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Orders Of The Day

Volume 893: debated on Wednesday 11 June 1975

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Social Security Pensions Bill

Order for consideration, as amended ( in the Standing Committee), read.


That the Bill be re-committed to a Committee of the whole House in respect of the Amendments to Clause 62, page 48, line 11; Clause 63, page 49, line 44; Clause 64, page 50, line 37; the new Clause (Mobility allowance); the Amendments to Schedule 4, page 66, line 2; Schedule 4, page 66, line 4; Schedule 4, page 66, line 12; and the Amendment to the Title, standing on the Notice Paper in the name of Mrs. Secretary Castle—[Mr. Walter Harrison.]

Bill immediately considered in Committee.

[Mr. GEORGE THOMAS in the Chair.]

'(1) In Chapter II of Part II of the principal Act (non-contributory benefits) the following is inserted after section 37—

"Mobility allowance.
537A.—(1) Subject to the provisions of this section, a person who satisfies prescribed conditions as to residence or presence in Great Britain shall be entitled to a mobility allowance for any period throughout which he is suffering from physical disablement such that he is either unable to walk or virtually unable to do so.
10(2) Regulations may prescribe the circumstances in which a person is or is not to be treated for the purposes of this section as suffering from such physical disablement as is mentioned above; but a person qualifies for the allowance only if—
(a) his inability or virtual inability to walk is likely to persist for at least 12 months from the time when a claim for the allowance is received by the Secretary of State; and
15(b) during most of that period his condition will be such as permits him from time to time to benefit from enhanced facilities for locomotion.
(3) The weekly rate of a mobility allowance shall be that specified in Schedule 4 to this Act, Part III, paragraph 3A.
(4) No person shall be entitled to a mobility allowance—
20(a) in respect of a period in which he is under the age of 5 or over pensionable age;
(b) except in prescribed cases, for any week before that in which a claim for the allowance by or in respect of him is received by the Secretary of State.
25(5) Regulations may prescribe cases in which mobility allowance is not to be payable, or is to be payable at a reduced rate, while the person otherwise entitled has the use—
30(a) of an invalid carriage or other vehicle provided by the Secretary of of State under section 33 of the Health Services and Public Health 30 Act 1968; or
(b) of any prescribed description of appliance supplied under the enactments relating to the National Health Service.
35(6) Except so far as may be provided by regulations, the question of a person's entitlement to a mobility allowance shall be determined as at the date when a claim for the allowance is received by the Secretary of State.

amendments on recommittal could not be posted until the House had decided on the form of the Instruction and the recommittal motion. Now that the decision of the House is known, copies of the selection list have been put in the "No" Lobby and further copies may be obtained from the Table.

Clause 62

Consequential Amendments And Repeals

5.52 p.m.

I beg to move Amendment No. 2, in page 48, line 11, at end insert:

'and otherwise required in connection with those provisions'.

It will be for the convenience of the Committee if we also discuss Government Amendments Nos. 3 and 4, and new Clause 1:

40(7) A payment to or in respect of any person by way of a mobility allowance, and the right to receive such a payment, shall (except in prescribed circumstances and for prescribed purposes) be disregarded in applying any enactment or instrument under which regard is to be had to a person's means.".
(2) In Part III of Schedule 4 to the principal Act there is inserted:—
"3A. Mobility allowance …£5".
(3) Regulations may make provision—
45(a) for permitting a claim for a mobility allowance to be made, or treated as if made, for a period beginning after the date on which the claim is made;
(b) for permitting an award on any such claim to be made for a period beginning after the date on which the claim is made subject to the condition that the person in respect of whom the claim is made satisfies the prescribed requirements for entitlement when benefit becomes payable under the award;
50(c) for the review of any such award if those requirements are found not to have been satisfied.
55(4) Regulations may provide for disqualifying a person for receiving a mobility allowance for a period not exceeding six weeks on any disqualification if he fails without good cause to attend for, or to submit himself to, such medical or other examination or treatment as may be required in accordance with the regulations.
(5) In the case of regulations under section 114(1) of the principal Act (determination of questions), so far as they relate to any question arising in connection with mobility allowance, subsection (3) of that section (determination of questions by Secretary of State's officer; reference of question to local tribunal, etc.) shall not apply.
60(6) Section 139 of the principal Act (consultation with National Insurance Advisory Committee) shall not apply to any regulations contained in an instrument which states that they relate only to mobility allowance and are made consequentially on the introduction of the allowance'.

Sub-amendment ( d), in line 20, leave out "5" and insert "2".

Sub-amendment ( f), in line 31, leave out lines 31 and 32 and insert

"(b) of an occupant-controlled powered wheel-chair issued for general use outdoors

'47A. In section 125(1) of that Act, in paragraph (a) for the words "the sum specified in Part III for" there shall be substituted the words "the sums specified in Part III for mobility allowance and".
47B. In section 135(2) of that Act, after paragraph (c) there shall be inserted—

"(cc) a mobility allowance".

47C. In section 145(1) of that Act, after paragraph (b) there shall be inserted—

"(bb) payments to or in respect of persons suffering from physical disability such that they are unable to walk or virtually unable to do so"

and sub-amendment ( a), leave out lines 1 to 3, and Government Amendment No. 1.

Amendment No. 2 is a technical amendment adding to the description of the amendment specified in Schedule 4 so as to cover amendments proposed for insertion in the schedule in connection with the new provisions for mobility allowances which may not strictly be described as consequential on those provisions.

Amendment No. 3 extends mobility allowances—a non-contributory benefit—from the items included in Chapter 1, Part II of the principal Act, the contributory benefits.

under the enactments relating to the National Health Service.".

Government Amendments Nos. 5 and 6, and Government Amendment No. 7, in Schedule 4, page 66, line 12, at end insert—

Amendment No. 4 enables different operative days to be appointed for mobility allowances for different age groups so that allowances can be phased in progressively.

I now move to the main proposition affecting the introduction of the mobility allowance. This is the occasion of a major breakthrough for 100,000 of the most severely disabled people in the country. This clause provides for the conferring of an entirely new benefit on disabled people and their families. The provisions add significantly to the legislative base for the Government's programme of improvements for the disabled which we announced last autumn. Legislation for the other new benefits—non-contributory invalidity pension and the invalid care allowance—has already been passed.

The general non-contributory invalidity pension will start in the autumn. The invalid care allowance will start next year. The non-contributory invalidity pension for housewives will begin as soon thereafter as we can fit it in. New Clause 1 inserts in the Social Security Act 1975 a new Section 37A which adds mobility allowance to the existing list of noncontributory benefits.

I am well aware of the volume of argument related to the interests of disabled drivers. If disabled drivers were the only persons to be considered, if an adapted car could meet all the needs of this group, and if it were right for the Government to run a car service on a large scale, cars for disabled drivers might be the right answer. Neither I nor most disabled people are ready to accept any of these propositions.

We have chosen the cash approach because we believe that it is the fairest approach to a much broader range of mobility needs including the needs of those who cannot drive, those who do not want to drive and those who have no one to drive them. I understand other views but I think that those who are obsessed with cars are starting at the wrong place and drawing the wrong conclusions.

In September we announced a £4 mobility allowance, which has now been increased to £5. That higher sum should be set in the context of our broader cash benefit strategy. We have opted for cash and not a car in this area because the present mobility scheme for the disabled is based on a cruel anomaly. Help is given not on the basis of disability but according to whether the disabled person can drive. This means that large numbers of the most severely disabled receive no mobility help at all.

The present scheme is both illogical and grossly unfair. There is a case concerning a courageous victim of multiple sclerosis who had a Ministry vehicle until she became too disabled to drive. Like so many others, she then forfeited not only the vehicle but all claim to mobility assistance. Now she has to pay for a taxi out of her own pocket whenever she wants to go out. Her crime is that she is more severely disabled than before.

6.0 p.m.

For the first time I now assert the right of all severely disabled people to mobility help. Up to 100,000 disabled non-drivers will benefit from the decision we are announcing today. Although they cannot drive, they have as much right as anyone else to look beyond their own four walls. The allowance of £5 a week, or £1,300 every 5 years, is not as much as I should have liked, nor could it have been in current economic circumstances, but it is an entirely new allowance that will increase the independence of many of the most severely disabled people in Britain today. I say again that this is a major breakthrough for the disabled people of this country.

For those who can drive, there is now the choice of an increased cash allowance or a Ministry vehicle. Our basic decision is cash, not cars, for all disabled people, but I was strongly urged by disabled people to keep open the option of a Ministry vehicle for present users whose disabilities made it impossible for them to drive any other type of vehicle. Therefore, the choice of cash or a Ministry vehicle is retained for disabled people who can drive. Disabled people want to be able to choose how they travel, whether by car, taxi, public transport or even by air or by sea.

Is there a correlation between the £5 allowance and the cost of running a Ministry car?

I shall come later to many points that will be raised in the debate. The life of a Ministry vehicle is seven years, and over seven years the mobility allowance will produce £1,820. I do not at this stage propose to go into fine detail about costs. I am presenting what I believe to be a major step forward for disabled people in speaking on the new Clause which embodies the Government's policy of mobility for the disabled.

If disabled people choose to have a car rather than cash, they should have the choice of a car that suits them. They should have the same freedom of choice as everyone else. The way to give them that freedom is to allow them to exercise the same choice that able-bodied people have to spend the money in their pockets. That is why our basic decision is cash and not cars.

In the 16 months since the Government came to power, the overall value of additional resources made available or pledged for benefits for disabled people amounts in cash terms to well over £1,000 million a year. That includes upratings and new cash benefits but takes no account of the provision of services. Some disabled people who only a few years ago had no benefit without a test of their means will be getting by early next year £7·90 non-contributory invalidity pension, £10·60 higher rate attendance allowance and £5 mobility allowance, and all these benefits are entirely without means test.

I was interested to hear that 100,000 people are likely to benefit from the mobility allowance on the basis of a test as set out in the new Clause. Is my hon. Friend able to tell the Committee, either now or later, how many people would have been eligible if the test had been a somewhat different one? I do not want to refer to an amendment which has been ruled out of order, but can my hon. Friend say how many disabled people would be eligible for the benefit if it were available to those who are unable through physical or mental disability to use public transport. I do not suppose he has the figure readily available, but if he is able to obtain it and give it to the Committee it will be of assistance.

I should like to help my hon. Friend, but it is difficult to give a precise figure. The 100,000 new beneficiaries under the proposal must not be taken as a definite indication of the number of people who will receive the new allowance. I emphasise that I am trying to make the money available to disabled people in the fairest possible way. I understand that my hon. Friends the Members for Mitcham and Morden (Mr. Douglas-Mann) and for Eccles (Mr. Carter-Jones) and certain Opposition Members are concerned about people whose mobility is not so severely restricted that they virtually cannot walk.

This subject is introduced into the Social Security Pensions Bill simply because the Bill is the best available suitable vehicle if we are to fulfil our promise to introduce legislation this Session so that payments to the first group of beneficiaries can start early in the new year. I said earlier that my hon. Friend the Minister of State had been in touch with the hon. Member for Rushcliffe (Mr. Clarke) and other members of Standing Committee A to explain that the timing is the earliest we can manage as well as the latest we can risk.

There has been a great deal of consultation. I have discussed this and other questions with the all-party Disablement Group in the House and I have also had a great deal of consultation outside the House with distinguished people who are themselves disabled or who speak representatively for disabled people.

The purpose of the clause is to provide for the payment of a mobility allowance of £5 a week—£260 a year—to severely disabled people who are unable to walk, or are virtually unable to do so, and who are likely to remain so severely handicapped for at least a year. It will be available to disabled people over the age of five but under pension age. An award will not depend—as the present vehicle service depends—upon ability to drive a car. The person receiving the benefit will be able to use it in any way he chooses as being the most suitable to help with his mobility problems.

By definition of its title, the mobility allowance will not be payable to someone who is totally incapable of mobility. Here we have in mind, for example, someone who for medical reasons should not be moved or who is in a coma and has no appreciation of his surroundings. We all know that severe head injuries caused by a road accident may mean, in rare and tragic cases, that someone spends the rest of his life, such as it is, in a coma and dies without recovering consciousness. It would clearly be inappropriate to pay such a person a mobility allowance. Equally, it is not the intention that a severely disabled person who can appreciate a change of surroundings but for whom outings are infrequent—and expensive—should be disqualified. We fully accept also that quite severely mentally handicapped people can in their own way enjoy mobility which has been previously denied to them by their additional loco-motor disabilities.

The allowance will not be means-tested and it will be generally disregarded in considering entitlement to other benefits.

The major advantage of the mobility allowance is that it starts to give assistance to many who in the past have had no help. In the last 10 weeks a working party of the Central Council for the Disabled has talked to more than 2,000 disabled people and their organisations in many parts of the country. I pay warm tribute to George Wilson, the Director of the Central Council for the Disabled. I am most grateful to him and his colleagues for the many long hours they have spent on this task.

I know that the working party's report is not complete, but its work has done much to ascertain the wishes of disabled people. Many of those who have already received assistance—for example, disabled drivers—have expressed the wish that their equally or more handicapped colleagues should be helped before any further improvement is made in their benefits. The mobility allowance now stands at £260 per annum as compared with £208 as originally proposed.

There is the question of whether the allowance will allow a driver to buy the car of his choice if he so wishes. The allowance should help with motoring costs as with other mobility costs. I know that the Central Council for the Disabled is considering the possibility of a scheme for offering loans to disabled car purchasers. Naturally, I eagerly await its findings. I am sure that the hon. Member for Exeter (Mr. Hannam), who raised with me the possibility of commutation, will rejoice in the work that is being done by the Central Council for the Disabled to ensure that every recipient of the new allowance receives maximum value for money in spending the allowance.

I know that the hon. Member for Exeter, the hon. Member for Wallasey (Mrs. Chalker) and many of my hon. Friends are in constant rapport with the Central Council for the Disabled. I know that they will join me in congratulating the council on its remarkable job of work in consulting not only the Government but also disabled people about the use to which the allowance can be put.

As we have promised all along, the invalid three-wheeler will continue to be available as an alternative to the allowance for those who prefer it and who are considered capable of driving it. Thus we are now providing by means of a new cash benefit an alternative choice for those who do not want a Ministry vehicle. Once the allowance has been introduced there will be, first, a single scheme with a single medical criterion and, secondly, a subsequent choice between a cash allowance and a vehicle.

There is also power in the clause to adjust the allowance if certain expensive aids to mobility are supplied free of charge under the National Health Service. This is a reserve power to be used if developments justify its use. We have in mind the possible future supply of occupant-controlled electrically-powered outdoor wheelchairs which might meet many of the mobility needs of some disabled people.

The legislation does not specify the timetable for introducing the allowance but allows different starting dates to be appointed in respect of different age groups. The allowance will be phased in over a three-year period. We intend to work as quickly and as flexibly as possible by bringing small age groups within the broad age bands and in the order of 15 to 50, 5 to 14 and finally 51 to pension age. We cannot be certain about numbers at this stage. As I have explained to my hon. Friend the Member for Mitcham and Morden, his question presents an even more difficult problem than the one with which we have been dealing in seeking to try to establish further how many people will have an entitlement under the arrangements as we propose them. If there are approximately 100,000 new beneficiaries the process of take-up, which we hope will start in January 1976. should be complete by March 1979.

I think it will be helpful to the Committee if I say something briefly about the limitations on what we are able to do. I shall seek to reply to detailed points that are raised during the debate. I have explained that there is much more that we want and need to do. Nevertheless, this is a significant Bill for many severely disabled people. What we are proposing will more than double—indeed, nearly treble—present expenditure on mobility for disabled people. Within that context, and recognising the present severe economic difficulties as I must, there are inevitable constraints. Even Ministers with responsibilities for the disabled are not protected from the economic winds.

6.15 p.m.

The scheme is limited to people of working age and to children. We have made unprecedented increases in retirement pensions and further increases have now been announced. As with the present arrangements, we are concentrating on locomotor disability—that is, inability to walk. Blindness is not covered but it may sometimes be a factor in the assessment of a person's ability to walk. Again, I must emphasise that this is an allowance for locomotor disability and not a general expenses allowance for severely disabled people.

Will the Minister clarify the situation of people without a distinct locomotor disability who are physically weak from other conditions, and who are without a car and are unable to go out because they might catch a disease because they are so weak? As I understand what the Minister is saying, children and adults in that situation who can walk but who have other susceptibilities to distinct infection will not benefit from the mobility allowance. Am I right?

I cannot be precise about any particular case. I shall be explaining that there are entirely new arrangements for appeals machinery, which I think is a major step forward for disabled people. The sole criterion will be loco-motor disability or inability to walk. I have said that some disabled people may have a combination of disabilities the total effect of which makes them virtually unable to walk. I must not try to fill the rôle of the medical assessors who will make decisions within the criterion I have mentioned.

Is there a chance that when the regulations are drafted there will be more room for flexibility, so that cases such as the one described by the hon. Member for Wallasey (Mrs. Chalker) can come within the umbrella of the mobility allowance?

I regret that I cannot go further than the clause now before us. There will be much further information about the allowance as we go forward. There will be disabled people who do not qualify for the allowance. Nevertheless, my best estimate is that about 100,000 people will qualify. As the debate proceeds I shall try to give further information in reply to the points that are raised, but I must emphasise that this is an allowance for locomotor disability and not a general expenses allowance for severely disabled people who are not able to walk.

Mobility expenses are a significant item in the costs that severely disabled people have to meet. The new single medical criterion reflects, as we announced it would, the sort of medical criterion now in use for the vehicle service. The essential difference is that we are now replacing a discretionary scheme with a statutory scheme. There will be a statutorily defined base, independent adjudicating authorities, medical boards and medical appeal tribunals, insurance officers, local appeal tribunals and national insurance commissioners. There will be formal appeal rights and a vastly increased number of claimants. It has not been possible to retain the additional social criteria of the vehicle scheme regarding the need for transport to get to work or to run a home. These additional criteria have not worked very satisfactorily as a means of sorting out claimants even in the present entirely discretionary scheme.

I conclude by saying that overall our policies are ones that I am very happy to put forward. They make a real advance and are both fairer, more comprehensive and more generous than what has gone before.

We welcome the proposal for a mobility allowance. It is the Government's aim to give priority to care for the disabled and handicapped as it was the aim of the Conservative Government to give priority when we introduced such measures as the tax-free attendance allowance and the long-term special invalidity benefit. Better provision for the disabled must remain the aim of any Government, whatever their composition In that spirit we welcome the new allowance and the way in which the Minister proposed it.

The provision removes a major injustice in the present system, namely, the distinction between disabled people who can drive and those often more seriously disabled people who cannot drive. As the matter stands, a seriously disabled person who can drive receives either a cash allowance or an invalid vehicle. A more seriously disabled person who cannot drive receives nothing at all, not even the cash allowance. We agree that help should be based not on the consideration whether a disabled person can pass a driving test but on the degree of disability.

We welcome the general principle of the allowance, but there are a number of fundamental questions which remain to be answered. The first relates to inflation. In these debates there is sometimes a tendency on the Government benches to speak as though inflation were outside the scope of departmental interest. Nothing could be further from the truth Groups such as the disabled are the most vulnerable to inflation. The value of the mobility allowance will quickly diminish unless the Government tackle the problem.

This was the point made, in a different context, by the Child Poverty Action Group in its pamphlet "Back to the Thirties for the Poor." That group spelt out the crisis which many of the poor now face, and observed that at present inflation disguises the crisis faced by Britain's poor. We recognise the problem, but mere recognition is not enough. We must seek to guard against it. Clearly, in the long term a correction of the situation can be tackled only by a permanent reduction in the rate of inflation.

We should seek in this legislation to ensure that mobility allowance does not fall behind the rate of inflation by requiring that the allowance should be subject to regular reviews. Some hon. Members would like a six-monthly review, and indeed, that is the view of the Disablement Income Group, but the Government, far from accepting the case for a six-monthly review, have moved specifically to exclude annual reviews. I understand that that is the effect of the Government amendment to Schedule 4, and this explains why we have tabled an amendment to that amendment. I gather, Mr. Thomas, that it would be convenient to debate that amendment now, but to vote on it at a later stage.

Our case can be put shortly. We live in times of exceptional inflation. At such a time it is all the more important that groups such as the disabled should be protected from the rise in prices—increases which those affected can do so little to prevent or influence. We realise that the Government have powers to increase the allowance, but we believe that they should not just have general powers. We believe that a requirement should be placed on them to review the allowance annually, as is the case with so many other benefits.

Our amendment does not go as far as the DIG or some hon. Members would like. However, I commend it to the Committee as a compromise which we can all accept. I certainly commend it to the Government because all they have to do is to move to an annual review of the mobility allowance.

The second major question concerns the reduced rate of mobility allowance to be paid, for example, to the disabled person who has the use of an invalid three-wheeler. This is an important proposal. A number of disabled drivers take the view that it is all very well to have an invalid car, but that it is expensive to run and, therefore, they would not make great use of such a vehicle. Indeed, they do not get the full benefit of the mobility intended to be extended to them. Clearly, the mobility allowance would help to pay the extra running costs, but at what level is the allowance to be paid? Will it be in addition to the tax-free petrol allowance of £10 or will it be in place of that figure?

The third point concerns the invalid three-wheeler and future Government policy. I shall try to choose my words carefully because it is all too easy to raise hopes which may not be fulfilled. I am sorry to say that the Minister was guilty of raising such hopes when, in a censure debate in 1972 against the then Conservative Government, he said that three-wheelers were unsafe, unstable and should be replaced by four-wheelers. Far worse was the speech of the Prime Minister only days before the February 1974 election when he accused the Conservative Government of meanness in their attitude to disabled drivers. He said that for a couple of years—and I quote from the Press release:
"… there has been strong pressure not only from disabled drivers but from road safety experts to the effect that the three-wheeled vehicle which the Government still insist on issuing to disabled drivers should be replaced by a proper four-wheeled version."
The implication of that speech is clear and unmistakeable—namely that a Labour Government would replace the three-wheeler. There could be no other interpretation of those remarks. But what has happened is that, rather than scrapping the three-wheeler, the Government are ordering more of them. Therefore, in view of Labour's previous statements, we are entitled to ask the Government for their current view.

I listened carefully to the Minister's reply to an Adjournment debate introduced by my hon. Friend the Member for Exeter (Mr. Hannam) on the day the House rose for the recess. However, many of the questions then asked by my hon. Friend were not answered.

I would remind the hon. Gentleman that on that occasion the hon. Member for Exeter (Mr. Hannam) and I had available to us a debating time of 30 minutes. He left me with 12 minutes in which to reply to his 8-minute speech. Obviously I was put in an impossible position in having to reply in such a short period. I have since written to the hon. Gentleman about the points on which I was unable to reply on that occasion.

I accept what the Minister says. I was not seeking to attack him on that point. I hope that he will use the opportunity of this debate to come forward with the answers to questions which I should now like to ask him.

In Opposition the Minister and the Prime Minister told the country that three-wheeled vehicles were unsafe. I repeat that no other interpretation could be placed on those statements. The Minister must be aware of the concern which those statements caused. He must also be aware of Press reports, notably those by Adam Raphael in The Guardian. the views of the Disabled Drivers' Action Group pointing to the same conclusion, and also the views of Lady Sharp in a letter to The Guardian last year. I hope that the Minister will give a clear statement of the situation in regard to the safety of these vehicles. As he knows, many drivers would like to retain the three-wheeler, and, of course, their wishes should be respected, irrespective of the form taken by general policy in this area.

6.30 p.m.

As regards costs, the Sharp Report suggested that a four-wheeler car would be cheaper to provide. If that is so, it must dispose of a considerable part of the objection. Most of us believe that a four-wheeler vehicle would be socially preferable. If it is also cheaper, the argument and the case for a four-wheeler becomes very strong indeed. As an Opposition we clearly reserve our position until we hear the Government's reply, although the Government will know what we have said on previous occasions.

I should like to make a suggestion. In my view we have been provided over the past years with a great deal of information on the three-wheeler vehicle, but we have had nothing like as much information on the possible four-wheeler replacement for it. I suggest that it would be of value to us, and certainly to the public generally, if the Government were to commission a study to cover two points. One is to review the practice in other European countries, such as Holland and France, and to study the cars which are used in those countries and the costs involved. The second is to carry out a study in this country to ascertain the prospects of producing either a purpose-built four-wheeler or adapting a present production model taking into account the costs involved in such an exercise. Such a study would not be particularly expensive and it should not take long to complete. I urge the Minister—and I say this in a constructive spirit—to give consideration to that matter.

We are all concerned about resources. Therefore, I point out to the Minister that early in 1974 the Council of Ministers of the European Community approved a social action programme which in turn gave rise to the handicapped workers' action programme issued by the EEC Commission later that year. The programme envisages money being granted for the training, housing and transport of disabled persons under Article 4 of the Social Fund. I suggest to the Minister that he should take this matter up with the European Commission to see whether funds can be made available here. After all, we are all Europeans now and we all recognise that resources are a crucial problem in this sector.

It is the aim of the Opposition to improve provisions for the disabled and it is in that spirit that we approach the debate and put forward our suggestions. We welcome the mobility allowance and we hope that the Government will accept the improvements that we have suggested.

Like the hon. Member for Sutton Coldfield (Mr. Fowler), I welcome the provision of the mobility allowance. He would be a fool or a callous person who did not welcome the fact that a vast number of people will now benefit from such a scheme. When we have won a battle, we should not linger with our war memories. We have won our battle, and now we must go to the next round and look at the plight of those who possibly have not been included.

If I am not ruled out of order, I can refer once again to the infamous money resolution. Two of my amendments still stand in the Paper, but before I deal with them I must point out that 100,000 people and their families will welcome the action of my hon. Friend the Minister, which must stand to his credit. No one can take it from him. If I am critical, I am sure he will understand that I speak as a long-standing friend.

I seek information about the method by which the figure of £5 has been reached. As I understand it, the three-wheeler will continue for those who want it. I have no love at all for the three-wheeler. In my view it is an extremely difficult vehicle to drive and it has some unsafe features. Nevertheless, if I go through my long list of mail—and I suppose I receive just as much mail as anybody else—I receive a tremendous amount from owners or users of three-wheelers urging the Government to continue with them.

The first figure I want from my hon. Friend the Under-Secretary is the cost of running a three-wheeler in relation to the £5 allowance. If the cost of running a three-wheeler is higher than the £5 allowance, there is very good reason for increasing the allowance.

Secondly, will my hon. Friend consider something which I know the Central Council for the Disabled is considering, namely, tying the whole concept to a cost-of-motoring index and having a six-monthly review? That was one of the amendments which was ruled out of order, but it is now in Hansard and reflects my thinking that I should like to see a costof-motoring review every six months so that we can update the value of the allowance.

Another matter which worries me greatly is the problem of the elderly who might receive at present the private car allowance of £100. What will happen to them with the introduction of the new mobility allowance of £5? My understanding is that if they receive the £100 allowance it will continue beyond pension age. Will the mobility allowance affect them adversely in any way?

I took the view that the money resolution—not the mobility allowance—was obscene because it prevented us from mentioning cases which we felt were important. I can illustrate the theme by considering the position of a haemophiliac who can walk. By definition it will be said that such a person is mobile, but let us consider the case of a haemophiliac who walks to a bus stop, gets on a bus and gets battered in the bus. Frequently after such a journey, because of the nature of their complaint, the battering that these people receive on the bus is such that they have to pay four or five visits to hospital. Are not such people deserving cases? Should they not be considered? They are not vast in numbers but they are a group who I feel should be considered.

I keep looking at you, Mr. Thomas, because as a compatriot of yours I realise that I am getting very near the wind. Perhaps you could glance elsewhere or engage in conversation.

Order. That is always possible until my attention to drawn to the matter, when it becomes impossible. I remind the hon. Gentleman that he cannot pursue amendments that are beyond the scope of the Bill and certainly beyond the scope of the money resolution.

That is a good point. I should have realised that as an ex-Rugby man I should not have tried to come on your blind side, Mr. Thomas.

I turn to the amendment which is acceptable for debate, that which would reduce from five years to two years the starting age of entitlement. A person who suffers from agoraphobia is afraid to go out of the house and therefore lacks mobility. A child sufferer must be accompanied and looked after. I cannot for the life of me understand why we are not allowed to give the mobility allowance to children under five years of age and over two years. I have been assured that the behaviour pattern of some of these youngsters is such that a private form of transport is the only reasonable way of taking them around from the point of view of their parents, their guardians or the rest of their family.

I do not know why the age of five has been chosen. Some civil servant in his wisdom probably said that that is the age at which children go to school. What do civil servants know about what happens to children under the age of five? Are the children to be kept permanently under sedation? Very often when they have passed the age of five they can be looked after at school, but between the ages of two and five there is a major problem for the parents and families of some children. Therefore, that age group should also be included.

Not all the mentally handicapped are immobile, but some are, and at present they are excluded. Many haemophiliacs are immobile. Why are they excluded? Many agoraphobics are immobile. Why are they excluded?

Those are questions to which the Committee deserves answers. They account for my intemperate language at the beginning of the debate about the way in which the Treasury drafted the money resolution. We, not the Treasury, decide the matter. There is a large enough body of knowledge within the House of Commons, and we are fed enough information from outside to make us capable of making a major contribution.

The only other amendment which I managed to make stick on the Notice Paper and which has been selected concerns the advance of technology. I should like my hon. Friend the Minister to consider very carefully what will happen when, in the not-too-distant future, we see the development of an outdoor vehicle which is capable of being power-driven and which could possibly be used in the home. The hon. Member for Wallasey (Mrs. Chalker) and I have seen such developments, and I think that in the next 12 months these vehicles will become available. I should hate to think that this sort of advance will disqualify from the allowance a person who can use a technically-developed wheelchair within the home and outside.

When the regulations are being drafted, will my hon. Friend use his native guile, his good will, ingenuity, skill and compassion to make sure that there is scope for widening the provision, not for a large number of people but for a small number, whose needs are as great as those he has now covered? I end by paying him tribute for the fact that he has brought in 100,000 souls and their families, and by making a plea for a few more thousand. I say to my hon. Friend "Please use ingenuity, and defeat the prophets of doom".

Like other hon. Members I welcome the mobility allowance, which has long been sought. I hope that in this debate we can turn our attention to some of the cases covered by the amendments which have escaped the red pen, and that with the Minister's good will we can succeed.

I am concerned about the increase in the cash benefit from £4 to £5 which the Government have been able to introduce since last September. Will it be sufficient in view of the increase in costs since then? I hope that when other benefits are being reviewed the Minister's mind and voice will be to the fore, and that out of the total cake he will keep on pushing for the slice that the disabled deserve and are beginning to have.

6.45 p.m.

I support the amendment in the name of the hon. Member for Eccles (Mr. Carter-Jones) to reduce the age of eligibility from five to two years, for very good reasons. I sought clarification from the Minister earlier about the problem of young disabled people, who are very susceptible to infection. It is a particular problem during the fast growth years between the ages of two and five. It is also a problem thereafter, but that is not a subject of disagreement. I hope that the Minister will be able to accept that amendment.

There are a tremendous number of children who are physically able to walk but have severe management problems. They are not yet at school and are being coped with at home by young mothers with other young children. They cope but they do so with great difficulty. Whether these disabled children be hyperactive, aggressive or violent—whatever their manifestation of anti-social behaviour—they are usually unable to travel by public transport. I have seen distressing examples of mothers with whole families which include one hyperactive child being turned off public transport because of the activities of that one child. That sort of thing has a tragic effect on the other children in the family.

There is a great need to keep families together. One of the difficulties is that such children alienate themselves from the other children in the family. Children are much less able to reason. Although they may be able to cope with the situation in the home, when they are transferred outside the situation does not make the same sense. The Minister could well amend the Bill to bring in this young age group.

I am also concerned to see that we encourage the integration of non-handicapped and handicapped children. We have very few specialist playgroups for severely handicapped children. The chance to take a handicapped child to a normal playgroup often exists only if the mother can get the child to the playgroup. Some of those children who are able to walk are very heavy and cumbersome to take to an activity which will give the mother and other members of the family a short respite during the day, which is something I am sure the Minister wants to do.

I fear that in his reply the Minister will tell us that those who are able to walk but who have other severe disabilities must remain to be looked after by the Joseph Rowntree Memorial Trust, by the Family Fund which has begun to help many disabled families. That fund, doing its best to cope with many of the problems brought to it so far, has to cover clothing, telephones, laundry, home and holidays as well as mobility. Already 30 per cent. of the £2·25 million of the fund has been spent on paying for transportation of young congenitally handicapped people. It has helped only a small number so far, and many others need that help.

Therefore, I ask the Minister closely to examine the definition of ability to walk. Walking is one thing, and being accepted as moving in the normal train of society is another. I should welcome from the Minister a clear interpretation of the words in the clause.

I also remind the Minister that many of the people who are excluded under the Clause because they are so badly mentally handicapped that they are unable to appreciate their surroundings are still a grave drain on the family funds in paying for transportation. It is necessary to take even the most handicapped of children to the dentist or doctor and to get special clothing. It is necessary also for a parent to expose that child to other stimuli outside the home and the near-home environment. This simply cannot be done unless the family can actually travel. Therefore, I believe that the Minister has a duty to look at this aspect. If he cannot include these children here, perhaps he will include them in an extension of the Family Fund started so well by my right hon. Friend so many years ago but needing increased funds, as ever, now.

That brings me to the question of increased funds. My hon. Friend the Member for Sutton Coldfield (Mr. Fowler) mentioned just now the possibilities of assistance from other countries through the Social Fund of the EEC. I have been privileged to see some of the things that are beginning to be done in other countries, and I am quite sure that to facilitate the reduction in age from five years to two years an application to the Social Fund of the EEC would be well worth making. I am sure that it would be listened to sympathetically.

The other aspect of international cooperation that I hope will bring about a greater possibility of locomotion is that concerned with amendment (f). We have already heard from the hon. Member for Eccles of the advances which are taking place in motorised wheelchairs for use both within and without the home. It is thought nowadays that many of the younger handicapped people who are unable to walk, or unable to walk any distance, might benefit from a much earlier age from such a vehicle, though not a car, and I hope the Minister will look sympathetically at this. The prototypes which are currently being utilised are to my knowledge quite able to be controlled by a 12-year-old. This begins to develop the child so that later he or she may lead a full and probably fully-earning life. It is this investment at the early stages which I believe to be so vital.

Those two amendments are well worth the Minister's kind consideration, not only with words but, if necessary, also with his feet. In welcoming the measures that he has found it possible to bring before us today, I hope that the hon. Gentleman will also find himself able to lend support to those amendments, which happily are in order for our debate.

In all the years during which I have been speaking on disablement I have never spoken on the mobility of the disabled. The reason for that is that I have more or less left the problems of the disabled to the magnificent campaigns that were conducted for many years by the hon. Member for Banbury (Mr. Marten). The hon. Member conducted a single-handed campaign for the mobility of disabled people long before many of us ever dealt with the problem of disability, and as a consequence we tended to leave the matter in his hands and in the hands of those of his colleagues who specialised in it. Later my hon. Friend who is now the Under-Secretary took great interest in the subject and did a great deal concerning the problems of the mobility of the disabled. Latterly the hon. Member for Exeter (Mr. Hannam) has taken a very great interest in it too.

I should have been more than happy to leave matters like that, and I know that it is quite unusual for a Parliamentary Private Secretary to participate in a debate, no matter how briefly, but I want to speak briefly in this debate because certain charges have been made about the Government's policy outside the House, especially about the negligence of the Minister concerned with the disabled and the negligence of the Secretary of State. That is a very serious charge against anyone—a charge of negligence concerning the safety and mobility of disabled people.

It so happens that when the present Government came into office they were faced with a clear choice, given the very difficult economic circumstances, of either helping all disabled people or, alternatively, helping those who were faced with the problem of mobility. What the Government did, in my view, was to help the immobilised people much more than they helped the other groups of disabled people. The various other categories of disabled people—the blind, the deaf, spastics, vaccine-damaged children and so on—did not get a great deal from the present Government, or indeed from any Government, in terms of direct assistance.

What the Government then did was to allocate more money to the immobilised disabled, and having done that they more or less sat back and expected some kind of reaction. But the reaction has been a hostile one. Far from being thanked by people who are disabled and immobilised, the Government are being criticised. That is fair enough. We expect this criticism from Opposition Members, and we receive it.

I listened with great interest to the hon. Member for Rushcliffe (Mr. Clarke) and to the hon. Lady the Member for Wallasey (Mrs. Chalker). I do not know why the hon. Lady is not on the Front Bench, nor do I know why the hon. Member for Exeter is not there. I have listened to their criticisms and they have been interesting, but they seemed to miss the simple point—I am anxious to make no party point in this debate—that it is the present Government who have allocated far more resources to the problems of the immoblised disabled than have ever been allocated before. Hon. Members should recognise that.

We are facing a very serious economic crisis. I welcome the suggestions for extending the mobility plan to more people. Professor Townsend has put a very powerful case elsewhere. I hope that his case will be listened to very sympathetically and echoed here by hon. Members, though not perhaps with Professor Townsend's eloquence.

My point is that as a result of the mobility allowance a far larger group of people have been assisted than if we produced the three-wheeler. This is very important. A campaign has been waged by disabled drivers for a very long time, both before the present Government took office and now. Jolly good luck to them. But none of them waged a campaign for the disabled passenger. One or two Opposition Members and my hon. Friend the Under-Secretary and I campaigned for the disabled passenger, and, as a result of the mobility allowance the disabled passenger is for the first time being helped.

In our anxiety to improve the safety of the three-wheeler—we should certainly try to do that—we must not forget the priorities of trying to help, first, all the people with different disabilities and, secondly, the disabled passengers and others who will be helped by the mobility grant. In my view it is absolute nonsense to accuse my hon. Friend the Under-Secretary or my right hon. Friend the Secretary of State of negligence. It is a charge that should never have been levelled. By all means let us criticise them, but they are not negligent. The mobility grant has my warmest support, and I commend it to the Committee.

I believe that the Government should be pressed to extend the mobility grant. Let us have the children. Let us have the mothers. Let us have as many people as we can. But let us agree that the mobility grant is more important than any of the suggestions put forward by the disabled drivers. I think that we should have regard to priorities, and those priorities have been laid down by the Government.

7.0 p.m.

I followed the speech of the hon. Member for Stoke-on-Trent, South (Mr. Ashley) with great pleasure. Although—rather unusually—he spoke as the PPS to the Minister involved in the debate, a contribution from the hon. Gentleman is welcome in any debate about disablement because of the leadership and experience that he gives to all of us who are concerned with the affairs of the disabled.

I wish to express my own general welcome to the mobility allowance. It introduces a long awaited and much wanted principle of cash help for all disabled people, whether they be drivers or passengers. It also offers a certain degree of freedom. I enables all disabled people to use the money as they wish, whether on bus or taxi journeys or to save in order to purchase vehicles of their own.

My main criticism is that the time involved in saving for an alternative vehicle will be too long, taking into account the cost involved and the amount of the allowance that we are discussing. I regret that even with the £1 additional allowance announced on the Friday we adjourned for the Whitsun Recess, taking account of the obvious erosion by inflation, it is a moot point whether the allowance will be of greater value in real terms than the 1972 £100 private car allowance.

Earlier, the Minister talked about those hon. Members and people outside this Chamber who have an obsession about cars for disabled people. He spoke of the need for cash rather than for cars. I do not wish to go back over the arguments I voiced in the debate we had on the Whitsun Adjournment about the three-wheeled invalid tricycles issued by the Department, but, like my hon. Friend the Member for Sutton Coldfield (Mr. Fowler), I remind the Minister and all those concerned that he and the present Prime Minister only about 18 months ago expressed very similar views to those we are expressing now in calling for the phasing in of a four-wheeled vehicle and the gradual phasing out of the three-wheeler, together with a mobility allowance—in other words, a choice of cash and car or three-wheeler. It is for this, in effect, that we are asking.

For anyone to wish to move to a four-wheeled passenger carrying vehicle which is safer and more reliable for a disabled person is not to have an obsession. It is quite normal. It is fair to say that 90 per cent. of those concerned with disabled people do not want to see those who have three-wheelers and who wish to retain them deprived of their vehicles. The hon. Member for Eccles (Mr. Carter-Jones) has made the point strongly on many occasions that about 15 per cent. of all disabled drivers wish strongly to retain their existing three-wheeled vehicles. So this is not what we are calling for, and certainly not what I want to see. We all want to see a three-way choice—a mobility allowance, a three-wheeler, or an adequate four-wheeled vehicle.

The Minister referred to the work carried out by George Wilson of the Central Council for the Disabled in touring the country gathering information from disabled people as to how the allowance can be best used. I am especially pleased with the information that we have been given today to the effect that consideration is being given to possible ways whereby loans might be made available for recipients of the allowance to purchase their own vehicles. This is very important and will go a long way towards satisfying the criticisms of the hon. Member for Stoke-on-Trent, south.

It had been my hope to move an amendment allowing a disabled person in receipt of this allowance to commute the amount over a five-year period so that he or she might have an initial capital sum with which to purchase a vehicle and, as a result, not have to go on using vehicles provided by the State. However, the restrictive money resolution about which we were grumbling earlier prevented my amendment from being selected.

We have made our complaints about that, and I resented the attack of the Secretary of State, who suggested that some of us were being less than adult in our approach to the money resolution. I do not need any lessons about the state of the economy. I do not need to be told that inflation is the greatest enemy of the disabled. If any measures to control inflation mean controlling Government expenditure, I support them fully, but we were trying to underline the fact that, within a total overall sum for such an allowance, ways and means could be found for using the money to the best possible advantage of the disabled. These amendments relate to the best means whereby we can apportion the total sum.

Disabled people face above average increases in costs through inflation combined with lower than average increases in any income they may have. As a result, they are hit harder by inflation than most other people. I welcome the mobility allowance, though I fear that it is not quite enough, and that the taxing of the allowance will mean that the net amount received by disabled people who are earning and trying to integrate normally into every day life will be less than one would hope. What is more, it may result in their receiving less than they may have been with the private car allowance.

I press the Government to look carefully at the possibility of commuting the allowance and of bringing forward a five-year amount in a lump sum so that disabled people may purchase their own vehicles. This would reduce the number of disabled drivers who are dependent on the State for their vehicles, and who are not happy with them and who, therefore, are critical of the State about the vehicles with which they are provided. There would be a saving to the Treausry in the longer term. That is why I regret the constraint placed upon us in terms of our ability to discuss all these matters in detail on specific amendments.

My hon. Friend the Member for Sutton Coldfield presented a forceful case for the re-examination of the relative costs of three-wheelers and four-wheeled cars. I am satisfied that an adapted Mini would cost less than the unsafe, unsocial and unreliable tricycle at present issued by the Department. If we consider the cost to our balance of payments of a vehicle which has an Austrian engine, an Italian suspension and an American transmission, we must agree that a British vehicle ought to be provided in its place.

I restate my welcome for this step forward in the provision of a car allowance for disabled people, whether they be drivers or passengers. I hope it will be followed by other major steps forward. I should like to see a more open mind about eligibility and about the provision of better cars for the disabled. It should not be a case of cash or car. We need a fuller choice of an allowance, a three-wheeler, a four-wheeled car, and the commuting of the allowance for the purchase of vehicles. We have to move away from the glorified bath-chair, which was provided originally for those people wishing to make short journeys from their homes. I hope that this step will be the first of many and that we shall move quickly, economic circumstances permitting, towards a disability allowance and the provision of decent vehicles for disabled people.

My contribution will be astonishingly brief. I recognise that all hon. Members have covered much of the ground about which I intended to speak. I intend to concentrate my remarks upon the first of the surviving amendments, in the name of my hon. Friend the Member for Eccles (Mr. Carter-Jones).

I am reluctant to appear critical of any aspect of the legislation that is being reviewed by Parliament today. The Bill is an enormous step forward. In many respects it makes previous provisions appear paltry. I am particularly pleased with the conception of the mobility allowance. The clause breaks entirely new ground; this is truly enlightened legislation.

However, together with other hon. Members, I deeply resent the restriction that is imposed upon the entitlement. I refer to the ruling that handicapped children under the age of five should not benefit from the allowance. There is nothing in the money resolution to prevent the allowance being extended to those from two years of age upwards. No global sum is mentioned. It simply refers to "people under pensionable age", as defined by the 60-year and 65-year age limits. There is no problem in that area.

We must all have witnessed the melancholy plight of youngsters of three or four years of age who are confined to trolleys or wheel-chairs in order to get about at all. We have all shared the embarrassment and, indeed, the despair of mothers who endeavour to manoeuvre disabled children on to public transport and try to get them out and about at all. It is a hideous experience even to witness at times.

We must be aware of the cumbersome nature of some of the disabilities and the distress to the child, and, indeed, to the parents, when the consequences of a disability prevent the family participating in everyday activities that the more fortunate among us take very much for granted.

To amend the clause—this would be in line only with the provisions for attendant allowance—would not impose financial burdens of formidable dimensions on the State and the community. Even if that were so, we should accept the cost as being trifling when compared to the burden carried by the young disabled person. To make this gesture would in many cases introduce a joy, an excitement and a real delight into young lives that, generally speaking, are restricted, drab and often painful. Who can place a fee on such a transformation?

If my plea for reconsideration is short, it is not in proportion to my deep and heart-felt feelings on the matter. I hope that this modest amendment may be accommodated by my hon. Friends.

I should like to comment briefly, following the remarks of my hon. Friend the Member for Exeter (Mr. Hannam), who raised many of the points I was about to raise.

I welcome wholeheartedly the fact that we are making a greater range of mobility available to a larger number of people. This is undoubtedly a milestone in the progress of help for the disabled to which all hon. Members have contributed over the years. There are dangers in it. We may lose sight of giving enough attention to the right type of vehicle when individuals want to choose their own vehicles for their own specific use. Concentration on specific vehicles in the past has, perhaps, been too great, but now there is a danger that it will be too little.

I hope that the Minister of State will take seriously the point made by my hon. Friend the Member for Sutton Cold-field (Mr. Fowler) about encouraging more research into suitable four-wheeled vehicles to replace the three-wheeled vehicles in the future. Perhaps the Minister of State could consider issuing a challenge to the motor industry to develop an adaptation which could be used in a great many more cases that the ordinary Mini and other suitable vehicles.

7.15 p.m.

I ask the Minister to consider carrying out more research, as is the case in Europe. In some cases our partners in Europe are ahead of us. It is difficult to find out exactly what they are all doing. In the short period that has been available—because we have not had much time in the last week or so—I have been trying to find out. All the information I have received is rather out of date. The Department could help considerably now that we are wholeheartedly in Europe by finding out what other countries within the Community are doing and whether we could share some of the costs of research and development into these matters. We all face the same problems, and some countries are well ahead of us.

The Minister of State was not willing to reply to the point made by the hon. Member for Eccles (Mr. Carter-Jones) about the correlation between the costs of maintaining and running a vehicle and the new allowance. It is important that the public should know. If the cost is a good deal more than the allowance, we understand the reasons for it, but we feel that the allowance has to work up so that it covers the full cost of running a vehicle. I have made that point clear and I hope the Minister will answer it.

The new allowance is taxable. I understand that, because in the main, all allowances are taxable in order to help those less well off. The general policy throughout the whole social security area is that allowances are taxable.

Will the Minister make special inquiries to find out whether the allowance for children will be aggregated with the incomes of parents? I know that this does not fall truly within the sphere of the Department of Health and Social Security, but it is important. If that is the case, there will be many instances where this allowance will mean very little help towards the mobility of children. It is, perhaps, a small point, but it is an important one and may affect a limited number of people.

I share the feelings expressed at the opening of today's proceedings against the money resolution. It has not enabled us to amend this new clause in the way in which Parliament thinks best. It has been brought before us, and we have to take it or leave it. We have not been able to amend in any way to include some of the groups which outside organisations have brought to our attention. This was brought to my attention by the Family Fund, which is administered by the Rowntree Memorial Trust. It is quite clear that there are children under the age of five and parents who would greatly benefit if a mobility allowance were extended. The cost would not be great. I cannot believe that the difference in cost between five years and two years is anything like as much as the Secretary of State implied in her opening statement on the money resolution.

With those remarks and queries, in general I think that this is a milestone. I pay tribute to the Minister with responsibility for the disabled. He has piloted the provision through. I am sorry that we have not had the proper time or opportunity to discuss this matter more fully. Nevertheless, I welcome it very much.

Speaking so late in the debate I am sorry to strike a slightly sour note. I have been present throughout the debate. I should have liked to have had the opportunity to make this point earlier. Although, like everyone else, I am delighted that 100,000 people will have their particular forms of hardship alleviated by the introduction of a mobility allowance, which is something I have been very anxious to see, I am, nevertheless, rather concerned about it because every time we introduce a new allowance, the eligibility for which is specific and closely defined, we clear some anomalies but create others.

I am sure that my hon. Friend the Minister is well aware that one can have two families both including severely disabled people and living next door to each other. One person may have sustained an injury in an industrial accident and be getting industrial disablement benefit or a special hardship allowance, or be entitled to an attendance allowance, when another person, next door, who is almost exactly as severely disabled, does not receive such benefits. We shall now have yet another anomaly—those eligible for mobility allowance and those who may not be eligible.

These differences can be cumulative. Certainly in the case of eligibility for attendance allowance and mobility allowance, one can find people with very similar disabilities, of whom some will be eligible for both allowances and others not eligible for either. But in each case the hardship for the family is almost exactly as great. My hon. Friend the Member for Eccles (Mr. Carter-Jones) and the hon. Member for Wallasey (Mrs. Chalker) referred to some of the anomalies that will arise as a consequence of the very precise definition in the clause and the money resolution as to the eligibility for this mobility allowance. They have given examples of cases which are just as deserving and needy as others but in which it will not be possible, because of the restriction, for the allowance to be paid.

As I indicated when we were debating the money resolution, it would be preferable, when dealing with this allowance, to widen the net, even if it were necessary because of financial restrictions imposed by the Treasury to limit the total amount we are spending on it. As to the anomalies we are creating by this restrictive definition, I can think of not only the examples given but of the blind and the epileptic. I have a constituent who is unable to travel on public transport because he is so severely incontinent that it is quite impossible for him to get any distance away from the opportunity to relieve himself. He continues to be as "locked in", despite the introduction of this allowance, as he was previously.

Apart from the question of the anomalies arising from this allowance I would urge my hon. Friend the Minister to set up a review of the entire system of the allocation of specific benefits. Every time we create a new benefit precisely defined we create anomalies. We have already the example of an alternative system—the industrial injuries benefit system. Under that system disablement is assessed overall on a percentage basis. It can take account of the inability to drive a car and all the myriad forms in which disability can present itself.

Although the forms of allowance we have at present may be desirable as they stand it is certainly also desirable that we should have some form of more flexible discretionary benefit, even if we do not take the whole step towards an overall disablement allowance for all disabilities, irrespective of the nature of their causation. If we cannot take that step in one go, we could have, as we urgently need to have, some kind of more flexible disability benefit.

Although this measure will resolve hardship for many it is liable somewhat to increase hardship for others. Every time we reduce the number discriminated against, the likelihood of their having their problems resolved is reduced. Although I am delighted for those who will be eligible for this benefit, that it is to be available, I am apprehensive that, by the creation of further anomalies, we shall be creating even more hardship for those left out.

This has been a most valuable debate. I am glad that so many hon. Members have been able to contribute to the discussion of legislation which is profoundly important for the most severely disabled people in this country.

The hon. Member for Sutton Coldfield (Mr. Fowler) warmly welcomed the new allowance. He also acknowledged that we must have regard to resources. I have also said that I should very much have liked a bigger allowance. In current economic circumstances, it was highly unlikely that I would be able to get more than I have announced in this debate.

I am glad that it has been accepted that we are today removing a cruel anomaly. It is utterly wrong that under the present scheme help is based not on a person's disability but on his ability to drive. The hon. Member for Sutton Cold-field readily accepted that by excluding the disabled passenger and helping only the disabled driver the present scheme is unfair as well as anomalous. He referred to inflation and the need for reviews. As he mentioned, there is an amendment on the Order Paper, which he discussed together with the main proposition.

There is a case for putting mobility allowance in the same category as maintenance benefits and attendance allowance and for guaranteeing that it is increased at least annually in line with earnings. Mobility costs will rise if costs in general rise, and mobility expectations may to some extent rise if earnings increases outpace price increases. Indeed, it can be argued that where mobility is related to ability to maintain oneself, because some severely disabled person will use the allowance to help meet his travel-to-work costs, any distinction between maintenance and mobility is a little artificial.

However, the case for automatic up-ratings is not stronger than the case for widening the scope of the allowance, which has also been very strongly urged upon me. My hon. Friend the Member for Mitcham and Morden (Mr. Douglas-Mann) is disquieted at the fact that we are not able to make the allowance more widely available. He accepts that to include 100,000 new beneficiaries is a major step forward. Yet he is prepared to contemplate an allowance of a lower value to more people. The hon. Member for Sutton Coldfield is concerned about preserving the value of the allowance and, as I read his mind, about increasing as rapidly as we can its real value. There are these two conflicting views in the Committee.

The only reason why I am willing to accept that it should be of a lower value is that we have a money resolution which precludes us from discussing whether it should be maintaining its value.

I well appreciate my hon. Friend's difficulty. He will know that I am not without difficulty. We have finite resources, as he has noted. He says that, given the quantum, he would be prepared to accept an allowance of lower value.

7.30 p.m.

The hon. Member for Sutton Coldfield wishes at the same time to preserve the value of the allowance and to increase its value. We are not in a situation where we can take action which would be regarded as good by hon. Members on both sides of the Committee.

I appreciate the point made by the hon. Gentleman. However, he and I are not debating Government plans. The Opposition point is that the increased allowance should retain its value given the present rate of inflation. Will the hon. Gentleman confirm that the effect of Amendment No. 7 is to exclude the mobility allowance from the annual review procedure?

The Government are not guaranteeing annual uprating in their proposals. As Minister with responsibility for the disabled, my list of subjects on which urgent action is required is long. There will be pressure from my hon. Friend the Member for Eccles (Mr. Carter-Jones, my hon. Friend the Member for Mitcham and Morden and many others to extend the entitlement to the allowance. I shall move as quickly as I can to implement the proposals now before the Committee. Today I cannot go further than the proposals.

We shall look at the need for upratings. In doing so, we shall take account of all the relevant factors. I am sure that we would not wish to allow long periods to go by without any changes in the mobility allowance if costs rise steeply. The price to be paid for achieving anything in the present situation is the acceptance of changes which are less than perfect. That does not seem to me to be consistent with the strong exhortations to make massive cuts in public expenditure, or to make every possible improvement in these arrangements.

The hon. Gentleman cannot get away with that. The Opposition urge that the proposed allowance, which we support, should retain the value it has when it is introduced. I should have thought that that proposal would have found support on both sides of the Committee. I should not have thought that that was remarkably controversial. I urge the hon. Gentleman to think again.

There is, clearly, strong support for the proposition that we should seek to preserve the value of the allowance that we now propose.

I have said that we shall look at the need for upratings. In doing so, we shall take account of all the relevant factors. I am sorry that I cannot go further. The hon. Gentleman will appreciate that I accept the force of what he said and the support for what he said which was expressed in speeches made by hon. Members on both sides of the Committee.

A further important point was raised by the hon. Gentleman. He referred to the reduction of the mobility allowance in certain circumstances under subsection (5), where the disabled person enjoys other provisions—for instance, the provision of appliances—under the National Health Service. Regulations will be made in due course. The point raised by the hon. Gentleman remains to be considered. I said that we had in mind the occupant-controlled, powered out-of-door wheel-chair. I cannot anticipate technical progress, although perhaps an extremely expensive new machine may become available to help those who cannot manage a three-wheeler or four-wheeler. We must await the regulations. I shall bear in mind the points made by the hon. Member for Sutton Coldfield and others.

Reference was made to comparative costs of three-wheelers and four-wheelers. That question depends on the specification, whether there is automatic transmission and what hand control adaptations there are. It is not easy for me to give precise details of comparative costs. However, I am advised that it would cost the Government more to provide a three-wheeler than to pay the mobility allowance. The running costs of three-wheelers are borne partly by the Government. Insurance, maintenance and repairs must be taken into account. There is also the £10 petrol allowance. That allowance was discontinued by the previous Government in 1972, but was retained as a preserved right for people who were then receiving the allowance. Nevertheless we have restored the allowance. We doubled it from £5 to £10.

I was asked about the safety of three-wheelers.

Will the Minister say what will happen to the quarterly maintenance allowance available to those who use their own cars? Will that be eliminated now that there is to be a mobility allowance?

If a person who is entitled to the mobility allowance is now receiving the private car allowance he will take the mobility allowance as his total entitlement to mobility help. Many disabled passengers have made the point to me that our increase in the petrol allowance was decidedly unfair to them. I hope that disabled passengers will regard this as their day in that we are seeking to bring them into the Government scheme, after what many of them will regard as a long delay.

I was asked about the safety of the three-wheelers. The hon. Member for Exeter (Mr. Hannam) said in a recent Adjournment debate, as did the hon. Member for Sutton Coldfield today, that 18 months ago I spoke in the same sense as hon. Gentlemen who are now speaking from the Opposition benches. A great deal has happened in the past 18 months. While in Opposition I pressed strongly for the publication of the Sharp Report. I was informed that that report had been made available to the Department of Health and Social Security early in October 1973. I pressed for the publication of the Sharp Report. After the Labour Government took office and I became Minister with responsibility for the disabled, one of my first actions was to publish the report of Baroness Sharp.

I exerted a great deal of pressure in Opposition for the publication of the inquiry by the Motor Industry Research Association into the vehicle. Some independent reports had given the impression that the vehicle was extremely unsafe and unstable. I said that we had heard from the Cranfield Institute that the vehicle was unsafe and unstable. There were other pointers in that direction. Many hon. Members will remember that I pressed again and again for publication of the MIRA reports. After I became Minister for the disabled the MIRA reports were published. They are important documents and have been placed in the Library of the House of Commons. We have taken action on the MIRA reports.

Some have said that the synopsis of the wind gust tests did not give the whole story about what happened when the vehicle was tested by MIRA. The full report showed, as I informed the hon. Member for Exeter, that the synopsis was in no way misleading. No essential information was hidden in the synopsis of the report placed in the Library.

Over the past 18 months there has been a great deal of consultation with organisations representing disabled people. I spend much of my time with disabled people. The Central Council for the Disabled has recently discussed the mobility allowance and mobility problems of disabled people with 2,000 severely handicapped people and the organisations representing them. The information from those we consulted after publication of the Sharp Report was extremely instructive. I heard far more about the need for a high-profile vehicle with light steering after becoming Minister for the disabled than I heard before.

Some months ago my hon. Friend the Member for Eccles asked me to see a deputation in his constituency. I was visiting the Swinton Children's Hospital, which cares for abandoned children. Some of them are in hospital on custodial, not medical, grounds. I saw the deputation. My hon. Friend's constituents said that they were very angry about the London-based criticism of the three-wheeler. One man, who is representative of disabled people and runs an organisation for disabled drivers, said "If you take my three-wheeler away, you immobilise me".

In the last 18 months we have published the Sharp Report and the MIRA reports. More than that, we have had wide-ranging and detailed consultations with disabled people and their representatives.

It is eminently clear that many disabled people want to keep the three-wheeler. My preference was to go for cash against vehicles of any kind. Many able-bodied people make a simple error when they talk about disabled people. They think that the disabled are standard people. If one argues for a standard vehicle, the assumption is that the disabled are standard people. About 12 months ago an hon. Lady from the other side of the Committee told me that one of her constituents was so tall, wide and disabled that he could not fit into either a three-wheeler or a four-wheeler.

My hon. Friend the Member for Eccles, after I became a member of the Government, put forward what some might regard as the rather eclectic proposition that a milk-float was the only vehicle that some disabled people could possibly drive.

7.45 p.m.

I should like to make this point clear. It sounds like a joke, but it is absolutely true. There is a disabled person in Horsham, and the best vehicle for him is a milk-float. Hon. Members may smile, but it is a fact. He is the horizontal man, Paul Bates, and, with the aid of some advanced technology, he drives a milk-float. There is no standard vehicle. I could not agree more with my hon. Friend on that point.

I am arguing strongly that the disabled are not standard people. Therefore, the more freedom of choice that we can give the disabled, the better it will be for them and for society, because large numbers of disabled people will be able to take a much greater part in our social life.

I was extremely concerned when, in the context of the test on the invalid vehicle carried out by MIRA, the hon. Member for Exeter, in a recent Adjourn- ment debate, referred to the number of three-wheeled tricycles which overturned. In reply to a number of questions, including some posed by the hon. Gentleman himself, I have given an account of one overturning incident which was reported to me and was entirely unrelated to the test. If the hon. Gentleman has any information leading him to suppose that there was another such incident, I shall of course look into it immediately.

Regarding the specific request that I should give permission for MIRA employees to discuss the incident, which was entirely unrelated to the test, I should point out that that is a matter for MIRA. That body, which is completely independent, was carrying out the test on the three-wheeler for my Department on a contract basis.

I know that the hon. Member for Exeter, as secretary of the all-party disablement group, is deeply concerned to maximise the safety of disabled people and, with me, to give them the greatest possible freedom of choice. I, too, am concerned to maximise the safety of disabled people.

There has been a great deal of publicity about the safety of the three-wheeler. My hon. Friend the Member for Stoke-on-Trent, South (Mr. Ashley) referred to articles in the Press about the safety of the three-wheeler. An article in the Press last Monday stated that there were 1,412 accidents—this was all accidents, including parking scrapes—in the half year to 31st March 1975 compared with 2,502 accidents for the whole of the year before. These figures related to the Model 70 three-wheeler. What the article did not point out, although it was clear from the information that I gave the House at the time, was that the later figures related to a larger number of vehicles and that the accident rate per vehicle showed a slight fall.

Nevertheless, I am anything but complacent about the safety of the three-wheeler or the safety of disabled people in other vehicles. Bearing in mind that the number of three-wheelers on the roads is, and has been throughout the five years up to September 1974, about double the number of four-wheeled vehicles, the accident figures are not adverse to the three-wheeler, although they may suggest that the dangers of driving for disabled people, whatever vehicle they may drive, are somewhat greater than for other drivers. That is another reason why the introduction of cash as the main benefit is right.

My hon. Friend knows that we have been arguing about the three-wheeler or the four-wheeler for many years, in Opposition and in Government. I accept that he has gone to great trouble to be satisfied about the safety of the vehicle, but I would draw his attention to the safety and health of the disabled driver. Does he realise that the single driver may, if he has a breakdown in the middle of the night, have to sit there until people go to work at 5.30? Would he bear in mind that grave danger of the three-wheeler?

I can say more than that I shall bear it in mind. It is that consideration and many others which have made me opt for cash against cars. For the future we are seeking to get away from the three-wheeler as the main benefit. For any disabled person who can drive a car and wants to do so there will now be the mobility allowance. We know that it is not by itself enough to buy and run a car, but by raising it to £5 for everybody we have gone as far as is humanly possible. It would be unfair to single out for extra benefit people who can drive a car. We are moving, as no previous Government have done, towards helping disabled people to choose for themselves, rather than forcing any machine on them.

As I have said, I have learned a great deal since I became the Minister for the disabled about the wishes of large numbers of the disabled themselves. I am satisfied that the main decision that we have made is the one that the vast majority of disabled people would have wanted us to make.

I was asked about the Netherlands. As I have explained, schemes abroad may reflect different national priorities and may benefit one group rather than another. I recognise that the Dutch scheme has advantages for some disabled drivers, but I would not accept that the Dutch have found a complete solution which we have only to adopt. I understand that it is a requirement of their scheme for the provision of cars that the disabled person should be able to move his arms freely. People with limited arm movement who cannot manage an adapted car are, therefore, better off under our scheme because often one or other of the special steering arrangements available on the three-wheeler will suit them. It is their own decision whether to apply for or drive a three-wheeler. Our scheme makes it available, and in future they will have the option of the mobility allowance.

I shall be looking into the extremely important point raised about the EEC Social Fund. I have not ignored this matter, and I hope to have helpful information to give at an early date.

My hon. Friend the Member for Eccles referred to the possibility of a "cost of motoring index". He mentioned elderly beneficiaries under the existing scheme and was anxious to know their position when they retired. Existing beneficiaries under the present arrangements will have preserved rights to retain their benefit or revert to it as long as they continue to meet the conditions under which it was awarded. So people over pensionable age with a private car allowance keep it. They are unaffected by the fact that the mobility allowance is not payable beyond pension age.

The hon. Member for Wallasey (Mrs. Chalker) stressed the need to ensure that handicapped children should have every possible assistance to integrate them with other children who are not disabled. She referred to the Rowntree Family Fund. We have recently doubled the amount of the fund, and I announced on 4th December last year that it is now available to all severely handicapped children and not just those who are severely congenitally handicapped.

The hon. Lady said that the fund was helping the families of severely disabled children not only with mobility but with telephones and other forms of assistance. Her right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), when Secretary of State for Social Services, made it clear that the fund would not be asked to provide help which was provided for under legislation. He had in mind the Chronically Sick and Disabled Persons Act 1970, Section 2 of which provides for all forms of help for the greater safety, comfort and convenience of disabled people—a wide-ranging provision. The right hon. Gentleman the Secretary of State in the previous Government was right to emphasise the availability of forms of help which can be given under existing legislation.

The hon. Lady clearly wanted to reduce the age of entitlement below five. Like my hon. Friend the Member for Chorley (Mr. Rodgers) she was concerned that the allowance would not start to be paid until that age. It is our intention that the allowance will be payable to the parents of the disabled child. The view which has been taken is that the problems of mobility with younger children are less acute and that it is right to start at school age. However, strong pressure on behalf of children under five—

What does the hon. Gentleman mean by "less acute"?

There are children born severely handicapped who are not recognised as such in the first few months of their lives. There are forms of handicap which do not even make themselves plain to the parent. I am saying that very young children are given mobility help whether able-bodied or disabled. I am not arguing that we would gladly exclude children under five.

My hon. Friend gave as an example those who clearly have difficult problems of transport. In what way are they "less acute" than those to which the Minister is referring?

In the example given, the disability was extremely acute. Considering, however, the general problem of mobility of handicapped children, it can be argued that one should begin at school age. Children go to pre-school classes. I am not arguing that there is no case for children under five. My hon. Friend the Member for Chorley and the hon. Member for Wallasey made a very strong case for the under-fives, but we are trying to spread the finite resources as equally and as well as we can.

8 p.m.

On the specific question of the limitation of resources, we all realise the difficulties that face my hon. Friend. Will he say how much it would cost to extend this benefit to children between the ages of two and five as the amendment suggests?

I do not have the precise figure for that, just as I was unable to give a definitive reply to my hon. Friend the Member for Mitcham and Morden. I shall be in touch with my hon. Friends about the costing. Even the figure of 100,000 is not definite, which is why I referred in approximate terms to there being 100,000 beneficiaries from the scheme.

My hon. Friend the Member for Stoke-on-Trent, South spoke with great authority on the problems of the severely disabled. I shall bear his point very much in mind. He knows we have been extremely concerned to use the new resources available to us as equitably as possible. I am sure he agrees that this is a historic day for the majority of the disabled who are incapable of mobility. They are the people, including large numbers of disabled children, who cannot drive a car.

The hon. Member for Wells (Mr. Boscawen) referred to comparative costs, and I said something about that in reply to the hon. Member for Sutton Coldfield.

I have not dealt with all the points which have been raised. This is a most complicated matter. The announcement which we have made is a major breakthrough for the most severely disabled people. Money buys mobility for the disabled as much as for the able-bodied, and £1,300 every five years will buy a lot of mobility. The new allowance will enable many people to become a part of society instead of being treated as apart from society. The main purpose of the allowance is to let the individual decide how and when he will be mobile as well as bringing an end to the cruel discrimination against those who are so severely disabled that they cannot drive.

Amendment agreed to.

Clause 62, as amended, ordered to stand part of the Bill.

Clause 63


Amendment made: No. 3, in page 49, line 44, after 'II', insert '(except section (Mobility allowance))'.—[ Mr. Alfred Morris.]

Clause 63, as amended, ordered to stand part of the Bill.

Clause 64


Amendment made: No. 4, in page 50, line 37, at end insert:

'(1A) Without prejudice to subsection (1) above there may by an order under this section be appointed different days for the coming into force of section (Mobility allowance) of this Act, and of other provisions of this Act relevant to the operation of that section, in relation to persons or different age groups'.—[ Mr Alfred Morris.]

Clause 64, as amended, ordered to stand part of the Bill.

New Clause 1

Mobility Allowance

'(1) In Chapter II of Part II of the principal Act (non-contributory benefits) the following is inserted after section 37—

"Mobility allowance.
37A.—(1) Subject to the provisions of this section, a person who satisfies prescribed conditions as to residence or presence in Great Britain shall be entitled to a mobility allowance for any period throughout which he is suffering from physical disablement such that he is either unable to walk or virtually unable to do so.
(2) Regulations may prescribe the circumstances in which a person is or is not to be treated for the purposes of this section as suffering from such physical disablement as is mentioned above; but a person qualifies for the allowance only if—
  • (a) his inability or virtual inability to walk is likely to persist for at least 12 months from the time when a claim for the allowance is received by the Secretary of State; and
  • (b) during most of that period his condition will be such as permits him from time to time to benefit from enhanced facilities for locomotion.
  • (3) The weekly rate of a mobility allowance shall be that specified in Schedule 4 to this Act, Part III, paragraph 3A.
    (4) No person shall be entitled to a mobility allowance—
  • (a) in respect of a period in which he is under the age of 5 or over pensionable age;
  • (b) except in prescribed cases, for any week before that in which a claim for the allowance by or in respect of him is received by the Secretary of State.
  • (5) Regulations may prescribe cases in which mobility allowance is not to be payable, or is to be payable at a reduced rate, while the person otherwise entitled has the use—
  • (a) of an invalid carriage or other vehicle provided by the Secretary of State under section 33 of the Health Services and Public Health Act 1968; or
  • (b) of any prescribed description of appliance supplied under the enactments relating to the National Health Service.
  • (6) Except so far as may be provided by regulations, the question of a person's entitlement to a mobility allowance shall be determined as at the date when a claim for the allowance is received by the Secretary of State.
    (7) A payment to or in respect of any person by way of a mobility allowance, and the right to receive such a payment, shall (except in prescribed circumstances and for prescribed purposes) be disregarded in applying any enactment or instrument under which regard is to be had to a person's means.".
    (2) In Part III of Schedule 4 to the principal Act there is inserted:—
    "3A. Mobility allowance … £5".
    (3) Regulations may make provision—
  • (a) for permitting a claim for a mobility allowance to be made, or treated as if made, for a period beginning after the date on which the claim is made;
  • (b) for permitting an award on any such claim to be made for a period beginning after the date on which the claim is made subject to the condition that the person in respect of whom the claim is made satisfies the prescribed requirements for entitlement when benefit becomes payable under the award;
  • (c) for the review of any such award if those requirements are found not to have been satisfied.
  • (4) Regulations may provide for disqualifying a person for receiving a mobility allowance for a period not exceeding six weeks on any disqualification if he fails without good cause to attend for, or to submit himself to, such medical or other examination or treatment as may be required in accordance with the regulations.
    (5) In the case of regulations under section 114(1) of the principal Act (determination of questions), so far as they relate to any question arising in connection with mobility allowance, subsection (3) of that section (determination of questions by Secretary of State's officer; reference of question to local tribunal, etc.) shall not apply.
    (6) Section 139 of the principal Act (consultation with National Insurance Advisory Committee) shall not apply to any regulations contained in an instrument which states that they relate only to mobility allowance and are made consequentially on the introduction of the allowance'.—[Mrs. Castle.]

    Brought up, read the First and Second time, and added to the Bill.

    '47A. In section 125(1) of that Act, in paragraph (a) for the words "the sum specified in Part III for" there shall be substituted the words" the sums specified in Part III for mobility allowance and".
    47B. In section 135(2) of that Act, after paragraph (c) there shall be inserted—"

    (cc) a mobility allowance".

    47C. In section 145(1) of that Act, after paragraph (b) there shall be inserted

    "(bb) payments to or in respect of persons suffering from physical disability such that they are unable to walk or virtually unable to do so"'.—[Mrs. Castle.]

    I beg to move, as an amendment to the proposed amendment, sub-amendment (a), to leave out lines 1 to 3.

    Division No. 227.]


    [8.06 p.m.

    Bain, Mrs MargaretFowler, Norman (Sutton C'f'd)McCrindle, Robert
    Biffen, JohnGow, Ian (Eastbourne)McCusker, H.
    Boscawen, Hon RobertGower, Sir Raymond (Barry)Macfarlane, Nell
    Boyson, Dr Rhodes (Brent)Gray, HamishMacGregor, John
    Brittan, LeonGriffiths, EldonMacmillan, Rt Hon M. (Farnham)
    Brotherton, MichaelGrimond, Rt Hon J.Marshall, Michael (Arundel)
    Brown, Sir Edward (Bath)Grylls, MichaelMarten, Nell
    Buchanan-Smith, AlickHall-Davis, A. G. F.Mather, Carol
    Carr, Rt Hon RobertHamilton, Michael (Salisbury)Maude, Angus
    Chalker, Mrs LyndaHannam, JohnMaxwell-Hyslop, Robin
    Clark, Alan (Plymouth, Sutton)Harvie Anderson, Rt Hon MissMiscampbell, Norman
    Clarke, Kenneth (Rushcliffe)Hayhoe, BarneyMolyneaux, James
    Cockcroft, JohnHenderson, DouglasMontgomery, Fergus
    Cooke, Robert {Bristol W)Holland, PhilipMorrison, Charles (Devizes)
    Cope, JohnHooson, EmlynMorrison, Hon Peter (Chester)
    Corrie, JohnHowells, Geraint (Cardigan)Neave, Airey
    Costain, A. P.Hurd, DouglasNeubert, Michael
    Crawford, DouglasJones, Arthur (Daventry)Normanton, Tom
    Crouch, DavidKellett-Bowman, Mrs ElaineOsborn, John
    Crowder, F. P.Kimball, MarcusPage, Rt Hon R. Graham (Crosby)
    Dean, Paul (N Somerset)King, Evelyn (South Dorset)Pardoe, John
    Dodsworth, GeoffreyKitson, Sir TimothyParkinson, Cecil
    Drayson, BurnabyKnight, Mrs JillPenhaligon, David
    Dunlop, JohnKnox, DavidPowell, Rt Hon J. Enoch
    Dykes, HughLane, DavidRathbone, Tim
    Eden, Rt Hon Sir JohnLawrence, IvanRawlinson, Rt Hon Sir Peter
    Evans, Gwynfor (Carmarthen)Le Marchant, SpencerRees-Davies, W. R.
    Ewing, Mrs Winifred (Moray)Lewis, Kenneth (Rutland)Reid, George
    Fairgrieve, RussellLuce, RichardRenton, Tim (Mid-Sussex)
    Fletcher-Cooke, CharlesMcAdden, Sir StephenRhys Williams, Sir Brandon
    Fookes, Miss JanetMacCormick, IainRodgers, Sir John (Sevenoaks)

    Schedule 4

    Consequential Amendments

    Amendments made: No. 5, in page 66, line 2, at end insert—

    '45A. In section 34(1) of that Act, after paragraph (c), there shall be inserted—
    "(cc) mobility allowance"'.

    No. 6, in page 66, line 4, at end insert—

    '46A. In section 119(4) of that Act, after paragraph (c) there shall be inserted—
    "(cc) modifying those subsections in relation to payments by way of a mobility allowance in respect of any person, where the benefit was not paid to him but to some other person on his behalf"'.—[Mrs. Castle.]

    Amendment proposed: No. 7, in page 66, line 12, at end insert—

    Question put, That the amendment to the proposed amendment be made:—

    The Committee divided: Ayes 126, Noes 138.

    Ross, Stephen (Isle of Wight)Stainton, KeithWatt, Hamish
    Host, Peter (SE Derbyshire)Stanley, JohnWeatherill, Bernard
    Scott, NicholasSteen, Anthony (Wavertree)Wigley, Dafydd
    Scott-Hopkins, JamesStewart, Donald (Western Isles)Wilson, Gordon (Dundee E)
    Shaw, Giles (Pudsey)Stradling Thomas, J.Winterton, Nicholas
    Shaw, Michael (Scarborough)Taylor, R. (Croydon NW)Wood, Rt Hon Richard
    Shelton, William (Streatham)Taylor, Teddy (Cathcart)Young, Sir G. (Ealing, Acton)
    Shepherd, ColinTebbit, Norman
    Silvester, FredTemple-Morris, Peter


    Sinclair, Sir GeorgeThompson, GeorgeMr. Anthony Berry and
    Smith, Cyril (Rochdale)Townsend, Cyril D.Mr. Michael Roberts.
    Speed, Keithvan Straubenzee, W. R.
    Spicer, Jim (W Dorset)Wainwright, Richard (Colne V)


    Allaun, FrankHayman, Mrs HeleneRees, Rt Hon Merlyn (Leeds S)
    Anderson, DonaldHeller, Eric S.Richardson, Miss Jo
    Armstrong, ErnestHughes, Rt Hon C. (Anglesey)Roberts, Albert (Normanton)
    Bagier, Gordon A. T.Hughes, Robert (Aberdeen N)Roberts, Gwilym (Cannock)
    Barnett, Guy (Greenwich)Hunter, AdamRoderick, Caerwyn
    Barnett, Rt Hon Joel (Heywood)Jackson, Miss Margaret (Lincoln)Rodgers, George (Chorley)
    Bates, AllJay, Rt Hon DouglasRooker, J. W.
    Booth, AlbertJohnson, Walter (Derby S)Roper, John
    Boyden, James (Bish Auck)Jones, Alec (Rhondda)Ross, Rt Hon W. (Kilmarnock)
    Bray, Dr JeremyJones, Barry (East Flint)Ryman, John
    Callaghan, Jim (Middleton & P)Jones, Dan (Burnley)Sedgemore, Brian
    Canavan, DennisKerr, RussellSelby, Harry
    Cant, R. B.Kilroy-Silk, RobertShaw, Arnold (Ilford South)
    Carter-Jones, LewisLamble, DavidSkinner, Dennis
    Cartwright, JohnLamond, JamesSmall, William
    Castle, Rt Hon BarbaraLewis, Ron (Carlisle)Spearing, Nigel
    Clemitson, IvorLitterick, TomSpriggs, Leslie
    Cocks, Michael (Bristol S)Lomas, KennethStallard, A. W.
    Craigen, J. M. (Maryhill)Loyden, EddieStewart, Rt Hon M. (Fulham)
    Cryer, BobLyon, Alexander (York)Stoddart, David
    Cunningham, G. (Islington S)Lyons, Edward (Bradford W)Strang, Gavin
    Cunningham, Dr J. (Whiteh)Mabon, Dr J. DicksonTaylor, Mrs Ann (Bolton W)
    Dalyell, TamMcElhone, FrankThomas, Mike (Newcastle E)
    Davies, Bryan (Enfield N)Mackintosh, John P.Thomas, Ron (Bristol NW)
    Davies, Ifor (Gower)McMillan, Tom (Glasgow C)Thorne, Stan (Preston South)
    Delargy, HughMadden, MaxTomney, Frank
    Dempsey, JamesMarks, KennethTorney, Tom
    Doig, PeterMarquand, DavidTuck, Raphael
    Dormand, J. D.Marshall, Dr Edmund (Goole)Wainwright, Edwin (Dearne V)
    Douglas-Mann, BruceMellish, Rt Hon RobertWard, Michael
    Dunn, James A.Mendelson, JohnWatkinson, John
    Dunnett, JackMikardo, IanWeetch, Ken
    Edwards, Robert (Wolv SE)Millan, BruceWeltzman, David
    Ellis, John (Brigg & Scun)Miller, Dr M. S. (E Kilbride)Wellbeloved, James
    Evans, John (Newton)Molloy, WilliamWhite, Frank R. (Bury)
    Ewing, Harry (Stirling)Morris, Alfred (Wythenshawe)Whitlock, William
    Fletcher, Ted (Darlington)Murray, Rt Hon Ronald KingWilliams, Alan Lee (Hornch'ch)
    Ford, BenNewens, StanleyWilliams, W. T. (Warrington)
    George, BruceNoble, MikeWilson, Alexander (Hamilton)
    Ginsburg, DavidOakes, GordonWise, Mrs Audrey
    Gourlay, HarryO'Halloran, MichaelWoof, Robert
    Graham, TedO'Malley, Rt Hon BrianYoung, David (Bolton E)
    Grant, George (Morpeth)Ovenden, John
    Hamilton, James (Bothwell)Owen, Dr David


    Hamilton, W. W. (Central Fife)Palmer, ArthurMiss Betty Boothroyd and
    Harper, JosephPendry, TomMr. Thomas Cox.
    Harrison, Walter (Wakefield)Phipps, Dr Colin
    Hatton, FrankRadice, Giles

    Question accordingly negatived.

    Amendment agreed to.

    Schedule 4, as amended, agreed to.


    Amendment made: No. 1, in line 10, leave out "and to" and insert:

    "(including an amendment of Part II of the Social Security Act 1975 introducing a new non-contributory benefit called 'mobility allowance'); and to make other provision about"—[Mrs. Castle.]

    Bill reported, with amendments; as amended ( in the Standing Committee and on recommittal), considered.

    New Clause 1

    Premium On Termination Of Contracted-Out Scheme

    ".—(1) In the case of an occupational pension scheme which is contracted-out, the Occupational Pensions Board may, for the event of its ceasing to be contracted-out, approve any arrangement made or to be made in relation

    to the scheme, or for its purposes, for the preservation or transfer—

  • (a) of earners' accrued rights to guaranteed minimum pensions under the scheme;
  • (b) of the liability for the payment of guaranteed minimum pensions thereunder in respect of persons who have then become entitled to receive them.
  • (2) If the scheme ceases to be a contracted-out scheme (whether by being wound up or otherwise)—

  • (a) the employer of each earner whose accrued rights to guaranteed minimum pensions under the scheme are not subject to approved arrangements shall pay a state scheme premium in respect of that earner; and
  • (b) the prescribed person shall pay a state scheme premium in respect of each person who has then become entitled to receive a guaranteed minimum pension under the scheme and whose guaranteed minimum pension rights are not subject to such arrangements.
  • (3) A premium under subsection (2)( a) above may be referred to as an 'accrued rights premium'; and a premium under subsection (2)( b) may be referred to as a 'pensioner's rights premium'; and in each case the premium shall be paid within the prescribed period to the Secretary of State.

    (4) For the purposes of subsection (2) above, an earner's accrued rights or, as the case may be, a person's guaranteed minimum pension rights are subject to approved arrangements if (either before or after the scheme ceased to be contracted-out) the Occupational Pensions Board have approved arrangements under subsection (1) above which operate as respects him and the rights in question, and have not since withdrawn their approval.

    (5) The amount—

  • (a) of an accrued rights premium shall be the cost (as certified by the Secretary of State) of providing guaranteed minimum pensions for the earner and his widow in accordance with his accrued rights under the scheme; and
  • (b) of a pensioner's rights premium shall be the cost (as so certified) of providing or continuing to provide any guaranteed minimum pension thereunder, whether for the earner (or former earner) or for his widow.
  • (6) The costs referred to in subsection (5)( a) and ( b) above shall, if the person liable for the premium so elects in the prescribed manner, be calculated on the basis that (disregarding any orders made under section 21 of this Act) the relevant earnings factors have been increased by 12 per cent. per annum in each of the five complete tax years before that in which the scheme ceases to be contracted-out.

    (7) In calculating those costs, the Secretary of State shall apply the prescribed actuarial tables; and regulations for the purposes of this subsection—

  • (a) shall be made only after consultation with the Government Actuary;
  • (b)) shall be so framed that the tables applicable from time to time vary with the yield on such investments or classes of investments as the Secretary of State thinks fit.
  • (8) In certifying any amount under subsection (5) above, the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

    (9) Payment of an accrued rights premium shall extinguish the earner's accrued rights to guaranteed minimum pensions under the scheme; and payment of a pensioner's rights premium shall extinguish any right to receive guaranteed minimum pensions thereunder, whether for the earner (or former earner) or for his widow'.—[ Mrs. Castle.]

    Brought up, and read the First time.

    8.16 p.m.

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

    With this clause we may also discuss the following: sub-amendment (a), at end of subsection (7)(b), insert—

    '(c) shall require that the Secretary of State shall publish the full actuarial bases of such tables and shall give five years' notice of any change in such bases'.

    Amendment No. 29, in Clause 39, page 29, line 39, at end insert—

    '(6) In considering a scheme for the purposes of subsections (1) and (2) above, the Board may calculate guaranteed minimum pensions on the basis that the earner's earnings factor for any relevant year shall be taken as that factor increased by eight per cent. per annum and not as increased by any order or orders that have come into force under section 21 above'.

    Government Amendment No. 31.

    Amendment No. 32, in Clause 41, page 31, line 32, after 'premiums', insert—

    'subject to the provisions of subsection (7) below'.

    Amendment No. 33, in page 32, line 19, at end insert—

    '(7) If the resources of the fund are less than the amount of the state scheme premium then the amount of the state scheme premium shall be determined as prescribed'.

    This new clause fulfils a promise I made in Committee. During our Committee debates my right hon. Friend the Minister of State, the Under-Secretary and I made it clear that what we were seeking in the Bill was a permanent solution of the pensions questions, in so far as anything can be considered permanent in our developing political life. Perhaps it would be better to say that we are seeking an enduring solution based on an agreement between both sides of the House that the right way to solve our problems is to secure a partnership between the State scheme and private occupational schemes. That is what we have sought to do in the Bill.

    We have recognised that working men and women attach considerable importance to their private occupational schemes when they are good ones, so we have sought to improve the schemes and to enable the good private schemes to continue. We have sought to remove any disincentive in the Bill to the contracting-out of good, recognised schemes. I am sure Opposition Members will appreciate that we made several concessions in Committee to that end. They will remember that we agreed to a larger reduction in the contribution for the approved contracted-out scheme, and we made a concession on the buying-back of early leavers. As the Committee stage developed, however, it became clear that there remained one major uncertainty which was likely to act as a disincentive to employers to contract out. That was described in Committee as the open-ended commitment which faced the contracted-out employer if for any reason he wanted or had to terminate his arrangements for contracting out.

    Under the provisions of the Bill as it stands and as it came out of Committee, when an occupational scheme ceases to be contracted out the employer has to pay a premium to the State scheme in respect of the earners in the scheme. The amount of that premium is the cost of providing or continuing to provide guaranteed minimum pensions for the employee and his wife.

    Clause 41, which is being deleted by Amendment No. 31, provides:
    "In calculating the costs … the Secretary of State shall apply the prescribed actuarial tables".
    which will be set out in regulations.

    The complaint made in Committee and by the pensions interests to my right hon. Friend the Minister of State who has been in continuing consultation with them, is that at a time when wages are rising rapidly and investment yield is falling, the employer could be caught between the upper and nether millstones of rising costs and falling resources and that the fear of being caught in that way could make him hesitate to contract out under the scheme. In addition, it was put to us that when a scheme was winding up the employer might be driven to realise his assets to pay high premiums at a time when the yield on and therefore the market value of his assets was low.

    None of us expects this to be the permanent background to this legislation. If it were, not only the scheme but the country's whole economy would be in a parlous state. But the experience of recent years has caused a great deal of understandable nervousness and uncertainty among employers. Therefore, it was put to us in Committee that a way must be found to close the open-ended commitment which the employer faced when his scheme ceased to be contracted out for any reason and he had to buy back his employees into the State scheme.

    During discussions in Committee and during the talks which my right hon. Friend had with pensions interests, various and highly complex solutions were advanced. The ingenuity of some members of the Committee has been commendable but not always completely fruitful in finding an answer to this problem. There was no consensus of opinion among hon. Members and there has been no consensus of opinion among pensions interests, because we are seeking to deal with an emergency situation and we cannot legislate on the basis that the emergency is endemic and that provision for dealing with it should therefore be built into the legislation. There has to be a fall-back position for dealing with a situation which it is hoped will not face any of the schemes concerned.

    We were immensely intrigued and stimulated by the various suggestions that were put forward. As I told the Committee when we last discussed this matter, my right hon. Friend has been in continuing consultation with the pension interests to see whether an agreed solution can be reached. In the end, it became clear to us that there would not be a complete consensus of opinion. Therefore, we have had to reach our own decisions.

    New Clause 1, which I am recommending to the House, embodies the result of our thinking, in the light of the talks that have been held and of the Committee's discussion. I pay tribute to my right hon. Friend, who has been continuously thinking about this problem, and to the officials of my Department who have been working to clothe his bright ideas with the practicalities of legislation and administration. The clause is our answer, and no better one has been produced. It suceeeds remarkably well in dealing with the potential catastrophe with which we are trying to deal.

    The clause does three things. First, it meets a suggestion made in Committee that there might be a little more clarification of nomenclature. It distinguishes between the two types of premium which have to be paid on the termination of contracting out by giving them names. We refer to the "accrued rights premium", payable in the case of the employee with accrued rights, and to the "pensioner's rights premium", which relates to the retired person with a guaranteed minimum pension when the scheme winds up.

    Subsection (6) limits the employer's financial liability when he is buying his employees back into the State scheme. Thirdly, in subsection (7) it is provided that in calculating the cost on which the premium is based the actuarial tables shall vary with the yield on investment.

    The way in which the provision will work is as follows. First, under subsection (6), for buying-back purposes the employer, instead of having to revalue the amount of the guaranteed minimum pension earned in line with national average earnings, can choose to revalue on the basis that earnings have risen by 12 per cent. a year in each of the five complete tax years in the period before the scheme ceased to be contracted out. That, as the House will appreciate, has the effect of letting the employer know in an uncertain situation the maximum extent of his commitment for five years ahead. At a time of an upsurge in earnings such as we have been through it would limit his liability in respect of the guaranteed minimum pension. After a period of high inflation, the employer would be able to wait and see whether the income from and the value of his investments were catching up with earnings before having to take a decision to buy back. In other words, it gives him time.

    8.30 p.m.

    Secondly, under subsection (7) the premium paid into the State scheme to transfer the guaranteed minimum pension liability back to the State scheme will vary according to current market yields. It is envisaged that the regulations which we shall be laying under the subsection will provide for a set of buying-back tables, the particular tables to be applied at any time depending on the value of some measure of market yield. For practical reasons it would probably be desirable for the same tables to remain in operation for a minimum period of at least, let us say, one month.

    The details of how the scheme would operate are still being worked out. We have not yet decided whether the measure to be used should be the price of a particular stock or some market index, and whether it would be desirable or feasible to take account of changes in the yield of equities as well as gilt-edged stocks. When the proposals have been worked out in detail it will clearly be only reasonable to give the pension interests an opportunity to comment before the proposals are embodied in regulations, and that is what we shall do.

    Together these two new provisions should remove the fear on the part of employers that a period of rapid inflation could result in a high buying-hack premium to be met out of depreciated assets, with a resulting deficiency in the occupational scheme which would be absolutely beyond the employer's ability to make good without serious damage to his enterprise.

    It would be helpful if the right hon. Lady could clarify the way in which the Government Actuary is involved. It is said in subsection 7(a) that the regulations will be made after there has been consultation with the Government Actuary. Subsection 7(b) says, as the right hon. Lady has just explained, that the applicable tables will take into account the yield on such investments as the Secretary of State thinks fit. It would help if the right hon. Lady were able to say that in the arrangements which she is now working out the Government Actuary will be consulted as to the appropriate investment to take into account.

    Yes, of course he will be consulted. I do not think that the lack of a specific mention has any significance. We rely very much on the Government Actuary's advice in this whole area.

    These two new provisions should remove the fear of the open-ended commitment which was referred to in Committee by so many hon. Members. It would give the employer an assurance that it is no part of our intention that he should be placed in a situation in which, as a result of his statutory obligations, he could be bankrupted. I repeat what my right hon. and learned Friend said in Committee—namely, that it is no part of our purpose to place undertakings on occupational pension schemes that they are manifestly unable to fulfil. The whole purpose of the Bill would be invalidated if we were to do so.

    There could be cases where a firm was in difficult financial straits and had to apply the provisions of the clause. Would the liability under the clause produce, as it were, a preferential creditor, as it would in the case of salaries, or would the position be that of an ordinary creditor under the bankruptcy scheme?

    If there is to be any guarantee to the members of the scheme, that must be so. We are trying to meet the needs of both employer and employee. To ensure that the scheme is acceptable, we are limiting the liability. That does not mean that the rights of the employer go out of the window. I think that is obvious.

    In Committee the hon. Member for Somerset, North (Mr. Dean) asked me to confirm that when I produced the Government's proposals I would ensure that they covered three areas—first the case of the scheme when contracting out ceased, secondly the case of the scheme on winding up, and thirdly the case of the early leaver.

    The provisions in the new clause cover both schemes—namely, schemes which cease to contract out and those which are involved in a winding-up. In amendment No. 36, with which we shall deal a little later, I shall be extending the concession which varies the premium in line with the market rate of interest to cover early leavers. We can examine that point later. I hope that the hon. Gentleman will be satisfied that I have met the three matters mentioned in Committee.

    We have throughout been in close touch with the pension interests and it is fair to say that they have welcomed our provisions. I think they recognize that the clause deals satisfactorily with the problems in respect of earnings revaluation where a scheme ceases to contract out and the situation involving a decrease in yield, which in turn leads to a fall in asset values.

    I have been asked to go further. Indeed, it has always been my experience in the Government that once one makes a concession one is asked to take even further steps. That is what has happened in this case. I have been asked to ensure that the tables should not operate for a period of five years. Indeed, that is the effect of sub-amendment (a). We do not know whether it will be moved, and we shall wait and see, but, if it is moved, my right hon. Friend the Minister of State will explain why we cannot accept sub-amendment (a).

    I hope that the House will welcome the clause as further proof of the fact that we have been genuine in our intention of a partnership between the State and private schemes. I hope indeed that the proposals will not be accepted grudgeingly. I want a message to go out from this House today as we reach the concluding stages of this Bill. The message is that yet again the Government have shown their real desire that good private schemes shall flourish and shall be enabled to operate. We want the message to be understood—and the message is that this scheme will stick.

    8.45 p.m.

    The clause is substantially the result of the bipartisan approach adopted in Standing Committee and our deliberations there. I am happy to confirm that we appear to be making real progress towards a bipartisan agreement on a scheme which will reassure those with an interest in occupational pensions that a genuine partnership will be achieved and will last into the future.

    It is in a way surprising that we begin on this note. I should certainly like to add to what the Secretary of State has said by paying tribute to her right hon. Friend and to her staff for the genuine way in which they responded to the arguments during Committee and for the great deal of work which has clearly been done in trying to meet the points and representations that were made. It is surprising that we have reached this stage in this manner, given the background of anger with which we began when the White Paper was first produced.

    The Crossman scheme produced by the Labour Government in 1970 fell with a General Election and was rejected by the succeeding Conservative Government. We committed ourselves to a scheme which we still defend vigorously—namely, the Joseph scheme—which provided occupational pensions for all. However, the present Government found it unacceptable. The anger arose when that scheme was rejected. Fortunately, both sides clearly reached the view that if we continued successfully to destroy each other's pension schemes, with successive parties throwing out a measure with a view to bringing forward something else, the uncertainty and change would succeed in completely destroying the occupational pensions industry outside. Moreover we would jeopardise the interests of the substantial number of people who have great expectations of good occupational pension schemes. Although we prefer the principle of funding and of occupational funded pensions being the main expectation of most people in work, we are prepared to settle for good contracting-out arrangements, for the maximum number of people, in schemes which meet the Government's requirements in this legislation.

    The clause deals with what the occupational pensions industry saw as the major obstacle. We must test the clause as it now stands, and the work of the House so far, to see whether we shall achieve the target which we are all agreed upon—namely, that when the new scheme comes into operation in 1977 or 1978 it will provide a structure which can be accepted by successive Governments thereafter as the structure within which any further political debate will take place, and that approximately 8 million working people will contract out under the arrangements that the Bill will lay down.

    The biggest single obstacle to that expectation and the factor most likely to persuade employers and those who advise them not to contract out but to abandon their general occupational scheme and to rely on the State was what we came to describe as the open-ended commitment that seemed implicit in the Bill as it originally stood.

    As the Secretary of State has said, fear about the open-ended commitment especially arises because of the unfortunate relationship that has persisted for some time between the yield on investment—the income coming into a fund—and the high level of inflation of wages and salaries, given that final salaries determine benefit.

    Those who manage any kind of invested fund have found that they have had a negative yield. Therefore, on paper they are losing money. The return on their investment has not been increasing at an adequate level to keep pace with rising wages and salaries. If that negative yield continues indefinitely there is simply no basis upon which any occupational pension, as we know it, can conceivably continue in business.

    There is one particular problem which follows this legislation. In the past there have always been short periods when this sort of situation has arisen and it has been a risk at the back of everybody's mind. However, an occupational pension fund, in the last resort, could wind up and do the best it could to satisfy as many of its beneficiaries as possible, and then close down.

    For the first time the Bill imposes a legal liability on the fund and, through the fund, on the employer to keep match with the open-ended inflation-proof obligation of guaranteed minimum pensions come what may, even if it is suffering a negative relationship between the yield on its investment and the inflation of its employees' salaries. As a legal liability the problem that was being contemplated in Committee was in the last resort—and I accept that we are talking about a doomwatch situation—an emergency situation which all Governments would hope to avoid. In the last resort one could reach a situation where the legal liability upon the fund and, through the fund, upon the employer could possibly bring down the company and cause bankruptcy and difficulties to other creditors. We must therefore see how far this substantial and welcome clause has gone towards removing that fear in all but the most unlikely situations.

    There are two other matters that we must consider. I have already said that the whole matter is bedevilled by the appalling economic climate and the serious difficulties that occupational pensions have faced for the past three or tour years, and that they are very fearful of facing for two or three years more. We are talking about the relationship between yield on investment and the high level of inflation and salaries. In Considering the clause in detail, we must keep in mind that the essential thing that will remove doubts and fears, the only thing that can make any sense if we continue expecting this to mean anything in 1978, is that there must be a change in the inflation in wages and salaries and the yield on investment, particularly the relationship between the two.

    The black fears sometimes expressed, one hopes unnecessarily, by some people in the pensions industry are in part conditioned by the apparent impossibility of this Government's producing any economic policy giving anyone confidence that the rate of salary and wage inflation will be checked in the foreseeable future. The problems of their yields on investment and the difficulties their funds face were made worse during the progress of the Bill through Committee by an asinine interjection by a Secretary of State in another Department, then Industry and now Energy. He started producing policy documents pre-supposing that at some future date a Government would start intervening with investment managers, directing that their funds be invested in areas approved by the Government or the National Enterprise Board, in such a way as to reduce the yield on investment that they would receive by investing elsewhere.

    That proposal was fantastically ill-timed. It ran totally counter to every thing Ministers now in the Chamber were saying about pensions policy, and it caused a great deal of fear. I am glad to say that the Secretary of State for Social Services ultimately associated herself with the Prime Minister's repudiation of the then Secretary of State for Industry's proposals, although her letter to me seemed a somewhat lukewarm repudiation and more an obedient falling in with the authority of the repudiation of those views by the Prime Minister. Given what the right hon. Lady has done in the clause, one trusts that she accepts that such proposals affecting the yield on investment would do terrible damage if they were ever introduced, if any such restraints were put on pension funds and the way in which the savings of working people, put into those funds, are invested in the future. We trust that such wild schemes will not be implemented.

    Against the background I have described, an employer contemplating contracting out must look at the limits of his commitment. He is bound to consider the worst that could happen to him if the present economic climate continued and he found himself facing liabilities because of his pension fund. Those whose commercial interest it is to try to persuade employers to contract out will be able to give that advice honestly, will be able to give good advice which will carry weight, only if they can tell an employer that there is a tolerable limit to the commitment that can fall upon him through his pension fund, that that commitment is reasonably ascertainable, with plenty of warnings, and that it could in no circumstances cause disaster to his company.

    When deciding what the extent of the commitment could be, one must look at the situations which may arise when a negative yield situation is persisting and the actuaries and others advising on the management of an invested pension fund realise that the fund faces serious difficulties in continuing to meet its obligations.

    It seems to me that there are three situations that can occur when a fund gets into such a situation and an employer is receiving advice. There are three courses open to an employer who has his mind trained to the situation when real difficulties are occurring in the management of his fund.

    The first is that the employer should cease to contract out, and buy back into the State scheme, which is one of the bases of the clause.

    The second—in my opinion, preferable to ceasing to contract out and buying back—is to contract out of the scheme, so that there is no ongoing commitment to a guaranteed minimum pension, but to make other arrangements for the preserved rights that have so far accrued, so that there is no question of buying the whole thing back into the State.

    The third course—I accept that it is the Government's preference—is to choose not immediately to cease to contract out but to do what any properly managed investment fund ought to be able to do—that is, to ride out a period of temporary difficulties until the climate improves, and then, having ridden out the storm, to look at the liability which falls on the fund management, if the worst comes to the worst. It would not do that if real disaster, possibly bankruptcy, lay at the end of it.

    In each of these situations it is necessary to look at limited liability. The third of those situations is covered by new Clause 1, because, as I understand it, a firm which chooses to ride out difficulties, hoping to continue to be contracted out, will have at the back of its mind the risk of winding up. This limits the liability on winding up, so that course may not be too bold, and is the preferable course that we would like it to take. This is an encouragement to do that.

    We have to test the clause. We seem to be agreed on the aims of it. Are we now completely out of the wood in the situation where an employer might face bankruptcy in some foreseeable situation, or where there are real risks? I think that substantially we are, and I pay tribute to the Government for introducing a scheme of their own which seems to cover most of the situations about which we were all so fearful in the Committee.

    The 12 per cent. limit on the revaluation of earnings factors for the last five years seems to me to be entirely an O'Malley idea, or that of those who advise the right hon. Gentleman. It supersedes all those which were pouring in on the Government, and the representations of the Opposition. The figure seems to be fairly steep at 12 per cent. I would not want to lobby against it. Some limitation of that kind is an advantage, and there is no point in trying to go to the market place haggling for the most advantageous bargain.

    I welcome the fact that subsection 7 (b) is applying the prescribed actuarial tables. That is the point we made in relation to an emergency arising at a time when the value of investments is depressed, so that depreciated assets have to be sold to pay the premium that has to be paid.

    Having said those things about it, and that it covers most aspects of the situation, I still have some doubts—as the right hon. Lady said, those in the industry have some doubts—whether the Government have completely achieved the purpose I described of encouraging the employer to ride out bad times, waiting for his well-managed fund to enjoy the usual relationship between yield, investments and liabilities, and to continue to contract out. When an employer looks at that situation, and at the limits of his liability upon winding up, it is true that, following this clause, one limitation is that there will now be a 12 per cent. limit on the revaluation of earnings factors in the last five years before he ceases to contract out. But he still has to pay a premium which takes account of the future cost of providing a guranteed minimum pension and that premium is still uncertain. It would still be an uncertain factor to be calculated at the time when the employer was deciding whether to ride out the storm.

    The CBI has been one vehicle for putting forward this complaint, as Ministers know. But it is not simply a CBI point. I understand that, on this occasion, the CBI has put forward an agreed problem.

    I quote from a letter which I have received from Mr. Martin Cobb of the CBI:
    "We are concerned, however, that there is still an element of openendness since if, when the new tables are issued under Clause 41 these are based on less favourable assumptions with regard to future earnings increases, or indeed to other factors such as reduced mortality of pensioners, occupational schemes might not be able to take the way out by winding up before the new tables come into force. We therefore think it essential that there should be one further concession to the effect that when the new tables are issued a sufficient period is provided in the legislation before these come into force so that companies will have an adequate opportunity to pay premiums on the old basis for which they will have funded. We assume the new tables will normally apply from the beginning of a tax year and we think it necessary to write into the legislation a provision that they will not be brought into force until at least 5 years after their approval by Parliament. This time factor would be consistent with the 5 year period in Sub-clause (6), and a period not much shorter than this would often in practice be required for a scheme to carry through all the consultation with employees and their representatives and make the administrative arrangements necessary in a winding up situation."
    We are back to the problem of the premium being calculated on the actuarial tables which have to be produced under the Bill. In Committee we all got used to these acturial tables and the problems of using them as the basis for assessing the various bills—in this case, the bill for buying back if anyone ceased to contract out.

    Sub-amendment (a) deals with the effect of changes in the actuarial tables. The Government say that the actuarial tables will usually last for five years and that there will usually be about 12 months' notice of any change. But the problem arises when those changes are made.

    If I understand the representations aright, the problem is that every time the tables are changed, at that stage the possible cost of the premium may change substantially. If there is to be only 12 months' notice of a change being made, that is not long enough if 12 months is not long enough with which to organize a winding-up situation or to decide about contracting out.

    The amendment would mean that, instead of having five-year tables changed at five-year intervals with 12 months' notice each time, there would be, to use town and country planning jargon, a five-year rolling period, with the tables being reviewed each year but with no change coming into force until five years after the date on which they were announced. The five years would give all the time necessary for the advice and the consultation for which the Bill wisely provides, and it would mean that at every stage when the price of the premium was being changed, the employer who decided that the price had moved to his advantage would have the option of shutting up shop, contracting out, winding-up and buying back at the price which he knew before.

    It is already the case that, in a sense, the tables would be rolling tables, since this clearly would indicate the premiums required according to investment yield at a given level and at a given time. Secondly, it is the case that they would not be rolling tables in the sense that the underlying, basic assumptions would be changed every year.

    However, the hon. Member for Rushcliffe (Mr. Clarke) should bear in mind that in the initial round of reactions which we had from the industry there was almost complete unanimity that the period of five years for the review of the fundamental assumptions underlying any such tables was a sensible period in which to operate.

    9.0 p.m.

    I am obliged to the right hon. Gentleman. There is complete unanimity now on the representations of the CBI. What he referred to was put forward in a different context, before new Clause 1 was tabled. That was when the acturial tables were being revised five years at a time, with 12 months' notice. Certainly, if they were to be applied in that way, the industry would not want them chopped and changed every year. The industry now wants, because of the circumstances the clause gives rise to and because of the two types of premium we are considering, a last-resort protection against the risks involved from the open-ended commitment. The industry wants five years' notice of change so that there will be a five-year interval between announcement and their coming into effect.

    If this is to be the industry's last protection, which it is now, it is the Government's answer to the open-ended commitment but it is not the situation which was discussed previously.

    The industry needs time to take advice from its actuaries and expert advisers and then to consult its members and trade unions—which, easily, demonstrably could certainly take a number of years, given the slow progress with the OPB, if that is involved—but it also has another advantage which would satisfy what the Government are trying to meet; namely, certainty. With the five years' notice the price of the premium at any given time is there. I am advised that it would give certainty, which is the ultimate protection which any prudent investment manager or employer would like. It would make the liability insurable and coverable, and it would close finally the suggestion that this was an open-ended commitment because it would be open to insurance companies acting legally within the restraints put upon insurance companies by other branches of legislation to give cast-iron insurance cover to the liability, which they cannot do at present.

    As Ministers are aware, an insurance company cannot legally give any kind of cover for an open-ended, unlimited liability of any kind. The Secretary of State has already intimated that that is not acceptable, and the Minister of State will give further reasons why not. By his intervention the Minister of State thinks that it is the opposite to what was put to him earlier, when representations were made.

    I have put the case. It has considerable merit. It is intelligible, and it is obviously of serious concern. I was first made aware of it in a letter from the CBI. No doubt the Minister also first heard of it in this way. The Minister has probably found that it has been backed up solidly by almost every branch of the pensions industry. No hon. Member will listen to the pensions industry and say that it must be right. All the lobbying and representations that industry has made have to be sifted and considered, and what is of commercial interest has to be disregarded.

    However, expert advice should not go unheeded, because if we have a genuine partnershp these are the partners, and the actuaries, with their professional standards, will give objective advice to employers, who, in the last resort, are the people who have to make the decisions on whether they contract out or whether they rely on the State.

    Given that such strong representations have come forward on a new clause which was tabled only recently, that the representations so far are coupled with an acknowledgment of the Government's good faith in tabling the new clause and that we appreciate that the Government have responded with a novel suggestion to all our representations in Committee, at this stage they should say that if there is a problem they will look at it, especially as we have gone so far down the road towards an agreement not only between the Government and the Opposition but between the Government and the occupational pensions industry. There should be an agreed structure which would give 8 million people the benefit of occupa- tional pensions. I ask the Government seriously to consider this.

    There are two other important points with which I hope the Minister will be able to deal. First, I am still rather worried about what happens to a scheme which ceases to contract out, in the difficult circumstances I have described, but preserves its pension rights, a scheme which decides that it will cease to contract out but not buy back, a scheme which decided that it could not continue to contract out would still want to do rather than have all the problems of buying back. It seems to me that the clause does not give much reassurance on that point.

    May I ask the hon. Gentleman a question so that I may the better answer him at some stage? What is the proposition that he is putting to me? Is it that the scheme ceasing to contract out nevertheless would wish to maintain to the fund the full responsibility of pre-award dynamism in respect of the GMP,—or is the proposition that such a scheme would wish to pay a premium into the State scheme as the Bill now stands and merely maintain a liability in respect of pre-award dynamism to the extent of 5 per cent.? Which set of circumstances is the hon. Gentleman envisaging?

    I was envisaging the former—I think—which is that the scheme would wish to cease to contract out so far as future liability of the GMP is concerned, because it would have received the advice that it was no longer covered by investment but it would not wish to pay a premium of any kind to the State to buy back to pre-award liability for its GMP. That again involves an element of risk which, among other things, an employer would want to take rather than go through the process of buying back. It does not seem that there is a limitation on the possibility of winding up.

    I should like the Minister to get another reaction about what the industry would prefer. Instead of having a premium of this kind, liability could be fixed at a certain fixed level of revaluation. This is still being urged and has the overwhelming merits, which this scheme does not have, of simplicity and of clear, defined liability and a clearly insurable risk which everyone could manage. I trust that the Minister has not thrown that out of the window, even at this late stage.

    I also draw the Minister's attention to Amendment No. 29 and I ask him to give his reactions to it. This bears slightly on the same point. It is the liability which could fall on a scheme in relation to the solvency requirements in a later part of the Bill. The Occupational Pensions Board can quite rightly require a scheme to top up its fund when the board considers that the scheme cannot guarantee its liabilities. That could be punitive, particularly if the OPB requires a topping-up payment to be made at a time when a company is in cash flow difficulties.

    These are not light sums of money. Some of the corporations in the public sector have been paying out huge sums in recent months to cover their pensions liability. The Post Office and the British Gas Corporation have been paying out millions of pounds. In this case it is public money, so it is all right for them. But major breweries and others have used a great deal of money in topping up funds. If the cash cannot be raised, this involves a question of a legal liability. This is a requirement that the OPB can impose. A company might be made insolvent if it could not raise the cash to top up its fund. It might be guilty of an offence under the Companies Act if it continued to trade.

    It would be helpful if we got this little area out of the way at this stage. I believe there would be general agreement on both sides of the House, and indeed, between the pensions industry and the Government, that differential solvency requirements lead one into a series of extremely serious anomalies which one could not sensibly contemplate. Therefore, in the type of circumstances that the hon. Gentleman is describing, I think we must expect the Occupational Pensions Board to use its discretion in a sensible way to avoid the kind of difficulties which can be avoided under the discretionary powers which the board has under the Bill.

    I believe that it would be generally the view of the House that the OPB, both on its present representation and on the manner on which it has acquitted itself so far since it was set up by the hon. Member for Somerset, North (Mr. Dean), could be expected with some confidence to deal sensibly with the type of situation that the hon. Gentleman describes.

    That is a considerable reassurance. I accept that the OPB can be relied upon to do that, if it has the necessary discretion, and to make sure that its solvency requirements are not more stringent and out of line with those which will be imposed under other legislation, especially the Companies Act. That amendment might not be necessary. It is an attempt to fix the liability limit to revaluation. I hope that the Minister will deal with that point in general. I hope he will accept the principle of the main burden of my remarks. We hope that the Government will look at this problem with considerable care. They have moved a long way to close the open-ended commitment.

    We have moved a long way, through an interesting Committee stage, to produce a workable bipartisan scheme involving partnership between occupational pension schemes and State schemes. We should like to complete that deal and to take the structure of pensions out of politics. I trust that the Minister will reassure us that the subject will be looked at again in the other place.

    I welcome the new clause as a genuine effort on the part of the Government to meet the points that were made in Committee and in the consultations which the Minister of State had with pensions interests. I believe that this is a genuine and successful attempt to meet the open-ended uninsurable commitments which existed in the Bill before the new clause appeared. I welcome the co-operation of the Government and the careful thought which they have given to the points raised.

    In the context I should like to make two general points and one detailed point. The first general point is minor in scope. The right hon. Lady, in introducing the new clause, spoke of clarification. I do not know what hon. Members think. We find reference to "accrued rights premium", "pensioner's rights premium" and, in a later new clause, "contribution equivalent premium". I suggest that that is not clarification but is the worst form of jargon creeping in. I know why it has happened. The Minister has been through the process which I went through a few years back and has endeavoured to meet the points which have been made and to introduce amendments to meet them. As a result, complexities have been introduced into the Bill which were not there before. I give credit to him for introducing these amendments. I suspect that he will be criticised, as I was, for making the measure more complex than it was to begin with.

    My main point was referred to by my hon. Friend the Member for Rushcliffe (Mr. Clarke). However, in spite of the new clause, which I welcome, those concerned with pensions are still unhappy. Their anxieties stem not from the Bill but largely from the economic and financial situation. The ugly spectre of inflation casts its dark presence over all, including pension funds, which are one of the strongest and safest forms of investment. The Bill will fail, even with these amendments, unless inflation is curbed. It will be a dead letter. It will not be worth the paper on which it is printed. The fears of those concerned will be realised unless the Government take action and the country backs them in that action.

    9.15 p.m.

    Up to now we have had talk from the Government on inflation, but not action. In recent months, to be charitable, the Government have been paralysed by the referendum. From last Thursday, however, that reason no longer applies. Unless the Government are prepared to take effective action to deal with the problem of inflation, the fears of the pensions industry will be realised. However, I believe that those fears stem largely from the general financial and economic situation, not from the Bill as amended.

    I should like to make one or two detailed points on the clause as it stands. The Secretary of State, referring particularly to subsection (6), said that it lays down the maximum extent of the com- mitment on an employer and that he is therefore able to plan on that basis. I think that the subsection does that, and I welcome it.

    Subsection (7) refers to consultation with the Government Actuary and to taking into account the yield on various investments which will be selected by the Secretary of State as she thinks fit.

    We are here moving into a new area. It is important that the Minister of State should be able to assure the House tonight that the decisions on the types of investment to be taken into account will be actuarial and in no sense political, social or any other type of decision. They must be based firmly on the discussions which Ministers will have with the Government Actuary, and the advice that he gives on the types of investment which are most appropriate in assessing the tables must be the criterion on which those tables are based. It is important to get this point established clearly now as we move into this new area.

    Is the hon. Gentleman saying that pension fund investments ought to meet a national criterion or that they ought not necessarily to meet a national criterion but should be based purely upon actuarial assessment?

    The hon. Gentleman has not quite grasped the point I am making. I am talking about a fairly important point of detail. The clause deals not with the investment of pension funds in general but with a particular circumstance: in what circumstances can a pension scheme, finding that it can no longer fulfil the liabilities of contracting out, cease to contract out or, if necessary, wind up its scheme?

    I am asking the Government to assure us that in those circumstances the only criterion which is acceptable and should apply is an actuarial criterion, that the judge of that should be the person who is most expert to decide these matters—the Government Actuary—and that political considerations should not come into it. I believe that the Minister of State will be able to assure us on this point. I hope that that is the case, because it will help the pension interests, employers and those concerned with pension schemes in their planning following this debate.

    Can the Minister also say a little more—I appreciate that it may not be easy at this stage—about what types of investments are likely to be taken into account and over what period the criterion will apply? Presumably it will be comparatively long rather than short. Any further information that the right hon. Gentleman can give will give additional assurance to those concerned about these matters.

    With those observations I welcome the new Clause as a genuine and helpful attempt by the Government to meet the points put forward. I hope that we shall get a little more information, particularly on the point about a longer period of notice before new tables come into operation.

    I know that we want to make progress but it is not the fault of those who were on the Standing Committee that we are only now dealing with new Clause 1. We should not be diverted from thoroughly exploring vital issues.

    I shall confine myself to one comment and one question. I hope that the comment will be received as it is intended—constructive and helpful. It is that it is vitally important that the Government should recognise that their present aim should be to buy time, in the sense of stopping precipitate movement to contract in before the scheme starts by schemes at present contracted out. The danger is that decisions will be taken hastily and that, once they have been taken, there will be no chance for second thoughts. The Government must give a favourable impression of the justice of this scheme right from this moment.

    There could not be a more unfavourable economic background against which to introduce it. Our present inflation presses particularly hard on schemes set up by what I would call, in shorthand and, I hope, uncontroversial terms, good employers—those schemes which have been long established, have final salary provision and at the moment face a heavy commitment for existing pensions in payment and a heavy liability for accrued pensions for those in service. It is just such schemes which are under pressure and will look hard at any opportunity to limit their liability. If they are in any doubt about whether or not to continue to contract out, such schemes will seek to contract in.

    I am sure that the Minister of State will regard as helpful—it is surprising that the Secretary of State did not make it more strongly—the point that the liability for guaranteed minimum pensions will build up very slowly. One of the criticisms of the Bill is that help to new pensioners in the early days will be very small. There will be very little liability for a guaranteed minimum pension before 1980, and, therefore, established schemes will have time to evaluate the sense of what the Government have done. The problem is much more urgent for schemes which are just now being brought into existence or are in contemplation. There is a tendency not to appreciate the slow impact of the statutory obligation for a guaranteed minimum pension, and the attitude to that obligation is being influenced by existing liabilities which are pressing very hard on companies but have nothing to do with the Bill.

    The question concerns the tables. We keep coming back to the actuarial tables, and I wish to pursue the point now. I hope that I shall be coherent and reasonably concise. We have been told, and we can see, that the liability for actual current guaranteed minimum pension at any one time will be limited by the option to substitute a 12 per cent. earnings escalation over the previous five years for what might have been a higher actual figure. Presumably there will be an element in the premium calculation and a variable in the tables to take account of this. We understand that the tables will be cast in semi-permanent forms with columns from which one can read off the appropriate current yield: but will there be another column from which one can read off the projected future escalation of earnings?

    It seems that somewhere in the actuary's assessment of the premium to be paid must be taken into account his assumption of future earnings escalation. It will not be much consolation if the assumed yield is realistic—I echo the words of my hon. Friend the Member for Somerset, North (Mr. Dean), that the figure must take into account the equity yield as well as fixed interest, although they do not always vary as much as people think in an actuary's assessment—but has a factual yield of, say, 15 or 16 per cent. and an actual earnings escalation of perhaps 25 per cent., giving a negative 10 per cent. yield.

    We have been told that the actuary will take into account the current yield position. In arriving at a figure the actuary is looking at a future liability as well as a current liability in terms of buying back, and that future liability must reflect his assumption about the level of future earnings escalation. Will there be any limitation on that? Are we, as was hinted in Committee, never to have a negative yield assumption? Is the minimum yield position to be zero? This point must be answered, or people will feel that there is an element in the calculation which may turn against them very quickly indeed.

    9.30 p.m.

    However long one may be connected with this subject, one always runs up against new questions. The last two posed by the hon. Member for Morecambe and Lonsdale (Mr. Hall-Davis) I have heard tonight for the first time. I shall attempt to answer all the questions which have been raised in the debate.

    This new clause, with the associated amendments, is extremely complex. We are involved with such questions as yield, negative yield, assumptions about inflation and the last five years of employment rather than the whole period of employment. Questions have been asked about whether that affects the whole of the accrued liabilities of pension schemes, particularly at a time of rapid inflation. This is a complex matter because complex solutions are the only solutions to what is a simple problem. I shall put the matter on which there is broad agreement as simply as possible and comment on the further requirements and observations of the Opposition.

    During the past decade there has been a significant increase in the number of occupational schemes and occupational pensioners covered by final salary type provision. Inherent in such provision is complete pre-award dynamism based on earnings movements. The occupational pensions movement has demonstrated its ability to provide pre-award earnings dynamism.

    Two things have changed and produced the type of discussion we have had on the open-ended commitment. Before the Bill was introduced an occupational scheme, if it ran into financial difficulties, could in the last resort do the best it could for its members and wind up. Now, for the first time, such schemes are faced with a legal liability, which could in certain circumstances lead directly to the bankruptcy of an employer, particularly if he were required to wind up at a time when he was not especially liquid, when the stocks and assets in the pension funds were at a low level. This is the essential first leg of the open-ended commitment problem.

    The second leg is that throughout the whole of the post-war period there have been peaks and troughs but over the period as a whole the occupational schemes have existed in a positive yield situation. That situation has changed dramatically in the past two years. Occupational pension schemes are in a negative yield position. Funded occupational pension schemes cannot continue indefinitely to provide final salary type pensions with this inbuilt pre-award dynamism in a negative yield situation.

    Unless we get out of such a situation these schemes will not be able to carry on. We are dealing here not with the money of employers or of a fund but with the deferred pay of millions of men and women. It is, therefore, right for hon. Members on both sides of the House to say that we must get out of the position of negative yield. If that negative yield were to continue for long enough, the people who would be hurt are the men and women in the work force of this country whom we represent in the House. We clearly have to get out of that situation.

    Coming to the detail of the Bill, the position is as simple as this. We want to avoid a situation in which because of a new legal liability an employer at a time of low liquidity and falling asset values is driven into bankruptcy by the provisions of the legislation. Secondly, we want to safeguard the position during periods, such as the present, when there is a short-term negative yield. As Lord Byers said, it is wrong to write off good occupational pension provision, whether in the public or private sector, but that provision depends on a positive yield situation. To allow such provision to continue and to flourish, there must be a limitation on the open-ended commitment contained in the Bill when it first came before the House.

    There has been general agreement on the type of solution we have brought forward, namely, the 12 per cent. limitation of the premium tables, varying with the investment yield, as was described by my right hon. Friend the Secretary of State. In that context I give an assurance that the Government Actuary will advise the Government. We are consulting pension interests in an attempt to get a fair index which represents yield. We want to be able to measure the yield of funds in occupational schemes. We shall carry forward that consultation as we have carried forward other consultations.

    The hon. Member for Somerset, North (Mr. Dean) referred to the question of names. I do not find the names poetic either, but what is in a name? What became obvious during my discussions with the pension interests was that when we talk about buy-back situations we have to go into a lot of longhand to decide what type of buy-back situation we envisage. It is better that there should be some names rather than no names.

    The hon. Gentleman asked me a question which I did not understand. He will no doubt interrupt me if I answer him wrongly. He asked me over what period the premium tables would operate. It is the yield on investment at a certain point in time which determines the market value of the investment and, therefore, the level of the buy-back premium. I think that I was right all along. As my right hon. Friend said, the premium would depend on the yield within the table. As I have described to the hon. Member for Rushcliffe (Mr. Clarke), there would be roll-on tables. The basic assumption having been made, one would turn at a certain time to the yield on the investment at that time. From the part of the table dealing with the yield on investment one would be able to see the type of premium which would be required to be paid.

    One would not necessarily wish to take into account the yield over the one year. One would probably want to take into account the yield over a longer period. I was seeking an assurance that that would be one of the elements that would be taken into consideration.

    I think that the hon. Gentleman misunderstands the situation. We are concerned with a situation in which assets have declined in value. That decline can be measured through the level of yield.

    Therefore, the tables could vary according to the yield.

    As my right hon. Friend explained—and this is subject to consultation—we might take a period of one month in which to use a particular assumption or figure of yield for the purpose of assessing the amount of premium payable at a certain time. I hope that this answer satisfies the hon. Gentleman. No doubt he will read what I have said—I shall also read what I have said—and if he has any further questions I shall be pleased to answer them.

    The hon. Member for Morecambe and Lonsdale rightly pointed out that the liabilities under the scheme would grow slowly because the liabilities only begin with the inception of the scheme in 1977 or 1978, whatever is the starting date of the new scheme. The hon. Gentleman asked me whether there would be an escalation of earnings figures on the tables. I have not been asked that question before. It is a highly technical matter. I would not regard such figures as suitable for inclusion in a set of tables of the kind we are discussing. However, I shall consider the question. I shall write to the hon. Gentleman and give him my considered judgment. I do not think I can answer him now with any finality. I shall contact him and let him know the full facts of the situation and the assumption that will be made.

    The hon. Member for Rushcliffe asked me questions about preservation. By permission of the Occupational Pensions Board, preservation can be either with full revaluation or with the 5 per cent. plus the premium as the Bill stands. First, I deal with the situation in which the premium is paid. In such a case the 12 per cent. limitation is not in the Bill as it stands, but I give the hon. Gentleman an assurance that a suitable amendment will be moved in another place to meet that point. It was the Government's intention that such a matter should be contained in the Bill, and we have endeavoured to meet the point.

    9.45 p.m.

    I should like to deal with sub-amendment (a) to new Clause 1. The effect of the amendment is twofold. First, it requires the Secretary of State to publish the full actuarial basis of the tables. In Committee the Government accepted in principle that the premium tables would be brought within the review procedure of Clause 27 and that any changes in the bases of the tables would be subject to affirmative resolution in both Houses. It has not been possible to prepare amendments in the time available, and amendments will be tabled in another place. When those amendments have been made, any changes in premium tables will be within the full control of Parliament and the bases on which the tables will be calculated will have already been published in a memorandum by the Government Actuary.

    I turn to the second part of the sub-amendment. I find that sub-amendment—which comes from the CBI and also from a large number of organisations interested in pensions—somewhat surprising. I thought that we were all concerned to assess premiums on the actuarial cost of paying for the pension. The sub-amendment would freeze any actuarial assumption for five years. That assumption could be completely out of date, so that it would be a negation of any actuarial assumptions. We could work on a basis quite apart from actuarial assumptions in these circumstances. The five-year situation could operate to the acute disadvantage of employers. I wonder whether the organisations concerned have considered all the aspects.

    I repeat that I find the sub-amendment surprising. Frankly, as I see the situation, I regard it as an unsound proposal. I did not receive any information about the proposition until the CBI's letter of 2nd June. I am not complaining about the date of the letter, but I wish merely to say that if the pensions industry would like to discuss the problem further with me, so that I may have the opportunity of listening to its views and of pointing out the fundamental flaws in the propo- sition, I shall continue the type of consultation which we have already pursued on the Bill. Before the matter is discussed further in another place, I shall look to see whether the proposition which is being put forward stands up to detailed scrutiny. Therefore, if the hon. Gentleman decides not to press his subamendment—although I give no commitment about what would happen as a result—I shall be happy to undertake such consultations before the Bill is considered in another place.

    Will the Minister of State assure us that in carrying out his consultations he will explain to the interested parties exactly what problem he envisages in this amendment? Moreover, will he assure us that he will enter the consultations with a genuine open mind seeking perhaps some alternative solution to close the open-ended commitment entirely, and that if such a solution can be reached he certainly will consider tabling the necessary amendments in the House of Lords to complete the understanding and the bargains that the Government are clearly trying to seal with the interested parties?

    It is one thing to make not concessions, but sensible arrangements for a partnership. However, the hon. Member for Rushcliffe must also understand that it is in the nature of interested organisations., whether in this business, politics, diplomacy or anything else, not to be impartial.

    As the Secretary of State said at the outset, if one makes a concession someone always wants something more. Therefore, I give no commitment of any kind that I shall accept anything. Of course, I shall enter into any discussions with an open mind. I shall put my views and objections to this amendment in detail to the organisations. I am prepared with an open mind to see what the results of those consultations will be. I hope that on that basis the hon. Member for Rushcliffe will be able to withdraw his amendment. I am most grateful for the way in which the Government amendment has been accepted.

    It would certainly help me and other hon. Members if we could see the format of these tables as early as possible. One of our difficulties is that tables are being scribed where the curtain is lifted only in part and not in full. I do not expect to see the tables now, but discussions would be more fruitful if, the Government having gone so far in devising these all-important tables, their format could be disclosed as soon as possible.

    I shall certainly let the hon. Member for Morecambe and Lonsdale have as much information as I can on that matter at the earliest possible date.

    Question put and agreed to.

    Clause read a Second time.

    Does the hon. Member for Rushcliffe (Mr. Clarke) wish to move his amendment?

    Accepting the Minister's open-mindedness on the discussion, I beg to ask leave to withdraw my amendment.

    Clause added to the Bill.

    New Clause 2

    Premium On Termination Of Contracted-Out Employment

    '(1) This section has effect as to the cases in which an earner's employer may pay a state scheme premium where—

  • (a) the earner's service in contracted-out employment by reference to an occupational pension scheme is terminated before he attains the scheme's normal pension age or (if earlier) the end of the tax year preceding that in which he attains pensionable age; and
  • (b) he has served for less than five years in contracted-out employment by reference to the scheme;
  • and a premium under this section may be referred to as a "contributions equivalent premium".

    (2) If—

  • (a) the earner's service is terminated in any way except by his death or by the scheme's ceasing to be contracted out; and
  • (b) his period of service is not one which conforms to the appropriate extent with the preservation requirements of Part II of the Social Security Act 1973,
  • his employer may elect to pay a contributions equivalent premium with a view to extinguishing the earner's accrued rights to guaranteed minimum pensions under the scheme.

    (3) If the earner's service is terminated by this death and he dies leaving a widow, his

    employer may elect to pay a contributions equivalent premium with a view to extinguishing any such accrued rights in respect of the widow'.—[ Mr. O'Malley.]

    Brought up, and read the First time.

    With this we shall consider Government new Clause 3 and Government Amendments Nos. 30 and 34.

    The two new clauses make two changes from the existing Clause 40. They introduce, first, the term "contributions equivalent premium" and, secondly, a new provision to permit employers to buy back a widow into the State scheme where the earner dies during the first five years of contracted-out service.

    Our proposal has been tabled in response to representations from pension interests. It provides more flexibility for the employer, who is thus able to buy out a widow's small guaranteed minimum pension by paying a contributions equivalent premium to the State scheme.

    There are administrative drawbacks to paying small pensions. If a widow had an entitlement to any pension in excess of the guaranteed minimum pension, the scheme would be able to make lump sums available under Clause 37(3).

    I am happy to welcome both new clauses in the name of the right hon. Gentleman. New Clause 2 replaces Clause 40, which deals with the situation of early leavers with less than five years' service. It has never been the cause of any disagreement between us and merely clarifies the position. We welcome the sincerity which the Government have shown in the provision to buy back the widow's reserve guaranteed minimum pension, which is tiny. We urged this on the Government in Committee and pointed out the great difficulties faced by schemes having to pay out these tiny reserve pensions. The Government have responded to what we said, and we are glad to see that they have included this provision in the Bill at this stage.

    Question put and agreed to.

    Clause read a Second time, and added to the Bill.

    New Clause 3

    Premium Under Section 40: Additional Provisions

    '(1) The amount of a contributions equivalent premium shall be the equivalent, as certified by the Secretary of State, of the amount by which the Class 1 contributions payable in respect of the earner's employment in contracted-out employment by reference to the scheme have fallen short of what would have been payable if the employment had not been contracted-out; and in certifying any amount under this section the Secretary of State may make such adjustments as he thinks necessary for avoiding fractional amounts.

    (2) Where under the rules of the scheme transfer credits have been allowed in respect of the earner's accrued rights under another scheme, the references in section (Premium on termination of contracted-out employment) (1), and in subsection (1) above, to contracted-out employment by reference to the scheme shall include references to employment in any period of linked qualifying service which was contracted-out employment by reference to the other scheme.

    (3) For the purposes of section (Premium on termination of contracted-out employment) (2), a scheme conforms to the appropriate extent with the preservation requirements of Part II of the Social Security Act 1973 if—

  • (a) it entitles the earner to short service benefit within the meaning of those requirements; or
  • (b) it makes any provision which under those requirements is permitted as an alternative to short service benefits (other than provision for return of contributions or for benefit in the form of a lump sum).
  • (4) Except in such cases as may be prescribed, an employer shall not, in making or abstaining from making elections under section (Premium on termination of contracted-out employment) (2) or (3), discriminate between different earners on any grounds other than their respective length of service; and if the Occupational Pensions Board consider that an employer is contravening this subsection, they may cancel any contracting-out certificate held by him in respect of the scheme in question.

    (5) An election by an employer under section (Premium on termination of contracted-out employment) (2) or (3) must be made within the prescribed period in the prescribed manner; and where an employer elects to pay a premium in respect of an earner, he shall pay it to the Secretary of State within the prescribed period.

    (6) Payment of a premium under section (Premium on termination of contracted-out employment) (2) shall operate to extinguish the earner's accrued rights to guaranteed minimum pensions under the scheme; and payment of a premium under section (Premium on termination of contracted-out employment) (3) shall operate to extinguish any right to guaranteed minimum pension in respect of the widow.

    (7) Subject to regulations made under paragraph 1 of Schedule 2 to this Act, an employment which is terminated by the death of the employer shall be treated for the purposes of section (Premium on termination of contracted-out employment) as terminated immediately before the death'.—[ Mr. O'Malley.]

    Brought up, read the First and Second time, and added to the Bill.

    Clause 2

    Rates Of Contributions In Respect Of Employed Earners

    I beg to move Amendment No. 1, in page 2, line 19, leave out '6·5' and insert '7'.

    The amendment touches on the delicate problem of the contribution rates payable by the working population who will be paying into the new pension scheme. Therefore, it is probably as well that I do not move it at an hour when I have time to dwell on it, because it is the aspect of pension policy which is the least attractive to those who discuss it, the aspect that Governments in particular wish to gloss over.

    However, I wish to point out that a great cost will fall on the working population, both in the near future, when the scheme comes into effect, and the distant future, when it matures. Although we are trying to reach bipartisan agreement with the Government on policy for the future, we very much regret that they have been so determined to take the State into earnings-related, fully inflation-proofed pensions, on a pay-as-you-go basis that in 20 years' time there will be a great obligation on our children. We must make sure that contribution rates do not reach the limit of the capacity of the working population and their willingness to pay.

    To remind the Government of what has already been done, I take the example of a middle-income man hard-pressed by inflation and taxation, a man earning £80 a week and paying the Class 1 contribution. In fact, £80 a week is slightly higher than the middle income, but those in that group are probably the section of the working population most hard-pressed by all the economic difficulties and taxation changes of the past 12 months. Anyone whose pay was £80 a week for the past 18 months was paying in February 1974, when we left office, £2·83 each week, contracted out of the graduated scheme. By August 1974 that had risen to £3·40, and by April this year to £3·79, and on the Bill as it stands it goes up to £5·20. Since the day we left office, his contribution has already nearly doubled.

    We said in Committee that the figures in the Bill are not a realistic calculation of what the contributions will be in 1978, when it comes into force. The whole thing is based on the assumption that there will be 2½ per cent. unemployment, which is only 575,000 registered unemployed. That will obviously be a dream in 1977 or 1978, as the Government are using unemployment as an economic weapon, and it is reasonable to expect that the figure will be at least double whenever the scheme comes into effect.

    With 5 per cent unemployment in 1977 or 1978—not a breathtaking figure, being a little over a million—another l¼ per cent. contribution will have to he raised, and so it will go, with an extra quarter per cent. for an extra half per cent. unemployment.

    The Government are so blind to this that the legislation restricts their flexi-

    Division No. 228.]


    [10.00 p.m.

    Allaun, FrankEvans, John (Newton)Lyon, Alexander (York)
    Anderson, DonaldEwing, Harry (Stirling)Lyons, Edward (Bradford W)
    Armstrong, ErnestFletcher, Ted (Darlington)Mabon, Dr J. Dickson
    Atkinson, NormanFord, BenMcElhone, Frank
    Bagier, Gordon A. T.George, BruceMackintosh, John P.
    Barnett, Guy (Greenwich)Gilbert, Dr JohnMcMillan, Tom (Glasgow C)
    Barnett, Rt Hon Joel (Heywood)Ginsburg, DavidMadden, Max
    Bates, AlfGourlay, HarryMarks, Kenneth
    Beith, A. J.Graham, TedMarquand, David
    Booth, AlbertGrant, George (Morpeth)Marshall, Dr Edmund (Goole)
    Boyden, James (Bish Auck)Grimond, Rt Hon J.Mellish, Rt Hon Robert
    Bray, Dr JeremyHamilton, James (Bothwell)Mikardo, Ian
    Callaghan, Jim (Middleton & P)Hamilton, W. W. (Central Fife)Millan, Bruce
    Canavan, DennisHarrison, Walter (Wakefield)Miller, Dr M. S. (E Kilbride)
    Cant, R. B.Hatton, FrankMolloy, William
    Carter-Jones, LewisHayman, Mrs HeleneMorris, Alfred (Wythenshawe)
    Cartwrlght, JohnHeller, Erie S.Murray, Rt Hon Ronald King
    Castle, Rt Hon BarbaraHooson, EmlynNewens, Stanley
    Clemitson, IvorHowells, Geraint (Cardigan)Noble, Mike
    Cocks, Michael (Bristol S)Hughes, Rt Hon C. (Anglesey)Oakes, Gordon
    Cox, Thomas (Tooting)Hughes, Robert (Aberdeen N)O'Halloran, Michael
    Craigen. J. M. (Maryhill)Hunter, AdamO'Mallay, Rt Hon Brian
    Cryer, BobJackson, Miss Margaret (Lincoln)Orbach, Maurice
    Cunningham, Dr J. (Whiteh)Jay, Rt Hon DouglasOvenden, John
    Dalyell, TarnJohnson, Walter (Derby S)Owen, Dr David
    Davies, Bryan (Enfield N)Jones, Alec (Rhondda)Palmer, Arthur
    Davies, Ifor (Gower)Jones, Barry (East Flint)Pardoe, John
    Delargy, HughJones, Dan (Burnley)Pendry, Tom
    Doig, PeterKerr, RussellPenhaligon, David
    Dormand, J. D.Kilroy-Silk, RobertPhipps, Dr Colin
    Douglas-Mann, BruceLamond, JamesRadice, Giles
    Duffy, A. E. P.Lee, JohnRees, Rt Hon Merlyn (Leeds S)
    Dunn, James A.Lewis, Ron (Carlisle)Richardson, Miss Jo
    Dunnett, JackLitterick, TomRoberts, Albert (Normanton)
    Ellis, John (Brigg & Scun)Loyden, EddieRoderick, Caerwyn

    bility to change matters. If unemployment is over 805,000, they will need new legislation to bring the contribution rates up to the level needed to pay for the beginning of the new scheme. I stress that that is only the beginning. By insisting that the bargain between both sides of the house must be on the basis of State-based, inflation-proofed, pay-as-you-go pensions, the Government are imposing on the willingness of our children to pay out of their earnings for our pensions to an extent to which the current generation are not prepared to pay for the present generation of pensioners. Their assumptions about the cost—

    It being Ten o'clock, further consideration of the Bill, as amended, stood adjourned.

    Business Of The House

    Motion made, and Question put,

    That, at this day's sitting, the Social Security Pensions Bill may be proceeded with, though opposed, until any hour and that the Motion relating to Economic Policy Guidelines may be proceeded with, though opposed, until half-past Eleven o'clock or one and a half hours after it has been entered upon, whichever is the later.—[Mr. John Ellis.]

    The House divided: Ayes 145, Noes 9.

    Rodgers, George (Chorley)Stewart, Rt Hon M. (Fulham)Wellbeloved, James
    Rooker, J. W.Stoddart, DavidWhite, Frank R. (Bury)
    Roper, JohnStrang, GavinWhitlock, William
    Ross, Rt Hon W. (Kilmarnock)Taylor, Mrs Arm (Bolton W)Williams, Alan (Swansea W)
    Ryman, JohnThomas, Mike (Newcastle E)Williams, Alan Lee (Hornch'ch)
    Sandelson, NevilleThomas, Ron (Bristol NW)Williams, W. T. (Warrington)
    Sedgemore, BrianThorne, Stan (Preston South)Wilson, Alexander (Hamilton)
    Selby, HarryThorpe, Rt Hon Jeremy (N Devon)Wise, Mrs Audrey
    Shaw, Arnold (Ilford South)Torney, TomWoodall, Alec
    Skinner, DennisTuck, RaphaelYoung, David (Bolton E)
    Small, WilliamWainwright, Edwin (Dearne V)
    Smith, Cyril (Rochdale)Walker, Terry (Kingswood)


    Spearing, NigelWard, MichaelMiss Betty Boothroyd and
    Spriggs, LeslieWatkinson, JohnMr. Joseph Harper
    Stallard, A. W.Weetch, Ken


    Bain, Mrs MargaretStewart, Donald (Western Isles)
    Brotherton, MichaelThompson, George


    Evans, Gwynfor (Carmarthen)Watt, HamishMr. Douglas Henderson and
    Ewing, Mrs Winifred (Moray)Wilson, Gordon (Dundee E)Mr. Dafydd Wigley.
    Reid, George

    Question accordingly agreed to.

    Social Security Pensions Bill

    Bill, as amended ( in the Standing Committee and on recommittal), further considered.

    I am sorry that the Scottish National Party should be so reluctant to hear my last sentence, which was that the Government's proposals will be extremely costly to the contributor. As I have indicated, in all the assumptions that the Government have made about cost they have been grossly optimistic to try to conceal the facts from the working contributor. That sentence having been uttered, I trust that it is so impressive that the Minister will find himself hard-pressed to give any reply which adequately deals with the points I have made.

    The hon. Gentleman is generally articulate, often talkative and sometimes quite ludicrous. There is really no connection between what the amendment says and what the hon. Gentleman has said about it.

    First, I shall deal briefly with the amendment and then with the comments of the hon. Gentleman, assuming always that I am in order to refer to his comments, which seem to have nothing to do with the amendment. However, I shall not fall out with him at this time of night. I want to make some progress on the Bill and I do not want to upset the hon. Gentleman too much.

    Clearly, if the hon. Gentleman is concerned about the position of hard-pressed workers—that is, men and women who are prepared to work, to do some overtime in a factory or at their place of employment, or work long hours in order to increase their income—and if he is worried about the level of the national insurance contributions they will have to pay, it is a very odd way to express worry when his amendments increase the primary contribution from 6·5 per cent. to 7 per cent. The hon. Gentleman is not bringing them down. If we link the amendment with other amendments, it appears that he is increasing them only for a certain section of the population, and all employed earners would do worse as a result of his amendment once it is linked with others, as a result of the tilting of the balance—well away from European standards; and we are all good Europeans now—from the employer to the employee.

    Secondly, we understand the hon. Gentleman's arguments about pay-as-you-go. I have never taken the view that one method of financing the State scheme is intrinsically and inequitably right—that is, pay-as-you-go rather than funding or the opposite. The overwhelming majority of national insurance schemes throughout the developed world depend upon pay-as-you-go, and that is the case in Europe.

    However, it is more important to look at our position. The simple fact is that in this country we now have 8½ million retirement pensioners. We have no inherited fund or funded scheme from which to pay the pensions of those pensioners this week, next week or the week after. There is no point in going into discussions on whether the 1946 legislation, which began in 1948, should have been funded rather than pay-as-you-go. Whatever the merits of that, it did not happen. We have no inherited pension fund from which to pay the pensions of the present generation of retirement pensioners.

    Therefore, if we were now to go for a system of full funding in the National Insurance Scheme, what would be required of hard-pressed earners—to use the hon. Gentleman's words—would be that they should pay two lots of contributions: first, the contributions which are necessary to pay the retirement pensions of the present generation of retirement pensioners, and, second, a whole edifice of contributions in order to pay for their own pensions when they retire 10, 20, 30 or 40 years in the future.

    10.15 p.m.

    Recognising that this is not a question of dogma between the two sides—at least, I hope it is not—clearly no Government could seriously contemplate moving entirely on to a funded basis. What we are doing in establishing the partnership which is implicit in the Bill and has run throughout our discussion, is trying to ensure contracting out in the upper tier of entitlement into occupational pension schemes. We all recognise that potential occupational pensioners in both the public and the private sectors in funded schemes—although for that matter, also in unfunded schemes—value highly their occupational pensions. Therefore, in their interests we would want to see their occupational pension arrangements and deferred pay arrangements thrive and flourish. There will be in the future a very large dependence on funding and I hope that we shall move to a positive yield situation and away from the negative yield situation that exists at present for the good of occupational pension schemes.

    Thirdly, the hon. Gentleman said that these contributions would be a burden on our children. I remember this being said as long ago as the time of the Crossman scheme. If that argument could be levelled at the Crossman scheme—although too much was made of it then—it certainly cannot be levelled against this scheme with the same degree of intensity, because we are dealing not with an alternative occupational scheme in fixed money terms but with pre-award dynamism which is the responsibility of occupational pension schemes.

    We cannot say that there will be a burden on our children. None of us knows that. It depends on the amount of contracting out that takes place at the inception of the scheme and whether the contracting out builds up in the later years. The hon. Member for Rushcliffe (Mr. Clarke) shakes his head, but what I am saying is not a matter of opinion. It is a matter of fact. The problem that would confront the National Insurance Fund if there were very substanial levels of contracting out—that is, far higher than the 8 million figure used for illustrative purposes by the Government Actuary—would be, in business man's parlance, a cash flow problem.

    Certainly the degree to which there will be a difference between the initial level of contributions at the inception of the scheme and the emergent level of contributions 20 or 30 years later is closely linked with the number of people who will be contracted out. But, on the range of assumptions made by the Government Actuary, we are talking about an initial level of contributions of 16½ per cent., and the Government Actuary estimated that in 30 years the total level of contributions would rise from 16½ per cent. to 18 per cent. That is a rise of 1½ per cent. in 30 years. It is a far smaller rise, incidentally, than the level of increase we have seen over the post-war period.

    I think that there will be agreement that it is quite right that this nation should deploy quite substantial resources for people in old age. One of the purposes of the Bill is to get rid of the massive problem of poverty in old age.

    I am grateful to the hon. Gentleman for giving us the opportunity to debate the broader question of "pay-as-you-go" versus funding, on the statement that the scheme could be a burden on our children. I am also grateful to him for making it clear that the amendment he has moved—I wondered, frankly, what he was up to—was merely being used as a vehicle to express general views, which I understand although I think he has probably made too much of them.

    I think that the hon. Gentleman has probably made too much of those views. He puts himself in a spot when he says that earners are hard pressed. I agree. He also said we should put up the level of contributions. In proposing that the hon. Gentleman is treading a dangerous path, although I recognise that he is putting forward the amendment as a vehicle for general discussion.

    Before the Minister sits down, having accused my hon. Friend of being sometimes ludicrous or articulate or talkative, will he reflect on those words? The pressure will build up in a relatively short period to help the lowest paid. I refer to those who receive supplementary benefit and will continue to do so for a long time. That will force the Government or a future Government, to increase contributions substantially, because the scheme is geared to helping those with average earnings with their occupational pension schemes. It is not geared to helping people with lower earnings.

    The hon. Gentleman is wrong on that point. We discussed this matter in Committee. There is a substantial redistributive element. The fact that there is a 100 per cent. return up to the lower earnings limit is an indication of that. We have been through all this before. As to the hon. Gentleman's first comment, when a Minister is faced with a person as sharp as the hon. Member for Rushcliffe, he is obliged to use the same expertise and weapons used by the hon. Gentleman.

    I am bewildered by this combination of insults and flattery. I suspect that the Minister and I are at the centre of the kind of words which were spoken during an earlier amendment. The hon. Gentleman knew what I was up to when I replied to his comments.

    The Minister dismissed my remarks about funding. We made a serious attempt at a funded scheme for the future in the 1973 legislation, which regrettably the Government decided they could not go on with because they liked neither the State reserve scheme nor the long build-up period. They have opted for a pay-as-you-go, earnings-related scheme. That scheme will undoubtedly be expensive.

    I am reassured as a result of what the Minister said about the rate of contracting out and its bearing on contribution levels. One of the most reassuring aspects of the Bill is the fact that all Governments will have a built-in vested interest in trying to keep up the contracting out rate, because that will be the biggest determining factor on the stability of future contribution rates.

    The Minister said that on present calculations only a 1½ per cent. rise was contemplated over the next 20 or 30 years before the build-up period. However, we must not overlook the fact that we start from a level, which we all accept. That level just touches the limits of the capacity and willingness of contributors to pay. No scope has been allowed for other improvements in national insurance finance benefits. However the Government will have pre-empted the freedom of action of themselves and of future Governments to a considerable extent by raising contributions to the fund to a level where contributors cannot stand much more.

    The Minister has said that my amendment to raise contributions will have a punitive effect on the people in whom I am interested. Those are the contributions levels which will be imposed when this scheme starts. No doubt a small wager can be made behind the Chair, and we shall see who is right in 1977 or 1978.

    I have tabled an amendment to try to bring home to the Government, through the aspect of the scheme on which they like to concentrate—the tables of glossy benefits which might accrue in 20 or 30 years' time—the reality of what it will cost in 1977 or 1978. The Government think that it is not necessary. I think that they will need fresh legislation to get the right figure when they bring their scheme into operation. I leave the Government to find out whether it is not necessary. I am happy to ask leave to withdraw the amendment to see whether the Minister of State can live up to what he said and stick to 6 per cent. to 7½ per cent. in 1978.

    Amendment, by leave, withdrawn.

    Clause 3

    Married Women And Widows

    I beg to move Amendment No. 2, in page 2, line 36, leave out

    'when subsection (1) above comes into force'.
    I cannot promise to be articulate, but I hope to be substantially briefer than some of the earlier contributors to the debate. I suspect that after all the discussion during the earlier part of this evening about negative yields, guaranteed minimum pensions, pre-award dynamism and buy-back premiums, the House will welcome the fact that we now turn to a situation which concerns people in their everyday lives.

    The amendment concerns the Government's plans to phase out the married women's option, as a result of which we contend that many working married women will suffer.

    The House has been over this ground before, not once but many times. Therefore, I do not propose to weary the House overlong. However, the Opposition hold this matter to be sufficiently important to return to it again before coming to the last stages of the Bill.

    We want the working widow or married women to go on having the option to pay reduced contributions for reduced benefits. We believe that the 3 million out of the 4 million working women who exercise this option at the moment want it to continue, too. They will not understand the Government's determination to end their freedom to keep this option when the full implications become clearer.

    The Bill is supposed to be a charter for women. In many ways it is. In Committee I paid tribute to the Secretary of State for making it so. Why then, in the interests of what I can only call a specious and largely unwanted equality, is it proposed to take away from women something which, by all the evidence, they very much wish to retain?

    The Government will no doubt again tell us that, among other things, it is to end the dependant status of women. But the women in question are not complaining. The Government will say that it is to improve the benefits that a woman can enjoy in her own right. In that case, I suggest that the woman in question is getting a very poor bargain.

    I will quote one set of statistics. Of the married couple pension of £18·50, £11·60 applies to the husband, and £6·90 is the so-called dependant allowance for the wife. If the option is taken away, she will lose the £6·90 and gain £11·60—in other words, a net improvement of £4·70. But she will then be paying the same as the single woman, who gets £11·60 in her own right. So far from giving the married woman a better bargain, it is a very poor return on the additional money that she is expected to invest.

    I cannot see this as a measure to liberate or to bring equality to the married woman. In fact, a respectable case could be made out that it is quite the reverse. Therefore, this proposal is against the wishes of the majority of women and is a bad bargain as well.

    With 3 million women involved—therefore, 3 million votes at stake—why should the Government be so obstinate? I believe that it is because they have no alternative if they are to raise the considerable revenue that their scheme requires. So it has little to do with the abhorrent principle of dependency: it is really all about hard cash. We think that the woman on £20 a week—hardly a princely income in 1975—who finds that the Government have reduced her take-home pay by £1 a week will discover that she needs the cash more than the Government.

    10.30 p.m.

    I expect I shall be told again that I do not understand the mentality of the women concerned and that I am doing them a disservice in pressing for the retention of the option. But I am not recommending that married women exercise the option. I can understand that in many ways, because they cannot see sufficiently far ahead, women would be well advised not to exercise it. But so many women have become used to exercising it that the Government are wrong to take it away.

    The women of whom I speak are often mothers, their children are at their most expensive age, mortgage payments perhaps are biting their hardest, and for them going out to work even for a short period makes a good deal of sense. To reduce their take-home pay by a sizeable proportion will be a disincentive at a time when male unemployment might be making the woman, for no matter how short a time, the principal breadwinner. I do not think that the Government understand the women we are talking about, defenders of the working classes though they would have us believe they are.

    So the amendment was tabled for three reasons. First, 3 million women who take advantage of the option at the moment demand its retention. Second, the Government are offering a poor deal in return for its withdrawal. Third, their reasons have nothing to do with release from dependency and everything to do with raising extra revenue.

    The last time that they took action against a minority of the people—the self-employed—the Government reaped the whirlwind when that minority, suddenly and perhaps for the first time, became a highly articulate body. When married women find that this option is being withdrawn, the reaction against the Government who introduced such a measure will be considerable. I ask the Government, even at this late stage, seriously to consider withdrawing this proposal if we are to avoid dividing the House.

    This seems likely, mercifully, to be a brief debate. As the hon. Member for Brentwood and Ongar (Mr. McCrindle) said, we have gone over these matters extensively in Committee. I am interested to see that the Opposition persist in their rôle as latterday Bourbons, who have forgotten nothing and learned nothing—

    The Secretary of State cannot take any notice of the Lancashire papers.

    I am sorry that the hon. Lady did not put her views into words before I rose to reply—

    I have raised this point with the right hon. Lady so often that I have the speech coming out of my ears. I am sparing the House yet another repetition, but she knows my views. They have been expressed in all the Lancashire papers that she reads too.

    I have never had the pleasure of reading the hon. Lady's views in the Lancashire papers. But this is a late hour and to avoid duplicating my speech I wanted to give everyone the opportunity to express his views.

    A simple principle is at stake here. What kind of benefits and security do we think are needed by women who work? Under the present insurance schemes, embodying the principle to which the hon. Member referred—that of opting out of equal responsibilities—they are the greatest sufferers. They are the ones who end up on supplementary benefit after years of inadequate wages and very often practically non-existent coverage in their own right.

    We have one simple principle. We believe that women, more than almost any other section of society, need security, because they have been on low wages, because they have never been given equal pay and have never, therefore, been given equal responsibilities. Do we want women's benefits improved? Do we want the expensive new charter for women contained in the Bill to which the hon. Member for Brentwood and Ongar has frankly and honourably paid tribute? Or is the hon. Member arguing that women should have equal benefits for unequal contributions? That has never happened in human history, and it has not happened to women up to now.

    The freedom of the married woman or widow when she is at work to opt out of paying the full national insurance contribution has meant that she has had second-class benefits even when she has made a full contribution. The hon. Member knows that she has had inferior unemployment and sickness benefit even if she paid the full contribution. That situation was perpetuated under his Government's legislation. He knows that she has suffered from the half test. He and his hon. Friends know that under their conditions which continued the married woman's option she had a poorer accrual rate than the man. They want to perpetuate the unequal treatment, but I and my Government do not.

    The hon. Member claims that I am proposing a specious and what he called largely unwanted equality. He tried to say that 3 million women would be outraged. How does he know? I do not know whether he had a private poll during the referendum, whether he slipped one in on the side about the married woman's option. I do not know where he gets his scientific certitude from—or should I say his pseudo-scientific certitude? There is a lot of confused thinking among women.

    I am not proposing this scheme because I believe it will necessarily be particularly easy to get across. There was a revealing Freudian lapse in the hon. Member's remarks when he talked about "3 million votes". Oh, yes, how the Conservative Party loves to capitalise on the more obscurantist elements in our national thinking! That is their one hope of survival. Here they are again appealing to the least far-sighted and forward-looking attitudes. On that basis one never progresses in society.

    The Conservatives may pick up the odd vote or two. That, however, is not the most important criterion when considering a pensions reform that we have all agreed on both sides should last us for a considerable number of years. We cannot build into a pensions scheme designed to carry us through a decade or two the principle of continuing inequality of treatment of women. I am surprised that the Conservatives still cling to the past in this way.

    Perhaps I may, therefore, answer some of the hon. Gentleman's more major inaccuracies. He said that the married woman who no longer has the right to opt out, who will get a pension and a right to her husband's insurance, is getting a poor bargain. The truth suffers some strange distortions in this House. What the woman will get in return for this obligation to pay the same as a man on the same earnings when she is at work is the same accrual right. We ignore this irrelevant factor of longevity to which the Opposition always attached such importance. We will not punish women for living longer, as the Opposition did when in government. The woman who contributes in full will get her pension at 60.

    As I said in Committee, the Conservatives overlook the 1 million women, often working-class women—the waiting wives—who reach retirement before their husbands, often five years before. There is sometimes a great drop in family income as a result.

    Older widows will receive 100 per cent. of their husbands' retirement pensions plus their own additional component instead of the 50 per cent. entitlement in the Conservative's Act. They will receive equal short-term benefits for unemployment and sickness, and the half test will be abolished. In addition, the woman at work will have the fall-back safeguard of the dependency pension if that should prove to be more advantageous. The Opposition call that a bad bargain. It is an odd use of words.

    Does the right hon. Lady recall that her Department sent out a letter to Members of the Standing Committee on 14th April which showed the extra benefits and costs related to the phasing-out of the married woman's option? Does she further recall that there was only one year between now and 2009 when the extra benefits for the married woman exceeded the extra costs?

    I was coming to that point and the accusation that this was a swindle designed to raise revenue at the expense of these people. That letter was sent out to guide the Committee in deciding whether we were robbing the married woman in some way. The hon. Gentleman has totally misunderstood the figures. In Committee he added them up and quoted a figure of additions. These are not consecutive years but sample years of a broad kind.

    What matters from the point of view of our argument is the conclusion which the actuaries who gave these figures drew from them. I quote from the letter:
    "The general picture is that during the first 30 years of the scheme the additional contribution income including Treasury supplement broadly matches the additional benefit cost. Thereafter the benefit cost gradually exceeds the contribution income."
    There is no basis there for saying that the abolition of the option is a way of compelling women to subsidise everyone else. I am sure the House will accept that with my record of involvement with equal pay legislation that would be the last thing that I would be prepared to authorise in my ministerial capacity.

    10.45 p.m.

    I know that ending the option, far from being a swindle for women, is their gateway to greater financial security as well as to the dignity of being able to stand on their own feet.

    I will give the House one example. On the basis used in the Government Actuary's report on the Bill, we estimate that a woman who marries after the start of the new scheme, who would not qualify for the option, would on average pay about £50 extra in contributions but would on average qualify for about £70 a year in short-term benefits, including sickness benefit and unemployment benefit, and invalidity pension, in addition to building up entitlement to extra pension in the longer term. To allow women to continue to opt out would be cheaper because they would forfeit so many benefits by doing so. This is extra expenditure which we believe we owe to my sex.

    We are not proposing to introduce this change brutally. All the widely representative women's organisations we consulted said that if women are ever to have a square deal the option for people who marry after the scheme comes into operation must be abolished. But we are all agreed that for the woman who is at the moment opted out we must temper the wind of change to her shorn income. We are, therefore, putting forward detailed alternatives for the phasing out of the option and for dealing with people who at present are entitled to exercise the option. All the details have been circulated to hon. Members, and we are urgently getting back the final response

    Division No. 229.]


    [10.54 p.m.

    Atkins, Rt Hon H. (Spelthorne)Dodsworth, GeoffreyHurd, Douglas
    Berry, Hon AnthonyDrayson, BurnabyJones, Arthur (Daventry)
    Biffen, JohnDykes, HughKellett-Bowman, Mrs Elaine
    Boscawen, Hon RobertEden, Rt Hon Sir JohnKing, Evelyn (South Dorset)
    Brittan, LeonFairgrieve, RussellKnight, Mrs Jill
    Brotherton, MichaelFowler, Norman (Sutton C'f'd)Knox, David
    Brown, Sir Edward (Bath)Gow, Ian (Eastbourne)Lane, David
    Buchanan-Smith, AlickGower, Sir Raymond (Barry)Lawrence, Ivan
    Carr, Rt Hon RobertGray, HamishLuce, Richard
    Chalker, Mrs LyndaGriffiths, EldonMcCrindle, Robert
    Clarke, Kenneth (Rushcliffe)Grylls, MichaelMarshall, Michael (Arundel)
    Cockcroft, JohnHall-Davis, A. G. F.Marten, Neil
    Cooke, Robert (Bristol W)Hamilton, Michael (Salisbury)Mather, Carol
    Cope, JohnHannam, JohnMaude, Angus
    Corrie, JohnHarvie Anderson, Rt Hon MissMaxwell-Hyslop, Robin
    Crouch, DavidHayhoe, BarneyMiscampbell, Norman
    Dean, Paul (N Somerset)Holland, PhilipMontgomery, Fergus

    from the organisations concerned. We shall be guided by what those representative organisations want. We are not here to impose change on women that they do not overwhelmingly want.

    In a few years' time historians looking back will be astonished that hon. Members should have pressed in 1975 the Victorian ideas which have today been put forward by Opposition Members.

    Historians may be surprised at some of the things that we do in 1975, but I suspect that in the immediate future, when it is appreciated what the right hon. Lady's action means, the 3 million working married women will express surprise and probably an emotion which will have a more direct effect on the right hon. Lady's political future.

    In view of the late hour I do not wish to take up all the points that the right hon. Lady has made in replying to this short debate. It is obvious that nothing has changed in her mind and that the division that separates both sides of the House on this important matter is as deep as ever. I am bound to say that the right hon. Lady gave me no satisfaction on some of the points that I particularly wanted to stress, not least that effectively what she is doing is pulling 3 million women, who do not seek the equality which she wishes to impose, kicking and screaming into a situation that she would like to have them occupy. I believe there is no alternative but to recommend to my hon. Friends that we show our disapproval of the Government's policy by dividing the House.

    Question put, That the amendment be made:—

    The House divided: Ayes 89, Noes 136.

    Morgan, GeraintScott, NicholasTaylor, Teddy (Cathcart)
    Morrison, Charles (Devizes)Scott-Hopkins, JamesTabbit, Norman
    Morrison, Hon Pater (Chatter)Shaw, Giles (Pudsey)Temple-Morris, Peter
    Neave, AireyShaw, Michael (Scarborough)Townsend, Cyril D.
    Neubert, MichaelShersby, MichaelTrotter, Neville
    Normanton, TomSilvester, FredViggers, Peter
    Osborn, JohnSims, RogerWeatherill, Bernard
    Page, Rt Hon R. Graham (Crosby)Sinclair, Sir GeorgeWinterton, Nicholas
    Rathbone, TimSkeet, T. H. H.Wood, Rt Hon Richard
    Rawlinson, Rt Hon Sir PeterSpeed, KeithYoung, Sir G. (Ealing, Acton)
    Renton, Tim (Mid-Susaax)Spicer, Jim (W Dorset)
    Rhys Williams, Sir BrandonStenley, John


    Ridsdale, JulianSteen, Anthony (Wavertree)Mr. Adam Butler and
    Roberts, Michael (Cardiff NW)Stradling Thomas, J.Mr. Spencer Le Merchant.


    Allaun, FrankHenderson, DouglasRodgers, George (Chorley)
    Anderson, DonaldHooson, EmlynRooker, J. W.
    Armstrong, ErnestHowells, Geraint (Cardigan)Roper, John
    Atkinson, NormanHughes, Robert (Aberdeen N)Ross, Rt Hon W. (Kilmarnock)
    Bagier, Gordon A. T.Hunter, AdamRyman, John
    Bain, Mrs MargaretJackson, Miss Margaret (Lincoln)Sandelson, Neville
    Bates, AlfJay, Rt Hon DouglasSedgemore, Brian
    Belth, A. J.Johnson, Walter (Derby S)Selby, Harry
    Booth, AlbertJones, Alec (Rhondda)Shaw, Arnold (Ilford South)
    Boothroyd, Miss BettyJones, Barry (East Flint)Skinner, Dennis
    Boyden, James (Bish Auck)Kerr, RussellSmall, William
    Bray, Dr JeremyKilroy-Silk, RobertSmith, Cyril (Rochdale)
    Callaghan, Jim (Middleton & P)Lamond, JamesSpearing, Nigel
    Canavan, DennisLitterick, TomSprigga, Leslie
    Cant, R. B.Loyden, EddieStallard, A. W.
    Carter-Jones, LewisLyons, Edward (Bradford W)Stewart, Donald (Western Isles)
    Cartwright, JohnMcElhone, FrankStewart, Rt Hon M. (Fulham)
    Castle, Rt Hon BarbaraMackintosh, John P.Strang, Gavin
    Clemitson, IvorMcMillan, Tom (Glasgow C)Taylor, Mrs Ann (Bolton W)
    Cocks, Michael (Bristol S)Madden, MaxThomas, Mike (Newcastle E)
    Craigen, J. M. (Maryhill)Marks, KennethThomas, Ron (Bristol NW)
    Cryer, BobMarquand, DavidThompson, George
    Cunningham, Dr J. (Whiteh)Marshall, Dr Edmund (Goole)Thorne, Stan (Preston South)
    Dalyall, TamMellish, Rt Hon RobertThorpe, Rt Hon Jeremy (N Devon)
    Davies, Bryan (Enfield N)Mikardo, IanTorney, Tom
    Dolg, PeterMillan, BruceWainwrlght, Edwin (Dearne V)
    Dormand, J. D.Miller, Dr M. S. (E Kilbride)Walker, Terry (Kingswood)
    Douglas-Mann, BruceMitchell, R. C. (Soton, Itchen)Ward, Michael
    Duffy, A. E. P.Moiloy, WilliamWatkinson, John
    Dunn, Jamas A.Morris, Alfred (Wythenshawe)Watt, Hamish
    Dunnett, JackNewens, StanleyWeetch, Ken
    Ellis, John (Brigg & Scun)Noble, MikeWellbeloved, James
    Evans, Gwynfor (Carmarthen)Oakes, GordonWhite, Frank R. (Bury)
    Evans, John (Newton)O'Halloran, MichaelWhitlock, William
    Ewing, Mrs Winifred (Moray)O'Malley, Rt Hon BrianWigley, Dafydd
    Ford, BenOvenden, JohnWilliams, Alan (Swansea W)
    George, BruceOwen, Dr DavidWilliams, Alan Lee (Hornch'ch)
    Gilbert, Dr JohnPalmer, ArthurWilson, Alexander (Hamilton)
    Ginsburg, DavidPendry, TomWilson, Gordon (Dundee E)
    Gourlay, HarryPenhaligon, DavidWise, Mrs Audrey
    Graham, TedPhipps, Dr ColinWoodall, Alee
    Grant, George (Morpeth)Radice, GilesYoung, David (Bolton E)
    Harper, JosephRees, Rt Hon Merlyn (Leeds S)
    Harrison, Walter (Wakefield)Raid, George


    Hatton, FrankRichardson, Miss JoMr. James Hamilton and
    Hayman, Mrs HeleneRoberts, Albert (Normanton)Mr. David Stoddart.
    Heffer, Eric S.Roderick, Caerwyn

    Question accordingly negatived.

    Clause 19

    Contribution Conditions For Retirement Pensions, Widowed Mother's Allowance And Widow's Pension

    I beg to move Amendment No. 3, in page 10, line 34 at beginning insert

    'In relation to Category A and Category B retirement pension'.

    With this amendment we are to take Amendment No. 4, in page 10, line 42 leave out 'responsibilities at home' and insert

    'the care of children or elderly or disabled relatives'.
    and Government Amendment No. 5.

    Amendment No. 3 makes it clear that the provision now in the Bill relates only to retirement pensions. Amendment No. 5 makes a different provision for widow's pension and widowed mother's allowance, so as to enable a man to qualify his widow for a full benefit provided he had actually contributed or been credited with contributions in at least half of his requisite number of years, or in 20 years if that is less, and the remainder were years of home responsibility.

    This amendment will be of particular benefit in those cases where a man dies in his 20s or early 30s, and where the benefit at issue will almost always be widowed mother's allowance. The normal rules require a man whose insurance life runs from age 16 to age 30 to have contributions paid or credited in 12 of those 14 years if his widow is to get full benefit. The modification which the amendment makes would mean that if, for example, he had paid for 10 years only, but had had home responsibilities for the other two, her title to the full rate of benefit would not be lost. Cases of this kind will undoubtedly be rare, fortunately, but it seems right that, where they arise, pension rights should be protected if family responsibilites have kept the husband at home.

    I am not sure whether the Oppostion intend to press Amendment No. 4, or whether it is merely a probing amendment. We spelt out in Committee the general terms under which the home responsibility would be decided. Detailed examples were given by my right hon. Friend in reply to a series of interventions by the hon. Member for Rushcliffe (Mr. Clarke). Following that detailed explanation, letters were written to the hon. Member for Rushcliffe, and I believe that specific cases and examples were sent out to Members of the Committee indicating how the home responsibility would affect people of different age groups and different records of contribution.

    Apart from the general terms, we envisage that there would be three, as it were, general categories of people entitled to the home responsibility provision. First, there would be those persons in receipt of personal benefit such as child benefit. Secondly, there would be persons in receipt of dependency benefits on an invalidity or retirement pension. Thirdly, where there was no such previous benefit there would be claims which would need investigation, but wherever possible it would be our wish that the home responsibility provision could be identified by reference to payment of benefit, because this would make it a simple and easy scheme to administer.

    In Amendment No. 4 the inclusion of the word "care" is the problem worrying us. The proposed wording, in fact, covers those contingencies which would be within the Government's definition of "home responsibility". The inclusion of the word "care" in the statutory provision would tend to suggest that we would have a duty to investigate in almost every individual case. That is something we would obviously seek to avoid.

    I understand that the Opposition naturally would want—as would every hon. Member—the fullest details of the home responsibility provision. I have sought to reaffirm the point made by my right hon. Friend; namely, first, to acknowledge the principle that we want it linked wherever possible with the payment of a benefit, and, secondly, to show that, whilst we would not want to carry out investigations in a broad variety of cases, there will be cases where investigation is absolutely necessary, and in such cases investigations will be carried out.

    Where a claim has to be substantiated we would first have a signed statement giving us the details and circumstances of the case. We would arrange home visits to check on this, and certainly where necessary spot checks would also be carried out.

    There are some details of the home responsibility not yet finalised, and I regret this, but there is a link at least with home responsibility and other problems such as married women's option. The hon. Gentleman will understand that.

    The best protection for the House—we are not trying to rush anything through—is the fact that the regulations embodying home responsibility will need an affirmative resolution of this House, and at that time the final details, which have not yet been completed, will be available for the scrutiny of the House.

    I can begin, on Amendment No. 4, by reassuring the Under-Secretary of State that our principal purpose was to make sure that a further debate took place on the home responsibility provision.

    I accept his explanation that the use of the word "care" in the amendment would cause difficulties in practice, and I am quite happy to accept what he says, therefore—that technically it would cause more difficulties than it would solve to substitute our definition.

    But the reason we wish to have a further debate on the home responsibility provision is that it was clear, at the time of the Committee discussions, that, despite the considerable expertise of the Minister of State and his ability to answer the very detailed questions which were thrown out as more and more complications occurred to Members of the Committee, the Government had not concluded their decisions on this matter. There is still a great deal of uncertainty. What has happened is that the Government have written into the Bill the power to use the home responsibility provision in the way outlined, but the details of how it is provided and precisely which people are to be benefited still remain completely in the dark. The letter which was helpfully sent to my hon. Friend the Member for Ealing, Acton (Sir G. Young) and other Members of the Committee, trying to explain some of the difficulties, includes the phrase,
    "the details of home responsibility have not yet been decided",
    and that is what the Under-Secretary of State has just confirmed. It is very unfortunate that a Bill can go through all its stages and reach this stage with the Government still unable to give any final details about the categories of people who will be affected.

    I have to clutch at straws and accept that there is some consolation in what the Under-Secretary said. When the Government have reached some decision to put their good intentions into practice, the procedure will be the affirmative resolution procedure. So, no doubt at a similar time of night on some future occasion we shall have more details about who is to benefit.

    We welcome the idea in principle, but the Government are still saying that the home responsibilities will normally be attached to the receipt of some benefit. I understand that the Government were looking at the case of those who had to look after children—therefore, presumably, those receiving family allowance is probably what they had in mind—and then those caring for relatives receiving invalidity or retirement pension or those receiving attendance allowance for some dependent relative in their household.

    Several questions arise from that. I confine myself to two. First, is it the intention that home responsibilities will apply for all children of school age, so that one would be credited with home responsibilities for the full 16 years of each child's school life, resulting in many years of home responsibilities in the case of large families?

    Secondly, is it the case that the Government anticipate taking into account only the care of relatives? The original explanatory notes on the Bill talked about the receipt of a specified benefit by the person concerned, a dependant, or another member of the household. It sounds as though someone being cared for, living in the household, not a relative, might be the basis for home responsibility payments.

    I invite the Minister to deal with those broad points before we go any further.

    This late hour is no time for me to go into the careful explanation given in the same letter to my hon. Friend the Member for Acton about the way in which home responsibility will work, given that it will have an effect on the requisite number of qualifying years that anyone has when it comes to entitlement to benefit.

    Three examples were given in that letter seeking to show the level of benefit to be payable to people who had a given level of years of contributions and years of home responsibility. The generosity still startles me. One of the illustrations shows how years of home responsibility from the age of 21 to 39—which is not unreasonable for anyone looking after a family—result in contributions being required for only 20 years, after taking account of home responsibilities. Therefore, to qualify for a benefit, bearing in mind the 25 per cent rule, which is the minimum to qualify at all, someone in that position need only work and pay national insurance contributions for five years to get a benefit in her own right.

    It is a major step that only five years' contributions are necessary in an entire potential working life to get a benefit. Anticipating the years of home responsibility between 16 and, say, 23 or 24, plus the added years between 55 and 60 in the case of a woman younger than her husband, a great many people will be able to take advantage of the home responsibilities arrangements. For that reason, it will be very expensive to introduce this innovation.

    We shall save our queries for the regulations. We accept the crying need to do something about the woman who has to break off her employment to look after young children and who, at the moment, finds her national insurance benefit affected adversely. Then there is the single woman who has to abandon work after paying national insurance contributions for some years in order to stay home to look after an ageing relative or other dependant. Such people are hard-hit categories. The national insurance system hits them very hard.

    We welcome the home responsibilities arrangements. We obviously view them as an important target area. Perhaps if a little further light is shed on this matter I could happily assure the Minister that I shall not seek to move Amendment No. 4.

    11.15 p.m.

    I am very pleased that the hon. Gentleman has welcomed the general principle of home responsibilities. In the two special cases he mentioned there is no disagreement between us.

    The hon. Member said that he felt that home responsibilities could be regarded as a slightly over-generous method of dealing with things. The basic point is that one is trying to deal with home responsibilities by trying to ensure that anyone who qualifies by virtue of having to stay at home to look after a child or a sick or elderly parent shall not suffer as a consequence. It is our desire to do that by way of fitting them into categories, either those who have a personal benefit, such as a child benefit, or those who are dependent on people on benefits. There is also a third category of claims where family circumstances would need investigation.

    Complications came to light in Committee. Every time my right hon. Friend the Minister of State answered one specific point, another arose. We could have continued the discussion of home responsibilities from that time until tonight and still be dealing with a series of complications.

    I cannot go any further on the details tonight. However, the affirmative resolution will give the House the fullest opportunity to debate this matter in great detail.

    Amendment agreed to.

    Amendment made: No. 5, in page 10, line 43, at end insert—

    '(7) In relation to a widowed mother's allowance and widow's pension, the second condition shall be deemed to be satisfied notwithstanding that paragraphs (a) and (b) of subparagraph (3) above are not complied with as respects each of the requisite number of years if—
  • (a) those paragraphs are complied with as respects at least half that number of years (or at least 20 of them, if that is less than half); and
  • (b) in each of the other years the contributor concerned was, within the meaning of regulations, precluded from regular employment by responsibilities at home".'—[Mr. Alec Jones.]
  • I beg to move Amendment No. 6, in page 11, line 4, at end insert—

    '(5) In section 33 of the principal Act (partial satisfaction of contribution conditions) the following subsection shall be added—
    "(4) Regulations may provide that where—
  • (a) a person is entitled by virtue of this section to a Category A or Category B retirement pension consisting only of the additional component with no basic component; and
  • (b) that pension, and any graduated retirement benefit to which he may be entitled, together amount to less than the prescribed rate,
  • the person's entitlement as respects that Category A or Category B retirement pension shall be satisfied either altogether or for a prescribed period by the making of a single payment of the prescribed amount."'
    The purpose of the amendment is to provide that, where a person has no title to the basic component of a retirement pension, any small amount of additional component—or of additional component and graduated retirement benefit—which is due to him may be commuted. This parallels the provision which has operated since 1961 under the graduated scheme.

    Amendment agreed to.

    Clause 22

    Increase Of Long-Term Benefits

    I beg to move Amendment No. 7, in page 13, line 4, leave out 'and' and insert 'to'.

    With this we may discuss Amendment No. 8, in page 13, line 6, leave out from 'beneficiaries' to end of line 8.

    In moving the amendment, perhaps I should declare an interest. It affects part of our pension scheme as Members of this House. But that is not why I have moved the amendment. I do so on behalf of many hundreds of thousands of public service pensioners.

    I shall be brief, and perhaps very simple compared with the sort of debates we have had at earlier stages. The aim of these amendments is to produce a simplification. It seems completely anomalous that we should have a system under which one part of the pension is affected by one set of criteria and another part of the same pension is subject to a different set of criteria.

    The Minister may well argue that public service pensioners are well treated compared with many in the private sector. But the House should not forget that in many areas of the public service the pension is regarded as part of the additional benefit of the job, and that there is frequently some sacrifice in other areas because of the particular pension provisions.

    The Minister may perhaps dazzle the Committee with figures showing how costly this process will be. In that case I hope that we shall not be given mere crystal-ball-type figures. We have already heard many such figures in the debate. I hope that the figures relating to the cost of this proposal will be supported by some real statistical arguments showing how they were derived.

    I believe that these logical amendments make sense of the scheme.

    I support the plea to the Minister made by my hon. Friend the Member for Cannock (Mr. Roberts). Al- though we do not expect to be successful at this late hour, we feel that the case should be put.

    For many years the position of public service pensioners has deteriorated because of the increases in the cost of living. At intervals those pensioners have been desperately trying to catch up. There have been many complaints from retired teachers that their pensions were worth less every day because of inflation. They are frantically trying to catch up.

    There is heavy inflation in this country. That is a regrettable situation. There are now average wage increases of 30 per cent. or 30 per cent. plus, while the cost of living has increased by about 20 per cent. I do not think that that situation can go on for ever. We must control it. The pensioners, especially public service pensioners, are being held back because their pension increases are related not to average earnings but to the cost of living. When the rise in average earnings is substantially ahead of that of the cost of living it means that the pensioners are not sharing in the increased prosperity of the country.

    I hope that the Government will soon find some way of controlling pay increases, which have sometimes amounted to 30 per cent. If 30 per cent. wage inflation continues each year, we shall be faced with a serious situation and possibly a threat to the democratic process.

    We believe that pensions increases should be based on or related to the increases in average earnings rather than the rise in the cost of living, so that pensioners may share in the temporarily increased prosperity.

    There may come a time when there must be some form of a rigid incomes policy, although not necessarily a statutory incomes policy. I hope that in the next few months we shall draw up a workable voluntary policy. No one pretends that the social contract is now working. We must design a modified, though stricter, social contract. In the meantime it is important that public service pensions should not fall behind in the race. Therefore, we have put forward these simple amendments. I expect that we shall be told that from an actuarial point of view the proposals will cost a large sum of money. I remember when we were told that we would have to increase the teachers' pension fund contributions to meet the predicted future actuarial deficiencies. They all turned out to be phoney. I have become increasingly suspicious of actuarial calculations of that kind.

    The Minister will probably say that this proposal will cost several hundred million pounds. If so, I press him to back that up with concrete statistical evidence. Unless he does, we shall be very suspicious of him.

    It is not sufficient to throw out figures. We had enough thrown at us during the recent referendum. There were references to 500,000 unemployed for one reason and 750,000 unemployed for another. It was a case of thinking of a number and doubling it. It is not sufficient to throw out figures from nowhere. I hope that my right hon. Friend will back up any figures he may quote with statistics to show that they are correct.

    I do not want to detain the House at this late hour. The Minister must justfiy why he is asking the public service pensioner, as such, not to share in the general increase in prosperity that is coming during a period of inflation.

    I will confine myself to the amendment. I will not attempt to give my hon. Friend the Member for Southampton, Itchen (Mr. Mitchell) evidence, statistical or otherwise, regarding the "500,000 unemployed" discussion which took place in the country recently—for all I know, my hon. Friend and I may have had the same or dissimilar views on that matter; that argument is over.

    Since this Government came into power there have been substantial and significant changes and improvements embodied in legislation which move in the general direction of the kind of protection that the amendment is seeking. For the first time we have put into legislative form the guarantee that retirement pensioners would in future receive increases in their basic pensions based on either earnings or prices—prices if they proved to give a higher increase than earnings. At a time of peculiarly difficult economic circumstances, the Government gave that pledge and are keeping it in respect of the basic pension, which becomes translated, in the terminology of this Bill, into the basic component.

    Understandably, my hon. Friends are suggesting that we should dynamise the upper tier component by relating it to earnings in the same way as we intend to dynamise, and are already dynamising, the basic component. That would mean that both the additional component in the State scheme and the pension entitlement of those who are contracted out of the State scheme would have to be dynamised post-award according to earnings.

    I understand that my hon. Friends are discussing the interests of the public service pensioner, but, quite properly, the amendment goes much wider than the public service pensioner and deals with the whole of the working population.

    As I have said, the Government have made substantial improvements by giving a guarantee of earnings-related dynamism on the basic component and of price protection—that is, complete inflation-proofing—in respect of the upper tier. This is a major and significant step forward. In public sector schemes there is currently post-award inflation-proofing, but it is rare to find permanent arrangements of that kind in privately funded schemes. To say that is in no way to attack those privately-funded schemes.

    11.30 p.m.

    Of course, some privately-funded schemes have been able on an ad hoc basis to provide inflation-proofing for their pensioners after award. But one simply cannot insure for that kind of thing. What can be done in terms of post-award proofing or partial inflation-proofing depends on the ability of the funds to meet those needs.

    What the Bill does by the contracting-out conditions and by the meshed arrangements as between the National Insurance Scheme on the one hand and occupational schemes on the other hand is to say that for the first time in the history of pension provision in this country the whole of the working population will have a basic component which is protected and keeps pace with earnings and an additional component which keeps pace with prices—that is to say, it gives complete inflation-proofing post-award. This in itself is a historic step forward.

    I accept fully what my right hon. Friend is saying about the importance of the inflation link. This is a major step forward. Does he not accept, however, that there might also be the question of pensions of this type sharing in what might be called the national dividend, in the growth factor which might take place in people's standards of living? Does he not feel that if there were a considerable step forward in this direction they could well fall behind although they were keeping pace with a purely inflationary situation?

    Is not one of the difficulties—I hope that my right hon Friend will be sympathetic on this—that some of the public service pension schemes we are talking about are not funded—for example, in the case of teachers? Some of us have argued for a long time that they should at least be partially, if not wholly, funded. Is not that one of the difficulties?

    No. I am familiar with the position as an ex-teacher whose contributions—my contributions as an employee—were taken back from me, some would say—but not in this place—stolen from me by my ex-employers. My deferred pay was taken back from me when I came to the House. I do not think that that is the difficulty. The only schemes which could guarantee that kind of inflation-proofing are public sector schemes because ultimately they have the backing of the State, although I recognise that with local authority schemes which are funded different considerations arise.

    The central question is that raised by my hon. Friend the Member for Cannock (Mr. Roberts). Of course it is right that one should do everything possible to ensure that there is a switch of resources to pensioners. That happens in this Bill. Secondly—I use my hon. Friend's expression—there should be a share for the pensioner from the national income. As regards the basic component, there is that share in full. In the case of the additional component, there certainly is a share through complete inflation-proofing because this is coming from the resources produced by the working population.

    It is true that there is a significant advance in the Bill, and there has been a significant advance during the last 18 months. My hon. Friends are asking whether we can go further. I am referring not only to public service pensioners but to the whole of the population, because it is right that we should consider them. My hon. Friends will have seen some of the letters in the Press—I am not commenting on them but am merely noting their existence—in recent months drawing attention to the price protection which is so valuable in public service pension schemes and the fact that private occupational schemes cannot match that kind of post-award payment. That is the reason why, within the parameters of this scheme, occupational pension schemes which are contracted out have no obligation for post-award dynamism, simply because it is an uninsurable risk.

    So, recognising that we have gone a long way, should we go further for the whole population? Anything that we do in a Bill like this clearly has an immediate impact. It also means the pre-emption of resources in significant quantities far into the future. Are we justified at this stage in our economic life in taking the step proposed?

    The estimated joint contribution rates required would be the percentage rates shown in Table 2 of the Government Actuary's Report increased by, in the tenth year of the scheme, 0·2 per cent., in the 20th year 0·6 per cent. and in the 30th year 1·4 per cent. That is because, on the assumption that I will give, the approximate emergent costs in these years are £100 million, £300 million and £750 million. The assumption on which that is based is that real earnings increase by 3 per cent. per annum; and the extra contribution depends on that historic assumption.

    Of course I should like us to be able to do this. We have made significant, indeed historic, improvements in provision for retirement in the Bill, but I cannot, in present circumstances and looking forward, recommend that we should pre-empt resources on this scale. No pension scheme lasts for ever, and we have a continuing history of improvement, but my hon. Friends have been right to bring this matter forward so that it can be put in context. I hope that they will feel that I have dealt with it as comprehensively as possible at this time of night and will bear in mind the significant costs in the future.

    I accept my right hon. Friend's assurances and his hopes for the future. I beg to ask leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    Clause 26

    Contracted-Out Rates Of Class 1 Contributions

    I beg to move Amendment No. 9, in page 15, line 11, leave out "2·5" and insert "3".

    With this it will be convenient to discuss Amendment No. 10, in page 15, line 14, leave out "4·5" and insert "5".

    The reason for the comparative harmony on the Bill, apart from the fact that we might all be weary of what has come to be known as "pensioneering", is that both sides see it, as they have repeatedly said, as a partnership between the State and the pensions industry as a basis for future pensions provision. The Government have made it clear that they are anxious to encourage good occupational schemes and to ensure that as many people as possible are encouraged to contract out and, therefore, to be brought within the benefits of such schemes.

    The attractiveness of the contracting-out terms to employers becomes as a result the acid test of the Government's sincerity of purpose. The amendment suggests that the proposed terms are inadequate and unacceptable. If they cannot see their way, even at this late stage, to improving the terms, I doubt whether the partnership to which they aspire can effectively be achieved.

    The amendments refer to the increases in the percentage reduction of contributions to the State scheme by employers and employees when they are contracted out; in short, the encouragement given to employers to contract out from the State scheme and become part of an occupational pension scheme.

    We are asking for a total of 8 per cent. against the 7 per cent. suggested by the Government. It will be incumbent upon me to prove that unless this increase is granted the scheme for partnership between the State and private pension schemes will not be a success. The figure of 7 per cent. which the Government propose is significant. Originally the proposal was that it should be 6½ per cent. In other words, in asking the Government to move on this matter we should on the face of it be pushing at an open door. Arguments have been deployed before and have seemingly persuaded the Government to change their mind. Between publication of the White Paper and the appearance of the Bill they were persuaded that 6½ per cent. was too low a figure to encourage employers to contract out.

    Of course, I recognise that the Government Actuary, having been obliged by the power and force of the arguments to move once, will make it extremely difficult and will require a very powerful case to be made before we can expect him to move again. I believe that a sufficiently powerful case exists to justify the amendment.

    The case revolves around four main reasons why our proposal is justified. First, we believe that the assumption of a 1 per cent. positive return on investments relative to earnings, which is part of the assumption underlying the Government Actuary's conclusions, cannot be sustained. We should like to hear far more justification of the Government's acceptance of that before we can accept it as a valid ground for resisting the pressure we are putting on tonight. I listened in Standing Committee to the Minister's explanation, and it is partly because I was unconvinced then and remain unconvinced now that I put it as the first reason for the Government listening to our argument.

    Secondly, the Bill is aimed at giving equality to women to become members of occupational pension schemes, and that fact has been warmly welcomed on the Opposition side. With equal pay almost upon us the balance between men and women in occupational schemes is likely to change. Equal access to these schemes between men and women is to become the order of the day. This equal access makes it imperative that employers be given an appropriate encouragement to contract out. We contend that that encouragement is not present at 7 per cent as envisaged in the Bill, but is present at 8 per cent as we propose.

    It is interesting that, although the professional organisations have differed widely in their reactions to other aspects of the Bill, it appears that they are united in agreeing with us that 8 per cent is the level at which there would be true encouragement to employers to contract out.

    11.45 p.m.

    Third, there is a risk to be undertaken by employers who contract out. This has never been more so than in the investment climate now prevailing. We know that we are on powerful ground here because it was on this basis alone, as we understand it, that the Government Actuary was persuaded, between the publication of the White Paper and the Bill, to approve an increase from 6½ per cent to 7 per cent in the contracting-out reduction terms.

    We believe that, that risk having been recognised, the incidence of inflation and the continuing uncertainty is such that the ½ per cent in return for the risk factor is insufficient. As the Government have already accepted the case about the acceptance of risk as a reason for improving the terms, we believe that we can do no better than underline the continuing need to re-examine the risk factor.

    Fourth, and perhaps more controversially, occupational pension schemes will be expected, in future as in the past, to lead the way in providing benefits above the minimum. In the past such schemes have acted as catalysts for the State. That is as it should be. If confidence is to be instilled into employers to contract out, to encourage the development of ever better terms within these schemes, the terms of contracting out must be made more attractive.

    If there is a marginal doubt in the mind of the Government about whether they can concede this the matter is so important that the benefit of the doubt must be given to the employers so that the occupational schemes may be able to blaze the trail to better benefits.

    The Bill is presented as being a breakthrough for women. For the first time women are to have equal access to occupational pensions schemes. In all seriousness and weighing my words carefully I must ask: what if there are no occupational schemes to which to have equal access? I do not overstate the case when I say that, apart from public service schemes and some large existing private schemes, that could be so if the encouragement to contracting-out is as marginal as it appears and if the climate remains as uncertain as it is.

    I contend that it is crucial for the Government to yield on this point, and I hesitate to use such a word as "crucial" at this stage in our consideration of the Bill.

    The assumed return of a positive rate of interest cannot be justified in the quicksands of the present inflationary situation. The changing complexion of schemes as women are given equal access to them has not been taken sufficiently into account by the Government Actuary. The assumption that the same proportionate number of people will be contracted out as under the graduated scheme will not stand. Yet that, as I understand it, is the basis upon which the matter has so far proceeded. The Government Actuary, in our view, has forgotten the new dimension of women's equality of access and, perhaps just as important, equality of pay.

    There is also the question of the risk factor, which the Government Actuary concedes is worth more than the ½ per cent. which has been yielded at the moment. Recent Press reports of pension schemes in difficulties and the need for employers to transfer large amounts to keep them afloat are proof of that, if proof be required. If occupational pension schemes are to blaze the trail, as they have done, they must be given the benefit of any marginal doubt. This is the touchstone of the Government's sincerity. Do they really believe what they say, that partnership between the private pensions industry and the Government is our only hope for taking pensions out of politics? Do they want occupational schemes at all, and are they convinced that there will be any if 7 per cent. remains an immutable figure? How can they justify running the risk of depriving hundreds of thousands of people, including women, of the opportunity of joining such a scheme because the contracting-out terms are not such as to induce the employer to set up a scheme?

    I listened with care to the Secretary of State when she said that there should go forth from the House the message that we want a partnership between the Government and the pensions industry. Unless the Government can answer the point I have made, unless they can justify beyond peradventure that 7 per cent. is an adequate figure by which to reduce the contracting-out terms so as to develop the growth of pension schemes as they would wish, their protestations of sincerity and partnership will become a hollow sham.

    It is my sincere hope that, without taking any further action, the Minister will be able to tell us that, having thought again about the scheme, he recognises that there may be an argument along the lines I have deployed and accepts the amendment.

    It could be said that the Opposition by Amendments Nos. 9 and 10 are spending money which they would have recouped from the fund had Amendment No. 1 been carried. Who would gain and who would lose as a consequence of the amendments? The contracted-out employer would gain 0·5 per cent., the contracted-out employee would lose the equivalent 0·5 per cent. of earnings up to the lower income level and the non-contracted-out employee would lose 0·5 per cent. of all his earnings.

    It has been argued in Committee and again today that an amendment of this type is necessary to persuade employers that it is worth their while to contract out. The CBI, the Life Offices' Association and hon. Members in Committee all advocated alterations in the contracting-out terms, the argument being that 7 per cent. was inadequate. The Government have moved from 6½ per cent. to 7 per cent., but hon. Members—rather like Oliver Twist—are asking "Please, Sir, can we have some more?". My right hon. Friend might have been wiser to keep the 7 per cent. up his sleeve until this evening rather than give it away too soon, because his concession seems to have increased the appetite rather than satisfied a genuine need.

    Many reasons have been given for increasing the contracting-out reduction. It is said that it is necessary to encourage firms to contract out, and the hon. Member for Brentwood and Ongar (Mr. McCrindle) said that this was a test of the Government's faith. The Government have spoken in favour of encouraging firms to contract out, and have given considerable evidence of their wish for a partnership between the occupational pension schemes and the State scheme. They have done, and are doing, much to encourage contracting out.

    I do not deny that the Government have moved substantially in various directions to make possible the development of occupational pension schemes, but surely the Minister munst agree that unless employers are encouraged in the first place to contract out all the concessions made by the Government will be as naught. Surely this is the most fundamental of the changes that we must press upon the Government.

    I concede that the hon. Gentleman is making a strong case. He says that this is one of the most fundamental of the changes that the Opposition seek to make, but I suggest that that phrase has been used to describe almost every amendment which the Opposition have pressed in Standing Committee and in the House. The point I am trying to sustain is that we have shown evidence of our determination to bring about cooperation. I remind the House of the improvements which were brought about between publication of the White Paper and publication of the Bill, the long consultations my right hon. Friend has had and the improvements which were made and accepted in the new clause this evening.

    It is my duty to justify the 7 per cent. That is the crux of the hon. Gentleman's case. He is seeking to justify moving to 8 per cent., and it is upon me to justify 7 per cent. I start by referring to the White Paper, which proposed that the reduction should be 6½ per cent. That was the so-called neutral figure arrived at by the Government Actuary. However, we went further than that. We did so in recognition of the serious risk which the hon. Gentleman talked about this evening. In recognition of that risk, the Government increased the reduction to 7 per cent. More than that, the increased ½ per cent. was allocated entirely to the employer. I think that the hon. Gentleman must take on board that to go beyond 7 per cent. would be unfair to those contributors not contracted out of the State scheme who would have to bear the additional cost. As I have said, the contracted out employer stands to gain the 0·5 per cent. whereas the contracted out employee, and even the non-contracted out employee, would lose a comparable figure.

    One of the criticisms that have been made is that the contribution reduction does not sufficiently allow for the effect of the Bill's provision for equal access for women or for the effect of equal pay. The supposition is that it will increase the relative weighting of women in a scheme because pensions for women are more costly than pensions for men.

    I am sure that the hon. Gentleman knows that a memorandum was prepared by the Government Actuary to explain his conclusions. A copy of the memorandum was sent to the Opposition and a copy was placed in the Library of the House. Two of the specific points which I have mentioned—namely, equal access and equal pay—were specifically examined in the memorandum. First, the Government Actuary examined the assumption that the proportion of women working full-time and covered by occupational schemes in each five-year age group became as high as the corresponding proportions for male employees. That is a fairly generous assumption, but even on that basis—and it is surely a basis which most of us would find unlikely to be achieved in practice in the immediate future—the rate of reduction brought out was only 0·1 per cent. higher than on the basis adopted for the Government Actuary's memorandum.

    I recall that my right hon. Friend the Secretary of State referred to this matter in Committee and that the hon. Member for Rushcliffe (Mr. Clarke) expressed some surprise and suggested that he would like to see the figures. I assume that by now he has had a copy and has seen them. I am sure he would agree that the claim that the rate of reduction being brought out will be only 0·1 per cent. higher is substantiated by the Government Actuary's memorandum. It suggests that equal access on the conditions I have spelt out would not make it necessary to move from 7 to 8 per cent., and I suggest that one could keep it down to about 6½ per cent.

    12 midnight.

    Similarly, the Government Actuary examined the effect of equal pay and discovered that a high proportion of women contracted out under the graduated scheme were in employment giving equal pay, such as banking, insurance, the public services and so on. To that extent the effects of equal pay were already present in the weighting adopted by the Government Actuary. On these factors a contribution reduction of 6½ per cent. at the start of the scheme would still be justified. Such a rate would give to an average earnings scheme an equal chance of profit or loss.

    There remains an element of uncertainty—namely, that the assumptions adopted about such factors as the level of interest rates and increase in the general levels of earnings might not be borne out in practice. What matters is not the return on investment or the rate of wage inflation, but the margin between the two—which when averaged over long periods in the past, has been consistently favourable. However, there have been short periods when the margin was small or negative, and recent experience has certainly been unfavourable.

    I understood the hon. Member for Rushcliffe to suggest in Committee that it would not be reasonable to assume that this unfavourable balance could persist indefinitely. It was precisely because of the element of risk in making assumptions about these factors that the Government decided to extend the contribution reduction by ½ per cent., making 7 per cent. in all as the initial contribution reduction. The increase to 7 per cent. represents a significant move towards accommodating schemes. To go further would be to tip the balance unduly to the disadvantage of those in the State scheme at whose expense any further increase in the contribution reduction would have to be found.

    It is understandable that groups in the pension industry would prefer 8 per cent. to the 7 per cent., but I think it is right to say that the quality Press regard the increase from 6½ to 7 per cent, as reasonable and fair. I have a number of Press cuttings on this point. The Daily Telegraph on 27th February referred to the ½ per cent. increase to 7 per cent. proposed as the contribution reduction to the State scheme for contracted-out schemes and pointed out that those in the pensions and life assurance industry would be in a position to recommend contracting out as an attractive proposition to companies.

    I believe that we have moved significantly towards helping the schemes that want to contract out to do so. This is a further step by the Government to show our determination to bring about that degree of co-operation.

    The Minister has concentrated on two of the four points that I made—on the increasing incidence of women likely to come into occupational pension schemes and the risk factor. It would take too long, and the hour is too late, to challenge some of the things he said about bringing women into schemes, but I must say that the Minister did nothing to ease my fears that the risk is much greater than the Government Actuary and the Government conceded in accepting the increase from 6½ per cent. to 7 per cent.

    However, I do not wish to be unduly contentious at this late hour. I can only express the hope that the confidence which the Minister shows that occupational pension schemes will develop, that the partnership to which he again at least paid lip service tonight will be carried forward. I hope that he is right and that I am wrong. But there is a residual fear within the pensions industry that the contracting-out terms might be such as to be less encouraging that I think both the Minister and I would like to see.

    The best last word that I might say on this is that if one of us is to be proved right in his prognosis of what will happen to occupational pensions schemes I devoutly hope that it is the Minister.

    Amendment negatived.

    Clause 27

    Review And Alterations Of Contracted-Out Rates Of Class 1 Contributions

    I beg to move Amendment No. 11, in page 16, line 20 at end insert

    "provided that that tax year begins not less than 12 months after the date upon which the draft order was laid before Parliament".
    The amendment arises from a rather odd amendment in Committee, when I moved an amendment dealing with the period of notice of changes in the contracted-out rate of contributions and made it clear that I had made a mistake in the wording, so that the amendment did not achieve the purpose I had had in mind. The Under-Secretary was quick to offer to accept the amendment, which would have changed the Bill in precisely the opposite direction to that which I had intended. I had some difficulty in being allowed to withdraw the amendment and reconsider the wording.

    This amendment would give effect to the intention I outlined in Committee. It goes back to the question of the amount of notice contracted-out schemes will have of changes in circumstances affecting them, in this case changes in the contracted-out rates of contribution. Changes in the actuarial tables are also very much affected.

    The difficulty is that every time changes of this kind are made, as they will have to be made from time to time, those running a scheme must reconsider its position and decide once more whether to continue to contract out, given the new arrangements. That involves taking advice from actuaries and fund managers, who may be pressed by other schemes seeking precisely the same advice, so that there will be delays.

    If advice is given that the change in the contracted-out contribution rate is such that it is no longer advantageous to contract out, further delay takes place while notice is given to the members and trade unions, and there is consultation leading up to trying to cancel the contracted-out certificate with the Occupational Pensions Board, which can refuse cancellation until it is satisfied that all the consultation has been carried out.

    In Committee I explained that it would take at least 12 months. Earlier in the debate I indicated that there are those who think it could take very much longer in many circumstances where a company is trying to contract out. The Government accepted the spirit of what I was saying in Committee. Although the Under-Secretary of State was anxious to take my amendment, in what he said he tried to reassure us that the Government realised that about 12 months would have to be the necessary notice in any individual case.

    I ask the Minister, given that we have had this opportunity of reconsidering it, and that he must have known throughout that we were bound to have a Report stage debate, whether he now accepts that he can go beyond just saying that the Government realise that a period of about 12 months is involved, and whether he will accept writing into the Bill a commitment that there will be at least 12 months' interval between the announcement of changes and those changes coming into effect, so that schemes can have adequate time to reconsider their position.

    Having run this race over almost the same course, if I could be assured that this was the real intention of the Opposition on this occasion I would feel happier before I opened my mouth on this subject. But I can say to the hon. Gentleman that certainly we would want to help the Opposition as far as this amendment is concerned, and to help the industry. We are aware that there is a need for time for making allowances and are quite prepared to accept this in principle. We want to have a look at the wording of it further. Consequential amendments in other parts of the Bill will be involved.

    Certainly we accept the principle behind the amendment and that there is a need for something of this type. I see that the hon. Member for Rushcliffe (Mr. Clarke) is looking surprised. I understand that if we are to avoid postponing any change for a further year it would be necessary to amend Clause 27 further. With that proviso, I would seek to put the right sort of amendments down in another place.

    I am grateful for that assurance. I gather that the acceptance in principle goes to the extent of saying that my second attempt at drafting—which is as technically defective as the first, although nearer my intention—still needs improvement, but that the Minister is definitely saying that there will be amendments in another place which will meet the purpose behind it.

    Amendment, by leave, withdrawn.

    Clause 29

    Contracted-Out Employment

    I beg to move Amendment No. 12, in page 17, line 7, leave out

    '(on the assumption that he will attain that age)'.

    With this we may discuss Government Amendments Nos. 13, 15 and 16.

    Amendments Nos. 12, 13 and 16 have the effect of enabling schemes with a waiting period of not more than five years to be used for contracting out, provided that service during the waiting period counts towards the guaranted minimum pension and that, when the waiting period is completed, service in that period counts towards requisite benefits. The amendments have been put down in response to representations from pensions interests. Amendment No. 15 is a technical amendment.

    Amendment agreed to.

    Amendment made: No. 13, in page 17, line 15, at end insert—

    '(1A) Where it is a condition of a scheme that the earner shall complete a specified minimum period of service before qualifying for requisite benefits in excess of guaranteed minimum pensions, then in determining whether his service qualifies him as mentioned in subsection (l)( a) above at a time when he has not completed that period of service, the assumption is to be made that he will complete it; but in such a case for the employment to be contracted-out by reference to the scheme—

  • (a) the minimum period must not be more than five years;
  • (b) any service during that period must count towards guaranteed minimum pensions; and
  • (c) any service in the period must, when the period is completed, count towards all the requisite benefits of the scheme'.—[Mr. Alec Jones.]
  • Clause 33

    Annual Rate Of Earners' Pension

    Amendments made:

    No. 15, in page 21, line 19, leave out from 'in' to ';or' in line 21 and insert

    'contracted-out employment by reference to the scheme'.

    No. 16, in line 25, at end insert—

    '(2A) Where it is a condition of the scheme that the earner shall complete a specified minimum period of service before qualifying for requisite benefits in excess of guaranteed minimum pensions, the scheme's rules need not provide as in subsection (2) above for an earner whose service is terminated before completion of that minimum period'.—[Mr. O'Malley.]

    12.15 a.m.

    I beg to move Amendment No. 17, in page 21, line 28, leave out from 'salary' to 'by' in line 31 and insert:

  • '(a) the method of computing average annual salary must be approved by the Occupational Pensions Board; and
  • (b) the scheme must provide that earnings for any period falling within any tax year shall, for the purposes of the calculation, be treated as increased by the same percentage as that prescribed for the increase of earnings factors for that year.
  • (3A) In subsection (3)( b) above, "prescribed" means prescribed'.

    With this amendment, it will be convenient to discuss Government Amendments Nos. 18, 19 and 20.

    The four amendments are linked.

    The amendments to Clause 33(3) are to provide that the method of calculating average annual salary in an average salary revalued scheme must be approved by the Occupational Pensions Board, and that full earnings in any tax year must be revalued by the same percentage as that prescribed for the increase of earnings factors in that year.

    The amendments are designed to ensure consistency by providing that the OPB will have a similar oversight of the method of computing average annual salary as it has over the method of ascertaining final salary in Clause 33(4).

    The amendments to Clause 33(4) are drafting amendments.

    Amendment agreed to.

    Amendments made:

    No. 18, in page 21, line 33, leave out 'he' and insert 'the earner'.

    No. 19, in line 38, leave out from beginning to first 'the' in line 40 and insert:

  • '(a) the method of ascertaining final salary; and
  • (b) the scheme's provisions for calculating the rate of pension by reference to it, must be approved by the Board.
  • (4A) In deciding whether or not to give their approval under subsection (4)( b) above'.

    No. 20, in line 43, leave out 'that' and insert 'final'.—[ Mr. O'Malley.]

    I beg to move Amendment No. 21, in page 22, line 22, leave out 'not' and insert 'would not exceed'.

    This again is a drafting amendment. It is an amendment to the revision of the subsection which was accepted in Committee, and is aimed at putting right a technical error in that amendment. As it stands, the effect of the subsection would be that only earnings over one and a half times the upper earnings limit would be excluded from the scheme's definition of "salary", whereas the intention is that any earnings over the limit may be excluded. The amendment corrects this.

    Amendment agreed to.

    I beg to move, That further consideration of the Bill, as amended, be now adjourned.

    We have made substantial progress in our deliberations on the Bill today. Members of the Committee, but also other hon. Members, have made valuable contributions to our discussions. It is reasonable that, having gone past midnight, we should adjourn until a more sensible hour consideration of some important amendments which still have to be discussed. I hope, therefore, that this motion will be generally acceptable to the House.

    Question put and agreed to.

    Bill, as amended ( in the Standing Committee, and on recommittal), to be further considered this day.

    European Community (Economic Policy)

    12.18 a.m.

    I beg to move,

    That this House takes note of Commission Document R/731/1/75.
    Almost a year ago I had the privilege of initiating in this House the first debate on a report of the Scrutiny Committee. It was then on the economic guidelines applicable to last year. This evening I have the privilege of initiating the first debate on a report of the Scrutiny Committee after the referendum which confirmed Britain's membership of the European Community. It is again on the economic policy guidelines, applicable for the present.

    The three documents covered by the Commission letter (R/731/1/75) are concerned with the adjusted economic policy guidelines for 1975, with the summary account of economic policies pursued in 1974, and with the report on the application of the Council decision on 18th February 1974 on the attainment of a high degree of convergence on economic policies of member States. Right hon. and hon. Gentlemen will recall the debate last July when I dwelt at length on the guidelines system. I pointed out that it provided a useful practical procedure for discussing national economic policies and their interaction and that it was an additional means for making our views on common problems known, in a way which may lead member countries to adopt policies which will ease the adjustment process.

    The general guidelines—that is, the guidelines addressed to the member States collectively—recognise three major economic priorities—the correction of the balance of payments, the fight against inflation and the reduction of the level of unemployment; and on the basis of the external position and the rate of inflation the United Kingdom and Italy have been singled out as countries in which there is a continuing need to maintain overall policies of restraint, while vigorously supporting the necessary transfer of resources into the balance of payments and fixed investment.

    Broadly speaking, we accept these general guidelines. Indeed, by his action in the recent Budget, my right hon. Friend the Chancellor of the Exchequer provided proof of this Government's determination to correct the structural weaknesses in the United Kingdom economy, made considerably more serious by the recent oil crisis. We have made a start. The statistics show a major swing of resources into the balance of payments last year. The prospect is for a further movement of resources into the balance of payments this year, and a deficit at least £1 billion less than the £3·8 billion in 1974. The medium-term intention to eliminate the deficit entirely is in accordance with the specific United Kingdom guideline that reducing the external deficit should remain one of the principal aims of economic policy.

    Both the general guidelines and the specific United Kingdom guidelines emphasise the need for high deficit countries to contain the growth of real personal consumption in order to achieve the necessary reduction in the external deficit. In the United Kingdom personal consumption showed no growth at all in 1974, and it weakened further in the first quarter of 1975. The effects of the April Budget measures on real personal disposable income are expected to result in a further small fall after the Budget, thereafter showing little change from the level in the second half of 1974. But, while we accept the need for moderation at home, we believe that the surplus countries within the Community—the Netherlands and West Germany—have a particular responsibility to get demand moving. The guidelines recognise this, although we might place a rather greater emphasis on the rôle of a strong rise in consumption rather than investment as the basis of their re-expansion.

    If the recovery is to be lasting, however, there is a need, stressed in the guidelines document, not only for a better allocation of resources but for a slow-down in the rise of costs and prices. The problem of inflation remains a serious threat to our overall economic strategy. Over the last year to March, earnings and retail prices have risen 27·9 per cent. and 21·2 per cent. respectively—a rate of wage and price inflation out of keeping with trends in other countries. Although British exports remain competitive at present, the continuation of a high rate of inflation would cast doubts on our ability to maintain this advantage in the months ahead. There are, however, as my right hon. Friend said in his April Budget Statement, good prospects of a slower rise in the cost of living in the second half of the year. By that time the effects of the Budget measures will have fed through to prices in the shops, and the benefit of lower food and commodity prices should be making itself felt. But everything depends on the success with which we tackle the problem of excessive wage settlements.

    Although the problem of unemployment is covered only in the general guidelines, it must clearly be faced as one of our most serious problems Nevertheless, our record to date compares favourably with most other member countries, where the effects of measures taken or not taken have tended to be more restrictive than was perhaps intended, and there now appears to be general agreement that demand has fallen to an undesirable extent.

    Looking ahead, the prospect for the United Kingdom is a continued rise in unemployment this year, and although some will say there was a case for reflation in the recent Budget, this argument takes no account of the unprecedented nature of the circumstances which face us in 1975, nor of the damaging consequence it would bring in its wake. It would worsen the balance of payments by increasing the demand for imports with possible adverse effects for exports. It would increase the demands made on the system at a time when inflation is continuing at a very high rate—a rate higher than that of our major trading partners, and so dangerous for United Kingdom trade and payments in the future. It would increase an already massive public sector borrowing requirement by a wilful act of policy. Brighter prospects in the export sector should, however, tend somewhat to offset the deflationary effects of the recent Budget.

    The guidelines, drafted before the Budget, urged that
    "vigorous efforts should be made to reduce the share of the public sector deficit in the GDP."
    As a result of the Budget, the public sector deficit and the borrowing requirement should be much the same in 1975–76 as a percentage of GDP—8 per cent. and 10 per cent. respectively. The Budget tax measures, together with the public expenditure measures, will have a much greater effect in 1976–77.

    On that very point, I think that the Minister said that the deficit as a proportion of gross domestic product would be approximately the same. He used the figures 8 per cent. and 10 per cent. Is he saying that it is increased from 8 per cent. to 10 per cent.?

    I referred to the public sector deficit and the borrowing requirement, which, as the hon. Gentleman will realise, are two separate concepts.

    The Budget tax measures, together with the public expenditure measures, will have a much greater effect in 1976–77, when it is essential that resources should be available for a switch into exports to take advantage of the recovery in world trade which is expected then.

    The guidelines' implicit endorsement of the present monetary policy is welcome. Last year's borrowing requirement was financed in such a way that it did not lead to a rapid growth in the money supply, and the Chancellor has reaffirmed his determination to prevent the growth of money supply once again fuelling inflation. The guideline recognises that our domestic interest rates must take account of the needs of the external position and must be responsive to international development. But, as I said in the debate for last year, it is not possible to say in advance precisely what degree of relative attractiveness will be necessary at any particular time in the future, since this depends on the degree of international confidence in sterling at the time.

    To sum up, the Government believe that the guidelines before the House tonight are appropriate to the Community's situation. The guidance which they contain forms a broad framework in which the United Kingdom Government, together with the other member countries, can develop their individual economic policies whilst taking account of their impact on each other.

    As the House will realise, the process of consultation involved in the preparation and discussion of the guidelines is as important as the detailed text of the document itself. It is through this continuing debate, through the exchange of views at meetings of the Council and other bodies, that we are able to bring our influence to bear on the development of economic policies within the Community. The preparation of the guidelines forms a focus for this activity. The document is perhaps the formal, as opposed to the efficient, element in the system.

    Against that background, the Government believe that it would be right for the House to take note of the guidelines. If it does so, the Government will lift their reserve on their adoption.

    12.28 a.m.

    This is the first European, or Common Market, debate since the referendum. It is interesting that in recent weeks there has been a very high level of exchanges in the country from all sides. We have heard what I can only describe as the still, quiet voice of the Minister as we get down to some of the practicalities.

    I welcome the debate and, indeed, the guidelines. First, I think that the debate demonstrates to anyone who may still be in doubt that this House can, and does, consider proposed Community decisions, which may affect our national interest, before they are adopted. Secondly, it demonstrates that the House retains the right, which we could exercise tonight—although I, for one, would not advise it—to reject such decisions out of hand if it were minded so to do.

    In reality it is extremely unlikely that any European measure would come to that, because the Government would be most ill advised to put to the House any legislation for which they did not believe that there was a majority. In that rare event all the experience of the Community suggests that, one way or another, there would be a compromise designed to meet our national needs or the needs of any other dissenting country, not to speak of the need to meet the political difficulties of the member country involved.

    These matters have been debated at length over recent weeks, but it is right that tonight I should record, after the referendum, that Parliament here demonstrates that it has not surrendered its legislative power to Brussels and that the House is, and will continue to be, an essential sovereign part of the legislative machinery of the Community as well as remaining the undoubted legislature of this country regarding our domestic affairs.

    I was glad to hear the Prime Minister in his statement on the referendum say that he expected
    "to develop the scrutiny arrangements to make them more effective. I trust that there will be an early debate on the recent Report of the Procedure Committee on European secondary legislation."—[Official Report, 9th June 1975; Vol. 893, cc. 36–7.]
    This debate tonight, which is on an important matter, ought not to be taking place at this late hour when it is inevitably so thinly attended. I am sure that the Paymaster-General will accept that it is wrong that this matter should have been first considered by the Scrutiny Committee and that the Treasury memorandum, which the right hon. Gentleman has laid before the House, should have been prepared in March, and here we are in mid-June only now beginning to consider it. I suspect that we are considering it now because the Government wish to withdraw their reservation so as to get on with the decision in the Council of Ministers.

    I make the point that we must do a better job in the House at a time when the public can observe, and, indeed, at present listen to, our proceedings in examining these matters which come to us from the Community.

    I hope that the right hon. Gentleman will take back to his right hon. Friend the Leader of the House the wish of the Opposition that the Prime Minister's undertaking, that the work of the Scrutiny Committee will be developed and that we shall have an early debate on the Select Committee's report, will be implemented very quickly.

    I welcome the debate because of the subject matter. It is dealing with what is now by any measure the most urgent matter—economic policy—of the many problems which confront us. Inflation is now very nearly out of control. Public, spending is rising at a rate which we cannot afford. Debt is at a prodigious level—probably beyond our ability to finance it—and the pound is, in terms, on the skids.

    Against that background it is right that the House should debate the economic management of the country, and we are indebted to the Commission and to the right hon. Gentleman for enabling us to debate that matter, even at so late an hour.

    I welcome the Treasury's confirmation in the accompanying memorandum, which the right hon. Gentleman quoted, that it welcomes the recommendations of the Commission on what we ought to do to overcome our economic problems. The right hon. Gentleman said that the recommendations of the Commission are, in the words in the memorandum,
    "broadly in line with the policies already being pursued by the Government. They will be taken into account in the formulation of any further economic policy measures."
    I will come to the Commission's diagnosis of our problems and its proposals for dealing with them in a moment. At the outset, I want to ask the Paymaster-General this specific question: do all the economic Ministers in the Government believe with him that these recommendations of the Commission are broadly in line with what is needed for the country? Specifically, do they all agree with the Commission, first, on page 1, that a more active co-ordination of economic policies within the Community appears from now on to be essential to reduce unemployment?

    The Opposition endorse that recommendation. So, too, does the Paymaster-General. But what about the Secretary of State for Energy, who has repeatedly told us that membership of the Community has already cost us more unemployment and that many more jobs will be lost as a result of the decision taken by the British people to remain in the Community? Does he, as a member of the Cabinet, agree with the recommendation of the Commission for a more active co-ordination of economic policies within the Community? The Treasury says that it agrees. Can I be assured that all economic Ministers in the Cabinet agree with that statement?

    Secondly, the Commission says in section 1·5 that overcoming the economic crisis requires stern action to hold down the rate of
    "growth of wages and prices to permit a gradual improvement in profits and in the propensity to invest".
    Those are the words of the Commission, and I am glad to read in the covering memorandum from the Treasury that that is in line with Government policy. I should like to know from the right hon. Gentleman, however, why such action recommended by the Commission on the growth of wages has not yet been taken. The Commission recommends it, the right hon. Gentleman says that it is in ine with Government policy, but nothing has been done.

    In most other Community countries, notably Germany, France and the Low Countries, not only have measures of this kind been applied for several months but in most cases, notably Germany, these remedial measures are paying off. We are entitled to ask why the Government, if they say that that is the right diagnosis and accept that it is in line with their policies, are still putting off the action that is required.

    Can the hon. Gentleman help the House by telling us exactly where he was quoting from in Section 1·5? His might be a different text from the one I have.

    Perhaps I can help the hon. Gentleman. It says that

    "certain preconditions are required; changes in the growth of wages and prices".
    That is rather different from the words used by the hon. Gentleman.

    No. The quotation, which I have copied out very clearly from here, is in the Commission's recommendation. I think it is to hold down the rate of

    "growth of wages and prices to permit a gradual improvement in profits and in the propensity to invest".
    But I will of course, with pleasure, look at what the hon. Gentleman has said, and if he is correct in his interpretation I shall happily change to the form of words which he has proposed. It makes no difference, however, to the substantial point which I am making and asking of the right hon. Gentleman: why have not the Government taken action to achieve what is recommended and what he has told us is in line with the Government's policy?

    If I may now turn briefly—

    Perhaps the hon. Gentleman will allow me to continue. Many hon. Members wish to speak, and it is exceedingly unpopular when the Front Benches hog all the time.

    I want now to deal with the substance of the proposed guidelines and the draft decision. On trade deficits the Commission identifies three groups of nations: those which, like Germany and the Netherlands, have accommodated themselves to the oil problem and now have large trade surpluses; those, like France and Denmark, whose policies are leading to an improvement in their balance of payments; and, thirdly, those which, like ourselves, with Italy mentioned, are still wallowing in heavy trade deficits.

    In the latter case—our own—the Commission finds that there needs urgently to be, and I think I am quoting correctly,
    "a transfer of resources…into the export sector, and, internally, into those investments yielding the highest return in the long term…this process,"
    the Commission says in Section 2.3,
    "requires a moderation in the rise of the standard of living. If such moderation is not shown, inflation will continue to affect economic activity and employment…and those countries—"
    Britain and Italy—
    "would have increasing difficulty in borrowing abroad to finance their excessive expenditure on consumption."
    Again, that is the Commission's recommendation and I could not put it better.

    I also had the impression that the Chancellor of the Exchequer and the Secretary of State for the Environment had now seen the light and accept the Commission's diagnosis. But what are they doing about it? Talking about suicide is all very well, but what our partners in Europe are plainly looking for, and what I suspect they may yet insist on if, as is more than likely, we have to go with the begging bowl asking for a loan, is not fine words at the Guildhall but some action, and that has not yet been taken. Since he has said that he accepts these recommendations, I must ask the right hon. Gentleman: why are the Government still hesitating to bring those actions before the House?

    It is thanks to the good sense of the British public that we now have the ques- tion of our remaining in the EEC behind us. There is no excuse for the Chancellor failing to get on with it and bring in the economic measures which have now become a necessity to undo what many of us believe to be the damage caused by him and his colleagues.

    Finally, I turn to the specific guidelines proposed by the Community for each individual country. They are couched in fairly general terms because, as some of us have never ceased to insist, the Commissioners can only propose in these matters: it is the Council of Ministers which disposes, and on that body, like every other member, Britain has its veto.

    What strikes one most vividly about these country-by-country guidelines is the open contrast between the condition of Britain after some 18 months of the present Government's management and that of nearly every other member State. In the case of Denmark, the Commission talks of "near-stagnation" but goes on to describe "the easing of personal taxation" and the setting of the stage for "a more moderate rise" in wages and salaries.

    It reports that the measures taken by the German Government
    "…should bring about a gradual upturn in the economy. Indeed, there are already some signs of a recovery in business confidence…the annual GDP growth rate could reach 3 to 4 per cent. by the end of the year. The employment situation should improve. The increase in prices should further slow down."
    How I wish that that report could be made of the United Kingdom.

    The Commission says that France is experiencing a gradual upswing:
    "…the rise in consumer prices will continue to slow down".
    It will probably be less than 10 per cent. per annum by the end of the year. The same goes broadly for the Netherlands and only slightly less so for Belgium.

    But what of the United Kingdom? The Commission says:
    "The prospects of the British economy seem to be virtual stagnation in activity between now and the end of the year, continued unemployment, further rapid rises in prices and wages and a slight lowering in the substantial deficit on current account."
    That is the diagnosis of our candid friends, and it is in these cases a devastating indictment of the economic management of the present Government.

    Essentially, the Commission recommends two things, and the right hon. Gentleman was fair in referring to them—first, that reducing the external deficit should remain one of the principal aims of economic policy. I was glad to hear the right hon. Gentleman say that he hoped that there would be an improvement of £1 billion on the balance of payments account. But the Commission goes on to say that, to achieve that,
    "it is essential to contain the growth of private consumption in real terms.…In particular, care should be taken to avoid increases in incomes designed to offset anticipated price rises."
    I am glad to know that the Government accept this recommendation; but have they told the NUR? Have they the agreement of the TUC? There is no evidence that they have.

    Second, the Commission advises:
    "Vigorous efforts should…be made to reduce the share of the public sector deficit in GDP".
    Again I wholeheartedly agree, but where is the right hon. Gentleman making these necessary cuts? How can he square a programme of more than £2,000 million in subsidies for food and council rents and artificially low prices in the public sector with his acceptance of this explicit recommendation? How does he propose, to use the Commission's terms, which he says he believes to be in line with the Government's policy, vigorously to reduce the public sector deficit with a commitment to nationalise aircraft, shipbuilding, building land and the rest at a cost of a further £2½ billion?

    We welcome the Commission's intelligent diagnosis of the Community's problems and its suggestions, for they can be no more, of ways and means by which each one of our countries should put its own house in order. We would not necessarily support every word of the guidelines in respect of either the Community as a whole or Britain in particular, but we welcome the Commission's concern and value its advice as that of candid friends.

    I therefore advise my hon. and right hon. Friends to endorse the general guidelines laid out in that document, thereby authorising the Government to withdraw the reservation they made until Parliament had debated it. Any doubts the Opposition may feel reflect not upon the Commission's diagnosis and guidelines, but upon the will and ability of the Government to carry them through for the good of our country and for Europe as a whole.

    12.46 a.m.

    As has already been mentioned, this is not only the first debate on European Community affairs since the referendum, it is also virtually the anniversary of the first debate in this House on a report from the Scrutiny Committee which took place last July on the guidelines for that year.

    Unfortunately, as occurred last year, we are subject to certain problems over documents. Clearly the hon. Member for Bury St. Edmunds (Mr. Griffiths) was quoting from an earlier version of the document than the one I have before me. According to the explanatory memorandum which the Government have circulated, the document we are being asked to take note of is not the document which will be considered by the Council of Ministers when the Government remove their reservation. The guts of the document we are considering tonight is the proposal for a Council decision.

    It is the Council of Ministers which has to make decisions on the guidelines. The draft decision on an unnumbered page about halfway through the mass of paper involved contains Article 1, which says that member States shall pursue their economic policies in conformity with the guidelines specified in the annex to the decision. That decision is similar to the one discussed last year which was criticised in the House as going further than was thought appropriate for the Council to go.

    We were, therefore, very pleased to be able to read in the explanatory memorandum that at the meeting of the Council of Ministers on 18th March the Council amended the wording on this point to read
    "adopted the guidelines which are specified in the annex to this Decision for the Member States in the elaboration of their economic policy."
    That is a very much milder wording than that included in the original decision last year.

    The difficulty is that the House is not being asked to take note of these documents as amended by the Council of Ministers on 18th March. The House is being asked to take note of the decision as it originally was. It seems rather unsatisfactory that we are not able on this occasion to take note of the document which will be considered and which will, I assume, be approved by the Council of Ministers at its meeting when it comes to it.

    No doubt my right hon. Friend the Paymaster-General will be able to explain why the "take note" motion is so short on this occasion. We have had longer versions in recent debates. It would have been helpful if some reference had been made to the amendments made to the draft decision.

    Perhaps the right hon. Gentleman would be willing to help the House. Is it not the case that the document provided to us has been amended by the recent meeting of the Council? Although the amendments may be modest, the document we have before us is not the same as that which will be before the Council of Ministers at its next meeting.

    Order. The Minister must seek leave not from me but from his hon. Friend if he wishes to intervene. The Chair does, however, frown upon two interventions at the same time.

    My hon. Friend is wrong in suggesting that this "take note" motion is incorrectly worded. What the House is asked to do is to take note of Commission document R/731/1/75. There are various versions of the document. The one before us is described as "R/731/1/75 rev" in the explanatory memorandum.

    To inform the House of the latest position I drew attention to the fact that there had been an amendment in the wording of the decision as a result of the discussions in the Council of Ministers of 18th March so that it now reads:
    "The Council adopted the guidelines which are specified in the annex to this Decision for the Member States in the elaboration of their economic policy."
    There is no document which incorporates that decision. Assuming that the House was prepared to take note of this motion, at the next meeting of the Council of Finance Ministers, which takes place next week, this will be before the Council, the United Kingdom reserve will be withdrawn and there will then be a document which incorporates as a decision the words in the explanatory memorandum. Although it is complicated, I do not think that it is wrong.

    I am glad to have that partial explanation. If the Minister looks at his explanatory memorandum he will see that at the bottom of the first page he makes it clear that at its meeting of 18th March the Council amended the wording in the draft decision. The point I was making is that it would have assisted the House if the "take note" motion had drawn attention to this explicitly by adding the words

    "as amended by the Council of Ministers on 18th March 1975."
    That would have assisted the House in making sure what it was that we were taking note of and what it is that the Council of Ministers will be deciding at its next meeting.

    I turn to the substance of these guidelines. In many ways they are much more satisfactory than those we had to deal with last year. For example, I remember that in last year's debate my right hon. Friend agreed that it was not satisfactory that the Council should be setting us a specific target for the improvement in our balance of payments over the year. This year, instead of a numerical target, there has been a general, verbal statement. This is a considerable improvement. On the other hand, the general tone, particularly of the introductory chapters, of the guidelines document is still pretty low-grade economic journalism compared with documents produced by the OECD. We cannot really be satisfied with it. I hope my right hon. Friend and other Ministers will draw the attention of the Commission to this and try to improve the quality of future reports.

    In the guidelines dealing with the United Kingdom there is a reference to an adjustment to indirect taxes. I assume that this is a suggestion that those indirect taxes which are not ad valorem but specific should be indexed. As this is a specific proposal to the United Kingdom, what is the Treasury's attitude to the proposal, and are there likely to be amendments in Committee on the Finance Bill to incorporate the proposal? It is an interesting idea, but it would have been helpful if the Paymaster-General could have given us an indication of the Government's attitude.

    The words are:

    "In addition an adjustment of certain indirect taxes to price movements could be considered."
    Does my hon. Friend read those words as implying a reduction in tax or an increase in tax? Why does not the document say to which indirect taxes it refers instead of referring to "certain indirect taxes"?

    I am asking my right hon. Friend the Paymaster-General to elucidate this matter and to give us what the Prime Minister refers to as "a little éclaircissement". I assume that certain indirect taxes are specific rather than ad valorem, that in an inflationary situation they do not have the same buoyancy as do other indirect taxes and that, therefore, there is a case for making them ad valorem rather than specific, but I am sure that my right hon. Friend will clarify that matter.

    In the second document, the report on the application of the Council decision, in paragraph 1.2.5 on page 1 it is said:
    "Article 5, which states that the annual report must be brought to the attention of the national parliaments, has been implemented more in form than in substance and in varying ways in the Member States. It does not appear that this document has had much influence on debates within the national parliaments."
    At least this Parliament had the opportunity to spend one-and-a-half hours discussing this report, the Scrutiny Committee has seen it, and we are again today discussing guidelines and proposals. I hope that when the Council of Ministers considers this matter again it will be made clear that, even if other Parliaments do not discuss these reports, the House of Commons, albeit at an absurd hour, gives some attention to them.

    12.58 p.m.

    As those before me in the debate have pointed out, this is a weird subject for our first Common Market debate after last week's little local difficulty. The weirdness of it was increased by the sombre, not to say almost morgue-like, tones in which the debate was introduced by the Paymaster-General.

    As the explanatory memorandum points out,
    "Her Majesty's Government reserved their position on the draft decision pending completion of United Kingdom parliamentary scrutiny procedures."
    It is to be presumed that after the "take note" which will occur in three-quarters of an hour or so the eager chargers will be released and Her Majesty's Government will be free to assent to the platitudes and fatuities with which the document abounds.

    Although it is difficult to say whether the Government were conforming with the guidelines or the guidelines were conforming with the Government, it still did not become quite clear whether the guidelines on page 18 represented what the Government of this country were trying to do or were achieving.

    I draw attention to the reference to the share of the GDP that is represented by the public sector deficit. If I understood him correctly, the Paymaster-General said that this was approximately 8 per cent. in the last financial year and is expected to be approximately 8 per cent. in this financial year. I think that is what the right hon. Gentleman said. In that case, the "vigorous efforts" which should be made, according to the EEC, "to reduce the share of the public sector deficit" in this year compared with last have either not been vigorous enough or else attended by singular misfortune. In addition, there is the mysterious reference, although it is guarded in the language in which it is introduced, to an adjustment of certain indirect taxes to price movements. Although that is in the guidelines to the Government, the Government's representative has not so far deigned to indicate what it might mean.

    It is easy to be misled in studying the document and its implications by the extraordinary fatuity of so much that it contains. Although there is luxuriant material for reaching that judgment, I cannot forbear to bring to the attention of the House a point on page 8 where it reaches noble proportions. I refer to the passage at the end of paragraph 2.6 that reads:
    "greater encouragement should be given to entrepreneurial spirit namely by giving clear guidance as to the type of development to be undertaken."
    There may be something that has gone wrong in the translation, but most people would think that there was a contradiction between entrepreneurial spirit and waiting to get clear guidance from an authoritative governmental body as to the type of development which should be undertaken.

    It is also possible to take too much comfort from the tone of resignation, if not despair, which pervades certain parts of the document. In the foreword we read that the Council has been concerned in its decision of February 1974 to achieve
    "a high degree of convergence of the economic policies pursued by the Member States…".
    But two paragraphs later we see the Commission obliged to admit that
    "Discrepancies…in economic policy among the countries of the Community have never been so pronounced as at present…".
    One's first impulse is to say, especially if one has felt certain anxieties as to the relationship between this House and this country and the Economic Community, "Well, it is only a tissue of fiction, there is no reality and no substance to it. Provisions are put forward but their non-realisation is accepted with a shrug of the shoulders. Why, therefore, should we worry if on paper we do appear to have subjected ourselves to the ultimate decisions of external bodies in the Community?"

    I think that would be an unjustified deduction to be drawn from the document. I draw the attention of the House to two statements in the first document. Paragraph 1.1 on page 1 reads:
    "However satisfactory"—
    I think it means "successful" but it says "satisfactory"—
    "the Member countries are…in reducing inflation, their actions will have repercussions on their partner countries at least as great as would any measures designed to encourage exports or restrict imports."
    The document is here referring to the very type of economic intervention which runs counter to the general principles of the Economic Community, being contrary Ito the principles of an internal free trade area. So here is the significant statement that success by the various member countries in policies for reducing inflation will have repercussions on partner countries no less serious than measures which run counter to the basic principles of the Community would have.

    Light is cast on the train of thought of the Commission by a sentence which occurs on the following page:
    "Experience in the last few years has shown that balance of payments disequilibria cannot be dealt with solely by means of floating exchange rates."
    Taken at face value, that statement is nonsense, because it is axiomatic that with a floating exchange rate payments in total must balance without intervention by Governments or by central banks. So one wonders why that statement should be made and why there is such insistence on the inadequacy of floating or free exchange rates to eliminate balance of payments disequilibria. The answer is that the two statements to which I have drawn attention are linked in the mind of the Commission and in the thinking and intentions of the Community. The Community does not look forward to a régime whereby the payments of the respective member States will be kept in equilibrium by an adjustment of the relative exchange values of their currencies.

    Will the right hon. Gentleman make clear what balance of payments he is talking about? If he is talking about the current balance of payments, it is nonsense.

    I wondered whether I should waste another minute by pointing out the additional nonsense in the Commission's formula, in the words which I quoted, because by definition a balance of payments always balances overall. When the Commission refers to disequilibrium in balance of payments, it means that sort of equilibrium which one decides to alter by specific Government intervention. There are many statements in these documents where the term "balance of payments" is illicitly used and where the expression should be "current balance" or "balance of trade" or even "balance of visible trade".

    It is a grave defect that there should be unclarity on that substantial point; so I make no complaint about the intervention by the hon. Gentleman. But I return to the point which I was making. I was saying that the Commission and the Community look forward to a régime of fixed exchange rates; for it is true that under a régime of fixed exchange rates the correction by one country or another of the rate of deterioration of the domestic purchasing power of its currency is bound to have repercussions on the real economy of other member States.

    Beneath the fatuity and acknowledged inefficacy of what is now happening in pursuance of last year's decision, there lies the intention—consistent with the nature of the Community in its other aspects of economic management—to move from a régime of floating exchange rates to a régime of fixed or fixedly interlinked exchange rates, which brings with it in turn the necessity of a coordination and correlation of the domestic policies of the different countries and of those policies in particular which are of most immediate interest politically and socially to their citizens.

    My conclusion is simply that, although this document could be treated with light-heartedness and even with contempt as not being a document which bites or is intended to bite, nevertheless in its phraseology there is spelt out the dilemma which has run through all the debate on the Common Market hitherto, and the dilemma by which the Community today is faced: to go for minimum or to go for maximum; whether it is to be content to amble along with the chance coincidence of what the member States happen to decide to do, or whether it is to go for that economic and monetary and—if it is different from those two, which I doubt—political union, which all the declarations of the Heads of State, except our own, frankly recognise as the logical and, indeed, essential goal of its development.

    That dilemma is still there, and as the months go by we shall look forward to seeing Her Majesty's Government executing an ever more painful performance of what I believe in other contexts is called the splits, as these alternatives widen and become more visible.

    1.11 a.m.

    The right hon. Member for Down, South (Mr. Powell) has shown further paradoxes in the paper before us. I begin with the paradox of the motion, which is to take note of the document. When our continued membership of the Common Market was in some doubt, when the Government were renegotiating—they said—some of the basic terms of our membership, perhaps a take-note, half-stalling, neither "yea" nor "nay", the motion might have been appropriate, but now that phase is over. I believe that it would even have been within the terms of the treaty for the Government to say that they approved. I could hardly see them putting down a motion saying that they disapproved, without being in breach of the treaty. Perhaps my right hon. Friend the Minister will say why we have such a motion in the circumstances in which we find ourselves since last Thursday.

    Already this text of the document has received some skilled exegesis. Some of the texts do not even tie up. But this text is not available to the general public of the United Kingdom. I do not know whether it is easily available for representative organisations. When I made inquiries before the referendum as to how an ordinary member of the public could get hold of these documents I met a blank wall. Her Majesty's Stationery Office does not supply them. I am told that only the more important ones are printed in the Official Journal, some time after they are originally distributed.

    We have been involved in other matters in the past few days, but if we had had time to seek the views of representative organisations in the United Kingdom we might have found that they had not been able to get hold of the document. I hope that my right hon. Friend, in this first debate in the new situation, will undertake to look into the availability of these documents.

    One of the qualities of the House is that so many hon. Members can bring to bear the observations and knowledge of their constituents and various bodies. In these debates that has not been possible so far.

    We are debating the matter much too late at night. But for chance, it may have been three hours later. We debate it under a business guillotine of an hour and a half. But this material is not secondary in the sense in which statutory instruments have been. I believe that it is a primary document. The social security matters that we discussed earlier, and the question whether the Government can afford them, may well depend, in the end, on the macro-economic questions which we are discussing. I hope that if we have another such debate it will come first, perhaps for three hours until 7 o'clock. We can afterwards discuss our municipal legislation, which is what I understand legislation originating in this House is now to be called in technical terms.

    The right hon. Gentleman the Member for Down, South talked about convergence of economies. I am not clear to what we are supposed to be converging. There seems to be within this document a belief—it may be naive—that convergence, of itself, cures economic ills. I suppose it may, if one has identified the desirable objects to which one has to converge. One age's economic wisdom is the economic folly of the next. Suppose the convergence to which any commission might have us move is not that which cures the ills which it is supposed to cure? Suppose that it exacerbates them? To use an analogy with which the right hon. Member for Down, South may be more familiar, convergence in the economic sense might be a Procrustean bed on which we have to fit our nation. The people who will suffer, whose limbs are cut and chopped and moved, are not necessarily those who are the decision makers in the economy; they are those who take the backlash.

    On page 1 of the Commission document we are told:
    "But it also assumes great importance as far as the movement of labour is concerned as well as for monetary and financial relations, particularly in the field of investment and the establishment of joint enterprises in the partner countries."
    We are told, I suppose, that in order to reach this convergence we must speed up our movement of labour. Economists have been justifying that internally in this country for many years, but it cannot be looked at just in terms of economics. There is a social secondary effect of which we are all aware, even within our own country, and I suspect that it would be equally so on a European scale.

    The tax question has yet to be replied to, and I am very sorry that when my right hon. Friend introduced this document he did not refer to it, for quite clearly it is in addition to what the Government are doing. These words are clearly in the text, on page 18:
    "In addition an adjustment of certain indirect taxes to price movements could be considered."
    I am very sorry that we have had to prise it out of him. Perhaps in his reply he will deal with it. One might have thought that the Government would be frank. It is up to my right hon. Friend, when he goes to the Council, to find out exactly what is meant, if he does not know already. If he does, will he tell us, and will he undertake to report back to this House what the Council had in mind? Can he tell us what commodities are involved? Is it an ad valorem matter, as my hon. Friend the Member for Farnworth (Mr. Roper) pointed out, or something else? If, as the Commission said in March, it could be considered, have the Government considered it? If they have considered it, what conclusion have they come to?

    In summing up, therefore, I hope that my right hon. Friend will pay particular attention to this point, and also tell us specifically how he intends to report back to this House the result of that inquiry, and whether the Council decides that the Government's consideration of this matter is satisfactory or is not.

    1.18 a.m.

    Quickly commenting on the fact that this is the first occasion on which we have debated a paper of this kind since the referendum, I, too—rather curiously perhaps—join with one of the observations made by the hon. Gentleman the Member for Newham, South (Mr. Spearing). It seems to me that if the purpose envisaged in these debates is to try to ensure that Ministers go to the Council of Ministers in the Community armed with the strong views of Members of the House, they could be better framed than within a "take note" debate. I therefore take that view, also.

    I draw attention to the fact that this is not a piece of secondary legislation. This falls within the remit of the magic phrase "et cetera"—the remit of the Scrutiny Committee—which covers matters which do not form secondary legislation, as such. It none the less comes within the purview of that Committee and therefore can be referred to the House for debate if appropriate.

    I have two observations, one on the procedural aspect and one of substance.

    The timing of this debate is noticeable. I refer not to the deplorable business of taking these important matters at this late hour, but, first, to the fact that we are half-way through 1975 and that we were half-way through 1974 before starting to give advice to Ministers about the way in which they should look upon guidelines which had been developed in the Community. It is a curious way of planning, and I doubt whether it could guide ministerial decisions on matters concerning the management of the economy.

    My other observation about the timing which may come up within the framework of the debate which will take place, I hope, as a result of what the Prime Minister said in his recent statement, is that here, again, we have the Government bringing forward a document of this kind for debate purely for their own convenience. The Government want to get something through the Council, and therefore they have decided that the House is now ready to take this, whereas the object of the work of scrutiny and of this debate is to take in time matters so that the Government may digest and chew on what the House says to them. That is not just for the convenience of the Government, therefore, and it should not be so interpreted.

    I come, then, to my observation of substance. In some ways, the report on the 1974 performance was more interesting even than the suggestions for the conduct of the 1975 one. I draw attention to item 2.1 in page 3 of Con. (75) 93 Final dated 17th March, which refers to failures of the member countries to abide by the guidelines and attributes those to certain causes, amongst which is the lack of wholeheartedness with which the measures were undertaken and the lack of a broadly-based agreement on the policies which should be followed.

    I am anxious to put some firm thoughts into the mind of the Minister in this case. If there is truth, as I believe there to be, in the fact that the economies of the nine member countries are substantially interrelated and that actions by one have profound effects on results in others, I hope that the faults which have been detected and reported upon in the paper to which I have referred will not be perpetuated.

    I ask the right hon. Gentleman to consider the words he used in addressing the House tonight. They spoke to me of that kind of broad-brush acceptance which is so easy to evade. The right hon. Gentleman said that, broadly speaking, the Government accepted these general guidelines. We know the meaning of that kind of phrase. Then he said that everything depended on the success with which we tackled excessive wage settlements. The injunction within the framework of the guidelines is that they should be tackled. There is no general and philosophical commentary on what may or may not happen.

    The right hon. Gentleman referred to these guidelines as "a broad framework". If there is real importance in this matter, as I believe, I hope that, armed with a measure of certainty about the future conduct of the Government in relation to Community affairs, the right hon. Gentleman will seek to move from broad frameworks and generalised statements of consent into some more positive action to try to apply, in this sadly desperate country, some of the rather sensible measures which seem to have been developed during the course of discussion in the Community. I like to think that we shall see something more sharp-edged and less broad and blunt in the future.

    1.25 a.m.

    There is one interesting aspect of this wadge of papers, namely, that Table I, which follows page 19 in the first lot of papers, contains forecasts of consumer prices for 1975. It is the practice of the United Kingdom Treasury in, for example, the Financial Statement, not to publish any current price forecasts; not to publish, indeed, any forecasts of price indices. Yet here we have a forecast of the consumer prices index for 1975.

    These are alleged to be tentative forecasts by the services of the Commission. I inquired of the Commission what its services are. I also inquired of our permanent representative in Brussels what these services are. I found that all that they amount to are secretarial services to a committee of representatives of national Treasuries or Finance Ministries. What this seems to be, therefore, is a forecast supplied to Brussels by the United Kingdom Treasury, given a figleaf called "the services of the Commission", and then handed back to this Parliament. That seems an extraordinary way for us to obtain prices forecasts relating to our own economy.

    This raises a further question about the way in which the Commission should operate in dealing with broad questions of economic policy. I understand—again from our permanent representative in Brussels—that in a recent speech the President of the Commission outlined two major proposed developments during the current year. One was the export-import bank, which is not a matter for debate tonight. The other was a proposed economic institute of the European Communities. It is not very clear what this is to do, where it is to do it, for whom it is to do it, how it is to be staffed, or anything else. But it is a matter which clearly would be of considerable importance in the institutional development of the Community, and something on which my right hon. Friend the Paymaster-General may be able to comment.

    The most important omission in the Chancellor's Budget speech this year—and a matter which has subsequently become perhaps the most important immediate influence on the economy—was the question of the Government's policy towards the management of the exchange rate. I do not think that the right hon. Gentleman said anything about that in his Budget speech, yet we have had statements from him in recent weeks saying that he hoped that it would not go any lower, and when it did he said that he hoped that it would not go any further lower, and so on. Yet we have in these guidelines the very important expression of hope, in paragraph 2.8, that
    "An orderly financing of deficits should, thus, be arranged while waiting for the adjustments in real flows to be realised".
    This is much the biggest single service which the European Communities may be called upon to give to the United Kingdom within the next few weeks, or, indeed, at any time. I should like to be assured that arrangements are in hand—I would not expect my right hon. Friend to be explicit as to what they are—to enable the Community to act firmly, so that we are able to deal with any massive flows across the exchanges in an orderly way with the help of our friends in the Community, and are able to adjust our real flows.

    There are very encouraging figures for the first quarter balance of payments for the United Kingdom. I hope that they will be maintained. I refer to the United Kingdom balance of payments for the first quarter of 1975. The details were given on the news tonight.

    I am grateful. I meant the current balance of payments.

    Our ability to deal with such a situation will depend on whether the trade unions feel that policies are being imposed on us by gnomes or by the Commission, or that the decisions have been arrived at in an orderly way by ourselves.

    These are matters of the greatest importance, which go far beyond the scope of this debate, but at least we could have an assurance that the mechanics of the Commission and the Community are properly organised and working smoothly.

    The debate will finish at 1.48 a.m. I understand that it is desired that the winding-up speeches should begin in three minutes' time.

    1.32 a.m.

    A limitation of three minutes on a speech is a grand excuse for ditching all the more complex aspects of the contribution which I should have liked to make. I shall therefore concentrate on one point, namely, the wholly unsatisfactory state of these debates.

    Now that the referendum result means that we approach these matters in a slightly different context, I hope that the hon. Member for Bury St. Edmunds (Mr. Griffiths), who opened the debate from the Opposition Front Bench, will not take it unkindly if I say that he placed a very charitable interpretation on how satisfactory these arrangements were for demonstrating the way in which the House would be able to exercise power over the executive in its