Thursday, 13 December 2007.
The Committee met at five minutes past two.
[The Chairman of Committees (Lord Brabazon of Tara) in the Chair.]
Before the Minister moves that the first order be considered, I remind noble Lords that in the case of each order the Motion before the Committee will be that the Committee considers the order in question. I should perhaps make it clear that the Motion to approve the order will be moved in the Chamber in the usual way.
Legislative Reform (Local Authority Consent Requirements) (England and Wales) Order 2007
rose to move, That the Grand Committee do report to the House that it has considered the Legislative Reform (Local Authority Consent Requirements) (England and Wales) Order 2007.
The noble Baroness said: I am delighted to introduce the draft Legislative Reform (Local Authority Consent Requirements) (England and Wales) Order 2007. We are in pioneering territory and doing things for the first time often has its hazards. This is the first order to be made under the Legislative and Regulatory Reform Act 2006. It has been laid in draft and has been considered and reported on by the Delegated Powers and Regulatory Reform Committee of your Lordships’ House and the House of Commons Regulatory Reform Committee.
The House of Commons committee suggested some small clarifying amendments to the footnotes and Explanatory Notes, but recommended that the draft order should proceed. The Delegated Powers and Regulatory Reform Committee of your Lordships’ House made three main recommendations. The first, and perhaps most significant, is the recommendation that the procedure applying to this draft order should change from the proposed affirmative resolution to super-affirmative. Noble Lords stated in their report of 23 November that they made this recommendation because they needed to correspond further with the Government about the draft order and because they considered that they might wish to propose amendments. This has been done.
Their second recommendation is that the draft order should be amended so as not to include metropolitan district councils in the cancel-out provision, which I will discuss in further detail later. The final recommendation was a change to the recitals in the draft order—that is; the statements at the beginning of the order—where it was felt that the reference to consent of the National Assembly for Wales required some clarification in technical legal terms. As a result, I am now pleased to have the opportunity to invite Members of the Committee to consider the draft order so that my department may take account of these considerations in laying any future draft of the order.
I should like to say something about the background. The aim of the draft order is to assist in giving local authorities greater freedom to take local decisions to improve public services and provide better community leadership for local people. There are a number of activities carried out by local authorities which require the authority to seek consent from another body, which is usually, but not always, the Secretary of State, before the authority can take action within its own area. The draft order follows the Government’s commitment made in 2002 to deregulate several local authority consent requirements.
In September 2002, the then Office of the Deputy Prime Minister announced a programme of action to deregulate 84 of these consent requirements which had been identified. The four in this order were included in this programme of action, which was welcomed, because the Local Government Association said at the time:
“The LGA welcomes this government announcement. We have been pressing the government for some time about progress on consent regimes powers. This announcement on progress and further repeal should result in significant time savings for local authorities”.
There are no other available vehicles through which to deregulate the consent requirements covered in these proposals.
The draft order allows the Government to remove statutory burdens which would otherwise need to be addressed through primary legislation. This provides the quickest option for removal as well as the most effective use of parliamentary time. Removing these consent requirements clearly supports this Government’s commitment to encourage simplification and deregulation. Of course, Members of the Committee will know, as we debated them fully in the Local Government and Public Involvement in Health Bill, that a major step is the new local area agreements to be agreed by June next year. The new set of 198 national indicators is stripped down from the original 1,200. These arrangements are derived from the 2006 Local Government White Paper when we spoke about giving local people and government more influence over improving their local communities. The order now amends legislation to four consent regimes that at present require local authorities in England and Wales to gain formal consent from the relevant Secretary of State, the Welsh Assembly Government or, in one case, the Attorney-General, before taking certain actions.
Once the order is enforced, it will remove from Section 4 of the Cancer Act 1939 the requirement for local authorities to obtain the Attorney-General’s consent before instituting prosecutions for publishing certain cancer treatment advertisements. Removing the reference to the Attorney-General might have suggested that there was no further discretion to prosecute. To make that clear, the amendment of the Cancer Act also makes it clear that specified local authorities will have the discretion whether to prosecute in any case.
Secondly, the order removes from the Local Government Act 1972 the need for a local authority to obtain consent from the Secretary of State for and the approval of the Welsh Assembly Government of a resolution allowing it to amalgamate taxing licensing zones. Thirdly, it will remove from the Local Government (Overseas Assistance) Act 1993 the need to obtain consent from the Secretary of State to provide assistance to bodies engaged overseas in carrying on any of the activities of local government. Finally, it removes from the Education Act 1996 the requirement on local education authorities to seek the Secretary of State’s approval of their arrangements for dealing with complaints about the curriculum in pupil referral units. One provision to repeal Section 71(2) and (3) of the Local Government and Housing Act 1989 is not included in final draft of the order, although it was the subject of consultation. The repeal will still be carried out, however, as Section 71(2) is in Part V of that Act, and provision is made for the repeal of the whole of Part 5 in Part 12 of the Local Government and Public Involvement in Health Act 2007.
The committee reported on the draft order in its first report of this Session, and it made two principal recommendations for changes. The first was made in relation to the proposed amendments to the Cancer Act 1939, which requires a little detailed explanation. The amendments are made in Article 2 of the order. Article 2(a) repeals Section 4(6) of the Cancer Act 1939, which is the requirement for obtaining the Attorney-General’s consent before bringing proceedings. Article 2(b) goes on to substitute a new subsection (7) in Section 4, which says that any of the authorities listed may bring proceedings under that section.
One category of authority that is listed in new subsection (7) is a district council in England for an area without a county council—in other words, a metropolitan district council. Noble Lords will know that there are six metropolitan districts—Greater Manchester, Merseyside, South Yorkshire, Tyne and Wear, West Midlands and West Yorkshire—and 36 metropolitan district councils. At present, these councils have no duty at all to bring proceedings of this nature under the Cancer Act, even with the Attorney-General’s consent, because of the complicated interaction between this legislation and the Local Government Act 1985, which changed local government structures and abolished the metropolitan county councils but sadly did not transfer the duty of prosecuting under the Cancer Act to metropolitan district councils.
The draft order sought to address the issue by extending the power to prosecute to metropolitan district councils, too. I am pleased to say that the committee agreed that the changes proposed in Article 2 of the order remove a burden from local authorities and from the Attorney-General, because the amendments remove the requirement on local authorities to obtain his consent before instituting proceedings, and remove the burden on the Attorney-General to provide such consent. Instead, local authorities will exercise their own discretion whether to prosecute. We fully acknowledge that although the committee was convinced by the scope of the amendment, it did not feel that the power under the Legislative and Regulatory Reform Act 2006 to extend those changes to metropolitan district councils existed legally.
To explain further, my department and the Department of Health, which has primary responsibility for Cancer Act legislation, took the view that the extension of powers to metropolitan district councils could roughly be analysed as the removal of an administrative inconvenience for the purposes of Section 1(3)(b) of the Legislative and Regulatory Reform Act 2006. Under that section, the sort of burden that may be removed by a legislative reform order includes an administrative inconvenience.
The committee noted in paragraph 43 of its report that it may be sensible as a matter of policy to remove the small anomaly of the provisions not applying to metropolitan district councils. Sadly, perhaps, it did not agree that the absence of a power to prosecute was an administrative inconvenience within the definition of “burden” in the 2000 Act, and recommended that the draft order should be amended so that it did not extend the Cancer Act provisions to metropolitan district councils. My officials, and those in the Department of Health, which has primary responsibility for the Cancer Act legislation, have closely considered the committee's recommendation on that point, and are prepared to accept it on the basis that the Government will be able to address the issue relating to metropolitan district councils through another legislative vehicle.
I turn to the committee’s other recommendation. This was a change to the recitals in the draft order, the statements at the beginning of the order, where it was felt that the reference to consent of the National Assembly for Wales required some clarification in technical and legal terms. It is correct that the consent of that Assembly was obtained, as recited in the draft order. However, that Assembly as it was constituted prior to the Government of Wales Act no longer exists. The Government of Wales Act came into force in May 2007, as the Committee will be aware. It transferred some functions of the National Assembly for Wales, as it was constituted prior to the Act, to Wales Ministers and made related transitional and other provisions. That accounts for changes in the terminology used in the preparation of the order after May. There are also some additional legislative implications that are being addressed by the Welsh Assembly Government and by the National Assembly, as constituted following the Government of Wales Act 2006.
I am content to accept the recommendation that the recitals in the draft order be clarified in that respect. My officials are engaging fully with their Welsh colleagues in order to finalise that. In conclusion, I am content to accept the recommendations of the Delegated Powers and Regulatory Reform Committee and invite any further recommendations in relation to the draft order 2007 to be made. I beg to move.
Moved, That the Grand Committee do report to the House that it has considered the Legislative Reform (Local Authority Consent Requirements) (England and Wales) Order 2007. First Report from the Regulatory Reform Committee.—(Baroness Andrews.)
I am very pleased to hear the reactions of the Minister and the statement of the Government's intentions. I very much welcome them. I still want to speak for a few minutes in this debate in my capacity as chairman of the Select Committee on Delegated Powers and Regulatory Reform. I do so with the approval of the committee and am very pleased to see two members of the committee present this afternoon in what is otherwise a rather thin audience.
This is the first legislative reform order made under the Legislative and Regulatory Reform Act 2006—something of a tongue-twister; I will in future refer to it as the 2006 Act. It is appropriate for me to put on record and explain to the Committee how the Delegated Powers and Regulatory Reform Committee intends to exercise its powers, and to explain how the general principles apply to the order. I do not expect that there will be a need for the chairman or another representative of the DPRR Committee to speak often on future occasions.
The first step for the committee is to decide which of the three procedures available under the 2006 Act it considers appropriate for the draft order: the negative resolution procedure under Section 16; the affirmative resolution procedure under Section 17; or the super-affirmative procedure under Section 18. The committee is unlikely frequently to accept a proposal that the negative resolution procedure should be applied. That is because legislative reform orders—LROs—will almost always involve changes to primary legislation; that involves the exercise of the Henry VIII power. Also, it is a well established principle that Henry VIII powers that are conferred by secondary legislation normally need the affirmative resolution procedure. There are occasional exceptions to this; no doubt there will be occasional cases in which a negative resolution procedure would be appropriate under the 2006 Act.
The affirmative resolution procedure is likely to be the standard procedure where the LRO is straightforward and is not likely to need or call for amendment. Where the committee believes that an amendment to the order may be required—as in this case—or that the House may wish to have an opportunity to amend the order, even if the committee does not press for that, it is likely to recommend the super-affirmative procedure.
In this case, as the Minister pointed out, the order involves amendments to four unconnected Acts: the Cancer Act 1939, the Local Government Act 1972, the Local Government (Overseas Assistance )Act 1993 and the Education Act 1996. The Cancer Act involved two distinct points: the removal of the need for the consent of the Attorney-General for a prosecution, which does not, in our view, raise any difficulties; and the extension of the Act to areas in which there is currently no power for a local authority to prosecute. I do not know how many prosecutions are brought under this Act; I suspect not very many.
The committee needs to be satisfied, under Section 1 of the 2006 Act, first, that the purpose of the draft order is to remove burdens—or a burden or to reduce a burden—and, secondly, that the conditions specified in Section 3(2) can reasonably be regarded as being satisfied. When the draft came before the committee, we were concerned that some of the tests under subsection (2) might not be satisfied and we were concerned about the point about the Cancer Act 1939, which has already been mentioned. We therefore called, under Section 15(6) of the 2006 Act, for the super-affirmative procedure.
Following further correspondence with the department, the committee was satisfied on all but one substantial point. I do not deal with the point about the amendment to the recitals, which is a minor and highly technical point. The only outstanding point of significance was whether the proposal about local authorities that do not now have the power of prosecution under the Cancer Act 1939 involved the removal of a burden.
The background to that has been explained. At the time of the 1939 Act, all parts of England and Wales were within either county councils or county borough councils. In 1985, following the abolition of metropolitan county councils by the Local Government Act 1985, that ceased to be the case. As a result of what was plainly an unintended oversight, powers under the Cancer Act were not transferred to the metropolitan district councils, so no power to prosecute for a crime under that Act can be prosecuted in that district.
Under the Regulatory Reform Act 2001, which was repealed by the 2006 Act, there was a power by order not only to remove a burden but to correct an anomaly. The absence of the power, in some cases, to prosecute breaches of the Cancer Act was plainly an anomaly which could have been corrected under the 2001 Act had it still been in force. Unfortunately, however, there is no reference to anomalies in the 2006 Act, perhaps because the need for such a reference was overlooked in the course of making the extensive amendments to its Bill in its late stages.
The Government have therefore argued that the extension of the Cancer Act to operation in areas where it cannot now be operated could be the removal or reduction of a burden. A “burden” is defined in Section 1(3) of the 2006 Act, which says:
“In this section “burden” means any of the following—
(a) a financial cost;
(b) an administrative inconvenience;
(c) an obstacle to efficiency, productivity or profitability; or
(d) a sanction, criminal or otherwise, which affects the carrying on of any lawful activity”.
The committee felt that the absence of a power for a local authority to do something which might confer a benefit on the residents but would involve additional work and expense for the local authority itself could not reasonably be regarded as a “burden” within the meaning of Section 1(3); nor could the creation of that power be regarded as a removal of the burden. Indeed, if the absence of a power to do something you would like to do is an “administrative inconvenience”, that would greatly expand the operation of the Bill—which was the subject of considerable debate and substantial amendment, as I have already said.
Faced with this situation, the committee had options. One would have been to allow the draft order to go forward as it stood, leaving it for a judge to decide in future whether the amendment to Section 4(7) of the Cancer Act—which extends the power of prosecution—was intra vires. Leaving the decision ultimately to be taken by the judge might be a reasonable course of action in a case where there is doubt as to the vires of the changes to be made by the order but a good or at least reasonable chance that they would be held to be valid. In this case, the committee felt that it would be unlikely that an amendment to Section 4(7) could be regarded as the removal or reduction of a burden. We also had in mind that other courses of action appear available to correct this anomaly, particularly through the use of existing powers under the Local Government Act 1985 to make consequential amendments.
We therefore decided to recommend that the order should be amended to remove the extension of powers to prosecute under the Cancer Act. We do not question that an extension is desirable. However, that does not justify putting an unreasonably wide definition on the word “burden”. We are, as I originally said, grateful to the Government for accepting this view. We look forward to them duly correcting this anomaly by other means.
I congratulate the Minister and her department on being the first to come forward with an order under the Legislative and Regulatory Reform Act 2006, and welcome the start of the process of removing some of the consent requirements from local authorities. It says something about the centralised state in which we live that we regard removing the need to have the Secretary of State’s approval for hackney carriage licence changes as a step for devolution.
We must accept that the four changes proposed here are a fairly modest start. I would like to say that amending Section 1 of the Local Government (Overseas Assistance) Act 1993 is a hot topic in the pubs of Needham Market, but it is not. It is interesting to reflect on the fact that when you ask why on earth this is in statute, it was a reflection of a real concern at the time: that local authorities were spending vast quantities of taxpayers’ money swanning around all over the world. It was felt necessary to curb them by having primary legislation. I do not agree with that view, but nevertheless it is interesting to reflect that there always was a reason why the burdens were there in the first place.
Although I am no longer a member of the Delegated Powers and Regulatory Reform Committee, I always feel comforted that it keeps a beady eye on these things to ensure that the original purpose is no longer required or that the matter is covered in some other way. Equally, I agree with my noble friend that it is important as a matter of principle that changes to primary legislation should be made by affirmative or super-affirmative procedure because many of these will have been hotly debated on the Floor of the House when the original legislation was going through. It is extraordinary that we can make changes with virtually no one being interested.
I wonder whether the noble Baroness can say something about the process. While I have no comments on the issues here—certainly all the responses I have read have been in favour of these changes—I am interested in how long it will take to work through the 84 that have been identified. I recognise that that is difficult because some of them will come through as amendments to primary legislation, and some will be taken through this procedure. Can she say how long it might take?
Can she also say something about the process of the Government responding to other consent regimes which people bring to their attention? I note from the responses that local authorities have raised other parts of legislation that might helpfully be removed.
Finally—I say this more in hope than expectation—I wonder whether we are as confident as we can be that when new legislation is passed we are not stacking up work for the successor of my noble friend, Lord Goodhart. I can see that there is a strong tendency to introduce central control and central measures. I can understand why; there is an old proverb that says if you have a hammer all problems look like nails. We tend to get rather a lot of that and I suspect that much of what we hotly debate in your Lordships’ House now will be deregulated in a few years’ time. How much better it would be if we did not have it in the first place.
Not for the first time, I am grateful to the noble Baroness for her home-spun Suffolk wisdom. I am grateful that the noble Lord took the time and trouble to put the full reasoning of the committee on the record, because that is important. We have done this for the first time and it has shown in our department’s response as well. I note from the correspondence that has gone back and forth between the department and the committee that—I shall not say there was a certain acerbity, but it was an interesting process. As the process evolves, other departments will learn from our experience, which is as it should be.
The noble Lord raised the issue of the number of prosecutions, and I can confirm that there have been 11, which were not all successful, so he is right that there have been very few. He also referred to the potential of using other legislation to achieve the same effect, and mentioned the Local Government Act 1985. The jury is still out on which would be the best vehicle, so the department is looking at it closely.
The noble Baroness, Lady Scott, was tempted to have a much bigger debate. She opened the door just a crack on the issue of centralisation and burden. I am tempted to send her the 20 departmental simplification plans published on Tuesday 11 December—no one can say they are not up to date—showing how we can reduce burdens on business. For example, in the public sector there are 280 different ways with total net administrative savings of £800 million. The order is an important step forward as a proportionate response in managing change, but it is only one of a number of instruments at our disposal. There is a lot going on, as the noble Baroness said.
In terms of what happens next, of the 84, 62 consents have been deregulated so far: most of them have been removed. There is the one that we have been debating today and there are four that have completed their consultation and are expected to be introduced to Parliament this Session. Looking at them, it is interesting how wide is the range of issues. They include changes to the individual voluntary arrangement, insolvency services, merger of the Health and Safety Commission and the Health and Safety Executive and second insolvency and individual voluntary arrangements. We are working through that list. I do not think that any of us could hazard how long it will take to get through them all, but that gives us a good idea.
The noble Baroness also asked about other consent regimes. I cannot answer that; it is not within the scope of my extensive briefing; but I am happy to write to her with an answer on that.
I am very grateful to noble Lords, both for their welcome for the Government's response and for the rigorous, intense process, which is full of integrity. I am sure that it will help us to achieve better government.
On Question, Motion agreed to.
European Communities (Definition of Treaties) (Agreement on Enlargement of the European Economic Area) Order 2007
rose to move, That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Agreement on Enlargement of the European Economic Area) Order 2007.
The noble Baroness said: I am pleased to move the Motion for this order on enlargement of the European economic area to include Bulgaria and Romania. As the Committee is aware, the Government have put tremendous effort into ensuring that Bulgaria and Romania were able to join the European Union as scheduled on 1 January this year. The order is a formal step towards delivering the benefits of enlargement. The UK can be proud of the major part that it has played in ensuring that conditions were right for EU enlargement to happen. We will continue to promote and support reform in Bulgaria and Romania, helping those countries to fulfil their potential. Bulgaria and Romania are now important partners in tackling global challenges such as climate change, globalisation and security.
The subject of the order, the agreement signed in Brussels on 25 July 2007, together with four protocols that are not the subject of the order, allows the participation of Bulgaria and Romania in the European economic area. The EEA allows Iceland, Norway and Liechtenstein to participate in the internal EU market, bringing benefits to them and us in trade and the free movement of people. It is important to bring the EEA agreement into line with the expanded EU, to create a single market that embraces Bulgaria and Romania, and Iceland, Norway and Liechtenstein—a single market encompassing 30 countries with a population of almost 500 million citizens.
Through the EEA enlargement agreement, Iceland, Norway and Liechtenstein will make valuable financial contributions to economic and social reform in Bulgaria and Romania. Negotiations on the level of contributions to be made by the EEA states were the primary reason for the delay in Bulgaria and Romania's entry into the EEA, which should have been 1 January, the date of their EU accession. Under the terms of the agreement and four associated protocols, Iceland, Norway and Liechtenstein will contribute €72 million from 1 January 2007 to 30 April 2009 to alleviate social and economic disparities in the enlarged EEA. Norway will also contribute €68 million as additional bilateral financial contributions over the same period.
In addition, the Community has signed two supplementary agreements, with Norway and Iceland respectively, governing additional market access commitments for certain fish projects from those two countries into the Community until 30 April 2009 in order to take account of the addition of Bulgaria and Romania to the single market.
I believe that this is a positive measure for the UK, ensuring effective free trade between European partners. I am sure that we will agree that this is a welcome agreement that supplements part of the EU enlargement process, ensuring that full benefits are available to Bulgaria and Romania. I hope that we will approve the order. I beg to move.
Moved, That the Grand Committee do report to the House that it has considered the European Communities (Definition of Treaties) (Agreement on Enlargement of the European Economic Area) Order 2007. 3rd Report from the Statutory Instruments Committee.—(Baroness Royall of Blaisdon.)
I thank the Minister for introducing this order. As the Minister for Europe noted in another place, this order has strong cross-party support and I would like to add my voice to those welcoming the recent accession of Bulgaria and Romania to the European Union.
The order will give parliamentary approval to an agreement on the enlargement of the European economic area. Specifically, the agreement, which the order ratifies, alters the EEA's arrangements to take account of the recent accession of Bulgaria and Romania into the enlarged EU. As paragraph 4 of the Explanatory Memorandum notes, under the heading “Legislative Background”:
“The Agreement is concluded by the European Community and all its Member States, and must be ratified by each of those States as well as by the Community before it can come into force”.
I am particularly happy to be speaking today on this order, having initiated and taken through the European Parliament all the preliminary Bulgaria-Europe agreements during the five years from 1989 to 1994, when I was a Member there.
If I may, I will mention that only the other day, the Speaker of the Bugarian Parliament, through the Bulgarian ambassador, honoured me with a special award.
I have a few questions for the Minister on the order. As the Explanatory Memorandum states, the financial contributions and market access concessions that the agreement allows relate to the period from 1 January 2007 to 30 April 2009. As a result of negotiating delays, the agreement was not concluded until after it was due to come into force, so we are, in effect, being asked to approve it retrospectively. First, have any payments been made to date, particularly by the Norwegians, who are the major contributors under the agreement, or has no money changed hands? Secondly, the new agreement is due to expire on 30 Apri1 2009—less than a year and a half from now; what happens thereafter? How will the money be spent and how will the project’s success be evaluated? Fourthly, will this be done by the Norwegian financial mechanism office or by some other body—and, if so, which one?
These countries' accessions have naturally led to a strengthening of ties between these countries and others in the EU, including the UK. These ties will, I hope, encourage all countries to reach standards of environmental protection and good governance, as well as directing investment funds to the areas that need them most. I hope that these advantages will continue after the expiration date of this treaty.
These ties, of course, also extend to cultural and charitable sector exchanges. There are many excellent foundations and charities working between the UK, the EU and Bulgaria and Romania. For example, some deal with street children and orphanages, such as Karen Dom, which was started by the former Foreign Minister and Bulgarian Ambassador Ivan Stancioff. I also mention the all-important and influential Free Democratic Bulgarian Foundation, founded in 1991 privately by Yvonne and Dimi Panitza; it is dedicated to strengthening the democratisation of Bulgarian society. I should declare an interest as being involved with several charities in Bulgaria and Romania and as governor of the American University in Bulgaria. These cultural and social links are one of the great strengths of the EU, giving each country the chance to both help and benefit from each other.
Many more people than was the case a few years ago are involved with these foundations and are taking holidays and investing in these countries. What are the Government doing to encourage more people to be involved and to help with opportunities for young people? For example, young people in particular have the chance nowadays to spend a gap year learning more about both themselves and the world around them. Does the Minister agree that working with these and similar charities would be a worthwhile pursuit? This area is now no longer the forgotten Europe of pre-1990. This debate has, I hope, highlighted the founding principle of the EEA and the EU—the importance of more than just the free market in establishing lasting bonds between countries that have too often found themselves opposing rather than supporting each other. I hope that the order has prompted the Minister to continue to press for the attainment of this principle in future.
I thank the noble Baroness for her explanation of this order. This side, too, very much welcomes the accession of Bulgaria and Romania: may more of the western Balkans soon follow within a reasonable period. I also must congratulate the noble Baroness, Lady Rawlings, on her contribution, through that very noble institution of the European Parliament, towards this happy outcome. When I first saw this on the schedule of business, I thought that it would be fairly dry stuff, apart from the fact that it talks about important global issues. But one or two things come up.
First, clearly because of my misreading of statutory language, I was unaware that there had been a political union between Bulgaria and Romania. We seem to talk about the Republic of Bulgaria and Romania, but I presume that that is the way these things are written. I am particularly interested in the fact that the accession of the two republics to the EEA seems to have been after that to the European Union. I want to understand how that could happen. It suggests to me that these two republics, although having acceded to the EU, were not members of the EEA legally until this process had finished. I do not understand how that can be the case, so I would be interested in the Minister’s comment on that and what implications it might have had in the interim, if any.
What particularly interests me is the language around the reason for the delay. The EFTA members—particularly Norway and Iceland, important fisheries nations—have obtained market access concessions within fisheries by, it seems to me, wheeler-dealing in terms of extra bilateral payments. I would be very interested indeed to understand what has been going on over the beer and sandwiches in Brussels to cause that. It seems a strange way to go about it. What extra concessions have those important fishing nations had in the European market in return for the—this is obviously the wrong Scandinavian nation—“Danegeld”? I am very interested to know what deal has been done in order to get aid—I am sure that it is highly welcome bilateral additional aid—to these welcome member states.
I am grateful for the strong support for this order shown by both noble Lords this afternoon, and for their informal contributions. I would expect nothing less from two former Members of the European Parliament. I can think of nobody more appropriate to speak for the Opposition than the noble Baroness, Lady Rawlings, who has a strong record in this area. I warmly congratulate her on her award from the Bulgarians. I am also grateful for her exposition of the work of various charities in Bulgaria that strengthen the bonds between our countries. That is of course something we should support. The more soft co-operation we can have, the better.
In response to the noble Baroness’s questions, no payments have been made as yet, but the infrastructure has been put in place and tenders for applications will be available in early 2008. Negotiations will begin in 2008 to allow a new financial mechanism to take place in 2009 when this one expires. Payments will be monitored by the EEA Financial Mechanism Office in Brussels, with close evaluation. The Norwegian bilateral funding will be run by Innovation Norway on behalf on the Norwegian Government. The European Commission will also examine projects. I am assured that the evaluation will be rigorous.
On charities, the British embassy in Bulgaria is engaged with the Bulgarian Government and NGOs to encourage reform in, for example, child care institutions. EU funding is helping to tackle the problems.
The noble Lord, Lord Teverson, rightly queried the provisional application to date. The agreement has been provisionally applied by the European Community since its signing in July 2007. It is unfortunate that the agreement could not enter into force simultaneously with the EC accession. We wish to ensure that this does not happen with future accessions, but I am sure that it is absolutely legal. I do not appear to have a response to the noble Lord’s important question about fisheries, but will write to him.
I have found two paragraphs. Bulgaria and Romania’s EU accession on 1 January 2007 concluded the historic fifth wave of enlargement that saw east and west divided into a reunified Europe. The EEA enlargement agreement ensures that the internal market is extended, allowing Britain’s goods, capital and services to be traded freely across a single market of 30 countries, giving British people and companies the right do business and set up businesses in those countries with minimal difficulty on a level playing field. The House of Lords overwhelmingly supported the legislation, ratifying EU enlargement in 2003, and supported the entry of Bulgaria and Romania into the EU on 1 January 2007. By approving this order on the EEA today, the Committee has an opportunity to reaffirm its support for the inclusion of Bulgaria and Romania in the process of building a competitive and effective Europe.
I can now respond to the question of the noble Lord, Lord Teverson, on fishery products and whether this would hit the UK fishing industry: a good question from the Member of the Committee from the south-west. The UK Government remain committed to free trade and would therefore prefer to see all forms of tariff quotas removed. These issues are of course being dealt with in the context of the World Trade Organisation discussions. The Government are working closely with the British fishing industry to ensure that it is able to compete in international markets. In principle, the tariff concessions on fisheries largely reflect existing trade patterns from the EEA states to Bulgaria and Romania in these projects.
On Question, Motion agreed to.
Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007
rose to move, That the Grand Committee do report to the House that it has considered the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007.
The noble Lord said: As Members of the Committee will recall, the Financial Assistance Scheme, which I shall refer to as FAS hereafter, offers help to people who have lost out on their defined benefit occupational pension because their scheme was underfunded when it wound up and the employer is insolvent or no longer exists. The regulations extend this definition further, as I shall explain.
In addition, FAS also provides assistance for surviving spouses and civil partners of qualifying members. It is funded by the taxpayer and administered by the Department for Work and Pensions via the FAS operational unit in York. Before discussing the regulations, I shall briefly mention the final report of the Young review, which has been the subject of much speculation over the past week. That review was charged with looking at whether better use could be made of the assets remaining in failed pension schemes to boost the level of FAS payments towards 90 per cent and whether some pension schemes, including those with employers which remain solvent and which are not covered by these or previous FAS regulations, should be admitted to the FAS.
I appreciate that your Lordships are keen to see the Young review’s recommendations on these points, as are affected members. I confirm that the review’s report is now complete and we are currently considering both its contents and our response. The full report will be published early next week but as the Prime Minister announced during yesterday’s Prime Minister’s Questions, we are confident that we will be able to provide a 90 per cent guarantee. We will make a more detailed statement of our intentions alongside the publication of the Young report early next week.
In the mean time the regulations will allow us to provide increased assistance to more members of more schemes while we bring forward changes arising from responses to the Young review’s recommendations. Before explaining what the regulations cover, I think it useful to remind noble Lords that before this Government introduced the Pensions Protection Fund and the FAS as part of the Pensions Act 2004 there was no help available for those who had lost out on their pension because their scheme had wound up underfunded with an insolvent employer. It is true that the FAS, as originally constituted, helped only those within three years of their normal retirement age on 14 May 2004 but in December last, we extended this help to members of qualifying pension schemes who were within 15 years of their scheme’s normal retirement age on 14 May 2004.
This assistance was tapered depending on the member’s distance from normal retirement age. To put the scope of today’s regulations into context, I remind noble Lords that the original FAS would have helped just 15,000 people over its lifetime. Last year’s extension to FAS boosted the number helped to around 40,000 people and increased total funding for the FAS from £400 million to over £2 billion in cash terms. The regulations being discussed today will bring about a further significant extension to the scope of the FAS while we consider the final findings of the Young review, and round off the package of FAS measures announced in and subsequent to the Budget in March.
This extension increases the Government’s commitment to the FAS to more than £8 billion in cash terms, and means that the FAS will now help about 130,000 people who have lost significant amounts of occupational pension due to employer insolvency. The regulations do away with tapers on assistance so that all qualifying members of qualifying schemes will be eligible for a top-up to 80 per cent of their expected core pension, subject to the cap at age 65. The regulations will get rid of the de minimis, which meant that FAS awards of less than £520 a year were not payable. They raise the cap on assistance from £12,000 to £26,000 a year.
On our plans for the cap, I am sure noble Lords will have recognised that, without indexation, the cap will mean that assistance due to members who will not reach 65 for some time will not retain value before coming into payment. The Government agree that it is not appropriate in the longer term for the FAS cap to remain static. On 21 May 2007, the Minister for Pensions Reform told the other place:
“We intend to ensure that the cap retains its value, even where assessments are made for members who will not be eligible for payment until many years into the future”.—[Official Report, Commons, 21/5/07; col. 1159W.]
As relatively few members are affected by the increased cap, and as any significant effect of non-indexation will not bite for some time, it makes sense to defer associated changes to the cap to be considered alongside any other changes to the way in which assistance is calculated arising from the Young review of pension scheme assets. The amendments that we are proposing will also bring additional schemes, and their members, into the FAS.
Following discussions with affected schemes, we believe that it is right to extend the FAS to members of pension schemes where the trustees believed that it was in the best interests of their members to reach a compromise agreement with the employer. Under these agreements, schemes accepted a lower amount than the full debt owed by the employer on the winding-up of their scheme in order not to tip that employer into insolvency. The regulations ensure that the trustees and employers of such schemes who have acted reasonably in reaching a compromise agreement will be helped. We have yet to receive data for all the schemes that might benefit from this change, but we believe that up to 13,500 members may qualify for assistance. Following an approach by an affected scheme, we have also amended regulations to allow certain small self-administered schemes, which were previously excluded, to be considered qualifying schemes for the FAS.
The Committee will recognise the importance of preserving the assets in relevant schemes until we can bring forward regulations to implement changes arising from the Young review’s final recommendations. We have already implemented some protective measures. The halting annuitisation regulations, which came into effect on 26 September, seek to protect the funds in affected schemes by preventing trustees from purchasing annuities for nine months, except where trustees already have a binding commitment to purchase annuities before the regulations came into force or where they have the approval of the scheme manager.
Today’s regulations include a further protective measure to deter trustees who are allowed to purchase annuities from buying annuities with enhanced annual increases. Currently, the FAS calculates a top-up payable for life, based in most cases on the annuity rate that will come into payment at the member’s normal retirement age. Thus, if an indexed annuity is secured that starts at a lower initial rate than a flat-rate annuity, the member will stand to receive a higher amount of assistance than he would have done had a flat-rate annuity been secured. Given the relatively low position that general indexation occupies in the priority order for non-pensioner members, we would not expect trustees in most circumstances to secure deferred annuities with annual increases. However, scheme rules may allow trustees broad discretion over purchasing increases, and we understand that trustees are not always bound to match the way in which assets have been allocated under the priority order when purchasing annuities. For these reasons, we do not believe that current legislative powers are sufficient to control selection against the FAS.
Allowing trustees to purchase generous indexation would increase the FAS assistance payable and increase the costs of the FAS as currently configured and therefore affect the capacity of the Government to deliver increased benefits in response to the Young review. Under the proposed change to the FAS, the scheme manager will be given the necessary powers to redetermine the annuity rate in cases where that annuity rate has been secured with annual increases that he considers to be unreasonable. We believe that this should deter trustees from playing the system and taking advantage of the money the taxpayer is committing through the FAS to secure unreasonable increases for their members. The regulations also introduce a number of amendments linked to the calculation of FAS payments, the recovery of overpayments and the provision of information. These are necessary to provide essential clarification of certain aspects of the FAS, and to ensure that it operates effectively.
Much criticism of the FAS has focused on the number of people whom we are currently paying. Too few commentators acknowledge that the main barrier to making more payments is not the Financial Assistance Scheme operational unit but getting the right information from trustees.
Despite those difficulties, the operational unit has received and dealt with almost 400 applications from pension schemes and, as of 7 December this year, 3,540 cases were in payment and a further 1,223 members had been assessed and are likely to become eligible for payment once they reach 65. Those payments are making a real difference to the lives of people, many of whom had given up any hope of enjoying the retirement for which they had saved.
I remind the Committee that, despite press criticism, FAS has received favourable comments from pension scheme members who had despaired of seeing anything from their pensions and who can now look forward to their old age with increased certainty. I am sure that the Committee will be interested in some of the reactions that we have had from people who thought that they had lost everything. They illustrate a different side of the story to the one that we are accustomed to hearing from more vocal campaigners and their supporters. They say, for example:
“After four long stressful years after retirement I can now look forward to the difference these payments will make to both my wife and I in our future every day needs”.
“It’s good to know that your department exists to help those of us caught up in these types of problems”.
“I am highly delighted with the way FAS Operational Unit handled the communication side and very pleased about the forthcoming payments”.
I acknowledge that, in its earliest days, legitimate questions were raised about whether FAS was delivering the outcomes we had hoped for. Those questions have now been scotched. I emphasise once again the professionalism and commitment of FAS operational unit staff in working with schemes that may have inadequate records and where members may have long since abandoned hope of seeing anything of their pension. I can assure the Committee that the operational unit is already working closely with trustees to ensure that schemes that benefit from changes to the rules relating to scheme eligibility can provide the necessary data and supporting information to the FAS operational unit as quickly as possible.
The regulations ensure that the FAS continues to operate effectively and provides assistance to more of those scheme members who face the most significant losses. In my view, the regulations are compatible with the European Convention on Human Rights, and I therefore commend them to the House. I beg to move.
Moved, That the Grand Committee do report to the House that it has considered the Financial Assistance Scheme (Miscellaneous Amendments) Regulations 2007. [3rd Report from the Statutory Instruments Committee].—(Lord McKenzie of Luton.)
The Grand Committee—this very large Grand Committee—will be grateful to the Minister for introducing the order, which gives effect to yet more changes to the FAS announced during the Budget in March this year.
Towards the end of his comments, the Minister told us of the grateful recipients of FAS money. We can all understand that, but we must remember that the Government set up FAS in the first place in response to a threatened rebellion from their Back Benchers in another place, who knew then that a large number of pensioners had been misadvised over many years to invest in a pension, only to find that their pension fund was bankrupt and that they would get nothing.
Added to that—I cannot resist saying this, and I am sure the Minister expects it—was the Prime Minister's first Budget, which removed £5 billion a year from the pension savings of all pensioners. In the spirit that is supposed to surround Christmas, I am well aware that the Government have never recognised that figure. I accept that. However, can the Minister put his hand on his heart and tell me that the removal of ACT made no difference to those likely to be in the FAS or any others saving for a pension? To change the subject slightly, the Minister will know to what I am referring when I say that, unlike some of his ministerial colleagues, it takes only a very little gentle bullying from me for him to respond to my questions. I hope that he will give me an early Christmas present by answering that question.
When we were discussing what became the Pensions Act 2004, it was believed that about 66,000 people had lost all or most of their pensions. The Government inserted a new clause in that Act to cover members of qualifying defined benefit occupational pensions schemes which started to wind up between 1 January 1997 and 5 April 2005. All this, and the scheme as it has developed, is very well explained in the Explanatory Memorandum, so I will not weary the Committee with it. However, I would make the point that only £400 million was originally set aside to pay the pensions in question, which would amount to only 80 per cent of the core pension, or £12,000, whichever was the higher.
The term “core pension” was invented by the Government. It amounts to about 60 per cent of the money value of the expected pension. Since this has reduced to 80 per cent the net result is around half the expected final pension. Even if the money had been sufficient to achieve this, which it soon proved not to be, the amount of pension an individual would receive was to be far short of what they could expect had their scheme not wound up, and hence not fall within the remit of the financial assistance scheme. Over and above this, no payment would be made if the amount due was less than £10 a week—I assume for rather shaky administrative reasons. Why are they shaky? It is because state benefits often pay out less than £10 a week. This order removes this de minimis amount, which begs a question. Of the current recipients—I believe that the Minister gave the figure of 3,540—how many get £10 or less a week? While we are at it, I know that in February this year, payments were being made to only 950 people, so I congratulate the staff of the FAS on acting on information received from trustees at last in a prompt and proper manner.
I cannot help wondering whether doing away with the de minimis amount altogether is entirely sensible. The sum of £10 will make a significant difference to the income of many of the pensioners involved, with which I am sure that the Minister would agree, but would 50p or £1? I recall that everyone has complained about—but no one has done anything about—the 25p a week allowance for state pension recipients more than 80 years old. I am awaiting the Government’s announcement on this, although I might die before I get it.
Be that as it may, my party said at the time that the original £400 million over 20 years was not nearly enough. When a couple of years later it came to light that the number of potentially eligible payments under the FAS was more like 125,000, we were proved right. All parties, not least the pensioners’ action committee, continued to press the Government for more, and the Government produced more—surprise, surprise. They said that £1.9 billion more, to be precise, would be found, bringing the total in the pot to £2.3 billion in cash terms over 60 years. Even though the time limits of eligibility were increased from being within three years of pension age to 15 years, this was still not seen as enough. This was incorporated in last year’s FAS order.
Over the past two years pressure has continued to grow. In his last Budget, the Chancellor announced yet another increase in the FAS pot; another £5.7 billion over the new 60-year life of the scheme. These figures are my appreciation, because I cannot work out whether it has become a cumulative amount or whether there is another method of calculation. I am sure that the Minister, having a background as an accountant, will be able to answer me on that. Whatever the amount is—I expect, with a bit of luck, that we will get the answer soon—this total pot would be spent on giving all qualifying members a maximum of 80 per cent of their core expected pension or £26,000 a year indexed, as we have just heard, to today’s cash value. This is very curious terminology.
People do not expect the core, but they will get it none the less. Even after the Budget announcement, we have seen angry, naked pensioners demonstrating about this. As the Minister knows, they want 90 per cent of their pension, so that it would equate with pensions paid out under the Pension Protection Fund where there is no core pension arrangement. The Budget announcement, and now this order, constitute a ratcheting up of the FAS pot. The £400 million to be spent over 20 years does not stand up in comparison with £1.9 billion over 60 years, both in cash terms. None the less it is not much—averaging out at just over £31.5 million a year at today’s prices.
During our discussions on this year’s Pensions Bill, Ministers conceded that yet more money could be found by means of the better use of assets of the failed schemes, and if that transpired, the Government would match these amounts pound for pound. They set up, as the noble Lord said, the Young review to investigate. The Minister has commented on the press reports in the past 10 days or so. I am delighted to find out that within the next four or five days—anyway, by close of play on Tuesday, I assume—the Young report will be published, and we will see what truth there was in the press that a row has been going on over the matching of the funding.
Lastly, I have to go back to the “core” and “expected” pension because the Explanatory Notes both confuse and conflict the two terms. I should be grateful to have definitions for both terms on the record. Having said all that, I welcome the order, as do tens of thousands of pensioners, but I must warn the Minister that he will be brought to the Dispatch Box again, no doubt kicking and screaming, to produce an even fairer version of the FAS. For how long will we have this annual ritual?
It is a great pleasure to follow the noble Lord, Lord Skelmersdale, the self-described gentle bully—I think I have heard him say that—and to agree with many but not all of his points. I should be interested if the Minister could tell us who the two anonymous people are—FAS campaigners are happy to operate under their own names—but rather like them, we on these Benches are grateful for small mercies. To that extent we welcome the order as far as it goes. Clearly there are some serious questions to ask about the operation of the FAS and where it is now.
First, there has been a great deal of talk—let us be clear that it is a con trick—about the concept of a core pension that has been invented by the Government. Whether it is 80 per cent or 90 per cent of this entirely fictional figure, can I ask the Minister straight out what is the difference between core pension, as the Government define it and the level of benefits to which pensioners would be entitled under the PPF, which is the policy that we on these Benches put forward clearly in our manifesto at the previous election? We are still putting that forward, and would like to know what typically, on average, the difference is. If the Minister is talking about 80 per cent or 90 per cent of core pension, what percentage is that typically of PPF benefits? The debate will be much more honest and open if we can all agree on a definition of that.
Secondly, my colleague, Danny Alexander from the Commons and I were at the vigil outside Downing Street the other night, as I know was the Minister responsible for pensions reform. The people who were there are disgusted by the treatment they have received from this Government. They were kind enough to give me a T-shirt as I passed yesterday. I am glad that I did not have to wear it outside Downing Street on that cold night. I was a little tempted to wear it here today, but my Chief Whip dissuaded me. The Minister should be under no illusions about the deep disgust felt not just by pensioners but by many of us on these Benches.
It is welcome news that the Young report is about to be dragged kicking and screaming into the light. Following the question asked by the noble Lord, Lord Skelmersdale, what does early next week mean? Will the report be published by Tuesday, before the House breaks up? Will there be an opportunity for a debate or a Statement? Surely by now, after the Prime Minister spoke yesterday, the Government have decided what they will do and how that will be properly discussed.
On the administration of the payments, surely by now the Government can see that it makes much more sense to let the PPF, which is a highly efficient, well organised and well established operation, administer the payments under the FAS. We on these Benches argued right at the beginning in 2004, when the Bill was going through the House, how much simpler it would have been if that had been done. It is not too late to do it now. The PPF management has confirmed to my colleague Danny Alexander and me that it is fully able and willing to do that. Will the Government please focus on that to save time and money and to integrate that operation?
In the Commons, the Minister for Pension Reform sneered at the Sunday Torygraph, as he called it. We have had a few cheap cracks at the expense of the press today. The Sunday Telegraph, among other newspapers, has run a splendid campaign under the editorship of Patience Wheatcroft, who is sadly no longer there, and Liam Halligan. Both have great expertise in these matters and a very strong interest and feeling for the pensioners who have been done. It ill becomes the Government to sneer at newspapers that have exposed the Government’s really very sad record on this issue. It would be better if the Government focused on getting payments and justice to these people rather than sniping in that way.
We look forward to the report next week, I hope, before we break up. Again, the Minister in the Commons said that he would be happy to have discussions with members of other parties about whether we should say something over Christmas or whether it would be better to wait until the House returned. We would prefer it to be done next week, and if more money can be found, that money should get through to members as soon as possible.
I have a simple question for the Minister, because he was kind enough to give me a Parliamentary Answer a few months ago to the effect that, in the next 10 years, simply bringing up FAS benefits to PPF levels would cost between £15 million and £20 million a year. What is his latest update on those figures? On that basis, how many minutes—I use the word “minutes” advisedly—of taxpayers’ funds pouring down the Northern Rock plughole would it take to give the FAS pensioners PPF-level benefits?
I end by asking the Minister whether he has read the excellent publication, Pensions Week, this week? On the front page, under the heading “ABI calls for saver trusts in government”, Maggie Craig, the director of life and savings at the Association of British Insurers, was quoted as saying that,
“the government must instil higher levels of confidence in a new generation of savers”.
This is clearly in the context of the new Pensions Bill personal accounts. She was also quoted as saying:
“Establishing trust is going to be central if this is to be successful. In particular, there is a lack of trust in government when it comes to pension provision”.
The article continued:
“Drawing on research conducted for the Department for Work and Pensions, that found 51% of people did not trust the government on pensions, Craig said a huge amount of work needed to be done to improve understanding and confidence”.
Frankly, given the way in which the Government have treated the members of the FAS and the robbed pensioners there, I am amazed that nearly half of them have some trust in the Government. I would have thought that the figure would have been much lower, and the Government should accept at last that when they are trying to bring in a scheme to enrol vast numbers of people in this country into saving for a pension, they should at least give justice to the people who have been waiting and sort this problem out once and for all.
I think I detected a welcome for the regulations in both those contributions, even though there were some reiterated concerns about what has gone before and what may or may not follow.
The noble Lord, Lord Skelmersdale, asked about the withdrawal of payable tax credits from pension schemes and what impact I thought that that would have on failed pension schemes. We have debated this endlessly, as the noble Lord knows. The reality is that that change to the tax system was accompanied by other structural changes to corporation tax, including the reduction of the main rate by 2 per cent and, subsequently, 1 per cent. It looks as though the noble Lord is—
Okay. That structural change in the tax system was particularly focused on the regime which existed before the change, which in effect encouraged dividends rather than retention—one of the issues around an imputation system. It was therefore part of a package of measures to generally create more stability and a better structure for the UK corporate regime. That was part of building stability for the economy as a whole, and part of building a successful framework for corporate Britain. If you look at it in the round, that was the right decision. That reduction in corporation tax in itself gave companies a greater capacity to fund contributions to pension schemes.
I also remind the noble Lord that that structural change was partly something which his Government had done previously. The rate of imputation was always linked to the basic rate of tax and, as that changed, the imputation credit progressively reduced. Therefore, pension schemes under his Government had a progressively smaller payable tax credit to recover for their assets. That was done without any accompanying change in the rate of corporation tax. What really affected pension schemes, as we know—the Turner commission has emphasised and validated this—was growing longevity. The phrase of the noble Lord, Lord Turner, was the “fool’s paradise” of living with assumptions of asset returns which were not realistic in the long term. That was not helped by the regime which limited the extent to which surpluses could be built in funds, and gave rise to a whole raft of pension holidays under the regime which his Government set in train. A combination of issues affected defined benefit schemes. The experience of the UK is no different to what has happened elsewhere in the world. The demise of defined benefits schemes has been at an accelerated rate in the US compared to the UK. Does the noble Lord wish to intervene?
Perhaps, in view of that very impressive but not very happy explanation, I should rephrase my question. Is the Minister saying that the whole package—I accept that it was a package—made no difference to the income stream of pension schemes? The noble Lord also had a little political go at the sins, as he sees them, of my forebears as Ministers in a Conservative Government. Of course, the Chancellor’s mistake was to suddenly chop it all off at its roots rather than continuing a gradual decline.
Whether it made any difference would depend on which timescale you made the judgment over. Clearly, when you move into an altered regime where the structure of the tax system is different, with lower rates but without the imputation repayable tax credits, all the various components of that would not necessarily have had the pluses and minuses for outcomes at the same point in time. If you look over a period, it was the right decision, and would therefore not have had any significant impact on the assets of pension schemes overall. If you looked at any particular year, whether it did or did not would depend on which year you chose. I do not believe that pursuing that point is genuinely productive in trying to fully understand what happened to schemes. That is very clear from the impressive Turner report which gave us the basis for the key changes that we made this year and will make next year. That was his judgment and the judgment of others as well.
On whether it is done progressively or not, the change made in 1997 was accompanied by a change in the rate of corporation tax. That effectively did not happen when the changes and reductions undertaken by his party took place generally, apart from one exception, with which I will not bore the Committee, when there was a change in the rate of corporation tax because there was a change in the rate of first-year allowances.
The noble Lord, Lord Skelmersdale, noted the demise of the de minimis £10 and asked whether we should have a de minimis at all. In considering any detailed implementation of proposals we expect to stem from the Young review, we can consider whether it makes sense to make small payments in the form of regular payments or in some other way. The administrative issue that the noble Lord raises is reasonable. On the number of people who are currently being paid £10 or below, the de minimis has already been lifted for initial payments. We debated that in the Pensions Bill 2007. Significant numbers may already be receiving less than that amount, but I do not have a number. If we can readily obtain one, I would be more than happy to provide that information to the noble Lord.
The noble Lord, Lord Skelmersdale, referred to the 25p for the over-80s. If I were a betting man, I would bet that that will be gone before the noble Lord reaches his entitlement to it, but who knows? He also asked about the cost to date. Two figures are always used: a net present value figure, which is associated with the basis on which these things are reported and the resource accounts; and the cash figure, which is just the sum total of the cash amount over the whole life of the scheme. I do not have right up-to-date cost estimates, but I do not think that there is any significant difference. In the previous cost estimates, the cash figure is a smidgeon under £8 billion, which is a cumulative figure that takes us to where we are, including the provisions in these regulations. The net present value of that is £1.86 billion.
Both noble Lords made reference to the 90 per cent figure of entitlement. As was made clear previously, and was emphasised by the Prime Minister at Question Time, the extra value that we believe is possible from the Young review, together with matching funds, would take us towards 90 per cent. On the basis of the Prime Minister’s announcement, that 90 per cent is now guaranteed. We have to await publication of the Young review to see quite how the extra assets are—
I did not hear the answer to the question, which was very specific from me and, I believe, fairly specific from the noble Lord, Lord Skelmersdale. On the 90 per cent of core pension, what percentage typically of PPF-level benefits would that be? It is a very simple question. What is the answer please?
It is a very simple question. I was coming to core pension. It would be wrong of me to pre-empt what is in that review. The 90 per cent figure—as we have previously discussed and was the aspiration that we talked about when we looked at the interim Young review—was of core pension.
I am sorry. This has been going on for some months now. The campaigners have made it clear that they believe that the figure is of the order of 50 per cent or 60 per cent. I cannot see in any way how we need to wait for the Young review. If the Minister does not know, will he please give us an undertaking that he will immediately calculate that? This calculation must have been done in the DWP, given how much pressure there has been on it. If he does not know the figure, it is a disgrace. Will he promise to produce it next week?
When we previously discussed the figure of 90 per cent we were referring to 90 per cent of core pension. I shall come to what that means in a minute. As to what may or may not be in the review, I ask the noble Lord to bear with us for a few more days.
I am sorry but that is not a satisfactory answer. Will the Minister undertake that next week, when the review is published, at the same time the DWP will give figures on the 90 per cent core pension, and what percentage that is of the benefits that people would be entitled to under the PPF? That is all we are asking for. The Government must know the figures, but if they do not know them now will they please publish them next week?
I shall review that question when we have seen what is covered in the report. The noble Lord will have to bear with us until it is published, which may or may not satisfy his quite proper detailed inquiry. To the extent that it does not, I shall undertake to be more specific on outstanding residual issues. I hope that that satisfies the noble Lord.
Both noble Lords touched on the issue of the amount conceived by the Government to put into the scheme and the difference between core pension and what otherwise would have been pension entitlement. We should be clear that it was never conceived as a pension scheme; it was an income replacement proposal to deal with the challenges that individuals faced. There are difficult judgments within that, such as the net present value and total cost figures of where we are today, which are considerable sums of public expenditure. Those are the sorts of difficult judgments that have to be faced and analysed in government.
I have a feeling that I have answered most of the questions of the noble Lord, Lord Skelmersdale, but doubtless he will remind me if I have not. The noble Lord, Lord Oakeshott, referred to the vigil. I know that my colleague Mike O’Brien was there. I am pleased that the noble Lord has the T-shirt.
I reiterate that whatever anger has been generated, the Government have always had great sympathy with the plight of individuals who have lost their pensions. In a sense it is easy to do that; it is just words. The challenge has been deciding what goes in place to support those people. That is the journey we have been on, and I hope that what comes out next week will be the end of that journey. The noble Lord asked about the difference between the 80 per cent and 90 per cent rate and what that would mean per year, and he referred to previous correspondence between us. In light of what the Prime Minister said at Question Time, it will be best to wait until next week. If it is not clear from that, certainly I can write further to the noble Lord.
He asked whether I read Pensions Week. The answer is no but I shall put it on my reading list. I am still ploughing through the 1974 Second Reading of the Health and Safety at Work etc. Act when Michael Foot was Secretary of State, as part of my understanding of my ministerial responsibilities.
The noble Lord asked about administration and why it could not be dealt with by the PPF. There was a review last year of FAS administration, which looked explicitly at whether the PPF should administer FAS, and concluded that it should not. We need to look at that again to see how it can best be administered in the light of the Young report. I have not answered when next week it will happen; it is not within my gift. The usual channels have an influence on this, but it is not unreasonable that it will happen before the House rises. I do not think I am on my brief in saying that, but that would be reasonable and what we would want to achieve.
Going back to the issue of administration, there have been challenges—certainly on cost. For the first year, which we are only part of the way through, we have seen the level of payments made by FAS far outstrip the costs. It took time to build up the IT infrastructure to get the systems in place to last us over many decades. It is now clear that the annual costs of that are way below the annual amounts that have been paid out.
I hope that I have dealt with each of the questions that have been asked. There was a reference to Northern Rock and how quickly the Government acted. There is no parallel. For a start, the funding that went into Northern Rock was a loan and not a payment or inevitably a call on taxpayers’ money. However, the judgment was that the Government acted to avert a threat to the very stability of the financial system, which is why they acted as they did and with the speed with which they did. It is therefore not right to make that parallel.
That is not right. Schemes that have become insolvent and are being wound up of course present challenges for pensioners who were in danger of losing out, but it was this Government who put in place the protection fund and the financial assistance scheme. Indeed, this is the only Government who have acted to seek to protect pensioners in a changing environment. Other reforms that are being made to the state pension, which we dealt with earlier this year, and the plan for the second Bill, which is now in the Commons and aims to build greater trust and engagement in the occupational pension scheme, take us in the other direction. The thrust is to encourage and to help people to understand how important it is to save for their retirement and the importance of pension schemes as a key component of that.
Both the noble Lord, Lord Oakeshott, and I asked for definitions of “expected pension” and “core pension”. I am quite prepared for the Minister to respond by saying that this is not the time to give them. However, the time has come to have it written down in the Official Report. Will the Minister therefore undertake to make a Written Statement on that subject? If he does not, we shall be forced to table joint Questions for Written Answer.
I was going to say that on this occasion that is really not the same. I know that the Minister is very good about putting copies of his letters in the Library, but quite honestly this has got to the point where, irrespective of what is in the Young report next week, these terms really must be defined much more publicly than simply in a letter to the noble Lord, Lord Oakeshott, and me.
I support that request. That definition must be in the Written Statement which, following his helpful comment, we now expect by next Tuesday. If it is not, I am afraid that that is quite unacceptable and it is frankly discourteous to this House. The request, which the noble Lord, Lord Skelmersdale, and I are both making, is perfectly reasonable.
I am helpfully reminded that the terms are already defined in regulations. Perhaps I can undertake to provide noble Lords with a copy of those regulations so that the terms are clear to them. We did touch on some core pension issues. A core pension obviously excludes some of the provisions. A routine pension might survive benefits. We also considered the extent to which there will continue to be uprating; and lump sum payments. The core pension does not typically cover that, but there is a definition in regulations and I will undertake to ensure that they are brought to the attention of Members of the Committee. If that proves insufficient, they can come back and we will find another way to make it absolutely clear to the wider world what these definitions are. But we are not trying to hide or cover up anything on this, particularly as I am reminded that it is already there in the regulations.
I am sorry to labour the point, but we are both asking a specific question. We can read the regulations, but we want to know what the DWP’s assessment is of the percentage that core pensions will be of benefits that people will be entitled to under the PPF. That is the question we continue to ask.
I honestly think that this has gone on for quite long enough. The Minister has done his level best to produce an answer. He is probably right that there is a definition of the term “core pension” buried somewhere in regulations. I do not think that there has ever been a definition of “expected pension”. I know what I think it means: what the pension’s contract actually said that it would be. But then we have this extraordinary conflation of “core expected pension”. That is certainly where my confusion comes in—and, if I may speak, for once, for the noble Lord, Lord Oakeshott, perhaps it is where his confusion comes in.
We await next week. I promise the Minister that if he thinks that he has had hell now, he has not had half of what he is going to get next week.
I look forward to next week. We can be clear on the definition. Expected pensions will differ depending upon the nature of provision in the individual schemes, but it is perfectly possible to be clear on the definition and what “core pension” is. The basis of assessment of FAS support would be clear; we will set that down. If Members of the Committee are not satisfied by the time the review is published, then we will find a means, in a robust way and as transparently as possible, to ensure that those definitions are with Members of the Committee and shared with their colleagues. I cannot be more specific than that.
I thought you were going to ask a question about prisons there.
We have heard further criticism of the way in which FAS operates and the speed at which it has been making payments, but I remind Members of the Committee that the operational unit has paid out more than £11 million. It is making real progress, and will continue to work closely with schemes to obtain the necessary data to enable us to pay affected members as soon as we are able. We are making steady progress on payment numbers. I should have quoted numbers earlier: we expect to reach around 4,000 payments by the end of this year subject to confirmation of personal details.
I hope that Members of the Committee will therefore join me in supporting the aims of the FAS to provide help to those people most affected by pension losses. I understand that many Members of the Committee are frustrated at not being able to examine the final recommendations of the Young review and the Government’s response before this debate. While I sympathise with such feelings, I hope that, whatever our conflicting views on the overall policy, we can today make progress towards getting assistance to more people as quickly as possible, and these regulations are ours to do that. I therefore commend them to the Committee.
On Question, Motion agreed to.
The Committee stands adjourned until Monday 17 December at 3.30 pm.
The Committee adjourned at 3.48 pm.