asked Her Majesty’s Government:

What steps they will take to prevent further closures of rape crisis centres and to ensure proper provision of counselling to victims of rape.

My Lords, the Government have commissioned an advisory group of sexual violence organisations to consider the financial viability of the sexual violence voluntary sector and to report back to Ministers. In addition, the Government have announced an emergency fund of more than £1 million to prevent immediate closures of rape crisis centres. The Government have invested around £10 million over the past four years to ensure that victims are supported through a number of organisations and agencies.

My Lords, I thank my noble friend for that Answer and for the £1 million of extra funding, but does he recognise that over the past 20 years the number of rape crisis centres has declined from 84 to 38 and that, of those remaining, half are in peril because of erratic funding and lengthening waiting lists? What more can the Government do to help those centres and to enable them to plan properly for the future, which erratic funding prevents them from doing? Can the Government do anything to encourage people to give to charities that help women and children as generously as they give to those that help animals and trees?

My Lords, obviously it is important that the Government should make the case for continued support for rape crisis centres, which do an invaluable job. We seek to ensure that a range of agencies provides support and assistance for victims of this most unpleasant and appalling crime. The noble Lord drew attention to what no doubt he sees as a disparity in support and sympathy for rape crisis centres and animal welfare charities; I fully understand that point. By encouraging people to give and, as important, by focusing on the local support that these agencies and bodies receive, we can raise their profile and encourage greater support from the public.

My Lords, does the Minister appreciate that fewer than 6 per cent of cases in which there has been a complaint of rape end in a successful prosecution? That is an affront to the administration of justice. As far as any deployment of police resources is concerned, the nature of the crime makes it unlikely that any preventive assistance can be given to women. Furthermore, does he accept that any diminution in assistance humanely given to women who make complaints in this way would be not only counterproductive but extremely unjust?

My Lords, I entirely agree with the noble Lord’s last point. That is why the Government have provided support and encouragement to sexual assault referral centres, which were established in the early part of this century and are now increasing in number and developing the quality of their service. The noble Lord draws attention to the low percentage of cases of recorded rape that end up with a conviction. If there is good news in this sector, it is that the percentage of rape cases that are prosecuted is increasing: it now stands at some 34 per cent, which is up over the past 10 years. I take some encouragement from that, as I do from the fact that the Government’s approach in this sensitive policy area has at least begun to improve the volume and quality of reported rape cases, which are up from some 6,600 in 1997 to over 14,000. That shows that women are more confident in coming forward.

My Lords, does my noble friend agree that rape crisis centres perform a unique service to women? Only women are referred to them. Those who go to the centres may have been raped 10 or 15 years ago and many will not have made a complaint to the police; nevertheless, they still need support and counselling, even after a long time. I believe that the uniqueness of rape crisis centres means that the Government should put much more funding into them compared with other organisations that deal with women, men and children who have suffered sexual violence. Will the Minister agree to have talks with my right honourable friend Harriet Harman to see whether further funding can be made available, not only to keep open those centres that already exist but also to create new ones?

My Lords, I fully acknowledge the valuable and valiant role that rape crisis centres play in different localities. Indeed, I take pride from the fact that we helped to rescue the local rape crisis centre in Brighton through local authority funding, which is the more traditional route for funding such centres. As I said, we have already announced an emergency fund of over £1 million to target the centres that appear to be most at threat. Of course, we will listen carefully to the advisory group in this field, which will no doubt give further advice to my right honourable friend Harriet Harman regarding proposals for future funding.

My Lords, do the Government recognise that the anticipated figures for next year are that, in a population of half a million, probably 320 adults will be raped, of whom 30 will probably be men and 50 will be children, and that the figures have been rising year on year? Can the Minister confirm that the funding of sexual assault referral centres, of which 20 are new and 18 are planned, is secure so that they can help with prosecutions into the future?

My Lords, I referred earlier to the valuable work of sexual assault referral centres, which are a fully supported government initiative. We have invested £10 million in these specialist services over the past four years. I can tell the noble Baroness that not only do we acknowledge the value of these important initiatives but they get our continued support.

My Lords, is it acceptable that it takes at least 84 days for women in crisis who have been raped to be seen? That does not suggest a sense of crisis. What funding will the Government make available so that women in crisis can be seen within an acceptable time?

My Lords, I am not aware of that statistic and I certainly do not understand it in the terms that the noble Baroness sets out. We have been putting funding where it matters and where it makes a difference. Rightly, the development and expansion of sexual assault referral centres have been praised and supported. The range of services and help that they provide for women is invaluable and that is where a lot of the investment has been going.

My Lords, is the Minister aware that my right honourable friend David Cameron has announced that a future Conservative Government will ensure stable three-year funding for settlements for rape crisis centres, thus avoiding the year-on-year funding crises? He said:

“This would give these vitally important public services the certainty and stability they need to help victims of rape”.

What specific plans do the Government have for introducing a stable and long-term funding settlement?

My Lords, the Government have put a growing policy emphasis on dealing with the difficult issue of rape over the past 11 years. Much as I welcome David Cameron’s commitment, I think that he comes rather late to the policy. We are increasing our support in this sector and will continue to do so. Women deserve all the support, encouragement and help that they can get when they go through these difficult, traumatic situations.

asked Her Majesty’s Government:

What is the average time for recovering student loan repayments.

My Lords, we estimate that a student who entered higher education in 2006-07 will take an average of around 13 years to repay their student loan. The repayment period is counted from the April following the year of graduation. The calculation is based on assumptions about lifetime graduate earnings derived from the British household panel and labour market surveys. The calculation takes account of gender, age and periods spent unemployed or inactive for other reasons.

My Lords, I thank the Minister for that Answer, which was obviously a theoretical one. Does she agree that we are in difficult times and that huge student debts, insecurity in the job market, pension commitments and the ballooning cost of living place a recent graduate’s financial future on very rocky ground?

My Lords, we need to be clear about the nature of the student loan facilities that have been made available by the Government, which are on a different basis from commercial loans. A student who is earning £18,000 is expected to repay around £22 a month for their loan. I am sure the noble Baroness will agree that when we consider the benefits of higher education, which I am sure everyone in the House accepts are highly significant and very important, it is not unreasonable to expect students who benefit significantly from such education to make some contribution towards the costs, as indeed the Government have been doing in the past 10 years by significantly increasing funding for higher education.

My Lords, does my noble friend agree that income-contingent loans have been a great advance on previous kinds of financing for students and have advantaged a lot of students who go on to higher education? Does she further agree that for many families this is the first generation going into higher education and they find the whole way of applying somewhat complicated? Do the Government have any plans to simplify the process in order to help people to apply for university?

My Lords, I thank my noble friend for that. He is right to point out that students from what are sometimes described as non-traditional backgrounds can find bewildering the process of applying for university and looking for finance. That is why the Government have invested significantly in programmes such as Aimhigher. There has been a year-on-year increase in applications from students from disadvantaged backgrounds, but we are also mindful of the need to do more. The Student Loans Company, as instructed by the Department for Innovation, Universities and Skills, is involved in a major overhaul of the information, advice and guidance available to students, and we are aiming to have a streamlined application process for university and finance online by 2009.

My Lords, have the Government paid attention to the fact that a student loan can affect one’s eligibility for a mortgage? To my knowledge, young students are affected by that. What are the Government doing about that?

My Lords, the Council of Mortgage Lenders has been clear that students should not be prevented from making successful applications for mortgages because of their student loans. We need to be clear that student loans concern the ability to pay according to income and not the amount of outstanding debt. That is an important difference from the old mortgage-style loans that were introduced before this Government came to power.

My Lords, we all know that we may well be heading for a quite tricky economic situation. Surely that is an argument for looking at this scheme more thoroughly. Is the Minister aware that recent graduates are charged 4.8 per cent interest on their loans and yet, in employment, many of them receive pay increases of 2.5 per cent or less?

My Lords, I am very aware of the interest rate that is charged on the outstanding debt that students have. We need to be clear about the difference between the interest rate on the outstanding debt, which is in line with RPI—it will be set again in September in line with RPI for March this year, so students will see a reduction in the interest charged on the outstanding debt—and the interest rate on repayment, which will always be 9 per cent above the £15,000 threshold. For example, the £18,000 earner will pay only 9 per cent, which is £22 a month. So we are talking about two kinds of interest and the repayment interest rate is 9 per cent.

My Lords, does the Minister recognise that none of the £22 a month paid by the £18,000 earner will actually go towards repayment? Indeed, the debt will be accumulating at that point because with a debt of something like £20,000, which is what students will have in future, one will hope to be earning £25,000 before one starts repaying the debt, as distinct from just meeting the interest rate payments which, I accept, reflect the rate of inflation. However, at 4.8 per cent one needs to repay more than £500 a year before one gets anything back.

My Lords, the key point is that graduates have an increased earning potential of at least £100,000 over their lifetimes in comparison with students who attain a couple of A-levels. It is about students putting something back because they benefit significantly from higher education.

My Lords, in the absence of my noble friend Lord Blaker and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

The Question was as follows:

To ask Her Majesty’s Government what recent contacts they have had with members of the Southern African Development Community regarding the situation in Zimbabwe.

My Lords, the Prime Minister, the Foreign Secretary and I are in regular contact with SADC leaders and Foreign Ministers to discuss the crisis in Zimbabwe. Our embassies and high commissions in the region take every opportunity to remind them of our concerns and emphasise the key role they have in resolving the situation.

My Lords, I thank the Minister for that reply. The outrageous spectacle of Mugabe’s presence at the FAO summit in Rome has been condemned from many quarters. Has there been any condemnation from African Governments? Recently, President Mbeki wrote to President Bush asking him to “butt out” of Zimbabwe. Meanwhile, Mbeki used his vote at the UN Security Council to block discussion of the crisis in Zimbabwe. Is it not time he was reminded forcefully that the US and the UK between them have to feed over half the population of Zimbabwe to save them from starvation as a result of Mugabe’s evil policies? Does the Minister agree with Morgan Tsvangirai that President Mbeki’s lack of neutrality makes him unfit to lead the SADC process on Zimbabwe? Given HMG’s patient support for regional action on the crisis and our strong bilateral links with SADC countries, what response has there been to the Prime Minister’s call for election monitors from the Caribbean, Canada and other countries? Is it not time for SADC to insist that trade union delegations from the region be allowed to enter Zimbabwe? Finally, if China can be open to the world in its crisis, why not Zimbabwe?

My Lords, I am not sure that President Mbeki needs any reminding that we are meeting the food needs of half the Zimbabweans because there are 3 million Zimbabweans in exile in his country. The desperate and tragic violence in recent months reflects the cost to South Africa of failing to resolve this crisis. The internal debate in South Africa around that issue shows that many South Africans share the view not just of this Government but of SADC neighbours that it is time for an honest, fair election and for its result to be recognised by President Mugabe.

My Lords, given the current levels of intimidation, torture and displacement in Zimbabwe, can the Minister say what the UK Government’s attitude as part of the international community will be if President Mugabe is re-elected as president?

My Lords, the noble Baroness is correct that the omens are not good. The NGOs authoritatively report that since the second round began 30,000 people have been displaced, 1,700 have been beaten and 27 have been murdered. It would seem that all that is a targeted effort by the Government to undermine the human infrastructure of the MDC opposition. We have been clear that for this election to be recognised by the world it must meet SADC, AU and international principles of freeness and fairness. Frankly, it is not off to a good start.

My Lords, we do not know when fundamental change—the end of the Mugabe regime—will come in Zimbabwe, but come it will. Is my noble friend confident that DfID, the European Union, the United States and the international community generally are prepared for that, when it comes, and that we will have a package of immediate aid to help the long-suffering people of Zimbabwe?

My Lords, my right honourable friend the Prime Minister has committed to a major contribution by Britain, through a multilateral effort, probably led by the World Bank and the UN, for the reconstruction of the country. DfID has taken the lead in encouraging the World Bank to set up a multidonor trust fund and to begin planning for that moment when Zimbabwe returns to accountable government and starts to put back in place a functioning economy.

My Lords, I am sure the Minister has seen the statement by President Bush calling on the AU, the UN and SADC to blanket the country with elections and human rights monitors. In view of the fact that it is unlikely that the regime will allow more than the bare minimum of something like 300, which has already been agreed, to enter the country, would he consider suggesting to the Secretary-General of the United Nations and the High Commissioner for Human Rights that they jointly appoint a special representative to receive testimony via SMS and voice messages about the violations occurring now, so that retribution can be visited on the criminals perpetrating those atrocities after the elections have brought another party to power?

My Lords, we have certainly made it clear to the UN Secretary-General and in the Security Council that a UN human rights envoy is badly needed in Zimbabwe. An earlier envoy was able to stay the violence over slum closures several years ago. We also continue to press for the maximum number of observers necessary, which is estimated as between 400 and 600. We are supporting a trust fund at the UN to finance observers. We are working with SADC and AU leaders to make sure that they are able to provide sufficient observers, and we are continuing to press for Caribbean and Latin American observers to make sure that there are witnesses to what happens in coming weeks in Zimbabwe.

My Lords, would the Minister give his support to the call by the most reverend Primate the Archbishop of Canterbury for the United Nations to investigate the sustained campaign against the Anglican Church in Zimbabwe?

My Lords, I certainly would. I observe that the attack on the Anglican Church clearly represents the effort to close down any free, fair and objective voices in the country in advance of the second round of elections.

My Lords, would the Minister agree that Zimbabwe is effectively being run by the military, more specifically Emmerson Mnangagwa, the ministry of police and the intelligence agencies, particularly Mr Chihuri, and therefore the forthcoming rerun is going to be a complete farce? Will the Minister elaborate on what discussions there have been with the African Union with respect to those on the sanctions list? What actions are Her Majesty's Government taking to prevent their children being educated here in Britain?

My Lords, I have heard the same reports as the noble Lord about the increased influence of the individuals that he names and, indeed, of others. We are tracking the situation. President Mugabe exhibits every sign of still being in charge, but it is enormously important that he—or whoever else is now running the country—runs free and fair elections. If that does not occur, not just Britain but all of us will want to revisit the range of sanctions in force against that country.

asked Her Majesty’s Government:

What steps they will take to secure the early ratification and signature of the treaty banning cluster munitions, following the agreement of a text in Dublin last week.

My Lords, as the Prime Minister made clear, we are delighted to have played a leading role in bringing about the new draft convention, which was adopted in Dublin on 30 May. That convention will be open for signature on 3 December in Oslo. We are studying the text to see if legislation is needed before we can ratify. We have taken a significant step towards implementing its norms by withdrawing from service, as of last Friday, all the UK’s cluster munitions. We believe that the new convention will help to make the world a safer place.

My Lords, I thank the Minister for his robust and welcome Answer, and I acknowledge the key role that the Government’s diplomatic representatives and, indeed, the Prime Minister have played in bringing about the result in Dublin. The Minister knows that the treaty will not come into force until 30 countries have signed it. In view of that, and of the near certainty that legislation will be needed to enable us to ratify, will the Government arrange business in both Houses of Parliament so that that legislation is taken through in record time, bringing forward the moment when the treaty will begin to save lives?

My Lords, I thank the noble Lord and others in this House who have worked so hard for the moment that we face today. I reconfirm that this is an example of where this House, and the Questions that it asks of Ministers, can be so influential in important policy changes.

We ourselves withdrew these weapons as of last Friday, and plan to sign the treaty in Oslo in December. The noble Lord is right that actual ratification will have to wait until both Houses have approved the legal arrangements, but I certainly commit—and I am sure that my noble friend the Leader of the House will agree—to move that forward as speedily as possible.

My Lords, we on these Benches congratulate the Government on signing the treaty, but we understand that there are some problems to be sorted out, both about American cluster weapons stored in bases in this country and about joint actions—in places such as Afghanistan—between British and American forces, whose aircraft will carry cluster bombs. Will the Minister explain how, since the United States has not signed the treaty, those delicate issues will be arranged?

My Lords, the noble Lord is correct that discussions are, indeed, under way with the United States. Those will be at the level of Secretaries of Defence and of Secretaries of State in the coming days, to make sure that we are on the same page. The short answer is that while, in the coming period, the US may if it so wishes continue to keep these weapons in its bases, there is an eight-year period during which they will need to be eliminated. The reading of the treaty indicates that there are overriding political reasons to expect that there will be no such weapons on British territory at the end of that eight-year period. That includes other people’s bases situated on our territory.

My Lords, I warmly congratulate the Government on their decision to ban cluster munitions. I was in Dublin at the time, and I am aware that that decision had a significant influence on some other countries that were wavering a bit. They were persuaded by the robustness of the Government’s decision, and on that day the Prime Minister was the most popular Prime Minister in Dublin. Will the Government continue to keep Parliament and this House informed on the progress made in decommissioning those weapons and in seeking to persuade other countries—those which did not sign, particularly our American friends—to do likewise?

My Lords, my right honourable friend the Prime Minister made it clear in his statement last week that we would seek to persuade all other countries to sign up to this treaty, which we wish to be universal and supported across the country. I have no doubt that he will be delighted to hear of his popularity in Dublin.

My Lords, I join in thanking Ministers, my noble friend Lord Elton and others for their persistence in bringing about this most welcome advance. However, following his comments about the United States, will the Minister explain how its position will affect us directly? I understand there are large stockpiles of US cluster bombs on British soil. Will the US be required to remove those immediately, or will we have to wait until it comes round to signing the treaty? Is there a great transition period ahead about which we have not been told?

My Lords, as I said in answer to an earlier question, all countries which are signatories to the treaty have an eight-year period in which to decommission and destroy these weapons. The assumption is that at the end of that eight-year period, as the treaty reads, even a country such as the US, were it not a signatory, would no longer be able to keep such weapons on UK territory.

My Lords, when the land mines treaty was ratified, the cynics among us quickly realised that cluster bombs had taken their place. Is there any weapon planned to take the place of cluster bombs?

My Lords, I can assure those in the House whose only concern about the decommissioning of this weapon is whether it will leave a hole in the British arsenal that a weapon called the BSFM will provide the same functional purpose in warfare that the cluster bomb was intended to provide—that is, piercing tanks and other heavy armour—without having the same indiscriminate, damaging effect on civilians. Cluster bombs have a large number of submunitions within a single shell—last year we decommissioned one which had 600 submunitions within a single weapon—but the BSFM, which is to replace these weapons, is different in three critical regards and therefore does not meet the Dublin treaty definition. First, it has only two submunitions; secondly, not only does it self-destruct but if it were not to do so, it would deactivate because of a battery mechanism within it; and, thirdly, it is much larger and therefore not a risk to children, who were thought to have picked up the cluster bombs considering them toys. The strong lobby at Dublin is satisfied that the BSFM is a weapon which serves the pure military purpose of protecting against tanks in warfare without damage to civilians.

My Lords, I beg to move that this Bill be now read a second time.

Together with the changes to the state pension in the Pensions Act 2007, this Bill represents the most radical reform to the pensions landscape since Lloyd George enacted the first state pension a century ago. It seeks to tackle undersaving by individuals and underprovision in the private pensions market. It will enable millions more to save for a better retirement, benefiting millions of low-paid workers, especially women, by giving them a pension for the first time. It will allow millions of those who do save the benefits of employer contributions for the first time.

The Bill is built around progressive values. It removes inequalities so that low income or lack of understanding will no longer be barriers to saving for the future. It promotes social justice, enabling millions more to realise their aspirations in retirement and to lead an active and more dignified later life. It builds on our reforms from last year, creating the basis for equality for women and carers, and with a more generous state pension linked to earnings.

Since 1997 we have relentlessly sought to alleviate pensioner poverty and rebuild confidence in pensions. This year we are spending £75 billion on our pensioners, £12 billion a year more than if we had continued the policies of the previous Government. Our policies have targeted support at the poorest, lifting more than 1 million out of relative poverty and more than 2 million out of absolute poverty. As a result, pensioner incomes have risen across the board with the poorest benefiting the most, so that today old age is no longer a proxy for poverty.

Today, though, we need to go further. The challenges posed by our ageing society mean that we need to look ahead not in years at a time but in decades. When the first state pension was introduced a century ago, there was just one pensioner for every 10 people of working age. Today there are only four people of working age to every pensioner, and by 2050 that will fall to just two.

In 1908, pensions were an insurance against the risk of old age; today they are a necessity for the certainty of old age. With longer, healthier retirements, people’s aspirations and expectations are increasing. However, too few people currently save for retirement. More than 40 per cent of working-age employees are not saving at all, and that is even more pronounced among the young, with only one in seven aged between 20 and 24 saving compared to about half of those aged over 35.

The Bill forms the second part of the Turner package of reforms to UK pensions. The first part, the Pensions Act 2007, created a simpler, fairer and more generous state pension. It addressed the historic inequalities faced by women and carers and committed us to restoring the link to earnings broken by the previous Government. The 2007 Act enables restoration in 2012 or by the end of the next Parliament. That means that by 2050 the basic state pension will be worth twice as much as it would have been otherwise.

The Bill will build on that Act, reforming private pension provision to encourage more people to save. The linchpin of these reforms is a requirement for employers to automatically enrol eligible jobholders who are not in a qualifying pension scheme into an automatic enrolment scheme. Jobholders will be enrolled from the first day they become eligible, but they will have the right to opt out. The term “jobholder” is defined widely and includes agency workers.

The Bill places a duty on employers to pay contributions at least equal to 3 per cent of earnings of an individual between £5,035 and £33,540 in 2006-07 earnings terms. We believe that automatic enrolment will change the equation; instead of inertia preventing saving, it will result in saving. Having a pension will become the default position. While automatic enrolment creates the presumption to save, the employer contribution gives individuals a clear incentive to save. For most, their money will be matched pound for pound by a combination of contributions from their employer and the state through tax relief.

The Bill provides for the Pensions Regulator to have overall responsibility for the compliance regime. It also introduces new employment rights that will protect workers from unfair treatment if they decide not to opt out of pension saving and measures to deter employers from encouraging or forcing workers to opt out. We are proposing to strengthen these provisions by bringing forward an amendment introducing a prohibition on inducements to opt out.

For those employers who do not already offer an adequate scheme, Chapter 4 of Part 1 gives the Secretary of State the power to establish a pension scheme. The new pension scheme, or personal accounts, will be targeted where the need is greatest—low to median earners with limited access currently to good quality occupational pension provision—providing a simple, easy-to-understand product with low charges. Personal accounts will be a trust-based scheme, procured by the Government but run independently of Government for the benefit of members.

Chapter 5 broadens the remit of the Personal Accounts Delivery Authority to take forward the implementation work for this scheme. The size and nature of the personal accounts scheme presents a number of challenges in developing a viable strategy. We cannot take decisions on the best approach until PADA has been given the powers, through the Bill, to complete the design of the scheme and engage with private-sector suppliers. However, we are clear that any strategy will need to deliver low charges for members; be consistent with our intentions for the scheme to be self-financing in the long term; be commercially viable; and comply with EU state-aid rules. We do not want to unfairly advantage this scheme. Indeed, the broadened remit of PADA requires it to have due regard to a number of principles, embedded in which is the focus on the target group and being complementary to existing provision.

It is important that these reforms are designed to complement, rather than replace, existing employer provision. That is why the Bill includes a number of measures discouraging employers with good schemes from levelling down. Employers with existing good schemes will be encouraged to continue offering them via a straightforward qualification test. We propose a ban on transfers between existing pension schemes and personal accounts, and an annual contribution limit of £3,600 in terms of 2005 earnings. Further, we are helping employers to adjust to the new minimum contribution requirements over a three-year period.

This Bill has engendered considerable debate around savings incentives and the impact of means-tested benefits. This is not a new issue; nor is it created by this Bill. Our reforms to the basic state pension and the state second pension will help to reduce means- testing and provide a solid foundation for private saving.

The measures in the Bill will further improve incentives to save. Millions of workers—many for the first time—will see their pension contributions matched pound for pound through employer contributions and tax relief. The majority of those who are auto-enrolled can expect to benefit from having saved, including those on benefits. We recognise the need for well-informed discussion and evaluation of savings incentives, and have therefore established a government-led work programme to consider this issue. We also recognise that individuals will need access to relevant and accurate information when they are auto-enrolled, but do not believe that they will need regulated advice or, in most cases, extensive guidance.

The UK still has strong private pension provision. In 2005, the value of pension funds in the UK was approaching £1 trillion, about two-thirds of GDP. We recognise the decline in defined-benefit pension schemes. It is a steady decline that has occurred since the mid-1960s, and is not confined to the UK. We want to send a clear message to employers with good pension schemes: “We want you to continue”.

The present regulatory system governing occupational pensions has grown incrementally over the past 30 years. It is now, by common consent, lengthy, complicated and hard to understand. That is why we announced a rolling deregulatory review and why, in this Bill, we are determined to reduce legislative burdens on employers, while recognising the balance needed to protect members’ interests. We will reduce the revaluation cap on pensions which build up in the future from 5 per cent to 2.5 per cent. We will repeal the requirements relating to safeguarded rights, removing a layer of particular complexity for scheme administrators. As a further measure to support existing provision, following clarification from the European Commission, we are bringing forward amendments to enable automatic enrolment into qualifying workplace personal pensions. This is an important and growing market and these amendments will enable WPPs to take advantage of the benefits of auto-enrolment.

While supporting the existing pensions market, we must not lose sight of the continuing need to protect scheme members. We recognise the importance of innovation in the pensions buyout market, but we must also be alive to the emerging risks posed by particular business models. That is why we are consulting on changes to the anti-avoidance powers of the Pensions Regulator. Following the outcome of the consultation, we may bring forward amendments to the regulator’s powers.

Changes to the Pension Protection Fund are provided for in the Bill, especially to enable compensation to be shared on divorce or dissolution of a civil partnership. We are seeking to allow members of the Pension Protection Fund who are terminally ill to claim a lump sum, bringing this into line with the practice of the financial assistance scheme.

We will also bring forward amendments to ensure that the historic settlement reached on the financial assistance scheme can extend to certain schemes that formerly fell between the PPF and FAS and, consistent with that settlement, an extension of the current restriction on annuitisation.

There are other important matters in the Bill which I am sure we will have the opportunity to consider in Committee. They include easement of pension credit arrangements for those aged 75 or over, consolidation of accrued rights under the succession of earnings-related state schemes and provisions to enable pensions paid under the Pensions (Polish Forces) Scheme to be paid to those who are now resident in Poland.

I have already mentioned some of the amendments that we plan to bring forward, but there are a number of other government amendments that we wish to table as soon as possible. The bulk of them are drafting amendments designed further to clarify the legislation rather than change our intended policy. I am pleased to announce that we will bring forward amendments to comply with all of the recommendations made by the Delegated Powers and Regulatory Reform Committee last month.

Noble Lords may have seen the announcement last week that we intend to share data with energy companies to help tackle fuel poverty. In this Bill, we therefore intend to bring forward amendments to allow the controlled sharing of data with energy companies.

We are also pleased to bring forward an amendment to help those resettled in Britain through Kindertransport during the 1930s. Changes to their UK national insurance records will allow the German authorities to recalculate their entitlement. I am committed to tabling government amendments at the earliest opportunity to enable noble Lords to take a considered view.

The Bill has been the subject of an exceptional consensus. There has rightly been debate about the details and I do not doubt that there will be more in your Lordships’ House. The Government have sought to play their part—for instance, over savings incentives—and have listened to the debate and mapped a way forward. From the TUC to the CBI, Age Concern, NAPF, EEF, Which?, EHRC, ABI, PPI and others, we have seen a mature understanding of the long-term issues at stake. There is a pressing need for these reforms. One of the pensions commissioners, Professor John Hills, stated in January this year:

“We believe that there is a great prize here. The reforms in last year’s Act and, potentially, in this Bill, offer the opportunity to open up low-cost savings for retirement to a group of people who have never had that before”.

We know that the pension system hitherto, state and private, has discriminated against women. It was not necessarily always by intent, but its provisions did not fully take account of the differing work patterns and particularly the caring responsibilities which fall disproportionately to women. The measures in the Bill, taken together with the reforms provided for in last year’s Pensions Act and the reform of SERPS, are transforming the pension prospects of women. They lay the basis for equality and justice and take us beyond the Beveridge settlement, which, however far-sighted, envisaged a society focused on men. This Bill will provide millions of women with a chance to save or to save more.No Government in our country’s history have done more to better the pension prospects for all women.

There is an outstanding issue concerning whether we can do yet more to redress the inequalities of the past by introducing opportunities for additional buy-in of class 3 national insurance contributions. We have not hitherto found a way to deliver a targeted solution consistent with the criteria of fairness, affordability and simplicity, but we are continuing to consider these issues.

This is a truly historic Bill, which will complete the reform package. On top of a wider and more generous state pension, the Bill will give millions of people access to private pension saving for the first time. We will see 9 million more people saving and £10 billion a year more saved in pensions. This is a transformation of the private pensions landscape and a blueprint for embedding a new savings culture in Great Britain. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord McKenzie of Luton.)

My Lords, the House is grateful to the Minister for his introduction of this very important Bill—so important that, unlike the 2004 Bill, it will go into a Committee of the whole House. I welcome that decision, and the overall tenor of the Bill.

The Minister mentioned consensus; we do not resile from what our honourable friends said in another place. However, it is no good for the Government to assume that everything in the garden is beautiful. There is a collective view among parties—and, as the Minister just said, among stakeholders—that it is right to introduce personal accounts, and as soon as is practicable. He mentioned 2012, just three and a bit years after Royal Assent—a tight timetable if ever I saw one. I wonder whether it is achievable. Consensus works both ways. Dogmatism on the details will not maintain this consensus. It is the details that worry me and my noble friends. Your Lordships are in for a lot more explanation from the Minister before we can agree on the way forward for personal pensions.

I hope that the House will forgive me if I look back. When this Government took over running the country in 1997, they inherited a pensions industry that was the envy of the world, with 6.2 million employees enrolled in private sector workplace pensions, 5 million of them in defined benefit schemes. Savings were high, with a total saving of £54.39 billion and a savings ratio of 9.5 per cent. Today the position is very different and the EU recently reported that Great Britain was fourth from bottom of the pensioner poverty league. Only pensioners in Spain, Latvia and Cyprus are more likely to fall into poverty. In 2007, total savings were only £26.413 billion and the savings ratio was 2.9 per cent. The number of active members of pension schemes has fallen from 5.1 million to 3.3 million. Only 900,000 workers are in defined benefit schemes in the private sector. These schemes have closed not only to new members, but to existing employees as well. Workers have had to suffer a reduced income in retirement after being forced into DC schemes. State employees, though, have on the whole retained their DB schemes, resulting in much greater retirement income. No wonder jealousy abounds.

There are two reasons for this downgrading of private sector pensions. The main one is affordability—affected, obviously, by increased longevity. Firms have found that they have to put more into their pension schemes to maintain the status quo. Secondly, there is the effect on pension schemes of the Government’s decision to remove advance corporation tax in one fell swoop. This brought an extra £5 billion a year into the Treasury—£55 billion to date. I admit that not all of this was attributable to the investment income of pension schemes. However, the Government have never admitted that there was any effect on schemes, although the Pensions Policy Institute—it is very well thought of—believed the figure was between £2.5 billion and £3.5 billion a year. What prospective pensioner has gained from this? Have pensioners really benefited to the tune of £2.5 billion a year from, for example, the National Health Service?

The Government recognised, even in those early days, that one group of employees was not saving for a pension, so they invented stakeholder pensions, which we were told would be applied for by 4 million to 7 million employees. By May 2006, according to the Government’s White Paper, only 2.7 million of them had been sold. I do not believe that that is to be seen as a prognosis for this Bill, most of which covers personal accounts along the lines of the scheme envisaged by the noble Lord, Lord Turner of Ecchinswell, and his Pensions Commission. The Minister has revised the figures to the top end of the original figures; the first impact assessment that I saw referred to between 6 million and 9 million employees but the Minister mentioned 9 million employees alone in his speech.

However many employees are involved, the Government believe that they will have pensions savings for the first time because of auto-enrolment, by which workers have to make a positive decision to opt out, but not on day one. An added twist is that employees will pay into the scheme from their first pay date after day one and get their money back if they opt out. Knowing this Government, I assume that that will be without interest. Ministers in another place have stated that the decision to opt out must be taken within a month. This may be time enough if you are paid weekly, as you will be able to see the effect of the withdrawal of 4 per cent of your pay cheque on your household income, but what about those who are paid monthly? Will it not take more than one pay period to establish whether they are doing the right thing by remaining in a personal account? We will discuss that in Committee. I am glad to hear, though, that the Minister intends to amend the Bill to allow any firm to auto-enrol its employees into its existing workplace pension.

We will look, too, at the very curious drafting of the Bill, which, although it is all about personal accounts—or 90 per cent of it is, at least—does not even mention them until Clause 58, some half way through. The Minister could save himself an awful lot of trouble by telling me why that is so when he winds up, as well as why it is necessary to have quite so many regulation-making powers, which are as yet pretty opaque. I counted 11 of them in the first 28 clauses, which must be a record. I read the comments of your Lordships’ Delegated Powers and Regulatory Reform Committee with much interest, and I am interested to hear that the Minister is going to accept all its recommendations. Certainly, the Government’s response to that report did not give me that impression, so this is looking on the brighter side.

As for the scheme itself, the Government are rightly seeking to contract it out to the private sector, to be overseen by a board of trustees. On their own figures, 60 per cent of moderate to low earners, earning from £5,000 to £35,000 a year, are not saving for their retirement, so a low-level pension scheme is certainly needed. However, especially at the top end of the range—let us say from £20,000 to £35,000—personal accounts will be competing with existing schemes. There must therefore be a level playing field. It is of particular note that for personal accounts wages are counted as gross, whereas for any workplace pension that I have heard of they are counted as net. We will investigate that in Committee.

There is, too, a particular worry that firms will be tempted to downgrade their existing schemes to or near the basic minimum of 4 per cent from employees and 3 per cent from themselves. I am glad that government amendments are promised to stop employers inducing their employees to opt out. There are also concerns about the qualifying schemes, which, if you are a member of them, may absolve you from enrolling in personal accounts. Can a private pension scheme with no employer input, for example, be a qualifying scheme?

Many of the earners that we are talking about are likely to take career breaks, either voluntarily or involuntarily, in which case their contributions will cease. We will seek to change the Government’s mind on whether top-ups are to be allowed when people are back in work. After all, that is exactly what is allowed with state pensions.

On the subject of state pensions, I believe that in the dying days of last year’s Pensions Bill the Government behaved shabbily in persuading the noble Baroness, Lady Hollis, to withdraw her amendment on women being able to make up more contribution years than is allowable on the basis that they would review the position, giving the distinct impression that something could be done. The Minister was then forced to come to the House to say that the Government had reviewed the position and decided to make no change. I have no doubt that the issue will be raised again in our debates, and that the thorny issue of compulsory annuities at 75 will figure in our discussions.

There is also the tie-in between state pensions and personal accounts because of the date of increasing the former by earnings gross, which the Pensions Commission said was intrinsically entwined with personal accounts. Had my party won the last election, it would have already happened, but the Government have been very coy about the start date. Should not the change be made at the same time as personal accounts start in 2012?

I readily understand why it will take at least that long to prepare the ground, to arrange the contracting out, and for the pensions industry to prepare the individual funds from which to choose, which include a Sharia fund but I note no ethical fund. Nor indeed, apart from a default fund, has there been any announcement of other sorts of funds.

There is a balance to be struck here and we need to work it out in Committee, somewhere between caution at the beginning and things that employees will want to do with their contributions. However, the more funds there are, the more confusing the scheme will be for the employees it is aimed at. We believe that the KISS principle should apply. Is it, for instance, right that it is only after personal accounts are up and running for five years that a decision will be made about whether an employee’s extra funds can be put into the scheme or, indeed, small amounts of money taken out? That is almost 10 years away. That will not give confidence to many people, especially migrant workers, who are on the whole only in the United Kingdom for a short time before returning to their country of origin. Is Brussels turning a blind eye to this as it applies to EU citizens, or do they not know about it?

We also have concerns about the cost of personal accounts and when the scheme will be self-financing. To what extent will the start-up costs fail to be paid back by the trustees when it is up and running? As to the overall cost of the scheme, I hope that the Pensions Commission’s suggestion of 0.3 per cent a year can be adhered to. However, that cannot possibly cover advice to employees, which the noble Lord mentioned briefly, so who will provide this? We will certainly be looking at that in Committee.

My noble friend Lady Noakes in particular will be looking critically at the new trustee body and the length of time that the Personal Accounts Delivery Authority will survive after the former is set up.

Your Lordships will remember only too well the plight of the 125,000 pensioners whose firm had become broke, and the fact that the Government were forced by the ombudsman and the High Court to bring in the distinctly mean financial assistance scheme in 2004 by means of a clause in the Pensions Bill of that year, and only then at the last minute after the threat of a major rebellion by Back-Benchers. That clause was purely and simply an order-making power, a Henry VIII power. All the operative legislation on the FAS has so far been by affirmative instrument. These have included the much better terms and conditions that the Government were forced into yet again and which my noble friend Lord Taylor and the Minister debated the week before the Recess. It is always nice to welcome a reformed sinner, and I congratulate Ministers in the DWP on achieving them. No doubt a tremendous battle ensued with the dead hand of the Treasury, but they got there in the end to the great relief of a large number of people who believed their pensions to be safe and discovered that they were not.

I only mention this because I note that part of the Government’s most recent changes involved changes to the definitions of “qualifying member” and “qualifying pension scheme”, and those cannot be made by order, even an affirmative one, which is why we find them in this Bill.

It has become a part of the pensions arena that occasionally pension funds get bought by insurance companies and others, and that could be said to be a case of business models running ahead of the regulatory framework. Ministers have said that they intend to give the regulator draconian powers over this perfectly legitimate activity, which can be to the benefit of both existing and future pensioners, affording them more security. I do not know how far these plans are advanced or whether they are even intended for this Bill or some future one, perhaps next year’s welfare Bill. To allow pension schemes to be sold extraterritorially where there is no robust control by the regulator needs thinking about extremely carefully. I am also concerned that such powers are to be so draconian as to prevent perfectly reasonable sales and so throw the baby out with the bath water.

In some ways, one can liken this Bill to a train journey. We know the starting point—the Pensions Commission’s report. We know where we want to get to: the pension scheme for low-to-middle earners that does not exist at the moment. These are likely to work in small and medium-sized enterprises and there are concerns about the costs of personal accounts to them. Although we welcome the proposals to phase in personal accounts, this remains a worry. Continuing with my metaphor, the vague regulation powers are like scheduled stops in the middle of the night where you cannot read the station signs. Indeed, some of the stops are as yet unscheduled. We have to investigate a lot more before we arrive at our destination—which I am sure after several weeks we will.

My Lords, I declare an interest as a pension fund investment manager since 1976 and as an old lag on this Front Bench, too. I am leading on my third Pensions Bill since 2004. Once this Bill is law let us hope that for a year or two we can focus on implementation rather than legislation.

I start with consensus, as far as it goes. That is the Government’s buzzword for the Bill. We all want to reverse the spiral of decline in private pension provision over recent years. It must be a cause for real national concern, not a party political point, that good quality final salary pension schemes of the type I have been proud to manage for most of my working life are now limited to the public sector and the odd oil company and bank. In 1995, 5 million people were members of open defined benefit pension schemes. As the noble Lord, Lord Skelmersdale, said, today that figure is 900,000—a fall of five-sixths. We all want to see as many people as possible saving again for a pension as long as they keep the fruits of their saving when they retire and do not see it eaten away by the maggot of means-testing.

We must also fear for the future when family budgets are so savagely squeezed today. Two-fifths of households have negative monthly cash flows and nearly half of all credit card holders do not clear their debt each month. When hard-pressed families cannot find the cash for their gas bill or mortgage payment, they are sadly not going to spend a penny on a new pension. Debt destroys pensions saving today and it will cast its shadow over the whole “does it pay to save?” debate up to 2012 and beyond. Mike O’Brien, Minister for Pensions Reform, highlighted the problem just this week in the Financial Adviser. Referring to the 8 million or 9 million people expected to be auto-enrolled into personal accounts, he acknowledged that those with large debts, particularly with huge student loans, would not be best-served by personal accounts. He said:

“It is up to those with these large debts to decide whether they are best served servicing these debts or putting money into personal accounts. We cannot make decisions for people and it is up to them to inform themselves on the best financial choices”.

Well yes, but only up to a point. The 8 million or 9 million people on low and middle incomes being auto-enrolled into personal accounts—especially women who miss out so badly today—will ultimately have to make their own decisions. Yet they will need access to good quality, simple and generic advice on one of the biggest financial decisions of their lives in what will be for many uncharted financial waters. Saying it is up to them to inform themselves on the best financial choices if they have large debts sends the wrong message. Millions of people drowning in debt desperately need help. With the collapsing housing market, a mortgage famine and savage credit squeeze, the debt crisis will not be solved any time soon.

We have a cross-party consensus on the aims of pensions policy and the brave project of personal accounts at the heart of the Bill. In the cut and thrust of scrutiny and amendment as we improve the Bill, we on these Benches will always remember that a national pensions saving scheme, as we called it, was our idea. We will oppose any attempts to hobble it, pad it out or make the rules for personal accounts too restrictive. Like the People's Pension Coalition of Which?, Help the Aged, Age Concern, the TUC and the Commission for Equality and Human Rights, we want to make personal accounts as simple, accessible and cost-effective as possible—a real people's pension scheme.

Paul Myners and Tim Jones, the chairman and the chief executive of PADA, were very persuasive in the useful evidence session in Committee in the Commons when they urged Parliament to avoid the temptation to add bells and whistles to personal accounts. Everyone in the pensions world always condemns complexity, but then each of us seems to have our own pet scheme or qualification to add to whatever is proposed. My Bill team and I have had many fascinating meetings and read many useful submissions on the Bill from business, charities, academics and campaigning organisations. We will discuss their ideas at length in Committee and, I am sure, benefit from them. But the first question on my mind on any amendment on personal accounts will be: does this make the scheme simpler to operate and understand? Does it keep the costs down so that people of modest means saving for the first time for a pension get the biggest bang they possibly can for their buck?

The threat of “levelling down” posed by personal accounts is much exaggerated. It has been going on for years, well before personal accounts came in, and will continue quite independently. For perfectly understandable reasons, our highly sophisticated and profitable financial services industry has not been able to reach the 8 million or 9 million people who are the target market for personal accounts, as the abject failure of stakeholder pensions proved. Do not stop millions of people being “levelled up” from no private pension saving at all.

Personal accounts do not represent a serious commercial threat to existing pension providers. It just is not their market, however fond our memories might be—for those of us old enough to remember—of the man from the Pru in his bicycle clips pedalling from door to door. That just is not something they can do today. Some of our businesses and insurance companies should be careful not to be seen to be adopting a dog in the manger approach. Financial services firms also will benefit both from investment management fees on the tens or even hundreds of billions being invested in personal accounts and from massive additional annuity business when personal account holders retire.

So far so good; we are part of the consensus with the Government on making personal accounts work. But we will not be able to support much of the detail of the Bill in this place unless the Government face up far more honestly to the scale of the means-testing and generic advice problems and take action. The key problem on means-testing is still that our basic state pension is far too low—down, as the noble Lord, Lord Skelmersdale, pointed out, in the European relegation zone. Let me use another analogy. Britain’s rotten state pension is now worth less as a share of wages than when Clem Attlee was Prime Minister in 1950. We will move amendments in Committee to link pensions to earnings again, and we will be hoping—and hoping the Conservatives will come with us—to do that by 2010 at the latest, as the Turner commission proposed. We hope the Conservatives will back the link again, as they did in their last general election manifesto. Three million pensioners cannot wait until Labour’s last date of 2015, because they will be dead.

Far too many people—30 per cent to 40 per cent on the Department for Work and Pensions’ own estimates released yesterday—will see chunks of their savings eroded by losing means-tested benefits. That can lay the Government open to a charge of mass pensions mis-selling unless the groups at most risk are guaranteed access to high-quality face-to-face generic pensions and debt advice. We are most concerned, as are the Pensions Policy Institute and the People's Pension Coalition, about the highest risk group: people over 50 who are likely to be on housing benefit when they retire.

As the noble Lord, Lord Skelmersdale, made clear, the Conservatives care about means-testing too; of course they do. But unlike the Liberal Democrats they are not prepared to make a commitment to raise the basic state pension over two Parliaments so that pensioners then receive as of right the means-tested benefits they now have to apply for. As we know from the Department for Work and Pensions’ annual report, which has only just come out, it is clearly failing to get pension credit out even to its fairly modest targets, falling 800,000 short. That is just not working and not getting through. A simple citizens’ pension is the right and straightforward way to make sure people keep every pound they save. Meanwhile, let us at least try and carry the House with us on the principle that the earnings link will be restored as soon as possible, whichever party is in power.

My noble friend Lady Thomas of Winchester will call for a massive expansion of integrated debt and pensions advice, based on the uniquely trusted one-stop shop, the citizens advice bureau. How can it be the right advice for people to save for a pension with an expected long-term rate of return of 7 or 8 per cent if they are paying 17 per cent a year, which is the average rate of interest on unpaid, unsettled credit card bills, or 30, 40 or 50 per cent on other borrowing, as so many lower-income people are today?

The Government are clearly worried by the widely held and well-informed concern about whether it will pay for these high-risk groups to save. As the Minister has just said, they have set up a work programme for stakeholders which will report by the end of 2008. The Liberal Democrat and Conservative Front Benches have had an invitation, with an illustrious list of stakeholders in the pension debate, to a savings incentive seminar in the Duke of Wellington Hall on 11 June. I hope that DWP Ministers do not copy the example of the Duke who, when asked how his first Cabinet meeting had gone, said, “I gave them their orders but they all insisted on asking questions”. I am afraid I have a prior engagement with the Association of Mirror Pensioners—the innocent victims of pirate captain Maxwell—but I very much hope that our new DWP spokesperson in the Commons, Jenny Willott MP, will be able to go. Frankly, a report after the Bill has been passed is not good enough. We on these Benches warned James Purnell in his previous incarnation as a DWP Minister years ago that he had to take the advice gap more seriously and urgently. We are not prepared to buy a pig in a poke, even from him.

We will bring forward amendments to make it crystal clear to both buyers and sellers of annuities that the full range of options must be made available, including enhanced annuities. These used to be called impaired life annuities when they started but that had a rather ominous ring to it. This is for up to 40 per cent of people who might, for instance, have been smokers or had diabetes or cancer. Now you can get a better rate if you have an unhealthy postcode in Liverpool or Glasgow. As the Mail on Sunday and the Sunday Times have highlighted, only a quarter of people eligible currently buy these best-value products. More than half a million people retired in Britain last year and more than 400,000 bought annuities. They lost more than £1 billion in pensions altogether by not getting proper advice on their best-value annuity. That rip-off must stop.

There is consensus on the aims of pensions policy and on the direction of travel but not on the Government’s snail’s pace of reform and poverty of ambition. Let us give women and carers pension justice now, as this House demanded overwhelmingly under the excellent lead of the noble Baroness, Lady Hollis, last year, by letting them buy back more years to qualify for a full basic state pension. Let us protect those most at risk from wasting their hard-earned pension savings by rolling out face-to-face debt and pension advice in every constituency in the country. And let us set a firm date now, whichever party is in power, to end the shameful erosion of our basic state pension and link it to average earnings to turn back at last the tide of means testing. This House must send a bolder and clearer Bill back down the corridor after it has done its job over the summer and autumn.

My Lords, pensions are designed to deal with the low-income and longevity of old age by smoothing earnings from work to retirement and locking them away. We ask people to start saving early, to save enough, to do so regularly, and not to touch their savings for 40 years with the promise that it will be worth it in the end. Yet none of this makes much sense for many women. Pensions have been a poor fit for the risks and realities they face, which is why, outside the public sector, as both of the previous speakers have said, so few low-earning women have pensions. For pensions you need to start early, for example by 30, and pay regularly, but whereas men’s earnings peak at 42, and their pension payments with it, women’s peak around 29 and then fall off. If they have children, half of them stop paying into a pension whereas men carry on.

Do they pay in enough? Women are paid less, they often work part time or for small employers, they move jobs more often and they are exposed to risks that most men do not face, including lone parenthood and caring responsibilities. They therefore want savings that they can access in an emergency, not a pension that they cannot access. His income, for example, rises after divorce; hers falls. She may experience more financial pressure during her working life than at retirement, unlike him.

Over the years, the basic state pension has recognised this through HRP, carers’ credits and, in particular, last year’s excellent Bill, but occupational pensions have not, because they presume a full-time attachment to the labour market. Personal accounts are designed to be an occupational pension for the low paid, especially women. There are low rates, low charges, auto-enrolment, no small-firm exemptions and there is greater portability. They are contracted in and built on the platform of the BSP and the state second pension.

To what extent does the Bill rectify the shortcomings in conventional pension provision for women? To what extent is it a good fit, given women’s needs? To what extent will the Bill overcome poverty in retirement? To what extent will it encourage women to save and will saving be worth it? I apologise to the House—well, no, actually I do not—for putting up the gender filter in this way, because personal accounts very much have low-paid women in mind.

Auto-enrolment should encourage the early start of payments and research suggests that up to 70 per cent of women will continue to pay in, which is good news, and it should be worth it, which is very good news. If a woman on half median earnings, say £11,000 a year, saves for 30 years—not 40 years, but 30—in a personal account, I calculate that she should have a replacement income in retirement of some 85 per cent of her earnings, which is transforming. I congratulate my noble and right honourable friends in the DWP on such an achievement.

However, certain safeguards need to be in place to achieve that outcome. First, as both noble Lords on the Benches opposite have mentioned—for which I am grateful—there must be an opportunity for women to have a full basic state pension by having a right of buy-back for missing years when they have been looking after other people, children or the elderly, instead of themselves. This issue is not going away, as the noble Lord, Lord Skelmersdale, helpfully reminded the House. I hope that the Government will agree with that; if they do not, I shall again seek the support of the House on this issue.

The second safeguard is that with a broken work record a woman’s ability to save may be more lumpy than that of a man. Pension sharing on divorce may bring in a small sum, or she may receive a small inheritance following caring, which has taken her out of the labour market. So we need to add a modest lifetime cap in addition to the annual cap. Will my noble friend confirm that at the very least—I pick up a point made by the noble Lord, Lord Skelmersdale—women will be able to buy back not just current years in which they might be out of the labour market, but missing past years, which would then exceed their annual contribution, as with the BSP? Given that she changes jobs more frequently and may pile up several very small pots, she should, within limits, be allowed to transfer them into her personal account. We all accept that personal accounts should draw in new money, not recycled, existing money. We need greater flexibility regarding women’s capacity to contribute. The simplicity of a single pot with smaller pots going into it as a result of her job mobility would be a great gain and very attractive.

Another issue that we must explore, given that pension contributions to personal accounts, unlike WPPs, are made only on earnings above £5,000, is that a woman with two £6,000 jobs is very much worse off than a woman with one £12,000 job. I am confident that we can find a way through this issue in Committee.

Thirdly—this has already been mentioned by noble Lords—we must ensure that we spring the trap of means-tested benefits. Like everyone else, I am well aware of the downside of IRBs, especially the intractable housing benefit, although I understand that there is a government working party on this. Of course, now only a quarter of pensioners are not owner-occupiers and the number is reducing. I think we all understand that, unless need is targeted, benefits will be either too limited in their effect on the individual or, in an attempt to make them adequate but universal, too expensive for the community.

Men have more than twice the pension income of women. Pension credit is mostly claimed by and paid to single women—mainly elderly widows whose income has died with their husband. That is usually because his annuity is single-life, flat-rate and eroded by inflation. I know that there are technical difficulties with this but changing the rules on annuities might do more to keep widows off pension credit than changing the rules of pension credit. If not, unless and until women have their own pensions in their own right, widowhood will need the benefits and means-testing that stand between them and profound poverty.

The complaints about means-testing may be erroneous in another way. In future, any woman retiring with a full earnings-linked basic state pension and a full state second pension would have an income of around £145 in today’s terms—enough to float her off pension credit entirely. Therefore, the two state pensions added together would mean that at the point of retirement her income would be above the level of pension credit and she could enjoy and keep her personal account pound for pound. Full state pensions plus personal accounts, if paid in full, equal no means-testing at retirement.

A fourth way of avoiding the means-test trap is by trivial commutation, which at the moment is limited to some £16,000, or about £1,200 a year, and is fussy and fiddly to administer. I hope that the Government will consider raising it to, say, £25,000, doubling to 22 per cent the number of pensioners who are able to commute. Most pensioners live within their income but have a shortfall in capital for white goods, improved heating, the car, the roof or the walk-in bath/shower. Those things are especially necessary because, as pensioners grow frail, they need to adapt their homes if they are not to move into residential care, and that takes capital. Can we please have some joined-up thinking? After all, we can all turn capital into income if we wish but it is very difficult on a low income to turn income back into capital.

I should also like to see whether we can raise, or perhaps even align with commutation, the exempt capital in pension credit—currently £6,000—and related benefits. However, that would be costly. It would require £240,000 to raise it to £15,000 and £350,000 for a £25,000 disregard for PC and related benefits, but it would spring pensioners out of means-tested benefits and into relative comfort in retirement.

The next problem for women is that pension savings cannot be touched. That is fine for men; come children, divorce or frail parents, they continue to work and build a pension. Each of these life changes for women, however, may take them out of the full-time labour market, stop them saving and create a financial crisis. The product that many women say they want was proposed by the party opposite: a combined lifetime savings and pension accounts, or LISA. I have always been a fan of that. At the moment, we can put ISAs into pensions but we cannot put pensions back into ISAs. It is absurd that of the two pots of value that most people have—a house and a pension—it is easier to get money from the bricks than it is to get money from the money. LISAs were complicated and the American 401K scheme is probably far too loose, but perhaps I may suggest a way forward. On retirement, we all get 25 per cent of our pot tax-free. Subject to a de minimis—let us say that you must have £20,000 in your pension pot—and a ceiling of, say, £80,000 or £100,000 so that there would be no fancy footwork for school fees, why should you not draw down during your working life that tax-free sum, giving your pension a defined top slice of liquidity—a savings element? No tax adjustments would be necessary. We obviously want to keep personal accounts simple but today we can draw our tax-free lump sum at 50 or 55, so today it is detached from paying a pension. No principle would be breached but it might overcome that psychological hurdle that you have locked money away for 40 years, come whatever crisis.

Most women would not want it or need it, but knowing that they could access between £5,000 and £25,000 according to the size of their pot for divorce, disability, debt, risk of repossession before retirement instead of only at retirement, would allow women to overcome a major hurdle to pension savings—their belief that pensions are selfish because their money is locked away for 40 years when they may need it 10 years down the road, given the huge financial riskiness of many women’s lives compared to those of men. After all, pensions should reduce financial risk. As presently structured they can, for many women, add to it. I hope that we will pursue that avenue.

This all suggests that for some women the decision to opt out would be finely balanced, and I follow the noble Lord, Lord Oakeshott, who was absolutely right. As John Hills said, the calculation for any individual as to whether to opt in or opt out is really quite simple. All they need to know is their age, gender, present and future employment status and earnings, existing savings and future investment returns, existing pension rights, present and future housing tenure, future eligibility for mean-tested benefits, future assets from elderly relatives—and all these factors for their partners as well—together with an assessment of their health and that of great-aunt Ethel’s. But despite the complexity of risk, we can offer broad-brush group guidance, which is why sound financial information and advice is essential.

I declare an interest as a trustee of the Pensions Advisory Service and we hope to produce a traffic-light system offering high, medium and low-risk guides to people seeking advice. We must address this issue, otherwise the Government and employers, both, face a particular risk and charge of mis-selling.

I give a warm welcome to the Bill; profound gratitude to the noble Lord, Lord, Turner, for making it possible; and to the Government for making it happen. We still have issues to address, safety nets to insert and loopholes to close if women are fully and safely to gain from this Bill, but we look forward to its future progress.

My Lords, I warmly welcome the Bill, which will ensure big changes in retirement saving, making it worth while for many for whom previously this has not been the case—especially women—to have access to a decent private pension for the first time. I strongly support the noble Baroness, Lady Hollis, in the work that she has been doing to ensure the right for women to buy back up to nine years of insurance contributions. I cannot understand why the Government find it so difficult to introduce that change, and I hope that something will be done to get it right.

I also agree with the noble Lord, Lord Oakeshott, that our current state pension is still too low. If raised, it would deal with a lot of the problems of means-testing, and it needs to be relinked to earnings sooner than the Government plan for the obvious reason that a lot of the people about whom we are most worried will be dead by the time they would receive that benefit.

I welcome many aspects of the Bill, particularly the ones that I shall mention briefly, such as the broad definition of “jobholder” so that people with no formal contract can be included, and the personal accounts that are essential for jobholders who are not in current qualifying pension schemes. By ensuring automatic enrolment and compulsory employer contributions to personal accounts, people will be able to support themselves much better in the future. This automatic enrolment can combat the tendency not to act when faced with financial difficulties, which, sadly, as the noble Lord, Lord Oakeshott, said so eloquently, is a problem that many, particularly younger people, face at the moment.

The Government need to ensure that personal accounts are offered to low and middle-income people who want to save, regardless of whether they take breaks from work for short periods. Age Concern has pointed out that that is very important. I am also worried about non-employed people, some of whom are the carers on whom we depend so much for the care of the very frail people in our population. We must ensure that such people are able to join personal accounts because, as the Bill is currently drafted, they may be excluded unless they have previously been a member of a scheme. I hope that the Government will be able to do something about that.

I agree with the noble Baroness, Lady Hollis, about trivial commutation. We have a fast-ageing population and many people will live to be very old and very frail. They need capital, not just income, and we need to ensure that poorer pensioners have access to some capital if they are to achieve the essential changes to their homes which enable them to stay in them in some comfort.

The Commission for Equality and Human Rights, on which I serve, has pointed out that there may be some individuals for whom savings will not pay, as their savings in personal accounts or other savings products will serve merely to replace means-tested benefits, such as pension credit, housing benefit or council tax benefit to which they would have been entitled had they not saved. The Pensions Policy Institute has pointed out that dilemma and I hope that the Government will be able to solve it.

Another group that has been mentioned to me is people who change employers regularly. Each time they leave a job they are given the option of taking back their pension contributions. When they ask what their contributions have bought in the way of a pension, they find that the amount is so little that they do not think it is worth keeping the pension in place. If we are not careful, such people will have no private pension at all when they eventually retire. We need to consider that group.

Some young people, often those who are self-employed, have very high, even interest-only mortgage repayments and they are putting off paying into a pension scheme. They have been relying on increasing property values which are now falling very fast and the prediction is that 1 million people will face negative equity in the near future. The Government should consider what incentives or help they can give to that group.

A fully effective compliance regime is vital to ensure that no individual suffers detriment due to their employer failing to help them or attempting to coerce them into opting out of a scheme. We must ensure that that does not happen. There is an understandable concern in the pensions industry that some currently available and very sound pension schemes might be undermined because of the introduction of extremely flexible and low-cost products, which we know are essential. We need flexibility but the Government need to ensure that the mechanisms for levelling up do not result in levelling down elsewhere. I am sure that some of these points will be looked at in detail as the Bill goes through the House. We need to ensure that the Bill fulfils its potential to be of enormous benefit to our population as a whole. Lastly, I agree that information and advice services are essential, particularly for the target group of people for whom this Bill can do so much. We must get it right, as they need this Bill.

My Lords, I welcome the opportunity to participate in this Second Reading debate and thank the Minister for his detailed introduction to this complex and important Bill. As he said, it is the second part of the Government’s reform of the UK pension system and is based very largely on the report of the Pensions Commission, which was chaired by the noble Lord, Lord Turner of Ecchinswell. That took place against the problems caused by the disappearance of many final salary schemes and their replacement—if they were replaced at all—by money-purchase schemes offering less secure pension entitlement. Stakeholder pensions have not been successful, largely because employers only had to offer access and did not have to make payments to such schemes. People have not been saving enough for retirement, which is hardly surprising in view of the pressures upon those who have to struggle in middle life to pay the mortgage; pension provision is often the last thing they want to think about. Moreover, it has become clear that due to health improvements, which we should all welcome, people are living much longer, so we have an ageing population. The basic state pension does not provide enough to live on unless backed by means-tested benefits.

The Government’s new personal accounts scheme has therefore attracted wide support. It is aimed at moderate to low earners who do not have access to a workplace pension scheme, and it places a duty on employers automatically to enrol jobholders in a qualifying workplace scheme, including the simple, low-cost saving scheme: the personal accounts scheme. The Personal Accounts Delivery Authority has had its remit broadened to enable it to oversee the establishment of the personal accounts scheme. That is the main thrust of the Government's pension reform programme, although there is much more detail to be discussed later.

The main idea has been supported by consumer organisations, the main employer bodies, trade unions and the main political parties. That is important because major pension reforms are essentially long term and should not be undermined by possible future changes of Government. The noble Lord, Lord Skelmersdale, referred to past problems, and I agree with quite a lot of what he said. However, I remind him that Conservative Administrations have not always been very good about collective occupational pension provision. During the previous Conservative Administration, employees were encouraged to leave good schemes in favour of individual private pension provision and had to be compensated later for the resultant losses. I recall that well because at the time I was chair of the PIA Ombudsman Council, which had to deal with those claims.

We now have a scheme on which I hope there is wide agreement. However, there are some matters that I would like to raise. An issue that has been raised in the Commons and by a number of organisations is the interaction with the benefits system. Jobholders will have the right to opt out of the scheme. If it seems that individuals who do not pay their 4 per cent contribution reach retirement just as well off, via the benefits system, as those who have paid, there will be an incentive to opt out. It must be made very clear that saving pays. I understand that the Government are aware of this concern and currently have the issue under consideration.

Then there is the position of women, which has already been dealt with by the noble Baroness, Lady Hollis, in an interesting and moving speech. Most poor pensioners are women, usually because the state basic scheme is based on contributions and women often have an interrupted work pattern and so do not qualify for a full basic state pension. The Government took certain steps in the previous Bill to remedy that, but did not do so completely, so this House passed an amendment that allowed women to buy back pension rights for the years when they were not able to pay contributions. Unfortunately the Government did not put that into operation and have since declined to do so. The problem of large numbers of women in poverty in old age remains. It has been suggested by many of us that it will continue until the contributory entitlement requirement is changed to a requirement based on residence. The issue will continue to be raised.

Another concern, which I share, is that the new arrangements could result in a certain amount of levelling down. As the TUC has pointed out, the provision of a very good occupational pension scheme costs a great deal more than the minimum 3 per cent proposed for the personal accounts scheme. The Government should do everything possible to persuade those employers still providing final salary schemes to continue them. Where they have been discontinued in the private sector, it has been with direct opposition from the staff concerned, but where those staff have had the collective power and the will to oppose the disappearance of such schemes they have done so—sometimes with success. I applaud them for doing so; future employees will thank them. In the mean time, some employers may try levelling down their payments in a good system, in view of the much lower minimum provided for in the personal accounts scheme; they must be discouraged from doing so.

I am glad that the Government have chosen the term “jobholder” rather than “employee” to define those entitled to membership of the scheme. I assume that this would cover agency workers who would not, perhaps, be directly employed by the employer. It is important that such workers receive equality of treatment and I assume that that is the Government’s intention. It would appear that some self-employed people would be eligible, including carers, and I agree that every effort should be made to cover the whole workforce, no matter what kind of contractual arrangements they may have.

I understand that the PADA has already established a consumers’ panel. There is also to be a members’ panel, governed by trust law. How will that actually represent members or be established? What connection would it have with trustees? I take it that there would be member-elected trustees. It has already said that trustees will,

“not be the subject of undue liability in respect of their actions. They will retain an obligation to fulfil their fiduciary duties”,

and that the PADA,

“should be able to pay any legal costs that the trustees incur”.—[Official Report, Commons, 31/1/08; col. 311.]

I would welcome hearing the Minister’s explanation of how these various functions and representatives will interact. Trustees are important in ensuring good governance of schemes.

Finally, we cannot leave this general subject of pensions without referring to the plight of many present-day pensioners who will not be much affected by the reforms we are discussing. Many of them are women, as I have already indicated. Recent research conducted by Help the Aged indicated that 21 per cent of today’s pensioners, or 2.2 million, are living below the poverty line. Means-tested benefits remain the Government’s key policy for taking pensioners out of poverty. Year after year, the money is failing to reach those who need it most. It is said that some pensioners are too proud to claim benefits, but Help the Aged says that the majority are put off by the assumption that they will not be entitled to anything or by the complexities of the claims process.

Help the Aged is calling for three steps that it believes will substantially reduce the numbers living in poverty: the immediate introduction of the earnings link for the basic state pension; the payment of a full basic state pension to all pensioners; and the automatic payment of all means-tested benefit. It urges the Government to utilise the data that they already hold to make direct payments, so that older people can get the money without having to make a claim. The introduction of the earnings link to basic pensions was promised in the last Pensions Bill, but it was not to be until 2012. Even then, there seems to be a get-out clause in the reference to the then-existing fiscal situation. There is no reason why it should not be introduced now. Even so, the basic state pension is a great deal less than it would have been had the earnings link never been dropped by previous Governments.

If the Government’s case is still that that link would mean paying the increase to people who do not need it, the answer is that the Government can claim it back via the tax system. If they still contend that even that would mean some loss to the Treasury, it is a relatively small price to pay for restoring more money and dignity to around 2 million people. This issue was raised during the Commons debate and the Government have not really answered it, certainly not to the satisfaction of many current poorer pensioners.

There are many issues which will doubtless be raised in forthcoming sessions on this important Bill, but its main proposals are widely accepted and I hope that it can soon be put into operation.

My Lords, I am delighted to follow the noble Baroness, Lady Turner, who has a distinguished record in campaigning on these issues. I remind the House of my interests as the director of a life and pensions company and as a director of companies which provide workplace pension schemes.

The test for this legislation is not the impact it will have on interest groups but what it will do for future generations of pensioners. On those grounds, like others in the debate, I welcome the objectives set out in the report of the noble Lord, Lord Turner, and the legislation that has followed. The issues are in the details enacted in the Bill and I wish to raise a number of points in this debate to which I hope the Minister will be able to respond.

I wish to enlarge on some of the points that have been made about the impact of the Bill on existing workplace pension schemes. As everyone has said, it is important that these are not diluted. They have been an important part of savings in this country—and will be, it is to be hoped, in the future—and yet we have to accept the fact that most employers will not want to run two schemes side by side. Therefore, wherever possible, we must make it possible for them to meet the requirements of the personal accounts within their existing pension schemes rather than having the complications of running separate schemes and the interfaces between them.

The Bill has a number of deficiencies in this respect. First, on the qualifications for automatic enrolment—which, of course, is necessary in order for an existing scheme to fulfil the requirements of the personal accounts—the legislation as drafted has a narrow restriction on the occupational pension definition which qualifies for automatic enrolment. I know this is due in part to difficulties with the European Union distance marketing directive. The Minister alluded to the fact that amendments will be brought forward to deal with some of the issues, which I welcome, but it is important to recognise that not only do we need the legislation to allow existing stakeholder pensions, existing group personal pensions and existing group SIPPs to be eligible for automatic enrolment but also that we need to follow through and ensure that secondary legislation—for example, in regard to the SFA conduct of business rules and the legislation on unfair commercial practices—also aligns with the intent of the Bill.

We need to look at how the Government intend to provide that these personal pension schemes meet the requirement of employees not having to choose a fund, through a mechanism for a simple default fund, while still allowing personal schemes to encompass the wider choice that many existing members want. We need a great deal more clarity in the Bill in that area.

The second area of difficulty relates to the complex rules envisaged in the Bill on whether an existing scheme provides benefits equivalent to those that a personal account will provide. The legislation is drawn up on the basis of having to meet 8 per cent of qualifying earnings as the reference test. But “qualifying earnings”, as defined, excludes the first £5,035 of earnings but includes overtime, bonuses and commissions. That is completely different from the basis on which earnings on most personal pension accounts and employer contributions currently work. Trying to do such comparisons will create huge complications, particularly for firms with significant numbers of employees close to that threshold and where their earnings are of such a nature that they vary from week to week or from month to month. It will create a huge complexity which, I fear, will lead many employers to decide that it is easier to scrap their schemes and opt for the personal account.

Another complexity about which I am not clear and on which I would welcome guidance is whether employers can carry out the comparison once every calendar year and then make up any differences, or whether they will have to make the comparison on a monthly or weekly basis as they pay cheques and make pension contributions. If it is intended that payments should be made on a weekly or monthly basis it would add enormously to the complexity and make it extremely difficult for this to be a workable proposition. I should like the Government to clarify that and, if necessary, amend the legislation to make clear that this can be done on a calendar-year basis.

The difficulty here is not just the complexity for the employers but the fact that if employers scrap these schemes, the employee may end up worse off as a result. For example, an employer may be contributing 7 per cent to 9 per cent on their own to an existing scheme. If they opt to scrap that and go over to a personal account where the overall contribution is 8 per cent of qualifying earnings, they can drop their own contribution to 3 per cent and require the individual to make up the difference by contributing 4 per cent. The amount of contribution from the employer can be significantly reduced if they decide to scrap a scheme and go to the personal accounts system.

The third area of complication with workplace schemes is the point about targeting, which the Minister mentioned. I was glad to hear him reinforce the idea that targeting is important to limit the scope of where personal accounts compete with existing provision. I was also glad to hear him repeat the commitment that there should be an annual cap of £3,600, but I note that that is not in the Bill. There is a question about whether that number should be in the Bill, as some other numbers are. In addition to that cap, Clause 61, as I read it, also lays open that there may be additional payments into the scheme on top of that annual cap, which may or may not be capped by order. That obviously leaves open the option that they may not be capped. I understand the point made by the noble Baroness, Lady Hollis, that we would want to ensure that there was provision for people who had missed payments to make those up. If that is the intent of the clause, that could be made much clearer in the Bill. If it leaves open the possibility of unlimited payments being made into personal accounts, it opens up a huge area of uncertainty about what their role is relative to existing providers.

There is the issue of costs. We want a level playing field between this provider and existing providers. If the costs are truly lower then that benefit should be passed on to consumers, but the Bill contains provision for financial subsidies from the Government to the Pensions Authority. It should be clear that those subsidies, if provided at all, should be limited to the start-up costs. There is the question of whether they ought to be paid back over time, but there should be no question that there could be ongoing subsidies that would lead to a distorted competitive position where in effect we were subsidising one provider against another.

There is the issue of the fines that can be imposed on employers who do not adequately meet the tests of whether their provision is better than personal accounts. As I read it, these fines can be imposed without any necessary preconditions having been met. I should have thought there was a case—although I may have misunderstood this—that there should at least have been a compliance notice given to the employer that it had ignored before there was any question of fines. So there are a number of areas where we need to be clear about exactly what the terms of competition are and how we can ensure we are not damaging existing workplace schemes by taking advantage of them to meet these objectives.

My second major area of concern is the interaction with benefit schemes and personal debts and the advice requirements around that. There must be, as others have said, a significant risk that for many people who either are low-paid or have large debts, or both, personal accounts will represent a poor—or indeed negative—return relative to other uses they can make of their income. Another complication is raised in the interaction with the savings gateway that was introduced in the Budget, which we need to work though as well. It is not yet clear in the guidance notes.

I should be grateful if, at some point early in the debate, the Minister was able to give us some data on the income levels below which the Government currently believe there is an issue of people falling into the benefit trap if they have not saved enough to get themselves above the means-tested benefit, and on how many people, in rough terms, the Government estimate will be in the position where, particularly taking account of debt, they may be taking out a product that is not the best one for them to enrol in, as a result of auto-enrolment. We need some estimate of those numbers in order to gauge what we should do about that.

Following that, we have to take a view on how important it is for people to be made aware of that, and whether the generic advice that the Government are proposing can be adequate to deal with individuals’ detailed questions when they may be ill-equipped to come to their own conclusions. If we want to avoid these becoming big issues, some of the solutions are, as others have said, expensive. One is to raise the basic state pension so that, over time, and as rapidly as possible, means-testing disappears. That clearly has merit. A second option is to concede that money from these pension schemes will not be off-set against means-tested benefits, so that people know that a pound saved will be a pound that they will benefit from in retirement. Both of those options are clearly expensive.

There is a third possibility, which the Government might like to consider alongside those, and which the House might consider. This particularly concerns avoiding advice complexities. We do not want to get into a situation where the cost of advice outweighs potential savings and benefits to the individual or one where the advice burden falls unequally between the pensions authority and private pension providers. It is important that advice can be given, on equal terms, to anyone, whether they are auto-enrolling in a personal pension or auto-enrolling in a personal account. One of the ways to simplify the advice system would be to set out the principle that means-tested benefits in retirement are not entitlements, but discretionary social support for those in need. It would be possible for the Government, in a sense, to take a moral view, and say that means-tested benefits should be disregarded and that individuals should be encouraged to make provision for themselves, with advice given on the basis that that is what they intended to do. Means-tested benefits would then be there as a support mechanism for those who failed to do that, but not as an entitlement that people take into account in deciding whether they should make their own provision. That would be a significant shift in attitude, but it may be worth considering.

There are a number of difficulties with the Bill. There are a number of traps and a lot of detail that need to be worked through as the Bill is debated. It is incumbent on us to take the time and care to make sure that we get it right before the Bill leaves the House.

My Lords, I join other noble Lords in welcoming this important Bill. I am pleased that the Government have accepted the Pensions Commission’s proposal in regard to the national pension savings scheme. I rather suspect that the areas of this Bill where we may disagree with the Government could be those where they have chosen to disregard recommendations from the Pensions Commission. We will see.

Three key areas have attracted a lot of attention. First, there are personal accounts. We have to be careful that we are not in danger of thinking that one size fits all and that this will work well for everyone. I am not sure that it will. Secondly, there is the compulsory employer contribution, which I very much welcome. Thirdly, there is the automatic enrolment in pension schemes. This Bill will be good for many people, but there will be those who are left behind and left out of the improvements in retirement that this Bill will bring for many. With increasing longevity, pensions are of growing importance to many more people in our community. When the state pension was introduced, it was worth approximately 25 per cent of the average wage. I remember being part of the Carnegie inquiry into the third age in the early 1990s. The pension was then worth about 17 per cent of the average wage. Today, it is worth about 13 per cent. How much longer do we have to go on before we see the state pension being worth very little? This Bill will help stop that happening and will certainly help many people.

As I read the Bill, I wondered how much progress we had made. The Bill provides for a 3 per cent compulsory contribution from the employer, 1 per cent through a tax provision from the Government and 4 per cent from the employee. I have always been brought up to believe that the employer pays as a minimum the same as the employee. A reasonable employer pays one and a half times and a good employer twice what an employee pays. The Bill represents a very clear statement of just how much we have gone backwards in pension provision in the UK from what we have had within most occupational pension schemes during the past two decades.

I referred to numbers being left out. I join my noble friend Lady Hollis in concentrating particularly on low-income people, the majority of whom are women. The baseline of £5,035 before one is covered by the personal accounts will be extremely detrimental to women, large numbers of whom have more than one job. All of those jobs are low paid, yet the Bill provides no opportunity to bring them together.

When we discussed this matter during the passage of the previous Pensions Bill in 2007, the Minister said that,

“the Government will commit to looking at the range of options in the coming weeks, including the option to buy additional years”.—[Official Report, 24/7/07; col. 695.]

He did not refer to having multiple jobs. Subsequently, on 17 December, the Minister said that the Government had looked at the matter and that nothing was going to change. The inability of the Bill to provide women with that option to buy extra years—“lost years” would be a better description—linked with the baseline of £5,035, which will preclude many women from being able to contribute to a pension because their earnings cannot be brought together, will prevent substantial numbers being able to provide for a pension in their retirement. As the Bill is so important, we have to get it right here and now. I regret if my opinion differs from that of my own Government, but pensions are so important that you cannot just put them right next year by passing a statutory instrument or further legislation. We have the opportunity to get this right now and we should do so.

We have to be careful that the low paid do not fall into a trap because of the possible impact of personal accounts on some benefits. Pension credit, for example, has a £5 disregard, but it has been at that level for some years. Is this not an opportunity to deal with that issue now? The possible impact on housing and council tax benefit means that people could believe that, by saving in personal accounts, they could be better off, but when they retire, they will be poorer in net terms. That is where advice is important. We have to make sure that the Act is fit for purpose without causing too many unintended consequences.

Older women in particular may have a problem with the transitional arrangements. The Bill is good for young people and people in their 30s and 40s, but a whole group of people—women in particular—will never feel the benefits of the Bill. A number of us on this side of the House—and I hope that noble Lords on the other side of the House will join us—will propose amendments intended to mitigate some of the exclusions in the Bill for that group of women, both by enabling them to buy extra years and by looking at the lower paid who have more than one job. My noble friend Lady Hollis referred to someone on £12,000 per year being in a much better position than someone who does two jobs each paying £6,000 per year. That cannot be right and we have to deal with that.

I welcome very much the extension of the powers of the pensions regulator, particularly in appointing trustees to pension schemes that are in trouble. All too often, those issues are dealt with when it is almost too late to do something substantial about the scheme. If we could do something earlier, it would certainly help.

I think that the noble Lord, Lord Oakeshott, talked about giving knowledge and information. This is very important. All too often, people are frightened of going to a qualified financial adviser and there is nothing in between. There are citizens advice bureaux, but many people do not feel that they can get advice there. We need to make sure that when this Bill passes, there are provisions for information to be given to people based on their individual cases, because one size does not fit all. That is absolutely essential and it needs money behind it. We cannot expect citizens advice bureaux or other organisations to give advice without being properly funded. They have to be properly funded to be independent, and an independent view is absolutely critical. We should remember the pensions scandals of the past, such as the mis-selling of pensions, when the previous Conservative Government gave people lump sum enhancements to come out of their occupational schemes into money purchase schemes, which led to the mis-selling of many pensions. We do not want a repeat of that, so information is absolutely essential. I do not regard it as a soft option under the Pensions Bill—it is part of the central core. I look forward to the debates that we will have. No doubt the Minister will feel uncomfortable from time to time. However, I hope that he will listen and I hope that he will show flexibility, because the Bill as it stands is not the answer for too many people, most of whom are low-paid women.

My Lords, I rise to reinforce what the noble Baroness, Lady Dean, said about the importance of a high level of disregard. Unless the disregard is set fairly high, a great many people will ask, when they retire, “Why did I bother?”. I and others know of hard-working couples who have saved all their lives and have a pension, who live in a council house, pay their council tax and pay full rent. Next door are people who have not saved a penny, who get their council tax and rent paid and who go on holiday to the south of France, whereas the couple I know cannot afford to. We have to be careful not to penalise savings—whether for pensions or general savings—and it is vital that a disregard is set sufficiently high to encourage people to save and not be penalised when they retire. I am sorry for intervening at this point.

My Lords, like other noble Lords who have spoken, I am glad to welcome, in principle, this next step in the Government’s legislation for pensions. It follows logically from the Pensions Act 2007 and helps to meet a number of concerns raised by my noble friend Lord Turner in his report. As the Minister said, it is intended to create a retirement savings framework that no longer excludes those on low incomes, or those with erratic earnings, and which establishes a framework for savings that far better reflects the increasingly flexible and changeable world of work. Almost no one today has the same employer from the moment they start work to the moment they retire. That gives you a tiny flavour of how fast everybody moves in and out of jobs, even if they are working full time, as they gain more experience and move on to the next thing. But, above all, I hope that this Bill will make it possible for the less well-off, and particularly carers, whether of children, the ill or the aged, to make maximum retirement savings from their inevitably interrupted job opportunities throughout their working lives. As we all know, the majority of carers are women, and it is women who also form the majority of pensioners living in poverty.

A vital question that Which? and others stress in their excellent briefings on the Bill is whether carers will be able to join personal accounts and on what terms—and in particular, if they deem themselves self-employed but unpaid, whether they are eligible. That was a point raised by my noble friend Lady Greengross. If this crucial group is really to be excluded from the benefits of this important retirement scheme, it simply beggars belief, and we must clearly go back and look harder at that area.

We know that already there are nearly 5 million UK citizens aged 75 and over, and this number will increase by more than two-thirds in the next 25 years. Unsurprisingly, against that background, we are all being encouraged to work and pay taxes and national insurance well beyond today's statutory retirement age, which is anyhow due before long to rise dramatically—and, I emphasise, for both sexes. We know, too, that the state of citizens’ finances today is not good, for all the reasons mentioned by other noble Lords. However, equally, as we heard during Question Time earlier, any form of further and higher education, except for a very few, costs a lot. That has to be paid for. That is something that my generation, thankfully, did not have to pay for; we had that ability for free and could start our savings from that point.

It is surely sensible, therefore, against that relentless background, to give individual citizens in low-income groups every kind of encouragement to save now, via this limited and means-tested scheme, and particularly those who are currently saving the nation huge sums by their caring responsibilities. Amendments to this Bill to clarify the whole situation will be essential, unless the Minister can reassure the House on this point.

It is obviously good news that the employers’ federation, the CBI, is firmly behind the principle of auto-enrolment. I take the point of the noble Baroness, Lady Dean, and have some sympathy with it, when she talks about rather more coming from the individual than from the employer. But that percentage will be able to be paid either to the new personal accounts scheme or to a qualifying workplace pension. It is clearly good news, too, as I think I have understood it, that auto-enrolment is agreed as lawful under EU law. I hope that I am right about that, because I do not think that I have heard many people mention it. But equally, the CBI's emphasis on minimising other costs, reducing bureaucracy and increasing flexibility—and, incidentally, maximum flexibility seems a vital ingredient for all the parties that briefed us—is also right. So, too, is the need, which again the CBI emphasises, for the Government to put in place a targeted support package for the very smallest firms, because some of them will be badly hit.

There is also clearly a need for stronger powers for the pensions regulators, not least to judge the quality of proposed schemes. That was emphasised by the unions and the third sector. There is a need, too, for expert advice on choice of schemes to be available to employees from outside their own employing companies. Above all, there is a welcome determination by everyone involved to ensure that savers get a fair deal, with emphasis on the theme “it pays to save”. One of the suggested amendments from Which?, that certainly makes sense to me, is to include among PADA principles a duty,

“to act in the best interests of prospective members”.

There are clearly many hours of debate ahead of us as the Bill goes through its various stages. Apart from general support, I am particularly glad to welcome it for two quite different reasons, but, above all, for the opportunities it provides to return to the attack on these other fronts. The first of these has already had full support from noble Lords on all sides of the House, as well as very determined lobbying from Which?, Age Concern and, indeed, the People’s Pensions Coalition and the women's pension network. I refer, of course, to the superbly argued amendment of the noble Baroness, Lady Hollis, during the passage of the previous Pensions Bill, which would have allowed people with interrupted work patterns, mostly of course women who have had caring responsibilities, to buy back up to nine years of national insurance contributions and thus improve their state pension.

For the Government, with their otherwise excellent record on support for equal opportunities, not to have followed through the clear hint that was given at the time that this amendment would be accepted was nothing short of disgraceful. This time, unless the Government have realised the error of their ways, it is clear that they will have an even more determined fight on their hands.

Alas, I cannot say that I expect my second additional reason for welcoming the Bill to receive quite the same universal support. I refer, of course, to the current unequal treatment of men and women in pension annuities. But if I fail again, do not expect me to give up the battle—if I am still around—when the next pensions Bill presents itself.

I shall make the case as briefly as possible. If equal treatment for men and women is to have any substance, it should surely apply to that portion of an individual's earned retirement pension which the Government rightly require each individual to take as an annuity. That is not the present position; on the contrary. Although a man and a woman will have equally contributed to identical retirement pensions, the annuity sum paid annually to the women is currently less than that paid to the man because of a presumed longer life expectancy, and even that, until last year, has been closing. It is that difference in the annuity payable that is really unacceptable.

The suggestion is not that the insurance industry should bear the cost of correcting that inequality, but that the cost of the differentials involved should be spread evenly between men and women. In order to help the state cope with the considerably higher costs of the longer life expectancy that I and other noble Lords have mentioned, anticipated for both sexes, men and women are rightly being required to move towards a higher, but ultimately the same, statutory retirement age—a hike of considerably more years for women than for men. But still they will receive unequal annuity payments. Surely, it is high time to get rid of this unjustifiable sex discrimination.

My Lords, this is an entirely sensible and necessary Bill. As such, I warmly welcome it. There is just one respect where an opportunity has been missed and where the Bill could be strengthened. That concerns socially responsible investment and how it will relate to the new personal pensions plans being drawn up under the Bill. I hope that my noble friend will be able to deal with this when he replies.

In the United Kingdom and beyond—both domestically and internationally—great attention is being devoted to socially responsible investment. Almost every major institutional investor and international organisation has had to consider the promotion of good governance, sustainable development, human rights protection and climate change. This is in response to rapid growth in transnational corporate activity and recent scandals. Many companies of course have extensive operations around the world.

Sadly all too often we hear of how some corporate operations have involved environmental degradation, human rights violations and social instability. Our laws do not govern corporate activity abroad, so corporations are not prevented from exploiting volatile conditions to maximise profit. To their considerable credit, many institutional investors would certainly prefer not to invest in corporations that profit from human misery. Yet there is considerable confusion in the investment community about the extent to which investors can take human rights and environmental, social and governance issues into account when taking investment decisions. There is surely a great opportunity for the Bill, which is designed to create one of the largest pension funds in Britain and by extension a powerful institutional investor, to give an imaginative lead in clarifying the legal position.

For this opportunity to be seized, two amendments are necessary. First, institutional investors, charged with investing funds under the new personal pension plan scheme, should be required under Clause 10 to sign up to the United Nations principles on responsible investment—UNPRI, as they are known for short. The UN principles were drawn up as a toolkit for investors to use when considering environmental, social and governance issues—ESG—in their investment decisions. The principles are not prescriptive. They are voluntary and aspirational and do not dictate what should be invested in or where and when specific action is necessary.

Secondly, institutional investors charged with investing funds under the new personal pension plan scheme should be able to disinvest from or not invest in companies which can be seen from credible information available to the public to have links to crimes against humanity, war crimes or genocide as defined in the Rome statute of the International Criminal Court and adopted into English law by the International Criminal Court Act 2001.

The UNPRI have already been debated extensively in the Commons both in Committee and on Report, where the Government’s objections to their inclusion boiled down essentially to concerns of cost and simplicity, financial returns for investors and the need for the Personal Accounts Delivery Authority—PADA—to be as free as possible to draw up its own policy on socially responsible investment. Most reasonable people agree that the public pension scheme should be as clear and simple as possible on the costs, system and choices available under the scheme. Signing up to the UN principles would not be contrary to that aim. The evidence suggests that the costs of doing so are relatively insignificant, involving the employment of a quite small number of staff to examine the environmental, social and governance issues that arise and perhaps a subscription to research services. They are also proportionate, considering the good returns that can be achieved with ethical investment.

Rather than damaging the rate of return for investors, paying attention to ESG issues in investment decision-making can improve returns. Last year, the Co-operative Society’s ethically invested fund was the best performing fund in the United Kingdom all-company sector. Mainstream investment can, by contrast, make catastrophic mistakes, as we have sadly seen in the cases of Enron or WorldCom. These mistakes might well have been avoided had there been greater scrutiny of the corporate governance of those companies.

It has been widely acknowledged that there will be a default fund, and a limited number of alternative funds, administered under this scheme. One of these would, it seems, be administered under Sharia law. If that is permissible, why not also have one administered under the UN principles with regard to international human rights law? In the other place the Government apparently suggested, by implication at least, that ethical investment based on religious belief is more important than ethical investment on a non-religious basis. Surely that must be highly questionable.

Moreover, SRI is entirely consistent with government policy in other areas, including sustainable development, particularly related to Africa; protection of human rights domestically and internationally; and tackling climate change. Surely it is counterproductive for the Government to try to address those other issues while they defend the right of their public pension scheme to invest in companies that make these problems more acute.

The Government have said that they do not consider PADA, the pension scheme, to be the appropriate body to be covered by the UN principles and that this should be the responsibility of the trustee board itself, once it is appointed. However, between now and 2012 PADA will be the authority that will draw up the whole basis on which personal accounts are to be administered. Surely there should be a clear commitment to SRI from the beginning. I reiterate that the UN principles are not prescriptive and are merely a toolkit for investors to use in the decision-making process.

The business case has already persuaded many asset owners and managers, with approximately $10 trillion of assets under management, to become signatories to the UN principles. Currently, the UK Pension Protection Fund, the French Fonds de Réserve pour les Retraites and the New Zealand Superannuation Fund are all signatories to the principles. All are large national schemes. It is clear to me that there is a heavy responsibility for the Government to take a similar lead with what will eventually be the UK's largest pension fund, especially given that some UK pension funds and a number of major UK asset managers are already signatories.

The safe-harbour amendment, as with the UNPRI amendment, is permissive rather than prescriptive. It protects investors from legal action in the event that they choose to disinvest from companies with links to disturbing breaches of international human rights law, crimes against humanity, war crimes and genocide, as defined in the Rome statute of the International Criminal Court. I need hardly draw the House's attention to the vital necessity to protect and promote human rights worldwide and to the increasingly critical attention given to corporations working in developing countries which do not have regard for international human rights law in their operations. Crimes against humanity, war crimes and genocide can be among the most horrendous breaches of international human rights law. I believe that it is necessary to make it legal for trustees and investors to exercise their judgment in these narrowly defined areas of international criminal law.

The Government have repeatedly expressed their commitment to promoting and protecting human rights worldwide. For example, the Prime Minister has described Darfur as,

“one the greatest humanitarian disasters of our time”.

Yet as the Aegis Trust—which has been doing so much focused work on Sudan, and to which I am very grateful for its help in preparing for this debate—has stressed, western investors, including those in the United Kingdom, continue to invest in corporations working in Sudan which do not benefit ordinary Sudanese civilians, which demonstrate no corporate social responsibility regarding the Darfur crisis, and which continue to provide the Sudanese Government with revenue that can then be used to carry out their policy of ethnic cleansing in Darfur. Surely, as the Aegis Trust and others argue, if the Government are truly committed to the ending of the crisis in Darfur, they should want to ensure that UK investment is not fuelling that crisis.

Such an amendment would encourage and reward good business practice in relation to breaches of human rights, particularly in developing countries, and thus protect the most vulnerable people in these societies. It would also help to clarify an area of socially responsible investment that is currently unclear, namely whether and when disinvestment is appropriate and permissible. Some experts have argued that modern portfolio theory makes disinvestment permissible. However, trustees and investors remain nervous because of the uncertainty over the applicability of old case law to modern investment practices.

The Government have suggested that the burden of the cost—which I have already argued would be minimal and proportionate—would fall on the poorest in our society. I hope that this amendment would achieve the protection of the most vulnerable people in the world, who are subject to the worst human rights violations. The vital security of our own pensioners in retirement—and I take second place to nobody in my commitment to how vital that is and believe I have shown that it will still be protected—should surely never come at the expense of the world’s most vulnerable, deprived and abused people. I hope my noble friend and his colleagues in government will look favourably at what I propose.

My Lords, I shall make a brief contribution. I apologise for going out for a meeting at 4.30 pm.

I think this will be seen historically as a red letter day. It has taken a great many years to put together the work of the Pensions Commission under the distinguished chairmanship of the noble Lord, Lord Turner, who is not in his place. He has done a remarkable job alongside his other public work on climate change and for the Financial Services Authority. These issues have one thing in common—they require action to be taken in this generation for events 20 or 30 years hence. It is not easy to get this generation to take ownership of those responsibilities, particularly, as people have pointed out, when there is a credit crunch. Some people may say that this is the worst possible time to get people to pay 4 per cent more. I would say that this moment of truth for intergenerational responsibilities has to be taken on the chin, certainly in terms of the price of carbon and living on tick—for example, thinking that if you withdraw equity from your house, £100,000 will appear out of nowhere. These are obvious fallacies of the financial services industry, which have created a climate of mistrust that presents us with an even more difficult jigsaw puzzle than would have been the case otherwise.

One thing that shines through all of this is compulsory saving, like Lord Keynes’s post-war credits, which is guaranteed to have a return in the economy. Whatever people say about big government, that is what people are going to trust at the end of the day. So if there is trust and confidence and as long as the economy can develop, both main parties and the Liberal Party would say that that has to represent some sort of consensus and presumption. Without being too awkward, I shall pick up what is perhaps a debating point made by the noble Lord, Lord Skelmersdale. Surely the very fact that it is difficult to sell a product satisfactorily to people with limited resources means that things will be difficult for those people. However, if you look at the analysis made by the noble Lord, Lord Turner, this is one of the ingredients as to why we have arrived at this solution. I hope that this consensus will continue.

The noble Baroness, Lady Noakes, will, no doubt, comment on the degree to which consensus remains. I very much hope that it still stands between all the parties, although I am beginning to be a bit nervous about it. The degree of consensus may not be quite as strong as one might have hoped, because after the noble Lord, Lord Skelmersdale, mentioned consensus, he spent the next five minutes saying “but” a lot. Perhaps the noble Baroness, Lady Noakes, can tell us whether there is still a consensus between the TUC, the CBI, Help the Aged and everyone else, including the Engineering Employers’ Federation, which is not normally known for being soft on workers’ rights and collective bargaining.

My Lords, before the noble Lord leaves that point, does he accept that in virtually all the briefings that we have received, there have been questions of detail that are so disparate that they can hardly add up to a consensus?

No, my Lords, I do not agree with that formulation. Nearly all the briefings have said that we have a robust consensus within which particular issues have to be sorted out. To make my point, I shall provide a couple of examples of issues raised by the TUC within its very robust support for the Bill. The first relates to the compliance regime. The TUC states:

“An effective compliance regime for the reforms and provisions to ensure the opt-out is not abused by employers are vital”.

Therefore, employers must,

“pay their contributions in full and workers participate as widely as possible”.

Secondly, they must not,

“attempt to influence their staff to opt out of personal accounts (or their own schemes where they provide an alternative qualifying pension scheme) … Most employers will co-operate fully with the new system, but it is likely that a minority will fail to fulfil their responsibilities”.

The TUC says that it needs strong sanctions,

“to ensure that employer non-compliance is regarded as a very serious breach of employment regulations”.

It says that the trade unions,

“recognise that there was a debate in Government about which agency should be the compliance and enforcement body for personal accounts and other existing good-quality employer provided pensions”.

The TUC thinks that the right decision was made and that the role should be fulfilled by the Pensions Regulator. However, the briefing continues:

“We look for reassurance that TPR understands that this is a major change in its role. Up to now it has largely been dealing with stable large and medium sized employers responsible enough to establish a pension scheme, with the occasional issue caused by a relatively small number of employers. Its new role will mean that it has to deal with a hugely increased number of employers, many of them small and perhaps less organised, and some seeking to evade their responsibilities”.

The TUC says that it is therefore very important that the TPR is given a step upwards in its resource and in its ability and competences to access all the data that it needs from other government agencies, such as HMRC, and that it shares data in return. It is also important that it has effective enforcement powers.

My other example where there has been robust support for the Bill concerns the debate about the appropriateness of auto-enrolment. The TUC says that it recognises that there are some groups of people for whom saving would not be appropriate or others where there is a risk that they will not benefit from saving. This is not, however, a new issue and it is not specific to the introduction of personal accounts. It says that the language of mis-selling has been used by some opponents of the whole system, but genuine mis-selling has been conducted by companies which were fined for selling inferior products to members of good defined-benefit schemes. Although access to good information and guidance is essential in helping people to plan for their retirement and make decisions about saving, it is not possible to eliminate risk from the system unless either all means-tested benefits are replaced by universal benefits or all pension payments are disregarded in the means-testing. That could happen only if public spending on benefits were massively increased or big cuts were made in benefits. Sometimes these conditions are not spelt out.

The TUC also says that in addition, all calculations that try to assess winners and losers are based on the current means-testing regime, maintaining not only its current structure but also its current level of benefits for many years ahead. This is not something that history suggests is very likely. Critics also undervalue the benefit that savers may see in building up their own pot rather than relying on the uncertainty of future benefits; nor do they take into account the extra tax credits that many lower-paid pension savers will get, as their pension contributions will lower the income used to calculate their tax credits.

Finally, there is always a danger of mixing Second Reading speeches and Committee speeches. In Committee, people often say, “You’re making a Second Reading speech”, and today one might think that noble Lords have made Committee speeches. With this Bill, it is particularly difficult to make a Second Reading speech without making a Committee speech at the same time. However, in juxtaposing Second Reading and Committee speeches, we should not forget that there is tremendously strong support for the architecture underlying the Bill. That has been a remarkable achievement over the past 10 years; I remember that we were talking about the architecture right at the beginning of the Labour Government. Therefore, when we start to look at Committee points, can we please recognise the historic step that we are taking today?

My Lords, this has been a debate of very high quality—not surprisingly, given the number of experts on all Benches around the House. My noble friend Lord Oakeshott pointed out that seven Peers of each sex have taken part in the debate. He reckons that such sex equality is always welcome when discussing a pensions Bill.

The Bill has been given a general welcome, for which the Government must be relieved, although it will not necessarily have an easy passage, as many amendments have been signalled. The Bill was published late last year when there were relatively few signs of economic slowdown, but that is changing and the economic climate is certainly getting chillier, as my noble friend Lord Oakeshott and the noble Lord, Lord Lea of Crondall, pointed out. Who knows what the state of the economy will be in 2012, but the Government must be aware that research done for the Bill among stakeholders may already be somewhat out of date.

The Bill was, of course, foreshadowed during last year’s proceedings on the first Pensions Bill, now Act, from the Pensions Commission, and there is broad consensus—although I am nervous about using that word—on the main principles of the Bill, if not on a lot of the detail, as this debate has reflected.

The Pensions Policy Institute has produced useful research, including a stock-take of key stakeholders’ views on the main principle of auto-enrolment, which revealed 22 out of 24 organisations in favour. The figure of 90 per cent take-up of auto-enrolment where it exists, compared to 56 per cent where it does not exist, is telling. However, the PPI’s figures also show that not everyone will benefit from a personal account, which has been reflected in all the speeches we have heard today—even those to whom the Bill is aimed; namely, low to median earners. We have heard, too, of the groups at the highest risk of personal accounts being unsuitable. They are probably single people likely to be renting in retirement and having no additional savings. They could fail to qualify for means-tested housing benefit if they have just enough savings in a personal account. The other “at risk” groups singled out by the PPI are in a different category, as they would not be auto-enrolled. They are middle-aged single people on low to median incomes without significant savings who are self-employed.

The whole question of the way in which personal accounts will interact with means-tested benefits is one of great uncertainty. We have only just received—yesterday—the department’s projections about this interaction, which I am sure will repay close study. As we all know, the benefits system is extraordinarily complicated, and in 2012, unless the system is simplified, there could be not only a great deal of confusion about whether someone on low to median earnings would be better off opting out of auto-enrolment, but some accusations of pensions mis-selling, as we have already heard. Even the department acknowledges the difficulty of forecasting in this field. It says:

“Estimating the extent of entitlement to different combinations of income-related benefits and how these will evolve over time is a complex task”.

We welcome the Government’s commitment to review the interaction of personal accounts with means-tested benefits and urge them to take appropriate action to ameliorate the situation. One step, of course, towards simplifying the benefits system would be the restoration of the link with earnings being brought forward, as the noble Baronesses, Lady Greengross and Lady Turner, said. What better celebration of the centenary of the introduction of the state pension by a Liberal Government, led by Lloyd George, could we have than an announcement that the link with earnings was to be restored by 2010?

This brings me on to the matter of generic financial advice and information and why it is vital for a really good system to be in place by 2012. This has been borne in on me very much recently because I have been carrying out my own highly unscientific survey on attitudes about occupational pensions among people I meet. There is tremendous ignorance around the whole subject of pensions. Not only is there ignorance; there is a curious unwillingness to want to know, as though by finding out what pension provision we can expect, we are hastening old age and retirement, and even death. So many people are deliberately putting their hands over their ears. That is why auto-enrolment is so important. But there is also the other side of the employment coin, and the attitudes of small employers to auto-enrolment, even with its phasing in. It will, after all, place an extra burden on companies employing, say, 15 to 25 people, or even fewer.

Let us take the scenario of a small firm in the building trade employing 15 people, including a few migrant workers, in a small rural town. I was told that it is very rare for employees in the building trade to have any occupational pension provision. Will this firm encourage its employees to become self-employed? There are those who have criticised the 3 per cent employer contribution figure as inadequate—particularly the noble Baroness, Lady Dean—but to a small employer, and after all they are the life blood of rural employment throughout the country, any higher contribution, coupled with the extra paperwork involved, may be the straw that breaks the camel’s back, so a balance has to be struck.

Some people with no existing pension provision are relying on bricks and mortar, as the noble Baroness, Lady Greengross, has mentioned, with the thought at the back of their minds that they can downsize eventually, using the resulting savings in lieu of an occupational pension. And then there are the people who are up to their necks in debt and who are just concerned to get through the next week, let alone the next 30 or 40 years, as the noble Baroness, Lady Hollis, has said. For those people, even 4 per cent of their earnings going towards pension provision will be a burden that they are unable to carry.

High quality generic advice—and ideally personalised advice—is just what all these people need, so I look forward to the Government's detailed plans about how this will be provided. I dread the thought that it may come about with a push-button telephone system: “Welcome to the Government's pensions advice service. Press 1 for information about auto-enrolment; press 2 for auto re-enrolment; press 3 for trivial commutation limits; then perhaps press 4 to make an appointment with a sympathetic psychiatrist”. There must be a really user-friendly free telephone system, using plain English, with enough lines available, especially just before the scheme is due to start in 2012.

As far as face-to-face advice is concerned, I have spoken before about the invaluable service provided by citizens advice bureaux up and down the country. I believe that the Government should fund enough advisers so that every CAB can have trained specialists to deal with the many people who will want to know whether it is right for them to enrol in a personal account, as well as giving advice on all the other benefits to which they are entitled.

This brings me to the question of the amendment which was overwhelmingly won in this House during the passage of the last Pensions Bill, but overturned in the other place, allowing mostly women to buy back missing years of pension contributions in what has become known as the “Baroness Hollis amendment”. I would like to raise a parallel point to this because the noble Baroness, Lady Hollis, gave such a virtuoso performance that I do not think her arguments need repeating. My honourable friend in another place, Professor Steve Webb, MP, has been doing some private enterprise on the matter of women being able to buy back contributions—on this occasion in relation to those whom the Government are allowing to do this, owing to the inadequacy of government computer systems between 1996 and 2002.

Extraordinarily, the Government seem not to be contacting these women to tell them that they are eligible, even though they hold all the national insurance records needed. Neither do these women need to find a few thousand pounds up front to pay for their missing years. The Government are allowing them to offset the amount they owe against the money they will receive in the form of cash and a better pension. My honourable friend has even had offers of marriage, so delighted were these women to be contacted by him. He has called on the Government, as I do now, to contact these people officially to tell them about their entitlement, and to extend this system of offsetting to the group of mainly women they did write to in 2004-05 about gaps in their national insurance records, but who have not yet responded. Time is running out for this group, and the Government have all the records they need to contact these people again before it is too late. This time, they should suggest offsetting and they will almost certainly get a good response.

This has been a stimulating debate and a good many issues in the Bill have been discussed: auto-enrolment in group pension plans, the impact of the Bill on existing pension provision, annual contribution limits and transfers, and, most importantly, the way the scheme is to be run. In the weeks to come, we on these Benches will play our part in helping to make this welcome Bill even better.

My Lords, I agree with the noble Baroness, Lady Thomas, that we have had a high-quality debate this afternoon. That is our custom when this elite band of noble Lords who have an interest in pensions matters gathers together for yet another Pensions Bill. My noble friend Lord Skelmersdale rightly reminded us that it has been on this Government’s watch that defined benefit provision has been decimated, and the Bill does nothing about that. Instead, it deals with the different, but important, issue of those with no or inadequate pensions savings and paves the way for the new system of personal accounts. My noble friend’s tour d’horizon included our concerns about aspects of the Bill that reinforce incentives for employers to level down. I know that when faced with the prospect of rewriting existing schemes and payroll programs to comply with the hurdles set out in the Bill, finance directors will be all too ready to lead their businesses towards the easy life of the Government’s personal accounts scheme with its relatively low employer contribution of 3 per cent. We will press the Minister very hard on removing those aspects of the Bill that positively encourage levelling down.

Running through the Bill is a lack of clarity about the important issues that will arise as automatic enrolment and the personal accounts system are rolled out. There is a broad consensus behind the ideas that underpin the scheme put forward in the Bill, but I say to the noble Lord, Lord Lea of Crondall, that it may not be robust in the face of the details because, as ever, the devil is in the detail. My noble friend Lord Skelmersdale has already indicated our position on that.

During the passage of the Bill, we shall try to get as much detail as possible from the Government, preferably put on the face of the Bill, but there is a balance to be achieved between the concerns of employers and the aspirations of other interest groups. While there is a broad consensus on the underlying concepts, there is no consensus on the details of implementation, and we should not pretend otherwise because we will be fooling ourselves. As is common with pensions legislation, much detail is left to later rafts of regulations. If we give the Government the huge powers that the Bill creates—and that is a big “if”—we shall want to see the powers counterbalanced by further parliamentary involvement. In this context, I welcome what the Minister said about accepting the recommendations of the Delegated Powers Committee.

Let me outline some of the lack of clarity in the Bill that concerns us. We do not know what the Bill will cost. We know little about the costs of PADA and even less about the costs of the new personal accounts pension scheme and the compliance regime. We do not know how the costs will be recovered and what costs the Government intend to subsidise. The Minister will be aware of the strong opposition from the pensions industry to the unlevel playing field that soft loans or grants for personal accounts would entail. We do not know whether the personal accounts scheme will be up and running in 2012. We all hope so, but Mr Tim Jones, the chief executive of PADA, has conspicuously failed to commit to delivery by 2012. If there is any possibility of personal accounts being delayed, we shall want to look at the options for encouraging pensions saving in the interim.

Similarly, we are in the dark about the commencement of earnings uprating of state pensions in line with last year’s Pensions Act, the earliest date for which is 2012. We will need to look at how the Bill can be strengthened on this, but I fear that we shall disappoint the noble Lord, Lord Oakeshott, on whether that should be accelerated to 2010. We do not know how the Government intend to avoid future mis-selling problems due, inter alia, to the impact of means-testing, which has grown massively in scale and complexity in the past 10 years. Most noble Lords have raised this issue today. My noble friend Lord Blackwell asked the Minister some pertinent questions on this area, and I hope he will be equipped by his officials to answer those questions when he winds up.

The Government have set up a review—at long last—and have invited the various lobby groups inside that tent, which seems to have bought them off pro tem, but there is no certainty that the review will produce anything other than words. We cannot allow the Bill to go forward unless it reflects that auto-enrolment should not proceed if the pay-to-save issue is not resolved. An obvious link to that is advice for employees on opting-out, on which a number of noble Lords have spoken. We should be clear that the Thoresen Review of Generic Financial Advice and its pilot schemes do not deal with the decisions that this Bill will introduce; Mr Thoresen himself does not claim that. I am not clear whether the giving of generic advice in any form will ever deal satisfactorily with the issues raised, or whether the noble Baroness’s traffic lights via the Pensions Advisory Service would be acceptable. We are in something of an evidence-free zone here. If the Government are not worried about that then we certainly are, and want to look further at it.

Perhaps the biggest unknown is the economic environment that will surround personal accounts when they are eventually introduced, as the noble Baroness, Lady Thomas, has pointed out. Will employers be under extreme cost pressures as the result of high inflation and low or even, possibly, negative growth? That will of course increase the pressures for levelling down. Will employees be able to afford to pay 4 per cent of their wages into a pension scheme, or will they just opt out? I think I can tell the Minister with some confidence that if personal accounts were introduced this year on top of the 10p tax debacle, the opt-out rate would be high. Lower-paid workers simply could not afford it on top of rising tax burdens and rising inflation.

When mentioning lower-paid workers I should flag an issue that I have discussed with the Minister’s officials. The personal accounts scheme has been sold on the basis of 8 per cent going into those accounts—that is, 3 per cent from employers, 4 per cent from employees and 1 per cent from the taxman. In fact it is not that simple as, while the scheme appears to have a nice symmetry at the point where the basic rate of tax kicks in, some groups of low-paid workers have additional tax reliefs. In addition, those who work for less than a complete tax year, which is probably most likely to affect women coming in and out of employment, will need a special arrangement if they are to avoid paying 5 per cent and missing out on that 1 per cent tax relief. We will be probing that with the Minister in Committee.

Returning to the economic environment, that is much less benign than when the noble Lord, Lord Turner, issued his Pensions Commission’s report, or when the Government issued their White Papers. The Minister is, doubtless, thinking that it will not be his problem in 2012: we certainly hope that the electorate will have passed their final verdict on the current Government by then. We will be subjecting this Bill to the most rigorous scrutiny to ensure that the best does not drive out the good. We must avoid gold-plating. It may be hard enough to get the personal accounts system to take off and to be well received in an economic environment that is not as fortunate as it has been in the past; we must not make that job harder when implementation dates arrive. The Government have recently increased their estimates of the year-one and ongoing costs to employers, especially those to micro-employers to whom these costs are a big concern, but they still look low. We will look critically at the many complexities in the Bill and ask whether they will really help the scheme succeed, or just add cost—especially for small businesses.

The Bill paves the way for personal accounts to be introduced via a special pension scheme. We have concerns about the trustee corporation that will run that scheme, which will be a government quango—credible only if it is independent of the Government. We will need to probe whether the balance between independence and government interference is the right one. For us, the involvement of Parliament is more important than work opportunities for civil servants. There are other detailed aspects of the trustee corporation and the pension scheme that we will need to probe in Committee.

We will also be looking at the changes being made to the Personal Accounts Delivery Authority. We welcome the addition of principles to which PADA must work and we shall work to improve them. We will also look at why similar principles are not also appropriate to the trustee corporation.

A specific issue which we intend to pursue in Committee is that, as my noble friend Lord Skelmersdale reminded us, on this Government’s watch our pensions’ landscape has been transformed and defined benefit schemes outside the public sector are now open to relatively few employees. As has been pointed out, the figure is now around 900,000 as compared with 5 million in the mid-1990s. If defined benefit provision is to stabilise, the rules need to be more flexible.

The Minister will be aware of the proposals put forward by the Association of Consulting Actuaries to tackle the rigidity of the current indexation requirements. The conditional indexation approach used in the Netherlands does not provide all the flexibility that would make employers—and in particular their finance directors—feel warm about defined benefit provision, but if conditional indexation helped just one defined benefit scheme to stay in existence, albeit on a modified basis, that would be worth while and we intend to table amendments to that effect.

A dog which has not barked in the debate is compulsory annuitisation at 75. We will be returning to this issue in Committee. On annuities generally, the comments of the noble Lord, Lord Oakeshott, about choice at the time of annuitisation were interesting and we look forward to seeing whether robust amendments can, in practice, deal with this issue.

A dog which has barked loud and clear today is the issue of women’s pensions. We on these Benches fully understand and sympathise with the issues that have been raised, most notably, of course, by the noble Baroness, Lady Hollis, who works so tirelessly in this area. But we have to bear in mind that many of the issues have cost tags attached to them. In addition, some of the amendments to the personal accounts scheme that people want will add complexity—and therefore costs—to that scheme. These are difficult areas but we look forward to returning to them in Committee with an open mind.

We support the aim of greater workplace pension provision that the Government are seeking to achieve but, as I have said, that support is not unconditional as to the detail. The Minister should by now be on notice that we on these Benches look forward to a detailed and comprehensive scrutiny of the Bill when the Committee of the Whole House commences.

My Lords, this has been a fascinating debate and I genuinely look forward to Committee stage, even though some of it is going to be a bit tough. Given the range of points that have been raised, I shall eschew my formal text and try to deal with as many points as I can. Those that I cannot cover will, I am sure, recur in Committee. I should say to the noble Lord, Lord Skelmersdale, that I am pleased that we are starting the train journey together and hope that we will complete it together.

The noble Lord asked about the positioning of personal accounts in the framework of the Bill. The absolute cornerstone of the Bill is auto-enrolment, not only for personal accounts but for a range of provisions. That is why we have started it off and it is right to do so. The noble Lord and the noble Baroness, Lady Noakes, challenged the issue of implementation. The first act of the incoming chief executive, Tim Jones, was to review the delivery plans and a summary of that review has been placed in the Library. This work confirms the achievability of a 2012 launch for the personal accounts scheme. Not surprisingly, at this stage some of the factors that will influence progress are uncertain—not least the passage of this legislation—and we will need to monitor carefully the delivery assumptions that we have made. That said, 2012 is our intention and we believe that it can be delivered.

I will not dwell for long on the issue, but I cannot let the challenge go without responding on issues around dividend tax credits and this Government’s record on pensions. The abolition of payable dividend tax credits was part of a wider package of measures designed to improve the long-term investment climate in the UK. I would be interested to know at some stage when these matters are raised whether in fact it is Conservative policy to reverse that position and increase the rate of corporation tax. We all know that the wider effects on pension schemes were caused by a stock market fall due to the dotcom crash when there was a £210 billion fall in the market value. We know that many firms took contribution holidays in the 1980s and 1990s—on the Conservatives’ watch, I may say—believing bullish equity markets to be a long-term trend. There were also rapid increases in life expectancy.

I should also say that the current level of tax relief for pension funds is estimated to be around £17.5 billion in 2008-09. It is this Government who have sought to rebuild faith in pensions. We put in place the Pension Protection Fund, we have proactively protected pension scheme members through the Pensions Regulator and delivered a just settlement on the FAS, as well as setting up the Turner commission and all the good stuff that has flowed from that.

My noble friend Lord Judd, with particular passion, and the noble Lord, Lord Skelmersdale, raised the issue of ethical investment. I repeat what my honourable friend Mike O’Brien said at a national ethical investment reception last week: it is only if institutions and others embrace the concept of good governance and ethical investment that our economy can thrive and that our legacy to future generations will be a positive one. Economic success cannot be regarded as in conflict with social and environmental goals. He said that ethical investment and effective governance of investment decisions attracted much debate in the other place, which it did, and that there is also wide-ranging consumer support for an ethical choice to be included in the personal accounts scheme. Such investment decisions are, quite rightly, the responsibility of the scheme trustee, but we recognise the importance of good governance and socially responsible investment. I am pleased to see that the Personal Accounts Delivery Authority will be consulting on these matters in the autumn. I say to my noble friends that I am not aware that the Government have objected to this at any stage; indeed, our position has been that it is for the trustees to decide because this is an independent scheme. I hope that the consultation on this matter will lead to the appropriate conclusion, which we would all support.

A number of noble Lords—the noble Lords, Lord Skelmersdale and Lord Oakeshott, and my noble friend Lady Turner—raised the issue of levelling down. As I said in my opening remarks, our reforms are designed to complement, not replace, existing employer provision. There is a range of issues, which I identified, that support that. Our research shows that most employers with good schemes support our reforms, and the majority, particularly the larger employers, plan to maintain their schemes at current levels. We are not complacent about the issue, however, and we will continue to track employers’ attitudes and likely reactions to the reforms as we move towards 2012.

My Lords, I have a detailed question on that. When the department goes out to do its research, does it talk to finance directors or does it avoid that source? My understanding is that finance directors are much more sceptical about the costs of ongoing pension provision and are more likely to pull in the other direction.

My Lords, my understanding is that the department contacts a range of people. I am happy to write to the noble Baroness about the specifics of the research behind that particular comment.

A number of noble Lords, and perhaps I should thank them, raised the issue of voluntary national insurance contributions. I should perhaps express even greater thanks to those who did not raise it. I understand that it is a matter of great concern. The Government have acknowledged the inequity in the system. It is not fair to say that we have simply walked away and reneged on our commitments; a lot of work has been focused in this area. In particular, we have looked at a range of options on the basis of the criteria that we set before Parliament—fairness, affordability and simplicity—but we have not yet identified an option that is well targeted at those women about whom I know my noble friend and others are most concerned. We need to be mindful that buyback does not help people who are heading for pension credit or the one-third of women retiring before 2010, numbering some 250,000, who paid reduced-rate contributions. We should also keep in mind that the opportunities under existing buyback rules enable more than 90 per cent of women reaching state pension age after 2014 to buy back enough contributions for full basic state pension under current arrangements, and that will rise to 95 per cent by the end of that decade.

My Lords, I am glad to hear that there is so much work going on. Does the Minister expect, as a result of this, to be able to bring forward government amendments on this issue in Committee, or will we have to do it for him?

My Lords, I can only say that that work will continue; we will have to see where it leads and over what time-scale.

The noble Lords, Lord Skelmersdale and Lord Blackwell, and the noble Baroness, Lady Noakes, raised the issue of the funding of the scheme. Our shared aim is for personal accounts to deliver low charges and to be self-financing in the long term. Any funding arrangements should not unfairly advantage the scheme; we are very clear about that. We will not know the costs of delivery until PADA has completed the design and begun to engage with private sector suppliers. It is vital that we do not rule out at this stage any options that may later prove to be in members’ interests. Obviously, due to commercial sensitivities, we are currently unable to make public much of this work.

A number of noble Lords raised the issue of uprating the basic state pension. I say to my noble friend Lady Turner that there is no get-out in the Government’s position. Earnings uprating will happen; it is enshrined in law. We did that last year. We will do this in the next Parliament. Our aim is re-link the 2012 sum to affordability and the fiscal position.

The noble Lord, Lord Oakeshott, proposed that we should double the basic state pension. The annual cost of that would be something like £150 billion per year in real terms in 2050, the equivalent of 15 pence on the basic rate of tax. Citizens’ pensions now would cost something like £10 billion to £20 billion per year, if that were brought in immediately. It is almost impossible for Governments to eliminate means-testing without huge cost; even doubling the level of the basic state pension from 2012 would leave one-quarter of pensioner households entitled to an income-related benefit by 2015. It is simply not that straightforward.

The noble Lord, Lord Oakeshott, said that he would test amendments according to whether they over-complicate personal accounts or make them more expensive. That is a good yardstick; I think that was the sentiment expressed by the noble Baroness, Lady Noakes. The noble Lord made reference to the scale of means-testing and yesterday’s DWP release. He also said that people need to be helped to buy the most suitable type of annuity. We agree that it is important for people to have the information they need to make an informed decision on annuity purchase. That was a key feature of the Government’s review of the open-market option for buying annuities, on which we reported last autumn.

A number of noble Lords raised issues around generic advice, individual choices to save and the need for good-quality advice. We recognise that individuals who are auto-enrolled will need access to relevant and accurate information, but we do not believe that they will routinely need extensive advice, particularly because of the employer contribution. There is no requirement now that people who join a pension scheme should receive advice. Auto-enrolment, as it exists at the moment, does not introduce any new factors into the decision. As for the Thoresen review on money guidance, the national money guidance service recommended by the review and the Government’s action plan on financial capability will also assess the need to add to the services on offer, as well as those referred to by other noble Lords.

Savings incentives, raised by the noble Lord, Lord Oakeshott, and my noble friend Lady Turner, are not a new issue. A new issue is not created by this Bill. We need to keep this issue in perspective. Under reasonable assumptions, the majority of those who are enrolled can expect to benefit from having saved. Our reforms will significantly reduce the level of means-testing, and the basic state pension will be worth more than double what it otherwise would be, ensuring a solid platform for saving. Measures in the Bill will further improve incentives to save. Existing policies ensure that those who save can benefit. The savings credit permits pound-for-pound claw-back. Twenty-five per cent of the pension pot can be taken as a tax-free lump sum. Those with very small pots may be able to take the whole of their pot as a lump sum. I am conscious of issues raised by my noble friend and others about perhaps changing or improving those rules.

My noble friend Lady Hollis, as ever, raised many challenging issues. I look forward to our debates on them in Committee, but I shall respond to one or two points straightaway. She asked whether personal account schemes should allow for some pre-retirement liquidity. The personal account scheme will be a tax-registered pension scheme. Pension saving in the UK is privileged through the tax system. The Treasury rules are quite clear: tax relief on pension saving is not provided to support pre-retirement income, asset accumulation or inheritance. The expansion of access to pre-retirement pension saving would need to be across all UK pension schemes and products and not just personal accounts to avoid severe market distortion. We are aware of little evidence that such allowance would support increased engagement in pension saving.

My noble friend asked whether women will be able to transfer in small pots. When reforms are introduced, there will be a ban on transfers in and out of personal accounts and a contribution cap. These measures are designed to protect the existing pensions industry. However, there will be a review of them in 2017 when the reforms have bedded in. It is clear that the desire of some individuals to consolidate their pension saving will be an important consideration in that review.

My noble friend further asked whether we would allow a lifetime sum so that women can top up their saving. We have not put the amount of the contribution limit in the Bill, because we want to allow the annual contribution limit to operate flexibly. The wide enabling powers will allow for the higher contribution limit in the first year of the scheme’s operation and for a lifetime lump-sum contribution to run alongside the annual contribution limit. We need to consider whether to introduce this additional complexity when the scheme is introduced or wait for the review of the contribution limit in 2017.

The noble Baroness, Lady Greengross, touched on voluntary national insurance contributions, but also asked, as did the noble Baroness, Lady Howe, how carers can access the scheme. Anyone who joins the personal accounts scheme will be able to continue to save in their personal account even after they leave the workplace or move to an employer that does not offer personal accounts. With the passage of time, job churn, especially among women and carers with fragmented working lives, will mean that a growing proportion of the working-age population will have personal accounts.

My noble friend Lady Turner spoke about the need for a strong consensus and to take a long-term view, which was a very important point. She asked whether the term “job-holder” would include agency workers. I am pleased to say that it does: there is specific provision in the Bill for that.

My noble friend asked about a range of issues around trustees and governance. Like any other trust-based scheme, the personal accounts scheme will be run by a trustee body with an overriding duty to act in the best interests of scheme members. Trustees will be appointed by open competition, in line with the arrangements for any other public appointments. There will also be a members’ panel to represent members’ views and interests, which will, among broader duties, support the nomination of member-nominated trustees, who will make up at least one-third of the members of the trust.

The noble Lord, Lord Blackwell, challenged me with a range of very interesting but pertinent points, with some of which I shall try to deal now. He asked about the interaction between the savings gateway and personal accounts. The Government provide tax incentives for shorter-term savings such as through ISAs. The savings gateway is a cash-saving account for those on lower incomes. Following the success of the pilots in promoting saving and financial inclusion, it was announced in this year’s Budget that the savings gateway will be introduced nationally. Savings gateway and the personal account scheme provide complementary vehicles for shorter- and longer-term savings.

The noble Lord asked about qualifying earnings and whether we will allow annual calculation of contributions. We accept that existing schemes use different definitions. However, it is the amount saved into pensions that counts, not the method of calculation. Employers, payroll providers and scheme representatives recognise that the calculation and checking of contributions will be automated in the vast majority of cases. However, we recognise the concern in this area and we are committed to working with stakeholders to ensure that the duties are communicated to employers as simply as possible.

The noble Lord also asked whether Clause 61 introduces a limit on the amount that can be saved in a personal account. The answer is yes, we will introduce a contribution limit of £3,600 a year with the scheme, uprated by earnings—that is at 2005 prices. He asked whether government subsidies will be limited to start-up costs. The Government have made clear that there will be no unfair subsidy for the personal accounts scheme. Our intention is that all costs, including start-up costs, will be met from members’ charges over the long term.

The noble Lord also asked whether compliance notices could be used to encourage employers to comply. There will be a graduated approach to enforcement, from initial reminders to notices and penalties, and there will be opportunities to appeal against the imposition of any financial penalty. I hope that the noble Lord will forgive me if I do not respond in detail to his other points now. I am sure that we will have another chance to discuss them in Committee.

My noble friend Lady Dean spoke with huge commitment on the issue of lower paid workers and asked whether those with multiple part-time jobs would be disadvantaged. We recognise the issue of individuals with multiple jobs but the solutions most frequently suggested by stakeholders—for example, the aggregation of earnings—would have to be compulsory for everyone. That could have perverse consequences in increasing costs for all employers for the benefit of a few people. It is not immediately obvious how the employer contribution could be calculated easily—no mechanism currently exists. Would multi-employers share the cost of the employer contribution? How would that be done? Which employer would take responsibility for contributing to the pension scheme? I hope that my noble friend will see some of the complexities. We know that there are around 400,000 individuals with multiple jobs providing a combined income of more than £5,000 who are not currently contributing to a private pension scheme. Of these 400,000 people, around 300,000 earn more than £5,000 a year from at least one of their jobs. Around 60,000 people earn more than £5,000 a year from each of their jobs. Around 30,000 individuals aged between 22 and 64 earn less than £5,000 a year from each job and women hold 80 per cent of those jobs.

The noble Baroness, Lady Howe, spoke about equal treatment in pension annuities. I am sure that we will debate this matter again in Committee, but I cannot promise a different government view from last time. She asked whether a carer could opt in to the personal allowance scheme as a self-employed worker. It is difficult to see how a carer in these circumstances would be treated as self-employed. However, any carer with a personal account could continue to save in it, even when they were no longer in work.

My noble friend Lord Lea spoke strongly in support of the Bill, and I appreciate that. He stressed the importance of the long term and trying to seek consensus, and the importance of the employment protections in the Bill, to which we will add by way of amendment. The noble Baroness, Lady Thomas, gave a broad welcome to the Bill, but with some challenges. I appreciate her strong support for auto-enrolment, which is a fundamental part of the Bill. She asked about costs for small employers. We have sought to help by phasing in contributions. I was interested in her vision of telephony.

On the subject of deficiency notices and Mr Steve Webb, the DWP ran a special exercise and we contacted more than 400,000 people, at a cost of £33 million. In the light of discussions with Steve Webb, we are taking another look at a further 73,000 women whom we did not previously contact but who could benefit for a period before they became entitled to a married woman’s pension.

The noble Baroness, Lady Noakes, said that she would try to get as much detail into the Bill as possible. I understand the thrust of that remark, but I am sure she will appreciate that much of the detail has yet to be worked out and, indeed, cannot be worked out until we pass this Bill and give PADA the authority and powers that we want it to have. The government review around Pays to Save is not buying off people; it is there for a proper purpose, and I am sure that it will deliver.

The noble Baroness raised some challenging points about lower-paid workers and how the tax system would work. I think that we might leave that to Committee, as it will be an interesting debate.

On risk sharing, we want good employer pension provision to continue and we want to explore all means of achieving that. However, we do not think that there is a magic bullet and we need to balance the benefits to employers with protection for employees. My honourable friend Mike O’Brien announced during Committee in the Commons that we will issue a consultation paper on risk sharing in June and consult through a 12-week period.

The Bill addresses the real issues that this country faces, including major demographic change and lack of saving to pay for it; confidence in the pension system; the move away from final salary schemes; and pensioner poverty. We recognise those problems and are making one of the biggest changes on pensions in 100 years. We are reforming for the long term. We have an opportunity for a new confidence in UK pensions and there is no better time than now. If we can achieve these measures by 2015 we will see a step change in saving, with up to 9 million people saving more or for the first time, with total pension contributions increasing by up to £10 billion. This is a multi billion pound opportunity for the pensions industry and a massive opportunity to transform the savings habits among millions of people in this country.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

rose to move, To resolve that this House calls on Her Majesty’s Government to revoke the regulations laid before the House on 10 March (SI 2008/646).

The noble Lord said: My Lords, one or two words of explanation are probably called for on why I am moving this Motion. I would not be called one of the usual suspects in this House when discussing equine activities, but I happened to be in the right place at the wrong time to get myself involved in this. A good start is living in Lambourn, which, to those who do not know it, is to jump-racing what Newmarket is to flat-racing. I happen to have a wife who rides and a child who has a pony, and they happen to have a farrier, one Pete Baker, who is an influential member of the United Kingdom Horse Shoers Union. He asked my wife for advice, as she works for an MP in the House of Commons, and then about what should be done in this place. A conversation ensued—and then I realised that there was something in what he said, something of concern that should be addressed.

The basic concern, before we go into detail, is that farriery in this country is regulated by an Act that goes back to 1975. It sets out certain criteria by which this practice can take place and a legal framework that guarantees—as closely as possible; let us not overhype any qualification in this context—or gives a degree of certainty at least that the person undertaking that activity knows what they are doing, no more, no less. Members on these Benches are not usually the ones who cry against European regulations as a matter of course. We are quite enthusiastic about Europe, as a rule. But these regulations interfere with that certainty and that level of reassurance acquired by a long-established regulation that allows for an apprenticeship scheme to be gone through and allows people to qualify by other means for farriery. Should we be worried about this? We should if we do not understand what exactly is going on.

We are not asking to cross-reference qualifications. In many other parts of these regulations we accept that somebody can become qualified through practice. I have become dangerously familiar with the 1975 Act over the past few weeks. I have established that this principle of “You have been doing the job for a long time; there is no protest against you, so you should come in and be able to do it” is accepted. However, two years would seem to be a very short space of time.

What does training usually mean? It usually means that you are capable of addressing a series of problems and are prepared to deal with things as they happen. Horses are half a ton of nervous muscle, full of flight-and-fight response, which occasionally kill people—not that many, but people get hurt around horses all the time. Farriery means that you are using blades to cut around a part of a horse. There are sharp nails, and bits of hot metal are applied to that horse. Things can go wrong, but the better and more convincing the training, the less likely that is to happen.

What do the provisions address? Somebody after a very short period of experience potentially could come in and start practising. Even if we take into account the emotion that the horse may well be a family pet, it is several thousand pounds-worth of livestock that could be damaged. The person who makes a mistake is immediately at risk. One kick can kill, even one from a comparatively small pony. The person holding the animal is at risk. If the farrier has made a mistake and the person is riding that horse on the road, for instance, the animal may well shy and there is a danger that it may slip.

As an aside, I say that the community now accepts hard hats and back protectors. I have a little ongoing fight with my wife that as my five year-old starts to jump she will have to wear a gum shield, as do the jump jockeys. That apparently is a cultural step too far for part of the equine community. But there is a risk. Anything that enhances that risk should be regarded very seriously.

So what do we have? We have the principle of the free movement of labour against whether these people can be safely allowed to do the job. Let us not pretend that the whole of Europe is full of limping horses. There are places where farriery is carried out properly. The concern here comes in the nature and the size of the task, those who have to implement it and the timeframe and resources available for them so to do. You have to cross-reference the skill level across the rest of Europe—the 26 nations—or to go for entrance by experience. That may be two years, but you will be lucky not to have made a mistake within two years of practising something from a very basic level of skill. If you have been dealing with the same horses on a regular basis you may well get away with it over the two-year timeframe. I do not say that you always will, but the danger is there.

We are trying to preserve the reliability of the qualification and name of farrier. Will the Government tell us exactly how they intend to allow us to know how they are implementing this procedure? I have ignored those who have six years’ experience and are registered under other parts of the Act; the temporary matter is probably the most immediate. Will the Government allow us to know the processes by which, first, these people are being cross-referenced and, secondly, they are reporting and paper-trailing back those who are qualified through experience?

How should this take place? The Government may say that it is all on the website. If I wanted to hide something I would stick it in the middle of a website. It would be nicely and safely tucked away without a reference to where it is—“Oh, you can find it; just keep on clicking and you will get there”. It was suggested in the meetings with various officials that it would not be unreasonable for the Government to undertake to tell us where this information will be stored—not us here but those who are the consumer group, through the relevant publications. Horse and Hound stands out; I am afraid to give out the advertising but it is more or less the bible of the equine community.

The information should be signposted. What is the process we are following? What is happening to the Farriers Registration Council and have the Government assessed exactly whether they have enough resources to carry this out? This group draws its fees from the farriers themselves. It is rather odd that we should pay to allow competition in, but Europe is a funny place and this means the farriers can go across to other nations and practise themselves. How is this going to take place? Will the Farriers Registration Council have sufficient resources to make sure that this change takes place? There is the cross-referencing, the layering and the different types of qualification out there. Which one is better or worse? It may well prove that we do not have the best qualifications. We may have the best registration system but qualification moves on. We do not know and certain places do not have any qualification.

Can the noble Lord show us where the signposts will be and will he make sure that the general public know, so that there is more faith in the new system about where people are coming and going in the process? It should not be too many people. If the Government take a proactive step now, the slightly chaotic mess we have got into may be averted. What is required is information and clarification. Others may disagree about the nature of these qualifications but I think that, as a minimum standard, the Government must say what they are going to do about signposting information so people can understand what is going on. If there are major problems, everybody will know and we stand a chance of raising sufficient noise to get them corrected.

I hope I have not gone on too long about this. The fact is that there is a real concern in a large part of our leisure sector, where people are dealing with pets and valuable livestock at the same time, and their own safety. If the Minister can tell us how he proposes to minimise any risk of greater integration, I will be very relieved at the end of this debate. I beg to move.

Moved, To resolve that this House calls on Her Majesty’s Government to revoke the regulations laid before the House on 10 March (SI 2008/646).—(Lord Addington.)

My Lords, my reading of the regulations is that they allow individuals who have practised farriery but who do not possess a registrable qualification in their own country to come to the United Kingdom and practise farriery provided that, during any period of two years before the date of application, they have been regularly and gainfully engaged in shoeing horses other than as an apprentice or one undergoing a course of training. I should declare an interest in that I am a member of the Worshipful Company of Farriers and hence have a specific interest in this.

In this country, there are three grades of qualification in farriery. First there is a diploma of the Worshipful Company of Farriers; secondly, there is an associate of that company; and, thirdly, there is a fellowship. All involve intensive apprenticeship, and it takes several years before a person can be recognised as a fellow. Consequently, we have a high level of competence in the farriery profession in the United Kingdom.

I recognise that these regulations are part of the treaty of Rome directive on the recognition of professional qualifications. The Explanatory Note accompanying the regulations comments that a full impact assessment has not been prepared as no significant impact is evident, but I completely differ with that assessment of the regulations. As the noble Lord, Lord Addington, mentioned, shoeing horses is by no means a simple or easy procedure. Substantial harm can occur if horses are badly shod. This instrument could also have a significant impact on sectors other than horses. Donkeys, for example, require farriers. They do not wear horse shoes, or donkey shoes, but if they are working on soft ground, their feet need to be looked at periodically. Indeed, the training for donkey farriery is much more rigorous and extensive than that for horses.

The way to avoid the problems which the noble Lord, Lord Addington, and I have identified is to allow only persons holding approved farrier qualifications that are recognised in the United Kingdom to be recognised here. Hence I join the noble Lord in asking the critical questions about policing that he has asked of the Minister. How will this be looked at and regulated? What harm might occur to horses that have been shod by perhaps incompetent individuals who have not gone through the apprenticeship schemes that our farriers in this country have undergone?

My Lords, in rising to support the Motion to revoke proposed by the noble Lord, Lord Addington, I ask the House to forgive the fact that I missed the first two or three minutes of his speech. I was detained elsewhere. I declare an interest in that I am a member of the Countryside Alliance, which has some interest in this subject.

We are looking at something that has fallen between two major government departments, the DIUS and Defra, and is borne upon by European Union directive 2005/36 on mutual recognition of professional qualifications. All of that adds up to a classic example of the law of unintended consequences. As one picks one’s way through the barbed wire entanglement of regulations and statutory instruments, one comes to a point where the result could not have been intended or imagined and is certainly unacceptable.

I should like to dwell on the two words “rider” and “horseman”. Riders are people, often with considerable competence, who sit on top of a horse and generally do not fall off. Horsemen know a good deal more than riders about the animal on which they are riding. All horsemen have known for some centuries the four-word truism which is as true today as it was centuries ago: “No foot—no horse”.

To the uninitiated, a horse stands on a lump of bone which has underneath it a piece of metal to protect its feet from the road. Nothing could be further from the truth than that. As all horsemen know, the hoof conceals one of the most complex physical systems in the animal kingdom. Not only is the hoof involved, but underneath it, near to the ground, is the very sensitive sole and the frog. Inside the hoof you have a complicated, complex system of laminae and blood vessels; above that, suspensory ligaments; and, then, a very complicated system of bones that makes up the lower leg. All of that can be made or marred by the farrier. “No foot—no horse” is true, as I have already said, and yet farriery appears to be now classified in the basket labelled “metalworkers”. That seems quite ridiculous. There is clearly, in the minds of officials, a confusion between blacksmiths on the one hand and shoeing smiths on the other, to use the old cavalry definition. A farrier operates in that middle ground between skilled metalwork and considerable veterinary knowledge.

My Lords, I congratulate the noble Lord, Lord Addington, on his diligence in researching this matter and on pressing for time to have a debate on it, because the House ought to consider it. I should declare an interest, because my daughter is a veterinary surgeon involved in equine reproduction. I have no financial interest, merely a concern for the welfare of horses generally.

When I first looked at this issue, I was struck by the way that the European directive operated. I have complained on many previous occasions that the Government go around gold-plating European directives. This seems to be the other side of the coin. The directive’s effect is actually to undermine the position with regard to the regulation of farriers. The other thing that surprised me somewhat was the way in which the matter had apparently been looked at by our statutory instruments committee, which decided that there was nothing of particular interest to which it should draw attention. The reason for that is probably to be found in the memorandum produced and submitted to that committee, which is available to your Lordships. On the policy background, it stresses strongly that the purpose of the Farriers (Registration) Act,

“is primarily to prevent and avoid suffering by and cruelty to horses arising from the shoeing of horses by unskilled persons”,

and,

“to establish a Council to regulate and register persons engaged in farriery”.

However, the memorandum does not indicate the kind of concern that has been expressed this evening. If I understand it correctly, the main concern is that whereas we have a regulatory system which requires people to undergo training and, effectively, to have qualifications, it is proposed that those from other parts of the European Union with no more than a number of years’ experience can carry out permanently the task of a farrier. Indeed, if they are to do that on a temporary basis, they will need only two years’ experience. Experience is no guarantee of competence; they may have gone around other European countries for that period and been grossly incompetent.

None of that emerges from the Explanatory Memorandum, which contains a very strange paragraph that points out that there have been consultations with various bodies involved with these issues. It states:

“Concerns raised during consultation on these Regulations centred on the level of competence of temporary service providers. In particular, that the Directive significantly undermines the progress made since the introduction of the FRA in ensuring that all those who carry out farriery in GB have been properly trained and have passed a test of competence as a pre-condition to registration”.

So far, so good. The memorandum continues:

“However the FRC accepted that the introduction of provisions for the registration of temporary service providers was the best way of handling applicants wishing to provide services on a temporary basis”.

That is a total non sequitur. The memorandum reflects the fact that concern has been expressed but in no way states how it is to be resolved. Apparently, we have gone along with the proposals in the directive and are implementing it in a way involving dangers that both previous speakers have pointed out. Surely we ought to have an arrangement whereby those who deal with horses in this way are suitably qualified and are subject to registration.

The other matter of concern is that apparently the regulation specifies that no charge may be made for registration. In that case, perhaps the Minister can explain how the process of registration is to be financed. At the moment, that is not at all clear.

Effectively, we should ask the Government where they stood when the negotiations on this directive took place. Were they involved in its drafting? If so, did they support the position that is now in the directive or did they oppose it but were outvoted so that we are now stuck with it? I hope that the Minister can explain the position. Surely we should go back to the drawing board and rethink the matter. It is not satisfactory that unqualified people should be able to register and then practise, with all the dangers that noble Lords who have already spoken have pointed out.

My Lords, I admire the noble Lord, Lord Addington, for introducing this debate. He laughs modestly but I admire the way that he has introduced it because it draws attention to the fact that, once more, we are being saddled with regulations from the European Community that we do not want. That is the sort of point that my noble friend Lord Pearson of Rannoch loves to dwell on and I recommend that he thinks about it.

Like the noble Lord, Lord Addington, I did not ride horses. Being tall, I was always given the largest horse and I found it all rather terrifying, so I never got beyond hanging on to the saddle with one hand. Most people did not think that that was a very suitable way to go riding, so I did not do too much of it.

I declare an interest in that I am a liveryman in the Worshipful Company of Farriers. That is not a pecuniary interest; if anything, it is a reverse pecuniary interest but it is an interest nevertheless.

I am worried about this measure because I think that it will lower the standards of farriering. At the moment, farriering in England involves a four-year apprenticeship. A person is then awarded a diploma by the Worshipful Company of Farriers, the purpose of which is to protect horses and the people who look after them from the attention of unqualified people. As I understand it, a Frenchman registers and then sets about his trade. In the European Union, a qualified farrier is not assessed, he does not have to take examinations and he is not given a diploma, but the United Kingdom diploma is regarded throughout the world as the gold standard that people should try to achieve. It was brought in by the Farriers (Registration) Act 1975 and was set up to protect horses.

I simply ask why we in the United Kingdom should accept lower standards. We have set the highest standard and other people should be trying to climb up to it, rather than our being made to climb down, all for the purpose of some kind of uniformity. Uniformity should be accepted only if it is for the better.

One thing that frightens me about this whole matter appears in the Explanatory Memorandum. The noble Lord, Lord Rooker, will know this backwards because he must have read it dozens of times but I shall remind him of it. Paragraph 7.3 states:

“As the UK government is required to implement the Directive, the consultation on these Regulations did not consult on the principles underlying the Directive or those provisions whose transposition into domestic law leaves no room for discretion at Member State level. The purpose of the consultation was to explain why we are proposing to transpose in the way that we are”.

It is a funny kind of consultation that consists simply of explaining what we are doing. I put it to the Minister, who is very wise and understanding, that he is imposing on the farriers and the horse-riding fraternity standards which we do not want in the United Kingdom, which are lower than the ones that we have at the moment and which will not do us as a country—nor, I suspect, the European Union—any good.

My Lords, I, too, along with my noble friend Lord Ferrers, congratulate the noble Lord, Lord Addington, on bringing this matter to our attention. I apologise for not being in my place at the start of this short debate. I had not realised how quickly your Lordships would read the Pensions Bill a second time.

As others, including my noble friend, have said, there is great concern among Britain’s 2,500 registered farriers that the regulations have the potential to undermine our high standards. That is an important point because for more than 30 years, the aim of the Farriers (Registration) Act 1975 has been,

“to prevent and avoid suffering by and cruelty to horses arising from the shoeing of horses by unskilled persons … to prohibit the shoeing of horses by unqualified persons”.

It appears that these regulations, which amend that Act, do exactly that.

The noble Lord, Lord Addington, drew attention to the human health and safety consequences of these regulations. He talked about horses killing. I am not sure about that, but as someone who has occasionally parted company with a horse while it was on the move, which is a most unwise thing to do, I, too, have an interest in ensuring that horses are shod comfortably, at least. We do not want any more accidents than can possibly be helped.

The noble Lord, Lord Soulsby of Swaffham Prior, pointed out—and I, too, am concerned—that the regulations do not appear to have been subject to a formal assessment of the impact on animal welfare, which is normal in these cases. There are a number of issues to be looked at carefully, all of which have been detailed by other noble Lords, so I do not intend to go through them. I urge the Government to look again at these regulations. Between them, the Department for the Environment, Food and Rural Affairs and the Department for Innovation, Universities and Skills appear to have let this particular ball drop. I urge them to work with the horse sector to produce regulations that not only safeguard the high standards for which United Kingdom farriers are justly famous, but are, above all, workable. The regulations before the House tonight are not.

My Lords, I should like to add a few words as well, and I have some questions for the Minister. I thank the noble Lord, Lord Addington, for bringing this forward; he should not apologise for not being a horse-rider or for not being as knowledgeable as some other noble Lords who have spoken. It is good that someone outside the particular interest realises that there is a problem.

I understand from the memorandum that the consultation was launched on 7 November 2007 and closed on 19 December. Why was it not a proper 12-week consultation? Clearly it was not, and with the run-up to Christmas perhaps there were not as many responses as there might have been. While I have no particular current interest to declare, I, like many other noble Lords, rode horses and ponies from a tiny age and fell off too many times with resulting broken bones. We were always brought up to make sure that we heeded the importance of having horses well shod. Any horse with a slightly damaged foot is much more likely to be jumpy and not such a safe ride. From a young age, we always had qualified farriers who looked after our animals, which was extremely important.

I gather that concerns were raised during the consultation. How many were there and what happened to them? Did they go to Defra directly, the farriers, or the Worshipful Company of Farriers? It is extremely important to know that.

I reinforce what other noble Lords have said about the qualifications being unequal. Clearly, work experience is not the same as proper professional qualifications. Can the Minister tell us how many of the countries that are likely to have people applying to perform farrier work in this country have different systems? I suspect that there are many, and in some countries there are probably no systems at all. It is important for us to have that information if it is available.

The importance of the safety of riding, particularly in a country where riding is becoming increasingly important, lies at the heart of this short debate. Thousands of children aged four, five, six, seven and eight ride ponies and the last thing we want to do is put any of them at risk purely because we have adopted a directive which lowers the standard that we in this country think is so important. One of my colleagues raised the question about the Government’s stance when this was discussed. I hope that the Government lobbied heavily on it. Did they seek a derogation from these proposals? If not, why not? Whereas we normally set the standards and say that everyone must rise to them, it is very odd to have to accept lower standards for those who carry out farrier work in this country.

Lastly, what will happen if someone who comes from abroad is found to be inadequate? Will that person be treated, as our farriers would be, and go to appeal? What happens if that person is found guilty and does not have enough money? I am not sure what will happen if the work is unacceptable—I was going to say shabby—and I seek clarification.

My Lords, I congratulate the noble Lord, Lord Addington, on introducing this debate. I am the third noble Lord to apologise for not hearing the first couple of minutes of his opening remarks. I too was caught out on the timing.

This is a rather sad debate. We are discussing something that we cannot change. This is an EU directive and the Explanatory Memorandum says that,

“the consultation on these Regulations did not consult on the principles underlying the Directive or those provisions whose transposition into domestic law leaves no room for discretion at Member State level”.

My noble friend Lord Ferrers is absolutely right about that. Therefore, we are wasting our time talking about it.

We have contracted out our farriery to Europe just as we have contracted out immigration. This is yet another regulation or directive that we simply do not need. It joins the curd cheese regulations, which were debated a few months ago; the drivers’ hours regulations; the ladder directive; the very recent regulations which noble Lords enjoyed on mediums and spiritualists, which drew some comment from the Liberal Democrat Benches when they could not believe that they were actually involved in that—sadly they were. Those are regulations that we cannot do anything about.

This evening, I have been struck by the expertise of everyone who has spoken. The noble Lord, Lord Dear, with his detailed knowledge, must have been head of the Birmingham mounted police force in a previous incarnation. He is quite right to say, “No foot, no horse”. Farriers do an invaluable service and save us a lot of money; with good farriery we do not have to call the vet out as often. This country has had a very good farriery service and we still do. As this debate, although sparsely attended, has shown, we are capable of running our own show when it comes to farriery. Why do we need to import these absurd regulations from Europe? We cannot do anything about them. We can make wonderful speeches and we can move ourselves to tears with our eloquence but, in the end, it will not do any good at all. I am sure that the Minister who is an honest and straightforward man, whom I much admire, will admit that we have to put these regulations or directives into law. We have no alternative.

It is a sad evening when this Chamber, this Parliament, is reduced to asking itself why we cannot run our own farriery industry. I should like noble Lords to think about that and to wonder whether it is right that we should have contracted out so much of our government to an unelected bureaucracy in Europe and sit here willingly to discuss something that we cannot change. It is deeply depressing and deeply sad, which is why, like my noble friend Lord Pearson, I believe that we would be very much better off out of the European Union and running our own affairs. We have a perfectly good Government—let me rephrase that and say we have a good system of government, the highly respected mother of parliaments and an educated electorate. Why do we have to contract out so much to the European Union? Why are we doing it? The noble Earl, Lord Ferrers, is quite right: it is time we asked ourselves whether we are going down the right road here. I strongly support the noble Lord, Lord Addington, in what he said in this debate, and all the other speakers were spot on in what they said. However, I am afraid that the Minister will tell us where we get off.

My Lords, it is undesirable that the packed Benches on this side of the House should be silent on this critical issue, so I shall join in by congratulating the noble Lord, Lord Addington, on raising this matter. I should declare an unpaid interest as I am a trustee of the charity World Horse Welfare, previously the International League for the Protection of Horses, whose concern is for horse welfare throughout the world, and this is a central issue for us. I shall not elaborate because noble Lords have unanimously expressed their concerns on the main issue of standards. Let us be in no doubt that the result of the regulations will be that standards of farrier practice in this country will be to some extent lowered and undermined. We have the best standards in the world, but those standards are not matched throughout Europe. We know that in some parts of Europe, particularly eastern parts, it is difficult to establish what the standards are, and if people come here with certificates describing experience or qualifications, it will not always be absolutely clear what they mean. The issue of standards is at the centre of this. Lowering standards has implications for animal welfare and, as has been pointed out, animal welfare has links to human welfare because of the threats to human health if bad farrier work has been done. I look forward to hearing what my noble friend has to say as he is always individual and constructive.

I should particularly like him to say something on the important point made by the noble Lord, Lord Addington, about information. This change was slipping through with most of our world unaware of it. When I started speaking to people in the horse industry, most of them were unaware that this was happening. If the regulations proceed, there is an obligation on the department or departments to make sure that everyone in related industries is fully aware. For instance, this morning I spoke to the British Horseracing Authority and suggested to it that it might be helpful if it considered whether part of the conditions for licensing trainers should be that they should guarantee to use fully qualified farriers. It may well be if the information is communicated to other parts of the horse industry they can take measures to try to protect standards and animal welfare. I look forward to what my noble friend—who, I say to the noble Lord, Lord Willoughby de Broke, represents a perfect Government—has to say, and I hope he will assure us that should the regulations go through all parts of the industry will be fully informed of the implications and that the departments will look at every means possible to protect the high standards that we have so long enjoyed.

My Lords, I have no immediate personal interest in this matter. Unlike several of your Lordships I have no horse, nor do I ride. Yet one of my daughters-in-law is an enthusiastic, competitive horsewoman, which I suppose is an interest that I should declare. However, I thank the noble Lord, Lord Addington, as have other noble Lords, for laying this Prayer to revoke the regulations. He laid out the argument extremely well, and our debate has been instructive on the issue. I am sure that the Minister will share the misgivings of the many noble Lords who have spoken in this debate who, without exception, have expressed the view that the Government have got it wrong.

It is certain that these regulations would not have been laid in this form if the consultation period had been more thorough. My noble friend Lady Byford explained that there had been a relatively short period of consultation before these regulations were laid, from 7 November to 19 December. The Government consulted the Farriers Registration Council, the Worshipful Company of Farriers, the United Kingdom Horse Shoers Union and the National Association of Farriers, Blacksmiths and Agricultural Engineers. Yet, as far as I can see, they did not include the British Horse Society, for example, or the Jockey Club, or the racehorse trainers’ association, or the racecourse managers, the Pony Club or anybody else who uses the services of farriers. Nor, for that matter, did they appear to consult the veterinary profession; neither can I find any reference to them asking the Army for an opinion, although as a service the Army has a qualification for a farrier going into civilian life having done service as a trained army farrier.

Do the Government share the view of many in the farrier profession that allowing farriers to practise in the UK without having gone through UK channels of training is a regressive move? What safeguard do the Government have in place to ensure the welfare of a horse at the hands of an unqualified, temporary farrier? Is there any way in which these regulations have taken the horse’s welfare into consideration? To press the Minister further, are not horse owners at risk of having their insurance invalidated if their horse is damaged by an underqualified or temporary farrier?

We are not talking of a minor industry; the noble Lord, Lord Dear, gave the figures. There are 1.35 million horses in this country, and at least 4 million people riding out once a year. The equine industry is worth £4 billion overall, with farriers themselves earning £250 million as a key part of the horse economy. There were 2,455 farriers registered in Great Britain in 2006. These figures emphasise the risks involved, as poorly-shod horses are a threat to animal welfare and public safety. My noble friend Lord Soulsby explained the importance of proper shoeing. The fact that the directive fails to classify the profession as having public health or safety implications prevents the Farriers Registration Council—the industry’s regulatory body—from making competence checks on an individual from within the EU who wishes to practise in the UK before they start doing so. There are no animal welfare or public safety provisions in the original directive, and it shows.

I accept the enormous benefits that the free movement of professionals throughout Europe can bring to the economies of European member countries, but that cannot be at a reduction of professional standards. I hope that the Minister will agree to look again at these regulations, and at how the directive has been implemented.

My Lords, I congratulate the noble Lord, Lord Addington, on securing the debate. I hope we will be able to clear the air of some misconceptions. I do not have any interests to declare, although a couple of long-distance friends from the 1960s might have in their loft a photograph of me—dressed in suitable safety equipment—trailing along the lanes of Llanymynech on the Welsh border. They were showing me what the movement of an animal underneath me feels like. That is about the full extent of my experience so I do not have an interest to declare in that sense.

No one has mentioned it but it is worth putting on record that these regulations have been in force since 19 October last year. So we are not talking about something that has just been brought in. I do not wish to flood the House with constituents but it is also worth putting on record the latest figures I have. The total number of farriers on the register is 2,300 and there are 390 farriers without formal qualification or training. So there are 390 UK nationals—untrained, unqualified—doing farrier work. No one has mentioned that. The number of EU farriers on Part 1 of the register is two, and the number of declarations of intention to provide temporary services since October last year, when the regulations came into force, is one. That is the situation in June 2008. I wanted to set that on the record so that one can see the context in which we are dealing with this. There are nearly 400 unqualified, untrained, UK nationals doing farrier work against a total of 2,300 on the register; and there has been a grand total of three EU farriers on Part 1 of the register, including one declaration of intention to provide temporary services, since 19 October last year.

My Lords, I am not doubting the Minister’s figures, but are the unqualified farriers he mentioned attached to qualified farriers—in other words, are they undergoing training—or is he saying that they practise unqualified?

My Lords, they practise unqualified. Basically they have grandfather rights, but they are still untrained and unqualified. I am not criticising them. Regulations come into this country that affect people who have spent 20, 30 or 40 years at a certain activity and one allows them to continue working and not to go through the process. Pesticide spraying is a profession which still retains its grandfather rights. I am just putting on the record that people doing this work are not being trained but have grandfather rights. If they were new to the profession they would have to be formally trained and go through the process. I just want to set the context of where we are to start with.

I do not have a list but the competent authorities in the countries of the European Union vary. I am not saying that the general tenor of the debate is “No foreigners need apply” as that would be wrong and unfair, but the allegation is that because professional farriers working elsewhere can be employed here—they do not have to be—it will necessarily lower standards. I just want to put that in context before I begin the set part of my speech.

My Lords, I would like to press the Minister further on the grandfather rights. Does that go back to before the 1975 Act? In other words, how old is the grandfather? Are we talking about 33 years of practising farriery? That might be considered a pretty long run-in.

My Lords, I will get an answer to that, because I clearly do not have one off the top of my head. I was told that the answer was grandfather rights, but I do not know how far back that goes. That might apply to foreigners coming in, such as Irish nationals. I do not believe the Irish horse industry is using farriers who damage the horses, but it does not have the same regulatory system that we have—far from it.

My Lords, I would like to provide some clarification. I was informed that the Irish had a system that was recognised by us, but they have now stopped it and gone over to another system. That might clear this question up, but it emphasises just how complicated this issue is. The point about grandfather rights is quite right.

My Lords, we have had discussions in the past couple of days about this. I asked these questions, because they are important. I said, “What about the Irish situation, given the importance of the bloodstock industry to them?”. I was told that it was somewhat different, as the noble Lord has just indicated. No one has complained about that.

I understand the concerns expressed about the provision. In fact, my collar was felt about two months ago by my noble friend Lord Donoughue on this very issue before it was even a blip on the horizon. I had long since signed off the Explanatory Memorandum the year before, but I went to find out about it. I want to see if I can put those concerns to rest because we take them seriously, particularly those about animal welfare. There is no way we would countenance any diminution of animal welfare. We are satisfied that the directives provide adequate safeguards. I shall come to that in a moment. I have answered Parliamentary Questions from the noble Lord, Lord Willoughby de Broke, and the noble Baroness, Lady Byford, in some detail. One of those Answers indicated that there was an advantage for animal welfare in bringing in these regulations.

We have to take care—this is the bit that is expected—that domestic legislation complies with European law. This all goes back to the European Communities Act 1972, as I recall from my early years when I was opposing it. I do not now; I support it. Subject to certain safeguards, someone legally established to practise farriery in another member state can provide the same service in the UK on a temporary basis. I emphasise that because it is important. The UK is obliged to implement directive 2005/36/EC on the recognition of professional qualifications, which goes right across the professions. That works both ways for people in this country. Some of the measures suggested by UK farriers for strengthening the safeguards are simply not permitted under the directive. For example, we cannot require a service provider to undertake a practical test of their competence. Checks can be made with contact points and competent authorities in other member states about the provider’s legal establishment or the relevance to farriery of his professional qualifications, but access to farriery on a temporary basis cannot be delayed or complicated in any way if the person has provided all the required documentation—that is, to prove that they are legally conforming and operating as a farrier in the other member state.

My Lords, the Minister has come on to an important point. I think he said that legally qualified people from another state can come over and practise farriery here on a temporary basis. When does that temporary basis become permanent? Is it when they have passed an exam in England?

My Lords, that is an excellent question. That will be judged on a case-by-case basis by the Farriers Registration Council. I understand that the period cannot be any more than a year, so someone cannot be temporary for longer than that. The Farriers Registration Council, this country’s regulatory authority, will decide on that, based on the evidence provided by the individual concerned.

My Lords, I am grateful to the Minister, again, for giving way. If the gentleman concerned does not pass the test of the Farriers Registration Council, can he be, as it were, thrown own?

My Lords, the test is that of supplying the necessary information, not a practical test. It requires documents: evidence from the member state and details from the competent authority. Where there is no competent authority, they have to provide the documents to show that they have legally been carrying out a business and, indeed, are doing so because they are only coming here to provide a temporary service. The Farriers Registration Council can limit that for a year, but if they fail to provide the necessary documentation, they would not be able to provide the temporary service. There is a check and balance here, and another which I will come to in a moment.

The main overall objective of this directive is the reduction of obstacles to free movement. It merely makes possible the pursuit of a profession for which a person is qualified on an employed or self-employed basis, provided the activities are comparable. It introduces new arrangements for migrants who want to provide a service on a temporary and occasional basis with the minimum of bureaucracy and red tape. Here is the key part: it places absolutely no obligation whatever on employers or service users to engage a professional from another member state. To the best of my knowledge—as was mentioned earlier, and as I discussed a couple of days ago—it must be perfectly compatible with, let us say, insurance companies putting in terms and conditions that require one to use professionally qualified competent people to do the necessary work. If not, one’s insurance is at risk. Therefore, these are quite legitimate, but no one is forced to employ professionals from another member state. That is an important point.

The directive was largely implemented last October by the Department for Innovation, Universities and Skills through the European Communities (Recognition of Professional Qualifications) Regulations 2007. Many of the provisions are carried over from a previous directive on the recognition of professional qualifications. A lot of this is not new. Europe-based farriers have been able to provide temporary services, under the DIUS regulations, by submitting a declaration to the Farriers Registration Council—the UK competent authority—since last October. As I have said, so far, the Farriers Registration Council has received only one declaration. There are only two European farriers currently registered to practise farriery on a permanent basis in the United Kingdom. I do not know which member states they are from. The directive leaves the registration of temporary service providers up to member states.

Having consulted the Farriers Registration Council, we agreed that the best way of managing temporary service providers would be to provide the regulator—the Farriers Registration Council—with the necessary powers to deal with issues relating to conduct. The Farriers’ Qualification (European Recognition) Regulations 2008—the subject of this debate—therefore provide for consequential amendments following changes introduced last year by the DIUS, and provide a framework for registering temporary farriers. Revocation of the regulations would not affect the entitlement of European farriers to provide their service on a temporary basis, pursuant to the DIUS regulations, but it would hinder the UK’s ability to implement fully its European obligations. In addition, it would remove our ability to manage these arrangements in a transparent way, and to ensure that any problems can be dealt with by the Farriers Registration Council. That is an important point, because bringing regulations into force allows the Farriers Registration Council to be the regulator for the temporary activities.

Farriery is not a regulated activity in some member states. The directive, and the DIUS regulations, set out other criteria that must be taken into account in those situations. Competent authorities—in the UK, the regulators—have an obligation to work in close collaboration with the competent authorities in other member states to facilitate the application of the directive. The directive defines “professional qualifications” as:

“(a) qualifications attested by evidence of formal qualifications,

(b) an attestation of competence issued by the competent authority in a person’s home State … and/or

(c) professional experience”.

Therefore, “professional qualifications” includes professional experience, such as two years’ lawful and effective practice of a profession. You have to provide evidence that you have been doing it and carrying it out, even in a member state where there is no competent authority.

When making a declaration to the Farriers Registration Council, a temporary service provider must include details of any insurance cover, an attestation that they are lawfully established in their home country, as well as evidence of professional qualifications and proof of at least two years’ lawful and effective practice if they come from a state where farriery is unregulated. There are therefore some hurdles even in countries where there is no regulation of farriery. I do not claim that they are as good, but it is not a free-for-all; it is not for any Tom, Dick and Harry to come over here and say, “I’m a farrier. I’ll undercut your prices. I can do the job. I’m OK”. There is a series of hurdles to clear.

My Lords, how exactly would these farriers who come from an EU country which does not have a regulated industry prove that?

My Lords, they would be required to prove that they had lawfully engaged in a business in their home country. It has nothing to do with whether it is regulated. If they claim to be operating as a farrier, even in a country where farriery is not regulated, they must have documents to show that they are lawfully in business and have been so for a lawful period. They have to be able to prove that. That goes beyond what would be required. It is not so much as would be required if they had a competent authority, but they have to show that they are engaged in that practice and have been so lawfully for a minimum period.

We acknowledge that UK farriers and horse owners need to be reassured that the competent body responsible for administering these provisions—that is, our Farriers Registration Council—has all the information, support and guidance needed to implement the new arrangements effectively. Guidance has been issued by the Department for Innovation, Universities and Skills to all the relevant UK regulators—that applies for other professions as well. The regulators as contact points have the function of providing information to incoming and outgoing professionals and to assist citizens in realising the rights conferred on them by the directive.

I agree that we are still in the early days of implementation of the new arrangements. They need to be given time to bed down and their effectiveness properly assessed. A commitment has already been made by the Department for Innovation, Universities and Skills to review the implementation of the directive in October next year. Therefore, it is more or less two years after it came into operation. As I speak, we have only one in the queue, and two operating.

If sufficient evidence comes to light to show that the welfare of animals is not adequately safeguarded because of a lack of professional training and/or experience in farriery on the part of temporary service providers, we will bring it to the attention of the other department responsible for the regulations. But simply to say that is not good enough: we have the Animal Welfare Act. All the responsibilities of animal keepers are in statute now. We have much tougher animal welfare regulation than ever before. That Act is only one year in being. If we find evidence of the welfare of animals being affected, action will be taken long before the review of these regulations next year.

In the final paragraph of a Written Answer to the noble Baroness, Lady Byford, I wrote:

“The amendment to the Farriers Registration Act, providing for registration of temporary providers of farriery services in Part V of the Farriers Register, will have a positive impact on animal welfare because it will enable the Farriers Registration Council to take disciplinary action against those registrants, should this be necessary”.—[Official Report, 6/5/08; col. WA 51.]

In other words, without this regulation—although it arrived here without a long consultation or the possibility of being amended, for the reasons explained by other speakers as well as myself—the UK regulator would have no power to act in those particular cases.

The issue raised by the noble Lords, Lord Donoughue and Lord Addington, is that while the regulators have all been informed about this, it behoves Defra to explain the rules, some of which I have touched on tonight—I stuck closely to the script, because I wanted to get it on the record. For example, recent publications said that, because of a loophole in new legislation, unqualified farriers from other EU countries would be able to practise here. On this point, I have said that a farrier must provide a host of documentary evidence to show that they have been engaged in the profession, even if in a country where there is no regulation. The Farriers Registration Council has to scrutinise these qualifications and all the other information that must be provided. It cannot force a competence test, because that is outwith the regulations allowing professionals free movement within the EU.

We have a good system in this country—people better qualified than me know that it is a far superior system. However, it is wrong to suggest that all the good work that has been done in farrier training by the farrier community is eroded by a directive that opens up the system to abuse and allows people to injure and lame horses with no redress. If the requirement was that everybody with stables would have to employ a certain quota of temporary farriers from countries without competent authorities, there might be a case to make. However, no one will be forced to employ anyone from an EU member state and insurance companies can provide restrictions or extra barriers. As I have said, some member states with very successful and extensive bloodstock industries do not have the same system as we do, and we should not be worried about farriers in those countries coming here. It will be up to individuals as regards whom they employ.

Because of what has been said here tonight and published recently—I will not criticise individual publications, that would be unfair—I think that it behoves us to set out some of the rules and hurdles that people might have to tackle in order to ply their trade here. This should be better explained. We can do a much better job and I will make that my responsibility. I asked yesterday if this had gone through the other place and it has not. I do not think that it was prayed against. This may be our only opportunity for a debate, but I will ensure that we take steps to explain better the rules and regulations to the industry, so that people are no longer fearful about the welfare of their animals, which is the top priority.

I understand the issue raised by those whom I call “my friends in the Countryside Alliance”, although I am not a member. They make a point about public health, which takes us to the other part of the regulation. I understand that there is a public health issue if things go wrong and horses are treated badly. However, we do not have any evidence from the Court of Justice to bring public health arguments into what is an animal welfare issue. I know that the tenuous link can be made, as the Countryside Alliance has done, but there is no force of law behind that, in such terms that the solicitors and lawyers would argue that there was a public health issue here and that therefore we could use the other aspect of regulations.

I hope that the debate has been useful, both for those in the industry and those outside who watch our events. I shall take steps to ensure that Defra takes this issue seriously, by way of explaining it better. It will not cost a great deal; we do not have many extra resources, but this is an area in which a few pennies spent on better explanation would not go amiss.

My Lords, can the Minister answer the question asked by my noble friend Lord Higgins about what position the British negotiators took in Brussels to ameliorate this situation in any way? Why did this measure come over here in such unpalatable form? Can the Minister answer that here? Perhaps he could write to us on that matter.

My Lords, I shall write if the explanation needs to be better. The fact is that, although there was a short consultation, 18 months of discussions went on before last November. This is not something that has just appeared out of nowhere. We discussed this matter, and some of the concerns raised were not able to be taken into account in how the directive operates. I think that some of the farriers here said that there should be a practical competence test before you are employed, but it is not possible to do that.

Following the discussions in Brussels, we were satisfied about the animal welfare issue, which is the key issue here. There are hurdles—they are not barriers, but hurdles; we have free movement of professions, with some rules and regulations. The temporary issue is important; it involves a temporary period, with a maximum of a year.

This was not an issue on which we discussed an encyclopaedia of rules and regulations, but it was discussed for some 18 months beforehand, and we were satisfied that the animal welfare considerations were fully met in the regulations as the final regulation appeared—and then we transposed it for the farriers.

My Lords, the Minister has spent quite a long time, understandably, giving quite a complicated answer to quite a complicated series of questions. However, there was one point that he missed, with respect. If the standards in the United Kingdom are higher than anywhere else in the world and if we are now going to allow in people who do not come up to those standards, we are lowering those standards, are we not?

My Lords, it is for each individual member state and competent authority to set their standards. We are trying to encourage free movement of professions and we will buy in, as we do in other professions, whether it is medicine, engineering, science or dentistry—there are all kinds of issues like that—with the need to meet certain basic conditions. In this case, the basic conditions are those that I set out: if you are in a country where there is no competent authority you must still meet a set of criteria and prove that you have been practising in the profession for at least two years. You have to show that you are running a lawful business in another country to enable you to come over here on a temporary basis.

It is for others to decide, but there may be the odd one or two farriers who are better than some of our farriers. We have 390 here who are not qualified, in the sense that we are discussing qualifications—those with grandfather rights. One has to ask, who judges those? Are they better or worse than others from other countries? It would not be me who would want to make that decision.

My Lords, I think that this debate has been necessary, because we have drawn attention to concerns. As the Minister said, it is possible that there may even be slightly better regulation or processes, or new and developing processes, in Europe. One hopes, after what the Minister said, that if there are, we will now find out about them and have enough information coming in.

I know that the noble Lord, Lord Willoughby de Broke, is on my side, but praying in aid the great mother of parliaments when we are discussing this under negative procedure, when we can discuss it only after it has gone through, and slowly, means that possibly we are not that perfect all the time in how we handle secondary legislation. That is the conclusion I would draw. The way in which this was picked up by accident at the last minute, by me, suggests that we should look at that situation more carefully in future.

I should have made one declaration of interest. At a dinner party several months ago it was decided that I had won something in Lambourn that was relevant to the equine fraternity. It was decided that I was possibly the most unlikely person in the town to be a jockey. The noble Lord, Lord Dear, with his wonderful explanation of how a horse’s foot works, might possibly challenge me for that if he turns up.

However, I hope that the Government’s undertaking is to give us information in a way—a nod of the head is sufficient here—that we can actually understand and can get through to the general horse-owning public. If so, many of the fears here may well be allayed. We also have a process of reviewing this in case they are not. I beg leave to withdraw the Motion.

Motion, by leave, withdrawn.