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Inheritance and Trustees’ Powers Bill [HL]

Volume 752: debated on Monday 3 February 2014


Schedule 1: Determination of the fixed net sum

Amendment 1

Moved by

1: Schedule 1, page 6, line 25, at end insert—

“3A (1) This paragraph applies where—

(a) a figure for the consumer prices index for a month has become available, and(b) the consumer prices index for that month is more than 15% higher than the consumer prices index for the base month.(2) The Lord Chancellor must, before the end of the period of 21 days beginning with the day on which the figure mentioned in sub-paragraph (1)(a) becomes available (“the publication date”), make an order under paragraph 3(1).

(3) But if the Lord Chancellor determines under paragraph 5 that the order should specify an amount other than that mentioned in paragraph 5(1), the Lord Chancellor is to be taken to have complied with sub-paragraph (2) if, within the period of 21 days beginning with the publication date—

(a) a draft of a statutory instrument containing the order is laid before each House of Parliament, and(b) paragraph 5(4) is complied with.(4) In this paragraph—

“the base month” means—(a) the month in which this Schedule came into force, or(b) if one or more orders under paragraph 3(1) have been made before the publication date, the most recent month for which a figure for the consumer prices index was available when the Lord Chancellor made the most recent of those orders;“consumer prices index” means—(a) the all items consumer prices index published by the Statistics Board, or(b) if that index is not published for a relevant month, any substituted index or index figures published by the Statistics Board.”

My Lords, I have put down an amendment to the Inheritance and Trustees’ Powers Bill that will amend the way in which the level of the statutory legacy is set. As noble Lords will know, the statutory legacy, referred to in the Bill as the fixed net sum, is the sum awarded to a surviving spouse for his or her future maintenance before any other part of an intestate deceased’s estate is shared with any other beneficiary. It is therefore important that it takes account of the prevailing economic conditions.

The Bill as introduced required the Lord Chancellor to make an order specifying the level of the statutory legacy at least every five years. The proposed government amendment would sit alongside the existing requirement but would oblige the Lord Chancellor to make an order short of the five-year deadline if the level of the consumer prices index, known as the CPI, rises by more than 15%. The purpose of this would be to allow for the statutory legacy to be updated more frequently in times of high inflation so that it more accurately reflects the cost of living.

The CPI, which is published monthly by the Statistics Board, will be judged to have risen by the requisite amount if a particular month’s figure is more than 15% higher than the CPI for the month when the Bill comes into force in the first instance, and then the month when the most recent order specifying the level of the statutory legacy was made. It should be noted that although the default position would be that the order would raise the statutory legacy so that it is in line with the rise in CPI, the Lord Chancellor will still be able to amend the level of the legacy in some other way. However, if he chooses to do this, he must first submit a report to Parliament setting out his reasoning for doing so. If an order is made because the CPI has risen by the necessary amount, this will signal the start of another five-year period within which another order must be made.

This amendment has a very similar effect to the one that was put forward by the noble Viscount, Lord Hanworth, during a meeting of the Special Public Bill Committee. Since taking up my ministerial post, I have considered that amendment and recognise the merit in providing for more frequent updates to the statutory legacy should this be required. I am grateful to the noble Viscount for his original suggestion. In those circumstances, I ask noble Lords to look favourably on this amendment. I beg to move.

My Lords, in his very helpful letter of 30 January 2014, the Minister referred to the amendment moved by the noble Viscount, Lord Hanworth, at a meeting of the Special Public Bill Committee on 16 December. He indicated that the present amendment is to the same effect.

These things go out of one’s mind so quickly that I have had to refresh my mind as to what took place at the two meetings that we have had. At our previous meeting on 13 November, the noble Lord, Lord Beecham, asked why the fixed net sum should be reviewed only every five years and not annually. The noble Viscount, Lord Hanworth, strongly supported that suggestion. Professor Cooke said that she would look into why the Law Commission had come up with the figure of five years in the first place. In her letter of 28 November, she explained the Law Commission’s reasons: on the evidence that it had received, five years was a compromise figure.

By the time of our next meeting on 16 December, the noble Viscount had drafted his amendment, but it contained two, quite separate features. It contained, first, the requirement of an annual review such as we had discussed at our first meeting, but it also contained the new feature of a compulsory order if the consumer prices index should increase by more than 15%.

There was support for an annual increase from the noble Lord, Lord Beecham, but doubts were expressed by the noble Baroness, Lady Hamwee. I took the same view as the Law Commission; in other words, that an annual review was too frequent, certainly if it led to an annual revision of the fixed net sum. There was very little, if any, discussion of what is now before your Lordships; that is, the proposal for a compulsory review if the index rose by more than 15%—I think that a passing reference to it was made by the noble Lord, Lord Plant.

In due course, the noble Viscount sought leave to withdraw his amendment, but said that he would come back on Report. It is now proposed by the Government that we should accept the second half of the noble Viscount’s amendment but not the first—I think that I understand the Minister right in saying that. There is to be a compulsory review if the consumer prices index is increased by 15%, but there is to be no annual review.

My only concern is that this new amendment now before your Lordships, confined as it is to the compulsory feature, was not considered in any way by Professor Cooke—at least not to my knowledge. However, it seems a sensible amendment, and I cannot imagine the Law Commission, had it been asked for its views, having any objection. It makes sure that the Lord Chancellor will in only limited circumstances be, as it were, brought up to the mark, even though he will then—again, if I understand the noble Lord correctly—have discretion as to the amount. In my view, this represents an improvement to the Bill and I therefore support the amendment.

My Lords, I will not be the only person in the Chamber this evening who remembers when mortgage interest rates were 15%, and very painful they were too. I have one question for the Minister, relating to the term “available” in proposed new paragraph 3A(1)(a). When does the figure become “available” within the meaning of the provision? Does it mean published or “available” to the public? The figure must be available to others privately before it is published. I do not know whether it means published in the sense that the consumer prices index uses the word “published”, but we need to be clear about how one identifies when a figure becomes available.

My Lords, in Committee, I raised a number of issues and said that I would consider the position further before Report. I took advantage of seeking advice from leading counsel, Mr Nugee, who gave evidence to the Committee. I have to say that he received the same fee for his services as the Minister receives for his in his present capacity, and I am obliged to Mr Nugee for his advice. Having considered it, I am not proposing any further amendments today. He would perhaps be inclined to support such amendments but, taking things in the round, thought that the position that had been reached in Committee was reasonable.

We are discussing an amendment stemming effectively—I agree with the noble and learned Lord, Lord Lloyd—from the contribution of my noble friend Lord Hanworth. As I said to him just before we entered the Chamber, he has the law in his genes because his grandfather, the first Viscount Hanworth, was Attorney-General in the coalition and subsequent Conservative Governments in the early 1920s. Clearly, he has inherited that gene and deployed it to some effect. I have no difficulty with the amendment that the Minister has moved, but I have one query.

In Committee, I moved an amendment to Clause 1 which did not succeed because it referred to simple interest. Are the amendments now being proposed compatible with Clause 1 as it now stands, which appears to provide for the interest rate referred to in paragraph (B) of case (2) of the table to be the Bank of England rate? I may have misunderstood the original effect of Clause 1 and the amendment. I assume, but perhaps wrongly, that Clause 1 deals with the situation that the amendments now seek to modify. I just hope that the provisions are compatible but that, if they are not, perhaps by Third Reading we might have the necessary change. On the face of it—again, I may have misunderstood the position—the two are to some degree in conflict.

Be that as it may, I agree with the amendments. It is always a pleasure to be involved—this is only my second time—with a Law Commission Bill. It is a rather quixotic enterprise to tilt at Law Commission windmills, but I thank the commission and the learned—or, perhaps, not learned but effective—lady who presented the Bill and took us through it. I also thank the Bill team: I know we are not yet at Third Reading but, subject to the matter I have just raised, this is effectively the end of the road. Having said that, I support the amendment.

My Lords, I am grateful for the contributions to our short debate on this and for the thorough contributions to the Bill Committee which discussed these important, although relatively obscure to some, provisions.

The noble and learned Lord, Lord Lloyd, referred to the fact that Professor Cooke had not specifically considered the question of the 15% trigger. I can assure him, and the House, that she has now considered it and approves the amendment, which has her blessing as well as that of the Government. The Government think the 15% trigger is high enough to ensure that the level of the statutory legacy is adjusted only where there has been enough of a rise in inflation to warrant it. I, too, remember the days referred to by the noble Baroness, Lady Hamwee.

In answer to the question raised by the noble Baroness about the word “available” in new paragraph 3A of the amendment, this refers to the Statistics Board publication of the consumer prices index for a particular month. The index is published on the website of the Office for National Statistics. The monthly publication dates are published a year in advance.

I turn to the query of the noble Lord, Lord Beecham. Clause 1 refers to the interest payable on an unpaid statutory legacy. New Schedule 1A refers to the level of the statutory legacy overall. I understand that the different rates apply in different circumstances and are compatible. We will take cognisance of this matter and refer it back at Third Reading if there is any residual doubt on it.

My Lords, before the Minister finishes, I will test the patience of the House and say that I understand his common-sense answer, which was what I expected. However, I am not completely convinced that the Bill, incorporating this amendment, actually says that. I will leave that with him, as it is not very sensible for the noble Lord, Lord Ahmad, to go to and from the Box to answer a rather technical question. However, we are all such pedants in this Chamber that I know we all want it to be correct.

I follow the noble Baroness to take a little further our discussion on the impact of Clause 1 and the amendments. If I understand the noble Lord correctly, there are two situations. One will be governed by one rate of interest, as specified in Clause 1, and the other will be covered by these amendments. This raises a further question of why there should not be consistency, in terms of the interest to be calculated, in respect of what appear to be two separate situations. If they are not separate situations, there is a degree of confusion; if they are separate, there needs to be a rationale for having two different rates of interests. I invite the noble Lord to consider that before Third Reading. It may or may not need tidying up. On the face of it, there seems to be something slightly awry with the position we will be in when the amendment is passed.

My Lords, I accept the invitations from both the noble Baroness and the noble Lord to consider their points and come back, if necessary, at Third Reading.

Amendment 1 agreed.

Amendments 2 to 7

Moved by

2: Schedule 1, page 6, line 26, leave out from “Chancellor” to end of line 27 and insert “must ensure that the power under paragraph 3(1) is exercised in such a way that an order is made—”

3: Schedule 1, page 7, line 38, leave out “instrument” and insert “order”

4: Schedule 1, page 7, line 39, leave out from “index”” to end of line 44 and insert “has the same meaning as in paragraph 3A”

5: Schedule 1, page 7, line 46, leave out “paragraph” and insert “paragraphs 3A and”

6: Schedule 1, page 7, line 47, after “index” insert “(as defined)”

7: Schedule 1, page 8, line 1, leave out “that paragraph” and insert “those paragraphs”

Amendments 2 to 7 agreed.

House adjourned at 8.05 pm.