Social Security (Reduced Rates of Class 1 Contributions, Rebates and Minimum Contributions) Order 2006

My Lords, I strongly agree with the points raised by my noble friend Lady Noakes and the noble Lord, Lord Oakeshott. I should like to put three questions to the Minister which arise out of the discussion that we have just had. First, I should like to press him further on exactly what is so adverse about the ““present fiscal circumstances”” as to convince the Secretary of State not to accept the proposals from the Government Actuary? Secondly, have Ministers really thought through the impact that this decision is likely to have on various forms of pension and how that will interlink with their response to the Turner commission? Thirdly—the Minister has already referred to this—to what degree does he believe that the forthcoming White Paper might necessitate a further review of rebates? On the first point, in his report the Secretary of State states that,"““in the present fiscal circumstances and given the current consideration of pensions policy outlined in the second paragraph to this report, I do not believe it would be appropriate to accept his recommendation””—" that is, the recommendation of the Government Actuary. On reducing the cap from 10.5 per cent to 7.4 per cent he states:"““I have now decided to change this to 7.4%, taking account of fiscal constraints””." The Secretary of State has decided to pay rebates below the actuarially neutral level to defined benefit schemes and to individuals above the age of 43 in defined contribution schemes. So the cap for DC has,    therefore, been reduced dramatically. Paying actuarially neutral rebates does not cost the Government money. It simply transfers, as my noble friend pointed out, an unfunded state pension liability to a privately funded one, in which case the only real   impact of contracting out is going to be one of cash-flow. What exactly is so adverse about the current fiscal circumstances of the National Insurance Fund that the Secretary of State has deemed it necessary to disregard the advice of the Government Actuary and refuse to pay an appropriate rebate to, or on behalf of, potentially millions of individuals? Surely Ministers should have provided a fair deal on contracting out? Contracting out moves individuals from unfunded state pensions to privately funded pensions. This would appear to be in line with the Government’s objectives for a number of straightforward reasons. In the light of spiralling unfunded public sector pension liabilities, measures to transfer future liabilities appear to be sensible. This rebate announcement seems to go against that logic. For defined contribution schemes, does the Minister accept that the vast majority of those above age 43 are likely to rejoin S2P? In the case of defined benefit schemes, where contracting in would require extensive structural change, does the Minister accept that this announcement may further accelerate the decline of such schemes? Surely the Government should be encouraging, not discouraging, privately funded pensions? Reference has already been made to the Pensions Commission’s view that there should be changes to state and private sector pensions and to contracting out. On state pensions, the recommendation is to raise the state pension age. On contracting out, as has been pointed out, the proposal is to discontinue for DC schemes in 2010, and to phase out for DB schemes by 2030. I hope that the Minister will respond in greater detail to the very valid points raised from the Opposition Benches and explain why he and his colleagues believe that the White Paper in response to the Pensions Commission might prompt a further review of rebate levels? We have heard some interesting comments about the White Paper. I suppose one might almost say that in the spring a Minister’s thoughts lightly turn to thoughts of a White Paper, but we do not know when exactly. My noble friend has rightly asked whether it is early or late spring. It is now early spring. I challenge the Minister to walk outside the Chamber where he will enter a spring environment. So where is the White Paper? It would be very helpful to have further, more definite information on that. It is interesting to note that, even when rebates had become clearly inadequate, Ministers opted not to exercise their powers of reviewing rebates earlier than the standard five-yearly reviews. Under the existing legislation we could have another review next year. It would be helpful if the Minister could give us further information on that. Is there really any justification for not going down that route and for allowing deliberations which will not bite until at least 2010 to influence rebate levels from 2007?