Pensions Bill

My Lords, it is to my surprise that I find myself involved in this Bill because pensions are not a subject that I generally participate on. Before I say any more, I must beg the indulgence of the House for the fact that my contribution is a little more specific than is usual on Second Reading. I am restricting myself to just one topic—to one clause relating to an earlier Bill that I was involved in. I am optimistic that I may be pushing at a slightly open door and I hope that after he has heard me, the Minister might agree to resolve my problems in his response. The marginal note to Clause 5, which is the one that I am concerned with, tells us that it is about: "““Uprating of basic pension et cetera and standard minimum guarantee by reference to earnings””." In other words, it is to restore the link between the state pension and average earnings, rather than the RPI in accordance with the pledge given in the White Paper. The principle behind this amendment is certainly accepted by both us on these Benches and industry, and probably by all your Lordships. However, the wording of this clause is entirely unsuitable for that purpose. I would like to explain my objections to the provisions in the order in which they appear inClause 5, which seeks to insert a new Clause 150A in the Social Security Administration Act 1992. Proposed new subsection (2) requires the Secretary of State to lay an order before Parliament upgrading the pension in accordance with the ““general level of earnings””. However, proposed new subsection (3) immediately contradicts that provision by excusing the Secretary of State from performing that duty, "““if it appears to him that the amount of the increase would be inconsiderable””." What this inelegant phrase means is that they do not have to bother to uprate the pension if the amount of the increase would be very small because the increased general level of earnings in the review period was also ““inconsiderable””. Inconsiderable to what? Who is to decide whether the general level of earnings has only risen inconsiderably? Suppose that a review does not take place. That lost increase is not made up when in a subsequent period it is considerable because new subsection (2) limits the review to a current year and does not permit retrospective increases. I have some slight sympathy with the Government over the problem that they are seeking to resolve. Your Lordships may recall a few years ago the opprobrium that was heaped on the Chancellor of the Exchequer for his so-called meanness in offering pensioners a miserly indexed increase of 75 pence a week. I can understand the Government wanting to avoid a repetition of that farce. But if the increase is too small in any year to be worth while for the Secretary of State to bother with, what justification is there for not making it up in subsequent years to those pensioners who manage to live that long? There are three subsections which are entirely objectionable because of the wide and entirely discretionary powers that they give to the Secretary of State. New subsection (3), to which I have just been referring, says the Secretary of State can ignore indexing, "““if it appears to him that the amount of the increase would be inconsiderable””." In new subsection (4), the Secretary of State can round the increase off, up or down, "““to such an extent as he thinks appropriate””." Not only is he given complete discretion, but there is no limit to what rounding off he may think is appropriate—to the nearest pound, to the nearest penny, to the nearest 10 pence, or what? And although the Secretary of State can round the increase down as well as up, there is no obligation, or even power, if he has arbitrarily lopped X pence a week off pensions to make up the loss in subsequent years. The ““general level of earnings”” is defined as the key to the whole of the Bill’s operation of indexing. In new subsection (8), the Secretary of State is to be empowered to estimate the general level of earnings, "““in such manner as he thinks fit””." He is not required to conform to any particular method of calculating it, or to accept the figures from any of the established publications of statistics on such matters, nor is it clear which trades, professions and occupations are to be included in his entirely personally calculated index. Will football managers, Premier League players and pop stars be included? What about nurses, teachers and police officers? What about the effect of artificially depressed below-inflation wage settlements imposed on public service employees? We could, in effect, find ourselves back quite close to the retail prices index. I have on several previous occasions, in connection with other Bills which I conducted through your Lordships' House from the opposition Front Bench, protested and objected—sometimes successfully—against the attempts by this Government of control freaks to rule by ministerial decree. The objectionable provisions to which I am speaking are prime examples of that process. On many occasions when I presented amendments to some Bill or other, I was met with the objection that they were unnecessary for some entirely specious reason. The arrangements for working out the general level of earnings contained in this Bill are not only wholly objectionable for the reasons I have just given, they are also unnecessary. Adequate arrangements have already been made and passed by Parliament to provide for what is called indexation of amountsin accordance with a strict mathematical, wholly independent and unarguable formula which does not depend on the whim of a Minister or the diktat of the Treasury. In Clause 34 of the Employment RelationsAct 1999, a precise formula is laid down for the indexation of sums payable to employees under two other Acts. Although that relies on the retail prices index, which we are all agreed should be eliminated as a factor in calculating pension increases, there is no reason why it should not be adapted to the average earnings index, published monthly by the Office for National Statistics. Its website claims it is the, "““key indicator of how fast earnings are growing””." Why is the Secretary of State not using this authoritative index, which is published by a government agency, at taxpayers’ expense, but is instead proposing to produce a figure out of the air by reading the ministerial tea leaves, or some other unscientific method? Why should the method of indexing relevant figures be different between one Act and another? By adapting the tried and tested formula in the Employment Relations Act to the average earnings index, the Minister will, in one fell swoop, dispose of all my objections about the meaning of ““inconsiderable””; the use of the Secretary of State’s personal whims to calculate a competing index of the general level of earnings; and missing rises because of downwards rounding off. Incidentally, the 1999 Act also provides for rounding off but, unlike in this Bill, it is upwards only. I believe that the Minister is a most reasonable man who will certainly appreciate the force of my objections to Clause 5 in its present form. I repeat the plea I made at the beginning of these remarks: I sincerely hope that before we reach the next stage of the Bill, he will save me the trouble of drafting amendments and writing speeches and will come back with government proposals to rectify the defects—the Government do not like defects—which I have detailed.