Pensions Bill

moved Amendment No. 15: 15: Clause 5, page 5, line 39, leave out from ““Where”” to ““shall”” in line 41 and insert ““the general level of earnings is greater at the end of the period under review than it was at the beginning of that period, the Secretary of State”” The noble Baroness said: My throat is dry and I hope that my voice will not put the Minister off being kinder to me. I shall speak also to AmendmentsNos. 16, 18 and 19 and I thank the Minister for his courtesy in discussing with me his objections to my amendments. I am sorry to say that after much consideration, and with the utmost respect, I feel that he simply is not correct. I hope I shall be able to convince him of that. Clause 5 is intended by the Government to restore the link between pensions and average earnings, a step that is supported by all sides of the Committee and by industry. This group of amendments in no way detracts from that objective. On the contrary, they are intended to strengthen the new system by ensuring that the necessary adjustments, from time to time, are calculated efficiently, impartially, accurately, transparently and, above all, without the possibility of any political interference, especially from the Treasury. As the Committee is aware, in the course of several Bills in which I have been involved over the years,I have argued—sometimes successfully—against provisions that simply depend on the Government’s opinion or result, in effect, in government by ministerial decree. To that end, my amendments remove from the clause all elements that depend on the opinion of the Secretary of State and make the changes not only entirely fact-based, but indisputably fact-based. Amendment No. 15 removes from the clause the power of the Secretary of State to decide whether the general level of earnings has risen. It bases the operation of the whole of this important clause on the simple and patently obvious question of whether it has risen or not, rather than on a purely subjective test of whether it appears to the Secretary of State that it has or has not. On Amendment No. 16, proposed new Section 150A(2) in Clause 5 quite rightly requires the Secretary of State to lay an order before Parliament upgrading the pension in accordance with the general level of earnings. However, new subsection (3) immediately contradicts that clear provision by excusing the Secretary of State from performing that duty. I ask Members of the Committee to note the words, "““if it appears to him that the amount of the increase would be inconsiderable””." I repeat my objection to a decision about whether an increase is or is not inconsiderable being solely in the mind of the Secretary of State. In addition to that, by what standard is an increase to be regarded as inconsiderable? What is inconsiderable to a Secretary of State, earning perhaps £2,000 a week, may be substantial to someone subsisting on the state pension. As I said at Second Reading, I have some slight sympathy with the Government over the problem they are trying to resolve. I am sure that they recall with considerable embarrassment the outcry over the derisory increase of 75p a week in 1999. However, there is nothing to prevent the Chancellor of the Exchequer granting a higher increase than the bare mathematically calculated minimum. More than that, the subsection contains another and, to my mind, fatal flaw. If the increase is so inconsiderable as to be missed, there is no unambiguous provision to make up the expense in a later year, as the clause provides for the increase to be based on a specific year or a review period. In other words, once it has gone, it has gone. I suspect that that is intentional because the proposed marginal note to new Section 150A refers to ““Annual up-rating””. ““Annual”” would require an increase every year—the general level of earnings increases—and if it is not done in one year, I submit that it must be done in a later year. Amendment No. 18 deals with that and removes any possible ambiguity. It fixes the increase that can be ignored at a maximum of 99p a week or, as the amendment says, less than £1 a week. It also enables the Secretary of State to increase that figure of £1 a week by order from time to time. The amendment also makes it clear beyond doubt that the ignored amount can be carried forward to a subsequent year unless the Chancellor should have generously decided to override the mathematical calculation and to allow a higher figure. Amendment No. 19 simply provides for rounding off upwards instead of either up or down as the Bill proposes. Docking even a small sum a week may be trivial to most of us, but not to a pensioner who has to count every penny. I regard new subsection (4), as drafted, allowing rounding down, as the height of meanness and unworthy of a wealthy country. Amendment No. 19 contains the whole nexus of my series of amendments. It removes from the Secretary of State the power by means of some formula dreamed up by him to calculate the increase in the general level of earnings. At the moment, the Bill provides for the Secretary of State to calculate the increase, "““in such manner as he thinks fit””." He is not required to publish his methodology; or to use any recognised method; or to conform to any accepted independently published tables; or to be consistent from one year to another. This amendment leaves the sum to be calculated as a matter of course by the Office for National Statistics, an independent government agency. The Office for National Statistics publishes a monthly average earnings index and claims it is the key indicator of how earnings are growing. Why will the Government not bind themselves to accepting the findings of their own statisticians, but instead allow the Secretary of State to pluck some other figure out of the air if he is so minded? I hope that the Minister will explain. There is a precedent for using an independent table or index to determine the level of increase in earnings. That is to be found in the Government’s Employment Relations Act 1999 where, for the purposes ofSection 34, the figure is calculated by reference to the retail prices index also published by the Office for National Statistics. The Government are content to rely on an Office for National Statistics index for the 1999 Act, so the index of the general level of earnings, which the same agency produces, should apply to the present Bill. That reference brings me to the precedent on which the Minister, who told me in a meeting I had with him, he intends to rely. He calls into aid the Social Security Administration Act 1992 which contains the identical formula as is proposed in this Bill—ministerial discretion and ““inconsiderable”” increase et al. I now have the greatest respect for parliamentary draftsmen, but in this instance they have made a serious mistake by using the 1992 Act rather than the Government’s more recent 1999 Act. I did not have the pleasure or privilege of being a Member of your Lordships' House when the 1992 Act was passed, otherwise I would have argued like mad with my colleagues against the extent of the ministerial discretion that was granted at that time. Much more importantly, in 1992 the Office for National Statistics did not exist in its present form and there was no index of average earnings. In 1999, it did exist and, quite rightly, the Government utilised the authoritative retail price index that it produces. There is a major inconsistency between two of the Government’s own pieces of legislation, the 1999 Act and this Bill. More than that, if under Clause 5 the Government were to produce any lesser figure than the Office for National Statistics’ figure, I can confidently predict now that the Secretary of State will find himself in court before anyone can say ““judicial review””. It will be of no use, if that is his intention, for the Minister to reassure your Lordships that, of course, the Secretary of State will take the Office for National Statistics’ calculations into account. The Minister suggested in discussion that the wide ministerial discretion will allow for flexibility. Flexibility is not what is required from the Government in this case. What is needed is consistency between the two Bills. Accepting my amendment would also restore some measure of confidence. We did not discuss that important fact when we met. The situation today is different. People have lost confidence in pensions. There have been too many sad pension stories and the result is that we do not want to leave matters to ministerial discretion—to what the Minister thinks and does not think. I do not want to make a political point on this, but the position of pensions has been severely battered in recent years. There is no reason why—except for obstinately refusing to acknowledge that a drafting mistake has been made—the correct formula should not be enshrined in the Bill and therefore automatically applied. While it is not for me, as a very humble Back-Bencher, to propose an amendment to an Act passed by Parliament when my party was in government, I believe that the Minister should take the opportunity to consider bringing the 1992 Act into line with the 1999 Act and should not take a step backwards by making us revert to an obsolete, 15 year-old precedent. Clause 5 is a key provision in the Bill. Its objectives are not disputed or contentious. However, the methodology is totally flawed and leaves its implementation entirely at the discretion of the Secretary of State. My amendment puts the implementation on an open, transparent basis. The Minister has to think that that is sensible. I beg to move.