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Lord Elton: My Lords, the noble Lord addresses a point which I wanted to come to early, and he has considerably shortened what I need to say. However, I find it difficult to understand how he is so confident that the question of whether there shall be a split pension will always be clear at the beginning of the process. The statement to which the noble Lord referred comes at the beginning of the divorce process. Where there is a contested divorce, the availability or not of a split is likely to be one of the major bargaining counters. Therefore, it will not be open to the parties. I see that the noble Lord is about to rise. Perhaps I may finish this bit and then the noble Lord will be able to intervene. If it is to be a bargaining counter, it will not be known whether there is to be such a split at the time the statement must be made. The amendment says that where there is to be a split, then the statement shall be made. The noble Lord will explain.
Lord Mishcon: My Lords, the noble Lord, with his usual courtesy, has allowed me to explain and I am grateful to him. The original statement which has to be made by the party or parties seeking a divorce is one which, under Clause 10 of the Bill, will be dealt with by rules. The answer to the noble Lord is that the statement will presumably include the question--if it does not, information will be given, and that has to be sought before the statement is made--"Is there a pension involved in your matrimonial dispute?" Answer: "There is a pension, yes".
All I am saying is that where there is a pension--one does not have to go so far as to say whether it is going to be split --the statutory declaration has to be made and we have got rid of the bogus divorce point.
Lord Elton: My Lords, I am most grateful to the noble Lord. Perhaps I may pass from the paving amendment to what is normally called the consequential amendment, Amendment No. 116A, which is in the group. It strikes at Clause 60 and waves a magic wand over the principal amendment, Amendment No. 86A, and converts it into something entirely different from any clause in the rest of the Bill.
Unlike any other clause, it will have effect in Scotland. That is natural of course since that is where many pension funds are located. But it serves to remind your Lordships of the very great complexity of what is now in these few, simple words proposed. It makes one recall that Scotland has a separate statute book otherwise unaffected by the Bill and at the very least wonder at the effect of the importation of this single provision and whether it may have odd effects on divorces there, which will be unaffected by all the other 60 clauses in the Bill; or will they?
The paving amendment, Amendment No. 10, that we are now discussing will extend the effects of Clause 4 to arrangements made under Section 10 of the Family Law (Scotland) Act 1985. Yet even if Amendment No. 116A to Clause 60 were to be accepted, Clause 160 would still prevent the operation of Clause 4 in Scotland. So we begin in confusing waters.
That reflection in turn prompts another. The principal amendment, Amendment No. 86A, seeks to amend the Matrimonial Causes Act 1973--and raises doubts to which I referred earlier as regards the Family Law (Scotland) Act 1985--to empower the courts in most generally stated ways to distribute pension rights between the employed and the dependent spouse.
The problem of how to treat the tax benefits accruing to a pension in relation to the earning level of the employed spouse when a proportion of the benefit is transferred to a spouse not in employment is not addressed, nor is the court given guidance on the age at which the split section of the benefit shall come into payment. I inquired, and I got a list of the primary legislation that will have to be amended to bring pension splitting into effect; I understand that it is incomplete--yet these are the rocks which lie in the sea which the noble Lord, Lord Marsh, with commendable lightness but not levity, referred to the ship of state as "bobbing" in, as though it were not at risk. It reminds me of the "Sea Empress" which was in very well-charted and very well-known waters but ran aground with disastrous results.
It seems to me that this is a real and not an imaginary difficulty dreamed up by a government trying to kick things into touch. In fact, I believe that we have the wrong metaphor. I do not believe that it is a question of kicking into touch. I should have said at the beginning that I want to see fairness in pension arrangements and I share my noble friend's ambition that such arrangements should be in place--but it should be done effectively. She who wills the end must will the means. We have discussed the financial means to some extent. I leave it to my noble friend Lord Mackay of Ardbrecknish to deal with what my noble friend said at the beginning. It spoils a fine peroration, but I give way.
Lord Marsh: My Lords, I take the point quite seriously that the noble Lord makes. But I cannot understand how these problems can appear at this stage in the debate without having been noticed earlier.
Lord Elton: My Lords, I was about to come to that point. Of course it is open to the noble Lord, Lord Marsh, and many others, with varying degree of enthusiasm, to embarrass the Government with that question, but we are where we are. There is that amount of legislation. I have not yet mentioned the wide-spreading intricate matrix of subordinate fiscal legislation among which all this operates.
If we are to put this desideratum--that is what it is, something we all want--into the Bill, we are left with just two choices. One is to have all these issues addressed, agreed and incorporated into the Bill, and that I honestly think is beyond the power of Parliament between now and Royal Assent. The other is to leave them all unresolved to be resolved, as someone suggested, by the courts.
There is a third. It is for the Minister to be left with powers by subordinate legislation to do all that is necessary to make this fit. We have much experience of that. We know all about giving Ministers power to amend primary legislation to make it fit subsequent primary legislation. It is called the Henry VIII clause. Noble Lords have been so exercised about it that your Lordships set up a special committee to prevent it being abused, and I have the honour and duty of serving on that committee. During my life on that committee I have never seen a Henry VIII power so sweeping as this would be for a Minister, or such wide discretion for a court.
The unfortunate beneficiaries of your Lordships' intended generosity--if this were to be left to the courts--would never know what they would receive until the case law had developed. Every new departure would be tested by the courts. That is a delay and an expense which your Lordships would not want to wish upon any of your friends.
If we are to include the matter in the Bill, we are--not so much in grave danger--certain to get it wrong. We should get it right. If my noble friend the Minister will commit himself to a review in terms from which he cannot resile, and with the intention of legislating as a result, I, for one, would go along my way rejoicing, if necessary into the Not-Content Lobby, because I believe that that is the only way we shall obtain what we want; otherwise we shall get what we do not want, and it will be disaster. I hope the noble Baroness will have that in mind and possibly not press the amendment.
Lord Meston: My Lords, for those of your Lordships who are impressed by the practical difficulties and may be tempted by the idea of a Green Paper, perhaps I may reinforce a point made by the noble Lord, Lord Marsh: there have already been numerous reports on this topic over the past 25 years. They culminated in a clear report on pensions and divorce by the Pensions Management Institute in 1993. That was a report produced by a diverse body of experts, including experts from both England and Scotland.
My second point is that this is not novel in this country. Pension splitting already operates in other countries and it operates satisfactorily. This is not, in other words, a problem which has just crept up on us requiring, as the noble Lord, Lord Marsh, said, to be kicked into touch. The only substantial argument against pension splitting seems to be fiscal. As far as I can understand, that was demolished comprehensively in Committee by the noble Baroness, Lady Hollis.
The only other argument we heard advanced in Committee was that people might somehow be tempted into an artificial divorce to obtain the benefit of lower rates of tax. Perhaps I may remind your Lordships of the 1970s when tax at the higher rate was 90 per cent. One could obtain tax relief at the higher rate on maintenance ordered by a divorce court, and maintenance could be extended to cover private school fees. It was a tax regime which lasted until 1988. If ever there were a time for cynical millionaires to try to get bogus divorces, it was then. As a practitioner at the time, I was pretty irritated to see some of my clients receiving that level of tax relief, but I was never tempted to go through a divorce to get the housekeeping set against tax.
In the Pensions Act we have earmarking which is very much half a loaf. It has serious consequences for the clean break principle in divorce. The great advantage of pension splitting is that it will facilitate the clean break which is especially important to avoid the hostility and animosity of divorce cases.
Of course the timetabling needs to be looked at, but I suggest that the time has come now to enact this provision. It can come into operation later; otherwise there will not be pension splitting this side of the
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