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Lord Skelmersdale: Having made the decision to transfer the Contributions Agency and most of its attendant pieces to the Inland Revenue, it seems that, yet again, the Government are drawing back from that conclusion. We have had several examples during the course of the day, either in amendments or in responses to amendments, showing that the Government clearly do not believe 100 per cent. in what they are doing. They are keeping matters back when, in my judgment, they should not be kept back and they should go lock, stock and barrel to the Inland Revenue.

Baroness Hollis of Heigham: I shall deal with that last point first. It is not that we do not believe in what we are doing and, therefore, we are keeping things back. Clearly, there is a whole series of issues on which we are trying to make a pragmatic decision, given the number of appeals and existing arrangements in organisations elsewhere. Rather than set up special machinery, it may be preferable to use existing machinery, integrated in that way. That is our response.

I shall stand back a moment and try to set the context for the issues that the noble Lord, Lord Goodhart, has raised today and which he also raised on Second Reading. As I am sure your Lordships are aware, Clause 15 amends Section 170 of the Pension Schemes Act 1993 which is concerned with the decision-making and appeals process for the contracting-out of SERPS.

Contracting-out of SERPS is administered by the Contracted-out Employments Group of the Contributions Agency, known as COEG. COEG will transfer to the Inland Revenue with the rest of the Contributions Agency. Responsibility for policy and legislation on contracting-out will remain with Social Security Ministers.

The Inland Revenue will be responsible for making decisions and managing disputes on those decisions. Clause 15 makes the necessary amendments to Section 170 of the Pensions Schemes Act 1993 to enable Inland Revenue officers to make decisions on these matters.

However, as the Committee identified, any appeal on contracting out will be to a DSS unified appeal tribunal, and thereafter to social security commissioners in accordance with the provisions of the Social Security Act 1998 and supporting regulations rather than to tax appeal commissioners. That deals with the point about whether or not we believe in what we are doing.

I am aware that there are some concerns about the decision we have taken. At Second Reading, the noble Lord, Lord Goodhart, questioned our reasoning for

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retaining the social security appeal route, noting that at least the special commissioners are experienced in dealing with pension matters in the context of approval of tax relief. As she did today, the noble Baroness, Lady Anelay, spoke on this issue.

Amendment No. 37, tabled by the noble Lord, Lord Goodhart, places contracting-out decisions and appeals under the remit of the tax commissioners, demonstrating that the noble Lord considers that the new DSS unified appeal tribunal to be the wrong body to deal with contracting-out matters. I can see the ground for that argument: that contracting-out matters should follow the tax appeal route. However, those arguments fail to recognise the practical interaction between the state scheme and contracting out. The reality is that when disputes arise--and I stress that that is rarely--they arise not in the context of employers and whether or not they satisfy the conditions to be awarded to a contracting-out certificate but rather in the context of the amount of contracted-out pension due. Therefore, we need a decision and appeal-making system which ensures that when appeals arise they are dealt with by the body which can best respond to the needs of the appellant.

UATs will handle SERPS appeals; and experience has shown that questions about the contracted out pension--for example, the guaranteed minimum pension--often arise as subsidiary points to the main SERPS appeal. Therefore, if an appeal is raised specifically on the contracted-out pension the right body to hear it is a DSS unified appeal tribunal given that it will be dealing with SERPS appeals more generally. We do not think that it would be right to send those appeals to tax commissioners who have no expertise in that area and do not deal with benefits.

The only appeals which could readily be referred to tax commissioners would be those relating to contracting-out certificate, as it could be argued that there are some parallels with appeals concerning tax approval for pension schemes. But again the reality is that appeals are extremely rare in this area. The unit, COEG, has a good working relationship with employers and scheme administrators and a history of resolving disputes quickly, effectively and to the satisfaction of all concerned.

I understand that since contracting out was introduced in 1978 there has been only one dispute related to certification which needed to be escalated for resolution to the then occupational pensions board. At that time the occupational pensions board was the equivalent of a tribunal for contracted-out pension matters. We have no reason to think that matters will be different in the future. Rather than making alternative provision for such exceedingly rare cases, we suggest that it makes sense for any such appeals to go to the same body as SERPS appeals.

Where an appeal contains a technical point relating to private pensions, we have provided for the tribunal to seek the assistance of an expert witness such as an actuary or pensions lawyer. Appellants can also take expert advice and present it to the tribunal in support of their appeal. Although I accept that the system is not perfect--it is one of those areas where there is a genuine

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overlapping of mutual responsibility--it provides a pragmatic solution, given the number and type of disputes that occur on contracting out; and for the extremely rare case which might arise every now and then it seems a price worth paying if it means a unified, coherent and transparent appeal system for contracting out.

Amendment No. 38, tabled by the noble Baroness, Lady Anelay, concerns contracting-out matters. The amendment puzzled us. However, our reading of it was not the same as the noble Baroness's explanation of what the amendment intended to convey. Our reading of it suggested that the amendment removed the appeal route for contracting-out decisions and offered no alternative. I know that the noble Baroness did not intend to take away such a fundamental right, but that was the effect technically of the amendment. However, the noble Baroness made it clear that she was using the amendment in order to probe what we had in mind as regards the constitution of the tribunal and membership.

Some of those issues were raised when we discussed the social security decision-making appeals legislation. We expect that 75 per cent. or thereabouts of all appeals will continue to be heard by tribunals consisting of two or three members. I do not expect that these matters will be heard by a tribunal of three members, although the president of tribunals could so certify if he thought that that was in the best interests of decision-making. We would expect, for example, that there might be one legally qualified person, plus one expert. That would give more expertise at a UAT than at a special commissioner's tribunal if one of the members were legally qualified. Alternatively, it could be two tribunals together and one expert. Although there may not be three members, we think that the members will have the relevant expertise--expertise possibly greater than that which the special tax commissioners may enjoy. Given the rare number of cases, it is more pragmatically sensible to integrate those into the appeal structure of the UAT.

We think that the system should work well. However--hence the wrap-around clauses--our judgment could be wrong. Future pensions legislation may open up areas of concern which we have not yet envisaged. We shall soon discuss Clause 22. The current debate on the appropriate appeal route is an excellent example of why Clause 22 is desirable. Clause 22(1)(d) provides for switches by Order in Council of appeals between the tax appeal commissioners and the unified appeal tribunals. I can assure the Committee that if the system is not working, and if the worries of the noble Lord, Lord Goodhart, are confirmed, when the show is on the road we have the necessary mechanism to reverse the situation. We all want it to be a satisfactory, expeditious, appropriate and fair appeal system. If the route that we propose, which we believe to be best given the rarity of the cases, turns out not to be so, we have a fairly straightforward way of ensuring that we can alter the position to ensure that we achieve our objectives.

6.45 p.m.

Lord Goodhart: I shall read with great care what the noble Baroness said. I am not sure that I shall be

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persuaded that my view is wrong. However, I take some comfort from Clause 22(1)(d) which enables the jurisdiction to be transferred if it turns out that I am right. However, for today I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 38 not moved.]

Clause 15 agreed to.

Clauses 16 and 17 agreed to.

Schedule 6 [Decisions and appeals]:

Baroness Hollis of Heigham moved Amendment No. 39:

Page 45, line 6, at end insert--
("10A. In paragraph 8 of Schedule 2 to the Social Security Contributions and Benefits Act 1992 (application of Part V of Taxes Management Act 1970 in relation to Class 4 contributions), for the words from "but nothing" to "arising--" there is substituted "but nothing in this Schedule affects the extent to which the Income Tax Acts apply with respect to any decision falling to be made--".").

The noble Baroness said: In moving Amendment No. 39, I shall speak also to Amendments Nos. 40 and 65 with which it is grouped.

The purpose of these three technical amendments is to bring provisions of existing legislation--as to the application of tax legislation to Class 4 contributions--into line with changes made elsewhere by this Bill.

Paragraph 8 of Schedule 2 to the Social Security Contributions and Benefits Act 1992 at present excludes from the application of the taxes Acts the categories of Class 4 contributions which it is not currently the function of the Inland Revenue to collect. As a result of the Bill, those categories of Class 4 contributions will fall to be collected by the Inland Revenue, with decisions about liability being taken by their officers. Appeals from such decisions will be determined by the tax appeal commissioners and will need to be governed by provisions of the Taxes Management Act 1970. Paragraph 8 of Schedule 2 therefore needs amendment to recognise that tax legislation is to apply to these Class 4 contributions to that extent. The first of these amendments includes that change in Schedule 6 to the Bill.

Schedule 2 to the Social Security Contributions and Benefits Act also applies in Northern Ireland and is set out word for word as Schedule 2 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992. So the second of these amendments makes an equivalent change in that schedule to that Act.

Finally, the amendments to paragraph 8 of Schedule 2 in both the Great Britain Act and the Northern Ireland Act need to be reflected in Clause 27 which lists those provisions of the Bill which are to extend to Northern Ireland. This change is made by the last of these three amendments. I beg to move.

On Question, amendment agreed to.

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