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Noble Lords: No.

Lord McIntosh of Haringey: Then, my Lords, I beg to move.

Lord Astor of Hever: My Lords, the House will be grateful to the noble Lord for his explanation of the amendments. We are concerned about the intention behind the drafting of Amendments Nos. 229 to 257 relating to the Bankruptcy (Scotland) Act 1985 and the Insolvency Act 1985. Our concern focuses on the

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proposal to delete references to “excessive contributions" and to replace them with the term “is recoverable". If these amendments were to be accepted, the consequences for the creditor of the debtor who is bankrupt may be very serious indeed.

If a debtor tried to defeat the interests of a creditor by entering into a pension-sharing transaction which could be deemed to be a gratuitous alienation or unfair preference in terms of the Bankruptcy (Scotland) Act 1985 or the Insolvency Act 1985 and made excessive contributions into that arrangement, the creditor, as the Bill currently stands, would be entitled to claim the amount to which he or she is legally entitled; namely, the full extent of the excessive contribution.

If, however, the House accepts the amendments, the creditor's rights would be limited to the extent of what is “recoverable". In some situations, that could be significantly less than that to which the creditor should be legally entitled. Accordingly, in those situations the debtor would have successfully frustrated the interests and rights of the creditor by placing beyond his or her grasp the difference between the excessive contributions and what is recoverable.

We do not accept that this is a desirable policy objective. We want to prevent pension sharing becoming a source of problems for the courts in years to come. We therefore hope that the Government will give this matter serious consideration before Third Reading.

10.45 p.m.

Lord McIntosh of Haringey: My Lords, I did my best, but I should have read out the fuller brief. I shall have to do so now because the noble Lord is entitled to a proper answer to his questions. He referred particularly to the amendments which relate to the Bankruptcy (Scotland) Act.

Amendments Nos. 42 to 44, 238, 245 and 246 are only there to ensure consistency in the usage of terms with the rest of the Bankruptcy (Scotland) Act. I do not think that the noble Lord will have any problem with that.

Amendments Nos. 233, 234, 242, and 244, together with Amendments Nos. 250, 251, 254, and 256 make clear the position of the former spouse in relation to the recovery of excessive contributions from her pension share. Although it is generally accepted that there needs to be a mechanism to recover excessive contributions that are contained in the former spouse's pension share, I think we would all agree that the provision needs to be carefully drafted so that only the excessive contributions, and nothing more, are recovered. That is what these amendments do. The amendments make it clear that it is only the balance of any excessive contributions not recovered by the court order against the bankrupt that can be recovered from the former spouse.

Amendments Nos. 229 to 232, 235 to 237, 243, 247 to 249, 252, 253 and 255 are further technical amendments. In the comments I have just made, I referred to the recovery of excessive contributions

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from the former spouse's pension share. I used the phrase “excessive contributions", however, as a shorthand term. Properly, the phrase is best restricted to the bankrupt and his contributions to the pension. What may be recoverable from the former spouse is an amount equivalent to those excessive contributions, if any, which cannot be recovered from the bankrupt's pension. These amendments bring out that technical distinction. I assure the noble Lord that although the term “excessive contributions" is being replaced, this is purely a technical change and the policy remains unchanged.

Perhaps I may say a word about bankruptcy law in Scotland because that was the thrust of the noble Lord's argument. Current bankruptcy law in Scotland provides that the permanent trustee in bankruptcy can apply to a court to seek recovery of property or funds in three circumstances where he believes that a transaction has had the effect of defeating creditors: first, gratuitous alienation, where property has passed to another person at less than full value; secondly, unfair preferences, where one creditor has been unfairly preferred to another and, thirdly, he can also apply to overturn a court order made on divorce. The new measures allow recovery from the former spouse's pension share but build on those existing provisions.

I would be happy to answer any questions which the noble Lord may have. Indeed, I shall ensure that the questions he raised are dealt with in a letter which I shall write to him before Third Reading. I hope that he will agree, on that basis, that it is appropriate that I should commend the amendments to the House.

On Question, amendment agreed to.

Lord McIntosh of Haringey moved Amendments Nos. 43 and 44:


Page 22, line 12, leave out (“debtor's").
Page 22, line 35, leave out (“debtor's").

On Question, amendments agreed to.

Lord Higgins moved Amendment No. 45:


Before Clause 17, insert the following new clause--

INCOME SUPPORT: CAPITAL LIMIT FOR PENSIONERS

(“ .--(1) The Income Support (General) Regulations 1987 shall be amended as follows.
(2) At the beginning of regulation 45 (capital limit) there is inserted “Subject to regulation 45A".
(3) After regulation 45 there is inserted--
“45A. For the purposes of section 22(6) of the Social Security Act 1986 as it applies to income support (no entitlement to benefit if capital exceeds prescribed amount), the prescribed amount for persons of pensionable age is £16,000."").

The noble Lord said: My Lords, it will be convenient to consider also Amendments Nos. 46 to 48. The amendments are best grouped in two pairs, taking Amendments Nos. 45 and 46 together and Amendments Nos. 47 and 48 together. I shall not burden your Lordships at this hour by reading out the terms of the amendments but simply explain them.

The difference between the two sets of amendments is that Amendments Nos. 47 and 48 include a provision for uprating the capital allowances, to which

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I shall refer in a moment, in line each with inflation, whereas Amendments Nos. 45 and 46 do not. On reflection, at the present level of inflation, Amendments Nos. 47 and 48 are probably not necessary and I shall therefore concentrate on Amendments Nos. 45 and 46.

These amendments are important for this reason. It is now well recognised that the capital limits which determine whether pensioners are entitled to income support are long overdue for increase. This legislation gives us an opportunity, which may not arise for some considerable time, to provide that increase.

At the moment, individual pensioners on income support are “allowed" £3,000 capital before their income support is reduced. When that capital reaches £8,000 they lose their entitlement to income support altogether. For reasons I shall put forward in a moment, those figures are long overdue for amendment. The situation with regard to housing and council tax benefit is somewhat similar. Nothing happens up to £3,000, but after £16,000 the housing and tax benefits are effectively eliminated.

I am slightly puzzled by a document I received from the Department of Social Security which says that higher limits apply in relation to the top end of the scale for income support and jobseeker's allowance “for people in nursing homes". I am puzzled as to how people in nursing homes may be entitled to jobseeker's allowance, but I leave that matter on one side; there may be some reason for it.

At all events, it is clear that there is an assumption that these limits are imposed because they are likely to generate an income which will be useful to the individual concerned instead of income support. In fact, the department's document suggests that that is not so. It says in terms that:


    “These graduated reductions are not intended to represent any return that could be obtained from investing capital. The system provides a straightforward method of calculating the weekly contribution which people with capital in excess of £3,000 are expected to make from those resources to help meet their normal living expenses".

I find that to be total gobbledegook and do not understand what the department is seeking to say. The common-sense approach is that limits are supposed to be imposed on the basis that if the individual holds this amount of capital, then he derived from it an income which is a substitute for income support. If that is so, one must consider whether the limits are now appropriate in line with what such sums of capital are likely to produce.

There are some differences in limits between different social security benefits. But what prompted me to table the amendments were the discussions we had on a previous Bill with regard to the limits for working families' tax credit where people would receive some benefit if they had an income of, in some cases, over £20,000 a year. If they have an income of £20,000 a year some contribution is made to their expenses by the Inland Revenue, but if they have capital as small as £3,000--and certainly by £8,000--the system makes no provision for them whatever at the higher limit and it is tapered between the two.

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Therefore, these amendments seek to raise the limit and to alter the taper in line with the argument that I am putting forward.

There is, of course, a traditional Treasury argument on the matter--I forget how many letters I may have signed pointing this out--which is that the first £3,000 of capital is ignored. Consequently, the implicit rate of interest on capital of, say, £3,250 is very low; indeed, I believe that the department calculates that 1.6 per cent would be the equivalent rate of interest. However, by the time you get up to £8,000, the equivalent rate of interest is 13 per cent.

I looked through the Sunday newspapers in order to consider where one might reasonably invest this meagre amount of capital so as to get an income which would justify one's social security benefits being reduced but had some difficulty in finding anything yielding more than 6 per cent. It seems quite clear to us on this side of the House that an increase is long overdue. The figures that we have selected for these amendments are arbitrary to some extent, but there are considerable cost implications involved. Therefore, it would be helpful if the Minister could give us some indication of the likely cost of such changes. We could then consider before Third Reading the exact way in which we should proceed on the matter.

For years on constituency interview nights on a Friday evening I had elderly ladies coming to see me and saying, “I have £5,000 capital and my income support will be chopped back. If I have £8,000 it will be eliminated altogether". In their hearts they feel that this is somehow their last remaining barrier against any unforeseen disaster which may befall them. Therefore, it is important for us to take that aspect into account. As I say, week after week that argument was put to one and one was tempted to say, “Well, the best thing you can do is to go on a world cruise and then come back and claim income support". But, alas, the legislation makes provision for that and, should it happen, they will be clobbered anyway.

I hope that the Minister will respond sympathetically and give us some idea of what the appropriate figures might be. As this Bill will probably be the last opportunity for some time to do something about this situation, we could then decide by Third Reading what is an appropriate change to make. I beg to move.


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