---

In his Written Statement about setting up these inquiries, the Secretary of State said that an incremental return to full boarding operations in all areas will take place. Are they now taking place? Will the Minister remind the House why it is necessary for boarding parties to undertake these operations, which have a serious restriction on free passage? Given the evidently limited expertise of those involved in the boarding operations, is this a better way of finding out whether there is contraband cargo than examining ships when they dock? Has General Fulton’s inquiry established whether the risks involved in boarding are supported by excellent or very good results?

Lord Drayson: My Lords, I can inform the House that the Royal Navy recommenced boarding operations in the Gulf on 23 April 2007. These boarding operations are very important. Considerable smuggling is taking place in the region. It is important for these operations to take place to ensure that this smuggling is reduced. These anti-smuggling operations are done under the auspices of UN Security Council Resolution 1723. The noble and gallant Lord highlighted the assessment of the risks of such boardings in the area. These are within the remit of the inquiry that Lieutenant-General Fulton has undertaken.

Lord Soley: My Lords, can my noble friend reassure me that following these reports the Government will give very careful thought to the training needs of our service personnel because, particularly in areas of trouble and where there are either tyrannical or fragile states, it seems inevitable that it will become increasingly common for our service personnel to be used in propaganda films and as hostages? The nature of the training required for all our service personnel in those areas to deal with that is profoundly important. That should be one of the lessons to be learnt from this. I hope that my noble friend can reassure us about that.

Lord Drayson: My Lords, I am grateful to my noble friend. He is absolutely right that training for after capture is considered under the inquiry. Lessons that need to be learnt in that area will be implemented. The Navy has already taken certain actions to ensure that proper training is given to all personnel engaged in operations.

Lord Astor of Hever: My Lords, these Benches also send our condolences to the families of the three soldiers whom the Minister mentioned. We are entirely satisfied with the setting up of the Fulton inquiry but have concerns about the second inquiry. Is the Minister satisfied that this inquiry will be able to name those responsible for the disastrous decision to sell the stories, whether they be in the Royal Navy, MoD public relations civilian staff or, indeed, Ministers?

Lord Drayson: My Lords, as both the review and the inquiry will be published shortly I do not think that it would be right for me to comment on their conclusions or the actions which will be taken as a result. However, I can say that we will publish in full the report of the media access review. Therefore, there will be a full opportunity to debate any lessons which need to be learnt as a result.

Lord Garden: My Lords, these Benches also add our condolences to the families of the three soldiers killed in Afghanistan. Last week was a difficult week for the multinational forces in general both in Afghanistan and Iraq. It is very heartening that the Fulton inquiry has reported so quickly, given that it comprised just Lieutenant-General Fulton and his major. It was an unusual process. Do we now expect to have a formal board of inquiry so that evidence may be taken in the normal way and that those who may be criticised for what happened will have a legal basis on which to defend themselves?

Lord Drayson: My Lords, we need to see the outcome of the inquiry. Both the Defence Select Committee and a group of noble Lords will have the opportunity to scrutinise the inquiry on a confidential basis; in this House the group will be under the chairmanship of my noble friend Lady Dean. I am not aware of decisions having been taken on the process following the Fulton inquiry. The noble Lord, Lord Garden, is absolutely right that this is an unusual process, but it was done to enable us to carry out the inquiry much more quickly than would otherwise have been the case, had we gone through a formal BoI. I believe that the House believes that to have been the right decision, but of course we will have to make sure that full opportunity is provided to all personnel concerned relating to any consequences of the Fulton inquiry.

Lord Morris of Aberavon: My Lords, without anticipating the conclusions of the inquiries, will the terms include whether there was adequate ministerial cover on those fateful days when the decisions were taken regarding publication? Will the inquiry deal with whoever took the decisions?

Lord Drayson: My Lords, I have nothing further to add to the statements that have been made, setting out in full the terms of reference for both inquiries, and the fact that the inquiries were set up immediately and were given a very clear and broad remit covering both the operational aspects, which were of fundamental importance, and the media handling where there are clearly lessons to be learnt. The terms of reference have been set out. We will be reporting on the outcomes of the reviews very shortly, and then we will have a full opportunity to debate any consequences.

Lord Lawson of Blaby: My Lords, is it not an important principle of our parliamentary democracy and of ministerial responsibility that, whatever the circumstances of the decision to allow those people to sell their stories to the press, it is the Minister who is responsible? There is no way that that can be got away from.

Lord Drayson: My Lords, I believe that my right honourable friend the Secretary of State made it crystal clear in his Statement to the other place that he takes full responsibility for all the actions of the Ministry of Defence, including in this case.

Victims of Overseas Terrorism Bill [HL]

3.07 pm

Read a third time; an amendment (privilege) made; Bill passed, and sent to the Commons.

Pensions Bill

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The LORD SPEAKER in the Chair.]

Clause 1 [Category A and B retirement pensions: single contribution condition]:

Lord Oakeshott of Seagrove Bay moved Amendment No. 1:

Clause 1, page 1, line 13, leave out “2010” and insert “2008”

The noble Lord said: Here we are again at the Committee stage of a pensions Bill. I welcome the noble Lord, Lord Skelmersdale, who, with me, was a veteran of the 2004 Bill. I speak as a player in an enthusiastic and talented string quartet that consists of my noble friends Lady Thomas, Lord Kirkwood and Lord Addington.

We on these Benches would have preferred these proceedings to have taken place in Grand Committee. This Bill will raise strong emotions and involve Divisions, but given that much technical work is needed, a Grand Committee would be a better forum for achieving consensus and for probing, particularly due to the way that the committee rooms are laid out. The Committee stage of the previous Pensions Bill was taken off the Floor of the House. It would have been easier to consider this Bill in that way because officials would have been able to be there with the Minister and many issues might have been resolved immediately, rather than going backwards and forwards. The Welfare Reform Bill worked better in that way, although some proposals were contested and major changes were made at Report. In addition, I have a pile of papers that would have been easier to deal with in the Moses Room. Those are serious points regarding the correct way of conducting our business and I hope that in the future we will think long and hard as to whether it is right to consider a Bill in Grand Committee or on the Floor of the House.

Moving on to this important Bill, we start with the issue of reducing from 39 to 30 years the period that people have to work in order to qualify for a full state pension. This is most relevant to women. Helpful background figures from Age Concern show that 17 per cent of single female pensioners live in poverty, that only 24 per cent of newly retired women are entitled to a full basic state pension in their own right and that some 40 per cent of women who are employed part-time say that their employer does not have a pension scheme, compared with 25 per cent of women in full-time employment. I am grateful for the briefing given by the National Pensioners’ Convention, Tony Lyons and Help the Aged, in support of our amendment.

Under the Government’s proposals, there will be an inevitable cliff edge in 2010. As I said at Second Reading, we on these Benches believe that a citizens’ pension should be payable to all, as of right. If that were the case, this sort of problem would not arise, but, meanwhile, we must make the best of the current situation. We invite the Minister to discuss this issue, and although we recognise that it would be very expensive automatically to apply a 30-year rule, rather than a 39-year rule, to everyone now, it would be affordable and sensible to bring forward the cut-off point to 2008. That would save a number of people from that cliff edge. I beg to move.

Baroness Greengross: I speak to my Amendment No. 5. The provision for gender impact assessments under the public duty to promote equality is welcome, and I congratulate the Government and the DWP as first department to make that provision. I also welcome very much recognition of the caring role as counting towards the 30-year qualification but, unless this is made retrospective, there will be stark inequalities between people with identical contribution records. The figures available to me—the noble Lord, Lord Oakeshott, referred to correspondence from Age Concern, Help the Aged and other bodies—suggest that this could be as much as £1,000 a year at current pension rates.

We know that the situation of today’s pensioners remains acute: two-thirds of those in poverty are women; 40 per cent of eligible people are not taking up pension credit; and 47 per cent of people eligible for council tax benefit are not taking it up. Although, overall, the Bill will mean that outcomes between men and women converge, the Pensions Policy Institute, of which I have the privilege to be president, estimates that that will not happen until 2050. By then, the projected number of people of state pension age or older will amount to 25 per cent of the population, as opposed to 19 per cent now.

In Committee in the House of Commons, the Minister said that the cost of making the 30-year requirement retrospective would be extremely expensive. The cost is estimated to be about £1 billion, yet the Government estimate that £4 billion will be saved by ending contracting-out rebates. The estimate of the value of unpaid childcare by grandparents is £220 billion and that of carers is £57 billion. In that context, how can the Minister say that £1 billion to address a significant unfairness is extremely expensive? The Government seem content to exploit the good will of families but are unwilling to give back this relatively small sum.

We know that longer life expectancy, together with changing family structures, relationships and interdependencies, requires greater recognition and greater commitment from the Government. In correspondence that I have received, concern has been raised that the current method of each year deducting home responsibilities protection from a woman’s target working life of 39 years makes a current HRP year mathematically less valuable than a year of home responsibilities payments for women retiring from 6 April 2010 onwards. Something needs to be done and I hope that the Minister will respond favourably.

Lord Skelmersdale: My amendment in this group is intended to explore the extent of the analysis relating to the decision to improve the coverage of the full state pension. However, before I do that, like the noble Lord, Lord Oakeshott, I want to say a few words. First, as a former micro-member of the usual channels, I am well aware that it is necessary to have a balance between Committee stages taken in the Chamber of your Lordships’ House and those taken off the Floor of the House. The fact that previous pensions, welfare or national statistics Bills have been held in one or the other is of no consequence as regards precedence.

Secondly, as I said at Second Reading, there is a large measure of consensus between us and the Government on the Bill. However, as usual, problems arise due to what is not, rather than what is, in the Bill. Most of the amendments in the Marshalled List for this Committee stage relate to the category of what is not in the Bill.

In speaking to my amendment, I start by making a purely probing comment. The reform in the Bill relating to state pension age has been widely welcomed and we on these Benches fully support it. However, we should take care that the Bill does not promise what cannot be delivered. It is in everyone’s interests, especially those who hope to receive a full state pension, that the extra cost to the taxpayer of reducing the required amount of national insurance contributions is affordable and that phasing in the new requirements is done fairly, smoothly and with the least possible amount of confusion.

As I understand it, the only information in the public domain, as the noble Baroness, Lady Greengross, mentioned, is in the regulatory impact assessment, which explains why the whole package of reforms that the Bill introduces will raise spending on pensions from 5.1 per cent to 7.3 per cent of gross domestic product. As we shall no doubt hear in Committee, that is still considerably less than is spent on state pension provision in other European countries. However, the increase will still have to come from somewhere and it will be necessary either to increase taxes or to reduce public expenditure in other areas. I would be interested to hear from the Minister which route the Government intend to take. If it is the latter, are there any particular savings that they have in mind already? My noble friend, Lord James, spent many months discovering many such savings when he produced his excellent report. However, the Government are hell-bent on increasing expenditure, not least in the areas of health and education, with little obvious benefit.

There are also administration costs. A total of £192 million is expected to be spent on adjusting the pension systems to the new conditions. The Government have an unfortunate record in introducing large scale administrative reform, especially where complex computer systems are involved. The report that this amendment hopes to provide would highlight any unrealistically optimistic predictions and would also be extremely valuable should the estimates not prove to be accurate. Therefore, I look forward to hearing the Minister's response.

I find the suggested timetable of 2008 in the amendment in the name of the noble Lord, Lord Oakeshott, rather optimistic. Although we on these Benches fully support the Government’s intention to reduce the required contributions to 30 years, I do not think it is feasible to introduce such change in so short a time.

Lord McKenzie of Luton: I very much welcome the opportunity in Committee to debate the detail of a Bill that has been widely welcomed. I welcome contributions from veterans of past pensions debates and newcomers, such as myself and my noble friend Lady Morgan. We are happy to engage with Members in Grand Committee or on the Floor of the House—whatever the usual channels determine.

Amendments Nos. 1, 5 and 6 all concern the keystone of our state pension reforms: namely, that to qualify for a full basic state pension there will be one single 30-year contribution condition. These amendments raise three important points: first, why the Government have chosen 2010 as the introductory year for the 30-qualifying-year condition; secondly, why we do not propose to apply the change to both existing and future pensioners; and, finally, why we do not intend to phase in this reform.

In responding to these important questions, I begin by saying that Clause 1 addresses the inequality of state pension outcomes for men and women. It will bring forward the improvement in women's outcomes in particular, with almost three quarters of all women reaching pension age in 2010 receiving a full basic state pension.

Moreover, from 2025 the proportion of women reaching state pension age with a full basic state pension will, for the first time, equalise with men at over 90 per cent. Without these reforms only around 75 per cent to 80 per cent of people would be entitled to a full basic state pension by then. It surely must be the case, though, that when changes are made a line has to be drawn somewhere. To bring that line forward from 2010 to 2008, as the noble Lords, Lord Oakeshott and Lord Kirkwood, propose, would substantially increase costs, jeopardising the overall affordability of the reform package. The estimated additional net cost would be around £50 million in 2008 and around £150 million in 2009.

Those additional costs would persist well into the longer term, so it is worth considering the practicalities. It would be impossible to bring these measures forward to 2008 because of the lead time required to make changes to both the pensions' computer system and the NIRS system. The lead time is at least 18 months. The noble Lord, Lord Skelmersdale, chided the Government on their performance on changes to computer systems. Having the proper lead time is the key to this working effectively. That lead time is similar to lead times for changes to systems in the private sector. We cannot undertake detailed design work until we receive Royal Assent, so we look forward to co-operation from Members on all sides of the Committee to get that as soon as we can. So, even putting costs aside, the earliest that the change could realistically be implemented is 2009, and the more complex the change—for example, phasing it in—the more challenging it would be.

As Members of the Committee know well, there has been much debate about the cliff-edge effect of this measure, about which I wish to say a little more. I should begin by saying that bringing forward the introductory year to 2008, as proposed the noble Lord, Lord Oakeshott, would not resolve the cliff-edge effect, but would simply move the line so that it would apply to a different group of people.

In response to the amendment tabled by the noble Lord, Lord Skelmersdale, and the noble Baroness, Lady Noakes, I acknowledge that there is much to be said for phasing in major changes in policy in order to graduate the effect whereby people are treated significantly differently on either side of a seemingly arbitrary line. That is exactly what we would have done, were there not overwhelming reasons for making these changes with full effect from 2010.

It is inescapable that the benefit of this measure is optimised if we introduce it in one hit. We are determined that these measures benefit the maximum number of people. I accept that if we were to smooth the reduction in qualifying years to 30 over a period of a few years, there would be a less stark change in outcomes either side of A-day. However, it would also mean that fewer people would benefit overall and, moreover, the critical cohort of women aged over about 45 today—who we have identified as being in particular need of help—would be most disadvantaged by such a phasing arrangement.

I assure noble Lords that we have explored options for mitigating the cliff edge either side of 6 April 2010, but we have concluded that no option provides an acceptable solution. The options are either unfair in principle or they introduce unwelcome complexity or are simply unaffordable. We believe that there are two realistic ways that this reform could be structured so as to smooth the differences in outcomes.

First, we could introduce the single contribution condition more slowly with a phased transition starting with 38 qualifying years for women and men in 2009 and reducing qualifying years in one-year steps to reach 30 in 2017. This would smooth the introduction of the reform, but would make the gains for women reaching pension age from 2010 to 2016 less generous. As a result, around 65,000 fewer people would miss out on a full basic state pension and some 45,000 of them would be the women for whom the reform is most needed.

Secondly we could make the measures retrospective, as the noble Baroness, Lady Greengross, suggested. I have some sympathy with this view as it seeks to improve the situation of today’s and tomorrow’s pensioners and would create a level playing field for those reaching state pension age either side of 6 April 2010, which is the point at which the single contribution condition in Clause 1 comes into force. On the face of it, the noble Baroness’s amendment could increase the amount of basic state pension paid to some existing pensioners and its effect for those reaching state pension age from 2010 would be similar to that of Clause 1, and would therefore make it unnecessary.

However, I should say to noble Lords that while there is admirable intent behind the idea of retrospection, we should be aware that such an amendment would not be affordable and would not necessarily achieve improved outcomes for all. The cost of introducing the proposals for all pensioners is extremely high: at least £1 billion in 2010. The noble Baroness, Lady Greengross, asked why we do not use the savings from the abolition of DC contracting out to pay for it. Over recent months, we have seen a number of references to the so-called savings from the rebate being used.

3.30 pm

I should make it clear up front that the abolition of contracting out for defined contribution schemes will not produce savings as such. While abolishing the DC rebate reduces costs in the short term, of course there is a broadly equivalent increase in future spending on the state second pension.

---