I do not think that the guidance will be sufficient to enable the complex choice of deciding between annuity products. What guidance will do is to help people to consider where to annuitise, or whether to take the cash option or to go for some kind of draw-down product. This is fine as far as it goes. People who retain an independent financial adviser pay that person to select the best annuity options for them to choose between. There are hundreds of such products, all with a lot of small print and mystifying jargon and statistics. Choice requires expert help—even, dare I suggest, for the financially literate. The independent financial adviser is an expert, with regulatory backing and examinations to pass, so they do more than offer guidance. People may pay upwards of £1,500 for that assessment of options—a steep fee, and certainly one beyond the reach of people with small pension pots. However, the fee reflects the complexity of choosing the right product for that person to meet his or her particular needs. Guidance is not sufficient to choose an annuity.

There is other evidence to support advice for choosing annuities. As was made clear in Committee in the other place, pension schemes should ensure that any brokerage service they employ on behalf of their members meets best practice in terms of providing members with an assisted pathway through the annuity process, ensuring access to most annuity providers and minimising the costs. Pension schemes have a duty to get the best possible deal for their members, or to do it themselves in-house. Such good practice can be found in pension schemes such as the Royal Mail’s and the National Employment Savings Trust. Though this amendment, we are seeking such best practice in pension schemes across the country.

The Minister said in Committee in the same speech that requiring independent advice may have the perverse result of deterring people from selecting to stay with the same savings body. It is estimated that 20% of savers remaining with their existing company get a good deal, or perhaps even better than by changing companies. However, the fact that 80% do not get such a good deal indicates to me that our amendment is required to protect savers to ensure that they do. With respect, I think that the Minister is wrong in principle. An independent broker should consider all options, including remaining with the existing provider.

In many ways, I deeply regret the need for this amendment because it acknowledges that the change needs to come from government. Offering advice is best practice in some pension saving schemes, so why do they not all do it? If the industry acted in the best interests of all savers, it would not be necessary. Sadly, the industry does not always conform to the ABI code of conduct. Despite a series of damning reports from think tanks such as the Centre for Policy Studies, and the Office of Fair Trading report published in 2013 and the FCA reports in 2014, this financial sector has refused to change and put the best interests of savers first. Government action is required; the public should be able to look to us to protect them. At a time when the House collectively agrees that this series of pension reforms should seek to rebuild trust and confidence in pensions, particularly in the private pension sector, this amendment is needed to protect consumers.

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5.15 pm

I hope that I have now persuaded noble Lords that people who turn their pension pots into an income do not shop around for the best deal because it can be complex, confusing and difficult. Guidance, however good it is, will not be enough; it may help them to decide whether to draw down, take cash or annuitise, but deciding between options for annuities will require another level of advice. Because of that it seems sensible, if the consumer is to get it right for their retirement income, to empower pension schemes to undertake their responsibilities. I hope that this proposed new clause draws on best practice and that the Government will see merit in it. I beg to move.

Lord Bourne of Aberystwyth: My Lords, I thank the noble Lord, Lord Bradley, for introducing this amendment, which we recently considered in Committee. In his speech in Committee the noble Lord explained the intent behind this amendment, as he has again today: to protect savers who put their pension savings into an annuity with the same provider they save with because of failure to shop around for a better deal. In Committee he also referred to the concept of empowering schemes to undertake the responsibility for ensuring the member gets the best deal, using their advantages of bulk buying. We can all understand the noble Lord’s motivation but, for reasons I will give, I do not think that the amendment would achieve these ends.

If the amendment were agreed to, an individual would be able to buy an annuity from their savings provider only if it was recommended by an independent annuity broker. This requirement would catch everyone who wants to buy an annuity from their savings provider, not just those who accept an annuity from their scheme without having looked for a better deal on the open market. It would also affect those who have made extensive investigations on their own behalf and who would therefore be paying a broker to tell them something they already know.

Moreover, the amendment would not protect consumers from getting a bad deal. I acknowledge that it might limit the providers who could offer that bad deal, but only regarding their existing customers. There would be nothing to stop someone getting a bad deal from an annuity provider chosen on the basis that it has a shop on their high street or appeared first on their internet search, as the annuity broker requirement would bite only if the member wanted to buy an annuity from his existing savings provider. If the broker does not recommend the savings provider, the member will not be permitted to buy an annuity from them. Are we so sure of the competence of all annuity brokers that we should, effectively, take this decision out of the hands of the person most affected by it and put it into the hands of the annuity broker?

On the idea of empowering schemes to undertake the responsibility for ensuring the member gets the best deal by using the advantages of bulk buying, there again appears to be nothing in the amendment to facilitate this. In any case, I remain agnostic on these advantages in the context of an individual choosing what to do with their pension savings. The purpose of the Budget changes is to allow the member to choose from a range of options that suit them best, based on

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their knowledge of their specific circumstances and wishes. It is not clear how schemes bulk buying annuities for cohorts of members would be able to reflect these choices.

In addition, we must always be careful of the law of unintended consequences—a law that cannot be amended by this House. There would be a real risk that members would simply stop even considering internal annuity products because of the inconvenience and delays, not to mention the extra costs involved in consulting a broker. In fairness to the noble Lord, that point was raised in Committee.

I remind noble Lords that some providers offer guaranteed internal annuity rates which can often be a higher rate than that available on the open market. We should be careful before we do anything which might deter members from taking advantage of such products. As I hope I have made clear, we agree that individuals should certainly be helped in reaching the decision that is right for them and, as noble Lords already know, we have put in place a number of ways in which this help is offered, and via the FCA we have brought forward additional safeguards thereto. However, we do not think that the individual’s decision should ultimately be constrained by others. On that basis, I urge the noble Lord respectfully to withdraw his amendment.

Lord Bradley: Again, I am grateful to the Minister for his views on this amendment, so clearly laid out. I was particularly interested in his comment that we should recognise the law of unintended consequences on this amendment. Some may consider it to be true of the whole Bill, but that remains to be seen.

Maybe the reason I am most persuaded to withdraw the amendment is that I will not have to try to pronounce “annuitise” as many times in the future as I have in the last few days. I recognise the points that have been made, and we will be debating further this afternoon matters relating to the guidance guarantee and how robust that will be in supporting people. We are particularly concerned about the number of people who remain within the same scheme and do not seek advice. We will look at that again as these matters unfold further through regulation. In the mean time, I beg leave to withdraw the amendment.

Amendment 11 withdrawn.

Amendment 12

Moved by Lord Newby

12: After Clause 79, insert the following new Clause—

“Public service pension schemes

In Schedule 5 to the Public Service Pensions Act 2013 (meaning of “existing scheme”), in paragraph 1, after “1972” insert “other than a scheme which relates to staff of the Secret Intelligence Service or Security Service”.”

Lord Newby: My Lords, these two amendments make a small change to the Public Service Pensions Act 2013 in respect of the pension schemes of the Security Service and Secret Intelligence Service to put beyond doubt the application of that Act to those agencies.

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The first amendment introduces a proposed new clause after Clause 79 to ensure that the pension schemes of the Secret Intelligence Service and the Security Service are not included in the list of existing schemes in Schedule 5 to the Public Service Pensions Act. The amendments are necessary because since the Act was passed in 2013 new information suggests that the pension schemes for those security services might fall within the Act’s definition of an “existing scheme”. As such, they would be subject to the requirements set out in the Act that their current pension schemes should close on 1 April this year, and a new scheme, reformed in line with the Government’s principles on public service pension reform, should take its place.

However, at the time the Act was drafted it was thought that the security agencies’ pension schemes fell within a different category—that of public body pension schemes. The requirements here are different. Instead of a closing date of April this year, the Government have set out an expectation that public body pension schemes will reform by April 2018. Consistent with our original understanding of their status, the Government have been working with the security agencies to ensure that a new reformed pension scheme is in place ahead of 2018.

As I am sure noble Lords will understand, it would not be possible at this late stage for the Government to change course and put in place a new pension scheme for the security agencies in time for this April. It would also not reflect the agreement the Government have with the agencies and their staff to keep the existing scheme open until 2016. As things stand, without introducing a new pension scheme in April this year, there is a significant risk that the agencies’ staff would be left without any lawful pension provision after this date. That is obviously a situation that the Government could not allow to happen. The amendments I propose today will prevent any risk that the security agencies’ pension scheme will be forced to close on 1 April 2015 and will allow the Government to continue to work with the security agencies to put in place a new reformed scheme by the original deadline. The amendments do nothing more than this and will have no wider bearing on any other public service or public sector pension scheme. The second amendment enables the new clause to come into force on Royal Assent. This is to ensure that it is in force before 1 April 2015, so the risk of forced closure never manifests itself. I beg to move.

Lord Bradley: I am grateful for the explanation from the Minister and I can assure him that I have no intention of opposing changes to the secret service’s or the security services’ pension schemes.

Amendment 12 agreed.

Clause 83: Regulations

Amendment 13

Moved by Lord Bourne of Aberystwyth

13: Clause 83, page 47, line 4, after “containing” insert “—

( ) the first regulations under section 8(3)(b), 9, 10, 11 or 21,”

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Lord Bourne of Aberystwyth: My Lords, this amendment changes the parliamentary procedure applicable to the exercise of some delegated powers contained in Part 2 of the Bill from the negative resolution procedure to the affirmative resolution procedure the first time these powers are exercised. These powers relate to exclusions from the definition of collective benefits and how schemes that provide collective benefits will operate in relation to certain key matters. The Delegated Powers and Regulatory Reform Committee recommended that the regulation-making powers in Clauses 9 to 11 and Clause 21 should be subject to the affirmative procedure the first time they are used. In response to amendments tabled by the noble Lords, Lord Bradley and Lord McAvoy, in Committee, I made clear that the Government accept that recommendation in respect of those powers. This amendment therefore places regulations made under those powers subject to the affirmative procedure on first use, as the Committee recommended. The Committee also recommended that the power in Clause 8(3)(b), allowing regulations to exclude a specified benefit from the definition of a collective benefit, should be subject to the affirmative procedure every time it is used.

I also explained when we debated the noble Lords’ amendments in Committee that the Government do not consider this to be appropriate because there needs to be flexibility to respond to new developments in scheme and benefit design that could result in benefits falling within the definition of “collective benefits” and hence becoming subject to the requirements of regulations made under Part 2 of the Bill, contrary to policy intention. Clause 8 is a key provision as it defines the scope of the provisions relating to collective benefits in Part 2. Because it is a key provision it should be subject to the affirmative procedure the first time it is used but there are circumstances where the Government may need to use this power without unnecessary delay to avoid members’ benefits being affected and to avoid schemes being subject to expensive requirements around the setting of targets, actuarial valuations and so on, which are not appropriate because other regulatory and governance requirements would be more appropriate to them. As the affirmative procedure could result in delay, leading to significant distress to members who would be without clarity as to whether their benefits were caught by the collective benefit provisions, we believe that the power in Clause 8(3)(b) needs to be affirmative on first use only. I therefore beg to move this amendment.

Amendment 13 agreed.

Amendment 14

Moved by Lord Bourne of Aberystwyth

14: Clause 83, page 47, line 4, after “containing” insert “—

( ) regulations under section 48(3)(b), or

( ) ”

Amendment 14 agreed.

Clause 84: Regulations: Northern Ireland

Amendments 15 and 16

Moved by Lord Bourne of Aberystwyth

15: Clause 84, page 47, line 16, at end insert—

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“( ) Subsection (2) applies where regulations made by the Department for Social Development in Northern Ireland contain—

(a) provision made under section 51(3)(b), or

(b) provision made under section 82 that amends, repeals, revokes or otherwise modifies a provision of primary legislation,

(whether alone or with other provision).”

16: Clause 84, page 47, line 17, leave out from “Where” to “, the” in line 19 and insert “this subsection applies”

Amendments 15 and 16 agreed.

Clause 88: Commencement

Amendment 17

Moved by Lord Bourne of Aberystwyth

17: Clause 88, page 48, line 35, at end insert—

“( ) section (Public service pension schemes);”

Amendment 17 agreed.

Schedule 2: Other amendments to do with Parts 1 and 2

Amendments 18 and 19

Moved by Lord Bourne of Aberystwyth

18: Schedule 2, page 63, line 21, at end insert—

““( ) regulations made under Schedule 17 to the Pensions Act 2014;

( ) regulations made under Schedule 18 to the Pensions Act 2014;”

19: Schedule 2, page 63, line 24, at end insert—

““( ) regulations made under paragraph 17 of Schedule 17 to the Pensions Act 2014;

( ) regulations made under paragraph 6 of Schedule 18 to the Pensions Act 2014;”

Amendments 18 and 19 agreed.

5.30 pm

Schedule 3: Pensions guidance

Amendment 20

Moved by Lord Bradley

20: Schedule 3, page 68, line 20, at end insert—

“( ) must be sufficient to ensure that the body is capable of carrying out its functions under section 333C(1).”

Lord Bradley: We now come to the very important issue of the guidance guarantee. In Committee we debated a number of significant issues that this amendment addresses. However, I would like to probe the Government a little further on the arrangements for providing guidance through Citizens Advice and the Pensions Advisory Service.

Specifically, I am seeking assurances that those two organisations are capable of delivering the guidance and that the quality of the guidance will be consistently high across the two delivery partners. Key to this is that the delivery agencies receive the funding they need to deliver a quality advice service for those who request it. The whole purpose of this is to ensure that

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when the pensions freedoms and flexibilities are introduced in April, people have the quality guidance to make the crucial decisions about their retirement income.

Guidance—not advice, which is a regulated function—will be available from April 2015 to assist all the 600,000 people due to retire next year, or those who have deferred making decisions about their annuities until the legislation is passed, together with any 55 to 65 year-olds who are thinking of cashing in their pension pot. Further demand for the service may also come from younger people as the Treasury has said that people in their 50s or even 40s may be eligible for guidance.

In the debate on the previous amendment, we talked about unforeseen consequences of the legislation. I hope— this is just a background comment—that we are not in a position that a previous Government were in in the 1980s, when we blundered into a massive pension reform without thinking through all the implications. As Black and Nobles said in “Personal Pensions Misselling”, as quoted in The Blunders of Our Governments:

“No-one looked at pensions as posing particular problems because no-one knew or thought to look”.

To her credit, my noble friend Lady Turner was pretty much a lone voice in the debate in this House in raising concerns about that Bill, and concluded in a speech on 11 July 1986 that it was “vital” that people buying personal pensions should be offered adequate protection. I am very pleased that my noble friend is in the Chamber this afternoon.

It is against this background that we still have concerns and questions about how guidance will be organised and delivered in practice. These concerns include: people who decide to cash in their pension pots or to move money into complex draw-down products when an annuity may still have been their better option; the potential for product scams and whether the introduction of the criminal offence, although welcome, will be enough to deter the proliferation of what the Financial Times called “whizzbang investment schemes”; that the Financial Conduct Authority will not be specifically regulating the guidance guarantee; that the guidance will not be comprehensive enough to ensure that people fully appreciate the consequences of the decisions they make; and that all government policy has not been thoroughly thought through and clarified, because unless the policy is clear, the guidance staff will be put at a great disadvantage.

We know now that in the first instance the Government have allocated £35 million to the guidance service to recruit around 300 staff for the Pensions Advisory Service and Citizens Advice. It is still not clear how this amount has been calculated. Has the Minister made any further assessment of the likely take-up of the guidance from the first tranche of, say, the 600,000 people who may seek such guidance? As was pointed out in Committee, there has been a huge variation in projections on this point, from the Legal & General study of 9,000 people being offered free advice but with only a 2.5% take-up, to the Chartered Insurance Institute, which predicted a 90% take-up.

Further, has an estimate been made of the proportion of people who will seek guidance by phone from the Pensions Advisory Service and those who will seek a

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face-to-face interview delivered by the citizens advice bureaux? Without such an assessment, it is difficult to understand how demand for the service will be managed by the different delivery agencies.

Next I will deal with qualifications and training. These issues have been explored well by outside commentators, including Radio 4’s “Money Box” programme, Money Marketingand other specialist pension advisers. It has been noted that TPAS is recruiting telephone advice workers at a salary of around £30,000 per annum. Applicants are expected to have five years’ experience of pension work and advice and, ideally, a relevant qualification. However, the CABs are recruiting people for face-to-face work on salaries of around £18,000 to £24,000. Applicants there need merely to be numerate, and knowledge of pensions is desirable but not essential.

Further, the Treasury has said:

“All Citizens Advice and TPAS staff delivering the pensions guidance will receive intensive and detailed technical training prior to April 2015. They will be tested to ensure they have the necessary pensions knowledge before they talk to the public. They will also have access to a programme of continuous professional improvement”.

However, Barnett Waddingham, senior consultant and former TPAS chief executive Malcolm McLean has said:

“You can train people until you are blue in the face, but they need to have a starting point of knowledge. Citizens Advice seems to think that you can take people with absolutely no pensions knowledge and train them up in a few weeks’ time. Why is it asking for such a different level of pensions knowledge to TPAS? Arguably the face-to-face service is more difficult, because you are on your own in a room with someone”.

Is the Minister satisfied that staff recruited will be of sufficient quality to deliver the service? “Money Box” suggested that the face-to-face service could be second class compared with TPAS. Will he confirm that to date TPAS has recruited only 20 extra staff. Crucially, will he confirm that the intensive and detailed technical training will be completed when the system goes live in April?

My next questions are about coverage of the face-to-face service being provided by the citizens advice bureaux. In Committee, it was pointed out that Citizens Advice has a network of some 300 bureaux across the country, but the specialist pension guidance staff would be located in only 44 offices. In the light of the International Longevity Centre study that suggested that 63% of people seeking guidance would prefer a face-to-face interview, are 44 centres sufficient to meet the demand from April? Can the Minister confirm that these are sufficient? Have the Government made any estimation of the maximum waiting time for an appointment at one of these centres? If there is a delay in getting an appointment, a decision could be made about pension pots that is not in the best interest of the customer.

Since there are only 44 centres, what is the maximum distance that a person will have to travel to get guidance, and has account been taken of the distribution of these centres for public transport for those who may need it? In terms of the day-to-day operations of the service, will the offices be open early in the morning or late in the evening, or at weekends, particularly for those people who are in employment? Further, on the

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money allocated for the service, will the Minister again assure us that the invaluable work undertaken by CAB staff for some of the most vulnerable people in local communities will not be affected by the pensions work and that no funding provided by local authorities will be used by CABs for pensions guidance? Will the Minister also confirm that each interview will last up to 45 minutes and that the designated guidance adviser, as the CAB worker will be known, will just lay out the options for the customer to consider? Will the customer after a period of reflection be entitled to further consultation, or will they then have to seek paid independent financial advice?

Will the Minister confirm what the complaints procedure will be? Will the customer first complain to the CAB and what form will that take? If it is not resolved, will it then be passed to an independent adjudicator approved by the Treasury? Can the Minister give details about how that independent adjudicator service will work? If the complaint remains unresolved, will the Parliamentary and Health Service Ombudsman then intervene, but only with the support of a Member of Parliament? Is this all correct, and will the Minister give full details of the complaints procedure? If he cannot do so today, can he tell us when it will be published?

Finally, will the Minister give us an absolute assurance that both the TPAS and the CAB service will be ready to go live from April, in barely eight weeks’ time, not only in England and Wales but in Scotland and Northern Ireland, and that there will be clarity on all policy areas so that those delivering the guidance are able to give accurate information to the customer?

At the heart of the amendment is our wish to ensure that the Bill works in the way that is intended and that the guidance will be available, taken up and prove effective in helping people to choose the right products to fund their retirement, and to make the right decisions about lump sums or other retirement income. To date, this House has been provided with too little information about the guidance to be offered. At this late stage, we must be satisfied that the guidance will be fit for purpose and will address all the issues that the public will need to consider in order to make one of the most important decisions of their lives. I beg to move.

Baroness Oppenheim-Barnes (Con): My Lords, this Bill is a very welcome reform and has been met with a good deal of justified praise. I, too, have concerns about the possibility of the citizens advice bureaux being able to take on such another role—and to do it effectively, because I have the greatest admiration for it having dealt with it over many years. Its staff are all volunteers. They do not necessarily have specialised knowledge. Those who have had training in dealing with the pensions market are scattered quite thinly, as has already been said by the noble Lord, Lord Bradley. We had not very long ago two big Bills which imposed new duties on the citizens advice bureaux, the most recent being the Consumer Rights Bill and, before that, the regulatory reform Bill. They were given extra sums of money, which were not overgenerous, because they now have to give specialised information. I know

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that big-shot financial advisers often get things very wrong and they are supposed to be experts, so a great onus is being placed on the citizens advice bureau that I am concerned about. These are very important matters; this is a very important and welcome Bill; and I hope that my noble friend will be able to say something that is helpful and pacifies my concerns.

5.45 pm

Lord Flight (Con): My Lords, I, too, have some reservations about the guidance arrangements, in two different types of area, which I hope can be put at rest. First, imagine that an individual with a pension of £20,000 goes to get guidance. Is the guidance likely to say, “Go on—pay the tax, take the money and spend it”? The main guidance will be divided between buying an annuity or entering into a draw-down. The pension might be a bit small for the mechanics of a draw-down, so one is likely to be guided towards an annuity. For the present and foreseeable future, we all know that bond yields are artificially low, and that anyone who buys an annuity today will look back in five, seven or I do not know how many years’ time, when bond yields are back to normal, and say, “My God, I got a really bad deal when I bought that annuity. I know that I cannot sue the Government because it was guidance, not advice, but it was pretty bad guidance to suggest that I buy an annuity when what it was based on—mainly bond yields—were artificially low”.

The second thing that worries me is that people will, as it were, be left in the air. Their guidance might sort out whether they would be right to buy an annuity or right to do something else, but let us say that the guidance is, perhaps, that they should leave their money in the pension scheme and draw down only when they want to. They will then need someone to manage those investments. As a result of what I believe to be the very mistaken RDR reforms, most financial advisers are not willing to take on individuals with less than a substantial sum of money. How, therefore, will the individual get from the position of government guidance on what type of product they might buy to selecting a fund manager or a fund, if they are not able to get financial advice? As a result of the contortions that we have got into in financial regulation, people cannot get such advice from the government guidance bodies because the Government cannot give investment advice. I think a lot of people will end up feeling that they are left hanging in mid-air, even if they have gone through a very good guidance process, as to where they should go to choose the right product.

Baroness Turner of Camden (Lab): My Lords, it was very kind of my noble friend on the Front Bench to mention me in his very interesting summary in support of this amendment. This is a Bill that involves a number of risks for the individual. That is one of the reasons why the individual benefiting from it should also have access to very reliable advice. That is what this amendment is all about: ensuring that the Government make quite clear that individuals have a right of access to reliable information. This has to last them for a long time, and it is on a risky basis unless they have proper guidance before they enter into it.

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Lord Newby: My Lords, this amendment relates to the funding of the Pension Wise service. It requires that financial assistance given to the service and to Citizens Advice is sufficient to allow them to discharge their function of giving pensions advice. The Government wholeheartedly agree that it is vital that delivery partners are funded appropriately to discharge the function of giving pensions advice. As I made clear in Committee, there are already provisions in the Bill that effectively safeguard that. The Bill places the Treasury under a legal duty to take appropriate steps to ensure that people can access pensions guidance. Implicit in this duty is a requirement to ensure that delivery partners are appropriately funded to deliver their element of the service.

The noble Lord, Lord Bradley, asked a number of questions, in Committee and again today, about both funding and process. I hope that I can reassure him on them.

On funding, I am happy to reconfirm that all delivery partners, especially those such as the Pensions Advisory Service and the three Citizens Advice bodies in the UK, which will rely wholly or largely on government funding, will be appropriately funded to allow them to deliver pensions guidance, and that that funding will be ring-fenced for that purpose. There is no question that Citizens Advice core grant funding from local or national government will be expected to be diverted from other activities to fund pensions guidance. Citizens Advice is very experienced in effectively managing multiple ring-fenced funding streams.

I can also reassure noble Lords that grant agreements are already in place to ensure that delivery partners are appropriately funded in the current set-up phase. That funding is coming out of a £20 million development fund that the Chancellor announced in the Budget, of which a £10 million advance was approved by Parliament last July to cover preparatory work on the service. Funding agreements for the live running phase are currently being discussed and agreed with the delivery partners.

In its guidance publication on 12 January, the Treasury set out further detail on the costs of preparing to deliver the guidance service in the current financial year, and an initial estimate of how much it will cost—namely, £35 million. Both in Committee and today, the noble Lord, Lord Bradley, asked me to give a more detailed description of what assumptions have been made to come up with that figure, because there is a wide degree of uncertainty as to how many people will take it up. I am sure that he will understand why the Government are reluctant to publish a central assumption, as it were. Inevitably, it will be less than 100% accurate and will raise all kinds of questions about whether it should be higher or lower than the figure given. All that I can say today is that we have talked to the potential guidance providers and other stakeholders, and formed a range of likely outcomes, which has informed that figure of £35 million.

I can confirm that the majority of the funding estimate will go to delivery partners. We are continuing to take on board information from delivery partners and others. I can confirm what I said in Committee, which is that we will confirm a levy figure in March, which we expect to be £35 million, or very similar. If

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the Treasury finds that more resource is needed, it will provide that resource in the forthcoming financial year and claw it back from the industry in subsequent years. So there is flexibility to ensure that we can meet demand once we see how the scheme is going.

The noble Lord and other noble Lords asked a number of detailed questions about citizens advice bureaux’s readiness for 6 April. I hope that I can reassure them on progress to date. First, delivery partners have had clarity on FCA standards since they were published last November. That provides the framework for the guidance against which their compliance will be measured. I can assure him that delivery partners and the Treasury have been working hard to ensure that the service will fully comply with those standards.

The noble Lord asked about the 44 participating bureaux. The 44 bureaux, the names of which have already been published, are the first tranche of participating bureaux. We will not limit the number to 44 across the country as a whole; that is the first tranche, and a further wave will be announced shortly. So there will be significantly more than 44, and we are still in discussion with Citizens Advice about exactly what that number should be.

Recruitment is under way, and there has been a very encouraging response so far. I understand the concerns of the noble Lord and others about training and whether, at the end of it, people will be able to give high-quality advice. The development of that programme is well under way and it will be accredited by the Chartered Insurance Institute, which is an extremely well respected professional standards body. All trained guidance specialists must have undergone training and passed the assessment at the end of the training programme.

Lord Bradley: Is the Minister confirming that they will be accredited with that qualification before the service goes live at the beginning of April?

Lord Newby: My Lords, that is the intention. I was about to say that although not every person recruited by Citizens Advice will be an expert in the field, it is recruiting at two levels, including those with relevant experience. It would, therefore, be a complete mistake to gain the impression that the Citizens Advice workforce will be made up of well meaning people who have just had a bit of training. Some will have had a small amount of training but others will be seasoned experts in the field. That has been borne out to a certain extent by the people coming forward so far.

Lord Bradley: On that point, will the customer be able to choose whether they have a specialist adviser or someone with a very small amount of training on this issue?

Lord Newby: No, I do not think that that is the intention. We believe, and are confident, that everybody will have been trained to a level at which they can give appropriate advice. It would be completely impractical and unnecessary to proceed as the noble Lord suggests. I can assure him that the Treasury is working extremely closely and collaboratively with the guidance bodies to design the service and ensure that we are ready for April. Are we confident that we will be? Yes, we are.

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The noble Lord asked a number of other questions. Could I confirm that we expect a typical advice session to last 45 minutes? Yes, we can. He asked whether people would be able to go back and get a second bite of the cherry. We have already said that that will be possible, although we hope that if people do not have all the guidance they need, directing them to the website will deal with a lot of second-order issues.

The noble Lord outlined his understanding of the complaints procedure. I believe that the way he outlined it is correct. If not, I will write to him—I need to read it first.

The noble Lord also asked about operating hours, which are still being finalised.

Baroness Hollis of Heigham (Lab): Would the Minister mind expanding a little on this? He, or certainly his colleagues, will know that as a result of cuts by the MoJ, CABs have lost 60% of their funding that has been going into legal aid. To my knowledge, this means that CABs have substantially restricted their hours, they are often unavailable on the telephone and they are offering a very reduced and spartan service, particularly in rural areas, where, at the same time, individuals cannot access through broadband any of the websites that TPAS and so on may go on to produce. Is the Minister saying that there will be enough funding, over and beyond paying the CAB advisers £18,000 a year or whatever after their training, to keep CABs open at full hours, rather than simply to mount the skeleton service that is all they can afford at the moment, thanks to the cuts by his colleague, the right honourable Chris Grayling?

Lord Newby: My Lords, I am saying that we will designate a very significant number of CAB offices to provide this service, and the funding that we will provide will allow them to meet this additional requirement without having to draw on any of their existing funds. We are not planning to operate this service through every CAB, so I cannot say how it will affect any particular one. However, the key principle under which we are operating is that the CABs which participate in giving this advice will have the funding to do it without drawing on any of their other resources.

Baroness Hollis of Heigham: I am grateful to the noble Lord for giving way. Is the Minister saying therefore that the CABs will be open all the hours necessary for pensions advice, but will still be unavailable to help people who are at risk of losing their home because they have housing benefit problems?

6 pm

Lord Newby: My Lords, all I am saying about operating hours is that they are still being finalised.

The noble Baroness, Lady Oppenheim-Barnes, expressed some concerns that other noble Lords have expressed, in particular that CAB volunteers might be expected to do this onerous job. I assure her that everybody who will be providing the guidance will be paid, so it is a rather more formal arrangement than that.

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The noble Lord, Lord Flight, talked of the possibility of people being given inappropriate advice. It is not a question of the guidance being like advice, to the extent of saying at the end of the session, “You should therefore do X rather than Y”. The purpose of the guidance is to set out the options so that people can make informed choices. He referred to people hanging in mid-air because they would not know what to do next. We hope that the combination of the guidance session and the information on the website will be extremely helpful. As we discussed earlier, the companies with which an individual already has a pension pot will have significant responsibilities to ensure that their existing policyholder takes all relevant circumstances into account. To the extent that the companies believe that the policyholder may be going off the rails, they are able to point this out to them and, we hope, guide them on to a more sensible path.

Perhaps I may conclude by quoting Gillian Guy, the CEO of Citizens Advice, speaking on BBC Radio 4’s “Money Box” last Saturday. She said:

“We are absolutely confident that our service will be up and running and … we’re really pleased that we have a role in this pensions guidance delivery, because it actually plays to our strengths in helping people understand the options that are open to them and setting them on a path where they can take decisions in a well-informed place”.

We agree. I hope that the noble Lord will feel reassured that the Government will provide sufficient funding to delivery partners to provide the guidance service and therefore feel able to withdraw the amendment.

Lord Bradley: Again, I am grateful to the Minister for his response to the many questions that I and other noble Lords have raised today. I must admit that I am not particularly reassured by the responses. I am still concerned about the level of qualification and training of the staff in CABs. This is no reflection on the CAB which, as the noble Baroness said, does invaluable work. When I was a Member of Parliament, my local CABs were superb in giving supporting advice to my constituents, many of whom I referred directly to them. This is no comment on the integrity or the quality of the CAB. I just worry that by moving into this specialist area, it will not have the level of expertise to give the proper guidance to ensure that people make the right decisions about their retirement income.

Again, while I cast absolutely no criticism on the CAB, I worry that the haste in which the service is to be rolled out—in barely eight weeks’ time—will not ensure that the bureaux are able to deliver as comprehensively as will be required, or that they have the level of staff in the 44 offices in the first instance to respond to the demand. In regard to the second tranche which the Minister mentioned, the CAB website refers to “a small number” of additional officers. Again, that concerns me when it comes to the national coverage of the scheme—there will not be a sufficient number of accessible officers to meet the demand.

I recognise why the Minister is not able to give me a take-up figure, but surely in determining what the demand will be on 7 April, some estimate must have been made. Again, I worry that if that has not been done in a very effective way, people may have to wait weeks or even months for an appointment with one of the advisers to get advice, by which time they may have

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taken a decision that is not in their best interest. The underpinning of the freedoms and flexibilities will quickly fall into disrepute because of the lack of opportunity to get an appointment and for the guidance to be in an accessible place at the time the person needs that help and advice.

A huge number of issues have been raised this afternoon across this House that still need to be properly addressed. I fear—I mentioned it as background—the problems of the 1980s; I sincerely hope that the guidance service will not quickly fall into disrepute due to lack of preparation, lack of staff qualifications and lack of coverage to meet the demands made of it. I make all those points to ensure that they are recognised by this House. We will monitor the situation closely, as will the public and outside bodies. Suffice it to say that that is what we will do. In the mean time, I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

Amendment 21

Moved by Baroness Hollis of Heigham

21: Schedule 3, page 70, line 24, at end insert—

“( ) must ensure that guidance includes the consequences of pensions flexibility on eligibility for income-related benefits and on assessment for care and support under section 17 of the Care Act 2014 (assessment of financial resources).”

Baroness Hollis of Heigham: My Lords, I would like to move Amendment 21 in the names of my noble friends Lord Bradley and Lord McAvoy and the noble Baroness, Lady Greengross, who apologises for having to leave early. I hope, as this is a modest amendment asking for guidance, that the Government will accept it. I really do. There are huge issues to be untangled.

The Government are proposing that, at 55, people should have full access to their DC—defined contribution —pots, without, I believe, fully considering how this affects entitlement to means-tested, income-related benefits, IRBs, as well as payment for social care. Clearly, if a warehouseman of 56, earning perhaps £20,000 per year and living in private rented accommodation with a DC pot of £25,000, in future extracts £8,000 of it to buy a new car, that £8,000 will count as extra income in that year. Some of it will be taxable and it will affect any income-related benefits he may have, such as housing benefit. Obviously, guidance is absolutely essential, so that people with modest pots understand this. Taking some capital from their DC pot adds to their income—no question. It can both be taxed and affect any benefits.

So far, so simple—sort of. But what if our warehouseman can access the £25,000 in his pension pot but chooses not to do so, so that it sits there as capital? The social security capital rules of people of working age are clear: you are allowed £6,000 of savings without affecting your income-related benefits; from £6,000 to £16,000 your savings are assumed to generate an additional income of £1 for every £250 of capital per week; more than £16,000, you lose entitlement to means-tested benefits altogether. If, therefore, our warehouseman has savings, say, in an ISA worth £25,000, he has to spend down £10,000 of that to become eligible, say, for some housing benefit.

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The question then is: what counts as accessible capital or savings such that they affect working-age benefits? Not your home—I will not raise issues of equity release here—nor an inaccessible pension pot; but savings accounts, unit trusts, stocks and shares, and ISAs do count, sensibly, so that one cannot shelter large savings, say of £100,000, while claiming taxpayer-funded benefits. The rules are there for a purpose. If you deliberately deprive yourself of capital—perhaps buying that Lamborghini—in order to claim housing benefit, you are treated as though that capital is still available to you.

However, from April you can access your DC money purchase pot at 55 in exactly the same way as you can access your ISA. Both pensions and ISAs are tax privileged. From 55, the only difference will be that with pensions you get tax relief when putting money in, and with ISAs when taking money out. Growth in either a pension or an ISA pot is tax-privileged in exactly the same way.

We know, however, that £25,000 in an ISA pot debars you from IRBs. What will happen now to a £25,000 pension pot equally accessible at 55? Under the existing rules on social security, having such a pot should stop you claiming IRBs until you have spent it down to below £16,000. Our warehouseman, who after 20 years with the same firm injured his back at 53, gets ESA and housing benefit, but at 55, because he can access his DC pot of £25,000, exactly like ISAs, he should lose his benefit—until, exactly like ISAs, he has spent it down to £15,000, whether or not he actually takes money out of the pot.

However, the Government do not like that; it rather spoils the pensions party. So they seek—irrationally, in my view—to treat pensions and ISAs differently, because, as the letter to me of 22 January from the noble Lord, Lord Bourne, of which other noble Lords have also received copies, states:

“The key difference between the classification of pensions and ISAs rests on the tax treatment. Pensions have never been taxed, and so are effectively deferred income which has yet to be taken. As the primary purpose of pensions is for retirement, this is not assumed to generate an income until pension credit age. ISAs on the other hand are treated as capital rather than income, because they have been saved for out of already-taxed income. Although ISAs and pensions may appear more similar in the light of flexibility, they remain fundamentally distinct”.

But they do not; the argument is patently absurd. The key difference between pensions and ISAs in the past has not been their tax treatment, which is effectively identical if you are a basic rate taxpayer, both in work and in retirement, with the same tax relief on the way in and on the way out. That makes no difference at all, despite the letter from the Minister. The key difference has always been that ISAs are accessible and pensions are not. Because ISAs were accessible, they counted—rightly, in my view—against income-related benefits. Because pensions have not been accessible but were ring-fenced for retirement, they rightly did not count against income-related benefits.

The Minister says that the primary purpose of pensions, and therefore the reason for treating them differently from ISAs between 55 and 65, is that they are for retirement. That is true now, but it will not be after April 2015. That DC pot of £25,000 can be used

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at 55 for anything—buying a car, helping a daughter with university fees or helping a son with a mortgage deposit—just like ISAs. The pension pot can be wiped out by 65 even before you hit retirement—just like ISAs. Equally, the pension pot and the ISA pot made by choice both remain untouched until 65—just like ISAs. There is no difference. To argue that they have a different purpose because “pensions are for retirement” is whistling in the wind. DC pensions need no longer be for retirement at all; they are just like ISAs. Much of the research so far suggests that some people will treat them in practice exactly like ISAs and use them for whatever they see fit. For the Government to treat them differently makes a mockery of fair and consistent rules in social security.

6.15 pm

But hold on; it gets worse. My warehouseman is in work at 53 but his back is troubling him badly and, in the next year or two, he fears that he will have to stop work and need to claim employment support allowance and housing benefit. Because he has worked in a firm for 15 or 20 years, he has £25,000 in ISAs and £25,000 in his pension pot. His ISAs, though not his pension pot, stop him getting benefits—ESA and HB—so, as we have seen, he will be incomeless. So he transfers all his ISAs into his pension before he is 55 and thus shelters £50,000 in his pension pot, any pound of which he can access at any time after 55, just like his ISAs in the past. Meanwhile, having sheltered that amount, he gets full income-related benefits if he needs them, as though that pension pot did not exist. He has lost no access and gained full IRBs, such as housing benefit.

Some 17.5 million people have ISAs; some 4.5 million people have DC pots. It is a no-brainer. Shelter your ISAs or any other savings by cycling them into your pension pot, especially if you rent privately and might be glad of some housing benefit because you are on a low income. Up goes the benefit bill. So either pensions are treated, after 55, like ISAs and people lose their income-related benefits, or they are treated differently, in which case the taxpayer may foot a large increase in benefit payments at a cost to us all.

But hold on; it gets still worse. My warehouseman at 56 has so badly damaged his back that he has, alas, become confined to a wheelchair. He is semi-paraplegic and needs social care and support. According to the Care Act 2014, this is currently means tested by the local authority. How will he be assessed for its cost? My noble friend Lord Hunt pressed this earlier, and the noble Baroness, Lady Jolly, replied on 12 January 2015. Her letter may assume that all those needing social care are pensioners, though the Act simply talks about adults and makes no distinction about what age one may seek social care. The letter makes it clear that, under Section 17 of the Care Act 2014, social care benefits will be income related—in other words, means tested.

So, if my warehouseman puts his pension pot into a savings account, under the Act this is taken into account for social care. However, if, after 65, he does not access his pension, the local authority will still treat his pot as generating income as though he has turned it into an annuity and he will pay towards his social care. So if my warehouseman at 55 needs only employment and support allowance, his pension pot

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does not count—but, if he is more severely injured and needs social care, under this Act his pension pot must count as income and he has to pay. With a lesser injury, he gets full income-related benefits but, according to the Care Act, with a greater injury, he has to pay income-related social care. Is that fair?

Or does he? Are the Government going to have different rules for paying for social care before and after retirement? At 55 pensions do not count, even though you can access them, but at 65 they do, even though you have not accessed them. The elderly—anyone over 65—needing social care get hit and have to pay for it, whether they have accessed their pension or not. However, those of working age over 55 who could access their pension but have not done so and need social care, do not. This is simply because the untouched pension pot is not taken into account for social care between 55 and 65, but is after 65. So will my warehouseman in a wheelchair have his pension excluded until he is 65 and then suddenly be hit with social care bills thereafter? If the same social care is offered throughout from the age of 55 to 65 and from 65 thereafter, does this not amount to age discrimination and is it not illegal under equalities legislation?

This is a complete mess, and frankly, the Government should be embarrassed. They are tearing up the rulebook on the treatment of capital within DWP by tearing up the rulebook on access to pensions in HMRC. Once the Government have finally got their head clear, when we may have some consistent policy between DWP and HMRC, may we hope that that same luminous clarity will be conveyed in guidance to those millions who may be affected to their detriment and who do not know what to do? That guidance is essential. I beg to move.

Baroness Drake: My Lords, this amendment addresses the need for the Government to make savers aware of the interplay between pension freedoms, entitlement to income-related benefits and assessment for care and support. Pension reforms give rise to a significant risk that those with modest incomes will be overtaxed when they take cash out of their pensions—a concern shared by the FCA, the Pensions Policy Institute and the International Longevity Centre.

In the face of complexity, people get security from taking cash and putting it in the bank. They may not understand that that could result in their facing a significant tax bill, generating less income for their retirement. However, that is not the end of it. Savers accessing the cash from age 55 may not understand the risk of depriving themselves of income-related benefits. Some savers therefore risk both moving into a higher tax band than normal and paying unnecessary income tax, and losing benefit income because cash in the bank means loss of entitlement to benefits.

For pension savers below the state pension age who are claiming income-related benefits, the DWP will not take into account their pension savings if they do not access them. Once they do, however, the funds accessed will be treated as income, such as an annuity, or capital, depending on how they take them; the rules are different. Savers receiving benefits—such as housing benefit, council tax deductions, income support and income-based jobseeker’s allowance—could therefore experience benefit loss if they take significant cash out

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of their pension pot. For example, and as my noble friend explained, under current rules, anyone below state pension age with capital below £16,000 can apply for housing benefit. When an individual’s wealth goes above £6,000, they will start to see a reduction in benefit, and once it reaches over £16,000 it will stop completely. Reductions in council tax operate on a similar principle.

For pension savers above the state pension age, under the new freedoms, as now, pension savings are taken into account when assessing entitlement to benefits —whether or not the saver has accessed them. Defined contribution pots are given a notional income, or the actual income taken from the pension pot is used. Under the new freedoms, a saver, through income draw-down, can keep varying the amount of cash that they draw down. As it is not a single decision, will people have to report every time they access their savings?

If the saver takes all of their pension pot in cash—not to behave irresponsibly but to put it on deposit in their building society—they might meet a loss of entitlement to benefit. The noble Lord, Lord Newby, in his letter to my noble friend Lady Hollis, states:

“We believe that people should use their funds responsibly if the alternative to doing so is claiming income-related benefits”.

I completely agree with that sentiment. However, that message has not been communicated clearly to people on income-related benefits or to those who are potentially on those benefits. It has been lost in the “Your Money, Your Choice” promotion. Pension savers who take the cash and put it on deposit may not believe that they are behaving irresponsibly. As Martin Wheatley of the FCA observed: when faced with complexity, people prevaricate. If the simple option of just taking the money and putting it in their bank is given to them, they may just make that snap judgment.

Where savers take the cash and go on a spending spree, they risk being caught by the “deliberate deprivation of assets” rule, which is meant to stop benefit abuse. I will paint a scenario. Complexity and behavioural bias push people towards taking cash. They are overtaxed and the value of their savings falls. The cash, put responsibly in the bank, results in a loss of benefit income so the real value of their savings falls further. If they spend their capital too aggressively they could be caught by the deliberate deprivation of assets rule. One could say that it was their freedom of choice: they made the mistake and took the cash and put it in the building society; or they blew it, so they should not be allowed to fall back on the state. However, we should at least make sure that people understand that. I am pretty confident that most people out there do not have a clue on the interface between the benefit system and the pensions freedom. If the Government want them to make an informed choice, they are entitled to and need to know.

How does one police the new arrangements? Does the DWP have the capacity to keep track of how pension cash has been spent? Will providers have to keep records of savers’ behaviour, and for how long? What if someone takes their savings in cash in their 50s, when working, and there is a long gap between taking it, spending it and seeking benefits? What evidence will be used for determining deliberate deprivation? Will it include

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taking too many cruises? The Government’s policy and rules need to be clear and people need to have clear information so they can take informed decisions. I do not demur from the sentiment explained by the noble Lord, Lord Newby, but at least allow people to understand how they discharge responsible behaviour.

There is also a lack of clarity on how the Government’s pension freedoms are intended to complement their policy on the provision of care and support. I have not seen any analysis that has worked through the subtleties of that interplay. Rather, as the noble Baroness, Lady Jolly, confirmed in her letter to my noble friend Lord Hunt, the Government’s view is that the impact on care and support in the longer term is difficult to assess, because it is difficult to predict how people will behave under the new freedoms. The Government have therefore chosen a practical response on how people will contribute to the cost of care. In essence, people will be charged and assessed on the basis of their assets at the point of needing care. Cash taken from pension pots is an asset to be taken fully into account. If a saver has an annuity, that income will be taken into account. If the saver has not accessed their funds, a notional income will be calculated. These are complexities which have to be explained to the saver who is looking to make an informed decision. On the one hand, if people take all their pension fund in cash and put it in a savings account, it could be utilised more quickly when paying for care. On the other hand, if people do not take an annuity and spend their pension cash quickly, they will make less of a contribution to the funding of social care costs. This presumably has policy implications for any Government.

How will access to cash from income draw-down products be monitored or required to be taken? If draw-down is to be treated as income, could you take such a little tiny bit that you protect your pension assets and have a minimal amount taken into account? I do not have a clue and I am sure most people do not either. Will the rules require you to take a certain amount from your income draw-down product when you are being assessed for care support? I do not want to get into debate on government policy, but people need clear information on what the policy and rules are so that they can make informed decisions.

6.30 pm

Lord Bradley: I will be brief as I cannot better the brilliant analyses of my noble friends Lady Hollis and Lady Drake on the interrelationship between the pension freedoms, income-related benefits and care costs. The only point I want to emphasise relates to our previous amendment on the guidance guarantee—namely, it is critical that there is absolute certainty and clarity of policy in this area to ensure that those who are giving guidance to customers are consistent and clear about what that guidance should be. I look forward to the Minister’s detailed response to the analyses of my two noble friends.

Lord Newby: My Lords, I hope that noble Lords will forgive me if I concentrate on the amendment. First, the Government believe it is right that the content of the guidance session is set out in FCA standards which are unfettered by a restrictive legislative framework.

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The FCA consulted on these standards last year and published its responding policy statement, including a near-final version of the guidance standards, in November last year.

Baroness Hollis of Heigham: I apologise for interrupting the noble Lord quite so quickly, but the amendment was not meant to refer solely and exclusively to face-to-face guidance that may or may not be offered by the CABs or TPAS. What I am talking about is a government leaflet, the content of which should also be on a website, explaining in very plain English exactly what all these interactions mean, and therefore allowing people to reflect on those before they then go off to the CABs to decide what is the best thing for them.

Lord Newby: My Lords, I remind the noble Baroness that there will be three strands of guidance: face-to-face guidance; telephone guidance; and information on the Treasury website. Perhaps we will produce a leaflet, but we hope that much of the detail of the background to the way in which the system will work will be on that website.

Baroness Hollis of Heigham: I am sorry to press this, and the noble Lord is being very generous in allowing me to intervene again. However, after following this Bill through, I do not know how these provisions will interact. I do not know whether it is okay to recycle your ISAs into pensions and carry on claiming full income-related benefits. This is not about guidance from the CABs. Unless the CABs know whether you are allowed to recycle your ISAs into pensions, how the hell can they give anybody any advice?

Lord Newby: My Lords, I will come to that. I shall deal with the amendment first because it raises an important point in itself before we get to some of the broader issues.

As I say, the FCA consulted on the guidance standards last year, and published its policy statement in November. The near-final FCA standards make certain specific requirements with regard to both collecting relevant information and providing certain types of information. Ensuring that consumers consider factors which are pertinent to their retirement decision, as relevant to them, is an important part of that which the standards capture. The standards require that, according to consumer needs, people are encouraged to provide relevant information about their financial and personal circumstances and their objectives to ensure that they can get maximum value from their guidance experience. In terms of financial information, this might include pension pots or benefits, other sources of wealth or income, including where the individual has a spouse or partner, tax status and debt. In terms of personal circumstances, this might include whether an individual has dependants, or a spouse or partner, and the state of their health and potential long-term care needs. In terms of objectives, this might include the consumer’s plan for retirement, so they can identify their income needs.

The noble Lord, Lord Bradley, spoke to this issue in Committee and asked about the effects of the new flexibilities on eligibility for income-contingent benefits

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and social care. That has been the burden of other speeches today. This is an extremely important issue and one to which the Government have given, and continue to give, detailed consideration. It is important that the treatment of such products is clear for claimants and for decision-makers, as noble Lords have pointed out. On guiding principles, the Government want to ensure that someone’s decision to use a flexible pension product does not significantly impact on how their means are assessed for social security purposes or social care charging purposes.

Our intention is for the principles of the current rules to remain in place after April this year. At the last Autumn Statement we announced a change to the notional income rules for benefits from April 2015, so that 100%—rather than 150% as now—of the income that an equivalent annuity would offer is taken into account. This will therefore be a more generous calculation than under the previous rules. Guidance will be tailored to an individual’s circumstances and give consideration to issues such as welfare, the need for and future likelihood of social care, and levels of savings and debt. However, where it is clear that consumers need specialist help, they will be directed to relevant specialist guidance and information as appropriate. In the case of social care needs, the guidance service will direct people to their local authority, which, under the Care Act, is obligated to direct them to sources of information and advice.

Benefits entitlement will be one issue for individuals to consider in making their choices, but it is only one of several important factors, such as tax consequences and personal circumstances. As we discussed on tax, there is a special requirement on pension providers to discuss with customers the potential tax implications of the course that they might follow. I can also reassure the House that the guidance service will ensure that consumers also consider relevant issues related to pension decisions, such as state pensions, debts, and other assets, wealth and income. The Government are committed to ensuring that individuals are equipped and empowered to make informed decisions on how to use their pension savings and to take account of these wider circumstances.

On the amendment, the guidance will include benefits. The problem that the noble Baronesses so eloquently described, particular concerning ISAs, is that there are a number of extremely detailed interactions between the savings options and the benefits and tax consequences that will need to be dealt with as part of the guidance. The concern expressed by the noble Baroness, Lady Hollis, which I completely understand, is that the Treasury and DWP will not get their act together and are not up to the job of doing this. Unsurprisingly, I am significantly more confident than she is. She has begun a correspondence with the DWP on the ISA issue; an e-mail from her to the department is awaiting a response. I can give her an assurance that she will get a detailed response in writing to the questions she has raised between now and Third Reading.

I am not seeking in any way to diminish the fact that potential areas of confusion might arise in particular cases. The challenge that we have accepted, and hope that we can rise to, is to ensure that the guidance and

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the people providing it will be able to guide people through some of these thickets. If it were not complicated, we would not need to go to such lengths to set up a guidance system in the first place. We are confident that we will deal with these issues, and that people, as they take up guidance, will get the information they require to enable them to make informed choices.

Baroness Hollis of Heigham: My Lords, the Minister’s answer—this is of course not personal; he is dependent on the briefing and the current state of the consideration in the two departments—frankly has appalled me. It is shocking. We are eight weeks away and apparently the two departments have not yet worked out the different rules for the treatment of ISAs and pensions. Are you allowed to cycle your ISAs into pensions to protect them but see the benefit bill go up? Answer: we know not.

We seem to have different rules for social care for those below 65 and above 65—above 65 you will pay, but below 65 you need not. A capital asset is essentially your pension. Is that right? We do not know. We do not know whether we will have fairness between people of a generation—those aged from 55 to 65—or whether we will have intergenerational fairness between those below 65 and those above it.

This is not about guidance; it is nothing to do with guidance at this stage. It is about getting the darned policy right. The policy has not been established. On all the difficult issues, the Government have said, “Have your choice and don’t worry about the small detail”. I am sorry but something like 15 million people are out there who in one way or another will be getting income-related benefits or state pension who need to know. We are eight weeks away and the Government, in the Minister’s words, say these issues are under “detailed consideration”.

This is awful. I have never seen anything of such significant importance to individuals in all my time—20-odd years in social security—or of such sizeable financial implications for taxpayers. We are eight weeks away and we have no clarity of policy that could therefore inform guidance. Writing guidance down and sending it off to CAB and TPAS is easy. What matters is getting the policy straight, and as far as I hear from the Minister tonight the Government have not even begun to do that. It is frankly appalling. I do not blame him. He is obviously a messenger—if I may use that word impertinently—from the DWP and is trying to put the best case he can, but this is shocking. I am sorry that unless he can tell us the policy answers to the questions raised by my noble friends and me tonight this has to be further explored at Third Reading because, as he said, it is under “detailed consideration” and he cannot give answers now.

All that the Minister has so far are inconsistent and contradictory policies, whether they come from HMRC, social care or the DWP. Even though he has had plenty of notice, he has been unable to put those bits together into a jigsaw so that we can even begin to recognise the picture on the box. Eight weeks away! He must be mortified. I would be if I had come to the House with that brief. I hope that, as a result, he will stamp his foot, and we will see whether he is in a position to give clarity of policy, following which there may then

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possibly be clarity of guidance on Third Reading. If not, I strongly suggest that he postpones Third Reading until the Government have got their act together. In some anger, I withdraw the amendment.

Amendment 21 withdrawn.

Amendment 22 not moved.

Amendment 23

Moved by Lord Bradley

23: Schedule 3, page 80, line 37, at end insert—

“Pension flexibility: Treasury review

(1) The Chancellor of the Exchequer shall, within a period of 18 months from 6 April 2015, publish and lay before both Houses of Parliament a comprehensive review of the impact of pension flexibilities.

(2) The information published under subsection (1) must include—

(a) the distributional impact, by income decile of the population;

(b) a behavioural analysis;

(c) an analysis of the cumulative impact on Exchequer revenues;

(d) an analysis of the impact on the purchase of annuities.”

Lord Bradley: I will be brief on this amendment because I share the concern of my noble friend Lady Hollis about the previous amendment, and I do not want to delay the Treasury Minister stamping his feet to get it sorted out as soon as possible.

This group contains amendments which, in their various ways, require the Treasury to publish updates on the key fiscal and behavioural effects caused by the freedoms and flexibilities introduced in this Bill and in the Taxation of Pensions Act. I wanted to return to the debate that we had in Committee and see whether this time I could convince the Minister of the importance of doing so. I hope that I am not unfairly characterising his argument in Committee by saying that the essence of it was that this is not necessary because the relevant data will be published elsewhere. He said that,

“there is no need, in the Government’s view, for further reviews of the Exchequer impacts of the policy as the Government have already committed to keep these under review through the usual processes”.—[

Official Report,

12/1/15; col. 576.]

There are two reasons why I still believe that these amendments represent a good additional way of tracking the effects of the policy. The first is that while the relevant data may be published elsewhere, a single document containing the Government’s assessment of the effects, specifically of the new freedoms and flexibilities, would be a welcome addition and require the Government to focus on the overall effects of the policy.

The Government are fond of talking about how significant and novel the changes are. In the foreword to the recent update the Chancellor wrote:

“The government is introducing the most radical changes to pensions in almost a hundred years”.

It is therefore incumbent on the Government to go further than before in thoroughly monitoring the effects and ensuring the public have easy access to the information.

27 Jan 2015 : Column 169

6.45 pm

The second reason is that other types of analysis are required by these amendments that may not be covered by the usual Treasury documents. For instance, we are specifically requesting that the Government conduct analysis on the use of salary sacrifice arrangements. It is still not clear whether the Government had properly thought through the potential loss of tax revenue that could result from these arrangements. The updated figures the Minister was kind enough to provide in Committee confirm that the Government revised up the amount of tax that could be lost in this way—after putting in place the £10,000 annual allowance—once a pension has been flexibly accessed. That rather suggests that the first estimate did not include salary sacrifice because if it had then the introduction of the allowance should have led the tax leakage figure to be revised down. I gave a specific example of this in Committee and would be grateful if the Minister would confirm again that the scenario I outlined has been fully recognised in the Government’s calculations. These amendments also require the Treasury to publish analysis on the behavioural effects of the changes and the effect on the annuities market, which I do not think would be part of the usual process of review, although I am clearly happy to be corrected.

Once more, I urge the Minister to reconsider the Government’s opposition to conducting the analysis outlined in the amendment. It is reasonable and proportionate given the speed with which these profound changes are being implemented and will help to ensure clarity and transparency of the effects of the policies, both inside and outside Parliament. I beg to move.

Lord Newby: My Lords, these amendments would require the Government to publish two reviews of the impact of pensions flexibility. I will explain again to noble Lords why the Government believe that they are unnecessary. First, on the issue of the request for distributional analysis,

“by income decile of the population”,

Amendment 23 seeks to require that the Government review the distributional impact of pensions flexibility no less than 18 months after the Bill takes effect. As set out during debate on the Taxation of Pensions Bill, pensions flexibility does not have a direct consequential impact on household incomes. Distributional effects will be driven by the choices individuals make about how and when to take their pension. In addition, household income is not necessarily a reliable measure of pension wealth, particularly in the years immediately prior to retirement. It is possible that the impacts of this policy could be misrepresented if we were to review them only against the distribution of household income.

Turning next to the issue of behavioural analysis which we discussed in Committee, the costing of tax policies often takes account of how individuals will behave in response to them. The assumptions that underpin this behavioural assessment and the methodologies used to arrive at them are certified by the independent OBR. The assessment of how people will behave is, of course, fundamental to the costings that the Government published in the Budget for the impact of pensions flexibility on the Exchequer. The policy costings note

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published alongside the Budget sets out in detail how the figures have been calculated and so how the Government have estimated the number of people who will access their pension flexibly.

Although I will not describe that methodology in detail here, it is freely and publicly available. Additionally, the Government have set out information elsewhere on the number of people they expect to access their money flexibly. The Tax Information and Impact Note published at the Budget and updated since states that the Government expect,

“around 130,000 individuals a year to access their pension flexibly”.

Policy costings notes set out the assumptions and methodologies underlying costings for tax and annually managed expenditure policy decisions. This practice was established at the June Budget 2010 and reflects the principles outlined in Tax Policy Making: A New Approach, published alongside the Budget that year. This publication is part of the Government’s wider commitment to increased transparency. However, as discussed in Committee, the Treasury considers that in certain circumstances—usually regarding tax-planning and avoidance—making more detailed behavioural assumptions public can have the potential to affect the behaviour they relate to, and can as such be potentially detrimental to policy-making. I reassure noble Lords that the Government will be closely monitoring the behaviour of individuals through tax data when the new system comes into force. This will also be made public through the significant amounts of data on tax receipts and liabilities that HMRC publishes annually.

Both these amendments would also require reviews of the effects of pensions flexibility on the Exchequer, including the impact on income tax, national insurance contributions and the use of salary sacrifice arrangements. When considering this, it is important to note that at the Autumn Statement the Government published estimates of the Exchequer impact of the policy as a whole. These costings, which were certified by the independent Office for Budget Responsibility, cover all the changes made to the policy since the Budget as a result of consultation.

As noted earlier, table 2.1 of the Autumn Statement document set out the total impact of these decisions publicly. After debate on this subject in the other place during the passage of the Taxation of Pensions Bill, the Financial Secretary to the Treasury wrote to the former committee for the Act, setting out these impacts. This included costings for the £10,000 annual allowance, which the Government have introduced to protect the flexibilities from being used by individuals to gain unintended tax advantages.

Turning first to the issue of salary sacrifice, as I explained in Committee, the costings published as part of the Autumn Statement are based on the same central assumptions that underpin the costings published at the Budget. Since the Budget, the Government have explored in more detail the effect of salary sacrifice on this costing. These costings have been scrutinised by the OBR, which was created to provide independent and credible analysis of the public finances. In line with standard practice, these are accounted for as changes to the forecast and so are not outlined in table 2.1 of the Autumn Statement document.

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In recognition of the concern raised by Members in the debate on the Taxation of Pensions Bill about the likely impact of salary sacrifice on the Exchequer, the Government’s estimates of these costs were included in the letter sent by the Financial Secretary, and I outlined them in Committee. As the Financial Secretary stated in the debate on the Taxation of Pensions Bill in the other place, the Government will be closely monitoring behaviour under the new system and will work closely with industry to ensure that the system remains fair and proportionate.

The Government therefore believe that there is no need for further legislation in relation to reviews of the Exchequer impacts of this policy, as the Government have already published a significant amount of information and have committed to keeping the Exchequer impacts under review through the usual processes.

Amendment 23 contains a provision that would require that any published review include any impact the pensions flexibility measures might have on the sale of annuities. Data on annuity sales will continue to be available through other channels, such as the data published by the ABI and publications by individual firms. For the Government to review this would be an unnecessary duplication of information already in the public domain.

As I have set out, much of the information requested by this amendment is already in the public domain, published as part of the fiscal process. I hope that that will satisfy the noble Lord. He asked me a specific question about whether his assumption in Committee was correct. I believe it is; if I am wrong, I will write to him. But in the mean time, I hope he will withdraw his amendment.

Lord Bradley: I am grateful to the Minister for his response, particularly on that last point about the example I gave in Committee regarding salary sacrifice. I accept his assurance that, as far as he is aware, all possible scenarios in relation to salary sacrifice have been taken into account in the calculation of impacts on Exchequer revenues, and thank him for his offer to write to me if that is not comprehensively covered by the point I made in Committee.

I am obviously disappointed that the Minister is not prepared to bring all the issues together into one coherent document that would be available to the public and to Members in both Houses of Parliament for ease of analysis of that information. However, I am pleased that he has assured us that, as part of the process of monitoring, the behavioural effects will be taken into account, because the consequences of all these changes need to be very closely monitored. But, in light of the time and the urgency with which he needs to address many of the issues raised today on Report, I beg leave to withdraw the amendment.

Amendment 23 withdrawn.

Schedule 4: Rights to transfer benefits

Amendment 25

Moved by Lord Bourne of Aberystwyth

25: Schedule 4, page 83, line 5, at end insert—

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“( ) provide for this Chapter not to apply in prescribed circumstances in relation to a member of a prescribed scheme or schemes of a prescribed description;”

Lord Bourne of Aberystwyth (Con): My Lords, this group of amendments is required to ensure that the transfer provisions contained in Schedule 4, which replace provisions under the Pension Schemes Act 1993, continue to operate effectively. The amendments will also ensure that the regulations being adjusted to take account of the new transfer rights that we are creating operate correctly. It may appear that we are taking a range of additional regulation-making powers, but I reassure noble Lords that that is not the case.

Many of these amendments will enable the continued operation of regulations that have been created under existing powers in the Pension Schemes Act 1993 and their adaptation for the new transfer provisions. These regulations were created under a broad power in the Act to modify or disapply the transfer provisions. This power related to salary-related schemes. As this term will no longer be used, that section of the legislation was removed. However, the regulations that flowed from it still need to operate in the broader regime that we are now creating. Rather than replace the broad power, these amendments introduce a number of more specific powers so that it is clearer in the primary legislation what the regulation-making powers are being used for.

I will now briefly set out what each amendment does. Amendment 25 restores an existing power to ensure that the Transfer Values (Disapplication) Regulations continue to have effect by creating a new limb to new Section 93(10) to provide a power to disapply the right to transfer in prescribed circumstances in relation to a prescribed scheme or a member of a prescribed scheme. It is necessary to restore this power to ensure, for example, that the current provisions relating to NEST and transfers continue to have effect. Amendment 33 makes identical provisions for the corresponding Northern Ireland legislation.

Amendment 26 will allow the continued operation of the regulations that give a member more time to make a decision about their transfer if their cash equivalent value has changed—for example, due to a mistake in the original calculation—after they have received their statement of entitlement. From April, members with safeguarded benefits will be required to take “appropriate independent advice” before their transfer out can be processed. This amendment would allow regulations to provide for more time to apply for a transfer if they do not obtain their financial advice within the usual three-month period, should this prove necessary. Amendment 29 will allow regulations to make corresponding time extension provisions for trustees to do what is necessary to give effect to their members’ wishes.

Amendment 27 provides a power to allow the continued operation of the transfer regulations that enable a member to choose whether to proceed with a transfer where the amount of the cash equivalent shown in a statement of entitlement is subsequently increased or reduced.

Amendment 28 makes a consequential amendment to the existing legislation that sets out when a member’s right to a transfer falls away. It puts beyond doubt that the right to a transfer value falls away either after three months or after any extension period granted by the legislation. This amendment has been made in response

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to industry concerns that the current situation could place trustees in a conflicting position where they could not action the transfer, as the advice had not been obtained within the relevant period, even though, in theory, the right to transfer still existed.

7 pm

Amendments 30 to 32 deal with pension credit members who have acquired pension rights in a scheme following a divorce settlement. Amendment 30 restores in part an existing power by adding a power to the provisions dealing with pension credit members; that is, those who have rights in the scheme as a consequence of a court order made on divorce or dissolution of a civil partnership. The power allows regulations to disapply the right to transfer in relation to persons of prescribed descriptions. An identical power was inserted into the legislation by the Pensions Act 2008 but was inadvertently omitted in the current legislative changes and is now being restored.

Amendments 31 and 32 provide that pension credit members may be granted additional time, in prescribed circumstances, to complete the various steps of the transfer process. This will ensure that pension credit members have time to obtain the “appropriate independent advice” where they wish to transfer safeguarded benefits to a scheme that will provide flexible benefits and receive parity of treatment with members under regulations. Amendments 34 to 39 make identical provisions for the corresponding Northern Ireland legislation.

The amendments will ensure that the transfer process continues to operate smoothly for members and scheme trustees after April, when the new transfer requirements come into force. I hope that I have reassured noble Lords that these are not a whole new set of regulation-making powers, but rather allow existing regulations, suitably adapted, to continue to operate. I beg to move.

Lord Bradley: I am grateful to the Minister for his explanation. Clearly, it is important that the transfer provisions smoothly flow between this legislation and previous legislation to safeguard people’s benefits in their pension schemes. While I acknowledge the Minister’s comment that the amendments do not add even more regulations, in the scheme of things, this matter probably would not be something that we would be too concerned about because of the number of other matters that already have to be dealt with. However, that is the nature of the Bill—it relies heavily on regulations—so the explanation of these amendments is important in the overall scheme of the Bill.

Amendment 25 agreed.

Amendments 26 to 39

Moved by Lord Bourne of Aberystwyth

26: Schedule 4, page 84, line 19, at end insert—

“( ) After subsection (6) insert—

“(6A) Regulations may extend the period specified in subsection (1A)(a) in prescribed circumstances.””

27: Schedule 4, page 85, line 19, at end insert—

“(3B) Where regulations under subsection (2)(b) provide for the cash equivalent shown in a statement of entitlement to be increased or reduced after the member has made an application under

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section 95, the regulations may provide for the application under section 95 to lapse (but this does not prevent the member making a fresh application in respect of the increased or reduced cash equivalent).””

28: Schedule 4, page 85, line 24, leave out from “period” to end of line 27 and insert “required by section 95(1A) or (6A).

(1A) A member of a pension scheme loses the right to take a cash equivalent in accordance with this Chapter if, after the member makes an application under section 95, the duty of the trustees or managers to do what is needed to carry out what the member requires is extinguished by section 99(2A).

(1B) Nothing in subsection (1) or (1A) prevents the member from later acquiring a new right to take a cash equivalent in relation to the same benefits.”

29: Schedule 4, page 85, line 45, at end insert—

“( ) After subsection (4A) insert—

“(4B) Regulations may extend the period for compliance under subsection (2) or (3) in prescribed circumstances.””

30: Schedule 4, page 88, line 41, at end insert—

“( ) provide for this Chapter not to apply in relation to a person of a prescribed description;”

31: Schedule 4, page 89, line 35, at end insert—

“Regulations may extend the period specified in subsection (2)(b) in prescribed circumstances.”

32: Schedule 4, page 90, line 23, at end insert—

“( ) After subsection (2) insert—

“(2A) Regulations may extend the period for complying with the notice in prescribed circumstances.””

33: Schedule 4, page 96, line 3, at end insert—

“( ) provide for this Chapter not to apply in prescribed circumstances in relation to a member of a prescribed scheme or schemes of a prescribed description;”

34: Schedule 4, page 97, line 15, at end insert—

“( ) After subsection (6) insert—

“(6A) Regulations may extend the period specified in subsection (1A)(a) in prescribed circumstances.””

35: Schedule 4, page 98, line 16, at end insert—

“(3B) Where regulations under subsection (2)(b) provide for the cash equivalent shown in a statement of entitlement to be increased or reduced after the member has made an application under section 91, the regulations may provide for the application under section 91 to lapse (but this does not prevent the member making a fresh application in respect of the increased or reduced cash equivalent).””

36: Schedule 4, page 98, line 42, at end insert—

“( ) After subsection (4A) insert—

“(4B) Regulations may extend the period for compliance under subsection (2) or (3) in prescribed circumstances.””

37: Schedule 4, page 101, line 29, at end insert—

“( ) provide for this Chapter not to apply in relation to a person of a prescribed description;”

38: Schedule 4, page 102, line 26, at end insert—

“Regulations may extend the period specified in subsection (2)(b) in prescribed circumstances.”

39: Schedule 4, page 103, line 14, at end insert—

“( ) After subsection (2) insert—

“(2A) Regulations may extend the period for complying with the notice in prescribed circumstances.””

Amendments 26 to 39 agreed.

Schedule 5: Pension scheme for fee-paid judges: consequential amendments

Amendment 40

Moved by Lord Bourne of Aberystwyth

40: Schedule 5, page 106, line 40, at end insert—

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“8 (1) Section 29 (regulations and orders) is amended as follows.

(2) In subsection (2), after “other than” insert “regulations under section 18A above or”.

(3) After subsection (2) insert—

“(2A) A statutory instrument which contains regulations under section 18A may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.””

Lord Bourne of Aberystwyth: My Lords, the House will be relieved that this amendment is relatively straightforward. It enables any regulations that are made under new Section 18A of the Judicial Pensions and Retirement Act 1993 to be subject to the affirmative resolution process.

Clause 78 of the Bill provides a power to create a fee-paid judicial pension scheme via new Section 18A of that Act. The creation of such a pension scheme is a legal requirement on the Lord Chancellor as a consequence of the Supreme Court ruling in O’Brien v Ministry of Justice.

The Delegated Powers and Regulatory Reform Committee report for the Bill recommended that such regulations be subject to the affirmative regulations procedure, and we are pleased to confirm this. This brings regulations on judicial pensions in line with those that will establish the new judicial pension scheme starting in April 2015, providing a high level of parliamentary control in respect of any changes to judicial pensions. I beg to move.

Lord Bradley: It would not behove me well to challenge anything that the Supreme Court rules on, but I am sure that it is as relieved as we are that the regulations would be subject to affirmative resolution.

Amendment 40 agreed.

Eritrea and Ethiopia

Question for Short Debate

7.05 pm

Asked by Lord Chidgey

To ask Her Majesty’s Government what assessment they have made of recent events in Eritrea and Ethiopia, and of their impact on migration to western Europe.

Lord Chidgey (LD): My Lords, according to the UN refugee agency, in the first 10 months of 2014, the number of asylum seekers in Europe from Eritrea nearly tripled. In Ethiopia and Sudan, the number of Eritrean refugees also increased sharply. By November, some 37,000 Eritreans had sought refuge in Europe, compared with around 13,000 a year ago. Most asylum requests have been lodged in Sweden, Germany and Switzerland, with the vast majority arriving by boat from across the Mediterranean. Eritreans were the second largest group to arrive in Italy by boat, after the Syrians. An unprecedented number of Eritreans are fleeing their country as refugees, on a precarious journey to Europe as well as to bordering countries. As at mid-2013, the UNHCR estimated that the total population of concern originating from Eritrea was more than 313,000 people, including more than 292,000 refugees and 20,000 asylum seekers.

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Sheila Keetharuth was appointed special rapporteur on the human rights situation in Eritrea by the UN Human Rights Council in September 2012. Since then, she has made several requests to visit Eritrea; so far, her requests have been denied. She has nevertheless reported on the human rights situation in Eritrea. In her second report, in May 2014, she confirmed that violations included indefinite national service; arbitrary arrests and detention; extrajudicial killings; torture; infringement of freedom of movement, assembly, association and religious belief, and so on. In November 2014, the UN announced that the commission of inquiry into human rights abuses in Eritrea, established in response to the steep rise in migration out of the country, had begun operations. It is due to report in June 2015.

A common argument from Eritrean pro-government supporters is that the exodus of Eritreans is due to economic pull factors. If this were the case, one would surely expect to see refugees from other developing countries fleeing in similar epic proportions. They clearly do not. On the other hand, there are apparently numerous human rights violations that incite Eritreans to leave the country. In this regard, the indefinite national service and arbitrary arrests and detention, or fear of them, are the top push factors for flight, according to the special rapporteur.

According to reports from the UN Human Rights Council, Eritrea holds many detainees without charge or due process. Some have been in prison for more than a decade. Others have died in detention. Apparently, detention without recourse to justice is common in Eritrea, there being no avenues for detainees to submit complaints to judicial authorities, or to request investigations of credible allegations of inhumane conditions or torture. There is no independent authority serving on behalf of detainees. Furthermore, detainees and family members do not challenge, allegedly for fear of reprisals. The state does not investigate or monitor conditions in detention centres, nor does it appoint independent monitors to do so.

The Danish Immigration Service undertook a fact-finding mission to Ethiopia, London and Eritrea in the autumn of 2014, publishing its findings and conclusions in November 2014. The conclusions of the report differed significantly from the body of the text in its interpretations of the causes of emigration, quoting information from UN agencies that could not be verified by the UNHCR. Supporters of the Eritrean Government have nevertheless quoted the report widely in response to concerns about the unprecedented number of Eritreans fleeing the country. The UNHCR published its concerns regarding the methodology used by the DIS, stressing that information ascribed to the UN in the report was not provided by the UNHCR, as inferred. Information provided by the UNHCR about Eritrean arrivals was not included; instead, the report relied on the speculative statements of others.

In December 2014, the UNHCR published a detailed, point-by-point commentary and critique of the DIS report. It pointed out the absence of any information on regulatory frameworks for the media, NGOs, research institutes and other actors, and of any assessment of the reliability of information from those sources. It is understood that the DIS has withdrawn its report

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for further consideration. In the mean time, the 17 recommendations made to the international community in the first report of the UN Human Rights Council special rapporteur on Eritrea still stand.

With regard to development co-operation, for more than a decade, the Eritrean Government have encouraged mining and exploration firms to participate in the exploitation of the country’s mineral resources. Although major firms have stayed away, possibly aware of the risk of complicity in human rights violations through the use of national service conscripts, a number of smaller firms have acquired mining and exploration licences.

According to Human Rights Watch, those mining firms are walking into a potential minefield of human rights problems, particularly getting entangled with the Eritreans’ uniquely abusive programme of indefinite forced labour—the inaptly named national service programme. The programme was originally set at 18 months, but now requires all able-bodied men and most women to serve indefinitely, often for years with no end in sight, under harsh and abusive conditions. Some conscripts are assigned to state-owned construction companies, which have a complete monopoly in their field. International firms operating in the country are more or less forced to engage those companies as subcontractors, thus indirectly supporting a system of forced labour.

The relationship between Eritrea and Ethiopia is arguably the most important and volatile in east Africa. The fall-out between the two former brothers in arms initiated a two-year long border war in 1998. Apparently triggered by a dispute over the border district of Badme, the war claimed about 100,000 casualties, cost billions of dollars, and remains the main source of instability in the region.

Fighting ended with the signing of the Algiers peace agreement and establishment of the Ethiopia-Eritrea border commission in 2000. The commission delivered its delimitation decision in early 2002—importantly, placing Badme inside Eritrean territory. Initially, Ethiopia refused to accept the commission’s findings and refused to withdraw to the border that it had established, leaving thousands of internally displaced people in refugee camps.

Ethiopia eventually accepted the commission’s ruling in 2006, but its implementation continues to be the source of severe tension between the two Governments. Indeed, the UN special rapporteur on Eritrea stated in her second report in May 2014 that she holds the view that border issues should not serve as an excuse for the Government of Eritrea to violate the rights of their citizens within their own territory.

Furthermore, a sustainable peace is unlikely to emerge as long as conflict is seen solely in terms of border demarcation. The economic, political, cultural and historical links that bind the two states together should be the basis for a sustainable framework for peace. According to the Royal Institute of International Affairs—Chatham House—opportunities exist for external efforts to foster improved relationships. A fresh approach should involve engaging with each country separately, rather than immediately attempting to promote dialogue between them.

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Economic incentives are central to enabling improved relations between the two states, although prospective economic benefits from reopening the border are unlikely to be persuasive, given that they were unable to prevent the war. International engagement on areas of mutual interest could help foster a sense in Eritrea of stable economic sovereignty against Ethiopia’s economic predominance. Waiting for changes of leadership before making significant efforts to engage is, however, untenable, with no guarantee that successors would adopt a different foreign policy.

In discussions prior to this debate, it has been claimed by Eritrean Government supporters that the Eritrean Government now plan to restrict national service to 18 months as set out in law, probably by the end of the year. I have also acquired a document issued by the Permanent Mission of Eritrea to the UN in New York. The document is entitled “Leaked Memo” and claims to reveal Ethiopia’s destabilising policy against Eritrea. It is apparently a translation into English from Amharic of a news item from the Shabait news agency website last February. I would be grateful if my noble friend the Minister could comment on these developments and perhaps give a considered response in due course.

My noble friend will be aware that since December 2014 a number of responses have been given to Written Questions on Eritrea submitted by noble Lords, including the noble Baroness, Lady Kinnock. These have been commented on in the past but can my noble friend provide an update, for example on the outcomes of meetings of FCO and Home Office officials with Eritrean Ministers in December; on EU negotiations on policies towards Eritrea, to suppress the number of refugees from that country; and on the release of political prisoners in Eritrea since FCO officials raised the issue with the Eritrean ambassador in March 2004, considering that since then a new ambassador has been appointed?

7.15 pm

Lord Patten (Con): My Lords, migration from Ethiopia and Eritrea to western Europe can be understood only in relation to where those leaving go to. Take Ethiopia. Following my noble friend’s excellent speech and the point he made on Ethiopia, we must recognise, however, that that country is now host to more than 600,000 immigrants—the highest number of refugees taken in by any African country. The Government of Ethiopia should be highly commended for accepting and managing so many with such scant resources—and not attacked.

The first question is where these refugees come from. A minority come to Ethiopia from sub-Saharan Africa—from countries even poorer than Ethiopia. Far more come from countries nearer at hand. A lot of Somalis, many more from the Sudan and more from Eritrea itself, of course, flood into Ethiopia. Then there is the huge number—more than 160,000—of recent returnee refugees: Ethiopians returning to Addis Ababa from Saudi Arabia since the amnesty there granted by the late King Abdullah ended. They, too, are often destitute when they arrive.

Where do all these people go to if they try to get away from Ethiopia? The answer is that not all, by any means, go to Europe—that is a contemporary urban

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and media myth. Quite a lot travel south to South Africa. Ethiopia and its Eritrean refugees generate by far the largest number of migrants out of the Horn of Africa to the Yemen and through Djibouti. Certainly, some travel the western route, aiming north for countries such as Libya and thence to attempt those perilous sea crossings to reach the warm waters of southern Europe, before travelling further north. Far from all of them, however, come, or seek to come, to Europe.

Vital work needs to be done to try to anchor people where they are in Ethiopia or Eritrea—to develop there a stable, trustworthy civil society within which sustainable local livelihoods can emerge. This does not need grand plans, geopolitical initiatives or great gestures, let alone a bunch of selfie-taking celebs jetting in and then, just as quickly, jetting out as soon as possible. Rather, it needs some money and lots of slogging, grinding hard work.

Many are trying to do it. For example, there are three outfits in Ethiopia that I know doing just this, in the shape of CAFOD, the UK-based Catholic Agency for Overseas Development, and two sister—or brother—organisations of theirs from the Caritas network: SCIAF and Trócaire. They are all working to promote sustainable livelihoods and then to anchor the otherwise wannabe migrants, whether they are refugees in transit from the countries I have described or younger native-born Ethiopians seeking the somewhat illusory betterment that they think they might get abroad through migration.

As it happens, my own daughter, Mary-Claire, is not long back from a visit to Tigray in northern Ethiopia, with CAFOD, for whom she works, happily just in time for this debate. She has told me what it is like on the Eritrean border, marked by just a line of straw across the asphalt track between the two countries. The programmes run by these three bodies have to date reached more than 65,000 people, more than 60% of whom are women and girls, which is much to the good.

What do these programmes do? They provide training and support on business development and entrepreneurship skills to poor female and male farmers—former pastoralists—as well as to the urban self-employed, predominantly women and girls. They also help organise farmers into co-operatives and support groups and get the young training in business, finance, numeracy and literacy, and lots more.

None of this is easy; nor is it easy at the moment for our own Government to deal with much of the raucous criticism of our taxpayer-funded overseas aid budget. I suspect but do not know that much of it, directly or indirectly, goes on trying to help people in the end to stay put and not to migrate—to be where all of us would want to be, at home if at all possible. I say to my noble friend the Minister on the Front Bench that figures are perhaps available. If figures to this end are available, they might persuade more of our fellow citizens that the overseas aid budget is well spent on trying to anchor the otherwise migrant-inclined.

7.20 pm

Baroness Kinnock of Holyhead (Lab): My Lords, I will briefly touch on the situation in Ethiopia. With an election looming there in May, we learn that its media

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are being decimated. The right to free expression continues to be denied and at least 60 journalists have fled the country since 2010. The reality is that the Ethiopian Government cannot tolerate independent voices being raised or information and analysis being disseminated. Intimidation, harassment, threats and unbearable pressure are put on those whose voices are raised against policies which threaten political opposition.

Both Eritrea and Ethiopia have a Marxist-Leninist heritage. Ethiopia is still effectively controlled by the Tigrayan People’s Liberation Front, through a system of ethnic federalism. Although there has been some improvement we have to ask how it can be that, at the 2010 election, the EPRDF won 90% of the vote. At this stage, I particularly commend the work of Human Rights Watch, which argues relentlessly for recognition of the effects of the Ethiopian denial of fundamental rights and the need for its friends and donors to speak out on issues which are of life-and-death proportions to so many brave people.

In 1988 I travelled to Eritrea, which was at war at the time with Ethiopia. Since 1962 they had been deadly enemies; tensions and conflicts have characterised all the years since. It was the longest running struggle for independence in Africa and was about independence from Ethiopia. As we know, the people of Eritrea continue to suffer and such is their desperation that they seek refuge in other countries, which can mean very long journeys.

On the subject of migration, I begin with a shocking fact which serves to illustrate the desperation of Eritreans. Almost as many Eritreans fled their country—a country which, incidentally, is not at war—as Syrians fled theirs in 2014. UNHCR has said that:

“From January to October 2014, more than 60,000 Syrians, including almost 10,000 children, arrived by sea. In the same period almost 35,000 Eritreans arrived by sea in the Mediterranean, including 3,380 unaccompanied children”.

Surely, we have to ask exactly what makes people take such terrible risks to leave their country. The cruelty, tyranny and oppression of Isaias Afewerki and his regime know no bounds. Eritrea is isolated politically, regionally and internationally and it is under UN sanctions because of its alleged support for al-Shabaab in Somalia. The country is often described as Africa’s North Korea. All rights and freedoms are denied. There is no religious freedom or political pluralism, and no freedom of the media or of speech.

The 2015 FCO report has given details of Eritrean abuses: arbitrary and inhuman detention, indefinite national service, lack of religious freedom, no job prospects and much more. Indefinite national service is clearly the main driver of migration. UNHCR has confirmed that young Eritreans are conscripted into endless military service characterised by harsh treatment. They are sent to work in gold and copper mines or to camp out on the Ethiopian border. National service should be limited to 18 months but conscripts are often held for as long as 20 years. Is it surprising that they are prepared to take such risks in the hope of a chance of a better life? The number of Eritreans seeking to come to Europe has nearly tripled over the last year and is mostly made up of very young refugees. The special rapporteur says that the authorities in Eritrea show no inclination to tackle the root causes of the

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exodus. She confirms a lack of rule of law, and reported cases of extrajudicial disappearances, arbitrary detention and torture in detention.

Also, does the Minister agree with the suggestion made by some European Governments that it is necessary now to offer additional support and engagement to Eritrea, arguing that additional aid will lead to more openness and to change? Surely there can be no “new beginning”, as has been suggested, with this regime. As history proves, concessions to regimes such as Eritrea will achieve absolutely nothing. I ask the Minister to give some detail on the apparent willingness of the UK to have discussions with the Eritrean regime on,

“drivers of irregular migration and ways to mitigate it, asylum and returns, and potential areas for joint co-operation”.—[

Official Report

, 6/1/15; col.

WA 136


What exactly does that mean? Will the UK delay any response on refugee policy until the UN commission of inquiry issues its report on the subject?

European Governments should not make major Eritrean policy changes until they see the inquiry findings. Let us see if Eritrea is prepared to co-operate with the UN commission of inquiry before taking any hasty decisions. Now there are signs of unbelievable courage and determination in Eritrea on challenging Isaias Afewerki. The people are aware of the dangers of open protest, but we have to ask just how long they—and he—can hold on. We must urge the EU and others to make sure that the UN commission is given clear and urgent access.

Isaias Afewerki’s agreement to co-operate would be the first test of whether he is ready to accept change. Whatever happens, if there is negotiation, the European Union and member states must not make quick concessions but use any momentum to ensure that there can be—and will be—fundamental change. The release of Dawit Isaak would be a welcome and symbolic victory.

My final point relates to what are routinely called “irregular migrants”. These people arrive in Calais having endured a terrifying journey and are then treated as if they are economic migrants. This is clearly not what persuades them that they must leave Eritrea. Many other African countries are just as poor as Eritrea, but their citizens do not come to Europe in their thousands, as they do from Eritrea now. Will the UK argue for their right to stay and ensure that they are treated as refugees?

7.28 pm

Lord Avebury (LD): My Lords, I warmly congratulate my noble friend Lord Chidgey on securing this short debate that links Eritrea and Ethiopia, and on his masterly summary of the human rights violations in Eritrea and the consequent exodus of large numbers of refugees.

The two countries were linked in a forced marriage when the UN organised a bogus test of public opinion in Eritrea and imposed a federal union of the two countries in 1952, followed 10 years later by Emperor Haile Selassie’s annexation of Eritrea. There followed a 30-year war of liberation to restore Eritrea’s independence.

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In the 1970s, I was chairman of the Eritrea Support Group, which campaigned in Parliament and the media for Eritrea’s freedom and tried to persuade Ministers to support the self-determination of the Eritrean people, sanctioned by international law. Ministers would always reply with the mantra, “We believe that a federal solution would be best for the people of Eritrea”. I tried to ask them how they dared to usurp the right of the people themselves to exercise the most fundamental right of all peoples, emphasised by its position as Article 1 of the International Covenant on Civil and Political Rights.

In 1981, I visited Eritrea at the end of the Ethiopian sixth offensive. I travelled by Port Sudan through the desert and then along the Freedom Road, which was blasted out of the rock, up into the highlands, where I stayed at the Nacfa Hilton, a cave behind the front line. At dawn we saw the Antonov bombers dropping their loads on the ruins of Nacfa, in which the only building standing was the tower of the mosque. The corpses of Ethiopian conscripts killed in a hopeless attack on the cliffs protecting Nacfa were still lying where they had fallen, testifying to the futility of the Dergs’ colonialism.

In 1993, after the Eritreans gained their freedom, they held a referendum, in which there was a 99.3% turnout, in favour of independence, an event that no one who was there could ever forget. There was a spontaneous outburst of joy, with singing and dancing in the streets, and it seemed as if Eritrea, with its talented and hard-working people, would become a beacon of democracy and prosperity in the Horn of Africa. However, that dream was shattered when Ethiopia launched a fresh war of aggression on the pretence of a dispute over the border between the two countries.

After tens of thousands of lives had been lost on both sides and hundreds of millions of dollars had been spent on sophisticated weapons, it was agreed to refer the demarcation of the boundary to a commission headed by the distinguished British jurist Sir Elihu Lauterpacht, who was a schoolmate of mine 66 years ago. Both countries had agreed to accept the commission’s decision as final, but when the details were published in April 2002, Ethiopia found one excuse after another to dispute the findings. Ostensibly, its main reason was that the commission had awarded the small town of Badme to Eritrea, but as it had no significant value there must have been other reasons. The suspicion is that the long-term objective of Ethiopia is to re-annex its former dependency and, meanwhile, to weaken it by threatened aggression along the border and working to intensify sanctions on false charges of supplying weapons to the al-Shabaab terrorists in Somalia.

The Ethiopians unlawfully occupied territory all along the border that should have been demilitarised under the settlement, and Eritrea has been forced to maintain large armed forces as a precaution against further military attacks by its bullying neighbour. That was its justification for the much criticised imposition of indefinite military service, which was mentioned by my noble friend. The Eritrean ambassador told us that from last November conscription was limited to 18 months and that conscripts would not be required, as before, to perform civilian work such as road building, earning no more than $30 a month. Thousands of young people

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are fleeing the country every month, and Eritreans are the most numerous of those attempting the risky crossing from north Africa to Europe in which so many lose their lives. There is hope now that the flood of Eritrean asylum seekers will abate and that the colony will receive a boost from the extra labour in the private agricultural sector from the release of the indefinitely conscripted young people in the system.

The permanent existence of a state of “no war, no peace” is a major reason for the plethora of human rights violations by Eritrea, which have been mentioned by both my noble friend and the noble Baroness, Lady Kinnock. These include the arrest and disappearance of 21 opponents of the Government in 1991, arbitrary arrests and severe restrictions on freedom of expression and assembly. These are undoubtedly seen by the regime as necessary protections against their unscrupulous and determined enemy. That is not to defend such practices but to make an observation. Does the Minister not agree that, if the threat of aggression were lifted, violations of human rights would diminish and the flow of refugees would be further reduced? Trade between the two countries and access by Ethiopia to the ports of Assab and Massawa would boost economic activity throughout the region and lower unemployment locally and internationally, thus reducing the incentive to emigrate.

Ethiopia, on the other hand, has no enemies in the region and therefore has no reason for the severe restrictions on freedom of expression that it imposes. Human Rights Watch said last week that 22 journalists, bloggers and publishers were charged with criminal offences in the past year. Six independent publications were intimidated and closed, with dozens of staff forced into exile. Three owners of publications also fled abroad to escape false charges that led to sentences of three years in prison in absentia. Six members of Zone 9, a bloggers’ collective, were charged under the counterterrorism laws and have been in custody for 274 days, sending a chilling message to online activists. Can the Government not make representations to Prime Minister Desalegn to relax the stringent controls on freedom of expression so that Ethiopians can have a genuine election in May?

Above all, I call on the Government, and through them the EU, to launch a new diplomatic effort for peace in the region—for Ethiopians of all political parties to accept the Lauterpacht settlement unequivocally and to withdraw their forces from Eritrean territory.

7.36 pm

The Lord Bishop of Derby: My Lords, I, too, thank the noble Lord, Lord Chidgey, for his comprehensive and challenging analysis and assessment. I will make some general remarks and then one or two specific points.

This complex situation is partly because the region is very unstable and there is a lot of movement from both of these countries to Saudi Arabia and the Yemen, as well as to Europe. Such an unstable context requires some big picture approaches. Then there is the conflict between Ethiopia and Eritrea, as the noble Lord, Lord Avebury, has clearly explained. That complexity makes a neat solution very difficult.

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We have heard something of the human rights abuses. We need to put firmly on record in this House the particular suffering of women and girls, not least through military service, through trying to avoid military service by escaping into marriage and getting married at a very young age. There is also the problem of religious freedom in Eritrea. The constitution there guarantees religious freedom but only four groups are allowed to worship—Orthodox Christians, Catholics, Sunni Muslims and Lutheran evangelicals. Any mature country in that region needs to honour the spirituality and aspirations of its citizens.

We are told that 4,000 people a month are fleeing from Eritrea into Ethiopia, which further complicates the dynamic between the two countries. Because many who flee are women and children and unaccompanied minors, they are ripe for what we call human trafficking. Many of them are picked up and exploited by labour gangs for sexual slavery and even for body parts. The noble Baroness, Lady Kinnock, spoke of their sheer desperation and desire to escape. In Matlock, in the Peak District of Derbyshire, you might think that you could not be further from Ethiopia and Eritrea. However, when a couple who had driven back from the continent in a campervan arrived in Matlock, out from underneath crawled a refugee. He had had a desperate experience and was shaking, crying and happy to be turned in to the police. This tragic vignette illustrates the issue.

I am privileged to be a trustee of Christian Aid, which, along with CAFOD, is working on the ground in Ethiopia. It has been there for 30 years. It started by engaging with emergency work and is now doing very important development work with HIV, malaria, maternal and child care and especially the safeguarding of the rights of women and girls and of their educational development. I tell noble Lords that in part because it is a sign of hope, but Christian Aid—and possibly CAFOD, too—does not work in the north of Ethiopia or in Eritrea. It cannot get access to do that voluntary work; often we can work with partners on the ground, growing capacity, but Eritrea and the north of Ethiopia is a no-go territory because of the chaos. That means that the partnership that government can often assume from the voluntary and faith sector is not able to operate, which is a further challenge and complexity.

The number of migrants we experience in western Europe is simply a cry for help, showing us the scale and seriousness of government malfunction and the complexity of the history we are looking at. Therefore, there has to be an approach that is not just bilateral, with these countries trying to work with their difficult histories and tensions. Rather, we have to ask our Government to work with the EU, the UN and through the Foreign Office, and to try not just to look at the political possibilities but to engage with the voluntary and faith sectors to work with the desperate need on the ground, especially in northern Ethiopia and Eritrea, where there is all that suffering and no real access to giving help.

Therefore, I will be interested if the Minister can comment on the overall strategy and on how working with Europe and the UN might give some hope, besides bilateral things; on any representations on honouring religious freedom in Eritrea; and on how

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voluntary and faith groups might assume the partnership they often have with Governments in other needy areas to offer some offer support and development on the ground within the context of that complex political situation.

7.41 pm

Lord Rea (Lab): My Lords, I am very grateful to the noble Lord, Lord Chidgey, for securing this short debate. I thank the noble Lord, Lord Avebury, for introducing me to Eritrea in the year 2000 during a lull in the war with Ethiopia. In the next phase of the war the Eritreans did not do so well; it ended in a rather unsatisfactory ceasefire a year or so later. The subsequent developments in the economically damaging state of “no war, no peace”, were described extremely well by the noble Lord, Lord Avebury. The unresolved border tension, as several noble Lords have said, is having a major impact on Eritrea’s economy—less so, I guess, than in Ethiopia, which has a much bigger population. The standing army that Eritrea maintains is a major drain on a country with only 3 million people.

When we were in Eritrea, we visited, among other places, the Red Sea port of Massawa, where we met the Minister for the coast and fisheries, Petros Solomon, an impressive former senior officer in the independence struggle. He took us to see a remarkable coastal prawn and tilapia aquaculture pilot project, which was being developed with the help of a small American grant. If that project had gone ahead and expanded it could have become a valuable food-producing and export industry. Sadly, it was abandoned a year or so later, possibly due to government opposition to external NGOs.

In 2001, I was among those invited to attend the 10th anniversary celebrations of the end of the independence struggle. Among other visits we were taken by helicopter to the former battleground of Nakfa, which the noble Lord, Lord Avebury, described. We were impressed by the ingenuity and courage of the Eritreans and their capacity for hard work. However, shortly after our visit, 15 senior government members, known as the G15, who had signed a letter to President Isaias Afewerki urging him to implement the agreed democratic constitution and hold elections, were all arrested. They included Petros Solomon, whom the noble Lord, Lord Avebury, and I had met one and a half years earlier. Some 13 years later, he is still in prison, without trial and held incommunicado, as is his wife. Can the noble Baroness, to whom I gave notice of this question, say whether our embassy has been able to obtain any information about this man and his colleagues who are still detained? Some fear that he and some of the other G15 letter writers may no longer be alive.

There are other long-term political prisoners, including a number of journalists known as the 31, whose fate is unknown, and there are almost certainly many more. Human Rights Watch and Amnesty International have condemned these and other arrests and disappearances, as the noble Baroness is fully aware. As all other speakers have said, there is compulsory conscription for national service and not all of it is military. Some consists of what could euphemistically be called vocational training, but pay is very low—pocket money if you are

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lucky. There is also a large standing army which has to be maintained because of the tension with Ethiopia and which the country can ill afford.

It is alleged that many national service recruits are being used as virtual slave labour, in poor conditions in ore-producing mines. The Eritrean Government deny this. Does the noble Baroness have any information on this? According to an independent report by the Danish immigration service, the reason given by most Eritrean asylum seekers for leaving the country is economic rather than political, although deserters from national service naturally fear punishment if they return. As noble Lords have said, this report appears to have been withdrawn. Other noble Lords have testified to the important part played by human rights abusers in the exodus of Eritreans. As we hold this short debate, there is a UN human rights commission of inquiry going on. It was not allowed into Eritrea itself, so it has, apparently, had to rely on external testimony. Does the noble Baroness have any information on the progress of this inquiry?

Other informants give another, rather more hopeful, side to the story. There is grass-roots development and, within limits, considerable local democracy. As can be imagined, this does not include criticism of the president who, like President Putin, is unaccountable but still apparently popular, despite having lost the war with Ethiopia and heading an autocratic regime. As in Russia, support for the president is strongest in provincial and rural areas. In part, this is due to the policy of land reform which grants land—all of which is state owned—to landless farmers on equitable long-term leases. WHO and UNDP have praised the effectiveness of Eritrea’s antimalarial programme and its collaboration with external advisers in public health. It has achieved the millennium development goals in education and maternal and child health. This information comes, not just from the Eritrean Government, but from United Nations agencies. Its expansion of free education and healthcare is well ahead of most other countries in Africa.

Eritrean support of al-Shabaab in Somalia is denied by the regime’s supporters who say that, in fact, Eritrea has its own jihadist problem. Does the noble Baroness have direct evidence of this alleged Eritrean involvement in Somalia? Could this possibly be Ethiopian propaganda?

Eritreans are intensely proud people and respond negatively if told what to do. They are determined to pull themselves up by their own bootstraps—hence their rejection, often to their own detriment, of many projects by aid agencies, whether official or non-governmental, and their stringent conditions for accepting much needed inward investment. They are determined not to be exploited by multinational corporations. It would be very useful to hear what the UK’s experience of investment in capital projects has been in Eritrea.

I suggest that, as with other long-drawn-out conflicts, discussion, initially perhaps behind closed doors, is more likely to lead to an acceptable outcome than open confrontation or sanctions. Having said that, political prisoners such as Petros Solomon, of whom I spoke, must be released, or at least be tried in open court. Their continued detention without trial and the failure to implement independent Eritrea’s agreed

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democratic constitution are major factors blocking the development of normal relations between Eritrea and the rest of the world.

7.50 pm

Baroness Morgan of Ely (Lab): My Lords, I congratulate the noble Lord, Lord Chidgey, on securing this very important debate, and particularly on his illuminating introduction.

The tragedy unfolding in Eritrea and Ethiopia is impacting directly on us here in the UK and across the EU, and the picture painted by the right reverend Prelate tugs at your heartstrings. It is another example of how we cannot isolate ourselves from the problems of the world; we cannot haul up the drawbridge and hope that the situation will go away. Hundreds of thousands of innocent people are desperate in both these countries: so desperate that they are prepared to risk everything—and I mean everything—to start a new life, not just here in Europe but in other African countries, too, as noble Lords have said.

There is no doubting the seriousness of the situation, particularly in Eritrea. As has been suggested, Eritreans and Ethiopians are the main nationalities of the irregular migrants seeking asylum in the EU, apart from Syrians. They come either by land, normally through Lebanon and Syria into Turkey and the western Balkans, then on to the EU, or by sea, often using Tunisia or Alexandria in Egypt as their key point of departure. I ask the same question as that asked by my noble friend Lady Kinnock: what are they fleeing from? What is driving this mass exodus, which includes not just women and children but thousands of unaccompanied minors? The simple answer is that neither Ethiopia nor Eritrea is a functioning democracy.

Although both Ethiopia and Eritrea are suffering real problems, there is more scope to influence activities in Ethiopia. In the past, there seems to have been a modicum of free speech and a free press in Ethiopia, although the Government’s intolerance of dissent seems to be increasing significantly in the face of general elections in May. There have been large-scale arrests of protesters and a crackdown on opposition opponents. This is particularly true in the Oromo region, where at least 5,000 people have been arrested as a result of their opposition to the ruling party.

But if we think that the situation is bad in Ethiopia, it is truly catastrophic in Eritrea, where all freedoms were suppressed in September 2001. There is no religious freedom, as the right reverend Prelate underlined, no political pluralism, and no independent press in the nation. The forced and interminable military service to fight the unending border war with the neighbours in Ethiopia is clearly a real problem that is driving people from the country.

There are some key points which we would like the Government to take on board. We believe that all possible pressure should be brought to bear in particular on the Eritrean regime to give way to a democratic Government who will respect human rights and the wishes of their people. What this does not mean is attempting to start a new relationship with the existing Eritrean authorities through providing unconditional

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aid. Given the failure of all previous attempts to engage in a meaningful way, do the Government really believe that the regime can respond positively? Do the Government agree that, unless there is clear and verifiable evidence that human rights in Eritrea have improved, there should be no new beginning with the regime?

I understand that the United Nations Commission of Inquiry on Human Rights in Eritrea will visit the UK this week to hold meetings and collect testimonies and accounts on the human rights situation in Eritrea. Can the Minister give an assurance that the Government will support the UN in its work and ensure that an objective picture of the situation in the country can be assembled?

We are all aware that there are fears and concerns within the British population about the scale of immigration to the UK. Such a fear is not just here in the UK, but true across the EU. We need to ensure that, across the EU, we have a co-ordinated approach to migration from this part of the world. Let us be clear: if Britain left the EU it would not stop people from coming, but it would stop us from working together in a co-ordinated fashion with our EU partners.

A €5 million programme is being established between FRONTEX—the agency of the EU that manages co-operation between national border guards to secure the external borders of the Union, including from illegal immigration, human trafficking and terrorist infiltration—and the UNHCR to help the countries of the western Balkans strengthen their asylum and migration policies and capabilities. Additionally, FRONTEX is co-operating closely with Turkey, which has helped to stem the flow of the ghost ships that we saw before Christmas. I understand that it has assigned a member state expert to help the Turks to improve security around the port of Mersin.

The EU has also signed a readmission agreement with Turkey, which means that Turkey must take back not only nationals who may be irregular migrants, but migrants who are seen to have come from Turkey. There is close and joint co-operation in the Aegean Sea and on the Greek and Bulgarian land borders. Could the Minister explain how on earth the UK could begin to influence or support these actions if we were outside the EU?

We should not underestimate the people who are seeking to benefit from people’s immense suffering: the people traffickers who extort thousands from these desperate people. Europol is ensuring that there is an exchange of information across Europe and with our partners in the western Balkans and Turkey that ensures that European nations can tackle some of the criminal aspects behind this migration.

However, we should be clear that none of this will stem the flows out of Ethiopia and Eritrea. The human rights violations are simply too much for many of the population to bear. While Eritrea is considered a real basket case in terms of human rights, the tragedy is that things seem to be getting worse in Ethiopia, which was once the darling of the international aid community. Can the Minister explain how aid, being conditional on improvements in human rights, can be strengthened for Ethiopia? Can she outline how we can offer more support to Eritreans in the camps in

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Sudan and Ethiopia? Finally, can the Minister clarify the situation relating to migrants from these two countries when they arrive in the UK? What proportion of them are termed “irregular migrants”? What proportion are given asylum status? Is there any recognition that there are many desperately poor countries in Africa, but that poverty and economic migration does not explain the disproportionate numbers arriving from these two countries?

7.58 pm

The Minister of State, Foreign and Commonwealth Office (Baroness Anelay of St Johns) (Con): My Lords, I congratulate my noble friend on securing today’s debate. I also commend the important work of the various all-party groups of which he is an active member, including the All-Party Group on Africa. As he has described, there are few more moving stories than those of migrants who undertake perilous journeys to reach western Europe, sometimes losing their lives in the process. The noble Baroness, Lady Morgan of Ely, has just described that graphically. Today’s debate is, therefore, a welcome opportunity to discuss an issue that clearly links the United Kingdom and our partners in Africa—and indeed, our partners in the European Union in our work to reduce the need for migration and the need for unsafe migration.

The Government have made it very clear that the international community must act together to reduce the risk of migrants losing their lives or falling prey to the traffickers. Migrants make the journey for a number of reasons—whether seeking more economic opportunities or to escape human rights abuses and persecution. I shall come in a moment to some of the more specific points which noble Lords have made on that matter. Poverty and instability in the Horn of Africa drives individuals to seek a better life in Europe and beyond. For those who cannot leave, these same factors contribute to an environment in which fundamentalism and extremism can prosper. Tackling illegal migration to the EU from the Horn of Africa is therefore clearly in our interest and that of all countries in the region. We must address the problem at its source, and the UK is committed to playing its part.

The noble Lord, Lord Rea, in particular asked questions about al-Shabaab and the terrorism link with regard to that. He mentioned the United Nations and Eritrea monitoring group. I understand that Eritrea denies any support for al-Shabaab but continues to refuse entry to the monitoring group. We urge it to co-operate fully with the group’s work. I am entirely at one with the noble Lord in this matter.

Clearly co-operation through our European Union partners is important. I was asked about that not only by the noble Baronesses, Lady Morgan and Lady Kinnock, but by my noble friend Lord Chidgey and the right reverend Prelate. In addition to our bilateral work with key regional partners, we play an active role in the new EU-African Union Khartoum process, which includes of course both Ethiopia and Eritrea, supporting dialogue and co-operation to tackle people smuggling and human trafficking in the region. I can tell the noble Baroness, Lady Morgan, that the Prime Minister’s position is that we will negotiate a successful

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resolution to our relationship with the European Union, and in any future decision by the British people we would put a very positive case and would certainly hope that we would remain part of it. That is the result of successful negotiation by my right honourable friend Philip Hammond, who has been travelling around countries throughout western Europe, taking soundings and getting some very positive results—more positive perhaps than some of the press makes clear on some of the issues that we have been broaching. There is still a long way to go. We know that but we are making progress.

We welcome the fact that both Ethiopia and Eritrea have expressed commitment to the Khartoum process. It provides the best framework to drive this issue forward. Noble Lords have drawn attention to the tension between Ethiopia and Eritrea. I would say to them that if they are taking the Khartoum process seriously, they have to take negotiation on the basis of solving the differences between them seriously too. As a member of the core group of EU and AU member states steering the development of how we take this process forward, we as a country are keen to ensure that we maintain momentum and that the process leads quickly to concrete projects that combat the smuggling and trafficking.

Several noble Lords asked me, in particular, about extended military service—very much a euphemism. I listened very carefully to all the words used by the noble Lord, Lord Rea, the noble Baroness, Lady Kinnock, my noble friends Lord Avebury and Lord Chidgey, and the right reverend Prelate about the real nature of this—one or two noble Lords referred to it as being like slave labour—and the fact that it acts as a serious driver for people to leave the country. Having left and broken the rules on conscription, people are—I cannot think of the right word—terrified to return. That is why some of the figures of asylum grants by us to Eritreans look so high, because clearly there has been concern about them returning to that country given their reasons for leaving.

We did indeed have a joint visit to Eritrea by Home Office and Foreign Office officials in December. They looked at the drivers of migration and particularly discussed the matter of extended military service. I can say to my noble friend Lord Chidgey that this was a useful starting point for further co-operation. A similar visit to Ethiopia is planned for the near future. With regard the visit to Eritrea, the Eritrean Government representatives assured the officials from the FCO that military service will be strictly limited to 18 months and, indeed, I have been briefed by those officials today. The undertaking has been given. It is matter now of making sure that that is put into practice.

The noble Lord, Lord Rea, made the valid point that not everybody fleeing Eritrea is fleeing persecution; some leave for strong economic reasons, and the extension of the 18 months’ military service, with no knowing when it would finish, was an awful position to be in. That is very different from some of the drivers that one sees for people fleeing from Syria.

The matter of development assistance was raised by my noble friend Lord Patten. He asked about the role of aid. We are firmly committed to the use of aid

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in ensuring that there is security and prosperity in countries that currently experience neither. Our total spend over all countries in 2013 was almost £11.5 billion, second only behind the USA in overall volume. We believe that that is helping to change the lives of many millions of ordinary citizens across the Horn of Africa. In Ethiopia, in particular, last year our funding allowed over 1.6 million children to go to primary school, helped 110,000 mothers to give birth safely and provided clean water for more than 250,000 people. Our funding is also helping Eritrean refugees in Ethiopia, particularly with shelter and support to unaccompanied minors, as well as warning refugees of the risks of illegal migration. I know that none of that will be a surprise to the noble Baroness, Lady Kinnock. When she was a Minister she was passionate about these issues, and rightly so. I can assure her that that passion remains in government.