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"In March, I announced that we would defer any changes in the inheritance rules by two-and-a-half years until 6th October 2002. That remains the position. I also said that I would consult the ombudsman, the National Audit Office and others on a protected rights scheme which was designed to provide redress to people who were given wrong or incomplete information. I have received a range of helpful and constructive representations from Members of this House, Select Committees and others. I have also received the advice of the Social Security Advisory Committee, whose report I am publishing today. Copies will be available in the Library and the Vote Office.
"As I have said before, the solution to this problem has to be both fair and workable and, as the ombudsman has said, it must provide a global remedy. I am determined to make sure that we do that. Over the past few months, I have become increasingly convinced that a protected rights scheme would not work in the way intended and therefore would not provide a fair and just solution to this problem. It would not be fair because we cannot be sure that it would reach all those affected, particularly the very elderly and vulnerable. It would be very difficult to safeguard the scheme against fraud and abuse. Its operation would inevitably cause injustice, and on that basis I do not intend to pursue it.
"There were two key problems with the decisions taken 14 years ago by the last Conservative government. First, they decided to implement the changes without any transitional arrangements. What is worse, they continued for years to give out wrong, misleading and incomplete information
"The proposals I am making today are designed to give full protection to every pensioner; to give younger people adequate notice of the change to SERPS rules; and to provide transitional arrangements for those approaching retirement age. First, men and women who are already over the state pension age cannot do anything to restore their position. I have therefore decided that all men and women who are over state pension age on 5th October 2002 will be exempt from the changes. That means every pensioner will keep their existing entitlement.
"Secondly, proper notice has to be given to those who are planning for their retirement. So I am proposing that the new rules will only apply to men and women who are now 10 years or more away from their state pension age.
"Thirdly, those people who are approaching state pension age will have less time to plan for their retirement. So for those who are within 10 years of their state pension age, we will phase in the changes. For example, people who reach state pension age between 2002 and 2004 will be able to pass on 90 per cent of their SERPS; those reaching pension age between 2004 and 2006 will pass on up to 80 per cent, and so on.
"We intend to bring forward regulations in the new year to implement these changes and we will consult on the draft regulations in the usual way. We will also write this week to all those people who have contacted us already to set out the position.
"There is of course a very small number of people who have evidence that they were clearly misinformed by the department. For example, they have a letter from the Benefits Agency containing the wrong information. This small group will have access to the usual departmental procedures that deal with cases of maladministration to the extent that the proposals I am announcing today do not fully compensate them already.
"I have already taken steps to prevent this happening again. As I told the House in March, I am reorganising the DSS so that it can better serve its key customer groups. I am bringing together policy and operational responsibility into a single organisation dedicated to pensioners.
"As part of that process, we have already tightened up the procedures for checking leaflets and guidance. I want to ensure that in future people are told about changes in pension policy so they can plan for their retirement in full knowledge of their position. That is why, next year, we will begin to send out combined pension statements giving people more comprehensive information on their entitlements.
"Due to the timing of these changes the costs will be comparable over the next three years. The reforms I have announced today will cost around an extra £1.5 billion over 10 years and an extra £4 billion over 50 years.
"This problem should have been sorted out 14 years ago. What happened in the years after 1986 was a series of colossal blunders which were inexcusable and caused untold distress to millions of people. The then Conservative government have to take full responsibility for what happened. We are now taking the responsibility for sorting it out. I commend this statement to the House."
Lord Higgins: My Lords, the House will be grateful to the Minister for repeating the Statement which was made in another place by the Secretary of State. This whole problem has been described as the most expensive act of maladministration since the war. I believe that it is probably true to say that it is the most expensive act of maladministration ever. It has been an extremely long-running saga. That saga is given in very great detail by the report of the Commons Select Committee on Public Administration entitled Administrative Failure: Inherited Serps published only a few days ago. When I first saw on the Annunciator that there was to be a Statement, I assumed that it would be a response by the Minister to that report. In fact, I now understand why it is not mentioned.
I very much regret the tone of the Minister's Statement in the other place; I do not refer to the Minister in this place. Discussions on this matter have shown that we on this side fully recognised responsibility for what happened in our period in office. But we have also recognised, as I believed the Minister had done, that there was a responsibility on the other side as well. That is set out very clearly indeed in the report to which I have just referred. It states:
Indeed, it is also the case that as regards responsibility, throughout there has been an appalling breakdown in communications, but that has not been deliberate. However, paragraph 17 of the report states:
I shall not detain the House by going into some of the other matters referred to by the Select Committee. This whole problem raises important issues as regards the relationship between officials and civil servants. I am glad that the report will do something to improve that because it is still impossible to find out who was responsible for what has happened. When I was the chairman of the Liaison Committee in another place, we dealt with this matter at great length. The report raises important questions--which I hope the Government will study carefully--as to the relationship in the House and in Parliament between officials and Ministers.
We spent many hours on previous Bills debating this issue. In particular, we commented on the ombudsman's report, which the Government said they accepted. The ombudsman recommended a global solution, which the Government's proposal for a protected rights scheme clearly was not. We now have a new situation which will, I hope, deal with the problems envisaged by the Select Committee.
This is certainly an improvement on the previous scheme, which clearly would not prove to be practical. It is extraordinary that it has taken the Government so long to realise that that is the case. None the less, what is now proposed is better than the procedures previously envisaged--on which the House spent so much time and which are now, willy-nilly, dropped at a moment's notice.
It is a complex proposal and it will take time to understand it. Therefore, other than saying it is better than the previous proposal, I should not like to comment in great detail until we have had an opportunity to study it.
Perhaps I may ask the Minister one or two specific questions. First, as to the question of cost, I am rather surprised that, given the Government's proposal, the cost is smaller--amounting only to billions and billions--than one might have expected. As a point of comparison, can the Minister tell the House how the costs now to be incurred compare with the costs of not going ahead with the proposal to reduce SERPS at all?
Finally, we welcome the statements made in regard to better information for pensioners. It has emerged clearly from this saga that private pension providers have onerous obligations to provide correct information. It appears still to be the case that the Government have only a duty of care to provide proper information. The two are very different. Are we to understand that the Government propose to strengthen that position and that there will be a more onerous obligation on them to provide correct information than has hitherto been the case?
Lord Goodhart: My Lords, we welcome the Statement. The inherited SERPS disaster has been debated on several occasions in your Lordships' House, both in the present Session and in the previous one. This is clearly the most serious administrative failure for decades--although, in relation to its effect on pensioners, it is not as serious in the end as the disastrous pensions mis-selling scandal, which was introduced as a result of the unfortunate decision of the previous Conservative government to allow people in occupational schemes to opt out of them.
Any fair remedy for this disaster will be very expensive. The ultimate cost appears to be something of the order of £6.5 billion--that is some £2.5 billion for the deferral to October 2002 and an additional £4 billion. The Government's preferred remedy before the Statement was made was deeply unsatisfactory. It proposed that compensation should be given only to those who had acted--or, more likely, failed to take action--in reliance on incorrect information.
The burden of disproving a claim, once made by a pensioner, was placed on the Government. This meant, first, that the burden of initiating the claim rested on the pensioner. Many pensioners were unlikely to make a claim; many would have failed to appreciate the need to take action at all; and many others would have been deterred by the consequent involvement in the bureaucracy of having to deal with the DSS. But, because the claim, once made, was difficult to disprove, the scheme could have been a charter for fraud, as the Select Committee on Public Administration pointed out.
The Government's new proposals are therefore a great improvement. We welcome the age-related exemption from the reduction in SERPS as a better solution than the further deferral of the change in the system. We also welcome the tapered exemption for those who will be within 10 years of the state pension age on 6th October 2002. We shall obviously want to look at the detail of the proposals, but we believe that, in principle, they are acceptable.
The Statement is not the end of the matter. Two things need to be done. First, there is a need to ensure fair treatment for present and future pensioners; and, secondly, there is a need to prevent any similar disaster happening again. The Statement deals in a broadly satisfactory manner with the first of these issues; it does not deal at all with the second. That is not a criticism of the Statement. This is a wider issue. It is not a matter for the Department of Social Security alone; it concerns every government department.
This disaster may well have been due, as Sir Christopher France suggested in his answer to question 188, to something as elementary as a proof-reading error. That should not have been possible. Plainly, the antiquated IT system in the DSS may well have played a part. Here I shall refer to the evidence of Mr Peter Mathison, who was the chief executive of the Benefits Agency from 1995 to 2000. At question 248 he stated:
Baroness Hollis of Heigham: My Lords, I am glad to receive the words of welcome for the Statement from the noble Lord, Lord Goodhart. I was a little disappointed at the tone of the response from the noble Lord, Lord Higgins. I thought it unusually grudging
Any government who develop new policies have the responsibility at least to ensure that their literature is consistent with those policies. It was the then government's responsibility to ensure that the information that they gave out was accurate. They did not do so. That was a major failure on the part of the previous administration. I suggest in all modesty that that was rather different from the approach taken by the current Government who inherited the situation. As soon as they were aware of the problem, they took measures in the Bill that came before the House in the summer of 1999; they followed that with consultation; they came up with proposals in March this year, on which they subsequently consulted; and they are now responding. It has taken a fair amount of time, not only to consult properly, but to come up with proposals that the Government believe to be workable.
The difficulty for this Government is that when we realised the nature of the problem we thought that we could redress the grievance that lay at the heart of it; namely, that people were suffering, either from misinformation or from a failure of information, and that that had either added to their financial detriment or failed to act to their financial advantage. That was the problem that we sought to address. That was the basis of the protected rights scheme that we brought before the House in March 2000.
Three specific questions have arisen, two of them shared by noble Lords. The first relates to costs. For the original scheme--the protected rights scheme--£2.7 billion was the cost of deferring any change until October 2002; there was to be a further £5.5 billion, making a total of £8.2 billion for the protected rights scheme. The scheme that we have now produced involves the same £2.7 billion through to October, and a further £9.5 billion, which brings the figure to £12 billion. I was asked what would be the cost of not going ahead at all. It would be £20 billion in total over 50 years.
The noble Lord, Lord Higgins, raised a point about remedy and maladministration. We shall now resort to the customary position of the DSS; namely, that if there is a case of maladministration the responsibility is on the DSS to ensure that the person is put back into the situation in which he or she would have been had the maladministration not occurred. That means that we are returning to a more conventional situation in which the person who is subject to the maladministration must show evidence to that effect.
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