COMMITTEE FOR SOCIAL DEVELOPMENT

OFFICIAL REPORT

(Hansard)

Pensions Bill

8 November 2007

Members present for all or part of the proceedings:

Mr Gregory Campbell (Chairperson)
Mr David Hilditch (Deputy Chairperson)
Mr Mickey Brady
Mr Jonathan Craig
Ms Anna Lo
Mr Fra McCann
Miss Michelle McIlveen

Witnesses:

Ms Margaret Ritchie ) Minister for Social Development
Mr Gerry McCann ) Department for Social Development
Mr John O’Neill )

The Chairperson (Mr Campbell):

Minister, you are welcome. I understand that you have a strict time limit.

The Minister for Social Development (Ms Ritchie):

That is right.

The Chairperson:

We are going to do our best, not least because I have a similar time limit. We will endeavour to keep to those time restrictions.

You are here in relation to the Pensions Bill and a request for accelerated passage. Would you and your officials like to outline the case for that?

Ms Ritchie:

That is what I would like to do, Chairman. I am conscious that the Committee has already had two briefings on the Bill from my officials, one in June and another in October. I will briefly refer to the content of the Bill and the equality impact assessment, and then go on to the reasons for accelerated passage, if you are content.

I am pleased to be here and to continue my engagement with the Committee. It is essential that the Pensions Bill should be subject to accelerated passage. It is not something that I do lightly. There are various reasons for it; all of this is underpinned by the principle of parity, so there is little option in this.

Members will recall that my officials provided briefings on the proposals in June and again in October. Nevertheless, it might be helpful if I explained some of the background.

The Pensions Bill mirrors the provisions of the Westminster Pensions Act 2007, which received Royal Assent on 26 July. It contains a package of reforms in a number of areas. Its reforms to the state pension will particularly benefit women and carers and will make the system fairer by reducing the number of qualifying years required for a full state pension to 30 for both men and women. Currently, only 40% of women in Northern Ireland are entitled to a full category A pension. Under the proposals, it is anticipated that, in 2010, 75% of women reaching state pension age will be entitled to a full pension — rising to 90% by 2025. Category B pensions — based on a spouse’s National Insurance record — will cease to be conditional on the spouse’s claiming their pension. Category B pensions will be available to married men and civil partners from 2010.

A new credit-based system will be introduced for parents and carers. The Bill will provide for the basic state pension to be uprated in line with earnings rather than prices, and will ensure that the standard minimum guarantee element of pension credit will also be uprated annually in line with earnings. The Bill reforms and simplifies the state second pension, abolishes adult dependency increases in category A and C retirement pensions, and puts protections in place for the small number of people — 1,100 at September 2006 — affected by that change.

The reality of an ageing population is confronted by ensuring a sustainable future for the state pension scheme: by increasing the state pension age from 65 to 68 years of age, over a 30-year period, but with protections for those unable to work between the ages of 65 and 68 through a corresponding extension in availability of working-age benefits.

The Bill also simplifies private pension arrangements, encourages saving for retirement, and provides for the initial functions of the personal accounts delivery authority, in preparation for the introduction of a personal account system to enable people to save for retirement. Members will be aware that another pensions Bill was mentioned in the Queen’s Speech two days ago; it will deal with the mechanisms of that.

With your indulgence, Chairperson, and that of your Committee, I will now move on to the equality impact assessment. This Bill has been subjected to a full equality impact assessment. One response was received, from Disability Action, which pointed out that 2·2 million pensioners were living in poverty in the UK. The equality impact assessment identified a number of differential impacts, mostly beneficial, on the groups set out in section 75 of the Northern Ireland Act 1998. Some of the impacts are unintentional and, indeed, incidental, given the population breakdown. Where there is an identifiable adverse impact, for example, in relation to the abolition of adult dependency increases and increases in state pension age, there are mitigating factors.

I will now turn to the issue of accelerated passage, and the reasons why it is necessary to seek accelerated passage for this Bill. The Committee is aware that social security and pensions are policy areas in which there has been a long-standing principle of parity with Great Britain. The Northern Ireland Act 1998 places a statutory duty on me, and on the Secretary of State for Work and Pensions, to seek to maintain single systems of social security and pensions in Great Britain and Northern Ireland.

Members are also aware of the constraints of parity, both in terms of what is operationally possible given common computer systems, and, crucially, the very substantial funding that we receive from the Treasury to pay benefits here. All members are aware of annually managed expenditure, which is currently around £2·4 billion a year. Members know that that funding is predicated on the maintenance of parity. To put that in context, the amount received from the Treasury in 2004-05 to fund our benefits exceeded the total amount of income tax raised in Northern Ireland. Parity is underpinned by sound economic imperatives.

Planning for retirement is a long-term process, and the rationale for commencing the provisions of the Pensions Act 2007 in this way was to allow people to plan with certainty for retirement. We are already finding that this is causing operational difficulties, for example, in relation to retirement pension forecasting. If this Bill were to be subject to the full legislative procedure, people here would be disadvantaged for some months to come, in that they would be unable to plan with any certainty.

Furthermore, until now, the standard minimum guarantee of pension credit has been uprated purely at the discretion of the Secretary of State for Work and Pensions. The purpose of the standard minimum guarantee, which is currently £119·05 for a single person and £181·70 for a couple, is to ensure that no pensioner has to live on less than the guarantee. The Pensions Act 2007 places a statutory duty on the Secretary of State for Work and Pensions to uprate the standard minimum guarantee of pension credit annually in line with earnings. That takes effect from the uprating in April 2008.

My Department has no power to uprate benefits unilaterally in Northern Ireland, but the Pensions Bill will empower the Department to make an Order to uprate the standard minimum guarantee in Northern Ireland to the same rate. As the Committee knows, the Pensions Act 2007 received Royal Assent on 26 July, and the majority of the provisions in that Act were brought into force about two months thereafter, even though most of the provisions will have no practical effect until 2010 onwards.

If the Pensions Bill is to be subject to the full procedure, there could be no guarantee of its receiving Royal Assent in time to allow the necessary Order to be made. The Department, therefore, would have no power to uprate the standard minimum guarantee in Northern Ireland, and claimants here would remain entitled to the 2007-08 rate. Therefore, they would be at a severe financial disadvantage, and no one wants that to happen.

The practical impact of that is perhaps the starkest reason why the use of accelerated passage procedure is justified. Without an uprate in the standard minimum guarantee, pensioners in Northern Ireland would not be entitled to receive the new higher rate from April. In bald terms, that would mean that pensioners in Northern Ireland would be entitled to only £119·05, while their counterparts in GB would be entitled to £124·05. A couple here would be entitled to only £181·70, rather than £189·35. I trust that the Committee agrees with me that people in Northern Ireland should be entitled to receive the new higher rate from April in the same way as people in Great Britain.

As I said at the outset, I respect and value the Committee’s role and contribution, and I do not take the use of accelerated passage lightly, nor do I view this instance as setting a precedent. I trust that I have adequately outlined what the Bill does and why the accelerated passage procedure is necessary. I hope that the Committee will be able to support my request.

I apologise for going on a bit, but there are good reasons behind the request.

The Chairperson:

I understand that, Minister.

Before I ask members for their questions, I remind them to speak directly into the microphones, as we are still having recording difficulties.

Minister, we understand the issue of parity, and no one wants anyone to be disadvantaged by the Bill’s progress through the Assembly. However, at the start of your remarks, you mentioned category A pensions, and I think that you said that there was a 40% take-up by women?

Ms Ritchie:

That is right.

The Chairperson:

You said that, under the provisions of the Bill, that should increase to 75% within a couple of years, but that it would be about 15 years before the take-up rate would increase to 90%, is that right?

Ms Ritchie:

Yes.

The Chairperson:

Why is there such a significant gap before achieving that extra 15%?

Mr Gerry McCann (Department for Social Development):

I am sorry, but I cannot answer that question. I do not know why there is such a gap. I would have to examine the figures.

The Chairperson:

In two years, the take-up rate will increase from 40% to 75%, but it will take 15 years to rise by another 15%.

Ms Ritchie:

It might be helpful, Chairperson, if my officials were to research that matter, and I provided the Committee with a written explanation.

The Chairperson:

That is fine.

Mr Brady:

Thank you, Minister, for your presentation. You said that you were reluctant to ask for accelerated passage, but this is the second or third piece of legislation for which accelerated passage has been requested. Is it likely that accelerated passage will be requested for all parity legislation? You mentioned that the main provisions of this Bill will not come into effect until 2010, so —

Ms Ritchie:

I imagine that there will be quite a number of provisions to put in place. In fact, as I am sure that all members are aware, Standing Order 40 recognises that certain Bills may require accelerated passage through the Assembly. It makes provision for that through omission of the Committee Stage. I do not want or like to have to do that. However, I am bound by the principle of parity. The procedure is designed to cover several circumstances. The long-standing principle of parity must be upheld, whereby Northern Ireland’s legislation on pensions and social security matches that of GB, not only in its content but in the timing of its implementation. Provision is made for that in the Northern Ireland Act 1998, which followed the Good Friday Agreement. The Bill must correspond with legislation from the Department for Work and Pensions.

Mr Brady:

The parity issue does not necessarily preclude the Committee from scrutinising the legislation. My point is that the legislation can be scrutinised and still be parity legislation. It seems to me that if accelerated passage is going to be requested for all parity legislation, there is not much point in the Committee’s dealing with it at all.

The Chairperson:

It is really a matter of timing.

Ms Ritchie:

It is a timing factor. The most pressing reason is that the Westminster Act now places a statutory duty on the Secretary of State for Work and Pensions to uprate annually the standard minimum guarantee of pension credit in line with earnings with effect from April 2008.

Each Bill is considered on its own merits. There are various other pieces of legislation that could be subject to parity. Obviously, I would bring those to the Committee and to the Executive. As I explained, where there are issues that relate to finance and upratings that are forthcoming in April, I do not want single pensioners and couples to be without that necessary uprate. We all appreciate that that money is extremely important to pensioners.

Mr Brady:

I certainly accept that. However, each piece of legislation should be judged on its merits. By definition, if it is scrutinised then it is being better judged on its merits than if it is put through by accelerated passage.

The Chairperson:

The point that Mr Brady is making, Minister — which is one that, I imagine, is shared by the Committee — is that we do not want accelerated passage to become a routine measure.

Mr F McCann:

I appreciate that the Minister is present to discuss the Bill. However, every time that the Committee has to deal with accelerated passage for a parity Bill, it on the back of our being told that if we do not pass it, that will impact greatly on people further down the line.

I cast my mind back to the Welfare Reform Bill, about which the same thing was said at this Committee. However, when the Committee raised the matter on the Floor of the Assembly, it was castigated for trying to stop the Bill’s passage. The Committee is reluctant to accept that. One of the Committee’s main purposes is to scrutinise legislation. However, after being told that, the last thing in the world that it wants to do is to stop any legislation going through. It seems that when accelerated passage is proposed, the point is always made about how it will affect people in one, two or six months’ time. However, that removes the Committee’s obligation to scrutinise legislation.

Ms Ritchie:

Obviously, this is a difficult issue. However, there are many reasons why, in this instance, parity cannot be broken. For me, the most important of those is to ensure that people receive the benefits to which they are entitled.

With regard to the particular issue that Mr McCann raised, I remind him that all Members are free to table amendments. It is worth noting that the First Stage will take place on Monday 12 November. The Second Stage will be on Monday 26 November, followed by Consideration Stage on 4 December and Further Consideration Stage on 10 and 11 December.

If my memory serves me, amendments to the Welfare Reform Bill were tabled during its Consideration Stage on 18 June. Members did get a little opportunity — I appreciate that it was not a full line-by-line examination, but nonetheless it did happen. It is a matter for the Assembly, the Business Committee and the Speaker to decide whether it accepts amendments, and I am sure that Members will argue their cases robustly, as they did before, and as I would expect them to do.

Mr Brady:

Could the Assembly not better decide if the legislation had been scrutinised?

Ms Ritchie:

That is a matter for the Assembly.

Mr Brady:

We were told initially that accelerated passage was a rare thing, but I am finding out that it is not that rare.

The Committee Clerk:

The Bill falls within section 87 of the Northern Ireland Act 1998, and, as the Minister said, its objective is to maintain a single system for social security, child support and pensions. The Assembly will decide whether to grant accelerated passage. If the Committee did not support the Minister’s request for accelerated passage and the Assembly then decided that the Bill required a Committee Stage, what could the Committee do? The Committee can scrutinise the Bill and propose amendments, but if any amendments are accepted that affect the single system, the required money will come out of the Northern Ireland block.

The Chairperson:

Members are endeavouring to steer a middle course. Nobody wants to disadvantage those who are entitled under the parity system to an increase in their benefits — in this case, we are talking about their pensions. Neither does the Committee want the Department to routinely propose measures by using that possible disadvantage as a reason to reduce scrutiny, if not avoid it.

Ms Ritchie:

I take that on board. As someone who is involved in the process, I would prefer it if the Committee were to deal with the Bill line by line — and I think that I said as much on the Floor in respect of the Welfare Reform Bill. However, the Committee Clerk has clearly outlined why we are prohibited and constrained in this instance, and that is why it is important that the Committee give its full consideration to the accelerated passage of the Bill today and within the template that is available in the Chamber.

The Chairperson:

Can we leave it that, following your presentation today and whatever the Committee decides to do beyond that, you will consult intensely within the Department as to how future parity measures are dealt with and brought before the Committee?

Ms Ritchie:

Yes. I have no problem with that, because I fully understand. I am aware that in many instances it is difficult to understand the parity issue, but we do not want to see people in the community being penalised.

The Chairperson:

I thank you and your officials for attending; I think that we have managed to keep you on time.

Ms Ritchie:

Thank you.

The Chairperson:

You have heard the Minister’s explanation; you have heard the questions. I think that we have a caveated approach. The Minister cannot be unaware of the reservations that we have about the principle of introducing consecutive Bills, albeit that they are parity Bills, without the full line-by-line scrutiny. You heard what she said towards the end. With that caveat, are members content to support the Minister’s request? Remember, this is not the Committee’s request; the Minister has requested that we give our support to her request to seek accelerated passage on the Floor of the Assembly.

Mr F McCann:

It is our duty to scrutinise. There are groups who deal with the elderly and with other sections of the public. Many of them may have difficulties with elements of pensions Bills or other benefit issues. I agree that we will accept accelerated passage for this Bill, but at some stage we need to consider how to widen the process to get the opinions of those people. If we do not, we will not be listening to a wide section of the public. We have already heard that 22,000 people with disabilities, or their representatives, have difficulties with aspects of it. There are a whole raft of people out there who may feel the same, and we have a duty to listen to their opinions when Bills like this are going through.

The Chairperson:

I was somewhat concerned that officials did not appear to have done sufficient research to answer my question. It seems a bit odd that, in two years, they can almost double the number of women claiming category A pensions, but that to get it up even marginally beyond that is going to take another 15 years. There did not seem to be a ready response to that, but hopefully we will get it in writing. Are we agreed that we proceed on the basis that we have outlined, with the Minister having heard our concerns clearly expressed?

Members indicated assent.