"(c) in particular, where the court determines to make such an order, whether the order should provide for the accrued rights of the party with pension rights ("the pension rights") to be divided between that party and the other party in such a way as to reduce the pension rights of the party with those rights and to create pension rights for the other party.".
"(8) If a pensions adjustment order under subsection (2)(c) above is made, the pension rights shall be reduced and pension rights of the other party shall be created in the prescribed manner with benefits payable on prescribed conditions, except that the court shall not have the power—
"(aa) make such consequential modifications of any enactment or subordinate legislation as appear to the Lord Chancellor necessary or expedient to give effect to the provisions of section 25B; and an order under this paragraph may make provision applying generally in relation to enactments and subordinate legislation of a description specified in the order,";
With this, it will be convenient to discuss the following: Government amendment No. 24.
Amendment No. 97, in clause 5, page 3, line 5, after `assets', insert 'or rights'.
Government amendment No. 47, in clause 9, page 7, line 43, at end insert—
'(8) If the parties' arrangements for the future include a division of pension assets under section 25B of the 1973 Act or section 10 of the Family Law (Scotland) Act 1985, any declaration under subsection (2) must be a statutory declaration.'
Amendment (a) to the amendment, after 'assets', insert `or rights'.
Amendment No. 109, in clause 15, page 11, leave out lines 1 to 18.
New clause 8 is important to the Bill. Its acceptance would—I hope will—be welcomed by many people, but perhaps most by thousands of women who are facing the possibility of divorce, often in circumstances which they have not chosen, and who know that the consequence of divorce may be poverty in retirement. I speak of the impact on women, although the proposals of course are gender neutral. The inability of legislation to enable pensions to be split at the time of divorce largely affects women.
It has been recognised for at least 30 years that divorce can have a devastating impact on the retirement income of a divorced spouse. There has been a growing recognition of that impact in recent years. Sadly, that has not been recognised by the Government. Every action that the Government have taken in that matter has been marked by delay. Everything that has been achieved has been grudgingly conceded—often in the face of either an actual, or a potential, defeat in Parliament.
The basic problem is well recognised on both sides of the House. For a long time, it has possible in principle to take into account the value of pension assets as part of a divorce settlement. In practice, however, that could be done only where there were sufficient other assets to be offset against the pension. Real justice could be achieved only if, in some way, the value of pension assets could be shared in appropriate proportions between the divorcing couple.
In practice, that has not been possible. The result has been that many women who have spent lifetimes bringing up children, looking after a home and sacrificing their careers to their husbands' success have been punished for everything that they have ever done. They have been left without a pension on income support and means-tested benefits, as, in a sense, a burden on the taxpayer—a burden that they never wanted to be. Throughout their lives, they have exercised family responsibilities with every intention of living in independence and security in retirement. Being forced to claim benefits in retirement was the last thing on their minds.
Does my hon. Friend agree that it is absolutely essential that the Government set a clear timetable on the matter because, as we know, many women are suffering grievously because of the basic inherent inequity?
I entirely agree with my hon. Friend. I am about—I hope at not too great a length—to set out the history of the matter, which I am afraid shows that the House should not take too seriously bland assurances from the Government. The history is not a good one.
A system that puts an unnecessary benefits bill on the taxpayer and unnecessarily takes independence and security from individual women cannot be right. Despite the fact that the position has been long recognised, the Government have initiated nothing save a mysterious report on pensions and divorce, which is long overdue and has not yet been published.
It was during the passage through the other place of the Pensions Act 1995 that the first progress was made. The Government bowed to cross-party pressure to concede the approach known as attachment, or earmarking. Under that procedure, once a pension is in payment, part may be paid by the pension provider to former partners. That was an improvement on the previous position in law but that gain—this relates to the question of my hon. Friend the Member for Hampstead and Highgate (Ms Jackson)—remains a meaningless paper commitment.
In 1995, the then Minister, the hon. Member for Wanstead and Woodford (Mr. Arbuthnot), said that the earmarking of pensions would apply to orders made after 1 April 1996. Now we are told that it will apply only to new applications for divorce made after 1 July 1996. That is a huge slippage, given that there are some 170,000 divorces a year. One can only speculate on how many women have been hit by the Government's lack of urgency.
The House was told in February by the then Minister, the hon. Member for Brecon and Radnor (Mr. Evans), that the reason for the inexcusable delay was to allow consultees sufficient time to comment on the proposals. Two weeks before 1 July, there are no regulations out for consultation, no commencement order has been published and there is no sign of good faith from the Government, showing that they are moving urgently to implement the measure. I stress that history because it is possible that the Government will ask the House to accept their good faith on the matter. Their record of inaction and delay in implementing earmarking suggests that something a good deal more explicit will be necessary—above all, a clear timetable for the implementation of pension splitting.
After the historic vote in another place, the Government have accepted the principle of pension splitting. It is an improvement on earmarking for the simple reason that a woman will no longer be tied to her husband's life, life expectancy or career after a divorce. Instead of divorced spouses having to wait for their partner's pensions to come into payment, after their partners have retired, at the point of the divorce the pension can be split into two independent pensions. That is the way we should go.
We argued that it was possible for the Government to introduce the principle of pension splitting in the Pensions Act 1995. The Government failed to do that. It is now possible to do it in the Family Law Bill. New clause 8 is intended to do just that. Its purpose is to produce a framework within which it would be possible, by regulation, to achieve a limited form of pension splitting this side of the next century. There is no reason why they cannot accept it.
I should explain briefly how new clause 8 improves on the present clause 15, which was adopted in another place. That clause was a historic victory and had cross-party support but it has some weaknesses. It is not sufficiently clear about the difference between a pension asset and a pension right, which are not necessarily the same things in different schemes. The provision for unfunded schemes is not clear. Most difficult of all, it allows the courts too much flexibility and may lead to a situation where there is no standard pattern of pension splitting, which would be enormously expensive for those who are called upon to implement it.
New clause 8 improves the existing clause in each of those respects. It is clear about the rights involved. It enables regulations to prescribe the shape of the benefits that would be reduced for the member of the scheme and the shape of the benefits that would be created for the divorced spouse. It would enable the regulations to be clear about the rights of the spouse once the benefit is set up. It would give clear rights to schemes in respect of the circumstances in which assets should be transferred to a new, free-standing pension or retained within the existing scheme. It will enable a limit to be set in the case of unfunded schemes to prevent an expensive commitment of cash transfers to separate pension schemes. New clause 8 is therefore a significant improvement on clause 15 and would take us much nearer to the implementation of pension splitting, which has been long sought and should have been put in place by now.
The Opposition have been practical and realistic. We have accepted that it is not possible to complete all of the changes that could be made. In particular, the inclusion of the state earnings-related pension scheme and, possibly, of guaranteed minimum pensions in pension splitting at this stage is a technical challenge that will require further work—although I am reluctant to accept the Government's lengthy timetable as a rigid limit on how long it should take. We have recognised the need to restrict rights to claim large cash transfers from unfunded pension schemes. Our commitment to pension splitting is accompanied by a belief, and an intention, that it can be introduced at no net cost to public expenditure.
New clause 8 would move us forward and bring new hope to many people, especially many women, who are facing divorce and, as a consequence, poverty and insecurity, in their retirement. The Government have, for the reasons that I have given, lost credibility on the matter, but they have the chance to recover some. To accept the new clause would be an important step. Perhaps more important—because even under the new clause, regulations will be needed to implement the measures that it sets out—the House needs a clear timetable from the Government showing when pension splitting will be introduced.
Several concerns have been raised, although the figures have changed significantly over the past year. On the two major measures, the figures for 2020 produced by the Treasury suggest that any tax implications would be offset by savings on income support and the legal aid bill. We have recognised that, in the case of unfunded public sector schemes, it would not be possible to enable a divorce partner simply to take a cash lump sum from those schemes to transfer into an alternative pension. Although in the long term there would be no net cost from that, it could lead in the short term to a substantial outflow of funds from the unfunded schemes. In an ideal world, that limitation might not be desirable, but we regard it as necessary at this stage. We have taken some care to examine the matter and have tabled new clause 8 in the belief that pension splitting can be introduced at no net cost to public expenditure.
A clear timetable from the Government is essential. It must not be the sort of the timetable that led women to believe that earmarking would be applied to their divorces if they entered actions in 1995 only to find that the rules were changed and that they had been denied the benefit of the Pensions Act 1995. Such a misleading timetable would not be acceptable. We must have a clear timetable for when the Government expect to bring forward the necessary measures to put pension splitting on the statute book.
The hon. Member for Southampton, Itchen (Mr. Denham) has mentioned a number of matters. The Government accept the principle of pension splitting when dealing with financial provision on the termination of marriage. We are fully committed to it and to legislating to effect it as soon as practicable. There is no point of difference between the Government and the Opposition on that.
Earmarking has been mentioned. The scheme for attaching orders for periodical payments and lump sums has been fully considered so that a regulatory framework can be provided. I am happy to say that the agreed policy will be subject to regulations to bring section 166 into force for petitions that are filed on or after 1 July 1996. That intention was made plain earlier this year and we shall deliver on it. An announcement on the agreed policy will be made within the next couple of days.
As a measure of good will, we agreed not to overturn clause 15, although the clause would not, as I think the hon. Member for Itchen agreed, work as intended. Instead, we agreed fully to explore the issues and to present appropriate legislation when we had done that. That is the proper approach. The Opposition amendments restate the principle, but they do not underpin it with a considered policy that deals with all applications in terms of pensions and taxation.
The amendments are an attempt to deal with those wide-ranging, complex and sensitive issues by giving to the Lord Chancellor powers not only to effect pension splitting but to amend existing primary and secondary legislation when the majority of legislative change lies within pensions and tax law. The amendments would also, inadequately in the Government's view, extend pension splitting to Scotland. The issues have not been consulted upon or worked out. New clause 8 addresses that by leaving everything to be prescribed, but that approach has two serious flaws.
The first flaw is the extent to which the powers can be used to address the issues in regulations. In effect, it would mean that Parliament would be denied the opportunity to make important decisions on principle and policy. For example, it would not be allowed to decide whether all the pension rights should be split or only those that had been acquired during the marriage; what rights a non-scheme member spouse should be given; the obligations of scheme managers; and to what extent their discretion would be fettered.
Parliament would have no opportunity to amend or even to debate regulations that affect divorcing couples and public finances. There is no legal or constitutional rule prohibiting Parliament from legislating to provide wide powers, but Parliament is usually highly critical of any attempt to bypass its scrutiny of policy. As illustrated by the Bill, many of our debates consider policy issues and their implementation in great detail.
There would be a need for a great deal of prescription: the regulations would have to contain a raft of policy and legislative change. Those changes could affect the fundamental rights of many people. For example, they would affect property rights, tax positions and even rights within the civil justice system. I should have thought that, at the very least, the debate in the other place and elsewhere has clearly illustrated that pension splitting raises fundamental issues in relation to the purpose, operation and tax treatment of pension schemes.
My hon. Friend says that he accepts the principle; that this is a complex issue that needs to be looked at carefully; and that therefore there must be proper legislation. He has also said that, in the spirit of good will, he will leave clause 15 in the Bill. That clause was agreed in the other place and has not been debated in the House. So that we shall know what to do later this evening, what is the impact of leaving it in the Bill?
Clause 15 establishes in the Bill the principle of pension splitting without giving the courts the powers that are necessary to effect it.
My right hon. Friend the Chancellor of the Duchy of Lancaster has made it clear that the Government's proposal was for a Green Paper to examine all the issues in detail so that we would be able, after proper consultation, to put in place the regulations to give effect to the principle that is outlined in clause 15. The Government's approach was to accept the principle and to have clause 15 in the Bill, but to go about the business of the consultations and preparations that are needed to make pension splitting a reality.
The Bill will receive a Third Reading and Royal Assent, and clause 15 will be in it. The Government will later present proposals, but in the meantime, cases could come before the courts. What will be the effect in court of clause 15 being in the Bill? If lawyers start debating the issue, putting it before the court or taking cases to court under clause 15, will that clause have any effect?
Perhaps I did not make the matter clear. Clause 15 does not contain the means to enable the court to make an effective order for pension splitting. In its present form, the clause could not be implemented. No doubt that is the thinking behind new clause 8, which is an attempt to provide regulation-making powers that would give reality to pension splitting, although I have criticisms of that. Of itself, clause 15 would not be sufficient to effect that change.
When somebody is about to have his property rights altered or taken away, he should expect Parliament to have conferred an appropriate power to do that. However, it is not clear that the powers in the new clause are appropriate for that. They are certainly not transparent. For example, it is open to challenge that there is a clear power to allow the court to make an order requiring the managers of a pension scheme or anyone else to take the necessary steps to effect a pension split. That lack of clarity should not be condoned. There are implications for employers, pension scheme managers, funds of more than £600 billion, other scheme members, actuaries, lawyers and others as well as for the individuals concerned and public finances.
The powers within new clause 8 are arguably not transparent, and are inadequate. The second major flaw is that, although the regulation-making powers appear to be wide ranging, they may not be wide enough to deal adequately with all the legislative issues that arise. Under those powers, further primary legislation may be required. The potential scale of legislation that may need amendment does not seem to have been fully considered. I am glad that the hon. Member for Itchen has listened to that point.
My noble Friend Lord Mackay of Ardbrecknish and the noble Lord Elton said in the other place that, even in February, a one-and-a-half-page list of statutes would need to be looked at. That list is likely to grow significantly as we consult because we do not yet have a clear idea of the full extent of the legislative amendment that will be needed after we have consulted. It is fair to say that, in pensions, consultations often provide useful information about defects in draft regulations and ways in which legislation can be better effected. That is one of the reasons for taking such trouble to consult people in the industry and others at every stage on the pensions legislation regulations. That has been applauded, and I think that Opposition Members agree with it.
With respect, the hon. Gentleman is being slightly disingenuous. The earmarking proposals apply to petitions issued after 1 July 1996, but it was never intended to lay orders in relation to petitioners until April 1997. Adequate time is available for those petitions to be filed, and those involved in matrimonial law are fully aware of that.
Opposition Members may argue that enough work has been done to determine policy and that they know what legislation is necessary. If so, the hon. Member for Itchen has not set out a scheme in detail. If one provides Henry VIII powers—as, in effect, the new clause does—the limits within which those powers are to be exercised are usually defined. The Government believe that the publication of a Green Paper in July, to explore the issues and to consult on how pension splitting might be sensibly achieved, is the proper way forward. It is not intended as a delaying tactic in any way, and it is necessary that groups with an interest in the matter have an opportunity to comment. It is sensible to introduce legislation and proposals for its implementation once that work is complete, and not before. Producing sound policy in a complex matter such as this takes time, as Opposition Members know. They should appreciate that a wide range of issues will be considered in the Green Paper.
Have the Government ventured any kind of judgment as to whether the proposition that pensions should be split between a divorcing husband and wife would increase or decrease the attractiveness of marriage?
No one who has been involved in a divorce case—I speak as a lawyer who has represented individuals in such cases—would consider that it was a good thing financially to become divorced. To spread one or two incomes over two households where previously there was only one is not easy. It is not the Government's view that accepting the principle of pension splitting will give a reward either for marriage or for divorce. It is simply a provision that the courts have wanted for a considerable time, as those involved in family law would agree. The Government's concerns are to put the proposal into practical effect and to ensure that the necessary regulations and primary powers are provided.
The Government confirm their commitment to the principle, and we are prepared to leave clause 15 in the Bill until such time as it can be amended or replaced by suitable implementing legislation. We should introduce legislation from a position of knowledge, not guesswork, and the most sensible route is to introduce appropriate legislation once the consultation process is complete. I reiterate the Government's commitment to do so. I ask the hon. Member for Itchen to consider how we should make proper law in such cases.
The Government do not object to the other Opposition amendments in the group.
It is clearly the will of Parliament that pension splitting should be addressed in the Bill. I listened with interest to the Minister as he talked about a Green Paper. The matter has been discussed by a number of institutions for more than 25 years. In 1993, the Pensions Management Institute produced a very good report, which has been followed by report after report. Pension splitting takes place in other countries satisfactorily, and it is high time that we had fewer excuses and more action from the Government in bringing it about.
Many groups have campaigned on the matter and have produced information in reports. The Fairshares group—a group of divorcees—has campaigned, as has the Pensions Management Institute, the National Association of Pension Funds, the Equal Opportunities Commission and the Association of Pension Lawyers. There is plenty of evidence to assist the Government.
My noble Friend Baroness Seear put it succinctly when she said that this is a matter of "justice, decency and honour", and that is right. During the debates on the Pensions Bill in 1995, we saw a little move along the road by the Government, but it was unsatisfactory. The hon. Member for Southampton, Itchen (Mr. Denham) said that women who are getting on in life are most likely to benefit from the measure. A lady came to my surgery on Saturday and specifically asked me, not to help her—she knows that it is too late for her—but to speak in support of the proposal in the House of Commons. Many women who end up being traded in for a younger model have supported the gentleman in question for a number of years. They have contributed considerably to the pension, and it is only just and right that that is recognised when the marriage ends.
I hope that there will be quick action from the Minister, although I suppose that we should be grateful that the Government recognise that the principle is needed in the Bill. Like other hon. Members, I want to see the regulations and the enactment of the Bill soon. Many matters in the Bill are for an individual hon. Member's conscience and will be dealt with by a free vote, but my colleagues in the Liberal Democrats would be unhappy about a Bill that did not include pension splitting.
I hope that that will be supported, although I am disappointed that, once again, we are waiting for a Green Paper. The Government must get on with it, as the matter certainly needs to be dealt with.
I shall be brief, as we have a lot of work ahead of us. In answer to the hon. Member for Northampton, North (Mr. Marlow), section 25 of the Domicile and Matrimonial Proceedings Act 1973 imposes a duty on courts to have regard to the value of a pension if that is ascertainable. From a practical point of view, I know that that is frequently a very difficult exercise. The law is very much in need of reform so that the parties know where they stand and the courts have a uniform approach to an asset which is, after one's home, often the largest asset in a normal family. The duty in section 25 of the 1973 Act is to have regard to a range of factors, one of which is the value of a pension scheme.
The Minister said that groups involved directly in the pensions world are unhappy or unable to comment favourably on the proposed change, but I do not accept that. The Pensions Act 1995 was a considerable step forward, and the Pensions Management Institute and the National Association of Pension Funds are in favour of pension splitting. Those organisations were commended in the other place for their hard work in trying to educate the Government on the matter. Other bodies, including the Institute of Actuaries and the Association of Pension Lawyers—both of which are well versed in the intricacies of pensions law—are in favour of a change.
I am sure that the whole House is in favour of equitable pension splitting. My hon. Friend the Minister has said that clause 15 as written is not justiciable. The hon. Gentleman is a lawyer—as least he is implying that he is a lawyer. Is it wise to have within the Bill something that is not justiciable?
It is an offence to imply that one is a lawyer if one is not—I am, in fact, a lawyer. Mind you, in many circumstances it can be an offence to admit that as well. We are dealing with a broad statement of principle, and that is why the new clause should find favour. Frankly, it would add flesh to the bones and would enable us to take the matter forward. I am sure that the Minister is sincere, but I respectfully remind him that discussions have been going on since at least 1968. It is a long time since then, during which a great number of people have, as it were, fallen by the wayside in divorce. I have received many letters from women who are unable to do anything about accessing a share of the husband's divorce pension allocation, to which I believe that they are entitled. The time lag does us no credit. I hope that we can introduce legislation very quickly.
I make one final point, in an effort to assist the deliberations more than anything else. In the past 10 years, there has been a tendency towards clean break orders in matrimonial courts. It is a welcome change, because often the parties need not return for any variation and the settlement is made once and for all, as the words "clean break" imply. It is not possible to apply a thorough clean break principle to divorce law if one must leave to one side the second most important asset of that marriage—the pension.
I urge the Minister and the Government to get a move on, because the interests of justice, and of fair play generally, demand it.
I strongly endorse what was said by Labour Members and by the hon. Member for Christchurch (Mrs. Maddock). The Married Women's Association was formed more than 40 years ago by one of my constituents and is now chaired by her daughter. One of its concerns, all those years ago, was what would happen to the pension on divorce, as it was inevitably and invariably the woman who found herself without pension rights.
Hon. Members have spoken of the contribution that a woman makes by maintaining home and family, precluding her from earning any occupational pension rights herself. Representations have been made to me by constituents who, while managing home and family, made a sizeable contribution in some instances to the family business and after divorce found themselves excluded from any pension rights.
The Minister's contribution appalled me. He seemed to say that he accepts in principle that pension splitting is right, but that it is so incredibly complex that the House may be unable to define the legislation to make an inequitable situation equitable. He spoke of property rights, and I received the impression that he regarded the property rights to a pension as being exclusively those of the male partner in this sense. We argue that, as far as a pension is concerned, there are equal property rights.
The Government appear to have had no difficulty shaping and passing through the House legislation when they wished to change, for example, pension rights of employees of British Rail or people working in the bus industry. Surely it is not an impossibility for the House to bring its attention and intelligence to bear to change a growing inequity.
Timetabling is enormously important. If women are to be fobbed off again with fine words from the Minister saying, "Yes, we accept that this is basically unjust, but we cannot give you any idea of when this unjust situation will be rectified," I must tell the Minister that I find that unacceptable, as I know do many of my female constituents, who have made specific and direct representations to me on this. I cannot believe that the Minister is not aware of the grave economic difficulties that an increasing number of women suffer as a result of this injustice, and I refuse to accept that it is beyond the will and wish of the House to introduce legislation so that that injustice can be eradicated comparatively soon.
The Minister's response is as grudging as it is mean-spirited. [HON. MEMBERS: "Oh."] Oh yes. Had it not been for Opposition Members, the Government would have done nothing about pension splitting when we considered the Pensions Bill. Had it not been for Members on the Labour Benches in another place, with cross-party support, we would not be addressing the issue of pension splitting now. That is the reality.
The reality today is that the Government are still not prepared to commit themselves to the timetable that we want in relation to this matter.
Early in the new year is not good enough. The Government have had plenty of time to consider the matter. We want a clear sign that they will do what is necessary in terms of regulation, that they will do what is necessary—if it is necessary—in terms of primary legislation, and that that process will commence at the beginning of the next Session. That is not an unreasonable timetable, but obviously the Minister is not prepared to make that commitment.
We must make one thing crystal clear to the Government. No Family Law Bill will pass the House that does not have written on its face the regulations that are contained in new clause 8 and our amendment in relation to that matter. The Government will have no Bill unless they recognise the vital nature of the concerns that we have raised with them—the concerns of women who face an old age of poverty because the Government have failed to act.
If the Government will not act, we will. If we have to, we will divide the House on this issue and, if we have to, we will vote against the Bill on Third Reading unless and until this new clause and the amendments are carried and appear on the face of the Bill.