Arrangement of Business
The Deputy Chairman of Committees (Lord Skelmersdale) (Con)
My Lords, the Grand Committee is now in session. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Co-operative and Community Benefit Societies and Credit Unions (Investigations) Regulations 2014
(10 years, 8 months ago)
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Lord Newby
That the Grand Committee do consider the Co-operative and Community Benefit Societies and Credit Unions (Investigations) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Newby (LD)
My Lords, I am pleased to introduce the Co-operative and Community Benefit Societies and Credit Unions (Investigations) Regulations 2014. With your permission, I will refer to them as the investigations regulations.
The current regulatory regime for co-operatives, community benefit societies and credit unions is in need of modernisation in order to deliver better outcomes for consumers and the sector in Great Britain, now and for the years to come. The Government are therefore taking forward a package of measures, following a public consultation last year. The investigations regulations are part of this package.
The other three measures in the package will increase the amount of withdrawable share capital an individual can invest in a society from £20,000 to £100,000; make insolvency rescue procedures available to industrial and provident societies; and simplify electronic registration for new societies.
These changes, alongside progressing the co-operative and community benefit societies consolidation Bill, demonstrate the Government’s commitment to promote mutual bodies and to foster diversity in the UK economy while preserving the unique features of the sector. There are around 7,600 societies and 380 credit unions registered in Great Britain. The sector continues to provide a popular and successful structure for mutually run businesses, with a growing membership of more than 15 million members in the UK.
Looking specifically at the investigations regulations, this statutory instrument gives the Financial Conduct Authority additional powers to investigate co-operatives, community benefit societies and credit unions where circumstances suggest their behaviour may be improper or unlawful. The FCA initially requested these changes to legislation to enhance its powers to investigate societies. The proposal was included in the Government’s July 2013 public consultation, Industrial and Provident Societies: Growth through Co-operation, and was well received by respondents from industrial trade bodies, individual societies, credit unions and consumer groups.
The investigations regulations aim to increase confidence in co-operatives, community benefit societies and credit unions by creating a level playing field with the requirements that companies face. Therefore, the additional powers for the FCA are in line with the current powers in the Companies Act 1985, appropriately modified for societies. The investigations regulations include a number of new powers, including the requirement for the FCA to appoint an inspector if a court instructs it to do so. They also give the FCA power to appoint an inspector to investigate the affairs of a society. The power is available in the same circumstances as for companies, for example where it appears to the FCA that the society’s business may have been conducted with an intention to defraud creditors or for unlawful purposes.
Other powers concern the expenses of an investigation and state that these would be payable in the first instance by the FCA, which would then have the power to recover them from the society investigated. The total cost of an investigation is expected to be no more than £100,000, since co-operatives, community benefit societies and credit unions are relatively simple business models compared with large companies, where much higher costs may be involved.
In practice, the FCA’s first intention would be to recover the costs of an investigation from the periodic fees paid by all societies; as a last resort the FCA may consider using its central budget before passing on any costs to a society. It is also worth noting that the FCA estimates, based on past experience, that it would only need to use the powers to investigate up to one society a year.
The measure also gives the FCA, or an authorised investigator, power to give directions to a society to produce documents and provide information. This is similar to the FCA’s existing powers but, in addition, the investigations regulations give the FCA or an authorised person the power to apply to a magistrate for a warrant of entry to premises of a society on the same grounds as those relating to companies.
These regulations will help to improve the legislation for co-operatives, community benefit societies and credit unions by bringing it more into line with that for companies and giving members of these societies confidence that the regulator has adequate powers to act to investigate those societies suspected of wrongdoing. This will benefit the co-operatives sector as a whole by giving more confidence in the legal form, and it has been welcomed by the main trade body, Co-operatives UK. I commend the regulations to the Committee.
Lord Tunnicliffe (Lab)
My Lords, these regulations seem to be universally welcomed and they are certainly welcomed from these Benches. I studied the Explanatory Memorandum with some care and looked at the general Committee debate in another place. The only point that my eyes alighted upon was the powers mentioned in paragraph 7.4 of the Explanatory Memorandum. The other powers concern the expenses of the investigation. These will be payable in the first instance by the FCA but will be recovered from the society being investigated, which rather implies that they go through the FCA as a transaction. I note the response that the Financial Secretary to the Treasury made in another place, using more or less the same words that the Minister has used—that it would be unusual for such a charge to be passed through to the society being investigated. However, I would welcome an assurance that where the investigation reveals no malpractice, there will certainly be no passing through of the charge to the society concerned. With that, I am entirely content with the regulations and fully support them.
Lord Newby
My Lords, in respect of the noble Lord’s question, the FCA has the option of either recouping its costs directly from the society in question or funding the costs from within its own overall budget. In the case of a society being felt to have committed no wrongdoing, the FCA may well decide that it is more appropriate to adopt the latter option. However, the decision will be for the FCA. I hope that that answers the noble Lord’s question.
Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2014
(10 years, 8 months ago)
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Lord Newby
That the Grand Committee do consider the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Newby (LD)
My Lords, I am pleased to introduce to the Committee the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2014 and the Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2014. As both the regulations and the order deal with national insurance contributions, it seems sensible that they should be debated together. As a matter of course, I can confirm that the provisions in the regulations and the order are compatible with the European Convention on Human Rights.
The changes to the NICs rates and thresholds covered by these two instruments were announced as part of the Chancellor’s Autumn Statement on 5 December last year. It is worth confirming from the start that the basis of indexation that has been used to calculate the changes covered by these two instruments is the same as that used since the 2012-13 tax year.
In the Budget 2011, we announced that from the 2012-13 tax year the basis for indexation of most NICs rates limits and thresholds would be the consumer prices index, the CPI, instead of the retail prices index, RPI, rate of inflation. This is because the Government believe that the CPI is the most appropriate measure of the general level of prices. The exceptions to this are the secondary threshold and the upper earnings and upper profits limits.
I will start with the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations. These regulations are necessary to set the class 1 national insurance contributions lower earnings limit, primary and secondary thresholds and the upper earnings limit for the 2014-15 tax year. The class 1 lower earnings limit will be increased from £109 to £111 per week from 6 April 2014. The lower earnings limit is the level of earnings at which contributory benefit entitlement is secured. However, NICs do not need to be paid by the employee until earnings reach the primary threshold. The class 1 primary threshold will be increased from £149 per week to £153 per week from 6 April 2014. The secondary threshold is the point at which employers start to pay class 1 NICs. In line with the commitment in Budget 2011, this is being increased by RPI from £148 to £153 per week.
From this April, the income tax personal allowance for people born after 5 April 1948 will be increased above indexation by £560 from £9,440 to £10,000. The point at which higher rate tax is payable will be increased to £41,865 in the 2014-15 tax year. As I mentioned, the upper earnings limit is not subject to CPI indexation. This is to maintain the existing alignment of the upper earnings limit with the point at which higher rate tax is paid. The upper earnings limit will be increased from £797 to £805 per week from 6 April 2014. The regulations also set the prescribed equivalents of the primary and secondary thresholds for employees paid monthly or annually. There will be no changes to NIC rates in 2014-15. Employees will continue to pay 12% on earnings between the primary threshold and the upper earnings limit, and 2% on earnings above that. Employers will continue to pay contributions at 13.8% on all earnings above the secondary threshold.
I move on to the social security order. This order sets out the NICs rates and thresholds for the self-employed and those paying voluntary contributions as well as providing for a Treasury grant. The order raises the small earnings exception below which the self-employed may claim exemption from paying class 2 contributions. The exception will rise in April, from £5,725 to £5,885 a year. Many self-employed people choose to pay these contributions in order to protect their benefit entitlement even though they may claim exemption from paying class 2 contributions. The rate of class 2 contributions for the 2014-15 tax year will rise from £2.70 to £2.75 a week. The rate of voluntary class 3 contributions will also increase from £13.55 to £13.90 a week for the 2014-15 tax year.
Today’s order also sets the profit limits for class 4 contributions. The annual lower profits limit on which these contributions are due will increase from £7,755 to £7,956 in line with the increase to the class 1 primary threshold. At the other end of the scale, the annual upper profits limit will increase from £41,450 to £41,865 for the 2014-15 tax year. This is to maintain the alignment of the upper profits limit with the upper earnings limit for employees. The changes to the class 4 limits will ensure that the self-employed pay contributions at the main rate of 9% on a similar range of earnings as employees paying class 1 contributions at the main rate of 12%. Profits above the upper profits limit are subject to the additional rate of 2% in line with the 2% paid by employees on earnings above the upper earnings limit.
Finally, I need to ensure that the National Insurance Fund can maintain a prudent working balance throughout the coming year, which the Government Actuary recommends should be one-sixth or two months of benefit expenditure. The rerating order provides for a Treasury grant of 5% of benefit expenditure to be made available to the fund in the 2014-15 tax year. Similar provision will be made in respect of the Northern Ireland National Insurance Fund. I commend the regulations and order to the Committee.
Lord Tunnicliffe (Lab)
My Lords, I have studied the Explanatory Memorandum and these regulations with great care, and I have to confess that I am finding it very difficult to find any questions whatever to ask on them. The report of the general committee in the other place was equally bereft of any serious exchange. There were some technical questions asked but I will not repeat them, on the basis that I am sure that the Treasury machine would give precisely the same answers. There was an exchange on some thinking that we are developing about a different rate of benefit for people who have paid contributions over a number of years but that has to be developed further, to make sure that it is cost-neutral. The 5% that the Minister mentioned is, as I understand it, essentially a piece of book-keeping and does not represent any increase in overall public expenditure. I am not sure whether the Minister said that explicitly and I would value it if he were to confirm that but otherwise we have no comments to make on these regulations.
Lord Newby
My Lords, I can confirm that the provision of a 5% Treasury grant is indeed a piece of book-keeping and does not involve any additional expenditure.
Lord Tunnicliffe
My Lords, before we start the next business, due to the efficiency with which we have executed our previous business, we are rather scratching to find a spokesman. I wonder whether we might take a 10-minute break for the Opposition to find a spokesman for the next round.
The Deputy Chairman of Committees
My Lords, yes, in due course but the noble Lord, Lord Tunnicliffe, is being a little previous.
Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2014
(10 years, 8 months ago)
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Lord Newby
That the Grand Committee do consider the Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
The Deputy Chairman of Committees (Lord Skelmersdale) (Con)
My Lords, I think by general agreement the Grand Committee will adjourn for 10 minutes.
Warm Home Discount (Amendment) Regulations 2014
Lord Gardiner of Kimble
That the Grand Committee do consider the Warm Home Discount (Amendment) Regulations 2014.
Relevant document: 19th Report from the Joint Committee on Statutory Instruments.
Lord Gardiner of Kimble (Con)
My Lords, in introducing this debate on the Warm Home Discount (Amendment) Regulations 2014, I will first give some background to the scheme to provide context to this amendment.
The coalition is committed to tackling the problem of fuel poverty and to helping people, especially in low-income vulnerable households, heat their homes. Fuel poverty remains a huge challenge. Despite significant investment in improving our housing stock, some housing remains inefficient. Combined with rising energy prices, that means that there are still too many households left in fuel poverty. The warm home discount scheme is part of the Government’s programme to address the contributing factors of fuel poverty, either through increasing income or reducing the costs of energy.
Introduced in 2011, the key aspect of the warm home discount is that it requires electricity suppliers with more than 250,000 domestic customer accounts to provide financial support with energy costs to their vulnerable customers. Spending is incurred by participating suppliers in respect of two groups of customers: first, the poorest pensioners, who are customers of participating energy suppliers—described in regulations as the “core group”—and secondly, other low-income and vulnerable customers. This second group comes under what is described as “non-core spending”.
Under the core group, all the poorest pensioners eligible for the scheme receive a rebate in respect of their electricity cost from their supplier. This winter, that rebate was £135. Other groups, such as low-income families and those with long-term illnesses and disabilities, can apply for rebates to their supplier. Those rebates are counted as part of non-core spending and are also worth £135 this winter.
Since the warm home discount scheme was introduced, around 2 million households each year have had lower energy bills as a result. Due to the success of the warm home discount, the Government have committed to extend support to 2016, with spending of £320 million in addition to the £1.1 billion which will be spent over the first four years of the scheme.
This amendment aims to give energy suppliers the incentive to spend £34 million more than they are required to spend this scheme year. As a result, more than 250,000 more low-income and vulnerable households could benefit from a £135 rebate this scheme year. That would also maintain an upward trajectory of spending each scheme year.
There is an overall spending target for each year of the warm homes discount which sets out the value of assistance that participating suppliers should collectively provide. For 2013-14, the spending target set out in regulations is £300 million. That total spending is divided into the demand-led core group and the non-core spending. Having estimated the size of the core group, the Government set the total non-core spending obligation for suppliers for the forthcoming scheme year. The larger the core group, the smaller the amount of non-core spending suppliers have for other groups of households who may qualify for a rebate. The size of the core group has to be estimated in advance of the start of each scheme year to inform suppliers and give them sufficient time to prepare for their spending obligations.
When the department set the non-core spending obligation in advance of the 2013-14 scheme year, it estimated that the core group would result in spending of £200 million. Given a total spending target of £300 million, the department set the total non-core spending obligation at £100 million. However, six months on from setting the non-core spending obligation, the size of the core group was lower than forecast. Therefore, we now estimate that suppliers will spend £166 million on their core group customers in 2013-14.
That means that £34 million of the overall spending target that suppliers could use to help other vulnerable households would not be required to be spent in 2013-14. Under the current regulations, if suppliers spend more than required, their individual obligations for the next scheme year are reduced by a maximum of 1% of the current scheme year’s non-core spending obligation, even if they overspend on more than 1%.
The amendment would change that maximum limit to 34%, providing an incentive for suppliers to spend above their obligations by up to that amount. For example, if an individual supplier spends 25% above its individual non-core spending obligation in 2013-14, Ofgem will reduce its obligation in 2014-15 by the same amount.
However, spending by suppliers will still be higher next winter than this winter. The amendment is intended to close the gap in spending between years so that we maintain the growth in the number of households who receive electricity bill rebates year on year. As required in the regulations, the Secretary of State has already notified Ofgem of the non-core spending obligation for 2014-15. The Secretary of State has set the obligation based on spending of £266 million in 2013-14, and has added the £34 million underspend against the total spending target this scheme year to the spending target for 2014-15. This takes us to a total of £344 million.
However, if suppliers incur more non-core spending than they are required to prior to the end of March, Ofgem will be able to adjust down individual non-core spending obligations by 30 September once suppliers report their actual spending for this scheme year. This change has been consulted on and all respondents were supportive of the change. Although suppliers have not given us exact forecasts of how many more rebates they intend to provide, some suppliers have already decided to spend above their regulatory obligations in anticipation of this change. This amendment means that more low-income and vulnerable households may receive £135 off their bills this winter than would have been the case otherwise. It will give suppliers the incentive to provide more rebates to a greater number of households this year and therefore provide more help to tackle fuel poverty. For those reasons, I commend these regulations to the Committee.
Baroness Maddock (LD)
My Lords, my noble friend the Minister will know that fuel poverty is one of the areas in which I take a particular interest. During the passage of the last Energy Bill, due to pressure on the Government from myself and many others, we were pleased to have a fuel poverty strategy from the Government in that Bill. Therefore, I particularly welcome the changes here, which mean that more vulnerable and low-income households will be taken out of fuel poverty.
As we have listened to my noble friend, it is obvious that the regulations surrounding all this are incredibly complicated. Have the Government any plans to try to simplify this as they move forward with their fuel poverty strategy? I was going to ask how many people will be taken out of fuel poverty, but I think that he answered that in his opening comments.
It is particularly important that we look at the cost of fuel because, although a lot has been said in the press about people who are choosing between food and fuel and about people attending food banks, the real increase for people on low incomes has been in the price of fuel. The increase in fuel prices is much higher than for the price of food, particularly for people on low incomes who are on some form of benefit, because they are often unable to access the cheapest rates for fuel. They have a key card and pay more than many people who can afford more. So I welcome this provision, but I would like to know how it fits in as we go forward with the fuel poverty strategy.
Lord McKenzie of Luton (Lab)
My Lords, I am grateful to the Minister for his clear exposition of his amendment. Like him, we see it as an issue subject to significant challenge. As the noble Baroness, Lady Maddock, has just said, it is the poorest who sometimes pay comparatively more for their fuel; those who of us who are better off can do it with direct debits and take advantage of various schemes on offer.
I have a couple of questions. I understand the thrust of what the Minister was saying. I am sure that my noble friend Lord Grantchester will chip in and support me on this, as I think that he has done the background work. I am a little unclear as to why the numbers in the core group are falling short of what was originally anticipated. My understanding is that the access to that group is determined by pension credit—either the guaranteed credit or the savings credit. I think that there is an age threshold of 75 and above for either savings credit or the guaranteed credit; for those below that age, it is just the guaranteed credit. Part of my question is, if it is because fewer people have been able to access pension credit—we know that pension credit is one of the benefits with the lowest level of take-up—what are the Government doing to address that?
Specifically, in relation to the core group, the non-core group and the criteria going forward, the Government are introducing a Pensions Bill at the moment with the single-tier pension. One consequence of that Bill is that, from April 2016, pension credit or savings credit is being abolished. Therefore, people who retire on or after that date will not be entitled to the savings credit. Fewer will be entitled to the guarantee credit because the idea of the single state pension effectively is to have a pension which is at the current guaranteed pension credit level or slightly above it. The income of people will not be substantially different but they may be swapping state pension for what was a guarantee credit top-up.
Therefore, there are two categories of people; namely, those currently entitled to savings credit, which will disappear in April 2016, and those currently entitled to guarantee credit who will end up with broadly equivalent income but will get it via the single-tier pension and not via the guarantee credit. If those two avenues, which I understand are the access to the core group, are no longer available, what discussions have taken place? What focus has there been on any alternative route and access to the warm home discount scheme? I am sure that the Government have turned their mind to that issue, which seems to me to be vital. I would be interested to hear from the Minister quite what is proposed.
I am not quite sure that I grasped what the Minister said. I certainly will read the record. I am sure that my noble friend Lord Grantchester will ask how the carryover will work. If the net effect is for an extra £34 million to be available in support of this scheme, clearly we would support that. I am not quite sure how the cut-off points work and whether the discounts are dealt with on a financial-year basis; that is, they run until 31 March, notwithstanding the fact that someone’s account might span that date and, in a sense, run over any period. Doubtless the Minister will be able to enlighten us. Those are my questions but my noble friend may well wish to supplement them. I thank the Minister for his exposition of these proposals.
Lord Grantchester (Lab)
I apologise to the Committee for being caught out in my public transport arrangements this afternoon and I am very grateful to my noble friend Lord McKenzie for stepping in at the last minute. He is right that the core group has been reduced and in asking his questions. In terms of the year being averaged with the following year, as I understand it, the shortfall in any one year and the expenditure can be carried over into the non-core group. The Minister is nodding his head in confirmation. Obviously my noble friend has asked the pertinent question of what is being done to make sure that the right people are targeted and helped in order to receive the money that they so desperately need to alleviate fuel poverty.
Lord Gardiner of Kimble
My Lords, I thank your Lordships for their comments. I had personal sympathy with my noble friend Lady Maddock when she spoke about simplification. I had to read some of this brief rather more than once or twice and the point is very much taken on board. This spring, we will be consulting on the future of the scheme, part of which is to see whether we can simplify it in a way that is perhaps more readily understandable and user-friendly.
The whole basis of this part of what we are seeking to do is to ensure that the most vulnerable in our society are protected as well as possible, given rising prices and, as I have explained, homes that are not as efficient as we would like. I know that my noble friend Lady Maddock has been a fierce champion of fuel poverty issues, and rightly so. As I said, that is part of what we are seeking to do. Certainly, the whole way in which this amendment is designed and why it is important is because it provides another £34 million for that non-core spending that will help families, which is so important.
Lord McKenzie of Luton
Can the Minister help me out on that point? He differentiated between forecasts for pension credit as a whole and forecasts of those components of pension credit which drive accessibility to the warm home discount scheme. What is different about that second category compared to those who are otherwise generally entitled to access pension credit?
Lord Gardiner of Kimble
I may have to write to the noble Lord because this is getting intricate. However, we are intending to consult this spring on the changes to pension credit impacts. This will include impacts to the changes to the benefits system vis-à-vis, as the noble Lord mentioned, pension credit and universal credit. Therefore, the best thing I can do is to make sure that I get this absolutely right for the noble Lord. Rather like these regulations, some of it is quite intricate, and I would like to give the noble Lord a full answer to that particular point if that would be helpful.
Lord McKenzie of Luton
That would be very helpful, and I am grateful to the Minister. I will revert to this issue about the changes which the Government are proposing to the state pension. Part of that is that the savings credit will simply not be available in the future—it will disappear as a benefit. Therefore what discussions have taken place and what planning is under way to make sure of the position of people who currently access the warm home discount scheme because they are in receipt of that benefit? What will be their position and access in the future? That is a pretty important policy issue. We have tried to get some clarity via the Pensions Bill; it would be good to get some clarity somewhere on this.
Lord Gardiner of Kimble
Given the points the noble Lord has made, the best thing would be for me to include that issue in a letter. That would be more fulfilling as regards getting the answer he is looking for.
Lord McKenzie of Luton
It would be particularly helpful to have that explanation by the time we get to Third Reading of the Pensions Bill, as it is one of the few residual issues on that piece of legislation.
Lord Gardiner of Kimble
I shall ensure that the noble Lord gets a letter.
In conclusion, the noble Lord, Lord Grantchester, was right to say that the basis of this is to get the right groups targeted. This is part of the way in which the Government wish to address fuel poverty. It is right that the net effect is to ensure that another £34 million goes in to help families. I agree that we should look at how we simplify these matters, but under the regulations we are dealing with we need to have this amendment.
Non-Domestic Rating (Levy and Safety Net) (Amendment) Regulations 2014
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Stowell of Beeston)
My Lords, these regulations will help to maintain the smooth operation of the business rates retention scheme in England. The scheme allows local authorities to retain up to 50% of business rates income in their area, which provides a direct incentive and a boost to those authorities that go for growth. This incentive could deliver a £10 billion boost to the economy by 2020.
The scheme was first introduced last April and since then we have continued to hold discussions with local government on how it operates in practice. These regulations make some technical changes to the rules for calculating the levy and safety net under the business rates retention scheme, which we have identified as a result of those discussions. All of the changes we are making today have been agreed with representatives of local government.
The rates retention scheme includes a safety net system to protect those authorities which, for whatever reason, see a large drop in their business rates income. The safety net ensures that no authority’s income from the rates retention scheme can drop by more than 7.5% below their baseline funding level. Authorities in that situation receive a safety net payment which increases their income to the 7.5% threshold.
Equally, there are some authorities which, because they have such a large amount of business rates income in comparison to their spending, are potentially able to generate significant sums in business rates growth. These sums may be very large when compared to the authorities’ spending requirements. Therefore, the system includes a levy on those authorities which can generate growth which is disproportionate to their spending. The income from the levy is used to fund the safety net.
These regulations make some technical changes to that levy and safety net system. First, the regulations, together with the original regulations which they amend, ensure that changes to business rate reliefs introduced by central government are not captured within the calculation of the levy or safety net. So, for example, in the Autumn Statement of last year the Government announced that small business rate relief will continue to be doubled until 31 March 2015, a change that was welcomed. This rate relief for business reduces the rates income for local government. These regulations ensure that the reduction in income from this change, and other changes introduced by the Government, are not included in the calculation of the levy and safety net.
We have done this because we will separately compensate local government for the lost rates income from central government changes to business rate reliefs. We will do this outside the rate retention scheme using a grant under Section 31 of the Local Government Act 2003. Indeed, the Section 31 payments for 2013-14 have already been made, and the payments for 2014-15 will commence in April.
If we did not make the amendments in these regulations, local authorities might also receive compensation for the Autumn Statement measures through a reduced levy or a safety net payment. For example, if an authority is already on the safety net then the Autumn Statement measures would merely increase their safety net payment, and this would duplicate the compensation they are already receiving through the Section 31 grant.
So these amendments ensure that authorities will receive the correct amount of compensation for changes to business rate reliefs introduced by the Government. The amendments and the method for calculating the Section 31 grants delivering the compensation have all been agreed with local government.
The regulations also make a number of technical improvements to the original scheme. They will ensure that when an authority which is paying a levy or receiving a safety net also chooses to reduce rate bills using a local discount scheme, it will have to meet only the local share of the cost of those discounts. The original regulations required it to meet the full cost of the local discounts, which was rightly criticised by local government, so I am pleased to be able to correct it now. We are also taking the opportunity to correct an error concerning the treatment of relief in an enterprise zone and we have also included amendments to future-proof, to use the common phrase, business rate retention pools so that we do not need to return to the House with further regulations every time those pools change.
I hope that I have been able to explain the measures clearly. They are designed to ensure as far as possible simplicity of the operation of the scheme. I commend the regulations to the Grand Committee.
Lord McKenzie of Luton (Lab)
My Lords, I thank the noble Baroness, Lady Stowell, for a very clear explanation of the regulations. As will be clear from our contributions in another place, we will certainly not be opposing them.
I shall come in a moment to the matter of helping to maintain the smooth operation of the current system and explore how the general progress of the new system is proceeding, but first I have one or two specific questions. On the adjustments being made to small business rate relief, is it just the extra small business rate relief for 2013-14 and 2014-15 which is being adjusted for or the totality of it? I have not worked through the formula, but I would be grateful for an answer. As for the Section 31 grant which is keeping local authorities whole, is that an exact compensation for each authority for the adjustment being made under the proposals?
The noble Baroness referred to discretionary rate relief; some of it has been amended under the provisions, but not all of it. Paragraph 7.7 of the Explanatory Note states:
“The 2013 regulations ensure that certain discretionary discounts (relating to not for profit organisations, community sports and social clubs, rural properties and property in enterprise zones) and hardship relief will be included for the purpose of calculating retained rates income, but that other discretionary relief will be ignored”.
Can the noble Baroness give a few examples of what is likely to be in that other discretionary relief which will be ignored?
I am trying to get a handle on what is happening to the safety net and the levy. For the two years in question, could we have an update on the amounts of the safety net now expected to be payable in comparison to the original estimate? Do we know how much of that safety net expenditure is attributable to appeals rather than to other changes in the capacity of the business rate base in any particular council? In respect of that safety net, how much is actually being paid for by the levy and how much is being top-sliced from the RSG? It is important to understand who is actually bearing the cost.
I conclude on the noble Baroness’s assertion that these regulations are helping to maintain the smooth operation of the new system. It is clear from looking at what is happening to local authority support, using the Government's own preferred measure of the spending power of the household, that the 10 most deprived authorities in England will lose 10 times the amount in spending power per household compared to the 10 least deprived local authorities between 2010-11 and 2015-16. If you look at the cumulative cut in spending power per household over that period of 2010-11 through to 2015-16, some of which I accept precedes the business rate retention scheme, for the 10 most deprived authorities there is a reduction of 25.3%, while for the 25 most deprived it is 22.5% and for the 50 most deprived it is 20.96%. However, for the 10 least deprived it is 2.54%. Can the Minister explain how these outcomes are justified? Is it an intent of policy that this be the outcome or some quirk that was not intended to happen? We have seen enough of the system now to be able to ask legitimately whether the Government really intend this redistribution. Perhaps we could understand where it is articulated because if we extrapolate forward what has happened over the past couple of years the situation for local authorities, particularly those most deprived and challenging authorities, is very dire indeed.
Baroness Stowell of Beeston
I am certainly grateful to the noble Lord for confirming that the Opposition do not oppose these regulations. As noble Lords will be aware, when this Government came into power we made some changes to business rates. One of our various changes was having measures to reduce the burden of business rates on business; the others were to ensure that local authorities were able to enjoy the benefits of the business rates that they collected and to do so in a way that encouraged and supported growth, so that they would see the benefits and enjoy some of the proceeds of that growth. We believe that this system is working well.
The noble Lord, Lord McKenzie, asked me some specific questions to which I am happy to respond. First, he asked about the Section 31 grants, which are paid to compensate local authorities for the reliefs that were announced in the Autumn Statement. I can confirm that each local authority will be compensated for the relief that they actually give. He also asked about the small business relief and the share for local government. I have been given an answer but I am struggling as I read it to recall which point the noble Lord raised. However, I think that the plus symbol in the regulations is 50% of the full cost of the small business rate relief that is the local share. Does that answer the point that the noble Lord raised? I think that he was asking about the small business relief and the half for local government share. I may need to come back to that one and perhaps clarify it.
The noble Lord asked for an update on the safety net and how that is working. In the last financial year, we have paid £69 million in safety net payments. Those numbers may change when outturn figures are available at the end of the year but, at the moment, I cannot give him any further information. I should make it clear that while I said “the last financial year”, it is the current financial year in which we are paying £69 million in safety net payments. Clearly, as we are still in that financial year I am not able to give him the final data on that number.
To go back to the question that I was struggling to answer, I think that the symbol that the noble Lord was asking about is T. In Regulation 4, there is a calculation and, in that rather scientific-looking formula in the regulations, T is 50% of the amount of small business rate relief given to local ratepayers. In other words, it is the amount of relief given as a result of the Government’s decision to double small business rate relief in 2013-14 and 2014-15. I hope that that clarifies the noble Lord’s question.
We have set aside £120 million from revenue support grant to pay for the safety net in 2014-15. If it is not needed, we will return it to authorities. I think that the noble Lord asked me how much of the safety net was being paid for out of the revenue support grant beyond that collected via the levy from those authorities that operate a surplus, if I can describe it in that way.
The noble Lord also pointed to paragraph 7.7 of the Explanatory Memorandum and asked for examples of other discretionary relief that will be ignored, as described in that paragraph. I spoke about other Localism Act relief schemes. These are local authority-run schemes, such as that in Croydon town centre. These regulations ensure that local authorities pay only their local share of the cost of those schemes. To expand briefly on that, we are saying—as the noble Lord understands and as I mentioned—that we have given local authorities the power to introduce their own discounts and reliefs. However, we need to ensure that, in introducing those discounts and offering those reliefs, they have to meet only 50% of the costs and not the full costs. The deal is that central government will meet half those costs, so we are amending the regulations to ensure that what we intend is borne out in practice.
More generally, to give some statistics on how the scheme is operating, our latest estimates show that business rates income in the next financial year, 2014-15, will be £22.4 billion, of which half, £11.2 billion, will flow directly to local government under the rates retention scheme. Local government will also retain a further £112 million for enterprise zones, renewable projects and collection costs. Some 92% of authorities will have more money in 2014-15 than their baseline funding level. Therefore, in only its second year, the rates retention scheme is delivering benefits for authorities that go for growth.
As to the noble Lord’s point about spending power more generally and the way in which local authorities are funded, he will know, because we have debated this in the past, that this Government are very clear that the changes we have made to how local authorities are funded represent the difference between us and the previous Government in principle. We are ensuring that areas of the country that are not currently in a position to benefit as much from this new system of going for growth are properly supported and that the grants that they receive and the spending power that is set for those areas reflect the pressures on them in terms of demands on their local services and the time that it may take them to be in a strong position to go for growth. We think that the way in which we have changed how local authorities are funded is right. We also think that the principle of encouraging growth is right.
With regard to towns and high streets, we are also making sure that local businesses have the right environment to be able to expand and flourish. The changes that we make, whether they are to business rates or other measures, such as tackling parking charges or development regulations in towns, mean that where there is potential for growth, that growth takes place and local authorities are able to benefit from it. They, in turn, can pass on the benefits to their local taxpayers.
I hope that I have been able to respond to all the points raised and I commend the regulations to the Grand Committee.
Lord McKenzie of Luton
Before the Minister sits down, I am grateful for some very detailed responses there. On the safety net for 2014-15, I think that she gave us a figure for the top-sliced amount. Can we have a figure for what is expected to be raised from the levy? Reverting to the more general point, one can see an argument in favour of encouraging people to go for growth, but if we look at what has actually happened in people’s loss of spending power, do the Government believe that it is right that the most deprived authorities should lose much more in percentage terms than the least deprived authorities? Is that an outcome of government policy which the Minister is happy with and believes is right?
Baroness Stowell of Beeston
On the specific question of money expected to be raised by the levy, I shall have to follow up in writing. As to the more general point about spending power, the point that I was trying to make to the noble Lord is that this Government are ensuring that those areas of the country in greatest need are properly supported. Spend per household in those areas is higher than in those areas that are wealthier. We certainly want to ensure that our approach supports all areas of the country to grow and to receive the benefit from a stronger economy so that, in time, they are all operating at their full potential.
Access to Justice Act 1999 (Destination of Appeals) (Family Proceedings) Order 2014
(10 years, 8 months ago)
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Lord Faulks
That the Grand Committee do consider the Access to Justice Act 1999 (Destination of Appeals) (Family Proceedings) Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
The Minister of State, Ministry of Justice (Lord Faulks) (Con)
My Lords, I beg to move that the Committee do consider the draft Access to Justice Act 1999 (Destination of Appeals) (Family Proceedings) Order 2014, the Justices’ Clerks and Assistants Rules 2014 and the Crime and Courts Act 2013 (Family Court: Consequential Provision) Order 2014.
As your Lordships may be aware, these statutory instruments are a significant part of a package of secondary legislation required to bring into being the new family court. Section 17 of the Crime and Courts Act 2013 provides for the creation of a single family court for England and Wales. This will replace the three separate tiers of court that deal with family proceedings. The High Court will still hear family proceedings, but the intention is that in practice it will hear only those matters reserved exclusively to the High Court.
The Committee will recall that the independent Family Justice Review recommended the setting up of a single family court as the current three-tier structure is complicated, inflexible and difficult for families and other court users to navigate. Parliament then passed a law creating such a single family court in the Crime and Courts Act 2013.
The new family court will be able to sit anywhere in England and Wales and all levels of magistrates and judges will be able to sit. This includes lay magistrates, district judges, circuit judges, High Court judges and above. This should enable more effective and efficient use of judicial resources and of court staff and buildings. These instruments will go a long way in ensuring that family proceedings, particularly those involving children, will be dealt with more efficiently, with delay being the exception.
When the new family court is implemented, the family proceedings courts will no longer exist and magistrates’ courts and the new single county court will not be able to hear family proceedings. However, as the family court can sit anywhere, it can sit in the county court or magistrates’ court buildings.
I turn to the destination of appeals order. The Matrimonial and Family Proceedings Act 1984 provides that if any party to proceedings in the family court is dissatisfied with the decision of the court, that party may appeal to the Court of Appeal. The Administration of Justice Act 1960 provides that if any party to proceedings in the family court is dissatisfied with a decision relating to contempt of court, that party may appeal to the Court of Appeal. The destination of appeals order aims to route appeals against the decisions of certain judges of the family court away from the Court of Appeal to the family court.
I will speak first about appeals against decisions in the family court, except those relating to contempt. The objective of this order is largely to enable replication of the current position whereby appeals from magistrates and of district judges do not go to the Court of Appeal. Rerouting appeals away from the Court of Appeal is not new. It is a well established principle that appeals should normally be heard at a lower level than the Court of Appeal. In the family court the intention is that they will be heard by a higher level of judge than the one who made the decision being appealed.
So the intention is that generally, for the single family court, the same judges will be hearing appeals as now, but they will be sitting as a family court judge, rather than as a county court judge or in the High Court. Subject to your Lordships’ approval, the effect of this instrument will be that appeals from a decision or order of the judges or officeholders listed in the order are routed away from the Court of Appeal to the family court.
For example, where there is an appeal against a decision of a bench of lay justices, or a district judge sitting in the family court, about which parent a child should live with, or whether a care order should be made in relation to a child, that appeal will be heard in the family court not the Court of Appeal. As I said earlier, this is not new. At present an appeal from the decision in family proceedings of lay justices or a district judge sitting in the magistrates’ court, or of a district judge sitting in a county court, is heard in a county court.
The level of judge that can deal with appeals routed to the family court by the destination order will be set out in a different statutory instrument under Section 31D of the Matrimonial and Family Proceedings Act 1984. It will be made by the Lord Chief Justice, or his nominated officer, after consultation with the Family Procedure Rule Committee and with the agreement of the Lord Chancellor. That instrument is not yet before Parliament, but I can reassure noble Lords that the plan is for appeals in the family court to be heard by a circuit judge, as now. However, there will be greater flexibility to ensure that judicial resources are used more efficiently and that the appeal is heard at an appropriate level. For example, there will be provision for a judge of High Court level sitting in the family court to be able to hear an appeal which would otherwise be heard by a circuit judge, where a designated family judge or a judge of High Court level considers that the appeal would raise an important point of principle or practice.
Noble Lords may have also noted that this order makes provision for decisions of certain tribunal judges and court martial judges to be routed away from the Court of Appeal. I should explain that this provision seeks to future-proof the legislation. These judges cannot currently hear family proceedings, but the Crime and Courts Act 2013 provides for more flexible deployment of the judiciary to make efficient use of resources. It provides for tribunal and court martial judges to be judges in the criminal, civil and family courts and for the judges of those courts to be tribunal judges. Although there is no immediate intention to deploy these judges in the family court, they are in fact judges of the family court. It would not be appropriate for appeals against the decisions of those tribunal and court martial judges listed in the draft destination order to go to the Court of Appeal, so this order routes appeals against any decision which they may make in the family court away from the Court of Appeal to the family court.
In addition, appeals against decisions by deputy district judges and justices’ clerks will be routed away from the Court of Appeal to the family court and be dealt with by a circuit judge sitting in the family court. Appeals from decisions of judges of the family court which are not listed in the destination order will go to the Court of Appeal. For example, an appeal from the decision of a circuit judge, or of a High Court judge sitting in the family court, will go to the Court of Appeal.
The provisions of the Destination of Appeals Order 2011 which relate to routes of appeal to a judge of a county court or to decisions of the Principal Registry of the Family Division when it is treated as a county court or care centre are revoked. The remaining provisions of the 2011 order are needed for the High Court hearing family proceedings.
I turn briefly to appeals against decisions relating to contempt. Currently the route of appeal for decisions concerning contempt of court is complex. The draft order we are considering today simplifies the routes of appeal so that appeals against such decisions will follow the same route as appeals against other decisions of the family court. The Crime and Courts Act 2013 enabled us to do this so that the process is streamlined and more transparent.
I now turn to the draft Justices’ Clerks and Assistants Rules, known together as the Justices’ Clerks Rules. The Crime and Courts Act 2013 provides for justices’ clerks and their assistants to give legal advice to lay judges of the family court—as they currently do in family proceedings courts—and allows for rules to set out where they may perform functions of the family court or of a judge of the court.
Primary legislation already exists that allows for justices’ clerks and their assistants to provide legal advice and assistance in the magistrates’ courts for criminal and family proceedings, and to perform functions of the court. Existing rules made under that legislation specify which functions they can perform. For the new family court, new rules are needed to specify the functions of the family court or of judges of the court which justices’ clerks and their assistants will be authorised to carry out.
During the passage of the Bill this House expressed some concern about which functions justices’ clerks would be able to perform in the new family court. I think that the noble Lord, Lord Beecham, put down an amendment at some stage which concerned this issue. I reassure the Committee that the draft rules being considered today have been agreed by the President of the Family Division as the Lord Chief Justice’s nominee, and were developed in close consultation with the Family Procedure Rule Committee. My noble friend Lord McNally gave an indication of our plans to the House on Report, and these draft rules reflect those plans. Therefore the draft rules allow justices’ clerks to continue to perform broadly the same functions as they currently do in family proceedings courts.
However, as previously explained to the House, they will be able to perform those functions in cases allocated to any level of judge of the family court rather than just when a case is allocated to lay magistrates, which provides greater flexibility. Therefore justices’ clerks will be able to assist in progressing cases, freeing up judges to deal with the more complex parts of the case. This should increase the efficiency of the family court and help reduce delay—something that we know can adversely affect cases with children involved.
These rules will also allow justices’ clerks to perform some functions for the first time. For example, these rules will allow a justices’ clerk to perform certain functions in undefended divorce or separation cases. These cases are relatively straightforward, but because of the volume of applications they take up a significant amount of district judges’ time. Allowing justices’ clerks to perform these functions will allow judges more time to deal with more complex matters. However, I stress that justices’ clerks will not be able to deal with any case where the application for divorce or other order is defended. These will continue to be dealt with by judges of the family court.
The draft rules also provide for assistant justices’ clerks, as now, to be able to perform functions when authorised by a justices’ clerk. In all cases, justices’ clerks and their assistants are subject to a duty to refer matters back to the court if, when considering carrying out an authorised function, they consider that it would be inappropriate for them to carry out that function. This is a duty to which justices’ clerks and their assistants are currently subject in the existing rules, so it is replicated in these draft rules.
I emphasise that although justices’ clerks and assistant justices’ clerks are employed by Her Majesty’s Courts and Tribunals Service, they are not subject to the direction of the Lord Chancellor or any other person when carrying out the functions set out in these rules or when giving legal advice or assistance to lay judges of the family court. They act independently, just as a judge would.
These rules largely replicate the functions that justices’ clerks can currently carry out for the court. They have been carefully considered by the members of the Family Procedure Rule Committee, and the president of the Family Division, who has agreed them. The rules will allow the extensive knowledge, skills and experience of justices’ clerks to be used, over time, to free up judges to deal with more complex cases and to improve the efficiency of the courts. I would further expect this to reduce delay and provide an improved service for families who need to use the new family court.
Finally, I will consider the Crime and Courts Act 2013 (Family Court: Consequential Provision) Order which makes amendments to primary legislation required because of the creation of the new family court. Already a number of changes to primary legislation in the Crime and Courts Act 2013 are required because of the creation of the new family court. However, as is often the case with a change as complex as the creation of the family court, further changes to primary legislation are required to ensure the family court can operate effectively. Section 59 of the 2013 Act gives a power to make provision in consequence of the 2013 Act. This order will be made under that power and provides for various amendments to primary legislation which are needed as a consequence of the setting up of the single family court. It mainly replaces references in primary legislation to magistrates’ courts and county courts with references to the family court, as the magistrates' courts and county courts will no longer be able to hear family proceedings when the new family court is commenced.
The amendments to primary legislation set out in the order are required to ensure that the family court can deal with matters such as the enforcement of maintenance orders, which currently are often dealt with in magistrates’ courts but in future will be dealt with in the family court. The order also removes references to matters which will no longer be dealt with in magistrates’ courts. It will enable legal aid payments to be paid for advocacy in the family court, in circumstances to be specified in legal aid legislation. It also makes other amendments to primary legislation to ensure that the family court can deal with all the matters that it needs to, such as an application from a creditor in relation to a judgment debt, for information about what enforcement action to take to recover that debt.
The instruments presented today will enable the creation of a new family court that will be able to operate more effectively and efficiently, and provide an improved service to the families who need to use the court. The creation of a simpler court structure should make it easier for those who need to use the courts to do so. They will no longer have to work out to which tier of court to submit their application. Instead they will just submit it to the family court in their area and it will be allocated to the appropriate level of judge. Cases will no longer need to be transferred between the old tiers of court. Court users should experience a more streamlined and efficient service with a significant reduction in delays. These measures, together with others, will give the judiciary, working together with Her Majesty’s Courts and Tribunals Service, greater flexibility and allow it to respond to differences in demand to ensure the most efficient use of judicial and court resources.
I hope that noble Lords will feel able to approve these draft instruments so that the benefits of the single family court can be achieved. I therefore commend these draft orders to the Committee and I beg to move.
Lord Jones (Lab)
My Lords, I thank the Minister for his pithy and customarily helpful remarks. My questions stem from the most honourable tradition of asking questions in a Parliament to a Minister. Will he give specific reasons why the Government have resolved to end the interests of magistrates’ courts and county courts in these courts? That question is linked to another: shall we truly have more flexible and more efficient family courts? What were the magistrates’ courts doing wrong and what were their shortcomings? Why has it been resolved to end the historic relevance of the magistrates’ court with its three citizens? What insights have informed these decisions? Can we be absolutely assured that in the new arrangements the primacy of the interests of the child will be always borne in mind? Is that a reason for this large change? Surely we can raise this matter in this Committee and surely it has always informed Ministers and those who advise them.
Lord Beecham (Lab)
My Lords, I begin by breaking the habits of my three and a half year parliamentary career and not only thanking the Minister for the clarity of his exposition—to which we are accustomed—but also confirming that most of what is in these instruments is agreed by the Opposition.
I reassure my noble friend, who has just spoken, about some of his concerns. The family court concept does not exclude the magistrates’ court and lay justices; it includes them. They become part of a virtually seamless provision for dealing with family court matters. Therefore, the magistracy will remain involved. With regard to my noble friend’s last question to the Minister, the Minister may or may not be able to answer it but I can, because I have put the same question to the Magistrates’ Association. It is content with this afternoon’s legislation and has no objections to any of the proposals.
Lord Beecham
I can report to the Committee only what I have heard directly from the Magistrates’ Association. I have not heard from the Justices’ Clerks’ Society because I did not contact it. The Magistrates’ Association has no reservations about these matters.
Lord Jones
But is my noble friend speaking on behalf of the Magistrates’ Association and is he giving guarantees?
Lord Beecham
No, I cannot speak on behalf of the association. I am not, as it were, briefed by it or retained by it, unfortunately, but I assure my noble friend that it has communicated with me in the sense that I have just described. However, other reservations that my noble friend has expressed, which are not, strictly speaking, germane to the matters that we are debating this afternoon, raise concerns which I share and which, indeed, I have raised from time to time. They are also concerns which the Magistrates’ Association shares—that is, the current size of Benches that have been amalgamated and the position now occupied by the justices’ clerks on those Benches. The clerks are no longer responsible to magistrates but are responsible upwards, as it were, to the Ministry of Justice.
My noble friend rightly refers to the accessibility of courts and the closure of court buildings. However, one matter to which he has not referred but which has caused concern, which I have voiced previously, is the apparent growth in the role of full-time or part-time professional district judges as opposed to lay magistrates. There is concern about the imbalance that that is creating. Nowadays, some cases are dealt with virtually exclusively by district judges and the lay judges have a diminished role in consequence. These are genuine concerns which I think we need to explore further, but not for the purposes of the legislation today.
I have in the course of my 40-odd years—some of them rather odd indeed—practised as a solicitor and have spent much time briefing counsel. I am experiencing something of a role reversal today, because I have benefited from briefing from a distinguished family law practitioner, Michael Horton. I do not know whether he is somebody with whom the Minister is acquainted but he is an experienced counsel dealing with family matters. He raises a number of issues which do not undermine the thrust of the regulations that we are discussing but in some instances suggest that a little further clarification is required.
The first issue relates to the appeal to the family court. Where, within the family court, does the appeal lie? In other words, who in the family court will deal with the appeal? The Civil Procedure Rules lay out a definition of who will hear appeals. At the moment, it appears that a new practice direction to the Family Procedure Rules will identify the destination of appeals—that is, not just the broad destination of the family court, which, as I have just emphasised, reaches from the magistracy right through, ultimately, to the Court of Appeal—but what tier of the judiciary will deal with it? I understood the Minister to say that that either has happened or is about to happen—that the rules will be promulgated. They are to come into force in six or seven weeks’ time. I take it that they have been the subject of consultation and I should be grateful if the Minister could confirm that. If, by any chance, they have not yet been the subject of consultation, I strongly urge that they be made so.
Another issue raised is not a criticism at all but it arises from a welcome change to which I do not think the Minister specifically referred. It is the possibility of funding emerging from the change in rules which will allow payments to be made to charities, to be ordered by the family court. I am not quite clear of the intention here. but one hopes that such payments could cover the advice services provided by voluntary organisations to those engaged in family disputes. It would be helpful to have clarification of whether that is in fact the intention. It could make a significant difference in facilitating support for litigants who are not able to pay for or obtain legal aid for advice, as would be the case in a number of instances, if voluntary organisations could be the recipients of money as the result of such an order.
Lord Faulks
I am very grateful to the noble Lord, Lord Jones, for his contribution to the debate, and to the noble Lord, Lord Beecham, for his observations.
The central question behind the speech given by the noble Lord, Lord Jones, was, “Why do we need this reorganisation of a family court, and why ignore the experience there was in the magistrates’ court?”, and that we should take into account in particular the convenience for local people to use their magistrates’ court. I quite understand that concern. However, as the noble Lord, Lord Beecham, quite rightly said, we will not lose that expertise. Magistrates will still deal with family proceedings, but within the overall context of a family court. Previously we had these various tiers, but now we have a unified court. However, they will all be the family court, albeit some will sit in magistrates’ courts, some in county courts and others will physically sit in the High Court, depending on the allocation and the level of the dispute. So that much-valued expertise will not be lost. What is intended, as I indicated in my opening remarks, is that there should be increased flexibility and a better use of appropriate judicial resources. I am not sure that those qualified lawyers who act as justices’ clerks would welcome being described as a lower level of judge, as the noble Lord, Lord Beecham, described them. They are very often qualified and, if not qualified, have a considerable amount of relevant experience, and they will not be given any tasks that they are performing now and will perform in future unless it is clear that they have relevant experience and expertise.
The creation of the family court was recommended by the family justice review. It was considered that the new structure would limit delays and simplify the whole question of people who go to their local area with a particular issue, which will then be allocated to the appropriate level of court. It will not be the enemy of localism, which I think was the concern expressed by the noble Lord, Lord Jones.
Lord Jones
Will the Minister write on those questions that he may not be able to field, such as the ones that I have posed?
Lord Faulks
Yes, I will certainly write in so far as I do not answer all the issues raised by the noble Lords, Lord Jones and Lord Beecham. I fear that I will not be able to answer all the points, but I hope that I can at least reassure the noble Lord that the magistracy will still be involved in the matter, as it was before, and will not lose its expertise—it will simply be called something different. There is some reallocation of its tasks, but not a loss of its important role.
The closure of courts generally is a different issue from that which we are considering. There are always difficult arguments on the cost of having a court that is infrequently used as against the convenience for local people. We are of course anxious that the quality of decision-making should be high and that there should be convenience, and we do not anticipate that there will be a radical change in individual cases. The noble Lord mentioned the position in Llanelli, where he feared that there would not be enough local expertise. I am assured that there would not be a radical transfer unless the court service was satisfied that there was the appropriate level of expertise in a local area.
I turn to issues raised by the noble Lord, Lord Beecham. He said that he was concerned that there had not yet been a specific route for the appeals identified. I indicated in the course of my remarks that they would be set out in a statutory instrument under Section 31D of the Matrimonial and Family Proceedings Act 1984, which would be made by the Lord Chief Justice or his nominated officer after consultation with the Family Procedure Rule Committee and with the agreement of the Lord Chancellor. The rules are made with the consultation of the committee, which includes expert practitioners, justices’ clerks and judges. It also includes a representative of the court users, so it should be possible before the appropriate tier of appeal is finalised for all interested parties to have an opportunity to have their views reflected in the designation. Although I understand the noble Lord’s anxiety, it is unlikely that he will find the organisation of appeals in any sense out of sync with the construction of appeals that exist generally in civil procedure—that is, there will be an appeal from a court to a higher level of court and, depending on where the initial allocation begins, a superior court will then come to consider the relevant appeal.
The noble Lord, Lord Jones, asked a question about the consultation with the Magistrates’ Association, which was very helpfully answered by the noble Lord, Lord Beecham, who was able to confirm that it had been consulted. The statutory obligation was to consult the family practitioners’ rules committee, which comprises representatives of the lay magistracy, justices’ clerks and a number of judges, so it would have been included in any event in that consultation.
The noble Lord, Lord Beecham, asked about payments to charity. I am told that the amendment to Section 194 of the Legal Services Act 2007 will mean that the family court will be able to order a party to make a payment to a charity. This mirrors the current position in the civil courts and applies where a party has been represented free of charge. It will be for the court in the individual case to determine to which charity the payment should be made. I hope that that answers that point. The noble Lord also made a point about the increase in costs and the fees for divorce going up. Yes, if it is dealt with at a lower level then I understand his point about that. A final decision has not yet been made on whether to increase the fees for divorce, although this matter was consulted on. I will certainly take back his observations.
Perhaps I have not quite sufficiently answered the question about the general sufficiency of the numbers of justices’ clerks. It is actually the case that the assistant justices’ clerks will be doing most of the work in courts. There are about 1,400 of them and the justices’ clerks are managers, so there is one in each area. There are 26. Her Majesty’s Courts and Tribunals Service has assured Ministers that there will be sufficient justices’ clerks to perform the various functions which they are able to do as a result of this designation.
I think that I have answered most of the questions—no, I have not.
Lord Beecham
There is just the question of interest, upon which the Minister might care to write to me. I presume that he has not been briefed on that yet by those behind him.
Lord Faulks
The position is that I cannot give an answer, I am disappointed to say, but we will definitely write on that issue. I hope that the noble Lord will be satisfied with the answer.
I am grateful for the helpful questions from noble Lords and, notwithstanding the reservations in the points that have been helpfully made, I hope that your Lordships will agree that these draft instruments are an important step in simplifying the family court system and making it more accessible to families.
Crime and Courts Act 2013 (Family Court: Consequential Provision) Order 2014
(10 years, 8 months ago)
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Lord Faulks
That the Grand Committee do consider the Crime and Courts Act 2013 (Family Court: Consequential Provision) Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Justices’ Clerks and Assistants Rules 2014
(10 years, 8 months ago)
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Lord Faulks
That the Grand Committee do consider the Justices’ Clerks and Assistants Rules 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014
(10 years, 8 months ago)
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Lord Bates
That the Grand Committee do consider the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Bates (Con)
My Lords, in order to make the best use of parliamentary time there are two instruments for debate today. I have agreed with my noble friend Lord Faulks also to present an instrument which falls within the remit of his department, the Ministry of Justice. I will speak also to the draft Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014, which bring forward a measure that is consequential on my department’s regulations. Both regulations were laid before both Houses on 21 January 2014 and are intended to come into effect from 1 April 2014.
I am satisfied that the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 is compatible with the European Convention on Human Rights. Likewise, my noble friend Lord Faulks and I are satisfied that the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014 is also compatible with the European Convention on Human Rights.
First, the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 provide for a maternity allowance to be made available to women who are neither employed nor self-employed in their own right, although they regularly take part in activities related to the business of their self-employed spouse or civil partner. They must be neither a partner nor an employee of the business concerned.
These regulations are being introduced in order to fully comply with European directive 2010/41, which was adopted on 24 June 2010 following negotiation between member states. The directive assures equal treatment between men and woman who are self-employed. It protects self-employed women during pregnancy and motherhood, together with women who are not self-employed, who habitually participate in the activities of their self-employed spouse or civil partner’s business.
The UK already complies with most of the directive through existing equality legislation, primarily the Equality Act 2010. However, Article 8 of the directive legislates for a maternity allowance to be paid to self-employed women and spouses or civil partners who habitually participate in the activities of a self-employed worker. This is required to enable them to interrupt their activities as a result of pregnancy or motherhood. We already provide a maternity allowance to self-employed women.
Women who contribute to their spouse or civil partner’s business by regularly helping out in an unpaid capacity could bring themselves within coverage of the maternity allowance and other social protection by becoming partners in, or employees of, the business. There are strong business and social incentives for doing this, which include tax benefits for the business and greater social protection for the woman. However, for women who do not wish to take these steps we must bring forward these regulations to ensure that we fully comply with the directive. If we were not to bring these regulations forward, we would not be fully compliant with the directive, which would put the UK at significant risk of being subjected to infraction proceedings by the European Commission. This would attract an initial lump sum fine estimated at around €11 million with a daily accrual until we are fully compliant.
The regulations will provide a maternity allowance to women who are due to give birth on or after 27 July this year and regularly assist in the self-employed business of their spouse or civil partner but are neither employees nor business partners. For the first time, spouses or civil partners of the self-employed worker who help in the business and receive no income will be able to receive a maternity allowance enabling them to take a break in their activities as a result of pregnancy.
In line with the Government’s objective to avoid the gold-plating of EU legislation, we will not go beyond the minimum requirements of European directives. This means that benefit will be payable at the weekly rate of £27 for a maximum of 14 weeks. This reflects the lowest rate of maternity allowance that is currently payable to working mothers on a very low income to be paid for the minimum duration specified by the directive.
This rate is less beneficial than the standard rate of maternity allowance currently awarded for up to 39 weeks to women who are eligible because they are employed or self-employed in their own right—the standard rate from April 2014 being £138.18. The higher rate and longer payment period of maternity allowance is intended to provide a measure of earnings replacement to enable women to take a break in their occupation at the end of their pregnancy or soon after childbirth. It would not be right to make a corresponding award of maternity allowance to women who have no earnings to replace. A number of stakeholders have been notified of this forthcoming change: for example, Netmums, Mumsnet, and Maternity Action. Maternity Action has advised that it supports the change and will help us to raise awareness of it if it is passed by your Lordships’ House.
I trust that your Lordships will agree that the regulations will help women who are pregnant or have recently given birth where, prior to that, they have lent unpaid support to their spouse or civil partner in helping them to build and maintain a self-employed business.
I turn to the draft Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014. Those draft regulations amend the Legal Aid (Information about Financial Resources) Regulations 2013 that came into force on 1 April 2013. They add the maternity allowance being introduced for participating spouses or civil partners of self-employed earners to the list of prescribed benefits in the schedule to the 2013 regulations.
If an individual is in receipt of a prescribed benefit, the director of legal aid casework in the Legal Aid Agency, in assessing an individual’s income for the purpose of the legal aid financial means test, may request information about the benefit from various other government departments, including the amount that the individual is receiving. Having accurate information about the financial resources of an individual who is applying for or in receipt of legal aid is an important part of ensuring that only those eligible for legal aid receive it, and that those who can afford to contribute to the cost of their legal representation are made to do so. I commend the instruments to the Committee.
Baroness Scott of Needham Market (LD)
My Lords, I support the social security regulation which we are debating today—not just because it avoids an €11 million fine. I think it is a good thing in its own right. For once, we have a welcome change to the benefits system in that it is beginning genuinely to reflect the diversity of people’s lives and the lives of women in the workforce. That is a very good thing indeed. It is bringing a new group of women, predominantly from the very small, micro-business sector, within the ambit of maternity benefit. I just wish that the gold-plating had been left in place just on this one occasion so that they could have had a benefit more in line with everyone else.
I want to ask two questions. The first is about disseminating information, because this is a very difficult group to reach. They do not tend to be members of chambers of commerce, and that sort of thing. I do not have a particular answer, but I wanted to put in the plea that all efforts are made to ensure that women who are likely to benefit actually know about it and are able to. We hope that the Government’s new enterprise allowance scheme will be successful, so we could have even more very small businesses starting up in the coming year or so, so we need to get on top of how we can ensure that women know that these benefits are available.
Secondly, I welcome the discussions on shared parental leave—I know that the Deputy Prime Minister has been very keen on this and it has some support within government. It would provide welcome flexibility, but I am curious as to how these arrangements might work if we have shared parental leave. With those questions, I welcome the instrument.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation and I look forward to hearing the answers to those two excellent questions. I do not propose to ask any questions about the second order, as I accept the Minister’s assurance that it is consequential upon the first. However, I should like to ask a few questions so as to understand better the implications of the first order, relating to maternity allowance.
The first question relates to the point that has just been made about the rate being so low. The standard rate of maternity allowance is £136 a week, or 90% of average weekly earnings, for up to 39 weeks. In this case, the Government decided to settle on £27 a week for 14 weeks. I think I heard the Minister say that the aim of the allowance was to enable women who regularly help in the business of a spouse or civil partner to take a break from their activities towards the end of a pregnancy or the start of motherhood. Have the Government made any assessment of whether the amount of money involved is such that it is likely to make taking that break possible when otherwise it would not have been?
Secondly, the Explanatory Note says that 1,300 women will be affected by the provisions at an estimated cost of £0.5 million. No impact assessment was carried out, so we do not know whether the Government considered other approaches. Clearly, there is quite a wide range between what the Government are doing and an allowance that is fully gold-plated. Did the Government consider bringing this in at an intermediate level and, if so, what kind of cost would have been implied?
Next, I should be interested in understanding what conditions a claimant would have to meet to qualify for maternity allowance under these circumstances. We have had a question about shared parental leave. I should also be interested in knowing what happens to someone who is adopting a child rather than giving birth, as the regulations are specifically about giving birth or having just given birth. Looking at the regulations, I do not think that someone in these circumstances would be entitled to statutory adoption pay, so would they be entitled to maternity allowance? Similarly, what happens if the child is stillborn or dies immediately after birth? Certainly, I think that SMP is payable if a child is stillborn after 24 weeks, but is there a read-across to this provision?
I was pleased to hear the question about communication because I was going to ask something similar. The Minister made the very good point that there may be strong reasons why women in these circumstances may be better off being paid by the business and being able to pay national insurance. I am very conscious that the Pensions Bill is going through the House at the moment. Of course, if a woman in these circumstances does not end up with 35 years of national insurance payments in her own right, she may find that when she comes to retire she is not entitled to the new single-tier pension, and in future she will not be able to claim on her husband’s contributions either. Therefore, when the Minister looks at the communications campaign, I wonder whether anything can be done to make sure that the opportunity is taken to communicate to those women so that they understand the consequences of not paying national insurance and of not coming within the national insurance and tax system.
Finally, I have a practical question. Can the Minister explain the tax and tax credits treatment of these benefits and say whether there is any passporting or link across to any other benefits as a result of receiving this maternity allowance?
Lord Bates
I thank my noble friend Lady Scott of Needham Market for her contribution and I also thank the noble Baroness, Lady Sherlock, for raising these points. Some very good questions have been asked and I shall do my best to answer them.
My noble friend Lady Scott asked whether women getting this maternity allowance will have access to shared parental leave and a pay scheme. The answer is no, and I am sorry to be disappointing. The statutory shared parental leave and pay provisions are designed for employed couples to share the care of their child. It would be available to eligible women who are entitled to maternity leave, statutory maternity pay or maternity allowance because they are employed or self-employed earners—that is the key word. Therefore, women receiving this form of maternity allowance will not have access to that scheme as they will be neither employed nor self-employed in their own right.
My noble friend Lady Scott and the noble Baroness, Lady Sherlock, asked how we will encourage take-up of the allowance, and we talked about some of the publicity which is being received. We have identified stakeholder groups relating to both self-employment and maternity, and they have been informed of the change. They include Maternity Action, Netmums, Mumsnet, Bounty, Sands, Citizens Advice, the Royal College of Midwives, the British Medical Association and HMRC. We will be publicising the qualified conditions and the claim process on direct.gov.uk, as well as providing relevant guidance and claim forms. Needless to say, if there are any specific organisations which the noble Baroness thinks it would be helpful to include in that list, we will be delighted to hear from her.
I turn to the points raised by the noble Baroness, Lady Sherlock. She asked about the sad cases where there is a stillborn child. The mother would still be entitled to maternity allowance, in the way that statutory maternity pay applies at present. These provisions do not extend to adoption.
Baroness Sherlock
Before the Minister leaves that point, I understand the Government’s argument that they do not wish to gold-plate anything that comes from Europe. I was pushing him slightly because he gave two different reasons for doing this. One was not to gold-plate; the other was to give the women an opportunity to take a break from their activities. My question was whether he had done any assessment of whether the level and duration of the payment would be adequate to meet that objective.
Lord Bates
The answer is that no such assessment was undertaken.
The noble Baroness asked whether this maternity allowance will passport through to other benefits. It is up to each provider of those passported benefits to decide whether to extend their passported benefits to this group. Of course, in the same group of regulations we are talking about changes being made to the legal aid provision, so there is some element of a knock-on effect to that. I am grateful to all noble Lords who have spoken.
Baroness Sherlock
I am happy for the Minister to write to me but I asked about the tax treatment of the allowance and the tax credits position. He may feel free to write if that is easier.
Lord Bates
I apologise to the noble Baroness. I will follow that up in writing.
I am grateful to all noble Lords who have spoken. I thank them for their interest in the debate and take the opportunity to say that I hope we agree that the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 ensure that those women who participate in the business of their self-employed spouse or civil partner can receive maternity allowance to enable them to interrupt their activities due to pregnancy or motherhood, and that the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014 contribute to ensuring that those entitled to help with their legal aid costs receive that help, while those who can afford to pay, do so.
Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014
(10 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Bates
That the Grand Committee do consider the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Social Security Benefits Up-rating Order 2014
(10 years, 8 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Bates
That the Grand Committee do consider the Social Security Benefits Up-rating Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.
Lord Bates (Con)
My Lords, the Guaranteed Minimum Pensions Increase Order 2014 and the Social Security Benefits Up-rating Order 2014 were laid before the House on 27 January 2014 and I am satisfied that they are compatible with the European Convention on Human Rights.
I start by touching briefly on the Guaranteed Minimum Pensions Increase Order, which provides for contracted-out defined benefits schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 2.7%, which is in line with inflation as at September 2013. As noble Lords will be aware, we are not here to discuss the Welfare Benefits Up-rating Order 2014, which was made on 24 January. The rates increased by 1% in that order were debated in Parliament during the passage of the Welfare Benefits Up-rating Act 2013.
Turning to the Social Security Benefits Up-rating Order, I would like to start with the increase in the basic state pension. One of this Government’s first acts was to restore the earnings link to the basic state pension. Indeed, we went a step further and secured a triple lock for pensioners—a commitment from the Government to increase the basic state pension each year by earnings, prices or 2.5%, whichever is the highest. This year, as prices were greater than average earnings and 2.5%, the basic state pension will increase by CPI at 2.7%. The new rate of basic state pension will be £113.10 a week for a single person, an increase of £2.95 from last year. This means that from April 2014 the basic state pension is forecast to be around 18% of average earnings, a higher share of average earnings than at any time since 1992. Our triple lock commitment means that someone on a full basic state pension can expect to receive £440 a year more than if it had been up-rated by earnings since the start of this Parliament.
On pension credit, we have taken an important decision to ensure that the poorest pensioners are able to benefit from the effects of our triple lock. That means that, rather than rising in line with earnings at 1.2%—the minimum required by legislation—the standard minimum guarantee credit in pension credit will be increased by 2% so that the poorest pensioners benefit from the full cash value of the increase in basic state pension. Single people will receive an increase of £2.95 a week while couples will receive an increase of £4.45 a week. Consistent with our approach last year, the resources needed to pay for that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase.
I can confirm that additional state pensions will rise in line with inflation at 2.7% in 2014-15. That means that the total state pension increase for someone with a full basic pension and average additional pension will be around £196 a year. The decisions we have taken on pensioners reflect the Government’s belief that even in difficult economic times it is important to protect those who are less able to increase their spending power.
That belief is reflected in our decision to ensure that those benefits that reflect additional costs because of disability will be protected and will be increased by the full value of CPI at 2.7%. These include the personal independence payment, disability living allowance, attendance allowance, incapacity benefit, disability premiums in working-age benefits, the support component of the employment and support allowance, and the limited capability for work and work-related activity element of universal credit. That is also true of the carer’s allowance and the carer premium, both of which will be uprated in line with inflation.
In conclusion, I ask your Lordships to note that at a time when the nation’s finances remains under real pressure, the Government will be spending an extra £3.3 billion in 2014-15. Of that, about £2.7 billion is for the state pension and over £600 million will go to people of working age, with nearly £600 million of those increases going to disabled people and their carers.
The uprating commitment I have outlined today will give real support to the poorest and most vulnerable in society, ensuring that people who are least able to change their incomes are protected against increases in the cost of living. On that basis, I commend the orders to the Committee, and I beg to move.
Lord German (LD)
My Lords, I have a number of questions. First, I welcome the triple lock. This is the first time that we have seen prices as the lock that has come into play, which means that pensioners will always benefit from the best of the three options. This is the first time we have seen one of the three locks.
I will spend a few moments on the rationale behind the 1%, 2% and 0.7% for the pensions and other matters. This is really about what is contained in the Government Actuary’s report. For the first time, we see from the Government Actuary what the state of the fund is—the fund from which these benefits will be paid—not just for this year but through to 2018-19. I believe that this is the first time we have been able to have those projections. The report clearly shows that there are a number of difficult years to come, in particular 2015-16. Next year the actuary projects that the Government will have to put in £8 billion extra in order to keep the fund at its one-sixth level of what goes in and what comes out, and what is left in the fund. However, the last table of the Government Actuary’s report shows that the following year will be even more difficult. Can we have some comparison for benefits’ sake?
I will be quite happy if my noble friend wishes to send me information about this or to write to me about it. As we are projecting forward six years to 2018-19, can we have the figures showing how much has had to be contributed in the past 10 years, say, so that each year we can see what the graph or the direction of travel is? Quite clearly, it is not the usual case that the Government have to top up the fund to achieve that one-sixth balance. It might be useful to know how often that happens and what the projections are for the future.
I have just two short questions, one of which relates to the implementation dates in the order. I should probably know the answer to this question, but I would be very grateful if the Minister could answer it, although it is a question similar to, “Why do we always have elections on a Thursday?”. For the dates of implementation, which are contained within this order, we have 1, 7, 9 and 10 April. I know that it does not mean very much if someone has to wait a week longer for their benefit to come through, but why is it not possible to have a single implementation date at the beginning of the financial year, or is there some administrative reason for that?
My second and final question relates to the investments in the national insurance fund. I noticed that the projection from the Government Actuary is that they will fall from £127 million to £90 million. If the investments made £127 million last year, which obviously supported the amount of money that could be put into benefits without having to top them up from the Treasury, why do we see a lower projection in the coming year when all the signs are that investment opportunities are greater in the coming year than they were in the past year? I should be grateful for some explanation, but I will be perfectly happy if my noble friend wants to do that for me in writing.
Lord Kirkwood of Kirkhope (LD)
My Lords, I am pleased to follow my noble friend Lord German, who asked some pertinent questions. I want to take a slightly different approach and put these uprating orders into the context of a longer timescale. As I think we all know, changes to upratings will generate more savings for the department over the middle to longer term than any other single change, so it is important for Parliament to stay abreast of what is going on.
My first point is about process. In the old days—he says, reverting immediately to nostalgic mode—this used to be a huge debate. My noble friend the Minister will know, because he was there and was briefly a Minister, that the uprating order was a big event then, when we were spending millions, not billions as now. There was a full Chamber in the House of Commons and those numbers were keenly contested. It has now come to this, at the fag end of a late Monday, with the Minister and two or three lonely survivors discussing these very important matters. We must make sure that the parliamentary process is maintained because the scrutiny of these matters is important.
The process which we now have is a bit confusing to me. The Minister is absolutely right that the Welfare Benefits Up-rating Act 2013 basically takes out the working-age benefits from consideration this afternoon. I do not think that is for all time coming but I am not sure. I assume that the 2013 Act will render it nugatory to discuss working-age benefits until that Act falls away, after its third year. Presumably we will then go back to the uprating system as before. I am also a bit nervous about losing sight of tax credits and child credit Treasury-type benefits, which in the old days were also all subsumed into the one comprehensive debate.
I am even more confused about the annually managed expenditure proposals which the Chancellor has been talking about. I am always suspicious about Chancellors talking about social security department business as, in my experience, they invariably make a hash of it. I would stiffen the Minister’s resolve to resist these territorial ambitions from the Treasury, which are very hard to contain. I can see some heads nodding, so I am obviously on a strong point there.
The point that I am making is a simple one. In Parliament, we should insist on being able to have proper opportunities in good time to look at the comprehensive changes being made, even though they are getting more complicated, so that we can satisfy ourselves that at least we know what is going on and can make the best points to the Minister and his future heirs and successors. I am fearful that this is becoming so piecemeal that it is getting difficult to do. That is my first point and I suspect that the Minister will not disagree with it.
I would like to know what the additional costs of these orders are. They are basically pension-orientated. I have nothing whatever to say about the Guaranteed Minimum Pensions Increase Order. I have never had anything to say about that order; it goes on and it goes up, and that is fine. However, my impression is that there is £3 billion or so involved in increased spend and I would like to know to what extent, over the period of this order, that is derived from an increased caseload. In the middle to longer term, the demographics will obviously change regarding the proportion of the population. There will be more and more pensioners, so we will have more and more trouble paying for them, which is perhaps part of the answer to the important question that my noble friend Lord German asked. I would not mind being copied into any answer that he gets because it is a very important question. However, the caseload is bound to increase, so if that number increases, the costs will get bigger as the numbers get higher. I understand this, perhaps, more than most. As of the fiscal year 2014-15, we spend £211,000 million each year, every year, which is a serious sum of money. We really need to make sure that we understand how we are spending it and that we get control and make it as effective as we can. I should like to know the cost of these orders, just to keep track of the expenditure.
The Section 150 duty on the Secretary of State in the Social Security Administration Act 1992 is that he considers and reviews, and, in a kind of Delphic way, the answer comes out as CPI. I hope that the Minister would be able to give me some reassurances, after some of the evidence coming out from the archbishop, now cardinal, and the powerful intervention that he made about destitution. I do not think that he is right to say that the entire safety net has been withdrawn, but he is a serious man, and the Church of England and other churches are beginning to pick up the fact that some serious things are emerging in their localities. I think that they are correct about that, although I would not go as far as to say that the safety net was being removed. But that evidence is the kind of thing that I would hope somebody in Parliament would put in the box for the Secretary of State when he did the annual review.
There are other political issues as well. People like myself cannot understand why universal benefits for pensioners, in these circumstances when austerity is upon us, are not in the mix and being considered as possible savings. The fact that I get a winter fuel allowance is not appropriate to the financial circumstances that we are in. That is the kind of thing which I hoped the review would have looked at.
I was very struck by the Barnardo’s report just before last Christmas about the emergency food services now being used. The Minister and I have both watched these issues for a long time but I have never seen evidence as cogent as that—750,000 families. The emotional cost of rolling up and asking for food must be enormous. That is new and it cannot be ignored.
Finally—and I think that this is more hidden—the impact on local authorities’ service provision is beginning to be bigger than I have ever seen before in my past experience. That is characterised perhaps by the local welfare assistance fund, which I think the Local Government Association was right to complain that the Government seemed to be withdrawing funding from. These are the kinds of things which I hope the Minister will be able to tell me were thought through carefully in the department before the Secretary of State discharged his duty under the 1992 Act, because they are bits of evidence that are more cogent than I have seen in the recent past—and I have a longer list, but I shall spare him.
I am a member of the council of the Institute for Fiscal Studies, and I want to make a point about the 2.7% and CPI. I guess that the Government had no option but to go for CPI, because RPI is not appropriate any more—if discredited is too strong a word—and I can understand that. But there are problems with CPI in how it differentially impacts on low-income and high-income families. My speech will be a lot shorter, if the Minister says that he will read, or get somebody in his department to read, the IFS Green Budget of February 2014. Chapter 6 of that document says that,
“the average price level faced by households in the bottom quintile rose by 7.1 percentage points more than that faced by households in the top quintile between 2007-08 and 2013-14”.
That is a long stretch and 7.1% is a big figure. That is at page 126, in chapter 6 of the IFS Green Budget 2014. That figure struck me.
The other side of the question, looking at inflation, is on page 138 under the heading “Group specific inflation rates”. It states:
“Figure 6.10 shows that inflation rates since the recession have tended to be higher than average for low-income households … The average rate of inflation experienced by low-income households over the period 2008–09 to 2013–14 was 3.4%, compared with 2.4% for high-income households”.
These are snapshot quotes and you need to read the whole chapter to get the sense of the work that has been done by Oxford Economics, which did this work. This is very compelling evidence that it is dangerous just to go from mean average figures of inflation and prices because they impact differentially on different households and in different proportions of spend within family budgets, because lower-income people spend a lot more money on energy, food and the like than they do on mortgage interest payments. If I can have an agreement that somebody will read chapter 6, I will go on to my next point.
Although there is only a glancing reference in these regulations to universal credit and personal independence payments—it is the first time we have seen uprating orders for those two benefits and I wish them both well—the Minister and I both know that there is some controversy and uncertainty about the programmes and timetables for implementation for these benefits. I am sure that that will become clear during the period of the duration of these orders. Can the Minister say anything, even if it is in writing, about the timetable for it? The press comments and indeed the ministerial comments that have been made about the Atos origin contract for PIP understandably have caused a lot of uncertainty.
I have always believed that we have a problem in this country with the capacity of professional occupational health specialists. The Government are suffering from that, and any Government suffer from it. If you do not have the professionals—and it is a very skilled thing to do properly—any company, Atos or otherwise, will struggle to carry the weight of these hugely important and very onerous contracts. Can the Minister give us any comfort about the upratings contained in these orders as it relates to the personal independence payment and the timetable for dealing with Atos? Similarly, there are uprating elements in these orders about universal credit. If the Minister could give us any comfort on the timetable for universal credit and the ICT contract, that would be very welcome.
Finally, I noticed in the Explanatory Memorandum—they are always very instructive and helpful for these things, and I pay tribute to the poor people who have to write them—that the deductions for service charges on housing benefits for energy charges is 7.7% in the year to September 2013. I understand what service charges are and what rental agreement deductions are in housing benefit, and that they are not new. However, 7.7% is a big percentage. It might not be much—a couple of pounds—but that is a big change. I was grateful that the Explanatory Memorandum took the trouble to point it out to us. I hope that the Minister will take that back and satisfy himself that that is not an outlier figure as regards 2.7% increases here and there. Particularly when energy costs have gone up so dramatically over the recent past—there have been some quite significant increases—7.7% is striking. If the Minister can go away and satisfy himself that that is not a relative punitive increase in a deduction, I would be very grateful.
My main concern is that Parliament, over the distance, is able to track low-income households in particular. As we go into fiscal consolidation—I am sure we will and I hope we do, the sooner the better—differentially, as incomes go up the thrust in controlling the benefits spend keeps benefits down. Incomes go up and the difference gets too great. As parliamentarians—and I know that my noble friend takes an interest in these things—we are bound to make sure that we do everything we can to protect the poor.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation of the orders, and the noble Lords, Lord German and Lord Kirkwood, for their contributions. I would like to add myself to the circulation list for this exciting reply to the questions of the noble Lord, Lord German. Is the Minister willing to place a copy in the Library, given that it might be of interest in years to come? They are very good questions.
I share the hope of the noble Lord, Lord Kirkwood, that Parliament retains a sense of the importance of these orders. The decisions taken here by Parliament will affect the living standards of millions of people over the next year. They really matter, and if we ever get to the stage where we stop taking them seriously we will be failing in our duty. I pay tribute to the noble Lord, Lord Kirkwood, who turns out every year, come rain or shine, although I am disappointed that he had nothing to say about the GMP. I look forward to a year when I find something to say to it, but I am not going to ask any questions about it either.
Much has been made of the fact that the Government are uprating pensions by the triple lock. That is welcome as far as it goes. The comments about RPI notwithstanding, will the Minister acknowledge that the triple lock has so far been less generous than the RPI uprating it replaced? It was not used in the first year. I notice that my right honourable friend Stephen Timms pointed out, when this order was debated in another place, that the RPI last September was 3.2%, whereas the pension uprating delivered by the order, as the Minister said, is 2.7%. My right honourable friend said that the triple lock has delivered a lower uprating than the previous formula in each of the three years it has been used. The effect of that is that in RPI terms it is a real-terms cut for the third year in a row.
More concerning is that the standard minimum guarantee element of pension credit is to be increased by only 2%. This reduces both its real-terms value and its value relative to the basic state pension. One of the consequences must be that the poorest pensioners find their pension income falling in real terms. The Minister, I am sure, can confirm that. I would be very interested in the Minister’s answer to the question of the noble Lord, Lord Kirkwood, about cost. If the value of some of these benefits is falling, but the spend is rising, is caseload the reason? I would be interested to know.
The decision on pension credit is significant not just for those currently dependent on pension credit, but potentially for all those who will receive the new single-tier pension, which is due to be introduced in April 2016, if the Pensions Bill currently going through the House receives Royal Assent. The Government have signalled, during our deliberations on that Bill, that they propose to introduce the new single-tier pension at a rate above the prevailing rate of pension credit. By reducing the value of pension credit in real terms, are the Government not giving themselves the option of introducing the single-tier pension at a starting rate lower than might have been the case had pension credit maintained its value in real terms?
Can the Minister help me on another point? As the premiums payable to pensioners with working age benefits will be uprated in line with pension credit rates, does that also mean that they too will face a real-terms cut? Will the Minister confirm that? Also, what assessment has he made of the impact on pensioners with small savings of the Government’s decision to increase the savings credit thresholds by 4.4%, some way above inflation? I know that the Government are keen for people to do the right thing and to save, but the reason for introducing a savings credit was so that people who had put money aside would still find themselves better off than those who had not. Will the Minister explain the Government’s thinking on that?
I also have some questions about process. I am with the noble Lord, Lord Kirkwood: I fear that I may have lost track of some uprating that should have happened. If I tell the Minister what I think is happening, perhaps he will correct me where I go wrong. As I understand it, the Welfare Benefits Up-rating Order 2014 uprates by 1% those on benefits covered by the Welfare Benefits Up-rating Act. The protected benefits are covered by this order. So what happens to tax credits? Where did they get uprated? Where was the benefit cap uprated? I know that it has been, but I am not quite sure where that happened. Also, are all the elements of universal credit uprated in this order and, if so, where are the work allowances uprated? I could not see them.
I have two final questions. First, on childcare, it seems to me that the childcare element of universal credit is not being uprated at all. Can the Minister explain why not? If it is not being uprated at all, that is a significant real-terms cut. The last annual childcare cost survey in 2013 from the Family and Childcare Trust—what used to be the Daycare Trust—found that costs had risen by an average of 6% the previous year, more than double the rate of inflation. If the decision is made to cut that childcare element in real terms, coming on top of the Government’s decision to cut the proportion of childcare costs in universal credit to 70%, will that not have a significant impact on the ability of working parents to afford childcare? There was no impact assessment, and I was not able to work out what the effect of that was. Have the Government made any assessment of the impact on working parents of that decision on childcare and, if so, what is it?
Finally, I should be very interested to hear the answers to the questions from the noble Lord, Lord Kirkwood, on PIP, for example, where I have grave concerns about the implementation. The recent report is not encouraging in that respect. Also, I should like to understand to what extent, if at all, the Secretary of State is using discretion in making judgments about the appropriate levels of uprating, given the concern that abounds now about the use of food banks and the extent of poverty among people who are in receipt of benefits.
Lord Bates
I thank noble Lords for their questions. All Members who have spoken are renowned experts in the field. Until a few months ago, I was joining from the Back Benches in scrutiny of such orders, so I sense the expertise that lies behind the pertinent questions which have been asked. I was particularly struck by my noble friend Lord Kirkwood’s question about how small is the audience for a mere £3.3 billion of taxpayers’ money to go to the poorest in society. That is a worthy point to make, and it would be absolutely ungallant of me to point out the level of participation from the Liberal Democrat Benches and the absence of participation from the Opposition Benches.
Lord Bates
We are a coalition—we share the point. The point is that I think that there is a genuine cross-party support. For example, the triple lock on pensions is welcome, it is working and it is delivering real-terms increases to pensioners.
If I may, I will go through the points raised in the order in which they were raised. My noble friend Lord German raised the question of the Treasury grant to the National Insurance Fund. It is not a question of the National Insurance Fund running out of money. Making provision for such grant has no overall impact on the Government’s finances. It is done primarily for accounting purposes to ensure that the National Insurance Fund complies with the Government Actuary’s recommendation of maintaining a working balance of one-sixth of the expected benefit expenditure in 2014-15. My noble friend was absolutely correct to point out that at least now the information in the forecast is being made available in the Government Actuary’s report. He asked me a specific point about whether we will look at that historically over the 10-year period. I should say that we think that the grant has not been required over that period but, as one of the paragraphs in the probably lengthy letter that I shall be sending to noble Lords, I shall cover that important point and I thank him for raising it.
There was a smart observation asking: why the different dates. They are in place for good administrative reasons, including taking into account the prescribed payment days of different benefits. I know that there might be a follow-up question asking why there are different payment days but perhaps we can just say that that is the answer. However, the noble Lord puts his finger on an interesting point.
My noble friend Lord Kirkwood asked whether we would ensure that working-age benefits will be debated once the Bill is finished. Working-age benefits will be debated again from 2016-17. I will turn to the IFS Green Budget in a minute. My noble friend and the noble Baroness, Lady Sherlock, asked about the uprating of tax credits. The Tax Credits Up-rating Regulations 2014 will uprate certain elements of tax credits by CPI from 6 April. These were laid in draft form on 12 February and are due to be debated later in March. The Child Benefit and Tax Credits Up-rating Order 2014 will increase certain elements of tax credits and the rate of child benefit by 1% from 6 April and 7 April respectively. That was made on 24 February.
My noble friend Lord Kirkwood also asked about how much of the increase in expenditure is in relation to caseload increases. Clearly, caseload is an important factor in the overall expenditure, which is why it is important to make pension spending more affordable over the longer term, including, for example, the changes we are making through increasing the state retirement age. As regards the delay in implementation of the personal independence payment, PIP has been successfully introduced using a controlled approach to learning lessons as we go along in a live environment. We have been very clear that PIP will be introduced in a gradual way. Disabled people have wanted us to take time to get it right, which is what we are doing. Natural reassessment is under way in several areas and we will continue to monitor and evaluate it before making any further decision on widening the reassessment rollout.
My noble friend also asked whether we are going to introduce new eligibility criteria for winter fuel payments. Winter fuel payments are non-contributory and were designed to give older people in the UK reassurance that they can keep warm during the cold weather. The Government intend to bring in an eligibility criterion based on country of residence with payments going to only eligible people living in EEA countries with colder climates. Legislation will be needed to pass this before any changes are made.
On the UC rollout, our current planning assumption is that the universal credit service will be fully available in each part of Great Britain during 2016, having closed down new claims to the legacy benefits it replaced with the majority of the remaining legacy caseload moving to universal credit during 2016-17. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution.
My noble friend Lord Kirkwood also asked about the Green Budget report written by Paul Johnson and the excellent organisation, Oxford Economics, for the Institute for Fiscal Studies. He suggested that we read the report—it says here that I will do so. I think that I will apply the collective and say that I assure my noble friend that we will do so. It is a very important contribution. We have all said that we want these changes to be evidence based. When serious organisations such as the IFS produce serious research, of course we should take it seriously. We will monitor future developments. I am grateful to my noble friend for drawing that to our attention.
Baroness Sherlock
My Lords, I am very grateful to the Minister for explaining the process and what happens to the different benefits, but I am still chewing over the information that neither the childcare allowances nor the work allowances in universal credit will be increased at all and are therefore facing a real-terms cut. I might have let that go, but I am afraid that I will have to push back on his comment that all sides of the House agree that people will be much better off under universal credit than under the present system. Universal credit is simply a delivery vehicle. Whether or not people will be better off will depend on how generous the benefits are, the taper rates applied, the levels of work allowance or disregard applied and the interaction with other sources of support. In other words, unless the calculations done previously about the gains to work and participation rates in work are redone using these figures, we do not know whether people getting universal credit are going to be better off than they are now.
If the Minister cannot tell me now, could he please write to me later and place a copy in the Library on what assessment the Government have done about the effect on incentives to move into work and gains to work as a result of these real-terms cuts to components of universal credit?
Lord Bates
I appreciate the point which the noble Baroness has made and I was not suggesting that everybody would be better off under this provision. The question is one of removing perceived barriers to go back into work—to encourage people to move seamlessly off benefits and into work—without creating disincentives. That principle, I think I am correct in saying, is one that is widely shared on all sides of the House. How it actually applies and is worked out for individuals and individual families is clearly a crucial matter. On that point, I will add that to the list of issues about which I will write to noble Lords immediately following this debate.
I have already explained that we are spending an extra £3.3 billion on uprating pensions and benefits in 2014-15, enabling us to protect key benefits and vulnerable groups. This order protects pensioners, many of whom have worked hard all their lives and are no longer in a position to increase their income through work, and benefits, which reflect the additional costs faced by disabled people, again reflecting our commitment to protect those least able to increase their spending power. Those are principles which I hope all noble Lords can support and on that basis I commend these orders to the Committee.
Guaranteed Minimum Pensions Increase Order 2014
(10 years, 8 months ago)
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Lord Bates
That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2014.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments.