Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2019

Baroness Buscombe Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Regulations laid before the House on 15 January be approved.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I will speak also to the Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2019. I am required to confirm to noble Lords that these provisions are compatible with the European Convention on Human Rights and I am happy so to do.

These statutory instruments will increase the value of lump-sum awards payable under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 and the diffuse mesothelioma scheme, which was set up by the Child Maintenance and Other Payments Act 2008. These two schemes stand apart from the main social security benefits uprating procedure. However, through these statutory instruments we will increase the amounts payable by the September 2018 consumer prices index rate of 2.4%. This is the same rate that is being applied to industrial injuries disablement benefit and certain other disability benefits, and under the main social security uprating provisions. These new amounts will be paid to those who satisfy all the conditions of entitlement, for the first time, on or after 1 April 2019.

Turning to the purpose of the lump-sum schemes, the Government recognise the great suffering of individuals and their families as a result of exposure to asbestos or certain other forms of dust. They may be unable to bring a successful claim for civil damages, due mainly to the long latency period of their condition, but can still claim compensation through these schemes. Although improved health and safety procedures have restricted the use of asbestos and provided a safer environment for its handling, the legacy of its common use is still with us. That is why we are ensuring that financial compensation from these schemes is available to those affected.

I will briefly summarise the specific purpose of the two compensation schemes. The Pneumoconiosis etc. (Workers’ Compensation) Act 1979—which for simplicity I shall refer to as the 1979 Act scheme—provides a lump-sum compensation payment to individuals who have one of five dust-related respiratory diseases covered by the scheme, and who are unable to claim damages from employers which have gone out of business and have not brought any action against another party for damages. The five diseases covered by the 1979 Act scheme are: diffuse mesothelioma, bilateral diffuse pleural thickening, pneumoconiosis, byssinosis, and primary carcinoma of the lung, if accompanied by asbestosis or bilateral diffuse pleural thickening. The 2008 mesothelioma lump-sum payments scheme, which I will refer to as the 2008 scheme, was introduced to provide compensation to people who contracted diffuse mesothelioma but were unable to claim compensation under the 1979 Act because, for example, they were self-employed or their exposure to asbestos was not due to their work. But the 2008 scheme, as many noble Lords know, allows payments to be made quickly to people with diffuse mesothelioma at their time of greatest need. Under both schemes, a claim can be made by a dependant if the person with the disease has died before being able to make a claim.

Payments under the 1979 Act scheme are based on the age of the person with the disease and their level of disablement at the time they are diagnosed. The highest amounts are paid to those diagnosed at an early age and with the highest level of disablement. All payments for diffuse mesothelioma under the 1979 Act scheme are automatically made at the 100% disablement rate, the highest rate of payment, reflecting the seriousness of the disease. Similarly, all payments under the 2008 scheme are made at the 100% disablement rate and based on age, with the highest payments going to the youngest people with the disease. In the last full year, April 2017 to March 2018, 3,680 people received payments under both schemes, totalling just under £50 million.

I know that in previous debates on increasing the value of these lump sums, noble Lords have raised the subject of equalising the payments made to dependants who claim after the death of someone who had the disease with those made to people who have the disease and claim in their lifetime. However, I must tell noble Lords that we do not intend to equalise payments. The Government’s view remains that it is most important that the available funding is given to the people with the condition who would most benefit from it. Of course, I fully understand that whole families can be devastated by this disease, but there is still the recognition that they are able to get compensation, even if it is not at the same level. When we have to make such decisions about how we use our limited resources—the taxpayers’ money that is available—we believe it is only right that we target that money by giving it to the people to whom it can make the most difference.

I am aware that the incidence of diffuse mesothelioma is a particular concern of noble Lords. The number of deaths in Great Britain remains at a historically high level. Diffuse mesothelioma has a strong association with exposure to asbestos, and current evidence suggests that around 85% of all mesotheliomas diagnosed in men are attributable to asbestos exposures that occurred through work. Those diagnosed with diffuse mesothelioma usually have a short life expectancy, with many people dying within 12 months of diagnosis. The number of cases currently occurring reflects the long latency period of the disease, which means that 30 years or more can pass from the time of exposure to the disease becoming apparent. The latest available information suggests that there will continue to be around 2,500 diffuse mesothelioma deaths per year before the number of cases begins to fall during the next decade, reflecting a reduction in asbestos exposure after 1980.

I turn to wider improvements in lung health. Although we expect the number of people diagnosed with mesothelioma to begin to fall in the coming years, the Government are well aware that many people will still develop this and other respiratory diseases in the coming years. That is why we are committed to working with our agencies and arm’s-length bodies to improve the lives of people with respiratory diseases.

In the recently published NHS Long Term Plan, the Government have identified respiratory diseases as a clinical priority. The long-term plan sets out how the NHS will take action in a number of areas, including expanding programmes that support earlier diagnosis of respiratory diseases, such as pioneering lung health checks, trialled in the north-west of England; and increasing access to proven treatments such as pulmonary rehabilitation. Furthermore, an NHS England respiratory oversight group has been created, which includes membership from the British Lung Foundation. Additionally, the NHS has been working closely with the Taskforce for Lung Health, which recently published its own lung health five-year plan.

Specifically on mesothelioma, the Government have committed to driving research activity forward. The National Institute for Health Research has led work which resulted in the funding of five studies, the first of which was completed last year. The Department of Health and Social Care is also a key stakeholder in the British Lung Foundation’s mesothelioma research network, which aims to improve outcomes for people affected by mesothelioma. Funding continues to be available from a variety of sources, including the National Institute for Health Research, the Medical Research Council and medical research charities.

Returning to these important regulations, I am sure we would all agree that while no amount of money can ever compensate individuals and families for the suffering and loss caused by diffuse mesothelioma and the other dust-related diseases covered by the 1979 Act scheme, those who have them deserve the monetary compensation that these schemes can offer. I commend the increase of the payment scales for these schemes and respectfully ask noble Lords’ approval to implement them.

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[Baroness Buscombe]

Can the noble Lord repeat the question?

[Lord McKenzie of Luton]

Yes, I should speak up. What are the current levels of recovery under the 1979 Act? Also, what drives the quantum of lump sum payments under that Act, which created the schedule in the first place? We know what the uprating is about.

The annual question posed is about bringing payments for dependants up to the level payable to sufferers. I join those who say it is time that we should do this. Debate in the other place on the regulations was in part conflated with arrangements in the 2012 Act, which I think was introduced only in 2019. Historically, as we know, there were concerns about low levels of compensation made available for these long-latency diseases. Focus for a long while was on the traceability of employer liability policies and, although progress was made, it was considered that in too many cases employers and their insurers were avoiding liability. I understand that this led to the diffuse mesothelioma payment scheme, introduced in 2014 and led by the noble Lord, Lord Freud, who deserves credit for his difficult negotiation with the insurance sector.

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[Baroness Buscombe]

My Lords, I begin by thanking all noble Lords who have contributed to this really important debate. I go straight to the first point raised: why do we not uprate automatically every year or put this on the statute book? I absolutely understand where that question is coming from. It was asked by several noble Lords, most notably the noble Baroness, Lady Thomas. I think it is important to have a debate such as this to remind not only noble Lords but those many people beyond who may not appreciate that this is not something that will end in the short term. Noble Lords have so passionately highlighted the perverse ease with which people can contract these deadly diseases. We still have to be incredibly careful and cautious about the future for those people.

The noble Lord, Lord Freyberg, mentioned new products such as carbon nanotubes, which I confess I know little about. The issue of threats from these new products should be raised through opportunities to help awareness, such as this really good debate. In that way, points can be made and we can raise both awareness and ongoing concerns.

I want to be very clear that, during last week’s debate in the other place, there were calls to put the uprating of the lump sum schemes on a statutory footing with a legal requirement to uprate annually in line with inflation, and my honourable friend the Minister for Disabled People, Sarah Newton MP, agreed to consider the proposal and work with her officials to explore the options. I want to set the record straight because, with great respect to the noble Lord, Lord Freyberg, I think I am right in saying that, although he said that my honourable friend said that she would make this change, she in fact just agreed to consider it.

I will do my absolute best to respond to the number of questions asked by noble Lords as fully as I can. Several references were made to the Health and Safety Executive, with which we have a brilliant working relationship and whose work is instrumental in looking at threats from new products. The question was asked what we and the Health and Safety Executive are doing to raise awareness of asbestos. The HSE health priority plans set out three strategic priorities for our work on occupational health going forward, the core focus of which concerns work-related stress, musculoskeletal disorders and occupational lung disease—including the risks associated with asbestos. Delivery of the OLD strategy includes holding a,

“National Summit to raise the profile of occupational lung disease”,

and,

“establishing and facilitating a new Healthy Lung Partnership … to provide direction and coordinate stakeholder activity on occupational lung disease”.

Following the asbestos awareness campaign between October 2014 and March 2015, the Health and Safety Executive continues to make a wide range of information freely available through its website. Further specific awareness-raising activities may be considered in future, and helping at-risk workers to recognise that asbestos is relevant to them and their work, encouraging them to seek reliable information about how they can protect themselves, and encouraging and enabling safer work with asbestos through behavioural change is always at the front of our mind.

Like other noble Lords, I pay tribute to the brilliant ongoing work of the British Lung Foundation in research, clinical trials, supporting research into lung health and recognising some of the difficult cases raised today.

The noble Baroness, Lady Thomas, asked specifically what the Government are doing to remove remaining asbestos in schools, which I believe noble Lords will have thought about on a personal level. The Department for Education takes this issue seriously and is committed to supporting schools, local authorities and academy trusts in fulfilling their duty to manage asbestos safely. It is the Government’s aim to remove all asbestos from schools as more school buildings are replaced and refurbished over time. We have taken significant steps in recent years to strengthen schools’ approaches to managing asbestos, including publishing refreshed guidance for schools in 2017 and launching an assurance process earlier this year to understand the issue better. Expert advice, again from the Health and Safety Executive, is clear that as long as asbestos-containing materials are undamaged and not in locations where they are vulnerable to damage, they should be managed in situ.

However, we are clear that asbestos cannot be managed effectively in situ. It should be removed; we have provided significant funding for that purpose. Indeed, the department has invested £5.6 billion in maintaining and improving the schools estate since 2015, enabling local authorities, academy trusts and voluntary-aided schools to maintain their school buildings. This is all part of the Priority School Building Programme, with its additional investment of £4.4 billion. Asbestos is being removed or encapsulated where appropriate as part of these investment programmes.

The noble Baroness, Lady Thomas of Winchester, and the noble Lord, Lord McKenzie, asked about universal credit. Broadly, the same rules will apply to universal credit as under current working-age income-related benefits. For someone with a disease who receives a lump-sum payment under either of these schemes and also receives an income-related benefit, the payment is treated as capital, not income, and is disregarded for a 52-week period. After that time, if the money has been placed in a trust fund, the capital will be disregarded, as will any income from the fund. If the payment is made to a working-age dependant, the normal capital rules apply, meaning that if the dependant’s total capital is more than £6,000, their income-related benefit may be reduced. If they have capital of £16,000 or more, their benefit entitlement will end.

A question was also asked about why dependants who claim payments under either of these lump-sum schemes are paid less than if the person with the disease had made a claim in life. As I said in my opening speech, the main intention of these schemes is to provide financial support for people living with certain diseases and help them to deal with the issues that illness brings. As around 90% of payments made under both schemes are paid to people with a disease covered by them, we believe that resources are rightly targeted. For example, in 2017-18, 3,420 payments were made to people with those diseases and 260 to dependants.

The calculations for dependants are complex and depend on a number of factors, such as the age of the person with the disease, the length of time between diagnosis and death and whether the person died from the disease or from some other cause. In 2017-18, across both schemes, 3,420 awards were made to people with a disease, averaging £13,783 each. For the dependants, as I said, 260 awards were made, but they averaged £8,462. However, this comparison is broad and does not really reflect the complexity involved in these calculations.

Noble Lords asked why the Government do not equalise dependant payments with those made to people with a disease. We estimate that the additional cost of equalisation would be in excess £3 million per year. We must prioritise resources where they are needed most: with people living with a disease. Equalising awards between people with a disease and their dependants would require legislative changes. That would be a complex task, as awards to dependants under the 1979 Act include payments made in two parts: first, a payment for the effects of the illness before death, based on the assessed level of disability and the length of time the person had the illness; and, secondly, a payment made in cases where the death was actually caused by the relevant disease. Taking forward such changes is not a current legislative priority, but we will continue to keep this issue under review.

The noble Baroness, Lady Donaghy, suggested meeting to discuss the issue of equalisation. I do not want to commit my honourable friend in the other place, the Minister for Disabled People, but she is renowned for welcoming meetings. I shall suggest to her that this meeting could take place because it is very important for noble Lords to have the opportunity to share things with her—she takes these matters incredibly seriously—and discuss this point further. I heard with care and I want to share with my honourable friend in another place the details of the different suggestions that the noble Lord, Lord Alton, has made today of schemes that could support such a move. I suspect my honourable friend is already aware of them; she is always so on top of her brief. However, I think it would be helpful if I share with her the entire debate that has taken place today to see what could be done. I will be in touch with all noble Lords on that proposal for a meeting, and all will be welcome.

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[Lord Wigley]

I was referring to those under the pneumoconiosis compensation scheme, whereby dust has accumulated, perhaps in a quarryman working in Wales for a number of years then working abroad, and the disability only becomes apparent after he has worked abroad.

[Baroness Buscombe]

Yes. As I said, it has to be demonstrated that the disease was as a result of working in the United Kingdom. If somebody worked for a number of years in the UK and then continued that occupation abroad, I assume that it would be for those who assess an individual’s case to make a reasonable assessment in the circumstances.

A number of noble Lords, including my noble friend Lady McIntosh of Pickering and the noble Lord, Lord Wigley, spoke about the MoD scheme. With a son in the Fleet Air Arm, I have a personal interest in this. It is an extremely good question. Are we being careful to ensure that we are doing all we can to protect our Armed Forces—particularly those in the Navy, on ships? I would welcome a reply from the Ministry of Defence, so I say here and now that I will ask that question with all speed and reply to all noble Lords and place a copy in the Library.

My noble friend Lady McIntosh also asked how long it takes to deal with claims under the 1979 Act scheme and the 2008 Act scheme. Claims lodged under both schemes are dealt with as quickly as possible. For the 1979 Act scheme, which includes diseases other than diffuse mesothelioma, it can take a number of weeks as investigations may be required into the existence of a relevant employer against which civil action may be taken. However, that is still very quick in comparison with civil litigation cases, which of course can take years. Under the 2008 scheme, where there is no need to ascertain the existence of a relevant employer to sue, cases are dealt with very quickly. Dependant claims under both schemes can take longer, as the department may have to await the death certificate or other official confirmation that establishes the cause of death. We are not aware of any general delays or issues with processing claims.

A number of noble Lords touched on what we do to promote awareness of the schemes. The Department for Work and Pensions highlights the availability of the 1979 Act scheme to industrial injuries disablement benefit claimants in official letters. A leaflet is included with the award notice for any of the five diseases covered by the lump-sum scheme, encouraging people to make a claim. All government schemes are publicised on GOV.UK. The department also maintains regular telephone contact with a range of asbestos support groups, and meets their representatives face to face at the annual asbestos forum to discuss the lump-sum schemes.

The noble Lord, Lord McKenzie, asked about the amounts recovered each year by the Compensation Recovery Unit of the Department for Work and Pensions. It recovers around £27 million per year from civil compensation awards. If a mesothelioma claimant subsequently recovers compensation in civil proceedings, the process for clawback of any lump-sum payments is as follows. Once a claim is settled or determined against a compensator, a certificate is requested from the Compensation Recovery Unit that details an amount equivalent to the value of benefits paid in respect of the condition for which the claimant has successfully pursued civil action. The compensator makes a payment of the value of the certificate to the CRU.

The 2008 Act scheme was set up on the basis that it would be funded by compensation recoveries from civil claims. The 1979 Act scheme is funded partly by civil compensation recoveries and partly by the department. It is a long-standing principle that people should not be compensated twice and, in most cases, where social security benefits are paid, they are recovered from compensation where people have been successful in a subsequent civil claim for damages. The net cost to the department of making payments under both schemes in the last financial year, 2017-18, was £22.2 million. Payments totalled £49.2 million and £27 million was recovered.

The noble Lord also asked how many people had benefited from the diffuse mesothelioma payment scheme, how much had been paid out and what was the average award. In the fourth year of operation, 2017-18, the scheme paid out £36 million in compensation to 200 successful claimants, with the average mean award being around £145,000—up from £141,000 the previous year. Since the scheme was launched in April 2014, it has helped just under 1,000 sufferers from mesothelioma, with £133.8 million awarded in compensation.

The noble Lord referred to tax credits and universal credit. Payments made under both schemes are paid by a lump sum and regarded as compensation. Therefore, they are not included as income for the purpose of income tax or tax credits. However, interest arising from the lump sum is subject to income tax and included in the income calculation for tax credits. For universal credit, payments are treated as personal injury compensation and, as I said, disregarded for one year. If they are then placed in a trust, they are disregarded indefinitely.

I hope that I have managed to answer noble Lords’ questions to the best of my ability. I thank all noble Lords for their many and helpful contributions to this debate. The Government recognise that the two schemes form a hugely important part of the support available to people with mesothelioma and certain other dust-related diseases. The regulations will ensure that the value of that support is maintained. I thank all noble Lords who have been supportive of the uprating of the payment scales for these schemes and ask approval to implement it.

Motion agreed.

Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2019

Baroness Buscombe Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Regulations laid before the House on 15 January be approved.

Motion agreed.

Guaranteed Minimum Pensions Increase Order 2019

Baroness Buscombe Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Order laid before the House on 16 January be approved.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, in moving this order, I will speak also to the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019. In my view, the provisions in both these orders are compatible with the European Convention on Human Rights.

I shall be brief. The Guaranteed Minimum Pensions Increase Order 2019 deals with an entirely technical matter that we attend to each year. This order provides for defined benefit occupational pension schemes which were contracted out to increase by 2.4% members’ guaranteed minimum pension that accrued between 1988 and 1997, in line with the increase in the consumer prices index the previous September.

The Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019 reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds required by the Pensions Act 2008. In conducting the review, the Secretary of State has considered both the automatic enrolment earnings trigger, which determines the point when someone becomes eligible to be automatically enrolled into a qualifying workplace pension, and the qualifying earnings band, which determines those earnings of which the enrolled employee and their employer have to pay a proportion into a workplace pension.

Automatic enrolment has been hugely successful in achieving its aim of getting millions of people saving into their pensions. Last year was a significant one for the policy, with a number of key milestones being reached. In February, the last group of smallest employers took on their duty to automatically enrol all staff, meaning that all established employers and new businesses are now subject to automatic enrolment. This was shortly followed by the first phased increase in minimum contributions from 3% to 5% in April 2018. We now have 1.4 million employers who have complied with their automatic enrolment duties, and have just reached the commendable milestone of 10 million people successfully enrolled into a workplace pension. It is also extremely encouraging that, despite the significant changes last year, rates of stopping saving—for example, through opt-outs and cessations—have remained consistently low since the increase. This year will bring another key milestone for the policy. In April, the second planned increase in minimum contribution levels, to 8%, will occur, with contributions rising to 3% and 5% of band earnings for employers and employees respectively.

This order sets a new lower and upper limit for the qualifying earnings band and will be effective from 6 April 2019. The earnings trigger is not changed within this order and remains at the level set in the automatic enrolment threshold review order for 2014-15, so no further provision is required. As signalled by the Minister for Pensions and Financial Inclusion in his Written Statement on 4 December 2018, this order will, as previously, align the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits for the 2019-20 tax year of £6,136 and £50,000 respectively. This will ensure continued stability during the next phased increase in minimum contributions this April, providing consistency for payroll systems and helping employers manage costs.

The order does not change the earnings trigger, which remains at £10,000—striking a balance between bringing in those most likely to benefit from pension saving and affordability for employers. Those earning below the £10,000 earning trigger who feel they can afford to save still have the option of opting in and benefiting from employee contributions if they earn above the lower earnings limit.

Automatic enrolment has enabled many people who previously would not have been saving towards their retirement to contribute towards a pension. We are seeing increasing numbers of young workers, with over 70% of 22 to 29 year-olds enrolled in a workplace pension, and pension participation rates for women in the private sector are now comparable to those for men. It is estimated that by 2019-20, an extra £17.7 billion a year will go into workplace pensions as a result of automatic enrolment. Due to anticipated wage growth and with maintenance of the existing trigger, the effect is a real-term lowering of the trigger. We expect that an additional 40,000 individuals will now meet the earnings criteria and be brought into the automatic enrolment population, the majority of whom will be women.

It is important to be clear that the proposal outlined in the 2017 review of automatic enrolment to remove the lower earnings limit is setting the direction for the future of the policy and is not reflected in a current-day change. The Government stand by the proposals in that report and continue to work towards our ambition of automatic enrolment reforms in the mid-2020s. Our ambitions for automatic enrolment will be delivered in a way and at a pace that maintains the stakeholder consensus, while finding ways to help individuals, employers and the Exchequer manage the higher costs associated with the proposed changes. We will in due course consult formally on the best approach to implementation, including when and how to introduce any new legislation.

The Government are also aware of concerns that have been raised by Members of your Lordships’ House and in the wider public around the differences in administering pension tax relief and its impact, particularly on low-income earners. I take this opportunity to assure noble Lords that the Minister for Pensions and Financial Inclusion is actively engaging with his counterparts in the Treasury to explore this issue.

I will conclude on this point. The proposed package of changes in these orders provide crucial stability and simplicity for employers during the second phased increase of minimum contributions, while continuing to increase overall pension savings nationally by £5.5 billion in 2019-20. I therefore commend the order to the House and I beg to move.

[Baroness McIntosh of Pickering (Con)]

My Lords, I welcome these orders for the reasons that my noble friend has given. However, I am concerned that a couple of categories are being left behind.

By definition, those on zero-hours contracts cannot benefit from schemes such as this, or from bonuses, paid holidays, sick leave, overtime and other such perks of work. In my last five years as an MP, for the first time I had a job centre in my constituency, whereas for the previous 13 years I did not, and so had to go outside my constituency for information on job vacancies and the number of unemployed. My experience was that there are specific categories, including women returning to work. I was delighted to hear my noble friend say how many younger new employees will benefit from this order. However, many women who have had children and wish to return to the workplace, or young people at the start of their career—I fell into this category when I first went into the workplace—are struggling to work and often have two, if not three, paid jobs. They could be working in a shop as a cleaner for part of the time and working in a bar the rest of the time, and obviously students will fall into that category as well.

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[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for explaining the purpose of the orders. On the face of it, the GMP issue is straightforward. As we heard, GMPs are designed to provide a minimum weekly pension broadly equivalent to the amount of additional state provision accrued if not contracted out. Has any assessment been undertaken of the value for money of the GMP system? My noble friend Lady Drake raised an important issue around the Lloyds judgment and the decision to equalise pension benefits. I believe she wanted to know what would happen to the guidance and how soon it could be forthcoming. Is it a question not of the GMPs themselves generally having to be made more equal but, rather, of other components of the package?

On auto-enrolment, there was a brief but good debate in the Chamber—the contributors being women—the main thrust of which, not unreasonably, was the role of women. We praise auto-enrolment but all too often overlook the fact that it still has a job to do. I could recite the roll of honour of those who made auto-enrolment happen, but you know who you are.

Specifically, the legislation requires that the Government do two things: renew and, if necessary, amend the upper and lower thresholds of the qualifying earnings bands; and review the level of the earnings trigger, adjusting for roundings where appropriate. As the Minister explained, the order proposes to freeze the latter at £10,000 but align the former with the lower and upper earnings limits for national insurance purposes. This widens the earnings band by some £3,500.

The supporting analysis for this included a DWP review document of December 2018, which sets out the three principles adopted for the review. Subject to challenge from my noble friend Lady Drake, those principles are: will the right people be brought into pension saving; what is the appropriate minimum level of saving for people who are automatically enrolled; and are costs and benefits to individuals and employers appropriately balanced?

As for raising the qualifying earnings band to the UEL, this increases total pension savings by £179 million, employer contributions by £68 million and employee contributions by £85 million. Retaining £10,000 as the earnings trigger represents a real-terms decrease, which brings an additional 40,000 individuals within the target population. According to the DWP analysis, of that 40,000 some 75% of the additional savers are estimated to be women.

How have the Government made the judgment that costs and benefits to individuals and employers are appropriately balanced? What are the tests? The above apart, what specific additional factors have influenced the proposal before us today? Subject as always to the Minister’s reply, we have no difficulty in supporting the proposals in the order.

I was pleased to hear what the Minister said on tax relief and trying to address the thorny issues of relief at source and net pay arrangements. These issues have been long outstanding, certainly over more than one Government.

I am conscious that we are addressing these issues in the wake of the 2017 review, which involves a wider focus on auto-enrolment. It is also at a point where most of the transitional introductory phases have been accomplished. March 2018 saw staging completed for small and micro employers, while minimum contribution levels rose to 5% in April last year and are heading for 8% this April. Can the Minister say something about re-enrolment and opt-out levels?

As that review identified, despite its success, individuals are still not saving enough. An estimated 12 million are undersaving for their retirement and some 5.7 million are mild undersavers. The broader review, Maintaining the Momentum, charts a path for the future that will help to address some of the shortfall. Its recommendations include: reducing the lower age limit from 22 to 18; calculating pension contributions from the first pound earned; removing the lower earnings limit; and working to increase saving among the self-employed. These may be matters for another day but, like my noble friend, I do not see why they have to wait until the mid-2020s. Is the Minister satisfied with this framework?

Nevertheless, we continue to be enthusiasts for auto-enrolment in one of the most important public policy initiatives of recent times, bred of a consensus.

[Baroness Buscombe]

My Lords, this has been an important and helpful debate and I will do my best to respond to as many questions as possible. I thank all noble Lords who have spoken in support of automatic enrolment. It was a cross-party initiative. It seems only five minutes ago—but it was a year—that the noble Lord and I were debating this subject in very similar terms. There is support for auto-enrolment, which is a success story, but we are never complacent. There is always more to do to improve the system.

I shall start with questions on the guaranteed minimum pension. I thank the noble Baroness, Lady Drake, for giving me early notice of her question about the recent Lloyds Bank case. That case endorsed the Department for Work and Pensions’ long-held position that schemes must equalise for the effect of inequalities caused by guaranteed minimum pensions. The principle of equal pensions was established by the European Court of Justice in 1990. The requirement on schemes to equalise is not a new cost; they have been aware of it and should have been planning for it for many years. My department has put forward a method that schemes can use to equalise pensions which, because of its “once and done” nature, should limit costs resulting from additional administration requirements. The department will provide guidance in the near future for schemes wishing to use the method upon which the department consulted in November 2016. The Department for Work and Pensions intends to make further changes to the guaranteed minimum pension conversion legislation to facilitate the methodology on which we consulted. We are looking to make those changes as soon as a suitable opportunity presents itself. The representative beneficiaries in the Lloyds case sought leave to appeal on two points of the judge’s decision concerning the methodology favoured by them and the requirement to provide back-payments. Leave to appeal was refused, as I am sure the noble Baroness knows.

The noble Lord, Lord McKenzie of Luton, asked about the assessment of the guaranteed minimum pension system. I am unable to answer a couple of those questions and will write to him. Guaranteed minimum pensions were abolished in 1997, but those which accrued before that time must be honoured by schemes which had contracted out while GMPs were accruing.

On auto-enrolment uprating, the noble Lord, Lord McKenzie of Luton, asked why the Government do not tackle the inequality in the tax system which means that individuals automatically enrolled into a pension scheme use net payment arrangements or are losing out on tax relief. My noble friend Lady Altmann is not in her place but I know she is particularly concerned about this. The Government recognise the different impacts of the two systems of paying pension tax relief on pension contributions for workers earning below the personal allowance. The Government will look at the current differences and explore how to make the most of any new opportunities to balance simplicity, fairness and practicality. The Department for Work and Pensions has worked and is working with the Pensions Regulator to issue guidance to highlight to employers the differences between the NPA and RAS schemes and the potential disadvantage for low earners who are not eligible for tax relief if their employers opt out of NPA schemes.

The noble Lord also asked how many individuals have opted out. A total of 9% did so during the implementation of auto-enrolment. The 2018 evaluation report showed initial evidence of opt-out rates having fallen since the programme was fully implemented. Of course, the department will continue to monitor re-enrolment.

--- Later in debate ---

[Baroness Buscombe]

I thank the noble Lord. Unless it is somewhere among my notes, I do not appear to have the answer to that. If between now and the closing of my speech I cannot find it, I will write to him. I trust that he will bear with me on that.

My noble friend Lady McIntosh of Pickering and the noble Baronesses, Lady Janke and Lady Drake, asked a number of questions about auto-enrolment, with particular reference to women, people who are not in jobs, zero-hour contracts, the gig economy and so on. I want to respond to those questions and to the question of the state pension age, particularly in relation to women born in the 1950s.

I turn, first, to multiple jobholders and the earnings trigger. The proposal to remove the lower earnings limit and removing entitled worker status in legislation will ensure that multiple jobholders who are eligible for automatic enrolment or who choose to opt in will qualify for employer contributions in all jobs and will be able to pay their own contributions from the first pound of earnings. This will give multiple jobholders the opportunity to build the same retirement savings as individuals who have only one job. It is the Government’s ambition to make these changes in the mid-2020s in the light of learning from the phased contribution increases and following full consultation with stakeholders in order to develop a consensus and find ways to make this affordable. I remember touching on this matter last year, and I again stress that we need to progress at a measured pace. As I said in my opening speech, we have to think about the cost to both the Exchequer and employers in supporting the scheme, but we will obviously continue to engage on this matter with stakeholders.

With regard to the gig economy in particular, in December 2018 the Government published a report entitled Enabling Retirement Savings for the Self-Employed: Pensions and Long-Term Savings Trials. This sets out our intention to test a number of approaches and interventions through trials with industry partners. It also invites organisations from a range of sectors, including invoicing software providers and accounting organisations, to work with the Department for Work and Pensions in co-designing and testing interventions.

On those working in the gig economy, the department will consider with BEIS and the Pensions Regulator the implications of recent rulings in this area. The Government’s December 2018 Good Work Plan set out the vision for the future of the labour market and ambitious plans to implement the recommendations arising from the Taylor review of modern working practices. The Government commit to legislate to improve the clarity of the employment status tests, reflecting the reality of modern working relationships. We will ensure that any changes are also considered in relation to auto-enrolment so that there is coherence and clarity for individuals and businesses on who is eligible for automatic enrolment.

I recall that my noble friend Lady McIntosh referenced people working in different situations and those returning to work. There is continuing progress in that regard. She also mentioned her nearest jobcentre. We are constantly improving the training of our work coaches to provide assistance in signposting support and helping those who want to go back into work or wish to build their confidence in order to do so. I think my noble friend will find that terrific progress is being made in that regard.

Only yesterday, the Secretary of State for International Development announced a new initiative to support particularly women and carers in returning to work. The Secretary of State for my department, the right honourable Amber Rudd MP, when Home Secretary, launched a similar project last year to help women and carers return to work. In fact, those two cross-government initiatives represent some £2 million. We are constantly working cross-government on this issue. Given the issues of multiple jobs, and the gig and zero-hours contracts economy, it is important that we keep a flexible eye on the changing world of work, as well as working across government with BEIS.

On zero-hours contracts, individuals can still opt in, but the removal of the lower earnings limit in the 2020s will help to address the issues for this group.

We stand by our mid-2020s timescale. As our AE review confirmed, automatic enrolment should continue to be available to all eligible workers, regardless of who their employer is. Making saving the norm for young people, by lowering the age for automatic enrolment so that an extra 900,000 people can benefit from a workplace pension, is certainly a goal. We want to support all those automatically enrolled—particularly those with low earnings in multiple jobs—to save more for retirement by removing the lower earnings limit, so that their contributions are calculated from the first pound of earnings. Also, we recognise the diversity of the 4.8 million classified as self-employed, for whom a single saving intervention might not be effective. We will work to implement our manifesto commitment by testing targeted interventions aimed at the self-employed—as set out in the review report—to identify the most effective options to increase pension saving among self-employed people.

Automatic enrolment has always been implemented methodically, backed up by comprehensive analysis to help us understand its affordability for employers and individuals. We will work to maintain the consensus that has underpinned automatic enrolment’s success, including by giving employers and savers time to plan. In that way, we can help avoid any risk of deterring individuals from continuing to save—so keeping the number of those opting out to a minimum—or any risk of undermining employer engagement with reforms. The latter point is hugely important: we have to keep employers on board.

I want to make further reference to women. Automatic enrolment was designed specifically to help groups such as women and low earners, who have historically been less likely to save. The decision to maintain the trigger for 2019-20 is estimated to bring an additional 40,000 individuals into workplace pension saving, as the noble Lord opposite has referenced; of these, three-quarters are expected to be women. In 2012, 60% of eligible women in the private sector did not have a workplace pension. As of 2017, this had fallen to 20%, and I trust the figure continues to fall.

The earnings trigger determines who is eligible to be automatically enrolled. I hope noble Lords will forgive me if I repeat myself. We believe that maintaining the figure at £10,000 continues to strike a balance so that those who can most afford to save are automatically enrolled in the workplace pension. Lowering the trigger could result in diverting income away from the day-to-day needs of the lowest earners, risking and impacting significantly on their living standards. For those low earners in a position to contribute, the option remains to opt in. If they earn above a lower earnings limit, they will also receive employer contributions.

I would like to make particular reference to carers, as mentioned by the noble Baroness, Lady Drake, whom I recall referring to this a year ago. The 2017 automatic enrolment review concluded that there should be no change to the way carers are currently treated through automatic enrolment. Those who provide informal care are not subject to automatic enrolment as they have no employer to enrol them. However, bringing in individuals not subject to a contract of employment would be a fundamental change to the framework of automatic enrolment, which works through an employer-employee relationship. Carers in receipt of carer’s allowance are automatically credited with a class 1 national insurance credit, which helps to protect their future entitlement to a state pension. Individuals who provide informal care for 20 hours per week are eligible to apply for carer’s credit, which also helps to protect future entitlement to a state pension.

Of course, there is an issue with regard to women born in the 1950s—I include myself in that coterie. People are living longer and are healthier for longer. We welcome this, but it is right that arrangements for the state pension system reflect changes in average life expectancy. As we continue to build a country that works for everyone, we need an affordable and fair state pension-age arrangement for current and future generations of pensioners. The average woman reaching state pension age last year will get a higher state pension income over her lifetime than an average woman reaching state pension age at any point before. Women retiring today can still expect to receive the state pension for 23.5 years on average; that is almost three years longer than men, even after equalising women’s state pension age with men’s. Women will spend on average around two years more in receipt of their state pension, because of their longer life expectancy.

Transitional arrangements are in place. We committed £1.1 billion to lessen the impact of the 2011 changes for the most affected. This means that no one will see their state pension age change by more than 18 months, compared to the 1995 Act timetable. We have had to make tough choices, but we have calculated all of this with care. It is about maintaining a sustainable pensions system. We strongly believe that, with the new state pension, the change in life expectancy and the increase in the number of women working for longer and so on, we have struck the right balance on this.

The noble Baroness, Lady Janke, referenced black and minority ethnic individuals and asked what the impact of freezing the trigger is. I can tell the noble Baroness that the analysis underpinning the automatic enrolment earnings thresholds review suggests that freezing the trigger has had no adverse effect on the proportion of black and minority ethnic individuals in the group eligible for automatic enrolment.

I shall answer a question asked by the noble Lord, Lord McKenzie, about increasing the contribution rate as part of the 2017 review, with reference to the 8% and automatic enrolment. Millions of people are now saving, or saving more, as a result of automatic enrolment. As the noble Lord will be aware, the first planned increase in contribution rates took place on 6 April last year, with the second increase, to 8%, coming this April. It is certainly encouraging that since the increase to 5% in April 2018 there has been no increase in rates of stopping saving. However, as the review of automatic enrolment in 2017 revealed, there is no consensus about future contribution rates, and whether, when and to what level they might increase. As such, it is important that we understand the effects the second planned increase will have and carry out further work on the adequacy of retirement incomes. We will then take this forward to look again at the right overall level of saving and the balance between prompted and voluntary savings in due course. I shall allow my noble friend to ask a further question while I search for another answer on communications.

[Baroness McIntosh of Pickering]

I congratulate my noble friend on her generous and comprehensive response. I was delighted to hear her response to a question about opt-outs being down. However, I am slightly concerned that paragraph 12 says there has not been an impact assessment, but the Government have identified an estimated £79 million more in employer pension contributions. Do the Government share my concern that that might encourage more people to opt out? Also, I know that the burden on small businesses of the cost of administering the state enrolment scheme has been an issue. Is that something the Government are hearing less about, or does it continue to be a concern expressed to her department?

[Baroness Buscombe]

My Lords, the Secretary of State has considered the impact of the various options for each of the thresholds. A full analysis of volumes and costs was published on 18 December 2017. A separate impact assessment has not been prepared for this instrument. I hope that provides some assurance.

On the burden on business, particularly small businesses, we cannot have it every which way. We are trying to develop the whole process and opportunities for auto-enrolment in a very measured way, because it is hugely important that we do not put too much burden on SMEs, given the support of most of them for the national living wage and so on. We have to be careful that we do not increase rates without taking into account anything needed to help those in small businesses to cope with supporting their staff through automatic enrolment.

I will say something about communication, which was particularly referenced by the noble Baroness, Lady Janke. I absolutely understand where she is coming from. The reality is that we have got much better at communicating. We have advertising campaigns and a brilliant team at the Department for Work and Pensions focused very much on communications for every aspect of the work we do, including support for automatic enrolment, all the opportunities for support for women and so on.

The advertising campaign is not just done in the old-fashioned way; there is a lot of use of smartphones to make it really accessible. But we are not complacent: we continue to work on communications so that people understand what they can do and who they can go to for support and advice through signposting and a whole raft of communications to inform and encourage. We also work closely with outside organisations as our stakeholders in pensions. I hope that the single financial guidance Act, which is well-known to your Lordships’ House from its passage last year, will only make future support for people better by helping them understanding how they can work with their pensions. I look to the noble Baroness, Lady Drake, thinking of the pensions dashboard. That is something else we are developing our thinking on. There is a consultation out, so we are very excited about that.

I hope I have managed to answer most noble Lords’ questions. I will write to the noble Lord, Lord McKenzie, and share that letter with all noble Lords and place it in the Library. On that basis, I commend the order.

Motion agreed.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2019

Baroness Buscombe Excerpts

Thursday 14th February 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Order laid before the House on 16 January be approved.

Motion agreed.

Social Metrics Commission

Baroness Buscombe Excerpts

Tuesday 29th January 2019 Lords Chamber

[Baroness Lister of Burtersett]

To ask Her Majesty's Government what assessment they have made of the report A new measure of poverty for the UK, published by the Social Metrics Commission in September 2018.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

The Government welcome the work that the Social Metrics Commission has done. Measuring poverty is complex, and this report offers further insight into the nature of that complexity. The Social Metrics Commission report acknowledges that further work needs to be done, particularly around data availability and quality. We want to carefully consider the detail that underpins the methodology that the Social Metrics Commission has employed when this has been made available to us.

[Baroness Lister of Burtersett (Lab)]

My Lords, I congratulate the commission, so ably led by the noble Baroness, Lady Stroud, on achieving such wide support for its innovative relative poverty measure. David Cameron pledged that the Conservative Party would recognise, measure and act on relative poverty, yet now Ministers repeatedly cite only the so-called absolute poverty statistics when challenged. What has changed to negate that pledge, other than the worrying increase in relative poverty since 2011-12, especially among children, and the Government’s regressive social security and other austerity policies that have taken their toll?

[Baroness Buscombe]

My Lords, the Government accept that the current suite of measures is not without limitations. However, the relative poverty line, for example, moves across with average income, which is useful when looking at whether groups are or are not keeping up with the middle of the income distribution over time, but it does not show whether the average income of those on the lowest incomes is improving in real terms. Therefore, if everyone’s income were to double tomorrow, the number of people in relative poverty would be unchanged. The absolute poverty line, on the other hand, moves with inflation, providing a better measure of how the income of those on low incomes compares with the cost of living.

[Baroness Stroud (Con)]

My Lords, do the Government believe that the inclusion of debt and assets and the extra costs of disability and childcare are an improvement to the measure and give us a better understanding of the nature of poverty?

[Baroness Buscombe]

My Lords, this is a very important point. I thank my noble friend for introducing a debate on this very subject last week. It is right that we take note of the unavoidable extra costs of disability and childcare. However, so far as we understand it, the Social Metrics Commission does not include, for example, the unavoidable cost for the elderly of social care. In regard to disability, it is important to note that we spend more than £50 billion a year on benefits to support disabled people and those with health conditions. It is encouraging that 973,000 more disabled people have entered into work in the last five years, and we now have much more generous childcare provision.

[Lord McKenzie of Luton (Lab)]

My Lords, we share my noble friend’s enthusiasm for the approach adopted by the commission, particularly the focus on relative poverty. This is a measure that takes account of both income and inescapable costs to which the Minister has just referred, such as childcare, housing and the impact of disability. Under the commission’s new measure, there are 14.2 million people in poverty, nearly half of whom are living in families with a disabled person. Do the Government think that this is acceptable? Measuring is all very well, but what are the Government going to do about it?

[Baroness Buscombe]

To answer the last point first, the current measure shows that in 2016-17 23% of people in households where someone was disabled were in poverty, compared with 24% in 2010-11, so that shows that poverty levels among disabled people are not rising. Compared with 2010, there are now 1 million fewer people—300,000 fewer children, 500,000 fewer working-age adults and 200,000 fewer pensioners—in absolute poverty.

[Baroness Janke (LD)]

My Lords, given the variations in poverty rates across the regions—as much as 10%, according to the report—what plans do the Government have to address the specific causes, issues and needs of the regions and to improve the conditions of those in poverty across the country?

[Baroness Buscombe]

My Lords, it is important to say that we are committed to action that will make a meaningful difference to the lives of disadvantaged children and families, and that goes beyond a focus on the safety net of the welfare system to tackle the root causes of poverty and disadvantage. I am taking a particular interest in debt, working with my honourable friend the Minister for Pensions and Financial Inclusion. We are also very much looking at housing, working across government with the Ministry of Housing, Communities and Local Government. These issues matter very much when looking at the root causes, as does low pay, and that applies not just to the private sector; it is important that we also look at the third sector and other institutions that might not be paying sufficient wages to those whom they employ.

[Lord Howarth of Newport (Lab)]

Does the Minister accept that the availability of a new and more informative measure of poverty must be the springboard to new action to alleviate poverty? To start with, will she insist with her colleagues in the MHCLG that their proposal to remove the deprivation factor from the foundation formula for the allocation of grants to local authorities would further impoverish urban communities already impoverished by this Government’s disproportionate reductions in grant, further widen inequality and, indeed, put further pressure on the social security budget?

[Baroness Buscombe]

My Lords, as well as doing the work that I have just referred to, over the coming months we look forward to the release of further information from the Social Metrics Commission and to working with the commission. In particular, the department is keen to be involved in the stakeholder discussions on some of the critical and more complex issues which the noble Lord recognises and which the commission is taking account of in its measures.

[Baroness Couttie (Con)]

My Lords, I would be very grateful if the Minister could tell us what action the Government are taking to help working households which are struggling with the cost of living increases and to stop them falling into poverty.

[Baroness Buscombe]

My Lords, we are supporting those on low incomes through the national living wage, which was increased from £7.50 to £7.83 in April 2018, and this April it will increase again to £8.21. The party opposite may make noises but it did not introduce the national living wage.

[Noble Lords]

Oh!

[Baroness Buscombe]

Noble Lords might laugh but we introduced the national living wage, never mind the minimum wage. We have also raised the personal allowance from £11,500 to £11,850, which will make a basic rate taxpayer £1,075 better off in 2018-19 than in 2010-11. We have doubled the amount of free childcare available to working parents of three and four year-olds to 30 hours a week, saving them in total around £5,000 per child per year.

Poverty: Metrics

Baroness Buscombe Excerpts

Monday 21st January 2019 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, this worthy debate has been far too short. The noble Baroness, Lady Stroud, deserves our congratulations on all that she has done, together with her team, which was mentioned a moment ago. She is right to encourage the putting of poverty at the heart of government policy, although we recognise that this will entail a major change of approach. The SMC report which she has presented reminds us that there are no official measures of poverty in England or across the UK as a whole. As others have said, can the Minister say why this is? How is it possible to target poverty, particularly child poverty? We have heard from a number of Peers that what gets measured gets done—the noble Baroness, Lady Tyler, and the right reverend Prelate made that same point.

Noble Lords may recall the debates we had at the time over the use of income measures in the Child Poverty Act, which was renamed by the coalition Government as the life chances Act. My noble friend Lady Lister will certainly recall that, as indeed will the noble Lord, Lord Freud, who led the charge in those days. The income measures were replaced by reporting obligations on workless households and educational attainment, particularly at key stage 4. Can the Minister please remind us of progress on those reports, which are required to be made to Parliament? I think that two are due by now under those arrangements.

It would seem that the Social Metrics Commission accepts that an income component to measuring poverty is appropriate. This would base its data on the FRS. As we have heard from a number of noble Lords, its metric of total resources available is proposed to include all sources of post-tax earnings and income, including benefit and tax credit income, liquid assets available for immediate use—I can see that there may be some difficulties with those at the margins—deductions for family-specific recurring costs such as housing and childcare, along with the inescapable costs of disability. I think that the report floats the possibility of social care being included at some stage. We are thoroughly supportive of the proposals to include rough sleepers as living in poverty. Indeed, it should be impossible to describe them otherwise.

We know that despite the substantial effort on the part of the commission there are still gaps where the policy is not oven-ready. The approach of the commission is caveated by reference to, “within existing data and research”. The report indicates that the commission decided that it was not possible to move immediately to a new method of equivalisation and that more work would be needed. Can the Minister say how any future work on this is to be undertaken? I think that we were given a hint that there may be a Bill in the offing at some stage. Will this be the responsibility of the DWP or the Social Metrics Commission? Who has responsibility for and ownership of the project? At the end of the day, this should be about sending a message to Government about changing the dire state of our communities blighted by poverty. We have some 14.3 million people living in poverty, including 8.2 million working-age adults despite the success of universal support, as well as 4.6 million in persistent poverty. I could go on. We must build a picture of those in poverty so that we can better understand their challenges and what they need to make progress in their lives.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank my noble friend Lady Stroud for securing this debate and all those who have contributed to today’s debate of this important question. I really commend the work of the Social Metrics Commission.

Measuring poverty is complex. There are many factors affecting a person’s standard of living, and reaching consensus on whether a person’s circumstances indicate poverty is difficult to assess objectively. Of course, assessing poverty accurately across the whole population requires robust data. This is why academics here and abroad have developed so many measures, including low income, material deprivation, social exclusion, consumption, expenditure and multidimensional poverty. I was struck by the reference by the noble Lord, Lord Howarth, to the lack of indicators for cultural poverty—our collective experiences. That is a very good point, because it emphasises the reality that the possibilities for how we approach the way we measure poverty are, if not quite endless, enormous.

As noble Lords know, this Government already publish official data that sets out the number and characteristics of households that fall below various income thresholds, as well as a measure of material deprivation. These are well-established measures, often used for international comparison purposes. We will continue to publish data on them in line with the statutory commitment that we have made. However, the Government accept that the current suite of measures is not without limitations. For example, the relative poverty line moves with average income, which is useful when looking at whether groups are keeping up with the middle of the income distribution over time but does not show whether the average incomes of those on the lowest incomes is improving in real terms. If everyone’s incomes were to double tomorrow, the number of people in relative poverty would be unchanged. On the other hand, the absolute poverty line moves with inflation, providing a better measure of how the income of those on low incomes compares with the cost of living.

Our persistent poverty measures assess the numbers in relative poverty for three of the last four years, and are helpful in identifying groups struggling to escape low income. Our material deprivation measure looks at the goods and services that people report they can access, taking account of the costs that parents and pensioners face as well as the resources they have. At 11%, the number of children in material deprivation has never been lower. That means, for example, more families able to afford fresh fruit and vegetables every day and more children who have a winter coat.

We therefore welcome the Social Metrics Commission’s work. Its new measures aim to better reflect what it has identified as the unavoidable costs that are combined with a person’s income. This goes further than our current low-income data, as while it takes account of housing costs, it does not take account of the costs of childcare and disability, as referenced by a number of noble Lords. The commission has also identified further costs—for example, care costs—that it thinks should be taken into consideration if appropriate data was available.

The recommendations in the report are too numerous to cover here, but I offer a couple of examples of the elements we need to assess. First, we need to look at the quality of the data used to estimate some of the costs included in the commission’s measure. Indeed, its report accepts that there are data-quality issues. There is also the possibility that including some additional costs but not others could skew the measure towards certain groups. The commission’s report indicates that there may be more children and disabled people and fewer pensioners compared with the official statistics. What would be the impact on the measure if social care costs were also included? Children and disabled people were particularly referenced by my noble friend Lady Stroud.

In disregarding disability benefits from the calculation of relative poverty, we cannot lose sight of the fact that these provide a valuable financial contribution towards the extra costs that disabled people can face. I want to encourage my noble friend Lord Bethell. We spend over £50 billion a year on benefits to support disabled people and people with health conditions. That is £8 billion more in real terms than in 2010. PIP, the personal independence payment, is better at targeting support to those who need it most, as we see with 31% of people on PIP receiving the top rate of benefit compared with 15% under DLA. Alongside this, the proportion of people with mental health conditions getting the highest level of support under our system is over five times higher than under the old system. We believe that disabled people should have every opportunity to thrive in the workplace, and we provide financial support to ensure that someone’s disability or health condition does not hold them back at work. My noble friend Lord Bethell referenced how difficult it is for people to go to work, but it is really encouraging that 973,000 more disabled people have entered work in the last five years.

Over the coming months, we look forward to the release of further information, including the programmes used by the commission to produce its estimates and the papers supporting its decisions around what its measures should include. To answer my noble friend Lady Stroud, while we are unable to make any commitments to the Social Metrics Commission at this stage, we will want carefully to consider the detail that underpins the methodology that the commission has employed when this is made available to us. The department is also keen to be involved in the stakeholder discussions on some of the critical and more complex issues associated with the commission’s measure.

To answer the noble Lord, Lord McKenzie, about who will be empowered through where we go next, I want to make it clear that we welcome the opportunity that we as a department have been given to work with the Social Metrics Commission. As a number of noble Lords suggested, as with so many things in life, this is more important than politics.

In tackling poverty, ensuring that we have robust measures for assessing the nature and extent of poverty is vital. The department is thinking strategically about the issues behind poverty, including housing, debt, low pay and worklessness. We will raise housing supply to 300,000 new homes per year on average by the mid-2020s and are investing £9 billion into our affordable homes programme, so that we can deliver more homes where they are needed most. Our economy has grown for the 23rd consecutive quarter in a row and we are backing businesses to deliver better jobs, better incomes and better lives for people across the country. Since 2010, there have been 1,000 more people in work every day and 80% of the rise in employment has been in full-time work. That suggests that it is important that we look more closely at low pay across all employment sectors, not just the private sector.

I thank my noble friend Lord Freud for his reference to the introduction of universal support. It is doing an enormous amount to help, but I also take on board his suggestion with regard to the importance of sharing data. That is incredibly important. There is also the possibility going forward for claimants to be able to work with electronic wallets.

I now move to our approach as a Government. We are firm in our belief that work is the pillar of a strong economy and strong society, and we have clear evidence about what works. We know that, for those who can, work offers the best opportunity to get out of poverty and become self-reliant. Adults in workless families are four times more likely to be in poverty than those in working families, and children in workless households are around five times more likely to be in poverty after housing costs than those where all adults work. Indeed, the Social Metrics Commission recognises that, under its new measure, the majority—68%—of people living in workless families are in relative poverty, compared with just 9% of people living in families where all adults work full time. Our policies therefore strongly reflect that work is the best way out of poverty. One example is the Access to Work scheme, which now allows people to claim up to £57,200 annually to help pay for the additional support they need in the workplace. That is particularly targeted at the most vulnerable and the disabled.

Children need role models and parents need dignity and self-worth to believe that they can achieve their potential of supporting their children. The principles of UC entirely support this truth. I particularly take on board what my noble friend Lord Farmer said regarding the elephant in the room and the importance of including the family. I commend all the work that he does on the reducing parental conflict programme. It is important to note that the Social Metrics Commission does look at the family—the reference is to family, relationships and community—but we need to look further at this and see how it all comes together. It is for those reasons that we are pushing ahead with the most ambitious reform to the welfare system in decades, delivering real and lasting change to the lives of many of the most disadvantaged people in society—and yes, as my noble friend Lady Stroud said, focusing on better outcomes for people.

Universal credit is, of course, at the heart of these reforms and will tackle poverty by helping an extra 200,000 people into work. It is a modern benefit with one monthly payment that adjusts to earnings, avoiding the cliff edge associated with the legacy benefits it replaces. Those in work under universal credit earn an average £600 extra a year, and because it is a simpler system than Labour’s complex mix of tax credits and benefits, 700,000 families will get money they are entitled to which they are currently missing out on.

I take issue with what the noble Lord, Lord Shipley, said about the UC system being digital by default. That is simply not the case. Universal credit focuses on strong personalised support, with work coaches and case workers, and we will offer home visits where needed. We want to focus on individuals and we do so.

As my noble friend Lady Bloomfield of Hinton Waldrist said, we are listening to concerns. We note when we get it wrong, and it is a work in progress. I thank the right reverend Prelate for his welcome for the Secretary of State’s comments in her recent speech in this regard.

Our policies are making a difference. Under this Government income inequality is down year on year and remains lower than 2010, both before and after housing costs. Since 2009-10, annual incomes of the poorest fifth have increased by £400 above inflation before housing costs, whereas the incomes of the richest fifth have fallen by £800, showing that people are able to progress. Our official statistics show that there are 1 million fewer people in absolute poverty compared with 2010, including 300,000 children, and that the number of children in material deprivation has never been lower. There is so much more that I would like to say. We believe that building stronger partnerships with local services and organisations is key to identifying barriers and providing cohesive support for those who need extra help.

My noble friend Lady Stroud has asked what I believe is a question of great importance for all of us in this House, and I stress that the Department for Work and Pensions takes this very seriously. I thank my noble friend for the work the commission is undertaking and look forward to its further work in the future. Ultimately, however, this Government will be held to account for their progress in tackling poverty, and I have no hesitation in recommending our reforms as the right approach if we are to make a long-term difference to people’s lives and build a society where everyone can realise their potential.

Occupational and Personal Pension Schemes (Amendment etc.) (Northern Ireland) (EU Exit) Regulations 2018

Baroness Buscombe Excerpts

Tuesday 15th January 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Regulations laid before the House on 3 December 2018 be approved.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe)]

My Lords, Northern Ireland’s occupational and personal pensions legislation broadly mirrors legislation in Great Britain. These regulations, therefore, make analogous minor and technical changes to Northern Ireland legislation as the regulations I have just spoken to. The intent of the regulations is the same: to make sure that Northern Ireland legislation continues to operate effectively once the UK withdraws from the European Union.

Let me explain why we are laying these regulations on behalf of Northern Ireland. The UK Government remain committed to restoring devolution in Northern Ireland. This is particularly important in the context of EU exit, where we want devolved Ministers to take the necessary actions to prepare Northern Ireland for exit. This includes ensuring that the necessary legislative corrections are made to ensure that Northern Ireland’s statute book is ready for exit day. That is consistent with the action being taken at Westminster and the other devolved legislatures.

However, with exit day only a few months away, and in the continued absence of a Northern Ireland Executive, the window to prepare Northern Ireland’s statute book for exit is narrowing. UK government Ministers have therefore decided that, in the interest of legal certainty in Northern Ireland, the UK Government will take through the necessary secondary legislation for Northern Ireland at Westminster. This was done in close consultation with the Northern Ireland Civil Service. This approach is being taken forward across government departments to make separate Northern Ireland statutory instruments which create a separate, transferable body of Northern Ireland legislation made at Westminster in the absence of a functioning Northern Ireland Assembly. This helps to keep a separate body of Northern Ireland law intact for when a functioning Executive and Assembly return.

It is common practice to have mirroring legislation in respect of Northern Ireland when legislating in the area of pensions. This is fundamentally no different. These regulations were developed in close co-operation with the Department for Communities in Northern Ireland, and it has cleared the text of the regulations. This approach is common to that being taken across government departments—that is, to make separate Northern Ireland statutory instruments which create a separate, transferable body of Northern Ireland legislation made at Westminster in the absence of a functioning Northern Ireland Assembly. This helps to keep a separate body of Northern Ireland law intact for when a functioning Executive and Assembly return.

The list of specific legislation that these regulations amend is lengthy, and I would be happy to provide noble Lords with a list of the Northern Ireland legislation that is being changed. We will continue to work closely with the Department for Communities in Northern Ireland, the Pensions Regulator and stakeholders to ensure that all parties are involved in the process where their interests are concerned. I beg to move.

[Baroness Drake (Lab)]

My Lords, I will avoid repetition. In the debate on the previous SI, I logged my concerns about the UK leaving the EU pension cross-border regime, the protection of members’ assets and their movement in cross-border schemes, and the significance of the cross-border issue between Ireland and the UK. That particular problem triggers a concern about a wider issue.

These draft Northern Ireland regulations apply to policy areas which are a transferred matter for Northern Ireland. In the absence of a Northern Ireland Executive, the Government are taking steps to secure a functioning statute book in the event of a no deal. The UK Government are clearly taking through the necessary secondary legislation at Westminster in consultation with Northern Ireland departments. These regulations are a classic example of doing that in the absence of the Northern Ireland Executive. The Government are able to do that through the Section 8 powers in the withdrawal Act and Schedule 3, which relates to Northern Ireland in particular.

I fully appreciate and accept the problems that the Government face in Northern Ireland, but the democratic deficit that exists there, as a consequence of the problems that we face, is even more concerning in a no-deal scenario because the risks and consequences flowing from it are even greater. That will exaggerate the consequences of no deal and having no Northern Ireland Executive to express the opinion or represent the interests of the people of Northern Ireland. Could the Government look at what they can do, even with the withdrawal agreement, to have a strong relationship with the Irish regulator? The Northern Ireland Executive are not here to articulate the significant issue of pensions in Northern Ireland.

[Lord Adonis (Lab)]

Will the Minister tell us more about what consultation there has been with the Irish regulator and stakeholders in Northern Ireland, not just about the technical details of these regulations but also on the wider implications for pensions and pension funds in Northern Ireland if there is no deal? Can she also confirm my reading of the Explanatory Memorandum and the text of the order? It is that this order went through exactly the same process as the previous one and had to be withdrawn because the defective drafting meant that it would not be possible for UK pension funds to invest in certain European assets under the changes that were first proposed. I assume that is because it was drafted in the same way as the first regulation and had to be changed in the same way. Is that the case? Was it the same defect in both regulations that had to be corrected?

Secondly, what further consultation has there been with the pensions industry in Northern Ireland since this new draft regulation has been laid? Does it have concerns similar to those which I quoted in relation to the previous regulation, and might more issues come out of further consultation? As my noble friend Lady Drake has said, there are some concerns about there not being a Northern Ireland Assembly or Executive. This has all been done at two stages removed and, since we have special duties in respect of Northern Ireland, it would be good to have reassurance that these processes have been gone through.

[Baroness Buscombe]

I will respond to both noble Lords on these issues around Northern Ireland. First, in response to the noble Lord, Lord Adonis, there was the same error when the regulations were first drafted. When that error was picked up, the situation was immediately changed. We withdrew the draft regulations and they were relaid in their current form on 3 December. It is important to stress that we have ongoing discussions. We consult with the Irish regulator and Pensions Regulator on an ongoing basis. We of course need to remove the cross-border regime that exists between two member states. We have, therefore, been in discussions with the Irish regulator and Pensions Regulator to reflect Northern Ireland and its relationship with Ireland, which will remain within the EU. These discussions will continue, as we want to make sure that we can transpose statutory instruments, doing for Northern Ireland as we do for the UK, to ensure that there is legal certainty.

In a no-deal situation, the UK cannot participate in the EU’s authorisation regime for cross-border activity, as we will no longer be a member state. However, we are working with the Pension Regulator, Northern Ireland and industry stakeholders to see what can be done to support members of cross-border schemes, including where employees or Irish employers are across the border and contribute to a UK occupational pension scheme. Notwithstanding the reality that these regulations do not address that, we are cognisant of the fact that we need to do all we can to work across border in relation to Northern Ireland and Ireland to ensure that, in any event, the proper protections can be put in place and we can reassure employers and employees with regard to occupational pension schemes. I hope that that goes some way to reassure noble Lords.

It is common practice to have mirroring legislation. These instruments do not make policy changes but are designed to ensure that UK law in the field of occupational and personal pensions continues to operate effectively in the event that the UK exits the EU without a withdrawal agreement in place. I hope that noble Lords will support these regulations.

Motion agreed.

Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2018

Baroness Buscombe Excerpts

Tuesday 15th January 2019 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Regulations laid before the House on 3 December 2018 be approved.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, these regulations make minor and technical changes to domestic legislation that would otherwise no longer operate effectively once the UK withdraws from the European Union. The regulations were specifically designed to ensure that domestic legislation continues to operate effectively in the event that the United Kingdom leaves the EU without a deal. In the event that a deal is reached, after the implementation period there will be a need to make legislative changes, but the nature of those changes will be informed by the nature of the relationship that exists between the EU and the UK.

Before I discuss the details of the regulations, it may be useful if I give some context and background. The UK is not reliant on any European institutions or agencies for essential functions in respect of private pensions such as approvals, licences, decisions or rights. The Pensions Regulator’s powers are derived from UK law. This means that the UK does not need to create any legislation to replicate domestically any EU-level activities relating to occupational and personal pensions after the UK’s exit from the EU.

Nevertheless, we must ensure that domestic legislation relating to occupational and personal pensions continues to work and does not rely on any definitions, obligations or reciprocal arrangements that will no longer apply once the UK is no longer an EU or European Economic Area member state. UK domestic legislation contains various instances of references to EU law, and to the UK as a member state of the EU, which will no longer be the case once the UK exits the Union. This includes where distinctions have been made between EU or EEA member states and overseas entities that will no longer apply, where the UK is referred to as an EU or EEA member state or where the UK is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.

These regulations are made using powers in the European Union (Withdrawal) Act 2018 to fix legal inoperabilities and other deficiencies in retained EU law that will arise when we leave the Union. The legal powers used are those provided for under the European Union (Withdrawal) Act, and the amendments made are completely in line with both the policy and legal intent of that Act. The use of secondary legislation to amend primary legislation—so-called Henry VIII powers—was debated at length during the passage of the withdrawal Act. The Explanatory Memorandum that supports these regulations sets out the legislation in Great Britain that is being changed.

[Lord Adonis (Lab)]

The noble Baroness has just said that the regulations are completely in line with the EU withdrawal Act and do not go beyond any provisions in that Act. But from reading the Explanatory Memorandum and the impact assessment, my understanding is that the regulations had to be revised and re-laid, and that this is the second version of the regulations, because in the first version the regulations were defective. They were not properly consulted on and would have required pension funds to disinvest from European funds because they had not been subject to a proper consultation procedure. Furthermore, there has been no formal process of consultation on these regulations either. Could the noble Baroness inform the House about these matters?

[Baroness Buscombe]

I can inform the noble Lord. He is absolutely right that a formal consultation was not considered necessary for these changes as there is no policy change and they make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.

[Lord Deben (Con)]

My Lords—

[Baroness Buscombe]

I will give way to my noble friend. However, I would like to answer the question on making the changes and re-laying the regulations.

[Lord Deben]

I interrupted only because my noble friend might be able to answer my question at the same time. The question is this: if it were not thought necessary to have the consultation in the first place, but then it was found that by not having the consultation the orders had to be taken and re-laid, would it not have been better to have had the consultation in the first place—and would it not now be better to have consultation, because that is the fundamental issue in all these matters? It is not that they somehow get outside the withdrawal Act, but that they do not have the proper consultation we need.

[Baroness Buscombe]

My Lords, it was as a result of ongoing communication with our industry stakeholders that we discovered that it was important to re-lay the regulations. In a sense, there was not a formal consultation, but we do have ongoing and constant communication with industry stakeholders who will be affected by these minor and technical amendments when we leave the European Union. I stress that we were very concerned to correct a fault in terminology, which is why we withdrew the original draft.

[Lord Foulkes of Cumnock (Lab Co-op)]

The Minister read from paragraph 10.1 of the Explanatory Memorandum for my noble friend Lord Adonis. That paragraph does confirm what she has just read out: that,

“the Department did engage with and respond to industry concerns over one aspect of the draft regulations that created an unintended consequence”.

How can she know, without carrying out a full consultation, that other aspects would not create unintended consequences?

[Baroness Buscombe]

The noble Lord, with all his experience, will know that all legislation, however much it is consulted upon, runs the risk of unintended consequences. However, in this case, there was ongoing communication and involvement with industry, and it was industry that pointed out the risk we were taking by laying the regulations with the wrong terminology—the words “UK regulated market”. We redrafted regulations that were originally laid in draft on 24 October so that we could fix an unintended consequence that industry stakeholders highlighted for us. They were concerned that the use of the term “UK regulated market” in the original draft regulations could have resulted in occupational pension schemes having to disinvest from regulated markets outside the UK. So there was a concern that this could impact further than was intended. The redrafted regulations re-laid on 3 December addressed the issue by clarifying the definition of “regulated market” to include United Kingdom, European Economic Area and other regulated markets. Industry stakeholders have welcomed the change.

The Explanatory Memorandum that supports these regulations sets out the legislation in Great Britain that is being changed. Noble Lords will see there a list of all the Acts where changes are required to be made. Primarily, the regulations make changes to reflect the UK’s new status as a state independent of the EU in the event of no deal and to ensure that domestic legislation continues to operate effectively following the UK’s exit from the Union. Consequently, they deal with the authorisation of cross-border pension schemes—that is what they are really about.

The EU’s cross-border authorisation regime applies to cross-border activity between member states and requires pension schemes to seek authorisation from their regulator to undertake such activity. Broadly speaking, cross-border activity is when an employer in one member state selects to base its occupational pension scheme in another.

These regulations recognise that once the UK ceases to be a member state following its exit from the Union, it will no longer be subject to the rules of the regime for any cross-border activity. Consequently, the regulations remove the requirement for UK occupational pension schemes to obtain authorisation from the Pensions Regulator to carry out cross-border activities.

As I have said, but I will repeat it for all noble Lords to make sure that I have got the message across, these regulations were originally laid on 24 October and were intended to make changes to domestic legislation. It was at that point that industry stakeholders in conversation with our department identified an unintended consequence of the draft regulations relating to its use of “UK regulated market” as a definition of regulated markets rather than “other regulated markets”. Industry stakeholders were concerned that this could have resulted in occupational pension schemes having to disinvest from regulated markets outside the UK.

As this was not the original policy intent, and following engagement with industry stakeholders, we redrafted the regulations to correct this unintended consequence. The draft regulations that were re-laid on 3 December addressed this issue by extending the definition of “regulated market” to include UK, EEA and other regulated markets. A corresponding change has been made to the Northern Ireland regulations, which I will speak to shortly.

These instruments are part of a wider legislation package that my department is laying. We have already laid statutory instruments relating to social security and to the European job mobility portal, more commonly known as the EURES regime.

As I have said to noble Lords, a formal consultation on these regulations was not carried out by the Department for Work and Pensions. It was not considered to be necessary because the regulations do not make any policy changes and make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.

Similarly, we expect the regulations to have no significant impact on business, charities, voluntary bodies or the public sector. In fact, in their absence, if elements of the UK’s occupational and personal pensions legislation do not work effectively after the UK departs the EU, it will result in associated costs on all involved parties; for example, extra resource invested in trying to clarify the situation. These instruments make the changes needed to avoid this situation and, on this basis, are assessed to be at least cost-neutral or beneficial on balance to all involved parties, charities and voluntary bodies. In other words, we felt it was very important to make sure that the legislation was clear prior to leaving the EU.

[Lord Adonis]

The Minister said that the regulations would be cost neutral and the Explanatory Memorandum says, as she has just noted, that they,

“make minor and technical changes”,

but that does not appear to be the view of the sector. The journal Professional Pensions, which did a long article on these regulations, quoted Faye Jarvis from Hogan Lovells who said the regulations,

“could result in significant costs being incurred, the magnitude of which will depend upon the level and type of exposure that would need to be relocated to comply with the rules in the event of … no deal”.

Since there has been no impact assessment, what the Minister is saying to House this afternoon is pure assertion. The only response that I have been able to discover—because although an impact assessment has not been conducted there has been a certain amount of response in the media—suggests that there might be significant costs. How does she think that the House can make a judgment between the claims of people in the sector that there could be significant costs and her assertion that there are no costs, when no impact assessment of any kind has been conducted?

[Baroness Buscombe]

My Lords, it is interesting that the noble Lord has taken one quote from one article on this. Certainly, our understanding from our discussions with industry is that because this focuses on cross-border activity, it is up to the industry to decide whether to do something different if we leave the EU with no deal. Our focus has to be on the resulting associated costs to all parties involved—for example, extra resources invested in trying to clarify the situation: in other words, certainty of the law post exit from the European Union.

Our focus is on what happens if there is no deal. Should different companies in the pensions industry choose to do something different post exit, there may of course be other impacts on business, but certainly in our discussions with business, that was not the impression we received.

[Lord Adonis]

Since there has been no formal consultation, the House has no basis on which to make any judgment at all. The Minister has simply made a number of assertions which appear to be at variance with the actual public response. She said that there have been ongoing consultations and dialogue. Can she tell the House more about them?

[Baroness Buscombe]

My Lords, we are constantly in touch with the Pensions Regulator, with which we have a very good relationship. We work very closely with industry. My honourable friend in another place, the Minister for Pensions and Financial Inclusion, also has ongoing discussions with the Pensions Regulator and individual companies within the pensions industry. The noble Lord will recall that I have stated that there was no formal consultation because there was no change to policy. Given that there is no change to policy and that we are dealing with minor and technical amendments, and given our constant and ongoing involvement with the industry—those in the industry are very much in touch with each other; it is not an industry that is hard to be in touch with—and this niche area of cross-border activity of pension companies and pensions, it is fair to say that the department has done all that is reasonably necessary and, indeed, cost-effective to limit our consultation to an informal ongoing communication with both the Pensions Regulator and industry stakeholders.

[Lord Foulkes of Cumnock]

On this constant and ongoing activity with the industry, I wonder whether the Minister can help me. The territorial extent of this provision is the United Kingdom. What is the position if my pension is based in the Channel Islands or the Isle of Man, or if my employer has a base in the Channel Islands or the Isle of Man? How is that covered?

[Baroness Buscombe]

My Lords, we are talking about occupational pensions and private pension schemes. If the noble Lord has a pension in that area, it would be important for him to make sure that he is in touch with his pension provider, to make sure that payment will continue. However, these regulations have nothing to do with payment of pensions.

[Lord Foulkes of Cumnock]

I am not asking that. I should make it clear that I do not have a pension based in the Channel Islands or the Isle of Man. At least, if I do, then Brian Donohoe is going to be in trouble, because he is in charge of parliamentary pensions, which is all I have. I asked the question as a Member of this House, scrutinising this on behalf of people outside who may have pensions based in the Channel Islands and the Isle of Man. I have read through the whole document and there is nothing related to either. What discussions have taken place? As the Minister knows, the Channel Islands and the Isle of Man have large financial sectors. They are providers of pensions and investments that are the basis for other pension funds that may be based in the United Kingdom or elsewhere in the European Union. How are the funds in the Channel Islands and Isle of Man affected by the proposed changes? It is not clear in any part of the document and I hope the Minister can tell the House.

[Baroness Buscombe]

My Lords, if I am unable to give the noble Lord a full reply, or after this debate my officials tell me that there is something else to say about the Channel Islands, I will certainly write to him and share my letter with all noble Lords. We are not moving away from current legislation. We are just introducing minor technical amendments to make sure that current UK legislation carries on working seamlessly in the event of no deal. There is nothing in UK private occupational pensions legislation that prevents occupational pension schemes making pension payments overseas. We do not expect this to change as a result of the UK withdrawing from the EU. We also do not expect there to be any issues with EEA schemes making occupational pension payments to residents in the UK. However, as I have said, individuals should contact their EEA scheme to clarify whether they expect any changes as a result of the UK leaving the EU.

These regulations are not about pay, but if a pension is paid into a UK bank account the bank should contact the scheme member if it expects any changes as a result of the UK leaving the EU. In the same way, those points would extend to any arrangements that an individual had with pension providers in the Channel Islands and elsewhere.

I would like to progress and complete my opening statement. We expect these regulations to have no significant impact on business, charities, voluntary bodies or the public sector. These instruments make the changes needed to avoid a situation that could be other than cost-neutral or beneficial. All noble Lords will know that the European Union (Withdrawal) Act is a crucial piece of legislation that will ensure that, whatever the outcome of negotiations, we have a functioning statute book on exit day, providing certainty to people and businesses across the UK. The Act enables this by providing a power for Ministers in the UK Government and devolved Administrations to deal with deficiencies in the law arising as a result of our exit from the EU. I beg to move.

[The Senior Deputy Speaker (Lord McFall of Alcluith)]

The Question is that the two Motions in the name of the noble Baroness, Lady Buscombe—

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[The Senior Deputy Speaker]

To save any problems, the Minister’s Motion to move these Motions en bloc has been objected to, so the Minister should now move the first Motion on its own.

[Baroness Buscombe]

I beg to move.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I am grateful to the Minister for that extended explanation. It was quite clear, but perhaps it is easier for me to say that because I am a serving member of the Secondary Legislation Scrutiny Committee, which has been looking very carefully on the House’s behalf at all of these points. These regulations were cleared, and the SLSC does not clear regulations that are not properly looked at. All of the important questions were addressed. While I would encourage your Lordships to ask more questions about some regulations—because there are occasions when regulations are laid before Parliament that deserve a lot more scrutiny than they normally get—this is not one of them. This regulation is technical and I take the point that has been made about the lack of consultation. That is always something that the committee is very solicitous to understand and the explanation that we got, which was crystal clear to me, was that the objection that came in and was found by bilateral consultations with the industry was so technical that you would not expect a member of the public to be able to volunteer something of that kind.

There are two kinds of consultation, and we are always looking for consultations where there is any case for making them. In regard to this regulation, this was not a sensible judgment to make, so the department was right both to take the advice from industry and to make the change. It is standard that regulations, in the gestation between Parliament and the department, often get relaid. Often the Explanatory Memoranda are changed and that is all to the good.

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[Lord Deben]

My Lords, if I had not gone through earlier debates, I would have agreed with the noble Lord. I want to make it clear that whatever certain government sources may say, there may well be some sort of arrangement as far as the Opposition are concerned but it is not one in which I have been involved at all. I went to listen to some later SIs last week. In listening to the debate, it became clear to me that a number of assertions were being made by the Government which, frankly, did not stand up.

Of course, the whole problem with these SIs is that the Government constantly remind us that they hope they will never be implemented and this is all about the possibility of there being an exit with no deal. But that does not mean, as I am sure the noble Lord, Lord Kirkwood, will agree, that we can ignore these SIs because they probably will not happen. Of course, as the days go on, that becomes less and less probable, in my view. Now that the Prime Minister has said that it is more likely that we will have no Brexit than a no-deal Brexit, perhaps one may be happier about it. But I am not here because I happen to believe that Brexit is a nonsense. I am here because I believe that there are some really fundamental things in these SIs.

The first is the assertion that we do not need to work too hard on them because they are not going to happen. That seems unacceptable.

[Baroness Buscombe]

When have I made the assertion that we do not need to take time on them? We have spent an enormous amount of time in the department ensuring that what we carry out in relation to these SIs is detailed and careful, to the best of our ability.

[Lord Deben]

I was not making the assertion about my noble friend; I was referring to the meeting of the Grand Committee last week, when that was very much the underlying assertion. That is all I was doing. I do not wish to make any such implication or accusation about my noble friend, whose presentation was perfectly right and reasonable, except that it is based on falsities. I will go on to the other falsities on which it is based.

The second falsehood is that this SI is not making much difference and therefore we do not have to go through the usual procedure. The difficulty with that is that there is a definition here which I find very peculiar. The definition of “impact” refers only to the direct impact of what is in this—the impact on people in the United Kingdom who do not have anything outside the United Kingdom, and who are concerned only with the United Kingdom. There is no reference to the cost of or the damage done by these regulations to those who are in the United Kingdom but have arrangements outside the United Kingdom within the European Union, who will be seriously disadvantaged because the UK will not be within the same arrangements. I realise that that is a result of Brexit but the idea that you can assess the impact without mentioning that seems very peculiar. If you mention that, you have to have an impact assessment. I am very suspicious of this because I think the Government do not want an impact assessment that explains to people precisely why exit from the European Union is so damaging. I do not understand how we are supposed to deal with an SI when it says simply that there is no, or no significant,

“impact on business, charities or voluntary bodies”.

That is the second reason that it seems to me that this is a kind of fudge.

The third reason, and this is the most important thing that I want to say, is about consultation.

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[Lord Warner (CB)]

Will the noble Lord agree with me, having sat through six sets of regulations which have been negatived, that there is a pattern emerging? Does he agree that the pattern is real doubt about whether there are accurate impact assessments and real doubt about whether any worthwhile consultation has taken place with interested parties? I am asking the question because this is of great importance to the House as a whole. There is a continuing assertion that these were minor and technical issues which did not involve a change of policy; but on further investigation, all showed that there were serious concerns about impact assessments, there were changes of policy, and there were great deficiencies in the consultation. As this House in Grand Committee has negatived six sets of regulations, one after the other, one can be excused for being a little sceptical about assertions from the Dispatch Box.

[Baroness Buscombe]

My Lords, if I may be helpful to the House, I think I made it clear to all noble Lords that, because of consultation with the industry concerning this fairly niche area within the pensions industry of cross-border activity with the EU, we learned that one word was wrong within the draft regulations. Therefore, notwithstanding what may have happened with other SIs that noble Lords have been debating in recent weeks, with regard to this SI, one word was out of place and, quite rightly, the pensions industry alerted the department, which withdrew the draft regulations. As the noble Lord, Lord Kirkwood, so helpfully stated, the reality is that this happens. It does not happen on a regular basis. I cannot believe that, when my noble friend was Secretary of State, every piece of legislation he brought forward was perfect the first time round.

[Lord Deben]

I perfectly agree with my noble friend that I did not always produce legislation that was perfect the first time round. However, I did consult. I would not have dreamed of having a situation like this, where after I had published the legislation and told people that there was no need for consultation, I then found that there was a need for consultation. In this case, my noble friend is coming to the House and saying, “Although we got it wrong the first time, we know we are not getting it wrong the second time”. I know that she does not wish me to refer to what has gone on in other SIs, but the trouble is that there is beginning to be a pattern here. There is an assertion that proper consultation is not needed but it is then found, after they publish the document, that a series of people from the industry come up with really very serious matters. In two cases, those matters could affect the lives of people in this country because of the way in which the legislation has been framed. My noble friend really does have to understand that we are not having this argument for some esoteric reason or because we happen not to like the withdrawal Act. We are having it because, by accident, we have come to understand that when you work this out, discuss it and think about it, it does not turn out to be quite the legislation that we were told it was. That is the next reason why I find it difficult to accept this SI.

Then there is the question of cost. Evidently, it was not thought necessary to have a consultation because it would not be cost effective to have one. I do not know how much it costs to withdraw an SI and then to replace it, but that does not seem to be a cheap alternative to having a proper discussion in the first place. I do not understand why there could not be a consultation. After all, if the consultation had taken place at the time the original SI was laid, it would have happened, it would have been over, and we would have known that there had been such a consultation.

Lastly, I will talk for just one moment about the whole question of cross-border activity. This SI says, “If we leave the European Union, and if we leave it without an agreement, we are putting in place something that will enable us to be an island which does not have any outside connections at all but our own internal arrangements”. This means that we are going to reduplicate what are, at the moment, some of the arrangements which are done across the whole EU. I do not see here the cost of having entirely our own system and the cost to pension operators in this country of having to make new cross-border arrangements themselves. That does not come into the impact assessment. There is no question about that cost, but it is not here. All we have here are the costs of that very narrow area which the Government have decided is what is defined as “cost”. Yet the Government are going to have to accept that pension people in this country will have the cost of making arrangements so that they can do the things they are doing at the moment inside the European Union. This is a cost, but it is not here.

I know my noble friend is bored with it and thinks that we should let this all pass, but this House is about revision. We have made a mistake with this particular SI. We should recognise that all these SIs need to have at least a formal consultation. There should be a time when people can be asked to put in their concerns; the ability for a Minister to get up and say, “We have had a consultation”. I think it is unfair on my noble friend. She can only get up and say, “Well, there has been an informal series of talks”.

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[Lord Deben]

I will answer the noble Lord, but I do not want to prolong my remarks. I am already a bit fed up with being told that I must not talk about these things because it takes too long. I find it extremely difficult but it has to be talked about. The noble Lord is entirely right. This will be true and, if so, I have to declare my interest as chairman of PIMFA. I have some allied interests, but not as far as pensions are concerned.

I come back to my noble friend. There is national concern about the responsibility of government and Parliament. That leads me to say very seriously to her that if it looks as though you are hiding the consequences of decisions that you make, that does a great deal of harm. Not having the proper costs here—

[Baroness Buscombe]

My Lords, I must intervene at this point. I take great exception to any suggestion that I am seeking to hide anything at this Dispatch Box. I hope that the noble Lord—my noble friend—will apologise.

[Lord Deben]

Frankly, I did not say that my noble friend was hiding it. I said, “If it looks as if you”—and I am not referring to my noble friend but to the Government who have laid this SI—“are hiding”. She really cannot take exception to that—well, she has taken it, and if exception was taken, I apologise for any reasonable exception—but really, I say to my noble friend that we are trying to debate this issue. I was saying that if it looks as if you are hiding something because you do not include the costs of withdrawal, the public will find that difficult to accept. I do not think that I have accused her of anything, and trying to get upset about it is not acceptable.

All I am saying to her is that I hope that she will talk to the people who have laid these instruments and have not told us directly the costs. I believe that they intended not to tell us the costs, because if people add up the costs of Brexit in each of these SIs, they will begin to see why some of us have been so concerned.

I end by saying simply this. We need to have proper consultation and proper costings—not just generalised ones—and, when we have a changed SI such as this, which has been changed because we did not have a consultation, it would have been much more reasonable to have had a consultation before this SI was produced. I do not believe that it is possible for a Minister to get up and say that there is no need for consultation because we know that it is perfectly right. So, for all those reasons, I think it is perfectly correct that we should be having the kind of debate that we are on this SI.

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[Lord Warner]

My Lords, I am not going to continue the discussion about our previous experiences of SIs. I just have a question that I want to put to the Minister on this set of regulations, prompted by the helpful remarks of the noble Baroness, Lady Drake. To what extent, if any, would this set of regulations require pension funds to shift their investment strategies, which could be deleterious to the beneficiaries of those pension funds?

[Baroness Buscombe]

My Lords—

[Lord McKenzie of Luton]

Forgive me; I was waiting because I thought the Minister was going to answer the question.

[Baroness Buscombe]

No.

[Lord McKenzie of Luton]

My Lords, this has been a wider debate than I anticipated when I signed to speak on these regulations but, I suggest, relevant nevertheless. Some important issues have been raised. The noble Lord, Lord Deben, implicitly shared my noble friend Lady Drake’s view of the squeezing of time to look at these things properly. My noble friend Lord Adonis went to the root of the problem and the challenges that we face on no deal.

My noble friend Lord Adonis talked about secrecy in the departments. I have to say that I have been disappointed in one respect because I have always been a supporter of the DWP. There is a note attached to each information note saying, “X at the Department for Work and Pensions, telephone number Y and email Z, can be contacted with any queries regarding the instrument”. When I tried to do so, I was told that that was not really for opposition Members to use. Given that these are situations where there is highly technical stuff, I found that disappointing. We had always thought that we would have a basis of sharing technical issues, even if our conclusions may be different.

The noble Lord, Lord Kirkwood, started off by giving us robust reassurances about the degree of scrutiny and sufficient time. What came from that bit of the debates, which involved my noble friend Lord Adonis and the noble Lords, Lord Kirkwood and Lord Deben, was that we need to reflect on this issue. What started off as a narrow technical piece of legislation has raised a lot of questions about scrutiny—not only the scrutiny of this legislation but other things that we do as a result of Brexit.

I am again indebted to my noble friend Lady Drake, who has done the heavy lifting for us on this SI. She has focused particularly on the challenge caused by the absence of the Northern Ireland Assembly, and raised an important point about a weaker regulatory system for cross-border activities and the broader question of what the pensions context should look like.

I thank the Minister for her explanation of these regulations. They have a fairly straightforward intent, so we are told, despite the seemingly technical nature of the proposed adjustments. As we heard, the regulations are part of the planning that would enable UK law to operate effectively if the UK leaves the EU without a withdrawal agreement in place. One example would be the obvious problems where the UK is currently particularised in relation to the EEA, either as “with the UK” or as “other than in the UK”.

The Explanatory Memorandum asserts that we do not need to make policy changes to ensure UK law in the field of occupational and personal pensions continues to operate effectively in the event of withdrawal without an agreement. I am not sure that is right; at what point is a change a policy change, and at what point is it not? For example, Regulation 2(3), among others, in reference to insurance policies or annuity contracts of security, would,

“omit ‘or any other EEA state’”.

Is that a minor tactical detail or a change of policy? The Pensions Act 2008 excludes Article 6 of the IORP directive, with its main administration in the EEA. Is that not a change of policy? The regulations enter into force on exit day, so could the Minister confirm what date this is? It is not specified in the regulation so far as I can see. If the UK should exit the EU on an agreed basis, how does this impact the entry-into-force date? Does it simply fade away? How much of this SI still stands or is necessary should—however unlikely—the Prime Minister’s deal be supported by the Commons? Indeed, can the Minister remind us of what is in the Prime Minister’s deal on the issue of pensions? The amendment to the Pension Schemes Act 1993 is focused on the security for GMP not to be allowed to be an instrument of an EEA state. May I ask the Minister why that is the case?

Further provisions are a bit convoluted; perhaps the Minister can comment on some, starting with Part 2 and Regulation 2, which amends the Pension Schemes Act 1993; what is this detail about? I tried to get clarification from the department. Can the Minister please give us a detailed explanation of this and the amendment to the Pensions Act 2004?

These are important provisions. I share with many the view that we may never have to deal with them in practice, but they should be properly introduced and scrutinised in the interim.

[Baroness Buscombe]

I thank all noble Lords who have taken part in the debate, and I will do my best to respond. My notes are somewhat spread, so if I may I will begin by responding to the noble Lord, Lord McKenzie. On his not being able to contact the department, I took 27 pieces of legislation through this House on behalf of Her Majesty’s Opposition, and not once was I given access to civil servants or to support from any department. I recall the wonderful Lord McIntosh of Haringey, who sat in my place and whom I miss still, because he was utterly brilliant when it came to the most technical and difficult regulations. I would telephone him and he would laugh at the suggestion that I should have access to any of his civil servants. However, on one occasion he did relent, because he agreed that the support I had from industry was so exceptional that he would share his expertise with me if I shared mine with him.

My department responded to a question from the noble Lord only this morning, confirming that these regulations are focused on what will happen in the event of no deal, but in the event that there is a deal, it is very important to stress that they will no longer be required. We would then expect to defer, revoke or amend the instruments in time for the end of the implementation period to ensure that they properly reflect whatever deal scenario might be in existence. It is important to make it clear that these regulations are about legal certainty on exit day; they are not about trying with a crystal ball to know what would happen in any particular deal situation. They are about ensuring legal certainty in the event of a no deal, which would mean that we walked away from the EU on 29 March.

--- Later in debate ---

[Lord Warner]

May I just correct the Minister, as someone who was highly involved in the Human Rights Act? There was extensive consultation before the 1997 election with a whole raft of interests concerned with that Act. It therefore came as no surprise, and many external lawyers were highly involved in drafting the policy and advising on the legislation. It is simply not true that the Act was suddenly sprung on Parliament without any consultation. It was also in the Labour Party manifesto that it would be introduced after the 1997 election.

[Baroness Buscombe]

The noble Lord has clarified the situation, in that the Act came in some time after his then party came into power and the consultation took place prior to the general election that brought it into power.

[Lord Harris of Haringey (Lab)]

My Lords—

[Baroness Buscombe]

I want to progress, my Lords, and do not have to accept any more interventions.

[Lord Harris of Haringey]

I am sorry, but the Minister is misleading the House on a specific point which she chose to introduce on the passage of the Human Rights Act and the consultation on it. I was a member of a body set up called the Human Rights Act taskforce, which was designed to consult and involve stakeholders in how the Act should be implemented. There was consultation because I was part of it. I was not a Member of this House at that stage; it was something that the then Government did.

[Baroness Buscombe]

My Lords, let me turn to the consultation that took place in relation to these statutory instruments. Other noble Lords have insinuated that there was no consultation. I made it clear at the outset that there was a form of consultation. As the noble Lord, Lord Kirkwood, made clear, there is in a sense consultation and consultation. We are talking here about consultation with those very closely connected with the industry. The Department for Work and Pensions engaged with a pension provider, an advisory firm and a trade body for occupational pension schemes, that trade body obviously representing a fair number of those in occupational pension schemes. Any suggestion by noble Lords that there has been no consultation is simply not true. I reassure the most reverend Primate the Archbishop of York that consultation took place with those involved in the bespoke part of the industry concerning cross-border activity within the EU. These SIs do not have any policy intent. They do not change policy; they are minor and technical amendments. It is not our role to look at the implications of a deal or no deal; it is more about ensuring that there is preparedness for a no deal and legal certainty when we leave the EU on 29 March.

I am grateful to the noble Lord, Lord Kirkwood, for his support and to hear that the Secondary Legislation Scrutiny Committee decided that the regulations were clear. Of course, it was necessary to re-lay them when an incorrect reference to UK regulated markets was found, but we were very quick to do that. We withdrew the draft regulations and re-laid them on 3 December. It is about making sure that we can be agile and flexible and therefore respond with certainty when we need to. Any question of there not having been consultation with those in the industry whom the regulations impact is simply not the case.

As always, the noble Baroness, Lady Drake, asked the more challenging questions. I will do my best to reply, but, if I fail with regard to any aspect of these very technical regulations, I will write to her. These statutory instruments fix elements of the UK’s occupational and personal pensions legislation that will not work effectively after the UK departs the EU, including where distinctions have been made between EU or EEA member states and overseas entities, such as EEA central banks, that will no longer apply, where the UK is referred to as an EU or EEA member state, or where it is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.

If someone lives in the European Economic Area and has a personal pension or annuity with a UK-based firm, the firm should have made plans to ensure that the person can still receive payments from the personal pension or annuity even if the UK leaves the EU without a deal. If the firm needs to make any changes to the personal pension or annuity, or to the way in which it provides it, it should contact the person. If the person has any concerns about whether they might be affected, they should contact their firm. The UK state pension will still be payable cross border into the EEA.

The European Union (Withdrawal) Act repeals the European Communities Act 1972 and converts into UK domestic law the existing body of directly applicable EU law and UK laws relating to EU membership. So, this body is referred to as retained EU law. The Act also gives Ministers a power,

“to prevent, remedy or mitigate … any failure of retained EU law to operate effectively, or … any other deficiency in retained EU law, arising from the withdrawal of the United Kingdom from the EU”,

through statutory instruments such as these regulations.

We believe it is in the interests of both the EU and the UK for the UK to have a smooth and orderly exit from the EU, as set out in the withdrawal agreement. But it is our duty to continue to prepare for a range of potential outcomes, including no deal.

To answer the question from the noble Lord, Lord Warner, when companies invest in pension schemes it is up to those schemes and pension providers to think about their investment opportunities in future. It is not something that we can reflect through these statutory instruments.

I want to be sure that I have covered as much as I can to the best of my ability. Noble Lords have been concerned that we have not given these statutory instruments enough attention. I can only repeat that that simply is not the case.

[Lord Adonis]

The Minister is doing a great job of responding to the points raised. I raised the point about paragraph 2.5 of the Explanatory Memorandum, which says,

“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.

Can she explain what the impact of that would be and what the regulator has said about the effect it would have on the pensions industry?

[Baroness Buscombe]

The noble Lord is talking about cross-border pensions that do not have to come to our Pensions Regulator once we leave the European Union. The whole point is that we have to make sure that our Pensions Regulator no longer retains a power to influence cross-border activity where it ceases after we leave the European Union.

[Lord Adonis]

It says “UK occupational pensions schemes”. It does not say other schemes.

[Baroness Buscombe]

These are pension schemes operating in member states. If they are operating in member states they do not then have to make sure they abide by UK law and the UK Pensions Regulator. If they happen to be operating in the EU, they do not have to abide by UK law if we leave the EU. Does that make sense? I hope it does.

[Baroness Drake]

I did understand what the Minister said, and I completely accept that she always seeks to answer my questions. One of my concerns is that it is impossible. I found it difficult from the SI and the memorandum to understand, in the traffic both ways, how individuals’ assets are protected if the UK is no longer in the IORP regime. I could not trace that. Given the volume of cross-border activity on pensions between Ireland and the UK, what is the realistic prospect, even in a no deal, of getting a memorandum of understanding to address that and to try to have a common regime?

[Baroness Buscombe]

I will be turning to the Northern Ireland regulations shortly. If we leave with no deal it is not possible at that point for our Pensions Regulator to continue to protect assets beyond what will become our borders. That is where there is a great hope that there will be a deal, so that during the implementation period we can make sure that we introduce legislation that will protect our pension assets—the very thing that concerns the noble Baroness. We hope we will be able to bring it before the House prior to the end of the implementation period. Then we could revoke the statutory instruments before your Lordships’ House today.

[Baroness Altmann (Con)]

Might it be helpful if my noble friend went back to the department and asked it to reassure itself that pension assets can be protected in the event of no deal? It strikes me that there may be an issue that has not yet come to light, and that some cross-border issues might need to be addressed a little more carefully.

[Baroness Buscombe]

I take on board my noble friend’s question. We have to be realistic about this. I am sure noble Lords will accept that we cannot impose any legal rights, certainties and protections prior to the end of March, or prior to knowing whether we will have a deal. In the event of a no deal, it would be impossible for us to be certain on that day that we can protect things. I put my hand on my heart and say that in the event of no deal, I am sure that those in my department who are focused on this subject—including my honourable friend in another place, the Minister for Pensions—will do all they can post exit to ensure that we can negotiate and work closely with those with whom we currently have a cross-border relationship, and to reassure them that we can continue in the same vein.

However, I can make no guarantees at the Dispatch Box. It would be wrong for me to seek to try until we have certainty. I repeat: these regulations give legal certainty at the moment when we leave the EU with no deal. I hope that all noble Lords will accept that I have done my best to reassure them that these regulations are in good shape. Again, I thank most particularly the noble Lord, Lord Kirkwood—who sits on the SI Committee and has access to a whole host of regulations—for his support, saying that these regulations are effective. I hope noble Lords will show their support for them.

Motion agreed.

Benefit Reforms

Baroness Buscombe Excerpts

Thursday 10th January 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, this Government support families. Our welfare system supports those who are vulnerable and helps people into work. These reforms are working, with 3.3 million more people in work and 300,000 fewer children in absolute poverty than in 2010, a record low. Once fully rolled out, universal credit will result in an extra 200,000 people moving into work and will empower people to work an extra 113 million hours a year to support their families.

[The Lord Bishop of Gloucester]

I thank the Minister for her Answer and I am grateful for recent engagement with faith and other groups on this issue, but the Government’s own statistics show that child poverty is rising among families with more than two children, even when those families have an adult in work. One of the principal drivers of this increase is the Government’s two-child limit, which makes it harder for parents of more than two children to work their way out of poverty, contrary to the aims of universal credit. In light of this evidence, will the Government reconsider that two-child policy?

[Baroness Buscombe]

My Lords, I welcome this question from the right reverend Prelate. First, I want to say that we now spend more in this country than any other developed nation on family benefits.

[Lord Foulkes of Cumnock (Lab Co-op)]

That does not answer the question.

[Baroness Buscombe]

I said I would begin by saying that we now spend more in this country than any other developed nation on family benefits. The aim of the two-child policy is an important one: to strike the appropriate balance between support for claimants with children, and fairness to taxpayers and families who support themselves solely through work. Parents who support themselves solely through work would not expect to see their wages increase simply because of the addition of a new child to their family. However, we are looking at the policy with regard to its extension, which is due to take place next month.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, the Resolution Foundation recently estimated that the four-year benefit freeze implemented in the Welfare Reform and Work Act 2016 will result in a net cumulative saving by the Exchequer in 2020 of £4 billion. Is it not now time to think about redeploying some of those savings to provide much-needed assistance to hard-pressed low-income families with children?

[Baroness Buscombe]

My Lords, let us look quickly at what we offered in the Budget. The Budget has made an enormous difference in the amount of money that we have put into the system following concerns. We announced a £4.5 billion cash boost to universal credit in the 2018 Budget; that was voted against by the party opposite. The reality is that we are doing a lot to reduce the number of children in workless households because we believe that that makes an enormous difference to the possibilities for children: we know that they are five times less likely to be in poverty where both parents work. Children need role models, and parents need dignity and a sense of self-worth to believe that they can achieve their potential and support their children. The principles of UC entirely support this truth.

[Baroness Corston (Lab)]

My Lords, will the Minister accept my evidence from shopping at a supermarket in a small town in South Gloucestershire, an area not noted for poverty? At the beginning of the school holidays last July there was a note at the Trussell Trust food bank to the effect that it wanted more donations, because there were 34 children—in a relatively prosperous town—who were no longer having school dinners and were in families that could not afford to give them a lunch? If I were sitting on that side of the House I would be ashamed.

[Baroness Buscombe]

My Lords, I am not ashamed. There are many and varied reasons why people use food banks and it is misleading to automatically link this to any single cause, as the party opposite chooses to do. Let me give noble Lords an example of the kind of support that we are giving children and families, in addition to free school meals and Healthy Start vouchers—

[Noble Lords]

Oh!

[Baroness Buscombe]

It is not to use up time, it is to set out our case. A working couple on universal credit with three children aged four, six and eight, for example, could be eligible for childcare support alone of up to £18,000 per annum from this Government. That is a long way from where we were when, under the last Labour Government, nearly 20% of all households were entirely workless: one-fifth of the entire household population of the United Kingdom. That is down to 13.9%. We are not complacent. We are making real progress to support families.

[Baroness Sherlock (Lab)]

My Lords, I have spent time in food banks. I have seen working parents embarrassed and ashamed at having to go there to bring home food for their children. I do not think that anyone goes to a food bank unless they are desperate.

The Minister mentioned working parents getting childcare support. Parents of very young children are now required to take a job when their youngest child is three. They can be sanctioned if they do not. Yet the way in which universal credit pays out childcare help is that the parent has to pay the money up front and then claim it back. A lot of parents just cannot afford to do this. How can it be right for parents to risk being sanctioned when they are faced with a choice between taking a job and getting into debt, or not taking it and being sanctioned?

[Baroness Buscombe]

The noble Baroness will have heard that we are doing a lot through cash injection for childcare support, but I accept that it is important to look at the process of how and when it is paid. We are doing this at the moment. We know that 30 hours is already making a real difference to families. The independent evaluations of our early delivery found that 78% of parents reported greater flexibility in their working lives. Nearly a quarter of mothers reported being able to increase their working hours as a result. In particular, we want women in households to be liberated and empowered, just like every noble Baroness sitting in this House. I note that the noble Lord, Lord West of Spithead, is in his place. One of the things in which I am particularly interested is flexibility of spousal employment for those women in the Armed Forces who support their husbands or partners. We are doing everything we can, working holistically across government, to achieve more to enable both parties to work and support their family.

Universal Credit

Baroness Buscombe Excerpts

Tuesday 8th January 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, with the leave of the House, I will repeat as a Statement an Answer given to an Urgent Question in another place by my right honourable friend the Minister for Employment. The Statement is as follows:

“Mr Speaker, universal credit is a vital reform that overhauls a legacy system that trapped people out of work. With six different benefits administered by three different government departments, it was utterly confusing for claimants. All new claimants now receive universal credit. In the future, we will move claimants who have not changed circumstances from legacy benefits to universal credit in an approach known as managed migration.

It is right that the Government should seek to align provision for all, in order to eventually operate one welfare system. The department has long planned to initially support 10,000 people through this process, in a test phase, before increasing the number of those migrated. This first phase will give us an opportunity to learn how to provide the best support, while keeping Parliament fully informed of our approach.

Universal credit is proceeding as planned, with no change to the timetable of completing managed migration by December 2023”.

My Lords, that concludes the Statement.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for repeating that Answer. I woke on Sunday to news suggesting that universal credit rollout was being delayed. Joy, I confess, was unconfined in Sherlock Towers and doubtless all around the land. But it was not so. It seems that the Government are pressing ahead with the 1.4 million people currently getting universal credit, and another 1.5 million people will join them in the next year. So any delay seems to relate only to the regulations on managed migration, which Ministers had told us were incredibly urgent. These are very controversial because, rather than transferring people across to universal credit, in practice the DWP will simply end legacy benefit claims and invite people to apply for the new benefit. The DWP was to pilot it this summer and roll it out to some 3 million people from next year.

Our Secondary Legislation Scrutiny Committee urged Ministers to take only the powers and regulations to run the pilots and then come back to the House before going for the full rollout—so I hope that maybe that is what the Government are doing. But Ministers down the other end could not confirm this at all.

I do not want a general bit of debate or flannel: I just want to know what is being delayed and until when. So will the Minister tell the House whether the Government are delaying consideration of the managed migration regulations until after the pilots have been evaluated? If so, how will they get the powers to run the pilots and introduce the concession they have made on the severe disability premium? If they are not doing that, what on earth is going on?

[Baroness Buscombe]

I will respond by saying first that perhaps we should ask the press what on earth is going on. The news that there is a delay is wrong. The Government previously committed to hold a debate on the affirmative regulations in relation to managed migration, and that will happen in due course on the Floor of the House. We will debate them as and when parliamentary time allows, but we will also make sure that we meet our commitment to severe disability premium recipients. To ensure a start date from July 2019 for those 10,000 people, we have long said that we will work with a test-and-learn process.

The noble Baroness talked about a pilot. We have always called it a test. It is perhaps just different terminology. In my response to a debate put to the House by the noble Lord, Lord Bassam of Brighton, on 1 November, I made it very clear that we were always going to have the test-and-learn phase starting at the end of July 2019, whereby we would manage-migrate only 10,000 people through the following 12 months. A debate will be held on the regulations to allow for the managed migration.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I welcome this change in so far as it separates the regulations in the first phase to do the testing and learning. It was argued for very forcefully by the scrutiny committee and others. I welcome the Government paying attention to that. However, a timing issue flows from it, because if we do not get the evaluation of the test-and-learn phase in time to be useful when the comprehensive spending review comes around later this year, we are going to be short of money. If we are to learn anything between now and July, time is very short, so the managed migration regulations need to be laid and they need to be evaluated in time to be useful to get resource put into universal credit in the longer term for the future.

[Baroness Buscombe]

I very much take on board what the noble Lord said. This has been very much part of our thinking in the department. It is very important that we make sure that we have an opportunity to debate the managed migration regulations prior to the end of July 2019 and the pilot phase—as it is now popularly referred to, rather than, as we have called it, the test and learn phase—whereby we will be co-designing the whole system with 70 stakeholders working with us to make sure that we get this right. So there is no question of us not being very cognisant of the fact that we want to ensure that we protect recipients of the severe disability premium so that they do not in any way have a gap in receipt of their severe disability premium. We want to make sure that that happens as soon as possible.

[Baroness Wyld (Con)]

My Lords, in the debate at the end of last year, I asked the Minister specifically about those with mental health illnesses who are struggling with the complexity of the system. In the light of recent changes, can my noble friend say a little more about the specific support that will be available to those struggling with mental health conditions, and how they will be helped to manage their way through this process?

[Baroness Buscombe]

I thank my noble friend for this question, because of course our focus is very much on all claimants. Each claimant has a different bespoke need. The reality is that they have a work coach and a caseworker supporting them in a bespoke way that never existed under the legacy system. In relation to those who are particularly vulnerable and have particular mental health issues or disability needs, we are committed to gathering better data to support those claimants and to prioritise this as part of the wider Work Programme for universal credit. Anything we do will be introduced incrementally and could cover a broad range of complex needs rather than focusing on one particular group.

We have been focusing very much on training staff and increasing the number of staff. For example, we have introduced a function to pin key profile notes so that they are instantly visible to all staff helping a claimant. After a small trial, this feature was rolled out in September last year. We are thinking all the time about how we can help people in a bespoke way. A number of Peers who joined me at the Department for Work and Pensions at the end of last year saw for themselves the work that we do and how we focus to the best of our ability on what will be 8 million people when the whole system is fully rolled out, each and every one of them having perhaps a slightly different issue but being part of the system that works for everyone.

[Baroness Lister of Burtersett (Lab)]

My Lords, perhaps I may go back to my noble friend’s question. We will be debating exactly the same regulations that were laid last year, with their sink-or-swim approach that has been widely condemned by the Social Security Advisory Committee, any number of parliamentary committees and all the voluntary organisations on the ground. The only thing that has changed is that the regulations that we were told had to be agreed by 12 December have disappeared.

[Baroness Buscombe]

My Lords, the noble Baroness is wrong to say that the regulations have been widely condemned. Why do 70 different stakeholders want to work with us if they condemn what we are trying to achieve? I feel very strongly about this. The noble Baroness herself came to the department to see the fantastic work done by our work coaches. She may laugh at what our employees do day in and day out, 24/7, to help benefit claimants in a far better way than ever happened under the legacy system where, frankly, people were left to—

[A noble Lord]

Nonsense!

[Baroness Buscombe]

I am sorry. Under the legacy system people lived, as it were, in the shadowlands of dependency. We are lifting people out of poverty and encouraging more people into work. The universal credit system is working but we want to make sure that, prior to the volume migration of those on legacy benefits, we work carefully and slowly with the 10,000 people who are coming forward so that we do it correctly. It is also important to make sure that we protect those with a severe disability premium.

[The Lord Bishop of Durham]

My Lords, I thank the Minister for the time that she has given to a number of us. The session that we had at the DWP was very informative and helpful, and I thank her for it. However, I am still confused as to why, when we met the Minister, we were told that these regulations had to be dealt with before Christmas, yet we are still not clear exactly what regulations we will be asked to debate. Can she please clarify that?

[Baroness Buscombe]

My Lords, I am trying to clarify it to the best of my ability. The reality is that, as I have already said, we want to make sure that we protect those with a severe disability premium and we need to do that by the end of this month. I think that noble Lords will accept that at the moment we are in an unusual place when it comes to the parliamentary system and the timetable, but I am absolutely clear that, when parliamentary time allows, we will debate on the Floor of this House affirmative regulations for managed migration.