Financial Services Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Wednesday 25th July 2012 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, I rise to give particular support to the second amendment to which the noble Baroness has spoken. I shall not repeat the very strong arguments that she made about the need for this to be pre rather than post-appointment. I would just add a few comments about the importance of the role of the chief executive of the FCA to consumers—as may be a bit expected of me now. After all, consumers are the people on whose savings, or need to borrow, this industry depends.

The Financial Conduct Authority has been called the consumer champion, albeit the word “consumer” no longer appears in the title. That is how, I am delighted to say, the newly appointed chair described it to me. I know that that is what consumers will want it to be. We need this new architecture to have the confidence of the public—some of whom undoubtedly hold financial products at the moment, while some may have done so in the past, and some might do so in the future. Without the confidence that this sector will behave and conduct itself in their interests—with integrity, professionalism and high standards of behaviour—what chance is there that those individuals will save for their homes or pensions, or that small businesses will borrow to produce growth and jobs?

The people who can hold the FCA to account and to scrutiny on behalf of all those millions of small savers, borrowers and those with simply a bank account are, of course, our Members of Parliament. They should, therefore, through their Treasury Select Committee, hold a pre-appointment hearing of the chief executive. This will establish in successful candidates’ minds that they are responsible to the people for the performance of their organisations. Chief executives will know that they will return to the Treasury Select Committee from time to time to account for their record and explain their decisions. That will be a healthy relationship. It does not give the Treasury Select Committee a veto, but it makes clear that the candidate needs to establish the confidence of that committee before taking up the post, and that before appointment she or he has the capability and the vision to stand in the shoes of clients and safeguard their interests. That is not too much to ask.

[Lord De Mauley]

My Lords, my noble friend’s Amendment 128BC would require the FCA to conduct reviews of its policy and performance if requested to do so by the Treasury Select Committee, and to report to it on that review. It is clear that, under the current system, the regulator is not sufficiently accountable when things have gone wrong, so the regulator itself needs to take primary responsibility for initiating reviews. The Bill provides a much clearer framework for when the FCA should initiate a review into regulatory failure. It includes a number of measures intended to rectify this.

In future the FCA will be required to conduct an investigation and report on possible regulatory failure with the triggers set out in statute. This is supplemented by the power of the Treasury to order an investigation when it considers that an investigation would be in the public interest. The Treasury must, subject to limited exceptions, then lay such a report before Parliament. There are also the value-for-money and NAO audit powers to which my noble friend referred in the previous group. This is an extensive framework that should significantly enhance the ability of Parliament to hold the regulators to account in future.

I understand that the Treasury Select Committee has recommended that the Bill should go further, and clearly Parliament has an important role in calling for reviews. However, it does not need additional powers to do so. If the Treasury Select Committee believed that a review under Clauses 69 to 76 was required but was not being conducted, it could request such a review. The FCA will in any but the most unusual circumstances comply, as is the convention. Of course, the FCA would be available to report back to the Treasury Select Committee. This is, in fact, what happened in the case of the FCA’s report on the failure of RBS. Additional wording in the Bill is not necessary.

Amendment 143B seeks to create a statutory requirement for pre-appointment scrutiny of the FCA chief executive. This is something that the TSC recommended in its report on the FCA. The Government believe that it is more appropriate that the appointment should be subject to a pre-commencement hearing. Let me explain why. This is the same approach that has been taken for the appointment of the chair of the FSA, and appointments to the MPC. Pre-appointment Select Committee hearings are not convened for all public appointments and, indeed, have seldom been held for chief executive posts. They are not held for the appointment of chief executives at other sectoral regulators such as Ofcom and the Office of Rail Regulation. They are generally used for appointments where the post plays a key role in regulating government itself, or in protecting public rights, or where independence from Ministers is particularly vital to the credibility of the post.

Although this process is appropriate for some offices and non-executive appointments, it introduces scope for delay and public disagreement over whether a candidate is fit for an appointment, which risks damaging confidence and undermining the effective operation of the ultimate appointee. It would not be appropriate for appointments to a regulator of financial markets and services, which is, additionally, a market-sensitive appointment. Pre-commencement hearings will provide the right balance between allowing for TSC scrutiny and protecting markets from undue uncertainty.

I therefore hope that noble Lords can accept that the Government’s proposal will significantly enhance the Parliament’s ability to hold the regulators to account, and that I have explained why I do not believe that it is necessary or appropriate to go further in the way that the amendments suggest. I therefore hope that my noble friend will feel able to withdraw her amendment.

Financial Services Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Wednesday 18th July 2012 Lords Chamber

[Lord De Mauley]

I am pretty sure that the noble Lord is correct in his analysis, but if there is any change to that, I will write to him.

[Baroness Hayter of Kentish Town]

My Lords, the fact that the Minister does not know the answer to that seems to me to make the case for why we need an MoU. In fact, in his answer he went through the sorts of things that the OFT and the FCA would need to look at—their objectives, their resources and their method of working. We are not setting out what those should be. We are simply saying that there should be an MoU that sets out those sorts of things, things such as when one will take the lead and when the other will.

I accept, sadly, that the specifics in the amendment of the noble Lord, Lord Flight, which we were attracted to, are probably more than we could hope for from the Government. However, as the Minister has admitted that there need to be MoUs for all the other key players—the Treasury, the Bank of England, the FOS, the compensation schemes and so on—it would be extraordinary not to have one for what he now accepts is the prime competition authority: the OFT currently, but the CMA eventually. I hope that the Government will think about this again. The lack of an MoU for the prime competition authority would seem to create a slightly opaque situation for the other market players that want to know who leads on certain items. In the hope that the Minister will think about that, although he did not promise to, I beg leave to withdraw the amendment.

--- Later in debate ---

[Baroness Hayter of Kentish Town]

My Lords, I was particularly grateful to hear the words of the noble Lord, Lord May of Oxford. We will shortly come to a specific amendment about a duty of care. I hope that he will be here to repeat his words in 20 minutes or whenever we reach the amendment. I also hope that the Minister can pick up a briefing note that says “support”. His face tells me possibly not.

At Second Reading, I talked about caveat emptor, not having realised that it is no longer the accepted term. I have concerns about it because it is rarely used as an excuse for ordinary consumers to say, “Oh, I lost money”; it is far more used by producers to say, “Well, we told you so”, even if it was, as the noble Lord, Lord Hodgson, said on an earlier amendment, on page 4 of small typed script of something that had been sent to them. I remain of the view that responsibility for ensuring that consumers know what they are buying rests with the provider by producing intelligible and appropriate information. We will turn to the issue of duty of care shortly.

The Joint Committee on the Bill wrote that, should it be essential for the FCA to have regard to the behaviour of consumers, the FCA duty should be amended as set out in Amendment 105, in my name and that of my noble friend Lord Eatwell. As the Joint Committee stated,

“provision of information alone will not significantly improve consumers’ ability to make well-informed decisions. The information needs to be easily understandable and accessible”.

There is widespread suspicion that many purveyors of financial products deliberately try to keep certain customers in the dark. That confusion can mean that some, blinded by graphs and numbers, sign up to a product and later down the track find themselves caught by certain clauses and conditions of which they had, sadly, been unaware.

An issue just as difficult, of course, is the ability to compare prices and thus to shop around—an essential element of the much-vaunted caveat emptor, or competition, on which the Government rely to improve services. Martin Wheatley, the chief executive-designate of the FCA, has described the difficulty for consumers in comparing products such as bank accounts, which are structured in a way that makes it really difficult to establish whether the product is good value. We all know of practitioners who talk in terms so remote from the common-sense understanding of contractual agreements that people are unaware of what they are signing up to. This was undoubtedly the case with the recent interest rate swaps.

Asked whether firms had a duty to go beyond their legal responsibility to consumers, Mark Hoban MP said in another place:

“It is in the interests of firms to ensure that consumers do understand the products that they are buying because it then minimises the risk of problems further down the track”.

Although I agree with those sentiments, that answer seems to be about not having to pay redress later, rather than trying to prevent the mischief in the first place. Unless we do something to reduce such occurrences—today we have already mentioned PPI, personal pensions and mortgage endowments—we will have learnt nothing from what has gone wrong.

However, as the amendment moved by my noble friend Lord Peston makes clear, it is not simply language—the “crystal mark” of plain English—that is important. This is about explaining the risk to which the consumer is signing up, or for which they are paying money so that someone else takes that risk in exchange for the payment. So they might buy a product that covers the risk of inflation but does not cover longevity, or vice versa. Or a product might cover their life expectancy but not that of their surviving spouse. The permutations are endless. What is key is that, in addition to the language being clear, the limits of the product should be clear so that—in the famous words—there are “no surprises”. If I buy a bottle of Coke I will know its size, volume, sell-by date and taste. Regulation has sorted out much of that. We need to give this regulator the ability to expect no less from the providers of services which they are selling to largely unsuspecting customers.

In the other place, the Minister said:

“The Government recognise that there can be significant information and capability asymmetries between firms and consumers”,

and that poor “provision of information” could be a key factor in,

“a consumer ending up with an unsuitable product”.

He therefore fully supported,

“the intention behind the amendments”—[Official Report, Commons, Financial Services Bill Committee, 1/3/12; col. 261]—

in the other place, and therefore the intention behind the amendment that is in my name in this group. I hope that the Minister will now go further than his colleague in the other place, who accepted only the intention behind the amendments, and that he will accept the amendments as they stand. If it would make him feel better, perhaps he could agree to the intention now and bring back a suitably worded amendment on Report.

[Lord De Mauley]

My Lords, this group of amendments is concerned with the information provided to consumers, so that they are able to make empowered choices and decisions. Amendment 104C seeks to add a new ‘have regard’ subsection to the list of matters that the FCA must consider in advancing its consumer protection objective—namely,

“the need to inform and educate consumers with special emphasis on the unavoidability of some risk”.

I agree with the noble Lord that consumers need to understand that there will necessarily always be an element of risk involved in engaging in a financial transaction, and that they must consider carefully their own risk appetite and the ability of their personal finances to absorb any loss, and enter in to any contract with full information. We cannot pursue a zero-failure regime in financial services, and consumers must understand this. The regulator cannot shoulder the responsibilities that consumers should take for their own decisions and actions, but it can take steps—as my noble friend Lord Hodgson said—to ensure that consumers have the best possible information when they make those choices.

Both financial education—which we spoke of earlier—and effective conduct of business regulation have a role to play in educating consumers about risk. The Money Advice Service will have a key role in improving financial literacy so that consumers understand the difference between available financial products and their uses, what information they should seek out before entering into a contract or transaction, and what rights they have when things do not go to plan. We covered the role of the MAS when we discussed Amendment 104.

--- Later in debate ---

[Lord De Mauley]

My Lords, I think that I have given the right answer but I am happy to write to the noble Lord, Lord Peston, if I can express it in a way that he might find more acceptable.

On Amendments 105A and 106, it is important to note that if we are to create the conditions in which consumers can make better choices for themselves, we need to address some of the asymmetries of information between consumers and providers that still prevail in financial services. I think that that is a point that noble Lords are making. That is why the Government added new subsection (2)(c) to new Section 1C, which will be inserted by Clause 5, before the Bill’s introduction to the parliamentary process. This provision requires the regulator to consider,

“the needs that consumers may have for the timely provision of information and advice that is accurate and fit for purpose”.

This provision complements the FCA’s new power to require firms to withdraw a financial promotion and disclose the fact that it has done so, as well as a new power to disclose at an early stage to the public that disciplinary enforcement action has commenced against a firm or individual. The FSA will carry out a root-and-branch review of transparency and disclosure on the part of firms and the regulator to be completed ahead of commencement of the Bill.

I agree with many of the points made by the Committee in terms of the improvements that we want to see, but I do not agree that Amendments 105A and 106 are necessary. I argue, for example, that referring to information being “fit for purpose” is, in modern idiom, a better way of achieving the aims that we all share. “Fit for purpose” is an umbrella term that includes, for example, information being legible, intelligible and appropriately presented. Information could not be fit for purpose if it was not also those things.

“Fit for purpose” is also broader and allows the regulator to differentiate between the needs of different consumers, to adapt its approach and perhaps to place additional requirements on firms where it considers this necessary. There may be requirements that we cannot anticipate at this point. Using a broad term such as this therefore gives flexibility and allows the regulator to be responsive to changing circumstances and market conditions. Being too exhaustive in the Bill could be unhelpful. However, it is also not appropriate, as the detailed requirements will be set out by the FCA in its rulebook.

I therefore argue that Amendment 105A is unnecessary, as fit for purpose already captures information being intelligible and appropriately presented. Amendment 106 could restrict the FCA’s ability to design a regime on the provision of information to consumers, as “intelligible” is a narrower term than “fit for purpose”.

[Baroness Hayter of Kentish Town]

Before the noble Lord moves off that particular amendment, perhaps I may point out that the provision also uses the word “advice”. He has covered only the information that has to be clear, but not the point about access to advice.

[Lord De Mauley]

My Lords, I apologise if my argument covered only one aspect, but it should be taken to cover both.

The noble Lord, Lord May of Oxford, to whom I am grateful for his intervention, asked about a duty of care. Subsection (2)(e) of new Section 1C, which is headed “The consumer protection objective”, states that providers should,

“provide consumers with a level of care that is appropriate … to the … risk … [of] the investment … and the capabilities of the consumers”.

I hope that that is helpful.

I hope that I have made it clear that the Government are fully committed to improving the provision of information to consumers, and that I have succeeded in convincing the noble Lord to withdraw his amendment.

Financial Services Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Tuesday 10th July 2012 Lords Chamber

[Lord De Mauley]

My Lords, I am saying that the concerns to which the noble Baroness’s amendments relate are addressed as the Bill stands.

[Baroness Hayter of Kentish Town]

My Lords, I thank my noble friends Lord Peston and Lord Barnett, who between them have been teaching me economics for 40 years. It is very nice to have their support now. I also thank the Minister for his response. Unfortunately, he does not answer the major question. He says that they will mitigate problems from any decisions. Under this amendment, we were trying to say that consumers should influence those decisions. We keep putting things right when they have gone wrong and we want a voice in those decisions. I do not think that those questions have been answered by the noble Lord; nor has he taken up the point that the chief executive of the FCA, who does not come from the consumer movement, does not have the feel of it. That is fine; it is a different job. I think that we will want to return to this matter, because clearly it is key to the Bill. For the moment, I beg leave to withdraw the amendment.

Financial Services Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Tuesday 26th June 2012 Lords Chamber

[Lord De Mauley]

My Lords, in its report on Bank of England accountability, the Treasury Select Committee indeed recommended that the court publish minutes of its meetings. In its response to the Treasury Select Committee, the court accepted this recommendation in principle and agreed to begin to publish a record of its meetings once the new structure was in place. By putting this requirement into the Bill, as we propose to do through government Amendment 97, we ensure that this important transparency mechanism will remain in place.

As the Treasury Committee itself recognised, the court is likely to discuss extremely sensitive matters that are unsuitable for publication—for example, the provision of emergency liquidity assistance to an ailing bank. Therefore sub-paragraph (3) of new paragraph 12A establishes that the record must not contain any information whose publication would be against the public interest. I am pleased to see that Amendment 12, tabled by the noble Lord, Lord McFall, contains a similar provision. However, in a divergence of opinion, perhaps similar to that discussed by my noble friend Lord Sassoon in the previous group, the Government do not agree that the court should be required in all cases to notify the Treasury Select Committee of the reasons why information might have been withheld for public interest reasons from publication.

When the Bank takes actions that involve risk to taxpayer money, such as liquidity operations indemnified by the Treasury, it is the responsibility of the Treasury rather than the court to ensure that the relevant parliamentary committees are informed, on a confidential basis if necessary. There are already formal and informal mechanisms in place for this to happen, including in the new crisis management MoU. When a court discusses sensitive matters that are not related to public money, I do not see the value in creating a bureaucratic requirement for the court to notify the TSC, or to keep under review material that it excludes from meeting records, with a view to publishing it at a later date. Of course, the court may publish information on discussions that were originally excluded from the record at a later date if it believes it appropriate to do so.

The same arguments apply to Amendments 72 and 86 in the name of the noble Lord, Lord Eatwell, in relation to material excluded from the records of FPC meetings and meetings between the Chancellor and the governor. There is also widespread agreement that the Financial Conduct Authority should publish a record of its board meetings. The future leadership of the FCA has agreed to this. We have therefore brought forward Amendment 144, which makes similar provision for the FCA. Indeed, the FSA will publish in early August a record of its June board meeting, consistent with the provisions proposed.

Amendments 70 and 80, tabled by the noble Baroness, Lady Hayter, attempt to include the word “minutes” in other places in Clause 3 where the word “record” is used. That goes to the point made by the noble Lord, Lord McFall. The specific word used is not important. I hope we can agree that what is vital is ensuring that the record provides a clear public account of decisions taken by the court, the FPC and the FCA, and of the rationale and arguments that were put forward by members in favour of and against each decision. Sub-paragraph (2) of proposed new paragraph 12A, which sets out what the record must contain, ensures that that will be achieved for the court. Identical new provisions cover the FCA under Amendment 144. New Section 9R(2) similarly sets out precisely what the FPC’s meeting record must contain.

I move on to Amendment 85, which was also tabled by the noble Lord, Lord Eatwell, and the noble Baroness, Lady Hayter. Subsection (5) of new Section 9U requires the Treasury to consult the Bank before publishing the record of the meeting between the governor and the Chancellor. That will ensure that the Bank’s views about whether material is suitable for publication will be taken fully into account. The noble Baroness can be assured that the Treasury would not publish any material which the Bank believed was sensitive.

Amendments 20, 59, 60, 71, 77, 78, 83, 84 and 85 are generally speaking to do with websites. Transparency and openness are a critical part of any regulatory system. Transparency of decision-making is a vital aid to the public understanding of regulatory actions. In all cases where the Bill provides for certain documents to be made public, including those affected by amendments in this group, I would of course expect the publications to be made available on the relevant website. That is because the internet is at present the primary method for the public to access this type of material. However, I ask noble Lords to accept that technology advances at a tremendous pace. Fifty years ago, neither the internet nor websites existed. It is impossible to foresee how far digital communication will have advanced in the next five years, let alone 50.

As well as publishing documents on their websites, the Bank, the Treasury and the FSA already make use of Twitter, Flickr, YouTube and RSS to communicate with the public. Any one of these, or some other new form of media, may become the most widespread way to communicate with the public in the future. That is why we should not make provision in the Bill for specific types of communications media that may be superseded sooner or later. That is in line with the long-standing principle of future-proofing new legislation. While I think we agree on the principle of transparency and openness, I hope that the noble Lord will be persuaded to withdraw the amendment.

Let me reassure noble Lords that this should not be taken to imply that the new authorities will not make use of the internet to promote transparency and openness. The interim Financial Policy Committee has already published two financial stability reports and a record for each of its five meetings on the Bank’s website, with the latest record to be published on 6 July. In addition, last year the Bank published on its website a public consultation on macroprudential tools. I have no doubt that this will continue, but in general I contend that it is sensible to allow the publishing authority to decide in what manner to reach interested parties most effectively, which is why I hope noble Lords will understand why I cannot support Amendment 82, which seeks specifically to remove this discretion from the Treasury. I hope that noble Lords will accept government Amendments 97 and 144 and be prepared not to press their own.

[Baroness Hayter of Kentish Town]

Did the Minister mean to refer only to the Treasury Select Committee? Our amendment related to the decision taken not to publish and whether only the chair of the Treasury Select Committee would be informed of the reasons. He did not actually comment on this.

[Lord De Mauley]

I think I have an answer. The point is that the principle is as I outlined, whether it is an individual or the committee.

Welfare Reform Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Tuesday 17th January 2012 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, I am not sure whether the noble Lord, Lord German, is for or against the amendment, but all the other speakers have clearly supported these amendments. This is quite sensible, because the amendments all set out to ensure that vulnerable people can continue to access support once the Social Fund has been devolved, to whomsoever.

The first amendment in the group implements a recommendation of the Select Committee in another place. It would provide some reassurance about the effectiveness of the new system of helping those in need, and clearer information to local voters about whether their local authority is choosing to spend less than the allocated amount. It does nothing to restrict local discretion in how to implement the Social Fund replacement scheme; it merely places a requirement on the local authority, as has been said, to account for it. I think that all noble Lords who spoke would support that, and I feel sure that this is an aim that the Minister, similarly, will support.

The second amendment in the group, as was spelled out, would ensure that the use of local connection rules cannot prevent, for example, care leavers, the homeless, those fleeing domestic violence—the noble Lord, Lord Blair, spoke about them—and those leaving institutional residential care accessing Social Fund-type support. It is true that it ties the hands of local authorities a little, but only to ensure that groups that might be very much in need of support are not left with nowhere else to turn. As we heard, for many women fleeing domestic violence, community care grants are vital in helping them to set up a new home and perhaps buy a cot, a bed or a cooker. Given that many women need to enter refuges or other homes away from their former partners, they will often be unable to meet local connection rules.

We know that, among people who use the discretionary Social Fund, one in eight is leaving some sort of institutional care; nearly one in 10 is leaving prison; and one in five has at some time experienced homelessness. I work in Camden with people who have alcohol problems. There are a lot of train stations in Camden, so a lot of people arrive on our doorstep. At the time we help them with their drink problem, they will not be in the same area where they have lived and worked for perhaps 30 years.

Although I understand that the noble Baroness, Lady Meacher, will not press her amendment, I urge the Minister to consider it. We know that although universal credit budgeting loans could be available for rent in advance, crisis loans will be abolished before the introduction of universal credit, and it could be some time before the new system is set up and reliable. We know from our experience of many new IT systems that even the best laid plans occasionally go wrong. We have had many assurances from the noble Lord, Lord Freud, about the robust nature of the system being put in place, but it would be prudent to ensure that a national safety net remains while we wait for him—we hope—to be proved right on this occasion. I said “prudent” but it is probably vital that we continue to guarantee national access to community care loans and crisis loans until the universal credit system is set up. Once national systems have been devolved, the accountability that my noble friend spoke of, as well as the local connection rules, will be an essential part of helping these vulnerable groups. We are happy to support all three amendments in this group.

[Lord De Mauley]

My Lords, when we discussed the Social Fund last week, I hope I was able to offer reassurance in two key areas. First, I informed noble Lords that we would extend the 2014-15 review of a cross-section of local authorities to include information about the way they have used their funding for the new local provision. Perhaps I may return to that in a moment.

I was also able to assure your Lordships that the settlement letter that noble Lords referred to today that will accompany the funding will set out what the funding is to be used for and will describe the outcome that must be achieved—although, for reasons I explained, not the method that should be used to achieve the outcome. After further consideration of the issue, and following questions from noble Lords, I am able to explain what the settlement letter will contain. The letter will set out what the funding is to be used for, the underlying principles, and describe the outcome that must be achieved. It will say that the funding is to concentrate resources on those facing greatest difficulty in managing their income, and to enable a more flexible response to unavoidable need. The letter will make explicit that the funding is to provide a replacement provision for community care grants and general living expenses crisis loans.

The letter will go on to explain that community care grants were awarded for a range of expenses, including household equipment, and were intended to support vulnerable people to return to or remain in the community or to ease exceptional pressure on families. They were also intended to assist with certain travel expenses. It will also explain that crisis loans were made to meet immediate short-term needs in an emergency or as a consequence of a disaster when a person had insufficient resources to prevent a serious risk to the health and safety of themselves or their family. As I said in our discussion of Amendment 50 last week, I assure your Lordships that we are equally committed to ensuring that this funding goes to help the most vulnerable.

Amendment 50ZA would require the Secretary of State to publish information on the amount of money given annually to each local authority. I can assure your Lordships that we already plan to publish this information on the DWP website. On community care grant budgets, noble Lords might like to be aware that work has been done since Committee to make the funding distribution fairer by changing the funding allocation methodology.

It is each local authority’s responsibility to decide what type of support it provides with these funds. We have already been made aware of a variety of innovative ways in which local authorities plan to use this money, such as furniture re-use schemes, working with credit unions, investing in existing projects or joining up with other organisations in the area. For example, the fieldwork undertaken by the department shows that rural local authorities had very different ideas from those of urban authorities, and would embrace the freedom to design and establish local provision that suits the particular challenges they face.

Some benefit recipients cannot even afford the delivery of free goods from support schemes. During the fieldwork, the department was made aware of the fact that a local authority in Yorkshire is considering using some of the new funding to pay the delivery fees charged by an existing provider for the delivery of free goods to benefit recipients and other low income groups. This demonstrates the benefit of tailoring support to the local area. This initiative is particularly useful in a rural area, as it would have been far more expensive for people to arrange their own deliveries than in an urban area. This service would help people on the lowest incomes to receive free household goods that they might otherwise be simply unable to access.

Another example of innovative thinking came from a local authority in the Greater Manchester area, which said that it would use the funding to expand the local credit union, as this already provides household goods to people on low incomes. Expanding the scheme would increase access to affordable credit for those on low incomes and reduce the reliance on high-cost and illegal lenders. Yet another different approach to the new provision is that of a local authority in the south-west, which has been looking at how commissioning services would boost the local economy, providing new skills and routes back into employment and out of poverty.

As I hope is evident from these examples, giving local authorities the responsibility for deciding what the new local provision will look like allows for innovative new schemes that are tailored to the local area.

Welfare Reform Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Wednesday 11th January 2012 Lords Chamber

[Baroness Hayter of Kentish Town]

My Lords, I think I have the right group. As we have heard, unless this Bill is amended, it will fundamentally alter discretionary payments. Budgeting loans will be replaced by payments on account as part of the universal credit. Community care grants, which help those on means-tested benefits stay in their own homes, and crisis loans, which basically do what it says on the tin —they are for a crisis and they are a loan—will both be abolished and the money handed over to local authorities.

As has been said, the problem is that there are no guarantees that similar support will be available to vulnerable people who need it; the funding will not be ring-fenced; and there will be no statutory duties attached, not even any guidance of the sort that my noble friend Lady Hollis has requested. Earlier the Government were very clear that they would not issue any guidance—we trust they may have had time to rethink that. Without guidance, which would guarantee access to certain groups or place a statutory duty on councils to provide the sort of service that has existed, or to ring-fence the money, there is a real danger that the kinds of support that have been available will simply dry up.

The lack of ring-fencing caused the biggest concern to those responding to the Government’s consultation: 42 per cent of respondents raised it, a higher proportion than on any other part of the proposals. The various charities, which know a thing or two about vulnerable people, have, I am sure, contacted the Government—they certainly contacted us about this. Crisis is,

“deeply concerned about the impact on homeless people moving into independent, settled accommodation”.

Family Action is similarly,

“seriously concerned about the abolition of the discretionary Social Fund”,

which it fears,

“will remove one of the final safety nets for some of the most vulnerable and needy members of society”.

Barnardo’s also knows a thing or two about working with vulnerable people. It feels that,

“the Social Fund is a lifeline for many”

and is therefore “seriously concerned” about its removal and the money being given to local authorities, should this not be ring-fenced. Scope is similarly,

“deeply concerned that the Government plans to devolve a vital source of support … with no intention of ring-fencing”.

I am sure that some 22 charities have been in contact because they are worried about the loss of this last safety net for the most vulnerable when they suffer from emergency situations in the form of traumatic events such as homelessness and domestic violence, which has already been referred to by the noble Lord, Lord Blair.

The lack of the ring-fence was mentioned here tonight by the noble Lord, Lord Kirkwood, and in Committee, including by the noble Lord, Lord German, who is not in his place. In response to that, the Minister, who also is not in his place, said that he was extremely concerned about what was being said about the lack of a ring-fence and that he would reflect on the issues raised. I trust that his reflection is going to be shared with us shortly. As we have heard, a third of those getting community care grants are disabled, a quarter are lone parents and one in 10 are pensioners. These moneys go to people moving out of residential or institutional care to live independently, including children moving on from care and people coming out of homeless hostels, psychiatric hospitals and women’s refuges. These are exactly the sort of people who are being helped. In the future, of course, we may rather sadly have to add those who are forced to move as a result of the Government’s so-called under-occupancy rules, should the Government insist on overturning your Lordships’ amendment. Similarly, we risk larger families being forced to move elsewhere once the benefit cap, if that is not amended, affects high-rent areas such as London and the south-east. Again, people will be forced to move and set up home anew. Community care grants also help families at risk due to exceptional pressures. We have heard about overcrowding, relationship breakdown and the examples of a house fire or flooding.

Perhaps the Minister could tell the House whether he has read Destination Unknown, a Demos report tracking the lives of disabled families through the cuts. If he has read it, does he recall the central message that, for the disabled, one unexpected event such as an added illness, a mix-up over benefits, the need for new wheels on an electric chair or longer taxi rides to medical appointments can completely blow a person’s budget out of the water? The disabled tend to have no savings, no leeway and nothing else to rely on. It is exactly this sort of money that has been available to them. Charities, which have also often stepped in, are seeing their supply of funding drying up. They are finding themselves overburdened with demands. Jobs are less available, and the traditional hiccups or slight delays in payments that are bound to occur with the introduction of new systems that we will see at a later stage can have a devastating effect on the week-to-week budgets of disabled people. They just manage, but it is these sorts of emergency funds which can make all the difference when something goes wrong.

Crisis loans are slightly different from the other elements and the DWP has claimed that this expenditure rose following the introduction of the telephone-based application scheme. However, there is no actual evidence that it was a cause rather than a correlation which showed on the figures as the rise in claims also coincided with an increase in unemployment. Also, it is important to remember that the crisis loan scheme is a loan.

Another report that the House may be aware of was published by Barnardo’s in December last year on the vicious circle and heavy burden of credit on low- income families. Families can become trapped in a cycle of debt, which can have a very persistent effect. The Social Fund offers a far better alternative to vulnerable families than home credit, payday loans and other forms of high-interest lending, including of course illegal loan sharks. It is estimated that a £100 loan from a loan shark needs repayments of £285 and takes 57 weeks to repay. The same loan from the Social Fund costs £100 and takes 15 weeks to repay. Furthermore, these are the amounts we are talking about. I think that the average award last year was just £83, so we are not talking about hundreds of thousands, but we are talking about money that makes an enormous difference to a certain number of people. These loans can be life-changing. They can be the rent for a new home; they can be the move out of institutional care and help to pay either that rent up front or for the cooker that enables one to live there.

Our concern is that a lack of ring-fencing will mean that these loans are simply not available under a new scheme. Councils, as has been heard, are already worried that the money will drift away elsewhere, and we understand the temptation for that. We have already seen 123 local authorities increase their meals-on-wheels charges, some by up to 400 per cent, while their own grants to local voluntary agencies, which used to be able to help, are drying up. We should not be surprised if local authorities were a little tempted to move this funding elsewhere.

The amendment does not seek to frustrate the Government’s intention to localise, nor does it argue with the contention that need will best be met if identified at a local level. It seeks to provide a safeguard for the many people who need the support that the Social Fund now provides to help them in a crisis. It is because of the strong concerns that we have heard expressed across the House about the vulnerability of these groups of people if this money is not available that we support the amendment.

As Barnardo’s points out, some local authorities do not yet have expertise in working with the poorest. An inner London borough may well understand how to implement the infrastructure to offer a Social Fund replacement, but this is less likely in a shire county with a smaller and more dispersed population of disadvantaged people. Indeed, localised replacement is likely to be provided through adult social services. Many people who need the support of the Social Fund, such as homeless people, will not be clients of social services, so they may struggle to access it anyway. Without ring-fencing and some guidelines about who it should go to, we have grave worries about the gap that will be left. I hope that the Minister’s period of reflection on the amendment will enable him to accept it.

[Lord De Mauley]

My Lords, I absolutely understand what the noble Baroness’s Amendment 50 is trying to achieve. I assure your Lordships that we are equally committed to ensuring that this money is targeted on and reaches the most vulnerable people. We appreciate the importance of this money to vulnerable people, as the noble Baroness, Lady Hayter, has just explained.

As noble Lords have said, ring-fencing was debated in Committee and the Government have thought carefully about the valuable points that were made. We share the desire of noble Lords to ensure that these funds are used in the way intended and are not lost in the general pool of local authority funding.

We have concluded that the most appropriate way to make clear to local authorities the purpose of the funding is by setting it out in a settlement letter from the Secretary of State that will accompany the funding that is sent to each local authority. This letter will set out clearly what the funding is to be used for and describe the outcome that must be achieved. It is important that local authorities are not constrained in how they achieve that outcome, so the letter will not prescribe the method that should be used.

Welfare Reform Bill

Debate between Baroness Hayter of Kentish Town and Lord De Mauley

Monday 28th November 2011 Grand Committee

[Baroness Hayter of Kentish Town]

My Lords, I thank the noble Lord, Lord De Mauley, for moving the amendment. It is never quite as welcome as his normal Motion, which is that we should have a tea break.

There is nothing between us on the amendments. As the Minister said, and as was contained in the helpful note issued by the DWP, it is anticipated that the volume of cases that the DWP wishes to prosecute will substantially increase. What additional resources are being committed, first, to the CPS to enable it to deal with the substantial increase in prosecutions; and, secondly, to advice agencies, which will inevitably face an increase in demand as claimants seek to understand why they are being prosecuted and what their rights are in this area? Given the absence of legal aid in future for many such cases, as we have already heard today, such generic funding will be vital.

As the Minister said, the second group of amendments relate to information-sharing between the Government and local authorities and sensibly use the generic term rather than the specific ones for each particular benefit. However, can the Minister clarify whether there are any duties on local authorities to share information in the other direction—that is, with the department—because, as we have seen and has been mentioned again in the case of the benefit cap, understanding the amount of help with council tax that the claimant is receiving may be critical to ensuring that the system proposed can be made to work.

[Lord De Mauley]

I am grateful to the noble Baroness for her questions. In order to hasten things, may I write to her with answers to those questions?