Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 7 months ago)
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Baroness Hollis of Heigham (Lab)
My Lords, first, I thank the Minister and his honourable friend in the other place, Steve Webb, for briefing me on their position before our amendment went to the Commons to be overturned. I appreciated their courtesy then in the same way that I appreciate the Minister’s generosity today. I also appreciate above all—that is what matters—their recognition—sort of, at any rate—that this issue is not going to go away. Obviously, my regret is that the Minister did not feel able to come back with an appropriate amendment in lieu, but of course I welcome the detailed review announced today.
What was the point of the original amendment? The state pension has been a national insurance pension built on men’s full-time working lives, where wives and widows largely derived their state pension entitlement through him. However, as family structures have changed, as motherhood has become divorced from marriage, as disabled people have lived into retirement, as mothers have joined the labour force, as grandparents in their 50s have become carers of even frailer parents in their 80s, so governments over the years have credited those in unwaged work—mainly women—into the NI system. Noble Lords—many of whom are here today—have helped enormously to make all that possible.
However, though the state pension has responded flexibly and appropriately to the changes in our demography, in my view it has failed to respond flexibly and appropriately to similarly profound changes in the labour market, such as the growth in self-employment, part-time work, agency work, zero-hours contracts, the 24/7 working world and the fact that nearly 40% of all people in the labour force no longer work a standard labour contract, on which our pensions are still largely based.
We have, alongside the US, probably the most flexible and deregulated labour market in the developed world—for good and for bad—but our pension structures have not caught up. Therefore, along with insecurity, uncertain income and hours, issues of sick pay, holiday pay and childcare needs—the dark side of the flexible labour market—almost always overlooked is, for some, the lack of pension entitlement. We who benefit from the labour market, including me, should ensure that appropriate safety nets are in place.
After all, if you are unemployed and on JSA, you are in the national insurance system and build a pension; if you are on disability benefit, you are in NI; if you are a carer of children or frail elderly relatives, you are in NI; if in future you are self-employed, you are in NI; and if you work 20 hours a week on the minimum wage in a single job, you are in NI and you build a pension. That is good. However, if you are in a non-standard work pattern, working 30 hours a week on the minimum wage but with two 15-hour jobs or three 10-hour jobs, you are excluded from national insurance.
If your earnings fluctuate across the year, when you can be sent home 10 minutes before your shift starts, you may not even know whether at year’s end you have crossed the LEL line and built your pension. If you strive to come off JSA, as we would wish, by patching together mini-jobs, which may be all that is available and with all the effort, travel costs and risk that that requires, you may get punished for it by losing the state pension that you would have got by simply staying on JSA. That is perverse. We are punishing people for doing what is right—those who are taking risks to do what is right—and public policy which does that must be wrong.
A woman may be cleaning offices early in the morning and late at night, as well as other offices late in the day, and doing domestic cleaning, travelling for hours by bus and building her working week. She may be working at a department store late on a Thursday evening and all day Saturday, alongside working in a laundrette during the week. A man may be doing three hours each weekday in a sandwich shop alongside some delivery work or part-time security work in Tesco. Multiple jobs are hard work.
Steve Webb in the other place was puzzled as to why such workers do not find jobs with longer hours. Disappointingly, he cannot have read the research. Students and pensioners may want those limited hours, but nearly half the workers in the MASS1 survey wanted longer hours and could not get them, sometimes because, I am afraid, employers want to dodge paying NI. Such workers need a second or even a third mini-job to make ends meet. They work 30 or 40 hours a week, fractured between several jobs. They may earn £11,000 or £12,000 a year and they may pay tax. We are quite happy to amalgamate their earnings for tax, through which they contribute to other people’s pensions, but we refuse to allow them to do it for NI, which would build their own state pension. This is so wrong.
We do not know precisely how many people are in this situation but my own best estimate—and it is only that—is that the figure is some 250,000 and growing. The obstacles over the decade in which we have been arguing this have basically been two. First, it is fiddly getting fractions of employers’ contributions from different companies. Secondly, there is an assumption, which I know the Minister does not share and which I am sure his right honourable friend does not share, that those with a couple of part-time jobs are mostly older women who can rely on their husbands and work for pin money; for them, the situation is short term and they do not matter. Well, they do. The changing world of work has made this a real issue.
Real-time information allows HMRC to track them—that is now straightforward. The new state pension—and I am so pleased about this—brings 4 million self-employed people into national insurance without an employer’s contribution, so that is not necessary. In addition, there are in any case millions of unemployed people on benefits or earning above the LEL of £5,700 but below the point at which they pay NI at £7,500 and who are credited into NI for free, yet because someone is earning £12,000 from three £4,000 jobs, they are outlawed and get nothing. We should be supporting their work effort and applauding their effort to patch together a wage under difficult circumstances, not undermining it.
Neither is this some short-lived rite of passage. What little survey material we have suggests that 40% of people in zero-hour contracts have been with the same employer for five years or more and 20% for 10 years or more, to the detriment perhaps of their future state pension. We know, for example, that many low-paid people cycle between employment, self-employment and no employment, but we do not fail to support the self-employed because their self-employment may last only a few years and theoretically there is time to build a full NI record. These non-standard work patterns are not some temporary phenomena but a fundamental shift in the nature of employment where demand for labour and services will ebb and flow by the hour, the day, the week, the season. With a Pensions Bill before us, we could do something about it and bring the state pension into line with this new working world.
The House agreed. On 24 February it supported this entirely permissive amendment. The Minister in the Commons who overturned it made three points: it was technically defective; we did not know the real stats—the Minister used that argument today—and universal credit would sort it; and, therefore, it was premature to act. I agree with the Minister on most of that, but not on the last point. The amendment is probably technically deficient. I have had many technically deficient amendments run against me. If the House and Government agreed, it was my responsibility, with consent, to bring back an amendment that in the words of the honourable Steve Webb could “normally be tidied up”. He simply chose not to.
Secondly, I agree with the Minister that we do not know what the facts or stats are. We have no definitive figures. Research on the topic is limited and they use different data bases. Of the primary pieces of research, one samples employers and one samples employees. One looks at only zero-hour contracts and the other at short-term contracts as well. They have different wage bands and different hour bands. The reason is that they were researching the work conditions behind zero-hour contracts, not the question of pension entitlement to NI. I am afraid that those questions did not arise. We can only make informed assumptions about the number of those at risk who will be covered by UC.
I am delighted that today the Minister has committed himself to decent research on the subject over and beyond what we already know. A full review of the existing literature, as I am sure the Minister knows, will take him precisely 10 hours. What I do not know, and what the chartered institute or MASS1 could tell us, is whether their data can be cut in different ways to answer some of the unknowns or whether we need fresh survey material that focuses specifically on the NI and pension entitlement issue. If we do need fresh survey research material, is the Minister in a position today to give us the guarantee that he will use departmental resources to find out what else we may need to know?
However, none of these considerations need stop the Government following through on the amendment, in my view. Why? How? We could, for example, treat such workers in pension terms like the 4 million self-employed, coming into NI for the first time, leaving open the status of their employment. Or we could encourage voluntary NICs, but the employee will not know until retirement how many years she has missed, and by then voluntary NIC rules do not allow her to make good the missing years from 25 years earlier. Aren’t we clever? We could treat her like those on JSA, in that by working more than 20 or 30 hours a week, she was indeed meeting work conditionality and was credited in. We could reconsider the LEL—lowering it perhaps, as Steve Webb suggested, to bring in more mini-jobs or, as the IFS has proposed, raising the primary threshold, perhaps to the tax threshold with which it was previously bracketed. That comes at a cost.
We need departmental resources to determine how best to proceed, but it is not rocket science. We could do it quite easily with political will. We need to do it because the new state pension—this is also different—is financially more generous but it has scrapped the married woman’s pension and scrapped the widow’s derived pension. The widow or the wife can have absolutely nothing. Universal credit is a household test and the husband’s income may float them off it. If she were doing too many jobs that took her above the LEL, and was not allowed to bring them together, she could fail to get a pension through her own work; she could fail to get a pension through her husband’s national insurance; and she could fail to get a pension through UC. Unless we tackle this issue she will get no pension at all for those years in which she ran together many jobs. No state pension at all—none.
Let me make one final point. Of course I welcome the review and I am delighted that the Minister has spelled it out today. However, we are perhaps making heavy weather of what might be quite a modest change in crediting rules. Yet—I hope the House will forgive me for saying this—we have just had a Budget where, as far as I know, without any research, consultation, briefing or preparation but simply by fiat of the Chancellor, we have turned the annuity market upside down, affecting up to 400,000 people a year, with unknown, possibly disastrous, effects on retirement income, housing and social care.
Why are we bothered? Why is this House bothered with the private sector parts of the Pensions Bill? I really do not know. We have all, including the Minister, wasted countless hours on it. I do not in the least accuse him of bad faith on this because he may well have been in the position—I do not know—that the rest of us were in. However, we have certainly had enough departmental time to have this issue sorted. None the less, I welcome the review and the Minister’s generosity in outlining it today.
Housing Benefit (Transitional Provisions) (Amendment) Regulations 2014
Baroness Hollis of Heigham Excerpts(10 years, 7 months ago)
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Lord Low of Dalston (CB)
My Lords, I realise that time is at a premium so I shall be brief and say just a few words. I remember very clearly, as will other noble Lords, the words of Lord Newton of Braintree who, to the great sadness of all, is no longer with us. In his intervention on Report during debates on what is now the Welfare Reform Act, he warned his colleagues in the Government that this would not last five minutes. Once people started realising what was happening and getting on to their MPs in droves, the Government would be forced to scrap it. It has not worked out quite like that but the bedroom tax is visibly unravelling before one’s eyes. It is not saving any money or freeing up any accommodation. My advice to the Minister would be to recognise when he is beaten. He has not a friend in the House. When you are in a hole the only sensible advice is to stop digging. I advise the Minister to recognise realities and run up the white flag.
Baroness Hollis of Heigham (Lab)
My Lords, in her powerful speech, my noble friend Lady Sherlock has explained our opposition to this statutory instrument. It brings more people into the bedroom tax which should be abolished. She has had support from all around the House today. The tax is disastrous. A previous Tory Government introduced and repealed the poll tax in the same Parliament. As the noble Lord, Lord Low, said, this Government should have the courage and decency to do the same.
You do, of course, need sanctions in social security to ensure, for example, that compliance with JSA work search is not voluntary. However, the bedroom tax—for the first time ever—falls on the innocent, disabled and vulnerable. They are punished when they have done no wrong: they simply occupy the house that the council allocated them. The Government have now said to them: move or pay. Most tenants can do neither. As my noble friend Lord Beecham said, tenants who want to move will be waiting three to four years. Arrears mount; single people or couples on the waiting list who want smaller accommodation will never get it; pensioners wanting to downsize cannot. As for overcrowding, outside London six times more families are underoccupying than overcrowding Just helping pensioners to move would sort it, with grace and consent. The bedroom tax destroys sound housing policy.
Will the Government, nonetheless, make their savings? No, because benefit cuts have been shunted on to tenants to become irrecoverable arrears. In Norwich, which has spent every penny of its DHPs, 60% of tenants affected by the bedroom tax are now in average arrears of £300 and mounting. Nationally, around two-thirds of affected tenants are in arrears. DHPs are utterly insufficient, short-term, and a postcode lottery, yet that is the policy on which the Minister, sadly, relies. Carers UK says that 75% of tenants trying to pay were cutting back on food, heating, medical supplies and mobility. The fragile economy of tenants collapses, as they turn to food banks, payday loans and loan sharks, with debts from which I doubt many will ever recover. The Government’s notional savings become tenants’ irreversible, irrevocable debts and, in the process, we destroy lives.
Fifteen per cent of affected tenants, nearly half of those in arrears, have already received eviction warning notices. What happens then? Do we evict tenants into the private sector—private landlords do not want them and it costs more—or into bed-and-breakfast accommodation which costs even more, or what? Should they be rough sleeping? What about children and disabled people? Through no fault of their own, there are people who cannot pay their rent because the Government have cut their benefit.
Instead, do we allow rent arrears to grow and in the process threaten the very viability of housing associations, as the noble Lord, Lord Taylor, said? We have offered the Minister three possible strategies to help because every defence of the bedroom tax is false. The first option is that the bedroom tax should not apply to disabled people, as the Work and Pensions Committee said only yesterday. Two-thirds of affected tenants are disabled. One may ask why. Adaptions, at a cost of £6,500 a property, become wasted. As regards space, the CAB has said that for disabled people that extra room for carers or equipment is,
“a lifeline as vital as a guide dog or a wheelchair”.
Finally, disabled people need the support of neighbours, as my noble friend Lady Lister said. We talk about social or community care and at the same time the Government seek to pluck disabled people out of the very communities that provide that social care.
The second option is that it should apply only to those who refuse an acceptable alternative offer. Following the remarks made by the noble Lord, Lord Taylor, I should like to know what the position of the Lib Dems is. Will they continue to support the bedroom tax in Parliament while campaigning on the doorstep simultaneously for its repeal? The third option is that the Government could treat social tenants like private tenants and apply the bedroom tax only to new tenancies. Any of those options would help.
We will go further. The Labour Party is pledged to repeal the legislation. It is the most wretched piece of social security legislation that I have known in 25 years in this House. But by then, in the summer of 2015 after the election, we will have seen hundreds of thousands of social tenants—our fellow citizens, most of them disabled and many with children—punished for occupying a house that was allocated to them. They would have been doing no wrong but are unable to pay or to move. They may be deep in debt and fearing, or perhaps experiencing, the loss of their home. How can we do this to them? It is grotesque.
Lord German (LD)
My Lords, I am the first to recognise a political device when it comes my way. Indeed, this is a political device to secure a wider debate on the spare room subsidy on the back of regulations which have already been made and have come into effect. I do not dispute the need for political devices or regret the use of political devices but it is clear that that is what is being used. I think I should start by clearly laying on the line our policy as Liberal Democrats. What was said at our conference and what we have heard today from noble Lords is the preamble. But two things are being called for: the first is a review and the second is to do with housebuilding.
More crucially than anything else, we want to see the effect that this policy is having in this country. As I understand it—my noble friend can tell me—the review of the policy is due to publish its initial findings soon. I always hesitate when the word “soon” is used but I know that my noble friend loves the word, so perhaps he will indicate whether it will be before the end of this Session, before the Summer Recess or whatever. It would be useful to know when we can have that information.
One would expect that a Labour Party that has designed its policy to abolish the whole thing—we could have a debate about that—will want to assert that a huge amount needs to be put right. But we need facts that stand up to such an assertion and to know exactly where we are. We need to know whether things need to be changed as a result of that independent review, which was put in place by the Welfare Reform Act. That is the position of my party.
Perhaps I may dwell on the issue of correcting secondary legislation, which is what the Motion is about. The unexpected consequences of legislation of the past must have affected all Governments. I could assert that an opposition party present today will at some time have had to use corrective secondary legislation for something which has appeared after primary legislation has been put in place. Perhaps my noble friend can tell me whether I am right or wrong.
There are problems with the 1996 legislation. Perhaps my noble friend can tell us whether it was designed for social sector tenants. The impact that we are talking about is with regard to social sector tenants but my understanding is that that original legislation was put in place particularly for private sector housing and as a protection for private sector tenants. Perhaps my noble friend can advise us whether something that was designed for a different purpose is producing unexpected and unintended consequences.
My second point concerns what is happening in local authorities. Although I do not have as many years of experience in local government as the noble Lord, Lord Beecham, I did spend quite a considerable amount of time in local government. I cannot recall whether I spent more or less time than my noble friend Lord Tope. I certainly remember that we had the use of electronic equipment in the mid-1990s when I was a city councillor. How many local authorities are having to resort to paper trails in order to find out the number of people affected by the 1996 legislation? Do some local authorities have up-to-date information? When there are assertions that between 3,000 and 40,000 people are affected, somewhere there must be reasoning behind those assertions. Do we expect to find the correct solutions and answers soon? Will we be able to find out very soon how many people are affected?
Will my noble friend reassure the House that local authorities are being reimbursed for the extra work that they are having to do to trawl through the paper trails where those records have not been kept electronically or have been lost? Now that the loophole is closed, I understand that there is now an issue relating to discretionary housing payments paid to people who were subjected to the extra charge between March 2013 and March 2014. People who were awarded DHP were awarded it on the basis that they needed it at that time. Can my noble friend reassure me that there will be no question of people having to repay it and that that discretionary housing payment remains in place?
Today, the noble Lord, Lord Touhig, gave an example of a case, which has been publicised, in Torfaen, the borough in which I live. I note that the Government made additional money available for discretionary housing payments to all 386 local authorities in this land and that only about 80 applied for money. In Wales, only Cardiff, Caerphilly and Conwy—it is very easy to remember them as the three “C”s—applied for discretionary housing payments and Torfaen did not. One can only assume therefore that local authorities which say that they do not need any more discretionary housing payment have enough to make available to people who have a need. I have a number of questions to ask those who support the case, which I read about in my local newspaper. Did those involved go to the local authority? Did the local authority turn them down for extra support, given that local authorities have enough money as they did not need to apply to the Government for additional money?
The second issue my party is concerned about is that of new homes. One of the problems that might come about as a result of this policy is the distortion as local authorities and housing associations decide to build more single-bedroom units. Can my noble friend give me any indication of what is happening in the housebuilding sector, not just in England but also in Wales? We could have a direct comparison with the record on housebuilding of the Conservative and Liberal Democrat coalition and a Labour Government. On that matter, can my noble friend tell me whether the Government’s target for building 170,000 new homes in England by the end of this Parliament in 2015 is still on track? Is it being matched in Wales by the Labour Government on the number of houses that they will be building as well?
Finally, I would like to ask my noble friend a question about the overall budget for housing benefit. The Labour Party, the Liberal Democrats and the Conservatives have all said that we have to try to contain the overall budget. In fact, in the other place all three parties voted in favour of the retention of that hold on the overall budget. Will the changes that have come about as a result of amendments to the secondary legislation affect the original estimates of expenditure on housing benefit, and how much, if at all, will this put up the bill for housing benefit in this coming year?
I have asked my noble friend a variety of questions. I would be grateful if he could tell us when “soon” means in terms of the first stage of the review of this policy.
Housing: Inherited Social Housing Tenancies
Baroness Hollis of Heigham Excerpts(10 years, 8 months ago)
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Lord Freud
My noble friend draws the comparison between the amount of capacity that we have in this country and the demand for it. The number of people on the waiting list is 1.8 million, with the figure for overcrowding running at 250,000 on some estimates and 400,000 on others.
When this Government took office, we were left with the lowest level of peacetime housebuilding that this country had seen since the 1920s. Since then we have delivered nearly 400,000 new homes and put in very substantial investment. There is £11.5 billion public investment to boost housing supply over the four years of the spending review, and this is meant to lever in more private investment. The volume of housebuilding is now picking up. The starts in the quarter to December were up 20% compared with the same period last year.
Baroness Hollis of Heigham (Lab)
My Lords, every stat I have heard from the Government is either misleading or wrong. The bedroom tax will not help the waiting list because they too want smaller accommodation. It will not much help overcrowding as most families who are overcrowded do not live in the places where there are underoccupied houses. It will not make government savings. As we see, the GHP figures keep going up but the savings stay the same—false. Had the Government followed their own precedent of 1996 of transitional protection for the private rented sector, or had they followed what we did in 2008 by protecting existing tenants in the private rented sector, we would not have the calamity, misery and distress facing so many vulnerable and disabled people in this country. It is shameful.
Lord Freud
My Lords, the figures show that there is a reasonable balance around the county; there is not one place with overcrowding and another with waiting lists. We are staying with the estimate of roughly £500 million a year in savings. On transitional protection, we have given even more notice on the changes coming through than we gave on the LHA changes at the emergency Budget of 2010.
Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 8 months ago)
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Baroness Hollis of Heigham (Lab)
I am slightly puzzled, but I think that the Minister is saying that if you could devise a way in which to find out that those who are on the new state single pension were in the very bottom decile, that or a similar group would be an appropriate one to be eligible for a cold weather payment, because it would be the group that under the previous regime would have got pension credit. I would have thought that anyone getting the new single state pension without any other supplementary income coming their way, whether through savings or an occupational pension, would, in the past, have automatically qualified for pension credit—in which case, he already has his population.
Lord Freud
I am always grateful to the noble Baroness when she comes up with solutions for us, and I can see her yearning to be on this side—perhaps not in this particular coalition but in this particular ministry—sorting out these issues. She has gone to the issue of what the best way might be in which to help this group, which, clearly, we will look at precisely when we consider that matter. I shall pass on her thoughts to the consultation in the hope that it will speed it up.
As I say, we will consult on our strategy, and that will cover the two schemes referred to in the amendment of the noble Lord, Lord McKenzie, as well as broader approaches to combating and preventing fuel poverty, which the noble Baroness, Lady Hollis, indicated. On that basis, I urge the noble Lord to withdraw his amendment.
Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 9 months ago)
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Lord Freud
Well, if they started moving to active members as well, whatever the route, it would give this group of organisations an enormous market position. I confirm to the noble Lord, Lord Hutton, that I will have to write to him.
It seems strange that, in response to the OFT’s conclusion that there is a lack of competition in the pensions market, the Opposition are calling for the creation of a market dominated by a few big master trusts. We need only to look at other industries, such as the energy market or banking sector, to see that dominance by a few powerful players can result in real concerns for consumers. If we were to press on regardless with enabling these large aggregators to come into being, we would need to be clear that there would be no turning back. It would be extremely difficult to reverse the process if we found that an aggregator model was not sustainable, and to tackle the vested interests if consumers were getting a poor deal.
We have heard—for example, from the noble Baroness, Lady Sherlock—that the Government are alone in supporting pot follows member. It is not true that few people support it but I agree that there is a powerful lobby supporting the aggregator model. It is hardly surprising that those who are shouting the loudest are those who are lobbying on behalf of master trusts that could come to dominate the market under an aggregator model.
The ABI itself supports pot follows member, as do many groups within it—Aviva, Fidelity, Friends Life, HSBC, Origo, Scottish Life and Scottish Widows—as well as non-members of the ABI such as Alexander Forbes, Altus, Buck, Foster Denovo, the Investment Management Association, JLT and the National Federation of Occupational Pensioners.
This Government’s starting point is the consumer—and it is the individual who wants to see their pension follow them to their new employer, as the research from NOW: Pensions, which we have already touched on, underlines. The ABI’s consumer research showed that 58% of individuals said that the pot should follow them automatically to the new job; 10% were in favour of a new central scheme, the aggregator; 15% said the pot should stay where it is and it is up to you to move it; and 17% said it should be visible with all other pension pots at a central place online. That is the sentiment among consumers.
I appreciate that some consumer groups have concerns. I say to them that we are listening to those concerns and that low charges and scheme quality are top of our agenda, not just for automatic transfers but for all schemes. We want these groups to work with us and the industry now to deliver pot follows member in the simplest, safest way for consumers.
The noble Baronesses, Lady Drake and Lady Sherlock, raised concerns about consumer detriment. I remind the House about the work the Government are doing to ensure that all schemes are good schemes. Uniformity is not good for consumers, but only if all aggregators had identical charges and standards would we completely remove the risk of an individual moving to a worse scheme. The noble Lord, Lord Turner, made the point about the interconnectedness of these issues. The Minister for Pensions has confirmed that he remains “strongly minded”—I think that is fairly parliamentary language —to introduce a charge cap. My noble friend asked about the DWP response to the OFT and the consultation on charges. That response is coming soon and we will be discussing that later this afternoon.
Baroness Hollis of Heigham (Lab)
Can the Minister tell us what the department has in mind as an appropriate charge cap?
Lord Freud
I am putting it on the record that we will aim to capture all costs, including all transaction costs. As noble Lords know only too well, when you look into this legislation there are bits and pieces scattered all over the place, but I can summarise it in that very simple sentence. It is very similar to the point about proposed new subsection (6): it is just a drafting requirement that we do not overlay things and that we have a clear line. It is not to do with the EU.
I am sorry that the noble Lord, Lord Browne, was concerned about my overconcentration on my noble friend Lord Lawson. I did not mean to do any airbrushing but I did mean to concentrate on the fact that I believe that my noble friend Lord Lawson’s amendments in Grand Committee and at this stage have been especially helpful in pushing this whole debate forward.
Turning to Amendment 29 in the name of the noble Lord, Lord Browne, I would actually be very disappointed in the noble Lord if he was to decide to test the opinion of the House. I have been absolutely clear about the timing of government action. I do not understand why he would want to start stipulating in primary legislation the timing of when regulations would be brought, given the language that I am using to talk about what we are doing.
Even though I may not satisfy the noble Baroness, Lady Drake, with the clarity of my expression, I will go through what we are doing. Consultations have sought views on policy implementation. Employers made clear that they wanted sufficient notice of any new scheme requirements. The Minister remains strongly minded to cap charges and, as former Ministers know and can tell the noble Baroness, Lady Drake, significant policy decisions must go through due process, but the Government response is coming soon.
I hope that I have made it utterly, utterly clear what will happen. That is the reason that I do not want the noble Lord, Lord Browne, to test the opinion of the House, because that seems purely political, given what I have just said, and that is not in the spirit—
Baroness Hollis of Heigham
I thank to the Minister for giving way. Do the words of the Pensions Minister in the other place, “strongly minded”, have the full, unambiguous support of HMRC?
Lord Freud
Yes. I do not want to go into the Lobby on this. I do not think we should; that is not the way that we have conducted the Bill, which we have done by information, support and debating the issues. We should not reduce ourselves to having a debate when we are saying exactly the same thing across the House. That is my request of the noble Lord.
Lord Freud
My Lords, I do not think that anyone in the House can be under any misapprehension but that the Government value extremely highly the role of evidence, analysis, consultation and evaluation in policy-making. Our approach to designing this once-in-a-generation package of pension reforms has been heavily informed by a robust and wide-ranging evidence base. However, looking at the text of the amendment and its timing, I must make clear that the provisions on the new state pension, and many of the other provisions in the Bill, will simply not have been commenced by spring next year—the time used in this amendment. Therefore, all that would come out of such an amendment would be a rehash of the information that has already been provided to Parliament: there would be nothing to add. We have no particular objection to this amendment in terms of sentiment, but its timing is just not appropriate.
I will not spend a lot of time going through all the issues, which we have gone through in huge detail over the past weeks and months. However, I will touch on how we will monitor the impacts in the future and what the plans are. It is clearly imperative, as the noble Baroness said, that a set of reforms of this nature is accompanied by a strategic approach to monitoring at sensible intervals. I am not saying anything that noble Lords will disagree with when I state that pensions is a very long-term policy area, and that the impact of many measures will not be felt fully for decades.
As a society we are asking people to do more to think ahead and plan for their retirement. As a Government it is our duty to do the same in looking at the retirement outcomes of the population as a whole. Our retirement outcomes framework, published in September 2013, provides an overview of projected future retirement incomes, looking at the impacts of government pension reforms as a whole and across state and private systems.
Baroness Hollis of Heigham
Perhaps the noble Lord could write to me if he does not have the answer at his fingertips. I respect his concern for evidence and policy base, but, as he will know, that depends on longitudinal statistics and their consistency. There has been quite a lot of dispute about threats to discontinue some of the longitudinal statistics which show households below average income, recipients of benefits, what is happening with pension credit, and so on. My noble friend Lady Lister, who is not here at the moment, has been concerned about that. Can the noble Lord write to us and tell us what series of statistics will be kept from the implementation of this Act, so that we can track, for example, the groups that my noble friend has mentioned—the 1951 to 1953 group—and what is happening to people who will lose their derived rights as married women, widows, divorcees and so on? What assurances can he give us about how we can be sure that we are in a position, if we need to be, to adjust policy because we have the information to hand?
Lord Freud
That is clearly a relevant and central set of issues, and it is quite technical. As the noble Baroness invited me to write, I will make sure that we produce a comprehensive look at exactly what these series are and what they will contain. I will be happy to arrange that.
Baroness Hollis of Heigham
Also, what if any future surveys does the Minister expect the Government now to engage in as a result of this Act coming into force?
Lord Freud
I am happy to make sure that we itemise those in a way that will help noble Lords keep an eye on what they need to monitor as we go along.
We will update the modelling as evidence becomes available on the impact on work and saving of automatic enrolment, the single-tier state pension, and state pension age changes. As noble Lords will know, the department conducts a six-monthly tracking study of attitudes and behaviours in relation to pensions, later life and automatic enrolment. A similar exercise will start after Royal Assent, to monitor awareness and understanding of the reforms.
We are committed to the principle of post-legislative scrutiny, but such scrutiny must have scope to provide insights beyond the impact assessment and consultation practices to which we are already committed. I know that the noble Baroness accepts the point on timing, but the timing of this amendment would not add materially to the powers of the Work and Pensions Select Committee. Indeed, there is an awkwardness about the timing, because it straddles the next election. However, we look forward to continuing to develop pensions strategy with that committee’s input.
I know that the noble Lord does not appreciate my asking for the other side to withdraw this amendment and not press it to a vote, but that is the position I am in. Maybe there is more warmth to my request than there has been this evening.
Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 9 months ago)
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“( ) Regulations may provide for circumstances in which a person may opt to have a year treated as a qualifying year if by aggregating income from two or more jobs, that person’s earnings are equal to or greater than the lower earnings level for that year.”
Baroness Hollis of Heigham (Lab)
I am grateful for the tolerance of the House in allowing me to delay speaking for a moment or two while noble Lords are leaving the Chamber. They are clearly underwhelmed by the issue that we are about to debate.
I strongly welcome the new state pension. Pensions are attached to the waged labour market. Only one job in four created since 2008 is, according to the Work Foundation, permanent; 1 million or more are zero-hours contracts with no certainty of any work at all. Hundreds of thousands of others are short-hours contracts and, along with other non-standard employment patterns such as term-time working, job sharing and so on, comprise 40% of all jobs—I repeat, 40%—as employers seek to match a flexible and irregular labour force to flexible and irregular demand.
Part-time work and flexible work may suit, and does suit, many women, students or older people on a pension. Those jobs are in cleaning, catering, domiciliary care—involving 150,000 people—hotel and retail, and are usually paid at around minimum wage level. Very many of those people will not be building a state pension. Our pension structure, both state and private, has not yet caught up. It is 10 or 15 years behind as the plates shift in the labour market.
This amendment, which is permissive, seeks to put a pension floor under workers who may work in several mini-jobs and put in quite long hours—30 or so a week—but who cannot, under rules set out decades ago, build themselves a new state pension. If they are in one job with sufficient pay they will build a state pension, but if they are in several jobs with identical pay they do not. If your Lordships agree today we can begin to do something about it.
Under Governments of both parties we have sought to credit people into the national insurance system for a state pension where, for good reason, people are not in waged work. They include mothers of young children, disabled people and carers. Universal credit, which I strongly support, will credit another 0.8 million people into national insurance, I understand.
So where are we? From 2016 you will need 35 years’ worth of credits or payments into the national insurance system to get a full state pension. If you are unemployed and on JSA, and later on UC, you are credited in for free. If you have a child under 12, are a grandparent caring for a child whose mother works or are on disability benefits or carer’s allowance, you are rightly credited in for free. Your Lordships have over the years been at the forefront of pressing all Governments to bring such groups rightly into the national insurance system. If you earn above the lower earnings limit, or LEL, at £5,700 a year you come into the national insurance system for free. If you earn more than £7,500 in a single job you come into the NI system but pay. If, however, you work 30 hours a week and earn £11,000 a year but in several, splintered jobs, you cannot add the pay together to get above the LEL. Come retirement, you do not have a decent state pension.
Hence this amendment. It seeks an entirely permissive way in which to future-proof our state pension structure for those in the new flexible economy who work in and combine mini-jobs, by allowing them to combine the earnings from several jobs for a pension if that takes them over the LEL at £5,700. In the past, perhaps 50,000 people, mostly women, were affected, especially in rural areas, as they stitched together a patchwork of cleaning, fruit picking, bar work and so on, and they relied instead on their husband through the married women’s dependency pension. That pension, which would have protected her, is being abolished. She—or you, or we—is on her own and will not get any state pension from her patchwork of mini-jobs. From now on she gets nothing at all. The reason is that the labour market has changed dramatically in the past decade or so with the growth of zero-hours and short-hours contracts.
Short-hours contracts guarantee part-time work for three, 13 or maybe 23 hours. Zero-hours contracts, however, do not guarantee you any hours at all. You may in practice work 10, 15 or more hours fairly regularly. Equally you could find at the beginning of your shift, 10 minutes before you are due to start work, that there is no work for you: you get no pay and go home. I understand that every Domino’s Pizza worker is on a zero-hours contract—ZHCs—as are hundreds of thousands of staff in McDonald’s, Boots, Burger King, Subway, Wetherspoon and Sports Direct. They work in food joints, call centres, customer services and domiciliary care; they are cooks, cleaners, drivers and waiters; they are agency workers—almost all of whom are on zero-hours contracts. Most are on, or on around, minimum wage. Far from this being a shrinking sector of the market, the number of such contracts is increasing rapidly and very many of those workers will not be building a new state pension.
Baroness Hollis of Heigham
My Lords, first, I thank very much my noble friends Lady Drake and Lord Morris for their powerful and moving speeches. I thought that their contributions were extraordinarily impressive, and I am sure that they moved many people in this House.
I shall address first the comments of the noble Lord, Lord German, many of whose points were dealt with very effectively by my noble friend Lord Browne from the Front Bench. Basically, he ran two arguments. First, he said that most of the people concerned would be on UC, and he pressed the Minister instead on UC. Secondly, he commented on the problems for HMRC in combining possible jobs. On the first argument, on UC—and I am very much in favour of universal credit—we agree the statistics are that another 800,000 should come into the NI system as a result of crediting arrangements. That is great, but the point is that UC is income-based and that income is surprisingly low. No one has mentioned that today. For example, if you are a single person and you earn more than £4,000 a year in any job, well below the lower earnings limit, you are above the level for universal credit so you do not get credited in. If you are a married woman, your husband is in work and you have two children—I am aiming for a generic family, if you like—and if he is earning more than £12,000 a year, that family is not entitled to UC, apart from housing benefit. She may be earning £4,000 or £5,000, but that will not give her a credit through him. Those two groups of single people and married women, which my noble friend identified and I seek to identify, are both outside the reach of UC. What is worse—and neither the Minister nor the noble Lord, Lord German, mentioned this—is that it is happening at the same time as we are withdrawing the married woman’s dependency pension of 60% that she would have had as an alternative and could have relied on. That is what is new. If she cannot get into the pensions system through universal credit, she cannot get in at all, and that has been created and constructed by this Bill.
The noble Lord, Lord Freud, said that he was confident of his figures of 50,000 people, but he was equally confident about two years ago when we were debating welfare reform and the figures then were 20,000 or 25,000. They have doubled exponentially in the past two years or so, and they may go on to grow equally geometrically, as opposed to arithmetically, over the next few years. He says that his statistics are broadly in line, but I do not know about that. His statistics are based on labour force statistics offered by the ONS, which the ONS now says are unreliable; that therefore means that his statisticss are unreliable. My statistics of 250,000 are the best that I can do with all the evidence there is, overlaying different subsets. I accept that, but I am as confident as I can be on the evidence that exists that at least 250,000 people and maybe more—it is an increasing problem—are outside the national insurance system and will not be credited in either through UC or any caring responsibilities.
The noble Lord quoted average income. An average income is pulled upwards by the proportion of people who work in IT, for example, which is highly paid, or in further education, where they are paid piecemeal. The Chartered Institute of Personnel and Development—which the Minister quoted several times, although he did not quote this—says that 40% of the 1 million people who are employed work below 16 hours per week. We know that the majority of those are on, or on around, the minimum wage: for example, in jobs in domiciliary care, hotels, waiting, driving or security. A mean average is no use in this, because the figures are skewed hugely upwards by people in IT, who may be very well paid—perhaps at £50 per hour—and come within zero-hour contracts. We need to see how many people are below the LEL in one job and work in a second job that is also below the LEL, which together would bring them into the NI system from which they are currently excluded. I repeat: that figure is likely to be 250,000—nearly every single person and most married women.
The Minister says that it would produce all sorts of perversities and paradoxes. There is no greater perversity than the situation in which, if you are unemployed and on JSA, you are credited in for free national insurance, but if you work 30 hours a week in two 15-hour jobs, earn £11,000 and pay tax, you cannot get into the NI system and get no state pension. Which of those is the perversity? Do not work and you are in for free; or work as best you can, by putting jobs together, and you are outside the system. Is that right or decent? It is not. I would like to test the opinion of the House.
“( ) A person is not entitled to bereavement support payment and is exempt from work conditionality as specified in section 30(1A), if he or she has reached pensionable age.”
Baroness Hollis of Heigham
My Lords, I should like first to say a word about procedure. I am glad to see the noble Baroness, Lady Anelay, in her place; that is helpful. This is a paving amendment that the Public Bill Office assures me is appropriate. Amendment 21 in this group—and only Amendment 21—is consequential on Amendment 2. Therefore, any vote on the first amendment is, in the words of the Companion, also a vote on its directly consequential amendment—although it does not, of course, determine any other amendments in the group. If it were not directly consequential there would be no point in a paving amendment. As I have carefully taken the clerk’s advice on this, I hope that the Minister and the House will agree with my statements. If the Minister does not agree that Amendment 21 is consequential, perhaps he could indicate so now because I would not wish to waste the House’s time.
Baroness Hollis of Heigham
I am grateful to the noble Lord, as this allows us to have a substantive discussion on bereavement—which I know concerns many of your Lordships—in good time and not in the late hours this evening. I know that the Minister is sympathetic to the situation of distressed children and widowed parents. I hope that I can refer generally to widows, as there are three times as many women who are bereaved with children as men—and I know that the Minister means well by them. I hope that the House will agree that this is neither a party matter nor, as it is permissive, a cost matter, as the cost is almost too low to estimate.
This is a modest amendment that seeks to help widowed persons avoid additional pressure in the most stressful and distressing period of their lives. Three-fifths of bereaved parents are in work at the time of bereavement—virtually all fathers and around half or so of mothers. Most fathers with a terminally ill wife continue, or continued, to work. Most mothers, however, give up their jobs to care for their husband. Fathers would normally go back to work after a couple of weeks; indeed, they are often anxious to do so. Some mothers may feel able to do so as well, depending on the age of their children and the nature of their job. However, many widowed mothers were not in work, because they had younger children, or they had stopped working to become carers and—this is key—many mothers who were in work when their husband died drop out of work for some time while they support their children. If they return to work later, it may be to a different job, to one that is part-time or less demanding. Whereas work seems to be essential and continuous for fathers, it becomes secondary and broken for bereaved mothers.
The Government are reconstructing bereavement benefits, with more money paid as an up-front lump sum and less as a monthly payment—which, at £400 a month, will be paid only for 12 months and topped up by universal credit while the claimant is out of work. After 12 months, bereavement support payments stop and, if the parent does not return to work, she may draw her full income from UC. Being on UC normally entails work conditionality—entering or re-entering the labour market. The Minister has agreed—for which I am delighted—that for kinship carers, work conditionality associated with claiming UC should not apply for 12 months after they have taken on the care of children. But—and this is the point of my amendment—work conditionality for widowed parents, unlike for kinship carers, will kick in after six months, not 12 months, while they are still on bereavement benefit. That benefit runs for 12 months precisely because the Minister, in all decency—and I respect him for it—recognises that they need that support for 12 months. Surely work conditionality should be aligned with those 12 months.
The Minister said in Committee that he thought that six months’ relief from work conditionality while on bereavement allowance, if the claimant receives some UC top-up, was “generous”. I confess that that shocked me. It is generous only by comparison with the situation of someone who is not a bereaved spouse, and I think that that is not a proper comparison. If the mother has returned to work, or wants help to do so earlier than that—and some will—that is fine, but I do not think it right and decent to require her to attend work interviews and full work conditionality and job-hunting after six months, when she has grieving children who need her more than ever.
In Committee, the Minister justified this by saying that work conditionality after six months,
“is necessary to help them adjust and regain control of their lives”.—[Official Report, 15/1/14; col. GC 146.]
I was shocked by that as well. From my experience, the exact opposite is true. If work conditionality kicks in at six months while the woman is still on bereavement benefits and she is not ready for it, she loses what little control she has in handling her family life. Instead, that power is transferred to the DWP—perhaps to a 23 year-old young man in a local benefit office who, I expect, will be well intentioned until the pressure of targets bears down on him. He is probably a young man without children and without any experience of bereavement. It is assumed that he knows better than she does what is best for her and her children in their grief. I hope that he asks his own mother for advice, because he probably will not have a clue.
I do not think that that is acceptable. We are turning this young man at the age of 23 into her parent and treating her as the child, denying her, as a parent, the ability to look after her children in the way she believes is best. This is a sort of cruel-to-be-kind, tough-love philosophy towards a grieving widow and severely distressed children. Tough love is perhaps fine for youngsters who are on JSA and do not want to get up in the morning, but we are bullying into seeking work a widow with children who is still numb with grief and hugely distressed. We really cannot have that.
In this paving amendment and the consequential amendment attached to it I am not arguing that a widow’s benefit should be increased, although personally I would support that. The amendment is not about more money; it is about allowing widows to decide what is best for them and their family in the immediate aftermath of bereavement. For me, the immediate aftermath is the first year during which all the anniversaries occur—Christmas, his birthday and the anniversary of his death. I know, as do many of your Lordships, that that first year is the hardest.
I ask your Lordships to put themselves in the widow’s place. Her husband’s death may have been sudden, due to an accident at work or in the car, and she is still traumatised by the shock, or he may have died after an illness such as a stroke or cancer and she is exhausted through caring for him. She is wiped out and her mental and physical health is pretty fragile. It is just at this time when, although she is exhausted herself, her children are distraught and most need her. Children I know who have experienced the death of a parent have regressed into bed-wetting, nightmares, broken sleep and school phobia. They have lots of mysterious tummy aches and frequent headaches, and they display challenging and clearly needy behaviour. Irrationally, they suffer anguish that in some way they were responsible for their father’s death. They feel guilty that they had never told the lost parent how much they loved him and are fearful that they may lose their mother as well.
Older children worry about their mother’s safety if she is late back, or they fear they may lose their home. They are profoundly upset a second time over at their mother’s grief. Stoically they try not to weep, as that makes it harder for her to cope. “He is not here to hug me”, said one young girl. They dream of him and experience severe depression. Children need their surviving parent to be physically available for them. They need the trust that exists between a child and his mother to discuss their father’s death. Emotional availability follows from that. In Committee, the noble Lord, Lord German, quoted very movingly from research into the effect of bereavement on children’s later lives, from delinquency to poor mental health and suicide risk, and the noble Baroness, Lady Finlay, mentioned cases of multiple deaths.
Every family is different, as is the work status of any bereaved parent, but this amendment, at no cost, permits the bereaved parent to decide what is appropriate for her and her family. We know that currently, bereaved parents do not take all the time off that they could from work. They do not exploit the system; they do not abuse it; they do not milk it. They want to work when they feel fit enough and their children are steady enough, but only they know that, not the DWP or the local benefit office. That is the point of having 12 months of bereavement payments. Insisting on work interviews and work conditionality at six months, or even leaving it to the discretion of 23 year-olds in local offices, adds stress to the suffering of the parent and distress to the pain of the child. We really should not do that.
The amendment would give widowed parents a breathing space from work conditionality alongside a bereavement payment while they rebuild their fractured lives. This House has always looked out for widows and children and I hope that it will do so again today. I beg to move.
Baroness Hollis of Heigham
My Lords, the noble Lord has misrepresented both my amendment and my speech. I said that many parents would welcome it, but that the decision on at which point within that 12 months they returned to the labour market lay with them, not with the local benefit office.
Lord Freud
The point I am trying to make is that it is far better to recognise that individual responses to grief vary. As a number of noble Lords have said, grief often does not manifest in behavioural and emotional challenges until months or even years down the line, as a child matures. That is why, under universal credit, advisers have the flexibility to personalise requirements at any point, responding as circumstances arise. Where parents are facing difficulties with school, childcare arrangements or other extenuating circumstances, advisers can limit or even lift requirements.
I recognise that the application of that flexibility depends on the ability of those advisers. While I feel that our advisers are able, it is important to ensure that they have the best guidance and training to deal with such difficult cases. That is why we are currently working with experts in the field including the Childhood Bereavement Network, the Children’s Society, Cruse Bereavement Care, WAY and Gingerbread, to ensure that guidance and learning clearly articulate how advisers can identify and support parents in these circumstances, including the particular circumstances in which it would be inappropriate to apply conditionality. Our advisory services are also being repositioned as a profession with a clear career path, accredited learning and ongoing professional development. The learning programme will ensure that advisers have up-to-date skills to deal with any claimant interaction and support them in making relevant and appropriate decisions on an individual basis.
That is the standing position. I now move to the more specific response that I wish to make following our discussions in Grand Committee, particularly in answer to the points raised by the noble Baroness, Lady Finlay. I recognise that there are circumstances in which children could be in considerable distress and in which it is clear that conditionality should not be applied and flexibility is essential. I do not, however, see such cases as being limited to bereavement. There may be other circumstances in which children need additional care—for instance, where a family is fleeing domestic violence.
I assure the noble Baroness that we are not looking for a measure to define “distress”. Indeed, we need to establish exactly what the expression means; we are using it as a shorthand and there may be a much better way of capturing the concept, which is one of the things that a review should do. We are looking to identify specific circumstances in which we could expect a child to be distressed, and in which they will therefore have additional needs that need to be recognised. Claimants would need to demonstrate only the circumstances they are in, not the fact of distress, which is, as the noble Baroness has pointed out, extraordinarily difficult to establish.
I therefore want to conduct a review as quickly possible, in order to embed any new rules in the regime before we take new claims to universal credit from families. That is why I propose to undertake the review myself. I would like, in practice, to conclude that review by June or so. I will report back to the House following that. I am not quite sure of what form that will take but we will find the right form nearer the time.
Baroness Hollis of Heigham
I am sorry, but why? The noble Lord has already made the judgment on kinship parents. This is a permissive amendment, which he can draw on if needed. If he does not need it because of his review he does not need to deploy it. It is there as a safety net, so why is he asking the House to make it an either/or judgment?
Lord Freud
My Lords, this is not a permissive amendment. It makes a change to the conditionality regime for one element. If I need to look at how I do a review, I would have to look again at the specific context of doing this review.
Baroness Hollis of Heigham
I am sorry; I crave the indulgence of the House. Let me read the substance of Amendment 21:
“The Secretary of State may by regulation and within the overall budget for bereavement support payment exempt any widowed parent from work conditionality while in receipt of said payment”.
The Secretary of State “may” do that by regulation. As I said, the amendment is permissive. I am sorry that the noble Lord did not, perhaps, fully appreciate that.
Lord Freud
My Lords, let me make my point here. I will have to look again. As noble Lords know, a “may” in this context is a very substantial “may”. I will have to look again at the context in which I would want to do something such as this. I may very well want to do it, but I cannot make a commitment to have both at this stage. On that basis, I urge the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
My Lords, I am still slightly baffled by the less than satisfactory response of the Minister. Let me first thank the noble Baroness, Lady Finlay, the noble Lord, Lord Rix, the noble Earl, Lord Listowel, the right reverend Prelate the Bishop of Wakefield and my noble friend Lady Sherlock for their very powerful and moving speeches on something that really matters: trying to protect and support widowed parents for the first 12 months of their bereavement. I welcome the Minister’s offer of a review on distress. However, what he has suggested is so wide that I rather doubt—although I would be pleased to be proven wrong—that he will be able to turn this into effective policy.
I give one tiny example, which I was thinking of as the Minister spoke. He was going to extend this to the distress of cohabiting parents when one of them dies. It is not too far fetched to suggest to the House a situation where a woman was with the father of her child or children in a cohabiting relationship but they then separated. She then had a period of perhaps five or seven years with someone else, to whom the children really connected and related. Then she moved on to a new boyfriend—a new stepfather—for perhaps the past year. Could the Minister tell me which of those three would have to die—forgive the language—for her to be entitled to bereavement benefit under the proposal of distress? Is it the recent stepfather, over whom the children are not especially distressed but the mother is highly distressed; the long-term stepfather, who has helped to bring them up, to whom the children were committed and over whom they are distressed while she is less so; or their natural father, who is giving them financial support and they see regularly? Which is it? I suspect one cannot do what the Minister seeks to do.
Lord Freud
My Lords, I am grateful to the noble Baroness for making the point for me. If we do these things piecemeal, we will not get the right answer. That is why my response to what the noble Baroness, Lady Finlay, said to me in Grand Committee was to think that we need to look at this comprehensively. We need to get this issue right across the piece and understand how to incorporate it as a whole into our conditionality regime. That is the response that I am looking to do, not to sort it out on the Floor of the House where we simply do not have enough information to do it properly at this stage.
Baroness Hollis of Heigham
My Lords, I make two points. First, we are not seeking to sort it out on the Floor of the House. I am seeking the consent of the House, if it is so minded to give it, to a permissive amendment, which does not commit the Government to anything they subsequently decide is inappropriate in the light of further research. The second point is that the Minister’s definition of distress is so wide that I genuinely believe, from my limited experience in Parliament, that he will find it very difficult indeed to turn it into deliverable policy. I am sure he is as aware as I am that it will end up depending on the discretion—he made this point himself—of local people in local benefits offices, such as the 23 year-old who will be interviewing the widowed parent. Is she numb? If so, does that mean she is coping or not caring sufficiently? Alternatively, is she voluble? Does that mean she is coping or not caring? He will have to peer into her soul and we should not go there.
The Minister says that he wants to help widowed parents to adjust, to,
“regain control of their lives”,
with tailored solutions. He is saying that the local benefits office, the 23 year-old, will decide. The 23-year old will turn her into his dependant, reliant on his judgment as to what she should do and what is best for her family. That is inappropriate and improper. You are making the adult back into a child and adding to her stress and distress. The Minister should not be going down that path. He will not be able to do it by clear policy; he will depend on discretion. Neither of those routes is satisfactory for a small and coherent group that we can easily define—that is, widowed parents with children following a bereavement.
The Minister is opposing a permissive amendment dealing with a small, specific group, which he can respond to exactly as he has already helped—and I am glad of it—kinship carers. He has allowed kinship carers 12 months off on work conditionality; he can do the same thing for this very specific group and make their work conditionality freedom align with the 12 months in which they are receiving bereavement benefit. After all, that is precisely why they have bereavement benefit in the first place. If they have it because they need support following their bereavement, at the same time they need the freedom from the additional pressure that the Minister’s work conditionality will ensure.
The Minister said that it was not quite either/or, but suggested that—
Lord Freud
My Lords, I just want to make the point that if you pick out particular groups and have legislation just for them, you end up with the kind of carbuncled benefit system that we are trying to escape from. I am determined to try to build a system that is coherent across the piece, and I want to look at all the situations to make sure that they are consistent.
Baroness Hollis of Heigham
My Lords, I understand the Minister’s support for grand schemes. We will see whether the grand scheme of universal credit, which I support, will deliver what he hopes that it does—and I hope it does. But here we are dealing with a situation in which we have kinship carers and widowed parents, and we may be talking subsequently about women experiencing distress in domestic abuse situations, and the Minister is trying to make something coherent. He is trying to fit them into one common mould, but he does not have to. He may come up with appropriate and different solutions for different groups because, as he himself said in his reply, every family is different and may need different help. This amendment would allow him to do precisely that.
The amendment does not cut across any review in any way, any more than his 12-month provision for kinship carers does. It seeks only to protect a small, identifiable and precise group from additional pressures of work conditionality at no cost at all and at a time when they and their children are most deeply distressed. I do not think that they should be put on the back burner for a review that may or may not deliver what I hope the House will think is the right path to take. If the review goes ahead and the Minister does not need the amendment, as it is permissive, he does not need to draw on it. If his review falters, which I think it will because he is asking too much of it, the amendment would give protection to some of the most vulnerable people in our country at the time of their deepest grief.
It is very simple. The amendment is permissive but says that we recognise the situation of widows and widowed parents and will give them, under the new system, one year of bereavement benefits and payments. This amendment asks for that one year, which we recognise is the period of most grief and distress, and that we should also not apply the pressure of work conditionality. This House has always looked out for widows and children, and I am asking the House to do it again today. The amendment is permissive and cost-free, and the Minister can build on it if he wishes to do the review. It is just a small safety net of help for grieving children and their grieving parent. I beg your Lordships to protect them tonight. I wish to test the opinion of the House.
Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“Pension statement
(1) The Secretary of State may by regulation introduce arrangements for the periodic notification to individuals of their entitlement to request a pension statement.
(2) Such regulations shall not require the provision of such notification before a person has reached the age of 45 nor, subject to subsection (3) below, more frequently than once every five years.
(3) Such regulations shall require notification of entitlement to receive a pension statement in the penultimate year before a person reaches state pension age.”
Baroness Hollis of Heigham (Lab)
My Lords, like others, I am delighted that we are introducing a new state pension, based on 35 years of contributions, which will help to float older people off poverty and encourage savings. However, if that is to happen, people have to know where they stand as they go along, especially women who may have acquired credits and young people on short hours-contracts, on which we voted earlier today. They need to know how reliably their state pension entitlement is building up and whether they need to take any action to make good shortfalls.
It seems obvious, does it not, that if we want people to build a pension they must know how they are doing, how far they have got and what they may get? We expect this from the private sector. Most of us get not only yearly but six-monthly statements about our ISAs, for example, and how they and we are doing. Usually—not always—it encourages us to save more. We all agree that we need transparency about charges and better information and guidance about our financial choices. The Government set up a money advice service to help people do precisely that.
Along with my noble friend Lord McKenzie, who regrettably cannot be in his place today, I was again taken aback in Committee to learn that there will be no such service and support in the field of state pensions. On the biggest investment a person may have—their pension—which, for many people, will be worth more than their home, they are working blind. People will be working and contributing, or not, and claiming credits to which they are entitled, or not, without any information and guidance to help them until shortly before they retire, when it may be far too late to change the hours of their job or claim a carer’s credit which might have brought them safely into the NI system.
How many women in their 40s and 50s with teenage children know that if they work 16 hours a week at minimum wage they will not usually be building a state pension, but at 18 hours a week they will? How many women know that by caring for elderly relatives for 20 hours a week they could, and should, get a carer’s credit? Not many, yet it is one of the most important things they need to know. How many women even know that they will not get a married woman’s dependant pension from 2016 on? Very few, I suspect. We do not and will not tell them, unless they have the wit to ask, until it is almost too late to do much about it. It is absurd and shameful. The DWP’s refusal to provide a level of service is unacceptable. None of us would accept this from the private sector. Indeed, the private sector would probably be pursued and prosecuted if it behaved like we do.
What is the Government’s position? They will respond to a query, which is likely to come from the alert, educated and informed, but they will not bother to trouble those who most need advice, information and guidance. Those who do not inquire and those who leave it too late are most likely to retire with a pension shortfall. Who are the people who are most likely to retire with a shortfall and who will not know until it is too late? What a surprise—women, I fear.
In Committee, the DWP quoted the cost of providing annual statements as a deterrent—a cost which, none the less, we expect the private sector rightly to bear. I therefore suggest that we consider the “nudge” theory: that if we cannot afford to provide annual, or even five-yearly, individual statements, at the very least DWP sends out periodically a standard letter, in bright bold print, two paragraphs only—I offer a draft— saying for example:
“You are able to draw your state pension at 65. To get a full state pension you need by 65 to have made 35 years of contributions into the National Insurance Fund which pays out your pension. Pension contributions may come from your job or you may be receiving free contributions credited towards your pension if, for example, you have children under 12, you are a carer, you are on universal credit, you are disabled or in other circumstances”.
Paragraph 2 would say:
“You may want to find out how many years contribution you have already built up. If so, please contact us either by phoning us on “x” or online at “y”. If as a result you think you may not have made enough contributions by the time you reach 65, we can send you a leaflet which tells you what steps you can take to build a full pension”.
I offer this template letter to the Government as a possible way forward. One standard letter—a nudge—telling people what they may wish to know, in bold print, going out to everybody at five-yearly intervals from the age of 45. It is a nudge for people to find out where they stand and if necessary to do something about it, to help people to help themselves. Otherwise why bother with a Pensions Bill—one that is more generous and certainly one that I support—if we do not want or seek to encourage people to build a full state pension at the end of it? Why bother? It must make sense to nudge people. I beg to move.
Baroness Turner of Camden (Lab)
I support my noble friend Lady Hollis on this amendment. I am sorry that the noble Lord, Lord McKenzie, is not here to second it, The Government have had a long-term policy—they kept telling us about it at every stage of this Bill—of being in favour of people saving for themselves in addition to having the pensions provided in the Bill. They expect people to save for themselves and they regard the pensions provisions that they are making as a kind of platform from which people can then make savings for themselves.
How are people to save for themselves if they do not have the necessary information about what their entitlement is? The amendment addresses the entitlement to a pension statement and notification of entitlement to a statement. All that is very necessary if people are to make sensible arrangements for their retirement. I am amazed to think that the Government may not accept this amendment. I hope however that they will because it is in line with their own thinking on the Bill. They want people to save. How do they expect people to save if they do not know what their entitlement is? They have an obligation to tell them what it is. Certainly it happens in the private sector; I belong to a private pension scheme and I get a regular statement as to what my entitlements are. Why can that not be the case for people who are receiving state benefits?
Baroness Hollis of Heigham
My Lords, I should like to thank my noble friends Lady Turner and Lady Sherlock for their contributions. I understand that the Minister is as committed as could reasonably be expected to trying to ensure that people are aware of and fully knowledgeable about their entitlements. I accept and absolutely understand that there is considerable virtue in having an evidence-based policy by building it up on the results of research into the most effective lines of communication. I also agree that a variety of responses may be wanted, including press, mailings and online, but I have to say that I would worry if it was largely dependent on online information, given what we know about many people’s recalcitrance over using online facilities as UC is rolled out. It may be that it is a generational thing and that over the next decade to 20 years the recalcitrance begins to disappear, particularly if places such as Norfolk end up actually having access to broadband.
My difficulty is that the Minister has a policy premised on the fact that those who know that they do not know will make the inquiry. The problem is around those who do not know that they do not know, and I am not confident that he has in place a strategy to make them aware of it. In the past, the people who were most vulnerable would have been married women who had been in and out of the labour market according to their caring responsibilities. They had a very straightforward safety net by the fact that they could have 60% of the husband’s pension as a baseline, and only if their own contributions exceeded that, as increasingly they have begun to do, would they draw on their own contributions. That is no longer the case. So the 60% married women’s pension is being withdrawn without, as far as I can see, ensuring that those women know, first, that they are losing what they would have counted on in the past and which is common knowledge, and secondly, what other benefits—or credits, I should say—they may be entitled to claim because that information is not being sent out to them in lieu.
I think that the Minister has a problem here. We are on the same side and I fully accept that he wants to make sure that people are aware of this, but I do not think he really understands what happens when the safety net of the married women’s dependency pension which has existed for 50-odd years is pulled away and women are told that they are on their own. He does not actually know, understand or appreciate what it may be like to find the headspace, resources and capacity to change behaviour in order to build up a pension. I am sure that this is not a gender point, but I really do not think that the Minister understands where women like that may be coming from. In the past, as the Minister will know, we had deficiency notices under NIRS 2. They told you whether you had incomplete NI records. When the computer, on which the Minister is relying so heavily, toppled over in the late 1990s or thereabouts and we could not get it back on its feet for several years, we increasingly lengthened the period during which someone could buy back their NICs or make contributions accordingly to cover the lack of deficiency notices. We were willing to do it then for everybody on an annual basis, as far as I recall, before the computer toppled over, yet the Minister is reluctant to go back to that. I understand the point about mailings and so on, but at the very least I press the Minister to identify in his research the at-risk group. For my money, the at-risk group are women, particularly married women, who had relied on the 60% married women’s pension, who were perhaps unaware in the past of the credits they could have claimed, including carer’s credits, and they are not on the list.
I would like some assurance from the Minister—it could just be a nod if he likes—that the at-risk group in particular can be identified. At 65 or 66, they could find themselves on their own with an incomplete state pension and it is too late to do anything about it because we have failed to keep nudging them. If the Minister could give me that assurance, I would be content.
Lord Freud
I would be very comfortable giving the noble Baroness that assurance. Clearly, a generalised mailing out is exactly what we are concerned about. The evidence is that people will get official-looking letters which they do not look at. We have to find a way of getting to the most vulnerable groups, who may take a Rumsfeldian attitude—they do not know what they do not know—and we have to find a way through that. Therefore, I can give the noble Baroness that assurance. I think we are basically agreed around this Chamber about the need to get the communication right, but we need to do the research. There is no point in us making it up without that knowledge.
Baroness Hollis of Heigham
With those assurances, I am content to withdraw the amendment.
Baroness Hollis of Heigham
I will just say a couple of sentences. I am very pleased indeed that the Government are building on the work of the last Labour Government in recognising the particular obligations that go with the military covenant and ensuring that the spouses of service personnel are not disadvantaged when it comes to a full state pension. I welcome this and am very glad that the department and the Minister have been able to meet the concerns raised in Committee.
Lord Browne of Ladyton (Lab)
My Lords, we welcome the Government’s amendment, which requires the introduction of regulations to provide for spouses and civil partners of service personnel to gain national insurance credits for periods spent on accompanied assignments prior to 2010. As my noble friend has just said, these provisions build on the reforms of the last Labour Government, who allowed credits to begin from 2010. I thank the Minister for the generosity of his remarks about my noble friends Lady Dean and Lord McKenzie and, indeed, his recognition of my own small contribution to this outcome.
However, it would be remiss of me if I did not express from these Benches that we are in no doubt who is entitled to the greater credit for this amendment being tabled. It is my noble friend Lady Hollis who is the heroine of the hour. There is no question that the Government have acted because she raised the issue so effectively in an amendment in Grand Committee. Before she did so—and I am sure that the Minister will confirm this—the Government’s position was an honourable one, but, as expressed on page 33 of the document The Armed Forces Covenant: Today and Tomorrow, they stated:
“At present the Government has no plans to make further adjustments to the tax and benefits system for Service personnel and their families but will keep this issue under review”.
The Minister indicated in Grand Committee that he would review it and his officials have kept us all informed of that review going on and it is to his credit that it has resulted in this outcome.
The Government deserve significant credit for responding in the way they have done and now at least we can say in relation to this issue that there is no disadvantage and that members of the Armed Forces community have access to the same benefits as any other UK citizen. As the Minister has said, the challenge now is to ensure that, of those potential 20,000 beneficiaries, the maximum number benefit from this opportunity. The current figures for applications for the 2010 credits are disappointing. Either the MoD now needs to build a process for credits to be automated, or it needs to improve its engagement with its own personnel, to inform people of the availability of the credits and to facilitate and encourage take-up.
I accept that the other government amendments are consequential and uncontroversial and we welcome them also.
“( ) The weekly rate is not to be increased under subsection (1) if a person has opted to receive a lump sum.
( ) The amount of any lump sum to which a person who has deferred entitlement to a state pension shall be set out in regulations.”
Baroness Hollis of Heigham
My Lords, we move to a new subject: deferred pension and how it may be taken, whether as income or lump sum. Over the past 15 years, most pensioners have for the first time been lifted out of poverty. In 1997 nearly half of pensioners were below the poverty line. It is now about one in seven: 14%, compared to nearly 50%. Pensions have risen three times faster than earnings, pension credit has topped up their income and now, we are pleased to say, pensioners are no more likely to be poor than any other group in society.
With pension credit for most future pensioners being absorbed into the new, more generous state pension, together with the guarantee of the triple lock, that journey out of poverty continues. Pensioners’ incomes, especially for those with no occupational pension, will be stronger and more stable than ever before. It is good news and I am delighted. I congratulate the Government on it, I really do.
We know, in any case, that most pensioners are very careful and spend up to their income and no more. They cope and they avoid debt like the devil. However, the growing problem is that those pensioners dependent on the state system, who may in future have a more adequate state pension, are also less and less likely to go into retirement with some modest savings as a cushion against rainy days or as a resource to meet lumpy expenditure. Currently, 21% of pensioners—one in five—have no savings whatever; 37%, more than a third, have less than £3,000 in savings; and half have less than £8,000. If the Minister gives us any mean averages, they are frankly a waste of time, as they were in a previous debate about hours.
Pensioners face soaring quarterly energy bills—I imagine other noble Lords, like me, have been slightly shocked in the past week or two to receive an energy bill rather larger than anticipated. The roof may need substantial work, especially after the gales, and may not be fully covered by insurance. Washing machines and boilers pack up. If they live in rural Norfolk, they may need to replace their old car with another, otherwise they are effectively housebound. They may have an outstanding mortgage and want to pay it off. What do the one in five who have no savings at all do when they are hit by a large utility bill? What do the more than one in three who have savings of less than £3,000 do when one of them dies and they face funeral bills?
We have, understandably, concentrated on building up pensioners’ incomes, and rightly so. However, we have largely ignored the issue of accessible pensioner savings for those of modest income. You can always turn capital into income—you just draw it down as you need it for that energy bill—but it is very hard to suddenly find £400 or more to pay the winter quarter energy bill from state pension income alone if you have no savings on which to draw. In other words, pensioners need savings, just as we all do, and too often they do not have any.
We recognised this when we did the deal with what was then Age Concern as we introduced pension credit in, I think, about 2002. The first £10,000 of savings would be disregarded for pension credit, although thereafter there was a high notional tariff rate. We recognised this need for savings when my noble friend Lord McKenzie made means-testing far more light-touch as pensioners became older. That is why, incidentally, I am seriously bothered about the new class 3A contributions, which encourage pensioners to use up capital to buy a year of S2P, taking an unwise gamble on their life expectancy, increasing their income by a bit but heavily reducing their capital. That is very unwise.
Above all, we recognised this when, back in 2005, we allowed pensioners who had deferred drawing their state pension to take that saved-up pension either as an income addition to their future pension—which is what most did—or as a lump sum to give them some savings. The Government propose to abolish the choice of taking that saved-up pension as a lump sum; it will be available to people only as an addition to the state pension. They are removing the choice of a savings sum from future pensioners. Currently, of the 1.2 million who defer their pensions, 63,000 take the lump sum, which was, on average, just under £14,000. In future, that option will be scrapped. Why? The Minister for Pensions, Steve Webb, is absolutely clear that he is doing it to “simplify the system”. It is not about costs at all, he says, just about simplicity. What is so difficult to understand about a lump sum of your two years or so deferred pension? It is complex, the Minister says, because DWP needs a 64-page leaflet to explain the choice. The Minister in your Lordships’ House, the noble Lord, Lord Freud, says the same.
As the Minister would expect, I have that 64-page leaflet. It is well written—well done to the DWP—simple to understand and straightforward. I have worked through it. I calculate that if, in the name of simplicity, you removed the choice of a lump sum and allowed only an increase in the pension, you would remove precisely 11 pages in total—I will give him the references if he wishes—so that the 64 pages would come down to 53. The rest of the pamphlet would remain unchanged apart from occasionally deleting the words “or lump sum” from, for example: what happens when I die, if I get divorced or if I am widowed; can I combine them; what if I live abroad; what are the effects on my benefits or on my tax; where can I find out more; what organisations may help me; and so on. That is what the 53 pages are largely about. All that applies to any deferred state pension, whether it is taken as an increment or as a lump sum—the argument of simplicity does not wash at all. It is a complete myth, and if anybody worked through that pamphlet, they would see it for themselves. I am confident that the Minister has worked through that pamphlet and I am therefore confident that he will agree with my assertion that it removes only 11 pages out of 64 in the name of simplicity, thus denying choice to people who want to exercise that choice. Taking out that choice in the name of alleged simplicity is, frankly, laughable—it is absurd. I have never seen such a trivial justification. It takes 11 out of 64 pages and thereby denies the choice of a savings lump sum to 65,000 people. I presume the Minister thinks people can understand 53 pages but that 64 pages is just too much. Really? Because he thinks, without any evidence, that they cannot manage those extra 11 pages, he will take the decision out of their hands and make it himself. He knows better than pensioners what they should do with their money. He cannot trust people who have been working and scrimping for 50 years not to waste any savings—their money—that they may accrue.
Mind you, if you have a private occupational pension and get a 25% lump sum tax-free, that is fine. You can do what you want with it. If you simply defer your S2P element, your additional pension, for two years you can take that as a lump sum. The Minister will not tell you how to spend that either. However, on a state pension, he is taking away the possibility of a lump sum—your money—that you have saved for, because, frankly, he does not trust you with it and is calling it simplicity if he takes 11 pages out of a 64-page pamphlet.
Some people, after two years’ deferral, may want that £14,000 of their money rather than the alternative of £14 a week. I would. They would be better off taking the £14 per week instead of a lump sum only if they live, I calculate, a further 20 years until they are aged 87. Those without savings are also poorer and least likely even to reach 80, let alone 87. Who are we talking about? They may be husbands working longer until their younger wife also reaches state pension age. They may both work longer, and one takes the income and the other the lump sum. They may have a somewhat impaired life expectancy; perhaps one is a smoker and they want the lump sum up front just in case that person does not survive to 87. The unspent portion of the lump sum can be inherited by the surviving spouse and would help cushion her—but if taken as increased income it dies with him.
We rightly spend hours trying to encourage people of working age to work longer. We rightly spend hours trying to get them to save. We know we need to build a savings culture. In a low-paid job, perhaps the only way they may be able to build savings is to defer their state pensions for a year or two, work a bit longer and take it as a lump sum. That may subsequently save them needing to get loans at huge interest rates because they have a lumpy bill, perhaps an energy bill, to meet. It allows them to make choices, which each one of us in this House takes for granted. Having just that extra margin in savings means that they can decide to help a grandchild, buy a washing machine that works, replace the carpet, celebrate a golden wedding anniversary, turn up the heating when it freezes or give a donation to their local church. They cannot do that out of income. They need savings. It is their choice, not ours. Pensioners, as they enter pension age, are moral adults and we should respect that and respect them. They have earned the right to that choice and we—and the Government—have absolutely no right at all to take that choice away. I beg to move.
Lord Freud
My Lords, in designing the single-tier reforms our overriding aim has been to deliver a flat-rate pension above the basic level of the means test without increasing spending, and to do so in a way that recognises people’s contributions under the current system. This is not easy to do and it involves difficult trade-offs. Some elements of the transition necessarily generate costs in the early years, particularly the “better of” calculation, which means that people with low amounts of additional state pension, such as carers, receive a boost. There is also the fact that those with high amounts of additional state pension, which take them over the full amount of the single-tier pension, are able to keep the surplus as a protected payment. Nevertheless, we have been able to stay within 1% of projected expenditure until 2040, which is fair to current pensioners and to future taxpayers.
In answer to the blunt question of the noble Baroness, Lady Sherlock, removal of the lump sum option for those who defer their state pension has played a key role in flattening expenditure. The early-year savings that this delivers have been ploughed back into the single-tier design. We are, however, still keen to preserve some flexibility for single-tier pensioners who, by choice or accident, claim after they reach state pension age, so people will still be able to build up an increase to their state pension that is paid on top of their single-tier entitlement for the rest of their lives. As discussed in Grand Committee, there remains the option of backdating a claim for a single-tier pension. By backdating their claim to a state pension, someone who has delayed claiming for whatever reason—either unintentionally or as part of a planned retirement—will be able to get up to 12 months’ arrears when they make their claim for a pension. This would provide someone who has qualified for the maximum weekly amount of £144 with arrears of almost £7,500 at 2012-13 prices.
Baroness Hollis of Heigham
Can the Minister help me with a technical point? With arrears, is the assumption that interest will be paid on the deferred money?
Lord Freud
What happens is that the amount is repegged to the year in which it is taken. If, for instance, someone’s delay in claiming exceeded a year, they would get an increment on top of the single-tier entitlement.
Baroness Hollis of Heigham
I am sorry but I still do not understand. This is a very simple point. At the end of the year in which you have not drawn your pension, do you get the equivalent of a return on capital—in other words, an interest payment—over and beyond the direct addition of 12 months of state pension?
Lord Freud
No, you do not get interest on arrears, but let me take the example of someone who delays claiming the maximum amount for two years and wants to backdate their claim for the 12 months. If we take the £144 example, they would get an increment of around £7.50 to £8 a week, depending on the value of the uprating, which would be added to their weekly entitlement. It would also include the calculation of arrears due to them for the backdated period. That would boost the overall arrears payment to more than £8,000, so that is the mechanism through which the delay works.
On the question from the noble Baroness, Lady Sherlock, about why women in particular are deferring, one of the main reasons is that women have a lower state pension age than men, although of course the reasons will vary with individual circumstances. I am loath to go too deeply into the simplicity argument because we will have a row which will go on for ever. However, to conflate complexity with the number of extra pages in a particular pamphlet is, bluntly, a somewhat bizarre argument. The difficulty for individuals is in making the decision on what option is best for them in the longer term and what is best for their surviving spouse.
Lord Freud
I must confess that I have not counted up the pages or gone through it in detail. I suspect that I have gone through it but I cannot remember it and have not done the counting job on pages that clearly I should have. I knew that I should not have said this. However, I am not going to back down and I will stay with my “bizarre” comment.
Baroness Hollis of Heigham
Is this evidence-based policy? The Minister has not read it but it is “bizarre”.
Lord Freud
My Lords, I am most grateful for having a superb staff, some of whom have not only read the document but written it, so I am confident in the statement that I have just made.
The removal of the lump sum is not because we do not trust people; in fact, it is quite the opposite. We believe that people can make savings decisions for themselves. If they can afford not to claim the state pension, they can choose to save it.
Let me go to the figures on pensioner capital. We do not recognise the figures quoted by the noble Baroness. The figures I can quote—which are not averages, which I know the noble Baroness would scorn—are that almost three-quarters of the pensioner population already have more than £5,000 in capital, and more than half of all pensioners have more than £12,500 in net wealth.
Baroness Hollis of Heigham
The Minister challenges my figures. Is that households or individual pensioners?
Lord Freud
I am not sure why that was the point precisely, but those are the figures I have. The proposed amendment would allow for regulations to introduce a lump-sum payment into the new scheme. That would bring costs forward and would undermine the cost neutrality of the single-tier package, as well as the simplification.
Bringing costs forward may sound like a technical concern, but the timing of expenditure is vital. Without making offsetting savings elsewhere in the single-tier package, Governments in the early years of single tier would be forced to divert more spending towards the state pension system than under the current scheme, which means more government borrowing for future generations to shoulder, or less to spend on today’s priorities. We simply do not believe it is right to make this trade-off to enhance the personal financial management options for a relatively small group of people who do not need to draw the income from their state pension and are therefore able to exercise their option to defer.
We understand that a one-off payment can help people build up capital, and the backdating option can provide flexibility in this respect. However, we question whether there is a widespread problem of low capital for those in retirement. Introducing a lump sum would require us to make alternative savings from elsewhere in the single-tier package, most likely by reducing coverage. We simply cannot agree to that, and so I urge the noble Baroness to withdraw her amendment.
Baroness Hollis of Heigham
My Lords, that was a very interesting reply. I only wish we were in Committee so we could show up more of the thinness of the Minister’s reply. For somebody who is so evidence-based—which is something I greatly respect about the Minister—he was dismissing it rather wildly out of hand.
The Minister pushed the argument that this is about cost and said that this removal played a key role in “containing expenditure”. That is very interesting. I had a discussion with his right honourable friend something like three weeks ago on precisely this point. He assured me most emphatically and vigorously—I am sure he would confirm the conversation, and there were witnesses—that this had nothing to do with cost but was only about simplicity. May I at least suggest that the Minister talks to his right honourable friend and agrees a common line on this? At the moment, one says it is all about cost and the other says it is nothing to do with cost but is all about simplicity. I suspect that the Minister in our House is probably correct about the cost argument, but that is not the position presented by the Minister responsible for pensions, who assured me emphatically to the contrary.
As to the point about simplicity, frankly, it is absurd. I checked my pages again. Pages 11 to 17 are a table showing the cost value of a lump sum compared with increments, and pages 26 to 29 are on taxing the lump sum. That makes 11 pages in total, and probably only three of those, on taxing the lump sum, would be regarded as any form of challenge beyond a reading age of seven and a quarter—so the Minister’s argument about simplicity is frankly absurd, patronising, condescending, lacking evidence and without any factual basis whatever. Frankly, we expect rather better from the Minister.
As for pensioner savings, as I suspected, the difference between us is that my figures are based on individuals, and I stand by them, and his figures are based on households, which does not help the argument very much. He seems to think that 64,000 people denied a lump sum is such a small number that we do not need to bother about them. It is three times the number of service spouses, if I remember correctly, that he is going to help through the military covenant, and no one said they were too small a number to bother about—yet the figure for a lump sum possibility which is three times larger is too trivial to be worth troubling ourselves with.
Frankly, I do not think the Minister believes a word of his argument. I think he does believe his argument about cost, but I do not think he believes anything else about it. He knows and understands that pensioners need savings. He knows that this may be a way for those who take this lump sum to exercise that choice. He knows that it is not difficult to understand. It could not be simpler. Do you want to take this two years’ worth of pension as a lump sum or do you want to add it on? If you are taking away the increment, that would be complicated to explain. A lump sum is the easier and simpler of the two options, and that is the one the Minister is taking away, to the pain of the individual who I calculate will reach their cross-over point—I asked the Minister for this figure, but it has never come to me—at about 87: I stand to be corrected if the Minister thinks I am wrong.
We are left with backdating—fine. All I can hope, and I am sure others do as well, is that we will keep up the pressure on Ministers to ensure that people are aware that they can take their pension lump sum in arrears, as a form of saving, after 12 months and get £7,500 or £8,000 for that sum, which will still keep them below any risk that other benefits, if they are necessary, including housing benefit, will be lost.
I am disappointed by the Minister’s reply, and I think that the Minister is disappointed by the Minister’s reply. He knows that it does not stand up to a scrap of scrutiny—not one scrap—but there is nothing much we are going to do about it at this time of night, so I beg leave to withdraw the amendment.
Pensions Bill
Baroness Hollis of Heigham Excerpts(10 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
“Assessed income period: indefinite period
Notwithstanding sections 28 and 29 above, any recipient of pension credit may from the age of 75 years have his or her assessed income period set for an indefinite period.”
Baroness Hollis of Heigham
My Lords, pensioners usually have stable incomes, especially compared to those who work, and they do not fluctuate by much. At the moment, existing pensioners on pension credit have their income and thus their eligibility assessed every five years at 65, 70 and 75. Thereafter, no further means-testing is required, although people need to report the death of a spouse or when they move into residential care. The Government are proposing to replace this light-touch system with annual means-testing every year until death, with the modest exemption of those currently already over 75, for whom means-testing has been suspended. All future pensioners will have annual means-testing until they die, which means that they will means-test, for example, a frail, 90 year-old widow.
In Committee, we argued that we would retain the current system of five-year assessments of income for pension credit eligibility and the suspension of means-testing after 75, both of which the Minister wishes to replace with annual means-testing. The Minister was not sympathetic; he tried to suggest to my noble friend Lady Sherlock that the new system would be simpler, whereas on any ordinary understanding of the word it is becoming more complicated. Eventually, he fell back on the necessity of making these savings—all £65 million or so extracted from some of the poorest people in the country.
This amendment is modest and targeted. It would permit the Government to means-test pensioners annually, as they propose to do, until the recipient is aged 75, and from then on as now those means tests would be suspended. Why this proposal? My concerns are threefold. First, the proposed changes will discourage pensioners from claiming pension credit. Secondly, it is profoundly unfair. Thirdly, it is not worth the relatively small savings that may follow.
Baroness Hollis of Heigham
When the Minister says that there is no evidence, does that mean that he has sought evidence and there is not any, or does it mean that he simply does not know, or what? Has he evidence to prove that there is no deterrent effect? I suspect that the answer is no.
Lord Freud
Take-up of pension credit guarantee credit, which is aimed at the poorest pensioners, is already high at 82%. However, I think that it would be better if I offered to write to the noble Baroness on the exact nature of the evidence which I do or do not have. Actually, I do not need to write because I can tell her that her second supposition is correct. We do not have any evidence either way. With that covered, I ask her to withdraw the amendment.
Baroness Hollis of Heigham
My Lords, I am not going to pretend that I am not disappointed with the Minister’s reply. I thought that he showed a degree of sympathy and understanding in Committee, particularly of the plight of older pensioners in their late 70s or their 80s, or perhaps older still, who are getting increasingly frail and confused. I thought he understood that. That is why in this amendment I dropped the idea of periodic assessments and simply suggested that, while the Minister does what he thinks is appropriate or is required to do on this in terms of having annual means-testing until the age of 75, at least from 75 onwards he could abandon the annual means-testing system.
I really do not think that the Minister has addressed the issue. He said, first, that he thinks that the savings would be reduced by 30%. I suspect that that is a slightly arbitrary figure, arrived at by dividing the number of years and the percentage of savings, but it takes no account whatever of the fact that means-testing will already have excluded pensioners at an earlier stage. I suspect that at least half his savings will come from the fact that pensioners do not claim what they are entitled to, rather than them not getting what they otherwise would by having annual means-testing.
The Minister said that if those under 75 were annually means-tested but those over 75 were not, that would give rise to appeals and disputes. What evidence does he have for that? After all, we have had periodic means-testing since 2008. How many appeals have there been from people under the age of 75 against the “no further means-testing at 75” rule, and what has been the result of those appeals? I shall give way to the Minister. He ran that argument, so I presume that he has some statistics for us.
Lord Freud
I shall have to supply the statistics separately and will do so in writing.
Baroness Hollis of Heigham
My Lords, forgive me, but trying to persuade the House that this would generate appeals and disputes and not presenting to noble Lords what is already a firm basis of evidence from the existing situation does not seem acceptable. I rather doubt that the Minister has more than a couple of handfuls of cases but we will see when he digs out his statistics. I just do not think that it is a valid argument and I have not had a shred of evidence from him or the Box to support it, although I have plenty of anecdotal evidence to the contrary.
However, my deepest concern—and it is one that I do not think the Minister has addressed—is just how profoundly unfair this is. I am baffled that he does not seem to accept that argument. He is quite deliberately building means-testing out of the new state pension, and I welcome that wholeheartedly. However, every reason he adduces for building it out of the new state pension applies equally for not continuing to means test after 75. Every argument that supports the new state pension works to support the amendment and not continuing means-testing after 75. If means-testing is so innocent, why get rid of it in the new state pension? The Minister knows, as we all know, on the basis of good and effective DWP research, that means-testing is loathed by pensioners and they do not take up the benefits they are entitled to. That is what the Minister is counting on for his savings and it is profoundly unfair.
Pensioners slightly younger are built out of means-testing because the whole lot of pension credit has been thrown out of their new state pension. One day older and they are not only going to be means-tested but means-tested annually until the day they die, until they are 90. That is shameful. The Minister is widening the gap between younger pensioners, who will be much better off and with no means-testing, and the pensioners who will be staying with the old system, who are already older and poorer and who will have a lower pension and face means-testing. He is widening the disparity rather than narrowing it.
That is not good enough. It is not decent. The Minister is profoundly wrong on this but, given the lateness of the hour, obviously I will not seek the opinion of the House at this time of night. I will withdraw the amendment but with a heavy heart because it is profoundly wrong to widen the gap between older and younger pensioners at a time when we are trying to build means-testing out of the system and the Minister is reinforcing it back in again. I beg leave to withdraw the amendment.
Housing: Underoccupancy Charge
Baroness Hollis of Heigham Excerpts(10 years, 10 months ago)
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Baroness Hollis of Heigham
To ask Her Majesty’s Government what assessment they have made of the effect of the underoccupancy charge on tenants.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
Both an impact and a quality impact assessment have already been published, although it remains too early to say how people are reacting to this change. We have commissioned a consortium to undertake a two-year monitoring of the effects of the policy. The research will include looking at the effects of the measures on supply issues, the impact on rural areas and the effects on financial circumstances and vulnerable individuals.
Baroness Hollis of Heigham (Lab)
My Lords, I thank the Minister. Social security sanctions claimants and cuts their benefits if they break the rules, say on JSA, in order to change their behaviour. But the 660,000 families affected, whose existing housing benefit is being cut by the bedroom tax, cannot change their behaviour because there is nowhere smaller for most of them to go. Two-thirds of them are, in any case, disabled, and may need the extra space. Discretionary housing payments, on which the Minister properly relies, can help only a minority even of disabled people. Does the Minister really think it fair to sanction existing tenants for misbehaviour when they have not misbehaved and when they cannot change their behaviour? Are we not punishing people who have done no wrong but who, as they face eviction, are having wrong done to them? Is that now social security’s definition of social security?
Housing: Underoccupancy Charge
Baroness Hollis of Heigham Excerpts(10 years, 10 months ago)
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Lord Freud
Clearly, one thing about this policy is that it makes properties that are underoccupied available for people who are overcrowded. According to the English housing survey, the figure for overcrowding is about a quarter of a million. Under the 2011 census, the figure was higher, going up to a third of a million—361,000.
Baroness Hollis of Heigham (Lab)
My Lords, overcrowding is essentially a London problem, but the local authorities most affected are not London authorities; they are in places such as the north. I am sure that the Minister respects the facts on that and will share his information with the House. Does he agree that the problem that local authorities and housing associations face is that there is an absolute shortage of small accommodation to which people can move? Does he therefore agree that it would only be fair, right and decent if people were sanctioned by the bedroom tax only if they refused an acceptable alternative offer of smaller accommodation?
Lord Freud
My Lords, less than half the overcrowding takes place in London. More than 30% of properties are actually one-bedroom and 108,000 have come up. We are adapting to the transition by using the discretionary housing payment system. The recent data on discretionary housing payments show that that is exactly how local authorities are using that money.