Queen’s Speech

Baroness Sherlock Excerpts

Tuesday 10th June 2014 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for that introduction to today’s debate. We have many interesting speakers to come and I, too, am looking forward to the maiden speeches. I am sure that the noble Lord, Lord Bamford, with his wealth of experience in business, will have much to share with us. I am particularly pleased to be here for the maiden speech of my own bishop, the right reverend Prelate the Bishop of Durham. I know that he has a strong interest in many of the subjects that we are discussing today, and I look forward to hearing what he has to say about them.

Although the Minister’s presentation was very enthusiastic, I confess that I struggle to share the enthusiasm that he has displayed for this Queen’s Speech. The 11 Bills announced here contain some things that are welcome, as far as they go, but, taken as a whole, I find the programme a bit underwhelming. I realised early on that two of the 11 Bills are actually about private pensions, at which point I had a strong sense of déjà vu, as it feels as if the noble Lord, Lord Freud, and I have spent most of our adult lives talking about pensions in this very Chamber. I went back to my diary and found that the last Pensions Bill got Royal Assent only four weeks ago. I understand that things move on—but that quickly? In practice, most of the measures in the pensions tax Bill were flagged up in the previous Budget while the Pensions Bill was still going through this House. In fact, many of us started debating the annuities market while having no idea that the Government were about to unveil measures which would totally change the context. I completely exempt the noble Lord, Lord Freud, whose integrity is beyond reproach. Frankly, I do not think that he knew any more about it than I did: I think that it was all done on the hoof. However, I struggle to conclude that a strategic approach to reforming pensions needs three Bills just on private pensions in one year, but perhaps I lack imagination. I look forward to hearing more about them.

We have had the headline—namely, that the pensions tax Bill is aimed at people who are 10 years below retirement age with defined contribution pension schemes. In future they will no longer have to buy an annuity with their pension pot to give them a guaranteed income during retirement; instead they can access the money and spend it as they choose. At the time this caused speculation that people might take the whole pension pot and blow it on a cruise or a Lamborghini. Indeed, the Pensions Minister, Steve Webb, said that he was relaxed about the prospect of Lamborghini purchases. I confess that I had no idea how much a Lamborghini cost, so I googled it. I do not want to disappoint some people but, as the average pension pot is about £30,000 and you can easily spend £300,000 on a Lamborghini, I do not want anyone listening today, at least those at home, to get too excited. As I googled this information, it occurred to me that in future the targeted advertising that pops up on Google might be directed less at discounted filleting knives and more at Lamborghinis. What a disappointment I will be to those advertisers, that is all I can say.

For some people the idea of taking out their savings will be very attractive but others, especially those on middle incomes, might be better off with an annuity which gives them a guaranteed income throughout retirement provided that the charges are reasonable and the returns are good. We support giving people more flexibility but there have to be real options from which they can choose. I regret that the Government have failed to meet the challenge that Labour laid down during the debates on the Pensions Bill to sort out the dysfunctional annuities market once and for all. All they have done is to sidestep the issue by letting people take their money out, but that does not solve the problems so we will return to that issue as the Bill goes through this House.

Most importantly, these reforms have to meet three crucial tests. First is the advice test. It is essential that people get good independent advice. It cannot be a 20-minute chat over a cup of tea, as some in the industry fear. The Government need to provide a comprehensive and costed plan for delivering robust, high-quality advice and Parliament must be able to scrutinise those proposals to make sure that we do not end up in the midst of another mis-selling scandal. I remind the House of my registered interest as a senior independent director of the Financial Ombudsman Service, and mis-selling scandals and PPI are ringing in my ears as I say this.

The second test is the fairness test. The new system has to be fair to all savers, ensuring that those on middle and low incomes can still get the products they need to get certainty of income and that the billions we spend on pensions tax relief do not benefit just the very rich.

The third test is the cost test. We need to be fair across generations and to be careful that costs are not passed on to the state—for example, if somebody spends their pension pot and then the state is asked to pick up the tab for social care or for means-tested benefits such as housing benefit, which then falls back on taxpayers. Incidentally, when this measure was announced, the Telegraph pointed out that if everybody over 55 took their income as pension contributions it could cost the Treasury £24 billion a year. Obviously, that will not happen but, if just 10% did that, that is £2.4 billion in lost tax and NI receipts. The Government have a serious risk assessment to do first.

Then there is the private pensions Bill which, as the Minister explained, provides for new collective pension schemes, something called for repeatedly by Labour. The Dutch and Canadian models have shown that those kind of schemes can outperform individual defined contributions by some 30%, so in our view the potential for lower charges and the benefits of a pooled investment strategy can be desirable. As we have pointed out in previous debates, they also offer the potential for addressing the pension challenges in industries which have a high staff turnover and lots of small stranded pension pots. We on these Benches support the principle of the proposals on collective pension schemes but we will look for decent caps on charges and other measures to make sure that they deliver secure returns on the pensions in the future.

Labour is determined to ensure that the pensions market works for everyone. To that end, my honourable friend Rachel Reeves set up an independent taskforce to be chaired by Professor David Blake from the Cass Pensions Institute to look at how we can ensure that low and middle-income savers can get good value products in retirement and avoid mis-selling scandals. I call on the Government to provide a full impact assessment of the costs and risks of all the pension reforms together. I ask the Minister to assure the House that the Government will do both those things and also publish a distributional analysis of the reforms, including pension tax relief. Labour has said that we would lower the rate of tax relief for the top 1% of earners. I hope that the Government might agree to that. If they do not, we should at least expect the House to have all the details of the impact of the reforms before being asked to assent to them.

Moving on, reluctantly, from pensions, of the other nine Bills, most are not relevant to today’s debate but I should mention those that are. I will not detain the House on the Defra front with the draft governance of national parks Bill and the Broads Bill but would like to touch on the 5p charge for carrier bags. I am pretty sure that I do not use 155 bags a year so somebody else is using an awful lot—I will talk to them later. I certainly agree that far too many plastic bags are made and used in Britain and that a charge on all plastic bags is the best way to control their use. However, I worry that the policy announced by the Government is actually not quite that and, arguably, is an unscientific mess that could do some damage to the environment. The reason for that is that the Government decided to exempt biodegradable plastic bags, against all the best available scientific advice and despite repeated requests from the Environmental Audit Committee to explain their position. I think that Defra has now accepted that there is no such thing as a really biodegradable plastic bag. There is not: the bag may degrade but the plastic does not. If the bags get washed into rivers they produce microplastics which absorb marine pollutants, are then ingested and work their way up the food chain. Could the Minister please explain why the Government ignored the scientific advice and decided to exempt biodegradable plastic bags from the charge?

There are plenty of other areas Defra could have acted on and I am disappointed not to see any in the Queen’s Speech. There is nothing for those whose homes are blighted by flooding, and nothing on sorting out rural broadband or protecting the health of children in high pollution areas. There is nothing for the 2 million households in England and Wales which spend more than 5% of their household income on water. Defra has responsibility for food banks. Food aid charities are handing out a record number of food parcels to people who are poor. Why could Defra not take the opportunity to investigate and do something about the underlying causes that drive people into food banks, including those in working families?

Next is the Childcare Payments Bill. Any help with the eye-watering costs of childcare is welcome but it does not begin to make up for the losses that working families face. Childcare costs have gone up 30% since the last election but these proposals would have nothing on the table until autumn 2015. Even then, just one in five families would receive enough help through tax-free childcare. It is welcome but not enough.

Finally, there is the small business, enterprise and employment Bill. My noble friend Lord Stevenson will talk about this more—and with considerably greater expertise, I am relieved to say. However, I want to touch on the principles behind it. It contains some measures that are welcome if rather late and a bit half-hearted. That makes me think that one of the themes of this Queen’s Speech—and of much government policy-making of late—is that, in a number of areas where the Government are acting, they have belatedly realised there is a problem and that something needs to happen, often provoked by a Labour announcement. We adopt a policy, it is popular because it is badly needed, then the Government rush out a cut-price version to try to counter it. It is always flattering to be copied but the danger is that these rip-off versions of our original designs look okay at first glance but you should not look too carefully at the seams. We have already seen the position with energy pricing. There are two more today in housing and zero-hours contracts.

Even more importantly, taken as a whole this programme does not do what is needed for the country. The Queen’s Speech seems to be predicated on an analysis that we have had a tough time but it is all getting better so we do not need a major legislative programme. I could not disagree more. The biggest problem is that the Government’s approach is still predicated on the assumption that a rising tide will lift all boats and that wealth will trickle down to all. If that was ever true, it is certainly no longer a safe assumption. The Government’s own record makes that clear. Working people have seen their pay fall by £1,600 a year on average. By the end of this Parliament, people will be worse off than they were at the start. Something very serious has happened to the British economy: the link between our national wealth and the state of family finances has been broken. It is no longer safe to assume, if we see recovery, that it will benefit most working families in Britain. If anyone doubts that, talk to the people out on the doorstep. That has real implications for the way we go about the challenges ahead: restoring real growth, tackling debt and getting the economy working for working people. Low wages, insecure work and the hope of some wealth trickling down is not the way forward; it is actually part of the problem. A Labour Government would take action to correct that and drive us towards the sort of higher skill, higher wage economy we need.

This Parliament unfortunately has seen a rising tide of insecurity. A record number of people are on zero-hours contracts. I am delighted the Government have woken up to the issue—slightly late, despite the best efforts of my noble friend Lady Hollis, who pushed the Minister very much on this during the passage of the Pensions Bill. What is being offered is not enough. As well as ensuring that those employees have greater clarity on their terms and conditions and can work for other employers, Labour would give them the right to demand a fixed-hours contract if, in practice, they had been working regular hours for the preceding six months. After a year they would have an automatic right to a fixed-hours contract. Labour would also ensure that employees on zero-hours contracts are not obliged to make themselves available outside their contracted hours and that they have the right to compensation if shifts are cancelled at short notice.

A Labour Government would then tackle the scandal of low pay in Britain. The Government have previously dangled the possibility of a £7 minimum wage, but nothing has ever materialised. Labour would set an ambitious target to increase the value of the national minimum wage and would drive up much more robust enforcement, including penalties of £50,000 for failing to pay the minimum wage, and new powers for local authorities. We would incentivise employers to pay the living wage through “make work pay” contracts. This makes straightforward economic sense. For every extra pound employers pay to raise a worker from the minimum wage to the living wage, the Treasury saves 49p in lower social security payments and higher tax revenues. It is win-win.

Thirdly, Labour will tackle the problem of youth and long-term unemployment. I disagree with the Minister. I accept that he cares about youth employment—however, the Government’s record has not been good at all. The youth contract has been an absolute disaster. Labour, by contrast, has pledged to create jobs for six months for all young people who have been out of work for more than a year—proper jobs—and for every other person after two years.

Finally, Labour will address the failures of our social security system, on which there is nothing in detail in the Queen’s Speech. We will make the system fit for purpose by reforming the tests for disability benefits, by abolishing the disastrous bedroom tax and by introducing a basic skills test for the newly unemployed, so we intervene early to avoid further long-term unemployment.

We will get serious about housebuilding. By 2020 we pledge to be building another 200,000 houses a year at least. We will protect renters by legislating for longer-term tenancies and by stopping letting agents charging them fees. The lack of housing supply is causing so many problems, from asset bubbles to huge housing benefit bills, overpriced and poor quality rented accommodation, and the inability of so many first-time buyers to get on the ladder. What does the Queen’s Speech offer? I am sorry to say it offers nothing at all for families renting, and a plan for a one-off new town with 15,000 homes, when we need at least 10 or 12 times that.

There is so much more I could say: about the need for reform of banking, finance for SMEs, but most of all a recognition that we need serious action to get the British economy fit for purpose. We are at a point in this extraordinary economic cycle where we have a chance to think about what kind of economy we really want and what kind of country we want to be. I want to live in a country where the economy works for everybody—not just the gilded few at the top—where the welfare state functions properly and where people who are working all the hours God sends can feed their kids without having to resort to food banks. That is the kind of country Labour wants; that is what we will build, and that is what the Queen’s Speech should have done.