Working-age Welfare System

Baroness Sherlock Excerpts

Tuesday 1st September 2026 Lords Chamber

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

So, no pressure then. My Lords, the Government are prioritising welfare reform, putting work and opportunity at the centre. Our system should support people to get into work and get on in work, while ensuring that those who cannot work get the support that they need. The Milburn and Timms reviews are looking across the social security system and will publish their final reports in the autumn. We will work across government to respond to their recommendations; in the meantime, we have a range of initiatives to support individuals to get into work.

[Lord Balfe (Con)]

I thank the Minister for her Answer. The situation that we are in today is not a Labour or a Conservative one; it is one that we have drifted into. Every day, we read in the newspapers about there not being enough money to go round. As a previous Prime Minister said, if you do not have money, you cannot spend it. Will the Government help by looking at ways in which the public sector welfare bill can be trimmed?

[Baroness Sherlock (Lab)]

My Lords, the Government are absolutely looking at how we can reform our social security system. It simply is not fit for purpose and it needs work. The noble Lord will know that we are in the middle of two vital reviews: into youth unemployment, led by Alan Milburn, and into the future of personal independence payment, led by my colleague Stephen Timms. In the meantime, we are taking action across the field, investing in support for young people, rebalancing universal credit to encourage people into work, guaranteeing disabled people the right to try, overhauling job centres and building personalised work programmes. We are determined to get this right.

[Baroness Teather (LD)]

My Lords, many people with disabilities and long-term conditions want to work and, with a lot more flexibility and support, would be able to do so. I welcome the new disabled persons bus pass with free travel, something for which my Lib Dem colleague Tom Gordon long campaigned. Does the Minister also support giving disabled people more rights to flexible working, including, for example, a right to work from home unless there is a strong business case against it?

[Baroness Sherlock (Lab)]

I am very glad that the noble Baroness welcomes the extension of bus passes. The credit should probably go to my friend Andy Burnham rather than to anyone else, but I am delighted that she welcomes it none the less. We are working extensively with sick and disabled people to support them back into work, but we must first make sure that they have the support they need, the motivation they need and, crucially, the jobs they need. We also need to work with employers. We are doing a lot of work with employers who are trying to hire people and want to make sure that they know what they can best do. Our connect to work programme is working with both the individual and the employer, to find people, connect them with jobs and make sure that they get the help they need. That is the most important step to take now.

[Baroness O’Grady of Upper Holloway (Lab)]

Can my noble friend the Minister confirm that official figures show that spending on non-pensions social security will remain at the same percentage of GDP for this Parliament—at around 5%—and that we should deal with the root causes rather than the symptoms of dependence on social security by creating decent jobs, decent homes and decent healthcare?

[Baroness Sherlock (Lab)]

My noble friend is absolutely right about the level of GDP. It is around 4.9% of GDP and, as a share of GDP, spending on social security is due to remain broadly stable all the way up to 2030-31—I say in passing that, on that basis, overall welfare spending is in fact forecast to rise by less than half as much as it did under the previous Government. What is most important is that as a Government we are still committed to reforming the system. Certainly, we want to make spending sustainable, but we also want to improve outcomes. It is not good for people to spend most of their lives with no opportunity to work. We know that is the problem. We have to reform the system, and we are committed to doing that.

[Baroness Bull (CB)]

My Lords, according to Mencap, only around 5% of adults with a learning disability are in paid work, despite 86% of people with a learning disability surveyed wanting to undertake paid employment. Can the Minister say what the Government are doing to support employers better to understand how to provide employment for people with learning disabilities, who can be such a valuable resource in the workplace?

[Baroness Sherlock (Lab)]

The noble Baroness makes an excellent point. She is absolutely right that the employment rate for people with a learning disability is unacceptably low. Through developing our connect to work programme, we have found that we need to work with both the employer and the individual who wants a job. I have been given some really interesting cases—some wonderful examples. A young woman called Jennifer, who had left college and been unable to get a job, worked with connect to work and was given help with interview support and with identifying an employer. They found an opportunity for her to work with Stagecoach. Stagecoach wants to employ such individuals and regards her as a valuable employee, but once she is in the job, connect to work can carry on supporting her and make sure that she gets the continued support she needs to stay in it. That is the way forward: to work with individuals and to find out what they most want to do. Jennifer is now a bus driver. Other people have opportunities to do other things. For each individual, it will be different, whether or not they have a learning disability.

[Lord Hintze (Con)]

My Lords, the Minister has said something very important. We have, obviously, a huge need to support the vulnerable in our country. We all agree with that. But what about what the Minister said about making sure that those who cannot work are supported? How are the Government making sure that those who are taking welfare—and there is a two-way obligation here, to the individual and to the state—are in fact vulnerable and need that support?

--- Later in debate ---

[Baroness Sherlock (Lab)]

The noble Lord raises an important point. We all agree that those who can work should work and those who cannot work at all should be supported. That leaves us with two questions. One is: how do you tell the difference? The second is: is it an absolute difference anyway? I think it actually is not. The mistake we have made is assuming that the world is in two categories of people: those who can work and those who never can. The fact is that for lots of us there are times in our life when we can or cannot work, and times when we can do some work. Our job is to accept that the overwhelming majority of people can work, either now or in the near future, and we know they want to. Our job is to make sure that we support people and help them. But clearly the system is there. There are clear conditionality requirements. If you can work, you should. But just telling you that is not enough. We need to give you the confidence. For example, in our work with young people—I am sorry, Chief Whip, I will stop now.

[The Lord Bishop of Manchester]

My Lords, I am glad to hear that the Minister is so passionate about this and that, overall, this is taking place. As part of that, however, the Trussell Trust tells me that the majority of people who go to food banks are already on universal credit. Are the Government going to look at what it actually costs to survive in this country so that that can be factored into what levels of universal credit people are going to be getting?

[Baroness Sherlock (Lab)]

The right reverend Prelate raises a really important point. As I know he knows, in our work on rebalancing universal credit, the Government are making the first above-inflation increase in the standard rate of universal credit. We are also investing in other things that support people with the cost of living: help with housing, with heating and with childcare. We need to support those who are out of work. Also, a lot of people on universal credit are in work, so it is important for us to help them to get on in work, develop, improve their salaries and have opportunities. Most people do not want to spend their entire life out of work. It is not good for them; it is not good for the state. That is our job.

[Lord Mohammed of Tinsley (LD)]

My Lords, can I talk about the young people whose parents are the richest—that is, the corporate parents, us, the state? In particular, can I press the Minister on supporting looked-after young people? What particular support can those young people who are leaving care look forward to from this new Government?

[Baroness Sherlock (Lab)]

That is a really important question. The Government take a number of specific steps. For example, we know that some young care leavers find it hard to get into work, so we have people in jobcentres who are specialists in that area, who identify care leavers, work with them and give them extra support. There is help for them to get extra qualifications which they may not have. We have schemes about working with employers to employ care leavers. We have people who can help them develop at the next stage. Many of them get different levels of support in the benefits system depending on their circumstances. All that makes a difference, but in the end most of them are like other young people: they need an opportunity. We are now creating a range of things: a youth guarantee, support for those who need help, hiring centres for employers—and, if you are still there after 18 months, a guaranteed job for six months with this Government. That is the help people need.

[Baroness Stedman-Scott (Con)]

My Lords, in September 2025, the leader of the Opposition, my right honourable friend Kemi Badenoch, offered the Government Conservative support for serious welfare reform in light of the warning that the cost of sickness benefit could rise to £100 billion by 2030. Will the Minister tell the House whether the new Prime Minister will take a different approach to that of his predecessor and work constructively with the Opposition to bring this rapidly rising and unaffordable welfare bill under control?

[Baroness Sherlock (Lab)]

My Lords, I well remember the offer by the leader of the Opposition—long may she stay so—to support any sensible offer on social security. I am always open to discussing with the noble Baroness and others how we can do that. We both think very similarly about the importance of supporting young people, in particular, to go out there and get jobs. I have already described that dealing with young people is a decade-long challenge. This did not happen just recently—between 2021 and 2024, almost a quarter of a million young people became NEET. It is a job for all of us as a country—employers, the state, everyone—to get out there and support young people to get the jobs that they need.

Pensions Commission

Baroness Sherlock Excerpts

Wednesday 22nd July 2026 Lords Chamber

[Lord Davies of Brixton]

To ask His Majesty’s Government what recent progress the Pensions Commission has made on its programme of work.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, last year, the Government revived the Pensions Commission to examine how to improve retirement outcomes for future generations. Its interim report, published on 19 May 2026, sets out key challenges with the current system and priorities for the next phase of work. It highlights that too many people, especially low and middle-income earners, are not saving enough for retirement. The Government look forward to receiving the commission’s final report and recommendations in early 2027.

[Lord Davies of Brixton (Lab)]

Perhaps I may first welcome my noble friend the Minister to her rightful place on the Front Bench. I thank her for her Answer. We look forward to the progress of the commission to the agreed timetable, but I have concerns that it is only one leg of a three-part review: there is the commission; there is the Government’s review of the state pension age, which commenced a year ago yesterday and has been little heard of since; and there is the issue of the triple lock and the level of the new state pension. They all need to be resolved together to achieve a sustainable settlement. Can my noble friend explain to the House how these different strands will be brought together?

[Baroness Sherlock (Lab)]

I can indeed, and I am grateful to my noble friend for his welcome back. He will forgive me, as I will not be able to give him any specific answers on the future rates of the state pension; if I pre-empt the Budget, I think I may be the shortest-living Minister in history—I would not even make it to 24 hours. But I can tell him how the process will work. The Government are required to do a review of the state pension age. We have set up an independent commission, chaired by Dr Suzy Morrissey, to look at the evidence and make a report, which it has now done and handed it in. The Government will take a wider range of evidence, including from the Pensions Commission, and will then have to make a decision about the future of the state pension age. The commission is looking at the adequacy of the state pension. Obviously, the state pension is there, but the key objective is determining whether people are saving enough for retirement—so it is not just about what the state pension is doing but about whether people are saving enough in private pensions for retirement, and it is clear from the interim report that they are not. We now look forward to the recommendations that are coming. All of us will come together and the Government will make a decision. This is all on the back of the significant work done already by the pensions investment commission and the recent Bill on private pension schemes. It is all coming together.

[Lord Palmer of Childs Hill (LD)]

My Lords, I welcome the fact that the Minister is still there on the Front Bench; may it continue. My question is on which comes first. We discussed the then Pension Schemes Bill at length—a very complicated Bill—various other pension things have come before the House; and now we have a commission. Surely, it is putting the cart before the horse by us all doing lots of legislation and then having a commission to see what should be in it. Surely, the commission should have come first.

[Baroness Sherlock (Lab)]

I now realise that I did a terrible job, because repeatedly during the passage of the Pension Schemes Act I tried to explain why that was not right, and I utterly failed—I will have one last go. The Government set out a pensions investment review to look at the state of the landscape of private pension saving. We then recognised that, if we want people to save more for their retirement in private pensions, we need to make sure that they will get the returns they need. The Pension Schemes Act is now laying the ground to make sure that private pension savers are getting the returns, so that if the Pensions Commission looks at it and decides there needs to be more private pension saving, the people who make those savings will get the return on that hard-earned money. It does all come together. I know the noble Lord was not able to be there, but I did a briefing yesterday, open to all Peers, on what is happening in the pensions area, and we set out a road map showing how all these things come together; I would be very happy to send him a copy of that.

[Baroness Finlay of Llandaff (CB)]

My Lords, in welcoming the Minister back to her seat, with her in-depth knowledge of all these topics, can I ask whether the Pensions Commission will explore how access to the state pension for terminally ill people of working age who are too ill to continue working can be made available? A large number of them have already paid 35 years of contributions but, because they are young, they are not accessing the pension at a time when they desperately need it.

[Baroness Sherlock (Lab)]

My Lords, I am not pre-empting anything that the commission will say, but the Government are very aware of the position of people who have terminal illnesses. As the noble Baroness of course knows very well, we have looked at some of the rules around how, for example, the benefits system can best assist people. She may be aware, from a Question answered by my noble friend Lord Livermore in which she was very much involved, that the Government have agreed to look at the way in which the tax system more broadly treats that and how we will address it. All those things are being looked at in the round. What the Pensions Commission does is up to it and I wait to hear what it has to say.

[Lord Bellingham (Con)]

My Lords, is the Minister aware that only 17% of the 4.4 million self-employed people in this country are actively saving? Is this of grave concern to her? What are the Government going to do about it?

[Baroness Sherlock (Lab)]

The noble Lord raises an excellent point. In fact, we have seen a significant drop. In the 1990s, roughly half of people who were self-employed were saving for a pension; it is now under 20%. There are more self-employed people now and there are different kinds of self-employment. However, there is no question that that is a big dip. The Pensions Commission found that, of those whose only income comes from self-employment, only 4% were saving for a pension. One of the key tasks for the Pensions Commission is specifically to look at and recommend to government what to do about all those who are undersaving, including people who are self-employed. I am grateful to the noble Lord for raising that.

[Lord Beamish (Lab)]

My Lords, I too welcome my noble friend back to her rightful position. She talked about people working hard to save for their pensions. They include pensioners who worked at Nissan in the north-east. Many now find themselves in very dire straits, because for those who accumulated in a pension scheme before 1997, the pension trustees and company are no longer increasing it along with inflation, so those pensioners are now finding the value of their pensions diminishing. Is this something that the Government could look at?

[Baroness Sherlock (Lab)]

I am grateful—I will never be so appreciated ever again, so I am really going to enjoy this session. My noble friend raises an important point. In a sense, it is up to individual schemes what their rules are for indexing their pensions. The minimum legal requirements for indexation have to be appropriate for all DB pension schemes, because they have to strike a balance between what members need and what the employer can afford. In the end, as he will know, the strongest guarantee is a good, strong sponsoring employer. However, there are two things that may help. One is, as he may be aware from the Bill, that the Government have changed the rules to allow a wider range of well-funded schemes to release any surplus that is there, with the agreement of trustees, which could be used to go towards paying for indexation, for example, if affordable and appropriate. At the other end of the scheme, the Government took action in that Bill to look at giving indexation to those who end up in the PPF or FAS for benefits earned before 1997. That will at least help.

[Baroness Spielman (Con)]

My Lords, the Pensions Commission is rightly worried about pension adequacy for a worryingly large and even growing proportion of the population and will of course make its recommendations in due course. But given the urgency of the problem, can the Minister tell us what the Government are doing now to promote greater financial self-sufficiency and reduced welfare dependency in retirement?

[Baroness Sherlock (Lab)]

Yes. The single best guarantee of a happy retirement is a happy working life where people have the opportunity to earn enough money and to save enough money. We absolutely are doing huge amounts—I will not recite it all here as I have done many times before—and investing in all kinds of programmes to get people into work and to get them to progress in work and to be able to move up the income ladder to be able to save. However, one thing we know is that too many people are not working long enough to save or saving enough when they are in work and, in many cases, even if they put the right amount of saving in, the decisions they make at the point they come to retire—decumulation—can be crucial to how much they get to live on. We have to attack it on all fronts; no one of those alone will do it.

[Baroness Coffey (Con)]

Will the Minister rule out the state pension age ever being 70, despite what the commission and others might say, recognising that the pace of the increase in life expectancy has slowed considerably?

[Baroness Sherlock (Lab)]

My Lords, the law is clear at the moment. The state pension age is now gradually rising from 66 to 67. That began in April 2026, and it will finish in March 2028. What I can say about the state pension age is that, as legislated by the previous Government, there is a requirement periodically to review it. The third government review of the state pension age was launched on 21 July last year. It has to be completed by the end of March 2029. Clearly, I cannot pre-empt what will come out there. Its job is to consider a wide range of evidence, including evidence on life expectancy, findings from the Government Actuary on the proportion of adult life spent in retirement and the independent report by Dr Suzy Morrissey that I mentioned earlier, as well as other evidence; for example, from the Pensions Commission. The Secretary of State will look at all that evidence and make a decision. For reasons the noble Baroness will know very well as a former Secretary of State having been in that kind of position, he will wait until he has all that evidence and make a decision.

Unemployment: People with Autism

Baroness Sherlock Excerpts

Thursday 25th June 2026 Lords Chamber

[Lord Touhig (Lab)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and declare my interest as a vice-president of the National Autistic Society.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the Government are committed to supporting autistic people into employment, including through targeted specialist support. Our £1 billion connect to work programme includes a supported employment pathway for neurodivergent people and is now live across most of England and Wales, with recent data showing encouraging early signs. We are also supporting employers to recruit and retain more neurodivergent people.

[Lord Touhig (Lab)]

I welcome my noble friend’s response, but can I suggest an initiative that will help more autistic people into work? Businesses across the country are employing autistic people, but if we are to get more than three in 10 autistic people into work, we need to do more. Will my noble friend consider a mentoring scheme whereby those who have employed autistic people can sign up to help others and advise them to do the same? If she would like to know how this can work, I will happily provide her with some examples.

[Baroness Sherlock (Lab)]

I am grateful to my noble friend and will be delighted to talk to him about examples and take them back to the department. He is right to focus on the importance of supporting employers; there are many who want to do the right thing but may not know how best to do it. Business-to-business mentoring can be key, and my noble friend will perhaps be reassured to know that we are exploring the benefits of business-to-business mentoring as part of our regional Vanguard employer work as part of Keep Britain Working. In the meantime, the Disability Confident scheme encourages collaboration between employers, including peer-to-peer learning; and connect to work, our specialist voluntary supported employment programme, works directly with employers to help secure and sustain jobs. My noble friend is absolutely right to push on this area.

[Baroness Monckton of Dallington Forest (Con)]

My Lords, I declare my interest as chairman of Team Domenica. The Alan Milburn review on young people and employment states that for every £25 spent on benefits, £1 is spent on supporting employment. The Access to Work supported internship scheme, which was for 39 weeks, has been reduced to 26 weeks. This does not give people with autism and learning disabilities enough time to learn the skills they need to get into employment. Will the Minister consider reinstating the 39-week programme?

[Baroness Sherlock (Lab)]

The noble Baroness is absolutely right to focus on support. Alan Milburn made the point very strongly about the need—across the system, not just in employment—to engage with support and early prevention work rather than just dealing with the outcomes of inactivity among young people. Access to Work is an incredibly valued and supported programme. We are looking at how to reform it. I can write to her with the details, but there was not a decision taken to reduce its length across the board; it was simply that what should have been an occasional extension had become more broad. We are looking to ensure that it ends up doing the right thing to support people. The work on supported internships is really well valued, and Access to Work does incredibly well in supporting people across hundreds of colleges to engage in work experience. For all young people, real work experience in a real workplace is the best way to help them get into work, and we are committed to that.

[Baroness Hollins (CB)]

My Lords, does the Minister agree that the individual needs of autistic people vary hugely and that individually agreed reasonable adjustments are essential to enable people to succeed in the workplace?

[Baroness Sherlock (Lab)]

The noble Baroness makes an extremely important point. One reason we have focused the nature of our support through the connect to work specialist programme, which works with people who are disabled or have a health condition, is because everyone is different. Autistic people are different from each other, and there is also significant co-occurrence of autism and other neurodivergent conditions. I realise that I am telling this to a Member of the House who knows more than I will ever know about this, but she knows of what I speak. We have set out to make sure that, in that programme, someone has a specialist jobs coach who will work with them and find out what their barriers and their goals are and what they want to be. A recent example is of a young man who got his dream job in a hobby store: he needed his job worker, who went to the interview with him, went through the induction and worked with the employer to make the right adjustments, and now the young man is a really happy and thriving member of staff. That is what we can do well.

[Baroness Leaman (LD)]

My Lords, in response to the Think Work First report, the Government accepted the recommendation to double the number of supported internships and to expand eligibility beyond those with an EHCP. Can the Minister tell the House what, if any, targets have been set to achieve this expansion and, therefore, when young autistic people without an EHCP will be able to access a supported internship in every part of the country?

[Baroness Sherlock (Lab)]

What I have been trying to describe is our intention to make sure we have personalised support. The noble Baroness raises an important question. She will know, from having seen the work done and from the early report from the Department of Health, which looked into questions around prevalence of autism and other neurodivergent conditions, that one challenge is that people are having to seek out diagnosis in order to get support. In fact, we need to make sure that support is not dependent on diagnosis. Let me be really clear that a diagnosis of, for example, autism is absolutely not a requirement for engaging with employment support. We are determined to make that available. A diagnosis may be the right thing and may help many people, but it is not a prerequisite for our support.

[Lord Watts (Lab)]

My Lords, has my noble friend the Minister seen the drama “Patience”, which traces the actions of a young woman with autism? It demonstrates that you need to have special provision for such people but that it can be very rewarding to employers if they make that provision. Children with autism do not have special needs, just different needs.

[Baroness Sherlock (Lab)]

I must confess to my noble friend that I have not seen it, but I will seek it out. His point is really important. If we can get young autistic people—indeed, any autistic people—into work, I know that many employers will find that there is a huge benefit, not just to the individual but to the organisation. Sometimes, people simply do not know what to do. Line managers are key to this. Earlier this year, for example, my department funded some ACAS-run workshops—masterclasses on neurodiversity—for employers. They were free of charge for employers and aimed particularly at smaller companies to help them understand what it would be like, how to recruit people and how to support them. We know that a lot of employers want to do the right thing, but sometimes just do not know how to do it. Our job is to make that as easy as possible.

[The Lord Speaker (Lord Forsyth of Drumlean)]

My Lords, the noble Lord, Lord Shinkwin, is taking part remotely. I invite the noble Lord to speak.

[Lord Shinkwin (Con) [V]]

My Lords, I speak as the co-chair of the APPG on disability employment. One initiative that would benefit people with autism and disabled people in general, and which was in both the Labour manifesto and the 2024 King’s Speech, is an equality, ethnicity and disability Bill. Yet the Bill was pulled from the latest King’s Speech at the last minute by No. 10, despite the Bill manager, whom I met, having been appointed. Does the Minister appreciate the huge disappointment that this inexplicable decision has caused, and will she make every effort to ensure that the Government introduce the Bill in this session?

[Baroness Sherlock (Lab)]

The noble Lord raises an important point. I reassure him that the Government are completely committed to delivering on the manifesto commitment to introduce mandatory ethnicity and disability pay gap reporting for large employers. I know that my colleagues in the Cabinet Office are working hard on this and will introduce legislation as soon as parliamentary time allows. There is always competition for Bills in the Session, but I know that they are still committed to it. In March, as the noble Lord probably knows, the pay gap reporting consultation was published, showing how the proposed approach would work. Employers with 250 or more employees would have to report their workforce composition and ethnicity and disability pay gaps and take action to address that. It is very hard to solve something if we do not know the scale of the problem. I reassure him that the Government will do this as soon as possible.

[Lord Hope of Craighead (CB)]

My Lords, should more be done to advertise the benefits of employing autistic people? I know of one employer who employs 20% of its workforce with autistic people with appropriate management. They find them to be loyal, hard-working and capable of solving problems that, in some cases, few other people can. There are real benefits in employing autistic people.

[Baroness Sherlock (Lab)]

The noble and learned Lord asks an excellent question; I would love to hear after this who the employer is and see what we can learn from them. I would be especially interested to know whether that employer is a member of the Disability Confident scheme. The noble and learned Lord may know that that scheme encourages collaboration between employers, not only through peer-to-peer learning, but by specifically asking leading organisations to use their influence across their networks and supply chains. There may be things that we can learn from this employer, as well as ways that we can support them to take the message out. There is some really good news out there, and I would love to hear more about it.

[Baroness Spielman (Con)]

My Lords, if reducing unemployment is a serious government priority, the proportion of young autistic people beginning sustained employment must be improved substantially. Can the Minister therefore explain how the Government plan to use their funding and regulatory levers to ensure, first, that colleges place autistic students on the most suitable courses for them and, secondly, that colleges connect these courses to local job opportunities in sectors and roles where young autistic people can thrive?

[Baroness Sherlock (Lab)]

The noble Baroness raises an excellent question about schools and education, and I reassure her that my department is working very closely with the Department for Education to address it. I am sure that she has read the interim report from Alan Milburn, so she will know that he identified problems not simply in getting young people into employment, but in making sure that schools were doing the right thing in transition and in making sure that health services were doing the right thing in engaging with prevention. We are developing plans across that piece. We are doing a lot, and I would be very happy to talk to the noble Baroness outside if she would like to pursue this.

Child Poverty

Baroness Sherlock Excerpts

Thursday 18th June 2026 Lords Chamber

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, let me add my words of appreciation to my noble friend Lady Lister, who must at this point be blushing from the compliments showered upon her, but they are very well deserved. I am thrilled that she got this debate and introduced it so well. I am grateful to all noble Lords who have spoken and for the great encouragement from around the Chamber, especially from my new encourager on the Lib Dem Front Bench, the noble Baroness, Lady Teather, whom I welcome to the Front Bench. I also welcome the noble Baroness, Lady Spielman, to her role on the Front Bench, and I look forward to taking issue with her later.

As we have heard, there are 4 million children in poverty in the UK. That is 700,000 more than there were in 2010. Almost 2 million children are in deep material poverty—a term I will come back to—lacking even the most basic essentials like a warm home or healthy food. We know that growing up in poverty has a devastating impact on children and their prospects. It affects their attainment at school, their future earnings, and their mental and physical health. They are more likely to grow up to become NEETs. Right now, we have more than 1 million young people not in education, employment or training. That is what happens when funding for services is cut, when wages flatline, and when people are trapped in the system.

As my noble friend Lord Kestenbaum said, this is indeed the fight of our lives. We have to break this link between a child’s background and their future success. I should digress for a moment. In 2000, I was running a charity working with single parents when Gordon Brown, then the Chancellor, hired me to work for him to advise on child poverty and how we tackled that, on Sure Start and on all the work that that Labour Government did. I was hugely proud to be part of that effort, so to be back here now with another child poverty strategy and a Government committed to it is something which I am hugely privileged to be part of. It is the fight of our lives, and we have to intend it or it will not happen.

The consequences of poverty impose heavy costs on the taxpayer through lost productivity and added pressure on public services. That goes to questions of economic growth and economic success—tackling poverty is also vital for our economy, as well as for the lives and opportunities of our children. This Government are correcting course. We want every child to have the chance to fulfil their potential—hence our child poverty strategy, which will lift 550,000 children out of poverty, the largest expected reduction in child poverty in a single Parliament. We are now focused on delivering the commitments in the strategy, monitoring its impact and the trajectory of poverty to ensure we build momentum and sustain our progress. I shall try to answer the very many questions, and when I fail, I will write and answer the ones I do not get to, with apologies ahead of time.

Let me start with the worries about the Child Poverty Unit, which I hope I can assuage. The unit has moved to the DWP, as the strategy set out that it would do. Many of the officials are the same officials who worked there right the way through. They have retained the same strong relationships that help deliver the strategy inside and outside government. We have some brilliant officials working on this and I really enjoy working with them. We also have the interministerial group chaired jointly by the DWP and the DfE, which met formally for the first time yesterday, involving 13 government departments. We are determined to make sure through this that child poverty remains a priority across government. I want to reassure the noble Baroness, Lady D’Souza, whether or not I can get all the way with her, that that kind of cross-government working is the only way we are going to make this work. I will read her words of wisdom again carefully when I come to read Hansard, but she pushes us in a really important direction.

My noble friends Lady Lister and Lady Donaghy asked whether I could share any information about the baseline report ahead of time. I regret to say to my noble friend Lady Donaghy that my petticoat must stay firmly where it is. I am sorry that I cannot offer any spoilers at this stage, but it is due out this summer, so they will not have too long to wait.

My noble friend Lord Kestenbaum raised questions about education, which I will come to in a moment. I will touch briefly on targets, raised by my noble friends Lord Babudu and Lady Lister, the noble Baroness, Lady Teather, and others. I think the most important thing is that what we are doing is visible. We already have a statutory duty to publish poverty statistics annually. As well as that, we are going to hold ourselves to account through the monitoring and evaluation arrangements put in place from this year and in future years, so the progress we make is transparent for all—and if we fail to make progress, that too is transparent for all. I think that will make the big difference.

My noble friend Lady Lister asked about migrant children, raised also by the noble Baroness, Lady Teather, and, in a rather different way, by the noble Baroness, Lady Spielman. Within the immigration system, the Home Office determines eligibility for benefits, and most migrants with temporary visas cannot access the benefits system. Access to public funds and benefits is usually at the point of settlement, although the Home Office, as has been noted, is consulting on changing the rules on that and will respond in due course. Migrant children who are subject to the no recourse to public funds condition have access to initiatives in place across the UK to support disadvantaged children, including free school meals, subject to certain eligibility thresholds, and support for children with special educational needs or disabilities. We are also looking to develop our understanding of that and its impacts for new questions in the Family Resources Survey.

Free school meals were raised by many noble Lords and Baronesses across the debate. Extending free school meals to all children in households on universal credit is a really significant step in tackling child poverty. I recognise the desire always to go further, but let us not just bank this and move on; let us look at this and see what a significant step it is. This expansion will lift around 100,000 children out of poverty and put money back into the pockets of families who need it most. We all know that children who are not hungry are more likely to attend school, to get better results and to improve their long-term life chances. That is one of my answers to the noble Baroness, Lady Coffey, about who should get them and who should not.

I am afraid I will not be able to do all that the right reverend Prelate the Bishop of Leicester would like, but I can tell him that the DfE is updating the eligibility checking system, which will make it easier for local authorities and schools to check whether children are eligible for free school meals and to ensure they receive a healthy, nutritious meal during the school day. I take his point about changes in the system, but local authorities are already taking innovative approaches to maximising take-up. For example, Sheffield runs an annual data-matching exercise using pupil records and housing benefit data to identify eligible children, which it can justify under its duty to support eligible children. I will undertake to make sure that the right reverend Prelate’s remarks on this are shared with my colleagues in the Department for Education, because he gave a lot of attention to it. I will make sure it is looked at carefully.

On the matter of free school meals, as a word to my noble friend Lord Brooke, we propose to make changes related to increasing fibre, reducing sugar and further restricting foods higher in fat, sugar and salt in free school meals, in line with the nutritional advice set by the Scientific Advisory Committee on Nutrition.

The question of employment was raised repeatedly, and it is incredibly important. It is one of the places I take issue with the noble Baroness, Lady Spielman, who mischaracterised the child poverty strategy as being about trying to get people to stay on benefits. I hope I have made clear that growing up in poverty makes children less likely to be in work, get skills and achieve as adults, so our job is to make sure we help lift them out of poverty to give them the best chance. We also want to get parents into work, so our new jobs and careers service will give tailored employment support, taking into account their circumstances, to get them into work.

Although parental employment is high, we are also aware that almost three-quarters of children in poverty live in working households. My noble friends Lord Hendy and Lord Sikka raised the question of in-work poverty and low wages. The Government are clear: work should be a route out of poverty. That is why the strategy takes action to support people into work and to improve incomes for working families. We have increased the national living wage, and I should pause to pay tribute to my noble friend Lady Donaghy for all that she did in making sure that we had a national minimum wage in the first place—another achievement of hers but also of a previous Labour Government. We will also look to increase access to affordable childcare so that more parents can take up and progress in employment; I will come back to that if time permits. We are improving universal credit to make sure that families keep more of what they earn, including reducing deductions, and we have increased the basic rate for the first time, but we are also tackling the cost of essentials.

We are doing a lot to invest in childcare. We are investing £82 million in over 600 school-based nurseries, creating 11,000 new places by September next year. For those on universal credit, we are improving the process for claiming support for childcare costs, removing cost caps so parents can get more money if they have more than two children; and there is a lot more out there for supporting families.

I turn to some of the questions that have been asked. The subject of education was raised by a number of colleagues, including my noble friends Lord Kestenbaum and Lady Blower. On the point about inspiring teachers, when my noble friend Lord Kestenbaum said that, I bet that every one of us thought for a moment of an inspiring teacher from our childhoods. I certainly think of Miss Scriven and Mrs Scriven—both in my school but, weirdly, unrelated—both of whom inspired me. I pay tribute to all those who are teaching now and to organisations like Teach First, bringing people into teaching to inspire the children so that we have people there enabling them to have a future.

Child poverty impacts all aspects of education. As I said, children who are hungry or living in unsuitable accommodation struggle to learn, but the fact is that schools also end up diverting energy and time to dealing with hardship rather than just teaching children. Again, getting the child poverty strategy right can help to free that up.

I am advised there are 4,654 more teachers—approximately—in 2025-26 than a year earlier, and our delivery plan was published in February to show that we are setting out to recruit 6,500 teachers in secondary and further education over the course of this Parliament.

My noble friend Lady Nargund made some important points about health inequalities. I cannot respond to all of them, but I will pick them up and talk to my noble friend Lady Merron, who is sitting next to me, about these matters from a health perspective.

In our 10-year health plan, we are expanding mental health support teams to cover all schools by 2029, an issue raised by my noble friend Lord Brooke. We are increasing the value of Healthy Start vouchers so that more families can buy the nutritious food they need. We have detailed the rollout of a supervised toothbrushing programme; it is shocking that tooth decay is the most common reason why children are admitted to hospital. Through the 10-year health plan, we are committed to expanding funding for healthy babies to cover all areas over the next decade.

A number of noble Lords asked about homelessness and housing. Homelessness levels are far too high, and we recognise the devastating impact that has on children’s lives, so we are taking action across the system to prevent homelessness and support families who are affected. We are investing £1 billion this year in homelessness and rough sleeping services, alongside further funding for local authorities to prevent families entering temporary accommodation in the first place. We are also making the biggest investment in social and affordable housing in a generation, alongside measures such as the Renters’ Rights Act to strengthen security for tenants and help protect families from losing their homes.

I was asked about the local housing allowance. The Government had to take difficult decisions at the Autumn Budget and prioritise measures that had the biggest impact on reducing child poverty, such as the removal of the two-child limit. It is difficult, because we already spend around £37 billion a year on housing support, including some £13 billion in the private rented sector. However, we are doing the most important thing to attack the gaps in and levels of rents, which is to address the underlying problem of a lack housing supply. That is why £39 billion is being invested in the Social and Affordable Homes Programme.

We continue to support households that are struggling with housing payments, through the Crisis and Resilience Fund housing payments in England and discretionary housing payments in Scotland and Wales. We also need to address the quality of homes, an issue raised by my noble friend Lady Nargund and others. The Government are introducing stronger standards and protection, including Awaab’s law, to tackle serious hazards, putting in new electrical safety regulations and a future decent homes standard.

My noble friend Lady Nargund raised the terrible situation of the death of children linked to temporary accommodation. The death of any child is devastating, and it is imperative that we prevent deaths caused by unsuitable accommodation or gaps in care. So we are taking a cross-government approach to strengthen protections and improve the experience of families in temporary accommodation, including eliminating the use of B&Bs for families except in emergencies. We are acting to prevent harm by introducing proactive health outreach for families, improving data through a new clinical code for children in temporary accommodation and ending the practice of discharging newborns into unsuitable housing.

My noble friend Lord Brooke raised questions around children and obesity. There are complex issues around obesity and poverty, as I know he understands very well. We are taking decisive action on the crisis of childhood obesity. We are restricting the advertising of junk food; we have consulted on proposals to ban the sale of high-caffeine drinks to children; and we have given local councils stronger powers to limit schoolchildren’s access to fast food. Defra is also taking important steps to address the whole issue of food, including developing good food neighbourhoods and working with local authorities to support community-led initiatives such as food clubs, community kitchens and nutrition programmes. I will return to the points raised by the right reverend Prelate the Bishop of Peterborough in a moment.

I was pleased that my noble friend Lady Paul raised the question of boys, and disadvantaged boys in particular. I recently attended an interministerial group chaired by the Deputy Prime Minister on the question of men and boys. We were talking about this very issue. The evidence about school attainment and the outcomes for boys is shocking. It will continue to be a focus in how the Government consider groups at particular risk of poverty, and their outcomes in childhood and later life. I will share my noble friend’s comments on this matter with my right honourable friend.

A number of noble Lords mentioned the benefit cap, including my noble friends Lord Babudu and Lady Lister, and the noble Baroness, Lady Teather. The Government believe that, where possible, it is in the interests of children to be in working households. Being in work substantially reduces the chance of poverty. The poverty rate of children living in households where all adults work is 16%, compared with 60% for children in households where no adults work. The benefit cap limits the total amount of benefits a working-age household can receive. But people who are working and earning at least £881 a month are exempt from the benefit cap, and there is also protection for the most vulnerable, as those in receipt of care or disability benefits are exempt from the cap. I know my noble friend Lady Lister knows that there is a statutory obligation to review the levels of the cap at least once every five years. They were last reviewed in November 2022 and, as such, they will have to be reviewed by November 2027. That will happen at a time the Secretary of State believes appropriate, but by that date.

The question was raised about partnerships and working with voluntary organisations. The noble Baroness, Lady Wheatcroft, gave a really interesting example. I would be grateful if she would let me have some more information about the charity: I like the sound of what was being described there. The point that she and others made—about the importance of children arriving at school at least ready to learn, or ready to engage with other children—is incredibly important. It is one of the things that I found so important when we developed Sure Start. The question of how to engage families is really important. In the Sure Start days, it was the very universality that reduced the stigma and therefore made it easier to get engagement. You could go along for a dental check-up and while you were there, other things could get picked up. But we are doing really important work with Best Start Family Hubs, which are reaching out, and that will be a way in which we develop this in the future.

We also recognise more broadly the voluntary and charitable work done by so many charities, and we are, for example, establishing the £500 million better futures fund, and the world’s largest social outcomes fund—a point raised by my noble friend Lord John—to support vulnerable children and families, and unlock up to £1 billion in total funding through collaboration with charities.

I was grateful to the right reverend Prelate the Bishop of Peterborough for describing what was happening at the Woodford Halse Community Larder. I recognise some of that: I visited some community larders, which are wonderful. I loved her point about the importance of dignity. This is about human dignity and attacking poverty is fundamentally about human dignity. On Monday I was invited by another bishop to visit a brilliant charity in Grimsby working with local, very disadvantaged families, supporting children and young people in a brilliant way. I found it inspiring and I was very pleased to hear more about it. I am always interested to hear examples of good practice, so I encourage anyone to let me have them. I am always happy to go and visit projects, so if noble Lords have things they would like me to go and visit, do please get in touch.

We are looking forward to engaging continually as we go forward. We had wonderful engagements with voluntary, community and faith organisations in developing the strategy, and those will carry on. I know that my honourable friend the Minister for Employment was very grateful to the right reverend Prelate the Bishop of Leicester for bringing together a multi-faith group to meet her. That is an engagement she looks forward to carrying on.

The noble Baroness, Lady Coffey, raised questions about metrics. I recognise that these are Labour debates, so I thank her for taking the time to come and do this, especially late on a Thursday afternoon. She and the noble Baroness, Lady Spielman, raised questions about metrics. First, I must say to the noble Baroness, Lady Spielman, that “relative low income” is not some random measure that this Government came up with. It is the internationally recognised measure of poverty which reflects changing living standards over time. The reason we put in more than one measure is to get a rounded view, so we are going to use that. But deep material poverty is a new measure which is based on material deprivation, and together they will help give us a more rounded picture of what poverty looks like in the UK.

The noble Baroness, Lady Coffey, also raised the issue of debt. The Best Start Family Hubs are designed to be a gateway to the full range of support that families need. Every hub will connect families to debt advice where it is needed, and that is something that can be really important.

The noble Baroness, Lady Smith, raised the question of how we will work with Wales. We are committed to continued collaboration with the devolved Governments to tackle child poverty across the UK. Specifically, we are committed to making sure that the UK-wide strategy complements their efforts and does not detract from their own work on poverty reduction. I look forward to working with the noble Baroness’s colleagues on this matter.

My noble friend Lord Babudu asked about the commencement of the socioeconomic duty. This Government are committed to ensuring that everyone can thrive, no matter their background, and we will commence the socioeconomic duty on public bodies soon.

My noble friend Lord John made some important points about NEETs. We commissioned Alan Milburn’s report; we welcome it, and we are already acting, and are going to act even more strongly, on it. I welcome my noble friend’s points about growth. As a Government, we are completely committed to expanding growth. However, I would also say that growth in itself does not mean that child poverty will improve. We have to be determined to tackle it, and this Government are determined to tackle it wherever we find it, including in ethnic minority families—an important point that was raised by my noble friend Lord Sahota.

I am running out of time, so I simply want to say that this Government are determined to break down barriers to opportunity, deliver growth and raise living standards. We will invest in children and families because we believe in the value of every person and the contribution that they can make to society. Every pound we spend lifting children out of poverty invests in the future health, education and social security system of this country. We can save children from the consequences of poverty. A good childhood is in all our interests, and we owe it to the children of our country to give them the best possible start in life.

I am grateful to all noble Lords for their contributions to this most important of subjects. It is not only the fight of our lives but a source of, and an opportunity for, real hope for the future. Let us work together to do it.

Health-related Benefits Assessments

Baroness Sherlock Excerpts

Monday 8th June 2026 Lords Chamber

[Baroness Maclean of Redditch]

To ask His Majesty’s Government what assessment they have made of the value of mandating that (1) all, or (2) more, health-related benefits assessments be conducted in person.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, face-to-face assessments are an important part of our multichannel approach. For some individuals, they are the best way for us to understand the impacts of their health condition or disability, and they can help boost public confidence in the health assessment system. This Government are committed to increasing the number of face-to-face assessments while acknowledging that remote assessments also have a role.

[Baroness Maclean of Redditch (Con)]

I thank the Minister for her Answer. She will know that the number of young people on health-related benefits has risen by more than 50% over the last five years and that four out of five of them are claiming for mental health or neurodiversity conditions. Yet these assessments, I understand, are largely carried out over the phone, when surely people would need to be seen face to face to assess what is wrong with them. Why is the Government’s ambition, as set out in the Timms review, to raise the assessments to 30% so low? Why not make it 100%?

[Baroness Sherlock (Lab)]

My Lords, I agree with the noble Baroness about the challenge that we face with the number of young people not in employment, education or training. That is why the Government commissioned the Milburn review, and why we welcome that report, and that is why we have action clearly going on in this space. The Government are committed to increasing the number of assessments. There is a range of reasons why it is taking time. The noble Baroness may not be aware that, for example, before Covid, assessments were pretty much all done face to face. They collapsed in Covid and the numbers have barely come back up since. In 2023, about a year before the general election, the previous Government signed long-term contracts, making sure that most assessors could work from home. I understand why that would be attractive—because they can be anywhere in the country—and so it is a bit of a challenge trying to get face-to-face assessments in the right parts of the country. We are working with contractors and driving up face-to-face assessments. We will do the right thing and we are attacking this problem.

[Lord Palmer of Childs Hill (LD)]

My Lords, can the department cope with more face-to-face assessments? How long will it take to put that into effect? Has the department come up with any other suggestions of how assessments can be made, particularly for people suffering from health issues which may make face-to-face assessments quite difficult?

[Baroness Sherlock (Lab)]

The noble Lord raises an important point and I am grateful to him. There have traditionally been different ways of doing assessments: some are face to face, some are on the telephone and some are video assessments. The starting point is that the health professional must look at and assess all the written evidence—from the GP and the hospital, and evidence provided by the claimant—and then make a decision. There are some cases where, clearly, face to face is right, for reasons of identity verification, wanting to get details they cannot easily get online, where there is a physical examination and so on. There are other cases where people may have a particular reasonable adjustment that they need—it may be difficult for them to get to a centre—and for them a face-to-face assessment is not appropriate. We want to maintain all those things but drive up the proportion of face-to-face assessments to get the right results for individuals and for the taxpayer.

[Lord Watts (Lab)]

My Lords, I want to be clear that this is a policy that was introduced by the last Government, who had no policies whatever to address the problem. It has been left to this Government to come forward with policies that will address the problem. Is that correct?

[Baroness Sherlock (Lab)]

That is so often correct, I have to say to my noble friend. In this case, we are in a situation where we are doing all we can to drive up face-to-face assessments. The most important question is that we get everyone into work who possibly can work. The biggest crisis of our time is in relation to young people. That is where the Secretary of State has put his focus; he has prioritised addressing the million young people we have not in employment, education or training. That is why we are investing in the youth guarantee, in support for employers, in subsidies for wages and in making sure we go out there to find the challenges and get people into work. This Government are doing something about that problem.

[Baroness Finlay of Llandaff (CB)]

How many long-term claimants with severe long-term disabilities, who will never have a life devoid of dependence on disability benefits, has it been agreed will not be recalled to assessment—assessments which proved to be futile and quite damaging to their whole persona as they feel they are not being believed? These are often people who have got severe brain damage or ongoing congenital abnormalities and genetic difficulties.

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness for raising such an important point and for her work and expertise in this area. Our job is to make sure that we assess the right people at the right time. There is always a danger when debating this that we forget the significant number of people who are absolutely dependent on sickness and disability benefits; frankly, most of them would give anything to not be dependent on those benefits and to not have had the condition, injury or accident that transformed their lives for ever.

Our job is to make sure that those who need our support get it. We have been looking at the way we review things, so that we are reviewing the right people to make sure they get the right level of award. If it gives the noble Baroness some reassurance, there will be cases where the health assessor can clearly make a judgment based on the medical evidence alone. In those cases, they will not necessarily need to see somebody face to face or call them to an assessment. Where there is any doubt, however, we need to make sure that people get the right support if they are entitled to it and give confidence to the public that we are doing those assessments in the right way.

[Lord Hayward (Con)]

My Lords, I was interested by the answer the Minister gave to my noble friend in relation to the signed contracts for work being undertaken virtually. Could she clarify whether there is an expiration date, or a time limit in some form or another, for these contracts in order that you can bring people back to a face-to-face arrangement quickly?

[Baroness Sherlock (Lab)]

These were long-term contracts and were signed only in late 2023 and took effect shortly after, but we are not simply taking that as meaning that we cannot do anything. We are in close negotiations with all the contractors to look at how we can drive up the proportion of face-to-face assessments. It will take time because, having started with so many being home-based, we have to make sure we can get the numbers back up in time. There are limited numbers and assessors have to be either a registered doctor, a nurse, an occupational therapist or a physiotherapist; they have to be trained in disability assessment medicine; and they have to engage in continuous professional development. We need to make sure they are properly qualified to make those assessments, but we are working to get the numbers up as fast as we can.

[Baroness Nargund (Lab)]

My Lords, I thank the Minister for reassuring us that face-to-face appointments will be increased with trained professionals. I welcome the DWP initiative to reform the fit note system. There are millions of women who are absent from work due to women’s health problems and nearly 60,000 women are leaving work every year due to menopausal symptoms. What conversations has my noble friend the Minister had to ensure workplace adjustments will be made to get these women back to work or into new employment?

--- Later in debate ---

[Baroness Sherlock (Lab)]

My noble friend raises a very important point—and one that I suspect at least maybe half of the House could empathise with in some way. I reassure my noble friend that the Government take menopause support seriously. We have been doing work specifically on this, having appointed a menopause champion, and are looking at women who are experiencing severe menopausal and perimenopausal symptoms and how that impacts their work.

This ties in with our reform of fit notes—we are piloting new ways to make the fit note system work better—and, crucially, the work we are doing with employers. We know that employers want to support their staff to keep them in work. We do not want women falling out of work unnecessarily when they hit the menopause for either lack of preparation or support on their part or from their doctors, or because employers do not understand and cannot make appropriate adjustments. I am really grateful to my noble friend for raising this.

[Baroness Stedman-Scott (Con)]

My Lords, between July 2024 and July 2025, 1.1 million assessments were carried out remotely. Three-quarters of those were conducted by telephone and just 3% were conducted by video link. Notwithstanding the answers the Minister has given us already, how can a DWP assessor properly judge whether someone has significant difficulty with daily living or mobility as a result of their condition when the assessment is conducted by telephone and the assessor can hear but cannot see the person concerned?

[Baroness Sherlock (Lab)]

I will not dwell on the point that the challenge we are facing is the challenge the previous Government faced, and we did not invent telephone assessments.

The noble Baroness raises an important point. The truth is that it depends on the case. The job of the health professional is to begin by looking at all the written evidence. As I said previously, sometimes that will mean that a case can be absolutely ruled in, or indeed ruled out, but there may be circumstances in which more information is needed. Video assessments can be effective in that, so can face-to-face assessments, but it depends on the nature of the question. There are questions that can be addressed in a telephone assessment. The same core assessment process is used across the piece to gather evidence and ask the right questions, so the health professional can justify their decision. At any point, if they need a different kind of assessment, then it is their job to request it. We want to make sure we have more face-to-face appointments available, but we want to make sure we get people into the most appropriate assessment, so we can get through assessments as fast as possible, get people who need help the right help, and get people who should not be getting help into work.

Reforming the Child Maintenance Service (Public Services Committee Report)

Baroness Sherlock Excerpts

Monday 8th June 2026 Grand Committee

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to all noble Lords who have spoken and to the Public Services Committee, especially the former chair, my noble friend Lady Morris of Yardley, for her serious work on this. I am also grateful for the detailed and constructive report and express my thanks to the clerks who worked on it and the witnesses who informed it.

The Government share the committee’s focus on two priorities: helping children in separated families to avoid poverty and ensuring that both parents contribute their fair share. As was observed by various noble Lords, children do not choose for their parents to break up, and partners may leave each other, but they do not leave their children. The CMS plays a vital role in improving outcomes for children in separated families.

My noble friend Lady Morris said that I summarised at the end of my appearance—I apologise for what was clearly a long waffle beforehand—that the CMS’s job is

“to get money to kids”.

That is absolutely its job, and it does it: through both family-based arrangements and those made by the CMS, an estimated £2.9 billion is transferred each year to children in separated families, keeping around 120,000 children out of poverty. For clarity, “poverty” here means relative low income after housing costs. As has been pointed out, tackling child poverty is at the heart of this Government’s mission to break down barriers to opportunity. We estimate that the child poverty strategy that has been brought out will lift 550,000 children out of poverty in the final year of this Parliament.

But the committee is right: too many children still do not receive the support that they are due. So this Government have set out ambitions for the CMS to help change this. We want to deliver a fair and trustworthy service that is more accessible to parents, particularly those who are vulnerable, and we want to tackle non-compliance head on by moving to a single, streamlined service, where we can quickly identify and tackle missed payments.

I will try to cover the very range of things I have done in 20 minutes. When I fail, I will write to pick up those questions that I do not manage to answer. Even at the speed I speak, I do not think I will get through them all, but I will try to slow down so that Hansard can pick it up—if not passing dogs.

I say at the start that we all need to be realistic about this. I was struck by the fact that eight of us have spoken, of whom three either are or have been Ministers with responsibility for the Child Maintenance Service, either directly or from a more exalted standpoint. Successive Governments have brought in reforms of different kinds, yet we keep hearing about problems. Our job is to recognise that, when we are dealing with something as challenging as a service that faces parents at probably the worst point in their lives—when their lives have fallen apart and things are incredibly tense—the state needs to step in, as my noble friend Lady Morris said. But we must also recognise that the state cannot solve that problem, so it has to do all it can to encourage and enable parents to support their kids. We will keep pursuing continuous improvement, but I do not want to raise the idea that there is a single silver bullet. If there was, previous Governments would have found it, and the Ministers around this table would certainly have fired it—I have no doubt about that. I will do my best.

Let us talk about the removal of Direct Pay. It absolutely remains our complete and firm intention to legislate to remove Direct Pay, which we estimate could result in around 20,000 fewer children living in poverty. Moving to a single service, where the CMS monitors and transfers payments, will address the long-standing issues highlighted by our research into Direct Pay, including hidden non-compliance and the burden on parents having to chase payments themselves. It will also reduce unwanted contact between parents.

I realise that I have failed completely to persuade the noble Baroness, Lady Coffey, of the case for doing this. I will have a brief go, but I listened carefully to her comments. At the heart of this is the fact that, under the current Direct Pay model, the CMS cannot routinely monitor payments. That means that non-compliance can go undetected unless a parent reports an issue. Our research on this is interesting. It suggests clearly that only 60% of receiving parents report receiving the full amount due and that only 40% get it on time. Direct Pay is not performing brilliantly, and there are problems in Collect and Pay. We now know that Direct Pay is hiding significant amounts of non-compliance, so moving into a single service will enable routine monitoring, allowing earlier identification of missed payments and intervention.

Let us face it: Collect and Pay is made up of previously ineffective Direct Pay cases. Under the previous reforms, you can get into Collect and Pay only if you fail in Direct Pay, so Collect and Pay involves the people who did not manage to make it work in Direct Pay. Collect and Pay shows that, when payment behaviour is visible and enforceable, just over half of parents are fully compliant and a further quarter are partially compliant. Given that those are the difficult cases, that is something we need to hold on to.

Under those reforms, well-functioning Direct Pay cases should carry on. If things are working, there is no reason to assume that they cannot continue in a family-based arrangement, as long as we provide support with the calculation. If they are not working, they come into the main system. That will help compliance, and it will benefit victims and survivors of domestic abuse by removing the need for parents to chase missed payments or engage with each other. We will work closely with domestic abuse organisations to ensure that communications and support are safe, targeted and effective. The reality is that, when Direct Pay is removed, the level of non-compliance we anticipate being revealed could indeed put a bump in the statistics on non-compliant cases. But all that would be doing is surfacing hidden non-compliance in Direct Pay, not creating new levels of non-compliance.

Noble Lords are understandably keen to find out about the timing. As I have said, our firm intention is to remove Direct Pay, but we will have to wait to get primary legislation to do so. I want to make the changes as soon as possible, but the Committee will understand that the Government have a crowded legislative agenda and we have to take our place in that alongside the many other vital reforms that departments are pursuing. We are continuing to develop legislation on a range of matters related to welfare reform and I remain determined to legislate on this and other important matters as soon as parliamentary time allows. In the meantime, we are taking action to make it easier for parents to switch to the Collect and Pay service through our improvements to the change to service type process and being clear in our communication about what support is available for victims and survivors of domestic abuse.

On the additional workload—I have totally failed to persuade the noble Baroness, Lady Coffey, on this, too; my track record is not excellent here, but let me try again—I reassure the Committee that compliant Direct Pay cases require the same amount of work and caseworker resource as compliant cases in Collect and Pay. The main extra cost to DWP as a result of these reforms will be administering previously unidentified non-compliant cases. If the workload goes up, it will get in money from cases that at the moment are simply hidden.

There are also benefits in two other areas. First, some compliant cases will move to family-based arrangements and will not require the CMS to intervene at all. Secondly, the removal of the process of changing them from one to the other accounts for around 1,000 cases a month, and the resources released by ending that burden will be redirected where they are most needed, supporting the increased volume of cases that need support from the CMS.

The noble Lord, Lord Farmer, and others raised domestic abuse. The CMS has substantially strengthened its processes, due in no small part to the work of his supporter, Samantha Callan. I am very grateful for that work, which the department has read and benefited greatly from. We have certainly improved caseworker training and signposting resources, with a dedicated domestic abuse plan for caseworkers to follow in supporting victims. I think the noble Baroness, Lady Coffey, mentioned the Domestic Abuse Act. We know from our research that most victims and survivors of domestic abuse are unlikely to have enough evidence to pass the tests we would have to apply were we to introduce the provisions of that Act. The Act requires the Secretary of State to set out evidence requirements for domestic abuse in regulations. My latest and best advice from officials looking at this in detail is that that evidence would have to be court-based. That is because it would need to be verifiable and, when it is provided, could not be disputed by the other party because it has already been litigated. Someone could try to JR it, but if it has been through the courts that gets more difficult.

For victims and survivors who have enough evidence, we know it can be traumatic for them to relive the abuse by having to produce it and go through it again. We want to avoid that wherever possible. Our priority has to be making the CMS more effective at supporting all victims and survivors engaging directly with the service. However, I want to reassure the Committee that we are not closing the door on this; we will continue to explore evidence-based ways that could allow us to commence the Act in future, should it be needed as part of a broader package.

I turn to the calculation, which my noble friend Lady Morris and many others commented on. We looked carefully at the committee’s recommendations. We recognise that, to secure voluntary compliance, parents need to have faith that the amounts are fair and understand how they are calculated. That is why we conducted a review of the child maintenance calculation, focusing on ensuring that it strikes the right balance between both parents to encourage compliance and secure money for kids.

For the record, I will say what we will and will not be doing on this. Following the review, I am pleased to advise the Committee that we plan to reduce the income tolerance from 25% to 15% so that changes to income are captured more quickly and assessments remain fair to both parents. I hope that makes my noble friend Lady Morris happier. She spoke about things such as rental income; we will include unearned income within the standard calculation, which will ensure that liabilities more accurately reflect parents’ full financial circumstances. Those reforms will help ensure that the system better reflects how families earn and receive income today, helping deliver more consistent support for children.

We looked carefully at the committee’s recommendations on how child maintenance is calculated. While we agree with the spirit of many of them, we will not be adopting them, which I know will be disappointing. For example, we know from the experience of before the child support system was introduced that the family court approach added complexity, created delays and reduced the number of children able to benefit from maintenance. We are determined to avoid that. I take the points made by the noble Baroness, Lady Deech, whose expertise obviously far exceeds mine in this area. However, having looked at the problems created—this was the reason the administrative system was introduced in the first place—we do not feel that that is the way forward.

I will say that there are ways in which the court can do things. Parents are not obliged to use the CMS. They can, if they both choose, make their own arrangements or seek an order through the courts if they agree. Once a court order for child maintenance is in place, after 12 months someone can choose to come to the CMS. The courts also play a role where receiving parents want top-up above the threshold for the Commons, but we think that, fundamentally, for the bulk of parents an administrative system is the way forward.

We looked at whether more significant changes to the calculation, including changes to the rates and thresholds, would deliver the improvements in fairness and compliance that we wanted. As part of this, we undertook extensive research with users of the service, which has now been published, to understand how parents’ behaviours may be impacted by potential changes. Having carefully considered that research and other evidence through the review, it is clear that the case for proceeding with such large-scale change is currently not sufficiently strong. We will therefore not be moving to reform rates and thresholds at this time.

We are confident that the current approach, which uses HMRC income information to assess liabilities, provides stability and certainty for parents, subject to the changes that I have mentioned about the sensitivity threshold and types of unearned income. It gives us the flexibility to reflect a parent’s current income in the calculation where appropriate, which we can verify using real-time information for PAYE-paying parents. Alongside that, the variation process plays a crucial role; it allows parents to ask us to consider income or expenses falling outside the standard calculation, so that works better.

I am conscious of time, but I shall say another word on that. The judgment was in the end that the sharp end of the calculation is essentially a zero-sum game. If the amount of money due for one parent goes up, that received by the other parent goes down. That means that any reform affects the whole case load in extraordinarily different ways, and makes it very difficult to target any changes that would reliably ease affordability for the right parents without substantially reducing liability for many parents who are only just managing to support their children at existing levels.

The evidence that we have found does not demonstrate that the reform of rates of thresholds would deliver a meaningful improvement in the amount of maintenance paid. For example, we looked at making a change in the form of a hypothetical increase to the flat rate. Both receiving and paying parents felt that the change would have limited impact: receiving parents genuinely viewed modest increases as not enough to make a meaningful difference; paying parents felt that even a small increase would add to financial strain and be difficult to manage. In the end, we felt that this was not the time to do it. Changing liabilities during a period of continued cost of living pressures could inadvertently risk destabilising existing arrangements and result in lower compliance. I recognise that that is a disappointment to the Committee, but I wanted to be clear about opposition on that.

I turn to another favourite subject, implementing administrative liability orders. Work is still under way to implement ALOs. As the Committee knows, while child maintenance is reserved, enforcement in Scotland has to be carried out through the Scottish judicial system, which is devolved. We are working very closely with His Majesty’s Courts and Tribunals Service and the Scottish Government to get ALOs operating across Great Britain, and we will introduce the necessary legislation as soon as possible.

Just to be clear, it is the Scottish judicial system through which we would have to implement this, but there are complexities there. It turns out that uncoupling the liability order from the rather complex Scottish judicial process while retaining the ability to exercise the full range of enforcement measures through Scottish courts has proven significantly more challenging than I assume was envisaged when work began on commencing the powers in the 2023 Act by the noble Baroness, Lady Coffey. My department is working closely with the Office of the Advocate General and other key powers in the Scottish judicial system to find a solution that works that for everyone. I have personally spoken with the Advocate-General to make sure that we have her full support.

In response to the noble Baroness, Lady Coffey, I looked at commencing the powers in different parts of the UK at different times but, as it turns out, that simply creates different legal problems and operational challenges, as well as meaning that not everyone benefits. Nobody wants this to be implemented quickly more than I do; as soon as it possibly can be, it will be.

I want to clarify one thing on enforcement. The idea that there is no enforcement if you pay anything at all is simply not true. Stats are collected on those who pay anything to show compliance. There are technical reasons for not using stats showing 100% compliance or not, which I think we explained to the committee at times—but essentially I can write and explain that in detail, if it is helpful. There are technical reasons why parents who are in fact paying what we tell them may not show as paying 100% compliance, which both my predecessors as Ministers will understand. I should be happy to write if it was helpful to pursue that.

Also on enforcement, I am absolutely with the noble Baroness, Lady Stedman-Scott: I, too, have been shocked by the extent to which some people will go to avoid paying for their children. Having said that, I want to say that most parents want to do the right thing: they want to pay for their children and pay up, and our job is to help them to do it—but where they do not, it is right to go after them. Like the noble Baroness, I have been so impressed by the colleagues that I have met. I have visited child maintenance offices and our enforcement colleagues are doing everything that they can: they are brilliant, and I am grateful to the noble Baroness for saying that. The CMS has lots of fantastic staff and brilliant leadership, determined to keep driving for improvement, and it is really nice to hear that said, because otherwise they hear all the criticisms, as if we do not know the really good work that they do and how hard they work. There is not much more that I can say on that in the short term.

Let me try to rattle through things in my remaining four minutes. The noble Lord, Lord Farmer, and the noble Baronesses, Lady Pidgeon and Lady Stedman-Scott, asked some excellent questions about supporting parents. Noble Lords may be interested to know that we are looking at a range of new tools and guidance to support separated families, to help them make informed financial decisions and to help them choose the best option for them. These include enhancing the online calculator, by aligning it more closely with the statutory application to strengthen confidence in the estimates, and providing better ongoing support for family-based arrangements. When the reforms to abolish Direct Pay go ahead, parents will be given information to help them judge the suitability of a family-based operation, as well as on how to go ahead with the CMS if that is the way that they want to go. We are also working across government with the Ministry of Justice to look at how it is developing digital tools for post-separation contact and to make sure that it can align with what the CMS is doing, in order to support parents in making safe and sustainable family-based arrangements.

The noble Baroness, Lady Pidgeon, and the noble Lord, Lord Farmer, mentioned family hubs. The family hub presence should offer universal materials and information about how to book on to services for separated families, including signposting parents to the Child Maintenance Service. The hubs are deliberately designed to be a gateway to the full range of support that families need, so every hub will connect families to debt advice, welfare support, housing support and support with the cost of living. Child maintenance officials are working really closely with DfE colleagues to identify all the opportunities to share information about the CMS through the family hubs, so that they can do that. This is a really great opportunity. Obviously, because it is for everybody, we hope that it will also reach those parents; we are really working on that.

The noble Lord, Lord Farmer, also asked what we are doing to increase confidence in the CMS. There are two things here. First, despite what we have heard here today, we need to be clear that, although there are hard cases that test the service, overall, the service is much better than it used to be and most people’s cases run reasonably smoothly. People are still applying in large numbers. In fact, there has been an increase: as of last December, we are at almost 800,000 cases, up from 640,000 just three years earlier. So large numbers of people are coming and using the service and, within that, compliance has been going up.

We are not complacent, but I do work really hard to reach out. I run surgeries for MPs. We engage with stakeholder organisations. We go out there and talk. We are doing a lot. The CMS’s modernisation programme is also doing a lot to communicate with parents and to make it easier for them to find information. It is running targeted social media campaigns, including signposting people to tools and trying to move things along. We need to get the word out there: “The CMS is there for you, and it works”.

I may have to write on the mediation voucher but, again, I am really pleased with how it is going; I am grateful to the noble Lord for acknowledging that. The scheme is working well and has been heavily promoted.

I have only 15 seconds left. The noble Baroness, Lady Coffey, mentioned back-to-work employment. The Government are committed to supporting people into work; I will not go through all of that, but we are doing a huge amount there. However, survey evidence and CMS calculations suggest that the majority of paying parents are in work, so our job is to support them in this.

I am running out of time; I have only 10 seconds left. Let me simply say how grateful I am to the committee for its work and how determined I am to make this service work. The noble Baroness, Lady Morris, started by saying that I care about this issue; I am grateful to the noble Baroness, Lady Pidgeon, for acknowledging that. I absolutely do care, and I know that my whole department and the leadership of the CMS do too. We are determined to make this service the best it possibly can be; children and parents need it, and we will make it work.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Tuesday 28th April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, and do agree with the Commons in their Amendments 88C, 88E to 88P, 88R, 88S, 88W and 88Y to 88Z8 to the words restored to the Bill by the Commons disagreement to Lords Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88.

88Y: Clause 40, page 46, leave out lines 3 to 16 and insert—
“(4) In this section “qualifying asset” means an asset of a prescribed description that is held in a main default fund of a relevant Master Trust or group personal pension scheme.
(5) A description of asset may be prescribed under subsection (4) only if it represents a direct or indirect holding in any of the following asset classes—
(a) private equity;
(b) venture capital;
(c) private credit;
(d) interests in land;
(e) infrastructure;
(f) unlisted equity securities not falling within paragraphs (a) to (e).
In this subsection “unlisted equity securities” means equity securities not listed on a recognised stock exchange within the meaning of the Income Tax Acts (see section 1005 of the Income Tax Act 2007) (including equity securities admitted to trading that are not listed on such an exchange).”

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88Z8: Clause 40, page 51, leave out lines 14 to 16

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

Noble Lords will be aware that we have one outstanding issue on this Bill still in play. Unsurprisingly, it is the reserve power on asset allocation. As this is the fourth time the House has been asked to consider the question, I will spare noble Lords a detailed exposition of the merits of this policy. Let me simply say that the Government’s underlying position has not changed, reflecting our policy intent to ensure that savers’ best interests are secured by bigger and better pension schemes investing in a wide range of assets.

Today, the Government return to their previous amendments, all of which the elected House endorsed. These spell out the intended purpose of the reserve power to underpin the industry’s commitments in the Mansion House Accord and rule out other uses, such as a focus on any specific asset or asset class. Today, we are also bringing forward a final set of changes that aim to respond to points made in this House and the other place, while retaining the policy intent I have set out. These have three elements.

First, there is a new requirement on regulators, in this case the TPR and the FCA, to make an assessment of the extent to which there is evidence for the collective action problem that we have discussed in debates on this Bill. There will be a requirement for this assessment to be incorporated into the production of the ex-ante report that the Bill requires to be published before any use of the reserve power. Our amendments today would also place a duty on the Government to have regard to this regulatory assessment before any use of the power. It was always the Government’s intent to evaluate progress against the Mansion House Accord commitments in terms of the broad direction of travel over a substantial period of time rather than shorter-term movements in private asset exposure. To reinforce this, we also propose to add to the Bill that the power cannot be exercised any earlier than 2028.

Our second set of changes builds on the savers’ interest test to reinforce the central role of trustees and providers. Our amendment in lieu would change the bar required to engage the savers’ interest test. Rather than having to demonstrate that meeting the asset allocation requirements would be likely to cause material financial detriment, a scheme would instead have to show that meeting the requirement is likely not to be in the best interests of members. This reflects language regularly used when considering trustee duties. In addition, we have more tightly specified the regulator’s role, confining it to ensuring that the trustees’ or providers’ assessment of what is in the best interests of members is reasonable, rather than replacing that assessment with its own.

Thirdly, our amendments address worries about differential treatment of particular investment vehicles by allowing for consideration of direct or indirect holdings in the six asset classes named in the Mansion House Accord.

This Bill has its roots in much work that has been under way for some time in government but also in Labour’s commitment to ensure that workplace pension schemes take advantage of scale and invest in a wider range of productive assets. That was why one of the first things the Government did on taking office was to launch a comprehensive review of pensions investment. That review found clear evidence that the DC pensions market is operating with an excessively narrow focus on cost, to the detriment of saver outcomes. That is where the reserve power comes from. It exists because the review found, and the industry itself has told us publicly and privately, that the competitive pressure focused on cost minimisation is the single biggest barrier to diversifying in savers’ long-term interests.

Of course, things can change over time, and a range of other factors may come into play; the changes that we propose today address that worry and others. They require regulators to assess whether these competitive pressures remain a material barrier to more diverse private asset investment before any use of the power. They put trustees’ or providers’ assessments of savers’ best interests centre stage.

I am grateful for engagement across the House with this Bill and for the engagement with the opposition parties particularly in recent times. This House has done its job in revising this Bill, and I commend the government amendments to the House. I beg to move.

[Viscount Thurso (LD)]

My Lords, I rise for the last time in your Lordships’ House to congratulate the Minister, to thank her for all the hard work that she has done and to say how much I have appreciated my interaction with her. We have arrived at a perfect compromise in that none of us is entirely satisfied—which has always been the definition of a great compromise. We are in a place where the major concerns that many of us had on the mandate part of this Bill have been, if not removed, modified to the point at which they are liveable with. As the Minister said, it is this House at its best.

When I came into this House in 1995, if your Lordships had said to me, “The last time that you speak will be on the fourth ping-pong of a Pension Schemes Bill”, I would have said, “On your bike—not a chance”. However, I have enjoyed the work of being part of this Bill, and I think that both the Government and the Opposition have done their job well. I hope that when this goes on to the statute book, it will deliver for pensioners.

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[Baroness Sherlock (Lab)]

My Lords, I am very grateful to noble Lords for their remarks. I will not detain the House for long. I want to say just a couple of things.

One is that this Bill is about so much more than the reserve power. We should take a moment to think about what we have done. We have done some really significant work which will help to reshape the pensions landscape, to help get better returns for savers, as the noble Baroness, Lady Altmann, said. We have addressed questions of value for money, scale, lost pots, guided retirement, a superfund regime, and an uprating for PPF members. A huge amount has gone into this, and more besides. I am so grateful to the House for its detailed scrutiny. Bills such as this show the value of this House, when we get the time to crawl all over them. I like the characterisation given by the noble Viscount, Lord Thurso, which I think will outlive him: that when we are all a bit unhappy, we may well have landed in a place that we can live with.

I say thank you again to all noble Lords—I will not name them all because there are too many, but obviously they include the noble Baronesses, Lady Bowles, Lady Stedman-Scott and Lady Altmann—for their work on this and their engagement in recent times. I thank the noble Viscount, Lord Thurso, for his kind words about me—and I hope he took from the warmth of the House’s response how much his work is appreciated and how much he will be missed—and for all his years of public service.

Finally, I say to the noble Viscount, Lord Younger, on behalf of the House, that after 15 years on the Front Bench he deserves a break. There is a life outside here—said once more with feeling, as someone who is not far off that. I thank him for all those years of public service, his years as a Minister and his years on the Front Bench, for his courtesy, kindness and engagement, and for all the work that he has done. We wish him a very happy time outside this House. When he discovers the joys to be found beyond here, he may write back and tell us and we will just be very jealous.

In the meantime, with thanks to everybody, I beg to move.

Motion A agreed.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Monday 27th April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, and do agree with the Commons in their Amendments 88A, 88C, 88E to 88P and 88R to 88W to the words restored to the Bill by the Commons disagreement to Lords Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88.

88R: Clause 40, page 38, line 28, at end insert “See also section 28G (suspension of asset allocation requirement: savers’ interest test) for provision about circumstances in which the asset allocation requirement is suspended.”

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88W: Clause 40, page 51, line 11, at end insert—
“(ca) must require the Authority to provide reasons for any determination not to approve an application;”

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the other place has once again considered this House’s amendments and has once again disagreed with them, tabling further amendments in lieu. I will set out in a moment what those amendments contain, but I want first to say something about where we now find ourselves.

The elected House has now voted on the reserve power three times. On each occasion it has supported the Government’s position, by large majorities. This House has every right to scrutinise what is before it, and the quality of that scrutiny has improved the Bill. But we need to be clear about the context in which we are operating: these exchanges have gone on for some time, and the Government have moved a considerable distance.

Let me trace that distance briefly. In the first round, the Government wrote the Mansion House Accord targets into primary legislation—the 10% and 5% caps—and introduced the asset class neutrality requirement. In the second round, we went further: the sunset was brought forward to 2032; the power was restricted to a single use; the application was limited to main default funds; and we provided for the full repeal of the entire asset allocation framework at the end of 2035. This was not just the enabling power, but every associated provision—the approval requirements, the penalty regime, the review obligation, and any requirements that had been brought into force—removed from the statute book entirely.

Today, the other place agreed a third set of amendments. These address the savers’ interest test—the mechanism at Section 28G by which schemes can apply for an exemption from any asset allocation requirement. I know that the operation of this test has been a source of concern in this House, touching as it does on issues around trustees’ fiduciary responsibilities to savers. The Government have listened carefully to what has been said, while explaining the reason for their own position, which is, in essence, that these fiduciary duties have not to date been sufficient to overcome the distortion of asset allocation decisions by commercial pressures.

When we debated things last Wednesday, the noble Baronesses, Lady Altmann and Lady Bowles, described our position as believing a market failure to exist, and that is a fair characterisation. The Opposition argue that decisive government action to correct this market failure is not justified. We simply disagree. We believe that it is the Government’s duty to take the steps needed to further savers’ interests.

Our first new amendment, Amendment 88U, lowers the threshold for an exemption. The Bill, as drafted, would have allowed regulations to require a scheme to demonstrate that compliance would cause material financial detriment. That language attracted close scrutiny in this House. The noble Baroness, Lady Bowles, among others, questioned whether it set the bar too high, requiring proof of certainty. The threshold is now would “be likely to” cause. A scheme will need to show that detriment is the probable consequence of compliance, not that it is certain.

The second amendment, Amendment 88T, confirms in the Bill that where the threshold is met, the regulator must grant the exemption. The Government always intended the test to work that way. The Bill now states it clearly.

The third amendment, Amendment 88V, expressly requires the regulator to have due regard to the scheme’s own assessment of why compliance will be likely to cause material financial detriment. Schemes applying for an exemption must set out their reasoning, and the regulator will be under a statutory obligation to engage with it properly.

Noble Lords have argued that trustees and scheme managers are best placed to understand the circumstances of their members and that the regulator should give proper weight to their analysis. “Due regard” is established statutory language. It carries real legal weight, and it means the regulator cannot receive a scheme’s assessment and pass over it without proper consideration. I am aware that this type of language finds favour in a number of places in the House. I hope that noble Lords will recognise that the Government have engaged with the substance of what has been asked for.

The fourth amendment, Amendment 88W, requires the regulator to provide reasons for any decision to refuse an application. The Bill already provides for a right of appeal to the Upper Tribunal. This ensures that schemes have what they need to exercise that right—a right that is meaningful only if applicants know why they were turned down.

Let me set out what the reserve power now looks like, taken as a whole. It is capped at the accord targets. Regulations cannot concentrate requirements in a single asset class. The power applies only to main default funds. The percentage can be set only once. The power lapses if not used by the end of 2032. Even if used, the whole framework is repealed at the end of 2035. It remains subject to the affirmative procedure and to statutory reporting requirements before and after any use. The savers’ interest test now provides a lower threshold, certainty that an exemption will be granted where it is met, a statutory requirement for the regulator to give due regard to the scheme’s own reasoning and transparency about decisions if the application fails.

I understand the position of noble Lords who believe that this power should not exist at all. I have listened to those arguments with care throughout the passage of the Bill, but the Government’s view remains that the risk of inaction, of allowing the collective action problem to persist while pension savers bear the cost, is the greater risk. The Government have now brought forward three successive rounds of concessions, each responding to arguments made in this House, each written into primary legislation. The power that is now before noble Lords bears the imprint of this House’s scrutiny at every turn. Given all that, I ask noble Lords not to insist on their amendments and to agree the amendments proposed by the other place in lieu. I beg to move.

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[Baroness Sherlock (Lab)]

My Lords, my speech says, “I would like to thank all noble Lords who have spoken in today’s debate”—but that will not take long.

I will not hold us here for a long time, tempting though it is to go over the arguments in considerable detail, but I will say a couple of things. We need to remember that the whole purpose of the Pension Schemes Bill is to improve outcomes for savers. Where are savers in all of this? It is their interests that are there. The reason the Government are doing this is that the evidence is clear internationally that pension funds which have a small holding in private assets as part of a diversified portfolio bring better returns.

If there were a situation where that would not be in the interests of a particular scheme, that is the point of the savers’ interest test. This does not cut across fiduciary duty because, in fact, nothing in the Bill overrides that core principle of fiduciary duty. If trustees believe it not to be in their interests, not only can they make an application for an exemption under the savers’ interest test but we would expect their fiduciary duty to guide them to make that application. That really is the beginning and end of it.

I will simply say this. The whole point of the Bill is to make pensions better. This whole Bill will transform our pensions landscape. Pensions are the promise we make to millions of people that years of hard work will be rewarded with security and dignity in retirement. Bigger, better pension schemes will drive better returns, as well as tackling inefficiencies. We need to find a way to get the Bill agreed. Industry wants to get on with implementing the reforms and our pensioners want to start benefiting. The other place has expressed its view clearly, repeatedly and by substantial margins. I hope that noble Lords will reflect on whether it is right to ask the elected House to vote for a fourth time on a question to which it has given the same answer on every occasion. I ask noble Lords not to insist on their amendments and to agree the amendments proposed in lieu in the other place.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the arguments have been well rehearsed. I am not convinced that this coercion is as innocent as has been made out and I therefore wish to test the opinion of the House.

Chemicals (Health and Safety) (Amendment, Consequential and Transitional Provision) Regulations 2026

Baroness Sherlock Excerpts

Monday 27th April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the draft Regulations laid before the House on 24 February be approved.

Relevant document: 55th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I will come to the amendment from the noble Baroness, Lady Bennett, in a moment, but first, let me introduce the regulations. The measures in this instrument form an important part of the Government’s programme to ensure that Great Britain’s post-EU exit chemical supply regime is robust, proportionate and fit for the long term.

The regulations amend three pieces of assimilated EU chemicals legislation, rectifying issues that could not be addressed at the point of EU exit due to the limited powers available under the European Union (Withdrawal) Act 2018. I am satisfied that these regulations are compatible with the European Convention on Human Rights. They reflect the Government’s commitment to maintaining high standards of protection for human health and the environment, while ensuring that regulatory systems work efficiently for businesses and support sustainable economic growth.

In combination with the commitment from the Health and Safety Executive—HSE—to remain aligned with EU regulatory decisions other than in exceptional circumstances, the regulations create a framework by which EU chemical hazard classifications can be adopted more quickly in Great Britain. This supports the objective shared across chemical stakeholder groups to remain as aligned as possible with the EU to facilitate trade and to ensure that we maintain the high standards of protection we inherited from our closest trading partners.

The measures strike an important balance. They will introduce more certainty, flexibility and proportionality for suppliers of chemicals and the regulator while upholding a system that protects our natural environment from the risk of chemical pollution; protect those who use and work with hazardous chemical substances; and ensure that society can continue to benefit from the use of important biocides, such as those used to provide clean drinking water across Great Britain.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their thoughtful contributions. Although we are having this debate in the Chamber rather than in Grand Committee, it is always good to have the opportunity to scrutinise things. The noble Baroness, Lady Grender, made an important point. These things should not go through without any consideration. They are too important for that, and the chance to have the conversation is welcome.

The regulations introduce necessary changes to a highly technical set of regulatory regimes, but the changes preserve the high standards of protection we inherited from our time in the EU and ensure we can continue to recognise decisions made by the European Chemicals Agency, which remains highly respected. I will try to go through the points raised. I will not get to them all and I will have to write, for which I apologise. I will start with the list from the noble Baroness, Lady Bennett, as she tabled the amendment.

First, the noble Baroness asked about adding the EU’s SVHCs to our list. The Government intend to make secondary legislation by June 2027, providing for the incorporation of the six EU hazard classes in GB CLP. The noble Baroness, Lady Grender, also asked about that. The work on developing that is already under way, and the HSE is currently engaging with stakeholders to understand the potential impacts of aligning with the EU on CLP measures, including its hazard classes. It has issued a stakeholder impact survey for exactly that purpose.

The work has been progressed separately from the SI, as I explained, due to constraints in the REUL Act that prevent an overall increase in regulatory burdens. The Government have made it clear that reaching a negotiated SPS agreement with the EU is a key priority. Negotiations are ongoing but we are committed to reaching an agreement by the end of this year. Broadly, it is expected that the areas in scope will dynamically align with the relevant EU legislation. I hope that reassures noble Lords on that front.

To be clear, we will continue engaging with the EU and other international partners at the UN GHS to consider the scientific basis for the six EU hazard classes. As the noble Baroness, Lady Bennett, knows, discussions at the UN GHS have not yet concluded, so the outcomes of those discussions have not been determined. The UK will take into account the EU’s intended action in response to the outcomes of the UN GHS work when formulating our own position on the conclusions of the UN GHS consideration. I underscore that we intend to make legislation by June 2027 that provides for the incorporation of the six EU hazard classes in GB CLP, and that is being done separately for reasons I have just explained.

The noble Baronesses, Lady Stedman-Scott and Lady Bennett, raised questions about the resourcing of the HSE and its size. The HSE’s funding and its priorities and progress are monitored by the Government. DWP is the sponsor department for the HSE, and a delight it is. It is important work, much of which is at the centre of what we do. To be clear, the fundamental scientific judgments are not changing as part of our changing the regime here. The HSE’s business plan for this year confirms its continued commitment to concentrating on the most serious risks and to targeting industries with the greatest hazards and sectors with the worst risk management record.

In response to the noble Baroness, Lady Stedman-Scott, I note that the HSE significantly increased its resources to deal with the extra workload after leaving the EU. For example, on 1 January 2021 there were 262 technical staff in the HSE’s chemicals regulation division, working across the six chemical supply and use regimes. Today that division has approximately 440 staff—so where it is necessary to respond, additional resource is put into those areas.

The noble Baroness, Lady Bennett, raised the issue of the regulatory approach and the noble Lord, Lord Redwood, pulled it from the opposite direction. The HSE’s regulatory approach is aligned with the requirements of the growth duty, but its job is to achieve the right regulatory balance between supporting safe business practice and protecting workers and the public. Proportionate health and safety regulations facilitate economic growth, but the key is that they have to be proportionate. The noble Lord, Lord Redwood, is quite right. This is not about taking risks or cutting corners on safety; it is about making appropriate, proportionate decisions. There is no point in leaving regulatory requirements in place if they serve no purpose and do nothing to make anybody safer but simply make things more difficult for business.

I should make a correction. Apparently, when I was talking about how biocides actually have a useful role in controlling harmful organisms, I said, “harmful organisations”. If I did, I was not dissing anyone’s organisation, just the organisms, so apologies for that.

The noble Baroness, Lady Bennett, asked about the jurisdiction question. We can already consider a jurisdiction from anywhere—this is about speeding it up—but I reassure the noble Baroness that qualification for the fast-track evaluation process has to be subject to the criteria set out in the SI. The only jurisdiction that meets them now is the EU; no other jurisdiction adopts GHS in the same way as the UK, apart from the EU, and no other jurisdiction apart from the EU has an open and transparent classification system based on public consultation, as we do. Other jurisdictions can submit proposals, but they will be part of the normal-track evaluation process, and any proposals to add jurisdictions which are considered to meet the criteria will be included in the HSE work plan, subject to consultation as part of the work plan, and decisions are taken by Ministers. However, the bottom line is that they have to meet the criteria—that is the safety net.

The noble Baroness, Lady Bennett, asked about removing the special reference identification number. She mentioned cutting red tape. Cutting red tape can sometimes be good. Special reference identification numbers are not a requirement of the Rotterdam convention. They were introduced for use in an EU IT system to which we no longer have any access, so they serve no useful purpose. Therefore, removing the requirement of the companies to obtain a special reference identification number for small quantities of chemicals being exported solely for research or analysis removes a completely unnecessary burden on businesses and on the HSE as the PIC-designated authority. They simply do not have a function.

The noble Baroness asked about the disbanding of the Defra stakeholder event. Regular stakeholder engagement is really important in this area, as in others, but it can take many forms. I am advised that Defra will continue to engage closely with a range of stakeholders to gather their input, harness their expertise and share Defra’s thinking. It does not plan to organise any further CSF meetings but its engagement remains strong through its monthly chemicals NGO forum and the industry chemicals policy communication forum, as well as through relevant events. With regard to any HSE materials that were discussed in that context, I want to say really clearly that the HSE is happy to engage and consult with stakeholders at any time. If there are concerns about the HSE, I encourage the noble Baroness to get in touch with me and we can take that forward from there.

The noble Lord, Lord Teverson, asked about the exceptional circumstances. Just to be clear, these reforms do not allow exceptional circumstances to be used to weaken protections. Divergence will occur only in exceptional circumstances and only on scientific and technical grounds, not on economic grounds. Government priorities explicitly emphasise maintaining high standards of health and environmental protection, and leaning into alignment with EU decisions unless scientifically justified otherwise. That could, for example, be the fact that more information may have come to light after an EU opinion had been issued, but it is scientific.

I am assured that the HSE’s commitment to align with EU discussions has been welcomed across all chemical stakeholder groups—although, I acknowledge, possibly not by the noble Lord, Lord Redwood. That reflects a strong commitment across a number of priorities, including reducing trade barriers that arise from divergent standards, which will support trading goods with our biggest trading partner, and protecting the UK internal market by ensuring that different regulatory requirements do not apply in Northern Ireland, significantly reducing the risk of supplies of chemical products no longer supporting the market in Northern Ireland.

I say to the noble Lord, Lord Redwood, that this process is not about banning other products in Northern Ireland. One of the things that closely aligning where possible does is to protect Northern Ireland’s supply chain by making sure that the company will still be able to supply and will want to supply. The extent of agreement or divergence with EU classification proposals or decisions will be identified and reported in the HSE work plan. I hope that answers the question he asked about that.

I think somebody asked whether extending expiry dates would reduce risk protection. Just to be clear, these are substances that have previously been evaluated under the GB BPR, meaning that the risks are understood and they have already been approved for use. Postponing the expiry dates allows the HSE’s regulatory resources to be focused on higher priority evaluations, including first-time approvals where the risk is less well understood, and a limited number of high hazard renewals. I hope that makes a difference. It will mean that critical biocides remain on the GP market that in themselves would cause issues if they were not available. Nothing in the regulations allows new biocidal products which are not already on the market—rather, the purpose is continuity to ensure that essential products, such as those critical for aviation safety and safe drinking water, are not lost.

The noble Baroness, Lady Stedman-Scott, raised the GB CLP notification database. In the absence of that, GB CLP suppliers can use other resources, such as the European Chemicals Agency’s analogous database, which may encourage agreement between EU and GB suppliers on hazard classifications of their chemicals, otherwise known as self-classifications. Duty holders also still have a legal obligation to self-classify. Substances that pose higher risks are already regulated under frameworks such as REACH, the GB BPR and the GB Plant Protection Products Regulations, or other downstream legislation such as the UK cosmetics regulation or the Control of Substances Hazardous to Health Regulations. This ensures ongoing oversight of relevant hazards and associated risks.

I may be running out of things I can usefully say. I hope I have answered the things that are critical to today’s vote. I can assure the House that I will look carefully at Hansard and write to noble Lords with questions that I have not been able to answer.

Although I am grateful for the scrutiny, I stand by the case I have set out for these regulations. This instrument is practical, proportionate and urgent. It keeps essential biocides available, safeguarding public health and critical infrastructure, while preserving the ability to respond quickly to emerging risks. It speeds up our regulatory decision-making so that it is more transparent and better targeted to GB needs, enabling us to align more quickly with EU classification decisions and prioritise chemical hazard evaluations of greatest importance to the GB market, and it simplifies export requirements under GB PIC while ensuring that we continue to meet our international obligations. These are measured improvements to ensure that the system works for Great Britain as intended, supports our chemicals industry, protects people and the environment, and allows the HSE to regulate where it delivers the greatest value.

I hope that the noble Baroness, Lady Bennett, has been reassured and will not push her amendment to decline these regulations. If she does, I urge the House not to vote for it.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank all noble Lords who have taken part in this quite short but important debate—perhaps shorter than we expected due to the absence of our Northern Ireland colleagues.

I particularly thank the Minister for a comprehensive, careful and clear response. I think there will be significant reassurance in what she said to the campaigners with whom I have been working. For all noble Lords who might be thinking about their dinner, I give advance notice that I am not intending to put this to a vote, having heard the debate.

However, I will say a couple of things. I particularly thank the noble Baroness, Lady Grender, for a very clear explanation of the importance of this debate and for the important point that relaxing time limits is not a mere detail but potentially a matter of great safety and health concerns.

In responding to the noble Lord, Lord Redwood, I have to say first that he spoke with some glee about strong disinfectants killing germs. I would love to have a chat with him about antimicrobial resistance and where that interacts with what he said. I also think he suggested that this is some kind of Brexit freedom. I point to the fact that, on substances of very high concern, zero for us and 44 for the EU is not some kind of freedom—I do not think anyone could reasonably call it that.

I was pleased to hear from the noble Baroness, Lady Stedman-Scott—indeed, from the Tory Front Bench—about the concerns about HSE capacity. The Minister pointed out that additional resources were being put into chemical regulation. Of course, unless the overall resources increase, that means that resources are being taken away from other places. I note in passing silicosis, which I have done a lot of work on and which is associated with machine worktops, and the issues around that.

I may have misunderstood the Minister’s introduction, which is undoubtedly my fault. I was pleased to hear about the EU’s six classes and that the Government intend to lay a statutory instrument on that by June 2027. I think I misunderstood that, thinking that that was talking about primary legislation in 2027. I therefore ask the Minister to write to me about what the Government’s framework is for primary legislation, because both the Secondary Legislation Scrutiny Committee and the HSE itself say that primary legislation is absolutely necessary to enable us to keep up to date with the secondary legislation.

I will conclude with one final thought on what kind of chemicals we are talking about here. There is a class of chemicals known as second generation anticoagulant rodenticides. Many Members of your Lordships’ House and of the other place have been asking the Government questions about this, including my honourable friend Ellie Chowns. She was told that the Government were considering monitoring residues of these very dangerous chemicals in red kites, buzzards, sparrowhawks, peregrine falcons, red foxes, otters and hedgehogs. That gives a sense of the way in which we are contaminating our environment, our natural world, with some very dangerous substances. That is something I urge your Lordships’ House to keep a very close eye on. However, in the meantime, I beg leave to withdraw my amendment.

Pension Schemes Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 22nd April 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the Commons amendments now be considered forthwith.

Motion agreed.

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88, and do agree with the Commons in their Amendments 88A, 88C and 88E to 88P to the words restored to the Bill by the Commons disagreement to Lords Amendments 15 to 24, 27, 30 to 34, 36, 38 to 42, 83 and 88.

88E: Clause 40, page 45, line 36, after “in” insert “main”

--- Later in debate ---

88P: Clause 122, page 154, line 11, leave out “2035” and insert “2032”

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I do not get to say “forthwith” often enough. That is a great start to the day. I thank all noble Lords for their continued scrutiny of this important Bill. We are now looking today at the remaining areas of disagreement.

Let me start with the reserve power. Amendment 15 and those connected with it sought to remove the reserve power on asset allocation from the Bill. Noble Lords will be aware—indeed, we just heard—that the other place has considered this House’s amendments and has once again disagreed with the amendments that would remove the reserve power from the Bill. In doing so it has tabled further amendments in lieu, and I will come to those in a moment. However, I want first to acknowledge the level of interest in the House on this issue.

Noble Lords have engaged with these provisions with great care, and I am genuinely grateful for the quality of scrutiny that has been brought to bear at every stage from Committee through Report and to our exchanges between the two Houses. I know that many noble Lords remain concerned about the reserve power and I do not dismiss those concerns out of hand, but I must also be candid with the House about where we stand. The elected House has now considered the case for the reserve power on two occasions, and on both occasions it has concluded that the power should remain in the Bill. However, the Government have not simply dug in; they have responded to the concerns raised in this House with substantive changes to the legislation. In a moment, I will set out what those changes now amount to, because the cumulative picture is important.

I will briefly restate the case. There is a well-evidenced collective action problem in the defined contribution market. The industry itself has been clear that a key barrier to delivering on its commitments are market dynamics that continue to focus on minimising cost rather than maximising long-term value for savers. The industry wants to diversify in its savers’ interests but risks being undercut by competitors which see a commercial opportunity. The reserve power exists to address that problem, and that problem alone.

In the first round of these exchanges, the Government tabled three amendments in lieu, delivering two concessions that responded directly to arguments made in this House. The first, which had been pressed by the noble Viscount, Lord Younger of Leckie, and the noble Baronesses, Lady Stedman-Scott and Lady McIntosh of Pickering, was the statutory cap. Regulations may not require more than 10% of default fund assets to be qualifying assets or more than 5% to be of a UK-specific description. That writes the Mansion House Accord targets into primary legislation so that no future Government can use the power to go further.

The second, responding to the type of concern raised by the noble Baroness, Lady Bowles, and other noble Lords about the breadth of the power, was the asset class neutrality requirement, which ensures that regulations must cover each of the named private market categories and cannot concentrate requirements in any one class. Those amendments represent meaningful constraints on the reserve power, of a kind for which this House has previously signalled strong support. I stand by them.

Today, the Government, with the support of the other place, propose to go further, in three ways. First, we have tabled an amendment to bring forward the existing sunset date for the reserve power from 2035 to 2032. The Mansion House Accord commits the industry to reaching its targets by 2030. Bringing the sunset forward aligns the power more closely with that timeline. If the power has not been exercised by the end of 2032, it falls away entirely, and if it has been exercised, the percentage requirements set under it may not be raised after that date.

The second amendment ensures that the power to set the headline percentage may be exercised only once. Combined with the statutory caps, this means that any future Government have at most a single opportunity to set the asset allocation requirement, and only up to the levels to which the industry itself has committed under the accord.

Thirdly—I ask the House to consider carefully the significance of this step—the other place has agreed an amendment providing for the full repeal of the asset allocation regime at the end of 2035. I want to be precise about what that means, because it goes beyond the sunset of the enabling power. Even if the power has been exercised and requirements are in force, the entire framework—the approval requirements under Section 28C, the savers’ interest test, the associated penalty and review provisions and any asset allocation requirements which have been brought into effect—is repealed from the statute book at the end of 2035. I therefore hope that noble Lords who have expressed objections to this power being a permanent feature of our pensions legislation will recognise that the Government have listened to them.

I will set out what the reserve power now looks like taken in the round. It is capped at the accord targets; it cannot be used to compel investment in a single hand-picked asset class; the headline percentage can be set only once; the power lapses in 2032 if not used; and, if it were ever used, the entire regime is repealed at the end of 2035—every element of it removed from the statute book.

On top of all that, it remains subject to the savers’ interest test, statutory reporting requirements both before and after any regulations are made, and the affirmative procedure. This power has been meaningfully altered and constrained by the scrutiny of this House, and I hope noble Lords will recognise the collective significance of those safeguards. Industry has welcomed our amendments to constrain the power. By way of one example, this morning, Aviva said:

“We welcome the government’s amendments to constrain the reserve mandation power so that it can only be used to support delivery of the Mansion House Accord … We hope this is enough to build the consensus needed for the Bill to be passed in this Parliamentary session”.


I understand the position of those who believe the power should not exist at all. The noble Baroness, Lady Bowles, has made that case with clarity and rigour, and I respect it. But the Government’s view is that the risk of inaction, of allowing the collective action problem to persist to the detriment of pension savers, is the greater risk. The power as it now stands is a carefully circumscribed instrument, designed for a single purpose and limited in every dimension.

This House has done its job as a revising Chamber. The Government have engaged in good faith with the concerns raised and responded with changes to primary legislation—not undertakings, not assurances, but amendments to the Bill. I hope this demonstrates the seriousness with which we have taken this House’s scrutiny and I ask noble Lords not to insist on their amendments and to agree the amendments proposed by the other place in lieu.

I turn now to Lords Amendment 35B, which would require the Secretary of State when making regulations across the scale measures and those for default arrangements to

“have regard to the benefits of competition among providers of pension schemes”.

The Government absolutely support a competitive market; that is evident through all the scale measures. However, we believe that in designing regulations, a range of factors must be taken into account. Our focus always has to be on delivering the best outcomes for members.

Noble Lords have stressed the importance of competition as the market moves towards scale. The Government agree: we have always considered it to have a central role in the policy. The new entrant pathway is designed to drive this, as is the freedom schemes will have to open new default arrangements which will support competition. However, we have listened carefully to the arguments that have been made during debates, especially by the noble Baroness, Lady Noakes, and we recognise the desire to see that commitment feature in the Bill. We have therefore tabled amendments in lieu to set out that regulations, both those in respect of the scale measures and those relating to default arrangements, must have regard to the importance of competition and innovation.

However, under the Government’s Amendments 35C and 35D, regulations will also need to have regard to additional factors: the importance of scale, improving member outcomes and effective governance. It is clearly right that we place members at the heart of this policy—I am sure there can be no disagreement that their needs are just as important as those of the market that serves them. Members’ interests come first and this amendment recognises that.

The noble Baroness, Lady Noakes, has asked me to confirm two matters in relation to this amendment: first, how the Government will meet the new duty in relation to the different factors set out. Under our amendments, when making regulations, the Government will need to have regard not just to the need to reach an appropriate scale but to the importance of competition and innovation in the design and operation of schemes, to effective governance and to the vital objective of improving outcomes for members. This amendment captures the basic but important principle that the Government’s approach to making regulations must be holistic, taking account of many relevant factors. The Explanatory Notes will also make this clear.

Secondly, the noble Baroness asked me to confirm why new Section 28J does not appear in the list of provisions in this amendment, and I am very happy to do so. This is because new Section 28J will allow the Treasury to make regulations that switch on the FCA’s enforcement powers in relation to Chapter 3. This is primarily a question of whether these powers should be available to the FCA, so the matters listed in the amendment are therefore not applicable to that question in the same way they are to the powers that allow the Government to construct key elements of the scale framework. I hope that explains things to her satisfaction.

Lords Amendments 37B and 37C set out the ability for a regulator to exempt a scheme on the basis of an innovative offering or where consolidation may not improve member outcomes. We debated this amendment this week and I will not restate the arguments in the interests of time. The Government have long been clear about our intention to adopt reforms to ensure that workplace pension schemes take advantage of consolidation and scale to deliver better returns for UK savers, and that is what we are doing in the Bill.

While I recognise that this policy may have an effect on some schemes in the market, we must prioritise the need to deliver on this commitment to members. Our priority is to serve those who have begun to save through auto-enrolment and who work hard to save for retirement: we want to ensure that they are saving into schemes that deliver better outcomes. However, we have heard concerns expressed, in this House and in the other place, that the benefits that innovation can bring should not be lost in the process of consolidation. We agree. We have therefore tabled Amendments 37D and 37E in lieu to require the Secretary of State, in conjunction with the regulators, to publish a report about the effects of pension scheme consolidation, and the extent to which innovative product designs are adopted or maintained following consolidation activity, as well as any barriers that may exist to preserving these features. This report will be published within 12 months of the Bill becoming an Act. The timing of the report will ensure that the Government are then able to take action, as needed, in advance of the scale measures being commenced in 2030.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

My Lords, since we have only one group of Motions today, I shall address our three key areas—scale and competition, public sector pensions and mandation—together.

First, on scale and competition, I am grateful to the Minister for bringing forward these amendments in lieu. The government response does two important things. First, it places a clear duty on the Secretary of State, when making regulations under key pension powers, to have regard to a set of core principles: innovation in scheme design and operation, competition between providers, the need to improve outcomes for members, the achievement of appropriate scale and effective governance. Secondly, it applies a similar discipline to the appropriate authority when making regulations under Clauses 42 and 44 requiring regard to innovation, competition, member outcomes and governance. Together, therefore, this amendment establishes a statutory framework that must guide the making of these regulations. It ensures that scale is pursued not at all costs but alongside innovation, competition and, above all, better outcomes for savers.

We also welcome the amendment in lieu from the Government, which would require the Secretary of State to publish a report into the effects of consolidation on innovation in the design and operation of relevant master trusts. These are welcome changes to the Bill following our long-fought Conservative campaign. They reflect in a meaningful way the concerns we have consistently raised about the balance between scale and innovation. On that basis, we are content to accept these amendments, and I thank the Minister for her constructive engagement in bringing this forward. This is the change in emphasis that we wanted to see, and we are glad that the Government have moved on this.

Turning to public sector pensions, I pay tribute to my noble friend Lady Neville-Rolfe for her sterling work in pressing this important issue. This is a fundamentally important matter. We are talking about vast sums of public money—indeed, one of the largest government liabilities behind gilts. I am pleased that the Government have recognised the important point that my noble friend has been making and have brought forward this amendment in lieu. We shall of course await publication by the Government to ensure that it receives full and proper scrutiny once it is released, but we thank them for their recognition of this point.

Finally, I come to mandation. We have had some small movement from the Government in their amendments in lieu, which is welcome to some extent, but the Government should not have this power at all—a view that we share with both industry and the public.

The Government want greater investment in private markets. The reason why that is not happening as fast as they would want has many causes—which could in turn have many solutions, not limited to increasing consumer visibility, strengthening employer-side incentives, addressing the role of intermediaries and promoting co-ordination through voluntary alignment. Indeed, we already have several in motion, such as the Mansion House Accord, a voluntary, industry-led framework that was agreed less than a year ago and designed to address precisely these issues through alignment, not coercion.

Yet before the approach has even had time to take root, the Government are reaching for the most extreme lever available: the power to direct private investment into assets of their choosing. That was, contrary to some claims, not in the Government’s manifesto. The noble Baroness, Lady Bowles, is right to oppose this in the strongest possible terms.

Mandation is a profound mistake. It cuts across the fundamental principle of fiduciary duty and the obligation to act in the best interests of savers, not Ministers. It sets the deeply troubling precedent that, where markets do not move quickly enough in the Government’s opinion, the Government will simply override them. The Government are trading partnership for pressure and replacing trust with the threat of intervention. This is not how you build a strong, dynamic investment market; it is precisely how you undermine it.

This power is not just unnecessary: it is dangerous and it should not stand. We entirely support the Motion from the noble Baroness, Lady Bowles, to insist on her amendment and we will support her if she chooses to test the opinion of the House on this question.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords who have spoken. I thank them for being very constructive in their engagements—possibly more so offstage than onstage, but I am always grateful for and will take whatever I can find. I thank in particular the noble Baronesses, Lady Neville-Rolfe and Lady Noakes. I am glad that the noble Baroness, Lady Noakes, knows now that I really was listening all the way through Committee and Report, even if there may have been times when—I am sorry—it looked like I was not; I shall work better on my nodding in future. I am really glad that she and the noble Baroness, Lady Neville-Rolfe, are happy with where we have got to.

I will try to pick up on a few points. We have gone over them many times in debate, so I will not hold the House back in order to redo them all over again, tempting though that is. I turn first to the noble Lord, Lord Vaux. I think the problem is that we have started in the middle of the argument. The diversification of portfolios is critical to reducing risk. There is clear international evidence that a small investment in productive finance, in the context of a diversified portfolio, brings better returns. That is demonstrable. We have to admit that most mass-market DC schemes have little or no private markets in their default funds, and that is very much in contrast to the position in many other countries. So the starting point is that it is reasonable to assume, as the evidence would suggest, that it is better for savers for that to happen.

However, we do want safeguards around this, and what the noble Lord described is one of the safeguards. If this power were ever to be used—it is a reserve power, so the Government do not expect it to be used—a report would have to be commissioned to look at the impact of doing so on savers as well as the broader economy, to establish what would happen. Then, despite all that, if trustees believed, knowing their savers and membership, that it would not be in their interests because of some reason—for example, even if it might broadly be in their interests but it would not be in their savers’ interests—not only can they make an application for an exemption under the savers’ interest test but we would expect the fiduciary duty to drive them to do so. The test is designed to be capable of being passed, not just failed. I understand the noble Lord’s position, but that is the Government’s position.

The noble Baroness, Lady Bowles, asked about the timing: why should it not stop in this Parliament? We have talked about the power stopping in 2032, but the Mansion House Accord has until 2030 to happen, and this Parliament, I am sorry to say, is due to finish before that. Would that it could continue—no, I will not go in that direction; it will get badly reported. We think, that if the power were ever used, there would have to be enough time to see its impact before bringing it to an end. The sunset date of 2032 seems a reasonable starting point and that, I hope, is something that she can appreciate.

A question was asked about collective action, which we have been around several times. The Government have set out the arguments that the view on collective action failure in the market is not just ours; the industry has made this really clear. When the Mansion House compact—the predecessor to the Mansion House Accord—published its collective assessment of progress two years into its assessment, it identified this dynamic of competitive pressure focusing the market on minimising cost as the single biggest barrier to delivering on its own commitments. We have been here before; it has been tried on a voluntary measure and failed, and industry identified this as the single biggest barrier. That is why we are addressing this and that is the reason for doing it.

I can reassure my noble friend Lord Davies that the OBR will continue to produce long-term forecasts of the economy, which will provide a context for the figures that are being made. I am grateful to him for asking about it.

Finally, to describe the changes the Government have made as small is unreasonable. I remind the House what this now is: this provision, the reserve power, is now capped at the same rate as the accord. It cannot be used to compel investment in a single, hand-picked asset class. The headline percentage can be set only once. The power lapses in 2032 if not used and, if it were ever used, the entire regime is repealed at the end of 2035—every element is taken off the statute book. Those are significant movements. The Government have listened. The Commons has twice sent this back; it wants this in the Bill, so we should give it to the Commons. I urge the House to agree.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I thank all those who have contributed. As the Minister said, we have been around the arguments many times, so I will be brief. This was sold as a backstop to the accord, so it is not a case for celebration when something that bit off a lot more than the accord is brought a bit more closely into alignment with it. The fact is that the reserve power is coercive—that is what it is there for and what it is meant to do. It is not without effect, yet it was not consulted on. It was sprung on us suddenly and snuck into the Bill, and we have had to deal with it.

I was interested in the tax advantage point raised by the noble Lord, Lord Davies, but these are the least well-off pensioners who are going to be asked to put more into risky assets. Should they not get an extra slice of tax relief, then? All the people who are in safe, defined benefit schemes and those kinds of things where they are not at risk get a tax advantage too. It is not a runner.

I come back to the basic point, which relates to fiduciary duty and the best interests of pensioners in what is their money. Bear in mind that the point has been raised—I am not sure whether it has ever been answered—about the human rights aspect of diverting some of the pensions. We could go on a lot longer— I hope we do not—but I regret that I must test the opinion of the House.

--- Later in debate ---

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 37B and 37C, and do agree with the Commons in their Amendments 37D and 37E in lieu.

37D: Clause 40, page 53, line 18, at end insert—
“28K Report about effects of pension scheme consolidation
(1) The Secretary of State must prepare and publish a report about the effects of consolidation on innovation in the design and operation of relevant Master Trusts and group personal pension schemes.
(2) The report may in particular include information about—
(a) the extent to which consolidated schemes adopt or maintain innovative product designs of constituent schemes;
(b) barriers to consolidated schemes adopting or maintaining such innovative product designs.
(3) The Pensions Regulator and the FCA must provide such information and assistance as the Secretary of State may require for the purposes of the report.
(4) The report under this section must be published before the end of the period of 12 months beginning with the day on which this section comes into force.
(5) In this section “consolidation” means the consolidation of a relevant Master Trust or group personal pension scheme with one or more other schemes.”

37E: Clause 122, page 153, line 29, leave out from “force” to end of line 30 and insert “as follows—
(i) section 40, in respect of the insertion of section 28K of the Pensions Act 2008 (report about effects of pension scheme consolidation), comes into force on the day on which this Act is passed;
(ii) the remaining provisions of Chapter 3 come into force on such day as the Secretary of State may by regulations appoint;”

[Baroness Sherlock (Lab)]

My Lords, I have already spoken to Motions B to D. I beg to move.

Motion B agreed.

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 35B, and do agree with the Commons in their Amendments 35C and 35D in lieu.

35C: Clause 40, page 53, line 18, at end insert—
“28K Regulations about quality requirements
In making regulations under section 20(1A) or (1C), 26(7A), 28A, 28B, 28E or 28F, the Secretary of State must have regard to the importance of—
(a) innovation in the design and operation of relevant Master Trusts and group personal pension schemes;
(b) competition among relevant Master Trusts and group personal pension schemes;
(c) improving outcomes for members of relevant Master Trusts and group personal pension schemes;
(d) relevant Master Trusts and group personal pension schemes achieving an appropriate scale;
(e) relevant Master Trusts and group personal pension schemes having effective governance.”

--- Later in debate ---

Moved by

[Baroness Sherlock]

That this House do not insist on its Amendments 77 and 85, and do agree with the Commons in their Amendments 85C to 85E in lieu.

85C: Page 152, line 11, at end insert the following new Clause—
“Public service pension schemes
(1) The Government Actuary must, before the end of the period of 12 months beginning with the day on which this section comes into force—
(a) prepare and publish a document setting out cash flow projections for each of the next 50 years that cover the public service pension schemes within subsection (4);
(b) provide the document to the Treasury and the Office for Budget Responsibility.
(2) The Treasury must lay the document before Parliament.
(3) For the purposes of this section “cash flow” means—
(a) expenditure on benefits, and
(b) income from member contributions.
(4) The following public service pension schemes are within this subsection—
(a) any scheme under section 1 of the Public Service Pensions Act 2013 (schemes for persons in public service) which—
(i) is a defined benefits scheme (within the meaning of that Act), and
(ii) is not a scheme for local government workers (within the meaning of that Act);
(b) any scheme under section 1 of the Public Service Pensions Act (Northern Ireland) 2014 (schemes for persons in public service) which—
(i) is a defined benefits scheme (within the meaning of that Act), and
(ii) is not a scheme for local government workers (within the meaning of that Act).”