Cessation of EU Law Relating to Prohibitions on Grounds of Nationality and Free Movement of Persons Regulations 2022
Baroness Sherlock Excerpts(1 year, 5 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Stedman-Scott) (Con)
My Lords, this instrument was laid before the House on 20 October. It disapplies retained EU equal-treatment provisions relating to nationality and freedom of movement so that they cease to be recognised and available in domestic law in relation to access to social security, statutory payments, social assistance, housing assistance, education, training, apprenticeships and childcare-related matters.
These retained EU provisions have been redundant since the end of the transition period. The withdrawal agreement provides the necessary protections for those EU citizens who were resident in the UK before the end of the transition period and their family members. By disapplying the redundant provisions, this instrument furthers the Government’s aim of ensuring that all UK law is right for the UK. Correcting this deficiency in retained EU law will bring greater clarity to the UK statute book. I am satisfied that these regulations are compatible with the European Convention on Human Rights.
Prior to the UK’s exit from the EU, these equal-treatment provisions granted EEA and Swiss citizens rights to access benefits, services and educational entitlements on the same basis as UK nationals, if their presence in the UK was based in the exercise of specific freedom of movement rights. The UK voted to leave the EU and, as a result, freedom of movement between the UK and EEA countries came to an end on 31 December 2020. Equal-treatment provisions based in freedom of movement arrangements therefore became redundant.
Disapplying these redundant equal-treatment provisions clarifies the situation that is already in effect for EEA and Swiss nationals coming into the UK. In line with the Government’s manifesto commitment, EEA nationals are now treated on an equal basis with other non-UK nationals arriving in the UK after the end of the transition period, with the exception of those EEA or Swiss nationals granted status under the EU settlement scheme.
While the instrument does not effect a policy change for any group of EEA or Swiss nationals in the UK, I particularly emphasise that it in no way alters the rights of EEA or Swiss nationals that are protected under the EU-UK withdrawal agreement, the EEA European Free Trade Association separation agreement and the Swiss citizens’ rights agreement. They will continue to be able to access benefits and services on broadly the same basis as they did before the end of the transition period, and their rights to do so are protected by the European Union (Withdrawal Agreement) Act 2020. Additionally, we already have domestic law that protects individuals from discrimination. Retained EU provisions based on freedom of movement are therefore not only redundant but unnecessary.
In summary, this instrument is a technical correction of the statute book that will address a deficiency arising from retained EU law. I therefore commend the regulations to the Committee.
Baroness Sherlock (Lab)
No other takers—I am shocked, given that it is such an exciting instrument. I thank the Minister for her introduction to these regulations, in which I am interested. I was going to say, “and all noble Lords who have spoken”, but it is just me. I am also grateful for the briefing on the regulations from the Minister’s officials. I confess that, despite reading everything I could, I am struggling to work out what these regulations actually change, if anything.
I read a summary of this instrument done by the House of Commons Library for a colleague at the other end. It noted that Parliament has already legislated to end the underlying right of free movement for EU citizens moving to the UK. The Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 repealed the main provisions of retained EU law relating to free movement and disapplied the equal treatment obligations supporting free movement, in so far as they were inconsistent with the UK’s immigration laws. However, the note went on to say that
“these equal treatment rights ‘would continue to apply in non-immigration contexts unless disapplied’. The draft measure now disapplies those equal treatment rights in the specific areas set out in the schedule, including social security payments and housing.”
The Minister said that these rights “became redundant” as a result of the 2020 Act having ended the underlying right to free movement. I am still not clear as to exactly what rights may still exist that this instrument is disapplying. Can the Minister clarify that? I can see that the aim is to make it clear that EEA nationals who are not subject to the settlement arrangements should have the same rights as anyone else subject to the points-based immigration system going forward. I am just not clear what, if any, rights they have now that they will not have once this instrument becomes law. If the answer is none, I ask the Minister to say that categorically for the record. It may be about legal clarity; I would just like to be really clear.
I want to make two other points. Regulation 4 makes changes to Regulation (EU) No. 492/2011. I looked this up; it turns out that it amends Article 7—it prohibits different treatment of EU nationals in respect of employment, social and tax advantages—to say that this will not apply in relation to the matters in the Schedule to this draft instrument, namely: social security, social assistance, housing, education and training, and childcare. Do Article 7 rights continue to apply to any other areas?
Finally, the instrument also removes Articles 9 and 10, which provide for the rights of EU nationals in relation to social housing and to state education for their children. Are there any other rights that EU or EEA nationals still enjoy that have not been repealed? If the answer is that any such rights that exist will be swept away by the sunset provisions of the advancing retained EU law Bill, why not wait for that rather than using Section 8 powers? I look forward to the Minister’s reply.
Baroness Stedman-Scott (Con)
I thank the noble Baroness, Lady Sherlock, for her contribution and questions and congratulate her on her stamina in these matters. I will try to answer all the points raised.
The noble Baroness asked how the EU provisions to be disapplied became deficient or redundant. Prior to the end of the transition period, through the EU freedom of movement of persons rights, EEA and Swiss citizens had access to certain benefits, services and education entitlements. When the freedom of movement of EEA citizens ceased at the end of the transition period, the application of these rights became redundant, as the rights granted by these provisions have been redundant since the close of the transition period. They represent the deficiency arising from retained EU law. The regulations clarify the situation already in effect.
The noble Baroness asked what rights the provisions to be disapplied still grant. First, let me clarify that these regulations should not be understood as implying that these provisions continue to grant rights outside of the relevant matters as per Regulation 1(4). The department involved in these regulations examined the provisions as they relate to the benefits and services covered in the relevant matters and is confident that these rights are redundant as they relate to the relevant matters. We are disapplying them to clarify the position that is already in effect.
The noble Baroness, Lady Sherlock, asked what would happen if these provisions were allowed to remain on the statute book. These redundant provisions are not in line with domestic legislation on immigration and access to benefits and services. They therefore create confusion in the statute book. Not disapplying them would leave this deficiency in UK law unaddressed. It could also mean that EEA nationals who are not eligible for benefits or services could bring legal challenges against the Government to try to bypass domestic legislation by instead relying on those retained EU freedom of movement provisions. This would set back progress on implementing the public’s decision to leave the EU and end freedom of movement.
The noble Baroness asked me to clarify whether that was a change in policy. The answer is categorically no. These regulations do not effect any policy change; they are a technical rectification of the statute book to clarify the position already in effect after the end of the transition period. She asked why the regulations were being laid now. Why not let these retained provisions be sunsetted by a reform and revocation Bill? Work on the regulations was initiated independently of the Retained EU Law (Revocation and Reform) Bill under Section 8 powers from the European Union (Withdrawal) Act 2018. Those powers allow Ministers to address deficiencies in retained law. Section 8 powers expire on 31 December 2022, thereby creating a need to lay these regulations.
The noble Baroness also asked whether any rights still applied. Rights and entitlement for EEA citizens set out in the withdrawal agreement and domestic legislation still apply.
These regulations are a technical rectification to ensure that UK law functions with legal clarity. The retained EU provisions that they disapply are redundant, and that deficiency should be corrected. This instrument will not change the policy in place regarding any rights currently enjoyed by EEA nationals in the UK. However, it will bring greater clarity to the UK statute book. I therefore commend the regulations to the Committee.
Biocidal Products (Health and Safety) (Amendment) Regulations 2022
Baroness Sherlock Excerpts(1 year, 5 months ago)
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Baroness Sherlock (Lab)
My Lords, I thank the Minister for her introduction to these regulations, the noble Baroness, Lady Brinton, for her very interesting contribution, and officials for supplying some useful information.
As we have heard, these regulations are needed because the post-Brexit arrangements made for authorising biocidal products in Great Britain are not, shall we say, working quite as smoothly as one might have hoped at an early stage of the process. After Brexit, the process of authorising the “active substances” in biocidal products was transferred from the EU to the Health and Safety Executive. There was a three-year transition period during which products whose active substances had previously been authorised could continue to be sold in GB using the certification. These regulations propose that those products can carry on being sold in Great Britain until the end of 2027, whether or not the HSE has processed their application for authorisation—I hope I have that right; I read them several times but I would not swear to it. However, the Minister can correct me in her response if I have not.
The noble Baroness, Lady Brinton, mentioned the comments by the Secondary Legislation Scrutiny Committee, which helped us to understand that the big problem is in fact a huge backlog primarily caused by the fact that the HSE no longer has access to much of the data stored in EU databases on which previous assessments have been made. Therefore, we need this instrument to give legal certainty that at least until the end of 2027 biocidal products can continue to be sold and used legally while the HSE works its way through the backlog of applications for authorisation.
I too have some questions. First, when did the HSE know that it would not have access to the data in the relevant databases that was needed to make these assessments? Presumably, it was part of the negotiations for Brexit; did it know in plenty of time? If so, why were alternative arrangements not put in place for some time? Nobody could suggest that the Brexit process passed swiftly—I feel that it has been happening for most of my adult life, but even if it was not that long, it was not a speedy process. Was there not time to get ahead of the curve?
I would be interested in the response to the questions raised by the noble Baroness, Lady Brinton, about what the agency is doing to build up its own database and what progress it is making on reducing the backlog.
What assessment has been made of the possible risks of the HSE not having access to the data it needs to make timely and expert assessments of biocidal products? I understand that the EU was doing a rolling review of active biocidal substances, so presumably there are products awaiting authorisation that have not been reached. So their active substances had not yet been reviewed by the EU, yet, at the moment, these regs provide for them to be legally marketed until the end of 2027 without any HSE authorisation. Can the Minister therefore tell us what is the longest period a product could be on the market since either its active substances were approved either by the EU or the HSE?
What happens if evidence emerges that an active substance is not as safe as it had perhaps been thought or indeed as it was known to be when it was approved by the EU? I presume that the HSE or other bodies have powers to act if someone brings evidence to them saying, “Evidence has emerged that this product is not as safe as we thought it was.” However, since there will not be any guaranteed systematic review of the evidence for quite a long time, what if that evidence emerges elsewhere and is not drawn to the attention of the agency? Has a plan been put in place to consider the impact of that? If a product were to contain, say, two active substances which had been approved separately by the EU, how would we know if they would interact and whether the product is safe if the product is not being authorised by the HSE for, potentially, a number of years?
Finally, to follow on from the question from the noble Baroness, Lady Brinton, the HSE now has an enormous job to do. The Minister mentioned an increased head count. What I am interested in is whether she can assure the Grand Committee that her department has taken the view that the HSE has access to the numbers of people and the expertise that it needs to keep British people safe in this area. I look forward to her reply.
Baroness Stedman-Scott (Con)
I thank the noble Baronesses, Lady Brinton and Lady Sherlock, for their contributions. I shall try to answer those questions. If there are some that I cannot answer, I shall write and clarify at a later point.
First, the noble Baroness, Lady Brinton, asked about the backlog in the past three years. It is important to clarify that the HSE has been working on the backlog of biocidal product applications for only around a year. Three years is a misleading timeframe, because it fails to account for the EU exit implementation period and, after that, the time given to industry applicants to resubmit their applications to the HSE. In this year, the HSE has added the details of all resubmitted applications and associated data into their systems and initiated work on around 20% of these. This is in line with plans to clear the backlog of applications. The HSE’s operational planning assumptions are that it will commence 50 applications per year over the coming years, which means that, by the end of the five-year period, it anticipates having completed the roughly 200 applications received after the transition period or be on track to complete them with the normal timeframes in the legislation. After that, the HSE will return to operating within the existing deadlines so that the deadline extension can lapse.
The noble Baroness, Lady Brinton, also asked a question about having lost access to the EU databases. The EU databases contain certain historical information from the EU regime, which it would be too costly to recreate in Great Britain. Therefore, at the same time, the HSE is exploring options for how it can best operate the GB regime, on the assumption that this information will remain unavailable. Working on this is at an advanced stage, and appropriate solutions will be implemented as soon as they are fully developed and tested. I do not know how we would plan to communicate that once it is done, but I shall write to noble Lords.
Baroness Stedman-Scott (Con)
My understanding is that, with the information that the HSE has, it has to start from a very low point, but it will not be without anything—as I understand it. I am told that biocide evaluations are complex regulatory assessments involving a number of scientific specialisms, so developing solutions is inevitably taking some time. I am not sure that that answers the question that the noble Baroness has challenged us with—whether we are starting from scratch, or whether we have information with which we can start it off. In fact, I can now say that we are not starting from scratch, but I think that I owe both noble Lords a bit more on that, and I shall place a copy of a letter in the Library. They can be comforted that we are not starting from scratch, but I am not sure where we are starting from—but there we are.
The noble Baroness, Lady Brinton, asked about retained EU law. The Department for Work and Pensions and the Health and Safety Executive will continue to assess REUL to identify potential impacts. We are committed to ensuring that health and safety legislation continues to be fit for purpose and that our regulatory frameworks operate effectively following the sunset of the REUL—forgive me for not reading the term out in full.
The noble Baroness, Lady Sherlock, asked about mixing two authorised products into one—a chemistry set comes to mind when answering this question. The new product will require its own authorisation. It will not be allowed on the market until it has gone through its own risk assessment, biocidal product assessment and authorisation
The noble Baroness also asked when the Government found out that we had lost access to the EU databases. The EU withdrawal agreement provided that the UK would no longer have access to the relevant EU databases from the end of the implementation period. Since then, as I said, the HSE has been assessing a number of options to manage biocidal product authorisations, taking into account the loss of access to historical information in EU databases, such as use of publicly available information. I am sorry that it is not possible to give a timeline, but work is at an advanced stage and appropriate solutions will be implemented as soon as they are fully developed and tested.
The noble Baroness raised the issue of resources, which is important. The total budget for the HSE’s chemical regulation division has grown by 39%, from £22.4 million to £31.2 million between 2018-19 and 2022-23, reflecting the HSE’s need for increased resources for its post-EU exit responsibilities. The HSE’s current focus is on building out from our initial day one operating capacity and laying the foundations for its long-term future operation. The funding the HSE has received to date is sufficient to support that work, and I am not aware of any attempts to reduce it in the current climate.
The noble Baroness, Lady Sherlock, asked about the risks of leaving products on the market. There is a multi-regulator approach to the regulation of biocides not yet authorised under BPR using a jigsaw of legislation, including product safety law and earlier pesticides legislation. This provides proportionate powers for the appropriate authorities to take the regulatory action if products are identified that pose risk to people, animals or the environment.
The instrument will provide the necessary extension to the legal deadlines—
Baroness Sherlock (Lab)
On that last point, the question I was trying to ask—I probably phrased it very poorly—was that I realise that if information comes to the Government’s attention, by some tool or agency, a means will be found to do something about it. But it is quite possible that, for a product that has been on the market without review for a long time and is used around the world, evidence may have appeared elsewhere which has not been brought to the Government’s attention. The point about systematic reviews is that one presumably goes out looking at the evidence. Is there any concern that, the longer products are on the market, the greater the risk that some previously unclocked problem may arise?
Baroness Stedman-Scott (Con)
I will write to the noble Baroness about that. I would assume—correctly or incorrectly—that the Health and Safety Executive is keeping up with developments by other countries’ health and safety agencies, but let me write to the noble Baroness to clarify that point. If, when she gets the letter, she is still worried, she may come back to me and I will do further work on it.
To conclude, the instrument will provide the necessary extension to the legal deadlines to enable HSE to process effective biocidal product authorisation applications. This will provide legal certainty to businesses that biocidal products on the market awaiting their application to be processed can remain there. In turn, biocidal products essential to the functioning of society can continue to be made available and used. I commend the instrument.
Carer’s Allowance
Baroness Sherlock Excerpts(1 year, 5 months ago)
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Baroness Stedman-Scott (Con)
I ask my noble friend Lord Markham, “Shall we talk?”. I am very happy to talk to anybody to make life better for people. Maybe my noble friend can follow that through in the next Question.
Baroness Sherlock (Lab)
My Lords, the Minister is rightly encouraging people to claim the benefits to which they are entitled, but can I take her back to the question asked by her noble friend Lady Fookes? Even people on benefits may be struggling at this point. The report showed that those who are caring have extra costs which others do not. The report was incredibly moving. One person said:
“My son is incontinent … if we don’t wash him in warm water several times a day this will cause him to physically decline. So how do we pay for the gas to heat the water if we are currently at max budget?”
Another said,
“my husband has terminal brain cancer, I am worried about how I will cope over the winter months as I can’t allow him to be cold—I need him to be as comfortable as possible in his final months at home”.
Those who are on just carer’s allowance do not get any extra help with fuel. What are the Government going to do to see whether the money given to those who are caring is enough to meet the costs they encounter?
Baroness Stedman-Scott (Con)
Those who are on carer’s allowance receive the £400. Those who are on carer’s allowance but who are entitled to the carer’s element of UC, where they are not required to look for work, can get another £2,000. The Government are helping, and we are four minutes away from finding out what more they might do around energy costs. The stories and case studies that the noble Baroness read out are harrowing, but the Government are doing everything they can, within the limits of their financial position.
Pensions Dashboards Regulations 2022
Baroness Sherlock Excerpts(1 year, 5 months ago)
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Baroness Sherlock (Lab)
My Lords, I thank the Minister for her comprehensive introduction to these regulations, and all noble Lords who have spoken. Most of us were involved in the passage of the Pension Schemes Bill, so it is nice to have the band back together again even if—it has to be said—we are a bit of a band of anoraks. I am also grateful to the Minister for the briefing that she arranged for us, and for her willingness to engage. It was helpful to be able to hear from Ministers—and, indeed, officials—about the work that has been done on the scheme, and really good to hear about the progress that has been made. We have supported the idea of a public dashboard and it is great to see that coming to life.
That said, I have a lot of questions to ask. I apologise to the House in advance, but this is the only chance that we will have to ask questions on a very complex, billion-pound project. Once we come out of here today, there is no automatic place where we will get to do it again, as the noble Lord, Lord Vaux, pointed out. So I hope that the Minister, and the House, will bear with me. I have tried to give notice of my questions to the Minister as many are quite technical.
First, we need clarity on timing, as mentioned by the noble Lord, Lord Vaux, but also on what schemes will be covered. Schemes with under 100 active or deferred members are outside the scope of these regulations. Can the Minister tell the House how many pension pots fall into that category, and can we expect all other pension pots to be included in due course? Schedule 2 shows when the different schemes will be brought on to the system. Can the Minister tell the House when data from personal and stakeholder pension schemes will be available to the public through the dashboard, and what is the position with group personal pension plans?
At the dashboards available point, or DAP, when the public can access dashboards, we expect to see some 99% of pension pots covered by the dashboards. Is that correct? How many pots does that leave out, and how many people will be in that position? Since some pots will not be displayed, how will I know as a consumer that I am not seeing all of my pensions? How will that be flagged up to me so that I can make an appropriate judgment?
My noble friend Lord Davies had some important questions about how the value of different pots will be displayed. I will be interested to hear the response to those. I also want to talk about handling data, on which the noble Lord, Lord Vaux, raised some important questions. But first, how confident is the Minister about the data quality? Has the work done so far thrown up any concerns?
My noble friends Lord Davies and Lady Drake raised some important questions about identity verification. It will be interesting to hear the answers to those but, once you have the identity, the next step is matching the consumer to the pension pot. That, essentially, is the central activity on which the whole system hangs, yet the Government have decided not to set a common data standard which has to be met to trigger the release of pensions data. Instead, firms are to be told to set their own data standards to trigger release; so, once a find request is received, a scheme will have to complete matching to identify whether they hold information on an individual’s pension matching that in the request. But rather than requiring trustees to use particular data criteria for determining matching, DWP expects schemes to take “reasonable, diligent steps” and to minimise the risk of data breaches or not returning any matches.
Regulation 28 requires information on the matching process used by schemes to be given to MaPS, TPR and the FCA. The idea is that the relevant regulator can, if they so decide, require a scheme to change its matching data requirements if it does not think them appropriate. There will be guidance from the Secretary of State, and the FCA will be seeking consistency of approach to identity matching for release of view data by its regulated providers, while the ICO will be issuing its own statement on matching data breaches. The DWP consultation points out that the whole thing rests on consent:
“The nature of an individual’s consent must be clear, explicit, understood, and informed. It cannot merely be … a tick box condition of usage”
That will be articulated more closely by the pensions dashboard programme in another publication. Given all that, why did the DWP not set particular minimum data standards for schemes for matching and releasing data to a view request, especially given the number of schemes involved? Can the Minister explain for the record what would happen if data submitted by a consumer are a partial match for data held by a firm? That is something I have had offline.
Can the Minister also tell me whether a member’s view data can be screen-scraped and stored by a third party? I am very exercised by this. I think the regulations say that a firm cannot store the data except during a session, but let us think through what this means in practice. Suppose a consumer is viewing her data on a firm’s dashboard, with an adviser from that firm sitting next to her. Can the firm screen-scrape the data from its own dashboard, retain it and immediately conduct a transaction off-dashboard, which might be a matter of pressing a button and jumping from one screen to another? If the answer is, “Only if the consumer consents”, how will the Government ensure that consent is meaningful, given the quotation I gave earlier from the DWP?
Sometimes the answer to this tends to be, “Don’t worry, because the FCA will have regulatory oversight of the firms and, where appropriate, the advisers”. This is where my noble friend Lord Jones comes in, because that was of course the case when British Steel’s pension scheme got into trouble and had to be restructured. Has the Minister read the report published in July by the Public Accounts Committee? It found that the FCA failed to protect British Steel pension scheme members from “unscrupulous financial advisers” who were incentivised by existing fee structures and regulation “to provide unsuitable advice” that led to around 7,800 steelworkers losing an average of £82,600 in life savings—I stress, an average of that—with some losing up to £489,000. The committee said:
“The FCA has consistently been behind the curve in responding to unsuitable pension transfer advice.”
The Minister cannot simply say that it is a matter for the FCA. If her Government choose to legislate to mandate the creation of commercial dashboards, on which we have expressed concern, and the release of data belonging to millions of consumers knowing that the Public Accounts Committee has said that the FCA is consistently behind the curve on protecting those consumers from unsuitable advice, then it is the Government who will bear responsibility for the consequences if people suffer losses. What assurance can the Minister give the House that the PAC will not be publishing another report in three or five years’ time on the fallout from commercial dashboards?
That takes us to the liability question. I am still not entirely clear about end-to-end liability in the system. Where does liability lie if a consumer makes a decision on the basis of view data which later prove inaccurate? If liability is with a trust-based scheme, ultimately that means the trustees. Is the Minister concerned that if some significant liability were established, many trustees simply would not have the personal wealth needed to fund any redress, and where would that leave consumers? Does this pose a risk that anyone other than corporate trustees will be deterred from serving as a trustee on a pensions board?
Next, where can consumers go to make a complaint? I understand that there is to be a single front door, but where does it lead and what is behind it? Which bodies will handle requests for redress from consumers who lose money as a result of making decisions which turned out to be based on wrong data? Can they go to the Pensions Ombudsman, the Financial Ombudsman Service or somewhere else?
Hackers and scammers were raised by my noble friend Lord Davies. I assume the plan is to warn consumers to be aware of scammers, but is there a strategy in place to counter the risks of scams within the system, as opposed to at the individual consumer’s end? Has it been designed to make it hard for scammers to operate and is there a plan to counter the risk of hacking or are we, as my noble friend said, going to see pensions view data being traded on the dark web, as we do credit card details? Are there back-up systems? If somebody were to lose a payslip, so that somebody picking it up simply had a name, address and national insurance number, could that be enough to hack their pensions data?
We have highlighted a range of concerns and some potentially serious risks of the project, but clearly there will be benefits too. I take the point made by the noble Baroness, Lady Bowles, about the importance of who benefits, not just that there should be benefits; we need the consumers too. Like the noble Lord, Lord Vaux, I read the impact assessment and I had a lot of fun with it. I know that it is a very anoraky thing to say but, my goodness, what a great document. Basically, it sets out low, central and high estimates for costs and benefits. In present value, the central estimate says that the project will cost £1.089 billion over 10 years. That is broken down as, roughly speaking, £850 million in industry costs and £240 million in public administration costs, or £1 billion over 10 years in today’s money.
As the noble Lord, Lord Vaux, said, the central estimate of the benefits comes in incredibly conveniently at just £29.5 million over. Of course, that is plus or minus £1 billion because the high and low estimates are literally £1 billion over or under. It is not a very meaningful aggregate figure anyway because it costs industry and government £1 billion and saves consumers a very notional £1 billion. But when we look at the benefits to consumers, that £1 billion of benefit in the central estimate is split almost equally between £541 million for the value of lost pots and £578 million for something called the consumer surplus. Digging further, it turns out that consumer surplus is the notional value deriving from consumers getting for free a service for which they would have been willing to pay. How do we know they would have been willing to pay? Researchers were sent out to ask them what they would pay for this service, then came up with this number. All I will say is “Hmm”, although we learned the interesting fact along the way that the number of users is expected to rise from 3 million in 2024-25 to 18.5 million in 2031-32.
We cannot incur all this risk and spend north of £1 billion for those two bits of value, particularly the consumer surplus. There must be other benefits. The Explanatory Memorandum has a really good section headed “What is being done and why?” at paragraph 7.4. It says that pensions dashboards
“will engender a greater sense of ownership of pensions, reconnect individuals with any lost pension pots, support the advice and guidance process, and enable more informed choices to be made when individuals access their pensions savings”.
The key question is: will people end up with higher pensions? The answer is “We don't know”, because the impact assessment says on page 23 that
“there is no robust evidence to attach causality and monetise the benefits in terms of increased retirement income that result from the dashboards”.
Could they end up with lower pensions? That might sound daft, but if someone sees their pension assets and decides to use them by taking some cash out—using the pension freedoms the Government gave them—to deal with their current living costs, they would end up with less to live on. Out of curiosity, is there any evidence that the process could lead to reduced retirement income? The IA did not address that.
Baroness Stedman-Scott (Con)
I note the noble Baroness’s point. This is something that we will take back with officials and to the relevant authorities, and it is something else that I shall write about and I hope give her a better answer than she has had to date.
The noble Baroness, Lady Bowles, raised the issue of risk of exploitation of data. Pensions dashboards and the technology behind them are designed to maximise data security. For example, pensions information is sent directly and securely from the scheme to the individual; it is not stored by qualifying pensions dashboard services or by the digital architecture. Individuals will always have control over who has access to their data, and will be able to revoke access at any time.
The noble Lord, Lord Jones, and the noble Baroness, Lady Sherlock, have raised to me individually the issue of British Steel pension schemes. The FCA is responsible for the regulation of the financial advice market and has looked closely at the advice provided to those BSPS members who decided to transfer out of the defined benefit scheme. It found that a very high proportion had received unsuitable advice, as has been said. The FCA has announced that it intends to take forward a scheme to provide compensation for BSPS members who received poor advice; it published a consultation on this scheme on 31 March, which has now closed. I think that the point that the noble Lord and the noble Baroness were making was that it must not happen again, and I am sure that message is understood.
The noble Baroness, Lady Sherlock, asked me to confirm when the data from personal and stakeholder pension schemes will be available to the public through the dashboard. She also asked what the position was with group personal pension plans. As set out in FCA rules, the majority of personal and stakeholder pension schemes are required to stage as part of the first cohort by the end of August 2023. That includes group personal pension plans. Until dashboards are launched to the public, schemes’ data must be available to invited users for testing purposes.
The noble Baroness raised a point about missing pots. Only a very small proportion of occupational pension scheme memberships are out of scope of the obligations to connect in our regulation and FCA rules. We expect that, at the point when dashboards are launched to the public, most individuals can be confident that all their pensions will be available to find via dashboards. When the value data for found pensions has not yet been provided—for example, if the member is new to the scheme, or when the value is still being calculated by the scheme—information to that effect will be displayed on the dashboard.
The noble Baroness asked how confident Ministers were about the quality of the data and whether the work has so far thrown up any concerns. It is critical that savers can trust the information in front of them; trustees and managers have existing legal obligations in respect of data quality, including the accuracy principle under UK GDPR, which requires that organisations ensure that data remains accurate and up to date. The Pensions Regulator set out its expectations on data quality in its record-keeping guidance; this includes that data is measured at least once a year.
The noble Baroness asked why the DWP had not set particular minimum data standards for schemes for matching and releasing data. The regulations allow for the trustees and managers of schemes to set their own matching criteria. We believe that schemes should be given discretion over which data elements they use to suitably search their records for a match. It is important that any scheme’s matching policy is appropriate to the level of confidence that they have in their own data; a uniform approach across all schemes would be likely to result in suboptimal matching.
Just to divert the House for a moment, I am conscious of how long I have been speaking, and I am keeping others from their business, but I am absolutely committed to answering these questions. With the leave of the House, I hope that I can carry on.
The noble Baroness, Lady Sherlock, asked whether I could explain for the record what would happen if the data submitted by a consumer was a partial match with data held by a firm. Schemes have the option of returning a possible match if they believe that they hold a record for an individual but are not certain. When a scheme returns a possible match, an individual will receive a limited form of administrative data that will enable them to contact the scheme to see if the possible match is in fact a match made.
The noble Baroness asked about screen-scraping. The regulations prohibit the storing of dashboards of view data, unless for temporary caching and for the sole purpose of displaying the view data in a single session. Similarly, transactions are not possible through the dashboard ecosystem. Making it possible for consumers to find information about all their pensions in a single place and requiring the consumer to undertake an identity verification check before being able to access that information significantly reduces the consumer appeal or perceived benefit of agreeing to screen-scraping. I have much more that I could say on that issue, so I shall write and place a copy of the letter in the Library of the House.
The noble Baroness, Lady Sherlock, and the noble Lord, Lord Davies, raised the point about complaints and where the liability lies if a customer makes a decision on the basis of view data that later proves to be inaccurate. As set out in our response to the consultation on the draft regulations, trustees or managers are responsible for meeting the requirements, which include receiving fine data, as well as undertaking, matching and returning the correct view data. Trustees or managers are not responsible for verifying the identity of users, and the authorisation of view requests or any processing of view data carried out by dashboards. The question of liability in the event that something goes wrong to the detriment of the individual would have to be considered on a case-by-case basis.
The noble Baroness, Lady Sherlock, raised the issue of liability and risk for trustees. The Government acknowledge that many trustees do an excellent job, often on a voluntary basis. The vast majority of trustees are in schemes with fewer than 99 members, so will be outside the scope of these regulations, unless they connected to pensions dashboards voluntarily. Although we accept that the regulatory requirements on trustees have grown a great deal over the years, this is only right, given what is at stake—we are talking about pension savings for millions of people.
The noble Baroness, Lady Sherlock, raised the issue of handling complaints and where consumers go to make a complaint. The dashboard ecosystem is made up of multiple different parts and, as such, dashboard users would potentially have complaints against a number of different parties. MaPS will therefore provide a central queries and complaints navigation tool, which qualifying pension dashboard services must direct individuals to, to help them understand their issues and know to whom they should direct their query or complaint if things go wrong, and the available routes to redress.
The noble Baroness, Lady Sherlock, raised the issue of scams and hackers and asked whether there is a strategy in place to counter the risk of scams within the system and whether this is being revisited regularly. It is crucial that dashboards give power to consumers and not scammers, which is why the dashboard ecosystem has been designed to ensure that only relevant pension schemes and authorised qualifying pension dashboard services have access. To maximise the effectiveness of the Money and Pensions Service pensions dashboard, users will have access to a retirement planning hub, which will provide onward planning journeys in a single place, supporting good decision-making. The FCA and MaPS will keep their rules and standards under review as dashboards emerge and evolve.
Baroness Sherlock (Lab)
If I can put the Minister out of her misery, I would be content from this point onward if she were to write to me with answers to the remaining questions. I just say for the record that I flagged up to the usual channels some time ago that this instrument would take rather longer than the normal time, and it would have been helpful if the planning for this evening had taken that into account. However, I am very grateful to her for having answered so fully and to have taken the time to do this—I really appreciate it.
Universal Credit
Baroness Sherlock Excerpts(2 years, 7 months ago)
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Baroness Sherlock (Lab)
My Lords, I thank the noble Baroness, Lady Tyler, and all noble Lords for their contributions. The Government have very few supporters on this matter, and nor should they.
We have heard about the impact on poverty. Citizens Advice has said that 2.3 million people could fall straight into debt. That is because £20 is not a small amount of money. Basic universal credit for a single person over 25 will fall by 21% when this comes in. If they are under 25, the fall is more than 25% overnight. The noble Baroness, Lady Eaton, may think the Government were clear about this, but Turn2us surveyed people last month and found that 36% of respondents were unaware this cut was coming. Rethink found that many severely mentally ill people, because they do not go online, have no idea this is coming down the track.
The defence we have heard from the Prime Minister, that the Government want to prioritise work, is simply misleading. We have been here before. Back in 2012, George Osborne tried to justify cutting £10 billion from social security by talking about the need for fairness
“for the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next door neighbour sleeping off a life on benefits”,
even though he knew he was cutting in-work benefits. Now here we are again.
The Prime Minister will know that 38% of adults in families on universal credit are employed. This cut is a direct blow to low-paid workers, including many we feted as pandemic heroes not long ago. The RSA found that 660,000 low-paid key workers, including nurses, supermarket staff and carers, will be hit by this cut.
The noble Baroness, Lady Tyler, is right: when the Government take £1,000 a year from low-income families, they should remember that this money is spent in towns and cities across the country. Poorer families spend their money because they cannot afford not to. Taking that cash out of the economy, when the recovery is so fragile, damages us all—disproportionately so in the north and the Midlands.
Let us remember one thing. There is a reason why the Government had to increase universal credit when millions of people flooded on to it: because people could not live on the benefits at the level they were at previously. They had gone up under Labour Governments —historically, they have not always been bad—and the Government cut over £10 billion out of our system, so people could not afford to live on the system that was there. As my noble friend Lady Donaghy pointed out, that is why the Resolution Foundation is right that if this goes ahead, we will be back to the lowest level of basic benefits for three decades.
We deserve a decent social security system and an economy with secure, well-paid jobs. We do not get there by plunging the poorest people into deeper poverty. Can the Minister tell us now whether the FT is right? Is there really internal modelling saying that this will have a catastrophic effect, leading to a rise in homelessness and poverty and soaring use of food banks? Is that true? I find it impossible to credit that a Minister would look at that assessment, shrug their shoulders and do it anyway.
Universal Credit: People with Mental Health Problems
Baroness Sherlock Excerpts(2 years, 7 months ago)
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Baroness Sherlock (Lab)
My Lords, I congratulate my noble friend Lord Davies of Brixton on securing this debate and on his introduction to it, and all my noble friends who have contributed this evening. I also commend all those involved with the Money and Mental Health Policy Institute for their work in high- lighting these issues.
Ever since its inception, I have had a steady stream of people telling me how hard they found it to navigate the online pathway to getting and maintaining universal credit. This is a particular problem for certain categories, such as those without ready access to the internet and those for whom their mental health makes the process of applying seem insuperable. If they do push through, it can aggravate their mental health. When I raise this, Ministers normally say that most people have no trouble at all. I have never been entirely persuaded by that, but even if I were, it does not seem grounds for not doing more to help the rest. After all, even a small percentage of 6 million people is a lot of people; it is not a small percentage. This report suggests that
“nearly 1.3 million UC claimants … report experiencing significant mental distress”.
For them, the requirements of UC are difficult to complete on their own.
As my noble friend Lady Drake said, most UC claimants with mental health problems who were surveyed say they have needed help from family and friends to manage their accounts at some point, and a quarter have needed it often. However, involving others is not straightforward because of the issues around explicit consent, which my noble friend Lord Davies explained very well. As both he and my noble friend Lady Drake have said, the whole process of delegating explicit consent online or over the phone ironically requires claimants to navigate the very tasks which led to them needing help in the first place. Any IT specialist will tell you that, if you make security issues too tough, people just find workarounds. My noble friend Lord Davies is quite right, as half of respondents simply shared their login details with somebody else. That is not helping in any way, so we have to find a better way of dealing with this.
The report notes that
“Symptoms of mental health problems can make it harder”
to make and maintain a universal credit claim. It talks quite interestingly about pain points in the UC system where a significant number of claimants started to struggle. These included, for example, trying to understand how their awards were calculated and which changes in circumstances they had to tell the DWP about. Confusion there is really dangerous as a failure to report a relevant change could lead to underpayments or overpayments and even being prosecuted—so that is really bad. It also included trying to challenge deductions or sanctions and renegotiating their claimant commitment.
The charity Rethink Mental Illness did a little briefing for this debate. It agrees that third-party access is vital, since its mental health and money advisers report that a lot of people severely impacted by mental illness cannot access their online journal. I realise that privacy is really important and appropriate safeguards need to be put in place. Yet, when I raised via a Written Question that both partners can see any messages exchanged by either one of them with a work coach on their journal and that this could be an issue in relation to domestic abuse because it had been raised by a claimant, I got a fairly dusty answer saying simply that people should not share sensitive information. Of course, all kinds of information can be sensitive in the context of domestic abuse. I think we are getting stuck both ways. Has the DWP investigated whether there could be a more nuanced way of treating issues around access to information which provides more protection for privacy, supports those needing assistance and works for those with fluctuating capacity? That is one of the issues.
I will be interested to hear the response to the question from my noble friend Lady Donaghy about CABx and the roles they might be able to play. I thought that was a marvellous speech and I commend all three of my colleagues for some very serious research and work that has gone into preparing for tonight. I would be interested to hear the Minister’s response to my noble friend Lady Drake’s question about the idea of a new help-to-manage service. If the DWP invested the best part of £40 million in the help-to-claim service, it is an awful shame to spend that getting people on to universal credit if they then fall off because they cannot manage their claims. What are the Government doing about that?
I have a couple of quick questions for the Minister. First, does she accept the principle that a significant minority of people find the universal credit system difficult to navigate, both in terms of applying and maintaining their claim? I think it is helpful for the debate for her to answer that question directly. Does she accept that there is a problem for a significant minority in claiming and staying on?
Secondly, does she think the situation will get worse with managed migration? Can she tell us when that is going to happen? There are around 1.9 million people on ESA. If they move to universal credit and the report is right in that two-thirds of those are considered to have mental health problems, that is quite a problem coming down the track in terms of scale. I think that figure of two-thirds, from looking at the report, was from a 2014 study. If the department has more recent figures, perhaps the Minister could share them with us. Rethink hears from people who are scared to move on to UC from legacy benefits precisely because they are afraid of using the online system. The charity is calling for improvements to online accessibility before managed migration is rolled out further. Does the Minister think there is an issue here? If so, what is being done about it?
Finally, the report makes an impressively modest number of recommendations, but they are quite specific and practically addressed. My noble friend Lord Davies summarised them well. Given that the title of the report was in the title of this debate, the department has had plenty of time to look at the recommendations. Given that, and that my noble friend went to all the trouble of getting the debate and of researching the recommendations, I hope that the Minister can at least give a comment on each of them. If she cannot today, could she write to address each? There are not very many. If the department really does not like them, it is only fair to explain whether it thinks there is not a problem or that this is not a good way to solve it. If so, what else is it doing?
With that said, a lot of work has gone into this report, and I commend my noble friend and all those involved in it, especially the interviewees. I think of Gary, who was mentioned by my noble friend Lord Davies. If all he wants is a little help and some sympathy, surely that is not beyond us, is it?
Occupational Pension Schemes (Administration, Investment, Charges and Governance) (Amendment) Regulations 2021
Baroness Sherlock Excerpts(2 years, 7 months ago)
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Baroness Sherlock (Lab)
My Lords, I thank the Minister for her careful explanation of these regulations. I must say it is a pleasure to see her in person across the Dispatch Box once again, especially on so exciting a subject. I also thank all noble Lords who have contributed today.
There have been so many policy and statutory interventions into the private pensions scheme post auto-enrolment that I have to say that I am slightly with my noble friend Lord Davies here. It is quite hard to follow the long-term strategic objectives and outcomes that the Government are seeking to achieve. I get that this set of regulations is designed to take forward government policy to enable and encourage DC schemes to invest in a more diverse set of growth assets, including private equity and venture capital, in the belief that this will benefit both the British economy and the interests of pension scheme members.
We have heard the headlines today. Trustees of smaller schemes will have to do a more holistic annual “value for members” assessment and, if the regulator does not think that they can demonstrate good value, they will be pushed to wind up and consolidate. Trustees of all relevant schemes will have to give net investment return statements for default and self-selected funds. Then there is an amendment to the charge cap regulations to smooth the impact of performance fees over five years.
As we have heard, the Government in their call for evidence are seeking views on how to accelerate the pace of consolidation of schemes and are looking ahead to the second phase of consolidation for medium to large schemes with assets of between of £100 million and £5 billion. As my noble friend Lady Drake was hinting, £5 billion is way more than small. Obviously, strengthening the regulatory framework in pension schemes is welcome and, presumably, here the aim is to do that through more stringent “value for members” assessments, reporting on investment performance net of fees and the promotion of consolidation into larger schemes to create scale and leverage to deliver value, drive down charges and consider more diverse and innovative investment strategies that will benefit members. However, given the Government’s intention to drive greater consolidation, even of schemes with assets of above £5 billion, we really do not have much detail as to how and when this accelerated consolidation into a much smaller number of very large schemes is going to take place.
My noble friend Lady Drake was pushing into this subject. We need to know what the optimal number of schemes is against which the Government are benching their drive to consolidation. I think the Committee deserves to have a clear answer to that. If we are to be asked to approve one set of interventions after another, it is only reasonable to be given a vision of the end state the Government have in mind once they all work their way through the system.
Baroness Stedman-Scott (Con)
The noble Baroness, Lady Drake, referred to the PM and the Chancellor calling for an “investment big bang” and said that these measures wrongly force schemes to invest in illiquid assets. The Government do not wish to direct trustees of pension scheme investments. Trustees must invest in line with their fiduciary duty; that is, in the best financial interest of their beneficiaries. Instead, we are seeking to remove barriers to investments in illiquid assets. The provisions in this instrument have received support from the pensions industry.
The noble Lord, Lord Davies, talked about default schemes. He is correct that almost all members save into the default arrangement. Those who self-select still receive regular information on charges and are generally engaged. He raised the subject of the threshold for “value for members” assessment being set at less than £100 million, which had increased from £10 million at consultation. He asked whether it would increase further in future. The Government increased the “value for members” assessment threshold following consultation with industry. The reason for this was to capture as many potential poorly performing occupational DC schemes as possible. We have evidence that the smaller a scheme is, the more likely it is to be poorly governed. By our moving the “value for members” assessment threshold from assets under £10 million to £100 million, more occupational DC schemes will have to undergo this rigorous new assessment. This will mean that more members will benefit from improved governance, administration and returns as a result. We will review the assets under the £100 million threshold regularly but have no plans to change it at present.
The noble Lord, Lord Davies, asked how meaningful to members the information would be. The Government are taking forward several measures—dashboards and simpler statements among others. The SI is about how these schemes are governed internally. We are intervening to prevent members languishing in poor schemes.
The noble Baroness, Lady Sherlock, raised a point about CDC. I am advised that we will write to her on that. She also asked what the instrument would mean for the future of look-through and said that the Government had said that they would advise on a policy in July. The instrument does not amend the Government’s policy on treatment of such costs. In our consultation response on improving outcomes for members, published on 21 June, we state that occupational DC pension schemes should continue to look through closed-ended funds as they would all funds of funds and incorporate such costs within their regime of charges levied on members.
If there are points raised by noble Lords that I have not dealt with—
Baroness Sherlock (Lab)
I am grateful to the Minister. Could she write to me with that last point, as I did not quite catch the bit about look-through funds and look-through operations of closed-ended funds? I asked two questions. First, my noble friend Lady Drake and I both asked what the Government’s optimal number of schemes is. Would it be one big or enormous scheme—would that be fine? Is it fine to have lots of schemes? Can the Minister give some idea what the centre is in that? The other thing I asked about, which I do not think she answered, was what guidance would be given to trustees or employers who might want to consolidate but were concerned that the moving goalposts would mean that they could end up simply being moved again and, potentially, again. If she did respond to that, I apologise for having missed it.
Baroness Stedman-Scott (Con)
I will write to the noble Baroness on the three points she has raised and put a copy in the Library for everybody to see. If there is anything, having looked at Hansard¸ that we have not dealt with, other than that which the noble Baroness raised, I will write to all noble Lords.
This instrument makes several different changes to several different sets of regulations. It has one theme at its core: improving outcomes for pension savers. We have a duty to ensure that those who have engaged in pension saving in their workplace as a result of automatic enrolment can rest assured that their occupational DC pension scheme is on course to deliver the best possible outcome for them. This instrument does this by tackling poor levels of governance, shifting the attention of the market from a narrow focus on cost to overall value, and removing barriers to schemes allocating to a wide range of different assets. I therefore commend it to the House and beg to move.
Pensions Regulator (Employer Resources Test) Regulations 2021
Baroness Sherlock Excerpts(2 years, 7 months ago)
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Lord Davies of Brixton (Lab)
I am glad that it was an accountant who made the comment that profits can be whatever you want them to be, which was my concern. However, I am struggling to grasp what role this is playing. In some ways, I suspect that we could overengineer the definition of “resources” and make it very complicated. There are strong arguments for keeping it as simple as possible so that the regulator can take a holistic view. This is what I understood the process to be. My guess is that the regulations will enable the regulator to do what we always thought it could do in the first place, and it tripped over some regulatory legal point. There are strong arguments in favour of keeping it simple and leaving it essentially to the judgment of the regulator.
Whenever I mention the regulator, I have to add my qualification that of course it does not represent scheme members in any way. It does not have the accumulated knowledge of unions and employers who actually do the business of agreeing pension schemes. I have questions about the Pensions Regulator but the ideal should be a Pensions Regulator that knows the field and can apply the test proportionately.
I have one specific question. I have no idea what this means. Regulation 4(8) says that
“the Regulator must take into account all relevant information in its possession”.
Well, yes, it is not going to take into account information that is not in its possession. However, it goes on to use the word “verification”. I am not sure what “verification” is doing in that paragraph.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for her explanation of the reasoning and intent behind the employer resources test, and all noble Lords who have spoken. I too welcome a move to strengthen the power of the Pensions Regulator. We should say that most employers with DB schemes act professionally and responsibly and maintain good relations with their scheme trustees. However, the Pension Schemes Act 2021, from which these regulations flow, rightly gave the Pensions Regulator stronger powers to deal with the small number of circumstances where parties decide to evade their obligations to their pension schemes or behave recklessly. The test is whether these measures will enable the regulator’s approach to be clearer, quicker and tougher. This is what we are exploring today, so I hope that the Minister can help to reassure us on that point.
I will not go back over what the regulations do, but as we have heard, employer resources will be assessed through normalised annual profit before tax, with non-recurring or exceptional items removed. The Minister explained how that would happen: you would take NAPBT, the regulator would then look at the impact on NAPBT caused by the act or the failure to act, produce an adjusted NAPBT and then decide whether to issue a contribution notice. It would compare the two and then argue that the reduction was material in relation to the estimated Section 75 debt.
The case for the test must be that it removes the evidential challenges and uncertainties in forecasting how the employer might or might not perform in the future— absent the act or failure to act—and therefore presumably would provide a quicker measure of assessing the employer’s ability to support the scheme and reveal whether a reduction in resources was material.
Occupational Pension Schemes (Climate Change Governance and Reporting) Regulations 2021
Baroness Sherlock Excerpts(2 years, 9 months ago)
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Baroness Sherlock (Lab) [V]
My Lords, I welcome this important instrument. I thank the Minister for her introduction and the other noble Lords for their contributions.
The Explanatory Memorandum notes the evidence suggesting
“that we are currently on track to see 3°C of warming by the end of the century.”
That level of warming would cause changes that fundamentally shift how the planet behaves, including the breakdown of the global ocean circulation system, rainforests turning to savannah, ice sheets disintegrating, the spread of deserts and the collapse of farmable land. This could result in mass migration, famine, war and death. It could not be more serious.
As the Minister reminded us, climate change is expected to have a significant impact on pension schemes and their almost £2 trillion in UK assets due to both the physical and transition risks. It is good that we are starting to see action taken within the industry, such as Aviva announcing that its auto-enrolment default funds will aim to achieve net zero by 2050—that is some £32 billion of capital—or the BT pension scheme setting a goal of net zero by 2035 for its whole portfolio of about £55 billion. There is lots of good practice emerging in public sector DB schemes.
With the climate emergency getting ever more serious, today’s action is long overdue, so it is good that the Pension Schemes Act from which this SI derives addresses climate risk. Pensions Minister Guy Opperman described the proposals as “world-leading”, and the Minister today noted that the UK is set to become the first major economy to require climate risks to be specifically considered and reported on—but I gently say to the Minister that the grandstanding is a little ungracious and that no reference was made to the fact that the Bill was made greener only by cross-party working in our House.
When the Pension Schemes Bill was introduced as a Lords starter, rather than net-zero provisions there were zero climate provisions in the legislation—a gaping hole we highlighted at Second Reading. The Government then introduced amendments in Committee but they had to be strengthened through cross-party negotiation, led by my noble friend Lady Jones of Whitchurch and the noble Baroness, Lady Hayman, to ensure that trustees and managers had to take account of the Paris Agreement and domestic targets such as net zero. As a result of that work, “climate change” was mentioned in domestic pensions legislation for the first time. We are really pleased with this achievement.
Turning to the detail of the instrument, I have a number of questions—the Minister would be disappointed if I did not, but none of them should be very unexpected, so I hope she will be ready and able to answer them. First, the Pensions Regulator will put requirements on trustees to drive change among investment managers. But the regulator has acknowledged that without standardised and enforced data throughout the investment supply chain, trustees would find it difficult to access the good-quality data they will need to produce the qualitative and quantitative outputs required by the new governance and reporting requirements.
There is an issue because the two regulators, TPR and the FCA, are not fully aligned in time, and TCFD disclosures aligned to the Task Force on Climate-related Financial Disclosures are not currently required throughout the investment chain. As my noble friend Lord Davies mentioned, the FCA is currently consulting on proposals to introduce climate-related financial disclosure rules and guidance for asset managers, life insurers, FCA-regulated pension providers and issuers of standard listed equity shares; to require firms to reveal how they will take climate-related risks into account in managing investments on behalf of clients; and to produce a baseline set of disclosures in respect of their products and portfolios. But the FCA proposals will not be released until 2022, so we do not know how they will align with the TPR requirements.
In his Mansion House speech on 1 July, Chancellor Rishi Sunak announced the sustainability disclosure requirements to be introduced for businesses and financial products. The Treasury has said that these are intended to bring together and streamline existing climate reporting requirements and that the Government will work with the FCA to create a new sustainable investment label—a quality stamp.
Here come two important questions on this issue. First, can the Minister clarify how these sustainability disclosure requirements will interact with the rules for trustees arising from these regulations on reporting on climate risk? Secondly, can trustees rely on an FCA quality stamp as a reliable and acceptable source of data for meeting their disclosure requirements under these regulations?
Next, a word about scope. The Minister mentioned that these new governance requirements will apply initially to trustees of schemes with relevant assets of £5 billion or more, then from October next year they will bring into scope trustees of schemes with relevant assets of £1 billion or more. TPR estimated that the first phase would capture 102 pension schemes, or roughly 42% of all UK pension assets. The second phase would capture an estimated 351 schemes. The provisions would then, by the end of phase 2, cover approximately 71% of all UK pensions assets.
Here comes the third question: what, if anything, will be done to manage climate risk for the other 29% of pension assets? Will there be any requirements on them at all, or any action in relation to them? Some respondents to the TPR consultation argued that the DWP should commit now to bringing more schemes into scope in 2024. I get that they want a review, but why did the Government reject that commitment in principle to bring more schemes in? Also, what support will be given to trustees to help them meet these new obligations?
I have two final quick questions. One is on cost. The annual net direct cost to business is suggested as £6.2 million—roughly £12,000 for a scheme in year 1 and about £10,800 thereafter. Is the intention to provide any transitional funding, or will the Government monitor these costs so that they can decide whether help is needed for smaller schemes when they are brought into scope? Finally, will there be a central collection and monitoring process to review information from all industry reports to get a broad picture of the progress that schemes are making?
These changes are very welcome, but we still have a long way to go to ensure that the pensions industry and the Government manage climate risk better and reach net zero by 2050. I congratulate all those who worked so hard to get this instrument before us today. I hope that the example of the pensions Bill, where cross-party pressure in this House led the Government to a better place, is one that will set a trend for the future. I look forward to the Minister’s reply.
Child Maintenance Service
Baroness Sherlock Excerpts(2 years, 10 months ago)
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Baroness Sherlock (Lab) [V]
My Lords, I remind the Committee that, a long time ago, I was a non-executive director of the Child Maintenance and Enforcement Commission and, even longer ago, chief executive of One Parent Families.
I am grateful to the noble Lord, Lord Famer, for securing this debate, as we rarely get to discuss child maintenance, which is really important. His opening speech began with a history lesson, capped fascinatingly by the noble and learned Lord, Lord Mackay of Clashfern, who reminded us just why we need an effective statutory Child Maintenance Service—a cause he has long championed. The noble Lord, Lord Farmer, also gave us a tour d’horizon of many of the key policy issues relating to child support, with the noble Baroness, Lady Eaton, offering some more in her contribution.
I will focus on more operational questions, but I start by agreeing with the noble Lord, Lord Farmer, that it is important, wherever possible, that both parents should contribute towards the cost of bringing up children after a relationship has broken up. Children are a lifelong responsibility for their parents, and it can be important for them to know that both parents continue to support them. I also agree with the noble Lord, Lord McColl, about the importance of good support for families at every stage.
There is also clear research evidence demonstrating the role that child maintenance can play in helping to lift single parents out of poverty. This is really important, given that we went into the pandemic with 4.3 million children living in families in relative poverty. Given the scarring effect in later life of living in poverty as a child, the stakes are very high.
Ministers often say that work is the best route out of poverty, but working poverty is now at a record level of 17.4%. Interestingly, a recent IPPR report found that the poverty rate for couples with one full-time earner is now 31%. Since single-parent households tend to have just one earner, it is perhaps not surprising that almost half of children living in single-parent households are in poverty. But if a single parent is already working full time, they cannot really make much more money by earning more, so getting maintenance paid in full and on time may be their best chance of lifting their children out of poverty.
Unfortunately, too much maintenance goes unpaid, and it must be said that the Child Maintenance Service has not had a good pandemic. That is not a reflection on the hard-working staff of the CMS. When Covid hit, a large number of staff were redeployed away from the CMS to help process universal credit claims. Can the Minister tell us how many? My noble friend Lady Massey of Darwen was pushing on that as well. I understand the need for more staff processing universal credit claims, but single parents paid the price for that. Victoria Benson, CEO of Gingerbread, said that for much of the pandemic, the CMS was
“running a skeleton service, meaning they are now as a rule not enforcing payment and are allowing paying parents to reduce or withdraw maintenance payment without any proper evidence.”
Single parents are still complaining to Gingerbread that CMS is not enforcing child maintenance owed to them.
I looked up the last official child maintenance statistical report, which covered the last quarter of 2020—it came out on 23 April, so we are due another one any day. It said that the CMS had resumed virtually all areas of service delivery and was now focusing on the recovery and enforcement of outstanding arrears. Can the Minister tell us what the current situation is? Is CMS now operating a full service in all areas? Is it using its full range of enforcement powers? Crucially, are there as many staff now in the CMS as there were before the pandemic? Does it have a plan for tackling those arrears?
My noble friend Lady Massey raised the question of the reduction in the period of time for considering a paying parent’s maintenance liability where their income had changed because of Covid. That was cut from 12 weeks down to two. It protects paying parents but of course hits receiving parents. CMS said it will revert to 12 weeks as soon as possible. Can the Minister say whether that is still in force and, if so, when will it revert?
The statistics show that in the last quarter ending December 2020, of paying parents who pay via collect and pay 50% paid over 90% of their child maintenance—that counts as fully compliant; 22% paid something; and 28% paid nothing at all. Does the Minister think that is acceptable? If not, is there a target to improve it? We need to look at those stats in light of the fact that more people have moved on to benefits; they are more likely to pay child maintenance as it is knocked directly off their benefit payments before they get it. Indeed, 40% of all collect-and-pay cases now involve deductions from benefits, whereas it would normally be more like 21% to 24%. So that is flattering the compliance rates.
What about the amounts? In the quarter to September 2020, the statistics say that £41.1 million was paid through collect and pay. But by the last quarter, when things were allegedly back to normal, that went up only by £1 million. That seems to leave £15.2 million of maintenance uncollected in that quarter alone. That is £15 million that could have been spent on feeding and clothing children.
Since 2012, when the Government created the Child Maintenance Service, £395 million in unpaid maintenance is owed through collect and pay. That is roughly 9% of all the maintenance ever due to be paid since the new service started. The Government closed down the previous service, reformed the system and created what we have now. It is their baby. Are they happy with how it is doing?
That is just those who get into the statutory system. Like my noble friend Lady Massey and the noble and learned Lord, Lord Mackay of Clashfern, I worry about the impact of charging and I would also like to know how much maintenance is being paid through private arrangements.
Finally, a consultation was launched just last Friday on making some changes to CMS. I read that the proposals are to change how unearned income is treated, to enable the writing off of low amounts of debt, to allow CMS notifications to be sent digitally, and some other stuff about who has to provide information. Can the Minister tell us whether all those changes which the consultation is addressing can be made in secondary legislation? Will the DWP analyse the responses to the consultation before it publishes the draft legislation? I know that sounds obvious, but it does not always happen. The NAO is also preparing a report on the CMS. Will the department await the final NAO report before making any changes?
Child maintenance matters to parents and to society but, above all, it matters to children, since, as my noble friend Lady Massey always reminds us, the welfare of the child is paramount. We owe it to our children to have a well-functioning, supportive system of child maintenance in Britain. I look forward to the Minister’s reply.