Pensions Advice

Debate between Baroness Sherlock and Lord Newby

Wednesday 23rd July 2014 Lords Chamber

[Lord Newby]

My Lords, the key thing is that people get guidance from a trusted source. There will be a commonality of approach. The FCA is producing very detailed technical guidance, which everybody providing the personalised guidance will provide. I recommend that the noble Lord looks at the FCA consultation document that came out earlier in the week, which explains how it is going to do that. There is a danger that we are so concerned that things might not work that we never innovate.

[Baroness Sherlock (Lab)]

My Lords, I remind the House of my interest in the Financial Ombudsman Service board. In the Budget, the Chancellor announced that everybody would get,

“free, impartial, face-to-face advice”.—[Official Report, Commons, 19/3/14; col. 793.]

on their retirement options. Now we learn that it will be guidance, not advice, and that face-to-face could mean online or over the phone. Will the Minister please tell the House how many people in 2015-16 will actually get face-to-face guidance? Will he reassure the House that that commitment will not be watered down any more? People coming up to retirement need advice they can trust.

[Lord Newby]

My Lords, the difference between guidance and advice is simply that within the financial services sector advice is a regulated activity which, as the noble Baroness knows, requires those who offer it to have gone through a significant process. This is a different level of advice. As far as face-to-face advice is concerned, the Treasury has undertaken a considerable amount of consultation. Many people have said that they would much prefer, in the first instance at least, to get their advice online or to do it on the phone. We have said, however, that any individual who wishes to have face-to-face advice will have it, and they will. It is simply that not everybody wants it that way.

Pensions

Debate between Baroness Sherlock and Lord Newby

Thursday 26th June 2014 Lords Chamber

[Lord Newby]

My Lords, the Association of British Insurers has produced a detailed response to the consultation that we are undertaking. Within that, it has underlined its commitment to help customers understand their options and enable them to make good decisions. I think that for many people, when the word “pension” is mentioned, a mist descends; so demystifying pensions is a big challenge already. That is why we are devoting £20 million over the next couple of years to getting the new guidance system up and running.

[Baroness Sherlock (Lab)]

My Lords, the mist may not be entirely accidental. I remind the House of my interest as the independent director of the Financial Ombudsman Service. The Telegraph reported on 13 June that officials are getting ready to tell more than 1 million people in their late 50s and early 60s that they will not get the full amount of the single new “flat-rate” state pension. The Pensions Minister, Steve Webb, told the Telegraph:

“I think I may have been guilty of oversimplifying the new flat rate state pension ... But as soon as you caveat this type of thing people switch off”.

Will we have the opportunity to scrutinise the communication plan for this scheme to make sure that more mist does not descend in future?

[Lord Newby]

My Lords, the provisions relating to the guidance will be in the pension scheme Bill when it comes before your Lordships’ House. I am sure that there will be plenty of opportunity to debate those provisions at great length, to which we on this side look forward.

Welfare Benefits Up-rating Bill

Debate between Baroness Sherlock and Lord Newby

Tuesday 5th March 2013 Lords Chamber

[Baroness Sherlock]

My Lords, we have heard yet again some very powerful and persuasive speeches and it is a very interesting argument. I commend the right reverend Prelate the Bishop of Ripon and Leeds for provoking such a good debate on so important an issue. As we have heard, this amendment would remove child benefit, child tax credit, and the child addition to universal credit from the scope of the Bill. Since we on these Benches would like to remove all benefits and tax credits from the scope of this Bill, we are pleased to support it

As we have heard from the right reverend Prelate, the noble Baroness, Lady Grey-Thompson, and others, the Bill has a disproportionate impact on children and families. The Government’s own impact assessment shows that two-thirds of affected households are families with children. As the noble Lord, Lord Low, noted in a very powerful speech, the Children’s Society says that while 30% of all households are affected, 87% of families with children are hit.

On one level this is because families with children receive more in state support—of course they do. As the noble Baroness, Lady Grey-Thompson, pointed out, a household without children is rather cheaper to run than one with children; not to mention a great deal quieter. However, while most parents rightly bear the lion’s share of the cost of raising their children, the state has always contributed—not just in extreme cases to try to protect children from the misfortunes that befall their parents but also because, in general, it is always recognised that children are a public as well as a private good. We all have a stake in seeing the next generation thrive.

Many noble Lords have rehearsed—and I will not repeat them—the concerns expressed to all of us about the impact of these measures on families with children. We have all had briefings from Save the Children, the Child Poverty Action Group, the Children’s Society and others making those points. These are very difficult times to be raising children, as my noble friend Lord Touhig noted in a very powerful speech. As the costs of food and energy have soared, more and more parents are struggling to make ends meet as they spend more of their money on these basic costs.

The right reverend Prelate made a telling point, I thought, when he reminded us that, unlike other areas, we do not have people in here with direct expertise of the matters under consideration. To that end, I liked the quote from Rosemary Keenan, the chief executive of Catholic Children’s Society (Westminster), when she said:

“It is hard for many of us to imagine what it is like for a mother to only have £1 left and know she still has to feed her children before the next payday. Families facing in-work poverty rely upon Working Tax Credits and other benefits to help make ends meet, and will face serious hardship as a result of these restrictions”.

Indeed they will. As we have heard from a number of noble Lords, the Bill comes on top of a series of cuts in the value of other tax credits and benefits. As well as the headline cuts, there have been a series of hidden cuts affecting, for example, tax credits for families with children by changes to taper rates, the treatment of income and the freezing of allowances, all of which sound technical but have in fact saved billions. However, it is not of course money that has been saved, but money that has been taken way from low-income families with children.

I seem to recall that the Government suggested at earlier stages that one of the reasons that so many families are affected is that tax credits go too high up the income scale. The implication, I suppose, is that people would not miss the money. However, the noble Baroness, Lady Grey-Thompson, described some figures from Citizens Advice. It has given us case studies showing that a couple with two children, where one parent is working full-time on just over minimum wage—getting £13,000 a year—will gain just 76 pence from the personal allowance. As a result, however, they will lose £3.46 a week net. By April 2015, that family on £13,000 a year with two kids will be £12.79 a week worse off. Even if we go nearer to average earnings, Citizens Advice suggests that a family earning £26,000 in similar circumstances will be over £12 a week worse off by April 2015. The sums may not sound like a lot, but they are significant to families on those kinds of incomes.

The Bill, as we have heard, will affect primarily working families with children. I was pleased to hear my noble friend Lady Massey of Darwen reiterate the impact of the Bill on child poverty, although I hope to hear something specific about this. I feel that I have probably done it to death, so I shall stop saying it now.

To come back to our core concerns, the Bill is a completely inappropriate way to address the up-rating of state support for families. We have perfectly good mechanisms in place to do that on an annual basis in the light of prevailing economic conditions. To come to the specifics, in trying to circumvent those annual mechanisms, the Government have left me slightly confused. I therefore have two questions for the Minister. First, can he tell the Committee what plans are in place for the up-rating of those benefits, tax credits and allowances which are not included within the scope of the Bill? This was raised at an earlier stage, but I do not think that we got a full answer; if we did, I apologise and will look it up. If the Minister does not know, would he mind writing to me before Report stage?

Secondly, other than those mentioned in the schedule and the universal credit work allowance mentioned in the Autumn Statement, are there any other benefits or allowances which the Government intend to up-rate by 1%? Those two questions together sound quite boring but, in fact, their answers will enable us to understand the parameters of the Bill’s impact. Unless we can get that detail, the Committee cannot properly understand its consequences.

Coming back to our core objections, these are poor choices for the Government to be making. The families who will be hit are not responsible for the economic situation, for the banking crisis or for the failure of the Government to get the economy growing again. They are just doing their best to manage in difficult times. Yet the Government are planning to cut the value of the help they get from the state in order to fund a tax cut for nearly 13,000 people earning £1 million a year. We should not be doing this and are pleased to support the amendment.

[Lord Newby]

My Lords, I absolutely understand and appreciate the desire of the right reverend Prelate and other noble Lords who have spoken on these amendments to protect and support children; of course, we all want to do that. However, our view is that supporting children is not just about increasing benefit levels. One of the most important things that we as a country can do to support children is to tackle the deficit and restore economic growth. In doing so, we create a future of prosperity, opportunity and jobs for the parents of those children in the short-term and for those children as they grow up. Taking benefits out of the Bill, as proposed by the right reverend Prelate, would take away some of what we consider to be the vital savings required to do this.

The amendments which we are debating now would remove from the Bill the child element of tax credit, child benefit and the lower rate of disabled child addition in universal credit. I assume that the right reverend Prelate’s intention in removing those elements is that they would be up-rated with prices, as was the case previously. If that were the case, I need to remind the House that the savings delivered by the Bill would be reduced by nearly £1 billion. In our view, those savings simply have to be found. If we did not do it through the Bill, they would have to be found from somewhere.

I was extremely grateful to the right reverend Prelate for the fact that, unlike the Opposition, he at least set out how he would raise the money. It was a long and credible list. However, it is not a list with which the Government agree. The Government’s view is that tax credits and child benefit account for over 40% of working-age welfare expenditure. It is not realistic to think that they can be excluded from the need to make savings.

We are attempting to prioritise resources into reforms which can help children in a variety of ways. To repeat some of the points which I made in my earlier speech, I hope not too tediously, we have since September 2010 entitled all three and four year-olds to 15 hours per week of free early education. This is being delivered flexibly to meet parents’ needs. It will be extended to 260,000 disadvantaged two year-olds from September 2013. We are also helping 100,000 more working families with their childcare costs by spending an extra £200 million in universal credit.

To deal with a point made by the noble Lord, Lord Touhig, we are taking action to deal with exorbitant practices by payday loan companies and loan sharks. One thing that we are grappling with, with which any Government would grapple, is that many families on low incomes have got very high levels of personal debt. This is not new. When I was Treasury spokesman for the Liberal Democrats about seven or eight years ago I appeared, somewhat implausibly, on the steps of the Treasury with my right honourable friend Vince Cable, bearing an outsized cheque at the point when personal debt in the country reached £1 trillion. Most of this, I accept, was mortgage debt; it is not the debt that we are talking about today. However, some of the biggest increases in personal debt over the past decade have been among people on low incomes. This growth in personal debt was not effectively recognised or tackled in the past. Indeed, our appearance bearing this cheque just guaranteed a huge amount of ridicule for Vince Cable and myself, rather than anybody, including the previous Government, taking the slightest notice of it, which was deeply distressing—or, more importantly, taking the slightest action to deal with the culture with which we are now grappling.

However, both in terms of loan sharks and payday lenders, I hope that we are taking more effective measures, not least through the amendments during the passage of the Financial Services Act, to ensure that people requiring access to short-term loans can, at the very least, do so with companies which will treat them half-decently. The other area which we protected, which is vital to families and benefits those at the poorer end at least as much as those at the upper end, is the support they get through the schools system and the NHS, where the budgets are protected.

The right reverend Prelate spoke about child benefit, which he is anxious to protect. I remind the House that, even after the changes that have been made to child benefit, nine out of 10 households are still covered by it. We are taking the entitlement away only right at the top end. Child benefit continues to be paid to many households which are by no means on low income.

Financial Services Bill

Debate between Baroness Sherlock and Lord Newby

Monday 15th October 2012 Lords Chamber

[Baroness Sherlock]

I support in particular the comment made by my noble friend Lord Kennedy at the end of his contribution. He asked the Minister whether he would meet with my noble friend and other interested Members to consider if not this then what other action can and should be taken. I think that the House would be particularly interested to hear the Minister’s response on that.

It seems quite obvious that as a market the CMC sector simply is not working. Not only are significant numbers of people being pressured essentially into doing things which they do not want to do, but there appears to be no price competition in the market at all. All the evidence shows that consumers are just as likely to use a claims management company which charges 40% as one that charges 15% of any money that they might get back. Many simply are not aware that they could do it for themselves for free by going directly to the ombudsman.

If the Minister is not minded to go in that direction, will he tell the House two things? First, what would the Government be able to do very soon that would have a significant impact on targeting in particular the minority of claims management companies that are behaving very badly? Secondly, will he at least agree to meet interested Peers to discuss that matter very soon?

[Lord Newby]

My Lords, I share the concerns behind the amendment about the activities of CMCs in relation to financial services products. Like all noble Lords, I have been approached by them with the most spurious and ridiculous arguments about why I should give them details about my financial affairs in return for some often unspecified benefit. We start off by sharing that concern.

I would be more sympathetic to the amendment if I did not think that the Government were already doing something about it. I am very happy to meet noble Lords who would like to discuss the matter, along with colleagues from MoJ, to see what might be done to expedite effective action. But I do not think that it is necessary or appropriate to expect the FOS to step in as a quasi-regulator and make its own conduct rules. The role of the FOS should be to act as an independent dispute resolution service and not to act as a quasi-regulator of CMCs. It is just the wrong organisation to do that.

As I have said, I am sympathetic to what the noble Lord is seeking to achieve and I give an undertaking to set up a meeting to discuss it further. On that basis, I hope that the noble Lord can withdraw his amendment.