Oral Answers to Questions

Guy Opperman Excerpts

Monday 3rd November 2014 Commons Chamber

[Steve Webb]

The right hon. Gentleman deserves great credit for his promotion of the living wage. My right hon. Friend the Secretary of State inherited a situation in which some of the Department’s employees were not receiving the living wage. Our Department has committed to it, and we have had that dialogue with our subcontractors as well.

[Guy Opperman (Hexham) (Con)]

I also welcome the rise in the living wage announced today. The Minister will be aware that jobseeker’s allowance claimant numbers are falling across the board in every single constituency in the north-east, and by 31% in my Hexham constituency over the last year. Does he agree with me that coming off JSA and into employment is surely the way forward?

[Steve Webb]

My hon. Friend is quite right. It is entirely welcome that we are ensuring not only that more people get into work, but that work pays through the universal credit reform, which this coalition Government are proud to have introduced.

Pension Schemes Bill

Guy Opperman Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Steve Webb]

I do not think that my hon. Friend can intervene on an intervention, but I will give way to him in a moment if he so wishes.

I agree with my hon. Friend the Member for Reigate (Crispin Blunt) that we want to see innovation. The industry is talking about a decade of innovation, so although this system will be up and running next April, it is widely assumed that the market will develop and new markets will indeed be brought forward. I have seen no evidence that the envisaged level of levy will hamper entry into the market. As he well knows, the financial services industry is a big industry, and this is a huge opportunity. We are also talking about the auto-enrolment of between 8 million and 9 million new pension savers. These are huge additional sources of revenue for the pensions industry. Relative to that, the scale of the levy for the guidance is modest, so I think that I can reassure him about that issue of scale.



To move on to the substance of the Bill, I will make my remarks in two sections: the first on the pension schemes and the defined-ambition proposition, and the second on freedom and choice in pensions.

First, what is defined ambition? Essentially, it is a radical reshaping of pensions legislation to ensure that it remains relevant for future generations, and to reflect, recognise and, to quote the coalition agreement, “reinvigorate” innovation in consumer-focused product design in either shared-risk or, as we are calling them, defined-ambition pensions.

The Bill will introduce three categories of pension scheme based on the type of promise that they provide to savers during the saving phase about the benefits that will be available to people on retirement, including a new defined-ambition or shared-risk category of pension scheme. The Bill will enable collective benefits to operate in the UK, as they do successfully in many other countries. We have very much tried to focus on pension members’ experience of what their scheme offers. The new Bill will apply and refocus existing legislation in relation to the new terms.

The first category is for salary-related pension schemes—for example, traditional final or average-salary schemes—where the pension is specified in relation to the person’s salary. They have been in decline since the 1970s, and the majority of them are now closed to new members. They are often known as defined-benefit pension schemes, in which the employer bears the risks of longevity, investment returns and inflation.

The switch has been to the other extreme—schemes commonly known as defined-contribution or, more technically, money purchase schemes. The number of defined-contribution schemes established per year has generally increased since 2007, with 1,060 new schemes in 2013. Membership of such schemes increased by 15% to 2.7 million in 2013.

As you can clearly see, Mr Deputy Speaker, we have a binary model: people get either a money purchase or a non-money purchase benefit. Although both types of pension will be the right product for many people, is it right that the only future for pensions that is encouraged by our legislation is one in which either the individual consumer or the employer takes on all the risk? We do not believe so. Many employers have found the increasing costs of longevity and investment risk too heavy to bear, but if defined-contribution schemes are the only alternative, outcomes for savers will be less certain and more volatile than for earlier generations, making it much harder for future generations of savers to plan for later life.

Consumer trust in the pensions industry is low. As I have said, we can protect people against the risks of high charges or poor governance, but our research has shown time and again that many individuals want more stability and certainty. They want to know something about what their savings will give them and have some protection from the worst vagaries of the market. That is why the Bill provides new definitions for private pensions, including the new defined-ambition category of pension scheme, and for collective benefits.

The new shared-risk definition describes a middle ground between the more polarised money purchase and non-money purchase definitions. It will create a distinctive space to encourage innovation in pension design, and it will provide more certainty for individuals than defined-contribution schemes by sharing risks among employers, employees and third parties.

The collective benefit definition will enable a new form of risk pooling among scheme members that is able to provide greater stability in outcomes for members. Collective pension schemes are often recognised internationally as high quality, and it is only right that the United Kingdom should have access to pensions viewed as being among the world’s best. We also have the advantage of providing protections at the outset that address issues to which the more mature schemes overseas are now turning their attention.

We have engaged extensively with stakeholders across the pensions industry and found that there is an appetite for legislation that allows greater risk sharing and risk pooling. There are employers who will welcome the greater flexibility to create pension schemes that suit the needs of their work force. Pension providers want the flexibility to design and offer pensions that provide greater certainty. Individuals value the option to have greater certainty than that provided by DC pension schemes, as well as the greater stability that collective schemes may provide.

I am pleased to share with the House the warm welcome that the proposals have had. Age UK says that it

“welcomes the overall intention of the Bill”.

The National Association of Pension Funds says that it has

“long supported enabling greater risk-sharing in pensions arrangements”

and welcomes the creation of a framework that enables greater innovation and risk sharing. The TUC says that it has long supported collective pensions

“as a means of improving the income available to workers in retirement. The legislation will bring the UK into line with countries such as the Netherlands, Denmark and Canada where such schemes already operate.”

I welcome the fact that the Opposition have sort of, vaguely-ish welcomed our proposals. The more stability and consistency we have on pensions, the better, because pensions are not just for Christmas but are a long-term business. The fact that there is a degree of common ground in this area is entirely welcome.

[Guy Opperman (Hexham) (Con)]

On behalf of my constituents in Northumberland, I wholeheartedly welcome this reform, which has been massively welcomed by those who currently have a pension. However, how will the Government ensure that most small and medium-sized enterprises offer defined-ambition pensions? There is a degree of concern, which is legitimately held, that the safer defined-contribution pensions, in which there is little or no risk, will continue to be offered, thereby reducing the impact of the defined-ambition pension. What are the incentives?

[Steve Webb]

I am grateful to my hon. Friend for raising that important point about the potential market and demand for such schemes. We have undertaken research not only among consumers but among employers. We have found that about a quarter of employers say that they would be interested in providing shared-risk schemes and that another quarter are waiting to see. To be honest, if I were surveyed at this point, I would probably be in the waiting-to-see quarter because the legislation is yet to go through and the regulations that this framework Bill provides for have yet to be tabled. Understandably, firms are not queuing up to declare for this form of pension provision.

On the whole, such schemes are unlikely to be provided by SMEs. In general, we anticipate that just as with final salary and DB pensions, it is larger employers who will tend to go for shared-risk schemes—not exclusively, but largely. The reason is that, beyond the bare legal minimum of auto-enrolment, providing a workplace pension is not a legal requirement but an option. It tends to be larger employers who see pension provision as part of a package, perhaps including a company car or a workplace crèche, and who offer additional benefits. A risk-sharing scheme is, to my mind, a fringe benefit. However, it is a very valuable benefit where the employer says, “I want to do more for my employees than the legal minimum.”

My hon. Friend the Member for Hexham (Guy Opperman) asked what the incentive is. Although the best pension schemes may have gone, the best employers have not. There are therefore good employers out there who want to do more than the bare legal minimum. They will find that their employees want a pension scheme that reduces the risks and uncertainties of this very uncertain world. They will therefore find that this is an attractive part of their package.

Once the schemes are up and running, small employers may well choose to join them. We will probably need scale before we get to that stage. I am guessing that larger employers will use them first, but once there is the infrastructure—a regulatory regime or governance regime—one can imagine a scenario in which smaller employers would join.

--- Later in debate ---

[Gregg McClymont]

The hon. Gentleman is a doughty fighter for better pensions and I respect that, but I ask him to reflect on what he has just said. The annuities market was broken because people did not shop around. They found annuities confusing and complex, and they defaulted into the option offered by their insurance company. Why do we think that that behaviour will suddenly change in a system that continues to be predicated on individuals making a choice?

[Guy Opperman]

rose—

[Gregg McClymont]

I will give way to the hon. Gentleman in a moment. Let me make the point again in case it has been misunderstood by Government Members. The annuities market was broken because individuals did not exercise choice effectively. Why do the Government believe that individuals will now exercise choice effectively in a complicated marketplace? That is presumably why the Government put such emphasis on the guidance guarantee. They are right to do that because if this scheme is to work effectively, guidance must be of the highest quality. The hon. Member for Warrington South (David Mowat) mentioned advice, but this is not advice; it is guidance. There is a significant difference and the Government must reflect on that.

--- Later in debate ---

[Gregg McClymont]

I will give way to the hon. Member for Hexham (Guy Opperman) and then to the Secretary of State.

[Guy Opperman]

I am grateful to the hon. Gentleman for allowing me to intervene before the Secretary of State, but he is dancing on the head of a pin because he has not indicated whether he approves or disapproves of this measure, which I take implies implicit approval. Does he agree with my constituent whom I met barely a month ago and who said:

“I am delighted with these reforms. It’s my money. I saved it. Why do I have to give it away in annuities and charges for low returns?”

[Gregg McClymont]

I will come back to the hon. Gentleman’s point after letting the Secretary of State come in.

--- Later in debate ---

[Mark Field (Cities of London and Westminster) (Con)]

I paraphrase the Minister when I say that it is probably fair to say that like holy matrimony pensions reform is probably best entered into—or not entered into—advisedly, soberly and discreetly. For good reason the final year of a Parliament is often not the best time to embark on radical reform in the sector. It simply becomes all too easy for political adversaries wilfully to misrepresent some far-reaching proposals. Yet there is no disguising that the notion of pensioners being able to unlock their life savings during an uncertain retirement is a revolutionary change, and one I support.

As deficit reduction remains more straightforward to explain than achieve, these pension reforms also allow for some considerable fiscal loosening. Once implemented the proposals will release a vast dollop of cash for those over the age of 55 to pump into the economy, rather than being forced to buy an annuity at a woefully uncompetitive rate. Make no mistake—this is not an unintended consequence of the proposals. The Red Book to last spring’s Budget made it clear that the reforms anticipate a boost to aggregate pensioners’ spending to the tune of £320 million in 2015-16, rising to over £1 billion in 2018-19.

[Guy Opperman]

Is it not fundamental that, given the failures of annuities, the Government provide extra flexibility? Fundamentally, they are doing one thing: trusting people with their own money.

[Mark Field]

I confess that I wholeheartedly support the Treasury’s belief in the principle of freedom to which my hon. Friend refers. It is right that we as Conservatives trust those who have worked hard and saved throughout their adult life to make their own decisions on their savings. Nevertheless, we must accept that the generous tax relief that attaches to private pension savings has always been predicated on the basis that, by providing for their old age, pension savers will not be a drain on the state. It will become ever more difficult to justify reliefs at the generous levels we have all been used to over the past few decades if the compulsion that goes with annuities or restrictions on access to savings is consigned to history.

I am also pleased that the coalition has consulted a little more widely on these plans, albeit somewhat belatedly. One hopes that some technical issues will be ironed out, but I wanted at this stage to make some more general observations. The Government have been commendably vigorous in reforming the pensions system since 2010. As the Minister pointed out, we are already on the third pensions Bill and he already has another in his sights. Eligibility for a state pension will only kick in at a later age. That has to be the right move forward. The earnings-related element of the pension has been abolished. We now have a system of automatic enrolment for employees. Many of these reforms have been undertaken for one simple reason: we could not go on as we had. Our understanding of retirement has changed beyond all recognition and comprehension since the state pension was introduced in 1909. Life expectancy then was lower, so there was no point in continuing the pretence that the state could adequately sustain decent incomes for generations that will now live for 20 or 30 years after retirement.

If the emphasis is now firmly on self-reliance and the ever greater involvement of private providers, the most crucial ingredient will be trust. If the law is essentially to compel citizens via auto-enrolment to hand over an unspent surplus of their hard-earned cash to what they may regard as the unqualified or incompetent, there is little incentive for anyone to save. Central to addressing all this must be a pensions industry in which there is universal public confidence and which willingly recognises a collective responsibility. As we know, we are a hell of a long way from that point. The regulator, encouraged by the Government, now needs urgently to engender a culture among the major institutions in the sector akin to that prevailing among the leading banks during the 1970s.

Universal Credit

Guy Opperman Excerpts

Wednesday 9th July 2014 Commons Chamber

[Mr Duncan Smith]

I will give two answers. First, the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Wirral West, stated what is factually correct: that the strategic business plans for this Parliament have all been approved. That is an absolute fact. Secondly, it was I who was not happy with the way the development was taking place nearly two years ago, and who instigated the first process through my red team report. That is correct and I stand by that. Working with the Cabinet Office, we changed the plan. The plan is now being delivered exactly as the Public Accounts Committee, on which the hon. Lady sits, wanted us to deliver it, with all the necessary checks and balances. I would have thought, therefore, that she would congratulate us.

[Guy Opperman (Hexham) (Con)]

Companies in the north-east provide some of the computer and IT support for universal credit, providing welcome jobs there. I have met the staff at those institutions, and they are committed to the project, which is getting people back into work and training, and they are supportive of the slow, careful and measured way in which we are rolling out universal credit, which, after all, is something that the whole House supports.

[Mr Duncan Smith]

Again, we hear reason from the Government Benches. My hon. Friend is absolutely right. It is necessary to roll out the programme carefully so that it works, and so that we do not end up, as we did with tax credits, with 400,000 people not getting any money and going off to food banks and getting food parcels. That is the shambles that the Labour party created. We will not repeat it.

DWP: Performance

Guy Opperman Excerpts

Monday 30th June 2014 Commons Chamber

[Rachel Reeves]

Eight months is far too long for anyone to have to wait and, clearly, any further delay is totally unacceptable.

On the work capability assessment, the Government spend £100 million a year on the contracted assessors, as well as tens of millions more on decisions that are appealed. Now, the process has almost reached “virtual collapse”, according to the senior judge overseeing the trials, with Atos walking away from the contract, the Government yet to identify a replacement and a backlog of more than 700,000 assessments in a queue. As a result of the disarray, we are seeing spiralling costs to the taxpayer, with the latest report from the Office for Budget Responsibility showing an £800 million increase in projected spending and leaked documents revealing that the Government now see this as one of the biggest fiscal risks, with spending on course to breach their own welfare cap.

[Guy Opperman (Hexham) (Con)]

This debate is also about employment, so will the hon. Lady welcome the rise in employment, not least in her constituency, where, according to the House of Commons Library, the number of jobseeker’s allowance claimants has reduced by 23% in the past year, with youth unemployment down 26% and unemployment among those who are 50 and over down by 17.6%?

[Rachel Reeves]

But what we have also seen in my constituency is that average wages in Yorkshire and Humber have reduced by £26 a week since the coalition came into government and employment and support allowance claims have increased by 0.9 percentage points during the same period.

--- Later in debate ---

[Mr Duncan Smith]

I think that I have been pretty clear about the end-state solution. It is universal credit completely delivering to everybody in the UK. That is the end-state solution—live, online and fully protected. Perhaps I need to spell it out to the hon. Lady again. On PIP, I will simply say that we did not rush it. We have kept control of the level and scale of the roll-out. As we have learnt what the difficulties are, we have made changes, working with the providers. I will demonstrate in a moment that we are driving those numbers down to reasonable levels, as expected.

[Guy Opperman]

Government Members welcome the rise in job numbers, which have improved by 30%-plus in Hexham. I also welcome the transformation in universal credit, which is fixing a broken system. The pathfinders, the pilots and the reform are necessary and we must stick to our guns. My right hon. and hon. Friends are behind the Secretary of State.

[Mr Duncan Smith]

I thank my hon. Friend.

Oral Answers to Questions

Guy Opperman Excerpts

Monday 31st March 2014 Commons Chamber

[Mike Penning]

We may be cutting it a bit fine, but we want to get it right. We do not want people to try to apply before it is possible for them to do so. I find it difficult to understand why any Opposition Member should deny that this is a wonderful scheme that gives hope to people with a disgusting, horrible disease. Those people received nothing previously, which is why the scheme is so important.

[Guy Opperman (Hexham) (Con)]

In a previous profession I represented many victims of this terrible disease and I welcome the fact that the coalition has managed to get approval for the mesothelioma fund on the statute and also secured enhanced damages. Does the Minister agree not only that this will make a very big difference in the north-east, where there is a high prevalence of this disease, but also that the focus now must be on enhanced publicity so all the victims know just what they have to do to get the compensation?

Job Insecurity

Guy Opperman Excerpts

Wednesday 5th February 2014 Commons Chamber

[Mr Umunna]

My hon. Friend is right. We are a nation of shopkeepers. That is why we want to cut business rates in 2015 and freeze them thereafter. We also want to provide more support for local communities and high streets. I am proud to have the longest continuous stretch of high street in the country in my constituency.

[Guy Opperman (Hexham) (Con)]

I am listening to the hon. Gentleman’s speech and there have been good parts of it. He has spoken about voting records. Can he assist the House by giving any example of when the Labour party has voted in favour of or supported the Government’s position on employment, business or welfare reform over the past four years?

Benefit Entitlement (Restriction) Bill

Guy Opperman Excerpts

Friday 17th January 2014 Commons Chamber

[Mr Chope]

As my hon. Friend knows, I have never been an enthusiast for the minimum wage. Indeed, further down today’s Order Paper is my Employment Opportunities Bill, which would enable people to opt out of it. I am glad to see the Front-Bench spokesman agreeing with that.

[Guy Opperman (Hexham) (Con)]

In opposition to my hon. Friend’s comment, I am a very strong supporter of the minimum wage, and I believe that it is a progressive thing to trickle down the effects of the economic turnaround. There is ample evidence from a university of Essex study and various other studies that an increase in the minimum wage does not have any impact on job creation.

[Mr Chope]

I am sorry to disagree with my hon. Friend, but as soon as he resorts to the expression “progressive” and subsequently refers to the university of Essex, he has lost me. I think that the level of wages should be set in a private arrangement between the employer and the employee, and that it is not for the Government to intervene. We hear all the current talk about whether the minimum wage should be increased, but it is open to anyone currently on the minimum wage to go to their employer and say, “I would like to be paid more”, while it is open to the employer to pay their workers more. The fact that they are not being paid more suggests to me that the labour market is such that if they were paid more it would result in either them or their colleagues being put out of work.

The whole concept of a national minimum wage ignores the fact that we have different labour markets in different parts of the country. What might be a reasonable wage in London might be a totally unrealistic and unaffordable wage in some of the more remote parts of the country. I do not know what my hon. Friend thinks the position is in Hexham, but if the national minimum wage is designed to ensure that people in London and in Hexham are treated equally well, it is likely to have the result of reducing the employment opportunities in his constituency.

[Guy Opperman]

I will pass on my hon. Friend’s apologies to the university of Essex. The harsh reality is that there is ample evidence from a variety of sources, including from other universities—[Interruption.] They are not their own sources; they are independent. It has been shown that the minimum wage does not impact on jobs. My hon. Friend challenged me specifically on the north-east. I represent an area that has one of the highest levels of social deprivation and there is still significant unemployment there to this day. It is coming down, but it is still significant. A rise in the minimum wage would be a fantastically good thing—for the north-east and for employers. I suggest that it would produce greater loyalty, greater productivity and greater enthusiasm in the work force. That is evidenced by companies, whether they be big ones such as Barclays or Aquila Way in Gateshead—a housing association that provides good support for the living wage.

[Mr Chope]

Perhaps we will get a chance to discuss the Employment Opportunities Bill later. As the name suggests, it gives employment opportunities to people who would not otherwise have them. I hope that my hon. Friend has looked at the Bill. To assert, as he has, that the minimum wage cannot have any impact on jobs is to ignore the level at which the minimum wage is set. That is why the Low Pay Commission was set up to look at the level and make recommendations on the minimum wage. I know that you, Madam Deputy Speaker, will be concerned if we start discussing the Employment Opportunities Bill in detail at this stage—

Food Banks

Guy Opperman Excerpts

Wednesday 18th December 2013 Commons Chamber

[Mr Robert Syms (Poole) (Con)]

Poole food bank does a valuable job, supported by a wide range of people, largely from the churches, but including people across the political spectrum. They are all dealing with what must be a very difficult personal crisis for many when they cannot put food on the table. As a parent, one cannot conceive what it must be like to worry about what can be provided for children in an evening meal. In some respects, food banks provide a perfect example of the third sector at work, doing what it can to plug a gap at a particularly difficult time.

When all this started, I was sitting on the other side of the Chamber, watching the Budgets and the economic management of the country. At that time I was told that boom and bust had been abolished, yet we had one of the biggest busts ever—nearly 7% of GDP. However we look at it, if GDP falls by as much as that, living standards will take a hit.

Let me make an important point. It could have been a lot worse if people in work had gone for high pay increases to compensate for high bills, but they did not; they priced themselves into jobs. It could have been worse if people had been irresponsible, but they have not been irresponsible. Given the scale of the bust, it is a miracle that only 7.4% of people in the country are unemployed. The figures in Germany and Holland are lower, but, among European countries, Britain is not doing too badly.

[Guy Opperman (Hexham) (Con)]

Does my hon. Friend agree that, while we should all support churches, charities and organisations such as the West Northumberland food bank in my constituency, we should praise the Salvation Army in particular, because it has been providing food assistance for generations?

[Mr Syms]

That is a very good point.

We all know that many people in work, as well as those who are out of work, have experienced a big drop in their living standards, and we know that that is because of the economic crisis, but the good news is that there are still a great many people in work and we have a growing economy. It is inevitable that living standards will start to recover as incomes rise, the market recovers and we start to export more.

Universal Credit

Guy Opperman Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Duncan Smith]

The hon. Lady, of course, misrepresents the position. [Interruption.] The money that we were talking about yesterday, the write-offs, is for technology that will not be used, and the write-down is equipment we will be using over the next 12 months. The other value she mentioned is for equipment that will be written down over a period of years, once we start to use it. We cannot write it down until it is actually in use.

[Guy Opperman (Hexham) (Con)]

The situation is that welfare required reform and, as my hon. Friend the Member for Gloucester (Richard Graham) made clear, work was not paying. I welcome the phased roll-out of universal credit, but I am still at a loss as to the Labour position. Can the Secretary of State advise my constituents in Northumberland why he chose to test, learn and then roll out a project of such a large scale that it will be truly transformative?

[Mr Duncan Smith]

That is exactly right. The point is that we intervened early when we thought there was a problem, and we did not deliberately drive it through to roll-out. Quite frankly, we will have got this right because, unlike Labour, we are testing the system and learning first, and then finally implementing it. My hon. Friend is right: we have no idea what Labour Members really want. They just want to criticise but they have no other proposals.

Oral Answers to Questions

Guy Opperman Excerpts

Monday 1st July 2013 Commons Chamber

[Mr Duncan Smith]

I will certainly try to encourage precisely those people to invest. The aim is eventually to establish a proven project which delivers a social return, thus encouraging both trusts and private sector investors, as well as local authorities, to supply guaranteed funds to organisations that would otherwise have no funding. We think that the potential market is enormous. The Americans, among others, have said that they are grateful for our leadership in this regard, and the G8 was very keen on hearing from us.

[Guy Opperman (Hexham) (Con)]

Does the Secretary of State agree that social investment could be channelled through local regional banks and expanded credit unions, which are surely the best-placed organisations and the closest to their local communities?

[Mr Duncan Smith]

All those are options. We have put in extra investment in credit unions—some £35 million—to try to increase their scope and to bring them together again. My hon. Friend is right. Local is what this is all about. It is about giving projects in the local area, with local authorities, a chance to obtain reasonable, long-term investment to deliver life-changing results. It is interesting that, at the G8 conference—this is the most important thing—many of the countries said that this is the way for them to go, too. This country has led on this area, thanks to the coalition.