Pensions Auto-enrolment
Jack Dromey Excerpts(6 years, 9 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Chippenham (Michelle Donelan) on initiating this debate and on a thoughtful and challenging contribution, with some ideas in it that I shall come to later.
Forgive me if I say that the right hon. Member for Preseli Pembrokeshire (Stephen Crabb) was right: auto-enrolment is a testament to what the last Labour Government did in initiating the Turner review and putting the wheels in motion for auto-enrolment to be implemented. As I have often said to the Minister, it is deeply welcome that there has been continuity of policy. He said only yesterday in his address to the TUC that, on issues such as pensions, continuity wherever possible is absolutely critical.
I was personally involved in some of the discussions with successive Secretaries of State and with Adair Turner, and the basis that was laid and the point we have reached now are both very welcome indeed. It has led to a better workplace pension landscape than before, with an additional 10 million workers estimated to be newly saving or saving more as a result of auto-enrolment. It has led to an additional £17 billion of pension savings being put away, mostly by low-income workers. We welcome the move by the Government to reduce the age of eligibility for auto-enrolment to 18, as that should lead to more people becoming aware of the importance of pensions at a younger age. The sooner that is introduced, the better.
However, for all the welcome progress that has been made, it is not a perfect system and there are issues that need to be addressed at the next stages to make the pension landscape better. First, the threshold over which workers are automatically enrolled is too high. According to the latest statistics from the Department for Work and Pensions, 37% of female workers, 33% of workers with a disability and 28% of black and minority ethnic workers are not eligible for master trust saving through auto-enrolment.
Secondly, auto-enrolment does not cover the self-employed or workers in the gig economy. The impact is felt in particular by female workers, workers with disabilities and black and minority ethnic workers, who are over-represented among low earners, the self-employed, those with multiple jobs and carers. That is why it is absolutely necessary, as the Taylor report recommended, to redefine workers in the gig economy as employees, meaning that they would be eligible for auto-enrolment. As Matthew Taylor said, if it looks like employment and smells like employment, it should be employment.
Having said that, the statistics outlined in various contributions today are stark. Self-employment, and in particular bogus self-employment, are becoming increasingly prominent in the modern economy. Figures released last year suggest that the number of self-employed workers in the UK rose by 23% between 2007 and 2017, from 3.8 million to 4.7 million. That represents a dramatic shift in the nature of the world of work and the way in which the British economy works.
Self-employed people now represent around 15% of the workforce, and 91% of businesses say that they hire contractors. The latest figures from the Office for National Statistics show that only 19% of the self-employed are saving into a personal pension. That is a worrying trend, and more needs to be done, not least because those concerned face decreased security in their current working practices and in their retirement. That is why the hon. Member for Chippenham was absolutely right—dare I say it?—to bang on about this and to call for a detailed review at the next stages. I would strongly support that. That issue needs to be tackled because of the changing nature of the workplace.
Thirdly, as stated earlier, the advent of auto-enrolment has increased the number of workers saving for retirement, with more active savers now in defined contribution pension schemes rather than defined benefit schemes. While the overall trend toward a greater number of savers is positive, we do not want to see a growing threat posed to DB schemes. It was never intended that auto-enrolment should become a bolthole for employers seeking to move away from historic DB schemes. Indeed, I thought what the Minister said yesterday to the TUC conference was absolutely right—he said that DB is working well notwithstanding a whole number of problems, and that where employers can, they should continue with their responsibilities. I strongly agree with him.
Fourthly, the rise in the number of pension savers is a step in the right direction, but DC plans must continue to evolve in order to provide savers with an adequate pension. A report by the Pensions Policy Institute in 2016 found that the median saving of DC scheme members could yield only £3,000 per year as an annuity, which is not a lot of money. That therefore demands action at the next stages and on a whole number of fronts: more work, for example, needs to be done to improve the adequacy of returns on DC savings, including looking in greater depth at costs and charges. On the 8% target, it is clear that, for the current proposed automatic contributions—I stress again that they are a welcome step in the right direction—8% should not be the summit of our ambition as we look ahead over the years to come. I take the point from the hon. Member for Chippenham that we should get the balance right so that we do not impose unreasonable burdens as we progressively move forward. However, I stress again that 8% should not be the summit of our ambitions.
On how one might have the best possible DC arrangements, there is an interesting debate going on around collective defined contribution pension schemes and what is being proposed by both Royal Mail and the Communication Workers Union. We have been engaged in constructive discussions with the Government on opening the door for such arrangements to be introduced at the next stages. However welcome it is, I stress again that 8% is not enough, and we therefore need to look at several things, including transparency, costs and all those things that would make a difference.
More workers having access to a pension pot is welcome, but I refer to what my hon. Friend the Member for Weaver Vale (Mike Amesbury) said earlier: it is vital that there is greater knowledge about pensions. To that end, the Government have the opportunity, through the Financial Guidance and Claims Bill, which is welcome, to increase the provision for financial education.
Geraint Davies (in the Chair)
I was hoping to allow the Minister about 10 minutes in which to speak.
Jack Dromey
In which case I will finish in about 90 seconds. Financial education is at the heart of that Bill, which is welcome. The role of the new single financial guidance body will also be important.
Auto-enrolment has been positive for the workplace pensions landscape in this country. It needs extending and improving—of that there is no doubt—to give workers greater security in retirement, but it is a strong and welcome step in the right direction, and it is deeply welcome that there is cross-party consensus.
Work and Pensions Committee
Jack Dromey Excerpts(6 years, 10 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
I pay tribute to my right hon. Friend the Member for Birkenhead (Frank Field) and the Select Committee as a whole for their excellent work.
Universal credit was designed to smooth the transition into work and to help lift people out of poverty. Does my right hon. Friend share my concern that, more than seven years after universal credit was first announced, and after repeated resets and delays, it is clear that the Government still cannot provide evidence for their key claim that people claiming universal credit will be more likely to find employment? I mean not just single unemployed people without children, before cuts to work allowances, who appear in the statistics that the Government cite, but the full range of people—single parents, the self-employed, carers and disabled people—who are now claiming universal credit as the full service is rolled out.
Frank Field
I am immensely grateful to my hon. Friend for that question, because the central part of any business case for universal credit is that there will be a movement from benefits into work. We know the Government have no up-to-date data on that, yet they are pressing ahead. That is why I asked the Economic Secretary to the Treasury not to sanction further cash for this programme until the Department for Work and Pensions has produced a business case.
State Pension Age
Jack Dromey Excerpts(6 years, 10 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
I thank the Minister for his statement and for arranging to let me have sight of it earlier this morning.
The state pension for women born in the 1950s should be set in the wider context of the Government’s—uninspiring, I have to say—track record on pensions. Last July, the Government announced that they would be bringing forward the increase in the state pension age to 68 in 2037, justifying this on the increase in life expectancy. However, in the same week, the renowned expert on life expectancy, Professor Sir Michael Marmot, described how a century-long rise in life expectancy was
“pretty close to having ground to a halt,”
and had flatlined since 2010—in part, I have to say, the consequence of Government policy on austerity.
Since then, statisticians from the ONS have revealed that by 2041 life expectancy for men and women would be a year less than had been projected just two years previously. In addition the ONS has revealed that, although women continue to live longer in good health than men, their healthy life expectancy has decreased since 2009. Yet more evidence from Public Health England shows how deep inequalities in healthy life expectancy remain. On average, people in the UK are now projected to live shorter lives than previously estimated. Does the Minister agree?
It is in this context that the Government are failing women born in the 1950s. This statement does nothing to address the pensions injustice these women face. The Government have had multiple opportunities to act, so why is the Minister again refusing to use the opportunity of a motion passed by this House to do so and to take further steps? It is unacceptable that we are having to make this same argument and raise the same points again because this Government continue to refuse to help these women, who are suffering and losing out due to the acceleration of the state pension age and lack of proper notice. This issue is not going to go away. Why do the Government continue to act as though it will? This statement is, sadly but not unsurprisingly, yet another example of the Government’s failure to give women born in the 1950s the dignity and respect they deserve. It is a missed opportunity to take real action.
We have all heard often heart breaking stories from many thousands of women affected by the changes about how the situation they face is one of desperation and fear of poverty. Christine in my constituency is 62 and is now having to wait until she is 66 to retire, with both her husband and her father having just died. In her words, “Not that cleaning jobs are a bad thing, but I have never done a cleaning job in my life and I am now having to do three cleaning jobs to make ends meet until such time as I can retire.” That is wrong.
It is to this Government’s shame that they refuse to recognise the very real basis for the fears of women such as Christine. What immediate measures will the Government take to address this appalling situation? Does the Minister understand how difficult it is for many women in their 60s to retrain and access decent work? What support will his Department offer these women—or will he repeat the bizarre proposal made from the Conservative Benches that they might take up apprenticeships?
As we have repeatedly set out, there are several immediate actions the Government could and should take, but time and again they have refused. Can the Minister explain why he refuses to offer women affected by Government changes to the state pension age the cost-neutral option to draw their state pension at age 64, as we have proposed? That would allow women who choose it to retire up to two years earlier.
The pension age is due to rise to 66 by the end of 2020. We reject the Government’s proposal to increase the state pension age even further. We will act by putting in place a new review of the pension age, specifically tasked with developing a flexible retirement policy that reflects the contributions people make, the wide variations in life expectancy and the arduous conditions of some work.
It is also right to extend pension credit to those who were due to retire before the increase in the pension age, which would benefit hundreds of thousands of women. Will the Minister look again at that proposal?
In conclusion, sadly, this statement does nothing to help women born in the 1950s. Actions are needed, not words, if the Government are to restore some of the faith and dignity that many people feel they have lost as a result of the Government’s refusal to act and to introduce proper transitional procedures. These are the women of Britain—the women who built this country. They deserve nothing less.
Guy Opperman
I thank the hon. Gentleman for his comments. He seeks an independent review of the state pension age. Well, the Government did that last year. The Cridland review was independent of Government and it published its conclusion, just as the Labour party manifesto called for. The review’s findings supported the assertions that the Government have put forward.
The Labour party used to be financially credible, but sadly those days are long gone. The Labour party, under Tony Blair and Gordon Brown, passed the Pensions Act 2007, which raised the state pension age. We now have the bizarre situation in which the Labour party manifesto states that the state pension age should not go beyond 66. In other words, it is going back on its own decision in 2007. Its credibility is sadly lacking.
The situation is further complicated by Labour’s reliance on Michael Marmot. The shadow Secretary of State for Work and Pensions keeps relying upon him, and the hon. Gentleman repeated that today. Michael Marmot made it very clear that “improvements in life expectancy at birth, which had been around a one-year increase every five years for women, and every three and a half years for men, have slowed since 2010 to a one-year increase every 10 years for women and ever six years for men.” The point is that the increase is still going ahead; it might have slowed to a degree, but life expectancy continues to rise.
The Labour party agreed in 2004 that the ONS cohort figures should be accepted and then followed them thereafter. The ONS produced a report last December on life expectancy at birth, which found that in 50 years’ time, by 2066, cohort life expectancy at birth is projected to reach 98 years for females and 96 for males, a rise of over six years for both genders. In 2018 life expectancy at birth is projected to be 92 for women and 89 for men.
Let me touch briefly on the Fuller Working Lives strategy, which I am sad to say the Labour party seems no longer to support. There are 1.2 million people over the age of 65 in employment, which should be celebrated. It is entirely right that retraining might not be suitable for everyone, but it is also right that Governments of every hue should provide opportunities for those who wish to take those things up. For example, over the most recent nine-month period, the number of apprenticeship starts for people between the ages of 45 and 59 was 53,000, and for the over-60s it was 3,400. That means thousands of people taking opportunities for retraining. With respect, that should be supported.
Oral Answers to Questions
Jack Dromey Excerpts(6 years, 10 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
A Port Talbot shift supervisor was badly advised by a pensions predator preying on him who made him take the wrong choice. “I will never forgive myself”, he said, “because all 20 on my shift followed my lead.” In an otherwise welcome Bill, in the words of Baroness Altmann,
“the Government seems to have bowed to industry pressure and proposes to weaken consumer protection for pension customers. By removing a clause introduced in the House of Lords…more people are at risk of losing their hard-earned savings in scams, frauds and unwise pension withdrawals.”
She is absolutely right. Will the Government think again?
Guy Opperman
I am grateful to have the opportunity to replay the same debate that we had in the Bill Committee last Thursday. I will give the same answer, which is that, with no disrespect to Baroness Altmann, she is incorrect on this point. The Government are addressing pensions guidance. We have introduced very stringent new laws. We have improved on the point raised by the Work and Pensions Committee, as my hon. Friend the Member for Brentwood and Ongar (Alex Burghart), who sits on that Committee, agreed in the Bill Committee last Thursday.
Alok Sharma
Of course I join my hon. Friend in congratulating the staff at Sittingbourne and Sheerness jobcentres. When I have spoken to work coaches in the visits I have made, they are incredibly enthused: they tell me this is the first time they are able to do what they want to do, which is help people into work.
Jack Dromey (Birmingham, Erdington) (Lab)
The behaviour of Philip Green on BHS pensions was outrageous; likewise, Carillion paying dividends and big bonuses, while running up a £900 million pensions deficit. We expect better from our universities; does the Secretary of State agree that it cannot be right that they are proposing to cut the pension benefits of staff just when one vice-chancellor alone at Edinburgh university has accepted a 33% salary hike as part of a package worth £410,000?
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
With respect, this is not a matter for Government to respond on. The joint negotiating committee, which is made up of trustees, employers and unions, is responsible for approving an appropriate recovery plan to ensure the scheme is adequately funded. The universities are subject to regular assessment of their overall financial sustainability management and governance, and I am sure the Pensions Regulator will therefore be watching this situation.
Financial Guidance and Claims Bill [ Lords ] (Second sitting)
Jack Dromey Excerpts(6 years, 10 months ago)
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The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I had anticipated that we would deal with amendments 27, 29 and 39 together. I thought that they would have been grouped, but I will address amendment 27 to start, and take your guidance from there, Mr Rosindell.
The hon. Member for Birmingham, Erdington proposes in amendment 27 to amend the Bill by a single word. The strategic function of the Bill as drafted and its three elements have been carefully designed, and I believe that the amendment should not be made. Through its strategic function, the guidance body will bring together interested partners in the sector, various services, the public and voluntary sectors and the devolved administrations with the aim of improving the ability of members of the public to manage their finances effectively. To that end, the body will develop and co-ordinate a national strategy.
The Money Advice Service has been undertaking that vital role to date, and key stakeholders agree that that important work should continue and be expanded. The national strategy will succeed only if the new body works effectively with its many partner organisations in the financial services and other sectors in a collective effort with shared ownership and accountability. Indeed, the premise of the national strategy is that one organisation working independently has little chance of making a great impact, but many working together have more. The role of the new body will be to drive the process forward and oversee its implementation, but not to be solely responsible for the delivery of the strategy in its entirety. For those good reasons, I urge the hon. Member for Birmingham, Erdington to withdraw the amendment.
Jack Dromey (Birmingham, Erdington) (Lab)
It is a pleasure to serve under your chairmanship, Mr Rosindell. Briefly, in the words of the Minister, a national strategy will be pursued at the next stages, including a range of stakeholders and, I suspect, other enforcement bodies. Flowing from what the Minister said, the question is who will drive that at the next stages. The single financial guidance body will clearly and undoubtedly have a pivotal and central function.
Jack Dromey
I see the Minister nodding his head in agreement. In those circumstances, we look for a dynamic body to do precisely that: drive the national strategy. On that basis, I am content not to press the amendment.
Guy Opperman
Amendment 29 seeks to add another strand to the three existing areas of the strategy set out in the Bill. The Government agree with the hon. Gentleman on the overall principle that the strategy of the new body needs to be future-proof and flexible, to meet the challenges that an evolving modern economy might bring. Clearly the Taylor review is relevant to all those factors, but we do not believe that the amendment is necessary. It lacks a specific focus and would risk diverting focus and resources from the areas that we believe the body should prioritise through its strategic function. As I understand it, the amendment is not sought by existing providers. In the circumstances, I ask the hon. Gentleman not to press the amendment.
Jack Dromey
It is not for one moment our intention to divert focus from the body’s core and strategic function. All I would say is that the changes taking place in the modern labour market are immense, complex and often profoundly disturbing. To give one example from my personal history, in 2003-04, alongside Gillian Shephard, I chaired the coalition of support that resulted in the Gangmasters (Licensing) Act 2004. From plough to plate— from the National Farmers Union to the supermarkets—it sought to tackle some of the worst abuses of workers and the undercutting of reputable providers by rogues. My experience—like that of all Committee members, I suspect—is that there is much in the modern workplace and the world of work that is profoundly disturbing and needs to be tackled. Having said that, the Minister said himself that the body would take account of the demands in the modern labour market.
As far as the Taylor process is concerned, I know Matthew very well and his report contains some valuable proposals, although I do not agree with them all. It is helpful that on the Government’s part there has been a focus on the modern labour market, including the gig economy. In those circumstances, particularly in the light of what the Minister said about the context of the Taylor review and the demands of the modern labour market, I shall not press the amendment.
The Chair
To clarify, amendments 27, 29 and 39 are part of a single group, so any Member who wishes to speak to any of the three amendments must do so now.
Jack Dromey
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Jack Dromey
I beg to move amendment 28, in clause 3, page 3, line 31, at end insert—
“(9A) In seeking to improve the provision of financial education to children and young people, the single financial guidance body may advise the Secretary of State that—
(a) Ofsted should take into account the financial education provided by schools when carrying out inspections, and
(b) financial education should be added to the primary school education curriculum.”
This amendment allows the single financial guidance body to, as part of its function to improve the provision of financial education to children and young people, advise the Secretary of State that Ofsted should take account of financial education when carrying out inspections, and that financial education should be added to the primary school curriculum.
Some hon. Members may be surprised by the amendment, but I will explain why it is important. We believe that the provision of financial education to young adults in further and higher education—let alone to primary school children—needs to be improved. Young adults are an important age group not particularly well served under current arrangements. We believe that, where appropriate, education providers should incorporate financial education modules into programmes of study.
Thousands of young people throughout the country leave school without the necessary financial knowledge to approach critical situations such as applying for credit and mortgages. Research shows that 37% of 18 to 24-year-olds hold one or more credit cards, an overdraft or another form of borrowing, with average combined debts of £2,989, not including student loans or mortgages. The House of Lords Select Committee on Financial Exclusion heard that 51% of 18 to 24-year-olds regularly worry about money. Generally, half of all UK adults modestly rate themselves as having some understanding of financial products and services, while 15% say that they have a very good understanding and a minority of just 5% admit to having no understanding. Just 54% of the C2, D and E social classes say that they have some understanding or a very good understanding of financial products and services.
In September 2014, in a welcome move by the then coalition Government, financial education was added to the statutory national curriculum for secondary schools in England. Since then, schools have been required to include financial education as part of mathematics and citizenship teaching at key stages 3 and 4. However, there is still no requirement for English primary schools to include financial education as part of their teaching. In addition, as only 35% of state-funded secondary schools are now maintained schools, the obligation to teach financial education does not apply to nearly two thirds of all state secondary schools.
As the hon. Member for North Swindon (Justin Tomlinson) said on Second Reading:
“We live in a very complex society, with direct debits, standing orders and complicated marketing messages coming forward. Making sure that we equip all people of all ages to make informed decisions is an absolute priority.”––[Official Report, Financial Guidance and Claims Public Bill Committee, 22 January 2018; c. 62.]
The hon. Member for Solihull (Julian Knight) said:
“The development of key skills and knowledge about money matters helps pupils and, indeed, their parents to make wise choices in later life, when innovations in financial technology and online consumer tools—not to mention the march towards a cashless society—will make previous experience and the advice of their elders an unreliable guide.” ––[Official Report, Financial Guidance and Claims Public Bill Committee, 22 January 2018; c. 95.]
In a world in which credit and financial services are more readily available than ever, it is vital that Britain’s young people are given the financial education they need to approach those challenges when they leave education. In the view of the Opposition, it is only through mandatory financial education in both primary and secondary schools that we can be confident that young people will be equipped both to achieve the best possible start in life, and to avoid being exploited by the ruthless.
Returning to my first point, some may ask whether financial education should be taught in primary schools. My experience is that it is crucial that children at young age—primary school age—are involved in crucial discussions that help them to understand the future and the challenges they will face. I will give two examples.
First, Jaguar Land Rover—an excellent company; the Jaguar plant is in my constituency—has a highly developed programme of operating in primary schools. That is because it is the kind of company that looks ahead two to five years, five to 10 years and 10 to 20 years. It always has a particular problem in the recruitment of skilled labour, and it wants, through its work in primary schools, to open up the horizons of primary school children more generally. That is very important in a constituency such as mine, which is rich in talent but is one of the poorest in the country and has high unemployment. In particular, JLR wants to encourage young girls to see themselves as having a future in engineering and car manufacturing. Its strong view is that, without starting that work at that age, by the time people get to secondary school and beyond, preconceptions are formed about what is appropriate for a young girl, and ultimately a woman, to do.
My second example is controversial, although it has cross-party support. I have worked very closely with the admirable Dot Com Children’s Foundation, which collaborates with the police and local authorities. I have seen it at first hand its programme in primary schools that uses a comic book format to teach children to spot risk and harm, to reject any obscene approaches and to know with whom they should talk if they feel themselves threatened. When we embarked down this path in Birmingham, where more than 100 primary schools have now used the programme, I remember some parents saying, “What? At primary school age?” Actually, in a non-threatening way, we absolutely want to make a start in helping children to understand the difference between family and friends on the one hand and those who would seek to exploit them on the other.
I am giving examples of important areas in which primary school children are equipped to deal with the modern world. And coming back to the issue of financial guidance, I suspect that not many primary school children have credit cards. Having said that, however, as they grow up they will need to know how to manage their finances, how to avoid exploitation by those who would seek to exploit their vulnerability and how to get the best possible start in life.
Guy Opperman
I should have said before that it is a pleasure to serve under your chairmanship for the first time, Mr Rosindell, and I welcome you to the Committee.
The hon. Member for Makerfield is right that a significant number of organisations provide, in a primary school setting, particular aspects of financial education in various shapes and forms, whether it is the Association for Citizenship Teaching, MyBnk, the Personal Finance Education Group or a variety of other organisations, and I would happily talk for some considerable period of time and overindulge the Committee on LifeSavers. As she knows, I set up a community bank in my constituency with Archbishop John Sentamu on 5 November 2015, and that community bank has bid for the LifeSavers project in Northumberland, and provides six schools with that financial education. We run six different banks in six different schools in my community. That work is extraordinarily successful. The original pioneer is in Lewisham, which I know the Opposition Whip, the hon. Member for Lewisham, Deptford, will be interested to hear, and the success rate has been wonderful.
The proposal is that the single financial guidance body should have a look at, and then come up with a strategic assessment of, what the provision of financial education of children and young people should be. I take issue with the Opposition on whether Ofsted should judge schools on the basis of financial education. I say, with respect, that it most definitely should not. Ofsted itself does not seek that, so I definitely disagree with paragraph (a) of the amendment. Ofsted, which has been consulted in broad terms, thinks that it would be inappropriate to inspect financial education specifically, since it usually inspects not individual subjects but the curriculum as a whole.
On the broader points raised by the hon. Member for Birmingham, Erdington, the curriculum is ultimately a matter for the Department for Education. He is right that financial education was brought into the secondary context under the coalition Government. Successive Governments have drilled down on the importance of maths, which is an absolute prerequisite and is fundamental to the education of our young people. The maths curriculum has been strengthened to give pupils from five to 16 the necessary maths skills, and I am sure he has seen in his own constituency the success of mental maths and advanced maths in primary schools. We responded to the House of Lords Committee’s report on financial exclusion in a similar way—I make the same case here.
It will be for the single financial guidance body to target specific areas of need, and to match individual funders and providers of education projects and initiatives aimed at children. The amendment is very broad brush. I would prefer the guidance body to be able to zero in on particular areas. That is the purpose of making overall assessment one of its strategic functions. That means that it will be better able to deliver what we all want: enhanced financial education for our children.
We agree about objectives, but I am not sure that we agree about the way forward for delivery. With respect, I invite the hon. Gentleman to withdraw his amendment.
Jack Dromey
My hon. Friend the Member for Makerfield made a powerful point about the importance of primary schools as places of contact—sometimes the only place of contact—with people who are struggling in their lives. My experience from a number of projects is that what is done in primary school reads across to a child’s parents, so her point is very valuable indeed.
We can question how this should be done, but it is now public policy that children should be involved in financial education. A valuable start has been made with secondary schools, and we will seek at subsequent stages of the Bill to engage with the Government about how that might be extended further. There are questions about the context for that, including the overall maths context, but that can be teased out at the next stage.
Finally, if there is a coalition of support in the Committee for lobbying the Treasury on LifeSavers, I say: “Yes please, but don’t stop at LifeSavers.” On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Jack Dromey
I beg to move amendment 30, in clause 3, page 3, line 32, at end insert—
“(d) the understanding members of the public have on how the duties placed on financial service providers under the Equality Act 2010, including the requirements on service providers to make reasonable adjustments, can enhance their ability to manage their financial affairs.”
This amendment would ensure members of the public are informed about what financial services companies need to do to comply with the Equality Act, in particular the duty to put in place reasonable adjustments for disabled customers.
The purpose of the amendment is to ensure that members of the public are informed about what financial services companies need to do to comply with the Equality Act 2010—in particular, but not exclusively, the duty to put in place reasonable adjustments for disabled customers. We are rightly proud of that landmark Act in this country, and I am particularly proud that it was introduced by a Labour Government. There have been subsequent problems with its implementation and, dare I say, without wishing to divert into areas where we would disagree, the implementation of clause 1 of the Equality Act is yet to take place. Having said that, on disability matters, there would certainly be consensus around ensuring that people who have problems with their health and who have disabilities of different kinds get the support that they need and are not taken advantage of.
Under the Act, a person is disabled if they have a “physical or mental impairment” that has
“a substantial and long-term adverse effect”
on their ability
“to carry out normal day-to-day activities”.
In that case, a duty to provide goods, facilities or services falls on providers, employers and a range of other parties. People automatically meet the disability definition under the Act from the day that they are diagnosed with a condition such as cancer, multiple sclerosis or HIV infection.
If an organisation that provides goods, facilities or services to the public finds that there are barriers to disabled people in the way it operates, it has an obligation to act, including to consider making reasonable adjustments. If those adjustments are reasonable for that organisation to make, it must make them. That duty is sometimes described as anticipatory, which means that an organisation cannot wait until a disabled person wants to use its goods, facilities or services, but must think in advance and on an ongoing basis about what disabled people with a range of impairments might reasonably need.
An organisation is not required to do more than is reasonable for it to do—I stress that again—but that depends, among other factors, on its size and nature, and on the nature of the goods, facilities and services it provides. Making disabled customers and their advocates aware of that duty means that they will be able to ask their financial service provider to potentially adjust the GFS it offers and to remove any barriers.
Although I would be the first to accept that there is good practice in the sector when it comes to making adjustments for visual and hearing impairments, that is rarely done in the context of the legal framework. In certain circumstances, where that is not done and where conditions such as a cancer diagnosis or neuro-diverse disabilities such as autism, brain injuries and dementia are not considered, that means that people are let down and there is a failure to comply with the terms of the law. For example, the Alzheimer’s Society reports that 66% of people with dementia need some assistance when using a bank and 80% of carers said that banks need a greater understanding of lasting powers of attorney. On the one hand, there is the legal obligation, and on the other, there is an undoubted need for it to be complied with.
There is no reference to the duty to make reasonable adjustments in the Financial Conduct Authority’s handbook. Frankly, I am surprised at that. The handbook contains provisions set out in legislation that are relevant to the FCA and other provisions made by way of instruments by the FCA. It contains a mixture of rules, which are binding obligations that can result in enforcement action if not adhered to, as well as guidance. The amendment will ensure that disabled people or their advocates are informed about the duty to make reasonable adjustments and that they can use that information to ask financial service providers to make adjustments to the goods, facilities and services they provide, which could include removing physical barriers or making services dementia-friendly.
Guy Opperman
It is a pleasure to respond to the hon. Gentleman’s speech. I will make three key points: I will discuss whether the Equality Act applies to this body in future; I want to give some assurances to the House on an ongoing basis, because that really matters; and I will briefly deal with the point about the duty of care.
Jack Dromey
I actually met Jacci and did a conference with her, and I thought what the hon. Member for Mid Derbyshire said on Second Reading was very powerful and moving, telling the story of a wonderful person and using it as proof positive of why we need to ensure—
Mrs Pauline Latham (Mid Derbyshire) (Con)
Is it not true that other financial institutions could do what Santander did and voluntarily sign up to her “Dying to Work” campaign, which would help everybody that they deal with?
Jack Dromey
I strongly agree with the hon. Lady, and that is something we might pursue, including on a joint basis, at the next stages. The “Dying to Work” campaign’s objectives are right. To make the obvious point, she will have seen at first hand what a battle it is for people like Jacci, and I am sure that all of us have come across some very powerful cases in our constituencies. The banks and the financial institutions should absolutely, without hesitation, follow Santander’s lead. Santander is to be congratulated for what it did. Do we have a marketplace where everyone conducts themselves in the same way? No, we do not, so the hon. Lady raises a very valuable point.
In terms of the Minister’s response, it is welcome that, following Second Reading, the situation with regard to the Bill is unambiguous. I want to make two additional points. First, we will return to duty of care later. Secondly, the issue of enforcement is very important. The Equality and Human Rights Commission will have a watchdog role to play, but it is important that, from the start, the single financial guidance body is obliged in law to build into the culture of its operation, as we have argued, oversight of how financial institutions conduct themselves in terms of services, goods and facilities for the disabled.
Guy Opperman
I assure the hon. Gentleman that the whole reason we introduced the vulnerable circumstances provision in the Bill was to address that exact point. I cannot stress enough, and I have made the point repeatedly today, that the objective specifically enshrined in the Bill is that the particular needs of people in vulnerable circumstances need to be borne in mind.
Jack Dromey
That is welcome. All I will say is that, in our experience, there can be a law or a set of legal obligations, but are they necessarily carried out in practice? In fact, to take the Santander example once again, it took a view that it should do the right thing and that it was obliged by law to do so, but not every provider necessarily takes the same view. The issue of enforcement is key. I stress again that the Equality and Human Rights Commission has a role to play, but at the heart of the SFGB’s operation should be action to ensure that the disabled are not disadvantaged. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 3 ordered to stand part of the Bill.
Clause 4 ordered to stand part of the Bill.
Clause 5
Specific requirements as to the pensions guidance function
Jack Dromey
I beg to move amendment 33, in clause 5, page 4, line 13, leave out subsection (2) and insert—
“(2) In section 137FB of the Financial Services and Markets Act 2000 (FCA general rules: disclosure of information about the availability of pensions guidance) after subsection (3) insert—
‘(3A) In determining what provision to include in the rules, the FCA must include a requirement for members of a scheme, or survivors of members of a scheme, to indicate before gaining access to or arranging individual transfer of their pension assets either—
(a) that they have received information and guidance made available under section 5 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function), or
(b) that they understand the nature and purpose of that information and guidance and have chosen not to receive it.
(3B) The rules—
(a) must impose an obligation on the trustees or managers of a relevant pension scheme to satisfy themselves that the requirement under subsection (3A) has been complied with,
(b) may make provision about what is to be, or not to be, treated as a sufficient indication under subsection (3A) (which may, in particular, require indication on more than one occasion in specified cases or circumstances),
(c) must specify that accessing a website or receiving published information does not alone amount to receiving information and guidance for the purposes of the requirement under subsection (3A), and
(d) may include exceptions for specified cases (which may include cases of assets below a specified value, cases where information, guidance or advice has already been received, cases of transfers by way of consolidation and any other cases specified in the rules).’”
This amendment would strengthen the provision in the Bill for requiring members of pension schemes to be given access to guidance in specified circumstances, so as to ensure that guidance was actually received or expressly refused.
The Chair
With this it will be convenient to discuss the following:
Government amendment 2.
Amendment 40, in clause 5, page 4, line 24, leave out “may” and insert “must”.
This amendment paves the way for Amendment 41.
Amendment 41, in clause 5, page 4, line 25, leave out from “manager” to end of line 26 and insert “to ensure that, either—
(a) the members of the scheme or survivors of members of the scheme receive information and guidance made available under section 5 of the Financial Guidance and Claims Act 2017 (specific requirements as to the pensions guidance function), or
(b) they understand the nature and purpose of that information and have chosen not to receive it,
before proceeding.”
This amendment would require guidance to be provided to members of a relevant pension scheme or their survivors unless they chose to opt out.
Clause stand part.
Government amendment 19.
Government new clause 1—Personal pension schemes: requirements to recommend guidance etc.
Government new clause 2—Occupational pension schemes: requirements to recommend guidance etc.
Jack Dromey
Amendment 33 would strengthen the Bill’s provision for requiring members of pension schemes to be given access to guidance in specified circumstances, so as to ensure that the guidance was actually received or expressly refused. As I will come to argue later, that is an absolutely key point. I underline once again that the term “expressly” is crucial and should lie at the heart of the Bill and what happens during the next stages.
Our proposed default guidance would strengthen the Bill and ensure that more people were protected when transferring their pension assets. Currently, the system of checks and balances for those looking to move their pension assets from a defined benefit scheme are very strong. Members are offered guidance at the time and those moving more than £30,000 must undertake mandatory guidance. However, at a time when more and more defined-benefit schemes are closing than ever before, there is no such safety net for those on defined-contribution schemes. In our very strong view, default guidance would provide such checks and balances for those transferring assets with more value than they may have ever seen before in their lives.
Although the guidance offered by Pension Wise to those seeking to transfer their pension is of great value to many people, the take-up is relatively low and many enter into transactions without proper prior knowledge of their options and the consequences. Once again I refer to the story I told earlier today about the Port Talbot steelworker weeping because of the consequences of his actions and the 20 people he was responsible for who followed his lead.
The lack of a provision for default guidance has resulted in many members of schemes suffering detriment through scams or through making the wrong choice. The current system of signposting advice by pension providers to members of schemes who want to transfer or withdraw their pension pot is not working as it should. The providers, particularly the rogues, have no business interest in making sure that their members receive the appropriate advice and, as such, it is not made as clear as it should be. The right kind of default guidance—strong default guidance—would promote shopping around, better informed decision making and protection against scams.
The amendment would mean that members of a scheme, or survivors of members of a scheme, must either indicate that they have received the appropriate guidance before accessing the pension assets, or explicitly state that they do not wish to receive it. They must state explicitly and beyond any doubt that that is their choice
The service given by Pension Wise is highly respected and is appreciated when it is given. Between February 2016 and January 2017, 94% of people who completed an appointment were satisfied and 93% felt informed about their pension options, compared with 56% of a control group who had not used the service. However, as Pension Wise would be the first to acknowledge, the take-up of the service is extremely low. The number of appointments made with Pension Wise is rising—there were 66,000 in 2016-17—but that is still extremely low compared with the number of pension scheme members exercising pension freedoms.
Latest figures from HM Revenue and Customs show that some 772,000 people withdrew more than £6.5 billion from their pension pots in 2017. An FCA survey found that only one in eight 55 to 64-year-olds who plan to retire in the next two years and who have a defined-contribution pension had used the Pension Wise service in a 12-month period. Although traffic to Pension Wise’s website is quite high, it is not a sufficient substitute for access to tailored and personalised advice. As Baroness Altmann said in the Work and Pensions Committee,
“When you introduce pension freedom into a marketplace that has never really been encouraged to engage with pensions and mostly does not understand much about them, obviously you need an expert to help you.”
The National Employment Savings Trust has said that it was concerned
“that people appear to be making decisions based solely on a read of the Pension Wise website”,
and from what we have been told about the experience of others, that is absolutely right. The main means of promoting Pension Wise advice is through signposting by pension providers and through advertising.
Jack Dromey
This has been a good debate, with some powerful contributions. I absolutely agree with the hon. Member for South Thanet on the scale of some of the problems. Those include some welcome problems with auto-enrolment, but also situations in which people with their backs against the wall are being taken advantage of. The sheer scale is immense, so it is hugely important to get this right. As the hon. Gentleman said so compellingly, it is crucial that we should be confident that the mechanism for default guidance is robust and will work.
My hon. Friend the Member for Makerfield made a typically powerful and well informed contribution. A provider recently spoke to me about “pension ignorance”—I am not sure that I would quite use those words, because they sound a wee bit insulting, but I know what he meant. There is a lack of knowledge about pension entitlements, because pensions are very often seen as being in the distance. My hon. Friend was absolutely right to raise that point. As I argued earlier, neither the take-up of currently available advice nor the trials to improve take-up inspire us to believe that the Government have got it right yet.
The Minister described our amendment as the Labour amendment, which of course it is—we tabled it. However, I dare to say that it was the product of the Work and Pensions Committee, working on a cross-party basis—a collective wisdom with which we agree. The Minister’s point about the importance of looking at pensions in the round is correct, because we are looking at the totality of pension arrangements for the future. He said, with good intent, that there would be a speedy process to consider regulations at a future stage. The problem is that we have to get it right when we specify in the Bill what the expectations of Parliament are.
Let us compare the Government’s proposals with the status quo. Interesting work has been done to compare the FCA’s conduct of business sourcebook—COBS—with Government new clause 1. It would seem that the Government have not moved as far as they should have, so it is important that we get this crucial issue right in the Bill. Of course the Minister is right when he says that circumstances vary enormously, but we strongly believe that there is an absolute principle that must be enshrined in law. Crucially, it is not about erecting barriers. On the contrary, we want to help people to make their decision and ensure that they have access to the advice and guidance necessary when they come to make that decision.
The wording proposed is not yet good enough. Ultimately, we seek an outcome in the Bill that puts it beyond any doubt that the individual can be shown to have made a conscious decision and to have decided not to access that guidance. The Minister has referred to a nudge, which has its place but, frankly, a nudge alone, in the traditional sense of the word, is not enough at this stage. We need a strong statutory obligation and entitlement. I stress again that the consequences of what happens if things go badly wrong are heartbreaking. We have all seen it. That is why there is a determination across the House to ensure that some of the abuses of the past are not carried forward. For that to be the case, we need strong and unambiguous law.
The Minister has said that the Bill is a skeleton that we can put flesh on the bones of. The hon. Member for South Thanet made the point, which I understand, that this will be a significant issue on Report. To be frank, there is no flesh on these bones to show what needs to be done at the next stage. I hope that the Minister will listen not only to us and to the Work and Pensions Committee, but to the widespread expressions of people who are reputable in a vast industry—of course, there are people to the contrary, but they are not particularly fazed by what we propose—who recognise the importance of what we are arguing. I hope that the Minister will hear their voices as well as ours.
Question put, That the amendment be made.
Guy Opperman
In the circumstances, I am delighted to say that I do not believe this clause is controversial.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7
Debt respite scheme: advice to the Secretary of State
Jack Dromey
I beg to move amendment 34, in clause 7, page 5, line 24, leave out subsection (1) and insert—
“(1) The Secretary of State must, within the period of six months beginning with the day on which this Act comes into force, introduce a debt respite scheme.”
This amendment will require the Secretary of State to set up a debt respite scheme within 6 months of this Act coming into force.
The Chair
With this it will be convenient to consider the following:
Amendment 35, in clause 7, page 5, line 35, leave out subsections (3) to (5).
This amendment is consequential to Amendment 34.
Clauses 7 and 8 stand part.
Jack Dromey
The amendment would require the Secretary of State to set up a debt respite scheme within six months of the Bill coming into force.
A “breathing space” is a scheme that stops debts from increasing by freezing interest and charges, and halting enforcement action, allowing families the time and space they need to get back on their feet. This morning I told the story of a victim of domestic violence who fled and then got herself into a downward spiral of debt. She said: “I borrowed to pay my debts. I then had to borrow to pay my debts. I then had to borrow to pay my debts.” What she would have greatly enjoyed, if it had been in operation at the time, is a breathing space to halt the downward spiral and allow her to sort out her finances, and indeed her life and the lives of her children.
While we welcome the fact that the Government have committed to a debt respite scheme with the introduction of the new body, those vulnerable people who are stuck in a cycle of problem debt cannot afford to wait. A debt respite scheme gives people who are suffering from debt problems the breathing space to stabilise their financial situation and get on a more stable footing.
One survey showed that 60% of people said that their financial situation had stabilised once all of their creditors agreed to freeze further interest charges and enforcement action. In a world where credit is easier to access than ever before, it is all the more likely that some will fall into problems with debt. Therefore, it is incumbent on the Government to ensure that these people are not left to suffer alone, and that they receive the support and guidance they need to climb back out of the downward spiral of debt.
StepChange, a debt charity, has estimated the wider social costs of current debt problems to be £8.3 billion. Currently, 2.9 million households are at crisis point with severe, unmanageable debt problems. Some 21 million people are struggling with their bills; 18 million people are worried about making their income last until payday; and research by the Money Advice Service found that, for nearly 9 million people, financial difficulty had progressed to more serious and persistent arrears, with bills and debts described as an ever more heavy burden.
Debt has wider social effects. StepChange polled its clients. Seventy-four per cent. said that debt had affected their sleep patterns; 43% said that debt worries left them unable to concentrate at work; 6% said it caused changes to work attendance, such as arriving late or taking more time off; and 2% said that it led to them losing their job. If that evidence was scaled up, it would point to 2.9 million people with severe debt problems, which potentially means nearly 60,000 people out of work as a result of problem debt.
In addition, 57% of indebted parents said debt put their current or most recent relationship under strain. Some 7% said their relationship actually broke up because of debt, and children in households experiencing debt problems were more than twice as likely to say they had been bullied at school.
Michelle Donelan (Chippenham) (Con)
Does the hon. Gentleman agree that rushing a scheme could impact the effectiveness of debt respite? Although I completely agree with everything he said about the problems that can be incurred via debt, it is important to get this crucial element of the Bill correct and to liaise with organisations such as StepChange and the others he mentioned.
Jack Dromey
The hon. Lady is absolutely right. It is important that we get this right at the next stages of the Bill. I do not disagree for one moment. Having said that, let me distinguish between two things. Making substantial changes to the machinery of government to deliver a new function willed by Parliament can take a long time, so the SFGB probably will not be operational until May 2019. I understand that. However, it is not beyond the wit of man or woman to send an unambiguous message now, on the face of the Bill, to those who are responsible for unreasonable pressure being put on people in debt that they are not allowed to do so. Introducing that within six months of the Bill becoming law is eminently achievable.
I stress again that I am the first to recognise that great change sometimes takes time to implement, but to be frank, given the times we are living through, I do not want people who could get respite to spend another six months not getting it. There is no good reason not to give them respite. As I said when we started this morning, we want to strengthen a good Bill, and inject into it a greater sense of urgency as appropriate.
Yvonne Fovargue
I thank the Minister for his letter about breathing space and the other issues, but it gave me another question for him. He mentioned a six-week breathing space period. I have said this many times: please, please talk to debt advisers. Six weeks is really not enough time.
Jack Dromey
The Minister speaks with obvious sincerity, which is welcome. As has repeatedly come up in our proceedings today, whether our experience is from our constituency or otherwise, we have all seen the price that people pay as they sink ever more deeply into debt. I do not mind admitting that there was one particular case—it is not appropriate to go into the details—where, when my constituent walked out the room, I was in tears because of what had happened to her. Her life was in a downward spiral. There is common ground and obvious sincerity, so the Government should act.
We will not push the amendment to a vote, but I suggest that the Government reflect further and come back on Report with the best possible timescale for implementation. I agree with my hon. Friend the Member for Makerfield: we should not necessarily have to await the formation of the new body. The scheme is a related matter to the function of the body—of that there is no doubt—but we have seen experiences such as the arrangements in Scotland. We also have the collective wisdom of the discussions in the sector and in the House of Lords. Everyone is determined to get it right. We just do not think that the scheme should be introduced a year beyond the Bill coming into effect in three or four months’ time. We would be talking about it being a year and a half before we ultimately see this welcome mechanism introduced.
In not pushing the amendment to a vote at this stage, I ask the Government to reflect further and come back on Report on two things. First, we want clarity on what the Government think is necessary. The Minister has gone a long way towards that. We want clarity about how one goes about arriving at the default scheme. That relates to the mechanisms and who should be engaged. The Minister has referred to that already. Secondly, we want the quickest possible timescale to get the scheme introduced. If the Minister will respond accordingly on Report, I am prepared to withdraw the amendment.
John Glen
I am grateful for the hon. Gentleman indicating that he will withdraw the amendment. I observed closely what he said on clarity on the default scheme and having the quickest mechanism possible to bring it forward. I will reflect with my colleague the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Hexham and provide an update on Report.
Jack Dromey
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 ordered to stand part of the Bill.
Clause 8 ordered to stand part of the Bill.
Clause 9
Guidance and directions from the Secretary of State
Question proposed, That the clause stand part of the Bill.
Guy Opperman
The clause gives the power to give guidance to the single financial guidance body and directions specifically on the way it exercises its functions. I do not believe that it is contentions.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clause 10
Setting standards
Question proposed, That the clause stand part of the Bill.
Guy Opperman
I will briefly address the matter of the standards, which the clause will require the single financial guidance body to set out, and their enforcement and monitoring. The clause will require the FCA to review those standards and how the body is monitoring and enforcing those standards. We believe that is appropriate in the circumstances, and that we are creating this body with a degree of scrutiny in the right and proper way.
Jack Dromey
We rehearsed this morning the importance of the independence of the body, in terms of its operational role, on the one hand. On the other hand, there is common ground that there should be proper accountability and oversight. We are content with the proposed arrangements.
Question put and agreed to.
Clause 10 accordingly ordered to stand part of the Bill.
Clause 11 ordered to stand part of the Bill.
Clause 12
Financial assistance from the Secretary of State
Jack Dromey
I beg to move amendment 36, in clause 12, page 8, line 10, leave out from “State” to “financial” and insert “must provide”.
This amendment proposes to adjust Clause 12(2) to strengthen the provisions on financial assistance from the Secretary of State related to the operation of the SFGB
Jack Dromey
The amendment proposes to adjust clause 12 to strengthen the provisions on financial assistance from the Secretary of State related to the operation of the single financial guidance body. The intention of the new body is to increase the number of people who receive financial guidance and advice—indeed, the ambition is to greatly increase it. This function is key to increasing financial awareness, education and inclusion across the country.
While the current services provided by the three bodies to be merged are greatly valued and appreciated by those who use them, I think there is common ground that they are not used enough. A primary function of the new body needs to be to increase take-up of the services it offers. For example, take-up of the services offered by Pension Wise is extremely low. The latest figures from HM Revenue and Customs show that some 772,000 people withdrew more than £6.5 billion from their pension pots in 2017. However, only 66,000 appointments were made with Pension Wise in 2016-17—approximately 8.5% of people.
An FCA survey found that one in eight 55 to 64-year-olds who planned to retire in the next two years and who have a defined contribution pension had used the Pension Wise service in a 12-month period. The FCA also found that 25% of pension transfers are withdrawing all, or virtually all, of the pension, with 19% withdrawing virtually all and 6% withdrawing all. What plan do the Government have for those who have withdrawn all their pension and may end up with nothing later in life? They may end up falling into the arms of the taxpayer, and the Government need to prepare for that.
While traffic to Pension Wise’s website is quite high, it is not a sufficient substitute for access to tailored and personal advice. Also, many of those looking for advice may not be completely digitally aware. As Baroness Altmann said in the other place,
“When you introduce pension freedom into a marketplace that has never really been encouraged to engage with pensions and mostly does not understand much about them, obviously you need an expert to help you.”
NEST has said that it is concerned
“that people appear to be making decisions based solely on a read of the Pension Wise website”.
If those looking to transfer their pension are only accessing the Pension Wise website, it means that they will not get the tailored specialist advice that they need at such a time. We must therefore ensure that as many as possible of the 772,000 people who take advantage of their pension freedoms every year receive the guidance that they need to make informed and reasoned decisions about what are usually large sums of money.
For this reason, having set out why this body matters and the scale of likely demand at the next stages, we are surprised that the Government, from some of the things that they have said, appear to expect to make a financial saving from the formation of the new body. The Government’s impact assessment states:
“One structure replacing three will reduce cost of guidance provision, releasing funds through these efficiencies…savings could be used to reduce the levies that industry pay to finance the government’s guidance provision.”
With the greatest respect, that is the last thing that should happen. We do not believe that the Government should use the formation of the new body to make savings and pass them on as reductions in the amount paid by the industry to finance the body. The industry has a responsibility to finance the body adequately through the levy system. The industry and the Government should use the efficiencies created by the new structure, as well as additional money in grants and levies, as appropriate, to drastically increase the services provided. In our view, that is essential to the success of the SFGB if it is to deliver the complete guidance service that people need.
I had a fascinating discussion earlier this week with the chief executive of the Pensions Advisory Service, and she referred to the extraordinary statistics on TPAS’s work and the take-up of it. She made the point, absolutely rightly, that more could be done with existing resources and economies of scale from bringing together the three organisations, but she went on to make the compelling point that so great is the likely demand at the next stages that much more will need to be done to finance the new body. Inescapably, unless it is properly resourced, the new body will not be able to discharge the functions that will fall upon it.
The chief executive gave some examples. She made the point again about not duplicating work done by other areas of Government such as research, and said that, in TPAS’s experience, some things that are key to the services that it provides include, of course, the dashboard and the website, but also face-to-face guidance, which is crucial time and again. She talked about the specialisms necessary to help and inform decisions about options, saying that we should not dumb things down by having people give guidance by just reading off a list. She said that an advertising programme ought to be part of what the Government do, and that it could be done in a number of different ways. She also spoke about what I call the Carillion capacity—the capacity to respond at a time of crisis—as well the promotion of financial public awareness, which we debated earlier.
In conclusion, we hope for a statement from the Government that makes the point that the purpose of the new body is not to save money but to provide the kind of service that all people in all circumstances ought to be able to count on. The industry must play its part, but Government must be unambiguous that the body will be properly and fully resourced.
Guy Opperman
Can I answer the point raised directly? It is absolutely the case that merging three bodies and having one building rather than three will create some degree of potential cost efficiencies, but we are absolutely of the view that those efficiencies should then be directed into frontline services. I can unequivocally give that assurance to the Committee.
The hon. Gentleman referred to the original response to the consultation. It is true that there is an expectation that rationalising the provision will create some operational efficiencies. One would expect that. However, that same response made it very clear that the intention was for any savings to be channelled to frontline delivery of debt advice, and money and pensions guidance. I could not be any clearer on that in any way whatsoever.
I manifestly want to make that point, but I also disagree that there will be an insufficiency of funding, and the reason for that, it seems to me, is threefold. First, this is effectively not taxpayer-funded; it is done by a levy. The levy is a moveable feast, depending upon the need identified by the individual organisation, and it is something that can be assessed and increased on an ongoing basis, to provide the service that, it seems to me, we all wish to ensure is there. Secondly, there is capacity to top up the levy, should the Secretary of State wish to do so, and the financial guidance body on an ongoing basis, and that additional funding can be provided.
The proposed amendment has the bizarre, counter- intuitive effect of removing the discretionary nature of the financial assistance that the Secretary of State can provide. I simply make the point that while we are keen to ensure that this body is run more efficiently, in terms of amalgamating most probably into the High Holborn offices of the Money Advice Service, we certainly believe that this is something the levy will be able to fund, and if it is the case that this expands the provision—the House of Lords seems to have done so and this House may do so as well—then the levy may go up to accommodate the need as has been described. With those assurances, I respectfully ask the hon. Gentleman to withdraw his amendment.
Jack Dromey
The assurance that this is not a cost-saving measure is very welcome, but I stress again: is there an economy of scale? Are there possibilities, for example, of freeing up, by locating in one location, which is very likely to be the case? All of that is absolutely true, but right at the start, as we go down this path, to see a welcome mechanism created, we need to be confident, and to send a message to the people out there that they can be confident, that the new organisation will be effective, dynamic and properly resourced. Therefore, on the basis of the assurances given, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 ordered to stand part of the Bill.
Clauses 13 to 20 ordered to stand part of the Bill.
Schedule 3
Minor and consequential amendments relating to Part 1
Amendment made: 19, in schedule 3, page 34, line 22, leave out paragraph 13—(Guy Opperman.)
This amendment removes the amendment to s.137FB of the Financial Services and Markets Act 2000 in the Schedule 3 which was needed in consequence of the Bill, because this is now dealt with in the new clause inserted by NC1.
Schedule 3, as amended, agreed to.
Clauses 21 to 23 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Amanda Milling.)
Financial Guidance and Claims Bill [ Lords ] (First sitting)
Jack Dromey ExcerptsThursday 1st February 2018
(6 years, 10 months ago)
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Guy Opperman
It is a pleasure to work under your chairmanship, Mr Stringer, and I welcome all colleagues to the Committee. I am grateful to those Members of the House of Lords who contributed to the Bill—it started in the other place—expanding and improving it in a significant and important way.
The Bill builds on a Government commitment to ensure that members of the public can access good-quality, free-to-clients and impartial financial guidance and debt advice. Those services are currently provided by a number of different organisations, including financial services firms, utilities and those in the charity sector. Government-sponsored pensions guidance, money guidance and debt advice is provided by the Money Advice Service, the Pensions Advisory Service and the Department for Work and Pensions under the Pension Wise banner.
There have been a multitude of reviews, Select Committee assessments, consultations and calls for evidence since 2015, by which we reached the state in 2017 when the Bill was introduced in this Parliament. Consequently, clause 1 establishes a new non-departmental public body, to be referred to in legislation as the single financial guidance body. The clause introduces schedule 1, which provides details of the proposed governance and accountability of the new body. The provisions within the schedule deal with, for example, the appointment of the chair, non-executive members, executive members and staff, the delegation of duties within the body, the constitution of the committees, and the statutory reporting and accounting procedures.
Clause 1 allows the Secretary of State to make regulations to replace the phrase “single financial guidance body” in legislation with the actual name of the body—the body will be named nearer to the time it becomes operational. The regulations that name the body will be created through a statutory instrument under the negative procedure, which is subject to annulment by either House of Parliament.
Clause 1 dissolves the consumer financial education body now known as the Money Advice Service. Schedule 2 allows the transfer of staff, property, rights and liabilities from the Pensions Advisory Service and Pension Wise—in effect from the Secretary of State to the new body. The schedule allows similar transfers from the Money Advice Service to the new body. I have met all three organisations and discussed the proposed merger with them. I can assure the House that all three are keen to merge, which is rare in Government mergers and should be applauded.
Amendments 1 and 18 are technical in nature and extend the power to make transfer schemes under schedule 2 to the devolved authority. Schedule 2 already allows the Secretary of State to transfer staff, property, rights and liabilities from the Money Advice Service to the new single financial guidance body. This is required to ensure continuity of provision, including on contracts held, and avoid disruption to services in the creation of the body. The devolved authorities will have responsibility for the provision of debt advice in their areas once the new body is established. Devolved authorities have been consulted on this and are very much in agreement. Amendment 1 therefore helps to avoid similar disruption to debt advice provision in the devolved authorities when the new body is established.
Jack Dromey (Birmingham, Erdington) (Lab)
It is an honour to serve under your chairmanship, Mr Stringer. Let me start by paying tribute to the three organisations that are being merged into one—the Money Advice Service, the Pensions Advisory Service and Pension Wise—for the work they have done over many years. The Minister is right that all three agree about the good sense of bringing them together into one body. Why? Because all three know from experience, and have advocated, that high-quality advice—independent, trustworthy and there when it is needed—is of the highest importance, particularly in circumstances of redundancy, death or divorce, when the financial consequences for the citizen can be very serious.
I will give some examples. In Port Talbot, the staff supervisor told Michelle Cracknell, the chief executive of the Pensions Advisory Service, that he was distraught that he had been badly advised on pensions and that the 20 others on his shift had followed his lead. He burst into tears when he said, “It’s not just the mistake that I’ve made; it’s the mistake that others have made following my example.” I remember a victim of domestic violence in my constituency saying, “I borrow to pay the debt, because I borrow to pay the debt, because I borrow to pay the debt.” That is the downward spiral into which citizens all too often fall at a time of crisis in their lives. A Kingstanding dustman said to me, “I’m an agency worker on a zero-hours contract and I would love to buy a house, because my wife is pregnant and we’re paying a fortune in rent.” He went on to say, “It’s not just that: because I’m on a zero-hours contract, I can’t plan. I keep getting into debt. I’ve had bad advice.”—he used stronger words than those—“Where do I turn?”
That is why we made it clear on Second Reading that this is a welcome Bill and a strong step in the right direction, and it has been strengthened by constructive debate in the other place. Our intention is to make a good Bill better still and to inject a sense of urgency into some of its proposals, because the dignity and financial wellbeing of our citizens, in opportunity or adversity, is of the highest importance.
We agree to the concept of the new organisation and support the direction of travel. We will seek to amend the Bill in certain key areas in order to strengthen it further, so that it delivers, particularly for those in desperate need and in circumstances in which there are still too many rogues taking advantage of the vulnerable. There is a joint determination across the House to ensure that nothing but the best is provided in the future for the British people. I am talking about high-quality advice that they can count on in all circumstances.
Mhairi Black (Paisley and Renfrewshire South) (SNP)
I echo much of what the hon. Member for Birmingham, Erdington has just said. I am very grateful, on a Thursday morning, that the Bill is not contentious—I do not know about anyone else here, but I am not in the mood for arguing. We have proper concerns about only three areas of the Bill. The first relates to how young people are involved and educated through it. The second question is whether we can clear up some of the difficulties between guidance and advice. The third and most important issue is dealing with clause 5, because what we have from the Government now is wholly inadequate. With that said, I look forward to having genuine discussions in Committee.
The Chair
We now come to amendment 23 to schedule 1, with which we will consider the question that schedule 1 be the First schedule to the Bill.
Guy Opperman
No, it is your amendment 23, to schedule 1, in relation to the independence of the single financial guidance body.
Schedule 1
The single financial guidance body
Jack Dromey
I beg to move amendment 23, in schedule 1, page 27, line 9, at end insert—
“(3) The Secretary of State shall have regard to the desirability of ensuring that the single financial guidance body is as independent from Government as reasonably possible in determining its activities.”
This amendment will ensure that the single financial guidance body has the autonomy to fulfil its functions.
The Chair
With this it will be convenient to discuss the following:
That schedule 1 be the First schedule to the Bill.
Jack Dromey
My apologies, Mr Stringer, for getting things in the wrong order—having been dealing this week with the issue of Carillion, the problems at Jaguar Land Rover, and GKN, I have to say that it has been a rather hectic few days.
The purpose of the amendment is to ensure that the single financial guidance body has the autonomy to fulfil its functions. The new body will be a publicly funded, non-departmental public body, answerable to the Secretary of State. As such, it is imperative that it have the correct amount of autonomy from Government to ensure that it can fulfil all its functions effectively. The new body will be tasked with carrying out a number of very important and critical functions, including starting a new era of enhanced financial guidance and education. Those will best be fulfilled by an independent, autonomous body, free from Government interference. It should be free to make decisions that let it do the job for which Parliament has voted. It should not be subject to the whims of whichever Government are in power, and the political winds those whims can bring. It should be free, as is often said, to speak truth unto power, and all too often the uncomfortable needs to be said and done. The new body should not feel constrained in so doing.
The new body’s important functions include providing guidance to those who are making important financial decisions. The take-up of the services offered by Pension Wise, for instance, is extremely low. Of the 772,000 people who transferred some or all of their pension in 2017, only 66,000 had an appointment with Pension Wise, and an FCA survey found that only one in eight 55 to 64-year-olds who planned to retire in the next two years and who have a defined-contribution pension had used the Pension Wise service in a 12-month period.
The intention of all parties in the House is to have a new and effective organisation that ensures that in future we do not have that kind of problem of take-up by the citizen. We want to ensure that it is widely known that Pension Wise exists; that Pension Wise is vigorously advertising its purpose and function; and that, because we insist on independent advice being given, it is truly independent from Government.
I will just make one final point, which arises out of constructive discussions with the Minister. I am the first to recognise that there needs to be oversight and accountability. There must be oversight by, and accountability to, Parliament. Crucially, however, it would be inappropriate for the Government to interfere in the day-to-day conduct of the new organisation. It should be free to do its job and to do its job well, and therefore I hope that the Government will give the necessary assurances about it.
Jack Dromey
My hon. Friend, who is part of an honourable tradition of giving high-quality advice to people in times of need, particularly through citizens advice bureaux, is absolutely right. The evidence is damning; the need is apparent. It is now a question of how best that need is met. The new body is a step in the right direction, but it should not be the last word; it is the first “next step,” but it is an important step in the right direction.
Guy Opperman
I am grateful to colleagues for their comments. The Bill sets out absolutely clearly that the single financial guidance body will be at arm’s length from Government. That distance from Government means that the day-to-day decisions the new body makes will be independent, as they will be removed from Ministers and civil servants. Nevertheless, there is a sponsoring Minister, who remains answerable to Parliament for the activities of the new body, its effectiveness and its efficiency, including any failures, especially in the case of a body that receives public funds. It is important that there is a balance—I think all of us recognise that—between enabling the Department to fulfil its responsibilities to Parliament and to be accountable, and giving the new body the desired degree of independence.
Conferring functions on the new body involves a recognition that operational independence from Ministers in carrying out its functions is appropriate, and the new body will support delivery of the objectives of both the Treasury and the Department for Work and Pensions, to create a more effective system of publicly funded financial guidance and to give savers the confidence to save and access money in the future. The new body’s activities will be funded by a levy on the financial services industry and on pension schemes.
On Second Reading the hon. Member for Makerfield addressed one of the criticisms levelled at the Money Advice Service. All of us support what MAS is trying to do, its broad objective and the efforts it is making. However, one of the strong criticisms of it in its early years, which came from both the independent Farnish review and the Treasury Committee, which obviously operates on a cross-party basis, was that MAS lacked accountability and that the activities it delivered, and the money it was spending, could not be held to account by Parliament and the respective Minister.
The Farnish review, which is one of the reasons we are creating this body in the way we are, suggested that the Money Advice Service accountability regime was weak, and recommended that it be strengthened. The Treasury Committee expressed concerns that the Money Advice Service had moved its service away from its intended focus. I am certain that the hon. Member for Makerfield will be directing it to have a “laser-like focus”—the expression she used on Second Reading—on commissioning services, towards direct delivery and building up its brand name.
Lord knows, all Governments like to be held to account by Oppositions, and quite rightly too, but let us imagine that the single financial guidance body chose to do something that any Member of the Opposition or of the Government felt was inappropriate. The inability to hold that body to account and to hold a Minister to account would not be something the House would want. In the circumstances, it is appropriate that the responsible Minister is able to make representations, but it is very much a partnership system that needs to work well between the body and the Government, and there must be clarity about expectations and the approaches to accountability.
The correct way forward is to have a framework document setting out that particular method of working. That framework document approach, setting out the partnership so that there is due accountability to Parliament, while at the same time allowing the body to get on with the job that we all agree it should be doing, is well established and has been under successive Governments. In the circumstances, I believe that placing the requirement in legislation, as set out in amendment 23, is both unnecessary and undesirable, and I urge the hon. Gentleman to withdraw his amendment.
Jack Dromey
The Minister has said some helpful things, and he is absolutely right that it is about getting the right balance between accountability and operational independence. The proposal for a framework document is welcome. I simply ask that there is consultation on the nature of that framework document, including with stakeholders, at the appropriate stage.
On the establishment of the new body, the governance of it and precisely how that will be structured, we have heard what has been said thus far, but it will be important that we have high-quality and independent individuals engaged in the governance, including on a day-to-day basis.
On the basis of what I and the Minister have said, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 2
Transfer schemes under section 1
Amendment made: 18, in schedule 2, page 32, line 3, at end insert “and the devolved authorities.”—(Guy Opperman.)
See explanatory statement for amendment 1.
Schedule 2, as amended, agreed to.
Clause 2
Objectives
Mhairi Black
I beg to move amendment 37, in clause 2, page 2, line 19, leave out from “accordingly” to end of line 20 and insert—
“(da) to ensure the needs of people in vulnerable circumstances, including but not exclusively—
(i) those who suffer long-term sickness or disability,
(ii) carers,
(iii) those on low incomes, and
(iv) recipients of benefits,
are met and that resources are allocated in such a way as to allow specially trained advisers
and guidance to be made available to them.”
This amendment would require that specially trained advisers and guidance are made available to people in vulnerable circumstances and would provide an indicative list of what vulnerable circumstances might include.
The amendment came about because we were chuffed, when reading the Bill, to see that there was a mention of vulnerable people, especially given the nature of pensions and how much is at stake with them, but to be honest we felt that the wording was a little weak. I would like the wording tightened up to ensure that it is clear and means what I think it does. That is why we have suggested what we consider “vulnerable people” to mean, and it will be good to see whether the Government are happy to accept that.
We want to make sure that the new body is as accessible as possible for all people, regardless of their circumstances. Specially trained advisers and resources should make up part of that new body, so that people can have confidence and the ability to make the right decisions. I do not think that the amendment is that contentious; it just tidies up the Government’s wording.
Jack Dromey
I rise to support the proposition. We will deal with the issues of vulnerability and disability later in the Bill, but although it is true that not everyone who needs urgent and independent advice is necessarily in circumstances of vulnerability, the nature of the world of work and of the economy means that a lot of people’s backs are against the wall, especially after the high-profile collapses of late. We should make explicit what is implicit: the new body should proceed in the right way. I hope the Minister will give the assurance that everyone who turns to it will receive high-quality independent advice. A specific focus on support for the vulnerable is a legitimate objective.
Guy Opperman
I am keen to give assurance on that specific point. If the hon. Member for Paisley and Renfrewshire South will allow me, I will walk her through how we got to the situation where the Government chose to amend the Bill to add in the vulnerable circumstances clause that is the basis for her amendment. The Government take the view that the amendment is not necessary in the circumstances, and I will explain why.
The body’s activity towards the people who are most in need and in vulnerable circumstances has been the priority of all parties since the creation of the Bill. Vulnerable circumstances were not originally spelt out, but they were certainly spelt out on Second Reading in the House of Lords. There was extensive debate in the House of Lords on a cross-party basis with representations by Baroness Finlay, Baroness Coussins, Baroness Hollins and the Labour Lord, Lord McKenzie, about the need for clarity on access to financial guidance and awareness of financial services for people who find themselves in vulnerable circumstances.
The Government decided in the other place to state explicitly in clause 2(1)(d) that the body’s objectives include the need to support people in “vulnerable circumstances” when exercising its functions. An amendment was introduced to strengthen the objectives to ensure that the body’s
“information, guidance and advice is available to those most in need…bearing in mind in particular the needs of people in vulnerable circumstances”.
The Government’s amendment has created a statutory framework that will give clear direction to the new body to support people in those circumstances. That means that the body will be required to focus its efforts and resources on that area, and will look at the best ways to provide guidance to vulnerable people in different places.
A general principle of the Bill, which I will expand on in relation to this and other points, is that there is a danger of being overly prescriptive to a body that one is setting up with the specific purpose that it has the latitude to exercise the appropriate commissioning and employment of charities and organisations in particular places. Asking the body to have a generality of specially trained advisers and guidance risks being too prescriptive in the Bill. We want to ensure that the body has the latitude to take advantage of its expertise to find the best interventions and the best channels to address the needs of people in vulnerable circumstances now and in the future. That is not to say that the body itself may not choose to do exactly what the hon. Member for Paisley and Renfrewshire South has fairly set out, but that is for the body to do under the circumstances that it sees fit.
The risk outlined on Second Reading—I can see that I will have to refer to the hon. Member for Makerfield on several occasions—was the danger of duplication. Whether or not one feels that the Government or individual local authorities are providing appropriate services, other services are being provided, whether that is universal support or the visiting service, that support claimants with a face-to-face service and by offering to manage their claims. There is a duplication risk, which was the specific problem of the Money Advice Service in the past.
The general point is that we believe that it is wrong to be too prescriptive and to predefine a whole series of obligations, functions and capabilities of this organisation. That does not mean that we will not have a discussion going forward, nor that the body will not address these specific points, but I do not want to predefine and subdivide every single part. It should be left to the body to make those decisions as it goes forward. That does not in any way diminish the need for these things to be addressed, but I would not want that in the Bill. It is for the body, when it is fully formed, to address those points. In the circumstances, I invite the hon. Member for Paisley and Renfrewshire South to withdraw the amendment, having taken due note of the assurances that I have given.
Jack Dromey
I beg to move amendment 24, in clause 2, page 2, line 32, at end insert—
“(4) In the case of members of the public who are self-employed “information, guidance and advice” also includes information and advice on business-related debt, in addition to personal debt.”
This amendment would extend the single financial guidance body’s remit to advise the self-employed on business finances and debts.
The Chair
With this it will be convenient to discuss amendment 25, in clause 2, page 2, line 32, at end insert—
“(4) In the case of members of the public who are self-employed—
(a) “financial matters” also includes information and advice on business-related debt, in addition to personal debt”, and
(b) “financial affairs” includes business-related financial affairs, in addition to personal financial affairs.”
This amendment would extend the single financial guidance body’s remit to advise the self-employed on business finances and debts.
Jack Dromey
Although self-employed people will be able to access the help of the new body for their personal finances, they will not be able to use it for their business finances. We have listened very carefully to the voice of the self-employed—on one hand organisations such as the Federation of Small Businesses, and on the other hand people I have spoken to in my own constituency, including taxi drivers and construction workers who are self-employed and, indeed, an individual who ran a fruit and veg shop in Erdington High Street and got into financial difficulties.
I have seen how self-employed people badly need advice and guidance, and there is all too often an overlap between their personal advice and guidance and that for the business in which they are engaged. That is why we say that evidence shows that, for the self-employed, the line between personal and business finances is usually blurred and can be very difficult to manage, particularly for those just setting out as self-employed people. The number of self-employed people is higher than ever before in our economy, so they need to be able to rely on the new body for advice and guidance when they need it.
Figures released last year suggest that the number of self-employed workers in the United Kingdom rose by 23%—from 3.8 million to 4.7 million—between 2007 and 2017. That represents a shift in the nature of the world of work and the way the British economy is working. Self-employed people now represent about 15% of the workforce, and 91% of businesses say they hire contractors. The majority of self-employed people are sole traders, and there is no legal distinction between them as individuals and as businesses. There were 3.4 million sole traders in 2017. The biggest increase in self-employed people was among women.
Although self-employment is a positive choice for most, there is a real problem with the conscription of some into reluctant self-employment. Either way, the average earnings of the self-employed are significantly lower than those of the employed. The figures vary—I would be the first to acknowledge that—but there has been growth in self-employment in higher-skilled, higher-paying areas, such as advertising, public administration and banking. Although some workers enjoy greater flexibility and control over their working patterns, self-employment can nevertheless have a negative impact on their access to finance.
As self-employment has increased, so has demand for advice about business-related debts. Last year, 36,421 people were helped by the business debt line run by the national charity the Money Advice Trust, which does outstanding work and gave us very good advice and guidance about the Bill. Demand for the debt line has increased from 24,000 in 2016 to 36,421. The Money Advice Trust says, and I think it is right, that it expects the rise in demand to continue.
The amendments would ensure that the SFGB provided self-employed people with information, advice and guidance about their business-related, not just their personal, debt and finances, with a focus on those who are most in need, in line with the body’s wider objectives. The amendments would apply to its debt advice and money guidance functions. As Lord Haskel said in the other place,
“the work of the SFGB should include the self-employed and micro-businesses, particularly at a time when the line between company employment and self-employment is becoming very blurred.”—[Official Report, House of Lords, 5 July 2017; Vol. 783, c. 933.]
Personal and business finances are closely intertwined for many self-employed people. Some 48% of self-employed people use a only personal current account for their business, and a further 17% use both a personal and a business account, according to the Financial Conduct Authority’s “Financial Lives” survey in 2017. The Money Advice Trust report, “The cost of doing business”, which is based on extended interviews with business debt line clients, found that almost seven in 10 of those who had taken out a personal loan were using it to prop up their business. Research by the University of Bristol’s personal finance research centre identified two key areas of overlap between business and personal finances: first, general living expenses, especially for those who live on their business premises; and, secondly, the use of personal credit to manage cash flow where necessary. Given the intertwining of business and personal finances for many self-employed people, if the SFGB does not offer information, advice and guidance on both, it will not be able to provide that growing section of the population with the support it needs.
I very much hope that the Minister will respond constructively to what we are saying and look at what might happen if the Government choose not to amend the Bill. I reserve my right to come back on that after hearing the Minister’s response.
Yvonne Fovargue
I want to make a short contribution about how the finances of the self-employed are muddied with their personal finances. I had a meeting recently with Amigo Loans, a guarantor loan provider. It said that an increasing part of its business is loaning to people in a personal capacity, although they know it is for business purposes. Is that a business debt or a personal one? The fact that it does not look at the business plan might make it a personal debt, although I do think it ought to be looking at the business plan. Is it a personal debt or a business debt for the guarantor who guarantees the debt? In a lot of cases, it is fairly unclear where the line lies. To have a firm demarcation line where no business debts are dealt with is probably detrimental.
Guy Opperman
I recognise my hon. Friend’s expertise in such matters, and I thank him for his intervention. Support for self-employed people is covered by the Bill, because the self-employed are members of the public, in the way he outlined. Any personal business debt of a self-employed person is covered in respect of them being an individual member of the public.
I take my hon. Friend’s point about loans. I am delighted to say that I am not able to answer it right now, but I will definitely get back to him. In seriousness, we need to consider that point and work out whether there is any way of changing it and taking on board the views of the organisations that have practised in this area for some considerable time. I will certainly write to him with a specific answer and circulate that answer to all Committee members.
Jack Dromey
The hon. Member for South Thanet is absolutely right, and his examples about the complexity we face are fascinating. The Minister’s response has been helpful. The new service is welcome; there is a degree of confusion about exactly what it can do for the self-employed, but that has already been substantially clarified. We recognise the complexity the hon. Gentleman summed up so well, so if the issue of business advice—if I can use that as a shorthand term—is not addressed effectively at this stage of the Bill, it will have to be addressed at another stage. Even if we cannot make progress in Committee, the Minister’s undertaking to engage in discussions will be warmly welcomed by organisations such as the Money Advice Trust and the Federation of Small Businesses.
Guy Opperman
May I briefly clarify a point that I should have addressed in my response? I applaud the Money Advice Trust’s work, but in the briefing that it submitted to our Committee, it seeks broader business support, arguing that the single financial guidance body should address a host of other things and be available to small businesses more broadly—a mission creep that I would oppose. The MAT is a laudable charity and I respect entirely its good work, but that is a classic example of the mission creep that we want to avoid. Both the hon. Gentleman and I support the charity and its good works, but I believe that there is a limit to the assistance that the FSGB should give to that charity and its objectives.
Jack Dromey
It is legitimate mission creep. What is good about our exchange is that we recognise that making progress with the issues identified by the MAT and the hon. Member for South Thanet may be difficult in Committee, but we can move forward at a later stage. The Minister’s point is absolutely right, but no one is suggesting that we should duplicate the functions of other bodies. If we can move forward at a later stage, jointly engaging with the organisations that represent the self-employed and those who advise them, it will be welcomed both by the organisations concerned and by the self-employed who need that advice and guidance. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mhairi Black
I beg to move amendment 38, in clause 2, page 2, line 32, at end insert—
“(4) The single financial guidance body must, within three months of being established, define the following terms within the context of its objectives and functions—
(a) “information”,
(b) “guidance” and
(c) “advice”.”
This amendment would require the new body to define “information”, “guidance” and “advice” so that consumers are better able to understand which of the three would be most helpful to them.
Craig Tracey (North Warwickshire) (Con)
I declare an interest as chairman of the all-party parliamentary group on insurance and financial services. I welcome the Bill in general, and from my conversations with the insurance industry I know that it is very supportive of the Bill and of the establishment of the single financial guidance body as great step forward to having access to guidance at relevant points in life. Because of the welcome pension freedoms, that guidance has become more essential than ever before.
There is good practice in the industry already—for example, Aviva insurance is running its MOT at 50 scheme, on which the preliminary feedback has been very positive. The results show that getting advice made people far more engaged with their finances and more likely to plan for their retirement, and many went on to seek regulated advice. The crucial point that Aviva made was that by delivering the MOT at 50, people had time to change their plans, think realistically about the future to meet their retirement objectives.
I want the Minister to give clarification on three points. First, what will the Bill provide for consumers? From the APPG’s and my perspective, it should look at providing financial resilience, promoting early intervention to prepare for life events, and raising awareness of the benefits of protection products, which are particularly helpful for the self-employed—things such as income protection, critical illness and life insurance. In my experience as a broker, people generally only took those when it was too late and when they had had a bad experience. If we can help to advise people ahead of incidents, that would be really useful.
Secondly, could we have clarification on the timeline for implementing the SFGB and assurances that transitional agreements will provide certainty of access to guidance for consumers, and certainty for providers in relation to signposting arrangements? Thirdly, will the Minister set out how the new body will set standards to be approved by the FCA? The Bill says that that should happen, but it does not specify how it should be approached or how it intends to set out the strategy. Could the Minister provide some guidance on that? I appreciate that the answer to the third point might be quite detailed and I will be happy if we wants to write to me with the information. I look forward to his response.
Mhairi Black
The logic behind the amendment is that right now we have hit a fork in the pensions road, because we are recognising that we might not be able to sustain a lot of the things in place now into the future. People are making decisions about their pensions when, to be frank, they do not have a clue about what they are doing, and they are ending up in horrendous situations because of a lack of understanding and of clarity. To me it seems perfectly reasonable to point out that those three terms, which may be used interchangeably in general conversation, in reality can have a massive impact on an individual.
The Government are promoting an ethos of educating and informing people, to ensure they make the right decision, and I do not see how the amendment waters that down in any sense. I know the Minister is saying that the body needs freedom, and so we cannot define terms as precisely as we would like, but that sounds like the Government are saying that we just have to trust the body’s good will. This is a Government Bill, so why not strengthen it where we can? In that spirit, I am happy to withdraw the amendment on the basis that my later amendments are given due consideration, and that the Minister takes on board what I said. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.
Clause 3
Functions
Jack Dromey
I beg to move amendment 26, in clause 3, page 3, line 5, at end insert
“including by means of provision to the public of a pensions dashboard within the meaning of subsection (11).”
This amendment would require the single financial guidance body to provide for the public a pensions dashboard as part of its pension guidance function.
The Chair
With this it will be convenient to discuss the following:
Amendment 31, in clause 3, page 3, line 34, at end insert—
‘(11) In this section and section 5, “pensions dashboard” means a publicly available service where members of the public can securely view details of their state and other pensions savings.”
This amendment defines “pensions dashboard” for the purposes of Amendment 26 and 32.
Amendment 32, in clause 5, page 4, line 12, at end insert
“including by means of provision to the public of a pensions dashboard within the meaning of section 3(11).”
This amendment would require the single financial guidance body to provide for the public a pensions dashboard as part of its pension guidance function.
Jack Dromey
The lead amendment defines a pensions dashboard. It would require the single financial guidance body to provide for the public a pensions dashboard as part of its pension guidance function.
The idea of a pensions dashboard as a one-stop shop, enabling people to look at their pension scheme assets in one place, has been considered for a long time. We should have introduced one years ago. Many people across the country have very little idea of the value of their pension schemes—they may be in multiple schemes, and as a result they may have no idea what the returns might be. Pensions are a grey area for millions of people who believe they do not need to worry about it in the here and now, and that they will be able to deal with it when the time comes, but that is simply not the best or the most productive approach.
If someone has a solid awareness of the state their pension schemes, they have a much better insight into their future earnings after they retire, and they know whether they should put more—or perhaps, on occasion, less—money into their pension pot now. Crucially, this is about getting people to look forward and save for the future. A person moving jobs may have up to 11 small pension pots—that was the case for somebody I encountered recently—but perhaps only one provider has up-to-date details about them.
Government policy needs to be clear about whether and how the use of the dashboard can measurably reduce the small pots problem, and improve the position of savers whose funds are sitting in legacy products that offer poor value. We should introduce a pensions dashboard as a single public service dashboard overseen and hosted by the new single financial guidance body. It should be a safe viewing place, where an individual can see all the necessary information on their state and other pensions savings.
Although we did not press the amendment to a vote on Second Reading—indeed, depending on the Minister’s response, we may not do so today—we raised this issue because we urge the Government to look at making it a statutory duty, including for pension providers, to engage with the publicly owned dashboard, and thus to ensure that everyone has a complete picture of their pension situation when using it. The data should only be visible one way. Pension providers should not be able to see an individual’s pension dashboard. They must, however, be obliged to provide data towards it. If the direction of travel is in favour of a pensions dashboard—if that is common ground—the issue of what I describe as a duty to co-operate with the new mechanism is of the highest importance. If the dashboard is to be successful, all providers must release their data into it, although there still are some big, significant questions to be answered about governance, implementation and consumer protection —I would be the first to accept that—before the Government can move to compel all providers to provide the data that the industry is calling for.
Within the dashboard, there should be a pension finder service—an engine that sends out messages to search the records of all providers and schemes to see whether there is a match for the customer’s details. The engine would then collect that data to populate the consumer’s front-end viewing space.
The data of millions would be accessible through the dashboard, so I stress again: high standards, tough regulation and sound governance will be required to ensure that there is no abuse of a mechanism that is absolutely crucial to help people plan for the future. There are problems to be overcome, but a dashboard can make pensions guidance more effective. Individuals would have greater knowledge, which would improve the guidance conversation, with less time spent on working out what people have and more on giving the quality guidance that they need.
The direction of travel is common ground. We ask the Minister to brief the Committee on where the Government’s plans have reached, and I will respond accordingly.
Guy Opperman
I am delighted to have the opportunity to update the Committee on the pensions dashboard, which is a project I have very much taken to heart in the seven months I have had this job. I am massively committed to it. I endorse utterly the broad thrust of what the hon. Member for Birmingham, Erdington says. It is a groundbreaking project that will provide the holy grail of access to the variety of pension pots we have, in various shapes and forms, as we get older in life—state pension, private pensions or other types of pensions—on one accessible portal.
However, the proposal to launch the dashboard was taken only in autumn last year. The Department for Work and Pensions is undertaking a feasibility study, which will be finished in March. I propose to report to the House of Commons by written or oral statement before the end of this term. The objective, which is very ambitious, is to launch the dashboard in some shape or form by May 2019.
I resist the amendment on the simple basis that, although it is very possible that the single financial guidance body will ultimately run the dashboard, that simply cannot be said at the present stage. There are a considerable number of complexities with the dashboard: the retention of a huge amount of different types of data, whether from state pension data or private pensions; who has access to that data; who controls it; and whether that is something that should be done by the Government, as ultimately the most trusted provider—regardless of whether one trusts or does not trust any particular Government—or by a relatively independent quango such as the single financial guidance body. There is an issue about what body would take it forward and hold the data, and the extent to which the data is accessible, to whom and in what way. There is a lot of devil in the detail, but the objective is utterly clear.
The amendment seeks to put in the Bill that the single financial guidance body will be in charge of the pensions dashboard and will take it forward. This slightly goes to the earlier point from the hon. Member for Paisley and Renfrewshire South about three months. I would be nervous of saying to the single financial guidance body, which has a big job ahead of it, that it is being set up to merge these organisations, provide all these services, do all of the things we want it to do, and then say, “By the way, on top of that, you have to do the single most complex piece of administration of all aspects of all pensions straightaway within six months of your creation.” In my view, that would be a significant burden on that body at a very early stage. If it was a business, we would be asking, “Why deviate from the core purpose right now?”
It is possible that once the dashboard is up and running, the logical organisation to take it forward and run it would be the single financial guidance body, but I would be reluctant to commit to that in the Bill. I certainly do not want it to take that on right at the very start. I am happy to work with the hon. Member for Birmingham, Erdington and colleagues across the House as we go forward. I do not think there is a single naysayer to the project, but one should not underestimate its size or complexity.
For present purposes, I will resist the three amendments. I am happy to sit down with the hon. Gentleman and other Committee members and explain the issue in more detail, as I did when I appeared before my hon. Friend the Member for Brentwood and Ongar and his colleagues on the Work and Pensions Committee. The Chair of that Committee was very dubious about the likelihood of a dashboard coming into existence. He said that it would not happen during his lifetime, but I robustly assured him that it would. I hope that it will be up and running by May 2019, and that the body will advise it. I therefore respectfully resist the amendments.
Jack Dromey
I agree that this is a groundbreaking proposal. We have believed for some years that a pensions dashboard is essential, and there is common ground across the House that one should be introduced. We will not press the amendment to a vote, but we argue that such a dashboard should be part of the core purpose of the new SFGB.
What the Minister said is helpful. It is right that there is a feasibility study that includes investigation of the complexities, not least because, as I mentioned, on the one hand we want individuals to have access to high-quality advice and guidance, but on the other we have to protect data and ensure that individuals are not put at risk as a consequence of data leaks of one kind or another. I would be the first to recognise the complexity of that, and I welcome the fact that there will be a report in March.
Let me make two concluding points. We strongly believe that the SFGB is the best mechanism, but let us have that discussion at the next stage. I welcome what the Minister said about being prepared to sit down and talk that through at the next stage, including with the industry and stakeholders. All that is already happening, but it needs to be done in respect of the construction and final shape of the dashboard and precisely where it is located. I look forward to those discussions at the next stage and, on that basis, I beg to ask leave to withdraw the amendment.
The Chair
I apologise for not using the plural. The Minister is absolutely right.
Amendment, by leave, withdrawn.
Jack Dromey
I beg to move amendment 27, in clause 3, page 3, line 27, after “develop” insert “deliver”.
This amendment would strengthen the SFGBs strategic function to support and co-ordinate a national strategy to a “develop and deliver” function.
The Chair
With this it will be convenient to discuss the following:
Amendment 29, in clause 3, page 3, line 31, at end insert—
“(d) financial guidance relevant to the modern labour market.”
This amendment creates a duty for the single financial guidance body to develop and co-ordinate a national strategy to improve financial guidance relevant to the modern labour market.
Amendment 39, in clause 3, page 3, line 31, at end insert—
“(d) the uptake of financial advice from the single financial guidance body by members of the public, and
(e) the understanding of pensions amongst those between the ages of 18 and 55.”
This amendment would add improving uptake of financial advice from the single financial guidance body, and improve understanding of pensions amongst people aged 18 to 55 to the requirements under the body’s strategic function.
Jack Dromey
These amendments deal with developing and delivering the function of the SFGB and with the notion of a national strategy to improve financial guidance relevant to the modern labour market.
Amendment 27 would strengthen the SFGB’s strategic function to support and co-ordinate a national strategy to what we call a “develop and deliver” function. We propose that the new body should not only play a part in developing and devising the national strategy for increased financial education and inclusion, but be tasked with delivering that function. As the primary body for advice and guidance on financial services, it will be best placed to deliver a scheme that seems to target a specific area of need—financial illiteracy—for many people in the United Kingdom.
As we have stated from the start, this is a two-topic Bill. The first concerns the establishment of a new arm’s length entity to replace the three existing publicly funded consumer bodies. The SFGB will have a strategic function to support and co-ordinate the development of a national strategy. The Bill’s stated aim, which we support, is to increase financial capability, reduce problem debt and improve public understanding of occupational and personal pensions. Especially given the appointment of a Minister for Financial Inclusion, the SFGB’s strategic function could be strengthened to a “develop and deliver” function, despite the fact that the body may have limited leverage in certain areas.
As stated in the Lords Committee on Financial Exclusion, a real strength of the Money Advice Service is its focus on what works and on gathering together an evidence hub. We do not want to see momentum lost—[Interruption.] I am confident, given Government Members’ reaction, that no one wants to see that work slip through our fingers; that would be a missed opportunity. The Committee concluded that
“it is important for the Government and service providers to continue to develop a greater knowledge of ‘what works’ when seeking to deliver increased financial capability.”
Sadly, there are many recent examples of vulnerable individuals who have been preyed upon by so-called introducers at a time when the state of their pension scheme has been in question—in particular, British Steel workers in Port Talbot and, more recently, Carillion workers. Earlier, I told hon. Members about a shift supervisor breaking down in tears because he made a wrong decision after receiving bad advice, and because 20 others on his shift had followed his bad advice. He said that he would never forgive himself. Introducers—vultures—pounce upon workers at a time when they are unsure about their future financial situation, and persuade them to transfer their pension savings to a different scheme that will lose them money and often attracts high fees. Such examples illustrate the need for a national strategy to improve the financial education available to the British public.
The admirable Michelle Cracknell, chief executive of the Pensions Advisory Service, makes the point that we have the green cross code—I am sure all hon. Members have seen it—to encourage the safe crossing of streets. It is inculcated in people’s minds and has been very effectively promoted. I went through it with my own kids. She says that, likewise—although not perhaps in the same way—we should encourage people to pause, think and get it right, particularly in circumstances of adversity. We should also help people plan for the future. Either way, that “Where do I turn?” is absolutely crucial. The new body will be a welcome step in the right direction, but we need to deliver a dynamic new body that works hard to create awareness.
The amendment would create a duty for the single financial guidance body to develop and co-ordinate a national strategy to improve financial guidance relevant to the modern labour market. Due to the increasingly fragmented and insecure nature of the contemporary labour market, many people are sadly perpetually in a precarious financial situation. I have seen that at first hand time and again in my constituency and in my former role at Unite the union. That group, now commonly known as the precariat, includes self-employed people, workers on zero-hours contracts, part-time workers, workers in the gig economy and those who are conscripted into bogus self-employment. I stress once again that I always draw a distinction between the admirable people—there are many—who want to work on a self-employed basis, and those who are given no alternative, including by employers such as Uber.
Due to the nature of their work and their hours, those people often find it difficult to access basic financial services. It can be hard for them to rent a home, to get a mortgage, to find home or contents insurance, and to access credit. That has contributed to record low levels of disposable income, alongside the longest wage stagnation in 150 years. Figures released last year suggest that the number of self-employed workers in the UK rose by 23% between 2007 and 2017, from 3.8 million to 4.7 million. Many of them are desperately in need of high-quality advice and guidance. What we are seeing is a shift in the nature of the world of work and the way that the British economy is working. The self-employed now represent 15% of the workforce and 91% of businesses. Although that can mean many enjoying greater flexibility and control over their working lives, it can have a negative impact on their access to finance.
A 2017 FCA report showed that consumers with no permanent address or who move regularly, which is often a characteristic of insecure employment, can regularly have problems opening bank accounts and accessing insurance and credit. That is a common situation for many people in the current labour market, particularly young people in metropolitan areas. Due to short-term tenancies and insecure working patterns, many people move on a regular basis. That can leave them open to problems accessing basic financial services and they may need guidance on the best way to go about that. The amendment proposes that the new body would need to devise its strategy and financial guidance taking into account the contemporary labour market and the challenges it delivers.
There is no question but that we have a rapidly changing labour market, with many badly in need of advice and support, as a consequence of patterns of employment. The Government have recognised the need for a focus on the issues about the modern labour market through the Matthew Taylor report. The amendment sits comfortably in the context of the overall scrutiny by the Government and Parliament on how we respond on what is permissible in the future in terms of patterns of employment, and how to, in the here and now, give support to people in insecure employment that time and again they so badly need.
The Chair
Just before I call the Government Whip, let me clarify my previous remarks about amendments being withdrawn. I was a little too eager to agree with the Minister. The question before us then was whether the amendment should be made. We were discussing two other amendments with that, but they were not for decision, so it was singular and not plural—I am just trying to be helpful, Minister.
Ordered, That the debate be now adjourned.—(Amanda Milling.)
Draft Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018
Jack Dromey Excerpts(6 years, 10 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
It is a pleasure to serve under your chairmanship, Mr Wilson.
The regulations are welcome and we support them, but we want to ask some questions. The Minister is right that they represent a continuity of policy. We may have substantial disagreements about pension policy, but the regulations represent a continuity of policy under successive Governments.
The regulations will increase assistance payments for members of the financial assistance scheme who have been disproportionately affected by the cap on the amount of assistance payable to an individual member under the scheme. They will make changes to legislation to increase the current financial assistance scheme cap for those with long service in a single eligible pension scheme.
It is estimated that 290 FAS members will benefit from the introduction of the regulations over the lifetime of the financial assistance scheme. Although that is not many people, it is a significant proportion of the 500 people estimated to be affected by the cap.
On 6 April 2017, provisions for a long service cap were implemented in the Pension Protection Fund, and the regulations introduce a similar long service cap into the financial assistance scheme. The Pension Protection Fund provides compensation for pension scheme members whose employer became insolvent on or after 6 April 2005.
From its commencement, the financial assistance scheme was criticised for providing less generous support than the Pension Protection Fund. However, successive Governments have made significant improvements to the scheme, and that is welcome.
I want to ask some questions that arise out of engagement with stakeholders on the one hand and discussions in the other place on the other. The dialogue around the proposals has been generally constructive.
First, it was announced that from 2016 the financial assistance scheme would be closed to new applications. That decision keeps the scheme open some 10 years longer than was originally planned, but have the Government made any assessment of how many individuals will lose out as a result and how much the Government will save? Failure to access the scheme may be laid at the door of trustees or scheme administrators, but any loss will be suffered by members. Is that fair? Will failure to seek access to the scheme cause any restriction to access to social security benefits?
Another issue that arises is whether the regulations should define pensionable service. Such a definition would help to avoid confusion in cases in which service is under another scheme and is to be disallowed. The Government say that they are content to rely on information from trustees about pensionable service, based on the definition contained in individual scheme rules. However, one bugbear of the scheme, at least initially, was the poor quality of data held by various schemes. What is the current situation in that regard? What confidence is there across the board that scheme data are now more robust? In how many cases and on what points has the scheme manager had to issue guidance to individual schemes?
We note that no impact assessment has been offered for the regulations, although reference is made to the impact assessment for the Pensions Act 2014. Will the Minister tell us why no such assessment has been prepared, particularly given that after asset transfers and recovery, the scheme’s net costs are met by the public purse? Since the regulations will apply to Wales as well as to the rest of Britain, may I ask whether they have any relevance to the controversial issue of steelworkers at the Tata-owned Port Talbot works?
Financial Guidance and Claims Bill [Lords]
Jack Dromey ExcerptsMonday 22nd January 2018
(6 years, 11 months ago)
Commons ChamberRead Full debate Financial Guidance and Claims Act 2018 View all Financial Guidance and Claims Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 70-I Marshalled list for Third Reading (PDF, 106KB) - (20 Nov 2017)
Jack Dromey (Birmingham, Erdington) (Lab)
A heavy duty falls on us in Parliament to ensure the security, dignity and financial wellbeing of the British people. On the one hand, we must help our citizens to realise opportunity, particularly with wise advice about planning for their retirement. On the other hand, we must avoid our citizens being taken advantage of in adversity. It is therefore key that we provide the ability to access high-quality advice that can be counted on, and that our citizens are not ripped off in the process. The hon. Member for South Thanet (Craig Mackinlay) was right when he said that it is also key that people know exactly where to turn, particularly in circumstances of adversity. My hon. Friend the Member for Makerfield (Yvonne Fovargue) was right when she said that it is crucial that advice is intelligible and accessible.
Sadly, history is littered with scandals and scams, including PPI and the all too often outrageous behaviour of claims management companies. Think of Carillion and the shameful scams, with the vultures—the introducers —who, on the backs of workers facing disaster, whether at Port Talbot or Carillion, move in and seek to take advantage of their vulnerability. Sometimes, extraordinary losses of up to £200,000 are incurred. For all my history I have fought for working people to be able to enjoy advice that they can count on. I brought together the group that formed the second community law centre in Britain a generation ago.
Earlier today, we had the urgent question on private sector pensions, and the Government were rightly held to account for their lamentable failure and the failure of governance in respect of Carillion. However, it would be absolutely churlish of me not to reflect on the fact that this is a welcome Bill, establishing the single financial guidance body and also the more effective regulation of claims management companies, including regulation under the auspices of the FCA. I was intrigued by the notion proposed by the hon. Member for Bromley and Chislehurst (Robert Neill) of fit and proper tests being applied to those who work for claims management companies—a powerful argument that we might return to in Committee.
It is a welcome Bill, which was strengthened in the Lords —particularly by Lord Sharkey and Baroness Drake—and informed by the Select Committee on Financial Inclusion and its deliberations. I must say that the Minister has been in genuine listening mode. He has a personal history of financial inclusion, including in his own constituency with the establishment of the Tynedale Community Bank. We support this important Bill, but we will seek to strengthen it further and to inject in it a sense of urgency.
May I turn now to some individual measures in the Bill? On the issue of funding more generally, the Government’s impact assessment says that a high proportion of people need help but are not currently getting it. One in five of those in debt receive advice. The Bill aims to bring together the pre-existing three bodies under one roof to give better and more efficient advice. However, if the Government are looking to make a financial saving, that would be wrong. There is growing demand for good financial guidance, and the Government should be looking to increase funding in that area, not to decrease it.
The new body must be adequately funded to fulfil the multiple roles that it will be tasked with carrying out. There were some very powerful contributions during the debate. We heard about the importance of effectiveness from the hon. Member for Chippenham (Michelle Donelan) and about the importance of high-quality advice, particularly for working people in dire straits, from my hon. Friend the Member for Bristol North West (Darren Jones). I will return to that point later.
I have these questions for the Minister. Does the Government expect to make savings from the merger, and, if they do, how much? Have the Government considered what resources the new body will need to identify and to support those who do not currently access advice or guidance? If the body is a success, there will be many more who will want to access it. How will the Government guarantee the adequate resources to ensure greater uptake of services?
Let me turn now to cold calling. The Government committed to banning cold calling in their 2017 manifesto and we did, too. Cold calling preys on some of the weakest in society, and particularly the elderly. I am not sure whether I was completely convinced by the argument of the hon. Member for Walsall North (Eddie Hughes) that, somehow, it is axiomatic that poor people are more likely to find it difficult to manage their finances. Actually, very substantially, my experience is the reverse.
There are 2.6 million cold calls made every month in the UK. What they do is put at risk those who are the recipients of those calls. The hon. Member for Croydon South (Chris Philp) was absolutely right when he pointed to the evidence from the Association of British Travel Agents. He said that, effectively, what was happening was that the public were being encouraged to commit a crime by reporting bogus illnesses, and he also mentioned the driving up of the cost of holidays. The Government have stated that they wish to ban cold calling, specifically calls and texts on pensions. The Bill is the perfect opportunity to put that into practice.
A prime example of the vulture-like nature of these companies has come in the tragic case of the collapse of Carillion. Those people who may have just lost their jobs and are unsure of how they will cope financially are being preyed on by those wishing to trick them into transferring their pension immediately, usually charging extortionate transfer fees. A similar practice was carried out after the massive redundancies at the steelworks in Port Talbot.
More generally, the evidence from Citizens Advice is powerful. Some 10.9 million consumers have received unsolicited contact about their pensions since 2015. It found that almost nine in 10 had difficulty in identifying the scams, not least because the scams are clever and constantly evolving. It rightly argued that a ban on pension cold calling is a crucial part of the consumer protection framework, which should help to reduce the disgraceful targeting of consumers
The Government must seek to put in place a ban on cold calling as soon as possible. They indicated in the other place that they would bring forward an amendment or new clause to introduce such a ban, and that it would not be linked to the establishment of the new body. Will the Minister do so, and, assuming that he does, what will it cover? Will he also listen to the powerful contributions in this debate from the hon. Members for Croydon South and for Gloucester (Richard Graham) and bring forward new provisions at Committee stage to put in place, in their words, an immediate ban on cold calling and to introduce default guidance to assist people accessing or seeking to transfer their pension assets?
Let me turn briefly to the self-employed. In its current guise, the SFGB will provide advice for the self-employed only on their personal finances and debts, not their business finances or debts. The Money Advice Trust, which helped more than 38,000 people last year, said that for many self-employed people there is simply no distinction between their personal and business finances. As the shadow Secretary of State said, to exclude business finances and debts from the SFGB’s remit is a missed opportunity, particularly given the significant growth in self-employment in recent years. Will the Government respond to the arguments that have been put, including by the National Federation of the Self-Employed and Small Businesses?
We heard a number of powerful contributions on default guidance during the debate. This is a key pillar of the Bill and moves to improve financial awareness for those looking to undertake transactions. Anyone wishing to transfer a pension must be automatically provided with financial guidance by a qualified independent expert. That should be given by default, and anyone not wishing to receive that guidance should have to sign a form stating specifically that they do not want to be given it. That would avoid the process whereby people are given the minimum amount of information possible to try to force them into transferring their pension. This would be of use to many workers who were let go by Carillion last week and who may be faced with the choice of transferring their pension, but who should, by default, have access to independent financial guidance to help them to make their decision.
What consideration has the Minister given to removing the exemption of “introducers” from the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 —a specific point on top of that to which I have already referred? A default guidance scheme guidance would be very helpful, but what else has he given consideration to on that front, and what consideration has he given to allowing the FCA to keep the financial penalties that it receives so that it can increase its enforcement work?
On the breathing space scheme, there is cross-party support, including from the other place. This is about granting a freeze on interest charges, fees and enforcement action for six weeks so that a person can receive guidance on the next steps that they can take to relieve the debt burden. UK household debt in 2017—I know that this was an issue of some contention during the debate, but the facts speak for themselves—reached £l,630 billion. Consumer credit has increased 17% since 2012, and UK household debt is now 140% of UK household disposable income. That is why it is all the more necessary now, with the sheer scale of the pressures being generated—this was very powerfully described by the hon. Member for Chippenham when she talked about the agony that is debt—that the Government, having committed to this in the past, act now at the next stages. The commitment is in the Bill, but the timescale for implementation is too slow. It is vital that the Government get it right and act quickly to have this measure in place as soon as possible. This is a vital change to lift the burden of debt from millions of people across the country, including those who may be suffering from mental health problems as a consequence. Therefore the Government need to act as quickly as possible.
As the shadow Secretary of State has made clear, we support the introduction of universal credit on its premise of simplifying the benefits system. However, a number of reports have shown that, in its current guise, it leads to increased personal debt, including rent arrears. Has the Minister considered the impact of universal credit on personal debt and the implications for resourcing the new body?
The Bill gives the FCA the power to cap fees for claims management companies when dealing with PPI claims. However, the proposed cap would limit the average fee to only £340 plus VAT, which is not much different from the current cap. The Government could ensure that firms that are at fault for PPI claims are charged the fee and that the consumer receives 100% of their compensation. Why are the Government not also prepared to act on the mis-selling of packaged bank accounts—bank accounts that charge a fee and are sold with added benefits—many of which were mis-sold over the past 15 years without sufficient information? Why have the Government not introduced a provision to cap fees for these claims in the Bill? The justification given thus far is unsatisfactory.
On the duty of care, I do not want to add in any detail to the powerful contributions made by the hon. Members for Mid Derbyshire (Mrs Latham), for North Ayrshire and Arran (Patricia Gibson) and for Gloucester. We have received a number of constituency letters about the amendment proposed by Macmillan. The Lords Financial Exclusion Committee has advised that the Bill should include a provision requiring the FCA to make rules setting out a reasonable duty of care for financial services providers. The evidence given is powerful, particularly from Macmillan, as four out of five people with cancer are affected financially by their diagnosis, as a result of increased costs and loss of income. The Government and the FCA have said that they must wait until after the UK’s withdrawal from the EU becomes clear. However, our strong view is that this issue should not wait any longer. I urge the Minister to consider it carefully and bring forward suitable proposals in Committee.
Financial inclusion is absolutely critical. Will the Secretary of State use this opportunity to address the scourge of financial exclusion in our society, including the proposal from the hon. Member for Eastbourne (Stephen Lloyd) that this should now be set out in statute? The pensions dashboard is a welcome proposal, but will the Secretary of State bring forward legislation to ensure that pension providers liaise with the scheme and give all savers a clearer picture of their savings?
In conclusion, there is a heavy duty on parliamentarians to ensure the security, dignity and financial wellbeing of our citizens, and that is all the more important in these tough times, seen at their most dramatic with the collapse of Carillion. There is substantial consensus on the Bill—we have adopted a constructive approach towards it—but it needs to be better and stronger and to act with greater urgency in the next stages.
Universal Credit Roll-out
Jack Dromey Excerpts(7 years, 2 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
Disaster looms for tens of thousands of Birmingham citizens, with universal credit being rolled out less than a fortnight before Christmas, on 13 December. MPs’ offices are being besieged by worried claimants, including people who have suffered previous changes introduced by the Government, and the Government seem to be oblivious to the pain they are causing. All too often over the years they have shamefully demonised claimants, and they blunder ahead learning nothing from the mistakes of the past, even on universal credit where there is agreement in principle but the Government seem determined to get it wrong in practice.
On the issue of demonising, I must tell the story of Angela, who came to my constituency office and wept for 45 minutes as she poured out the fact that she had left school at 16, trained to be a nurse, met her husband in the NHS, and they then got married, bought their own home, and had three kids, but, sadly, two of them were disabled, with Scottey, the eldest, being severely disabled. She told about how she was feeding Scottey on one occasion, and then she saw on the television, as she said, Mr Osborne’s speech about shirkers and strivers. Three weeks later a whispering campaign started against her in Kingstanding, with two neighbours in particular saying “Why has she got a car on benefits and we haven’t?” She described what this ultimately culminated in: “Jack, you know what kids are like; they listen to their parents.” Twice in three weeks, when she was out in the streets with Scottey in his motorised wheelchair, local youths threw stones at him.
I thought to myself then, and I think to myself today: do the Government not begin to understand the pain that they have caused over the years—in the changes from disability living allowance to personal independence payments, for example? The impact studies showed that 0.5% of the claims were fraudulent and 99.5% were not. Nevertheless, the Government went ahead with the change, which had catastrophic consequences for people such as Fiona in my constituency, who fought for her life and tried to keep working but ultimately got her PIP two weeks before she died of breast cancer, and Zak, who was in a wheelchair and was assessed and reassessed from three months old. He finally got his PIP two years ago on 17 July; he died on 3 August.
Do the Government not recognise the problems on this and so many other fronts, including for those suffering from motor neurone disease who are desperate to secure lifetime awards rather than being constantly reassessed? I heard a very moving contribution at a recent event here in the House of Commons from a man who said:
“I’m going to die. For God’s sake, why do you keep reassessing me?”
Then we have the Tory Workers Union attacking people like us who are raising issues like this today. It has said to me:
“Most people are not on UC but have jobs and want their MP to show some sort of encouragement”.
Actually, many of them do have jobs. We will never cross the road on the opposite side. We will support the working poor, the poor and the vulnerable. Labour founded the welfare state and we believe in a Britain that looks after the poor, the working poor, the disabled and the vulnerable.
Martin Whitfield (East Lothian) (Lab)
My hon. Friend talks about workers who are claiming universal credit. Studies in East Lothian have shown that 18% of those people who are working saw no change in their income, that 18% saw an average increase of £18.31, and that 45% of people in work saw a fall in their income of £39.99 a week.
Jack Dromey
My hon. Friend is describing real-life experiences in our constituencies and bringing home the facts that the Government seem oblivious to. I sometimes question what planet the Government are living on.
We are determined that we will get this right, and that is why, unashamedly led by our shadow Secretary of State, we have been fighting to achieve precisely that. I stress again that there is agreement across the House on the principle of universal credit, but unless the Government get it right, the pain will continue and be magnified for hundreds of thousands of people in the next stages. I say to Ministers specifically in relation to Birmingham: please do not press ahead with the introduction of universal credit on 13 December. Come and listen to some of the heartbreaking cases. We have had people in tears in our constituency offices asking, “What are we going to do over Christmas?” Come and listen to the landlords who say that they are never again going to let to tenants on universal credit. Hear at first hand the real-life experience of the consequences of your actions. Have you no heart? Pause universal credit and then get it right.
Universal Credit Roll-out
Jack Dromey Excerpts(7 years, 2 months ago)
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Jack Dromey (Birmingham, Erdington) (Lab)
On this side of the Chamber, we live in the real world of our constituents. People suffering from motor neurone disease came to see us in Westminster yesterday to say that on top of the agony of their disease, they faced the indignity of fighting for their full entitlement under PIP. Today a landlord came to see me in my office, saying that he will never again let to tenants on universal credit, and a single mum told me that she is desperate because, with roll-out just before Christmas, she and thousands of others face a bleak Christmas. Does the Secretary of State begin to understand—
Mr Speaker
Order! I am sorry to have to shout, but the hon. Gentleman, though he speaks with great force and eloquence, took too long. We must have shorter interventions, as it is not fair on others.