Queen’s Speech

Lord German Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord German (LD)]

My Lords, before I address the remarks made by the noble Lord, Lord O’Neill, in his excellent opening speech, I should like to add a supporting measure to the comments on tourism made by the noble Baroness, Lady Liddell. As a Minister for economic affairs in Wales with responsibility for tourism, I resisted every attempt to push that portfolio into the culture and sport portfolio. The main reason for that was that tourism is an economic driver and contributes 7% of GDP in Wales. A huge amount of its growth is possible through tourism and it was important to maintain it as an economic driver.

I wish to address my remarks to the comments made by the noble Lord, Lord O’Neill, and many other noble Lords about the productivity issue, particularly the need to see it as one of the principal inhibitors of growth in our economy. I shall focus on one factor on the issue of increasing productivity, and that is in-work progression—helping people to progress within work both financially and in self-esteem. I wish to link these remarks to the full employment and welfare benefits Bill and to address some of the wider implications of that Bill. As the Bill has both the words “employment” and “welfare benefits” in its title, and as it spans the responsibilities of BIS and the DWP, I apologise if I stray across the subject areas scheduled for debate both yesterday and today.

The elephant in the room facing Treasury Ministers is the proposed £12 billion cuts in the welfare bill. I shall not venture into the landscape of where the Government are going to make those savings—after all, all efforts to find the answer to that question failed during the general election, as they did in this House yesterday—but the Prime Minister’s announcement a few days ago that child benefit and child tax credits will not be touched leaves the only credible answer to the question of where the cuts are to come as housing benefit and disability benefit. In themselves, these cuts will work to the detriment, with job-related impacts, in particular relating to in-work progression.

These issues are closely linked to the real progress that we can make on ensuring employment opportunities for our country. The challenge for the Government will be not only to get people into jobs but to ensure that they can have in-work progression in the number of hours of work they are offered and in their rate of pay. The full employment and welfare benefits Bill presumes that the savings in the welfare benefits element will go in part or in full to pay for the promises in the full employment element. The Treasury question to be asked at the outset is whether the envisaged cuts in welfare are savings to contribute to deficit reduction or savings to be reallocated to other areas of government.

The information we have so far on the Bill is that the savings from the welfare element are specifically to fund new apprenticeships and to increase support for the troubled families initiative. The IFS’s analysis of the matter is that that would account for £130 million a year to put to those issues. Is the £12 billion still a separate amount? I would value an answer to that question from a Treasury Minister.

The Government’s Bill is about a series of sticks and carrots, incentives and sanctions, to meet their policy objectives but there appear to be more sticks than carrots. The policy of providing more opportunities for jobs is laudable, but it requires an appropriate mix of incentives and sanctions. There is no doubt that the previous Government achieved a great deal in sourcing jobs and getting people into work, but the challenge now is not only getting people through the doorway into work but ensuring that they have an income which permits them not to fall back on to state benefits.

The current statistics are stark. The noble Baroness, Lady Drake, mentioned £30 billion of tax credits and, according to the House of Commons Library, over £5 billion last year was paid out in housing benefit alone to people in work. The figures and the numbers are growing and this is a recurring feature of universal credit as it is rolled out. I agree that work remains the best route out of poverty and that is why universal credit is so important. Its successful implementation will mean a route into meaningful employment.

However, there are potential incentives the Government can provide to assist working households to increase their earnings. That might mean through a continuation of the Access to Work programme of support to get people into work and to help them to get the skills and self-esteem that they need to progress within work.

As to the sector facing the most difficulties in accessing a job—those with disabilities—yesterday in your Lordships’ House the noble Baroness, Lady Campbell, told us that 52% of working-age people with a disability are out of work and that many wish to work. There are some incredible examples of where people with a disability have found work and are contributing fully to the economic life of our country. However, for many there is a need for support. The Access to Work programme paints disability with a single brush and the Government intend to make this worse by trying to get more users out of the same amount of money.

Each person with a disability has different needs. For a deaf person it could be the provision of sign language; for a wheelchair user it could mean physical adaptations, including widening doors and putting in ramps. The Government’s ambition is to halve the disability employment gap. Does that mean that the Government’s target is that 25% or less of people with disabilities will be unemployed? More importantly, what is their target? Is it to increase the rate of employment among people with disabilities from 48% to 75%? That is a big challenge.

The big challenge of improving productivity is closely linked to these elements of work progression. The dramatic cuts which are threatened to in-work benefits will have a major impact not only on helping people into work but on enabling them to progress in employment and creating that sustainable productive economy which is the wish of all Members of this House.

Credit Unions

Lord German Excerpts

Tuesday 3rd February 2015 Lords Chamber

[Lord Newby]

My Lords, there is scope to look at a whole raft of new initiatives, to make sure that there is access to finance for people on more modest incomes. One development in recent weeks has been agreement with the banks on fee-free basic bank accounts, which will be a good improvement for many people who are currently denied even the most basic bank accounts.

[Lord German (LD)]

My Lords, the Credit Union Expansion Project was designed to enable people on lower incomes to have access to modern banking methods. One of the problems for people in this category is that they have not been able to get cheaper electricity and gas bills because they have been unable to pay by direct debit. Can my noble friend say what progress has been made by both credit unions and the Post Office card account to enable people to access those cheaper bills through the direct debit mechanism?

[Lord Newby]

As my noble friend says, this is a very important issue for people on low incomes. A number of the largest credit unions already offer current accounts that have a direct debit facility. However, they are still a small minority. This is an area where the Credit Union Expansion Project is very important, as it will allow more of them to offer such services.

More generally, the Government’s announcement in December about basic bank accounts means that people who open such accounts will have access to a range of normal personal current account facilities, including direct debits.

Pension Schemes Bill

Lord German Excerpts

Tuesday 27th January 2015 Lords Chamber

[Lord German (LD)]

My Lords, before I listen to answers from the Benches opposite, I shall ask the Minister a few questions. If he feels that it is not appropriate for him to reply, perhaps members of the Labour Front Bench might give me the answers.

My understanding is that the number of schemes without trustees—those referred to in this amendment—is of the order of 40,000 to 47,000. I have no problem with independent trustees or trust-based pension schemes: my question is about the scale of the impact of this amendment. If 46,000 or 47,000 schemes—if that is the number of schemes required by this amendment to set up boards of independent trustees—are required to find trustees, there would, first, be a drag on finding that number of suitably-qualified people to fulfil those roles. I wonder where such people might be found.

Secondly, is there a cost to such a change? Changing these schemes is bound to cost them money. Given that the Government have put in place the 0.75 per cent cap, which means that more than 99 pence in the pound of every pension contribution goes towards the benefit—the pension that comes out at the other end—is there any way that that cost would have to fall on the member benefits? In other words, would the need to pay the costs of so many changes to a large number of schemes reduce people’s pensions?

My final question relates to the role of the independent governance committees that are set up. My understanding —perhaps my noble friend could confirm it—is that these committees were set up as a result of the report of the Office of Fair Trading and are a government response to that request. If that is so, perhaps my noble friend could tell me what the role and responsibilities of the IGCs are which can be fulfilled, and which would perhaps fill the trustee role in the schemes where there is no trust-based system as required by this amendment?

--- Later in debate ---

[Lord Bradley]

I am very grateful to the Minister for that reply. I thank my noble friends Lady Drake and Lord Hutton, and the noble Baroness, Lady Greengross, for their support for this amendment.

The Minister responded well to the three questions I raised. While I accept that he is not a betting man, I also accept that his assurances that the board will approve these proposals, that they are not temporary, and that the DWP will bring in a similar, parallel policy for trust-based schemes are all welcome and reassuring to the House. I believe that this is a real victory for all those who have campaigned, both inside this House and outside Parliament, for a second line of defence to give added protection to people making decisions about the pension pots and retirement income. As we said, that is perhaps the most important financial decision they will make in their lives.

[Lord German]

I also support the letter from the FCA. It is very welcome. The bottom of the first page of the letter says, in absolute terms, that,

“the FCA has also decided to bring the ABI retirement code into our rules”.

Would the noble Lord agree that that is very welcome, given that the ABI retirement code lays out in great detail the journey through which the customer will travel? The letter makes it very clear that that will happen.

[Lord Bradley]

I am grateful to the noble Lord, Lord German. That is in the letter and, as I said, we welcome its contents. It reinforces the points that we made about the second line of defence and the future adequacy of that provision. That is clearly welcome.

In conclusion, we will closely monitor the way that the policy and the implementation fall, to ensure that consumer rights are properly protected in the way that everyone in this House expects. With that, I beg to ask leave of the House to withdraw the amendment.

Pension Schemes Bill

Lord German Excerpts

Tuesday 27th January 2015 Lords Chamber

[Lord McAvoy (Lab)]

My Lords, Amendment 10 would ensure that the fiduciary duty of pension scheme trustees should include a duty to consider whether the scheme had sufficient scale to deliver good value for members. It is the same amendment that we proposed in Committee but, having reflected on the Minister’s answers, we believe that this is so important an issue that we want to return to it.

The Minister said in Committee that,

“although … the market is driving things in the direction of scale, it is the case that managers and trustees should be considering this as part of their duties”.—[Official Report, 7/1/15; col. 393.]

He also said that the framework was already there to enable mergers and scaling up, and indeed they are happening. However, it is crucial to us on this side of the House, whether the issue is governance and transparency or the way in which duties are imposed on trustees, that we should always be looking to get best value and protect the interests of the public throughout this process. Strengthening the arm of the Pensions Regulator will help to achieve that scale.

It is our view—and that of the Pensions Regulator, which was set out in evidence—that there has to be a scaling up of the UK pensions industry. At the moment there are far too many schemes, and we want a process in place to try to reduce that and build up scale. Our proposed new clause would not by any means reduce the number to a handful, but would give powers to trustees and the regulator to promote scale. It would be a sensible addition to the powers of trustees and the regulator. Given the widespread consensus in the pension industry that scaling up will have to happen, and that in doing so costs would be reduced and there would be a better outcome for savers, I hope and believe that the Government will wish to support the amendment. I beg to move.

[Lord German (LD)]

My Lords, once again I have a few questions for the movers of the amendment as well as the Minister. The sense that I get from the amendment is that bigger is always best and small is not to be preferred. The truth, presumably, lies somewhere in the middle of all that.

There are questions that arise from the amendment. When you have schemes—I presume there are many tens of thousands of them are around, but I do not know how many of them are of the size and scale interpreted by the amendment—it is important to ask what defines sufficient scale, which is the first part of the noble Lord’s amendment. I would like to understand what “sufficient” means. I presume that noble Lords would want to see all pension schemes with good governance, low fees and good outcomes for their members.

So my first question is: what is it that big schemes can provide that smaller ones cannot? I understand from reading Hansard from the other place that one of the suggestions from the movers of this amendment there was that asset management could be moved in-house. I wonder whether that is a sensible provision. Can the Minister tell us whether or not there have been successes with in-house asset management? Is that a given for securing lower costs and a better outcome for the consumer?

I turn to the other pressure that the amendment seeks to apply. The claim is that by forcing schemes to merge, there will be economies of scale. In the capping regime that the Government have undertaken, there must be a league table of high-cost fee pension schemes. Can the Minister say how many bigger and how many smaller providers are in that league table? This will enable us to discover whether or not big is best and whether there are appropriate economies of scale.

I need to test another issue with the movers of this amendment: namely, merging. Merging with whom and how is it to be determined? What the amendment seeks to do is to force pension schemes to merge. I understand that there has already been a significant shift in the number of schemes that have merged; the extent of the direction of travel is extensive. Perhaps the Minister could remind us of the speed with which schemes are merging and growing bigger. But if you force mergers, as with any arranged marriage you need to engage in a partner search. I wonder whether the movers of the amendment can tell us how this partner search is going to take place; who is going to undertake it and who is going to police it—because I think that would be almost impossible.

I remain to be convinced that forcing unwilling, low-cost, good value for money, well governed, smaller pension schemes to merge is the right approach to ensure that the members of the scheme get the best returns. There are alternatives. The fee cap, disclosure, regulation of governance and transparency are all issues that this Government have taken on board and are progressing. I am left with some doubts about whether the forced marriage regime which is being proposed by the noble Lords opposite is the best approach when there are better alternatives.

[Lord Bourne of Aberystwyth]

My Lords, I thank the noble Lord, Lord McAvoy, for moving this amendment. It would impose an additional duty on trustees of pension schemes to consider whether the scheme is of a scale to deliver good value to members and, if not, to consider a merger with another scheme.

The principle of promoting scale to drive value for money for scheme members is one that we can all understand. However, the Government believe that introducing further legislation to ensure that the fiduciary duty of trustees includes a duty to consider whether a scheme has sufficient scale is unnecessary and overburdensome.

In response to my noble friend Lord German, I can confirm that there is already a trend towards larger schemes and away from smaller schemes. We contend that trustees’ existing fiduciary duties already require them to act in their members’ best interests, so it would be unusual if they did not consider this point. In addition, trustees must pay particular attention to four key areas. First, they must comply with governance requirements—for example, they must establish and operate internal controls. Secondly, they must have regard to investment governance and decision-making. Thirdly, they must adhere to administration practices—for example, record-keeping. Lastly, they should seek to prevent fraud—for example, theft or pension scams. Specific legislation would place the financial cost of managing a difficult and complex forced consolidation on members. In many cases it would be in direct conflict with scheme rules which may not permit such transfers and mergers.

A further difficulty with this amendment is the complicated underlying process that trustees would be required to undertake to implement its requirements. The noble Baroness, Lady Drake, put her finger on this in Committee when she said that problems could arise around transfers. Trustees would, for example, be required to find a suitable alternative scheme, assess the scheme’s suitability and undertake independent checks. Again, the costs of that would be borne by members; it could be a costly process if they were required to do that in the way this amendment suggests.

Pension Schemes Bill

Lord German Excerpts

Monday 12th January 2015 Lords Chamber

[Lord Newby]

It is difficult to give a precise answer to the noble Lord’s first question, about maturity. The Treasury is, for good or ill, going to keep its mitts on this process until we are very satisfied that it is working well and is seen to be in a stable and successful state.

As for the single session, noble Lords will be aware that people will be able to access the service either online, on the phone or in person. The hope is that by giving people all the financial information that they require, by encouraging them, in the case of pension providers, and by explaining to people, before they turn up to their session, the kind of information that we are looking for, it will be possible to give adequate guidance in one session. We accept that that will not be enough for some people; they will have forgotten something or a thought will occur to them once they have left. We hope that of those cases, which we hope will be a small minority, a majority will be able to get an adequate response to a specific query by going to the website.

We accept, however, that for some people that will not be the case, and that in a minority of cases some people will need to go back, either to make a subsequent phone call or to have a subsequent meeting. However, we are working very hard to minimise that necessity—because, obviously, getting things right first time will be in everyone’s interest.

[Lord German (LD)]

My Lords, perhaps I could follow the point that my noble friend and the noble Lord opposite have just raised in respect of the same document. Box 2.A on FCA standards requires the people delivering the service to have a range of skills, which are numbered i to viii. I shall refer to a report last week in a newspaper that prints on pink paper, in which it was trying to seek from Citizens Advice and the Pensions Advisory Service the qualities of the people that they would employ. The report in the Financial Times that I am quoting from says:

“Citizens Advice said details of where the”,

agents and case workers,

“would be deployed throughout its … bureaux … were still being finalised. However, it conceded that consumers could be required to make a further appointment if their questions could not be answered during their … guidance sessions”.

That raises two separate issues: one is the quality and skills of the people who are delivering the guidance service, and the other is whether Citizens Advice is on side with the idea of delivering it in one go. The comment seems to suggest that its people may not have answers to the questions that are being raised by those people seeking guidance in their first interview. I wonder whether the range of flexibility on the two is at all appropriate.

[Lord Newby]

My Lords, we are keen to make sure that by the time people have been through the guidance process, they are able to make the best decisions for themselves. As I say, we hope that that will be possible in the vast bulk of cases first time around.

I think that what will happen in giving guidance in this area, as happens elsewhere, is that there will be a number of very special cases, but the vast bulk of people will have the same issues as others. The CAB, which after all has to give advice on the whole benefits system, which if anything is even more complicated than the pensions system, has a proven track record of developing the skills of people, and is very good at this—while this is, of course, what the Pensions Advisory Service does.

So we are confident that there are going to be well qualified people. We are building flexibility into the system—partly by having three ways of accessing it and partly, as I say, by, in exceptional circumstances or in a minority of circumstances, allowing people to go back—and we hope we are going to make sure that at the end of the day people will all have the degree of guidance that they need, relevant to their needs, to enable them to make well informed decisions.

Pension Schemes Bill

Lord German Excerpts

Monday 12th January 2015 Lords Chamber

[Lord German (LD)]

My Lords, I rise to support the remarks of the noble Lord, Lord Best. In doing so, I declare my interest as an unremunerated member of the advisory committee for the Equity Release Council. I am, I hope, still in extended middle age, which is a new term that I fully endorse.

Housing wealth, along with other assets, means that the guidance is crucial given the disparity between the amount that people tend to have in a DC pot and their housing wealth, which on average is more than 10 times as much. That is a considerable amount of money or resource which people will need to take into account. The FCA standards, which were helpfully published this morning by the Treasury, state that:

“In terms of content, the standards require that the guidance session must … request information about the consumer’s financial and personal circumstances that is relevant to their retirement options”.

That requires the adviser who is going to take people through the guidance session to ask them for information about their housing wealth, but it is not explicit in the standards, and while we know that they are nearly finalised, there is time for the Treasury to make them more transparent about what is required. Because of the relationship between the two amounts of money, the instruction ought to be clarified, perhaps not in the document but in the training so that it is always an issue which people take on board. Will the Minister indicate whether the sentence in the FCA standards set out in the document produced this morning by the Treasury implies that housing wealth, savings and investments will be taken into account? Will he consider making it more explicit in the information that is provided to the consumer and to those providing the guidance?

[Baroness Hollis of Heigham]

My Lords, I would like to ask the Minister a question which is triggered by the important issues raised by the noble Baroness, Lady Greengross, and the noble Lord, Lord Best. However, I want to look at it from the other way round, which is the situation of someone who is 55, is on housing benefit, and has £20,000 locked away in a small pension pot. At the moment, if you have capital of more than £16,000 and you are pre-retirement, that is an absolute block to any further income-related benefits. Different rules apply when you come to retirement. The assumption throughout is that you can access your pension only at the point of retirement, when different rules apply. What will happen now? Can the Minister help us on this? The rules are that if you have capital that you could get at if you applied for it, you are treated as having that capital. While it was tucked away in a pension and not accessible until you reached 60 or 65, you could not have access to it and so it did not affect your entitlement. But in future you will be able to access your capital in such a way that, under the Housing Benefit Regulations 2006, Regulation 49(2), because you can access your capital, you are treated as though you have that capital, which would therefore automatically cut you off at £16,000—you have £20,000 in your pot —from any access to housing benefit. Can the Minister clarify how this will work in the future?

Pension Schemes Bill

Lord German Excerpts

Tuesday 16th December 2014 Lords Chamber

[Lord German (LD)]

My Lords, I, too, join in the tributes to the noble Lord, Lord Jenkin, and associate the Liberal Democrat Benches with the good wishes that have been passed on to him so far. We look forward to his speech. Perhaps the House will afford me a moment for a small personal recollection. I know that the noble Lord, Lord Jenkin, has the words “love of music” stamped throughout him. One of the assurances that you can have about music is that you can continue to enjoy it no matter what age you are, from the youngest to the oldest. I wish him every success in his retirement, and hope that he will be able to join us, as he always has done, at future musical occasions of this Parliament, and enjoy with us once more those wonderful occasions. We all look forward to his speech later on in this debate.

This suite of Bills adds to the most comprehensive range of changes which we have seen to state and private pensions in a generation. Set against the backdrop of auto-enrolment—with the number of new savers reaching beyond 5 million and rising; the new single-tier state pension; establishing the link between pension age and life expectancy; and abolition of the retirement age altogether—I think it is safe to say that this Parliament has seen an unprecedented period of major pension change. In fact, I would venture to say that it has been a revolution, a quiet one, which has at last seen the coming together of major pension reforms.

I recognise that many noble Lords in all parts of this House, some present here today, have played a key role in ensuring that we have got to the place we are debating today. However, I pay tribute to my right honourable friend Steve Webb for the part that he has played in bringing these reforms to fruition. He is deserving of great praise, and it undoubtedly says something about his skills, as I understand that he is now the longest-serving Pensions Minister for many decades.

The Pension Schemes Bill follows two consultations, in November 2012 and November 2013. It will extend to three the present two-pronged approach to pension provision, defined contribution and defined benefit schemes. However, with the decline of defined benefit schemes, increasingly, as of now, for many people, the only realistic option available is a defined contribution scheme. The defined ambition option provided by this Bill provides a new alternative, one which allows people to act collectively, sharing risk, and smoothing out fluctuations, reducing volatility for the customer.

Sharing investment risks and longer-life risks has the potential to act against the interests of a consumer when operating as a solo investor. This measure will mean a reduction in the ups and downs of investment. The Bill therefore offers a third route, one which can provide more certainty and stability. I note that the Government do not claim that it will produce a better financial outcome, although some have claimed that it will—but it will provide stability. This new approach will also allow people to leave money within the scheme if they wish, even after entering the decumulation phase, so they can continue to see all, or part, of their pensionable savings invested.

As always, we look for parallel experiences in other countries, and my noble friend the Minister mentioned two in his introduction. However, each has conditions that render them unique, and it is not wise to try to lift the experience of others in a wholesale manner into the United Kingdom. For example, I anticipate that we will have a detailed discussion of the intergenerational nature of the new defined ambition pension. However, one benefit that your Lordships may wish to ensure as the norm in this measure is that joint action should lead to a spreading of windfalls and setbacks over time, so that fluctuations can be avoided. It is possible to mitigate changes in current market rates to reduce volatility and maintain stability within a collective pension scheme. The effect that this has on a defined cohort of pension recipients, by laying off the risk through smoothing over present and future generations, is one that this House will undoubtedly debate in detail at future stages of the Pension Schemes Bill. However, the experience of the Netherlands should lead the House to ensure that expectations are managed, that there are clear communications with members of the scheme, and that cross-subsidies within schemes are adequately and comprehensively managed, with legislative context for this to happen.

As a result of all the changes in pensions policy, and those in these two Bills, pension providers are increasingly being asked to think creatively, to adjust their provision, offer new products and provide more choice. Annuities have been a shackle on the pensions market, particularly as annuity return rates have gone steadily downwards over the past decade. The challenge for the pensions industry is to respond to the need for a strong dose of competition and innovation.

There is a danger that consideration of these Bills will mainly centre on the guidance guarantee. That is, none the less, a very important part of the legislation. It is important for the guarantee to consider the potential choices that a pension saver has, by looking at all assets that that person has. Here I must declare an unregistrable interest as a member of the advisory committee for the Equity Release Council. Housing wealth in this country is estimated to be £1.4 trillion—and many people also hold other assets, such as investments and savings. The FCA has just produced its “near final” rules and standards on the guidance guarantee, but the relevant standard, standard 20, is silent on the level of housing wealth being considered.

An Equity Release Council survey suggests that average housing wealth for the over-55s is £271,000. Meanwhile, the average defined contribution pension pot is in the order of £20,000. Whether these figures are robust is not the issue here, because they merely illustrate the need to consider housing wealth within the guidance guarantee. They show that housing wealth is more significant than the pension pot for most people over 55. This huge financial gap between the two assets is likely to continue in the next decade for people aged 40 and more, as this cohort is more likely than its predecessor to have defined contribution rather than defined benefit pensions, and they are just as likely to be pursuing home ownership through a mortgage that will be repaid before they retire.

I appreciate that the Government’s intention is for the guidance guarantee to equip people with basic concepts about their future financial needs, and to provide a basic knowledge of the range of products available. But not taking all assets into account when providing guidance will work against the guidance guarantee’s fundamental task, which surely must be to equip people with the questions they need to ask in order to help them make their decisions. To do this effectively the whole picture needs to be seen, and that means getting all the relevant information in one place, and in an easily understood format.

In respect of the pensions freedoms in these Bills, I would be grateful for confirmation from the Minister that the Government regard the FCA as the second line of defence, standing apart from the guidance guarantee, to ensure that the highest standards are met by those supplying financial products when people are at the point of making these crucial decisions involving their pension savings.

These Bills provide an opportunity for the introduction of much needed rights to improve the way that savers can engage with their savings. All the available evidence shows that people struggle to understand and engage with what is happening to their pension savings. This high level of disengagement must surely be a concern. One key mechanism for improving understanding and engagement is transparency—letting people know what is happening to their money. People are interested in knowing how their money is used, even though the language used by the financial sector may put them off. We could use this Bill to increase the ability for customer scrutiny over those who decide how to place their money. In a system where people cannot easily move their money, it is all the more important that their agents are held to account. What is required is customer-facing information and materials which help savers understand and access information. I look forward to a discussion on these issues at future stages of the Bill.

The number of government changes to the defined ambition Bill in its final stages as it went through the House of Commons was dramatic. Effectively, those changes added 65% or more extra detail to the Bill. This means that there is a real job of work to be done in your Lordships’ House to undertake scrutiny, particularly in Committee. I do, however, recognize that many of these changes were made as a result of announcements made in the Budget, after the Bill had been published.

Given the wide range and scope of subordinate legislation required for these Bills, there will undoubtedly be a need for detailed consideration at later stages of whether the affirmative or negative procedures are appropriate. Without draft regulations before us, I suspect that your Lordships’ House may well seek the affirmative procedure for many of these new regulations, but perhaps for some of them only on their first appearance in this House.

The timing of the new standards and rules governing all the issues in these Bills is a key consideration to be debated. The issues of quality of governance and levels of charging are high on the list of matters where the customer will require protection. The most urgent of these is the conversion of the FCA’s “near final” standards and rules on the guidance guarantee into their final form in time for when this Bill comes into force in April next year. I would be grateful if my noble friend the Minister could indicate when he expects these final standards and rules from the FCA to be received. Given that there are two regulators engaged in protecting the customer in these Bills, perhaps he could also indicate how it is proposed that the roles of both will be delineated, and how the Government will ensure that there is no overlap or, indeed, cracks between their respective areas of responsibility, where protection might subsequently fail. Perhaps my noble friend could give his and the Government’s view of whether it would be better to have a single regulator operating in this space rather than run the risk of overlap or gaps in provision.

In conclusion, I welcome these Bills and look forward to debating the key issues at future stages. They provide choice and rightfully put more powers in the hands of the consumer. They are to be welcomed.

Credit Unions

Lord German Excerpts

Thursday 16th October 2014 Lords Chamber

[Lord Newby]

I begin by recognising the valuable work that the noble Lord does with Lloyds in this respect. The part that the big commercial banks can play, not so much in funding—although that is useful—but also in transferring expertise, is very important. One of the key things now for credit unions in increasing the amount of capital they have at their disposal is to encourage large numbers of people with some relatively small amounts of capital to become members of a local credit union and deposit some capital with it. The work of the Church of England, for example, is potentially very important. There are many members of the church who would be able to join a credit union and put in a relatively small amount of money which could collectively transform the capital position of the many credit unions with a very small capital base.

[Lord German (LD)]

My Lords, the investment made by the Government in the credit union movement has paid dividends. We note with pleasure that 7% of the Scottish adult population is now registered with a credit union. However, for them to rationalise, streamline, offer new products and help people avoid payday lenders, credit unions need to have good back-office bank functions and new products. What progress has been made with the banking sector and the Post Office to provide those appropriate back-office functions which will allow them to become more streamlined and help people to keep out of the hands of payday lenders?

Pensions

Lord German Excerpts

Thursday 26th June 2014 Lords Chamber

[Lord Newby]

My Lords, that is the policy. The FCA is working closely with the Pensions Regulator and the DWP to co-ordinate standards to deliver it. In developing the guidance, it is working with consumer groups, the Pensions Advisory Service, the Money Advice Service and Citizens Advice to build on existing good practice. I think that it is fair to say that not everybody will want personal, face-to-face guidance, but to the extent that they do, it will be available.

[Lord German (LD)]

My Lords, for these reforms and freedoms to work, the Government must try to remove some of the mythical mist which surrounds pensions. As the FCA draws up options for the guidance which is to be given, what reassurance has my noble friend had from the pensions and insurance industries that they will support and drive forward these reforms so that the consumer, the owner of the pension pot, is in the driving seat?

[Lord Newby]

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

Economy: Sustainable Jobs

Lord German Excerpts

Thursday 27th June 2013 Lords Chamber

[Lord German]

My Lords, I apologise to the House for missing the first few moments of this important debate. I congratulate my noble friend Lady Brinton on bringing it to the House.

From a perspective looking at the figures behind what is happening in the field of employment and unemployment, there are of course some very welcome signs of improvement. It would be wise to note at the beginning that the direction of travel is correct. For example, unemployment in the UK over the past year has fallen faster than in Germany and the G7 as a whole.

Since the 2010 election, the number of people who claim the main out-of-work benefits has fallen by more than 300,000, while the youth claimant count—a very important figure—fell by 2,500 this month and is lower than it was at the May 2010 election. The other side of the coin is that private sector employment is up 46,000 on the latest quarter, which more than offsets the 22,000 jobs that were lost in the public sector. If you take that as a whole since May 2010, private sector employment is up by 1.3 million jobs, while of course public sector jobs have fallen by 423,000 over the same period.

The direction of travel is good and encouraging but there is no reason for complacency. It is important that we continue to tackle what is of fundamental importance for our people. For those of us who want a fairer society, ensuring that people can get into work will have dramatic effects on health and well-being and on future life chances, for them and for their families. For those who want to see a stronger economy—of course the subject of this debate covers both those topics—each new job adds an average of about £9,000 to the economy. For those who just want to reduce welfare spending, the best way to do that is to get people into sustainable, well-paid work, not to slash support for the vulnerable.

I will concentrate on the demand side. Today we have clearly had some important news. This morning we published the latest figures on the UK Government’s Work Programme, the Government’s main vehicle for getting long-term unemployed people into work. The key headline message that I take from today’s figures is that the Work Programme’s performance has significantly improved. It is designed to help people who are at risk of becoming long-term or very long-term unemployed. Many of those supported by the Work Programme are in receipt of benefit for nine or 12 months before joining and are then supported for a minimum period of two years. The Work Programme has not yet been running for two years, so today’s signs are very encouraging.

The Work Programme not only supports people into employment, but is also designed with the crucial aim of keeping them there. It encourages long-term private sector employment and is not just a short-term fix. Today’s figures show that 132,000 people have escaped long-term unemployment and got into lasting work, normally for at least six months. This is a large increase compared to the first year of the scheme. However, that is not the whole story. Far more people have started work but have not yet reached that target point of six months in work. Therefore, today’s figures from the Government are only for those who have been in work for six months or longer. However, figures from industry that were published last week showed that 321,000 people who were on the Work Programme have now started a job. The Work Programme is helping people who would otherwise have been consigned to the unemployment scrapheap.

There has been a significant and very welcome improvement from the providers. About half of the contract holders are now getting more jobseekers into lasting work than the level to which they were contracted by the Government. Last year not a single one managed that. We also know that, unlike the short-term job focus of previous schemes, which left many people on benefits after they had been completed, most people now stay in work well beyond three or six months.

The evidence of that improvement is clear. Figures this morning show that contractors are measured on how many participants they get into work each year, as a proportion of people who are referred to the scheme in that 12 months. As I just said, in year one of the scheme, not a single provider met its contractor level of getting 5.5% into work for that period. However, in the second year providers got an average of 31.9% of jobseeker’s allowance claimants below the age of 25 into sustained work. They were contracted to get 33%, so it is very close. For jobseekers aged 25 and over, the providers got an average of 27.3% into sustained work, against their contracted level of 27.5%—almost exactly bang on target.

More people are getting into work within a year of joining the Work Programme. The UK Statistics Authority has said that it was wrong to claim that only 3.5% of people got into work in the first year of the scheme. It says that the performance is best measured by counting how many people got into sustained work in their first year on the scheme. While on this measure just 8.5% of those who started the programme in June 2011 completed at least six months of work in their first year, this success rate dramatically increased to 13.4% for the more recent recruits who joined in March 2013.

This is a clear and demonstrable improvement. If you join the Work Programme now, you are more likely to get a lasting job. Of course, the Work Programme is also designed to give taxpayers a good deal. Providers are paid when they get jobseekers into work, rather than getting most money up front, regardless of success. Significantly, more people being helped by the Work Programme are moving off benefits and into work, and providers are keeping them in sustained employment. Most claimants have been on benefits continuously for nine or 12 months before even joining the Work Programme. Now providers are either exceeding or hitting the level set out in their contract for getting jobseekers into long-term work after substantial improvements in performance.

Last time it was too early to say whether the programme was working. Today’s figures reinforce the point that we now know where we stand. Unfortunately, the figures also reveal some weaker parts of our agenda, mainly related to the people who move into the Work Programme from employment and support allowance. The numbers of ESA claimants moving off benefit and gaining a job are lower than I would have hoped. Previous attempts to help these claimants into work were not successful. We still have a lot to learn about what works for ESA claimants. We have to work with those providers to improve performance for this group and build expertise in supporting those who are hard to help.

There is a ladder of helping people back into work. The rungs may be very short, and it may take a long time to get to the top of the ladder and into employment. First, people may have to be encouraged into self-belief. They have to have confidence in themselves and know their self-worth. We have to learn from those who have experience and expertise in that area. The term that is used for this in the Work Programme is the “black box”. I always thought this was rather a strange term to use when talking about a work programme. It gives me the impression that when you open the lid there is darkness inside and you do not know what is there.

What it really means—and the purpose of the black box approach—is that it allows providers helping people back into work to use whatever approaches they find work for those groups of claimants: localised results helping people individually. I hope that the Minister will tell us in his summing-up what approaches have been the best. Which are the ones we have to learn from, because these particular groups on employment support allowance are the most difficult to help? It is important that we learn lessons from the best providers and learn them rapidly.

The other area that is still of concern is youth unemployment. It is good to note that it has fallen, but it is still far too high. I know that we have to use the international comparators, which include all full-time equivalent students, so full-time students are included in the figures. However, if they are stripped out of the figures there are still 659,000 unemployed people in that youth category. I know that this is down 13,000 over the last quarter, but it is still a great problem because it has a scarring effect on young people. It is a distinctive scarring effect, because it is caused solely by the single experience of being unemployed. This brings a loss of personal esteem and of earning potential and can persist for decades. Youth unemployment, of course, can also lead to an increased crime rate.

This is not a new phenomenon. Over the years from 1993 to 2011, the figures show a substantial growth in the unemployment rate for 18 to 20 year-olds. Crucially, the bar of five GCSEs or more shows the level at which young people can escape from youth unemployment in a large way. One of the crucial things we have to do is ensure that people reach that standard of skills. That is why the apprenticeship programmes are also crucial to building up those skill levels. That five GCSE bar, the bar between level 1 and level 2, is the one that distinguishes between those who gain employment and those who do not.

There was some interesting analysis by the think tank CentreForum last year, which simplifies some of the issues. It stated:

“Academic research has been unable to find any robust evidence to substantiate the claims that rising levels of immigration or the introduction of the National Minimum Wage is responsible for the rising levels of youth unemployment”.

We should bear that in mind. This Government have focused their attention on universal credit and helping people back into work. It is work in progress and I hope that there is even better to come in the months ahead.