Pensions Bill

Debate between Lord German and Lord Browne of Ladyton

Monday 24th February 2014 Lords Chamber

[Lord German]

It is because we have a response in place, which is the universal credit system. What matters more than anything is that the system is in place in time to capture the people who will be most affected by this in the implementation years, from 2016 onwards. That is the fundamental question and I await the answer in my noble friend’s response.

[Lord Browne of Ladyton (Lab)]

My Lords, I support my noble friend’s amendment—and, having listened to the contribution of the noble Lord, Lord German, I am delighted that I do not have to answer the questions that he posed. I suspect that the noble Lord who is the Minister for Welfare Reform had wanted to avoid having to give a date as to when the universal credit system will be functioning well enough to provide the sort of functionality that the noble Lord, Lord German, seems to think that the alternative to this amendment requires. I will listen carefully to the Minister’s response and write down any date that he gives us in relation to that. It is also a pleasure to follow my noble friend Lord Morris, who speaks with significant experience of, and great authority about, the workings of the modern labour market, and who has assisted us greatly in understanding the need for this amendment.

As my noble friend said, this issue was debated in the Commons and in Committee at some length. I have considered carefully the various government responses, as my noble friends Lady Hollis and Lady Drake clearly have. They are to be congratulated for having produced here what could be described as an elegant, permissive, statutory device that adds to the Minister’s armoury in his desire,

“to seize this issue head-on”.—[Official Report, 18/12/13; col. GC 328.]

He used that phrase in our debate when he expressed equal concern—the words are mine—as the rest of us about this issue. I believed, as did all those who were present debating the issue, that he shared our concerns. Indeed, in his contribution to the debate he indicated why he had come to that conclusion.

In support of the arguments that I set out in my own contribution in Grand Committee, I simply want to make three points today. First, the phenomenon of people working in two or more low-earning jobs is not a limited one. They are often on zero-hours contracts but certainly on short hours, with each job under the level at which national insurance contributions are made, and are therefore not building up a contributions record towards the state pension. Nor indeed is it a temporary phenomenon, as has been argued, often coming at the end of a working life. Nor is it an experience limited to rural communities, although it is very prevalent there.

Since I shared the content of my overheard conversation on the Transport for London overground train, I have consciously inquired of young people whom I meet in this city and back home in Scotland how many of them are working for more than one employer. For noble Lords who have not heard this short anecdote, I will repeat it. A few days before we debated this matter in Committee, I overheard a conversation among three young people on an overground train as I was making my way home from your Lordships’ House. It was very clear to me that they had all been working together in what I suppose we would call a mini-job and that they each had two other jobs.

What was significant about them was that two were graduates and the third certainly had a tertiary level of education. I found that surprising. I do not know why I found it surprising, but it caused me to inquire the same of other young people, and I have come to the view that this is the norm for thousands of young people in the first phase of their employed life, even for graduates. It is a significant feature of a flexible labour market and, along with zero-hours contracts, it is part of the reason that politicians, particularly Ministers, and employers celebrate its flexibility. Undoubtedly the number of people in this situation is growing, not declining.

The question of numbers leads me to repeat a point I made in Grand Committee, which has already been made by my noble friends. The Government assert that there are about 50,000 people in this category. I am not convinced by their estimate of the scale of the problem. That is based not on my experience but on evidence that has already been referred to. We await the outcome of the—I think still anticipated—BIS consultation on zero-hours contracts, which was promised in October and is due to report by the end of March, but I have not seen a lot of evidence of it. We should reflect on the fact that in the fourth quarter of 2012, the ONS estimated that there were 250,000 people on zero-hours contracts. However, a contemporaneous survey of employers by the CIPD estimated that in fact the figure was around 1 million.

As we have heard, the union Unite estimates that as many as 5.5 million people are employed on such contracts up and down the UK. Following the CIPD estimate, the ONS conceded that the Labour Force Survey, which is based on responses by individuals, more than likely understated the numbers. The ONS then announced, as my noble friends have told your Lordships’ House, that it would change the way it collected its data from autumn 2013,

“so as to obtain more robust data”.

The importance of this contradictory information is not that it goes directly to the heart of the estimate from the Government, but that clearly it must have informed the Government’s estimate. None of the estimates that the Government have for the scale of this problem is at all reliable. Therefore, your Lordships cannot be convinced that a strategy based on unreliable statistics is a reliable strategy.

Finally, the Government’s responses appear complacent. Steve Webb, the Pensions Minister, suggested in the Commons that there was only a tenuous link between having multiple jobs below the LEL and being unable to build up the required 35 years’ contributions, and referred to this problem as a temporary phenomenon. In our debates in Grand Committee, the Minister promised that universal credit would resolve the issue. The noble Lord, Lord German, has already gone through the pros and cons of that in some detail, and my noble friend Lady Hollis significantly undermined that argument by pointing out the categories of people who are in these jobs who would be denied universal credit in the first place and therefore the consequent crediting of national insurance contributions.

I say with respect to the noble Lord, Lord German, that that is the one point of our argument that he did not engage with. Even if universal credit is the answer for some of those people, it cannot be the answer for all people in this category, and in the absence of reliable statistics, it is not easy to see what proportion of people would benefit from a universal credit system that met the coincidence of engagement with the challenge that the noble Lord, Lord German, set out.

What do we need? We need an alternative. We can have no confidence that the approach of either the Pensions Minister or the noble Lord, Lord Freud, will be sufficient. If it is not, the net effect will not only be to deny access to the modern pension system to a significant number of people, most of whom will be the least well paid working people in our society. As the numbers grow—and they will—it will also, in the long term, severely undermine the pensions policy that is now agreed across your Lordships’ House, because it will increase the number of people who have to depend on means testing in retirement.

We support the amendment tabled by my noble friend. We want to make it clear that this is a solution for now, in the context of the Bill. We hope the amendment will be agreed and will become law. It will then be for the Government to take it away and for the Minister to seize the opportunity to use it to address the issue head-on.

Pensions Bill

Debate between Lord German and Lord Browne of Ladyton

Wednesday 15th January 2014 Grand Committee

[Lord German (LD)]

My Lords, I raised this issue at Second Reading and have no hesitation in raising it again. I rise to address the issues that have been spoken of already, particularly those in Amendment 66, which the noble Baroness, Lady Hollis, has tabled this afternoon.

I hope and I am sure that noble Lords will judge the issue of changes to bereavement benefits as changes which would improve rather than worsen the current set of arrangements. We are told that these measures are based on what people were told the Government would provide them with, and that they would provide them with the best support. The Government in turn have told us that they are not about reducing entitlement or making savings. Therefore, the test surely must be whether the changes provide a genuine improvement and are not a worsening of the provision. That is why I have this concern about the one implication of the changes, that bereaved parents will be required to go back to work six months after the death of the mother or father. I am afraid I am unable to see the logic or the compassion that I would expect in this change. In fact, I used the word “cruel” at Second Reading.

For the benefit of the bereaved child or children, I would wish for those bereaved parents with children to have full conditionality relaxed for the whole year. This does not rule out preparation for return to work; in fact, there could still be some limited conditionality after six months—for example, attending work-focused interviews only. It is worth making the comparison with kinship carers. I regard this as an anomaly in the proposed regulations. If a child after bereavement goes to live with an uncle, aunt or cousin, that uncle, aunt or cousin, who may have to forgo work to look after the bereaved child, is exempt from full conditionality for 12 months. Yet the bereaved parent, the mother or father, is given only a six-month relaxation. As we know, a 12-month relaxation will not be necessary for everyone. The noble Baroness, Lady Hollis, said this. Some bereaved parents may determine that their circumstances are different and may want to return to work earlier. One would hope that that is always in the best interests of them and their bereaved children, but that is their choice and not a requirement of the state. There is compelling evidence to suggest that we need to alter the proposed provision.

There are six facts from studies, which I want to draw out. The first is that bereaved children and young people are more likely to have a serious illness or accident than their non-bereaved peers during the first year following the death of a parent. The second fact drawn from the studies conducted in this area is that they have higher rates of substance and alcohol abuse than their non-bereaved peers. Thirdly, one-third will show clinical levels of mental health difficulty at some point during the first two years after the death of their parent, and those bereaved suddenly of a parent are three times more likely to develop depression than their non-bereaved peers. Fourthly, there is an increased risk of suicide attempt and hospitalisation for psychiatric disorder. The fifth element is that parentally bereaved children score lower at GCSE than their non-bereaved peers. In other words, it affects their life chances through the examination system. The death of a parent by the age of 16 is associated with girls failing to gain any sort of qualification, and with men and women being unemployed by the age of 30. Sixthly, bereaved children and young people are overrepresented in the criminal justice system.

Of course, the increased risks outlined above do not mean that every bereaved child will go on to develop such difficulties, but they show that, as a group, they are more vulnerable than those who have not been bereaved. The most reliable longitudinal study that we have, which looks at the impact on bereaved children over a period of two years, conducted by JW Worden, Children and Grief: When a Parent Dies, found that the capacity of the surviving parent to care for their child was—and I am sure that no noble Lord will be surprised by this—the most important factor in securing better outcomes, emotionally and behaviourally, for the children. This included the surviving parent’s availability to the child—obviously emotionally but, more than that, in terms of being able to spend time with them and continuing routines where possible. Successful interventions with families generally involve supporting parents to communicate with and be available to their children, all of which point to allowing the surviving parent as much time as possible to be with their child in the year following the death.

Clearly, the conditions for claiming universal credit are intended to be as close to having a job as possible. It is important to think through the parallels between those who are bereaved and claiming UC, and those who are bereaved while in employment. While most employers clearly would not be able to offer a full year off work to a newly bereaved parent, many parents choose to change jobs, or even stop working, if their employer cannot be flexible, so that they can meet the needs of their children better.

This is the most important of issues and the most difficult time for children—when they lose a parent. Given that this is an anomaly compared to when a bereaved child is placed with a kinship carer, I believe that the Government should think again on this very important issue. I hope my noble friend will consider that.

[Lord Browne of Ladyton (Lab)]

My Lords, I will speak to Amendments 62ZZA and 62ZB, in my name and that of my noble friend Lady Sherlock, to Amendments 59, 60, 61 and 66 in the name of my noble friend Lady Hollis and Amendment 62ZA in the name of the noble Baroness, Lady Meacher.

At Second Reading, this part of the Bill figured large. The mood of your Lordships’ House then was that these provisions merited further debate and possible revision. We were all particularly indebted to the right reverend Prelate the Bishop of Derby for his powerful contribution that day. A lifetime of providing pastoral care to those suffering bereavement amounts to a wealth of experience and knowledge that we ignore at our peril, particularly when the lessons drawn from it are supported by the best research, as the contribution of the noble Lord, Lord German, has just suggested.

I expect that a strong thread of the Minister’s response will be an argument that the principal aim of these reforms is to make bereavement payments more effective in the 21st-century context. The Government have concluded that doing so requires only short-term intervention to allow a bereaved spouse or civil partner the time to deal with the immediate costs of the death of a partner and to come to terms with the consequential emotional and financial implications. In the longer term, they argue, if support is needed to cope with the consequences of bereavement, the universal credit system will provide that long-term support.

Broadly, those whom the Government consulted supported that approach, but significant reservations were expressed about the impact of the proposed changes on bereaved families. I believe, like many noble Lords and, perhaps surprisingly, the Pensions Minister himself, that there is a debate to be had about how long support should last, particularly in relation to bereaved families with children. On 29 October, on Report in the House of Commons, the Pensions Minister, Steve Webb, in restating the basic design of his reforms, said,

“there is a debate to be had about how long support should last”.—[Official Report, Commons, 29/10/13; col. 867.]

Thanks to the amendments before the Committee this evening, we have the chance to have part of that debate. I am indebted, once again, to my noble friends and other noble Lords who, in speeches moving and supporting the amendments, have set out the relevant differences in the proposed new financial support provisions compared to the status quo, saving me the need to repeat them and sparing your Lordships the tedium of having to listen to me do it. However, I have some points that complement their contributions and are worth emphasising.

The Bill—certainly this part of it—is cost-neutral, or at least broadly cost-neutral. It achieves its objective of paying out to all bereaved partners, regardless of age, mainly by reducing the level of support for bereaved families and by redistributing that money to those without children. The biggest beneficiaries are bereaved partners under 45—who are also the group most likely to be in work.

Secondly, the Government’s own figures on the number of families affected and what their numbers mean tell us some things, but not everything. The total number of deaths of people aged 25 to 64 in 2012, according to the ONS statistics, was about 73,000: 43,799 men and 29,413 women. The number of deaths increases with age, as one might expect. The number of people in receipt of each of the current three benefits includes 10,000-12,000 receiving bereavement support payments per annum. In November 2012, there were 21,000 people in receipt of one-year bereavement payments and 44,000 in receipt of the widowed parent’s allowance.

If I understand these statistics—and I might not—it appears that only half of bereaved partners in any one year are receiving bereavement benefits. This indicates that either bereaved partners are not claiming, they are not married or in civil partnerships, or they are unable to meet the national insurance contributions criteria. It would be interesting to know whether the Minister has any more detailed statistics than this. The estimated total expenditure of these benefits in 2013-14 is £575 million, falling to £531 million in 2016-17. The total is falling as the number of people dying below state pension age is falling and it is expected to continue to fall as people live longer. Importantly, however, as my noble friend Lady Hollis and the noble Baroness, Lady Finlay, reminded us very forcefully, behind these statistics each death is a great family tragedy. It is the loss of a loved partner or a loved parent, in some cases both.

This reform package includes a simplification of the conditions of entitlement and a relaxation of the qualifying national insurance contributions conditions. At this stage, I want to make two points. First, the contribution record of the deceased partner is still the principle qualification for these benefits, and that is important. This is not a case of something for nothing: it is a payment out for people who have paid in. Secondly, it is argued—although this is not reflected in any amendment before the Committee this afternoon—that in these reforms, the proposed contribution condition is more restrictive than at present. In particular, the proposed contribution condition requires Class 1 or Class 2 contributions, while the existing contribution condition allows payment of Class 3 contributions. Furthermore, unlike the current arrangements, it is argued, where the contributor dies before the end of the relevant year for the necessary contributions, there is no provision for earlier years to be aggregated and treated as if made in the relevant year. Will the Minister tell us whether this was intentional and, if so, why? Would the Government be sympathetic to an amendment that reflected the current rules?

As has already been explained by my noble friends, the existing system is replaced by the payment of a lump sum and monthly payments for one year to all bereaved spouses or civil partners regardless of age. We understand that the lump sum will be tax-free. Although the impact assessment assumes that the monthly payment will also be tax-free, we understand that this is still a matter about which the DWP is in discussion with the Treasury.

Amendment 62ZZA in the names of my noble friend Lady Sherlock and myself would ensure that both the lump sum and the instalment element of BSP would be tax-free. In the House of Commons, the Pensions Minister argued that if BSP is paid for just one year, it is easier to make the case that it is not a replacement for income, but a grant to meet the extra costs of bereavement. Therefore, he told us, it was easier to argue that it should be exempt from tax. Accepting that this is, of course, a matter for Her Majesty’s Treasury, a proper understanding of the effect of BSP requires more certainty than the Government are providing about its tax status. It would be helpful if the Minister could tell us when he hopes to have more clarity about this issue. Would it be helpful to the DWP if an amendment similar to our Amendment 62ZZA were passed on Report?

Amendment 59, in the name of my noble friend Lady Hollis engages directly with the Pensions Minister’s call for a debate about how long support should last. As explained by my noble friend, it seeks to extend the time of payment of BSP to a bereaved parent with children for at least three years or until the second year of schooling is complete for all dependent children, whichever is the longer period. The Childhood Bereavement Network states its confidence that this could be done cost-neutrally by adjusting down the monthly rate of BSP for parents and by reducing the lump sum for non-parents. Is the Minister willing to use his resources to test whether that brief is well founded? If it is, surely it significantly supports my noble friend’s amendment. She has shared not only her own experience of the effect of the loss of a parent on a child, but referred to research to which the noble Lord, Lord German, referred extensively. This demonstrated that the impact of a parent’s death on a child will be significant beyond a period of three years. This proposal is therefore evidence-based and, interestingly, is less generous than the current arrangements that my noble friend herself introduced.

The question that we are all asking is: to what extent are the Minister and the Government considering the needs of children in making this significant change of policy, by moving money from parents with children to those without? We hope that the Minister will engage with that question when he responds.