Charitable Sector: Food Provision

Lord Hain Excerpts

Monday 27th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

The figures that have just come out help us with a regional focus. For example, 4% of households in the north-east and north-west use a food bank, which is 1% higher than the average for households in England. To answer my noble friend’s question on food waste, we support a broad and holistic approach, with £2.7 million per annum grant funding to the Waste and Resources Action Programme. Crucially included in this programme is the food waste reduction road map and the push for food businesses to follow this tool to target, measure and act on waste, including to redistribute more. It is very important to make the connection between where there might be waste, particularly with foods at their sell-by date, and distributing to those most in need.

[Lord Hain (Lab)]

My Lords, why do half the NHS trusts in England have food banks for their staff?

[Viscount Younger of Leckie (Con)]

This question has cropped up before in this House. I deeply regret the anecdotal evidence that we have of those in the NHS who are minded to go to, or need to go to, food banks. It is certainly something that the Government are very aware of and are looking to take action on in a number of ways.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2021

Lord Hain Excerpts

Thursday 25th February 2021 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, I thank the Minister for her clarity in introducing this instrument. It is a pleasure to follow the noble Baroness, Lady Wheatcroft, particularly because of her appeal for fairness in the context of the pandemic.

There have been many expert contributions to the debate so far on the auto-enrolment scheme, which I was privileged to introduce in 2007-08 as Secretary of State for Work and Pensions, making employee pension membership virtually compulsory and helping people save for their retirement. At that time many millions were staring at a pensions black hole but since then I am pleased to say that over 10 million people are in auto-enrolment.

However, huge challenges remain around the level of pension savings, not least as we see the impact of Covid-19 exposing deep inequalities and injustices. We need to go much further to help people save for retirement. One important way to do that is through collective defined contribution pensions or collective money purchase schemes, as they are known in the Pension Schemes Act 2021. As I have said before in your Lordships’ House, I welcome the introduction of CDC schemes. I believe they represent an attractive third way in workplace pension provision. They have the capacity to deliver significantly better outcomes for savers than individual direct contribution schemes, improving pensions outcomes for workers.

I have spoken to Royal Mail and its union, the Communication Workers Union, and understand that they are keen to launch Royal Mail’s collective pension plan for its 143,000 employees in the second half of the next financial year. I therefore ask the Minister to ensure the passage of the necessary secondary legislation, including tax changes, in a way that will allow such schemes to begin accepting contributions. I also understand that the scheme will require authorisation from the Pensions Regulator. Could she please address this matter in her reply? There is still quite some work to be done before the first CDC scheme in the UK is up and running but, as with auto-enrolment in 2008, there is a significant prize to be won with the introduction of CDC schemes in 2021.

I again appeal to the Minister to reconsider the issue of the 5 million self-employed, many of whom are low-paid and have no pensions at all. When will the Government find a solution to this serious gap?

With defined benefit schemes closing at an alarming rate, the current norm of completely inadequate defined contribution schemes means that the state will incur multibillion costs in future to save millions of people from abject poverty. The average pension pot is £50,000, which would give an annual income of just £2,500 a year—nothing like enough to live on, even with the full state retirement pension. Experts estimate that we should each save at least 13% of our income from the age of 25 but we are doing nothing like that. The Government are simply not addressing this situation. The blunt choice is between a future of poverty and misery in old age for millions or politicians today being honest about the need for workers’ and employers’ incentives to pay more into pensions and for the Government to raise extra taxation to help finance decent pensions and elderly care.

Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) (Amendment and Revocation) Regulations 2020

Lord Hain Excerpts

Wednesday 21st October 2020 Lords Chamber

[Lord Hain (Lab) [V]]

My Lords, it is a real pleasure to follow my noble friend Lady Drake and the noble Baroness, Lady Altmann, who speak with tremendous authority on these pensions-related questions.

The Government’s insolvency reforms initially applied only to companies. They have now been extended to cover co-operative societies and community benefit societies such as credit unions, following lobbying, in particular by Co-operatives UK. So far, so good. Co-op retail societies have been doing well, with sales booming and market share rising, but some other smaller co-operatives have had to close for a few months or furlough staff.

In its efforts to modify measures originally designed for companies, Co-operatives UK gave priority to preserving co-operative and community purpose and to retaining democratic member control. I strongly applaud those efforts. I acknowledge too its September 2020 guidance to co-op societies facing financial strife, a 10-page brief on insolvency and financial liquidity that offers advice on how to respond to a crisis and how, in the worst case, to face up to a possible insolvency. However, I fear that those 10 pages of well-intended advice to co-op societies facing financial distress illustrate the shocking way in which workers’ rights are overlooked when businesses in Britain face going bust.

The opening paragraphs on page 1 of the guidance acknowledge that directors of co-op societies facing insolvency have a duty of care to the society’s creditors. When businesses face insolvency, the interests of creditors, especially those with secured debts, often and maybe always override those of employees. Witness what happens when companies in financial distress stay in business but use a “compromise agreement” to avoid meeting their obligations to the firm’s pension scheme. Only later does the Co-operatives UK brief say that only if there is no imminent threat of insolvency should directors

“Put employees and volunteers first”.


Sadly, even then the brief does not suggest consulting employees about the choice between furlough or redundancy. It recommends talking to workers about other options such as reducing pay and working hours only after big decisions have been taken.

The very last point at the foot of the final page of the brief covers good practice with employees. It says that

“looking after employees at a time of crisis is crucial”,

and refers to four pages of further advice, none of which covers possible insolvency. So there is no discussion of the possible threat to employees’ pension rights when businesses face insolvency, no mention of underfunded pension schemes, nothing about redundancy rights or unpaid wages, and nothing about unmet tax and national insurance obligations. That is a perfect illustration, sadly, of where workers stand when businesses face going bust: little more than an afterthought. But I do not blame Co-operatives UK: its brief simply reflects the sad reality of workers’ rights and the unfairnesses of Britain’s insolvency law.

Millions of jobs are in jeopardy today, in every sector of the economy, and it remains all too easy for directors of businesses facing financial distress to sacrifice the interests of the workforce by sidestepping their responsibilities for pay, redundancy, tax, national insurance and pensions. Despite the warm words we had during the passage of the insolvency Bill in the summer, the Government’s reforms have yet to address that fundamental flaw. Can the Minister give me any assurances about that, please?

Pension Schemes Bill [HL]

Lord Hain Excerpts

Report stage & Report stage (Hansard) & Report stage (Hansard): House of Lords
Tuesday 30th June 2020 Lords Chamber

[Lord Balfe (Con)]

My Lords, this is the first time for two months that I have been in this Chamber. It is a bit emptier than normal but it is good to be back.

I hoped to speak after the noble Baroness, Lady Bennett, because I want to say a few words about her Amendment 33, which is about trustees. It seeks to require trustees to take age, gender and ethnicity into account. I will certainly not support or oppose this amendment but I want to make a few points on trustees and where I think she is trying to get us to. The fact of the matter is that the whole area around the appointment of trustees could do with a close look.

There are a number of problems. The first problem for any pension scheme, particularly a small one, is getting trustees from among the membership. You can always get a professional trustee because they are normally paid £1,000 or more a day for coming to the meeting, so it is not too difficult. The difficulty is getting representatives of the pensioners. The second and even greater difficulty is getting representatives of the pensioners who actually know what they are talking about, because many people are completely bewildered by pensions.

When I read through both this amendment and the amendments about ESG and environmental safeguards, I was reminded very much of pensioners who come to me and say, “All I want, Richard, is for you to pay my pension. I couldn’t care less where it comes from.” I say, “Presumably you wouldn’t like us to invest in gas ovens,” and they say, “Well, no, but you’ve got enough common sense not to do that. You don’t need me to tell you.”

So I come to the point that, when we are looking at the age, gender and ethnicity of trustees, we also need to look at their qualifications and the way in which they are allowed to come forward, because some trustee boards are effectively self-perpetuating because they govern who is allowed to stand. You are invited to apply to become a trustee, and then you are assessed as to whether you are able to become a trustee. Often, people who come forward are not highly professionally qualified, but they are qualified in one thing, which is common sense. My experience of pensions, which goes back quite a long way, is that certainly some members on a board—not a majority—who can demonstrate common sense are extremely good.

I would also like to say that dealing particularly with gender and ethnicity can lead you into many problems. My wife gets a pension from the Workers’ Educational Association pension fund. It got itself tied into complete knots trying to deal with ethnicity and gender. It ended up asking people to vote for trustees who were anonymised. They were anonymised by taking out not only their name, age, gender and ethnicity but also most of the other things about them. So the great game in this case was to look back at previous reports and try to work out which trustee was the anonymised one. Of course, that gets you nowhere and in fact is a bit of an insult to the members who have applied.

So I say to the noble Baroness, Lady Bennett, and to the Minister that this is a subject that is much wider than this amendment, but it is certainly one that needs looking at. The way in which pensioners are represented on the governing boards of pension funds is haphazard, to put it mildly. It varies enormously between funds. Although there is a great cry from professional trustees that you clearly need professionals in the room, I counsel the Minister and everybody else to beware of the cry for the professional. It is very easy to get a professional to sit there and give you advice as an employee or if they are hired for the purpose. You do not necessarily need more than the odd one of them actually on the board. They have nothing great to add than cannot be added by a professional adviser. They do not need a place on the board, although sometimes—note the word “sometimes”—having a professional trustee as a chair can add a certain amount of discipline, knowledge and structure to the way that debates go. But it can be overestimated and, particularly since the pensions industry is dominated by the professionals, there is a great danger that it gets overemphasised because it is precisely the people who write in the pensions papers who are the experts and who then promote themselves for the jobs.

So I welcome the amendment in the name of the noble Baroness, Lady Bennett; I see it just as a probing amendment, laying down a few guidelines that we could look at. I say to the Minister that when there is an opportunity, it would be well worth while to set up some sort of study or working group to look at the way in which trustees are chosen or appointed, how they work and how they are remunerated.

[Lord Hain (Lab) [V]]

My Lords, I thank the Minister for the way in which she introduced these amendments, and particularly for the concessions that she granted on affirmative procedures for the issues that are contained in the government amendments. This is a very welcome response by Ministers to the feeling that was in the House.

I will speak to Amendment 1 and associated amendments in the name of the Minister concerning the authorisation criteria for collective money purchase schemes. I warmly welcome the introduction of these schemes, also known as collective defined contribution—CDC—schemes, as they represent an attractive third way in workplace pension provision, with a capacity to deliver significantly better outcomes for savers than individual DC—direct contribution—schemes. However, in order for the CDC schemes to be widely trusted, we need to get the legislative and regulatory framework right. To give one example, it is vital that the authorisation criteria are appropriate. A balance must be struck in ensuring that requirements are not so cumbersome as to deter employers who might offer these schemes from doing so, while ensuring that there are robust protections in place for employees saving in these schemes.

If we can get this right, there is a significant prize to be had in the introduction of CDC schemes, and the case for this is only strengthened by the current Covid-19 crisis. The virus has had many negative consequences for our society and economy. One of those consequences is directly relevant to the Bill before us today: there has been significant negative impact on the defined contribution pension savings of many individuals as a result of the financial markets’ reaction to Covid-19. I am afraid that, as the noble Baroness, Lady Altmann, so compellingly pointed out, the Bank of England’s recent injection of quantitative easing will make this much worse. A drop in asset values and bond yields has led to more expensive annuities and resulted in pension reductions of around 8% to 10%. This has caused much consternation and led a significant number of people to defer their retirement during this period.

In my remarks at Second Reading, I welcomed the introduction of CDC schemes and cited, among other factors, their enabling of the pooling of risk between savers. This can, in turn, enable higher-yield investment strategies, as well as less volatility and greater predictability for savers. It begs the question, therefore, of how CDC schemes might have fared in comparison with individual DC schemes in the light of the recent crisis and the sharp economic downturn that has so negatively impacted DC pension savers.

Royal Mail, which in conjunction with the communication workers—CWU—has been leading the push for the introduction of CDC for its 143,000 employees, asked its actuarial advisers to look at precisely this question. The resulting analysis, carried out by pension consultants Willis Towers Watson, was conducted in the context of the 20% fall in the global equity market in the first quarter of this year. The modelling looked specifically at how the CDC scheme design proposed by Royal Mail would have been affected. The conclusion reached by Willis Towers Watson was that the CDC would have performed significantly better than an individual DC scheme. In this scenario, a scheme member close to retirement would have been able to retire as planned, with no reduction in their retirement income. This is because the Royal Mail scheme is designed with a certain amount of headroom in contributions, intended to fund future pension increases. As Willis Towers Watson has written,

“it is only if the funding health suffers very materially that the headroom could run out and pensions would be reduced … in the vast majority of scenarios, it would only be the level of future pension increases that would be at risk.”

Even with the severe level of market shock experienced in quarter one of this year, therefore, the modelling shows no effect on current pension levels for CDC scheme members, and that is very welcome. Future pension increases would be impacted, but only by a modest 0.25% per year, as this market shock was nowhere near severe enough to remove the significant headroom that the scheme would hold. In contrast, an individual DC pension saver, due to retire by starting to draw down benefits in the near future, would expect their pension pot to have fallen in value by approximately 10% over the quarter. While they would have the option to keep the pot largely invested, this saver would potentially have to rethink their retirement plans, such as changing their planned pace of drawdown, or even deferring their retirement altogether for a period. Those considering an annuity would find that the price levels had increased by around 8% over the quarter.

This analysis provides a timely and powerful illustration of just one of the benefits that CDC schemes will bring to savers through the pooling of risk and the capability to build up significant headroom to smooth out the impact of shocks, even those as severe as we have recently experienced. CDC therefore represents an attractive third way in workplace pension provision, offering better value and greater certainty for savers than individual DC schemes. With that in mind, I welcome the Government’s commitment to ensuring that the appropriate processes will be in place around authorisation criteria. I commend the Bill to noble Lords, and I hope that we will see its swift passage through its remaining stages in this House and its early introduction and passage through the other place.

Automatic Enrolment (Offshore Employment) (Amendment) Order 2020

Lord Hain Excerpts

Tuesday 19th May 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, in 2007-08, as Secretary of State for Work and Pensions I introduced the original auto-enrolment legislation that made employee pensions membership virtually compulsory. At that time, many millions were staring at a pensions black hole, so I am pleased that since then over 10 million people are in auto-enrolment, as part of the three-quarters of workers now part of a workplace pension.

These statutory instruments are a welcome advance, especially for maritime workers and seafarers, but I appeal to the Minister to reconsider the issue of the 5 million self-employed, many of whom, as other noble Lords have said, are in low-paid or insecure work and have no pensions whatever. Can she explain how the Government intend to find a solution to this?

This is all against a background of defined benefit schemes—once the gold standard for occupational pension provision—closing at an alarming rate over the last decade as companies cut costs. The norm is now inadequate defined contribution schemes, which means that on current trends, and if the Government, with business, do nothing, the state will incur multibillion costs to save millions from abject destitution.

Notwithstanding auto-enrolment, the average pension pot of £50,000, which would give an annual income of just £2,500 a year, is nothing like enough to live on, even with a full state retirement pension. Experts estimate that we should each save at least 13% of our income from the age of 25. That is simply not happening, with auto-enrolment at a combined 8%.

The Government have kept kicking the can down the road on proper funding for elderly care, and we have witnessed the desperate predicaments of care homes in the Covid-19 crisis, but the same is true for decent pensions. We cannot and must not continue in this way. The blunt choice our society faces is between a future, which currently beckons, of poverty and misery in old age, or politicians today being honest about the need both to pay more into pensions and to raise extra taxation to finance decent elderly care.

Pension Schemes Bill [HL]

Lord Hain Excerpts

2nd reading & 2nd reading (Hansard): House of Lords & 2nd reading (Hansard)
Tuesday 28th January 2020 Lords Chamber

[Lord Hain (Lab)]

My Lords, we always welcome the contributions of the noble Lord, Lord Young of Cookham. I say that we all do but I am not sure that that is always the case with his Front Bench, which he occupied with distinction. He is very fortunate that Barbara Castle is not present to reply to him in her normal robust fashion.

I refer to the Members’ register in welcoming the Second Reading of this Bill, especially having been Secretary of State for Work and Pensions in 2007-08. Its provision for collective defined contribution—CDC—schemes is a step forwards in addressing the UK’s growing pensions crisis.

Individual, as opposed to collective, defined contribution schemes are now the default for occupational pensions, but these individual DC schemes are characterised by inadequate contribution rates and uncertain outcomes that completely fail to provide a decent standard of living in retirement. The average total contribution rate for an individual defined contribution scheme is just 5% of pensionable earnings, and the average pension pot is £50,000, which would give an annual income of just £2,500 a year. That is nowhere near enough to live on, and experts are saying that we should save at least 13% of our income from the age of 25. By comparison, average contribution rates for defined benefit—DB—schemes are far higher, at nearly 26% of earnings, compared with 5%.

Fresh impetus was given to the push for collective defined contribution pension schemes when Royal Mail and the Communication Workers Union agreed in February 2018 that they would seek to introduce a CDC pension scheme for Royal Mail’s 143,000 employees. I commend Royal Mail and the CWU for their efforts in working closely together to pursue this new “third way” pension scheme, which, as CWU national officer Terry Pullinger said at the time of the agreement, would

“secure our members’ future employment, standard of living and retirement security”.

Nobody pretends that CDC is some silver bullet, as the noble Baroness, Lady Altmann, pointed out so succinctly; indeed the Royal Society for the Encouragement of Arts, Manufactures and Commerce has recently published an excellent analysis, which I hope the Minister will read, highlighting some of the specific issues of concern that all CDC schemes must address. But there is widespread recognition that CDC schemes can provide greater certainty about retirement outcomes than is possible in traditional individual defined contribution schemes.

When in 2018 the CWU secured this ground-breaking deal with Royal Mail to introduce a CDC scheme after the company closed its defined benefit scheme to future accrual due to rising deficit costs, the union had fought to save the DB scheme, but, with the deficit repayments increasing from £400 million to £1 billion a year, they had no choice but to discuss alternatives.

The agreement opens the way for new collective pension schemes to be rolled out across the UK with the help of this Bill. It shows how elements of defined benefit can be linked to CDC because it includes a defined benefit cash balance fund that will provide guaranteed lump sums for members. In pushing for this deal, the union saw a clear need to do something to improve pension provision for all its members, 80,000 of whom were in the company’s defined benefit scheme and 40,000 in the defined contributions scheme. The DB scheme was closed to new entrants in 2008. Most DC scheme members were on the base contribution level, which was very low, and most were in the younger age bracket, so there was a question of generational fairness and making sure that younger employees had access to a decent pension scheme. There was also the need for the CWU to protect those who were in the defined benefit scheme, as moving them on to the defined contribution scheme would have substantially reduced their expected benefits.

Although a CDC scheme provides for a target rather than a guaranteed pension benefit—a point made by other noble Lords and Baronesses—modelling shows that the Royal Mail CDC scheme would hugely outperform the individual defined contribution scheme and could even deliver the kinds of benefits that would have been expected under DB.

It is important to understand why CDC schemes, at least of the kind negotiated between the CWU and Royal Mail in 2018, have clear advantages over individual DC schemes. First, they allow savers to pool their risk, which enables higher yield investment strategies and better returns. Studies have shown that CDC schemes can generate a pension that is up to 39% higher than a traditional DC scheme. Evidence from other countries—such as the Netherlands, as has been mentioned, where CDC schemes are widespread—clearly demonstrates that CDC schemes offer a better alternative to DC schemes. Secondly, collective pensions are subject to less volatility than individual pensions, making them far more predictable. They also avoid the need for an annuity or draw-down, which reduces costs and avoids difficult and often stressful decisions for savers about how to invest their funds. It is no secret that the guarantees associated with annuities are expensive and consumers often receive a poor deal when choosing them.

There has been some resistance to these plans from those with a vested interest in selling DC products, of course. They say that CDC schemes could run counter to the trend towards individual freedom and choice in pensions, but the evidence suggests that the majority of scheme members do not want the responsibility of managing their savings pot when they come to retire, or the uncertainty that comes with it. I certainly would not want that. Most savers just want financial security with the guarantee of a pension income for life, and that is what CDC offers.

Of course, there are also benefits for employers because CDC schemes avoid the risk of large, long-term pension liabilities on their balance sheets. Defined benefit schemes remain the gold standard for occupational pension provision and should be defended as far as possible. Sadly, however, DB schemes have been closing at an alarming rate over the last decade as companies have sought to cut costs. There has also been a total lack of innovation in the pensions space. The only show in town has been inadequate defined contribution —DC—schemes. If they remain the norm, and the Government, with business, do nothing, the state—which means the taxpayer—will begin incurring multi-billion costs in future to save millions of elderly citizens from abject destitution.

As the CWU’s Terry Pullinger has explained, in the Royal Mail we have a generation of people fast approaching 40 years of age who do not own any property and have little or no pension provision. It is a social car crash waiting to happen and, if not addressed, will leave an entire generation facing poverty in old age with total reliance on the state.

Research by the TUC has found that a typical DC saver could be £5,000 a year poorer in their old age if they retire after a bad period of investment returns for pension funds rather than in a good period. The benefits of scale and pooling of investment and longevity risk in CDC schemes are clear; modelling by the highly respected Pensions Policy Institute likewise confirms that, over the long term, CDC produces better outcomes than individual DC schemes.

Overt measures have been taken in the design of the Royal Mail scheme to ensure that there is no deliberate saving up of a capital buffer which would represent money paid in by one generation that is held back from that generation’s benefit provision. While there will inevitably be variations across generations, Royal Mail and the CWU have worked to ensure that these are only the product of varying circumstances rather than an inherent bias.

Furthermore, the legislation before us is drafted in such a way as to ensure that CDC schemes are governed within a strict regulatory structure and implemented only once a clear governance and disclosure framework is put in place. This regulatory framework is vital in providing savers with full confidence in this new type of scheme. There is an indisputable case for enabling CDC schemes through legislation and encouraging their take-up as an alternative, at least to DC pensions. That is why it is welcome that the Bill sets out not only how Royal Mail and the CWU can progress with their CDC scheme, but also how other companies could follow suit.

As the CWU has said, this scheme will drive pension innovation for current and future generations of working people, and will resurrect the principle of dignity and security in retirement. Royal Assent to this Bill is needed as early as possible. Can the Minister in replying please say when exactly that is expected to occur?

CDC schemes offer a third way forward, which has been recognised by one of our largest employers, Royal Mail, and one of our largest trade unions, the CWU. If we get this legislation right and enable the establishment of these schemes, I believe that they could offer a positive way forward for many other employers, as well as unions.

Gleision Mine

Lord Hain Excerpts

Wednesday 26th November 2014 Westminster Hall

[Mr Peter Hain (Neath) (Lab)]

It is a pleasure, Mr Chope, to serve under your chairmanship.

On Thursday 15 September 2011, seven men left their homes and commuted to work at the Gleision pit in my constituency. Having drunk their morning tea, they moved underground just after 9 o’clock to labour on the number two Rhondda seam. Wearing high-visibility jackets and safety gear, they expected to work until 5 o’clock and then return to their families. Instead, at 9.45 am, a small explosion that they detonated led to the release in a matter of seconds of 3,000 tonnes of water into a shaft hardly 4 feet high. The exact sequence of events is unknown, but the mine manager, Malcolm Fyfield, was close to the inrush. Astonishingly, he was able to survive the torrent of water and climb through the breach hole, finally to emerge bloodied, having struggled out of another entrance to the mine.

Further from the breach, David Wyatt heard the roar from the coming torrent and ran until he was able to jump on a conveyor belt, which carried him to the main mine entrance, the water chasing him through the passage. There, he alerted his colleague, Nigel Evans, and the emergency services were called. Daniel Powell, another collier in the mine, was also lucky to escape after running from the inrush. Those three were the only men to survive. Charles Breslin, Philip Hill, Garry Jenkins and David Powell were crushed by the terrifying raging force of the flood. With nearly a century of mining experience between them, those colliers had laboured in mines across the Swansea, Neath and Dulais valleys all their working lives. Charles Breslin had returned from retirement for a stint down Gleision to earn extra money to complete the family home he was building.

In the hours immediately after the explosion, teams from across Britain came to the fore as emergency services from Dinas, Cwmgwrach, Glynneath and even Yorkshire rushed to help in a frantic rescue operation and the subsequent investigation. Down the mountain in Rhos community centre, the families of the trapped men gathered with community leaders in a 36-hour vigil until the miners’ bodies were eventually recovered and gradually identified, and everyone began to come to terms with the trauma, and the families with their stunned grief. Today, over three years on, we are no closer to being told by any of the key agencies or the justice system why Charles, David, Philip and Garry died.

This is not an exercise in finding someone to blame. There was a trial and the manager and mine owners were acquitted of manslaughter and corporate manslaughter respectively. Mining is inherently dangerous, but neither I nor the families who were present during the long hours of that sad vigil in Rhos community centre have been given answers as to why the accident occurred by the Secretary of State for Work and Pensions, the Health and Safety Executive or indeed the trial at Swansea county court earlier this year. I am therefore left to make my own judgment after careful assessment of the trial evidence and other inquiries.

[Ian Lavery (Wansbeck) (Lab)]

I congratulate my right hon. Friend on bringing this matter to Westminster Hall. Can he say what happened at the inquest? Unfortunately, I have been involved with deaths in the mining industry all my life, and normally there is some indication from an inquest of how an individual died.

[Mr Hain]

My hon. Friend speaks with great authority as a former leader of the National Union of Mineworkers. The coroner’s inquest was convened and then adjourned, and has never been completed, which has left unanswered questions.

The Gleision tragedy was a chilling reminder of a death-strewn mining era long thought consigned to history, and of the fact that short-cut attitudes to health and safety can be fatal. It also revealed how erosion of the Mines Rescue Service could create greater tragedies in the future if we fail to address the formidable budget challenges that that key agency faces if it is to maintain its long and dedicated record on mining.

The first lesson is that employers must be responsible for their employees in a way that was obviously not the case at Gleision. Throughout its recent life, it seems there was illegal mining at Gleision, certainly in the decade prior to 2011. At the trial, Mr Justice Wyn Williams said that successive managers had read into health and safety regulations what suited their needs, failing to co-operate sufficiently with Her Majesty’s inspectorate of mines. Despite this, the mines inspectors confirmed that the mine plan from which the manager and the four men were working, even as they detonated that fatal blast, was accurate. The inspectors checked during the official investigation after the tragedy and found that, although Gleision had not been inspected in the 16 months prior to the accident—an attempt to do so had been foiled by bad weather—the survey conducted two months before in July 2011 by mines surveyor John Brosnan was up to date and sufficiently accurate.

Of course, the Management and Administration of Safety and Health at Mines Regulations 1993 made it incumbent on the mine manager or owner to inform the mines inspectorate of any major changes in working plans underground. The inspectorate relies on the mutual co-operation of the mine manager and mine owner to alert to changes in the faces that they seam, and it is more than likely that multiple Gleision managers before Malcolm Fyfield had failed to do that adequately and properly.

The entire legal framework of health and safety at work in Britain is sensibly based on a self-policing model, relying on companies and their executives to comply with and guarantee safety standards by keeping risk as low as reasonably practicable. It is clear to me that in the events leading up to the tragedy the regulations were not complied with. However, the most frustrating question, and the one that haunts us all, is: why were the four miners there facing death in the first place?

The day after the tragedy, having been escorted from Rhos community centre up the mountain to stand at the mine entrance amid rescue workers and police, the mines inspector showed me the same mine plan from which Fyfield and the men were working. It showed clearly that they were mining directly towards an area in the old mine workings marked “Old Central Workings and Underground Water”. I have the mine plan here. The mines inspector expressed his surprise at this, and there is still no explanation for why the decision to take that risk was made.

The exact source of the water—whether it was in the area marked on the plan I saw, only a few metres from where the men fatefully detonated their explosion, or somewhere else nearby—was hotly disputed during the trial. The fact remains that the water was indeed there, exactly as marked on the mine plan, and that it killed them. Mines inspectors investigating the accident afterwards confirmed that its presence coincided with markings on the plan I saw. Indeed, they were able to see the high tide mark previously reached by the water that subsequently raged torrentially through the breach.

[Mr David Anderson (Blaydon) (Lab)]

I congratulate my right hon. Friend on bringing this sad debate to the Chamber today. Is it true that this is not a one-off, and that some of the regulations on water ingress into mines were developed because of tragedies such as this? There was one in the 1970s at Houghton Main in Yorkshire, when exactly the same discussions took place. That is one reason why the need to map out where water lay was built into the inspection regimes. That is why it is clear that plans should be checked regularly, and not just cast to one side.

[Mr Hain]

I agree with my hon. Friend. He also speaks with great authority as a former miner.

Mr Fyfield, who was the mines manager, is highly respected and experienced. He told the court that he went into the old workings to check for the presence of water marked on the plan and found none. Somehow, there was a catastrophic misjudgment. The water was indeed there, and it nearly killed him, just as it killed the four miners. Built into the regulations is a statutory procedure that could have prevented all this. A precautions against inrush scheme would surely have given the men an indication of the presence of the water. There can be no question but that it should have been implemented, because the Mines (Precautions Against Inrushes) Regulations 1979 demand that if miners are moving towards a suspected hazard, a PAI scheme be created.

These were all experienced miners, led by an expert and experienced mine manager, yet the Health and Safety Executive has not yet explained—neither has the trial evidence nor the verdict—why those crucial regulations were not followed. Whether motivated by cost-cutting, or simply the result of a cataclysmically mistaken judgment, the decision was taken to blast too close to the water, and four men died as a consequence, the manager only narrowly escaping, emerging so bloodied, severely injured and traumatised that he needed intensive hospital care to get back on his feet.

In 2011, the mines safety expert Dave Feickert claimed that it was possible to have a no-fatality mining industry in the UK, such was the strength of HSE regulations, yet at Gleision, those were ignored. In my view, that is the truth that should have been established by the trial and never was. Although the verdict is the verdict, it delivered neither justice nor accountability to the victims of the tragedy and their families. They have all been failed by the justice system and by the absence of a full coroner’s inquest. It was only through the immense efforts of the fantastic Mines Rescue Service, together with Walter Energy and the Unity mine, close to Gleision in the Neath valley, and which, unlike now, were fully operating at the time, that the bodies were recovered and the accident could be fully investigated.

After the tragedy in 2011, in an open letter to the Secretary of State for Work and Pensions, I warned of three things. The first was that without proper review, the Mines Rescue Service would risk becoming so chronically underfunded that it would be unable to provide the stellar service to Britain’s mines that, following coal privatisation, it was set up to in 1996. Secondly, I warned that were the current funding arrangements to continue, the cost to British mining of the MRS would become prohibitive, unless it was subsidised by Government. Thirdly, I stated that both those factors would combine to reduce and diminish the vital mutually co-operative spirit that is at the heart of the Mines Rescue Service and the coal industry in Britain, irreparably changing them for the worse.

The coal industry has changed a great deal in the three subsequent years. Faced with increasing international competition and dwindling profit margins, more coal mines in the UK have had to shut down. The Mines Rescue Service has been forced to change its funding structure in order to carry on providing a service to British mines while not having its viability impinged on too badly. However, under new regulations, the few remaining mines in Britain will no longer be obliged to pay a levy to the Mines Rescue Service, and instead will have a commercial relationship with a suitable provider should a disaster occur.

The MRS has evolved to become a successfully run enterprise able to diversify and rely on fees from its other work. In 1996, the MRS levy on each mine was able to cover its core costs, but the relentless closure of British mines since means that the coal levy now accounts for only 11% of the Mines Rescue Service budget, and even that is predicted to drop to 7% next year. That clearly impacts on the capability of the MRS to carry out its vital mines emergency service. Indeed, I strongly suspect that the MRS centre at Dinas in the Rhondda valley may have to be closed and its facilities transferred perhaps to Mansfield in England, because there are no longer sufficient south Wales mines to fund it.

Since 1996, the MRS has not received a penny of support from the Government. In the heyday of British Coal, it had the resources to deliver a universal rescue service. Even after privatisation, mines paid the levy because it did not affect their profitability. Instead, a mutually co-operative understanding ensured that aid would come if an accident occurred in a mine. The MRS scheme covered the costs of funding when it was called into action, and additional costs fell to the mine or to nearby mines.

For three weeks after the accident, when the Gleision mine was investigated, the HSE became responsible for keeping the mine open because Gleision’s owners, MNS Mining Ltd, could not afford to do so. Under normal circumstances, the costs of investigation and rescue would be placed on the mining business in question. However, the finances of MNS were so precarious that that was simply not feasible. Such a scenario had never been encountered before by the Health and Safety Executive and the mines inspectorate, and they deserve a great deal of credit for ensuring that a full investigation was carried out despite experiencing budget cuts, yet they should not have been put in that position.

Although the MRS has a team of core rescue specialists, it relies heavily on the mutual co-operation of other British mines, which provide their own men to aid the rescue effort, as well as equipment and resources. In 2011, as I said, those were provided by Walter Energy and Unity, two mining companies nearby in my constituency, and the unsung heroes of the disaster. However, the rescue effort was much more fragile than it appeared. The co-operative ethos, which is the foundation of the MRS, is based on a pooling of fiscal and technical resources in the event of an accident, and was built on the foundations provided by the Coal Board’s central fund, yet Gleision clearly exposed flaws in the mutual co-operation model that were not envisaged when the scheme was set up.

The financial costs of keeping the mine safely open to enable South Wales police and the HSE to investigate fell on the shoulders of the HSE together with Walter Energy and Unity, which were also sacrificing men and equipment to investigators, and this was a heavy burden. By Friday 16 September 2011, the day after the tragedy, Walter Energy alone had covered costs of £77,645 for the recovery and investigation, yet by December had still received no recompense. Last year, it laid off over 100 men, and the Aberpergwm pit has since been on care and maintenance, as has the Unity mine, both victims of the falling price of coal, yet they were both essential to the rescue effort.

As a result of all that, if there were ever to be a future Gleision-type accident, both a rescue and a full investigation might not be feasible. When I was the Secretary of State for Work and Pensions in 2007-08, the HSE’s budget was £215 million. By last year, it had been cut by £50 million, or a quarter, to £165 million. Unless the Government provide more money for mines rescue and the HSE, accidents in mining will be more frequent, as self-policing health and safety and self-funding rescue and investigation services are no longer viable or fit for purpose.

I was one of the many community leaders who, over those long hours, observed the heroic and dedicated efforts of mines rescue workers, supported by highly professional police officers, other emergency workers and mines inspectors. I am full of praise for all of them. None of us knew at the time that there was never a chance of rescuing the men who died, but at least their bodies were recovered, in dark, dangerous and filthy conditions. The families of Philip, David, Garry and Charles have conducted themselves with dignity and deserve enormous praise from all. They do not seek vengeance and scapegoats, and nor do I; all they have asked for is justice, but they have still not received that.

In his letter of January 2012, the Secretary of State assured me that lessons would be learned from the Gleision accident. We await the impending report by the Health and Safety Executive, and I trust it will not be constrained by the trial verdict, because if it is, the inspectors will not be able to reveal their professional conclusions, which I strongly suspect broadly coincide with mine.

The day of 15 September 2011 would have been an unremarkable day in the history of the Swansea valley had proper health and safety practice been followed. We still have no answers as to why Garry, Charles, Philip and David died, why they were heading straight for the water that killed them, and why no precautions against inrush scheme was implemented. The Gleision tragedy should not have happened; that is what makes it not simply a terrible accident, but a shocking, terrible scandal.

--- Later in debate ---

[Mr Hain]

The Minister will have noticed that I said, because I am worried about this, that the HSE report will be constrained by the trial verdict. I am worried that the HSE report will not be able to be as open as perhaps, for all I know, the mines inspectorate would like to be about its views on what really happened. Will he do whatever he can to try to ensure that that barrier, if it is there, as I suspect, is taken away?

[Mr Harper]

What the report can do is set out the results of the investigation. It can set out the facts that those who inspected with their professional judgment found in the mine. What it cannot do is rerun or revisit the questions that were investigated at the trial and the jury’s conclusion. I listened carefully to what the right hon. Gentleman said. I fear that he wants the HSE to be able in its report—I do not think it can do this—to answer questions about what was in the minds of the mine manager and those working there about the direction that they proceeded in. It simply cannot revisit those questions. My understanding is that those issues were dealt with at the trial. Evidence was put forward on both sides of the argument. The jury reached a verdict, and that is something that the HSE cannot reopen in its report and investigation.

[Mr Hain]

I am not asking for that. I am certainly not asking for the HSE to read the minds of those, including the mine manager, who were mining at the time. I am simply asking the Minister to try to create circumstances in which the mines inspectors, in the HSE report, can confirm that they suspect that the water, as I said in my speech, was where the mine plan said it was and that, therefore, a catastrophic misjudgment was made. For what reason and how, it would be impossible to speculate. I readily accept that, but the misjudgment was made none the less.

[Mr Harper]

What the inspectors will be able to do is set out the evidence they got from the site investigation. They cannot revisit questions that were dealt with at the trial.

--- Later in debate ---

[Mr Hain]

I am very grateful to the Minister for offering to do that. Will he tell his colleagues at the Ministry of Justice that it is my strong view that the process should be resumed? There should be a full inquest.

[Mr Harper]

When I contact colleagues at the Ministry of Justice, I will put on record the fact that it is the strong view of the constituency MP that the inquests should be resumed. I am not familiar with the legal rules around the matter and I do not know what the position is, but I will contact colleagues in the Ministry of Justice. I will write to the right hon. Gentleman—and, because of their interest in the matter, to the other two hon. Members who are present—and set out the position. I hope that that is helpful and that it will go some way to meeting the concerns of the families who, as the right hon. Gentleman has said, have conducted themselves with great dignity throughout the process. I hope that offers some small measure of comfort, and I thank him for raising the matter in the Chamber today.

Question put and agreed to.

Oral Answers to Questions

Lord Hain Excerpts

Monday 3rd November 2014 Commons Chamber

[Mr Duncan Smith]

My right hon. Friend is absolutely right and he is approaching this from the logical perspective, which is that we have a responsibility to make sure that the economy is in balance, that we get the deficit down and that we are able to afford what we want to do to support the most vulnerable. What the Opposition fail to recognise time and again is that the economy that they left in a totally wrecked position has got to be sorted out; we cannot just go spending what we do not earn.

[Mr Peter Hain (Neath) (Lab)]

Will the right hon. Gentleman accept that children are also being pushed into poverty because his Department is not pursuing errant non-resident fathers vigorously enough? As he knows, my constituent Lisa Jones, a hard-working single mother, has been totally frustrated by the lackadaisical attitude of the Child Support Agency in tracking down the father, despite knowing his mother’s address, when he owes £23,000 and she has been struggling on tax credits and housing benefits to bring up a teenage boy while the father takes exotic holidays and avoids court orders. Will the right hon. Gentleman stop his weasel-worded replies to me and sort this matter out now?

[Mr Duncan Smith]

I completely agree that in the right hon. Gentleman’s individual case, which I do know about and I recognise, that money should go to the parent with care. We fully agree with that and the CSA, part of the Child Maintenance and Enforcement Commission, is bearing down to try and get the details of this individual. As he knows, this case is a little complicated because the individual moves time and again before the agencies can get hold of him, but I have to say that I have already intervened by talking to them about this, and I promise the right hon. Gentleman this, and ask him to pass this on to his constituent: I personally will take direct interest in this because it is outrageous that this individual gets away with what he is doing. I have told the CMEC that it must bear down on these cases. The reforms we are bringing in will do just that, and I hope the right hon. Gentleman can reassure his constituent that we will sort this out.

Pension Schemes Bill

Lord Hain Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Mr Peter Hain (Neath) (Lab)]

In noting the interesting points that the hon. Member for Amber Valley (Nigel Mills) raised, I particularly commend his colleague, the hon. Member for Cities of London and Westminster (Mark Field), for drawing to the attention of the House the fact that the average pension pot is just £17,700. That is a miserably small amount, and underlines the dire predicament that far too many pensioners face, and which the Bill does nothing significant to address.

The hon. Member for Amber Valley makes interesting points, and some valid points, about lifestyle changes as people get older, but they apply in the main to professionals and middle-class people. For a lot of working-class people who have worked in manual, low-paid service jobs for most of their lives, those choices do not exist in the same kind of way; I caution the hon. Gentleman about that.

I commend my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) for his expertise and very authoritative critique of the Bill, which I guess he will follow through in Committee.

The Government are introducing in this Bill the biggest reform to pension tax rules in nearly a century. Of course citizens, especially those with small pension pots, welcome the choice to take lump sums that may be more beneficial to them—by, for example, enabling them to pay off a mortgage or loan, or fund social care support—rather than eking out a living on what, for far too many, will be very small monthly payments. The kind of annuities that most people have are not inflation-indexed, so their value erodes every year. Most neither cover a partner nor offer protection against illness or infirmity. Most do not allow people to leave a legacy if they die young; nor do they let them benefit from good future investment returns or rising interest rates. For all those reasons, there has been widespread public frustration about the inflexibility of annuities, especially in the past few years of low interest rates and because, as people live longer, a retirement can be as long as 20 or 30 years. To buy an annuity 30 years ahead when savings could continue to accrue as investments makes less sense than previously.

So far, so good, as far as the Bill is concerned, but there are massive dangers as a result of destroying good annuities, which has been going on for a few decades and is bequeathing a real nightmare that the Government’s policies are nowhere near capable of addressing, let alone preventing. A rapidly ageing population is dumping a huge additional burden on the young, many of whom are leaving university with already massive debts thanks to the Government’s dysfunctional policies. Now they will be saddled with subsidising through their future taxes older people who are being encouraged to live for today, not to protect themselves for tomorrow. My right hon. Friend the shadow Chancellor was right to voice fears in March that widening choice away from annuities could mean individuals spending all their savings within a few years of retirement and then becoming dependent on the welfare state, at a significant cost to taxpayers. There is a serious prospect that pensioners who cash in their lump sums could be plunged into poverty, leaving future taxpayers to grapple with the consequences.

It is therefore incredibly important that pension reform is not carried out in isolation, although the Bill risks doing that, because it is one of many ways, albeit not the only one, in which we can give peace of mind to people planning for or approaching retirement. It is imperative that reform happens in the context of a comprehensive policy for retirement and ageing in the UK, especially with regard to health and social care for the elderly, on which my right hon. Friend the shadow Health Secretary has rightly insisted that we need whole-person care in what amounts to a national care service to complement the national health service. Mainly because of their obsession with cutting public spending, the Government continue to fail abysmally to face up to this huge challenge and duck the reality that there will have to be much more significant public support to deal with this urgent social need. They continue to pass the buck to future Governments and taxpayers, and to ensure that there is a future in which infirm and frail elderly citizens and their families see their savings and inheritances disappear as they are engulfed by horrendous care costs.

Our changing demographic profile means that baby boomers—people such as me who were born between 1945 and 1965—will form the big bulge in the active ageing category. That change presents immense problems, not least in preparing for the future. Ironically, as our society gets older, pensions should increasingly become a young person’s issue, because the ratio of workers to pensioners has started to tip towards crisis levels. In the next 50 years or so, the number of people over pension age will increase by more than half, and there will be only two people working for every one person in retirement, compared with four working people for every retired person today. A hundred years ago, there were 10 working people for every one person in retirement.

I remember only too well having to confront that serious situation when I was appointed Secretary of State for Work and Pensions in 2007. The cost implications for future generations of such increasing longevity are deeply alarming. People are expected to be active for longer in retirement and need the resources to fund that. I welcomed the Government’s delivery, through the Occupational and Personal Pension Schemes (Automatic Enrolment) (Amendment) Regulations 2013, of measures that I introduced through the Pensions Act 2008, but I see no sign at all that they have any intention of taking the necessary decisive action to ensure that most people get decent pensions, whether private or public. They are certainly not doing that through the Bill. The decline in private sector occupational pension provision since the late 1960s is serious and, in the face of increasing costs, employers have been abandoning their defined-benefits—that is, final-salary—schemes, whose active membership numbers have fallen from 8 million in 1967, to 5 million in the 1980s and 1990s, to fewer than 3.5 million today.

There is a chronic problem of under-saving, with perhaps as many as 7 million people not saving enough to fulfil their aspirations in retirement, and some low earners not saving at all. The Bill does not tackle the problem, meaning a chasm will grow between the income that they need and what they actually receive in retirement. There are many reasons for people not saving. Many on low incomes or with broken working patterns do not have access to a workplace scheme. Some will be put off by the complexity of pensions while others will simply live for today. Others will lack confidence in pensions. The Bill does nothing to address that.

Of those of working age, around three quarters say that they will need more than the state pension to live on, yet only around 40% of those who have not yet retired are saving into a private pension; 60% are not. We must get to the point at which saving becomes the norm and a savings culture is embedded in society in general and in the young in particular. In that respect I welcome the Government’s decision to raise the level for tax-free ISAs and premium bonds, but such initiatives deal only with the tip of an iceberg; the Bill does absolutely nothing to deal with it.

Sixteen per cent—one in six—of 20 to 24-year-olds are saving for a pension, compared with about half of those aged over 35. Less than half of moderate to low earners with incomes from £5,000 to £35,000 are saving towards a pension, compared with three quarters of those earning more than £35,000. The requirement for automatic enrolment into a qualifying pension scheme introduces for the first time a bias towards saving, which is welcome. Evidence suggests that automatic enrolment is one of the most effective ways to combat people’s tendency not to act when faced with difficult financial decisions. It also has the greatest impact among groups where participation rates are the lowest. On the other hand, nobody should pretend that most such schemes will deliver the kind of living standards in retirement that people today expect. Most will not—and the Bill does not.

The plight of those who lost their pensions because of the collapse of their occupational pension schemes was both a national scandal and a personal tragedy for all the individuals concerned. Through the Pension Protection Fund, the previous Labour Government legislated to ensure that such a scandal could not be repeated in future: it safeguards more than 10 million people in eligible defined-benefits occupational pension schemes throughout the UK. We also established a more powerful Pensions Regulator. I was able to deliver late in 2007, through the financial assistance scheme, a fair and just settlement for 140,000 people who were robbed of their occupational pensions as a result of employer insolvency before the Pension Protection Fund was created. All those affected received 80% of their expected core pension.

When Labour came to government, many women were prevented from building a state pension entitlement in their own right. Our Labour Government made significant headway, legislating for a simpler, fairer and more generous state pension system, so that about 75% of women who retired in 2010 received a full basic state pension like men. As a result, by 2025 more than 95% of men and women will retire with a full basic state pension. This Government have also made improvements, but there are still anomalies they have not resolved, especially for women today in their late 50s. The Bill does not address that and there is no sign that it will do so.

In 1997, carers were similarly mistreated by a system predicated on a 19th-century view of working lives and social relationships; millions were without access to occupational pensions; and the mis-selling of private pensions, overseen by the previous Conservative Government, was a national scandal. Meanwhile, the exceptional equity returns of the 1980s and 1990s allowed many defined-benefits schemes to ignore the rapid rise in the underlying cost of their pension promises.

That was compounded by botched policy such as the minimum funding requirement introduced by the current Leader of the House, then the Minister responsible, which failed to encourage employers to fund their pension schemes properly. In the 1980s and 1990s, many firms, despite rising liabilities, took the decision to take contributions holidays, believing that a bullish equity market would be a long-term trend. The Conservative Government believed that too—indeed, they encouraged it, as demonstrated by Nigel Lawson’s decision effectively to cap pension fund surpluses in 1986. As the Pensions Commission noted:

“The deep dip in contributions seen in the period 1988-91...almost certainly reflects the impact of this policy.”

[Mr Brian Binley (Northampton South) (Con)]

I am listening with interest, as I always do, to the experienced right hon. Gentleman. I understand many of the points he is making, and, as a pensioner myself, I have some sympathy with them. However, I wonder whether he has sympathy with me, in that when he paints a picture of all that has gone wrong, would he include in that picture the work done by the former Chancellor of the Exchequer who later became Prime Minister, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), in taxing the private sector pension schemes almost to the point of destruction? Does he agree in retrospect that that was not the cleverest move?

[Mr Hain]

I have great respect for the hon. Gentleman despite our big political differences. I anticipated this question, he might be intrigued to know, and I looked into it. In fact, he is entirely wrong and that Tory charge is entirely misplaced. Let me explain why. The stock market fall reduced the basic market value of pension scheme assets by some £250 billion between 1999 and 2002. The effect of the package of tax changes for which he and the Conservatives seek to pin the blame on our Government and Chancellor was entirely marginal. The problems that occurred in the new century were due to the stock market downturn, not the tax change, which was minuscule compared with pension fund turnover. Let me remind him that in 2007 the respected and extremely independently minded economics commentator Anatole Kaletsky wrote in The Times:

“How could the removal”—

by the Chancellor, that is—

“of a £5 billion annual subsidy suddenly reduce a pensions industry with more than £1,000 billion in assets from the ‘healthiest in the world’ to one that was nearly bankrupt? The answer is that it couldn’t and it didn’t.”

That rather puts into perspective the hon. Gentleman’s impudent and irrational question.

It was no Tory utopia in pension holidays in the 1980s; it was a Tory fool’s paradise, with the Government behaving irresponsibly, recklessly and complacently in encouraging employer pension holidays. I quote from the 2004 Pensions Commission report:

“When the fool’s paradise came to an end...companies adjusted rapidly, closing”

defined-benefits

“schemes to new members. A reduction in the generosity of the DB pensions promises which existed by the mid-1990s was inevitable.”

So the Tory party bears a heavy responsibility for the closure of defined-benefits schemes and the shift towards defined contribution, and this Bill nowhere near compensates for that.

To be fair, though, this was not a UK-only phenomenon, and certainly not one brought about by changes made by the previous Labour Government—very far from it. Accelerated further by record demographic changes, it was a worldwide phenomenon—a product of the neo-liberal orthodoxy gripping Governments from the era of Margaret Thatcher and Ronald Reagan. Sadly, this Government remain in the grip of that, and the Minister’s former Liberal party colleague, John Maynard Keynes, would be turning in his grave to see a Liberal Democrat participating in it. In the US, for example, the number of defined-benefit schemes halved in less than 30 years, while defined-contribution schemes tripled. Australia, also worshipping neoliberalism, saw an 80% reduction in the number of workers covered by defined-benefit schemes from the 1980s.

Whereas this Bill does very little, if anything at all, to tackle pensioner poverty, Labour led the way in responding to the challenges that our pension system faces. First, we tackled pensioner poverty. In 1997, some 2.7 million pensioners were living in poverty, many facing the indignity of living on as little as £69 a week, as I am sure you will recall, Mr Deputy Speaker.

Thanks to the pension credit, winter fuel payments and a 9% real-terms increase in the basic state pension, we lifted more than 2 million pensioners out of absolute poverty. The measures in the Pensions Act 2008 took protection even further, with a new settlement for women and carers and a restoration of the earnings link that had been removed by the Conservatives in 1980.

We also took decisive action to tackle the loss of confidence in the private pensions market. One reason for that loss of confidence was the pensions mis-selling scandal that our previous Labour Government inherited. In 1997, less than 2% of pensions mis-selling cases had been satisfactorily resolved; by the end of 2002, under Labour, more than 99% of consumers with mis-selling claims had been compensated, with total compensation reaching £11 billion. That £11 billion was the bill for Tory incompetence and Tory injustice over pensions mis-selling.

I make these points because they are an essential background to this Bill, whose implementation will itself raise important problems. A key one is that people might spend all their pension savings at the point of retirement, dooming themselves to poverty later in life. Having saved into a pension fund, received tax relief for many years and reached retirement with a pot of money, they might be tempted to just blow the lot all at once—perhaps on the Minister’s Lamborghini—meaning they would never have the benefit of extra income as they get older. If that happens, the tax relief they received will not have funded a pension; the employer contributions they may have received along the way will just end up funding immediate consumption, rather than providing a long-term income.

We know that some people will do that; we do not know how many and we hope that the number will be relatively low. The Government assume that very few will do so, but a survey by the respected pensions expert Ros Altmann—whom the Government appointed in July as their business champion for older workers—suggests that currently about 7% say they would spend it all. The truth is that it is impossible to accurately predict this. I expect that people with small sums would be most likely to spend the whole lot, but that the tax system itself will act as a disincentive to others to take the money and run. However, if too many people do it—the rising cost of living will put pressure on them to do so—there will be increasing numbers in poverty in future, which will also be a drag on the whole economy as the baby boomers get older and have less and less money to spend.

The new flat-rate state pension mitigates some of the risk of people falling back on the state having spent all their pension savings, but there will still be about 20% of pensioners on means-tested benefits even after the new system starts. That is partly because many people will not receive the full state pension during the early years, and also because there are other means-tested benefits aside from pension credit. Those who do not own their own home would still be potentially entitled to means-tested benefits in retirement, via council tax benefit and, of course, housing benefit.

People might try to game the system by taking all their pension money and then recycling it into a new pension fund, getting more tax-free cash and another lot of tax relief. That would be of most benefit to those who are reasonably well off with high incomes in later life, and it could be costly in terms of extra Exchequer spending on tax relief.

The new system could cause great confusion for people. These points have been made by Members who have spoken before me. If people are suddenly faced with new choices at retirement, they may not know what to do and end up at the mercy of pushy salesmen selling unsuitable products. In the old system, people pretty much had to buy an annuity unless they had substantial amounts of pension savings—perhaps £100,000 or more, but certainly at least £50,000. That meant there was no choice to be made, and there was no guarantee of receiving a secure income for life: the annuity may have given people very little, it might have been the wrong type of annuity for them and usually had no inflation protection. That was partly because insurers did not treat customers fairly and were left to regulate themselves, without having to offer suitable products or good value, but with the chance of taking about 2% of each customer’s pension fund without their realising.

Few dispute that the old system clearly did not work for customers, and the Financial Conduct Authority and the Financial Services Consumer Panel uncovered some disgraceful practices that were very detrimental to consumers. I recognise the Minister’s sincerity in seeking to address some of those problems.

Annuities were not value for money. In fact, someone retiring last week with savings of £100,000 and the intention of buying a pension annuity that kept pace with inflation could expect to be paid only about £3,600 annually. Assuming they are 65 years old, they will need to live to the age of 93 to get their money back; 15 years ago, they would have received much more.

That was partly a market issue, and it should perhaps have been possible to reform the market without the draconian retreat from annuities that this Government are proposing in the Bill. Would it not have been possible to insist that insurers were obliged to treat customers fairly by ensuring that they would be liable if they did not carry out suitability checks to identify which type of annuity was best and if they did not offer a good rate? Would it not have been possible to reform the way annuities worked, and to allow more but not complete freedom?

What protections will be built into the new system to ensure that unsophisticated consumers are not left at the mercy of product providers offering poor product choices or higher risk products that people do not understand and on which they will end up losing significant sums? The FCA needs to be on top of that right from the start. Judging by past form, can we be confident of that? I have very serious doubts.

What will the Government do to ensure that people are given proper, impartial and professional help before they make their retirement decisions? Half an hour of free guidance will not be enough. Such guidance must be delivered by those who are qualified and can be relied on to ensure that people ask the right questions before they buy a product or make a decision that, for lots of them, will be a life-changing one.

Ideally, guidance to help people to make a financial plan should start to be given well before retirement. We have underestimated the complexity and confusion that people face compared with what was faced by their predecessors, who were simply in an annuity scheme that came and went with their working life. Although it might be hard for the very young to take such advice on board, would it not still be worth expanding some of the guidance for potential savers?

If the guidance is delivered by product providers, they are liable to entice their customers into poorer-value products. Experience shows that they will do whatever they can to try to keep customers’ money, or to give them poor value and make extra profit. The annuity market has worked poorly for years, with rising profits to insurers and reducing value for customers, who ultimately are pensioners. What will the Government do to ensure that the new products developed finally offer good value, and that charges are fair and terms reasonable? The Bill does not adequately address those questions.

Will the Government ensure that people get signposted to full advice as well as just guidance? In the new, more complex world, a much wider array of choices will be on offer and people need to understand them all. They also need to understand the tax implications of cashing in their pension fund, so the guidance must make that clear.

Why did the Government not consult on these radical measures before introducing them as a bombshell earlier this year? My view is that if they had done so, the industry lobby would have been so fierce that their introduction would have become too difficult. Only shock therapy will really wake up the industry.

Now that all or a substantial part of a person’s savings can be taken out on the day of retirement, a pension plan is more like a golden handshake for leaving work. Let us say that a person reaches their late 80s and finds that they are fast running out of money. Where is their safety net, except to fall back on the welfare state, which is certainly not the Chancellor’s favoured outcome, even for those already in desperate need? Choice is good but structured choice is better, especially when the issue at stake is people’s hard-earned futures.

We need a pension system that works not for the market, but for pensioners and taxpayers. According to the RSA, most people want to

“give their money away to someone whom they can trust will use it wisely to generate an income when they retire”.

We need a comprehensive private pension system. That is not something that exists in the UK, but it must exist in the future. That point is not addressed seriously by the Bill or any of the Government’s policies.

There has been a lot of talk about the Dutch model of mega-funds. In Holland and Denmark, people put money aside each year and receive a pension in retirement. That seems simple and it is. However, if a typical British pensioner and their Dutch counterpart each had the same amount saved, had the same life expectancy and retired on the same day, the pension that the Dutch saver received would be 50% higher than that of the British pensioner—that is half as much again. With the same amount of money saved, there is a huge increase in peace of mind and quality of life.

The Pension Schemes Bill will enable employers to offer collective defined-contribution schemes—versions of mega-funds—at their discretion, but few employers have expressed enthusiasm. According to the Minister, CDC schemes offer higher and more stable returns by pooling risk. Employees will all pay into one common pot, instead of braving market risks on their own, so that years where losses occur can be offset by those that see a profit.

The Government are right to legislate to permit collective defined-contribution pensions, but I urge Ministers not to over-hype the benefits. In principle, such schemes ought to be better for employers than traditional final salary schemes and better for workers than traditional defined-contribution schemes. In practice, they still suffer from market and actuarial risks. Ros Altmann points out that lower earners might subsidise higher earners and that younger members might subsidise older members. The new pension freedom provided for in the Bill to take most, if not all, of the pension pot in a lump sum might also mean that people will prefer pure defined-contribution schemes that they can access in retirement if they wish to, because collective defined-contribution schemes usually mean that people cannot just take the cash, which might well make them less attractive to members.

My challenge to the Minister is, rather than leaving the private pension system to market providers and their whims, to build a new system that works—a system with longevity that savers will understand and find confidence in. A lack of confidence in the Government’s approach to pensions is something that I imagine savers and I share.

There seems to be some ideological confusion within the Government about the structure of pension reform. On the one hand, the Bill allows pensioners to withdraw their savings in a lump sum at retirement, doing away with annuities, which may be flawed, but which are important for older people and especially for vulnerable people who need to ensure a continuous income stream. On the other hand, the Minister has championed the idea of allowing employers to offer Dutch-inspired collective defined-contribution schemes. It is the individual versus the collective—which is it? The two ideas are not entirely incompatible, but they are far from ideological bedfellows. The Chancellor’s plan has serious appeal to providers of pension products, who until now have been limited to annuities, but who will now diversify and probably profit hugely from the move, as they usually do, at the expense of pensioners. It would be interesting to know whether the Chancellor consulted his City friends ahead of the policy announcement.

As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East argued, the biggest long-term issue with the end of compulsory annuitisation is efficiency. The returns for savers will be lower because pension funds will have to assume that an individual will exit the scheme at 55 and, 10 years before that exit date, will have to move the individual’s pension savings into low-risk, low-return assets—that is, bonds—to ensure that there is no possibility of a reduction in the size of the pension pot in the run-up to exit. That is known as a lifestyling investment strategy and it is standard.

Before the taxation of pensions Bill, the fundamental critique of individual DC pensions was that they prevented savers from getting the higher returns that come from pooled investment, where greater risks for greater rewards can be taken because there are enough assets to hedge against those risks. The Government now risk making the problem even worse by ensuring that the shift to low-risk, low-return assets takes place even earlier in the pensions savings cycle, at age 45 rather than 55 as now. While the Chancellor’s right hand further fragments and individualises pensions, the pensions Minister’s left hand legislates for collective defined-contribution pensions. Why should any employer move to that collective system when they can see the Treasury going down precisely the opposite route? I doubt, sadly, whether many will do so.

There are other issues such as the nature and provider of financial guidance, who foots the bill for it, and the impact on eligibility for means-tested benefits and social care. The issue of efficiency, however, is fundamental: greater freedom might come at the expense of bigger pension pots.

In conclusion, I have considerable concerns about the Bill, and do not think the Government are doing anything like enough to face up to the time bomb of our ageing society, and the required pensions and social care needed to underpin the new life rapidly overtaking us. The whole Government philosophy of leaving private pensions to the market, and saying to the citizens, “You are on your own”, has failed abysmally in the past, just as—sadly—I believe it will fail abysmally in the future, at terrible cost to us all.

Personal Independence Payments (Wales)

Lord Hain Excerpts

Wednesday 9th April 2014 Westminster Hall

[Mr Peter Hain (Neath) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Owen. I apologise at the outset for having to leave immediately after I finish speaking, to undertake an official appointment relating to my duties as a former Secretary of State for Northern Ireland. I will not hear the Minister’s reply, but I will of course read it.

In the short time since personal independence payments have come into force, it has quickly become evident that the system is miserably failing people and leaving some of the most vulnerable in our communities in absolute desperation. My Neath constituency has one of the highest rates of take-up of the old disability living allowance, a legacy of the industrial heritage that once provided livelihoods for many of my constituents, but has now resulted in serious health problems—a heavy price to pay.

New applicants face a system of delay and despair. Many constituents have been waiting six months or longer, having had their face-to-face assessments and been told, frustratingly, that

“the report is in the final stages with a senior healthcare professional.”

For those six months they have been living off savings to help them to adapt to their conditions. The prospect of a backdated payment is of no comfort to them as they struggle with day-to-day tasks that many of us take for granted, while their families suffer under the stress and strain of caring for them.

In some of the cases processed by Capita, health care reports have not been up to standard and further information has been required. That involved going back to the assessor and requesting further information. In one case, a second face-to-face assessment was required, and in one astonishing instance it came to light in March 2014 that despite the assessment being carried out in November 2013, no assessment report had been prepared by the assessor. Those constituents’ misery and distress seems to have no end.

The protracted ordeal is just to get the assessment report from Capita to the Department for Work and Pensions. As the assessment reports start to trickle through to the Department, the emerging trend is of further delays in the final decision after the report has reached the Department. So after months of waiting with Capita, applicants face further delays, and that only adds to their misery.

I raised with Capita and the Department a case that encapsulates the ordeal. A constituent made his original application on 5 July 2013 after suffering a serious brain seizure, a stroke and several other seizures. He returned to work initially, but because of his mobility problems he could not continue. He underwent a home assessment on 15 October 2013, and made numerous calls to the Department for Work and Pensions to chase up the progress of his application. Every time, he was referred to Capita because the report had not been sent, but he was told that

“the report is in the final stages with a senior healthcare professional”.

One event epitomises his situation. He woke up one morning and asked his wife to leave him in bed as he was feeling unwell. Shortly after she left for work at 8 o’clock in the morning, he suffered a series of convulsions that lasted approximately 30 minutes. He had difficulty breathing and removing his continuous positive airway pressure mask, which he has to wear because of obstructive sleep apnoea and the danger of a stroke or heart attack. He was unable to get out of bed for the rest of the day until his wife came home at 4.30. He did not eat or drink all day and had to urinate into a bottle.

My constituent’s wife is caring for him but because he has no income from PIP she is at the point of utter exhaustion. The decision to award the benefit is vital to enable his wife to give him the proper care and supervision he needs. Until a decision is made, the couple cannot arrange that care, and their life is in limbo. In March, my constituent finally received his decision notice, only to be informed at the end of the month that a stop had been put on his payment—a decision that could not be explained when he phoned DWP. It has now been nine months and he has not received a payment. DWP’s decision notice states that he is owed a back payment of more than £5,000. He has been let down by Capita and the Department for Work and Pensions as his anguish goes on.

In another case, the application was made in June 2013. The report from Capita was eventually received by DWP on 13 February, but a decision has still not been made. The claimant told me:

“I have no confidence that the process will ever end, there is always one more stage, one more delay.”

That sentiment is felt by many who have lost faith, which is a dreadful stain on the Department for Work and Pensions, where I served as Secretary of State.

The excruciating stress and anxiety is hitting people seriously, including cancer sufferers and ex-servicemen with post traumatic stress disorder. Ministers should be ashamed of the system, which is punitive, nasty and causes abject despair to far too many people.

[Kevin Brennan]

To emphasise the dilemma facing our constituents, I should say that in a similar case in my constituency a women who suffered a stroke made an application in June 2013, and has just received the benefit. Her husband elected to reduce his hours at work as a result of which they lost the tax credits that they were entitled to, so they went into even deeper problems as a result of the unacceptable delays.

[Mr Hain]

My hon. Friend makes an important point. I am not going to make personal attacks on Ministers because they probably believe they are doing a professional job, but I sometimes wonder whether they have any idea of what is happening on the ground as a result of their policies.

If the Atos debacle taught us anything, it is the importance of getting the decision right in the first place—in my constituency, the local welfare rights unit had an 80% success rate with its appeals against Atos’s decisions—but that should not mean waiting unacceptably long times such as six, seven or eight months for a decision that could dramatically affect somebody’s life and income. Action must be taken immediately to address this inexplicably lengthy and prolonged system that is causing misery and despair for applicants. The turnaround of applications must be drastically accelerated by both the assessment provider and the Department.

[Several hon. Members]

rose—