Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017

Lord Henley Excerpts

Thursday 9th March 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, this order was laid before the House on 2 February 2017. I give the Committee the usual assurance that the draft statutory instrument is compatible with the European Convention on Human Rights.

The order reflects the conclusions of this year’s annual review of the automatic enrolment thresholds required by the Pensions Act 2008. The review considered both the automatic enrolment trigger, which determines the point at which someone becomes eligible to be automatically enrolled into a qualifying workplace pension, and the qualifying earnings band, which determines those earnings of which the enrolled employee and their employer must pay a proportion into a workplace pension.

The order sets a new lower and upper limit for the qualifying earnings band and is effective from 6 April 2017. The earnings trigger is not changed and so no further provision is required in this order. The earnings trigger remains at the level set in the automatic enrolment threshold review order of 2014-15. Automatic enrolment continues to be a programme that works; nearly 7.3 million people have been enrolled, more than 400,000 employers have met their duties and the opt-out rate remains low at around 9%. We are now in the final year of rollout and the most challenging phase of automatic enrolment, with small and micro employers staging in peak volumes throughout 2017. Against this backdrop, it is more important than ever to maintain simplicity and consistency for employers. This year’s order will provide this through to the end of rollout in February 2018.

I am sure the Committee will share my enthusiasm about the very exciting juncture of automatic enrolment at which we find ourselves, with the review of the policy and its operation being undertaken by my department this year. With that review, it is time to reflect on the successes we have achieved so far, take stock of the current position and consider how to build on this so that automatic enrolment continues its success in helping to rebuild a culture of saving. As such, it is important that this year’s thresholds decision avoids pre-empting the outcome of the 2017 review but still delivers on the established principles of increasing the opportunity for people to make meaningful savings into a workplace pension while balancing costs for employers.

To describe the impact of the order, I turn first to the qualifying earnings band. As signalled by my honourable friend the Minister for Pensions on 12 December 2016, the order will, as previously, align both the lower and the upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits of £5,876 and £45,000 respectively. By maintaining the alignment with the national insurance thresholds, both at the point where contributions start for low earners and are capped for higher earners, the overall changes to existing payroll systems are kept to a minimum. This decision therefore both ensures simplicity and minimises the administrative burden of compliance for employers in 2017-18, while maintaining consistency for hundreds of thousands of small and micro employers implementing automatic enrolment over the coming year. As I said, the order does not change the earnings trigger, which remains at £10,000, as set in the 2014-15 order.

Automatic enrolment continues to bring into its eligible target group those least likely to save for retirement. Low-paid workers and women, who are often likely to be low earners, have traditionally been underrepresented in workplace pension savings. Between 2012 and 2015 the private sector saw a 30 percentage point increase in eligible female participation in workplace pensions, and in 2014 there was no gender gap at all in participation. In fact, 2015 has seen more eligible women in the private sector participating in a workplace pension, exceeding the participation of men with 70% to 69% respectively.

Due to anticipated wage growth and with the maintenance of the existing trigger, we expect that an additional 70,000 individuals will meet the earnings criteria and be brought into the automatic enrolment population, of whom around 75% are women. Individuals earning below the £10,000 earnings trigger but above the lower earnings threshold will still be able to opt into a workplace pension and benefit from their employer contributions, should they so wish.

In conclusion, the decision to maintain the earnings trigger at £10,000 will increase the number of low earners who meet the earnings criteria and are therefore automatically enrolled in a workplace pension. The decision will increase the total number of people saving into a pension and the total savings. In addition, the decision to maintain the alignment of the lower and upper earnings qualifying bands with those for national insurance contributions maintains simplicity and consistency and minimises the burdens on employers at a crucial stage of the programme’s wider rollout. Taken together, that means that the total pensions saving is expected to increase by some £71 million. The order therefore ensures that automatic enrolment will continue to provide greater access and opportunity for individuals to save into a workplace pension and build up meaningful pension savings. I commend the order to the Committee.

[Baroness Bakewell of Hardington Mandeville (LD)]

My Lords, I thank the noble Lord the Minister for his instructive introduction to the order and for the fact that the number of women who are now enrolling has increased considerably. That is very good news.

I welcome the fact that the earnings trigger above which people will be automatically enrolled will remain at £10,000, which seems very reasonable. A lower threshold would bring more people into pensions, but, as the Minister indicated, with a state pension currently providing over £8,000 in retirement, there is obviously a limit to how far the Government want to be enrolling people who earn approximately £9,000, taking into account the cost to employers of setting up schemes, making payroll changes and so on. As has been indicated, the earnings trigger will undergo a fundamental review as part of the automatic enrolment review later this year. It would perhaps be better to wait for that and to look then at altering the trigger threshold.

The lower and upper limits for the band of qualifying earnings, on which contributions are due, are currently linked to the lower and upper limits for national insurance contributions. The order maintains that connection. However, I note that the Chancellor of the Exchequer raised the upper limit for national insurance contributions from £43,000 to £45,000. The order does the same and means that higher earners will be putting pension contributions in over a slightly wider band. That is welcome, but they can of course opt out if they wish to.

Although I welcome the regulations, I flag up my concern about people who have multiple jobs whose individual incomes will be below the threshold but cumulatively above it. They might earn £6,000 in one job and £5,000 in another. Such people are excluded from automatic enrolment; perhaps that can be considered on another occasion.

The Review of the Automatic Enrolment Earnings Trigger and Qualifying Earnings Band for 2017/18: Supporting Analysis report, which was published in December 2016, refers to an important point about the 280,000 people who earn between £10,000, the automatic enrolment trigger, and £11,500, the current tax threshold, who get tax relief. However, they get their tax relief only if it is administered according to the relief-at-source tax system, but not if their tax relief is administered according to another system, the net pay arrangement. That arrangement is somewhat obscure and the Government have failed to address the issue in the order. Those are minor points, however, and I generally welcome the order.

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[Lord McKenzie of Luton (Lab)]

My Lords, automatic enrolment has been a hugely successful example of public policy and once again I pay tribute to the role of my noble friend Lady Drake in helping to formulate its development and implementation.

The success of auto-enrolment has been built on rigorous research and assessment of the data, engagement with the industry and the building of a political consensus—legislated for by a Labour Government, implemented by the coalition Government and now sustained by the Conservative Government. Of course, that does not mean that we share an identity of view on every aspect of its implementation, as this discussion has already indicated. I will say more on this later. But it has undoubtedly been successful because it addresses a fundamental issue of chronic undersaving for pensions.

To date we are told—we have new figures today, I think—that some 7.3 million workers have been automatically enrolled by nearly 400,000 employers. The DWP review suggests, and we agree, that with all large and medium-sized firms having reached their staging times, the rollout for small and micro-sized employers is the most challenging phase. Of course, we are still in the 1%/1% contribution phase. DWP analysis suggests that by 2019-20 there will be an extra £17 billion of workplace saving per year as a result of automatic enrolment—a considerable achievement.

Of course, the success of auto-enrolment has run ahead of the necessary regulatory framework as it spawned the growth of master trusts. But this is being addressed in part by the Pensions Schemes Act, as I think it now is. Perhaps the Minister can give us an update on implementation plans for this legislation and its multitude of regulation-making powers.

The Minister will be aware that there are obligations on employers not only to automatically enrol workers but periodically—every three years—to re-enrol those who have not taken up the opportunity thus far. It is understood that there is a six-month window in which to do this. Given an October 2012 start date for automatic enrolment, employers will increasingly face this obligation. Can the Minister give us some data on how this is all going? How many workers have been re-enrolled and how many have opted out?

The order addresses the earnings trigger, which determines who is eligible to be automatically enrolled, and the qualifying earnings band, which determines the minimum level of contributions. The particular bone of contention with this order, as the Committee heard from my noble friend Lady Drake, is the earnings trigger, which is retained at this year’s level of £10,000. While it represents a modest lowering of the threshold in real terms, it does not go far enough, as my noble friend asserted. Bringing within scope a further 70,000 individuals, 75% of whom are women, is to be welcomed. But if the trigger rate were just set at the national insurance primary threshold, as the papers before us show, a further 750,000 would be in scope and 70% or more of those would be women.

My noble friend has highlighted research, some of which came from Scottish Widows. Although it shows improvement in the number of women saving for retirement, there is still a gender gap. That reflects the fact that women are more likely to be in part-time work and lower-paid jobs—it is they who bear the brunt of having an earnings trigger that is too high.

In making the judgment as to the appropriate level of the earnings trigger for 2017-18, the Government assert that the overriding factor should be ensuring that people have sufficient retirement income savings. We agree with this. However, they then use the broader upcoming 2017 review to settle for the status quo on the basis of stability and affordability, without, I suggest, any detailed analysis, at least on the latter. Perhaps the Minister will take the opportunity to expand on this justification for the record.

So far as the qualifying earnings band is concerned, we note the continued alignment of the starting point with the LEL and the retention of an overall cap on employer contributions. The Government acknowledge that using a trigger below income tax personal allowance level does not preclude the benefit of effective tax relief if net pay schemes are used. Reliance on those below the income threshold opting in ignores the key principle of inertia on which auto-enrolment is built. Can the Minister give us any data on the numbers who opt in to schemes voluntarily and obtain the benefit of the employer contribution? Nevertheless, as my noble friend said, we look forward to the upcoming review and trust that it will include a focus on such matters as mini-jobs—mentioned by the noble Baroness, Lady Bakewell—and the self-employed.

The self-employed have of course caught the attention of the Chancellor this week. So, too, have those who operate through their own companies. When the legislation was introduced, excluded from its scope were sole-director companies, generally on the basis that such individuals were officeholders rather than workers. Given the growth of such arrangements, are there any plans to review this situation?

The order represents a modest advance in expanding the reach of auto-enrolment and we will obviously not oppose it. The 2017 review is an opportunity to take stock of matters more widely to ensure that the full benefits of this policy are obtained and that there are better outcomes, in particular for women and the low-paid.

[Lord Henley]

I am very grateful to the noble Lord for his offer not to oppose the order. I am even more grateful for the generally constructive approach that all noble Lords have taken to it. As we know, it is very simple and deals merely with automatic enrolment and raising the lower qualifying limit and higher qualifying limit in line with the lower earnings limit and the upper earnings limit of NICs, at the same time leaving the £10,000 figure where it was.

As I made clear in my opening remarks, we are conducting the 2017 review, so I have to be fairly circumspect in what I say in response to noble Lords because I do not want to prejudge that. However, many of the speeches, in particular that of the noble Baroness, Lady Drake, will be taken into account in that review, and we will consider in due course any further comments that she wishes to put forward. I will answer one or two of the more detailed questions put to me in the course of this short debate.

Perhaps I may deal first with the question of multiple jobholders, which was raised by the noble Baroness, Lady Bakewell, by making it clear that for some multiple jobholders, one of their jobs will earn in excess of £10,000. They will therefore be automatically enrolled on that job. But it is the case that they can choose to opt into schemes if they earn under £10,000 but more than the lower earnings limit so if they have a number of jobs, one of which is paying at least £5,876 a year, they can obviously do that. We think that around 500,000 multiple jobholders meet the age criteria for automatic enrolment and that of these, some 330,000 earn more than £10,000 in at least one job, so they would be automatically enrolled in it.

This may deal with the point raised by the noble Lord, Lord McKenzie, when he asked about the numbers of those seeking to voluntarily opt in who are below the £10,000 trigger and above the upper earnings limit. I understand that the survey we conducted in 2015 suggested that some 5% of those ineligible workers had chosen to opt in, which probably shows the benefit of the whole idea behind automatic enrolment—that you are automatically opted in and have to opt out. If we compare a 9% dropout rate there with a 5% enrolment rate for those who can, we see that leaving these things to a voluntary process would have led to a very different take-up from what we have seen so far with the automatic enrolment introduced by the 2008 Act. As I think I made clear in my opening remarks, we have seen a dropout rate among those who were automatically enrolled of only 9%. That rate might go up as the contributions go up but, at the moment, it is way below what was originally estimated by the then Government who introduced this measure and in other measures by us.

The noble Baroness, Lady Drake, expressed some concern about the £10,000 limit. She would like to reduce it still further. She certainly agreed that it was preferable to keep it at £10,000, though, rather than linking it to the personal income tax threshold. I think she would also agree that the arguments are finely balanced on both sides as to whether to increase or decrease the limit. I can see the case for a degree of simplicity by aligning it with the personal income tax threshold, but that would obviously exclude many more people. There is also the argument on the other side: if one lowers it—below £10,000—yet more people who are not paying income tax will be eligible for automatic enrolment. Having listened to the noble Baroness and said that the arguments are finely balanced, these matters can be looked at in the 2017 review, which I stress will look at the overall operation of the policy in the round, including the balance between catching the lower earners and other factors that determine the overall numbers who will be subject to automatic enrolment. Again, the concerns that she has put forward will be taken into account.

The noble Lord, Lord McKenzie, also asked about the Pension Schemes Bill, which is close to my heart. It was just disappearing from this House with all its detail as I arrived back in DWP and is awaiting its Report and Third Reading in another place.

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[Lord McKenzie of Luton]

Before the Minister sits down, may I comment on his comment on the opt-in rate, which is 5%? That means that 95% of people who could take advantage of an employer contribution, for example, are missing out. A 5% opt-in rate is not great, and reflects the fundamental architecture of the scheme. Causing people to do something generally does not work with pay and pensions: you need to do something. Inertia keeps them in. On the issue of mini-jobs and whether any of them reaches a £10,000 threshold, even if one of them did, it would not give relief or benefit on the full aggregate of a number of mini-jobs that people may have, so it is not equivalent. It is difficult: we have debated and agonised over the issue of how effectively to aggregate these disparate jobs and get the same result as if it were one job. If that came out of the review, it would be a real success.

[Lord Henley]

What it reflects—to use a fashionable modern word—is the power of nudge. By means of automatic enrolment, we are achieving those high rates, whereas if one asks individuals whether they wish to join, one gets the relatively low rate of 5%. That 5% compares very interestingly with what I think is a rather low rate of opt-outs: 9%, which is far lower than we originally expected.

Having said which, I would still say that one has to get the right balance between administrative simplicity and ensuring that people will ultimately benefit. It is important to remember administrative simplicity for the employer, particularly the very small and micro-employer. That said, all those factors can be taken into account in the annual review. We all have the same desire: to increase enrolment in pensions as far as possible, but in the best way. This has been working very well since the 2008 Act. There are just questions such as whether to bring the trigger lower. They are best looked at in the review, where they will be taken into account.

I think I have dealt with most matters, other than those on which I promised to write to the noble Lord, Lord McKenzie. I commend the Motion.

Motion agreed.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2017

Lord Henley Excerpts

Monday 6th March 2017 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 25 January be approved. Considered in Grand Committee on 28 February.

Motions agreed.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2017

Lord Henley Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2017

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, in moving this Motion I will speak also to the draft Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2017. I am required to confirm to the Committee that these provisions are compatible with the European Convention on Human Rights, and I am happy so to do.

The two statutory instruments will increase the value of lump sum amounts payable under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 and the diffuse mesothelioma scheme set up by the Child Maintenance and Other Payments Act 2008 by 1%. These new amounts will be paid to those who first satisfy all the conditions of entitlement on or after 1 April 2017.

The two schemes stand apart from the main social security benefits uprating procedure and there is no legislative requirement to review the level of payments each year. None the less, I am happy to announce the increase in the amounts payable for 2017 by the consumer price index. This is the same 1% rate that is being applied to industrial injuries disablement benefit and some other social security disability benefits under the main social security uprating provisions.

The Government recognise that people suffering from diseases as a result of exposure to asbestos, or one of a number of other listed agents, may be unable to bring a successful claim for civil damages in relation to their disease. This is due mainly to the long latency period, often stretching back decades, between exposure and onset of the disease. Therefore, by providing lump sum compensation payments through the two schemes, we fulfil an important role for sufferers of certain dust-related diseases. The schemes aim also to ensure that sufferers receive compensation in their lifetime while they themselves can still benefit from it, without first having to await the outcome of civil litigation.

Improved health and safety procedures have restricted the use of asbestos and provided a safer environment for its handling. However, the historic legacy of the common use of asbestos is still with us. That is why we are ensuring that financial compensation from both these schemes is available to those affected.

I will briefly summarise the specific purpose of these lump sum compensation schemes. The Pneumoconiosis etc. (Workers’ Compensation) Act 1979, which for simplicity I will refer to as the 1979 Act scheme, provides a lump sum compensation payment to those who suffer from one of five dust-related respiratory diseases covered by the scheme who are unable to claim damages from employers because they have gone out of business, and who have not brought any action against others for damages. The five diseases covered by the 1979 Act scheme are diffuse mesothelioma, bilateral diffuse pleural thickening, pneumoconiosis, byssinosis and—if accompanied by asbestosis or bilateral diffuse pleural thickening—primary carcinoma of the lung.

The 2008 mesothelioma lump sum payments scheme was introduced to provide compensation to people who contracted diffuse mesothelioma but who were unable to claim compensation for that disease under the 1979 Act because, for example, their exposure to asbestos was not due to their work. The 2008 scheme also allows payment to be made quickly to diffuse mesothelioma sufferers at their time of greatest need. Under both schemes a claim can be made by a dependant if the sufferer died before being able to make a claim. The rates payable under the 1979 Act are based on the level of disablement assessment and the age of the sufferer at the time the disease is diagnosed. The highest amounts are paid to those diagnosed at an early age and with the highest level of disablement. All payments for diffuse mesothelioma under the 1979 Act scheme are made at the 100% disablement rate—the highest rate of payment. Similarly, all payments under the 2008 scheme are made at the 100% disablement rate and are based on age, with the highest payments going to the youngest sufferers.

The Committee may like to know how many claims we received and the amounts paid out under these two schemes. In the last full year, from April 2015 to March 2016, 3,520 people received payments under the 1979 Act at a cost of £45.9 million, and 400 people received payments under the 2008 scheme at a cost of £8 million. The total amount of compensation paid out under both schemes during this period amounted to almost £54 million. The forecast for the current year, 2016-17, is that 3,592 people will be paid under the 1979 Act scheme and some 420 people will be paid under the 2008 Act scheme. The estimated total amount of compensation under both schemes is likely to be £54.2 million.

I am aware that in previous debates on increasing the value of lump sum payments paid under these two schemes, noble Lords have raised the subject of equalisation of payments between sufferer and dependant claims. However, we do not intend to equalise payments this year. Instead, we will continue to keep this matter under review and consider equalisation once resources allow.

Around half the payments made under the 1979 Act scheme are made for diffuse mesothelioma. I am aware that the occurrence of diffuse mesothelioma is a particular concern of many noble Lords, given that diffuse mesothelioma-related deaths in Great Britain are at historically high levels. Diffuse mesothelioma has a strong association with exposure to asbestos, and current evidence suggests that around 85% of all male mesotheliomas are attributable to asbestos exposures that occurred through work. Those diagnosed with diffuse mesothelioma usually have a short life expectancy —generally between nine and 12 months—with the sufferer becoming severely disabled soon after diagnosis.

The number of cases reflects the long latency period of the disease, which can take decades to become apparent. Latest available information suggests that there will continue to be around 2,500 diffuse mesothelioma deaths per year for the rest of this decade before annual cases begin to fall, reflecting a reduction in asbestos exposures following its widespread use between 1950 and 1980.

These regulations increase the levels of support through the statutory compensation schemes and I am sure the Committee will agree that, while no amount of money can ever compensate individuals and families for the suffering and loss caused by diffuse mesothelioma and the other dust-related diseases covered by the 1979 Act scheme, those who are suffering rightly deserve some form of monetary compensation. These statutory schemes deliver an essential part of it. I commend the increase in the payment scales and ask the approval of the Committee to implement them. I beg to move.

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[Lord McKenzie of Luton]

No, I cannot possibly say that. It is not my role as a shadow Minister. If anybody is going to give those undertakings, it is the noble Lord, Lord Henley, and I wish him well.

As we have heard, the regulations cover various compensation schemes, including the ones for pneumoconiosis and other dust-related diseases covered by the Pneumoconiosis etc. (Workers’ Compensation) Act 1979, and, separately, mesothelioma. The payments are uprated by 1%, which is the September 2016 CPI rate of inflation. One might say that this is a meagre sum, just missing the surge in inflation generated by the decline in the rate of sterling post the referendum, although we acknowledge that there is no statutory obligation to uprate the compensation schedules and that the 1% aligns with the uprating of industrial injuries benefits, as we have heard. Obviously, we support the regulations but I have some questions.

We have no impact assessment for the instruments, although the Explanatory Notes indicate that in the year to March 2016 some 3,520 people made a claim under the 1979 Act, including 310 claims for dependants. I think my question may already have been answered. Can the Minister tell us how many of these claims were successful and can we have an analysis of the various categories of dust-related diseases? I think the noble Lord referred to 3,592 payments. The explanatory memorandum talks about claims. Maybe it is a question of nuances of terminology, but it would good to know the actual number of successful claims. Can we also be provided with an analysis of the amounts of the various claims, how these were funded and the extent to which there has been or will be clawback of social security benefits?

So that we can get the overall picture of the numbers suffering from these dust-related diseases—other than mesothelioma—can we have some detail on what has been covered by employer liability insurance? The ELTO 2015 annual report—when will we get an updated one?—shows an improvement in successful inquiries but apart from mesothelioma itemises only asbestosis and asbestosis-related illnesses. Further, the ELTO report does not cover successful claims which might be made directly to insurers outside of ELTO. Can we be provided with a complete picture of the number of workers entitled to lump-sum compensation arising from the 1979 Act for the latest period available? Can we also be provided with details of how many are missing out on compensation?

The position concerning mesothelioma is different, as we have heard. Diffuse mesothelioma is a fatal cancer of the lining of the lungs or abdomen caused almost exclusively as a result of exposure to asbestos. Symptoms and diagnosis may not emerge until 30 or 40 years following exposure—it is a long-tail disease—and this obviously exacerbates difficulties in identifying relevant employers and employer liability insurers. A number of steps have been taken in recent times to improve access to compensation for sufferers of this terrible condition. In 2008 the previous Labour Government introduced the scheme which is the subject of the regulations before us today. It is a no-fault scheme, so does not require a work-related nexus or proof of negligent exposure to asbestos. It has tended to be illustrated, as the noble Lord, Lord James, said, by exposure caused by washing somebody’s work clothes.

After an initial differential, the rates of compensation under the 2008 Act—for sufferers and dependants—have been separately aligned with the 1979 Act amounts for those with 100% disability, although, as the noble Lord said, there is still the differential between payments in respect of dependants and sufferers. Again, we have no impact assessment, although the Explanatory Note tells us that some 400 people made a claim in the period ended March 2016, including 10 dependants. How many of these claims were successful? How were they were funded? I seem to recall that the original concept was for funding to come from civil claim recoveries. What is the current position? If we are to see the overall picture here, albeit not strictly covered by these regulations, we should consider the further important developments led by the noble Lord, Lord Freud, with the co-operation of the insurance industry. These include the Employers’ Liability Tracing Office, which focuses on assisting claimants to identify an appropriate employer liability insurer. While the 2015 report shows the inquiry success rate improving, it is far from 100%. For mesothelioma, it is just below 77%.

So onward to the diffuse mesothelioma payment scheme—a scheme of last resort—which started making payments from July 2014. It seeks to compensate those negligently exposed to asbestos while at work but who cannot trace the responsible employer or insurer. The scheme is funded by a levy on the gross written premiums of those insurers writing employer liability insurance. It was acknowledged that the insurers could not commit to a levy level above 3% of gross written premiums. In its first year, net payments of £24 million were made, with an average amount of £122,000. The tariff payments, originally at 75% of average civil claims, have risen from 80% to 100%. There is an oversight committee, which my noble friend Lady Donaghy chairs.

In respect of mesothelioma entitlements with an employment nexus, can the Minister let us know for the most recent period available the total number of successful compensation claims and the amounts achieved via employers or insurers, either directly or using the tracing office, and the total number of tariff payments made under the payment scheme? Has the DWP made an assessment for the most recent period of the number of mesothelioma sufferers who have not been able to access either compensation or a tariff payment? What do we understand the reason to be for the shortfall between the expected claims to the payment scheme and outturn for the most recent period? The Minister did give us an updated forward projection of the incidence of mesothelioma: 2,500 cases for the rest of the decade. The Minister is probably aware of the extensive debates we have had on this issue and of the focus on funding for research for sufferers. That has been a positive development.

As a final point, ELTO has made good progress in tracing policies. It is suggested that better access to the employer reference number from HMRC would assist in this. There was an attempt to amend a recent Bill to try to secure that, but it was unsuccessful. Will the Minister tell us what is happening on this issue?

[Lord Henley]

My Lords, I thank the noble Lord, Lord McKenzie, and my noble friend Lord James of Blackheath for their comments. The noble Lord, Lord McKenzie, asked a number of fairly detailed questions, a great many of which will, I suspect, be far better dealt with in correspondence, if the noble Lord will accept that. The answers will come down to rather detailed figures because he asked about the analysis of the levels of claims, which obviously depends on the age of the complainants. I have a sneaking suspicion that a table setting out such details might be of greater use to the noble Lord and other noble Lords who have taken a great interest in the matter.

I appreciate that we did not have a debate on this last year because the CPI was where it was and so there was no uprating. One could say that one of the benefits of this being normally uprated in line with inflation, because it is separate from the others and at the discretion of my right honourable friend the Secretary of State, is that we manage to have some debate on this important matter each year, with the exception of last year. That way, these matters can be exercised, rather than subsumed in the general uprating debates that happen—for example, last week. Having made that broad point, let me try to answer a number of the questions that noble Lords have raised.

The first is one on which, again, I will have to offer to write to my noble friend. He asked about the support that the Royal British Legion might be offering to former Navy servicemen, particularly from HM Yacht “Britannia”, who have suffered from this, and whether they were going to lose out as a result of payments being made by the Royal British Legion. I will take advice on that and will write to my noble friend.

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[Lord Henley]

I want to make sure I get it right and give the right figure. The noble Lord is asking whether we are reaching all those who we think are affected. I think I can give an assurance that 100% of those who are suffering from the five diseases that I set out comply in other respects; in other words, they have not made another claim, or whatever. Those are successful, but if there are some who are unsuccessful, I suspect that will be because they are not eligible. Once suffering from the diseases, there is no need to prove anything further. We are not talking about people being turned away in that respect, but I suspect I will have to write to the noble Lord with further detail.

The noble Lord also asked about the employers’ tracing scheme—ELTO—and again I can confirm that it is still doing what it was set out to do and it is, as he put it, having somewhat greater success. As a result, something in the order of half of that £54 million—I have the figures here—comes back. Again, I will write in further detail to the noble Lord on that matter. I apologise to the noble Lord for not really being able to give him greater detail at this stage, but I believe that I can set out the figures—as he put it, in further detail—and I have given assurances that I will do. I hope that that satisfies the noble Lord and others. I beg to move.

Motion agreed.

Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2017

Lord Henley Excerpts

Tuesday 28th February 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2017.

Motion agreed.

Personal Independence Payments

Lord Henley Excerpts

Tuesday 28th February 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, with the leave of the House, I shall repeat as a Statement an Answer given to an Urgent Question in another place by my right honourable friend the Secretary of State for Work and Pensions on personal independence payments. The Statement is as follows:

“Recent legal judgments have interpreted the assessment criteria for PIP in ways that are different from what was originally intended by the coalition Government. We are therefore now making amendments to clarify the criteria used to decide how much benefit claimants receive in order to restore the original aim of the policy, as previously agreed by Parliament, which followed extensive consultation.

I want to be clear about what this is not. This is not a policy change, nor is it intended to make new savings. I would like to reiterate my commitment that there will be no further welfare savings beyond those already legislated for. It will not result in any claimant seeing a reduction in the amount of PIP previously awarded by the DWP.

Mental health conditions and physical disabilities which lead to higher costs will continue to be supported, as has always been the case. This Government are committed to ensuring that our welfare system provides a strong safety net for those who need it. That is why we spend around £50 billion a year supporting people with disabilities and health conditions and why we are investing more in mental health than ever before, spending a record £11.4 billion a year.

Personal independence payments are part of that support and provide support towards the additional costs that disabled people face. At the core of PIP’s design is the principle that support should be made according to need, rather than a certain condition, whether physical or non-physical. It is also designed to focus more support on those who are likely to have higher costs associated with their disability. PIP works better than DLA for those with mental health conditions. For example, there are more people with mental health conditions receiving the higher rates of PIP than under the old DLA system”.

That concludes the Statement.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for repeating the Statement to the House. I want to concentrate on the judgment on the mobility component of PIP. Despite what the newspapers may have reported, the tribunal ruling does not mean that anyone with mental health problems can get the higher rate of PIP. What it does mean is that assessors cannot arbitrarily ignore all mental health problems when working out whether someone is entitled to the higher rate of PIP to deal with the higher costs that they face. Despite the Minister’s comments, MIND has pointed out that the Explanatory Memorandum for the original Act said that the higher rate was right if someone’s mobility was,

“severely limited by the person’s physical or mental condition”.

If these regulations go through, it seems that someone who is blind and needs help to plan or navigate a journey could get the higher rate of PIP but someone who, for example, has autism or early-onset dementia and could not manage to plan or navigate a journey without help would not be able to get the higher rate of PIP. My question is very simple: how does that sit with the Government’s commitment to parity of esteem between physical and mental health and to the Prime Minister’s promise to tackle the stigma associated with mental health problems?

[Lord Henley]

My Lords, what the tribunal said was that there was some uncertainty in our regulations, despite the fact—I am sure the noble Baroness will remember this far better than I can, because I was not in this position at the time—that these matters were extensively debated during the passage of the Bill a year or so ago and agreed in Parliament. The tribunal said that there was uncertainty and we are trying to put that right.

The noble Baroness specifically referred to the example of people who are blind in comparison to those with psychological distress. That was a matter considered in one of the two cases that we are dealing with. Mental health conditions are more likely to fluctuate than conditions such as visual impairment or blindness, and people who cannot navigate due to a visual or cognitive impairment are more likely to have a higher level of need and therefore face higher costs. What we are seeking to do, quite simply, is amend the criteria to reinstate the distinction between those two groups, as was originally intended in the order. It is no more than that.

[Baroness Thomas of Winchester (LD)]

My Lords, the Minister said that this is quite simple. It is not quite simple. In both recent appeals, the Upper Tribunal considered the relevant PIP descriptors most carefully. Does the Minister accept that in the second case, which dealt with mobility, the judges took into account the Government’s own declaration that non-physical conditions, which surely must include “overwhelming psychological distress”, under descriptors 1.b. and 1.e. in the 2013 regulations, should be given the same recognition as physical ones? Why did the Government not consult disabled organisations before bringing in these amending regulations so that they could learn the true picture of what the changes would mean?

--- Later in debate ---

[Lord Henley]

My Lords, in the time available we have not been able, as the noble Baroness will know, to consult SSAC, nor have we been able to consult a large number of different organisations; no doubt those consultations will take place. What the two tribunal decisions exposed, to go back to what I said earlier, was that there was some confusion in the original directions. We are seeking to put those back on the footing that Parliament agreed a year or so ago, so that the matter is clear and we can continue the support that is, and has been, available at a very high level—at much higher levels than it ever was available under DLA, as I made clear in the original response.

[Baroness Campbell of Surbiton (CB)]

My Lords, have the Government conducted an impact assessment of the social isolation caused by denying enhanced-level PIP to people who would experience overwhelming psychological distress if they had to undertake a journey without someone to accompany them? If this assessment has not been done, when will it be and could it please be made available to this House?

[Lord Henley]

Can I again make it clear to the House that we are not in any way trying to suggest that people with any particular condition should be deprived of PIP? As the noble Baroness and the House will be aware, when we brought in PIP the arrangements were much more generous and reached far more people than DLA did in the past. It is not any specific condition that is being looked at here; people are not awarded PIP on the grounds of any specific medical condition but because of the way that particular impairment or medical condition affects their ability to live an independent life. That is what we are trying to do with PIP, or it is what we were trying to do and want to try to get back to.

[Baroness Hollis of Heigham (Lab)]

My Lords, it is not the case that PIP is more generous than DLA. The Minister has only to consult the information produced by Motability on the number of the people losing cars to know that that is not a correct statement. Let me go back to the substance: we all know that DLA, followed by PIP, is not an income-replacement benefit but an extra-costs benefit associated with disability. What analysis have the Government made of the extra costs facing people with mental health problems, which would underpin their eligibility for the points assessment in assessing the awards for PIP? Given that there is not a clear answer, which I accept, would it not be wise and prudent to refer it to the Social Security Advisory Committee, whose job is precisely to steer the Government in areas such as this?

[Lord Henley]

On the noble Baroness’s first point, I go back to what I originally said: there are many more claimants on PIP with mental health conditions who are claiming the mobility component. It is 29% compared to the 9% who were on DLA, which was not as good at reaching these people as PIP is. As regards her second point, it was right that, the decisions of the two tribunals having been made, and complaints having being made by the tribunals about a lack of clarity in the original directions, or words to that effect, we should correct those directions and get back to what Parliament originally intended. That is what we are trying to do and will do in these regulations.

[Baroness Chisholm of Owlpen (Con)]

Can my noble friend the Minister give an update on what the Government are doing to remove the stigma for many people with mental health conditions, particularly those in the workplace? Does he agree that it is particularly important for people with mental health conditions to stay in work and find it quickly if they are unemployed? What is being done to support them in this way?

[Lord Henley]

My Lords, PIP is just part of all that the DWP and the rest of the Government are doing in this field. We believe that we are reaching more people. We are committed, as we made clear in our manifesto, to increasing the number of disabled people in work, and that includes those with mental health conditions. We are also committed to narrowing the gap between employed non-disabled people and employed disabled people, and will continue to work in that area.

[Baroness Hollins (CB)]

The Minister may know that as many as 50% of people with learning disabilities also have mental health problems, which are often undiagnosed or overlooked. Has the department looked at how the regulations will impact on eligibility for PIP for those who have a dual diagnosis of a learning disability and mental illness?

[Lord Henley]

My Lords, the important thing to remember about PIP, which is what we are discussing today, is that, as I made clear in one of my earlier responses, we are looking not at specific conditions but at how those specific conditions or medical conditions affect their ability to live an independent life and then, as the noble Baroness said earlier, to make sure that the benefit goes to meet their extra costs.

[Baroness Bloomfield of Hinton Waldrist (Con)]

Can the Minister confirm that this Government are investing more in mental health than ever before?

[Lord Henley]

My Lords, I can give that assurance. As I made quite clear in my earlier remarks, we have seen a growth in the support for people with disabilities and for those with mental health problems. As I said, we spend something in the region of £50 billion a year supporting people with disabilities and health conditions, and we are investing more in mental health than ever before.

[Lord Clark of Windermere (Lab)]

My Lords, will these measures be retrospective? Will those thousands of individuals who have undergone reassessment for PIP, and are waiting for the mandatory reconsideration, be judged on the old system or the new system?

[Lord Henley]

All those who are in receipt of PIP will continue to receive PIP at the rates granted to them in the past. There is no question of any individual losing out.

Bereavement Support Payment Regulations 2017

Lord Henley Excerpts

Monday 27th February 2017 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations and Orders laid before the House on 12 January and 16 January be approved.

Considered in Grand Committee on 21 February.

Motions agreed.

Benefit Cap

Lord Henley Excerpts

Wednesday 22nd February 2017 Lords Chamber

[Lord McKenzie of Luton]

To ask Her Majesty’s Government what estimate they have made of the extent to which the new lower benefit cap will encourage people into work or to move into smaller homes.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, the evaluation of the 2013 benefit cap showed that more households are looking for and finding work. Capped households were 41% more likely to enter work than similar uncapped households. The evaluation found that very few capped households moved house, and those who moved generally only moved short distances. Statistics show that people moving into work is the largest single factor in the benefit cap no longer applying.

[Lord McKenzie of Luton (Lab)]

I thank the Minister for that reply but wonder if he has seen the recent report from the IFS which, in relation to the new cap, identifies that a larger number of smaller properties, both in and out of London, will now be affected; and its assessment that, on the basis of the earlier cap, there is little evidence that it helps move people into work or to smaller accommodation—indeed, I think fewer than 5% of those affected by the cap previously actually went into work. Is the Minister also aware of the report of the Chartered Institute of Housing? It forecasts that the new benefit cap will cut the benefit income of some 116,000 households, including 320,000 children, by up to £115 a week. Is it not time for the Government to come clean and recognise that this is not about changing behaviours, it is all about saving money at the expense of some of the poorest in our society?

[Lord Henley]

My Lords, I totally reject what the noble Lord had to say. As he knows perfectly well, because he will have seen it, our evaluation that appeared in 2014 showed just what I said in my original Answer—they were some 41% more likely to go back into work than similar uncapped households. It also showed that 38% of those capped said they were doing more to find work, one-third were submitting more applications and one-fifth went on to make more interviews. That is why my right honourable friend made the announcement in last year’s Budget of further changes to the benefit cap. In due course we will look for a further evaluation, which I look forward to showing to the noble Lord when it comes through.

[The Lord Bishop of Southwark]

My Lords, according to the Government’s own impact assessment nearly a quarter of a million children are affected by the reduced benefit cap, more than two and a half times the number of affected adults. This includes many preschool children in lone-parent families at greater risk of poverty. Given that the prime aim here is to encourage more people into work, will the Minister consider exempting single parents with young children, who would not otherwise be expected to work under the current benefit rules and who rely on familiar social networks and services?

[Lord Henley]

My Lords, I accept one part of the right reverend Prelate’s question: it is valuable for all concerned, particularly children, to live in households where all those who are likely to earn are in full-time employment. It is work that is the benefit to children. I can assure the right reverend Prelate that the number of children living in workless households is now at a record low. We have seen falls there; the number is down by more than 80,000 in the past year and well over half a million since 2010. We need to wait to see the evaluation of our further changes to the benefit cap before we make any further promises of the sort that the right reverend Prelate is seeking from me.

[Lord Farmer (Con)]

My Lords, the Government made it clear during the passage of the Welfare Reform Act 2012 that the aim of the benefit cap was to achieve positive effects through changed attitudes to welfare. Beyond the employment statistics that we have heard today, are there any other signs of a shift away from a culture of welfare dependency towards a culture of work dependency?

[Lord Henley]

My Lords, I am grateful to my noble friend for highlighting that point, something ignored by noble Lords on the other side. Trying to get away from the culture of welfare dependency into a culture of work dependency is exactly what we are trying to do, and it is what we have achieved. That is why I wanted to highlight to the House—I could repeat it to my noble friend but I do not think that that is necessary—just what the 2014 evaluation showed. We will look for an evaluation of those further changes in due course.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, the Minister’s undertaking to provide another evaluation subsequent to the 2014 evaluation is welcome, but I have to say to him that no one I have met outside the Government believes the assessment that was published in 2014 so he is going to have to work harder in future to secure the policy success that the Government are looking for. In the course of the next evaluation, will he look carefully at the sustainability of the work that clients achieve, the proportion of the case load that is moving into disability benefits and the proportion of the case load applying successfully for discretionary housing payments? The discretionary housing payment spend for the rest of this Parliament will be £1,000 million.

[Lord Henley]

I am sorry the noble Lord does not believe the evaluation that appeared in 2014. A very good evaluation it was, and it produced some very good figures that I do not think the noble Lord himself could question. I have quoted the figures from that evaluation and I will be able to produce further figures in due course when another evaluation appears. However, it is not just about changing the culture, although that is very important; it is also a question, as I am sure the noble Lord will accept, of fairness. We do not think it is right that those in benefit should be receiving incomes higher than those on average earnings.

[Baroness Meacher (CB)]

My Lords, the lower benefit cap is just, of course, one of the many measures that the Government are using to reduce access to welfare benefits, as the Minister indicated in an earlier answer. Another is the repeated assessment of disabled people. Does the Minister believe that it is reasonable to reassess repeatedly people with brain injuries, for example, and life-long disabilities that will prevent them ever getting back to work? Will he assure the House that he will give his personal attention to this matter, with a view to bringing to an end this cruel procedure?

[Lord Henley]

I regret to say that the noble Baroness is going quite beyond the Question on the Order Paper, but I would be more than happy to write to her about that particular issue.

Guaranteed Minimum Pensions Increase Order 2017

Lord Henley Excerpts

Tuesday 21st February 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Guaranteed Minimum Pensions Increase Order 2017.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, I will be brief. The Guaranteed Minimum Pensions Increase Order is entirely a technical matter that we attend to each year. This order was laid before the House on 16 January 2017 and, in my view, its provisions are compatible with the European Convention on Human Rights. The order provides for formerly contracted-out defined benefit occupational pension schemes to increase their members’ guaranteed minimum pension which accrued between 1988 and 1997 by 1%, in line with the increase in the general level of prices as at September 2016. On that basis, I beg to move.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Lord for his brief introduction to this technical order. It addresses, as we have heard, the required uprating of GMPs by CPI. The period in question is the year ending 30 September 2016, which we have just discussed. That period largely precedes the spurt in inflation—imported inflation—driven by the post-referendum depreciation of sterling. At 1%, it is well within the 3% cap on the GMP uprating. We will obviously support this order but, although it is superficially straightforward, uprating GMPs is a complicated area, as a recent NAO report identifies. It illustrates that, although GMPs were applicable for a relatively short period of time—1978 to 1997—there are ramifications well into the future. Some people with rights to GMPs would not reach state pension age until around 2050.

April 2016 saw the introduction of the new state pension, of course, which involved the end of contracting-out and of the additional state pension. Because the contracting- out position is incorporated in somebody’s starting amount, the Government no longer take account of inflation increases to GMP accruals between 1978 and 1988, nor for increases beyond 3%. I think that is correct, but perhaps the Minister might just confirm it. Can he also remind us what is happening to GMPs which are in payment?

The NAO also points out that, with changes to the state pension age, there is a growing time period between GMP age, which is 65 or 60, and the actual state pension age when payment begins. Other things being equal, this means a longer period during which the GMP is not fully uprated.

The scheme provider is now solely responsible for uprating, but only from 1988 and in excess of 3%, and for maintaining the records necessary to calculate each member’s GMP. The NAO advises that up to October 2018, scheme providers have to reconcile their records with HMRC. Individuals will be notified of the value of their GMPs as at April 2016 and will have to keep a record thereafter themselves, including when they transfer to another pension scheme. Can the Minister tell us how this is all going? What communications support these requirements, and what assessment have the Government made of compliance with these arrangements? How many individuals are involved in this process?

Finally, the Minister may be aware of the article on the front page of the money section of the Sunday Times last week, which seemingly involved contracted-out pensions and the provision of inaccurate data. Can the Minister please explain what is happening? What is the problem and its scale? Who is affected and how is it going to be fixed?

[Lord Henley]

My Lords, the noble Lord, Lord McKenzie, is quite right to refer to the complicated nature of this field and to point out how long it is likely to go on. He talked about 2050. I did a few sums and thought that someone—I hope not me—could still be moving this order some years after 2050. Certainly, it has some years ahead of it as an annual order—when the GMP has to be increased by either CPI or 3%, whichever is the lower. That is why we have increased it, on this occasion, by 1%, which is the CPI figure for September.

The noble Lord also asked some rather detailed questions about what communications we were making to individuals and what compliance we sought from the benefit providers. I would prefer, on this occasion, to write to him in greater detail on that matter, because it might be dangerous to answer. Similarly—this goes beyond today’s debate—the problems reported in the business section of the Sunday Times, which I think it got slightly wrong, are a matter probably better dealt with by a letter from me rather than in a debate on the uprating of the guaranteed minimum pension, formerly SERPS. I apologise to the noble Lord for not answering his questions on this occasion but promise to write to him. I also accept his acceptance of the 1% increase—as it will be—and look forward to having this debate again for many years to come, though not necessarily with him or me involved if it continues as late as 2050.

[Lord McKenzie of Luton]

I am grateful for the offer of correspondence on those two issues: dealing with information flows under existing arrangements and the Sunday Times article. It may be “fake news”—I think that is the term—and I do not know how accurate it is, but it seemed to tie in with important issues regarding data and the capacity of the system to cope with it.

I am particularly concerned about the arrangements for reconciling records with HMRC. My noble friend Lady Drake has been heavily involved in many pension matters over the years, particularly the Pension Protection Fund. She could wax lyrically about the dirty data that somehow came from defined benefit schemes, and how difficult it was to straighten those data out. I am not sure whether there is any of that in this, or how many GMPs are currently in payment. Having said all that, I accept the generous offer of correspondence on this. It would be helpful to have it as soon as possible, because I have to go back to basics every year to remind myself what it is all about.

[Lord Henley]

My Lords, I listened to the noble Baroness, Lady Drake, as my noble friends Lord Freud and Lord Young took the pensions Bill through, and admired her expertise on this subject. One day, no doubt, the noble Lord, Lord McKenzie, and I will reach such a level, but in the meantime we will have to rely on correspondence between us. I am grateful to the noble Lord for accepting my assurance, and I will write to him in due course on those matters. I beg to move.

Motion Agreed

Social Security Benefits Up-rating Order 2017

Lord Henley Excerpts

Tuesday 21st February 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2017.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

I beg to move that the Grand Committee do report to the House that it has considered the draft Social Security Benefits Up-rating Order 2017. In my view, the provisions in this order are compatible with the European Convention on Human Rights.

Today we are debating the Social Security Benefits Up-rating Order 2017. This statutory instrument reflects the Government’s continuing commitment to: increase the basic and new state pension with the triple lock at 2.5%; increase the pension credit standard minimum guarantee in line with earnings at 2.4%; and increase benefits to meet additional disability needs and carer benefits in line with prices at 1%.

The Chancellor reaffirmed this Government’s commitment to the triple lock for the length of this Parliament in his Autumn Statement on 23 November 2016. This ensures that the basic state pension will continue to be uprated by the highest of earnings, prices or 2.5%. This year, the increase in average earnings and the increase in prices were less than the baseline of 2.5%. As such, the basic state pension will increase by 2.5%. This means that from April 2017 the rate of the basic state pension for a single person will increase by £3.00 to £122.30 a week. As a result, from April 2017 the basic state pension will be more than £1,200 a year higher compared to April 2010. We estimate that the basic state pension will be around 18.5% of average earnings, one of its highest levels relative to earnings for more than two decades.

Last year, the Government introduced the new state pension for people reaching their state pension age from 6 April 2016 onwards. This made the system clearer, providing a sustainable foundation for private saving. The Government have previously announced that the triple lock will apply to the full rate of the new state pension for the length of this Parliament. This is the first year that the new state pension will be uprated. As such, this year the full rate of the new state pension will increase by 2.5%. This means that from April 2017 the full rate of the new state pension will increase by £3.90 to £159.55 a week. This will be around 24.2% of average earnings.

We are continuing to take steps to protect the poorest pensioners. This includes through the pension credit standard minimum guarantee, the means-tested threshold below which pensioner income need not fall. The pension credit standard minimum guarantee will rise in line with average earnings at 2.4%. This means that from April 2017 the single person threshold for safety-net benefit will rise by £3.75 to £159.35. Pensioner poverty continues to stand at one of the lowest rates since comparable records began.

I turn to the additional state pension. This year state earnings-related pension—SERPS—and the other state second pensions, together with protected payments in the new state pension, will rise, in line with prices, by 1%. On disability benefits, this year the Government will continue to ensure that carers and people who face additional costs because of their disability will see their benefits uprated in the usual way. Disability living allowance, attendance allowance, carer’s allowance, incapacity benefit and personal independence payment will all rise in line with prices—by 1%—from April 2017. In addition, disability-related and carer premiums paid with pension credit, and working-age benefits, will increase by 1%, as will the employment and support allowance support group component, and the limited capability for work and work-related activity element of universal credit.

The Government will be spending an extra £2.5 billion per year in 2017-18 on uprating benefit and pension rates. In this order we continue to maintain our commitment to the triple lock for both the basic and the new state pension for the length of this Parliament. We also commit to increase the pension credit standard minimum guarantee by earnings and to increase benefits that reflect the additional costs that disabled people face as a result of their disability, and carer benefits, in line with prices. This includes increases to the disability living allowance, attendance allowance, carer’s allowance, incapacity benefit, personal independence payment, and disability and carer premiums.

On that basis, I beg to move.

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for his introduction of this order and the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Thomas of Winchester, for their contributions. The noble Lord, Lord Kirkwood, and I gather around this time every year—sometimes to decreasing effect, it feels—and we miss my noble friend Lady Lister, who is usually with us on these occasions. In the absence of her enormous knowledge, I will do my best to fight the good fight for these Benches.

I reassure the noble Lord, Lord Kirkwood, that he is not out of order because the order increases the disability premium and some elements of working-age benefits. Therefore his area of comment is wholly in order for addressing these questions today. It was a comment in which I have an interest because I am about to do the same thing.

While obviously not objecting to the 1% uprating of the benefits that are covered, the triple lock or in-line-with-earnings increases as described by the Minister, we have serious concern about the increasing impact of the Government’s approach to benefit uprating on the millions of people who rely on benefits to look after themselves and their families. The real action here, as the noble Lord, Lord Kirkwood, pointed out, is happening offstage. It applies to the many benefits that should be on this list and are not.

The summer Budget 2015 listed a series of working-age benefits that would be frozen for four years from 2016-17 to 2019-20. We should remember that they had had only 1% uprating from 2013 and that there was the massive effect, described by the noble Lord, Lord Kirkwood, of the shift from RPI to CPI as the measure for increasing benefits. That list includes child benefit, JSA, ESA, income support, housing benefit under women’s state pension age, LHA rates, child tax credit, working tax credit, universal credit and bereavement support payment. Many of these benefits affect working people and working families, but they all affect people who are dependent on benefits to survive. It is good that the disability and other premiums paid with these benefits are being increased by 1%, and I am glad to see that.

The freeze to the other levels of social security payments are having a detrimental impact on those who depend upon them. Between 2008 and 2014, the prices of essentials rose three times faster than wages. Combined with the period of 1% uprating and then the freeze, low-income households have seen a significant deterioration in their income. Now that inflation is starting to pick up, we need to be reassured by the Government about how they are going to ensure that Parliament can understand the degree to which households are protected from the consequences of those changes in ways that we could reasonably expect them to do.

The 1% uprating is based on the rate of CPI prevailing in the year to September 2016, which was reported at 1%. However, since then, inflation is clearly on the rise. Last week, we saw the release of the latest figures which showed that the consumer prices index rose by 1.8% in the year to January 2017. Last week we also saw the Bank of England inflation report which said:

“In the central projection, conditioned on market yields that are somewhat higher than in November, inflation is expected to increase to 2.8% in the first half of 2018, before falling back gradually to 2.4% in three years’ time”.


As the Resolution Foundation pointed out in a report entitled Under New Management in November 2016, the effect of rising inflation is that this policy is saving the Treasury rather more money than it expected. The report estimates that rather than the £3.6 billion the policy was due to save the Exchequer by 2020-21, the savings would rise to £4.6 billion. Can the Minister tell the Committee whether that £4.6 billion figure is accurate and, if not, what is the value of the savings now estimated to be according to his department or the Treasury?

On the other hand, the effect of these changes on households in receipt of benefits is also far greater than Parliament expected at the time when the decision was made to freeze benefits, and people on the lowest incomes are least able to withstand the effects of inflation because they have the least disposable income and in most cases they have little or no savings to depend on as a cushion. That is why Parliament has traditionally protected them from these risks by inflation-proofing benefits. As the IFS puts it:

“This policy represented a significant takeaway from a large number of working age households. But it also represented a shifting of risk from the Government to benefit recipients. Previously, higher inflation was a risk to the public finances, increasing cash spending on benefits. Now the risk is borne by low-income households: unless policy changes higher inflation will reduce their real incomes”.


That point was also made by the noble Lord, Lord Kirkwood. The IFS also points out that, as of last March,

“the freeze represented a 4% cut in the value of those benefits … relative to previous plans”.

Last October, the IFS, based on its inflation forecasts at that point, produced some other observations on the impact on claimants, saying:

“As a result, 11.5 million families were expected to lose an average of £260 a year, saving the government £3.0 billion in 2019-20. Given the latest inflation forecasts from the IMF, the policy now represents a 6% cut to affected benefits. The same 11.5 million families are now expected to lose an average of £360 a year (£100 a year more than expected in March), saving the government £4.2 billion in 2019-20 (i.e. an additional £1.2 billion on top of what was expected back in March). Greater losses are found among families—typically those on lower incomes—who receive more in benefits”,


so,

“8.3 million families affected now expected to lose an average of £470 a year”.

The Minister might claim, truthfully, that his party had a manifesto commitment that the working-age benefit system should be made less generous over this Parliament, but as the IFS pointed out,

“it is hard to see why the appropriate size of cut should be arbitrarily determined by the impact of movements in sterling on prices”.

Quite, but if the Minister does not want to listen to the Resolution Foundation or the IFS, or the noble Lord, Lord Kirkwood, or the noble Baroness, Lady Thomas, or, unaccountably, even me, perhaps he might be persuaded by the following comments, reported in the Independent from another parliamentarian:

“When the original benefit freeze was set it was set against an estimate of a much lower rise in inflation … Therefore I’m sure the Treasury will want to look at to keep that under review because the purpose was not to have such a dramatic effect on incomes against a forecast of rising inflation … I’m sure the Treasury will want to look at that and keep that under review so that doesn’t actually happen and make it adverse in a way that it was not completely intended”.


That was Iain Duncan Smith, speaking to an event in Westminster, reported in the Independent on 8 November last, and that was before inflation hit the heights that we saw last week.

My questions for the Minister are simple. First, can he tell the Committee the latest estimate of the savings to the Exchequer of this four-year benefit freeze, as against CPI uprating, over and above the amount originally scored? Secondly, how big would the gap have to be between projected and actual impact on claimants of this freeze before the Government would revisit it? Finally, to echo the noble Lord, Lord Kirkwood, whom I commend for his determination to come back to this matter on behalf of all parliamentarians every time we discuss it, what is the mechanism for Parliament to revisit the issue and be assured of the adequacy of social security benefits in the absence of any appropriate annual mechanism?

[Lord Henley]

My Lords, again, I thank all noble Lords who have spoken in this debate. The noble Lord, Lord Kirkwood, spoke about his experience of uprating statements going back to, I think he said, 1983. I feel a mere child in these matters going back only to the 1989 uprating statement. I did a few after that, but I do not think that I have quite the assiduous record that the noble Lord has in these matters.

The noble Lord also talked about the process by which we go through these matters, and asked whether it is still the case that my right honourable friend the Secretary of State sits down and considers what uprating is necessary. I assure him that, within the confines of current legislation, he does and that he takes note of comments received in both Houses. I assure the noble Lord that I shall report back to my right honourable friend and others about the course of this debate.

Obviously, we have to make very difficult decisions on welfare spending. The noble Lord, Lord Kirkwood, is aware of that, as is the noble Baroness, Lady Sherlock. We also know very well that work, not welfare, is the best route out of poverty and that anything that can encourage people into work will be good for them in all possible ways. That is why our welfare reforms are designed to incentivise work for those who can and go wider than just the benefit system. They include such things as the national living wage, which will be up to £9 an hour by 2020, cutting income tax for more than 30 million people and the rollout of universal credit. At the same time, we remain committed to protecting all those who need support. That is why we made the reforms we did. As someone coming back to this world after some years out of it and having had some experience of seeing benefit offices, it is gratifying to see the rollout as it begins and to hear the comments of those making use of it. I am sure it is going to be a success. Anyway, I can give an assurance that my right honourable friend sits down and considers these matters.

The noble Lord, Lord Kirkwood, talked about the change from using CPI as opposed to RPI, an issue also touched on by the noble Baroness, Lady Sherlock. I appreciate that there is no ideal measure of inflation, and there never will be, but we certainly think that CPI is a better measure than the old RPI. I understand that the ONS is making changes to RPI, and it may be that some improvements can come forward in due course. However, at the moment, we are committed to CPI, which we think is a better measure and is the target rate used by the Bank of England. It also takes better account of how behaviour changes in response to price changes, using a methodology in line with international standards, and better reflects benefit recipients’ and pensioners’ experience of inflation by excluding mortgage payments. Again, we have to recognise that all the measures of inflation affect different people in different ways. I think all would agree that there is no ideal measure that we can use. CPI is the best and using the September-to-September measure is the only practical way in which to introduce the change in April the following year. I am sure that the noble Baroness would accept the difficulties of having to use a figure some months ahead, but any subsequent inflation will be taken into account in following years, so there is a catch-up designed into the system for future years.

The noble Baroness, Lady Sherlock, is not happy about the whole subject of freezing benefits, which goes wider than the uprating statement we are debating today. As she is aware, we have by statute frozen working-age benefits for a number of years—until the end of this Parliament, if I remember the dates correctly. It is not a matter for discussion today, but I repeat what I have said: we are dealing not merely with benefits but with work, which is the best route to get people out of poverty. As I said in response to the questions from the noble Lord, Lord Kirkwood, we want to incentivise work for those who can work, while supporting those who cannot. The noble Baroness then asked a number of detailed questions about our estimate of the savings and cited estimates made by this or that group and ending up with the comments made by my right honourable friend Mr Duncan Smith. I shall not comment on any of those estimates at the moment; this is not necessarily the right and proper place to have that debate. If we have some appropriate figures that I think the noble Baroness will find useful, I am more than happy to make them available to her.

--- Later in debate ---

[Baroness Thomas of Winchester]

It was on the back page.

[Lord Henley]

I will have to write to the noble Baroness to assure her on that point.

I appreciate that the noble Baroness, Lady Sherlock, would prefer a greater and longer debate on freezing benefits. As I said, I do not think that this is either the time or the place.

[Baroness Sherlock]

I confess to being disappointed by both the content and the tone of the Minister’s response to the questions put not just by me but by the noble Lord, Lord Kirkwood. I wonder whether he could tell me two things. First, does he accept that a number of the benefits being frozen are in-work benefits? Secondly, if this is not the occasion on which Parliament can expect to hold the Government to account to find out what in fact will be the impact of a measure which now looks to be much more expensive to benefit- claiming families than they were assured in the first place, what is?

[Lord Henley]

My Lords, this is the occasion to deal with the uprating of those benefits which are being uprated. Parliament debated on another occasion, during the passage of the 2014 Bill, the freezing of benefits. The noble Baroness will not find it hard to find other occasions to raise the subject. When we are debating those benefits which we are uprating, it is not the time to pursue the question of the freezing of benefits.

Motion agreed.

Bereavement Support Payment Regulations 2017

Lord Henley Excerpts

Tuesday 21st February 2017 Grand Committee

Moved by

[Lord Henley]

That the Grand Committee do consider the Bereavement Support Payment Regulations 2017.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)]

My Lords, the regulations were laid before the House on 12 January. They provide the details of a new benefit, bereavement support payment, which was first introduced as part of the Pensions Act 2014. Bereavement support payment will replace bereavement allowance, widowed parent’s allowance and the bereavement payment for those who lose a spouse or civil partner on or after 6 April 2017. These regulations set out the amounts to be paid, the duration of payments, payments for those who are prisoners, and the territories in which a person must reside in order to receive the new benefit. I am satisfied that this instrument is compatible with the European Convention on Human Rights.

Losing a spouse or civil partner is a tragic occurrence, and bereavement benefits provide vital financial support during this deeply distressing time in a person’s life. Previous reforms have tended to be limited and in response to specific pressures. No one had really considered how this support fits in with wider changes to the benefit system and, indeed, to the social landscape as a whole. Consequently, the current benefits are out of date, difficult to administer and hard to understand. Reform is essential to simplify and modernise the current system. The history of bereavement benefits is rooted in the Widows, Orphans and Old Age Contributory Pensions Act 1925, at a time when most women were wholly dependent on their husband’s income. If a woman was widowed, her sole source of income would disappear completely, so it was considered necessary at that time to provide a replacement for that income in order for her to survive. Thankfully, that situation is no longer the case, women as well as men are active participants in today’s workforce, and many households are now made up of, and benefit from, dual careers and dual incomes. For those where the loss of a spouse equates to the loss of the sole breadwinner, income-related benefits are available to make sure that nobody is left without sufficient money to live on.

Compared to the current bereavement benefits, bereavement support payment is designed to be significantly simpler with a uniform payment structure and a single contribution condition. The aim is to provide targeted financial support at the time when it is needed most without affecting access to additional forms of support available through other parts of the welfare system. The reform of bereavement benefits has been welcomed by both the Social Security Advisory Committee and the Work and Pensions Select Committee, the latter of which heralded many of the changes as long overdue. In addition to scrutiny by those two bodies, bereavement support payment was also the subject of a public consultation exercise launched in 2011. Responses to this consultation played a major part in the design of bereavement support payment, including the decision to structure the payments as a series of instalments as opposed to a single lump sum and also the decision that bereavement support payment will not be subject to income tax.

The evidence from our public consultation exercise found that the financial impact of spousal bereavement is particularly acute in the early months. Bereavement support payment will therefore provide a significant cash boost for people at this time where they need it the most, with a lump sum followed by 18 monthly instalments. In recognition that those with children may need a greater level of support, a higher rate will be paid to those who are pregnant or who have dependent children at the time they are bereaved. The duration of payments is not intended to equate to the period of an individual’s grief, nor is it intended to provide ongoing income replacement; rather, the fundamental design principle of the new benefit is that, as a short-term payment, it is designed to address the additional costs of bereavement rather than contribute towards everyday living costs. Because they are clearly distinct from income replacement benefits, we will disregard payments of bereavement support payment from universal credit and legacy benefits, as well as discounting them from the calculations which count towards the benefit cap. This will clearly benefit the least well-off as they will, for the first time, be able to receive payments of bereavement benefit in full, alongside any other entitlements. For example, an unemployed widow with one child who is entitled to bereavement support payment could receive £7,350 in the first year. In addition, they could receive the standard allowance and the child element of universal credit, which is more than £7,130 a year. On top of this, they may also be able to access other support such as help with childcare and housing costs.

--- Later in debate ---

[Lord Henley]

My Lords, I thank the noble Baroness, Lady Sherlock, the noble Lord, Lord Jones, and the right reverend Prelate the Bishop of St Albans for their contributions. I hope to deal with their concerns in the course of my speech.

On the first point raised by the right reverend Prelate about the length of time—this was also alluded to by the noble Baroness, Lady Sherlock—as noble Lords will remember, the original idea was that it should be for 12 months. This was extended as a result of the consultation, the comments from SSAC and the Select Committee to 18 months. One of the reasons for this is that it was considered that 12 months was not the optimum period, particularly in the light of its ending more or less on the anniversary of the death. Eighteen months fits in slightly better with that. The same could be said about three years because it also would fall on an anniversary. However, I do not use that to argue against a period that might be longer or shorter. We came to the view that 18 months rather than three years was about right and that thereafter, if necessary, income-related benefits would be more appropriate. The idea is to provide support at the time of bereavement and in the months afterwards, but there has to be a cut off at some point.

The noble Baroness accused us of bad faith when we extended the period from 12 to 18 months and said that the global amount would be a slightly smaller figure. If we extended to three years the same would apply—it would be a smaller figure—and it is better to get it in 18 monthly instalments than over a period of three years. Others may disagree, but judgments have to be made on this issue and we feel that 18 months is about right.

The right reverend Prelate also objected to the fact that there was no automatic top-up in line with inflation. The noble Baroness, Lady Sherlock, also wished to address the point. She will know that bereavement benefits of all sorts have been uprated in the annual Social Security Benefits Up-rating Order 2017, which we will get to later on. She will also know that the basic component of bereavement allowance and widowed parent’s allowance have to be uprated annually, at least in line with price inflation. There has been no requirement to uprate the bereavement payment, which has been frozen since 2001.

Bereavement support payment is a grant paid in instalments, rather than as an income replacement benefit, so it is treated in a similar way to the current bereavement payment. That is what is behind our views on that matter. It will be reviewed annually on a discretionary basis but without expectation that the payment should automatically be increased annually. Again, I imagine that we will want to come on to that later on, when we debate the general uprating order.

The third point touched on by both the right reverend Prelate and the noble Baroness was about extending the payment to cohabitees, as opposed to just those who are married and in civil partnerships. I do not actually know the result of the civil partnerships case that was in the Court of Appeal today.

[The Lord Bishop of St Albans]

It was rejected.

[Lord Henley]

I am grateful to the right reverend Prelate for saying that it has been rejected. By that, I take him to mean that it is still not possible for those of the opposite sex to have a civil partnership. Civil partnerships will therefore apply to those of the same sex, and marriages to those of the same sex and those of the opposite sex. We took the view that it was better and simpler to confine it to those groups, rather than to extend it to cohabitees. Cohabitees, as we have always known, have the ability to take steps to rectify their position and become married or, in certain cases, to become civil partners. To add the complexities, which I accept already face cohabitees regarding, for example, income-related benefits, such as UC, to a payment of this sort would not be appropriate. It can be dealt with by people themselves if they wish to regularise their position, which is always important to know.

I can remember some of the debates on various Private Members’ Bills, particularly one which I think was promoted by the noble Lord, Lord Lester of Herne Hill. He said that there was gross ignorance about this matter and that people thought being a common-law wife or husband gave them the same rights. I think that by now, most people should know that it does not give them the same rights; their rights are distinctly different if they are cohabitees. As I said, it would add excessive complications to a benefit of this sort, and I do not see the reason for extending it.

The noble Lord, Lord Jones, asked about the numbers of those who are likely to be affected. In the past, it has been something of the order of 40,000 a year and we have no reason to believe that it will be any different. I can add to that one other figure, which will be of interest to him and the Committee: of those 40,000, some 8,000 also have dependent children. That figure might or might not surprise the noble Lord. I was slightly surprised, since we are talking about claimants of working age, that it should be as low as that. But that is the figure, and I have no reason to believe that it will change.

Finally, I can confirm to the noble Baroness, Lady Sherlock, that bereavement support payment will be disregarded for universal credit and for income-related benefits. I think I made that clear in my speech. If even Homer nods, perhaps even the noble Baroness occasionally nods.

[Baroness Sherlock]

In a different way.

[Lord Henley]

She was nodding in a different way but anyway, I can confirm that it will be disregarded, as it will be for the benefit cap.

Finally, the noble Baroness talked about the time for claiming the benefit and the fact that the monthly payments must be claimed within three months but that in terms of the basic amount, they had a full year. The simple answer is that for monthly payments it is appropriate to have a cut off that is shorter than for the lump sum. I do not believe—this is the important thing—that there is much ignorance, once people are bereaved, about benefits of this sort. Certainly the evidence we have and the evidence we have had in the past, which implies a very high take up of this benefit, seems to suggest that most people get to know about it very quickly. It is one of those things that, for example, I am sure undertakers know about and will advise on, as will others.

I hope that, with the assurance that I may find that there are one or two points I have not answered, the Committee will accept the regulations.

Motion agreed.