Credit Unions
Lord Kennedy of Southwark Excerpts(10 years, 2 months ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what plans they have to support credit unions in addition to the Credit Union Expansion Project.
Lord Newby (LD)
My Lords, the recent HM Treasury call for evidence sought views on how government and others could do more to support the development of the credit union movement. The call for evidence closed on 1 September. Responses are currently being considered by the Treasury and an announcement will be made in due course. We are also working with others, including the Church of England, the Ministry of Defence and banks, to facilitate increased access to credit unions.
Lord Kennedy of Southwark (Lab)
My Lords, I declare an interest as a director of London Mutual Credit Union. I am delighted to see the noble Lord, Lord Newby, here. I hope it is okay with the noble Lord, Lord Freud. Will the noble Lord join me in congratulating Her Royal Highness the Duchess of Cornwall on her work in support of the credit union sector? She is today hosting a reception at Clarence House to support International Credit Union Day. Will the noble Lord arrange for me to meet the relevant Minister in government to discuss how to get government departments to follow the example of Clarence House and this House and arrange for civil servants to be able to join a credit union using payroll deduction?
Lord Newby
My Lords, I would be happy to do that. The Government are keen that civil servants should join credit unions where possible. Some work has been undertaken on how we could do that at reasonable cost. In the mean time, civil servants are being encouraged both to join credit unions and to get involved as volunteers. For example, an accountant at DWP is the treasurer of a credit union in Sheffield. That is a good example of how civil servants can use their experience and benefit the credit union movement.
Debt Management Organisations
Lord Kennedy of Southwark Excerpts(10 years, 4 months ago)
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Lord Newby
On the second part of the noble Lord’s question, debt management companies will be required under the new rules to signpost consumers to free debt advice, which will be a major improvement. There are two elements of regulation of cold calling and unsolicited text messages. The ASA has some responsibility in that area and it has already taken action to ban payday lenders’ use of unsolicited text messages. As with its regulation of other financial services markets, the FCA is committed to ensuring that cold calling by phone, text or e-mail makes the identity of the firm and the purpose of the communication clear to those being called.
Lord Kennedy of Southwark (Lab)
In a recent Parliamentary Answer I found out that since 2005 companies in the financial services sector have been fined £1.2 billion. Will the Minister agree to look at the points made by the noble Lord, Lord Sharkey, and maybe use a small portion of those fines to fund good charities, good organisations and credit unions which actually help people who are in debt?
Pensions Advice
Lord Kennedy of Southwark Excerpts(10 years, 4 months ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what safeguards will be in place to ensure that people receive sound advice when seeking to access their pension funds.
Lord Newby (LD)
My Lords, every individual with defined contributions pension savings will on retirement have a new right to free and impartial guidance to help them make informed decisions about how they use their pension savings in retirement. The Government will legislate to give the Financial Conduct Authority responsibility for setting standards for guidance and monitoring compliance with those standards. The FCA has published a consultation paper alongside the Government’s response on its proposed standards.
Lord Kennedy of Southwark (Lab)
My Lords, what has been announced by the Government so far is wholly inadequate. We all remember the pensions mis-selling scandals of the 1980s when people were enticed out of SERPS and then fleeced. What qualifications will individuals need to have in order to be able to give this advice, and what guarantees will be put in place to ensure that people do not see their pension pots go in fees, charges and wholly inappropriate products?
Lord Newby
My Lords, the key innovation in the way we are planning to introduce this change is that of giving every individual coming up to retirement an entitlement to free guidance. To ensure that the guidance is impartial, we have decided that it will be provided by independent organisations which have no actual or potential conflicts of interest; it is not going to be the pension companies providing that guidance. A team has been established within the Treasury to lead on service design and implementation, bringing together expertise from across government, the Pensions Advisory Service and the Money Advice Service. The FCA will be the ultimate backstop in terms of the quality of the advice given and the monitoring of it. We will legislate to give the authority that explicit power in the Pension Schemes Bill later in this Session.
Northern Ireland: Illegal Petrol and Diesel
Lord Kennedy of Southwark Excerpts(10 years, 5 months ago)
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Lord Newby
My Lords, there is a lot of data published about the duty rates. Noble Lords can see those. What is extremely difficult to do is to demonstrate with any great degree of precision exactly how much of a product crosses a border without a customs post. That is obviously a challenge between the Republic and Northern Ireland, as well as more generally within the EU.
Lord Kennedy of Southwark (Lab)
My Lords, there is also, of course, a problem of smuggling from mainland Europe into the UK. I went down to Dover a couple of years ago and was shocked to see how porous our borders are. We spoke to the customs officer there; in terms of illegal alcohol and tobacco, there just were not the staff to stop the vehicles to check them.
Lord Newby
My Lords, tobacco smuggling has been a problem for some time. The additional resources that have gone into HMRC over the course of this Parliament, which amount to about £1 billion, have among other things enabled more to be put into that area also.
Payday Loans: Debt Collection
Lord Kennedy of Southwark Excerpts(10 years, 5 months ago)
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Lord Kennedy of Southwark
To ask Her Majesty’s Government what action they propose to take in respect of Wonga.com and other financial sector companies which have employed misleading debt collection practices.
Lord Kennedy of Southwark (Lab)
I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as a director of London Mutual Credit Union.
Lord Newby (LD)
My Lords, the Government are determined that abuse in the payday lending market should be tackled wherever it occurs. That is why we gave the Financial Conduct Authority strong powers to regulate the payday lending industry and legislated to require the FCA to introduce a cap on the cost of payday loans. The FCA asked Wonga to make redress to customers, which Wonga has agreed to. Wonga will pay compensation totalling more than £2.6 million to around 45,000 customers.
Lord Kennedy of Southwark
Will the Minister join me today in condemning the disgusting activities of Wonga.com? Will he arrange for me, faith groups and other campaigners to meet a Treasury Minister to look at the idea of putting the fines imposed on companies in the financial services sector into a separate fund and using them to support the credit union movement, financial charities that work with adults and children, and similar organisations? Enabling people to make better-informed financial choices and to understand their options is a much better way forward.
Lord Newby
My Lords, I agree with the noble Lord on his first point and I am happy to arrange a meeting. I remind the House that the Government are putting £38 million into the credit union expansion plan and we strongly support the expansion of credit unions.
Barnett Formula
Lord Kennedy of Southwark Excerpts(11 years ago)
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Lord Kennedy of Southwark (Lab)
My Lords, like other noble Lords who have spoken, I place on record my thanks to the noble Lord, Lord Shipley, for initiating this Question for Short Debate in the light of the Local Government Association’s recommendation that the Barnett formula is replaced with a new needs-based funding model.
The Barnett formula is often discussed in your Lordships’ House and I hope that, in his response to the debate, the noble Lord, Lord Newby, will give us a bit more information than we were able to get in an exchange at Question Time, and address some of the points I am going to make about the funding of local government in England and Wales. Like all noble Lords, I am aware that the formula which bears the name of my noble friend Lord Barnett was devised when he was Chief Secretary to the Treasury and has been used for more than 30 years to allocate more than half of total public expenditure in Scotland, Wales and Northern Ireland.
The Barnett formula has been criticised on a number of grounds. It has been argued, among other things, that, because of its focus on population, it fails to recognise higher levels of poverty. In this debate it is useful to look at what has happened to local government in England and Wales in recent years, and in particular since 2010. We have a picture of local government that has been described by the Prime Minister as,
“officially the most efficient part of the public sector”.
However, his Government have made bigger and earlier cuts to local government than to any other part of the public sector. Their actions have been criticised right across local government and real inequalities and unfairness have crept into the system. I still find it shocking, when I look at the figures, to see that they highlight the West Oxfordshire District Council, the local authority that covers the Prime Minister’s constituency, which is ranked in the multiple indices of deprivation at 316—with one being the most deprived and 325 being the least deprived—and which is actually getting an increase of 3.1% in its spending power. Meanwhile, other local authorities such as Hastings on the south coast and Burnley in the north-west, which are ranked 19th and 11th respectively in the same indices, are facing the maximum cut in their spending power in 2013-14, which equates to a reduction of 8.8%. I agree very much with the comments made by the noble Lord, Lord Shipley, regarding the difficulties in which some local authorities find themselves.
It is also shocking to note that the 10 most deprived local authorities in England will lose six times the amount of spending power per head of the population when compared with the 10 least deprived local authorities by 2014-15, when compared with 2010-11. The noble Lord, Lord Shipley, also referred to the calls for further devolution of powers and fiscal reforms in England. I very much agree with his comments about the core cities.
Will the noble Lord, Lord Newby, address in his response the points that the Local Government Association is calling for, to which the noble Baroness, Lady Eaton, referred, including five-year funding settlements across the public sector to give more certainty to local government? That is a sensible idea. Will he also address the point about the distribution of funds in England being taken out of the hands of Ministers and replaced with an agreement across English local government? The current arrangements are opaque and, as with the figures I highlighted earlier, people struggle to understand them and how they are arrived at. They just demonstrate unfairness in the process—a process which disadvantages people living in our most deprived areas and communities. I very much agree with the noble Baroness, Lady Eaton, that the devolution of further power to local government in England is a good thing. Like her, I have also noted the MORI polling which shows that 79% of people trust their local council, whereas only 11% trust central government. I shall not comment further on that; I leave it there.
This debate has to address the issues around spending in our most deprived communities. How do we ensure that no matter whether you are living in a deprived part of Glasgow, a deprived mining village in south Wales or on a council estate in Southwark, central, devolved and local government provide the funding that helps you improve the situation in which you and your community find yourselves, whether through the provision of better housing, better schools, the means to get the skills and training you need to get a job to provide for your family, or to look after yourself in your old age as your needs change?
The noble Duke, the Duke of Montrose, made a number of important points to which I hope the noble Lord, Lord Newby, will respond. I again thank the noble Lord, Lord Shipley, for initiating this debate and look forward to the response of the noble Lord, Lord Newby.
Lord Kennedy of Southwark
My Lords, in response to the point about the funding formulas in West Oxfordshire, I agree that it is very complicated stuff. Is there anything that the Minister or his department could provide to Members so that we may understand it further? If we have debates saying that this council got this and that council got that, it makes it more complicated. Some of the figures seem very unfair. If we understood how it was funded and more of what was behind that, maybe we would see a different picture.
Public Service Pensions Bill
Lord Kennedy of Southwark Excerpts(11 years, 10 months ago)
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Lord Kennedy of Southwark
My Lords, Clause 10 imposes a normal pension age of 60 on firefighters as well as on police and members of the Armed Forces. My amendment would build some flexibility into that but does not rule out 60 in respect of firefighters.
The Government, under the previous Fire Minister in the other place, set up a review, chaired by Dr Tony Williams. It published its report in January, just a couple of weeks ago. I think it is at best odd, and perhaps even outrageous, that the Government are pressing ahead here and are not taking the review properly into account. The report does not recommend a normal pension age of 60; nor does it make the case for firefighters working to 60. The review was set up to assess the appropriate normal pension age. Nowhere in the review does it say that 60 is appropriate. At most, the review’s recommendations establish a set of conditions —such as national firefighter fitness standards, fitness entry standards at recruitment, fitness training throughout careers, and an accepted testing regime—that would have to be met before working to 60 was possible.
The report provides medical evidence that working beyond 55 is not attainable by most current firefighters. Between half and two-thirds of current firefighters would not be fit enough to work beyond 55. Other figures in the report suggest that more like four out of five firefighters would not be fit enough to work beyond 55. The Government seem intent on imposing a national pension age of 60 despite the medical evidence against that. I hope that in his response today the Minister will explain fully why that is the case.
A national pension age of 60 will hugely disrupt the fire and rescue services. There is also a danger that it will not only discriminate against women but will drive out most women firefighters, undermining decades of equality work. A national pension age of 60 will not just remove the link to the occupational nature of the pension scheme; it will also risk making it unsustainable. With higher contributions, it will take a drop-out rate of only 7% to do so.
The Williams report recommended that firefighters over the age of 55 who can no longer meet the fitness requirement should be allowed to leave early on an actuarially reduced pension, calculated so there is no overall financial advantage or disadvantage to the firefighter. This means that most firefighters will get a reduced pension because the national pension age is wrong.
I want to move on to make some remarks about fitness. Aerobic fitness, one of the core components of fitness—along with anaerobic/high-intensity fitness and strength—is often measured using the rates of oxygen uptake, or VO2. The Williams report suggests that at least 42 VO2 is necessary for firefighting. This is the level recommended by experts in the field and is the level that the majority of fire services are using today. The report admits that at 50 to 54 years of age, 51% of firefighters are below the figure of 42 VO2. At the age of 55 to 60, that rises to 66%: two-thirds of firefighters are below that standard. The report suggests that if 42 is the standard, then by 60 years of age up to 92% of present firefighters could be below the minimum standard for operational duty. To push ahead with this is risky and dangerous.
The report suggests that, even in a best case scenario, where firefighters maintain their physical activity status, their body mass index and their smoking status as they age, at 55 years of age approximately 15% of firefighters would be below the minimum standard required for operational duty. By 60 years of age, this percentage would rise to 23%. However, this best case scenario model uses a higher entry standard than the one currently in force. It assumes that firefighters are recruited at 47 VO2, whereas actually the recruitment standard is much lower at 42. This means that the best case scenario is flawed as it assumes a much higher fitness level on recruitment than is in fact the case.
Will the noble Lord spell out clearly what kind of fitness regime and lifestyle changes will be necessary to meet this best case scenario? Most firefighters are likely to do fitness training at work of at least 30 minutes per shift; some do up to four hours a week. Does the noble Lord accept that what may be possible in the future, with new recruits and different standards, is fundamentally different from expecting people now in service to reach these service levels at ages between 55 and 60? It is risky and dangerous. If the noble Lord is not prepared to accept the amendment, can he tell the House why? The amendment commits the Government to do nothing other than accept that the national pension age must be set in scheme regulations and must be no more than 60. It allows for further discussions to take place, and if the Government are not persuaded, they can set the level at 60.
I had a meeting with the noble Lord. He very kindly met me and representatives of the Fire Brigades Union and I thank him very much for that. It was a very useful meeting and people put their case across very well. I appreciate that he did that. I hope that the Government will come back today with something positive.
Lord King of Bridgwater
I think that probably all noble Lords have had a most interesting letter from the general secretary of the Fire Brigades Union setting out the union’s case on this matter. I do not know whether I read it wrong, but I got the impression from the letter that there are safeguards to protect those who are approaching retirement age at the present time and that the issue arises much more for firefighters who are now 40 to 45. In those cases, when it is recognised that people are going to live longer and when the pension age may rise to 67 or higher, it seems that we are going to be looking for a different standard of fitness. It is quite difficult to argue in your Lordships’ House that nobody is fit any longer at 55.
Lord Kennedy of Southwark
I think the noble Lord is absolutely right that there is a difference in fitness. That is the problem. A regime could be put in place for people when they first come as recruits. By accepting my amendment, the Government could set the age in scheme regulations, whereas at the moment the age would normally be 60. I beg to move.
Lord Eatwell
My Lords, there are also in this group a pair of amendments in my name and that of my noble and learned friend Lord Davidson, both of which seek to add flexibility and that famous characteristic, future-proofing, to the Bill. It is a laudable objective of the Government to have a common movement—a standard process—that can be seen as fair and generally acceptable across the entire structure of public service pensions. However, it is an objective which will, inevitably, from time to time, run up against reality. We have already seen it run up against reality in the case of the uniformed services, which we discussed earlier. It could also run up against reality in a whole series of other circumstances where the best would be the enemy of the good. In other words, the commitment to uniformity would produce elements of unfairness and, perhaps, elements of unsatisfactory performance because individuals were staying in employment longer than they ought to in some circumstances.
We need a degree of flexibility and Amendment 19 relates flexibility to a scheme-specific capability review. These reviews are now becoming quite common within public services, as they already are in private industry. They are designed in some circumstances to relate to the capabilities of individuals with respect to age. If there were to be a thorough review which a Government at the time accepted, this amendment would give the Government the flexibility to amend the pension ages set out in Clause 10(1) and (2). This would provide a degree of flexibility and that is all it is intended to do.
I questioned the noble Lord in Committee about a number of reviews that are currently under way. He pointed out to me that those reviews were not considering issues of pension age and I accept that entirely. However, this does not mean that considering pension age relative to capability will not occur or is not likely to occur. On the contrary, it is highly likely to occur over the next 10 years or so. Amendment 19, therefore, provides the Government with the necessary flexibility to respond to scheme-specific capability reviews.
Amendment 20 would incorporate into the Bill a proposition directly taken from my noble friend Lord Hutton’s excellent report. He argued at the time that the relationship between the state pension age, which is the sort of anchor of the whole structure, and the structure of pension ages in the public sector should be reviewed from time to time. This amendment incorporates my noble friend’s proposition.
In Committee, the Minister said:
“The DWP White Paper published yesterday says that we intend to hold a review every five years, so the link will be reviewed when a review is announced”.—[Official Report, 15/1/2013; col. 621.]
He got a bit muddled there but we know what he meant. That is fine, but could he tell us what is going to happen to this DWP White Paper? Is it the forerunner of some legislation? If so, when will that legislative proposition appear? Would it not be comfortable, given the structure of this Bill, to include Amendment 20, taken from the Hutton report, to achieve the goal he declares to be the Government’s goal, as set out in that DWP document?
I entirely understand the commitment to having a standardised, clear, comprehensible system, but there will always be anomalies which have to be appropriately addressed. I believe that these two amendments provide flexibility and would ensure that the Government could do exactly that.
Lord Newby
My Lords, as regards Amendment 18, we are aware of, and greatly respect, the hard work done by the police, firefighters and the Armed Forces. But the noble Lord, Lord Hutton, was clear that the normal pension age for these schemes should be equal to 60, subject to regular review. As we know, this fixed age is already significantly different from the position for all other public service workers. A pension age of 60 for police and firefighters is in line with the reforms implemented by the previous Administration. We are not, and nor should we be, in the business of reducing pension ages given the longevity challenges we face. To do so would go against all that the Bill is designed to achieve.
We already have made a commitment to review these provisions as and when future changes to the state pension age are announced. Those reviews will be separate from the state pension age reviews to ensure that the specific impacts on public service schemes are taken into account. The noble Lord, Lord Eatwell, asked about where we would legislate for the DWP White Paper more generally. We will legislate separately for that. Obviously, it is not appropriate to do that in this Bill. It is a much wider issue and we will deal with the question of reviews in the context of the rest of the White Paper.
I firmly believe that the drafting of the Bill is correct on this issue and that the pension age provisions, including the link to state pension age for other schemes, are rightly the cornerstone of the legislation. It is also worth remembering that setting a normal pension age of 60 does not prevent people retiring before 60 if they wish. Early retirement factors can be taken within the scheme rules and added pension can be bought. Both of those allow for more flexibility over when people can access their pension. All three schemes captured by this amendment already allow people to take benefits from the age of 55 if they wish.
However, I will attempt to respond briefly to the points raised concerning the firefighters and the review by Dr Williams, about which the noble Lord spoke. I should start by making it clear that it is not the case that the review found evidence that a very large proportion of firefighters would not be fit enough to work to 60. The report finds that the average serving firefighter is already beyond the required fitness levels at the age of 35 to maintain operational fitness until the age of 60, if those individuals maintain their physical activity levels and BMI.
In our meeting, I discussed with the union that there is an argument for more structured and formal procedures to be in place to help people keep fit. People may spend time on physical activity but quite a lot of it might generously be called pretty informal. Getting a more formal and rigorous fitness regime in place, which would help individuals more generally as well as in their ability to work to the age of 60, falls outside the scope of the Bill and is something that the FBU no doubt will want to discuss further with its employers.
The report projects that in circumstances where people maintain their physical activity levels and BMI, individuals could maintain operational fitness in many cases until their mid-60s. We simply do not believe that it is necessary to make an amendment which enables a lower pension age than 60 for members of the firefighters’ scheme, or for the police and Armed Forces schemes.
The difference from Amendment 19 is that it would allow for exemptions to any of the normal pension age provisions currently set out, should a capability review make such a recommendation. We are not talking about just the police, firefighters and Armed Forces but all other public servants who will have their normal pension age linked to the state pension age.
I should briefly remind the House of the reason for the state pension age link in the first place. To get a grip on public finances, we were faced with a choice. We could either significantly reduce the value of scheme benefits or ask people to work slightly longer before they can receive their pension. We decided that the latter approach is best. Scheme benefits will be marginally less generous in the new schemes but only by a small amount. Instead, we are asking people to wait until their state pension age before becoming eligible for their pension. We think that this is preferable to significantly reducing benefits and increasing hard-working public servants’ reliance on means-tested benefits in their retirement.
We should remember what this state pension age link really means. For those retiring in the near future, it means waiting until the age of 66. When people talk about waiting until 67 or 68 and beyond, they are talking about several decades’ time from now. We are not talking about extending people’s working lives overnight. Instead, we have a lot of time to assess how best to adapt to extended longevity and how to ensure that employers provide the right working conditions to allow people to work up to the state pension age. That is why the NHS working longer review—to which the noble Baroness, Lady Hollins, referred—is so important.
I think everyone recognises—I made this point in Committee—that it is not just in the public sector that there are a range of occupations which people cannot do as well at the age of 67 as they can at 27. It is a challenge across society to find methods of working which reflect that so that people can carry on working to a later retirement age without being faced with undue stress during their latter years. The review is looking not at the link with retirement age but at how best to deliver NHS services with a workforce who is living longer. I am sure that other workforces in the public sector will need to follow the lead of the NHS in looking at how they can achieve that.
What we should not do is seek to make exceptions to the state pension age link. As I have outlined, the link has very little effect in the short to medium term, but it is a crucial part of the solution to the long-term problem. While we should not dig our heads in the sand, there comes a time when it is best to accept the reality of the situation: people are living longer and the public service workforce must and will adapt to that. The previous Administration recognised that when they asked all public servants—barring those whom we have identified—to work to the age of 65. We are simply future-proofing that approach by tracking the state pension age as it moves beyond 65. If we do not face up to the challenge of increases in longevity now, we would only have to do so in the near future when there will be less resource available. For those reasons, I cannot support this amendment. The universal state pension link is absolutely vital to putting public service pensions on a fair and sustainable footing. I have complete confidence that, with the appropriate foresight and common sense from employers, it will be deliverable across all the relevant public service workforces.
Finally, Amendment 20 seeks to provide for an independent review of the pension age mechanisms in this Bill. I reiterate that the Government are totally committed to reviewing the pension age, as and when future changes to the state pension age are announced. This was one of the recommendations of the noble Lord, Lord Hutton, and we are sticking to it. I add that the House should be reassured that, when coming to decisions on any changes to the state pension age, Ministers will bear in mind the consequences for public servants. We would also expect member representatives to feed into this separate process. None the less, there are good reasons why this Bill does not provide for the review to the normal pension age provisions, which would follow any state pension age reviews that result in a change to the state pension age. For a start, public service pensions link to the state pension age, not vice versa, so given that work on the state pension age reviews is still in its early stages, and we do not know exactly how it will consider public service schemes, it would be premature to lock down details of the normal pension age provisions at this stage.
More importantly, we have not yet even developed those details—and that is sensible. We should not be determining the parameters for such reviews so far in advance, nor should we be trying to do so. It would be for the Government of the day to consider what is appropriate, beyond of course taking into account any changes in longevity. If that were to involve an independent assessment, so be it. However, again, it would be for the Government of the day to decide if that were appropriate. The Government may already have had all the independent advice that they require on longevity from the wider state pension age review, depending on the final details of that process. If, during the course of that review, there was no representation from the public sector that it wished to be treated any differently from anyone else, the scope of a review would be rather less than if there was a lot of independent evidence and representations being made from the public sector that it was in a different situation from the rest of the workforce—and not just a different situation, but a worse situation. Of course, nobody is going to argue that the public sector should have a differentially higher retirement age. While we could put a bland commitment into the Bill just to review the provisions from time to time, that would not be worth while without being able to include any details. It would carry very little weight and give no more assurance on this matter than the public statements that we have made on our intentions on a number of occasions. I therefore urge the noble Lords to withdraw their amendments.
Lord Kennedy of Southwark
I thank the Minister for his response. I am happy to withdraw the amendment, but it is a bit odd and not really joined-up government to have the previous Fire Service Minister, Mr Bob Neill —I think I am right, but correct me if I am wrong—commissioning a report on firefighters’ pensions for 12 January, less than a month ago, when this Bill is going through. It is not very well organised and I think it should have been done better. However, I hear what the Minister says and, with that, am happy to withdraw the amendment.
Public Service Pensions Bill
Lord Kennedy of Southwark Excerpts(11 years, 11 months ago)
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Lord Eatwell
My Lords, this group of amendments deals with various issues associated with pension age and the way it is adjusted relative to movements in the state pension age.
First, perhaps I may speak to Amendments 52, 55 and 57. These are minor amendments tabled to address what we see as a drafting anomaly. If it is not an anomaly, it would be very helpful if the Minister could explain why. The exemptions outlined in Clause 9(2) refer only to a person’s normal pension age, not to their deferred pension age. We believe that this means that the exemptions will apply only to active members of pension schemes and not to those who have moved on from their occupation and are classified as deferred members. In another place when this point was raised, time ran out, as it tends to there, and the Minister did not address this question at all.
I now turn to much more substantial amendments. Amendment 56 would insert a caveat with respect to changes in pension age. It says that such changes would not apply to members of a public service pension scheme who would be exempted from the operation of subsection (1) as a result of a scheme-specific capability review—in other words, those who do not come just within the broad categories of the fire and rescue services, a police force or the Armed Forces. There would be a scheme-specific review looking at the necessary capabilities of workers within a particular scheme. After all, some public sector workers not covered by the broad categories in Clause 9(2) have physically demanding jobs and it would not be appropriate to increase their pension age in line with the planned increases in the state pension age. For example, we could refer to mental health nurses, who occasionally have to physically restrain patients, and paramedics might also be considered.
However, what is really important with respect to the examples I have just given is that capability reviews are already under way. In fact, the Department of Health is undertaking the working longer review in relation to the NHS. This will make recommendations about the appropriateness of certain NHS staff working beyond the age of 65. However, the Bill does not exempt any NHS staff from the state pension age link; nor does it make any provision for the findings of a review—including the working longer review, which is now under way—to be taken into account, even though the review has not yet published its conclusions. Therefore, effectively the Bill makes this aspect of that review redundant, and the people working on it might as well just pack up and go home because the Bill effectively excludes any recommendation that they might make with respect to changes in the pension age of specific workers in the NHS. Amendment 56 would insert a caveat into Clause 9 so that a change in pension age would not apply to members of public service pension schemes who should be exempted from the operation of subsection (1) as a result of a scheme-specific capability review.
In another place the Government rejected this review on the basis that the amendment would create confusion and uncertainty. Why it would do that when you have specific capability reviews I am at a loss to understand. Secondly, the reason that certain professions are excluded is not just because of physicality but because they perform a specific public function. Again, that could clearly be undertaken and expressed in the terms of reference of a capability review, wherever that might take place. In this case the Government really have to think very carefully again. They set up the working longer review. They recognise that, in some specific cases not covered by the generality of Clause 9(2), there are cases where the link to state pension age should not be made and yet the Bill does not provide the means of incorporating the results of appropriate reviews.
I shall now speak to Amendment 59 which is also in this group. This refers to a recommendation made by my noble friend Lord Hutton in his review that the link between the state pension age and the normal or deferred pension age should be kept under review and should be reviewed regularly. The report recommends:
“The Government should increase the member’s Normal Pension Age … in most schemes so that it is in line with their State Pension Age”.
That, after all, is one of the key themes of this Bill. Then the report says,
“However, the link between the SPA and NPA should be regularly reviewed to make sure it is still appropriate, with a preference for keeping the two pension ages linked”.
Therefore, it should be reviewed in the light of circumstances. This Bill is implementing one half of my noble friend’s recommendation and leaving out the other half for a regular review.
A regular and independent review into the state pension age link would help to ensure that public service schemes remain sustainable if life expectancy is rising or whatever happens to it. One of the great mysteries of academic life is that one would expect demographers always to be incredibly accurate because they have such a range of data. They know how many people have been born in a particular year and they should be able to look forward to what will happen. However, one learns that demography is a very inexact science and demographers make—and admit that they do—a lot of mistakes and their circumstances change. After all, their profession would die if they did not have new things to worry about as the world changes. We need the possibility of a regular review of the link with the state pension age so we can ensure that members are being treated fairly and that the funding of the schemes, where they are funded, and the provision for non-funded schemes fit within the framework of the Government’s finances.
In another place the Government recognised the recommendation of the noble Lord, Lord Hutton, and said they expected reviews to be undertaken as and when future changes to the state pension age are announced—so they expect it to happen. However, it was not necessary to put it in the Bill as the Government will in due course make announcements about the review process, which is not desirable as it would restrict flexibility. How does it restrict flexibility? This is one of those blanket excuses, like “it is unnecessary”. It does not restrict flexibility at all; it just says, as the Government have conceded, that it would be desirable to have a review whenever the normal pension age is changed.
I have a particular question for the Minister in this respect. Suppose there is a review and it finds that the link is not working and something has gone wrong. What would happen then? Without having the review on the face of the Bill, it seems to me that the Government would have to return with primary legislation. Therefore, we are increasing the flexibility of the Bill by removing that threat to the flexibility of the operation of the Bill as a whole. I beg to move.
Lord Kennedy of Southwark
My Lords, I speak to Amendment 53, which is in my name. When the noble Lord responds to this group, I hope that he will be able to give the Committee some assurances in respect of the Government’s understanding of the special situation that firefighters find themselves in. They put their lives at risk on a regular basis to help and to protect members of the public and their property. I also hope that the noble Lord will confirm that he accepts and understands fully that maintaining high levels of fitness is crucial for firefighters and that there is evidence that, as we get older, cardio-respiratory fitness declines over the whole population. Therefore, asking firefighters to work until they are 60 in these front-line roles is not sensible and not safe for firefighters or the public.
I would like the noble Lord to comment on the review that has been undertaken by Dr Williams and his committee on the normal pension age for firefighters. The committee and Dr Williams were appointed by the previous Fire Minister, Mr Bob Neill, the Member for Bromley and Chislehurst in the other place. Let us be clear that the Department for Communities and Local Government’s document Firefighters’ Pension Scheme: Heads of Agreement in 2012 includes a requirement for the national pension age to be subject to regular review, informed by research carried out by the firefighters’ pension committee. I think that the Bill, coming at this time and relating to firefighters, has pre-empted the review, and that seems odd to me.
These decisions are really important and should be informed by evidence-based research, so I want to understand how the Government will use the research that they commissioned to inform the decisions that they make and the proposals that they will bring before Parliament.
Lord Newby
My Lords, the noble Lord gives an example. I was literally just about to give another example. I will come back to his example. My example concerns a former police officer who leaves service aged 35 to work as an office-based local government worker for the rest of their career. It is by no means an unusual or impossible example. Should their police pension still be available, unreduced, at 60? That is the question, particularly when a local government colleague sitting at a nearby desk must wait until the state pension age to take his or her full pension. Surely the answer can only be no. The strength of that argument is greatest if someone left the police after a year aged 22 and is weakest if they left it aged 59. I agree with that. The argument is not exactly the same at every age.
However, in looking at this, the noble Lord, Lord Hutton, recommended that we should go to the provision that we have indeed gone to, which is that all deferred pensions are payable in full from the state pension age. If we were to move towards what the noble Lord suggests, we would have an extremely complicated position where there were grades of deferment, if you like. We wanted first of all to have a relatively simple approach. We have followed the recommendations of the noble Lord, Lord Hutton, and we think that we have come up with a sensible, practical solution. We understand the argument, but we have deliberatively taken the view that deferred pension age should be the same as normal pension age.
On Amendment 53 in the name of the noble Lord, Lord Kennedy, the noble Lord was asking about the position of firefighters and the Williams review, and where we had got to with that. The starting point, as we know, is that firefighters continue to have their normal pension age at 60, as set out in the new Firefighters’ Pension Scheme in 2006. The Williams review of the normal pension age recognised that, as long as firefighters maintain their physical activity levels and adopt a healthy lifestyle, there is no reason why they cannot maintain operational fitness levels until the age of 60. The report does not call for a change in the normal pension age. However, as the report recommends, firefighters who wish to retire early will continue to be able to do so from 55, with an actuarial adjustment to their pensions. There were other detailed recommendations within the Williams review and the Government are still considering them.
Lord Kennedy of Southwark
I thank the noble Lord. I will not press him further on this. He is right: the review has just come out and we are in the middle of debating the Bill. However, would the Minister agree to meet with representatives of the Fire Brigades Union and me between now and Report? The Williams report raises a number of issues that have a direct bearing on this, and further discussion is important.
Lord Newby
My Lords, I am always willing to meet the noble Lord. However, I will do so on the basis that we are not reopening the whole of the scheme. The Williams review has made it clear that there is no reason why the retirement age should not be 60. That, certainly, is not up for discussion. If there are other issues around it we can discuss those, although my initial view is that it is highly unlikely that anything else he is discussing would require amendments to primary legislation, although it may require amendments to the scheme rules. On that basis, I am very happy to have a meeting.
The next amendment in this group is Amendment 54, tabled by the noble Baroness, Lady Donaghy. It looks at further exemptions from the state pension link. We have set the current exemptions in line with historical precedent and the Hutton review. There are no other groups that are currently recognised in such a way through their normal pension age provisions as the three set out in the Bill. In fact, as a result of the previous Administration’s reforms, new employees in all other groups of public servants already have a normal pension age of 65. This includes ambulance service staff under the most recent changes to the NHS scheme, which were agreed to by unions.
As we are all aware, this Bill seeks to rationalise provisions across the public services, not to add further diversity. We are trying to move away from the general inconsistencies in the current schemes, which lead only to unfairness for subsections of particular workforces. That is not to say that we do not recognise the physical nature of the work that is carried out by groups such as ambulance service staff, or the risks attached to that work. The schemes introduced under Clause 1 have been developed very carefully with this in mind. They follow extensive discussions with members, trade unions and other member representatives to ensure that they best meet the needs of all members of each scheme. This includes ambulance service staff in the development of the NHS scheme. It would be wrong to reopen those negotiations—not least because, as my noble friend Lord Sharkey alluded to, there are many groups with degrees of stress in their job that are greater than those in others. We could spend a vast amount of time assessing afresh all those groups. Over the years that work has been done and it has led to the schemes we have now. It was also looked at again by Hutton. I am therefore extremely unwilling to start a long process of looking at a raft of groups when they have been considered before. I understand only too well the stresses and strains faced by 999 responders, but other groups face stresses and strains as well. As I say, we have decided that the three groups which are already exempt from the normal retirement age provisions are the only ones that we believe are in a distinctly different category from any others.
Amendment 56 also relates to this issue, but the difference from this amendment is that it would allow any group to be exempted from the state pension age link should a capability review recommend it. Presumably that would mean that the pension ages for these groups would be set out in secondary legislation. I have just explained why I do not agree with the spirit of the amendment. The link was a key feature of the Hutton report and was a cornerstone of the constructive discussions we held with unions and member representatives over the course of 18 months. The outcome of those discussions was the proposed final scheme designs, including the universal retirement age link which the Bill honours in full. We have no plans to reopen those designs, although we have made it clear that we will review the link to the state pension age as and when future changes to the state pension age are announced. The DWP White Paper published yesterday says that we intend to hold a review every five years, so the link will be reviewed when a review is announced.
The Bill as it stands takes a sensible future-proof approach to review the provisions when it is most appropriate to do so; that is, when there are other pension age changes that affect public servants. Naturally, those reviews will take into account any evidence submitted by interested parties—
Financial Services Bill
Lord Kennedy of Southwark Excerpts(12 years ago)
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Baroness Kramer
My Lords, almost without exception this House has spoken and is speaking with one voice on this issue. In the United States it is quite common, when an important piece of legislation goes through, to name it after its sponsors. Whether this is the Mitchell-Sassoon amendment or the Sassoon-Mitchell amendment, it will have a very big impact on people’s lives.
However, it is important that the FCA, in the language that is already in the Bill, has the powers to do the acts for which the amendment calls. An amendment such as this ensures that the point is highlighted—that it is understood and not lost—because the FCA will have a wide range of areas to address. In the Bristol study that was commissioned and which we will be reporting in the next few weeks, the FCA and the Government demonstrated a very high level of concern around this issue, and the need to get underneath it to really understand the dynamics.
The importance of ensuring that the clause is an enabling one was well illustrated by the noble Baroness, Lady Coussins, a moment ago. There are many very complex issues around this that will need very direct attention. The devil will be in the detail to ensure that the amendment is effective in the way that the House desires, and that it does not create the opportunity for loopholes. We are talking about an industry that will game legislation if it has the opportunity.
I will pick up the issue that was addressed by the right reverend Prelate the Bishop of Durham, because it is hugely important. Almost all of this will be for naught if we do not ensure that there are appropriate sources of credit for those who need it at a reasonable price. The issue that the House is facing today has been neglected over decades; it is a challenge that the Government are picking up. It means that the clauses have to stand together with those that lower barriers to entry and which enable the community—whether social enterprises, charities, businesses, local authorities or whatever—to come together and take the initiative to build up the sources of finance that exist in many other countries.
The noble Lord, Lord Mitchell, talked about the constraints on payday lenders in the United States. One of the most powerful constraints is that there are community banks where individuals can get credit on reasonable terms. That is a far stronger constraint on any payday lenders in the United States than legislation could be. That is what we need here: the opportunity for market constraint. However, I congratulate all sides on coming together to be effective for some of the most vulnerable people in our community.
Lord Kennedy of Southwark
My Lords, I, too, congratulate my noble friend Lord Mitchell, the right reverend Prelate and other noble Lords for bringing forward this amendment today. I also pay tribute to the Member for Walthamstow in the other place, who has done more than anybody else to bring forward this issue. I would like clarification from the Government on the amendment that they will bring forward at Third Reading. Will it enable interest rates to be capped? That is key here; the cost of the charges and the interest rates levied are the nub of the issue. If that matter is not dealt with, we will unfortunately be back here at Third Reading and all sides will be very cross about it. Will the Minister clarify that?
Financial Services Bill
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“( ) The Treasury or the Secretary of State may by order amend Schedule 17 to FSMA 2000 to require a scheme operator acting under the Schedule to make rules relating to the behaviour of a person who has entered into an agreement with a complainant to represent the complainant with respect to a complaint under the compulsory jurisdiction, the consumer credit jurisdiction or the voluntary jurisdiction pursuant to which any fee has been, will be or may be paid by the complainant.”
Lord Kennedy of Southwark
My Lords, in moving Amendment 101A as one of the three amendments tabled in my name on the Marshalled List, I hope that all noble Lords will agree that something now needs to be done. Whenever I raise the issue of claims management companies in the House, I always say that many of them act responsibly and fulfil an important role. If people want to use them, that is their prerogative. On the mis-selling of payment protection insurance, it was the banks that mis-sold these products to their customers, not the claims management companies. It is also true to say that if the banks were more upfront about what they had done, then the room for these companies to operate would be greatly diminished and more money would end up in the pockets of consumers who had been mis-sold the products rather than in the hands of the CMCs, which can take up to 30% of someone’s successful claim.
My amendment states:
“The Treasury or the Secretary of State may”—
I emphasise the use of “may”—
“by order amend Schedule 17 to FSMA 2000 to require a scheme operator acting under the Schedule to make rules”.
If the amendment is accepted we would not be forcing the Government to do anything that they do not want to do themselves. We are merely giving them the power to do something in the future if they want to do so. Amendments 101B and 101C are more prescriptive and in both cases use “must”. I would be delighted if the Government would accept them, but today I am offering them a version using “may”.
The amendment using “may” could be all that is needed. It would give the Government another string to their bow so that they could say even more forcefully, “Look, we believe in self-regulation in this sector, but there is considerable concern about the practices of some CMCs. As an industry, you need to get your act together, clean up the bad practice and deal with those who are making the industry look bad for all of you. If you do not get a grip, we are going to make sure that regulations are in place to ensure that you all act responsibility. So let us be clear: we have taken the required powers to enable us to do this, and we can act quickly if your industry fails to do so”. That may be all that needs to be done if the industry regulates itself properly.
Why is this amendment needed? It is simple. What is in place at the moment is not robust enough. The part of the industry that needs to get its act together will presently breach guidelines on cold-calling, text messages and email messages, it will fail to disclose properly the amount of compensation, and the consumer will have to pay if the claim is successful. We have all had the nuisance calls and text messages. I have seen firms at my local shopping centre telling people that they will get them thousands of pounds in compensation. When I asked a question recently on text messaging, the noble Lord, Lord McNally, accepted that the range of bodies involved on different aspects may be part of the problem in ensuring effective regulation.
Other types of bad practice include companies that bombard a whole raft of financial institutions with PPI claims on behalf of the customer, not even bothering to check whether the consumer ever had dealings with that particular institution before submitting the claim. What does that do? It wastes the time and money of the financial institution concerned and it diverts resources away from dealing with the genuine complaints so that consumers have to wait even longer to get their cases dealt with. After dealing with the financial institution, or in some cases not even bothering to go to the financial institution, all claims are submitted to the Financial Ombudsman Service, which again wastes time, costs everybody money except the CMCs concerned and makes genuine complainants wait even longer to get their complaint dealt with.
In conclusion, I hope that the Government will accept this amendment. As I said at the start, it should cause them no problems whatever. It compels them to do nothing they do not want to do themselves. It just says “may”, and that may be all that is required. I beg to move.
Lord Newby
My Lords, clearly there are serious conduct problems among a minority of claims management companies. Nobody denies that. We are all too well aware that the reaction of the claims industry to the mass mis-selling of payment protection insurance has also brought with it a fall in compliance standards and an increase in poor practices, to some of which the noble Lord, Lord Kennedy, referred. He said that something needs to be done. Something is being done. The claims management regulator is taking forward a programme of reforms which are due to be implemented next year. These include a ban on claims management companies offering financial rewards or similar benefits as an inducement to make a claim; tightening the conduct rules so that the requirements of authorisation are made clearer and protection for consumers is strengthened; and extending the role of the Legal Ombudsman to act as an ombudsman for consumers with complaints about claims management companies, which I think deals with some of the points that were made about the ombudsman.
However, we will continue to require a robust and co-ordinated approach from both the claims management regulator and the FCA in responding to risks of detriment. That starts with the financial services regulator. Lessons have been learnt from PPI. The FCA will have an objective requiring it to intervene earlier to prevent detriment arising and, where mass detriment is occurring, use its powers to establish or agree redress schemes so that affected customers are proactively contacted and compensated. We have seen the FSA already moving much more quickly to agree redress schemes with the major banks in relation to the interest rate hedge mis-selling.
However, where CMCs have a role to play, consumers already seeking redress need to be protected against further detriment. So we will see the claims management regulator stepping up its approach and resources devoted to tackling the underlying problems that exist in the conduct of some CMCs. We have already seen the establishment of a specialist PPI compliance team at the claims management regulator. To ensure that the regulator is sufficiently funded going forward, the MoJ is proposing to increase fees levied on CMCs, particularly those operating in the financial products and services sector.
However, I am not convinced that institutional reform is necessarily the answer. At the moment, it could represent a distraction from the task at hand, particularly given everything else that is happening in changing the financial sector regulatory architecture. It is important to remember that CMCs operate in a number of sectors, not just financial services. In fact, personal injury remains the largest sector. PPI is a very significant sector currently, but the next wave of activity and potential detriment may come from another sector. As I have said before, we do not think that it is appropriate for the FOS to act as a quasi-regulator, as the amendments propose. That would detract from its role as an independent ombudsman. It is simply not what an ombudsman does. That is why it does not matter whether the clause says “must” or “may”. Our objection is not about that; it is that an ombudsman is not the right person to act as a quasi-regulator. The regulators do that. The ombudsman looks at particular claims of mistreatment.
Amendment 101A would simply provide an enabling power. However, it is making a proposal in terms of institutional change which we think is inappropriate. That is not to say that the Government are complacent in any respect about the need to do more in terms of the regulation of CMCs. The range of activities that I have mentioned gives us cause to believe that we will see a very significant increase in the effectiveness of regulation in the period ahead. In the light of that, I hope that the noble Lord will feel able to withdraw his amendment.
Lord Kennedy of Southwark
I thank all noble Lords who have spoken in this short debate. I thank my noble friend Lord Eatwell and the noble Lord, Lord Hodgson of Astley Abbotts, for their support. The Minister’s response was very disappointing. He knows that I have pursued this matter for some time now. Yes, some action may be taking place, but the problem is that the rules in place are inadequate and are not properly enforced. Nothing that the noble Lord has said today in his response has convinced me otherwise. In that case, I should like to test the opinion of the House.