Budget Statement

Lord McKenzie of Luton Excerpts

Friday 12th March 2021 Lords Chamber

[Lord McKenzie of Luton (Lab) [V]]

My Lords, I start by offering my congratulations to all those who have made maiden speeches today. The pandemic has caused the most comprehensive and sustained economic shock that we have had to endure, and Brexit has of course added to that challenge. Witness the devastation on our high streets, the impoverishment of our councils and the continuing housing crisis.

The Chancellor’s chosen method of introducing a range of tax increases was to freeze a whole bundle of tax thresholds and allowances at 2021-22 levels —a rather weasel way of circumventing manifesto commitments, but not novel; we have all been at it. It leaves the determination of the rates of real increases in tax to a range of market economic factors not necessarily under the direct control of the Chancellor.

Perhaps the time has come to get more from capital taxes—inheritance tax and capital gains tax—and one further tax. Noble Lords may be aware that the Wealth Tax Commission, chaired by the noble Lord, Lord O’Donnell, recently delivered its final report. As the report sets out, it is half a century since a wealth tax was seriously considered in the UK. Given the scale of the public finance crisis, there is an imperative, I suggest, to think big on tax. Why should we not at least develop our thinking on a wealth tax—a broad-base tax on the ownership of net wealth—to help pay the bills, as some have suggested? Public attitudes, according to the report, show a clear desire for wealth to be taxed more relative to income. I live in hope.

EU-UK Trade and Cooperation Agreement

Lord McKenzie of Luton Excerpts

Friday 8th January 2021 Lords Chamber

[Lord McKenzie of Luton (Lab) [V]]

My Lords, it is hard to celebrate legislation which will lead to our country becoming poorer. It is also difficult to accept that Boris Johnson has just “got Brexit done” when so much else remains to be resolved. In the meantime, we are urged to anticipate the beginning of a new, historic relationship built on shared history, interests and values, while many of us were content with the old arrangements. It is hard to receive these urgings from those who have made a career out of scapegoating the EU.

However, we have to support the TCA and build on its thin prospectus. Membership of the EU has brought substantial benefits to our country, and certainly to the place where I live, Luton, where our mainstay employers are in the automotive sector and aviation. A few years back, General Motors decided unilaterally that it was going to close the car plant in Luton, and it was the engagement of the EU together with trade unions that fostered new investment and regeneration projects, the beneficial effect of which can still be seen today. My noble friend Lord Woodley will recall those times.

I am sure that, until the pandemic hit, Luton Airport was one of the fastest growing in the country. It is therefore to be hoped that the arrangements we now have with Europe will of course go beyond a trade agreement and will foster easyJet continuing to fly and Vauxhall continuing to build vans. This means coping with the rules of origin, the ending of automatic freedom of movement, sustaining the level playing field, dealing with an explosion of customs declarations, and much more. I see this deal as one which we have to embrace, regrettably.

Finance Bill

Lord McKenzie of Luton Excerpts

2nd reading & Committee negatived & 3rd reading & 2nd reading (Hansard) & 2nd reading (Hansard): House of Lords & 3rd reading (Hansard) & 3rd reading (Hansard): House of Lords & Committee negatived (Hansard) & Committee negatived (Hansard): House of Lords
Friday 17th July 2020 Lords Chamber

[Lord McKenzie of Luton (Lab) [V]]

My Lords, Covid-19 has changed all our lives in a way that we might have thought unimaginable a few months ago. With optimism for a V-shaped recovery receding and facing a 12.8% fall in GDP this year, and with public sector borrowing in excess of £500 billion, we face difficult times. Levels of borrowing that might previously have been said to be indefensible, dangerous and unsustainable are now being viewed as mainstream.

With the reality of major job losses growing apace, and faced with the changing norms of ongoing social distancing, working at home, changing supply chains and accelerated use of technology—just look at this place, for example—life has changed. The world of work has changed, and will change more after Brexit, and I do not think it will spring back any time soon. If it is to, where are the signs to suggest that it will?

The pandemic has brought home that, in times of crisis, we have to look to and engage the power of the state to find solutions and to provide resource and direction, nowhere more so than in tackling unemployment. It is to the state that we must look to build a safety net—the social security system newly enthused by those who hitherto never imagined that they should need recourse to it and who now have to engage with the paucity of its provision and the frustrations of its complexity. Of course, this will necessitate more borrowing, but one of the lessons we have directly learned is that levels of public borrowing must not be bound by the orthodoxy of the past. We need jobs as the priority.

One of the lessons, as we see from its nightly inclusion in people’s lives through our TV screens, is the spotlight being shone on just how unequal is the society in which we live and how fragile the financial resilience of many families—evidenced by growth in access to food banks, for example. With the poorest one-fifth of households suffering a 7% fall in income, how do we find this acceptable?

Breathing Space Scheme: Consultation Response

Lord McKenzie of Luton Excerpts

Wednesday 19th June 2019 Lords Chamber

[Lord Young of Cookham]

The answer to “please do” is, “Yes, I will”.

[Lord McKenzie of Luton (Lab)]

My Lords, like other noble Lords I warmly welcome today’s announcement. At the start of his presentation, the Minister talked about progress that was being made other than via these announcements, and he referred to financial capability. Can he update us on what progress has been made in that area? He touched upon the issue of overpayments of social security, whether through universal credit or otherwise. Can he say again how that fits into this scheme and whether the sanctions delivered on people might be covered by it?

[Lord Young of Cookham]

The second part of the noble Lord’s question is easier to answer than the first. Any overpayments to the DWP will stop. People will not have their benefits docked if part of their benefit is an overpayment of a previous benefit; that will stop from day one. Likewise, if they have been overpaid universal credit and it is being docked because that is being paid back, that will stop on day one. On financial capability, I remember the noble Lord’s interventions during consideration of the Bill referred to by the noble Lord, Lord Stevenson. I mentioned in passing the work of the Church in financial education, but the noble Lord’s question deserves a more substantive reply than I can give at the moment. Perhaps I could write to him about progress on developing financial capability.

Revised Draft Airports National Policy Statement

Lord McKenzie of Luton Excerpts

Thursday 15th March 2018 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the noble Baroness for introducing the debate and for her explanation of the NPS. I welcome the debate to range over the revised draft airports National Policy Statement and the issues it raises.

I agree with the analysis of the importance of aviation to the UK economy and the need for new airport capacity. Heathrow is the busiest two-runway airport in the world. While declaring my support for Heathrow expansion, subject to safeguards, I am mindful of the perspective of London Luton Airport—a major contributor to aviation provision in the south-east—which is also reaching capacity as currently configured. I hope noble Lords will forgive me if I divert to another airport from time to time. I draw attention to my interest in the register as an advisory member of the board of London Luton Airport, a council company that owns the airport assets.

By way of history, Luton Airport was originally run as a committee of Luton Borough Council but was required to transfer its undertaking into a separate company by the Airports Act 1986—the handiwork, I believe, of the noble Lord, Lord Spicer. This was at the same time as the British Airports Authority was required to restructure into a main holding company with seven separate operating companies: Heathrow, Gatwick, Stansted, Edinburgh, Glasgow, Aberdeen and Southampton. Along the way, the Scottish airports were privatised and the BAA, which subsequently had to divest itself of Gatwick, Stansted and Edinburgh, was sold to Ferrovial.

London Luton—progressively known as Luton International and then London Luton Airport—travelled a different path to ownership and development from most airports when Luton Council entered into a public-private partnership through its wholly owned company with a third-party consortium. The airport has, perhaps unusually, enjoyed considerable support from its local community. Indeed, a local election was lost by the party which sought to privatise the airport, for a derisory sum, and which has never since—at least so far—regained control of the council.

In common with much else we debate at present, we should be mindful of the impact of Brexit on aviation and therefore airports policy. The liberalisation of air transport, with the ability of carriers to fly wholly within and wholly between other EU states and between a base and any other EU airports, has had a significant beneficial effect, added to by the advent of low-cost, short-haul flights across Europe and the growth of such airlines as easyJet and Ryanair.

There is clearly an imperative for the Government to negotiate continuing access to this liberalised regime on one basis or another, ranging from staying in the European common aviation area, a UK open skies deal with Europe or a single bilateral agreement with the EU. The issues of access to airspace and the implications for airfares, as well as safety regulation, also need to be resolved. Assuming that Brexit becomes a reality, we would argue strongly for our staying in the European common aviation area and remaining in the European Aviation Safety Agency. My initial questions to the Minister are: what progress is being made on all of this and what are the expected outcomes; and to what extent have these issues—or any of them—been taken into account in passenger number predictions, especially for Heathrow?

We should recognise that Conservative policy on the expansion of Heathrow has flip-flopped in recent times. Before the 2010 general election the party was opposed to a third runway and a sixth terminal at Heathrow. Its 2010 manifesto referred to stopping the third runway and linking Heathrow directly to the high-speed rail network. The coalition Government talked of cancelling the third runway at Heathrow, and the owners of Heathrow announced that they would abandon plans for a third runway. However, concerned lobbying persuaded the Government to look again, thankfully, hence the long-grass device of the Airports Commission.

Initially, the Government announced that they accepted the case put by the commission for more capacity in the south-east but had not decided where. Eventually, on 25 October 2016, after being pressed by constant questioning in Parliament—noble Lords will remember those exchanges in this House—the Secretary of State announced that the Government would support a third runway at Heathrow and bring forward a draft NPS. All in all, this is a disgraceful example of how the vital infrastructure needs of our country should not be handled. Political considerations were to the fore, as capacity at our most important airport was squeezed. The commission eventually unanimously recommended a new north-west runway at Heathrow combined with a significant package of measures to address environmental concerns. In making this decision, it gave weight to economic and employment benefits, as we heard: long-haul flights and connections; domestic connectivity; lower fares; surface access links; and support for freight. I support the strength of the position it has taken.

The consultation process at various stages has become a bit convoluted. In February 2017 the Government produced a draft airport National Policy Statement for a 16-week consultation. However, following their commitment to update their evidence base on airport capacity and their air quality plan, they then produced a revised draft airports National Policy Statement for yet further consultation. This sits along a range of other documents, including the Aviation Policy Framework and UK airspace policy. The Government have also announced the setting up of an Independent Commission on Civil Aviation Noise.

Can the Minister tell us where these further consultations leave the timetable for expansion at Heathrow and whether they expect any further adjustments to the NPS because of data changes? When might we expect the final airports National Policy Statement to be laid before Parliament, and will it be subject to a vote in both Houses? I think the answer already given to that is yes. Can the Minister summarise for us the key differences in those two consultation outcomes?

So far as the airports policy framework is concerned, it is important that we recognise that there is no one-size-fits-all and that the unique position of each airport is considered on its merits. Indeed, that is what the NPS does fairly. It is also important that the DfT understands the need to support the growth plans of other airports in the period before a new runway at Heathrow is delivered and that it recognises the contribution that these can make to capacity requirements —I speak particularly of London Luton Airport. I believe we can be reassured that Luton’s plans—which I will outline—are consistent with the development of Heathrow, but is this the view of the DfT and the Government?

London Luton Airport plays a vital role in the local and sub-regional economies, as well as contributing to the national aviation strategy. It is the fifth-busiest and one of the fastest-growing airports in the UK, and estimated to provide 22,000 jobs and £1.4 billion to local GDP by 2030. It plays a different role and serves different markets from Heathrow in the aviation sector. Its expansion can develop runway capacity and meet the specific needs of its catchment area—which of course includes London—for short-haul, point-to-point journeys. It supports the government aviation strategy in agreeing that more intensive use can be made of existing airport capacity, alongside the provision of a new runway at Heathrow. It looks to the Government to support its ambition.

At present, its passenger capacity planning permission is set at 18 million passengers per year from 2014, which was expected to be sufficient to meet demand through to 2026-27. There is a £160-million redevelopment programme to create this capacity. However, that capacity is expected to be fully utilised by 2020-21, so the focus is now on looking to maximise use of the existing runway and to maximise the benefit for the local and sub-regional economy, consistent always with managing the environmental impacts in a responsible and sustainable way. The assessment is a possible capacity of 36 to 38 MPPA, or 240,000 aircraft movements per year, with no new runway.

In their call for evidence on its aviation strategy the Government acknowledged the importance of surface access to airports and the need to link road, rail and air. A new £220-million fixed-rail link between Luton Airport Parkway—funded by Luton Borough Council—and the airport terminal will be a significant improvement on the current bus link. But transport links could be improved if the DfT were to stipulate that four fast trains per hour should call at Luton Airport Parkway as part of the base specification for the new east midlands rail franchise. Consultants have analysed that this would add minimal time to the semi-fast Nottingham services each hour, take some 70,000 car journeys off the road and save some 500 tonnes of CO₂. It would create an integrated transport hub as conceived in the NPS and the aviation strategy. I am aware that this matter has been raised before, and perhaps the Minister can tell us whether any progress has been made.

We readily recognise the importance of the aviation sector in our economy, which directly supports some 230,000 jobs and contributes £20 billion per year. We further recognise that the opportunity to deliver the potential for the sector is being affected by capacity constraints at some airports, and Heathrow is the premier example. The Minister will be aware of the controversy engendered by the Government’s upping of the expected contribution of an expanded Heathrow to £74 billion over the 60-year period, and that the NPS shows this below the contribution which could come from Gatwick expansion over the longer term. Perhaps the Minister will comment on that point.

Decisions to expand airports properly involve delicate assessments of the environmental and community impacts of new build, especially runways. That is why my party has rightly laid out the four tests to be met for Heathrow, covering: how the increased capacity will be met; the need to reduce CO₂ emissions from aircraft to help us meet our legal climate change obligations; the effective management of noise and environmental impacts; and the need for the benefits of expansion to be shared.

As part of the appraisal of sustainability for the north-west runway scheme, it is noted that there are a range of mitigating or supporting measures, which the Minister mentioned, to enhance the positives and mitigate the negative impacts of a proposal. There is reference to the growth of greenhouse gas emissions, but there is little detail other than that the promoter has put forward a number of commitments, which the Government expect to be honoured. This is a bit thin. Perhaps the Minister can say more in his reply. He dealt with the issue of a package to address the problems of noise.

There is a need to make progress at Heathrow as it heads for full capacity. There is also the need to press ahead with expansion at Luton as it approaches the current 18 mppa planning constraint.

Universal Credit

Lord McKenzie of Luton Excerpts

Thursday 16th November 2017 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, it is a great pleasure to follow my noble friend Lord Cashman. Like everybody else who has spoken, I congratulate my noble friend Lady Hollis on securing this debate and on the typically forensic manner in which she introduced it. Like many people, I have supported the stated aims of universal credit—to simplify the benefit system and to strengthen incentives to work. There were hopes, too, that it would build on a social security safety net leading to lifting 350,000 children and 600,000 adults out of poverty. Its inheritance was that child poverty was at a 13-year low and there was cross-party support for further poverty reduction.

But we are a long way from all that today, and from the confidence of the coalition Government’s November 2010 White Paper. One of its paragraphs demonstrates the poor judgment involved in implementing such a major change, and why it has run into so many difficulties. Paragraph 12 of the executive summary states that universal credit,

“would involve an IT development of moderate scale, which the Department for Work and Pensions and its suppliers are confident of handling within budget and timescale”.

So much for confidence, with the programme having to be pushed back several times and a complete reset in 2013. But this has still not avoided the problems faced today, which is why we call for a pause in ramping up the full service rollout, so that some of its problems can be sorted out.

Many of the problems have been well aired this morning, and we have received a plethora of briefings for this debate, which are remarkably consistent. Some of the problems are design issues, some are problems with the administration of UC, and some are made worse by the fact that the changes are being implemented in a period of severe austerity. We heard some of the data from my noble friend Lord Livermore.

It is worth reflecting on the scale of this austerity. Let us remind ourselves that, as the CPAG analysis sets out, cuts to social security during the period of the coalition Government amounted to some £14.5 billion a year. The subsequent squeeze under the Conservative Government added further cuts of £13 billion. The OBR has confirmed that universal credit is now less generous than the tax credit and benefit system it replaces. Rather than reduce child poverty, the cuts will mean 1 million more children in poverty compared with the original design. The cuts will also reduce the rewards from work.

We will doubtless hear from the Minister that these cuts are countered by measures to boost family incomes, such as the increase in the personal allowance, the national living wage and childcare support. However, as the IFS points out, not only are these gains much smaller than the loss in benefits but they do not in general accrue to poorer households. Perhaps the Minister will confirm that.

On matters of design, much attention has rightly been focused on the monthly payment cycle and the initial six-week wait for payment. But there are other issues, perhaps not of such wide application, which have already been aired. Is the Minister aware of the difficulties arising from the late payment of final earnings, which can deny the initial period of a universal credit claim? Does she consider that the treatment of mixed-age couples who are denied pension credit is fair, and if so, why? What justification can she offer for the scrapping of the severe disability premium?

We know that the payment of housing costs through the housing element of universal credit is a significant problem, and the build-up of debt is hurting landlords and tenants alike. It is known that more landlords are joining those who are already reluctant to accommodate tenants on universal credit. The National Housing Federation includes in its representations concerns over mistakes being made by the system, and the lack of information, particularly when transitioning from legacy benefits. We have enough of a housing crisis, without adding to it by procedures which put tenants at risk of eviction and homelessness.

We should acknowledge that the Government have been generous with their time in holding briefings. But there is a total mismatch between what Ministers seem to hear and the furore raging in the country about how universal credit is being applied. It is to be hoped that today’s debate will reach those who currently have the power to change this.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Tuesday 24th October 2017 Lords Chamber

Moved by

[Lord McKenzie of Luton]

13: Clause 2, page 2, line 34, at end insert—
“( ) In seeking to improve the provision of financial education to children and young people, the single financial guidance body may advise the Secretary of State that—(a) Ofsted should take into account the financial education provided by schools when carrying out inspections; and(b) financial education should be added to the primary school education curriculum.”

[Lord McKenzie of Luton (Lab)]

My Lords, Amendment 13 takes us back to issues of education. The amendment focuses on the narrow aspects of our prior debate, namely a route to having financial education added to the primary school curriculum and having the Ofsted process take into account the extent to which financial education is provided in schools. These proposals were recommendations of the House of Lords Financial Exclusion Select Committee, as so much of our debate has been. Our debates both in the Select Committee and in Committee went wider than this, and the noble Viscount, Lord Brookeborough, in particular was a strong proponent of the benefit of financial education. Given the limited ability to make financial education effectively compulsory in all schools, the recommendation of the Select Committee was viewed as a practical way of effecting this so far as possible.

Noble Lords may recall that we had a positive response from the Minister, the noble Baroness, Lady Buscombe. We were told that we would get a reply to the recommendations in due course and that discussions had already taken place with the Minister for Pensions and Financial Inclusion about joint working with the Minister for Education to take forward the recommendations of the report and to dismiss concerns, particularly those about primary school education. As that was more than three months ago, perhaps the Minister can update us on progress. I beg to move.

[Viscount Brookeborough (CB)]

My Lords, as a member of that committee, I support this amendment. This is different from some of the other amendments that have come under Clause 2(7), because this is really already there as far as schools go, but it just falls short of doing what it should. For instance it talks about the “provision of financial education” and then says,

“working with others in the financial services”.

Your Lordships might sympathise with what Martin Lewis says:

“We do not ask GlaxoSmithKline to pay for chemistry. This is on the national curriculum. Why are we asking banks to pay for it?”.


Why are we asking financial institutions? I am perfectly happy that, as the Minister will say, “Yes, we do ask them and they do something”, but it is really small and does not begin to touch.

Here are just a few statistics to show why we are talking about education. I will not try to bore your Lordships with them all, but they put this into perspective: 40% of the working population have less than £100 in savings; one in six struggle to identify a single bank balance; around a third of the population, 17 million, cannot even manage a budget; and 26% of postgraduates —that is all—are confident in managing their money. The excellent FCA report which came out at the weekend also shows why it is important. I will come to education in schools in a minute, which is fairly horrifying, but the report says:

“Adults with postgraduate degrees are just as likely to feel uncertain about their abilities as those educated to GCSE level”.


So, with all due respect, there is simply nothing going on. Many do not understand the excessive interest rates on unauthorised overdrafts, for example, or revolving credit card balances and the interest rates that are put on those. They do not understand payday loans very much—although it is interesting to note, since we were ready to condemn them, that payday loans are actually cheaper than some of the other loans available, which is quite surprising. That is not because payday loans are cheap but because interest rates on credit cards and unauthorised overdrafts are not only ridiculous but incredibly unfair, as they do not even notify you. At least when you take out a payday loan, you know that you have borrowed £1,000. With most banks, you would not have a clue until you got the bill. So the question is not straightforward. These statistics are all true; they come from evidence that we took and the survey that I just mentioned, showing how very poor the understanding of basic financial matters is in this country. We are way behind others, including, I believe, China.

This whole problem ultimately causes so much unhappiness and stress and will mean a higher cost than otherwise to the welfare state, purely because of the number of people who could have managed but do not because no one told them how. It is all due to a single cause: the lack of financial education in schools. The Bill talks about,

“the provision of financial education to children and young people”.

Where are children and young people, and where are you going to educate them? Even I went to a school, and that is the only place where you have them all in one place. You do not honestly think that on a Saturday, instead of going to the cinema, they will go to a class on financial education. So there is only one place for it: the schoolroom. You have only to add “in school” to the wording and you almost have the amendment as it stands.

Financial education could be introduced into primary schools. However, although we are aware that there is some excellent work in primary schools—the Minister may come back and say, “There are good stories about primary schools because they teach people things”, and they do—in answer to question 179 in our evidence transcript, Adrian Lyons of Ofsted, who was incredibly useful and very nice about it, said of ex-primary schoolchildren,

“but then the children go to secondary school and hit a brick wall”.

That completely sums it up. What a condemnation that is from Ofsted itself.

What of the addition of financial education to the secondary school curriculum in 2014? The first point is that to most sane people a curriculum is what people have to learn. Believe it or not, though, there are actually two curriculums, one non-statutory and the other, the national one, statutory. You have got it in one: this is on the non-statutory curriculum, because it lies within the PSHE programme. It gets worse, as only 35% of state schools come under that so-called curriculum—all the free schools and academies are outside it. We need not say that financial education is being taught in schools as a curriculum subject; clearly it is not, as we would understand it, and it definitely does not go anywhere.

Financial education lies within PSHE subjects but they are not statutory. Guess what happens. Time devoted to PSHE has been reduced by 32% since 2011 because it is non-statutory and there is not enough time for it. Why? One reason for that was suggested by the PSHE representative, who said that schools,

“have so little time for it”,

characterising the situation as follows:

“We only have 20 minutes, and if we don’t do something on sexual exploitation or online safety we’re going to be in trouble over safeguarding”.


To all intents and purposes, that is the end of your secondary school financial education. Adrian Lyons said that Ofsted produces a state-of-the-nation education report. Our chairman, the noble Baroness, Lady Tyler, asked,

“how much was there on financial education in the last one?”.

Mr Lyons’s answer was:

“I do not know the answer to that, but I would be surprised if there was any, to be honest”.


I think we know that it was zero.

Here we have something that is all about life skills. After all, school, at the end of the day, is concerned with life skills. You are not going to survive on geography alone; you are not going to survive on physics or other things alone. We are talking about very basic financial management; we are not talking about pensions. We are saying: if you save one sweet every day until the end of the week, you will get five sweets; and if you want to borrow five sweets from me, you can pay me 10 next week. As a foundation, it is as simple as that, but the inspectorate does not even look at it. This amendment could change all that.

Of course, Ofsted says that you cannot judge something—I seem to think that this is how it puts it—without having exam marks, and there are no exam marks here. Ofsted is about marking schools. It is also about encouraging schools to do the right thing and to teach life skills, so why not initially find a way of saying, “Do you teach financial education? How much do you teach? Okay, we’ll give you 10 points for that”? At least that would be an incentive to do what they should.

When we talked about education in schools, every reason under the sun was given for why they would not or could not do it. We did not have the teachers in front of us. I am terribly sympathetic about teachers’ time, so I am not getting at them. There is no time. Teachers are not confident to teach this subject but, as I have said, we are talking about the basics. Any teacher on a salary is going to know something about saving or spending or not having enough money or whatever. I just do not believe that that is the reason.

The FCA book shows a really poor record on everything, yet schools are the only place where we have young people’s attention. What are we meant to be doing? If we say that schools should not be the place—we have already had several amendments turned down because they were too well defined or because they have added too many lines—where should it be? It is not going to be in church, so I suggest that it should be in schools and that we do something to make sure that it is done; otherwise, it will not be done. When we talk to people about where it might be done, why it is not done and the problems with that, it is somebody else’s problem. No doubt we will be told that it is the education board’s problem, or whatever there is. I am telling noble Lords that that is passing the buck. The sooner we get “schools” written in the Bill, the better.

[Baroness Kramer (LD)]

My Lords, I will add just a brief comment in this area, as the noble Viscount, Lord Brookeborough, has really made the case. A few years ago, when I was dealing much more with banking institutions, one of them very proudly showed me its pack for schools. All that I came away with was that its logo and colours were all over everything. Had this been presented to an adult, they would have regarded it as a sales pitch rather than an educational tool. That was rather worrying. We are moving into an era where there is huge disruption of all the traditional players. On a personal basis, many of the people making decisions to save or borrow will be looking at many of the new disrupters—the challengers, the peer-to-peers, the digital bodies and whatever else. If we are looking towards the handful of major high-street players to be the providers of financial education, particularly to the young, they will not be introducing that world, which they very much regard as threatening. Yet that is the world of the future that our youngsters will have to deal with. The Government have to be very cautious about how they use providers as a delivery instrument for this education.

[Lord McKenzie of Luton]

My Lords, I am grateful to the noble Viscount, Lord Brookeborough, for his contribution to this debate. It is a pity that there were not more people in the Chamber to hear the powerful case that he made.

Actually, I do not think that the Minister has responded yet—my apologies.

[Baroness Altmann (Con)]

My Lords, I echo the wise words of the noble Viscount. It is absolutely clear that the level of financial education across the country is woefully low, and that stems from the absence of any financial education at the schooling stage. When I was looking at introducing some pension issues into the national curriculum, the main message that I received as to why it could not happen was that teachers themselves did not know enough about those issues to be able to teach even primary or secondary schoolchildren.

There is clearly a role for the single financial guidance body, which is set up to provide information and education for the public, to devise modules that schools could use—but not only schools. I would hope that, given that most people in the workplace did not get financial education in school, such modules would also be useful within the workplace. This is a big gap in our education system. Education needs to provide our students and young people with the tools that they need to manage their lives. If they cannot manage their finances, they will often get into difficulties that they do not need to be in.

I certainly echo the sentiments of the amendment, which would require the single financial guidance body, as the obvious body to do this, to provide education materials that could be used within schools, but even importing that into the workplace alongside auto-enrolment, because all workers will automatically be put into pensions and need to have some understanding of how finance works in order to make the best of that. I support the sentiments expressed.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I apologise for my earlier precipitate attendance at the Dispatch Box. For a while, I was transported back to earlier times.

It is clear that we are all in agreement on the need for financial education to tackle the challenges we face. The best way to do it; what the focus should be; how it is going to be funded—these are all issues which will lead to significant debate. It was good to hear the passion of the noble Viscount, Lord Brookeborough. We heard it in the Select Committee and it was the noble Viscount himself who brought particular focus on that in the report. I am looking forward to the Government’s response, and doubtless the noble Viscount is as well—presumably before Third Reading. Perhaps we should keep our powder dry until we see it.

I thank the noble Viscount, Lord Brookeborough, and the noble Baronesses, Lady Altmann and Lady Kramer, for their support. The noble Baroness, Lady Altmann, widened the focus. It is not just about youngsters in schools, which is where, as the noble Viscount said, we have them, but in the workplace and beyond. This is difficult and challenging but no less important. I look forward to the response to the Select Committee report in due course, but in the meantime I beg leave to withdraw the amendment.

Amendment 13 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I, too, offer my support to my noble friend Lord Hunt. I agree with his two amendments, which seek to attack one of the major menaces of the spurious claims activity in our society at present. Does my noble friend the Minister think that the FCA is qualified and able to take on all these extra tasks? Will there be a new category of authorised person within the FCA? The skills required to regulate CMCs of various kinds may not be exactly the same as, for example, those required to give financial advice. It is also worth checking that there are not any other areas of spurious activity or the encouragement of spurious claims which are already being practised by unscrupulous people.

[Lord McKenzie of Luton (Lab)]

My Lords, as we have heard, these amendments would add two types of services to be brought within the definition of claims management services and hence within the regulatory provisions provided for in the Bill. The amendments were introduced with some passion. We support both of them.

We heard from the noble Lord some of the unacceptable behaviours of those delivering these services which warrant such inclusion. As part of the rampant compensation culture, we have heard about holiday sickness claims, which we will come on to debate, and artificial claims being stirred up by advertisements. Of course, medical reporting organisations and credit hire companies are involved in the claims process for road traffic accidents, providing medical reports and temporary replacement vehicles—an important service, perhaps, but it should be undertaken and conducted properly.

By way of background, we make it clear that we support the provisions in the Bill which enable the regulation of CMCs to transfer to the FCA but need to be reassured that it will be properly resourced to meet the totality of its new tasks—a point touched on by the noble Viscount, Lord Trenchard. The FCA currently regulates around 56,000 authorised financial services firms.

At present there is an exemption, which the noble Lord, Lord Hunt, touched on, from the regulation for claims management companies which employ solicitors on the grounds that such entities are under the jurisdiction of the Solicitors Regulation Authority—which, incidentally, bans cold calling. However, it is suggested in some quarters that the SRA regulation is less rigorous than the current MoJ regulation of CMC activity and as a consequence some CMCs are changing their business structures to take advantage of this. Is the Minister satisfied that there is no weakening of the regulation through this route?

There is another, tangential matter I would like to raise, of which I have given notice to the Minister—frankly, seeking a meeting rather than a detailed answer to an amendment. This is to do with tax refund companies. These are businesses which help people who have had too much tax deducted at source from their wages complete and submit the paperwork required by HMRC to claim back the overdeducted tax. There is absolutely nothing wrong with that—it is a vital service. This will include employees who have spent their own money on tax-deductible employment expenses; for example, care workers who do mileage in their own cars. Tax refund companies generally make their money by making high volumes of low-value, simple claims that they charge fees for. While some of these tax refund companies make sensible claims and charge proportionate fees for the service they provide, others are less scrupulous. It is these which we want to focus on. It is worth noting that tax refund companies’ bread-and-butter activities—refunds based on unused personal allowances —have recently been curtailed by HMRC’s auto-reconciliation service, which makes it harder for them to stay in business.

How do the companies work? There are some similarities with the points made by the noble Lord, Lord Hunt. They are mainly online businesses, typically with fun and appealing websites that contain eye-catching claims such as “Let us maximise your refund” or “We make claiming your refund easy”. They may somehow imply that they have an inside track with HMRC. They often pay for advertising space so that they appear at the top of search engine results, where their ads are not necessarily distinguishable from organic search results by those who are not IT-savvy. The costs vary but there can often be two elements: a minimum admin fee—the Chartered Institute of Taxation says that it has recently seen a minimum fee of £90—and a charge based on a percentage of the refund, such as 20%. Percentage fees of up to 40% for relatively straightforward claims have been seen, which are a scandal. The company will normally mandate the refund back to itself in the first instance and collect its fee before transferring the balance to the individual. Often, the two fee elements taken together will outweigh the tax refund if it is small. Sometimes the companies add on charges for transferring money to a bank account, which they are not always transparent about. The pricing structure incentivises poor practices such as putting in inflated or fraudulent claims.

Who do these companies target? It can be workers who are unaware of or confused by the rules around when a refund might be due. The work-related travel expense rules are a particular example. It can be people who may have an inkling that they are due a refund but who lack confidence or knowledge of the tax system to initiate a claim themselves, or those who could probably organise a claim but do not have the time or the inclination.

Some tax refund companies meet a genuine need in the market and operate according to appropriate standards but the area is unregulated, like the issue we have just been debating, and there is a huge spectrum of providers. The Chartered Institute of Taxation’s report on tax refund companies identified a range of consumer protection issues with some of the more exploitative agents and made pages of recommendations. While some of these were taken up, many were not. We acknowledge that HMRC has invested in improvements in certain areas by offering online channels to apply for refunds, restricting agent access to taxpayers’ pay and tax details, and dealing with refund agents who gave the impression that they were in some way affiliated to or approved by HMRC. However, tax refund companies continue to proliferate, which suggests that things are still too complex or that taxpayers are still being swayed because of things such as overinflated promises or misleading information as to fees.

I apologise for taking the Committee’s time to focus on this issue. I was not quite sure how to address it otherwise. My purpose is to give this an airing and to seek from the Minister the opportunity of a meeting in due course, together with the Chartered Institute of Taxation and the Low Incomes Tax Reform Group, to delve further into the issue. Having said that, I reiterate that we support the two amendments proposed by the noble Lord, Lord Hunt, and do so enthusiastically.

[Lord Mackay of Clashfern (Con)]

My Lords, I very much support the amendments proposed by my noble friend Lord Hunt of Wirral. I just wonder whether regulation should sometimes encompass outlawing these activities altogether. It is probable that the amendment is sufficiently broad for that to happen but some of these activities may well be best outlawed rather than regulated.

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[Baroness Kramer]

My Lords, I was a member of the Parliamentary Commission on Banking Standards, which looked at the duty of care issue. In the end, the commission made the decision not to pursue the matter and to empower the FCA to take up regulation and play a role. I thought at the time that was not a good decision but the argument was very much based on the idea that the remit of the Parliamentary Commission on Banking Standards was to do with banking, and that the new banking standards body would tackle many of these culture issues, of which duty of care is obviously an inherent part. Looking at the work of that banking standards body, I do not think most of us think it has followed that direction. I do not see any significant change in pressure from the various bodies, whether applied to banks or financial institutions, to make them become much more conscious of the needs of their customers, especially vulnerable ones.

I have never understood why the industry has resisted this duty. Frankly, it is akin to constraints on mis-selling as behaving in the wrong way towards any individual, providing them with an inappropriate service and not giving them adequate support to understand whether that is the service they need surely falls into that mis-selling category. Expanding the powers of the FCA to allow it to provide a more general approach through the mechanism of duty of care would make the FCA’s job on issues such as mis-selling significantly easier. Therefore, I hope very much that the Government will take this on board. Frankly, the long-grass decision is very frustrating. Whenever I hear that an important piece of legislation is being postponed because we have the Brexit Bill, I begin to wonder whether we recognise appropriately the needs of the country.

[Lord McKenzie of Luton]

My Lords, this is an important amendment and we should congratulate the noble Lord on its introduction. It goes to the heart of what the regulation of claims management companies should be about, although I think we recognise that it is a surrogate for a broader duty of care issue. It is understood that there will anyway be a consultation around the regulatory principles that the FCA should adopt. Others have commented on the timing of that. Perhaps the Minister will let us have his view on whether the current timescale attached to that is appropriate.

The issue takes us back in part to our debates on earlier sections of the Bill, and to the current position of the FCA and the CMRU. As the Brady report sets out, the primary objectives of the CMRU are protecting and promoting the interests of consumers, protecting and promoting the public interest and improving standards of competence and conduct of authorised persons. This is quite different from the operational objectives of the FCA, which are to secure appropriate protection for consumers, protect and enhance the integrity of the UK financial system and promote effective competition in the interests of consumers.

Some of the “ideal organisational objectives” for claims management regulation proposed by the Brady review co-mingled some of this but included empowering consumers to choose a value-for-money service as well as maintaining adequate and effective access to justice.

While I support the noble Lord’s proposals, I quibble on the inclusion of “where appropriate”. Where is this not appropriate? Certainly, the proposed new subsection (1)(a) places a strong and proper focus on consumers, which we support. It addresses dealing with conflicts of interest, and although it is implicit in the noble Lord’s amendment, it seems desirable that transparency should feature in the requirements. However, the noble Lord has given us at least a starter for 10 on this important topic, and we look forward to the Minister’s reply.

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[Baroness Kramer]

My Lords, I support the amendment. We all understand that the amendment has drafting problems, but the intent behind it is an important one: to avoid delay in taking action against pernicious behaviour by some of these companies.

[Lord McKenzie of Luton]

My Lords, I will be brief in a similar vein. We support the thrust and spirit of the amendment, which is to make progress on the cap before we get to the stage where PPI claims have all gone through the system. It would be a tragedy if people continued to lose significant amounts of money from claims management companies when there is a clear remedy available.

This also partly picks up the issue, which we touched on earlier, regarding SRA regulation being less rigorous than MoJ regulation of CMC activity. The noble Lord felt that that was not a problem, but as I understand it a thematic review of solicitors who undertake claims management activities has been commenced, with the intention of strengthening their approach to regulation on this activity. The noble Lord may be able to confirm that or help us, but it seems to be a clear worry of some whether being able to escape CMC regulation because a solicitor is on board—albeit that brings in a different form of regulation—is a fair way to proceed.

However, the substantive point is to have the opportunity to get that cap in place well before the PPI claims have run their course.

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[Lord McKenzie of Luton]

My Lords, this has been an extensive and fascinating debate. We on these Benches support the call for a ban on cold calling, as laid out in Amendments 72 and 73. As to which is the right formulation, the answer is probably neither of them as they stand, but we can work on that between now and Report.

My noble friend Lady Drake argued for a well-regulated market and the need for access to justice. That is not inconsistent with a ban on cold calling; it seems to me entirely consistent. I hope that deals with the concern expressed by the noble Baroness, Lady Kramer.

We have heard some very powerful presentations. The noble Lord, Lord Sharkey, introduced the amendment with a range of statistics. His term was “omnipresent menace”, which has been demonstrated extensively in this afternoon’s debate. The noble Lord, Lord Elystan-Morgan, said that such cold calling was a social nuisance of massive proportions, and I agree. For me, it interrupts my slumbers on the sofa on the Sunday afternoon, but that may be a minor inconvenience.

The noble Lord, Lord Deben, said it was an industry we could do without. My noble friend Lady Drake dealt with that point: we need a well-regulated industry because we need a means of helping people reach justice.

[Lord Deben]

I am sorry; it was a slip of the tongue. It is a mechanism which we could do without from this industry.

[Lord McKenzie of Luton]

I take the noble Lord’s point.

The noble Baroness, Lady Stowell, made the interesting point that some of the behaviours that the existence of cold calling has generated have an impact on our reputation not only here in the UK but around the world. Many other points were made, all in favour of a ban on cold calling.

We should reject the suggestion that we should shy away from such a move because the Government have perhaps set their face against it for the time being. Anybody from outside the Chamber who has listened to this debate would readily see the consensus reflected on all these Benches. We should test the democracy of this Chamber and bring forward amendments that are in scope but focus on claims management as a start. We realise that the Ministers are not unsympathetic, so it would help them in their cause of persuading Secretaries of State and the wider mechanisms of government to support the measure. The Government have done the right thing, although too slowly, on pensions; here is an opportunity to follow that up swiftly and ban cold calling for claims management operations as soon as we can. We should do that quickly.

Financial Guidance and Claims Bill [HL]

Lord McKenzie of Luton Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 6th September 2017 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am strongly in favour of this amendment, which picks up on an issue addressed earlier by the noble Baroness, Lady Altmann. It is that the world we live in is far more complex than the one that provided the framework when these original bodies, which are now being brought into one, were set in place. We need that revision for this single body to encompass the whole of the arena of life as it is today.

The noble Baroness, Lady Greengross, was very clear that for many people, the overwhelming majority of their wealth and assets is in their home, that using that as part of their support for their old age may well be a strategy they want to pursue, and that they cannot consider a pension without looking at that issue with the same kind of clarity and without looking at the situation as whole.

I have personal experience of this. I have an elderly family friend who is considering equity release or some similar way to use the wealth embedded in her home. I started to look at the various websites and at the products that are available. Noble Lords will be delighted to know that this is apparently the golden age of equity release, which is increasing at the rate of 28% per year. The websites are exceedingly seductive. The comparison sites compare one product to another, but none of them exposes the real issues of concern or the questions one should be asking about whether the product is appropriate. It is also easy to find a way to access that equity without being in a regulated environment. Recognising that, equity release is for some people entirely appropriate but for many it is entirely inappropriate, and advice is critical.

If people are not signposted and sent through a guidance mechanism to get that financial advice, it seems to me they are in very murky waters. It takes a very sophisticated financial expert to work their way through this. It makes pensions look simple, and I hope very much that the Government will take on board and make use of this excellent amendment.

[Lord McKenzie of Luton (Lab)]

My Lords, this is an interesting amendment. I believe that it is possible for the noble Baroness to achieve what she wants under the terms of the Bill as it stands, but that is not entirely clear and not quite for the reasons set down in the amendment. The amendment says:

“As part of its pensions guidance function, the single financial guidance body must provide”,


et cetera. Clause 2(4) says that the “pensions guidance function” under Clause 2(1)(a) is,

“to provide, to members of the public, information and guidance on matters relating to occupational and personal pensions”.

I do not think that equity release falls within that definition. There is a separate issue as to whether it would fall within Clause 3, which says:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance”,


et cetera, but that is to do with,

“flexible benefits that may be provided to the member or survivor”.

It seems to me, on a straightforward reading of the Bill, that it would not be possible to use the pensions guidance function strand of the new body, but there seems absolutely no reason why the money guidance function could not be used for that purpose. That would be a potential quarrel I would have. The Minister may say that interpretation is too restrictive and not right, but I do not think it would preclude the noble Baroness achieving what she wants. It seems to me the money guidance function should enable guidance to be provided on assets including on equity release.

The noble Baroness, Lady Kramer, raised the question of whether the FCA regulates all these schemes. I am advised that it probably does not, but obviously there is an issue there and perhaps the Minister would respond to that. We can support the thrust of this, because I think it achieves what the noble Baroness wants, but not quite, as I understand it, in the terms of the amendment, because of the other functions in the Bill.

[Lord Young of Cookham (Con)]

My Lords, I begin by thanking the noble Baroness, Lady Greengross, for her amendment, which seeks to add an additional requirement to Clause 3. She has a formidable reputation for campaigning on behalf of those of above average age. For as long as I have known her, she has taken a particular interest in housing, so there is a lot of force behind her amendment.

Clause 3 specifies that as part of its pensions guidance function, the single financial guidance body must provide information and guidance to help a member of a pension scheme make decisions about the options open to them as a result of the pension freedoms. This requirement replaces the current duty on the Secretary of State for the DWP to take steps to ensure that people have access to guidance on the pension freedoms. It ensures that the single financial guidance body will continue to meet the guidance guarantee made by the Government when they introduced the pension freedoms legislation back in 2015.

In its recently published interim report on the review of the retirement income market, the Financial Conduct Authority identified some emerging issues. For example, the review found that draw-down of defined contribution pots is becoming much more popular, and accessing pension pots has become the “new norm”. The FCA is now working with the Treasury, the DWP and other stakeholders to fully understand all the emerging themes and to develop ways in which any issues can be addressed. Without reopening some of the earlier debates, that shows the FCA is able to respond to concerns about consumer interests.

At Second Reading the noble Baroness raised questions about the adequacy of saving into a pension scheme at the levels required by automatic enrolment. The amendment she proposes would make it a statutory requirement for the body to provide guidance on other sources of retirement income, including housing wealth. While I agree with her that it is important that people plan for retirement, no matter what they age they are, and that they consider all their retirement income options, I hope to persuade her that her amendment is not necessary.

As part of its pensions guidance and money guidance functions, the body will provide general information and guidance to members of the public about the benefits of saving towards retirement, and the range of products available to provide income in retirement, including the products that the noble Baroness mentioned in her speech. I think the noble Lord, Lord McKenzie, came up with the answer before me: these services are already provided by the Money Advice Service and the Pensions Advisory Service. For example, the MAS website has information on what equity release is and on other products, such as home reversion plans. In establishing the single financial guidance body, the information and guidance about sources of retirement income that are currently spread across all three existing bodies will continue to be delivered but will be much more joined up—for example, there will be just one website instead of three—making it easier for people to access and consider in the round. That will also make it easier for the new body to assess any gaps in the provision, quality or impartiality of the information and guidance available.

Reverting to the debate that we had before the dinner break, the body will not provide advice on specific products. Its role is to provide general information and guidance on the options open to people so that they can make their own more informed financial decisions. It is not in the remit of the body to provide financial advice. In some instances, though—this was touched on during our debate—it may be that the body would need to refer an individual to an independent financial adviser, who would be able to advise them which products were the most suitable in their circumstances; I think that is what the noble Baroness, Lady Kramer, was implying. That in itself is a helpful service; we know that often, people are reluctant to seek financial advice or unsure of where to go. The body and its partners can play a role in breaking down those barriers, enabling people to understand when it will be beneficial or necessary for them to seek financial advice.

Housing wealth, as the noble Baroness knows better than anyone, is a complex area. Equity release schemes, as an example, may be a suitable option for some, but it is important that people are made aware of the associated risks. The FCA’s ageing population study, to be published later this year, will consider how lending in retirement can be made to work better for older consumers—again, evidence that the FCA is conscious of its responsibility to consumers. That study will consider product innovation and building upon existing industry initiatives to facilitate mortgage lending to older consumers. The Government are clear that anyone considering equity release should seek independent financial advice to ensure that the product is appropriate to their individual circumstances.

The noble Baroness, Lady Finlay, raised a number of issues. I may have to write to her about the transparency of exit charges. In a nutshell, though, so far as equity release is concerned, the FCA, as I think she said, has responsibility for the regulation of equity release products and advice on these. The Equity Release Council is the industry body for the sector and sets out rules and guidance that all members have to comply with. All customers must receive independent legal advice before taking out an equity release product. I hope that addresses some of the issues the noble Baroness raised about undue pressure being exercised by family members with an interest. The borrower has to provide a written suitability report, and the FCA requires the borrower to be provided with a “key facts” illustration for each product. Independent solicitors must also verify understanding before proceeding, and the customer must signal receipt and acceptance of the written suitability report. That report explains why they believe that equity release is suitable and why a particular product is being recommended to that customer. I think the noble Baroness raised the issue that people do not have to get regulated advice. I would like to reflect on that and perhaps drop her a line.

So while the body may provide general information on these schemes, that is an example where it would be best placed to make people aware that they should be speaking to regulated advisers, and signpost them to the appropriate place. As I explained, the body is required to provide guidance to replace the pension guidance guarantee. That is because we want to ensure that the move to a single body in no way reduces the guidance on offer for those who wish to consider exercising their pension flexibilities.

To conclude, the SFGB’s money guidance and pensions guidance functions already enable it to provide people with information and guidance on retirement planning, saving in a pension scheme, different sources of retirement income and, where appropriate, to signpost them to regulated advisers. These are all services which MAS and TPAS deliver now, and the body will continue to do that but in a more joined-up way for customers.

Against that background, I ask the noble Baroness to withdraw her amendment.

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[Baroness Altmann]

My Lords, I support the amendment, to which I have added my name. It would make the take-up of guidance the default option or a mandatory option for anyone who does not have independent, regulated financial advice. We are taking time and spending so much effort setting up a body that is designed to help to guide and inform the public; this amendment would help to ensure that the public actually get the benefit of it.

Clause 5(1) gives the Secretary of State powers to issue,

“directions to the single financial guidance body”,

to do this. Therefore, before anyone could transfer or access their pension savings, they would have received this guidance, which will be set up specifically to make sure they understand the risks before they make any decisions about their pension. Someone would also explain the tax consequences and the potential long-term dangers of giving up a pension because, once they have given it up, they cannot get it back. As the noble Lord, Lord Sharkey, just remarked, the recent FCA research shows that there are some people who are transferring money out of their pension and just putting it into a cash account or a different investment because, clearly, they do not understand the benefits of keeping it in a pension. Having somebody explaining it to them first would be very much the aim of this particular body.

I wholly support the pension freedoms that the Government have introduced, but they are introducing them into a landscape where, for the past few decades, people were encouraged to believe that they did not really need to understand or engage with pensions, because all the decisions were taken for them. For most people, they were in a default fund on their savings journey and then, when they took the money later on, they were put into an annuity and that was it. They did not really need to understand what any options were because they did not really have many options. Unfortunately, people did not understand how annuities worked either. If we make this guidance a default or mandatory option then we make sure that we are protecting the public as well as giving them the freedoms. It is right that we give them the opportunity to make decisions that will suit them, but we have to make sure that we give them the opportunity of making properly informed decisions and as fair a chance as possible of making the freedoms work for them.

Providers too often want people to make a decision when they are too young, for example. It is not just in the freedoms landscape that people are taking their pensions early; the majority of people were buying annuities well before the age of 65 under the previous system, too. I hope that the Government will seriously consider that the 7% take-up rate for Pension Wise is woefully low—we need to find a way to increase that and we need to make sure that we protect the public and give them the fairest chance of making the freedoms work. Pension Wise or the new body could, for example, issue vouchers for everybody who is coming to the stage at which they might need to make a decision about their pension. They could be sent a voucher for a free guidance session. The financial guidance body, perhaps with the FCA and with providers, can work on ways of boosting take-up, but it is definitely something that would make the work that we are doing in this Committee so much more valuable around the country. I support this amendment.

[Lord McKenzie of Luton]

My Lords, we support this amendment. We think that it is a good, strong, robust amendment. It takes us back to the introduction of pension freedoms which, I am afraid, were done rather precipitately and without the groundwork being properly laid. This was a point that my noble friend made at the time but it fell on stony ground.

I was going to ask what the take-up of regulated advice or guidance was at the moment but the noble Baroness has given us the 7% figure for Pension Wise. If one is heading for a much higher percentage, it raises the question of what the resource implications of that would be. I do not know if any groundwork has been done—it is not a reason for not doing it. These are important situations. My noble friend has prompted me about the idea of an MoT at the age of 50 as part of the process to get people to focus on their upcoming pensions. We are certainly happy to support this. I am interested to hear what the Minister has to say on what the problems with it might be. Whatever they are, I would hope that we could overcome them, because this could make a very significant difference to the pensions landscape.

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[Lord Sharkey]

My Lords, I was pleased to add my name to the amendments in the name of the noble Baroness, Lady Altmann. Both amendments address the problem of cold calling and pensions. I would, like the noble Baroness, have preferred an outright ban on cold calling, just as I would like an outright ban on cold calling for the benefit of debt management companies and for claims management companies. We can deal with banning cold calling for claims management companies later in the Bill, as the noble Baroness just pointed out, and she and I have both tabled amendments to do exactly that. Regrettably, banning for pensions and debt management companies is outside the scope of the Bill.

The amendments before us, therefore, cannot and do not go that far, but they do offer a pretty good work-around. They would do two things, as the noble Baroness has explained. They would require the SFGB to provide information and guidance on cold calling. They would also require people to have received this information and guidance before taking any action following a cold call.

Noble Lords have discussed cold calling on many occasions in this Chamber. On every occasion there has been universal dissatisfaction with the process and universal recognition that it is a menace, yet it still goes on. There has been a 180% increase in the past 10 months alone. There are now 2.6 million calls every month. This is an omnipresent menace. But there is no cold calling for mortgages. We banned that. Successive Governments have never got around to banning cold calling for pensions, for debt management or claims management and I know that the Government have promised, yet again, to ban cold calling for pensions. But, yet again, it is a promise without a delivery date. It is a promise that has no obvious legislative vehicle except this one.

I still do not understand why the Government are dragging their heels over this or over debt management and claims management cold calling either. I acknowledge that there will be complexities in devising the details of any ban, but it is surely not beyond the ability of the Government to deal with it speedily if they assign the right priority and the right resources to it. In any case, I remind the Minister that we have already held out in these debates the possibility of an enabling clause in the Bill with the details to follow later in secondary legislation. We have had no response to that—all rather disappointing and mystifying. In the absence of any willingness on the part of the Government to actually do anything in the Bill, these amendments show how progress can be made. I very much hope that the Minister will respond positively.

[Lord McKenzie of Luton]

My Lords, we support the thrust of the amendment, but there is just a query on its precise ramifications which perhaps I may raise now. The amendment states:

“As part of its pensions guidance function, the single financial guidance body must provide information and guidance regarding unsolicited communications and make provision to ensure that members of the public receive this information and guidance before taking any action following an unsolicited communication”.


I am not quite sure how that could be caused to happen; that is, where the knowledge of an unsolicited communication is and how that feeds through to encourage people not to take any action until they have considered these matters. When the Minister winds up, she might expand a little on that.

I certainly support what the amendment is trying to achieve. The idea of taking a power in the Bill to seek to move forward more quickly once it has left this House is certainly worth considering. But I guess that my key message is to the Government. Their response to the consultation document was robust and covered not only cold calling, but we have this equivocation as to when it is going to happen. I find it difficult to understand, given everything that is going on with Brexit, which is changing the world, why we cannot move swiftly to introduce provisions in a vital area where there is clear consumer detriment that is destroying many people’s lives. It would be helpful to have that clarification in the wind-up, and subject to that we support the amendment.

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

Perhaps I may give an indication of my support in principle for banning cold calling of every type by saying that I have given up my landline because so many calls now are nuisance calls. They are about pensions and all sorts of other things. Apparently I have more accidents in my car than hot lunches. We have all had enough of it and this is an issue which is close to the hearts of many, if not all, noble Lords.

These amendments seek, under the pensions guidance function, to give the single financial guidance body a duty to provide information and guidance to members of the public about unsolicited communications. I should like to start by thanking my noble friend and all noble Lords for their contributions to this topic at Second Reading and during the first day of Committee. I really do understand that pension scams, and particularly unsolicited communications, have to be dealt with. As I have sought to reassure noble Lords, the Government also take the threat of pension scams extremely seriously and have committed to taking action to tackle the issue. Noble Lords have already made reference to the fact that last month the Government published their response to the consultation on pension scams, and in that document the Government underlined their commitment to bring forward a package of measures designed to tackle such scams.

As noble Lords will be aware, the Government intend to introduce legislation in a finance Bill later this year to tighten the rules in order to stop scammers opening fraudulent pension schemes. Tougher measures to prevent the transfer of money from an occupational pension scheme into a fraudulent one will be introduced following the rollout of the master trust authorisation regime in 2018-19. The Pensions Regulator will be given new supervisory measures to authorise and deauthorise master trusts according to strict governance standards, and the Government will consider how the legislation to limit transfers should align with these measures.

On pensions cold calling, which is the subject of my noble friend’s amendment, the Government’s consultation response committed to bringing forward legislation when parliamentary time allows. I really would like to reassure noble Lords that work is under way to ensure that the ban, which will include emails and text messages, is robust. We will continue to work with stakeholders and those with an interest in this space as work progresses. We hope to be able to outline more about our plans for engagement on Report. I say that, but I also ought to make it clear that, as the noble Lord, Lord Sharkey, has said, while we would love to do this overnight, the truth is that this is not in the scope of the Bill. I wish noble Lords could be flies on the wall at some of the meetings I have had with officials from the DWP and the Treasury, and also with ministerial colleagues including the Pensions Minister. We have been searching every which way to find an opportunity to introduce this legislation. We will not be overcome. We are determined to do it as soon as is practically possible. Indeed, it was not until I became a Minister that I realised how hard it is. It is easier for me now to understand, even after nearly 20 years in your Lordships’ House, how difficult it is to get some of these things done in practice.

I hope my strength of feeling is coming across: we are genuinely working on this as we speak. We are not dragging our heels. There is no lack of willingness. We are absolutely clear that we want to take this forward, but at the same time we need to be really careful about how the legislation is drafted—for example, by being careful not to exclude legitimate transactions and so on. I have the result of the consultation in front of me, which sets out in some detail the reasons why we have to be a little bit careful about how this is drafted, but I assure noble Lords that if it was in scope it would be in this Bill. Unfortunately, it is not in scope and we have been given clear instructions on that by all the powers that be who advise us on drafting of legislation in Parliament.

I turn to the amendment tabled by noble Lords on the pensions guidance function. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions. The noble Lords’ amendment would see the single financial guidance body given a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

I will take each part of the amendment in turn and will first talk to the duty to provide information and guidance on pensions cold calling. As my noble friend and all noble Lords will be aware, information on spotting, avoiding and dealing with scams is currently provided by the Money Advice Service, TPAS and Pension Wise. Information on pensions scams is also available via the Financial Conduct Authority’s and the Pensions Regulator’s websites. This function allows for the body to provide information and guidance on matters relating to occupational and personal pensions, but the amendment would give the single financial guidance body a duty to provide information and guidance on pensions cold calling and a duty to ensure that members of the public receive this information and guidance before taking any action following a cold call.

Under the new body’s money guidance function, which will allow the body to provide information and guidance to enhance people’s financial capability, the Government would expect the body to continue to provide information of this sort. However, the Government believe that the new body will be best placed to determine exactly what information and guidance it provides. It will have the ability to assess the landscape and see what information and guidance is already out there. I agree that information on avoiding financial scams is vital, and, as I have already said, the Government expect that the body will continue the existing services’ good work in this area, but I do not agree that it is necessary to specify this in legislation.

On the second part of Amendment 42D, which states that the body should,

“make provision to ensure that members of the public receive this information and guidance”,

after receiving a cold call, I wholeheartedly agree that members of the public should know where they can go to seek information and guidance if they need it. Of course, the Government would expect that any information or guidance that the body provides is as accessible as possible. However, the amendment would not help to achieve this. In practice, it is not possible or reasonable for the body to be required to ensure—the noble Lord, Lord McKenzie, has said it is quite difficult—that people will come to it for help after receiving a cold call. Having said that, I heard an example of this when I was at TPAS. It was absolutely brilliant. It had all been recorded, of course, so one could hear this woman say, “I think I’ve just had a cold call”. Sure enough, this brilliant adviser—the person giving guidance—said, “I’m very sorry to say this sounds very much like a cold call that you should ignore. Well done for calling us, thank you so much”. This is happening daily, as I saw for myself. The body would not know who had received a cold call unless, of course, they went to the service. Even if the industry had access to this information, the body would not have the power to require the industry to ensure that members of the public received information before taking action.

I understand what noble Lords are seeking to achieve with this amendment. However, it would not be helpful to mandate the guidance that the body provides, particularly when there is already a clear expectation that the body should provide it, or to make the body responsible for ensuring that people seek out this guidance. I therefore ask my noble friend to withdraw the amendment.

Social Security (Personal Independence Payment) (Amendment) Regulations 2017

Lord McKenzie of Luton Excerpts

Monday 27th March 2017 Lords Chamber

[Baroness Stroud (Con)]

My Lords, I have been listening to the debate and am concerned that the nature of our discussion may not reflect the actions that the Government are taking. I understand that the Government are laying these regulations in response to a court case which has broadened the eligibility criteria of the PIP assessment beyond the original intent that this House voted for, at a potential increase in cost of £3.7 billion.

I want to be clear that I am pleased to be part of this House—a House that has done so much to ensure that the rights and needs of those with disabilities are upheld. That is why I have spoken on the importance of halving the disability employment gap, and why I have supported my noble friend Lord Shinkwin’s Private Member’s Bill.

Like all of us in this Chamber, I believe that a decent society should always recognise and support those who are most vulnerable. However, I have read carefully what the Minister said in the other Place, and I do not think that this is what is at stake here. Despite the wording of this fatal Motion and Motion to Regret, it is worth reflecting on the fact that we in this country rightly spend more on supporting people who are sick and disabled than the OECD average. We rightly spend around £50 billion a year to support people with disabilities and health conditions. However, if you listened to the speeches in the Chamber this evening, you would think that these regulations were about to reverse this level of support and the protections that are in place. Will my noble friend the Minster confirm that this is not the case and that the level of support that this House legislated for will be protected?

The wording of the regret Motion tonight suggests that the regulations discriminate against people with mental health problems and could put vulnerable claimants at risk but, again, it is my understanding that the Government have laid these regulations to address the impact of the court case which broadened the eligibility of PIP beyond the original intent voted for by this House. Will the Minister confirm that this is indeed the case and that there are no further savings beyond those that were legislated for here in this House that are being sought?

Both Houses of Parliament voted for the changes from DLA to PIP, and one key reason for this was a recognition that PIP focuses support precisely on those experiencing the greatest barriers to living independently. At the core of PIP’s design is the principle that awards of the benefit should be made according to a claimant’s overall level of need, regardless of whether claimants suffer from physical or non-physical conditions, and it has been good to see that 28% of PIP recipients with a mental health condition get the enhanced-rate mobility component, compared to 10% receiving the higher-rate DLA component, and that 66% of PIP recipients with a mental health condition get the enhanced-rate daily living component, compared to 22% receiving highest-rate DLA care. It is precisely because PIP improves support to those with mental health problems, addressing a discrimination inherent in DLA, that this House supported the legislation in the first place. Will the Minster confirm that this remains not only the intent of PIP but the reality, and that the regulations restore the original intention of PIP, which was to make sure there is a sustainable benefit to provide continued support to those who face the greatest barrier, whether physical or mental, to living independent lives?

[Lord McKenzie of Luton (Lab)]

My Lords, I shall forgo the right to speak as extensively as I otherwise would, but I shall do three things. First, I very much support the Motion of my noble friend Lady Sherlock, and the manner in which it was spoken to. Then I wanted to ask the Minister a question about the original policy intent, because we have heard it as a justification for these regulations on a number of occasions. Can we be very clear on this? The Government pray in aid the PIP assessment guide as evidence to the original policy intent, but can we understand precisely when that and the detail were discussed by Parliament—not by officials but by Parliament—to be able to justify the claim that was made?

Finally, on the finances, we should not forget in all this that PIP was introduced against a backdrop of the predecessor, DLA, having a 20% cut in its budget. We talk about the implications of government costs of £3.7 billion, but let us just remember that forgoing that cost to government means resources to disabled people are lost as well. While £3.7 billion is what the Government might save from this, the losers are the disabled community, to a massive extent.

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

My Lords, I get the impression that the House would like me to move this debate towards a close, so I shall deal with some of the points that have been made during what has been a wide-ranging and, at times, an obviously impassioned debate all across the House. I recognise the concerns that have been raised and welcome the opportunity to respond on behalf of the Government. I hope to make matters clear, and provide reassurances on a number of points.