Taxation: Avoidance
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby (LD)
My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my honourable friend the Financial Secretary to the Treasury to an Urgent Question in another place on tax avoidance by HSBC. The Statement is as follows:
“HMRC has a long-standing approach to tax evasion, which is based on collecting the tax and interest due, changing taxpayer behaviour to discourage them from evading in future, and enforcing the most appropriate and effective penalties. Overwhelmingly, this means providing disclosure facilities to encourage tax evaders to sort out their tax affairs, backed by civil penalties to fine them for the offence.
This Government have supported HMRC’s approach by increasing investment in HMRC’s enforcement capacity and by strengthening HMRC’s powers, including increasing the maximum civil fines for hiding money in tax havens to 200% of the tax evaded. There was no evidence for the possibility of prosecution of HSBC from the data provided to HMRC. However, if further evidence comes to light through the evidence published today, HMRC will of course respond appropriately.
This approach has been very successful in tackling tax evasion—whether from plumbers, barristers and medics in the UK or from the wealthy hiding money in offshore accounts. HMRC has collected more than £1.6 billion from 57,000 disclosures as a result of a wide range of UK and international initiatives. Internationally, since 2010, HMRC has brought in around £2 billion in previously unpaid tax as a result of the UK’s agreement with Switzerland on a withholding tax on Swiss bank accounts and the international Liechtenstein disclosure facility.
In a small number of cases, HMRC will institute criminal investigations into serial tax evaders and those who deliberately conceal information from us. But in most cases, disclosure and civil fines are the most appropriate and effective intervention, and that is how HMRC has approached the receipt of data from leaks and whistleblowers, including the Swiss HSBC data that were shared with the department in May 2010.
Using the civil disclosure approach, HMRC has systematically worked through all the HSBC data that it has received, and has brought in more than £135 million in tax, interest and penalties from tax evaders who hid their assets in Swiss HSBC accounts. HMRC received data about 6,800 entities, which, after removing duplication, resulted in information on 3,600 businesses and individuals. Of these, more than 1,000 were challenged and the cases were settled. HMRC believes the remainder are compliant but continues to monitor their activities. HMRC is examining whether we have all the same data that the ICIJ has, and will be asking the ICIJ for any data that we have not already been given.
HMRC received the HSBC data under very strict conditions, which limited the department’s use of the data to pursuing offshore tax evasion and prevented HMRC from sharing the data with other law enforcement authorities. Under these restrictions, HMRC has not been able to seek prosecution for other potential offences, such as money laundering. The French authorities have today confirmed that they will provide all assistance necessary to allow HMRC to exploit the data to the fullest.
HMRC’s powers to crack down on international evasion are being further strengthened by the new international common reporting standards, which more than 90 countries have agreed to as an extra tool for closing down the options for tax cheats to pursue this increasingly high-risk practice”.
Lord Davies of Oldham (Lab)
My Lords, I fear the House and the country are going to regard that as a fairly lame Statement in the light of the disclosures today. The Minister has not made any attempt at all to answer the questions that are being asked about past actions. We and the country want to know: why did the Prime Minister, first, appoint Stephen Green to this House when the information was already in the Government’s hands and, secondly, make him Trade Minister? Did they not address the issue of due diligence at all with regard to Mr Green’s past actions and responsibilities at HSBC, as chairman and before that as chief executive? When the information was received by the Government, why was it not acted on?
Why is it that we are now hearing from the Government that we have had one successful prosecution, but the French are talking about the very many successful prosecutions that they have carried out? Why are the Government now boasting about the fact that they have been able to persuade the French to release their information and be helpful to the British Government? That looks as if the French have set about the issue with the due seriousness and urgency that were required, and our Government have not.
Finally, despite what the Minister says about the actions being carried out, the amount of uncollected tax has risen year on year on this Government’s watch, from £31 billion in 2009-10 to £34 billion in 2012-13. When will this Government take real, meaningful action to tackle this tax gap?
Lord Newby
My Lords, as I explained at Questions earlier, before the noble Lord, Lord Green, was appointed to your Lordships’ House, he went through the normal rigorous vetting procedure that is undertaken by the House of Lords Appointment Commission, and the Cabinet Office went through its normal procedure. As for prosecutions, my colleague’s Statement in another place explained that HMRC received the HSBC data under very strict conditions which limited our use of them to pursuing offshore tax evasion, and prevented us from sharing the data with other law enforcement authorities. Under these restrictions, we have not been able to seek a prosecution for other potential offences such as money laundering. However, by pursuing the civil route, we have been able to recover some £135 million from people who were involved in this activity. The noble Lord is right in saying that, in monetary terms, the tax gap has increased very slightly but I think he will find that in real terms the tax gap has fallen.
Lord Phillips of Sudbury (LD)
My Lords, in the course of his Statement my noble friend said twice, I think, that it is more appropriate to deal with these issues by way of civil proceedings. He mentioned that the amount recovered was a sum short of £200 million. My own experience—I must plead guilty to being a practising lawyer of 57 years’ standing—is very clear that one conviction of one major figure in one major bank for tax fraud, such as that which HSBC has been carrying out for many years, reverberates around the City and the world of business and the professions with infinitely more force and effectiveness than any amount of civil penalties, which none of those who are responsible for the malefactions actually pay from their own pocket.
Lord Newby
My Lords, the noble Lord asked about civil as opposed to criminal penalties, and whether an exemplary hanging might not be a good idea. I explained the difficulties about prosecutions in this case, but we have successfully prosecuted people for LIBOR manipulation and we have extended the scope of the criminal law in respect of people in senior positions in banks. The noble Lord will probably have seen that the very threat of criminal action against directors of banks, even though pretty remote, has made a number of non-executive directors of banks extremely nervous.
Lord Howarth of Newport (Lab)
My Lords, anybody who knows the noble Lord, Lord Green of Hurstpierpoint, as many of us in this House do, knows that he is a person of the utmost integrity and great ability. Do not these revelations about HSBC, profoundly shocking as they are, demonstrate two things, among others? The first is that enormous international conglomerates such as HSBC are impossible to manage as they need to be managed. Secondly, does not this revelation demonstrate the cultural change wrought by the neo-liberal orthodoxy which has been dominant during recent decades and under which personal material self-seeking has been elevated far too far above other values?
Lord Newby
My Lords, if noble Lords have read the statement by HSBC in today’s Guardian—it may be in other newspapers, but that is where I read it—they will have seen that it is clear that, in 2005, HSBC was run as a very loose confederation and that the centre sought not to exercise very great control. That has changed very dramatically, and the new regulatory authorities are much more intrusive in ensuring that management at the centre has effective control throughout the organisation. It is clear that there was a wholly unacceptable culture in many of the banks. Both regulatory and legal change and activities by the banks in setting up their own body to monitor standards—as well as statements by senior management at the top of banks—are trying to reverse that culture towards the kind of culture that I suspect most people would expect their bankers to follow.
Lord Howell of Guildford (Con)
My Lords, I have listened to several attempts by the Opposition to tie the name of my noble friend Lord Green to whatever was going on in HSBC Switzerland, which I know in intention he would not dream of defending. Does the Minister nevertheless accept that my noble friend Lord Green is a man of the utmost probity who has done an enormously valuable job as a Trade Minister for this Government? I have the privilege of working with him. His activities bring great benefit to this nation. Would it not be a little wiser, if we want to maintain the quality and integrity of our political discussion in this House, to avoid premature innuendo of the kind that we have heard frequently from the opposition Benches?
Lord Sherbourne of Didsbury (Con)
My Lords, can I endorse what the noble Lord, Lord Howarth, said? I know my noble friend Lord Green, who I agree is a man of great integrity. I agree also that the acquisition by HSBC at the time of a great many companies, producing a loose federation, caused management stretch in terms of organising it—I think that it has learnt the lessons of that. It is important that people outside this Chamber understand the measures that this Government have taken to strengthen controls on banking behaviour.
Lord Newby
My Lords, I agree with the noble Lord. It is important to stress that, as a result of initiatives led by this Government, there will be in place automatic information exchange agreements with more than 90 countries within a couple of years, including Switzerland, which means that the kind of egregious behaviour which today’s revelations have brought to light simply will not be possible in future.
Lord Harris of Haringey (Lab)
My Lords, the noble Lord, Lord Green, as everyone has said, is a man of great integrity. Can the Minister tell us whether the noble Lord was aware of the wrongdoing of the bank of which he was chairman? If he was aware, was the Prime Minister aware of that when he appointed him as a Trade Minister? If he was not aware, what judgment did the Prime Minister make about how effective he was as chairman of HSBC?
Lord Newby
My Lords, I have no idea what was in the head of the noble Lord, Lord Green, but I am aware that when he was appointed he was held in extremely high esteem by everybody who had ever had any dealings with him.
Pension Schemes Bill
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby (LD)
My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Pension Schemes Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Schedule 3: Pensions guidance
Amendment 1
Lord Bradley (Lab)
My Lords, I will be brief, because the issues presented by this amendment have been brilliantly articulated by my noble friend Lady Hollis.
Throughout the passage of the Bill we have sought to ensure that consumers’ interests are fully protected, particularly in respect of the guidance that they will receive from the citizens advice bureau or TPAS. But the accuracy of the information for them is wholly dependent on the clarity of government policy. We are concerned that the treatment of pension funds in respect of income-related benefits and social care do not meet this test of clarity. Such clarity is particularly essential here, because the decisions that people make will have a dramatic impact on their future lives. I hope that the Minister in response will be able to give the House the assurances that we are seeking through this amendment so that there is no confusion in the public’s mind and no inconsistency across the country in the guidance that will be given on this incredibly important issue.
I thank the Minister for his letter dated 4 February, which lays out the Government’s position on how they will deal with some of these matters. But I—and, I am sure, my noble friends—remain concerned that, as they say, “the devil is in the detail”, and we have already heard this morning of cases where there has to be clarity and consistency of treatment of individuals in this respect. Clearly, we will continue to look closely at the regulations that follow and the guidance issued in association with them, to ensure that the public understand the implications of the decisions they take in respect of any entitlement to income-related benefits or social care costs.
Lord Newby
My Lords, I begin by thanking the noble Baroness for her amendment, which obviously addresses an extremely important issue.
This amendment seeks to place a separate and additional duty on the Treasury to provide appropriate information on the effect of pension freedoms and flexibilities on income-related benefits and social care costs. I agree that it is vital that people understand how benefits and social care entitlements interact with the new pensions flexibility and that consumers need to be aware of the impact of accessing their pension pot on their eligibility for income-related benefits and help with social care costs.
The Treasury is working to ensure that the content of the Pension Wise service includes information about entitlement and deprivation rules so that consumers are aware of these when choosing whether to access their pension savings. We are also working to ensure that people are aware of the need to plan for later life, including the risk of needing care and support and what that might mean for their choices. This will help people think about how they wish to live the rest of their lives. In response to the noble Lord, Lord Lipsey, the Care Act provides that no one is required to sell their home to pay for care. The difference in this case is that the lump sum is income in the year taken, and we agree that this will need to be covered in guidance, both on pension pots and on social care, which we will provide.
The DWP will issue clear guidance on the treatment of pension pots in income-related benefits in advance of April. This is to help people make informed decisions about accessing their pension pot. We plan to do this, as requested by the noble Baroness, by producing a leaflet which we will both print in hard copy and place online on GOV.UK. Other websites will be able to link to this information, and there will definitely be such a link from the GOV.UK Pension Wise website, which will direct those who are affected by this issue to the DWP information. Pension Wise will be a key way of equipping people with this information online on GOV.UK, on the phone through the Pensions Advisory Service, and face to face through citizens advice bureaux across the country. Alongside the new content being developed for Pension Wise, the new guidelines will also be reflected in the training programme for guidance specialists from the Pensions Advisory Service and Citizens Advice.
As the noble Baroness said, she met my noble friend Lord Bourne and me earlier this week to discuss the substantive policy issue—namely, the interaction of pension flexibilities with the benefits and social care means tests. The principal query that the noble Baroness raised is whether the distinction we make between ISAs and other savings vehicles, as opposed to pension pots, in benefits means testing remains fair after the introduction of the new flexibilities. ISAs are taken fully into account in income-related benefits, whereas we ignore untouched pension pots until someone reaches pension credit qualifying age. The noble Baroness argues that this is an arbitrary distinction now that the tax treatment of the two products is more aligned.
The Government, however, firmly believe that the difference is an important one. ISAs are for use at any time, but we specifically encourage people to save into pensions to provide for themselves in later life. We would not want to design our benefit system in such a way as to encourage people to spend their retirement savings when they are still below pension credit qualifying age. Aligning the treatment of ISAs with that of pension pots in the means test would be expensive for the taxpayer, as people with resources could secure more benefit. On the other hand, aligning the treatment of pension pots with that of ISAs would mean that claimants could lose benefits and so may deplete their pension savings before reaching their retirement. Neither outcome is desirable, and we therefore believe that the current position remains the right one.
This gives rise to a second question that concerns the noble Baroness, which is whether this situation gives individuals the opportunity to move their ISAs, which would be taken into account, into their pension pots, which would not be taken into account until pension credit qualifying age. The Government have considered the matter seriously and, in the light of our analysis, we do not feel that we need to act on this matter presently. The numbers of income-related benefits claimants with substantial ISAs is relatively modest and, should people move their savings to their pension pot, the additional upfront welfare costs to the Exchequer are partly offset by welfare savings in later life as those individuals would rely less on income-related benefits as a pensioner. On this issue, we plan to monitor behaviour after April when the new pension flexibilities are introduced, and respond proportionately if we need to.
I should add that people deliberately depriving themselves of money in order to secure or increase benefit entitlement may be subject to rules on deprivation of assets that already exist in both the benefit and social care systems.
Baroness Hollis of Heigham
Is the Minister saying—he may go on to say this in the next sentence—that if you cycle your ISAs into your pensions, that would be deprivation of capital?
Lord Newby
No, I do not think I am saying that. I will make sure that I am not and correct myself if I am wrong. All I am saying is that the deprivation of assets rules which currently apply will continue to apply in respect of money taken out of ISAs.
Baroness Hollis of Heigham
That was my question. Can the Minister explain to me why, if money is taken out of ISAs and goes into pensions, that is not deprivation of assets?
Lord Newby
It is not the point at which money goes from ISAs into pensions that is a deprivation of assets. Deprivation of assets may occur if and when money is taken out of one or both of those pots.
Lord Rooker (Lab)
I have listened with care to my noble friend, and although I have not participated in the debate, I understand the issue. Surely by moving an ISA into a pension pot, the individual then does not have access to buy, sell or add to the ISA. It is just not available; it is now hidden in the pension pot. Therefore, the individual deprives himself or herself of the choice they had when they had the ISA. It is fairly simple: is it or is it not something that could be penalised? People need to know this. If we are not careful, there will be chaos in this country later in the year as regards people with small pensions and small ISA pots.
Lord Newby
My Lords, I thought I had just said that if you move money from your ISA into your pension pot that does not qualify to be treated as a deprivation of assets. You are not taking that asset as income and you are not spending it; you are moving it from one pot to another.
Baroness Hollis of Heigham
So if you have more than £16,000 in a building society, which stops you getting means-tested benefits, and you take that money out of your building society account and put it into a pension pot, is that deprivation of assets?
Lord Newby
My Lords, that is an extremely interesting question to which I do not have the answer. However, it has absolutely nothing to do with the amendment before the House, which is to do with whether the Government will give adequate guidance on the issue. The amendment is not about the detailed substance of the rules which are being dealt with not least via a series of discussions with the noble Baroness, as she said. Those discussions will continue. I will happily write to her and other noble Lords about these detailed issues but I stress that the purpose of the guidance—the point of this amendment—is to ensure that the guidance correctly reflects policy. That is what we have committed to do. We have explained how we are going to do it. We have met the noble Baroness’s perfectly sensible idea that we produce a specific leaflet to do it, and we will do that by the beginning of April.
As I explained, we have already had a number of discussions with the noble Baroness and have agreed to meet her after today and before the start of the Recess to continue our discussion on these important matters. I know that she is still unhappy about what the Government are doing with regard to the substance and some of the details of this issue. As I say, we are committed to making sure that we have the maximum degree of clarity. We are committed to having further negotiations with the noble Baroness to tease out—
The Archbishop of York
My Lords, if the Minister is assuring us that there will be information online and people will be able to understand everything, why cannot this amendment be put on the statute book so that there is a duty on the Treasury to inform people about this issue? For me the provision is so simply worded that I do not understand why it cannot be on the statute book.
Lord Newby
My Lords, we are not suggesting that this goes on the statute book because this requirement already exists. The FCA rules on the guidance providers already require guidance to be given in respect of benefits. All we are doing now is fleshing out how we intend those existing rules—which are in the FCA rulebook, or the FCA document which has gone to the organisations providing guidance—will work in respect of benefits and social care.
The Archbishop of York
Could the Minister explain in a clear way that a simple mind like mine would understand whether you are depriving yourself of assets when you take money out of an ISA and put it in a pension fund? How can I be confident that the guidance, which will come from somewhere else, will be more erudite than what I am hearing at the moment? I for one want to say, in this week when we have seen great difficulties in social care provision and when most people are worried about their social care and their pensions, that it seems that this particular bit of legislation actually puts a duty on the Treasury to ensure that it is the one that informs people of this.
Lord Newby
My Lords, for the third time, if you move money from your ISA to your pension pot, that is not a deprivation of asset. The Treasury is in charge of the guidance process.
Lord Newby
The noble Baroness has an aversion to the Treasury—I cannot imagine why—but the Treasury has this power to provide the guidance under the Bill. The Treasury and the FCA have set out the details of what the guidance has to contain. It is already written into the FCA rulebook that it has to cover benefits. Therefore, the Government’s contention is that there is no need for a second amendment requiring this to be in the Bill when not only will it happen, but the rules saying that the guidance providers must do it are already in existence.
Baroness Hollis of Heigham
My Lords, I am grateful to all of those who have taken part. It was really helpful to try to tease out some of the very serious issues. They are serious. All of us are concerned about a rising benefit bill, particularly where there are cuts across other objectives such as the health service, education and whatever. We also want to support those services.
These proposals were imposed on the DWP. My sympathies are entirely with the DWP, which is trying to sort out the mess created by an open-handed gesture from the Chancellor of the Exchequer, which has not been thought through for its implications for means-tested benefits. That is the problem which is apparent today, from everything that we have heard. We still do not know half the answers. I am quite sure that the DWP and DWP Ministers are doing their honourable and decent best to try to make some sense out of a tangle and mess that has been dumped on them by HMT. I am not blaming any Minister personally, but that is what has happened. HMT’s pension freedoms absolutely tear up the rulebook, particularly on DWP capital, which is there to protect all of us in terms of benefit expenditure. It is only after yesterday evening that we are beginning to get some detailed information. We have been pressing for this for five weeks in this House, let alone down at the other end.
I am grateful to my noble friend Lord Lipsey, who teased out further problems with the interaction between social care and pensions. I look forward to the letter that he so rightly asked for being in the Library.
The noble Baroness, Lady O’Cathain, absolutely rightly emphasised the need for clarity. She is so right, but how can you have clarity when you have not fully sorted the policy problems behind what you are trying to explain to people? That is why we have come back with a very anodyne amendment, but behind it is the charge that the policy has not been fully sorted. I therefore hope that the actor writing that pamphlet will ensure that the policy is sorted.
I am not saying that the noble Lord, Lord Newby, gave the game away, as that sounds too frivolous, but he made the point that you cannot align ISAs with pensions, because that does not work, and you cannot align pensions with ISAs, because that does not work for people over the age of 50. So he is stuck and we are all stuck because, as far as I can tell, nobody at HM Treasury took on board the very real skills and experience of the people at the DWP who have to operate the service in practice. Talk about silo government—although we are all guilty of that; I am not saying that we are whiter than white when obviously we are not. However, here is something that will affect hundreds of thousands of people, and the two departments have not got their act together. The DWP is trying to make rules which are not rules but simply arbitrary decisions, and I am confident that at least some of them will be tested by judicial review over the years.
This is a mess but I hope that this amendment, which I will of course withdraw given the undertakings that the Minister has given today, will at least send a signal, as the most reverend Primate said, and give us the chance to get the policy clear so that the leaflets can be clear. Frankly, in order for that to happen the DWP at the highest level has to talk to the Treasury at the highest level and come up with something which is decent, fair, transparent, consistent and simple, if it can. I beg leave to withdraw the amendment.
National Health Service Pension Scheme (Consequential Provisions) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the National Health Service Pension Scheme (Consequential Provisions) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Credit Unions
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Kennedy of Southwark (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as director of London Mutual Credit Union.
Lord Newby (LD)
My Lords, on 31 December 2014 the Government published a response to the call for evidence on credit unions. In this response, the Government committed to consider, in the next Parliament, potential changes to credit union legislation.
Lord Kennedy of Southwark
My Lords, it is important for credit unions to be able to grow on a solid base to deliver for their members. Whichever party or parties are in government after the general election, would the noble Lord agree that two of the most important areas for reform are reform of the 2 million cap on potential members—maybe change that to actual members—and removal of the legal barriers to enable credit unions to give other financial products to their members?
Lord Newby
Yes, I agree with the noble Lord that those are both important issues. In the response to the call for evidence, the Government have committed to considering changes to the common bond legislation. The noble Lord will be aware that credit unions maintain their exemption from the consumer credit directive only if they have a restricted potential market. It is important that we do not expand the definition of the common bond in ways that could jeopardise that exemption.
Lord Hunt of Wirral (Con)
In declaring my interest as chair of the Credit Union Expansion Project, I point out to my noble friend the Minister how much I welcome the measures that this Government have taken to reform credit union legislation and the recent commitment made to produce proposals for further reforms in the next Parliament. I join the noble Lord, Lord Kennedy of Southwark, in welcoming that. I hope that it will receive support from all sides of the House. Will the Minister agree that legislation is only part of the answer? Helping credit unions to co-operate and to become more competitive and attractive will be key to growing this sector sustainably.
Lord Newby
Absolutely, my Lords, and I commend the noble Lord for his work in this area. Increased collaboration is vital if the sector is to become more competitive and grow. The Credit Union Expansion Project, to which the noble Lord referred and which the DWP is funding to the tune of £38 million, is aimed at doing exactly that—for example, by providing shared back-office services to cut costs. However, the sector would also be strengthened if it were able to speak with one voice, which requires a reduction in the number of trade associations currently operating in the sector.
Lord McFall of Alcluith (Lab)
My Lords, our ambitions for the growth of credit unions on a national scale have a long way to go. Given that banks and building societies have extensive networks and operational systems, is there now a case for the Government to consider establishing a community reinvestment Act, as in the United States, as a solution to the problem of providing affordable finance for all individuals?
Lord Newby
My Lords, there is scope to look at a whole raft of new initiatives, to make sure that there is access to finance for people on more modest incomes. One development in recent weeks has been agreement with the banks on fee-free basic bank accounts, which will be a good improvement for many people who are currently denied even the most basic bank accounts.
Lord German (LD)
My Lords, the Credit Union Expansion Project was designed to enable people on lower incomes to have access to modern banking methods. One of the problems for people in this category is that they have not been able to get cheaper electricity and gas bills because they have been unable to pay by direct debit. Can my noble friend say what progress has been made by both credit unions and the Post Office card account to enable people to access those cheaper bills through the direct debit mechanism?
Lord Newby
As my noble friend says, this is a very important issue for people on low incomes. A number of the largest credit unions already offer current accounts that have a direct debit facility. However, they are still a small minority. This is an area where the Credit Union Expansion Project is very important, as it will allow more of them to offer such services.
More generally, the Government’s announcement in December about basic bank accounts means that people who open such accounts will have access to a range of normal personal current account facilities, including direct debits.
The Lord Bishop of St Albans
My Lords, I imagine many of us are concerned about the culture of debt that seems to be normative in many parts of our society. In the light of this, can the Minister tell us whether the Government have any plans, first, to encourage all schools to consider working closely with credit unions, as in the case of the credit union in St Albans, where I come from and, secondly, to further roll out and encourage payroll savings schemes as part of a wider initiative to encourage saving and financial responsibility across society?
Lord Newby
My Lords, the Government support both those concepts. The right reverend Prelate will be aware that the Government have been working with the Archbishop of Canterbury’s task force on affordable credit and savings to institute the LifeSavers project, under which primary schools are working with credit unions to encourage young children into good savings habits and raise awareness of credit unions.
Lord Davies of Oldham (Lab)
My Lords, the House will have noticed just how vague the Government’s commitment is when they say that after the election—yet another commitment for “after the election”—they will introduce additional legislation. Does the Minister recognise that what the next Labour Government will do is to increase the levy on payday lenders in order to help the development of credit unions?
Lord Newby
My Lords, the Government have legislated several times to modernise the law in respect of credit unions. The proposals of the Labour Party are based on an assumption that payday lenders represent a large stock of cash. The way in which the payday lending industry is going suggests that there simply will not be that amount of resource available from the sector.
Lord Clarke of Hampstead (Lab)
My Lords, when this subject was discussed on a previous occasion, I asked the Minister if he would liaise with the Department for Education to see if some sort of campaign could be set up to get children at school learning about the benefits of credit unions. St Albans credit union, of which I am a member, has links with a number of schools. This helps children get into the habit of understanding the need to save before they borrow. Did any talks ever take place between the two departments, and if not, will they go ahead and do so now?
Lord Newby
My Lords, as I have said, the Government are working with the Archbishop of Canterbury’s task force to get credit unions into schools, initially in Lewisham, Bradford and Nottingham, but with a view to rolling the project out in the near future to 100 schools and involving 30,000 children. Also, for the first time last autumn, we instituted financial literacy as a compulsory part of the national curriculum.
Armed Forces Pension (Consequential Provisions) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the Armed Forces Pension (Consequential Provisions) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Lord Newby (LD)
My Lords, the regulations we are debating today make consequential modifications to the Pension Schemes Act 1993 and to the Finance Act 2004 to make sure that the major public pension schemes created under the Public Service Pensions Act 2013 work as intended.
They make some small and technical modifications to the law governing the new teachers’, NHS, civil service, police, firefighters’ and Armed Forces pension schemes. The consequential modifications relating to the Judicial Pension Scheme are being debated as part of its main regulations.
It might be helpful if I set out some of the context and background to the wider reforms to public service pension schemes. People are living longer and the cost of providing public service pensions is increasing. Following recommendations made by the noble Lord, Lord Hutton of Furness, and adopted by this Government, new pension schemes are being established under the Public Service Pensions Act 2013 for civil servants, the judiciary, local government workers, teachers, health service workers, fire and rescue workers, members of police forces and the Armed Forces.
These reforms were needed to balance the legitimate concerns of taxpayers about the cost of public service pensions with the need to ensure decent levels of retirement income for millions of people who have devoted their working lives to the service of the public. I am pleased to say that these reforms received cross-party support when they were debated in your Lordships’ House.
The design of the new schemes has now been settled, and the schemes will take effect from 1 April this year. The statutory instruments before us today are simply the means of ensuring that the scheme designs work properly within the wider framework of pensions and tax law. They will make sure that the members of these schemes get the pensions that they expect and that they do not lose out as a result of any glitches between the scheme design and the wider pensions law.
Two sets of modifications are being made to the Pension Schemes Act 1993, the first of which is needed to ensure that members moving from their existing schemes to the new schemes are not inappropriately treated as deferred members of their existing schemes. The purpose is to ensure a seamless transition between the old and new schemes.
The modifications are, first, to ensure that the benefits they have accrued in their existing schemes are not revalued as if they were deferred members; secondly, that their right to a cash equivalent transfer value, to a refund of contributions or to a cash transfer sum applies only when they leave the new scheme; and, thirdly, that anti-franking provisions do not apply as if they were deferred members on 1 April 2015. The modifications we are making mean that for these purposes such individuals do not cease to be active members of their existing scheme until they also leave their new scheme.
Lord Newby
As I was saying, the modifications that we are making mean that for these purposes such individuals do not cease to be active members of their existing scheme until they leave their new scheme.
We are also making modifications to the regulations that govern contracting out, specifically those dictating the process that a scheme must follow to be contracted out. For the new public service pension schemes we have simplified the process, ensuring that the new schemes, and therefore their members, continue to be contracted out of the additional state pension until the end of contracting out in April 2016.
The second set of modifications that we are making to the Pension Schemes Act 1993 concern only the police, firefighters’ and Armed Forces pension schemes. These are needed to ensure that the 1993 Act is in line with the 2013 Act, which requires active and deferred members in these three schemes to have different pension ages. To give a little context, the 1993 Act says that schemes cannot calculate the pensions of deferred members differently from those of active members, while the 2013 Act explicitly requires the uniformed schemes to assign a different pension age to active and deferred members. That difference in pension age makes a difference in pensions calculation inevitable.
In recognition of the unique nature of these occupations, and following recommendations made by the noble Lord, Lord Hutton, the Government are implementing a normal pension age of 60 in these three schemes, while members of other schemes will have a normal pension age well above this, set equal to state pension age, which for the majority of members will be 68. The Government have also decided to implement the noble Lord’s recommendation for deferred members of the police, firefighters’ and Armed Forces pension schemes to have a deferred pension age equal to the state pension age as the need for early retirement does not apply once a member has left these services and is no longer performing that unique and physically demanding role. The modifications before us today enable this split pension age in the police, firefighters’ and Armed Forces pension schemes to operate in harmony with wider legislation on short-service benefits.
The third set of modifications that we are making today relate to the Finance Act 2004 and ensure that members with service in both a new and an existing pension scheme who retire with an ill-health pension do not face unintended tax consequences. Specifically, they ensure that parts of the ill-health pensions available to members who fall ill are not measured twice for annual allowance and lifetime allowance limits simply because of the transitional mechanics for payment of ill-health benefits. Put simply, the modifications ensure that the tax regime will apply in the way intended by the Government to those members who move into the new scheme and then retire because of illness.
These are very technical modifications to wider pensions legislation that seek to ensure that civil servants, teachers, NHS staff, firefighters, police officers and military personnel can get the pensions that they expect without any unexpected effects as a result of tensions with the wider law. I therefore commend these modifications to the Committee.
Lord Tunnicliffe (Lab)
My Lords, the noble Lord, Lord Newby, and I seem fated to address technical and lengthy statutory instruments in front of a packed Committee, with the general public watching on with bated breath.
In representing Her Majesty’s Opposition in these circumstances, there seem to me to be two options: the one-hour option and the 100-hour option. The 100-hour option would mean tracing through all six documents and referring to, but not excluding, other laws and regulations made in 1992, 1993, 2004, 2006 and 2013 and sundry other modifications. Amazingly enough, I have not chosen the 100-hour option.
The one-hour option, of course, is to look at the Explanatory Memorandum and to see whether it is consistent and relevant, makes sense and so on. I have done that and I am pleased to advise the Committee that, in line with normal tradition, we will not be voting against these regulations when they come forward into the Chamber in a day or two’s time.
However, I felt a need to look behind the regulations. The way I did that was to look at the consultation. I felt that if the regulations were straightforward and fairly sensible and everyone involved with them also said that, then everyone would be happy. I looked into the consultation and it is fair to say that the consultees are content with five out of six of the sets of regulations. I shall therefore speak only to the one where the consultee—the Fire Brigades Union—is not content.
In response to the invitation to consult, it provided a letter dated 14 November from Sean Starbuck, its national officer. As I understand it, the union has three areas of concern. The first is that the benefits or value in its 1992 scheme could not be, as it were, crystallised and then imputed into the 2015 scheme. I am sure that there is a series of good pension words to more precisely express what I have said but we are all familiar with the system of pensions where you have a pension in one scheme moved to another scheme with a separate employer; there is then a calculation about the value of your accrued benefit, a calculation about the accrued benefits in the new scheme, money changes hands between the schemes and everyone is happy. As I understand the 2015 scheme, if you had worked in another firm or business, the state or—surprisingly in this case—the military, that is exactly what would happen. There would be a transfer of scheme value from, say, a military pension into the 2015 pension.
However, for firemen that is not possible. For firemen, as I understand it, one scheme ends and its value is deferred—I am sure that I have got the words wrong—until the point at which it is earned, and the service then starts in the 2015 scheme. The Fire Brigades Union took the view that it would be a good thing if that option was available to firefighters. Its view was that this should not be a problem because the very essence of these kinds of transfers is by definition cost-neutral. The money is calculated and moves over.
The union is particularly seized of that because, as I understand it—I confess I have not read the parent legislation—there is envisaged in the 2015 scheme a capability for partial retirement, which I gather everyone thinks is a good idea. That involves drawing some proportion of the pension but continuing to work on a part-time basis. It contends that the provisions that fall out of the various Acts and these regulations would make the partial retirement provision non-viable. Lastly, it contends that that does not honour assurances given by Ministers. It quotes in particular a Written Ministerial Statement of 28 October that states:
“Where firefighters are transferring to the 2015 scheme, they can be reassured that the pension they have built up in their existing schemes will be fully protected, and they can still choose to retire at the age they currently expect (which could be from age 50)”.
The Fire Brigades Union has had no formal direct response to its concerns, which seems to me to be of singular concern. In a sense, the union has had a partial response through the response in the Explanatory Memorandum. I mean “partial” in two ways: first, the response is incomplete, and, secondly, it affirms rather than proves that there is some cost. As the Minister said, the Opposition have more or less gone along with these regulations consensually because we recognise the financial problems and we are not seeking to burden the Government with more of them. However, the response affirms that it will be costly rather than arguing it through.
Lord Newby
My Lords, I am grateful to the noble Lord for his welcome of the regulations as a whole. Perhaps I may deal with the consultation and the Fire Brigades Union. The Department for Communities and Local Government undertook a short technical consultation on the draft regulations that we are discussing.
Lord Tunnicliffe
I noticed the word “technical”. I do not see suggested anywhere in the regulations the idea of technical. Obviously I have not read the Public Service Pensions Act cover to cover. It talks about consultation and I am not sure what is meant by the word technical in that context.
Lord Newby
My Lords, a key difference between these regulations and the main regulations being established under the Public Service Pensions Act is that these consultations cover only these technical regulations. The regulations we are talking about today are not the main scheme regulations. They are simply a series of regulations that enable the transition from the earlier scheme to the new scheme to go smoothly, without people being taxed twice or not taxed enough, and to make sure that, from the Government’s, the employer’s and the individual pension holder’s point of view, things move forward in terms of their entitlement, almost as though no new schemes were being introduced. That is why I used the word technical. Perhaps I should have said that they undertook a short consultation on the draft technical regulations, which would have been clearer English. As the noble Lord pointed out, the FBU submitted responses to that consultation.
As is always the case with these types of consultations, the department did not provide an individual response; it provided a response that covered them all. As the noble Lord said, it published its formal response in the draft Explanatory Memorandum which accompanied the draft regulations. Yesterday, a committee paper was circulated to members of the Firefighters’ Pension Committee notifying them of the outcome of that technical consultation. The noble Lord is right that that committee is coming to an end, but it is being subsumed into the scheme advisory board, which will be a body on which the FBU is represented and the purpose of which is to advise the department on the operation of the new scheme going forward.
Lord Tunnicliffe
My Lords, if it is technically possible, perhaps I could receive a copy of that circulated paper electronically so that I might have it in my in-tray by tomorrow morning.
Lord Newby
The noble Lord certainly can have a copy of the response sent to the committee. I am happy to give that assurance. That is what has happened. In terms of the FBU’s concern, its response proposed that these regulations should permit former scheme members who joined the new firefighters’ pension scheme to transfer 2006 scheme benefits into the 2015 scheme and allow 1992 scheme members to take their pension without having to retire or face a tax charge. The former would increase scheme costs and the latter would substantially increase costs, as 1992 scheme pension benefits will come into payment earlier and will be unfunded. It was open to representative bodies to put forward alternative scheme designs during the discussions leading up to the publication of the proposed final agreement to ensure that any increased costs were taken into account when setting the accrual rate in the 2015 scheme.
The department concluded that it was not appropriate to use these regulations, which are of a technical nature, to provide unfunded improvements to existing scheme benefits, as requested in the consultation. There is a process point about which regs would be the appropriate ones to deal with that issue. The department and the Government’s contention is that, as these are very technical regulations, they are not the appropriate regulations to do that. The main scheme regulations, if it were to be done, would be the way to do it. However, the Government are not convinced that it should be done. No doubt these issues will be raised again in ongoing discussions via the scheme advisory board between the FBU, the department and other stakeholders.
Firefighters’ Pension Scheme (England) (Consequential Provisions) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the Firefighters’ Pension Scheme (England) (Consequential Provisions) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Police Pensions (Consequential Provisions) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the Police Pensions (Consequential Provisions) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Public Service (Civil Servants and Others) Pensions (Consequential and Amendment) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the Public Service (Civil Servants and Others) Pensions (Consequential and Amendment) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Teachers’ Pension Scheme (Consequential Provisions) Regulations 2015
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby
That the Grand Committee do consider the Teachers’ Pension Scheme (Consequential Provisions) Regulations 2015.
Relevant document: 17th Report from the Joint Committee on Statutory Instruments
Small Business, Enterprise and Employment Bill
Lord Newby Excerpts(9 years, 3 months ago)
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Lord Newby (LD)
My Lords, these amendments relate to Clause 60, which will enable the adjudicator to levy funds on pub-owning businesses to contribute to the adjudicator’s expenses, with the Secretary of State’s consent. Amendment 90B would change “may” to “must”, making the power a duty. We have had many similar debates on a number of subjects during my time in your Lordships’ House. I remember with affection the noble Lord, Lord Barnett, trying to get us to put “must” into various banking Bills, with no success. As I said then, and as I am sure the noble Lord, Lord Hodgson, realises, “may” in reality often means “must”. I assure him that in this case the amendment is not necessary.
The amendments would together require the adjudicator to impose a levy not only on the pub-owning companies in scope of the code but on any pub-owning company with tied pubs. I hear what the noble Lord says about the code becoming the industry standard for everybody, but that is by no means clear at this point. It is certainly not a requirement of the Bill. To the extent that pubcos not covered by the Bill did not use the code, this amendment would go against the “polluter pays” principle. The Government are clear that funding the adjudicator through a levy on pub-owning businesses covered by the Pubs Code is the right approach. The conduct of the large pub-owning businesses has led to the need for the adjudicator, so it is appropriate that they should cover the costs. This approach is in keeping with the funding of the Groceries Code Adjudicator by the large retailers in scope of the Groceries Code.
It would be unfair for companies such as the family brewers, whose tied tenants would not have the protections of the Pubs Code—at least initially—nor the ability to refer disputes to the adjudicator, to contribute to the levy. The representative body for some of these smaller companies, the Independent Family Brewers of Britain, has committed to continuing the current voluntary arrangements. This includes funding industry dispute resolution services to continue to provide protections for their tied tenants, so the amendment would require them to pay twice. The Government intend to fund the set-up costs of the adjudicator—but, once it has been established, it is only right that the expenses are met by that part of the industry whose conduct has led to the need for the adjudicator. The existing drafting of Clause 60 provides for this.
The amendments would also require the adjudicator to impose a levy every financial year. This would be the case even if, however unlikely, the money was not required that year—a situation which could arise if there was sufficient money left unspent from the previous year. It is therefore right to allow this flexibility for such circumstances. I hope that I have been able to persuade my noble friend that he should not press his amendment.
Lord Hodgson of Astley Abbotts
My Lords, my noble friend has brought us back to the extraordinary aspect of the parliamentary draftsmen, where “may” equals “must”. Who else in this country would believe that “may” equals “must”? He is quite right to remind us that this is one of the quirks of parliamentary draftsmanship. If, as he points out, the polluter should pay—and if the code becomes widely used by smaller companies below the 500 limit—all I would like to know is whether there is a possibility that, at that stage, the cost of the code could be extended to cover the people using the code, because that is the “polluter pays” principle that he referred to. I hope that the Government will think about that, but, in the mean time, and particularly given the hour, I beg leave to withdraw the amendment.
Lord Hodgson of Astley Abbotts
My Lords, Amendment 93 could be called, in shorthand terms, the “shopping around clause”. My noble friend the Minister may have spoken to this earlier; I hope that she will be able to reassure me in fairly short order that my amendment is no longer needed with the new provisions.
Clause 67, to which this amendment refers, defines inter alia the term “tied pub tenant”. It does so in respect of prospective tenants at subsection(1)(b), which says,
“who is a party to negotiations relating to the prospective tenancy of or licence to occupy premises which are, or on completion of the negotiations are expected to be, a tied pub”.
That is a very loose definition. An individual might make a casual inquiry—even by telephone—about taking on a tied tenancy but may be without any serious intent, at least initially, of eventually signing up. However, the pubco does not know that when the telephone call is received. As such, under this wide definition in the new regime, it will have to go through considerable administrative procedures at some cost at this early stage.
My Amendment 93 would narrow the definition to people who are getting close to signing up and making an arrangement by inserting the words,
“who is party to negotiations which have reached the stage of a provisional trading agreement for the prospective tenancy of a premises which are, or expected to be, a tied pub ahead of any final terms of the agreement being agreed”.
This has the effect of requiring serious administrative effort to be made only once the tenant has shown himself to be of serious intent. It in no way weakens his position; it merely ensures that he is likely finally to take on a tenancy before he qualifies as a tied pub tenant, with all that that implies under the code. I beg to move.
Lord Newby
My Lords, I hope that I can reassure my noble friend Lord Hodgson on this point. Evidence from the Government’s consultation in 2013 and correspondence we have received from tenants shows that many such prospective tenants appear to have been given insufficient information, or have even been misinformed, by large pub-owning companies about the pub that they are negotiating to take on. The Pubs Code will ensure that prospective tenants receive the information they need to make a considered decision on whether the deal they are being offered is fair and right for them.
I completely understand the concerns that my noble friend raised. As he said, we clearly need to avoid the situation where any casual enquirer is entitled to all the code’s protections. That would be unnecessary and onerous for the pub companies. At the same time, we need to ensure that prospective tenants receive the information promised by the code early enough in their negotiations with the pub company to influence their decision. That is why we have carefully phrased Clause 67(1)(b) to restrict these rights to those who are,
“a party to negotiations relating to the prospective tenancy”.
If there have been no negotiations, there would be no right to the details. The pub-owning company would not be in breach of the Pubs Code for failing to supply them. We will consult on the code before it is finalised, which will allow us to ensure that we will draw the line in the right place, in a way that takes account of the procedures that different pub companies use to recruit and take on new tied tenants. I hope that that gives my noble friend the reassurance that he seeks.