Wealth Inequality

Debate between Lord Newby and Lord Naseby

Wednesday 21st January 2015 Lords Chamber

[Lord Naseby (Con)]

My Lords, is it not time that some of our leading charities set about solving the problems they were set up to solve rather than getting involved in financial lobbying and somewhat dubious forecasting? Does my noble friend agree that, looking at what the British Red Cross and Médecins Sans Frontières do, they are the blue chips of our charities, and perhaps some of our other large charities could follow the example that they have set?

[Lord Newby]

My Lords, the advocacy role of Oxfam and other charities is extremely important. The list of proposals in the report we are debating includes issues such as promoting women’s economic equality and women’s rights. Those goals are shared by all international development charities, which do a very useful job in bringing these important issues to wider public attention.

Financial Services: Cold Calling

Debate between Lord Newby and Lord Naseby

Monday 17th November 2014 Lords Chamber

[Lord Newby]

My Lords, the easiest way to ensure that people do not get that plethora of calls is for them to sign up to the Telephone Preference Service, which will mean that they do not get the bulk of calls coming in. As far as the potential mis-selling of pensions is concerned, the FCA has a very wide remit and toolkit to deal with any potential mis-selling, and I know that it is working very hard in this area.

[Lord Naseby (Con)]

Is my noble friend aware that there is something wrong with the Telephone Preference Service, in that numerous calls are made to, I suspect, every Member of your Lordships’ House from overseas, and even from the UK, extensively for financial products, and is it not time that Ofcom and the FCA sat down together, with the help of government, to try to tighten up this whole area?

[Lord Newby]

My Lords, the regulation of cold calling is split between the FCA, the Information Commissioner’s Office and Ofcom. The Nuisance Calls Action Plan was issued by the Government earlier in the year, one of the key parts of which is to bring these components together and to work with equivalent bodies in other parts of the world from where people make cold calls. In addition, a consultation is currently under way, which recommends that it should be much easier in future for the Information Commissioner’s Office to take action and to enforce penalties against people who are breaking the rules.

National Savings and Investments

Debate between Lord Newby and Lord Naseby

Tuesday 14th January 2014 Lords Chamber

[Lord Naseby]

To ask Her Majesty’s Government what assessment they have made of the impact of the introduction of a new computer system at National Savings and Investments.

[Lord Newby (LD)]

My Lords, National Savings and Investments has been moving customer accounts and investments to a new banking system. That follows a major review which concluded that upgrades were necessary to modernise and simplify NS&I products. It will enable products to be managed online, by telephone or post and ensure long-term customer satisfaction. NS&I recognises that a small number of customers may be frustrated, as is often the case during any such period of change, and has taken measures to ensure that customers understand the reasons for its actions.

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[Lord Naseby (Con)]

My Lords, will the Minister explain why the NS&I cannot be like every other investment house and send to investors, without asking, a half-yearly statement which lists their holdings and the value of those holdings, plus such transactions as have taken place in the previous six months, and eventually produce a total value of all their holdings?

[Lord Newby]

My Lords, I think the correct analogy with NS&I is with a bank or building society, where common practice—this is what NS&I is moving towards—is that people get a statement on the anniversary of when they took out savings and that customers are able to look online for a comprehensive statement of all their various policies and holdings.

Banking: Co-operative Bank

Debate between Lord Newby and Lord Naseby

Wednesday 30th October 2013 Lords Chamber

[Lord Newby]

My Lords, I think the merger with the Britannia Building Society was one of the material causes of this problem. I cannot comment on what the regulator may have said. Generally, where banks of all sorts have sought to make large acquisitions and they have then gone wrong, the principal responsibility for due diligence rests with the management of the bank involved in the takeover. The role played by the regulator, whatever its scale, does not detract from the fact that responsibility for major corporate decisions of that kind lies primarily with management.

[Lord Naseby (Con)]

Will my noble friend confirm for all of us who believe in mutuality and are sorry that the Co-op Bank has got into its current situation—I believe that mutuality is supported by both sides of the House—that when the new owners have got the bank onto a stable footing and making a profit they will possibly return it to mutuality?

[Lord Newby]

Well, my Lords, that is possible but, as noble Lords know, the sad truth is that the process has tended to be something of a one-way street with regard to mutuality. When mutuals have ceased to be mutuals, they have tended to cease to be mutuals for good. Still, one can always hope. I should also have mentioned the raft of provisions in the banking reform Bill to bring building society legislation up to date and make it easier for them to compete in the marketplace.

Financial Conduct Authority

Debate between Lord Newby and Lord Naseby

Tuesday 15th October 2013 Lords Chamber

[Lord Naseby]

To ask Her Majesty’s Government whether the Financial Conduct Authority has the authority to assess and monitor consumer finance products and anticipate their compliance with the law and the likelihood of their mis-selling.

[Lord Newby (LD)]

My Lords, the Government have granted the Financial Conduct Authority a product intervention power to protect consumers. This power allows the regulator to mandate, restrict or ban certain features of a financial product, restrict a product’s sale to certain groups of consumers or ban a product outright. This power will extend to consumer finance products when the Financial Conduct Authority takes on responsibility for regulating consumer credit next April.

[Lord Naseby (Con)]

My Lords, that announcement is very welcome, although the delay to next April is one that I do not particularly welcome. Does the Minister recall that the FSA under its watch allowed PPI to happen, costing the banks that mis-sold it well over £1 billion and allowed CPP to sell credit card identity insurance, costing millions of pounds? Although this new body is set up, is it not worrying that the Consumer Panel has yet to meet? Can we have an assurance that practitioners of retail financial services will be on that panel, not least because the retail distribution review is now in force and there will be increasing numbers—millions of our citizens—investing in financial products without taking third party advice?

[Lord Newby]

My Lords, I am sure that the FCA is well aware of the need to have a Consumer Panel that is as broadly based as possible. It is important to recognise that the FCA now has significant new powers: the product intervention power, the ability to ban products and powers to disclose details of warning notices, for example, as well as a power to take formal action against misleading financial promotions and disclose the fact that it has done so. It has more teeth, and all the evidence so far shows that it intends to use them.

Public Service Pensions Bill

Debate between Lord Newby and Lord Naseby

Monday 21st January 2013 Lords Chamber

[Lord Newby]

My Lords, the noble Lords, Lord Naseby and Lord Stewartby, are concerned that Clause 31 as currently drafted creates ambiguity and could have a wider interpretation than is intended. I will seek to put their minds at rest and in doing so answer the two questions raised by the noble Lord, Lord Naseby.

I hope I can reassure the noble Lord that the clause as drafted does not provide for a wide power to amend accrued rights under the relevant schemes. The power provided for in the clause is actually very narrow and the disregard for the accrued rights protections in CRAG applies only to this very narrow provision. The power simply allows those responsible for the schemes to amend them to create a link between normal pension age under the scheme and state pension age, which would apply to benefits accrued from the point the amendment takes place. That is to say, once that link is in place any increase in state pension age will increase the normal pension age, but only for those benefits accrued after the creation of the link. That is the key point. The clause does not allow for changes to the indexation arrangements for deferred members, sweeping changes to the death in service benefits or removal of the final salary link. All these areas will continue to have the same level of protection under Schedule 6 as now.

I believe that the phrase,

“(as well as other benefits)”,

in the clause is of considerable concern, as the noble Lord, Lord Naseby, said. I should like to put on the record the Government’s view that this phrase does not open the door to a wider interpretation of the benefits that could be subject to the state pension age link as a consequence of this clause. It is important to include this phrase, so it is clear that the clause does not reduce the power the scheme already had to change the normal pension age for benefits that accrue after the change. However, it is also clear from the current drafting of the clause that the only accrued benefits that come within the new power are “relevant” accrued benefits, as defined in new paragraph 29A(3)(d). I hope therefore that the noble Lord will find sufficient comfort in what I have said to be able to withdraw his amendment.

[Lord Naseby]

I am most grateful to my noble friend for listening to the propositions and concerns that we had. I think his answers were very helpful. Certainly, I would like to study his reply very carefully after Committee stage, and if necessary return on Report, but I hope that will not be necessary. At this stage, I beg leave to withdraw the amendment.

Public Service Pensions Bill

Debate between Lord Newby and Lord Naseby

Wednesday 19th December 2012 Lords Chamber

[Lord Newby]

My Lords, this Bill offers a rare opportunity to introduce primary legislation that pulls together a new common UK legal framework for public service pensions, and it is right and necessary that we do so. We must have public service pensions legislation that is fit for purpose and ensures that those who commit their careers to delivering our valued public services continue to receive guaranteed benefits in retirement that are among the very best available.

However, we also have an obligation to ensure that these generous arrangements are provided on a fair, transparent and sustainable basis. This Bill is based on the recommendations of the independent Public Service Pensions Commission, which was chaired by the noble Lord, Lord Hutton of Furness, who I am delighted will be taking part in the debate today.

In June 2010, the noble Lord accepted an invitation from the Government to conduct a fundamental structural review of public sector pension provision and to make recommendations on pension provisions that would be affordable in the long term, fair to both the public service workforce and the taxpayer and consistent with the fiscal challenges ahead, while protecting accrued rights. This Bill fulfils the Government’s commitment to bring forward fundamental changes to public service pensions based squarely on his recommendations.

I thank the noble Lord, Lord Hutton, for his significant role in bringing about these important reforms. His recommendations mark an important milestone in the history of public service pension provision, and we are extremely grateful to him for having undertaken this somewhat thankless task. I must also thank those in the other place for their work on the Bill to date.

As was made clear on Report in the Commons by my ministerial colleague the Economic Secretary there are some areas in this Bill that we are reflecting on further, following representations made in another place. For example, we are looking at the best way to reflect our commitment to member representation on scheme boards and at how personalised information is provided. As for the powers that would allow scheme managers to make retrospective changes to schemes, I am aware that this is an issue about which many feel uncomfortable and that the Delegated Powers Committee has also expressed concerns. The Government are considering their response to the Committee’s report, and we will return to that matter.

As we begin our consideration of the Bill, we must not underestimate the importance of what it is trying to achieve. We are in a world where people are living longer. While this is obviously an extremely important and welcome trend, we must face the consequence of this improvement on the costs of providing public service pensions. As well as looking at how to keep the increasing costs under control, we must also consider the fairness of the arrangements. I hope and believe that the Bill gets this important balance right.

The Bill is in one respect rather curious, in that many features of public sector pension schemes are not covered in detail. They will be set out in detailed scheme rules which will eventually come before Parliament in the form of negative resolution statutory instruments. What the Bill does is provide an overarching framework for all public service pensions schemes. This is not a new approach. The Bill before us today supersedes the Superannuation Act 1972, which followed the same principle. The reason for this is simple: detailed pension schemes are extremely complicated, will vary between different parts of the public sector and will need in some respects to change over time. They are much better suited to secondary legislation.

This inevitably means that many of the most important aspects of the schemes—for example, the accrual rates and the revaluation rates—are not in the Bill. The key principles which underpin public sector pensions and the way in which pensions schemes will be determined are, however, covered by the Bill, and I should like to turn to some of its principal provisions. However, I stress at the outset that the Government intend that public service pensions continue to set a high-quality benchmark and one to which many in the private sector could usefully aim.

The Government intend that public sector pensions should continue to be based on defined benefits. For many years, these have been based on an individual’s final salary. This has had a degree of inequity in that, per pound contributed to the scheme, those on high final salaries have received a greater return in terms of the pension that they have received. This Bill proposes that members’ benefits should be calculated on a fairer basis; namely, on an individual’s career-average earnings. By following this approach, low earners will no longer be expected to subsidise the benefits of higher earners.

The Bill links normal pension age to state pension age for most members. This will automatically track changes in longevity and protect the taxpayer from the associated cost risks. Historically, improvements in longevity have not been well managed, and the failure to do so in a timely manner has represented the single biggest risk to the future affordability of these pension schemes. The establishment of the link between public sector and the normal state pension age addresses this problem. As an exception to the link, a normal pension age is set at 60 for firefighters, police officers and members of the armed services in recognition of the unique characteristics of those public servants’ work. We want to be sure that these normal pension age provisions remain appropriate, which is why the Government intend to review the provisions as and when the state pension age changes. This will ensure that a consistent approach to pension age policy is taken across government as a whole.

Of course, normal pension age does not represent the age members must work until; rather, it is a point on which to base the calculations. Members can choose to retire earlier or later if they wish and, should they decide to do so, a fair adjustment will be applied to their benefits. The same principle applies in other pension arrangements—it is built into annuity rates, for example—and it is right that it applies to public service pension arrangements, too.

In addition to the longevity link, the Bill includes provision for an employer cost cap which will provide additional protection against unforeseen changes in the cost of public pensions. If the cost of a scheme rises, the scheme rules must set out a process for agreeing how they can be brought back under control. The cap may well in practice not be breached, but if it is, the Bill provides for a clear way of dealing with what could otherwise be an unacceptably high cost to taxpayers. In effect, the employer contribution to the scheme is being fixed within specified margins. Any change beyond those will result in benefits or member contributions being adjusted to bring costs back under control. Details have been made available in the House Library regarding the practical application of the cap and the Government’s intentions around the valuation procedures to be followed in the new schemes. These are new and important elements of the Government’s policy, and I hope that these papers provide useful clarification to the House.

As I said earlier, I emphasise that this Bill is not just about fairness to taxpayers; it is also about fairness to scheme members. This is why we propose transitional arrangements for members of most schemes who have less time than others to adjust their retirement plans. Those who were 10 years from their current normal pension age on 1 April this year may continue to accrue benefits on their existing terms; their pensions will be unaffected by the Bill—

[Lord Naseby]

I apologise for making an intervention, and I must declare an interest as a trustee of the Parliamentary Contributory Pension Fund, but I would like to tell my noble friend that in Committee I shall be moving an amendment to Clause 31, concerning the rights of the members of the PCPF and their appropriate protection in legislation. The Bill, as currently drafted, casts doubt in that it could be read as enabling IPSA, in relation to MPs’ future pension provision, to break the link between members’ accrued benefits and their final salaries. I wish to place that on the record.

My understanding is that we are going to have the Committee stage pretty soon after we come back. I hope very much that my noble friend and I can have a discussion on that amendment before we come to the Floor of the House.

[Lord Newby]

My Lords, I am very happy to have an early discussion with my noble friend and look forward to debating any amendment that he may wish to bring forward.

As I was saying, we want public pension recipients to be reassured that, as a result of the provisions set out here, the new schemes will be administered and governed as effectively as possible. The new open scheme arrangements will ensure greater accountability and transparency through a common approach, an approach that will be independently overseen by the Pensions Regulator. The Bill builds on the regulator’s existing role and powers in relation to public service schemes and, as far as is appropriate, mirrors the existing approach to other occupational pension schemes. The regulator’s new powers will help public service pension schemes deliver good standards of administration and governance, ensuring that scheme costs and risks are understood and managed effectively.

All these changes demonstrate that the end of the current benefit arrangements and the creation of these fairer, more sustainable pension schemes are the right and proper way forward. It is right that public service pensions continue to set a good-quality benchmark for the private sector, and a race to the bottom in terms of pension quality must be avoided.

A consistent approach across schemes regarding consultation processes and the application of financial directions from the Government will also mean that members see unprecedented certainty about how their pensions are handled. It will no longer be the case that a member in one scheme can look over to another public service workforce and marvel at the myriad different quirks and anomalies within the scheme rules. There is some scope for variation to suit the needs of each workforce but, as the noble Lord, Lord Hutton of Furness, recommended, this is a common framework which brings all these schemes together under one legislative umbrella.

We have said that we hope and expect that the new schemes that will be drawn up under this Bill framework will last for at least 25 years. Of course, no Parliament can bind its successors, but we have included in the Bill enhanced consultation procedures, both with those who would be affected by any significant changes and with Parliament, to ensure that there is a high hurdle to be cleared before any such changes could be made.

The approach we are following will apply across all public service pension schemes, including smaller public body arrangements. We are aiming to reform the pensions in those bodies by spring 2018, and there will be no exceptions. This is why I am pleased that the Northern Ireland Government have indicated their intention to maintain parity with the changes set out in this Bill when they bring forward their legislation. Likewise, I hope our colleagues in Scotland and Wales will follow suit for the handful of schemes where competence for pension legislation sits outside Westminster.

Finally, we have also taken the opportunity of the Bill to reconsider whether certain generous historical entitlements remain appropriate in the modern age. The Great Offices of State pension arrangements, which apply to the Prime Minister, the Lord Chancellor and the Speaker of the House of Commons, give unusually generous pensions to these office holders. The scheme will now be closed to new office holders. Future holders of these positions will be entitled to a scheme that is the equivalent of those available to Ministers, thus ending this historical anomaly.

In conclusion, I believe that the package of measures contained in the Bill will fulfil the legitimate and worthy aim of bringing about long-term structural changes that are in the best interests of members, employers and other taxpayers. This is sound, reforming legislation, which I hope will continue to command cross-party support. We must, however, get the detail—

Taxation: Avoidance

Debate between Lord Newby and Lord Naseby

Tuesday 11th December 2012 Lords Chamber

[Lord Newby]

My Lords, HMRC does indeed estimate that the tax gap in 2010-11 was £32 billion, which represents 6.7% of total tax due. The tax gap as a percentage of tax due has fallen from 8.2% since 2004. It is not good enough but it is going in the right direction. The absolute determination of the Government to bear down on this was evidenced by the decision we took last year to divert £900 million into this area, which has since been supplemented by an additional £77 million to increase the specialist abilities within HMRC to deal with some extremely clever advisers and companies that seek to minimise their tax.

[Lord Naseby]

My Lords—

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[Lord Naseby]

Why does HMRC not take action a bit nearer home and look at the smuggling into this country of cigarettes and tobacco? The percentage for this is still 20% to 25%, denying retailers and the trade a normal profit margin and ensuring that cigarettes are cheaper and easier for young people to take up. That percentage has not changed for the past three years.

[Lord Newby]

My Lords, tobacco smuggling is a significant issue but in the overall quantum of tax that is currently not paid but should be, it represents a relatively small proportion.

Child Trust Funds (Amendment No. 3) Regulations 2010

Debate between Lord Newby and Lord Naseby

Monday 19th July 2010 Lords Chamber

[Lord Newby]

My Lords, over the coming months and years a series of public expenditure cuts will no doubt come forward that will make people on these Benches feel extremely uncomfortable,. This, however, is not one of them. We opposed the introduction of child trust funds at the start, before there was a financial crisis, for a number of reasons that in my view have not been seriously undermined by the experience of the child trust fund programme.

First, we were very sceptical of the programme because we felt that it was poor value for money. We felt that the principal beneficiaries of it would be middle-class parents and middle-class families who saved every last penny they could tax free, and that the poor—because they were poor—would not be able to add to the programme. As the noble Lord, Lord Liddle, said, poor children will undoubtedly end up with a nest egg aged 18, but middle-class children will end up with a big nest egg aged 18 because their parents will have taken advantage of very significant tax breaks. This view has been borne out by the take-up of child trust funds in constituencies. In the poorest constituencies, 40 per cent of parents have not even exercised their option on where the trust fund should go, far less put any money in it. Therefore, our view was that the scheme was not such a wonderful measure in reducing wealth inequalities—far from it, as the wealthy were the principal beneficiaries.

Secondly, it always seemed to us implausible that this scheme would somehow inculcate a savings culture among young people as young people were not saving. The Government were saving on their behalf and in a minority of cases their parents were also saving on their behalf. Why would that inculcate a savings culture in a 10, 12 or 15 year-old? Many children will simply be unaware of the scheme as they are not putting anything into it; they are passive beneficiaries of it. Therefore, I do not believe that it inculcates a savings culture, nor do I see how, in itself, it helps improve financial literacy.

The third issue we have with this flows from that. I am a great supporter of thrift. When I was a boy, my parents practised it and encouraged me to practise it. However, the thing about thrift is that you save up and forgo something now so that when you get the benefit of it at a later date, you value it because you know that it has cost you something in terms of consumption forgone. The problem with this scheme is that there is no link between the contribution and the benefit which you achieve aged 18. Noble Lords have said that 18 year-olds will use a nest egg they are given for all kinds of worthy purposes and that it will be used to help their education. On an earlier occasion, a noble Lord from the Labour Front Bench suggested that 18 year-olds might use this nest egg to put down a deposit on a house. I do not know whether my experience of 18 year-olds is totally different from that of other noble Lords who have spoken but, frankly, I do not believe that the mentality of most 18 year-olds—poor or affluent—is to take a nest egg to which they have not contributed and use it for long-term savings and benefits. To me, that goes against the grain of human nature and nothing that I have seen in my experience of 18 year-olds suggests that human nature has suddenly changed.

The strongest argument for child trust funds is that it must be in the interests of society for parents to save funds so that their children can be helped when they have more requirements. At the moment, parents can save £5,100 tax free in an ISA, which can then be transferred to their children at age 18, or whenever, to benefit them. If the money is transferred in that way, I suspect that the relationship between the parents who have saved the money and their children will mean that it is more likely to be used for a positive purpose. The tax free ISA limit of £5,100 is far beyond the savings capability of a family on a median income. It offers plenty of scope for parents who have a desire to save for their children to do so already. There may be an argument for marketing ISAs which may eventually be used to provide a nest egg for children, but the benefit in terms of taxation is already there in ISAs, and the child trust fund, almost by definition, can be of additional benefit only to parents who have enough money to put not only into an ISA but into a child trust fund. That is not the cohort of parents who the proponents of child trust funds—

[Lord Naseby]

If the noble Lord’s argument was valid, why do 12 per cent of families contribute to ISAs, whereas contributions to child trust funds cover 30 per cent of families?

[Lord Newby]

My Lords, that is why I was saying that I thought that within the ISA wrapper, a marketing campaign directed at parents who wanted to save for their children could be extremely effective.

We opposed the child trust fund from the start. We oppose it now and we hope that the Government waste no time in bringing forward the primary legislation to finish it off.