Mesothelioma Bill [HL]
Lord Stoneham of Droxford Excerpts(11 years ago)
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Baroness Masham of Ilton
My Lords, I congratulate the Minister on his hard work on this Bill and I am pleased he understands what an awful condition mesothelioma is. It seems this condition has almost been written off as far as research is concerned. However, there are so many developments and advances in modern research that there should be research into all types of tragic conditions. There should always be hope. Research into one condition can often find a cure for another by chance. My noble friend Lord Alton of Liverpool explained the need for research so well. I hope your Lordships will support these amendments. It is good to see Ministers from two departments coming together. This is very hopeful. I support these amendments.
Lord Stoneham of Droxford
My Lords, I start by giving apologies from my noble friend Lord German who should be standing in my place today but is at a family funeral. I join in the praise for the two Front-Bench spokesmen for the dedication and commitment they have given to this legislation.
The amendment is worthy and I have admiration for the persistence of the noble Lord, Lord Alton. However, this is quite an easy target to win support for medical research and we have to question whether it is an effective amendment. All the evidence we have heard today suggests that it is not necessarily the lack of funding that is the problem but the lack of effective research proposals. That is what we should be addressing. If the insurance companies thought there was effective research to be supported, they would be the first to support it because it would reduce their liability. That is what we need to address. The Minister in his response should help us.
The other important thing is that this levy has been arrived at by negotiation and agreement. It is not a statutory levy that we are putting in place because we think that it is appropriate. It has been arrived at through agreement and negotiation. Are we saying that we have to start these negotiations again as we will be putting a supplementary payment on the people who have agreed to this levy? We need to know whether this will mean a serious delay to the legislation and its implementation. The Minister should give us answers to the complications that these amendments could cause. We are interested in getting the benefits into the hands of the families who have suffered from this disease.
We also have to ask what we are arguing over. What are the sums of money that we are arguing over? They do not seem to me to be very large. The Minister should therefore tell us—I am sure that he will in his closing remarks—what efforts the Government are going to make to meet some of the requirements for funding if we can find effective research.
This issue seems worthy and worth support and it is very easy to argue for it. But what is the reality and effect of the amendment and what sort of delay will it cause to this legislation? Those are the key issues that the House should be looking at this afternoon.
Lord Deben
My Lords, the noble Lord, Lord Howarth, made an important contribution to this discussion. As a former Minister, I understand precisely the difficulties in which Ministers find themselves, particularly in the medical area, because there are many diseases that are extremely distressing and which, when specifically singled out, can cause all of us to feel that we ought to do something about it. There are few as distressing as this, but there are others in parallel.
It may be that what the Minister has said so far is the right answer, distressing and difficult though it is, particularly in terms of the danger that arises if we start deciding politically which diseases are properly sought after and which are not; this is a dangerous area to be in. My problem is slightly different. I hope that, in his response, my noble friend the Minister will not rely on the Treasury argument of hypothecation. One of the disastrous themes in this country’s legislation is the refusal of the Treasury to accept that hypothecation is an essential part of sensible financial arrangements. Many things would be much better done if there was a clear connection between what people pay through tax and what happens.
I speak with an interest in mind, as a passionate believer in the environment. We will not get people to understand why they should pay congestion charges, for example, if the money is not clearly spent on reducing congestion. In other words, there needs to be hypothecation. I remember when I fought hard for and got the first hypothecated tax, the landfill tax, which few would now deny was very important. My noble friend the Health Minister remembers that as well as I do. It was a battle against a theology. I hope that, when the Minister comes to speak, he will do so in the terms of the noble Lord, Lord Howarth, and not in the terms of those who deny this kind of response—not on the basis of ensuring objective decisions by independent judgment, but on the basis that there is something inherently unacceptable about hypothecation.
If this country moved to greater hypothecation, it would be signally more democratic—although it might mean that the Treasury would have less opportunity to get its fingers on the money on its way to that for which it was needed. That is a wholly admirable aim: the effort to ensure that there is a link in the public’s mind between what they pay and what they get is an essential part of our democracy. I hope that, of all the arguments my noble friend uses, he will eschew that one. I would not like to be pushed over the edge to not support him because of the importance of upholding the fine principle of hypothecation.
Lord Browne of Ladyton
My Lords, I support this group of amendments. In the interest of the efficient use of our time I shall do so principally by adopting the arguments that have already been advanced by my noble friends in support of them, and will seek only to reinforce one point and augment another in relation to Amendments 5 and 6.
The quotations which my noble friend Lord Howarth deployed from the ABI’s brief come from the brief that the ABI provided to some of us—in a discriminating fashion, I recollect—in anticipation of the Committee stage on 5 June. On that occasion I deployed these very same quotations; I do not think that the noble Lord, Lord Howarth, had them at that stage. I made this point then, and I wish to repeat it: the ABI’s argument in relation to self-employed people seems to be, “This was a very small number of people”. I felt that that argument read that since we were leaving behind only a small number of people, we could be justified in doing so. I deployed the argument that that increased the injustice substantially and that extending the scheme to this very small number of people would have a very limited effect on the total cost of the scheme and on its administration. I also argued that it would be a deep and disproportionate injustice to leave those people behind because they were probably victims of the same negligence; they probably picked up the fibres that caused this dreadful disease in exactly the same workplaces as employed people did, but just happened to be working in them at the time. I repeat that point as there is some significant merit in it.
In relation to the group of people who are referred to in the Minister’s letter of 4 July as those who are infected by environmental or secondary exposure, there is a more compelling argument as to why these persons should be included in this scheme. It relates to the way in which public liability insurance and compulsory employers’ liability insurance—or employers’ liability compulsory insurance, which I think is its proper title—was sold historically. It may still be sold this way, but I know that it was sold in this fashion. I explored this argument in Committee—I am grateful to the Minister, who, in his characteristic fashion, addressed comprehensively in his letter those issues that he did not have a briefing to address in Committee—and I have now had it confirmed, from the information in the Minister’s letter, that it is right.
Almost invariably, employers’ liability compulsory insurance was sold in a package, with, among other things, public liability insurance. Consequently, it is invariably the case that the insurers, who carry the employers’ liability risk, also carry the public liability risk. It is the behaviour of exactly the same insurers, in either destroying their records or failing to be available to those who identified them as the insurers who carried these risks, that has caused this deep failure in the insurance market. Therefore, there is no difference in relation to the mechanism of insurance and its failure to provide compensation for people who have been exposed to environmental or secondary exposure, compared with those who were employed in the first instance.
It is almost incontrovertibly the case that were an employer to have been sued by the person who was exposed at the secondary level, that person would have been able to establish that they were owed a duty of care and that there was a direct causal connection between the exposure of their relative or loved one and their contracting the disease. Had they had somebody to sue, they would have been able to get compensation. If the employer does not exist and the insurer cannot now be found, they are in exactly the same position as the relative who was exposed to the fibres and carried them home. I made that argument, and from the way I read the very carefully worded letter from the Minister, that appears to be what his researchers have revealed: that this group of people would have been covered by public liability insurance and that almost invariably the same insurers would have carried that risk.
There is no argument, therefore, that has any merit, that those people who were in the category of secondary exposure should be excluded from this scheme. The opposite is the case. Given that exactly the same players would have been involved in the processes that caused their contracting this disease and dying from it, we should honour the experience they have had by including them in the scheme.
Lord Stoneham of Droxford
My Lords, I will comment on a number of issues to which these amendments give rise—and they are very sensitive issues. Any start date is arbitrary, and there will always be people who are caught by a start date, so whether it is 2010 or 2012, there will inevitably be feelings of unfairness. However, the earlier the start date, whatever the cost—perhaps the Minister will clarify the cost, but we were told it was £119 million, and if it is 70% of that it will come to £80 million—agreeing to that concession would cause a 25% increase in the cost of this scheme. Where is the money going to come from? Will it come from a new negotiation, or from reduced benefits and compensation for those who will receive money from the scheme? That question has to be answered by the movers of the amendment.
On the issue of coverage, there are obviously concerns about the self-employed and people from the same household, but are we saying that we are going to complicate this legislation and hold it up while we have an argument about public liability insurance versus employee insurance? That would be a recipe for severe delay. The great advantage of this legislation is that we have kept it simple and we have an agreement. It is a balancing act to get to that agreement and to get the legislation through so that it benefits the people who were in employment. Once this settles down, we could consider coming back to this—I hope the Minister will do so at some stage—and look again at how we might cover the self-employed and people from the same household, but if we start that discussion now we will be here until 2015 or 2016 before we have legislation to benefit the families for whom it is intended.
Lord Alton of Liverpool
My Lords, I will speak briefly to these amendments, in particular to support what the noble Lord, Lord McKenzie, argued in Committee and what these amendments call for today. We had a long debate on 5 June, in which I spoke at some length. The point I made then, which partly answers what the noble Lord, Lord Stoneham, has just said about the arbitrariness of dates, was that the original consultation period is surely the point from which this scheme should kick in, not the date of July 25 last year, the last day of the Session, when a welcome announcement was made that there would be a Bill along these lines and a scheme of this kind.
The consultation date of February 2010 is, for me, a seminal date. For those affected it represented a promise waiting to be fulfilled. The eligibility date should be at the commencement of the consultation. After all, the Association of British Insurers began the discussions at that time. It can hardly have woken up on 25 July last year, shocked at having failed to make contingency plans or reserves. Therefore, applying the date of February 2010 is the right and fair way to go about this. It is the date that people anticipated and expected. In law, as well, it is far more consistent. After all, there will be people who were diagnosed with mesothelioma during that period and it is important that they are accepted as part of this scheme.
I know that the Minister will not be in a position to share the legal advice that he has been given within the department, but we might well leave ourselves open to claims because of the consultation document that was issued and the clear indication that this scheme would probably begin from as long ago as February 2010, rather than 25 July last year. For those reasons alone, I am happy to support the noble Lord, Lord McKenzie.
Queen’s Speech
Lord Stoneham of Droxford Excerpts(11 years, 2 months ago)
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Lord Stoneham of Droxford
My Lords, I will speak about those aspects of the gracious Speech that support people saving for retirement and the important ongoing reform of state pension provision. Obviously, the focus of the coalition is to get the British economy back on an even keel, but we should not forget the important social reforms that it has undertaken, and those in the pension field are, in my view, outstanding.
Most of the pension objectives set out in the coalition agreement have been implemented: the triple lock for state pension enhancements; the review of the sustainability of public service pensions, which has largely been agreed; the raising of the state pension retirement age and the phasing out of the default retirement age; and the launch of auto-enrolment. Most of these policies were derived from the implementation of the pensions commission’s recommendations, initiated by the previous Government. The gracious Speech brings forward further reforms: a new single-tier state pension to simplify and create a fairer system designed to encourage more retirement saving; the increase of the pension age to 67 in 2026-28 and the formalisation of a permanent system for reviewing the retirement age in future; the reform of bereavement benefits; and the automatic transfer of smaller pension pots.
These are important reforms and they have benefited from the continuity and determination of our work and pensions ministerial team: Iain Duncan Smith, my noble friend Lord Freud and Steve Webb. It must be significant that they have been together for three years. They have apparently resisted efforts to break them up and are now getting into their stride, concentrating not just on getting legislation through but tackling the central importance of delivery on pensions and welfare generally in the second half of the coalition Government. I have been reading Jack Straw’s autobiography; I always like to understand how admirers of Liberal Democrats work and think. One of the examples he gives of not-so-good government is that the previous Government, in one nine-year period, had nine Secretaries of State for Work and Pensions. The coalition has learnt that lesson in the interests of better government, just as the Liberal Democrats have learnt the importance of discipline in coalition.
I agreed with every word that the noble Baroness, Lady Hollis, said on the single-tier state pension and social care. Fixing the single-tier state pension at the level for means-tested benefits will greatly simplify pension provision and end a system whereby 46% of pensioners currently rely on means-tested benefits while 33% of those entitled to claim do not do so. It also recognises the huge problem we have with pension saving and the incentives to save. In 2011, 30% of 35 to 64 year-olds made no pension provision. Activists in pension schemes fell from 12 million in 1967 to 8.2 million in 2011. It is therefore essential that the new single-tier pension will complement the auto-enrolment reform that is being phased in.
There will be transitional difficulties with the ending of contracting out, especially with the imposition of particular costs on defined benefit schemes. Legislation must provide for a statutory override that supports private sector employers coping with these problems. Steve Webb has clearly convinced the Prime Minister of his concerns. We should have confidence in his ability to guide us through these difficulties.
I was less in agreement with the noble Baroness, Lady Hollis, on her view that seems to resist the further raising of the state pension age. Some 33% of children born in 2012 are expected to live to 100. By all predictions, at least 95,000 of those reaching 65 this year will celebrate their 100th birthday in 2048. Longevity and active living are increasing. I agree with the noble Baroness that, in making decisions on raising the state pension age, we should consider the quality of retirement as well as its length, and also the social inequalities that arise in retirement. We need a formal process to arrive at consensus about what is the right and appropriate state pension age. I believe that that is what the Government are seeking to do.
It is also important that pension reform must lead us to encourage the easy transfer of small pension pots between pension schemes, but we must ensure that people are not transferring their pension pots to poorer providers. Now that these key reforms are coming into place, we need to concentrate on the protection of individual pension provision and the paramount need to maintain consumer confidence in investors and saving institutions. There remains strong cynicism and an enormous lack of understanding about costs and investment risk. This area has to be regulated and reformed to encourage more saving.
I hope that the Government and the regulators will look again at the whole concept of fiduciary duties of investors to ensure that they act only in the best interests of pension clients. We will need a culture of trust, confidence and respect in pension management. That must recognise that more people will be dependent on contract-based pension schemes, rather than of those such as NEST, which have had trustee basis for their governance. We have to continue to anticipate these problems so that our worst fears are never realised.
Taxation: Families
Lord Stoneham of Droxford Excerpts(11 years, 6 months ago)
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Lord Stoneham of Droxford
My Lords, I join in the congratulations for the noble Baroness, Lady Hollis, not only on this debate but on the leadership that she provides the House on forensic analysis and social concern. I am sad that I cannot be completely alongside her today on the issue before us. I would like to follow by setting some sort of economic and social context, following in the footsteps of my noble friend Lord Bates.
Although government is never easy, it is always exceptionally difficult when the economy is bordering on recession and there is an overspending deficit to clear up at the same time. We will never really know, but I suspect that without the formation of the coalition and a deficit-reduction strategy we could well have had turmoil in the markets and the IMF knocking on our door. Interestingly, that was precisely the scenario that our opponents in the general election said would happen with a coalition—but it has not happened.
As we look at the impact of tax and benefits changes on families, we therefore need an economic context for all the decisions being made—and the economic context has been dire. There has been a huge adjustment in living standards, with a fall of more than 7% overall since 2009. In fact there has been no growth in real income for the median income earners for a decade. This was inevitable when economic growth has been subzero. Households have not only had to bear the burden of the national debt reduction; they have also had to reduce their own personal household debt, following a decade of economic growth built on the shaky foundations provided by unsustainable huge growth in personal credit and debt.
The European meltdown and rising commodity prices, particularly energy, have compounded the economic impact of the UK recession. This has undoubtedly led to an adjustment of the Government’s deficit strategy—not to plan B, but actually to one which closely follows the strategy set out by the Labour Chancellor Alistair Darling. We will be very keen today to hear the views of the noble Baroness, Lady Sherlock, telling us where she will make the savings to replace the cuts that they oppose.
Two other points need to be made about the economic context, the first of which is on mortgages. The confidence in the Government’s deficit reduction strategy has led to the continuation of low interest rates. This has been critical to those families who otherwise would have been embroiled in debt repayment problems, negative equity and very severe impacts on family budgets. That was the scenario in the last recession in the early 1990s and it could easily have happened again if interest rates had moved up to 5% or 7%. Those with mortgages—and they are not simply the well off—have benefitted from those low interest rates. That should not be forgotten, and low interest rates must remain an important objective.
The second issue is employment. Growing unemployment is always the great fear associated with recession. We can look at the impact of benefits on family incomes but this assumes a static situation. In reality, the situation is very fluid. People move in and out of the labour market. Unemployment figures used to be explained to me as being like a bath: unemployment figures rise like water in a bath when the flow into unemployment continues; but the flow out of unemployment is plugged because the vacancies disappear in weak economic conditions.
This recession has been marked by a much better performance on employment at a time when the working age population has increased by 350,000 a year, more than we could have ever anticipated. There is nothing worse for an individual’s psyche than losing their job. Self-respect and purpose go with being in work. There will be arguments about the type of jobs being created. However, the figures show that there are 1 million more jobs in the private sector and the possibility of these jobs—whether full or part-time, permanent or agency—is encouraging and vital for families up and down the country, north as well as south.
This growth reflects incredibly well on our flexible labour markets. It has allowed adjustments to be made to keep people in jobs. It has created many new opportunities which otherwise would have been denied to people on the fringes of the labour market. It also undermines the arguments that say that our labour market is not sufficiently flexible and that there should be more attempts to increase flexibility, thereby undermining basic protection rights.
This leads to another point—that recessions are always bad things. It is why boom and bust is so damaging to the poorest and most vulnerable. They are the ones who suffer when the flows into and out of the unemployment bath move adversely. The poorest and less skilled and those who are less mobile will always bear the heaviest burden. That is fundamentally why putting the national economy on a secure path of growth is so important, and important to them. That is why sustainable growth must now be the overriding priority for the coalition.
However, despite the difficulties and the economic constraints that the coalition Government are facing they are also confounding their sceptics by a massive programme of social reform that will benefit vulnerable families. We are being, and will be, criticised for the tough decisions that we have had to make on work-related benefits. However, this criticism ignores the relative rise of benefits compared to the position for those who are reliant on earnings over recent years when real incomes have been falling. At some stage an adjustment was going to be on the agenda.
This action, however, is matched by action that will assist families. As we have heard today, the rise in the basic tax allowance by 45% in three years is unprecedented. Anyone on the minimum wage has seen their tax bill halved. The Labour Government gave a high priority to families through the growth of family credits. The coalition has prioritised pensioners, who would otherwise have been very vulnerable to energy prices going up, and whose incomes have fallen behind income growth. The triple lock meant that, last year, pensions went up by 5.2%, and will go up in April by 2.5%. It would have been much less under the previous Labour regime.
Action on current pensions is being matched by fundamental reforms on the single-tier pension and, in due course, in seeking to resolve the social care issue for the elderly which was left hanging by the previous Government. It has been a major worry and concern for growing numbers of families with elderly relatives that these issues have not been resolved. The wholesale reform of the welfare system will follow with the reform of universal credit. Who would have thought that a coalition could take on this issue—which James Purnell failed to persuade Gordon Brown’s Government to tackle because there were thought to be too many more losers than winners in a reform needed to simplify, target resources on the poor and reduce disincentives to work?
The noble Baroness, Lady Jenkin, mentioned William Beveridge. Today is the birthday of Lloyd George. I think that they would be justly proud of the scale of the reform that the coalition Government are undertaking at this very difficult time. Reform and change are always difficult. It is made even more difficult when money is short and there are insufficient funds to help oil the wheels of change. However, no one can say that the coalition Government are not seeking to combine economic competence with a social concern for fairness which is aimed at improving the outlook, security and well-being of families up and down this land.
Leveson Inquiry
Lord Stoneham of Droxford Excerpts(11 years, 6 months ago)
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Lord Stoneham of Droxford
My Lords, I am pleased to follow the noble Lord, Lord Lipsey, with whom I have shared a lot in my political career. I share his frustration at not having full copies of the report available. I have spent a lifetime in the regional and national press and I have joined the noble Lord, Lord Donoughue, on the roll of honour at News International. I am saddened by what Leveson has revealed about the ethics and lack of judgment shown by certain sections of the national press. We should be absolutely clear that it is only certain sections, though, and by no means the majority of journalists or editorial staff throughout our newspaper industry. Newspapers are never going to be popular institutions; I think that it was Lord Rothermere who said that every day he was publishing things that people did not want published. However, a free and responsible press is central to our democracy, warts and all.
A lot of points have already been covered in this debate, so I shall simply confine myself to three issues that concern me. The first, as noble Lords might expect, is the regional press. As the right reverend Prelate the Bishop of Norwich said, Leveson rightly gives the regional press a pretty good bill of health in terms of its working practices, its respect and support for the work of the Press Complaints Commission, its commitment to its local communities and the respect and trust that it maintains with its readers. We should remind ourselves, as Leveson does, that 70% of adults read regional press newspapers, compared with only 56.8% of adults who read a national daily.
One of the great sadnesses is that the national press is now taking fewer journalists from the regional press who have served a full apprenticeship. Nothing beats journalists living and working in the communities where every day they are meeting their principal readers. That provides the best training for ethics and appropriate behaviour. It is also a good thing to be working for editors who are tough and disciplined on standards, not simply getting the most stories out of people. Journalist training is one of the principal issues that need attention following Leveson. The regional newspaper industry remains, as Leveson said, and as several speakers have mentioned, under financial pressure in the cyclical downturn. This provides big issues for the vibrancy of our local communities. Above all, we must not saddle our provincial press, already vulnerable, with a bureaucratic and burdensome regulation regime that it does not deserve.
The second issue is the importance of independent self-regulation. Although I remain sceptical about statutory involvement in press regulation, I accept the need for fundamental reform towards independent self-regulation. I certainly welcome the work of my noble friend Lord Hunt of Wirral. Press regulation is being transformed under his proposals: it will be independent, it cannot have serving editors on it and it must have sanctions. It must also be resourced not simply to provide a complaints service but to audit governance and to conduct fuller investigations as required. In my view, the issues that have to be resolved are how to ensure that all titles are included and how to sustain the initial progress that the noble Lord is making and is going to make. I am attracted by incentives on the costs of civil litigation and an arbitration service to solve disputes, which will improve justice for individuals and assist publishers. If that is matched by a statutory verification process for publishers, though, the key issue is that the devil is in the detail; that will determine whether or not the proposals are acceptable.
The third issue is plurality. The noble Lord, Lord Donoughue, gave us an historical perspective of this and my noble friend Lord Sharkey has made a more specific analysis. Generally, the fact is that plurality as an issue is not getting the attention that it deserves following the publication of the report because the regulation of behaviour is getting all the public attention. We must not forget where we came in: but for Milly Dowler, the Culture Secretary was within days, if not hours, of agreeing that the same international company that had nearly 40% of our national newspaper market could also control the monopoly supplier of satellite broadcasting in the UK. Plurality is important because it has never been properly regulated. It has enabled an overpowerful, overdominant media owner to become too influential in all walks of our national life. Dominance breeds arrogance, as has been said, and arrogance has perverted the culture and the risk-taking, and indeed has probably encouraged criminal behaviour, in this powerful enterprise. They thought that they were untouchable. They had the politicians and the police in their pocket. It took the David of the Guardian and Milly Dowler to bring them down.
The noble Lord, Lord Donoughue, has told the story about Conservatives in power. Let me tell you what life was like under new Labour. A shocking experience for me was to attend the retirement party in 2003 of the editor of the Sun, David Yelland; in effect, it was the crowning party for Rebekah Brooks. Pretty much the whole of the Labour Cabinet, with the honourable exception of the noble Lord, Lord Prescott, was there that night. This was no respectful attendance for a colleague stepping into retirement; it was a more familiar, kissy-kissy celebration than I would ever have anticipated. This was a meeting for colluding friends, supposedly.
I went up to one leading Labour figure, who had been savaged in the Sun in only that past year. I said to him, “What on earth are you doing here?”. He shrugged his shoulders and said, “Ben, it’s one of the things we have to do”. It is ironic that the more people are close to power in this country, the more they feel that they must trade up to the powerful interests in the media. I am sure that the Liberal Democrats might even be tempted if this continued. The key must be not to have these powerful interests. Overdominance breeds contempt and arrogance in any market. It is strongly against our national interest, culture and democracy. Regulation in the interest of greater plurality must play a central part in the reforms following the Leveson report. It must not be overlooked.
Credit Unions
Lord Stoneham of Droxford Excerpts(11 years, 7 months ago)
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Lord Stoneham of Droxford
My Lords, I declare an interest as chair of Housing 21, a national provider of retirement homes, and as former chair of First Wessex housing group, which is heavily involved in supporting credit unions on the south coast.
I congratulate the noble Lord, Lord Kennedy of Southwark, on initiating the debate at a very timely period in the development of credit unions. I also thank the noble Lord, Lord Griffiths, for all the work and dedication he has given to social inclusion and the development of credit unions. I also congratulate the noble Lord, Lord Graham, on his speech and on his dedication and commitment to the co-operative and mutual movement.
I warmly welcome the initiatives being taken by the Government, led by my noble friend Lord Freud and the Minister of State for Pensions, Steve Webb, in building on the work of the previous Government on credit union development. We all know—we heard some of the figures this morning—that 1.4 million adults have no bank account; that 7 million people are using high-cost credit lenders; and that social exclusion and the disadvantage of not having access to bank facilities are big problems.
This comes at a time when, frankly, the clearing banks—I certainly welcome the suggestions and initiatives proposed by the noble Lord, Lord Griffiths—have been largely removing their risks and their unprofitable businesses so that they probably no longer have the day-to-day regional and local branch network contacts that they could develop into this market within their current structures.
We also know that pressures from the recession are contributing to social problems, with more changes of jobs, more part-time work, more uncertainty in households, more debt. Together with the changes in the welfare system, where we will have to confront the move to monthly universal credit, the changes in the discretionary Social Fund and the direct payment of housing benefit to individuals rather than to their housing provider, all these issues stress the importance of the work of credit unions.
If we look at the last decade, there has been a huge growth in the use of credit unions, which suggests that the market is large. I welcome the work of the project steering committee of which the noble Lord, Lord Griffiths, was a member; we must be aware in this debate of the problems it raised. The cost of the existing credit unions is too high, and as the noble Lord, Lord Griffiths, told us, they are not financially viable—unless there are changes. Their processes need modernisation; they are not currently fit for purpose. Many people simply have a lack of awareness about them and how to get in touch with them. However, we know that the market potential for credit unions—the noble Lord, Lord Griffiths, mentioned the figure of £7 million, which the working party concluded on—is very significant.
The Government are already pursuing a number of initiatives to follow up that report. They are raising the interest rate chargeable and allowing interest on deposits. They are welcoming a more flexible approach to extending areas of lending, recognising that these organisations will not be viable if we confine their activities to small, risky loans. The Government are also sensible in adopting a phased approach towards sustainable development.
Credit union development needs renewed impetus. It has problems of capacity and development potential; there are simply too many small credit unions. As a result, there are concerns about governance and competence. There is too little awareness in the market of what they can do, and their activities are too restrained. There is a danger that we will have very cautious regulation, when we should be encouraging them. I welcome the partnership between local authorities, the DWP and social housing providers, which is vital to the development of credit unions. These are key interested parties, and they have the most to gain from improving financial awareness, using banking facilities and helping people to better manage their debt.
There are a number of avenues, therefore, that provide a way forward. As somebody involved with housing associations, I certainly welcome a very strong link with housing associations. They could provide help with governance; they could get involved with the process of how rent is paid in the future, particularly with people who do not have bank accounts; and they could make appropriate investment in credit unions. They have an interest in doing so, to reduce their own debts. They have the resources. The best housing associations have a very strong social commitment, as well as being social entrepreneurs. Local housing associations, particularly ones that are regionally based, have a very important role to play in the development of credit unions. They should be using some of their funds to invest in and develop local credit unions in their areas. Local authorities will be central as well.
However, there has to be a greater size for credit unions; this is one of the areas we must encourage. The small, area-based credit unions need to move to a bigger scale, to the counties or the regions, to be viable and have the capacity to expand. To be sustainable, they must also expand their services; they simply will not be viable if they are concentrating on small loans, although that will be a major part of their work.
I welcome the proposed possible links with the Post Office, as one part of the banking offer. Many of these credit unions need the systems and the payment facilities to pursue their activities. The awareness of the Post Office—its strong brand—and its security will help to promote the use of those facilities. We must also encourage more volunteering from the financial sector. On the south coast we had people on secondment from banking and financial services. They are vital in understanding how to make loans, evaluate risk and manage the process. Such people need to be encouraged to come into the credit union sector.
We have to get the balance right between regulation and enterprise. We have to recognise that there will be failures in the sector. We have to protect those who could suffer through those failures, but that is inevitable when you are developing enterprise. However, we must ensure that the successes are greater.
Finally, I leave this thought with noble Lords: in many respects we are returning to an era of the previous century where a lot of people were involved in mutuals and co-operatives, developing services particularly for the poor, out of which grew major businesses and commercial enterprises. Sometimes society venerates the large entrepreneurs, the Richard Bransons and Rupert Murdochs, and gives them credit for building up million-pound businesses, but I recall the housing association I was first involved with, the Portsmouth Housing Association. That was started up by a vicar, Canon Bill Sargent, a very disciplined and determined man. He bought the first house for the housing association in 1972; in 2007 the business was capitalised at over £1 million and now it is part of a business several times that size. That is a huge achievement and these people need to be venerated as much as those who are involved in more publicity-conscious commercial enterprises. Local building societies, the Co-operative Bank and even some other banks started up through somewhat similar local initiatives in the 19th century and before, and they met a social need. Now we must find that combination of localism, meeting social need and social enterprise as we go forward.
Small Pension Funds
Lord Stoneham of Droxford Excerpts(11 years, 7 months ago)
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Lord Stoneham of Droxford
My Lords, I am very glad to follow the very informed contribution of the noble Baroness, Lady Hollis, whose remarks I completely agreed with, and the cross-party consensus of my noble friend Lord Patten, with whom I also thoroughly agreed. I congratulate the noble Baroness, Lady Greengross, on the timing of this debate—coming the week after the Government published their consultation document Reinvigorating Workplace Pensions. It is refreshing to have in government a Minister—my colleague Steve Webb—so committed to pension reform and with the confidence to pull the right levers in government.
One important lever has been to build on the cross-party strategy of the Turner commission, which has helped this Government to add to the Labour Government’s initiatives and to bring in the start of auto-enrolment, the restoration of the earnings link for state pensions, the abolition of the default retirement age and, of course, the commitment to the single state pension. As we start auto-enrolment, however, we have a huge problem of raising understanding and commitment to increased pension provision.
The noble Baroness, Lady Greengross, is right to raise the need for good advice for people with small pension funds. I agree entirely with what she so wisely said. However, I would like to widen the concern to three themes. Those themes are the need for much greater simplicity; the need for more education, ongoing communication and advice; and, most important of all, the need for trust.
Simplicity is essential to improve the understanding of pensions. The single state pension will do away with the confusion of pension credits, and restores incentives to save. The important power of inertia is being exploited through auto-enrolment and it will help to raise saving but, as the noble Baroness, Lady Hollis, was saying, the automatic rollover of small pots is essential to individuals needing to keep track of their savings to ensure that they do not lose out from duplicated high charges.
We have to recognise that the move to more defined contribution pensions increases uncertainty and the chance of misunderstanding on the eventual pension income that individuals will receive. They put additional burdens of decision-making on individuals who will not have the guidance of trustees. Somehow we have to demonstrate the underprovision for pensions when the actual pension outcome is so uncertain, compared with defined benefit schemes. The efforts of the Pension Minister to promote the concept of defined ambition pensions to provide more certainty and to encourage more risk-sharing is an important initiative. We also have to recognise the ongoing reliance of housing investment and ISAs on individual provision for pensions. It is wise for individuals to make provision through a number of means and we should encourage whatever individuals understand best and whatever they feel comfortable with.
Education was my second theme. A prime task is to get people to make greater provision for their pensions. There are three steps in the need for greater education. We have somehow to get people to recognise the need for pension provision early in their working careers. We have to improve understanding on how individuals can increase their pension income as retirement approaches, and appreciate particularly what fees and charges they are susceptible to. We also have to improve people’s understanding of turning pension pots into retirement income, which is critical.
Communication and advice are key elements in improving understanding. I congratulate the Minister, Steve Webb, on his big drive to make language in the pensions sector more understandable. The department’s own guide to language for auto-enrolment is very helpful. It is not fashionable to say it these days but we need more of the language of the Sun and the Mirror, rather than that of the Telegraph and the Guardian, to improve understanding among those who need the most advice.
Web communications and e-mails from the department, NEST and other pension providers should be targeted at the key stages of the life cycle which are so critical to pension provision—at the early stages of working life and the mid-career key stages, and at those preparing for retirement 10 and five years out, while there is still time to make adjustments. Government must have a big interest in encouraging greater provision because, if it is successful, it will ease the burden of old age on the state.
However, personally I worry about the multiplicity of providers, the ongoing apathy and the lack of understanding among the working-age population. Trust is a key issue. I am also concerned about whether competitive pressures and the habits of the financial services could lead to ongoing threats to trust, which it is so important to sustain. Mis-selling and the underperformance of investments will lead to a serious undermining of confidence and trust in pension provision.
Defined benefit pension schemes had trustees to safeguard pensioners’ interests, but defined contribution schemes are normally governed by contract rather than by a trust deed. In my view, the fiduciary character of the management of pensions should not be affected by this change. We need to strengthen the concept of stewardship and mutual confidence based on trust. The responsibility of agents in pension investment should be defined in a way that establishes and reinforces trust.
The noble Baroness, Lady Drake—I am sad that she is not with us today; normally she would be—and I tried on two occasions to strengthen the Financial Services Bill by proposing that the current FSA regulations should be strengthened to say that investment agents must act in the interests of their customers. It is too weak to say, as the regulations say at the moment, that:
“A firm must pay due regard to the interests of … customers and treat them fairly”.
It is also too weak to say that conflicts of interest must be managed fairly. The fiduciary duties of investment agents now need to be redefined and the recommendations of the Kay review need serious consideration by the Government at an early stage. Simplification, education, communication advice and trust are all essential elements in focusing awareness of pension provision, particularly for smaller savers. However, the greatest element must be trust, as without it we will not get the increase in saving that we need.
Universal Credit
Lord Stoneham of Droxford Excerpts(11 years, 8 months ago)
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Lord Freud
My Lords, we have a very substantial contingency prepared if, for instance, a disaster takes down our data centre—we have two data centres for that reason—and particularly if we have a cyberattack. We will have contingency built into the system to make sure that our payments systems do not go down because of these problems.
Lord Stoneham of Droxford
Can the Minister confirm that the Treasury is giving the fullest possible co-operation to his department on the computerisation of the universal credit system? In particular, are employers being sufficiently geared up to provide monthly pay information on their employees?
Lord Freud
My Lords, I am happy to confirm that the Treasury is whole-heartedly in support of this radical transformation of our welfare system. Part of the system relies on real time information through HMRC networks, and HMRC is driving ahead with a series of expanding pathfinders. It currently has 2 million employees or pensioners on the system today and is ramping it up into April and October next year.
Pensions: Occupational Pensions
Lord Stoneham of Droxford Excerpts(12 years, 5 months ago)
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Lord Stoneham of Droxford
My Lords, I am pleased to take part in the debate initiated by the noble Lord, Lord McFall, whose work on the Workplace Retirement Income Commission was timely. I thank him for his immensely valuable input to this debate. I agree with pretty much everything that has been said by the previous speakers. That underlines that real progress on pensions comes when there is genuine cross-party co-operation. The work of the Pensions Commission and actions initiated by the previous Labour Government and now taken on by the coalition, are the ones that will have lasting value.
I hope that this generation, benefiting from the last of the direct benefit pensions, will help prepare the next generation for the pension problems that they will have. Clearly, over the next five years we will have to concentrate on the introduction of auto-enrolment and NEST to attract the 6 million to 8 million people whom we want to bring into pension coverage. I think that it was the noble Lord, Lord Hutton, who said that stability is now absolutely essential. The one opportunity that this big change will give is that it will raise the profile of pensions and the need for us to make the case for people to save for them. It is important that we concentrate on doing this well, but there remain a number of ongoing problems that we need to look at for the future.
The pensions system remains incredibly complex with the two-tier state pension and all the constraints and conditions of auto-enrolment—the phasing in and the exclusions. Initially these will not help; they will confuse people, and we are going to have to work very hard to explain them. I hope that the Government will progress with their proposal for a single higher-rate basic pension, not least because 9 million to 10 million people will miss out on auto-enrolment. There has to be a greater understanding of the need for people to provide more for their retirement. We must plan ahead for the review of auto-enrolment in order to simplify it once it has settled in—removing the caps, looking at the thresholds and easing the transfers into NEST.
One fundamental problem with the system that we are going into is that the contributions are simply too low to provide adequate pensions for people entering retirement. We will soon have to examine ways of gradually raising, through phased increases, an auto-escalation of the contribution rates. We cannot do this initially but it will be important for the future.
Another problem is that we are introducing this at a very bad time. The impact of the recession, all the changes associated with student loans and the ability to raise the deposit for a house will all delay saving for retirement and make it much more difficult for people to prepare for their retirement. As a result, we are going to require far greater experimentation and flexibility in relation to savings vehicles to encourage flexible saving to support pension provision.
Governance and risk in occupational pensions is one area that we will need to look at very carefully. We can argue about what has caused the death of the defined pension scheme but the consequence is that it has weakened, and will continue to weaken, employer interest in pension provision. It is already having the effect of weakening contributions. I suspect that it is going to weaken interest in the governance of defined contribution schemes, and there is going to be less joint employer/employee interest in these schemes. Employers will be outsourcing it, if they can.
It will be very important for the Government to do everything they can to encourage experimentation with pension schemes. The end of the defined benefit scheme has meant that we have become very polarised: now, the employer is not prepared to take any risk and has handed it all to the employee. In some respects, that polarisation has gone too far. We need to move back to a middle way of experimentation where there is a sharing of risk in pensions.
The role of employers remains terribly important in pensions. Certainly, they have to provide a countervailing power if we want to get competitive rates for annuities, if we want to get the general level of charges down and if we want to take advantage of the benefits of scale in pensions. The role and interest of employers in the management of pensions is absolutely essential. We must not downgrade the importance of the employer.
Finally, there is the outstanding issue of tax incentives. I am sure that there will be an ongoing debate about reducing the inequities of the current tax incentives, which see the majority of the £28 billion of tax relief going largely to higher earners. There is an inequity here which certainly Liberal Democrats have been committed to ending. Some of this money could be better used in attracting more lower earners to the idea of starting the habit of saving for retirement, as well as paying for the higher state pension.
Welfare Reform Bill
Lord Stoneham of Droxford Excerpts(12 years, 6 months ago)
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Baroness Drake
The Bill sets the welfare rules for people who do not have a record of benefit dependency. In the national insurance contribution system, one is trying to design something that gives people a cushion. Sometimes it will be because they will be earning higher than the cap; on other occasions it is because of the nature of their accommodation. Either way, instead of having a cushion so that they can concentrate on getting back into work as quickly as possible, which it is clear most of them want to do, there is a danger that the immediate way in which the cap will operate means that they will have to take defensive measures to bring down their level of expenditure rather than putting all their efforts into finding a job.
Lord Stoneham of Droxford
My Lords, I have a lot of sympathy for the amendment of the noble Lord, Lord Best. It is largely about the transitional arrangements, on which we are still working towards having more information. It would be helpful if the Government could spell out exactly how they are going to deal with the problem of the flow after April 2013—because everyone will have a year’s transition. If they become unemployed after April 2013, they will in certain circumstances be hit by the cap. I think that there is some sympathy in the House for people who have not had a history of benefit dependency. We are not trying to achieve behavioural change with them. How are we going to help them back into work when they are suddenly faced with high housing costs and a cap being imposed on them?
In our debate on children, insufficient attention was given to the fact that one of the biggest problems is the differential in housing costs between certain areas. Fortunately, those who have the highest housing costs will normally be in areas where they are likely to get a job quickly, rather than in areas where housing costs are lower. Even so, it takes much longer to get a job these days, particularly in this market, than it has in the past. People need some help with that transition.
We need more information from the Government on the transitional arrangements, which we on our Benches are concerned remain imprecise. This particular issue highlights that.
Baroness Hollins
My Lords, I shall speak to Amendment 60A, which is perhaps slightly oddly grouped with the amendments proposed by my noble friend Lord Best. The amendment would prevent carer’s benefit claimants being subject to the proposed household benefit cap by exempting households including a carer’s allowance claimant and carers in receipt of the carer premium in universal credit.
There can be no doubt about the contribution made by carers in unpaid care—indeed, there was considerable discussion about this at a previous stage of the Bill and last week. Their contribution has been valued at some £119 billion by Carers UK and is of immeasurable value to the people they care for. Peers from all sides of the House have recognised this contribution with personal accounts of experiences of caring and moving stories from families struggling in what are often very difficult circumstances.
Carers’ contribution and the challenges they face set them apart as particularly deserving of support from the benefits system and as clear candidates for exemption from a cap which the Government have said is designed to penalise individuals who are failing to play a full part in society.
Energy: Winter Fuel Payment
Lord Stoneham of Droxford Excerpts(12 years, 7 months ago)
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Lord Freud
Yes, you can keep your winter fuel payment only if you go to another European country, so if it is being obtained by someone in Trinidad, the noble Baroness might make a call to Crimestoppers or someone.
Lord Stoneham of Droxford
Does not my noble friend agree that it would be fairer to tax the winter fuel allowance and use the money to ease the burden of his housing benefit reforms?
Lord Freud
My Lords, clearly, one can look at how one treats this, but essentially it is a simple payment. It is one of the universal payments to pensioners along with the state pension, additional pension and passported benefits such as NHS prescriptions. That is how it is designed. It would be rather complicated and expensive to tax it.