Universal Credit and Welfare Reform

Richard Graham Excerpts

Tuesday 11th September 2012 Commons Chamber

[Richard Graham (Gloucester) (Con)]

I begin my contribution to this important debate with a letter I received in 2007 from the ancient ward of Kingsholm in my constituency, where the Domesday Book was commissioned, and which is today home to Britain’s finest rugby club. The letter was from a young mother who wanted to return to work. She had been offered a part-time job and had done some detailed calculations, which she shared with me, and which showed conclusively that she would be about 10% worse off in work than she was on benefits. She wrote: “The system appears to have been designed to make sure that I should never work again,” and added for good measure that, “the depressing thing is that this letter will make absolutely no difference at all.”

My reply at the time was that the situation my constituent described was morally wrong. I said I hoped that if my Government were given the chance, we would act to change things, and that one day I would be able to say to her, “We have made sure that work pays.” I still have her letter, and I hope to have the chance to write to her in due course to say that our dream has come true.

The motion could not be further from that dream. Indeed, although the shadow Minister, the right hon. Member for Birmingham, Hodge Hill (Mr Byrne), said in introducing the debate that we all want work to pay, it was not clear to me that his heart was really in it. It sounded as if he rather hoped the scheme that the Conservatives and Liberal Democrats have worked so hard on would end in tears, or, as he put it, that it would descend into chaos—an inferno of incompetence that he awaits with some relish.

It was ironic to hear a call from the right hon. Gentleman to “dial up the competence”. After all, his Government designed the most complex benefits system in the world, and he left office apologising that there was no money left. He also reverted to form in calling for yet another play on the bankers’ bonus as a solution to the problem. I have said before in the House that he is an outstanding salesman of the absolutely unsellable policy of his party’s refusal to back any cap on benefits. This time, however, he has been pushed forward as a salesman without a policy. He simply attempted to rubbish and decry arguably the most important policy that the Conservative and Liberal Democrat coalition is proposing, which, sadly, his party was unable to construct during its 13 years in office.

If any hon. Member wishes for proof of that, I can offer a conversation that I had more than two years ago with Lord Freud, the Minister with responsibility for welfare reform. I asked him: “What is the difference between the work you did as an adviser to the previous Government and the work you do as a Minister?” He said, simply, “The most important difference is that whereas the previous Government talked about reform, this Government will deliver it.”

The motion contains several main criticisms of the work being done by my right hon. Friend the Secretary of State and his ministerial colleagues. The first is that universal credit is late and over-budget, but we have heard a convincing rebuttal of both accusations. For example, the roll-out of the pathfinder starts next April and more widely in October.

The second accusation is that there is widespread unease surrounding the implementation of the £2 billion IT project. I asked about this when a member of the Work and Pensions Committee and since then I have asked questions of the contractor and the Department, and I will go on doing so because there is no room for complacency. Again, though, the accusation of widespread unease is a bit rich—or perhaps the Opposition have realised that the situation with the £60 billion national NHS IT project that went so disastrously wrong under the former Government should not be repeated. On that, I am absolutely with the right hon. Member for Birmingham, Hodge Hill. We must ensure that the project is successful, and I am sure that Ministers are listening carefully.

Thirdly, the motion accuses the Department of creating such a bad design that it reduces work incentives. It has been designed to do precisely the opposite. Above all, the project is designed to provide strong incentives for everybody to return to work. It is not poorly thought out and there is no serious risk of it descending into chaos. It will affect 8 million households, lift 900,000 individuals out of poverty and reduce 30 complex benefits into something that even the humblest citizens advice bureau can understand and explain to the many constituents of ours who visit them. This is a vital project that we all should back. The impact of its not succeeding would be too awful for us to consider. Universal credit is the right thing. It is a noble goal and deserves our support, and my constituents will back it strongly. In particular, the woman who wrote to me in 2007 deserves a reply. That means that the motion should be soundly defeated.

[Several hon. Members]

rose—

Oral Answers to Questions

Richard Graham Excerpts

Monday 25th June 2012 Commons Chamber

[Mr Duncan Smith]

I see that the Opposition have discovered one word that they can now all say because it is not too long for them: shambles. The only shambles that we see is what is going on on their Front Bench. The reality is that we did not persist with the two-week work experience programme because all the young people told us that it did not work—they needed more time. That is what you do: when you hear the truth from people who need your support, you act on it, like we did, and give them that extra time.

[Richard Graham (Gloucester) (Con)]

7. What recent discussions he has had with his EU counterparts on the influence of the European Commission on UK social security policies.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

I continue to have concerns about the efforts of the European Commission to increase its influence over the social security policies adopted by national Governments. I am working closely with European colleagues to resist encroachment on our national welfare systems, and last week met with some of them to discuss this. I am determined that social security should remain a national matter, and will continue to resist efforts by the EU to interfere.

[Richard Graham]

I am very grateful to the Minister, who has almost answered my question. Does he share my view that social security policy should be left entirely to member states, and what does he believe that we can do in practice to ensure that that is the case?

[Chris Grayling]

I think that it has to be overwhelming pressure from member states. The Austrians, for example, are now facing a case in the European Court that would have a similar impact on them as the court cases we are facing in this country. I increasingly find that other member states are recognising that this is a problem. The best way for us to deal with it quickly is to work together to get the Commission to rethink policy totally on this front and to do what member states believe is right.

CPI/RPI Pensions Uprating

Richard Graham Excerpts

Thursday 1st March 2012 Commons Chamber

[Mr Crausby]

I accept that that is the situation on their pension fund, as long as those individuals can trust those private pension schemes to continue to pay; I have to say that during my working lifetime that has not always been a very happy experience when it comes to private pension schemes.

My principal argument is against the Government’s decision to make savings at the expense of our pensioners by using CPI rather than RPI. Of course this is not the first time a Government have behaved in this way, as the Conservatives have a track record of not treating pensioners properly. Margaret Thatcher’s decision to make a change on the link with earnings has cost pensioners across the country many thousands of pounds. The harsh truth is that the public just cannot trust the Government any more than they can trust their employers, and I find that very sad. It is not in the best interests of our country.

[Richard Graham (Gloucester) (Con)]

If the hon. Gentleman and others of his colleagues were so concerned about the decision made by the previous Conservative Government to separate pensions uplift from earnings, why did his party do nothing about it for the 13 years it was in power?

[Mr Crausby]

The previous Labour Government did decide to restore the link and were committed to doing so. The current Government have now restored the link at a time when wages are flatlining, and the reality is that the restoration has cost them not a penny. But the real issue is not the restoration of the link, but the many thousands of pounds that will have been lost by our pensioners until the day they die since Margaret Thatcher broke the link in the first place.

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[Richard Graham (Gloucester) (Con)]

I join others in congratulating the hon. Member for Hayes and Harlington (John McDonnell) on securing this debate. I recognise his sincerity and the consistency of his position on pensions over some time. I am also sure that his party—perhaps his party leader in particular—will have taken careful note of his desire to form the next Government, although he must forgive me if I do not immediately flock to his standard.

I draw attention to my statements of interests. I am chairman of the all-party group on occupational pensions and a deferred pensioner of the civil service pension scheme. That means, first, that I recognise the important differences between CPI and RPI, although everyone in the House should recognise that this is a fairly nerdy subject to most of the public, and, secondly, that I would personally benefit from the hon. Gentleman’s proposal to form the next Government if the reversion to RPI is the cornerstone of his policy platform. I suspect, however, that the increased costs of his forming the next Government would greatly outweigh any selfish benefit for me.

That takes us to the nub of the issues that the hon. Gentleman raised. Why the change? What are the consequences? Is his motion the right way forward? I will first tackle the change. The difference between CPI and RPI, and the change made by the Government, reflect the growing costs, particularly of public sector pensions. I can do no better than quote from the Hutton commission’s final report, in which Lord Hutton, a distinguished former Secretary of State for Work and Pensions, wrote that

“between 1999-2000 and 2009-10 the…benefits paid from the five largest”

unfunded

“pension schemes increased by 32 per cent. This increase in costs was mainly driven by an increase in the number of pensioners, a result of the expansion of the public service workforce over the last four decades, longer life expectancy and the extension of pension rights for early leavers and women.”

That places in context the increases in Government spending and in the amount of taxpayers’ money spent on these pensions because all unfunded pension schemes are currently paid for directly from taxation.

The hon. Member for Hayes and Harlington is right that over time there will be a significant difference between the two rates of indexation—the Hutton commission estimated it at approximately 15%—and that that might reduce the pension benefits paid out to people previously accustomed to RPI. It is also worth mentioning, however, why CPI is a more appropriate index for pensions, and on this issue I can do no better than quote the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), who said in 2003:

“The long-term credibility of our symmetrical target will be enhanced—as the independent Office for National Statistics reports in its paper published today—by adoption of the internationally recognised measure of inflation, the harmonised consumer prices index. It is more reliable because, taking account of spending by all consumers, this consumer prices index gives a better measure than the old”

retail prices index, because the spending patterns take

“better account of consumers substituting cheaper for more expensive goods.”—[Official Report, 10 December 2003; Vol. 415, c. 1062-3.]

The hon. Member for Hayes and Harlington did not say anything about that at the time the statement was made or in subsequent debate, although he might have had stronger feelings on the issue when it became more apparent that this would be applied to pensions.

[John McDonnell]

We need to be clear about what the then Chancellor introduced. He confirmed the measure of CPI for macro-economic policy with regard to comparisons across Europe. At that point, the intention was not to use it for pensions increases themselves, although a number of us said that if it was translated to the uprating of pensions or benefits, we would oppose it.

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[Richard Graham]

I am grateful to the hon. Gentleman for his intervention. He is correct, as I had just pointed out, that it was not then intended to apply to pensions, but it set the train in motion.

I want to address one technical issue. As I said earlier, I do not want the debate to descend too rapidly into every technicality on this very technical issue, but there is one issue that I have flagged up for the Minister: a relatively recent study by the Office for National Statistics on the differences between CPI and RPI. That raises the question of whether one of my assumptions about the differences is correct. I had assumed in a previous life that the major difference between the two indices was the absence of any provision for mortgage costs in CPI, but the recent ONS study puts a question mark over that and ascribes much greater impact to the difference between CPI and RPI in the formula reached. The Minister might wish to comment on that later if he has had a chance to study it, or reply at a later stage.

To return to the question, “Why the change?”, I have touched on the growing cost of public sector pensions, as laid out in the Hutton report, on the move from RPI to CPI as a better measure of inflation under the previous Government and on the recent ONS analysis of the differences between the two indices, but there is a further aspect to consider: the heavy cost of maintaining the RPI link over time. The hon. Member for Hayes and Harlington suggested that the benefits of these changes to the Government were short term, but it is worth mentioning that the Hutton commission’s conclusion was precisely the opposite. It concluded that

“gross expenditure on unfunded public service pensions will remain close to current levels as a proportion of GDP over the next decade.”

Lord Hutton anticipated—the Minister might care to update us if he has further figures—that the financial benefits of the changes being made would be seen over a much longer time period. He estimated that some £20 billion would be saved by 2060, but that is in the very long term—long after the hon. Member for Hayes and Harlington has formed his Government and retired from this place, I suspect. The benefits were not intended or calculated to be short term; they were precisely the opposite.

[Grahame M. Morris]

The hon. Gentleman refers to the Hutton report and predictions about the call on the public purse, but my understanding is that, as a consequence of the negotiated settlement reached between the previous Labour Government and the public sector trade unions, the costs were projected to fall from 2% of GDP to 1.4% by 2060. Does he agree?

[Richard Graham]

To be honest, I have no insights on the talks between the previous Labour Government and the unions at the time. However, with regard to what the previous Government said they could or would do, I am reminded of the earlier comments of the hon. Member for Bolton North East (Mr Crausby) about the Labour party’s commitment to reforming or restoring the link between pensions and earnings. I have to ask him and the hon. Member for Easington (Grahame M. Morris) how long a party can have a commitment to doing something without doing it and retaining any credibility. If my wife asked me to do something and I say that I am committed to doing it but some 13 years later I had done nothing about it, it would be hard for her to believe a word I said.

The hon. Member for Hayes and Harlington rightly talked about the importance of trust in the long-term provision of pensions and of sticking to promises, but he was silent on this issue. I suspect that he agrees with me and would have preferred his party to have done something about its commitment rather than just talk about it.

[John McDonnell]

The hon. Gentleman must not have heard me. I was not silent on that issue; in an intervention I said that I supported the commitment. In fact, on an annual basis I proposed the restoration of the link with earnings. Eventually we secured a commitment from the previous Government that they would introduce the link no later than 2012. To be frank, that is what this Government have done to a certain extent. With regard to the GDP figures, the Hutton report sets out clearly the falling costs. On the point about the union negotiations, the hon. Gentleman will know, because the Secretary of State reported it, that in the last negotiations the unions accepted that any costs resulting from increasing longevity would be borne by increasing contributions, but they would not accept the shift from RPI to CPI.

[Richard Graham]

I am grateful to the hon. Gentleman for his intervention and for confirming his position on the previous Government’s stance, which is what I had assumed it to be.

I have covered in some detail the question of why this change is being made and will now touch briefly on what the consequences will be before concluding with whether the motion is the right way forward. The hon. Gentleman referred to three consequences that cause him concern: first, pensioners will lose out; secondly, workers might leave the schemes; and thirdly, the fact that both those consequences would have a negative impact on social service expenditure.

It is of course true that those pensioners and future pensioners, such as myself, who would benefit from the retention of RPI as the index of inflation will lose out absolutely, but I do not believe that anyone involved will lose out relatively. It is important to realise that very few countries in Europe have defined benefit pension schemes at all. Most of us who will benefit as a result of being members of a public sector defined benefit scheme, such as myself, even if for only a few years, will still be much better off than most workers in the UK and Europe.

Above all, it is important to realise that the people who suffer the most in retirement are those who are not members of any pension scheme at all, those for whom the new pension scheme—the national employment savings trust—is intended to be of great use, and those who depend entirely on the basic state pension. In that context, it is relevant that the Government have done a considerable amount to help those who survive on the basic state pension partly through the triple-lock guarantee: the reversion to the link with earnings, a basic absolute increase of 2.5%, and the link to inflation. That is important and was referred to by Members who spoke earlier, including my hon. Friend the Member for West Worcestershire (Harriett Baldwin) and the hon. Member for Eastbourne (Stephen Lloyd).

It is important that the change to the basic state pension envisaged by the Government will also be of great benefit to workers and to almost all women who work part time in order to bring up their children and will save considerably on the administrative costs of having two current basic state pension schemes, one of which, the means-tested one, has in my view had a discriminatory impact on those people whom the hon. Member for Bolton North East rightly referred to when he said that some of his constituents with a small amount of savings might be no better off than those with no savings at all. It is important that the Government remove that difference so that we can establish once and for all the principle that those who save will always be better off. I know that that is what the Minister is driving towards and very much hope that we will be able to achieve that goal, that we can state it with confidence and that our constituents will be able to believe it before the end of this Parliament.

I do not believe that the consequences of the changes will be as drastic as the hon. Member for Hayes and Harlington claimed they would be. I reject the argument that the change is principally about contributing to the Government’s efforts to bring down the budget deficit. In fact, I do not think that it will make any difference to the budget deficit in the short term. I also reject the idea that our most vulnerable workers will suffer, because the most vulnerable workers are those who are not on defined benefit schemes and survive purely on the basic state pension. I applaud the fact that the Government have been generous to those of my constituents who are on that scheme. Instead, I believe that the long-term savings to be had from the change will hugely benefit all our constituents. First, they will reduce the amount of interest currently paid on our vast mountain of debt—£120 million a day—which is money that could much better be spent on education, health and other good causes.

Secondly, if those businesses that have defined benefit schemes are able to change the index from RPI to CPI, they will increase their chances of surviving, growing and providing jobs for our constituents, and that is important, because many smaller businesses that have been going for about 100 years in my constituency are engineering companies that do not have great, specific investment skills, and the money that they are spending to top up their defined benefit pension scheme is being spent often at the cost of growing their business, of establishing more investment in their factories and of providing more jobs for my constituents.

[Bob Stewart (Beckenham) (Con)]

Will my hon. Friend give way?

[Richard Graham]

Of course I will give way to my distinguished and gallant hon. Friend.

[Bob Stewart]

My hon. Friend is very kind. For me the most important thing that we can do for the future is to look after the people who now do not have a pension. We have a basic state pension, but we want to encourage as many people as possible to get on to a supplementary pension, and I hope very much that the Government’s scheme will do so. I am thinking of the poorest people in the country, and about them having not just a state pension, but an add-on, so that we can lift them out of poverty in retirement.

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[Richard Graham]

My hon. and gallant Friend is absolutely right, and that is precisely what the new NEST pension is designed to achieve. I am sure that he will join me later this summer, when the NEST pension arrives at the same time as the Olympics, in hoping that many of our poorest constituents will indeed benefit from that new savings scheme.

Is the motion the right way forward? I believe that it is not, because above all else the change in the pension inflation index, from RPI to CPI, which this Government have seen through, is all about benefiting future workers, who are those who will pay for the pensions of current pensioners, about benefiting our children and about benefiting our grandchildren.

Governments are often accused of being short-term and of purely looking for votes in the next election, but Governments should be looking to future generations and to what we can pass on to them. The changes made will, in the longer term, benefit our country and our constituents hugely. I understand the emotion and the beliefs behind the motion in the name of the hon. Member for Hayes and Harlington, but I will be voting for future generations, our children, our grandchildren and their interests, and that is why I will be voting against the motion.

[Guto Bebb (Aberconwy) (Con)]

rose—

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[Madam Deputy Speaker (Dawn Primarolo)]

Order. If the hon. Member for Gloucester (Richard Graham) wants to intervene, he should stand up. It is impossible to conduct a debate when comments are shouted across the Chamber and Hansard cannot properly record them. If the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) does not mind, perhaps Mr Richard Graham will intervene.

[Richard Graham]

Thank you, Madam Deputy Speaker. I do apologise. I was following the example of the shadow Chancellor.

Will the hon. Gentleman confirm for the record that his party’s policy, therefore, is to revert to an indexed inflation link with RPI if it gains power?

[Gregg McClymont]

Alas, the hon. Gentleman must wait for the next Labour party manifesto to satisfy his curiosity.

Clearly, the issue is whether CPI is an accurate measure of inflation. The Government and the Minister are clear that it is, but some important authorities, including the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face, especially housing costs, which were mentioned by some of my hon. Friends. The UK Statistics Authority has indicated that it does not believe that CPI should become the primary measure of data inflation until housing costs are included.

I know from our previous discussions that the Minister will look closely at the consumer prices advisory committee proposals on adding housing costs to CPI. We await that with great interest. Heating, which was also mentioned by a number of my hon. Friends, is also important in that context. Heating costs have been rising fast, which could mean that pensioners face higher inflation on average than other groups in society, which is significant given the removal of £100 from the winter fuel allowance.

In the end, this is a political decision. The UK Statistics Authority observed last year:

“Questions about compensation, who to compensate and what for, are straightforwardly political questions, not for statisticians.”

We cannot support adopting that approach in the long term. In just five of the last 20 years has RPI been lower than CPI. As was mentioned by my hon. Friend the Member for Hayes and Harlington, the Office for Budget Responsibility November economic and fiscal outlook states that the long-run difference between RPI and CPI is likely to be 1.4% rather than the current 0.7%.

Welfare Reform Bill

Richard Graham Excerpts

Wednesday 1st February 2012 Commons Chamber

[Mr Slaughter]

I will not.

I end by asking the right hon. Member for Wokingham (Mr Redwood), who talked about how people should work, how much more likely it is that that family will be in work when they are in Hull. I mean no disrespect to Hull or its Members, but that family will have been taken away from the schools and community network in Shepherd’s Bush, where they have lived for generations and where there are employment opportunities.

This is about not just intolerance or inhumanity but incompetence. The Government are sundering communities and sending people away from their families and communities, and giving them no prospect of either a decent life or employment.

[Richard Graham (Gloucester) (Con)]

It is an absolute delight to join the debate, which is of key interest to my constituents.

I first wish to talk about the people who have had the least said about them today. Indeed, I do not think any Opposition Member has referred to them. They are the people who pay the £175 billion benefits bill that the Government run up each year on behalf of the people of Britain. I wish to speak for some of the taxpayers in Gloucester.

I have done some research on average earnings in my constituency. The figures are not complete, but I think it will be of interest to Members, and relevant to their own constituencies, that of some 20,000 public sector workers in Gloucester, I estimate that 90% have pre-tax salaries of less than the £35,000 that is equivalent to the £26,000 benefit cap that the Government propose. That figure of 90% means that 18,000 people working in my constituency of 100,000 people are in that position

It is harder to get the same figures for people working in the private sector, but based on a straw poll of three companies employing more than 400 workers, I estimate that some 87% are on pre-tax salaries of less than £35,000 a year. I believe that the vast majority of workers in my constituency would be astonished that Labour proposes that there should be no cap on the benefits that people get.

[Philip Davies]

My hon. Friend is absolutely right, and I endorse his figures. Given the scaremongering that we have heard from Opposition Members, does he know how many of those people who earn £35,000 a year are homeless?

[Richard Graham]

My hon. Friend raises a key point, and I will come on to the definition of “homeless” in a moment, as it is of significant interest.

[Dame Joan Ruddock]

We all appreciate that the hon. Gentleman’s constituents who are in work are hard-working and may be getting less than the national average wage, but will he acknowledge that they may well be entitled to a raft of in-work benefits such as working tax credit, child tax credit, child benefit and housing benefit? It is not a case of saying that people in work have only a certain amount of money and others should not have so much. There is a real difference between people’s overall entitlement and the simple figures about their wages.

[Richard Graham]

The right hon. Lady makes a perfectly valid point. Some workers receive benefits, but I do not believe that any of them will receive benefits for their family equivalent to, let alone more than, £26,000 a year. I stand to be corrected, even immediately by e-mail to my office, but I am pretty confident.

[Sheila Gilmore]

I tend to agree with the hon. Gentleman. I do not know Gloucester very well, but it would be unlikely for people in Edinburgh to reach that cap, which is exactly the difficulty. Not everywhere is the same. Hon. Members have said that some rents are far too high, but we cannot compare the situation of people in Gloucester with that of people in London.

[Richard Graham]

The hon. Lady is welcome to visit Gloucester. We have lots of things to show her that she will enjoy. If her point was that there are specific problems in London, I agree with her, but I shall come to that later if I may.

The second group of people in my constituency whom I want to address is those on the lowest wages of all. The Government have been clear that one of their major goals—many of us campaigned for this long before the general election—is to reduce, and if possible to eliminate, income tax for the lowest earners in our constituencies. They have done a great deal towards that goal—I believe that 1.1 million have been taken out of income tax altogether. What message do we send to those who are not earning very much and whom we would like to take out of income tax altogether if we do not cap the benefits that those not in work can clock up?

We should send the lowest earners the message that this Government are on their side. We want to take them out of income tax when we can, and at the same time, we want to put a cap on those families who, for whatever reasons, are unemployed. That is a very important message to send, for example, to the young worker at Asda in Barton and Tredworth, who finds that the presents she buys her children at Christmas are not nearly as good as those bought for the children of the family next door, who are living more comfortably on benefits. This is a worker-friendly policy and Bill.

The third group in my constituency whom I should like to address is those who are the most worried and the most vulnerable, including the disabled—I have had several mails from disabled people—war widows and those on PIP or attendance allowances. As the Minister has made absolutely clear, the Bill provides protection for the most vulnerable in our constituencies.

I absolutely recognise that people could well be affected by some elements of the Bill, and the vast majority of them probably live in London. It is not for me to speak on their behalf or on that issue, but the Minister has addressed the problem with three measures: first, the 10-month grace period; secondly, a special nine-month grace period for those who lose their job; and thirdly, a package of discretionary funding. That seems to me to be a significant proposal for hon. Members whose constituencies are likely to be affected.

The right hon. Member for Birkenhead (Mr Field) made a good point when he warned of the consequences of the Bill in a year or two. Many Government Members, including me, are new to the House and indeed to the world of politics, whereas he has years of experience. I do not have his experience of debating measures that sound great on the day but do not deliver quite what they intended, but in 2010 the Select Committee on Work and Pensions, of which I was a member, looked very carefully at changes to housing benefit. There were warnings from well-known charities such as Shelter and speeches from Opposition Members such as the hon. Member for Westminster North (Ms Buck) that thousands, if not hundreds of thousands, of people would be thrown out of their accommodation and have to sleep rough on the streets. A year later, none of that has come to pass, although I may have missed something.

[Mr Duncan Smith]

Does my hon. Friend agree that one of the biggest problems in these debates about welfare is that contributions from the other side, with the exception of the right hon. Member for Birkenhead (Mr Field), are characterised by massive scaremongering about every single change? That has been reprehensible.

[Richard Graham]

My right hon. Friend makes an important point. I have heard from many charities, whose work I deeply respect in many ways and who are active in my constituency, and the strength of their words on some of these issues does amount to scaremongering. I hope that, as on housing benefit, they are proved entirely wrong.

I hugely congratulate the right hon. Member for Birmingham, Hodge Hill (Mr Byrne) on the ingenuity of his argument. I have no doubt that were he to go more deeply into the private sector, as I believe he is starting to do, he would be a fantastic salesman of unsellable products. Today, we have heard from him an extraordinary, last-minute and uncosted proposal that leaves us none the wiser about what the Opposition really believe. I sympathise with the right hon. Gentleman. He said that if we left matters to politicians, they would make a pig’s ear of it. He is right: he did. From the man who was in charge of the spending of taxpayers’ money and realised that he had spent it all, that was a hugely motivational factor for many Government Members, who realised that politicians had made a pig’s ear of it and perhaps it was time for people from outside politics to come in and try to do something to help.

[Mr Byrne]

The hon. Gentleman is very generous and I am grateful for his compliments. But he must accept that Ministers have so badly thought this policy through that they have had to face the indignity of coming to this House and promising to spend £130 million solving a problem that they have told us for the last year would never present itself.

[Richard Graham]

As the right hon. Gentleman will have just heard, I came into this House from outside politics, with a background in the public sector, the charity sector and business, where making concessions and being flexible in achieving goals was generally considered to be a merit. Perhaps if he had shown more flexibility in his approach to the handling of taxpayers’ funds, we would not be in quite the situation that we are today. I am sorry, because I enjoy his company, but I came to the conclusion that his approach today does not remotely add up to a policy. It is simply the continuation of a welfare culture by his party that amounts to gross irresponsibility, married to a something for nothing culture.

In summary, the Bill achieves the following goals. It protects the weak, the disadvantaged and the disabled. There are transitional arrangements in place to help families who are unintentional victims of the Bill in places with high housing costs such as London. It does ensure that workers who are paying the tax that goes to support an enormous benefits bill can see that the Government are taking steps to cap the amounts that are paid out. It is the right thing for Gloucester and for this country, and the amendment is a clumsy, last-minute fudge rather than any solution. I have no hesitation in rejecting it and supporting the Government’s proposal.

[Kate Green]

I need only a couple of minutes to ask three questions, particularly in relation to the Lords amendment on leaving child benefit out of the cap.

As has been pointed out many times, families earning £35,000 or £40,000 and families on benefits both receive child benefit—it is a universal benefit. First, then, how can it be right to have the same cap for a single, childless adult as for a family with children? Secondly, why are this Government, of all Governments, importing a new couples penalty into the benefits system? It might make more sense for a couple, each of whom might separately be below the cap, to separate than to stay together and incur it. I have never understood why this Secretary of State, of all Secretaries of State, wants to introduce such a policy.

Thirdly, how will the cap be uprated—if, indeed, it is to be uprated? What will happen if a family is forced to move to cheaper accommodation because its costs exceed the cap, and then rents rise in the new area and it is forced to move again and again and again? Until we know how the cap is to be uprated, children’s well-being and family stability will be put at risk, but I have yet to hear Ministers address that issue.

Pension Plan Charges

Richard Graham Excerpts

Wednesday 7th December 2011 Westminster Hall

[Brandon Lewis]

It is absolutely right that as much as possible should be transparent—potentially, everything should be as transparent as possible. The hon. Gentleman is right. As I will come on to say, people do not necessarily understand that when they come out of certain schemes or change jobs, the potential cost to them can as much as double. The costs are effectively hidden, because they are not clear or transparent at the time of entry, let alone of exit. That is why we need regular transparency. I will touch on that further in a moment.

It does not seem possible to find an easy way of comparing like with like. Just last week, the Work and Pensions Committee was taking evidence on pensions and it became very clear from looking at different operations that there are major variations in style between companies. What highlighted the issue of transparency for me more than anything was the fact that one company said that the simplicity and transparency of its charges is its single biggest marketing advantage. If Members will bear with me, I will read a short quote from that session. Adrian Boulding of Legal & General, which I congratulate for having this kind of transparent operation, said to the Committee:

“We compete on price in the market place and we are able to do that because we have invested heavily in technology. If I look at pension schemes that we have sold this year, they have all been sold within a price range of 0.3% at the bottom to 0.8% at the top. 90% of them have been sold at 0.5% or less.”

Again, that is a range of figures that many people will struggle to understand. However, Mr Boulding went on to say:

“One of the particular features of our pitch to the market is that we charge just a single charge for the scheme, whereas some providers now want to charge £1.50 in addition to a fund management charge. NEST charges a contribution charged at 1.8% in addition to a fund management charge. Some insurance companies charge higher fund management charges when people leave the scheme. We charge a simple, straight fund management charge and it is the same for all members whether they are in the scheme or whether they have left, and there is only the one charge. We find that gives us an edge in the market place.”

It was interesting that a company specifically said that the simplicity of its charging—it only has a single charge—was its marketing edge.

What is included in the charge element of a pension fund varies, but the inconsistency in how charges are communicated is an additional complicating factor. In fact, the wide range of approaches is needlessly complicated. Some pensions are regulated by the Financial Services Authority and require an illustration of the effects of charges. Other pensions, mainly those that are trust-based, have no requirement for such disclosure. The stakeholder pensions were introduced in 2001 and I credit the previous Government for introducing something that provided some simplicity and clarity. Stakeholder pensions require disclosure of individual deductions.

The lack of comprehensive and consistent information prevents effective monitoring by the FSA, the pensions regulator, and, potentially, by the Department of Work and Pensions itself. We risk creating a regulatory black hole if we fail to create a clear communications framework. That is why there is also a need to specify which regulator covers which area and to define regulators’ powers to avoid market confusion over which regulator covers which issue—let alone confusion among consumers or among the employers that are implementing a scheme.

The approach taken by different pension providers and schemes also varies widely, as the National Association of Pension Funds has helpfully highlighted. Some providers quote an annual management charge as a percentage; others illustrate the effect in cash terms. Some present information in a personalised form, where charges are illustrated in a very varied way over different periods, whereas others provide information with a generic example. In some cases, the information is prominent, but in others it can be hard to find. In some cases, there are even charges for different parts of the process—for example, fund management prices can be shown separately.

We should compare the pensions sector with the banking sector, in which statements now clearly show what bank charges are on a weekly or monthly basis. The example of the banking sector is certainly one that the pensions sector should look at.

There is also financial jargon, which is unhelpful in any industry. If the range of charges and the communications about those charges are inconsistent, a pensions fog is created, and the impenetrable financial jargon that consumers must navigate has created a further consumer whiteout. In fact, I have used much of that jargon in my opening remarks today. I want to illustrate that point by giving two real-life examples, courtesy of the National Association of Pension Funds. They highlight how difficult it is for any consumer or business to understand what they are taking on with pensions. The first example is taken from a handbook provided to employees on a trust-based scheme. The handbook says:

“The manager’s charges differ according to the type of fund. The charges are made within the fund and are reflected in the price of fund units. With some funds, two unit prices are shown - the “bid” price, at which units are sold, and the “offer” price, at which units are bought; the difference - the “bid/offer spread” - reflects the manager’s dealing costs. The bid/offer spread on these funds vary.”

Then there is an impenetrable table listing six funds, showing for each one:

“a percentage annual charge on fund and a percentage bid/offer spread”.

Just looking around the Chamber now, I can see that Members are already somewhat glazing over with the difficulty of trying to understand what we ask ordinary people to understand in their daily lives.

[Richard Graham (Gloucester) (Con)]

I congratulate my hon. Friend on securing this debate on a really important topic and on building a strong case for transparency and clear communications. Does he think that the example that he has just given proves the point that Einstein used to make when he said, “If you can’t explain something to your grandmother, you probably don’t really understand it”?

[Brandon Lewis]

My hon. Friend has just summed things up with exactly the sort of clarity that we need in pensions charges, and I agree entirely with him.

Let me further enhance that point by giving another example, which is from a different type of scheme: a contract-based scheme. The quotation comes from a block of text headed “Additional expenses” that goes into a pension fund member’s handbook:

“Additional expenses such as trustees’, registrars’, auditors’ and regulators’ fees may be deducted from some investment-linked funds. In addition, where the [name of insurer] investment-linked fund links to a Fund of Funds (a fund that holds other underlying funds as its investments) the additional expenses may also include the cost of managing the underlying funds. Where these expenses arise within the fund they have been taken into account in the calculation of the unit price. Details of the Annual Management Charge and any Additional Expenses can be obtained from your [insurance company] Pension Pack.”

I assure Members that that is not an excerpt from a Monty Python sketch. It is, however, what people are having to deal with, and it is absolutely no wonder that consumers are confused and indeed suspicious of pensions when they are presented with information in such an opaque, complicated and almost incomprehensible fashion.

As I have already mentioned, many other financial products—such as mortgages and loans—now present information in a much clearer way, generally as a result of consumer pressure. I hope that similar consumer pressure will be brought to bear on the pensions industry.

It is rare for pension providers or schemes to show the actual cash amount of charges on an individual statement. Surely that would be the clearest way to provide vital information that the majority of people can understand. It is time to move away from a too long and too complicated explanation of charges towards greater clarity and understanding.

I have experience of being responsible for a company’s pension scheme. In that scheme, people had to contribute nothing themselves but they were given money by the company to enter the scheme. That money did not come from their salaries; it was money over and above their salaries. However, on far too many occasions, even educated people with degrees turned the scheme down. When we asked advisers why that happened, we heard on a number of occasions that it was because people simply do not trust the forms or the companies, and they do not want to get into filling in forms and giving things away. They do not understand that, as in the case of my former company’s pension scheme, it is about effectively trying to give them money; they still turn the money down. The system is so complicated that it puts people off, even people who are highly educated.

The problems that the system creates and the benefits of reforming it are what I will turn to next. The introduction of auto-enrolment next year will see between 10 million and 11 million extra employees being given access to a workplace pension. The Government’s aim is the provision of low-cost pension options for savers, yet consumers’ suspicion or wariness of pensions means that there is a risk of a high opt-out rate, which is something that we all obviously want to avoid. We must avoid exacerbating the problem because charges and their structure are difficult for people to understand.

Small businesses particularly face that problem. The complexity of schemes for businesses to choose from could risk disengagement by employers. At this point, I must congratulate the Federation of Small Businesses on considering establishing its own pension scheme. It understands that there is an onus on companies, particularly small and medium-sized enterprises, to do something. However, those SMEs are not only worried about the potential cost of auto-enrolment; in many cases, they see their staff as being part of a family. They care about their staff and want to provide the best for them, so they will want to ensure that they are making the best offer, the best investment and the best decision for their staff. They do not necessarily have the time to become involved with a range of pension providers but they know and trust the FSB, because they are members of it, so the idea that the FSB itself should have a brand of pension for SMEs to be part of makes a lot of sense.

For many businesses, independent financial advice will be unaffordable and, as I have just said, they will not have the time or expertise to cut through what can be a dense, even impenetrable, amount of financial information. Transparency can lead to better decision making on behalf of employees.

Much of our discussion today is about the information provided when someone joins a scheme, yet there is often scant information about what happens once they are involved in a scheme, as has already been touched on by Members. The lack of comprehensive information does nothing to reassure consumers, and it means that funds are under no pressure to demonstrate value for money and that much further down the line people can be in for a shock when they see where their pension stands, because of the charges. I agree with the sentiment expressed by Aviva, which said that focusing entirely on charges might be

“counterproductive and risks deterring a generation of new savers.”

In terms of what those charges are, I think that Aviva is right, and in terms of making sure that the charges are understandable, we still have an important job to do.

We need to see that charges provide value for money and flexibility, and to do that we need to see what the charges are in a way we can all understand. We need to see whether members can receive value for money if a charge is very low, because the very best pension fund operators might not see that as a viable option for their involvement. Although I want to see the lowest possible charges for consumers, to encourage as many of them as possible to invest and have the best return on their money, we also must ensure that they and their employers receive adequate and proper advice, otherwise it might be that only higher-end earners will get the advice they need and want—and, indeed, pay for. There needs to be an industry culture of charges reflecting the cost and value of the services provided, but providers must continue to find ways to offer better value for money, which means finding additional efficiencies, using new technologies as Legal & General has outlined, and improving processes.

I believe that providing clear financial information using a pounds and pence principle will exert sideways pressure on schemes to maximise value for money. Showing consumers and employers what the bottom line in charges is allows them more easily to compare schemes. With a whole range of products, whether it is high street banking and its charges or anything else we want to buy, we are generally able to go out into the marketplace and find an easy way to compare like with like, and decide if we want to invest in a more expensive or a lower-cost product. If we are looking for the latter, we can see the range of offers from various companies, understand them and make an informed decision about where to invest and what to purchase. With pensions, it is extremely difficult to find like-for-like offers, and when employers have a range of things to do, including running their businesses, this is one more thing that we must make simpler for them.

I have thus far focused on companies, and on information being given to companies that run schemes, but we must not forget the wide range of people out there who have personal pension schemes. There are people at the higher end who can pay advisers whom they trust to make the best decisions, but there are other consumers who have gone to the trouble of taking out their own pensions who are not necessarily at the highest end and able to pay high-value advisers. Nevertheless, they need good pensions, and they need to have faith in them and understand them. We need clarity and transparency so that end-users—consumers—can see what the cost of their pension is when they get their statement, not just when they first enter a scheme but potentially on an annual basis.

I want to turn to what the Government can do. What options are available to Ministers to create a new culture of charge transparency? I argue for a very light-touch approach from the Government. Their role in this transformation should be to guide, encourage and motivate the process, and resorting to regulation or further legislation must be a final option. The introduction of auto-enrolment will mean that the national employment savings trust will become the default option for many. Although we should welcome NEST’s role in pension provision, we must also remember that it is just another provider, and is neither designed nor suitable for everyone. I hope that its existence will assist in driving down charges across the sector, but its own charging structure is not a simple model and I am interested in the Minister’s view on how we can move that forward.

I hope that, even though NEST provides a low-cost option, Ministers will press for greater transparency across the sector, so that there will be benefits of transparency also for people for whom NEST is not the most suitable option. NEST will not necessarily attract higher earners or employees who require a larger choice of investment funds and greater contribution levels, but those people equally need greater charge clarity. NEST will not pick up many seasonal workers or low earners who fall below the threshold, many of whom could be women who work part-time due to child care issues, and we must do more to simplify and open up the system to give them an option to save, if only a few pounds each week. The system needs simplicity and clarity if it is to have a chance of encouraging a wider range of people to come into saving.

I am interested to hear from the Minister how he thinks the Government can encourage transparency, how he thinks charges can be set out clearly and in terms readily understood by savers, and whether he believes, as I do, that this approach should apply equally to contract-based and trust-based pensions, where there are currently no requirements for charges to be disclosed to savers. Will he also outline how his Department plans to provide guidance to consumers and employers ahead of the introduction of auto-enrolment? It is important that we take every opportunity to raise this issue and to clarify the matter.

Employers have a crucial role. They must be fully aware of the costs and charges associated with the workplace schemes for which they will effectively be responsible for their employees. In evidence to the Work and Pensions Committee last week, it was indicated that the code of practice, at least in the first period, will be aimed at giving clarity of evidence and information to employers, so that they can make decisions about the scheme for their staff, rather than directly to the end-user or consumer, and in the long term that will not be enough. We need the clarity and transparency to go right through to the end client. Legal & General has managed it, and we need to ensure that we get it across the sector. Will the Minister also comment on the suggestion by Which? that pensions should be benchmarked against NEST to assure value for money?

Several organisations, including Which?, have expressed concern about active member discounts, which are schemes that have a low charge for people who are actively contributing but in which the charge increases, often significantly, once someone moves job or goes on maternity or paternity leave. That issue was touched on in an intervention earlier. I have heard it expressed that this is more of an inactive member penalty, and should be seen as such. It is potentially one of the biggest issues facing pension costs, and it should be addressed. Again, it can particularly affect women who take a break from work due to child care issues, and low earners who can be out of work for periods of time.

I am particularly concerned about the increase in charges levied by some insurance companies for people who change jobs, and transparency can help to deal with that as well. Which? research has found that some companies have an annual management charge of between 0.5% and 0.7% for active members, but that once someone leaves a company the charge can double. Such high charges could have a big impact on the pension received by the consumer at the end of the scheme, with their pension potentially reduced by up to 25%.

Although I would like to see a commitment from the Government to clarify the governance and regulation of charges, I have mentioned the desirability of a light-touch approach from Government and the impetus for change must come from the industry. The National Association of Pension Funds has taken the lead in responding to the challenge to simplify the communication of charges. Earlier this autumn, it initiated an industry-wide discussion on the preparation of a voluntary code of practice on transparency of fees and charges, which resulted in the establishment of a working group to pursue that goal. I believe that only this morning the working group met to discuss how charges will be presented to employers in future, and I look forward to hearing about that discussion in greater detail.

That is exactly the responsible industry-led attitude that Minsters will be, and I am sure are, encouraging, and I hope that both Her Majesty’s Treasury and the Department for Work and Pensions are able to play an active role in the process. The heavy hand of further statutory regulation or additional legislation should be pursued only if this process fails or proves unsatisfactory. I hope that a new code of practice is agreed and adopted across the pensions sector by next spring, ahead of the introduction of auto-enrolment later in the year, but we must ensure that we are able to move gradually and, potentially, as quickly as possible to ensure that the clarity that is needed and that the industry is now working on developing can be provided not just to employers operating schemes but to end-users.

Although that step initiated by the industry and the NAPF is very good news, it is not the total solution. For that we need simplicity in the statements, to give clear figures to pension holders of the cost of their pensions on an ongoing basis, going right through to the end client and not just to the employer running a scheme. For consumers, employers and the pension industry itself it is vital that the Government clarify the existing regulation of charges and encourage that transparency. Failure to do so will risk a return to the mis-selling scandals of recent decades and a drain on the new auto-enrolment scheme as employees opt out of the scheme chosen on their behalf. Most importantly, it will risk a massive loss of consumer confidence, jeopardising the radical reform necessary to secure the future retirement of millions.

Across Departments and local government, we have found that the transparency agenda has had a cleansing action. Costs have been cut, people are more aware of what is going on and confidence can be rebuilt. It is the most cleansing initiative before us today, and Government have taken that on board. I argue that the pension industry should also take transparency on board as a way to clarify the issue to restore, rebuild and develop confidence in the pension industry, so that people will save more to provide for their future when they retire.

Oral Answers to Questions

Richard Graham Excerpts

Monday 28th November 2011 Commons Chamber

[Mr David Amess (Southend West) (Con)]

9. What assessment he has made of the effect of work experience programmes on employment prospects.

[Richard Graham (Gloucester) (Con)]

13. What assessment he has made of the effect of work experience programmes on employment prospects.

[The Minister of State, Department for Work and Pensions (Chris Grayling)]

Early indications show that the work experience programme is proving extremely successful. The first figures we published for the period up to August show that more than half the young people starting a work experience placement under the scheme are off benefits within three months. As the scheme is extremely cost-effective, that is welcome news.

--- Later in debate ---

[Chris Grayling]

My hon. Friend is absolutely right. There are times when I read things and have to step back in amazement and think, “Some people just don’t get it.” The work experience scheme is making a real difference for young people. I pay tribute to the firms taking part in the scheme, particularly, given recent publicity, our supermarkets, which are large and diverse employers with wide-ranging opportunities. They are playing an important role in giving young people a start in their careers. The scheme is working, and that is enormously down to the work of employers in helping to give young people an opportunity.

[Richard Graham]

I believe, like other colleagues, that work experience is beginning to have a real effect on the employment prospects of the young. I also see from the sister programme, the Work programme, a really encouraging drop in long-term unemployment in my constituency of Gloucester. I understand the reasons for waiting a year to analyse the results, but will the Minister consider publishing data, at least on a preliminary basis, after six months to show the results across the country?

[Chris Grayling]

I hear what my hon. Friend is saying. I am not in the business of burying good news. We are hearing encouraging noises from the early stages of the Work programme. Indeed, one of our providers has said on the record that it is going much better for them than the previous Government’s flexible new deal. I will bring forward statistics on the Work programme as soon as it is practical to do so, but I am under obligations from the Office for National Statistics to produce statistics that are valid and appropriate, which is what I will do.

--- Later in debate ---

[Chris Grayling]

I obviously cannot comment on that specific case, but what I can say is that anyone who is going through a work experience placement can continue to draw their benefits. That is the big difference that we made. Under the previous Government, somebody who was offered a work experience place was forced to lose their benefits.

[Richard Graham (Gloucester) (Con)]

T6. Does my right hon. Friend agree that many people of both sexes, in Gloucester and elsewhere, who are currently without a pension will benefit considerably from the on-time and on-budget auto-enrolment that will arrive next summer? Does he also agree that many more people, especially women, would benefit from the current proposal under consideration for a single-tier state pension?

[Mr Duncan Smith]

I absolutely agree. Auto-enrolment is not a negative; it is a positive. The fact that the Government are to plough ahead with it, that there will be no exemptions and that all companies will be brought under its scheme is critically important. I support the proposals of the pensions Minister, my hon. Friend the Member for Thornbury and Yate (Steve Webb). Furthermore, the reason that we were left in such a parlous position, with too many people owing money, was that not enough people in Britain had saved; now is the time to start changing that.

Credit Unions

Richard Graham Excerpts

Wednesday 23rd November 2011 Westminster Hall

[Damian Hinds (East Hampshire) (Con)]

It is a pleasure to see you in the Chair for this important debate, Mr Streeter. I know that we are competing against an Opposition day debate in the main Chamber and the appearance of Mr Patrick Vieira, so it is particularly good to see many hon. Members present. The subject matters to Members from all parties in the House. It is good to see at least four parties represented here already, with possibly a fifth quite soon.

I should declare an interest at the outset in that, like many hon. Members present, I am a member of a local credit union—in my case, United Savings and Loans, in Hampshire. I also chair the all-party group on credit unions, whose secretariat is provided by the Association of British Credit Unions Ltd.

The debate is timely, and that timeliness is to do with the making earlier this month of a legislative reform order that will come into effect in January. It is a key milestone enabler for the credit union sector that will boost the ability of credit unions to improve financial inclusion right across the piece. There are other timely aspects, such as the Government’s recent announcement on the modernisation fund and the exciting possibility of linking up credit unions with the post office network. More broadly, the debate is timely also because of the focus that we have these days on debt at all levels—national, corporate and individual—and because of the desire to re-encourage a culture of savings at a time when 4 million households in the country have no savings at all.

Several related debates are taking place within Parliament, such as on capping the cost of credit, debt management companies and credit brokerage. While those are not debates for today, I would not be surprised if hon. Members brought up aspects of them.

Credit unions have a huge growth opportunity in this country. The sector has already seen substantial and rapid growth over the past decade—between 200% and 300%, depending on which measure we choose. The growth fund, which was introduced under the previous Government, was a big part of that growth. There had already been substantial momentum for growth, but the growth fund also enabled credit unions to reach out to a new category of clients and members. Credit unions in Britain now have more than 800,000 adult members and more than 100,000 junior savers.

However, on an international level, membership penetration of the population by credit unions in this country remains small—a low, single-digit percentage, compared with almost a third in the United States and Australia, and almost half in Ireland. Before I am corrected, I should say that when I talk about credit unions in Britain being small, I am referring to Britain, not the United Kingdom, because in Northern Ireland, as in the Republic of Ireland, credit union penetration is massively higher than it is in England, Scotland and Wales. Globally, there are some 53,000 credit unions, with 188 million members across 100 countries. This model is not some newfangled idea or experiment; it has a great international, long-term record.

We are here to talk specifically about credit unions and financial inclusion. It is important to note that when we talk about financial inclusion or exclusion, the subject is not quite as binary as those terms suggest. It is not that someone is either included or excluded, but that there is a scale in between. No one has no access to any financial service whatever. The scale runs from one end—people trading derivatives on personal accounts—to the other, which is people borrowing money from the sort of lender whose idea of a late-payment penalty is a cigarette burn to the forearm. The question is not whether someone is absolutely included or excluded, but what sort of financial services they can access and at what cost.

A great deal of progress has been made on the entry level of financial inclusion, which is having a transactional bank account. In 2002-03, 10% of households did not have a bank account, and the latest figures suggest 4%. That, however, is still one household in 25, or 1.5 million adults in 1 million homes. Disproportionately, such households are single households, households with single parents and pensioner households, and they tend to be at the bottom of the income scale.

Not having a bank account matters on a practical level. Figures suggest that people could save between £125 and £215 just on utilities in the first year, because they could use direct debit. Interestingly and importantly, such savings can be wiped out by bank charges, particularly behavioural charges for people who are more used to dealing on a cash-only basis.

Broader than the question whether someone has a bank account is how much they pay. Risk will always be priced into credit. Different people will always pay different prices. However, it remains the case that some people pay massively more than others. In credit and other sectors, there is still a significant problem in that the poorest pay the most.

The Centre for Responsible Credit recently produced a good analysis and report, showing how much more the poorest pay for their credit than we—people with access to mainstream credit—do. It found that for every £100 borrowed for infrequent purchases, such as white goods, the cost of credit for people with access only to high-cost credit was on average 2.5 times as much as for people who accessed mainstream financial services. For annually recurring items, such as Christmas presents and back-to-school purchases, that figure rose to 10 times: the cost was £7.80 per £100 borrowed on a Barclaycard, and £71.90 if someone borrowed from home credit providers.

We are not talking about small numbers of people, even though sub-prime and high-cost credit is not an issue that many opinion formers and journalists are particularly aware of because they do not see some of the issues. The leader in the home credit market has 11,000 agents calling weekly on one home in 20 in the UK to collect repayments. Payday loan companies have between 1 million and 2 million customers per annum, and the segment is growing quickly. The leader in the rent-to-own market has 245 stores nationwide, with an ambition to more than double that. With rent-to-own in particular, the question is not only the advertised annual percentage interest rate, which is high enough, but the hidden costs that go with that, especially on the mark-up of goods and the additional cost of service cover.

Across personal credit, particularly to the most disadvantaged, although we could argue that this extends far beyond them, much of the emphasis is not on what they can afford to repay, but on what they want. Combining that with extensions and roll-overs, too many of the poorest and most disadvantaged people in society find themselves in a seemingly never-ending trap of debt, from which it is difficult to break out.

How do credit unions address financial inclusion? On transactional bank accounts, credit unions offer current accounts, and I have such a card with me. There are 33,000 active accounts through 25 different credit unions. Credit unions also offer affordable credit. Interest on loans from credit unions is capped at 26.8% APR, which is a small fraction of what someone might pay to high-cost and sub-prime lenders. Importantly, credit unions must have a balance between savings and loans, so they encourage savings. They are personal, community focused and responsible, and perhaps most importantly, they have an ethos about helping people. They are run by and for their members and are truly co-operative, without a profit motive.

One of the most important development and growth areas for the credit union sector recently has been forging partnerships to reach out to people at risk of financial exclusion. That can be groups of people who would identifiably be at risk of exclusion and a broader group who would, at certain times, be at risk of exclusion. To help such groups, many credit unions work actively with local community organisations, ethnic associations and so on. Some excellent work is being done in prisons to help offenders to prepare for release, rehabilitation and work. Leeds City credit union, for example, is undertaking a number of such projects. Care leavers are an important segment. There is a new financial savings product for children in care, and I hope that credit unions will take the opportunity to work actively in that area.

There is also a broader group of people who, at different times in their life, will face the trigger points at which the risk of financial exclusion becomes that much greater. For example, those trigger points can come when a person is setting up their first home or moving into a flat for the first time. The temptation of going down the high street and seeing the furniture and the flat screen telly in the window of the BrightHouse store is a real danger point, because if someone gets into the trap then, it may take them years and years, or perhaps longer, to get out of it.

There are also those who, perhaps through a change in circumstance—a change in job or the breakdown of a relationship—suddenly find themselves in rent arrears, and the problem can build up and snowball. Organisations such as the London Mutual credit union do a lot of great work with housing associations on exactly that area. By coincidence, right now, in the room next to this Chamber, the all-party parliamentary group on credit unions is holding a fair that showcases some of those partnerships, including London Mutual’s work with the Family Mosaic housing association.

Other types of partnership that credit unions engage in do something slightly different. Rather than just targeting people at risk of exclusion, they seek to grow to build up their self-sustainability and reach out to more people. An important way in which that can be done is with housing associations. Such a partnership is a great way to reach people—it is absolutely in the interests of the housing association that new tenants do not fall into rent arrears. They need tenants to become better at managing their finances and, ideally, to build up savings. Credit unions including my own, United Savings and Loans, do very good work in that area.

Payroll deduction schemes are another interesting and exciting development. They drive savings accounts, either through employer-based credit unions—credit unions can be community, employer or association based—or in partnerships. For example, we could see a community-based credit union partnering with local companies.

[Richard Graham (Gloucester) (Con)]

I congratulate my hon. Friend hugely on securing today’s debate and on his leadership of the all-party parliamentary group on credit unions. He mentioned the importance of the legislative reform order that is due to come in, and also alluded to the important role that housing associations can play in the spread of credit union membership, which we both agree is incredibly important. Does he not agree that there is a real opportunity for the National Housing Federation and the Local Government Association to go out there and encourage all their members to join their local credit union so that almost immediately the number of people across the country with access to loans and a place to deposit their money would increase sharply overnight?

[Damian Hinds]

My hon. Friend makes an important point. There is a great opportunity to expand the work between credit unions and housing associations. I hope that the number of those partnerships will increase greatly.

Some credit unions have been involved in payroll deduction savings accounts for many years. I had the privilege of visiting the Voyager Alliance credit union in Manchester. Based at the Stagecoach bus depot in Moss Side, the credit union runs a slick operation. When bus drivers and transport workers join the organisation, they frequently open a savings account from day one. Very small amounts go into the account from their wages. It is a bit like pay-as-you-earn in that they almost do not notice the deduction—well, they do notice it, but hon. Members know what I mean. Before they know it, a small nest egg has been built up, which is important for their financial stability.

The Police credit union does great work with a number of different forces. The Glasgow credit union, which is one of the most successful in the country, has 71 partnerships with different organisations to facilitate building up exactly this kind of savings account. The book on the power of nudge is required reading for all political anoraks these days, and we have talked about that mostly in the context of auto-enrolment pensions, but there is great potential for savings products as well.

Those are some of the things that credit unions themselves are doing, but as my hon. Friend the Member for Gloucester (Richard Graham) mentioned, deregulation of the sector and Government support are about to unleash a set of new and exciting opportunities.

Youth Unemployment

Richard Graham Excerpts

Wednesday 9th November 2011 Commons Chamber

[Ian Lavery (Wansbeck) (Lab)]

May I say at the outset that I am disappointed that we have had only two hours to discuss youth unemployment and jobs, which is one of the most important issues in this country at the moment? I will use my four minutes to try to expose the myth that we are all in this together. Before the election, the now Prime Minister said that the north-east would be hit hardest and first, and that the public sector there was too big. What an absolute disgrace! It was an insult to everyone in the region, and what is more, only this week a report by the Institute for Public Policy Research North think-tank stated that 32,000 public sector jobs have been lost in the north-east so far this Parliament, yet 24,000 public sector jobs are being created in the south-east of England and 8,000 in London. Where is the fairness in all this? How are we in this together? It is not right. Why is the north-east continually hammered by this coalition Government?

[Richard Graham (Gloucester) (Con)]

rose—

[Ian Lavery]

Excuse me, but the hon. Gentleman has just come in. There are people who have been in here for ages.

In my constituency, 20.7% of young people are not in education, employment or training. It was once a thriving mining community, but we now have unemployment levels of 7.7%. Over the past five years, there has been a 67% increase in the number of jobseeker’s allowance applications, and over the past 12 months, a 19.8% increase. The number of applications from those aged 24 and under has increased by 34% in 12 months. It is an absolute disgrace.

The most horrendous statistic is that for every job vacancy in Wansbeck, there are 9.6 applicants. The jobs are not there for people. It is unacceptable, and we cannot continue to treat people like this. It has been said on numerous occasions, “Is this a price worth paying?” Do people believe that youth unemployment is a price worth paying? It is not. The lack of jobs and opportunities will see this country decline in the future. Young people should be seen as our future doctors, business men and women, nurses, firefighters, teachers, soldiers, sailors and council workers. We should treat them with a little decorum.

--- Later in debate ---

[Rachel Reeves (Leeds West) (Lab)]

It is right that we should have the chance to debate youth unemployment today, as our economy continues to flatline and unemployment is rising. It is just a shame that neither the Secretary of State for Work and Pensions nor a single member of the Treasury Front-Bench team has bothered to turn up. How complacent and out of touch this Government are.

The last time we debated the economy in this House was on the day when new figures showed that youth unemployment had reached a 17-year high, with 991,000 young people out of work. Next week we shall have an update on those numbers, but in the last few weeks the Government have done nothing to address the national youth unemployment crisis. It is almost two years since this country moved out of recession, yet the prospects for unemployment and youth unemployment are gloomier than ever. Labour has set out a five-point plan for jobs and growth, and called on the Government to introduce an alternative to their plans, which are hurting but not working. Businesses up and down the country are seeing demand hit. Young people out of work and facing trebled tuition fees are seeing the impact. Families struggling with high VAT and rising energy prices are feeling the impact. All are still waiting for a plan for jobs and growth from this Government. We are all waiting for some leadership from this out-of-touch Government on a jobs and growth plan internationally as well. Every day of waiting is a day wasted, with potential going untapped and opportunities squandered.

[Richard Graham]

I congratulate the hon. Lady on her appointment. Can she explain to me how it was that during the 13 years of Labour Government, 5,600 private sector jobs were destroyed in my constituency of Gloucester?

[Rachel Reeves]

What I do know is that in the hon. Gentleman’s constituency, as in mine, youth unemployment and long-term youth unemployment is going up on this Government’s watch.

There has rightly been concern from all parts of the House today about youth unemployment. My hon. Friend the Member for Hartlepool (Mr Wright), whose constituency has the highest youth unemployment in the country, rightly talked about the impact on his constituents. My hon. Friend the Member for North West Durham (Pat Glass) gave a passionate speech about youth unemployment and its effect in the north-east, as did my hon. Friend the Member for Wansbeck (Ian Lavery), who talked about people in his constituency being hammered by this Government’s policies. My hon. Friend the Member for West Bromwich West (Mr Bailey), in whose constituency long-term youth unemployment has risen by 106% in just nine months, was right to talk about the need for a national insurance holiday for small businesses. My hon. Friend the Member for Halton (Derek Twigg), in whose constituency long-term youth unemployment has gone up by 81% in nine months, raised the prospect of Royal Bank of Scotland bonuses of £500 million this year, with no tax on bank bonuses to fund youth jobs—a policy proposed by the Labour party.

Pensions Bill [Lords]

Richard Graham Excerpts

Tuesday 18th October 2011 Commons Chamber

[Gregg McClymont]

That was not so much an intervention as a speech. The fact remains that the difference between the Government’s proposals and ours is £10 billion over 10 years. That is £1 billion a year. Is the hon. Gentleman really saying that a saving of that kind cannot be found in a more sophisticated way, without placing an unfair and disproportionate burden on those women? I do not agree, and nor does any other Opposition Member.

The Prime Minister was right when he suggested that if you put eight Conservative men around a table you would get some interesting answers on pensions, but you would not get the right answer. The Prime Minister was right then, and the Government are wrong now. The Minister’s amendments are welcome, and I am sure that he would personally like to go further, but he does not sit at the Cabinet table, although perhaps pensions Ministers should be in the Cabinet. This concession thus remains too limited. Some 500,000 women will still have to wait up to 18 months longer before reaching state pension age.

Turning to a point the Minister made earlier, this is not an easy issue, and there are great challenges, including that of longevity. As people live longer, the state pension age needs to rise to ensure a decent state pension for all. Labour set in train the Turner consensus: the state pension to rise in line with earnings; the retirement age to rise to 68 by 2046; and private pensions to be opt-out rather than opt-in. Labour also maintained the timetable for equalisation set out in the Pensions Act 1995.

Members on the Government Benches ask why we did not implement that, but Labour made great strides on pensions. Some 1 million pensioners were lifted out of poverty between 1997 and 2010. That is a real achievement. The poorest pensioners were lifted out of poverty. No pensioner lives in absolute poverty any longer. I must also point out that we had to do that because the previous Conservative Government left the pension system, and particularly the poorest pensioners, in a very difficult situation.

[Richard Graham (Gloucester) (Con)]

The hon. Gentleman takes us back into the mists of history, but surely today’s announcement can be warmly welcomed by all Members on both sides of the House? The right hon. Member for Birmingham, Hodge Hill (Mr Byrne) describes this announcement as “just a sticking plaster”, however. I cannot think of any other sticking plaster in history which has cost £1.1 billion and helped 250,000 people. That cannot have been the case even when the right hon. Gentleman was at the Treasury.

[Gregg McClymont]

Perhaps because I have a historian’s perspective, I do not consider 35 years ago to be the mists of time. I think that that era is relevant to our discussion of pensions today.

We cannot sit still and do nothing on pensions. We accept that changes have to be made; we have no complaint about that, and we accept the Minister’s point about rising longevity.

--- Later in debate ---

[Gregg McClymont]

I thank my right hon. Friend for that very important point. This all bears on the fact that, for all the talk, the Government do not understand the difference between a deficit and a national debt. That is pretty clear from our discussion so far.

[Richard Graham]

Will the hon. Gentleman give way?

[Gregg McClymont]

No, I will not.

Let me restate our case. The Bill fails our two tests: first, it fails to give fair and due notice of the rise in pension age to the 500,000 women concerned; and secondly, the burden falls disproportionately on this group of women.

--- Later in debate ---

[Alok Sharma]

rose—

[Richard Graham]

rose—

[Gregg McClymont]

In the event that a modification in the timetable is necessary, and in answer to the questions about where the savings would come from, it may well be that the Government would do better to speed up the timetable for a state pension age of 67 and 68. That is something that we would consider. It is a much more sensible option than this disproportionate, unfair and unjust hit on women aged 57 and 58, of whom there are 500,000.

--- Later in debate ---

[Richard Graham]

The right hon. Gentleman has much experience in these matters. However, may I put it to him that the reason why he voted in 2007 for the increase in the pension age was simply that the statistics to which he referred had changed so much? In 1911, when the first pensions were introduced—to be paid at 65—the average life expectancy of a male in the United Kingdom was 66. He made the point that some people today still die before the age of 65. Back in 1911, the vast majority of males died before that age. Life expectancy today is now 87 for the average male. Does he not agree that the changes in the state pension age reflect a huge change in longevity, and that the pension age has actually risen very slowly?

[Malcolm Wicks]

I am bound to say that life expectancy is not 87. On average, a girl born in the UK will live to 82 and a boy to 77. Obviously, however, once they have survived to the age of 65 many people are likely to live into their 80s, so I understand the broad point being made.

I shall conclude later by talking about a sensitivity that we could introduce into the system that might meet some of those problems, although the Minister has so far resisted it. However, now I want to refer to the association between social class and location, which various colleagues are interested in and knowledgeable about. This is not just about the broad difference between living in Kensington and living in parts of Glasgow; even within many of our big cities there are huge class differences in mortality. Across Sheffield, for example, there is a difference in life expectancy of more than 14 years between different parts of the city, and even in Kensington and Chelsea—the borough with the highest life expectancy—there is a difference of eight years between the most and the least deprived wards—which, for those of us who know Kensington, is not so surprising. Those differences and unfairnesses are reflected in terms of where people live in our cities.

Before I mention the idea that I have been trying to persuade the Minister to accept, I want to apply some pressure elsewhere: where will the jobs come from? We are living through a period of rising unemployment, and many people, including graduates with good degrees, in their 20s, 30s and 40s, cannot get jobs. Are we confident that if we make these accelerated changes—as the Minister knows, the acceleration is the difference between what the Labour Government did and what the coalition Government are doing—the work will be available?

Now 39% of 62-year-old men and 52% of 64-year-old men are not working, which means that huge proportions of men approaching what is meant to be their retirement are effectively retired from the labour market already. Furthermore, 36% of 58-year-old women are not working. I fear that we will be extending a kind of benefit twilight zone, in which people who are ineligible for their state pension—because we are raising the pension age—will jog along on incapacity or other benefits, with no one in the jobcentre pretending that those folks will get work—even the Minister will not be able to pretend that they will—and a huge army of people living in a state of desperation in that twilight zone.

--- Later in debate ---

[Pat Glass]

I absolutely agree.

The Chancellor has told us that he will not balance the books on the backs of the poor abroad, so why is he prepared to balance the books to a disproportionate degree on the backs of 500,000 women who just happen to have been born between 6 October 1953 and 5 March 1955? Why is it okay to do that to those women? The Government need to listen to the women of this country and accept Labour’s amendment so that no woman will have to wait more than an extra 12 months to reach their state pension age.

[Richard Graham]

I am delighted to be called to speak in the debate. I welcome amendments 13 and 14, which show that the Government have listened to their people, and I congratulate the Secretary of State and the Pensions Minister on successfully providing some relief to women in their 50s in my constituency. I pay tribute to all those from Gloucester who came to see me about this issue, led by Patsy Toleman, and to those who were encouraged by the campaign led by Age UK to write to me about it.

Like others on both sides of the coalition Government, I have been very active in writing to and making the case personally to the Secretary of State and the Chancellor, and I am sorry that the Opposition have been less than generous in their recognition of the value of capping at 18 months the increase in the wait for their pension for 250,000 women. They should perhaps be reminded that Age UK has said that

“we can’t emphasise enough the great achievement that this change represents as it will cost the Government £1 billion in lost cuts to expenditure.”

[Fiona O’Donnell]

Will the hon. Gentleman give way?

[Richard Graham]

I will be more generous than the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) was earlier; I will give way.

[Fiona O’Donnell]

I thank the hon. Gentleman for his generosity. He might find us ungenerous, but I wonder how many of those women who came to see him have been in touch over the past few days to tell him that the Government have gone far enough.

[Richard Graham]

I have not heard specifically from any of those who originally lobbied me on this issue. No doubt they will be hearing this debate, and I think that they will recognise, as all Members should do, that the Government cannot simply brush aside the issue of expenditure as those on the Opposition Front Bench did when they were in government. The interest that all our families are having to pay on the mountain of national debt built up by the hon. Lady’s party over the past 13 years means that an amount greater than the entire education budget is being spent on debt interest alone. That affects every woman in her constituency and in mine.

--- Later in debate ---

[Sammy Wilson]

The hon. Gentleman has rightly said that the Government have listened to the case that has been made, that they have made additional money available and that they will give people some notice of the changes in the pension age. Does he accept, however, that for many people who are carers, for example, or who are in part-time work or in and out of work for other reasons, the time horizon that is now being made available to them will not give them much chance to plan for their retirement?

[Richard Graham]

In a perfect world, everyone would have liked the changes to have gone further, but I believe that capping the additional waiting period at 18 months represents a significant step forward in providing time for preparation. We are not, alas, living in a perfect world—

[Pat Glass]

Will the hon. Gentleman give way?

[Richard Graham]

I should like to finish answering the previous intervention before I take the next one.

I am sure that the hon. Member for East Antrim (Sammy Wilson) would agree that tonight is all about a welcome change for all of us.

[Pat Glass]

I am grateful to the hon. Gentleman for giving way. We have heard several Members on the Government Benches talk about a perfect world, but does he accept that we did not have a perfect world in 1909, when the first pensions legislation was discussed, and that we certainly did not have one in 1945? Other Governments nevertheless saw that it was right not to take this kind of action, despite the very difficult financial circumstances in which they found themselves.

[Richard Graham]

I do not believe that that analogy is relevant. As I pointed out earlier to the right hon. Member for Croydon North, any analogy that stretches to compare today’s announcements with those in the original pensions legislation in 1911 is inaccurate, because it leaves aside the critical factor that life expectancy back then was hugely different from what it is now. In fact, the vast majority of people then did not live long enough to collect their pension, whereas today people will be living for 40, or possibly 50, years beyond their pension age—[Interruption.] The hon. Member for West Ham (Lyn Brown) is chuntering away, but the reality is that there are people in the public service who are drawing their pension in their 40s or early 50s, and it is not inconceivable that they will live for another 40 years.

[Lyn Brown]

Will the hon. Gentleman give way?

[Richard Graham]

I will not give way on that point.

The arguments of the Opposition, who tabled amendments 1 to 7, have been extremely disappointing. My constituents will have heard three main points from the Opposition Front Bench. First, the Opposition have opposed the changes made by the Government on the basis that they do not go far enough. Secondly, the Opposition have strongly intimated that if elected in 2015, they would not implement the changes that they recommend tonight, which reeks strongly of hypocrisy. Thirdly, they have made it clear that they are not concerned about the additional £11 billion costs of their proposals, as they could be dealt with in the future and, therefore, should not affect our debate today. That is an entirely irresponsible attitude, which is entirely in keeping with the words of the former Chief Secretary to the Treasury when he announced that he was sorry there was no money left. It is very disappointing that the same philosophy is still strongly in evidence from the Opposition Front-Bench team.

[Brandon Lewis]

I was in the Chamber when the shadow Minister commented on £1 billion a year being only one thousandth of the debt, thus implying that it was a small amount of money. If we are talking about people being in touch with reality, surely my hon. Friend would agree that people outside this place will wonder about the economic credibility of an Opposition party that says £1 billion is not a lot of money.

[Richard Graham]

My hon. Friend is absolutely correct. As an American economist once said, “A billion here, a billion there, and sooner or later you have a large sum of money”. It is disappointing to hear such an irresponsible approach to spending and to the interest being paid by everybody in this country on our vast mountain of national debt.

Let me conclude. Tonight, I shall vote in favour of amendments 13 and 14. I recognise the significant achievement, to which Age UK has paid tribute, represented by the welcome changes that will benefit large numbers of women across the country. I pay tribute again to those women in my constituency who lobbied me on the issue, for whom I fought a long and quiet campaign with Ministers. I shall not vote for amendments 1 to 7, and I greatly regret the fact that the Opposition continue to table motions that they would not implement were they in power.

[Dame Anne Begg]

The Government’s amendments are an admission that they realise, at long last, that they got it very wrong about the acceleration of the new state pension age for women. On Second Reading and in Committee, there was always a promise that the Government would come up with some sort of transitional arrangements for the group of 500,000 women who will have to wait more than a year, and particularly for the group of 33,000 women who will have to wait for two years before qualifying for the state pension. However,all they have done is to shift the timetable six months later. Why cannot they go the whole hog and take the anomaly out of the system altogether? If they were to do as the Opposition ask and delay all the increases to the age of 66 until after 2020, once the initial transition is over for women between 60 and 65, there would be no anomaly that would require transitional or any special arrangements at all. There would then be no unfairness specifically to women—it is, of course, only women who have been affected by the changes—and that would also answer the question posed by my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) about the lack of time available for the group of women affected to prepare for the new pension age.

If the Government have recognised that issue, it is a shame that they could not go further. I suspect it is probably because the Minister, to whom I pay tribute, has found that getting anything out of the Treasury is like getting blood out of a stone. I recognise that getting just over £1 billion is a huge achievement, but in the overall scheme of things, and given the effects of the change, it would have been better—it would have been better if acceleration had not been proposed in the first place—if the problems had been properly recognised.

Before Government Members applaud themselves and welcome the change too much, perhaps we should think about the enormous campaign that was waged against the proposals. Would that campaign have existed if the Government had proposed at the outset what they propose now? In other words, when all this started, if it had been proposed that there would be an acceleration of the women’s state pension age up to 66 before 2020 so that 300,000 women would have to wait 18 months longer—on top of the delay they were already facing because of the timetable already set—would there have been the same outcry and the same campaign? I think that the answer to that question is unequivocally yes.

Just because the Government have made something bad slightly less worse, it does not mean that what is being proposed is not particularly bad. Someone who, after an accident, is told by a surgeon that they will lose both their legs, and who finds out after they come out of the anaesthetic that they have lost only one might feel a degree of elation that this was better than they had expected. However, someone going into an operation expecting to lose a leg who does lose one would still feel disappointed. In other words, the amendments that we are being asked to vote on still do not amount to a good deal for the group of women concerned.

[Richard Graham]

I simply want to observe that if any of us went into an operation expecting to lose both legs and a doctor managed to save one of them, surely we would feel that the doctor had done rather a good job. The analogy with the Minister’s announcement this evening is not irrelevant.

[Dame Anne Begg]

The hon. Gentleman has just made my point for me. Yes, we would feel a lot better, but if we had gone into the operation not expecting to lose either leg, but discovered afterwards that we had lost one, we would be absolutely devastated. The result would appear to be the same, but the emotional trauma caused in the meantime is quite different. That is exactly the position faced by these women.

The women we are talking about are not rich; they are not people for whom a billion pounds here or there amounts to pennies or not much money. These are women who have made the financial calculation that they will be able to get their state pension at a particular age. Some of them are still making the calculation that they will get the state pension at 60. I received an e-mail today from someone who could not understand why her pension age had gone up by 30 months. It is because she had not taken into account the original equalisation. That is no fault of the Government, but it illustrates the fact that people need a lot of time to prepare for the change, and even if they have had the time, they are not always prepared for it.

For the group of women who had not realised that the state pension age was going up to 65, it is a double whammy to discover that it is now going up to 66 and that they must face waiting that extra time, perhaps with no income at all. Many of these women will be in that position, even if they have taken early retirement for one reason or another. We know that by the age of 65, only about 40% of women are still in work; they might have fallen out of work for various reasons. Those women will have been depending on getting not just the basic state pension, but probably pension credit and all the other passported benefits that were mentioned earlier. For these women, there is a big hole in their financial planning. We have heard much about the Government’s debt meaning that they cannot possibly afford to do right by the group of women concerned, but the effect will be on those women’s personal debt. They will have to borrow money or in many cases live in pretty dire circumstances if they do not get the pension when they were expecting to get it.

Oral Answers to Questions

Richard Graham Excerpts

Monday 18th July 2011 Commons Chamber

[Mr Duncan Smith]

My hon. Friend definitely may. We are working closely with BIS in all it tries to do and my Department is doing quite a lot to help small employers. We listened carefully on auto-enrolment, we made a change to give a little more time and that helped small businesses enormously.

[Richard Graham (Gloucester) (Con)]

2. What steps he is taking to address incentivised transfers out of defined-benefit pension schemes.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We recognise that employers need some flexibility to manage their scheme liabilities and that well-managed transfer exercises can be a useful tool, but we are concerned about scheme members being offered cash inducements to encourage them to take a transfer that might not be in their best interests. We have discussed the issue with a number of industry groups and we are actively looking to see what action needs to be taken to combat any bad practice.

[Richard Graham]

As the Minister knows, I support him on the principle that enhanced transfers do not necessarily advantage many members of pension schemes. What does he think about the other side of the equation, however? In my constituency of Gloucester, we have at least a dozen very successful family-owned manufacturing firms whose ability to grow is impeded by the residual liabilities of their closed DB schemes. How does the Minister think we can balance our responsibilities to members of the scheme with the desire to help such companies grow?

[Steve Webb]

I enjoyed my visit to my hon. Friend’s constituency, when we discussed pension issues with local employers. The important consideration is fairness, as he says. We have no problem with people transferring out of such schemes in a fair exchange, but because these are complex and difficult financial transactions we must ensure that people have the proper advice and information on which to make such choices.