Oral Answers to Questions
Stephen Timms Excerpts(9 years, 8 months ago)
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Esther McVey
Again, I need to correct the record. It would be helpful if Opposition Members looked at the true youth unemployment numbers, which are down on the year and down nearly a fifth since 2010. Opposition Members delivered an increase in youth unemployment of 45%. Please stop scaremongering, get the facts right and go and help young people into jobs.
Stephen Timms (East Ham) (Lab)
I hope the Minister will at least take some note of her own UK Commission for Employment and Skills, which points out that the UK now has German levels of adult unemployment, but eurozone levels of youth unemployment. Some 40% of unemployed people in the UK are under 25. Youth Contract wage incentives failed and were scrapped eight months early last summer. Does she have any new plans to tackle the very high level of youth unemployment—nearly three times the level of adult unemployment—which, as my hon. Friends have rightly pointed out and contrary to what she has been telling us, has gone up in the past couple of months, not down?
Esther McVey
What can I say to Opposition Members? They seem blind to the truth. The fact of the matter is that youth unemployment was going through the roof—there was an increase of 45%—and this Government have brought it down by nearly 200,000 since 2010. Working with businesses, we brought in an array of support, from work experience to sector-based work academies and wage incentives. We brought in a whole plethora of support. Some worked better than others—that is correct—but the aim and the outcome remains: youth unemployment is down by nearly 200,000 since Labour left office.
Stephen Timms
There is not much evidence of soft skills in that answer. The part of the UK where we have seen real progress on youth unemployment has been Wales. Youth unemployment used to be higher in Wales. Thanks to Jobs Growth Wales it is not higher any longer. Is it not now clear that for young people to benefit fully from the recovery that is under way, we need the young people’s job guarantee right across the UK?
Esther McVey
I am afraid it is the right hon. Gentleman who has soft skills. I have core skills in telling the truth: youth unemployment is down 200,000 since he left office. We do not need a job guarantee scheme, which does not work and costs an incredible amount of money. The work experience scheme we brought in is delivering better results at a twentieth of the cost. You bring in Labour, you pay a lot more for a lot less results.
Compulsory Jobs Guarantee
Stephen Timms Excerpts(9 years, 9 months ago)
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Stephen Timms (East Ham) (Lab)
I beg to move,
That this House calls on the Government to put a strict limit on the amount of time that people can be left on jobseeker’s allowance without being offered, and required to take up, paid work, by introducing a compulsory jobs guarantee that would ensure that anyone under 25 who has been receiving jobseeker’s allowance for a year, and anyone over 25 who has been receiving jobseeker’s allowance for two years, would be offered a paid job, with training, that they must take up or face losing benefits; and further calls on the Government to ensure this compulsory jobs guarantee be fully funded by a one-off repeat of the tax on bankers’ bonuses and restricting pension tax relief on incomes over £150,000.
This is a debate about the kind of recovery our country needs to see, about who is being left behind, about the kind of future we are building for the next generation and about whether this Government are using more than just warm words when they talk about full employment, as the Prime Minister has done recently.
Our challenge to Ministers today is to put a strict time limit on the period for which someone can be left on jobseeker’s allowance before they are offered, and required to take, proper paid work. The compulsory jobs guarantee, funded by a tax on bankers’ bonuses and restrictions to pensions tax relief on incomes over £150,000 a year, would mean a new start and new hope for the more than 29,000 young people who have been out of work for over a year, and for the 130,000 over-25s who have been out of work for more than two years.
Andrew Bridgen (North West Leicestershire) (Con)
Will the right hon. Gentleman clarify whether this will be the 10th or the 11th time his party has spent the bankers’ bonus tax?
Stephen Timms
We had a bankers’ bonus tax in the past, but this will be the sole purpose for the new bankers’ bonus tax to be introduced after the next election. We will all be committed to the guarantee that I am setting out for the House this afternoon.
Those people I have described are the ones this Government have left behind. They are the people whom Labour Members are not going to forget, not only because we owe them a fair chance to escape long-term unemployment but because we cannot afford, as a country, to leave them on benefits for years on end. Nor can we afford the consequences of the low wages that they are likely to earn if they do find work after such a long period of unemployment.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Does my right hon. Friend agree that this guarantee is a serious step towards what has always been my great ambition, which is that there should be no unemployment for anyone under 25? They should be in a job, in a job with training, in training, in education or in valuable paid work experience. That is the ambition and the Government cannot grasp it because it is too ambitious.
Stephen Timms
My hon. Friend is absolutely right about the ambition, and of course this scheme will be an enormous step towards tackling the scourge of long-term unemployment. To build a strong and stable recovery, and a fairer and more united country, we need to make sure, as he says, that everyone gets to play their part, that we harness its talents and fulfil the potential of all, and that everybody knows they have a stake in our country’s future.
We have seen some welcome recent falls in the headline rate of unemployment, from the peaks reached after this Government choked off the recovery they had inherited in 2010. More people in work is always good news, which is why we repeatedly urged the Government to do more to stop the soaring unemployment they presided over after the general election.
Mr Alan Reid (Argyll and Bute) (LD)
I draw the right hon. Gentleman’s attention to the fact that in my constituency unemployment rose by 385 under his Government, whereas it has fallen under this Government by 763. His Government failed, not this one.
Stephen Timms
But long-term unemployment is higher in the hon. Gentleman’s constituency now than it was at the time of the last election. That is the legacy of the three years of almost no growth in the economy following the general election, which we now need to address. Let me say to him and to other Government Members that self-congratulation on what has happened in recent months is dangerously complacent about underlying problems in the labour market and utterly out of touch with the impact such problems have on people who are desperate to work and to earn their way out of the cost of living crisis they are facing. People are deeply concerned about the prospects for their children and the grandchildren. Those are the points we now need to address.
Alok Sharma (Reading West) (Con)
The right hon. Gentleman talks about self-congratulation, but that is not what Government Members are doing. We are recognising that policies have been put in place for businesses to create more than 2 million jobs. Why will he not congratulate the Government on their policies and businesses on creating those 2 million-plus jobs?
Stephen Timms
We were left with a legacy of a very large number of people who have been out of work for a long time. It is welcome that at long last the economy is growing and jobs are being created; the long-delayed recovery is now, finally, in place. The question is: are those who have been left out of employment by the events of the past few years going to get the opportunities that these new jobs will create? Addressing that is exactly the purpose of this afternoon’s debate and of the proposal I am commending to the House.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
If the right hon. Gentleman wants to be completely fair, will he take the chance now to apologise for the fact that under the last Government long-term unemployment doubled and youth long-term unemployment rose by a half? Should Labour not be saying, “We are really sorry, we got something very badly wrong”?
Stephen Timms
The number of long-term unemployed young people—those claiming for more than a year—is a lot higher now than it was at the time of the election. As we are talking about apologies, I would hope the Secretary of State would apologise to the House and to the country for the fact that the Government allowed unemployment to soar to 2.67 million after the general election, allowed youth unemployment to soar to more than 1 million and allowed long-term unemployment to hit historic highs at the end of 2013. Those are the failures and the legacy we must now address.
Pete Wishart (Perth and North Perthshire) (SNP)
I note that Labour’s motion talks about taking benefits away from under-25s if they do not take an offer of a job. How does the policy of the right hon. Gentleman and the Labour party to take benefits away from young people differ from the Tory party’s policy on taking benefits away from young people?
Stephen Timms
Young people want a job. That is what they are asking for and that is what we will provide under the jobs guarantee, and I hope the hon. Gentleman will support us.
Andrew Gwynne (Denton and Reddish) (Lab)
May I commend to my right hon. Friend the work of Tameside’s Labour council, which has implemented, as part of its “15for15” pledges, a local youth jobs guarantee and a Tameside enterprise scheme that will support small businesses not only to take on and to train young people, but to give them vital mentoring?
Stephen Timms
I am glad to join my hon. Friend in congratulating Councillor Kieran Quinn and Tameside’s council on what they have achieved. We are seeing this idea being introduced by Labour councils. We heard earlier this afternoon about the Edinburgh guarantee, and these ideas are now taking their place around the country. We now need the Government to be putting a national guarantee in place.
Unemployment is now, at long last, back on the downward path that the Labour Government set it on in 2010, although, of course, its level is yet to return to the lows under Labour before the global financial crash.
Stephen Timms
I will in a moment, but I wish to make a little more progress first.
There are serious causes for concern in the labour market and much more needs to be done to build a recovery that works for everyone. Long-term unemployment remains much too high. The long period—three years—after the general election when there was almost no growth in the economy has left too many people locked out of employment and now left behind even as overall employment is rising. The number of people claiming jobseeker’s allowance for more than two years is 224% of what it was in May 2010, and young people remain at high risk of unemployment. Strikingly, the relative position of young people has become steadily worse since 2010 The most recent figures show that the youth unemployment rate is almost three times the overall rate—it is 2.9 times that rate—and for the past three months, while overall unemployment has been falling, youth unemployment has been going up. The total is now back above three quarters of a million, and we just have to hope that that is not the new trend. Action needs to be taken now to make sure that it is not and that young people are able to share in the benefits of the recovery.
Andrew Bridgen
Would the right hon. Gentleman like to comment on the words of James Sproule, the chief economist of the Institute of Directors? He said that
“Labour’s job scheme does not bear much scrutiny as a solution. No government can pull a lever in Whitehall and expect youth unemployment to disappear.”
Is not the truth that only the private sector can create sustainable jobs but that it needs a business-friendly Government to do so?
Stephen Timms
Jobs are being created. The question is: who is going to get them? At the moment, the evidence clearly shows that young people disproportionately are not. We know that the future jobs fund worked—I will discuss that in a moment—and we are going to be repeating that approach with this jobs guarantee.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The right hon. Gentleman is making some important points about youth unemployment, which is a big issue in Wales. Given that, does he think his Labour colleagues in Wales have been wrong to cut the Jobs Growth Wales fund for 18 to 24-year-olds?
Stephen Timms
I shall be discussing Jobs Growth Wales. I believe the hon. Gentleman is commending it, and I agree with him; it has been a great success and there are certainly lessons to be learned by the rest of the UK from the great success of that programme.
Derek Twigg (Halton) (Lab)
My right hon. Friend rightly says that young people, in particular, have been suffering and continue to suffer under this Government. Is not one of the important points about our jobs guarantee the fact that it will give young people experience in work? One of the biggest problems on getting into work is that lack of experience because these people cannot get a job.
Stephen Timms
My hon. Friend is right about that. I have spoken to a large number of people, including young people whose break came through the future jobs fund. They have said that having got six months’ work under their belts, thanks to that initiative, they were then able to look after themselves and apply for jobs, do well and build a career. As he rightly says, young people need that crucial first break and that is what this guarantee will provide.
Every day of unemployment means hardship, worry and missed opportunity for someone who wants to be working and earning. But the full costs are borne more widely and last much longer. Every day of unemployment is a cost to the taxpayer in unemployment benefit and tax revenue forgone, and a cost to the economy in lost output. It also imposes a cost we can never account for, through the strain it puts on individuals, families and communities. Those costs—in benefit spending, tax revenues, economic output, and individual and social well-being—can reach far into the future, as the scarring effects of unemployment build up.
The Acevo commission on youth unemployment found that people who experienced unemployment in their younger years are more likely to suffer not only spells of unemployment in later life, but in work an average wage penalty of more than 15%. That is why it is so troubling that youth unemployment is going back up. It is back up today to more than three-quarters of a million. Young women now unemployed will, a decade from now, be earning on average £1,700 a year less as a result of being unemployed today. Young men now unemployed will be earning £3,300 less a decade from now. Those effects worsen the longer that somebody is out of work.
Work by Paul Gregg at the university of Bath and Emma Tommony at the university of York suggests that the 200,000 young people who have now been out of work for more than a year are, on average, likely to spend another two years either unemployed or economically inactive between the ages of 28 and 33, and that the men, by the age of 42, will be suffering a wage penalty of more than £7,000 a year. Those are big effects that need to be addressed.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
My right hon. Friend is making a very powerful case. On the effects of long-term unemployment on young people, he mentioned the impact on income, but will he comment about the impact on mental health, as unemployment can have lifelong effects? Does he agree that it is important to have a joined-up approach between the Department of Health and the Department for Work and Pensions?
Stephen Timms
My hon. Friend is absolutely right. I was at an event yesterday with the Prince’s Trust where a young man was describing how he was about to be sectioned when, thanks to the Prince’s Trust, he was able to go into a job and his mental health problem was resolved. She is also right about the costs to the economy and the health service of long periods of unemployment early on.
Mike Gapes (Ilford South) (Lab/Co-op)
Will my right hon. Friend confirm that the jobs that we are talking about here, unlike the jobs that many young people have to take at the moment, which are zero hours and exploitative, will be real and proper jobs? They will not be the fake jobs that this coalition Government are producing.
Stephen Timms
I can assure my hon. Friend that these will be jobs for at least 25 hours a week and paid at least at the level of the national minimum wage.
The persistent unemployment that we still see today could be contributing to a continued cost of living crisis tomorrow, weakening the productivity and the growth potential of our economy as well as undermining efforts to keep social spending under control and to bring down the deficit. We must take urgent and effective action now to tackle the problem.
What action have we seen from the Government? One of their very first acts on entering office was to abolish the future jobs fund, breaking, incidentally, the promise that the current Home Secretary made during the election campaign. Eventually, the DWP published an evaluation of the future jobs fund and, to the surprise of nobody on the Opposition Benches, it was glowing. It found a net benefit to society—net of all the Exchequer costs—of £7,750 for every single young person who took part. It reckoned that, within three years, half the cost of that intervention came back to the Exchequer because participants stopped claiming benefits and started paying tax and national insurance. It was an exceptionally cost-effective policy.
By late 2012, when the evaluation was published, it was too late. The future jobs fund had gone. In the time since its abolition, unemployment had risen to more than 2.5 million and youth unemployment had risen to more than 1 million.
The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)
As the right hon. Gentleman is referring to the research, may I just read out what it says? It says that
“even under the most optimistic combination of assumptions…the FJF programme is still estimated to result in a net cost to the Exchequer…there might never be an estimated net benefit to the Exchequer.”
That is what the analysis said.
Stephen Timms
If the right hon. Gentleman looks at the previous paragraph, he will see that the evaluation said that half the cost of an intervention came back to the Exchequer within a three-year period and that the wholly inadequate replacement for it was the Work programme, which sends more people straight back to the jobcentre after two years than it places in sustained work. It also performs shockingly badly not just in Edinburgh, as we were hearing earlier on, but for those in need of support, such as older workers and people with health problems for whom it has so far recorded failure rates of 87% and 93% respectively. The Work programme has been a failure and we must replace it with something that works better.
On youth unemployment, the Deputy Prime Minister saw what was going on and had an attack of conscience. He announced the Youth Contract, which the Government promised would lead to 160,000 work subsidies for young jobseekers. It started in April 2012 and it was an utter flop. It was not promoted. That was undoubtedly because DWP Ministers, with the possible exception of the Minister for Pensions, did not have their heart in it. Employers knew nothing about it. Those who did hear of it were confused by it and had nothing to do with it. The Government’s own advisers on poverty and social mobility said that it was not working, so last summer it was unceremoniously shut down early, after it had achieved fewer than 10% of the promised placements that were budgeted for. Ever since then, unemployment among young people has been going up.
The latest proposal from the Government is time-limiting support for young people without giving them the opportunity to train, after which they will simply be required to do community service. That is not an employment policy, but a policy for punishing the victims of the negligence and ineffectiveness of this Government.
Mr Marcus Jones
For all the right hon. Gentleman’s bluster, does he not accept that youth unemployment has gone down under this Government? For all his criticism, does he not accept that youth unemployment under the Labour Government was steadily going up from 2004 to 2010? Labour does not have a good record.
Stephen Timms
Youth unemployment was affected by the worldwide economic crash. What is worrying—even the hon. Gentleman might, in the privacy of his own reflection, be worried about this—is that, at a time when overall unemployment is coming down, youth unemployment is going up. The rate of youth unemployment is nearly three times the overall rate of unemployment now, and that multiple has been going up progressively since the general election.
Stephen Timms
The hon. Gentleman just needs to look at the figures published in January, which show that youth unemployment has been going up for the past three months. The figures that we saw last month cover the period from September to November.
Stephen Timms
Let me make a little more progress, then I will gladly give way again.
Labour has a real plan to get young people into work and to end the scourge of long-term unemployment. It is a tough plan as we will hold people responsible for accepting work when it is offered, but it is also a fair plan as it gives a young person the opportunity to work, earn a wage and develop skills. Our compulsory jobs guarantee will guarantee a real, paid job, most likely in the private sector—[Interruption.] Members just need to look at what has happened with Jobs Growth Wales, which we heard about a few moments ago. About 80% of the jobs provided on the same wage subsidy model—5,000 companies have been hosting those jobs—are in the private sector. We will guarantee a job for every 18 to 24-year-old who has been looking for work and claiming jobseeker’s allowance for a year, and for every adult aged 25 and over who has been looking for work and claiming for two years.
Robert Halfon (Harlow) (Con)
I am grateful to the right hon. Gentleman for giving way. Let me quote him the statistics from Harlow. In May 2010, 605 young people aged 18 to 24 were claiming JSA, a rate of 8.1%. That was higher than the national average. Now, 235 young people are claiming JSA in Harlow—a rate of 3.1%—putting Harlow back in line with the national average. What does he say about that? Surely those figures are to do with not just the Work programme but all the investment in apprenticeships, the new university technical schools and other methods.
Stephen Timms
I refer the hon. Gentleman to the national figures. Of course unemployment was hit hard by the worldwide economic crash, but over the past three months in particular there has been a steady, month-by-month increase in youth unemployment at a time when overall unemployment is coming down. I put it to him—I think many Government Members would sympathise with this view—that we need to ensure that young people have a fair chance in the recovery that is now under way of gaining the jobs that are being created. The measure that I am arguing for will allow that to happen.
Stephen Timms
I will make a little more progress and then I will gladly give way again.
The Government would cover the costs to employers of paying national minimum wage and national insurance for a 25-hour week plus £500 per employee to help businesses with training, admin and set-up costs. In return, employers would be expected to provide training and development for those taking part and show how the jobs were additional—not replacing existing jobs and not leading to somebody else losing their job or seeing a reduction in hours.
Nick de Bois (Enfield North) (Con)
Given the right hon. Gentleman’s faith in the private sector in rallying to his scheme, is he not perturbed by the Institute of Directors saying that it
“does not bear much scrutiny”?
It continued:
“Wage subsidies for employers are not the source of sustainable jobs.”
With that in mind, will he place in the Library or share with the House how many companies have come forward to express their delight at the scheme?
Stephen Timms
I can answer that very directly: 5,000 employers are taking part in the Jobs Growth Wales scheme. The Federation of Small Businesses in Wales is a champion. I simply contrast the quote given by the hon. Gentleman with the experience of those on the ground, including the FSB.
Jim Sheridan (Paisley and Renfrewshire North) (Lab)
Many of the jobs that my right hon. Friend is referring to would come from small and medium-sized enterprises. One of the main problems faced by SMEs on my patch is cash flow—trying to get money from work that they have completed. Is there anything that a future Labour Government could do to speed up payments, so that small suppliers could get the money in and take on young people?
Stephen Timms
I have just mentioned the FSB. My hon. Friend will know how active it has been in demanding change of the kind he describes and makes a telling case for. I agree: more should be done to support small business in that way, and in other ways. We need to reform how the banks deal with their small-business customers too.
Andrew Bridgen
The right hon. Gentleman is being generous in giving way. He has expounded a great deal on his belief in Jobs Growth Wales. His party’s socialist policies have been implemented in Wales, but figures from the Welsh Government show that only one in three of the young people who have applied for Jobs Growth Wales got a job, so it is nowhere near guaranteeing a job for all young people.
Stephen Timms
We will be delivering a guarantee, exactly as we did with the future jobs fund. Anyone can look back at the record of the future jobs fund, where a guarantee was delivered. It will be again.
I shall say a little more about how the guarantee would work. Participants would be required, if their employer did not plan to keep them on when the subsidy ended, to pursue intensive job search for a permanent opportunity at the end of the six months. Any jobseeker who refused to take up a job offered under the guarantee would, in the normal way and in line with the long-standing conditions for benefit claims, lose their benefits. That is always the case.
The Minister for Pensions (Steve Webb)
The right hon. Gentleman is very careful with his figures, so he will know the answer to this question. He points to the future jobs fund as evidence of how his new scheme would work, and he says he hopes those new jobs would be in the private sector. What percentage of future jobs fund jobs were in the private sector? What is the figure?
Stephen Timms
Very few. There is the good example of Jaguar Land Rover taking on a group of young people under the future jobs fund, and my understanding is that every single one of those young people was kept on in their job when the wage subsidy ended. The future jobs fund was largely about the charity and public sectors; the guarantee is largely about the private sector, exactly as Jobs Growth Wales has been.
Alok Sharma
The right hon. Gentleman is keen to talk about numbers, so let me give some from his own constituency. In May 2010, there were 410 jobseeker’s allowance claimants who had been unemployed for more than a year. In December 2014, the figure was 225. In May 2010, the six-month figure was 1,585, but in December 2014 it was 1,045. Will he not acknowledge that, even in his own constituency, this Government’s policies are making a difference and people are getting real jobs?
Stephen Timms
Those figures, in my constituency and in his, are far too high. A great deal more needs to be done to enable young people in particular, but long-term unemployed over-25s as well, to share in the benefit of the recovery that is, at last, under way.
Stephen Pound (Ealing North) (Lab)
I am a little distressed at the rather mean-spirited response from some Government Members. Does my right hon. Friend agree that one of the most salient features of the proposal is giving people the experience of work and letting them see what 8 o’clock in the morning looks like and get the idea of being in a job? If the job that they move into in the future is not the same job, so what? The important thing is to get people into the world of work.
Stephen Timms
My hon. Friend is right. I have spoken to many people, including those who went through the future jobs fund, who say exactly that: having the break of getting six months in a job, becoming familiar with the habits and routines of work, and putting that on their CV enabled them to thrive.
This policy is not just an immediate intervention to limit youth and long-term unemployment; it is an investment in the skills and employability of the British work force, underpinning our productivity, growth potential and fiscal sustainability into the future, but we have been clear that there will be no commitments in our manifesto that require more borrowing. Therefore, we have set out clear plans to fund the policy fairly and prudently.
In the first year, to provide for the large number of long-term claimants left by this Government’s policies, we would pay for the policy with a repeat of the successful bank bonus tax, which was levied in 2010. That could raise £2 billion. In future years, the costs would be covered by restricting pensions tax relief for the highest paid—those earning more than £150,000 a year—to 20%. The House of Commons Library has estimated that that could raise between £900 million and £1.3 billion a year. That is a fair and prudent way to fund jobs for young people and the long-term unemployed, and to fund the guarantee throughout the next Parliament.
Stephen Timms
I will not give way again.
Those measures have been opposed and rejected by Government Members, but we have seen where five years of their trickle-down philosophy has taken us—five years of protecting privileges for a few at the top while leaving the rest to fend for themselves.
Our plan is to put working people first, ensuring that those who can and should work are in work, that we make the most of their talents and that hard work is always rewarded. That is the way to secure a recovery from which everybody can benefit and to get social security spending under control and our public finances on a sustainable footing. That is the way to secure a future in which prosperity and social justice go hand in hand and ensure that the next generation can look forward to a brighter future. That is the plan our country needs. This Government will not deliver it. We can be thankful that the time is not far off when we can elect a Labour Government who will.
Mr Duncan Smith
May I say to my hon. Friend—I repeat, my hon. Friend—what an excellent job he has done in championing his constituency? He is right—it is about getting private sector businesses to create real jobs for young people and older workers to go into.
I want to deal in some detail with the jobs guarantee versus the future jobs fund. A Labour press release that I saw in 2014 extolled the Opposition’s pet project as
“building on the success of the Future Jobs Fund”.
The right hon. Member for East Ham carried on the Labour line. I hope that was noted back at headquarters. He is clearly to be trusted through the election, and I give him a lot of support for that.
As for the claimed success of the future jobs fund, the DWP analysis that I quoted earlier is important. It was commissioned under Labour and was subjected to extensive peer review by the National Institute of Economic and Social Research, which, as I said earlier, found that not only was the fund estimated to result in a net cost to the Exchequer but that, as I pointed out, the future jobs fund was not estimated to benefit the Exchequer at any stage, and the Exchequer would not be able to get back the money that it had spent on the programme.
By contrast, as the hon. Member for Ealing North said, young people want work experience. I remember that early on, when I first went into jobcentres, I was accosted by young people who said that the problem for them was that at job interviews they were asked whether they had job experience, and when they said they had none, they were told that they could not be given a job without work experience, but their response was that they could not get work experience without a job.
Under the previous Government, people were allowed only two weeks’ work experience before they were expected back at the jobcentre. What we did instead was to allow them up to two months’ work experience in a business, and an extra month if they were offered a job or an apprenticeship. So, by contrast, work experience under this Government—this is the interesting point—has achieved the same success rate at least as the future jobs fund achieved, but at a twentieth of the cost—£325 per place as opposed to £6,500 per place. Another difference is that the vast majority of positions under the work experience programme are in the private sector, whereas I can think of hardly any private sector companies that offered jobs under the future jobs fund. It is a success versus a costly failure.
Stephen Timms
As the right hon. Gentleman knows—he has the evaluation in front of him—there was a net benefit to society of £7,500, net of all Exchequer costs, for each person who took part. Is he surprised that youth unemployment has been going up over the past three months, at a time when overall unemployment is coming down, or was that what he expected?
Mr Duncan Smith
Youth unemployment is now lower than it was under the previous Government, and it has been falling consistently. I will wait for the figures for the next few quarters, and when they show that youth unemployment has continued to fall, I expect the right hon. Gentleman to write me a note saying, “Sorry about that; that’s another thing we got wrong.”
Social Security and Pensions (Statutory Instruments)
Stephen Timms Excerpts(9 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen Timms (East Ham) (Lab)
Will the Minister also confirm the straightforward fact that if the previous arrangement of uprating by RPI had remained in place throughout this Parliament, the state pension would be higher now than the figure in this order before us?
Steve Webb
I will come on to the issue of the use of the RPI, because the right hon. Gentleman knows the RPI has fallen into disrepute and no credible Government would have continued with the RPI, so the question does not arise.
The new rate of the state pension will be £115.95 a week for a single person, an increase of £2.85 from last year. We estimate this means the basic state pension will be around 18% of average earnings, and my hon. Friends might be interested to know that, as a share of the national average wage, that is the highest rate of state pension for over two decades. Thanks to the coalition Government’s commitment to the triple lock, a person on a full basic state pension will, as my hon. Friend the Member for Worcester (Mr Walker) said, receive around £560 more in 2015-16 than if the basic state pension had been uprated only by earnings during this Parliament. That commitment means that, since coming into office, this coalition has increased the basic state pension by about £950 a year.
The triple lock applies to the basic state pension, and the question is: what should we do for the poorest pensioners on pension credit? Under the law left to us by the previous Government, we are required to uprate pension credit only in line with earnings. We could therefore have done the legal minimum and put the pension credit up by about 0.6%. However, we thought that that was too little for the poorest pensioners. We wanted to ensure that the very poorest pensioners, those who are dependent exclusively on the guaranteed credit, would benefit in full from the triple lock.
Each year, the standard minimum guarantee must be increased only in line with earnings, which would have equated to 0.6%, but to ensure that the poorest pensioners benefited from the full cash value of the increase in the basic state pension, we decided to increase the value of the standard minimum guarantee by 1.9%, so that single people would receive an increase of £2.85 a week and couples would receive an increase of £4.35 a week. Consistent with our approach last year, the resources needed to pay for this above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income may see less of an increase.
This year, the state earnings-related pension scheme—SERPS—and the other second pensions will rise by 1.2%. Labour froze SERPS pensions in 2010, but this will be the fifth year in a row that the coalition has uprated SERPS by the full value of the consumer prices index.
This year, the coalition will continue to ensure that those people who face additional costs because of their disability, and who may have less opportunity to increase their income through paid employment, will see their benefits increase by the full value of the CPI. So disability living allowance, attendance allowance, carers allowance, incapacity benefit and personal independence payment will all rise by 1.2 % from April 2015. In addition, those disability-related and carer premiums paid with pension credit and working-age benefits will also rise by 1.2%, as will the employment and support allowance support group rate and the limited capability for work and work-related activity element of universal credit. Pensioner premiums paid with working-age benefits will increase in line with pension credit.
We have been debating the use of the CPI on a more or less annual basis for the past four years. When we first switched to using the CPI, the right hon. Member for East Ham (Stephen Timms) responded to the debate. He rather inventively accused us of being “ideologically driven” in our switch to the consumer prices index from the retail prices index. The choice of a price index for the uprating of benefits is not quite up there alongside the great battle between communism and capitalism, is it? At the time, however, he said:
“Changing permanently from RPI to CPI, other than in this year, and keeping things that way even after the deficit is long gone, is plainly not a deficit reduction measure—it is ideologically driven, and the Opposition do not support it.”—[Official Report, 17 February 2011; Vol. 523, c. 1182.]
Since then, there has been a great deal of analysis of the suitability of different price indices, and his view that we should somehow clear the deficit—I do not know when, under his plan—and then go back to the good old RPI is no longer credible. I hope that he will set out his position on uprating when he responds.
The right hon. Gentleman is sceptical of my views on these matters—he hides it well, but he probably is—so I want to bring forward two witnesses. My first witness is Tim Harford, who presents the BBC’s statistics programme “More or Less”.
Stephen Timms (East Ham) (Lab)
I thank the Minister for his explanation and confirm that I do not plan to express concerns about the Guaranteed Minimum Pensions Increase Order 2015. I do, however, wish to comment on the Social Security Benefits Up-rating Order 2015, on which he spent most of his time.
As we noted last year, this is a rather thinner debate than the corresponding ones prior to 2014. Much of what we used to consider in these debates is now covered by the Welfare Benefits Up-rating Act 2013, which imposed a 1% uprating for this year, and so is outside the scope of these orders. Uprating this year is notable for one element at least: for the first time since its introduction, the so-called “triple lock”, which the Minister referred to on a number of occasions, has delivered a higher rise in the state pension than the formula in use up to 2010 would have done.
The term “triple lock” was intended to convey the impression of great generosity towards pensioners, but it is worth just reflecting again on the history of its use. In its first year it was announced but not actually used, because it would have delivered a pension rise that was too small and so the Minister overrode it and adopted RPI. He told us a few minutes ago that he did not think much of RPI, but he used it in the first year in place of the triple lock, because the triple lock would have delivered a small rise. He was sensible to override the triple lock, because clearly it would have been unwise to use it in that first year. In the following three years, the triple lock was applied and in each year it delivered a pension increase that was lower than the increase that would have been delivered under the formula in use previously—uprating in line with the increase in RPI.
This year, for the first time, the increase will be slightly greater than would have been delivered under the previous formula. The increase in this order is 2.5%—the minimum allowed under the current arrangements—whereas the increase in RPI is slightly lower at 2.3%. It remains the case that the basic state pension for 2015-16 would be higher than the figure in the order, under paragraph 4(3)(b), if the formula in use before the general election had been applied each year since then, instead of the triple lock. Contrary to the impression that is frequently given, the triple lock has in fact delivered a lower state pension in each year that it has been applied than the previous arrangement would have done. We are often told that the triple lock is this extraordinarily generous arrangement, when, in fact, it is less generous and delivers less to pensioners than the previous arrangement would have done.
Steve Webb
Just for the avoidance of doubt, let me say that we are paying a pension increase this April that is four times the rate of earnings growth and double the rate of headline inflation. Is the right hon. Gentleman saying that that is not enough?
Stephen Timms
I am merely pointing out to the Minister that the increase is 0.2 percentage points higher than the increase in the RPI. Before the last election, the state pension was raised in line with the RPI. If that arrangement had continued each year since 2010, the state pension would be higher for the coming year than the figure in the order in front of us. I simply think that, in listening to his frequent protestations about how generous the Government have been to pensioners, the House should be aware that in every single year since 2010 the level of the state pension is lower than it would have been if the previous arrangement had stayed in place—except for the first year when they matched what the arrangement would have been before the election. That is surprising, especially in the light of the fact that Ministers keep on telling us about their generosity towards pensioners.
As well as the state pension, the order contains uprating details for universal credit. Those are currently largely of academic interest, because so few people are in receipt of universal credit. The Government announced in November 2011 that a million people would be claiming universal credit by April 2014. That was an absurd boast, as we pointed out at the time. The Government have consistently failed to grasp the scale of what would be required to implement universal credit. The latest figure for universal credit claimants is 27,000. At the present glacial rate of progress, it will be 1,571 years before the transition to universal credit is complete.
In 2011, Ministers said that transition to universal credit would be complete by 2017, a date that was then six years ahead. Now we are told that the transition to universal credit will be complete by 2021 at the earliest, which is six years away. Expected completion has slipped by four years in four years. The National Audit Office reports that £344 million had been invested in universal credit IT up to 31 October 2014, but that the value of the assets created by that date was £125 million—little more than a third of the sum invested. Waste on such a large scale reflects just how much trouble this project is now in, and the problems continue. Last October, the Department predicted that there would be 100,000 people claiming universal credit by May of this year. I recently tabled a written question to inquire whether Ministers still thought that that would be achieved. The Minister for Disabled People, whom I am delighted to see in his place, answered the question on 26 January. He said:
“The latest forecast agreed with OBR still rounds to 0.1 million cases”.
So the figure has clearly already slipped again, and that is only since October.
This debate is the last of its kind before the election, so it gives us an opportunity to reflect on the cumulative impact of the Government's changes to benefits in this order and the previous ones. That task has been greatly assisted by the publication last month of the report from the Institute for Fiscal Studies—the former employer of the Minister for Pensions—on “The effect of the coalition's tax and benefit changes on household incomes and work incentives.” It is a very revealing analysis. Let me quote the opening couple of sentences, which say:
“Tax and benefit changes introduced by the coalition have reduced household incomes by £1,127 a year or 3.3% on average...These involve an average loss to households of £489 per year, comprising an average gain of £321 a year from cuts to direct taxes, an average loss of £333 a year from increases in indirect taxes and a £477 a year average loss from benefit cuts.”
Even the gain through direct taxes is outweighed by the loss through indirect taxes, never mind the bigger loss from benefit cuts as a result of this order and its predecessors.
The report goes on to state:
“Low-income working-age households have lost the most as a percentage of their income from tax and benefit changes introduced by the coalition…Middle-income working-age households without children have gained the most”.
That is what the Government have achieved. Low-income households have lost and middle-income households have gained. That is not what the Minister and his hon. Friends used to argue for when they were in opposition, but it is what they have delivered in office.
The IFS found that households with children have been hit hardest by tax and benefit changes. The poorest households with children have lost more than 6% of their incomes and those without children in the middle of the income distribution have seen their incomes rise as a result of tax and benefit changes, as they have benefited from personal allowance increases and have not been affected by social security changes such as those to tax credits. Families out of work or with only one parent in work lost almost £2,000 a year as a result of the changes, while families with both parents in work lost between £1,000 and £1,500 a year.
The shadow Secretary of State, my hon. Friend the Member for Leeds West (Rachel Reeves), published new analysis from the House of Commons Library last week that shows that five more years of failure to make work pay of the kind we have seen in the past five years, with wages today on average £1,600 less in real terms than at the general election, and wages falling short of expectations to the same extent in the next Parliament as they have in this, would mean another £10 billion in social security spending on top of the figure already projected.
The Government’s own Social Mobility and Child Poverty Commission, in its second annual assessment of progress towards the 2020 child poverty targets, was scathing. It states:
“The impact of welfare cuts and entrenched low pay will bite between now and 2020. Poverty is set to rise, not fall. We share the view of those experts who predict that 2020 will mark not the eradication of child poverty but the end of the first decade in recent history in which absolute child poverty increased…We have come to the reluctant conclusion that, without radical changes to the tax and benefit system to boost the incomes of poor families, there is no realistic hope of the statutory child poverty targets being met in 2020.”
The Minister served, as I did, on the Public Bill Committee on the Child Poverty Act 2010. He argued then that the targets should be more demanding, but his legacy, and that of his colleagues, will be that there is no realistic hope of achieving those targets by 2020.
Should we be elected in May, our approach will be different. We will balance the books and get the national debt falling in a fair way. We also want the Office for Budget Responsibility to monitor and report on the Government’s progress in reducing child poverty. That is something that the OBR should do. We plan to restrict the growth of benefit spending through stronger, more balanced economic growth and more good jobs paying decent wages. We will tackle low pay and insecurity, raise the minimum wage and improve its enforcement, tackle the abuse of zero-hours contracts and expand free child care for working parents. We will incentivise payment of the living wage by employers by offering a 12-month tax break employers who raise their employees’ wages to that level. We will introduce our compulsory jobs guarantee to get more young and long-term unemployed people off benefits and into work.
We will reform the banks and end the dither on big decisions, such as airport expansion, with an independent infrastructure commission, and we will back British firms by cutting business rates for small firms and unashamedly arguing for Britain to stay in a reformed European Union. We have a radical plan for spreading power and prosperity across the country, including giving England’s city and county regions more power over their public transport networks and devolving £30 billion-worth of funding over five years to the English regions. We will tackle the housing crisis with a commitment to build 200,000 homes a year by 2020.
We could have recognised the case for a temporary use of CPI for benefit uprating as an element of a balanced programme of deficit reduction. We do not, though, support the Government’s decision to adopt CPI permanently. We do support the increase in the state pension in line with the triple lock, and as voting against this measure would have the effect of delivering no increase at all, I will not be asking my hon. Friends to vote against the orders.
When we look at the impact on poverty and on middle income households of the policies that have been adopted over the past five years, it is clear that it is urgently time for a change.
Steve Webb
With the leave of the House, I shall respond briefly. The right hon. Member for East Ham (Stephen Timms) will not be asking his hon. Friends to vote against the orders because he has sent them all home, as far as I can tell.
Let me try to deal with a few of the points that were raised. There were lots of comparisons between the rate we are paying and what would otherwise have happened, so to be clear about the £560 statistic, the comparison is as follows: the basic state pension—the £520 comparison—is the triple lock against earnings. That is what would have happened, compared with uprating in line with earnings, but there are several different benchmarks.
On the state pension, we cannot have these debates without refreshing our memory. One of the reasons that we have the triple lock and that 2.5% floor is that the Opposition, when in government, once raised the pension by a paltry 75p. They were so embarrassed by that that they had to have a £5 increase the next year. We do not think that is good policy, so we say that there should be a worthwhile increase each year, which is where the triple lock comes in.
The right hon. Gentleman says that the benchmark is lower than it would have been if we had linked the pension to an index of inflation which the Office for National Statistics report says is discredited, so why is that an interesting comparison? He says that the Labour party rejects the move to CPI, but presumably he is not committing to RPI as he is not allowed to make any spending commitments because the shadow Chancellor will not let him. “Vacuous posturing” is a rude phrase and I would not use it. The Opposition do not like what we are doing, but to imply that in a year when we are increasing the benefit by four times the average wage and twice the rate of inflation that that is still not enough is extraordinary.
If the right hon. Gentleman wants to stand up and say, “We’d pay a higher pension,” fine. He is entitled to say that, but he has not said that Labour would pay a higher pension. He wants us to think that, but there is no money to pay a higher pension. He simply wants to imply that Labour would do so. He says that the Opposition reject CPI as the main measure, but he has not told us what it would be. How can people vote for the Labour party in anticipation of what it would do on the pension when it has not said what it would do on the pension? I hope that before the election Labour say what it would do. There was an opportunity to do so this afternoon and the right hon. Gentleman failed to take it.
The right hon. Gentleman raised the issue of universal credit, a matter which is regularly debated in the House. He referred to the current rate of progress and said that it will go on for ever. He understands the importance of an accelerating process—the need to get a benefit right and to start with a limited group before applying it to a broader group, and that is exactly what has been happening with universal credit. It is worth saying that our projections for the numbers on universal credit are affected to some extent by the jobs revolution that is going on. As fewer people are unemployed, fewer people will be within the scope of universal credit. Every time we look at the numbers, falling unemployment is one of the factors that reduce the number of people on universal credit.
The right hon. Gentleman asked about the IFS report. It was quite candid about a number of limitations. For example, it acknowledged that the figures it uses assume that everybody takes up their benefits, which we know is not the case, so that is an unrealistic assumption. Crucially, the report does not include spending on public services. We know that the poorest 20% of households get five times as much value in kind from public spending as they contribute in tax, so the fact that we have ring-fenced the key public services, such as health and schools, is of huge benefit to those at the bottom of the pile, but that is not something that the report takes into account.
The right hon. Gentleman also mentioned work incentives. The IFS report states:
“By cutting benefits for non-working families and increasing the personal allowance, the coalition has significantly strengthened average financial incentives to work for most groups.”
He says that there is a challenge, and of course there has been over the past four or five years. On one hand the Opposition say that we have not cut the deficit enough, but on the other hand they have voted against practically every measure we have brought forward to tackle it.
Steve Webb
The Opposition voted against the Welfare Reform Act 2012, which made the principal changes necessary for reducing the deficit. They recognise that, had they been in office, there would have been substantial cuts in public spending, and no doubt that would have included social security, which is one of the biggest single areas of public spending, but they have had the luxury of never having to say where the cuts would have been made. The right hon. Gentleman knows in his heart of hearts that, had his party been in office, there would have been significant reductions in spending on social security, so he cannot compare the situation with some blank sheet of paper against some benign economic backdrop. In the last year of the previous Labour Government we saw record borrowing—£150 billion, which is an extraordinary amount of money—so the idea that they could somehow have closed the deficit without having any impact on people’s living standards is extraordinary and unrealistic.
Let us be absolutely clear about the comparison figures. On the issue of the level of the pension, compared with what it might have been, £560 is the key figure we should be using. What we have done through the triple lock, and through each successive measure, means that the pension is higher than it would have been under the policy that the Labour party told us it would implement—RPI to 2012 on earnings, which was in its manifesto—and higher than it would have been had we gone for earnings throughout. Obviously, the figures depend on which baseline one assumes. The idea that the Labour party, had it been in office, would have carried on with RPI, ignoring the statisticians telling them that it should not be used and ignoring the fiscal position, is simply implausible, because it is not a relevant benchmark.
These regulations are important because they pave the way for the next step in our efforts to restore the state pension to where it should have been—a decent amount that provides security and dignity for people in old age. What matters is what people get in retirement, relative to what they used to earn, and on that measure the state pension as a share of the national average wage, and the pension as a result of these regulations, will be at their highest level for more than two decades. That is something of which this Government can be proud. I commend the regulations to the House.
Question put and agreed to.
Pensions
Resolved,
That the draft Guaranteed Minimum Pensions Increase Order 2015, which was laid before this House on 19 January, be approved.—(Steve Webb.)
Oral Answers to Questions
Stephen Timms Excerpts(9 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Duncan Smith
What went wrong was the Youth Contract, full stop. The money used for the Youth Contract actually went to invest in people who had greatest disadvantage, and when we set up our other programmes, including the Work programme, we outperformed anything the Youth Contract had. Furthermore, work experience was not available to young people under the previous Government for any great length of time, whereas we have had more than 50% of people on those work experience programmes go back to work. More young people are in work now than when we came into office; they were left by the disaster of the previous Government.
Stephen Timms (East Ham) (Lab)
Young people remain at a distinct disadvantage in the labour market. The statistics published last week show that for the third month in a row overall unemployment came down but youth unemployment rose. Does the Secretary of State have any new proposals to tackle this problem of currently rising youth unemployment?
Mr Duncan Smith
I do not know whether the right hon. Gentleman has actually looked at the figures correctly. He will find that under this Government youth unemployment has fallen; there are now more young people in work; and youth unemployment is at a lower level than the previous Government left us in 2010, after they crashed the economy. I might also remind him that they used to put young people on short-term programmes. As soon as they did that, they took them off the register and started them as though they had begun looking for work then, rather than being six months in. The previous Government gerrymandered the figures and they still failed.
Stephen Timms
At the time of the general election the rate of youth unemployment was two and a half times the overall level of unemployment. Since then, the relative position of young people has steadily worsened, to the point where last week the youth unemployment rate was 2.9 times the overall rate of unemployment. Judging by his answer, the Secretary of State may not have noticed that youth unemployment is currently going up. Is it not now high time for a compulsory job guarantee, so that young people have the chance of a job at the start of what should be their working lives, instead of spending years on unemployment benefit?
Mr Duncan Smith
The reality is quite different from that set out by the right hon. Gentleman. Youth unemployment is down 171,000 on the year—nearly a fifth; 7.1% of all young people are unemployed and not in full-time education; and the number of young people on jobseeker’s allowance has fallen every month for that past three years. The truth about this is quite the opposite to that he suggests. The previous Government left us with young people unable to get work experience and unable to get jobs, and a real stagnation problem, with young people not being able to get the skills necessary. Youth unemployment is now falling. Youth employment is rising—[Interruption.] No; since the last Parliament youth unemployment has fallen. Youth employment is rising. Once in a while it would be nice if the right hon. Gentleman got up and said, “You know what, the last Government got it wrong. Thank you for getting it right.”
Jobseeker’s Allowance (Sanctions)
Stephen Timms Excerpts(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen Timms (East Ham) (Lab)
I am very grateful to Mr Speaker for this opportunity, following my point of order in the Chamber last week. My aim is simple: to obtain from the Minister an answer to a straightforward parliamentary question to which I have—in vain—been seeking an answer for the past year and a half.
We know from the Trussell Trust that about a quarter of a million people went to a food bank in the past year because their benefit had been sanctioned and they did not have enough money to buy food for themselves and their family.
Stephen Timms
Published official figures show that the number of people sanctioned rose from about half a million in the year before the election to a million in the past year. That figure includes sanctions subsequently overturned on appeal. The Minister has been quoted as saying, and has said from time to time, that only a very small fraction of claimants receive a sanction. That is a fair comment about any given month, but in fact about a quarter of jobseeker’s allowance claimants get a sanction at some point during their claim.
The increase from half a million to a million is obviously a big one, but it is not clear why, from very few people before the election, the number forced to use a food bank because of a sanction has rocketed to a quarter of a million. Early last year, I tabled a parliamentary question to ask not how many people had been sanctioned, but how much money was being taken away from them all. I received an answer from the Minister’s predecessor on 25 March last year which I found very helpful.
The Minister’s answer showed that in the year before the election, the amount of benefit withheld from fixed JSA sanctions was £11 million—that is, a little less than £1 million per month. In April to October 2012—the latest period for which data were available at that time—the amount was £60 million, so £10 million per month. That represents a tenfold increase in the amount withheld, as opposed to a twofold rise in the number of people affected. It struck me that that was the beginning of an explanation for why so many people had been forced to use a food bank as a result of a sanction: the amount of money being taken away was greatly increased.
Those data went up to October 2012. In that month, a new and significantly harsher system of sanctions was introduced. The minimum period for a sanction was increased to four weeks and it became possible to remove claimants’ benefits for a full three years. We do not yet know precisely how many people have received a three-year benefit sanction, but it appears that the number is already over 1,000 across the country, so there seems little doubt that following the tenfold increase between the election and October 2012, the amount being withheld in sanctions must have increased substantially further since October 2012.
Once the financial year 2012-13 was over, I again tabled a written parliamentary question to obtain an updated answer to my earlier question, in order to find out how much had been withheld in the second half of the financial year 2012-13—that is, after the changes introduced in October 2012. This time, the Minister’s predecessor provided me with a much less helpful answer. Dated 24 June 2013, it appears at column 30W:
“An estimate of the amount withheld as a result of benefit sanctions cannot be made for a number of reasons. Primarily, we do not know what benefits and payments the claimants would have received had the sanctions not been applied.”—[Official Report, 24 June 2013; Vol. 565, c. 30W.]
I was puzzled by that, Mr Deputy Speaker, as I know you understand, because a perfectly good answer had been provided to the same question three months earlier. Early this year I had another go, as I told Mr Speaker, in a three-page letter which he described in responding to my point of order as “a substantial academic essay”. I should say that I also forwarded that letter to the office of the Minister, so that she knew exactly what the simple and straightforward question was to which I was seeking an answer through this debate.
The current Minister, who is in her place today and who had by then taken over, told me in a written answer on 5 February, at column 268W:
“The information is not available in the format requested.
Trends in sanctions are better understood by looking at the number and type of sanction decisions—which are routinely published (the last publication, covering sanctions to end June 2013, was published in November 2013”—[Official Report, 5 February 2014; Vol. 575, c. 268W.]
Again, the information was provided in the format requested on 25 March 2013, so I could not understand the rationale for that answer saying that it could not be done in the format I had requested. The Minister’s suggestion to me that trends in sanctions are better understood by asking something else made it hard to avoid the inference that she simply did not want to reveal the answer, as her predecessor willingly had done.
On 9 April this year, I tried again, at column 300W, and was equally unsuccessful. Last month, I tried yet again, with Question 215334, and received this answer:
“The Department does not estimate the amount of benefit withheld as a result of benefit sanctions.”
Yet on 25 March 2013, the Department did provide precisely such an estimate. On 25 November, hoping to understand why an answer that could be given in March 2013 could not be repeated now, I tabled this question:
“Pursuant to the Answer of 24 November 2014 to Question 215334 and the Answer of 4 July 2013, Official Report, column 736W, (a) on what date and (b) for what reason his Department stopped estimating the amount of benefit withheld as a result of the application of sanctions.”
On 1 December, the Minister sent me this answer:
“The Department has never estimated the amount of benefit withheld as a result of benefit sanctions.”
As you will appreciate, Mr Deputy Speaker, I know that that was not right, because the answer I received on 25 March 2013 contained a table headed “Benefit withheld from fixed JSA sanctions (£ million)”, so the Minister’s predecessor provided precisely the estimate that her latest answer claims never to have been provided. The Minister’s answer went on:
“The answer of 25 March 2013, Official Report, column 986W, on social security benefits, contained a calculation of the amount of jobseeker’s allowance (JSA) that claimants would have received if they had continued to be on benefit for the length of a fixed sanction. This is not the same as the amount withheld as a result of sanctions.”
I thought, perhaps a little naively, that the Minister was finally giving me a hint about how to obtain the information I wanted, so on 2 December I tabled this question:
“How much additional jobseeker’s allowance in total claimants subject to a fixed sanction would have received if they had continued to be on the benefit for the length of time of their sanction in (a) 2012-13 and (b) 2013-14.”
Unfortunately, my optimism was ill-founded and short-lived. On 5 December, I received a repeat of the refusals I had previously received:
“The Department doesn’t make an estimate the amount of benefit that would have been withheld as a result of benefit sanctions.”
As you know, Mr Deputy Speaker, because I have already pointed it out several times in this debate, the Department did make precisely such an estimate in the written answer to me dated 25 March 2013.
I have now, over a period of a year and a half, tabled six written parliamentary questions to obtain straight forward and important information that was provided in a written answer in March 2103, but in all that time and with all that effort, I have so far drawn a complete blank. In exasperation, I appealed to Mr Speaker for advice, and he suggested this debate as a way to enable the Minister finally to provide the requested information.
I have discussed this matter with Dr David Webster of Glasgow university, the leading academic authority on benefit sanctions. He estimates that the amount of benefit withheld in sanctions is now running at £300 million per year. If that is the case, it is important that Parliament knows it. It should not be necessary for people to make speculative estimates—the Minister should provide the answer. She will no doubt want also to provide various caveats, clarifications and health warnings, as did the initial answer on 25 March 2013, but she should provide Parliament with the basic information being sought.
In preparing for this debate, I had a look at the ministerial code, which says:
“Ministers should be as open as possible with Parliament and the public, refusing to provide information only when disclosure would not be in the public interest which should be decided in accordance with the relevant statutes and the Freedom of Information Act 2000.”
That is all I am asking for. I believe that as a Member of this House—ever grateful to you, Mr Deputy Speaker, and to Mr Speaker for upholding the privileges of Members— I am, and we are, entitled to a substantive answer.
I applied for this debate within minutes of Mr Speaker giving me his advice. One unexpected result was that I have received a number of representations expressing real worry about the impact of current jobseeker’s allowance sanctions. The Salvation Army has told me:
“The more stringent conditionality introduced into the benefit system under this government and the resulting rise in benefit sanctions are having a profound effect on many of the people we work with…we urge the government to review the system and ensure that adequate systems are put in place to make sure that benefit sanctions are applied in a way that is both appropriate and proportional.”
St Mungo’s Broadway has said:
“Under current sanctions regimes St Mungo’s Broadway clients are under threat of being sanctioned for failing to meet conditions which do not help them to enter and remain in work or which they cannot meet. People who are homeless are more likely to be sanctioned than other claimants.”
The Joseph Rowntree Foundation stated in a report published in September:
“Sanctions are now used much more frequently within the welfare benefits system. The severity of sanctions has also increased and conditionality is now applied to previously exempt groups (e.g. lone parents, disabled people). Benefit sanctions are having a strongly disproportionate effect on young people under 25, and there is also evidence of severe impacts on homeless people and other vulnerable groups.”
In a striking representation, Barnardo’s says:
“Particularly worrying…is the impact that the harsher conditionality regime is having on our services which work primarily with young people. Barnardo’s run a number of services which work with vulnerable young people, for example services which offer support to care leavers, homeless young people, or teenage parents. Amongst this subset of services over two thirds (67%)”—
in a survey it carried out—
“said that the increased conditionality and greater use of sanctions were having an impact on their service users. Our services report that sanctions often happen because of misunderstanding on the part of the young people...The impact of sanctions on this group of young people, who often lack family support, is to plunge them into destitution, leaving them reliant on insecure credit, and often resulting in them ending up in rent arrears, putting their tenancy at risk. As one service manager commented: ‘We have a number of care leavers being sanctioned which results in extreme poverty.’”
There is now, therefore, very widespread concern about what is happening, beyond the very striking conclusion in the report published last month by the Trussell Trust, the Church of England, Oxfam and the Child Poverty Action Group that between 19% and 28% of people driven to use food banks were there because of a benefit sanction.
Parliament is entitled to be told what is going on, so will the Minister inform the House how much is currently being withheld from jobseeker’s allowance claimants in benefit sanctions?
The Minister for Employment (Esther McVey)
As this is the last parliamentary business before the Christmas recess, I want to start by wishing you Mr Deputy Speaker, the right hon. Member for East Ham (Stephen Timms) and all other Members and parliamentary staff a merry Christmas and happy new year. I also thank the right hon. Gentleman for securing this debate in order to bring closure to the matter and give him the clarification he seeks.
Sanctions are not a tool to save money, nor were they ever designed with that purpose in mind. In fact, sanctions play a vital role in supporting the conditionality of a regime. They encourage claimants to comply with the requirements that are designed to help them move into or prepare for work. Sanctions have always been a part of the benefit system since they were first designed and introduced. Successive UK Governments have applied sanctions.
There is a link between entitlement to benefits and engagement with the labour market. As Matt Oakley said in his review:
“Benefit sanctions provide a vital backdrop in the social security system for jobseekers”
and are a
“key element of the mutual obligation that underpins both the effectiveness and fairness of the social security system”.
We know that, internationally, most developed economies use sanctions. As the OECD said recently:
“There seems little reason to doubt that, especially in countries with high levels of benefit coverage of the non-employed working-age population, the success of activation policies in relation to unemployment is critical to achieving high employment rates.”
To go back to the right hon. Gentleman’s parliamentary question, the response made it clear why we cannot estimate, and have never estimated, the amount of benefit withheld because of a sanction. The Department does not make an estimate of the amount of benefit withheld as a result of benefit sanctions. Sanctions are designed to ensure claimants comply with their requirements to move off benefits and into work.
The answer of 25 March 2013 on social security benefits—Official Report, column 986W—made it clear that it is not possible robustly to estimate the actual amounts withheld, as we do not know what would have happened in the absence of sanctions. For example, some claimants who leave benefits during a sanction may do so irrespective of the application of the sanction, while others may do so because of the sanction.
As the right hon. Gentleman has pointed out, we provided some data in the response to the parliamentary question. The Department wrongly interpreted the question to mean the maximum amount of benefit that claimants would have received had they remained on benefits for the length of the sanction, rather than to mean a total. It is impossible to calculate such a total, and trying to do so would lead to the Department handing out inaccurate information.
It must be noted that the original response clearly set out the reasons why that is the case. Let me run through them. First, the data provided were for the maximum amount that claimants would have received, and should not be interpreted as absolute. In fact, we made it clear that the figures were “overestimates”.
Secondly, the data could not take into account claimants who had left benefits during a sanction, such as those who might have moved off benefits and gone into a job or education, or moved on to another benefit. As we know, employment is now at record levels—up nearly 600,000 over the past year—so many people are moving off benefits and going into work. The rate at which people are doing so is now faster: nearly 80% of them have moved off benefits within six months.
Thirdly, the calculation does not net the figures for hardship payments. It is not possible to take into account the hardship payments that would have been received, which puts up to 80% of the benefits back into payment.
Fourthly, the amount of benefits withheld is not readily available for JSA-varied sanctions. During the period covered in the parliamentary question—2009 to 2012—the sanctions system changed, which resulted in more fixed level sanctions so that claimants could be clearer about the consequences of not meeting the requirements designed to help them into work.
It was therefore clear that the information handed out was not right, and that such a total could not be provided. That came to light when follow-up questions were asked, including in the other place. We do not routinely collect information of benefits withheld because of a sanction that has been imposed, or of benefits that would have been claimed had someone not lost their entitlement. We therefore cannot produce the figures without making a number of assumptions and judgments about people’s behaviour, and any resulting figures would be very misleading.
Stephen Timms
All I am really asking for is an update of the table provided on 25 March 2013. I take the point that such a table would need a caveat attached to it and that people would need to be told that it is not what it might at first appear to be, but if we just had an updated version, the House would be happy.
Esther McVey
I appreciate what the right hon. Gentleman says, but if we want the Department to provide robust and reliable information which is not misleading, then such an update cannot be given. He says that he just wants a good answer, but such an answer would not be a good one. Surely nobody would want information to be given out to people who might be misled. As we know, all those caveats are seldom, if ever, applied, and such information would be incorrect. After the further questions, and having examined what was first handed out, the Department decided that the information provided was wrong, inaccurate and misleading.
The answer stated that it was important to focus on why there is a sanctions system. It is about making sure that people understand what is required of them, making sure that decisions are timely and correct, and protecting the most vulnerable. Fundamentally, sanctions cannot be seen in isolation. They are part of a broader system of support that includes financial support, training in employment skills and getting people into work. Because of that extra training and support, and because of the claimant commitment that we have introduced to make the system tailor-made for the individual, so that they know what sanction they would get and, at the same time, what support they would get, we have seen record-breaking results in getting people into work, the biggest fall in youth unemployment since records began, the biggest fall in long-term unemployment since 1998 and record rates of women getting into work. All that is part of a system. What we were aiming to do, and what we have done, is to get nearly 2 million extra people into work.
Stephen Timms
On a point of order, Mr Deputy Speaker. Can you advise me whether it is in order for the Minister to say that she is not going to answer a question because she thinks that the answer would be misleading? Surely it is for Members of the House to determine what information they want and for Ministers to provide that information.
Mr Deputy Speaker (Mr Lindsay Hoyle)
The responsibility to answer a question lies with the Minister. The right hon. Member for East Ham (Stephen Timms) has been tenacious in holding the Minister to account. That is the role of Members: to hold Ministers and Departments to account. I am sure that that will continue if he does not get the answer today.
John McDonnell
An answer that was given a year and a half ago was misleading. If that is the case, would it not have been appropriate for the Minister who gave that misleading answer to come to the House at the first opportunity, as is the convention, to correct the information? As far as I am aware, there has been no correction whatever. I ask you to take this matter up, Mr Deputy Speaker, as a point of procedure with the relevant Department.
Oral Answers to Questions
Stephen Timms Excerpts(9 years, 11 months ago)
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Mr Duncan Smith
Each local authority is dealing with this matter differently. We have given a huge amount of support, through the discretionary housing payments, so some will move, some will not, and some have had their rents dealt with and have stayed in place. We have trebled the support to £345 million, and more than 392,000 DHP awards were made last year. As I said, each authority is doing it differently. For example, Sheffield city council is using DHPs to pay removal costs and provide decorating, while Southwark and Islington councils are paying additional incentives through mutual exchanging with overcrowded households. They are all doing different things, but they are basically getting it right. We were warned that arrears would rise, but actually housing association arrears are lower than they were last year.
Stephen Timms (East Ham) (Lab)
Research published last month by the Trussell Trust, Church Action on Poverty, the Church of England and another organisation—Oxfam—showed that more than half the rocketing demand at food banks was caused by problems in the benefits system, not least by the hated bedroom tax, but also by escalating payment delays, contrary to what the Minister for Disabled People, said a moment ago. Will the Tory welfare waste party now follow the U-turn its coalition partners took and realise that the bedroom tax has to go?
Mr Duncan Smith
The right hon. Gentleman went a long way round to get to his usual comment, but most of his facts are incorrect. Let us get the facts right on benefit processing. Each year, we provide £94 billion in working age benefits, and benefits have been paid in arrears for the last 25 years, so there is not an unusual delay. People are often confused about whether or not there is a delay. On benefit processing times, 93% are processed absolutely on time, which is up seven percentage points since Labour left office. The vast majority of the delays are pre-decisions awaiting additional evidence. Of course there is more we can do. I am looking at a report today, and I am going to be positive about ensuring that we can do other things. I can thus announce today that we are looking to new measures committing the Department to raising much more awareness, as was asked for, of the short-term benefit advances. We are doing that through websites, on posters and by providing information in jobcentres. We are testing that and hoping to roll it out at the beginning of the new year. We are also issuing fresh guidance to advisers to make sure that they constantly advise those at risk of the availability, should they need them, of interim payments.
Benefit Sanctioning
Stephen Timms Excerpts(9 years, 11 months ago)
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Stephen Timms (East Ham) (Lab)
I welcome the opportunity to respond to the debate, and congratulate my hon. Friend the Member for Sheffield Central (Paul Blomfield) on securing it. I also congratulate Sheffield Citizens Advice and Tim Arnold, who produced the report that was the basis of much of what my hon. Friend said. I welcome the thoughtful debate, with contributions on both sides expressing grave concern about what has been happening with benefit sanctions.
My hon. Friend made the point that sanctions have been part of the social security system since it was established. It is right that there should be sanctions for people in receipt of benefits who do things they should not. However, it is clear that the sanctions system has gone badly wrong, that in too many cases it is no longer fair and proportionate, and that terrible damage is resulting from that.
The hon. Member for Wycombe (Steve Baker) and my hon. Friend the Member for Wansbeck (Ian Lavery) both mentioned one of the most harrowing cases, involving the diabetic ex-soldier David Clapson, who died, as his sister said, “penniless, starving and alone”, because three weeks after his benefit was stopped for missing a jobcentre appointment his electricity card had run out and his refrigerator was not working, so he was not able to keep the insulin on which his life depended. He died as a result.
That is an extreme case and should not have happened. No one in the Chamber today became a politician to preside over such harrowing events. We need changes to prevent them. I want the Minister to tell us more about the implementation of the Oakley review, whose recommendations were designed to introduce such changes. Such things seem still to be happening at the moment.
Certainly a very large number of jobseekers now feel that jobcentre staff are there primarily not to help them but to catch them out and find grounds for sanctioning them. That has done terrible damage to the reputation of jobcentres. I am sure that the perception is often unfair, but it is very widely held because of the destructive preoccupation with sanctioning. At some point, a major programme of renewal for Jobcentre Plus will be needed. The Select Committee on Work and Pensions was right to make the case that as a first step jobcentres should be evaluated on the basis not of benefit off-flow, with all the perverse incentives that that has created, but of sustained job outcomes—the same measure used in the case of Work programme providers.
There has been some discussion in the debate about the contentious issue of targets for sanctions. I am sure that the Minister will reaffirm in a few minutes that there are no targets for sanctions, but it is clear that that is not how many Jobcentre Plus staff understand the position. Indeed, it is not too difficult to find out why they think that there are targets for the implementation of sanctions. The Minister provided a written answer on 15 October 2013 to my question on whether Jobcentre Plus advisers’ regular personal reviews included discussions of the number of benefit sanctions that they handed out. She confirmed:
“Jobcentre Plus uses advisers’ personal reviews to monitor performance, to inform these they use a variety of performance data, including sanctions referrals.”——[Official Report, 15 October 2013; Vol. 568, c. 647W.]
So regular reviews of Jobcentre Plus advisers feature the number of sanctions issued. That is part of the assessment. I am told that the expectation is that advisers should give out at least eight sanctions per month and that if they do not they are usually, as my hon. Friend the Member for Sheffield Central mentioned, placed on a performance improvement plan, to help them pull their socks up and get them to give out more sanctions in the future. The Minister may be able to explain the difference between that arrangement and targets for sanctions. Clearly, in practice, targets are set for the application of sanctions by Jobcentre Plus staff, and if they do not meet the expectation they are in trouble.
Dr David Webster, of the university of Glasgow, has just published his latest briefing on benefit sanctions. He tells us that there were an estimated 1.03 million jobseeker’s allowance and employment and support allowance sanctions in the year to 30 June 2014, before reconsiderations and appeals, compared with 564,000 in the last 12 months of the previous Government; so the number of sanctions handed out has roughly doubled. Dr Webster says that JSA claimants are
“sanctioned at the rate of 6.92% per month before reconsiderations and appeals”.
Ministers sometimes say that the vast majority of benefit recipients are not sanctioned, but 7% of JSA claimants are sanctioned per month, and Dr Webster also says that about a quarter of JSA claimants get a sanction at some point during their claim. He also makes the point that ESA claimants were sanctioned at the rate of 1.16% per month in June 2014. Dr Webster comments—and this picks up on the point made by my hon. Friend the Member for Edinburgh East (Sheila Gilmore)—
“The DWP has not provided any explanation for the increase in ESA sanctions.”
There has been a dramatic increase in the number of ESA claimants being sanctioned, and it is not clear why.
The number of sanctions is one thing; another issue is their severity. To try to get a handle on that I tabled a series of questions asking for the total amount of benefit withheld as a result of benefit sanctions in each of the past four years. The Minister’s predecessor, the hon. Member for Fareham (Mr Hoban), gave a helpful answer on 25 March 2013, with a table showing
“the total amount of jobseeker’s allowance (JSA) withheld to the nearest £ million…as a result of fixed sanctions in each of the last four years up to 22 October 2012”.—[Official Report, 25 March 2013; Vol. 560, c. 986W.]
The table showed that in 2009-10—just before the election—£11 million was withheld. In 2010-11 the figure was £43 million, so it quadrupled after the election. In 2011-12 it was £45 million and in 2012-13, up to October 2012—so just for the first half of that financial year—it was £60 million. Therefore, taking the whole of 2012-13, benefit was being withheld at approximately 10 times the rate for the year before the general election.
I have since tried repeatedly to get an update on that figure, and the Minister yesterday provided a written answer in response to my latest attempt. She said:
“The Department has never estimated the amount of benefit withheld as a result of benefit sanctions.”
That clearly is not true, because her answer goes on to refer to the written answer of 25 March 2013, with its reference to the table—so the Department has previously provided an answer to my question. The Minister goes on to explain why her answer does not have a very helpful figure, but I am today tabling a further question to ask whether she will at least do the calculation again, so that we can see what has happened in the intervening period. I have also tried to find out with a written question how many jobseeker’s allowance claimants have been issued with a three-year benefit sanction. Some people have been sanctioned for three whole years—not four or six weeks, as we have heard—in each month since October 2012.
Pension Schemes Bill
Stephen Timms Excerpts(10 years ago)
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Stephen Timms (East Ham) (Lab)
Given the current cost of living crisis, it is certainly the case that people struggling to set aside money for the future need access to pension schemes that they can trust to give good value for money and to provide them with a decent income in retirement. We welcome the improved opportunities that we hope the Bill will provide, as we have throughout the debates on the Bill.
A lot of important detail is still to come; this is an enabling Bill. However, as interventions from my hon. Friends the Members for Edmonton (Mr. Love) and for Central Ayrshire (Mr Donohoe) and from the right hon. Member for East Yorkshire (Sir Greg Knight) have pointed out, it is pretty extraordinary and very unsatisfactory that in an important Bill, which has in total 55 clauses, we should at this very late stage be debating 33 Government new clauses and 72 new Government amendments.
The Minister knows very well that this is not a field in which haste is fruitful. He attempted in his response to one intervention to make a virtue of the fact that he was “picking these things up in real time.” What he actually means is “making it up on the hoof.” I do not think that is a good way to legislate on pensions. The scope for mistakes in drafting very technical measures such as these is too great.
The point of having proper parliamentary scrutiny is to spot problems early and to allow for them to be corrected. As it is, there will, of course, be many mistakes in the 70 pages, or whatever, of new material in front of the House for our brief debate this afternoon. We can only hope that Members in the other place will spot them and be able to put them right, but things are bound to go wrong. Having said that, I think that the risks are significantly less in this group of amendments than they are in the next, on which I will have more to say. However, it is troubling that there is so much new and technical material here.
I wanted to ask about one particular point. As the Minister has said, the new clauses are imposing new obligations on scheme trustees. As I understand it—I may be mistaken; if I am, I know that the Minister will correct me—the Government have not provided an estimate of the cost of meeting those obligations for scheme trustees. I wonder why not; normally, I would have expected there to be an impact assessment with an estimate. Will the Minister comment, first, on whether I am right—that there is no estimate or at least none has been published so far—and, if so, the reason for that?
Will the Minister set out his intentions over the numerous sets of regulations that are envisaged? Is he able to tell us at this stage which of those sets of regulations are going to be subject to the affirmative as opposed to the negative procedure, so that we can be assured of future debate about those more detailed provisions when they become available?
Crispin Blunt (Reigate) (Con)
I have listened to the right hon. Gentleman’s critique of all the new clauses coming forward at this time, but he will have had them at least for some time and the resources of the Opposition have been available to him. I have tabled the only non-Government amendment this afternoon. The right hon. Gentleman is a replacement—a senior one—for the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont). Is he able to say whether the Opposition are going to table further amendments in the other place?
Stephen Timms
As the hon. Gentleman is well aware, we have not tabled amendments on Report. Of course, we debated in Committee three Opposition amendments, but we were sadly unsuccessful. I am delighted that the hon. Gentleman has tabled an amendment, which will provide us with a little relief when we get to the second group; at least it will not be entirely Government material on the amendment paper. I commend the hon. Gentleman for his amendment, and he is right that the Opposition have not tabled amendments today.
Steve Webb
I shall not detain the House for long, but the right hon. Member for East Ham (Stephen Timms) asked a couple of specific questions. The impact of regulations brought in under the primary Bill in front of us would depend on what they can contain. We cannot do an impact assessment because we have not yet written the regulations. Generally when we produce regulations and they have a cost on business, there is an impact assessment to go with them. I hope that explains why we have not published an assessment at this stage.
On the timing, our broad goal is to have all this in place by April 2016. The right hon. Gentleman will know that a very significant change in April 2016 will be the end of contracting out, so defined benefit pension schemes will be considering what they do in response to that. In particular, if a shared risk scheme or something of that sort is envisaged, there clearly needs to be a legislative framework by around that time—not right on the day, but about that time. That is our goal and the rough timetable that applies.
The right hon. Gentleman asked about the negative and affirmative resolutions. The collective and shared risk regulations are generally subject to the negative procedure. He will see that clause 41 deals more generally with regulation-making powers and considers when they should be negative and when affirmative. In general, as I say, most of these are relatively technical regulations, so the negative procedure applies. I hope that is helpful. I commend the new clause to the House.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Power to impose requirements about factors used to determine each benefit
Regulations may make provision as to the factors to be used to determine what proportion of the amount available for the provision of any collective benefits by a pension scheme is to be available for the provision of a particular collective benefit.—(Steve Webb.)
This amendment allows regulations to set out the factors that must be used to calculate members’ benefits.
Brought up, read the First and Second time, and added to the Bill.
New Clause 3
Power to impose requirements about dealing with a deficit or surplus
(1) Regulations may specify circumstances in which a deficit or surplus in respect of any collective benefits that may be provided by a pension scheme must be dealt with in a particular way.
(2) The regulations may, in particular, specify steps that must be taken by the trustees or managers and the period or periods within which any steps must be taken.—(Steve Webb.)
The amendment allows regulations to set out how a deficit or surplus must be dealt with in specific circumstances, the steps trustees or managers may be required to take and the time period within which those steps must be taken.
Brought up, read the First and Second time, and added to the Bill.
New Clause 4
Requirement to wind up scheme in specified circumstances
(1) Regulations may require the trustees or managers of a pension scheme under which collective benefits may be provided to wind up the whole or part of the scheme in specified circumstances.
(2) The regulations may, in particular—
(a) provide for the winding up of the scheme or part to be as effective in law as if it had been made under powers conferred by or under the scheme;
(b) require the scheme or part to be wound up in spite of any legislative provision or rule of law, or any scheme rule, which would otherwise operate to prevent the winding up;
(c) require the scheme or part to be wound up without regard to any legislative provision, rule of law or scheme rule that would otherwise require, or might otherwise be taken to require, the implementation of any procedure or the obtaining of any consent with a view to the winding up.”—(Steve Webb.)
This allows regulations to require the trustees or managers of a pension scheme under which collective benefits may be provided to wind up the scheme or part of it in circumstances specified in the regulations.
Brought up, read the First and Second time, and added to the Bill.
New Clause 5
Policies about winding up
(1) Regulations may require the trustees or managers of a pension scheme under which collective benefits may be provided—
(a) to have a policy about the winding up of the scheme or part of it;
(b) to follow that policy.
(2) The regulations may, in particular—
(a) require the trustees or managers to consult about the policy;
(b) make provision about the content of the policy;
(c) set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy;
(d) make provision about reviewing and revising the policy.
(3) The regulations may, in particular, require the policy—
(a) to contain an explanation of the circumstances in which the trustees or managers are permitted or required to wind up the scheme or part and any requirements about the distribution of assets (including any order of priority);
(b) to contain an explanation of how the trustees or managers intend to use any powers to wind up the scheme or part and how they intend to use any powers in relation to the distribution of assets (including any order of priority);
(c) to contain an explanation of how the costs of winding up are required to be met or how the trustees or managers will use any powers to decide how those costs are to be met.—(Steve Webb.)
This allows regulations to be made requiring the trustees or managers of a pension scheme under which collective benefits may be provided to have a policy about winding up.
Brought up, read the First and Second time, and added to the Bill.
New Clause 6
Working out which assets are available for the provision of which benefits
Regulations may make provision, in relation to a scheme under which any of the benefits that may be provided are collective benefits, about how to work out—
(a) which assets held by the scheme are held for the purposes of providing collective benefits;
(b) which assets held by the scheme are held for the purposes of providing which collective benefits;
(c) which assets held by the scheme are held for the purposes of providing any benefits other than collective benefits.—(Steve Webb.)
This regulation making power will allow provision to be made about how to work out which assets are held for the purposes of providing which benefits.
Brought up, read the First and Second time, and added to the Bill.
New Clause 7
Independent advice in respect of conversions and transfers: Great Britain
(1) Where a member of a pension scheme has subsisting rights in respect of any safeguarded benefits, or a survivor of a member has subsisting rights in respect of any safeguarded benefits, the trustees or managers must check that the member or survivor has received appropriate independent advice before—
(a) converting any of the benefits into different benefits that are flexible benefits under the scheme;
(b) making a transfer payment in respect of any of the benefits with a view to acquiring
flexible benefits for the member or survivor under another pension scheme.
(2) The Secretary of State may by regulations make provision about—
(a) what the trustees or managers must do to check that a member or survivor has received
appropriate independent advice for the purposes of subsection (1), and
(b) when the check must be carried out for the purposes of that subsection.
(3) The Secretary of State may by regulations create exceptions to subsection (1).
(4) In subsection (1)(b) the reference to another pension scheme includes a scheme established in a country or territory outside Great Britain.
(5) Where the trustees or managers fail to carry out a check required by this section, section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or manager who failed to take reasonable steps to ensure that the check was carried out.
(6) Failure to carry out a check required by this section does not affect the validity of any transaction.
(7) In this section—
“appropriate independent advice” has the meaning given by regulations made by the Secretary of State;
“safeguarded benefits” means any benefits other than—
(a) money purchase benefits, and
(b) cash balance benefits.”—(Steve Webb.)
This provides that before trustees or managers of a pension scheme (in Great Britain) in which a person has safeguarded benefits convert them into flexible benefits, or make a transfer to another scheme to acquire flexible benefits, they must check that the person has received appropriate independent advice.
Brought up, and read the First time.
Steve Webb
Obviously, that issue is not spelled out in the Bill, but it is important none the less. What we envisage is that people will contact the guidance service, which by then will have a brand, an identity, a phone number and all the rest of it, and will make an appointment if they want face-to-face or telephone-based guidance. Obviously, they can access the website as many times as they like, but if they wish to have face-to-face or telephone-based guidance, it will be at a set time on a set date. There will be a period between the initial contact and the guidance appointment for the gathering of information to make the session more useful. Coming out of that session will be documentation and signposting for further sources of information, guidance and, if they wish, regulated financial advice.
Clearly, we want everybody to be able to access the guidance, so the core model is that a person does that once. But the Pensions Advisory Service has a business as usual role anyway and it is inconceivable that, even if a person has had their formal guidance session with the service and then rang it up the next day with a question, it would put the phone down on them; of course it would not, so there would be flexibility. Clearly, we need to think further on that. We need to reflect on the fact that if someone has a guidance session and then has additional needs, is a formal second guidance session appropriate or necessary or are there other ways of dealing with those needs? The core model is one session, but other resources, such as signposting, are available on tap. We are considering whether further flexibility could be introduced.
I hope that I am near to conclusion. I ran through the relatively minor and consequential amendments that come towards the back of the Bill and that are relatively uncontentious. On the title of the Bill, amendment 1 amends the title of the Bill to include
“provision designed to give people greater flexibility in accessing benefits and to help them make informed decisions about what to do with benefits.”
That change is to reflect more accurately the content of the Bill in the light of the new amendments on the pension flexibilities.
In sum, these new provisions are designed to ensure that the guidance guarantee works as effectively as possible; that the various rules on transfers do not act to the detriment of people who are left behind in the schemes; and that the process is properly overseen with the provision of independent financial advice. They also spell out who pays for the help, and whether or not it is taxed. The provisions help to flesh out some of the detail of this important policy, and I commend new clause 7 to the House.
Stephen Timms
We are now embarking on a debate on 27 Government new clauses, 40 new Government amendments and—providing welcome relief—an amendment from the hon. Member for Reigate (Crispin Blunt) and the right hon. Member for Sutton and Cheam (Paul Burstow).
The changes the Government have announced will introduce much-increased flexibility for savers, which is welcome. They will also make the pensions market more diverse and complicated and lead to a whole new range of products about which consumers have not had to make decisions in the past. Of course it is right that safeguards need to be in place to protect savers adequately from the danger of being taken advantage of, as we have seen happen in this market in the past.
We are dealing with an area full of technicalities, some of which we have just been hearing about, and fraught with difficulty. I appreciate that the Minister had no choice but to introduce these measures at the same time as the implementation of the Budget changes, but he will recognise, as the House certainly will, that there is a danger, in providing so little opportunity for the House to conduct proper scrutiny, of creating serious problems and a future mis-selling scandal.
We have set out three tests for the new flexibility. First, is there reliable advice for people saving for their retirement? Secondly, is the system fair to those on middle and lower incomes who want to secure retirement income? Thirdly, are the Government confident that the changes will not result in extra costs to the state, either through social care costs or by increasing the cost of housing benefit? I would welcome the Minister’s comments on the extent to which he believes the changes before the House will meet those tests.
The annual workplace pension survey carried out by the National Association of Pension Funds this year showed that only 19% of savers feel very capable of knowing what to do with their savings. That is ahead of the very major changes about to take effect, and we can be certain that consumer bewilderment will rocket from next April. The new arrangements are supposed to be in place from that date—in less than six months—but we do not yet know how they will work.
In previous discussion about the form that the guidance will take, the Minister said that
“it is not formal, detailed or product-specific”.
That is rather different from what was said by the Financial Conduct Authority when it launched its consultation on guidance. It seemed to envisage something rather more substantial than the Minister suggested in his remarks, but the FCA will produce only the standards; Her Majesty’s Treasury will oversee the drafting of the guidance. Nobody can yet feel confident about what will emerge from that process. A number of questions must be asked, such as the one posed by my hon. Friend the Member for Edmonton (Mr Love) earlier. It is not clear even who exactly will pay for the advice or through what mechanism it will be paid for. I would welcome the Minister’s comments on how he envisages that process working.
The challenges were helpfully illuminated by the article on the front page of The Daily Telegraph on Saturday which said, “Pension mis-selling: scandal hits 100,000 retired savers a year”. The article explained that
“one in four pensioners who retired with a private pension in the past seven years is entitled to a larger annual pension income.
Savers with medical conditions including diabetes, high blood pressure and even smokers should have been offered an increased annuity based on their lower life expectancy.”
It went on to say that
“just seven per cent of those who are entitled to the increased pay outs have automatically received them. Studies indicate the true figure should be closer to 60 per cent.
Now Aviva, Britain’s largest insurer, is paying compensation and increasing the annual payouts of hundreds of customers after discovering staff sold inappropriate deals.”
Crispin Blunt
I am interested in the issue because two highly innovative companies in my constituency, Partnership and Just Retirement, sold these products to people approaching the point where they had to make a decision about an annuity. Of course, they are anxious about guidance because if people are given guidance about the nature of the market, they can then go to the right place to make those decisions. Is the right hon. Gentleman saying that existing providers should have provided such guidance? He used the words “should have”. These products were available in the market. There was a failure in the previous annuity market which I hope this guidance will address, pointing people to the right kinds of provider.
Stephen Timms
We welcomed the new flexibility that is being provided. I hope the guidance that we are legislating for will deliver the improvement that the hon. Gentleman describes, but we cannot yet be confident that that will be the case. This brief debate gives us an opportunity to press the Minister to give us rather more reassurance about that. I shall refer to some of the comments of JustRetirement, one of the companies that the hon. Member for Reigate (Crispin Blunt) mentioned.
The most recent Association of British Insurers data show that overall annuity sales are down 14% from the second quarter of this year, and by 56% compared with the third quarter of last year. Consumers are presumably waiting until the reforms go live in April next year before deciding how to use their defined contribution pension savings. The same ABI data show external annuity sales—that is, annuities bought on the open market—down from 49% to 35% in the third quarter of this year. Internal annuity sales, where an annuity is bought from the incumbent pension provider, have increased from 51% to 65% in the same period. The overall share of enhanced annuity sales has fallen from 28% to 22%.
The ABI data highlight the risk of the kind of consumer detriment described in the article in The Daily Telegraph on Saturday. Together, they suggest that problems will continue unless the Financial Conduct Authority intervenes actively. Just Retirement makes the point particularly strongly and effectively that there is an urgent need for a second line of defence requirement for providers. What happens if the guidance on offer is not taken up? That is not provided for in the amendments.
Legal and General has highlighted the lesson from the pilot that it undertook with public support—that in practice the guidance on offer will very likely not be taken up. As the Minister knows, the take-up was very small—2.5%—in the pilot that it set up and supported. If that happens on a significant scale when these arrangements come into force next year, it opens up the possibility of very large-scale new consumer detriment. JustRetirement, along with others, is right to argue that by introducing a second line of defence requirement, the FCA can apply a crucial brake against this potential future consumer detriment by requiring providers to check consumers’ circumstances when they come to access their DC pension savings.
The hon. Member for Gloucester (Richard Graham) asked whether the guidance would take account of other financial assets beyond DC pension savings. That is a good question.
Mr Love
The Minister alluded to discussions taking place between the Department and the FCA, but the formal FCA position given earlier in the consideration of the Bill was that consumer take-up would be a matter of public choice, leaving it to the person concerned. With all the emerging evidence, surely we cannot be confident that that will answer the question.
Stephen Timms
I fear my hon. Friend is right. If in practice only a tiny proportion of people, or even a modest proportion, take up the guidance being offered, there is every chance of very serious problems in this market in the future. The House cannot be satisfied with that likelihood.
A number of organisations have pressed vigorously for a second line of defence requirement and they make a telling case. Proceeding without that safeguard will leave many consumers exposed—we should bear in mind that this is all supposed to happen from next April—making people guinea pigs and opening up the real possibility of another mis-selling scandal in the coming months.
Richard Graham
The right hon. Gentleman raises an issue that may not technically arise from the amendments that we are debating, but in which all hon. Members have some interest. What could a possible second line of defence look like?
Stephen Timms
That is a good question. I do not have a proposition to make. I would hope that those who are reflecting on these matters, particularly in the FCA, will be giving that some thought. There is time for it to incorporate something else and to put that second line of defence in its conduct rules. What it would look like, I am not in a position to propose this afternoon, but the need for it is clear. If the hon. Gentleman is about to propose something, I would welcome that.
Richard Graham
The right hon. Gentleman is being very generous and Madam Deputy Speaker is indulging us gently so I will be brief. I guess—perhaps the Minister might nod sagely at this stage—that this is an issue primarily for the FCA, but I hope that the message has gone out from us today that we are interested in it.
Stephen Timms
I am grateful to the hon. Gentleman. I hope that those who follow these debates will take that as an endorsement of the need for that second line of defence to be devised and put in place. If it was not there, there is a real risk of exposing consumers to risk of a kind that we have all seen before, and which would undermine these important reforms from the outset.
As the Minister explained, independent financial advice amendments are set out in new clauses 7 to 13. New clause 7 requires that when a member requests a transfer of safeguarded benefits, which are anything other than the cash balance or other money purchase benefits, with a view to acquiring flexible benefits, which are anything that is not safeguarded, the trustees
“must check that the member or survivor has received appropriate independent advice”.
I want to pick up a number of issues. What exactly are the trustees being required to do? Are they being asked to evaluate the appropriateness of the advice that was given to the scheme member? It does not seem right that they should be called upon to do that. It is quite a big undertaking for them and they are probably not in a position to do it. That wording could be understood to mean that that is what they are being asked to do. I would be grateful if the Minister commented on that.
We are seeing the creation of two new categories of benefits—safeguarded benefits and flexible benefits. I gather that the use of these terms is completely new; they are not used elsewhere in the statute. We have three new categories of scheme set out in the Bill, but this is the first time that we have had reference to safeguarded and flexible benefits. The use of those terms seems unfortunate, because safeguarded rights has a particular meaning, which was familiar when, admittedly now rather a long time ago, I was in the office that the Minister now holds. In the context of contracting out, safeguarded rights had a particular meaning. That term is now being introduced in the amendments before us to mean something completely different. The term “flexible” also has a specific meaning in pensions tax terms. Again, there is a real risk of confusion in reusing that particular term to mean something very different from the one people familiar with pensions tax arrangements understand it to mean.
The National Association of Pension Funds has argued that the statute should state that where the member has requested a transfer of his or her benefits, other than cash balance or other money purchase benefits to a scheme in which they will be paid a cash balance or money purchase benefits, the trustees should require appropriate proof from the member that he or she has received independent financial advice from a person authorised by the Financial Conduct Authority to give such advice. The regulations could define “appropriate financial advice” in that way. The NAPF makes the point that the language in front of us is rather ambiguous about what exactly is envisaged. Perhaps the Minister could comment on the alternative wording proposed by the NAPF, which it thinks would make it clearer and would not give the impression that trustees were being called upon to do something that is actually very difficult for them.
New schedule 1, as the Minister has told us, deals with the detail of the calculation of the cash equivalent transfer valuation, replacing the current CETV provisions under the 1993 Act. I fear that the tangle gets worse here. The distinction is between money purchase benefits, flexible benefits that are not money purchase benefits—in other words, cash balance benefits—and benefits that are not flexible benefits, previously defined as safeguarded benefits. There are also transferable benefits, which are benefits
“by virtue of which this Chapter applies to the member.”
This is all quite complicated stuff. One of the fears is that the changes in terminology, and the reuse of previously familiar terms to mean completely different things, significantly increase the amount of confusion being created. Instead of just removing the current statutory requirement that all benefits be transferred if a member wants to transfer any benefits, the effect here is to prohibit schemes from having rules that require transfer of other categories of benefits if the member wants to transfer only one category, or that
“prevent a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.”
Again, the NAPF makes the point that that last provision is “incredibly wide”. It points out that schemes do not let members participate in various sections willy-nilly; there are all sorts of rules about who can accrue what sorts of benefits and under what circumstances. The fact that somebody has asked for a CETV in one section of the scheme should not entitle them to benefits in other sections, but that is the way that this provision has been written. Perhaps the Minister could comment on whether that is what he really intends.
New clauses 14 to 16 seem to allow the Secretary of State to forbid draw-down from schemes that give members a guaranteed return, because draw-down can only be from money purchase benefits. That seems odd as well. Perhaps the Minister could tell us whether he or his officials discussed that with anybody before producing these new clauses. Certainly, the NAPF tells me that it is not aware of any discussions about that with it, or with anybody else. It well understands that schemes with guarantees must comply with the funding regime, but it does not understand why they should not be allowed to do draw-down or UFPLS—uncrystallised funds pension lump sum. Perhaps the Minister could comment on that.
The Bill requires members of defined benefit schemes to have received independent financial advice before being permitted to transfer into a defined contribution arrangement, unless they have pension wealth amounting to less than £30,000. The NAPF is concerned that that will impose a requirement that it would be very difficult, if not impossible, to meet. People will be required to prove that they do not have pension wealth in excess of £30,000, which will be very difficult for the average saver. There is the potential for a lot of confusion for savers attempting to assess their level of pension wealth. They might not realise that previously crystallised pension assets will be counted towards that threshold. They might find it difficult to assess the current value of such assets.
The average person may well not understand—nor should they be expected to understand—that the £30,000 will be measured not by the current CETV system but using the methodology created to measure benefits against the lifetime allowance, information that members are not currently entitled to get from other schemes. As a result, many defined benefit members will not be able to exercise their rights in the way that the Bill intends. The NAPF urges that savers should be able to access a total of £30,000 of defined benefit benefits calculated on a CETV basis, regardless of any additional defined contributions savings that they may have. Will the Minister respond to that point?
As with the previous group of amendments, I ask the Minister to set out his intentions on the regulations that are envisaged. He gave a clear and helpful response to my earlier question, but as he is well aware, it is good practice where regulations are referred to in primary legislation for Members who are scrutinising that legislation at least to have a draft in front of them when determining whether they support the provisions. The Minister said that it was not possible to give the costs for trustees because there was not yet a draft of the regulations. I think he will accept that it is very difficult for Members to decide whether to support these provisions if the House has not been told the cost for those who have to operate the regulations. Telling Members that the Government have no idea, at this stage, of what the cost of all this will be for everybody makes it impossible for us to do the job that we are required to do in properly scrutinising the costs and benefits that the legislation provides.
I was rather down-hearted by the content of the Minister’s previous answer, but I will ask the question again as regards these measures. Does he anticipate bringing forward the regulations on the same sort of time scale as the one he indicated earlier? Is there any prospect at least that draft regulations might be available to Members in the other place when they scrutinise the Bill? Does he expect that, as he said before, the majority of the regulations will be subject to the negative rather than the affirmative procedure? Will he draw the House’s attention to any exceptions, as he did last time, and point to those that will be subject to the affirmative procedure?
I am not going to urge the House to vote against any of the measures before us. I look forward to hearing the hon. Member for Reigate (Crispin Blunt) speak about his amendment. I have to tell the Minister that the House is being placed in a pretty unsatisfactory situation. I hope that even though we have not been able properly to scrutinise these measures because of the lack of information to support that scrutiny, he might encourage us by saying that those in the other place will have a better chance to do so.
Crispin Blunt
I am delighted to follow the right hon. Member for East Ham (Stephen Timms) and to know that I have the opportunity to persuade the massed ranks of the Labour party of the merits of my amendment. I shall do my very best to do so.
Four of the most significant players in the United Kingdom pensions market are based in my constituency of Reigate: Just Retirement, Legal and General, Partnership, and Fidelity. I should declare, if it is an interest, that my son works for one of those companies—Just Retirement. Between them, they employ a pretty significant number of the constituents I am privileged to represent. The past six months since the announcement in the Budget of the measures in this Bill have not been easy for them. The number of annuities purchased has dropped off a cliff, as customers and financial advisers await the implementation of the reforms.
Overall, however, the need for and the rightness of the reforms cannot be doubted. The pensions market has for too long been shackled by the obligation to annuitise; annuity rates have fallen consistently over the past two decades; and strenuous competition and liberalisation is just what the industry needs if each new batch of retirees are not going to find themselves commensurately worse off than their predecessors. The proposals are right not only on a practical level, but ethically as well. It is farcical that we have deemed retirees incapable of managing their own finances and have paternalistically restricted access to the money for which they have worked hard throughout their lives.
Steve Webb
This is in response to a consultation. During the consultation, one of the issues raised was about people who had not accessed the guidance. This is the response to that.
Reference was made to a story in The Daily Telegraph about people buying annuities that were not as good as they should have been, given their health condition. The FCA is undertaking a thematic review of the annuity market and looking at at-retirement choices. A lot of reporting and recommendations from the FCA will come out over the next couple of months. The Government have investigated some of the failures of the annuities market. We are tackling them by giving people new choices and it is about time that that was done.
The right hon. Member for East Ham asked about DB to DC transfers and what trustees have to do. They have to make sure that, before a DB to DC transfer happens, the member has accessed independent financial advice by a regulated IFA or similar. They do not have to look at what the IFA has said and see whether it is any good or appropriate; that is not what we mean. But before they say yes to the transfer, each trustee will have to say to the scheme member, “Have you accessed independent financial advice?” That is only right and proper because, in general, we still think that most DB scheme members should remain in DB. That will be the right thing for most. That is why we think the advice test is the right thing to do.
The right hon. Gentleman asked about forbidding draw-down in schemes that provide cash-balance benefits. To be clear: our intention is to ensure that members are appropriately protected by ring-fencing their pots from those of other members. That means that assets must always meet the liabilities in relation to those benefits. Keeping conversion to money purchase is the simplest way of achieving that. This is about ring-fencing cash-balance benefits.
The right hon. Gentleman asked how people would calculate their overall level of pension wealth from the point of view of the £30,000 threshold. Obviously, the details of that will be set out in regulations. We are consulting the NAPF on that. It is interesting that the NAPF thinks that nobody is talking to it; we talk to the NAPF all the time. We are also consulting the ABI and other interested parties.
The nitty-gritty of how we set the £30,000, what it includes and whether it is all of someone’s assets will be subject to detailed discussions and regulation. But the principle has to be right: if we are to require people to have advice, we do not want people to be forced to pay, say, £1,000 for advice if they only have a pension pot of £5,000 or £12,000. There has to be some sort of cut-off. Clearly, we need a sensible operational definition of what that is, but I do not think the principle is at issue.
Stephen Timms
I am grateful to the Minister for giving way and for the thorough way in which he is responding. May I take him back to his response to my question on the duties of trustees in an instance where a member wants to switch from DB to DC? The proposition from the NAPF was that the sole responsibility of trustees should be to require adequate proof from the member that they have received independent financial advice from a person authorised by the FCA to give such advice. It sounds to me that the Minister is saying that that is what he intends. Is he happy with that form of wording proposed by the NAPF?
Steve Webb
I am aware that our conversations are occasionally listened into by lawyers, so I am reluctant on the hoof to say that the wording from the NAPF is better than the wording that my lawyers have come up with, which is in the Bill. Clearly the point is not that the trustees have to second-guess an independent financial adviser—that is absolutely not what we are saying—but we are concerned to make sure that trustees do not simply nod through DB to DC transfers without ensuring that the scheme member has accessed suitable financial advice.
The right hon. Gentleman asked whether regulations will be under the negative procedure or affirmative procedure. In general they will be under the negative procedure, but the regulations under new section 97A(11) in new clause 26 are affirmative. Given the speed at which we are working and the importance of getting all this in place, it is not realistic to think that we will have draft regulations for their lordships’ consideration in a few weeks’ time. But their lordships obviously will want to probe the likely content of the regulations and we will continue to try to be as helpful as we can in that regard.
Stephen Timms
Will the Minister accept that it is pretty unsatisfactory for the Bill to go through both Houses with the Members of neither of them having a draft of the regulations to consider so that they can see what exactly the Government have in mind?
Steve Webb
No, I would not accept that. The right hon. Gentleman will know, from having taken quite a few Bills through the House, that there is a balance to be struck among primary powers, giving the House a general sense of direction, our stating on the record what the regulations seek to do and separate scrutiny for the regulations themselves. We will always try to make clear our intentions and what the regulations will try to achieve and we will continue to talk to the experts outside and inside Government about the fine detail. It is perfectly normal to pass primary legislation without every last regulation being produced in draft form. The right hon. Gentleman was responsible for welfare reform legislation in which large swathes of regulations were not produced in draft form when Royal Assent was given.
Stephen Timms
The right hon. Gentleman is pressing my memory with that, but my understanding of what has generally been regarded as good practice is that there should at least be draft regulations in front of Members. We do not necessarily need every last detail and he is quite right to make the point that there will be further discussions before things are finalised, but for Members of neither House to be able to see even a draft of the regulations is unusual and pretty unsatisfactory.
Steve Webb
I do not agree that it is either unusual or unsatisfactory. It is clearly important that the House accepts and is familiarised with the basic principles of approach and that we set out what will be in the regulations and what we are going to try to achieve through them, but often the regulations will be subject to separate consultation exercises. There is an awful lot of scrutiny; I can assure the right hon. Gentleman that these things are never knowingly unscrutinised.
The right hon. Gentleman asked about the timetable. Let us put it this way: our lawyers are not taking Christmas holidays. We are working as fast as we can.
Stephen Timms
The cost of living crisis underlines the need for people in work who are struggling to set money aside for the future to be able to access pension schemes they can trust to give them good value for money and a decent income in retirement. Therefore, we welcome the proposed establishment of collective defined contribution pension schemes, which my hon. Friends called for earlier this year. Those schemes have the potential to provide a more reliable retirement income than individual defined contribution schemes. For that reason, they are to be welcomed. They operate in other countries: the Netherlands, for example. They are potentially better for individuals than individual defined contribution schemes because they can pool risk across and between generations. Research by the Institute for Public Policy Research at the end of last year concluded that there was “strong public support” for a collective pension, that it was the most popular of the options it tested and that it appealed across different income levels, life stages and ages.
We also support the establishment of shared risk schemes and the rule preventing transfers out of most public service schemes—with some exceptions that the Minister talked about earlier. We support the power to redefine the pension regulator’s powers to appoint or replace trustees and the power that will allow the Secretary of State to make payments into the Remploy pension scheme.
We have not opposed the Bill, and we will not do so this afternoon, although there are parts that, in our view, should have been strengthened. We are also disappointed that the Government have not been willing to make the changes for which we argued in Committee. We welcome the new pension flexibilities that were announced in the Budget, but we are concerned that Ministers are not yet providing adequate safeguards in the Bill to protect the savings of people who have worked hard all their lives from the risk of excessively high charges.
The changes will introduce increased flexibility for savers, and we agree that that is welcome. They will also make the pensions market much more complicated, however, and safeguards need to be put in place to protect savers from being taken advantage of, given the confusion that could arise as the changes bed down. We simply cannot afford to have another pensions mis-selling scandal like the one that was presided over by the last Conservative Government, which did a great deal of damage.
The Bill contains 55 clauses, which were substantially rewritten in Committee, and the fact that the Government have today added 33 new clauses—over half as many as we started out with at the beginning of the afternoon—and made 77 additional new amendments does not inspire confidence that these complex changes in an area of such immense importance have been properly thought through. This looks rather like a case of legislate in haste, repent at leisure. We can only hope that Members in the other place, among whom there is substantial expertise in this area, can make significant improvements. Trying to make these important changes at the same time as enacting the Budget changes is of course making the task more difficult and more risky.
A few minutes ago, towards the end of the last debate, the Minister gave a full answer to my question about regulations, for which I was grateful. His answer was a full one, but it was not particularly satisfactory. He pressed me about my experience of taking Bills through the House. My recollection is that if such a Bill had referred to regulations that were going to be introduced, I would at least have expected to put a note in front of members of the Committee explaining what those regulations were going to do. Ideally, there would be draft regulations to put in front of the Committee. In this case, as far as I can establish, there is no information at all about any of the regulations referred to in the new clauses and amendments. I was disappointed when the Minister said that no such information would be put in front of Members in the other place either.
Steve Webb
I think there is a danger of the right hon. Gentleman overdoing this a bit. A lot of the regulatory framework for the budgetary freedoms involves the Financial Conduct Authority, so we are not talking about statutory instruments or any other stuff that goes through this House. The FCA has consulted and published its principles, and it will be publishing its final statutory guidance. All of that will be entirely available to Members in the other place. So a lot of this stuff is out there already; it has been consulted on and will be published. A lot of the regulations that the right hon. Gentleman is talking about relate to defined ambition and risk-sharing, for which the timetable is much slower.
Stephen Timms
That is helpful, and I am grateful to the right hon. Gentleman, but I was making the point that, in my experience as a Minister, I would normally have expected to be able to provide some documentation about each set of regulations referred to in a clause that I was advocating to the House. There is no such information relating to the significant number of the new clauses and amendments that refer to regulations and that now form part of this Bill. The right hon. Gentleman suggested that that was normal, but I do not think it is. I was recalling my experience from the Welfare Reform Bill, on which I led for the Opposition. There was a problem there, because at the outset no information was provided about regulations being referred to in the Bill. However, by the time we got to the end of the Committee we were reliably getting, before we debated each clause, some information about the regulations being referred to in it. So I urge him, if he can take even more holiday time away from the lawyers, to look at whether he might be able at least to give their lordships some information about each set of regulations being referred to.
In the earlier debate, I mentioned the three tests we have set for the new flexibility, and I am grateful to the Minister for his response to each. My party has commissioned Professor David Blake of the pensions institute at Cass business school to lead a review of how to support a pensions market that works for all, retaining flexibility and choice on how savings are accessed and drawn down, while ensuring that all savers, including those on low and modest incomes, are protected and are able to secure a decent and reliable retirement income. One question he will consider is whether income draw-down products should be subject to a new charge cap, which could offer some safeguards that are not envisaged at the moment.
Widespread concern has been expressed about the crucial guidance provisions. We do not know a great deal yet about how this is all going to work, and it is supposed to be up and running by next April. There is serious worry, which we have debated earlier, that the guidance on offer will not be taken up in practice. We will certainly be looking with great interest at what the FCA says—the Minister has assured us that it will be referring to this—about the second line of defence.
The TUC has made the point that
“half an hour of the best possible advice will not equip people for what could be thirty years of managing their pension pot”.
It has argued for the kind of careful consideration of evidence undertaken by the last Government, which has underpinned the success of auto-enrolment—that successful measure was developed over a period, decided on by the previous Government and taken forward by the current Government and, in particular, the Minister on the Bench today. Everybody would agree that the proper deliberation that underpinned it has been an important element in its success, but we are not seeing the same thing with these changes. I fear that nobody can, as yet, feel confident about what is going to emerge.
The Minister also knows that we have concerns about the governance of collective defined contribution schemes and about the so called “independent governance committees” proposed for defined contribution schemes; and about the restrictions on the National Employment Savings Trust—NEST—which my colleague who normally speaks on these matters has long argued should be removed and which the Minister said in July last year would be removed “as soon as possible “. In fact, they remain in place, and the opportunity to remove them in this Bill has not been taken.
The Bill is worth while, but a worryingly large amount more still needs to be done. Working people must not become the victims of yet another mis-selling scandal—that has happened too often already. The dangers of ill-thought-out and rushed legislation are all too clear, and doing all this at the same time as the Treasury changes makes the risks much worse. We can only hope that Members in the other place will have the information they need and will be able to deliver some of the scrutiny which Members in this House have not, sadly, been able to provide.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Self-Build and Custom Housebuilding bill (Money)
Queen’s recommendation signified.
Resolved,
That, for the purposes of any Act resulting from the Self-build and Custom Housebuilding Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Brandon Lewis.)
Self-Build and Custom Housebuilding bill (Ways and Means)
Resolved,
That, for the purposes of any Act resulting from the Self-build and Custom Housebuilding Bill, it is expedient to authorise the charging of fees under the Act.—(Brandon Lewis.)
Local government (Review of Decisions) Bill: Money
Queen’s Recommendation signified.
Resolved,
That, for the purposes of any Act resulting from the Local Government (Review of Decisions) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Kris Hopkins.)
Oral Answers to Questions
Stephen Timms Excerpts(10 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Duncan Smith
There has been very little movement of more than about five miles from people’s existing homes as a result of the benefit cap. Most people have settled, and many—two thirds—have either gone back to work or found alternative employment. Let me say to the hon. Gentleman that there is something called the discretionary housing payment, and his local council, like any other, can make decisions about how it modifies the process. It is up to councils to do that, and we leave it with them.
Stephen Timms (East Ham) (Lab)
The flagship of welfare reform was supposed to be universal credit. The Secretary of State’s former adviser told Radio 4 last week that the Secretary of State had known that the project was going badly wrong since May 2012, but he continued to tell the House that it was “exactly on track”. The Chair of the Public Accounts Committee expects IT write-offs to exceed half a billion pounds after the election. What is the right hon. Gentleman’s estimate?
Mr Duncan Smith
Yet again, the right hon. Gentleman has got his facts completely wrong. The reality is that, as was announced only a few weeks ago, universal credit is not only doing well, but is to be rolled out nationally. The right hon. Gentleman may be smiling because he has the idea that Labour might somehow get into government, and might inherit a success. I can tell him that Labour will not get into government, but universal credit will get more people back to work. It is already the case that it will give the economy net benefits of more than £30 billion, and there will be direct benefits of some £9 billion a year as a direct result of the roll-out that we are planning successfully.
Stephen Timms
According to page 34 of the “21st Century Welfare” Green Paper,
“The IT changes that would be necessary to deliver”
universal credit
“would not constitute a major IT project.”
Is not the problem—as I pointed out to him at the time—that the Secretary of State failed to grasp the scale of the undertaking at the outset, and that hundreds of millions of pounds have been wasted as a result?
Mr Duncan Smith
Again, the right hon. Gentleman is wrong. No money has been wasted. The roll-out means that, with all the work that we are doing, the vast majority is reusable through the digital system. I should be happy to invite him into my office to discuss the issue; the door has always been open to him.
Let me also say this, however. I wish that the Opposition would stop trying to play silly games and would recognise that this benefit, which is now being rolled out successfully and whose national roll-out has been announced, will be a massive benefit for those who are seeking work and those who are in work. It is time that the Opposition sat down with jobseekers and those who run the jobcentres, and got their story straight. The hon. Member for Leeds West (Rachel Reeves) spent about half an hour in a jobcentre, and then disappeared without talking to anyone there.
Parliamentary Under-Secretary of State for Welfare Reform (Disabled People)
Stephen Timms Excerpts(10 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Stephen Timms (East Ham) (Lab)
We have had a wide-ranging debate with thoughtful contributions from hon. Members on both sides of the House about how best to support disabled people. Lord Freud’s words touched a nerve with disabled people around the country because of their experience in the past few years. They felt that, in those words, there was an explanation of what has happened, such as the bedroom tax and the delays with PIP assessments, which we have heard a lot about in the debate.
In an excellent speech opening the debate, my hon. Friend the Member for Stretford and Urmston (Kate Green) pointed out that half of former Remploy employees are still out of work. A constituent came to see me yesterday morning. He has cerebral palsy. He worked for 25 years at the local Remploy factory, which closed in 2012. He came to see me before the closure because he was worried that he would end up on the scrapheap. Today, he believes that that is exactly where he is. Promises were made about support, but he has had one trial for a call centre job in the two years since the factory closed down, and it came to nothing. The promises that were made have simply not been kept and help has not materialised, and disabled people have been let down.
Earlier this afternoon, I met representatives from the residential training colleges for disabled people and those furthest from the workplace. Between them—there are nine of them—they get hundreds of people into work every year. They have a contract until next August. They have no idea what happens beyond that. They told me that the Minister has repeatedly refused to meet them despite their requests. Once again, disabled people are being left in limbo.
Ben Gummer
The hon. Gentleman raised a sad individual case and drew a general conclusion. Does he accept that since 2010 166,000 more disabled people are in work than when we took office?
Stephen Timms
As the Minister was right to acknowledge, the employment rate penalty for disabled people is not going down. It was going down in the past; it is no longer going down. Part of the reason for that is what has happened with the Work programme. In respect of people out of work on health grounds—people on employment and support allowance—the invitation to tender for the Work programme said that if there was no programme at all, 15% of them would be expected to get job outcomes within two years. Actual performance, with the Work programme in place, has been worse than half that—an extraordinary failure rate of 93%.
The Minister told us earlier that the Work programme is now doing a bit better and that one in 10 people are getting some help. That still means that 90% are not being helped—an extraordinary failure. [Interruption.] What the Secretary of State is chuntering from the Front Bench is wrong. All the current funding for the Work programme comes from job outcome payments. According to a recent written answer, the Work programme paid out in total £332 million in job outcome payments between June 2011 and March 2014. Only £19 million of that was payments in respect of ESA claimants. Very little has been spent on helping disabled people back to work, so it is not surprising that so few have been helped.
I join other speakers in the debate in congratulating my hon. Friend the Member for Heywood and Middleton (Liz McInnes) on her excellent maiden speech. I echo her tribute to her predecessor, Jim Dobbin. I did a little canvassing during her election campaign and spoke to one man who said he would vote for her. He has since written to me to tell me that after that he met my hon. Friend and was delighted that he had made the right decision by voting for her. It was quite a long letter, which I have passed on to her. I know that she will have a very successful tenure as the local Member.
The situation does not need to be as it is at present. The plan that we have set out shows how we can do much better for disabled people than we have been doing. We agree with the independent taskforce on poverty and disability chaired by Sir Bert Massie, and with the think-tank the Institute for Public Policy Research, that we need to take people on ESA, other than those with the very shortest diagnoses, out of the Work programme and set up a new programme for them. We understand why Ministers wanted everybody in the same programme; it clearly has not worked. The Minister cannot pretend that the Work programme has been anything other than a failure for disabled people. We need a different approach. That is the clear lesson from Australia about the advantages of separate disability employment services. The new programme would move away from the outcome-based funding which has clearly not worked.
We also need a much more localised approach. Partly because of those huge regional contracts in the Work programme, it has squeezed out the good local voluntary sector expertise that can do so much to help. We want instead a programme contracted at the city region/local enterprise partnership level, and we want provision to reflect the local labour market. We want local authorities, colleges, employers and, critically, the health service to be around the table. Such integration can be achieved at a city region level. It cannot be achieved, as the Government have shown, from Whitehall.
The Working Well project in Manchester is a good example. It is for people claiming ESA who, after two years on the Work programme, do not have a job—of course, that is the great majority of people on ESA who start on the Work programme. It has been commissioned by the Greater Manchester combined local authorities. The project board is chaired by one of the chief executives and includes Jobcentre Plus, NHS England, the local drug and alcohol team, mental health trusts, colleges and adult education services. Protocols have been drawn up setting up how participants in that programme will be served with health and housing interventions. The funding model is different, with some up-front payments, not just job outcome payments. The contract requires that every client must be seen at least once per fortnight. We need those minimum standards. We have heard a lot from those participating in the Work programme, some of whom have received just an occasional phone call from their provider. We need the NHS to be part of the programme as well. That is the way forward to do a much better job.
We cannot afford to continue wasting the potential of so many disabled people—to continue to tell disabled people by our actions that they are not “worth” it, as the Minister did so shockingly with his words. We need to value disabled people—to enable them to make a contribution, as so many could and, as we have heard in this debate, wish to. The employment gap between disabled people and others is no longer falling. We need to change policies to start bringing it down again. That is worth doing. We need to learn lessons from all the other OECD countries that have a higher employment rate than we do among disabled people. It needs a change of approach; it needs Ministers who respect disabled people; and I am afraid it also needs a change of Government.