Pensions and Social Security
Stephen Timms Excerpts(12 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Steve Webb
My hon. Friend is right that when the uprating was considered, there was speculation that a different month, or a rolling average or something like that, might be used. It was decided to continue the practice of using the September CPI, but I would stress that that is not a one-month figure, but a figure published in one month about the past 12 months. Although as it happened 5.2% was the peak—I think I am right in saying that it was lower in the month before and the month after—each 12 months joins on to another 12 months, so in another year, the September figure could be the lowest. We took the view that that was the established practice, and that changing it could leave it open to manipulation. Although in a particular year it can stand out, when we take one year with the next, it will sometimes be lower and sometimes higher.
As hon. Members know, using the CPI measure of inflation was an important part of this Government’s plans for uprating pensions and benefits. I am delighted that we will have a debate on that very subject next Thursday afternoon—I look forward to being here at the same time and the same place next week. In addition to being the headline measure of inflation in the UK and the internationally recognised target measure of inflation used by the Bank of England, we believe the CPI is a superior measure of inflation when it comes to uprating benefits and pensions, first because the CPI basket of goods is a better match for the spending patterns of pensioners, and secondly because it takes better account of how households respond to price changes.
Last year, the High Court upheld the Government’s decision that the CPI can be used for pensions and benefits uprating and we have robustly defended our case in the Court of Appeal.
Stephen Timms (East Ham) (Lab)
As the Minister knows, the UK Statistics Authority has said that CPI should be used for that purpose only if it incorporates a measure of housing costs. I know some work is being done to incorporate such costs in the CPI measure, but is it the Government’s intention to use that modified measure when it is available?
Steve Webb
The hon. Lady may not have been in the Chamber when I referred to next week’s debate, when we will debate such issues at greater length. I was not aware that it was Labour party policy to revert to RPI—its view for now is that CPI is appropriate. She might want to raise that with the right hon. Member for East Ham (Stephen Timms), who is on the Opposition Front Bench. For the reasons I have given, our judgment is that the CPI basket of goods matches the spending patterns of pensioners. The Institute for Fiscal Studies has confirmed that modelling and people’s response to price changes is better with CPI than in RPI. No index is perfect, but there is a good case for using CPI.
Funnily enough, when I attended a National Pensioners Convention event in the House a few months ago, the people there all demanded CPI, which shows how the debate has moved on. I am sure the hon. Lady has a press release saying that more is being demanded, but the tenor of the debate was that there was speculation that we would not honour our triple-lock promise. They said: “Minister, will you guarantee us the triple lock—prices, earnings or 2.5%? Will it be the 5.2% that we have just seen?” That was commendable realism on the part of the National Pensioners Convention—that is its role in life—but things may have moved on now it has banked the 5.2% in the current environment. In fact, 5.2% is the biggest cash increase ever and one of the biggest real-terms increases in a long time. I am proud to stand by that figure.
Restoring the earnings link for the basic state pension was an early action by this coalition Government, putting an end to 30 years of deterioration in the value of the foundation of retirement income relative to average earnings. Better than that, we went one further with our triple guarantee to pay the highest of the growth in earnings, prices or 2.5%, so that even in times of slow earnings growth, we will not see a repeat of the small rises, such as the 75p rise in 2000, presided over by the Labour party.
In line with the triple guarantee, the new rate for the basic state pension, received by more than 11 million people in this country, will be £107.45 a week for a single person, an increase of £5.30 a week. My hon. Friends in the coalition may be interested to know that that means that from April 2012, the basic state pension is forecast to be 17.1% of average earnings, which is a higher share of average earnings than in any year of the previous Labour Government from 1997.
Stephen Timms
A minute or two ago, the Minister said that this was the highest ever real-terms increase to the state pension.
Stephen Timms
I thought that was what the Minister said. Perhaps he can clarify that point, because by definition it cannot be a real-terms increase.
Steve Webb
It is the highest cash increase ever and the highest real-terms increase for about 10 years.
Stephen Timms
Given that the increase is purely in line with inflation, how can the Minister describe it as a real-terms increase?
Steve Webb
Because the point at which the money is paid is not the point at which inflation is measured, so when people actually get the money it will be substantially more than the inflation since the last increase.
Stephen Timms
This takes us back to the point raised by the hon. Member for Bury St Edmunds (Mr Ruffley). The Minister is making a virtue out of a timing point rather than a substantial point. He is a modest man, and I am sure he will accept that the Government cannot claim credit for inflation being slightly lower now than it was last September.
Steve Webb
On the contrary, let us bear in mind what the Government have done: the Chancellor has taken action on the taxation of petrol, resulting in inflation being lower than it would have been, and we have successively frozen council tax in many parts of the country, which is of huge benefit to many pensioners. There are many things that Governments do that influence inflation. Some factors are global, which is one reason inflation peaked at 5.2%, but measures that the Government have taken have also been one reason prices have been falling. That is entirely to the Government’s credit.
Stephen Timms (East Ham) (Lab)
The Minister has helpfully explained that we are dealing with three separate orders, aspects of which are welcome but others of which are decidedly unwelcome. I shall make it clear where we do not support the Government.
The Pensions Act 2008 (Amendment) Order—to give it a rather briefer title than the one the Minister used—makes minor amendments to protected rights over payments of defined contributions contracted-out pension schemes. As he said, the underpinning legislation is the Pensions Act 2008. I accept that the order is necessary to clarify a following order, and I have no objection to it.
The most substantial of the orders—the one that I am sure this debate will focus on—is the Social Security Benefits Up-rating Order 2012, which, as the Minister said, uprates most out-of-work benefits and the basic state pension in line with the consumer prices index. For most out-of-work benefits, this will be the second year that CPI has been used rather than RPI, but for the basic state pension it is the first year. Members might recall that, like this year, last year the Government trumpeted their triple lock on the basic state pension.
I recall that in the debate last year the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), who unfortunately is not with us today, congratulated his hon. Friend the Minister on his success in introducing the triple lock—only, the Government did not, in fact, apply it last year. Under the triple lock, the basic state pension would have been uprated by CPI, which was a long way below RPI last year, so the Minister—prudently, I think—decided to overrule his triple lock on its first outing and instead operate the old mechanism, uprating the basic state pension by the higher rate, RPI. In doing so, he exposed to public view the weakness of his triple lock. He had to override it in the first year it was due to be applied. Advertised as a safeguard for pensioners, the triple lock in fact undermines pensions uprating.
The Government have told us that the switch from RPI to CPI is not simply a deficit reduction measure. Instead, the justification for the switch is that, as the Minister said again today, CPI is a more accurate measure of changes in the cost of living for pensioners. Last year the Minister told us that he viewed CPI as
“the most appropriate measure of price inflation for this purpose,”
and that he saw
“no reason to change it in the future.”—[Official Report, 17 February 2011; Vol. 523, c. 1174-77.]
However, the view that RPI, let alone CPI, is an adequate measure of pensioner inflation is one on which many pensioners would take issue with him, as the hon. Member for Banff and Buchan (Dr Whiteford) suggested a few minutes ago. I was interested in the Minister’s view that the National Pensioners Convention is happy with CPI uprating. However, as the Civil Service Pensioners Alliance, among others, has pointed out in its briefing:
“The Royal Statistical Society…has said that CPI fails to reflect the spending patterns of pensioners and the rising costs they face. The Institute for Fiscal Studies”—
to which the Minister referred—
“has shown that most pensioner households are not shielded from many of the costs excluded from CPI. The UK Statistics Authority…has said that they do not believe the CPI should become the primary measure of data inflation until housing costs are included,”
which is a point that he touched on in response to my intervention.
The Minister has tried to paint the change as simply a sensible bureaucratic change, not one that is ideologically motivated or that represents a cut in the income of pensioners, but in reality that is not the case. As the UK Statistics Authority put it last year:
“Questions about compensation, who to compensate and what for, are straightforwardly political questions, not for statisticians.”
In other words, this is a matter for political decision. Let us be frank with people: the Government have chosen to uprate benefits and pensions permanently in a way that, in the case of benefits, will usually be meaner than the method used before and, in the case of pensions, was meaner this year and last year, which is why the Government overrode it last year and used the old method instead.
George Hollingbery (Meon Valley) (Con)
I seem to recall some embarrassment in the Labour party back in 2000 when the low rate of 1.1% was used to uprate pensions, the result of which was a 75p increase. Does the right hon. Gentleman agree that, under this Government, the triple lock will ensure that 2.5% is the minimum that can be paid?
Stephen Timms
Of course, that is indeed the effect of the mechanism that the Government have chosen. I would simply point out to the hon. Gentleman that if the previous method was still in place, there would be a higher increase in the basic state pension than the Minister has announced today.
Ian Paisley
The right hon. Gentleman has mentioned the triple lock, which interests me and which applies only to the basic state pension. A number of charities, such as Age Concern and others, have contacted me about this issue. They argue that the Government should apply the triple guarantee to other elements of the state pension, including the additional pension allowance. Does he agree that that would make good sense?
Stephen Timms
That is a matter that the Minister may well want to comment on in his response to this debate. In my view, the triple lock is certainly not the wonderful device that the Government maintain it is. As I have said, it is leading to a lower uprating of the basic state pension in the year ahead than if the RPI mechanism was still being used.
Oliver Heald
Does the right hon. Gentleman agree that we need to exercise judgment about what the increase should be? One of the faults of the last Government was to be too rigid. My hon. Friend the Member for Meon Valley (George Hollingbery) has already mentioned the 75p increase, but there was also the freezing of the additional pension, which, again, was considered a mean act. Is it not right for the Government to take a judgment and—on pension credit, for example—to make increases well above the rate that they have to use, which is earnings, and instead use a higher measure, in order to be fair?
Stephen Timms
The hon. Gentleman’s argument is a different one from the Minister’s. The Minister says that because of the triple lock, pensioners are safeguarded and need not worry about what future judgments Ministers will make. In a way, I am rather more with the hon. Gentleman on this than with the application of the formula. Again, however, I would point out that last year—the first year that this supposedly wonderful mechanism was in place—the Government overrode it. I am therefore not quite sure what certainty pensioners would have for the future about whether, in the event of siren voices being heard—we heard about those earlier—the triple lock might be overrode in the other direction, if someone judges that to be appropriate.
Steve Webb
Will the right hon. Gentleman confirm that the statutory position that his Government left—and which was the basis of the spending plans for 2012 that they published for us—was based not on the higher of either prices or earnings but on earnings alone, and that the pension rise that his party pencilled in for 2012 was not five-and-a-bit per cent., but more like 2.5%?
Stephen Timms
As the Minister well knows, the basic state pension was uprated over a long period in line with RPI. My point is simply that if that mechanism was still in place, there would be a greater increase in the current year than the Minister has incorporated in the order before us today.
Steve Webb
But if the right hon. Gentleman thought that in the event of prices being higher than earnings he would choose prices, why did he make it the statutory position that just earnings would be used, therefore pencilling in an earnings-only increase for 2012, which meant that we had to find extra money to do better than just earnings this year?
Stephen Timms
It is probably the case that the Government’s poor performance on inflation—to go back to a point the Minister made earlier—and the resulting high level of inflation have been a surprise. I do not think anyone expected inflation to rise so rapidly. However, I want to underline the point, which the Minister has not acknowledged yet, that if RPI was still in place for the coming year, the increase for pensioners would be higher than the order in question sets out.
The judgment to adopt this approach of using a permanently meaner version of uprating than was in place before is one that we oppose. Of course there is a pressing need to reduce the deficit. We know, as does the International Monetary Fund—and, it would seem, the credit rating agencies and, this week, the former Defence Secretary—that reducing the deficit requires economic growth, which is strikingly absent at the moment. With the economy not creating enough new jobs and so many people out of work, not paying taxes but instead claiming benefits, targets for reducing the deficit will just keep being pushed back further and further. We heard in the autumn statement that we will be borrowing £158 billion more over the lifetime of this Parliament than on the last estimate, because the Government’s economic policy has failed to deliver growth and the economy has flatlined. If, instead of the permanent switch to CPI uprating, a temporary switch had been proposed—with the aim of contributing to deficit reduction over a short period—that might, in our view, have been justified, but we do not support the Government’s policy of a permanent switch to meaner uprating.
In the debate last year, the Minister attempted to make something of the fact that, for five of the past 20 years, RPI had been lower than CPI. Well, it was not lower last year, and it is not lower this year. RPI has generally been higher. Since 1989, the gap between RPI and RPI minus X and the CPI measure has been 0.7% on average. The Office for Budget Responsibility’s November economic and fiscal outlook suggests that the long-run difference between RPI and CPI is likely to be a good deal more, at about 1.4 percentage points. That is twice as much as that historic average, so the OBR thinks that the gap between RPI uprating and the CPI uprating that the Government want to apply in perpetuity is going to get bigger, not narrower.
George Hollingbery
I think I understood the right hon. Gentleman to say that he has made a commitment that, had a Labour Government been in power now, they would have uprated pensions using RPI. Has he calculated how much that might cost, and is that a spending commitment that he is prepared to make here today? Secondly, if he is arguing for RPI uprating in future, does he have any idea of the long-term commitment that that might involve for the Government?
Stephen Timms
I shall deal with the last point immediately. I have said that if this Government had proposed a temporary switch to CPI uprating in order to contribute to deficit reduction, we would have looked seriously at that argument. It is the permanent downgrading of the uprating method for pensions and all other benefits that we think is wrong.
The DWP impact assessment from July last year told us that the impact on occupational pensions over the next 15 years would be more than £70 billion, and I think the Minister has said that it would be more than £80 billion. It will certainly involve a very large figure indeed. In this coming year, the gap between CPI and RPI—the figure that has been used refers back to last September—is relatively small, at 0.4%. I think the Minister is hoping that pensioners will not notice that his triple lock, which sounds so generous, is in fact delivering a lower increase than the long-established formula used by all Governments until this one. High inflation makes this a substantial cash increase, but, given what the Minister has said about the importance of keeping inflation low, it is not greatly to this Government’s credit that the cash increase is so large.
Stephen Lloyd
Does the right hon. Gentleman agree, however, that if the Labour Government had used the triple lock, there would never have been the scandalous scenario of a few years ago when Labour gave pensioners an increase of 75p?
Stephen Timms
The point I am making is that if the RPI method were in place for the coming year, the increase would be larger than the one in the order before us today.
Sarah Newton (Truro and Falmouth) (Con)
I acknowledge the right hon. Gentleman’s deep knowledge of this subject, but he is not giving the House an entirely accurate picture. For the longest period, the state pension was linked to average earnings, but it suits his argument today to make a comparison with RPI. The huge benefit of the triple lock is that it provides a choice. Average earnings could be taken into account, for example, and if they grew between 6% and 7%, so would pensions. Also, there is always the floor of 2.5%, which would prevent a repeat of the disgrace of giving pensioners 75p, as happened under the last Government.
Stephen Timms
I thank the hon. Lady for her generous remark. There is some merit in having an earnings underpin to the system, but I say again that, for the year ahead, RPI would give a higher increase than the triple lock has delivered. That was the case last year as well, which is why the Government set the triple lock aside in the first year it was supposed to be in place. This year, the difference is much smaller, at 0.4%, and the Government must be hoping that people will not notice that the triple lock is delivering less than an RPI uprating would have done. However, in principle, having an earnings underpin as well is entirely helpful.
Sarah Newton
But does the right hon. Gentleman not see the benefit for pensioners and the wider economy of the certainty provided by the triple lock? People can now plan for their retirement, and the Exchequer can plan for the economy.
Stephen Timms
It is not clear what the degree of certainty is. As I have said, the triple lock was overridden last year because it would have given such a low rate of uprating. This year, it has been applied because there is not much difference between RPI and the triple lock. So no, I do not think that any kind of rock-solid certainty has been introduced; the triple lock was waived the first time it was supposed to be put in place.
Andrew Bingham (High Peak) (Con)
The right hon. Gentleman talks about certainty, but will he acknowledge that the triple lock will give pensioners the certainty that they will no longer get the derisory 75p they got when his party was in government?
Stephen Timms
As I have said, in the first year that the triple lock was due to be put in place, it was overridden, so I am not sure about the certainty to which the hon. Gentleman refers.
Oliver Heald
The right hon. Gentleman is being a bit naughty. It is a general provision in many pension schemes that there is a method of indexation, and it is often permissible to exceed it. To exceed the triple lock is not to break it; it is simply to be more generous. I do not think that “overridden” is the right word to use.
Stephen Timms
I deny being naughty. I am simply making the point that the Government have been telling pensioners that they are now in a wonderful new era, thanks to the triple lock, yet it had to be overridden in the first year it was supposed to be in place because it was not delivering an adequate increase. I am not persuaded that the degree of confidence that Conservative Members believe to have been bestowed on pensioners is a reality.
Ian Paisley
Far be it from me to encourage the right hon. Gentleman to be naughty, but is there not a certainty that pensioners—those over 80 in particular—are now going to be £50 a year worse off because of the loss of the winter fuel allowance additional payment?
Stephen Timms
The hon. Gentleman is absolutely right. People will feel that loss to a significant extent.
Those big figures, £70 billion or £80 billion, are a direct hit on the incomes of pensioners. They have paid into a pension, in many cases throughout their entire working lives, on the understanding that it would be indexed in a particular way. The Civil Service Pensioners Alliance notes that many of them will have
“entered into particular financial arrangements such as the purchase of added years, the conversion of lump sums into pensions and acceptance of moves to other employers on TUPE terms on the basis that future indexation will be linked to RPI”.
That contributory deal, understood and signed up to by pensioners, is being broken for good—permanently. KPMG has estimated that the total cost of the move to CPI uprating across the pensions system to public sector and private sector pensioners over the next 40 years will be £250 billion. The Government tell us—Conservative Members have just attempted to make this point as well—that pensioners will appreciate the stability. I have to say that they would appreciate even more having an income that kept pace with their costs.
I want to ask the Minister one specific question. The UK Statistics Authority has made the case that
“CPI should become the primary measure of consumer price inflation, but only when the inclusion in the index of owner occupiers’ housing costs has been achieved.”
I am grateful to the Minister for explaining the timetable he envisages for a change to the CPI mechanism possibly being introduced. He has not committed the Government to introducing such a change, but he has indicated when they expect to be in a position to do so. However, does he acknowledge the UK Statistics Authority’s point that, as things stand, the CPI is not an adequate measure, because of the exclusion from it of important elements of housing costs?
Dr Whiteford
The right hon. Gentleman has advocated a temporary use of CPI, but will he clarify whether he is advocating a return to the use of RPI at some future date? If so, when that would be?
Stephen Timms
I am simply making the point that if the Government had proposed a temporary switch to CPI uprating, perhaps for three years, that would have been a reasonable proposition for us to consider. As it is, we have this permanent switch, which we oppose. As to what we will do when elected to government, I will have to ask the hon. Lady to wait until the publication of our manifesto ahead of the next election, which she and many others will be eagerly awaiting.
Will the Minister say more about what will happen once this revised formula for CPI has been drawn up and published by the UK Statistics Authority? Can he provide any encouragement that the Government will in fact use what will almost certainly be a higher rate resulting from that, or will they wish to stick with the current, lower CPI figure—the one being used for the coming year?
This order also provides for an increase in the standard minimum guarantee element of the pension credit—3.9%, as the Minister said, which is above the increase in earnings to which it would be statutorily tied. It is not clear to me how the 3.9% figure has been arrived at; can the Minister shed some light on that? I do not intend to object to it. As the Minister also said, to pay for the increase, the threshold for the savings credit element, which rewards those who have made their own provision for retirement, has been increased by 8.4%—quite a large amount. The maximum savings credit payable has been reduced by about £2 a week. The reduction in eligibility was made clear when this policy was announced, but the reduction in the maximum amount was not announced at that time.
How many people does the Minister expect to be affected by those changes, and what financial savings will each of them realise for the Exchequer towards the cost of the slightly higher uprating of the minimum guarantee element of the pension credit? We need to recognise that what is happening here is that money is being taken away from slightly better-off pensioners who are still receiving pension credit in order to give to those who are dependent on the guarantee element.
Let me press the Minister on one specific question about CPI uprating. The Government are freezing local housing allowance rates from April in preparation for the linking of the benefit to CPI. To put it politely, that has not been well publicised. One might almost think that the Government would prefer it if people were not made aware of it. When the policy was originally announced, the impact assessment said:
“Some savings are assumed in 2012/13, on the assumption that LHA rates will be fixed at some point ahead of the first uprating.”
It did not say that it would be fixed for the entire year, which is what the Government are now saying. What is the Minister’s justification for doing that?
Local housing allowance rates will be calculated annually as either the lower of the rent at the 30th percentile of local rents or the previous year’s allowance uprated by CPI. That is my understanding; perhaps the Minister will confirm whether I am right. What that means, of course, is that LHA rates will fall over time below the 30th percentile of local rents. Surely Ministers should commit to ensuring, as they seem to have indicated, that at least 30% of local rented housing supply will be affordable to tenants on LHA; otherwise, there is no clear definition of what Ministers expect the LHA to deliver in each local area. Let me ask the Minister directly: what proportion of the local housing market do Ministers think should be affordable for tenants on housing benefit? When will they step in, and how far does the proportion have to fall before they will step in to uprate the LHA level back up to, hopefully, the 30th percentile point?
I have another query about housing benefit. In paragraph 4 of part 20 on page 14 of the order, the maximum deductions from benefit in respect of heating, cooking, hot water and lighting, when those costs are included in the rent and paid to the landlord, are being raised substantially by 18%. Will the Minister say a few words about why those deductions from benefit have been increased so much?
The Guaranteed Minimum Pensions Increase Order requires occupational pension schemes to uprate their guaranteed minimum pensions by their 3% share of CPI, with the state meeting the remainder of the costs. These provide an important floor to defined benefit schemes so that individuals do not get less than they would if they had remained on the state second pension. The 3% increase would have occurred under either CPI or RPI uprating, so it is not objectionable in itself.
This year we are debating these orders as proceedings on the Welfare Reform Bill seem to be drawing to a close.
Stephen Lloyd
I have enjoyed listening to the right hon. Gentleman. In my time in Parliament, I have always appreciated his fairness when he debates various issues. I would like to press him on one matter. He said at the beginning of his speech that he agreed with the Government on some aspects of the uprating. Thus far, however, I have mainly heard about where he disagrees with the Government about the uprating, so I would be grateful if he clarified what he thinks is good about it.
Stephen Timms
I am grateful to the hon. Gentleman for not accusing me of being naughty—indeed, rather the reverse. I have drawn attention to a number of points of agreement with the Government. For example, I do not object at all to the Guaranteed Minimum Pensions Increase Order. On its own, the increase in the pension credit guarantee level is welcome. We need to know a little more about how it is going to be funded, but it is a good thing in principle, as I said. I also made it clear that I had no objection to the first order I commented on. I thus hope that I will manage to maintain my reputation for fairness—at least in the hon. Gentleman’s mind.
As the debates on the Welfare Reform Bill come to an end, it is important to place this measure in the context of the Government’s wider changes, which will penalise pensioners and in some cases make it impossible for people of working age to save. Couples with one member drawing near to the state pension age are unaware that, as a result of the Welfare Reform Bill, if the other member is younger they will not qualify for pension credit, so the household will not benefit from the increase in the pension credit guarantee level to which the Minister drew attention—I understand why he did so. Couples who live in council or housing association accommodation and claim housing benefit will face the under-occupation penalty; if one of them is below the age of entitlement for pension credit, it will be applied to them as well.
Families on tax credits do not yet know that they will be punished for saving. If they are trying to save up for a deposit on a house or for a child’s university education, and have managed to save more than £16,000—such people have been and are currently entitled to tax credits—they will not get any universal credit at all. For some, universal credit will make it impossible to save. The Minister made a virtue—again, I understand why he did so—of the 5.2% increase in the level of contributory employment and support allowance in the order. What he did not mention was that 100,000 people will lose out when the time limit on contributory employment support allowance comes into effect. If, against all our efforts, the Welfare Reform Bill achieves Royal Assent in time, those 100,000 people will lose out at the beginning of April and another 100,000 will lose out in the following year as they hit the one-year limit. That is the world that the Welfare Reform Bill is ushering in.
We recognise that there are elements in these orders that are acceptable—some, let me say again for the hon. Member for Eastbourne (Stephen Lloyd), are even welcome. Other elements, however, and in particular the permanent adoption of a lower rate of inflation uprating for pensions and other benefits, we cannot support. For that reason, we will be unable to support the Government in the Lobby.
Steve Webb
Indeed. If one could obtain pretty robust and independently accepted forecasts—although that prompts at least two questions—there would have to be a decision about whether one used “forecast, forecast, forecast” or “history, history, history”. In terms of the orders, I am concerned with the decision that we had to make about this year. Had we switched from history to forecast just at the point when forecast was helping us, I think that we would have been criticised. With an historian sitting opposite me, I hesitate to say that no one can argue about history, but at least there is some certainty in the past. We now have the Office for Budget Responsibility, and we have the Bank of England, so we could get an objective future figure. However, if we did that and the future started to turn out differently, there would be a lot of pressure with people saying, “You forecast this figure but it is turning out to be more”. There would also be pressure to make in-year corrections, whereas nobody can argue about history, and that gives us a certain amount of certainty. Having said that, I understand my hon. Friend’s comment about the point of indexation being to match the inflation experience.
My hon. Friend talked about in-work and out-of-work benefits and the relative position of pensioners, as did my hon. Friend the Member for Eastbourne (Stephen Lloyd). I remind him that we have different approaches for pensioners and for non-pensioners. The statutory position for non-pensioners is generally CPI or, in some cases, discretionary, while our policy for pensioners is triple lock. We are in very strange times, with CPI, RPI and earnings going all over the place. In more normal times, when earnings rise faster than prices, pensioners will generally get bigger increases.
I entirely agree with my hon. Friend about the burdens on the low-paid. That is why we are keen to raise the tax-free personal allowance, among other measures. Nobody would say that being in a low-paid job is a comfortable place to be, especially with pay freezes. On average, people affected by the tax credits changes are on incomes of some £17,000 a year, but someone who is drawing employment and support allowance is on an income of about £3,500 a year. It is a question of how much scope the person has to accommodate and absorb these inflation shocks, and that was the judgment that we made. Most of the time, earnings rise faster than prices, and the gap between jobseeker’s allowance and low-paid people’s wages is increasing year after year. In the past 20 years, it has probably increased 17 or 18 times. In general, that will be the sort of outcome that we get. Of course, as soon as we introduce universal credit, that will institutionalise the gap between out-of-work and in-work benefits in the way that I think he wants to see.
My hon. Friend the Member for Eastbourne welcomed the 5.2% increase, particularly for working-age disabled people. I am grateful for his representations on that. He is right that we need to protect people who are not able to work. He asked about the evolution of CPI and RPI. Just to be clear, the £13,000 figure was reached by comparing our triple lock, based on OBR-type assumptions, with the RPI policy of the past 30 years. We asked what somebody retiring on a full pension this year would have got had RPI been rolled forward and what they would get under the triple lock according to realistic assumptions about earnings and prices. The difference between the two is a cumulative £13,000. That figure has changed. I used to say that it was £15,000, then the OBR changed its numbers and I said that it was £10,000. We now say that it is £13,000. The figure will change, but over time earnings tend to grow faster than RPI, so the basic pension will tend to grow faster than it would have done. That is something that we need to communicate over the coming years.
I wrote down a bizarre phrase that was used by the right hon. Member for East Ham (Stephen Timms). He said that the triple lock “undermines pensions uprating”. People can check his speech, but that is what I thought he said. That is nonsense. The triple lock reinforces pensions uprating because it always gives pensioners the best deal between CPI, earnings and 2.5%.
Steve Webb
I will in a second. Clearly, those numbers all fluctuate relative to each other. Perhaps the right hon. Gentleman can confirm whether he disputes the fact that £13,000 extra compared with the policy that his Government adopted for 13 years is the result of the triple lock?
Stephen Timms
I want to focus on the year ahead. Will the Minister confirm that the triple lock will deliver a lower uprating than would RPI?
Steve Webb
It is interesting that the Labour party has said that it does not support the orders, which include a CPI increase, and yet is not going to vote against them. I assume that it will not vote against them as there are only about four Labour Members here.
It is unclear what the right hon. Gentleman is saying. He does not think that there should be an RPI increase. Whether RPI is higher than CPI this year could be a debating point. Of course RPI is higher, as he well knows and as we all know. However, he is not in favour of using RPI this year, but favours a temporary move to CPI. I am not sure what debating point he is trying to make.
The right hon. Gentleman and the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) asked about CPIH, which is CPI including the housing costs of owner-occupiers. We are entirely open to looking at that. We are not going to say that we will definitely use it, because we do not know what it is, what it will include or what its properties will be. It would be premature of us to sign up to a prices index that we have not seen and that has not even been invented yet. We are entirely open to considering whether that is the right measure to use when the Secretary of State decides the general increase in the cost of living for September 2013, which is when it will presumably happen. I have said that consistently.
The right hon. Member for East Ham asked why we had increased the standard minimum guarantee by 3.9%. That is the cash pass-through. We have given the basic state pension £5.30. We wanted people on the minimum guarantee to get at least £5.30. It turns out that it will be £5.35. That is 3.9%.
The right hon. Gentleman asked about the savings from the savings credit change. We over-indexed the guarantee credit compared with statute, so it is 3.9% rather than 2.8%. That cost us £200 million, which we have to find by cutting back the savings credit. There is therefore no net saving on pension credit as a whole, but rather redistribution from the savings credit to the guarantee credit. I hope that that answers his question.
The right hon. Gentleman said that the Government had been secretive about the link between the local housing allowance and CPI, and about the freeze in April 2012. I accept that not many people listen to our debates in the House, but I announced that measure from the Dispatch Box on 6 December 2011. I think that he might even have been here. I said:
“As part of the preparation for this change, we need to fix LHA rates, to establish a baseline… As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012.”—[Official Report, 6 December 2011; Vol. 537, c. 164.]
The measure was therefore announced before Christmas. Perhaps the right hon. Gentleman had his mind on other things at the time.
The right hon. Gentleman asked why the deductions from heating and so on in the social security order are relatively high. The deductions are linked to the component indices of CPI. Those things have gone up by more than inflation. Each year, we link them to what has actually happened to the cost of those items. Therefore, had the costs been lower, we would have used a lower figure. That is just for consistency.
I stand before the House having just announced £6.6 billion of spending. With due respect to the hon. Members who have attended the debate, it has not received a huge amount of scrutiny, but as was said during the debate, that is because people overwhelmingly think we have done the right thing. We have recognised that pensioners, who will get two thirds of the money, should benefit from the triple lock, that the poorest pensioners should be protected, that disabled people should be protected from inflation and that people who are out of work through no fault of their own should not suffer a cut in their real living standards. It is therefore my great pleasure to commend the orders to the House.
Question put and agreed to.
Resolved,
That the draft Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) (Amendment) Order 2012, which was laid before this House on 30 January, be approved.
Pensions
Resolved,
That the draft Guaranteed Minimum Pensions Increase Order 2012, which was laid before this House on 30 January, be approved.—(Steve Webb.)
Social Security
Resolved,
That the draft Social Security Benefits Up-rating Order 2012, which was laid before this House on 30 January, be approved.—(Steve Webb.)
Welfare Reform Bill
Stephen Timms Excerpts(12 years, 9 months ago)
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Stephen Timms (East Ham) (Lab)
I hope that Government Members think long and hard before simply voting down Lords amendments 3B and 26B, but at the outset let me comment on the other amendments, as the Minister did.
I want in particular to welcome the Government’s concession on time-limiting contributory employment and support allowance for people in the work-related activity group. Amendments 17B to 17D and 19B provide in circumstances prescribed in regulations for a longer time limit than one year. That is a very welcome change, and I am grateful to Ministers for permitting it. The Government have made it clear that they have no intention of bringing forward such regulations, but the Bill will now at least allow a future, more fair-minded Government to do so, and I welcome that change very much.
The Minister in the other place also gave some assurances about people being treated for cancer, which has been an important issue in this debate. His assurances were, however, rather vague. They do not help people recovering from strokes or from severe mental health problems, or others who have no chance at all of getting back into work within a year, but the assurances in respect of cancer patients, in so far as they went, were helpful.
Amendment 73BA, which the Government tabled, would allow them to waive charges for the parent with care when accessing the child support system in specified circumstances. Again, we have no idea what those circumstances will be, but the amendment is nevertheless helpful rather than unhelpful.
There also needs to be movement on the policy addressed by amendments 3B and 26B, which the Minister before us still opposes. They have some perfectly reasonable aims, to which attention has been drawn in this debate. Under-occupancy of social housing is a problem; many people are stuck—overcrowded—on housing waiting lists; fewer people under-occupying would help; and a workable penalty for people who refuse an offer of smaller, more suitable accommodation could achieve that aim.
Mr Tom Clarke
I follow absolutely my right hon. Friend’s logic, but in the field of disability does he not recognise that in many cases the so-called extra room is there for a carer or for other physical reasons to help the disabled person? It is therefore pretty unacceptable to change that arrangement.
Stephen Timms
My right hon. Friend is absolutely right, and that is why the Lords propose in their amendment an exemption for people in receipt of disability living allowance, thereby addressing exactly that point.
Our original amendment would have penalised under-occupation in a workable way. If a tenant refused a suitable offer of a smaller home, they would suffer the penalty. If, however, no smaller home were available, they would not suffer that penalty. Unfortunately, that amendment was defeated in our previous debate, but I pay tribute to the 12 Liberal Democrat Members and two Conservative Members who supported it. I am glad to see some of them in their places this afternoon.
Legal challenge to the Government’s policy seems inevitable, because it penalises people for a situation that it is impossible for them to change. The amendment could not be reintroduced in the other place because the Government claimed financial privilege, so this afternoon we have in amendments 3B and 26B a much weaker proposal. It does, however, at least protect those, like the people to whom my right hon. Friend has just drawn attention, who will be hardest hit if the Government’s policy goes through.
The proposal would safeguard four tightly defined groups: first, people in the employment and support allowance support group—those who are too ill to be expected to return to work in the near future; secondly, adults and children who receive disability living allowance or its successor, the personal independence payment; thirdly, war widows; and fourthly, foster carers, because for the purposes of housing benefit calculations foster children do not count towards a bedroom need.
Let me underline how modest the proposal now is. Many Members will take the view, for example, that war widows should not be penalised for having a spare bedroom. The proposal, however, would not protect war widows in that way. It simply says that no war widow should be fined for under-occupying her home unless she has been offered appropriate smaller accommodation. If such an offer has been made to her and she has refused it, under the Lords amendments she would be penalised. The amendments would protect her position until such an offer was made. Only tenants in one of the four specific groups would have even that safeguard. Everybody else who was under-occupying their social tenancy would, under the amendments, be penalised even if it was impossible for them to move to somewhere smaller.
The Child Poverty Action Group has highlighted an example of how similar rules currently apply in the private rented sector, which highlights the point made by my right hon. Friend the Member for Coatbridge, Chryston and Bellshill (Mr Clarke). Let us consider a claimant who has two daughters, one of whom has severe and uncontrollable epilepsy with frequent fits during the night. Her social worker and occupational therapist agree that the two girls need separate bedrooms. The claimant currently rents a three-bedroom house, but housing benefit covers the cost of only a two-bedroom house. The Lords amendments would fix that situation for social housing because the daughter is in receipt of disability living allowance.
I will now consider the hypothetical example of a couple in which one person has terminal cancer, which puts them in the employment and support allowance support group for people who are not expected to work again. That is one of the four specific groups that the Lords amendments would protect. The couple have a spare bedroom in their two-bedroom council house because their child moved out recently. They would be happy to move to a one-bedroom council or housing association flat but none is available. Under the Minister’s policy, that couple will be penalised, on average by £12 a week. Under the amendments, because of the exceptional circumstances, they would not be penalised. That would be the modest and reasonable effect of the amendments that the Lords agreed.
The National Housing Federation tells us that 180,000 social tenants in England are under-occupying two-bedroom homes, but that only 68,000 one-bedroom social homes became available to let in the year 2009-10. The impact assessment from the Department for Work and Pensions, which is well worth reading, states:
“According to estimates from DCLG there is a surplus of 3 bedroom properties, based on the profile of existing working-age tenants in receipt of Housing Benefit, and a lack of 1 bedroom accommodation in the social sector. In many areas this mismatch”—
I am quoting the Department here—
“could mean that there are insufficient properties to enable tenants to move to accommodation of an appropriate size even if tenants wished to move and landlords were able to facilitate this movement.”
That is the reality in many places. There simply will not be a one-bedroom home to move to. That will be the case in the constituency of the right hon. Member for Bermondsey and Old Southwark (Simon Hughes), who intervened earlier, and in my constituency. Of course, the policy will not release a single one-bedroom home, because one cannot under-occupy a home with one bedroom.
The couple in the example, in which one person has terminal cancer, would see a cut of £12 a week or nearly £60 a month in their income. That is the average across the country. They would somehow have to make that up to their landlord from other income. The Department, no doubt trying to be helpful, gives some suggestions in the impact assessment of how they might do that:
“In these circumstances individuals may have to look further afield for appropriately sized accommodation or move to the private sector, otherwise they shall need to meet the shortfall through other means such as employment, using savings or by taking in a lodger or sub-tenant.”
I ask the House to reflect on each of those three suggestions in the case of somebody with terminal cancer. People in the ESA support group are, by definition, not in a position to work. That is why the Government have placed them in the support group. That suggestion therefore does not help. The DWP suggests instead that our terminally ill tenant in a two-bedroom flat should take in a lodger to help pay the rent. One has to ask whether the people promoting these policies have ever met anyone who will be affected by them. Of course, in many cases, the social landlord would not permit somebody to take in a lodger under the terms of their tenancy. The Department’s other suggestion is that they can use their savings. People in receipt of income-related ESA do not have very much saved—if they did, they would not receive income-related ESA.
Another alternative, as the impact assessment suggests, is that the tenant will have to move out of their council home into the private sector. In that case, their housing benefit will rise sharply. Where is the gain in forcing that to happen? The National Housing Federation, whose members are very worried about the change that the Government insist on making, makes the point that
“a couple with one child moving into the private sector from a three bed social flat in Crawley would be entitled to around £66 per week more in benefit to cover their additional housing costs.”
The key point is that it will be impossible for many of those affected to avoid the penalty. If suitable alternative accommodation can be offered to them, then fine, they can move and will no longer be under-occupying, and their benefit will continue to cover their full rent. The Lords amendments specifically allow for that. However, if there is no smaller flat available, our cancer patient will just have to take the £60 a month hit. How can that be justified?
The Minister will tell us, as he has before, that £30 million has been made available to councils in discretionary housing payments to avoid penalising a limited number of households. However, the Minister in the other place made it clear that, as the Minister of State hinted today, that money is to help foster carers and disabled people with adapted homes—so no help there for our terminally ill tenant.
Even for foster carers and disabled people in adapted homes, contrary to the impression that the Minister of State gave to the hon. Member for Crewe and Nantwich (Mr Timpson) and the right hon. Member for Bermondsey and Old Southwark, there will be no certainty. People wanting help will have to go to their local council and ask for it, because it will be discretionary—that is what the word means. It will up to each local council to decide what it does with the money. It could use it for that purpose, or it could use it for a different one. If other people have already taken all the discretionary funding that has been provided, that will be it. No further help will be available.
Charlie Elphicke
I understand that the policy in the Lords amendments would cost the Exchequer £150 million. How would it be funded?
Stephen Timms
The hon. Gentleman should reflect on the fact that, as I have described, the costs will be greater in a number of ways with the Government’s provisions in place than they would be if the Lords amendments were retained.
Before I leave the topic of discretionary housing payments, it is worth my noting how the extra £30 million has been found. Initially, the average penalty for under-occupying by one bedroom was going to be £11 a week, and now the Government have increased it to £12 a week. They have increased the penalty for everybody affected in order to scrape together the extra cash to increase discretionary payments.
The last time this policy was debated, we offered an effective alternative whereby a tenant would have their benefit cut as a penalty if they refused a suitable move. Unfortunately, Government Members threw it out. The Lords amendments would limit that safeguard to the four groups that I have mentioned—the sick, the disabled, war widows and foster carers.
Ministers have said that their policy will be a work incentive, but the support group comprises people who are not in a position to work. A work incentive will do them no good at all. Let us call a spade a spade: this is a spiteful cut in people’s income. Foster carers provide a service that saves the Exchequer billions. The Fostering Network has warned that people will be forced by the penalty to give up fostering, which will increase costs to the Exchequer. War widows and widowers have seen their loved ones die for their country. Their grieving barely over, they will be fined under the Government’s policy because they have one bedroom too many. I ask whether that is really what Government Members came into the House to do to their constituents. The Government’s policy, without the Lords amendments, will penalise everybody regardless of whether they could move.
Fourteen Government Members joined us in voting for the relevant Lords amendment last time. I thank them for that, and their constituents will do so as well, even if their Whips will not. As we were not successful, social landlords will have to take on extra staff to chase the resulting arrears that will start to accrue in every social landlord’s stock across the country. The current Lords amendments are much more modest than the previous ones, but they would at least protect those who stand to lose the most from what the Government want to do. I hope that hon. Members will support the Lords amendments and oppose the Minister’s motion.
Andrew Percy (Brigg and Goole) (Con)
When I spoke during our last consideration of the Lords amendments to the Bill, I expressed concerns about this policy, particularly about the changes to child maintenance payments. I am pleased that there has been some movement on that front, but I find myself once again in support of their lordships. I am sorry about that, because the ministerial team is one of my favourites. I will not tell you which is my least favourite, Mr Speaker, but people can guess.
Stephen Timms
I agree with the points that the hon. Gentleman is making. Just to take him back to foster children for a moment, as I understand it, they do not count towards the housing benefit bedroom entitlement, whether they are there are not. Therefore, not only is there a problem when there are no children; there is a problem when there are children.
Stephen Lloyd
I would welcome a response from the Minister on that issue.
To go back to disabled people and adjustments to their homes, I would like some detail from the Government as to exactly how they will meet that challenge, because clearly it makes no sense to move someone out after their home has been adapted to the tune of thousands of pounds.
Thirdly, what steps are the Government taking to ensure that there is enough housing stock when 2013 comes around? We have a year before that happens, so I would be interested to hear the Government’s plan. Last but not least, what plans are the coalition Government making, prior to implementation, to work with local authorities and housing associations in advance of April 2013 to ensure that the changes are made in a sensible and productive manner? I look forward to hearing the Minister’s reassurances in response to those four important questions.
Work Capability Assessments
Stephen Timms Excerpts(12 years, 10 months ago)
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Stephen Timms (East Ham) (Lab)
I congratulate my hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) on securing the debate. We have heard some important and telling points.
As we have heard, the previous Labour Government introduced the work capability assessment as part of the change from incapacity benefit to employment and support allowance. Incapacity benefit did not help people with long-term sickness or disability back into a job. In fact, in 1997, the vast majority of people in receipt of incapacity benefit were simply abandoned; in many cases having been encouraged to move on to that benefit to reduce headline unemployment.
We started, experimentally, with the new deal for disabled people, which was a striking innovation at the time. I am pleased that the Minister has sought to build on the lessons of that programme, and from pathways to work which followed, into the new Work programme, and the ESA was the next step in that process. The WCA was designed to look at applicants’ functionality, and to assess whether each applicant was fit to return to work, fit to undertake work-related activity, or not fit for either.
Atos was contracted in 2005 for seven years. The current Government opted to extend the contract for a further three years in November 2010—the contract now runs until 2015—and will soon need to decide whether to take up the option to continue the contract to 2017. That decision needs to be influenced by the kind of experiences that we have heard about in the debate.
It is clear that the system has been overloaded. There needs to be change for it to function properly, so we support fully the implementation of the first Harrington review and much of the second. We regret that the Government pressed ahead with implementing the Department’s internal review last year, given the widespread consternation about the findings of that review. We were particularly concerned by one aspect of Professor Harrington’s second review, which proposed that some cancer patients, who until then had been exempted from a WCA, should no longer be exempted. Macmillan Cancer Support was concerned that that would put greater stress on cancer patients when they ought to be concentrating on recovery. It was a particularly frustrating development for everyone. I hope that the Minister will be able to tell us this morning—if not this morning, then in the debate in the House this afternoon—that there will be something of a climbdown on that point.
I am anxious to ensure that the Minister has the time to answer fully the points that have been put to him, so will shorten my remarks. We have still to hear—apart from the point about cancer patients—about a number of other proposed changes that the two WCA reviews have recommended. What is being done on the new descriptors that cover fluctuating conditions—on which we have heard a good deal in the debate—and mental health conditions? There have been some helpful recommendations on those. When will the results of the pilots on recording assessments be released and responded to by the Government—a point also made in the debate?
It is worrying to hear that capacity pressures are restricting the ability of Atos to implement the Harrington recommendations. There needs to be better communication between Atos health care professionals and decision makers in the Department for Work and Pensions if we are to reduce the number of mistakes made in WCAs and the current, astonishingly high number of successful appeals.
I should like to draw attention to an issue that has not yet been raised and is a practical consequence of the problems and delays in the WCA system. The DWP recently revised its estimates of the number of people receiving ESA who will go into the Work programme, which the Government introduced in June. The forecast of the number of people going into the Work programme has been reduced dramatically, and the bottleneck in the WCA seems to be a major part of the explanation. Will the Minister comment on that? It is one of the key reasons why a number of small voluntary sector providers, which are contracted to the Work programme, are now at risk. Groups with specialist expertise to help people with particular health problems are receiving far fewer referrals—therefore, a far lower income—than they were encouraged by the Government to expect. In some cases, they have had no referrals at all since the Work programme started in June. Some are saying that they will have real trouble staying in business at all.
Problems with the WCA, as we have heard, could turn into a serious loss of capacity in the voluntary sector. People then left with no specialist help available would be in a worse position still. How will the Minister ensure that the WCA is refined? When will he introduce the changes that have been called for by charities and Professor Harrington? What assessment has he made of the capacity of Atos to implement those improvements? Will some of Professor Harrington’s recommendations not be implemented, as has been suggested, because of the capacity pressures in the system?
Ministers have defended their decisions about the welfare system on the basis of the need to save money. However, it is very important, particularly for Ministers in this Department, not only that they are saving money, but that the system that they are responsible to Parliament for is working fairly. All hon. Members who have spoken in the debate are absolutely right to highlight the fact that, with this part of the system, there is a long way to go.
Welfare Reform Bill
Stephen Timms Excerpts(12 years, 10 months ago)
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Chris Grayling
I can indeed confirm that that is the case. We have listened very carefully on this issue, and it was a point well made by my hon. Friend the Member for Cardiff Central (Jenny Willott) in Committee. We have listened and we have taken appropriate action. It is important that we look at such details to ensure that we get them right, but that does not detract from the overall principle of what we are trying to achieve.
I believe that a time limit of one year is the correct approach. It applies the right balance between restricting access to contributory benefits and allowing those with longer term illnesses to adjust to their health condition and surrounding circumstances. There is also a very strong financial argument. If accepted, this amendment would reduce the total savings in the spending review period by around a third by 2016-17, which is £1.6 billion. Given the current fiscal climate, we cannot afford to forgo these savings and this is one of a number of very difficult decisions the Government have had to make because, as the shadow Secretary of State pointed out at the time, there was no money left.
Lords amendment 18 would mean that no time limit would be applied to contributory ESA for those claimants receiving treatment for cancer if they have or are treated as having limited capability for work, or they have or are treated as having limited capability for work as a consequence of a cancer diagnosis. The whole point of our approach on these matters is that we have always looked at the effects of a condition on an individual, rather than at the condition itself. We can all think of other cases which could equally be regarded as special cases. We are trying to be sensitive to the very real concerns of individuals suffering from cancer, and since we took office we have made significant changes to improve the protection and support that we provide to them.
Most individuals with cancer are placed in the support group at the outset of their treatment. We have increased the scope of the support group for cancer patients. We have been working closely with Macmillan Cancer Relief to improve how the WCA assesses individuals being treated for cancer. We are now consulting on our proposals, following work by Macmillan and Professor Harrington, our independent assessor of the work capability assessment.
We are clear that our proposals, which are now out to consultation, include a presumption that someone with cancer will be in the support group. What we simply do not accept is that in all circumstances, regardless of the impact of cancer on an individual’s ability to work or otherwise, they should be guaranteed a position in the support group. We have not taken that approach with any other condition and we do not believe that we should take it with cancer.
Stephen Timms (East Ham) (Lab)
I know that there has been some discussion in the last few days about whether, if a doctor or nurse were able to provide confirmation that a person with cancer was not able to work, that person would be automatically passported into the support group. Is that something that the Government intend to introduce?
Chris Grayling
It is very much our intention—especially for those who have finished their treatment but are not yet prepared to return to work—to have a simple system that enables a medical professional to indicate to us that that person is not yet sufficiently recovered to make a return to work. Our proposals are out to consultation at the moment, but our overall clear goal is that, in the vast majority of cases, someone who is undergoing treatment for cancer or is recovering from the aftermath of that treatment should be in the support group. What we cannot accept is a principle for absolutely all cases and regardless of circumstance, and some people with cancer do work—
Stephen Timms
Will the Minister confirm that the case in question relates to a disabled young woman who is living with her British parents—in Spain, I think—but who was born and brought up in the UK?
Chris Grayling
It relates to someone who has not lived in the UK for most of the past 15 years, although she is a British national and has a link to the UK. The implication of the court case is that somebody who has a link to the UK but who has had no recent contact with it is none the less entitled to receive benefits. That is where we disagree with the European Court and why we think that its decision was wrong.
We think that the best way to close this door is to abolish the ESA youth provision, but it is not the only reason we are abolishing the youth provision. It is by no means the sole rationale for doing so, but as a matter of principle it is our view that we should make every effort to ensure that our benefits are paid only to those whom we think should be paid UK benefits—those who have recent connections to, or have lived in, the United Kingdom.
Chris Grayling
I would love to secure a more pragmatic and sensible approach to the regulation of social security in Europe. I have been working on it for the past 18 months with my counterparts in other member states, and I hope that we will make progress as soon as possible. Right now, however, we must obey European case law as delivered to us by the European Court—much as it sometimes might be frustrating to do so.
I have a couple of technical points to make before I finish. As a result of providing for the new category of entitlement, in respect of claimants whose health has deteriorated to such a degree that they are placed in the support group—I referred to this earlier in response to the hon. Member for Aberdeen South (Dame Anne Begg)—it has been necessary to remove the substance of the ESA youth time-limiting measure from the original clause 52 and to insert it in clause 51 via a new subsection in section 1 of the Welfare Reform Act 2007. The Opposition amended that new subsection by changing the period of the time limit from 365 days to a period to be prescribed of at least 730 days. That is Lords amendment 19. As a result, the House will need to agree to amendment 19 but with an amendment consequential upon the rejection of the other amendments providing for entitlement to ESA to be for 730 days rather than 365 days. This will restore the Government’s intention.
A similar complexity surrounds amendment 22, which was voted for in the other place and which ensures that no new claims can be made under the youth provisions in the future—in effect, from whenever that provision is commenced by order. This amendment would amend clause 52 by removing the substance of ESA youth time limiting, which is now included in clause 51, but would retain the key provision in clause 52 preventing new ESA youth claims from being made.
I am afraid that this position is further complicated by the fact that also in the other place amendment 23 was not pushed to a vote and therefore also stands part of the Bill. Amendment 23 effectively allows claims to be made to contributory ESA under the youth provisions for those that are placed in the support group. We therefore now have two conflicting clauses for conditions relating to youth. Finally, if amendment 23 were to be accepted, it would reduce the expected cumulative benefit savings by around £17 million by 2016-17—savings that would need to be found elsewhere in the benefits system.
In the light of these arguments—the urgent need to address the fiscal deficit we have inherited and the need to deliver principled reform to our welfare state—I hope that hon. Members will feel able to support the Government.
Stephen Timms
The Government are determined to insert some terrible things in the Bill, and none of them is worse than the indefensible one-year time limit on contributory employment and support allowance for people in the work-related activity group. Amendment 17 removes that one-year limit. The Government are trying to put it back. Now, with the blanket appeal that we have heard for financial privilege, they are trying to prevent the other place from daring to disagree with them once again.
The measure is literally indefensible: the Government have been unable to defend it. The Minister made no effort to defend it in his speech, other than to point out that it would save a great deal of money. He referred to what happens in other European countries, but there, of course, the support that people fall back on is much more generous than here. There is no defence for the one-year time limit, and the House needs to be aware that this change will start to impact in two months’ time, at the beginning of April. According to the Government, 100,000 people will lose contributory benefits at the beginning of April this year, having already been in receipt of contributory ESA for more than one year, and another 100,000 will lose it as they reach the one-year stage of their claim over the following 12 months.
Some people argue that ESA should not be limited at all—for example, the Liberal Democrats. At their party conference, they opposed any arbitrary time limit on how long claimants can claim contributory ESA, and the Liberal Democrat peer Baroness Thomas of Winchester told Members of the other place that what troubled the conference last year was
“the arbitrary nature of the one-year cut-off.”—[Official Report, House of Lords, 11 January 2012; Vol. 734, c. 158.]
Liberal Democrat party policy is clear on this, but we understand that today its elected representatives will take no notice of it.
The Lords amendments that the Government want to overturn are much more modest. They argue that the time limit should be not less than two years and, crucially, that the limit should be set down in regulations rather than in primary legislation. If the Government get their way, absurdly it would require a new Act of Parliament to change the limit. Throughout debates on the Bill—many Members have been present in Committee and other stages of the Bill—the Minister has told us that the purpose of the Bill is to provide the structure and that the details would be in regulations. On this measure, however, with no explanation, the opposite approach has been applied. These debates provide a clear indication of whether Ministers mean what they say when they tell us these things, or whether they are simply reading the script put in front of them.
We do not quarrel with time limiting. As the Minister said, contributory jobseeker’s allowance has been time-limited to six months for many years. The rationale has always been that within six months more than 90% of jobseekers are back in work. If it is to be fair, however, a time limit for ESA must also give people a reasonable chance to get back into work. A year is not enough. The Government’s own figures suggest that 94% of those who qualify for ESA are still on it a year later, so fewer than 6% are managing to get into a job within a year.
Chris Grayling
May I ask the right hon. Gentleman how he has factored into his considerations the typical six-month period that somebody in that position would have spent on statutory sick pay before they started on contributory ESA?
Stephen Timms
The question is: how long do people need to be on ESA before they get back into work? According to the Minister’s figures, only 6% are off the benefit within a year, whereas 90% are off contributory jobseeker’s allowance within the period that is being allowed for that benefit.
Chris Grayling
I would be grateful if the right hon. Gentleman answered my question. I asked him to what extent he had factored in the additional six months that most people would have had on statutory sick pay before starting 12 months on contributory ESA.
Stephen Timms
I answered the Minister’s question. What his figures show is that only 6% of those who go on to ESA—no doubt many of them will have been on statutory sick pay before that—are in a position to come off the benefit within one year. That is not a reasonable chance to get back to work, as I think the Minister will recognise if he reflects on the matter.
As the Minister said, Lords amendment 18 specifically addresses cancer. I do not think that anyone in this House will be surprised to learn that, for many cancer patients, 12 months is not long enough to become well enough to get back into work. At 12 months, many people are still experiencing debilitating physical and psychological effects from the cancer and from its treatment. People cannot go back to work in those circumstances, and that is why Macmillan Cancer Relief, which my right hon. Friend the Member for Cynon Valley (Ann Clwyd) referred to, says that
“proposals that ESA claimants who are expected to carry out work-focused activities will only receive the benefit for one year, without being means-tested, will hit cancer patients particularly hard”.
Macmillan also says:
“Three quarters…of people with cancer placed in the ESA Work-Related Activity Group are still claiming ESA 12 months later.”
Mark Durkan (Foyle) (SDLP)
Does my right hon. Friend agree that the Minister, with his rather “Let them eat cake” answer to our right hon. Friend, the right hon. Member for Cynon Valley (Ann Clwyd), was emphasising that the 7,000 people affected would generally have another income available to them? That ignores, first, that that other income could be quite modest; secondly, their family circumstances; and, most importantly, the fact that they face other costs—of a personal, family and household nature—because of their condition.
Stephen Timms
My hon. Friend is absolutely right. Ministers say that there is no need to worry because means-tested ESA will still be there, but if a partner is earning £7,500 a year, no means-tested support will be provided at all.
In the other place, Baroness Hayter quoted a letter from a 59-year-old man currently on contributory ESA who has worked and paid into the system since he was 15—that is, for 44 years. Now, when his health is failing, he will be left on the poverty line. He draws the obvious conclusion—this picks up on the point that my right hon. Friend the Member for Birkenhead (Mr Field) made earlier—saying:
“It would be better if my wife stopped working then perhaps I could claim income-related ESA—just like any person who has never worked”.
That is the position that this change is putting people in. The Government say they want to reward work; with this measure, they are scrapping the reward for work.
Mr Frank Field
Before my right hon. Friend moves on, perhaps he could dwell on that point. The Government rightly say that this Bill is about changing and shaping behaviour, and for all of us in this House, it is important to know that this year we will probably crash through the £200 billion mark. Anybody who thinks that that does not affect people’s behaviour is living in cloud cuckoo land. However, what message is this Bill sending out, when those who have provided and paid their contributions will get no benefits if there is any other income in their house, whereas those who have not played by the rules—who have decided that they will coast it on the back of taxpayers—get rewards?
Stephen Timms
My right hon. Friend is absolutely right. I am afraid that the message that this measure is sending to people in that situation is, “You’ve wasted your time.” Indeed, that is the case not only if they have a partner with an income, but if they have any savings. If they have more than £16,000 saved, there will be no means-tested support at all.
Members need to be clear about what the Government will be doing if they get their way. Under this measure, people who are in the middle of a health crisis will be plunged into a financial catastrophe. People who have worked and paid into the system all their lives—people who have, as my right hon. Friend says, done the right thing—will find that the system is not there to help them when they need it.
Chris Grayling
The shadow Minister has just talked about the position of somebody who has a spouse who is earning £7,500 a year. Will he confirm to the House that as a result of a diminution of household income, they would also be entitled to working tax credit, housing benefit, council tax benefit and possibly to child tax credit, and that therefore the amount of support that they will receive is substantially more than he is suggesting?
Stephen Timms
It will be a financial catastrophe for a very large number of people, and the Minister should listen to what people in that position are saying to him, because they have made their position extremely clear.
Ian Paisley
Does the right hon. Gentleman agree that, very simply, this change that the Government are seeking is saying to cancer patients, “You will be penalised because you are not recovering quickly enough”? That is where the insult rests: they are doing their best.
Stephen Timms
The hon. Gentleman is absolutely right: 12 months is simply not long enough for a very large number of cancer patients—or other patients, in fact—to get back to work.
Lords amendment 18 was moved in the other place by Lord Patel, the Cross-Bench peer who was formerly president of the Royal College of Obstetricians and Gynaecologists. He quoted a man with renal cancer who had had a kidney removed and who started claiming ESA in March last year. His partner earns £160 per week, but if the Government win, that man will lose all his contributory benefit in April. He says:
“We have used up virtually all our savings already. I have worked all my life and paid into the system but this doesn't seem to mean anything”.
Is that really how the Government want their system to work? Of course, it is not just cancer patients who will be affected.
Mr David Nuttall (Bury North) (Con)
Does the shadow Minister agree that it is completely illogical to single out cancer as a separate disease when, in fact, there are many illnesses and conditions that may result in someone being unfit for work and when, under these provisions, they would be provided for by being put in the support group?
Stephen Timms
The hon. Gentleman is absolutely right—indeed, I am just going on to make that very point. It is not just cancer patients who will be affected; there are many other people in exactly the same position. That is why we have argued for a two-year limit instead of a one-year limit, because with a two-year limit there is a chance for people to get back into work. The National Aids Trust makes the point:
“Many people living with HIV who are found eligible will face significant barriers to work that cannot be overcome within 12 months.”
Dame Anne Begg
The other group of people who will be affected by the time-limiting are those who have slowly progressive degenerative conditions. Initially on diagnosis, they may not be able to work—or they may have fallen out of work—but their conditions will not be severe enough for them to be placed in the support group, and they could spend up to 10 years without any kind of independent income-replacement benefit.
Stephen Timms
My hon. Friend is absolutely right. A woman with Parkinson’s disease also makes exactly that point:
“There’s no guarantee that I’ll find a job in 12 months. It could take me much longer. I’ve worked all my life and paid for decades into the system on the understanding that there will be support if I need it. To be told that all this support could have a… time limit is…unfair and stressful.”
The charity Sense points out that for some people in the work-related activity group, once their health has stabilised, they will need to retrain to get back into work. It will be impossible for them to do that within the 12-month period that is being proposed.
Joan Walley (Stoke-on-Trent North) (Lab)
Does my right hon. Friend share my concern about those constituents of mine who have had strokes and who are not able to return to work within that period of time, and the concern that DWP officials are implementing the legislation in advance of its being on the statute book?
Stephen Timms
I was not aware of that, and I am concerned to hear it. My hon. Friend is absolutely right that stroke is exactly the type of condition that we are talking about. In the other place, Lord Low read out a letter that had been written to him, which said:
“The state is breaking its side of the contract at a time when people are most vulnerable”,
having had a stroke, or whatever it is. Someone else was quoted in that debate in the other place who made the point that the news of the time limit
“came as a massive shock to me. I have found it…hard to come to terms with the fact that the government can be so cruel”.
They continued:
“My medicine prescription has been increased 4-fold and been supplemented with extra medication since the time limit was announced”.
This is a dreadful proposal. Removing contributory benefit long before most people will have a chance to get back to work will remove an absolutely key plank of the contributory system. In the past, people have been able to depend on support in the event of a health disaster. This change will mean that that will no longer be the case. Those in the other place were absolutely right to say that what the Government are trying to do is shameful. This House should throw it out.
The Minister of State, Department for Work and Pensions (Steve Webb)
The right hon. Gentleman has accepted the principle of time-limiting. He says that a year is too short a time, and he is against arbitrary time limits. Will he tell the House the basis on which he alighted on two years, rather than three, four of five?
Stephen Timms
If the hon. Gentleman looks at the amendment, he will see that it refers to a period of “at least 730” days. That was proposed precisely because there is as yet no evidence—certainly not from the Department—about what the right period should be. We can be absolutely sure, however, that it should not be less than two years, for all the reasons that I have just outlined.
Steve Baker (Wycombe) (Con)
The right hon. Gentleman makes a heart-rending case, but will he tell us what assessment he has made of the extra cost of moving to a two-year limit?
Stephen Timms
Those figures were quoted extensively in our debate. Our view is simply this: we should not be taking large sums of money from people who are recovering from cancer or from a stroke, and who have been told throughout their lives that if they paid into the national insurance system, they would be able to get help when they needed it. That pledge needs to be honoured, even by this Government.
Let me turn to Lords amendment 15 and the question of the youth passport. It is astonishing that the spiteful policy towards disabled young people remained in the Bill for so long. It is even more astonishing to see the Minister now trying to ram it back in today, after the other place took it out. The current principle is that people who have been disabled since birth or childhood should be passported on to a contributory benefit. In Committee, the Minister described the principle as an “oddity”, but it has been well established since the 1970s and backed by Tory Ministers throughout the 1980s and 1990s. Only now are this Government trying to scrap it. It provides an independent income for severely disabled people whose disability started before they had a chance to work. The Minister wants to deny them that. The principle that young people who are disabled from birth ought to be able to rely on a secure independent income might seem odd to him; to most people, it is simply right.
The Government’s impact assessment justifies this change, disgracefully, on the basis of simplifying the system.
Dame Anne Begg
The change will affect not only those who have had a disability since birth or childhood. A young person who has worked for only six months before having a major accident could also lose out and never have the chance to have an independent income-replacement benefit at any time in their life.
Stephen Timms
My hon. Friend is absolutely right.
The impact assessment states that the provision
“puts those previously eligible for ESA ‘youth’ on an equal footing with others who have to satisfy the relevant National Insurance conditions before they qualify for contributory ESA, which will create a simpler system”.
It will not put them on an equal footing. They have been unable to work since before they had a chance to work, or at least to build up two years of contributions, as my hon. Friend points out. They have had no chance to build up their contributions, and they are therefore at a disadvantage, compared with everybody else. Attempting to justify the proposal—in frankly Orwellian terms—as a simplification really takes the biscuit. We are talking about a small group—15,000 people—who have never had a chance to build up a contribution record. It is right that they should be treated differently. A little complexity is necessary for fairness.
It is worth looking at how much money the Government will save by overturning this amendment. It involves a fair amount of contributory ESA —Ministers in the other place said £70 million. However, many of those young people—the Minister said it would be 90%—will be entitled to income-related benefit if they lose their contributory benefit. Furthermore, the amendment from the other place is very narrow. It applies only to the support group—that is, those who the Government accept should be protected from ESA time-limiting. The net annual saving from this spiteful cut will be about a quarter of the amount that the state-owned Royal Bank of Scotland will hand out in executive bonuses this year. It will be less than £10 million a year.
Mr Frank Field
When my hon. Friend the Member for Aberdeen South (Dame Anne Begg) asked a question about a 20-year-old living at home, we did not get an answer. I was just wondering whether my right hon. Friend was trying to find out the answer by osmosis. At what point will disabled young people qualify in their own right for means-tested support, as opposed to having a household means test applied to them?
Stephen Timms
I also noted that the Minister did not give my hon. Friend the Member for Aberdeen South the assurance that she was seeking. My understanding is that any other income in the household, from any source, contributes to the household income, and the benefit for the disabled young person is therefore removed, pound for pound. My hon. Friend was seeking an assurance that some other provision would be put in place to safeguard the young person, but the Minister was unable to give her such an assurance, because I do not think that that is the Government’s intention. No such provision appears in the Bill at the moment.
Yvonne Fovargue (Makerfield) (Lab)
Does my right hon. Friend agree that the measure will have an impact on young people’s ability to form relationships? Having to depend on the income of a potential partner will have a great impact on their lives.
Stephen Timms
That is a particularly important point. If a person decides to marry someone who has an income, they will lose all their own income. The independence that the system has provided for 40 years is now being taken away.
Ian Paisley
The social impact of the proposals concerns me greatly. The right hon. Gentleman has rightly characterised them as “spiteful”. It is at the point when a long-term severely disabled person is in transition from their teenage years to adulthood that their parents or family unit require additional support. Cutting that support will hit the family, and the young person, really hard, socially.
Stephen Timms
The hon. Gentleman is absolutely right. The young person will be robbed of their independence.
Chris Grayling
If someone is living independently, they will be entitled to income-based ESA.
Stephen Timms
The hon. Member for North Antrim (Ian Paisley) was talking about young people who are living with their parents, who might have a little bit of income or savings. My hon. Friend the Member for Aberdeen South was seeking an assurance on that point, and if the Minister were able to give her that assurance, it would be most welcome.
Chris Grayling
Once someone becomes an adult, they count as living independently.
Stephen Timms
My right hon. Friend is prompting the Minister with the answer. We will look carefully at the detail of the proposals. Presumably, they are going to appear in regulations; they are certainly not in the Bill. It is helpful that the Minister has told us that, however.
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
Concerns have been expressed to me by parents who have tried to save for their disabled children. They have put money aside for them, but the proposals will affect them because the money will be in their children’s names.
Stephen Timms
The Minister has told us that someone who receives an inheritance should lose all their support from the state. Those could be similar circumstances to those that the hon. Lady has just mentioned.
Sammy Wilson (East Antrim) (DUP)
Does the right hon. Gentleman agree that the answer that the Minister has just given is quite astounding? He seemed to suggest that, in order to qualify for independent benefit, a disabled young person would have to leave the family home, where they have the support and facilities that they need, despite all the additional costs that that would entail. That would end up being even more costly.
Stephen Timms
To be fair to the Ministers, I think that there is some confusion on the Front Bench over the position on this. The Minister was asked by my hon. Friend the Member for Aberdeen South, who chairs the Select Committee, to give the House a straightforward assurance. He failed to do so—
Chris Grayling
Let us be absolutely clear: when someone leaves child benefit—which can be at the age of 18 or 19, depending on their circumstances—they are deemed to be an independent adult. The only issue around the savings rule comes in if they actually hold and own the money themselves. So, if someone gets a £1 million inheritance, they will not carry on getting benefits. Surely the right hon. Gentleman does not disagree with that principle.
Stephen Timms
The Minister talks about people getting £1 million, but people who have £16,000 will get absolutely nothing. That is the system that he is putting in place, and I am not surprised that he is ashamed of it.
Mr Nuttall
As a matter of general principle, does the shadow Minister agree that there has to be a rule about the amount of capital that people hold? Should not a cut-off apply? It was the Labour Government’s rule: there has to be a cut-off.
Stephen Timms
We are being taken into a slightly broader argument, but I will answer the point directly. The capital limit has always been a feature of means-tested out-of-work benefits. It was never a feature of the tax credit system because the previous Government wanted to encourage people in work to save. That incentive to save is being destroyed by the application of this capital limit—exactly the same capital limit—in future to people in work as well as out of work. That is another terrible feature of this Bill.
Dame Anne Begg
What has just been illustrated is the assumption that people are out of work in order to get benefit. We know—well, we hope, unless the Government are proposing to change the new personal independence payment—that there will be no capital rules, so someone with a million pound inheritance will, if they qualify and meet the criteria, continue to get benefit. That has always been in our system.
Stephen Timms
My hon. Friend is absolutely right. The number of people who have a million pounds can be counted on the fingers of one hand.
Mr Frank Field
Are not Government Members mistaken on this? We are talking about the existing rules, which encourage parents to put away money—they might have found it difficult to do so—for an endowment for a very disabled child. They will now find that their carefulness in not playing the system but trying to seek independence for their offspring will be penalised by the rules, which they could never have foreseen.
Stephen Timms
That is absolutely right; that is how the Government are changing the system. Disabled young people, in recognition of their particular circumstances, have been assured since the 1970s—under Governments of both parties—of an independent income from the state. This Government are taking it away from them. As a result of this change, they will lose that security in exchange for very little saving at all to the Exchequer. The Child Poverty Action Group points out that the current arrangement helps
“young disabled people who may be vulnerable to forming unsuitable relationships, or may avoid forming a suitable relationship due to fears about losing an independent income”,
as my right hon. Friend the Member for Birkenhead (Mr Field) correctly said. The current arrangements give the chance of a more secure and independent life to people who would, through absolutely no fault of their own, find that very difficult otherwise. At less than £10 million a year, that is a price worth paying for the independence of severely disabled young people. I urge the House to reject the Government motion.
Paul Maynard (Blackpool North and Cleveleys) (Con)
I am pleased to welcome the vast bulk of what the Government are doing. It is a pleasure to hear that people are not being defined by their condition and are not being forced to have decisions taken about them on the basis of a label or a particular condition. That is why, as I say, I strongly welcome much of what the Government are doing.
I would, however, like to reflect briefly on amendment 23, which relates to the youth passport. It is not that I particularly disagree with what the Government are doing, but I wish to focus on a few questions, which I hope the Minister will answer, about how we intend to ensure that these young people are given, as it says in the impact assessment, the “equal footing” that the Government rightly want them to have.
My primary concern is that these young people have not been able to acquire national insurance contributions because they are severely disabled. I would welcome some clarity about the expectation that they will accrue these contributions and be protected in the welfare system at the point at which they become an adult. Despite reading the impact assessment and all the debates in the House of Lords and listening carefully to what has been said today, I am still not entirely clear how that will be achieved.
Jenny Willott
I am grateful to the Minister, and I hope that when the figures flow through on appeals that have taken place under the new system, we see a reduction in the number of decisions overturned, and in the number of people who go to appeal. That would suggest that the assessment was working properly.
If we make sure that the assessment works properly, it will reduce the arbitrariness of the timetable, but as the Minister mentioned in an intervention on the Opposition spokesman, the right hon. Member for East Ham, it is important that we recognise that many people will receive six months’ statutory sick pay before they go on to the ESA, so they will be receiving benefits for 18 months. It is important that the Government continue the work that is being done to look at ensuring that employers work with staff when they become disabled or fall sick, and do not immediately push them on to ESA. Instead, employees should get the support that they need, possibly to stay in work over an extended period, and get their full entitlement to statutory sick pay and ESA, so that they get the full 18 months’ support to which many of them will be entitled.
Stephen Timms
The hon. Lady set out the fact that there was objection at her party conference to an arbitrary time limit. Does she accept the case for setting the limit, whatever it should be, in regulations instead of in the Bill? Putting it in the Bill means that it will take another Act of Parliament to change it in future.
Jenny Willott
There needs to be some stability, so that people know what to expect. One of the problems with putting that type of provision in regulations is that it becomes very difficult for people to know what they can expect. That creates uncertainty, which makes it more difficult for people to cope.
To return to the point made by the hon. Member for West Worcestershire (Harriett Baldwin) about people with deteriorating conditions, I welcome the concession that the Government made in the Lords. It is important that people with MS, motor neurone disease, Parkinson’s and so on get ongoing support when they really need it. That is definitely a step forward.
I still have some concerns about work incentives and the means test. A person does not get means-tested ESA if their partner has a low level of income. If the partner worked 24 hours a week on the minimum wage, that would be a household income of £145 a week. However, as people would get increased housing benefit, council tax benefit and so on, the drop in income for that household when the sick or disabled person no longer received ESA would be significantly less than the scare stories are leading people to believe. I also appreciate that when universal credit is introduced, that will be far less of an issue, because the income disregard for households in which there is someone with a disability will be set much higher, at £140 a week. In the future, under universal credit, a household with an income of £140 a week will get the whole of their income and the full universal credit on top of that, so this is mainly an issue for the 18 months between the introduction of the policy that we are discussing and the introduction of the universal credit in October 2013.
I would be grateful if the Minister, if he gets the chance to sum up at the end of the debate, would say whether anything can be done to bridge that gap. For example, we could look at making sure that people in that category are among the first to be moved on to universal credit, so that we can ensure that the period in which they lose out on income is as short as possible. In addition, the DWP impact assessment says that it is likely to cost £30 million in increased benefit payments as the partners of those affected leave work. I would be grateful if the Minister could consider whether there is anything that could be done to reduce that amount of money by considering the effect on such households.
Oral Answers to Questions
Stephen Timms Excerpts(12 years, 10 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Chris Grayling
When I visit Work programme providers —I have now visited most of them—I certainly find a great deal of enthusiasm, a sense of purpose and successful progress. I hope that that will show through in the official statistics when the time arises. I am not in the business of burying good news, and I very much hope that we will be getting the good news about the Work programme out there as soon as we possibly can.
Stephen Timms (East Ham) (Lab)
I welcome the U-turn on the publication of data that the Minister has just announced. The White Paper, “Open Public Services”, which was published only last summer, included the following commitment:
“Providers of public services from all sectors will need to publish information on performance”.
So why did he write into the Work programme contract a ban on the publication of performance data by those providers?
Chris Grayling
As we can all see, one of the challenges that Labour Members face at the moment is that they are all over the place on policy. On Friday, they were attacking me for allegedly misusing statistics; today they are asking why I am not going round the rules set out for us by the Office for National Statistics. They need to make up their minds about what they really stand for, because at the moment they have no idea.
Stephen Timms
The Minister has signally failed to answer the question. We know that he did not ask the UK Statistics Authority, whose rules he regularly quotes, before he imposed this absurd ban. I welcome the fact that he has finally announced a climbdown today, but he cannot blame anyone for asking him what he was trying to hide.
Chris Grayling
I have absolutely nothing to hide. I have to say to the right hon. Gentleman, as I have been saying to him for weeks, that I am not in the business of burying bad news. None the less, the statisticians expect us to make sure that we have robust and clear statistics before we publish them. As the Work programme has been going for only six months, and we have barely started to make payments for providers’ success in getting people into work, he is, I am afraid, not portraying the reality of the situation. I am glad that he is pleased that we are going to try to get the good news out there as quickly as possible, but we have to stick by the rules.
Unemployment
Stephen Timms Excerpts(12 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
John Glen (Salisbury) (Con)
In my constituency, 997 people are unemployed, which represents 2.3% of those who are economically active. I recognise that that is a modest number compared with many constituencies, but it is an absolute tragedy for every single one of those individuals, particularly the 85 who have been unemployed for more than 12 months.
I agree with much of what the hon. Member for Bolton West (Julie Hilling) said about the tragedy of unemployment. It means a loss of self-esteem, poor mental health, losing the pattern and discipline of work and losing hope. Listening to the debate this afternoon, I have found it very difficult to take the charge that all Government Members believe that unemployment is a price worth paying. I do not, but I do believe that it is a very sad economic reality.
The question is how the Government should respond. Should they act as though they have all the solutions and can essentially buy a load of jobs to relieve the misery overnight? Would that be a sustainable solution for the affected individuals in six, nine or 12 months’ time? I do not think so.
Looking back to before the general election, I am certain that elements of the future jobs fund were worth while. However, when the Government are constructing a national scheme for getting people into work, there comes a point when they have to consider whether such a programme is the most cost-effective way of delivering sustainable skills and jobs that will lead people to full-time employment for many years.
John Glen
I will not, because I want to give colleagues an opportunity to speak.
I believe that two significant matters need to be examined: supply-side reform and macro-economic stability. Many Members have already spoken about the excellent apprenticeship schemes, the work experience programme and the reforms under the new youth contract, but we need to recognise that if small businesses, such as the many micro-businesses in my constituency, are to be confident enough to take on new people, they need to feel that the Government are on their side. They need to know that the Government understand that they do not need so much regulation. They do not need the 14 new regulations a day that they had under the last Government. They want to know that we will exempt micro-businesses from new business regulation and EU accounting rules. Such issues influence whether a small business man takes the leap and takes somebody on in these difficult times.
We also need macro-economic stability. Low interest rates are important, because they condition investment decisions and how people feel about their finances. They cannot spend money that they do not have in a way that is expensive and does not have a secure outcome. The Government will not have all the answers, but they are on the right trajectory to relieve the misery, and I wish them well.
Stephen Timms (East Ham) (Lab)
We have had an interesting and worthwhile debate.
In June last year, the Prime Minister told the House that cutting the deficit faster would revive private sector confidence. That was the basis for the whole plan: private sector investment and jobs would surge, and new private sector jobs would outweigh public sector job cuts. We now know that that plan has not worked. My hon. Friend the Member for Llanelli (Nia Griffith) and the hon. Member for Banff and Buchan (Dr Whiteford) were right to underline that the key assumption that confidence would surge has proved to be wrong. The new “Business Confidence Monitor” from the Institute of Chartered Accountants says:
“UK business confidence has collapsed…Confidence has declined across all sectors and all regions.”
My right hon. Friend the Member for Rotherham (Mr MacShane) was right to underline the seriousness of the crisis we face.
Nobody claims that the coalition strategy has worked to boost confidence. We will take different views about the reasons why it has not worked, but the fact that it has not worked is beyond dispute. Public sector job cuts now far exceed new private sector jobs—by 67,000 to 5,000 in the last quarter. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) was right to draw attention to the fact that Conservative Members like to look further back, closer to the election, when there were still beneficial effects from the previous policies. Today, however, private sector job creation has completely stalled.
The Office for Budget Responsibility tells us that more than 700,000 public sector jobs will go; already, for the first time, more than a million young people are out of work. My hon. Friends the Members for Ynys Môn (Albert Owen), for Stockton North (Alex Cunningham) and for Easington (Grahame M. Morris) pointed out what that means in communities around the country.
What are the Government doing? Not long ago, the Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell (Chris Grayling) told us that all this fuss about youth unemployment was a distraction.
Chris Grayling
May I ask the right hon. Gentleman, who is a decent man, to go and look at the original quotation? If he does so, he will find that I said that the actual figure for youth unemployment was 730,000. The 1 million figure is not a true reflection of the position, because it includes a large number of full-time students looking for part-time jobs. I do not count those as being unemployed.
Stephen Timms
The Minister should take that up with the Office for National Statistics.
Last month the Government finally recognised that they had to do something and announced the youth contract, but they have not made up their minds about the details. There appears to be some haggling with the Chancellor about how it will work, and it is clear that the Government’s providers have no idea how they are supposed to be delivering it from next April. A year after the Deputy Prime Minister said—so he tells us—that something needed to be done, there has still been no action.
Although we do not know the details, we can say one thing for sure: it was folly to scrap the future jobs programme and allow youth unemployment to rocket. As was recognised by my right hon. Friend the Member for Rother Valley (Mr Barron), my hon. Friends the Members for Bolton West (Julie Hilling) and for Stretford and Urmston (Kate Green), and, indeed, the hon. Member for Salisbury (John Glen), a generation of young people will bear the scars of that folly throughout their working lives because Ministers were asleep at the wheel. All along, we were assured that the solution would be in the Work programme—that it would solve all the problems—but the truth is that the programme was rushed and inadequately planned. As we pointed out at the time, there needed to be a plan for transition from the previous programmes to the new one, but there was no such plan.
So how has the Work programme fared? As my hon. Friend the Member for Stretford and Urmston pointed out, Ministers have gone to extraordinary lengths to block the publication of data about what it is achieving. I am told that officials have threatened Work programme providers that if they publish any figures, they will lose their contracts. I well understand the concern of the provider in the constituency of my hon. Friend the Member for East Lothian (Fiona O'Donnell) who said, “I should not show you this, because if I do I may lose the contract.”
Absurdly, the Minister of State claims that the purpose of the ban was to meet the requirements of the United Kingdom Statistics Authority. As we have been reminded, he has some form with the authority. However, its chairman wrote to me last week:
“The Statistics Authority has not been consulted on whether it would be appropriate for Work Programme providers to publish their own performance data.”
It was the Minister's decision to hush things up, not that of the United Kingdom Statistics Authority. As I told the Minister yesterday in Committee, the same organisations published their performance data in the flexible new deal, under the same United Kingdom Statistics Authority rules. They actually want to tell people what is going on and what is happening. The Minister must lift the ban.
According to the foreword to the White Paper “Open Public Services”, signed by the Prime Minister and Deputy Prime Minister in the days when they used to agree with each other,
“it is only by publishing data on how public services do their jobs that we can wrest power out of the hands of highly paid officials and give it back to the people.”
How true that is, but in this case the Minister is resolute: they shall not know.
As it happens, it is possible to glimpse how the programme has been going by looking at the number of people coming off benefit each month. It is no surprise that the number plummeted in May, when the flexible new deal ended. The fact that it continued to be low as the Work programme got going should also have been no surprise, because that always happens. If we compare the months after May with the same period last year, we see that poor Work programme performance resulted in an estimated 86,000 people who should have obtained work not obtaining it. That is probably a permanent unemployment rise. The damage will be with us for years.
Incidentally, to deliver that worse performance, the Government had to pay out millions. I have heard that they had to pay tens of millions in penalty charges for early termination of flexible new deal contracts. I wonder whether the Minister can tell us how many millions of pounds the Government had to pay to prevent those 86,000 people from obtaining jobs.
The Government told us that the Work programme would enlist an army of voluntary organisations to give specialist help. To begin with, we were told that 508 voluntary sector organisations would be involved. By August, the number had fallen to 423. I met a group of them last month—superb organisations such as St Mungo’s, with a great track record in helping homeless people into work. They had agreements with three different prime providers in London. How many people had been referred to them for help under the Work programme in the six months since it started? None—not a single person. Dyslexia Action has Work programme agreements in six different areas. How many referrals has it received in the six months since June? I checked with it yesterday. None; not a single person; nobody at all. These are good organisations. They tooled up and acted in good faith on what the Minister said. He led them up the garden path; he has not delivered. The Merlin standards that he said would safeguard them have proved completely worthless.
Others who have had referrals told us that relationships in the Work programme are terrible. Prime providers are not talking to sub-contractors; jobcentres are not talking to prime providers; and as was rightly said earlier, there are persistent rumours of serious financial problems ahead in the new year. Can the Minister who is winding up tell us what contingency plan he has for the eventuality of a Work programme provider failure? The Minister of State, Department for Work and Pensions, the right hon. Member for Epsom and Ewell has indicated that he is relaxed about that eventuality. What will the Department do if it occurs?
It is clear that we need a new approach. We have spoken about the alternative five-point plan, which my hon. Friend the Member for Swansea West (Geraint Davies) was right to underline. That, at last, would give us a chance, and it is a chance we desperately need.
Oral Answers to Questions
Stephen Timms Excerpts(12 years, 12 months ago)
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Chris Grayling
My hon. Friend makes an important point. There are several aspects to the scheme that we intend to review and consider as time goes by to see whether changes can be made to make the scheme even more effective. I will happily give serious consideration to the point he raises.
Stephen Timms (East Ham) (Lab)
The Low Incomes Tax Reform Group points out that tax credits today support self-employment much better than the proposals for universal credit will in future because universal credit will assume that people are earning at least the minimum wage, which is completely unrealistic in the early years of self-employment. Will the Minister look again at that particular problem with universal credit at least for people in the first year or two of self-employment?
Chris Grayling
We will monitor carefully how the decisions we have taken on universal credit work. As the right hon. Gentleman knows, we want to encourage and support self-employment, and we cannot allow people to shelter themselves on benefits under the false excuse that they are self-employed. In order to encourage people and to make sure that claimants are genuine, we are putting in place new rules. However, as I have said to him in Committee, every individual will have the right to self-assess or self-refer each month, so that we always get amounts right and do not penalise people who are trying to do the right thing.
Credit Unions
Stephen Timms Excerpts(13 years ago)
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Stephen Timms (East Ham) (Lab)
I am delighted to see you in the Chair, Mr Streeter. I congratulate the hon. Member for East Hampshire (Damian Hinds) on securing the debate, on his work chairing the all-party group on credit unions, and on his thoughtful and well informed observations at the start of the debate. His constituency and mine have similar names, although they are rather different places. We both, however, have constituents who owe a great deal to their local credit unions. I will touch on that during my remarks.
We have had friendly societies for a long time, since the early 18th century, when the chaos of the period brought the need for the greater security that mutual action was able to provide. The idea of working co-operatively to ensure that people are provided for in times of want and have a secure haven for their money, drawing on the resources of the community, continues to be very important.
The previous Government made a number of widely supported changes to enable the development of new dynamism and opportunity to the credit union and mutual sector. We recognised that the way the law treated credit unions in a number of respects was holding them back. That was the reason why, in 2002, the previous Government brought credit unions under the regulatory aegis of the Financial Services Authority. The hon. Member for Isle of Wight (Mr Turner) gave a good example in his intervention of that arrangement working very well. The hon. Member for East Hampshire was also right to sound a cautionary note about some of the risks for credit unions in the current re-regulation process.
The previous Government then took steps to enable credit unions to modernise while retaining what has always made them unique, starting with permitting them to communicate electronically in 2007, which was previously not allowed. We also committed to looking at how to reform the legislation on their membership, and that was the background, in 2008, to what became the Legislative Reform (Industrial and Provident Societies and Credit Unions) Order 2011, which will modernise the common bond and which has been widely welcomed during the debate. I note, however, the cautionary observations made by the hon. Member for Foyle (Mark Durkan) about the possible effects in Northern Ireland.
It is clearly right that as communities have changed, so the restrictions that the common bond places on credit unions should change, too. Allowing businesses, housing associations and social enterprises to become partners with credit unions reflects the reality of communities today and the opportunities in them.
It was not just the previous Labour Government who introduced changes to the sector. Both the former Member for Bournemouth West, Sir John Butterfill, and my right hon. Friend the Member for Croydon North (Malcolm Wicks) tabled private Members’ Bills, which helped the sector by reflecting the extent of consensus and support. Like others, I hope that the Minister will make some favourable observations about the prospects for the imminent implementation of the legislative reform order.
Partly—perhaps largely—as a result of support given to the sector by Government, there has been significant growth in the size and scale of the credit union movement, particularly over the past decade, in terms of numbers and of the amount saved, as my hon. Friend the Member for Islwyn (Chris Evans) rightly pointed out. I pay tribute to the work of the Association of British Credit Unions in supporting the sector and its consistent and effective effort on behalf of credit unions. Recent unaudited data from the association note that credit unions grew by nearly 15% in just the first six months of 2009, which reflects what was happening elsewhere, I guess, in the financial services industry.
In Westminster Hall last week, I set out the case of my constituent who was about to start her university course and was unfairly denied a bank account after she became a victim of fraud when her card was stolen. She was only able to take up her university place because the local credit union, NewCred, of which I too am a member, as are other Members, was willing to offer her an account. Because she had run into problems with her bank account, a reference was made to CIFAS—the credit industry fraud avoidance system—which meant that she could not get an account from any bank at all. NewCred was the only institution able to offer her an account, and had it not been for that she would not have been able to take up her place at university, because she would not have been able to receive her student loan cheque or have an account for it to be paid into.
Like other Members, I hope that the Minister will be able to confirm the continuation of his Department’s funding for credit unions. That has been a valuable source of support over recent years; the hon. Member for East Hampshire mentioned the figure of £73 million, which has been spoken of in this context. I also hope that the Government will support credit union access through the Post Office, to which my right hon. Friend the Member for Oxford East (Mr Smith) drew attention during an intervention.
I echo the appeal made by my hon. Friend the Member for Islwyn for the creation of a central finance facility. He has talked about the cost of setting it up, but as he said, such a facility is widely used elsewhere and it is estimated that consumers will have significant savings in credit costs if such an arrangement can be put in place. It might also provide a mechanism to release more than £1 billion in the Post Office card account float, which could be lent to social fund customers, as well as providing, as my hon. Friend said, the potential to significantly increase the size of credit unions. Is the Minister able to say something about that?
One major disappointment is the missed opportunity—many of us felt this—in relation to Northern Rock. My right hon. Friend the Member for Croydon North raised the issue of the extension and expansion of the mutual financial sector in his question to the Prime Minister earlier today. We have not really received an explanation of why the option of a member-led remutualisation, which was proposed by the Co-operative party, was not accepted. There are some big questions to be asked about the sale of Northern Rock. When will the Minister and his hon. Friends publish the advice of United Kingdom Financial Investments Ltd and Deutsche Bank, so that we can see exactly why a mutual Northern Rock was ruled out? I know that the Treasury said that remutualisation would have meant gifting value currently held by the Exchequer to members of the new mutual, but we have not been told whether the Treasury is gifting £250 million of Northern Rock’s existing equity to Virgin, or what the difference in principle is between those two exchanges. A mutual Northern Rock would have been very attractive.
Members have rightly touched on other aspects of financial inclusion and exclusion. My hon. Friend the Member for Walthamstow (Stella Creasy) has made great strides in advancing the argument for a cap on interest rates in the UK, and there are pros and cons to that proposal. Before the election, as I recall, the Conservative party pledged that there would be a cap on excessive store card interest rates, to protect the public and help prevent people from falling into problem debt. I was present at an event at the Barbican where the former Parliamentary Private Secretary to the Chancellor, the hon. Member for Chelsea and Fulham (Greg Hands), said that the cap would be the firm policy of the Conservative party, and it subsequently appeared in a policy document. Will the Minister let us know what the plans for that measure now are?
I welcome the strong support expressed for the credit union sector in the debate. The growth of the sector has been greatly helped by Government support in the past decade or more. I, with others, hope that the Minister will be able to confirm today that support will be maintained, and that the sector will have the potential to expand further in the period ahead.
Oral Answers to Questions
Stephen Timms Excerpts(13 years, 1 month ago)
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Chris Grayling
My hon. Friend is absolutely right. The whole point of the Work programme is real investment in the long-term unemployed. Providers will take the requisite time to get them into work, but the Government will pay the bill only when people are successfully in long-term employment. That is a much better deal than under previous schemes from the previous Government. He is right that the Work programme is a much better deal for the taxpayer.
Stephen Timms (East Ham) (Lab)
The Minister for the Cabinet Office and Paymaster General says that openness and transparency on public services data will be a
“core part of every bit of government business”,
so why not this bit of Government business? Why is the Minister not only refusing to publish performance data but banning Work programme providers from publishing their own data, as many did under the new deal and would like to do now? He is threatening to withdraw their contracts if they publish that data. What is he trying to hide, and will he at least lift that ban?
Chris Grayling
The right hon. Gentleman clearly was not listening to the answer I gave a moment ago, but he would also do well to remember that his Government set up the current rules on national statistics. He would surely want statistics to be published properly and in an appropriate time frame, under the guidance of the UK Statistics Authority. I do not believe in giving information out haphazardly. Let us do it properly, according to the guidance and process he set up when he was in government.
Pensions Bill [Lords]
Stephen Timms Excerpts(13 years, 1 month ago)
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Stephen Timms (East Ham) (Lab)
May I ask the Minister a wider question on auto-enrolment? As he will know because it has been widely reported in the past few days, a report from Mr Adrian Beecroft recommends that the Government postpone the implementation of auto-enrolment altogether. Has the Minister seen that report? If so, what is his response to it?
Steve Webb
The right hon. Gentleman is right that a draft report has been produced and reported in the press, but I can assure him that—as we once famously pointed out—2012 will definitely happen next year. In other words, we do not believe that this important programme should be delayed. Interestingly, the CBI does not believe in a delay, either. It recognises that the biggest firms, which will come in next year, are already planning. In many cases they have already chosen their providers. They are getting on with it, and the last thing we need is new uncertainty about the start of auto-enrolment. We will, therefore, be pressing ahead.
Waiting periods are clearly a trade-off, but today more than ever, we need to realise the impact of what we are doing on smaller firms and businesses more generally.
Stephen Timms
I welcome new clause 2, but I speak in favour of new clauses 9 and 10, and amendments 18, 19 and 20. I shall also respond to some of the points that the Minister has just made. I shall begin by endorsing the tribute the Minister paid to Evelyn Arnold, who is retiring from his Department this week. I very much valued her advice and the way in which it was delivered.
I welcome the fact that the Government have maintained the all-party consensus on the principle of auto-enrolment, based on the work of Lord Turner’s commission on behalf of the previous Government. I worked closely with Adair Turner in that period, and I pay tribute to him, and to his fellow commissioners—Jeannie Drake, now Baroness Drake of Shene in the other place, and John Hills—for their very important achievement in the commission’s report.
I say “all-party consensus” about auto-enrolment, but—as I suggested in my recent intervention—there has been some discussion in the last few days about the extent of that consensus. I notice that David Prosser, who knows something about all this, wrote in The Independent on Saturday:
“There is a growing fear that the Government is about to announce a postponement of auto-enrolment…every delay in pension reform will mean a more miserable old age for millions.”
I am glad, therefore, that the Minister has reaffirmed that the Government intend to go ahead with auto-enrolment on the timetable that has been announced.
It has been reported that Adrian Beecroft, who has given more than £500,000 to the Conservative party in the past five years and has, coincidentally, been asked to advise the Government on cutting burdens on business, has recommended in an interim report that auto-enrolment should be put on hold and scrapped entirely for small businesses.
No doubt there has been some lively discussion within the coalition about this issue, and it is encouraging to see the Secretary of State in his place on the Front Bench and agreeing with the Minister. The Financial Times quotes a Liberal Democrat official this morning as saying of Mr Beecroft:
“He is an ideological Tory donor recruited to give voice to deeply held prejudices in the Tory party. His report has no evidence base.”
I also noticed that the Liberal Democrat Equalities Minister told The Observer on Sunday that Mr Beecroft’s ideas would be “swept away”. We perhaps heard some sweeping away from the Minister this evening. I am pleased to hear his confirmation—endorsed by the Secretary of State—that there will be no delay in auto-enrolment and that small businesses will not be missed out.
I welcome, therefore, the maintaining of the previous consensus on auto-enrolment, and I hope that the position that Ministers have put to the House this evening will stand. However, I regret the dilution of the previous proposals in the Bill. Our amendments seek to address the watering down of the principle of auto-enrolment that the Government have proposed. The amendments would reduce the proposed three-month waiting period to one month. They would also limit increases to the earnings trigger for auto-enrolment to no more than the increase in either the general level of earnings or the national insurance lower earnings limit. That is to address the concern explained by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), the Chair of the Select Committee in her intervention a few moments ago. The new clauses would put a duty on the Secretary of State to establish within two years a review into allowing transfers into NEST, and to review any order he makes on contribution limits in the scheme.
The Labour Government were determined to build cross-party consensus on pensions reform, and, thanks to Lord Turner’s commission, we succeeded. That was very important. We know that people have been under-saving for their retirement. It is estimated that 7 million people in the UK were not saving enough to provide an adequate retirement income. According to Scottish Widows, 20% of people were not saving at all for retirement. Overcoming that problem requires the establishment of a system that people can be confident will endure beyond a future change of Government. I welcome the fact that the principles have indeed survived a change of Government.
The levels of saving among people on low incomes are a particular cause for concern. While 77% of people earning £31,000 a year have savings, that applies to only 56% of people on average earnings and 44% of people on £18,000. The Office for National Statistics has reported that, thanks to the global financial crisis, pension savings fell by £2 billion in 2009-2010. The importance of tackling under-saving has risen even since auto-enrolment was first proposed.
The final report of the pensions commission in 2006 recommended three steps to tackle under-saving: a higher state pension age, restoration of the earnings link for the state pension and the introduction of automatic enrolment—the subject of these amendments. For a long time, inertia had acted against people building up sufficient savings for retirement. My hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) has commented on the effect of complex products on people’s understanding of the cost of products. Other demands on people’s income mean that people do not get around to saving. Auto-enrolment will harness inertia to the opposite effect by making saving, rather than not saving, the default option. We continue to support auto-enrolment into workplace pensions, and we are keen to maintain the consensus established for it. Partly for that reason, however, we cannot support the watering down proposed in the Bill.
Steve Webb
This is obviously a balancing act, but one reason for going beyond one month is seasonal workers. Given that the summer lasts longer than four weeks—perhaps not in Britain, but in general—the right hon. Gentleman’s proposals would bring fruit pickers into auto-enrolment. Does that not bother him?
Stephen Timms
No, it does not bother me. The people in that kind of employment might well fall into the category that the Minister mentioned earlier—people who progress later in their working lives, and the earlier that they start their pension saving the better. If they are in a job for more than one month, I would welcome giving them the ability to start saving for their retirement.
Dame Anne Begg
As someone who, in their young days, was a fruit picker in Angus, picking strawberries and raspberries, I think that the only way a fruit picker might end up in auto-enrolment would be if they had other jobs throughout the year that put them above the threshold. However, I can assure the Minister that the three months of the summer for which one would be fruit picking would be unlikely to generate the income that one would need to get over the threshold.
Stephen Timms
I could not have wished for a more effective endorsement of the case that I have put to the House. I am grateful to my hon. Friend.
The Government’s waiting period would incur significant costs through lost contributions for 500,000 employees at any one time and amounting to 7% of an average worker’s fund over a lifetime. Those losses undermine the principle of auto-enrolment and substantially outweigh the benefit from the small reduction in the annual costs to employers.
Amendments 19 and 20 would link the earnings trigger for auto-enrolment to the increase in either earnings or the lower earnings limit for national insurance. As the Minister set out earlier in his exchange with my hon. Friend the Member for Aberdeen South, the Bill will link the level of earnings at which people are auto-enrolled to the higher income tax threshold, with the level reviewed in future according to a number of factors. However, like the three-month waiting period, this measure will exclude a significant number of people from auto-enrolment. Those people will by definition be lower-paid workers, who we know already save proportionately less than others. We also know that they are disproportionately likely to be women.
Earlier the Minister touched on the aspiration that the income tax threshold will in due course rise to £10,000. As my hon. Friend said, there would be a worry if all those earning less than £10,000 were in due course excluded from auto-enrolment as a result. The National Association of Pension Funds has pointed out that that would exclude 17% of all employees and 27%—more than a quarter—of women employees. Adrian Beecroft might be pleased about that, but the Minister should not be. Pension contributions would remain payable on earnings above the national insurance threshold under the plans in the Bill. The TUC has pointed out that moving to that scenario would create a big cliff-edge, so that people would get to, say, £10,000 and suddenly find a large chunk of their earnings deducted, having previously not had anything deducted automatically. That would create a significant disincentive, which the Bill ought to avoid, to enrolment.
We have heard about the basis on which the Government intend to raise the earnings trigger. Their worry is that saving will not deliver sufficient benefits in retirement to be worth while for many people earning below the income tax threshold. However, the Government’s own report shows that most people earning around £8,000 to £9,000 a year will not be earning consistently or permanently in that range, as the Minister underlined, but will move up the income scale.
Stephen Lloyd (Eastbourne) (LD)
Does the right hon. Gentleman not agree that the danger of starting when incomes are too low is that the amount in the pot might be so risibly low that it would undermine the obvious advantages that auto-enrolment will deliver over the next 20 years or so?
Stephen Timms
The hon. Gentleman has a point—the Minister also made that point—which is that if the threshold was down at the national insurance threshold, the amounts involved could be tiny. What I am suggesting in our amendments is that the way in which the higher threshold that has now been agreed is subsequently uprated should be constrained. If it is not, a large number of people could be undesirably excluded from auto-enrolment at a time when it might be very much to their advantage to be included, particularly if the threshold goes up to £10,000.
The Minister will tell us—indeed, he already has —that people whose earnings are between the contribution threshold and the earnings trigger can opt into the scheme if they feel they are missing out. However, people have always been able to opt in; the problem is that they have chosen not to. That is why we have auto-enrolment. The point is that opt-ins have not worked. We need a step change. It is unfair to exclude people on lower wages, because they need to be part of the scheme too.
Our two new clauses would place a duty on the Secretary of State to review allowing transfers into NEST and the contribution limits on the scheme. The limits on transfers in and annual contributions were a factor in creating consensus on auto-enrolment—the Minister was right about that. They were correct at the time, and helped us to focus the scheme on where it was needed.
The Johnson review that the Government commissioned was clear about what ought to happen next. It made the point that the Government needed to review those two areas before the planned 2017 review. Paul Johnson said:
“Government and regulators should review as a matter of some urgency how to ensure that it is more straightforward for people to move their pension pot with them as they move employer, so that by the time of the 2017 review the more general issue of pension transfers has been addressed and NEST is able to receive transfers in and pay transfers out.”
The Minister suggested that to do two reviews would muddle things, but that is precisely what the Johnson review calls for, and I think that it does so with good reason. The report argues that that will be
“critical to the success of the reform”.
If this review does not occur before 2017, savers will spend years with fragmented savings in numerous pots that they are unable to combine. They will lose out on the benefits of being able to purchase an annuity on better terms as a result of having one, larger pot of money rather than several small ones. In some circumstances, they might also lose out due to higher management charges or as a result of deferred member penalties.
The Minister has offered some encouragement on this. I notice that he told a pensions conference last month of his vision that people will end up with what he described as “one big fat pot” instead of lots of little ones. However, no provision to review transfers in before 2017 appears on the face of the Bill, which means that people will continue to have lots of little pots, and his vision will remain unfulfilled.
It is right that contribution limits are in place while NEST is being established, but we should look again at whether those limits are necessary sooner rather than later. The Johnson review recommended that the Government legislate to remove the cap in 2017, which would be difficult if the review were commencing only in that year. The amendment therefore provides for a review in 2014. We remain wholeheartedly on the side of the consensus over auto-enrolment, but we believe that some changes are needed.
I shall also be listening with great interest to the speech of the hon. Member for West Worcestershire (Harriett Baldwin) in favour of her new clause 1. I was pleased that the Minister sounded well disposed towards it, although we shall need to know precisely what is going to happen to make its aims a reality. I hope that we can make progress in that area, as well as in the others that I have mentioned in my speech.
Mr Duncan Smith
I beg to move, That the Bill be now read the Third time.
I welcome the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) to his place. Notwithstanding our earlier little exchanges, I unreservedly welcome him. I am sure that he will be a great asset to his party, and I look forward to other clashes and debates that we may have as time goes on. I thank the Members on both sides of the House who served with distinction on the Public Bill Committee for their help in scrutinising the Bill. They have had to hang around for quite a long time, but we are where we are now. I also thank the Opposition for their approach to many of the positive debates on the Bill’s clauses. May I also extend my appreciation to my hon. Friend the Member for Altrincham and Sale West (Mr Brady) and the hon. Member for North Ayrshire and Arran (Katy Clark) for chairing the Committee sittings through those longer moments?
It is also right that I pay tribute to my hon. Friend the Pensions Minister for his commitment to taking this important legislation through this House. If there is anybody in government who has championed the cause of the low-paid in pensions, it is him. It is a privilege and pleasure to work with him in this coalition—a very firm coalition in our case. On a departmental point, may I back him up on what he said about one of our civil servants, Evelyn Arnold, whom the right hon. Member for East Ham (Stephen Timms) knows? She is retiring after a long time and has seen so many of these things go through, and it is right for us to thank those who serve us without normal comment. So, without question, I thank her for the time she has spent, on behalf of all parties in government, getting this sort of legislation through.
Over the past few months, a number of amendments were made that I believe have improved the Bill, and I shall run through them. With the blessing of the House, I do not intend to spend much time on them because we have been through them a lot. Amendment 1 related to the consumer prices index underpin, where we have listened to concerns and responded by ensuring that schemes that use the retail prices index will not have to uprate by CPI in the years when it is higher. We have heard the issues raised on deferred member charges and, having listened, we have extended an existing reserve power to cap charges to also cover deferred members. That enables the Government to protect all scheme members from high charges regardless of what might come in the future, which is an important feature. Thirdly, we have also made an amendment to clarify the definition of money purchase benefits in light of the Supreme Court’s recent judgment in Houldsworth v. Bridge, ensuring that schemes and members continue to have adequate protection.
The House will be aware that we have listened and responded to concerns about the women most affected by the accelerated rise in the state pension age. Last week we announced that no women will see their state pension age increase by more than 18 months. We have always been clear that our policy will not change and we will still equalise the state pension age by 2018 and increase it to 66 by 2020. We have, however, honoured the commitment I gave on Second Reading to ease the transition process for those who are most affected. I listened with interest to the debate, but the point that is sometimes missed is that the adjustment means that nearly 250,000 women will have a lower state pension age as a result of the change, as will a similar number of men: 500,000 people at a cost of just over £1 billion in the next spending period. We should not sniff at that.
Mr Duncan Smith
Before I give way to the right hon. Gentleman, let me make a small point. I understand why the Opposition want to trumpet a great deal about this. Having sat in opposition, I understand that getting self-righteous about such things in defence of others who raise them is exactly what Opposition Members do. As some of my hon. Friends said earlier, however, unless the Opposition can guarantee that they will reverse the measure if and when they come into government, in essence they are doing something quite cynical by raising the hopes of women outside, knowing only too well secretly that they will never make the change. If I give way, I would like to hear that the Opposition absolutely plan to reverse this measure and change it in government.
Stephen Timms
One thing the Opposition are entitled to do is ask the Government to explain why they are doing what they are doing. At a time when the Government are increasing the state pension age by one year for many people, what is the justification for picking out 500,000 women and treating them more harshly than everybody else?
Mr Duncan Smith
I think the right hon. Gentleman knows the answer to that question. It is wholly part of the process of equalisation and of moving everybody on at the same time for the extra year’s increase. That answers his point, but, as he knows in his heart of hearts—I consider him a reasonable man in his dealings most of all—the real point is that had Labour been in government, I suspect that they would have done almost exactly the same things.
The generation below my generation is likely to retire on a lower income in retirement, the first generation to do so, as a result of all the problems we have had with the economy—which the previous Government left for us and for which we never get an apology—and the reality that not enough people have been saving. We are about to condemn a generation of people who will struggle to save for their pensions and who will have to pay off elements of the debt that we—this generation going through Parliament—have overseen while at the same time paying for those who are already in retirement, and we must do something to help them rid us of that debt so that they do not pick up such a large proportion of it and are not saddled with it as they attempt to bring up their children and earn a living at the same time.
Stephen Timms
The Secretary of State is explaining why the state pension age needs to be raised and our amendments did not oppose the increase of one year. We are still waiting, however, for some justification why this particular group of 500,000 women must wait more than a year—longer than everyone else—to reach their state pension age.
Mr Duncan Smith
I think I have explained that. As I said earlier and as the right hon. Gentleman knows well, the acceleration is about reaching equalisation in time to move the age to 66. We can bandy this subject about, but the point remains that the Opposition must come to terms with something quite important. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, who opened the debate on Report, suggested that £11 billion—he insisted on saying £10 billion, but I must tell him that the figure is £11 billion—was no great problem and not an issue in the great scheme of things. That is, in a sense, the problem. I remind him that to save £5 billion in real terms today straight off, we would have to cut the education budget by 10%. That is the nature of how we would have to find the money.
I simply say to the Opposition that I understand the rules of opposition—goodness gracious, we spent enough time in opposition ourselves—and the temptations that come with opposition, but realistically they should be saying to all those women that we have made a major move. We are prepared to spend an extra £1 billion to make sure that those who were excessively caught in that trap are not any more. I think that is fair and reasonable and that the Opposition need to explain to women up and down the land why they are making a big fuss about this when they know, cynically, that they would not overturn this if they came to government. That is a very cynical position to be in—to whip up this emotion outside and then calmly and quietly say, “Of course, we can’t change it.” I am afraid that is bad politics and bad decision making.
Stephen Timms
The Bill certainly has some welcome features, as well as some very regrettable, unwelcome features. I shall touch on both aspects in my contribution.
The recommendations of the Pensions Commission chaired by Lord Turner were broadly accepted across the House. As Pensions Minister at the time, I was extremely impressed by the energy and commitment brought to their task by Lord Turner and his fellow commissioners, John Hills and the now Baroness Jeannie Drake. They were successful in putting together an all-party consensus, which has endured. We will continue to work consensually with the Government as far as we can for the strategy that was developed in the review.
The first element of that was auto-enrolment into a low-cost national scheme. I agree with the Secretary of State about the significance of that change and I welcome his confirmation that the Government will not move away from their commitment to auto-enrolment. The second element was an increase in the state pension age, and re-linking the level of the state pension with earnings was the third.
But it is not fair for the costs of this trinity of measures to be borne disproportionately by any one group in society, whether that group is defined by age, occupation or gender. The Bill would unfortunately affect some groups far more than others. We have just had a debate touching on the fact that young people and agency workers, who move jobs more frequently than average, are likely to lose many months of employers’ contributions because of the changes, as well as the chance of building up a savings habit, because of the introduction of a waiting period in auto-enrolment. Up to a million people on low wages would be left out of auto-enrolment owing to the increase in the level of the earnings threshold. But most significantly of all, and this is what gives us a real problem with the Bill, half a million women aged 56 and 57 will find themselves waiting up to 18 months longer for their state pension, and a third of a million will be waiting a full 18 months extra, with too little time to plan for the change. That is a serious problem.
We welcome the Government’s recognition that the original Bill was wrong, and what we have now is certainly a welcome change. I make no bones about welcoming the change that has been made, the concession in response to the big and entirely proper campaign that took place, but the Bill still leaves half a million women in the lurch. My hon. Friend the Member for Leeds West (Rachel Reeves) led the argument against the original ill thought-out plans, and I welcome the change that has occurred, but, with so many women still affected, Ministers cannot claim that they have solved the problem.
We understand why the state pension age is being increased by one year for many people, because the Secretary of State set out why and our amendments did not oppose the increase, but what has struck me about tonight’s debate is that no Government Member supporting the Bill has provided any justification why it is being increased by more than one year for half a million women—and not for a single man. What is the justification for picking out that group of half a million women and treating them more harshly than everybody else?
Why are those women being picked out for worse treatment? We have been given no justification at all, except that it will save a lot of money. No doubt it will, but the Secretary of State has a responsibility to develop a policy that can be defended, that has some rationale to it, not simply telling us, “Well, this is going to save us a lot of money.” There needs to be some justification for the change that is being made, and no justification—at least none that I can understand—has been made at all for picking out that group of half a million women.
The Pensions Policy Institute recommends that 10 years’ notice be given for people to plan for a change in their pension age, and the Turner report recommended a longer period, but the plans in the Bill still give some women as little as five years, and that is simply not enough. It is just not fair to those affected to impose on them such a big change with so little notice.
Those women have relied on an implicit contract of reasonableness and fairness between government and citizens when planning their retirement, and, if the truth is that government cannot be trusted to keep its side of the bargain, how are people expected to plan for pensions saving at all? Pension saving is inherently long-term in character, but it simply will not happen if the Government make a habit of sudden policy lurches that undermine the assumptions on which people have been encouraged to build in the past, so it is no wonder so many women feel so badly let down by what the Government have done.
We are talking about a 10-year period beginning in 2016. Under the coalition’s plans, unless they are to continue the current effectively zero-growth policy indefinitely, those savings are about the long-term sustainability of the pensions system, and we support, as our amendments tonight supported, the proposal to find further savings, if necessary, by bringing forward the date at which the rise to 67 years old occurs, as long as people have time to organise their affairs and to plan accordingly. The sudden unpredictable lurch, not mentioned by either coalition party in the general election campaign or in the coalition agreement, has caused the problem.
As my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) stated on Report, our objection to this part of the Bill is that it achieves these very large savings solely at the expense of one age cohort of women, apparently on a wholly arbitrary basis. The data are very clear. Women have substantially lower savings than men, yet a group of women—older women who have the least time to plan for the change—are being asked to bear the cost. The Bill simply fails the fairness test, and for that reason, in particular, we cannot support its Third Reading. We understand that Ministers are worried about rapidly plunging popularity among women voters and we are told that they are puzzled about why that is happening. They should just take a careful look at the unfairness in this Bill, and they will find a ready explanation there. We will not support that unfairness in the Lobby tonight, and no one else who values fairness should do so either.
The third of a million women with a wait of an extra 18 months will lose, just in state pension, pension payments averaging £7,800, and if one allows for pension credit and other passported benefits, we are talking about significantly greater sums still. Those women, if they are not working at the moment, will find it hard to find new jobs in the current labour market. Given that 37% of them are currently not in work, how are they supposed to make up that shortfall? We have been given no answers to that question.
As I think we would all agree, the design of the future pensions system should maintain inter-generational fairness. Imposing such large costs on one group of women means that the Bill fails to meet that fairness test. What became of the Burkean compact between generations to which Conservatives once subscribed?
Jenny Willott
Is the right hon. Gentleman able to answer the question that was posed by several hon. Members earlier in the debate, and then again by the Secretary of State, about whether he and his party would plan to repeal the proposals on women’s pensions and pension age if they were to come into government after the next election, given that the changes would not have taken place by that time and they would have the opportunity to do that were they so minded?
Stephen Timms
My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East answered that question earlier in the debate. Our view is that there have been too many changes and we would not propose yet another. The hon. Lady needs to explain the justification for picking out this particular group of half a million women and treating them more harshly than everyone else whose state pension age is being raised only by one year. For a third of a million women, it is being raised by a year and a half, and for half a million, it is being raised by more than a year. We have had no explanation and no attempt at a justification. Is it an accident or some kind of mishap? It certainly should be put right, and sadly it has not been put right in the changes that the Government have made.
There are other problems in the Bill. It dilutes the plan for auto-enrolment that was supported across the House. The proposals will leave many low-paid and agency workers outside auto-enrolment, and we think that they should not be left behind. Moreover, the gains from these exclusions, in lower costs for employers, will be small. It would be quite wrong to exclude people just because they work for small companies, as the Conservative party donor Adrian Beecroft is apparently arguing. I greatly appreciate the assurances that we have had about that during the debate, and I hope that Ministers will continue stoutly to resist any such moves if they are promoted from elsewhere in the coalition. The Pensions Commission made it clear that extending the benefits of pensions saving to more people who work for small firms is one of the prizes from this reform, and we must not throw it away.
The Secretary of State is absolutely right to argue that this is a pro-growth, not an anti-growth, change in making it possible for more people to save for a decent retirement. Of course it is right to be concerned about the plight of small firms in the zero-growth economy that we seem to have. I commend to the Government the national insurance holiday for small firms that take on additional workers that is proposed by my right hon. Friend the shadow Chancellor. We remain strongly supportive of the policy of auto-enrolment. We are disappointed, however, that the Government are seeking to water down the proposals around which the all-party consensus was hard won.
We welcome the consensus on the basic building blocks for a more sustainable pensions system, but the Government are quite wrong to load the cost of change so disproportionately on one group of half a million women. For a long time, they did not listen to those women at all. When they did, they came forward with a half measure. The sense of grievance that they have instilled in the women affected will not be readily dispelled. We are pleased to have won a concession, but many people will still be deeply disappointed. For that reason in particular, I urge Members to decline to give the Bill a Third Reading.