Data Protection and Digital Information Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Committee stage
Wednesday 24th April 2024 Grand Committee

[Viscount Younger of Leckie (Con)]

That is correct. I hope indeed that it provides some reassurance that extending it to the banks and financial institutions initially is deliberately designed to be narrow. It would be subject to both Houses to debate other areas beyond those. I am coming on to address that. The noble Baroness asked about phone companies. Simply put, we will be able to designate the third parties that fit within the provisions of this legislation where they hold information that would help us to verify whether someone meets the eligibility criteria for the benefit that they are receiving. However, ultimately, it would be for Parliament to decide whether a third party can be designated under this power, as we must bring affirmative regulations forward to do this. We have that power.

[Lord Davies of Brixton (Lab)]

To be clear, they already have some information about claimants or recipients. Does this Bill make any difference to that information? Can they already use the information that they have for these purposes, for example the name and address of a claimant’s bank account, or does this Bill extend the use of information to other information that they already have?

[Viscount Younger of Leckie (Con)]

Indeed, that is correct. I hope that is helpful and gives the noble Lord reassurance. To clarify, we have our normal business-as-usual processes so, where we are able to—with the restriction of not at present being able to use the banks and financial institutions as a conduit—we have those powers. However, obviously, as has been made clear by the ICO, there is no alternative to needing the help of banks and financial institutions to go further in tackling the ever-greater sophistication of fraud.

The noble Baroness, Lady Sherlock, asked whether we could issue an AIN to a bank other than that into which the benefit is paid. The answer is no. The power is exercisable only in respect of a matching account that meets the criteria in an AIN and receives a benefit payment. If this is not the case, the Secretary of State cannot require them to supply that information.

When it comes to issuing an AIN, DWP will be able to exercise these powers only for payments for which it is responsible. This means that DWP cannot exercise this power with some benefits that fall under the legislation, such as child benefit, as was mentioned on Monday. I know that the noble Baroness, Lady Sherlock, raised this issue. As I committed to do on Monday, I will provide in writing more detail on the scope of the measure and on these limitations, which will require more time.

I will also ensure that my letter is clear on how the measure will impact appointees, joint claims and other such accounts. I am well aware that a number of questions were asked about this matter on Monday but, in the interests of time, I will move on.

I turn to proofs of concept. I also want to speak about our approach to delivery, in particular how we plan to test delivery before we gradually scale up operational delivery; I am aware of the time, but I hope that the Committee will indulge me. Our planned period of “test and learn” will build on our learning from our two previous proofs of concept, which we conducted in 2017 and 2022. These demonstrated the effectiveness of this approach and contributed to the OBR’s certification that the measure will save up to £600 million over the next five years.

The two proofs of concept that I mention are important. I hope that the Committee will be interested to read the results, which demonstrate why we need to do this. Without further ado, let me say that I will set out the details of these two examples in the letter as well, which will, I hope, be helpful.

The noble Lord, Lord Vaux, who is in his place, the noble Lord, Lord Clement-Jones, and the noble Baroness, Lady Sherlock, spoke about the regulatory impact assessment on Monday. I just want to use this time to reassure them on that. More information on these proofs are contained within the RIA, which was, as noble Lords will know, green-rated by the RPC.

On “test and learn”, we have a clear view on how this power may work. We are already working with third parties in readiness to commence the formal “test and learn” period in early 2025 and preparing the code of practice in advance of that. I will come on to that in just a second—in fact, I will come on to it right now, given the time. I shall refer to Amendments 225 to 232 in the name of the noble Baroness, Lady Sherlock.

To support the delivery of this measure, we will produce the code of practice to help define how the measure will work, with explanations. I assure the noble Baroness and the Committee that the code of practice is already in development; we are working positively with around eight leading financial institutions through an established working group that meets regularly to shape the code. We are fully committed to continuing that work; I think I covered the timing of that earlier in my remarks. Accepting Amendments 225 and 226 in the name of the noble Baroness would therefore, we believe, have minimal effect. I am clear that DWP will produce a code of practice, which will be consulted on; I have also set out the sort of detail that it will contain. Accepting them may also potentially restrict our ability to develop the code of practice further as we understand more from “test and learn”.

Because we are developing this collaboratively with banks, I am not yet in a position to share the draft code, as I mentioned; I have given certain reassurances on that. However, I can say that it will provide guidance on issues such as the nature of the power and to whom it will apply. It will also provide information on safeguards, cover data security responsibilities and provide information on the appeals processes should a third party wish to dispute a request. We will engage with SSAC, to help the noble Baroness, Lady Sherlock, as we bring forward the affirmative regulations. On balance, I believe that the best course is to consult on the code of practice rather than rushing to define it now.

Data Protection and Digital Information Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Committee stage
Monday 22nd April 2024 Grand Committee

[Viscount Younger of Leckie (Con)]

That point is very much noted. I will certainly take it back. Clearly, we need to provide greater reassurance on the limits and scope, as well as on what we are trying to do. I regret that I am not able to give those answers in full to the Committee now but I hope that, today, I have already taken us further forward than we were before we started. That is quite an important point to make.

I shall touch on the benefits that are in scope of this measure, a point that was raised by the noble Baroness, Lady Sherlock. I think the noble Baroness wishes to restrict the power to working-age benefits, but pension-age benefits are not immune to fraud and error—I wanted to address that—and it is our duty to ensure that these benefits are paid correctly and in line with the benefit eligibility rules that Parliament has previously agreed. Every payment that the DWP makes has eligibility criteria to it. Parliament has considered these criteria in the passage of the relevant social security legislation, and the Government have a responsibility to check that payments are being made in line with those rules so that taxpayers’ money is spent responsibly.

[Lord Davies of Brixton (Lab)]

Pension benefits other than pension credit have eligibility criteria attached, but I do not know any eligibility criteria applying to pensions that you could discover from someone’s bank account.

[Viscount Younger of Leckie (Con)]

The example that the noble Lord will be aware of links to what the noble Lord, Lord Sikka, was saying about some pensioners who have moved abroad but, for whatever reason, have not told us that they have done so and continue to receive the uprating. The figure for the fraud aspect—or it could be error—linked to state pensions is £100 million.

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

Presumably the DWP already knows the address of the bank account to which an overseas pension is being paid. Why does it need to know any more?

[Viscount Younger of Leckie (Con)]

My understanding is that it needs to have these powers to be able to cover the ground properly. I say again that these powers are limited, and whatever comes from the data that is requested from the third parties will end up being, we hope, limited. Even then, it may not be used by us because there is no need to do so.

The power covers all relevant benefits, grants and other payments set out in paragraph 16 of new Schedule 3B to the Social Security Administration Act 1992, as inserted by Schedule 11 to the Bill. To remove pension-age payments from the scope of the power would significantly undermine our power to tackle fraud and error where it occurs. Pension-age payments are not immune to fraud and error, as I have mentioned. I will give an example of that. The noble Baroness, Lady Sherlock, asked whether people would be notified of their bank accounts being accessed.

Women’s State Pension Age

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Tuesday 26th March 2024 Lords Chamber

[Lord Davies of Brixton (Lab)]

The House should thank the Minister for bringing us the Oral Statement and answering the questions. We should, however, be under no illusion that this is only a minor element of the issues raised by the 1950s women arising from the increase in their retirement age. This stage is not about any form of restitution of the pension they have lost, it is simply about a failure on the part of the DWP to provide the people affected with adequate information. What is clear from the ombudsman’s report is that the DWP failed to adequately inform those concerned. That is what the report finds. It also finds that it constituted maladministration. Those points, those issues, were identified in the stage 1 report. So that part is not a surprise. The Government have known that for some time.

This stage identifies that that maladministration amounted to an injustice, and it suggests that those who were affected by that injustice are entitled to a remedy. The Secretary of State said in the Commons yesterday—he said it 26 times, by my count—that there would be “no undue delay”. Well, “undue delay” implies to me that there will be a delay. The Secretary of State argued—it has been repeated by the noble Viscount today—that the reason for this delay is the complexity of the issues.

I am afraid I do not have much sympathy at all for this issue of complexity. The issues are clear and straightforward: a group of women were told later than they should have been about the change in their retirement age and, because of that, they suffered detriment—a loss of autonomy and a loss of life chances. That is the injustice. That is all clear. It does not need any further assessment or thought. It absolutely leaps off the page in the ombudsman’s report.

My question for the Minister is: whatever the need for delay to work up the fine details of any deal, will he not accept that it is now time to acknowledge there was maladministration, as identified some time ago by the ombudsman? Will he recognise the injustice that is set out in this report? Will the Government commit to implementing some remedy in the light of the maladministration and the injustice?

[Viscount Younger of Leckie (Con)]

As I made clear earlier, the report came out only on Thursday. We have said very clearly that we want to have enough time to be able to look carefully at all the details in the report. This touches on some of the points that the noble Lord has made.

Could I just say that the story the noble Lord has presented is not entirely the actual story? For example, it is important to remember the state pension age changes were considered by the courts during the ombudsman’s investigation. In 2019 and 2020, the High Court and the Court of Appeal respectively found no fault with the actions of the DWP. The courts made it clear that under successive Governments, dating back to 1995—and I make the point about successive Governments—the action taken was entirely lawful and did not discriminate on any grounds. During these proceedings, the Court of Appeal held that the High Court was entitled to conclude, as a fact, that there had been

“adequate and reasonable notification given by the publicity campaigns implemented by the Department over a number of years”.

Just to add to that, to be helpful to the noble Lord, since 1995 the Government have used various methods to communicate the state pension age changes, including leaflets explaining the legislative changes, advertising campaigns to raise awareness and directly writing to those affected. So I would just make the point that that is one of the complexities and that it is not all as the noble Lord says. As I have made clear before, this is one of many complex issues that we need to look at as a result of the production of this report.

Love Matters (Archbishops’ Commission on Families and Households Report)

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Friday 8th December 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, it is an honour to close this debate on Love Matters, the report of the Archbishops’ Commission on Families and Households. I start by thanking all noble Lords for their valuable contributions today and, in particular, the most reverend Primate the Archbishop of Canterbury for initiating this important debate and for treating the House to a moving and passionate speech. If noble Lords will excuse the pun, in looking up to the gods, I thank the commission for its work in producing the report. It is a landmark report for the Church which makes valuable recommendations. I assure the House that these have been closely studied by the Government and are reflected in our plans and actions across the families agenda.

I add that it is a delightful change to see that there are more recommendations for the Church than for the Government on this occasion. However, just to reassure the House, there still remains much for us to do. As my noble friend Lady Bottomley said, faith groups and the Church are a crucial element in communities around the country and support many families. We have strong partnerships with the Church, including on the delivery of high-quality education in schools, and I will say more about that later.

Before I begin, I will just round up some of the themes. There were a lot of wide-ranging themes this afternoon: the importance and value of marriage, including same-sex marriage and in the traditional sense; a focus on children; views on single-person households and lone parents; relationships generally, and relating better, and how much this matters; a focus on the elderly from the noble Lord, Lord Davies; the joys or otherwise of being married to an MP; national service for young people cropped up; and, it is fair to say, bad days at the office for benefits officials struck me as being quite interesting. There was an emphasis on friends and “Neighbours”, and we have been exhorted to watch “Coronation Street” next Wednesday—I must make sure to put that into my diary.

I happen to be wearing a tie with an elephant on today, and the House will know that elephants have deep family bonds. They are loyal to a fault and they are known to spend time with the relics of their ancestors, so clearly, in that respect, love matters. I welcome the report’s focus on love, which provides an important reminder of the human element, the unconditional bond that underlies the entire families agenda. We all know that children benefit from growing up in a family that provides love and support and is part of a community. These are the things that ultimately make a difference to children’s happiness and success throughout childhood and up through as far as employment.

We also know, sadly, that this is not the case for all children, and that some families require greater support. As a result, providing such support to create an environment where all children can thrive is a key priority for this Government. That is why, in February, we published Stable Homes, Built on Love, which sets out our vision for a social care system built on love, safety and stability, along with the actions being taken to reform children’s social care, a focus shared by the report. This is just one part of our wider support for families, and I will highlight some of the further initiatives shortly.

The term “family” does not automatically imply everyone living together under one roof, nor only those who find themselves under the branches of the same family tree, so I welcome the report’s broad definition of family. In preparation for this debate, I was struck by one definition I happened to come across. It goes as follows.

“Family is loving and supporting one another even when it’s not easy to do so. It’s being the best person you could be so that you may inspire your loved ones”.


Indeed, as my right honourable friend the Prime Minister puts it, quoted by the report,

“whatever your family looks like, it doesn’t matter as long as the common bond is love”.

I echo the report’s celebration of all forms of loving relationships. As the most reverend Primate and the right reverend Prelate the Bishop of Durham said, they are significant for every individual, whether they opt for a life as a pair within a family unit or as a single person. We must respect and recognise the different family arrangements and structures, so that we can provide the right types of support. However, I listened very carefully to my noble friends Lady Stowell, Lord Cormack and Lord Robathan. They spoke passionately, particularly my noble friend Lady Stowell, about the value and benefit of marriage and the need to keep promoting this, and they are absolutely right.

The right reverend Prelate the Bishop of Durham echoed the view, which was also raised by the noble Baroness, Lady Twycross, that the marriage ceremony is enormously important, and the preparation for the ceremony—preparing for the commitment of marriage—was at the heart of this. The right reverend Prelate cited a role model for this at the Holy Trinity Brompton. I also declare an interest that I believe that I am a beneficiary of good preparation for marriage, having just, last June, celebrated 35 years—not quite as many as some others in the Chamber. I also noted the question raised by the right reverend Prelate the Bishop of Durham about the registrar possibly doing some signposting. I will reflect on that, and I will certainly get back to him, and put a letter in the House Library regarding that important point.

In terms of supporting marriage, I remind the House that the Government do indeed support the institution of marriage. The House will know that we introduced the marriage allowance in 2015 to recognise marriage and civil partnerships in the tax system as just one example of our support for marriage. The Government also have a strong track record of advancing LGBT rights, including the introduction of same-sex marriage in 2013. I was deeply moved by the speech from my noble friend Lord Herbert.

The most reverend Primate mentioned the importance of state intervention where needed. The noble Lord, Lord Davies, added in at different stages, and I think he alluded to the reference made to the elderly. I will come back to that, hopefully, with time later.

I will directly address what support the Government are providing on issues that affect families. As my noble friend Lady Bottomley highlighted, my own department, DWP, oversees the reducing parental conflict programme, which shows that supporting parents, inter alia, to reduce the damage of frequent arguing—I make the point that it is frequent arguing, not just arguing, that is very damaging—achieves positive and sustained impacts for children. This programme is delivered through local authority family services and with local community and faith partners. The most reverend Primate emphasised the importance of local action in this respect, and he is right. We continue to provide ongoing support for local authorities across England on this programme and are on track to have directly supported 40,000 parents in the last two years.

In addition, the start for life and family hubs programme has created a network of centres for families with children up to 19, or up to 25 where the child has a disability. These family hubs link professionals, local partners and faith groups to support families. The right reverend Prelate the Bishop of Durham spoke about family hubs very eloquently. They also support the very important early years development, which I know is a priority for the Royal Foundation and her Royal Highness the Princess of Wales. I am sure that the House will welcome the joined-up support being given by midwives and family hub workers to expectant and new parents, helping them with both their child’s and their own health and well-being.

The right reverend Prelate the Bishop of Durham asked how the Government will ensure that faith groups are involved in family hubs, and that they provide the necessary relationships advice. He is right: faith groups are at the heart of many communities and therefore are a key component of the family hub model. We have published guidance for local authorities on the services we expect family hubs to offer, including helping families access support for separating and separated parents, and to reduce parental conflict.

In another passionate speech, the right reverend Prelate the Bishop of Gloucester spoke about children with a parent in prison—a very important subject. A parent going into prison can have a profound impact on children, which I would say is an understatement. Local agencies are best placed here to determine what support is needed, for example, Keeping Children Safe in Education 2023: Statutory Guidance for Schools and Colleges states that the additional needs of children with a family member in prison or who are affected by parental offending should be considered.

Healthy relationships are built on a foundation of mutual respect, trust and honest communication. In schools, our children are being taught about the importance of healthy relationships through the inclusion of age-appropriate relationships, sex and health education within the curriculum. This helps them to develop mutually respectful relationships more broadly, but that is not all the help that they get on relationships. School mental health teams are already making a difference when relationships get tough, to help children address problems early before they escalate.

The reality is that not all relationships stand the test of time. The noble Lord, Lord Griffiths, put it very well when he said, “Bad things happen”, and indeed they do. In 2020, the Government introduced the Divorce, Dissolution and Separation Act. The legislation has modernised divorce laws and has created an online divorce service to help with financial settlements and childcare arrangements after separation.

In addition, the Child Maintenance Service—which I am directly responsible for—plays a crucial role in securing financial support for children where parents have separated. It mandates—and, where necessary, enforces—appropriate arrangements so that children have the best start in life with a solid financial foundation. Through both private family-based arrangements and more formal Child Maintenance Service arrangements, looking at the years 2020 to 2022, on average 160,000 children were kept out of absolute low income on an after-housing-costs basis.

Despite this progress, however, there is much more we can do. That is why, in October, my department announced measures to strengthen the Child Maintenance Service by accelerating our enforcement powers and removing the £20 application fee. We will also consult on the ways in which the Child Maintenance Service collects and transfers maintenance payments, all with the primary aim of getting more funds to children. My noble friend Lord Robathan is right to mention that it is mainly men—93%—who have strayed in a marriage. However, I emphasise that not all do not take responsibility for their children, so it is a complicated story.

The right reverend Prelate the Bishop of Durham spoke about the two-child limit, which I was certainly expecting to speak about this afternoon. He will probably know what my answer will be; my noble friend Lady Stowell alluded to it. The two-child limit has been extensively debated in this House. On inception, the policy had two clear intentions: first, to make universal credit fairer and more affordable to the taxpayer; secondly, to make sure those supporting themselves through benefits face the same financial choices around the number of children they can afford to have as those not on benefits. The House will be aware of the exceptions that apply. Child benefit continues to be paid for all children in eligible families.

Going further, in 2014—as the most reverend Primate highlighted—we introduced the family test, which guides policy-makers in assessing the potential effects of their decisions on family dynamics, including elements related to marriage. The family test is for individual departments to apply. The approach allows for flexibility to consider the test at the most appropriate points in the policy-making process. In my role, I have actively supported the family test and I remain committed to promoting it across government.

I know the most reverend Primate regards this as being very important. We acknowledge that some people, including himself, might like to see the consideration and publication of the family test become a statutory obligation. To work best, an assessment of the potential family impacts of policies needs to be done early in the policy development process, so that consideration can be given to adapting proposals. Feedback from policy-makers tells us that statutory tests risk becoming a box-ticking exercise at the end of the policy process, with pass or fail outcomes. However, perhaps I can reassure him and the House that we continue to work across government to support officials developing policy to apply the family test from the earliest policy development stages and encourage the sharing of best practice. We are also starting work across government to consider the language of the family test questions and supporting guidance. We really do want to ensure that it continues to be relevant and appropriate. We acknowledge the recommendations in the report, but also in the Children’s Commissioner’s report.

I will turn to some other matters raised in the report. On reducing poverty and supporting low-income families, the Government believe they have a strong track record of helping vulnerable families. There were a number of questions from the noble Baroness, Lady Twycross, and I will need to write a letter as there were an awful lot of them. I will be touching on housing later, however, which was a general theme during the debate, so I hope that some answers may come to her from that.

The House will be aware of the £276 billion spent on welfare in Great Britain over 2023-24. I will not rehearse all the Autumn Statement announcements, because the House has heard them on several occasions over the past two weeks or so. However, as I said earlier, I will focus on housing. The noble Lord, Lord Mann, raised this, and the most reverend Primate also spoke about the importance of family, where they live and how they live, and the right reverend Prelate the Bishop of Chelmsford spoke about the types of houses, the intergenerational focus on the buildings and, frankly, making it a lot better for families to live near each other so that we have the influence of the intergenerational aspects. Those are incredibly important points, which I certainly take on board.

In the meantime, as the House will know, in the Autumn Statement the Government are raising the local housing allowance rates to the 30th percentile of local market rents in April 2024, which will benefit 1.6 million low-income households by on average £800 a year in 2024-25, and of course help many who are in poverty. The right reverend Prelate the Bishop of Chelmsford asked about timing. I will certainly take her point back about perhaps bringing the date forward but I certainly cannot offer any reassurance on that.

The report rightly identifies many of the features that support families’ flourishing, including friendship, shelter and the ability to deal with conflict. However, I highlight the importance of work. I have to say that I am slightly amazed that this has not been raised at all during this debate, so I will take this opportunity to focus on it. It has been a long-standing principle for the Government that the most effective and sustainable way to tackle poverty is by championing employment, acknowledging the mental health benefit that this brings and supporting people, including parents, to progress in work. Work can be an important part of bringing families together, supporting their mental health, and role-modelling positive behaviours for younger generations. The Government are committed to improving lives by ensuring that more people can reap the rewards of work. The voluntary in-work progression offer is now available in all jobcentres across Great Britain. We estimate that around 1.2 million low-paid workers will be eligible for support to progress into higher-paid work, and we will encourage them to take up this offer.

On childcare and the actions of my department to support parents into work, from June 2023 we increased the universal credit childcare cost caps by 47% to £951 a month for one child and £1,630 a month for families with two or more children. Importantly, we can now also provide even more help with up-front childcare costs when parents move into work or increase their hours. I reiterate my appreciation to faith groups and their commitment to parents, carers and children, and I am grateful to the commission for its invaluable contributions to supporting and strengthening family life since it was established in March 2021.

I want to raise one very important point, which is the role of grandparents—the noble Lord, Lord Davies, referenced the elderly in his remarks, but I also thank the noble Lord, Lord Mann, profusely for raising this important subject. The intergenerational aspects of grandparents—the way they play a pivotal role in families, often stepping up to provide kinship care and support to children and their parents—are important. Many kinship carers, especially grandparents, take on this role at a time in their lives when they least expect to raise a family, we would guess. They provide support, sage advice and stability, forging strong relationships not out of duty but because love matters.

I will answer a question raised by the noble Lord, Lord Davies, to do with having a Cabinet-level Minister for Children. Perhaps I can be helpful by saying that of course he will know that we have a Children’s Minister, but that was not his point. The Secretary of State for Education fulfils the role of Cabinet-level Minister. She makes sure that the best interests of children and families are front and centre in policy and decision-making at this highest level of government. She has a statutory duty to promote the well-being of children in England under the Children and Young Persons Act 2008, and is responsible for overseeing domestic implementation of the United Nations Convention on the Rights of the Child and leading the reporting process on behalf of the UK to the UN.

The Minister for Children, Families and Wellbeing also chairs a cross-government child protection ministerial group. This group helps to ensure that safeguarding is championed at the highest level by government departments that provide services to children and families. Through this group, the Secretary of State also ensures that other government departments are held to account in delivering for children.

This Government are committed to delivering on issues that matter to the British people. That is why we will continue with our mission to help all families to thrive, and our young people growing up within them to flourish.

[Lord Davies of Brixton (Lab)]

Before the Minister sits down, can I ask him whether he used a word in his section on divorce advisedly? He referred to a proportion or percentage of men who had “strayed”. To me, that suggests an element of blame, whereas I thought that the whole thrust of developments in divorce law is for the law to avoid allocating blame.

[Viscount Younger of Leckie (Con)]

The noble Lord is absolutely right. I clarify that I was not attaching any blame; I was just making a factual point that it is the 93% of men who stray. There is a balance that we strike within the Child Maintenance Service to be sure that we take account of the issues relating to paying parents and receiving parents. It is very important that we do not take sides, but we also have to look at the facts.

State Pension Underpayment Errors

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Tuesday 16th May 2023 Lords Chamber

[Lord Davies of Brixton]

To ask His Majesty’s Government what steps they are taking to tackle under-payment errors in state pensions.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the Government are fully committed to ensuring that state pension error is put right as quickly as possible. More than 1,300 staff have been recruited or redeployed to the ongoing state pension underpayment correction exercise, with case reviews expected to significantly increase this year. This is an issue that dates back many years, and we are working hard to correct these historic errors and to ensure that they do not happen again.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Viscount for his reply and I know that he takes the issue seriously. However, it is notable that the figures published last week by the Office for National Statistics showed that the main cause of underpayment was what it termed “official error”, and in the last financial year, the underpayments totalled £580 million—£50 million more than in the previous year. It is getting worse. I note what the Minister says about additional staff, but it is clear that more needs to be done.

[Viscount Younger of Leckie (Con)]

The noble Lord is right. We know that 700,000 cases require review; an estimated 230,000 customers will be affected. In terms of what we have actually done, 173,538 cases have been reviewed; 46,760 underpayments have been identified, and just over £300 million was paid in arrears. As for the reasons that were highlighted by the noble Lord, they are multifarious. One is that DWP staff sometimes fail to manually set an action system prompt on state pension accounts to review payments, such as reaching an 80th birthday.

Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Wednesday 26th April 2023 Grand Committee

[Viscount Younger of Leckie (Con)]

Absolutely. That plays well into what I said in that I will reflect on what I and the noble Baroness have said, and there may well be a letter coming to add to the one that I will send to my noble friend.

I will address a couple more questions before I wind up finally. The noble Baroness, Lady Drake, and indeed the noble Baroness, Lady Sherlock, asked whether the PPF is right to build reserves at a slower pace than it has been doing. It is a fair question but that is, as the noble Baroness will expect me to say, very much a matter for the PPF board.

On whether there will be an update on the levy discussions, I may have alluded to this earlier—it was raised not only by the noble Baroness, Lady Drake, but by my noble friend Lady Altmann and indeed the noble Baroness, Lady Sherlock. I will certainly happily make inquiries, and that will be an addition to the letter which is growing bigger by the moment. There may be some other questions that I have not answered, but I will certainly look very closely with my team at Hansard.

To conclude, again I thank the noble Lord, Lord Davies, for providing us with this opportunity to discuss the UK’s flexible and robust regime for funding and protecting defined benefit pensions, which, as was mentioned, is an important subject. This regime has enabled most schemes to weather the severe economic downturns following the crash in 2007-08—the financial crisis, I should better call it—and the Covid pandemic, as well as the prolonged period of historically low interest rates. In fact, the aggregate scheme funding position on a Pension Protection Fund basis improved from 83.4% on 31 March 2012 to 113.1% on 31 March 2022 —an interesting statistic to reflect on. These improvements to scheme funding mean that fewer and fewer members of DB schemes will require the safety net of the PPF. That is of course good news for members, who are increasingly likely to receive their full pension entitlement. This is progress indeed but there is more to do, although of course we cannot eliminate all risk. When employers become insolvent, the PPF continues to stand by as a well-funded and responsibly managed safety net.

[Lord Davies of Brixton (Lab)]

I thank the Minister for his detailed and considered response to what I have certainly found a useful debate. I just need to say that I do not think that the issue will go away. As I suggested, the attrition of members’ benefits will continue, and pressure to do something will get stronger. It would be useful if a meeting could be organised—it is probably just as easy to do it directly with the PPF, but Ministers and officials might like to be involved in it as well, so I will write and suggest that. I thank the Minister again for his attention to this important topic.

Pension Schemes: Guidance

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Monday 13th March 2023 Lords Chamber

[Viscount Younger of Leckie (Con)]

Well, I will not be drawn on that by my noble friend, but the comments that she makes are broadly correct. It is very important that pension schemes, particularly those for purpose, encourage investments that align with the environment and society, and that includes climate change. I believe that the report, One Year On, outlines some pointers, insights or challenges. For example, most funds are using their investment consultants, while some are not yet using or including carbon offsets in their TCFD reports, but nothing in the findings so far is unfamiliar to DWP. We know there is work to do to improve the reports and build an element of expertise across the industries more generally.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome the report. The question is whether the advice can effectively come from the Government against the background—I hope the Minister will agree—that it is the members’ money that is intended to provide them with a retirement income and should be used in accordance with their wishes and views. Can the Minister confirm that that is his view of how money in pension funds should be used?

[Viscount Younger of Leckie (Con)]

I think it is important that the right advice is given. I start by saying that this is pretty ground-breaking, because the UK is the first country in the world to make occupational pension schemes consider, assess and report on the financial risks of climate change. In terms of what I would call “the push”, we have consulted with the pensions industry and certainly think it is right that guidance is given. For example, my department has introduced guidance alongside the TCFD requirements to help pension schemes understand how to identify, manage and assess climate-related risks and opportunities.

Pensions Tax Relief: Employment and Retention

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Tuesday 1st November 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, the Government greatly value the work of all public sector staff, be they NHS workers, teachers or police officers. Public sector pension schemes are mainly defined benefit schemes and are among the most generous available. The annual allowance affects only the highest-earning pension savers, and the Government estimate that 99% of pension savers make annual contributions below £40,000—the level of the standard annual allowance.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the Minister for his reply, but it is worth reminding ourselves that the last Prime Minister promised to stem the exodus of doctors from the NHS. The Prime Minister before that promised to fix the pension tax relief rules, and the new Chancellor, no less, has called the situation a “national scandal”. Of course, the annual allowance is a general problem that can affect people across all defined benefit pension schemes, not least senior nurses—this goes back to the previous Question. But does the Minister understand that, given the 10% increase in the CPI this September and given the rules of the NHS scheme, some GPs will be faced with additional tax bills into six figures this coming year? Does he understand the extent of the scandal and that tinkering with the rules will not be enough? Radical action is required.

[Viscount Younger of Leckie (Con)]

I recognise some of what the noble Lord has mentioned. In recognition of the impact that pension tax has on senior clinicians in the NHS, and to improve staff retention, which was part of the subject of the last Question, the Government announced changes to the NHS pension scheme on 22 September. These include changing the pension rules regarding inflation, encouraging NHS trusts to offer so-called pension recycling—the noble Lord will know more about this than me—and implementing permanent retirement flexibilities to allow experienced staff to return to service or stay in service longer.

Health and Social Care Levy (Repeal) Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

2nd reading & Committee negatived & 3rd reading
Monday 17th October 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, I am pleased to open the debate on this Bill. The health and social care levy was announced only last September and then made its way through Parliament to become the Health and Social Care Levy Act 2021. This Bill, if passed, repeals this legislation. I intend to set out the background to this, the consequences of this Bill and to provide some reassurance on its impact.

First, I shall make a few comments about the events which have taken place over this weekend and this morning, which provide a backdrop to this legislation. The Government, as we are aware, have a new Chancellor who, with the backing of the PM, has continued to emphasise the importance of achieving economic growth, not for its own sake but because of the benefits it will bring to communities across the country: higher wages, better public services and greater opportunities for all.

As the Chancellor has set out this morning, there can be no economic growth without fiscal credibility. That is why the Government are acting decisively today to get the public finances under control. As well as confirming that we will not proceed with the planned reduction of corporation tax from 25% to 19%, the Chancellor has set out further steps this morning to support confidence and, vitally, stability. The Chancellor is setting out further details in the other place shortly and a Statement will follow here, in discussions with the usual channels.

It is in the whole country’s best interests for the Government to act decisively, at scale, to regain the confidence and trust of financial markets. On 31 October, the Government will publish a credible plan to get debt falling as a share of the economy over the medium term, backed by the judgment of the independent Office for Budget Responsibility. For that plan to be credible, there will be more difficult decisions to come across tax and spending. The Chancellor has made a promise that, in doing so, we will always act in line with our values, seeking to protect vulnerable families and back businesses at the same time. The repeal of the health and social care levy should be viewed, therefore, in the context of this continued commitment to support families and businesses.

The levy was originally introduced to help put the NHS and adult social care on a sustainable footing. However, given the financial pressure on households, it is right now to reverse the levy. There is a reasonable question to be asked about the long-term impact on health and social care. Overall funding for health and social care services will be maintained at the same level as if the levy were in place.

The Deputy Prime Minister and Secretary of State for Health and Social Care recently set out details of her priorities for the health and social care sectors in the booklet Our Plan for Patients. The Government will seek to expand on this in due course. The Deputy Prime Minister’s plan includes a £500 million adult social care discharge fund that will help people out of hospitals and into social care support, while providing support to the social care workforce.

Noble Lords will forgive me if I briefly touch on how we got here. The health and social care levy was originally announced last September, as I mentioned earlier. The Health and Social Care Levy Act 2021 made its way through Parliament soon afterwards and received Royal Assent on 20 October. The levy had two key elements: first, a temporary increase in national insurance contribution rates of 1.25 percentage points for the 2022-23 tax year; then, from April 2023, a formal legal surcharge of 1.25%, which would also affect those working over the state pension age. As a result of this Bill, neither of those will now happen. To be clear, this Bill repeals that legislation, reversing the temporary NICs increase from 6 November 2022 and ensuring that no new levy comes into force in April 2023.

What does that mean for people around the country? All employees earning more than the annual equivalent of £12,570 and self-employed people earning more than £11,908 in 2022-23 or £12,570 in 2023-24 will benefit. The average saving is around £330 in 2023-24, with an additional average saving of around £135 over the remainder of this year. Some 60% of businesses, 920,000 of them, will see an average tax cut of £9,600 in 2023-24.

I note that businesses which benefit from the employment allowance already pay no national insurance contributions at all. The employment allowance was increased from £4,000 to £5,000 in April 2022, meaning that businesses and charities which had employer NICs bills of £100,000 or less in the previous tax year can claim up to £5,000 off their employer NICs bill. Thanks to the employment allowance, a further 20,000 businesses will be taken out of paying NICs altogether in 2023-24.

Taking into account the threshold changes made earlier this year, almost 30 million people will be better off by an average of over £500 in 2023-24. I realise that that is quite a lot of detail to digest, but the bottom line is this: reversing the levy delivers a tax cut for 28 million people worth, on average, £330 every year. It also delivers a tax cut for nearly a million businesses, in turn boosting economic growth, as I said at the beginning. Crucially—

[Lord Davies of Brixton (Lab)]

My Lords—

[Viscount Younger of Leckie (Con)]

If I may finish my remarks, as they are nearly finished, that would be very helpful. I encourage the noble Lord to ask some questions during the debate.

Crucially, as I said earlier, reversing the levy has no bearing on the funding of health and social care services, because the Government will maintain funding at the same level as if the levy were remaining in place.

To conclude my opening remarks, the Government’s reversal of both the levy and the temporary NICs rise will make a significant difference to the lives of millions across the country. It will also have no impact on the provision of health and social care services. The Chancellor has promised that we will continue to support families and back businesses; we will keep those promises. I beg to move.

Economic Situation

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Thursday 13th October 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

The Treasury is working with the Bank of England to monitor the implementation of the operations that the Bank has decided to undertake and the potential risks that it may pose, as well as continuing to monitor wider market conditions. It is thought that the announcements on Wednesday 28 September and the very recent ones on Monday 10 October and Tuesday 11 October will allow enough to be done. As I say, this is to settle the markets and to ensure that there is an orderly exit, as planned, from this Friday.

[Lord Davies of Brixton (Lab)]

My Lords, I make no apology for continuing the points raised by the noble Baronesses from different sides of the House. Yesterday, there was a headline in the Times, “Threat to pension funds”. Today, a headline in the Daily Express is “Doom loop Friday—will BoE governor Andrew Bailey let financial system collapse tomorrow?”. So far this has been a crisis of liquidity. However, earlier in the week, the Bank of England told us that

“self-reinforcing ‘firesale’ dynamics pose a material risk to UK financial stability.”

This is what the Daily Express refers to as the “doom loop”, and the point about it is that you do not know how deep it will go. Therefore, it raises the issue of a threat to solvency and hence to members’ benefits. The problem is that I doubt the ability of the Bank of England, with its mixed messaging, the Pensions Regulator and the PPF, to sort this out. Is it not the Government’s responsibility and a reversal of their mini-Budget the only way to solve it?

[Viscount Younger of Leckie (Con)]

I probably answered the noble Lord’s question earlier by stating, as an observation, what the Bank has done. I mentioned the announcements made on those three dates. The Bank has also announced that it will stand ready to increase the size of its daily auctions to ensure that there is sufficient capacity for gilt purchases ahead of this Friday. It continues to work with the liability-driven investment funds and pension funds as they continue to build their financial resilience ahead of the end of the Bank’s intervention. This is very much as an observation about behavioural change and there are signs that this is working.

Transport for London: Funding

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Thursday 23rd June 2022 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, the Government have repeatedly shown their commitment to supporting London’s transport network since the start of the pandemic, providing almost £5 billion in emergency funding to Transport for London. The Government have committed to consider a longer-term settlement, and we continue to discuss further funding requirements with TfL. However, any future support provided will focus on getting TfL back on to a sustainable financial footing in a way that is fair to taxpayers across the country.

[Lord Davies of Brixton (Lab)]

My Lords, I regret to say that I cannot honestly thank the noble Viscount for his reply. I was hoping that the Government would take the opportunity to end the uncertainty facing Londoners, both passengers and staff. Of course, it is not just Londoners; people across the country depend on work from TfL and on London as a key powerhouse of the UK economy. What we face is managed decline, making a mockery of the Government’s purported policy of levelling up. Will the Minister give a specific commitment to support the necessary capital expenditure that the Transport Secretary has acknowledged will be required in London as well as in the rest of the country?

[Viscount Younger of Leckie (Con)]

To the extent that the noble Lord is right, he makes a very important point: the London Underground transport system in particular is one of the best in the world, and is recognised as such. It is important that we continue to fund it wherever and however we can. But this extraordinary funding, so defined, was meant for a specific purpose, as a result of the revenue shortfall due to the Covid-19 pandemic. I am well aware that tomorrow is 24 June, although I regret that I am not able to tell the House what extension, if any, can be announced today.

Industrial Action on the Railways

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Monday 20th June 2022 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, I the interesting part of the Statement was, as someone said, its tone, which I think was accurately reflected in the Minister’s delivery to the House. There is clearly no intention from this Government to achieve a settlement. They have convinced themselves that it is in their interest to wind up the issue, reflected in the ministerial Statement in the use of terms such as “union barons”. This strike was because of the frustration among the membership of the unions involved; a massive majority of the entire unionised workforce was in favour of taking action. This is not down to the leadership; it is down to the members and their dissatisfaction. When the Minister comes and reads us a Statement that is more like a Daily Mail op-ed on a bad day, it demonstrates the Government’s total lack of interest in achieving any settlement.

[Viscount Younger of Leckie (Con)]

Sorry to interrupt the House again, but I urge Peers to keep their questions succinct to allow more Back-Bench questions to be asked.

[Lord Davies of Brixton (Lab)]

Does the Minister understand that part of the reason for this discontent is the Government’s intention to wind back on the pension schemes that cover the railway staff? The Government make policies to make people’s pensions worse; that is part of the problem. Does she understand that?

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Committee stage
Monday 10th January 2022 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Lord, Lord Davies of Brixton, for raising these interesting points. I hope that I can provide for him, as I wish to do, a full and rounded answer.

This amendment seeks to ensure that the National Insurance Fund, or NIF, remains in good health by allowing a transfer of funds from the consolidated fund to account for the reduction in revenue as a result of the zero-rate relief in secondary Class 1 contributions as introduced by the Bill for employers of free ports employees and the employers of forces veterans. I would like to explain to noble Lords why the Government consider that such an amendment is unnecessary. However, to start with, it may be helpful to provide some background on how the National Insurance Fund operates. Obviously, this is for the benefit of the Committee; I am aware that the noble Lord, Lord Davies, will be well versed in this particular matter. I will not go into the history too much, but it may be helpful for the Committee.

The majority of NICs receipts are deposited into the NIF, which in turn funds most contributory benefits, including the state pension. The NIF is funded on a collective basis, meaning that today’s NICs receipts pay for the benefits being paid today. In 2021-22, the Government Actuary’s Department estimated that total NICs receipts in the NIF would equate to approximately £122 billion, exceeding the £112 billion in benefit payments and associated costs. The cost of the veterans and free ports reliefs are therefore small in comparison to the NIF’s surplus and will not impact on the NIF’s ability to pay out contributory benefits.

Furthermore, the Government already have an established process in place to ensure that the NIF always maintains a sufficient working balance to continue to pay out contributory benefits. It has been the practice since 1983 to maintain a balance of at least one-sixth of projected annual benefit expenditure—in broad terms, two-months’ worth of benefit expenditure—to be able to deal with unexpected contingencies. As the NIF has no borrowing powers, Section 2 of the Social Security Act 1993 permits the Treasury to pay a grant from the consolidated fund into the NIF up to a specified percentage, at almost 17%, of estimated benefit expenditure.

Before the start of each financial year, the Government use the information provided by the Government Actuary’s Department in its uprating report to determine a ceiling for the grant that may be paid in the following year which is then subject to approval by Parliament. For example, in the 2021-22 financial year, the Government legislated for a Treasury grant provision of 17%, although, given the current surplus of the NIF, this provision is not needed to be drawn upon. This secondary affirmative legislation was debated by noble Lords on 8 February 2021. Therefore, we feel that such a provision that the noble Lord has proposed is unnecessary as the Government already have the ability to top up the National Insurance Fund should they need to.

A wider point has been made, particularly by the noble Baroness and the noble Lord, Lord Davies, on the legitimacy of this. However, there are already reliefs in the NICs system with regard to the employment allowance, the under-21 relief and the under-25 apprentice relief. I therefore reassure the Committee that this policy and the thinking behind it is not new, and that obviously it is used for different purposes.

Finally, if such an amendment was passed by this House, it would likely engage the financial privilege of the other House.

With those assurances, I hope that the noble Lord will withdraw the amendment in his name.

[Lord Davies of Brixton (Lab)]

I will withdraw the amendment. I will read carefully what the Minister said, but I maintain my position that there is a point of principle here. I agree that there are precedents for using national insurance relief, but I was not here then so I was unable to raise it. I am raising it now because, as I said in my introductory remarks, I believe in a national insurance system and the National Insurance Fund. If it is to be treated as just a source of general taxation, which effectively this does, it dilutes the principle. I shall read what the Minister said, and I thank him for his reply.

National Insurance Contributions Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

2nd reading
Wednesday 1st December 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

I asked about that, so I will say yes; we want to get a response as soon as we can. I do not yet have the dates for Committee but I should press to say that we want to get this as soon as possible, and certainly well before Committee.

I will conclude by talking about a point that was raised by the noble Lord, Lord Bilimoria, about investment in the UK, which is a bigger issue that he raised. There are very many reasons to be positive about the UK economy. We have been talking about free ports and NICs relief, but both the OECD and the IMF are forecasting that the UK will have the highest annual growth in the G7 this year. Decisions this Government have taken have provided around £400 billion of direct support to the economy during this year and last year, and the Bill helps towards that.

I thank all noble Lords for their comments. As the noble Baroness, Lady Kramer, said, this was a short debate but it has been quite intense and extremely helpful. I greatly look forward—

[Lord Davies of Brixton (Lab)]

Before the Minister concludes, does he have a reply on the salary sacrifice point? I will be happy to take a letter.

[Viscount Younger of Leckie (Con)]

Absolutely; I will look at Hansard to check on all the questions raised. I suspect that there were one or two that I have not responded to, and I will certainly write as soon as I can to respond to them. With that, I commend the Bill to the House.

Public Service Pensions and Judicial Offices Bill [HL]

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Report stage
Monday 29th November 2021 Lords Chamber

[Viscount Younger of Leckie (Con)]

My Lords, an amendment has been put forward to Clause 80 by the noble Lord, Lord Davies of Brixton, which concerns the employer cost cap. The noble Lord seeks to amend this clause to prevent the increase in value of schemes associated with the McCloud remedy being accounted for in the cost-control element of the 2016 valuations. I thank the noble Lord for bringing this to the attention of the House and am grateful to him for his prior engagement on the policy.

I can confirm that the Government have received pre-action protocol letters on behalf of some trade unions which have indicated that they may issue judicial review proceedings to challenge the Government’s decision to include the costs of remedy in the cost-control mechanism at the 2016 valuations. As the House will expect, and as the noble Lord, Lord Ponsonby, acknowledged, I cannot comment on the specifics of live or threatened litigation.

I acknowledge and appreciate the support the noble Baroness, Lady Janke, has given in general to the changes we have made to the cost-control mechanism—but there is more I want to say. I will talk through the general background, to reassure the noble Lord, Lord Davies, of the reasons for the Government’s decision. I will start by commenting on the policy rationale, starting with amending directions.

In Grand Committee, I brought to your Lordships’ attention that the Treasury had published amending directions on 7 October 2021 that will allow schemes to complete the cost-control element of the 2016 valuation process. These amending directions confirm that the increase in value of schemes associated with the McCloud remedy will be taken into account in the completion of the cost-control element of the 2016 valuations. The Government believe this is right, given that addressing the discrimination identified in the Court of Appeal’s judgment by giving members a choice of scheme benefits for the remedy period involves increasing the value of members’ pensions.

The cost-control mechanism was designed to assess costs arising from a change in value of schemes to members. Failure to capture the value of the remedy could have meant that members’ benefits may have changed going forwards, based on an incomplete and inaccurate assessment of the value of these pension schemes. This would represent an unacceptable risk to taxpayers, contrary to the objectives of the mechanism.

Turning to some specific detail on ceiling breaches, the Government have previously announced their intention to waive any ceiling breaches that arise from the 2016 valuations, and this is implemented by the current version of Clause 80. However, any floor breaches that occur will be honoured. This means that no member will see a reduction to their benefits as a result of the 2016 valuations. This decision, and the completion of the 2016 valuations, should provide certainty to scheme members over their benefits.

I will attempt at this stage to answer the point raised by my noble friend Lord Hodgson of Astley Abbotts and the noble Lord, Lord Ponsonby, about the use of directions. The Government acknowledge the key interest of the House in the scrutiny of secondary and tertiary legislation. The DPRRC considered this Bill and chose not to bring forward any comments for the attention of the House. The Government have powers under Section 12 of the PSPA 2013 to set out in Her Majesty’s Treasury’s directions what costs must be taken into account as part of the cost-control valuations. More broadly, I acknowledge the points my noble friend made; I have no doubt that Hansard will be read and I will say simply that his points are noted.

I will now say a few words about the amendment itself. The amendment seeks to amend the Treasury’s powers, set out in Section 12 of the Public Service Pensions Act 2013, to make directions which set the employer cost cap. Section 12 grants the Treasury a wide power to specify in directions which costs should be taken into account as part of the cost-control mechanism.

The amendment put forward by the noble Lord seeks to amend subsection (4) by omitting paragraph (c). I understand that the noble Lord’s intention is to remove the Treasury’s power to specify that the costs of remedy, or any other costs associated with the legacy schemes, should be accounted for in the mechanism.

This amendment may not have what I understand to be the noble Lord’s intended effect of preventing the increased value associated with the McCloud remedy from being included in the mechanism at the 2016 valuations. Subsection (4) sets out the type of costs that Treasury directions may specify for inclusion in the cost-control mechanism, but it is not intended to be an exhaustive list; rather, it provides some illustrative examples of how the wide power in subsection (3) may be exercised. I also note that the 2021 amending directions came into effect on 8 October 2021, as I mentioned earlier, under the existing powers. The noble Lord’s amendment as drafted would have no effect on the 2021 amending directions.

I want to attempt to answer some questions that were raised by the noble Lord, Lord Davies, supported, I think, by the noble Baroness, Lady Janke. There was some debate about why members are being made to pay for, as they put it, mistakes made by the Government. When the cost-control mechanism was established, it was agreed that it would consider only costs that affect the value of a scheme to members. Addressing the discrimination identified in the McCloud and Sargeant judgments by giving members a choice of scheme benefits for the remedy period involves increasing the value of schemes to members. The costs associated with this should therefore be taken into account as part of the cost-control element of the 2016 valuations process. However, any ceiling breaches that occur will be waived, no member will see a reduction in benefits as a result of the 2016 valuations, and any floor breaches that occur will be honoured.

The noble Lord, Lord Davies, asked when we will introduce amendments to reform the cost-control mechanism. I hope I can provide some reassurance by saying that the Government published our response to the consultation on the CCM on 4 October, we are currently working through our options and we will legislate for changes to the mechanism when parliamentary time allows. While a precise date has not been set—I am sorry I cannot give that date—the aim is to implement any changes in time for the 2020 valuations. As should now be clear, the Government have no intention of tabling an amendment in the House of Lords to implement these reforms. Instead, the package of amendments being introduced in this House are technical amendments that ensure the consistent application and legal operability of measures in the Bill.

I hope that, with these explanations, I have provided the noble Lord, Lord Davies, in particular, with some helpful reassurances on the policy rationale and the powers used, and I ask him to withdraw his amendment.

[Lord Davies of Brixton (Lab)]

My Lords, at the appropriate time I will indicate that I will withdraw the amendment. I am prepared to accept the advice that it does not actually achieve what I would like to achieve, and that the retrospective factor needs to be taken into account. But I would just like to highlight an issue mentioned by my noble friend Lord Ponsonby.

What the decision to make this a member cost means is that it will impact on those members who gain no benefit from the remedy. The remedy is not arbitrary, but there are broad patterns in who benefits from the remedy, and large numbers of members do not benefit from the remedy but will be affected by the inclusion of this as a member cost in the cost-control mechanism. The Government have suggested that they chose the four-year period within the cost-control mechanism for undertaking the calculation because they did not want to impact on future members of the scheme who gain no benefit from the remedy, but exactly the same problem applies to many current members of the scheme who will be active members during the relevant four-year period. To me, that sounds like an argument that the remedy should not be treated as a member cost, because of its inequitable impact.

I am very grateful to the noble Lord, Lord Hodgson, for his remarks. This is an issue that I have perhaps said more about than I originally intended, but I very much hope it will be taken seriously. What comes to me from it is that it is not easy to say what is or is not suitable to be dealt with through particular types of legislation. The issue is the impact it has, not its precise formulation—and making it a member cost has a substantial impact and so should get the appropriate level of consideration.

I note what the Minister said about the amendments to the cost-control mechanism and that he did not rule out the possibility that it would be added to this Bill during its Commons stages. I am a bit concerned about the idea of debating such significant changes in the context of the ping-pong process, so maybe he could give some sort of reassurance on that. But subject to those points, I beg leave to withdraw my amendment.

Public Service Pensions and Judicial Offices Bill

Debate between Viscount Younger of Leckie and Lord Davies of Brixton

Committee stage
Monday 11th October 2021 Grand Committee

[Lord Davies of Brixton (Lab)]

My Lords, effectively these issues have been presented by my noble friend Lord Ponsonby and I have the great advantage, of course, of having the Minister’s reply to the questions that I have not yet asked. In a sense, I am happy to take them as read.

I do not have an interest to declare but it would be helpful to the Committee if I declared a non-interest: I did have a declarable interest up to the end of August, in that I was a paid adviser to various trade unions on this very issue. Clearly, there would have been a conflict, but I ceased to hold that role at the end of August. The declaration will appear in the register of interests for a year but is no longer valid. I think that covers me for the whole of the Committee stage and that I do not need to say that again.

It might be helpful for the Committee if I say a little more than that, in that I have been a close observer and participant in the process of the reform of public service pensions, it seems, for the whole of the 21st century so far. Although we had the report of the noble Lord, Lord Hutton, in 2011, the process actually started earlier than that in 2005 with what was known as the Warwick accord between the then Labour Government and public service unions. I was involved at that stage, and in the discussions before and after the presentation of the Hutton report. Indeed, if I had to nominate my specialist subject in “Mastermind”, a strong possibility would be public service pensions reform in the 21st century.

These are not exactly random thoughts, but I thought that it might be helpful if I just set out three relevant and little-known facts about public service pension reform. As I mentioned, it did not start with the Hutton report but with the Warwick accord, going back to 2005 and the subsequent public service forum agreement of that year. Major changes took place in public service pensions at that time.

Just to clarify, the reforms were carried out in accordance with the heads of agreement of 15 December 2011 with the then coalition Government. Although it is described as a heads of agreement, it was not a total agreement but, effectively, a decision by the Government that was accepted by some, but not all, trades unions. A background point but an important one is that the new schemes were not worse for everybody. A non-trivial proportion of the public service workforce will gain from the reformed schemes, so the situation is not as simple as it is sometimes presented.

Turning to Amendments 10, 11 and 12, the issue here is that if people had had what they were entitled to following the Supreme Court decision, they might have made different decisions from those which they made at the time. Clause 19 refers to transfers. If you were in the old scheme you decided to make a transfer, but had you been in the new scheme, you might have decided not to, and vice versa. These issues are therefore important. To be honest, I do not envy the job of administering this process, but it is there and the Government are obliged to pursue it.

I listened to what the Minister had to say on the issue of “may” or “must”. I should add that I did some research, along with my noble friend, and we are grateful to the Police Superintendents’ Association for having drawn these issues to our attention. We have with us a magnificent set of legal talent, and perhaps at some stage we might have a definitive view on the difference between “may” and “must”. The problem here is that from the viewpoint of the Police Superintendents’ Association and other members of public service pension schemes, there is a level of mistrust. The issue is not some semantic definition of whether “may” or “must” works; they see “may” and they think, “Maybe the Government are not going to do what they’ve promised.” Saying “We’re going to do it anyway” does not totally answer the question that is put before you by having to choose “may” or “must”, because it invites the rejoinder, “Well, if you’re going to do it anyway, let’s have ‘must’ in there, and everyone can feel comfortable.”

There is no doubt that these issues are going to have to be dealt with in the process of implementing the court judgments, and from the perspective of the scheme member, “must” seems to work. My noble friend and I heard what the Minister had to say, and we will read with interest the precise wording. I take it that the Minister will not be writing separately on the issue, but the statement as set out in Hansard will be the definitive government position and we and the scheme members will study that, come to a view and, if necessary, return to the issue on Report.

I do not know whether I should do this now, but I happily indicate my intention not to push my amendments to Clause 19.

[Viscount Younger of Leckie (Con)]

My Lords, it might be helpful—

--- Later in debate ---

[Lord Davies of Brixton (Lab)]

Essentially the same background applies: this is the position in which we find ourselves following the Supreme Court judgment. It is a dog’s dinner really. We would never choose to be here but, now that we are here, we have to sort it out—but it is a mess. One of the most complicated issues which will need to be resolved is about people who paid ADCs in one scheme and would not have paid them in the other scheme or did not pay ADCs in the scheme they were in but would have done so if they had been in the other scheme. Some sort of assessment of some alternative reality has to be made, so the issue is complicated.

These amendments repeat “must” and “may” issue—and I have dealt with that—but they also deal with how the issue is resolved. There is a problem with additional voluntary contributions, which people pay voluntarily to secure additional benefits. It clearly is a decision determined by the scheme in which they will accrue benefits. If they misunderstood which scheme they were in, they may well have taken a different decision. The Bill gives the scheme administrator the decision about how that matter is resolved. Amendment 8 would place the decision about how the issue is resolved directly in the hands of the member rather than, as the Bill stands, leaving in the hands of the scheme administrator. It is an issue of the hypothetical: if a member had been in a particular scheme they would have paid contributions. As I understand it—and I would be grateful for the Minister’s clarification—the Bill as it stands deals only with how the contributions that the member has made are handled, but there is also the issue of the additional voluntary contributions that the member did not make but would have made. Finally, Amendment 9 seeks to make it clear, when a refund of contributions is decided on, the contributions that were made will be repaid with interest included in the sum. That covers the issues and I will be grateful for the Minister’s comments. I beg to move.

[Viscount Younger of Leckie (Con)]

My Lords, here we address six amendments that have been brought forward on Clause 18 by the noble Lord, Lord Davies of Brixton. I note again his declared interests that he pointed out at Second Reading and his expertise in this area, and I very much look forward to his appearance on “Mastermind” on his specialist subject.

Clause 18 provides for scheme regulations to make provision in relation to additional voluntary contributions paid during a member’s remediable service. As the noble Lord, Lord Davies, said, the first two amendments would require, rather than allow, scheme regulations to make provision about these matters. I hope that I can reassure the noble Lord that this is not necessary. I want to give a full response, although not quite as full as on the first group—but it is a full response on some of the important issues that the noble Lord has raised.

The reason this clause is enabling rather than directive is that not all additional benefits purchased during a member’s remediable service will need to be revised as a consequence of the Bill. For example, some legacy schemes provide that members may purchase additional pension by way of a lump-sum payment or periodic additional contributions, so the Government have agreed that members may complete the payment for these benefits when they have already commenced. The resulting benefits will not be changed, regardless of a member’s choice of whether to receive legacy or new scheme benefits. However, making Clause 18 directive would require schemes to vary the benefits, contrary to what schemes and members have asked for and government has agreed to.

The third amendment brought by the noble Lord would extend Clause 18 to require scheme regulations to provide members who were moved to the new schemes but did not make additional contributions with the option to purchase additional legacy scheme benefits, where they can show that they would have done so had they been able. I once again thank the noble Lord for tabling this helpful amendment. The Government will consider the principles underlying it and will take this away before returning with a thorough explanation of how the matter may be addressed in due course. The drafting of this amendment, at present, does not achieve the overall intention here, since Clause 18(1) provides that this applies only to cases where a person has paid voluntary contributions.

The fourth and fifth amendments are concerned with members who did make additional contributions to a new scheme. They would require scheme regulations to provide members with the options available under the Bill—to alternative or equivalent benefits in a legacy scheme, or to compensation for the contributions made. This provision is permissive rather than directive, because not all three options are intended to be used in every case. Alternative benefits are an approach whereby the benefits awarded in the legacy scheme are effectively recreated as though the member’s additional contributions had always been made there. Equivalent benefits are for situations where an appropriate alternative does not exist in the legacy scheme. In such circumstances, a member would instead be offered a benefit in the legacy scheme that is of directly equivalent value. So in both cases, the policy is that the member may choose instead to receive compensation for their additional voluntary contributions, where they do not wish to receive the alternative or equivalent benefit. Making this provision directive rather than permissive would not therefore work, as not all options will exist in all cases. I hope that explanation is clear and helps to answer the questions raised by the noble Lord.

The final amendment brought forward by the noble Lord relates to interest, as he mentioned, and requires that interest is paid on compensation payments. It is a fair point. The Government have committed to pay interest on these compensation payments, and provision is already made under Clause 23 accordingly. With those assurances on all the noble Lord’s amendments, I hope he is willing not to press them.

[Lord Davies of Brixton (Lab)]

I welcome the Minister’s comments, particularly on unpaid AVCs. I will look forward to his response with interest. In light of his other comments, we will read Hansard with interest and decide what to do on Report. I therefore withdraw Amendment 4.