Universal Credit: Free School Meals

Baroness Buscombe Excerpts

Wednesday 14th March 2018 Lords Chamber

[Lord Kirkwood of Kirkhope]

To ask Her Majesty’s Government what assessment they have made of the effect on Universal Credit work incentives of the recently announced proposals for passporting family entitlement to free school meals.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, the Department for Work and Pensions has been working closely with the Department for Education to support the delivery of their eligibility criteria for free school meals for universal credit claimants in England. When the Social Security Advisory Committee, which is independent of government, looked at this issue in 2012, it found that there was no rigorous research evidence to show that the provision of passported benefits acted as a work disincentive.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, I am grateful for that Answer. I would like to remind the Minister of the policy promise that was made in a White Paper back in 2010 when universal credit was first introduced, and I want to put to her a question that relates to a statement made in the foreword by the then Secretary of State:

“Universal Credit will mean that people will be consistently and transparently better off for each hour they work and every pound they earn”.


Does the Minister accept that, under the proposals which are being brought forward, that proposition will no longer always be true?

[Baroness Buscombe]

The simple answer to the noble Lord is no: I do not accept that. I think it is important to dispel straightaway any potential misunderstanding of what we are doing to safeguard the free school meals system for the future. The Government’s purpose here is to ensure that the programme continues to reach the most disadvantaged households in a way that is consistent, simple and fair. As the rollout of universal credit continues, it is no longer fair to retain the temporary measure, which we always said was temporary, that allows all households in receipt of universal credit to access free school meals. That said, the new rules will ensure that the provision of meals continues to be targeted where it is needed most, with 50,000 more children expected to benefit by 2022 as compared with the previous benefits system.

[Baroness Lister of Burtersett (Lab)]

My Lords, the noble Baroness has not actually answered the noble Lord’s question, so could she do so now? Can she also give an assurance that no one will be sanctioned if they are required to increase their earnings to the point which takes them over the eligibility limit and they lose their entitlement to free school meals as a result?

[Baroness Buscombe]

I have to take issue with the noble Baroness, because I feel that I have answered the question. I want to stress that the reality of this is that every child receiving free school meals now, and any child subsequently given free school meals while the universal credit rollout is under way, will have their entitlement protected until the end of the rollout or until the end of the child’s current phase of education, whichever is later. We want to ensure that, through the universal credit system, we are doing absolutely our best to give our young people the best possibilities in life; this is not the same as the old legacy benefits.

[Baroness Sherlock (Lab)]

My Lords, perhaps I may put the question for the third time. At the moment, if someone reaches a certain level of income, they lose free school meals but at that point they gain working tax credit, which is worth much more. What the Government are proposing under universal credit is that, when a household’s earnings exceed a cash fixed point of £7,400 a year, once the system has been rolled out, a household in that situation will immediately lose free school meals for all of the kids. Someone could be offered an extra hour of work or a small pay rise and face the choice of either turning it down or accepting it and losing free school meals for all of their kids. While the Minister has said a great deal about the transitional protection during the rollout, when the system beds down, is not the noble Lord, Lord Kirkwood, right that this will fly right in the face not only of the quote from Iain Duncan Smith, but of the whole point of universal credit—at such huge expense and great disruption?

[Baroness Buscombe]

My Lords, I heard quite a lot of what was said in another place yesterday, and I am afraid that quite a lot of it is misinformation. One only has to look at Channel 4’s FactCheck, which looked at the claims made by the Opposition about children losing free school meals and was clear that the Government are not taking free school meals from the 1 million children who currently get them. I quote the article directly:

“This is not a case of the government taking free school meals from a million children who are currently receiving them. It’s about comparing two future, hypothetical scenarios”,


both of which are more generous than the old benefits system.

[Baroness Walmsley (LD)]

My Lords, on what basis was it decided that the earnings threshold for eligibility in Northern Ireland would be double what it is in England? Is this because poor children in Northern Ireland are twice as malnourished as they are in England, or could it be political expediency?

[Baroness Buscombe]

My Lords, it is not a question of political expediency. In fact, the earnings threshold in Scotland, introduced last August, is lower than what we propose to introduce in England. Let me also explain further, referring—as the noble Baroness opposite did—to the threshold. The £7,400 relates to earned income and does not include additional income through universal credit. Depending on its exact circumstances, a typical family earning around the threshold would have a total annual household income of between £18,000 and £24,000, but let us remember that if we allowed free school meals to continue beyond the transitional period when universal credit is rolled out, we would include parents earning over £40,000 or £50,000. Is that absolutely fair? Is that what noble Lords opposite want?

[The Lord Bishop of Newcastle]

My Lords, we have years of clear evidence that tackling child hunger improves outcomes at school and improves achievement and social mobility. What assessment have the Government made of the impact of these proposals on child hunger and on our investment in our children’s futures?

[Baroness Buscombe]

I thank the right reverend Prelate for her question. That is why we have chosen not to monetise free school meals; if we did, the benefits of a hot meal in the middle of the day could be lost for 1.1 million of the poorest children. That is because there would be a risk of children not getting the free school meal if it were just added to the rates for UC. We believe that the nutritional needs of children should be paramount. We therefore think it is right that free school meals should continue to be provided in the way we propose.

[Lord Watts (Lab)]

My Lords, can the Minister explain why there is a different threshold in different parts of the union? Surely all children should be treated the same?

[Baroness Buscombe]

My Lords, the issue is actually about ensuring that children receive the right treatment. There is not an issue about—

[A noble Lord]

Answer the question.

[Baroness Buscombe]

I am seeking to answer the question. The devolved nations have decided on different thresholds for their own parts of the United Kingdom, but at the end of the day we want to ensure that we can target free school meals to those who need them. Let me also be clear that, throughout the current rollout of universal credit and until 2022, no parents of a child who currently gets free school meals will have to pay for their meals. It is either then or when they finish their primary or secondary education—whichever comes later.

[Baroness Randerson (LD)]

My Lords, I beg leave to ask—

Social Security Benefits Up-rating Order 2018

Baroness Buscombe Excerpts

Tuesday 27th February 2018 Grand Committee

Moved by

[Baroness Buscombe]

That the Grand Committee do consider the Social Security Benefits Up-rating Order 2018 and the Guaranteed Minimum Pensions Increase Order 2018.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, these orders were laid before the House on 15 January. In my view, the provisions in both orders are compatible with the European Convention on Human Rights.

I will start by touching briefly on the Guaranteed Minimum Pensions Increase Order. This order provides for contracted-out defined benefit occupational pension schemes to increase members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 3%, in line with inflation as measured by CPI.

Moving on to the Social Security Benefits Up-rating Order 2018, this Government are once again making good on our guarantee to the country’s pensioners that we will continue to apply the triple lock to the basic state pension and the full rate of the new state pension for the duration of this Parliament. For 2018-19, this means an increase of 3%, in line with inflation. The rate of the basic state pension for a single person will thus rise by £3.65 to £125.95 a week from April 2018. Pensioners who receive this rate will from April 2018 be £1,450 a year better off than they were in April 2010. The basic state pension will be worth around 18.5% of average earnings, which is one of the highest levels relative to earnings for over two decades. The full rate of the new state pension for people reaching their state pension age from 6 April 2016 onwards will rise by £4.80 to £164.35 a week, which is around 24.2% of average earnings.

With regard to pension credit, we are making sure that the poorest pensioners in the UK will see the full benefit of the triple lock by increasing the standard minimum guarantee in pension credit by £3.65 to match the cash rise in the basic state pension. This is a year-on-year increase of 2.29%, marginally exceeding annual growth in earnings of 2.2%, which we will fund by raising the savings credit threshold. From April 2018 the standard minimum guarantee for single people will be worth £163 a week, while the equivalent rate for couples will rise by £5.55 to £248.80 a week. With regard to the additional state pension, state earnings-related pension schemes will rise by 3%, in line with inflation, as will protected payments in the new state pension.

With regard to disability benefits, we continue to support carers and those with additional needs as a result of disability and will increase the benefits they receive by 3%, in line with inflation. These include: disability living allowance; attendance allowance; carer’s allowance; incapacity benefit; the personal independence payment; disability-related and carer premiums paid with pension credit and working-age benefits; the employment and support allowance support group component; and the limited capability for work and work-related activity element of universal credit.

In conclusion, total government spending on uprating benefit and pension rates in 2018-19 comes to an extra £4.2 billion. This is £4.2 billion that we are using to support pensioners, disabled people and carers. On this basis, I commend the orders to the Committee and I beg to move.

[Baroness Lister of Burtersett (Lab)]

My Lords, I had not planned to speak this afternoon, since I was supposed to be in two different places. But then I had this horrible memory of reading Hansard from our most recent debate on the uprating order, and of my noble friend Lady Sherlock naming and shaming me, in the nicest possible way, for not being there. I thought that I could not let this happen two years running, so here I am.

The Minister rightly said that the orders are compatible with the European Convention on Human Rights. However, there are other international obligations with which I do not think they are compatible. I would like to talk about the elephant in the room—those benefits that are not being uprated. This happened last year and the Minister very fairly accepted that it was a reasonable thing for us to do, because we cannot talk about uprating the benefits without thinking about benefits in the round.

As the Minister is aware, the European Committee of Social Rights recently issued a report, saying that levels of contributory benefits to the sick and unemployed are inadequate and therefore do not conform with Article 12 of the European charter. That was based on 2015 levels on benefits, so they would be even more inadequate now because of the benefits freeze in most working-age benefits.

In a report published last week the Resolution Foundation said that,

“in every year from 2016-17 to 2022-23 the UK is projected to miss its international commitment—through the 2030 Sustainable Development Goals”.

Those goals apply to us, as well as to poorer countries. The report said that it will fail,

“to deliver higher growth for the poorest 40 per cent of the population than for the population as a whole”.

Inequality is projected to rise to record highs by 2022-23. The Resolution Foundation says that this is,

“a story of the poorest working-age households being left behind”.

A key driver is the freeze in most working-age benefits. This is a policy choice. The Minister will talk about the living wage and personal tax allowances at some point but all this is taken into account. The fact is that the poorest people are falling behind, largely because of the benefits freeze.

According to the Resolution Foundation report, by 2020 jobseeker’s allowance and child benefit beyond the first child will be worth less than 32 years ago and child benefit for the first child will be at its lowest real-terms level in 20 years. I am sure that the noble Lord, Lord Kirkwood, will feel the same as me: as someone who has been working in this area for so long I find it very depressing to see how seriously we are going backwards.

The Minister gave us the welcome news about how pensions are improving relative to average earnings, but child benefit for a two-child family is less generous that at any previous point in the almost 40 years since it was fully introduced. It is set to fall even further over the next five years. Jobseeker’s allowance—unemployment benefit as was—was around a fifth of average full-time pay in the 1970s. It is now around 11% and is on track to fall to 10% by 2022, which will be a new low.

Does the Minister have the figures for what these key benefits, for people of working age and their children, would have been had they been uprated in line with prices since 2010? If she does not have them here—I would not expect her to read them all out anyway—would she be able to send them to Members of the Committee? It is important that we know what effect this freeze is having.

Given the way benefits are falling behind, it is hardly surprising that more people are turning to food banks and that poverty, especially child poverty, has started to rise again and is projected to increase by more than 1 million by the next decade. It is quite shocking. We are happy to allow the poorest to pay the price of increased inflation while the better off continue to enjoy cuts in taxation which do nothing for those whose income is too low even to pay income tax. I was very struck by reading in the paper yesterday that the Archbishop of Canterbury has said:

“Austerity is a theory for the rich and a reality of suffering for the poor”.


As the Resolution Foundation and others have said, these are choices. How we have responded to the financial crisis has been a matter of choices. I believe they are the wrong choices and that those with the narrowest shoulders are being asked to carry the burden. With inflation continuing to be significantly higher than it was projected to be at the point when the benefit freeze was first announced, is it not time that the Government think again about that policy and come back at the next available opportunity to say that they will now lift the benefit freeze?

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[Baroness Buscombe]

This has been a really lively and interesting debate. It is right that I emphasise that these orders are not about the benefit freeze and a fair number of other issues raised by noble Lords. However, having said that, I shall attempt to do my best to reply to noble Lords.

I have some news, also, for the noble Lord, Lord Kirkwood. He was here last year. Indeed, there are some similarities in his speech. I have to say that some aspects of it I have enormous sympathy with, so I shall come to that, and I welcome his contribution to this debate.

I shall cut straight to the issues of benefit freeze. It is not a cut—it is a freeze—and it is part of a package of welfare reforms designed to incentivise work, which we know is the best route out of poverty. I want to talk about the things that we have done that are really positive, because I fear that if one listened just to noble Lords opposite one would have a sense that somehow everything is going completely wrong—but that simply is not the case. However—and I shall come to this again in a few minutes—the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Sherlock, touched on the issue of affordability, which is a really tough and prescient one. Indeed, it has exercised my mind and thoughts since I arrived at the Department for Work and Pensions, given the huge sums of money that we are spending on welfare. We are spending more on pensions alone than we are spending on education and defence put together—£100 billion a year out of a total government budget of £750 billion. That is a huge proportion. Yes, there are some really difficult choices; it is all about choices—so are we making the right ones? We believe that we are, but we will have disagreements, of course. Indeed, there will be disagreements not only across the House but in another place as well, which is entirely laudable. But as the noble Lord, Lord Kirkwood, said, all of us need to keep thinking in terms of the future sustainability of the welfare system which really looks after those who are most in need.

The benefit freeze is part of a package of welfare reforms that are designed to incentivise work, which is the best route out of poverty. We have brought in 30 hours a week of free childcare for working families in England, cut income tax for 30 million people and provided the lowest earners with their fastest pay rise in 20 years through the national living wage. So yes, that is one choice that that we have made, but we have to support those who are earning and those on low wages to the best of our ability. We see that welfare reform is working. The employment rate is at a near record high and there are fewer households where no one is in work than at any time since comparable records began. However, I will say, 14.5% of all households in the UK are still workless, which is far too many.

The noble Baroness, Lady Lister, referenced the Resolution Foundation saying that inequality is projected to rise to record levels in the coming years. We simply do not believe that that is the case. There are choices. We have to make difficult choices and believe that we should focus our spending on those who need it most.

On the question raised by the noble Baroness, Lady Lister, of the burden falling on the poorest, Her Majesty’s Treasury published a cumulative distributional analysis alongside the Budget in November 2017, showing the impacts on household income of tax, welfare and public expenditure changes implemented or planned to be implemented since the 2010 general election. This analysis shows that the state is highly redistributive. On average, the 10% of households with the lowest incomes receive more than four times as much support in spending as they contribute in tax, while the 10% of households with the highest incomes contribute more than five times as much in tax as they receive in spending.

The noble Baroness, Lady Primarolo, asked whether we will lift the freeze on working tax credits, child tax credits and child benefit. I respond by simply saying that the Treasury is responsible for these benefits and it announced the 2018-19 rates at the same time as the Budget in November 2017. The noble Baroness talked a lot about children and families. We are committed to supporting families and tackling the root causes of child poverty and disadvantage. If you are a child growing up in a household where no one is in work you are almost twice as likely to fail at all stages of your education than if you lived in a working family. Children in households where no one is in employment are five times more likely to be in poverty than those in households where all the adults work. Nearly three-quarters of children from families where no one has been in employment moved out of poverty when their parents entered full-time work. That is why we are supporting parents to find and stay in work.

We have made the childcare element of universal credit more generous. Parents on universal credit can now claim back up to 85% of eligible childcare costs, compared with 70% in working tax credit, a change that is benefiting 500,000 working families. This Government are investing record amounts in childcare. By 2019-20 we will be spending more than £6 billion per year to support working families in this way. For families who face additional, complex barriers to finding work, we set out our framework for action when we published our strategy, Improving Lives: Helping Workless Families in April. I can tell noble Lords that we are doing a huge amount of work on this in the department. As I said earlier, the number of households where no one is working is actually at a record low: it is 954,000 households lower than it was in 2010, which means 608,000 fewer children in such households than seven years ago. We believe we are on the right trajectory. On a before-housing-costs basis, there are now 200,000 fewer children living in absolute poverty than in 2010.

I want to confirm for the noble Baroness, Lady Primarolo, that inflation is not at 4%; it is actually at 3%. Indeed, that is something that I double-checked with our researchers at the department. The noble Baroness, Lady Lister, asked for figures on the poverty rate since 2010 and the impact of the benefit freeze. We do not actually have those figures but the benefit freeze is part of a package of welfare reforms designed to incentivise work and support working families, including, as I have said, increasing the national living wage, reducing income tax and, of course, the rollout of UC. I will write to the noble Baroness with those figures.

[Lord Kirkwood of Kirkhope]

Is there any programme to evaluate the work-incentive point? Of course it is a perfectly obvious point and it may be working, but the only place where the data can be found is in the department. Is the department doing any work that will evaluate whether the powerful work incentive point that she has just made is actually making a positive difference?

[Baroness Buscombe]

Yes. Work is being done and I am very conscious of the fact that we should be talking more about that. We have been saying that work pays— I prefer to say that work transforms lives. The noble Lord is right. We need to do more to articulate our belief and the reasons why we are confident that we are right and that work transforms lives. It relates hugely to outcomes. It is not a simple, overnight back of the envelope matter, but we are working on it.

The noble Baroness, Lady Primarolo, asked about targets for child poverty. The income-related targets set out in the Child Poverty Act 2010 have been replaced by two new statutory measures of parental worklessness and children’s educational attainment. This will drive continued action on the areas that can make the biggest difference to children’s outcomes now and in the future. The noble Baroness also asked whether the Government would lift the freeze on working tax credits. The answer is that the Treasury is responsible for working tax credits.

The noble Lord, Lord Kirkwood, made his point with feeling, and I can only say that we are working hard and thinking about our policies going forward. The huge question is affordability. We are spending £95 billion—that is, ninety-five thousand million pounds—a year on benefits for people of working age. For how long is that sustainable? Our department accounts for 25% of the whole of the Government’s budget, which in terms of expenditure is now the size of Chile or similar, I understand. The noble Baroness, Lady Lister, referred to some overseas organisation, saying that we are behind the curve in terms of our expenditure. I simply do not recognise that, in terms of how much other countries are spending or of the choices that they have made. For example, are they paying the similar amount of 0.7% of their national income, which is what we are paying, on overseas aid?

[Baroness Lister of Burtersett]

I am sorry to interrupt. I may not have made myself clear. I was not referring to some international organisation. The Resolution Foundation pointed out that we will not be meeting our obligations under sustainable development goals not because of overall expenditure levels but because the lowest 40% are going to do worse than the population as a whole. That goes against what we have signed up for under the sustainable development goals. We think of the SDGs as being for the poorer countries, but they are for us as well.

[Baroness Buscombe]

I accept that, but it has to be comparative in terms of the goals that we have set. In the back of my mind I have the response to that particular figure that was quoted and we do not recognise that as being correct. I think that I have said that on the Floor of the House in another debate.

The noble Baroness, Lady Sherlock, raised a number of questions, the first of which was about contracting out. If a person was previously contracted out for a long period they may have a lower starting amount for a new state pension than someone who had built up some additional state pension. This is because they paid lower national insurance when they were contracted out and have built up an occupational pension as a result of these arrangements. Part of their occupational pension replaces the part of the state pension they were contracted out of. People who were previously contracted out are therefore not missing out. Although some people will get a lower starting amount from the state, many will have more than the new full rate in total if they add their state pension and their contracted-out private pension together. If no adjustment was made, people who had been contracted out would be paid twice for the same national insurance contributions. The transitional arrangements ensure that everyone who qualifies for the new state pension will get at least as much as they would have done under the old system, based on their own national insurance contributions to 6 April 2016.

--- Later in debate ---

[Lord Jones]

I am grateful, but they should have been much bigger.

[Baroness Buscombe]

My Lords, I would love to concur with the noble Lord. The following point is certainly not in my brief but is something that I think about a lot. The children we have referenced today will sooner or later become the working young. I think of my three children, who are all working now but do not earn very much. The issue is how the working young will afford pensions in the future. In probably about an hour’s time we will debate the order on auto-enrolment, which shifts the culture in terms of people contributing to their future pensions. There is very much a cross-party consensus on working out how we can make pensions sustainable in the long term. However, in the short term, I hope that the noble Lord will accept that, notwithstanding the fact that we would like to be ever more generous, it simply is not possible.

[Lord Jones]

That is a fair answer. Has the Minister answers to some of the questions that I posed? If she does not have them to hand, she may wish to write to me. However, she may wish to answer one or two of the questions.

[Baroness Buscombe]

I thank the noble Lord. I have just found the answers in my array of papers. He asked about different benefits, particularly disability and carer benefits. We now spend over £50 billion a year on benefits to support disabled people and people with health conditions, which is over £7 billion more than in 2010. The noble Lord asked about disability living allowance and benefits for carers. We are increasing benefits for the additional costs of disability and for carers in line with inflation. Recipients of carer’s allowance will now get £550 more per year than in 2010, while the monthly rate of disability living allowance paid to the most disabled children will have risen by more than £104. On a before-housing-cost basis, the absolute poverty rate among people living in a family where someone is disabled has fallen to a record low.

I am sorry that I have not been able to respond to noble Lords’ questions, particularly those of the noble Lord, Lord Jones, in relation to cold weather payments. That was discussed in the department yesterday, but I will write to the noble Lord.

[Baroness Sherlock]

I am grateful to the Minister for giving me quite a lot of information about the way the GMP system will work. The specific questions that I raised were raised by the NAO—whether the department had enough information about who would be affected in terms of the GMP and what it was doing to tell people about that. I am happy for the noble Baroness to write to me, but perhaps she could have a look at the specific questions in the record and write to me on those. I do not know whether I missed it, but will she confirm that she told the Committee what the latest estimate is of the savings to the Exchequer of the four-year benefit freeze over and above the amount originally scored? I apologise if I missed that.

[Baroness Buscombe]

I apologise to the noble Baroness; I had hoped that I would be able to reply to those questions today but, given the time as well, it is much better that I write to her and copy in others.

To conclude my closing remarks, the Government are maintaining their commitment to the triple lock for both the basic state pension and full rate of the new state pension, increasing the pension credit standard minimum guarantee so that the poorest pensioners see the full benefit of the increase in their basic state pension and increasing benefits to meet additional disability needs and carer benefits in line with inflation. I commend these orders to the Committee.

Motions agreed.

Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018

Baroness Buscombe Excerpts

Tuesday 27th February 2018 Grand Committee

Moved by

[Baroness Buscombe]

That the Grand Committee do consider the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018 and the National Employment Savings Trust (Amendment) Order 2018.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I am pleased to introduce these instruments, which were laid before the House on 29 January and 31 January 2018. Subject to approval, the Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2018 reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds required by the Pension Act 2008. It has considered both the automatic enrolment earnings trigger, which determines the point when someone becomes eligible to be automatically enrolled into a qualifying workplace pension, and the qualifying earnings band, which determines those earnings which the enrolled employee and their employer have to pay a proportion of into a workplace pension. This order sets a new lower and upper limit for the qualifying earnings band and will be effective from 6 April 2018. The earnings trigger is not changed with the order and remains at the level set in the automatic enrolment threshold review order 2014-15, so no further provision is required.

Subject to approval, the National Employment Savings Trust (Amendment) Order 2018 will facilitate the effective operation and development of the NEST pension scheme and improve the way the scheme operates for participating employers and scheme members. From 6 April 2018, the proposals will allow the NEST trustee to accept people who are contractually enrolled by their employer, give the trustee the discretion to remove members with empty accounts, allow bulk transfers in with consent, and require NEST Corporation to carry out research. I am satisfied that the orders are compatible with the European Convention on Human Rights.

Automatic enrolment has been hugely successful in achieving its aim of getting millions more people saving into their pensions. Since its launch in 2012, more than 1 million employers have complied with their automatic enrolment duties and more than 9 million people have been successfully enrolled into a workplace pension. The vast majority of people who have been automatically enrolled are choosing to continue saving, with opt-out rates remaining consistently low at around 9%. Such progress and success, supported by all sides of the Committee, is truly to be commended and celebrated.

This is a big year for automatic enrolment and one which marks several key milestones for the policy and programme. First, the final and most challenging phase of rollout concludes this month when the last month group of the smallest employers take on their duty to automatically enrol all staff. These employers will have to declare their compliance by the end of July 2018. This means that all established employers are now subject to automatic enrolment. From last October, the duties also began to apply to all new employers as a matter of course.

Secondly, in April this year, the first of the two planned increases in minimum contribution levels for automatic enrolment will occur with contributions rising to 2% and 3% of band earnings for employers and jobholders respectively. Automatic enrolment continues to be a programme that works. It is re-establishing a culture of saving and making workplace pension saving the norm for a new generation. However, the Government recognise that there is still more to do as they continue to work towards their commitment of improving retirement outcomes for millions of savers.

This time last year we were embarking on the early stages of the 2017 review of automatic enrolment. Last December, the report from this work, Maintaining the Momentum, was published—I think we should change the name—setting out a clear path for the future of workplace pension saving. The comprehensive and balanced package of proposals that it detailed are intended to build on the remarkable success of automatic enrolment to date, increasing the number of people saving and the amount that they will save. We are now embarking on the process of building consensus around these proposals. It is my Government’s ambition to implement these changes in the mid-2020s, subject to discussions with stakeholders around their detailed design, learning from the contributions increases in 2018-19 and finding ways to make the changes affordable. I am sure noble Lords will join me in welcoming and supporting our continued progress with this crucial agenda.

Turning now to the orders of the day, I will first describe impacts of the automatic enrolment thresholds order. As signalled by the Minister for Pensions and Financial Inclusion in his Written Statement in another place on 18 December 2017, the order will, as previously, align the both the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits of £6,032 and £46,350 respectively, ensuring stability and consistency in the light of the key milestones already highlighted. By continuing to align the limits to the national insurance thresholds, the changes relating to payroll systems are kept to a minimum. Simplicity is maintained and this approach helps employers to manage costs while they adjust to the overall increases in contributions from April. Setting the thresholds at these levels will also ensure that contribution levels continue to be meaningful for savers.

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[Baroness Buscombe]

I thank the noble Lords, Lord Kirkwood and Lord McKenzie, for their contributions to this debate and for their incisive questions. I also thank the noble Lord, Lord Kirkwood, for saying that the whole concept of automatic enrolment and the process through to its delivery and implementation has been successful. As the noble Lord, Lord McKenzie, said, this came about through a considerable amount of consensus. We hope that the changes—albeit fairly minor—that we have made to NEST will work well. Certainly for us, the whole process has been a huge success, and we hope that it will also work well into the future.

One reason why we have brought forward this order on NEST is that it is important to keep tidying up the legislation to ensure that certain requirements make sense—for example, in relation to research, as the noble Lord, Lord Kirkwood, said. He asked a question which I asked of officials while I was learning about this issue in recent weeks. Why were there only five responses to a small consultation? The truth is that of the five responses, four said, “Thank you so much for asking us but we really have no comment”. The fifth was a little bit negative, and that was it.

[Lord Kirkwood of Kirkhope]

Not a bad score.

[Baroness Buscombe]

I am glad that the noble Lord has said so. I take that as a very good sign that we are doing the right thing. Let us hope that it continues. We will ensure that we keep tidying up where necessary to keep this whole process—the implementation, the work of NEST and the work of developing auto-enrolment—as simple as possible while retaining an important balance between what is fair for the employer and what makes sense for us in communicating changes and developments in the whole programme.

The noble Lord, Lord McKenzie, asked some questions about automatic enrolment and the review proposal, including why we are not doing anything until the 2020s. Our review proposal is a comprehensive and balanced package, recognising that costs will be shared between individuals, families and businesses, who need time to plan for change. Over the coming year, we will work to build a renewed consensus to deliver the detailed design and implementation of our proposals. We need to learn from the implementation of the contribution increases, starting from this April. The support of employers and their advisers has been key to the success of automatic enrolment. We recognise the importance of giving them and savers sufficient time to plan for further changes. Our ambition is to implement changes to the automatic enrolment framework in the mid-2020s, subject to discussions with stakeholders around the detail of the design, learning from the contributions increases in 2018 and 2019, and finding ways to make the changes affordable, followed by formal consultation with a view to introducing legislation in due course.

The noble Lord, Lord McKenzie, asked about the timing of the implementation. It is important to put on the record that through the 2017 review we have set a clear direction to build a more robust and inclusive savings culture, specifically supporting younger generations with the opportunity to save for a more secure retirement.

The noble Lord, Lord Kirkwood, raised the issue of women. Increased gender parity is something that we are very pleased about, and it is making such a difference. Automatic enrolment was designed specifically to help groups who historically have been less likely to save, such as women and lower earners. The decision to freeze the trigger again for 2018-19 is estimated to bring an additional 100,000 individuals into workplace pension saving, of whom 72% are expected to be women. The gender gap in private sector pension participation has now been closed. In 2012, 65% of women employed full-time in the private sector did not have a workplace pension. As of 2016 this had fallen to 31%. I hope noble Lords will agree that that is real progress.

The noble Lord, Lord McKenzie, asked about net pay arrangements versus relief at source. Pensions taxation policy is a matter for Her Majesty’s Treasury—that sounds as if I am proposing a get-out clause. We continue to work with the Treasury and officials on this matter but a straightforward or proportionate fix has not yet been identified. However, alongside further work on the automatic enrolment changes outlined in the recent automatic enrolment review, the Government will examine the processes for payment of pensions tax relief for individuals to explore the current difference in treatment and ensure that we can make the most of any new opportunities that emerge, balancing simplicity, fairness and practicality, while engaging with stakeholders to seek their views.

I was asked why NEST needs to offer contractual enrolment. Contractual enrolment was raised in a response to the DWP call for evidence on the policy framework underpinning NEST, NEST: Evolving for the Future. Contractual enrolment is where workers are enrolled with their consent into a pension scheme under a contract and by reference to the rules of the scheme. By contrast, automatic enrolment is where workers are enrolled automatically into a qualifying scheme in accordance with the Pensions Act 2008. Contractual enrolment often covers groups of workers who do not qualify for automatic enrolment, such as those earning less than £10,000 per year or those aged under 22.

The majority of respondents who mentioned it in the call for evidence thought that any qualifying scheme should be open to all of a participating employer’s workers, including those who are contractually enrolled into it, as is normal in the industry. The Government expect that this change could ease administrative burdens on some employers who are already using NEST, and could result in small increases in the number of workers benefiting from workplace saving and an employer contribution. This change is minor and technical in nature and supports the delivery of the service of general economic interest defined in the approval granted to NEST.

The noble Lord also asked about empty accounts. Very briefly, it is just an issue of churn. Some people fall out of the system; more come in. We wanted to make sure that we tidied up the process. In fact, we are reducing the number of schemes, which will make it easier to administer. It is not anything that we feel we should be particularly concerned about, it is just a general issue of churn.

I hope that I have been able to answer all noble Lords’ questions. If I have failed in any way, I would be very happy to write. The long downward trend in pension saving has reversed. The number of workers saving into a workplace pension scheme has increased to almost 9.3 million. In practice, the changes will be delivered largely by the payroll and advisory communities, which have worked hard to support the introduction of automatic enrolment, providing a range of products to help employers comply with their automatic enrolment duties. NEST is playing its vital part in this success story and we need it to continue to do so.

Motions agreed.

Family Relationships (Impact Assessment and Targets) Bill [HL]

Baroness Buscombe Excerpts

2nd reading (Hansard): House of Lords
Friday 23rd February 2018 Lords Chamber

[Lord Kirkwood of Kirkhope]

That is a helpful intervention, because I absolutely agree with that. Family impact assessments are an important tool in getting to that point. That was the point I was going to make.

We need to look not only to local authorities—as the noble Lord, Lord Blencathra, and the noble Baroness, Lady Massey, mentioned—but to try to capture some soft support systems in neighbourhoods and communities in future. That is new for me; I look to the noble Baroness, Lady Stroud, when I say this, but I have always kept a bit of distance from the agenda that she has been very positively promoting in her own way, because I always had a suspicion that Conservative Governments and Conservative Chancellors in the past have sometimes used it as a way of saying that we do not really need to keep up the benefit expenditure. I am in favour of individual entitlements to benefits, and when you look at the cuts, freezes and caps, that has not been made any easier. But even I—if I can put it that way—am now thinking that we really need to look at some of these symptoms that the Centre for Social Justice and others have been looking at, as additional methods of support. We can make it more cost-effective if we have more effective family policy, and I think that this Bill does that, particularly in setting up objectives and targets, looking at reporting and being transparent and honest about that reporting.

I have a couple of points to contribute to the debate. The DWP has an enormous amount of data. The quest of the noble Lord, Lord Farmer, could be assisted considerably if some of the really clever people in the research department there thought about how to cut across and tabulate some of the real-time information. There is a minefield—no, not a minefield, a mine. What am I trying to say?

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

A mine of information?

[Lord Kirkwood of Kirkhope]

Ministers have their uses. There is a mine of information in the DWP, and Ministers should go back and ask whether some assistance can be given to this kind of policy programme. The data needs to be made available to local authorities, although you obviously have to be careful about data protection. There are rules about that, but you should be testing them to the limit of what is useful if that makes a difference to identifying some of the anticipated problem families. Big data is now so clever that you could begin to get, not algorithms but almost algorithms, which would anticipate where the problems were. You could make available the priorities in terms of the spatial dimension in deprived areas; and professionals in the department, and in local authorities, could start to be provided with data on circumstances that would help them to anticipate where future problems would arise. In support of family impact assessments, the department should do a little bit of work to see whether any help could be provided in that direction.

I spent a very interesting morning at the universal credit centre in Dover, where I observed two applications. I am saying this against myself—I was really looking for problems that I could come back and attack the DWP about, but they both went swimmingly well. It was clear that the job coaches were signposting people who had individual problems. That is what they should be doing, but they could be doing more of it. The noble Lord, Lord Farmer, rightly said that policy is pointed at individuals. Universal credit is actually pointed at households. The claimant commitment could go as far as saying to people coming on to universal credit for the first time that, if anyone who has signed up to it sees problems arising in their household that might lead to family breakdown, they could phone. The “Ghostbusters” number should be that of the universal credit coach who could hold the ring and say, “Let’s see what we can do”. I know that they have only got a certain amount of time available and they are not looking for things to do. However, in the course of these interactions with people coming on to universal credit, we might start to look at family problems a bit more broadly. That is a good place to start the discussion.

Finally, I say to the noble Lord, Lord Farmer, that if this does not work, we should think about getting more robust about enforcing it. If the DWP cannot do it, it should go to the Cabinet Office or to somebody who has control of all the Secretaries of State, now that I hear they are all in play—I hope that includes the Treasury. In the course of discussing the Bill, I hope that this House will send a clear signal to central government that we are not going to allow the family test failure to happen again on this Bill. If they do not get it right, we will come back looking for more and we will not be long in doing it. I support the Bill and encourage the noble Lord, Lord Farmer, whom I thank for the opportunity for this debate. I will stand shoulder to shoulder with him in his future work in this important area.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I thank my noble friend Lord Farmer and congratulate him on securing a Second Reading debate on the Bill. I also thank all noble Lords who have participated in today’s excellent and thoughtful debate. My noble friend has worked tirelessly to strengthen families. This is evident both in this debate and beyond, in particular through his work to strengthen the family relationships of prisoners, who are often the most in need of a supportive family environment. I agree with the noble Lord, Lord Kirkwood, and my noble friends Lord Framlingham and Lady Stroud that we value his work and the message to him is: please keep going.

The Government have a critical role to play in supporting families. Strong families, in all their forms, are critical to our success as individuals and as a society. I am pleased to see, and to learn from having been in the Department for Work and Pensions for several months, that families have been climbing the political agenda in recent months with debates being held on how the Government can support families and on the critical institution of marriage and its place in government policy. However, I agree with the noble Baroness, Lady Tyler, that we need to do more.

It is right that the Government continue to champion the family as the bedrock of a strong society. The family test, which has been in place since 2014, has helped policymakers to put families at the heart of policy development. We developed the current family test in conjunction with the Relationships Alliance, a group of expert organisations with a rich depth of knowledge about family relationships and functioning. Led by the Department for Work and Pensions, we continue to engage with other government departments to help them to implement the family test, and by doing so, ensure that families are considered early in the policy-making process.

Yes, families come in all shapes and sizes, in the words of the noble Baroness, Lady Massey of Darwen, and the noble Lords, Lord Alton and Lord Shinkwin; that is a critical point that should be made. However, I say to the noble Lord, Lord Kirkwood, that there is no question but that, for example, the Cabinet Office is looking very closely at how we can do more to strengthen policies in support of the family, as indeed we are across government.

My honourable friend in another place, Oliver Dowden, who is the Minister for Implementation, led a debate on 8 February this year on the strengthening families manifesto, during which he said:

“Within the Cabinet Office, we are continually looking at ways to measure the impact of policies in relation to the family. We currently analyse that impact through mechanisms such as the implementation unit, which falls within my brief. That is a central part of the initiative”.—[Official Report, Commons, 8/2/18; col. 659WH.]


I should explain to noble Lords that the implementation unit is a cross-governmental unit to support departmental capability and public service reform.

With regard to the statutory basis for the family test, I reassure noble Lords that the Government continue to be committed to the family test and the benefits that it brings by ensuring that families are central to all the policies that we develop. The family test and the five questions within it are intended to comprise a broad and flexible tool that encourages consideration of the family from the first stages of policy thinking and throughout policy development. Good policy-making requires giving consideration to a range of important factors, and the family test is a tool to assist policymakers to take into account impacts on family relationships and family functioning.

I am pleased to see that the proposals for the family impact assessment laid out in the Bill take into account all the factors that we consider as part of the current family test. Indeed, we agree that the Government should consider these factors, and the family test already supports this to happen throughout government. However, we are concerned that placing such an assessment on a legislative footing could risk losing the flexibility to adapt and change. I have been very struck by a number of the ideas and suggestions from noble Lords in today’s debate. Embedding such an assessment within primary legislation would mean that we lost that flexibility, which is an important feature of the current family test.

Noble Lords have made reference to the use of different language and talked about a different narrative and changing the culture. I believe it is very difficult to change culture. I say that as a lawyer; indeed, as a lawyer I am rather cynical that embedding policy in primary legislation can always succeed in changing culture. I am sure all noble Lords present will know that the recent report from the Jo Cox Foundation recommends that the Government should consider amending the family test to consider the matter of loneliness, which we know is a significant problem for many people across this country. Indeed, I would see loneliness in a sense as a subset of family and the breakdown of family, and that is something that we should consider in the round.

My noble friend Lord Framlingham spoke passionately about the impact of the internet on children and their response within their family and beyond. This is where, I fear, the truth is that legislation is a double-edged sword. It is easy to exclude if it is not on the list; indeed, the noble Lord, Lord McKenzie, made reference to the list of what constitutes the structure of a family. We have to take great care and think about future-proofing. However, that is not to say that we disregard much that is in the Bill or the spirit behind it with regard to the development of our policy.

The Bill also raises the matter of reporting on the costs and benefits of extending family impact assessments to local authorities—something raised by several noble Lords. We know that local authorities and the wide networks of partner organisations they work with are best placed to understand the families living in their areas, which is why central departments, including the Department for Work and Pensions, work closely with local areas on a range of family issues.

My noble friend Lord Farmer asked how many information exchange sessions and courses on implementing the tests had taken place over the past two years. The noble Lord, Lord McKenzie, also referenced the tests and the number of courses. When the family test was first introduced four years ago, the Department for Work and Pensions ran a number of seminars and sessions and supported departments with evidence packs and guidance. We continue to support departments to build capability of their own in this area, although I noted noble Lords’ emphasis on the importance of consistency across departments.

The work being carried out at the moment at the Department for Work and Pensions includes the new reducing parental conflict programme, in which I know my noble friend Lord Farmer has taken a keen interest. Since today’s Bill was laid last June, we have seen an increase in the total funding available for this vital work to up to £39 million. I note what the noble Lord, Lord McKenzie, said about cuts, but in many instances they have been accompanied by other support systems for the family. We are very careful to ensure that what we do does not drive breakdown in family relationships through income poverty, which he referenced. We understand, appreciate and accept that that would be entirely counterproductive.

Noble Lords have all stressed that it takes a lot more than money, critical though that is, to support the family. Through our new programme, we are actively supporting local authority areas across England to embed proven parental conflict provision into their mainstream services for children and families, as well as building and sharing the evidence base for what works to improve the quality of interparental relationships.

As we work with local areas on these critical issues, we will be able to gain a greater understanding of what support and guidance local authorities need in order to best consider the impacts of policies on families. Local authorities also need to retain flexibility to adapt and change how they assess impact on local families, including the ability to take local factors into account.

I was struck by what the noble Lord, Lord Kirkwood, said about his visit to Dover, which I have read all about. I am pleased that he found it a positive experience attending the jobcentre there. I am also pleased to be able to say that as work coaches in jobcentres become more familiar with the system of universal credit, they are enjoying and getting great satisfaction from, in a sense, going beyond their brief to support in a more holistic way the welfare, in the biggest use of that word, of those in front of them. I will also take what he said back to the department, because he is absolutely right: all the time we must think about ways in which we can so easily add to our support to the family through communication and signposting, which is so important.

I turn to the issue of family stability and the provision in the Bill which would require government to establish objectives, indicators and targets for promoting strong and stable families. We believe that families are vital. Not only are they the basic building block on which we build a successful economy and a stable society, but growing up in a loving family environment helps children develop into successful adults.

As my noble friend Lord Shinkwin said, without families there is no sustainable society. I was also struck and concerned when my noble friend used the words, “systematic devaluation” of the family, which was very much echoed in the speech by my noble friend Lord Framlingham. That is something that we should take great care of when thinking through our policy: how we respond to that idea of systematic devaluation of the family. But I was also struck by what was said in response to that, in a sense, by the noble Baroness, Lady Massey, who has spoken on this subject for so many years in your Lordships’ House, with such eloquence, expertise and experience—and I so welcome her contribution today. She suggested that we should ask what makes a family go right, and she is absolutely right. It is really important to think about what lends stability to a family. That is a very different experience, in many ways, from the experience and extraordinary expertise of the noble Baroness, Lady Tyler, in the work that she has carried out on all the evidence of what lends to the negative impacts of family breakdown.

To demonstrate our commitment to these key issues, last April we published Improving Lives: Helping Workless Families. This, with its accompanying analysis, set out nine national indicators designed to track the Government’s progress towards tackling the root causes of poverty and disadvantage. It includes the new relationship distress indicators, which measure elements of parental conflict in both intact and separated families. This was based on recent evidence, which shows that, when it comes to the critical issue of improving children’s outcomes, the quality of the relationship between the parents is far more important than the structure of the family. Indeed, my noble friend Lady Stroud referenced adult relationships, and we cannot underestimate their importance. As I mentioned, we are beginning to tackle the problems faced by workless families, who are three times as likely to experience parental conflict, through our new reducing parental conflict programme.

My noble friend Lord Blencathra referenced the Armed Forces and the importance of supporting them in this area. As the Department for Work and Pensions representative on the newly formed Armed Forces Covenant and Veterans Board, I reassure my noble friend that I am very much focused on the welfare of veterans and of our serving personnel. We are constantly looking at the range of extra support we provide to our Armed Forces families. Apart from anything else, as my noble friend said, retention of our Armed Forces personnel and their welfare is of vital importance.

I know that all the noble Lords present understand the importance of supporting families, and the benefits that strong family relationships can bring to us all. My department will continue to encourage active use of the family test, and continue the discussions across Whitehall, which will include the need for policymakers to consider whether any new policy supports strong and stable families or undermines these vital relationships. On a personal level, I am particularly keen to work with colleagues across government to reassess, perhaps, some of the narrative. A number of noble Lords today have referenced the use of language—how we explain what we are trying to achieve. Why do we use the term “conflict”, for example? It sounds more like a war zone—and, yes, is “test” the right word that we should use? We should not be afraid to revisit that issue.

I thank all noble Lords who have participated in today’s debate. I shall write to those to whom I have been unable to respond. I look forward to working with all noble Lords, because this is more than a Conservative Party issue—it is cross-government and cross-party. It is too important to be part of politics. So I look forward to working with all noble Lords as we strive to build a society that works for everyone, with the family at its core.

Personal Independence Payments

Baroness Buscombe Excerpts

Tuesday 23rd January 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, with the leave of the House, I shall repeat as a Statement an Answer given to an Urgent Question in another place by my right honourable friend the Secretary of State for Work and Pensions on the High Court judgment on PIP—personal independence payment. The Statement is as follows:

“After careful consideration, I took the decision not to appeal the High Court’s judgment on this case. I informed this House of my decision immediately by tabling a Written Statement on Friday last week. This Written Statement set out my decision and the steps my department will now take to implement the judgment. I repeat once again my commitment to implementing this judgment in the best interest of our claimants and through working closely with disabled people and key stakeholders over the coming months.

The Department for Work and Pensions will undertake an exercise to go through all affected cases in receipt of the personal independence payment and all decisions made following the judgment in MH to identify anyone who may be entitled to more as a result of the judgment. We will then write to those individuals affected and all payments will be back-dated to the effective date in each individual claim.

In accepting the outcome of this High Court judgment, the department does not agree with some of the details made in the judgment. The 2017 amending regulations were introduced in response to an Upper Tribunal case that broadened the interpretation of eligibility for Mobility 1, which is the ability to plan and follow a journey. Our intention has always been to deliver the original policy intent through clarifying how symptoms of overwhelming psychological distress should be assessed. In order to provide certainty to our claimants, we are not appealing the outcome of the recent High Court judgment.

Our next steps will build on the positive work this Government are already undertaking, including the following. Spending on the main disability benefits—PIP, DLA and attendance allowance—has risen by £4.2 billion since 2010 and real-terms spending on disability benefits will be higher every year to 2020 than in 2010. The Government have commissioned two expert-led reviews and invested a record £11.6 billion into mental health services. The Access to Work mental health support service has been expanded with a two-year trial of targeted support for apprentices with mental health conditions. We have also accepted all the recommendations in the independent review by the noble Lord, Lord Stevenson, and Paul Farmer, including establishing a framework for large employers to voluntarily report on mental health and disability within their organisations.

With regard to the next steps following this judgment, the Department for Work and Pensions will write to those who may be entitled to a higher rate of PIP. Where relevant, all payments will be backdated to the effective date in each individual claim.

PIP is a modern, dynamic and fairer benefit than its predecessor, DLA, and focuses the most support on those experiencing the greatest barriers to living independently. At the core of PIP’s design is the principle that awards of the benefit should be made according to a claimant’s overall level of need, regardless of whether they suffer from physical or non-physical conditions. This Government are committed to furthering rights and opportunities for all disabled people and we continue to spend over £50 billion per year to support people with disabilities and health conditions”.

[Baroness Sherlock (Lab)]

My Lords, I thank the Minister for repeating that Answer. I remind the House that these regulations were rushed through after the tribunal specifically to deny the higher-rate mobility component of PIP to people who were claiming on grounds of psychological distress, affecting people with Parkinson’s disease, schizophrenia or various other mental health conditions.

In the High Court judgment, Mr Justice Mostyn said that these new criteria were “blatantly discriminatory” against those with mental health impairments and that they “cannot be objectively justified”. Ministers should have known that. On 27 March this House voted for a regret Motion in my name objecting to these regulations precisely because they discriminate against people with mental health conditions. I then wrote to Damian Green, with the support of the right reverend Prelate the Bishop of Durham and the noble Baronesses, Lady Browning and Lady Bakewell, asking him to conduct a review mandated by that Motion. He declined to do so, so we ended up in the High Court.

I am glad that Ministers are not appealing the decision, but it leaves many questions, of which I can ask only two. First, will there be an appeal process for PIP claimants who are not contacted by the department but who believe they should receive back payments? Secondly, will applicants be entitled to a reassessment if they were given only the standard rate of the PIP mobility component after the regulations came through, where the cause of the claim was “psychological distress”?

If Ministers had, once again, only listened to this House, this confusion and distress for claimants could have been avoided. I dearly hope they do so next time.

[Baroness Buscombe]

My Lords, I shall respond robustly to what the noble Baroness opposite has just said by making it absolutely clear that this Government have been far more generous in supporting people with mental health conditions than the previous Labour Government, who put off any changes to disability support, particularly in relation to mental health conditions, until after the general election of 2010, which by then was too late.

This is not a policy change. We are going back to the heart of the policy intent and relates to those in psychological distress. We have accepted the Stevenson/Farmer recommendations, which shows that we are committed to supporting claimants with disabilities. We are also working with a range of disability charities to implement the judgment in the best way. We will look at appeals, to which the noble Baroness opposite made reference, but we want to make sure that we get the process right. We have already spoken with the charity Mind on how we implement the judgment. The Minister for Disabled People, Health and Work in another place talked only yesterday with a disability charity consortium to discuss the decision and to hear its views on implementation. We will reach out to claimants and look at every one of them.

To be clear, we are spending over £50 billion on disabilities. We are entirely committed to this issue—indeed, it is one of the Prime Minister’s top priorities. I can confirm that this was never a cost-saving measure. The judge in the case made references to cost saving but we do not agree with that. Indeed, we have focused on being more generous through the introduction of PIP and, as a result of the judgment, we will rightly become even more generous in supporting people with mental health conditions.

[Lord Kirkwood of Kirkhope (LD)]

My Lords, perhaps I may ask the Minister about the process. I fail to understand why, in March 2017, the Government did not have recourse to the power available to them under the Social Security Administration Act 1998 to suspend the implementation of adverse legal judgments pending further and better particulars. If they had taken that route they would have had recourse to the SSAC and a proper consultation, which would have prevented this adverse outcome from the High Court. Will the Minister learn from this and give an assurance that in such future circumstances, the Government will use the unique power the DWP has to prevent getting egg all over their face and causing adverse circumstances for many claimants who do not deserve that kind of treatment?

[Baroness Buscombe]

I hear what the noble Lord is saying. This is one of the reasons why the immediate response of my colleague the Minister for Disabled People—and indeed the Secretary of State—was not only to decide not to question the judgment but to do everything we can to help claimants. That is why we have already had early meetings with stakeholders and organisations who can help us think through how to ensure that we do not make mistakes going forward. It is important to say that the 2017 amending regulations did not represent a policy change. The distinction was based on the considered advice of highly qualified medical advisers, and the activities considered in PIP are used as a proxy for assessing a claimant’s overall level of need in daily life, which is what we were focusing on.

[Lord McKenzie of Luton (Lab)]

My Lords, the Minister on several occasions used the term “generous” in describing the Government’s position. By what yardstick is “generous” measured in these terms?

[Baroness Buscombe]

The noble Lord will understand that since 2010, spending on the main disability benefits comprising PIP, DLA and attendance allowance has risen by £4.2 billion. Disability benefits are at a record high this year. Indeed, as a share of GDP, the UK’s public spending on disability and incapacity is higher than in all other G7 countries bar Germany.

It is important to focus on the components in terms of spending on PIP and the DLA equivalence, which of course was what we had under the Labour Government. As at October 2017, 66% of PIP recipients with a mental health condition received the enhanced rate daily living component, compared with 22% receiving the highest rate DLA care component as at May 2013. Some 31% of PIP recipients with a mental health condition get the enhanced rate mobility component as at October 2017, compared with 10% receiving the higher rate DLA mobility component as at May 2013. I could go on with more figures. If one compares the percentage of spending by this department with other departments within the Government’s budget, we are, as we should be, strongly focused on how we can help those with physical and with mental health conditions to do a very dynamic thing that PIP stands for: have the independence to cope with their lives, whatever their condition.

[Baroness Hussein-Ece (LD)]

My Lords, the number of applicants who fail to qualify run into the hundreds of thousands. Can the Minister say what is being done to recruit enough staff to deal with the backlog? I have seen a report which states that it will take decades before they finally get up to date and PIP applicants will receive their social mobility claims, as they duly should. What is being done about the backlog?

[Baroness Buscombe]

I can indeed respond to the noble Baroness because only last week I had a meeting with officials who are closely focused on this issue. I cannot give her the exact numbers, but we are bringing on board many more work coaches. We are training them and continually working to improve our systems to ensure that any backlogs in the waiting time for the initial assessment and reassessment are cut down; I think they have been cut by at least half over the past year. We recognised that the number of people coming forward was greater than we had initially judged, so we are responding to that as quickly and efficiently as we can. At the same time, we have to make sure that there is continuous improvement, that the PIP benefits process is working fairly and effectively and that it offers the best claimant experience possible. My honourable friend in another place, the Minister of State with responsibility for this issue, has given me a list of the different things we are doing to improve the assessment process and deal with any backlogs in the system.

[Baroness Altmann (Con)]

My Lords, I would like to congratulate my noble friend the Minister and my right honourable friend in the other place on taking this decision. It is the right decision, although I am sure it was a difficult one and will be difficult for the department to implement. Nevertheless, it is right and I welcome it.

[Baroness Buscombe]

I thank my noble friend for supporting us in what we feel strongly was the right decision. It was a difficult one because obviously, we need to take some time—not long, but some time—to make sure that we can respond in the right way and support a fair number of people whose assessments we need to re-evaluate. We will do that to the best of our ability, but very much at the forefront of our minds is the need to work with stakeholders, including Mind and other charities, to ensure that we get this right. Again, I thank my noble friend.

Financial Assistance Scheme (Increased Cap for Long Service) Regulations 2018

Baroness Buscombe Excerpts

Monday 22nd January 2018 Lords Chamber

Moved by

[Baroness Buscombe]

That the draft Regulations laid before the House on 18 December 2017 be approved.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, these regulations will increase assistance payments for members of the Financial Assistance Scheme who may have been disproportionately affected by the cap on the amount of assistance payable to an individual member under the scheme. The cap is set at age 65 and is currently £34,229, reduced if a member opts to receive their assistance early. The cap helps to limit the costs of the Financial Assistance Scheme, which is funded by general taxation.

Individuals accrue high pensions for two reasons. Some were high earners, in which case they have generally had opportunities to secure alternative savings for retirement. Others have worked for a significant proportion of their working life to build up a pension with their employer and, consequently, may have little or no other private pension savings to offset against the shortfall between the capped assistance and what they had expected from the scheme. This change will benefit the second group of people.

Plainly put, these regulations will make changes to legislation to increase the current Financial Assistance Scheme cap for those with long service in a single eligible pension scheme. The provisions increase the cap by 3% for each full year of pensionable service over 20 years, subject to a new maximum of double the standard Financial Assistance Scheme cap. The new provisions will ensure that Financial Assistance Scheme members with long service will receive assistance which reflects a higher proportion of their accrued pension benefits.

It is estimated that 290 FAS members will benefit from the introduction of the regulations over the lifetime of the Financial Assistance Scheme. Although that is not many people, it is a significant proportion of the 500 people estimated to be affected by the cap. The change is expected to be widely welcomed by Financial Assistance Scheme members with long service, and their families.

Around £1.5 trillion is held under management in defined benefit pension schemes, which helps to fuel the UK economy through investment in UK government bonds, corporate bonds and equities. The pensions provided by these schemes are on average £7,000 per annum, which can be a vital source of income for around 11 million current and future pensioners. The majority of nearly 6,000 defined benefit pension schemes are run effectively, and we are fortunate to have a robust and flexible system of pension regulation in the UK. However, recent events affecting a number of high-profile schemes have shown that, while a robust system is in place, schemes can fail, and it was right to implement the regime of pension protection provided by the Financial Assistance Scheme and the Pension Protection Fund.

The Pension Protection Fund provides compensation for pension scheme members whose employer became insolvent on or after 6 April 2005; the Financial Assistance Scheme provides assistance to members of schemes that started to wind up before that date. From its commencement, the Financial Assistance Scheme was criticised for providing less generous support than the Pension Protection Fund. However significant improvements have been made to the scheme by successive Governments.

On 6 April 2017, provisions for a long service cap were implemented in the Pension Protection Fund, and these regulations introduce a similar long service cap to the Financial Assistance Scheme. We estimate that the long service cap will increase the overall cost of the Financial Assistance Scheme payments by approximately £1.2 million per year in the first eight years before starting to slowly decrease over the following years. Unlike the Pension Protection Fund, which is funded by the residual assets topped up by a levy on pension schemes, the Financial Assistance Scheme is funded by general taxation.

--- Later in debate ---

[Baroness Buscombe]

My Lords, I thank all noble Lords who have taken part in this brief debate. What I sense is a general welcome for these regulations. I shall do my utmost to try to respond to a number of questions that were put forward, particularly by the noble Lord, Lord McKenzie. I am not sure whether my pen could work fast enough for me to respond to all the questions and if there is anything I leave out, which I suspect there may be, I will endeavour to write to all noble Lords to fill in the detail.

Perhaps I may reiterate that the important thing about the regulations is responding to the policy, which, importantly, is to treat members of the Pension Protection Fund and the Financial Assistance Scheme as consistently as possible, where possible. The long-service cap for the Pension Protection Fund came into force on 6 April 2017. These regulations will introduce an equivalent long-service cap for the Financial Assistance Scheme. This cap applies to any pension that is in payment or will be paid. For example, if a member’s pension from their scheme was £39,000 a year and that scheme could not pay anything, the Financial Assistance Scheme would work out as 90% of that £39,000, which is £35,100. As the Financial Assistance Scheme cannot pay more than the cap amount which applies to the member, the member in this example would receive £34,229.

Following the introduction of the long service cap, Financial Assistance Scheme members will have their cap increased by 3% for each full year of pensionable service above 20 years when they first become entitled to payments from the Financial Assistance Scheme, subject to a new maximum of double the standard cap. Only a full year of pensionable service will be counted. Part years will not be included in the calculation.

The increase is applied to the cap amount in place for the member at the time assistance is first put into payment. The increase is not backdated and takes effect from the member’s first payday on or after the regulations come into force, currently expected to be implemented on 6 April 2018. From 1 April 2018, the basic cap amount will be increased to £35,256.

In response to the noble Lord, Lord McKenzie, it is important to emphasise that all members of the Financial Assistance Scheme will receive 90% of the maximum, while PPF members who are already in retirement will receive 100%. The assistance is calculated differently.

I was asked to comment on the difference between actual and expected pensions. The Financial Assistance Scheme is not intended to meet all pension costs; it is 90% of pension costs subject to the cap. I will write to the noble Lord to give some detail on the difference between actual and expected pensions.

I hear what my noble friend Lady Altman says about the assets of an insolvent company being passed to the Pension Protection Fund, which administers both schemes, but the Financial Assistance Scheme is funded through general taxation. The long service cap will increase the overall cost of Financial Assistance Scheme payments by approximately £1.2 million a year in the first eight years before starting to decrease slowly. The actual costs will depend on a number of factors, including pensioner deaths and the fact that the Financial Assistance Scheme closed to new schemes in September 2016. The actual costs in future years may be lower than the £1.2 million quoted. The Financial Assistance Scheme has paid £1.1 billion to March 2017. The assets are passed to the PPF.

The noble Lord, Lord McKenzie, asked why 3% was chosen as the escalation amount. It was chosen because we believe it is sufficient to lift a substantial number of the target group out of the compensation cap entirely, while still being affordable for the taxpayer. Lower percentages did not achieve this outcome. Of the 500 people affected by the cap, 290 will benefit from this measure.

On the Hampshire legal challenge going to the Court of Justice of the European Union, the noble Lord, Lord Kirkwood, is correct. A hearing in the European Court of Justice is set for 8 March 2018. For the benefit of all noble Lords, this legal challenge by Mr Hampshire contends that article 8 of the EU insolvency directive requires the UK to ensure that every pension scheme member gets at least 50% of their accrued benefits in the event of the insolvency of the sponsoring employer.

It is possible for the capped amount of compensation or assistance to be less than 50% of the member’s accrued pension, for example where a member has a large pension due to a high salary and/or long service within the same pension scheme. However, we believe the numbers affected to be very low. Only around 400 PPF and 500 FAS members are currently affected by the cap, which represents around 0.3% of the total membership of both schemes as at April 2017. We estimate that a very small proportion of these capped members are not receiving at least 50% of their accrued pension, and the increased FAS cap for long service will further reduce the number of members affected.

--- Later in debate ---

[Lord McKenzie of Luton]

What struck me when I looked at the data was that for the last year, up to March 2016, there were still some 23 schemes transferred into FAS, notwithstanding that it was 10 years or more since the obligation to commence winding up. If I understand correctly and there were 23 schemes for that period, how many were left out of the subsequent period and have been chopped off? This is particularly an issue if the failure—if it is a failure—to pick up that detail was with the trustees or the scheme administrator, because the consequence would fall on the individual member of the scheme.

[Baroness Buscombe]

I understand the question posed by the noble Lord; indeed, when I was discussing this with officials, I was amazed that it took 10 years. To begin with, I could not understand why the scheme closed to new entrants as late as 2016. I cannot say whether the figure of 23 schemes is correct for the final year but I will check and respond to the noble Lord; I shall seek to find out how many were left out and how many individuals might thereby have lost out. I also have a little more information regarding Tata: because this provision applies to schemes wound up before 2005, it is relevant not to Tata but to the PPF scheme.

The noble Lord, Lord Kirkwood, asked why the Government have taken so long to introduce the long service cap. There have been significant reforms to pension legislation over the last few years, and the introduction of the FAS long service cap is the latest change in a programme of work to treat members of the FAS and PPF schemes more consistently. I hope the noble Lord will accept that pension legislation is complex. It was important that we consulted on draft FAS long service cap regulations to ensure that the legislation operated as intended and did not have any unintended consequences. As a result, December 2017 was the earliest that we could lay the regulations. I appreciate that members of the FAS will be frustrated by the perceived delay but we had a legal obligation to consult on the regulations. The public consultation helpfully identified some small changes that were required to ensure that the regulations operate as intended for eligible FAS members.

We also had to ensure—I think this brings us on to the next question posed by the noble Lord—that the costs were proportionate and to structure the long service cap to ensure that no further costs would be incurred. The noble Lord was very concerned about the administrative cost. I share that concern; it seems like an enormous amount of money for the relatively few people affected. At least I can confirm that the costs are less than had first been forecast. It would be fair to say from the department’s perspective that we are continually looking at where costs can be kept to a minimum, not least because those costs fall on the taxpayer.

While in the past there has been much criticism and scepticism around the introduction of digital systems to support more effective, efficient and cost-effective systems for the administration of such schemes, it is fair to say that systems are proving more robust as technology advances and becomes more understood by users. However, it is incumbent on all of us to keep an eye on that in terms of ensuring that we do all that we can to reduce costs. The trouble is that we are talking about checking records of individuals. That takes time and sometimes it is easier to do manually for such a small number of people. I accept the noble Lord’s point: in some ways, one might question whether it is simpler and more cost effective to do it manually. I take very much on board what he has said.

With regard to transaction costs, going on from what I have just said—sorry to string this out—the PPF, which administers the FAS, is currently in-sourcing member data from Capita. The FAS data is currently out of date, incomplete and often paper-based, requiring manual processing and checking, and that is not a one-off cost. We should continue to look at that and encourage those who administer the scheme to do the same, although I am sure they are cognisant of these considerable costs.

The regulations will ensure that individuals who have worked hard for a single employer for many years are not penalised by the cap. This group of savers have built up a large pension pot, not because they are high earners but because they have worked for one employer for the majority of their working lives and, as a result, will not have had the opportunity to secure additional income in retirement.

The decision to increase the total amount of assistance that this group can receive has not been taken lightly, as the Financial Assistance Scheme is funded by the taxpayer. As my noble friend Lady Altmann said, a considerable amount of consultation, lobbying, and so on, was undertaken to encourage the Government to introduce the regulations. But to leave the situation unchanged would create an inequitable situation where those with long service in the Pension Protection Fund were treated more favourably than those in the Financial Assistance Scheme and break our commitment made in another place on 15 September 2016.

I reassure all noble Lords that no new funding commitments have been or will be made in respect of the scheme. Since 2005, employer insolvencies have fallen under the jurisdiction of the Pension Protection Fund. Unlike the Financial Assistance Scheme, the Pension Protection Fund is mainly funded by an industry levy and is therefore not reliant on the public purse.

I believe that the correct balance has been struck between securing meaningful income in retirement for members compensated by the Financial Assistance Scheme and the cost to the taxpayer. I have outlined in detail the issues that the regulations will address and why the Government have decided to act. Now is the right time to correct this problem, and I ask that the Motion be approved.

Motion agreed.

Private Sector Pension Abuse

Baroness Buscombe Excerpts

Monday 22nd January 2018 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, with the leave of the House, I shall now repeat in the form of a Statement the Answer given by my right honourable friend the Secretary of State for Work and Pensions to an Urgent Question in another place on private pension schemes. The Statement is as follows:

“The vast majority of employers do the right thing by their pension schemes and members can expect to receive the pension benefits they have paid for throughout their working lives. The Pensions Regulator and the Pension Protection Fund were set up in 2004 to provide pension scheme members with a safety net to ensure that their pension benefits received some protection when things go wrong—it is a fact that some businesses will fail. This PPF approach has been supported on a cross-party basis since 2004. To prevent irresponsible employers offloading pension liabilities to the PPF, the Pensions Regulator was given a wide range of powers, including the ability to recover significant assets where employers had failed to take account of the scheme. There are around 6,000 defined benefit schemes and cases like these are few and far between.

It is the responsibility of the Pensions Regulator to strike a balance between protecting members and PPF levy payers, and minimising any adverse impact on the sustainable growth of an employer when it comes to the regulation of defined benefit funding. The Pensions Regulator does not have the power to stop businesses paying out bonuses to executives or dividends to shareholders. However, if it sees a situation where it believes a scheme is not being treated fairly, the Pensions Regulator will investigate to see whether use of its powers is appropriate. However, this Government are clear that where sponsoring employers are able to meet their pension promises, they should, and must, do so, and that is why we have suggested ways that the current system could be strengthened to enable the Pensions Regulator to be more proactive.

In February 2017, we published our Green Paper, Security and Sustainability in Defined Benefit Pension Schemes, which included suggested measures that would strengthen the powers of the Pensions Regulator by introducing punitive fines for actions that harm a pension scheme. We also set out powers to enhance the regulator’s ability to demand information to ensure effective governance and spot issues before damage is done.

Our June 2017 manifesto reaffirmed this intent by proposing to give the regulator the power to impose a punitive fine alongside a contribution notice so that pension scheme members are fully protected. The details of the fine would be worked through with all relevant stakeholders but it would represent a significant strengthening of the deterrent.

Also we intend to make certain corporate transactions subject to mandatory clearance by the Pensions Regulator, but we must take care to ensure that these measures do not have an adverse effect on legitimate business activity and the wider economy.

I should also tell colleagues that we have received 800 responses to the Green Paper, and these are currently being reviewed by the department. The White Paper is in progress and will be published this spring.

Effective regulation is dependent on a prompt flow of information between parties concerned and compliance with rules and processes. Following the publication of the White Paper, we will introduce new legislation to ensure that the regulator gets the information it requires to conduct investigations and casework effectively and efficiently. It remains the case that this Government support free markets and capitalism but this has to be conducted responsibly”.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for repeating the UQ asked in the other place. Yesterday, the Prime Minister chose to announce via the media that, in part in response to the collapse of Carillion, the Government plan to introduce tough new rules to stop private sector pension abuse—so we are to play catch-up again, it seems, following the pensions freedoms debacle. Carillion had 13 defined benefit schemes in the UK, with some 27,500 members and a combined pensions deficit of some £600 million.

We know that, according to its chief executive, Carillion had been on the radar of the PPF “for some time”, and it was on the watch-list by autumn 2017. Carillion gave its first profit warning in July of that year and its second on 29 September. The Pensions Regulator reported the close monitoring of risks and that it had had “heightened engagement” with the company since July’s profit warning. It apparently had some discussions with Carillion on a regulated apportionment arrangement but these came to naught.

Given the level of engagement and knowledge, which particular tightening of the regulatory framework are the Government considering? Precisely what additional powers for the regulator are contemplated, and what difference does the Minister think these would have made in the Carillion circumstances now faced?

More generally—I think that the Minister has confirmed this—in accordance with the Work and Pensions Select Committee recommendations, there will be a number of recommendations concerning mandatory clearance powers for corporate activities that put pension schemes at risk and new powers to fine those who act in an irresponsible manner. If the Government support those recommendations, how quickly does the Minister consider they will reach the statute book?

[Baroness Buscombe]

I am grateful to the noble Lord for mentioning that the Prime Minister clearly takes this situation extremely seriously. He reiterated that we intend to strengthen the regulator’s powers. Importantly, we have done that with care, introducing a Green Paper last year, and we have committed to the publication of a White Paper in the spring. Although the Pensions Regulator and the Pension Protection Fund manage the process of company insolvencies, and while most pension schemes are managed successfully and very robustly, we accept that there are instances where it might be possible to improve and strengthen the powers. We have received more than 800 responses to the Green Paper. The department is analysing these and will bring forward proposals as quickly as possible.

It is important to emphasise—I sense that the noble Lord opposite appreciates this—that it is hypothetical to suggest that a different set of powers for the Pensions Regulator, such as the ability to clear corporate activities, would have necessarily made a material difference to the pension schemes. Having said that, there has been strong communication between the regulator and Carillion since the middle of last year, when a profit warning was announced. But of course, a profit warning is a warning as opposed to a transaction, so it was not necessarily a sign that the company overall was in such difficulty.

It is important to stress that we are very keen to strengthen the powers but, at the same time, we need to ensure that the new measures we introduce build on existing measures that to a large extent have worked extremely well since 2004, as I said before. However, we want to strengthen the Pensions Regulator’s anti-avoidance framework and information-gathering powers.

I am afraid that as yet, I cannot be certain about when legislation will be forthcoming. Obviously, we will look forward to and welcome the consultations and responses to the White Paper.

[Lord Kirkwood of Kirkhope (LD)]

My question is further to the important one raised by the noble Lord, Lord McKenzie, about timing. Whereas the Statement is correct to say that big insolvencies happen infrequently, when they do happen they strike at the confidence among employees about occupational pension savings altogether. I hope the Minister shares the House’s concern about the indirect impact this may have on auto-enrolment. As the Minister knows, some important steps are being introduced in the next phase of auto-enrolment in the near future but, if there is a White Paper in March, it may be 2020 or 2021 before the regulations are available to regulators, auditors and others. Will the Minister undertake to do everything in her power to push forward proper and sensible consideration of the regulations to be introduced, with as much dispatch as it is possible to muster?

[Baroness Buscombe]

I thank the noble Lord for his question. I share his concerns about the direct impact this might have on those who have pension plans and on those who are retired and in receipt of their pensions. Our drive on auto-enrolment has been extremely successful thus far. More than 9 million people have enrolled, via the auto-enrolment scheme, up to the end of last year. We will push this issue with as much dispatch as is sensible. Having said that, at the same time we do not want a knee-jerk reaction. We will publish our White Paper in the spring. We want to be sure that we make the right decisions and do not compromise the established, robust and, to a large extent, successful scheme that exists for the current powers of the Pensions Regulator. Yes, we must do all that we can. I am pleased to say that, as I speak, colleagues in another place are now debating the Second Reading of the single financial guidance body Bill, which I hope will support giving people advice and good counsel. The Pensions Advisory Service and others are already working on the Carillion issue. We are looking all the time to improve the system, to reassure people and to give them good advice and guidance on their pensions. We will legislate to do the right thing as soon as we can.

[Lord Cotter (LD)]

I am a non-expert in the field—a member of the public, if you like. The Statement talks about a,

“significant strengthening of the deterrent”,

and states that,

“employers have failed to take account of the scheme”.

As an outsider, I am concerned about those two important aspects of the Statement.

[Baroness Buscombe]

I agree with the noble Lord. It is important that we strengthen the deterrent to the best of our ability. That will be a signal to the behaviour of those who are charged with the responsibility of protecting the interests of their employees with regard to pension schemes. We must do all we can to reassure them. That said, it is important to emphasise that the system is—and must be—independent of government. There is a limit to what we can do to ensure that the right thing is done once the framework is in place. Indeed, I think that noble Lords opposite will agree that the introduction of the Pension Protection Fund in 2004 has gone a long way to reassuring people and has been incredibly effective in protecting people’s pensions, both current and into the future. But in response to the Carillion case, we take seriously the need to do what we can to improve or increase the deterrent. However, we must do that with care so as not to fetter the ability of business to be a successful, effective and important part of building our economy.

Poverty and Disadvantage

Baroness Buscombe Excerpts

Thursday 14th December 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord Bird, for securing this debate and all noble Lords for contributing to this vital Question, just six months on from the appalling Grenfell Tower tragedy. I also thank the noble Baroness, Lady Sherlock, for her apology.

Tackling poverty, and the root causes of poverty, is a key priority for this Government. As the Prime Minister has said, we are committed to building a country that works for everyone, not just the privileged few. It is for this reason that we are pushing ahead with the most ambitious reform to the welfare system in decades, delivering real and lasting change to the lives of many of the most disadvantaged people in our society.

Previous Governments have varied in their approach to this vital task; ours is based on a clear understanding of what works. We know that for most people, work represents the best route out of poverty. For example, adults in workless families are four times more likely to be in poverty than those in working families, and children in workless households are five times more likely to be in poverty than those in households where all adults work. Our reforms have acted to ensure that this principle is reflected in the service that we provide.

Through the introduction of universal credit, we have acted to transform a benefit system hindered by bureaucracy and welfare dependency into one which places personalised assistance for individuals and their families—families, I stress—at its very heart. People entering universal credit have access to more tools than ever before to underpin their search for work and receive a tailored package of support to meet their needs. It is clear that this reform is working. UC claimants are able to find work faster and stay in work for longer than those under the system it replaces: 86% of people under UC are actively looking to increase the hours they work, compared with only 38% on jobseeker’s allowance.

Those changes are empowering people. They acknowledge that the benefits of work extend beyond the purely financial. The evidence is clear that good-quality work can serve as a basis for a healthier, happier society, with demonstrable links to better physical and mental health, and improvements in personal well-being. We are committed to doing all we can to ensure that as many people as possible are able to share in these advantages, with particular help announced last week for those with a disability or health condition. In response to the right reverend Prelate the Bishop of St Albans, I have to say that this is something on which we have very much been focusing, and as a Government we are proud of the progress that has already been made towards this objective. There are 600,000 more disabled people now in work, for instance, than there were four years ago.

I want to stress, however, that increasing the rate of employment alone has never been the limit of our vision for a wealthier, more affluent society. We also want to build a country where work changes lives. This is why we have radically reshaped the welfare rules we inherited to ensure that people are able to see their efforts reflected in rising levels of prosperity. For those already in work, our reforms mean that people are able to take on more hours and increase their income without fear of being penalised, and that those on lower incomes can take home more of their earnings. To this end, the Government have cut income tax for more than 30 million people and taken 4 million low earners out of income tax altogether. We plan to further increase the tax-free personal allowance to £12,500 by the end of this Parliament. The introduction of the national living wage has given the UK’s lowest earners their fastest pay rise in 20 years. Since 2010 the annual average income of the poorest fifth of households in this country has risen in real terms by more than £300, while the income of the richest fifth has fallen.

However, we are not complacent. We are reducing social rents until 2020, and lowering the cost of housing for tenants and their families. I respect the fact that a number of noble Lords have focused on housing as one of the key issues. The basic state pension is now at one of its highest rates relative to earnings for over two decades, reversing a trend of decline we saw between 1997 and 2010. The number of pensioners living in absolute poverty on a before-housing-costs basis has fallen by 100,000 since 2010. In contrast, severe poverty rose under Labour.

The results speak for themselves. Employment is now at near record levels, with 3 million more people in work than in 2010. The number of households where no one is working is down by 954,000 over the same period, with 608,000 fewer children living in a workless household than there were seven years ago. However, 14.5% of all UK households still remain workless. That is something that we have to tackle. The approach taken by previous Governments to tackling child poverty was to focus resources on increasing family incomes above a notional poverty line. This Government believe that making a lasting difference to the lives of disadvantaged children and families requires a different approach that goes beyond the safety net—referenced so eloquently by the noble Baroness, Lady Sherlock—of the welfare system to address the underlying reasons why people fall into poverty.

We want to focus on prevention, referenced so strongly and eloquently by the noble Lord, Lord Bird. Our approach is based on compelling evidence about the impact of worklessness and the problems associated with it on families and children. Analysis conducted by the Department for Work and Pensions shows that children who live in families where no adults work are significantly more disadvantaged, and achieve poorer educational and employment outcomes than others. Again, a number of noble Lords, quite rightly, referenced the importance of education. Despite employment being at near record levels, around one in eight children still lives in a workless household.

Improving Lives: Helping Workless Families, published in April, provided a framework for a continued focus on improving children’s outcomes, now and in the future. We set out nine statutory and non-statutory indicators to drive collective action in the areas that are important in tackling the disadvantages that can prevent families from moving on with their lives—for example, parental conflict. As my noble friend Lord Farmer stressed, parental conflict and family breakdown are so critical to all this, together with poor mental health, and drug and alcohol dependency.

If we are to deliver lasting change, we must continue to take action to support those who face the most complex employment barriers, whether or not they have children—people whose ability to work is, for example, frustrated by issues such as a disrupted education, a history of offending, addiction, insecure housing and serious problem debt. This is why our jobcentre work coaches offer individualised, tailored support to those with complex needs. This can include temporarily lifting work requirements where claimants are homeless, in treatment for drug or alcohol dependency, or are victims of domestic violence. It can also include early access to the new Work and Health programme, and referral to local services that can help claimants get their lives back on track. We also offer targeted support to claimants in particular circumstances. For example, we are trialling the individual placement and support approach to help back to work those dependent on drugs or alcohol, as recommended by Dame Carol Black.

People who are financially included are better able to find and remain in work, and are less likely to experience debt and financial difficulty. We therefore welcome the findings and recommendations of the Lords Select Committee Report, Tackling Financial Exclusion: A Country that Works for Everyone? In our response, we announced the creation of a financial inclusion policy forum to be jointly chaired by the Minister for Pensions and the Economic Secretary to the Treasury, and bringing together Ministers from other departments and representatives from financial service regulators, industry and consumer groups.

The noble Lord, Lord Bird, has asked a question of vital concern to all of us in your Lordships’ House, and I take this opportunity to commend him personally for all the work he has done to raise awareness of the issues involved through a lifetime spent campaigning on behalf of the homeless—and, of course, the creation of the Big Issue. In truth, entrenched disadvantage is not something that a single department or indeed, the Government alone can do. As the right reverend Prelate the Bishop of Carlisle said, causes of poverty are often hidden. We respond by saying that they require a cross-governmental approach, and one, as referenced by the right reverend Prelate the Bishop of St Albans, that must also be rural-proof.

The noble Baroness, Lady Tyler, referenced the need for a joined-up approach. The social mobility action plan issued by the Department for Education is something in which we, as a department, will be much involved. That is why the Department for Work and Pensions continues to work across government in order to support the most disadvantaged. In addition to the financial inclusion policy forum, DWP is represented at ministerial level on the Social Reform Committee, the inter-ministerial group on homelessness, gangs and violence against women and girls; and on the drug strategy group. For far too long, poverty and disadvantage have held back far too many people in our society. The Government are committed not only to changing this, but are already making tangible progress through the measures that I have outlined. I have no reservation in recommending our approach to building a society where everyone can realise their potential.

I just want to respond to the question asked by my noble friend Lord Farmer in relation to opportunity areas. We have a number of opportunity areas, and evidence is at the heart of the OA programme. I say to the noble Lord, Lord Bird, that in an ideal world we would not have reports or bother with the evidence, but we have to have the evidence to try to do the right thing. Sadly, some of us are weighed down by our reports, but they guide us. In addition to improving outcomes for young people in the opportunity areas, we are also looking to learn what works best in driving up social mobility, so we can spread effective practice to other areas.

In closing, I reference my noble friend Lady Bottomley who said that we can talk about the inevitability of the downward spiral, but I agree with her: let us concentrate on the ladders.

Pensions

Baroness Buscombe Excerpts

Wednesday 13th December 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Baroness, Lady Scott, for introducing and securing this debate, and thank all those who have contributed. I shall do my best to respond to the various issues raised.

Work and society have changed tremendously since the introduction of the contributory state pension in 1948, and this Government believe that state pension provision should reflect this. As the demographic balance in the UK shifts, and fewer people of working age are expected to support a growing number of pensioners, it has become clear that an increase in the state pension age is necessary for the welfare of all. Underpinning this belief is the basic fact that a welfare and pensions system is only as successful as it is sustainable. Those who are able to work should support those who are not, confident in the expectation of support when they reach their own retirement. Today’s workers provide for the support of today’s pensioners, fulfilling this essential tenet of the social security system, as it has existed ever since the creation of the welfare state over 70 years ago. For this to continue, however, we must take steps to ensure that our model is fit for the future. A policy that allows each generation to spend an increasing percentage of life over state pension age, financed by an increased level of public pension expenditure, would be unsustainable in the long run and unfair to subsequent generations of taxpayers.

Women retiring today can still expect to receive the state pension for 23.5 years on average, almost three years longer than men. Even after equalising women’s state pension age with men’s, women will spend on average around two years more in receipt of their state pension because of their longer life expectancy. In response to the concerns raised during debates in both Houses on the Pensions Act 2011, we introduced a significant concession worth £1.1 billion, which ensured that no one would wait more than 18 months for their pension, when compared to the previous timetable. Any further concession would cost significantly more, and ask people of working age—more specifically, today’s younger people—to pay even more for it. It is the firm opinion of this Government that such an outcome simply cannot be justified.

Policy changes to the state pension system have been implemented over the past 22 years and supported by all three major political parties. Indeed, the noble Baroness’s party was in government when the 2011 Act was introduced, so it is disappointing that it has now chosen to distance itself from these necessary reforms, and talk about mistakes. The former Liberal Democrat Member of Parliament for Thornbury and Yate, for instance, who was Minister for Pensions under the coalition, has suggested that not enough was done to ensure that women were aware of the changes being made. We do not accept that argument. Since 1995, successive Governments have gone to great lengths to communicate changes to the state pension age. As my honourable friend in another place, the Minister for Pensions, has been clear in debates in the House of Commons, the Department for Work and Pensions has diligently communicated the timetable of these changes since they were set in train 22 years ago. This included writing to those affected by the 2011 Act throughout 2012 and 2013 to inform them of changes to their state pension age

Over the past 17 years, the DWP has provided over 19 million personalised state pension estimates. I do not think it is fair, therefore, for noble Lords somehow to suggest that these changes have been brought in by stealth. Indeed, as the noble Baroness’s friend in another place, the honourable Member of Parliament for Eastbourne, said just two weeks ago, there seems to be an “element of amnesia” to this debate.

The current arrangements represent the culmination of several decades of policy-making, to which all the major parties in this House have contributed. The noble Baroness’s party has yet to offer a clear alternative to our position. The official Opposition have outlined their ideas for potential changes to the Government’s policy and, with your Lordships’ permission, I will now address these. Noble Lords on the Benches opposite have suggested that the Government should set the pension credit qualifying age so that it precedes the state pension age as a means of compensating women affected by the changes we have discussed. While we acknowledge the good intentions that lie behind this proposal, we are clear that the unintended consequences of such a shift would render it unworkable.

Introducing a measure designed to benefit a specific group in this way would risk creating a new inequality. Any movement of the pension credit qualifying age would presumably have to be extended to cover not only women who are not affected by the 2011 Act but also men, if the Government’s actions are not be considered discriminatory. As a general point, it would also need to include housing benefit and help with council tax. If not, the proposal would risk providing money through pension credit with one hand and taking it away through higher housing costs with the other. To move women away from the working-age benefits system and the support available to them through their local jobcentre, in any case, would cause them to lose their link with the labour market, with an inevitable, negative effect on their household income and eventual pension pot. These women need support in the labour market, not exclusion from it—support that pension credit does not provide, with only a very small earnings disregard of over £5 a week.

The noble Lord, Lord McKenzie, or rather his party, has costed the option at over £800 million. However, we must also remember that the Labour Party manifesto committed to providing the 2.5 million women affected by the Pensions Act 2011 more generally with,

“some kind of compensation for their losses”.

It is not correct to say that these women have suffered losses of state pension. The position has always been that they will receive their state pension and other contributory benefits if they meet the entitlement conditions. The state pension they receive is determined under the rules in force on the date on which they meet these criteria. Making pension contributions in 1993, for instance, does not entitle someone to receive state pension according to the rules that were in force then. Paying state pension based on the pre-1995 rules, furthermore, would mean that pensioners would not receive all the additional benefits that have been introduced in the intervening years, or be protected under the triple lock.

The noble Lord opposite also suggested that we allow WASPI women early access to their state pension from the age of 64 at a reduced rate. Evidence submitted by the Government Actuary to the Work and Pensions Select Committee in April 2016, however, showed that it would be extremely complex to accurately predict the costs involved in this initiative. Within a matter of hours of suggesting it, I might add, two different versions of the policy were proposed. WASPI groups have rejected both. The introduction of a partial early payment in either form would involve bringing forward significant expenditure, even if the measure was assessed as cost-neutral in the long term. The wider impact on the economy cannot be ignored: adding even one year to people’s working lives would result in a sustained increase to GDP of over 1%—and 1% of GDP today is almost £20 billion.

The pension reforms we have undertaken have already greatly improved state pension provision for all, particularly women. Future pensioners stand to benefit not only from the introduction of the new state pension but also from the expansion of auto-enrolment and our Fuller Working Lives strategy. For many women, the new state pension is much more generous than the old system. By 2030, over 3 million women stand to gain an average of £550 extra per year as a result.

With respect, we cannot avoid the reality of the UK’s ageing population. The number of people over state pension age in this country is expected to grow by 4 million over the next 25 years, a rise of almost one-third. That is why the Government’s position remains firm and why we will not make any further concessions on this issue. Accelerating the increase in state pension age for both women and men has proved necessary in the light of increasing life expectancy and the increasing pressure on public resources. By 2035, the number of people aged 100 or over will have more than doubled. Failing to act on this evidence would not only be irresponsible but place a wholly unsustainable burden on future generations.

Our focus is to deliver a modern welfare system fit for the needs of the 21st century, which rewards work and targets support towards those who most need it. As part of this, we must ensure that the costs of an ageing population are shared out fairly. In this context, and given the financial pressures we face as a nation, we cannot, with regret, unpick a policy that has been in place for 22 years. It is simply not affordable. The average woman reaching state pension age last year will get a higher state pension income over her lifetime than at any point before. Let us celebrate the fact that longer life, better health and continued activity in later decades are reshaping the profile and participation of older people in our society. However, let us also accept that part of preparing the welfare system, and society at large, for the changes brought about by these advances must be to encourage older workers to benefit from fuller and longer working lives.

Local Welfare Assistance

Baroness Buscombe Excerpts

Monday 11th December 2017 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, since 2013 we have given local authorities the flexibility to develop their own local emergency provision for people in their areas. Local authorities are best placed to design and target this discretionary support, alongside their own local services, ensuring it reaches those who need it most at the right time.

[Baroness Lister of Burtersett (Lab)]

Ah, my Lords, the Pontius Pilate response. When the Government devolved crisis and community care support from the Social Fund to local authorities, they placed no duties on the authorities and refused to ring-fence the money. According to the Centre for Responsible Credit, about one in six authorities has abolished its scheme altogether, and many more have cut them back drastically, leading to some people facing destitution for lengthy periods. Will the Government now therefore accept, in the words of the Work and Pensions Committee, that they maintain,

“an ongoing obligation to ensure provision of a safety net which prevents vulnerable people from falling into severe hardship”,

starting with an urgent evaluation of what is now the final safety net?

[Baroness Buscombe]

My Lords, it is important to say that the national welfare system provides robust safeguards. These include: short-term benefit advances or universal credit advances for people in urgent financial need; Social Fund budgeting loans or universal credit budgeting advances to help with one-off and unforeseen expenses; and hardship payments for people who are sanctioned. But by abolishing the Social Fund crisis loans, which themselves had huge problems, we have now empowered local authorities to develop and deliver new provision to meet the needs of the most vulnerable people in their local communities.

[Lord Watts (Lab)]

My Lords, does the Minister think that it is irresponsible to delegate powers to local authorities and at the same time savage their budgets so that they cannot meet those responsibilities?

[Baroness Buscombe]

No, my Lords. The Government believe that councils are best placed to decide how to support local welfare needs. Local authorities in England will receive more than £200 billion to deliver those and other community services between this year and 2019-20, and will have the certainty to plan ahead through our four-year funding settlement.

[Lord Stoneham of Droxford (LD)]

According to the report from the Centre for Responsible Credit, in one year, my own city of Portsmouth has reduced the amount it spends on welfare assistance from £700,000 to £30,000. Do the Government intend to review the impact of these sorts of changes? If not, why not?

[Baroness Buscombe]

It is important that I stress again that, under the national system, there are strong safeguards in place. We expect local authorities to concentrate the funding on those facing the greatest difficulty in managing their income and to enable a more flexible response to an unavoidable need, perhaps through a mix of cash or goods and aligning with the wider range of local support that local authorities’ devolved administrations already offer. In short, the funding is to allow them to give flexible help to those in genuine need.

[Lord Howarth of Newport (Lab)]

The noble Baroness says that local authorities are best placed and they have £200 billion. Will she confirm that the Government have cut funding for local authorities by some 40% since 2010?

[Baroness Buscombe]

My Lords, perhaps I could quote the Local Government Association’s own study:

“Councils have managed the available budget effectively; reduced the potential for abuse, and created schemes which better meet the underlying needs of applicants and reduce repeat demand. This has enabled them to provide vital, timely support to some of their most vulnerable and deprived residents”.

[Baroness Lister of Burtersett]

My Lords, I still have not heard how those authorities that have abolished their schemes are going to meet the needs that the noble Baroness referred to. As she herself said, these are some of the most vulnerable people. There are 26 local authorities where there is no scheme that can meet those needs.

[Baroness Buscombe]

My Lords, the noble Baroness had already referenced the issue of ring-fencing. Government policy is not to ring-fence amounts in the local government finance settlement, as local councils are the best judge of needs and priorities within their areas. As I have already said, local authorities are in receipt of £200 billion. Part of that is to fund these emergency services, in addition to the safety net that we provide at national level.

[The Earl of Listowel (CB)]

My Lords, although recognising the tremendous work of local authorities to rise to the challenge, I have concerns which I hope the Minister shares. I listened to a very experienced, long-time child and family social worker in one of the committee rooms here two months ago. He expressed concerns about all the ancillary services being cut back for families, as the statutory services just about hold out. As these are cut, more and more children come into care, and more and more families are at risk of breaking down, so it is a very difficult situation. Of course the Government are doing important work to address these things, but we cannot deny that this is a huge challenge and is harming many people in this country.

[Baroness Buscombe]

My Lords, what the noble Earl has said about family breakdown and what this leads to is quite right. Indeed, that is why we have a strong focus now on the family parental conflict programme, to which we will be contributing £30 million in the coming two years. We have also invested up to £200 million in universal support, which provides budgeting advice and digital support to claimants, delivered by local authorities. This support is tailored to local needs and our work coaches, who gauge claimants’ financial needs from their first interview. We are doing a variety of things to help people at a local level. The noble Lord, Lord Foulkes, shakes his head, but we are doing an awful lot more than his Government ever achieved. I am proud of what we are doing.

[Baroness McIntosh of Hudnall (Lab)]

My Lords, will the noble Baroness please have another go at answering the question put to her by my noble friend Lord Howarth? Can she confirm that local authority budgets have been cut by 40%, and if she cannot, what figure does she think is the right one? Can she further say whether she thinks that—if that figure or anything like it is correct—it is at all likely that there has been no major impact on services that were previously provided?

[Baroness Buscombe]

My Lords, it is a great shame that under the Labour Government so much taxpayers’ money was wasted, leaving our local councils bereft of funds. We have worked hard to ensure that there are emergency provisions in place. Although there may be cuts to local authorities, we are ensuring that there is proper provision, but we are leaving it to local authorities to decide the best way to provide for the needs that people have at local level.