Financial Assistance Scheme (Qualifying Pension Scheme Amendments) Regulations 2014
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, perhaps I may put two brief questions to the Minister. There is no impact assessment attached to these regulations, but my recollection is that the FAS is funded from the public purse and not, as is the case for the Pension Protection Fund, from the levy. It may be that it is just de minimis in the scheme of things because we are dealing with only one identified scheme at the moment. However, I would be interested to know what the costs of this in terms of additional FAS spending might be. Perhaps the Minister might take this chance to update us on what the annual ongoing costs of the FAS currently are. Can the Minister also clarify for me, in relation to the particular scheme that has been identified, whether it had been paying the protection levy? If not, why was it outside of that?
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation and my noble friend Lord McKenzie for his, as always, insightful questions. I am very pleased to see the Government’s ongoing support of the Pension Protection Fund set up by the previous Labour Government. The PPF has made a substantial difference to people’s lives. As regards schemes including Woolworths, MG Rover and Turner and Newall, the members would all have had much lower pensions had it not been for the PPF and the Financial Assistance Scheme. I also welcome the Government’s continued support for that scheme.
I would like to ask a couple of specific questions. First, I recognise that the Minister is trying to close a specific loophole and obviously the changes relate to a particular case. I must confess that the Opposition are therefore unsighted on some aspects of this. Following on from the question of my noble friend Lord McKenzie, can he explain a bit more about the Government’s thinking in deciding to plump for the FAS as opposed to the PPF, rather than leaving the members of a scheme ineligible for either, because that would seem to be the key question?
Secondly, obviously, the Government have not brought forward an impact assessment for these regulations. The Explanatory Note was helpful in explaining the long gap between the consultation process and these being brought forward, but will the Minister confirm that there is a timescale for further consolidation of the regulations on which the Government consulted in 2011, and that an impact assessment will be brought forward to accompany those changes?
Lord Bates
I am grateful for those questions. In terms of context, we are talking about a specific scheme with a number of members—the George and Harding pension scheme. To answer the point made by the noble Lord, Lord McKenzie, the scheme had not been contributing to, or paying, the PPF levy and therefore was not able to claim under that procedure. Therefore, we are changing the relevant dates so that we do not break the contributory principle of the PPF but ensure that financial assistance is made available. The noble Lord, Lord McKenzie, is as astute as ever and I am sure that the noble Baroness, Lady Sherlock, as a former adviser in Her Majesty’s Treasury, will also be aware that Her Majesty’s Treasury did seek to have some idea of what the impact would be on the Exchequer. The estimated full cost of the FAS contribution is £600,000, which comes out of the Exchequer over time because, obviously, that will be the way that people will be compensated as and when the funds will need to be drawn down. That is also the reason for the specific dates because we are trying to cope with a specific scheme rather than giving an open-ended commitment. Having demonstrated this, I hope that we can point to the fact that, should similar gaps in certain schemes arise in the future, we will look very carefully at them without giving any cast iron guarantee.
Lord Bates
That is the net present value of the cost of the scheme. Annual ongoing cost differs depending on the schemes taken in. I do not know how helpful that is but we try to be as fulsome as we can. Has the relevant firm been paying the protection levy? I have covered that point but that does not mean that it gets entry into the scheme. It was thought that the employer supporting the scheme was a statutory employer. I think that is the point we are dealing with here—the definition of a statutory employer. It was realised that it was not only after investigation. When will we consolidate the FAS regulations? As noble Lords know, there is a great deal happening in the pensions area, to be continued on Centre Court tomorrow, I think. This requires the department to prioritise its resources. The consolidation of the FAS regulations remains on the department’s work plan but I cannot give a definite date as to when the draft consolidation regulations will be laid before Parliament. I am grateful for the probing questions I have been asked. The noble Baroness, Lady Sherlock, looks as though she wants to come back in.
Baroness Sherlock
I thank the Minister for those answers but just want to push a little bit more on consolidation. Is there a difference in principle with how long one might wait after consulting before consolidating legislation? I am glad things are on the departmental work plan, but I gather it is rather a busy work plan at the moment and would be grateful for any hints. The other question I asked is whether, whenever that happened, an impact assessment would be brought forward at that point.
Lord Bates
I think I will probably need to write to the noble Baroness on those two points, again to ensure that we get absolutely the right answer. They are good questions and we want to make sure we get a correct response. I am grateful to the noble Baroness and the noble Lord, Lord McKenzie, for raising their concerns. I commend these regulations to the Committee.
Employment: Universal Jobmatch
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Baroness Sherlock
To ask Her Majesty’s Government what steps they are taking to ensure that all vacancies advertised on Universal Jobmatch are genuine.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
The vast majority of employers post genuine jobs, and we do not hesitate to take action against those who do not follow our rules. We regularly monitor Universal Jobmatch to ensure that accounts comply, including that vacancies are genuine. If there is any cause for doubt, we will remove the vacancies until we have investigated. We continuously improve the service and are working with the provider to enhance our validation of employer accounts and vacancies.
Baroness Sherlock (Lab)
I thank the Minister for that very reassuring Answer. How does he then explain the fact that the media are reporting that a third of a million jobs on that website are ghost jobs? The Government were warned. The site has been found to be vulnerable to hackers. In the National Online Recruitment Awards, it won the wooden spoon for being a,
“mongrel of a recruitment website”,
that,
“commits almost every online recruitment crime, and then some”.
Channel 4 investigated last month. It found that one in 50 jobs had been placed by one man in Coventry. He could not prove that they existed, but it turned out that he made money every time he passed on a CV to a real agency. Channel 4 found out that, of the 600,000 jobs there, 118,000 were from one door-to-door catalogue company. This is a disgrace. You could not make it up. Will the Minister tell the House two things: first, when did the Government first know that there were problems with ghost jobs on this site; secondly, can he assure the House that no jobseeker has been sanctioned for refusing to apply for a ghost job or a job which they feared was there just to harvest their personal details?
Lord Freud
My Lords, Universal Jobmatch has revolutionised the service of Jobcentre Plus. It is a transformative service. We have many people registered on it on a paperless basis. Half a million employers are on that service. As I said, we monitor it the whole time. We are now looking at 179 employers who may be in breach of our conditions and will suspend them if they prove in breach. I can assure noble Lords that no jobseeker will be sanctioned for not applying for a job that does not exist.
Income Support (Work-Related Activity) and Miscellaneous Amendments Regulations 2014
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Baroness Sherlock (Lab)
My Lords, I thank the Minister for that explanation. Labour supports the aim of these regulations. Indeed, the leader of the Opposition said in a speech last June that in a workless household, both partners or a single parent should use some of the time while their children are at nursery to make some preparations that would help them get back to work. He also stressed that there would be no requirement to go back to work until the youngest child is five years old. So we support the aim of these regulations.
When this order was debated in another place, my right honourable friend Mr Stephen Timms asked a series of questions of the Employment Minister, Esther McVey. She was able to answer only two of them and perhaps not in the depth that my right honourable friend had hoped for. I shall therefore put some of the same questions to the Minister in the hope that the intervening week will have enabled his officials to brief him to answer them perhaps more fully than was possible on that previous occasion.
First and most seriously, why is there no easement in the regulations for lone parents who have suffered domestic violence? I acknowledge that the Government have taken domestic violence seriously. In this very Room not so long ago, we debated the new cross-government definition of domestic violence and I was pleased to give the Government support for aiming to do precisely that. In the Universal Credit Regulations 2013, there was a clear easement for domestic violence which stated that, for 13 weeks, there would be no work-related requirements. In jobseeker’s allowance, the claimant is exempt for four weeks, which can be rounded up to 13 weeks. But in these regulations, there is nothing.
On 3 March in the Delegated Legislation Committee in another place, Stephen Timms asked Esther McVey this question:
“Can she confirm that it is her intention that there will be guidance that makes it clear that there will be the 13-week easement for people who suffer domestic violence, in line with other regulations?”.
The Minister replied:
“I will indeed; it is right that, as such support is given in other areas, it should be given in this area”.—[Official Report, Commons, First Delegated Legislation Committee, 3/3/14; col. 14.]
Can the Minister confirm that it is indeed the Government’s intention that there will be guidance that makes it clear that there will be the 13-week easement for people suffering domestic violence? If so, can he explain why that is not in these regulations, as it is in the corresponding regulations on income support and jobseeker’s allowance? Finally on this first point, can he explain what a lone parent would have to do if a decision-maker should require her to undertake some work-related activity despite suffering domestic violence? After all, Gingerbread reports many cases of lone parents being pushed to do things which they are not required to do by regulations or by guidance, perhaps because of a misunderstanding among generalist advisers in jobcentres. What should a lone parent do in these circumstances?
The second question that I want to ask is on the issue of parents of children aged five who have not started school and are not legally required to receive full-time education. Parents have to explain why it would be unreasonable for them to find other arrangements for the care of the child until he or she is in full-time education. Why is that easement not in these regulations?
Thirdly, under the regulations and as the Minister explained, single parents cannot restrict their availability for work-related activities during their child’s normal school hours—which is to be expected—or when their child is under the temporary supervision of another adult. Gingerbread is concerned that the latter issue causes a potential problem, because it means that a single parent could be sanctioned for being unable to undertake work activities because informal childcare arrangements had broken down. The Minister may say that childcare is covered in the “good cause” provisions, but that is not acceptable because of the process that would have to be gone through to try to sort that out. In JSA, informal childcare is not taken into account when compliance is being determined, presumably for precisely this reason, so why is it here?
What would happen to a single parent asked to attend an interview or other work-related activity whose three or four year-old was not in nursery and who did not have access to reliable free childcare? How should she pay for childcare? In another place, when Stephen Timms asked about this, Esther McVey referred to the childcare subsidy available for the first year when a parent first starts work. She also referred to Childcare Assist, which helps with childcare costs in the week before a single parent starts work. What about someone who is not working and not required to work? How should she pay for her childcare in these circumstances? Gingerbread suggests that Jobcentre Plus should pay for the childcare. What does the Minister think of that?
Finally, there is the question of travel time. The JSA and universal credit regulations place a limit of 90 minutes’ travel time to and from an interview. Can the Minister confirm that that limit will apply also to single parents undertaking work-related activity? If so, will that be made clear in the guidance to decision-makers? I look forward to the Minister’s reply.
Lord Bates
I am grateful to the noble Baroness for her response and for generously saying that support for this initiative in preparing people for the world of work is shared across parties. When we are dealing with some of the most vulnerable people in the country, it is important that, as far as possible, such agreement exists.
The noble Baroness referred to domestic violence. Again, I preface my remarks by welcoming the fact that she acknowledged that the Government had taken this very seriously and it was of great concern. We do not believe it is necessary to put an easement for domestic violence into these regulations. The draft regulations are flexible enough for advisers to apply the policy when appropriate. The income support guidance will reflect the position in jobseeker’s allowance and universal credit by stating that when a person satisfies the policy requirements, they are eligible to receive the easement, which includes deferring interviews and not setting mandatory work-related requirements. Providing the domestic violence easement in guidance mirrors the current approach taken for claimants who are victims of domestic violence and abuse who are entitled to old-style employment and support allowance.
We believe that these regulations are broadly enough worded for that to be taken into account as a good reason why certain requirements may not be met. We do not think it is necessary to put it in the regulations, as has been requested. But in response to Stephen Timms in the other place, my colleague Esther McVey, who is the Minister responsible for this area, has said that she will issue guidance in this area to the workplace advisers. I hope that will go some way towards reassuring the noble Baroness on this point.
The noble Baroness asked what would happen if the coach made a claimant do something despite them being subject to restrictions. The requirement to undertake activity when subject to domestic violence would be a matter of good cause to be considered, and would also be subject to appeal if that was something that was disputed.
Baroness Sherlock
I just want to be sure that I have understood this correctly. Three questions occur. First, why would the Government use as their comparator the position in old-style ESA rather than JSA or universal credit—the creature of their own invention, which they have just introduced? What is the difference between somebody on universal credit and somebody on income support? Secondly, will the Minister clarify that the guidance he has just referred to will be for a 13-week easement? That was the question asked by my right honourable friend Stephen Timms. Thirdly, if a lone parent who had suffered domestic violence was then inappropriately asked to engage in work-related activity, she could appeal, but would her benefits be sanctioned in the mean time, and how long does the average appeal take? What would happen to her while she was trying to sort that out?
Lord Bates
While I am getting some guidance myself, I will move on to some of the other points that the noble Baroness raised. She asked: if childcare is not available, is this an excuse not to undertake a work-related activity? We have no power to mandate claimants to place their children in childcare in order that they can undertake work-related activity. Claimants may also restrict their availability for work-related activity to times when they do not have childcare responsibilities. However, claimants cannot use the unavailability of childcare as a reason for not undertaking work-related activity. Even with the ability to restrict their availability, the requirement to undertake work-related activity remains. Claimants must accommodate this requirement or face the possibility of sanction. Claimants would therefore need to be reasonable about what they could do, which may involve taking up the offer of free childcare. If a claimant fails to comply with work-focused interview or work-related activity requirements, the regulations prescribe that the availability of childcare must be taken into account in determining whether that is a good cause, although it is not determinative of good cause in itself.
The noble Baroness asked about comparisons with jobseeker’s allowance and universal credit and the limit of 90 minutes’ travel time to and from the place of interview. A 90-minute travel time to work in each direction applies to those claimants who are expected to look for, and be available for, work. It does not apply to lone parents affected by this change, not does it apply to claimants on employment and support allowance. Any work-related activity which a claimant is required to undertake must be reasonable, taking the claimant’s personal circumstances into account, including the time that it would take for the claimant to get there. When determining what is reasonable, matters such as the availability and practicality of using public transport, the location of work-related activity and childcare responsibilities must be considered. Guidance will be updated to ensure that advisers are aware of this and take account of claimants’ individual circumstances.
Another question was about what support the group could get from the flexible support fund. The flexible support fund can be used in a number of ways, including paying for travel and replacement adult or child care to enable lone parents to undertake training, attend interviews or start work.
On why we use comparator old-style ESA, not JSA or universal credit, the JSA easement is for jobseekers. The ESA easement is in guidance. We will consider the need to place this in regulations.
Baroness Sherlock
I thank the Minister. I urge him strongly to take the question of domestic violence back to his colleagues and to think again. I take the Minister’s line as possibly a hint that Ministers may indeed be doing that; I hope very much that I have not overinterpreted it. I look forward to hearing some more information about that. I do not think that the distinction between someone being a jobseeker or not seems to be a good reason why someone who has suffered domestic violence should be treated any differently. If one is coming out of that circumstance, the ability to look for a job, whether mandated to do so, or just to prepare for it, would both seem to be of comparable difficulty and ought to be treated similarly. I look forward to hearing some good news on that before long.
I want to clarify a couple of the Minister’s other points as I may have misheard them. When this matter was discussed in another place, the question of childcare—particularly the position of someone whose child was not in nursery having to use informal childcare—my understanding was that the Government’s position was that the additional childcare offer for two and three year-olds is an offer, not a requirement. I understood the Minister to say that, effectively, a lone parent would not be able to use the fact that he or she might not have access to any suitable childcare as a reason not to engage. Therefore, if they could not find anything else, they would have to take that offer up, whether they wanted to or not, or have their benefits sanctioned. Can the Minister clarify that?
On travel time, I am quite surprised to find that there is no limit. Can the Minister at least reassure the Committee that the guidance will say that one should not be expected to travel for three hours each way to do a brief interview or course? In a sense, the point of having a timeframe is that it is a time limit. If that time limit applies for a job, why would it not apply to a course or some other thing that the department might require the lone parent to do? Can the Minister reassure the Committee that there will be some limit, or some guidance, at least, given to decision-makers as to what a reasonable limit would be?
Lord Bates
On that point, we can safely say that that limit is consistent across JSA and ESA, and therefore the 90 minutes would continue to be the restriction. The whole point of this is to encourage an engagement to prepare people for their place of work, and therefore there is a degree of flexibility on both sides. On whether the 13-week easement in the case of domestic violence would still apply, the answer is yes.
On whether that guidance is still being formulated, of course, we introduce regulations and I would like to think that where we have had drawn to our attention certain lacunae in the regulations, particularly where they affect vulnerable people, we have shown a willingness to pause and look carefully at that. I am sure that when the guidance is issued, that will provide an opportunity for that to happen.
Baroness Sherlock
I thank the Minister for his graciousness in allowing me to intervene. There was one more issue, which was that of parents of children aged 5 who have not started school and are not legally required to receive full-time education, and why that easement was not in the regulations. I suspect the answer may be patterned on some of his previous answers.
Welfare: Cost of Family Breakdown
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Lord Freud
We are running two immediate programmes. The first is to provide help and support for separated families, running in SR10 at £14 million, £10 million of which is spent on an innovation fund that tests various interventions, involving 17 different voluntary and private groups. The other aspect is the relationship support interventions, on which we are spending £30 million. There are three main areas—something called Let’s Stick Together, marriage preparation and couples counselling.
Baroness Sherlock (Lab)
I would like to return to the answer that the Minister gave my noble friend Lady Lister. If the Minister does not know why people go to food banks, I commend to him the “Panorama” programme shown on television last night about food banks. Among other people, they interviewed a mother who described the fact that her benefits had been wrongly sanctioned for three months and that they had so little to eat that her milk dried up while breastfeeding.
I have two questions for the Minister. First what is the current success rate of appeals against sanctions on benefits? Secondly, what does he make of the pictures shown in the “Panorama” programme last night of the jobcentre that put up charts to show its staff how much money could be saved to the department by sanctioning people for a range of times?
Lord Freud
I must emphasise to noble Lords that we absolutely do not have targets for sanctioning. We have looked into this matter, and we do not have them—we do not run them. When there are exceptions, we stop it. That is not the purpose of sanctions; the purpose of sanctions is to run a system in which we provide some £85 billion to people who need it. It is our safety net to make sure that we give that properly and that people comply with the conditions required to receive that money.
Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014
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Baroness Scott of Needham Market (LD)
My Lords, I support the social security regulation which we are debating today—not just because it avoids an €11 million fine. I think it is a good thing in its own right. For once, we have a welcome change to the benefits system in that it is beginning genuinely to reflect the diversity of people’s lives and the lives of women in the workforce. That is a very good thing indeed. It is bringing a new group of women, predominantly from the very small, micro-business sector, within the ambit of maternity benefit. I just wish that the gold-plating had been left in place just on this one occasion so that they could have had a benefit more in line with everyone else.
I want to ask two questions. The first is about disseminating information, because this is a very difficult group to reach. They do not tend to be members of chambers of commerce, and that sort of thing. I do not have a particular answer, but I wanted to put in the plea that all efforts are made to ensure that women who are likely to benefit actually know about it and are able to. We hope that the Government’s new enterprise allowance scheme will be successful, so we could have even more very small businesses starting up in the coming year or so, so we need to get on top of how we can ensure that women know that these benefits are available.
Secondly, I welcome the discussions on shared parental leave—I know that the Deputy Prime Minister has been very keen on this and it has some support within government. It would provide welcome flexibility, but I am curious as to how these arrangements might work if we have shared parental leave. With those questions, I welcome the instrument.
Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation and I look forward to hearing the answers to those two excellent questions. I do not propose to ask any questions about the second order, as I accept the Minister’s assurance that it is consequential upon the first. However, I should like to ask a few questions so as to understand better the implications of the first order, relating to maternity allowance.
The first question relates to the point that has just been made about the rate being so low. The standard rate of maternity allowance is £136 a week, or 90% of average weekly earnings, for up to 39 weeks. In this case, the Government decided to settle on £27 a week for 14 weeks. I think I heard the Minister say that the aim of the allowance was to enable women who regularly help in the business of a spouse or civil partner to take a break from their activities towards the end of a pregnancy or the start of motherhood. Have the Government made any assessment of whether the amount of money involved is such that it is likely to make taking that break possible when otherwise it would not have been?
Secondly, the Explanatory Note says that 1,300 women will be affected by the provisions at an estimated cost of £0.5 million. No impact assessment was carried out, so we do not know whether the Government considered other approaches. Clearly, there is quite a wide range between what the Government are doing and an allowance that is fully gold-plated. Did the Government consider bringing this in at an intermediate level and, if so, what kind of cost would have been implied?
Next, I should be interested in understanding what conditions a claimant would have to meet to qualify for maternity allowance under these circumstances. We have had a question about shared parental leave. I should also be interested in knowing what happens to someone who is adopting a child rather than giving birth, as the regulations are specifically about giving birth or having just given birth. Looking at the regulations, I do not think that someone in these circumstances would be entitled to statutory adoption pay, so would they be entitled to maternity allowance? Similarly, what happens if the child is stillborn or dies immediately after birth? Certainly, I think that SMP is payable if a child is stillborn after 24 weeks, but is there a read-across to this provision?
I was pleased to hear the question about communication because I was going to ask something similar. The Minister made the very good point that there may be strong reasons why women in these circumstances may be better off being paid by the business and being able to pay national insurance. I am very conscious that the Pensions Bill is going through the House at the moment. Of course, if a woman in these circumstances does not end up with 35 years of national insurance payments in her own right, she may find that when she comes to retire she is not entitled to the new single-tier pension, and in future she will not be able to claim on her husband’s contributions either. Therefore, when the Minister looks at the communications campaign, I wonder whether anything can be done to make sure that the opportunity is taken to communicate to those women so that they understand the consequences of not paying national insurance and of not coming within the national insurance and tax system.
Finally, I have a practical question. Can the Minister explain the tax and tax credits treatment of these benefits and say whether there is any passporting or link across to any other benefits as a result of receiving this maternity allowance?
Lord Bates
I thank my noble friend Lady Scott of Needham Market for her contribution and I also thank the noble Baroness, Lady Sherlock, for raising these points. Some very good questions have been asked and I shall do my best to answer them.
My noble friend Lady Scott asked whether women getting this maternity allowance will have access to shared parental leave and a pay scheme. The answer is no, and I am sorry to be disappointing. The statutory shared parental leave and pay provisions are designed for employed couples to share the care of their child. It would be available to eligible women who are entitled to maternity leave, statutory maternity pay or maternity allowance because they are employed or self-employed earners—that is the key word. Therefore, women receiving this form of maternity allowance will not have access to that scheme as they will be neither employed nor self-employed in their own right.
My noble friend Lady Scott and the noble Baroness, Lady Sherlock, asked how we will encourage take-up of the allowance, and we talked about some of the publicity which is being received. We have identified stakeholder groups relating to both self-employment and maternity, and they have been informed of the change. They include Maternity Action, Netmums, Mumsnet, Bounty, Sands, Citizens Advice, the Royal College of Midwives, the British Medical Association and HMRC. We will be publicising the qualified conditions and the claim process on direct.gov.uk, as well as providing relevant guidance and claim forms. Needless to say, if there are any specific organisations which the noble Baroness thinks it would be helpful to include in that list, we will be delighted to hear from her.
I turn to the points raised by the noble Baroness, Lady Sherlock. She asked about the sad cases where there is a stillborn child. The mother would still be entitled to maternity allowance, in the way that statutory maternity pay applies at present. These provisions do not extend to adoption.
Baroness Sherlock
Before the Minister leaves that point, I understand the Government’s argument that they do not wish to gold-plate anything that comes from Europe. I was pushing him slightly because he gave two different reasons for doing this. One was not to gold-plate; the other was to give the women an opportunity to take a break from their activities. My question was whether he had done any assessment of whether the level and duration of the payment would be adequate to meet that objective.
Lord Bates
The answer is that no such assessment was undertaken.
The noble Baroness asked whether this maternity allowance will passport through to other benefits. It is up to each provider of those passported benefits to decide whether to extend their passported benefits to this group. Of course, in the same group of regulations we are talking about changes being made to the legal aid provision, so there is some element of a knock-on effect to that. I am grateful to all noble Lords who have spoken.
Baroness Sherlock
I am happy for the Minister to write to me but I asked about the tax treatment of the allowance and the tax credits position. He may feel free to write if that is easier.
Lord Bates
I apologise to the noble Baroness. I will follow that up in writing.
I am grateful to all noble Lords who have spoken. I thank them for their interest in the debate and take the opportunity to say that I hope we agree that the Social Security (Maternity Allowance) (Participating Wife or Civil Partner of Self-employed Earner) Regulations 2014 ensure that those women who participate in the business of their self-employed spouse or civil partner can receive maternity allowance to enable them to interrupt their activities due to pregnancy or motherhood, and that the Legal Aid (Information about Financial Resources) (Amendment) Regulations 2014 contribute to ensuring that those entitled to help with their legal aid costs receive that help, while those who can afford to pay, do so.
Social Security Benefits Up-rating Order 2014
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Baroness Sherlock (Lab)
My Lords, I thank the Minister for his explanation of the orders, and the noble Lords, Lord German and Lord Kirkwood, for their contributions. I would like to add myself to the circulation list for this exciting reply to the questions of the noble Lord, Lord German. Is the Minister willing to place a copy in the Library, given that it might be of interest in years to come? They are very good questions.
I share the hope of the noble Lord, Lord Kirkwood, that Parliament retains a sense of the importance of these orders. The decisions taken here by Parliament will affect the living standards of millions of people over the next year. They really matter, and if we ever get to the stage where we stop taking them seriously we will be failing in our duty. I pay tribute to the noble Lord, Lord Kirkwood, who turns out every year, come rain or shine, although I am disappointed that he had nothing to say about the GMP. I look forward to a year when I find something to say to it, but I am not going to ask any questions about it either.
Much has been made of the fact that the Government are uprating pensions by the triple lock. That is welcome as far as it goes. The comments about RPI notwithstanding, will the Minister acknowledge that the triple lock has so far been less generous than the RPI uprating it replaced? It was not used in the first year. I notice that my right honourable friend Stephen Timms pointed out, when this order was debated in another place, that the RPI last September was 3.2%, whereas the pension uprating delivered by the order, as the Minister said, is 2.7%. My right honourable friend said that the triple lock has delivered a lower uprating than the previous formula in each of the three years it has been used. The effect of that is that in RPI terms it is a real-terms cut for the third year in a row.
More concerning is that the standard minimum guarantee element of pension credit is to be increased by only 2%. This reduces both its real-terms value and its value relative to the basic state pension. One of the consequences must be that the poorest pensioners find their pension income falling in real terms. The Minister, I am sure, can confirm that. I would be very interested in the Minister’s answer to the question of the noble Lord, Lord Kirkwood, about cost. If the value of some of these benefits is falling, but the spend is rising, is caseload the reason? I would be interested to know.
The decision on pension credit is significant not just for those currently dependent on pension credit, but potentially for all those who will receive the new single-tier pension, which is due to be introduced in April 2016, if the Pensions Bill currently going through the House receives Royal Assent. The Government have signalled, during our deliberations on that Bill, that they propose to introduce the new single-tier pension at a rate above the prevailing rate of pension credit. By reducing the value of pension credit in real terms, are the Government not giving themselves the option of introducing the single-tier pension at a starting rate lower than might have been the case had pension credit maintained its value in real terms?
Can the Minister help me on another point? As the premiums payable to pensioners with working age benefits will be uprated in line with pension credit rates, does that also mean that they too will face a real-terms cut? Will the Minister confirm that? Also, what assessment has he made of the impact on pensioners with small savings of the Government’s decision to increase the savings credit thresholds by 4.4%, some way above inflation? I know that the Government are keen for people to do the right thing and to save, but the reason for introducing a savings credit was so that people who had put money aside would still find themselves better off than those who had not. Will the Minister explain the Government’s thinking on that?
I also have some questions about process. I am with the noble Lord, Lord Kirkwood: I fear that I may have lost track of some uprating that should have happened. If I tell the Minister what I think is happening, perhaps he will correct me where I go wrong. As I understand it, the Welfare Benefits Up-rating Order 2014 uprates by 1% those on benefits covered by the Welfare Benefits Up-rating Act. The protected benefits are covered by this order. So what happens to tax credits? Where did they get uprated? Where was the benefit cap uprated? I know that it has been, but I am not quite sure where that happened. Also, are all the elements of universal credit uprated in this order and, if so, where are the work allowances uprated? I could not see them.
I have two final questions. First, on childcare, it seems to me that the childcare element of universal credit is not being uprated at all. Can the Minister explain why not? If it is not being uprated at all, that is a significant real-terms cut. The last annual childcare cost survey in 2013 from the Family and Childcare Trust—what used to be the Daycare Trust—found that costs had risen by an average of 6% the previous year, more than double the rate of inflation. If the decision is made to cut that childcare element in real terms, coming on top of the Government’s decision to cut the proportion of childcare costs in universal credit to 70%, will that not have a significant impact on the ability of working parents to afford childcare? There was no impact assessment, and I was not able to work out what the effect of that was. Have the Government made any assessment of the impact on working parents of that decision on childcare and, if so, what is it?
Finally, I should be very interested to hear the answers to the questions from the noble Lord, Lord Kirkwood, on PIP, for example, where I have grave concerns about the implementation. The recent report is not encouraging in that respect. Also, I should like to understand to what extent, if at all, the Secretary of State is using discretion in making judgments about the appropriate levels of uprating, given the concern that abounds now about the use of food banks and the extent of poverty among people who are in receipt of benefits.
Lord Bates
I thank noble Lords for their questions. All Members who have spoken are renowned experts in the field. Until a few months ago, I was joining from the Back Benches in scrutiny of such orders, so I sense the expertise that lies behind the pertinent questions which have been asked. I was particularly struck by my noble friend Lord Kirkwood’s question about how small is the audience for a mere £3.3 billion of taxpayers’ money to go to the poorest in society. That is a worthy point to make, and it would be absolutely ungallant of me to point out the level of participation from the Liberal Democrat Benches and the absence of participation from the Opposition Benches.
Lord Bates
We are a coalition—we share the point. The point is that I think that there is a genuine cross-party support. For example, the triple lock on pensions is welcome, it is working and it is delivering real-terms increases to pensioners.
If I may, I will go through the points raised in the order in which they were raised. My noble friend Lord German raised the question of the Treasury grant to the National Insurance Fund. It is not a question of the National Insurance Fund running out of money. Making provision for such grant has no overall impact on the Government’s finances. It is done primarily for accounting purposes to ensure that the National Insurance Fund complies with the Government Actuary’s recommendation of maintaining a working balance of one-sixth of the expected benefit expenditure in 2014-15. My noble friend was absolutely correct to point out that at least now the information in the forecast is being made available in the Government Actuary’s report. He asked me a specific point about whether we will look at that historically over the 10-year period. I should say that we think that the grant has not been required over that period but, as one of the paragraphs in the probably lengthy letter that I shall be sending to noble Lords, I shall cover that important point and I thank him for raising it.
There was a smart observation asking: why the different dates. They are in place for good administrative reasons, including taking into account the prescribed payment days of different benefits. I know that there might be a follow-up question asking why there are different payment days but perhaps we can just say that that is the answer. However, the noble Lord puts his finger on an interesting point.
My noble friend Lord Kirkwood asked whether we would ensure that working-age benefits will be debated once the Bill is finished. Working-age benefits will be debated again from 2016-17. I will turn to the IFS Green Budget in a minute. My noble friend and the noble Baroness, Lady Sherlock, asked about the uprating of tax credits. The Tax Credits Up-rating Regulations 2014 will uprate certain elements of tax credits by CPI from 6 April. These were laid in draft form on 12 February and are due to be debated later in March. The Child Benefit and Tax Credits Up-rating Order 2014 will increase certain elements of tax credits and the rate of child benefit by 1% from 6 April and 7 April respectively. That was made on 24 February.
My noble friend Lord Kirkwood also asked about how much of the increase in expenditure is in relation to caseload increases. Clearly, caseload is an important factor in the overall expenditure, which is why it is important to make pension spending more affordable over the longer term, including, for example, the changes we are making through increasing the state retirement age. As regards the delay in implementation of the personal independence payment, PIP has been successfully introduced using a controlled approach to learning lessons as we go along in a live environment. We have been very clear that PIP will be introduced in a gradual way. Disabled people have wanted us to take time to get it right, which is what we are doing. Natural reassessment is under way in several areas and we will continue to monitor and evaluate it before making any further decision on widening the reassessment rollout.
My noble friend also asked whether we are going to introduce new eligibility criteria for winter fuel payments. Winter fuel payments are non-contributory and were designed to give older people in the UK reassurance that they can keep warm during the cold weather. The Government intend to bring in an eligibility criterion based on country of residence with payments going to only eligible people living in EEA countries with colder climates. Legislation will be needed to pass this before any changes are made.
On the UC rollout, our current planning assumption is that the universal credit service will be fully available in each part of Great Britain during 2016, having closed down new claims to the legacy benefits it replaced with the majority of the remaining legacy caseload moving to universal credit during 2016-17. Final decisions on these elements of the programme will be informed by the development of the enhanced digital solution.
My noble friend Lord Kirkwood also asked about the Green Budget report written by Paul Johnson and the excellent organisation, Oxford Economics, for the Institute for Fiscal Studies. He suggested that we read the report—it says here that I will do so. I think that I will apply the collective and say that I assure my noble friend that we will do so. It is a very important contribution. We have all said that we want these changes to be evidence based. When serious organisations such as the IFS produce serious research, of course we should take it seriously. We will monitor future developments. I am grateful to my noble friend for drawing that to our attention.
Baroness Sherlock
My Lords, I am very grateful to the Minister for explaining the process and what happens to the different benefits, but I am still chewing over the information that neither the childcare allowances nor the work allowances in universal credit will be increased at all and are therefore facing a real-terms cut. I might have let that go, but I am afraid that I will have to push back on his comment that all sides of the House agree that people will be much better off under universal credit than under the present system. Universal credit is simply a delivery vehicle. Whether or not people will be better off will depend on how generous the benefits are, the taper rates applied, the levels of work allowance or disregard applied and the interaction with other sources of support. In other words, unless the calculations done previously about the gains to work and participation rates in work are redone using these figures, we do not know whether people getting universal credit are going to be better off than they are now.
If the Minister cannot tell me now, could he please write to me later and place a copy in the Library on what assessment the Government have done about the effect on incentives to move into work and gains to work as a result of these real-terms cuts to components of universal credit?
Lord Bates
I appreciate the point which the noble Baroness has made and I was not suggesting that everybody would be better off under this provision. The question is one of removing perceived barriers to go back into work—to encourage people to move seamlessly off benefits and into work—without creating disincentives. That principle, I think I am correct in saying, is one that is widely shared on all sides of the House. How it actually applies and is worked out for individuals and individual families is clearly a crucial matter. On that point, I will add that to the list of issues about which I will write to noble Lords immediately following this debate.
I have already explained that we are spending an extra £3.3 billion on uprating pensions and benefits in 2014-15, enabling us to protect key benefits and vulnerable groups. This order protects pensioners, many of whom have worked hard all their lives and are no longer in a position to increase their income through work, and benefits, which reflect the additional costs faced by disabled people, again reflecting our commitment to protect those least able to increase their spending power. Those are principles which I hope all noble Lords can support and on that basis I commend these orders to the Committee.
Pensions Bill
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Baroness Sherlock
Baroness Sherlock (Lab)
My Lords, I remind the House of my registered interest as the senior independent director of the Financial Ombudsman Service. Amendment 23 stands in my name and in the names of my noble friends Lord Hutton and Lady Drake. In moving Amendment 23, I shall speak also to the other amendments in this group. These amendments may look lengthy but their aim is remarkably precise.
Amendment 23 is very simple. It would retain the power of the Secretary of State to put into place the consolidation of small pots but would remove the part of the sentence that limits this to the “pot follows member” form of consolidation. This sounds technical but really it is not; it is about fairness. As the state is enrolling people into a pension scheme without their explicit consent, surely it has a very high duty of care to them to ensure that the money they are putting aside is not lost through excessive charges or poor investment choices driven by inadequate governance.
“Pot follows member”, or PFM in the jargon, is the Government’s solution to a problem. I shall comment on the problem, demonstrate why I believe that the Government’s proposed solution is flawed and propose an alternative. The Government believe that action is needed to address the large number of dormant small pension pots that arise under auto-enrolment when employees move to new jobs, which they do on average 11 times in their career. We on these Benches agree that action is needed but we do not agree with the form of action proposed. The impact assessment confirms that the Government considered two default transfer options: first, pot follows member, where the small pension pot would follow the member to their new employer’s pension scheme; secondly, an aggregator scheme, where small pension pots would be transferred to an aggregator, such as NEST. The Government had two options but I believe that they chose the wrong one. However, I do not propose to substitute my judgment for that of the Government; rather, this amendment would simply increase the choice available to them. As it stands, Clause 32 allows only for pot follows member. Our amendments would enable the possibility of the Government using an alternative default aggregator model without the need for new primary legislation.
I would like to set out the context. The core issues of trust and confidence are still centre stage in getting people to start, and continue, saving for their retirement. This Bill, and auto-enrolment itself, should give people the confidence they need to save for their old age, but how can we demand that people save if they do not trust the savings vehicles and do not trust the pensions market as offering value for money? The pensions market is not a typical retail market where the consumer chooses the product. Under auto-enrolment, the consumer does not choose the product; the employer does. The only choice for the employee is either to stay in or to opt out and lose the employer’s contribution to their pension. There are also many intermediaries in the pension supply chain. Pensions are complex products, lacking transparency. While many large employers may have the resources to pay for good product advice or assessment of fund performance, SMEs may not. The demand side is weak.
Lord Freud
I can confirm my noble friend’s question—or I can give the answer to confirm it.
At this point in time, when we are just starting out with automatic enrolment and successfully getting people saving for the first time, we need to make it as easy as possible for them to build their pension. We need to use inertia in the right way. That means moving a small pension pot to the current live pot where the individual can see it growing, rather than sending it off to a scheme with which the individual has no engagement and in which they have no interest.
Now is not the time to break the link between the individual and his or her employer. Automatic enrolment is going well, with 3 million individuals newly saving and less than 10% opting out. It is reinforcing the workplace pension as a key element of the benefit package that employers offer their staff after decades of decline in occupational pensions.
I have heard the argument that these amendments are designed to give the Government another option, which appears on the surface to be a generous approach. Providing the Government with greater flexibility is one thing, but listening to the debate today, I suspect that few on the Opposition Benches want the Government to have the flexibility to chose anything but the aggregator model.
In practice, the amendments will leave us in limbo and bring back uncertainty at a time when industry is beginning to get behind, and position itself to deliver, pot follows member. As my honourable friend in the other place announced on Monday, officials are currently exploring the feasibility of using HMRC’s PAYE data and system to help us to deliver a secure, efficient and straightforward pot-matching element to implement the process.
In response to the assertion of the noble Baroness, Lady Sherlock, that pot follows member would be hard to set up, we have recently had some very positive workshops with industry representatives and HMRC. The model is already inspiring some exciting and innovative approaches to transferring money with an employee as they move jobs. The cost of the transfer was specifically mentioned by the noble Baroness, Lady Drake. It will be the same for an aggregator as for pot follows member. Altus has challenged the claim that pension transfers are too hard and too expensive by stating that transfers for ISAs and funds cost £1 or less, and that this can be replicated for pension transfers.
After two years of discussion and debate on this issue, even if we cannot agree with the Opposition on the right delivery model, I hope that we can agree that we need to take a positive step forward. On the “pause to reflect” point made by the noble Lord, Lord Hutton, I do not believe that we are rushing into this measure. We first consulted more than two years ago and followed up with two policy papers. We also held extensive discussions with industry and consumer groups within that period. I urge the noble Lords to withdraw their amendment to allow us to work together, and work with industry, to make automatic transfers a reality.
Baroness Sherlock
My Lords, I thank all noble Lords who have contributed to what has been another classic House of Lords debate. I particularly thank my co-signatories to this amendment, my noble friends Lord Hutton and Lady Drake. The Minister referred at the outset to a pantheon of pensions expertise, and indeed it has been. The noble Lord, Lord Bates, joked in Grand Committee that the Pensions Commission was almost quorate since two of its three members were gathered there. I say to the Minister, as I said then to the noble Lord, Lord Bates, that if I were sitting where he was and this pantheon was sitting opposite me and telling me that I was wrong, I would be pausing, just as my noble friend Lord Hutton suggested.
A number of arguments have been made today. The Minister says that the Government have been discussing this for two years but this House has not. When we discussed it in Grand Committee, I do not recall hearing a single supportive speech for pot follows member. I am glad that the researchers of the noble Lord, Lord Stoneham, moved him from his position then to the position that he articulated so clearly today, but I do not think that anyone in this House has heard those arguments made until today. I am glad that we have heard them, and very glad that the Minister has been doing work with the industry to get it ready to deliver what will be this Act. However, it is still a Bill; it is not an Act and this House has every right to make its own decisions. Whatever decisions Parliament makes, I have no doubt that at that point the Minister and his colleagues will go out there to deliver.
What arguments have we heard today against our enabling amendment? First, we have heard that it is not clear what the choice is. Well, that is the point: the amendment says to the Government, “Go back and think again. We will work with you if necessary, but think again”. It is said that there will be a delay. Yes, there will be a delay, but the wrong thing would be to rush ahead and make a decision because you want it now, if the consequences would be very serious because it is the wrong decision. This is too serious to rush into. A lot of criticisms have been made so far. For example, the Minister says that the way in which this amendment is constructed would leave the choice of the aggregator with the outgoing employer. If the Minister looks again at Amendment 23J, he will find in fact that it says that regulations may do one of two things. There is a big “or” between the two; it is either push or pull. Everything about these amendments is constructed to say that we recognise there are choices to be made but think that the Government have not given enough thought to what should be the right way forward for consumers.
We have heard nothing to counter the arguments made across the Benches here. What about all those who leave employment? What about the self-employed, who make up the fastest-growing sector: where do their pension pots go? What happens to the pension pot of the seasonal cricketer mentioned by the noble Lord, Lord Turnbull? I am sorry, but I live in Durham and our cricketers are mostly in the England teams, so I cannot advise him there. However, I can tell him that that person would really struggle under pot follows member. What about all those people in mini-jobs who will find themselves in a position of not having a single employer? Much has been said about the relationship between employer and employee, but the truth is that every model of pension scheme struggles with employee engagement. As the noble Lord, Lord Flight, pointed out, the whole point of this is that it addresses only the position of those who make no active choice themselves, yet those are the people to whom the state owes the greatest responsibility. These are the people whose funds we are moving, without their explicit consent, from one employer to another.
Much has been made of the fact that we want all the schemes to be of the best quality, but let’s get real—the OFT has already said that the market is not working. The noble Lord, Lord Turner, has described the challenges they found: people are learning when they come to retire that between 25% and 40% of their pension pot has gone in charges. If the Government really are committed to tackling charges I would invite the Minister to intervene again and to give a proper answer to his noble friend, the noble Lord, Lord German, about when the Government will cap pension charges. If he will not tell us now, I have a very simple solution for him—he can vote for our amendment in the next group and cap the charges tomorrow.
Lord Freud
I really do need to take up the invitation. I think that we have made it clear that we will deal with this within this Parliament, which I think means by a date some time in May. I think that that is fairly clear.
Baroness Sherlock
It is interesting, my Lords. What has happened—without wishing to pre-empt the next debate—is that the Opposition pushed the Government to do this but the Government said that it was not necessary. The Minister then went out to consultation and suddenly seemed to get cold feet, and he put it on hold for a year. There is a very small window but I am delighted to hear it. But the Minister can vote for our amendment and need not wait. The Government are again being invited to do it, and my noble friend Lord Hutton has very powerfully made the case for why they should.
I have been careful to try not to put my personal preference in the proposals, but I would be happy to join the Minister in a proper cross-party, consensual discussion about the way forward. The Labour Party introduced auto-enrolment and I pay tribute to the Government for taking it forward. We all share a common objective: to get as many people as possible saving for retirement. They can do so only if they have trust and confidence in the pensions market and in the schemes they are investing in. If they do not have that confidence they will not save and we will all be the poorer. The best way to do it is to ensure that there are schemes in which people can have confidence. I believe this is the right way forward and I wish to test the opinion of the House.
Baroness Sherlock
“Review of provisions
Within one year from the date of enactment, the Secretary of State shall, following the completion of a public consultation, lay before both Houses of Parliament a report assessing the impact of the provisions contained within this Bill on the following—(a) current and future recipients of the state pension;(b) members of private pension schemes;(c) women born between 6 April 1951 and 5 April 1953;(d) the level of knowledge among young people of state pension entitlement and private pension provision; and(e) such other matters that the Secretary of State for Work and Pensions and the House of Commons Work and Pensions Committee deem relevant.”
Baroness Sherlock
My Lords, Amendment 41A in my name and that of my noble friend Lord Browne calls for the Secretary of State to review and report to Parliament on the impact of the Bill on specific groups. I recognise that the department undertakes research, but this amendment picks up on something slightly different: the impact on specific groups about which concern has been expressed during the passage of the Bill through Parliament, or where provision is in effect a work in progress.
This is a major Bill that will have a significant impact on the majority of our citizens—indeed, on pretty much all of those who have yet to reach state pension age. If the Bill proves to be even half as good as the 1948 Act, it may be in place for a long time. The amendment calls for reviews of provisions made in the Bill to check that we have got it right and to enable us to make any necessary adjustments for those who are unfairly disadvantaged, or where provisions seem not to be working as we might have hoped.
Paragraph (a) of the proposed new clause calls for a review of existing and future beneficiaries of the state pension scheme. When there are winners and losers we should review that to make sure that we have got the balance right. We should also include within the review an assessment of whether transitional arrangements are adequate and working.
Paragraph (b) relates to the operation of private pension schemes. Given the debates this evening, I hardly need detain the House further by sharing our views on whether the private pensions system is working well; I think that we all know that there are challenges. Some of the changes that are needed, such as to the annuity market, may well need primary legislation, but many will not. The review will take the opportunity to look at whether the various changes, legislative or not, which the Government have made and promised, are working effectively.
Paragraph (c) relates to the concerns expressed by many women born between 6 April 1951 and April 1953. I am sure that all noble Lords have had many communications from women in that category who are affected. In Grand Committee, the Minister was pressed by various noble Lords, including my noble friend Lady Hollis and the noble Lord, Lord Paddick, to be clear as to whether or not this cohort of women would be better or worse off under the new system. The assumption of the Government is that they will be better off, but I never got a satisfactory response to the question I posed in Committee as to why the Government think that women born between 1951 and 1953 are better off under existing arrangements, and yet also claim that women will mostly be better off under the new pension arrangements. I still do not quite understand how both can be right. The amendment asks the Government to report to Parliament on the actual impact of these provisions, rather than simply relying on analysis of what the impact is likely to be.
Paragraph (d) focuses on the need for a review of the knowledge of young people of the system. Young people currently face a challenging work environment with high youth unemployment, the potential for high debts if they go to university and astonishingly high rents. We may safely conclude that, for most of them, concern about living in poverty in their dotage is not chief among their concerns, so a call to start contributing to an auto-enrolled pension may not ring loud. Yet that is of course the very best time to address those concerns.
Better financial education is needed, coupled with information about the importance of providing in future for their retirement. We owe it to young people to encourage them to consider making pension provision as soon as they are able to do so. This amendment seeks to keep track of the Government’s strategy to ensure that our young people are armed with a greater understanding of the need to proactively engage with pension decisions.
This is a far-reaching Bill and we should therefore make sure that we have got it right. Paragraph (e) of the proposed new clause recognises that the Select Committee, and indeed the Government, may identify other matters that should be reviewed and reported to Parliament.
The principle underpinning the Bill is that people should have a state pension that is simple to understand and that they should take responsibility for saving for their old age through work-based pensions. We also need to have it acknowledged today that the state owes a duty of care to the large numbers coming under auto-enrolment. In light of the broad consensus that industry must improve its standards and reduce its charges, its progress towards that should be monitored by Parliament. The amendment sets out a method of parliamentary scrutiny to ensure that we have got it right and that the Pensions Bill will last us, as the Minister aspires, for decades to come. As there will be an election before enactment—and, of course, a change of Government, one hopes—the amendment is prudent. I recommend it to the House. I beg to move.
Lord Freud
My Lords, I do not think that anyone in the House can be under any misapprehension but that the Government value extremely highly the role of evidence, analysis, consultation and evaluation in policy-making. Our approach to designing this once-in-a-generation package of pension reforms has been heavily informed by a robust and wide-ranging evidence base. However, looking at the text of the amendment and its timing, I must make clear that the provisions on the new state pension, and many of the other provisions in the Bill, will simply not have been commenced by spring next year—the time used in this amendment. Therefore, all that would come out of such an amendment would be a rehash of the information that has already been provided to Parliament: there would be nothing to add. We have no particular objection to this amendment in terms of sentiment, but its timing is just not appropriate.
I will not spend a lot of time going through all the issues, which we have gone through in huge detail over the past weeks and months. However, I will touch on how we will monitor the impacts in the future and what the plans are. It is clearly imperative, as the noble Baroness said, that a set of reforms of this nature is accompanied by a strategic approach to monitoring at sensible intervals. I am not saying anything that noble Lords will disagree with when I state that pensions is a very long-term policy area, and that the impact of many measures will not be felt fully for decades.
As a society we are asking people to do more to think ahead and plan for their retirement. As a Government it is our duty to do the same in looking at the retirement outcomes of the population as a whole. Our retirement outcomes framework, published in September 2013, provides an overview of projected future retirement incomes, looking at the impacts of government pension reforms as a whole and across state and private systems.
Lord Freud
I am happy to make sure that we itemise those in a way that will help noble Lords keep an eye on what they need to monitor as we go along.
We will update the modelling as evidence becomes available on the impact on work and saving of automatic enrolment, the single-tier state pension, and state pension age changes. As noble Lords will know, the department conducts a six-monthly tracking study of attitudes and behaviours in relation to pensions, later life and automatic enrolment. A similar exercise will start after Royal Assent, to monitor awareness and understanding of the reforms.
We are committed to the principle of post-legislative scrutiny, but such scrutiny must have scope to provide insights beyond the impact assessment and consultation practices to which we are already committed. I know that the noble Baroness accepts the point on timing, but the timing of this amendment would not add materially to the powers of the Work and Pensions Select Committee. Indeed, there is an awkwardness about the timing, because it straddles the next election. However, we look forward to continuing to develop pensions strategy with that committee’s input.
I know that the noble Lord does not appreciate my asking for the other side to withdraw this amendment and not press it to a vote, but that is the position I am in. Maybe there is more warmth to my request than there has been this evening.
Baroness Sherlock
My Lords, that would not be hard. I thank the Minister for that response, and I thank my noble friend Lady Hollis for pressing him for more detail on how this will be monitored in future.
I am very grateful to the Minister for setting out the Government’s commitment to post-legislative scrutiny and for setting out his commitment to making sure that the impacts of the Bill are analysed carefully, and with the use of evidence. I will press him to do two things. The first is to give particular attention to the two groups mentioned by my noble friend Lady Hollis. The women born from 1951 to 1953 feel very strongly that they have missed out on something important with this. If the Government turn out to be right, and they are better off under the current system, it is important not just that the Government find that out but that they share that knowledge as widely as possible. If that is the case, those women will be reassured—and, if not, they have a right to know anyway. Can the Minister also look at the position of those who would have been affected by, for example, the removal of derived rights, and whether the transitional protections are working well for them?
Secondly, as well as all the work that has been done to an appropriate timescale, will the Minister give some thought to how that might best be shared with the House? The proceedings have been very good as the Bill has moved through Parliament. A lot of issues have been raised—in this House in particular—and a lot of expertise has been brought to bear on this, and we have all learnt a lot from the process. Having done that, rather than have the results of it disappear into the department, marvellous as it is, it would be helpful if they could come back out so that we can all learn from that, both for the Bill and for future legislation. However, I will take his assent to those marvellous suggestions as read, and on the basis of that—and because he asked so nicely—I beg leave to withdraw this amendment.
Pensions Bill
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Baroness Turner of Camden (Lab)
I support my noble friend Lady Hollis on this amendment. I am sorry that the noble Lord, Lord McKenzie, is not here to second it, The Government have had a long-term policy—they kept telling us about it at every stage of this Bill—of being in favour of people saving for themselves in addition to having the pensions provided in the Bill. They expect people to save for themselves and they regard the pensions provisions that they are making as a kind of platform from which people can then make savings for themselves.
How are people to save for themselves if they do not have the necessary information about what their entitlement is? The amendment addresses the entitlement to a pension statement and notification of entitlement to a statement. All that is very necessary if people are to make sensible arrangements for their retirement. I am amazed to think that the Government may not accept this amendment. I hope however that they will because it is in line with their own thinking on the Bill. They want people to save. How do they expect people to save if they do not know what their entitlement is? They have an obligation to tell them what it is. Certainly it happens in the private sector; I belong to a private pension scheme and I get a regular statement as to what my entitlements are. Why can that not be the case for people who are receiving state benefits?
Baroness Sherlock (Lab)
My Lords, my noble friend Lady Hollis has raised some significant questions and I look forward to hearing the Minister’s answers. This amendment follows an ultimately rather unsatisfactory discussion we had in Committee during which my noble friends Lord McKenzie and Lady Hollis, along with the noble Baroness, Lady Greengross, and others tried valiantly to get the Minister to explain exactly when somebody would receive a communication from DWP to warn them that the state pension they would get in future would not be the same as what they might have expected. I went back and reread the record. I think the answer we got was that they would get a statement if or when they asked for it and then normally only digitally. The Minister kindly arranged for officials to explain their communications strategy to Peers, and I am genuinely grateful for that. However I think it is fair to say that the exercise did not entirely allay our fears or perhaps fill out all the gaps in our knowledge. I hope the Minister is looking forward to finding a consultancy fee for my noble friend Lady Hollis for her contribution to what will doubtless be the next mailshot from the department.
In Committee I raised comments that had been made during the Select Committee inquiry and elsewhere from quite a wide variety of bodies about this subject. It is worth highlighting a couple. Citizens Advice has been stressing that considerable complexity inevitably remains in the system because of the transitional provisions. It says that,
“a sustained communications programme could improve outcomes, manage expectations, minimise misinformation, promote action on NI contributions, and support personal saving for retirement”.
That last point is one made by my noble friend Lady Turner. The Association of British Insurers had also stressed that adequate communication was essential because it was important that people did not feel unclear about how much they would receive, and it should be clear that they would need to save. That is a crucial drive behind all of these reforms and the Labour reforms that preceded them. People need to understand what they are going to get to make sure they save enough for their retirement.
The Select Committee certainly found that there was a lot of confusion out there. Many people thought that from now everybody would get £144 a week instead of the current state pension. Many people thought that all means-testing would disappear and that if they would have got more than £144 now that they would lose that in future. The committee stressed how important it was that people have full information about their future entitlement.
I reiterate three simple questions which I raised in Committee; they did not get answered at the time but I think the Minister has had an opportunity since then to reflect on them. First, how and when do the Government propose to contact people to tell them of the changes to their entitlement? Secondly, at what point will the Government contact people who have previously requested and received a pension statement to warn them that it may no longer be accurate? Finally, in setting up a communications campaign on this new scheme, what outcomes are the Government seeking and how will they measure them? I look forward to the Minister’s reply.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, the single-tier pension reforms are designed to simplify the current state pension system, to make it easier for people to understand what they will get from the state in retirement. More so than for other reforms, therefore, communication is critical to success, so I certainly share the interest that noble Lords have shown in this issue. Effective communication requires both the right message and the right channel for delivering that message. This forms the basis for our communication strategy to support these reforms, a summary of which I circulated to noble Lords this morning and which will be placed in the Library.
We will deliver a phased approach to our communications, building from Royal Assent towards the implementation of the reforms and beyond. This will allow us to provide accurate and up-to-date information as quickly as possible before we issue more tailored communications through a range of channels to reach all our audience groups.
State pension statements will remain a key communication with future pensioners and will be an important vehicle for helping individuals understand how they are affected by the reforms. The introduction of these reforms gives us the opportunity to radically transform the way we currently provide this statement service. Our ultimate vision is to provide an online system that is integrated with HMRC’s national insurance data, enabling people to access this information at a time to suit them and in a way that allows them to model the impact of gaining further qualifying years.
In Committee I said that we would provide statements that reflect the single-tier rules once we have the new IT in place and individuals’ NI contribution records are complete up to and including the 2015-16 tax year. Prior to April 2016 our plan was to continue to provide statements based on the current rules accompanied by additional information on the single-tier changes to those affected by the reforms. However, we believe there is trade-off in terms of providing information we have available based on current system amounts while trying to minimise the distribution of information that is potentially misleading or simply begs further questions. Noble Lords may wish to note that we are therefore currently reviewing the information we can provide to customers prior to April 2016 to ensure that it is as accurate and helpful as possible. We will make a decision on this by the end of March when we will make our plans more widely known through discussions with our stakeholders and within our broader communication materials.
The noble Baroness, Lady Sherlock, asked when we might contact previous recipients who will be affected by the changes. We will consider this to be part of the process. It is important to note that our data retention rules mean that our statement IT systems hold only a limited number of historic requests going back a maximum of 18 months, and therefore we cannot contact all previous statement recipients. The statements make it clear that the estimates they provide are based on the current rules and may change if individual circumstances alter or the law changes.
Baroness Sherlock
My Lords, although we gave this a fairly good airing in Committee, I confess that I do not yet feel that I properly understand the nature of the Government’s objections to the taking of lump sums. My noble friend Lady Hollis explained her case for this, and there is no doubt that we have a crisis of savings in this country. Too many people do not have a safety net for a rainy day, and British households generally do not have enough money in savings. That amount has been falling in recent years—unsurprisingly, given the pressures on the cost of living. The case made by my noble friend about why people might need access to a lump sum deserves an answer from the Minister. She described when and why the option was introduced and what people might use it for.
However, having gone carefully over the record and the correspondence since, I did not get answers to some of the questions which I put to the Minister in Committee. Those answers would help me because I would like to understand two things. First, are the Government confident that they have worked through who will be affected by this, what the impact will be and what the alternatives are? Secondly, can they explain clearly why they are doing it? On the first point—and I did ask this—we know that 75% of those who are deferring are women, but do we know why?
My noble friend suggested in Committee that those people are waiting until their partner retires to claim their pensions. Have the Government been able to confirm whether that is why they are deferring, or are they deferring because they are still working and have not saved enough to feel able to retire? What do we know about the wealth of those who are deferring their pensions? These questions matter because they would go to the points made by my noble friend Lady Hollis about whether people without savings are going to end up accessing other forms of credit, which we would not want them to do as they may be problematic.
Most of all, I would like to understand what the Government’s objection is. We have had a few arguments made: the argument of simplicity was made and has been pretty well dispatched, so I will not revisit it. Another argument raised was that significant numbers of people deferring and claiming a lump sum are living overseas. However, we know from the data given to us that more than three-quarters of those people are living in the UK, so that is probably not the issue. Is it the administrative burden? Perhaps the Minister could tell us whether it is that or simply the cost.
If it is the cost, I understand that. If the Government’s argument is that the costs are significant, the House, I am sure, will listen carefully. However, it would be helpful at this point if the Minister could simply come out and say whether he would like to do this but cannot afford it or whether the Government think for some reason that it is a bad idea, in which case my noble friend Lady Hollis has laid down a strong challenge which the Minister really should answer.
Lord Freud
My Lords, in designing the single-tier reforms our overriding aim has been to deliver a flat-rate pension above the basic level of the means test without increasing spending, and to do so in a way that recognises people’s contributions under the current system. This is not easy to do and it involves difficult trade-offs. Some elements of the transition necessarily generate costs in the early years, particularly the “better of” calculation, which means that people with low amounts of additional state pension, such as carers, receive a boost. There is also the fact that those with high amounts of additional state pension, which take them over the full amount of the single-tier pension, are able to keep the surplus as a protected payment. Nevertheless, we have been able to stay within 1% of projected expenditure until 2040, which is fair to current pensioners and to future taxpayers.
In answer to the blunt question of the noble Baroness, Lady Sherlock, removal of the lump sum option for those who defer their state pension has played a key role in flattening expenditure. The early-year savings that this delivers have been ploughed back into the single-tier design. We are, however, still keen to preserve some flexibility for single-tier pensioners who, by choice or accident, claim after they reach state pension age, so people will still be able to build up an increase to their state pension that is paid on top of their single-tier entitlement for the rest of their lives. As discussed in Grand Committee, there remains the option of backdating a claim for a single-tier pension. By backdating their claim to a state pension, someone who has delayed claiming for whatever reason—either unintentionally or as part of a planned retirement—will be able to get up to 12 months’ arrears when they make their claim for a pension. This would provide someone who has qualified for the maximum weekly amount of £144 with arrears of almost £7,500 at 2012-13 prices.
Pensions Bill
Baroness Sherlock Excerpts(10 years, 8 months ago)
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Baroness Sherlock (Lab)
My Lords, I am not surprised, having sat through Committee, that this has been such a powerful debate. We have had some very important, moving and well informed speeches at all stages of the Bill touching on these subjects. I am very grateful to the noble Baroness, Lady Finlay, and to the noble Earl, Lord Listowel, for sharing their expertise in these areas, as well as to the noble Lord, Lord Rix, for being willing to share with us the experience of bereavement and its ongoing impact on one’s life at any age.
My noble friend Lady Hollis laid out the case very strongly at the outset. I am delighted that the Minister is interested in reviewing the impact on families with a distressed child and how that relates to conditionality in the future. It is an excellent commitment and I look forward to seeing the results of it. It is up to my noble friend Lady Hollis to make a judgment on this but I do not think that that in any way precludes the need for this amendment, which is about a very specific category of person—people who are bereaved and who may find themselves going on to claim universal credit but who would normally be expected to go out to work because they had children of school age. Both of those things are important.
I still have with me the very powerful speech made by the right reverend Prelate the Bishop of Derby at Second Reading, in which he laid out his experience of pastoral care for the bereaved, something reprised very effectively today by the right reverend Prelate the Bishop of Wakefield. I do not need to say very much more about why this matters. Many Members of this House have had experience of bereavement in one way or another and there can be few more important issues than how a country supports its citizens when the worst of all possible things happens to them.
The Government’s case throughout this debate has been that these bereavement reforms are not really about money. From 2016 to 2020, they estimate the changes will cost an extra £110 million, because they will protect payments under the current system, but that thereafter, in total, there will be small savings. The argument is that these are reforms not cuts. The Government have said throughout that they want to simplify the system and put resources where, in their view, they are most needed: as a short-term intervention to allow a bereaved spouse or civil partner to deal with the immediate costs of the death of a partner. If support is needed in the longer term, that is what universal credit is for.
Amendments 18 to 20, in the name of the noble Baroness, Lady Finlay, address the question of how long bereavement support should be paid for. In Committee, the noble Baroness laid out some very moving circumstances in which families could find themselves, clearly drawing on her own clinical experience. I know that the Minister expressed sympathy with what she said, and it may be that his review of distress will address that. I would be interested to see what he has to say when he comes to speak.
Amendments 2 and 21, in the name of my noble friend Lady Hollis, quite specifically seek to relax the work conditionality requirement for those in receipt of bereavement support payment. This is particularly important for widowed parents. There is a difference between those who do not want to work and those who would like to work, or go back to work, but who have been forced to recognise that the reality of the state that their children are in is such that they have to choose—of course they will choose their children and not work, unless they have literally no choice. Some parents will need a longer period, both to adjust to their own grief and shock and to deal with the grief and shock faced by their children.
It has already been pointed out that the regulations for universal credit mean that kinship carers are exempt from work conditionality for a year from the time that they assume the care of the child. This was agreed by the Minister—under the persuasive pressure of my noble friend Lady Drake and others—in recognition of the fact that adults need time to adjust to being, effectively, a single parent. Why should the same principle not apply to bereavement? I would be very interested if the Minister could answer one question about his review: does he intend to change the regulations to allow bereaved parents specifically to be exempt from conditionality? In Committee, he said that he was reviewing this and that he wanted to change the guidance given to decision-makers in jobcentres. But that is a very different question altogether. I can see why that might be the way forward for distress in general—after all, distress comes in very different forms and some judgment would have to be made about when the family was distressed. The awful thing about bereavement is that it is horribly clear: one is either bereaved or one is not, and I therefore do not think there is a need for the kind of flexibility that might be needed in other circumstances.
I also worry because I have heard many cases, as I am sure other noble Lords have, where young jobcentre officials, with the best of intentions, ended up making bad decisions because they did not properly understand what it was like to be a single parent trying to juggle more than one child and a part-time job. That person could of course simply say, “I am sorry but despite whatever you say, I am not going back to work because I have to prioritise my children”. If that happens, their benefits get sanctioned. They can appeal, but do we really want them to have to go through that six months after losing their husband, wife or civil partner? When 58% of appeals against sanctions on jobseeker’s allowance are successful, how much are we willing to bet the farm on the effectiveness of decisions by individuals in jobcentres? In my case, it would be not very much.
At Second Reading the noble Lord, Lord German, used words such as “harsh” and “cruel” to describe the decision to force widowed parents back to work after six months. I believe that he was right. He cited the research, which he touched on again today, showing that outcomes for children very much depend on the effectiveness of the remaining parent in coping. That is partly about their availability to children. All that this amendment from my noble friend Lady Hollis does is to ask that those widowed parents who need to claim universal credit alongside bereavement support payment to make ends meet should not be required to go back to work for 12 months. After all, the Government have decided to focus their support on that first 12 months, so surely they should be willing simply to stretch this for the same period.
I have heard it said that a year is too long: since employers do not offer bereavement leave for a year, why should the state? It is because employers cannot do that that so many parents end up giving up their jobs when they lose their spouse or civil partner. The combination of burdens is simply too much to cope with. Universal credit is meant to be the safety net for those very parents, and it must be here. This amendment specifically recognises that the Government are planning to recycle all the resources spent on bereavement to be able to create this new system. All it does is to give them the power to recycle that money in whatever way they want, such that that reform should include this small change—that for 12 months after losing one’s husband, wife or civil partner a parent should not be forced back to work.
We should be clear that a decent society will not put bereaved children in the position of having lost one parent only to find that the other is not able to give them the level of care that they need at this crucial time. Many people in this House will know that losing a parent in childhood is a life-changing event: one never gets over it. We cannot protect children from that horror but when it happens, please let us at least say that we will support the remaining parent as best we can. It is clear that this House does not think that the Government have got this part of the Bill right. Amendments 2 and 19 give them the means and the incentive to go away and get this right. I urge the Minister to accept them.
Lord Freud
My Lords, losing a spouse is one of the most tragic circumstances that a person will have to endure and, as such, it has been recognised since the outset of the welfare system that the bereaved need some financial assistance. Bereavement benefits form a crucial part of state support but limited reforms over the years have led to a complex system, which has not kept pace with changes in the benefit system or wider changes in society. This legislation will address this. With a simple payment structure focusing support on the period immediately after the bereavement and a single contribution condition, the new bereavement support payment will be far more easily understood and claimed. It will mean that more people will benefit, particularly younger widows.
A claim to the new bereavement support payment is made by the surviving spouse or civil partner. The noble Baroness, Lady Finlay, raised those extremely tragic cases where not only is there one bereavement but the surviving spouse dies shortly afterwards. She is of course right that there can be no expectation that a claim is made by the surviving spouse in such circumstances. I take this opportunity to make it absolutely clear that, as with the current benefits, there will be arrangements in place for claims to be made posthumously. Every year, the Department for Work and Pensions receives around 10 posthumous claims to bereavement benefits made on behalf of a bereaved spouse who has subsequently died. There are regulations to ensure that appropriate payment can be made in respect of these claims.
Pensions Bill
Baroness Sherlock Excerpts(10 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)
My Lords, I am aware that the noble Lord, Lord McKenzie, cannot be present today for personal reasons. Given the circumstances, I should be happy to have further discussions with him about his Amendment 7.
Baroness Sherlock (Lab)
My Lords, I know that my noble friend would wish to bring back his amendment at Third Reading. Would that be okay with the Minister?
Baroness Sherlock
My Lords, in speaking to Amendment 16, I shall also speak to Amendment 17 in my name and that of my noble friend Lord Browne. We on these Benches agree with the principle of raising the state pension age to reflect longevity. We accept the need for periodic reviews of the state pension age. Where we differ from the Government is on how best to do that.
Fixing the state pension age is never easy. There is always an issue of fairness at stake. Having a careful, evidence-based review before taking any future decisions on changes to the state pension age is a crucial element of ensuring fairness between generations. However, sometimes fairness requires a consideration of difference, particularly differences in longevity and health. The Government are setting considerable store by actuarial information on average life expectancy. However, while average life expectancy tells us something—mostly quite a lot about medical advances and their ability to keep us alive for longer—it does not tell us very much about our health in retirement or differential mortality rates.
We heard a great deal of evidence in Committee to inform our debate, and I certainly will not rehearse it all here, noble Lords will be relieved to hear. However, maybe the headlines are worth briefly restating. People are living longer, but the proportion of years in full health is not keeping track at the same rate. We have significant inequalities in health within the UK, and significant variations in mortality as a result. There are clear socioeconomic differences. There is a class divide, as managerial and professional classes live longer than manual workers by 3.8 years for women and 3.1 years for men. There is a clear geographical divide.
There is then the effect of this differential life expectancy on state retirement incomes, with the irony that those living the shortest lives post-retirement—the poorest and least skilled workers—will receive less in state pension than their better-off counterparts, but they may well have contributed for longer as a result of having spent less time in education.
If we want people to save for retirement, they need to trust the Government, to trust Parliament and to believe that their pensions are safe in our hands. The public need to know that they will not be at the mercy of political expediency, and that they will be protected from any adjustments that need to be made by ensuring that they are not made too quickly. Rather than simply being a matter for the Secretary of State, as the Bill proposes, we need a genuinely independent panel which has the kind of cross-party and independent representation that will reassure the public and give confidence to parliamentarians from across the spectrum. Our amendment proposes simply that the review body should include representatives of the opposition parties and of the Cross Benches of this House to ensure that Parliament as a whole is at the heart of this process. It would also include representatives of trade unions, who are themselves the representatives of those who are spending their ever-longer working lives saving for retirement. This broader representation will give people confidence that a wide range of views will be heard. I urge the Minister to accept it.
Lord Freud
My Lords, as your Lordships know, the purpose of the review of state pension age is to inform the Government. The reports from the Government Actuary and the independently led review, which will feed into the review, should collect and analyse the latest data, and give the Government of the day the information they need to make what will always be a difficult and contentious decision.
We are all keen that the Secretary of State receives a report that is impartial. Because we are requiring that all reports compiled as part of the review are published and all future changes to state pension age continue to go through primary legislation, any proposal based on a report that is not impartial, credible and comprehensive will quickly fall apart when scrutinised by stakeholders and both Houses of Parliament.
Turning first to the substance of the amendment tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, if one thing is apparent it is that there is no clear consensus on who should sit on the review, what they should look at, or how they should collect the necessary evidence. We have been clear in Grand Committee and in the other place that this Government’s vision of the review is one similar to the independent review of public service pensions. That review was run by the noble Lord, Lord Hutton, a member of the opposition Benches and an expert in his field. It was transparent, comprehensive, independent and established a consensus.
Noble Lords will also be aware that the Pensions Commission, set up by the previous Government, had three commissioners from the areas of business, trade unionism and academia: not a single politician or Cross-Bencher. That commission gained support through comprehensive and open debate about the issues and trade-offs, rather than being based on the inherent characteristics of the commissioners’ backgrounds.
In short, the amendment tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord Browne, would preclude these two successful models. It would result in a body of at least six individuals from stakeholder groups, the other place and this House. It would not necessarily have the expertise to review the relevant data and would effectively create a mini parliamentary process before the parliamentary process proper. We do not think that is the right way to run a review designed to inform the Government. In the Bill as currently drafted there is nothing to prevent a future Government running the review in whatever way they think best. That is a key point underpinning our approach to the review—getting future Governments to take active ownership of and responsibility for all aspects of the review, instead of just going through the motions.
Turning to the factors to be considered as part of any review, I must note that in response to the recommendation made by the noble Baronesses, Lady Turner and Lady Sherlock, we do not have the data regarding the relationship between specific occupations or types of work and life expectancy and healthy life expectancy. Beginning to collect such data would be both burdensome and, I imagine, for some professions simply impossible. More generally, we do not think it is necessary to specify any factors to be considered in legislation. We have already consulted stakeholders on what factors they think are important, and stated the factors we expect to be considered in the White Paper. The Opposition are worried that by not specifying the factors in legislation, future reviews simply will not consider important variables. However, what kind of support would such a review generate?
We want to encourage all interested parties to feed in their thoughts and contributions to better involve them. Specifying factors in the Bill could send out the message that we have already thought of everything important, and that future Governments do not need to consider additional factors as they are not set out in primary legislation. Such an approach could lead to a tick-box mentality, with Governments simply going through the motions instead of taking a proper, considered approach to each review. My point is illustrated by the fact that another factor has been added to the Opposition’s amendment since its predecessor was tabled only a month or so ago. Other noble Lords have also previously suggested additional factors, including life expectancy of the lowest income decile, prevalence of smoking and quality of diet. This demonstrates that the determination of relevant factors should take place after a thorough and extensive consideration and on an iterative basis for each review.
I turn now to the review’s remit. We believe that the Government should maintain control of this to keep it focused on the task at hand. There is nothing in the Bill to prevent the Secretary of State of the day updating the remit of the review, and we—or, more importantly, stakeholders—would fully expect him or her to do just this if new and compelling factors were identified during the course of the review.
The amendment of the noble Baroness, Lady Sherlock, also requires evidence to be gathered in public sessions. Although there is nothing in the Bill to prevent some evidence being taken orally—rather as Select Committees do—noble Lords will be aware that the nature of the analysis around state pension age, such as the myriad tables, charts and graphs, does not lend itself well to public sessions. Underpinning our approach is the idea that each Government will fully own and be responsible for the review. Setting out membership and factors to be considered restricts rather than increases that responsibility. It would instead limit the scope of reviews and reduce engagement by stakeholders. I therefore urge the noble Baroness to withdraw her amendment.
Baroness Sherlock
My Lords, in Committee the Minister came under sustained pressure on this matter from my noble friends Lady Hollis and Lord McKenzie, among others, and I am sure that he did not expect to emerge unscathed from Report. Many noble Lords pressed the Minister in Committee to try to understand what the consequences of this increase in means-testing would be. In particular, they were concerned about what would happen to those older pensioners who inadvertently, or perhaps negligently, fail to report changes of circumstances.
The Minister could not assuage our fears in Committee but wrote to us subsequently. That was helpful as it made clear what would happen. The letter he sent to us, dated 20 January, noted that claimants of any age who commit benefit fraud can be prosecuted. However, it also says:
“DWP may offer an Administrative Penalty as an alternative to prosecution. That penalty is 50% of the overpayment with a minimum value penalty of £350 and a maximum of £2000”.
When a claimant makes an error resulting in an overpayment, the letter explains that,
“a DWP decision maker will consider the full circumstances of the individual case … taking into account the reasons that led to the error”.
The letter then referred us to the guidance for decision-makers. I read this guidance so that noble Lords would not have to, and that is an hour of my life that I will not get back, so anyone who feels that he would like to buy me a drink at any point to say thank you is most welcome to do so. However, having done so, I then discovered the following. Incidentally, CPen means civil penalty and DM means decision-maker. The guidance states:
“Before imposing the CPen, the DM must establish that the claimant
1. has acted negligently and
2. has failed to take any reasonable steps to correct the error that led to the overpayment”.
I accept that the word “negligently” implies something serious. However, on the “Meaning of ‘negligently’”, the guidance continues:
“DMs should note that negligently should be taken to mean acting carelessly, not paying sufficient attention to the task in hand, or disregarding the importance of what is required to be done in relation to the claim or an award”.
In other words, that is a pretty low bar.
A number of noble Lords expressed concerns—as has been done very clearly by my noble friend just now—about what happens to pensioners who might struggle to keep the paperwork together or report every relevant change. The letter from the Minister said that robust safeguards are in place to ensure that matters such as mental capacity are considered. However, the guidance also makes clear that misrepresentation can involve simply leaving a section blank, perhaps because someone cannot figure out how to fill it in at that point and forgets to go back and do so later. The guidance also states at paragraphs 09206-7 that a claimant cannot avoid responsibility for misrepresentation just on the grounds that they claim they did not know what they were doing. It states:
“Non-responsibility is limited to those who are blind, illiterate or do not fully understand a particular form they have signed. Poor education, illness or inborn incapacity alone is not sufficient to show non-responsibility. People are expected to take reasonable steps to understand what they sign”.
This is exactly the sort of reason why so many pensioners dread means-testing and do not claim benefits to which they are entitled. If the Minister does not want to accept this amendment tonight, I plead with him to do one thing. Will he please take this guidance away urgently and have it revised before this legislation ever is introduced, so that pensioners are not expected to follow these kinds of rules?
Lord Freud
My Lords, assessed income periods were introduced by the noble Baroness, Lady Hollis, during the passage of the State Pension Credit Act 2002. At that time it was assumed that income and capital for those above pensionable age remained relatively stable and it therefore made good sense to relax reporting requirements, both for the individual and the department in terms of running costs. This was still the case in 2007 when the Government of the day introduced indefinite assessed income periods for those aged 80 or over.
The noble Baroness said just now that income and capital do not fluctuate by much. We have now tested those assumptions, analysed around 100,000 cases and come to the conclusion that there is actually a greater degree of volatility in people’s financial circumstances than she and the department had anticipated at the relevant times. In some cases, assessed income periods have allowed people to continue to receive pension credit following a change in their circumstances when they would not have been entitled to it had they made a new claim at that point. The evidence means that we have had to think again about the viability of the policy and have concluded that AIPs should be abolished. Ultimately, if we were to allow AIPs to continue, the taxpayer would be providing support to people who no longer need it. It would mean retaining a system in which we can only apply changes to retirement provision that would increase an award but cannot take account of windfalls that would otherwise see a reduction in or loss of benefit.
Let me be clear, we are not changing entitlement rules. We are changing the reporting system so that people’s benefit entitlement reflects their circumstances at the time. To that end, we are looking to simplify the reporting requirements so that we are able to support those who need it most and best target our benefit expenditure. I am of course mindful that by changing reporting requirements some people may find it more difficult to adjust, particularly those of the most advanced years who may have the greatest difficulty in contacting us. This is why existing indefinite assessed income periods in place prior to 2016 will continue.
For those new recipients, or those on fixed-term AIPs, we will have the opportunity to explain clearly what does and does not need to be reported at the point of claim or when their existing claim is reviewed. I stress that pension credit is already designed in such a way as to minimise reporting requirements. For example, changes to capital only need to be reported if their total amount exceeds £10,000. Currently, only 12% of people on pension credit have capital above that level. People would need to report new income streams, but we will continue to take into account annual increases in pensions automatically, based on what people tell us. We will also encourage people to tell us if their capital falls below £10,000 or if any income stops, to ensure that we capture beneficial changes.