Pension Schemes Bill

Baroness Sherlock Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

Moved by

[Baroness Sherlock]

21: Clause 10, page 12, line 7, after “76” insert “of the Pensions Act 1995”
Member's explanatory statement
This amendment corrects a mistake in a cross-reference to the Pensions Act 1995.

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[Viscount Younger of Leckie (Con)]

My Lords, we again understand the intention behind this amendment from the noble Viscount, Lord Thurso, supported by the noble Lord, Lord Palmer. We also recognise the strength of feeling that exists on the question of pre-1997 indexation; I listened carefully just now to that strength of feeling behind the noble Viscount’s remarks. It is an issue that has been raised in this House and, separately, we have had discussions ourselves with representatives of a number of the campaigns that have taken a close interest in this matter. We have heard the arguments that they have put forward and understand clearly where this amendment is coming from and why it has been tabled.

However, we feel that there is an important principle at stake here. The noble Viscount said that his amendment was not perfect, but I will continue. The foundation of the occupational pensions system is fiduciary duty. Trustees and scheme managers are entrusted with the stewardship of pension funds on the basis that they must act in the best interests of scheme members and beneficiaries. That is the basic and fundamental point on which the entire system operates. It is also the basis on which people engage with the system in the first place: members can have confidence that those responsible for managing their pension savings are legally bound to act in their interests.

Once we begin to qualify or redefine what those best interests are, however well-intentioned the objective may be, we risk undermining that principle. If Parliament starts directing or reshaping how that duty should be interpreted in particular circumstances, we may end up tying the hands of the very people who are trusted to make those judgments. Trustees could find themselves placed in a position where they are, effectively, required to act in a way that they themselves do not believe is in the best interests of members, based on their professional judgment and their understanding of the scheme’s funding position.

I believe that would represent a concerning precedent. The strength of the current framework lies precisely in the fact that those decisions are taken by trustees exercising their fiduciary responsibilities, not by central direction or legislative qualification of what those responsibilities ought to mean in practice. We will, of course, hear more about the point that I am making on Thursday.

For these reasons, although we recognise the concerns that have given rise to this amendment and the sincerity with which they are held, we are cautious about moving in a direction that could weaken the clarity and independence of fiduciary duty within our pensions system. We regret that we are therefore not in a position to support this provision becoming a feature of the pensions landscape. I am sorry to disappoint the noble Viscount to that extent.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Viscount, Lord Thurso, for introducing his Amendment 22. Many members of defined benefit, or DB, schemes have seen inflation erode the value of their pensions, as he said. That is especially true where any uplift on older benefits depends on decisions made at the level of the scheme. I want him to know that I hear those concerns loud and clear. I have heard them expressed by affected pensioners, as many Members will, and I understand the strength of feeling among them.

As the House will know, schemes take different approaches to indexation: some schemes have to provide increases under their rules; some do not require them at all; and a significant number allow discretionary increases, but usually only where both trustees and the sponsoring employer agree. This amendment focuses on the role of trustees in relation to pre-1997 discretionary indexation. The fact is that, in many schemes, such indexation can be awarded only where the sponsoring employer provides consent, which reflects the scheme rules. It means that trustees may be unable to award uplifts where employers are unwilling to agree, even in well-funded schemes.

I recognise why many schemes give employers a central role. Employers ultimately stand behind the scheme and may have legitimate concerns about future affordability and their long-term liabilities. But the result is that when employers are unwilling to support discretionary increases, even when the scheme is in a strong funding position, trustees are, effectively, prevented from acting. I understand that that limitation creates concern, especially in schemes that appear well-funded and may be running surpluses but are not providing discretionary uplifts on older benefits.

However, although I understand the challenge, we cannot accept Amendment 22 because—the noble Viscount identified this himself—it would require a statutory review of trustees’ fiduciary duty in a complex area. Fiduciary duties underpin trustees’ responsibilities to protect all members and ensure the long-term solvency of their scheme. Changes that go beyond trustees freely acting in line with their fiduciary duties on this issue and removing trustee discretion, or removing the employer from any decisions, could have significant consequences for scheme funding, employer sustainability and member security. In any action they take, the Government have to consider all schemes, not only those that are well funded or have historically paid discretionary increases. Mandating a statutory review thus risks creating uncertainty for all trustees and employers, while we are undertaking wider work on surplus and helping schemes make endgame choices.

The key point, as I know the noble Viscount, Lord Thurso, recognises, is that the difficulty in the hard cases is not typically that trustees lack the willingness or the legal ability to act. They are often acutely aware of the pressures their members are experiencing. However, I agree it would be helpful to develop a clearer understanding of the factors that prevent some well-funded schemes awarding discretionary increases, particularly where employer consent is not forthcoming. I am aware that the Pensions Regulator has been considering how it might build its evidence base in this area, and any insights from that work would be helpful in informing future thinking.

The Government recognise the importance of this issue. As I indicated in earlier debates, the wider package on surplus, including giving trustees the ability to agree surplus payments to employers, is intended to support more balanced negotiations so that both members and employers can benefit. I hope that has given at least an explanation to the noble Viscount, Lord Thurso, as to the position that the Government are in but, for all those reasons, although I recognise the concerns he has raised, I hope he can withdraw his amendment.

[Viscount Thurso (LD)]

My Lords, I am grateful for the comments of the noble Viscount, Lord Younger, and only sorry that I was not persuasive enough to get him to join my side. I am also grateful to the Minister, because the tea and sympathy has actually gone further than I might have expected. What she said in her response is very encouraging. It indicates that the Government are very much in listening mode on this. If we can find a way to encourage some of those schemes, particularly the BP scheme which I mentioned in Committee, to share those surpluses, and if the Government have a mind to perhaps put a bit of a wind behind that then that would be very good. In the light of that, I beg leave to withdraw my amendment.

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[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords who have spoken this evening. I am grateful to the noble Baroness, Lady Altmann, for her support on the principle of the shift to value for money. Before I move on to the detail of her amendments and others, I say to the noble Lord, Lord Lucas, that I am not going to get in between him and my noble friend Lord Davies in fighting it out on who got us here. Of particular relevance to this debate is that we would probably all agree on the need to move from cost to value—and that is only one of the things that has been going wrong. If we have pension funds competing for business with employers on cost rather than value, we are never going to move to the kind of scale that we want to see, which is a consolidated pensions market with large and better-performing pension schemes, improving the opportunity to invest in a wider range of assets and, I hope, taking us in a direction that would make the noble Lord happy.

I start with Amendment 24. I recognise the consistent commitment of the noble Baroness, Lady Altmann, to improving outcomes for members, particularly through better service quality and clear communications for vulnerable members. The Government entirely share these aims. Where we differ is that we think that the Bill already provides the necessary powers to deliver them. Let me explain why.

Service quality is a core part of the VFM framework. The Bill ensures that these metrics remain central to assessments, while allowing detailed definitions to be set in regulations so they can evolve with member expectations and industry practice. Clause 12 makes it clear that trustees may be required to disclose data on service quality. However, defining a comparable quality of service is complicated, as I am sure the noble Baroness will appreciate. We have consulted with industry on appropriate metrics and how these should be measured to ensure that they represent the nuances involved in determining quality, without inadvertently disadvantaging those arrangements—for example, with a less engaged member demographic.

Defining this through regulations provides us with the scope to develop comparable data in this area in an adaptable, consultative and proportionate way, while still acknowledging the technical nuance required here. For these reasons, while fully supportive of its intent, we cannot accept the amendment as the Bill already provides the powers needed to achieve its aims.

I turn to another matter for the noble Baroness, Lady Altmann, I fear. Her Amendment 32 would limit the Government’s ability to specify the consequences for intermediate ratings unless received for at least three consecutive years. I listened carefully to what the noble Baroness said, but the Government cannot support the amendment. Reducing reporting for such schemes risks missing early warning signals that changes are needed to protect savers. We believe that thorough, regular reporting ensures the long-term health and security of pension schemes for all members.

As the noble Baroness said, Clause 16 gives the Secretary of State discretion to set different consequences for different grades of intermediate rating. As proposed in recent consultations, amber-rated arrangements would face consequences, while light-green arrangements would not. A three-year threshold would mean potential problems going unchecked for too long. Instead, we propose giving schemes up to two VFM cycles to make improvements. We believe that is the right approach, and essential to protecting members.

Turning to Amendment 44 from the noble Baroness, Lady Stedman-Scott, while I appreciate the desire for a statutory timetable, we cannot accept this amendment, as a fixed 12-month deadline risks pre-empting the essential consultation and undermining the co-ordinated regulatory process which is already under way. Our published road map aims for the first data disclosures and assessments in 2028, based on 2027 data. Providing clear powers in the Bill, with the technical detail and timelines set out transparently in secondary legislation, remains the most proportionate approach here. A government amendment, to which I will come later, deals further with this. Industry’s responses to the latest VFM consultation will inform draft regulations and guidance.

Moving on to the group of amendments from the noble Baroness, Lady Altmann, on simplifying language in VFM assessments with a view to making them more intuitive for members to understand, this is another area where we completely agree with the aim but disagree with the proposals. Let me explain. “Fully delivering”, as set out in the Bill, is a more objective term, which is aligned with the structure of the framework. The language in the Bill has to allow regulators to make clear, consistent and, crucially, legally robust determinations, and “fully delivering” gives them the scope they need to apply the framework as intended. By contrast, the term “good value” risks weakening regulatory clarity by introducing a term that is broader, more subjective and less tightly aligned with the evidence-based metrics underpinning VFM assessments. Given what will flow from these assessments, clarity is crucial.

The same argument applies to amendments looking to change the terminology of “not delivering” to “poor value”. Crucially, these statutory terms will not be used in public-facing communications. Instead, members and employers will see the simple and intuitive RAGG ratings—red, amber, light green and dark green. Simplicity and accessibility will be appropriately delivered, without sacrificing the robustness required in the legislation. That is why we cannot accept the amendments.

I turn to the amendments tabled by the Government. As drafted, Clause 122, “Commencement”, provides that the value-for-money measures come into force on the day on which the Bill is passed. Our amendments allow the VFM provisions to be commenced via regulations. This provides the Government with greater flexibility to introduce elements of the VFM framework in stages, following detailed design work and informed by consultation. That brings the VFM clauses in line with other parts of the Bill which are commenced by regulations. The FCA and TPR have recently concluded their consultation on the VFM framework, and we are using the valuable insights and feedback from industry to shape final proposals in order to ensure that the regime is fit for purpose across both the trust-based and contract-based sides of the market.

We recognise that introducing the VFM framework is a significant undertaking for industry that requires adjusting to the administrative and data obligations to which it will be subject. I want to be clear that it is and remains the Government’s strong intention that the first VFM data disclosures and assessment reports will be required in 2028. However, this amendment provides us with the option, if necessary, to stagger the introduction of parts of the framework to allow more time for industry and regulators to adjust to its introduction.

In Committee, we debated amendments from the noble Baroness, Lady Altmann, on reporting requirements for intermediate schemes. The consultation paper from the FCA and TPR sets out our proposed approach, which is to require improvement plans for amber-rated but not light-green-rated arrangements, and action plans for red-rated arrangements. Templates will help keep requirements proportionate. Taking the flexibility to smooth the introduction of different elements of the framework, should that emerge as a pragmatic way forward, enables us to continue working closely with industry to fully understand the potential implications of the VFM measures. I hope that this provides the House with reassurance that we recognise the potential burden for industry. This has informed our approach—to reach a balance between ensuring that members receive the value they deserve, and that industry is in a position to comply with these new requirements.

Lastly, I clarify that government Amendments 36, 37, 38, 39 and 26 to Clauses 18 and 12 are of a minor and technical nature and correct consistency mistakes. In light of all that I have said, I hope that noble Lords will feel able not to press their amendments and to support those in my name.

[Baroness Altmann (Non-Afl)]

My Lords, I thank the Minister for her remarks. I also thank all noble Lords who have spoken in support of my amendments, in particular Amendment 24, which I had hoped the Government might be a little more favourable towards than they seem to have been. I understand that the Minister says that the Government have consulted industry and that has fed into the production of the Bill. I hope that the Government will also consult consumer groups and members because it is they who really need to understand the value-for-money framework. It is those groups that I was addressing with my proposals because from the point of view of industry it looks rather different, perhaps, from how it does from that of the ordinary workers who are having their money put into the pension.

I understand that the Government do not wish to accept Amendment 24 but it will, I hope, still help provide a framework for some further discussions as we develop the value-for-money framework. I beg leave to withdraw the amendment.

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Moved by

[Baroness Sherlock]

26: Clause 12, page 14, line 40, leave out “specified” and insert “determined”
Member’s explanatory statement
This amendment corrects a consistency mistake.

Pension Schemes Bill

Baroness Sherlock Excerpts

Report stage
Monday 16th March 2026 Lords Chamber

[Baroness Stedman-Scott (Con)]

My Lords, I will speak briefly to some of the amendments in this group. At the outset, I thank all noble Lords who have tabled amendments and contributed to the constructive discussions we have been able to have on these issues. While I will focus my remarks on some of the amendments, we understand the direction of travel intended across this group.

Taken together, these amendments largely seek to ensure that the process of releasing surplus funds from defined benefit schemes is carried out on the basis of sound professional advice, in close communication with scheme members and with their interests properly safeguarded. The group also includes a technical amendment from the Government, which tightens up the drafting of the Bill and which we are content to support.

Amendment 13 in the name of the noble Baroness, Lady Altmann, would introduce a formal decision-making safeguard before schemes even create the legal power to pay surpluses to employers. In practical terms, it would ensure that trustees have received and considered formal actuarial advice before making such a change to the rules of the scheme. That matters because altering the rules of a scheme to enable surplus extraction has potential implications for the long-term funding position of the scheme and for the security of members’ benefits.

Amendment 13 therefore performs two important functions. First, it seeks to ensure that trustees properly understand the impact that surplus distribution could have on scheme funding before rule changes are made. Secondly, it requires them to consider alternative approaches to dealing with surplus that may benefit members instead, such as running the scheme on, transferring to a superfund or securing benefits through annuities. In other words, it ensures that sound professional advice is formally incorporated into the process before it can be completed.

That process is then complemented by Amendment 15, which addresses the next stage of the decision. While Amendment 13 concerns the creation of the power, Amendment 15 would ensure that advice is taken when trustees decide whether to exercise that power and pay surpluses to the employer. Under this amendment, trustees would be required to obtain actuarial advice and to consider the risks and benefits of alternative approaches before distributing surplus. They would therefore need to evaluate options such as reducing or pausing contributions, running the scheme on, transferring to a superfund or buying out liabilities. Ensuring that these risks and alternatives are considered in sufficient depth is critical. It helps to make sure that trustees’ fiduciary duties remain at the centre of the process and that decisions about surplus are taken in a careful, balanced and professionally informed way.

Amendment 17 would retain the existing requirement that trustees must be satisfied that the exercise of the power to pay surplus is in the interest of scheme members. As noble Lords will know, that protection currently exists in the Pensions Act 1995, but the Bill as drafted would remove it. Retaining that test would represent a major governance safeguard. It ensures that trustees continue to place members’ interests at the heart of their decision-making when considering whether surplus should be returned to the employer. That seems to us both sensible and entirely legitimate. The Government should give serious consideration to adopting this change because members’ interests should always remain central to the operation of pension schemes.

The reforms proposed in the Bill potentially open a pathway for surplus to be released from defined benefit schemes. If that pathway is to command confidence, it must be underpinned by strong governance, professional advice and meaningful member engagement. The amendments in this group help to reinforce these principles. We welcome the opportunity we have had to debate and discuss these important issues.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Altmann, my noble friend Lord Davies and the noble Viscount, Lord Thurso, for introducing their amendments. During our various deliberations, many noble Lords have highlighted the fact that the level to which a DB scheme is funded is subject to volatility and to changes in the underpinning assumptions used to ensure that schemes remain able to meet the promised pensions. This is something we take seriously as we all want to ensure that the policy aim here can be achieved: for surplus funds to be used to benefit members and employers, but with the right protections so that every member’s pension can be paid.

As I have outlined previously, the DB funding code and the underpinning legislation require trustees to aim to maintain a strong funding position. Our changes preserve trustee discretion over surplus release. Crucially, trustees must receive actuarial certification that the scheme meets a prudent funding threshold, and members must be notified before surplus is released. Let us not forget that these changes are simply levelling the playing field, as some schemes can already release surplus.

Amendments 16 and 19 would both require a consultation to take place before surplus is released. I understand the wish of noble Lords for the voice of members to be heard when decisions are being taken about releasing surplus. We agree with that observation; that is precisely why the decision to release surplus remains in the hands of trustees, who are there to represent their members. Trustees will consider a range of scheme-specific circumstances, including the employer covenant and wider endgame planning, when discharging their duty to members. It is, however, entirely for trustees to decide whether they may seek broader views before taking a decision to release surplus. It is their decision, not that of the employer.

In our view, a legislative requirement to consult is not proportionate. The existing framework gives trustees scope to seek broader views as required, and the fact remains that, ultimately, trustees must act in the best interests of scheme beneficiaries when taking a decision to release surplus. Furthermore, under our changes, trustees will continue to be subject to a requirement to notify members in advance of any surplus release, maintaining this key protection for scheme members. I can assure my noble friend Lord Davies that we will be monitoring closely how schemes intend to use, and are using, these powers.

Amendment 17 seeks to retain the statutory requirement that trustees be satisfied that it is in the interests of members before agreeing to surplus release. We discussed this in some detail in Committee. Trustees already have a clear overarching duty to act in the interests of scheme beneficiaries. We have had clear feedback from industry-wide stakeholders, including trustees, who have welcomed the repeal of this statutory requirement. Existing legislation is perceived by trustees as a barrier to considering the release of surplus because they are not sure how this additional test is reconciled with their existing overarching duties. This could clearly lead to indecision on whether to release surplus, which may ultimately lead to members losing out. We are making this change to put it beyond doubt for trustees that they are not subject to any additional tests beyond their existing, clear duties of acting in the interests of scheme beneficiaries.

Amendments 14 and 18 cover the consideration of discretionary awards upon the release of surplus. I understand the concerns raised by scheme members whose pensions have not kept pace with inflation. But the Government do not think that these amendments would be helpful to trustees or members. These amendments address only a single element of the matters that trustees must consider when determining whether to release a surplus. In practice, trustees’ overarching duty to act in the interests of all beneficiaries requires them to weigh a broad range of criteria before deciding whether a surplus should be released and, if so, how members might appropriately benefit. This may include the award of discretionary increases but, by narrowing the scope of these considerations, the amendments would risk constraining trustees in the proper discharge of their responsibilities.

The noble Viscount highlighted some matters that we may return to when we discuss his Amendment 22. I will touch on them now—what happens in circumstances where there appears to be a decent surplus and trustees may be minded but employers are reluctant—but, if it is okay with the noble Viscount, I will come back to that in the debate on his Amendment 22 as it is probably more closely focused on that.

The Government therefore believe that it is important that trustees remain in the driving seat. They are best placed to understand the individual circumstance of their scheme, its characteristics and history, and to decide how members may benefit from the release of surplus. By extending the power to return surplus to more trustees, we are levelling that playing field, with strong safeguards in place to protect member benefits. Trustees will be in a better position to negotiate member improvements in return for agreeing to release surplus.

There is clearly an appetite out there for trustees to enable members to benefit from this. Recent industry research shows that over 40% of employers intend to share DB surplus with members. We are confident that there is an appetite. We need to be careful not to create so many new restrictions that the policy aim of allowing more trustees to share surplus is not achieved, because that would prevent surplus delivering real value not just to employers but to members and the wider economy.

I turn to Amendments 13 and 15 in the name of the noble Baroness, Lady Altmann. Amendment 15 would require regulations to include a condition that trustees receive and consider actuarial advice on scheme funding. Amendment 13 would create a legislative requirement for trustees to commission actuarial advice on future benefits and alternative approaches to surplus release before modifying a scheme to allow for payment of surplus to the employer. I am not going to revisit our discussion on TAS 300, which is a particularly delightful memory from Committee, but I understand the concerns raised by the noble Baroness about trustees having appropriate advice to be able to make an informed decision about their endgame choices and whether to release surplus. Trustees will be required to take into account the scheme’s long-term funding objective when making decisions on surplus. This will include the factors that are listed in these amendments. Under the funding code, trustees are already required to set out their funding and investment strategy, describing how they intend to meet members’ benefits over the long term—in other words, their long-term objective. They will already be seeking appropriate advice before determining the long-term objective for their scheme. That objective is reviewed in line with each triennial valuation at a minimum.

Putting in place additional legislative steps that require trustees to commission and receive actuarial advice before releasing surplus could result in additional unnecessary bureaucracy. Hardwiring specific legislative considerations that trustees must take into account will remove their flexibility to gather the most appropriate advice for individual schemes. The Pensions Regulator—TPR—has set out guidance for schemes considering their long-term objective and options, including buyout, superfunds and run-on, which sets out clear expectations of trustees. In particular, the guidance says that trustees

“should regularly review the best way to deliver members’ promised benefits”.

It is not the responsibility of the FRC; it is for TPR to set out the requirements on trustees and monitor them.

Universal Credit (Removal of Two Child Limit) Bill

Baroness Sherlock Excerpts

2nd reading & Committee negatived & 3rd reading
Thursday 12th March 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the Bill be now read a second time.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, this Government believe that the UK should be a country where every person has the opportunity to fulfil their potential. That is why we are so committed to removing the barriers that stop people thriving and becoming all that they can be. Doing this will benefit not just the individuals, it will benefit our country. So I am delighted to be here today to move Second Reading of the Universal Credit (Removal of Two Child Limit) Bill. It makes a major contribution to tackling the poverty that limits children’s chances in life, and often for life.

There are now four and a half million children in poverty—900,000 more than there were in 2010. To put that in context, if we picture a classroom of 30 children, at the moment around 10 of them will be living in poverty. Some 2 million of our children are in deep material poverty, lacking the basic essentials such as a warm home or healthy food—things without which no child should be growing up. It is shocking enough that so many of our children have to live through childhood like that, but it is even more shocking when we consider the hugely detrimental consequences that growing up in poverty has on children’s health, education and future employment prospects.

Just one in four children in families with the lowest incomes gets good GCSEs. As adults, those who grew up in poverty are more likely to be unemployed or to find themselves in low-skilled, lower-paid jobs. Those who grow up poor clearly do not lack talent; what they lack is opportunity. As a result, our country is missing out on their gifts and their contributions. We are determined to break this link between children’s backgrounds and their future success. That is why, since coming into office, we have taken significant steps to help families tackle poverty and give every child the best start in life: increasing the minimum wage, expanding free school meals for over half a million children, investing in social and affordable housing, and funding more Best Start Family Hubs. We are now pulling the single most cost-effective lever available: removing the universal credit two-child limit, which will lift 450,000 children out of poverty.

This is the right move to extend opportunity, and it is right because our system should not be penalising so many of our children for the circumstances of their birth—circumstances their parents may not have chosen or expected. Life is unpredictable, and crisis can hit anyone regardless of the choices they have made or the size of their family. Marriages break up; parents lose their jobs or get sick, or injured, or die.

That unpredictability is reflected in the fact that half the families who will benefit from lifting the two-child limit were not on universal credit when they had any of their children. These are people who found themselves in need of help after decisions about family size had been taken. It simply is not right to draw dividing lines in the way the two-child limit sought to do, especially when over half the families affected by the two-child limit are already in work, and, of those who are not working, a significant number are affected by serious health conditions or caring responsibilities.

Illness, disability, bereavement, unemployment, becoming a carer—these things can hit any one of us, and have probably hit many of us in this Chamber already. Our welfare state exists to pool risk, to give all of us some protection from the impact of life’s slings and arrows. Some will look only at the cost, without looking at the cost of failing to offer support. We simply cannot afford to sit on our hands and wait for the costs of poverty to spiral. Without intervention, 150,000 more children will be pulled into poverty by 2030. That is 150,000 stories of missed opportunity, of deeper inequality, of lost productivity. But if tackling poverty is vital not just for the lives and opportunities of children, it is vital for our economy. Every pound we spend lifting children out of poverty saves so much more in future health, education and social security costs.

Few investments will reap rewards as great as investing in the next generation, in our future workforce. Failing to act on child poverty will cost Britain far more than investing now. That is why removing the two-child limit is part of our wider child poverty strategy. We committed in our manifesto to making good work the foundation of our approach to tackling poverty. Parents are doing all they can to support their children. Parental employment rates are already high but, with almost three-quarters of children in poverty being in a working family, too many parents find themselves in jobs where they are still struggling to support their families.

Meanwhile, too many of those who are not in work face barriers to entering the labour market, whether that is down to health, disability, a lack of childcare, poor skills, public transport not working in their area, or all kinds of other barriers. We want every parent who can work to feel the benefits of secure, rewarding jobs that enable them to get on in life, to support their families and to set an example to the next generation. That is why we will deliver a step change in employment and skills support for parents, helping them to balance work and caring responsibilities through high-quality, flexible jobs and improving access to affordable childcare.

The expansion of childcare comes alongside other measures in our child poverty strategy to drive down working poverty, including raising the minimum wage and creating more secure jobs by strengthening rights at work. The measures and the strategy will lift 550,000 children out of poverty. These interventions will lead to the largest expected reduction in child poverty over a Parliament since comparable records began. Together, all this represents a strong start. It kick-starts action and ambition over the next 10 years, responding to the immediate pressures families face now while delivering change to fix the structural drivers of child poverty.

But we do not underestimate the scale of the challenge: to build a society where every child grows up safe, warm and well fed, not held back by poverty but helped forward by government. So we will monitor our progress using two main metrics. First, we will use the internationally recognised and well-established “relative low income after housing costs” measure to monitor overall child poverty. Secondly, there will be a new measure of deep material poverty, which we have developed to assess families’ ability to afford the essentials. This takes account not just of their income but of the cost of essentials, their overall financial situation and the support they receive locally. It is not just the number of children in poverty that matters; it is the depth of that poverty too.

We are committed to ensuring that removing the two-child limit, along with other measures in the child poverty strategy, delivers the results children need and deserve. To support this, we have published a monitoring and evaluation framework alongside the strategy. That sets out how we will track our progress and the success of these policies, as part of an ongoing commitment to transparency, accountability and continued learning. This includes focused analysis to understand what drives child poverty and the impacts of the changes we are making, so that we can build on our successes and continue to make the case for further intervention. We will publish a baseline report in the summer setting out the latest statistics and evidence, with annual reports thereafter to monitor and evaluate progress.

This Government will not stand by while millions of children face the long-term harm that poverty brings. Families in poverty cannot afford to give their children what they need to grow and to achieve their potential. We will boost family incomes through employment and social security, drive down the cost of essentials and strengthen local support services. We are investing in the future of our children and will hold ourselves to account on delivering the impact we promised through this Parliament and beyond. We will remove this cruel policy, which has pushed 300,000 children into poverty.

I look forward very much to this debate and especially to the maiden speeches of my noble friends Lady Antrobus and Lord Walker of Broxton and the noble Baroness, Lady Teather. Between them they bring an amazing wealth and breadth of experience and knowledge to our House. I am delighted that they have chosen this extremely important Bill to make their first contribution to our proceedings. I beg to move.

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[Baroness Sherlock (Lab)]

My Lords, I am so grateful to all noble Lords who have contributed to this debate. I love listening to maiden speeches, when we get an insight into the range and depth of experience coming into this House. Today we heard three magnificent examples. If anyone outside is listening, that exceptional richness of experience is what this House can bring to debates. We have heard about defence and air power; conflict and resolving conflict; climbing mountains, both literal and metaphorical; the importance of business; the compelling relational power of tea in the Long Room and learning to play dominoes—I may be better at one of those than the other, but maybe time will tell. I thank all noble Lords so much for coming in and contributing.

In developing our child poverty strategy, we engaged extensively with all kinds of people, including families, campaigners and experts. The aim was to try to work out what would have the greatest impact on the day-to-day lives of children living in poverty. The message was really clear: remove the two-child limit. I am grateful to my noble friend Lady Shah for pointing out the challenges we inherited and why it takes time for Governments to work through dealing with everything that comes out.

The Bill is supported by over 60 organisations, representing anti-poverty charities, which is perhaps not surprising, but also children’s doctors, teachers and health visitors—the people who know only too well the damaging effects of poverty and see its consequences every day. I remain very grateful for the work of the campaigning organisations, those professionals who support our children and all those who pushed for this change, including the Bishops’ Bench. I share the remembrance of the former right reverend Prelate the Bishop of Durham, who pushed for this in his time in this House.

The Bill is an investment to deliver a better future for children and for our country. Many noble Lords, including the noble Baroness, Lady Teather, and the right reverend Prelate the Bishop of Leicester, have set out the devastating impact that poverty has on children. Many, including my noble friend Lord Babudu, have pointed out that poverty is not evenly distributed.

Poverty imposes really significant costs on individuals and the country. Let me start with the Official Opposition, because they have set out clearly why they oppose this. It is my experience, in many years in and around politics, that, if you want to defend the indefensible, the first thing you do is set up some clearly false dichotomies. What have we listened to today? “It is children versus defence”. Of course it is not. If I were going to play politics, I would point out that, if the Conservatives felt that passionately about it when they were in government, maybe they should not have cut £12 billion from defence spending in their first term alone; maybe they should not have cut spending from the 2.5% the last Labour Government left, pushing us to raise it to 2.6% by next year; maybe they should have slashed child poverty. They were not choosing between the two things: they attacked both of them. Now, we could have that kind of conversation, or we could have a different kind of conversation. Let us take a step back and look at what actually happens with the policies.

What is the other false dichotomy? I think we fall into making a mistake if we try to set up social security versus work. I am not repeating the figure that 59% of families hit by the two-child limit are in work, in order to make a political point; I am pointing out that our social security system is there to help people in and out of work, and to help them get from being out of work into being in work. If the barriers get in the way of people being able to move into work, the system is not doing its job. Every time we start trying to pretend that this is contrasting people lying in bed all day with the blinds shut with those who go out to work, we do everyone a disservice. Please let us not have that conversation.

What we want to do is recognise that we have to enable work, encourage work and take away the barriers to work—that is really important—and that neither those in nor out of work are static populations: people move between those states, for a whole range of reasons. Our job is to make sure that, for those who can work, they stay in work as much as they can, for as long as they can, and, if they come out, to help them back into it when they can—but, if they cannot, to support them, because that is what we do by pooling risk.

The noble Lord, Lord Redwood, made some very interesting points. I parted company with him when he got to a certain point in his speech, but he made a really interesting point in saying that this policy is clearly not a panacea. The state cannot and should not pretend that it can solve all the problems families have, and the state does not raise children: families do.

The starting point, however, is that, if we want to tackle child poverty, as the noble Viscount, Lord Younger, said he does, the first thing we have to do is stop making it worse: stop tipping more children into poverty every year. The second step is to work out what the barriers are to people moving into work and developing in their lives. The noble Lord, Lord Redwood, mentioned some of those that are nothing to do with money, and the state can only do what it can to try to make it as easy as possible for families to do the right thing: investing in relationships education, supporting families —all kinds of education—and communities and relationships. What the state can do is tackle the things it can do something about. It is definitely not all about money, but it is not not about money: the statistics show really clearly, for example, the impact of poverty on family breakup and on parents struggling to do the right thing by their kids. We need to do both.

The next thing we need to do is create opportunities. I always hate disagreeing with the noble Lord, Lord Bird, because I know that he will come back at me, rightly, but we have to start to move not away from but beyond “handout versus hand up”. I absolutely agree with him that our job is to give people a hand up. He has done that in his time—as, indeed, has the noble Baroness, Lady Stedman-Scott—but I would not contrast that with any support the state gives to those who are struggling when they need it. A lot of what we do is on both those things. Like my noble friend Lord Walker, I have a real interest in how we use my department to help those who are struggling to get into work. Just this week, I was at a conference talking to businesses that are helping ex-offenders into work.

[Lord Bird (CB)]

My Lords—

[Baroness Sherlock (Lab)]

I knew I should not have mentioned him.

[Lord Bird (CB)]

Is it not wonderful that social security can be used as a hand up? That is the point I am trying to make. I am not trying to make the point of work versus social security. I am saying that a hand up is absolutely marvellous. The greatest hand up that I got was a probation officer.

[Baroness Sherlock (Lab)]

Indeed, and that probation officer clearly did a very good job: look where the noble Lord has ended up. Would that they were all that successful. I suppose that that is quite a high bar at which to set them, but I commend it. That is a really great point, and I am now violently agreeing with the noble Lord; but I will move on.

I want the social security system to do its job, and for most people its job is to support them into work, and in work, and to develop them in work. That is very much what this Government are seeking to do.

One of the challenges with universal credit is about assumptions. It was designed to move people into and out of work—to work in and out of work—and when it works it does so very well. All we are doing is making sure that the system works even better than it does. But the assumption that this Government are doing the wrong thing by spending money on tackling child poverty is fundamentally mistaken. My noble friend Lord Walker talked about the need to make sure we tackle NEETs, for example. We have one in eight of our young people not in employment, education or training. They did not start at 16.

[Baroness Stedman-Scott (Con)]

Will the Minister give way?

[Baroness Sherlock (Lab)]

Okay; it is going to be a long day.

[Baroness Stedman-Scott (Con)]

We are not saying that the Government should not spend money. It is about what you spend it on, and how it is spent to get the best outcome from what you are trying to do.

[Baroness Sherlock (Lab)]

My Lords, I understand that, but I have looked at what the last Government spent the money on and at the results, and I do not like them, so we are going to do something different.

My simple view is that if we will the end of tackling child poverty, we have to will the means. We believe that removing this barrier is fundamental. Those young people who were NEETs at 16 did not start at 16: they started without the opportunities, without the education, and without the start in life they should have had. The evidence shows quite clearly that children who grow up in poverty are likely to have poorer mental health, fewer opportunities and less chance to do all those things we want them to do. What we are doing is enabling those people to have opportunities, giving them the start they need. If we can get that in place, the whole country benefits. Instead of supporting people not to work, we are giving them the chance to flourish as individuals and to make the contribution to our society that they will not get the chance to make otherwise.

Before I get myself into any more flights of rhetoric, I should answer some of the questions that have been asked. My noble friend Lady Lister asked about council tax reduction. I think she knows this, but just for the record, local councils are of course responsible for designing and reviewing their own council tax reduction schemes. My department has been working with the MHCLG to communicate the change to local authorities, and they have been encouraged to consider the impact of their schemes in the light of the removal of the two-child limit. In 2029-30 an estimated 560,000 families will see an increase in their universal credit award, with these families gaining, on average, £440 a month. The impact of transitional protection is included in the impact assessment, but not on the numbers of households.

The benefit cap was raised by my noble friend Lady Lister, and by the noble Baronesses, Lady Teather and Lady Bennett, and by my noble friend Lord Davies and a few others. This Government want to preserve the fundamental principle that work is the best route out of poverty. We believe that leaving the overall benefit cap in place encourages personal responsibility while maintaining the incentive to work. Where possible, it is in the best interests of children to be in working households. Being in work substantially reduces the chance of poverty: the poverty rate of children living in households where all adults are in work is 17%, compared to 65% for children who live in households where no adults work. We will continue to protect the most vulnerable—those who are unable to work because of a disability or a caring responsibility are protected and exempted from that.

The noble Baroness, Lady Bennett, asked about numbers. When I answered her Written Question, the impact assessment had not been published at that point. I can say that among households in scope to gain from the removal of the two-child limit in 2029-2030, approximately 50,000 are estimated to be capped before the policy change, and a further 10,000 households will be capped afterwards. In contrast, 550,000 households in Great Britain will gain in full from the removal of the two-child limit in 2029-30, as will an estimated 2 million children in the United Kingdom.

The noble Baroness, Lady Janke, and my noble friend Lady Shah raised the impact of poverty on children and schools—

[Baroness Lister of Burtersett (Lab)]

I am sorry to interrupt my noble friend, but a number of us have made the point about the thresholds for the benefit cap and the fact that child benefit is taken into account. When we were in opposition, we said that child benefit should not be taken into account in the cap. Can she comment on that?

[Baroness Sherlock (Lab)]

I have given the same answer about the levels a number of times. The cap has to be reviewed by 2027. The Secretary of State will review it at the appropriate time, certainly within the statutory deadline, and he will make the judgments he makes at the time. I am happy to convey the comments made on this to my colleagues in the department, but the Government have taken the view that they have on the cap. We will simply have to leave it at that, I am afraid.

On schools and education, it is striking that schools are using their stretched resources on services such as food banks and providing essentials to children. Research by the Joseph Rowntree Foundation shows that now one-third of primary schools run food banks, one-quarter are providing essentials, and 38% say staff provide for pupils and families out of their own pockets. We got the Children’s Commissioner’s office to do some research to support the development of the child poverty strategy. Children and young people spoke about how low income impacts their education and at times limits their career aspirations, including by restricting their access to extracurricular activities. This is an incredibly important point made by my noble friend Lord John, or possibly by my noble friend Lord Walker—I am sorry, I am getting very bad at names. We listened carefully to families when we did that, and the consistent message was that a whole range of benefits came from lifting the two-child limit. It is not just about money; it is about all the things that enables. This goes also to the points made by the noble Lord, Lord Redwood.

As for paying for this, the Government have always made clear how they will pay for things when they announce them. It was made clear that the removal of the two-child limit was fully funded by policies in the Budget, including reforming Motability tax relief, clamping down on fraud and error in tax and social security, and reforming the assessment process. Together, those measures will save £4.9 billion in 2030-31 versus the £3.2 billion cost of removing the two-child limit.

The noble Viscount, Lord Younger, raised the OBR and the welfare cap. The Government are committed to ensuring that social security spending remains on a sustainable path. We set a new welfare cap in the Autumn Budget 2024 to make sure that it remains under control for the course of this Parliament. The forecast for social security spending is virtually unchanged from the last OBR assessment, increasing by only 0.1% in 2029-30 in the forecast. Welfare spending is forecast to rise by less than half the amount it did under the previous Parliament—just over 0.3% of GDP by 2030-31 compared with 0.7% previously—and health and disability spending is expected to rise by only 0.3 percentage points compared with 0.5 under the previous Government. This Government inherited a system which did not do all the things the Opposition say they wanted it to do. In fact, we saw growing numbers of people economically inactive as a result of ill health and disability. That graph went up. We have been working hard to bend that graph by taking the steps needed to do it.

On employment, parental employment rates are already high, but if we want to get more parents into work, it is important that we remove the barriers to getting them there. One of the key barriers is childcare. That is why we have announced 30 hours of funded childcare for working parents, saving eligible families using all 30 hours up to £7,500 per eligible child per year. When we talk about the parents in larger families being in work, one of the challenges was childcare again. We are extending eligibility for universal credit upfront childcare costs to parents returning from parental leave to ease that transition back to work, and we are providing UC childcare support to help with the childcare costs of all children, instead of limiting it to two children, so that parents who have larger families can afford to go back to work. It clearly is not about work or social security; it is about social security enabling work and supporting it, as the noble Lord, Lord Bird, said so clearly. We know that there is more to do, which is why we are committing to a review led by the Department for Education across government about access to early education and childcare support and delivering a simpler system.

What is coming next? We have been clear that the child poverty strategy will not solve problems overnight. This is one step in a journey looking forward 10 years. We have already made a number of significant steps: investing heavily in expanding free school meals; introducing a fair repayment rate into universal credit; investing in support to help people with their energy bills; investing in support across the piece; raising the minimum wage; looking at what is happening with affordable housing; and investing in helping people to get into secure jobs.

The most important thing will be to monitor that, to make sure that we do it. There will be a comprehensive programme of analysis, making sure that we know the exact impact of the changes we are making. If the Opposition are worried, we will be monitoring the impact of what we do. This will enable us to work with government departments and the devolved Governments to consider what we do in future and to capture the data as we go.

This Government are determined to break down barriers to opportunity, to deliver economic growth and to raise living standards. Removing the two-child limit in universal credit remains the single fastest and most cost-effective lever we have to reduce the number of children growing up in poverty. It is at the heart of a wider strategy to drive down child poverty and set the next generation up for success. Far from being anti-work, this strategy includes our plan to make work pay, to improve job security and living standards, and to enable people to get on into work. We do not simply want to move people from being out of work into jobs from which they can never progress. If we want social mobility, we need to enable people to develop skills so that we can become a high-skilled, high-wage, high-investment economy, as we have been challenged to do. We have also announced increased universal credit support, getting people into work and into more hours because, above all, we believe in the value of every person and the contribution they can make.

The noble Baroness, Lady Teather, and the right reverend Prelate the Bishop of Leicester made some very interesting points. Part of what we have to do is to invest in communities and relationships. All we can do with money is remove barriers. What we need to do as a country is look at how we engage with our neighbours and our communities, and how we can support all those in our communities to develop and to fulfil their potential.

My noble friend Lord John said that a Labour Government are nothing if they do not do something to tackle poverty and inequality. That is exactly what we are doing here today. The Bill, along with the wider actions in the child poverty strategy, will help deliver the biggest reduction in child poverty over a Parliament since comparable records began in the 1990s. It is time to put this counterproductive and cruel policy into the dustbin of history, and to focus instead on building a system that gives children and their families the security and opportunities to build a better life, no matter their background. I commend the Bill to the House.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.

Pension Schemes: Ministerial Powers

Baroness Sherlock Excerpts

Wednesday 11th March 2026 Lords Chamber

[Baroness Altmann (Non-Afl)]

My Lords, in begging leave to ask a Question of which I have given private notice, I declare my interests as set out in the register.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, the Pension Schemes Bill contains a reserve power on asset allocation, designed as a backstop to the voluntary commitments made by the pensions industry under the Mansion House Accord. The Government do not currently expect to use this power. Were this power ever exercised, schemes that cannot meet the requirements without causing material financial detriment to their members would be able to apply for an exemption under the savers’ interest test. The power is time-limited and subject to consultation, parliamentary approval and robust safeguards.

[Baroness Altmann (Non-Afl)]

My Lords, I thank the Minister for that Answer, but I am afraid that if the Government’s main argument for including these powers is that they do not expect to need to use them, and will use them only if pension schemes themselves decide that they do not believe it is wise to achieve the allocations that the Government want them to, I have even greater concerns about those powers. I urge the Government to think again about overriding trustees’ decisions about what assets to invest in.

In particular, the Government are trying to take unlimited powers in the Bill to prescribe a percentage, but we do not know what that percentage might be, and to invest in assets, but we do not know which assets they will be. Even those who brokered the Mansion House Accord, such as Pensions UK and the ABI, are saying that they wish this to be reconsidered. Do the Government really believe that they know better than the investment industry how pension schemes should invest? Do they not consider that this is an example of the problems that the Government might have in excluding from the Bill some of the ideal vehicles which could be used to invest in the very assets that the Government say they want to support?

[Baroness Sherlock (Lab)]

As the noble Baroness well knows, we have been discussing this matter for some weeks now in Committee and will be discussing it again on Monday, when we come to the matter on Report. Let me give her a brief answer to the points she has made. I know that she agrees with the Government’s objectives, because she herself has advocated previously—indeed, in Committee—that we make pension tax relief contingent on 25% of new investment being allocated to UK assets. I know she wants the same thing that we do.

To be really clear, the power is being taken as a reserve power to back the voluntary, industry-led Mansion House Accord, which said that by 2030, 17 of the largest pension schemes in the private pensions sector would be investing 10% of their relevant default funds into private investment, with half of that in the UK. The expectation is that having done that, the industry will do it. The reason for taking a reserve power is, as the noble Baroness knows very well, that the challenge in the UK is too often schemes compete on cost and not on value. There is always a risk that for some small competitive advantage, somebody may want to try to separate off from that, so the reserve power is signalling clearly to the industry: this is the direction of travel, so let us stay with it. All we are doing is backstopping that.

[Baroness Stedman-Scott (Con)]

My Lords, the Government say that this power is merely a backstop to the Mansion House Accord but that is a gross misrepresentation. The Pension Schemes Bill goes far beyond that and gives Ministers sweeping authority to mandate pension investments to whatever level they choose. The state should not be directing the allocation of private pension assets. Those decisions must be taken by trustees in the best interests of their members, not by Labour Ministers pursuing political objectives. This policy risks undermining confidence in the entire auto-enrolment system, which was built on the promise that people’s savings would be invested in their interests, not the Government’s. I ask the Minister a simple question: will the Government remove this dangerous and unjustified power from the Bill?

[Baroness Sherlock (Lab)]

There is a short and a long answer. The short answer is no. The long answer is that the Government have made it abundantly clear, because I have done it myself many times in Committee, what the purpose of the reserve power is: to backstop the Mansion House and trust commitments. My honourable friend the Pensions Minister and I have made it clear—he said it again this morning at a pensions conference—that we would make absolutely sure that the Government’s intention simply to backstop those agreements was there in the Bill. That is what the legislation is for, but I need to correct something in particular. This power does not direct schemes into specific assets or projects. What it does is set a broad framework aligned with the industry’s own voluntary commitments under the Mansion House Accord. Trustees retain full discretion over individual investment selection and the balance between asset classes. The role of a pension trustee has always been to exercise judgment, subject to constraints, and nothing in these provisions changes that.

[Lord Vaux of Harrowden (CB)]

My Lords, can the Minister perhaps tell us why she thinks pension funds are not currently investing, or have not been investing, in the types of assets that she would like them to? I ask that question because surely the better way forward is to understand what is stopping them doing so and fixing that problem, rather than telling them to do something they do not wish to do.

[Baroness Sherlock (Lab)]

My Lords, I have said this many times in Committee, as the noble Lord knows, but I am delighted to explain again for the benefit of the whole House. I have just explained what the Government believe the challenge is. By international standards, we are really very low in aiming for 10%. Canadian schemes invest 11% in infrastructure alone. The evidence is clear that investing a small proportion of funds in the context of a diversified portfolio brings better returns for savers over the long run. The aim is to get better returns for savers. There is too much short-termism in our markets at the moment, and the view of the Government—as well as the evidence that seems to be out there—is that this is because we are seen as competing on cost, rather than on return or value. It is much easier to pitch to an employer on that basis. If we make it clear that the whole industry is going in this direction, then we believe that that will be the case. The choices will still be there, the safeguards are still in place, and we believe that this will be in the interests of savers across the long term.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, what timeline are the Government following, given that the Mansion House Accord target is 2030? When will the Government commence consultation, as there has not been any yet, and what analysis has been done about the difficulties now reported daily of private credit funds, and others, not being able to make redemptions or exits? Would the effect be that the Government would be forcing workers’ pensions to be buyers of last resort, and is that fair when private sector workers do not have any guaranteed benefits?

[Baroness Sherlock (Lab)]

My Lords, the Government have not set out a timeline for using the power precisely because we have made it clear that we do not wish to use it, and do not expect to use it. The timeline for Mansion House is clear: the power expires if it is not used, and if any requirements are in place, they are capped at that level and cannot be raised thereafter. This will happen only if it becomes clear that the Mansion House Accord is not able to be delivered on. At that point the Government would consult, they would produce draft regulations, and the process would then happen. As I have made clear, since the only aim is to backstop the Mansion House Accord, the evidence should come from what companies are doing in that accord.

[Lord Davies of Brixton (Lab)]

My Lords, like my noble friend I am looking forward to discussing these issues at length on Report of the Pension Schemes Bill. Does the Minister agree with me that the real trick is not so much directing the investment as finding the suitable opportunities in which to invest? Her honourable friend the Pensions Minister has talked extensively about the failure of investment in reservoirs over the last 20 or 30 years. There is a failure there that has to be addressed.

[Baroness Sherlock (Lab)]

My noble friend is quite right; we have had many opportunities. It has been a joy to discuss the Pension Schemes Bill over many weeks, and that joy is set to extend for some weeks to come. My noble friend raises an important point: if the Government want to make sure that people are investing in good projects, they need to make sure that there are good projects to invest in. We also need to make sure that there are vehicles for doing that. The Government have done a great deal already, with the British Business Bank, looking at what has happened with Sterling 20 and at making sure that we work with industry to create the opportunities. But there is clearly money to be made here: if international pension funds are coming to our country and buying up chunks of our infrastructure and our private equity, we should be making sure that these are open to our own pension funds to make money on them. Nobody is making them do it; they are doing it because it is the right thing to do. We need to make sure, therefore, that we enable and encourage it, and the industry has taken the first steps itself. We are simply making sure that the backstop is there to make clear that this is the direction of travel.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, I declare my interest as chairman of the Scottish American Investment Company. I understand why the Government would want to take a reserve power, given the persistent failure of the City of London—one of the biggest global financial centres—to provide equity finance to British industry over 150 years. Equally, successive Governments’ record of direct investment, or indeed direct intervention, is, to put it charitably, poor. Does the Minister acknowledge that government intervention carries a price in terms of market confidence, and will the Government take that into account before exercising any reserve power?

[Baroness Sherlock (Lab)]

I thank the noble Lord for an excellent question; with his background I would expect no less. The simple answer is yes. To be clear, the power does not direct schemes into any specific assets or projects. What it does is set a broad framework. It talks about private investment as a whole, not about specific assets. Crucially, the safeguards are really clear. If the power ever comes to be used, a number of things have to happen. First, there has to be a report commissioned and published before the power is used, so as to make sure that the conditions are right, and to show the impact on savers’ interest and on growth. Secondly, there is a savers’ interest test. If the trustees believe that it would not be in the interests of their beneficiaries to follow the direction, not only can they, but one would expect their fiduciary duties to guide them to, make an application for an exemption under the savers’ interest test; that is there to do that job for them. There is also parliamentary scrutiny of any regulations. I hope that that reassures the noble Lord.

[Viscount Younger of Leckie (Con)]

As the Minister herself has just said, the signatories to the Mansion House Accord signed up to a voluntary agreement to invest in UK assets. Does she agree that they were not aware that the reserve power, the so-called mandation element, was going to be in the Bill? Does she therefore agree with me, with many of the signatories themselves, and with those in the pensions industry that mandation goes well beyond the Mansion House Accord?

[Baroness Sherlock (Lab)]

My Lords, to be clear, the Government designed this power specifically to backstop the Mansion House Accord, and that is our intention. I am always open to suggestions of ways to make that clearer than we have tried to do so far. I had a great opportunity to talk to many Members of the House about this and many other issues, and I am happy to carry on doing that. There is a very simple way for any of the Mansion House signatories to make sure that this power is never used: to keep to the voluntary commitments that they have already made. If that happens, there will be no need for the power ever to be used and the Government will not bring it in, so everybody will be happy. That is the simple way forward.

[Baroness Kramer (LD)]

My Lords, under the Mansion House Accord, and the mandation that now sits behind it, people on the lowest incomes will find 10% of their pensions put into high-risk illiquid assets. Given that that pool of assets is currently in very serious trouble thanks to illiquidity—this was prior to the Iran war, which is going to burst the bubble—will the Minister say that, if she forces this through, the Government will backstop the losses that will happen for those people on the lowest incomes, so that their pensions are not wrecked when they reach retirement?

[Baroness Sherlock (Lab)]

My Lords, first, as I have said before, the Government are very clear—and the Bill makes clear—that were the power ever to be used, the Government must commission a report that will look at the state of the market and the impact on savers’ interests, as well as wider impacts, before using the power. If what the noble Baroness is describing were to be the case, that would become evident, and it would of course affect the Government’s decision.

Secondly, and, again, just to be clear, it is because we want to look after the interests of savers that we want to tackle the fact that, by international standards, UK pension funds invest tiny amounts of money in private finance, and therefore, as a result of not investing in private assets, it is savers—those savers whom the noble Baroness specifically describes—who are losing out because they are not getting the returns that they need. These are the default funds, so savers who know lots about this, and who will want to make judgments on making sure that their assets are in the right place, are already doing that. It is not serving their interests if these default funds are being put simply into passive investing or things that will not bring the long-term returns.

Finally, this goes back to the fact that the trustees are not being directed to invest in any specific asset or particular project. If the power was ever to be brought in and they were asked to do this, and if they believed that it was not in their interests, then we would expect them to apply for an exemption to protect the interests of their members. If there was something about their members—in the way that the noble Baroness describes—that was relevant, they would simply have to provide that evidence. That is what the savers’ interest test is for.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2026

Baroness Sherlock Excerpts

Thursday 5th March 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the draft Regulations laid before the House on 15 January be approved. Considered in Grand Committee on 2 March.

Motions agreed.

Access to Work Fund

Baroness Sherlock Excerpts

Thursday 5th March 2026 Lords Chamber

[Lord Touhig (Lab)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare an interest as a vice-president of the National Autistic Society, an honour I share with my noble friend Lady Browning opposite.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, Access to Work is a demand-led, personalised discretionary grant programme, which supports the recruitment and retention of disabled people in employment. As part of standard operational practice, the DWP continually reviews how the service has delivered to drive improvements. Access to Work has not substantially changed since its introduction in 1994. In our Pathways to Work Green Paper, this Government consulted on the future of Access to Work and how to improve the scheme so that it helps more disabled people in work.

[Lord Touhig (Lab)]

My Lords, last year I met a group of autistic youngsters who were in employment for the first time, thanks to the support of the Access to Work fund. But the fund, in truth, is in crisis. There is a backlog of 60,000 applications waiting to be processed, 33,000 people are waiting for payments, and the system is overwhelmed and struggling to cope. The National Audit Office recently produced a report making recommendations for major changes to how the fund operates. Will my noble friend the Minister use this report as the basis for a complete review, to prevent this fund failing completely?

[Baroness Sherlock (Lab)]

I share my noble friend’s view of the importance of supporting people into work; that is what Access to Work is there to do. The NAO report, published last month, is a really helpful contribution and highlighted a number of pressures that we already know about. It also noted that the demand on Access to Work has gone up dramatically. It began to escalate significantly coming out of the pandemic—application rates have doubled since 2019-20—and the Government are now spending a record amount, over £320 million, which is the highest ever and 22% more than the year before.

A range of changes have made a difference, partly about the scale and partly about complexity, so we are taking those steps now. We increased the number of staff working in this area by 29% last year and we have looked at operational improvements to speed up cases. We are getting more complex cases coming through, which is making a difference. We also need to reform Access to Work. It has not been looked at properly since it was introduced over 30 years ago; we need to make sure it is fit for the future.

[Lord Sterling of Plaistow (Con)]

My Lords, I totally agree with the points brought up by the noble Lord, Lord Touhig. We are very fortunate in having a Minister who cares so deeply about this subject, as we all know. One of the problems in getting a job, which is what I want to ask the Minister about, is that, in practice, the workforce in many small companies is very nervous indeed to have somebody who is disabled or has a problem of that type. How can we deal with that better and faster?

[Baroness Sherlock (Lab)]

I thank the noble Lord for his question and for his kind words. He raises a really important point. One of the things we have discovered, both through our general work with employers but also through the report we have done in this area, is that many employers really want to help, but some small and medium-sized businesses do not know how. They are nervous, and they worry about having the right conversations and how to help. We have a special service, developed with SME employers, called SEND, where we can work with employers and bridge conversations between employer and employee to help them work out what they should do and what help they can get elsewhere.

At the same time, we need to make sure that really big employers step up to the plate. We should not be in a situation where very large employers use Access to Work for small pieces of equipment, such as buying keyboards or chairs, which one would hope they could have managed in the normal run of things. Our job is to help employers to do the right thing, because most of them want to, but the noble Lord knows very much from his experience that this can be challenging. Yet, the rewards of having a really good workforce can make all the difference in the end.

[Lord Palmer of Childs Hill (LD)]

My Lords, I compliment the Minister on the work that is being done in this area. In my view, the aim of the Access to Work fund is to get people out of the house and into work. The fund also pays for improvements and developments in the home when people are working from home. I am sure it would be of great interest to the House to know what proportion of the fund is going to support people working from home rather than working in a place of employment, which is not quite the same in what it achieves for mobility.

[Baroness Sherlock (Lab)]

My Lords, the noble Lord makes an important point: the scheme helps people to get into and stay in work. It is incredibly wide-ranging, covering anything from a customer applying for a single one-off grant of £100 to buy a piece of equipment, which they might keep for the duration of their work in that particular role, through to the other end, of a cap of £69,260 for someone who needs large levels of personal support. There are people who buy a single piece of equipment, or have British Sign Language support to do a job, and right across the piece. I do not have the figures about location, but if we have them I would be very happy to write to the noble Lord.

[The Lord Bishop of Leicester]

My Lords, although I recognise that spending on Access to Work has increased in recent years and applaud the Government’s ambition to support more disabled people into work, this will most likely require more financial investment and more training of specialist staff. Therefore, have the Government assessed how their welfare reforms will affect demand for Access to Work and how the scheme can be strengthened to meet what may be an increased case load in coming years?

[Baroness Sherlock (Lab)]

The right reverend Prelate raises a very important point. The Government hope there will be more demand for support. In reviewing Access to Work, we also have to review the whole landscape to look at how well supported employers are to be able to do the things they can do, which was the point raised by the noble Lord, Lord Sterling. What is the right thing for an employer to do, what can the individual do themselves and what can the state do to help them directly?

One of the challenges in recent times is that, along with that growth, we are getting very different types of cases. Broadly speaking, when the scheme was much smaller, people traditionally applied for a piece of physical kit for a physical barrier. The biggest single case now is people needing help with mental health. There are also cases of people coming through with a range of learning conditions, which are quite complex to assess and need a lot more work. We are having to review that, alongside broader policies, but the right reverend Prelate makes an important point to connect them.

[Lord Holmes of Richmond (Con)]

My Lords, if you are blind or visually impaired in the UK you have only a 27% chance of being in employment. In the light of that, what changes does the Minister propose need to be made to Access to Work, connect to work and all job programmes to close this horrific employment gap?

[Baroness Sherlock (Lab)]

I commend the noble Lord for raising these issues. I am really grateful to him for having been in touch with me, and I look forward to discussing this more with him directly. The Government are increasingly looking at how we can personalise our support. The disability employment advisers in our jobcentres are well trained to make sure they work with individuals, but the next stage goes back to employers. We can get individuals job-ready, but we have to make sure that places of employment are disabled person-ready as well, so we are trying to do both.

In developing the future of Access to Work, we consulted generally and set up a collaboration committee, working closely with disabled people and people from representative organisations, as well as employers, to look at how we get the scheme right. Within that, we are trying to capture the full range of needs and make sure it carries on being personalised, but in a practical way.

[Baroness Stedman-Scott (Con)]

My Lords, the Minister and I suffer from the same condition: an obsession with getting people into work and keeping them there. I hope the whole House shares an obsession with the same outcome. Nothing makes my heart sing more than knowing how many people we get into work, how many stay in work—particularly after a year—how much a job costs and how we can make sure we measure what we are doing. How does the department keep these outcomes under review and how does it ensure that expenditure in this area is demonstrably helping people enter and stay in work?

[Baroness Sherlock (Lab)]

I commend the noble Baroness for the really interesting and innovative work she has done in the past, and for her commitment to this area. It is always a pleasure to debate these issues with her. On value for money and the results of Access to Work, she will remember from her time in the department that the previous Government tried to look at how you assess the impact of this scheme, only to find that it is very difficult, because you do not have a counterfactual: you cannot have a control group who get no help at all and struggle on their own, and compare to see how the two groups are doing. The NAO flagged these issues to the department and we are very aware of them. We are looking all the time at how we reform the scheme in a way that helps individuals, demonstrates additional value for money and is not a substitute for what employers should be doing, but which none the less is not so bureaucratic that you cannot get the money you need. To reassure her, all those things are being taken into account in the review process.

[Lord Harper (Con)]

My Lords, when I was in the Minister’s position and responsible for this scheme, one of the problems we had was getting enough people to take advantage of the scheme. I urge her, although it is challenging, to take as a win the fact that demand is very high and to make the argument with the Treasury that getting people into work is a net benefit to the public finances. I assure her that, if she makes that argument, she will get cross-party support for it. Access to Work is a fantastic scheme and I look forward to the changes she is able to make to enable it to get more people into work, whether they are in a workplace or working from home, where that may suit them best.

[Baroness Sherlock (Lab)]

I am grateful to the noble Lord both for the history lesson and for his support. Access to Work has many challenges, but getting people to apply for it is not chief among them. One of the challenges is that, although we are spending record amounts of money, we are still supporting only around 1% of the working disabled population, so this is also about identifying the best way to get the right amount of support to the highest number of people. The noble Lord was helpful in raising that issue; that is now our challenge, and I am grateful to him for reminding me of it.

Pension Schemes Bill

Baroness Sherlock Excerpts

Thursday 5th March 2026 Lords Chamber

Moved by

[Baroness Sherlock]

That the amendments for the Report stage be marshalled and considered in the following order:

Clauses 1 to 118, the Schedule, Clauses 119 to 123, Title.

Motion agreed.

Rent Officers (Housing Benefit and Universal Credit Functions) (Modification) Order 2026

Baroness Sherlock Excerpts

Tuesday 3rd March 2026 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, I thank the noble Baroness, Lady Thornhill, for opening this short debate. Let me say at the start that His Majesty’s Opposition support the principle behind the instrument before us. It reflects a careful exercise of the Government’s statutory powers. The order will ensure that local housing allowance rates, which determine the housing support paid to universal credit and housing benefit claimants, remain at the level set on 31 January 2024 for the 2026-27 period.

While we believe that the decision behind the order is sensible—and I would argue, the only way—we also recognise that concerns have been raised, including by the Secondary Legislation Scrutiny Committee, about the impact of freezing rates in a context of rising rents. Both noble Baronesses put that case very eloquently. According to figures from the DWP, rents have increased by 14% since the LHA was last increased in April 2024, and over 50% of people in receipt of either housing benefit or universal credit see a shortfall between the cost of their rent and housing support. I say again that the noble Baroness, Lady Thornhill, eloquently set out her case and the noble Baroness, Lady Pinnock, added her own facts and interesting anecdotes. She went on to say that we cannot carry on spending as much as we are, with which we all agree.

The question that we all come back to is what to do about this. I will refer later to the two-child limit, which is perhaps a black cloud hanging over us all, but can the Minister set out what other measures of help are available for households facing squeezed budgets? Can she explain, particularly for me, the thinking and the policy behind the crisis and resilience fund—the so-called CRF—which will, as I understand it, incorporate the old discretionary housing payments, though not in Wales? I would like to understand the difference here between the CRF and the DHPs, or how they interrelate. By what mechanism will those who are most in need be targeted from now on? What role is there for local authorities?

In her speech, the noble Baroness, Lady Thornhill, referred to houses and homes. She is quite right, because lowering rental levels is surely a priority to help with this particular issue. The Government have said that homes, and building more homes, are a priority. They have stated publicly and clearly that they need and wish to build 1.5 million homes by 2030. If that were the case, it would increase supply, which would, in turn, decrease rents. With that, comes decreased demand, and I suppose the theory is that each house will therefore demand less rent. Where are these new homes? We are more than 18 months into this Government. What progress is being made? This strikes me as being a vital element of this order. The evidence shows that fewer homes are being delivered per year now than the maximum that the last Government managed in a year, which I happen to know was 240,000. I look forward to the Minister’s response to these and other points outlined by the Committee.

This order must be seen in a wider context. We must bear in mind public spending and the welfare policy under this Labour Government. Since 2010, successive Conservative Governments have sought to reform and target welfare so that it acts as a genuine safety net and encourages people into work. With the introduction of universal credit, the central focus was ensuring that the welfare bill was affordable to the taxpayer. We have now set out a plan to deliver £47 billion-worth of savings over the next Parliament; around £23 billion of that will be from non-pensioner welfare reforms, reducing waste and tackling the rising debt. I must make it clear that we will and we must continue to protect those who are genuinely and most in need.

This Government’s approach has been rather different. They have dramatically increased welfare spending, including the breaking of fiscal promises and presiding over higher public debt and taxes. More worryingly, their decisions seem to have been shaped by short-term political pressures, rather than by clear and disciplined fiscal frameworks.

The most notable example of this is the Government’s decision to remove the two-child benefit cap—a policy against which they previously whipped their own MPs. As the Committee will be well aware, this cap was introduced by the previous Conservative Government in 2015 as part of a broader effort to ensure fairness in the welfare system. Indeed, Labour’s own leader initially refused to scrap it, even withdrawing the Whip from MPs who voted to end it and treating it at the time as a tough but necessary choice. Yet in an abrupt reversal, the current Chancellor and Prime Minister abolished the two-child limit in the 2025 Budget at an estimated cost of more than £3 billion, stating:

“We on the Labour Benches do not believe that the solution to a broken welfare system is to punish the most vulnerable”—[Official Report, Commons, 26/11/25; col. 397.]


children. Those are well-meaning words, but that is a stark departure from Labour’s earlier position and one that flies in the face of its own fiscal constraints.

The U-turn came at a time when the Prime Minister’s net favourability happened to be at its lowest. This is irresponsible decision-making. The Government’s expansion of welfare spending has led to higher taxes and long-term pressures on the public finances, with the UK continuing to borrow well over £100 billion per year to fund day-to-day spending. The noble Baroness, Lady Thornhill, might bear this figure in mind because reducing it is surely a massive challenge and a must do to make a real difference through massive savings, which will, ultimately, feed through into alleviating local pressures to help the least well-off. Surely this is one thing that must be looked at with more urgency.

To be clear, we do not believe it is fair to raise the two-child limit. This is because many families in work make the decision to live within their means, including making decisions about the size of their families. These same families lose out when additional funding is provided to those out of work who decide to have more than two children. I am aware that the Bill will soon come before the House and that we will have the opportunity to debate this matter all too soon—it might even be next week—and we will continue to press the Government to ensure that housing support, and welfare more broadly, are sustainable and fair. We must make every effort to support individuals and families into well-paid work and not increase dependence on benefits.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Thornhill, for introducing her Motion. If that was the first time she has done so, I commend her on how clearly she set out her case. I thank her for giving us the opportunity to debate the incredibly important subject of housing support. I also thank the other noble Lords who have contributed. For clarity, the order sets local housing allowance rates from April for 2026-27. In his Written Ministerial Statement on 26 November last year, the Secretary of State confirmed that LHA rates would not increase for 2026-27 but would be maintained at their current levels.

The noble Baroness, Lady Thornhill, and the noble Viscount, Lord Younger, have come at this from the perspective of fiscal inheritance. The fiscal inheritance is not a defence, but it is a reality. I remind the noble Viscount that this Government, when they arrived, were not immediately able to make choices to tackle many of the problems that had been left. Frankly, this was a target-rich environment; there were challenges right across the environment. Our public services were falling apart, our roads and houses had not been supported, and benefits had been frozen or put below inflation for many years, from the coalition Government all the way through until this Government took over. So there are some really significant challenges. That is at the heart of what the Government had to do: we had to make some very difficult choices across the piece on spending, and I will try to explain why.

A key driver of high rents is the lack of housing supply, which is an issue for the whole country, not just for those who get help for their housing from the social security system. The noble Baroness, Lady Pinnock, set out the challenge that we are all facing: a significant amount of money is being spent. The Government are prioritising action in the longer term; if we focus only on the short term, we will never be able to address this issue. I will come back later to some of the specifics that have been asked about.

We have therefore committed to build 1.5 million homes in England this Parliament, which includes the biggest increase in social and affordable housebuilding in a generation. We aim to build 300,000 social and affordable homes, and the whole programme is backed by a record £39 billion investment. We know that in many cases it takes a long time to build the homes we need, so we are committed to a whole-system approach to unblock the barriers to building and to address productivity in the housebuilding sector. The noble Baroness, Lady Thornhill, is right: people need housing support now.

To illustrate the point made by the noble Baroness, Lady Pinnock, the DWP continues to spend around £37 billion a year on housing support, and over £13 billion of that is support in the private rented sector. She is right that these are huge sums, even in the context of the social security budget. The Committee may be aware that the last LHA increase in April 2024 cost £7 billion over five years. These are significant sums, so when the Government have to make choices, they have to look very carefully at each individual element of the choices in front of them.

LHA rates are reviewed every year by the Secretary of State, and a range of factors were considered before he decided not to increase rates. He looked at the rental markets across Great Britain. The noble Baroness, Lady Thornhill, is right that rental inflation is slowing: it was over 9% in November 2024 and, by last January, it was down to 3.5%. But the fact is that there are still housing affordability challenges, which are particularly acute in some areas of the country.

Given the challenging fiscal context, the Secretary of State also considered broader social security and wider cross-government priorities, including on homelessness, ahead of Budget decisions. He chose—and he was right—to prioritise certain measures that had a key impact on poverty and living standards. Reducing child poverty is a core manifesto pledge for this Government, and we intend to deliver on it. Removing the two-child limit—we will debate this in more detail next week, and I look forward to debating it with the noble Viscount—will lift 450,000 children out of poverty in the final year of this Parliament. That will rise to around 550,000 alongside other measures set out in the child poverty strategy, such as the expansion of free school meals.

I take the points made by both noble Baronesses about the challenges. If people have gaps in their rent, something else has to go. However, people’s incomes have to be seen in the round. Their incomes are formed not just by the amount of money being given for housing but the amount of money being given to support their children and whether they have to pay for all meals or can get free school meals. Therefore, the Government are making choices, and all these things have to be seen in the round.

--- Later in debate ---

[Baroness Thornhill (LD)]

Can the Minister clarify that this will be a different way to use what was previously DHP rather than additional new money?

[Baroness Sherlock (Lab)]

I will come on in a moment to try to answer the specific question. If the noble Baroness will give me one second, I move to that point, because I want to explain how it will work. I thank her for nudging me.

I will look at a number of the questions that were asked. The noble Baroness mentioned the Crisis report saying that only 2.7% of properties were affordable. For clarity and for the record, the Crisis report looked at newly advertised rents, which are typically higher than those for continued tenancies. Although the report highlights the cost challenge of moving to a new tenancy, we do not think it accurately represents the whole picture. LHA rates are based on confirmed rents for sitting tenants rather than the advertised rents. I am not challenging the broader issue; I just wanted to make that clear for the record.

The noble Baroness also mentioned the impact on homelessness. As we all know, the causes of homelessness are multifaceted and are driven by a range of factors, both personal and structural, but the relationship with social security is clearly one of those factors. The DWP has worked closely with the MHCLG on the national plan to end homelessness, which is driving sustainable change and addressing the root causes of homelessness. We explicitly considered LHA rates against homelessness goals. We are committed to working together with the MHCLG and the Treasury to keep LHA rates under review—I hope that gives the noble Baroness some reassurance.

However, we also know that too many people are living in temporary accommodation and that local authorities are under pressure, so we want to prevent homelessness in the first place. We are investing £3.6 billion in homelessness prevention and rough-sleeping services over the next three years, as well as the removal of the two-child benefit cap, increases in universal credit, and other measures. We are delivering the increase in supply of social and affordable housing.

On food poverty, which was mentioned by the noble Baroness, Lady Pinnock, we have announced action to transform our food system to ensure that it delivers access to affordable, healthy food. However, we are engaging routinely and regularly with stakeholders to understand the key priorities. We have also taken the step of expanding free school meals to all those on universal credit, which will in itself lift 100,000 children out of poverty by the end of this Parliament.

Briefly, before I come on to the crisis and resilience point, the Government have committed to building 1.5 million new homes. That is a stretching target, which is what we intended it to be. We are backing that up with a record £39 billion of investment to kick-start social and affordable housebuilding at scale across the country.

[Baroness Pinnock (LD)]

I am sorry to interrupt the Minister, but I feel very strongly about the use of the phrase “affordable housing”. Affordable housing is, by definition, not affordable. The broad definition of affordability for rent is 80% of the market rent, which, for most people, is not affordable—but social housing at social rents is. I would love the Government to erase “affordable” and just talk about 300,000 homes for social rent. That would make a difference; I hope the Minister will agree.

[Baroness Sherlock (Lab)]

The 300,000 target is for both social and affordable housing. I would be very happy to share the noble Baroness’s views with my colleagues at MHCLG to make sure that they reflect on them, if that is okay with her, as that policy is probably above my pay grade.

On the question asked by the noble Viscount, Lord Younger, the real challenge is that, if we do not get a whole-system approach on this, we are never going to unblock the barriers to building and addressing the productivity issues in the housebuilding sector. We are, therefore, working really closely with industry—including developers, housing associations and local authorities—to try to get a step change in this area. We have already taken some significant steps to address the planning issues that were holding back the supply of housing. Within months of coming into government, we published our revised National Planning Policy Framework, and, in December, we launched a consultation on further reforms to the framework to unlock additional housing supply.

The noble Viscount also asked about what will happen to vulnerable people. Let me explain what is happening there. At the moment, there is something called the household support fund, and, separately, there are discretionary housing payments. Both of these are short-term funds; the DWP gives the money to local authorities to pay them out. The household support fund was only ever done for six months at a time, and it was never clear that it would be done again for the following six months. DHPs, however, were set for a year at a time. There were, therefore, two separate, short-term discretionary schemes with different purposes and different sets of rules. Just to complicate things, they also often went to different tiers of local government.

Instead, we are creating the crisis and resilience fund, which is a single, multi-year, streamlined fund. It will eventually replace both the household support fund and DHPs in England from 1 April 2026. The key is that people can plan for crisis and resilience support longer down the line. To ensure that there is a transition from where we are now to where we are going, discretionary housing payments will be replaced by the housing payment strand of the crisis and resilience fund, which will, for the first two years, simply mimic what discretionary housing payments do now; it will carry on in the same way. In Wales, DHPs will continue to be maintained and delivered, while Scotland has developed its own alternative for that—as this is a devolved issue—which it launched in 2024. So our intention is that that is what will happen.

The £1 billion includes the element for the housing strand but we are working closely with local authorities so that, by the time we get to year 3, we can look at how that can be done. Also, they will be able to top this up if they want. I recognise, in the context of all the challenges they have faced, that some local authorities do this at the moment because they want to put more into housing.

I hope that that is helpful. I would be very happy to answer any other questions.

[Viscount Younger of Leckie (Con)]

Thank you; that was very helpful. May I have some further clarification? Will the CRF, therefore, combine the needs around housing with the needs around budget expenditure for those individuals who are targeted for help? I am thinking that local authorities—if it goes through them—will want to look at each case as it comes up. They will want to look at the housing issues and the expenditure issues and combine the two, which would make sense if that were the case.

[Baroness Sherlock (Lab)]

Of course, there are still issues about tiers and responsibility. One of the challenges is that local government reform is going on, which is one of the reasons why we need to make sure that we work with local authorities so that, by the time we get to that point, we have taken account of that. But this is the housing strand within the CRF—the CRF does other things too; it does not deal only with housing. The housing strand, however, is there to deal with support for those whose housing needs are supported through the social security system. I hope that is okay.

The noble Viscount also asked me who makes the decisions, and it is the local authorities. We believe they are best placed to make informed judgments about relative priorities and needs in their area, but we engage with them regularly through regular forums and we publish guidance on both schemes.

I hope that has picked up the questions that all noble Lords have asked. I am always very happy to be interrupted. If I have not, I will look through Hansard, and I will be happy to write if I have missed anything.

To conclude, we really must continue to provide support towards rent costs for those who need it, including the most vulnerable. However, we will have to balance that with challenges in other areas and with the needs of the taxpayer. In the current challenging fiscal environment, measures with the greatest impact on government goals in the area of poverty have been prioritised. That is why we are investing in social and affordable housing, as well as removing the two-child limit to lift children out of poverty—which, by the way, I do not regard as a cloud hanging over anyone; it is a wonderful opportunity to lift children out of poverty, and I am proud that the Government are doing it. That was a little parenthesis. We are also fixing the work disincentive for vulnerable people living in temporary accommodation and supported housing.

Once again, I thank the noble Baroness, Lady Thornhill, for giving us the chance to discuss this important issue, and I hope that she and the Committee can understand the reasons for the choices we made.

[Baroness Thornhill (LD)]

What I do understand is making difficult choices, and I often say it is a difficult position to be in—well, I would like to be in it, but I do not underestimate the difficulty of it.

I thank my noble friend Lady Pinnock who, as always, brings it slap down to reality and where we are; she is great at that. I also thank the noble Viscount, Lord Younger of Leckie—I never doubt his sincerity or the logical way in which he presents arguments and asks questions. He has today confirmed why I am at this end of the table and not that one—but hey ho.

I agree with the Minister that one of the issues today is short-termism; very often, it is from election to election, and it has absolutely been responsible for all the mess she has had to pick up. It has to be said that we are very much in tune with many of her aspirations and we wish them well. Unfortunately, however, we cannot see two, five, seven or 10 years into the future, so we do not know what will happen in the meantime.

It has been helpful to hear the Minister outline everything today, but I am still not convinced that this does more than move the money around. Let me put it this way: I wish the Government had made another choice. I just looked at the figures the Minister gave. She said it was £7 billion over five years, but if it is £1 billion a year for the new and old funds, that is £1.25 billion over a year, and it is £2.8 billion a year in temporary housing. So I am still not convinced that it all adds up, but I am sure that in a metaphorical smoke-filled room somewhere, the Minister has a sheet and she is saying, “Okay, that’s the right decision” because of whatever. I think we just have to hope that things improve in the future.

The Minister mentioned the reality of renting and keeping things in touch with what actual rents are. I therefore urge her to talk to her colleague, the noble Baroness, Lady Taylor, about the database that was promised in the Renters’ Rights Act, because rent levels are meant to be on that database, and that will be a very helpful part of it. During the passage of that Act, I was very pro the database, but it seems that a lot of things have been shoved into the long grass a bit. The database is a valuable tool. The proof of the pudding will be what happens in the future, and we hope for the sake of those tens of thousands of children and families that the Government are correct. I thank all noble Lords for their contributions.

Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2026

Baroness Sherlock Excerpts

Monday 2nd March 2026 Grand Committee

Moved by

[Baroness Sherlock]

That the Grand Committee do consider the Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2026.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)]

My Lords, I will also be asking the Grand Committee to consider the draft Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2026.

The schemes we are debating provide vital support for sufferers of certain dust-related diseases, which are often caused by occupational exposure to asbestos and other harmful dusts. This includes diseases such as pneumoconiosis and mesothelioma. We all recognise the deep suffering that can be caused by diseases such as these. Having attended these debates in the past, I am always grateful for the opportunity to debate these schemes and discuss the wider support for people diagnosed with these terrible diseases.

I will begin by providing a brief overview of these two no-fault compensation schemes and what these regulations seek to amend. The Pneumoconiosis etc. (Workers’ Compensation) Act 1979—henceforth the 1979 Act scheme—provides a single lump-sum compensation payment to eligible individuals who suffer from one of the diseases covered by the scheme. They includes diffuse mesothelioma, pneumoconiosis and three other dust-related respiratory diseases. It was designed to compensate people who were unable to claim damages from former employers that had gone out of business and who had not brought any civil action against another party for damages. To be entitled to a lump-sum award, claimants must have an industrial injuries disablement benefit award for a disease covered by the 1979 Act scheme or would have an award but for their percentage disablement.

The mesothelioma lump-sum payments scheme—or the 2008 Act scheme—was introduced to provide compensation to people who contracted diffuse mesothelioma but were unable to claim compensation through the 1979 Act scheme because, for example, they were self-employed or their exposure to asbestos was not due to their work. The 2008 Act scheme provides support to people with diffuse mesothelioma quickly at their time of greatest need.

Although both schemes aim to provide compensation to sufferers within their lifetime, they also allow claims by dependants if the person suffering from the disease sadly dies before they are able to make a claim. This is in recognition of the suffering that these diseases can bring to whole families.

These regulations will increase the value of one-off lump-sum payments made under these schemes for those who first become entitled to a payment from 1 April 2026. While there is no statutory requirement to increase the rates of these payments in line with prices each year, we are maintaining the position taken by previous Governments and increasing the value of lump-sum awards by 3.8%, in line with the September 2025 consumer prices index. This also means that the increase will, once again, be in line with the proposed increases to industrial injuries disablement benefit as part of the main social security uprating provisions for 2026-27.

--- Later in debate ---

[Baroness Stedman-Scott (Con)]

My Lords, I think this is about the fifth anniversary of me taking part in these uprating instruments. This year, for me, they are completely different.

When I started my charity, Tomorrow’s People, more than 35 years ago, the first lady I employed was absolutely outstanding. Last year, I received a letter from a lawyer, saying that somebody who had been employed by my charity had contracted mesothelioma and they wanted to talk to me about the buildings that we occupied. I got in touch with them immediately and said, “Yes, of course I will help. Could you tell me who it is?” They went back to the person and then came back to me to say that it was this lady, the very first one I had ever employed, who had got mesothelioma. It suddenly hit home that this was a disease that affected somebody whom I rated highly and had great respect for. She came here to see me for lunch and told me her story, and I have kept in touch with her. I expect—and hope—that she is watching what we are doing today. I want to say that it made the whole thing pretty personal.

I am pleased to say that we on these Benches support these two sets of draft regulations, which provide for a 3.8% uprating of the lump sum payments available under the mesothelioma and pneumoconiosis compensation schemes from April this year. These schemes remain a vital, no-fault safety net for those suffering from some of the most devastating industrial diseases. Mesothelioma and pneumoconiosis are cruel conditions, often emerging decades after exposure and, in many cases, at a point when it is no longer possible to pursue former employers through the courts. The provision allowing dependants to claim when a sufferer dies before making an application reflects the harsh reality and rapid progression of these illnesses.

Maintaining an inflation link is essential if these payments are to retain their real-terms value, particularly given the debilitating nature of these diseases and the financial strain that they place on families. The long latency period associated with asbestos-related illnesses makes statutory compensation schemes not merely desirable but necessary. Although there is no statutory duty to uprate these payments each year, successive Governments have taken the view that that is the proper course. I agree. Uprating in line with inflation is the least that justice requires, ensuring that compensation continues to provide meaningful recognition and practical support.

These instruments may be technical in form, but they are significant in human terms. For those confronting terminal illness as a consequence of historic workplace exposure, this support represents fairness, dignity and the acknowledgement of a debt long owed. We on these Benches therefore fully support the regulations before the Committee.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to all noble Lords for their helpful contributions to this debate. I confess that I would miss it if we did not gather once a year to talk about the impact of this, but I will come on to that in a moment. It is always a moment, and I appreciate that, from around the House, we have all come here to demonstrate the strength of cross-party support for these two lump sum schemes.

It was good of my noble friend Lady Donaghy to acknowledge the work of the noble Lord, Lord Freud, and others, as well as that of my late and much-lamented noble friend Lord McKenzie, who did so much work in this space for many years. My noble friend Lord Jones showed very well that, when it comes to anything in this space, we are standing on the shoulders of giants. He talked about the history of all the great Labour figures who knew that they came to Parliament to speak up for those who did not have a voice and those who had suffered at the hands of people who, in many cases, should have known better but, in some cases, did not know better. We learn as time goes on.

I remember my noble friend Lord Mann from a very long time ago as well. It is incredibly moving to think that his very first piece of casework was somebody who went on to die that day from one of these terrible diseases. As noble Lords will know, I am a priest in the Church of England, so I know what it is to be with people when they are close to death. It is a privilege as well as a challenge. To be able to take that experience and use it to advocate for others is what so many people go into politics for, so I commend my noble friend for being here to tell that story and to speak up for those who are not here and are unable to do the same.

Let me pick up on my noble friend’s point about process. This is a debate that we have regularly. Most years, somebody will suggest that we should put this into the annual uprating and then somebody else will say that we should not and give reasons why. On the reasons given today, the thoughts on the opportunity to debate these regulations and the point made by my noble friend Lady Donaghy about wanting to keep the amounts under review are interesting.

One thing I should say to my noble friend Lord Mann is that, if these payments were uprated automatically in the way that, for example, social security benefits are—these are almost always affirmative—they would still require affirmative regulations that have to be debated in Parliament. They could theoretically be rolled into a general social security operating order, but that would do the exact opposite of what my noble friend wants by putting them in with benefits rather than separating them out from benefits. Today is an opportunity for us to be here and to discuss this; either way, it would not make a difference to the claimants.

My noble friend made a wider point about understanding that these are not benefits. Of course, these schemes are quite different. Technically, they come out of what is known as departmental expenditure, rather than, like most benefits, annual expenditure. They are not benefits; they are compensation for something that people suffered but should not have done. My department offers a range of other financial support to people, including the main industrial injuries disablement benefit. Many people who get these diseases may have other costs as a result of their disability and may get things such as personal independence payments, the attendance allowance or other state benefits to cover their income replacement needs. The department wants to provide all the appropriate support for people who really cannot work as a result of injuries, while wanting to make sure that those who are economically inactive or unemployed are supported to get back to work, where they should be. We can help them to do that, and we should be expecting them to do that.

The noble Lord, Lord Palmer, asked about the amount. One of the reasons it is labelled as a percentage is that the amount any individual gets depends on the scheme and the age of sufferer at the point of death, so the amounts that people are paid are different. I can tell him the average amounts: under the 1979 Act scheme, the average award to sufferers was £14,700 and to dependants it was £11,500. Under the 2008 scheme, the average award to sufferers was £26,600 and £8,500 to dependants. That would have included a range of figures for individuals.

My noble friend Lord Jones asked me for the number of awards. For the record, under the 1979 scheme, there were 2,540, and under the 2008 scheme, there were 610. Those statistics are from the latest financial year for which figures are available.

On the point made by my noble friend Lady Donaghy, I recognise that there are many who want those amounts to be larger. All I can say is that the Government keep this under review and will continue to do so.

In terms of the comment from the noble Baroness, Lady Stedman-Scott, there is nothing that brings this home like knowing somebody affected by this, and being asked about the building in which, presumably, she also worked as well as the person she hired.

My noble friend Lord Mann talked about asbestos gloves. Some noble Lords will remember, and I remember, some of the horrific stories that have been told. I remember one of my noble friends talking about what happened onboard ships, where ratings were basically playing with balls of asbestos. There were stories of people trundling trollies down corridors of hospitals, porters and all kinds of things. There were stories about schools and all kinds of public buildings. There are people who are suffering simply for doing their jobs. Most of these jobs were in public service, serving the community and caring. The very least we can do is to make sure that they get appropriate levels of support.

I think that I have addressed most of the specific questions I was asked. I just want to finish on a positive note. I mentioned the work of the HSE in relation to awareness of exposure, but I would like to put some of the work that has been done elsewhere in government on the record. Quite often we discuss research, and we know how important research is in supporting individuals with these diseases. It is still the case that the life expectancy is incredibly low, especially by the time that people are diagnosed with diffuse mesothelioma. DHSC invests over £1.6 billion each year on research through the National Institute for Health and Care Research, and cancer is a major area of NIHR spending at £141.6 million in 2024-25.

Respiratory disease is a clinical priority within the NHS long-term plan. The aim is to improve outcomes for people who have these respiratory diseases through early diagnosis and increased access to treatment. NHS England has established 13 respiratory clinical networks across the country. These have been vital in providing clinical leadership for respiratory services and supporting services in primary care. Indeed, that continued investment in cancer research and support for people with respiratory diseases is key to reducing the numbers of families affected in the future and providing better support following a diagnosis.

I think that I have addressed all the questions that were asked. Once again, it is always a privilege to participate in this debate. I acknowledge the position of those who suffer from these terrible diseases and their families. The least we can do is carry on providing support. In light of that, I beg to move.

Motion agreed.

Child Poverty Strategy

Baroness Sherlock Excerpts

Monday 2nd March 2026 Lords Chamber

[Baroness Chakrabarti]

To ask His Majesty’s Government what progress they have made in relation to the (1) implementation, and (2) outcomes, of the Child Poverty Strategy.

[The Minister of State, Department for Work and Pensions (Baroness Sherlock)]

My Lords, the Government are progressing urgent legislation to remove the two-child limit from April, which is expected to lift 450,000 children out of poverty by the final year of this Parliament. Our monitoring and evaluations framework sets out our plans to track progress as part of our 10-year strategy for delivering long-term change. This summer we will publish a baseline report setting out the latest statistics and evidence, with annual reporting thereafter.

[Baroness Chakrabarti (Lab)]

I am grateful, as always, to my noble friend the Minister, who I suspect is one of the finest advocates for the Government in either House. She will know that some critics of the Government crave a greater overarching vision or story; others complain that policies such as removing the two-child benefit cap somehow reward the feckless. Would she like to take this opportunity to explain where this strategy sits amongst government priorities and why it is so important?

[Baroness Sherlock (Lab)]

I am grateful to my noble friend and commend her on her great taste in Ministers, if I may say so. It is also a really great question. The Prime Minister made it clear very early on what a high priority it was for him, and for this Government, to tackle the horrors of child poverty. Some 900,000 more children were in poverty as a result of the previous Government. This Government are determined to stop that, so policies such as removing the two-child limit and others that we have already announced will lift around 550,000 children out of poverty by the end of this Parliament. Do we know why it matters? It is not just to those individual children while they are kids; poverty scars their life chances. Children who grow up in poverty are more likely to have mental health difficulties by age 11. When they are adults, they are more likely to be unemployed and likely to earn less. Our country cannot afford to do that to our children, and our country cannot afford our children to underachieve. That is why it matters.

[Lord Farmer (Con)]

My Lords, the better futures social outcomes fund was announced in the child poverty strategy, with government payments tied to the achievement of measurable improvements in people’s lives, such as increased family stability. Family breakdown can be a driver, as well as an effect, of poverty. Can the Minister explain how progress in this area will be measured and whether the funding structure will enable ongoing work, after milestones have been reached, to prevent families slipping back into difficulties again?

[Baroness Sherlock (Lab)]

My Lords, the noble Lord is absolutely right about the importance of family stability; it is extremely important for children to grow up in a stable family wherever possible. He is right that poverty is both a driver and a consequence. We know that poverty puts huge pressures on families. Lifting the two-child limit and giving families higher rewards than those that they have now will lift over half a million families out of poverty and help to take the pressure off.

The noble Lord mentioned the better futures fund. That will be a 10-year programme focused on a range of long-term measurable outcomes, including family stability. He asked about how it will be measured. It is currently in the design phase, but the funding will primarily be used for social outcome partnerships, and those bidding will be expected to show the sustainability of their proposed ideas. We absolutely take seriously the importance of family stability. We are going to address the questions of poverty that drive problems, but we also want to do what we can to support families.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for her normal diligence on this subject. Alongside new measures

“to increase incomes, reduce essential costs and strengthen local services”—

I take those words from the Government’s own document—between 2025 and 2026 there have been 11 strategy documents. They are very good reading, but they do not help the people with the problems that I have just outlined. Can we speed this up? Let us stop talking about 10 years and instead talk about what is happening this year and next year.

[Baroness Sherlock (Lab)]

I will say two things. Children did not fall into poverty overnight and they will not all come out of it overnight. Poverty has a range of drivers. We are determined not simply to address this problem now but to find a way of tackling it in the long term. However, since the noble Lord wants examples of action, I will give him some. What have we already done? As we have made clear, we are going to put £39 billion into social and affordable housing. We are expanding free school meals to all families on universal credit, putting £600 million into the holiday activities and food programme, extending the warm home discount scheme to an extra 2.7 million people, and removing the two-child limit to lift 450,000 children out of poverty in this Parliament. That is action, and this Government are taking it.

[Baroness Deech (CB)]

My Lords, may I ask the Minister what the definition of poverty is? If it is “below the average” then there is no hope of getting rid of poverty. Is it an absolute standard? Secondly, has she calculated the amount owed to the Child Maintenance Service by absent fathers? Why should the taxpayer fund maintenance for children that the father owes and is not paying?

[Baroness Sherlock (Lab)]

My Lords, the Government are using two metrics. We are using relative low income after housing costs, which is the international standard measure, but we are also using deep material poverty. That is a new measure that has been devised based on material deprivation, which reflects our commitment to addressing deeper child poverty. Material deprivation is traditionally calculated by asking the public what essentials they think families should have and getting a list of them. They are things such as warm homes, appropriate housing, enough food to eat, et cetera. The measure shows that if a family cannot afford at least four of those then they are in deep material deprivation. Having both those metrics helps us to measure what is going on in families.

I completely agree with the noble Baroness about child maintenance. Everybody should pay for their children, whether they are still with the other partner or not. The Government have done a lot to drive up the rate of support for child maintenance. We are taking reform steps to make it even better, and we will keep doing that.

[Baroness Lister of Burtersett (Lab)]

My Lords, the strategy has been widely welcomed for the reasons given by my noble friend and because of its holistic cross-government approach, but there is considerable concern that Home Office policies on asylum, settlement and no recourse to public funds will undermine the strategy with regard to migrant children, who are already at disproportionate risk of poverty, especially deep poverty. Can my noble friend therefore confirm that the strategy includes migrant children and do what she can to encourage Home Office colleagues to do more to protect children in poverty from the impact of their policies?

[Baroness Sherlock (Lab)]

My Lords, my noble friend raises an important point. I assure her that the strategy, when it was being developed, looked at all children. We want to recognise the impact of poverty on children, whether or not they made any choices—because, as children, they do not make choices—contributing to their circumstances. It is clear that some of the measures we are taking, for example in relation to benefits, will benefit only those families who are eligible for those benefits. For example, the two-child limit affects only those on universal credit. Universal credit is available to families only in circumstances where their immigration status permits it. However, there are safety nets in the system to protect children, and I would be happy to share that view with colleagues across government.

[The Lord Bishop of Leicester]

My Lords, like many others, I warmly welcome the child poverty strategy; there is much to commend it, such as—to pick one particular aspect—the expansion of free school meals for children. However, I have a question about auto-enrolment of children for free school meals. There is much evidence to show that auto-enrolment not only lifts children out of poverty but increases educational attainment and allows schools to ensure that they get the pupil premium needed. Can the Minister therefore tell us what barriers remain for the introduction of auto-enrolment?

[Baroness Sherlock (Lab)]

My Lords, I am happy to raise that with colleagues in the DfE, but I reassure the right reverend Prelate that a lot of work has been and is going on in relation to free school meals for children on universal credit, making sure—whether it ends up being auto-enrolment or whether it is about communication or identification—that we get this out to all children. Free school meals are really important and are crucial to children: not only do they get to eat but hungry children struggle to learn, so it is a win-win all round. We think this is an incredibly important measure and we want to make sure that it works.

[Viscount Younger of Leckie (Con)]

My Lords, no child should grow up in poverty, and we agree that reducing child poverty must be an absolute priority for any Government. The surest answer to helping reduce child poverty is to ensure that more families can access the security and dignity of work, which I do not believe the noble Baroness mentioned. There are many young parents among the current high level of youth unemployment—16.1%—so what steps are the Government taking to engage directly and urgently with this cohort to enable them to secure work and optimise the chances of giving their children a better future?

[Baroness Sherlock (Lab)]

My Lords, I absolutely agree with the noble Viscount, and I have said many times from this Dispatch Box that, for many families, work is the best route out of poverty. Of course there will always be those who cannot work, and they deserve a welfare state that supports them, but this Government have invested considerable sums and will invest considerably more in supporting families to work. We already know that parents are actually more likely than average to be in employment. They want to work—they want to support their kids, they want to be a good role model and they want to show them that that is what adult life looks like—but many of them will need extra help, so we are investing heavily in those who have barriers to work. The noble Viscount mentioned young people. The Government have done so much on young people. He will know that Alan Milburn is doing a report for the Government looking at why so many of our young people—one in eight—are not in employment, education or training. That figure is a disgrace and we have to tackle that.