Pension Schemes Bill

Baroness Sherlock Excerpts

Thursday 18th December 2025 Lords Chamber

Moved by

[Baroness Sherlock]

Northern Ireland and Welsh legislative consent sought. Relevant document: 42nd Report from the Delegated Powers and Regulatory Reform Committee

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

My Lords, it is a privilege to open the Second Reading of the Pension Schemes Bill. I am grateful to noble Lords for the engagement we have already had, and I look forward to working constructively together as the Bill progresses through this House. I also very much look forward to the maiden speech of the noble Baroness, Lady White of Tufnell Park.

Pensions are really important, and the Bill will transform our pensions landscape for the better. It will play its part in delivering growth, as well as helping to raise living standards in every part of the UK. It will assist the pensioners of the future to feel more confident about the economy in general, as well as their own futures.

Pensions are the promise we make to millions of people that their years of hard work will be rewarded with security and dignity in retirement. UK pension schemes invest hundreds of billions of pounds in our country. The reforms outlined in the Bill will make those pounds work harder for pensioners by making schemes more efficient—more money invested, and less on overheads and administration.

The first Pensions Commission laid the groundwork for a new pensions landscape, with a simpler state pension and automatic enrolment into retirement savings. This transformed private pension saving in the UK. The Bill, along with the work of the pensions investment review, moves our private pensions system forward. Bigger, better pension schemes will drive better returns, as well as tackling inefficiencies in our system.

The new Pensions Commission is looking at the issue of adequacy across the state and private pensions systems, with a clear objective of building a strong, fair and sustainable pension system. I look forward to this debate on the Bill, which is all about making every pound saved work harder for members, unlocking investment for our economy and restoring confidence in the promise of a decent retirement.

I will now outline the main measures in the Bill. First, the Bill addresses the fragmentation of the Local Government Pension Scheme, which is currently spread across 87 funds in England and Wales. This fragmentation limits efficiency and scale. Through these reforms, all assets in the Local Government Pension Scheme, or LGPS, will be managed through FCA-regulated investment pools, ensuring professional oversight and better value for money. Administering authorities will set clear targets for local investment, working with strategic authorities to align with regional growth plans.

Of course, LGPS members’ pensions and benefits are protected, as they are guaranteed in statute and are not affected by the performance of investments. These reforms are about the LGPS being well governed and well invested to deliver efficiency and value for money.

Next, the Bill introduces powers to enable more trustees of well-funded defined benefit, or DB, schemes to share some of the £160 billion of surplus funds to benefit sponsoring employers and members. This will enable employers to drive growth through investment and higher purchasing power, but it will be subject to strict safeguards. The measure will allow trustees, working with employers, to decide how surplus can benefit both members and employers, while maintaining security for future pensions.

The defined contribution, or DC, workplace pensions market prioritises competition on cost rather than on the overall value. The Bill introduces a value-for-money framework to enable a shift in focus away from cost towards a longer-term consideration of value. This new framework looks to standardise how value is assessed, in a transparent, consistent and comparable way. It will require schemes to disclose standardised metrics, undertake a holistic assessment of value, and take improvement actions where needed.

Automatic enrolment has been a huge success, ensuring that millions more people are now saving for their retirement. However, frequent job changes mean that individuals are often enrolled into a new pension scheme by each employer, leaving them with multiple small pots over their working life, often with very small amounts saved. This has created a challenge across the workplace pensions market, with current estimates suggesting that within the system there are more than 13 million pots worth less than £1,000 each. This is hugely expensive for pension schemes to administer, with an estimated cost of £240 million a year, ultimately resulting in poorer value for members.

Through the Bill, we are taking powers to introduce automatic consolidation of these dormant small pension pots through a multiple default consolidator model. Opportunity for member choice will be built in; members can choose a consolidator scheme or choose to opt out entirely if they wish. This will simplify the system, reduce costs and support members so they can better track their retirement savings.

There is strong evidence that larger pension schemes mean better outcomes for members through efficiencies of scale, stronger governance and better investment opportunities at lower cost. The Bill will therefore drive scale by accelerating the consolidation of multi-employer DC schemes.

From 2030, schemes used for auto-enrolment must reach at least £25 billion in assets in a single main scale default arrangement, or £10 billion on a transition pathway with a credible plan to reach £25 billion within five years. This is about harnessing the power of scale: larger schemes can negotiate better deals, access more diverse investments and deliver better outcomes for savers.

On asset allocation, earlier this year, the Mansion House Accord was signed by 17 major pension providers, which, between them, manage about 90% of active savers’ DC pensions. This initiative was led by industry, and the signatories pledged to invest 10% of their main default funds in private assets, such as infrastructure, by 2030. The purpose of this voluntary commitment is, as the signatories put it,

“to facilitate access for savers to the higher potential net returns that can arise from investment in private markets as part of a diversified portfolio, as well as boosting investment in the UK”.

The Bill includes a backstop provision that would permit the Government, with Parliament’s approval, to require DC pension providers of auto-enrolment schemes to invest a fixed percentage of their default funds in specific asset classes. The Government do not anticipate exercising the power, unless they consider that the industry has not delivered the change on its own. There are also strong safeguards around it.

All workplace pension schemes are required to have a default arrangement, where contributions are invested if members do not choose an investment option. Most members go into a default arrangement and remain there throughout their scheme membership. There are currently thousands of different default arrangements in pension schemes, creating fragmentation, inefficiency and poorer outcomes for members.

The Bill introduces new requirements to review those default arrangements, with a power to make regulations as needed, following the review, to require default arrangements to be consolidated into a main scale default arrangement. There is also a power to make regulations for new default arrangements to be subject to regulatory approval. That will ensure that savers benefit from economies of scale and improved governance by reducing the fragmentation in the pensions market.

Many pension schemes, especially legacy ones, are not delivering good outcomes for savers. As contract-based schemes rely on individual contracts between firms and members, firms usually need individual members’ consent to make any changes, even when the change would improve outcomes for members. Obtaining this consent is often difficult and costly, especially when members are disengaged, even when a scheme offers poor value. This leaves members stuck in poor-value schemes.

To address that, the Government are introducing the contractual override power in the Bill. It will allow the providers of FCA-regulated DC workplace pensions to transfer members to a different pension arrangement, make a change which would otherwise require consent, or vary the terms of members’ contracts without the need for individual member consent, but only when the legal and regulatory requirements are met. That includes rigorous consumer safeguards such as the best interests test, which must be met and certified by an independent expert before a contractual override can take place.

At retirement, DC scheme savers face complex financial decisions. They need to evaluate the different options to suit their own individual circumstances, assess risks and uncertainty in financial products, and factor in their own estimation of their life expectancy. We know that savers do not always use the support available: only 16% used a regulated source, such as Pension Wise or a professional financial adviser.

The Bill puts new duties on trustees to develop and provide one or more default pension plans at retirement to help members access their savings without these complex decisions. These plans will provide a straightforward income solution for most members, with opt-out rights for those who prefer alternatives. Trustees must design plans based on member needs, communicate options clearly and publish a pension benefits strategy, which will be overseen by the Pensions Regulator. The Bill also requires the FCA to make rules that deliver default pension plans in relation to pension schemes regulated by the FCA, ensuring consistency and better outcomes for savers.

Superfunds are commercial consolidators that offer a new route for employers to secure the legacy liabilities of closed DB schemes that cannot secure an insurance buyout. Building on the current interim regime, the Bill establishes a permanent legislative framework for superfunds. It introduces an authorisation and supervisory regime with robust governance, funding and continuity arrangements, so that members of those schemes can have the confidence that their pensions are properly protected. Superfunds may invest more productively because of their scale, expertise and buying power, so they are good for members, employers and the wider economy.

Part 4 contains a range of important measures. Following the Virgin Media court case, certain DB pension benefit alterations could be treated as void if schemes cannot produce actuarial confirmation that they met the minimum standards in place at the time. This affects schemes that were contracted out between 1997 and 2016. The court judgment has the potential to cause pension schemes significant cost and uncertainty, even where the schemes did, in fact, meet the minimum standards required. To resolve that, the Bill allows schemes to ask their actuary to confirm that past benefit alterations would not have caused the scheme to fall below the relevant minimum standards.

The Chancellor announced in the Budget that the Government will introduce pre-1997 indexation into the Pension Protection Fund and the Financial Assistance Scheme—the PPF and the FAS—to address the long-standing issue faced by members. As noble Lords will be aware, those are the compensation schemes that provide a safety net for members of DB schemes. Currently, payments in respect of service before 1997 are not uprated with inflation, and affected members have seen the real value of their compensation decrease significantly in recent years.

The Bill will pave the way to introduce increases on PPF and FAS payments for pensions built up before 6 April 1997. These will be CPI-linked and capped at 2.5%, and will apply prospectively for members whose former schemes provided for these increases. That will help those members’ pensions keep pace with the cost of living. This is a step change that will make a meaningful difference to over 250,000 members. Incomes will be boosted by an average of around £400 for PPF members and £300 for FAS members after the first five years. Our changes strike an affordable balance of interests for all parties, including eligible members, levy payers, taxpayers and the PPF’s ability to manage future risk. The Bill makes some other changes to the PPF and the FAS that will benefit the members of these schemes and the levy payers supporting the PPF, including around terminal illness and the levies.

Finally, some noble Lords may have seen that the Delegated Powers and Regulatory Reform Committee published its report on the Bill last night. I emphasise that the Government recognise the importance of getting the right balance when taking delegated powers and using them appropriately. The pensions industry is highly technical and rapidly evolving, and there is a complex interaction between legislative requirements, regulatory oversight and changes in practice or innovation. In pensions legislation, it is common for a mix of requirements and principles to be set out in primary legislation, with finer detail, which is liable to frequent development, to be set out in secondary legislation. That allows for a quicker response to developments in the industry, including to protect scheme members. We think we have the right balance in the Bill, but I thank the committee for its report and will respond in due course.

This Bill will initiate systemic changes to the pensions landscape, with the aim of building a pensions system that is fit for the future—one that is strong, fair and sustainable, and that delivers for savers, employers and the economy. At its core, the Bill is about making sure that people’s hard-earned savings work as hard for them as they have worked to save, while galvanising the untapped benefits that private pensions can offer the economy at large. I look forward to our discussions today. I beg to move.

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[Baroness Sherlock (Lab)]

My Lords, I am grateful for the incredible range of thoughtful and constructive contributions we have heard during today’s debate. I should declare that I am a member of the parliamentary pension scheme; otherwise, I have a private pension.

I am so grateful to have heard the maiden speech of the noble Baroness, Lady White. I realise we have quite a bit in common: we are children of migrants, I too have spatial dyspraxia—I have never yet found my way around here—and we both engage with a church. I am afraid that there it ends; no one will ever ask me to chair John Lewis, which may be just as well for anybody who likes shopping there. She may have had an eclectic career but, now that she has joined this House, it will get a lot more eclectic still. It is a joy to have her on board and, if there is more of that to come, I look forward to it.

The range of views around of the House reflects the significance of the Bill for savers, employers and the pensions industry. The level of interest underscores how important pensions are to savers and the UK economy, and we need to help people get the best from their savings. There were some fascinating discussions in the debate today. I could have listened to the noble Lord, Lord Willetts, and my noble friend Lord Wood for a lot longer, and I shall not be able to do justice to what they said. But I shall go back and read it very carefully and I hope that we can continue to have some really interesting conversations.

There were a lot of questions, and I will not be able to respond to all of them. I shall do my very best, but I have only 20 minutes and it may be that noble Lords have to listen back to this at half-speed, if I am not careful.

I will start with adequacy, as that is where the noble Baroness, Lady Stedman-Scott, began. I was grateful to the noble Lord, Lord Willetts, for setting out that this has been very much a cross-party journey that we have been on together, and I hope that we can keep it that way. I am sure that the noble Baroness did not mean to presume that auto-enrolment started with the last Conservative Government, when in fact it was legislated by the previous Labour Government—and there was also the Pensions Commission. I am sure that she did not mean to say that. What we have done is provide some remarkable continuity in the journey, and I hope that we can carry on doing that.

I was delighted by the work done by the last Pensions Commission, on which my noble friend Lady Drake served with such distinction—and I know that she will serve with equal distinction on the next Pensions Commission. That is the place where adequacy will be addressed fully. The Government are committed to that—it is a key priority for us—but it is also important that we get the market into the right shape so that, if savers are saving more, they will get the returns on their money.

I turn to the issue of surplus. I listened very carefully to the noble Baroness, Lady Noakes, and my noble friend Lord Davies, and thought, “I can’t make them both happy on this front”. That is generally true, I think, but it is illustrated particularly on the subject of surplus. I shall say two things. First, to the noble Viscount, Lord Younger, I say that we are very careful about what surplus extraction will do. Schemes are currently enjoying high levels of funding, with three in four in surplus on a low-dependency basis. They are also more mature, with the vast majority having a hedge to minimise the risk of future volatility with investment strategies: they are protected against interest rate and inflation movements. The DB funding code and underpinning legislation introduced in 2024 require trustees to maintain a strong funding position.

The decisions to release surplus are of course subject to trustee discretion and underpinned by strict safeguards, including the requirement for a prudent funding threshold, actuarial certification and member notification. Of course, as part of any agreement to release surplus funds, trustees are in a good position to negotiate, and it will be down to trustees to negotiate with their employers about the way in which surplus is released.

My noble friend Lady Warwick rightly pressed me on the questions of scale. As outlined in the impact assessment for the Bill, there is a range of evidence showing that scale can help deliver better governance, with economies of scale, investment expertise and access to a wider range of assets all helping to improve outcomes. We may not be heading for the sunlit uplands of Aussie megafunds, described by the noble Baroness, Lady White, but we are pushing in that direction. In response to her question, we will ensure that the governance and regulatory requirements needed for these much bigger pension schemes will be robust. We will develop those with the industry going forward.

On the question of whether the scale measures are going to be tougher on smaller schemes, the problem is that our evidence shows, across a range of studies, that scale is what makes the difference. We are asked why there is a magic number of about £25 billion. The evidence from a number of studies shows that a greater number of benefits can arise from a scale of £25 billion to £50 billion of assets under management, including investment expertise and sophistication and the balance sheet to provide a more diverse portfolio to savers. We have not seen sufficient evidence that other approaches will enable the same benefits for savers and the economy, so we do believe that scale is the best way to realise benefits across the market for savers. However, there will be a transition pathway to enable those schemes that are not there now to have a route to scale where they have a credible plan to achieve it in five years, and we will consult the industry on what a credible plan may look like as part of the development of regulations.

A number of noble Lords, including the noble Baronesses, Lady Altmann and Lady Noakes, and the noble Lord, Lord Ashcombe, as well as my noble friend Lord Wood, mentioned the position of new entrants. The potential for future market innovation is really important; we are very conscious that scale requirements could, if not done correctly, prevent this future innovation. So the Government have provided for a new-entrant pathway, designed specifically to provide a route for this future innovation. We will monitor future movement in the market to ensure that the pathway is working as intended. In addition to innovation, these schemes will be required to have the strong potential to grow to scale over time.

I dive in briefly to the reserve power and asset allocation. I am clearly not going to satisfy the House today; we will have plenty of time in Committee to discuss this. But I shall make a few points now about it in general and the interaction with fiduciary duty. Questions were raised by the noble Baronesses, Lady Stedman-Scott, Lady Penn and Lady Noakes, the noble Lords, Lord Sharkey and Lord Vaux, my noble friend Lord Davies, the noble Lords, Lord Bourne of Aberystwyth and Lord Evans—and I am going to stop saying these names now.

There is widespread recognition of the benefits that a diverse investment portfolio can bring for savers. That is exactly why the signatories to the Mansion House Accord are committing to invest in private markets. This reserve power will help to ensure this change happens, but we have built in a number of safeguards. Let me just knock one thing on the head. I say to the noble Lord, Lord Ashcombe, that this asset allocation power does not apply to the LGPS. Following an amendment in the House of Commons, the Bill no longer allows a responsible authority, such as the Secretary of State, to direct asset pool companies to make specific investment decisions. I hope that reassures the noble Lord on that point.

On the wider question, the making of regulations under this power will be subject to a raft of safeguards contained in the Bill. To respond to the noble Viscount, Lord Younger, I say that the Government anticipate that we will not have to use this power if all goes well. Were the Government ever to use it, there are a series of safeguards, and we would have to consult and produce a report. We would at that point look at developing how it would be done. Let me briefly touch on the safeguards: first, the power is time limited, and I say to the noble Baroness, Lady Penn, that it will expire if it has not been used. Any percentage headline asset allocation requirements enforced beyond that date will be capped at their current levels. Secondly, and crucially, the Government are required to establish a savers’ interest test in which pension providers will be granted an exemption from the targets where they can show that meeting them would cause material financial detriment to savers. Finally, the regulations will obviously be subject to parliamentary scrutiny but, before that, the Government will need to consult and publish a report on the impact of any new requirements on savers and economic growth both before exercising any power for the first time and within five years of it being exercised.

I am going to have to rush through. I turn to the points raised by the noble Baronesses, Lady Altmann and Lady Bowles, about qualifying assets and investment trusts. I can see that the noble Baroness, Lady Bowles, feels very strongly about this—I listened carefully to the points that she and the noble Baroness, Lady Altmann, made. I say to the noble Baroness, Lady Bowles, in particular that the Government recognise the role that investment trusts play in the UK economy and in supporting the Government’s growth agenda, and we are committed to supporting this important sector. We put that on the record very clearly. However, when it comes to qualifying assets in a reserve power, we have aimed to stick closely to the scope of the Mansion House Accord, which itself is limited to investments made by unlisted funds. That is consistent with our general approach to this part of the Bill, where we deliberately ensure that the powers are suitably targeted and contain guardrails. In other words, they are not intended to be open-ended but should be capable of serving as a backstop to the commitments that pension providers have voluntarily made.

There were a number of points made by my noble friend Lord Davies about consumer protections. I reassure him that consumer protection is a priority for the Government, and ensuring that there are strong consumer safeguards is something we take very seriously. That is why the Bill introduces a number of robust consumer protections, including in the contractual override process, in small pots and in DB surplus. I look forward to discussing these in more detail with him and others in Committee.

My noble friend Lady Warwick raised the question of VFM. I am grateful to the noble Baroness, Lady Coffey, for welcoming that; my noble friend Lord Davies raised it as well. The noble Viscount, Lord Younger, asked about the interaction in different parts of the scheme. The pensions road map, which I am sure he has had the opportunity to read, shows very clearly how the different measures that we are proposing connect and how they are all necessary. They are all key parts of a machine necessary to achieving the Government’s objective of moving the pensions landscape forward. I can tell him that the next step will be a joint consultation by the FCA and the Pensions Regulator, which will be published early next year. This will then inform our draft regulations on value for money, which we intend to consult on during 2026. We expect the VFM framework to be implemented in 2028, with the first set of VFM metrics published in March 2028. The first VFM assessment reports and ratings will then be published in October 2028. On that basis, we would expect to see poor performing schemes starting to exit the market from November 2028.

On the pre-1927 indexation in the Pension Protection Fund and FAS, I listened very carefully to the comments that have been made by my noble friend Lady Warwick, the noble Lord, Lord Bourne of Aberystwyth—I thank him for his thoughtful reflection—and many other colleagues. We are laying the groundwork for the first major step forward in this area, and I think that some credit should be given to the Government for doing that. However, I understand that this will not go as far as many had hoped.

We need to recognise that the PPF maintains a substantial financial reserve. It is not a surplus; it is a financial reserve to protect against future risks. The cost of retrospection and arrears is significant and would greatly reduce that reserve. Any change that reduces the PPF’s reserves will, by definition, reduce the vital security the PPF provides to its current and future members. The PPF has very successfully navigated the past 20 years. It is well regarded as a prudent fiduciary acting in the best interests of pension savers, and we need to ensure that it can continue to do so.

I am going to disappoint my noble friend Lord Davies on the matter of pre-1997 indexation in wider DB schemes. I need to tell him clearly that the Government have no plans to change the rules on pre-1997 indexation for DB schemes. These rules ensure consistency across all schemes, and changing them would increase liabilities and costs. Over three-quarters of schemes pay some pre-1997 indexation because of scheme rules or as a discretionary benefit, but reforms in the Bill, as we have mentioned, will enable more trustees of well-funded DB pension schemes to share surplus with employers and deliver better outcomes for members, which may include discretionary indexation.

I turn to the questions on fiduciary duty, raised by many noble Lords, including the noble Baronesses, Lady Hayman, Lady Bowles and Lady Penn, the noble Lords, Lord Sharkey and Lord Bourne of Aberystwyth, and my noble friend Lady Warwick. It is often said that fiduciary duty is the cornerstone of trust-based pension schemes and that trustees should invest in the best interests of their members. That principle remains fundamental. The Government believe that the current legal framework gives trustees flexibility to adapt and protect savers’ interests. However, at the same time, we acknowledge the calls for more clarity on considering systemic factors, such as climate risk and members’ living standards, when making investment decisions.

My colleague the Minister for Pensions set out in the Commons that we intend to develop guidance for the trust-based private pension sector to provide this clarification. I know that he plans to come forward shortly with more details on what the guidance will look to cover. He has already confirmed how he intends to start engaging with a wide range of stakeholders in producing the guidance, starting with a series of industry round tables early in the new year.

Through guidance, the Government are trying to address a barrier that some trustees say they face when investing in savers’ best interests. Guidance has the potential to support climate and sustainability goals, and our wider goal to improve saver outcomes and unlock pension investment in UK growth. We are still in the early stages of undertaking consultation and exploring options on this, and we will provide further updates in due course.

The noble Lord, Lord Bourne, and the noble Baroness, Lady Penn, asked why we do not just change the primary legislation. It is the Government’s view that introducing statutory changes to refine investment duties could risk creating rigid and complex obligations, which would reduce the ability of trustees to respond to changing investment landscapes and circumstances. On the questions of how and when, we are exploring possible options for taking this forward if and when parliamentary time allows.

The noble Baronesses, Lady Bowles and Lady Coffey, raised the position of trustees, and others also alluded to it. Successful implementation of the Bill’s reforms will rely on highly skilled trustees operating independently, applying good governance and focusing on delivering the best outcomes for savers. That is why we launched a consultation on stronger trusteeship and governance earlier this week. It aims to bring all schemes up to the required standard and explore what changes might be needed to raise the bar for all trustees. The industry has welcomed the consultation and there seems to be a consensus that high-quality trusteeship and governance is vital to ensuring good outcomes for pension scheme members. I encourage anyone with an interest in this area to respond to the consultation.

A number of other points were raised. The noble Baroness, Lady Coffey, talked about the need for a single regulator. I say simply that the Government recognise the importance of clarity and co-ordination in the regulation of workplace pensions. The FCA and the Pensions Regulator work effectively together, including through joint working groups and consultations. They have shared strategies and guidance, and regular joint engagement with stakeholders. The Government keep the regulatory system under review.

The noble Lord, Lord Ashcombe, made some interesting points. The Government are committed to appropriate regulation, and to do that we need to engage regularly with stakeholders and industry to make sure that we get it right. There are some genuine questions, which we will go on to debate in Committee, about getting the balance right between primary legislation, secondary legislation, regulation, supervision, governance and guidance. We need space to be able to engage with industry, because any regulations we produce have to work and the details of the scheme will have to be worked through. That will inevitably mean that there will be times when the House will want more detail than we are able to give. One of the challenges is that it should not be possible both to criticise the Government while they are trying to make their mind up on everything at the same time in some areas and to criticise them for not being open to consultation. We will see how it goes and continue to consult extensively with industry and other stakeholders as we move through this.

A few more points were raised. The noble Lord, Lord Kirkhope of Harrogate, asked about the Pensions Ombudsman. It is important to clarify that the measure on the Pensions Ombudsman neither increases nor widens their powers, nor that of the TPO, beyond what was originally intended. This is reinstating the original intent of the ombudsman’s powers in pension overpayment dispute cases, which were debated in Parliament when the ombudsman was established in 1991. There was a High Court ruling; we are amending the existing legislation because that ruling stated that the TPO is not a competent court in pensions overpayment cases. The aim is to reinstate the original policy intent and reaffirm the government view and that of the pensions industry. I hope that reassures the noble Lord. It restores the original policy intent—that is all. It is not designed to try to widen it. I hope that is an encouragement to him.

On the question of small pots, the noble Lord, Lord Vaux of Harrowden, and the noble Viscount, Lord Trenchard, queried the pot limit. We had to choose somewhere. The initial pot limit of £1,000 will address 13 million stock of small pots, which we think strikes the right balance between achieving meaningful levels of pot consolidation and reducing administration costs for pension providers without distorting the market. However, the Secretary of State will keep the threshold under review to ensure that it remains appropriate as the market continues to develop following the reforms made in the Bill.

A number of noble Lords asked about the position on pensions dashboards. The Government have committed to regular updates to the House—we will be doing another one of those—but let me put some headlines on the record for now. The House will be glad to know that good progress has been made with the pensions dashboards. The first pension provider successfully completed connection to the pensions dashboards ecosystem on 17 April this year, forming a crucial step towards making dashboards a reality. More than 700 of the largest pension providers and schemes are now connected to the dashboards ecosystem; over 60 million records are now integrated into dashboards, representing around three-quarters of the records in scope.

Further, state pension data is now accessible, representing tens of millions of additional records. The pensions dashboards programme is confident that pension providers and schemes in scope will connect by the regulatory deadline of 31 October 2026. When we have assurances that the service is safe, secure and thoroughly user tested, the Secretary of State will provide the industry with six months’ notice ahead of the launch of the Money Helper pensions dashboard.

A number of noble Lords mentioned the gender pensions gap, including the noble Lord, Lord Vaux, and the noble Baroness, Lady Bennett. Auto-enrolment has delivered substantial progress in increasing pension participation among women, which has meant, as the noble Baroness said, that workplace pension participation rates between eligible men and women in the private sector have now equalised. However, it is absolutely right that gaps remain in pension participation and wealth, reflecting wider structural inequalities in the labour market. A gender pay gap leads to a gender pensions gap. Women now approaching retirement still have, on average, half the private pension wealth of men. The Pensions Commission will consider further steps to improve pension outcomes for all, especially women and groups identified as being at greater risk of undersaving for retirement.

That is probably about as far as I can go. I am really grateful to be part of a House with so much interest and knowledge in a subject that not everybody—noble Lords will be shocked to hear—finds as interesting as those of us here today do. However, we do, and I look forward to lots of really interesting discussions in Committee. This Bill marks a decisive step in modernising the pensions system, strengthening security for members, driving better value and enabling innovation across the sector. It combines ambition with safeguards, ensuring schemes can deliver improved outcomes while maintaining confidence and trust. I look forward to working with noble Lords—after they have had a very happy Christmas—and to continuing constructive engagement. I commend the Bill to the House.

[Baroness Penn (Con)]

The Minister has made a valiant attempt to answer all questions. Can she commit to writing to the noble Lords in this debate on the questions she did not reach, and to that letter reaching us before we start Committee?

[Baroness Sherlock (Lab)]

This is the last sitting day before we finish. I will look at what I can put in writing before we get to Committee. I have never been asked so many questions in such a short period—and I have talked to church youth groups. I will see what we can do on that front.

Bill read a second time.

Moved by

[Baroness Sherlock]

That the bill be committed to a Grand Committee, and that it be an instruction to the Grand Committee that they consider the bill in the following order:

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

Motion agreed.

Jobs Market: Wider Economic Implications

Baroness Sherlock Excerpts

Thursday 18th December 2025 Lords Chamber

[Lord Hunt of Wirral]

To ask His Majesty’s Government what assessment they have made of the jobs market, and of the implications for the wider economy.

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

My Lords, there is positive information in the labour market. The claimant count is falling. Over 350,000 more people have moved into work this year. Real wages have risen more since July last year than they did in the first 10 years of the previous Government, and UK growth is forecast to be the second fastest in the G7 after only the United States. However, the latest figures also highlight the challenges and the importance of our Get Britain Working plan, which includes creating a new jobs and careers service, tackling economic inactivity due to ill health and delivering our youth guarantee.

[Lord Hunt of Wirral (Con)]

The Minister omitted to mention that unemployment has now risen to 1,830,000 and, perhaps most chilling of all, that the number of young people without the dignity of work has risen to 735,000. Do the Government now accept that the triple blow of the jobs tax in last year’s Budget, the increased income tax levels in this year’s Budget and the unemployment Act, which received Royal Assent earlier today, have all contributed to the fact that unemployment is rising to 2 million people? What is she going to do about it?

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[Baroness Sherlock (Lab)]

I will tell the House what we are going to do about it: something the last Government never did, which is to take seriously the challenge of so many young people in our country who are not in employment, education or training. What did the last Government do about that? They did nothing. What are this Government doing? A huge amount: in the Budget, we have put hundreds of millions of pounds into a youth guarantee. We are creating guaranteed jobs for young people who are long-term unemployed on universal credit, and we have the former Health Secretary, Alan Milburn, digging down deep into what the driving reason is for why so many of our young people are not out there in the labour market. We are going to solve the problems we inherited; we are doing something about it.

[The Lord Speaker (Lord McFall of Alcluith)]

My Lords, I call on the noble Lord, Lord Campbell-Savours, who is participating remotely.

[Lord Campbell-Savours (Lab) [V]]

With the jobs market hugely influenced by the availability of training, in particular apprenticeship training, should we not positively welcome the £820 million for the youth guarantee scheme, with its emphasis on quality? Is not the lesson that the Government have learned from the YOPs and community programmes of the 1980s that such schemes work only when they incorporate quality, real skills development, and the prospect of long-term employment? Are they not the hallmark of this much expanded and brilliant training programme?

[Baroness Sherlock (Lab)]

I welcome a particularly fine question from my noble friend. I could almost have said that myself; in fact, maybe I will. He makes a really important point. We need to have support in the investment of skills for young people: skills for today and for tomorrow. Simply putting them on to some kind of make-job scheme does not work. We actually need to invest in them, so my noble friend is quite right. At the Budget, we announced £820 million of investment into the youth guarantee to support young people to earn or learn, but there was another £725 million for the growth and skills levy. We are trying to invest in young people so that they will find ways of getting the skills and be inspired to get out there and make a difference.

We also need to understand those who are not engaging. Alan Milburn issued a call for evidence this week. He is asking two questions: what is stopping more young people participating in employment, education or training, and what would make the biggest difference to support more young people to participate? We want to hear from anyone with knowledge, expertise or lived experience, so I urge noble Lords, with all their connections: let us all together try to get the answer to one of the most pressing questions facing our country.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the Bank of England has canvassed for resignations to cut jobs to save £45 million and use more AI, and many other jobs continue to be lost to AI. What strategy have the Government got to ensure that their AI and tech procurements support British jobs? If mandating is okay for pension fund investments, where is it for government?

[Baroness Sherlock (Lab)]

My Lords, I think I might save the pension fund for the extensive debate we will have later, which is my Christmas present from the Chief Whip. That is all I can conclude. The noble Baroness makes a very important point. One of the things that the Government as a whole are doing is looking across the piece. The truth is that it is still quite early days in working out what, in the medium to long term, will be the impact of AI on the economy. There is evidence that jobs may be displaced in some sectors while in others jobs are created. While we are understanding the full impact, the challenge for us is to make sure we equip people with the skills that enable them to compete in the markets that are to come. There is a lot of work going on in my department, but also in DSIT and across government, to monitor this and develop strategies. In particular, there is work on investing in homegrown tech companies to make sure that we have the opportunities here in which we can invest and our young people can work.

[The Earl of Clancarty (CB)]

My Lords, further to the points made about skills, will the Minister look at a new report by the Creative Industries Policy and Evidence Centre that finds that arts, culture and heritage sectors are all

“losing skilled employees due to low pay, limited progression and lack of flexibility”.

Although our freelance workers should certainly be better supported, there is concern over the levels of permanent creative staffing, including in theatre. How will the Government address these concerns?

[Baroness Sherlock (Lab)]

The noble Earl makes an excellent point. He is a fine ambassador for the creative sectors, for which I commend him. The Government are looking sector by sector at how we can support the development of skills. I am aware that we have had to work quite hard to protect some quite specialist skills, because if we lose them we will not get them back, certainly in the heritage sector. I am happy to look at how our sector work can do that, but what we are trying to do in DWP is to work with a wide range of employers to make sure that we know what they want, what skills they need and how we can support them. One thing that has made the biggest difference—I slightly bang on about it—is my noble friend Lady Smith’s welcome joining up of adult skills and the DWP. That can make a real difference, so I will make sure that we look carefully into that.

[Viscount Younger of Leckie (Con)]

My Lords, I am afraid that I am not yet in the Christmas spirit because, as the Minister herself said, there are huge challenges in the deteriorating jobs market. It is of great concern that jobs in the all-important retail sector have fallen by 74,000, and the chief executive of the BRC has stated that the number of people in work in that sector is at a record low, namely 2.82 million jobs. What are the Government going to do to change the situation, as a matter of urgency, in that sector?

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, the noble Viscount will know that we have a number of what we call sector work programmes to develop skills and support people into many areas of our economy, including hospitality and retail, and many others. I come back to the fact that there are challenges across the globe. The UK unemployment rate is firmly below the EU 27 average. The UK has the third-highest employment rate among the G7—higher than Canada, the USA, France and Italy. I fully accept that these have been challenging times but there has been a reduction in demand across the globe, for a range of reasons. I am confident that things are looking good. We are seeing, for example, that vacancies have stabilised. We are seeing interest rates coming down and businesses getting more certainty, not least from the fact that we now have an Employment Rights Act.

[Lord Mohammed of Tinsley (LD)]

My Lords—

--- Later in debate ---

[Lord Mohammed of Tinsley (LD)]

My Lords, I am more than happy to speak to Alan Milburn, given my long experience of working with NEETs. The question I will ask the Minister is about His Majesty’s Government having two key priorities. One is around net zero and the other is building 1.5 million homes. I want to know: what is the strategy around young people and apprenticeships? I ask this because I spoke to a young person studying at Sheffield College who is doing an electrician course. He is really stressed out that he is unable to get the apprenticeship course he needs to get properly qualified and contribute to the economy, because otherwise he told me that he will look for a job in McDonald’s.

[Baroness Sherlock (Lab)]

I am not going to diss looking for a job in McDonald’s, but I do not want to see anyone unable to pursue the things that they want to do. The noble Lord is absolutely right. We have invested £600 million in a construction package and are working closely with the industry. We have a strategic relationship team in DWP that works with key sectors to try to make sure, if jobs come on stream, that our people get them. We want young people and people who are not in the labour market to get them—those who are struggling with economic inactivity. I am grateful to him for raising that.

[Lord Spellar (Lab)]

My Lords, should not the Government look at the incredible difficulty that youngsters have in getting into work, with very bureaucratic HR processes for making applications? Should they also not say to employers who are on contracts to the Government that they need to provide a certain ratio of training places to qualify for being on government contracts?

[Baroness Sherlock (Lab)]

My Lords, those are two important points. The second quite often happens. I know that the social value element of contracts is something important that we in DWP take especially seriously. On the first point, we must all have had that experience of knowing young people and their heartbreaking experience of sending out application after application, and getting nothing back at all. I understand how tough it is for businesses to manage that, but if any employer is able to do that—to make it as easy as possible to support young people—that is great. One thing we can do in DWP is to support the young people in doing that: to connect them with employers, give them the skills and make sure they are putting in the best possible application in the first place.

Employment Gap for Blind and Sight-impaired People

Baroness Sherlock Excerpts

Wednesday 17th December 2025 Lords Chamber

[Lord Holmes of Richmond]

To ask His Majesty’s Government what plans they have to close the employment gap for blind and sight-impaired people, and by when.

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

My Lords, this Government are committed to providing high-quality support to disabled people, including those who are blind or visually impaired. This group will be supported to enter and stay in work through our pathways to work guarantee and our connect to work supported employment programme. Our progress is monitored through the Get Britain Working outcome metrics, which include indicators such as the health-related economic inactivity rate and the disability employment gap.

[Lord Holmes of Richmond (Con)]

My Lords, if you are blind or sight impaired, in the UK currently the employment rate is just 27%. If you are not disabled, it is 83%. Therefore, if you are sight impaired you have only around a one in four chance of being in work. This cannot continue. Will the Minister strongly consider establishing a taskforce to look at the issues and identify scalable solutions to close this pernicious gap that blights individual lives and scars our economy and society? To be clear: this is not a party-political point. No Government have gripped it. Will this one? Here is the rub: currently, if you are blind or sight impaired in the UK, talent is everywhere, opportunity is not.

[Baroness Sherlock (Lab)]

My Lords, I thank the noble Lord for that question and agree that it is not political. I know that his approach to this is not. I am grateful for how he approaches these issues. There are different views on the statistics. We can have a conversation elsewhere. A lot depends on how the definitions are made but, either way, the disability employment gap is far too big and needs tackling. As the noble Lord will know only too well, things got worse during the pandemic and have not really recovered.

This Government have made a real commitment to engaging, investing significant additional sums of money in supporting people with a range of disabilities and health conditions, including blind or visually impaired people, back to work; lots more tailored support; investment in supported employment programmes; and making sure that there are specialist disability employment advisers and coaches who understand how they can help people. We are also working with employers. I can talk more about that if it is helpful.

I am not in a position to announce a taskforce today, but we have announced the Independent Disability Advisory Panel. The membership will be announced shortly. The Government are taking very seriously the need to listen to the voices of disabled people, including blind and visually impaired people, as well as talking to the organisations that support them. I would welcome having further conversations with the noble Lord about how we can get this right.

[Baroness Kramer (LD)]

My Lords, the Minister acknowledges the sight-loss employment gap. How many full-time equivalent disability employment advisers are employed by the DWP—and do all DEAs have specific sight-loss training? Do access to work assessors and jobcentre staff have sight-loss training and, if they do not, will the Government seek to remedy this?

[Baroness Sherlock (Lab)]

I am not sure we have any published statistics, but my best understanding at the moment is that there are more than 800 disability employment advisers and DEA leaders. The Government’s aim and commitment is that every work coach will have access to a specialist disability employment adviser. The DWP provides particular learning for those who come into that DEA role, and that includes specific content relating to blindness and visual impairment. It is intended to give awareness of the challenges that people with sight loss who come to us may face, highlights the support we can offer, and explains what the DWP’s responsibilities are. As an organisation, we are looking specifically to improve that. The Government have recognised that we need to be investing more. We are going to put more money in over the rest of this decade, investing more money in hiring, improving the quality and the quantity of support providing help to disabled customers. We aim for it to be tailored to each individual circumstance, and that is what we ought to do. The answer is yes, we are investing in training as well as in having people on the ground who can help.

[Baroness Prosser (Lab)]

My Lords, I have been registered as partially sighted since December 2020. While I absolutely agree with the point of the Question regarding the need for employers to be more alert and more open to doing things differently—artificial intelligence plays a major part in helping blind and partially sighted people to see and proceed—I wonder whether the Minister will take away the point I wish to make, which is that there is a great deal of room for improvement in this House itself. There are many people who are very helpful but, overall, the system is completely dysfunctional. I thank the Lord Speaker for the work he has done in trying to bring this to the attention of leaders of various departments in the House, but there is no overall programme; there is in all the Civil Service departments but not in the political wings of our work. I hope the Minister will take that message away with her.

[Baroness Sherlock (Lab)]

I am grateful to my noble friend for raising that and for bringing her personal experience to the fore here. My department is responsible for disability in government, and we work very hard to be as accessible as possible. We have significant numbers of staff and colleagues who themselves have a range of disabilities, including sight impairment, and we work constantly to improve what we do and what we offer in that space. On Parliament, I think she makes a good challenge. The fact that Parliament is not subject in the same way as other employers to some of the legislative requirements does not mean that we should not do just as good a job as other people and try to make it better. I am very happy to talk to the House authorities on her behalf about how we continue to make progress in that area.

[Lord Forsyth of Drumlean (Con)]

My Lords, is the issue here not that the Equality Act applies to the staff in this House but not to the Members? Should that not be sorted so that Members are given the kind of support that we see in other parliaments—such as, dare I say, the European Parliament—where they are given the support to carry out their activities?

[Baroness Sherlock (Lab)]

I have always known the noble Lord as a good European—I am glad to hear him speaking up for the European Parliament today. To be honest, I am not sure we can use that as an excuse. We do not have to be made to do something to do it, and the House should look at it.

[Baroness Watkins of Tavistock (CB)]

My Lords, I had an aunt who was blind from birth, was funded to train as a physiotherapist—that was on careers advice at school—and worked for 43 years full-time. Is consideration being given to ensure that young people who have long-term permanent sight problems get the right career advice?

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness. Like her, I have had the benefit of a physio- therapist who is herself blind and is very good indeed. The noble Baroness makes an important point. We have been working really hard with our colleagues who work with the young people who come in. The reason we try to have tailored advice is to work out what works for that person. Just because it worked for the noble Baroness’s aunt, it might not work for her next-door neighbour in the same circumstances. It is about trying to find out what somebody is able to do, wants to do and has a passion for, and how we can give them skills and support.

One of the great joys of having my noble friend Lady Smith join us as Minister for Skills in the DWP as well as the DfE, getting the remit for adult skills, is that it is helpful to join up what we are doing to try to find opportunities for and support individuals, with them having the skills to enable them to follow through on that.

[Lord Watts (Lab)]

My Lords, the Conservative and Liberal coalition Government did away with Remploy. At the time that they abandoned Remploy, many of us said that it would leave the disabled exposed. Is it not the case that they did not make any provision for those people who were previously employed through Remploy?

[Baroness Sherlock (Lab)]

My Lords, I cannot speak to exactly what happened at the time that was abolished. What I can say is that this Government are absolutely committed to supporting people. I talk to brilliant, inspiring disability advocates in my organisation—advisers who have customers who come in and start out thinking there are not things that they can do and end up having jobs found for them and being supported into them. I want to do two things: enable people to get all the help they can, and persuade employers, many of whom want to hire disabled people but do not know how, that they can hire them and that they can thrive and be a real asset to the organisation. We should all get behind that.

[Baroness Buscombe (Con)]

My Lords, to the Minister’s point about employers, I remember that in government we offered all employers up to £52,500 per year for every person with disabilities to be supported into work. What has happened to that offer?

[Baroness Sherlock (Lab)]

I am not sure what the noble Baroness is referring to but, if I can find out, I will be very happy to write to her. We now have something called the support with employee health and disability service, which was developed with input from smaller businesses and disability organisations. It gives employers tailored step-by-step guidance as to how they can support employees in common workplace scenarios involving health and disability. It helps employers to understand their legal obligations and what reasonable adjustments may look like, and it even goes down to helping them feel confident having sometimes tricky conversations, either with a new member of staff or somebody whose health or disability may be changing. We know that lots of employers want to do the right thing; our job is to help them to do it well.

Universal Credit: Two-child Limit

Baroness Sherlock Excerpts

Wednesday 10th December 2025 Lords Chamber

[Lord Farmer]

To ask His Majesty’s Government what assessment they have made of the impact on work incentives of lifting the two-child limit in Universal Credit.

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

My Lords, this Government are determined to lift children out of poverty, and removing the two-child limit is the fastest and most cost-effective way to do so. The benefit cap is still in place, encouraging parents to take responsibility and work towards financial independence. Our approach balances fairness and provides a strong safety net without undermining the incentives to work.

[Lord Farmer (Con)]

My Lords, recent international evidence found that unconditional cash transfers increase fertility. Families claiming health-related benefits are not capped, so even these workless families will get UC for every child, again affecting work incentives. Research by the Institute for Fiscal Studies found that money-per-child tax credits increased births by 15% and decreased contraceptive use among beneficiaries. Have the Government assessed whether lifting the two-child limit will incentivise more births in benefit-dependent households, and whether many of the 450,000 children this measure intends to lift out of poverty would not otherwise have been born?

[Baroness Sherlock (Lab)]

My Lords, the Government have seen no evidence that the two-child limit had an impact on family size. For example, 47% of households affected by the two-child limit were not claiming universal credit when any of their children were born. In other words, things happen; people set out, they have children and something happens. Maybe someone loses their job, they are bereaved, their spouse leaves them, or they get sick and cannot work. The welfare state should be there to support people, both into work and in work, but it is also there to support them when they cannot work. We already know that some 60% of households affected by this are in work. Our strategy is to make sure we do all we can to get people into work, get them to develop in work and support them, but we are there as a safety net when they cannot do so.

[Baroness Lister of Burtersett (Lab)]

My Lords, academic research has found that the two-child limit had no positive employment effect and that parents living in poverty are pushed further from the labour market because of stress, insecurity and the sheer hard work of struggling to get by. Does my noble friend therefore agree that a decent social security system can support effective job-seeking and plays an important role in tackling child poverty, as the child poverty strategy recognised?

[Baroness Sherlock (Lab)]

My Lords, my noble friend makes a really important point about the scarring effects of poverty. Our aim is to make sure that everyone who can work, does, with all the help they need to do that. That is what this Government have been doing. We are investing heavily in childcare to make it possible to work, making sure wages pay enough so that work is a good thing, and supporting children.

We know that when children grow up in poverty, things get worse for them. They are less likely to work as adults, and they earn 25% less at the age of 30. Even if some parts of the House are not persuaded on the grounds of the importance of the individual child, this is an investment in the future of our country. No other G7 country has a policy like this and there is a reason for it. We cannot compete on the world stage, grow our economy or create prosperous futures for our kids if we do not enable them to grow up thriving and healthy.

[Lord Palmer of Childs Hill (LD)]

Does the Minister agree that this is not about getting people back to work; it is about improving living standards and making sure children are safe, and that this Question, which tries to link people getting into work with this benefit, is completely ridiculous?

[Baroness Sherlock (Lab)]

My Lords, I think I have made my views clear on the impact of this policy. It is, in essence, a failed social experiment which has been pushing 100 children a day into poverty. We simply cannot allow that to happen. We want to support families. Most parents want to work to support their kids. Already, 84% of parents are in work—that is what people do. I used to work with single parents, who would say, “Even when it’s really a struggle, I want my kids to see this is what you do when you grow up”, but many people face barriers to work, and it is our job to make that possible. If you cannot afford childcare, how can you get to work? If you are not paid enough to be able to make life even bearable, how can you do that? The social security system should be there to support those who cannot work, but for those who can, to make it possible and to help them have a decent standard of living when doing so.

[Baroness Deech (CB)]

My Lords, around £450 million is owed to the Child Maintenance Service by absent fathers and some absent mothers. Some 160,000 children would be lifted out of poverty if the defaulting parents paid what they owed to the Child Maintenance Service. Does the Minister agree that is not right for the taxpayer to pick up the burden owed by defaulting parents and that the Child Maintenance Service must get that money from the parents?

[Baroness Sherlock (Lab)]

My Lords, the great advantage is not an either/or. The wonderful thing about child maintenance is that it does not impact on somebody’s social security, so if someone is working and getting some universal credit, maintenance tops that up further. The Child Maintenance Service does an astonishing job in many, sometimes very challenging, circumstances. Here is one simple statistic: since the Child Maintenance Service was set up in 2012, it has collected 93% of all the maintenance owed, but I am sorry to say that there are some parents who simply do not want to pay for their children. The Child Maintenance Service has astonishing powers. It will go after them, and it will keep after them, but we should encourage everybody to do the right thing: pay for your children, go out there and make it possible for them to have a decent life.

[Lord Gove (Con)]

My Lords, if this policy is such a good idea, why was the Whip removed from seven Labour MPs in the other place when they voted in favour of it last year?

[Baroness Sherlock (Lab)]

My Lords, perhaps the noble Lord knows more than I do about the state of the economy that this party inherited when we came into government. We have dealt with all the challenges that his Government left behind. Chief among those was the state of—not just support for children—the welfare state. We had huge numbers of people who had been abandoned. Under the last Government, the bill went up by £88 billion. This Government came in with a budget. We invested £1.5 billion in employment support; we have reformed Motability and universal credit. We are going to make a difference. We care about children.

[Lord Winston (Lab)]

My Lords, can we come back to the original Question? We have had some very spurious statistics about fertility and contraception. Does the Minister agree that contraception has been hugely important in getting women back to work and earning money?

[Baroness Sherlock (Lab)]

I am grateful to my noble friend for calling me back to order. The availability of contraception has been transformative for women, and we should all recognise that. Being able to have control over their fertility makes an enormous difference to the choices that women make. For many of them, it means they can work and manage family size most of the time. However, we want to enable mothers and fathers both to have children and to work. That is the job of the state. Mothers should not have to choose between having kids and having a job. Families should never have to do that. The job of the state is to make both possible for the sake of those families and those children.

[Lord Londesborough (CB)]

My Lords, child poverty is undoubtedly a serious issue, and the steep drop in the number of children being born in this country is perhaps even more serious. Last week, we learned that the average cost of raising a child has now risen to £249,000, according to research by Moneyfarm, which may explain why an increasing number of working parents choose to have just one child or none at all. Down the line, this means a shrinking workforce in an ageing population. What is the Minister’s view on this?

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, the noble Lord makes a really important point, which is that we need as a country to make sure that we prioritise the cost of living and enabling people to earn enough. It should be possible to go out to work and earn enough to support your family, but that is one reason why we think it is important to invest in appropriate levels of social security. Crucially, we have to help people to develop skills. We want people to get into work, but we do not want them stuck on the lowest-paid work. We have increased the national minimum wage and invested in childcare and free school meals—we are doing all the things to make it possible to do the right thing. However, we need to go further. We need to see people in this country in higher-skilled, higher-paid jobs that will help them, grow our economy, and create opportunities for their children in due course.

[Viscount Younger of Leckie (Con)]

My Lords, can I bring the House back to the original intention behind the two-child limit? It was to make the benefits system fairer to taxpayers who support themselves and their families solely through work. It encouraged parents on benefit to make the same financial choices about family size as those not on benefits. With the Government’s poverty argument in mind, the IFS has said that reversing the two-child limit is “not a silver bullet”. It said that the benefit cap will

“wipe out the gains for some children in the … poorest families”,

as 70,000 more households are affected by the cap. Surely supporting parents into work and into quality jobs is much more important for reducing child poverty. Finally, the IFS says that raising the employment rate to 80% from the current 75% would lift up to 350,000 children out of poverty.

[Baroness Sherlock (Lab)]

My Lords, that is why the Government have set that as their target. I say to the noble Viscount that the whole point about this is that it is not a choice. It is not a question of either supporting children or helping parents to go into work. Supporting families makes work possible. Most parents want to work. Our job is to make that possible, so we have done that. We have invested in expanding free school meals to everyone on universal credit, including those in work; we have raised the national living wage, and we have put in more help for childcare—30 hours a week for parents of preschoolers—and more help for childcare in universal credit. Children deserve the best possible start in life and their parents deserve the best chance to have a decent life. We want to do both.

Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025

Baroness Sherlock Excerpts

Wednesday 10th December 2025 Lords Chamber

Moved by

[Baroness Sherlock]

That the draft Regulations laid before the House on 23 October be approved.

Relevant document: 40th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 8 December.

Motion agreed.

Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025

Baroness Sherlock Excerpts

Monday 8th December 2025 Grand Committee

Moved by

[Baroness Sherlock]

That the Grand Committee do consider the Occupational Pension Schemes (Collective Money Purchase Schemes) (Extension to Unconnected Multiple Employer Schemes and Miscellaneous Provisions) Regulations 2025.

Relevant document: 40th Report from the Secondary Legislation Scrutiny Committee

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

My Lords, I am pleased to introduce this instrument. Subject to the approval of this Committee, these regulations will be another significant step forward in the reform of our occupational pensions framework, building on the foundations laid by the Pension Schemes Act 2021 and the Occupational Pension Schemes (Collective Money Purchase Schemes) Regulations 2022. The primary purpose of these regulations is to extend the legal framework for collective money purchase schemes—commonly known as collective defined contribution, or CDC, schemes—to allow multiple unconnected employers to participate. Until now, CDC schemes have been restricted to single employers or groups of connected employers.

I have been advised that there are two minor drafting errors in Schedule 2 to the SI as laid in draft, resulting in two cross-headings before paragraph 2 where there should be only one and a repetition of “regulation” in paragraph 2. The intention is for these to be corrected in the version that is made so that there is a single cross-heading reading “General” and a single appearance of the word “regulation” in paragraph 2. I apologise for these errors, but I assure the Committee that these corrections do not change the legal meaning of Schedule 2 in general or paragraph 2 in particular.

Before I move on to the detail of this instrument, it may be helpful if I give some context. The Pension Schemes Act 2021 provided the statutory framework for CDC schemes in the UK. The Government believe that CDC schemes have an integral role to play in addressing the challenges faced in our pensions system, so long as the guiding principle is to ensure that we protect the interests of members. Although good progress has been made, four in 10 working-age people are under-saving for their retirement. CDC schemes can help address this issue: by pooling longevity and investment risk across the membership, such schemes have the potential to target higher investment returns for their members than a DC scheme. CDC schemes also have potentially infinite investment horizons and no need to lifestyle investments, which means they can invest productively for longer. Industry modelling suggests that CDC schemes could boost retirement income by anywhere between 25% and 60%. The Committee will agree, I am sure, that if such increases in returns were realised, CDCs could really help address the issue of inadequate retirement incomes.

CDCs can support the wider economy, too. Longer investment horizons mean greater investment in vital UK infrastructure and the technologies of the future, such as renewable energy. Pooling can also shield savers from much of the uncertainty and risk faced by members of DC schemes, which is especially important as they approach retirement. CDC schemes offer members a seamless transition from saving into receiving a trustee-managed retirement income. We know that many people do not want—and, indeed, feel ill-equipped—to make complex financial decisions at retirement. Some 72% of DC members want a pension income yet 50% of pots are taken fully as cash, exposing them to individualised longevity risk. CDC schemes provide a target income for life and will target at least inflationary increases in member benefits at a scheme’s outset, helping members’ money keep pace with the cost of living through their retirement.

The Government want to ensure that as many savers as possible can take advantage of these benefits. That is why we have introduced this legislation. This instrument opens the door for broader adoption of CDCs: it will allow different, unconnected employers to participate in the same scheme, including smaller employers who lack the scale or expertise to go it alone. It also opens the door to CDC being a solution for specific sectors and for commercial schemes. For employers, the benefits are clear. Their liability is no greater than in a DC scheme, with contributions being made in the same way. Yet, with the aforementioned benefits, CDC schemes can be a valued employee benefit, allowing employers both to attract and retain talent in a competitive labour market.

I will now dive into the detail of this instrument, and there is, of necessity, plenty of detail. Despite the successful launch of the Royal Mail collective plan last year, CDC remains a relatively novel concept. It is critical that employers and their employees can have confidence in CDC pensions. The Government therefore make no apology for this instrument setting a high bar for entry. The robust authorisation and supervisory framework introduced by this legislation means employers can be confident they are joining well-run, well-governed schemes.

Part 2 of this instrument removes the exclusion in the Pension Schemes Act 2021 which limits the schemes that can be collective money purchase schemes to schemes used, or intended to be used, by single or connected employers. This allows for the creation of unconnected multiple employer schemes. Part 2 also amends the definition of a qualifying scheme, so that a broader range of organisations can set up a collective money purchase scheme. This will enable commercial organisations to establish unconnected multiple employer schemes.

A scheme applying for authorisation must satisfy the regulator that it meets the authorisation criteria. These criteria are listed in Section 9(3) of the Pension Schemes Act 2021. Part 2 amends the existing authorisation criteria in the 2021 Act and thereby creates additional criteria, specifically for unconnected multiple employer collective money purchase schemes. We have identified persons that we consider will have important roles in unconnected multiple employer CDC schemes and have brought these people within the scope of the “fit and proper persons” test, so that they are subject to appropriate scrutiny.

Regulation 10 amends the 2021 Act to require that the scheme has a single scheme proprietor meeting specific criteria and the specific requirements set out in new Section 14C of that Act. As we are seeking to extend CDC provision to unconnected multiple employer CDC schemes, we know there will be new entities involved in the operation and funding of these new types of CDC scheme. We want to ensure that any financing required to meet relevant costs is credible and realisable, so that it is available at the point of need. Therefore, the scheme proprietor’s ability to deliver such financing will need to be assessed by the regulator, both at authorisation and on an ongoing basis.

Regulation 10 of the instrument also inserts a business plan requirement under new Section 14A of the 2021 Act. The scheme proprietor would be required to prepare, maintain and submit a business plan to the regulator, which will include the key financial information for its financial sustainability assessment. The detailed content of the business plan is set out in newly inserted Schedule 1B to the 2021 Act.

These regulations will permit schemes that intend to operate on a commercial basis. This will involve acquiring new business through the promotion or marketing of their scheme. To mitigate the risk of schemes overpromising to gain a commercial advantage, or mis-selling, we are introducing a new promotion or marketing authorisation criterion for these schemes. The requirement is that no person has carried out promotion or marketing of the scheme that is unclear or misleading without rectification, and that the scheme has adequate systems and processes for ensuring that its promotion or marketing is clear and not misleading.

We also want trustees of these schemes to focus entirely on the interests of the scheme members and to have complete autonomy to do so. If the trustee were also to act as a person who promotes or markets the scheme, or as the scheme’s CFO, it would detract from that responsibility and create a clear conflict of interest. Regulation 5 makes a separation of these roles a criterion for authorisation. The Government’s intention is that running an unconnected multiple employer CDC scheme as a closed scheme should always be an option open to trustees, where it is viable to do so, and to the extent permitted under wider legislation. Regulation 5 therefore inserts a new authorisation criterion into the 2021 Act to ensure that trustees can choose this option if appropriate.

Finally, on Part 2, Regulation 6 imposes a mandatory deadline of 24 months from authorisation by which an authorised unconnected multiple employer CDC scheme must start being operated. This is to deter speculators. We want only people or organisations that are fully committed to providing well-run and soundly designed unconnected multiple employer CDC schemes to apply for authorisation.

Part 3 of this instrument supplements the meaning of “connected” in Section 49(2)(a) of the Pension Schemes Act 2021. This is relevant for determining whether a collective money purchase scheme is a single and connected employer scheme or an unconnected multiple employer scheme and therefore which of the two legislative frameworks applies to it.

--- Later in debate ---

With that, I conclude my remarks.

[Baroness Sherlock (Lab)]

My Lords, I am grateful to the Committee for the handful of questions that has been offered up. I share with the noble Viscount, Lord Younger, disappointment that there are not hordes of colleagues here wanting to question these regulations. They are extremely important and utterly fascinating, but there is no accounting for taste—what can we say? I am very grateful to him and to my noble friend Lord Davies of Brixton for being here, asking such excellent questions and keeping me on my toes. I am going to try to work my way through them.

It is worth saying at the outset that my noble friend Lord Davies had quite a nice analogy about moving into a house. I moved house a year ago, and he is absolutely right—I now realise there should be power points in the middle of my kitchen where I actually use my devices and none of them are there. However, the reality is that there have to be some power points; some decisions have to be taken. At some point down the line, I may decide on additional power points and just have them put in. There may be new lights in the house, but we have to start off with lights, and we may add more lights later.

We have gone to considerable care to make sure that the system is set up as robustly as possible, but we will adapt and learn as we have experience from this. That is an important question, but it is one I am happy to offer reassurance on.

We think that CDCs are a type of money purchase because there is a type of money purchase benefits in the legislation. They are covered by the legislation applying to money purchase benefits and not DB benefits. I can see him shaking his head; I have failed to persuade him, but I will keep trying on subsequent questions.

My noble friend mentioned in passing that there are lots of different kinds of legislation and asked how they join up. I assure him they absolutely do join up. The Government have a vision for the pensions landscape. Most of these issues are coming in stages; for example, we have made our views known; we have had comments and clear steers from the Chancellor; we have had the pensions investment review, which set out the landscape, and as a result of that, we have the Pension Schemes Bill, which starts next week and which he and I are looking forward to so much. That will make the necessary adjustments to the landscape so that the Pensions Commission, which is doing its work on issues such as adequacy, can make sure that if savers, or indeed employers, are encouraged to invest more, or in different ways, the market is fit for it at that point.

These things do connect; I accept that they are complicated. One of the challenges is that pensions are very complicated, and there is a lot of money at stake, and therefore it matters—he raised the point about regulation—that we get that absolutely right.

My noble friend mentioned in passing the question about retirement CDCs. He will be aware the consultation has just closed and so more information on that will be coming out soon. He asked about whether CDC schemes will be captured by things such as the scale requirements in the Pension Schemes Bill. Because CDC schemes are a new and innovative development with the potential to offer improved outcomes, they will need to have a degree of scale and a long investment horizon to enable them to invest in a wider range of assets, including productive assets. It is right to give this new market the space to develop with confidence, but we are going to keep the requirements for these schemes under review as the market develops.

He asked about how the legislation will ensure fairness between members of different employers. Regulation 40 specifies that any adjustment to benefits that may need to be made must be applied to all members “without variation”. Regulation 40 also requires that benefit rates must be determined on the principle of actuarial equivalence and that, as he will of course be only too aware, is achieved when the expected accrual and expected contribution levels are equal over a period of time. That prevents new entrants unfairly subsidising existing members and avoids cross-subsidies between employers, which could, for example, happen if one employer had a younger workforce than another.

Both he and the noble Viscount, Lord Younger, asked about communication to members of CDC schemes. The regulations require schemes to inform members regularly and clearly that the rate or amount of benefits provided under the scheme is not guaranteed and can fluctuate. This includes providing this information at joining, annually and in retirement. CDC schemes are also required to have adequate systems and processes for communicating with members and must provide information in their authorisation application about monitoring them to help ensure the systems and processes remain effective. To ensure transparency, key scheme information must be made available on a publicly available website, including the scheme rules, a summary of the scheme design and information about the most recent actuarial evaluation of the scheme.

My noble friend commented about whether the regulation is all too burdensome or too hard to join, but as in DC schemes, members will bear all the risks of the CDC scheme in accumulation and decumulation. So, we think it is only right that we make sure these schemes are well-designed, well-run and resourced properly so that employers, members and the Pensions Regulator can have confidence in the scheme at authorisation and on an ongoing basis.

My noble friend raised the question of commercial interests. I know he was not necessarily challenging there being commercial providers; it was more about the language and how that is understood. We have worked quite hard to make sure that the authorisation criteria require a clear separation between the trustees and those funding the scheme, promoting the scheme and trying to make a profit out of it. The promotion and marketing authorisation criterion mitigates against the risk of overpromising to gain a competitive advantage, as I said in my opening speech. Although my noble friend does not like the term “proprietor”, the financial sustainability requirements are designed to prevent that person passing on to members the costs of setting up and operating the scheme.

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[Viscount Younger of Leckie (Con)]

I thank the noble Baroness for spelling out the code of practice; we look forward to seeing that. I remain quite surprised that the Pensions Commission will finally report as late as spring 2027. I cannot believe it is going to take that long, despite the fact that pensions are generally known to be quite technical and detailed. I am not expecting the noble Baroness to comment on that, but I just wanted to put it on record. The noble Baroness did not answer my question about surpluses, and I am very happy to be written to about that. Perhaps the main question I wanted to ask, which the noble Baroness also did not answer, is about membership take-up at Royal Mail. What was the rate of take-up for the Royal Mail scheme?

[Baroness Sherlock (Lab)]

On the question of surpluses, the regulators will ensure that a scheme has sufficient financial resources through a range of key mechanisms centred around the role of a scheme proprietor, robust planning and ongoing regulatory oversight. The Pensions Regulator must be satisfied that the scheme is financially sustainable before it can be authorised. That would obviously involve a rigorous assessment of its expected costs, income and the strategy for recovering any shortfalls. The schemes accounts have to be submitted to the regulator on an ongoing basis to give transparency. I am not sure that that does answer his question on surpluses, but if I have an answer, I will write to him.

On the membership take-up of the Royal Mail scheme, 110,000 people have joined and around 700 have opted out. I hope that answers that question, and that I have answered all the other questions. I thank both noble Lords for their helpful contributions to this debate. This instrument will allow CDC schemes to play an integral role in the future of pensions in this country, affording potentially millions of savers access to the benefits they offer. With that, I commend this instrument to the Committee, and I beg to move.

Motion agreed.

Carer’s Allowance: Overpayments

Baroness Sherlock Excerpts

Tuesday 2nd December 2025 Lords Chamber

[Baroness Pitkeathley (Lab)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I acknowledge the Government’s positive response to the recommendations in the independent review.

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

My Lords, the Government accept that between 2015 and summer 2025, the guidance on whether and how to average earnings in carer’s allowance did not accurately reflect the statutory position. We will therefore be reassessing earnings-related overpayment cases that occurred between 2015 and September 2025. Where it is found that overpayments were lower than originally calculated, carers will have their debts reduced or cancelled entirely, with the Government refunding any money already paid. We will set out plans for doing this in early 2026.

[Baroness Pitkeathley (Lab)]

I thank my noble friend for that response and for her patience at my persistence. After the problems for carers were ignored for so long by the previous Administration, and after systems did not respond to the clear evidence about the distress caused, carers naturally have a high level of mistrust about how their benefits are administered. Does my noble friend agree that rebuilding that trust must be a priority and that any changes must be completely transparent, with carers consulted and informed at every step of the way?

[Baroness Sherlock (Lab)]

I thank my noble friend for that question and for her work. I pay tribute to the millions of unpaid carers across this country; the Government greatly value them and the work they do. Carers are also fortunate to have some excellent advocates, including many Members of this House—and I think we would probably all acknowledge that supreme among them is my noble friend, whose work in this area has for so very long been recognised by us all.

Carer’s allowance provides support to around 1 million people and, for most of those who receive it, the experience is positive and the rules are clear. But my noble friend is right that, when we came into government, it became clear that there were far too many cases where working carers had been left with large overpayments to be repaid. That is why we commissioned an independent review of earnings-related overpayments. We are very grateful to Liz Sayce for her recommendations, but also to her advisory panel and especially to the unpaid carers who shared their experiences to make that right. We have accepted or partially accepted 38 of the 40 recommendations in the report, we have begun working on many of them already, and we will set out the details in the new year. We will be very clear and transparent: many of the recommendations regard reviewing how we write to people, how we make things clear and how transparent we are. Above all, when the Government make mistakes, they should acknowledge them and put them right, and that is what we are doing.

[Lord Young of Cookham (Con)]

When we discussed this matter a few days ago, I raised with the Minister the issue of the so-called cliff edge, whereby if you earn 1p over the earnings limit you lose the whole allowance. The Minister replied with characteristic sympathy, but she said that modernising the system would take “some years”. The independent review referred to by the noble Baroness, Lady Pitkeathley, takes a totally different view. It says that addressing the impact of a cliff edge is urgent, and asks the department to be

“creative in its thinking about options for short term changes to remove or reduce this impact more quickly”.

Does the Minister accept that recommendation?

[Baroness Sherlock (Lab)]

My Lords, what I said last time we discussed this is absolutely the Government’s position. For the reasons I explained then—I will not go back into them again—carer’s allowance is traditionally not a classic means-tested benefit, so we want to find ways to tackle this. It will take time, because everything about the system has been built in ways that were designed around a simple, non-means-tested benefit. However, we have already done significant things to make a difference; one of the most important of those was to raise the level at which people could earn by the largest cash amount since the benefit was created. This means that if you earn less than 16 hours a week at the national living wage, there is no problem at all. We have also gone through to make sure that most of the ways in which people have fallen foul of the system can be corrected. For example, we have taken action on guidance and communications, and we are now checking automatically all the data that comes in directly from HMRC. We are doing all the things that can be done in the short term.

Much as I do not want to say this, the noble Lord will have to be patient. To be able to remove a cliff edge, the first requirement is to automate earnings coming from HMRC, which cannot be done overnight. We have already begun the work and we are looking for all possible workarounds in the short term. This problem has been around for a long time and no one paid any attention. We spotted it, we are taking action and we will sort it.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for that. The Sayce review identified the problem. I am reminded, sadly, of Lewis Carroll’s “jam tomorrow”, a promised reward that is often postponed. I am not really encouraged by the point that it will be dealt with in 2026. I ask the Minister to be more definite and give us a date in 2026 when this will happen, so that it is not, in Lewis Carroll’s words, “jam tomorrow”.

[Baroness Sherlock (Lab)]

My Lords, if I could give the noble Lord a precise date on which all the computer systems and all the systems will have changed, I would be glad to do it. Let me put this in context: we estimate that about 15% of people who get a carer’s allowance payment are also in paid work and 90% of people who reported earnings did so without difficulty, so we are talking about a very important but specific subset of people, most of whom had fluctuating earnings, which this is designed to address. The biggest challenge in the short term is to make sure that we have clear guidance, we communicate with people, they know what to tell us and we are able to manage that. There is a big prize at the end as we modernise all DWP systems to get this right. A lot of the improvements will be made by really old-fashioned analogue systems—by making sure that we have the right information, communicate well with carers and make it as easy as possible to get the information. Those recommendations may not be exciting, but they actually make a lot of difference.

[Baroness Stedman-Scott (Con)]

My Lords, given that some 185,000 unpaid carers will now have their carer’s allowance overpayments reviewed following the independent report, will the Minister set out how these carers will be notified of the reassessment process and what steps the Government will take to ensure that communications are clear, timely and accessible?

[Baroness Sherlock (Lab)]

I am grateful to the noble Baroness for her important question. Our data suggests that there are around 212,000 overpayment cases in the relevant period, between 2015 and September 2025. We will set out the details in the new year, but we plan to review every case to understand where mistakes were made. Cases that were affected specifically by our unclear guidance will have their overpayment reassessed. If the review confirms that the money was not due, we will make an appropriate refund or reduction. I should say that if it were to result in a higher overpayment, we will not ask anyone for additional money—I just want to reassure anyone who is listening. If the review confirms that the person still owes money, we will give the usual support to make sure that it can be repaid appropriately, because it is not to do with this question.

I want to reassure those who are listening that nobody needs to get in touch with DWP at the moment. Our intention is to work through the cases. We have data for most of these cases and we will contact people proactively. We will set out in the new year how that process will work and what we will do in any remaining cases, but no one needs to get in touch. Please do not phone us at the moment.

[Baroness Tyler of Enfield (LD)]

My Lords, I welcome the independent review and the Government’s response, but what will happen to those carers who have already been convicted of benefit fraud as a result of the mistakes that have been made? Why did the Government decide not to offer compensation to those who have already been so badly affected and whose lives have, frankly, been made a nightmare by the mistakes?

[Baroness Sherlock (Lab)]

My Lords, I said that we will set out in the new year the details of how the reassessment is going to work. We will be working our way through all the cases. I do not know how many, if any, of the cases resulted in prosecution. We will work through what will happen in cases where people, for example, either had overpayments or may have had a civil penalty or even possibly another form of administrative penalty. On compensation, it is not unusual for there to be reassessment exercises when guidance or other systems are found to be wrong, and DWP does not routinely make special payments under those circumstances. The noble Baroness may not welcome it, but I am very grateful that carers’ organisations have really welcomed the fact that we have taken the trouble to work out through an independent review precisely what went wrong and are putting it right. I am delighted that we are able to do it, and I look forward to our being able to right those wrongs.

[Lord Laming (CB)]

My Lords, I hope I am right in thinking that the whole House is in support of what the Minister is trying to achieve, so well done. Can she extend this just a little further and help carers feel that they are recognised and listened to? Some of the points that I receive are of course about the financial arrangements, but more than that, many carers continue to feel aggrieved that their work and their worth are not recognised and valued.

[Baroness Sherlock (Lab)]

I am grateful to the noble Lord, who makes a really important point. One of the good things about the Sayce review is that it involved carers directly and listened to them, and by listening to them was able to get to the bottom of what had gone wrong. My colleague Minister Timms, who is the Minister in charge of this, has carefully gone out to meet carers and is going to do so again. I know that he will want to hear not just what went wrong here but how people’s lives are impacted by the care that they give. How do the Government make their lives easier or harder, and how can we learn from that?

Finally, since the noble Lord prompts me to do the right thing always, I say once again that the whole House will want to join me in thanking carers for the service they give to those they love. Many in this House will have experience of either giving or receiving care, possibly both. It is an act of love and it is the Government’s job to support it and not get in the way, and we pledge to try to do that.

Carer’s Allowance: Overpayments Review

Baroness Sherlock Excerpts

Tuesday 18th November 2025 Lords Chamber

[Baroness Pitkeathley]

To ask His Majesty’s Government when they plan to publish the final report of the Independent Review into Carer’s Allowance overpayments.

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

My Lords, the Government would like to thank Liz Sayce for the work and insights that went into the independent review of earnings-related overpayments of carer’s allowance. We are carefully considering the findings of the review and will publish the report and our response by the end of this year. We have already taken steps to improve carer’s allowance, including implementing the highest-ever increase to the earnings limit.

[Baroness Pitkeathley (Lab)]

I thank my noble friend for that response. I trust that I can feel hopeful about it and that, when the government response comes, it will be both positive and compassionate. I hope she will agree that the most important thing we have to avoid in future is prosecution of carers and the great distress caused to them by inadvertently going over the earnings limit when claiming carer’s allowance. The Government have pledged to increase the earnings limit and to keep it pegged to the national living wage. Can my noble friend confirm that this will happen from next year?

[Baroness Sherlock (Lab)]

My Lords, I am grateful for my noble friend’s patience; I am afraid that I must ask her to be patient for just a little longer. On the important question of earnings-related overpayments, we are very conscious that some carers found this extremely difficult—hence the need for the report. As I said, we have committed to keeping the weekly carer’s allowance earnings limit pegged to 16 hours of work a week at the national living wage level. That meant that, last April, there was a record jump in the earnings limit from £151 a week to £196 a week. We will announce the new earnings limit from next April in the next few weeks. I hope the House appreciates how difficult this has been but also that we are determined to get to the bottom of it. Carer’s allowance is an unusual benefit: if you earn £1 below the threshold, you get the lot; if you earn £1 over it, you get nothing. It has taken quite some work, but we hope the report will be out very soon.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for that reassurance, and we will of course wait for the independent review. In the meantime, what steps are the Government taking to ensure that carers are not unfairly penalised for minor or unintentional breaches of earnings rules? Will they consider writing off historical overpayments where department error is a significant factor?

[Baroness Sherlock (Lab)]

My Lords, I am afraid the noble Lord will also have to be patient for just a little longer to hear what the Government will do in response to this. It was a very detailed report of over 100 pages, with lots of detailed recommendations; we have been through it in an equally detailed manner and will publish a proper response very shortly. In the meantime, the Government have done a number of things to make a difference. For example, we have already improved guidance to help staff make judgments about the way they treat overpayments in earnings. The crucial thing, which my noble friend just asked about, is that increasing the earnings limit by so much will mean that a lot of people will not be caught by this issue at all and, by the end of this decade, another 60,000 people will be able to claim carer’s allowance. We have already taken significant steps to improve things and will do more in the months ahead, but for the details I am afraid he must wait for the response to the report.

[Lord Young of Cookham (Con)]

My Lords, further to the reply the Minister gave a few moments ago, why does the carer’s allowance, unlike other benefits, have a so-called cliff edge, where if you earn £1 over you lose all the allowance? Surely there should be a taper, as with other benefits, to avoid some of the problems which the noble Baroness, Lady Pitkeathley, has raised.

[Baroness Sherlock (Lab)]

The issue is long-standing. The real difference is that carer’s allowance, unlike universal credit, for example, is not actually means-tested. It is a benefit which is there to recognise that somebody may not be able to work, or not as much, because they are caring. The requirements are that you must be providing care for 35 hours a week to someone in receipt of a relevant DWP benefit. You must also not be in gainful employment, which we class as being 16 hours a week at the national living wage, and you must not be a full-time student. It is an individual benefit. For example, a woman in a household with no independent income of her own but with income in the household can still claim carer’s allowance.

Having said all of that, we would like to look at the way this works. Unlike universal credit, which was built with a taper in mind and automatic earnings from HMRC, carer’s allowance had none of that, either in the systems, the IT or anything else. Therefore, we have begun to look at other ways to automate certain kinds of earnings coming over from HMRC and what it would take to do a taper, but I do not want to raise expectations too quickly. This is a significant piece of work to modernise the system, which will take some years—but we are looking at it.

[Lord Laming (CB)]

My Lords, in the preparation of this report, could the opportunity be taken to pay a very warm and well-deserved tribute to carers for what they do? As a society, we should always indicate how indebted we are to the people who care for other people with very special needs.

--- Later in debate ---

[Baroness Sherlock (Lab)]

I am so grateful to the noble Lord—trust him to say the thing I should have said right at the outset, but I am very grateful to him for raising it. With all of his experience, he has seen this close-up. As he knows, anyone who has worked in professional social care knows just how much we all depend on the tier of unpaid carers who make all of this possible. I am told that 20 November is Carers Rights Day, so I take this opportunity to pay tribute to all of the unpaid carers who work so hard, day in, day out, to look after not only themselves but the people they care for. The whole of society depends on them. I thank the noble Lord for that very helpful nudge, and I am very pleased to pay tribute to them.

[Lord Sahota (Lab)]

My Lords, since the Government halted the recruitment of overseas care workers in July 2025, around 40,000 visa holders who came here in good faith to work in the care sector remain unemployed. What specific steps are the Government taking to support them and to ensure they are able to find suitable jobs in the care industry?

[Baroness Sherlock (Lab)]

My Lords, the care route admitted more than 150,000 workers in three years. There have been changes to the Immigration Rules, but that will not prevent those who want to from building a career in the sector, because there is a transition period until July 2028, which allows, for example, in-country applications from people who came in by other visa routes. This means that care providers could recruit graduates, for example, or people who come in other ways.

My noble friend is absolutely right that, on 1 July, we laid changes to the Immigration Rules, which included closing the social care visa route to overseas recruitment. That said, there remain significant numbers of international care workers who are looking for work in the UK who have not had the chance to support the system as they wanted. New measures have already come into effect which require care providers in England to prioritise recruiting international care workers who are already in the UK and require new employment.

More generally, DWP is doing a lot to try and encourage people into social care. We are working with adult social care bodies in developing recruitment events for the sector to encourage people into it. We want people who are committed professionals and who want to work in the sector, and we will do what we can to encourage them.

[Viscount Younger of Leckie (Con)]

My Lords, it is a pretty sobering statistic that 150,000 children provide more than 50 hours of care a week. What is being done in schools to understand who these pupils are and to give them the optimum support as they undertake their studies?

[Baroness Sherlock (Lab)]

The noble Viscount raises a very important point. Certainly, I have met with organisations over the years that work with young carers. Schools are becoming increasingly aware of these pressures. Good schools with good pastoral care systems are identifying them and making sure both that these young carers get the support they need and that they themselves are aware of broader issues in the home of which other authorities might need to know. The noble Viscount will know that this does not stop at 18, and there are issues for young adult carers who want to carry on and complete their studies. Fortunately, if somebody is doing less than 21 hours a week of supervised study, they can still claim carer’s allowance, but we are looking at how we can best identify and support young carers to enable them to combine their study with their caring. We want to make sure that their childhood is not ruined and that young adults have a chance to make a life for themselves as well as caring for those whom they love.

[Baroness Lister of Burtersett (Lab)]

My Lords, the level of carer’s allowance, understandably, was not part of the terms of reference of the review, but its very low level, relative to other similar benefits, contributes to the disproportionate risk of poverty faced by carers. Is this something that the Government might look at in the future?

[Baroness Sherlock (Lab)]

I will say to my noble friend that one of the differences, as I began to explain to the noble Lord, Lord Young of Cookham, is that carer’s allowance is not a means-tested benefit. If someone is on a low income and is doing some caring, they can also apply for a means-tested benefit, such as universal credit or, if they are older, pension credit. Although they cannot usually get both of those benefits, if they do get one of those benefits, they can get an extra £2,400 a year in universal credit or pension credit to acknowledge that caring. Having said that, the Government are determined to make sure that this maintains its value and is increased by CPI every year, and new rates for 2026 will be announced in the next few weeks. The Government are spending a record £4.5 billion this year on supporting a million carers through carer’s allowance.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, as the noble Lord, Lord Laming, reminded us, unpaid carers do a challenging, varied and extremely difficult job, but they do it invisibly. What are the Government doing to ensure that the visibility of unpaid carers is heightened, and that, whether they are in DWP or the health and care services, those providing complex support to this invisible and important population are seen and are supported?

[Baroness Sherlock (Lab)]

The noble Baroness raises a very important question; I am not surprised, given her charity work, that she is aware of this and the role of carers. Let me mention a couple of quick things. What DWP and other parts of government do is support those events which highlight them. For example, as I am sure she knows, Carers Week was back in June and Carers Rights Day is on Thursday, and the departments have been involved in those, trying to highlight the importance of this and engage with people. For example, tomorrow night Carers UK is holding a reception, and I know that my right honourable friend Sir Stephen Timms, who is a Minister in my department, and Minister Kate Dearden from DBT, are both going to that reception to mark it. The noble Baroness raises a really important point. Hopefully, even our having this conversation will help to raise awareness of that.

Jobs Market

Baroness Sherlock Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Hunt of Wirral]

To ask His Majesty’s Government what assessment they have made of the jobs market, and of the implications for the wider economy.

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

My Lords, despite Tuesday’s unemployment figures, there is positive information on the labour market. However, the latest figures show why we are right to focus on supporting people into work with our Get Britain Working plan, which includes modernisation of jobcentres, tackling economic inactivity due to ill health and delivering our youth guarantee.

[Lord Hunt of Wirral (Con)]

My Lords, there are now nearly 2 million unemployed people on this Government’s watch and the number is rising month by month since the introduction of the penal national insurance job tax and now the threat of first-day unfair dismissal rights under the Employment Rights Bill. Will the Minister listen to business, listen to the Resolution Foundation, listen to Tony Blair and listen to this House when it debates this issue on Monday? Will she undertake to persuade her colleagues that this Budget must have measures that inspire business to give people the dignity of work? Otherwise, the message will be what I said in my maiden speech 50 years ago: “Labour isn’t working”. It was not working then, and it is not working now.

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[Baroness Sherlock (Lab)]

My Lords, I regret that I was not here to hear the noble Lord’s maiden speech 50 years ago, but it is interesting that his message has not changed in the intervening years. Let me give him a few thoughts. First, he should look at what is happening underneath the employment figures and around the world. Let me point a few things out to him. Over the last year, more than 329,000 people have moved into work. In the first half of this year, the UK was the fastest-growing economy in the G7. We have the third-highest employment rate in the G7—it is above the G7 average. Over the most recent quarter, the number of people claiming unemployment benefits fell by 35,000. Those people in work are doing well. Let me give the noble Lord one final stat: since July 2024, real wages have risen more than they did in the first 10 years of the previous Government. I celebrate that.

[Lord St John of Bletso (CB)]

My Lords, can the Minister outline what assessment has been made of the dual impact of artificial intelligence on the UK job market, in both the potential for job displacement in some sectors and the creation of new roles? What is the Government’s strategy to manage this transition and equip the British workforce with the skills to drive the new AI economy?

[Baroness Sherlock (Lab)]

This is a really great question that is obsessing most government departments and most employers, as the noble Lord will know. I think the impact depends on the sector and on the individual job, but the evidence is quite clear, which is that, across the piece, it is better for businesses to embrace AI than not to. The biggest risk to our country is in not embracing artificial intelligence—if we do not take the opportunities it offers.

The World Economic Forum has forecast that AI will create 170 million new jobs globally over the next five years and displace 90 million. We will find that there are jobs out there, but they will be different. In our country, we have to make sure that we get those good jobs in the UK. What we are doing as a Government is analysing that very carefully and supporting businesses and individuals to make sure they have the skills they need to move on to the next area. We have reformed skills; we are bringing skills into DWP for many young people; we have a brand-new skills academy; we are looking at developing apprenticeships and we are focusing on supporting education to give young people the skills they need. There will be jobs there in the future; we just want to make sure our people get them.

[Lord Palmer of Childs Hill (LD)]

My Lords, I thank the Minister for her statistics, but the latest ONS figures show unemployment has risen from 4.8% to 5%—the highest level for four years. On that basis, can the Minister share concern that the UK’s sluggish productivity growth and skills shortages are still holding back economic recovery? What further measures are being considered to invest in adult skills and retraining? We will keep coming back to this. I thank the Minister for what she has said, but I would like a bit more information.

[Baroness Sherlock (Lab)]

On the unemployment figures, different things are going on under the surface if one digs down into the figures, which I am sure the noble Lord has done. For example, he may be aware that two things are going on. On the quarter increases and on the unemployment level, a chunk of that is driven by young people aged 16 to 24, including those in full-time education. Crucially, falling inactivity has contributed to increase in unemployment. We are tackling people who are economically inactive, but as people return to the labour market, they move from the figures of economic inactivity into the figures for unemployment. One thing that has happened is that the significant rise in economic inactivity down to ill health has been flattened, and that is really significant.

I would love to talk to the noble Lord at a greater length about skills. As he now knows, I have the great joy that my noble friend Lady Smith, who is now a Minister not only in DfE but in DWP, because she is the Minister for Skills, is joining up the two departments.

[The Lord Privy Seal (Baroness Smith of Basildon) (Lab)]

The other one.

[Baroness Sherlock (Lab)]

Yes, I was going to say the less important one, but I will get in trouble any which way I do this.

We are joining up with DfE to invest heavily in skills. We have new qualifications and new apprenticeships coming online and investment in skills strategies. A huge amount is going on—more than I can say at the Dispatch Box—but I would love to talk to the noble Lord more about this.

[Lord Woodley (Lab)]

My Lords, the Government have given notice that they will stop the employee car ownership scheme, ECOS, in the British car industry. That will reduce production by at least 80,000 units and cost 5,000 jobs. Does the Minister agree that it is time to re-evaluate this proposal?

[Baroness Sherlock (Lab)]

My Lords, I do not often say it, but I know absolutely nothing about that, so I will take it back to my department and somebody will write to the noble Lord.

[Lord Bailey of Paddington (Con)]

My Lords, 111,000 fewer young people are employed than at the beginning of the year. With the rise in NI and the rise in minimum wage, many employers say that they cannot afford to employ young people. What work are the Government doing to make sure that our young people have a future in employment and not on welfare?

[Baroness Sherlock (Lab)]

I am grateful for that question; I know that it is something that the noble Lord cares very much about. We are doing a lot for young people. This is what is so exciting about what is happening. We have a youth guarantee, but my boss as Secretary of State has also made it clear that if an eligible young person has been on universal credit for 18 months, we will create a guaranteed job for them to support them in getting back into a job and transitioning into work. We need to move to a point where every young person out there is either earning, learning or preparing themselves to do one or the other. I am particularly worried about the growing number of young people who are not in education, employment or training, particularly on health grounds or because for some reason they are outside the labour market altogether. The noble Lord may have heard that my Secretary of State has asked Alan Milburn to look specifically at an inquiry to find out what is going on with those young people. We are already doing huge amounts in this area, but we need to address work specifically on that. I am looking forward to finding out what he has to say.

[Lord Tyrie (Non-Afl)]

Has the Secretary of State commissioned an internal report on the effect of the national insurance change on unemployment, and have they passed that information to the Treasury?

[Baroness Sherlock (Lab)]

My Lords, the Government did an impact assessment at the time and acknowledged that there might be an impact on labour supply when they made changes to the national insurance regime. Obviously, what happens in the new Budget I know nothing about and it will come forward. What we have done is work very closely with employers. We know that employers are out there and want to take on people, and they want to support particularly people who are not in the labour market. Our job is to help them in doing that, and we are determined to do so.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I bring to the House my registered interest—I chair the Nuclear Industry Association. We had the recent announcement of the SMR, the small modular reactor, the Rolls-Royce build, going to Wylfa in Wales. Will the Minister join me in welcoming those highly skilled, well-paid and very often trade-unionised jobs being brought to the shores of the UK?

[Baroness Sherlock (Lab)]

I am delighted to welcome that. It was a really exciting announcement, and the Government are committed to investing in new high-quality, highly skilled jobs. We want to be a country that brings inward investment in, trains people up, gets them into good jobs and keeps them there. That is a good example.

[Baroness Stedman-Scott (Con)]

My Lords, we are losing around 5,000 people a day from the labour market on to benefits. What is the department’s latest projection for the number of people expected to flow on to out-of-work and health-related benefits over the next 12 to 24 months? What are the main drivers behind that projection? Will the Government publish the underlying assumptions of the quarterly progress data so that your Lordships can track whether the interventions that the noble Baroness refers to are working?

[Baroness Sherlock (Lab)]

My Lords, we have made clear what our ambitions are with Get Britain Working and that we will have metrics and publish regular data on them. One thing I want to take the opportunity to say at the Dispatch Box is that I have seen headlines this week suggesting that large numbers of people are flowing on to universal credit, as though this was a reason they were flowing out of work. I know the noble Baroness knows this and she is far too smart to raise it at the Dispatch Box, but I remind the House that the key reason for that is that the previous Government decided to close the legacy benefits and move anyone on to universal credit. For example, 800,000 people have left old benefits and made a claim to universal credit. I would encourage noble Lords, if they see those kinds of headlines, to think twice.

Public Authorities (Fraud, Error and Recovery) Bill

Baroness Sherlock Excerpts

Consideration of Commons amendments and / or reasons
Tuesday 11th November 2025 Lords Chamber

[Baroness Anderson of Stoke-on-Trent (Lab)]

My Lords, I have already spoken to Motion B. I beg to move.

Motion B agreed.

Motion C

[Baroness Sherlock]

Moved by

That this House do not insist on its Amendment 43, to which the Commons have disagreed for their Reason 43A.

43A: Because it is not appropriate to make further provision about reviews relating to eligibility verification measures.

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

My Lords, I will also speak to Motions E and F, with the leave of the House. I thank the noble Lord, Lord Vaux, for his continued constructive engagement on these issues. I hope that today we will reach a resolution with the amendments in lieu and assurances that I provide.

I start with Motion E and Lords Amendment 84 on the treatment of information obtained using an eligibility verification notice, or EVN. As drafted, this amendment carries three key risks: first, it risks DWP not being able to use EVM information properly, even in those cases where it might be a strong indicator of potential fraud; secondly, it risks legislating for a person’s state of mind; and thirdly, it risks undermining the existing public law principle that staff at DWP take decisions on behalf of the Secretary of State. Government Amendments 84A and 84B in lieu are therefore presented as a substitute. These amendments address those risks, build on the amendments I tabled on Report and reflect the Government’s stated policy intent throughout; namely, that EVM information considered in isolation cannot constitute reasonable grounds for suspicion or indicate wrongdoing.

These amendments focus on the actions which DWP staff must take following receipt of EVM information and clarify that where DWP has received it, staff must also have regard to all other relevant information held before taking further action. This approach would, first, require an authorised officer to consider all information held which is relevant to the question of whether to issue an information notice under new Section 109BZA of the Social Security Administration Act 1992, as well as the relevant EVM information. As a reminder, an information notice under that new section can be issued only where the authorised officer has reasonable grounds to suspect that a person has committed or intends to commit fraud, and the authorised officer considers the notice necessary and proportionate for the purposes of investigating that suspicion. The amendments in lieu make it clear that where EVM information is relevant to those considerations, the authorised officer must also consider non-EVM information that is relevant to the question of whether to issue the notice.

Secondly, it requires that before a DWP staff member can suspend benefit payments, they must consider all information held which is relevant to the question of whether to do so, as well as the relevant EVM information. Finally, it requires that before a DWP staff member can make a change to an earlier benefit decision, they must consider all information held which is relevant to the question of whether to change that earlier benefit decision, as well as the relevant EVM information.

DWP will always hold at least some further information on benefit claims, such as the presence or absence of relevant capital disregards, claimants’ declarations about capital or known vulnerabilities. This amendment provides the necessary assurance that DWP staff will consider this context carefully before taking further action. I think this reflects the intent of the original amendment from the noble Lord, Lord Vaux, as well as the Government’s stated policy intent. I am grateful for his engagement on this matter and hope that these government amendments in lieu offer the necessary reassurance.

I turn to Motion C and Lords Amendment 43 on the requirements of the independent reviewer. The noble Lord, Lord Vaux, knows that I cannot accept his amendment; I shall go through each part to explain why. Officials in my department have discussed its proposed paragraph (d) with the finance industry, which agrees that it may place a significant burden on financial institutions if they are asked to report on costs every year. However, I have put it on record before, and reassure the House again today, that the Government are committed to keeping costs associated with this measure proportionate.

I can assure the House that we will continue working closely with businesses as we implement these measures to ensure it is done in the most efficient and effective way. I have also previously committed to publishing a further, updated impact assessment within 12 months of Royal Assent, taking into account the ongoing work with industry through our test-and-learn period. I am happy to reaffirm that commitment to the House today.

As for proposed paragraph (e), there is no reason for individuals to lose access to banking services solely because of information shared under EVM. We have been clear that this information does not imply any wrongdoing, and we have worked closely with the finance industry to provide clarity in the draft code of practice to prevent any such problems. The role of the independent EVM reviewer is not to review every process which DWP carries out; rather, it is to review the exercise and effectiveness of that specific data-gathering power and to consider the Government’s compliance with the legislation.

I have stressed often before that DWP has strong support in place for vulnerable people. For example, all DWP front-line operational colleagues are trained to help identify and support our most vulnerable customers. This includes mental health training and the ability to provide reasonable adjustments.

Amendments 84A and 84B reaffirm that further decisions will not be taken without considering all relevant information, in addition to EVM information. This would of course include any available information on vulnerabilities.

Government amendments made on Report also introduced a specific requirement that the Secretary of State be satisfied that it is necessary and proportionate to issue an EVM, and clarified that the purpose for which an eligibility notice can be issued is to assist in identifying incorrect payments. As such, the independent reviewer can assess the Government’s actions against these requirements as part of their consideration of compliance with the legislation. We will work closely with the independent reviewer, especially in the test and learn phase, to identify any issues quickly and take steps to prevent or mitigate them.

Turning to subsection (f), Government amendments tabled on Report address this point. They require the Secretary of State to provide the independent EVM reviewer with all reasonably required material. I hope that this duty, alongside the Government’s commitment to work constructively with the reviewer, is sufficient.

My noble friend Lady Anderson made a commitment that Members will have an opportunity to meet with the PSFA’s independent reviewer. Today, I offer the House a parallel commitment that there will be opportunities for Members of this House to meet with the EVM independent reviewer, once they are appointed, and share their views with them.

I turn to Motion F, and Amendment 97 from the noble Lord, Lord Vaux, which concerns DWP-authorised investigators’ use of reasonable force. As I have made clear to the House, the powers of search and seizure, including warrant applications and production orders, are drawn from the Police and Criminal Evidence Act 1984. This also includes the power of reasonable force, as set out in Section 117 of PACE. These powers will be used by expert DWP staff, trained to industry standards, to tackle only serious and organised crime against DWP.

As I outlined on Report, I am not able to accept Lords Amendment 97 as drafted, although our stated policy intent is that DWP-authorised investigators would not use reasonable force against a person. The reason I cannot accept the amendment is that we cannot break down Section 117 of PACE to make the distinction between property and persons, and there is no precedent for specifying in PACE where or on what reasonable force may be applied. The Government’s preferred approach is for DWP to take powers of reasonable force from PACE, following precedents from other government departments.

However, I have listened to the concerns expressed in the House and looked for another way to reflect the stated policy intent in the Bill. The Government have therefore introduced, as amendments in lieu, Amendments 97A, 97B and 97C to Clause 76, and Amendments 97D, 97E and 97F to Schedule 4. These reflect our stated policy intent and draw a distinction between the power of reasonable force, exercisable by DWP-authorised investigators, and police officers or others with constable powers. These amendments remove the power of reasonable force that was derived from Section 117 of PACE and instead create a stand-alone provision on reasonable force in this Bill. This provision restricts DWP-authorised investigators’ use of reasonable force to force against property only, while retaining the police’s power to use reasonable force where necessary against people and property. This delivers our stated policy intent but brings DWP’s power of reasonable force outside of PACE. I believe this reflects the intent behind Lords Amendment 97, and I hope that the noble Lord, Lord Vaux, will welcome it.

However, this is a bespoke approach, and it is important that we maintain the same safeguards when DWP-authorised investigators exercise reasonable force. My department is working closely with the Home Office on this. To ensure that DWP-authorised investigators will still operate in the same way as others with powers of reasonable force under PACE, we will maintain compliance with PACE Code B, which governs the exercise of powers of entry, search and seizure.

The Home Office has confirmed that, when parliamentary time allows, secondary legislation will be brought forward to ensure that the stand-alone provision in the Bill will be subject to PACE Code B. My department has also worked swiftly to secure assurances that inspection of the use of this stand-alone provision will be provided by HMICFRS and the IOPC. The other relevant powers of entry, search and seizure, beyond reasonable force, will still be drawn down from PACE, and are subject to the safeguards and operational standards I have outlined over the passage of the Bill.

A different approach has been adopted for the provisions in Schedule 4 which apply to Scotland. These broadly replicate PACE search and seizure provisions to achieve parity but make some small, necessary adaptations for Scots law. Therefore, Amendments 97D to 97F make equivalent changes to powers of reasonable force in Scotland.

I hope this reassures noble Lords and puts this question about the use of reasonable force beyond doubt, as DWP-authorised investigators now cannot use reasonable force against people. I hope that the House will support this Motion. I beg to move.

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[Baroness Finn (Con)]

My Lords, as we come to this final group of government amendments on the DWP section of the Bill, I begin by recognising the real progress that has been made on the DWP use of PACE powers and eligibility verification provisions—progress that has been driven by this House’s detailed scrutiny and the persistence of Members from all sides, not least the noble Lords, Lord Vaux of Harrowden and Lord Verdirame, and the noble Baroness, Lady Fox of Buckley. Throughout, we on these Benches have sought to ensure that the Bill strikes the right balance—strong on fraud prevention but fair, proportionate and mindful of its impact on vulnerable people. We therefore welcome the Government’s concessions in several areas, which have come about as a result of the sustained pressure applied by this House.

Amendment 43 concerns the eligibility verification mechanism. Our overriding concern has been the impact on vulnerable individuals and those at risk of financial exclusion. The system must not lead to people being debanked, subject to excessive deductions or left unable to access essential services. We are pleased that the Government have now committed to an assurance that Parliament will be able to engage with the independent reviewer after Royal Assent to explore these issues, and that the concerns that we have raised here and in the other place will be formally shared with the reviewer.

I am grateful that the Minister in the other place claimed the may/must change as a government initiative—imitation, after all, is the sincerest form of flattery—but it was in fact first proposed from these Conservative Benches. That is another example of the constructive scrutiny that has improved the Bill, and I am sure that the Minister will be keen to correct this on the record.

We welcome the Government’s concession in Amendments 84A and 84B. These make it clear that human decision-makers must have regard to all relevant information and ensure that human judgment remains embedded in the process. This protects against the risks of mechanistic or AI-driven decision-making, not only now but into the future as these technologies evolve and become more widespread. This is a sensible safeguard and a direct result of arguments advanced in your Lordships’ House.

Regarding PACE powers, I am pleased that the Government have finally accepted that DWP investigators should not be able to use reasonable force against individuals. This corrects a serious drafting flaw in the text of the Bill and aligns its provisions with the Government’s stated policy. It makes the law safer, clearer and more coherent. I really thank the Minister for her valiant efforts in this area. However, it is surprising, especially given that it protects the integrity of the Government’s stated policy, that it should have required so much persuasion from your Lordships’ House for the Government to get to this position.

As a result of the changes made to the Bill in this House, the Public Sector Fraud Authority and the DWP will be better equipped to act against frauds while operating within a framework of stronger safeguards. Because of efforts on these Benches and others, the PSFA will be proactive but also more accountable and transparent. As a result of the work of the noble Lord, Lord Vaux, and other noble Lords, vulnerable people will be better protected and represented in the independent review, and the use of artificial intelligence will be subject to clearer human oversight. Fundamentally, the use of PACE powers will be strictly limited to property, not people.

Having said all that, there are still gaps in the Bill. The Government have yet to engage seriously with the growing problem of sickfluencers, online figures who use their platforms to encourage and advise people to make fraudulent benefits claims. Unless the Government begin to analyse and address this issue, they risk falling behind and missing the opportunity to tackle a significant driver of future fraud risk. We welcome the progress achieved, but we will continue to raise the issues we have championed during the passage of this Bill and keep a watchful eye on how its provisions are enacted. The Bill now better reflects the need to protect the public purse from fraud and the duty to safeguard the public. It leaves your Lordships’ House in a far better place than when it arrived and demonstrates once again, as the noble Lord, Lord Vaux, has said, the constructive and vital work of this House.

[Baroness Sherlock (Lab)]

My Lords, I thank all the noble Lords who have spoken in this debate. I am grateful that all noble Lords who have contributed have conceded that we have reached a point where we are all now content to move forward with this important Bill.

On the specifics, the noble Lord, Lord Vaux, asked whether we would move forward without any other information. DWP will always hold some other information on benefit claims, but it is crucial that appropriate weight can be given to EVM information if necessary. That is the reason we took the approach we did in the new amendment, because it makes clear that, where EVM information is relevant to a question, DWP must also consider non-EVM information that is also relevant. That other information could take different forms; it could be about the presence or absence for disregard or other information, as I went through. I hope that helps.

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Moved by

[Baroness Sherlock]

That this House do agree with the Commons in their Amendment 75A.

75A: Line 36, at end insert—
“(4) In this paragraph, “authorised officer” includes “authorised investigator”.”

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 84 and do agree with the Commons in their Amendments 84A and 84B in lieu.

84A: Schedule 3, page 80, line 26, at end insert—
“(2) Sub-paragraph (3) applies where—
(a) an authorised officer is considering whether to give an information notice under section 109BZA in relation to a person, and
(b) the Secretary of State has been given EVM information that is relevant to the question whether to give the information notice.
(3) The authorised officer must have regard to all information that the Secretary of State has that is relevant to the question whether to give the information notice, including information that is not EVM information.
(4) Sub-paragraph (5) applies where—
(a) the Secretary of State is considering whether to suspend payments of a benefit to a person in accordance with regulations under section 21 or 22 of the Social Security Act 1998, and
(b) the Secretary of State has been given EVM information that is relevant to the question whether to suspend the payments.
(5) The Secretary of State must have regard to all information that the Secretary of State has that is relevant to the question whether to suspend the payments, including information that is not EVM information.
(6) Sub-paragraph (7) applies where—
(a) the Secretary of State is considering whether a decision taken under section 8, 9 or 10 of the Social Security Act 1998 in relation to a person (“the earlier decision”) should be revised or superseded, and
(b) the Secretary of State has been given EVM information that is relevant to the question whether the earlier decision should be revised or superseded.
(7) The Secretary of State must have regard to all information that the Secretary of State has that is relevant to the question whether the earlier decision should be revised or superseded, including information that is not EVM information.”

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Moved by

[Baroness Sherlock]

That this House do not insist on its Amendment 97 and do agree with the Commons in their Amendments 97A, 97B, 97C, 97D, 97E and 97F in lieu.

97A: Clause 76, page 45, line 4, after “investigators” insert “, including”