Housing Benefit (Abolition of Social Sector Size Criteria)

Brian H. Donohoe Excerpts

Wednesday 17th December 2014 Commons Chamber

[Rachel Reeves]

Well, my own council has received less money from the Government this year compared with last year, so some people who received DHP last year will not receive it this year. Leeds city council says that there have been more applications for DHP this year. My understanding is that the overspend last year was £3 million, so people are applying for DHP but are just not getting it.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

One of the most ridiculous things about the tax is the fact that local authorities and local housing authorities were told that they had to build houses with two bedrooms. There are no one-bedroom houses in my constituency for rent, so how can people move in those circumstances?

[Rachel Reeves]

I have similar issues in my constituency, where there are 26 blocks of high-rise flats that are almost all two-bedroom flats. The council tries not to house families in that accommodation, and tries to put single people in there, because there is a feeling that a high-rise flat is not always the most appropriate place for a family to live. Many single people who have been put in two-bedroom flats in high-rise buildings have been forced to pay the bedroom tax through no fault of their own.

Pension Schemes Bill

Brian H. Donohoe Excerpts

Tuesday 25th November 2014 Commons Chamber

On Government amendments 7 to 13, trustees and managers of schemes providing collective benefits need to have a policy on calculating cash equivalents, which should cover all circumstances where a cash equivalent might be required. Amendments 7 to 12 simply ensure that the policy deals with calculation of cash equivalents for the purpose of pension sharing on divorce and transfer of pension credit benefits arising from a pension share, as well as revising a cross-reference to the Pension Schemes Act 1993. The amendments also include a power to add, through regulations, further circumstances where a cash equivalent might be required. Amendment 13 allows regulations to set out matters to be taken into account, or principles to be followed in formulating that policy.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I am beginning to see why my hon. Friend the Member for Edmonton (Mr Love) raised the question of the number of amendments and what they entail. I worry about how that will be interpreted by whoever happens to be a trustee of a pension fund. It will cost an inordinate amount of money, will it not?

[Steve Webb]

I am not sure that I follow the hon. Gentleman’s reasoning. The thing that would cost money would be poorly drafted, ambiguous legislation. What we are doing at the moment is listening and talking to people as the Bill goes through the House. We talk a lot to trustees, pensioners’ lawyers and pensions professionals, as well as to representative bodies of scheme members and so on, to ensure that we pick these things up in real time. I think the hon. Gentleman can take heart from the fact that, rather than stubbornly insisting that the first version of the Bill we published was immaculate, we are saying that we are creating new categories of pension scheme. There have to be rules on wind-ups, divorce and so on. Let us get them right now by further amendment, rather than by stubbornly insisting on our Bill and later discovering that we have a problem. I hope he will be reassured that that is what we are doing this afternoon.

Amendment 22 ensures that trustees or managers of schemes providing collective benefits can be required to seek actuarial advice before making any specified decisions or taking any other specified steps.

Government new clauses 4, 5 and 6, and amendments 14 to 21, all relate to the issue of winding-up schemes with collective benefits. This group of amendments is the result of continuing development of policy on creating the right legal framework for collective benefits. Winding up a pension scheme can be a difficult and complex process, and we need to ensure we have the necessary legislative framework in place. Collective benefits are different, so we need broad regulation-making powers to allow us to work with the pensions industry and others to get the detail right and to respond to developments.

This group of amendments covers: new clause 4, which provides for regulations to set out circumstances where a scheme, or part of a scheme, providing collective benefits must be wound up; and new clause 5, which requires trustees or managers to have and follow a policy about winding up a scheme that provides collective benefits. New clause 6, which is also part of this group, provides a power to make regulations setting out how to work out which assets are available for which benefits. This is not specific to winding up, as it may be used for other purposes as well. There are also a number of amendments that will ensure we can make regulations to ensure schemes providing collective benefits wind up effectively.

Amendments 14 to 17 provide for additional powers to enable regulations to make provision about the winding up of a pension scheme containing collective benefits and to make it clear how collective benefits will be treated when a scheme winds up. Amendments 18 and 19 ensure we can amend existing legislation that might need to change to cater for winding-up schemes providing collective benefits. Amendments 20 and 21 remove the limitation that changes to existing legislation relating to wind-up are only in relation to collective benefits.

Amendment 2 provides for regulations to specify additional requirements which must be met in order for a scheme to fall within the defined benefits scheme definition. Part 1 of the Bill contains provisions for three mutually exclusive categories of pension scheme, as I have mentioned. Government amendment 2 provides for regulations to specify additional requirements which must be met in order for a scheme to fall within the defined benefits scheme definition. It is appropriate for this to be dealt with by regulations and in consultation with the industry rather than on the face of the Bill, because this is about being able to respond to future scheme design and a theoretical risk. The regulations enable additional clarification to ensure policy intent is delivered in respect of future scheme design.

Amendment 2 has been made in response to discussions with industry and testing of the definitions, specifically in relation to theoretical and potential avoidance risks in new scheme designs, which would undermine the delivery of the policy intent for part 1. For example, we would not want a scheme that shared investment risk with the member to be categorised as a defined benefits scheme. Therefore, this regulation-making power provides that regulations can ensure that, as we intended, only schemes that provide members with certainty throughout the accumulation phase about the level of retirement income to be provided will fall within the defined benefits scheme definition.

We are confident that all existing scheme shapes we know about are covered by the definition of a defined benefits scheme in the Bill as it stands, but this does not preclude the possibility that a scheme might be designed in the future satisfying the requirements but also including an element of risk that could be passed on to members. We would not want such a scheme to be included in the defined benefits category. The power is therefore intended as a belt and braces measure to ensure that the policy intent behind the categorisation is not undermined. This is only about which category schemes will fall into; it is not to disallow or prevent forms of scheme design and has no effect on scheme funding commitments or member rights within a given scheme design.

Continuing my canter through this group, amendment 3 addresses the meaning of

“at a time before the benefit comes into payment”,

where a defined contributions scheme might find itself mis-categorised as a shared risk scheme. Clause 5 explains what is meant by the term “pensions promise”, including that it must be made at a time before the benefit comes into payment. Amendment 3, which amends clause 5, is in response to a point raised by the Chair of the Work and Pensions Committee, the hon. Member for Aberdeen South (Dame Anne Begg), when referring on Second Reading to a document from the Law Society of Scotland. The query was about the precise meaning of references to “at a time” and the intended application and effect. Amendment 3 addresses that point by excluding certain promises from the definition of pensions promise—if they are made at a particular point in time and conditional on coming into payment by a particular date—and enables the Secretary of State to make regulations on this matter.

We want to capture promises made in relation to income or saving while the member is saving—that is broadly what clause 5 already does—but the amendment caters for defined contributions schemes that also provide an income stream in retirement. Technically, such schemes will need to discuss and make a commitment to the member about that retirement income before the first payment is made. The schemes will usually only make the promise in relation to income that may be derived from the final pot and only in the immediate run-up to the retirement date. This means, in effect, that it provides no more certainty to the member than other defined contributions schemes and so should fall within the defined contributions scheme definition. However, the phrase

“at a time before the benefit comes into payment”,

in the meaning of “pensions promise”, might mean that it would be defined as a shared risk scheme. The amendment and the regulation-making power therefore make an exception in relation to this type of promise and ensure that this type of scheme falls within the defined contributions scheme definition.

We are on the home straight, Madam Deputy Speaker. Clause 49 makes amendments to bring the Bill within the scope of existing references to “pensions legislation” in the Pensions Act 2004 for specific purposes. The purpose behind amendments 32 and 51 to 55 is to move the text of clause 49 into schedule 3. This is sensible because of structural changes made to the Bill as amended in Committee. Having made several structural changes to the Bill in Committee, it makes sense to move what are essentially consequential amendments out of part 6 and into schedule 3. We believe that these changes sit better in schedule 3, which deals with amendments to existing legislation related to parts 1 and 2.

Finally, on judicial pensions, we have a minor amendment required to ensure that fee-paid judges who are subsequently appointed to the salaried judiciary are extended the same transitional protection rights as members moving between existing public service pension schemes. The clause provides that service as a fee-paid judge prior to 1 April 2012 has the transitional protections derived from the Public Service Pensions Act 2013 and the Public Service Pensions Act (Northern Ireland) 2014 applied to it, if that judge subsequently moves to salaried office. Following the O’Brien and Miller judgments in respect of fee-paid pension entitlement, the Lord Chancellor is required to establish a fee-paid judicial pension scheme. In order to ensure no less favourable treatment in the provision of pensions for fee-paid judges, the intention is to provide for transitional protection to apply to members of the fee-paid scheme. Transitional protections are a feature of both the 2013 Act and the 2014 Act. Regulations establishing new public service pension schemes may provide for transitional protection, extending the availability of pension benefits for certain members under existing schemes beyond 31 March 2015.

Fairness in Pension Provision

Brian H. Donohoe Excerpts

Tuesday 8th April 2014 Westminster Hall

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

It is good to see you in your place, Mrs Riordan. You, too, have a great interest in pensions, in the fairness of the system and in applying that fairness.

Since I was a very young person, I have always accepted that pension provision is part of deferred income and should be treated by employers and Government as such. All my life, I have believed that fairness should be applied to the whole question of pensions. At the bottom of this debate in many respects, however, is the unfairness in the application of the state pension scheme over a great number of years. I commend the Government for some of the changes to the scheme, making it much simpler than it was, but there is still a long way to go in terms of how we see the future for some elements of the situation. I will cover that later.

I come before the Chamber mainly because of the many constituents who came to see me to complain about the system. None of the three I will mention is after anything for themselves. They all accept that they are at an age when nothing further can be done for them, but by making themselves available to public scrutiny they want to help and protect those who follow to have a more level playing field.

I want to talk first about Ann Aitken, a constituent of mine for some time. She, as well as the other two, has worked since she was 15. She worked for ICI locally in various jobs, and then went to a knitwear company. She took five years off employment to bring up her first child and afterwards worked in shops and factories, before going to a local computer company, Fullerton Fabrication. Since then, she has worked in Crown Paints for some 22 years. She retires this Thursday, so I congratulate her.

Ann wants to bring to the attention of the House what she sees as an anomaly. Over that whole period, she never put her hand out for any form of Government assistance, other than the credits available for the times off she took. That would be in connection with the additional state pension. She is a friendly person and, from talking to her friends, has discovered that her additional state pension is less than that of someone who has never worked. She receives something like £16.22 for the additional state pension, while others she knows receive £21. Although she took five years off, she got no tax credits, because no such thing existed, yet she is now facing the penalty. She has a simple question: what reward was there for her working? What reward has she had for all the years that she has given? She hopes that her situation will not be repeated in future. That is what Ann is concerned about and why she has raised the issue with me.

The second person I want to talk about is Jean Dickson, another constituent who has come to me about her position. She worked from the age of 15, for all her days. Sadly, she lost her husband in 1998, and was grateful for the widow’s pension she received as a consequence, but she has worked all her days, even taking five years out to improve her educational standards. Latterly, she was employed as a nurse in an acute surgical area of the hospital. She, too, says, “Look, I have a state pension, and I am very grateful for it”, and it will be £566 per month. In addition, because of the occupational pension, she is receiving £240 per month before tax. As a result of her husband having a pension, she receives another £300 per year. As a consequence of the unfairness that I will cover in the latter stages of my presentation, she receives £166 per annum for the state earnings-related pension scheme, SERPS. In her last job, she paid 6.5% of her pay towards superannuation, so she still feels that there is injustice in her situation. She retired in October 2012, but is being penalised for working all her days, compared with those who perhaps were not.

The third case is that of Lawrence Clark, who came to see me and whose case particularly caught my imagination. He started working at the age of 15, similarly to people such as myself and my colleagues—he is of our age group. He started as a trainee accountant at Hyster, a local company, and went on to work for various companies, including Simpson Turner as a toolmaker. He moved on to Wilson Sporting Goods, another local company, where he worked for 25-odd years. He then worked for Digital, a local company that went bust, and for Scottish Golf Cast, which again lasted a few months. He ended up at the charity Quarriers for 15 years.

After that working life, he has managed to accrue £97 a month from his Wilson Sporting Goods occupational pension and £223 as a consequence of his work at Quarriers. In addition to that, on the basis of advice he received—another point I want to address in my conclusion—he paid towards a private pension that gives him something like £14 a month. From November 2015 he is going to receive a state pension of £123 a week. He is saying that, after 47 years, as a consequence of all that, as well as of being unemployed—if that is the right terminology for him—up until that point next November, he gets £60 a week for his pension credit guarantee, whereas others are apparently receiving £140. If he had not paid something like £30,000 into a superannuation scheme, he believes that he would currently be better off per week until he retires. That seems very unfair, and it should be looked at. He thinks that, had he not taken out a private pension or been involved in superannuation, he would have been better off. That is the unfairness that those three constituents believe they face.

I have outlined three cases in which there are problems with the pension provision directly, but we can also compare other aspects of the life they have lived with those of other people. Others have had free dentistry, free prescriptions for glasses, and housing benefit has been part of their scheme. The situation may have changed in Scotland now, but some people had to pay for their prescriptions all their lives. I am not saying for a minute that it is wrong that unemployed individuals are receiving these elements, but those three constituents say that perhaps more concern should be given to how they deal with the situation and how the Government deal with their problems.

On that basis, I want to broaden the argument. That is the difficulty for each of those individuals, but the position is more general too. The problem is that the great mass of people in this country do not have a clue, when they are aged 25, 35 or 55, about what provision they are making. They do not know what the result of their contributions will be for their pension. This issue has plagued me over the years, and it still does. Even here in the House, there are hundreds of Members of Parliament who do not have a clue what their pension provision is, and I say that as someone responsible for trying to educate them about that. It is clear that there must be a fundamental shift—information must be provided to every individual in this country to make them aware of the provision and advice available.

I commend the Government, because at the very least, and on the basis of all-party agreement, we now have financial advisers who are independent—in every sense of the word—in the advice they are giving. It used to be that financial advisers worked for companies on commission. The same individuals now charge for their services. That, at the very least, is a bit fairer, or gives the impression of being fairer.

[Mr Jim Cunningham (Coventry South) (Lab)]

I certainly remember the early ’80s when people were encouraged to take out a private pension, but unless they worked for a reputable company it was not explained how a private pension could sometimes affect the state pension. There must be thousands of people in that situation in this country. Whatever my views about the Government’s pension proposals, at least they will explain them to people. When I worked at Rolls-Royce, it spent a lot of money trying to persuade us away from the state pension to a private pension scheme and to some extent we got reasonable advice, but I can think of other car companies in the Coventry area where even today there are still problems with pensions.

[Mr Donohoe]

My hon. Friend has focused on an issue that was dear to my heart and about which I argued forcefully when a previous Administration allowed people to contract out of their company’s superannuation scheme. I was a joint secretary of the Scottish Transport Group when, for the first time in about 1982, people were given the opportunity of opting out of its pension fund and going private. I argued forcefully with everyone and anyone that that was a big mistake, that they were leaving themselves open and that when they eventually retired they would find themselves in a different situation. We had what was recognised at the time to be the best pension scheme—perhaps not as good as that for MPs, but certainly a very good pension scheme. Some people are now in a worse position because they were pounced on by supposedly independent financial advisers who told them that they would be far better off in a private scheme, when the truth was the exact opposite.

Many years ago, I was a convener and shop steward in a shipyard where the blue-collar workers were not in a pension scheme. I argued with the employer and succeeded in persuading them to introduce a scheme. That company is still in my constituency and I still have people telling me, some 40 years later, that it was the best thing that was ever done and that they have never been better off after taking advice and voting overwhelmingly to join that scheme. I do not know whether I am an anorak in terms of pensions, but I believe that making provision for a pension is more important than anything else in life. People should understand that, and do so earlier.

I seek clarification on one or two points, but I want to make a plea to the Minister. How widely defined are “employees” and “new arrangements”? Are the self- employed, carers and the unemployed included? They exclude zero-hours contracts and people who may have two part-time jobs. That is unfair and should be looked at.

I have grave reservations about the new scheme because people will be able to take out money and go on a world cruise or buy a Ferrari. That worries me. It will send the signal to many people who do not understand pensions that they can draw on that money, but at the end of the day they will be a lot worse off. I want an assurance that they will be protected. Financial advice is important, and that must be stated clearly.

A business man came to me and said that every business man in the UK received a letter from No. 10 Downing street telling them about the advantages of the latest Budget proposals on national insurance from 6 April. Will the Minister have a word with No. 10 Downing street to see to it that every single person in the country is sent a letter telling them how fundamental it is for them to look after their old age, and telling them that if they were to die in service, that would be looked at as far as their families are concerned? If I get that assurance, I will go back to my constituents and tell them that the debate has been worth while. I look forward to hearing what the Minister has to say.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

I congratulate the hon. Member for Central Ayrshire (Mr Donohoe) on securing the debate. We have a common interest in quality pension provision, fairness and making things simpler for people. I entirely accept the premise that we have allowed the pension system to become bafflingly complicated. I entirely accept his point—not only do not all of our colleagues understand the pension system, but why should a member of the public understand contracting out, guaranteed minimum pensions and all the rest of it? A central drive of the state pension reform—I am grateful to him for his positive comments on that—is to sweep a great deal of that away and to have a single, simple, decent state pension set at a rate that people know. They will get that pension for 35 years in the system, contributions or credits, with no contracting out and no differences if they have been in a company scheme. That is the world that we are moving to.

Clearly, the hon. Gentleman’s constituents have spent their working life in a very different world. I want to say a word about one of the reasons why some of them—without full details it is difficult to comment on individual cases—might be getting less state pension than their neighbour. They might think that that is unfair, but it may not be unfair, because there is something else going on that they are not really aware of, namely the whole business of contracting out, which is about to be abolished. A number of his constituents, whom he mentioned by name, worked for firms that had a workplace pension scheme.

Under the principle of contracting out, the operators of the scheme, not the individual, decided that the scheme would be contracted out of the state earnings-related pension scheme. As a result, the scheme would pay less national insurance and, crucially, the hon. Gentleman’s constituents would pay less national insurance than their neighbours who worked at a factory that was not contracted out. Imagine there are two factories side by side, one of which has a company pension scheme and the other of which does not. At the factory with the company pension scheme that chooses to contract out of SERPS, all the employees in the scheme pay less national insurance than the employees at the factory that does not have a workplace pension scheme.

[Mr Donohoe]

I am not talking about the person who is in another scheme; I am talking about the person who is in those schemes and who has everything coming their way, but who has never contributed anything to it. It is important to stress that I am not saying that we have to reduce the amount that they live on. I would not live on £130 a week, and I doubt whether the Minister would. The fact is that the situation is seen as unfair. If the new scheme will overcome that problem, it is a great idea.

[Steve Webb]

It will to some extent, for reasons that I will explain. When an individual is contracted out, they will receive a smaller state pension than they would have done, because they are building up only a basic state pension, not SERPS. However, they will not get a smaller pension than they would have done, because the company promises to match the SERPS pension that they would otherwise have received. When somebody retires and says, “I am only getting 16 quid of SERPS”, what matters is not the SERPS figure—in a sense, they might be getting zero SERPS—but the SERPS figure plus the occupational pension promise together.

[Mr Donohoe]

But they have paid for that.

[Steve Webb]

They have paid for it, but they have also saved by paying less national insurance. I take the hon. Gentleman’s point about people who have not worked, and I will come on to them. In a world of contracting out, if person A pays less national insurance but still gets the same pension as their neighbour who was not contracted out, that would not be fair either. Fairness has a number of dimensions. The fact that someone has a £16 SERPS pension does not tell us anything in isolation; it depends on whether they paid less national insurance than their neighbour for years and years, which is why they have got a lower SERPS pension, but they have got something else instead. That is part of the system.

The hon. Gentleman asked about the position of people who have done nothing, and I often hear from pensioners who say, “Why did I bother saving? If I had done nothing, I would have got everything.” Part of the point of the single-tier pension is to set the value of the state pension above the basic means test, not 30-odd quid below, where it is now. Automatic enrolment then takes people further above that figure. As a result, because they have saved, they are clear of the means test and they are better off than someone who has done nothing. That is a new feature of the new system, because we are trying to address that point.

The hon. Gentleman has said that people who do nothing get stuff for free. He is not saying that poor people should not get stuff for free, but we cannot have it both ways. If we think we have to look after people who have got nothing, and they get free prescriptions because they have no money to pay for them, we cannot then say, “But that is not fair to people who work, because they do not get them for free.”

--- Later in debate ---

[Mr Donohoe]

They do in Scotland.

[Steve Webb]

Well, temporarily they do. Unless we give everybody everything free, we must recognise that we sometimes do things for poor people because it is right to. Inevitably there will be an element of people who work and think, “It is not fair; I do not get that free.” However, as part of a civilised society I do not want people who have no income to be unable to afford medicines. That is just the way it is. If we give everyone free prescriptions and free everything, we will just tax everyone to the hilt. I understand what the hon. Gentleman says, and the new state pension system will start to address that point by setting levels of pension above the basic means test.

Automatic enrolment will be a huge step towards pensions for the millions of people who may never understand them, because the firm chooses it for people, puts them in for it, and puts money in. We put tax relief in, and people are free to opt out. Nine out of 10 are staying in, which is fantastic. Just as the hon. Gentleman got the pension scheme extended to shipyard workers, as I think he said, we are extending pensions to 10 million people, many of whom are low paid or part-time—many will be women or people on the edge of the labour market, and they are just the sort of people who would not otherwise have had a pension. That is a huge step forward in the spirit of what the hon. Gentleman achieved for his constituents all those years ago, and it will bring millions more in.

The hon. Gentleman asked about the scope of auto-enrolment. It is about employment and an employment relationship. There must be an employer to pay the employer contribution. The self-employed are not in auto-enrolment, but they do well out of the new state pension scheme, because at the moment the self-employed class 2 national insurance builds up only the basic pension, not the SERPS bit. In our new world, there is no distinction—there is just the pension; so every year in which a self-employed person puts in, in future, will be more valuable than now. That person will be building up 35ths of the whole pension, not 30ths of the basic state pension. So the self-employed will get better provision.

Carers, unless they are in a contract of employment, will not be auto-enrolled, because there will be no employer to put them in a scheme. However, they will be credited into the 35 years of full single-tier pension, so a carer will build up, every year, a 35th of the £144 pension—or whatever it will end up as. There is provision for carers in the new system.

Most people on zero-hours contracts work 20-odd hours a week, and as long as, at some point, they trigger auto-enrolment—as long as they earn above the threshold, ever—they will be put in. If I am on a zero-hours contract and work zero, zero, zero, zero, and then 20 hours over a pay period and go above the trigger, my employer has a legal duty to put me in. There are complexities about waiting periods and the rest, but the basic principle is that I must be put in once I am over the trigger. Once I am in, if there is a week when I have no earnings, of course no money goes in; but if there is a week when I do have earnings, money goes in. I do not fall out of the pension. Once I am in, I am in. Auto-enrolment happens once. It is triggered by earning above the threshold once in a pay period.

--- Later in debate ---

[Steve Webb]

A zero-hours contract is a contract. If someone has a contract of employment, in the weeks or months—whatever the period is—when they are above the earnings threshold, money goes into the pension. We will not insist on pension contributions being made in weeks when people do not earn any money. How would they put money in?

I think the zero-hours contract argument is greatly overdone, in the sense that the typical person on a zero-hours contract does 20 hours a week, on average. It may vary—when they earn a lot in a good week, they will put a lot into the pension; when they earn less, in a bad week, less will go in. As long as they get work through the contract they will be in a pension, possibly for the first time. I think that many people on zero-hours contracts will do better, because employers would not generally have put them in a pension at all. We are making that happen.

As to people with multiple jobs, a small number of people have jobs that, taken together, would put them into the system, but, taken separately, do not. Sometimes they will have children, and if they do they are credited in the state system anyway. Only 35 years of contributions are needed for a full pension, so someone might not make contributions for a number of years and still get a full pension.

The House of Lords, in about half an hour, I think, is going to talk about the issue in the debate on the Pensions Bill. We will gather more data on it. We think the issue is small, but clearly we need to ensure that we know what is going on. The number of women, for example, doing multiple part-time jobs went down in the past 12 months, so we do not think that the assumption that the numbers are all going up and that it will all get worse is borne out by the data. However, it is a serious point and we will look into it.

The hon. Gentleman is right that people often do not have a clue. It would be lovely to think that one letter from Downing street would fix things. I have two views on the matter. We need to make sure that pensions work for people who do not get it and never will, because with the best will in the world, expecting tens of millions of people to understand all this stuff is a heck of an ask. For me, we have to make sure that the system works for people who do not understand it and do not make active choices. That is where the state pension reforms come in.

[Mr Donohoe]

Could a booklet be prepared for people at jobcentres?

[Steve Webb]

We look at lots of different ways of communicating with people. The thing that we know most of all is that if we opt people in to pensions and they have to opt out, they stay in. We could have hand-printed 1 million booklets—I could have delivered them and sat down for half an hour with each person, and I would not have persuaded them. We have used the power of inertia and what we know about how people behave to get them in as 1 million Government advertising campaigns would never have done.

We are going to include financial education in the national curriculum. That is a good thing. Under the Budget measures that the hon. Gentleman referred to, people will have a guidance guarantee, so before they make their choices, they will have the right to a face-to-face conversation with somebody who is not trying to sell them anything, as he said. It is not independent financial advice—they can pay for that separately if they want; it is just a conversation that they have never had a right to before that will enable them to make informed choices. If they want to spend some of their pension money up-front, it is their money to spend, but we are making sure that there is a state pension system in place, so that even if they underestimate how long they will live—blow the lot, or whatever—they will have that floor of the state pension above the means test that they do not currently have.

I want to mention something else that may be of interest to the hon. Gentleman’s constituents who reach state pension age under the current system. We are allowing people to top up their state pension if they want to. If someone has a bit of savings and they want to pay voluntary national insurance, under a new category of national insurance for people who have already retired, or who will do shortly—we are calling it class 3A or the additional state pension top-up—they can pay national insurance and get an extra pension for the rest of their life. That will be index-linked. There will be survivors’ benefits if they die. We think that will appeal to a set of people who perhaps have very low interest on their savings currently and are getting nothing in the bank. From October 2015—there are helplines, websites and all the rest of it—they can make additional contributions and enhance their pension if they wish. That is another option that we have created for today’s pensioners.

The hon. Gentleman mentioned the guarantee credit. The constituent that he mentioned, if I understood him correctly, is above women’s state pension age, so qualifies for pension credit, but has not reached men’s state pension age. Clearly, in that period, we are saying to people who have no other income, “Here is an income that we think you need to live on, but if all you have is half of it, we will top you up to the full amount.” In theory, people could have nothing at all and get the full amount, which I think was the point that he made.

However, bear in mind conditionality on benefits. We do not allow people just to get jobseeker’s allowance for doing nothing all day. In a different debate, his colleagues might be saying to me, “We are far too strict with these folk. We are sanctioning them when we should not be”—and all the rest of it. The rules are pretty tight, so the option of sitting at home all day and doing nothing, and getting credits for a state pension, is one that we are essentially eliminating. People get credits for their state pension and so on only if they are actively seeking work, applying for jobs and doing the things we expect them to do. We do not have the system whereby people can just do nothing and then cash in. There are an awful lot of conditions and requirements on people receiving benefits.

We have tried to recognise that the system has been fiendishly complicated in the past—we accept that—and to simplify it so that it is simpler and fairer, particularly to older women, many of whom have done very badly out of the system. We have tried to ensure that everyone is in a workplace pension as far as possible and that that is good quality and good value, and to put new freedoms and guidance alongside that. I hope that, as a result, we will have a much fairer system in the future than we have had in the past.

Job Insecurity

Brian H. Donohoe Excerpts

Wednesday 5th February 2014 Commons Chamber

[Mr Umunna]

My hon. Friend is absolutely right, and I will move on to zero-hours contracts shortly.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Is it not also the case that people on the minimum wage who are contracted for perhaps 16 or 20 hours a week are having to work more than that, with employers exploiting them in that way? That is a major problem, and their employment is very insecure.

[Mr Umunna]

That is right. Zero-hours contracts are perhaps most symptomatic of the increasing insecurity we are seeing in today’s workplace.

--- Later in debate ---

[Mr Umunna]

We know that there has been stagnation in wages. My hon. Friend has given the clearest evidence of the impact of that in his constituency. That relates to the points that I have made to Government Members. Of course it is a good thing that people who have not been in work are getting work. The key thing is that it must be decent work that prevents people from having to go to food banks because they are not earning enough.

[Mr Donohoe]

My hon. Friend is being most gracious in taking so many interventions. One group of people who have been almost forgotten are small shopkeepers, who are suffering immensely as a consequence of the state of this nation. They have not been mentioned, but they have very insecure futures. Surely we should address that, as well as the other matters that we are addressing this afternoon.

[Mr Umunna]

My hon. Friend is right. We are a nation of shopkeepers. That is why we want to cut business rates in 2015 and freeze them thereafter. We also want to provide more support for local communities and high streets. I am proud to have the longest continuous stretch of high street in the country in my constituency.

--- Later in debate ---

[Vince Cable]

I do not have those figures, but I am sure we could get them. I am sure my colleague the Secretary of State for Work and Pensions will dig them out for him. I am sure that they reflect the pattern I describe that, certainly over the last year, full-time employment is rising relative to part-time employment.

[Mr Donohoe]

Will the Secretary of State give us the figures for those who are on zero-hours contracts?

[Vince Cable]

As the hon. Gentleman knows, we have had official figures from the Office for National Statistics and there has been a very wide range of surveys. The reason I have embarked on a formal consultation, which will be concluded at the end of March and will lead to policy action on the issues to which the shadow spokesman referred, is that we need to have a proper understanding of the scale before legislation is initiated. The simple answer is that nobody knows how many people are on zero-hours contracts—indeed, nobody can precisely define what they are.

Food Banks

Brian H. Donohoe Excerpts

Wednesday 18th December 2013 Commons Chamber

[Paul Murphy (Torfaen) (Lab)]

Perhaps I can bring the House back to the issue of food banks. I decided to take part in this debate only last Friday, when I visited the Eastern Valley food bank in Pontypool in my constituency and saw its excellent work with my own eyes. It distributes more than a tonne of food per week and feeds more than 120 local families, and demand is so great it has opened three distribution centres in Blaenavon and Cwmbran. Like many food banks in this country, it is linked to the Trussell Trust, to whose Welsh representative, Tony Graham, I pay tribute.

That situation is replicated throughout Wales, which now has 33 food banks and 74 distribution centres. In the UK, three open every week.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I have visited most of my food banks, but there are so many of them that it is very difficult. Has my right hon. Friend noticed, like me, the type of person turning up at these food banks? I saw a woman who was a skilled worker—a draughtswoman—who could not get a job and had not had one for four years as a result of the Government’s policies. Did he see anybody like that?

[Paul Murphy]

Indeed, I did. I also saw that many people using the food bank were working people who simply did not have sufficient money to feed their families.

The Minister spent some time trying to decide who caused the recession, but in 2010—the year the Government came to power—more than 4,000 people in Wales got food from a food bank. In 2011, it went up to 16,000; to 36,000 in 2012; and in this year, it is estimated that 60,000 people in Wales will have to rely on food banks. That is the population of my town, Cwmbran, the fifth largest town in Wales. That is a disgraceful indictment of society and of what the Government have—or have not—done.

Pensions Bill

Brian H. Donohoe Excerpts

Tuesday 29th October 2013 Commons Chamber

[Gregg McClymont]

That is not what I was saying, and I will explain why. I am not surprised by the Minister’s response, because it probably explains why he was reported as saying at the NAPF conference that transparency “gets you virtually nowhere”. I assume the basis for that view, which at first glance appears odd, is that he takes the point that I have been making throughout this debate that seeing the pensions market as one where the saver is always is in charge or can always be in charge is simply wrong. I just put that on the record, but now let me deal with his point directly.

First, I do not see any basis on which one can be against the full disclosure of everything that has an impact on pensions, including transaction costs. Secondly, if we had the disclosure of transaction costs, that would enable everyone with an interest in ensuring good pension outcomes, including the Government, to have the evidence at their fingertips to say to interested parties, stakeholders and, in particular, pension companies and fund managers, “That’s what you are charging? That’s not on.” How can the Minister not want to have all the evidence at his fingertips? He is taking a strange position. He says that he is carrying out a consultation on charges. We know that is a shift in his position, for the reasons I have set out and given his previous comments, but he is still behind the curve because he does not support the full disclosure of transaction costs—he certainly will not support our amendment (a), which will make such disclosure a reality.

Let us be clear about this: we simply do not know what happens on costs when pension moneys are put into the “investment chain”. That seems an obscure term, but I am talking about where someone saves into a pension, their pension provider passes the pension savings to fund managers—they are often in the same organisation, because, as with the energy sector, there is a lot of vertical integration—and then the savings are invested. There is no comprehensive disclosure of all the costs that accrue in that process, and that cannot stand for much longer in the 21st century.

The Minister was quoted as saying at the NAPF conference—if he has been quoted unfairly, I urge him to intervene to say so—not only that transparency “gets you virtually nowhere”, but that one had to strike a “balance” between the public’s right to know about transaction charges and the costs to fund managers of disclosure. We hear that argument a lot across political debate. It is not a foolish argument in some cases, but it is in this case, because fund management is such an opaque business and, according to the things we hear—without access to the facts we cannot know for sure—the costs can be significant. Hon. Members should not take my word for it. The Secretary of State for Business, Innovation and Skills commissioned the Kay report on equity markets and “long-termism”, and Professor Kay made it clear that all transaction costs should be disclosed.

Professor Kay was clear about that, on behalf of the Government—or, certainly, at the behest of the Minister’s Liberal Democrat colleague the Business Secretary—because of the evidence he had gathered that fund managers can over-churn pension fund savings. What do I mean by “over-churn”? The incentives lie in commissions for trading, and so rather than hold on to assets for the long-term—what one might call the “Warren Buffett” approach, which is a very successful long-term approach to investing and is consonant with the long-term nature of pensions—fund managers have a big interest in constantly trading, because that generates commissions. That might be the case, or it might not. We simply do not know, because those things are not disclosed. The Minister trumpets new clause 1, but it does not include any disclosure of transaction costs. If we want to move to an auto-enrolment system and have in mind the 10 million people who will be automatically enrolled, as a sine qua non of reform we must ensure that the transaction costs are disclosed.

I am not sure whether you are aware, Madam Deputy Speaker, but just over a year ago the Royal Society of Arts investigated what pension providers understand by “the costs and charges” of a pension. It contacted 25 big providers and the vast majority told it that the full costs and charges of a pension scheme were simply the annual management charges, not the total expenses ratio and not transaction costs. Our argument is that the Minister has been too slow to recognise how dysfunctional the private pension market remains. We welcome the fact that he is moving, but he is doing so far too slowly. As evidence of that, we cite the fact that he will not commit the Government today to the provision on the disclosure of transaction costs. Our amendment (a) to new clause 1 would ensure the disclosure of transaction costs.

Our other amendments, as they pertain to the scale and value of pension schemes, to trustees and to annuities, would make a significant difference in the market. They would start to make the changes that are necessary to ensure that everybody gets value for money.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Does my hon. Friend make a distinction between a scheme with trustees and one under which the member must look after their own interests as it has no provision for a set of trustees to oversee it?

[Gregg McClymont]

My hon. Friend makes a very good point. The logic of moving to a system in which every scheme has independent trustees flows from the fact that in the pensions market as it stands the consumer who is a member of a scheme without trustees cannot have their voice heard. What happens then? The interests of shareholders over-dominate. In a market that functions effectively, of course, the consumer can shop around, compare prices and if they buy something that they do not like they can even buy something else. None of that is true of the pensions market and that is why, in our view and given the options available, reaching a situation in which every scheme has trustees is the best way to try to ensure proper representation of saver interests. My hon. Friend is absolutely right.

--- Later in debate ---

[Richard Graham (Gloucester) (Con)]

This is the first time I have made a speech while you have been in the Chair, Madam Deputy Speaker, so let me add my warm congratulations to the many that you have already been given.

Our debate today has been a pretty specialist affair so far, in a different language from that which many of our constituents speak. It has no doubt been a struggle for many in the Public Gallery to remain awake throughout. As we dive into the detail, let us not forget the goal: the Bill’s aims are simplicity, clarity, a reduction in the flaws in means-testing and, above all, to ensure that it always pays to save. Some of that was rather lost in the 85 minutes for which the shadow Minister, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) spoke, so let me try to bring us swiftly back to the main points of detail.

Earlier we tackled auto-enrolment, small pots, aggregators, charges, scale and annuities. No doubt that would be enough to put many people off listening to any more, but let me add my thoughts briefly on each in turn. First, on auto-enrolment, the Minister outlined the success so far—1.7 million people already enrolled and 90% of them staying in. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East said that he was cautious and that that percentage might not be sustainable as we started enrolling those in smaller firms across the country. He may well be right about that. The Minister will be acutely aware of that, which is why he is right to tackle some of the detail now, ahead of the smallest companies enrolling.

The important thing in the section on auto-enrolment was the changes outlined today—two opt-outs: one for those who have already given notice of leaving their employer and one for those who would suffer negative tax penalties because they had already accumulated more than the maximum allowed for tax-free savings. The Minister confirmed that there is absolutely no intention of excluding small and medium-sized enterprises, the lifeblood of every Member’s constituency. That is important, and he rightly summarised Labour’s amendment 53 as unnecessary, unclear and ineffectual.

The discussion of small pots, importantly, covered the differences between the pot follows member approach recommended by the coalition Government and the aggregator approach proposed by the Opposition. The precedent of Australia is relevant. Those 5 million lost accounts worth some 20 billion Australian dollars are not a small matter. Millions of our constituents are affected. Those of us who have accumulated small pots at different periods in our life know that it is extremely hard to keep track of them and to have any idea of what our savings really are. The whole business of pensions is ultimately about savings. It is about accumulating a pot of money which will see us safely through retirement, ensuring that we can live after retirement without having to fall back on savings.

[Mr Donohoe]

Does the hon. Gentleman also consider that a pension pot is a deferred income and should be treated as such? The problem is that not many people do so.

[Richard Graham]

The hon. Gentleman is right in the sense that all savings are ultimately deferred income. If he is trying to differentiate capital and income from investments, which I do not think he is, that is a separate issue. I accept his point that ultimately everything is deferred income, though I would prefer the word “savings”, as we will all need savings at some point. There is no significant difference between us on that.

The Opposition approach is towards an aggregator, which is an uncomfortable world where there is no choice and our savings pot is shunted off in a Thomas the tank engine-like way to God knows where. We will not get into alluding to the names of the engines in “Thomas the Tank Engine”. That would be unfortunate and arguably inappropriate. The important thing, as the Minister rightly said, is that we must not have small pots that follow the member into a bad scheme. We must focus on all schemes being good. That is why it is important to legislate for quality schemes, as the coalition Government are doing.

I welcome the amendment that the Minister mentioned whereby those who have been in a scheme for less than 30 days will get a refund, but it is important that the practice which has grown up over time of people being in schemes for less than two years and being bought out for a not very significant sum comes to an end. I welcome that, as will many people across the land.

After small pots and aggregators, we come to the rub of the issue—charges. The Minister rightly observed that 1% compounded over time amounts to a huge amount of money paid out in charges to fund managers and administrators, and that it is important to follow the recommendations of the Office of Fair Trading report, which noted that pension savings is one of the worst sectors for charges, that the demand side is weak and that there is the contradiction between the employer choosing the manager, but the member effectively paying for that choice.

I welcome, and many Members across the House and others outside this place should welcome, the opportunity to look objectively and constructively at the issue of charges through a consultation. The option of 0.7% is no doubt at the lower end of options out there. That gives this Government and Members a chance to see what might be the most practical options, bearing in mind always that we do not want to limit the management of those funds to a handful of very large providers—the equivalent of supermarkets in a world where sometimes a delicatessen tailoring their investment to what members need can be an attractive and practical option.

The process of a consultation on charges clearly needs to include a definition of those charges. I was disappointed to hear so little of substance from the shadow Minister on the subject of charges. He did not even mention the total expense ratio or any of the other aspects and acronyms that comprise charges, which are beloved of my hon. Friend the Member for Warrington South (David Mowat) and others of us who have previously worked in the sector. There was no detail at all from the Opposition spokesman and, at the end of his 85 minutes of speaking, I am none the wiser about the charge that the Opposition are recommending

On charges generally, I think I can summarise the shadow Minister’s speech for Members and especially for those in the Gallery, whose concentration may understandably have wandered during those 85 minutes. There were four messages that he wanted to get out: first, highlight the fact that the coalition will do nothing for living standards; secondly, accuse the Government of sticking up for big business, not small pensioners; thirdly, sound as if the Opposition are offering an energy price freeze; and fourthly, do not give a precise figure. The approach behind all that is not to let the facts get in the way of the narrative. That, in about 12 seconds, broadly covers what the shadow Minister said in 85 minutes on the issue of charges.

The approach of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East to the Government’s recommendation of a consultation amounted to a simple slogan: consultation, not action. This, I thought, was a curious approach by the shadow Minister. He earlier intimated that he is very cautious about the implementation of auto-enrolment—the results might not be as good as they have started out to be and it was too early to celebrate. He gave the impression of being a very cautious driver, one who was unwilling to take unnecessary risks and who wanted the Minister to make sure that he keeps the car on the road.

Such analogies were built into the hon. Gentleman’s approach, but caution is precisely why, after 13 years of the previous Government, auto-enrolment had not been implemented. It is precisely why they did not pursue universal credit. As the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), admitted, it was too difficult. It is precisely why the previous Government were unable to make decisions—no nuclear power stations, no changes to the schools funding formula, no privatisation of Royal Mail, too little stimulus to apprenticeships, very little impact on manufacturing. It was all too difficult.

The approach of the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East today is to try to take credit for his party for the idea of auto-enrolment, and then to snipe at the detail offered by the Minister. The hon. Gentleman coupled that with something close to an apology for the previous Government not having done enough in the world of pensions, but it was a little like the policemen on Plebgate recently—it was not a wholehearted apology, but rather a nudge towards an apology. That was disappointing, because the central issue of charges is precisely what the debate is likely to focus on.

The shadow Minister alluded seven times, I think—I tried to keep count—to what he called the policy paper, “40 Policy Ideas from the 40”. He wrote me a charming letter about it:

‘Dear Richard… The policy paper entitled “40 ideas from the 40”, to which you were a contributor’—

I was not a contributor. I fear that he might not have read it in sufficient detail to understand who was and who was not a contributor. However, he was absolutely right that my hon. Friend the Member for Warrington South was a contributor and that he mentioned the lack of transparency in costs and charges in almost exactly the same language, as he confirmed today, as the Minister used when he called for the consultation on charges, which I think we all welcome and look forward to.

Pensions Bill

Brian H. Donohoe Excerpts

Monday 17th June 2013 Commons Chamber

[Mr Duncan Smith]

No, that is not our plan, but our commitment is public and stated, and goes throughout the whole of this Parliament. This Bill brings that in, so any further changes would have be made later. I simply say that our commitment to the introduction of this Bill remains exactly as it stands.

The two tiers—the basic state pension and the additional state pension—together with other outdated add-ons, make for this complication, as does the mess and mass of means-testing known as the pension credit. With 11 million people now not saving enough for their retirement, we can and must do more to simplify the state pension system. The right hon. Member for Birkenhead (Mr Field), who is in his place, has gone on about this matter for long enough and there has been consensus across the Floor of the House. Getting more people to save, and to save more when they save, is critical.

The first step, which the previous Government had initiated, was auto-enrolment. We picked that up and are now successfully rolling it out to help up to 9 million people into a workplace pension scheme and to make savings the norm. That big change has, again, been smoothed through and taken through at rate, but we have taken care and consideration, because at this difficult time some companies would encounter difficulties. We have been careful to ensure that the roll-out allows time for people to plan. Significantly, more than 400 of the country’s largest employers have now met their auto-enrolment duties, and more than half a million eligible jobholders were newly enrolled by the end of April 2013. Once this is in a steady state we expect up to £11 billion more in pensions saving every year. That is a very big and significant reform. People from many other countries around the world have been to talk to my hon. Friend the Minister of State and have seen me about doing it themselves. We are not breaking absolutely new ground, but for us and for many others it is a real departure: getting people to save and save from the moment they move into work.

Measures in the Bill will ensure that automatic enrolment works as intended. We need to address some technical issues, clarify the existing powers and provide for the automatic transfer of small pension pots. The last of those is vital, because a quarter of people already lose track of at least one pension, and it is estimated that some 50 million dormant pots will exist by 2050 if we do nothing about this issue. It is confusing, and I say with the greatest respect to my hon. Friend the Minister of State that although plenty of people understand pensions, dine out on them, sleep on them and can work them very cleverly—the word “anorak” does not come into my lexicon at all—most people find this a complex and difficult area. People can be left with small pots as they move, and that is now the way of work; people move in and out of different companies, leaving behind these pots. It is vital to deal with that, and my hon. Friend has made a huge move to do just that.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Perhaps I am an anorak, as the chairman of the pension fund for Members, but one of the issues is the question of contracting out. As I understand it, the Bill does not allow contracting out. Am I right to say that people like us and many others in the public sector will face an increase in national insurance contributions?

[Mr Duncan Smith]

I fully respect the hon. Gentleman’s knowledge of pensions, and that is the case. We have not shied away from that: there will be an increase in national insurance contributions for a number of people. Some 70% of employees will not pay any national insurance charges, although some 30% do, and overall most of our 10% will get a better pension that will be higher in total than that which they would have had according to their contributions. All, bar a smaller number, will be better off. It is never an easy pill to swallow, but the overall reform benefits the vast majority of people. I accept that there will be that charge, but the vast majority will benefit and even those with higher national insurance charges will benefit, too.

[Mr Donohoe]

In that case, it will mean a pay cut to a considerable number of people in the public sector.

[Mr Duncan Smith]

My point was that although, of course, the charge will add to the amount they pay, overall they will get a better state pension over the lifetime of that pension. It is a trade-off, in a sense: they get more, but they have to pay a bit more. Whichever way we cut it, it would be complex and difficult to avoid that. During the passage of the Bill, we will be happy to hear more from the hon. Gentleman and to hear any ideas he has, but our principal position at the moment is to reduce it to the smallest level that we can.

Jobseekers (Back to Work Schemes) Bill

Brian H. Donohoe Excerpts

Tuesday 19th March 2013 Commons Chamber

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Will the Minister give way?

[Esther McVey]

I will make some progress, as I have many questions to get through.

I want to offer clarification to the hon. Member for Easington (Grahame M. Morris). The Court of Appeal ruled against the Government on a technical point and we are seeking permission to appeal to the Supreme Court on that point. Contrary to what the Opposition have suggested, a great deal of thought went into drafting regulations that would be flexible enough to encompass a wide range of programmes to support jobseekers. That is key; this is about flexibility for the individual and for the businesses that are taking people on. We want to get more people into jobs than ever before, and that is what we are doing.

[Mr Donohoe]

The problem in my constituency is that there are no jobs. People can have all the training they want, but they cannot get a job. That is the problem, and it is down to this Government.

[Esther McVey]

Obviously, the hon. Gentleman will be pleased to hear that the past 11 consecutive months have seen a rise in the number of people in jobs. Of course education, training and work experience are key, and we are doing all we can to help his constituents.

I want to talk about the scrutiny that the regulations went through. They went through the Joint Committee on Statutory Instruments, the secondary legislation scrutiny Committee, and there have been various opportunities for Members to raise objections. That did not happen, however, and the regulations went through. We are seeking permission to appeal against the judgment by the Court of Appeal. This is about communications with claimants, and our view is that it was clear that the claimant received information not only through communication via letter but through meeting and speaking to their jobcentre adviser.

Welfare Reform (Disabled People and Carers)

Brian H. Donohoe Excerpts

Tuesday 18th December 2012 Westminster Hall

[Ian Mearns]

Alas, I fear that that is the likely outcome.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

I congratulate my hon. Friend on securing this debate about an issue that is burning hot in my constituency. Does he agree that Atos is not the problem? Although it has to administer the problem, it has been set certain parameters in which to work. The consequence is that everyone blames Atos, when the Government should be blamed for all that is happening to disabled people.

[Ian Mearns]

That is the case. We can hardly blame Atos for managing a system to its own benefit, because it is on a sort of performance-related pay that relates to the number of assessments it makes.

The cumulative effect on children could be as much as around £1,300 a year. Disabled children are losing that sum.

Another major change occurring through welfare reform is the introduction of the personal independence payment, which will replace disability living allowance. The disability Minister made a statement last week, which I thought was a little odd to say the least. She said:

“By October 2015, we will have reassessed 560,000 claimants. Of those, 160,000 will get a reduced award and 170,000 will get no award, but 230,000 will get the same…support.”—[Official Report, 13 December 2012; Vol. 555, c. 464.]

How could the Minister or the Department have drawn those conclusions before having done a single assessment of any individual? We already know that the outcome will be that 160,000 will get a reduced award, 170,000 will get no award, and 230,000 will get the same sort of support. I hope that I am not the only Member slightly concerned that the Minister, before any assessments have taken place, already has figures of those who will get a reduced award and those who will receive no support. Surely, it is down to the assessment to determine what the outcomes will be, but it seems that the Department has already pre-determined the outcome of the assessments for each individual.

Pensions Bill [Lords]

Brian H. Donohoe Excerpts

Monday 20th June 2011 Commons Chamber

[The Secretary of State for Work and Pensions (Mr Iain Duncan Smith)]

I beg to move, That the Bill be now read a Second time.

May I first say something that might help the House? Hon. Members might not realise that there are a number of different things in the Bill, and I plan to go through those elements. I will obviously take interventions, and it would be helpful if interventions were made on those sections in due course; otherwise, it will take a long time, and I know colleagues want to speak.

The Bill is designed to secure this country’s retirement system, putting it on a stable and sustainable footing for the future. I remind the House that our first priority on coming into government was to secure the position of today’s pensioners. We acted immediately to introduce the triple guarantee, meaning that someone retiring today on a full basic state pension will receive £15,000 more over their retirement by way of the basic state pension than they would have under the old prices link. For 10 years, the previous Government talked about this, but we acted in our first year.

The backdrop to the Bill is that we have taken action, and we have committed to a permanent increase in the cold weather payments to £25—an increase the previous Government had planned to be temporary. The old rate, I remind colleagues, was £8.50. Last winter alone we paid out some £430 million to support vulnerable families. At the same time, winter fuel payments will remain exactly as budgeted for by the previous Government: at £200, and £300 for those over 80.

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

Will that be inflation-linked?

[Mr Duncan Smith]

With respect, it never was under the previous Government, and we are not going to change that policy. We have had plenty of discussions on this, and I remind the hon. Gentleman that, although the previous Government uprated it, the Red Book for that time shows that absolutely no money was allowed thereafter, so it was going to settle back. Let us be absolutely clear about that.