Pensions and Benefits Uprating

Ian Swales Excerpts

Thursday 4th December 2014 Commons Chamber

[Mr Speaker]

If the hon. Gentleman was not in the Chamber at the start of the statement, it is not seemly for him to seek to participate. I would not want him to behave in an unseemly manner—wittingly or unwittingly. I am in a sense saving the hon. Gentleman from himself in saying that he should not participate on this occasion. We will store him up and look forward to his words of wisdom subsequently.

[Ian Swales (Redcar) (LD)]

I congratulate my right hon. Friend on today’s pension announcement and on getting the Liberal Democrat policy of a triple lock increase into this Government’s programme. Does he agree that with a safety net of 2.5%, the minimum pension increase that people can look forward to in the future is nearly £3 a week and that they will have no more insulting 75p a week increases?

Discretionary Social Fund (Redcar and Cleveland)

Ian Swales Excerpts

Wednesday 10th September 2014 Westminster Hall

[Ian Swales (Redcar) (LD)]

It is a great pleasure to serve under your chairmanship, Mrs Brooke. I rise to speak about a local issue: the discretionary social fund of Redcar and Cleveland borough council. I represent a corner of Yorkshire that has had mixed fortunes over the past few years. We have had a steep decline in employment in traditional industries over the past couple of decades, which has led to some real economic challenges. The restart of the steelworks in 2012 has helped to reverse the fortunes of the region, and with Government support there has been further improvement since then, with unemployment falling by 22% in the past year in my constituency.

My constituency remains 33rd out of 650 for unemployment, however, so there are some real challenges. It contains real pockets of deprivation: South Bank and Grangetown wards are among the most deprived in the whole country, and 80% of pupils at Grangetown primary school receive free school meals. I am particularly concerned to ensure that any help the Government can give on the social side is well targeted and reaches the people who need it.

Under the previous Government, the Department for Work and Pensions administered the discretionary social fund. That continued until the end of March 2013, and on 1 April 2013 responsibility for the social fund passed to local councils. Until that date, I cannot remember having any case work to do with the social fund. Clearly, people have needs, but the DWP seemed to be able to deal with cases on a basis that the people involved found acceptable. It is worth remembering that under the previous Government, the DWP did not have the power to refer people to food banks and other agencies. I am pleased that this Government have changed that, because if people need help, they should get the referrals that they need.

Councils assumed responsibility for the discretionary social fund. Redcar and Cleveland borough council’s cabinet papers contained a short description of the purpose of the fund:

“To provide financial assistance in times of crisis and assistance to customers returning to the community from a previous care arrangement.”

The money was given to the council for such purposes, although it was not ring-fenced; I will return to that point later. The DWP retained responsibility for situations of crisis that had to do with benefit transitions and delays. Will the Minister confirm that that is his reading of the situation? Is he comfortable that the new interface is working effectively? When the DWP had responsibility for the discretionary social fund, there was no interface, but one of the issues now is whether a crisis situation is the responsibility of the local council or the DWP.

The budget for the discretionary social fund was transferred to councils, and for 2013-14 there was programme funding of £631,000 and an allowance for administration costs of £133,000. In 2014-15, the amount of programme funding was the same, but the administration allowance was only £122,000. How were those amounts assessed? Clearly, some work was done in the DWP to assess need in the area. I would be interested to know, if the Minister has comparable figures, what the spend was in 2012-13, which led to the DWP’s assessment.

Redcar and Cleveland borough council, having received responsibility for the discretionary social fund, reacted in a constructive fashion and put together a comprehensive policy document. I have to say, however, that that document went way beyond the definitions that I have mentioned of what the money was for, and it contained a huge number of potential exclusions. Although I understand the need for controls and the avoidance of unnecessary claims on the fund, the policy document seemed to be more about setting out circumstances in which the money could not be given out rather than those in which it could.

The council has established an online application system, which raises concerns about exclusion, either because of digital access or literacy. We must remember that we are dealing with those who are in crisis and need. They may not have access to online equipment, or they may not be able to use it. I would be interested in the Minister’s comments on the application process, because I know that the DWP is moving in that direction. The council also established a policy that they would not make cash payments, to avoid the risk of discretionary social fund payments being spent on drugs, alcohol, tobacco or other things that would be unnecessary in a crisis situation.

What actually happened? In 2013-14, the council received 2,100 applications for the fund and it made awards in 195 cases, so less than 10% of applications were awarded. In fairness, the large number of unsuccessful applications—more than 1,900—includes those who were referred onward to the DWP because of the interface question that I have mentioned, so not all were complete rejections. Against the original allowance of £764,000, the spend in 2013-14 was £256,000, so more than £500,000 of the money given to the council was not actually spent. I do not have a breakdown of the £256,000, but assuming that the council spent more or less what was budgeted on administration, and I have no reason to think that that was not the case, the actual assistance given must have been some £120,000 out of the £631,000 that was allowed. That would mean that less than 20% of the money was given out. I also know that the total amount spent included money for section 17 children’s claims, which used to be met from a different budget in the council. The council also put some small amounts from the fund towards dealing with council tax for flooded properties. The amount that went to people in real hardship was a relatively small part of the total allocation.

As I have said, if I worked through the council’s policy document, I could find many ways of saying no to people’s claims. That has resulted in an increased case load for me as the local MP, and we have many examples of people being turned down. For example, someone was turned down because they had an annual mobile phone contract. Quite how they were supposed to turn that into cash to help with their crisis was not explained. That did not seem the right thing to do to someone who was experiencing a short-term problem.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

The hon. Gentleman has mentioned the funds that have not been spent yet, which I believe are at about the £465,000 mark. The council has said that it is carrying those funds forward to use for future allocations. Does the hon. Gentleman believe that that is a wise course of action, in light of the fact that on 2 January this year, the Government cancelled discretionary social fund payments to councils for future years? Does he agree that the council could use that balance to help future DSF claimants, given that the Government will not make any further allocations?

[Ian Swales]

I thank the hon. Gentleman for that comment. I share his concern, which I will mention later. I hope the Minister will respond on the future of the DSF.

There was a £508,000 underspend, which has been added to the £754,000 allocation for the current year, 2014-15, which makes £1.26 million in total. As the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) mentioned, the council has set out a plan to spend that money over four years, rather than in just the one year that we would have had left under the original allocation, which addresses his point. The council clearly assumes that no further DSF money will be available beyond that period. More than £500,000 was required to be spent on crisis in our area, so will the Minister confirm that, through the various reforms, his Department plans to make that nil from the year 2015-16? If that is the case, I understand why the council might feel the need to spread the money more widely. More than £800,000 of the Department’s allocation for the two years 2013-14 and 2014-15 will actually be spent in three future years beyond the general election, which obviously has implications for spending versus politics.

The council has developed a comprehensive spending plan for the £1.26 million. Over a four-year period the council intends to make grant awards of £190,000 and loans of £300,000, of which it expects £75,000 to be repaid over the period. The citizens advice bureau will get £75,000, including £20,000 to improve financial capability. A carers charity will get £20,000 to help carers and the disabled apply for the funds. £75,000 will go to the local credit union to help make it sustainable. I mentioned the section 17 children’s awards, which will total £200,000. Some £475,000 will be spent on administration, which when added to the administration that happened in the first year, 2013-14, means that some £600,000 will be spent on administration—council processes and staff—as opposed to the £255,000 that was allocated for 2013-14 and 2014-15. The upshot is that over the next four years, of the £1.26 million, only £190,000, or about 15%, is available for straightforward grants to people in crisis. The plan is to spend the rest of the money in the ways that I have outlined. Does the Minister believe that his Department expected such a picture to emerge when it gave those funds?

The original purpose of the discretionary social fund was

“to provide financial assistance in times of crisis and assistance to customers returning to the community from a previous care arrangement.”

That was the council’s original remit for the money, and things have clearly moved on since then. The council’s plans are a bold attempt to address the issues of deprivation and the problems in our area, but my sense is that far less direct help is reaching those who are most in need, and my casework bears that out. I would appreciate it if the Minister responded on the balance of the spending.

This debate is about the discretionary social fund, but I cannot allow it to be completed without referring to the discretionary housing payment fund, which is associated with the discretionary social fund and is in place to address issues arising from the welfare reform process. In mid-February 2014, it was discovered that only just over half of the DHP money had been paid out for the year ending in March 2014. I understand that, unlike the discretionary social fund, the discretionary housing payment fund would have had to have been repaid if it had not been used within the financial year. Again, I was concerned by the number of rejections about which I was hearing. I wrote to the Minister’s colleague, Lord Freud, a number of times, especially on the issue of disabled adults.

The Minister for Pensions may be aware that it was Redcar and Cleveland borough council that lost a court case involving a disabled adult to whom it had not been prepared to pay a discretionary housing payment. The judgment clearly stated:

“In considering whether there is under-occupation of the appellant’s property, the local authority has not taken into consideration her disabilities and her reasonable requirements, as a result of these, to sleep in a bedroom of her own”.

It is certainly true, as Lord Freud kept writing back to me, that discretionary housing payments were meant to cover such circumstances, and the judgment made that very clear. The council, however, expected people in that situation to apply every three months for the renewal of their discretionary housing payment, and many other councils expect only an annual application, particularly from people who suffer from disability. The Minister for Pensions knows that I have consistently fought on that issue, and I was obviously pleased to support the Affordable Homes Bill introduced by my hon. Friend the Member for St Ives (Andrew George) last Friday. The anomaly for disabled adults will hopefully be addressed, assuming the Bill is enacted, and such court cases and difficulties for people will no longer be required.

The discretionary housing budget was spent by the council, and one way in which it was spent was that a number of local residents were delighted to receive an unexpected £1,000 cheque through their letterboxes. Some of them had moved up to six months previously because they had been under-occupying. I understand the council’s reluctance to provide the money at the time because it did not know whether the budget would extend and be sufficient for the last month of the year, but it managed to defray the money very quickly when the year end was approaching. Redcar and Cleveland borough council was of course one of the councils that applied for extra money, so not all the money arrived at the start of the year. However, I met a few delighted residents who had suddenly received £1,000 that they were not expecting.

The administration of the two funds raises questions about the competence and attitude of some of the staff involved in the process. Given the stories that I have heard, I believe that, overall, my constituents have suffered more than they need to suffer. I will refrain from saying that this was politically motivated, but there is no doubt that the Labour party has been able to campaign on welfare reform more effectively as a result of some of the issues.

I am obviously not raising this issue today to get a response from the Minister on every detail, so I will summarise. I have already asked a number of questions. Is he satisfied that the interface is clear on the Department’s responsibility for benefit transitions and delays, and on the council’s responsibility for the discretionary social fund? How was the discretionary social fund money given to the council for 2013-14 and 2014-15 assessed, and how did it compare with previous years, particularly 2012-13? Is it true that the Department expects the amount to be nil for 2015-16 and beyond? Is he happy that, over the next four years, only 15% of the discretionary social fund is budgeted for direct grants to individuals and that more than twice as much money is earmarked for council administration?

The Department has embarked on many challenging reforms, and any Government would have made quite a lot of those reforms. The Government have provided help, and the Department’s reputation depends on that help being used effectively. Clearly we support localism, but is he happy that the money is not ring-fenced? Should the Department say more about the criteria for the awards? Are local councils the right recipients of the funds? These are challenging times for many of my constituents, and the Government are carrying on the work of the previous Government in balancing taxpayers’ money and welfare and trying to mitigate the consequent effects. I look forward to the Minister’s response on how that has been happening in my local area.

Affordable Homes Bill

Ian Swales Excerpts

Friday 5th September 2014 Commons Chamber

[Tim Farron (Westmorland and Lonsdale) (LD)]

I want to say a few words in support of my hon. Friend the Member for St Ives (Andrew George) and his Bill. He has proudly put forward not just a single-headed, but a double-headed proposal today. We are talking about not only how to tackle some of the injustices and unfairnesses surrounding the spare room subsidy, but about how to look to the creation of more affordable housing and provide greater levels of stock across the country.

It is important to recognise that over the last few years we have acknowledged and seen an explosion in the housing benefit bill. That happened for a variety of reasons, but principally because of the rise in the cost of housing. While the Opposition when in government introduced the abolition of the spare room subsidy for the private rented sector, the coalition parties did so for the social rented sector. We understand the reasoning behind it, but we recognise, too, that the burden has fallen on some of the people least able to cope with the cost. We have not collectively, as either a Parliament or a country, tackled the real problem, which is of course the fact that there are simply not enough social rented homes and not enough homes generally.

I am proud of my hon. Friend the Member for St Ives for bringing this Bill forward, and I am proud of my party for pushing us all collectively to reflect on the proposals before us today. I would like to mention Vikki Slade and Julie Pörksen, who proposed at our conference a year ago that we look again at this policy. Frankly, Members of all parties would do well to admit that, on reflection, things could have been done better. Given that we were put in this economic crisis in the first place, it would be lovely to see from Opposition Members a change of heart and an admission that things did not go as well as they could have done.

Many people will be talking about the spare room subsidy today, and they are right to do so, but the second part of my hon. Friend’s Bill is equally important. The fact is that in 1981, the average deposit for a first-time buyer was 12% of the average income. Today, it is 83%, and nearly 3 million people aged between 18 and 30 are living with their parents, which is likely to go up by another 25% over the next five or six years. We have the lowest levels of home ownership in over a quarter of a century, and if we look at our social rented stock across the country, we see that it has been decimated over 30 years through the right to buy with no compulsion to replace the properties in any meaningful way.

[Ian Swales (Redcar) (LD)]

Does my hon. Friend agree that the record of the previous Government, which saw 420,000 social houses disappear from the stock, was truly shameful?

--- Later in debate ---

[Chris Bryant]

If the hon. Gentleman does not mind, I will make a little progress.

The bedroom tax was ill prepared and it has been very poorly implemented by the Government. It is riddled with logical inconsistencies—as we have heard several times already today—and it has a central injustice at its very heart: the poor and the vulnerable are being made to pay for a recession that was caused by irresponsible lending not by them but by the wealthy in the City of London and in other countries around the world.

Some Government policies introduced since 2010 have been incompetent, and others, I believe, have been unfair, but this one manages to combine unfairness and incompetence to a phenomenal degree—quite a feat—and I am delighted that not only the two hon. Members from the Liberal party who have already spoken will be joining us in supporting that conclusion today, but that, I hope, all the other Liberal Democrat Members will do so as well. What particularly galls me and many on the Opposition Benches is that this was not only predictable but was predicted by countless Members of this House and by countless organisations—the National Housing Federation, the Local Government Association, local authorities up and down the land, individuals coming forward to newspapers—yet all the warnings were completely ignored.

I am sure the Conservative Minister will tell us that the aim of the bedroom tax is solely to end overcrowding in the social housing sector—the hon. Member for Hornchurch and Upminster (Dame Angela Watkinson) was, I think, trying to suggest that earlier. The declared aim was to force the nation to use the social housing stock more efficiently. I am sorry, but I simply distrust Conservatives talking about the social housing sector. We now have the lowest number of social housing completions in 20 years. I have already talked about the way in which the right to buy was implemented. In 2010, one of the first things this Government did was to slash the affordable housing budget by 60%. How on earth can people make an argument in favour of social housing when they have just slashed its budget by 60%?

From the outset, the Government knew that the vast majority of people would not be able to move into smaller accommodation—not because they did not want to move, but simply because there were no other suitable properties. Indeed, such is the cynicism of this Government that that was factored into the original financial assumptions that they made. They did not presume that 75% of the people affected by the bedroom tax would move, or 50% or even 20%. Their working assumption was that fewer than one in 10 families affected would be able to move to a suitable property, yet they went ahead with their retrospective change to a benefit that goes to hundreds of thousands of people who are in work. That is another element that galls me. So often, the rhetoric—from Conservative Ministers in particular—has suggested that this is all about the workshy, but actually a great many people in receipt of housing benefit are in work. It is the matching of housing benefit and work that makes work pay and makes it possible for those people to work.

The Government’s own evaluation, published this July, makes really depressing reading on this very point. Just 4.5% of those affected by the bedroom tax moved within six months. In the areas with the fewest people affected, a higher percentage—some 16%—moved, but in some areas, the numbers were even lower. The Secretary of State seems to think that that represents a great success, but I disagree. It points to the real problem, which is that there simply are not enough suitable smaller properties to move into, and that the areas with the highest number of people affected have the fewest properties for them to move into. In other words, the poorest communities in this country are the worst hit, through absolutely no fault of their own. That means that, at a time of real financial hardship, money is being deliberately siphoned off from the poor at the rate of £14 or £22 a week.

[Ian Swales]

The hon. Gentleman represents a community similar to mine. Is he aware that this policy has created a new form of housing blight, in which we have three-bedroom properties boarded up while people requiring one-bedroom and two-bedroom properties are on the waiting list?

[Chris Bryant]

Notwithstanding the hon. Gentleman’s voting record in Committee, he is absolutely right on that point.

Another problem has arisen. For years, in order to tackle antisocial behaviour, local authorities and social landlords have often tried to limit the number of young families in a development. They can no longer make that judgment and the consequence has been a new rise in antisocial behaviour in areas where there are now too many young families, all because of the bedroom tax.

The National Housing Federation made it absolutely clear last year that there simply were not enough houses for people to move to. I do not know why Ministers and other Conservative Members do not understand that. In the north of England, families with a spare room outnumber overcrowded families by three to one. In other words, we would have to move thousands of families thousands of miles across the United Kingdom if the aim of using the housing stock more efficiently, as the hon. Member for Hornchurch and Upminster suggested, were to be met by this policy.

--- Later in debate ---

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I am pleased to be able to speak in the debate. I congratulate the hon. Member for St Ives (Andrew George) on introducing the Bill and making the case for it. He is sincere in his personal opposition to the bedroom tax. I am therefore pleased to support him in trying to do something about it.

Like the hon. Gentleman, and like all hon. Members—I am sure this applies not only to Opposition Members—many dozens of constituents have come to see me or have written to me about the policy. That is hardly surprising. Gentoo, the largest social housing provider in Sunderland, tells me that more than 4,000 households across the city’s three parliamentary seats are affected by it. I do not know what supporters of the bedroom tax among Government Members tell their constituents who come to their surgery or who write to them, distraught about the impact the measure is having on their already stretched and limited incomes. Perhaps supporters of the bedroom tax do not see those people. Perhaps they ignore the letters and e-mails. That must be the explanation—it is the only one I can think of for why Government Members stand up and speak in support of a policy that is causing their constituents such hardship. Which of those Government Members’ constituents are most likely to be affected? According to their own impact assessment, it is overwhelmingly disabled constituents—people for whom an extra room is often not a luxury, as we have heard, but a necessity. It is not a spare room; it is a room for their partner to sleep in because their disability means it is impossible for them to sleep together any more; a place for their carer to sleep in; a storeroom for the equipment they need to manage their condition; or, in the case of one of my constituents, a sensory room for a disabled child.

What do Conservative Members say to constituents who tell them these stories or to those who could do without the extra room, but for whom no suitable smaller properties are available? Yes, the Government have had to introduce the discretionary housing payments to avoid mass evictions across the country, but they are limited not just by a budget, but by strict criteria, as we have heard, that have led to cases such as the terrible tragedy mentioned by the right hon. Member for Mid Dorset and North Poole (Annette Brooke) of a disabled person committing suicide. There have been numbers of such cases across the country and it is an absolute disgrace.

[Ian Swales]

Does the hon. Lady share my concern that although when one writes to a Minister one is told that discretionary housing payments are the solution, disabled adults have to apply every three months on forms that are dozens of pages long? Is this not a demeaning process?

[Mrs Hodgson]

It is extremely demeaning. Once someone has applied and been approved, it should be on the understanding that their condition will not change. Why should something that made someone eligible change three months later? It leads to the added anxiety and mental health stress we have heard about.

Ministers argue that their policies will lead to a rationalisation in the allocation of social housing and to those in overcrowded conditions suddenly having access to hundreds of thousands of homes they believe are being under-occupied, but as we have heard from several Members, a negligible number of households have been able to do that. Fewer than one in 20 across the country have managed to downsize within the social rented sector, and just 1.4% have moved to the private rented sector. In some of the worst areas for under-occupation in my constituency, the numbers have actually gone up in the past year. What do Conservative Members advise constituents who come to them in this Catch-22 situation of not being able to afford to pay the bedroom tax but not being able to downsize to avoid it either?

What do they say when they hear the effect of having to pay the tax on the already stretched household budgets of those with the lowest incomes to start with? The consequences of losing £700 a year might be negligible to Conservative Members, some of whom might earn that in a few hours of work outside this place, but to the vast majority of people in my constituency, especially those affected by the bedroom tax, it is a significant sum of money and losing it forces them to make choices many Conservative Members could never imagine having to make. It is the difference between having the heating on or not; between eating enough food or not; between being able to afford a child’s school uniform or not.

Conservative Members need not take my word for it. The DWP makes it clear that families and households are going without essentials thanks to the decisions it took and a policy it continues to defend. It has to be said it has a lot of competition, but it is one of the most disgraceful policies to have darkened this House over the past few years. It typifies the DWP under this Secretary of State: vindictive and incompetent in equal measure. And it highlights the priorities of this Tory-led Government: pay-offs for those at the top, penalties for those at the bottom. The faces on those Benches might change, but the true face of the Tory party never does. I am therefore pleased to support the hon. Member for St Ives in at least trying to undo some of the most pernicious elements of this policy, and although I do not think it goes far enough, I sincerely hope the Bill will be allowed to progress to Committee so that we can make amendments there or later on the Floor of the House.

People across the nation know that it is, of course, the Labour party that has fought against the bedroom tax from day one. It is the Labour party that continues to lead the fight now, and it is only a one-nation Labour Government who will scrap this wretched policy, electorate willing, next year.

Pension Schemes Bill

Ian Swales Excerpts

Tuesday 2nd September 2014 Commons Chamber

[Mark Field]

I confess that I wholeheartedly support the Treasury’s belief in the principle of freedom to which my hon. Friend refers. It is right that we as Conservatives trust those who have worked hard and saved throughout their adult life to make their own decisions on their savings. Nevertheless, we must accept that the generous tax relief that attaches to private pension savings has always been predicated on the basis that, by providing for their old age, pension savers will not be a drain on the state. It will become ever more difficult to justify reliefs at the generous levels we have all been used to over the past few decades if the compulsion that goes with annuities or restrictions on access to savings is consigned to history.

I am also pleased that the coalition has consulted a little more widely on these plans, albeit somewhat belatedly. One hopes that some technical issues will be ironed out, but I wanted at this stage to make some more general observations. The Government have been commendably vigorous in reforming the pensions system since 2010. As the Minister pointed out, we are already on the third pensions Bill and he already has another in his sights. Eligibility for a state pension will only kick in at a later age. That has to be the right move forward. The earnings-related element of the pension has been abolished. We now have a system of automatic enrolment for employees. Many of these reforms have been undertaken for one simple reason: we could not go on as we had. Our understanding of retirement has changed beyond all recognition and comprehension since the state pension was introduced in 1909. Life expectancy then was lower, so there was no point in continuing the pretence that the state could adequately sustain decent incomes for generations that will now live for 20 or 30 years after retirement.

If the emphasis is now firmly on self-reliance and the ever greater involvement of private providers, the most crucial ingredient will be trust. If the law is essentially to compel citizens via auto-enrolment to hand over an unspent surplus of their hard-earned cash to what they may regard as the unqualified or incompetent, there is little incentive for anyone to save. Central to addressing all this must be a pensions industry in which there is universal public confidence and which willingly recognises a collective responsibility. As we know, we are a hell of a long way from that point. The regulator, encouraged by the Government, now needs urgently to engender a culture among the major institutions in the sector akin to that prevailing among the leading banks during the 1970s.

[Ian Swales (Redcar) (LD)]

Does the hon. Gentleman share my concern that the move to individualism will potentially shoot away the concept behind annuities, which effectively provide group insurance for life expectancy? Therefore, is he concerned about annuities having a bad name? Will the industry get its act together to provide the right kind of insurance products to substitute for annuities?

[Mark Field]

I do share some of those concerns. I agreed to a certain extent with the Opposition spokesman’s points about the tension that exists. There is a tension, perhaps an understandable tension, between the drive towards individualism, which as a Conservative I support, and elements of the collective nature of pensions that have hitherto been in place.

Unfortunately it is clear that confidence in the pensions industry has not recovered after the debacle of Equitable Life, with investment in a residential property seen as the more reliable bet to all too many of those planning their retirement. That applies to virtually everyone of my generation and I suspect to many younger voters, too.

If we are to reduce reliance on the state, we might also reflect on the sobering fact that, earlier this year, the Financial Conduct Authority found the average pension pot to be a mere £17,700. For all the promotion of pensions, no amount of legislation will overcome the fact that far too many of our fellow countrymen are too poor to save adequately for their retirement. I fear that will only become truer for younger generations who find an ever-increasing portion of salary dedicated to servicing high rents or mortgages based on inflated house prices.

I should like to touch on coherence across Government pensions policy, which was referred to earlier by the Opposition. On the one hand, the Government are trying to create a new regime which places much greater trust in the individual to manage their own retirement funds, yet on the other their new system of automatic enrolment for employees suggests they have limited faith—let us put it that way—that people will take sufficient responsibility for saving in the years preceding their retirement. Similarly, while there is an implicit understanding that the state will no longer be able to provide citizens with adequate incomes in retirement, the Government have made a costly commitment to the so-called “triple lock” which guarantees that the state pension will increase in line with wages, prices or 2.5%, whichever happens in any one year to be highest.

In short, the messages to the electorate on pensions remain mixed to the point of confusion. I am not being critical of the Government in this regard, because this is a very complicated area and there are those almost inherent tensions in the pensions system which have been referred to earlier, but it would be helpful if the Minister restated in his winding-up speech the basic principles that underpin Government thinking in this vital area.

As I have suggested, as a Conservative I instinctively welcome the notion that people who have saved and planned their finances carefully should be free to spend their retirement funds as they see fit. It is exciting to see the Treasury and the DWP inject the principles of trust and self-responsibility back into the heart of Government policy. Nevertheless, it would also be wise for the Government to examine whether such policies alleviate or potentially increase the burden on the state.

In this regard, I ask the Minister what examination he has conducted into the system in Australia. Some 20 years ago, the Government there made similar decisions to those now being made here on annuities. However, I understand that the Australian Government are now considering reversing that decision after their Murray review, examining their financial system, found that roughly half of those retiring take money out as a lump sum with a quarter of that group exhausting their funds by the age of 70. In addition, many had got themselves into debt in the years preceding retirement in anticipation of using the lump sum on retirement to pay off those accumulated debts, rather than using it for living expenses in retirement. What safeguards do we have in place to avoid such an undesirable outcome?

Turning to guidance, I have received constituency representations from an industry specialist who is concerned that the new pensions “guidance guarantee” has the potential to create widespread confusion among consumers and damage to regulated financial advisers. The Treasury has announced that under the new regime everyone will be provided with free guidance from bodies such as the Pensions Advisory Service and the Money Advice Service. The cost of this will apparently be borne by a levy on regulated firms. Not only will the new levy add cost to the operations of independent financial advisers, but they will essentially be funding a service that stands to undermine their own offering since many customers will now take the view that it is not worth paying for that independent advice. This in itself is not a problem for the consumer. However, financial advisers currently already operate in a very strict regulatory environment, whereas the guidance guarantee will set out generic options, such as whether an individual should consider an annuity or income drawdown, rather than specific recommendations. There is a danger, therefore, that many pensioners will see broad guidance as an inexpensive substitute for tailored, quality advice. My correspondent therefore recommends either that the Government’s delivery partners remove any suggestion that they will be providing advice rather than simply general guidance, or else that policy is delivered through regulated, private sector firms, perhaps through a voucher system, which would offer consumers the kind of helpful, impartial and personalised advice that they need.

Finally, I should like to say a few words on unintended consequences. It has been clear for some time that the annuity system was not designed to fund the kind of long retirements we have seen as a result of improved life expectancies. However, there are implications for the health of the wider economy if we turn our backs on annuities in ever greater numbers. The vast majority of annuity money is invested in bonds, a crucial source of alternative finance for businesses beyond the traditional banking system. This helps spread risk in the system by ensuring that problems in the banking system, such as those we saw emerge in 2008, do not completely turn off the tap of finance to the wider economy. Currently, those saving in defined-contribution pension schemes buy approximately £11 billion of annuities per annum, with around £7 billion flowing to firms through corporate bond purchases as a result. What consideration has the Minister given to a collapse in such purchases should there be a sudden drop in the sale of annuities, which might well happen as a result of these changes? While I expect this will be offset in part by a fresh flow of money from those pensioners who decide to reinvest their lump sums, this cannot be guaranteed and, as I have suggested, my fear is that, without sufficient trust in the markets, property and the rental income received from it will prove a very attractive destination for this cash. An unbalancing of the property market as a result would not be a desirable outcome of these changes.

While I should appreciate the Minister’s response to all the issues I have raised today, I would like to finish my contribution by reiterating my admiration for the boldness of the coalition in trying to tackle a pensions system that clearly is not functioning well for the majority of our fellow Britons.

--- Later in debate ---

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate and welcome the many positive measures in the Bill, which will substantially improve the pensions landscape in the UK—not before time, perhaps. I wish to touch on the two main areas that the debate is focused on: the introduction of the defined-ambition or shared-risk scheme, and the move to get flexibility at retirement age and the guidance that that involves.

We should pay tribute to the Minister for the fact that we have defined ambition in a piece of legislation; it has been almost a one-man dream for most of this Parliament, and perhaps we all thought it would not quite make it, but here it is in the Bill. If I appear generous in my praise for my coalition colleague, let me say that it was a brave thing for any politician to try to define a promise. We have all struggled with this: when is a promise not a promise? We know now that a promise is not a promise when it is an ambition. I think we were tortuously trying to work out in this Bill how to say what constitutes a complete pension promise and where something is not quite a promise but an aspiration, a hint, a suggestion or something more than a hope. I think that the Bill’s definition just about gets there, but I am not totally sure, without trying to work it through in various scenarios, that I can work out when a full pensions promise perhaps becomes a partial promise. That goes to the nub of the matter.

When we try to get into the detail of how we regulate these things and move them forward, we find how much of a promise or how much certainty or expectation can be created to allow one of these schemes to become a shared-risk scheme rather than a defined-benefits scheme or something that is no more meaningful than an existing defined-contributions scheme. Working out exactly what a good employer who is trying to be generous and helpful to their staff can say without falling foul of some of these rules will be hard. I assume that what we are trying to do is to say that under a defined-benefits scheme, if a person finishes their role on £30,000 a year, they will get a £20,000 a year pension. That is clearly a defined benefit. I suspect that what we are trying to say under defined ambition is that if a person finishes their role on £30,000 a year, and investment returns and longevity are just about what we expect, we think that we will be able to give them £20,000 a year. But if those assumptions are a bit out, we might have to put in a bit more money ourselves and they will get £18,000 rather £20,000. I suspect that that is the sort of promise we are trying to achieve with a shared-risk scheme.

It is not clear exactly how we can set the parameters. For example, when can £20,000 become £10,000? If there is a higher investment return, contributions can be reduced and we may still think that we can get £20,000. I think that we will just end up dropping back into regulatory uncertainty and all the issues that we have had on defined-benefits schemes. A lot of work needs to be done to get these schemes out in the market. We need to understand exactly how much risk the employer is running and how much certainty the individual gets; otherwise we are left with the difficult situation the Minister alluded to, where one side thinks it is an actual promise and the other side thinks it is a kind of hope. It probably means that whoever regulates these new shared-risk schemes will have an incredibly important role. In some ways, it will be even more difficult for trustees to administer defined-benefits schemes. I sense we will need a very competent and focused regulator looking at these things.

As I said in my intervention, it is a little difficult to see where the line will be drawn between defined benefit and defined ambition and between defined ambition, defined contributions plus and pure defined contributions. I suspect that before these things get into full speed, we will need one regulator doing all those things. If a scheme makes a bit of a promise and then withdraws it, does it drop out from being a defined ambition and become something else?

[Ian Swales]

My hon. Friend raises some excellent points. He does not specifically mention governance, which could make the thing slightly more complex because there is a third leg to the stool between the employer and employee. The explanatory notes talk about comparisons with schemes in other countries and use the expression “when governed appropriately” when talking about what schemes can provide. Has he any comments about the governance situation?

[Nigel Mills]

Yes. I have not been totally clear. I was alluding to the fact that these schemes will be even harder for trustees. I meant the trustees who try to govern these schemes. If we have a scheme that is giving a clear promise, we can create a set of assumptions. We will know how much funding we will need on top of our investment returns and longevity predictions. We will at least have some fixed parameters, so we can then define the contributions. If we even vary what we are promising to pay, we would have to take a really educated decision and say, “Shall we vary the promise down from £20,000 to £18,000, put up the contributions or a bit of both? Will it all be all right again in five years?” That will become quite difficult for trustees, and we will then really need the regulator to be able to check that trustees are capable and competent at dealing with shifting sands in these calculations.

DWP: Performance

Ian Swales Excerpts

Monday 30th June 2014 Commons Chamber

[Mr Duncan Smith]

My hon. Friend makes a huge and important statement. The inefficiencies and chaos under Labour were so great that the welfare system was haemorrhaging money. There was a 60% increase in welfare spending—the party that really presided over chaos and malfunction is the Labour party.

Before I get on to some of Labour’s spending commitments, I should say that the hon. Member for Leeds West said to the Minister, my right hon. Friend the Member for Hemel Hempstead (Mike Penning), that she had never had a letter from him. She has had many. In future, instead of making allegations, she might like to read her correspondence.

With a little over a year to go to the general election, this is the choice facing the electorate. On the one hand, there is the party that in government wasted £26 billion on botched IT programmes and lost £2.8 billion on catastrophic tax credit implementation, £500 million on scrapped Child Support Agency IT and £140 million on the axed benefit processing replacement programme in 2006. In opposition, the party has opposed every single measure of welfare reform and it would turn back the clock to reverse our progress—back to more borrowing and spending. Reversing the spare room subsidy would cost £1 billion over two years. The unfunded jobs guarantee has costs underestimated by £0.6 billion in the first year and £1.7 billion in future years. Skills training for all 18 to 21-year-olds below A-level would be hugely expensive given that 92% of all those not in education, employment or training do not even have GCSE numeracy skills. Paying older workers higher JSA would mean, because under-25s are already paid less, that money would have to be taken from those with lower contributions such as young people and carers. The welfare party has learned nothing.

[Ian Swales (Redcar) (LD)]

At one of my first Public Accounts Committee hearings in 2010, the permanent secretary of the Department said that, with the systems he had, he could not get losses through fraud and error much below £1 billion. Does the Secretary of State think we can do better?

[Mr Duncan Smith]

We have already saved over £2 billion on fraud and error. We continue to drive that process forward, and there are more savings to be made. We have done remarkably well considering what we were left by Labour, which, as far as I can make out, did not even bother to try to save any money on fraud and error.

Oral Answers to Questions

Ian Swales Excerpts

Monday 31st March 2014 Commons Chamber

[Esther McVey]

My hon. Friend will be pleased to know that we are introducing sector-based work academies. When people are nearly job ready, and when businesses in the care sector have jobs to provide, we bring young people together and give them work experience and training, and a guarantee of a job interview at the end of that. Forty per cent. of those young people are being given jobs in the care industry.

[Ian Swales (Redcar) (LD)]

7. What assessment he has made of the effectiveness of the benefit cap.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

12. What assessment he has made of the effectiveness of the benefit cap.

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

The benefit cap is working. The latest statistics show that 39% of those who are no longer subject to the cap have since moved into work. We will evaluate the policy thoroughly, and expect to publish the findings in the autumn.

[Ian Swales]

The average yearly pay in my constituency is about £21,000 before tax and national insurance. Does the Secretary of State think that a benefit cap of £26,000 gives people outside London an incentive to work?

[Mr Duncan Smith]

The introduction of the benefit cap meant that, for the first time ever, people who were out of work could not end up with more than the average earnings of people who work hard and try to make their way in the world. That was the first stage of the process. Obviously, as with all our policies, we continue to look at it, but I currently have no plans to change the existing levels.

Universal Credit

Ian Swales Excerpts

Tuesday 10th December 2013 Commons Chamber

[Mr Duncan Smith]

The proof of this will be as we roll out the programme. I say to the Chair of the Select Committee that we intervened early when there were problems. We did not let this programme roll out so that anybody was damaged, unlike the Government whom she served, who rushed IT programmes into service, damaged vast numbers of people and wasted a huge amount of money. I wonder whether the Chair of the Work and Pensions Committee ever asked the shadow Chancellor or the previous Prime Minister why they did that.

[Ian Swales (Redcar) (LD)]

Will the Secretary of State confirm that he has seen the Public Accounts Committee report of 7 November and will take notice of its recommendations, which should be helpful in executing this vital project?

[Mr Duncan Smith]

I can tell my hon. Friend that all the recommendations have already been implemented. They were drawn from our own reports internally—both the red team report that I instigated and the PricewaterhouseCoopers report—and all these changes have been made. This roll-out programme bears complete authority on the basis of that.

Housing Benefit

Ian Swales Excerpts

Tuesday 12th November 2013 Commons Chamber

[Ian Swales (Redcar) (LD)]

I previously opposed this policy not because I think we should necessarily pay money for spare bedrooms, but because the consequences that we have heard about today were highly predictable, and I shall speak about some of them. It is no wonder that we have a crisis in rents and social housing availability when 421,000 social houses were lost under the Labour Government—a truly shameful record.

We have also heard about the different effects of the policy in different parts of the country, and I find myself identifying most with the hon. Member for Liverpool, West Derby (Stephen Twigg), given the characteristics of my constituency. Social housing is in reasonably plentiful supply and regeneration is required in many areas, but we are now getting housing blight because of the availability of three-bedroom houses that people do not want to take. Previously, smaller family units were put into those houses, but people will not take them now.

As most hon. Members have said, there is a suitability of stock problem. My constituency made the front page of the newspapers after a calculation that said it would take 37 years to make available one-bedroom accommodation to all those who need it.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

The hon. Gentleman is making some interesting points. I recognise that situation in Newcastle. Given that Government policy is punishing people for a problem—the stock available—not of their making, will he vote with the Opposition?

[Ian Swales]

I worry that housing policy tends to be dictated from inside the M25. It becomes less appropriate the further away from the M25 that we go.

My constituency has a discretionary housing payments problem. The last figures that I have seen show that there were 1,307 applications, but that only 358 awards were made. That happened because the money ran out, not because the applications were inappropriate.

We also have a one-size-fits-all penalty in the calculation for the amount of the spare room subsidy. In my constituency, the cost of an extra bedroom is about £7, but people are penalised by about £11. Therefore, people who should move from a three-bedroom property to a two-bedroom property get less housing benefit than they would get if they were in a two-bedroom house, which is deeply immoral.

Like many hon. Members, I have campaigned on various issues. I am pleased to welcome the Government’s concessions on foster parents, serving military personnel and disabled children. I also welcome the trebling of discretionary housing payments, but there is a lot of unfinished business. The hon. Member for Aberdeen South (Dame Anne Begg), the Chair of the Work and Pensions Committee, made some good points. I would make a plea for the exemption of disabled adults. Children are exempt when they need separate bedrooms for medical reasons. Let us do that for adults, instead of making people go through the demeaning process of applying. In my local council, people have to apply every quarter, and the application form is deeply intrusive.

As the hon. Member for South Derbyshire (Heather Wheeler) has said, many people are perfectly willing to move to right-size accommodation, but it simply does not exist anywhere in their area. In the north of England, we have a shortage of one-bedroom accommodation. In fact, some one-bedroom accommodation is being demolished in my constituency.

[Steve Webb]

My hon. Friend is making a thoughtful speech. I assume that he has a Labour-run local authority. If it has told him that the money for discretionary housing payments has run out, will he ask it why it has not applied for our additional funding? It appears not to have done so.

[Ian Swales]

I thank the Minister for that response. His announcement of that extra funding is the first I have heard of it. I will ask my local authority why it has not applied.

We need to recognise that some people simply cannot afford right-size accommodation and that it does not exist in their area. The Government should seriously consider a policy of treating those people as willing but unable to move and give them concessions in the system.

In my area, there have been some helpful consequences. I have been thanked by a number of families who have managed, owing to the policy, to get a bigger house in the area where they want to live. One social housing provider I met was surprised by the number of large families moving into their houses from overcrowded private rented accommodation. I do not know why that provider was surprised; surely, we ought to have expected that. Only the week before last, I was in an excellent hostel run by Coatham House, a charity in my constituency for homeless young people. It has said that it has seen a dramatic fall in the number of homeless young people. It put that down to the policy. Hon. Members might think there are bad reasons for that—I can think of those, too—but there might also be good reasons.

Many points have been made in the debate. The hon. Member for Gateshead (Ian Mearns) mentioned the financial stability of some of the stock transfer social housing providers. Some of them are highly leveraged and threatened by arrears, which will increase when direct payments begin. They could find themselves financially unstable.

I welcome the Government’s efforts to free up the system. One of the first cases that I dealt with as an MP was that of a single man living in a three-bedroom house. He wanted to downsize, but the system was so rigid that he was told that he would be moved to the bottom of the waiting list, with no guarantee of how and when he would get his next social house. Guess what? He did not move. I welcome that the system has, to an extent, been freed up and that exchanges are happening more often.

I welcome the continued commitment to review the policy, as it does need continual review. Despite the views that I have expressed in my speech, it is hard to welcome the hypocrisy evident from the Labour party on this issue. I look forward to the Minister’s response.

[Mr Speaker]

Order. I am sorry to disappoint the House, but speeches have tended to be at the limit, with lots of interventions taken. I have to reduce the time limit with immediate effect to four minutes, otherwise colleagues will not get in. People do not have to take the full time, but they can.

--- Later in debate ---

[Kate Green]

My hon. Friend is absolutely right. Let us remember that disabled people’s options are more limited. A number of hon. Members have said that people should work, or work a few more hours a week. Often for disabled people it is particularly difficult to work or to do extra hours, and as my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) pointed out, that is a particular challenge for carers. One point that I do not think has been made, but which is extremely concerning for disabled people, is that many local authorities are treating disability living allowance as income when calculating someone’s entitlement to discretionary housing payment. That is a disgrace. I have challenged the Minister on that before, but he has declined to take action to ensure that all local authorities of whatever political colour have clear guidance on how they should treat the DLA.

As colleagues have pointed out, the policy will not achieve the savings that have been expected and scored by the Government because of the extra cost of having to adapt, readapt or undo adaptations to homes and, as my hon. Friend the Member for Hammersmith (Mr Slaughter) pointed out, because of the extra high cost of rent and therefore housing benefit in the private rented sector. There are the implications of higher levels of arrears and the extra cost of advising people in arrears, and of collecting and managing arrears. There is also, of course, the impact on the financial standing of housing associations. The policy is damaging their credit rating and cash flows, and makes it more difficult for them to undertake the new builds we desperately need.

As colleagues have said, we will see extra costs for local authorities, children’s services, the health service and so on, and we also highlighted the utter perversity of the fact that being in arrears means someone will not get another tenancy in a small property unless and until those arrears have been cleared. That is simply not possible for many families.

We were pleased—surprised, I think—to hear the Minister of State say at the beginning of the debate that if it turned out that the discretionary housing pot in a local authority was fully committed, more money would be made available. That was encouraging, and we would welcome his colleague repeating that commitment. Let us remember, however, that the discretionary housing payment is temporary, transitional and—as its name suggests—discretionary. In many cases, we have instances of local authorities denying people access to that pot of funding, and actively discouraging people from going to appeal.

The most cruel part of the policy is the lack of suitable alternative homes for people to move to. There is a lack of one-bedroom properties in certain parts of the country and, increasingly, three-bedroom properties are left lying empty. How can that be sensible? People are being forced to leave sheltered accommodation that, by definition, cannot be taken up by families who do not have the special needs or meet the criteria to live in those homes.

Hon. Members on both sides of the House have rightly said that the answer to the problem is to build more housing. I am proud that Labour has committed to building 1 million new homes—[Interruption.] Let me address Labour’s record on housing. Between 2000 and 2007, the Labour Government increased the number of additional net new homes in every single year. The Department for Communities and Local Government figures from last week prove that. The number of net new homes has declined in every year since 2007, including under this Government.

[Ian Swales]

rose—

[Kate Green]

I will not give way.

In 1997, when Labour returned to power, the Labour Government inherited an urgent priority to deal with the appalling quality of the housing stock. Our priority was to bring it up to decent standards. Of course, it would have been good to build more homes, but we had to bring existing homes up to a decent standard.

It is time to call a halt on the Government’s policy. A review in 2015 is too late. Labour will act as soon as it comes to power to abolish the policy, but I hope the Government commit to abolishing it now.

Pensions Bill

Ian Swales Excerpts

Monday 17th June 2013 Commons Chamber

[Mr Byrne]

I very much hope that the hon. Lady will be on the Bill Committee to ensure that such arguments are fully rehearsed. I am worried that an injustice is being perpetrated on these women, which is why it is incumbent on us all to search every possible option to help ensure that they can be included and not excluded, particularly in the context of changes to auto-enrolment that have moved 1.1 million people out of that future.

[Ian Swales (Redcar) (LD)]

I declare an interest in that my partner was born in exactly this period. In this spirit of equality, is the right hon. Gentleman proposing that these women should have their retirement age equalised with that of men?

[Mr Byrne]

As the hon. Gentleman will know, many of these women have already been hit by the acceleration of the state pension age at very short notice, so no—we want to search during Committee stage for ways to include these women. I know there will be many women in such a position in his constituency, and I am sure he will want engage in that debate.

--- Later in debate ---

[Nigel Mills]

I think we recognise that in any change some people will lose out—it was particularly difficult to explain that point to those women whose retirement age increased at the start of this Parliament—but sadly these things are necessary in our financial situation.

[Ian Swales]

I recognise the hon. Gentleman’s expertise on these issues. Does he agree that we have a big job to do on communication, not just around the new flat-rate pension, but around how various groups will be affected? For example, MPs are already getting representations from existing pensioners who feel that the new arrangements are unfair on them. Communication is key.

[Nigel Mills]

I agree wholeheartedly. I think we have all had people come to us with calculations saying, “What will I get under this new pension? What would I have got?” When trying to talk them through it, there is an especial problem with people who do not understand that those who have contracted out for most of their working life will not get the full £143. They think a bonus is coming—that they will be £35 a week better off—whereas they might just miss out. We need to write to people before the change, saying, “Here’s what you’ve accrued”, “Here’s what will happen after the change”, “It looks like you’ll get your full £143 a week”, “It look like you won’t get the full £143 a week”, “Here’s what you can do”, “Are you due any credits for periods spent caring for children or other things?”, “Have you missed any years’ contributions?” We have to communicate all that clearly so that people have the information in time to make those decisions.

--- Later in debate ---

[Dame Anne Begg (Aberdeen South) (Lab)]

It is important that any pension reform has support in all parties across the House, because the last thing we want is for pension reform to keep changing every time a new Government come in. Up to now, the reforms introduced by the Labour Government in 1997 and later have not been changed by the present Government—I will talk about pension credit later. The proposals we are discussing in this Bill build on a number of those reforms, particularly auto-enrolment and changes to the occupational or second-tier part of a pension.

It is right that we should support the principle of this Bill. It is crucial that people know what pension they can expect from the state; I am glad that they will be able to expect a state pension in future. There has been a lot of debate in various media and elsewhere about whether future Governments will be able to sustain the whole principle of a single-tier pension or even the first tier of a state pension. I pay tribute to the Government for nailing the fact that this is what the future will hold. There will be an element that is not quite universal, because people will have to pay in, but everybody who has lived, worked and cared in the UK for more than 10 years—and up to 35 years—can expect a basic pension from the state, and everybody will know how much it will be.

There is a huge mismatch between what people expect on their retirement and what they are saving. The Scottish Widows report published the other week showed that most people want an income of around £25,000 in retirement, yet less than 20% of the population are saving at a level that would take them even remotely close to that. Even with the reform of the state pension and the introduction of auto-enrolment, people’s income in retirement will still not come close to the £25,000 that they might expect or aspire to. However, it will come a bit closer as a result of these reforms, because establishing a single-tier pension—a flat-rate pension—will make it easier for those giving advice to people saving for their retirement to say that it will always pay to save.

My right hon. Friend the Member for Birmingham, Hodge Hill (Mr Byrne) provided an example of where savings might not necessarily give someone a larger income in retirement, but the measures in this Bill will generally make it easier for those kind of calculations to take place and will make it easier and more understandable for people to realise just how much they are going to have to contribute to get an income that comes close to what they desire.

The introduction of the single-tier pension will also reduce means-testing, but only if the flat-rate pension is set above pension credit level. One of the Select Committee’s recommendations in our pre-legislative scrutiny report was that there should be clear blue water between the level of the single-tier pension and the pension credit—a bit more than the £1 and something that is there now. We had hoped that that principle would be built into the Bill and we are disappointed that the Government did not see their way to doing that. The principle is important —that the single-tier pension will always lift someone out of the basic means test.

Pension credit has come in for some criticism today, but at the time, it was absolutely the right thing to do, because the biggest issue that needed addressing in 1997 was that of pensioner poverty. Thanks to a level of success, the pension credit has managed to lift 2 million pensioners out of poverty. It means, too, that pensioners are not generally living in poverty; being old no longer equates to being poor. There are still people who are old and poor, but not in any different proportion than can be found in the general or working-age population.

[Ian Swales]

Does the hon. Lady regret the fact that two out of every five people who qualify for pension credit do not claim it, and does she welcome the measures in the Bill that will reduce the number of people who have to face the issue of means-testing?

--- Later in debate ---

[Greg Mulholland (Leeds North West) (LD)]

It is a pleasure to follow the hon. Member for Aberdeen South (Dame Anne Begg), Chair of the Work and Pensions Committee. I had the pleasure to serve alongside her throughout the last Parliament when we were both members of the Committee. Together with our Committee colleagues, we wrestled with many issues, including pensions. I am delighted she is now in the elevated position of Committee Chair and is continuing to demonstrate to the House the importance of the Select Committee system. It brings expertise to bear on subjects, both through the members who take a particular interest in a set of issues and the staff who support Select Committees so well and provide them, and therefore the House, with real expertise and analysis. I hope that that continues throughout the passage of this Bill.

I am delighted to welcome the Second Reading of this hugely important Bill. It is hugely important for both now and the future, and also for the country as a whole, not just our older citizens. The state clearly has an obligation to our older citizens; that is something that, despite our political differences, each and every Member of this House strongly believes. I concur with the hon. Lady’s comments about the continuation of a state pension for all in this country, and I am delighted that, across the political spectrum, we continue to believe in that.

That is not only an obligation, however; it is also financially sensible. It makes financial sense to have a simple state pension that gives people not only a fair basic level of income in retirement provided by the state, but certainty as to what the state will provide in their retirement. That entails certainty about what they need to do in respect of their income throughout their working life, which will, of course, fluctuate, in order to add to the amount and get to the levels of pension income they would want. The simple reality is that the current system is not sustainable financially, is far from universal and in many ways is simply unfair.

I am delighted that Members on both sides of the House with an interest in pensions issues have welcomed the principles of this Bill, and that many have welcomed the practical details, too. I must say, however, that I am proud that my party, the Liberal Democrats, have championed this for a long time. The pensions Minister, my hon. Friend the Member for Thornbury and Yate (Steve Webb), has led us to this day and the publication of this Bill, and he knows, as I do, that the Liberal Democrat party as a whole passed our policy of a citizen’s pension back at our federal conference in 2006, and that that has become the blueprint for the single-tier pension presented in this Bill.

Such a pension was also at the heart of our manifesto in 2010 as one of the key things we would want to introduce if we were in government, as we now are. Our manifesto said we were committed to

“immediately restore the link between the basic state pension and earnings”,

as well as moving towards the kind of pension we have today.

I am glad other Members have paid tribute to my hon. Friend the Member for Thornbury and Yate, and I join in those congratulations. He has shown his dedication, remarkable intelligence and expertise throughout the introduction of this reform, and I hope he will continue to lead on it. It is notable that he is already by some margin the longest-serving pensions Minister we have ever had in this country, and I hope he manages to add to that record with at least another period of the best part of two years as we take this important reform through.

Why are the Government doing this? Indeed, why are Members on both sides of the House aware that we have to make changes, as the Committee Chair, the hon. Member for Aberdeen South, made clear? I shall tackle the controversial issue first: we have not grasped the simple reality that for some time there have had to be changes to the retirement age. That has been ducked, which is understandable, as it is never going to be easy or popular, but it can be ducked no longer. The state pension age has been 60 for women and 65 for men since the 1940s. There has also been a strange and institutionalised form of unfairness between the sexes, and it is right to tackle that, particularly as we have known for some time that men have a slightly lower average life expectancy than women.

The reality is that our population is rising most quickly in the oldest age groups. The pensioner population is projected to increase from 12.2 million in 2010 to 15.3 million in 2035 and 18.3 million by 2060. Cohort life expectancy at age 65 is projected to increase from 21.0 in 2010 to 24.0 in 2035 for men, and from 23.7 in 2010 to 26.6 in 2035 for women. The Government estimate that even now almost 11 million people in the current work force face inadequate retirement incomes. The number of people currently saving in an occupational pension scheme has fallen from a peak of just over 12 million active members in 1967 to 8.2 million in 2011.

On unfairness, under the current pension system, the self-employed cannot get any more than £107.45 in basic state pension, despite the means-tested threshold being set at £142.70. More significantly perhaps, as this applies to everyone, at present some people—130,000 people in fact—get as little as £7 a week or less in basic state pension, while the same number of people get £230 or more a week. It is complex, it is not fair and it is not sustainable.

Let us look at the key groups and the need for reform. The first and most obvious change, and in many ways the most welcome, is what the reform will do for women. The single-tier pension will give a better pension to women, and it will clarify for them—as it clarifies for all pensioners—what they will receive from the state. The terrible reality is that under the current complex state pension system, on average women receive £40 less per week than men. The single-tier pension is, at its heart, devised to address that inequality, and also to count fully time spent out of work caring for children, which applies predominantly to women.

Secondly, I have mentioned the self-employed; across the political spectrum, we pride ourselves on recognising the importance of our self-employed and applauding the contribution they make to our country. They drive the local economy, contribute to the national economy and pay tax, yet they are so disgracefully discriminated against in the current pensions system. I warmly welcome the fact that that is being rightly recognised.

One healthy thing about the broad consensus on the need for reform and on the principles of that reform is that we can—I hope—have more thorough, positive and helpful scrutiny of the Bill. I echo the Select Committee Chair’s comments about the need for support from across the House to enact changes of this nature. At the same time, we should rightly ask the difficult questions and challenge every clause. The hon. Lady and her Committee have started that process, doing so at the pre-legislative stage, and it needs to happen throughout the passage of the Bill, with expertise and dedication coming from all who serve on that Committee.

Constituents have come to me to discuss the issue affecting women born between 1952 and 1953, which has been mentioned by hon. Members. I have spoken to the Minister about it, and I know that he and colleagues have examined it. I urge for much better communication on the issue so that we can ensure the Bill is as fair as possible. Perhaps the most telling thing that the Chair of the Select Committee said is that this matter will continue to be complicated; it will be all the way from now until we get to the stage at which citizens of this country know, from now, “I will have this pension when I retire.” All the other people in between will, by definition, have to go through the transitory arrangements.

I warmly welcome the work that the Minister, his colleagues and the civil servants have done to tackle the enormous complexities of dealing with the different systems and the transitional arrangements to make sure that what we have is fair, so that people who have contributed in different ways and have certain reasonable expectations of income will not be penalised. This will get simple in the end, when we reach the stage at which every citizen in this country knows precisely what the state will provide for them in old age, so they know exactly what they have to do. They need to be signposted to the correct advice on how they build up other forms of pension. I warmly welcome the work on auto-enrolment.

[Ian Swales]

My hon. Friend is making a powerful and persuasive speech. Does he recognise the point I made earlier about communication? Does he also recognise that certain cohorts need to be given clear information very quickly, as there are women born in 1952 who will be pensioners by the end of this year?

[Greg Mulholland]

My hon. Friend was right to raise that point, which was echoed by the Chair of the Select Committee. I am slightly worried that the letter she received sounds not to have been as clear as we would hope—that might be a euphemism. Given that all this good work has been done by civil servants and Ministers, we need to ensure that the communication to citizens of this country is better than it sometimes can be; things can be let down at that stage. There must be proper communication with all the different cohorts of people in their different situations, and that needs to take place as soon and as clearly as possible.

In conclusion, this is a historic day. I warmly welcome the principles of and measures in the Bill, and the way in which it has been handled. I look forward to contributing throughout the passage of this historic Bill, which will give people in this country the certainty, simplicity and fairness that all in this House would demand of a state pension system.

Oral Answers to Questions

Ian Swales Excerpts

Monday 28th January 2013 Commons Chamber

[Mr Duncan Smith]

I do not believe that there will be an impact. [Interruption.] The Opposition should look to their own record and the housing benefit mess that they left us. They left a rising bill that had doubled in nearly 10 years, so it would be better to have a little less from them. We are trying to ensure that those who are paying this money are not allowed to slip into debt for any great length of time. That matter is being discussed with housing associations and we are making good progress on it. I believe that this approach will help people who are trying to get back into work enormously, rather than their being treated as though they are children who have to have all their bills paid for them.

[Ian Swales (Redcar) (LD)]

A constituent of mine who did a few extra hours at Tesco before Christmas faces losing her income support and carer’s allowance for a whole month and will be much worse off. Does the Secretary of State agree that that shows the injustice of the system left by the previous Government, and that universal credit is desperately needed?

[Mr Duncan Smith]

That is exactly the point. My hon. Friend hits the nail on the head. The mess of all the chaotic benefits left by the last Government, many of which contradicted each other, meant that people were not incentivised to go to work for anything more than 16 hours in some cases. Many people who could have got themselves out of poverty by working did not do so because they were penalised by the system. That is the shame of what the last Government left behind.