Income Tax (Charge)
Julian Lewis Excerpts(2 weeks, 3 days ago)
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Sir John Hayes (South Holland and The Deepings) (Con)
Aristotle said that the state exists to advance the wellbeing of its members; a state that fails to advance its people’s wellbeing is not merely a state that acts badly, but an institution that has failed to achieve its defining purpose. Such a positive vision of the state requires strong institutions that are able to act, with a Government accountable to the people but free to take actions driven by what Disraeli understood to be the social welfare of the people.
A Chancellor who hides behind the supposedly impartial pronouncements of the OBR is incapable of delivering real, meaningful change. Restoring accountability in practice requires two parallel processes: first, political control of decision making must be rebuilt; secondly and equally importantly, a greater sense that the public have a stake in society—and by implication the state that serves it—must be engendered.
Restoring political accountability means removing what the economist and writer Dan Davies has termed “accountability sinks”: the mechanisms that ensure that nobody is to blame when things go wrong. Accountability sinks are one of the greatest banes of modern life, from automated call centres to computers that say no to applications for loans or other financial services. They are a matter of design, not accident. In the private sector, they can shield organisations from legal liability, as happened in the Post Office scandal. A decision made by an individual is much more open to question than one that is the consequence of a general policy.
In the public sphere, accountability sinks often shield politicians and other public servants from genuine accountability for Government policy. Privatisation, contracting out and private finance initiatives have all been used as ways of shifting responsibility from Government to market forces. The establishment of an independent Bank of England with an arbitrary inflation target is a classic example of a generalised policy that has replaced specific individual decision making and responsibility. Similarly, the Office for Budget Responsibility was established explicitly to protect the Treasury from taking responsibility for Budget forecasting. As Davies notes, the role of the courts and international bodies is similar.
Sir Julian Lewis (New Forest East) (Con)
Is my right hon. Friend suggesting that we ought to replace those bodies and have the Government re-adopt responsibility for economic policy in the round, such as by setting targets for inflation, instead of saying, “It’s all down to an unelected body”?
Sir John Hayes
Absolutely. Restoring accountability means reversing many of the processes that have been taken as read in recent years. Democracy is dependent on clear lines of accountability, but in the past 40 years they have been either diluted or displaced. Is it any wonder that the public feel disillusioned with the exercise of power as a result?
The British economy has suffered more at the hands of neoliberal globalisation than those of most of our competitors. Foreign ownership of UK public firms has risen from just over 10% in 1990 to 55% in 2020. Ownership has become remote and unaccountable to workers, customers and even shareholders. Credit creation has facilitated the growth of private equity and leveraged buy-outs. Private equity firms have been able to take on vast amounts of debt in order to take over businesses.
Our economy is controlled by oligarchies careless of their customers and their employees. The result has been to make all other business objectives secondary to the imperative of having enough cash to survive. As Davies puts it, the debt burden “creates an ultimatum”: if companies do not put their efforts into making profits, they go bust. Our constituents can see the increasing power of unaccountable globalist enterprises and can see the Government’s inability to do anything about it, just as farmers can see that the Government’s policy on inheritance is completely belied by the fact that most asset-rich farms do not make a lot of money. It is not about assets; it is about income. Such disillusionment is socially corrosive, but it is justifiable when the most important economic decisions are taken by commercial entities with no regard for the needs and values of the people.
Turning the ship around requires radical concerted action, not just platitudes. We need a new economic model—one that harnesses the power of the state to break up the power of rentier capitalism and restore an economy that works for society, not against it. Fraternal economics is the means; popular wellbeing is the end.
Carer’s Allowance
Julian Lewis Excerpts(1 month ago)
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Ed Davey
Thank you, Mr Speaker. The hon. Gentleman is of course right and I pay tribute to his constituent, who was lucky enough to be presented the award by Mr Speaker. He is right about the mental health of carers. NHS data shows that the mental health of carers is twice as poor as it is for the population at large because of the isolation, so that issue is absolutely a part of this debate.
Sir Julian Lewis
Before the right hon. Gentleman resumes his narrative—he speaks with huge authority on this subject—can he underline what he told the House before the previous intervention? This was a case where someone reported what they were doing, was wrongly told it was okay to proceed and was then hit with a bill for thousands of pounds retrospectively. Surely that is incompetence and maladministration. Is there not any way for that person to have recourse to justice?
Ed Davey
The right hon. Gentleman makes exactly the right point and as her MP I am pursuing that line of argument, but we need a change of culture and attitude at the DWP to be able to proceed with these cases on behalf of our constituents. She told me that the whole thing makes her want to give up caring and give up working. That is how affected she has been. Who is it helping, when carers feel like that?
I am sure that someone, somewhere in the DWP or the Treasury, thinks this sort of penny pinching saves the Government money, but they could not be more wrong. It is millions of carers like Andrea who save the Government money: £162 billion a year, according to Carers UK, through the vital work they do for free. When badly designed Government policies fail to support carers and instead push them over the edge, the real cost—an enormous cost—is to taxpayers and the economy.
There are so many stories like Andrea’s. Government figures suggest that more than 130,000 people have outstanding carer’s allowance debt, some going back years. According to the DWP’s own figures, last year alone there were 34,500 overpayments due to the earnings limit. We have heard how carers have even been threatened with prosecution. This is a terrible scandal: tens of thousands of carers becoming victims of a system that is supposed to be there to support them.
Although the stories we have heard in recent months have been truly shocking, they are not new. The Work and Pensions Committee launched an inquiry into this issue almost six years ago, back in 2018. The National Audit Office published its own report in 2019. The last Government should have acted then, but they did nothing. I raised it with the last Prime Minister. He did nothing. Conservative Ministers failed to tackle it for the entirety of the last Parliament. They just passed it on to the new Government, as yet another part of their legacy.
I raised the matter, therefore, at the new Prime Minister’s first oral questions in July. Although he was non-committal, I am genuinely pleased and grateful that Ministers have now announced a review, at least into the scandal of carer’s allowance overpayments. Whether that was in response to our motion, I will let others decide. I hope the Minister will say a lot more about the review when she speaks and how the Government are thinking about that. I hope the debate can be seen as the first input to, or kick-off of, that review. I certainly hope the Minister will make it clear that the review will not be a repeat of the type of review we had in the last Parliament, when Conservative reviews were set up primarily for delay and kicking issues into the long grass.
As I hinted at during today’s Question Time, my concern about the review is that the evidence to make a decision is already well-founded, with two recent Select Committee reports and mountains of evidence immediately available from organisations such as Carers UK or Carers Trust, and the National Audit Office carrying out its second review in just five years over the last four months. I ask the Secretary of State, therefore, to reshape the review that she has announced, because it is self-evident that the vast majority of overpayments of carer’s allowance should be written off immediately. I accept that there may be a few cases of genuine fraud in which that would not be appropriate, but the DWP should not be persecuting tens of thousands of carers whose overpayments were caused by the crazy cliff edge in the current carer’s allowance system, and by the DWP’s own incompetence in failing to notify them of overpayments immediately.
Some changes could be made to the rules that are just common sense, making it easier for carers to juggle work and care and thus boost our economy, such as raising the earnings limit and replacing the cliff edge with a taper. There are changes that do not need a long review; there are decisions that can be taken now, or at least very quickly. However, as our motion says, we need to go further for carers than these obvious and relatively simple decisions. The Government should conduct a full-scale review of all support for carers, so that we can make it easier for them to carry on caring and to juggle caring with work. That will be better for them, better for their loved ones, and better for our economy.
I urge the House to pass the motion. Let us not allow carers to be forgotten and ignored any longer.
Oral Answers to Questions
Julian Lewis Excerpts(1 month, 2 weeks ago)
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Sir Stephen Timms
My hon. Friend asks an extremely good question. The policy of the previous Government was to publish all such commissioned research reports within 12 weeks of receiving them. That policy was complied with until 2018, when Ministers stopped complying with it, so we have had to publish all these reports today. My right hon. Friend the Secretary of State’s announcement is a vital first step in rebuilding the trust in the Department that was so shattered by the culture of secrecy, obfuscation and cover-up by Conservative Ministers.
Sir Julian Lewis (New Forest East) (Con)
In response to several hon. Members, Ministers have spoken about the complexity of the ombudsman’s report on the WASPI campaign. While appreciating that, may I ask for a statement in principle that the Government will eventually offer significant compensation to the WASPI women?
Emma Reynolds
As I said previously, the ombudsman took six years to consider this complex case. We are looking into it very seriously, but I cannot make any announcements today. The right hon. Gentleman will have to wait for our announcement on this issue.
Social Security
Julian Lewis Excerpts(2 months, 1 week ago)
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Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I recognise the serious economic context of the debate today. The Institute for Fiscal Studies, for example, has estimated that 320,000 people are being pushed into poverty because of mortgage interest rate rises triggered by the disastrous autumn 2022 mini-Budget, and of course the then Prime Minister made many unfunded policies.
I recognise that the policy measures in the King’s Speech will go a long way to reduce household costs and increase incomes in the medium term, but those tackling the appalling poverty that we are seeing will not come in time for this winter. I am proud that Labour are continuing with the triple lock on pensions, something that will be worth an extra £460, but that will not happen until next spring. The setting up of a new energy production company, Great British Energy, alongside making homes more efficient, is a fantastic initiative that will contribute to our net zero targets and reduce energy bills for millions, but again that will not be in time to offset the 10% increase in energy bills this winter. I support our focus on growing our economy, but again that will not happen overnight.
The Joseph Rowntree Foundation estimated in its report earlier this year that there are 2 million pensioners living in poverty—about one in six of all pensioners. In areas such as my constituency, poverty rates are much higher. We have one in two children living in poverty. From the figures, we estimate that will be the same for pensioners. We know that four in 10 older people in Oldham East and Saddleworth have a disability, and almost half have a long-term health condition. We also know that, even before the escalation of energy costs, over one in six households were living in fuel poverty. Although pension credit provides extra financial support for the poorest pensioners, and opens up help such as housing benefit and council tax discounts for those who are eligible for it, only 5,500 of the 9,000 households in Oldham are eligible to claim it. Again, I welcome the automatic linking of pension credit to housing benefit to increase the uptake, but this again will not happen in time—in the next few months.
Debbie Abrahams
I am not going to give way. I thank the right hon. Member, but I cannot because I am under strict guidance from the Deputy Speaker.
One in three pensioners living in poverty are in the private rented sector, so what are we going to do about that? Even if everyone eligible for pension credit were claiming it, according to Age UK, there would still be another 2 million pensioners slightly less badly off who will not be eligible for pension credit and now the winter fuel payment. The cut-off threshold for pension credit is just under £12,000 a year for a single person. These are not wealthy pensioners. Poverty is poverty whoever experiences it, and we know that we have 8 million working people living in poverty, as well as 4.5 million disabled people, 4 million children and 2 million pensioners. As we did in previous Labour Administrations, I know we will tackle this, but again it will not happen overnight.
Could I point out what we know about the health effects of the cold? The Lancet published a very good paper reviewing data from the last 20 years, and it showed the extra deaths—the excess deaths—as a result of cold. I could mention dozens and dozens of cases from my constituents who have written to me and who, again, are just clinging on following the last 14 years. Is my right hon. Friend the Secretary of State able to say not just what other options she may have considered for offsetting the loss of the £300, but what alternative ways there are of raising the £1.4 billion we will get from means-testing the winter fuel payment? I know how complex and difficult our economic situation is, but, please, we must protect our most vulnerable citizens.
Women’s State Pension Age: Ombudsman Report
Julian Lewis Excerpts(6 months, 1 week ago)
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Andrew Selous (South West Bedfordshire) (Con)
It is a privilege to speak in the debate. When my constituents who have made a complaint come to see me, we quite often get to a stage at which I recommend the ombudsman to them. I regularly say to them, “Have faith: ombudsmen quite often find in favour of the complainant.” Ombudsmen are there for a purpose. We cannot merely support the institution of the ombudsman when it makes a convenient finding for the Government of the day. We have to accept its decisions if we are to have an ombudsman. We all know that trust in politics, politicians and MPs is at something of a low point at the moment, no matter what party we are in. I think that is very unfair, because most people in this House, of all parties, are decent people doing their best for their constituents and working very hard, so that reduction in trust really worries me. The response of the Government and Parliament to the ombudsman’s report is really important, because it touches on the issue of trust in our institutions, which have been through a very difficult time.
Sir Julian Lewis (New Forest East) (Con)
I warmly welcome the thrust of my hon. Friend’s argument. For the benefit of the record, I draw his attention and that of the House to paragraph 459 of the report, which states:
“For most sample complainants we consider the primary injustice is that they were denied opportunities to make informed decisions about some things, and to do some things differently, because of maladministration in DWP’s communication about State Pension age. That is a material injustice.”
Andrew Selous
I am grateful to my right hon. Friend. What he says is accurate. He quotes from the report; it was in July 2021 that the ombudsman found maladministration. In the report on 21 March, it said that that had led to an injustice. Like my right hon. Friend, I will quote briefly from the ombudsman. It said of the Department for Work and Pensions that
“in 2005 it failed to take adequate account of the need for targeted and individually tailored information. In 2006, DWP proposed writing directly to women individually to let them know their State Pension age had changed, but it then failed to act promptly. We found that if DWP had made a reasonable decision about next steps in 2005, and then acted promptly, it would have begun writing to affected women by December 2006.”
My right hon. Friend and other Members will have seen that in the back of the report, there is a table showing what should have happened when.
I, too, have constituents who wrote to me to say that they were very close to the age of 60 at the time. Some had worked all their working life, since the age of 15 or so. They had made all their plans on the basis that they could get their pension at 60, and they literally found out about the change from colleagues in the workplace, sometimes very shortly before they thought they were due to retire.
Peter Aldous
My hon. Friend makes a good point. It is a side point to the main point, but nevertheless the PHSO has pinpointed that issue. These are debates for another day. I suspect the right hon. Member for East Ham and his Committee need to look at these issues in more detail, but the PHSO has shone a spotlight on a wider problem.
The aims of the APPG that I co-chair with the hon. Member for Salford and Eccles are threefold: first, to represent those women who have been treated unjustly by the short-notice changes to the state pension age, 280,000 of whom have died, according to WASPI, since the start of the campaign; secondly, to develop and promote policy solutions to support 1950s-born women and their families who do not have access to their pension and are facing mental and physical health consequences; and thirdly, to feed the views and experiences of 1950s-born women into future policy decisions relating to state pensions and welfare.
Over the years, the APPG has had regular evidence-gathering sessions with various representative groups, and we have considered policies and initiatives to best help and assist them. In January 2022, the APPG made its own submission to the PHSO about the level of compensation that should be provided. I give special thanks to the hon. Member for Denton and Reddish for the work that he and his office did putting that together. Based on the evidence presented to us from across the UK, we reached what, for us, was the logical conclusion that level 6 of the PHSO’s compensation scale should apply. Subsequently, we refined that recommendation by proposing that compensation should be provided in a bell curve, with those who received least notice of the longest postponement receiving the most compensation, and those who received longer notice of shorter increase receiving lesser sums.
Sir Julian Lewis
May I take the opportunity to thank my hon. Friend for his key role in the APPG? I put on the record the dignified and well-informed views of local WASPI co-ordinators in my part of the world, Shelagh Simmons and Sal Robinson. We heard an intervention suggesting each case should be judged on its individual circumstances. I can see the merit in that, but it would have a devastating effect on the speed with which we would come to conclusions. What balance does my hon. Friend think should be struck on those two factors?
Peter Aldous
My sense is that there is a need to strike a balance, as the PHSO says. A way forward is beginning to emerge from the work of the APPG and the Select Committee, and I will elaborate on that.
Since the PHSO published its report on 21 March, the APPG has sought to play its role, as part of Parliament, in finding a fair and just mechanism, as quickly as possible, as the PHSO asked Parliament to do. The hon. Member for Salford and Eccles and I wrote to the Secretary of State for Work and Pensions, and we have subsequently met the Minister, my hon. Friend the Member for Blackpool North and Cleveleys (Paul Maynard), who is now back in his place. I thank him for the hearing he gave us.
Last Tuesday, the hon. Member for Salford and Eccles and I appeared before the Work and Pensions Committee —likewise, I am grateful to the right hon. Member for East Ham and his colleagues for the fair and full reception they provided. We are holding our own evidence sessions with the various representative groups; the first three sessions took place on Monday and there are more to follow. This is a complicated matter. While the APPG is yet to reach a settled and final recommendation about the form a compensation mechanism should take, it is fair to say that ideas are fast evolving and are pointing in a direction.
Pension Schemes
Julian Lewis Excerpts(6 months, 3 weeks ago)
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Mr Alistair Carmichael (Orkney and Shetland) (LD)
I beg to move,
That this House has considered pension schemes.
I am grateful to the Backbench Business Committee for allowing time for this debate. I last spoke about this issue in a half-hour debate in Westminster Hall on 17 January, and there have since been a number of significant developments, not least the third report of the Work and Pensions Committee, which is a good and substantial piece of work. I am delighted to see its Chair, the right hon. Member for East Ham (Sir Stephen Timms), in his place, and I will touch on the report towards the end of my comments.
Events have unfolded for the various pension schemes over the last few months, and what I spoke about in January as being particularly pertinent to the beneficiaries of the defined benefit schemes at BP and Shell has begun to look more like a wider course of conduct. There are significant developments under way, not least the Government’s recent consultations, which could significantly shape the way in which defined benefit pension schemes treat their beneficiaries in the future.
Although I initially thought that I was dealing with a couple of oil companies, I now see that it is a range of different companies. Yesterday I read an alarming brief from the pensioners of Hewlett-Packard. It is pretty clear that, as this area of pension policy develops, an ever larger number of large corporates will take the same path as BP and Shell. Ultimately, it will be our constituents, as beneficiaries, who lose out if we get it wrong and if these companies are allowed to do as they wish, rather than as they ought, on the position of their pensioners.
Sir Julian Lewis (New Forest East) (Con)
I am grateful to the right hon. Gentleman for securing this debate. I have been contacted by three retired members of ExxonMobil, which has a very large refinery in my constituency. I was reluctant to name the firm because I have not had a chance to ask for its side of the story, but the three letters tell me that exactly the same thing has been happening. Those three people were given no discretionary rise this January, and it was then modestly reinstated after protests were made. There is clearly some sort of co-ordinated effort, and not in a good way, exactly as the right hon. Gentleman describes
Mr Carmichael
It pains me to say it, but I think the right hon. Gentleman is absolutely right. What might have started with the oil and gas companies is clearly going much wider.
I should declare an interest, as I hope to be the beneficiary of a defined benefit pension, if I live that long, having been in the House before the move to career average earnings in 2011.
I will not rehearse what I said about the decision of BP, Shell and others not to pay a discretionary increase, which mattered significantly to their pensioners at a time when inflation was running north of 11%. However, it is worth reminding the House that a fundamental point of fairness is at stake here. When one is past retirement age, one no longer has the choices one has when one is of working age. If someone in employment is unhappy with the money they get for the work they do, they can look around and find another job, or they may choose to retrain and do something else more profitable. Once someone is of retirement age, they no longer have that choice and flexibility, which is why it has long been established as a matter of public policy that the beneficiaries of pension schemes require protection. After all, this is simply deferred income, with our being paid later, after we have stopped working, for the service we have done. It is a fundamental aspect of that protection that it should take as its starting point the undertakings that were given.
At BP and Shell, and I do not doubt ExxonMobil, people were given vigorous encouragement to join pension schemes and invest in them. They were given undertakings at the time that one advantage of a big pension scheme at a company such as that was that they would later in life have an income that was protected against inflation. So a question of good faith is at play here.
I have no doubt that for many of the big corporates, the BPs, Shells, Hewlett-Packards and so on, the possibility of paying money to those who are no longer economically active and contributing to their business is tiresome and inconvenient. I never cease to be amazed by the extent to which those at the top of these big corporates seem to think that somehow the corporates are as big as they are simply because of the role that they have played. They do not seem to understand that they are the inheritors of businesses that were built by others, who are now among those who would be the pension beneficiaries. If one is to stand on the shoulders of others, it is always good to respect the fact that one enjoys the view one has because of the shoulders on which one stands. I am sorry to say that that seems to have been forgotten in the boardrooms of too many of our large corporates.
I have expressed these concerns about BP, in particular, before. I remind the House that I have a large number of BP pensioners in my constituency, because for many years BP operated the oil terminal at Sullom Voe. It was a good employer and we valued its presence in the community for many decades. I am concerned now to see that BP pension fund trustees with a collective 94 years of membership of the fund have been replaced with four with precious little involvement, two of whom are citizens of the United States. Since we last debated this issue, both Shell and BP have again refused any discretionary increase to their beneficiaries—in essence, they are doubling down.
The briefing I have received from the Shell Pensions Group is of particular concern. As it is crafted succinctly and concisely, I shall, with your indulgence, Madam Deputy Speaker, read it into the record. It says:
“Shell has imposed this benefits cut upon its pensioners during a period when:
the Fund was in healthy surplus and well able to afford full cost of living increases without call upon Shell’s sponsor covenant; and
Shell, its shareholders and senior executives benefited hugely from the same energy crisis that was already causing their pensioners extremely high rises in their cost of living.”
The Shell Pensions Group has done considerable and detailed research on that point. From the actuarial reports and the scheme’s accounts, it concludes that
“during the same period, instead of a balanced approach using about 25% of the surplus (as quoted by Shell as necessary for a full cost of living increase) to the immediate benefit of the 93% of members whose pensions are currently deferred or in payment, the Trustee has largely opted to dissipate the surplus by massively accelerating completion of its Low Reliance (upon Shell) investment transition plan. This fifteen year plan was commenced in 2018, but with the acceleration opportunity provided by the surplus arising from increased bond deals, it was almost fully completed in 2022.”
That is where the money that could have funded the pension increases has gone. It has gone into accelerating a programme that was supposed to take 15 years and instead has been concluded in four years.
I am afraid to say to the Minister that the Shell Pensions Group also has strong concerns about the consultation that he launched on 24 February, under the heading “Options for Defined Benefit schemes”. It says:
“We are therefore aghast that…the Pension Minister opened a new consultation…with a view to identifying ways of encouraging and enabling sponsors of DB schemes to claw back surpluses. We feel that the foregoing demonstrates that sponsors require no assistance or encouragement in that and on the contrary, stronger measures are necessary to hold the surplus for the benefit of the beneficiaries, particularly in contributory schemes in which they have invested their own money by way of deferred salary and additional voluntary contributions.”
The Select Committee report has given careful consideration to this matter. Along with most of those to whom I speak, I am well pleased with the recommendations of the report in that regard.
BP also continues to double down. There continues to be no formal engagement with the pensioners’ group—what the previous chief executive officer called “the zero- engagement strategy”. I would have loved to have been at BP’s annual general meeting this year; by all accounts, it sounds to have been a heated affair. The analysis published recently in The Times by its financial editor ties in very well what BP is doing with the concerns we should all have about the future direction of travel. In a recent article, the financial editor wrote:
“Everyone at least pays lip service to the notion that meeting pension promises in full is paramount. No surplus should be touched without a meaty asset buffer being built up. No sponsor should be allowed to extract cash without showing a strong covenant—providing reassurance that it will still be around to pick up the pieces if things go wrong.
But even those safeguards aren’t nearly enough to fully protect members, according to a trenchantly argued submission from a ginger group of BP pension fund members, the BP Pensioners Group. Attempts by employers to evade their promises will be “legion” it says; they will “trim back or remove any benefit possible”; they will “abuse loopholes” in the rules to maximise their clawbacks. They will push hard to minimise what members should “reasonably expect”.
It also warned that the prospect of executive bonuses being fattened up by success in grabbing back surpluses will be far more potent in driving company behaviour than any residual feeling of responsibility to ensure schemes pay every last penny of promised pensions. The message is that it could all end up in an unseemly scramble.”
The article continues:
“The bitter dispute with BP is just “a foretaste” of how relations between many other DB pension fund members and their former employers are going to sour if the surplus-grabbing reforms are pushed through without proper safeguards. The old world is dead.”
That sums up very well the tension between surplus clawback and the need to honour the commitments that were given to beneficiaries. We see so often this mismatch, which affects the ability of the citizen to take on the big corporate, or the big public body. This is just the private sector version of what happened to the sub-postmasters. The Post Office was big enough, strong enough and well enough connected simply to ignore the sub-postmasters, to lie about them, to straight-bat their concerns, and to deny what was obvious to everyone until they could no longer manage to do so.
What is the agenda here, and ultimately who will be the winners and the losers? It is pretty obvious that the pensioners will not be the winners. We should consider the reputational damage that the issue is doing to BP and Shell. Obviously, any oil and gas company these days has to be a fairly thick-skinned corporate entity, but still I ask myself why they simply refuse to engage. Why are they denying the very obvious and clear justice of the case being put forward by their own pensioners groups? I find it difficult to see any explanation other than that the funds are being fattened up before being hived off to insurance companies or others.
The Times—The Thunderer—is not the only news outlet to have reported on BP pensions recently. On 29 March 2024, the PR Newswire reported a case in Houston, Texas, in which the judge told BP that it must reform its pension plan, following an eight-year legal battle over pension losses. Again, we are dealing with big corporates, which have deep pockets and can see off the attention of the small pension beneficiaries. PR Newswire said:
“A group of Standard Oil of Ohio (Sohio) oil workers received a winning decision…after an eight-year legal battle with BP Corporation North America, Inc. (BP), in a huge victory for oil workers, with a federal judge ruling that BP”—
this is worth paying attention to—
“‘committed fraud or similarly inequitable conduct’ in how it announced a pension formula change more than 30 years ago…Federal judge George C. Hanks, Jr., ruled that BP violated the Employee Retirement Income Security Act (ERISA) of 1974 and plaintiffs”—
that is, the workers—
“are entitled to appropriate redress by ‘equitable relief.’ The court ruled plaintiffs demonstrated BP committed multiple violations of ERISA in its communications to its employees…The Sohio retirees maintained, since 1989, BP had insisted the new formula would provide benefits as good as or better than the old formula. The judge agreed and found there is a pension shortfall for many.”
It is worth reflecting exactly what the people who took that case were motivated by: the work that they had done for BP. The article continues:
“Fritz Guenther, lead plaintiff, dedicated his work life to BP often in dangerous conditions on the North Slope of Alaska. He worked two weeks on, two weeks off for years relying on BP’s representations regarding his retirement. While he is still healthy, he says many of his colleagues face health issues, while others still have died within the past eight years. The retirees’ legal fight is taking place against a backdrop of a retirement wave nationwide, with the US Census Bureau estimating that one in five Americans will reach the age 65 or older by 2030.”
That was the nature of the commitment that BP employees in America gave to the company, and it is a measure of the moral bankruptcy that appears to be at the heart of that corporate that it could not see that payback was necessary for these people in their retirement.
I will touch briefly on the Work and Pensions Committee report to which I have repaired. I apologise for doing something that I was always told not to do as a law student: I will read from the rubric, rather than the substance of the report. I welcome what the Committee said about scheme surplus and governance. In particular, the executive summary says:
“Many schemes are much closer than they expected to being able to enter a buy-out arrangement with an insurer to secure scheme benefits.”
I touched on that earlier. The Committee was also right to talk about the various reasons why the flexibility would be advantageous to wider interests. There is a balance to be struck between the company, the beneficiary, and the national interest, in relation to the money being available for investment. That balance has to be properly struck, and it will inevitably slew towards the interests of Government and corporate interests, unless the necessary protections are put in place.
The Committee also observed:
“We note the current consultation on the level of funding a scheme would need to have for surplus extraction to be an option. However, strong governance will also be essential. We recommend that DWP should conduct an assessment of the regulatory and governance framework that would be needed to ensure member benefits are safe and take steps to mitigate the risks before proceeding.”
In this brave new world for defined benefit pensions, that is a warning that the Minister and the Government would do well to take onboard. If they do not, I am afraid that the losers at the end of the day will be our constituents, the beneficiaries of such pension schemes. We will look back in years to come, and we will see that the cases of BP, Shell, ExxonMobil, Hewlett-Packard and others are simply the canaries in the coalmine.
Sir Stephen Timms
The right hon. Gentleman is quite right. We have noted a bit of a move towards sole trustees in a number of cases, which clearly gives rise to concerns about how one person can represent the interests of the members of a pension scheme. We are reflecting on that in our work, but one of the members of the Hewlett-Packard scheme wrote to me this week—he may well also have written to other Members—about
“the further fear and despair they are now feeling as it dawns upon them that their company and pension scheme trustees are meanwhile preparing plans to derisk by transferring their Pensioner responsibilities to an Insurance Company”—
something the right hon. Gentleman touched on. That transfer will quite possibly mean
“no subsequent possibility ever for pre-1997 increases.”
He calls that “a frightening prospect”, and it is hard to disagree.
The Committee also looked at concerns about the new defined benefit funding regime to be introduced for scheme valuations from September. We noted that the regime had been developed
“in a different era when the vast majority of DB schemes were in deficit and amidst concern that employers were seeking to evade their responsibility to underfunded schemes.”
There have been big changes since then, especially in the wake of the liability-driven investment crisis following the Budget of 18 months or so ago. In particular, there have been significant improvements in scheme funding, but the principles of the new regime have not been changed. Schemes are expected to target a position of low dependency on the sponsoring employer, meaning low-investment risk at the point of significant maturity. That has promoted concerns that the funding code will, when introduced, force more unnecessary de-risking, particularly among open schemes, as well as among those that are closed but have long time horizons, which would increase costs to employers and result in premature closure.
We said that the DWP and the Pensions Regulator needed
“to act urgently to ensure they do not inadvertently finish off what few open schemes remain by further increasing the risk aversion”.
In a letter to the Committee on 18 December, the Minister told us that both the Department and the Pensions Regulator were
“acutely aware of the need to take account of the specific needs of open schemes,”
and he agreed that
“open schemes should not be forced into an inappropriate de-risking journey.”
We welcomed that assurance, but it needs now to be reflected in the final wording of the funding code and in the regulator’s approach.
The vote in Parliament on the statutory instrument came before the final version of the funding code was published, so Members did not quite know what they were voting for at that point. We recommended that the Department and the Pensions Regulator should work with open schemes to address their concerns, particularly on the employer covenant horizon—the length of time for which they are confident in the sponsoring employer’s willingness and ability to support the scheme—and report back to us on how they will do so before the new funding code is laid before Parliament.
Since our report was published, feedback from schemes suggests that things may not be moving in the right direction. In a consultation response last week, the University Superannuation Scheme—a large and still open scheme—described the regulator’s proposed approach as
“university superannuation schemes”.
In its view, the statement that it will be required to complete under the terms of the new code will demand
“significant…resource for little or no benefit to our members.”
To the USS, and to me, that appears inconsistent with the assurances that open schemes will not be adversely impacted by the new funding regime. The USS adds:
“Not…having had sight of the revised…Funding Code and accompanying covenant guidance has exacerbated”
their worries.
I know that the Minister understands these concerns well. Closure of those schemes would reduce pension fund investment in the productive economy at a time when the Chancellor wants—absolutely rightly—to increase investment from pension schemes into the productive economy. Can the Minister tell us when he expects the new funding code to be published, whether he will report back to the Committee before then on how the concerns of open schemes have been addressed, and whether he is open to considering a separate chapter in the funding code, setting out how the code will apply to open schemes?
Let me take a few minutes to talk about what is happening on the defined contribution side of the picture.
Sir Julian Lewis
I wonder whether the Chair of the Select Committee shares my concern that when those schemes go wrong, it seems to take an interminable time to get any form of resolution. I have in mind a scheme that I am sure he is familiar with: the Atomic Energy Authority Technology pension scheme. The Government gave strong guarantees from the Dispatch Box that transferring into that scheme would give benefits roughly similar to those of remaining in the original Atomic Energy Authority scheme, but that did not happen. I first quoted the concerns of my constituent, Dr Keith Brown, in 2016. The most recent answer that I received to a question on this subject was:
“This is a complex issue requiring further consideration”
between the DWP and the Cabinet Office. I first raised the matter in 2016, but the Government are still saying that in 2024.
Sir Stephen Timms
The right hon. Gentleman makes a very fair point. That is certainly a very long-running case, and the Select Committee has recently been looking at a notable pension scam case—the Norton Motorcycle Company pension schemes, which was a straightforward scam—that has been running for years and years. He is right that we need to find ways to speed up some of these processes, because the victims in these cases have their lives really blighted. We are allowing that blight to last for years and years, and that needs to change.
On the issue of defined-contribution schemes, the Committee published a report in September 2022 on saving for later life, which pointed out that auto-enrolment has been a very big success, doubling the proportion of eligible workers saving in a pension. I applaud the approach now being taken by Uber following the Supreme Court case that it lost, and the recognition agreement that it now has with the GMB trade union. It is now auto-enrolling large numbers of its drivers into a pension scheme, albeit with higher opt-out rates than elsewhere, which is making some real inroads into pension scheme saving in the gig economy. We need much more of that among other gig economy workers. However, many auto-enrolled people are not contributing enough at the moment for an adequate retirement income, and quite a lot of them are probably not aware of that. Contribution rates need to go up.
As such, the Committee recommended that the Government should first implement the recommendations of the 2017 auto-enrolment review: reducing the minimum age for auto-enrolment from 22 to 18, and minimum contributions being paid from the first pound of earnings. Almost all of our witnesses supported those measures, and we welcome Royal Assent being given to the legislation that will implement them. That legislation requires a public consultation on implementation, and for its findings to be reported to Parliament before the regulations are made. However, as yet there has been no consultation, and nor has any date been announced for it, so can the Minister tell us when the Department will be consulting on implementation of those regulations? Will that consultation be launched before the end of this Parliament, and does he still expect—as the Government have long maintained—that those changes will be implemented by the mid-2020s?
We always knew that auto-enrolment would lead to many small pension pots. People change jobs, so they accumulate, on average, 10 pension pots across their working life. By November 2022, there were over 12 million deferred pots under £1,000. The Department for Work and Pensions has proposed automatic default consolidation to deal with small pots, but that will not in itself stop small pots from building up in future. As such, the Department has proposed a lifetime provider model with member choice, so that employees tell their employer which pot to put their contributions into, and a pot for life, so that employees stay in the pension scheme they started out in throughout their working life unless they choose to move.
Consultation responses on those proposals raised some very serious concerns from the TUC, Age UK, and the Pensions and Lifetime Savings Association and the Association of British Insurers—the main industry bodies. Age UK, for example, said that the proposals would be
“highly disruptive and lead to poor outcomes for mass market savers.”
Major concerns raised in the responses include potentially unwinding the consensus on auto-enrolment; that other measures in train, such as pensions dashboards, value for money and consolidation, will reduce the number of small pots anyway and improve value; that the proposals would benefit savers with larger pots, but harm lower-income savers; and that they would increase employers’ costs while entirely removing their role in selecting a pension scheme for their staff.
I have heard time and again, as I am sure the Minister has, how important employers are to trust in pension savings and that employers have delivered in auto-enrolment what we have asked them to deliver. Other such concerns are that these changes would require a new infrastructure, which would be hard to build, as pensions dashboards have certainly proved to be; and that they distract attention from the important effort to increase auto-enrolment contributions over time, which the responses argue—correctly, I think—should be the main focus of changes over the next few years. The Minister will be very familiar with all those concerns. Will he tell us when the Department will publish its response to the lifetime provider model consultation, and does he acknowledge that responses to the consultation so far have indicated very significant risks in the Government’s proposal for rather limited gains?
There is a lot going on in this area. I am very grateful to the right hon. Member for Orkney and Shetland for giving the House the opportunity to reflect on all this at this particular time. There has been some good progress, for example with auto-enrolment, but a lot more work is needed. I look forward to hearing the Minister’s reply.
Paul Maynard
That is very much the approach that I am taking with this matter. It has been discussed at great length at the sector roundtables that I have been present at. It has been a very strong theme that I have heard, so I can assure the right hon. Gentleman that I am acutely conscious that that is the lens through which I am looking at the issue.
Sir Julian Lewis
My hon. Friend did say that things had moved on since January. May I gently remind him that it was in January that he told the Work and Pensions Committee that he was waiting to hear from his officials who were in discussions with the Cabinet Office about the AEA Technology pension scandal? He has since been saying that there is no timeline for how these people will be advised of appropriate redress. Does he expect there to be no timeline between now and the general election, or can they expect a definite answer at some point before then?
Paul Maynard
My right hon. Friend has pre-empted a topic that I was about to come to, because I could see that it was going to come up in the discussion on the Select Committee report. I have now been to see the Cabinet Office Minister with my officials, and my officials then went back for a second visit. So although I cannot give him a timeline, I can say that I am motoring this issue along as rapidly as I can. When I say that this is complex, it is because it is complex; it is not merely because that is a useful and convenient word to cover a multitude of things. We continue to work as fast as we can to try to reach a conclusion. I hear the points that he has made to me, both in this place and outside, about wanting to draw this to a conclusion as best we can.
The regulations that I referred to on the funding and investment strategy clarify what prudent funding plans look like, allow open schemes to take account of new members and future accrual, make it explicit that there is headroom in the regulatory environment for schemes to invest more productively, and require all schemes to be clear about their long-term strategy to protect member benefits.
DB funding levels have improved in recent years, and it is important that schemes take advantage of the opportunities that this brings. The scheme funding regulations will help schemes get the most from their assets, while at the same time ensuring that scheme members can be confident that they will receive the benefits that they are promised.
The regulations embed good practice and build on the existing funding regime for DB schemes by providing clearer funding standards, which will ensure, as far as possible, that schemes are properly funded over the long term. Scheme members can and should be confident that the regulations provide increased security for their promised pensions, which is important to many of the people whom the right hon. Member for Orkney and Shetland is trying to support through this debate.
In addition, the new general code for the Pensions Regulator has come into effect since we last discussed these issues. The new general code consolidated and simplified 10 of the existing codes to make it easier for trustees and those running occupational pension schemes to find the information they need on the regulators’ standards of conduct and practice. It came into force at the end of March this year.
I will do my best to reply to some of the points that have been raised in the debate before I continue with my speech. I am grateful to the Chair of the Work and Pensions Committee, the right hon. Member for East Ham (Sir Stephen Timms), for covering many of the issues in what was a very helpful report on DB schemes. I know that we often discuss Select Committee reports in this place on a Thursday, and it is quite right that we should do so. Normally, however, we do so after the Government have issued their official response to that Committee report. If the Chair of the Select Committee will forgive me, I will not pre-empt every recommendation in the report. But I can assure him that I sat down for a marathon session with my officials not so long ago, going through every last sentence in the report, so I can tell him that I am giving the matter full consideration.
It is worth noting that both the right hon. Member for East Ham and the hon. Member for Strangford (Jim Shannon) mentioned the auto-enrolment reforms. I am happy to place on the record today our ongoing commitment to consult in the mid-2020s on that issue. I am keen to make progress. I hear all across the Chamber that there is a recognition of why it is important that we make as rapid progress as we can.
The right hon. Gentleman mentioned that he will have to provide a consultation. He summarised the general tone of the contributions very well. Certainly there have been more responses to that consultation than to any other during my time in the Department. I have read most of them myself, rather than just waiting for the summary. I have absorbed similar mood music to the right hon. Member for East Ham, and I hope that we can have a proper Government response very soon.
Oral Answers to Questions
Julian Lewis Excerpts(1 year ago)
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The Minister for Disabled People, Health and Work (Tom Pursglove)
No final decisions have been made. We have had the consultation and we will respond appropriately in the normal way.
Sir Julian Lewis (New Forest East) (Con)
May we have specific detail on the help that jobcentres are giving to armed forces veterans, who must live with the consequences of decisions made by Governments?
Mims Davies
A very pertinent point after the weekend when we paid tribute in our local communities and after what we saw on the Elizabeth Tower. The DWP continues to work to identify universal credit claimants who are members of the armed forces community, with 11 dedicated forces champion leads and over 50 armed forces champions across our jobcentre network working with spouses and partners, too.
Tom Pursglove
I hear the point that the hon. Lady has raised. We have, of course, had the consultation, and many views were expressed. We will now consider those views very carefully, and come forward as appropriate in the normal way.
Sir Julian Lewis (New Forest East) (Con)
On a point of order, Mr Speaker. May I take advantage of a rather quiet news day to ask if there is any way in which I can place on record the appreciation of right hon. and hon. Members for the wise advice, quiet efficiency and unfailing courtesy of Mr Peter Barratt, who recently left the service of this House after more than 30 years?
Mr Speaker
I made a statement last week to thank Mr Barratt for all his service, so it has not gone unnoticed and has certainly not been forgotten.
Oral Answers to Questions
Julian Lewis Excerpts(2 years, 11 months ago)
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Guy Opperman
The hon. Lady will be aware that we spend £2 billion on the winter fuel payments. There is also the cold weather payments fund, the household support fund, and the pension credit energy rebate. There are a whole host of ways in which support can be found for her constituents.
Dr Julian Lewis (New Forest East) (Con)
I know my right hon. and hon. Friends in the ministerial team are doing their best, but is there any encouragement they can give, perhaps in conjunction with the Treasury, to the women of the Women Against State Pension Inequality Campaign who lost out on the state pension start age?
Guy Opperman
With respect to my right hon. Friend, that matter has been decided in the courts on two occasions—in the High Court and in the Court of Appeal—and it is not proposed to change the policy.
Oral Answers to Questions
Julian Lewis Excerpts(4 years, 8 months ago)
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Dr Julian Lewis (New Forest East) (Con)
Although face-to-face reassessments are very important in the normal processing of claims, do the Government accept that people living with and suffering from terminal diseases should be exempted from the stress that such reassessments impose?
Justin Tomlinson
My right hon. Friend is absolutely right. We can typically turn around those applying under the special rules for terminal illness process within six days, ensuring that those who are most in need of support get it as quickly and as swiftly as possible.
Oral Answers to Questions
Julian Lewis Excerpts(5 years, 1 month ago)
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Dr Julian Lewis (New Forest East) (Con)
I accept everything that the Minister just said, but does he accept that successive Governments, despite their best efforts, failed to get the message across to enough people that the retirement age for women was rising exponentially? Will the Government try to look at some of the proposals from people such as Baroness Altmann for ways in which alternative schemes could mitigate the problems that have resulted?