Social Security Benefits Up-rating Order 2015

Lord Kirkwood of Kirkhope Excerpts

Wednesday 25th February 2015 Grand Committee

[Lord Rooker (Lab)]

My Lords, I suppose that I should declare an interest as a recipient of one of the pension benefits that the Minister has just announced. I should get that on the record. When he read out the increases, I was reminded that I was the 75p Pensions Minister. He took me back down memory lane as he spoke.

[Lord Kirkwood of Kirkhope (LD)]

I remember it well.

[Lord Rooker]

I remember it well, too.

I want to raise a very narrow point on this order. Article 10 under Part 2 concerns the rates of the personal independence payment. Within the PIP is the mobility component, which enables people to access the mobility scheme for the lease of vehicles. I was in the Commons in the 1970s when the scheme replaced the old invalid trike, so I am well aware of the positive change. I make no comment on the scheme, save to say that it has given safe access to mobility for many thousands—indeed, millions—over the years, and I hope that it will for years to come. Given that it is public money that we are dealing with, I want to call now for a full inquiry in the next Parliament by the National Audit Office, the Public Accounts Committee and the Work and Pensions Select Committee into the finances of the scheme and particularly the banker-sized salaries paid to certain individuals.

The DWP is paying the Motability charity around £20 million per annum. The charity receives about £7 million in lease levy from the vehicles used. It has a total income of about £30 million. The £20 million from the DWP is paid to a company in respect of advance payments and adaptations. The charity itself—I will come to another one in a moment—is dependent on the money in this order. The chief executive of the charity, which is over 60% dependent on public funds—the money paid from the DWP—was paid £160,000-plus in 2013.

However, the main vehicle scheme is operated by Motability Operations Group plc, a company owned by four banks—Barclays, Lloyds, HSBC and RBS. It operates as a contractor to, and is overseen by, the charity. This point is crucial because it is the link with the money in this order. The revenue of the operations company is broadly £4 billion: £2 billion from operating leases and £2 billion from the sale of vehicles at the end of the three-year lease. Six hundred cars a day are placed on the second-hand car market, and I am aware that one in my family was once such a car.

The company, Motability Operations Group, claims, on page 4 of its report, that it gets no money from the Government, but the £2 billion for leases is in fact the DWP payment—now, the PIP—paid to over half a million people. Because the people receiving the PIP have agreed to assign the DWP allowance to the scheme, it is paid directly to the operations company and it is clearly government funding. I call that public money.

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I fully admit that I do not expect the Minister to answer these points. He can tell his colleagues that I would not be on my feet today if it were not for the fact that on Monday, 2 December 2013, during a very busy and crowded session of Oral Questions, the noble Lord, Lord Wigley, asked a Question about this issue. Half way through the supplementaries, my friend in this respect, the noble Lord, Lord Forsyth, popped up and asked the Minister about the salaries in the charity. The Minister said, “£800,000”. When Hansard reports what I am about to say—“Noble Lords: Oh!”—that is an occasion when the House indicated, “Oh!”. I rang the Minister’s office and asked whether he meant £80,000, not £800,000; was it a slip of the tongue, it is easy to do? “No, Lord Rooker,” they said, “but it is the operations company he meant, not the charity”. The charity supervises and oversees the operations company. There is a link. The whole thing depends on all those people assigning their Motability allowance in the PIP over to the company for the vehicles, so the scheme itself works all right. My question is, why the banker-size salaries on what is effectively a public good paid for out of public benefits?

[Lord Kirkwood of Kirkhope]

My Lords, it is pleasure as always to follow the noble Lord, Lord Rooker. I was the chairman of the Social Security Select Committee when he appeared in front us with his 75p increase. When I asked him if he thought he could live on that, he was honest enough to say, “No”. His reputation for honesty derives from that moment, as far as I am concerned.

The noble Lord has made a very effective intervention, even if it is on a narrow point, and I support what he is saying. I certainly think it needs to be looked at in the Select Committee in the other place and if not, the PAC is certainly the place to do it. There is a huge amount of uncertainty about the consequences of the changes. It is not just a question of transparency and proper use of public funds; there is a public policy downside that might cause great concern to large numbers of people. I do not want to detain the Committee. I just did not want to miss an uprating order because I have done 18 of them in the past 18 years and I would not want to be left out—people would think I was not well if I did not appear.

My first question is a broader one about the process we are now in. The Minister was quite correct to say that the 2013 uprating Act supersedes the Government’s usual review process for establishing value for money. What are the consequences of that? This is a unique uprating order in that sense. Was any review of any kind undertaken? Obviously, working-age benefits are largely absent from this order, except, as he said, disability carer benefits and ESA support components. What are the consequences for the future? Can we be given an assurance that when the three-year period of the 1% uplift, which was automatic under the 2013 Act—I got very excited about that at the time and I am still concerned about it—is over, we will go back to business as usual and there will be serious modelling in the department? I understand that Ministers review everything all the time and they always have done but in the old days of the Rooker-Wise amendment, for example, these things were seriously discussed on the Floor of both Chambers and that gave confidence to people that some serious modelling was done. I am nervous that that process is being eroded; it was always a valuable protection. There is a lot of corporate knowledge in the department and if it is deployed properly it can inform Ministers and Parliament. If that goes or is considered to be downgraded by the experience of the 2013 uprating Act I would be the first to queue up at the Minister’s front door and complain about it.

The other thing I noticed was the Minister’s references to the uprating of the basic state pension. The coalition Government have made some substantial progress with the uplift and the triple lock. I hope that that can be taken forward and enshrined in perpetuity, if the economy can bear the weight. The other side of that is the interesting front-page story in the Financial Times yesterday about the £7 billion reduction there has been in working age benefits that are not in these orders. I do not know if the Minister saw it.

My point is that there has been a dramatically increasing trend, in my view, of support for people past retirement age—both the noble Lord, Lord Rooker, and I are beneficiaries of that and, as I say, I welcome what has been done—but it should not be consistently at the expense, over long periods, of the working-age cohort of our society. There are two reasons for that. First, as colleagues know, the value of the CPI versus the RPI erodes. There has been another erosion, too: the change to the CPI in the 12 months to September 2014 was 1.2%, while the change in the RPI in the same period was 2.3%. That is another salami slice in the erosion of the respective relative benefits available to the retired population as opposed to the working-age population. Other benefits are involved, too. No doubt the upcoming election will allow everyone to talk about this—hopefully, more intelligently than some of the debates in the past. It cannot go on like this; the working-age population cannot be expected to be the source of increased resources for people who are past retirement age. I hope that that point can be addressed.

Schedules 9 and 10 of the order talk about some of the changes to the jobseeker’s allowance provisions. I am very worried about the impact of sanctions now on the jobseeker’s allowance, and they are covered in this order. One of the big increases in poverty that we have seen—the use of food banks—both in my experience and in the intelligence available to me, is among people who are temporarily out of work. I think that the great British public perceive people who are out of work as being a static group, as opposed to those who are in work. That is not the reality, as I am sure the Minister knows; there is a churn all the time and there are families going in and out of benefit. I am really surprised at the extent to which sanctions are being applied; I never for a moment expected 800,000 to 900,000 sanctions to be applied each year—I am really concerned about that.

My third point is that the department should weigh in the balance the fact that in 2010, when the Autumn Statement set some of this policy in place, there was a clear expectation, certainly in my mind, that by now universal credit would be bringing relief to big numbers of low-income households. We all know that there have been difficulties with the IT, but I am not satisfied that it is on the right track. We need to get it in as soon as we can. It will probably be 2019 before it is finished. In 2010 we were saying, “Well, this will provide some comfort”, but the fact that it is absent except for 61,000 people—and half of them are under 25-ish—will be weighed in the balance of benefit uprating, if not in this one then certainly in the next. If universal credit had been as operational as expected, and I think 2 million people were expected to be in place by now, that would have been a significant assistance to some of these low-income households. The early rushes that I have seen from the early evaluation of universal credit show that it is working; the cohorts are actually going into work, and it is sustained work. If the anti-poverty strategy is all about getting people into work, then the main engine of getting people into work, as far as I can see, is absent. I am really quite nervous about that; it needs to be thought about more carefully.

My final point, because disabilities are involved in this uprating order, is that single-parent families are under stress. Low-income households with disabilities, and some of those people are working-age, are really struggling. The Minister said that there was an uplift of £300 million. That is very welcome, but it does not match the demonstrated need that my intelligence leads me to believe is necessary to do this job properly. We have to be very careful. We are right to pursue universal credit progressively and positively, and to pursue the Work Programme and help people in that direction. We need a housing policy because, in the long run, it is the only way that we will deal with the burgeoning housing benefit bill, which is far too big and a waste of public money in the sense that it does not build any houses.

This uprating order is unusual in that it is constrained. When we get back to normal business and the economy starts to flourish, as we all hope it will in the coming months, I hope that we can get an assurance that we will not lose any of the important mechanisms that we have had for protecting the ability of Parliament to cross-examine government, just because we have had three years of a different system. I hope that the Minister can give the Committee some assurance on that point.