Pension Schemes Bill [HL]
Lord McKenzie of Luton ExcerptsWednesday 5th April 2017
(7 years, 7 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, I thank the Minister for introducing this first group of Commons amendments—Amendments 1, 3, 4 and 20. By way of background, we should acknowledge a degree of consensus emerging on the Bill, which has indeed been helped by the amendments before us today, which deal directly with some of the concerns we raised earlier in the parliamentary process.
This does not mean that we consider, as should have been evident in the other place, that the Government are on top of the entirety of the pensions landscape. There is more to do on the level and transparency of charges; governance; extending the benefits of auto-enrolment; and addressing the lingering injustice felt by those women whose state pension age was raised quicker than expected. Of course, the Government will need to consider John Cridland’s analysis of the state pension age, emerging issues from the DB Green Paper, and the need to make progress on proposals for the Money Advice Service, not to mention the continuing combating of pension scams.
The Bill deals with a specific and technical issue and is important to protecting millions of savers and billions of pounds of savings, and we have sought to address it in these terms. One of the criticisms of the Bill is its heavy reliance on secondary legislation, although that has now been changed to affirmative on first use, as we have just heard. The aspiration, as we understand it—and the Minister may confirm—is for this process to be completed during 2018 to enable all the provisions to be commenced. Doubtless this timetable was contemplated without due regard to Brexit. What is clear now is that an enormous amount of legislation, mostly secondary, will be required to give effect across government to our exiting the EU. Can the Minister say what assessment has been made of the capacity of government—indeed, of Parliament—to cope with all of this? Will he undertake to publish a current timetable for implementation of the Pension Schemes Bill?
We support Amendments 1 and 20, which as we have heard deal with an unintended effect of the original drafting. It would have required the scheme funder’s activities to relate only to the money purchase benefits aspect of each scheme that is a mixed-benefit scheme.
As the Minister has outlined, Amendments 3 and 4 deal with Clause 11 and the scheme funder requirements. This clause generated considerable debate in your Lordships’ House and in the other place, as the Minister again acknowledged. This was not about challenging the policy, which quite properly seeks to ensure that the financial position of scheme funders and their financial arrangements with master trusts are transparent and clear to the regulator. The concern raised by a number of noble Lords as well as stakeholders was that the original requirement for separate legal entities and activities relating to just one master trust scheme were too restrictive, could force costly corporate restructuring and could detract from market opportunities to consolidate.
The remedy proposed is to allow the scheme funder to carry out activities that relate to more than one master trust and for the Secretary of State to have power to make regulations to except a scheme funder from the requirement that it must carry out only activities directly related to master trust schemes for which it is a scheme funder. The power can be used where a scheme funder meets additional requirements relating to its financial position, its arrangements with the master trust involved and its business activities. The regulations can also enable application by the relevant master trust scheme to seek to satisfy the regulator that the scheme is financially viable.
On the face of it, these amendments potentially enable concerns about shared services, FCA-regulated entities and consolidation opportunities to be addressed, but it would be helpful if the Minister put further flesh on the bones of how he sees these relaxations being used. As we expected, he has addressed the Delegated Powers and Regulatory Reform Committee’s requiring a more convincing explanation of why these regulations should be subject to the affirmative procedure on first use—bearing in mind that this is the case in a number of places in the Bill. Subject to any final matter the Minister may raise, we are inclined to support these amendments as they demonstrate that the Government have been listening to the genuine concerns about what the original Clause 11 would have generated.
Lord Henley
My Lords, I am most grateful to the noble Lord, Lord McKenzie, for the constructive approach he has taken to this group of amendments. I hope that this will continue for the rest of this consideration of Commons amendments. He raised various points about Cridland and the state pension age, which go wider than the Bill at the moment. I will not respond to those points but he made an important point about the degree of secondary legislation that will come forward not purely from the Department for Work and Pensions but from across government—he meant later this year, I presume, and throughout next year. He wondered whether we hoped to get all of it completed by 2018. I believe that we do but it will obviously be quite a trying matter. We will want to continue to engage with the regulator, the pension industry and other stakeholders throughout the year. That will be followed by formal consultation on those draft regulations, which we currently hope to get early next year so that we can get them coming into force from 2018.
What pressure there will be on this House and another place from all the various primary and secondary legislation coming before us is probably beyond the noble Lord’s pay grade, and certainly beyond mine. However, I am sure that the usual channels will discuss that and ensure that we give appropriate coverage to all these matters.
As to the detailed timetable of all that consultation with the regulator and pension stakeholders, the noble Lord asked for a table, but it might be helpful it I write him a short letter setting that out, if there is anything that I can add to what I have said. We aim to have those regulations coming into force from 2018, and nothing that I have seen so far seems to suggest that we will not be able to meet that. I think we can go ahead and agree these amendments. I hope the noble Lord will accept that.
Baroness Altmann (Con)
My Lords, I welcome much of the thrust of the Bill. I am also delighted to see Amendments 3 and 4, which, I hope, ensure that insured master trusts will not be forced to separate from their insurance parent, which would have forced them to face higher costs and reduced the security of their members. I am very grateful to my noble friend for taking on board the comments made during the Bill’s passage through this House.
It strikes me that Amendment 2 should be considered separately from those to which it has been joined. I reiterate my strong concern—notwithstanding the reassurances from my noble friend—about leaving out Clause 9. I understand that there is a view that it is unnecessary and that the new regime will ensure that master trusts have sufficient resources, are financially sustainable and have capital adequacy in place. However, even with new schemes and the best will in the world, capital adequacy tests may prove inadequate. No provision in the Bill would cover members of a very large pension scheme that suffered a catastrophic computer failure and lost member records. The cost of restoring that could be well above the capital adequacy put in place, and nothing in the Bill explains where the cost of restoring those records would be covered. The only place might be the members’ pots themselves, which is not supposed to happen.
I vividly recall assurances given by Ministers on defined benefit schemes during the 1990s, when the minimum funding requirement was supposed to ensure that schemes would always have enough money to pay pensions. No one foresaw the problems evident in the early 2000s, when schemes that had met MFR legislation wound up and ended up without enough money to pay any money to some members on the pensions that they were owed.
Even more concerning than that is that the Bill is being introduced when 80 or so master trusts are already in existence in the market with a huge number of members across the country already saving in a pension. These trusts have not been subject to the capital adequacy test or other tests that the Bill will rightly introduce. What is the protection for members of existing schemes who are saving in good faith? They are not protected at all. That was why I was very pleased that we passed the amendment concerning the scheme funder of last resort. I echo the question of the noble Baroness, Lady Drake: what discussions have taken place with the industry to find a solution to cover the eventuality—we do not expect it and it is, I admit, a small probability—that an existing master trust winds up without enough funding to cover the costs of administration to sort out its records and transfer them over to another scheme? I should be grateful for some information from my noble friend about whether there are ongoing discussions and how the department sees that eventuality being covered: where would the money be found?
On Amendments 5 to 19, I share some of the reservations mentioned by the noble Baroness, Lady Drake, such as the regulatory disparity between a master trust, which would be regulated by the Pensions Regulator—and therefore under its control, if you like —and a master trust transferred under the amendments to a pension scheme regulated by the Financial Conduct Authority. How would the regulatory systems work together when they are under different legislation?
I have other concerns, but I may raise them under the next group.
Lord McKenzie of Luton
My Lords, let me start by expressing our regret that the requirement for there to be a funder of last resort—successfully pressed by my noble friend Lady Drake on Report—has been deleted from the Bill. That concern was also expressed by the noble Baroness, Lady Altmann. We of course accept that the whole purpose of the Bill—its protections, including capital adequacy, financial sustainability, systems requirements, scheme funder and transfer regime—is to secure people’s pension pots, militate against scheme failure, and ensure good order when difficulties arise. But as my noble friend asserted on Report, notwithstanding this, it cannot be guaranteed that a master trust will not fail and when it does there will be an available master trust to step into the breach so that members’ funds are protected. The noble Baroness, Lady Altmann, has just expressed similar concerns with vivid potential examples.
In seeking to resist the funder of last resort proposition, the noble Lord, Lord Freud, claimed that it would be costly and a disproportional response to the issue and with moral hazard implications—arguments deployed by the Parliamentary Under-Secretary of State for Pensions in the other place. We remain unconvinced of these arguments when put in the balance against the importance of protecting people’s savings. Nevertheless, we need to examine how the Commons amendments to Clauses 25 and 34 contribute to ameliorating this risk, which at least potentially they do.
We acknowledge the amendments to Clauses 25 and 34 which potentially widen the scope of continuity option 1 and expand the prohibition on increasing administration charges or imposing new administration charges. In particular, they raise the prospect of the accrued rights and benefits under a master trust scheme being transferred to an alternative pension scheme which is not a master trust. No detail is offered in the amendment about the likely characteristics of an alternative pension, other than the fact that it must be a pension scheme under the 1993 Act. This of course will include both personal and occupational pension schemes. Regulations will spell out the circumstances when the alternative might be available, and the characteristics of an alternative scheme. Regulations will also spell out how such an option is to be pursued.
While we can see the benefits of a potentially wider pool of pension schemes which could be available in the event of a master trust failure, it begs a number of questions about how any alternative scheme would be regulated and what protection it would offer members. My noble friend Lady Drake, in particular, as ever has produced some forensic questions to seek at least some clarity on key issues: further actions and discussions that have taken place; whether a receiving alternative scheme is sustainable and well governed; how such a scheme can operate a prohibition on increasing charges and preventing members’ funds from being accessed; and consideration of how bulk transfers would work. The noble Baroness, Lady Altmann, joined in the same sort of inquiry.
It remains to be seen how much these amendments provide a real opportunity to add a layer of protection and whether the market will offer up alternative schemes which can assist. We look forward to the Minister’s reply, but we are not minded to oppose these amendments.
Lord Henley
I start by offering my thanks to the noble Lord for making it clear that he is not minded to oppose these amendments. I understand that noble Lords felt quite strongly about their amendments and for that reason wanted them in the Bill to be considered by another place. The other place has considered those amendments and we now have this opportunity for further debate. We can then get on with seeing the Bill on to the statute book.
Before dealing with the questions, I shall respond to the brief point made by my noble friend Lady Altmann about not being happy with the groupings. The groupings are a largely informal matter, sorted out by the usual channels. To my knowledge—and I think that it was probably done in discussion with the Opposition—they have changed a number of times, but that is not unusual. Very often we get it wrong in how things are grouped. But as is made clear on the bit of paper that comes to the House every day, groupings are an informal matter, and it is always open to all noble Lords to intervene on any appropriate amendment at the appropriate stage.
Lord McKenzie of Luton
I can confirm that it was me who suggested that Amendment 2 should be added to the list.
Personal Independence Payment Regulations
Lord McKenzie of Luton Excerpts(7 years, 8 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, I thank the Minister for repeating that Answer. The Social Security Advisory Committee expressed the view that outside the DWP there is indeed some confusion regarding the original policy intent of the measures, and that the department had made errors about its intent in submission to an Upper Tribunal. The committee further expressed concern about unintended operational and legal consequences arising from the changes to the mobility descriptors in the regulations that have been made. It drew attention to circumstances where multiple factors make it impossible for someone to follow a journey without help, and where it would be difficult to strip out and exclude psychological distress from other factors.
How does the Minister respond to this issue and to the recommendation that these proposed changes and those relating to managing therapy should be tested with healthcare professionals and decision-makers? Will he commit to doing this before implementation of the regulations that have been laid? Further, can the Minister explain how regarding the consequences of psychological distress is consistent with fostering parity of esteem between those with physical and mental health conditions?
Lord Henley
My Lords, the original policy intentions were set out quite clearly during the passage of the legislation. The noble Lord will remember that far better than I do. That was then set out in the legislation—and in secondary legislation. However, as he is aware, the Upper Tribunal made it clear that there was, as I think it put it, a lack of clarity in the regulations as we set them out. That is what, I hope, we put right in the regulations we laid a week or so ago and which come into effect tomorrow.
The noble Lord asked whether there would be further consultations on that. Obviously, my honourable friend the Minister for Disabled People and others within the department will continue to keep an open dialogue with all those involved to make sure that our policy intentions are correctly applied and that these things are dealt with as clearly as possible.
The noble Lord also doubted whether there was the appropriate parity between mental and physical conditions. He alleged that there was a lack of parity, which we want to achieve. I believe that there is parity because we are looking not at the conditions but at the overall needs of individuals. In other words, it is not some specific complaint that the individual suffers from but how it affects how they get on with their lives. That applies equally—hence the parity—to those with mental and physical conditions.
Universal Credit
Lord McKenzie of Luton Excerpts(7 years, 8 months ago)
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Lord Henley
My Lords, the right reverend Prelate is right to draw attention to the problems some people have in knowing how the system works. He will find that how work coaches explain the administration of universal credit to people coming to them is completely different from how it used to operate. I recommend that the right reverend Prelate takes an opportunity to visit one of his local jobcentres to see how it works in practice. He might find that things have moved on a great deal since, say, his time in the diocese of Sheffield. If he wishes to take up my offer, I will be more than happy to make the arrangements.
Lord McKenzie of Luton (Lab)
My Lords, is it not the case that it is not just the architecture of universal credit that is creating problems but its administration, as the Select Committee in the other place determined? I understand that, when asked about the sometimes fractious relationship between the DWP and the Treasury over universal credit, the noble Lord’s predecessor said that,
“there were times when one’s view about the Treasury was totally unprintable”.
Does the current Minister have any such inhibitions?
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017
Lord McKenzie of Luton Excerpts(7 years, 8 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, automatic enrolment has been a hugely successful example of public policy and once again I pay tribute to the role of my noble friend Lady Drake in helping to formulate its development and implementation.
The success of auto-enrolment has been built on rigorous research and assessment of the data, engagement with the industry and the building of a political consensus—legislated for by a Labour Government, implemented by the coalition Government and now sustained by the Conservative Government. Of course, that does not mean that we share an identity of view on every aspect of its implementation, as this discussion has already indicated. I will say more on this later. But it has undoubtedly been successful because it addresses a fundamental issue of chronic undersaving for pensions.
To date we are told—we have new figures today, I think—that some 7.3 million workers have been automatically enrolled by nearly 400,000 employers. The DWP review suggests, and we agree, that with all large and medium-sized firms having reached their staging times, the rollout for small and micro-sized employers is the most challenging phase. Of course, we are still in the 1%/1% contribution phase. DWP analysis suggests that by 2019-20 there will be an extra £17 billion of workplace saving per year as a result of automatic enrolment—a considerable achievement.
Of course, the success of auto-enrolment has run ahead of the necessary regulatory framework as it spawned the growth of master trusts. But this is being addressed in part by the Pensions Schemes Act, as I think it now is. Perhaps the Minister can give us an update on implementation plans for this legislation and its multitude of regulation-making powers.
The Minister will be aware that there are obligations on employers not only to automatically enrol workers but periodically—every three years—to re-enrol those who have not taken up the opportunity thus far. It is understood that there is a six-month window in which to do this. Given an October 2012 start date for automatic enrolment, employers will increasingly face this obligation. Can the Minister give us some data on how this is all going? How many workers have been re-enrolled and how many have opted out?
The order addresses the earnings trigger, which determines who is eligible to be automatically enrolled, and the qualifying earnings band, which determines the minimum level of contributions. The particular bone of contention with this order, as the Committee heard from my noble friend Lady Drake, is the earnings trigger, which is retained at this year’s level of £10,000. While it represents a modest lowering of the threshold in real terms, it does not go far enough, as my noble friend asserted. Bringing within scope a further 70,000 individuals, 75% of whom are women, is to be welcomed. But if the trigger rate were just set at the national insurance primary threshold, as the papers before us show, a further 750,000 would be in scope and 70% or more of those would be women.
My noble friend has highlighted research, some of which came from Scottish Widows. Although it shows improvement in the number of women saving for retirement, there is still a gender gap. That reflects the fact that women are more likely to be in part-time work and lower-paid jobs—it is they who bear the brunt of having an earnings trigger that is too high.
In making the judgment as to the appropriate level of the earnings trigger for 2017-18, the Government assert that the overriding factor should be ensuring that people have sufficient retirement income savings. We agree with this. However, they then use the broader upcoming 2017 review to settle for the status quo on the basis of stability and affordability, without, I suggest, any detailed analysis, at least on the latter. Perhaps the Minister will take the opportunity to expand on this justification for the record.
So far as the qualifying earnings band is concerned, we note the continued alignment of the starting point with the LEL and the retention of an overall cap on employer contributions. The Government acknowledge that using a trigger below income tax personal allowance level does not preclude the benefit of effective tax relief if net pay schemes are used. Reliance on those below the income threshold opting in ignores the key principle of inertia on which auto-enrolment is built. Can the Minister give us any data on the numbers who opt in to schemes voluntarily and obtain the benefit of the employer contribution? Nevertheless, as my noble friend said, we look forward to the upcoming review and trust that it will include a focus on such matters as mini-jobs—mentioned by the noble Baroness, Lady Bakewell—and the self-employed.
The self-employed have of course caught the attention of the Chancellor this week. So, too, have those who operate through their own companies. When the legislation was introduced, excluded from its scope were sole-director companies, generally on the basis that such individuals were officeholders rather than workers. Given the growth of such arrangements, are there any plans to review this situation?
The order represents a modest advance in expanding the reach of auto-enrolment and we will obviously not oppose it. The 2017 review is an opportunity to take stock of matters more widely to ensure that the full benefits of this policy are obtained and that there are better outcomes, in particular for women and the low-paid.
Lord Henley
I am very grateful to the noble Lord for his offer not to oppose the order. I am even more grateful for the generally constructive approach that all noble Lords have taken to it. As we know, it is very simple and deals merely with automatic enrolment and raising the lower qualifying limit and higher qualifying limit in line with the lower earnings limit and the upper earnings limit of NICs, at the same time leaving the £10,000 figure where it was.
As I made clear in my opening remarks, we are conducting the 2017 review, so I have to be fairly circumspect in what I say in response to noble Lords because I do not want to prejudge that. However, many of the speeches, in particular that of the noble Baroness, Lady Drake, will be taken into account in that review, and we will consider in due course any further comments that she wishes to put forward. I will answer one or two of the more detailed questions put to me in the course of this short debate.
Perhaps I may deal first with the question of multiple jobholders, which was raised by the noble Baroness, Lady Bakewell, by making it clear that for some multiple jobholders, one of their jobs will earn in excess of £10,000. They will therefore be automatically enrolled on that job. But it is the case that they can choose to opt into schemes if they earn under £10,000 but more than the lower earnings limit so if they have a number of jobs, one of which is paying at least £5,876 a year, they can obviously do that. We think that around 500,000 multiple jobholders meet the age criteria for automatic enrolment and that of these, some 330,000 earn more than £10,000 in at least one job, so they would be automatically enrolled in it.
This may deal with the point raised by the noble Lord, Lord McKenzie, when he asked about the numbers of those seeking to voluntarily opt in who are below the £10,000 trigger and above the upper earnings limit. I understand that the survey we conducted in 2015 suggested that some 5% of those ineligible workers had chosen to opt in, which probably shows the benefit of the whole idea behind automatic enrolment—that you are automatically opted in and have to opt out. If we compare a 9% dropout rate there with a 5% enrolment rate for those who can, we see that leaving these things to a voluntary process would have led to a very different take-up from what we have seen so far with the automatic enrolment introduced by the 2008 Act. As I think I made clear in my opening remarks, we have seen a dropout rate among those who were automatically enrolled of only 9%. That rate might go up as the contributions go up but, at the moment, it is way below what was originally estimated by the then Government who introduced this measure and in other measures by us.
The noble Baroness, Lady Drake, expressed some concern about the £10,000 limit. She would like to reduce it still further. She certainly agreed that it was preferable to keep it at £10,000, though, rather than linking it to the personal income tax threshold. I think she would also agree that the arguments are finely balanced on both sides as to whether to increase or decrease the limit. I can see the case for a degree of simplicity by aligning it with the personal income tax threshold, but that would obviously exclude many more people. There is also the argument on the other side: if one lowers it—below £10,000—yet more people who are not paying income tax will be eligible for automatic enrolment. Having listened to the noble Baroness and said that the arguments are finely balanced, these matters can be looked at in the 2017 review, which I stress will look at the overall operation of the policy in the round, including the balance between catching the lower earners and other factors that determine the overall numbers who will be subject to automatic enrolment. Again, the concerns that she has put forward will be taken into account.
The noble Lord, Lord McKenzie, also asked about the Pension Schemes Bill, which is close to my heart. It was just disappearing from this House with all its detail as I arrived back in DWP and is awaiting its Report and Third Reading in another place.
Lord McKenzie of Luton
Before the Minister sits down, may I comment on his comment on the opt-in rate, which is 5%? That means that 95% of people who could take advantage of an employer contribution, for example, are missing out. A 5% opt-in rate is not great, and reflects the fundamental architecture of the scheme. Causing people to do something generally does not work with pay and pensions: you need to do something. Inertia keeps them in. On the issue of mini-jobs and whether any of them reaches a £10,000 threshold, even if one of them did, it would not give relief or benefit on the full aggregate of a number of mini-jobs that people may have, so it is not equivalent. It is difficult: we have debated and agonised over the issue of how effectively to aggregate these disparate jobs and get the same result as if it were one job. If that came out of the review, it would be a real success.
Lord Henley
What it reflects—to use a fashionable modern word—is the power of nudge. By means of automatic enrolment, we are achieving those high rates, whereas if one asks individuals whether they wish to join, one gets the relatively low rate of 5%. That 5% compares very interestingly with what I think is a rather low rate of opt-outs: 9%, which is far lower than we originally expected.
Having said which, I would still say that one has to get the right balance between administrative simplicity and ensuring that people will ultimately benefit. It is important to remember administrative simplicity for the employer, particularly the very small and micro-employer. That said, all those factors can be taken into account in the annual review. We all have the same desire: to increase enrolment in pensions as far as possible, but in the best way. This has been working very well since the 2008 Act. There are just questions such as whether to bring the trigger lower. They are best looked at in the review, where they will be taken into account.
I think I have dealt with most matters, other than those on which I promised to write to the noble Lord, Lord McKenzie. I commend the Motion.
Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2017
Lord McKenzie of Luton Excerpts(7 years, 9 months ago)
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Lord James of Blackheath (Con)
My Lords, I am sorry to interfere again but when I read this I got a nasty jangle in the back of my head which said that this does not necessarily fit with what we discussed before, in the days when my noble friend Lord Freud was bringing the Bill through. I remind your Lordships that at that time, I initiated direct discussions with the Royal British Legion on exactly this subject because it is the expert on what is happening, who is suffering and what their state is.
Sadly, the Royal Navy is the principal biggest culprit. Worst affected of all are those who served on the Royal Yacht “Britannia”, which is a terrible scandal. Nearly everybody who served or did anything in the engine room of the Royal Yacht “Britannia” is now either dead or dying from diffuse mesothelioma. The Royal British Legion set up a special department to deal with this, because the tragedy is that people’s wives and children have got it, too, because you have only to wash the coat of somebody who has this to be a condemned person from that moment on. The Royal British Legion has gone to great lengths to make sure that it is monitoring and looking after the wives, families and dependants of these dreadfully stricken people.
At the end of that debate, my noble friend Lord Freud gave an undertaking that he would not do anything that initiated payment structures which interfered with or were diminished by the presence of the Royal British Legion payments, so that people would get the maximum benefits for their hugely distressed situations; that he would look after things to ensure that nothing we did cut across the Royal British Legion’s process, and vice versa; and that it would be wholly co-ordinated. The jangle I got in my head was because I have never heard whether that has happened, and that is why I am asking for some assurance that my noble friend’s undertaking was fulfilled. What is its status today, please? It really matters.
Lord McKenzie of Luton (Lab)
My Lords, I thank the noble Lord, Lord Henley, for his introduction and explanation of the regulations. I am sorry that the noble Lord, Lord James, has had a nasty jangle in the back of his head. Clearly, he is concerned about undertakings made in respect of the Royal British Legion. I worked on this—not alongside the noble Lord, Lord Freud, but on the opposite side—and I do not think that anything has arisen in the course of lots of changes to these provisions over a number of years which would be in breach of the undertaking he gave the noble Lord, but it is not for me to defend a former Minister.
Lord James of Blackheath
My Lords, I will put the noble Lord’s assertion to the test with one simple question: can we say with absolute certainty that not one penny from the Royal British Legion has been withheld or interfered with by us through the conflict between its initiatives and ours, and that everybody has gone ahead with the full funding under both arrangements?
Lord McKenzie of Luton
No, I cannot possibly say that. It is not my role as a shadow Minister. If anybody is going to give those undertakings, it is the noble Lord, Lord Henley, and I wish him well.
As we have heard, the regulations cover various compensation schemes, including the ones for pneumoconiosis and other dust-related diseases covered by the Pneumoconiosis etc. (Workers’ Compensation) Act 1979, and, separately, mesothelioma. The payments are uprated by 1%, which is the September 2016 CPI rate of inflation. One might say that this is a meagre sum, just missing the surge in inflation generated by the decline in the rate of sterling post the referendum, although we acknowledge that there is no statutory obligation to uprate the compensation schedules and that the 1% aligns with the uprating of industrial injuries benefits, as we have heard. Obviously, we support the regulations but I have some questions.
We have no impact assessment for the instruments, although the Explanatory Notes indicate that in the year to March 2016 some 3,520 people made a claim under the 1979 Act, including 310 claims for dependants. I think my question may already have been answered. Can the Minister tell us how many of these claims were successful and can we have an analysis of the various categories of dust-related diseases? I think the noble Lord referred to 3,592 payments. The explanatory memorandum talks about claims. Maybe it is a question of nuances of terminology, but it would good to know the actual number of successful claims. Can we also be provided with an analysis of the amounts of the various claims, how these were funded and the extent to which there has been or will be clawback of social security benefits?
So that we can get the overall picture of the numbers suffering from these dust-related diseases—other than mesothelioma—can we have some detail on what has been covered by employer liability insurance? The ELTO 2015 annual report—when will we get an updated one?—shows an improvement in successful inquiries but apart from mesothelioma itemises only asbestosis and asbestosis-related illnesses. Further, the ELTO report does not cover successful claims which might be made directly to insurers outside of ELTO. Can we be provided with a complete picture of the number of workers entitled to lump-sum compensation arising from the 1979 Act for the latest period available? Can we also be provided with details of how many are missing out on compensation?
The position concerning mesothelioma is different, as we have heard. Diffuse mesothelioma is a fatal cancer of the lining of the lungs or abdomen caused almost exclusively as a result of exposure to asbestos. Symptoms and diagnosis may not emerge until 30 or 40 years following exposure—it is a long-tail disease—and this obviously exacerbates difficulties in identifying relevant employers and employer liability insurers. A number of steps have been taken in recent times to improve access to compensation for sufferers of this terrible condition. In 2008 the previous Labour Government introduced the scheme which is the subject of the regulations before us today. It is a no-fault scheme, so does not require a work-related nexus or proof of negligent exposure to asbestos. It has tended to be illustrated, as the noble Lord, Lord James, said, by exposure caused by washing somebody’s work clothes.
After an initial differential, the rates of compensation under the 2008 Act—for sufferers and dependants—have been separately aligned with the 1979 Act amounts for those with 100% disability, although, as the noble Lord said, there is still the differential between payments in respect of dependants and sufferers. Again, we have no impact assessment, although the Explanatory Note tells us that some 400 people made a claim in the period ended March 2016, including 10 dependants. How many of these claims were successful? How were they were funded? I seem to recall that the original concept was for funding to come from civil claim recoveries. What is the current position? If we are to see the overall picture here, albeit not strictly covered by these regulations, we should consider the further important developments led by the noble Lord, Lord Freud, with the co-operation of the insurance industry. These include the Employers’ Liability Tracing Office, which focuses on assisting claimants to identify an appropriate employer liability insurer. While the 2015 report shows the inquiry success rate improving, it is far from 100%. For mesothelioma, it is just below 77%.
So onward to the diffuse mesothelioma payment scheme—a scheme of last resort—which started making payments from July 2014. It seeks to compensate those negligently exposed to asbestos while at work but who cannot trace the responsible employer or insurer. The scheme is funded by a levy on the gross written premiums of those insurers writing employer liability insurance. It was acknowledged that the insurers could not commit to a levy level above 3% of gross written premiums. In its first year, net payments of £24 million were made, with an average amount of £122,000. The tariff payments, originally at 75% of average civil claims, have risen from 80% to 100%. There is an oversight committee, which my noble friend Lady Donaghy chairs.
In respect of mesothelioma entitlements with an employment nexus, can the Minister let us know for the most recent period available the total number of successful compensation claims and the amounts achieved via employers or insurers, either directly or using the tracing office, and the total number of tariff payments made under the payment scheme? Has the DWP made an assessment for the most recent period of the number of mesothelioma sufferers who have not been able to access either compensation or a tariff payment? What do we understand the reason to be for the shortfall between the expected claims to the payment scheme and outturn for the most recent period? The Minister did give us an updated forward projection of the incidence of mesothelioma: 2,500 cases for the rest of the decade. The Minister is probably aware of the extensive debates we have had on this issue and of the focus on funding for research for sufferers. That has been a positive development.
As a final point, ELTO has made good progress in tracing policies. It is suggested that better access to the employer reference number from HMRC would assist in this. There was an attempt to amend a recent Bill to try to secure that, but it was unsuccessful. Will the Minister tell us what is happening on this issue?
Lord Henley
My Lords, I thank the noble Lord, Lord McKenzie, and my noble friend Lord James of Blackheath for their comments. The noble Lord, Lord McKenzie, asked a number of fairly detailed questions, a great many of which will, I suspect, be far better dealt with in correspondence, if the noble Lord will accept that. The answers will come down to rather detailed figures because he asked about the analysis of the levels of claims, which obviously depends on the age of the complainants. I have a sneaking suspicion that a table setting out such details might be of greater use to the noble Lord and other noble Lords who have taken a great interest in the matter.
I appreciate that we did not have a debate on this last year because the CPI was where it was and so there was no uprating. One could say that one of the benefits of this being normally uprated in line with inflation, because it is separate from the others and at the discretion of my right honourable friend the Secretary of State, is that we manage to have some debate on this important matter each year, with the exception of last year. That way, these matters can be exercised, rather than subsumed in the general uprating debates that happen—for example, last week. Having made that broad point, let me try to answer a number of the questions that noble Lords have raised.
The first is one on which, again, I will have to offer to write to my noble friend. He asked about the support that the Royal British Legion might be offering to former Navy servicemen, particularly from HM Yacht “Britannia”, who have suffered from this, and whether they were going to lose out as a result of payments being made by the Royal British Legion. I will take advice on that and will write to my noble friend.
Lord McKenzie of Luton
If the Minister will allow me to intervene, it is not just a question of looking at the total numbers of people who are new sufferers, particularly in relation to mesothelioma; it is the extent to which they are able to access compensation—as the Minister put it—speedily, whether it is through systems such as ELTO, the payments scheme, or indeed any other scheme. Given the nature of these conditions, we should not be looking at the growing trends, but at whether the mechanisms we have in place are delivering and enabling those people to get access to compensation with tariff payments.
Benefit Cap
Lord McKenzie of Luton Excerpts(7 years, 9 months ago)
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Lord McKenzie of Luton
To ask Her Majesty’s Government what estimate they have made of the extent to which the new lower benefit cap will encourage people into work or to move into smaller homes.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)
My Lords, the evaluation of the 2013 benefit cap showed that more households are looking for and finding work. Capped households were 41% more likely to enter work than similar uncapped households. The evaluation found that very few capped households moved house, and those who moved generally only moved short distances. Statistics show that people moving into work is the largest single factor in the benefit cap no longer applying.
Lord McKenzie of Luton (Lab)
I thank the Minister for that reply but wonder if he has seen the recent report from the IFS which, in relation to the new cap, identifies that a larger number of smaller properties, both in and out of London, will now be affected; and its assessment that, on the basis of the earlier cap, there is little evidence that it helps move people into work or to smaller accommodation—indeed, I think fewer than 5% of those affected by the cap previously actually went into work. Is the Minister also aware of the report of the Chartered Institute of Housing? It forecasts that the new benefit cap will cut the benefit income of some 116,000 households, including 320,000 children, by up to £115 a week. Is it not time for the Government to come clean and recognise that this is not about changing behaviours, it is all about saving money at the expense of some of the poorest in our society?
Lord Henley
My Lords, I totally reject what the noble Lord had to say. As he knows perfectly well, because he will have seen it, our evaluation that appeared in 2014 showed just what I said in my original Answer—they were some 41% more likely to go back into work than similar uncapped households. It also showed that 38% of those capped said they were doing more to find work, one-third were submitting more applications and one-fifth went on to make more interviews. That is why my right honourable friend made the announcement in last year’s Budget of further changes to the benefit cap. In due course we will look for a further evaluation, which I look forward to showing to the noble Lord when it comes through.
Guaranteed Minimum Pensions Increase Order 2017
Lord McKenzie of Luton Excerpts(7 years, 9 months ago)
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The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Henley) (Con)
My Lords, I will be brief. The Guaranteed Minimum Pensions Increase Order is entirely a technical matter that we attend to each year. This order was laid before the House on 16 January 2017 and, in my view, its provisions are compatible with the European Convention on Human Rights. The order provides for formerly contracted-out defined benefit occupational pension schemes to increase their members’ guaranteed minimum pension which accrued between 1988 and 1997 by 1%, in line with the increase in the general level of prices as at September 2016. On that basis, I beg to move.
Lord McKenzie of Luton (Lab)
My Lords, I thank the noble Lord for his brief introduction to this technical order. It addresses, as we have heard, the required uprating of GMPs by CPI. The period in question is the year ending 30 September 2016, which we have just discussed. That period largely precedes the spurt in inflation—imported inflation—driven by the post-referendum depreciation of sterling. At 1%, it is well within the 3% cap on the GMP uprating. We will obviously support this order but, although it is superficially straightforward, uprating GMPs is a complicated area, as a recent NAO report identifies. It illustrates that, although GMPs were applicable for a relatively short period of time—1978 to 1997—there are ramifications well into the future. Some people with rights to GMPs would not reach state pension age until around 2050.
April 2016 saw the introduction of the new state pension, of course, which involved the end of contracting-out and of the additional state pension. Because the contracting- out position is incorporated in somebody’s starting amount, the Government no longer take account of inflation increases to GMP accruals between 1978 and 1988, nor for increases beyond 3%. I think that is correct, but perhaps the Minister might just confirm it. Can he also remind us what is happening to GMPs which are in payment?
The NAO also points out that, with changes to the state pension age, there is a growing time period between GMP age, which is 65 or 60, and the actual state pension age when payment begins. Other things being equal, this means a longer period during which the GMP is not fully uprated.
The scheme provider is now solely responsible for uprating, but only from 1988 and in excess of 3%, and for maintaining the records necessary to calculate each member’s GMP. The NAO advises that up to October 2018, scheme providers have to reconcile their records with HMRC. Individuals will be notified of the value of their GMPs as at April 2016 and will have to keep a record thereafter themselves, including when they transfer to another pension scheme. Can the Minister tell us how this is all going? What communications support these requirements, and what assessment have the Government made of compliance with these arrangements? How many individuals are involved in this process?
Finally, the Minister may be aware of the article on the front page of the money section of the Sunday Times last week, which seemingly involved contracted-out pensions and the provision of inaccurate data. Can the Minister please explain what is happening? What is the problem and its scale? Who is affected and how is it going to be fixed?
Lord Henley
My Lords, the noble Lord, Lord McKenzie, is quite right to refer to the complicated nature of this field and to point out how long it is likely to go on. He talked about 2050. I did a few sums and thought that someone—I hope not me—could still be moving this order some years after 2050. Certainly, it has some years ahead of it as an annual order—when the GMP has to be increased by either CPI or 3%, whichever is the lower. That is why we have increased it, on this occasion, by 1%, which is the CPI figure for September.
The noble Lord also asked some rather detailed questions about what communications we were making to individuals and what compliance we sought from the benefit providers. I would prefer, on this occasion, to write to him in greater detail on that matter, because it might be dangerous to answer. Similarly—this goes beyond today’s debate—the problems reported in the business section of the Sunday Times, which I think it got slightly wrong, are a matter probably better dealt with by a letter from me rather than in a debate on the uprating of the guaranteed minimum pension, formerly SERPS. I apologise to the noble Lord for not answering his questions on this occasion but promise to write to him. I also accept his acceptance of the 1% increase—as it will be—and look forward to having this debate again for many years to come, though not necessarily with him or me involved if it continues as late as 2050.
Lord McKenzie of Luton
I am grateful for the offer of correspondence on those two issues: dealing with information flows under existing arrangements and the Sunday Times article. It may be “fake news”—I think that is the term—and I do not know how accurate it is, but it seemed to tie in with important issues regarding data and the capacity of the system to cope with it.
I am particularly concerned about the arrangements for reconciling records with HMRC. My noble friend Lady Drake has been heavily involved in many pension matters over the years, particularly the Pension Protection Fund. She could wax lyrically about the dirty data that somehow came from defined benefit schemes, and how difficult it was to straighten those data out. I am not sure whether there is any of that in this, or how many GMPs are currently in payment. Having said all that, I accept the generous offer of correspondence on this. It would be helpful to have it as soon as possible, because I have to go back to basics every year to remind myself what it is all about.
Lord Henley
My Lords, I listened to the noble Baroness, Lady Drake, as my noble friends Lord Freud and Lord Young took the pensions Bill through, and admired her expertise on this subject. One day, no doubt, the noble Lord, Lord McKenzie, and I will reach such a level, but in the meantime we will have to rely on correspondence between us. I am grateful to the noble Lord for accepting my assurance, and I will write to him in due course on those matters. I beg to move.
Brexit: Disabled People
Lord McKenzie of Luton Excerpts(7 years, 9 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, we should thank the noble Baroness, Lady Scott of Needham Market, for initiating this debate. While the referendum campaign provoked some discussion around the significance for disabled people of remaining in or leaving the EU, these matters were not centre stage in our national debate. There was neither a specific reference to what Brexit may mean for some 10 million-plus disabled people in the January pronouncement of the Prime Minister nor a single word in the White Paper that has been issued today.
We are in the impossible position of being asked to start the process of exiting the EU without any clear idea of where it will end—except that the Government have given up on membership of the single market and the customs union. History will reflect with incredulity on how we got into such a mess. There is real concern that the future for the UK outside the single market will make us poorer as a country than we would have been over the long term. The OBR has made the judgment that any likely Brexit outcome will lead to lower trade flows, investment, net inward migration and potential output. All this has adverse implications for the public finances and our social security system, already battered by austerity.
I agree with the noble Baroness, Lady Scott, that we should be grateful to the Papworth Trust for its briefing on the key issues affecting disabled people and the EU. We should acknowledge the importance of the EU to date in bringing down the barriers faced by disabled people—for example, in improving access to public buildings and transport, and supporting employment programmes. Indeed, 19% of ESF grants are spent on projects that directly support disabled people. This is not to deny the role of the UK in leading the way on disabilities legislation but to recognise that the EU directives and the treaties that we have signed underpin discrimination laws.
Once outside the EU, the UK will lose the underpinning of EU equalities legislation and the oversight by the European Court of Justice. Can the Government at least confirm their intention on membership of the Council of Europe and the European Court of Human Rights? Commitments to enshrine all existing EU legislation into domestic law, the so-called great repeal Bill, are welcome but this does not mean that these rights will be sustained over time. Moreover, being outside the EU means that the UK could be left behind on future developments, such as the planned EU-wide European Accessibility Act. Would the Government support embedding the UN Convention on the Rights of Persons with Disabilities, which we ratified, into domestic law?
We know that disabled people are heavily reliant on the NHS and social care services, and we know that these services are heavily dependent on migration from the EU. We also know that there are horrendous recruitment problems in the sector. Restrictions on free movement will only exacerbate these. It is imperative, therefore, that the status of EU nationals working in the UK is clarified as a matter of urgency, to help retention. There is also a need for a clear strategy for the future.
We should not overlook the capacity issues in all of this—for the Executive, Parliament and the Civil Service—specifically in relation to plans for EU legislation that is currently directly applicable but which has to be converted into UK law. The House of Commons Library note suggests there could be some 5,000 pieces of legislation. I ask the Minister to provide us—in due course but, I hope, as soon as possible—with a list of all those which touch on matters relevant to disabled people. When ministerial red boxes are being stuffed full of Brexit matters, who will focus on delivering the halving of the disability employment gap?
Pension Schemes Bill [HL]
Lord McKenzie of Luton ExcerptsMonday 16th January 2017
(7 years, 10 months ago)
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Lord Kirkwood of Kirkhope (LD)
My Lords, it is a pleasure to follow my friend of many years’ standing, the noble Baroness, Lady Altmann. She is an expert on these things and is right that opportunities have been missed and there are still some bits of unfinished business. However, the House has acquitted itself well in the consideration so far. I welcome the noble Lord, Lord Henley, to his post. Those of us with long memories remember that he has been in this role before, so he is not without experience in these matters and our expectations of him are extremely high. I wish him well in his new responsibilities. I am sure he will continue his predecessor’s attempts at making sure that Members of this House are fully briefed on some of the technical provisions that we still have to deal with.
The Government were right to bring forward amendments to change a lot of the first-time affirmative resolutions and procedures for the statutory instruments that flow from some of these provisions. In passing, I note that this amendment to Clause 11 would introduce a negative procedure. I hope that is sensible, because the more affirmative instruments we get, the better our chance of understanding what is being brought before us. Despite that, I agree with the amendment as it stands.
I hope—this is merely a request for a repeat of an undertaking that was given earlier—that the Government will bring forward an updated impact assessment when, later this year and in 2018, we consider the secondary legislation that flows from this primary legislation. The impact assessment and the continuation of the consideration of the fine print of the provisions are still required to make sure that the Bill achieves its purposes in a way that is fair to all. In the process, I hope that, as the noble Baroness, Lady Altmann, said, the other place can pick up some of the opportunities that have been missed during the Bill’s consideration in this House. However, I wish the Bill well and I hope we continue to have the constructive and positive relationship with the noble Lord, Lord Henley, that we had with his predecessor.
Lord McKenzie of Luton (Lab)
My Lords, I begin by welcoming the noble Lord, Lord Henley, to his role, even at this 12th hour on the Bill.
We certainly do not oppose the amendment. As explained, it is intended to put beyond doubt the ability to introduce regulations relating to audit, particularly in relation to scheme funders, which under the Companies Act are not required to provide audited accounts. Perhaps for the record the Minister can set out the nature of scheme funders which might fall into this category. Presumably they could be partnerships, entities incorporated overseas or smaller entities, although I am not sure how they might feature in these arrangements. Can he also tell us whether it is planned to use these powers differentially in respect of scheme funders that fund benefits other than money purchase benefits? As an adjunct to that, we very much share the concerns expressed by the noble Lord, Lord Naseby, about how Clause 11, as it will now be, will work.
As the Bill passes to the other place, it is time to offer our thanks to the Minister, the noble Lord, Lord Young of Cookham, for the courteous and inclusive manner in which he has handled the Bill. We look forward to the same from the noble Lord, Lord Henley, on subsequent Bills. We have already given our thanks to the noble Lord, Lord Freud, for the role that he played. This is a narrow Bill but one with significant implications, which is why we want to see it make speedy progress. It has not been the easiest Bill to scrutinise, given the combination of the technical nature of its subject matter and the raft of regulation-making powers that it contains, but we have seen a Government in listening mode in some respects—although of course not all, and the noble Baroness, Lady Altmann, identified some of those.
I should take this opportunity to thank my noble friends who have participated in our deliberations—in particular, my noble friend Lady Drake for the expertise and precision that she has brought to our work. We trust that the important amendment concerning the scheme funder of last resort which she pressed on the Government will endure.
I also express our thanks to the Liberal Democrats, led by the noble Baroness, Lady Bakewell, the government Back Benches for their constructive approach, and indeed the Cross Benches. We have seen a Bill team who are thoroughly on top of their brief and have patiently spent time explaining to us aspects of the Bill which might otherwise have fallen on stony ground. Taking this matter forward now falls to the tender mercies of our colleagues in the other place.
Lord Henley
My Lords, I thank noble Lords for their very kind words and in particular, the noble Lord, Lord Kirkwood, for his high expectations of me in replacing my noble friend Lord Freud. If I do only half as well as my noble friend, I think I will be doing pretty well—I hope the House accepts that I will try my best. I can also confirm to the noble Lord that impact assessments will be updated for the new regulations. The timing for the formal consultation on the draft regulations will obviously depend on a number of factors, but we would expect that the initial consultation will take place some time in the autumn of this year.
I am very grateful to the noble Lord, Lord McKenzie, for not opposing the amendment. He had a number of questions, particularly in relation to scheme funders and I would prefer to write to him about those. He also asked whether the Government were going to table an amendment on scheme funders of a master trust that offers both money purchase and non-purchase benefits. I can confirm that they intend to table such an amendment and that can be a matter for another place.
My noble friends Lord Naseby and Lady Altmann raised concerns that go wider than this simple amendment, which merely relates to audit. Those matters can be considered and no doubt, will be noted by my noble friends when they take this Bill through another place. As I said in my introductory remarks, I expect another place, as always, to look at this Bill with its usual due diligence and I am sure that it will take note of the comments made by both my noble friends. If it can assist them, I shall try to write to them before that, but everything they have said will be noted by my honourable and right honourable friends. With that, I echo the remarks of the noble Lord, Lord McKenzie, in thanking all those who have been involved in this Bill.
Universal Credit
Lord McKenzie of Luton Excerpts(7 years, 11 months ago)
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Lord McKenzie of Luton (Lab)
My Lords, I start by saying that we too look forward to the maiden speech of the noble Lord, Lord Macpherson of Earl’s Court.
This debate is both our farewell to the noble Lord, Lord Freud, as well as an update on universal credit. Its dual purpose is fitting because there can be few other examples in recent times of the engagement of a Minister being so inextricably and consistently linked to a single piece of social policy, and one where the operation and policy development has been driven by that Minister—and a Minister who stuck with it while others around him have abandoned ship.
Universal credit, as we have heard, started life with a great deal of support—certainly ours—as being a single income replacement benefit for working-age families that would simplify the system, incentivise work and progression in work. The original plan was for claims to legacy benefits and tax credits to cease by April 2014 and for all existing benefit and tax credits to be transferred to universal credit by October 2017. That is now to be 2021. It interests me because, on inquiry over the months, it was always seemingly on time and on budget. It expected to lift 350,000 children and 600,000 adults out of poverty.
At Second Reading of the 2012 Bill on welfare reform, the noble Lord, Lord Freud, was dubbed Che Guevara for his revolutionary zeal, although we prefer to see him as Captain Kirk of the “Starship Enterprise” boldly going where no man had gone before, notwith-standing a few black holes and some warp factors.
A reference to warp factors brings us to the Treasury, whose malign influence has significantly changed the design of universal credit. A range of cuts has been imposed on the project since first proposed and changes to the work allowances in particular, according to the IFS, which has shaved—an interesting figure—£5 billion per year off its long-term cost. Overall, universal credit will cut benefit expenditure by £2.7 billion a year in the long run with 3.2 million households seeing a reduction in their means-tested benefits, and 2.2 million an increase. Incentives to work have been substantially watered down. The IFS projects that there will be 1.3 million more children in relative poverty in 2020-21 than in 2014-15. We have not yet had the Government’s assessment over that period.
As CPAG points out, there is continuing pain still to be inflicted by the two-child limit, removal of the first child premium, the continuing freeze on most elements of the benefit and the continuing twist of poverty being inflicted by monthly payments and waiting days—part of the original design, of course—not to mention sanctions.
However, the hope is that in the future, with a different Government, the original intent of universal credit might be restored, and for creating and embedding an architecture which would allow this, the noble Lord, Lord Freud, deserves full recognition. We wish him well earned rest.