Concentrix

Peter Dowd Excerpts

Wednesday 26th October 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

I am glad to follow the hon. Member for Inverclyde (Ronnie Cowan).

We have heard many interventions and speeches. The hon. Member for Paisley and Renfrewshire South (Mhairi Black) talked about a fishing expedition on the part of Concentrix. She enlightened us about the real Casanova of Scotland, R. S. McColl—I thank her for that—but more importantly, the cataclysmic effect of this flawed process. The hon. Member for Torbay (Kevin Foster), in a thoughtful contribution, gave us the experiences of his constituents and welcomed the Government’s actions in relation to the renewal of the contract.

My hon. Friend the Member for Stretford and Urmston (Kate Green) focused on the policy design that has led to single women, in particular, being affected or targeted, talking about the effects on their children and setting out a series of questions that went to the heart of the matter. The hon. Member for Gloucester (Richard Graham) discussed the relative value and efficiency of the contractor’s services, the role of HMRC, and the role of incentives in contracts of this nature. The hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) talked about a conflict of interest and the bad practice of Concentrix. My hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty) spoke of a series of constituents, usually single mothers, who have been distressed by the process, citing a catalogue of errors, and the need to fast-track these people’s benefits. My hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) talked about the hardship caused to his constituents and the common factors in the contractor’s lack of understanding and of compromise.

The hon. Member for Foyle (Mark Durkan) welcomed the personal intervention of the Financial Secretary, but questioned HMRC’s role in the process and spoke of the need for a change in its culture. The hon. Member for Dundee West (Chris Law) gave a number of examples of how people are being pushed into poverty. My hon. Friend the Member for Garston and Halewood (Maria Eagle) mentioned the influx of cases in August and asked what had caused that spike. She also talked about phantom tenants, the unreachable, and the harsh and inaccessible bureaucracy.

My hon. Friend the Member for Sheffield, Heeley (Louise Haigh) said that we want a system that supports people, not conglomerates, and a Government who will ensure that people, not corporates, are at the top of the agenda. My hon. Friend the Member for Ogmore (Chris Elmore) talked about the effect on single mothers, but also asked the key question of how many others have been affected, have not been able to reach out to their MPs and have suffered in silence.

The hon. Member for Ochil and South Perthshire (Ms Ahmed-Sheikh) suggested providing support for free communication with HMRC, and the hon. Member for Inverclyde said that the responsibility lies with the Government and that the citizen’s relationship should be with the state, not individual contractors.

I welcome the Minister’s mea culpa, but it does not go far enough. In last week’s Westminster Hall debate, I said that I, like other hon. Members, had been contacted by distressed constituents who had had their child tax credits stopped, with scant attention paid to due process. In effect, the plenipotentiary powers given by the Government to Concentrix to act as it saw fit to punish and penalise tax credit claimants were used with an alacrity bordering on the enthusiastic and manic. It has come to something when it is difficult to put a cigarette paper between the question of who, out of the Government and Concentrix, has been the bigger of the two culprits, but, following the principle of, “Whoever pays the piper calls the tune,” I opt for the Government.

As I said in last week’s debate, it does not take a genius to work out that, if a company is paid on the basis of bonus or commission to find tax credit error and fraud, it will start with the easy targets. In pursuit of a business model approved by the Government, Concentrix pursued people, mainly working women, to provide information. It was nothing short of overbearing state intrusion into private lives, but it was done under the guise of reclaiming taxpayers’ money from fraudsters and cheats, which is how many people felt that they were treated.

The plain fact, however, is that there was no evidence. In many cases, the victims of that intrusion were left penniless and had little capacity to fight back, as many Members have said. Meanwhile, the Savings (Government Contributions) Bill, which is currently in Committee, encourages people to save money. One agent of the Government administers the giving away of taxpayers’ money while another takes money away, by diktat, from working women. What a topsy-turvy state of affairs.

The whole process was deeply flawed and, as has been said, operated on the presumption that people were guilty until proven innocent. Apparently, a claimant would be sent a letter by Concentrix indicating that they were not meeting the standards for a child tax credit claim, and requiring them to provide evidence of their occupancy arrangement. Some attempted to call Concentrix, only to find that the number was engaged, but if the company did not hear from the claimant, their tax credits were stopped summarily.

I do not know whether Ministers were consulted on, or asked to sign off, that process. I asked that question last week, but did not receive an answer, so I ask them to enlighten us. Even Atos did not have the power to withdraw benefits. Concentrix was given carte blanche to do so, in a licensed way, by the Government, who were in the throes of renewing the contract for a job well done, which is remarkable. Did Ministers ask why Concentrix had so many savings on its books, and did they listen to the complaints of many of our constituents at an earlier stage?

Last week, the Economic Secretary claimed, very creatively, that it was the Government who stepped in to get things back on track when they realised that the service being provided by Concentrix was not good enough. That rewriting of history would be risible if the matter was not so serious for thousands of mothers all over the country. In reality, it was the Opposition who originally asked the National Audit Office to investigate, and we pushed for oversight and demanded action for the thousands of families who have still not received payments from Concentrix. The Government took action only under duress and pressure from the Opposition and the national media.

[Kevin Foster]

Does the shadow Minister agree that, given earlier comments, it is important that the National Audit Office leads the investigation into what happened, because it is independent and answers, ultimately, to this House, not to the Government?

[Peter Dowd]

That is a statement of the situation as it is. The key thing is that we need an independent investigation to get to the bottom of this.

The Government have said that the contract will not be renewed beyond the end of May 2017, but that still leaves us seven months. I am pleased that staff have been brought into HMRC, and I would like to know what measures the Government are putting in place to ensure that there is total oversight of Concentrix throughout the period and to make sure that nothing else goes wrong. When all is said and done, this is a question of the performance management of a government contractor, and a clear lack of oversight by the Government.

I deduced from the Economic Secretary’s inadequate response to the Westminster Hall debate last week that HMRC handed over third-party data to Concentrix and left the company to it. There was no oversight and, in the Minister’s own words:

“Concentrix…then chose who to pursue from those data.”—[Official Report, 18 October 2016; Vol. 615, c. 261WH.]

The Government have given Concentrix a free hand to intimidate and falsely accuse hard-working mothers of fraud. The Opposition want to know who signed off that decision and why there was no accountability. The Government have announced a £100 hardship payment for those affected, but no amount of money can make up for the struggles that those women faced after their tax credits were wrongly stopped, and we need an apology. As many other Members have done, I ask the Government to give that apology.

Concentrix will have the contract for a few more months, but it does not seem to have suffered any sort of penalty for its actions. We would like to know what is happening in that regard. Can we have a precise figure for how many decisions Concentrix got wrong? In how many instances was payment reduced because Concentrix failed to meet its performance standards? Perhaps the Government’s refusal to answer such questions and release the relevant information is because even with deductions for poor performance, Concentrix has still made huge profits on the backs of desperate and vulnerable people. We need answers to these questions. Perhaps an independent investigation—maybe by the NAO—will give us those answers, but whoever gives them to us, we need them as soon as possible.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 25th October 2016 Commons Chamber

[Mr Hammond]

I am not aware of the project to which the hon. Gentleman refers. As far as I am aware, the Northern Ireland Executive has not been in touch with the Treasury about it. We have, in fact, made two announcements. I announced that all projects signed in the normal course of business before the autumn statement would be guaranteed, irrespective of whether they continued to be funded by the EU after our exit. I subsequently made a further statement saying that after the autumn statement any new EU-funded projects would, provided they passed a UK value-for-money and strategic priorities test, get the same guarantee: however long they last, they will be funded by the UK Treasury once EU funding stops.

[Peter Dowd (Bootle) (Lab)]

This Government continue to be in chaos over their flagship so-called northern powerhouse. I live there, and I see it every day: they have no long-term industrial strategy. Meanwhile, notwithstanding what the Chancellor said earlier, regional economies are suffering from a lack of sustained investment in their infrastructure, and particularly transport infrastructure, by comparison with our major European partners—a problem now compounded by Brexit. What plans does the Chancellor have to end this uncertainty and finally bring about a rebalancing or an enhancement of regional transport infrastructure expenditure?

[Mr Hammond]

I urge the hon. Gentleman not to talk down the north and the significance of the northern powerhouse. The northern powerhouse is an important part of the Government’s strategy, and the new Prime Minister has made clear her commitment to it. The hon. Gentleman is, however, right to draw attention to the shortfall of infrastructure investment in the United Kingdom overall, by comparison with our principal competitors. That is an issue that we must address at national level. We must look for the best value for money—the projects that will make the greatest contribution to closing the productivity gap across the UK—and that is what we will do.

Savings (Government Contributions) Bill (Second sitting)

Peter Dowd Excerpts

Tuesday 25th October 2016 Public Bill Committees

[The Chair]

Welcome to this afternoon’s hearings. I call Peter Dowd to start the first set of questions.

[Peter Dowd (Bootle) (Lab)]

Q 4747 The proposal for the lifetime individual savings account followed a wider public consultation about the future of tax relief in pension provision. How do you think the LISA, as proposed, fits into that wider public debate? Mr Surtees first.

Joseph Surtees: I am afraid that, as an organisation, we have no particular views on the LISA. We are very keen on any proposals that the Government can bring forward to boost both short-term and long-term savings, and I think with the LISA we are still going over detail.

Ed Boyd: I am afraid I will not be much more help. Our focus has very much been Help to Save, and that is what we have been doing research on. I can give a personal view, but it probably won’t be too beneficial.

However, the one thing I think it would be worth saying on the LISA side, and it is more of a comment than anything else, is that if you look at the panoply of savings products within LISA and Help to Save, in 2021, only 8% of those funds are budgeted in the impact statement to go towards Help to Save. That falls within an approach that this is about the “just about managing”. Those who are on universal credit—they are kind of in-work, but we would love them to be earning more and trying to progress up the earnings ladder—are the “just about managing”, I think. The majority of the people on universal credit when it is fully rolled out will be in deciles two to five. So it’s just a question about the balance between the two—LISA and Help to Save—but I am afraid I have no detailed comments on the LISA itself.

[Peter Dowd]

Q Given that response, I will try another angle. Some of the suggestions that we have had about the LISA are that although it might well be a simple product on its own, in the context of a wider market full of God knows how many products it just complicates things. Do you have a view on that?

Joseph Surtees: I suppose that in terms of how it fits into the wider market, the point Ed makes is very interesting, which is that if you refer back to the ISA itself, people earning about £80,000 are twice as likely to have an ISA as people earning the average income, which is £26,000. So the savings crisis, if I can put it like that, is among the very low earners. When products come forward in tandem, like LISA and Help to Save, it is important to ensure that they both have equal weight and an equal offer, and that they both appeal to the right markets.

[Peter Dowd]

Q Okay. If we’re talking about encouraging people to save in one fashion or another, do you think that Help to Save adds to that in any substantial way? Will people save significantly more as a result of it?

Ed Boyd: So the question is: do we think that it will help? I think the answer is yes. There are always little bits to tweak and improve, I guess, as the Bill goes through, but as a whole—I mean, the idea of Help to Save is a fantastic one. When you look, as the CSJ does, at the root causes of poverty, we very purposefully have as one of the five—alongside worklessness, addiction, family breakdown and things of that ilk—problem debt. The majority of the people who we are talking about, especially when they have just moved into work, are only working 16 hours on the national living wage, which this will apply to, and will often have very little savings.

It is about the unexpected shots, and StepChange’s research on this is brilliant. It shows that every six months or so there might be something, such as a washing machine that breaks down, or something else, and if you have no savings, the effect that can have on you—not just in terms of, “Oh, we have to go to slightly higher-cost credit”, but on your mental health, and how productive and efficient you are at your work because your mind is continually filled with the debt problems that you are trying to carry—is hugely significant. So, anything that can try to create a culture of saving and provide some Government backing to incentivise people to save more is a wonderful thing. It is a great thing to add to the armoury.

Joseph Surtees: I certainly agree. We are very big supporters of Help to Save. The research that we carried out, which Ed is referring to, found that if a family has £1,000 saved, that reduces the chance of them falling into problem debt by 44%—so we think that Help to Save will really help in this area. To agree with Ed again, there are little tweaks that would help to increase its appeal. When it was introduced in the Budget, the potential eligibility for the scheme was 3.5 million, but the impact assessment says that it will probably only reach about 500,000. When looking at the Bill and the way that Help to Save and its features are going to be rolled out, the question is: how do we get that 500,000 closer to the 3.5 million figure?

[Peter Dowd]

Q Can I just ask, on that basis, how well targeted you think Help to Save is on those with the lowest income? It is all very well to say “Save”, but if you have no money because you are on benefits or have a low income, how well targeted is that particular product?

Joseph Surtees: I think it is almost as well targeted as it could be without putting a huge onus on banks and, in a scenario in this case, running de facto means testing. We could possibly open up the eligibility. I know that the Institute for Fiscal Studies has done some work on this—which I have one or two questions about—but as a basic proposition it is pretty well targeted at the group that needs the savings the most. If you look at the figures, almost half of families with an income below £14,000, a category that a lot of the Help to Save target families fall into, do not have savings. We have one specific issue, which is to do with how it will help people under 25. That is very much to do with the benefits rules, which I can either discuss now or come back to later.

[Maria Caulfield (Lewes) (Con)]

Q I want to touch on one of the points raised in our previous evidence session, which was that someone can withdraw money from this lifetime ISA if they want to buy a home, but if they want to withdraw money for any other reason—you touched on some examples, such as if their washing machine breaks down or they have an urgent need to get money quickly—they face a penalty of between 5% and 6%. Are there certain criteria you would like to see where there are other options to withdraw money without hitting a penalty?

Ed Boyd: As I said before, the detailed knowledge, in terms of the research that the CSJ has done, is on the Help to Save side rather than the ISA side of things. There is a valuable question about the accessibility and flexibility of accessing savings within Help to Save. I could give a comment on that—perhaps it is applicable across to ISAs. I would need you to be the judge of that.

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[The Chair]

We will now hear oral evidence from Union Pension Services Limited. Will the witness please introduce himself for the record?

Bryn Davies: My name is Bryn Davies. I am the director and actuary of Union Pension Services, which is a specialist consultancy helping trade unions with a range of issues involving pensions, both state and occupational, and of course saving.

[Peter Dowd]

Q I wanted a sense in the round of how you think the proposals in the Bill for LISA and Help to Save demonstrate a coherent approach to the Government’s objective of making it easier for everyone to build up savings as they need. How do they fit into that landscape?

Bryn Davies: It has to be recognised that these measures come out of the more fundamental review that was undertaken of taxation and provision for retirement. I do not think it would have come out now and in this form, particularly the LISA, without that preceding process. That process identified that it is difficult—the whole issue of how tax advantages are used to encourage people to provide adequately for their retirement is difficult. There was plenty of speculation in the press that the last Chancellor had made up his mind about some fundamental changes, primarily in pension taxation. He pulled back from that and came up with the three-pronged approach of increasing the ISA limit, introducing the LISA and Help to Save—which, set against that background, are relatively minor and unco-ordinated. I do not think anyone would say that they are a comprehensive approach to making sure that people provide properly for their retirement.

The LISA is functionally equivalent to the proposed pension ISA, which was much debated, though it has a different name. The particulars may not be as was proposed by the arch-proponents of a pension ISA, but functionally it is a pension ISA. Seen globally though, it is a pretty trivial contribution towards the much bigger problem. There is widespread acceptance that pension tax relief is a problem that needs to be dealt with. In that context the LISA is pretty limited, and Help to Save is obviously a very limited proposal that does not really fit within that scope at all. In terms of a comprehensive approach to the problems of making sure people save what they need, it is lacking—and I do not think anyone would be able to pretend otherwise.

This is something that I do not often say, but I very much agree with Richard Graham MP that we need a comprehensive approach. He has spread it a bit wider than I would: he is proposing that there should be a commission on saving. What I have argued for is that there should be a continuation of the Pensions Commission in one form or another to tackle the specific issue of tax relief. The Pensions Commission, which must be regarded in many ways as a great success, pulled back from tax relief—they sort of dodged it—but I think they or some successor should take on that issue and produce a comprehensive review. Set against that, the LISA is too little and too early. Unless you undertake a fundamental review of pension taxation, I do not think that the LISA really makes a lot of sense.

[Peter Dowd]

Q In that sense, given that there does not appear to be any appetite for any substantial review of the sort that you are talking about, let us take it at face value that that will not happen. Do you get the sense that this is—I will not say a gimmick, but simply the Government feeling that they have got to do something by chucking another product into the market as a smokescreen, or call it what you will?

Bryn Davies: I would not like to use the word “gimmick” but it was a policy in search of a solution rather than the other way round. The proposal for the LISA was seen as something that could be said to have come out of that earlier process, and not coming out with anything would have given the appearance of a significant failure in policy making. In that sense, it was seen as the least that could be done as part of that process.

The problem with it is not just that it does not fit—the argument I am making is that it does not fit within this broader review of how savings for retirement should be tackled—it is also problematic in itself. I watched your sessions this morning and I think the case has been made. There was some evidence in support but also, to my mind, powerful evidence pointing out the problems with the LISA, particularly in the context of the roll-out of automatic enrolment, which is a major concern in the trade union movement.

It is absolutely crucial that whatever comes out of the legislation should not in any way interfere with the completion of the process of automatic enrolment. It is particularly concerning that LISAs will start hitting the streets, as it were, at the same time as automatic enrolment is going to face its biggest test, when the contribution rates go up from their present very low rates to the full joint 8%. That is my major concern.

There will be such mixed messages that a lot of people will make wrong decisions at that time. The two processes should be disentangled. That is the simplest way. I know we are a long way down the road and evidence this morning from the industry was strongly that they just want to get on with the job and get these things delivered, as promised by the Government, from next year, but sufficient concerns have been raised about the interaction with automatic enrolment that it would be worth putting it off, to disentangle those two processes of people starting to sell LISAs at the same time as people start getting these increases in their contributions from the current level, as far as individuals are concerned, of up to 5% gross.

[Peter Dowd]

Q Can I take this in a slightly different direction? I suppose it is linked, to some extent, to some people’s concern about self-employment. That is perfectly legitimate and okay, but there are many people in effect being forced, de facto, down the self-employment line to take pressure off employers to pay national insurance and so on. Are there concerns that employers will encourage their employees to choose a LISA instead of a workplace pension, in effect reducing their contributions?

Bryn Davies: Of course, there are rules about enticing people away from automatic enrolment, and we want to see those enforced. The implication is that if people were offered a genuine choice, LISA would have to be better than the automatic enrolment offer. I am sure there will be some employers who decide to go down that road.

On the question of the self-employed, it has been identified that automatic enrolment does not really work for them. It is possible that something like a LISA would offer them something that can work alongside automatic enrolment for employees. That is leaving to one side the whole issue of whether this growth in self-employment is genuine self-employment or just a way of evading employment law by forcing people into self-employment when they should be employed—but that is a much broader issue, on which I am not an expert.

[Huw Merriman]

Q Mr Davies, could you help me a little? I have not come across Union Pension Services Limited before. Is there a formal link to the trade unions or do you represent anyone?

Bryn Davies: No, no—I am just an honest professional working to make my bread, but working just for trade unions. I work as a consultant to individual unions.

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[The Chair]

We will now take oral evidence from Scottish Friendly. Could the witness introduce himself for the record?

Calum Bennie: Good afternoon. My name is Calum Bennie. I am a communications manager at Scottish Friendly.

[Peter Dowd]

Q You have indicated in the past that,

“We at Scottish Friendly, while recognising LISA will not garner universal support, are enthusiastic about the initiative. It deals with one of the biggest problems society faces in the UK: trying to get under 40s to engage with planning for their retirement.”

[The Chair]

Could I ask the hon. Member to speak up?

[Peter Dowd]

Yes, I beg your pardon. When Paul Johnson of the Institute for Fiscal Studies came to address the Treasury Committee, he said he did not think that the lifetime ISA would encourage new savers. There seems to be a difference of opinion, although I am not saying that there is. Why are you so enthusiastic about it?

Calum Bennie: New savers are one issue, but we are supportive of the LISA because what it could do is attract people who are currently put off saving for life after work. They are not enamoured of pensions—they have been put off pensions for whatever reason, be it a bad experience of their own or bad experiences that their families have had. They are not interested in pensions per se. The lifetime ISA could be a way of them putting money aside for their retirement, which otherwise they would not have done. That is where we come from here.

[Peter Dowd]

Q Following on from that—I was trying to tease this out earlier—I get the sense that this is another product: “This one hasn’t worked, so let’s introduce another one; that one hasn’t worked, so let’s introduce another one,” or, “People aren’t saving for retirement, let’s introduce another one.” It begins to sound as if we are saying, “Let’s just try another thing. None of them work particularly well, but let’s just chuck this into the mix.”

Calum Bennie: I do not think we would disagree with that. As several people have said in the time that I have been in the meeting this afternoon, a more holistic approach to savings and pensions—or saving for life after work, as we would perhaps put it—needs to be looked at. In the meantime, though, we need to do something to get more people putting money aside for that period in their life. As has been raised several times, a key group of people who have not been saving for life after work or have been disadvantaged in doing so is the self-employed. There is a clear benefit from the lifetime ISA, at least for that group. From our point of view, it is quite clear that there is a group of people who are not interested in pensions. They have been put off pensions. This represents a way for them to put money aside for their future.

[Peter Dowd]

Q I have another quick question. The witness speaking before you was asked about evidence. I would ask you, what is your evidence that this will make people save? What evidence is there? You say that there is a flexibility in the system, but what is the evidence for encouraging this specific product to encourage people to save more? That was clumsy, but you get the gist.

Calum Bennie: When you introduce a product or investment that has clear advantages, as this one does, it will attract people to save. We have got quite a long experience of incentivised investment products for all sections of the community. In particular, our focus is on those with low to modest incomes. As a company with roots as a friendly society, for the last 30 years we have focused, initially, on friendly society tax-exempt savings plans. There was a clear tax advantage with those.

Twenty-five years ago, the minimum investment was £10 a month, and that attracted a substantial proportion of C2 and DE investors to put their money in those plans. In more recent years, the child trust fund was introduced. That is certainly going to help a reasonable group of people when they reach 18 with a reasonable start in life, and that has obviously then translated into the junior ISA. We were also a proponent of the insurance ISA that is no longer here, which attracted a mid-group part of the population that may have been put off by stocks and shares ISAs before.

That is why we are pretty certain that this product will also be taken up. It will not be by everyone, because there are going to be clear wealth warnings against it. If we were to introduce it, we would certainly need to make clear what you would be getting yourself into if you decided to try to access the fund before age 60—if you were saving for that length of time. But, all things being equal, savers do know what they are letting themselves in for. In our experience, a lot of savers like the discipline that they cannot touch the money. We have done focus group after focus group and that constantly comes up. That is why they like some of the products we offer—because they are long-term—and that could be a key incentive for something like this.

[James Cartlidge]

Q I was very interested in your main point. May I just clarify? Obviously there is this attraction for those who are self-employed, but are you suggesting that, perhaps because of a lack of faith or trust in pensions, even those who might actually be better off focusing on the pension side will simply be attracted to this, as it is something they have more trust and understanding in? Is that your basic point?

Calum Bennie: Yes. There are clearly some people who just do not want to touch pensions for whatever reason. The fact that we are having to force people into pensions is almost an indication that for many people, pensions are broke. We are not saying that pensions are bad and LISA is good; we are just recognising what is out there with people and that some people are very comfortable with ISAs.

We were one of the first friendly societies to introduce several ISAs in 1999 when they came out. More recently, we have moved away from friendly society tax-exempt plans, because they were inflexible, to a much more flexible ISA. We launched that five years ago. That was quite a risk. We did not quite know whether the market that we were aiming at—as I said, that is very much the low to mid-income group of people—would take ISAs, because it is a stocks and shares ISA that we market; it is not a cash ISA, because we are offering people growth potential. So there is a learning experience that people perhaps have got to think about before they invest in this, because it is a stocks and shares ISA, but it has been very successful in terms of the take-up of those ISAs.

In our experience anyway, because we are not focusing on the wealthy and well-advised, people are comfortable with ISAs; not everyone is comfortable with pensions. Therefore, this product, in the short-term perhaps—until a more holistic set of savings plans and investment plans, which perhaps has cross-party support, comes about—could attract lots of people who would otherwise not put money aside for life after work.

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[The Chair]

We will now hear oral evidence from MoneySavingExpert.com and the Women’s Budget Group. Could the witnesses please introduce themselves for the record? I start with Martin Lewis.

Martin Lewis: Yes, I am Martin Lewis, founder and executive chair of MoneySavingExpert.com.

Jonquil Lowe: Hi, I’m Jonquil Lowe and I am senior lecturer in economics and personal finance at the Open University, and part of the policy advisory group for the Women’s Budget Group.

[Peter Dowd]

Q I will make an assertion here: I think the consensus of opinion today is that the pensions landscape is broken. However, in the absence of more structural change to that landscape, any product that helps—even if it is only a little bit and even if it’s for a limited number of people—is welcome. Mr Lewis, you have made this comment about the LISA:

“For retirement savings it works the same way, but whether it beats a pension or not is a much trickier conversation.”

Could you give us a view about that consensus claim that I just made?

Martin Lewis: If we just look at lifetime ISAs as a pension product and ignore the homebuying element, which of course is a substantial element, based on pure numbers—well, actually there isn’t really anybody who should get the lifetime ISA, if you’re contrasting it with a pension. Certainly, if you are employed, you want to be auto-enrolled. If you are not employed and are a higher-rate taxpayer, there is a clear distinction—it is far better to be in a pension than it is to be in a lifetime ISA. If you are a basic rate taxpayer, the numbers are much of a muchness, but you have the two key factors: one, in your inheritance tax planning, the LISA is part of your estate, whereas your pension isn’t; and, two, LISA counts for benefit cap purposes, which could have a massive effect on many people, whereas the pension doesn’t. Those two factors mean that if you really break it down and make this a black-and-white binary decision, don’t put your money in a LISA.

Having said that, there are some people, especially self-employed basic rate taxpayers, for whom the idea of putting money away into one of these schemes is attractive, and therefore I support this as a good concept. Remember, we are only talking about pension saving there; not the other side, where it is a complete, utter no-brainer. Do you want a house? Put your money in a lifetime ISA. There are some arguments about whether Help to Buy is not in those transitional arrangements and I have issues with the help to buy ISA, but overall it is a no brainer.

I think my great concern over the lifetime ISA, though, is the one that goes back to the point about explaining a product that has a level of complexity, although it is not that complex. In my career, I have learned that what people want—I have just told you what it is—is a trusted source. That is enough for most people— a trusted source who says, “Don’t put your money in a lifetime ISA rather than in a pension unless you are a basic rate taxpayer who is self-employed.” There you go. People do not really need to know why. You have put the proofs: you’ve seen it on the website, so you are therefore on it. That is pretty much all you need.

All products are complicated, so we make them simple. You get trusted sources to do that, and it works. My great concern, and I have the same concern with Help to Save, is not the product in itself—I support both of them—but that there are certain dangers in misprioritising your finances. In the lifetime ISA, the danger is in wrongly opting out of auto-enrolment and putting your money into a lifetime ISA. In Help to Save, it is not paying off your expensive debts, and saving when you should be paying off the expensive debts.

I am aware that there is a new guidance system being set up, which is right and I approve of that. The problem with that is that you have to be proactive to go there. I would strongly urge you, when you set these up—it is much easier with the National Savings and Investments product—to ensure that at the point of application, whether that be online, by phone or in branch, the questions are asked, and that people are forced to ask them. So at NS&I, when you are setting up the Help to Save, it asks you, “Do you have debts? Are they expensive?”. If they are, some information is given about the fact that you may be better off paying those down. You do that not in a leaflet, but at the point of application.

With the lifetime ISA, which in many cases will be an online or on-the-phone product, rather than a branch product, I would say at that point in the online form, the question should be asked, “Are you an employee? Does the employer have auto-enrolment? Are you planning to do this instead of a pension?” and at that point, information is given that explains that generally you will not be better off with the lifetime ISA.

There is no problem with the product; there is a problem with how we communicate it and how we stop people making bad decisions. The way that you do that in the world that I work in is you signpost it once, you signpost it again, and then you signpost it a third time, and now you might just be starting to start the process. I will tell them when I talk about it on the telly or on the website; you will have it in a brochure for the product; and you will hear it from the pension guys. Then when you are signing up, you will have a final warning. If we do that, we will probably touch 50% of the people we should, but not all of them. That is my biggest caution to you today: just make sure that people know when it is not right for them. Then we can all be very excited about two new products that are out there, and which should, in general, be beneficial to the people who should be using them and are a good thing.

[Peter Dowd]

Q Can I pick up that last point on knowledge? That is another issue we have touched on today. In an ideal world, people have complete control of their faculties and decision making, and have capacity and so on, but out there, that does not always happen. The concern that has been expressed today is about that knowledge landscape, and people’s ability to grasp that, without it sounding patronising. Do you think that, out there in the world that this product will be sold in, there is enough information and knowledge for most people to make a reasonable decision?

Martin Lewis: I do not think there is now, because the products are not out there. The truth is that it is mainly people in this room and the industry, and a few nerds like me, who will be interested in them before they launch—why would you be? Once they launch, we need to get it right. For my TV show, next February, I have already got a lifetime ISA special booked in; it will probably be the second or third week of February—half an hour of prime time on ITV—and we will get the message out, because people need to understand how it works. We will get that out, but that communication needs to be right and consistent; the messaging needs to be right.

My concern is about product-provider level, where product providers and different people within businesses have incentives to sell products. Even in wonderful building societies, the savings managers do not ask their customers whether they have debts before they encourage them to save. Will you do it as a blanket? That is not the right way for anybody to go.

As we are starting two new products, we have a very interesting point where you can set up the regulation before we start to make it proactive, which is what I am encouraging. With Help to Save, the message is: “If you save £50 a month, after a couple of years, we will give you 50% on top.” Yes, I know there are complexities about exactly how much you have saved and whether you can take it out, but that is all you really need to know. For the lifetime ISA, it is: “You can save up to £4,000 a year. You have to be under 40 when you start it. Then you can use it towards a house, in which case we will give you the bonus then, or at the age of 60, when we will give you the 25% on top, with a maximum bonus. If you have ifs and buts, do your reading—but do your reading.” Those are all the messages that you need to get people interested in it.

These two products have a very simple advantage: it is called free money. Go and have a look at the green deal. Until the cashback section came in, no one was interested in the green deal. Once you started giving people free money, suddenly it became very popular. Well, you have two free money schemes. Done right, talked about right and communicated right, they will be very popular. Unintended consequences are possible—the lifetime ISA might pump the housing market, which is a concern, and we have already seen it somewhat with Help to Buy—but done right, this is free money for people. As for looking at this at a macroeconomic level—are we skewing it? Are we giving it to the wrong people? Does it have the right political consequences?—that is not necessarily my bag, but I have some concerns over it. However, if you are talking about whether you can communicate these products in such a way that people will take them up, free money does a pretty good job of getting people interested.

[Peter Dowd]

Q Thanks. I have a question for Ms Lowe. I do not know whether you have a comment on my original statement. If you do, please feel free to give it. Also, a distributional analysis by the Women’s Budget Group shows that by 2020, single female pensioners will experience a whopping drop in living standards. Is there anything in this product, for the sake of argument, that you think will help to deal with, alleviate or mitigate that?

Jonquil Lowe: No, we do not. That is the short answer. Martin touched on this: is the money being given to the right people? Certainly the lifetime ISA is less regressive than the existing system of pension tax reliefs, in that it gives a flat-rate 25% bonus to everybody. However, we still think that this is a very regressive way to use taxpayers’ money. Simply making a product available to everyone does not make it gender-neutral. You also need to take into account people’s opportunity to take up these products.

The lifetime ISA targets people who can already afford to save. There are huge swathes of people, mainly women but some men, who are contributing to the economy in the form of unpaid work, rather than paid work. Their decisions on care—caring for children and adults—mean that they are more likely to be in part-time work and are more likely to have periods out of work. When in work, they are more likely to be in sectors where their earnings are low, which tends to affect them not just at that time but for the rest of their working life. It is much more difficult for women to take advantage of these products, so we do not really see the lifetime ISA as a solution to women’s poverty.

We are also concerned, as Martin said, that the lifetime ISA may be a simple product, but it throws up complex decisions. The worry is that people may well choose to go with the lifetime ISA, rather than a pension, simply because it seems a simple product and they feel that they have more control, but in doing so, they are going to lose the employer’s contribution under automatic enrolment. They will be making decisions that are actually not in their best interests, which is a concern to us.

[David Rutley]

Q Mr Lewis, you mentioned some concerns about transitional arrangements between help to buy ISAs and LISAs. Could you expand a little on that? I then have a question to both of you. One of the issues with financial service products is getting younger people interested in them. The great thing about the lifetime ISA is that it applies to youngsters at 18. We have some young people in the audience from Macclesfield. How would we seek to get young people more interested in these products early on?

Martin Lewis: First, there is a difference between the two. The help to buy ISA is available at 16, which is one issue. The second issue is that help to buy ISAs are limited to properties worth £250,000, or £450,000 in London, but for the lifetime ISA it is £450,000 across the country, which is a good thing.

Here’s where it gets rather complicated. You can use a help to buy ISA effectively after three months. You need £1,600 in it; that’s £1,200 in the first month, and £200 each month for two months. We have some people who have done it in two months and thirty days. We are allowing people to transfer their help to buy ISA into the lifetime ISA within the first year, which is a good rule, because it allows people to move it across and then they can put more in their lifetime ISA. However, the lifetime ISA has a one-year minimum hold before it can be used on cash, so I could have had a help to buy ISA for three years, transfer it across into the lifetime ISA and then save more money in, and then suddenly discover that I cannot buy the house that I want and have found, even though I have been saving in the help to buy ISA for three years, because I have to have held the lifetime ISA for a year.

A simple arrangement to fix that would be to ensure that the trigger-point, if you transfer a help to buy ISA into a lifetime ISA, is the start-point of the help to buy ISA, not the start-point of the lifetime ISA, so you would have had your year. Those are the types of transitional arrangements I am talking about. They are not big-picture, I think, even at this stage of a Bill Committee, and they are ones that we have had a discussion on the phone about.

The other classic thing that I would be very wary of—I will throw this in while we are talking about this—is that, as I have suggested, both these products will not be perfect. There will be unintended issues, such as the help to buy ISA issue—that it was a mortgage deposit, and some people thought it would exchange. It always was at that point, but it was revealed by the newspapers. I would strongly suggest that with both these products, there is a pre-arranged one-year review, where minor terms can be tweaked to make better products, and where we discover the things that none of the clever people who have given evidence or who are sitting around the table have thought of yet. That’s a sensible way to introduce products such as these, which are so complicated—especially the lifetime ISA—to be honest with you. Those are the types of transitional arrangements I am talking about. Forgive me, what was the second part of your question?

Sale of Annuities

Peter Dowd Excerpts

Wednesday 19th October 2016 Commons Chamber

[Simon Kirby]

Mr Speaker, I acknowledge your sound advice, as ever, and apologise if I have been anything other than my usually well-behaved self.

My right hon. Friend the Member for New Forest West (Sir Desmond Swayne) raises an interesting point, but this is about people, many of whom are older and more vulnerable, making the right choices, and the Government making sure that the market is there to support them. That is not the case, which is why we have changed tack.

[Peter Dowd (Bootle) (Lab)]

This is the latest of the many U-turns that the Government have made. I thank the hon. Member for Leeds North West (Greg Mulholland) for securing this urgent question. Labour Members want to know why the Government did not do proper market analysis prior to the announcement. They were warned at the time. If they had done that analysis at the outset, they may have realised the chaos and confusion that such an announcement would cause for up to 500,000 pensioners across the country, who are already worried about their long-term future.

This U-turn on pensions comes in the same week as the Government have pushed forward with their proposals for a lifetime ISA, despite widespread cross-party concern about the impact of future public finances on personal retirement plans. In the UK pension market the consumer is unable to make an informed choice because of a lack of cost and performance data. We believe that it should be the role of the Government to provide those data. What will the Government do to assist with that process?

Like the hon. Member for Leeds North West, we would like to know when the Government decided to abandon the policy. Who made the final decision? Was there another interference by the Prime Minister in the previous Chancellor’s decisions? Who was consulted? How extensive was that consultation? The Government were warned. What assessment has been made of the pension market in general and the knock-on effects of this decision? What influence, if any, has the recent vote for Britain to leave the European Union had on this decision?

There is an indication that because of this decision, £900 million may be lost in the first two years in tax that would have come in as a result of people paying tax on the sale of their annuity. Where is that money going to come from? Is that not another black hole in the Government’s finances?

[Simon Kirby]

Let me deal with the points in reverse order. The hon. Gentleman will have to wait for the autumn statement to see what the finances look like, but it became increasingly apparent that not only was it not a good deal for consumers—those vulnerable people who we care about—but it was unlikely to provide the kind of income that had first been expected. We consulted extensively with the industry and consumer groups. I had many conversations with the Department for Work and Pensions, and particularly with the Parliamentary Under-Secretary of State for Pensions. The hon. Gentleman asks where information will be provided. The Government are introducing a new money advice service that will provide such information.

I shall finish with a quote from the Association of British Insurers, in whose interest the hon. Gentleman might suppose it was for us to continue with the policy. The ABI says:

“This is the right decision for the right reasons”

and that there were

“considerable risks for customers, including from unregulated buyers”.

We do not want to see unregulated buyers out there or vulnerable people affected.

Concentrix: Tax Credit Claimants

Peter Dowd Excerpts

Tuesday 18th October 2016 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your stewardship, Mr Nuttall. I start by thanking my right hon. Friend the Member for Slough (Fiona Mactaggart) for enabling Members to consider this matter, as well as hon. Members from across the House who have attended and spoken. I counted 24 interventions or speeches, and there was a theme in the words that were used time and again—words such as “shameful”, “shocking”, “distressing”, “desperation”, “anger” and “despair”.

Like other hon. Members, I have received many letters and phone calls from constituents who, to their shock and bewilderment, have found their child tax credits stopped, with little explanation and with few avenues of recourse. Under the Government’s contract with Concentrix, thousands of innocent mothers—the vast majority are working mothers—were in effect branded fraudsters and cheats. At the drop of a hat, they saw money that they desperately needed for their children taken away, notwithstanding their entitlement to it. Yet the company is not solely at fault—the Government are, too. Despite the protestations that the Minister will no doubt make today, the Government gave Concentrix a contract that was a licence to harass and was open to abuse. It does not take Sherlock Holmes to work out that if a company is paid commission to find tax credit error and fraud, it will start with the easy targets so as to turn an even easier profit.

What is more shocking is that the victims, which is what they are, did not have the means of fighting back. They were disfranchised. Hon. Members have spoken of their need to intervene personally in many cases to get movement. The whole process was deeply flawed and, as has been suggested, operated on the presumption that people were guilty until proven innocent—a concept completely alien and contradictory to our values, and our sense of justice, fairness and decency.

Under the system, the occupant of a household was sent a letter by Concentrix accusing them of not meeting the standards for child tax credit. The letter demanded that they get in touch to present evidence of their living arrangements. Having received the letter, some constituents attempted to call Concentrix, only to find the number busy, a point that has also been made. When Concentrix did not hear back from the person, who may not have received the letter in the first place, another letter was summarily sent, stopping tax credit payments. As far as I am aware, at no point was a Government Minister consulted or asked to sign off the process—can the Minister tell us otherwise? Instead, a private foreign company, whose sole interest was profit, was allowed to withdraw tax credits on behalf of the British Government. That is what makes the contract so unique: the vast power Concentrix had to act on putative information.

Jon Thompson, the chief executive of HMRC, confirms that in this novel approach, it was the first time such checks had been carried out by an external provider. Even Atos did not have the power to withdraw benefits. Concentrix had carte blanche. The Government were in fact planning to renew the contract for a job well done. They did not care to ask why Concentrix had so many savings on its books, or to listen to the complaints of many of our constituents. It was the Labour party that originally called the National Audit Office to investigate and the Labour party that has pushed for oversight and demanded action for the thousands of families who have still not received repayments from Concentrix.

We see the austerity cuts hitting women hardest, and the Government changing women’s pension age. Now we see the Government contracting private companies to take away money from single working mothers. We cannot help but ask what this Government have against women. What do they have against hard-working single mothers? It comes down to a lack of care. In essence, the Government are happy to outsource important processes affecting people’s lives to private corporations to make a profit. So be it, but not without the proper checks and balances being in place.

[Tom Elliott (Fermanagh and South Tyrone) (UUP)]

The hon. Gentleman has focused on the failures of Concentrix. Although many of us will accept some of his points, does he also accept that the main focus of the difficulties is HMRC and how it managed the contract?

[Peter Dowd]

The hon. Gentleman makes a fair point that needs to be looked at.

When all is said and done, this is a question of the performance management of a Government contractor, and a clear lack of oversight by the Government. On behalf of the many people affected by the debacle, I would like to performance-manage the Minister by asking the following questions. First, who was overseeing Concentrix’s contract? Secondly, how was the oversight conducted? Thirdly, how often was it reviewed? Fourthly, what were the penalties for mismanagement of the contract? Fifthly, when did the penalties kick in? Sixthly, what penalties are left on the contract? Seventhly, will Concentrix be paying back any money to the Government? Eighthly, how many people have been affected? Ninthly, what actions have the Government taken proactively to compensate those people? Tenthly, have the Government sent out formal apologies to those affected? And finally, when will the last person who has had their child tax credit withdrawn receive repayment? Those key questions need to be answered and acted on. We do not want any shilly-shallying from the Government.

[Melanie Onn]

Would my hon. Friend add two further questions: whether Concentrix has applied for any more contracts in the last month, and whether it will be prevented from bidding for any future contracts with this Government?

[Peter Dowd]

Those are important questions, which I am sure the Minister will pick up on in his response. I fear that unless the Government get to grips with their commissioning processes, we will be back here in six or 12 months’ time, looking at another company that has abused a Government contract for profit and, in so doing, deprived some of the most vulnerable people of much-needed financial support. The situation needs to be sorted; otherwise, I fear the fiasco will be repeated and the Minister will be doing an encore in due course.

[Mr David Nuttall (in the Chair)]

Order. I ask the Minister to leave, if possible, a couple of minutes at the end of his speech so that the right hon. Member for Slough (Fiona Mactaggart) has time to wind up the debate.

Savings (Government Contributions) Bill

Peter Dowd Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 17th October 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

We have had a number of contributions. The hon. Member for Newark (Robert Jenrick) told us about his grandparents getting to Blackpool courtesy of a jam-jar savings policy, which I thought was novel. The hon. Member for Ross, Skye and Lochaber (Ian Blackford) summed up the Government’s proposals as a missed opportunity, as undermining pension savings and as not tackling the real issue. The hon. Member for North West Hampshire (Kit Malthouse), who does not appear to be here, spoke of the diminution in the number of people with an asset base and said that, in his modest opinion, we should try to push on and get people to have a bigger asset base.

In an excellent contribution, my hon. Friend the Member for Harrow West (Mr Thomas) underlined the need for the Government to look afresh at the timescales in the Help to Save scheme and asked the Government to be more imaginative and reinforce the need to permit credit unions to participate in the scheme and the statutory right of payroll deductions of savings. The hon. Member for Gloucester (Richard Graham) gave us an enlightening exposition of his concerns that the proposal might be moving towards the death of the pension as we know it. I am not quite sure whether that was what he said, but that was the impression I got.

[Richard Graham]

Just to clarify, I said that the proposal risks undermining saving through a pension scheme and we do not want to do that.

[Peter Dowd]

I understand that clarification and I will touch on that topic in my speech.

Finally, the hon. Member for Morecambe and Lunesdale (David Morris), who supports the Government’s proposals, spoke about his experiences as a self-employed person and said that the proposal is not a supplementary pension but a means of saving.

Labour welcomes the sentiments expressed today on both sides of the House about the need to address savings overall. In general, anything that allows more people to save for the future is to be welcomed. Helping younger people and those on low incomes to save is a particularly legitimate and worthy objective, and the Government are right to consider policies to incentivise it. The majority of people on low incomes or in precarious work—categories sadly growing in Conservative Britain—are far from being in a position to save. Six years of Tory failures and austerity has led to many not knowing from where the next pound will come week in, week out. The Government’s clueless approach to exiting Europe simply compounds the problem on a macroeconomic level.

How is it possible for people to save when it is hardly possible for many to live properly on a weekly basis? How can a person save for the future when they can barely get through the day? The scandal of low retirement savings for the less well-off is an indictment on any notion of a cohesive society. One in seven pensioners lives in poverty and a further 1.2 million have incomes just above the poverty line. Distributional analysis by the Women’s Budget Group shows that single female pensioners will experience a whopping 20% drop in their living standards. It is unconscionable that people who have worked hard and contributed to society are forced to spend their final years in hardship and insecurity. We agree that there are problems that need to be solved urgently but the TUC states:

“Products such as… the forthcoming Lifetime ISA are disconnected from the world of work and prioritise goals other than retirement saving.”

As for the lifetime ISA, it is hard to see how its introduction even begins to tackle the problems to which I have just referred; not only does it represent a missed opportunity to build on the success of automatic enrolment, as those on the SNP Front Bench have said, but its introduction could serve as a distraction to tackling the real issues at hand. It misdirects valuable resources, as the money the Government are spending on this scheme is likely to benefit mostly those on higher incomes, as has been mentioned on a number of occasions. It also needlessly complicates the pensions and savings landscape—an arena already fraught with complexity. Perhaps most dangerously, it has the potential to undermine the emerging consensus that a pension ISA approach would be detrimental in the round. Indeed, it has the potential to introduce just such an approach through the back door. That is a concern and we are seeking assurances from the Government that it is not doing that.

In the months leading up to the Budget, the concept of replacing the existing systems of pensions tax relief with an ISA-style approach was widely debated and almost universally rejected as damaging to people’s retirement prospects. I wonder, as do many others, whether, after enduring an embarrassing rebuff, the Tories are back again with the same intent under the guise of this Bill. Many in the pensions industry have described the LISA as a “stealth” move towards pension ISAs. The Work and Pensions Committee has said that the Government are marketing the LISA as a pension product and there is a high risk that people will opt out of their workplace pension as a result. Let me be perfectly clear: people will not be better off saving into an ISA as opposed to a workplace pension. The Committee found that

“For most employees the decision to save in a LISA instead of through a workplace pension would be detrimental to their retirement savings.”

[Ian Blackford]

Can the hon. Gentleman shed some light on why he thinks the Government would introduce a Bill that would make people worse off as a result of investing in an ISA than they would be if they invested in a pension? Does he not think that that is an abdication of responsibility by the Government?

[Peter Dowd]

The answer to the first question is that I do not know and the answer to the second is yes.

I have to give credit where credit is due, because the Conservative party has a particular talent for conjuring up political smokescreens and opportunistic gimmicks: it has given us a national living wage, which, by any stretch of the imagination, is not a living wage; we were promised a “big society”, yet the Government set about systematically undermining the notion of a cohesive society; and we were cynically assured by the late, unlamented Chancellor that we were “all in it together”. One thing I do acknowledge is that post-Brexit, given the poor performance of the Ministers responsible for negotiating it, we will all be in it together—and it won’t smell very nice. In the meantime, the Government continue unfairly and unjustly to condemn working people and vulnerable groups to pay for the Government’s failed austerity obsession—and now it is time for the Government to mess up pensions. Do they never learn from their mistakes? Are they so ideologically driven that they simply cannot admit that they get things wrong? These are mistakes, I might add, that others pay for. Have the Government not done enough damage to the prospects of hundreds of thousands of WASPI—Women Against State Pension Inequality Campaign—pensions without thinking that through? Yet again, they have not thought about the potential for millions more to be affected.

When former Conservative pensions Ministers are referring to the LISA as a “Trojan horse” and warning that such “superficial attractions” will “destroy pensions”, alarm bells begin to ring on the Opposition Benches, if not on the other side of the House. Given this scenario, common sense demands ask that we ask this: are we now being presented with a savings Bill that will fundamentally undermine proper planning for pensions for the future? As many others have pointed out, the LISA is a sort of pension and not a sort of pension—it is both and not at the same time—and neither will it necessarily last for a lifetime. This seemingly opportunistically designed product risks even more pensioner poverty, which people can ill afford at any time, let alone in their later years. Moreover, the Tories’ approach of transferring responsibility and risk from the collective to individuals will not work, especially as the incomes of the poorest, the majority of whom are women, are being squeezed by public sector cuts and the roll-out of universal credit.

The Labour party is motivated and inspired by the real principle and value that we are all in it together—this is not a slogan and a soundbite, but a truism. We know that the majority of people are significantly disadvantaged by an individualised, dog-eat-dog approach, as opposed to a collective system that has fairness at its core. Today, people struggle with wages that are still lower than they were before the global financial crisis in 2008. There are now 800,000 people on zero-hours contracts and half a million people in bogus self-employment, and nearly 4 million of our children are living in poverty. Labour’s economic strategy is committed to tackling wage stagnation, particularly among those at the lower end, so that they are able and have the capacity to save for their future as well as living life now.

As the shadow Secretary of State for Work and Pensions has said:

“The pensions system that I want to see ensures dignity in retirement, and a proper reflection of the contribution that older people have made, and continue to make, to our society.”

Labour Members would like the Government categorically, unequivocally and clearly to assure the public that this Bill is not a veiled attack on pensions as we know them.

Small Charitable Donations and Childcare Payments Bill

Peter Dowd Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

May I begin by thanking all hon. Members who have made such valuable contributions to today’s debate? There were 11, alongside interventions, starting with the right hon. Member for Meriden (Dame Caroline Spelman), who talked about her involvement in the setting up of charities and the challenge she had in worshipping at the same time as filling out an envelope. She also talked about the demographic discrimination in relation to cheques and the need for them to be included in these proposals.

The hon. Member for Aberdeen North (Kirsty Blackman) welcomed the measures, but again raised the plurality of methods of giving and the challenges faced by smaller charities, which these proposals do not assist with. The hon. Member for Rochford and Southend East (James Duddridge) managed to get his wife, his mother-in-law and a shovel into his speech, which was an achievement, but importantly he also raised the issues of cheques, SMS messages and people’s ability to get their money into the charitable system through a plurality of methods of giving.

My hon. Friend the Member for Clwyd South (Susan Elan Jones) talked about the importance of supporting charities and the improvements that the Bill may bring and, again, raised the question of cheques as a way forward. The hon. Member for Taunton Deane (Rebecca Pow), who is not in the Chamber, referred to the bucket shaking that she does regularly and applauded those who go out collecting for various charities. She also welcomed the simplification introduced by these proposals.

The hon. Member for Foyle (Mark Durkan) also talked about the flexibility of methods of giving that are not in the Bill. He, too, pushed that issue. The hon. Member for Congleton (Fiona Bruce) also talked about the need for cheques and the ability of older people to participate by giving cheques. The hon. Member for Somerton and Frome (David Warburton), worshiping in his church, welcomed the simplification and the spontaneity in giving, as did the hon. Member for North East Hampshire (Mr Jayawardena), who again had a challenge: could the church get a contactless machine up the aisle at the same time as worshiping? That seems to have been a theme today. The hon. Member for Mid Dorset and North Poole (Michael Tomlinson) talked about the Great Santa fun run raising thousands of pounds and, touching everyone’s heart, the Waggy Tails Rescue dog re-homing charity.

We on the Labour Benches want to thank the charitable sector for all the remarkable work it does for all the communities we represent. Without its valuable role, many services in our communities would simply not exist, so the Opposition are broadly supportive of the content of the Bill. As such, I will keep my closing comments fairly brief. My hon. Friend the Member for Worsley and Eccles South (Barbara Keeley) has already made reference to our concern that loosening the eligibility criteria could increase the risk of fraud. That is important. The fact that a charity would not need to be registered for two years raises the question of whether just about anyone could set up a charity and relatively easily receive £2,000 of taxpayers’ money. That is an important point, so does the Minister have any figures on the amount of fraud that has taken place in the gift aid small donations scheme thus far?

The question of the risk of fraud is extremely important, given the inadequacy of the regulation of charity taxation. We hear about Government funds being mismanaged in elements of the charity sector or about charities being set up merely for the purpose of tax avoidance.

[Kevin Foster]

Does the shadow Minister agree that the call should be to ensure that the appropriate due diligence must be undertaken in new charity registrations, in particular by the Charity Commission, before a charity registration number is issued? I take on board his point about potential fraud via this scheme, but of course any charity being registered can start collecting and we need the public to have that confidence.

[Peter Dowd]

I completely understand that. At the end of the day, the process has to be sufficiently robust to ensure that fraud does not exist.

In that regard, the Charity Commission has identified the estimated levels of abuse, mismanagement, fraud and money laundering in charities today, in a succession of reports entitled “Tackling abuse and mismanagement”. It has identified an increase in the incidence of fraud in relation to charities, and a range of cases in which the commission gave evidence in criminal prosecutions, including against trustees who stole £350,000 from a charity for the relief of the people of Afghanistan, which is shocking. The number of compliance cases brought by the commission almost quadrupled between 2012 and 2013, demonstrating both that the commission needs our support and that we ought not be complacent. In that light, when proposed legislative changes come before the House, it is incumbent on us all to be vigilant. I do not want to rain on the party, but we need to be vigilant.

The problem is not just straightforward crime. There is something worrying in our corporate and tax-avoidance cultures that see charities as a means of making money. In recent years, a prime example is the Cup Trust, about which the Public Accounts Committee produced a damning report in 2013, while there was a judgment in the High Court earlier this year about the same issue. The report summarised:

“Despite its declared charitable aims, it is clear that the Trust was set up as a tax avoidance scheme by people known to be in the business of tax avoidance.”

In the meantime, the Cup Trust has claimed gift aid of £46 million. Regrettably, such tax-avoidance schemes are not isolated. As Professor Alastair Hudson, an expert on these matters, put it:

“There is something about the ‘goodness’ associated with charities, which made people reluctant to investigate or to criticise them.”

It is worth noting that when Northern Rock collapsed in 2007, it came to light for the first time that the bank had created a corporate structure known as “Granite”. This included what has been explained by academic commentators as a discretionary trust involving a small charity in South Shields among its beneficiaries. It appears that the charity was named without its knowledge. Moreover, it appears that the only purpose of this structure was to be “tax-efficient”. The presence of the charity in the structure appears to have been unconnected to working “for the public benefit”. We cannot be complacent about the law on charities, while that sort of activity is considered to be an ordinary part of corporate life. While tax avoidance is legal, it is, as Lord Denning said, “not yet a virtue.”

Of the 164,000 charities in the UK, a large number still do not lodge accounts with the regulators. It is difficult to know whether they are moribund, carrying on work “for the public benefit”, or being used for other less charitable purposes, so to speak. That does charities no good at all—and we need to protect them. Even the highest-profile charities such as Kids Company can be sources of mismanagement and bad financial practice.

Notwithstanding the best intentions of these proposals —namely, the loosening of eligibility criteria—it is vital that sufficient safeguards are in place to prevent fraud when Government funding or tax breaks are provided, as in this case, to the charity sector. I think that sentiment would get cross-party support.

That said, and as I indicated earlier, we are broadly supportive of the measures contained in the Small Charitable Donations and Childcare Payments Bill and we will not oppose it on Second Reading. We will, however, seek to improve the Bill in Committee next week, and I hope that the Government will support us in that.

Quantitative Easing

Peter Dowd Excerpts

Thursday 15th September 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

It has been geek central in the House this afternoon. I thank the hon. Member for Ross, Skye and Lochaber (Ian Blackford) for bringing this debate to the Chamber. I agree that a marriage between fiscal policy and monetary policy, which works in a constructive fashion, is a fair point. I also agree with the hon. Member for Wycombe (Mr Baker) about the wealth inequality and wealth justice effects of QE, but that is probably as far as our agreement goes given that he is a member of the Austrian school.

As for my hon. Friend the Member for Bishop Auckland (Helen Goodman), she is always lively and insightful on these matters. She talked about inequality per se and the regional inequalities in particular, and how QE may be able to overcome them. The hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) is modesty itself, and was as interesting as ever. Again, he talked about inequality and a better balance between fiscal and monetary policy. He said that the unintended consequences of QE must be a focus of attention. Finally, the hon. Member for East Lothian (George Kerevan) also talked about the unintended consequences of QE.

In response to a question about his confidence in the efficacy of quantitative easing, Ben Bernanke, the former chairman of the Federal Reserve, half-jokingly said that it worked in practice but not in theory. Such an off-the-cuff comment had some validity to it, but to an extent it is a moot point, and that is the very essence of today’s debate. Many Members will recall the former Labour Chancellor, Lord Darling, standing in this Chamber in 2009 talking about quantitative easing, or QE. Difficult times called for resourceful measures and the Labour Government had to consider all the potential policy responses to prevent or ameliorate a recession. This was not an isolated action; other countries have taken a similar path to some degree or other.

As Members will know, the first round of QE resulted in several tranches of gilt purchases—that was referred to earlier. By the 2010 general election, around £200 billion had been added to the Bank of England’s balance sheet, which still remains there to date. The predictions of wild hyperinflation, which came from some quarters, have been long forgotten. As I will suggest later, the precise effects of this relatively new approach are still being hotly debated, but we should all acknowledge the willingness of the Labour Government to consider policy measures outside the usual range.

Not long after taking office, the then Chancellor, the right hon. Member for Tatton (Mr Osborne), restarted the QE programme, giving authority to the Bank of England to print almost another £200 billion for the purchase of Government bonds. However, unlike the QE process under the last Labour Government, the post-2010 QE incarnation took place at the same time as the coalition Government were budgeting, year after year, for more and deeper cuts to public spending. As alluded to earlier, opinion remains sharply divided about the effectiveness of QE, but to judge its effectiveness, we must first agree, if possible, on what its aims were. However, there is little consensus on even that matter.

First, if the goal was to support nominal demand and prevent a deflationary spiral, there would seem to be broad agreement that inflation should have been lower without QE. Academic studies have consistently indicated that inflation, some five years ago, was around 1 percentage point higher than it would have been without QE.

Secondly, if the aim of QE was to support real GDP growth, there is, unfortunately, little agreement. The Bank of England estimates that economic growth would have been at least 1.5% lower in the absence of the first round of QE. Other economic studies have ranged from close to zero—no real effects at all—to around 2 percentage points of extra growth. The debate is likely to continue for some time, and of course the Labour party will watch developments closely.

A third potential motivation for QE was to increase the supply of credit. There is still considerable uncertainty about the extent to which QE has achieved this aim—a point touched on today. Last July, a post on the Bank of England’s blog argued that there was little evidence of QE having boosted the supply of credit:

“we find no evidence to suggest that QE boosted bank lending in the UK through a bank lending channel”.

Of course, other opinions are available.

When we look at the success or otherwise of QE, we must of course take into account the circumstances in which it happened. The first round of QE took place under conditions of supportive fiscal policy, as was referred to. Unfortunately, the Chancellor of the Exchequer between 2010 and 2016 adopted a fiscal approach at odds with that of almost every respected macroeconomist; he repeatedly targeted a smaller deficit, even when austerity measures failed to achieve their stated aim. His record will not be looked on favourably by history.

The Labour party welcomed the statement by the new Prime Minister and her Chancellor that they would ignore the only remaining target of the latest charter for budget responsibility, which lies in tatters after less than a year. A dawning realisation that a surplus is unlikely to be achieved in 2020 may have finally put an end to the failed economic approach that has characterised the past six years, but we remain in the dark about what will replace it. Britain is on hold while we wait for another two months to find out even the most basic outline of the new Government’s fiscal policy. The Labour party, and millions more nationwide, will hope that the new Chancellor, who sat at the Cabinet table throughout the last Administration, does not repeat the mistakes of the past.

Until the Chancellor pulls his finger out and finally outlines his plans, the Bank of England has sole responsibility for ensuring that the economy gets through the post-Brexit uncertainty. Last month, the Monetary Policy Committee announced the restarting of QE, including further purchases of £60 billion of Government bonds and up to £10 billion of corporate bonds. It is obviously too early to say whether these actions, which the hon. Member for East Lothian referred to, have delivered against any of the criteria mentioned earlier. Indeed, the statement of the MPC today in essence indicates that the Bank continues to keep a watchful eye on the effects of QE in particular and, more generally, the broader macroeconomic environment.

Last year, the European Central Bank began its own full-speed QE programme, similar in many regards to our own; it, too, includes bonds issued by institutions and agencies, including the European Investment Bank and the Nordic Investment Bank. Of course, if we had a UK national investment bank, another possible policy tool would be made available to the Bank—a point alluded to by my hon. Friend the Member for Bishop Auckland. Any decision about the potential use of QE in the context of a national investment bank would be made by the MPC.

My hon. Friend the Member for Hayes and Harlington (John McDonnell), the shadow Chancellor, pointed out in a recent Financial Times article that

“The operational independence of the Monetary Policy Committee is sacrosanct.”

That would include any decisions about QE, conventional or otherwise. However, set against any benefits of QE, there must be a serious consideration of any distributional impacts. As early as 2012, the Bank of England released a report looking at potential outcomes. It raised questions about the effect on pension schemes, especially those already in deficit. It concluded that the QE that had already taken place amounted to an increase in wealth of £10,000 per person, if it was equally distributed. Of course, as was said today, few think that the benefits of that increase in wealth have been equally distributed.

The Bank’s research suggests that as the action increased the value of assets, those who already hold assets will have benefited disproportionately. It notes that the wealthiest 5% of the population hold 40% of non-pension assets, but no one should be surprised by that: one of the aims of QE has always been to push down interest rates, and one of its effects has unquestionably been to push up the value of shares and other assets, including housing, and ownership of shares and other financial assets is distributed unfairly.

We would welcome any further study, to be conducted by the Government or others, on the effectiveness of unconventional monetary policy, so we support the motion. Most importantly, however, the country needs a signal from the Chancellor about his intentions for future fiscal policy, and waiting till November is not good enough. We know that lowering assumptions about future interest rates will keep down public borrowing, but we need to know whether or not the investment that the country urgently needs is finally on the way. We cannot afford to rely on the Bank of England alone to take responsibility for managing the macro economy.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 19th July 2016 Commons Chamber

[Mr Gauke]

My hon. Friend makes a very good point. Enterprise zones, which were reintroduced by the Government in the last Parliament, are important in creating a clustering effect and a culture of enterprise. They are making a big contribution to the northern powerhouse and playing a role in the increase in investment in the north of England.

[Peter Dowd (Bootle) (Lab)]

May I welcome the new Ministers to the Front Bench? Five northern powerhouse combined authority leaders have requested a meeting with the Prime Minister in Manchester to discuss the serious implications of Brexit for the northern economy, given its massive contribution to the country as a whole. In advance of the Brexit vote, will the Chief Secretary tell the House how many civil servants were working on regional plans, or any other plans for that matter, for such an eventuality?

[Mr Gauke]

First, I thank the hon. Gentleman and welcome him to his post. I am delighted to see that the shadow Front Bench is almost up to full complement.

We obviously face a number of challenges in terms of the new situation, but there are also a number of opportunities. As I have made clear repeatedly today, the Government are determined to ensure that, whatever the consequences of the Brexit vote, we will enable the northern cities to prosper and work together. That remains a Government priority.

The Economy and Work

Peter Dowd Excerpts

Thursday 26th May 2016 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

It is self-evident that investment, jobs and skills are the key to solving many of the problems facing the country. That is no less true in my constituency, so I shall touch on those topics.

There has been a slowdown in private sector investment owing to the impact of the recession and slow or stagnant recovery in the north. In my constituency, the only recent significant industrial investment is in a facility in Netherton at a manufacturing printers. The most strategic investment is in the new deep sea berth in the port of Liverpool at Seaforth. However, although there are plans to build a new road or a reconstructed road to the port, the plans for rail freight are abysmal, with just £10 million investment over the next three years. Perhaps there should be a halt to the road development until we get a better and more symbiotic relationship between rail and road investment there.

Bootle constituency has a chronic deficit of private investment as its employment base is in the public sector, at 23% in the borough of Sefton compared with 17% in the UK, and private sector job increases have not replaced public sector job loss. This is compounded by the underinvestment in public infrastructure on rail, ageing water and sewerage systems and undersupply of electricity to development sites. I hope the devolution deal will deliver on its promise to attract more investment into the area.

I want to give a thumbs-up to Mayor Joe Anderson, the chair of Liverpool city region combined authority, who has robustly made that case for the whole of Merseyside, as Ministers will testify. Gaining investment and jobs stimulated by the Liverpool2 development and improved road and rail access connecting it to the northern powerhouse will be critical.

On jobs, the stagnant recovery is reflected in job levels in Bootle, although the recession has not affected chronic unemployment. The issue of skills is a bone of contention nationally. We have managed to raise the level of skills, but there must be something wrong with an economy that can spend £20 million on a garden bridge across the Thames and £10 million on rail investment in one of the largest ports in the country. There is something wrong with that system and it must change. I hope this Queen’s Speech will change it, but I doubt it.