Pension Schemes Bill

Stephen Timms Excerpts

Tuesday 25th November 2014 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

Given the current cost of living crisis, it is certainly the case that people struggling to set aside money for the future need access to pension schemes that they can trust to give good value for money and to provide them with a decent income in retirement. We welcome the improved opportunities that we hope the Bill will provide, as we have throughout the debates on the Bill.

A lot of important detail is still to come; this is an enabling Bill. However, as interventions from my hon. Friends the Members for Edmonton (Mr. Love) and for Central Ayrshire (Mr Donohoe) and from the right hon. Member for East Yorkshire (Sir Greg Knight) have pointed out, it is pretty extraordinary and very unsatisfactory that in an important Bill, which has in total 55 clauses, we should at this very late stage be debating 33 Government new clauses and 72 new Government amendments.

The Minister knows very well that this is not a field in which haste is fruitful. He attempted in his response to one intervention to make a virtue of the fact that he was “picking these things up in real time.” What he actually means is “making it up on the hoof.” I do not think that is a good way to legislate on pensions. The scope for mistakes in drafting very technical measures such as these is too great.

The point of having proper parliamentary scrutiny is to spot problems early and to allow for them to be corrected. As it is, there will, of course, be many mistakes in the 70 pages, or whatever, of new material in front of the House for our brief debate this afternoon. We can only hope that Members in the other place will spot them and be able to put them right, but things are bound to go wrong. Having said that, I think that the risks are significantly less in this group of amendments than they are in the next, on which I will have more to say. However, it is troubling that there is so much new and technical material here.

I wanted to ask about one particular point. As the Minister has said, the new clauses are imposing new obligations on scheme trustees. As I understand it—I may be mistaken; if I am, I know that the Minister will correct me—the Government have not provided an estimate of the cost of meeting those obligations for scheme trustees. I wonder why not; normally, I would have expected there to be an impact assessment with an estimate. Will the Minister comment, first, on whether I am right—that there is no estimate or at least none has been published so far—and, if so, the reason for that?

Will the Minister set out his intentions over the numerous sets of regulations that are envisaged? Is he able to tell us at this stage which of those sets of regulations are going to be subject to the affirmative as opposed to the negative procedure, so that we can be assured of future debate about those more detailed provisions when they become available?

[Crispin Blunt (Reigate) (Con)]

I have listened to the right hon. Gentleman’s critique of all the new clauses coming forward at this time, but he will have had them at least for some time and the resources of the Opposition have been available to him. I have tabled the only non-Government amendment this afternoon. The right hon. Gentleman is a replacement—a senior one—for the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont). Is he able to say whether the Opposition are going to table further amendments in the other place?

[Stephen Timms]

As the hon. Gentleman is well aware, we have not tabled amendments on Report. Of course, we debated in Committee three Opposition amendments, but we were sadly unsuccessful. I am delighted that the hon. Gentleman has tabled an amendment, which will provide us with a little relief when we get to the second group; at least it will not be entirely Government material on the amendment paper. I commend the hon. Gentleman for his amendment, and he is right that the Opposition have not tabled amendments today.

[Steve Webb]

I shall not detain the House for long, but the right hon. Member for East Ham (Stephen Timms) asked a couple of specific questions. The impact of regulations brought in under the primary Bill in front of us would depend on what they can contain. We cannot do an impact assessment because we have not yet written the regulations. Generally when we produce regulations and they have a cost on business, there is an impact assessment to go with them. I hope that explains why we have not published an assessment at this stage.

On the timing, our broad goal is to have all this in place by April 2016. The right hon. Gentleman will know that a very significant change in April 2016 will be the end of contracting out, so defined benefit pension schemes will be considering what they do in response to that. In particular, if a shared risk scheme or something of that sort is envisaged, there clearly needs to be a legislative framework by around that time—not right on the day, but about that time. That is our goal and the rough timetable that applies.

The right hon. Gentleman asked about the negative and affirmative resolutions. The collective and shared risk regulations are generally subject to the negative procedure. He will see that clause 41 deals more generally with regulation-making powers and considers when they should be negative and when affirmative. In general, as I say, most of these are relatively technical regulations, so the negative procedure applies. I hope that is helpful. I commend the new clause to the House.

Question put and agreed to.

New clause 1 accordingly read a Second time, and added to the Bill.

New Clause 2

Power to impose requirements about factors used to determine each benefit

Regulations may make provision as to the factors to be used to determine what proportion of the amount available for the provision of any collective benefits by a pension scheme is to be available for the provision of a particular collective benefit.—(Steve Webb.)

This amendment allows regulations to set out the factors that must be used to calculate members’ benefits.

Brought up, read the First and Second time, and added to the Bill.

New Clause 3

Power to impose requirements about dealing with a deficit or surplus

(1) Regulations may specify circumstances in which a deficit or surplus in respect of any collective benefits that may be provided by a pension scheme must be dealt with in a particular way.

(2) The regulations may, in particular, specify steps that must be taken by the trustees or managers and the period or periods within which any steps must be taken.—(Steve Webb.)

The amendment allows regulations to set out how a deficit or surplus must be dealt with in specific circumstances, the steps trustees or managers may be required to take and the time period within which those steps must be taken.

Brought up, read the First and Second time, and added to the Bill.

New Clause 4

Requirement to wind up scheme in specified circumstances

(1) Regulations may require the trustees or managers of a pension scheme under which collective benefits may be provided to wind up the whole or part of the scheme in specified circumstances.

(2) The regulations may, in particular—

(a) provide for the winding up of the scheme or part to be as effective in law as if it had been made under powers conferred by or under the scheme;

(b) require the scheme or part to be wound up in spite of any legislative provision or rule of law, or any scheme rule, which would otherwise operate to prevent the winding up;

(c) require the scheme or part to be wound up without regard to any legislative provision, rule of law or scheme rule that would otherwise require, or might otherwise be taken to require, the implementation of any procedure or the obtaining of any consent with a view to the winding up.”—(Steve Webb.)

This allows regulations to require the trustees or managers of a pension scheme under which collective benefits may be provided to wind up the scheme or part of it in circumstances specified in the regulations.

Brought up, read the First and Second time, and added to the Bill.

New Clause 5

Policies about winding up

(1) Regulations may require the trustees or managers of a pension scheme under which collective benefits may be provided—

(a) to have a policy about the winding up of the scheme or part of it;

(b) to follow that policy.

(2) The regulations may, in particular—

(a) require the trustees or managers to consult about the policy;

(b) make provision about the content of the policy;

(c) set out matters that the trustees or managers must take into account, or principles they must follow, in formulating the policy;

(d) make provision about reviewing and revising the policy.

(3) The regulations may, in particular, require the policy—

(a) to contain an explanation of the circumstances in which the trustees or managers are permitted or required to wind up the scheme or part and any requirements about the distribution of assets (including any order of priority);

(b) to contain an explanation of how the trustees or managers intend to use any powers to wind up the scheme or part and how they intend to use any powers in relation to the distribution of assets (including any order of priority);

(c) to contain an explanation of how the costs of winding up are required to be met or how the trustees or managers will use any powers to decide how those costs are to be met.—(Steve Webb.)

This allows regulations to be made requiring the trustees or managers of a pension scheme under which collective benefits may be provided to have a policy about winding up.

Brought up, read the First and Second time, and added to the Bill.

New Clause 6

Working out which assets are available for the provision of which benefits

Regulations may make provision, in relation to a scheme under which any of the benefits that may be provided are collective benefits, about how to work out—

(a) which assets held by the scheme are held for the purposes of providing collective benefits;

(b) which assets held by the scheme are held for the purposes of providing which collective benefits;

(c) which assets held by the scheme are held for the purposes of providing any benefits other than collective benefits.—(Steve Webb.)

This regulation making power will allow provision to be made about how to work out which assets are held for the purposes of providing which benefits.

Brought up, read the First and Second time, and added to the Bill.

New Clause 7

Independent advice in respect of conversions and transfers: Great Britain

(1) Where a member of a pension scheme has subsisting rights in respect of any safeguarded benefits, or a survivor of a member has subsisting rights in respect of any safeguarded benefits, the trustees or managers must check that the member or survivor has received appropriate independent advice before—

(a) converting any of the benefits into different benefits that are flexible benefits under the scheme;

(b) making a transfer payment in respect of any of the benefits with a view to acquiring

flexible benefits for the member or survivor under another pension scheme.

(2) The Secretary of State may by regulations make provision about—

(a) what the trustees or managers must do to check that a member or survivor has received

appropriate independent advice for the purposes of subsection (1), and

(b) when the check must be carried out for the purposes of that subsection.

(3) The Secretary of State may by regulations create exceptions to subsection (1).

(4) In subsection (1)(b) the reference to another pension scheme includes a scheme established in a country or territory outside Great Britain.

(5) Where the trustees or managers fail to carry out a check required by this section, section 10 of the Pensions Act 1995 (civil penalties) applies to any trustee or manager who failed to take reasonable steps to ensure that the check was carried out.

(6) Failure to carry out a check required by this section does not affect the validity of any transaction.

(7) In this section—

“appropriate independent advice” has the meaning given by regulations made by the Secretary of State;

“safeguarded benefits” means any benefits other than—

(a) money purchase benefits, and

(b) cash balance benefits.”—(Steve Webb.)

This provides that before trustees or managers of a pension scheme (in Great Britain) in which a person has safeguarded benefits convert them into flexible benefits, or make a transfer to another scheme to acquire flexible benefits, they must check that the person has received appropriate independent advice.

Brought up, and read the First time.

--- Later in debate ---

[Steve Webb]

Obviously, that issue is not spelled out in the Bill, but it is important none the less. What we envisage is that people will contact the guidance service, which by then will have a brand, an identity, a phone number and all the rest of it, and will make an appointment if they want face-to-face or telephone-based guidance. Obviously, they can access the website as many times as they like, but if they wish to have face-to-face or telephone-based guidance, it will be at a set time on a set date. There will be a period between the initial contact and the guidance appointment for the gathering of information to make the session more useful. Coming out of that session will be documentation and signposting for further sources of information, guidance and, if they wish, regulated financial advice.

Clearly, we want everybody to be able to access the guidance, so the core model is that a person does that once. But the Pensions Advisory Service has a business as usual role anyway and it is inconceivable that, even if a person has had their formal guidance session with the service and then rang it up the next day with a question, it would put the phone down on them; of course it would not, so there would be flexibility. Clearly, we need to think further on that. We need to reflect on the fact that if someone has a guidance session and then has additional needs, is a formal second guidance session appropriate or necessary or are there other ways of dealing with those needs? The core model is one session, but other resources, such as signposting, are available on tap. We are considering whether further flexibility could be introduced.

I hope that I am near to conclusion. I ran through the relatively minor and consequential amendments that come towards the back of the Bill and that are relatively uncontentious. On the title of the Bill, amendment 1 amends the title of the Bill to include

“provision designed to give people greater flexibility in accessing benefits and to help them make informed decisions about what to do with benefits.”

That change is to reflect more accurately the content of the Bill in the light of the new amendments on the pension flexibilities.

In sum, these new provisions are designed to ensure that the guidance guarantee works as effectively as possible; that the various rules on transfers do not act to the detriment of people who are left behind in the schemes; and that the process is properly overseen with the provision of independent financial advice. They also spell out who pays for the help, and whether or not it is taxed. The provisions help to flesh out some of the detail of this important policy, and I commend new clause 7 to the House.

[Stephen Timms]

We are now embarking on a debate on 27 Government new clauses, 40 new Government amendments and—providing welcome relief—an amendment from the hon. Member for Reigate (Crispin Blunt) and the right hon. Member for Sutton and Cheam (Paul Burstow).

The changes the Government have announced will introduce much-increased flexibility for savers, which is welcome. They will also make the pensions market more diverse and complicated and lead to a whole new range of products about which consumers have not had to make decisions in the past. Of course it is right that safeguards need to be in place to protect savers adequately from the danger of being taken advantage of, as we have seen happen in this market in the past.

We are dealing with an area full of technicalities, some of which we have just been hearing about, and fraught with difficulty. I appreciate that the Minister had no choice but to introduce these measures at the same time as the implementation of the Budget changes, but he will recognise, as the House certainly will, that there is a danger, in providing so little opportunity for the House to conduct proper scrutiny, of creating serious problems and a future mis-selling scandal.

We have set out three tests for the new flexibility. First, is there reliable advice for people saving for their retirement? Secondly, is the system fair to those on middle and lower incomes who want to secure retirement income? Thirdly, are the Government confident that the changes will not result in extra costs to the state, either through social care costs or by increasing the cost of housing benefit? I would welcome the Minister’s comments on the extent to which he believes the changes before the House will meet those tests.

The annual workplace pension survey carried out by the National Association of Pension Funds this year showed that only 19% of savers feel very capable of knowing what to do with their savings. That is ahead of the very major changes about to take effect, and we can be certain that consumer bewilderment will rocket from next April. The new arrangements are supposed to be in place from that date—in less than six months—but we do not yet know how they will work.

In previous discussion about the form that the guidance will take, the Minister said that

“it is not formal, detailed or product-specific”.

That is rather different from what was said by the Financial Conduct Authority when it launched its consultation on guidance. It seemed to envisage something rather more substantial than the Minister suggested in his remarks, but the FCA will produce only the standards; Her Majesty’s Treasury will oversee the drafting of the guidance. Nobody can yet feel confident about what will emerge from that process. A number of questions must be asked, such as the one posed by my hon. Friend the Member for Edmonton (Mr Love) earlier. It is not clear even who exactly will pay for the advice or through what mechanism it will be paid for. I would welcome the Minister’s comments on how he envisages that process working.

The challenges were helpfully illuminated by the article on the front page of The Daily Telegraph on Saturday which said, “Pension mis-selling: scandal hits 100,000 retired savers a year”. The article explained that

“one in four pensioners who retired with a private pension in the past seven years is entitled to a larger annual pension income.

Savers with medical conditions including diabetes, high blood pressure and even smokers should have been offered an increased annuity based on their lower life expectancy.”

It went on to say that

“just seven per cent of those who are entitled to the increased pay outs have automatically received them. Studies indicate the true figure should be closer to 60 per cent.

Now Aviva, Britain’s largest insurer, is paying compensation and increasing the annual payouts of hundreds of customers after discovering staff sold inappropriate deals.”

[Crispin Blunt]

I am interested in the issue because two highly innovative companies in my constituency, Partnership and Just Retirement, sold these products to people approaching the point where they had to make a decision about an annuity. Of course, they are anxious about guidance because if people are given guidance about the nature of the market, they can then go to the right place to make those decisions. Is the right hon. Gentleman saying that existing providers should have provided such guidance? He used the words “should have”. These products were available in the market. There was a failure in the previous annuity market which I hope this guidance will address, pointing people to the right kinds of provider.

[Stephen Timms]

We welcomed the new flexibility that is being provided. I hope the guidance that we are legislating for will deliver the improvement that the hon. Gentleman describes, but we cannot yet be confident that that will be the case. This brief debate gives us an opportunity to press the Minister to give us rather more reassurance about that. I shall refer to some of the comments of JustRetirement, one of the companies that the hon. Member for Reigate (Crispin Blunt) mentioned.

The most recent Association of British Insurers data show that overall annuity sales are down 14% from the second quarter of this year, and by 56% compared with the third quarter of last year. Consumers are presumably waiting until the reforms go live in April next year before deciding how to use their defined contribution pension savings. The same ABI data show external annuity sales—that is, annuities bought on the open market—down from 49% to 35% in the third quarter of this year. Internal annuity sales, where an annuity is bought from the incumbent pension provider, have increased from 51% to 65% in the same period. The overall share of enhanced annuity sales has fallen from 28% to 22%.

The ABI data highlight the risk of the kind of consumer detriment described in the article in The Daily Telegraph on Saturday. Together, they suggest that problems will continue unless the Financial Conduct Authority intervenes actively. Just Retirement makes the point particularly strongly and effectively that there is an urgent need for a second line of defence requirement for providers. What happens if the guidance on offer is not taken up? That is not provided for in the amendments.

Legal and General has highlighted the lesson from the pilot that it undertook with public support—that in practice the guidance on offer will very likely not be taken up. As the Minister knows, the take-up was very small—2.5%—in the pilot that it set up and supported. If that happens on a significant scale when these arrangements come into force next year, it opens up the possibility of very large-scale new consumer detriment. JustRetirement, along with others, is right to argue that by introducing a second line of defence requirement, the FCA can apply a crucial brake against this potential future consumer detriment by requiring providers to check consumers’ circumstances when they come to access their DC pension savings.

The hon. Member for Gloucester (Richard Graham) asked whether the guidance would take account of other financial assets beyond DC pension savings. That is a good question.

[Mr Love]

The Minister alluded to discussions taking place between the Department and the FCA, but the formal FCA position given earlier in the consideration of the Bill was that consumer take-up would be a matter of public choice, leaving it to the person concerned. With all the emerging evidence, surely we cannot be confident that that will answer the question.

[Stephen Timms]

I fear my hon. Friend is right. If in practice only a tiny proportion of people, or even a modest proportion, take up the guidance being offered, there is every chance of very serious problems in this market in the future. The House cannot be satisfied with that likelihood.

A number of organisations have pressed vigorously for a second line of defence requirement and they make a telling case. Proceeding without that safeguard will leave many consumers exposed—we should bear in mind that this is all supposed to happen from next April—making people guinea pigs and opening up the real possibility of another mis-selling scandal in the coming months.

[Richard Graham]

The right hon. Gentleman raises an issue that may not technically arise from the amendments that we are debating, but in which all hon. Members have some interest. What could a possible second line of defence look like?

[Stephen Timms]

That is a good question. I do not have a proposition to make. I would hope that those who are reflecting on these matters, particularly in the FCA, will be giving that some thought. There is time for it to incorporate something else and to put that second line of defence in its conduct rules. What it would look like, I am not in a position to propose this afternoon, but the need for it is clear. If the hon. Gentleman is about to propose something, I would welcome that.

[Richard Graham]

The right hon. Gentleman is being very generous and Madam Deputy Speaker is indulging us gently so I will be brief. I guess—perhaps the Minister might nod sagely at this stage—that this is an issue primarily for the FCA, but I hope that the message has gone out from us today that we are interested in it.

[Stephen Timms]

I am grateful to the hon. Gentleman. I hope that those who follow these debates will take that as an endorsement of the need for that second line of defence to be devised and put in place. If it was not there, there is a real risk of exposing consumers to risk of a kind that we have all seen before, and which would undermine these important reforms from the outset.

As the Minister explained, independent financial advice amendments are set out in new clauses 7 to 13. New clause 7 requires that when a member requests a transfer of safeguarded benefits, which are anything other than the cash balance or other money purchase benefits, with a view to acquiring flexible benefits, which are anything that is not safeguarded, the trustees

“must check that the member or survivor has received appropriate independent advice”.

I want to pick up a number of issues. What exactly are the trustees being required to do? Are they being asked to evaluate the appropriateness of the advice that was given to the scheme member? It does not seem right that they should be called upon to do that. It is quite a big undertaking for them and they are probably not in a position to do it. That wording could be understood to mean that that is what they are being asked to do. I would be grateful if the Minister commented on that.

We are seeing the creation of two new categories of benefits—safeguarded benefits and flexible benefits. I gather that the use of these terms is completely new; they are not used elsewhere in the statute. We have three new categories of scheme set out in the Bill, but this is the first time that we have had reference to safeguarded and flexible benefits. The use of those terms seems unfortunate, because safeguarded rights has a particular meaning, which was familiar when, admittedly now rather a long time ago, I was in the office that the Minister now holds. In the context of contracting out, safeguarded rights had a particular meaning. That term is now being introduced in the amendments before us to mean something completely different. The term “flexible” also has a specific meaning in pensions tax terms. Again, there is a real risk of confusion in reusing that particular term to mean something very different from the one people familiar with pensions tax arrangements understand it to mean.

The National Association of Pension Funds has argued that the statute should state that where the member has requested a transfer of his or her benefits, other than cash balance or other money purchase benefits to a scheme in which they will be paid a cash balance or money purchase benefits, the trustees should require appropriate proof from the member that he or she has received independent financial advice from a person authorised by the Financial Conduct Authority to give such advice. The regulations could define “appropriate financial advice” in that way. The NAPF makes the point that the language in front of us is rather ambiguous about what exactly is envisaged. Perhaps the Minister could comment on the alternative wording proposed by the NAPF, which it thinks would make it clearer and would not give the impression that trustees were being called upon to do something that is actually very difficult for them.

New schedule 1, as the Minister has told us, deals with the detail of the calculation of the cash equivalent transfer valuation, replacing the current CETV provisions under the 1993 Act. I fear that the tangle gets worse here. The distinction is between money purchase benefits, flexible benefits that are not money purchase benefits—in other words, cash balance benefits—and benefits that are not flexible benefits, previously defined as safeguarded benefits. There are also transferable benefits, which are benefits

“by virtue of which this Chapter applies to the member.”

This is all quite complicated stuff. One of the fears is that the changes in terminology, and the reuse of previously familiar terms to mean completely different things, significantly increase the amount of confusion being created. Instead of just removing the current statutory requirement that all benefits be transferred if a member wants to transfer any benefits, the effect here is to prohibit schemes from having rules that require transfer of other categories of benefits if the member wants to transfer only one category, or that

“prevent a member who exercises a right under this Chapter in relation to a category of benefits from accruing rights to benefits in another category.”

Again, the NAPF makes the point that that last provision is “incredibly wide”. It points out that schemes do not let members participate in various sections willy-nilly; there are all sorts of rules about who can accrue what sorts of benefits and under what circumstances. The fact that somebody has asked for a CETV in one section of the scheme should not entitle them to benefits in other sections, but that is the way that this provision has been written. Perhaps the Minister could comment on whether that is what he really intends.

New clauses 14 to 16 seem to allow the Secretary of State to forbid draw-down from schemes that give members a guaranteed return, because draw-down can only be from money purchase benefits. That seems odd as well. Perhaps the Minister could tell us whether he or his officials discussed that with anybody before producing these new clauses. Certainly, the NAPF tells me that it is not aware of any discussions about that with it, or with anybody else. It well understands that schemes with guarantees must comply with the funding regime, but it does not understand why they should not be allowed to do draw-down or UFPLS—uncrystallised funds pension lump sum. Perhaps the Minister could comment on that.

The Bill requires members of defined benefit schemes to have received independent financial advice before being permitted to transfer into a defined contribution arrangement, unless they have pension wealth amounting to less than £30,000. The NAPF is concerned that that will impose a requirement that it would be very difficult, if not impossible, to meet. People will be required to prove that they do not have pension wealth in excess of £30,000, which will be very difficult for the average saver. There is the potential for a lot of confusion for savers attempting to assess their level of pension wealth. They might not realise that previously crystallised pension assets will be counted towards that threshold. They might find it difficult to assess the current value of such assets.

The average person may well not understand—nor should they be expected to understand—that the £30,000 will be measured not by the current CETV system but using the methodology created to measure benefits against the lifetime allowance, information that members are not currently entitled to get from other schemes. As a result, many defined benefit members will not be able to exercise their rights in the way that the Bill intends. The NAPF urges that savers should be able to access a total of £30,000 of defined benefit benefits calculated on a CETV basis, regardless of any additional defined contributions savings that they may have. Will the Minister respond to that point?

As with the previous group of amendments, I ask the Minister to set out his intentions on the regulations that are envisaged. He gave a clear and helpful response to my earlier question, but as he is well aware, it is good practice where regulations are referred to in primary legislation for Members who are scrutinising that legislation at least to have a draft in front of them when determining whether they support the provisions. The Minister said that it was not possible to give the costs for trustees because there was not yet a draft of the regulations. I think he will accept that it is very difficult for Members to decide whether to support these provisions if the House has not been told the cost for those who have to operate the regulations. Telling Members that the Government have no idea, at this stage, of what the cost of all this will be for everybody makes it impossible for us to do the job that we are required to do in properly scrutinising the costs and benefits that the legislation provides.

I was rather down-hearted by the content of the Minister’s previous answer, but I will ask the question again as regards these measures. Does he anticipate bringing forward the regulations on the same sort of time scale as the one he indicated earlier? Is there any prospect at least that draft regulations might be available to Members in the other place when they scrutinise the Bill? Does he expect that, as he said before, the majority of the regulations will be subject to the negative rather than the affirmative procedure? Will he draw the House’s attention to any exceptions, as he did last time, and point to those that will be subject to the affirmative procedure?

I am not going to urge the House to vote against any of the measures before us. I look forward to hearing the hon. Member for Reigate (Crispin Blunt) speak about his amendment. I have to tell the Minister that the House is being placed in a pretty unsatisfactory situation. I hope that even though we have not been able properly to scrutinise these measures because of the lack of information to support that scrutiny, he might encourage us by saying that those in the other place will have a better chance to do so.

[Crispin Blunt]

I am delighted to follow the right hon. Member for East Ham (Stephen Timms) and to know that I have the opportunity to persuade the massed ranks of the Labour party of the merits of my amendment. I shall do my very best to do so.

Four of the most significant players in the United Kingdom pensions market are based in my constituency of Reigate: Just Retirement, Legal and General, Partnership, and Fidelity. I should declare, if it is an interest, that my son works for one of those companies—Just Retirement. Between them, they employ a pretty significant number of the constituents I am privileged to represent. The past six months since the announcement in the Budget of the measures in this Bill have not been easy for them. The number of annuities purchased has dropped off a cliff, as customers and financial advisers await the implementation of the reforms.

Overall, however, the need for and the rightness of the reforms cannot be doubted. The pensions market has for too long been shackled by the obligation to annuitise; annuity rates have fallen consistently over the past two decades; and strenuous competition and liberalisation is just what the industry needs if each new batch of retirees are not going to find themselves commensurately worse off than their predecessors. The proposals are right not only on a practical level, but ethically as well. It is farcical that we have deemed retirees incapable of managing their own finances and have paternalistically restricted access to the money for which they have worked hard throughout their lives.

--- Later in debate ---

[Steve Webb]

This is in response to a consultation. During the consultation, one of the issues raised was about people who had not accessed the guidance. This is the response to that.

Reference was made to a story in The Daily Telegraph about people buying annuities that were not as good as they should have been, given their health condition. The FCA is undertaking a thematic review of the annuity market and looking at at-retirement choices. A lot of reporting and recommendations from the FCA will come out over the next couple of months. The Government have investigated some of the failures of the annuities market. We are tackling them by giving people new choices and it is about time that that was done.

The right hon. Member for East Ham asked about DB to DC transfers and what trustees have to do. They have to make sure that, before a DB to DC transfer happens, the member has accessed independent financial advice by a regulated IFA or similar. They do not have to look at what the IFA has said and see whether it is any good or appropriate; that is not what we mean. But before they say yes to the transfer, each trustee will have to say to the scheme member, “Have you accessed independent financial advice?” That is only right and proper because, in general, we still think that most DB scheme members should remain in DB. That will be the right thing for most. That is why we think the advice test is the right thing to do.

The right hon. Gentleman asked about forbidding draw-down in schemes that provide cash-balance benefits. To be clear: our intention is to ensure that members are appropriately protected by ring-fencing their pots from those of other members. That means that assets must always meet the liabilities in relation to those benefits. Keeping conversion to money purchase is the simplest way of achieving that. This is about ring-fencing cash-balance benefits.

The right hon. Gentleman asked how people would calculate their overall level of pension wealth from the point of view of the £30,000 threshold. Obviously, the details of that will be set out in regulations. We are consulting the NAPF on that. It is interesting that the NAPF thinks that nobody is talking to it; we talk to the NAPF all the time. We are also consulting the ABI and other interested parties.

The nitty-gritty of how we set the £30,000, what it includes and whether it is all of someone’s assets will be subject to detailed discussions and regulation. But the principle has to be right: if we are to require people to have advice, we do not want people to be forced to pay, say, £1,000 for advice if they only have a pension pot of £5,000 or £12,000. There has to be some sort of cut-off. Clearly, we need a sensible operational definition of what that is, but I do not think the principle is at issue.

[Stephen Timms]

I am grateful to the Minister for giving way and for the thorough way in which he is responding. May I take him back to his response to my question on the duties of trustees in an instance where a member wants to switch from DB to DC? The proposition from the NAPF was that the sole responsibility of trustees should be to require adequate proof from the member that they have received independent financial advice from a person authorised by the FCA to give such advice. It sounds to me that the Minister is saying that that is what he intends. Is he happy with that form of wording proposed by the NAPF?

[Steve Webb]

I am aware that our conversations are occasionally listened into by lawyers, so I am reluctant on the hoof to say that the wording from the NAPF is better than the wording that my lawyers have come up with, which is in the Bill. Clearly the point is not that the trustees have to second-guess an independent financial adviser—that is absolutely not what we are saying—but we are concerned to make sure that trustees do not simply nod through DB to DC transfers without ensuring that the scheme member has accessed suitable financial advice.

The right hon. Gentleman asked whether regulations will be under the negative procedure or affirmative procedure. In general they will be under the negative procedure, but the regulations under new section 97A(11) in new clause 26 are affirmative. Given the speed at which we are working and the importance of getting all this in place, it is not realistic to think that we will have draft regulations for their lordships’ consideration in a few weeks’ time. But their lordships obviously will want to probe the likely content of the regulations and we will continue to try to be as helpful as we can in that regard.

[Stephen Timms]

Will the Minister accept that it is pretty unsatisfactory for the Bill to go through both Houses with the Members of neither of them having a draft of the regulations to consider so that they can see what exactly the Government have in mind?

[Steve Webb]

No, I would not accept that. The right hon. Gentleman will know, from having taken quite a few Bills through the House, that there is a balance to be struck among primary powers, giving the House a general sense of direction, our stating on the record what the regulations seek to do and separate scrutiny for the regulations themselves. We will always try to make clear our intentions and what the regulations will try to achieve and we will continue to talk to the experts outside and inside Government about the fine detail. It is perfectly normal to pass primary legislation without every last regulation being produced in draft form. The right hon. Gentleman was responsible for welfare reform legislation in which large swathes of regulations were not produced in draft form when Royal Assent was given.

[Stephen Timms]

The right hon. Gentleman is pressing my memory with that, but my understanding of what has generally been regarded as good practice is that there should at least be draft regulations in front of Members. We do not necessarily need every last detail and he is quite right to make the point that there will be further discussions before things are finalised, but for Members of neither House to be able to see even a draft of the regulations is unusual and pretty unsatisfactory.

[Steve Webb]

I do not agree that it is either unusual or unsatisfactory. It is clearly important that the House accepts and is familiarised with the basic principles of approach and that we set out what will be in the regulations and what we are going to try to achieve through them, but often the regulations will be subject to separate consultation exercises. There is an awful lot of scrutiny; I can assure the right hon. Gentleman that these things are never knowingly unscrutinised.

The right hon. Gentleman asked about the timetable. Let us put it this way: our lawyers are not taking Christmas holidays. We are working as fast as we can.

--- Later in debate ---

[Stephen Timms]

The cost of living crisis underlines the need for people in work who are struggling to set money aside for the future to be able to access pension schemes they can trust to give them good value for money and a decent income in retirement. Therefore, we welcome the proposed establishment of collective defined contribution pension schemes, which my hon. Friends called for earlier this year. Those schemes have the potential to provide a more reliable retirement income than individual defined contribution schemes. For that reason, they are to be welcomed. They operate in other countries: the Netherlands, for example. They are potentially better for individuals than individual defined contribution schemes because they can pool risk across and between generations. Research by the Institute for Public Policy Research at the end of last year concluded that there was “strong public support” for a collective pension, that it was the most popular of the options it tested and that it appealed across different income levels, life stages and ages.

We also support the establishment of shared risk schemes and the rule preventing transfers out of most public service schemes—with some exceptions that the Minister talked about earlier. We support the power to redefine the pension regulator’s powers to appoint or replace trustees and the power that will allow the Secretary of State to make payments into the Remploy pension scheme.

We have not opposed the Bill, and we will not do so this afternoon, although there are parts that, in our view, should have been strengthened. We are also disappointed that the Government have not been willing to make the changes for which we argued in Committee. We welcome the new pension flexibilities that were announced in the Budget, but we are concerned that Ministers are not yet providing adequate safeguards in the Bill to protect the savings of people who have worked hard all their lives from the risk of excessively high charges.

The changes will introduce increased flexibility for savers, and we agree that that is welcome. They will also make the pensions market much more complicated, however, and safeguards need to be put in place to protect savers from being taken advantage of, given the confusion that could arise as the changes bed down. We simply cannot afford to have another pensions mis-selling scandal like the one that was presided over by the last Conservative Government, which did a great deal of damage.

The Bill contains 55 clauses, which were substantially rewritten in Committee, and the fact that the Government have today added 33 new clauses—over half as many as we started out with at the beginning of the afternoon—and made 77 additional new amendments does not inspire confidence that these complex changes in an area of such immense importance have been properly thought through. This looks rather like a case of legislate in haste, repent at leisure. We can only hope that Members in the other place, among whom there is substantial expertise in this area, can make significant improvements. Trying to make these important changes at the same time as enacting the Budget changes is of course making the task more difficult and more risky.

A few minutes ago, towards the end of the last debate, the Minister gave a full answer to my question about regulations, for which I was grateful. His answer was a full one, but it was not particularly satisfactory. He pressed me about my experience of taking Bills through the House. My recollection is that if such a Bill had referred to regulations that were going to be introduced, I would at least have expected to put a note in front of members of the Committee explaining what those regulations were going to do. Ideally, there would be draft regulations to put in front of the Committee. In this case, as far as I can establish, there is no information at all about any of the regulations referred to in the new clauses and amendments. I was disappointed when the Minister said that no such information would be put in front of Members in the other place either.

[Steve Webb]

I think there is a danger of the right hon. Gentleman overdoing this a bit. A lot of the regulatory framework for the budgetary freedoms involves the Financial Conduct Authority, so we are not talking about statutory instruments or any other stuff that goes through this House. The FCA has consulted and published its principles, and it will be publishing its final statutory guidance. All of that will be entirely available to Members in the other place. So a lot of this stuff is out there already; it has been consulted on and will be published. A lot of the regulations that the right hon. Gentleman is talking about relate to defined ambition and risk-sharing, for which the timetable is much slower.

[Stephen Timms]

That is helpful, and I am grateful to the right hon. Gentleman, but I was making the point that, in my experience as a Minister, I would normally have expected to be able to provide some documentation about each set of regulations referred to in a clause that I was advocating to the House. There is no such information relating to the significant number of the new clauses and amendments that refer to regulations and that now form part of this Bill. The right hon. Gentleman suggested that that was normal, but I do not think it is. I was recalling my experience from the Welfare Reform Bill, on which I led for the Opposition. There was a problem there, because at the outset no information was provided about regulations being referred to in the Bill. However, by the time we got to the end of the Committee we were reliably getting, before we debated each clause, some information about the regulations being referred to in it. So I urge him, if he can take even more holiday time away from the lawyers, to look at whether he might be able at least to give their lordships some information about each set of regulations being referred to.

In the earlier debate, I mentioned the three tests we have set for the new flexibility, and I am grateful to the Minister for his response to each. My party has commissioned Professor David Blake of the pensions institute at Cass business school to lead a review of how to support a pensions market that works for all, retaining flexibility and choice on how savings are accessed and drawn down, while ensuring that all savers, including those on low and modest incomes, are protected and are able to secure a decent and reliable retirement income. One question he will consider is whether income draw-down products should be subject to a new charge cap, which could offer some safeguards that are not envisaged at the moment.

Widespread concern has been expressed about the crucial guidance provisions. We do not know a great deal yet about how this is all going to work, and it is supposed to be up and running by next April. There is serious worry, which we have debated earlier, that the guidance on offer will not be taken up in practice. We will certainly be looking with great interest at what the FCA says—the Minister has assured us that it will be referring to this—about the second line of defence.

The TUC has made the point that

“half an hour of the best possible advice will not equip people for what could be thirty years of managing their pension pot”.

It has argued for the kind of careful consideration of evidence undertaken by the last Government, which has underpinned the success of auto-enrolment—that successful measure was developed over a period, decided on by the previous Government and taken forward by the current Government and, in particular, the Minister on the Bench today. Everybody would agree that the proper deliberation that underpinned it has been an important element in its success, but we are not seeing the same thing with these changes. I fear that nobody can, as yet, feel confident about what is going to emerge.

The Minister also knows that we have concerns about the governance of collective defined contribution schemes and about the so called “independent governance committees” proposed for defined contribution schemes; and about the restrictions on the National Employment Savings Trust—NEST—which my colleague who normally speaks on these matters has long argued should be removed and which the Minister said in July last year would be removed “as soon as possible “. In fact, they remain in place, and the opportunity to remove them in this Bill has not been taken.

The Bill is worth while, but a worryingly large amount more still needs to be done. Working people must not become the victims of yet another mis-selling scandal—that has happened too often already. The dangers of ill-thought-out and rushed legislation are all too clear, and doing all this at the same time as the Treasury changes makes the risks much worse. We can only hope that Members in the other place will have the information they need and will be able to deliver some of the scrutiny which Members in this House have not, sadly, been able to provide.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Self-Build and Custom Housebuilding bill (Money)

Queen’s recommendation signified.

Resolved,

That, for the purposes of any Act resulting from the Self-build and Custom Housebuilding Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Brandon Lewis.)

Self-Build and Custom Housebuilding bill (Ways and Means)

Resolved,

That, for the purposes of any Act resulting from the Self-build and Custom Housebuilding Bill, it is expedient to authorise the charging of fees under the Act.—(Brandon Lewis.)



Local government (Review of Decisions) Bill: Money

Queen’s Recommendation signified.

Resolved,

That, for the purposes of any Act resulting from the Local Government (Review of Decisions) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Kris Hopkins.)

Oral Answers to Questions

Stephen Timms Excerpts

Monday 3rd November 2014 Commons Chamber

[Mr Duncan Smith]

There has been very little movement of more than about five miles from people’s existing homes as a result of the benefit cap. Most people have settled, and many—two thirds—have either gone back to work or found alternative employment. Let me say to the hon. Gentleman that there is something called the discretionary housing payment, and his local council, like any other, can make decisions about how it modifies the process. It is up to councils to do that, and we leave it with them.

[Stephen Timms (East Ham) (Lab)]

The flagship of welfare reform was supposed to be universal credit. The Secretary of State’s former adviser told Radio 4 last week that the Secretary of State had known that the project was going badly wrong since May 2012, but he continued to tell the House that it was “exactly on track”. The Chair of the Public Accounts Committee expects IT write-offs to exceed half a billion pounds after the election. What is the right hon. Gentleman’s estimate?

[Mr Duncan Smith]

Yet again, the right hon. Gentleman has got his facts completely wrong. The reality is that, as was announced only a few weeks ago, universal credit is not only doing well, but is to be rolled out nationally. The right hon. Gentleman may be smiling because he has the idea that Labour might somehow get into government, and might inherit a success. I can tell him that Labour will not get into government, but universal credit will get more people back to work. It is already the case that it will give the economy net benefits of more than £30 billion, and there will be direct benefits of some £9 billion a year as a direct result of the roll-out that we are planning successfully.

[Stephen Timms]

According to page 34 of the “21st Century Welfare” Green Paper,

“The IT changes that would be necessary to deliver”

universal credit

“would not constitute a major IT project.”

Is not the problem—as I pointed out to him at the time—that the Secretary of State failed to grasp the scale of the undertaking at the outset, and that hundreds of millions of pounds have been wasted as a result?

[Mr Duncan Smith]

Again, the right hon. Gentleman is wrong. No money has been wasted. The roll-out means that, with all the work that we are doing, the vast majority is reusable through the digital system. I should be happy to invite him into my office to discuss the issue; the door has always been open to him.

Let me also say this, however. I wish that the Opposition would stop trying to play silly games and would recognise that this benefit, which is now being rolled out successfully and whose national roll-out has been announced, will be a massive benefit for those who are seeking work and those who are in work. It is time that the Opposition sat down with jobseekers and those who run the jobcentres, and got their story straight. The hon. Member for Leeds West (Rachel Reeves) spent about half an hour in a jobcentre, and then disappeared without talking to anyone there.

Parliamentary Under-Secretary of State for Welfare Reform (Disabled People)

Stephen Timms Excerpts

Tuesday 28th October 2014 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

We have had a wide-ranging debate with thoughtful contributions from hon. Members on both sides of the House about how best to support disabled people. Lord Freud’s words touched a nerve with disabled people around the country because of their experience in the past few years. They felt that, in those words, there was an explanation of what has happened, such as the bedroom tax and the delays with PIP assessments, which we have heard a lot about in the debate.

In an excellent speech opening the debate, my hon. Friend the Member for Stretford and Urmston (Kate Green) pointed out that half of former Remploy employees are still out of work. A constituent came to see me yesterday morning. He has cerebral palsy. He worked for 25 years at the local Remploy factory, which closed in 2012. He came to see me before the closure because he was worried that he would end up on the scrapheap. Today, he believes that that is exactly where he is. Promises were made about support, but he has had one trial for a call centre job in the two years since the factory closed down, and it came to nothing. The promises that were made have simply not been kept and help has not materialised, and disabled people have been let down.

Earlier this afternoon, I met representatives from the residential training colleges for disabled people and those furthest from the workplace. Between them—there are nine of them—they get hundreds of people into work every year. They have a contract until next August. They have no idea what happens beyond that. They told me that the Minister has repeatedly refused to meet them despite their requests. Once again, disabled people are being left in limbo.

[Ben Gummer]

The hon. Gentleman raised a sad individual case and drew a general conclusion. Does he accept that since 2010 166,000 more disabled people are in work than when we took office?

[Stephen Timms]

As the Minister was right to acknowledge, the employment rate penalty for disabled people is not going down. It was going down in the past; it is no longer going down. Part of the reason for that is what has happened with the Work programme. In respect of people out of work on health grounds—people on employment and support allowance—the invitation to tender for the Work programme said that if there was no programme at all, 15% of them would be expected to get job outcomes within two years. Actual performance, with the Work programme in place, has been worse than half that—an extraordinary failure rate of 93%.

The Minister told us earlier that the Work programme is now doing a bit better and that one in 10 people are getting some help. That still means that 90% are not being helped—an extraordinary failure. [Interruption.] What the Secretary of State is chuntering from the Front Bench is wrong. All the current funding for the Work programme comes from job outcome payments. According to a recent written answer, the Work programme paid out in total £332 million in job outcome payments between June 2011 and March 2014. Only £19 million of that was payments in respect of ESA claimants. Very little has been spent on helping disabled people back to work, so it is not surprising that so few have been helped.

I join other speakers in the debate in congratulating my hon. Friend the Member for Heywood and Middleton (Liz McInnes) on her excellent maiden speech. I echo her tribute to her predecessor, Jim Dobbin. I did a little canvassing during her election campaign and spoke to one man who said he would vote for her. He has since written to me to tell me that after that he met my hon. Friend and was delighted that he had made the right decision by voting for her. It was quite a long letter, which I have passed on to her. I know that she will have a very successful tenure as the local Member.

The situation does not need to be as it is at present. The plan that we have set out shows how we can do much better for disabled people than we have been doing. We agree with the independent taskforce on poverty and disability chaired by Sir Bert Massie, and with the think-tank the Institute for Public Policy Research, that we need to take people on ESA, other than those with the very shortest diagnoses, out of the Work programme and set up a new programme for them. We understand why Ministers wanted everybody in the same programme; it clearly has not worked. The Minister cannot pretend that the Work programme has been anything other than a failure for disabled people. We need a different approach. That is the clear lesson from Australia about the advantages of separate disability employment services. The new programme would move away from the outcome-based funding which has clearly not worked.

We also need a much more localised approach. Partly because of those huge regional contracts in the Work programme, it has squeezed out the good local voluntary sector expertise that can do so much to help. We want instead a programme contracted at the city region/local enterprise partnership level, and we want provision to reflect the local labour market. We want local authorities, colleges, employers and, critically, the health service to be around the table. Such integration can be achieved at a city region level. It cannot be achieved, as the Government have shown, from Whitehall.

The Working Well project in Manchester is a good example. It is for people claiming ESA who, after two years on the Work programme, do not have a job—of course, that is the great majority of people on ESA who start on the Work programme. It has been commissioned by the Greater Manchester combined local authorities. The project board is chaired by one of the chief executives and includes Jobcentre Plus, NHS England, the local drug and alcohol team, mental health trusts, colleges and adult education services. Protocols have been drawn up setting up how participants in that programme will be served with health and housing interventions. The funding model is different, with some up-front payments, not just job outcome payments. The contract requires that every client must be seen at least once per fortnight. We need those minimum standards. We have heard a lot from those participating in the Work programme, some of whom have received just an occasional phone call from their provider. We need the NHS to be part of the programme as well. That is the way forward to do a much better job.

We cannot afford to continue wasting the potential of so many disabled people—to continue to tell disabled people by our actions that they are not “worth” it, as the Minister did so shockingly with his words. We need to value disabled people—to enable them to make a contribution, as so many could and, as we have heard in this debate, wish to. The employment gap between disabled people and others is no longer falling. We need to change policies to start bringing it down again. That is worth doing. We need to learn lessons from all the other OECD countries that have a higher employment rate than we do among disabled people. It needs a change of approach; it needs Ministers who respect disabled people; and I am afraid it also needs a change of Government.

Oral Answers to Questions

Stephen Timms Excerpts

Monday 1st September 2014 Commons Chamber

[Esther McVey]

I thank my hon. Friend for the work he is doing in his constituency by helping to set up the Wolverhampton employment network, bringing employers and the local college together. We are doing many more things: not only are there over 1 million more young people on apprenticeships now, but we have had 150,000 on work experience placements since 2012, and 60,000 in sector-based work academies. In his constituency, we have had 370 on work experience, and 120 in sector-based work academies.

[Stephen Timms (East Ham) (Lab)]

Youth Contract wage subsidies were an attempt, albeit half-baked, to tackle youth unemployment, but they were abruptly scrapped just before the summer recess, despite an official promise that they would be available for people applying up until next April. Why have they been scrapped? Has the Minister seen that the CBI is pointing out that “young people are struggling”, and that the biggest single cause of long-term disadvantage is “unemployment early on”?

[Esther McVey]

It seems that only the Labour party is still calling for incentive schemes and guarantee schemes. Even Europe is now saying what a good job the UK is doing on youth unemployment and looking at how we are moving forward. We had a wage incentive scheme, but that has stopped because we are moving the money into other areas where it is needed more. That is the right thing to do—spending the money where it will be used most effectively and efficiently. As I said, we have had the greatest annual number of young people going into work since records began.

Jobcentre Plus

Stephen Timms Excerpts

Thursday 10th July 2014 Westminster Hall

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

I am delighted to lead this debate on the report by the Select Committee on Work and Pensions, “The role of Jobcentre Plus in the reformed welfare system”. It is a bit of a mouthful, but the report contains a lot of interesting things. We published it at the end of January this year, and the Government responded at the beginning of April. It seems a long time between that and this debate, but that is because Parliament prorogued somewhat earlier than expected and our debate got dropped as a result. Some of our findings, therefore, might be slightly out of date, but in general, most of what we discovered when we considered the work of Jobcentre Plus is as relevant today as it was in April and May.

Jobcentre Plus is at the coal face of the benefits system. It is part of an administrative system that processes out-of-work benefit claims from hundreds of thousands of people each year. At the same time, its staff work with people one-to-one to help get them off benefits and hopefully back to work. They are both difficult tasks, but Jobcentre Plus performs them well with limited resources. It is well organised, has hard-working staff and has been officially recognised by the National Audit Office as offering value for public money. Jobcentre Plus has also coped well with the inherent uncertainty that it faces, not least from the large fluctuations in the claimant count brought about by the economy’s shifting fortunes. It has even coped with the innumerable policy changes imposed by the Government.

It was in the context of the unprecedented change brought about by the current Government’s extensive welfare reform agenda that we considered Jobcentre Plus’s effectiveness now and the challenges that it will face in future. Our central finding was that JCP is not currently good at prioritising those claimants who need the most help looking for work and providing them with the personalised support that they need. I know that that is no easy task, and given the volume of out-of-work claims made each year, Jobcentre Plus does remarkably well, but a range of witnesses, particularly those representing the most vulnerable groups, told the same story: there is generally very little in-depth assessment of claimants’ needs at the start of the job-seeking process, meaning that claimants facing particular disadvantages—the homeless, people with disabilities or people with drug or alcohol problems—all too often go unrecognised and get no help beyond a brief fortnightly signing-on meeting at the jobcentre.

Not for the first time, my Committee called for a much more systematic approach to the initial assessment of claimants’ needs. A classification instrument, to use the jargon, was the first of our key recommendations. In plain English, that means making a thorough, systematic assessment of each claimant’s needs and categorising them according to the level of support they require. That must surely be the logical first step in all effective employment support; otherwise, claimants with the most challenging barriers to employment will continue to be poorly supported and will remain unemployed for much longer than they should.

For some reason, however, the Government continue to dither on the issue. The Department for Work and Pensions told us that classification instruments are the holy grail. I thought universal credit was the holy grail of welfare reform—if so, it has not been found—but if the holy grail is classification instruments, it has already been found. They are already in use in Australia, where a jobseeker classification instrument has been used to good effect for more than 15 years and has been honed and improved through several iterations during that time. I would be grateful if the Minister could offer a proper explanation as to why we in the UK cannot replicate something similar here.

[Stephen Timms (East Ham) (Lab)]

I welcome the report. One of the points it makes is that the Government’s response on that issue was not entirely clear: was it that they cannot do that kind of segmentation assessment, or was it that they are developing something along those lines? It was not clear to me from the Government response which of those was the Government’s position. Has my hon. Friend been able to work that out?

[Dame Anne Begg]

I am not sure whether I can shed any more light on that than my right hon. Friend. Perhaps the Minister can reply. Certainly, in our briefings with the DWP and relevant officials, they have suggested that the Government are trying to work something out, but that they believe either that it is not effective—although the figures that they quoted to us did not necessarily have the interpretation that could have been made from the reports that have been published—or that it might cost too much money in the long run, because an up-front payment would inevitably be involved in setting up a classification system.

The Committee contends, however, that doing it properly at the beginning would ultimately save the Government money by ensuring that the correct level of help was given and that the barriers to work were identified early, so that a much more personalised approach could be taken to jobseekers in particularly vulnerable groups. We are talking about more vulnerable and difficult-to-reach groups, because we know that by any measure, Jobcentre Plus is relatively successful in getting mainstream jobseekers into work. That is what it does; it is Jobcentre Plus’s bread and butter. It is what staff do week in and week out.

[Stephen Timms]

One point in the Government response is that if there were such a tool, it would be only 70% accurate. That struck me as not bad, actually, compared with what happens at the moment. What did my hon. Friend think of that particular statistic?

--- Later in debate ---

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Amess. It is also a pleasure to follow my colleague on the Select Committee, the hon. Member for Newton Abbot (Anne Marie Morris), who, as always, made a balanced speech. I am particularly pleased to speak on behalf of my constituents, many of whom are claimants and use their Jobcentre Plus, but I also speak on behalf of those who work within the Jobcentre Plus network and more widely within the Department for Work and Pensions system. I have been contacted by a number of people since the Select Committee started looking at this issue, and I want to air their views as well.

My speech will focus on sanctions, which both the previous speakers have touched on. The Select Committee’s report raised concerns on whether sanctions are being applied

“appropriately, fairly, proportionately and in accordance with the rules, across the Jobcentre network.”

The principle of conditionality has been accepted across all the parties represented in the Select Committee and beyond. It is that if claimants are receiving financial support from the state, there are conditions around that—on job search and on having regular meetings with jobcentre advisers, for example. That principle is long established and has in recent years been extended to involve financial penalties or sanctions being applied to the claimant, with benefit payment being stopped for a limited period if the conditions are not met. Even more recently, it has been extended to people who are sick or disabled, who can have work preparation conditions, with associated sanctions, applied to their benefits.

As many know, two thirds of those who receive social security payments are in work. The Government have already mooted that in-work conditionality and conditionality for in-work social security payments is likely. We should remember that and reflect on the particular issues we are facing with those on out-of-work or ill-health payments. The Welfare Reform Act 2012 introduced a new regime of sanctions. Instead of a maximum of six months of sanctions, the maximum period of a JSA benefit sanction is three years. The minimum is a month. Under the previous system, people could perhaps tide themselves over for a week’s sanction—they might have been able to borrow off family members or friends. A month, however, is a different kettle of fish. Later, I will come on to what that change means for so many individuals and families.

Many fair-minded people would say, “If you’ve done something wrong, it is only right that you should be punished for it.” That was raised by the Committee and has been mentioned today. My colleagues and I, however, have received overwhelming evidence, and investigative journalists have highlighted, that people are being sanctioned for doing nothing wrong at all. They are being set up to fail.

A whistleblower—a former JCP adviser—came to my constituency office and said that stitching up claimants was part of the job. He referred to a “bullying” culture, driven from above, in which claimants were constantly harassed to get them “off flow”, off benefit and off register. If advisers resisted pressure from managers, they were issued with a performance improvement plan, which is the start of a disciplinary procedure. Targets were set for advisers to cover targets for decision makers, resulting in perverse behaviour. He described advisers setting claimants up to fail, including making appointments about which they had no knowledge so that they were automatically sanctioned when they did not turn up. That is absolutely outrageous and there is growing evidence that it is happening up and down the country.

Another whistleblower from the midlands this week reported the pressure that she is under to meet targets to push people, including the sick and disabled, off benefits, such as being told to “disrupt and upset” claimants. The article states:

“Managers repeatedly question them on why more people haven’t been sanctioned. Letters are sent to the vulnerable who don’t legally have to come in, but in such ambiguous wording that they look like an order to attend. Tricks are played: those ending their contributory entitlement to a year on ESA need to fill in a form for income-based ESA. But jobcentres are forbidden to stock those forms. These ill people’s benefits are suddenly stopped without explanation: if they call, they’re told to collect a form”—

but of course the jobcentre does not stock them. The article continues:

“If someone calls to query an appointment they are told they will be sanctioned if they don’t turn up, whatever. She said: ‘The DWP’s hope is they won’t pursue the claim.’”

It is shocking.

Figures for the new sanction regime introduced at the end of 2012 show that sanctions have increased by 11% on the same period and that 1.35 million people on JSA were sanctioned in the first six months, with 553,000 upheld on appeal. For the same period, 11,400 people on ESA were sanctioned, including a constituent of mine who had a heart attack in the middle of a work capability assessment. The nurse said, “You’re having a heart attack. We’re going to have to stop. You’re going to have to go to hospital.” He received a letter two weeks later to say that he had been sanctioned.

The work that Citizens Advice in Manchester did on the effects of benefit sanctions on claimants showed that 40% did not receive a letter informing them of their sanction; they just had their money stopped. Over half of claimants said that they had not received any information about how to appeal.

When the Minister attended the Work and Pensions Committee in November, I asked her how sanctioned JSA claimants would affect JSA claimant figures and she said that, as long as they kept signing on, they would be counted. What she did not say, however, is that the Department does not keep such data. No one knows how many sanctioned JSA claimants keep signing on. If more than half of those sanctioned do not know that they can appeal, how many will know they need to sign on stay on register? Will JCP tell them? I would query that. I did some basic maths: taking the May JSA claimant figure, if 5% of 1.09 million people are sanctioned every month, the actual JSA claimant figure would be 1.147 million. It is apparent how the number can be distorted because the actual JSA claimant figures are not being kept.

I also asked the Minister whether she would commit to a second, broader independent review, as mentioned by my hon. Friend the Member for Aberdeen South (Dame Anne Begg), to look at inappropriate sanctions. At the time, she agreed. The Work and Pensions Committee certainly believed she had—it was one of our recommendations—but it is disappointing that the commitment has since been reneged on. I ask the Minister once more whether she will commit to that important piece of work in light of the compelling and growing evidence that has come forward since our inquiry and the potential distortion of the JSA claimant count.

The impact of benefit sanctions on people’s lives is becoming well documented. The Trussell Trust, which runs so many food banks up and down the country, cites benefit changes and delays, including sanctions, as the main reason why people visit it needing help. People are not able to feed themselves and their families. The principle of social security conditionality is well established and supported, but it needs to be examined in the round, as my hon. Friend said, to ensure that it is effective and produces the desired behaviour.

[Stephen Timms]

My hon. Friend is making a powerful case. Regarding the documentation of problems with benefit sanctions, has she seen the website devoted to the topic? It is entitled “A Selection of Especially Stupid Benefit Sanctions” and contains a raft of ludicrous examples, including the case of her constituent not completing his work capability assessment because he had a heart attack in the middle of it.

[Debbie Abrahams]

I have seen that website. Following the inquiry and people becoming more aware, a whole raft of unbelievable examples are coming forward.

As I said, the principle of social security conditionality is well established and supported, but the reports of punitive, unfair and inappropriate sanctioning and bullying behaviour in JCP offices should be a cause for concern. I urge the Minister not to turn her back on the issue and the people it is affecting this time and to do the right thing by committing to an independent review of inappropriate sanctioning.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

Like everyone who has spoken in the debate, Mr Amess, I want to say what a pleasure it is to serve under your chairmanship. I thank the Select Committee, and welcome the work that it has done on such an important topic.

It is disappointing, however, that the Government’s response to a very good report has been so negative. Of 24 recommendations only five were agreed to; five were rejected outright and the remaining 14 were partly agreed, although in quite a number of cases it struck me that the amount of agreement was very partial indeed. The Committee is right to affirm the value of a public employment service for unemployed people. Jobcentre Plus has been admired around the world, and we have been reminded, rightly, of the recent conclusion by the National Audit Office that it continues to do an efficient job. I very much concur with that judgment.

Jobcentre Plus does an efficient job. It also does a very important job. My hon. Friend the Member for Edinburgh East (Sheila Gilmore) is absolutely right to draw attention to the links between having employment and having good health. I noticed that the Prince’s Trust recently undertook research on that issue. Martina Milburn, its long-serving chief executive, makes this point:

“Unemployment is proven to cause devastating, long-lasting mental health problems among young people.”

Whether someone is in a job is a very important issue, so the task that Jobcentre Plus has is very important.

I visited Germany last year to look at the way in which youth unemployment was being tackled and visited an office in the town of Wolfsburg, Hanover, where the Volkswagen plant employs 60,000 people. I went into the office, which is jointly run by the local authority and the federal employment service, to talk about how it was supporting unemployed people, and one thing that struck me about it was that above the door it said “Jobcentre”. The people there had chosen to adopt the English term for that establishment, and the reason was that 10 years ago, when the Germans made the big reforms to their welfare system—the Hartz IV reforms—they took inspiration from what had happened in the UK. Jobcentre Plus was quite new at that time. They wanted a name that showed their ambition for a very effective, modern service, and they were inspired by the English system, so they have adopted the term “Jobcentre” for their establishments.

As we have heard, jobcentres in the UK are still doing an efficient job. Nevertheless, I am afraid that something has gone quite badly wrong in recent years. I do not think that anyone else in the world today would be inspired by what they hear is happening in our jobcentres, and the issue of sanctions, which has been highlighted in this report and debate, is a big part of the explanation for what has happened. I agree with the hon. Member for Newton Abbot (Anne Marie Morris) that it is clear that too often sanctioning goes wrong.

Of course, there are a lot of statistics about benefit sanctions. One that interested me was one that I got in a written answer on 25 March 2013 at column 986W of Hansard. I asked what the total amount withheld from jobseeker’s allowance payments as a result of benefit sanctions was, and the answer came back that the benefit withheld from fixed JSA sanctions was, in 2009-10, the year leading up to the general election, £11 million, in 2010-11 £43 million, in 2011-12 £45 million and in 2012-13, up to October 2012 only—in other words, just the first half of 2012-13—£60 million. That suggests that the amount being withheld in benefit sanctions had gone up tenfold up to October 2012, compared with the year leading up to the general election.

It is important to underline the truth that sanctions are an indispensable part of a benefits system designed to promote employment. No one should read into anything that I am saying—or, I think, what anyone else in the debate has said—that we should scrap sanctions, but there is a pertinent question, raised in this report, about whether something has gone quite badly wrong in the way in which they are being applied at the moment.

[Nigel Mills]

I apologise to the right hon. Gentleman, the hon. Member for Aberdeen South (Dame Anne Begg) and you, Mr Amess, because I need to leave for a constituency engagement shortly, but on the point that the right hon. Gentleman raises, will he therefore join me in regretting the fact that when the unions came to give evidence to us in this inquiry, they did not support sanctions having any part in the benefits system?

[Stephen Timms]

In the discussions that I have had with trade union members about this issue, the point has not been put to me that there should not be any sanctions. Sanctions have been part of the benefits system ever since the system was invented; there is nothing new about sanctions. I have not heard a case that sanctions should be entirely scrapped, but I do think that there is justified concern, partly expressed in this debate and certainly expressed by trade unions and others, including citizens advice bureaux and disability organisations, about the way in which the system is working at the moment.

We heard a good deal in the debate, and I was very interested to hear the contributions about what hon. Members have been told by whistleblowers because I have had a similar experience. One of my constituents, who works at a jobcentre, raised with me very similar concerns to the ones that we have heard about what is going on. I was very concerned by that. I forwarded her concerns to the Minister. The Minister responded, for which my constituent and I were grateful, and my constituent subsequently wrote to the Minister directly and copied me into what she said. I will quote from her letter, which said that

“staff at the Jobcentre are actively encouraged to impose benefit sanctions and are threatened with PIPs”—

I was not sure what they were, but I gather from my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) that they are performance improvement programmes—

“if they fail to get certain numbers of people off benefit per week…all too often it is the more vulnerable in society it is affecting, and probably not the customers who are too smart to be caught out by the sanctions. The large increase in people using the food banks is mainly due to the unfair benefit sanctions being imposed upon customers. I know the food bank in Hoxton has actually had to ask the JCP in Hackney to stop making so many referrals to them as they are unable to cope with the numbers”.

My constituent goes on to say that staff

“have never experienced working conditions like they have in the last few years…people who have worked so hard implementing the unpopular policies have been treated in an awful manner.”

My hon. Friend the Member for Edinburgh East raised the concerns that people have repeatedly drawn attention to that staff in jobcentres are being given targets. There have been the odd, well documented examples of where that has been the case, although in those instances Ministers have stepped in to make it absolutely clear that there are no formal targets, but it is the case, as I understand it, that in regular staff appraisals—this was confirmed, I think, in a written parliamentary answer—the number of sanctions that an adviser has issued is one of the bits of data on the table for the appraisal. Staff understand that, understandably and probably rightly, as indicating that they are, in part, being evaluated by how many sanctions they have issued—not whether those sanctions were accurate or appropriate, but whether there are enough of them. I think that it is clear that a culture has been developed in which staff are under pressure to issue more sanctions. My constituent talked about the awful working conditions. Let us be frank: that is part of the background to the industrial action taking place today.

A good deal of the external interest in this report has focused on the question of sanctions. There is no doubt that the dramatic increase both in the number of sanctions and in the amount of money taken off people—the duration of sanctions, which my hon. Friend the Member for Oldham East and Saddleworth also talked about—has been a big factor in the growth of food banks. The hon. Member for Banff and Buchan (Dr Whiteford) is absolutely right to say that no one should hide their head in the sand about that. I had not quite twigged it, but my hon. Friend the Member for Oldham East and Saddleworth made this telling point. Will people who have been sanctioned for a period of months, a year or even three years carry on signing on every fortnight just so that they appear in the claimant count? Of course they will not, and undoubtedly the claimant count is being depressed as a result.

Of course, all these reports, from whistleblowers, charities and food banks, can be and sometimes are dismissed as anecdotal. However, the pretty distressing picture that staff whistleblowers are painting is consistent with what a lot of jobseekers say. A few weeks ago, I was invited by Tesco to visit a new store with its HR director. Through the impressive regeneration model that Tesco has developed in partnership with the Union of Shop, Distributive and Allied Workers, the company had been very careful to recruit and train a large number of staff at the new store who had previously been unemployed. Tesco put them through an eight-week training course before the store opened. I was introduced to four of the staff who had been recruited in that way, and we talked about their experience. I asked them about their experience with Jobcentre Plus, and all four said that the main aim of the jobcentre had seemingly been not to help them but to catch them out and sanction their benefits. I think it is a real tragedy how badly the reputation of Jobcentre Plus has been damaged by the aggressive approach to sanctioning that has been introduced. It will take a lot to repair that damage.

In its briefing for the debate, Crisis told us about somebody called Billy

“who was sanctioned for turning up to a meeting that turned out to be cancelled and then failing to attend another appointment he knew nothing about because the letter arrived six days after the date of the interview”.

We have heard several such stories during the debate. I draw attention to the website “A Selection of Especially Stupid Benefit Sanctions”, which has pages of this stuff:

“You get a job interview. It’s at the same time as your job centre appointment, so you reschedule the job centre. You attend your rearranged appointment and then get a letter saying your benefits will be stopped because going to a job interview isn’t a good enough reason to miss an appointment.”

That one came from the Daily Mail.

“Your gran dies during the night. The next morning your partner calls the job centre and asks if you can come in the following day instead. The centre agrees, and you sign in the next day. Then you get a letter stating that you failed to sign in and would be sanctioned if you don’t reply within seven days. You reply, explaining the situation. The job centre gives you a six-week sanction for not replying.”

That one came from NetMums.

“You get a job that starts in two weeks time. You don’t look for work while you are waiting for the job to start. You’re sanctioned.”

That was from The Guardian.

“You apply for three jobs one week and three jobs the following Sunday and Monday. Because the job centre week starts on a Tuesday it treats this as applying for six jobs in one week and none the following week. You are sanctioned for 13 weeks for failing to apply for three jobs each week.”

That was from the Pontefract and Castleford Express.

“You have a job interview which overruns so you arrive at your job centre appointment 9 minutes late. You get sanctioned for a month.”

That one was from Consumer Action. As I say, there are pages and pages more on the website. Of course, those are anecdotal, but the jobcentre network now has that reputation and it will take a great deal to repair the damage that has been done.

A number of references have been made during the debate to the report that the Government commissioned. It is rather rare for the Opposition to be able to force the Government to do anything, but we were able, because the Government needed legislation quite quickly, to force Ministers to set up the review on sanctions, which was carried out by Matthew Oakley. Like everyone else, I am eagerly awaiting the report, which we thought would be published by the end of May but which has still not been published. I asked the Minister about that in a written answer the other day, and characteristically—of Ministers in the previous Government as well as in this one—the reply came back that it would be published “in due course.” Can the Minister give us any more detail? If she can, it would be welcome.

As we have heard, the Minister appeared to agree in her evidence to the Work and Pensions Committee that there should be a further review to consider not only Work programme or employment programme sanctions, but sanctions more generally. It was a disappointment to everybody that that commitment was not reflected in the Government response to the report, and I hope that the Minister might reaffirm the view that she expressed to the Committee.

It is particularly disappointing, although not surprising, that the Government have rejected recommendation 17 on page 47 of the report about recording the number of people who are signposted to food banks. There is no doubt that the increase in sanctions has played a big part in the remarkable growth of food banks over the past few years. The Committee recommended, as we have heard, that the Department should

“take urgent steps to monitor the extent of financial hardship caused by benefit sanctions, including by collecting, collating and publishing data on the number of claimants ‘signposted’ to food aid by Jobcentres and the reasons for claimants’ need for assistance in these cases.”

The way in which the Government have dealt with the Trussell Trust has been pretty disgraceful. When the Secretary of State was appointed, he rightly took a good deal of pride in announcing that he was lifting a ban on jobcentres referring people to food banks if they were in hardship and did not have enough money to buy food. I was the Minister for employment for a while, and I did not know that there was a ban on referring people to food banks, but apparently there was. The Secretary of State rightly said that that was wrong, and lifted the ban. The problem was that food banks started counting the number of people who were being referred from jobcentres and the reasons why they were being referred, which became far too embarrassing, so the Secretary of State reintroduced the ban on jobcentres referring people to food banks, although he said that it was all right to “signpost” people. I believe that the difference between signposting and referring is that when someone is signposted by a jobcentre to a food bank, they are not allowed to fill in the piece of paper issued by the food bank that states why they are being referred. The former approach enabled the Trussell Trust to collect data on how many people were being referred to food banks because they had been the victim of sanctions, benefit delays or other problems at the jobcentre, and the whole thing became too embarrassing for the Secretary of State so he said that he did not want it to continue.

It is a great shame that the Secretary of State has refused to meet the Trussell Trust and talk about the matter, because it has a number of sensible ideas about how the system could be made to work better, which would not cost the Government anything. The Secretary of State has accused the trust of having a political agenda simply, as far as I can tell, on the basis that it insists on publishing numbers about how many people go to food banks. That is a completely innocuous and public-spirited thing to do, but because the trust refuses to stop publishing that information, the Secretary of State accuses it of having a political agenda and being opposed to welfare reform.

Given that the Secretary of State has not been willing to meet the Trussell Trust, a couple of months ago I asked the Prime Minister if he would be willing to do so. He said that he would, and I am pleased to say that that meeting has taken place and the discussion was constructive and useful. Why on earth the Secretary of State is not willing to meet the trust for a similar discussion is a mystery to me, and I still hope that he might change his mind. I share the despair expressed by my hon. Friend the Member for Airdrie and Shotts (Pamela Nash) about the extent of the reliance on food banks nowadays. The Trussell Trust makes it absolutely clear that it expects the need for food banks to continue. The scale of the dependence—a million people over the past 12 months—and the rate at which it is growing are causing the trust great concern and prompting questions about whether it can cope with the demand.

I want to mention two other points that my hon. Friend the Member for Aberdeen South (Dame Anne Begg) has highlighted as the main recommendations in the report. Recommendation 21 on page 48 argues for

“the formulation of JCP performance indicators which promote and measure sustained job outcomes and better reflect the changing role of JCP consequent on the implementation of universal credit”.

The Committee makes the point—it is often suggested, and I think it is right—that the current measure incentivises behaviour that nobody wants. For example, if somebody goes in and out of claiming benefit—they do a couple of weeks’ work, then go back on benefit because the job fails, then do a couple of weeks’ work somewhere else, then go back on benefit—it makes a big positive contribution to benefit off-flow, because that person is coming off benefit a lot and the fact that they go back on benefit straight away is not picked up in the statistics. Of course nobody would regard that as a success in any meaningful sense of the word. It is certainly not what Ministers want to happen in jobcentres.

The Government’s response to that recommendation says:

“The current JCP performance metrics, focussing on off-flows, make best use of the data currently available to the Department, but do not track people once they leave benefit, as this is not cost-effective.”

That is the bit that I want to query. I do not understand why the Government are suggesting that it is not cost-effective to track what happens to people after they go off benefit, because the Government require Work programme providers to do exactly that. Work programme providers are remunerated entirely on the basis of whether somebody is in sustained work. Clearly, the Department has taken the view that it is cost-effective to require Work programme providers to find out that information, so why is it not cost-effective for Jobcentre Plus to do so? That seems to make no sense, and the Committee is right to highlight it in a recommendation. I hope that the change will be made before too long.

The other recommendation that I will mention was highlighted by the Chair of the Committee, and I agree with it. It is about segmentation. Recommendation 4 on page 44 of the report says that the DWP should

“continue to work to develop a ‘segmentation’ tool, to be conducted by Jobcentre advisers face-to-face with claimants, to allocate claimants to separate work streams according to their distance from the labour market and relative need for intensive employment support.”

I know that it is a long-held view among numerous people, including senior Jobcentre Plus staff, that segmentation is a rather illusory thing—my hon. Friend the Member for Aberdeen South used the term “holy grail”—that everybody would like to be able to do: “We would like to be able to tell how much help a person will need to get back into work, but it is unachievable in practice.” However, like my hon. Friend, I am mystified as to why it can be done in Australia but not in the UK.

I know that that point has been made to Jobcentre Plus staff, who respond by saying that Australia and the UK are different, but they are not that different. I visited Australia last September to, among other things, see how the jobseeker classification instrument worked. Nobody is claiming that it is infallible. In Australia, if someone is placed in one stream and it subsequently turns out that they need a different level of support, they can change. It is not a completely inflexible, wooden instrument, and it is certainly helpful. It means that people are more likely to get the right amount of help than if there were no segmentation. Even the length of time that someone has been out of work, which is easy to establish, is a big indicator of how much help they will need.

Of course, we already have segmentation in the UK. In the Work programme, customers are placed in different payment groups, based not on the kind of segmentation for which the Committee rightly calls but on which benefit they receive—jobseeker’s allowance or employment and support allowance. That does not necessarily tell us anything about how much help someone needs to get back to work, and in practice, as I think is pretty widely recognised, it has proved hopeless.

That is one reason why people a long way from the labour market have been so badly let down by the Work programme, as the National Audit Office pointed out last week. Among claimants of employment and support allowance who spend two years on the Work programme, the latest data suggest that the rate of failure to achieve sustained job outcomes is 93%: only 7% of those attached to the Work programme achieve a sustained job outcome.

In an earlier intervention, I asked my hon. Friend about the Government’s statement, in their response to the report, that their efforts to develop a tool have produced only 70% success. Of course it would be great if we could do better than 70%, but given that it is possible for people to change their stream after they have been streamed initially and that 70% success is certainly better than streaming people simply on the basis of what benefit they have been on, it seems to me that it strengthens the case for the Committee’s argument that it would be a worthwhile thing to do.

It would be the intention of a Labour Government, should one be elected next spring, to implement a segmentation tool as the Select Committee recommends. We would like to see it in place, again as the Committee recommends, in time for the commissioning of the Work programme’s successor. It will be possible, in designing that tool, to draw on the fantastic data that providers have gathered during their experience of the Work programme. There are now numerous rich data sets giving useful evidence about how much help individuals in a variety of circumstances need in order to get into work.

I welcome the report. The Committee has done the House and the cause of employment support a great service by providing it to us. Along with everyone here, I look forward to hearing the Minister’s response.

--- Later in debate ---

[Esther McVey]

We know that at the heart of the Government’s plan is the desire to build a stronger, more competitive economy.

[Stephen Timms]

Will the Minister give way?

[Esther McVey]

I will give way in a moment, but I want to ensure that we hear what Jobcentre Plus is actually delivering, which is a significant amount. I want people to understand how the more than 26,000 jobcentre staff are helping people and how many people come through the doors each day.

[Stephen Timms]

I have just been looking at the National Audit Office report, which seems slightly different from the impression the Minister is giving. A press release on the NAO website from 2 July says:

“After a poor start, the performance of the Work Programme is at similar levels to previous programmes, according to a report today by the National Audit Office.”

It also says:

“The Programme has…not improved performance for harder-to-help groups compared to previous schemes.”

[Esther McVey]

I will give the right hon. Gentleman greater clarification: that was at the very start of the scheme in June 2011, but the report says that, given the way performance has increased and what would be expected by the end of the programme, it would be 17% better than the pathways to work programme.

[Stephen Timms]

As the Minister says, the report does make the point that the Work programme got off to a rocky start and has improved, but its conclusion is currently that the programme has

“not improved”—

this is now, not at the start—

“performance for harder-to-help groups compared to previous schemes.”

[Esther McVey]

If the right hon. Gentleman looks into all the footnotes, everything associated and all the figures about what is expected by the end of the programme, he will find the numbers I cited. I can get the report out and go through it—I know that he has been flicking quickly to various points on his iPad, but I can give the full report because I went through it in quite some detail.

We are here to look at what Jobcentre Plus has been doing. It has carried out more than 25 million adviser interviews to help to prepare people for work. We talk about the scale; it is huge. Jobcentre Plus advertises 4 million job vacancies for around 390,000 employers. More than 97% of our JSA claims were processed within 16 days—an improvement of 10% from last year. The process of continual improvement that we talk about is happening.

We have reduced the average time taken to answer calls at our call centres from 4.55 minutes in 2012-13 to 1.07 minutes in 2013-14. According to our last survey, nine out of 10 employers were satisfied and a quarter were extremely satisfied with what we are doing. More than eight in 10 claimants on disability, carer or unemployment benefits report that they are satisfied with the DWP’s service. All that shows—

--- Later in debate ---

[Esther McVey]

I will not take another intervention for the time being; I will move forward with some of these answers.

Claimants are given the opportunity to explain why they have not complied with a requirement. If they provide good reason, they will not get sanctioned. Once sanctioned, claimants are informed of how to apply for these hardship payments. Vulnerable claimants, including any claimant with responsibility for a child, can receive payments immediately. We believe that we get the vast majority of our decisions right. In 2013, our decision makers considered nearly 2 million cases that were brought to them, but they imposed just over a million sanctions. So the information comes from the adviser and it goes to a decision maker, who looks at all the evidence before deciding whether a sanction will be given. Of those cases, only 130,000 were overturned on reconsideration or appeal—just over 13%—not the figures that I heard from the Opposition Benches; I am not sure where they get those from.

[Stephen Timms]

I remind the Minister of the letter from a whistleblower—a constituent of mine—with whom she has been in touch, who says:

“I am not sure if the providers are aware of a ‘good cause’ clause in the process…I don’t think it is being exercised much within the Jobcentre either as it would affect the number of off flows”.

I understand the theory, which the Minister set out, but the reality is rather different.

[Esther McVey]

The right hon. Gentleman quotes an anonymous whistleblower, but I am the Minister replying and I am not anonymous. We do know what good cause is. For example, if there were confusion about someone going to a job interview who thought they should have been at Jobcentre Plus, that would be good cause, and if somebody had to go to a funeral of an immediate family member, that would be good cause, too. There is a list of various good causes. If it makes common sense, that has to be right and those people have to be looked after.

Of course, we are far from complacent and continue to look for ways to improve the system and ensure that sanctions are applied appropriately. Some improvements have already been made, including introducing a telephone line for providers to check whether a sanction is appropriate, and we have introduced a new quality assurance framework, to improve standards and consistency in decision making—that has to be key.

The Matthew Oakley review will make a significant contribution to our drive to improve the system. The scope of this review was JSA sanctions for claimants on mandatory back-to-work schemes, focusing on clarity of information and claimant understanding. He has been generally positive about the sanctions system and we welcome his recommendations, which we accept and which will, as I said, be with us before the end of this month.

We need to know where we are going and we are now focusing our attention on the hardest-to-help claimants. Record numbers of people are now in work—[Interruption.] I am glad the right hon. Member for Birkenhead is listening rather than laughing, because many extra people are in work in his constituency, too, and right across Wirral. However, we must concentrate our efforts.

--- Later in debate ---

[Sheila Gilmore]

rose—

[Stephen Timms]

rose—

[Esther McVey]

Being able to provide for themselves and their family is people’s best way out of poverty I will now give way.

[Stephen Timms]

The Minister told us she met the Trussell Trust, by which I take it she means that she met people at the local food bank. I welcome that. Is she willing to meet the chief executive of the Trussell Trust, to discuss these issues with him?

[Esther McVey]

I have always said that I am there. Really, the key person who met him is the Prime Minister, and it is right that he did so.

[Stephen Timms]

Is that a yes?

[Esther McVey]

I have always agreed. I have met the Trussell Trust in my area and the food bank. We decided that the Prime Minister should meet him to discuss the issues.

We are increasing the percentage rate for our processing and getting more people into work.

Universal Credit

Stephen Timms Excerpts

Monday 7th July 2014 Commons Chamber

[Glenda Jackson]

It is not usual for me to be gobsmacked, but I certainly am by that story, even though I have heard from constituents who, while not necessarily experiencing heart attacks, have had absolutely disgraceful treatment. We are also seeing a rise in the number of appeals concerning employment and support allowance, and the appeals that have been lodged are taking longer and longer to come to a conclusion. I will not go into the whole debacle of the personal independence payment, but it is simply scandalous that some of the most vulnerable people in our society, whom the DWP is supposed to be assisting, are being left in many instances with no financial support whatever. To add insult to injury, this Government have also reduced the funding of local authorities. Many local authorities were absolutely central to ensuring that people with disabilities could live human, productive lives. That money has now been taken away.

I hope to bring home to the Chamber the absolute chaos out there at the moment, and to concentrate on the questioning that an individual claimant has to go through and the kind of questioning to which the Secretary of State responds. It is clear that he is burdened with delusions of adequacy, but some of his responses to my hon. Friend the Chair of the Select Committee at his most recent appearance in front of us were absolutely disgraceful.

Let me detail the experience of an individual claimant. A 71-year-old pensioner, dubbed by Her Majesty’s Revenue and Customs to be self-employed, applied for housing benefit. It has now taken 17 weeks and still there is no final cut-off point where she has been assured that she will receive housing benefit. The most recent inquiry that came to her was to detail the cost of a bill of £3.40; the second was to detail the cost of a bill of £7.47. Both of those claims took place in 2012. The mind boggles at that, when the Secretary of State, who has lost millions and millions of pounds on a failed IT system, has categorically refused to give the Select Committee any detail whatever about his newly trumpeted business plan. He has refused to discuss the costs of the plan or whether there will be any direct savings either to the taxpayer or to the overarching benefit system. It is an absolute disgrace that the Select Committee, which has been appointed to scrutinise the DWP, is being buffeted away. It seems that the Department is opting for some kind of bunker mentality, but it will not work.

[Stephen Timms (East Ham) (Lab)]

My hon. Friend is making a powerful case. Was she as surprised as I was to learn in the evidence given by Sir Bob Kerslake to the Public Accounts Committee this afternoon that the business case that she has just mentioned, which, according to the report, is due to be finalised by the end of April, has still not been agreed by Her Majesty’s Treasury?

[Glenda Jackson]

I am sure that my right hon. Friend, and I would hope every Member of this House, would be shocked to realise that the DWP is still not giving the right answers—it is ludicrous to expect the right answer to come from the Department for Work and Pension, as simple humility is not part and parcel of its make-up. The Committees and Government Departments that scrutinise where public money goes are being pushed to one side. I have already referred to the bunker mentality of the DWP, and the example that my right hon. Friend gives me is just par for the course; it happens constantly. Arguments are not even being put up. We are all being told, “Oh no, it’s none of your business; it’s our business.”

My hon. Friend the Chair of the Select Committee has given details of the actual answers. There is a pattern, which I find very disturbing. I have already touched on the issue of disregarding any serious questioning on costs. Ever since this major benefit change came into being, the Department has employed what I would call a programme of black propaganda, and every single one of the red tops has taken it up with glee and run with it. That black propaganda told the people of this country—I am paraphrasing; the DWP would never be this cogent—that everyone who was claiming benefits was doing so because they were too lazy to work. Nothing could be further from the truth. I have already touched on the agonies that are being endured by people with serious mental and physical disabilities, and the pattern is ongoing.

A report from the Office for National Statistics last week scrutinised the level of complaints made against all the Government Departments about the misuse of statistics, and guess which one came top of the list! It was the Department for Work and Pensions. Throughout the time I have been a member of the Select Committee, we have raised again and again the issue of the misuse of stats and the misuse of the English language to proselytise this black propaganda and to confuse and distort what should be central to the Committee’s concerns—namely, the well-being of the people who require benefits, not because they are lazy or workshy, or even because there are no jobs, but because they should be supported by the people of this country, as they always have been.

After the last debate on this issue, I was touched to receive a response from the people of this country. If there is a silver lining to the black cloud that is the DWP, it is that the majority of people in this country still believe that the welfare state should do what it was meant to do, which is to support people who, through no fault of their own, cannot maintain themselves without the support of the rest of us. That support is alive and well out there in the country. The one place where it is certainly dead is within the Department for Work and Pensions.

--- Later in debate ---

[Stephen Timms (East Ham) (Lab)]

The Work and Pensions Committee has done the House a service with its report, and the tributes to its Chair from both sides of the House are well deserved.

The hon. Member for Newton Abbot (Anne Marie Morris) is absolutely right to say that there is widespread agreement that universal credit is, in principle, a good idea, but I am afraid the universal credit project has had all the hallmarks of disaster right from the start, as a number of us pointed out at the time. Everybody hoped, as we were assured, that the lessons of previous failures had been learned, but unfortunately they had not.

It started to go wrong within just a few weeks of the general election. Ministers published a Green Paper entitled “21st Century Welfare”—I have my well-thumbed copy with me—which introduced the idea of universal credit. Paragraph 7 of chapter 5 stated:

“The IT changes that would be necessary to deliver a more integrated system would not constitute a major IT project”.

There was an utter failure, right at the outset, to grasp the scale of what the Government were about to embark on. How on earth the phrase “would not constitute a major IT project” came to be written in a Green Paper, I have absolutely no idea, but I am quite sure that no official in the Department would have been responsible for writing such a ludicrous claim. I am afraid that from that moment on, things have got progressively worse.

Will the Minister comment specifically on my intervention on my hon. Friend the Member for Hampstead and Kilburn (Glenda Jackson) about this afternoon’s announcement by the head of the civil service, Sir Bob Kerslake, in evidence to the Public Accounts Committee, that the Treasury has not yet approved the revised business case? A week ago today, the Minister said in response to a question from my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Secretary of State for Work and Pensions:

“The Chief Secretary to the Treasury has approved the UC Strategic Outline Business Case plans for the remainder of this Parliament (2014-15) as per the ministerial announcement (5 December 2013, Official Report, column 65WS)”.—[Official Report, 30 June 2014; Vol. 583, c. 434W.]

The Minister said that the Treasury had agreed the business case, but today the head of the civil service told the Public Accounts Committee that the Treasury has not agreed the business case. The Minister owes us an explanation of the discrepancy between her answer a week ago and what the head of the civil service has said today.

The project has suffered from three levels of failure: policy failure, delivery failure and governance failure. I will say a little about each of them. First, policy failure is perhaps the most serious one. As the hon. Member for Hornchurch and Upminster (Dame Angela Watkinson) has rightly pointed out, the point of universal credit was to make sure that people would be better off if their income increased because they got a job or did extra hours or for some other reason. However, the difficulty involved in achieving that apparently simple goal was never understood by Ministers, and the hard graft of delivering it has therefore never been done.

Last September’s National Audit Office report, which my hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) has rightly described as cataclysmic, noted:

“Throughout the programme the Department has lacked a detailed view of how Universal Credit is meant to work.”

That has been the central failure: the Department simply has not worked out what the system is supposed to do.

More than three years after the implementation of universal credit started, we still do not know, as we have been reminded in this debate, which recipients of universal credit will be entitled to free school meals for their children. That is not a minor detail; it is a very serious problem for the aim of making sure that people are always better off if their income goes up. If the truth is that a household will suddenly lose their entitlement to free school meals if they reach a specific income threshold—that appears to be where we are heading—of, for example, £9,000 a year, their income will be a great deal less than it was before the small increase that triggered that change. The Citizens Advice briefing for today’s debate has an example of a lone parent who, if free school meals are decided on the basis of income threshold,

“will be worse off by taking on extra work however many hours she works”.

Solving that genuine policy difficulty is at the heart of what the Government are trying to do with universal credit. As my hon. Friend the Member for Edinburgh East (Sheila Gilmore) has reminded us, she and I served on the Welfare Reform Bill Committee. On 24 March 2011, the Secretary of State said:

“we have to resolve some of these issues like free school meals…You asked when. I believe that during the Committee stage we should be in a much stronger position to make it much clearer how we will do that.”––[Official Report, Welfare Reform Public Bill Committee, 24 March 2011; c. 154-55, Q299.]

The Committee stage ended on 24 May 2011, just over three years ago. When I asked the Schools Minister about the subject last Thursday, he said that an announcement would be made “shortly”. It appears that we are heading for some sort of income threshold. If that happens, it will create a huge new work disincentive in universal credit for a very large number of people that will be far worse than anything in the current system, for all its flaws.

The universal credit rescue committee—I am grateful to the hon. Member for Warrington South (David Mowat) for drawing attention to its work—submitted its report to the Labour party two weeks ago. It pointed out that the work incentives for second earners in a couple are a good deal worse in universal credit than they are in the current system. My hon. Friend the Member for Oldham East and Saddleworth underlined the importance of that point.

Leaving council tax support out of universal credit undermines simplicity, with many claimants facing two separate rates of benefit withdrawal when they move into work or their incomes increase.

The decision to pay universal credit to only one member of a couple, rather than reflecting the current system in which payment with respect for children is paid to the main carer—an arrangement with which you, Madam Deputy Speaker, are particularly familiar—raises significant risks for many women and their children.

Universal credit also creates an extraordinary new red tape burden for self-employed people and partners in small partnerships who want to claim universal credit. The Institute of Chartered Accountants in England and Wales says that about 60,000 partners in small partnerships will want to claim universal credit and that it will be virtually impossible for them to meet the proposed red tape challenge.

It is the policy failures that are the most serious, but it is the delivery failures that are the most spectacular. As the Minister for the Cabinet Office said in a television interview, implementation has been “lamentable”. I wrote to the Secretary of State on 16 November 2010 to point out that his timetable was unrealistic, and I wrote to him again on 18 April 2011. The Secretary of State wrote a perfectly friendly response on both occasions, but simply denied that he had a problem.

In November 2011, the Secretary of State announced that 1 million people would be claiming universal credit by April 2014; in fact, there were approximately 6,000. In May 2012, he announced that new applications for existing benefits and credits would be entirely phased out by April 2014; Ministers now say that that will not happen until 2016. Even assuming that everything goes well from here, which it will not, the project is at least two years late.

Late last year, it was finally admitted that the transition to universal credit will not be complete by 2017. Everybody has known that for months. The hon. Member for Amber Valley (Nigel Mills) was right to make some very thoughtful comments about that. However, while everybody knew about the problems, Ministers flatly denied them. The Secretary of State told the House on 5 September 2013:

“The plan is, and has always been, to deliver this programme within the four-year schedule to 2017…that is exactly what the plan is today. We will deliver this in time”.—[Official Report, 5 September 2013; Vol. 567, c. 472.]

That was complete fantasy. He was still doing it on 18 November, when he said that

“universal credit will roll out and deliver exactly as we said it would.”—[Official Report, 18 November 2013; Vol. 570, c. 947.]

Everybody knew that that was untrue. Why do Ministers not simply tell us the truth about what is going on? Some £40 million has been written off so far, with more undoubtedly to come.

I was worried about achieving one universal credit IT system in anything like the proposed time scale, but we are now in the extraordinary situation of building two different universal credit IT systems. How much more will that cost? The Select Committee asked that question—surely that is what Select Committees are supposed to ask about—but the Government response simply does not provide any answers. Surely we can at least be told how much extra it will cost us to have two IT systems instead of one.

Lessons also need to be learned from another group of serious failures—the governance failures in the project. To answer the question quite rightly asked by the hon. Member for Warrington South, five different officials have had responsibility for the project since it started. However, the central problem is that the project has been managed primarily with a view to minimising embarrassment for the Secretary of State. That is essentially what decisions have been about. Problems, when obvious, have simply been denied; information that would have shed light on what was going on has been buried; and the people who have asked difficult questions have been fobbed off. Members of the public have made freedom of information requests to see the risk register, the milestone schedule and the project assessment review, but applications have of course been refused, and when the Information Tribunal found in favour of those members of the public, the Department simply appealed again.

Ministers are absolutely determined that nobody should know what is really happening. With this project, there is an obsession with hiding things; of pretending that all is well when it obviously is not; and, as the National Audit Office has pointed out, of only admitting to good news. That is not a culture that will deliver a successful project, and it certainly has not delivered success in this case. My hon. Friend the Member for Hampstead and Kilburn referred to a “bunker mentality”, and there absolutely is such a mentality.

Obsessive secrecy has no doubt spared the blushes of the Secretary of State, at least for a time, but it has hindered progress on the project. It has meant that it has taken longer than it should have done to recognise problems and to deal with them, and a large amount of money has been wasted. If, two years ago, the Secretary of State had put up his hands, and recognised that he and his advisers had got it wrong and that the project would take longer than they first said, much of the subsequent waste and delay could have been avoided. Instead, they just kept on denying that there were any problems, so the problems kept on getting worse—and the project is not finished yet.

The project is at least two years late, and it will have wasted much more than the £130 million already acknowledged. It is essential, as the universal credit rescue committee has argued, that the project is now paused. Central policy decisions still have not been made—Ministers cannot spend hundreds of millions of pounds on an IT system if they do not know what it is supposed to do—and Ministers have not made such decisions. As has rightly been said by the rescue committee, taking advice from the former chief information officer of Rolls-Royce, who served on it with distinction, we need a plan that is published, is audited by the National Audit Office and contains milestones with dates, so that everybody knows how the project is going. Why pretend that it going well when it clearly is not?

[David Mowat]

The point I made was that the review could be done in parallel with continuing the programme. Let us say that 1,000 people are working on the programme at the moment. What will the right hon. Gentleman do with those 1,000 people during that three-month review?

[Stephen Timms]

As I have said, the idea for the pause is based on the recommendation of Jonathan Mitchell, the retired chief information officer of Rolls-Royce, who has managed extremely large IT projects in that company—possibly even larger than those for which the hon. Gentleman had responsibility. He has said that when a project is as out of control as this one clearly is, it is essential to stop, to make policy decisions and to draw up a plan before simply shovelling in hundreds of millions pounds more.

[David Mowat]

Will the right hon. Gentleman give way?

[Stephen Timms]

I will not, because I should conclude.

Outstanding policy issues need to be decided, the work incentive design flaws need to be fixed and a hard-headed view needs to be taken about whether this project can be rescued within an acceptable time and cost. Opposition Members hope the answer to such a question will be yes, but we cannot assume that it will be. The question needs to be asked frankly and answered honestly. It should not be left until the election; it should be done now.

--- Later in debate ---

[Esther McVey]

I thank my hon. Friend. That is why we are learning as we are rolling the system out and using that to inform what we are doing.

We have a multi-disciplinary team of 90 people, 30 of whom are digital specialists. They are developing the digital system as we go along. It is not a twin-track approach. We are continually learning and informing. We have one system. That is what we are doing. I hope that that goes some way towards answering the questions that have been asked about IT. One thing that we can all agree on is that it is complex. We will learn as we go along and we have the right person doing the job.

[Stephen Timms]

Is it the case, as the Minister said in her written answer on Monday last week, that the Treasury has approved the universal credit business case—yes or no?

[Esther McVey]

I have just had the answer that I gave last week checked. It stated:

“The Chief Secretary to the Treasury has approved the UC Strategic Outline Business Case plans for the remainder of this Parliament (2014-15) as per the ministerial announcement (5 December 2013, Official Report, column 65WS)”—[Official Report, 30 June 2014; Vol. 583, c. 434W.]

That was the response and I have just had it verified.

[Stephen Timms]

Will the Minister tell us, then, why the head of the civil service today told the Public Accounts Committee that the Treasury has not approved the universal credit business case?

[Esther McVey]

I will look into that additional point and get back to the right hon. Gentleman. On his last point, I have had the answer checked by my officials and it was correct.

On the roll-out, the new service is now available in 24 areas across England, Wales and Scotland, where it is providing people with stronger incentives and support to get into work, stay in work and increase their income. On 23 June 2014, we began rolling out universal credit for single people to jobcentres across the north-west of England, starting with Hyde, Stalybridge, Stretford, and Altrincham. Last week, it went live in Southport, Crosby, Bootle, Bolton and Farnworth. I am pleased to say that today, Wirral, Birkenhead, Bromborough, Hoylake, Upton and Wallasey began accepting claims for the new benefit. Once the north-west expansion is complete, 90 jobcentres—that is one in eight jobcentres in Britain— will be offering universal credit.

From 30 June, we expanded the service to couples in five of the existing live areas: Rugby, Bath, Inverness, Hammersmith and Harrogate. That meets our commitment to expanding the new service to more areas and to more claimant types from this summer. We will continue to roll out universal credit carefully in a safe and secure manner—starting small, testing and learning from delivery. That remains the right approach. Later in the autumn, it will be expanded to include families.

My hon. Friend the Member for Warrington South answered the question about whether somebody will be able to feed in information about how many hours they work per week. Such real-time information is another part of the programme that we had the foresight to put in place. That is working well and the roll out of it is nearly 100% complete—it is more than 99% rolled out.

I have just received a quote from a claimant in Warrington who is working 20 hours a week:

“I’m currently working 20 hours a week but am able to pick up extra hours when overtime is on offer because UC is flexible in that way and I don’t have to worry about my benefit just stopping if I work more than 16 hours. I know I will still get support until I earn enough to completely pay my own way”.

That is what we always intended to happen. There is a cushion of benefit to support people, but they are able to take extra hours and to progress in work without being stopped from working by the old-fashioned rules and regulations that Labour Members allowed to continue for so long. That is what we are trying to change. We all agreed, including the Select Committee, that those changes were needed. That is an example of a claimant saying what is happening to them right now under this system.

Sadly, I come to the questions that were asked by the hon. Member for Oldham East and Saddleworth (Debbie Abrahams). One thing on which we agree is that the media must talk about people and depict people carefully and sensitively. Nobody wants to point the finger at anybody. Nobody on the Government Benches has used any inflammatory language, because that is not right. I have always been very careful about the words that I use, because we all know people who have fallen on hard times and have needed the support of the state. It is imperative that each and every one of us checks our language, because it means a lot, whether it is on the internet, in newspapers or on the radio. I totally agree with her about that.

However, I totally disagreed with the hon. Lady—I am sure she will understand this—when she asked how the Secretary of State is still in his job. I had to smile at that rather absurd comment, given what he has delivered in four years. We have a record number of people in work. We are delivering on youth unemployment: it has gone down consistently for nine consecutive months. It is now 100,000 lower than when Labour was in office. Under Labour, youth unemployment went up by 45%. We have had the biggest fall in long-term unemployment, which doubled under Labour, since 1998. There is not just a record number of women in work, but a record rate of women in work too. All of those things are why the Secretary of State is still in his job: he has changed things around fundamentally.

The hon. Lady talks about a £40 million write-down. Projects of this size usually have about 30% write-down rate—this has a 10% rate. Labour’s track record of IT failure is £26 billion written off with no scope whatever, so we can move on to why universal credit is so important. Even the Joseph Rowntree Foundation is very clear about the benefits of universal credit, recently stating:

“Universal Credit is a once in a generation opportunity to reform a failing and overly-complex system. It will revoke the worst work incentives of the current system, smooth transitions in and out of work and make it easier for people to access all the support they are entitled to.”

Those are the reasons why we are correct in pursuing universal credit.

Oral Answers to Questions

Stephen Timms Excerpts

Monday 23rd June 2014 Commons Chamber

[Mike Penning]

I am afraid that that is factually incorrect. I read Judge Martin’s comments, and I do not think that that is quite what he said. There has been a reduction of more than 80% in the number of people who are appealing. That is because better decisions are being made, which is right and proper for everyone.

[Stephen Timms (East Ham) (Lab)]

It is high time that Ministers took responsibility for their failings. It was their decision, after the election, to migrate all recipients of incapacity benefit to employment and support allowance. That was the decision that triggered the delays and backlogs about which we have heard. Now, the memos that were leaked last week have revealed that ESA

“is not delivering more positive outcomes for claimants”

than incapacity benefit did, and the Work programme has proved hopeless, with a 94% failure rate. How long will Ministers allow this shambles to continue?

Bedroom Tax (Scotland)

Stephen Timms Excerpts

Thursday 8th May 2014 Westminster Hall

[Stephen Timms (East Ham) (Lab)]

I am delighted to serve under your chairmanship, Mr Bone. I congratulate the Scottish Affairs Committee on its report and my hon. Friend the Member for Glasgow South West (Mr Davidson) on his introduction of the debate this afternoon.

It is refreshing to see an official document—the two reports from the Scottish Affairs Committee—that finally calls a spade a spade and uses the term “bedroom tax”. My hon. Friend the Member for Livingston (Graeme Morrice) drew attention to that as well. I was disheartened and my heart sank when I started to read the Government’s response to the report. Their very first point states:

“The Government has noted with some dismay the title of the Scottish Affairs Committee’s current inquiry”.

The complaint is about using the term “bedroom tax”, but everybody uses that term. Both parties that have spoken in this debate have used that term. The Minister for Welfare Reform in the other place used the term “bedroom tax” on more than one occasion. It is sometimes claimed that the term was invented by the Labour party, but I can reassure the House that that certainly was not the case. In fact, it is what the people call this hated measure. The Committee is absolutely right to reject specious arguments from Ministers that some other convoluted form of words should be used. I noticed in the Government response to the report that there is a long-winded phrase, which I cannot recall, but it has 10 syllables instead of the three in the phrase “bedroom tax”, and that is what it is absolutely right to call it.

My hon. Friend the Member for Glenrothes (Lindsay Roy) is right to say that the measure reflects straightforward Tory ideology. It is not a surprise that the Government’s housing benefit changes have hit the most vulnerable in our society the hardest. This has been explored to some extent, but it is disappointing to hear that the Scottish Government held back from protecting vulnerable claimants on the grounds that to do so would be to let Westminster off the hook. I welcome the progress that has been made in the past few days in overcoming that constraint.

The bedroom tax is the most hated of all the changes that the Government have introduced. The report is absolutely right to say that it is cruel and unfair, and is making a big contribution to the cost of living crisis faced by families in Scotland. Research by Sheffield university shows that it is the poorest who are picking up the tab, when we have seen tax cuts for the highest paid and a huge increase in bankers’ bonuses since the Government were elected. One of the biggest drivers of the loss in household income for ordinary families in Scotland is the bedroom tax.

The uniquely dreadful feature of this measure is that it cuts the income of people who are already hard up, without giving them any realistic options for making up the loss. We know that only 6% of those affected across the UK have been able to move, so 94% are taking the hit. The smaller social rented homes that would be needed to make the policy work—as we pointed out in the Welfare Reform Bill debates three years ago, and as Ministers must have known when they introduced the policy—are simply not available in many areas. We have heard from my hon. Friend the Member for Edinburgh North and Leith (Mark Lazarowicz) that in Edinburgh 3,300 people are affected by the tax and 22 one-bedroom homes are available—less than 1%—and that is not an uncommon percentage being reported from cities around the UK.

There are also particular difficulties in rural areas. In some of them, there is almost no one-bedroom accommodation available at all. I noticed the submission made by the Orkney Islands council on the Scottish Affairs Committee’s website that made a strong case for a derogation from the bedroom tax for remote and rural island areas. But the truth is, whether we are talking about cities, towns or rural areas, the bedroom tax needs to be scrapped.

Given that there are not smaller homes to move to, many people simply have to take the hit. Many are now in rent arrears, and those who simply cannot afford the extra and cannot find anywhere to move to are going to lose their homes.

[Mr Davidson]

Does my right hon. Friend the Member for East Ham—my party’s spokesman—accept the recommendation of the report that all bedroom tax should be written off and all payments made refunded? Would he, like me, welcome the opportunity to go into a general election with the slogan, “Vote Labour and get your bedroom tax back”?

[Stephen Timms]

That sounds a very good slogan, but, sadly, I cannot give my hon. Friend the assurance that he seeks. I agree with him about the distinction between the Scottish Government currently in power in Scotland and the position that would face a newly elected—hopefully, Labour— Government.

The point has also been made in this debate—absolutely rightly—that across the UK two thirds of the households affected include someone with a disability. My hon. Friend the Member for Airdrie and Shotts (Pamela Nash) indicated that the proportion is even higher than two thirds in Scotland. It seems particularly ridiculous that homes on which public money has been spent specifically to provide adaptations for families living with disabilities should be affected by the bedroom tax, and some people are being forced to leave them, even though public money has been spent to adapt them specifically to their needs.

We had a debate last week about the impact of the bedroom tax in Wales. The Committee’s interim report acknowledged that Wales was the part of the UK worst affected by the tax. The Government’s response to the report by the Welsh Affairs Committee once again rejects the idea of an exemption for adapted homes. That is very disappointing, and it is another aspect of the wastefulness of this measure. It contributes to the likelihood, as pointed out by researchers at York university and elsewhere, that the bedroom tax will end up costing more than it saves. Without smaller homes to move to, the measure is simply a tax on the poor. As my hon. Friends have said, the right thing to do is to scrap it.

I welcome the agreement that will enable the effects of the bedroom tax to be nullified in Scotland. Can the Minister tell us why the same provision cannot be made for Wales? Why are the Welsh Government not allowed to offset the effects of the bedroom tax? And what about the Greater London Assembly, so that my constituents could also be spared this pernicious measure?

Last week, my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) rightly brought to the attention of the House the issue of panic rooms, which are not exempted from the bedroom tax.

We have long argued that the hated bedroom tax was a mistake. Even the Conservative Chair of the Welsh Affairs Committee has recognised that it is a mistake in Wales. Our policy is that it should be scrapped. We will continue to press the Government to scrap it. That was the aim of the private Member’s Bill moved recently by my hon. Friend the Member for Wansbeck (Ian Lavery). If our efforts do not succeed and the bedroom tax is not scrapped by this Government, we have made it absolutely clear that it will be scrapped by the next Labour Government.

Housing Benefit (Wales)

Stephen Timms Excerpts

Thursday 1st May 2014 Westminster Hall

[Stephen Timms (East Ham) (Lab)]

I am also delighted to serve under your chairmanship, Mr Betts. I congratulate the Welsh Affairs Committee on its report and its Chair, the hon. Member for Monmouth (David T. C. Davies), on the position that he has taken in the debate.

It is no surprise that, as we have heard, the Government’s housing benefit changes have hit the least well-off the hardest. My hon. Friend the Member for Llanelli (Nia Griffith) was among those who made the point effectively that a greater proportion of housing benefit claimants have been hit by the bedroom tax in Wales than elsewhere. My right hon. Friend the Member for Torfaen (Paul Murphy) said that this is a “wicked” measure. I, and I think many who have contributed to the debate, share that view. The bedroom tax is certainly the most hated of all the Government’s changes.

The Minister might not be inclined to take as much notice as he should of the representations made by my hon. Friends the Members for Ogmore (Huw Irranca-Davies) and for Bridgend (Mrs Moon), but I hope that he will at least take notice of the views of the Social Liberal Forum, an organisation that he has been associated with. It says that the bedroom tax is

“easily the most disgraceful of all the Government’s welfare reforms.”

The Minister who, when in opposition, espoused a progressive position on social security will, in a few minutes, endeavour to defend this most regressive of changes, which is making a big contribution to the cost of living crisis being suffered by people in Wales.

My hon. Friend the Member for Swansea West (Geraint Davies) reminded the Committee that the Minister is a Liberal Democrat. I wonder whether the Minister can help us resolve a puzzle. It would be helpful to know what his party’s policy is on the bedroom tax, as that is a bit of a mystery. The president of the Liberal Democrats, the hon. Member for Westmorland and Lonsdale (Tim Farron), spelt out a clear position in Inside Housing in February. He said that his party will be opposing the bedroom tax at the next election. He explained why:

“It’s creating more hardship, it’s wrong and unnecessary…it’s impacting on people and the most vulnerable. It’s also having an impact on housing associations—it means that they have less to invest in social housing.”

He is absolutely right about that and that is why, no doubt, the Minister’s party conference voted overwhelmingly against the bedroom tax last September in a motion that condemned it as discriminating against the most vulnerable in society. The hon. Member for Ceredigion (Mr Williams) said that he has voted against the policy in the past. It would therefore be helpful if the Minister could tell us what his party’s position is on the bedroom tax. It rather looks at though it opposes it, but it does not vote against it. I hope that he can shed some light on that in this welcome debate.

The uniquely dreadful feature of the measure is that it cuts the income of people who are already hard up without giving them any options for making up the loss. We have heard in the debate that only 6% of those affected throughout the UK have been able to move; 94% are taking the hit. We pointed out in debates in the Welfare Reform Bill Committee three years ago that smaller homes for rent are simply not available in many areas. The Committee drew attention in the report, as its Chair did in his speech, to the particular difficulties in rural areas, with people reported as having to move 50 miles or so. Most people have therefore just taken the hit. Many of whom, as we have heard, are now in arrears and some who simply cannot afford the extra and—like the great majority—cannot find somewhere smaller to move will, in due course, lose their homes.

In Wales, the bedroom tax affects a larger proportion of claimants than in any other region and the Select Committee is right to draw that point to our attention. It affects 40,000 households, 62.5% of which are households with a disability. Some of the homes we are talking about have been specifically adapted to support their tenants’ needs. We argued, again in the Welfare Reform Bill Committee, that this pernicious measure should not apply to such homes to avoid the problem identified in Bron Afon Community Housing’s evidence, which is in the document before us today. Unfortunately, the Government rejected our proposed change and again rejected the idea of an exemption in response to the report. The Minister, in his intervention, at least hinted at some sympathy for that case and that, for homes with perhaps major adaptations, there should be some exemption. If he is able to encourage us that he might take that thought further, that would be welcome.

The Select Committee told us that local authorities have been asked to report on

“the number of awards that have been made to help with ongoing rental costs for disabled people in adapted accommodation.”

Will we be told how many disabled people in adapted accommodation will be refused discretionary housing awards? Can the Minister offer any reassurance to those affected?

We have heard about the survey undertaken by Rebecca Evans, the Member of the Welsh Assembly who has established that, in a survey of housing providers, the number of one-bedroom properties available was about 1% of those needed. The bedroom tax is simply a tax on people who are hard-up.

In some areas, larger properties are being left empty because smaller households cannot afford to live in them. That is another aspect of the waste being caused by this tax: good homes are being left empty. On Tuesday, my hon. Friend the Member for Plymouth, Moor View (Alison Seabeck) brought another aspect to the House’s attention: panic rooms, which have been installed in some homes, reflecting the serious domestic violence problems that some people face. Such rooms are not exempted from the bedroom tax either. Surely it makes no sense to force people in that position to move, even if there was anywhere for them to move to.

For many, the bedroom tax has proved a hit too far on their household budgets. It has been one of the major drivers of the extraordinary increase we have seen in demand for food banks in Wales, as my hon. Friend the Member for Newport East (Jessica Morden) rightly pointed out. Her survey showed powerfully just what a big increase there has been in the number of housing association tenants in rent arrears because of the introduction of this tax. She also calculated the loss to housing associations as a result of that.

In January, a loophole was discovered in the bedroom tax legislation that, in effect, exempted those who had held the same tenancy since 1996. This is a mess. The Government claim that only 3,000 to 5,000 people are eligible for a refund of their bedroom tax payments, but freedom of information requests to local authorities have already identified 23,000 who are affected and at least 1,800 of those live in Welsh local authority areas. Can the Minister give us an estimate of the cost of reimbursing tenants affected in Wales? That is, however, another reason why my right hon. Friend the Member for Torfaen said that it is likely that this measure will end up costing more than it was ever likely to save.

Labour’s policy, and I think the Liberal Democrats’ policy—it was at least its policy at its conference—is that the bedroom tax should be scrapped. We will continue to press the Government to scrap it and, if they do not, the next Labour Government certainly will.

--- Later in debate ---

[Steve Webb]

No, I will not. Labour cannot explain why it is right to say that private tenants have to pay for the size of the house that they live in, but that social tenants should not have to. Some suggestions were made about our views on excluding pensioners from the measure. They are generally excluded because, for example, expecting them to take work would be unrealistic. We have excluded pensioners for that reason, but it is pretty obvious why the Labour party wants to exclude social tenants, but not private tenants.

Someone said during the debate that we cannot both save money and make better use of the housing stock, but we are doing both of those things. The original estimated savings from the measure for the whole country of some £0.5 billion remains our expected order of magnitude. In addition, some people are moving to more suitable accommodation and freeing up accommodation for the people whose voice never gets heard—as has been said in the debate.

[Stephen Timms]

Will the Minister give way?

[Steve Webb]

No—I have only one and a quarter minutes left. Why did we not hear about the 13,000 people in Wales living in overcrowded social sector accommodation? Where was their voice in the debate? What about the people living in overcrowded private sector accommodation, or the 90,000 people on housing waiting lists?

There is a whole set of unmet housing need while we have people under-occupying social rented accommodation —through no fault of their own, so it is not a criticism of them, but it is a fact. The hon. Member for Swansea West (Geraint Davies) said that when people’s kids grow up, they should go on being able to live in a big family house, but what about the people who would love a big family house, but cannot get it because it is under-occupied? We have to help people with the transition, but that is why substantial additional DHPs have been found.

Finally, on the specific issue of adapted accommodation. We would have loved it had we been able to write a law in Whitehall that said, “This is adapted; this isn’t. Here is how we define it in an Act of Parliament or a statutory instrument. We will have a blanket exemption.” That would have been great. We looked hard, but we could not think of a national and consistent way of defining what it was. We therefore found the money instead—£25 million across Great Britain, which was our estimate of the cost of buying out the impact on substantially adapted properties. No one in the country living in a substantially adapted property who goes to a local authority should be turned away because there is not the money for DHP. We have given the local authorities the money, and that should not need to happen.

There is lots more that I would love to say, but I am constrained by time. I hope that I have been able to give some responses to the questions asked by the Chairman of the Committee.

Work Programme (Wales)

Stephen Timms Excerpts

Thursday 1st May 2014 Westminster Hall

[Stephen Timms (East Ham) (Lab)]

After three years of virtually no growth in the British economy after the general election, we are now finally seeing a recovery taking shape, which is very welcome. We all hope that the recovery will be sustained. The central labour market challenge now is that, following that period, we have unprecedentedly high numbers of people who have suffered unemployment in the long term. That needs to be at the centre of policy over the period ahead.

Tackling long-term unemployment is very urgent. As the Welsh Affairs Committee has pointed out, the Work programme is not up to that task. In fact, long-term unemployment rose inexorably to the highest level for 20 years in the two years after the Work programme was introduced. We need to do much better.

The facts about the Work programme’s performance in Wales have been set out fully in the report. The Government’s response says, “Well, it is not quite as bad as it looks, because 14.7% of those who started on the Work programme in Wales have achieved a sustained job outcome.” The Chair of the Select Committee said that it had gone up a bit to 15.1%, and I think that is right, on the most recent data. However, 85% of those who went on to the programme have therefore not achieved a sustained job outcome. It is very difficult to see how 15.1% can be regarded as good performance, and we should bear in mind that people have spent two years on the Work programme and that they have already been out of work for a year, usually, when they start on it. We are therefore talking about people who have had three years out of work, and it looks as though 85% of those who started on the Work programme do not have the sustained job outcome that is the purpose of being there. That looks pretty disappointing to me.

As my hon. Friend the Member for Blaenau Gwent (Nick Smith) rightly said, the policy has been particularly disappointing for young people. The youth contract has been a serious damp squib. Wage subsidies provided under that have had minimal take-up. I understand that Ministers have now given up on achieving the take-up that they initially forecast, and it is expected that spending on the youth contract will be much less than was originally thought. If the Minister could tell us her current expectations about that, it would be helpful.

It is true in Wales, as it is elsewhere, that the Work programme has been terrible for people who are out of work on health grounds and in receipt of employment and support allowance. Only 5% of them across the UK have secured a sustained job outcome after two years, so the failure rate has been 95%. If I am reading the Committee’s report correctly, at table 4, the proportion in Wales is less than 3%. Again, those people have spent two years on the Work programme, but it appears that less than 3% of them have a sustained job outcome. The Work programme has been very disappointing for jobseekers generally; for that particular group, it has been terrible. The report tells us that 2,630 former recipients of incapacity benefit were referred to the Work programme in its first two years. Of that 2,630, 10 secured a sustained job outcome.

We were told at the outset that the design of the Work programme would enable extra support for those facing the greatest barriers. In fact, many of those with the greatest barriers—such as people with health problems—have simply been parked by the Work programme and have not had any serious help to get back into work.

The report refers to alignment between programmes in Wales and in the whole UK. As my hon. Friend the Member for Llanelli (Nia Griffith) pointed out, the Welsh deputy Minister for Skills and Technology, Ken Skates, who I think is doing a fantastic job, made a statement on Tuesday about his discussions with the Minister. I hope that she will be able to tell us something from her perspective about the progress of those discussions.

Inspired by the success of the future jobs fund, which was in place across the UK before the election, the Welsh Assembly Government have established Jobs Growth Wales, which my hon. Friend the Member for Newport East (Jessica Morden) drew to our attention and the report mentioned. By contrast to the disappointment of the Work programme, my hon. Friend the Member for Swansea West (Geraint Davies) was absolutely right that Jobs Growth Wales has delivered for young people in Wales.

The shadow Secretary of State for Work and Pensions, my hon. Friend the Member for Leeds West (Rachel Reeves), and I visited Cardiff last month to find out more about how that success has been achieved. We visited a rapidly growing software company employing 150 people in Cardiff. It has taken on young people through Jobs Growth Wales. It told us that it took on 12 young people last year. The company is Israeli-owned, and it had quite a tough job making a pitch to the board in Israel that it should take on those 12 people. It was able to win that argument only because of the wage subsidy from Jobs Growth Wales, but having taken on those 12 young people, 11 have now become permanent employees. The 12th was not kept on, but that young person has gone on to get a job in another firm. We met four of the recruits at the company’s offices in Swansea. They all told us that they had found it extremely difficult to find a job. One told us they had applied for hundreds of jobs; it was Jobs Growth Wales that gave them a break.

As my hon. Friends have said, the performance figures from Jobs Growth Wales are very impressive. The most recent figures that I have seen suggest that of those who have completed the Jobs Growth Wales programme up to 10 April, 45% continued in employment after their six-month job subsidy ended with the same employer. Another 8% were able to get work with another employer and 26% went on to an apprenticeship. Most of the employers recruiting under Jobs Growth Wales are small and medium-sized enterprises. The programme has very strong support from the Federation of Small Businesses and, as my hon. Friend the Member for Swansea West said absolutely rightly, the lessons from that success should be applied right across the UK, and that is precisely what Labour’s compulsory jobs guarantee will do. We want to guarantee a choice of job offers to 18 to 24-year-olds who have been in receipt of jobseeker’s allowance for a year and—this is different from what is happening in Wales—to over 25-year-olds who have been in receipt of jobseeker’s allowance for two years. Every European Union member state, except for the UK, is now introducing a youth jobs guarantee. We should do so as well, and I very much commend what is being delivered in Wales.

The Select Committee was right to point out the extent of the disappointment in Wales about how the Work programme has done so far—less well than elsewhere, and it has been rather disappointing elsewhere, too. It has been at its worst in Wales. Jobs Growth Wales, by contrast, has established a much more encouraging record. In our view, the lessons from that need to be applied in a compulsory jobs guarantee in every part of the UK.