Automatic Enrolment (Transitional Provisions)

Steve Webb Excerpts

Wednesday 19th December 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The workplace pension reforms are a hugely important part of the Government’s commitment to secure and protect people’s income in retirement. As part of the automatic enrolment process, it is vital that employers comply with the spirit as well as the letter of the law.

The Government therefore intend to introduce legislation at the earliest opportunity to clarify the law and to provide certainty by preventing the avoidance of the automatic enrolment duty through the exploitation of an easement aimed only at employers who provide defined benefits under hybrid schemes or defined benefit schemes. Our intention is for the legislation to have retrospective effect from the date of this announcement.

The legislation will make it clear that only defined benefits (whether offered under a hybrid scheme or a defined benefit scheme) offered to the jobholder in question would satisfy the pre-conditions for employers to defer automatic enrolment under section 30(2) of the Pensions Act 2008. The legislation will amend the provisions of that Act relating to the transitional period for defined benefit and hybrid schemes, as well as the definitions of “hybrid scheme” and “defined benefit scheme”.

We intend for the legislation to have retrospective effect. Any employer who offers only money purchase benefits to the jobholder and has issued a notice to them to defer automatic enrolment under section 30 will need to automatically enrol that jobholder and backdate employer contributions to the date of this announcement. From the date the legislation comes into force, any employers who will be affected by the legislative change will be required to make back payments covering the period from the date of this announcement. It will be the jobholder’s choice as to whether or not they wish to pay their own contributions for this period. Where jobholders wish to make contributions, employers and schemes will need to allow these to be made over an extended period.

Employers offering money purchase benefits will still be able to use the transitional arrangements under section 29, which permit a gradual phasing in of the contribution requirements over a transitional period.

Workplace Pension Reform

Steve Webb Excerpts

Thursday 13th December 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Later today the Government’s response to the consultation on the 2013-14 review and revision of earning thresholds for automatic enrolment will be published, and I will place a copy in the Libraries of both Houses.

These papers will also be available later today on the Department’s website at: www.dwp.gov.uk/consultations.

It is intended to lay an order before Parliament in the new year which will include the following:

£9,440 for the automatic enrolment earnings trigger;

£5,668 for the lower limit of the qualifying earnings band;

£41,450 for the upper limit of the qualifying earnings band.

Child Maintenance

Steve Webb Excerpts

Monday 10th December 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Today I can confirm the Government will introduce their new, “pathfinder” statutory child maintenance scheme, which will be available to a very limited number of new applicants at the outset. All other cases will remain on existing schemes for the time being.

This Government are determined to avoid the mistakes of the past, when the 2003 scheme was launched too quickly and for too many clients. Through the pathfinder approach we will ensure that the 2012 scheme is operating effectively, before it is opened to all clients.

Eligibility for the 2012 scheme is based on the number of children—qualifying for child maintenance—named in the application. For the purposes of the pathfinder, there must be at least four children with the same two parents named in the application, and the parents must have no existing child support case in respect of those children, for that application to be administered under the scheme, otherwise it will be handled according to the 2003 scheme rules.

Oral Answers to Questions

Steve Webb Excerpts

Monday 10th December 2012 Commons Chamber

[Paul Uppal (Wolverhampton South West) (Con)]

3. What steps he is taking to increase take-up of workplace pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Automatic enrolment was introduced in October and the number of workers saving into a pension in some of Britain’s largest companies has already increased. In steady state, we expect 6 million to 9 million people to be newly saving, or saving more. To support this, we are running a national communications campaign, including TV adverts targeting those least likely to be saving in a pension.

[Paul Uppal]

It is becoming increasingly apparent that we on the Government Benches are on the side of those who strive and work hard in society. In that vein, how can my constituents in Wolverhampton South West who are saving for the future have access to enrolment to high-quality pension funds?

[Steve Webb]

Through the creation of the National Employment Savings Trust we have ensured that there is a benchmark of low-cost, high-quality pension provision, which is driving down costs across the market. We need to go further and we are looking at whether the role of NEST can be expanded. We are also driving through transparency on charges, so that firms and employees can see what they are paying for and can pay less over time.

[Mr Frank Field (Birkenhead) (Lab)]

Would not one good test of who is on the side of the shirkers or the strivers be a state pension that guaranteed that people were taken off the means test, so it would be safe to save through companies? Will the pensions Minister give us a date for when we will see the White Paper?

[Steve Webb]

The right hon. Gentleman will have heard the Chancellor only last Thursday reaffirm our commitment to state pension reform, and to do exactly that—to ensure that people who work hard and save hard are clear of means testing. The White Paper is at an advanced stage.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

Will the Minister reassure the House that the Government will not repeat the measures introduced in 1997 by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), which undermined the basis of work-based pensions? Does the Minister understand why the right hon. Gentleman is so often absent, which is doubtless due to his embarrassment about that assault on security?

[Steve Webb]

My hon. Friend is right. That was one of several measures that took money out of final salary pension schemes, which, given they were the highest-quality schemes available, was no way to show commitment to quality pension provision.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

I would have thought that Conservatives had more respect for the office of Prime Minister, Mr Speaker.

Do the Government have plans to make the rising state pension age fairer for those who have worked in manual occupations their whole life and who will tend not to have the same life expectancy? How do the Government plan to make the state pension age fair across all occupations?

[Steve Webb]

I am interested in that point—it is one that the hon. Gentleman’s late right hon. Friend, Malcolm Wicks, used to raise regularly—and we are always interested in looking at ideas on it. Our proposal is that the state pension age would be more automatically linked to the general improvement in longevity that has applied across the social scale. He is right that there remain significant differences, but a rising tide—as it were—is lifting all boats.

[Mr Peter Hain (Neath) (Lab)]

4. What assessment he has made of the effect of changes to housing benefit rules on married disabled people living in specially adapted two-bedroom properties.

--- Later in debate ---

[Mr David Hanson (Delyn) (Lab)]

9. What discussions he has had with the Welsh Government on the implications of his proposed changes to housing benefit.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

My noble Friend the Minister for Welfare Reform has met Welsh Ministers on several occasions to discuss welfare reform, including changes to housing benefit, and he maintains regular correspondence with them. In addition, officials from the Welsh Government are represented on a number of working groups relating to welfare reform.

[Mr Hanson]

Does the Minister accept that the 40,000 people in Wales who will be hit by the bedroom tax changes to housing benefit are either unemployed and long-term unemployed or, very often, are in work on low incomes? What advice would he as a Liberal Democrat offer? Would he encourage them to seek higher-paid jobs, to give up their homes or to take a massive cut in their income?

[Steve Webb]

The impact of the social housing under-occupation measure is lower in Wales on average than it is in the rest of the United Kingdom. A range of options is open to those who face a shortfall. As the Minister with responsibility for disabilities, my hon. Friend the Member for Wirral West (Esther McVey) said, one of them arises when a set of people living in over-occupied accommodation need to move somewhere larger. Many social landlords are getting to know their tenants and their pattern of need, better juggling the housing stock, which is vital and to the benefit of all our constituents.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

10. Whether it is his policy that people with cystic fibrosis should be eligible for disability living allowance.

--- Later in debate ---

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

The Secretary of State will be aware of the ever-increasing number of workplace pensions that are wound up in mergers and takeovers, as happened at Whitbread where former employees have lost their pensions. Will he review the legislation in order properly to protect people’s pensions on mergers and takeovers?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

We are obviously concerned when anybody does not get the pension they were expecting. The regulator has powers where corporate restructuring has been designed to avoid pension liabilities. If the hon. Gentleman gives me more details of the case, I will be happy to look into it.

[Mike Freer (Finchley and Golders Green) (Con)]

T10. People with HIV report poor levels of understanding of their condition by Atos assessors. This may be because the guidance is outdated and lacks information on living with HIV. Will Ministers be monitoring the guidance issued on such conditions?

[Nic Dakin (Scunthorpe) (Lab)]

The hon. Member for North Devon (Sir Nick Harvey) was right to draw attention to the rising tide of real concern and anxiety among those threatened by the bedroom tax. How many households will be directly affected by the bedroom tax?

[Steve Webb]

We published a full impact assessment as part of the Welfare Reform Act 2012, which deals with this and also breaks it down on a regional level, so the figures are already available to the House.

Benefits Uprating (2013-14)

Steve Webb Excerpts

Thursday 6th December 2012 Commons Chamber

[The Minister of State, Department for Work and Pensions (Steve Webb)]

With permission, Mr Speaker, I should like to make a statement about the uprating of social security benefits and pensions for 2013-14. I shall place in the Vote Office full details of the new rates that are due to come into force from the week of 8 April 2013 for each pension and benefit, and arrange for copies of a schedule of the new rates to be placed in the Libraries of both Houses. As part of his statement yesterday, my right hon. Friend the Chancellor announced the rates of tax credits for 2013-14. Today, I will announce the uprating of the social security benefits and pensions for which my Department is responsible.

Even in these difficult times, the coalition Government have stood by their promise for those who have worked hard all their lives. Specifically, we will honour our triple guarantee commitment to increase the basic state pension by the greater of earnings, prices or 2.5%. As prices and average earnings for September 2012 were below 2.5%, the floor of our triple guarantee is activated. Therefore, even while earnings growth remains slow, we will not repeat a small rise like the 75p rise in 2000.

From April 2013, the new rate of the basic state pension will be £110.15 a week for a single person, which is up £2.70 a week on last year. The House may be interested to hear that that means that the basic state pension is forecast to be almost 18% of average earnings—a higher share than at any time in the past 20 years.

Let me turn to additional state pensions, which are often referred to as state earnings-related pension schemes or SERPS. Unlike the Labour party, which froze SERPS in 2010, the coalition uprated SERPS by the full value of the consumer prices index in 2011 and 2012. I am pleased to announce that this year SERPS pensions will rise by 2.2%, which means that the total state pension increase for someone with a full basic state pension and an average additional pension will be £3.35 a week or around £175 a year.

On pension credit, each year the standard minimum guarantee must be increased at least in line with earnings. That would imply an increase of 1.6% for 2013, which would mean our poorest pensioners receiving a smaller increase than the one we are paying for the basic state pension. We think that would be unfair, so I am pleased to announce that we will make equivalent arrangements to those that we put in place last year, which will increase the standard minimum guarantee by the increase in the cash value of the basic state pension. From next year, the single person rate of the guarantee credit will rise by £2.70, taking the weekly income from this safety-net benefit to £145.40. For couples, the increase will be £4.15, taking their new total to £222.05 a week.

Also consistent with our approach last year, the resources needed to pay the above-earnings increase to the standard minimum guarantee will be found by increasing the savings credit threshold, which means that those with higher levels of income may see less of an increase.

This year, the coalition will ensure that those who face additional costs because of their disability and who have less opportunity to increase their income through paid employment will see their benefits increase by the full value of CPI. Therefore, disability living allowance, attendance allowance, carer’s allowance and the main rate of incapacity benefit will all rise by the statutory minimum of 2.2% from April 2013, as will the employment and support allowance support group component and those disability-related premiums that are paid with pension credit and working-age benefits.

In the face of the ongoing challenge to our national economy, we have faced a tough decision on working-age benefits. In exercise of his discretion in the uprating of certain benefits, the Secretary of State for Work and Pensions has decided that the national economic situation is such that the country simply cannot afford to be as generous as we have been in the past.

There has been speculation about a benefit freeze. However, the Government have found sufficient money to pay a 1% increase for people of working age who claim the main rate of jobseeker’s allowance or income support, as well as for those on the main rate plus the work-related activity component of employment and support allowance and housing benefit.

This has been a difficult choice. Where possible, and particularly for those with disabilities, we have sought to protect benefits against inflation. Indeed, we have gone further in the case of the triple guarantee for the basic state pension. Nevertheless, the fiscal position means it has simply not been possible fully to protect every benefit. As my right hon. Friend the Chancellor said yesterday, we need to

“ensure that we have a welfare system that Britain can afford.”—[Official Report, 5 December 2012; Vol. 554, c. 879.]

Uprating for 2014 and 2015 will be affected by the welfare uprating Bill that was announced by my right hon. Friend yesterday, and right hon. and hon. Members will be able to debate these matters further during the passage of that Bill.

At the June 2010 emergency Budget the Government announced that from 2013, rates of local housing allowance would be calculated annually by using the lower of the 30th percentile of local rents, or the previous year’s rate uprated by reference to the consumer prices index. That will end the monthly uprating of LHA and bring the system into line with the uprating of other pensions and benefits. In preparation for that change, the Government fixed LHA rates from April 2012 so as to establish a baseline from which they could be uprated in future. Therefore, from April 2013, LHA rates will be set at the lower of the 30th percentile of local rents or the April 2012 rate increased by 2.2%.

Uprating of LHA for 2014 and 2015 will be in line with the 1% increase for the majority of working-age benefits. LHA rates for 2014 will be set at the lower of the 30th percentile of local rents, or the April 2013 rate increased by 1%, and an equivalent approach will follow for 2015. The Government will set aside £140 million over two years to help those people in areas where rent increases are highest or there is a shortage of affordable housing. It is worth noting—I was surprised by this—that 44% of LHA rates will not increase next year because local market rents have been stable since those rates were last set, and in a further 13% of cases they have actually fallen.

At a time when the nation’s finances remain under severe pressure, the Government will spend an extra £2.8 billion in 2013-14 to ensure that people are protected against cost of living increases. Around £2.1 billion—three quarters of the money—will be spent on state pensions, nearly half a billion pounds will be spent on disabled people and their carers, and nearly £300 million will be spent on people who are unable to work because of sickness or unemployment.

We have protected the triple lock, taking the basic state pension to its highest level as a percentage of average earnings for two decades. We have protected our poorest pensioners with an over-indexation of the standard minimum guarantee so that they too may benefit from the triple guarantee. We have protected disabled people through increases to disability living allowance and attendance allowance, carer’s allowance and the main rate of incapacity benefit, in line with CPI, and disability premiums for those on working-age benefits.

Even in the face of a challenging national economic situation and the need to find savings to rebalance our economy, we have managed to provide a 1% increase to help support those not in work. In this statement I have outlined the Government’s ongoing commitment to ensuring that even in these difficult times no one is left behind, and I commend this statement to the House.

[Mr Liam Byrne (Birmingham, Hodge Hill) (Lab)]

I thank the Minister for advance sight of his statement, although from yesterday we had a pretty good idea what he was going to say. Today brings welcome news for Britain’s pensioners. When Labour was in office we lifted 1 million pensioners out of poverty and increased pensioner incomes by 40%. Today the Minister has confirmed that pensions are set to rise, which we welcome, and we look forward to his pensions White Paper, which is now acquiring mythical status—we hope he will soon be able to prove it is a reality and not a myth.

Although the news for pensioners is welcome, news for working people is a disaster. Buried in the small print of yesterday’s Budget is the brutal truth that it was a Budget for unemployment. We already knew that the Chancellor had throttled the recovery, that the Secretary of State for Communities and Local Government had cut hardest those councils where jobs were fewest, and that the Work programme was worse than doing nothing, but yesterday we saw what that means for the nation’s finances.

The Office for Budget Responsibility has revised up the claimant count by 340,000 by 2016. This Budget puts up unemployment, and the bill for that failure is enormous. The dole bill in 2015-16 will now be nearly £1 billion higher—£1.6 billion more over the next three years. The bill for failure is not going down but up, and yesterday we learned that working people will pay the price.

This country already has more than 6 million working people in poverty. The Resolution Foundation stated yesterday that 60% of the welfare uprating bill will be paid by working people. It is a strivers’ tax. Her Majesty’s Treasury policy costings state that the 1% squeeze will save £6.7 billion. Provisional analysis this morning by the Library shows that just 23% of that will come from JSA, ESA and income support. The rest of the balance will come from tax credits, maternity allowance, maternity pay, sick pay and housing benefits, which are all claimed by working people. The strivers and battlers whom the Prime Minister promised to defend at his party conference will pay the price for the Government’s failure.

I hope we will not have any nonsense from the Minister about how all that will be offset by the rise in the personal allowance. Already, £14 billion has been taken out of tax credits, and yesterday’s Budget steals another £5 billion from tax credits by 2016-17. The universal credit we have heard so much about—if it ever happens—has been hacked into before it has even started. The price will be paid by 6,000 families in the Minister’s constituency—no doubt they are delighted with him.

In the welfare uprating Bill, what is the value of the squeeze on working people’s maternity allowance, statutory sick pay, maternity pay, paternity pay, statutory adoption pay, working tax credit and child tax credit? During Second Reading of the Child Poverty Bill, the Minister said that he had given up being an even-handed academic, because he was

“appalled at what was happening in our country to the most vulnerable people”—[Official Report, 20 July 2009; Vol. 496, c. 625.]

Indeed, he attacked his hon. Friends for standing “idly by” and watching child poverty reach record levels.

Before the autumn statement, the Institute for Fiscal Studies said that 400,000 children will be plunged back into poverty by 2015 because of measures already taken. How many more children will fall into poverty as a result of this strivers’ tax? Will the Minister please justify to the House how the Chancellor can press ahead with a £3 billion tax cut for the better-off—a tax cut of £107,000 for the 8,000 people earning over £1 million—when 6,000 families in his own constituency will see their tax credits frozen or cut? This Budget has increased the claimant count, put up the cost of failure and now working people will pay the price.

[Steve Webb]

It is not often that Shakespeare springs to mind when I respond to these statements, but the phrase

“full of sound and fury, signifying nothing”

springs to mind—I missed out the earlier bit of the quote about a tale told by an idiot, out of respect for the right hon. Gentleman. We get a lot of fury and sound, but when it comes to the crunch, he abstains. He described the measures as a disaster, but it was not clear whether that means he will vote against them—answer came there none. If the measures are a disaster, surely he can say he will vote against them, but of course he does not. He sounds sympathetic and angry, but when it comes to the crunch and there is a vote, he disappears and is not to be seen.

The right hon. Gentleman asked about the crucial issue of employment, but he does not seem to realise that the number of people in work is at a record level and will rise every year of this Parliament. That is the record of the coalition. He asked about strivers and somehow wanted to waft away the large increase in personal tax allowances. I am afraid, however, that I will not let him waft away a large commitment to Britain’s strivers. This April, the personal tax alliance will rise by a record amount—£1,300. That is worth £5 a week to the hard-working families he claims to support—far more than any indexation impact.

The right hon. Gentleman referred to universal credit and used the phrase “if it happens”. He may not have noticed that yesterday we published the rates of disregard for universal credit, and on Monday my right hon. Friend the Work and Pensions Secretary will publish further details. This bold welfare reform is on track, on time and under budget, and it will be delivered as we have promised.

The right hon. Gentleman asked about three specific areas. When the welfare uprating Bill is published it will be accompanied by a full impact assessment that will deal with the figures he has requested. On child poverty, the Government remain committed to our statutory obligations, and when taken as a whole, our policies will deliver real reductions in child poverty. He will have seen the chart published yesterday on the impact of universal credit, which shows overwhelmingly that those in the poorest deciles benefit most. Universal credit will help us to eat into child poverty. He did not mention the Chancellor’s announcement yesterday of a multi-billion pound tax relief for investment by British business which will create jobs and reduce child poverty.

Finally, the right hon. Gentleman mentioned taxes on the highest paid. I seem to remember that he was a Treasury Minister. In 13 years of the Labour Government —if I remember rightly—the top rate of income tax was never above 40%. He seems to be objecting to the fact that we have a 45% top rate of income tax. If 45% is too low, why was he satisfied with 40% for 13 years?

[Graham Evans (Weaver Vale) (Con)]

Will the Minister confirm that the Government have protected the basic state pension? Will he also confirm that, as a result of the triple lock, pensioners in Weaver Vale can look forward to £15,000 over the course of their retirement? Does he agree that the Conservative party is the party that makes work pay and that makes it pay to save?

[Steve Webb]

My hon. Friend is right that the coalition is making it pay to work. We are paying an increase in the state pension that is above inflation and above earnings growth. The figure he gives is right: someone retiring this year on a full state pension will get around £15,000 more over their retirement than they would get under the policies adopted by the previous Government.

[Glenda Jackson (Hampstead and Kilburn) (Lab)]

To paraphrase Shakespeare, the Minister doth protest too much, methinks. He knows that the majority of our children who live in poverty do so in low-paid, working, not shirking, families. Those families are already experiencing serious difficulties in adequately feeding, clothing and, in some instances, even housing their children. In the light of the freeze on benefits, how many more families and children does he expect to be pushed into that—surely, in the 21st century—totally unacceptable situation?

[Steve Webb]

I hesitate to trade Shakespearian quotes with the hon. Lady, but to be clear, benefits are not being frozen, they are being increased. She is right on child poverty. The Government have not just stumbled across working poverty, because it was widespread under the previous Government, but it will be substantially improved by universal credit, which will make work pay in a way that it did not under the previous Government.

[Nigel Mills (Amber Valley) (Con)]

Will the Minister confirm that average pay has increased by only 10% and out-of-work benefits have increased by 20% in the past five years, and therefore that holding down the rate of increase will help to make the situation fairer for those who go out to work to pay for those benefits?

[Steve Webb]

My hon. Friend is right that we have substantially increased out-of-work benefits. He will recall the 5.2% increase last year in line with inflation. We judged that that was the right thing to do when inflation was running very high. This year, my right hon. Friend the Chancellor has had regard to inflation and the wider economic situation, which have informed his judgments.

[Mr Dennis Skinner (Bolsover) (Lab)]

BBC television this morning went to a clothing factory in Derbyshire.

[Mr Skinner]

Yes, in Alfreton. The BBC interviewed people—strivers—who work for a living at the factory about the effect of the Budget. Surprisingly, all three of those interviewed understood that the cut would affect them and not just people out of work. What answer has the Minister got for those people about how the Budget was presented? The Government tried to pull the wool over their eyes, but they were smart enough to spot that they would be the casualties.

[Steve Webb]

Those who travel to work using their cars will have been delighted by the cancellation of the 3p increase in petrol tax. By the time the rates are reviewed next autumn, petrol duties will have been frozen for two and a half years, and petrol prices will be lower by 10p a litre. The hon. Gentleman may wave his hands, but that is what matters to people who work. On the low paid, is he aware that those on the minimum wage have had their tax bill halved as a result of the increases to personal tax allowances? That is welcomed by strivers.

[Greg Mulholland (Leeds North West) (LD)]

I commend my hon. Friend and his colleagues for how they have conducted making this difficult decision. Will he assure the House that people who are vulnerable, including disabled people, those who are sick and carers, will continue to get the same benefits?

[Steve Webb]

I am grateful to my hon. Friend for his support. He is right. As well as the undertakings we gave in our election manifestos on the state pension, my right hon. Friend the Chancellor focused specifically on the most vulnerable. DLA will go up in line with inflation, as will attendance allowance, carers allowance and the support component of ESA. We recognise that money is tight—I recall that someone once said that all the money had gone—but we want to protect the most vulnerable.

[Sheila Gilmore (Edinburgh East) (Lab)]

It might be a bit more sensible if we had an opportunity to vote on all parts of the package. We could then include some of the things that the Minister’s Liberal Democrat colleagues did not manage to include—I am thinking, for example, of higher rates of tax on property. For working people, and particularly those who are working part time and are dependent on housing benefit, the changes to housing benefit uprating are yet another cut in their standard of living. They lost out in the last round of uprating because of the differential tax credits, which were not uprated in line with inflation. The latest changes are another hit on working families.

[Steve Webb]

The hon. Lady’s constituents will want to look closely at how she votes. We hear the sound and fury, but then there is abstention. The Labour party has no alternative. There is a shortfall, and the Government have found a measured and reasonable way to fill it. I have heard nothing from Labour Members about an alternative strategy. Until we hear that, we will not take them seriously.

[Mr Philip Hollobone (Kettering) (Con)]

Will the Minister confirm that next year’s 2.5% increase in the state pension exceeds both the growth in average earnings and the growth in prices? That stands in stark contrast to the miserly and insulting 75p annual increase given by the previous Labour Government to pensioners in 2000.

[Steve Webb]

My hon. Friend is right. Some have suggested that £2.70 is not that great a figure, but when we compare it with the figure he quotes, we can see that it is an improvement. It is higher than inflation and higher than average earnings. As I have said, it takes the pension’s real value relative to what people in work get to its highest level for 20 years. The coalition can be proud of that.

[Jeremy Corbyn (Islington North) (Lab)]

Many people in my constituency come to see me absolutely distraught at the prospect of losing their private rented flat because of the imposition of a housing benefit cut. Social cleansing is going on in all of central London because of the benefit cap. That is a disgraceful situation. It destroys communities and damages schools—need I go on? The Minister is proposing a £140 million transitional payment. That is not enough, and transition is not enough. We need rent controls in the private sector. If there is to be a benefit cap, it needs to reflect the reality of the costs of life in inner-city Britain.

[Steve Webb]

I am grateful for the opportunity to clarify where the £140 million that we have identified will be spent. The additional help will go to areas where there are local housing market pressures—areas where rents have risen rapidly or where there is a shortage of affordable housing. It is targeted support for local areas in addition to the discretionary housing money we have made available to local authorities so that the hardest cases can be properly protected.

[Sir Tony Baldry (Banbury) (Con)]

As co-chair of the all-party group on carers, I welcome the fact that carer’s allowance, and other benefits relating to sickness, such as DLA and attendance allowance, will be uprated in line with CPI. Will my hon. Friend explain what will happen to the value of those benefits under the welfare uprating Bill? Will he guarantee and give the House an undertaking that benefits such as carer’s allowance will continue to be uprated in future years along the lines of CPI increases?

[Steve Webb]

The focus of the uprating Bill will be on those benefits over which the Secretary of State has discretionary powers, particularly working-age benefits, JSA and ESA. We will also look at tax credits and child benefit. It is our policy to ensure that carer’s allowance is protected against inflation.

[Mr Mike Weir (Angus) (SNP)]

Does the Minister accept that many of those on working-age benefits spend much of their money on food and, in particular, energy, for which the rate of inflation is much higher than CPI? A 1% increase is not the difference between CPI and 1% for these people but is in fact a much greater cut in their living standards.

[Steve Webb]

This issue is raised every year, and every year it is argued that the rate of inflation for people on benefits is always above the prevailing rate of inflation, but in the long term there is no reason to think that that would be the case. We have made provision for the most vulnerable groups to be protected—those receiving disability benefits and pensioners—but unless the hon. Gentleman can suggest serious ways of saving money elsewhere in the Budget, for which the Scottish National party has not been famous, I am not sure that his opposition to our plans is credible.

[Mr Peter Bone (Wellingborough) (Con)]

I remember the outrage in my constituency a few years ago when pensioners discovered that the increase in their pension did not cover even the increase in council tax. May I commend the Government for increasing the state pension by 2.5%? It is clear that this Government care about pensioners and that the previous Government did not.

[Steve Webb]

I am grateful to my hon. Friend for mentioning council tax. Many pensioners, particularly those who are just clear of the means-tested benefit system, whom I often think of as the not rich, not poor group, felt those increases in council tax keenly. They will benefit substantially from our repeated freezing of council tax, which those on a fixed income in retirement value greatly.

[Mark Lazarowicz (Edinburgh North and Leith) (Lab/Co-op)]

The Minister spoke about the number of people in employment, but does he not accept that the number includes at least 3 million people who are now working part time—not because they want to work part time, but because they cannot work full time? Is that not precisely the group who will be particularly badly hit by his measures?

[Steve Webb]

There is a danger that the Opposition will denigrate part-time work, which is a choice for many. There are clearly some who want to move up from part-time work to full-time work, and our reforms of the in-work benefits system, through universal credit, will assist them in that process.

[Andrew Percy (Brigg and Goole) (Con)]

I welcome the extra support for pensioners. The Minister mentioned council tax. Does he share my shock and surprise that while Conservative councillors in my constituency have fought to keep council tax down by cutting councillors’ salaries and senior management, the few remaining and ever-decreasing number of Labour councillors insist on continuing to oppose those changes and fight for bigger increases in council tax year on year?

[Steve Webb]

All councillors have to have regard to the impact of council tax increases on those, such as pensioners, on a fixed income. It is incumbent on local government as much as it is on central Government to ensure that any unnecessary costs are stripped out so that council tax rises can be kept to a minimum.

[Jonathan Ashworth (Leicester South) (Lab)]

Will the Minister confirm, despite the Chancellor’s rhetoric yesterday about those who go to work and those who stay in bed, that of those affected by the 1% uprating, 60% are in working households? The increase in personal allowance will be outweighed by the losses to their tax credits and benefits. Is that correct? Yes or no.

[Steve Webb]

No, it is not correct. The personal tax allowance will rise by just more than £1,300 in April. At a standard rate of 20%, that is approximately £260 a year, or £5 a week, which is more than the impact for the vast majority of households. The hon. Gentleman makes the mistake of taking measures in isolation. It is crucial to look at our measures as a whole, including tax allowance rises and cuts in petrol duty compared with previous plans, which benefit the working households he is most concerned about.

[Diana Johnson (Kingston upon Hull North) (Lab)]

I wonder what the Government have got against women. Does the Minister agree with the House of Commons Library figures that show that women will bear the brunt of these changes—80% of those affected will be women?

[Steve Webb]

I do not recognise the hon. Lady’s description. A wide range of the policies we have introduced—for example, in my area on state pension reform—are focused particularly on assisting women. Many beneficiaries of universal credit will be in lower-paid work, which includes many women. She referred to very low-paid women, who, for example, receive statutory maternity pay. They will almost all benefit from the personal tax allowance increase.

[Chris Williamson (Derby North) (Lab)]

The Prime Minister used to talk about broken Britain, but is not the truth that this Government are breaking and dividing our country? How can the Minister justify the £3 billion tax give-away to millionaires while thousands of people in his constituency will lose out as a result of these announcements?

[Steve Webb]

We inherited a situation in which approximately £80 billion a year of spending reductions and tax increases were needed simply to balance the books. I have not heard anything this morning from the Opposition—not a single word—on where, now there is no money left, that should come from. If the hon. Gentleman voted against our proposals he would have some credibility, but of course when the crunch comes he will not—he will sit on the fence. He wants his constituents to think he cares, but when it comes to casting his vote in this place he will be somewhere else.

[Mr William Bain (Glasgow North East) (Lab)]

The Treasury’s own analysis shows that the measures announced yesterday and today are regressive towards people in the seven lowest income deciles. Given that three-quarters of the cuts in tax credits will affect people in work and that the Government have made no steps to deal with the looming work disincentives that will be faced by second earners in couple households with children, are the Government not making a mockery of their pledge to make work pay for everyone?

[Steve Webb]

If the hon. Gentleman looks at the distribution impact that was published yesterday, he will realise that he has mysteriously forgotten about the large amounts of additional tax that will be paid by the top decile through the restriction of pension tax relief, who will, by far, lose out the most, and that seems a very progressive thing to do.

Ford UK (Duty of Care to Visteon Pensioners)

Steve Webb Excerpts

Tuesday 4th December 2012 Westminster Hall

[The Minister of State, Department for Work and Pensions (Steve Webb)]

It is a pleasure to take part in this debate, and I congratulate the hon. Member for Finchley and Golders Green (Mike Freer) on securing it. It is clear that hon. Members from throughout the House were keen for the subject to be debated. This occasion is Parliament at its best, with hon. Members from all parts of the country and both sides of the House standing up for their constituents, who have clearly had a raw deal. That is what we are sent here to do, and I congratulate all hon. Members who have taken part, and the all-party group on Visteon pensioners, which I have been aware of, together with the Visteon pension action group. The action group’s members have been known to stand outside pension conferences, but the first time I attended one fortunately no one knew who I was, so I got in okay. I met members in July and they told me their personal stories and explained some of the detail of the case, some of which we have heard today.

I am constrained in what I can say with a court case pending. I understand that next week, on 12 December, a judge will rule on whether a group litigation order can be made, and I should not say anything to prejudice the continuing proceedings to the detriment of those bringing the claims; but as a personal observation I think any reasonable person who has heard our proceedings today would feel that the Ford Motor Company has some serious questions to answer.

I want to comment on two relevant organisations for which I have ministerial responsibility—the Pensions Regulator and the Pension Protection Fund—and their role in relation to the Visteon pensioners. As the House will know, the powers of the Pensions Regulator came into force in 2004. One of the problems in the present case is that the spinning-off of Visteon happened in 2000. Several hon. Members have said in the debate that, after meetings, they inferred what the regulator might have done had it been in existence at that time, but unfortunately the regulator’s powers cannot be applied retrospectively. Although the Pensions Regulator does indeed have powers to take action where employers have acted to avoid supporting a pension scheme—whether UK or overseas-based—the salient events in the Visteon case happened before the regulator was established.

When Visteon went to the wall in 2009 the regulator immediately launched a thorough and meticulous investigation, taking about two years, to see whether anything could be done. The possibility of using anti-avoidance powers against Visteon group entities and/or Ford was examined. Those are, specifically, financial support directions and contribution notices. However, the key question was whether the legal tests in the Pensions Act 2004 with respect to securing additional funds and financial support for the scheme were met. Unfortunately they were not, principally because the key material actions took place before the regulator had its powers, and also because of the way Visteon was set up independently—in a technical, legal sense—of Ford. I have heard the descriptions in the debate of how close the relationship was in practice, but clearly Visteon was set up so as to be sufficiently arm’s length from Ford to make it difficult or impossible for the regulator’s powers to be used. It is right and proper that the regulator considered the matter long and hard and was not constrained by the fact that the parent company was not UK-based, but in the end there appeared not to be a legal power to enable it to take action.

What, then, is the position of the Visteon pensioners on becoming part of the Pension Protection Fund? I understand that when the scheme was wound up the deficit was £355 million—obviously that had grown substantially over the years—and that as at February 2012 there were just over 1,500 pensioner members of the Visteon scheme in the PPF and just over 1,000 deferred members. The hon. Member for South Basildon and East Thurrock (Stephen Metcalfe), who I know has taken a leading role in the matter, mentioned the issues that had arisen about contacting some deferred scheme members. The Department operates a pensions tracing service to try to track people down. We cover our costs for doing it, but if we can assist we shall be happy to do that.

What will Visteon scheme members get out of the Pension Protection Fund? I want to make a slight correction to the impression that might have been given that someone in the PPF can lose half their pension. The vast majority of people in the PPF will not experience anything like that, although I shall say a bit in a moment about those who potentially would lose half their pension. I want to give some figures that I am not sure have previously been in the public domain: as at March 2011, of the pensioners who are not getting 100% of the pension they would have got, about 530 get between 90% and 100%; 665 get between 80% and 90%; 30 get between 70% and 80%; 15 get between 60% and 70%; and fewer than 10 get less than 60%.

Frankly, it is wrong, and a problem, if anyone does not get their pension. I do not diminish that fact. However, I stress that the Pension Protection Fund is a significant source of provision for those whose companies have gone into liquidation. The headline figures that the fund provides are 100% and 90%. In principle someone would get 100% as a pensioner, and 90% as a deferred member; but that is 100% of a fairly standardised set of entitlements. Rather than mirror the exact scheme rules, which would be incredibly complicated because of the number of pension schemes going into the PPF, the fund has a standard set of pension scheme rules. One, in particular, which is probably to the detriment of some Visteon pensioners, is to pay indexation on a statutory basis—that is in respect of service after 1997. Where a pension scheme had indexation for pre-1997 service it is not indexed under the PPF. That is how even people who are “100%” or “90%” pensioners can find over time that they get less indexation than they would have, and their pension progressively becomes somewhat less than it would have been.

At the meeting that I had with Visteon pensioners in my office, in July, we discussed the issue of people whose pension falls far short of what it would have been. As I said, as at March 2011, 55 people were getting less than 80%. Our latest estimate is that about 75 people are affected by the cap in the Pension Protection Fund. I know that that is a matter of concern to the action group. The Pension Protection Fund cap was introduced under the previous Government. The view was taken that the scheme was essentially an insurance scheme and there should be a cap, just as with a bank account—the figure used to be £50,000 but it may be higher now—so that the bulk of what people had would be covered by compensation, but there was a limit and very large amounts would not be covered.

Parliament took the view that there should be such a cap so that the largest pensions would not be paid in full. I think that the thinking at the time was partly to do with what was called moral hazard. The idea was that people at the top of the company would not have an incentive to take it to the wall and then go to the PPF and find that their very large pensions were covered anyway. It was a sort of anti-moral hazard provision. However, there are of course two sorts of people who would get large pensions from the PPF. One sort is what one might loosely call fat cats: people who had very high earnings but not necessarily long service. They might be people who knew that the company was going to the wall—not in the case before us today, necessarily, but in general—so some moral hazard provision might make sense.

The other sort of people, however—this is relevant to the Visteon workers—have a relatively large pension because they worked for the company all their life. The hon. Member for South Basildon and East Thurrock mentioned someone who had worked for Ford for 30 years, and then a few months for Visteon, who suddenly found their pension substantially cut.

A number of hon. Members have come to see me about the Pension Protection Fund cap, in relation to Visteon and other cases. It is the early-retired workers, or the people who have not reached scheme pension age but are drawing their pensions, for whom the cap bites, and the bite comes not just from the cap itself but from the actuarial reduction in it. People have described it as a double cap, and because of the further complication with lump sums, Visteon pensioners have even called it a triple cap.

Over the two and a half years that I have been in my current role, I have become increasingly concerned that the cap for those who have not reached scheme pension age acts in a penal way, and not on the people it was intended to affect—the fat cats who might have had a moral hazard issue—but on long-serving workers. Although we might think about capping those who had only a short time in the scheme and earned a huge pension because they had had the rest of their life to have built up other pension rights, it is much harder to justify a cap for people who have worked all their life for one firm, made their financial plans on the basis of the pension and have nowhere to top it up from. For some people who have taken early retirement, it is not simply the fact that they have planned on that basis. Instead, they are receiving the pension when the cap comes in and the pension in payment falls substantially. That can have a knock-on effect on survivors’ rights, with someone thinking that they have provided for a widow in the event of their death only to find that the survivor’s pension is reduced as well, which can come as a jolt.

I have asked my officials to look at options for reforming the PPF cap, and one possibility is for the cap to vary with length of service. For example, there would be a floor cap and then one that increased according to how long the person had been in the scheme. I think that that would be a fairer system, and we are evaluating how it would work in practice.

One issue, as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, is that any increase to PPF benefits is paid for by someone, through the levies on the other schemes that still have defined-benefit liabilities. We cannot simply jack up PPF benefits without considering the impact, but because we are talking about relatively small numbers of people I suspect that the impact on the levy would be relatively modest. I flagged this up to the Visteon pensioners when we met in July, and they might well feel that now it is December we ought to have sorted it out, but I can assure them that we have done a good deal of work. I hope that we can come forward with a legislative solution, subject to parliamentary time being available, which would help us to ensure that the cap did not penalise some of the workers who have lost out most through the whole Visteon experience.

It was mentioned that the Select Committee might be invited to investigate the issue. Although it is not the role of the Government to tell the Select Committee what to do—it is probably the other way around—we would certainly welcome any further investigation. I suggest that the all-party group continue its efforts to persuade the Select Committee to do that, and I will certainly make available our Department’s resources, and ensure that the Pension Protection Fund, the Pensions Regulator and my officials work closely with the Select Committee, should it decide to conduct such an investigation.

[Dr Francis]

The Minister would then welcome the Welsh Affairs Committee also having such an inquiry.

[Steve Webb]

Absolutely. This is like trying to grasp something that we cannot quite grasp; we are all trying to see how we can produce a fairer outcome for the Visteon pensioners. We would be happy to engage constructively with any parliamentary process that could assist with that, so I am grateful to the hon. Gentleman for that suggestion.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East raised the interesting question: does the existence of the Pension Protection Fund mean that corporate Britain is tempted, shall we say, to shovel off its pension fund liabilities and hope that someone else will pay for them? Clearly, the anti-avoidance powers of the Pensions Regulator are crucial in that regard. The Pensions Regulator did not exist when the Ford Visteon transaction took place, but it exists now, and central to its remit is protecting the Pension Protection Fund and, indirectly, the levy payers of British industry. The regulator can, and does, therefore, initiate action to require firms that have allowed their deficit to get out of control to put money in and put up collateral against the pension fund.

There is a balancing act to be struck. I hear what the hon. Gentleman says, and clearly we do not want people shovelling off their liabilities on to everyone else, but if the Pensions Regulator goes in too heavily and presses companies, particularly at a difficult time in the economic cycle, to pump more money into the pension fund, which perhaps then precipitates problems for the firm, we get criticised from the other side. It is a delicate balancing act, but what is good about the new regime is that it is scheme-specific. Whereas when the Ford-Visteon transaction took place there was a reactive regulatory regime in place—the Occupational Pensions Regulatory Authority—which reacted to whistleblowers but did not go out proactively, the Pensions Regulator does go out to look at schemes, and acts on a case-by-case and a risk-assessed basis. We can only speculate about what it would have done had it existed in 2000, but in similar cases now the regulator would consider whether a deficit would be properly funded, and if a parent company had tried to pass a liability on to a spin-off company, it would want to take action.

[Geraint Davies]

Is the Minister saying that if a global company created an arm’s length company that supplied itself, set it up with an underfunded pension fund and then unilaterally reduced the prices and therefore squeezed the pension fund still more, the Government could, under current regulations, act to stop that and to prevent the kind of injustice we have heard about today from happening in the future?

[Steve Webb]

I am grateful for the hon. Gentleman’s intervention. He has played an active role in the campaign. If a new pension fund is set up under trust, the trustees have a responsibility to look after the interests of the members. The scheme would have to be valued, and if there was a deficit a recovery plan would have to be agreed between the trustees and the new employer. The role of the Pensions Regulator at that point would be to sign off the recovery plan, on the grounds that it was a realistic basis on which the scheme could go forward. That could happen if, for example, a promise by the employer to make certain contributions over a period of time, or the actuarial assumptions, were considered realistic.

However, if a scheme were set up with a large deficit and the recovery plan was not credible, the Pensions Regulator could look at the parent company and require it to put up an asset as collateral or make a direct financial contribution to the scheme. Sometimes the regulator does that by passing a directions or issuing a notice, but often, as with good regulation, a mere threat is enough to get a firm to comply. Judging the effectiveness of the regulator by the number of times it uses its big stick is missing the point, because the point of the body is to spot things before they go wrong and get in there first, with enforcement as a last resort rather than as something immediately jumped to. In this sort of case, the regulator has far more power than it had back in 2000, under the previous regime.

This has been a broad debate, and for understandable reasons I have focused on the position of the pensioners. I hope that I have explained why the Pensions Regulator, while doing what it can, could not use its powers. We are, however, looking at whether the role of the Pension Protection Fund could be improved, so that the Visteon pensioners who have ended up in the fund through no fault of their own—principally those who have been capped—can get a fairer deal. That is something we will return to in the House.

Winter Fuel Allowances

Steve Webb Excerpts

Tuesday 27th November 2012 Westminster Hall

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Good morning, Mr Amess. I congratulate the hon. Member for Angus (Mr Weir) on securing this debate and on the efforts to which he has gone to raise the issue. I recall the Friday in question, when I had forsaken the joys of Thornbury and Yate to be with him in Westminster. I stood fully ready to respond to his debate, but unfortunately did not have the opportunity to do so. It is good to have the opportunity now to respond to the important and serious issues that he has raised.

The hon. Gentleman made the point that for a section of the population—as he rightly said, not just in rural Scotland but in rural parts of England, Wales and Northern Ireland—when they pay their big winter fuel bills is an issue. Whereas many people might pay around Christmas or early in the new year, the folk that we are talking about might pay in the autumn, for instance. He asked whether we could pay those folk their winter fuel payments early, and suggested that we would not do so during the first year after they reached women’s state pension age, because then they would lose out by a couple of months, but we could perhaps do it from year two.

One challenge of ours in responding to the hon. Gentleman’s suggestion is that at the moment the Government have a fairly slick and efficient way of getting those important payments to people. We have about 12 million pensioners in the land, and we make the payments as automatically as possible. To give him a feel for the problems involving claims, there is a set of men who are below the men’s state pension age but above the women’s state pension age who must claim for winter fuel payments, because we do not know that they exist. A 63-year-old man is entitled to a winter fuel payment, but does not receive a pension, so he must make a claim. It creates a big problem of complexity and take-up if a claim must be made; it is far better in terms of getting money to the people who need it if the process is as automatic as possible.

[Gordon Banks (Ochil and South Perthshire) (Lab)]

Will the Minister give way?

[Steve Webb]

I will not, if the hon. Gentleman will forgive me, as I want to respond to the points made by the hon. Member for Angus.

The hon. Member for Angus wants to ensure that the Government get payments to people. We want to ensure that we do so when we need to. Even with our systems, we do not manage to get the money to everybody before Christmas, although we get it to the vast majority—more than 95%, I think. One way to address his concern would be to bring forward the eligibility date for everybody; for instance, we could bring it forward from September to July. That would achieve his goal of getting the money to the folk who are off the grid when they need it.

The problem is that the vast bulk of people would then get their lump sum in autumn, rather than when the winter fuel bill arrives, which would be to their detriment. Surprising research by the Institute for Fiscal Studies found that because the money is labelled, branded and seen as a winter fuel payment, even though it is just cash and people can spend it on what they like, they are far more likely to use it for fuel bills than other cash coming in. We would be reluctant to move the bulk of payments away from the time when people’s principal bills arrive.

In that case, the hon. Gentleman’s proposition is that we identify a separate category of people who are off the mains gas grid. He said in his remarks that people would have to claim only once. I will return in a moment to the point about the claims process, but we would have to ensure that the data were accurate every year. To give a simple example, when I bought the house that I live in, which is not in the middle of nowhere by any means, it had no mains gas, so for one year we were off-grid. Had I been a pensioner when I bought it, I would have been entitled to early payment. The next year, we were connected to the gas grid. Somebody would have had to know that I was no longer entitled to the early payment. Either I would have had to report it to the Department for Work and Pensions, or the Department would have had to send people into back gardens; I do not know.

We would need a mechanism. Although the bulk of properties would be the same from one year to the next, there would be in-flow. New properties are built off the grid, and properties off the grid would come on to the grid. It is not as straightforward as the hon. Gentleman suggests. It would not be a one-off process in which once someone was in, they would qualify for ever.

[Mr Weir]

I understand what the Minister is saying, but I have two points. First, surely the churn would be relatively low. Secondly, with other payments, it is not unusual for claimants to have to notify the Department of changes in circumstance. Why would it be such a problem in this case?

[Steve Webb]

When the Department’s books are audited, we cannot say, “We think it’s broadly all right in most cases.” We have to make efforts to ensure that we are paying money only to people who are entitled. Although the stock would, as the hon. Gentleman rightly says, be largely the same from year to year, with some in-flow and out-flow at the margins, we have to ensure that the records are accurate every year. We need a mechanism in place to ensure that that is so.

To get this scheme up and running, we would have to identify which of the 12 million households were eligible for it and we would have to invent a claims process—I assume that the hon. Gentleman would suggest that people should be able to make a claim to us—and advertise that. We would then have manually to separate the potentially hundreds of thousands of cases, if not more, and process them differently. We estimate that the running costs to the Department would be several million pounds. It is not a trivial task. Is this the best way to help vulnerable households of the sort that both the hon. Gentleman and I want to help and support?

The hon. Gentleman raised an interesting issue about data on vulnerable households, which we deal with at the moment through the warm home discount. We have a deal with the big energy suppliers, through electricity bills, which helps people who are off the gas grid. We tie up their data, as customers, with ours on pension credit, age, and so on, and send a flag to the electricity companies to say, “This is a vulnerable household. Will you make a deduction at source from the electricity bill?” The figure at the moment is £130 this winter.

[Mr Weir]

I did not particularly mention that issue. Those who get the warm home discount will get it whether they are getting winter fuel allowance on-grid or off-grid. At least one large energy supplier told me that it would be interested in something similar, but because the Energy Act 2010 only allows data sharing with electricity companies, they cannot get hold of that information. Will the Minister at least consider whether it is possible to extend that regulation to gas and off-grid suppliers, some of which are fairly major now?

[Steve Webb]

Yes, I will. Our data sharing with pension credit customers is covered by the Pensions Act 2008, so in principle we can share our data, although we would need separate regulations for a different scheme. I am happy to explore that. If the hon. Gentleman provides me with details of the suppliers who expressed an interest, we could perhaps have a conversation with them. We might be able to do something constructive.

I take the hon. Gentleman’s point that some of the properties that we are talking about are hard to insulate, but I have always thought that far and away the best way to help people who are in fuel poverty is to tackle energy efficiency and wastage. I would far rather pay somebody £200—the winter fuel payment figure—to get their home better insulated, than pay them £200 simply to help them pay a sky-high bill for a house that is poorly insulated. Although some properties in the 1 million, or however many we are talking about, are of the sort that the hon. Gentleman described, many are not. These are important issues. My hon. Friend the Member for Brigg and Goole (Andrew Percy) mentioned his English constituency experience. Many properties are off-grid because of where they are, but they are not necessarily solid-wall insulated, or whatever.

We need to do a lot more. We have set up the energy company obligation, which is specifically designed to ensure that help goes to low-income and vulnerable households to enable them to heat their homes more affordably in the long term and to improve the energy efficiency of their homes. We are now setting up the green deal. The capital costs of home insulation are often quite large, but because of the cost of off-grid fuels, such as liquefied petroleum gas, oil, and so on, people could get substantial saving on bills. Under the green deal, essentially, people take a loan up front for large capital expenditure, but they then have a flow of savings. The golden rule of the green deal is that people are not lent more at the start than will be covered in repayments by savings on the energy bills. That is similar to the hon. Gentleman’s argument about there being a capital cost up front, as people would get their insulation done up front. That scheme might be particularly relevant to the sorts of households that we are talking about, because if their unit cost of energy is high, the savings they get from insulation will be high and the loan will be paid back within a reasonable time.

As the hon. Gentleman says, many people will use budgeting schemes with the larger oil suppliers. A colleague told me recently that they were off the gas grid and bought oil, but paid a flat amount every month. If people are in a position to budget through the year, there is no need for the Government to start moving winter fuel payments of £200 or £300 around a couple of months early. I take the hon. Gentleman’s point that some smaller suppliers might not offer such a scheme.

[Mr Weir]

I understand what the Minister is saying, but although somebody like myself, for example, would pay for my gas or electricity by direct debit and get a lower rate, not everybody is able to do that. Many off-grid pensioners simply cannot afford to do that. That is the basis of this problem and if we are going to tackle it—the same thing applies with green deal—we need to consider whether a pensioner can afford to take out a long-term loan to insulate their house. Probably, they cannot. There are difficulties in that regard.

[Steve Webb]

Perhaps I failed to explain the green deal properly. People can afford to do that, because the green deal only goes ahead if the savings on their energy bills due to insulation more than cover the repayment and debt-servicing costs of the loan. It is not a question of whether they can afford it, because it does not cost them anything. They get the capital up front and they have lower assessed energy bills, because the green deal does not apply unless they pass that test. So even including the repayment on the loan, they would be no worse off overall and they are living in a warmer home.

[Mr Weir]

But are they not effectively creating a larger debt based on their home? Many pensioners will be reluctant to do that.

[Steve Webb]

The requirement to repay is attached to the home, not the individual.

[Mr Weir]

It is effectively another mortgage.

[Steve Webb]

No. Because the home is better insulated than the one next door, the fuel bills are lower. The net effect is the same, except that when the loan is finally repaid people are living in a home with cheaper fuel bills. If I could choose between two properties in a street, one which had been green dealed and one that had not, I would go for the former, because the loan will come to an end and then I will have lower fuel bills than the house next door.

[Gordon Banks]

Will the Minister give way, just on that point?

[Steve Webb]

No, because the debate was called by the hon. Member for Angus.

The hon. Member for Angus was right to say that some pensioners may be wary of this scheme. I accept that. We need to look, for example, at budgeting support. I am a great fan of the credit union movement. We could find out whether we could do more to help low-income customers of the sort that the hon. Gentleman mentions with budgeting through the year. I am worried about our changing significantly a system, which runs pretty smoothly and efficiently for the vast majority of low-income pensioners who really need it, for a sub-group, within which many could manage with the right support.

A better approach would be to ensure, first, that the homes of the people we are talking about are as effectively insulated as possible and, secondly, that where it is a budgeting issue, which it essentially is, we help those with budgeting problems through other routes. Just being off the grid does not make the million or so households that are off-grid poor. I was not poor when I bought my house, but I was off the grid. So I would not need my winter fuel payment, if I were entitled to it, two months early. If we changed the system, we would be doing a lot of administrative messing around and keeping track of properties, with people making claims and signing off the system, and all of that, when this could be much more targeted.

The hon. Gentleman is right to raise the issue. People who heat their homes through off-grid routes are paying more and are more at risk of fuel poverty—that is correct—but we need a more targeted approach, rather than a broad-brush approach. We have to ensure that we do not mess up a system that works relatively efficiently. Although winter fuel payments are made to 12 million people every year, most Members of Parliament only get the odd complaint or a handful of letters each year, saying, “I didn’t get mine” or “I got it late”. Broadly, the system works. We do not want to mess up a system that works and spend millions on administration that could be better spent supporting vulnerable households.

I am grateful to the hon. Gentleman for raising the issue. His suggestion that, if the oil companies want to do more for vulnerable customers, the Government should try to help them, is good. I am happy to explore that. If he lets me know which suppliers are interested in doing this, the sort of data they would require and what schemes they would come up with, I am happy to explore whether there is more we can do to help in that regard.

“Reinvigorating Workplace Pensions”

Steve Webb Excerpts

Thursday 22nd November 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Later today I will publish the Command Paper “Reinvigorating Workplace Pensions”. Building on our coalition agreement commitment, this document sets out our strategy for putting in place arrangements that result in the provision of high quality pension schemes people can trust and take confidence in.

We need pensions that are affordable for employers and attractive to employees to ensure that automatic enrolment succeeds for the millions of new savers it creates. Our reinvigoration strategy covers a broad set of issues from how we increase the amount people are saving to how we ensure those savings go into high quality schemes that give people the income they expect in retirement.

Research shows people want more certainty in pension saving. We have responded by encouraging more risk-sharing through the development of defined ambition pensions, outlined in this plan, and are working closely with the pensions industry to encourage innovation and explore possible options and models.

Promoting scheme quality is also critical. Savers need to be confident they are putting their money into stable, well-run, customer-focused schemes that will give them the income they expect in retirement. This strategy sets out the issues we are examining to achieve this, such as scale, charges and the regulatory regime.

Part of the reason people lack confidence in pensions is they find them confusing, so we are looking at ways to increase engagement through improved information, and are considering putting in place simple mechanisms to support employers and consumers with scheme choice.

We will be working closely with consumers, employers and the pensions industry as we develop the plans set out in this strategy.

The document will also be available later today on the Department’s website.

Workplace Pension Reform

Steve Webb Excerpts

Tuesday 6th November 2012 Written Statements

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Later today I will be publishing a call for evidence: “Supporting automatic enrolment: A call for evidence on the impact of the annual contribution limit and the restrictions on transfers on the National Employment Savings Trust”.

The National Employment Savings Trust (NEST) was established to underpin automatic enrolment and has a key role to play in making the workplace pension reforms a success. We estimate that between two and four million people will be enrolled into NEST by the end of implementation.

This call for evidence explores the questions raised by the Work and Pensions Select Committee about the impact that two of the constraints on NEST—the annual contribution limit and the restrictions on transfers—are having on employer choice and whether they work as the policy intended.

It is critical to the success of automatic enrolment that employer choice leads to individuals getting a good deal when saving for their retirement, provision that is suitable for their savings needs, with charges that offer good value for money. We do not want the achievement of automatic enrolment to be undermined by employers—particularly smaller employers—perceiving the annual contribution limit and the transfer restrictions on NEST as complex and costly to administer, potentially leading to adverse outcomes for individuals. However, evidence currently available to the Department for Work and Pensions is not conclusive that these two constraints are acting as an unintended barrier to employers choosing to use NEST.

This call for evidence seeks views and evidence on whether the annual contribution limit and the transfer restrictions imposed on NEST continue to work as intended or whether the Government should consider alternative approaches, especially as smaller employers start to engage with the reforms.

The document will be available later today on the Department’s website at:

www.dwp.gov.uk/consultations/2012/.

I will also place a copy in the Libraries of both Houses.

Oral Answers to Questions

Steve Webb Excerpts

Monday 5th November 2012 Commons Chamber

[Dan Jarvis (Barnsley Central) (Lab)]

1. What steps he is taking to ensure that foreign conglomerates carry out their responsibilities to UK pension-holders.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

As this is the first session of DWP questions since the announcement of the untimely death of Malcolm Wicks, I hope that you will allow me, Mr. Speaker, to place on record, on behalf of the whole ministerial team, our appreciation of Malcolm and all that he contributed to our debates on pensions and welfare.

The Pensions Regulator has “anti-avoidance” powers to take action against employers when they have acted to avoid supporting the scheme. That includes taking action in foreign jurisdictions when necessary. For example, four financial support directions were issued last year against companies in north America in the Nortel case.

[Dan Jarvis]

I thank the Minister for his response, and for meeting my constituent Alan Hunton and me to discuss the matter. He is aware of my concern about foreign companies that have purchased and asset-stripped businesses in the United Kingdom. In some cases, those firms have discarded their pension responsibilities in such a way as to endanger the pensions to which their employees are entitled. Will the Minister explain how he is working with the Pensions Regulator, and with his colleagues in the Government, to curtail such predatory behaviour?

[Steve Webb]

This is indeed an important issue. I can assure the hon. Gentleman that the Pensions Regulator has engaged during the last 12 months, and continues to engage, with more than 1,100 schemes that are linked to overseas employers. Between April 2010 and August 2012, it has exercised its powers on at least 10 occasions in relation to such schemes.

[Andrew Bridgen (North West Leicestershire) (Con)]

The Minister is aware of a case in my constituency in which the BMI pension fund was placed in a pension protection fund by Lufthansa. In this case, Lufthansa voluntarily paid over £84 million in compensation to the fundholders. However, under current HMRC rules the money is being treated as income, and the lifetime and annual allowance rules are being applied to the compensation. Does my hon. Friend agree that the position is unfair and should be reviewed by HMRC?

[Steve Webb]

I am grateful to my hon. Friend for raising that case. I have corresponded with Treasury colleagues about the issue, and, subject to their consent, I shall be happy to share with him the reply that I have just received.

[Stuart Andrew (Pudsey) (Con)]

2. What progress he has made on the Government's disability strategy.

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[Lorely Burt (Solihull) (LD)]

8. What steps he is taking to protect members of pension schemes from being incentivised to transfer their pensions.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The Government have worked closely with the pensions industry to address concerns regarding incentive exercises. As a result, an industry code of practice was published in June, which we fully support. A monitoring board has been established to evaluate the effectiveness of the code.

[Lorely Burt]

I am grateful for that answer. Can my hon. Friend provide evidence on the number of companies that have signed up to the code of practice? Is it achieving its objectives?

[Steve Webb]

I am grateful to my hon. Friend for that. The industry’s response to the code has been very encouraging. Some 49 individual firms and, perhaps more importantly, 14 representative organisations have publicly signed up to support the code, and the figures are growing. The supporters include the major employee benefit consultancies engaged in these exercises and their representative organisations.

[Mr David Crausby (Bolton North East) (Lab)]

Auto-enrolment of pensions is a wise and overdue step forward, especially for low-paid employees. However, with workers changing jobs an average of 11 times in their working lives, does it not make much more sense for them to park their pensions in low-cost aggregator schemes? If not that, what will the Minister do to ensure that fundholders will not have incurred high charges throughout their working lives as a result of numerous transfers?

[Steve Webb]

The issue that the hon. Gentleman rightly raises is one of the many loose ends left for us by the previous Government. When auto-enrolment was set up, they simply left us with a situation where people could accumulate a dozen small pots and leave them fragmented. We propose under auto-enrolment that where people leave behind a small pot it will, by default, transfer to their new employer, so that they will accumulate what I have called, in technical terms, a big fat pot.

[Mr Peter Bone (Wellingborough) (Con)]

9. How many people have found jobs through Jobcentre Plus since May 2010.

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[David Mowat (Warrington South) (Con)]

14. What recent discussions he has had on the auto-enrolment charging regime for employees.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

It is vital that people are enrolled in schemes that offer transparent and value-for-money charges. The National Employment Savings Trust’s low charge structure has set a benchmark, prompting several competitive alternatives in the market, and I have called for providers to guarantee not to enrol people into high-cost legacy schemes.

[David Mowat]

The Minister will be aware of the recent Cass business school report that says that many older defined-contribution schemes charge 3% or more. That is six times the best practice of newer schemes, and it is costing many tens of thousands of people the chance of having a decent pension. Will he act to ensure that people cannot be auto-enrolled into those schemes—by using either a kitemark or a charges cap?

[Steve Webb]

On the sort of legacy schemes that my hon. Friend refers to, I am pleased to announce that, only today, another provider—Fidelity—has said that fees in its default funds will not exceed 1% and that existing scheme members will have the opportunity to switch out of their current funds. That follows Aviva’s statements that its schemes will have a charge of not more than 1%. It will not allow auto-enrolment into any older-style schemes. I encourage other firms to follow suit.

[Kelvin Hopkins (Luton North) (Lab)]

Auto-enrolment schemes will still be subject to stock market vagaries, the effects of varying interest rates and inefficiencies of scale. Is not what we really need a 100% state system, where we get defined benefits, as well as defined contributions, and efficiencies of scale and best possible value?

[Steve Webb]

Two sorts of risk are associated with pensions: financial risk and political risk. We have had SERPs—the state earnings-related pension scheme—which successive Governments cut and cut again. So that scheme did not provide any guarantee either. I want a balance of risks for people, a state promise and a private sector entitlement as well.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

rose—

[Andrew Jones]

16. I am developing it as fast as I can, Mr Speaker.

Can the Minister update the House on how employees have responded to auto-enrolment?

[Steve Webb]

Yes. The first firm to auto-enrol was RBS bank, which did so in July. It had 86% scheme membership before auto-enrolment. That has now risen to 93%. The early signs are encouraging.

[Gregg McClymont (Cumbernauld, Kilsyth and Kirkintilloch East) (Lab)]

We now seem to have a consensus across the House on the need for a charge cap. The leader of the Labour party has called for a charge cap on old-style legacy schemes, and the hon. Member for Warrington South (David Mowat) has just done the same. Can the Minister confirm that, when he refers to Aviva charging no more than 1%, that is an average and does not apply to all schemes?

[Steve Webb]

On the hon. Gentleman’s first point, this is another of the loose ends left by Labour on auto-enrolment. When Labour legislated, it put in practically no quality requirement at all. So Labour required millions of people to auto-enrol but set practically no standards for what they were auto-enrolled into. This is one of the many issues that we are actively tackling.

[Gregg McClymont]

The Minister has not answered the second part of the question, so I will ask it again. He just told the House that Aviva—I do not single out Aviva, as this is a broader issue—is charging no more than 1% on its schemes. My understanding is that that is an average of 1%, so a scheme could charge 0.4% and another could charge much more. The hon. Member for Warrington South, the leader of the Labour party and I are calling for a cap on old-style legacy schemes. Why does the Minister not get on with this, so that everyone can have a decent retirement scheme?

[Steve Webb]

Let me clarify the specific point. The statement by Aviva is that

“its schemes for automatic enrolment will have an average total product charge of less than 1%... It will not allow auto-enrolment into…older-style schemes.”

On the charge cap, the danger of the hon. Gentleman’s idea of having, say, a 1% across-the-board cap is that someone can tick the box with 0.99%. Actually, many in the market will offer below that. There is a danger that people will be misled if they are just below the cap, when many lower prices are available in the market.

[Gavin Barwell (Croydon Central) (Con)]

15. What recent assessment he has made of the level of employment.

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[Pauline Latham (Mid Derbyshire) (Con)]

17. What progress his Department has made on its plans to support separated families.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The Government have already announced a £20 million investment in the development of support for separated families in the current spending review period. This will include provision of an online distributable web application to be launched later in the autumn, and up to £14 million for the new innovation fund to support separated families.

[Pauline Latham]

I thank the Minister for that answer. Will he reassure the House that the £14 million innovation fund will be spent on projects that will ultimately benefit children, and will he explain how that will be achieved?

[Steve Webb]

Yes. We have had 100 expressions of interest from voluntary groups and charities, and we have whittled that down to about 30. All are trying to build on existing work that enables parents, when they are separating, to deal with each other in a mature way in the interests of the children. That is the central aspect of our new strategy.

[Kerry McCarthy (Bristol East) (Lab)]

When family breakdowns occur, grandparents, aunts, uncles or other relatives often have to step into the breach and a kinship care situation arises. Will the Minister assure me that he is talking to his colleagues in other Departments to make sure that when that situation happens, particularly in an emergency, support is given to those who step up to the plate?

[Steve Webb]

I agree that we need to support kinship carers, such as grandparents. One change that our Department has made is that, for example, where a mother is going out to work and is not using the national insurance credits that she would have gained for receiving child benefit, they can be passed to a grandparent, who may not be of pension age, to make sure that they are not financially disadvantaged. That is just one of the things we are doing to support that important group.

[Jonathan Evans (Cardiff North) (Con)]

18. What steps his Department is taking to ensure that older workers with little private pension provision are not disadvantaged by the introduction of auto-enrolment.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

Our research shows that even under the current rules 99% of savers will get back at least as much as they put in under auto-enrolment, and around 70% will get back twice as much. In addition, our state pension reforms will support planning and saving for retirement by delivering a simpler, single, flat-rate pension set above the basic level of the means test.

[Jonathan Evans]

I accept that those were the calculations made in 2010 as part of the auto-enrolment review, but since that time we have seen investment returns fall so much that the Financial Services Authority is ordering the industry to downscale its forecasts and we have also seen annuity rates fall. Have the Government recalculated their figures to take account of that?

[Steve Webb]

The short answer to the hon. Gentleman’s question is no. However, one important point I would raise is that if someone only builds up a very small pension pot, they have a legal right to take it, in most circumstances, as a cash lump sum with a quarter tax-free. Even someone later in life can get an employer contribution tax relief—a lump sum taken with a tax-free contribution. That will be attractive, even in later life.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

20. What steps he is taking to tackle the causes of social breakdown.

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[Mark Durkan (Foyle) (SDLP)]

T10. The Fair Pensions report, “Whose Duty? Ensuring effective stewardship in contract-based pensions”, highlights the relative lack of quality standards being applied to UK schemes, as opposed to other jurisdictions such as Australia. The Minister referred to active steps being taken in relation to auto-enrolment. Do those steps extend to re-visiting actively the qualifying criteria and the default fund guidance?

[The Minister of State, Department for Work and Pensions (Steve Webb)]

The hon. Gentleman is right to raise the important issue of governance. We do not think that we have a significant problem with the early stages of automatic enrolment for the biggest firms. They are coming in at a low cost and are well governed. The issue will arise further through the process and we are indeed looking at the quality of schemes into which people are auto-enrolled, including charges and governance.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

T7. What progress is being made to ensure that work capability assessments are sensitive to fluctuating medical conditions such as stroke care?