Benefits (Terminally Ill Patients)

Steve Webb Excerpts

Thursday 9th February 2012 Commons Chamber

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

I congratulate the hon. Member for Hackney South and Shoreditch (Meg Hillier) on securing this debate about such an important and sensitive matter. I join her in praising the work of the hospice movement—including St Joseph’s hospice in her constituency—for the care and support it gives terminally ill people and their families, and, as she said, for helping people to access the benefits that, perhaps in many cases, they should have been receiving earlier. I welcome that work, as well as the work of Macmillan Cancer Support, with which the Department works closely on a range of issues.

The hon. Lady has raised some important matters, to which I hope to respond. I can offer her the assurance that the coalition Government seek to put in place structures in the benefits system that treat people with terminal illness with dignity and give them efficient and effective support—as, indeed, did the predecessor Administration. Individual cases have been raised, both by the hon. Lady and by her hon. Friends the Members for Rutherglen and Hamilton West (Tom Greatrex) and for Bishop Auckland (Helen Goodman). I cannot respond to those individual cases immediately, but I can certainly give an undertaking that if any hon. Member here today wants to follow up on those cases with details—national insurance numbers, and so on—we will be keen to do that, because it is by following through what sometimes appears to have gone wrong that we learn lessons that will be of general benefit.

We want to make it clear that if an individual has a terminal illness, they must be entitled to the highest rate of support, and should receive that support quickly and in the most sensitive way possible. As the hon. Member for Hackney South and Shoreditch mentioned, the two key benefits that are relevant to terminally ill people and their families are employment and support allowance, and disability living allowance—or instead, for those of pension age, attendance allowance. In both cases, our aim is to ensure that terminally ill individuals are fast-tracked through the process for DLA and ESA, so that they can receive the highest level of support as quickly as possible, with a minimal burden on them and their family.

Although there are some differences between the two benefits—for reasons that I will explain—there are also common threads, which links in slightly with the hon. Lady’s point about having common treatment for people with terminal illness. One of those threads, quite properly, is that the definition of terminal illness that the Department uses is the same for ESA, DLA and attendance allowance. The definition is, as she said, that an individual is suffering from a progressive disease and that death in consequence of that disease can reasonably be expected within six months. Although that is a standard definition, I stress that there is also a good deal of flexibility built in. Therefore, although the definition is an indicative rule for accessing what are called the special rules, nobody in a jobcentre or a benefits processing centre will say, “Well, if it’s six months and a day, forget about it.” The definition is intended to be applied as flexibly and sensitively as possible.

Let me give an indication of the extent to which people qualify under the special rules scheme—that is, let me place before the House some indications, as it were, of where the system is delivering as it should. As the hon. Lady said, 4,200 people are placed directly in the support group—which is for non-time-limited support—for employment and support allowance owing to terminal illness each year. Around 22,000 people are awarded DLA owing to a terminal illness, while 38,000 people are awarded AA, which is obviously for older claimants, owing to a terminal illness each year. Therefore, although there will be some overlap between the two groups, roughly 65,000 people are, quite properly, accessing the special rules, which get their claims fast-tracked, so that they can be put straight on to the highest rates.

I want to say a bit more about the process that should be followed. The hon. Lady asked why there was no fast-tracking for employment and support allowance. I can assure her that there is. Individuals are fast-tracked into the support group, and they receive financial support, which is currently £113.90 for a single adult over 25. No obligations are placed on them to look for work or to undertake work-related activity.

[Tom Greatrex]

Will the Minister give way?

[Steve Webb]

I will not, if the hon. Gentleman does not mind. This is the hon. Lady’s debate, and I have only a few minutes in which to respond.

Unlike other claimants to employment and support allowance, individuals who are terminally ill are paid the support group component backdated to the date of claim. So, the assessment period, during which those making a standard claim would be paid at a lower rate, does not apply. Once we have identified that someone is terminally ill and put them in the support group, their payment at the higher rate is backdated to week one; they are not paid the lower 13-week assessment rate. That is quite properly an additional source of support. Similarly for disability living allowance, individuals are fast-tracked to the highest rate of the care component, which is currently worth £73.60. They do not have to satisfy the normal entitlement conditions for the care component, or meet the usual qualifying period of three months. These have all been features of the system for some time, and they are designed specifically to assist terminally ill people.

The hon. Lady also, quite properly, raised the issue of people finding out in an inappropriate manner that they are terminally ill. It is totally unacceptable for someone to find that out from a jobcentre or over the phone: that simply should not happen.

[Meg Hillier]

I thank the Minister for that categorical statement. Would it not be easier for DWP assessors simply to check the disability living allowance database? They would not then have to ask for a form, which would make life a lot easier for the patient.

[Steve Webb]

Absolutely. Atos was awarded the contract to do the face-to-face assessments some years ago. In regard to data sharing, it would be aware that a DS1500 form had been completed for a claimant, so it should not need to ask for another form to be completed. I would be keen to hear about any individual cases in which that has none the less happened, when it should not have done, and we will follow them up. The intention is that, whenever possible, these matters should be dealt with on the basis of paperwork and forms that have already been submitted, rather than calling people in for a face-to-face assessment. As the hon. Lady says, calling them in is inappropriate and unnecessary, and it also costs money. There is no reason why anyone would want it to happen, and we are keen to ensure that it does not.

We also recognise that some people do not know, or do not wish to know, that they are terminally ill. The provisions for DLA allow a claim to be made for such people under the special rules by a third party, and such a claim will be handled sensitively to ensure that the prognosis is not revealed to the terminally ill person. For both benefits—DLA and ESA—processes are in place to ensure speedy access to benefits and minimal form filling. I shall talk the House briefly through the process involved. The claim is sent for urgent medical advice from medical services, which have 48 hours to provide advice on whether the individual meets the terminal illness criteria. Performance data over the last year on the typical turnaround time for these applications show that medical services are providing advice in an average of 1.2 days for ESA claims, and an average of 1.5 days for DLA claims. In general, therefore, these claims are being turned round very quickly, and rightly so.

To provide this advice, medical services can contact the claimant’s GP, or the treating health care professional, to check whether they are already receiving DLA due to terminal illness. Advice is then provided to a decision maker, who makes a judgment on the balance of probabilities and has some discretion. The whole process should take no longer than a week from start to finish. Claims for employment and support allowance are currently taking just over seven working days, and claims for disability living allowance are taking just under six working days.

Appeals have been mentioned, and I would be the first to accept that it is taking too long to deal with them. These matters are handled by the tribunals service, under the Ministry of Justice, and we are working closely with the service to try to reduce the backlog. Some progress has been made. For most of this year, the number of new cases coming in has been lower than the number of appeals cleared, but I freely accept that it is still taking too long.

There are a lot of reassessments taking place at the moment, involving people who have been on incapacity benefit for a long time, and the volume of appeals is inevitably rising as a result. When someone appeals, they stay on benefit in the meantime. I am talking now about general decisions on IB, rather than those for terminally ill people. Appealing enables the benefit to continue, so there is quite a strong incentive to do so, and the volume of appeals has greatly increased.

We are taking steps to address that. First, we are dealing with appeals more quickly. The volume of appeals processed by the tribunals service has been 66% higher in the first seven months of 2011-12 compared with 2009-10. There is much greater throughput, therefore. Secondly, we must try to get the decisions right in the first place. That is in everybody’s interests. I am proud of the Harrington review process, which analysed the very flawed work capability assessment. Professor Harrington produced his first report, and the Department accepted all his recommendations and has been implementing them. Professor Harrington has reported back, saying the Department is doing a pretty good job in taking on his recommendations. He has now produced a second round of recommendations. As I have said, the key is to get these decisions right in the first place, and we are finding that the rate of successful appeals against WCA decisions is significantly lower than under the old personal capability assessment.

[Meg Hillier]

That is all very well for the bulk of cases, but the key point in today’s debate is that those who are terminally ill should not have to go through an appeal in the first place. Speed of delivery is also important. We are hearing of serious delays for people with a terminal illness. Will the Minister move on to the element of his remarks that deal with that?

--- Later in debate ---

[Steve Webb]

One problem is that defining someone as terminally ill for the purposes of the special rules involves the notion of a six-month prognosis. The hon. Lady will appreciate that this is not a science, and that it is hard to predict with any degree of certainty. Somebody might be identified, perhaps even by their clinicians, as having a longer prognosis, and the appeals service will in such cases look again at the initial decision. We are trying to make those decisions as swiftly as possible. If a decision is made to take somebody off benefit, their benefit continues while they await the appeal, and it is important that it should.

The hon. Lady mentioned fast-tracking of ESA applications, and that is in place. If someone is identified as having a terminal illness, when they have their WCA a flag should be set because those deemed to be terminally ill should not be contacted for three years. That is the norm; that should be what happens. However, some conditions—HIV, for example—used to be regarded as terminal, but now they are not. There is therefore a sort of backstop that, in effect, says that after three years the person in question may be contacted. In general, however, people will not be contacted again. We are continually looking to ensure that robust processes are in place for the sorts of cases the hon. Lady mentions, and I will raise this important issue with operational colleagues on the front line.

The hon. Lady asked why we do not have a single central service. One of the dilemmas we face is that people always tell us they want DLA and ESA to be seen separately. DLA is about the costs of disability and has nothing to do with work. Some people ask why we do not have a single form or system, but there is a danger of muddying the waters. Claimants’ organisations tend to ask us to keep them separate, and say that DLA should not be about pressurising people to work, and that instead it should be about meeting the costs of care.

I thank the hon. Lady for raising these issues. I have set out what the Department is seeking to do to help terminally ill people with their benefit claims, but I would be very happy to follow up any individual cases Members want to bring to our attention.

Question put and agreed to.

Welfare Reform Bill

Steve Webb Excerpts

Wednesday 1st February 2012 Commons Chamber

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

The right hon. Gentleman has accepted the principle of time-limiting. He says that a year is too short a time, and he is against arbitrary time limits. Will he tell the House the basis on which he alighted on two years, rather than three, four of five?

[Stephen Timms]

If the hon. Gentleman looks at the amendment, he will see that it refers to a period of “at least 730” days. That was proposed precisely because there is as yet no evidence—certainly not from the Department—about what the right period should be. We can be absolutely sure, however, that it should not be less than two years, for all the reasons that I have just outlined.

--- Later in debate ---

[Frank Dobson]

Will my right hon. Friend take at least a minute or two to try to get across to Government Members that housing benefit is not kept in people’s handbags or wallets? It is paid out to grasping private landlords, and until we do something about those landlords, the housing benefit bill will continue to soar.

[Steve Webb]

What did you do about it?

[Mr Byrne]

The Minister with responsibility for pensions asks what we did about it; again, in the Conservative party’s briefing for today’s debate, there are some interesting figures about the rise in housing benefit over the past few years, but of course closer inspection of the DWP forecast for the next few years shows that housing benefit is set to rise, year on year, at the same rate as in the past 13 years. That is why Labour has been right to expose the dangers of cutting investment in new housing and the lack of any policy making from the Government on what should happen to the private rental market.

This afternoon, Labour has set out its proposal for a benefit cap that will work in practice. We hope to press it to a vote and that the Government will think again about giving the other place a chance to vote on it—just to reinforce that point.

Unemployment (Halifax)

Steve Webb Excerpts

Wednesday 1st February 2012 Westminster Hall

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

I congratulate the hon. Member for Halifax (Mrs Riordan) on securing the debate and on the very measured but passionate way in which she presented her case. I entirely agree with her that one person unemployed is too many and that the rise in unemployment in Halifax and other towns is absolutely a source of concern. She said that something must be done, and I entirely agree. I hope to use the few minutes available to me to set out what the Government are doing to deal with some of the very important points that she raised.

To set the context, for claimants of jobseeker’s allowance, the national average rate is just under 4%. The figure for the hon. Lady’s region, Yorkshire and Humberside, is 4.6%, but the figure for Halifax is 6.4%, so her town is above average in the region, and the region is above average in the country. I therefore take the point that she makes about the particular pressures on her town.

Part of the Government’s strategy is to move away from some of the schemes that unemployed people have faced in the past. The hon. Lady and I will both have met people who were sent on a scheme by the jobcentre and came away from it thinking, “What was the point of that?” It did not help them to get a job, yet the provider of the scheme got paid and went home happy. We want to change that. We want to move, and are moving, towards a system whereby the companies that we pay to help people from unemployment, from incapacity benefit and so on into work get paid only when they deliver.

The whole philosophy behind the Work programme, which is still gearing up across the country and gathering momentum, is that the providers get paid only when they get people into jobs and, specifically, when they get people into sustained jobs. The bulk of the money is end-loaded. They get very little money up front, and if they do not deliver for the people of Halifax, they do not get paid. That is a sea change from the sort of schemes that we have had in the past.

Let me give the hon. Lady a flavour of what is being provided in the west Yorkshire area, within which her constituency falls. In each area, we have two prime providers for the Work programme. They are the main contractors, and we have two because they have to compete against each other to do their best for the people of west Yorkshire. Each year, we look at how each provider has done, and if one is doing a better job than the other, more people are referred to it, so the successful providers that are good at getting people back to work receive more referrals and make more money from that. We do not mind them making money from it, because they are saving the taxpayer money and helping the individuals concerned.

The two main providers in the west Yorkshire area are Best and Ingeus. Best has a series of subcontractors that provide services to the hon. Lady’s constituents. One of the reasons that people get stuck on out-of-work benefits—not just jobseeker’s allowance, but incapacity benefits, employment and support allowance and so on—is that they have physical or mental health issues. Condition Management Partners, a subcontractor in west Yorkshire, helps such people to overcome their mental or physical health issues by providing cognitive behaviour therapy, motivational interviewing techniques and other such therapies. That is a voluntary third sector organisation working with a prime contractor to help people who have barriers to work.

We want to make sure that there is not a core of people in Halifax who have just lost touch with the labour market. The longer such people are out of touch with the labour market, the less chance they have of getting a job. We need to get them back in contact with the labour market. I entirely take on board the hon. Lady’s point that there needs to be jobs for them to go to, and I will say a bit more about that later. We want the people who have been on long-term benefits, particularly incapacity benefit and jobseeker’s allowance, to be effective competitors for those jobs. We know that jobs are being created and that vacancies will exist. There are hundreds of vacancies even now at the hon. Lady’s local jobcentre. We want the people who have been on long-term benefits to be effective participants in the labour market, so that when jobs come up, they can apply for them and get them, thereby breaking out of that cycle of long-term benefit dependency.

Another subcontractor of Best is Forster community college, which is a public sector organisation in the supply chain that provides help for Work programme participants with drug and alcohol issues. It also provides specialist support for ex-offenders and homeless people. For all those people, the danger is that their characteristics are such that they appear less attractive to employers. When private sector, or even public sector, jobs are created, they are always at the back of the queue and then get stuck on benefits. We want to make them as attractive to employers as everybody else so that they do not get stuck on benefits.

The other main provider in the hon. Lady’s region, Ingeus, has a series of subcontractors, including a group called Specialist Health Advisers, which is helping people with the basics such as exercise and healthy eating. The barriers preventing long-term unemployed people from being effective participants in the labour market include having got out of the habit of work, having got out of routines or not looking after themselves. We are trying to tackle many of those issues. Part of our strategy is getting people who are on benefit to be attractive to employers. I entirely take the hon. Lady’s point: unemployment has gone up. None the less, employment is still up compared with 18 months ago. There are more people working than there were 18 months ago. Somebody is getting those jobs, and the challenge is to ensure that help goes to the people of Halifax who are perhaps the furthest from the labour market and who are in most need of support and intervention. We pay extra for that. If somebody is unemployed but could probably get themselves a job, they do not come near the Work programme, but if they have been long-term unemployed or long-term sick, we pay extra money—in excess of £10,000 in some cases—to a provider to get that person into work. We must tackle what I call the supply side. We need to ensure that unemployed people are supported and enabled.

I am sure that the hon. Lady would be the first to say to me that that is not enough. Clearly, there have to be jobs available. She mentioned some successful private enterprises in her constituency. She mentioned an environmentally friendly company. We will shortly be launching the Green investment bank, which will provide money specifically for new enterprises and growth industries. This is not just about London and the south-east; it cannot be. We have a regional growth fund that specifically helps areas that are dependent on the public sector to make the transition to a better balance between public and private. There will always be an important role for the public sector in her area, but there is no reason on earth why, with the right support, Halifax should not have a thriving private sector as well.

Let me give one example of the incentives that we are giving. New businesses outside London and the south-east will be exempted from up to £5,000 of employer national insurance contributions for each of the first 10 employees they hire. That is a concrete and practical thing, which I am sure she will welcome.

We are also using deregulation as a way to help small businesses. I remember that at one point my local party wanted to employ its first employee. I was absolutely horrified by all the paperwork involved and the bureaucracy of running PAYE. There is a real barrier to taking on that first employee. We have said that all small businesses will be exempt from all new regulation for the next three years. Therefore, we are saying to people who start new businesses, “We are on your side. We want to give you support.” We are lowering the rate of corporation tax, with the small firms rate cut to 20%. Again, we are trying to ensure that, where a company makes a profit, it keeps more of it so that it can invest it in the local area.

We contacted the Jobcentre Plus district manager in preparation for the debate. I know that Jobcentre Plus is working very hard. Next week, for example, it is hosting a jobs fair to coincide with national apprenticeships week. I understand that the district manager would be very pleased to meet local MPs on a one-to-one basis. If the hon. Lady is happy to take up that invitation, he will talk through some of the issues that she has raised today that we may not have the chance to cover in as much detail. No one can supply as much local detail as the Jobcentre Plus manager on the ground.

The hon. Lady mentioned young people. I agree that unemployment is devastating for anybody, but at the start of somebody’s working life, it is a particular tragedy. That is why I am pleased with what the Government have been able to do on the apprenticeships front—an issue that was mentioned by the hon. Member for Upper Bann (David Simpson). My understanding is that, last year in Halifax, there were 1,150 apprenticeship starts. That programme is being expanded and we will update those figures shortly. Many people recognise that the apprenticeship scheme, which is linked to an employer and is about learning and applying skills, is a much better way of dealing with youth unemployment. It gives young people a focus and links to an employer. Although it does not guarantee a job, it makes someone more employable and gives them a reference. I am proud that the Government are doing so much in that regard.

I must admit that I am not an expert on Halifax. I was not aware of the full details of the hon. Lady’s constituency. I should say, however, that normally my right hon. Friend the Employment Minister would be responding to this debate, but with the Welfare Reform Bill going through the House, he has had to be in the main Chamber. I had a look at some of the figures for Halifax, which I am happy to leave with the hon. Lady. I have a chart that shows the number of people who have been on out-of-work incapacity benefits for the last decade in Halifax. What struck me was how the number had not moved. For 10 years, despite the booms and the busts, there was the same number of people—obviously not all of them are the same people but many are—stuck on the list. I entirely take her point that we should not stigmatise or parody the position of people on benefits. Although many people are on benefits through no fault of their own, we have allowed ourselves to get to a situation in Halifax and in many other such towns in which nearly 5,000 people have consistently been on ESA or incapacity benefit for the last 10 years. The question is: are we doing right by those people? Many of them will be in their 50s. If we just left them alone because there are not many jobs, we would be saying, “You can be on incapacity benefit for another 10 years and then you can have a pension, but it won’t be much of a pension because you haven’t been working.” We can do better than that, which is why we are keen to have these Work programme providers incentivised to help the long-term sick and disabled to overcome the barriers to work which get greater the longer people are out of work.

The hon. Lady asked about the Government’s macro strategy. She mentioned public sector job losses. She would accept, I think, that a substantial rebalancing of public spending had to be done. She was not unduly partisan in her remarks, so I will not be in my response, but it is commonly known that substantial public sector savings had to be made.

Given that—this is from memory—roughly two thirds of everything that Government spend is spent on pay, and that is certainly true if we exclude social security benefits, we cannot scale back public sector spending without significantly scaling back public sector employment, particularly if we are going to protect pensions and so on. It can be done partly through pay, as the Government have obviously done, but it will also imply a smaller public sector. It is therefore doubly crucial that we assist towns where the public sector—the local authority, the hospital and others that the hon. Lady mentioned—has been a major employer.

The hon. Lady described what has happened to the private sector and how the wool industry among others is in long-term decline. The public sector will not fill that void. Across Europe, Governments are retrenching, so it would be dishonest for me to say that the public sector will take up the slack. I think that she and I are agreed that the vital thing is to facilitate a vibrant private sector, but I also agree with her that that will not just happen. Part of the solution is about skills and training—I have mentioned apprenticeships—part of it is about unsticking the folk who get stuck on benefits and part of it is about the overall macro-economic position.

To give one example, the hon. Lady mentioned her local department store, which needs people to have spending power in their pockets. My right hon. Friend the Deputy Prime Minister has been pressing for a rise in the tax threshold, and the Government are committed to that. Instead of low-paid people paying tax after roughly £6,500, as they did last year, by the end of this Parliament they will not pay tax until after £10,000. That extra £3,500 at a basic rate of 20% is an extra £700 a year in their pockets, and I know that it would be very welcome if we moved faster on that.

People at that level of income tend to spend it. We know that, if we put money into the hands of those on lower and modest incomes, they will spend it. When we faced difficult decisions before Christmas on what to do about benefit levels for the coming year, there was a lot of debate about consumer prices index inflation peaking at 5.2% in the year to September. That very high figure has come down significantly since, so what was the case for using the full 5.2% for jobseeker’s allowance, ESA and all the main benefits, as we did? One of the things that convinced us that it was the right thing to do was the fact that those people would spend that money, thus boosting the local economy, and that decision will have helped the hon. Lady’s constituency, where benefit income is a significant part of income.

We agree with the hon. Lady: something must be done, and it is being done at both the macro and micro level. I hope that she will continue this conversation with her local Jobcentre Plus district manager, who, I am sure, will be pleased to meet her.

Workplace Pension Reform

Steve Webb Excerpts

Wednesday 1st February 2012 Written Statements

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

I am pleased to be able to publish today the Government’s response to consultation on workplace pension reform. The formal consultation, which ran from 18 July to 11 October 2011, addressed the legislative changes recommended by the Making Automatic Enrolment Work review, and sought views on draft regulations published alongside the consultation document.

I would like to thank all those people and organisations who have offered their views and advice in response to our recent consultation.

The Government response document and guidance for those certifying pension schemes will be made available on the Department’s website today. The final versions of the regulations will be available on the Department’s website later today.

I will also place a copy of the Government response document and the guidance in the Library.

NEST (Revised Auto-enrolment Timetable)

Steve Webb Excerpts

Tuesday 31st January 2012 Written Statements

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

on 25 January, the Government published a revised timetable for the roll-out of the automatic enrolment duties from 2012.

The statement associated with the new timetable included the following paragraph:

“Medium sized employers will be re-allocated automatic enrolment dates between 1st April 2014 and 1st April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, this still means that around 70% of eligible workers will be automatically enrolled before the end of this Parliament compared with around 75% under previous arrangements.”

Since publishing this statement the modelling assumptions have been revisited. This affects the analysis of the existing implementation profile as well as the impact of the proposals outlined last week. Existing participation in workplace pensions is higher in large and medium-sized firms than in small and micro firms. This means that a lower proportion of workers in large and medium-sized firms will need to be automatically enrolled. A lower proportion of the 9 to 10 million workers eligible for automatic enrolment will therefore be enrolled in this Parliament.

As a result of this, the paragraph above should now read as follows:

“Medium sized employers will be re-allocated automatic enrolment dates between 1st April 2014 and 1st April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, this still means that around 55% of eligible workers will be automatically enrolled before the end of this Parliament compared with around 65% under previous arrangements.”

I apologise for this revision and for any confusion this may cause.

Automatic Enrolment Timetable

Steve Webb Excerpts

Wednesday 25th January 2012 Written Statements

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

On 28 November 2011, the Government announced that the timetable for the implementation of automatic enrolment will be adjusted so that small businesses are not affected by the reforms during this Parliament. This will provide them with some additional breathing space to prepare for the reforms while operating in tough economic times.

We also reaffirmed our commitment that automatic enrolment will start on time, from October 2012, and will apply to all employers.

I can now confirm that under the revised timeline, all employers with an existing staging date of on or before 1 February 2014 are unaffected. This means that no large employer will have to make any changes to their plans—which are in many cases already advanced.

Medium-sized employers will be reallocated automatic enrolment dates between 1 April 2014 and 1 April 2015. This means that the implementation dates of some of these employers will be up to nine months later. However, this still means that around 70% of eligible workers will be automatically enrolled before the end of this Parliament compared with around 75% under previous arrangements.

Small employers will be allocated automatic enrolment dates between 1 June 2015 and 1 April 2017.

New employers setting up business from 1 April 2012 and up to and including 30 September 2017 will have automatic enrolment dates between, and including, 1 May 2017 and 1 February 2018. Any new employer setting up from 1 October 2017 onwards will be required to comply immediately if paying earnings which attract PAYE deductions in respect of any worker.

We propose to delay from 1 October 2016 to 1 October 2017 the increase in the minimum rate of employer pension contributions from 1% to 2% of banded earnings. Contributions will increase to 3% from 1 October 2018.

We plan to publish a consultation document on the detail of these changes shortly. Draft regulations and an impact assessment will be published alongside the consultation document.

The table below sets out the revised automatic enrolment dates for all employer sizes.

Oral Answers to Questions

Steve Webb Excerpts

Monday 23rd January 2012 Commons Chamber

[Rehman Chishti (Gillingham and Rainham) (Con)]

13. What steps he is taking to protect the interests of people with small pension pots.

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

The problems associated with small pension pots can include higher charges, losing track of a pension or facing barriers to moving the pension and getting a decent annuity. That is why we published a paper last month that sets out some radical options for some form of automated transfer system to make it easier for people to build up one large pension pot.

[Rehman Chishti]

Does the Minister have evidence on the number of small pension pots that will be created after automatic enrolment?

[Steve Webb]

I am grateful to my hon. Friend for that question. There is a risk that without action, in an auto-enrolment world hundreds of thousands of new small pension pots will be created each year as people change jobs. That is why it is doubly important that we should have some mechanism to combine those pots so that they are a pension worth having.

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

The UK is in the grip of a private pensions crisis, with 60% of private sector employees saving nothing for their retirement. In the light of that fact and in the light of the emergence of new competitors in the auto-enrolment market, will the Minister consider ending the statutory restrictions on the national employment savings trust scheme so as to better serve the auto-enrolment market?

[Steve Webb]

The hon. Gentleman raises an important issue. The Labour Government introduced the constraints on NEST—and for a good reason, as it ensured that NEST focused on its target market. The situation has moved on and competitive developments in the market have emerged that were not necessarily foreseen. We are reflecting on the role of those constraints and I look forward to discussing the issue further with the Select Committee on Wednesday.

[Alex Cunningham (Stockton North) (Lab)]

14. What assessment he has made of the likely effect of the closure of the social fund on (a) homelessness, (b) hardship and (c) use of payday loans.

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

The social fund is not closing as payments for maternity, heating and funeral expenses will continue. Some discretionary payments, particularly community care grants, will be replaced by targeted local provision at the same total level—so it is not a cut in the budget—and universal credit will provide a better service with payments on account supporting many people in need of short and longer-term credit.

[Alex Cunningham]

I am grateful for that update. For some people, the social fund is a crucial safety net, allowing them to avoid catastrophe. One of the major concerns about its abolition is that people will no longer be able to claim crisis loans to pay rent in advance when they move into private rented accommodation. What provision will there be to help formerly homeless people pay rent in advance when moving into independent accommodation?

[Steve Webb]

I know that the hon. Gentleman had written his question before he heard the answer, but the social fund is not being abolished. The new system under universal credit of payments on account will actually be more flexible, allowing people to draw down their universal credit ahead of time. That will be more efficient than the current rigid system of crisis loans.

[Hywel Williams (Arfon) (PC)]

What discussions has the Minister had with the Welsh and Scottish Governments about the transfer of some responsibilities to local authorities and with what result?

[Steve Webb]

We are localising to English local authorities and, as the hon. Gentleman says, to the Scottish Government and the Welsh Assembly. We take the view—we have had a positive response on this from the Welsh Assembly—that the ability to shape a system for Wales is welcomed. Whether the Welsh Assembly chooses to do that through Welsh local authorities or at a national level in Wales will be a matter for it.

[Hugh Bayley (York Central) (Lab)]

15. If he will set a limit on the charges which pension fund managers may levy for the administration of pension funds.

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

Initial evidence ahead of the roll-out of auto-enrolment later this year is that the creation of NEST, with its relatively low charges, and competition in the market are leading pension providers to offer products for auto-enrolment with lower than average charges. However, we believe that charging levels are important and have taken additional reserved powers under the Pensions Act 2011 to cap charges under auto-enrolment if that proves necessary.

[Hugh Bayley]

The report produced for the Government by Dr Christopher Sier shows that pensioners are losing out because of the excessive fees and charges levied by private pension fund managers. What action will the Government take to cap the amount that private fund managers can milk from the funds they manage on behalf of pensioners?

[Steve Webb]

I think the hon. Gentleman was a Minister in our Department under the previous Administration, and as he knows they chose not to cap charges but to give themselves powers to cap them if it proved necessary. At the moment, our judgment is that the early roll-out of auto-enrolment will deal with big firms who will give good deals and low charges and that we have more competition than was perhaps expected, with NEST coming in at around 0.5% and other providers at or below that point. We are encouraged by developments in the market but we are absolutely prepared to use the capping powers if it proves necessary.

[Mr Marcus Jones (Nuneaton) (Con)]

16. What recent progress he has made on the youth contract.

--- Later in debate ---

[Mr Dave Watts (St Helens North) (Lab)]

T3. What advice can the Minister give the 3,259 people in St Helens who have been told to downsize their home, despite the fact that on existing turnover it will take five and a half years for them to do so while, in the meantime, losing their benefit? What advice would he give those constituents?

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

I think that the hon. Gentleman is referring to social housing over-occupation. If people are in a particularly difficult situation, local authorities have been given an enhanced amount of discretionary housing payment to help them make that transition. It is vital that we tackle 1 million empty bedrooms in social housing.

[Robert Halfon (Harlow) (Con)]

Going back to the issue of testing the disability living allowance, will the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Basingstoke (Maria Miller) reassure the House that testing will be localised, humane and fair?

--- Later in debate ---

[Ian Murray (Edinburgh South) (Lab)]

T6. Recent reports have shown that more than £3 billion of pension charges are hidden from consumers. Will the Minister tell us what the Government plan to do to make it possible for pension fund trustees and consumers to compare charges between pension funds?

[Steve Webb]

The hon. Gentleman is absolutely right that charges are a crucial issue, so we are working with the National Association of Pension Funds and others who have undertaken an industry-led initiative to make charges information-transparent and consistent, and we are pleased to support them in that.

[Sir Alan Beith (Berwick-upon-Tweed) (LD)]

May I assure the Secretary of State that a great many of my constituents object strongly to paying through their taxes for people to get more in benefits than they can get on a working wage, or to live in property far beyond anything that they could afford on their wage? It is important that we get the transition right, but the principles are sound.

--- Later in debate ---

[Mr Jim Cunningham (Coventry South) (Lab)]

May I ask the Minister whether employers can still take a pensions contributions holiday and, if so, how many?

[Steve Webb]

Where employers run defined benefits pension schemes, if they are in deficit and have a recovery plan agreed with the Pensions Regulator, there is no obligation on them to overfund above 100%, and there are Inland Revenue rules that affect surpluses, which are still in place.

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

Does my right hon. Friend agree that those well-intentioned but misguided individuals who oppose the introduction of a benefits cap are in serious danger of killing with kindness the very people they seek to help, by condemning them to a lifetime of benefits dependency and worklessness, which the benefits cap will seek to reverse?

Pension Funds (Fiduciary Duties)

Steve Webb Excerpts

Friday 20th January 2012 Commons Chamber

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

May I begin by congratulating the hon. Member for Dagenham and Rainham (Jon Cruddas) on securing this debate, which raises issues that I know are of real concern for many people? As he pointed out, it is just over a year since we were both here debating the same subject. One of my colleagues who observed our last debate said that she felt that agreement was breaking out violently all over the place. I suspect that we may be in similar territory today, because I have a great deal of sympathy with the points that the hon. Gentleman raised.

To be clear from the outset, I should say that the coalition Government fully support the highest standards of corporate governance and ethical behaviour. We agree that a socially responsible investment strategy is a sound choice for pension schemes, and we recognise the importance of the issues raised by FairPensions. I welcome the fact that the points made by the hon. Gentleman chime with the emphasis that both the Prime Minister and Deputy Prime Minister recently placed on responsible capitalism. Although not directly related to the duties of pension funds, the call by my right hon. Friend the Deputy Prime Minister for much greater corporate transparency and the unlocking of shareholder power indicate the coalition Government’s intention of addressing some of the wider concerns raised by the hon. Gentleman today.

I would like to emphasise the significant contribution that FairPensions has made to inform the debate on these issues. I have had a number of discussions with it and, as the hon. Gentleman said, its director is now a member of our trustee panel and I joined her for a meeting earlier this week. I hope that he will be reassured that that perspective is very much in the room when these issues are considered.

The hon. Gentlemen touched on the important role of the investments of pension funds in fuelling economic recovery in the UK. As he rightly said, the Chancellor announced in his autumn statement that the Government have signed a memorandum of understanding with two groups of UK pension funds to unlock additional investment in UK infrastructure, including the National Association of Pension Funds, the Pension Protection Fund, to which I will return, and a separate group representing pension plans and infrastructure fund managers.

The Government are also establishing an infrastructure investment forum with the Association of British Insurers—the hon. Gentleman mentioned the role of insurance companies—which will explore ways to ensure that capital markets continue to provide an efficient and attractive source of debt finance for infrastructure projects. The Government will target up to £20 billion of investment from those initiatives, which we hope will lead to a step change in the use of pension scheme assets to fuel our economic recovery.

The hon. Gentleman referred to the FairPensions March 2011 report on fiduciary duty. I entirely agree that that has done a good job in raising awareness about some of the important issues relating to the role of pension trustees in the governance and conduct of firms, and the role of advisers. One of the concerns consistently raised by FairPensions is that the extent of a trustee's fiduciary duty is frequently misunderstood. As he said, I pointed out in the Pension Bill Committee, and am happy to say, albeit in front of a slightly more select gathering on this occasion, that I am absolutely clear that fiduciary duty does not simply mean that someone must maximise short-term investment returns at all costs. I am also clear—again on the record—that those duties do not prevent trustees from considering environmental, social and governance practices. Indeed, as part of the discharge of their fiduciary duty, it would be perfectly reasonable for pension trustees to ask searching questions about the environmental, social and governance practices of those firms their scheme was investing in. There is no reason why trustees cannot take ethical and governance issues into account when making investment decisions, solely subject to their making sure they comply with the legislative requirements relating to scheme investments, and the provisions of their scheme's statement of investment principles.

I come now to the hon. Gentleman’s point about 2012 and the direction in which we are travelling. We have seen only recently the closure of the final salary scheme of a FTSE 100 company open to new members—another mark in the move away from defined benefit pensions—and we are moving into a world of auto-enrolment, which will not exclusively be into contract-based defined contributions, but clearly many of the providers will be structured in that way, and I want to come on to that. As he says, between 5 million and 8 million people will be saving for the first time, or saving more, in a workplace pension. Against this backdrop, the hon. Gentleman’s points about how pension fund assets are managed, and more directly the fiduciary duty of those managing the assets, are very important. I am grateful to the hon. Gentleman for his comments about NEST being a beacon of best practice, and I will certainly look at the examples he gave of the Strathclyde pension fund and the recent Charity Commission guidance, which sounds helpful in this regard.

Looking beyond NEST—obviously the “t” stands for “trust”—clearly a key difference between trust-based occupational pension schemes and contract-based schemes that are used for automatic enrolment is the fact that occupational schemes have trustees who have a fiduciary duty to act in the best interests of the members. As he said, last year the Government issued a call for evidence on the regulatory differences between the two sorts of pension schemes. While some respondents, such as the hon. Gentleman, were concerned that there was no equivalent protection for the investments of members of workplace personal pension schemes, others pointed out that many providers of workplace personal pensions—contract-based—do have alternative arrangements in place, such as governance committees. It does seem to be the case that many employers are increasingly moving towards arrangements for employee engagement through the establishment of such management or governance committees.

Research by the Pensions Regulator has found that approximately half of employers with a contract-based scheme do have some form of governance arrangement over and above what is legally required. These range from a very informal review on an ad hoc basis by employer representatives, through to more formal arrangements involving a wider range of parties, which may involve employee representatives. I do recognise that that does not wholly equate with a trustee's fiduciary duty, since there is no obligation on an employer to establish such a committee, and where they do exist there is a wide variation in their terms of reference, membership and powers.

In May last year, my Department issued detailed guidance on default funds in auto-enrolment to ensure the quality of a DC pension scheme’s default fund. This will be vital to the success of automatic enrolment as most individuals will not be making a choice about their investment fund and will be enrolled into a scheme's default option. Reflecting on what the hon. Gentleman said, that gives us an opportunity for scale. If the vast majority of people end up in the default funds, and we can get the default funds right, there is potential for good practice to be spread quite widely.

The guidance sets out the standards that pension schemes, advisers and employers should follow to ensure that the default fund is of sufficient quality. Those standards cover charges, governance, risk management, review and communications. The guidance was developed with employers, the pension industry, consumer groups and advisers to ensure not only that it is user friendly but that it strikes the right balance between prescription and allowing flexibility.

On the question of charges, evidence suggests that the vast majority of schemes have appropriately low fund charges, but there is always a possibility that charges could rise to inappropriately high levels in the future. That is why we took powers under the Pensions Act 2008 to regulate and set a charge cap, should charges become inappropriately high, given that even relatively small differences in charges can have a big impact on someone’s pension pot. The hon. Gentleman will know that we extended those powers in the Pensions Act 2011, for which I was responsible.

In the meantime, other initiatives are progressing. Hon. Members might recall that the Investment Governance Group, an industry group jointly sponsored by the Pensions Regulator, the Department for Work and Pensions and the Treasury, has developed principles for best practice in investment governance of work-based pension schemes. That guidance was published shortly before our previous debate and comprises six principles covering the three stages of investment governance: governance structure, investment choices and monitoring, and communications. It is available on the Pensions Regulator’s website. The aim of the principles is to encourage better investment governance and decision making by all stakeholders, and to provide a practical checklist to benchmark a scheme’s investment governance processes against best practice.

Two additional pieces of work from that group might be of interest to the hon. Gentleman. First, the Pensions Regulator is working closely with the National Association of Pension Funds to produce a report on defined benefit case studies, and considering investment strategies and approaches to ethical investments. Secondly, the National Association of Pension Funds is assisting the regulator in the preparation of a video podcast on the governance of small schemes, which I think will consist of at least two downloads. I understand that both those products should be ready for publication soon.

Much more recently, on 6 December 2011, the Pensions Regulator published a press release entitled “Six principles for good workplace DC”. This set out the regulator’s principles for good design and governance of DC schemes, and invited the industry to take part in a dialogue on the principles and the detailed criteria that sit underneath them. Publication of those high-level principles is the next step in the regulator’s ongoing engagement with the pensions sector to improve standards of DC provision and ensure that the sector is ready to support auto-enrolment.

I want briefly to mention the Pension Protection Fund. Someone told me recently that, in five to 10 years’ time, the PPF will be the biggest pension fund in the land, which is a slightly depressing thought. It is an operationally independent arm’s length organisation that was set up by Parliament. Like NEST, the investment strategy of the Pension Protection Fund is an example of the Government seeking to promote best practice in investment strategy, in this case through a non-departmental public body. In its statement of investment principles, published in November 2010, the PPF board makes it clear that it will act in the best financial interests of the fund and its beneficiaries in seeking the best return that is consistent with a prudent and appropriate level of risk. The board believes that it must act as a responsible and vigilant asset owner and market participant, and take account of the environmental, social and governance factors that can have an impact on the long-term performance of its investment. There is therefore a stress on long-termism and active engagement by this major owner of corporate Britain. I am sure that the hon. Gentleman will also welcome the fact that the PPF board is a signatory to the United Nations principles of responsible investment, a set of best practice principles on responsible investment.

The hon. Gentleman asked about discussions with the Pensions Regulator. When we debated these issues in December 2010, he asked whether I would be prepared to raise the issue of transparency with Michael O’Higgins, who was then the incoming chair of the Pensions Regulator. I can confirm that I have had a number of discussions with the chair in the past 12 months, and that I have drawn attention to the issues raised in the FairPensions report from March 2011, which have been echoed by the hon. Gentleman today.

Surprisingly, trustees are not obliged to disclose information about investments or their investment decisions to scheme members. It seems odd, given that it is our money, that we have so little ability to find out what is being done with it. The Pensions Regulator is therefore working with my Department to consider ways of introducing more transparency into schemes, and ways in which members could be better updated with information on their scheme. I shall be meeting the chair and the chief executive of the Pensions Regulator later this month, when we will discuss the issue further. I venture to suggest that it will be slightly higher on the agenda following the hon. Gentleman’s repeated interventions, for which I am grateful to him.

The hon. Gentleman mentioned the Kay review, which is obviously crucial. Professor Kay is examining UK equity markets and their impact on the long-term performance and governance of UK business. His independent review will consider a number of the issues that have been raised today, and its report is due later this year. Professor Kay kindly came to speak with me about the review on 3 November 2011, and I took the opportunity to raise the concerns raised by FairPensions about fiduciary duty and short-termism. I am hopeful that he will consider them in the course of his work.

The Kay review is examining the extent to which equity market participants are excessively focused on short-term outcomes, and what actions might be taken to address such problems if they exist. It will explore the incentives, motivations and timescales of all participants in the equity markets, as well as the fiduciary duties of pension funds and their role as long-term investors. I assure the hon. Gentleman that we will look very seriously at what Professor Kay has to say. I do not want to pre-empt that at this stage, but I will work closely with my colleagues in other Departments on any issues raised by the review that need to be considered further.

I thank the hon. Gentleman for his persistence. This is an important issue, and I hope that he will continue to raise it.

Question put and agreed to.

Draft Occupational Pension Schemes and Pension Protection Fund (Equality) (Amendment) Regulations

Steve Webb Excerpts

Friday 20th January 2012 Written Statements

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

The Government have today begun consultation on draft regulations to ensure domestic legislation reflects the effect of current European case law regarding the obligation on pension schemes to treat men and women equally.

The draft regulations will amend domestic legislation to reflect the specific point that, where an inequality in pension scheme rules results from the legislation governing the guaranteed minimum pension, the scheme is required to equalise, even where no opposite sex comparator exists.

The Government have been advised by a number of organisations that some schemes with guaranteed minimum pension liabilities have been finding equalisation action difficult. As we wish to offer as much help as is practical, we have also published today, for consultation, one possible method of equalisation.

This suggested method of equalisation will not have any force of law and there will be no obligation on schemes to use it. However, the Government hope that experts in the pensions industry will engage constructively with it and, as a result, schemes will know that the revised version will have been published after a consideration of a large range of views.

A copy of this consultation document will be placed in the House Library.

Workplace Pension Reform

Steve Webb Excerpts

Thursday 15th December 2011 Written Statements

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

I am pleased to announce that today we have achieved key milestones that will help secure a robust, efficient workplace pensions system for the 21st century.

First, we are publishing “Meeting future workplace pensions challenges: improving transfers and dealing with small pots” (Cm 8184). This paper sets out actions that the Government are taking to make sure people get the most out of the money they save:

We will abolish short service refunds for defined contribution occupational schemes. These rules jeopardise pension savings for low to median earners and will not be part of the automatic enrolment world. We expect this rule change to happen as soon as 2014, provided we are able to implement an accompanying solution for small pot transfers at the same time. A full impact assessment is being published alongside the paper to take account of this change.

Abolishing short service refunds will create more small pension pots for defined contribution (DC) occupational schemes, but this is part of a much wider problem. We anticipate that automatic enrolment and a highly mobile jobs market will lead to around 4.7 million additional small pension pots in our pension system by 2050. The burden of these small pots is compounded by the fact that systemic barriers, like cost and complexity, prevent people from moving and consolidating their pensions into one place.

So our paper seeks views and evidence from stakeholders on how we can reduce the number of small pots and improve transfers. We discuss possible solutions: ranging from minimal changes to the current system to an automatic transfer system where pension pots can be collected in one or more “aggregator” schemes or could follow people from job to job. We welcome feedback on these possible approaches.

Alongside this paper we are also publishing a consultation on the 2012-13 review and revision of the automatic enrolment thresholds. This consultation invites contributions to inform how we take this review forward for the first year of automatic enrolment live running. It is important that we get this review right—so that we target the correct group for automatic enrolment while carefully weighing the cost to business and the impact on the pension industry.

I would like to thank the pensions community for their input to this work so far. This collaboration needs to continue if we are to make automatic enrolment a success.

Copies of the paper will be available in the Vote office and Printed Paper office later today.

Copies of the consultation document and the impact assessment will be placed in the library.

These publications will be available later today on the Department’s website: http://www.dwp.gov.uk/ consultations/2011/