Pension Schemes (Default Investment Options)

Steve Webb Excerpts

Monday 13th December 2010 Written Statements

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

Today we will publish a consultation on default investment options for those people who are automatically enrolled into defined contribution pension schemes.

Automatic enrolment into workplace pensions will see millions of individuals newly saving for their retirements. Many of these people will not choose to make an active investment choice and it is therefore important that suitable default options are available to them.

To this end the Government have developed guidance on the design, governance, communication and review of default options.

This consultation provides the opportunity for the Government to work with interested and knowledgeable parties to ensure that this guidance is balanced and appropriate and that members’ interests are protected.

The guidance will be published in spring 2011.

The consultation document is available on the Department’s website at: www.dwp.gov.uk/consultations.

Parliamentary Written Question (Correction)

Steve Webb Excerpts

Thursday 9th December 2010 Written Statements

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

I regret to inform the House there was an inaccuracy in my answer to parliamentary question 20342 on 1 November 2010, Official Report, column 564W.

The response indicated that since 2006 credit unions have made over 262,056 loans to financially excluded people, with an additional 43,308 loans made through other community finance organisations. It also indicated that over 275,000 customers who took out a Growth Fund loan also opened a bank or savings account.

The figure quoted for customers who took out a Growth Fund loan and also opened a bank or savings account is a projection to the end of March 2011, but the response makes it appear that this is the figure to date. It is in fact estimated that the number of people who will have opened a bank or savings account to September 2010 is 216,000.

Benefits Uprating

Steve Webb Excerpts

Thursday 9th December 2010 Written Statements

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

I am pleased to announce the proposed rates of benefit for 2011, which are set out in the table below. The annual uprating of benefits will take place for state pensions and most other benefits in the first full week of the tax year. In 2011, this will be the week beginning 11 April. A corresponding provision will be made in Northern Ireland.

Benefits Uprating

Steve Webb Excerpts

Wednesday 8th December 2010 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 pensions and benefits for 2011-12. I shall place in the Vote Office full details of the new rates that are due to come into force from the week of 11 April 2011 for each pension and benefit, and arrange for the figures to be published in the Official Report.

As the Chancellor said in his autumn statement, we have taken

“decisive action to take Britain out of the financial danger zone.”—[Official Report, 29 November 2010; Vol. 519, c. 530.]

Our decisions today about uprating are part of the plan to ensure we both get on track and stay on track, now and in future.

The Department for Work and Pensions is continuing its comprehensive review of social security policy, including pensions and benefits uprating. As many hon. Members will know, an important component of the future plans for uprating pensions and benefits is the move to the consumer prices index—the CPI. For 2010, additional pensions and benefits were held at their 2009 levels because the retail prices index—the RPI—was negative, at minus 1.4%. In those circumstances, many people saw no increase in their pensions or benefit. Why did the RPI fall? It was mainly because of falling mortgage interest payments, but only 7% of pensioners have a mortgage. People with earnings-related pensions lost out because of a fall in costs that did not benefit them. Had the CPI been used to measure the change in prices last year, benefits such as additional state pension would have been increased.

The CPI is the headline measure of inflation in the UK as well as the target measure used by the Bank of England, and it is internationally recognised. The CPI uses a methodology that takes better account of consumer behaviour in response to price increases. The Government believe that it is right to use one appropriate index for uprating additional state pensions, public and private pensions and social security benefits, and that CPI is a more appropriate measure of changes in the cost of living of pensioners and benefit recipients than RPI. In addition, the House may be surprised to learn that the RPI excludes the spending patterns of the poorest pensioners.

For all those reasons, the Government have decided to move to the CPI. I acknowledge that over the long term the CPI tends to rise more slowly than the RPI. However, the question is not which is the higher or lower number but which is the most appropriate way to track and measure the changes in average prices. The coalition will ensure that the value of many important pensions and benefits is maintained through a rise of 3.1% even in these tough economic times. In addition, steps have been taken to protect low-income families with children through above-indexation increases to child tax credits. Such measures are better targeted on low-income families and will ensure that the measures in the Budget and spending review, of which the move to CPI was a part, will have no measurable impact on child poverty in the next two years.

For consistency, we also announced on 8 July that we would move to CPI as the basis for calculating the statutory minimum increases for revaluation and indexation of occupational pension schemes. Hon. Members will wish to note that the annual revaluation order, which implements the decision, is being laid before Parliament today, together with our consultation document which sets out proposals and seeks views on the impact of using CPI for private sector occupational pension schemes.

The consultation document includes three main proposals. First, we propose legislation to ensure that schemes that choose to stay with RPI do not have to pay CPI in those years when CPI is greater than RPI. We do not intend to put an additional burden on schemes. Secondly, we plan to include indexation and revaluation on the list of changes where employers are required to consult with their employees. I was surprised to learn that schemes had been able to change indexation and revaluation without any duty to consult employees. We will change that. Thirdly, we need to consider what to do when schemes specifically state that RPI should be used and when they do not have the power to amend scheme rules.

I know that many people will have been alarmed by press speculation that we were planning to override scheme rules. We were tempted to respond to the inaccurate reports in this morning’s press, but we were keen that this announcement should come out in a formal, structured way and to the House first of all. However, I am pleased to announce to the House that, contrary to press speculation, we do not plan to grant schemes a modification power to make it easier to use CPI when they do not already have the power to amend scheme rules. We believe that members’ trust in schemes and the scheme rules could be severely damaged if we intervened to give schemes the power to change their rules when the scheme does not already have such a power. Trust in pensions is important and I believe that intervention demands strong justification.

Finally, I should like to turn to one of the early actions of this coalition Government: the restoration of the earnings link for the basic state pension. Unlike the Opposition, who had 13 years to make that important change but failed to do so, the Government made good on the pre-election promises to restore the link with earnings and delivered that promise within months of coming into power. In fact, we have gone further. We have protected the future value of the basic state pension with a triple guarantee that it will rise by the highest of the growth in earnings, the growth in prices or 2.5%. The triple guarantee means that even in times of slow earnings growth, we will never again see a repeat of small rises such as the 75p rise in 2000.

The new rate for the basic state pension will be £102.15 a week for a single person—an increase of £4.50 a week. From April next year, single people on pension credit will receive an above-earnings increase to their minimum guarantee of £4.75, taking their weekly income to £137.35. For couples, the increase will be £7.30, taking their new total to £209.70 a week. Separately, to help manage expenditure, the Chancellor used his spending review statement to announce that we will freeze the savings credit maximum. Over time, the savings credit has resulted in more and more pensioners being caught up in the means-tested system. Freezing the savings credit maximum helps us to focus resources on the poorest pensioners.

At a time when the nation’s finances are under severe pressure, the Government will be spending an extra £4.3 billion in 2011-12 to ensure that people are protected against cost-of-living increases. We have protected the basic state pension with our triple guarantee and we have confirmed that most people on pension credit will benefit in full from the cash increase enjoyed by those on the basic state pension. Our move to CPI for the uprating of the majority of other pensions and benefits will result in an uplift of 3.1 per cent from next April and will set the future of uprating on a more appropriate, consistent and stable basis that is fair to individuals and the taxpayer. Throughout this statement, I have outlined our firm commitment to ensure that no one is left behind, and I commend the statement to the House.

[Rachel Reeves (Leeds West) (Lab)]

I thank the Minister for giving me advance sight of the statement today. Both sides of the House agree that we need to cut the Budget deficit, even if we differ in our approaches, but let us be clear from the outset that what is set out today is not about deficit reduction. Making this permanent change from the use of the retail prices index to the consumer prices index, the impact of which will be felt long after the deficit is long gone, is an ideologically driven move that Labour opposes. If it were a time-limited change, we would consider whether it was a fairer alternative to deep cuts in departmental expenditure and would be willing to work with the Government on it. We would have supported a time-limited change to uprating, but why would the Government change the uprating of benefits in a way that will have an impact after the deficit has been reduced if not for ideological reasons? I agree that we need to get the economy back on track, but why will we be punishing the poorest in society and our pensioners even when the economy is growing again? Can the Minister confirm just how much worse off people will be over the next 10 years as a result of the switch and, correspondingly, how much money it will save the Government?

The Minister has conceded today that CPI will rise more slowly than RPI, but he says that the question is not about which index is higher or lower. That might not be the question that he wants to focus on, but for millions of pensioners and low-income families up and down the country, that is exactly the question to focus on. They will be asking how they will make ends meet following these changes. What advice would the Minister give to people who will be worse off year in and year out as a result of his decisions today?

Let us look at the detail. The Minister has outlined the Government’s commitment to continue Labour’s policy of restoring the earnings link for the basic state pension with a triple-lock guarantee. [Interruption.] The Government Front-Bench team may laugh, but they know that we committed to doing that and they are doing nothing more than continuing with our policy. Given that the Government are usually so intent on regressive cuts, the announcement in the Budget sounded too good to be true. The Minister’s statement has confirmed that when something seems too good to be true, it usually is. His statement means that millions of pensioners will see the value of their pension fall every year, and that will be compounded by the increase in VAT, which will leave couple pensioners worse off by £275 a year and single pensioners worse off by £125 a year. To what extent will the Government’s combined measures on the change in uprating of the state second pension, the state earnings-related pension scheme, public sector pensions and the VAT increase wipe out any benefit to pensioners from the triple-lock guarantee?

What of the Government’s previous promises? Before the election, the Minister said:

“We are very clear that all accrued rights should be honoured: a pension promise made should be a pension promise kept…we would not make any changes to pension rights that have already been built up. I have confirmed that I regard accrued index-linked rights as protected.”

That is quite clear, I think, but today the Minister has confirmed that people who have paid into the state second pension, the state earnings-related pension scheme or a public sector pension throughout their working life will see their pension in retirement uprated by CPI, not RPI, as they had thought, which changes the rules of the game for pensioners and those coming up to retirement.

In just one week, we have seen the Lib Dems break their promises to students and to pensioners. The Minister will know, but for the benefit of others I shall remind him, that I have written to him to ask him to set out why he believes that CPI is a better measure of inflation for pensioners. I have copied that letter to the UK Statistics Authority, which on 6 October said:

“We believe that the CPI should become the primary measure of consumer price inflation but only when the inclusion in the index of owner occupiers’ housing costs has been achieved.”

I have not had a response to that letter, and given his attempt at explaining today, it is clear why.

The Minister has not produced any evidence to justify the change in indexation. Indeed, for pensioners and low-income families, average inflation is more than RPI and CPI, because of fuel and food costs. It is entirely disingenuous for him to claim that CPI is a better measure of inflation for pensioners when, in reality, pensioner incomes will be lower as a result. It is disingenuous as well to argue that CPI is a better measure of inflation than RPI for those on benefits. Those in that group spend more on food and fuel, so the average inflation is higher, not lower, than either RPI or CPI. Age UK says that CPI is not better, and that evidence is backed up by the Institute for Fiscal Studies. It adds that older people tend to spend more on essentials such as food and fuel, and still spend on housing costs such as council tax. I ask the Minister now, what evidence—not assertion, but evidence—is there that CPI better reflects inflation for pensioners and low-income families?

It is not just pensioners for whom this uprating makes no sense. The Government have said that, from 2013-14, they will uprate local housing allowance by CPI, rather than local rents, meaning a total disconnection between local housing markets and the housing allowance. The long-term consequences are likely to be dire, so will the Minister confirm whether that will be a permanent shift and whether he is comfortable that pensioners and low-income families risk losing their homes because of changes in rents over which they have no control?

The Government enthusiastically talk about making work pay—we would all support that—but we also hear today that they have said that they will freeze working tax credit but uprate jobseeker’s allowance. Does that not mean that the gains from moving into work will shrink every year? Will the Minister explain how that is compatible with the drive to get people back to work?

Finally, does the Minister agree with the Child Poverty Action Group, which says that the

“effective inflation rate for the poorest households was higher than RPI in recent years when the cost of basic essentials like food and domestic fuel rose much faster than other prices”?

It adds that CPI uprating will make inequality and poverty worse.

[Steve Webb]

I am grateful to the hon. Lady for her questions. The CPI

“is more reliable because, taking account of spending by all consumers, this consumer prices index gives a better measure than the old RPIX measure of spending patterns. It is more precise because… it takes better account of consumers substituting cheaper for more expensive goods.”—[Official Report, 10 December 2003; Vol. 415, c. 1063.]

How right the previous Prime Minister was when he said those words.

There is a sensible debate to be had about the most appropriate price index. The hon. Lady said that pensioner inflation is always higher. I did not notice the previous Government using a higher inflation measure for pensioners in the 13 years during which they decided these things. In fact, over the past 20 years—not the past five, which Age UK used—the average pensioner inflation and the average non-pensioner inflation were the same. In other words, there are times when it is higher and times when it is lower, as we would expect, but in the long run they are the same. Previous Governments never used pensioner-specific inflation rates; nor do we propose to.

It was good of the hon. Lady to say that she would consider the CPI for this Parliament. Obviously, we are announcing today the benefit rates for next April, so I am assuming that, in the event that the House comes to vote on these matters, she will support the benefit rates that we are proposing. It was not entirely clear to me whether she was for them or against, but I hope that, in due course, it will be clear.

The hon. Lady asked about the use of the RPI and felt, I presume, that it is a better measure of inflation. Does she believe that in the year to September 2009 pensioner inflation was negative? I have never met a pensioner who thought that their inflation was negative. The goal is to use an index that matches inflation experiences, and that is what we have done.

The hon. Lady mentions the IFS and its views on the issue. The main difference between the CPI and the RPI is not the basket of goods but how the two indexes respond to price increases. The IFS found that the substitution effect used in the CPI is a better measure for lower-income households, so its judgment is that, on that key difference, the measure that we are using better fits the inflation experience of lower-income households. I am glad she cited the IFS, because it was right on that point.

The hon. Lady raises the issue of people meeting their fuel bills, and, as my right hon. Friend the Prime Minister said, the cold weather payment is one of Labour’s ticking time bombs. This winter, it was due to fall to £8.50 a week. That was in the spending plans, but my right hon. Friend the Chief Secretary to the Treasury and my right hon. Friend the Secretary of State for Work and Pensions agreed that it was not fair—that paying people £8.50 a week this year would not be acceptable. So, we found the money to set it at £25 a week not just this winter, but for the whole Parliament, and pensioners on low incomes are better off as a result.

The hon. Lady asks about the net effect of the changes, glossing over the earnings link, which, mysteriously, was Labour policy but never implemented in 13 years. It is funny how things become implementable in opposition but not when one controls the levers of power. The earnings link on average gives about 2% a year above prices; the CPI change on average gives about 1% a year less than the RPI. So for those with low and modest occupational pensions, the net effect on pensioners of the two taken together will be positive.

We have a package of measures to protect the interests of pensioners. The earnings link over the long run will give a newly retired pensioner an extra £15,000 in state pension over their retirement, compared with the prices indexing that Labour, when it had the levers of power, applied for 13 years. That is what it applied in office for 13 years: the prices link. Within months, we have gone to the earnings link, and pensioners will appreciate what we have done for them.

[Jonathan Evans (Cardiff North) (Con)]

Does my hon. Friend have constituents like mine, who are looking forward to increases in SERPs, and who have looked at what they received last year when the RPI was negative and the CPI was positive? Labour Members back then proposed no increase whatever in those pensions. At the same time, looking over 10 years, is it not a little disingenuous to fail to take into account what has happened to house prices over the past decade? It is unlikely to be replicated in the next decade.

[Steve Webb]

I am grateful to my hon. Friend for that point. Many of the letters that I signed as a new Minister were to people complaining about the April 2010 non-increase in pension rates because they were linked to the RPI, which was negative. One of the worst things about using something that is so heavily affected by mortgage interest rates is that a pensioner with savings not only fails to benefit from falling mortgage rates, but is penalised by falling savings rates, so they get a double whammy. Neither factor will affect the CPI.

[Ann Coffey (Stockport) (Lab)]

The Minister in his statement said that he will continue to freeze the savings credit maximum, and the reason he appears to give is that over time the savings credit has resulted in more and more pensioners becoming caught up in a means-tested system. Is not another way of looking at the situation the fact that, in future, fewer pensioners on low income will be eligible for pension credit?

[Steve Webb]

I am grateful to the hon. Lady for her question. She is right: last year the savings credit maximum was increased—by 12p, and by 6p for a couple, so it is important to keep what we are doing in context. If, however, she is accusing us of shifting the balance between means-tested benefits and universal benefits such as the state pension, I plead guilty. We have chosen to focus scarce resources on the basic pension through the earnings link and to constrain the rise in savings credit, which is a relatively ineffective way of reaching poorer pensioners. It has a take-up rate of barely 50%. Half the people who are entitled do not even have it; everyone claims their pension.

[Jenny Willott (Cardiff Central) (LD)]

As the Minister said, the move from RPI to CPI will lead to much more stable increases in the uprating of benefits and pensions, and the triple lock will ensure that pensioners do not fall behind the rest of society. Some concerns have been raised, however, because the CPI does not include any costs associated with housing. The Government have announced plans to consider including some housing costs in the CPI calculation, but when does the Minister expect that to be done, and what impact is it likely to have?

[Steve Webb]

I am grateful to my hon. Friend, who is right that CPI rises tend to be more stable compared with the surges and freezes that we had with the RPI. On the point about the inclusion of housing in the CPI, costs in the form of rents are in the CPI already, so that is covered for lower-income renters. The CPI advisory committee is undertaking a two-year programme to see how housing costs might be included, but it has already ruled out directly including mortgage interest payments specifically, which will help with the issue that we have raised. As and when the Office for National Statistics comes up with alternative measures, we will certainly look at them, but that is without prejudice at this stage, because the work is ongoing.

[Hywel Williams (Arfon) (PC)]

The Minister draws attention to the restoration of the earnings link and to Labour’s failure over 13 years to make that important change, but does he not feel a little uncomfortable about being in cahoots with the party that broke that link in the first place?

[Steve Webb]

What is a great source of pride to me is being part of a coalition Government who are restoring the earnings link. I assure the hon. Gentleman that, although the measure was certainly in the Liberal Democrat manifesto, if the Chancellor of the Exchequer had not been happy with the plan, it would not have happened.

[Brandon Lewis (Great Yarmouth) (Con)]

Does my hon. Friend agree that one real benefit to pensioners that will result from today’s statement is that it gives them certainty and stability, something that, to their frustration, has been lacking over the past couple of years because of the measly and in some ways insulting changes that were made to their scheme?

[Steve Webb]

My hon. Friend is right. The nature of the triple guarantee is that, whatever happens to earnings and prices, pensioners will be guaranteed a 2.5% rise. Picking up on one of the points that the Opposition spokesperson, the hon. Member for Leeds West (Rachel Reeves), made, I should say that the previous Government, in their spending plans, pencilled in a 2.4% rise in 2012. I have no idea what prices or earnings will be next year, but I do know that 2.5% is bigger than 2.4%.

[Paul Flynn (Newport West) (Lab)]

If a private company alters its contractual obligations to pay its customers, it is likely to end up in court on a charge of fraud. The Secretary of State admits that CPI increases at a slower rate than RPI. Is not the measure just a simple theft of money from pensioners?

[Steve Webb]

No, it is not. Each year the Secretary of State has a duty to assess the general increase in prices; that is what the law requires him to do. If the law required him to link state pensions, for example, to RPI, that would be a different matter, but that is not the duty. The duty is to assess inflation fairly, which is what we are doing. I also announced today that, when companies have RPI written into their rules and no provision for changing those rules, the Government will not allow schemes to change them, precisely for the sorts of reasons that the hon. Gentleman mentions.

[Damian Hinds (East Hampshire) (Con)]

My hon. Friend rightly identified in his statement that the upratings policy forms part of a much wider review of social security policy, which will include major investment in the radical universal credit. Which elements of the Government’s programme does he think will have the most impact on people of working age?

[Steve Webb]

I am grateful to my hon. Friend for stressing that, as well as setting benefit rates, the Department, led by my right hon. Friend the Secretary of State, is looking at major structural reform to ensure that work pays. The hon. Member for Leeds West asked about making sure work pays, and we need to ensure that the move into work is seamless, people know what they will get and there are not the complexities of multiple withdrawal rates. I think that history will judge this Department and my right hon. Friend’s record very favourably for putting in place the structural reform that has been overdue for far too long.

[Helen Goodman (Bishop Auckland) (Lab)]

The Minister is very good at giving long, process answers to our questions, but I should like to ask him one simple, factual question. How much does he forecast the average pensioner losing over the next five years due to the switch from RPI to CPI?

[Steve Webb]

My forecast is that the average pensioner will gain from our announcements today. I understand why the hon. Lady wants to pick out one little bit, but she knows that the average pensioner draws a basic state pension, which we have restored to earnings, which more than offsets any change to CPI.

[David Rutley (Macclesfield) (Con)]

The Minister rightly reminds the House about the importance of the triple guarantee, which will protect the value of state pensions. What feedback has he had on that important announcement?

[Steve Webb]

I am grateful to my hon. Friend. I regularly meet pensioners groups throughout the country, and he will be reassured to know that the restoration of the earnings link has been universally well received.

[Mark Durkan (Foyle) (SDLP)]

The Minister will be aware that some of us who now sit on the Opposition Benches never believed that CPI was a better measure because of the fact that it tended to give a lesser increase. However, we do not deny the worth of the triple guarantee. If his concern is to protect the basic state pension, will he address the needs of those people who do not receive its full value because of the high rate of contracted-out deductions? Many people suspect that the rate of deductions is excessive and punitive, and some say that it represents a marginal tax rate of 80% or 90% on their basic state pension.

--- Later in debate ---

[Steve Webb]

Obviously, contracted-out deductions apply not to the basic state pension, but to the additional state pension. The idea of contracting out is that a scheme that offers to provide earnings-related pensions must promise to match the benefits that the state would otherwise have provided. That may not be well understood, but such schemes and the employees who use them pay less national insurance, in return for which, the scheme promises to match what the state would have provided. I do not recognise the hon. Gentleman’s description, but if he writes to me with specific examples, I am happy to look at them.

[Sheila Gilmore (Edinburgh East) (Lab)]

I have been contacted by a large number of constituents who are public sector pensioners, because they are extremely concerned that the pensions to which they have been contributing and which they thought were guaranteed to increase in a certain way should be changed by the Government without any justification. Why is it felt necessary to do that? If it is so good to triple-lock the basic state pension, why is it not equally good for public sector pensioners?

[Steve Webb]

To take the hon. Lady’s second point first, if we were to earnings-link all public sector pensions in payment, it would cause a massive increase in unfunded pension liabilities. She has just spent billions upon billions of pounds, apparently casually, but I am afraid we are not in a position to do that. We have done what Governments have always done, which is to assess the general increase in prices, make a figure for inflation and apply it consistently—in this case, to all social security benefits, tax credits and earnings-related pensions. By statute, public sector pensions are linked to what we do to additional pensions. What we are doing for contracted-out public sector pensions is therefore exactly what we are doing for contracted-in additional pensions.

[Jim Shannon (Strangford) (DUP)]

The hon. Member for Edinburgh East (Sheila Gilmore) asked about pensioners. What pensioners and this House need to know is the difference that is made in monetary terms when pensions are calculated using CPI rather than RPI.

[Steve Webb]

Under the triple lock, the increase will be determined by whichever is highest between earnings, prices and 2.5%. In the long run, the earnings figure is almost invariably higher than the prices figure, so regardless of which measure of prices is used, we will use the earnings figure. As I have said, CPI for additional pensions is about 1% a year lower. The average occupational pension in payment is about £70 a week, 1% of which is 70p a week. Under the triple lock, as I have just announced, the pension is going up by £4.50. That shows the great advantage of the triple lock.

Bill Presented

Armed Forces Bill

Presentation and First Reading (Standing Order No. 57)

Secretary Liam Fox, supported by the Prime Minister, the Deputy Prime Minister, Secretary William Hague, Secretary Kenneth Clarke, Secretary Theresa May, Secretary Vince Cable, Mr Secretary Mitchell, the Attorney-General and Mr Andrew Robathan, presented a Bill to continue the Armed Forces Act 2006; to amend that Act and other enactments relating to the armed forces and the Ministry of Defence Police; to amend the Visiting Forces Act 1952; to enable judge advocates to sit in civilian courts; to repeal the Naval Medical Compassionate Fund Act 1915; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 122) with explanatory notes (Bill 122-EN).

Social Fund Budgeting Loans

Steve Webb Excerpts

Monday 6th December 2010 Written Statements

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

The social fund helps people to meet additional costs they may find it difficult to budget for. This is especially true when people on the lowest incomes are facing difficult and expensive times in their lives such as having a child or paying for a relative’s funeral.

This is why, in the forthcoming Welfare Reform Bill, we will introduce legislation to make social fund budgeting loans available to help families to buy maternity items or items for a new baby or to help them towards meeting some of the costs of a relative’s funeral. This help will be available in addition to the Sure Start maternity grant and the social fund funeral payment from late next year.

Active at 60 (Community Agents)

Steve Webb Excerpts

Tuesday 23rd November 2010 Written Statements

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

Today, I am pleased to announce that the Government are providing £1 million to help older people keep active and make the most of their later lives. This money is available for local community groups or organisations within 30 selected areas¹ to bid for small grants of between £250 and £3,000.

Each local community group within the selected areas will recruit at least one Active at 60 Community Agent who will volunteer their time to help motivate, encourage and organise people within their own communities to become more active, physically, socially and mentally. Active at 60 Community Agents will be from the communities they are helping, and will have the flexibility to design innovative ways of encouraging and inspiring activity to help improve people’s later lives.

Through the Active at 60 Community Agent initiative those people who are more at risk of social isolation in their later lives will be supported in becoming more active, independent and positively engaged with society. Active at 60 Community Agents will help people within their communities:

take the first step in trying something new

understand the benefits they can get from being more active, engaged and contributing to their communities

build social contacts to help make being active part of their routine

This project is part of the Government’s ambition to build a big society in which power is transferred from Whitehall to local communities, and organisations and voluntary groups play a far greater role in their community.

¹ The following areas have been selected on the basis of level of deprivation and age structure, while ensuring a broad split across the English regions, encompassing both rural and urban areas:

Liverpool, Middlesbrough, Hackney, Sandwell, Kingston Upon Hull, Nottingham, Bournemouth, Southend-on-Sea, Brighton and Hove, Redcar and Cleveland, Wirral, Doncaster, Cornwall and The Isles of Scilly, East Sussex, Norfolk, Herefordshire, County of Lincolnshire, Enfield, Knowsley, Blackpool, Manchester, Stoke-on-Trent, Birmingham, Salford, Hartlepool, Tower Hamlets, Wolverhampton, South Tyneside, Rochdale, Sunderland.

Oral Answers to Questions

Steve Webb Excerpts

Monday 22nd November 2010 Commons Chamber

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

1. What recent assessment he has made of the effect of trends in longevity on his Department’s expenditure on pensions.

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

Between 2004 and 2008, our estimates of life expectancy at pension age rose by more than a year. For those who reach pension age this year alone, that will add £6.5 billion to their expected pensions over their lifetimes.

[Paul Uppal]

Does not increasing longevity make even more urgent the Department’s plans to get more people saving for their old age?

[Steve Webb]

My hon. Friend is absolutely right. We have taken forward plans introduced by the previous Government for automatic enrolment into workplace pensions, so that as people are working for longer, they can still retire on decent pensions, through more workplace saving.

[Tony Lloyd (Manchester Central) (Lab)]

Everybody recognises that increasing age has an impact on the funding of pension schemes, but does the Minister accept that there is a huge difference between a population such as the one that I represent, in which life expectancy is some 10 years less for males and roughly the same for women, and those populations with the highest life expectancy in the country? Simply increasing the state retirement age has an unfair impact on communities such as mine.

[Steve Webb]

The hon. Gentleman raises an important point, and it is one that we are aware of. However, he will be encouraged to learn that in the past decade, life expectancy for both manual workers and non-manual workers, for example, has risen by two years for men. Although there are still differences, both groups are seeing improvements in life expectancy.

[Mrs Anne McGuire (Stirling) (Lab)]

2. What steps his Department plans to take to assist employers to provide real-time pay data for universal credit computations.

--- Later in debate ---

[Michael Dugher (Barnsley East) (Lab)]

6. What estimate he has made of the likely effects on his Department’s expenditure on out-of-work benefit payments to residents of Barnsley East constituency of implementation of the changes announced in the comprehensive spending review.

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

Although estimates of expenditure savings are not available at constituency level, the impact of the changes has been published at the UK-wide level on the website of Her Majesty’s Treasury.

[Michael Dugher]

Is the Minister aware of last week’s report by Professor Steve Fothergill of Sheffield Hallam university, which showed that in areas like my own, private sector employment is unlikely to rise significantly in the next few years? Is it not the case that unemployment will increase, as will benefit payments, in areas like my own, because of the ending of the future jobs fund, the ending of the working neighbourhoods fund and the massive cuts to the local authority, with consequent effects on local employment?

[Steve Webb]

The hon. Gentleman is right to stress the importance of private sector employment, which is why I looked at the situation in Barnsley East. I found that the year to March 2010 saw an increase in employment of more than 3,000. I therefore think that it is vital not to talk down economic growth, because the private sector is creating jobs, including in Barnsley East.

[Jenny Willott (Cardiff Central) (LD)]

7. What discussions he has had with representatives of the social care sector on the cost of mobility support for disabled people.

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

The Government remain committed to involving disabled people when developing their policies, and I can tell my hon. Friend that we discussed the care homes measure with a number of disability organisations at the Department for Work and Pensions policy and strategy forum on 16 November.

[Jenny Willott]

We have already heard a number of concerns raised today about these particular proposals. I understand the Government’s rationale, but what consideration has been given to ensuring that residents in care homes who currently receive mobility disability living allowance will still be able to buy Motability cars, and scooters where appropriate, so that they can remain as independent as possible?

[Steve Webb]

My hon. Friend has raised an important facet of these changes, and I can assure her that the Department is already in discussions with Motability about how it might be handled.

[Ms Margaret Ritchie (South Down) (SDLP)]

Have the proposals for disability living allowance been subject to an equality impact assessment, and if so, what has been the result?

[Steve Webb]

As the hon. Lady may be aware, when elements are included in primary legislation, statutory equality impact assessments are published at the time that the legislation is published—and will be available to the House.

[Henry Smith (Crawley) (Con)]

8. What recent progress his Department has made on delivering its Work programme.

--- Later in debate ---

[Mr David Ward (Bradford East) (LD)]

18. What assessment he has made of the likely effects of his proposed reductions in housing benefit entitlement on jobseeker’s allowance claimants who have been unable to find work for more than 12 months.

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

The detailed design of the measure is still being developed and we are carefully considering its impact. We will publish a full impact assessment to accompany the relevant legislation when it is introduced in Parliament.

[Mr Ward]

The proposal is obviously designed as a work incentive measure, but it could be argued that any claimant affected will represent a failure of the measure to get people back into work. What steps is the Minister taking to ensure that anyone who is affected is genuinely unwilling to find work?

[Steve Webb]

My hon. Friend raises an important point. The key is to try to stop people being unemployed for 12 months. He will be aware that 90% of those who come on to JSA flow off before the end of 12 months. My right hon. Friend the Minister of State is bringing forward the Work programme, which will help the most hard-to-help groups before the end of the 12-month period to give them the maximum chance of not being in that position in the first place, which is our priority.

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

There are already single parents in my constituency—not exclusively but in the majority female—who are experiencing serious difficulty in convincing employers that they must have flexible working to maintain their child care. What are the Government doing to ensure that employers are aware of their responsibility, given the draconian effects of the proposed reduction in JSA?

[Steve Webb]

The hon. Lady is right to point out the importance of a flexible jobs market. The good news is that a large proportion of the new jobs that are being created are part-time jobs that will be of particular benefit to lone parents. The Government will consult on the right to request flexible working in the coming year.

[Hywel Williams (Arfon) (PC)]

The number of job applicants and the number of posted job vacancies varies widely from constituency to constituency and country to country. Is it fair to apply a universal rule to all claimants when their ability to comply with that rule varies so widely?

[Steve Webb]

The hon. Gentleman will know that Jobcentre Plus advisers already have a good deal of discretion in how they respond to individuals to reflect individual circumstances. We are keen to see that measures such as the Work programme are tailored to the individual so that they can address the particular problems that they face. If those problems involve transport or a lack of very local job vacancies, they can be addressed through the Work programme.

[Caroline Dinenage (Gosport) (Con)]

19. What recent assessment he has made of the value for money delivered by the flexible new deal programme.

--- Later in debate ---

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

T9. Is the Minister aware that his own Department’s statistics show that the impact of restricting local housing allowance to the 30th percentile in Glasgow is that 92% of recipients in one-bedroom properties will lose out by, on average, £7 per week? The Glasgow Housing Association told me on Friday that that is likely to lead to higher levels of rent arrears and lower levels of available investment for its properties. Does not that show how unfair and badly designed the proposals are?

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

I can only agree entirely with the hon. Gentleman on the manifesto on which he stood for election, which stated that we have to cap the rents that we are paying. His analysis assumes a static situation in which rents do not change. The Department puts more than £21 billion into the local housing allowance. If we changed the rules for that, we would change the market. We are trying to put pressure on rents so that they will go down, which will improve the situation.

[Guy Opperman (Hexham) (Con)]

T6. The whole House will welcome the news that unemployment is on the decline and look forward to the introduction of the Government’s Work programme. However, my right hon. Friend will be aware of the particular issues facing the north-east. What steps is he taking to ensure that there is support in the meantime for those seeking employment in the region?

[Malcolm Wicks (Croydon North) (Lab)]

As the Secretary of State and his team develop their longer-term thinking on social security, including for state pensions, what emphasis and importance will they place on the contributory principle?

[Steve Webb]

I am grateful to the right hon. Gentleman for his question. We believe that a link between what people put into the system and what they get out of it is important, and we are looking at ways of modernising that principle. He will know that the contributory principle, as it currently exists, was invented in the 1940s when the assumption was that men worked and women stayed at home. We live in a modern world and need to modernise the contributory principle.

[Julian Smith (Skipton and Ripon) (Con)]

T7. What measures will be contained in the Work programme to ensure that the unemployed in rural areas get the help they need?

--- Later in debate ---

[Toby Perkins (Chesterfield) (Lab)]

May I bring the Minister back to the question asked by my hon. Friend the Member for Glasgow North East (Mr Bain) about the cuts to housing benefit? The cuts to local housing allowance are the same cuts that will make people in Chesterfield up to £11 a week worse off. Will the Minister confirm that that was not in the Labour party manifesto and is nothing to do with the cap? Will he set the record straight?

[Steve Webb]

On the contrary. The Labour party manifesto said that people who were in work should not be in worse accommodation than people who are out of work. That implies the 30th percentile change, and that is what we have implemented.

[Dr John Pugh (Southport) (LD)]

What are the Government doing to prevent hardened drug addicts with consequent mental health issues claiming DLA in the normal way, which goes straight into their veins and up their noses? What are the Government doing to improve the situation and stop this waste of public money?

[Chris Williamson (Derby North) (Lab)]

Does the Secretary of State accept that the Government’s plans to accelerate the increase in pension age will come as a cruel blow to a whole generation of women in this country, because the financial reality of motherhood and family life makes it much harder for many women to build up a pension comparable to those of men? What provision is being made for women aged 54 to 59?

[Steve Webb]

I can assure the hon. Gentleman that no woman aged 59 or 58 is affected at all by the changes. However, we are equalising men’s and women’s state pension ages somewhat more rapidly. No one will be affected until 2016, and those who are most affected and who have the longest increase in working life will have a period beyond 2016, so they will have at least seven years’ notice of the change.

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

I warmly welcome the long-overdue review of the work capability assessment, but does the Minister agree that there are problems after the assessment, and that the time spent going through appeals and tribunals is far too long? What steps is his Department taking to rectify that?

Housing Benefit (West Ham)

Steve Webb Excerpts

Monday 22nd November 2010 Commons Chamber

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

I congratulate the hon. Member for West Ham (Lyn Brown) on securing this important debate and on her track record of raising such issues in the House—as she said, from the Government Benches, which are indeed still here. I agree with a good deal of what she has said in the past about the issue. Two years ago she told the House:

“My message is that the housing benefit system is in desperate need of reform.”

She then quoted one of her constituents, who had said that they were

“trapped in benefits, prevented from returning to work—all my wages would just go to pay the rent and I would be worse off.”—[Official Report, 5 November 2008; Vol. 482, c. 293-94.]

I suppose I was hoping that today she would come up with some suggestions for how housing benefit should be reformed to address those problems. In anticipation of her speech, I checked what the Labour manifesto said on the subject. Surprisingly, I found that I entirely agreed with that as well. It said:

“Housing Benefit will be reformed to ensure that we do not subsidise people to live in the private sector on rents that other ordinary working families could not afford.”

The basis for one of the key reforms to which the hon. Lady referred and which has most impact in Newham is the switch to paying rent based not on the 50th percentile, which is the current regime, but on the 30th percentile, which is more or less the typical rent for a low-income working household. That seems to be, almost verbatim, the policy on which she stood at the last election and which we are now implementing. Yet she is saying that the impact of that will have the single biggest impact on her constituency because the cap overall has relatively little impact, and that she now opposes that policy. I am not entirely sure that that is consistent.

The hon. Lady was critical of the universal credit, which my right hon. Friend the Secretary of State has proposed and which is designed to address just the sort of barriers to work that she is worried about by reducing withdrawal rates, albeit relatively modestly, and reducing barriers to work so that when people such as her constituents take jobs they will know that they are better off. I hope that on reflection she will be more charitably disposed to those reforms.

I will not dwell at length on the reasons for the reform, because time is limited, but it is true that cost is one. Housing benefit costs have risen by £1 billion a year in each of the past five years, partly due to the recession, but also to rising rent levels, so there is a need for action. But the issue is not just about cost; it is about fairness. The hon. Lady did not address why it is fair that someone on benefit, albeit not through any fault of their own, should have a wider choice of properties than someone in a low-paid job, and that is how the current system works. That is the current regime.

[Lyn Brown]

My basic tenet is that it is not possible to exist with the universal cap level and pay the rent of a London property, whether it is a two-bedroom flat over a fish and chip shop in Green street, or somewhere a little more palatial, perhaps further out. The taper in the benefit system, which the Minister rightly said I spoke about previously, is a disincentive for people who are trying to work, but we now have a cap and there will be no opportunity for them to negotiate their rent downwards. I cannot see how the reform that the Minister talks about will improve matters at all.

[Steve Webb]

With respect, the hon. Lady is conflating about three different changes. The universal credit is nothing to do with the cap. It is a separate proposition, and the details are yet to be announced. We have already announced exemptions, and people in work who receive working tax credit will not face the cap at all. That is part of the response to her point. No one in work and receiving working tax credit will be affected by the overall benefit cap, nor will anyone on disability living allowance, but the details have yet to be worked out. The universal credit—not the universal cap—is a separate reform designed precisely to address the points that she raises.

I shall try to respond to some of the more specific issues that the hon. Lady raised about her constituency. Our estimate is that in her borough of Newham, 32% of properties in the private rented sector will be available to people on local housing allowance.

[Sheila Gilmore (Edinburgh East) (Lab)]

Will the Minister give way?

[Steve Webb]

I have only six minutes left in which to respond to the hon. Lady, and it is probably important to do that rather than to respond to another hon. Member.

I have explained our broad estimate. A good proportion of rental properties will be available throughout the borough, but I agree that we do not want constant moves. No one wants that. The challenge is to ensure that when people enter a tenancy agreement they do so sustainably. All we are trying to do is to ensure that the choices made by people on benefit at the start of a tenancy, when they choose a property and a rent, involve the same constraints as for someone in low-paid work. The change is not designed to be penal; it is designed to be fair and equal. That is the idea.

The hon. Lady cited a figure of 82,000 people being at risk of losing their home, but that was based on London Councils research and not that of the Department for Work and Pensions, and it was based on a fairly low response rate from landlords. Moreover, landlords are bound to say that they do not want any reform that is going to cap what they get. Landlords have been the principal beneficiaries of the local housing allowance system. We have already seen private sector rents falling in the past 18 months, yet the rents paid to people on LHA have been going up. Through housing benefit and LHA, we are putting more than £21 billion a year into that market, and it would be implausible to suggest that we are not having an effect on it.

We believe in trying to restrain the growth in rents, although in four years’ time, we will still be spending more in cash terms on housing benefits than we are this year. I think that the hon. Lady used the term “swingeing cuts” about something else, but these are not swingeing cuts. This is about restraining the rate of growth of housing benefit, so it is a far more modest reform than she suggests.

The hon. Lady raised the issue of slum landlords, for whom we have no time, and one of the things we want to do is to change landlord behaviour, which is crucial. We are considering whether, by paying housing benefit directly to landlords, we could use that leverage to try to get rents down. Yes, some people might face shortfalls—I accept that point, although I think that the figures might sometimes be exaggerated—but we are not in a static situation. The question is: what happens next? If landlords, particularly those renting to housing benefit and LHA tenants, see that we are not simply going to follow the market up, that could change rent-setting behaviour.

The hon. Lady made a point about the consumer prices index, and about the way in which we are going to index LHA in the future. Her view seemed to be that we should simply follow the market, but we think that that has been the biggest problem with LHA over the years. We have actually stoked up the market, and then increased LHA to keep pace with the market, so that rents keep rising. We are not getting good quality accommodation, however; we are simply driving up rents, and that is not what we want to spend public money on.

I want to come back to the hon. Lady’s point about constant moves and people being constantly moved around an area. Clearly, there is an issue about the transition to the new regime, and we are trebling the discretionary housing payment system. More of that money will go to boroughs such as her own and to other inner London boroughs that are most affected, because we want the particularly hard cases, where people are particularly affected by the changes, to have extra resources to deal with that. However, the long-term goal has to be to try to get rent levels under control, rather than to keep stoking them up.

The hon. Lady referred in the debate in 2008 to the impact of high rents in temporary accommodation. She said:

“My constituents are virtually imprisoned by the excessively high rents charged for temporary accommodation”.—[Official Report, 5 November 2008; Vol. 482, c. 293.]

She was absolutely right, and in April 2010, a cap was introduced on the rents in temporary accommodation. Since then, the early evidence has shown that the rents in those properties have started to fall, so we have a precedent for what we are doing now. This is not nationwide, systematic evidence, but the early evidence suggests that what we are saying will happen in the wider market is already happening in the temporary accommodation market. That is what we as taxpayers, and as people who are concerned about our constituents, want to see. We want to see more of our money providing accommodation for people, and less of it simply stoking up the private rented sector.

The hon. Lady also raised the issue of the changes to non-dependant deductions. They have been frozen for a number of years instead of being indexed, which would have been a more natural policy, and all we are doing is returning them to the level at which they would have been, had they been indexed. So, yes, there is an increase, but we are simply taking them back to their real value of a few years ago. She mentioned the consumer prices index being applied for ever, but that is not the intention. It will come into the LHA rates in 2013 for two years, and we will then look at the market and the impact of the changes that have been made. So we are trying to introduce a cap and to restrain the rate of growth of rents, but we are trying to do that with some flexibility. We will look at the broad rental market areas when we do that and try to ensure that they fit the local housing market situation.

I want to try to draw some of those threads together. First, it is vital that we do not overstate the impact of the changes. There will be an impact, but some of the numbers that get thrown around, such as 82,000, are an exaggeration. We will see what impact they have, and there is the possibility of different rent levels as a result of the changes. There are also discretionary housing payments. The idea is to get good value for the taxpayer, but not to cause misery for the hon. Lady’s constituents. That is not our intention, and I do not believe that we will do that.

Question put and agreed to.

Pension Protection System (Administration Levies)

Steve Webb Excerpts

Monday 15th November 2010 Written Statements

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

I am pleased to announce that for 2011-12 the rates for both the PPF administration levy and the general levy will remain at the same levels set for 2010-11.

Some of the administrative resource costs of the Pensions Regulator (tPR), the Pension Protection Fund (PPF), the Pensions Advisory Service (TPAS) and the Pensions Ombudsman (PO) are recovered through levies raised on pension schemes. The rates for these levies are set in regulations.

Levy rates in year are set to avoid frequent changes and do not directly reflect forecast future costs but also take into account accumulated deficits or surpluses in expected levy collection. In holding rates stable, the Government are seeking to avoid additional cost pressures on pension schemes. The rates have remained unchanged since 2008; this stability will be welcomed by levy payers, pension scheme trustees, members and sponsoring employers.

State Pension Credit Research Study

Steve Webb Excerpts

Monday 15th November 2010 Written Statements

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

Starting from today, the Government are running a study exercise to look at ways of making better use of the data they hold about individuals, both from DWP administrative records and those of Her Majesty’s Revenue and Customs in order to help improve take-up of pension credit.

This study has been designed to meet the following objectives:

Provide information about how people might feel about a system which makes more use of personal information that the Government already hold to pay people pension credit without the need for a claim.

Evaluate ways of using the data available to the Government to improve take-up under the current pension credit regime.

Deliver evidence about how in the long term a reshaping of the benefit or acquisition of better data might enable the Government to streamline radically the process for awarding pension credit.

This study will involve making awards of estimated pension credit to a randomly selected group of some 2,000 pensioners who, based on the personal information held, appear to be entitled to pension credit but not claiming it. These payments of benefit will be made for 12 weeks without those selected first needing to have made a claim. The first payments will be made in December and conclude in March 2011.

At the end of the study there will be a thorough evaluation, with initial findings expected from summer 2011.