Pension Schemes Bill

Debate between Steve Webb and Gregg McClymont

Tuesday 24th February 2015 Commons Chamber

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

I thank the Minister for his explanation of amendment 1 and those with which it is grouped. Let me make a number of points. There are two parts of this Bill, and we will come to the second part regarding the way it interacts with the pension budget flexibilities announced in last year’s Budget in a moment. I would like to put on record my thanks to the other place and particularly those on the Opposition Front Bench who have done such a sterling job on what is often a rather technical Bill. I also want to put on record my appreciation for the work done by Baronesses Drake and Hollis who have done so much to make this a better piece of legislation.

Let me pick the Minister up on a couple of things, particularly around clause 8. He referred in his explanation to clause 8 and the delegated powers contained therein. He will be aware that the debates in the other place focused for some time on the implications of clause 8 because, of course, it is a key and critical provision setting the definition of what are collective benefits, on which the rest of the clauses in part 2, and many of the associated delegated powers, depend. That is why it is so critical in its construct and its definition of the delegated powers associated with it.

In the other place, Baroness Drake made it clear that in her view the power to set regulations under clause 8(3)(b) should be subject to the affirmative procedure because a definition of what is or is not a collective benefit is critical to the whole scope of part 2, which deals with collective benefits. Clause 8(3)(b) would allow the Government to use regulations to avoid schemes being subject to the expense of meeting the detailed requirements set out in clauses 9 to 35 if they are deemed not to be proper collective benefits, but the clause, in granting the Government power to significantly alter by regulation the constituent benefits that are not included in the definition of collective benefits, has the ability potentially to remove members of schemes from the protection of the requirements in the other clauses in part 2.

The Minister will know that this could have considerable implications for members and the scope of the whole of part 2. The potential of this regulation to remove members from the protections they may already have by being in a designated collective benefit scheme which subsequently a change of regulation deems they are no longer in makes it in our view compelling that this should remain a power that is subject to the affirmative procedure. The Government’s reply to the scrutiny from the Opposition in the other place was to say, “Well, the affirmative procedure will be used in first use, but subsequently not,” but surely this is worth considering. I will be interested to hear the Minister’s response.

In the other place, the Government gave a detailed response to this critique. As anyone who reads the debates will see, it revolved around the fact that the first use will be by affirmative procedure, but the affirmative procedure might be used in the first instance on something quite straightforward, such as that an obvious with-profits policy arrangement is not to be included in collective benefits, but the subsequent use of the regulation under the negative procedure might go-to the heart, to something much more fundamental such as an existing collective benefit scheme. We must be aware of the possibility that regulations could be used to weaken the protections scheme members have.

In response to this specific point, Lord Bourne said in the other place that the negative procedure will still provide a measure of protection, but we know that is not the level of protection that would be provided by the affirmative procedure. This is rather technical, but it does bear upon a very important aspect, which is that moving towards a negative position rather than a positive position through an affirmative vote could be a way in which the protections are weakened—I am sure against the Minister’s inclinations and desires. I would appreciate hearing his observations on that part of the debate in the other place.

More widely, much of the debate in the other place on this part of the Bill focused on clauses relating to the duties of fiduciaries or managers of the schemes. The Minister and I have had that debate a number of times, but given all the regulatory complication of setting up the independent governance committees and giving them fiduciary responsibilities to monitor the behaviour of private pension providers while exempting the private providers themselves, this just seems an unnecessary complication. Pensions are complex enough without making them that much more complex. The responsibility should be put directly on the decision makers in the pensions industry by applying a fiduciary obligation not to them themselves, but to trustees to do the job of governance throughout.

The Minister will be aware that Professor John Kay, reporting for the Government—and particularly for the yellow-tinged part of the Government, as the Minister will no doubt be aware—was clear that everyone managing someone else’s money or advising on investment should be subject to fiduciary standards of care. I have argued on a number of occasions—and if it is exhausting for me, it must be exhausting for those listening—for extending a clear fiduciary duty to those who have discretion over the management of other people’s money. The Australians have that principle at the heart of their system, and while that system is not perfect, that aspect of it makes it clear unequivocally that conflicts of interest must be resolved in favour of beneficiaries.

I am not expecting the Minister dramatically to change course at this stage, but I would just point out that the Financial Conduct Authority’s recent investigations into the pensions industry have provided substantial arguments in favour of the proposition that I and others have been advancing. We have now had numerous reports on how the market is not serving pension scheme savers well, whether they have legacy schemes or annuities, owing to a lack of transparency, charges and many other factors.

[Steve Webb]

As the hon. Gentleman says, we have discussed these issues before. Will he just clarify which of the amendments he is referring to, so that I can respond helpfully to him?

[Gregg McClymont]

I was referring to clause 8, to which the Minister has also referred, as well as referring to that part of the Bill more widely where it pertains to governance. I am sure that the Minister will be weary of the debates that we have had on these issues, and that he will be keen to set out his current thinking on this aspect of the Bill. He will be aware that this issue is central to his ambitions for collective defined contribution. If it were not, he would not have set out the Bill in this fashion.

I should like to put on record again my thanks to the other place and in particular those on the Opposition Front Bench, including the good Baroness Drake and the good Baroness Hollis. I am grateful, too, for the constructive spirit in which the Government in the other place have approached the Bill. I look forward to hearing the Minister’s observations on the issues relating to delegated powers and, more widely, on the governance of the pension schemes that he rightly wants to make permissible under the Bill.

[Steve Webb]

I shall respond briefly to the issues that the hon. Gentleman has raised. I am grateful to him for his comments, and I should like to extend my thanks to our noble Friends in another place for bringing the Bill forward on our behalf. I also share his respect for his colleagues, Baroness Drake and Baroness Hollis, for their knowledge and their contribution to the debates.

As the hon. Gentleman says, the issue of whether the affirmative or negative procedure is used in regard to regulations in clause 8 was debated at length. He pointed out that Baroness Drake wanted the affirmative procedure to be used in all cases, while the Government originally planned always to use the negative procedure. The Government then responded to the views of the Delegated Powers and Regulatory Reform Committee and agreed that, on first use, the affirmative procedure would be used. Obviously we could say that everything should always be decided through the affirmative procedure, but there is a balance to be struck here. The Committee wanted that, but the Government do not consider that to be appropriate because we sometimes need the flexibility to act quickly if schemes are being inappropriately caught by the collective benefits definition.

There is always a trade-off in these circumstances. Sometimes in the world of pensions, things happen that we do not expect. People might be in the wrong place, for example, or their rights might be at risk or inappropriately protected, and the Government need to be able to move quickly rather than having to go through the rather lengthy parliamentary process that the affirmative procedure requires.

We accept, however, that clause 8 is a key provision and I can put on record that it is not our intention for members who are in schemes providing collective benefits, and subject to the provisions, suddenly to lose the important protection that the regulations made under part 2 of the Bill will provide. If the situation were to arise in which those protections were to be taken away, we would want to understand the situation and ensure that it was appropriate and necessary before taking action and laying regulations. As the hon. Gentleman said, even under the negative procedure there is scope for praying against the regulations if a particular concern should arise, and for a debate to take place.

Most of my experience has been from the Opposition Benches, and during the passage of primary legislation, the Opposition always seem desperate for everything to be conducted under the affirmative procedure while the Government want nothing, but many of the affirmative statutory instruments that the hon. Gentleman and I have dealt with, over the past however many years it has been, have been over in 10 minutes. We get very exercised about the need for affirmative scrutiny, but when we get to that scrutiny, it can occasionally border on the desultory. I hope that we are striking the right balance in recognising that these are important matters and providing affirmative protection on the first use and further parliamentary scrutiny on any subsequent use through the normal processes.

--- Later in debate ---

[Steve Webb]

This group of amendments relates primarily to the new pensions freedoms announced by the Chancellor in the Budget last year, which will generally come into effect on 6 April this year. I shall begin with the pension guidance and guarantee, now known as Pension Wise, covered by amendment 10 and amendments 66 to72. The Government intend that all those who stand to benefit directly from the new pensions flexibilities provided by the Taxation of Pensions Act 2014 should have access to guidance. The amendments to clause 47 and schedule 3 are technical amendments to ensure that that is the case.

The amendments adjust the definition of pensions guidance in new sections 333A and 137FB of the Financial Services and Markets Act 2000 to extend pensions guidance to survivors of members who have flexible benefits, rather than just the members of pension schemes. This is needed because in some circumstances pension schemes may provide benefits to survivors of members of the scheme other than insurance-based products or cash lump sums—that is, flexible benefits—without their becoming members of the scheme.

Amendments 11 to 18 and amendment 50 provide advice safeguards. Clauses 48 and 51 were amended in the Lords via Government amendment. These contain the provisions creating the advice safeguard, which requires schemes to check that financial advice has been received before an individual exchanges their safeguarded rights for those that can be taken flexibly. Clause 48 makes provision for Great Britain, while clause 51 makes corresponding provision for Northern Ireland. Amendments 11 and 15 improve the drafting of clauses 48 and 51, while amendments 12 and 16 ensure that the requirement to take advice also applies when a member takes an uncrystallised funds pension lump sum from benefits that are safeguarded.

On Report in the other place, a second group of amendments to those clauses were made in response to the recommendations of the Delegated Powers and Regulatory Reform Committee. Amendments 13 and 17 specifically provide for the only exception to the advice requirement that is intended to be in effect by 6 April—namely, an exemption from checking that advice has been received in the case of those with safeguarded wealth of £30,000 and below. Amendment 50 provides that regulations creating this exception are subject to the negative procedure, while regulations creating any other type of exception are subject to the affirmative procedure.

Amendment 14 provides more detail on the nature of the “appropriate independent advice” that is to be required under the safeguard. It provides that “appropriate independent advice” must be given by an “authorised independent adviser”, who has permission under the Financial Services and Markets Act 2000 to carry out a regulated activity specified in regulations. The Financial Conduct Authority sets out the standards for regulated activities in its rules, and that will allow it to set the standards for advice provided under the advice safeguard. Amendment 18 makes corresponding provision for Northern Ireland.

Let me now deal with amendments 19 to 21, 23 to 25, and 38 to 43, which are amendments to clauses 55 and 56, consequential on the Taxation of Pensions Act 2014. They allow a person to leave any remaining money purchase funds to a nominee or a successor. Schemes will be able to offer both nominees and successors a drawdown fund, so they need to be included in the clauses which deal with such arrangements. Amendments to clauses 60 and 61 do the same thing for legislation covering Northern Ireland, while amendments to clauses 72 to 74 make small changes to the definitions of terms used in part 4 of the Bill.

Let me now deal with amendments 22, 26 and 73 to 116, which are technical amendments to reflect the extension of the statutory right to transfer benefits and to ensure that the transfer process continues to operate smoothly after the requirement to take “appropriate independent advice” comes into force in April. Without these amendments there is a risk that the new transfer rights would not operate as intended after the new flexibilities come into force. Schedule 4 of the Bill amends the existing transfer rights provisions contained in part 4 of the Pension Schemes Act 1993 to give scheme members a statutory right to transfer a particular category of benefits, and gives scheme members with flexible benefits a statutory right to transfer these rights up to and beyond their scheme’s normal retirement age. Amendments 73, 92, 94, 96 and 115 would make consequential amendments to reflect numbering changes made elsewhere in schedule 4.

Amendments 22, 82 and 83 ensure that clause 55 and regulations under clauses 56 and 57 override any pension scheme rules which conflict with the statutory right to transfer overriding provisions for the purposes of the definition of “scheme rules”. These provisions amend the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004, while amendments 26, 105 and 106 make corresponding provision for Northern Ireland. Amendment 75 replicates existing powers in the 1993 Act and will be used to preserve the effect of existing regulations under those powers, while amendment 98 makes identical provisions for Northern Ireland legislation.

Amendments 76 and 78 provide powers to extend the period within which a member who has received a statement of entitlement must take the cash equivalent of their accrued rights, and for the right to take the cash equivalent to lapse. Amendment 80 provides a power to extend the time in which the trustees of a scheme must do what the member requires. Amendments 88 and 89 make similar provision to extend time for pension credit members, and for trustees to act on members’ instructions. Amendments 99, 101, 103, 111 and 112 make similar amendments to the corresponding Northern Ireland legislation.

Amendments 79 and 102 make changes to section 98(1) of the 1993 Act and clarify that a member’s right to take a cash equivalent falls away where the trustees’ duty to carry out the member’s wishes is extinguished because they have been unable to confirm that the member has taken appropriate independent advice. Amendments 81, 86, 93 and 95 ensure that the definitions of scheme rules in the 1993 Act and the 2004 Act work for personal pension schemes. Amendments 82, 83 and 105 ensure that the definitions of “scheme rules” in the 1993 and 2004 Acts also apply for personal pensions, while taking account of any provisions that override these rules. Amendments 104, 109 and 116 do the same for Northern Ireland. Amendment 87 inserts a power to disapply the right of a pension credit member to transfer their pension credit rights in relation to prescribed descriptions of persons. Amendment 110 makes a similar amendment to Northern Ireland legislation. The remaining amendments in this group make a number of drafting, technical and consequential amendments to schedule 4 of the Bill.

Amendments 27 to 37 relate to public service scheme transfers. These are technical changes to improve drafting and ensure that the new safeguard applies where it should. The remaining amendments 45 to 48 and 51 to 55 are general amendments to part 6 of the Bill and are what are often known as the “back of the Bill” provisions. Amendments to clauses 80 and 81 would extend provisions to Northern Ireland, while the amendment to clause 84 would ensure that pension flexibilities provisions come into force at Royal Assent. I hope that what I have said has been helpful, and I commend the amendments to the House.

[Gregg McClymont]

The Minister raced through his text, much to the chagrin of the whole House I am sure, as we were enjoying it so much. Let me pick up on a couple of issues. We are dealing with the part of the Bill that has created some complexities because, to put it politely, it dovetails with the 2014 Act. If we were being less kind, we would say that some tensions are created because we cannot examine this Bill while, side by side, scrutinising that Act. I put that point on the record, although it has been discussed previously.

Lords amendments 13, 14, 17, 18 and 50 refer to the much-discussed guidance that those eligible to access their pension pots from April will be offered. The Minister mentioned Government amendments being tabled in the other place. Of course, the amendments are welcome, both as a necessary second line of defence and because they show that the Government are listening to the Opposition in this place and in the other place, and to the campaign led by interested pensions organisations outside the House. Why is it so important to have that second line of defence? As the Government accept, it is simply because it is one thing to offer guidance online from gov.uk, in person from citizens advice bureaux and by telephone through the Pensions Advisory Service, but what happens when an individual discusses buying a product from a provider is another thing entirely.

Much of the debate on this Bill and other pensions Bills in this Parliament has revolved around that issue. According to the FCA studies and a variety of sources, decisions often end up being much more in the interest of those selling the product than those buying it. The Government have recognised that when someone comes to consider buying a product, the provider must check that they have received the appropriate guidance, either from the services I mentioned or from other sources. It is welcome that they have accepted the argument of the Opposition and others on putting in place a second line of defence, which the Minister calls the “advice safeguard”.

That brings us to one question that relates to part of the 2014 Act, as well as this Bill: how do we ensure that individuals are equipped to make what at times are complex financial decisions about what to do with their retirement income? Much of the legislation pertaining to this important aspect lies in the 2014 Act and, on one level, is outwith the bounds of what we are discussing today. But it is important to put on the record that significant questions remain about how the guidance guarantee will work from April. That view has been heard repeatedly from those in the pensions world and I am sure that the Minister, if he is not having sleepless nights about it, is paying close attention to it.

The impact of the new flexibilities, which will be introduced from April, on eligibility for means-tested benefits was the subject of much discussion in the other place. This pertains to the guidance amendments and, more widely, to the 2014 Act, which of course goes hand in hand with the Bill. Baroness Hollis asked a series of important questions of the Minister in the other place and the Government about how this new system of pension flexibilities will work in harness with existing eligibility for benefits and, more widely, with Department for Work and Pensions benefit rules. I have to say that it is not that reassuring to hear from the Minister in the other place that all will be revealed before April. As things stand, there is still no clarity over how the new flexibilities will interact with DWP benefit rules, which will concern the whole House.

Post Office Card Account

Debate between Steve Webb and Gregg McClymont

Tuesday 16th December 2014 Commons Chamber

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

This is a welcome announcement from the Government, especially for all those who rely on Post Office card accounts. Indeed, it is the only sensible decision for consumers, pensioners and small businesses and for the Government. After all, it was this Government who promised to make the Post Office the front office of Government, to the tune of contracts worth £450 million per annum.

In the context of that promise, today’s statement raises as many questions as it answers. This is a not a new contract, but the renewal of an existing contract. What is the value of this new contract to the Post Office relative to the current contract? Where will the £27 million of efficiency savings come from? Does this mean more money for the Post Office or less? Does this statement take the Government closer to or further away from fulfilling their broken promise to the Post Office of an annual income of £450 million from the provision of Government services?

Before this renewal, Government services accounted for about £130 million of Post Office income. What is the total amount of Government income through the provision of Post Office services which will be in place following the contract renewal? Again, does this mean more money or less for the Post Office and for sub-postmasters? The National Federation of SubPostmasters urges the Government to fulfil their promise to deliver £450 million of income per year. Can the Minister be clear to the House about whether the statement takes the Government closer or further away from delivering that promise?

As the Minister knows, the Department for Work and Pensions had several pilots under way, which the Post Office was undertaking on its behalf. Will the Minister update the House on the progress of those pilots? They involved, for example, verification for national insurance and verification of documents for the Pension Service. What stage have those pilots reached, and will they contribute to closing the gap between the promise made and not delivered to the Post Office during the botched privatisation of Royal Mail?

More widely, the Minister rightly reflects on the importance of Post Office card accounts to those with disabilities and to pensioners. The Post Office Local programme is part of the network transformation and can, in some circumstances, reduce the number of counters available that provide privacy to those undertaking POCA business. What is the relationship between the post office modernisation programme and the ability of Post Office card account users to continue to enjoy the privacy that they associate with post office transactions, especially pensioners and the large number of Post Office card account holders who are over the age of 80?

The Minister referred in his statement to the number of transactions undertaken through Post Office card accounts. Does he seek to arrest the decline in usage? Is he clear that there has been a decline both in the number of people using POCAs and the number of transactions? His statement is ambiguous on that point. Finally, will he be clear about whether the Government have a strategy to increase the usage of Post Office card accounts or whether they are happy to let the decline continue?

This is a welcome announcement for all those who use post offices, but as far as we can see, it takes the Government no closer to—indeed, it takes them further away from—meeting that broken promise to the Post Office about Government services and making it the front office of Government. Can the Minister provide clear answers about the value of the contract, what it means for the Post Office’s total income and what it means for all those who care about the Post Office and Post Office card accounts?

[Steve Webb]

I am grateful to the hon. Gentleman for his characteristically enthusiastic welcome for this very important announcement that will help to safeguard the post office network. The big contrast between the past four or five years and the preceding 13 years is the hours that hon. Members are not having to spend running “Save our post office” campaigns. The hon. Gentleman talks about decline. The policy of the previous Government was to have rounds of post office closures; this Government have invested £2 billion in preserving the network. This contract will be a further fillip for postmasters.

The hon. Gentleman asks what we are doing to reverse the decline in Post Office card account use. Back in 2005 there were 4.2 million people using POCAs, and in 2010 there were 3.4 million. Under Labour the number of people using POCAs fell by 800,000, so the idea that continuing decline in the use of POCAs is a new phenomenon is news to me. What is happening is that older pensioners, sadly, die and do not use a POCA any more. Newly retired pensioners tend to be more familiar with banking, so the number of pensioners using the POCA will gradually decline, but when Labour set up the previous POCA contract, it asked the Post Office to migrate 700,000 working-age people off these accounts to save money. In fact, this did not happen. When Labour set the contract, its intention was to reduce the scope.

I made it clear in my statement that we believe we will keep the POCA over the next seven years for pensioners. People of working age, as they come within the scope of universal credit, will need a transactional bank account, so although the most vulnerable universal credit recipients will continue to have access to POCAs, we will seek to ensure that wherever possible people of working age have a transactional banking account that will allow them to benefit from direct debits, budgeting and so on. That is where they want to be.

The hon. Gentleman asked about post office locals. I am advised by my hon. Friend the Minister with responsibility for postal services that customer satisfaction, which is presumably the yardstick in these matters, is up in post office local branches. The hon. Gentleman asked about privacy. Presumably, when customers decide whether they are satisfied or not, privacy is one of the things they consider. In answering our questions, they say that they are more satisfied than they were before the investment went into these post offices.

The hon. Gentleman asked about efficiency savings in the contract. Unlike the previous Government, we do look to make those savings, but we have not reduced the price that sub-postmasters get for each transaction. We could have said to Post Office Ltd, “Save us some money—give the sub-postmasters less”, but we did not do that because the sub-post offices are our priority. He asked about the figure of over £400 million. That is not a target that the Government have set for ourselves.

The hon. Gentleman asked about other services. We are exploring the use of identity-related services at the post office. We run a cross-government service called Tell Us Once for customers to report births and deaths, and we are looking at whether that can be carried out at the post office and linked with ID verification. There is plenty of potential for new services. Driver and Vehicle Licensing Agency counter services have gone into post offices, as has Check and Send, an excellent service from the Passport Office. The crucial thing about this seven-year agreement is that it allows plenty of time for new services to be developed so that our post offices have a long and prosperous future.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 8th December 2014 Commons Chamber

[Steve Webb]

I agree with my hon. Friend in the sense that if one were designing a system from scratch, one would not necessarily design the one that we have arrived at over the course of 50 years. He will be aware, however, that paying for this indexation would cost some half a billion pounds a year, and I do not believe that any party in this House has committed to such an increase in public spending.

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

The state pension and associated benefits are very important to UK pensioners. Will the Minister therefore explain why, following last week’s uprating statement, 1.6 million pensioners will see their state pension income rise by just 87p?

[Steve Webb]

I am surprised that the hon. Gentleman did not raise this point last Thursday when I made an oral statement on this issue; perhaps he heard about it on “Money Box” on Saturday. As he knows, not all pensioners receive the full rate of the state pension. Many people—many women, particularly older women—receive a reduced rate, and, as has always been the case, the increase is proportionate to the rate of pension they receive. They get the same percentage increase; it is lower if they get a lower pension.

Pensions and Benefits Uprating

Debate between Steve Webb and Gregg McClymont

Thursday 4th December 2014 Commons Chamber

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

Every year the Minister comes to the House and declares to what is supposed to be a grateful nation that the wisdom and generosity of the Government is reflected in the uprating of pensions and benefits. Sadly, the reality is rather different. The Minister said at the end of his statement that “no one is left behind”, and he rushed through the Government’s changes to working-age benefits. How do those who are working or looking for work feel about the fact that the benefits they rely on are being raised by only 1%? It is the price of economic failure. Those individuals are the same individuals who are suffering the consequences of the hated and ludicrous bedroom tax. Let us get this in context: the Government are not treating people equally. The statement makes that clear.

Some £25 billion extra has been spent on social security since 2010 because of the Government’s failures. In the end, Government spending on the most vulnerable in our society—pensioners, those looking for work and those who rely on other benefits—depends on how the economy is performing. The Government have borrowed £219 billion more than they predicted they would in 2010. Is it any surprise that those in need are not seeing the benefit?

May I pick the Minister up on his wonderful use of the term “over-indexing”? In the context in which he uses the term, “over-indexing” means simply that earnings growth has been so weak and paltry under the Government that, to ensure that those relying on benefits that would have been uprated by average earnings have some sort of reasonable increase, he is forced to increase benefits by a measure other than average earnings. That was an Orwellian use of the term “over-indexing”.

Let us put the statement in context. The Government expect the nation to be grateful for their generous and munificent benefits uprating, but they are working within a narrow economic framework imposed by their own policies. People who depend on help to get into work and help to make ends meet will not be grateful for the paltry increases.

Interestingly, universal credit is included in working-age benefits in the statement. The Chancellor claimed yesterday that the welfare cap will be met, but is that because of the excessive delays in the introduction of universal credit rather than because the Government have got to grips with the underlying drivers of welfare spending—high rents drive up costs and low pay drives up tax credit claims? The welfare cap is related fundamentally, among other things, to the progress of universal credit. Will the Minister comment on that?

The context of the statement is that the Government have been forced to borrow much more than they believed they would have to borrow. Their failing economic policy means that those in most need are paying the price. The Minister trumpets the increases to pensioner benefits and the state pension, but let us not forget—[Interruption.] From a sedentary position, the Minister says, “Questions.” The question is this: why has his economic plan failed so badly that those who depend on help from the Government are not getting it?

The context is clear: the Government’s economic plan has failed, Government borrowing is so much higher than they expected, and, in the end, those who pay the price are those most in need.

[Steve Webb]

The House is not clear whether the hon. Gentleman is saying that we should spend more or less on welfare. As far as I could tell, he was arguing for both at the same time.

The hon. Gentleman referred to a failed economic policy. Is that an economy that is growing faster than any other developed economy in the western world, and an economy in which unemployment has fallen for 24 consecutive months? If that is failure, I am not sure what success looks like.

The hon. Gentleman asked about getting to grips with underlying economic issues. Worklessness is, of course, the most fundamental underlying economic problem, and worklessness is down substantially on 2010. Unemployment is down. Full-time and part-time work are up. Those are the things that helped us to announce yesterday that welfare spending is lower than had previously been forecast.

The hon. Gentleman mocked the term “over-indexing”, which means putting something up by more than one is legally obliged to. We have done that for the poorest pensioners. I am not sure whether he opposes or supports that, but I can tell the House one thing: we have looked at what the Opposition would have done had they been in our position and had put the state pension up in line with their announced policy. We assume their policy would have been RPI until 2012 and earnings thereafter, as that is what their manifesto said. We have discovered that had Labour been in office the state pension would now be £7 a week lower than the coalition is paying. I do not think we have any questions to answer from the Opposition.

Pension Schemes Bill

Debate between Steve Webb and Gregg McClymont

Tuesday 2nd September 2014 Commons Chamber

[Gregg McClymont]

I will make a little more progress and then let in hon. Members from all parts of the Government Benches.

The Minister glosses over the tension in Government policy, suggesting that everything is coherent, but I strongly believe that that is not the case. He spent 15 minutes talking about things other than this pensions Bill, in which, more widely, the Government are attempting—we welcome the attempt, not least because we have been arguing for it—to pool and share risk long term across generations. In doing so, they are reflecting a developing political consensus around the importance of sharing risk as widely as possible in the pension sphere. The corollary is that the bigger the pension scheme—appropriately governed—the greater the returns to scheme members. Put simply, the bigger the pension scheme—appropriately governed to share risk as widely as possible—the larger the pensions for people in those schemes. I think that there is a developing consensus that that is a good thing, and in so far as it promotes collective defined contributions, the Bill is welcome.

[Steve Webb]

Will the hon. Gentleman clarify the evolution of the Opposition’s thinking? In government, six months before the last general election, the Labour DWP produced a report rejecting CDCs. When did they change their mind?

[Gregg McClymont]

I would like to take all the credit, of course— having not been in the previous Parliament—but in my opinion and that of the Opposition Front-Bench team, there is a very good case for encouraging collective provision. Politics involves evolution. I am kinder at times than the Minister, so I will not give him chapter and verse about how he has chased our tail on pensions policy, but whatever the origins of the policy, surely the point is to get the best possible outcomes.

The Minister alluded to other parts of the pension scheme in the Bill. Its provisions reflect the knock-on consequences of the flexibilities at retirement announced by the Government, evidenced by the fact that this is being shared between the Treasury and the DWP. It redefines the type of workplace schemes that can be set up so that a third form of scheme—neither DB nor individual DC—can be created. It also prevents the transfer out of most public service defined-benefits schemes, except to other DB schemes, which makes sense given the basis on which these Treasury-funded schemes proceed.

Currently, on the insolvency of an employer, the Pensions Regulator can employ an independent trustee from a register that it maintains. Conversely, when it uses its general powers of appointment to replace a trustee found not to be fit and proper, it does so using flexible procurement panels. The Government’s response allows the alignment of both procedures on the second, which seems to make sense. And of course the Bill will allow the Secretary of State to make payments into the Remploy pension scheme. These are all sensible policies supported by the Opposition.

The principal case for the Bill, however, as the Minister set out, is the recognition of the case for collective pension saving. There appears to be some appetite among the public for this kind of risk sharing. Research undertaken recently by the Institute for Public Policy Research suggested as much when it found that collective pensions were the most popular option across different income levels, life stages and ages. That makes sense given that pensions are a form of collective insurance against poverty and indignity in old age. On that basis, the debate that the Bill generates is welcome.

The Minister described how the pensions landscape had changed. DB is no longer as popular as it once was; employers do not want to take on the risks of defined-benefits schemes; and increasingly we live in a world of individual defined contribution, where the risk is entirely on the individual saver and depends on the performance of the stock market. As he suggested, finding a way to share risk is a good thing, but let me point out several aspects on which the Bill is silent—aspects that are central if collective pensions are to succeed.

The first aspect—as far as I am aware, the Minister was silent on this—is the awareness that cross-generational collective pensions can, in extreme circumstances, involve a reduction in pensions in payment. This is not something that the UK is culturally and historically attuned to. In a cross-generational collective pension fund, the smoothing of risk and reward between different generations can mean, in extreme circumstances, that the pensions being paid to pensioners are cut. That is something with which our politics is not familiar and an important point about defined-contribution collective pensions that has to be considered.

The second important point is that governance is even more important in collective pension schemes of this kind than it is in other forms of pension. Managing a rolling pension fund—one that brings together the savings of teenagers, pensioners and every generation in between and that demands that each cohort is treated equally—requires substantial technical expertise. The prize, if a fund is managed correctly, can be bigger pensions, but that demands governance of the highest quality, yet the Bill is silent on governance. The Minister mentioned it in the round, but he did not talk about the governance that he wishes to see or that, more importantly, the Bill puts in place for these pension schemes. And the Bill is silent despite the Government saying in their response to the consultation document, “Reshaping workplace pensions for future generations”:

“Collective schemes are complex and can be opaque… This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products”—

not a philosophy the Government are adopting at the point of retirement via their Budget reforms. What has happened to their intention that governance be undertaken by experienced fiduciaries?

I am reminded of the fankle that the Government have got themselves into over the governance of individual defined-contribution pensions. I will not give chapter and verse now, because it would not be appropriate, but the independent governance committees that the Government intend to set up for individual defined-contribution pensions—the Minister referred to them—are neither independent, nor governance. They will be in the hands of the insurance company. The mistake that the Government appear to have made over individual defined-contribution pensions, they are now making with respect to collective defined-contribution pensions.

There is nothing in the Bill about the standards of governance that CDC pension schemes will have to meet. Everything is left to secondary legislation. I say to the Secretary of State and the Minister—who asked about the attitude of the Opposition—that so much of pensions legislation under this Government has been left to secondary legislation, making it difficult for the whole House accurately to understand the consequences and outcomes of any one pension Bill or policy.

As regards collective pensions and the second aspect of the Government’s silence—on governance—the Opposition believe that the Government should follow our lead and require the schemes to have trustees and to be based on a legal duty to prioritise the interests of savers above all others. Failure to require all schemes to have trustees—this is crucial—means that some collective DC schemes will be run by trustees and others by private firms seeking to maximise their short-term returns. That is surely not in the spirit of the collective pensions on which the Minister wishes to build. Given the complexity of managing collective, inter-generational, risk-sharing pension schemes, the highest level of governance is critical, and I urge the Government to say explicitly—either today or as the Bill goes forward—what the governance criteria and rules will be.

Beyond governance, a third crucial aspect of collective pensions remains unexamined by the Bill. The Government have left entirely to secondary legislation the question of what kind of collective pensions they wish to promote. The Minister suggests that collective DC is one sort of pension scheme, but it is not: there are different forms of collective defined contribution, so clarity about which form the Government wish to see would be useful for all parties as we examine the proposals.

Broadly, there are two kinds of collective pensions that the Government might wish to promote. One is a form of collective DC that sets a target income for each saver and a probability of the target income being met on retirement—a 95% probability, say, of that target being realised. This form of collective DC demands significant assets in reserve so as to make the probability realistic. Given the substantial assets that any scheme would need to materialise, that is what we might call a heavy form of collective DC pensions.

There is also, however, a lighter form of collective DC, which is more intra-generational than inter-generational—involving risk sharing among a particular cohort rather than between generations. That lighter form of DC collective pensions is also to be welcomed, as it would bring the advantage of scaling and pooling within a generation. Fundamentally, too—I am not sure the Minister mentioned this—the great advantage of collective pensions is that they avoid the real difficulty of having to make the decision on the spot on retirement for the rest of one’s retirement. That does not happen under either the heavier or lighter form of collective DC, as a form of draw-down applies. The pension fund never ends; it continues, so a form of draw-down is possible. As I said, an on-the-spot, once-in-a-lifetime decision about retirement income might apply under the Bill.

The Government have not stated which form of collective DC they wish to see materialise from the Bill. As with governance, the Bill is entirely silent on those points. Everything is left to secondary legislation once again, and I see a pattern when it comes to pensions legislation under this Government. They bring forward a Second Reading, take a Bill into Committee and then leave so much of the fundamental detail to subsequent secondary legislation. I am not sure that that is a sensible way to proceed if we want to make substantial and good legislation. Those are some of the issues on which I would like to gain further clarity from the Government.

The Minister spent some time talking about the budget reforms, and we have heard contributions and interventions from Front Benchers about them. The Government are silent on the issues of flexibility and the interaction with auto-enrolment pension saving. They claim that all those aspects fit together very well, but I have suggested that there is a fundamental difference in approach in the spheres of building up the pension pot, auto-enrolment and turning the pension pot into retirement income.

The three tests that the Opposition have set for these reforms are sensible. We must know first what the guidance guarantee amounts to—a fundamental point on which we still have no clarity. We expect perhaps an amendment or amendments to provide clarity on the guidance guarantee. We should remember that the Chancellor promised advice, not guidance, in his Budget statement. There is a fundamental difference between the two, and the Minister subsequently clarified that guidance rather than financial advice will be provided. We await with bated breath the details of the guidance guarantee. Without top-quality guidance, the potential for successful flexibilities will be much reduced.

Secondly, we need to know how the budget reforms will impact on the pension pots and retirement income of low and middle earners. That is important. One of the weaknesses of individual DC, from which the Minister is trying to move way, is that 10 years from any individual’s retirement, the pension fund has to move assets into low-yielding bonds to avoid any risks so close to the retirement age. There is less risk, but less return. The danger of the Government’s flexibility provisions on retirement is the interaction with pension fund asset management. It now becomes the norm that individuals will cash in their pension pot at 55, 56 or 57, which means that at the age of 45, 46 or 47 the pension fund will have to move into low-risk, low-yielding assets, reducing the pension pot when cashed in on retirement.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 1st September 2014 Commons Chamber

[Steve Webb]

We have made a number of changes to make sure that auto-enrolment works as smoothly as possible for the whole diversity of employment scenarios, such as the one to which my hon. Friend refers. The point about automatic enrolment is that where someone who is paid weekly exceeds the threshold once, they should be automatically enrolled. If in a subsequent week they earn below the threshold, nothing happens—no payment is due and no payment is made. If they go above the threshold again, payment is made, but there is no re-enrolment, disenrolment or leaving of the scheme. The complexity is often in perception, rather than in reality. If she is aware of individual employers who have particular problems, I would be pleased, as always, to receive details.

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

May I press the Minister further on the question asked by my hon. Friend the Member for Brent North (Barry Gardiner)? The Government have changed the rules on pension flexibility at retirement, or are in the course of changing them, yet there are members of pension schemes who will face huge exit penalties if they wish to take advantage of those flexibilities. Does he think pension savers in that situation will be comforted by his saying today, “Well, they entered into a contract and they have to put up with it”? The Government are changing the rules, so surely those savers deserve to be able to take advantage of the flexibilities just as much as anyone else.

[Steve Webb]

I do not think that the hon. Gentleman in his heart of hearts really wants these flexibilities. We announced in the Budget the flexibility for people to access their money at 55, in full and in cash if they want to do so. Clearly a minority of schemes—it is important not to exaggerate the scale of this—have contractual terms that relate to the basis on which money can be withdrawn. We are not overwriting the rules of existing schemes, but we are talking to the industry to ensure that as many people as possible can access their cash.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 23rd June 2014 Commons Chamber

[Steve Webb]

We are keen to avoid discrediting automatic enrolment with trivially small amounts of money. My hon. Friend can imagine the newspaper headlines if we had required a firm to set up a pension scheme so that the employee and employer combined put 8p a week into a pension. We would have been laughed out of court. We have reformed auto-enrolment, and it is going extremely well. It has a good, strong reputation, and I want to protect it.

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

What the Minister does not tell the House, of course, is that Library figures show that someone earning just below the raised threshold for auto-enrolment could save up to £20,000 over a working lifetime—quite a decent nest egg, I am sure that we would all agree. So why have the Government deliberately removed 1.5 million people—the majority of whom are low-paid women—from auto-enrolment? Although that sum is not enough to buy a Lamborghini, does the Minister agree that millions of people are losing out?

[Steve Webb]

On the contrary, the Pensions Commission—the hon. Gentleman often refers to the Pensions Commission, one of whose members is now a Labour peer—recommended that low earners needed an 80% replacement rate. Someone on the wage that he just gave gets an 80% replacement rate based on the state pension alone, so we are delivering—[Interruption.] That is after tax and national insurance. [Interruption.] They are paying national insurance at £10,000 a year, so they get about an 80% replacement rate without needing to be automatically enrolled. Setting up auto-enrolment for tiny amounts of saving is simply inappropriate.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 31st March 2014 Commons Chamber

[Steve Webb]

My hon. Friend is quite right. As he knows, we have both the Pension Protection Fund and the financial assistance scheme to help those whose sponsoring employer has become insolvent. It is important that we make sure that sponsoring employers are in a robust position and that regulation is proportionate, which is why we are changing the remit of the Pensions Regulator so that it has regard, in its actions, to the sustainable growth of the sponsoring employer.

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

Last week, the Minister announced that the Government were adopting lock, stock and barrel Labour’s policy on the pension cap. That is welcome news for savers, but the Minister and the hon. Member for Warrington South (David Mowat) both know that governance is key to ensuring that savers get value for money all the way through the pensions system. Does the Minister therefore agree that allowing big insurance companies to appoint independent governance committees themselves is a little like allowing the home team to pick the referee in a football match?

[Steve Webb]

The hon. Gentleman raises an important point about governance and independence. He should know that the proposed terms of reference for IGCs include requirements that providers go through open and transparent recruitment processes, and that members be appointed for fixed terms, with limited numbers of reappointments. The requirements are designed to avoid any possibility that IGC members have incentives not to challenge providers in order to remain in post.

Quality Workplace Pensions

Debate between Steve Webb and Gregg McClymont

Thursday 27th March 2014 Commons Chamber

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

I thank the Minister for notice of the statement.

Rare is the day when the Government appear to adopt an Opposition policy lock, stock and barrel. Rarer still is the day when the Government appear to adopt two of the Opposition’s policies lock, stock and barrel. Today, the two broken markets identified by my right hon. Friend the Member for Doncaster North (Edward Miliband)—energy and pensions—have been accepted by the Government, who have made concessions in that regard. They are two big wins for the Opposition.

We welcome those concessions. We welcome the Prime Minister’s announcement on Wednesday that an energy freeze from SSE is a good thing. Perhaps we will finally see the Government reversing their tax cut for millionaires, although that might damage the Minister’s new-found interest in the market in Lamborghinis. The Government have belatedly accepted that the market in pensions, as in energy, is not working for consumers. We welcome this historic change of Conservative and Liberal heart. It is a retreat from free-market dogma.

This is the second time—the Minister alluded to this—that I have welcomed a Government proposal to cap pension charges. The Minister refers in his statement to delivering on his timetable, but what he does not say is that it is a new timetable. In October, the Minister rushed into a four-week consultation with a view to capping pension charges from April 2014, five days from now, but his impact assessment was condemned as not fit for purpose by the Regulatory Policy Committee. Today, the Minister has confirmed that no charge cap will be in place until 2015, a year from now. That matters because in the Government’s own figures, someone who has worked hard to save £100,000 in their pension pot for retirement and is charged 1.5% for the next 12 months will pay a hefty £1,500 in charges, so why the delay, given the difference that will be made by a cap set at the level the Labour party suggested and given what the Minister has recommended today? Why the delay in not introducing it today? That £1,500 might not be enough to purchase a Lamborghini, but it could well amount to a deposit on the two-door Corsa that the whole world now knows the Minister drives.

This is so important because pensions market failure has significant consequences for millions of savers. The Minister knows that, by 2017, 11 million people will be auto-enrolled—3 million now and 4.5 million by the election. That is why it is so urgent. The Minister promised a full-frontal assault on pension charges in October. Whoever has heard of a full-frontal assault that comes with a 12-month notice period?

The Minister and I both know that governance is the key to better pensions, so when will the independent governance committees that the Labour party has called for be implemented? Will he give us clarity on that? In his review for the Business Secretary, another Liberal Democrat, Professor Kay concluded that excessive churning by fund managers was reducing the value of pension assets. Will the Minister pledge to the House today that all fund management costs, as set down in Labour’s amendment to the Pensions Bill, will be disclosed as part of the policy? Furthermore, to whom will the fund manager costs be disclosed? The statement mentions trustees and others, but who are these others?

Let me finish on a note of consensus: an Opposition are always delighted when a Government adopt their policy. To have two significant Opposition policies adopted in one day is truly a success for my right hon. Friend the Leader of the Opposition, and for the Labour party. We welcome the Government’s endorsement of our policy. It matters so much because of the difference it makes to pension savings, but we will continue to scrutinise the detail of the proposals as it emerges, because in pensions the devil is always in the detail, and this Government certainly have form on that point. We welcome this endorsement of Labour policy and we will look further at the detail.

[Steve Webb]

I understand why the hon. Gentleman wants to talk about energy and income tax rather than pensions: he has nothing to say on the pensions announcement.

The hon. Gentleman said that we have adopted Labour’s policy. I thought he might say that, so I thought I would have a little look at what Labour’s policy was. The first evidence we have is their record in office, when they had 13 years to cap charges and did precisely nothing. But we do have more recent evidence—he mentioned the leader of the Labour party and his views on the subject, so I have a done a bit of research. Clearly, The Guardian was briefed by Labour, and the leader of the Labour party called it an “all-out attack” on rip-off pension charges, so that is good. Patrick Wintour said in September 2012:

“Ed Miliband will promise to end rip-offs in the pensions industry”—

that is good, is it not?

—by putting a 1% cap on pension charges”.

I wonder whether he has moved a bit because he saw what we were doing. I get a slight sense that might be the case.

The hon. Gentleman asked about the timetable. Our consultation document made it clear that every scheme would have a cap in place by April 2015. We are today delivering on that timetable. [Interruption.] The hon. Member for Leeds West (Rachel Reeves) says, “What about April 2014?” If they are seriously suggesting that we should apply a charge cap with a few days’ notice, it shows how little they understand about how employers work and how the pensions industry works. Unless they are calling for us to announce a cap at a few days’ notice, which would be pretty irresponsible, we are delivering on the timetable that we set out.

The hon. Gentleman asked me some specific questions. The independent governance committees will have to be in place by April 2015, but the Association of British Insurers and the Office of Fair Trading have agreed that they will put them in place before that date. The legal requirement is April 2015, but we expect to see them in place before that.

The hon. Gentleman asked who the costs have to be revealed to. The trustees or the independent governance committees, who will act on behalf of the members and will have the technical expertise to understand all the detail, get the information, but they will form a judgment about the format in which they pass it on to scheme members. Scheme members need to understand about charges, but probably not in the full gory detail that trustees and governance committees would. The point is that for the first time there will be people in every pension scheme acting on behalf of the scheme member, and that is a radical step forward.

Pensions Strategy

Debate between Steve Webb and Gregg McClymont

Thursday 20th March 2014 Commons Chamber

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

No one can say that pensions is not a fast-moving and exciting world. The Minister was halfway through his statement before yesterday’s announcements were mentioned. The reason for that is straightforward. The announcements yesterday cannot be bold and radical and also be a logical extension of the Government’s existing pensions policy, as the Minister strains to claim. Let us be clear about that.

There is a wider context to the statement. Given that so much time was spent on the wider pensions strategy, it is surprising that the Minister made no mention of his retreat, so far at least, from clamping down on fees and charges in individual pension schemes. The stridency of the Minister’s statement results from the fact that he knows that on that fundamental issue he has not delivered for the millions of people saving in the new pension schemes for which he claims all the credit. It is important to put that on the record.

We welcome greater flexibility and choice, especially in the announcements— which are easy to understand and the impact of which is easy to interpret—regarding the changes from 26 March this year. It makes sense to allow greater flexibility, particularly for those with small pots, which the new auto-enrolment system is producing. An annuity will not deliver value for money for these small pots, so we welcome the changes. With the increase to £30,000 in the trivial commutation rules and the changes to the number of pots that can be taken in cash, some individuals will be able to take, by my calculations, up to £60,000 as cash. That is to be welcomed.

Let us probe a little more deeply, especially the new developments surrounding the changes from April 2015, which the Minister dealt with in the second half of his statement. He made great play of the fact that there will be a statutory right to guidance via pension providers. We welcome that. It is our policy, which the Government have taken. After all, imitation is the sincerest form of flattery. Is the guidance to be mandatory for all those approaching the point where they turn their pension pot into retirement income? If not, how does it deal with the cardinal feature of the current annuities market, which is that the majority of people do nothing other than take the current offer from their provider? Government Members have gone quiet now. When we get into the detail, which they do not understand, the picture looks a little different.

We need clarity on that guidance. We need to know what protections there will be for savers in the new investment products that are to be developed. What is the track record of the investment industry in delivering innovative new products that deliver value for money at low cost? [Interruption.] The Secretary of State says something but he has no idea of what he speaks.

What will be the safeguards around the guidance? Will it be mandatory? Will it ensure that people get the best possible deal for their cash? These savings measures are supposed to be part of a Budget that is meant to be for savers. Why, then, does the OBR forecast that the savings ratio will fall? Will the Minister tell us what these changes will mean for savings in future? There is nothing in the Budget about the savings ratio. More widely, how many people will continue to annuitise? The Minister talks of a radical liberalisation, but if a significant number of individuals continue to annuitise, surely the priority should be to ensure that that annuity market also delivers value for money.

Finally, the Minister made great play of his defined ambition agenda, which is buried in his statement. How can one develop the collective pensions to which he subscribes when they depend on intergenerational risk-sharing? As we understand it, intergenerational risk-sharing becomes extremely difficult, if not impossible, if people exit the system at the age of 55. On all these questions—the safeguards surrounding the guidance, and the recognition that the Minister has, to some extent, taken our policy, which we welcome—how do these reforms marry with the wider pensions agenda? We look forward to the Minister’s response.

[Steve Webb]

I am grateful to the hon. Gentleman for his wholehearted endorsement of our plans. The guidance guarantee is as it says on the tin: it is guaranteed. It is a right of members of the scheme. It is a duty on schemes to make sure, for the first time, that people coming up to retirement have a conversation with someone who is independent and who is on their side, and the schemes will have to make that happen. The Financial Conduct Authority will oversee that process. We will look into whether we can involve the voluntary sector and the advice sector in that.

We often hear the phrase “advice gap”. The hon. Gentleman suggests that we started from a blank sheet of paper, but we did not. We started from a situation where many people coming to retirement were making the wrong decisions and buying poor value products. This is the sort of thing that we have had to address.

The hon. Gentleman asks whether the Budget was really one for savers. To me the increase in ISA limits sounds like good news for savers. The new pensioners bond coming in next year sounds like good news for savers. New freedoms for pensioners with regard to how they can use their pensions sounds like good news for savers. Perhaps the hon. Gentleman wanted still more, but I quote to him Dr Ros Altmann, who said that yesterday was like London buses—all the good news for savers came at once.

The hon. Gentleman asked the question I thought he might ask. If I paraphrase it loosely, his question, as a former academic, was on “the consistency of the defined ambition framework with liberalised decumulation”. I think that is what he wanted to know about. It is perfectly reasonable for people to have collective provision in accumulation. People can build up pensions collectively and many people will go on buying annuities. Many people will still want an income, but we are giving them new options. Plenty of people will want a scheme in which to go on investing their money into retirement. That will be their choice. Our whole agenda is about new models and new options, not just going from one extreme to another.

The hon. Gentleman asked about action on charges. I assume that he had written his questions before he read my statement. Given that we gave him the statement well before the speech, I am surprised at that. I confirm that next week we will announce the conclusions and the action we are taking—action to tackle problems that were never tackled in 13 years of a Labour Government.

The hon. Gentleman says that guidance is Labour’s policy. I am delighted to hear that, but why was there none in place when his party was running the country? It is good of him to support the plans.

This is bold and radical stuff. People will have guidance for the first time and new flexibilities. Some Labour MPs are saying that this should be blocked because we cannot trust people to spend their own money. I think we should.

Pensions Bill

Debate between Steve Webb and Gregg McClymont

Monday 17th March 2014 Commons Chamber

[Steve Webb]

We envisage updating our own estimates by the summer and would be very happy to do that, and bringing together experts and trawling through the related literature in the latter part of this year. We do not want to kick this into the long grass. If we concluded that further data-gathering was needed, and it was qualitative rather than quantitative, that would take some time, but well-informed evidence-based policy making sometimes does take time, frustrating though it may be, and that is the approach the Government wish to take.

I urge the House to disagree with the Lords in their amendment 1.

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

I shall of course be disagreeing with the Government’s disagreement with Lords amendment 1.

Let me begin by putting the amendment and the labour market issues it pertains to into some context. Since 2008, only one quarter of the jobs created in this country have been permanent. There are hundreds of thousands of short-hours contracts and, according to some figures, approximately 1 million zero-hours contracts, in addition to other non-standard job patterns. Some 40% of all jobs are not the permanent, full-time positions that we traditionally associate with the UK labour market. That context is important to bear in mind: the Minister rightly referred to the need for the pensions system to keep up to date with changes in the labour market, and that is the reality of the labour market we are now all living with and working in.

--- Later in debate ---

[Steve Webb]

For the avoidance of doubt, I think the hon. Gentleman will find that the record shows that I did not say there were 17 logical flaws in the amendment. I said that there were 17 logical flaws in leaping from the assertion that there are lots of zero-hours jobs nowadays, to this amendment. My point was that it takes an awful lot of logical assumptions, all of which are false, to get to the amendment.

[Gregg McClymont]

Of course Hansard will tell this story, but it was a short quote and I think I managed to get it down correctly. If the Minister is saying that it was not that there were 17 flaws in the amendment, I am sure the whole House is delighted to have that clarification.

Let us probe a little further into the Minister’s argument. He says that on the Government’s estimates only about 50,000 people are affected, that there should be no “rush to solutions” and that the amendment is flawed technically for many reasons—but perhaps not 17. He says that the Government need to build their evidence base on the issue. Interestingly, he said that the Office for National Statistics has urged caution about the notion of an upsurge in zero-hours contracts. His point was, and the ONS’s point is, that it might be that individuals are more aware that they are on such a contract than that the upsurge has been so great. If that is the case, it does not negate the point that there are a significant number of these sorts of contracts around, and that has significant implications for a state pension system based on contribution.

I asked the Minister about the 17 logical flaws, but his argument also was that we do not know enough to go forward with an amendment to solve the problem. However, he also said he understands that the average zero-hours contract gives an individual between 15 and 20 hours of work a week. Is that his estimate or is it based on research? In a world where we are not precisely aware of the figures involved, there is a danger of bandying around our own figures without a relevant citation.

What situation are we trying to deal with through this amendment? As I said, we have an increasingly fractured and insecure labour market, and the question is whether individuals in that labour market and the pension system relating to that market are appropriately structured and linked. The amendment, introduced effectively in the other place by Baroness Hollis, seeks to deal with what is, on any measure, a significant problem. We welcome the fact that the Bill brings 4 million self-employed individuals into the state pension without an employer’s contribution, and of course those self-employed people pay £2.70 a week. The amendment’s thrust is that we need a similar approach for short-hours workers. The Minister rightly said that this is not just about zero-hours contracts; it is about the insecurity of short-hours working in the labour market more broadly and matching that up effectively with a universal state pension—the Minister is keen on that.

[Gregg McClymont]

As usual, my hon. Friend makes a pertinent intervention.

There is an issue to address and the question is how to do it. The Minister suggested that Baroness Hollis’s amendment, which my colleagues and I agree with, prescribes a specific solution, but of course it does not; it is a permissive amendment. As the Minister, using that fertile mind of his, started to think about different solutions, one could see the point of the amendment even more: to give him and his colleagues in the Department for Work and Pensions the authority to think carefully about how to solve this problem. He gave a number of ideas as to how it might be solved, which was when we particularly saw the function of this amendment. It would bring the best minds in the DWP together to deliver a solution, and it would remove the need for subsequent primary legislation. So, by his own words, the Minister gives succour to the amendment.

The amendment has a clear purpose: it is a permissive amendment to enable the Government more finely to match the state pension reform that the Minister is introducing with the nature of the modern labour market. He talked about estimates of the number of individuals involved. As he will know, Baroness Hollis has come to a different conclusion about the number affected and is very clear that the universal credit, which he mentioned, will not help the largest group—single people—nor, usually, will it help women without younger children or households where the joint income, including the man’s income, floats them off universal credit altogether. She calculates the number of individuals affected as being 250,000, which is a very different figure from the one the Minister gives. Universal credit, which he said would ameliorate the problem, will not help single people, women without younger children or households where the joint income, including the male income, floats them off universal credit. It is important to put that on the record. If a significant number of people are affected by this and if the Minister wants to make the state pension as universal as possible, as the Opposition believe he does, it would seem sensible for him to accept a permissive amendment allowing him to go forward on the basis of his thoughts about the various ways in which this might be taken up by the Government and to get cracking on it. The fundamental point is: why should those who, through no fault of their own, are in short-hours working or zero-hours contracts—those various kinds of flexible employment contracts—be denied the benefits of a full state pension?

The Minister said that the problem is not as significant as Baroness Hollis has suggested and that someone would need only 35 of 50 years in the labour market to qualify, but the issue is that where people spend significant parts of their life on these contracts, what is meant to be a universal state pension does not necessarily become one.

[Steve Webb]

I sense that the hon. Gentleman is concluding. The amendment is flawed in a number of respects. For example, it refers to a lower earnings level, but there is no such thing. Does he not have any qualms about the fact that if his vote were to succeed, he would be putting flawed legislation on to the statute book?

[Gregg McClymont]

The Opposition’s view is clear: the issue of job insecurity, of short-hours working and of zero-hours contracts is a significant problem for the pensions market and, specifically, for the state pension. In that context, it seems wise to us to allow the Minister to crack on with solving this problem. I have confidence that he will ensure that this amendment, if agreed to by the House, provides the basis for matching up the state pension with people on these insecure and flexible employment contracts. On that basis, we disagree with the Minister’s disagreement, and we intend to support the Lords amendment.

--- Later in debate ---

[Steve Webb]

Let me respond briefly to the debate. On the issue about the typical number of hours worked by someone on a zero-hours contract, I said 15 to 20 from memory, but the exact figure is 20 hours. The ONS estimates that the average number of hours worked by people on zero-hours contracts in 2013 was more than 20 hours. There is a danger that when we hear the words “zero hours” we assume that it means there is no money coming in. However, it simply refers to the number of hours guaranteed under the contract. Lots of people with zero-hours contracts are building up full qualifying years.

[Gregg McClymont]

Of course the Minister will be more than aware that averages can hide a multitude of sins; I am sure he accepts that.

[Steve Webb]

Yes, I do. The point is that 20 hours on a minimum wage would get someone above the lower earnings limit. If half of everyone on zero-hours contracts are doing more than 20 hours, we can immediately say that they will qualify, and those doing slightly fewer hours will also qualify. The link between zero-hours contracts and multi mini-jobs, which is the subject of the amendment, is, at best, unclear. In extremis, it could be that no one on a zero-hours contract is even covered by this amendment, if they have only one job at a time and no other job. We do not know and nor does the hon. Gentleman. Our sequencing is evidence first and policy next; the Opposition’s is the other way around.

The hon. Gentleman refers to the emerging labour market, and chose 2008 as his base because that enabled him to get a figure that worked for him. However, let me bring him right up to date. In the past year, the number of women working full-time increased by 270,000 while the number of women in two jobs, which is germane to the amendment, decreased by 25,000. The suggestion that there is some sort of inexorable rise might be wrong. If we were to update our figures, we might find that the number has continued to go down. There is a whole raft of statistics I could give the hon. Gentleman, but to assume that this is a vast issue and that the numbers are inexorably rising is far from the case.

The case of the hon. Member for Edinburgh East (Sheila Gilmore) is that even if only one person were in this situation, we should fix it, but there is an issue of proportionality here. To set up the lightest touch crediting regime based on past precedent would probably cost about £1 million and more than £1 million to run. One must always ask the question—as least we do on the Government Benches—about value for money. That is why we need to know how many people are affected, who is affected and the best way to deal with the issue.

Finally, when the hon. Gentleman was asked whether he cared about putting flawed amendments in the Bill, he essentially said that he did not; he simply wanted to make a political point. That is regrettable. As legislators, we are voting today on legislation. This is not an Opposition day debate where he can make a point. This is deciding what goes into the law of the land. I am rather disappointed that he feels that it does not matter if an ambiguous and unclear amendment, which uses terms that have no meaning in reality, should just go in the Bill, so that he has the chance to have a vote and put out a press release. That is obviously where he is coming from. I regret that, and urge the House to disagree with the Lords amendment.

Question put, That this House disagrees with Lords amendment 1.

--- Later in debate ---

[Gregg McClymont]

I know the Minister believes that God is a Liberal, but does he really have to be so pious?

[Steve Webb]

I usually sound grateful to the hon. Gentleman for his interventions, but I am not sure I am for that one. There is a bit of a pattern here. Labour has already called one vote on an amendment that was flawed, but it decided to vote for it anyway in order to make a point. I am explaining why amendment (a) is flawed, even according to the terms of what the Opposition want it to achieve, and it is obvious that the message has hit home, given the tenor of the hon. Gentleman’s response.

--- Later in debate ---

[Gregg McClymont]

I rise to speak to amendment (a), but let me start with Lords amendment 4. In Committee, the Opposition argued strongly that clause 37, as drafted, was far too widely drawn and left a possibility that those with an agenda to exempt smaller businesses from auto-enrolment could do so. We therefore welcome the Government’s concession. Among the Minister’s rather curious language, he said that I “got very excited” and that there was “almost universal cynicism” from the Opposition, but within that odd framing he has actually accepted what we said in Committee. That is very welcome, because it makes the Bill better.

Let us think about amendment (a) in the context of the wider debate. The issue of costs and charges for pensions has shot up the political agenda for obvious reasons. If the Government are enrolling millions of people into a pension scheme for the first time, they had better make sure that the schemes are all value for money.

[Steve Webb]

I agree that the Government had better make sure that the schemes are value for money. Why, therefore, did Labour not legislate for that when it could have done so?

[Gregg McClymont]

The Minister made that point in his speech, as he has done repeatedly, and he has now put it on the record again. Let me pick him up on something he said. In what has become his quite common style, he suggested that it was rather peculiar to give the Secretary of State powers to ensure that transaction costs are disclosed. However, he must be aware—in fact, he alluded to this—that the FCA already has powers to require transparency of transaction costs, but has never exercised them. Making the Secretary of State responsible does not mean that the Government should not use the FCA’s expertise. Indeed, the Government’s amendment states that the Secretary of State must consult the FCA when setting transaction costs for those pensions over which he wishes to retain responsibility, so why could the same model not be maintained for contract-based pensions? Of course it could be so maintained.

On the Minister’s suggestion that it is somehow peculiar in his world to list the transaction costs that must be disclosed in amendment (a), I have to tell him that we used Lord Lawson’s amendment in the House of Lords, where it was commended by Members on all sides, including by the Government spokesman, Lord Freud. [Interruption.] The Minister is mumbling, but he suggested that the amendment was peculiar, although Lord Lawson’s amendment was along exactly the same lines. I am afraid that the Minister is disagreeing not just with the Opposition, but with Government Members.

Let me say a little about our additions to Lord Lawson’s list. I make it very clear that our list of transaction costs is the same as that tabled by Lord Lawson in the Lords, with two additions—transaction costs in underlying funds; and interest on client cash balances or profits from stock lending retained by the fund manager. The reason for including such additional transaction costs is that it needs to be strongly signalled to the body setting the rule—whether the FCA or the Secretary of State—that those items should be declared.

Let us remember that the Investment Management Association has deliberately failed to include those items in its draft statement of recommended practice. Amendment (a) should be discussed in that context, not the diversionary trail thrown up by the Minister. It is important that transaction costs in underlying schemes are disclosed because a transparency regime can otherwise easily be bypassed by any fund manager that operates multiple funds. The fund receiving moneys can simply use them to purchase units in another house fund. The IMA SORP recognises that the fixed charges in underlying funds should be reported, but it fails to apply the same principle to transaction costs, which is why they are laid down in the amendment.

The House should be aware of the wider context. The Government have previously left it to the fund managers’ trade association to decide what, if any, transaction costs should be declared. The IMA has put forward a draft statement of recommended practice, which would require fund managers to declare some transaction costs in their annual accounts. The SORP must be agreed by a Government quango called the Financial Reporting Council. The concern that the SORP failed to include significant types of transaction costs led a cross-party group of MPs and peers to write to the FRC to say that it would be inappropriate for it to agree to a statement of transaction costs that omits significant types of transaction costs. That was widely reported at the time. It is common knowledge that a number of critical submissions were made to the FRC. Unusually, those submissions were not released at the end of the consultation period, and we still await them.

--- Later in debate ---

[Steve Webb]

I will respond briefly to the hon. Gentleman. However, I suspect that he decided to press for a vote on amendment (a) a good deal earlier this afternoon, so I do not think that anything that I say will have the power to change his view.

For the record, the hon. Gentleman seems to be confusing a power and a duty. He says that the FCA has the power to require transparency, but it has not done so. If he reads Lords amendment 9, which I encourage him to do, he will see that it states in subsection (2):

“The FCA must make”.

That is the bit that he wants to take out—the bit that requires the FCA to do the thing that he wants it to do—so his amendment (a) is incoherent. Instead, he would give the duty to the Secretary of State, but the Secretary of State does not have the same powers as the FCA over the schemes that it regulates. The hon. Gentleman wants to take the duty away from the body that has the sanctions and give it to somebody who does not have the sanctions. That would not achieve what he wants to achieve.

[Gregg McClymont]

Will the Minister confirm that the Government’s amendment states only that

“some or all of the transaction costs”

should be disclosed? Will he put that clearly on the record?

[Steve Webb]

The text of Lords amendment 9 is before the House. The whole point is that we want all sorts of pension schemes—those that are regulated by the Pensions Regulator and those that are regulated by the FCA—to ensure that there is effective disclosure. His amendment (a) is defective because it would take the duty away from the FCA, which regulates one category of schemes, and give it to the Secretary of State, who does not have the sanctions to enforce the very thing that he wants to happen. I know that he does not care that his amendment is flawed, because he wants to make a point, rather than to pass good law, but for the record, his amendment would fail to achieve what he says he wants.

The hon. Gentleman said that the noble Lord Lawson, who has made a valuable contribution to this debate, came up with a list and that we should therefore have a list. Of course, the noble Lord Lawson did not pursue his amendment because he accepted that we did not need all the detail in primary legislation. If the hon. Gentleman lists the name of a charge in primary legislation, all it would take is for the ever-inventive investment industry to give it another name and we would need regulations anyway. Including a list would achieve nothing.

The hon. Gentleman asked about the words “some or all”. To clarify, the intention is to require full disclosure of all costs and charges. The reason for that wording is that it will future-proof the legislation—something that he has called for—by providing the flexibility to deal with new costs as they arise. That is all that we are trying to do by using that wording.

[Gregg McClymont]

I thank the Minister for that clarification. Has he spoken to the FCA and asked what its view is about the disclosure of all transaction costs? Does it support that?

[Steve Webb]

The hon. Gentleman will know that the FCA is regulated by Ministers from the Treasury, rather than the Department for Work and Pensions. However, I have met the FCA on a number of occasions, as have my Treasury colleagues, and we have corresponded on these matters. We are agreed that there should be full disclosure, as under the terms of the Bill, of all categories of pension scheme that are covered by the legislation.

The hon. Gentleman avoided the question I asked on an intervention. His amendment (a) appears to contradict what he has said in the past, and it brings transaction costs into the scope of any potential charge cap. That was not his policy this morning, but it appears to be his policy this afternoon. Quite how he would set such a cap when we do not have the data on transparency is beyond me. Clearly, amendment (a) is not about how the law of the land should be written; it is simply about making a political point and doing so rather badly. On that basis, I urge the House to reject amendment (a), and to agree with Lords amendment 9.

Lords amendment 4 agreed to.

Lords amendments 5 to 8 agreed to.

Amendment (a) proposed to Lords amendment 9.—(Gregg McClymont.)

Question put, That the amendment be made.

Pensions and Benefits Uprating

Debate between Steve Webb and Gregg McClymont

Tuesday 25th February 2014 Commons Chamber

[Steve Webb]

No one is suggesting that nothing has changed. The global economic downturn was far deeper than was originally thought, and we have had to recover from that. We had to make changes to the benefits system to try to balance the books, which the previous Government failed to do.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said that he felt uncomfortable when I talked about over-indexation. Let me make it clear that under the pensions legislation that the Labour Government put in force, there is a legal duty to uprate pension credit by earnings, but we are doing more than that. The hon. Gentleman implied that we were doing less and that we were somehow putting in place a worse increase, but we are paying a £2.95 increase on the basic state pension, and we do not want to follow Labour’s approach of making an earnings increase to the guarantee credit because that would give the poorest pensioners less than £2.95. In our jargon, we are passing through the full £2.95. Far from paying less than the law requires, we are paying more, because we put the biggest priority on the poorest pensioners.

[Gregg McClymont]

The Minister is well aware that earnings have been in decline, so setting out the Government’s approach as some sort of virtue is a bit like the argument that was made when he had to override the triple lock on its first day because it would have produced so little. However, does the Minister not accept that the situation has implications for the level at which the flat-rate state pension will be set?

[Steve Webb]

I would like to suggest that the colleague who just whispered in my ear was saying how much he was enjoying our debate on welfare and urging me to keep it going, but that may not have been the tenor of his remarks. What we are trying to do is ensure that we do the right thing by the poorest pensioners. Had we simply done what Labour required us to do by law, which was to index in line with the growth in average earnings—it was Labour’s law, not ours—the poorest pensioners would now be getting less. I assume that the hon. Gentleman is not suggesting that we should do that. We have therefore overridden Labour’s law and been more generous to the poorest pensioners. I do not know whether that is socialist enough for him, but it is what I think is the right thing to do.

[Gregg McClymont]

Let us be very clear that pension credit has been uprated by less than the basic state pension. That is a judgment the Minister can make, but let us be clear about what it means for the poorest pensioners: they are not getting the same increase as other pensioners. That is a judgment the Government can make, but they should at least be clear about what is happening.

[Steve Webb]

The hon. Gentleman is completely wrong, because they are getting exactly the same increase—£2.95—as in the basic state pension. He seems to want it both ways. If he is saying that the increase in pension credit should have been the 2.7% on the basic state pension, can he tell us where he would get the money from?

[Gregg McClymont]

The Minister is an intelligent man, and my point is a simple one: an increase of 2% is less than an increase of 2.7%. I think that we can all agree on that.

[Steve Webb]

I did not hear the hon. Gentleman say where the extra cash would come from—the bankers’ bonus tax, perhaps? Is he saying that it should be 2.7% or not? As a debating point he is saying that it should, but he has no idea where the money would come from. [Interruption.] He says from a sedentary position that he wants me to be straight about this. Being straight with the electorate means that if he stands up in Parliament and says that the increase should be bigger, which he has every right to do, he must say where the money would come from. That is the nature of choice in government.

The right hon. Member for East Ham (Stephen Timms) asked about tax credit. Tax credit rates will be set out in affirmative statutory instruments in the usual way and debated in the usual way, so there is no difference there. He talked about the triple lock, which we are very proud of. In fact, we understand that the Opposition are going to copy it. On one level he was mocking and deriding it, but when the Prime Minister said that he would continue it in the next Parliament if re-elected, the leader of the Labour party said that

“nobody should be in any doubt about our commitment to the triple lock”.

The right hon. Gentleman ought to have a word with his leader, who thinks that the triple lock is really a rather good thing.

I want to respond to the right hon. Gentleman’s attempted demolition job on the triple lock that is now his policy. He implied that had Labour been in office, pensions would have gone up by more. There are two possible ways that could have happened. One is if Labour had continued the RPI link. We all know that the statisticians do not think that RPI is a particularly good measure of inflation, and I refer to what the hon. Member for North Ayrshire and Arran said earlier. I entirely accept that RPI is generally, although not always, bigger than CPI, but we are not trying simply to pick a bigger or smaller number. In having these annual debates, we are trying to compensate for average inflation. If society thinks that benefit rates are too low, we can do something about benefit rates. What we do not do is just pick an inflation measure because it is bigger or smaller.

We chose CPI because it is a robust and internationally standard definition. The statisticians have dropped RPI as a national statistic because they do not think that it is a good measure of inflation. When the Secretary of State looked at the increase in the general price level this year, CPI was the only number he could realistically have used because RPI is no longer regarded as an official statistic and the other new measures have not even been properly implemented yet. It is entirely open to the hon. Member for North Ayrshire and Arran to persuade her Front Benchers that we should tax people more and increase benefits, but that should be done by making a decision, not by using a measure of inflation that even the statisticians no longer think works.

--- Later in debate ---

[Steve Webb]

There are clearly differences in inflation over time and between different groups. We use one number across the board. There will be years when pensioner inflation is higher than the figure we use and years when it is lower. At the moment, there are particular pensioner price indices, but they do not include all pensioners. We simply use one number that, on average and over time, captures inflation, but spending patterns differ. This Government have clearly taken steps to help people at the bottom of the pile. To counter what the hon. Lady said, inequality rose under the previous Labour Government and has fallen under this Government. [Interruption.] She shakes her head because the statistics and the evidence do not fit her presumptions, but the fact is that Labour presided over growing inequality in this country.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East seemed to imply that pensions would be higher if Labour had remained in government, but he knows perfectly well that before the general election the previous Government mooted moving to earnings indexation from 2012. Had they done so, we would now have a lower state pension than we have now. Would they have carried on with a prices index that nobody really thinks is a good measure of inflation? Where would they have found the billions of pounds to do that? He has implied that they would not have done that and that they would have accepted use of CPI for three years, in which case the state pension would not now be higher. There are lots of “what ifs”, but it is fairly clear.

My right hon. Friend the Deputy Prime Minister has suggested that Labour has started to get it on the public finances, but I am afraid that the right hon. Member for East Ham is still in the Brownite mode from when he was in charge of the nation’s spending. People always ask me whether the triple lock is affordable, but it is just not good enough for him. He wants something more generous. I think that we need a dose of realism in this debate. He asked some specific questions, and my right hon. Friend the Secretary of State responded to his questions on universal credit yesterday. Practically every benefit that exists is listed in these orders and we could debate them all, but that is not the focus of this debate. Suffice it to say, universal credit will lift people out of poverty, which is why I am proud to support my right hon. Friend’s plans.

The right hon. Gentleman asked about ESA. I will not comment on documents that he said have been leaked, but I can say that we are taking action to tackle the backlog in the system. I would have thought that he, when wearing his constituency hat, would want us to do that, but he is welcome to table questions to the Minister of State, my hon. Friend the Member for Wirral West (Esther McVey), for further information.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East asked about the role of pension credit. He hails pensions credit as some sort of salvation. Let us be clear that pension credit was, primarily, a rebranding. We had national assistance, then we had supplementary benefit, then we had income support, then we had the minimum income guarantee, and then we had guarantee credit. They were all basically the same thing—a line below which people were not meant to fall. Therefore, the guarantee credit bit was, in essence, a Brownite rebranding. The new bit of pension credit was savings credit—one of the most tortuous, complicated and obscure benefits ever created.

[Gregg McClymont]

Will the Minister give way?

[Steve Webb]

In a second; I have not finished my rant yet.

Savings credit is such a lottery that of those entitled to savings credit only, half get it and half do not. I am afraid that I do not regard a system where one tosses a coin and half the people get it and half do not as a firm foundation for security and dignity in retirement. That is why we have introduced the single-tier state pension.

[Gregg McClymont]

I have a simple question for the Minister: is it or is it not the case that pension credit took 1.3 million pensioners out of poverty?

[Steve Webb]

I do not believe that for a minute, because at the same time as pension credit was implemented, other changes were happening. For example, SERPS—the state earnings-related pension scheme—was maturing, so each successive generation of retiring pensioners was getting higher levels of state pension, thereby reducing pensioner poverty, and people had longer service in final-salary pension schemes. A whole raft of long-term trends will lead to a reduction in pensioner poverty, so to say that it was due to pension credit on its own, one would need to know what else would have happened even without it.

Clearly, savings credit is extra money, and I am sure it is very welcome to those who receive it. We have gone on indexing—in fact, as I have said, rebalancing—pension credit to give more to guaranteed credit and less to savings credit, because people claim guaranteed credit. That is why we have focused on the very poorest pensioners.

[Gregg McClymont]

Let me reframe my question. Does the Minister agree that 1.3 million pensioners were taken out of poverty during the time of the previous Labour Government?

[Steve Webb]

The hon. Gentleman will know that the level of pensioner poverty has fallen in the long run because of the factors that I have described. [Interruption.] He says that it has happened since 1997. Had the previous Labour Government done precisely nothing, the level of pensioner poverty might well have fallen anyway because SERPS was maturing. SERPS came in in 1978 and had been running for only 19 years by ’97. In each succeeding year, more and more people have got more and more state pension under SERPS as it matures, so as the oldest pensioners with no SERPS die off, the newly retired pensioners come in with bigger and bigger SERPS. That would be a long-term reason for the change, and real earnings growth would have been another factor. It is complete nonsense to say that it was due solely to pension credit, and he ought to know that.

[Gregg McClymont]

Will the Minister give way?

[Steve Webb]

One last time, because I need to conclude shortly.

--- Later in debate ---

[Gregg McClymont]

The Minister appears to get tense under questioning and uses the words “complete nonsense”. Is he really standing at the Dispatch Box and saying that pension credit did not make a significant difference to pensioner poverty in the UK?

[Steve Webb]

As ever, the hon. Gentleman tries to misrepresent what the record will show that I said. I am not saying that pension credit was irrelevant; I am saying that his claim that pension credit reduced the level of pensioner poverty by 1.3 million is patently false.

Where does that leave us at the end of this debate? We have a set of orders that spend an extra £3.3 billion on benefits and pensions, overwhelmingly on pensioners. This Government will deliver a state pension that represents a bigger share of average earnings than in any year under the previous Labour Government. The point of pensions is to replace lost earnings, so they cannot do their job if they have fallen relative to earnings, as they did in almost every year of the previous Labour Government, most notoriously when they thought that 75p was enough for pensioners. We do not; we think that a £2.95 increase this year is fair and appropriate. We are proud of our record in protecting the most vulnerable and, in particular, in focusing additional spending on pensioners. I commend the orders to the House.

Question put and agreed to.

Resolved,

That the draft Guaranteed Minimum Pensions Increase Order 2014, which was laid before this House on 27 January, be approved.

Social Security

Resolved,

That the draft Social Security Benefits Up-rating Order 2014, which was laid before this House on 27 January, be approved.—(Steve Webb.)

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 24th February 2014 Commons Chamber

[Steve Webb]

As my hon. Friend knows, the manifesto on which she and I stood proposed a triple lock, which was implemented by this coalition Government. It means that each year the pension will rise by the highest of the growth in average earnings or prices or by 2.5%, so the state pension is now a higher share of national average earnings than at any time in more than 20 years.

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

The Minister has today laid before the House a pensions written ministerial statement that intimates that following a year-long Labour campaign the Government intend to ensure that pension fund managers in the City disclose the fees that they charge for trading all of our pension assets. That is welcome, but of course the devil will be in the detail. On that basis, can he confirm today that that disclosure will include the number of times that fund managers churn our pension assets for a fee?

[Steve Webb]

I know that the Opposition like to bluster a lot to cover their embarrassment at taking no steps at all on this in 13 years in government. By contrast, this week this Government are legislating to shine a light in the murky corners of the pensions industry, so that value for money is finally achieved for pension savers.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 13th January 2014 Commons Chamber

[Steve Webb]

Yes, I can. Women who paid the married woman’s stamp at any point in the 35 years before the scheme comes in will get the pension that they expected—namely, the 60% for married women and the 100% widow’s pension.

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

When the Minister announced his flat-rate state pension reform, the key argument was that the public would henceforth have clarity about what they could expect from the state in retirement. Now we find, via a parliamentary question tabled by my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), that the Government have no intention of writing to individuals to communicate what the state pension changes will mean for them and their families. Why did the Minister give the impression that the Government would write to people about their state pension entitlement if he has no intention of doing so?

[Steve Webb]

I am slightly baffled by that question, because our reforms to the state pension will affect everyone who reaches state pension age after 2016. That is almost the entire working age population. Is the hon. Gentleman really suggesting that we should write 40 million letters?

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 18th November 2013 Commons Chamber

[Steve Webb]

The hon. Gentleman raises an important point. In fact, consolidation is happening; the number of medium-sized schemes has declined quite significantly in the past few years. The quality standards that we will be putting in place will mean that running a small, substandard, sub-scale scheme will not be an option, so we anticipate that there will be much more consolidation. Together with the National Employment Savings Trust, the Government’s own scheme which already has over 500,000 members, we are moving towards better value for money.

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

Tonight on Channel 4, the Minister will accuse big pension companies of making excess profits at the expense of those who have worked hard and saved all their lives. “Dispatches” will claim that many savers are losing up to £10,000 per year every year in their retirement as the companies make excess profits, yet the Pensions Bill that the Minister has just taken through the Commons does precisely nothing to tackle rip-offs in annuities. When will he get a grip on the annuities market and end these rip-offs?

[Steve Webb]

I make no apology for defending consumers against an abuse that has gone on for far too long, with people buying annuities where they will get their money back only if they live until they are 90 or beyond. The Financial Conduct Authority, which was created only about six months ago, has already reported on annuities and will bring forward further proposals. We are working with our colleagues at the Treasury who lead on these matters to make sure that this issue, which has gone long unaddressed by successive Governments, is finally tackled.

Pensions Bill

Debate between Steve Webb and Gregg McClymont

Tuesday 29th October 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right. The consultation document discusses what should be included in the charge cap. My instinct is to prefer a comprehensive definition of charges. Clearly, we do not want to cap annual management charges and find out that the industry has cunningly managed to get its money back by some other route or a disguised charge. We therefore discuss what should be included.

My instinct is to go for a broad measure. There is an issue with transaction costs—we clearly want to know about them. Including transaction costs in the cap could lead to a slightly odd situation. Towards the end of the financial year, the fund and the trustees might believe that conducting a transaction is the right thing to do for the benefit of the pension fund. However, they might be unable to do that because the transaction costs would take them over the annual limit. We would be grateful for feedback on that and need to address those issues. One reason why we are having a consultation rather than laying down a definite answer is that we want insight on the fine detail, as my hon. Friend says. The basic principle is that we are looking at ensuring that 99p-plus of every £1 put into a pension goes into a pension. I am grateful for his comments.

I should add that there has been a suite of activity on charges. To remind the House, we announced a ban on consultancy charges earlier in the year. Government new schedule 1 and Government new clause 1 give us the power to put a set of powers to cap and regulate charges and quality all in one place. That includes automatic enrolment schemes, qualifying schemes and closed schemes. Lots of people have lots of money tied up in closed schemes. Without those measures, we would not necessarily have the powers we need to regulate the charges they pay. In some ways, the charges that people in closed schemes are paying—they are often old, high-charge schemes—are worrying, because people are often not engaged with their pension saving in a closed pension scheme.

Prompted by the OFT and working with the ABI, we are looking at legacy schemes—schemes introduced before 2001. The average charges in legacy schemes are 26% higher than charges in schemes sold after 2001. This is a full-frontal assault on pension scheme charges. We have banned consultancy charges; we are taking powers in the Bill to go further for auto-enrolment schemes; and we are looking at legacy schemes, charges and charge caps. We are taking effective action on issues that previous Governments have only dabbled with. That is why I urge my hon. Friends to support our new clause and our other proposals. They deliver, whereas the Opposition’s proposals mess about around the edges.

On governance and administration—in the context of new clauses 9, 10, 11 and 12, and amendments 54 and 55—quality in pension saving is not only about charges. How well schemes are governed and administered is important. Interesting issues are raised by the Opposition’s proposals—obviously, they are flawed, but I acknowledge that they raise important issues. New clause 9 would impose a trust-based structure for all pension schemes, with independent trustees across the board. But interestingly, the Office of Fair Trading’s project leader on the workplace pensions report that has just been published was recently quoted as saying that although trusts feel like an intuitively better way of looking after people’s pensions, that

“is largely dependent on the quality of the trustees.”

Given the many pension schemes we have at the moment, including many defined-benefit schemes, a requirement for every scheme to have a particular sort of trustee could be a real challenge, especially for smaller DB schemes.

Some of the Opposition’s suggestions may not be in the interests of members of schemes. I think the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was at the recent conference of the National Association of Pension Funds, where he would have heard Fiona Reynolds, the chief of the Australian Institute of Superannuation Trustees—our friends the Australians again—commenting on his suggestion. She said:

“Looking at the Australian system, we conducted a lot of research into whether there should be more independent trustees but in actual fact we found there was a greater alignment of interest within trust based schemes, and these schemes outperformed other schemes where independent directors were present.”

In other words, these are interesting ideas, but they have been tried elsewhere and they are not a panacea or golden bullet.

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

If that is the case for Australia—and I looked very closely at Ms Reynolds’s comments—why are the Australian Government giving the regulator and trustees a duty to consider how to improve the Australian pension system in the future?

[Steve Webb]

I do not see any incompatibility. The specific finding in Australia that independent trustees are not a magic bullet is not inconsistent with requiring schemes to ensure they are doing a good job. We will require schemes to meet quality standards that we will set out shortly.

Our call for evidence earlier this year sought views on provider-level governance structures, and the OFT has announced that the Association of British Insurers will work on independent governance committees for the big insurance-based schemes. We welcome that development and will consider our own proposals in detail in our response to the call for evidence.

The second set of governance issues relates to fiduciary duty and sustainability, addressed in new clause 12, tabled by the hon. Member for Brighton, Pavilion (Caroline Lucas) and amendments 54 and 55. By happy coincidence, I took part in a conference this morning organised by ShareAction. The hon. Lady was on the attendance list—perhaps she was sitting at the back heckling, but I did not see her there. The conference was to launch ShareAction’s green light project, which aims to get pension funds to take sustainability and climate change seriously. I was delighted to take part in that conference and I am very supportive of that agenda.

Clearly, the duty of trustees to their members is a cornerstone of trust-based governance, but we are looking at whether we have got the definition of fiduciary duty right. I welcome the fact that the Law Commission has consulted on this. Its interim conclusion is that fiduciaries should look at longer-term issues, and it is legitimate for them to look at environmental, social and governance—ESG—issues. The Government are therefore considering what the fiduciary duty on trustees means and how far we can deal with it through a better understanding of that work.

One of the issues that came out of the conference this morning—I shall try not to deviate too much from the new clauses, Mr Speaker—was that the trustee toolkit that the Pensions Regulator provides could be amended to take account of some of these concerns. One of the challenges is to try to ensure that the trustees do their job properly and have a broad understanding of what it entails. As I say, the Law Commission’s interim conclusion was that trustees should—note “should”, not just “may”—consider

“in general terms, whether their policy will be to take account of ESG factors in their decision-making”.

--- Later in debate ---

[Gregg McClymont]

I thank my hon. Friend for her shrewd intervention.

The Minister has been slow to understand the depth of the problems in the pensions market, and the House does not have to take my word for that. Earlier this week, I wrote to the Conservative MPs in the 40 most marginal Conservative seats, who have recently published a manifesto-cum-policy document. The language therein is—how shall I put this?—tougher on the private pensions market even than mine. The document, “40 Policy Ideas from the 40”, describes it as a failed market. It also states:

“Pension providers still refuse to clearly identify hidden charges such as churn and related fees…91% of retirees buy their pension annuity from their fund manager without checking other market options…the problem is that the private pensions market in the UK is a failed industry with higher charges than in any other country.”

That was not written by the Labour party. It was written by the Conservative MPs in the 40 most marginal constituencies. It seems a bit odd that they should take a tougher line on the pensions market than the Liberal Democrat Pensions Minister.

The way to explain that conundrum—I will not call it a paradox—is to say that anyone who believes in markets and thinks that they should work properly will support Labour’s proposals on reforming the private pensions industry. We want to reform it to ensure that the 10 million new savers going into automatically enrolled pensions get a fair deal. This pertains in particular to clause 29 and schedule 16, and the amendments thereto. It comes down to whether we believe that the pensions market is ready and able to proceed with pot follows member, given its fragmentation. The evidence shows that it clearly is not. Again, Members need not take my word for that. The National Association of Pension Funds has made it clear that we need to move to an aggregator system.

Given that the Minister was kind enough to spend a considerable period of time talking about the Labour amendments, I will do the same. I want to say a little about why aggregators are important. When the Minister addressed the NAPF, he gave a lucid, walk-around-the-stage performance that I enjoyed very much. He referred to two songs from “Les Misérables”. It would be unfair of me to sing either of those songs to him now. I have to confess that I am not a musicals man, although I suspect that the Minister might be a man for musicals—

[Steve Webb]

indicated assent.

[Gregg McClymont]

It seems that he is, and that is fair enough. I myself am not. Musicals are not my thing. He quoted from the innkeeper’s song, which I am certainly not going to sing. For one thing, I do not know the words. He used the song as a basis to talk about 2% here, 3% there and charges everywhere, and presented that as the problem in the UK pensions market. That is very different from what he was saying not long ago. It is just over a year since he accused Labour of scaremongering about pension charges, but he has moved a long way since then—rhetorically, if not perhaps substantially. He talked about that ditty and made it clear that there was a problem, but he still does not grasp the fact that pot follows member is impossible because of the fragmentation in the pensions market.



Labour’s new clauses would enable the restructuring of the UK pensions market so that savers’ interests would be appropriately represented. The Minister referred to our new clause 9, which deals with trustees, and he quoted the OFT’s view that the trustees would have to be good ones. He also quoted someone from Australia who is over here at the moment, who had said that in some cases trustees were not the answer.

Our proposals involve having trustees in every scheme, the scaling up of the UK pensions industry to reduce the fragmentation born of 200,000 different schemes—it is the most fragmented private pension system in the world—and the reform of the annuities market. Our amendment (a) to new clause 1 proposes that all costs and charges should be disclosed. Those measures need to be taken together as a package, as a Labour Government would do, and they would provide a starting point for tackling the fundamental problem in the UK pensions industry.

Our proposals would deal with the first problem, the system’s fragmentation. Secondly, they would deal with the problem that, as history tells us, pension savers are not the same engaged, informed consumers as those who buy tins of beans. The Minister seems to have undergone a damascene conversion on the merits and demerits of comparing the pensions market to the tin of beans market, and I will come back to that point. Savers are not informed and engaged in that way.

Buying a pension is not like buying a tin of beans. The consumer does not exert the same pressure. Someone buying a tin of beans might be given a choice of five different kinds. With pensions, such a choice would not be available to the saver anyway, because the employer buys the product. But let us use the Minister’s metaphor and compare the pensions market with the tin of beans market. First, if there were a pensions market in a supermarket, the saver would not choose the pension themselves; their employer would do so. That would be an odd arrangement in the tin of beans market. Secondly, the buyer of beans can taste the various kinds, from the cheaper ones to the more expensive, and come to a judgment based on taste relative to cost. It would be difficult for them to make a similar comparison with pensions; historically, it has never happened. Thirdly, I return to the point that it is the employer who makes the purchase of a pension.

The Minister has done something significant in the state pension sphere. He and I have been exchanging views across the Dispatch Box for almost two years now, and I say to him gently that he is still approaching the private pensions market on the basis that it has the ability to function like other markets, including the market for beans, even though, as he looks at it more closely, he can see that there are big problems. It cannot function like that. If we are to make it work properly, we have to ensure that the people acting in the pension saver’s interests are muscled, scaled and resourced.

That is what our new clauses would achieve. They would enable the scaling up of the pensions system, so that schemes would be able to get an effective deal from providers. Let us be clear: the providers in the pensions market have scale. In that sense, it is a bit like the energy market. They are large-scale, efficient organisations. It is the people saving into pensions who do not have scale, and that is because there are 200,000 pension schemes. They do not have the necessary representation because the smaller employers, in particular, who are auto-enrolling their employees are not pension experts. I know that the Minister is aware of those facts—we have discussed them a number of times—and I urge him to think about how all that relates to restructuring the private pensions system so that it takes cognisance of that reality. It is in that area that he is not taking on what the Opposition are saying.

We are clear that we need to move to an aggregator system, because otherwise pot follows member will not work and because if we enable the creation of aggregators, we have a chance to bring down charges in the auto-enrolment market. We know that there are millions of stranded pension pots, and the Minister rightly and repeatedly talks about them. How do we use the stranded pots issue to generate some change in the interests of pension savers, particularly the 10 million new savers automatically being enrolled in pensions for the first time? How do we do that? That is what our new clauses wink towards.

--- Later in debate ---

[Steve Webb]

The hon. Gentleman is making a thoughtful contribution, but what he seems to be saying is that if I have a small amount of money, I can have a 50 basis points pension fund, but his proposal for the charge cap for active members is 100 basis points or 1%. If I have a lot of money in pensions, I have to pay 1%, but if I go off to an aggregator, it is 0.5%. Why is that a good deal?

[Gregg McClymont]

I thank the Minister for that thoughtful intervention. I am coming on to the issue of the charge cap and the rate at which it will be set, so I shall take up the point when I discuss our amendment (a) to new clause 1. He refers to small pots, but that takes us into territory we have previously discussed about getting aggregators to take them on. Why does he believe that only small pots that are stranded should automatically be transferred? My view is that all stranded pots should be liable for automatic transfer. I am grateful for his intervention, because it reminds me of something I intended to say. The Government’s position on the pot follows member system appears to be supported only by the Government, the Minister and the ABI. First, the only pots liable for automatic transfer will be those for less than £10,000, and secondly no pots that are stranded before the date on which the legislation takes effect will count as stranded pots. [Interruption.] The Minister shakes his head. I will give way to him if I am wrong on that point. He does not want to intervene, so I shall continue on the basis that what I am saying is correct.

This is an important issue, because I am building a case that the Minister does not realise how substantial the problems in the private pensions market are. He continues to think it can be treated like better-functioning or well-functioning dynamic markets. Actually, the market is more like the one in energy. I say that because when, under the Minister’s leadership, the Department for Work and Pensions looked at how to consolidate pots, it gave as a reason against aggregators the fact that they would disrupt the current market structure.

The Minister talks about new clause 1 and the need to take very strong action. Implicit but also explicit in what he says is that there are really serious problems with this market. If that was not explicit in what he said today, it was certainly explicit in his “Les Misérables” ditty at the NAPF. He knows about these problems, and he knows that we need significant change. We are going to be in a position, however, whereby all currently stranded pots will continue to be stranded. The Minister is shaking his head again. Does he want to tell me that I am wrong? I am happy to accept it if I am wrong, but on the basis of our Committee debates, I do not think that I am. Am I wrong? The Minister will not stand up to say so, so I shall assume that I am not and that he wants to keep the currently stranded pots still stranded and will not take action to deal with the problem. He also sets a £10,000 limit. Why? The answer is that he continues to be unprepared to stand up to the vested interests in the pensions market.

The Minister said several times that the ABI is doing this, and the ABI is doing that. That is welcome; we like to see the industry engaged. However, a time must come—and it is now—when the Government must get on and make the changes necessary to reform the pensions system. I put that on the record, and if he wishes to correct me, he can. As I say, currently stranded pots will not be encompassed by clause 29 and schedule 16, and no pot above £10,000 will be considered to be a pot eligible for automatic transfer. I think that says something significant—that he does not understand the necessity for significant change in this market.

It is not just me referring to private pensions as a failed industry. As I said, the group of 40 Tory MPs in the most marginal constituencies have done so too. They do so because they understand that if 10 million people are to be automatically enrolled into the new workplace pensions, every scheme must provide value for money. The Minister needs to take the necessary action and accept that.

--- Later in debate ---

[Steve Webb]

The hon. Gentleman’s central thesis seems to be that he should claim credit for Labour’s 2008 auto-enrolment legislation. He likes to say that auto-enrolment is a Labour thing. However, he has spent the last three quarters of an hour telling us how fatally flawed that legislation was. It contains no standards relating to quality or to annuities. I would have asked myself on day one, “How can we get value for money?” Why did Labour think that it was good enough to legislate for auto-enrolment without addressing any of those issues?

[Gregg McClymont]

The Minister took a similar approach when he talked about stakeholders. I shall say more about the stakeholder issue later, but let me first make it clear to him that I have never claimed that all the credit for auto-enrolment should go to Labour; in fact, I have said a number of times that the Minister and the Government deserve credit for taking it on. The Minister is simply wrong to say that that is my “thesis”, as he put it. My thesis is that the Minister has underestimated the scale of the problems in the private pension market, and that the Bill and his comments on our new clauses suggest that he continues to do so. He says that Labour should have done this and should have done that, but I assure him that had I been pensions Minister in 2010, the first task on which a Labour Government would have focused would have been making the changes to auto-enrolment that were necessary to ensure that every saver was given value for money. [Interruption.] The new Whip, the hon. Member for Croydon Central (Gavin Barwell), of whom I am extremely fond, has just said something that I could not hear because I was talking at the same time as he was mumbling, but I am sure that it was shrewd and thoughtful.

The Minister talks of views. This is the Opposition’s critique. He has announced, “I want to carry out a radical reform of the state pension. I want to move from a very slow merging of the state second pension and the flat rate state pension to a hard and fast wind-up.” That is a complicated process that will take up a great deal of time. Meanwhile, he has been focusing on another issue, that of “defined ambition”. He spoke about that to the NAPF as well.

My specific critique of the Minister’s approach is to do with sequencing. Given his intentions and actions in respect of the state second pension, he should have made sure that there is nothing in the auto-enrolment market that could end up with any of the 10 million savers who are going to be automatically enrolled getting less than value for money. At one level the Minister does not disagree with that, because he told the NAPF that we will look back at this period as either one when something happened that was for the long-term good or as one when the problems in the private pension market were not dealt with. The Minister has been too slow to get on to this and, based on what he has said today, he is still not taking the necessary action. He is saying he might take action, but his words, which I will examine shortly, reveal it is in fact the appearance of action without the reality of action.

Let me develop that argument with reference to new clause 1 and our amendment (a). The Minister announced that there will be a consultation on a possible charge cap. We all knew that was coming: the Minister trailed it extensively. What did the Minister say about this consultation? First, it is important to note that it is a consultation, which, of course, does not commit the Government to doing anything. A consultation is not the same as legislation. The Minister became more engaged as he was speaking, and he finished by saying that this is a full-frontal assault on pension charges. The problem is he also said, “We will look at how far we can get.” A whole range of activity on charges has been undertaken, but, when he lists them, it is clear that they are mostly consultations. I give him credit on consultancy charges. The Minister acted decisively on that, but he needs to take similarly decisive action on the wider pension charges problem.

The Minister’s language was instructive. He wanted to dress up a consultation as action, but it is not action. He floated the possibility that one consultation option will be a cap of 75 basis points, but he did not say what the other options would be. Given my knowledge over two years of the way the Minister proceeds, I doubt that this will be a consultation with only one option, so will he tell us what the various options for a charge cap will be? He is probably giving the House only partial information by noting there will be one option of 75 basis points.

So the Minister announces a consultation, cherry-picks, for the benefit of his statement this afternoon, some of the things that will be in it, but no one in the House has yet seen the consultation and been able to examine it. That suggests the Minister is under pressure to get going on reforming the private pensions market, specifically in terms of costs and charges. That was what one felt when listening to the Minister. Not only did he spend a lot of time rebutting Labour’s vision for private pensions, but he felt the need to oversell what the Government are doing. I would say he felt that need because he feels under pressure on this issue. [Interruption.] The Minister suggests I am psychoanalysing him. As a historian rather than a psychoanalyst by trade, I will now present some evidence to support this view of the Minister.

Just over a year ago, when Labour pointed out the problems with charges, the Minister said we were scaremongering. However—to take us back to the issue of the tin of beans, as I promised—the Minister said in his statement that the pensions market is not like a tin of beans and that is why we have to look at a charge cap, but he also said in January this year, “I’m not sure a charge cap’s the way to go because the pensions market is like a tin of beans.” First, that suggests an obsession with tins of beans, which one would never have expected of the Minister, but it also suggests a little confusion in the Minister’s mind about what kind of market the pensions market is.

The Minister now says categorically, “The pension market is not like a tin of beans, so a charge cap has to be consulted upon”, but in January 2014 the Minister is quoted by AOL Money UK as saying there is no case for a pension charges cap and

“he is not yet persuaded that the Government should cap pension charges.”

The Minister can say he has changed his mind. I have absolutely no problem with that. He says he was not persuaded and now he is persuaded. That is a perfectly defensible position, but it gives credence to the Opposition argument that the Minister has been slow to realise just how dysfunctional this market is. The Minister said in January:

“Why does the Government not set a price cap on a tin of baked beans? We do not need to because there is a vibrant market; people have lots of choice”.

Yet today the Minister used the baked beans example himself and said categorically that the market is not like a tin of beans. That suggests the Minister has moved on this issue, which we welcome, but it raises this question: if he did not get it nine months ago, does he get it now? The way to test that is to look at what he said about charges, disclosure and caps in respect of new clause 1.

The Minister made it clear that the consultation is happening and it is important, and he pointed back to stakeholder pensions and said, “The Labour Government brought in stakeholder pensions in 2001, but look at how high the charges were capped.” I think the Minister will agree that he and this Government, by taking on the Turner consensus developed by the last Government, are grappling with fundamental legacies of pension policy decisions made by previous Conservative Governments in particular. [Interruption.] The Minister says Labour ones, too, but let me develop this argument.

The Thatcher Government did—I am sure for the best of intentions—a couple of things, one of which was breaking the link between earnings and the state pension, but we can come on to that when we talk about state pensions later. Specifically pertinent to the clauses and amendments currently under discussion, however, the Thatcher Government decided to encourage the taking out of personal private pensions and thereby encouraged—I will put it no stronger than that—5 million people to leave the state earnings-related pension scheme and/or occupational schemes. The Minister knows about pension pillars. The state pension is one pillar, and additional pension saving is another. What the Minister is trying to do in this Bill is reform the first pillar radically and make sure the additional pillar delivers effectively. That was the approach the Turner commission set out, and I am pleased to see the Minister nodding in agreement. The Turner commission reached that conclusion because it recognised that both pillars had to be rebuilt after the policy mistakes of the 1980s.

--- Later in debate ---

[Gregg McClymont]

I assume the hon. Gentleman is referring to the decision to remove the dividend—[Interruption.] I say to him, first, that I do not know where he gets that figure from. I have heard it from Conservative MPs, in particular, but I would be delighted if he explained where he got it from. I would be interested, because anyone who has looked at the matter closely would say that the figure had been plucked out of nowhere. Pensions are a long-term business, and I am not suggesting that the only Governments who ever made a mistake were previous Conservative Governments. However, the fundamental policy decisions that set the UK on a slippery slope regarding additional pension savings were the mistakes the Thatcher Government made through the enormous encouragement given to personal private pensions.

The hon. Gentleman might remember, or might have read about, the way in which an army of pension salesmen was unleashed to persuade people that they should leave high-quality occupational schemes or the high-quality second state pension—the state earnings-related pension scheme—and go into personal pensions. They were offered enormous lump sums, not realising that such sums, up front, actually came out of their pension savings. They were promised enormous returns, and they were promised that they could pay less into a pension and get a much better retirement income. Where did that lead? It led directly to the private pension mis-selling scandals, whose legacy of public mistrust of pensions we all live with today.

That relates back to my point about the Minister’s approach. He is trying to build back up and deliver, or try to deliver on, a consensus around the Turner proposals—that is the right thing to do. However, if he is going for a hard, fast wind-up of the second state pension, with the losers being low-paid private sector workers, he has to be clear and convinced that every auto-enrolment scheme—10 million people are going into these schemes—delivers value for money. That is where my view, and that of Opposition Members, that he has not moved fast enough comes from, and it is evident in his change in view that I have cited. His view on the private pensions market has evolved. We welcome his movement, but we say to him that he has to move faster, and that leads me to amendment (a).

We have to draw a distinction between costs and charges. Our amendment would, in particular, make possible the disclosure of all transaction costs. The Minister alluded to that, saying, rightly, that we cannot have transaction costs in the cap. I absolutely agree with that; I do not know anyone who would say that transaction costs could be included in the cap. However, we need to ensure that the transaction costs are disclosed to employees and employers. He suggested that it was odd that the Opposition would want there to be a statutory record of costs and charges, but that is not odd; it is central to reforming the private pensions market.

[Steve Webb]

A few minutes ago, the hon. Gentleman rebuked me for saying that engagement was important, because for most people this is all about inertia, but he is now saying that employees are going to go to the pensions regulator’s website to look at transaction cost charges on their pension. Those two things cannot both be right.

[Gregg McClymont]

That is not what I was saying, and I will explain why. I am not surprised by the Minister’s response, because it probably explains why he was reported as saying at the NAPF conference that transparency “gets you virtually nowhere”. I assume the basis for that view, which at first glance appears odd, is that he takes the point that I have been making throughout this debate that seeing the pensions market as one where the saver is always is in charge or can always be in charge is simply wrong. I just put that on the record, but now let me deal with his point directly.

First, I do not see any basis on which one can be against the full disclosure of everything that has an impact on pensions, including transaction costs. Secondly, if we had the disclosure of transaction costs, that would enable everyone with an interest in ensuring good pension outcomes, including the Government, to have the evidence at their fingertips to say to interested parties, stakeholders and, in particular, pension companies and fund managers, “That’s what you are charging? That’s not on.” How can the Minister not want to have all the evidence at his fingertips? He is taking a strange position. He says that he is carrying out a consultation on charges. We know that is a shift in his position, for the reasons I have set out and given his previous comments, but he is still behind the curve because he does not support the full disclosure of transaction costs—he certainly will not support our amendment (a), which will make such disclosure a reality.

Let us be clear about this: we simply do not know what happens on costs when pension moneys are put into the “investment chain”. That seems an obscure term, but I am talking about where someone saves into a pension, their pension provider passes the pension savings to fund managers—they are often in the same organisation, because, as with the energy sector, there is a lot of vertical integration—and then the savings are invested. There is no comprehensive disclosure of all the costs that accrue in that process, and that cannot stand for much longer in the 21st century.

The Minister was quoted as saying at the NAPF conference—if he has been quoted unfairly, I urge him to intervene to say so—not only that transparency “gets you virtually nowhere”, but that one had to strike a “balance” between the public’s right to know about transaction charges and the costs to fund managers of disclosure. We hear that argument a lot across political debate. It is not a foolish argument in some cases, but it is in this case, because fund management is such an opaque business and, according to the things we hear—without access to the facts we cannot know for sure—the costs can be significant. Hon. Members should not take my word for it. The Secretary of State for Business, Innovation and Skills commissioned the Kay report on equity markets and “long-termism”, and Professor Kay made it clear that all transaction costs should be disclosed.

Professor Kay was clear about that, on behalf of the Government—or, certainly, at the behest of the Minister’s Liberal Democrat colleague the Business Secretary—because of the evidence he had gathered that fund managers can over-churn pension fund savings. What do I mean by “over-churn”? The incentives lie in commissions for trading, and so rather than hold on to assets for the long-term—what one might call the “Warren Buffett” approach, which is a very successful long-term approach to investing and is consonant with the long-term nature of pensions—fund managers have a big interest in constantly trading, because that generates commissions. That might be the case, or it might not. We simply do not know, because those things are not disclosed. The Minister trumpets new clause 1, but it does not include any disclosure of transaction costs. If we want to move to an auto-enrolment system and have in mind the 10 million people who will be automatically enrolled, as a sine qua non of reform we must ensure that the transaction costs are disclosed.

I am not sure whether you are aware, Madam Deputy Speaker, but just over a year ago the Royal Society of Arts investigated what pension providers understand by “the costs and charges” of a pension. It contacted 25 big providers and the vast majority told it that the full costs and charges of a pension scheme were simply the annual management charges, not the total expenses ratio and not transaction costs. Our argument is that the Minister has been too slow to recognise how dysfunctional the private pension market remains. We welcome the fact that he is moving, but he is doing so far too slowly. As evidence of that, we cite the fact that he will not commit the Government today to the provision on the disclosure of transaction costs. Our amendment (a) to new clause 1 would ensure the disclosure of transaction costs.

Our other amendments, as they pertain to the scale and value of pension schemes, to trustees and to annuities, would make a significant difference in the market. They would start to make the changes that are necessary to ensure that everybody gets value for money.

--- Later in debate ---

[Steve Webb]

I am grateful for the chance to respond to the debate. I hope the House will forgive me if I focus my response to the shadow Minister on only the first hour of his speech, as I believe everything that followed had already been covered.

The gist of the remarks by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) was: when I was appointed in 2010, I should have looked at my in-tray, cleared it out and said, “It is essential we ensure value for money in workplace pensions.” By implication, action was needed because the previous Government, after 13 years, had not put pension savers in a position in which they would get value for money in workplace saving. Indeed, the hon. Gentleman suggested in his narrative that all the evils of pensions happened in the preceding 18 years of the Conservative Government. Again, by implication, Labour comes to power in 1997 ready to put right the failures of the previous Government; they have 13 years to have a go at it, yet the first job of a new Liberal Democrat Minister appointed in 2010 is to sort out the mess in pensions. There is, I think, a bit of a logical flaw in that argument.

I enjoyed the hon. Gentleman’s psychoanalysis of me—it is cheaper than therapy, that is for sure. He said, “We do not want consultation; we want action”. That was powerful, emotional and gut-wrenching stuff, except when we look at his amendment (a) we realise that, as my hon. Friend the Member for Leeds North West (Greg Mulholland) pointed out, in the midst of a clarion-call for action, it provides that, before action, or

“Before making regulations under subsection (2), the Secretary of State must undertake a public consultation”.

When the Government do it, then, public consultation is a substitute for action, but when the Opposition call for it, it means dynamism and standing up for the consumer. I do not know whether the hon. Gentleman will be a Minister one day, but he will know that Governments are required to consult before they legislate. That is what we are doing, and he can be assured, as my hon. Friend the Member for Leeds North West said, that consultation is a precursor to action.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East said that pot follows member was not a good idea here because whereas there are not many pension schemes in Australia this country has very large numbers of them. He massively understates, however, the extent of concentration and consolidation in the pensions markets. The Office of Fair Trading has said that the four largest providers hold the majority of schemes, assets and members. The four largest providers on their own have 68% of the assets, 76% of the schemes and 61% of the members. The hon. Gentleman believes that the vast number of schemes means that pot follows member cannot possibly work because everybody is in a small pension scheme; actually, the opposite is true. Most people are in big pension schemes, which is why pot follows member works perfectly well. Consolidation is already happening—I mentioned the fall of a third in the number of medium-sized pension schemes—and, moreover, when we implement measures on scheme quality, which will include action on charges, that will trigger substantially more consolidation. So the hon. Gentleman is, in a sense, being backward-looking in referring to the large number of tiny pension schemes.

[Gregg McClymont]

I thank the Minister for giving way to me again: he is being very generous with his time. Is he not conflating providers with schemes? Is he not really saying that there are big pension providers, rather than schemes, in the United Kingdom? Big pension providers may service 200,000 schemes, but there will be many different schemes within their overall provision .

[Steve Webb]

That was powerfully put, if I may say so. However, the hon. Gentleman is trying to portray a workplace pensions sector that is ludicrously fragmented and all over the place, and in which most people are in tiny schemes. In fact, most people are in big schemes. The number of medium-sized schemes is falling, and the quality standards that we are introducing will accelerate an existing trend. Pot follows member will be even more fitting as time goes by, because we are overseeing and hastening a process of consolidation in the pensions industry.

I will not say too much about baked beans, with which the hon. Gentleman seems to be even more obsessed than I am, but the point of the baked beans analogy is that the baked beans market works. As the hon. Gentleman said, in the pensions market the demand side is weak, and leaving everything to market forces is not the answer.

The model that the hon. Gentleman has embodied in his amendments and new clauses is a very confused one. He seems to be suggesting that small pension pots will go off to the new aggregator schemes, which are really good, so a silly little amount of money will automatically go to a really good scheme, whereas in the case of large amounts, the quality standard will be more relaxed. I understand that his party advocates a 1% charge cap, but he wants a 0.5% charge cap for the aggregator. That would bring about bizarre circumstances in which people with serious amounts of pensions money could pay 1% charges, but people with small amounts in a scheme that they never chose pay 0.5%. How is that coherent? I am happy to give way to the hon. Gentleman, but he cannot explain how it is coherent because it ain’t.

We need to ensure that high quality standards apply not just to small pension pots in an aggregator, but across the board, so that when people’s pots follow them from scheme to scheme, they move from a good-quality scheme to another good-quality scheme. The hon. Gentleman quoted the National Association of Pension Funds. The association is, of course, right. If we were simply going to allow money to be transferred automatically from a good scheme to a bad scheme, we would have a problem, but because we will regulate for quality, no bad pension schemes will be used for the purpose of automatic enrolment.

The hon. Gentleman said that nothing was happening about annuities. In fact, the Financial Conduct Authority is reviewing them. It has already surveyed the rates offered to existing customers and those offered to customers accessing rates through the open market option, and is trying to establish whether profits in the internal annuities market are too high because too few people are exercising that option. Action on annuities is not just about what my Department does; the FCA is considering the issue actively, and we are working with our colleagues in the Treasury.

New clause 11 requires savers people to consult an annuity broker. The hon. Member for Edinburgh East (Sheila Gilmore), who is no longer in the Chamber, said that that would mean that people were given advice, but annuity brokers do not give regulated advice; people must pay for that. The broker will no doubt charge a fee, and those who want advice will either have to consult someone else or pay again for the broker’s advice.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East wants to require those in charge of auto-enrolment schemes to send people to brokers who may charge, so those people may have to go elsewhere for advice. He says that that must happen in order for a scheme to qualify as an auto-enrolment scheme. We consider his to be a backward-looking and restrictive model. Let me give an example. What about pension schemes that annuitise internally—which, in other words, provide the annuity themselves? They may provide a guaranteed annuity rate, but in the hon. Gentleman’s world people will still have to go off to an annuity broker and shop around, rather than taking advantage of the product that is in the scheme already. That is an example of where he is trying to be over-prescriptive. [Interruption.] He says it is all in my head; I am not quite sure what he is talking about. The point is that we are trying to provide forward-looking provision for decumulation. Annuities is one model, with deferring taking a pension, for example, or draw-down, or enabling people to swap their annuities around, as my hon. Friend the Member for Gloucester (Richard Graham) said. We need to be examining all these things, but the hon. Gentleman wants to hard-wire into primary legislation a single model for a single product, which is not the future of decumulation.

--- Later in debate ---

[Gregg McClymont]

rose—

[Steve Webb]

I will certainly give way to the hon. Gentleman, but will he just clarify this? He mentioned in his speech a 0.5% cap for the aggregator and said, “There won’t be many of these. We can control them. We can guarantee quality. Quality equals 0.5%.” Then he says—he has said this publicly before—“The Labour party favours a 1% charge cap for schemes people are members of.” So why does he want to have half the charging level for people’s small amounts of money in an aggregator than for people’s active pension funds?

[Gregg McClymont]

I cannot respond at length as this is an intervention, but the Minister continues not to understand our proposal for aggregators. [Interruption.] He says, “It’s funny, that is”, but he just does not get it and I will discuss it with him further. We are very pleased the Minister takes Labour’s proposals so seriously that he is spending so much time and effort responding to them, but the aggregators would not only deal with the stranded pots. Pension providers can become aggregators if they meet governance, quality and charge standards, so it would not be deferred members from small pots alone who would be in these schemes as there would be larger schemes than that.

[Steve Webb]

I would love to say that clarified matters. Let me put this challenge to the hon. Gentleman. He says we do not understand his proposals, but I have not seen his proposals. He has not set out specifically his alternative proposals, and I am spending time on this is because no one is arguing about the Government amendments; it is the Opposition amendments that we are arguing about.

I challenge the hon. Gentleman to set down in some detail what exactly he is proposing and what kind of pensions market he envisages, because one of the confusing features of his vision—as it were—is that it is something like the energy market. He seems to envisage a small number of very large regulated providers who presumably get together with each other and maybe do not always have the consumer interest at heart. That is what the energy market that his party leader oversaw has delivered for consumers. I do not want to see the same thing in the pensions market.

[Gregg McClymont]

The Minister says he wants to take great action through a cap on charges, but after three years all he can do is introduce a consultation whose findings he will publish at some stage in the future. That is not a Government taking action, and he is doing that from the position of having all the powers of government at his disposal. I do not think we should take any lessons from a Government who are acting so sluggishly in sorting out the problems in the private pensions market.

[Steve Webb]

When the hon. Gentleman says we will publish that at some point in the future and he knows we are publishing tomorrow, we can understand why he feels vulnerable on this issue. I am simply suggesting that his reluctance to set out an alternative model shows the paucity of alternatives being offered to us.

On a specific point, the hon. Gentleman suggested we could deal with only small pots created after Royal Assent. That is not correct. We have the power to specify a prescribed date, and that date would in the first instance be likely to be the point at which auto-enrolment began. So in the first instance automatic enrolment pots from when this process began, rather than when we secured Royal Assent, would be within the scope of pot follows member. I just want to put him straight on that.

[Gregg McClymont]

Again, the Minister says he has a power but does not tell us how he is going to use it; that is common throughout the Bill. Will he categorically state that all pots stranded since auto-enrolment will be included within the Bill?

[Steve Webb]

I thought that was what I just said. Let me be clear: we want to get this thing going. The hon. Gentleman raised the issue of the £10,000 pot size limit. Clearly I would like to go further, and we look at a £20,000 pot size limit in our consultation document, but we have to get the thing going. May I tell hon. Members who were not here at the start of the debate that he said he had sat and watched a video of a speech of mine? I commend him for that, as watching videos of me speaking shows real devotion to the world of pensions. In my speech last week, I made it clear that we see this as the beginning of a process. The pot size limit could go up and the scope of pot follows member could be increased, but we envisage beginning with auto-enrolment pots. I am clear about that, and there is no ambiguity: we are beginning with auto-enrolment pots.

The hon. Member for Brighton, Pavilion (Caroline Lucas), who is not in her place, asked when further action would be taken on fiduciary duties. For the record, in case she should happen to read it later—or watch a video—I can confirm that the Law Commission’s final report on the issue will be published in June 2014. Obviously, further debate will take place at that point.

I wish to respond to the related issues raised by the hon. Members for Hayes and Harlington (John McDonnell) and for North Ayrshire and Arran (Katy Clark). The hon. Lady asked about the important issue of the position of protected persons, on which we have consulted and on which I hope we will shortly reach a conclusion. We think that slightly more workers are involved than she suggested, but certainly tens of thousands of workers are affected. One challenge we face is that this is not just a matter for our Department. For example, if we place a cost on the energy employers through the abolition of the national insurance rebate and if we exclude their employees because they are protected persons, that has the potential to feed its way into energy bills. Her party leader has a view on energy bills, as do we, but the knock-on effect of a decision we take on energy bills has to be thought through. The same applies in the transport sector, to which the hon. Member for Hayes and Harlington referred. If railway and other employers cannot pass on through the pension scheme the costs we are imposing on them through the ending of the rebate, that will find its way through into fare increases and to consumers. So we have to think through a wide range of consequences of these decisions. That is why this is taking a while, but I appreciate the need to get on with it.

The hon. Gentleman said that there was a special case for the railway industry. His new clause 7 does not provide any protection in respect of any of the other privatised utilities; there is no suggestion that if any of those employers went to the wall pension protection should apply—it would just apply to the rail industry. If he feels so strongly about the justice of this issue for rail workers, why does his new clause not say that any protected person should be protected if the sponsoring employer goes bankrupt? I know his affiliation, and I have spoken to him in his role as leader of the group on rail workers, but if Parliament were to accept his new clause, we would have to deal with the question about why we did not do this for everybody else, too.

--- Later in debate ---

[Gregg McClymont]

I thank my hon. Friend for that intervention. I agree that there is a specific set of circumstances around these pension schemes. I am certainly not saying that accruals and the terms and conditions of a pension can never be changed in any circumstances, but there is a specific set of politically charged circumstances to do with the privatisation of these industries. Specific undertakings were given to the members of those schemes to encourage them to accept, if not actively support, the privatisation of the industries in which they worked. I urge the Minister to tell us this evening, if he can do so, whether he intends to use the power he is giving himself in the Bill to honour the promises made to the members of those schemes. If he will not do so, we will force a Division to test the opinion of this House on amendment 37, which would mean that the promises made to the 50,000 or so men and women in those protected schemes were met.

I am conscious of the time and allowing the Minister appropriate time to respond to the broader debate. I noted closely what the hon. Member for Brighton, Pavilion (Caroline Lucas) said about her new clause 6 and her belief that the 700,000 or so women in the group born between 1951 and 1953 will not get the new state pension, because they are the last pension cohort before the equalisation of the pension age, whereas men of precisely the same age will get it. Let me put it in simple terms: if there were twins, one male and one female, in that age cohort, the male twin would get the new state pension in 2016 but the female twin would not, having retired a little earlier. Such issues do emerge when we are involved in pension reform. The Minister and I have gone back and forth on the matter on a number of occasions, and I will not anticipate his arguments because we have gone through them some time before. However, we have to look at the issue in the context of a view that has grown up among many women that this Government’s attitude to their pension provision is not as generous as they believe it should be.

When considering the 2011 legislation, we had to deal with the issue of a significant number of women having very little time to prepare for retirement and short notice. They would have had to work for longer but some of them would have had only five years to prepare for that. They were five years from when they thought they would be retiring and then found out that they might have to work for seven more years. I am pleased that the Minister made a concession on that, although he did not go as far as we wanted. That group of women—a slightly different group from those we are dealing with here—who were also approaching retirement, felt that they were being unfairly treated. Not only did they feel, rightly, that they were being unfairly treated, but we have also had to deal with the Minister’s approach to auto-enrolment, which is excluding more than half a million women—and rising—from the benefits of auto-enrolment, because of the raising of the threshold for auto-enrolment in line with the personal allowance. A general sense has developed that this Government do not quite get it with women and pensions.

[Steve Webb]

The hon. Gentleman’s new clause 8 calls for a review. Obviously, having a review is not the same as having an opinion, so what does he actually think should be done?

[Gregg McClymont]

I certainly think the Minister should undertake a review.

The perception I am talking about has developed, so let me quote something that the Minister might be aware of. I cited it a couple of years ago, but he has probably forgotten.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 14th October 2013 Commons Chamber

[Steve Webb]

My hon. Friend highlights the important point that we need a great deal more transparency about the many different pension scheme charges—the OFT report identified 18 different sorts of charges. We will be looking at its recommendation that the fees he refers to should be reported to governance committees, which will be best placed to act upon them.

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

It was the Leader of the Opposition who led the way in exposing the pension charges rip-off, only for the Minister to respond—I have the press cutting to hand—by accusing Labour 15 months ago of scaremongering. Now that the OFT has published its damning report, does he not accept that Labour was right all along and that pension charges must be tackled in a serious and timely fashion?

[Steve Webb]

May I first congratulate the hon. Gentleman on keeping his post in the Labour reshuffle, which I understand was codenamed the Blair Ditch project? He says that we need to cap pension scheme charges. What I do not understand is why they were not capped at any point when Labour was in office. Why has it decided to cap them only now? The OFT did not recommend a cap on pension scheme charges. I am sure he was disappointed when he read its report, because he thought that it would. That is why we are now consulting and gathering evidence. We will act where the previous Government did not.

Women’s Pensions

Debate between Steve Webb and Gregg McClymont

Tuesday 8th October 2013 Westminster Hall

[Steve Webb]

The hon. Gentleman is putting words into my mouth. I am saying that older workers, on average, are very productive. Clearly there comes a point when our productivity declines, as we get much older. We should bear in mind that the 700,000 women who are the subject of the debate are in their early 60s. I think that many of the hon. Gentleman’s constituents would be offended at the suggestion that they are not productive, valuable members of the work force. We do not say that employers should be forced to go on employing them if they want to stop working, but the evidence from the IFS has debunked what has been called the lump of labour fallacy—the idea that there is a lump of labour to be done, and so it is possible to knock out an older worker and slot in a younger one. That neglects the valuable contribution of older workers.

Clearly there is a limit. The hon. Gentleman mentioned the age of 72 or 73, although the statute book takes us only to 68 at the moment, so I am not sure where he got that from.

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

I am pleased to serve under your chairmanship, Mrs Main. I was going to ask the Minister about the lump of labour, which comes down to the argument that there is a fixed amount of labour in the economy. My view is that it is probably much more complicated; will the Minister expand on that a wee bit? Is there a demand issue as well? I take the point made by the hon. Member for Strangford (Jim Shannon) about people moving up a rung, but if we assume it is more complicated and stickier than that, there is a demand issue to do with the goods and services that older, wealthier workers are likely to buy.

[Steve Webb]

The very complexity of the issue is the reason for the IFS examining what happens across the developed world. It looked at different sorts of labour markets and different labour supply and demand conditions. Systematically, it found no evidence for the hypothesis that getting rid of older, more experienced, productive workers benefits the young unemployed.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 1st July 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right. The danger with the current system is that people who save find that the Government come along and say, “You’ve saved some money—we’ll take some money off you.” Our intention is to encourage, not penalise, saving. Paying a single, simple, decent pension just above the level of the basic means test will greatly enhance those incentives.

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

The Government’s case for the new state pension is that it will increase the incentive to save in private pensions, but does the Minister agree with his hon. Friend the Member for Warrington South (David Mowat), a Treasury Parliamentary Private Secretary? He told the House during Second Reading of the Pensions Bill:

“One reason that people are not saving is that there is massive distrust of the industry. I have many colleagues in the private sector who would almost cut their arms off than invest in the pensions market.—[Official Report, 17 June 2013; Vol. 564, c. 712.]

What will the Minister to encourage people to make those savings in private pensions?

[Steve Webb]

I agree with the hon. Gentleman to the extent that there is mistrust of private pensions, which is why we have taken strong action,: for example, we have banned consultancy charges, which were a source of concern. On savings incentives, if he looks at our analysis, he will find that low earners in particular will have much smaller withdrawal rates when they save. Therefore, the return on savings, particularly for low earners, about whom I am sure he is most concerned, will be enhanced by the proposals.

Pensions Bill

Debate between Steve Webb and Gregg McClymont

Monday 17th June 2013 Commons Chamber

[Steve Webb]

I have given way to the right hon. Gentleman twice already, so I will make some progress.

A number of hon. Members raised matters of detail. I thank my hon. Friend the Member for Rochester and Strood (Mark Reckless), who said that he had approached the Bill in a spirit of scepticism. He is right to have done so. We should approach all new pension reforms in a spirit of scepticism, because there have been so many of them. One of the nicest things anyone has ever said to me is that the more he found out about the Bill the more he liked it. I am grateful to him for that.

My hon. Friend the Member for Rochester and Strood asked a specific question on whether someone who defers under the current system past 2016 will continue to receive the current generous terms after 2016. He also paid tribute to the staff in the House of Commons Library—he mentioned Djuna Thurley specifically—who have to wrestle with complex legislation. I echo that tribute. A lot of legislation is complex and difficult, and I think all of us accept that the Library provides us with great support.

My hon. Friend the Member for Thurrock (Jackie Doyle-Price) asked about another group and the whole issue of derived rights. The single-tier pension is designed for the future, whereas the current state pension system is rooted in the 1940s when men had jobs and women had husbands. We cannot go on like that. We have introduced a lot of transitional protection. For example, there was an option for women to pay something quaintly called the married woman’s stamp. If they did that at any point in the 35 years up to their pension age, we would protect them and pay them the pension they would have got. There is extensive transitional protection.

My hon. Friend raised the question of what she described as homemakers. People who are not in the paid labour force can still receive protection for their pension rights in a number of circumstances. If they are at home with children, caring for an elderly or disabled relative, or are unemployed and looking for a job, they receive credits. If they are too sick to work, they receive national insurance benefits credits. So a whole raft of circumstances are covered.

My hon. Friend mentioned a specific and narrow group of people—childless homemakers. Interestingly, at the start of her speech, she said how important the contributory principle was—I agree with that—and she was right that in many ways the Bill reasserts that principle. To reassert it, however, and then say that someone who has paid no national insurance, not been a carer, not been looking for work and not been too sick to work should none the less get a significant pension creates a tension. I can reveal to the House that she and I discussed this issue in the Tea Room before we got here, and she said, “But aren’t you changing the rules late in the day?”, as she also said in her speech. We have to strike a balance between moving to a new system and protecting people as we move, and not setting in aspic every single corner of the old system.

The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont) said, “You can’t go on running two separate systems”, and then demanded that we keep various bits of the old system going for another 15 years while running two separate systems. I would say to my hon. Friend the Member for Thurrock, then, that there is extensive protection. If the lady in question were widowed, for example, there would be pension credit of £145, so if she had nothing else she would be brought up more or less to the same level. Extensive protections are in place. I cannot promise that every single person will be protected in every single respect, and nor should I, but there is extensive protection.

[Gregg McClymont]

I want to correct the Minister. I did not suggest that we could not run two systems in parallel; I was merely pointing out that when we talk about the simplicity of this new pension, we have to take it into account that two systems will be running in parallel. I did not say it was an argument against the Bill in toto, but it is a point that we must all bear in mind when considering a simple pension system.

[Steve Webb]

The hon. Gentleman raised a lot of questions, which it is his job to do obviously, but did not offer any solutions. He gave a case study of someone born between 1951 and 1953 and said how unfair the system was. I want to stress that the person he gave an example of will get exactly the pension she was expecting on exactly the day she was going to get it, so we have not changed anything about that person’s pension. We have, however, triple locked her pension, which is better than she might have expected under the last Government, so I think we have done the right thing.

Opposition Members drew a comparison between women in that age group and men born on the same day. Let us try a thought experiment: if we were to impose a sex change on all 700,000 women in this group, 95% of them would not thank us—financially at least, although perhaps for other reasons as well. Getting on for 95% of them would say, “Why did you do this to me? Yes, I might get another six quid a week, but I’ll have to wait two or three years longer for it.” That is not a good deal. We have worked out that it would take many of these women 30 years of retirement to recover what they lost through waiting longer for their pension.

The hon. Member for Glasgow North East (Mr Bain) mentioned people with short life expectancies, as did the hon. Member for Inverclyde (Mr McKenzie). People who do not live long after pension age want to have their pension as early as possible, and again the last thing these women want is to get their pension when men do, because if they are not going to live long past the pension age, they will want their pension straight away, not later. The comparison with men born on the same day, therefore, is a false one. Overwhelmingly, these women will do better than a man born on the same day.

The hon. Member for Banff and Buchan (Dr Whiteford) made a thoughtful speech. I was impressed with almost all of it, expect the bit when she was pressed by Scottish colleagues about independence, at which point she became shifty and evasive. [Laughter.] I think that is just about parliamentary. It is clearly that independence would mess up pensions big time. The whole debate today has been about simplification and people knowing where they stand. How on earth would we splice together different countries’ national insurance records, cross-border deficits—

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 20th May 2013 Commons Chamber

[Steve Webb]

I think that the hon. Gentleman might have written his question before he heard my earlier answer. Comparing those women in his constituency with men born on the same day, as he did, misses the point that those men will have to wait several years longer for their pension. They would far rather be in the position of the women who get their pension at 62 or 63.

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

The Minister’s response to my hon. Friend the Member for Denton and Reddish (Andrew Gwynne) is to say that these women are in a far better position than equivalent men. Let me push him a little on this. How did he come to a calculation suggesting that these women are better off? My understanding is that, under the Government’s plan, 700,000 women currently aged between 60 and 62 will on retirement receive a lower state pension every week than a man of the same age. Will he tell us specifically how much less a week on average these women will receive on retirement than a man of the same age?

[Steve Webb]

As the hon. Gentleman knows, two things matter: how much people get, and when they get it, and he ignores the second thing. A man born on the same day has to wait until he is 65, but the women he is talking about will get a pension at 61, 62 or 63. The fact that they get the pension for years longer more than offsets a lower average receipt.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 11th March 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right to say that information will be crucial. One thing we have been doing with the changes to the state pension age, for example, is writing to the individuals affected so that they know exactly what position they are in. All too often in the past, laws have been passed, no one has been told and it has taken many years for people to find out about it. An information campaign will be central to taking forward these excellent proposals.

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

The Minister has so far provided cold comfort for the 429,000 women who will not benefit from the new state pension when men of precisely the same age will. May I ask the Minister about a specific group of 80,000 women who are represented in Parliament today? Under the Pensions Act 2011, which this Government passed, their retirement age increased with little notice. Now they will miss out on the Government’s proposed new pension with an average loss to the tune of £9 per week. Is it fair to penalise these women twice in two years?

[Steve Webb]

To be clear about the particular group to which the hon. Gentleman refers, their pension ages increased by a maximum of six months under the 2011 Act. The vast majority of those 80,000 would be worse off if we treated them the same as men, which is what he seems to be calling for. I was not clear what else he was calling for, but treating them the same as men would leave them worse off than they are now.

Pensions and Social Security

Debate between Steve Webb and Gregg McClymont

Wednesday 13th February 2013 Commons Chamber

[Gregg McClymont]

I am still waiting for the hon. Gentleman to confess that he was absolutely wrong to suggest that this is an above-inflation increase. That leads to some questions about the ability of the Liberal Democrats to devise economic and financial policy when they do not know the current rate of inflation and how it relates to the basic state pension.

[Steve Webb]

Understandably, the hon. Gentleman would like to be sitting where I am sitting. If he was, by how much would he have put the pension up?

[Gregg McClymont]

The Minister is determined to tease out from the Opposition what will be in our next manifesto. Our position is clear, and he is obviously trying to deflect attention from this real-terms cut in the pension.

--- Later in debate ---

[Gregg McClymont]

My hon. Friend makes a good point. The Chancellor thought that he could play clever politics and draw dividing lines between different sections of society, but he did not take it into account that this would hit those in work above all else. I am afraid that he has been too clever by half.

Let us be clear. One of the groups that will be particularly hard hit will be women. House of Commons Library analysis is clear that two thirds of those hit overall by the real-terms cut in benefits and tax credits are women.

[Steve Webb]

indicated dissent.

[Gregg McClymont]

The Minister shakes his head, but that is House of Commons Library research.

There has built up a picture of a Government who, having failed miserably on the economy, want to make working people and those seeking work pay the price for their economic failure. Labour’s alternative is clear: get Britain back to work, introduce a compulsory jobs guarantee and bring down the unemployment bill—the price of failure that the country is paying.

To conclude, the proposals in the order for working-age benefits are an affront to hard-working people—although an increase is better than no increase, of course. If the Government want to plug the hole in their failing economic plan, they should cancel their tax cut for millionaires this April, not hit millions of working people on modest incomes. That is the reality of the situation. The pension proposals are, of course, worth having. Pensioners depend on these upratings every year to maintain their standard of living, so I will urge my hon. Friends to abstain on this order, but to campaign for a new set of economic policies as we move towards 2015.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 28th January 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right. For those who retire under the new regime, years spent some decades ago bringing up children, which were not properly protected for state pension rights, will be so under the single-tier arrangements.

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

It has been a busy few weeks in pensions world. The Minister will be aware that the Office of Fair Trading has recently announced that it is to undertake an inquiry into the private pensions market. This follows a Labour campaign for just such an inquiry. The Minister’s response to our campaign was to accuse the Labour party of scaremongering on pension charges. Now that the OFT has decided to undertake this inquiry, may I encourage the Minister to heed another Labour campaign call and lift the restrictions on NEST as soon as possible so that it can provide low-cost, high-quality pensions to everyone who wishes to save with it?

[Mr Speaker]

We look forward, I am sure, to hearing about NEST, whatever that may be.

State Pension Reform

Debate between Steve Webb and Gregg McClymont

Monday 14th January 2013 Commons Chamber

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

I thank the Minister for advance sight of the statement, although it was not as advanced as that of some newspapers over the weekend. However, he did have the decency to brief me as our paths crossed in a TV studio this morning.

Today was not supposed to be about pensions at all but about the unveiling of the Government’s flagship child care proposals, which took centre stage at the coalition relaunch last week. Unfortunately, the latest bout of coalition unity did not last even a week. The Government cannot agree on child care, but the Prime Minister was desperate to have something to talk about this morning other than Europe, so—voila—we have the pensions White Paper.

In all seriousness and in respect of the Minister’s commitment to this proposal, we will take the White Paper very seriously. However, I sound a cautionary note. The Government have form on pensions. We remember when the Government laid the 2011 Pensions Bill before the House. The Minister told the House that it was fair to all, but neglected to mention a huge unfairness. I talk, of course, of the targeting of women in their later-50s, who found that the goalposts for their retirement had been moved again at short notice. It took Labour’s digging to reveal that injustice and a Labour campaign to win Government concessions. There is therefore every reason to look closely at the detail.

The principle of a simplified state pension was laid down by the Turner commission and was supported by all parties. The Leader of the Opposition has reiterated our support for that principle. However, it is fair to note that Turner rejected an abrupt shift to a single-tier state pension, which is why the previous Labour Government adopted an evolutionary approach.

Even on my speed-reading of today’s White Paper, there will be heavy losers, steep cliff edges and significant costs if the proposal goes ahead as planned. For example, the briefing from the Government over the weekend was at pains to emphasise the women-friendly aspects of the measures. However, I want to ask the Minister directly about the 429,000 women born between 6 April 1952 and 6 July 1953. Is it the case that those 429,000 women will not qualify for the single-tier state pension, and yet men who were born between the same dates will?

Let me dig a little deeper. The Minister referred to existing pensioners. Is it the case that this proposal excludes all existing pensioners and all those who intend to retire before 2017? If so, what is his message to the 15 million or 16 million people, by my calculation, who will not be eligible for the new pension? How many pensioners does he estimate will remain on £107 a week rather than £144?

May I ask the Minister about the 1.4% national insurance tax rise on 6 million workers? As I understand it, the money raised by that tax hike will not be reinvested in the new state pension but will flow straight into Treasury coffers. If that is indeed the case, how much money will that tax grab raise, and why is the money not being reinvested in the new state pension?

More narrowly, will the de minimis 10 years of contributions be part of the process by which public sector workers and private sector defined-benefit contracted out workers will participate in the new pension? Specifically, will they need at least 10 years of contributions to the new state pension to get any pension whatever?

[Steve Webb]

indicated dissent.

[Gregg McClymont]

The Minister shakes his head, which is important. I would appreciate it if he referred to the matter in his response.

We also seek clarification on what the abolition of the state second pension means for savers. Will the state second pension part of people’s accrued rights be uprated by CPI, not under the triple lock that will apply to the single state pension? That is an important question. Furthermore, how many savers currently pay into the state second pension, and how many of them will receive a lower state pension than they would have done without this reform? In other words, how many losers will there be among those who currently save in the state second pension?

The Government claim to have learned from the 2011 Pensions Bill. They say, and have briefed widely over the weekend and this morning, that the big winners in the new system will be stay-at-home mums. Some context is needed here. The Labour Government put female pensioners at the heart of their pensions policy. Most importantly, they massively reduced the number of years of contributions that both men and women needed to get a full state pension. It was reduced enormously to 30 years from 44 for men and 39 for women. The Government propose to put it back up to 35 years. What will be the impact of that five-year rise in contributions? Specifically, will it reduce the number of pensioners eligible for a full state pension, on Department for Work and Pensions estimates? That is an important question.

May I ask the Minister about the rising state pension age, which he mentioned towards the end of his statement? The Government seem to propose a new mechanism for increasing the state pension age. I have two questions about that. First, the difference in life expectancy between a manual worker and someone doing a non-manual job will play itself out both in the amounts saved in the new state pension and in the fact that non-manual workers will get it, on average, for much longer than manual workers. How will the system be made fair, given the difference in life expectancy, with a rising state pension age?

The second question is related to that. What if manual workers in particular cannot work for as long as any new mechanism sets out that they should when the state pension age is raised? If they cannot do hard, physical labour, how will that affect the Government’s claim that there will be a massive reduction in means-testing in the new system?

Those are only some of the questions that face us as we consider the detail of the White Paper. I suspect that the argument will not disappear overnight, because there is much detail to be considered. I hope that the Minister will give us some provisional answers on important matters that are affecting our constituents and his own.

[Steve Webb]

I thank the hon. Gentleman for what I would characterise as his broadly constructive response to my remarks. I welcomed his comment on the television this morning that

“the Labour party supports the principle of a flat-rate state pension”.

I welcome that because pensions are for the long term, and with two coalition parties united in support for this reform and support in principle from the official Opposition, we have a chance of stability in pensions policy, which would be good for all.

The hon. Gentleman says that the Government have form on pensions, and that is a fair cop: we restored the earnings link after 30 years, we ruled out 75p increases, and last year we introduced the biggest ever cash rise in pensions. He asked about women in their late 50s, many of whom are the very women who were penalised for time spent at home with their children. Although they got some protection on the basic pension, they did not get it on SERPS and the state second pension. The Government are putting that right for the very group of women about whom he asks.

The hon. Gentleman asked about women born in certain months, and the equivalent men. The changes are based on state pension age, and as he knows, that is different for men and women so the implications are also different. The April 2017 change is based on when people’s state pension age falls. He asked about people who “retire” but that is not really the right word—it is all to do with someone’s state pension age and whether it is before or after the change.

The hon. Gentleman asked how many pensioners are on £107. To be clear, someone who has worked in the public sector throughout their life—a teacher, for instance—would be on £107 because they contracted out of the other bit. In our system, from day one they would also be on £107 because we will take account of past periods of contracting out. Future service in the public sector at the full NI rate will add years to that £107. It is not a cliff edge; the exact day before or day after for those people is the same, but they can then work off that contracted-out deduction.

The hon. Gentleman asked about the national insurance rebate and—interestingly—suggested that we spend it on pensions. That is obviously a matter for a future Chancellor, but given that the public sector, the NHS and schools will pay significantly more national insurance, it would be interesting to know whether the hon. Gentleman’s position is that that money should go from the NHS and schools into higher state pensions. He asked about the 10-year de minimis. Let us be clear that we are not saying 10 years in the new system—the requirement is 10 qualifying years in someone’s lifetime. That is because there are backpackers who do a couple of years of bar work and 40 years later we are paying them a state pension for another 20 years. The sorts of people who would be excluded are those who come for a few years, do not really have any skin in the game and pay just a few years of national insurance. They will not get a pension—that is how we save money to spend on pensions.

On state second pension uprating, as I mentioned in my statement, for someone on £160, the first £144—at least earnings—will be triple locked in our White Paper and the balance will be linked to the CPI as SERPS is currently. The hon. Gentleman asked about people who pay into the state second pension, and except for about 5 million public sector workers and a couple of million private sector workers, everybody else pays into the state second pension. He said they were all losers—obviously they will not accrue S2P, but they will accrue a bigger flat-rate state pension.

The hon. Gentleman mentioned the April 2010 changes to qualifying years which he described as an “enormous” reduction. That is, therefore, also an enormous cliff edge of the sort he accuses the Government of making, and there were virtually no transitional arrangements for that. Someone who retired a day before that enormous cliff edge got nothing, whereas someone who retired the day after got the benefit of 30 years’ contribution. There are precedents for such things. When the contribution years were set to 30, women’s state pension age was still 60. In our world, and in the future, it will be 65, 66 or 67, and it is hard to see why in a working life of 50-odd years someone should get a pension for 30 years of contributions. We are merging a pension with a 30-year rule with another pension with a 50-year rule, and we have 35 as a sort of weighted average.

Finally, the hon. Gentleman asked about differences in life expectancy. I gently point out, however, that when the previous Government legislated for a pension age of 66, 67 and 68, they did precisely nothing about differences in life expectancy. We are recommending an independent panel to look at the issue and advise the Secretary of State.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 10th December 2012 Commons Chamber

[Steve Webb]

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

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

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

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

[Steve Webb]

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

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 5th November 2012 Commons Chamber

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

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

[Steve Webb]

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

[Gregg McClymont]

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

[Steve Webb]

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

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

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

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 10th September 2012 Commons Chamber

[Steve Webb]

The hon. Gentleman is quite right: around one in five of those who will be automatically enrolled are in their 20s, and if we can just get people starting earlier in pensions saving, that would be a good thing. Next week we are launching television advertising about automatic enrolment. The key is good quality workplace provision, automatic enrolment—which most people will stay in—and incentives from the Government. To give just one example, people on the universal credit will get additional help with their pension, because their pension contributions are allowed against their income for universal credit, so low-income households will get an extra boost if they save for a pension.

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

In all parts of the House there will be agreement about the importance of auto-enrolment. However, the hon. Member for Warrington South (David Mowat) has already raised the issue of high costs and charges. Does the Minister agree that in order to meet his coalition pledge to reinvigorate occupational pensions, there must be full disclosure of all pensions costs and charges to the saver, and that this is a prerequisite to ending rip-offs and reinvigorating occupational pensions in the United Kingdom?

[Steve Webb]

I think we have common cause across the House in wanting to see good value for money and transparency in charges. That is why I welcome recent initiatives—not just by the National Association of Pension Funds, but by the Association of British Insurers—to try to find ways of presenting such information simply and consistently. So far, under automatic enrolment competition is driving charges down, but we have the powers to cap charges and we will use them if we need to.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 25th June 2012 Commons Chamber

[Steve Webb]

I can reassure the right hon. Gentleman that the next generation of pensioners will be well looked after and specifically that the starting point for our calculation will be what people have in the bank—that is to say, rights already accrued—and specifically, therefore, if people are heading for a pension of more than £140 at the point we change it and have got that in the bank, it will be respected.

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

We are hearing from all sides today concern and anxiety about the move to a flat-rate, single-tier state pension. In order to end that anxiety and to answer these questions, will the Minister confirm that a White Paper will be published on this reform? Will he tell us when it will appear?

[Steve Webb]

I am pleased to give the hon. Gentleman the assurance that a White Paper is under active preparation and will be produced.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 23rd April 2012 Commons Chamber

[Steve Webb]

If we were doing what the right hon. Gentleman says we are doing, I should be as outraged as he is. However, we are not doing that. Part of our proposition is that all contributions paid to date will be recognised in the new system. At the point of transition, if someone was heading for a pension of £150, £160 or £170 a week, that is what we would pay that person. [Interruption.] The right hon. Gentleman asks, from a sedentary position, where the money is coming from. We will present our costings in the White Paper, and he will see then that we will find it through less means-testing, among other things.

As for bringing people into the system, successive Governments have, for example, credited women who have spent a period at home with children. Although they have not paid cash, they have contributed, and that should be recognised. I think that that is right, and we are doing the same.

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

In his Budget statement, the Chancellor told the House that moving to a single state pension would not cost more in any year than the current pension system. Further to the question from my right hon. Friend the Member for Birkenhead (Mr Field), may I ask whether the costs of the move will be borne partly by the more than 7 million workers in the private and public sectors who contribute to defined-benefit schemes and are currently contracted out?

[Steve Webb]

As the hon. Gentleman knows, when we introduce a single state pension there will be no more contracting out, so clearly those who were in contracted-out schemes will be contracted back in. However, the annually managed expenditure costs of the scheme are being met by the reduction in means-testing and paying of savings credit to new claimants only, and by an increase in de minimis provision, so that people who have spent only a few years in the country do not build up a state pension as they would currently do. Those are the two main ways of meeting the costs, but they will also be met through the non-accrual of additional second state pensions after 2016.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 23rd January 2012 Commons Chamber

[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.

Benefits Uprating

Debate between Steve Webb and Gregg McClymont

Tuesday 6th December 2011 Commons Chamber

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

Mr Speaker, with permission I should like to make a statement about the uprating of social security pensions and benefits for 2012-13. I shall place in the Vote Office full details of the new rates that are due to come into force from the week of 9 April 2012 for each pension and benefit, and arrange for the figures to be published in the Official Report.

As part of his autumn statement last week, my right hon. Friend the Chancellor of the Exchequer announced the rates of tax credits for 2012-13, and today I am announcing the uprating of those social security pensions and benefits for which my Department is responsible. As my right hon. Friend Chancellor pointed out in his statement, uprating in 2012-13 would protect

“those who have worked hard all their lives…poorer pensioners…those who are not able to work because of their disabilities…those who, through no fault of their own have lost their jobs and are trying to find work.”—[Official Report, 29 November 2011; Vol. 536, c. 802.]

Starting with those who have worked hard all their lives, I should like to turn to one of the early actions of the coalition Government: the restoration of the earnings link for the basic state pension. This Government not only made good on the pre-election promises to restore the link with earnings, we went one step further by protecting the future value of the basic state pension with a triple guarantee—that the basic state pension will rise each year by the highest of growth in earnings, prices or 2.5%. The triple guarantee means that even in times of slow earnings growth, we will not see a repeat of small rises such as, for example, 75p in 2000.

The new rate for the basic state pension will be £107.45 for a single person, an increase of £5.30 a week. I can announce, therefore, that from April 2012, the basic state pension is forecast to be 17.1% of average earnings, a higher share of average earnings than in any year of the Labour Government since 1997.

I turn now to additional state pensions, commonly referred to as SERPS—the state earnings-related pensions scheme. In April 2010, one of the last acts of the previous Government was to freeze SERPS pensions. This was in the apparent belief that pensioners had not experienced any inflation in the preceding year. That was solely because the retail prices index was negative in the year to September 2009, with the rising cost of goods and services swamped by falling mortgage rates. However, in April 2011 we increased SERPS pensions by 3.1% and I am pleased to confirm that this year SERPS pensions will also rise by 5.2%. That means that the total state pension increase for someone with a full basic pension and average additional pension will be around £6.70 a week or £348 a year.

The standard minimum guarantee in pension credit must be increased each year at least in line with earnings. However, this would have implied an increase of just 2.8%; in other words, the poorest pensioners would have got the smallest increase. We judged that unacceptable, so instead, from April next year, the single person rate of the guarantee credit will rise by £5.35, taking their weekly income to £142.70. For couples, the increase will be £8.20, taking their new total to £217.90 a week.

To help manage expenditure, we shall be funding that above-earnings increase to the standard minimum guarantee by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase. In his autumn statement, the Chancellor told the House that we will uprate the standard minimum guarantee by £5.35 and that we would meet the cost of the over-indexation by increasing the threshold for the savings credit. That plan was correctly reflected in line 30 of table 2.1 on page 46 of the autumn statement, and it is indeed our plan. Unfortunately, the precise thresholds, which were calculated by our Department and appear at paragraphs 1.143 and 2.24, were incorrect. I apologise to the House for this error, which I am now in a position to correct. The correct thresholds for savings credit from April 2012 will be £111.80 for single pensioners and £178.35 for couples.

As many hon. Members will know, an important component of our plans for uprating pensions and benefits last year was the move to the consumer prices index— CPI. We believe that the CPI is a superior measure of inflation for benefits and pensions uprating. That is because the basket of goods on which it is based is a better match for the spending patterns of pensioners and others on a low income, and because it takes better account of the way in which lower income households respond to price changes. It is also the headline measure of inflation in the UK, the target measure of inflation used by the Bank of England, and internationally recognised. I am pleased to say that last week the High Court upheld the Government’s position that the CPI can be used for pensions and benefits uprating.

The coalition will ensure that the value of other social security benefits is maintained through a rise of 5.2%, even in these tough economic times. This means for disabled people, above and below pension age, through disability living allowance and attendance allowance, an increase of 5.2%; for people of working age who are not fit for work, through employment and support allowance, an increase of 5.2%; and for people who have lost their jobs, through no fault of their own, through jobseeker’s allowance, an increase of 5.2%.

On local housing allowance, at the emergency Budget in June 2010, the Government announced that from 2013, local housing allowance rates will be calculated annually by using the lower of the rent at the 30th percentile of local rents or the previous year’s rate uprated by reference to CPI. This will end the monthly uprating of LHA rates and bring the system into line with the uprating of other pensions and benefits.

As part of the preparation for this change, we need to fix LHA rates, to establish a baseline from which they will be uprated in future. As the new cycle for uprating LHA will be annual, we have decided that the baseline should be one year ahead of the first uprating event. Therefore, LHA rates will be fixed from April 2012. This approach means that there will be no reductions in ongoing awards as a result of this change.

So at a time when the nation’s finances are under severe pressure, this Government will be spending an extra £6.6 billion in 2012-13 to ensure that people are protected against cost of living increases: no less than £4.5 billion extra on state pensions; over £1 billion extra on disabled people and their carers; and over £1 billion extra on people who are unable to work through sickness or unemployment.

We protected the triple lock, securing the largest ever cash rise in the basic state pension. We have uprated the pension credit as well, so that the poorest pensioners benefit in full from the triple lock. We have uprated working age benefits by 5.2%, protecting the real incomes of the poorest. Through this statement, I have outlined our firm commitment to ensure that even in these difficult times, no one is left behind. I commend this statement to the House.

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

I thank the Minister for advance sight of his statement, and welcome some of his announcements about the uprating of pensions. I am delighted that on the issue of increasing the state pension age further, the Government have learned from some of their mistakes on the previous round and will at least give adequate notice to those affected. That is a positive move. I welcome the U-turn on the mobility component of disability living allowance. The change should never have been proposed. We, along with disability campaigners, have argued hard for a U-turn and we are pleased that the Government have taken that action.

Last year, in the wake of the autumn statement, the Minister told my predecessor that his Government had embarked on decisive action to take Britain out of the danger zone. What a difference a year makes. The Government’s economic policy has failed and is failing, and working families are paying the price. It is when a Government’s back is against the wall that their true character is revealed, because that is when the difficult choices have to be made. The failure is writ large in the Government’s revised borrowing forecasts.

We know that the Chancellor told the House that he is going to borrow £150 billion more than he planned—£150 billion more. The Government are fond of the credit card analogy, and £150 billion is an astonishing extra debt to add to the nation’s credit card bill. It is the price of failure, and this failure is nowhere more apparent than in the extra £29 billion, largely the price of rising unemployment, which the Government project they will spend on benefits. What the Minister failed to say in his statement today is that to pay for the Government’s own failure, they propose to take twice as much money from children and families as they do from bankers.

Let us look at the impact on families and women. We are left with a benefits policy that hits the poorer hardest. The Institute for Fiscal Studies, which used to employ the Minister, has said that measures in the autumn statement would

“take away from lower-income families with children.”

Even the Secretary of State had to admit to the House last week that the bottom 30% do quite badly. The Government’s benefits policy will hit women harder than men. The House of Commons Library estimates that of the £2.37 billion raised from tax credits and public sector pay changes introduced in the autumn statement, 73%—£1.73 billion—will come from women and 27% will come from men. Taking together all the changes to direct tax, benefits, pay and pensions announced by the Chancellor since the general election, of the £18.9 billion the Government are raising each year, £13.2 billion comes from women. Women are being hit twice as hard as men.

In addition, the Government’s benefits policy will increase child poverty. In its distributional analysis of the autumn statement, the Treasury has admitted that as a result of Government decisions the number of children living in households with incomes below 60% of the median will increase by 100,000 in 2012-13, which means more children living in poverty. The IFS now estimates that the number of children living in poverty will rise by 600,000 over the next period. Surely the Government and the Minister cannot be proud of that.

Let me ask the Minister some straightforward questions. Minister, you signed up to the Child Poverty Act 2010. Do you believe that under the terms and definitions of that Act child poverty is set to rise under your Government? You will have studied the IFS—

[Gregg McClymont]

Thank you, Mr Speaker.

The Minister will have studied the IFS presentation. Will he confirm that its conclusion is that the people who will pay most will be those in the bottom 30%? Does he agree with the Secretary of State that work incentives will be diminished by the Government’s actions in the autumn statement and that the changes to tax credits and public sector pay announced in the autumn statement will hit women disproportionately?

[Steve Webb]

I am grateful for the bits of the hon. Gentleman’s speech that actually responded to my statement, because he appeared to agree with us entirely. I am grateful for his support for our increase in the basic state pension, our announcement on the state pension age and our changes on the mobility component of DLA. I also agree that we see the true colour of a Government when their back is against the wall. Notwithstanding the huge pressure on the public finances, for reasons he might understand, we took the view that protecting the most vulnerable was a priority. That is the true colour of this Government.

The hon. Gentleman asked about the distributional impact of the measures we have taken. I refer him to Chart 1.C of the distribution analysis published by the Treasury last week to accompany the autumn statement, which takes account of not only the measure set out in that statement, but the cumulative impact of all that we are doing. I am sure that he will not want to be selective and will look at the whole picture. Page 4 of the analysis includes a chart ranking people by what they spend, which shows that the proportion lost rises with income. In other words, the smallest amounts lost are for the lowest households and the largest cash amounts lost are for the highest households [Interruption.] Yes, cash is what matters to people.

The hon. Gentleman asked about work incentives, and I am pleased to say that with his support the universal credit that my right hon. Friend the Secretary of State wants to introduce will be the biggest boost to work incentives for many generations. Starting in 2013, we will be rewarding work instead of penalising it, and the best thing that we can do for low-income households is to enable them to work and to support them in that.

The hon. Gentleman did not mention the many things that we are doing for low-paid working households, such as the personal income tax allowance increases, the council tax freeze, the cuts in fuel duty and, above all, the low-interest-rate environment, which for households with mortgages is crucial to their living standards. I am grateful to him for the measures that he did welcome, but there was a lot more that he should have welcomed.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 28th November 2011 Commons Chamber

[Steve Webb]

I am grateful to the Chair of the Work and Pensions Committee for welcoming our decision to keep everybody in. In terms of certainty, everybody who was due to be enrolled this side of July 2013 will see no change in their dates, and we will publish early in the new year the revised schedule. I entirely agree that certainty is needed, and I can confirm that there will be no further changes to the timetable.

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

Auto-enrolment is—or should I say, was?—central to the Pensions Minister’s strategy, so his resorting to bureaucratic language, saying that “all businesses remain in scope,” is not going to reassure anyone. The fact is, as I hope he will confirm, that the schedule has been moved back and millions upon millions of the employees whom he was keen to get saving in a pension scheme will not be auto-enrolled until after 2015. Is that correct?

[Steve Webb]

I am not sure whether the hon. Gentleman is aware of this, but under his party’s plans the roll-out of employers with one to 50 employees was already scheduled to go into 2016. I can confirm that the majority of the work force will be auto-enrolled during this Parliament. There was already a five-year roll-out for auto-enrolment, so it was already a phased process. Yes, we have changed the schedule, but, as he may be aware, his party changed it twice in a three-month period.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 24th October 2011 Commons Chamber

[Steve Webb]

I am grateful to my hon. Friend. The change that we made—a commitment to ensuring that the changes are fair as they affect women—cost £1.1 billion. The difference between us and the Opposition is that their policy cost ten times as much and they had no idea where the money would come from.

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

The Minister knows how important auto-enrolment is to ensuring that future generations retire on a decent pension, but the Government’s Beecroft report on deregulation looms large on the horizon. Can the Minister reassure the House that whatever Beecroft recommends, no business large or small will be allowed to opt out from auto-enrolment?

[Steve Webb]

I congratulate the hon. Gentleman on his new role in the House. I much enjoyed his attempt to persuade the House last week that £11 billion was not very much if we divided it by 10 and by the national debt. In answer to his question about auto-enrolment, I can assure him that 2012 goes ahead as planned, as my right hon. Friend the Secretary of State said at the Dispatch Box last week.

Pensions Bill [Lords]

Debate between Steve Webb and Gregg McClymont

Tuesday 18th October 2011 Commons Chamber

[Gregg McClymont]

In my first foray from the Dispatch Box, I would like to say that I look forward to having a continuing dialogue with the Minister on this subject. He has a formidable reputation in this field. He told me at our first meeting that one of my former students is now his researcher; that, I think, makes him doubly formidable. I would also like to pay tribute to my predecessor, my hon. Friend the Member for Leeds West (Rachel Reeves). She, along with thousands of women, has led the campaign to highlight the burden being placed on up to 500,000 women by the acceleration of the timetable for the equalisation of the state pension age. I think we can all agree that she has done a very important job of work.

We welcome the Government’s concessions as laid down in the amendments, but we do not think they go far enough. The Government are no longer condemning 245,000 women to an extra waiting period of between 19 and 24 months, and that is welcome; but it is too little, too late. The cardinal fact about the Bill remains that 500,000 women will still have to wait up to 18 months longer, and 330,000 will have to wait exactly 18 months longer, before reaching their state pension age. The Government have chosen to break the all-party Turner consensus that women’s state pension age should not reach 65 before 2020, and they have also broken the coalition agreement, which promised that women’s state pension age would not reach 65 before that year.

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

I congratulate the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)—this is the only time I am ever going to say that—on his new post. He mentioned Lord Turner. Is he aware that following the improvements in demographic projections that have taken place since Lord Turner produced his report, he is now on record saying that if he had been writing his report then, he would have gone much further much faster?

[Gregg McClymont]

The Minister is of course right. I believe that since the Turner report, longevity predictions have risen by 6.5% for men and 5.5% for women. There is no doubt that the issue is complex—no one is denying that—and there may well be a case for going further faster, but the burden of my argument involves the half a million women who must wait for up to 18 months. Our view is that that is a disproportionate burden, imposed without fair and due notice.

--- Later in debate ---

[Steve Webb]

The incentive is clear: the providers do not get any money at all unless they help someone into work.

The hon. Member for Llanelli (Nia Griffith) mentioned grandparents: women in the age group under discussion who by taking care of grandchildren enable their sons and daughters to work. That is an important point, and that is why I was pleased to carry through in office proposals that had previously been brought forward on national insurance credits for grandparents—when their daughters are not using them—to ensure that their state pension rights do not suffer.

The hon. Member for Edinburgh East asked why we did not do all that earlier and referred to Second Reading, but I remind her that in that debate my right hon. Friend the Secretary of State said that the basic principle of the Bill is right—that we move to equality sooner and to aged 66 in 2020. We have been entirely consistent with what he said, but he also said that we need to make sure that the transition is fair and that those most adversely affected are helped. That is exactly what we deliver on today with the amendments.

We have identified, notwithstanding the difficult fiscal position, £1.1 billion to ensure that half a million people face a shorter increase in their pension age, and that a quarter of a million women who could have faced up to 24 months will now face a maximum of 18 months. It is worth keeping in context the fact that nine out of 10 people affected by the Bill will see an increase of one year or less in their state pension age.

The hon. Member for Bolton South East (Yasmin Qureshi), who spoke last, said, “Well, it’s only a bit of money,” and, “It’s penny pinching,” and all I can say is that many people think that £1.1 billion is a lot of money. I know that it is a naïve observation, but I am in that category as well.

It was important to allocate to this issue a large amount of time for debate today, but we have simply had a repeat of what we heard in Committee: “Find £10 billion or £11 billion—it’ll come from somewhere, it’s not really a lot of money.” From the Government, however, we have seen a serious balance struck between introducing the fiscal responsibility that was all too often lacking under the previous Government and listening and responding to the needs of those most affected by the Bill—and I commend our amendments to the House.

[Gregg McClymont]

This been a very important debate. I thank the Minister for his reply, but he has not satisfactorily answered the question repeatedly asked by Labour Members, which is fairly straightforward. Why are these 500,000 women paying a disproportionate price? Why are they having disproportionately to carry the burden?

Our amendments, if accepted, would mean that not one of the half a million women affected by this Bill would have to wait more than an extra year for their state pension, and, importantly, that they would have at least nine years’ notice of the rise in their state pension age. At the same time, the state pension age of 66 for men and women would be brought forward to 2022. That would be a fair package, and it would keep the Government to the promise made in the coalition agreement. I should like to withdraw amendment 1 and test the will of the House on amendment 3.

Amendment, by leave withdrawn.

Amendment proposed: 3, page 1, line 8, leave out subsection (4).—(Gregg McClymont.)

Question put, That the amendment be made.

Housing Benefit (Scotland)

Debate between Steve Webb and Gregg McClymont

Tuesday 8th February 2011 Westminster Hall

[Steve Webb]

I think, technically, that right hon. and hon. Members who intervene are meant to tell me formally that they want to do so; I do not mind at all, but they have made their comments and I think it is fair that I respond to the hon. Gentleman.

There are several Scottish angles to the debate and I want to deal with some of them rather than make more general points. There is an issue about whether people who are covered by LHA are being driven into pockets—very localised areas. One aspect of the Scottish situation is that the 30th percentile tends to be closer to the 50th percentile than perhaps it is in other parts of Great Britain. The cash difference tends to be smaller, as I said earlier, so the impact is not as great as it might be in other areas where the rent distribution is more dispersed. I fully accept the point that the impact of the measures will be different in different places, but the 30th percentile has a smaller impact in Scotland because of the compressed rent distribution.

The hon. Gentleman quite properly raised the issue of unemployment. I would not for a moment suggest that it is ever easy or straightforward to find a job; but, again, headline unemployment is slightly lower in Scotland than for Great Britain as a whole. The majority of Scottish local authorities have lower unemployment rates than the Great Britain average. That is not to belittle the matter, but it is not a purely Scottish dimension. The issue is clearly one to be dealt with nationally.

As to the hon. Gentleman’s constituency and the support that we are giving, an important feature of the new scheme is discretionary housing payments. We recognise that we cannot anticipate every hard case, so we give local authorities discretion. We give them funds so that if there is someone who just does not fit the rules terribly well or who is acutely affected by the changes—the hon. Gentleman gave examples of situations that might be difficult—local authorities have discretionary funding. In 2011-12, Scotland as a whole will be getting an increase of 15% over 2010-11. That is an increase of £360,000 in discretionary housing payments. The hon. Gentleman’s local authority will be getting a 34% increase; more than double the Scottish average increase will be going to North Lanarkshire to provide additional assistance. The figure will go from £77,000 in support this year to £103,000. It is worth saying that the 2011 DHP increase is much smaller than the increases will be in succeeding years; the Great Britain-wide figure will go from £20 million this year to £30 million, and then £60 million a year. Most of the increase in DHP will be in later years, but we have already added 34% to it in the coming year for the broad rental market area of the hon. Gentleman’s constituency. Although, inevitably, that money will have to do a lot of work, it is specifically designed for the sort of hard cases he spoke about.

[Gregg McClymont]

I have been listening closely to the Minister, because I wanted him to develop his argument before I intervened. Is he comfortable with a policy which, as he perfectly fairly described it, tries to put people who get housing benefit and may be working, on a level playing field with people who are, as he described it, low paid, but who do not get housing benefit, in the context of an economy in which there is not much evidence that people can move into better paid jobs? The structure of the economy in a place such as North Lanarkshire does not include many professional—middle-class, if you like—positions for people to move up to, if the Minister’s broader argument is about social mobility. From our point of view there is a danger that instead of focusing on trying to increase opportunities for a broad range of people from near the bottom to the middle of the income distribution, the focus is on people who are already struggling. I think the Minister would agree that we must do something about what happens further up the scale, to open up opportunities for the people who are affected.

[Steve Webb]

I entirely agree with that point. We want to encourage people not simply to move into any job at the bottom of the scale; we also want to encourage career progression and additional hours and training—the things that make people employable and enable them to earn more. That is the philosophy behind the universal credit. One of the problems is that there is an issue about the incentive to take any job; once a person has a job the current system can withdraw 95% in the pound, in extreme cases. That cannot be right and it traps people. Even if jobs are available and there are opportunities to do more work or gain more skills, there is no point, because the money is simply clawed away. With a lower taper rate for most people the universal credit will give people more opportunity to do just the sort of things that the hon. Gentleman describes.

[Gregg McClymont]

We know that the hon. Gentleman is a thoughtful Minister. A larger question looms over the issue, and that is whether, in the economy as it stands—not just in this recession but structurally over the past 30 years—there are opportunities for people to move up the ladder in large enough numbers. Does the Minister agree that such macro-structural political economy issues are related? Unless we have that possibility, what is happening may be seen as an attack on people who are already not exactly living luxurious lives.

[Steve Webb]

I certainly agree that we are not talking about people leading luxurious lives. There are, as the hon. Gentleman says, bigger structural issues affecting the economy. In the past few years under a series of Governments the economy has created millions of new jobs, but some of them are part-time, and they vary in nature. One of the things that the Government are trying to do, whether through apprenticeships or a range of other initiatives, is to upskill the work force. In a global economy we shall not be able to compete with very low wages in the far east, for example.

In the final couple of moments available to me I stress that we are keen to engage with the Scottish perspective, as the hon. Gentleman suggested. COSLA is represented on the Department for Work and Pensions local authority associations steering group, which meets each month, and along with the local authority associations it was formally consulted on the draft regulations for 2011 that I mentioned earlier. Officials from the Scottish Government have attended events and meetings to discuss the impact of LHA reforms, and Members of the Scottish Government have been invited to attend a conference that we are holding in Glasgow on 3 March 2011. We have invited all Scottish benefit managers from local authorities to attend, and we are inviting officials from the Scottish Government to be involved in the LHA reform national implementation group and the evaluation of the reforms.

[Gregg McClymont]

Would the Minister consider publishing evidence that LHA is pushing up rents in Scotland? He referred to that earlier and it would be an interesting piece of information for us, if he would undertake to pass it on.

[Steve Webb]

I was quoting from COSLA’s assertion, but we are happy to give the hon. Gentleman what evidence we have, although trying to prove cause and effect is a challenge.

I congratulate the hon. Gentleman on raising this important debate, and I am grateful to colleagues who contributed.

Question put and agreed to.

Oral Answers to Questions

Debate between Steve Webb and Gregg McClymont

Monday 10th January 2011 Commons Chamber

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

2. What assessment his Department has made of the effects of changes to prices in January 2011 on the incomes of pensioners.

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

In April this year, benefits and pensions will be increased by more than £4 billion, more than three quarters of which will go to pensioners. In addition, price rises in January 2011 will feed through into the September 2011 price indices, which will be used in future benefit uprating.

[Gregg McClymont]

Pensioners on fixed incomes will be among the hardest hit by the Government’s VAT rise. Will the Minister confirm that the VAT hike will mean that pensioners are worse off in 2011 under this Government than they would have been under the previous Government’s plans?

[Steve Webb]

I am grateful to the hon. Gentleman for referring to the previous Government’s plans. In his constituency, vulnerable pensioners, vulnerable disabled people and vulnerable families with young children received four or five cold weather payments this winter to help them with their fuel bills in January 2011. His policy, and the plans that we inherited, would have reduced those payments to £8.50 a week. We have paid £25 a week four or five times to vulnerable pensioners in his constituency.