Discretionary Social Fund (Redcar and Cleveland)

Debate between Steve Webb and Tom Blenkinsop

Wednesday 10th September 2014 Westminster Hall

[The Minister for Pensions (Steve Webb)]

It is a pleasure to serve under your chairmanship, Mrs Brooke. I congratulate my hon. Friend the Member for Redcar (Ian Swales) on securing the debate and on representing his constituents’ concerns in such a measured, thoughtful and well-informed way.

In the brief time available to me, I hope to answer my hon. Friend’s questions and make some observations about how Redcar and Cleveland council’s performance compares with that of other local authorities. Some of the things he observed are, to a greater or lesser extent, common across local authorities, but some suggest that there are particular issues in Redcar that I should address.

My hon. Friend asked about the allocations for 2013-14 and beyond. Nationally, we are roughly spending the money that we would have spent on community care grants and certain crisis loans, plus an amount for administration, had we continued the schemes. The transition to local provision was not a cut, but broadly a transfer of the money we would have spent.

My hon. Friend asked how the specific allocations were made. They were based on historical spend and demand. In other words, we looked at where community care grants were paid and where crisis loans were bid for. It is never quite as simple as that, but that is the basis for the allocations. He asked for the figure for 2012-13. In his area, the Department for Work and Pensions spent £717,000 on the things that the council is now responsible for.

I will briefly recap what happened. My hon. Friend spoke about localism, and we took the view that, although it is right that DWP does certain things nationally, it is important that the national Government do not overlap, duplicate and interact unhelpfully with what local authorities do. We looked at what DWP was doing, and it became apparent that community care grants and, to some extent, crisis loans overlapped with things that local authorities were already doing for vulnerable people, people coming out of care and people in crisis. The point of the reforms was to give local authorities the money that we would have spent and enable them to co-ordinate it, so people have to deal with only one authority, not two, and get better results.

It is fair to say that all local authorities in 2013-14 took a while to get going on local welfare provision, which was not surprising given that it was new money and that new processes had to be set up. We estimate that in the first year, 2013-14, about 60% of the funding that was available across the country was spent. We think the corresponding figure for Redcar and Cleveland is 40%—that is programme funding, not administration.

Although we accept that there is a general issue about setting up new systems because it is costly and takes time, Redcar and Cleveland council seems to have struggled more than many others in getting the money out to its citizens. As my hon. Friend said, the unspent money was carried forward, so it will get into the system at some point. Nevertheless, in 2013-14 many people in need did not get the money when they needed it, and the fact that the council will spend the money in 2017-18 or 2018-19 does not address those people’s needs, which is regrettable.

My hon. Friend asked about ring-fencing, which is a constant dilemma. Philosophically, he and I are both localists, so we think that, in general, local authorities are best placed to determine local need. There is a risk if we tell councils in every specific case that they absolutely have to spend so much money on a certain thing because we think it is important. There is a tension between those things, and judgments must constantly be made. The philosophy behind the localisation was to merge the funding with other council funding in an integrated way to make funding for one person part of the big pot, so we felt particularly uncomfortable about creating a hard ring fence, although we thought hard about it. In the end, we said to local authorities, “This is your money.” The two things my hon. Friend referred to—crisis loans for people in immediate crisis and community care grants for people who are coming back into the community—are where we would have spent the money, and they mirror where the money was previously spent.

We asked local authorities to report back to us. As there was an underspend in 2013-14, I wrote to local authorities in January and July 2014 to tell them that in 2014-15 we would like to know what was happening on a quarterly basis. The majority of local authorities replied to that letter, but Redcar and Cleveland did not, which puts us in a difficult position. In the letter on 2014-15 spending, I said:

“Whilst we do not intend to withhold money, if evidence comes to light that the money is not being spent we will have to revisit that decision during the course of the year… Providing a return is a crucial part of monitoring this spend”.

I urge my hon. Friend’s local authority to let us know what it has been spending the money on in 2014-15. As custodians of more than £170 million a year of public money, we have a duty to seek assurance, in the context of localism, that the money is being well spent, so we need to hear back from the local authorities.

My hon. Friend also raised an important issue about the proportion of people being turned down, which is concerning. Not everybody used to get social fund loans or community care grants, but, roughly, more than two thirds of people who applied for crisis loans and more than a third of people who applied for community care grants were successful. Although my hon. Friend said that the one in 10 figure might not be what it seems, one must ask whether we have the balance right if the vast majority of people who have gone through the expense and difficulty of claiming are turned down. Obviously, it is for local authorities to decide how to carve up the pot, but if so many people are being turned down, the local authority probably should look again at whether is has the balance right.

[Tom Blenkinsop]

Will the Minister give way?

[Steve Webb]

As I have got only a few minutes, I am sure the hon. Gentleman will forgive me for not giving way.

My hon. Friend asked what happens in a crisis and whose responsibility it is. In general, if it has been agreed that somebody is entitled to a DWP benefit, but they have not yet got the money, they can get an advance payment of benefit. That is a matter for the DWP. If a person has applied to us and there has been a bureaucratic problem at our end, that is a matter for us, but financial crises per se are a matter for the local authority; that is the split. If a person has an issue with DWP, we expect them to go to DWP, but people have financial crises for a whole raft of reasons.

My hon. Friend asked about the position in 2015-16. DWP receives funding from the Treasury, which it allocates in full to local authorities for local welfare provision for 2013-14 and 2014-15. The intention was always that, post 2015-16, it would be one of the things that fell within local authority responsibilities funded by the Department for Communities and Local Government. As non-ring-fenced activity, there is no separate sum in the total local government settlement for that item, but the local government settlement for 2015-16 was set in the knowledge that this matter is a responsibility of local government. It is fair to say that local government gets significant sums for people in need. For example, it receives £200 million for a troubled families initiative, and £3.8 billion for adult health and social care funding. Therefore, large sums of money go to local government for people in need, and it will have that responsibility from 2015-16. The issue that my hon. Friend raised is currently the subject of a judicial review. I hope the matter will be resolved before too long, but, as it is currently before the courts, I am constrained about saying any more about it.

Finally, my hon. Friend asked whether I think that the council got it right and whether that is how we expected money to be paid out. I hesitate to second-guess local authorities because the point of localism is to let them decide how best to use the money in the interests of their citizens. I share my hon. Friend’s concern about the amount of money in kind available—as he said, we are not talking about cash—and about the fact that in the past people would have been able to get significant help in a crisis. Money is going to other things that are worthy in their own right—nobody objects to funding a credit union or a carers group—but there is a risk, and local authorities that have had spending power transferred to them must look after people in crisis. Improved infrastructure and general financial capability are great, but people in crisis and those who come out of institutions need provision. Every local authority, including my hon. Friend’s, must meet those urgent, immediate needs, not only their wider strategic goals. I hope that response helps my hon. Friend.

Quality Workplace Pensions

Debate between Steve Webb and Tom Blenkinsop

Thursday 27th March 2014 Commons Chamber

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Last, but certainly not least, the voice of Middlesbrough South and East Cleveland—Tom Blenkinsop.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Thank you, Mr Deputy Speaker.

I find the Minister’s statement fascinating given that he said only recently that putting a cap on pensions was like trying to put

“a price cap on a tin of baked beans”.

I wonder whether he read this in yesterday’s Financial Times:

“Labour led the way with criticism of the annuities market and high opaque fees on pensions, long before the coalition took action.”

Would he care to comment on that very good article?

[Steve Webb]

I would. It is no coincidence that that newspaper is printed on pink paper. It has run stories about our plans for a price cap which, now that we have made our announcement, will be shown to have been wholly inaccurate. Those who have subscriptions to that newspaper might wonder whether they can always believe what they read in it.

Pensions Bill

Debate between Steve Webb and Tom Blenkinsop

Tuesday 29th October 2013 Commons Chamber

[Steve Webb]

In someone else’s legislation—[Laughter.] Just between ourselves, I encourage the hon. Lady to keep up the pressure across Government, including at Business, Innovation and Skills questions, Energy and Climate Change questions and Work and Pensions questions. To be frank, this issue is not always at the top of the pension agenda, so I welcome the amendments for that reason. I am reluctant, however, to amend the Bill in a piecemeal fashion, when I hope that we can have a more overarching framework affecting company law, business regulation and the duties of trustees not only in pensions but beyond. I am sympathetic to what she is trying to achieve, but we want to do it in a systematic, cross-Government way rather than dealing with just a bit of the issue. I look forward to hearing what she has to say, but I hope that she will withdraw new clause 12.

Scale is important. I do not think anyone doubts that, on average, bigger schemes produce better outcomes than smaller schemes, in the sense that, typically, bigger schemes have lower costs; they have the potential to diversify and pool risk; they have access to investment vehicles that smaller schemes perhaps do not; they have access to better quality investment advice; and they have more experienced trustees. We can see why, on average, a big scheme will probably do better than a small scheme. Just as the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is searching for golden bullets on independent trustees—

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

Silver bullets.

[Steve Webb]

Apparently he is searching for silver bullets. In any case, we are already seeing consolidation. To give the House a sense of scale, let us consider small and medium occupational defined-contribution schemes for between 12 and 1,000 members. The number of such schemes fell by more than a third in three years—a dramatic fall—from 3,300 to 2,110. The number of micro-schemes, with between two and 11 members, fell by a fifth over the same period, from some 45,000 to 36,000. In a sense, the Opposition amendments seek to force the pace on scale, but it is already happening quite quickly. That is a welcome development, and once we implement our measures on scheme quality—which, subject to consultation, may include tough action on charges—there will be a seismic effect on the pensions industry.

If a scheme cannot be used for auto-enrolment unless it delivers seriously low charges, many small, sub-scale schemes will fall by the wayside. The trends are already in that direction, and the measures we shall implement will substantively accelerate that. Rather than presume that scale is the right answer, we have to regulate the quality. If a small scheme can demonstrate that it is, for example, tailored to the characteristics of its membership and is delivering for them, great.

We do not want to kill good-quality small pension schemes, which is what the Opposition’s slightly bureaucratic amendment could do. Instead, we will say, “This is what we think good looks like. If you, as a big or small scheme, can deliver that, we will not tell you what to do. We will set parameters for what good looks like and you have to deliver.” Consolidation is already happening, and the quality requirements we are putting in place will deliver the outcomes that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East wants.

Moving on—I apologise for the jargon—to decumulation, or “turning pension pots into retirement income,” as I think I am required to call it, new clause 11 suggests that it should be a requirement on schemes to feed in an annuity broker at the end. The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East touches on an important issue, albeit again in an overly rigid way. Getting pension pots into a good profile of retirement income is crucial, which is why we at the Department for Work and Pensions are working with our colleagues at the Treasury on annuities and decumulation. Decumulation is about more than annuities. That is not a snappy soundbite, but in other words, turning a pension pot into a retirement income has to be about the whole process of retirement, not just a single event on a single day that fixes one’s retirement income for perhaps 30 years.

The danger with the rigidity of new clause 11 is that it presumes a backward-looking annuity model. Annuities in their current form were designed for a world where people lived for 10 years with pensions and then died. We now have a world where people might annuitise in their early 60s, or want to stop contributing to their pension pot in their early 60s, and live into their 90s. There are serious questions about the suitability of annuities for everybody. For example, people with big pension pots might want to look at a mixture of draw-down. They might want to look at alternatives, deferral or a range of options. It would be a backward step to hardwire into primary legislation that the only good thing that can be done with a pension is to annuitise through this particular model. We should give people new options at decumulation, not hardwire them into the annuity model. Of course, even an annuity broker may not necessarily guarantee that someone will get, for example, an impaired life annuity or enhanced annuity for disability or low life expectancy.

There is a lot that needs looking at in this section of the market. The initiatives that the industry has already taken—for example, the ABI code that came into practice earlier this year—are welcome, but we need to go further. We need a creative approach to turning pension pots into pension income, not a single product hardwired into a primary legislation model. I understand where the hon. Gentleman is coming from and I believe that the annuity market is in need of further reform, but hardwiring into primary legislation does not seem to us to be the way to go.

The House will be pleased to know that there are two final sections left, both of which are brief. The hon. Member for Hayes and Harlington (John McDonnell), who does not appear to be in his place, tabled new clause 7, on rail pensions. The new clause relates to whether the Government should underwrite the shortfalls in the pension funds of employees who worked for the nationalised rail industry, which was then privatised, and where some companies, such as Jarvis Facilities, Relayfast and Fastline, went to the wall. We sympathise with any worker whose firm goes to the wall, but I say to the hon. Gentleman in absentia that the notion of protected persons in this case was simply that the terms of the pension scheme of the private employer would be as good as in the public sector. It was never a guarantee against the insolvency of the sponsoring employer. All private sector employees are covered by the Pension Protection Fund, provided that their firm pays the PPF levy. That is how these workers will get all or most, depending on their circumstances, of the pensions they were expecting. It would be wrong to give special treatment to that group when many other people work for firms that went to the wall and will not get that treatment.

Oral Answers to Questions

Debate between Steve Webb and Tom Blenkinsop

Monday 14th February 2011 Commons Chamber

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

1. What assessment he has made of the likely effects of the proposed change in the state pension age for women.

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

We published a full equality impact assessment as part of the White Paper on our proposals to bring forward the increase of the state pension age to 66, which sets out the effect on women of those changes.

[Tom Blenkinsop]

The coalition agreement states that the parties agree to

“hold a review to set the date at which the state pension age starts to rise to 66, although it will not be sooner than 2016 for men and 2020 for women.”

Will the Minister explain why he saw fit to U-turn on that promise and to start to increase the women’s state pension age to 66 from 2018?

[Steve Webb]

If the hon. Gentleman looks at the process of raising the state pension age to 66, he will find that early in 2020, the age will still be 65 and some months. It will not start to rise to 66 until April of that year.