Food Price Rises: Impact on Low-Income Families

Viscount Younger of Leckie Excerpts

Thursday 25th May 2023 Lords Chamber

[Baroness Hussein-Ece]

To ask His Majesty’s Government what assessment they have made of the impact of the rise in food prices on low-income families.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, we remain concerned about the impact of current global inflationary pressures on low-income families. This is a government priority and the reason why we have taken decisive action to support those on low incomes. The Chancellor met food manufacturers on Tuesday to discuss food costs and to explore ways to ease pressure on households. He also met the Competition and Markets Authority to discuss its investigations into the fuel and grocery markets.

[Baroness Hussein-Ece (LD)]

I am grateful to the Minister for his reply and that the Government are now seriously looking at this, but we know that inflation in basic foods is running at 19%, the highest rate since 1977, and polls show that one in six parents is going without—going hungry—so they can afford to feed their children, while supermarkets are still making record profits. The Minister may have seen reports that families with babies cannot afford baby formula, with the CEO of the British Pregnancy Advisory Service warning:

“We know that families experiencing food poverty resort to unsafe feeding methods, such as … watering down formula”.


What is the take-up of the Healthy Start allowance? Will the Minister urge his department to at least look at increasing its value, which is just £8.50 a week for children from birth to one year old and a staggeringly low £4.25 a week for children between one and four? Are the Government really going to stand by as babies are placed at risk of malnutrition and serious illness due to the cost of living crisis and the soaring cost of infant formula?

[Viscount Younger of Leckie (Con)]

There were a number of questions there from the noble Baroness. We know that it is tough for households and businesses across the UK at the moment and are doing whatever we can to support them with the cost of living. The noble Baroness will know that £94 billion is earmarked for giving out. On her question about supporting families who cannot afford the rising cost of infant formula, she will know that in cases of difficulty all local authorities should have an emergency formula provision pathway in place. Families can access this by talking to their health visitor or midwife, who can signpost them to local support. For women who cannot or choose not to breastfeed, Healthy Start provides support towards the cost of first-stage infant formula.

[Baroness McIntosh of Pickering (Con)]

My Lords, I congratulate the Government on organising the Farm to Fork summit but echo the sentiments of the noble Baroness who asked the Question. Does my noble friend share my concern that farmers are not receiving these increasing costs, which they are covering, of energy prices and food production, added to the shortage of staff? Will the Government use every opportunity to investigate the rising profits that the supermarkets are recording?

[Viscount Younger of Leckie (Con)]

I take note of my noble friend’s point on the Farm to Fork food summit, which allowed the sector to get together, discuss the future, provide further innovative methods on food supply and discuss the current situation. Supermarkets’ profit margins are actually surprisingly low; I have some figures that I can pass on.

[Lord Sahota (Lab)]

My Lords, with ever-increasing food prices, the Trussell Trust has said that 40% of people on universal credit are using food banks. Is it not about time that the Government looked at this benefit and increased it?

[Viscount Younger of Leckie (Con)]

We remain very aware that food banks are being used to a great extent. As I have done before, I pay tribute to those, including charities, who so ably and selflessly run them. With the Family Resources Survey that we picked up on recently, we are very aware of the issues and are determined to ensure that people do not and should not have to go to food banks.

[The Lord Bishop of Chelmsford]

My Lords, in the diocese which I serve, charities in Harlow alone have fed more than 1 million people in the last year, which, frighteningly, represents a slower than the average demand for food banks nationally. I draw the Minister’s attention to the Bounty Club, which works with local businesses and people on the edge of crisis, helping them access a large bag of fresh food for £2.50, saving households on average £20 to £40 a week. Demand in Harlow is such that queues are regularly seen from St Paul’s Church right down the street. What assessment have the Government made of the number of people who are on the cusp of falling into poverty? What strategies are they considering to prevent people requiring the use of their local food bank or even charities such as the Bounty Club?

[Viscount Younger of Leckie (Con)]

I take note of the point the right reverend Prelate makes about Harlow. We are alert to those who do fall into poverty. What I can tell her is that in 2021-22, there were 1.7 million fewer people in absolute poverty after housing costs than in 2009-10, but I am very aware of the current situation. All I can say is that we continue to keep an eye on this: we are spending £276 billion through the welfare system in 2023-24, including around £124 billion on people of working age and children, and £152 billion on pensioners, to help with this aspect.

[Baroness Sherlock (Lab)]

My Lords, the reality is that food is now the new energy; but it is worse, because households spend more of their budgets on food and it is not cheaper in the summer. In fact, it is worse, because the kids do not get free school meals. Food price inflation of 19% is a disaster for poor families. The Minister will know—because he has read the evidence—that those on low incomes, even in work, are already buying own-brand supermarket goods; they are already skipping meals; and they are already going to food banks. There is nowhere else for them to go. Is any thinking going on in the Government as to what they will do right now to help those families this summer?

[Viscount Younger of Leckie (Con)]

Of course, the noble Baroness is right. I said at the beginning that much work is going on with regard to interaction with the supermarkets. A number of supermarkets have some urgent initiatives on the go. For example, ASDA has invested £73 million, allowing it to drop and lock prices for over 100 household products. The prices of these products were dropped by 12% on average and will remain this way until the end of the year. Morrisons has similar initiatives: it has cut prices on more than 500 products. It is more than this, and the noble Baroness will know that it is not just the UK. There are other countries, including Germany, where food price inflation remains high, at around 18% or 19%.

[Lord Dodds of Duncairn (DUP)]

My Lords, have the Government made any assessment of the impact on the food industry, and therefore the impact on prices for consumers, of the new labelling requirements, which appear to be quite onerous and are required under the Windsor Framework? The Government are now saying that these will apply not just to goods going to Northern Ireland but right across the United Kingdom. Severe concerns have been raised about the impact on food prices of those requirements.

[Viscount Younger of Leckie (Con)]

I do not have any figures to support an answer to give to the noble Lord, but what I can say—to which I alluded earlier—is that, in terms of supermarkets and profits, looking at the money side, there is no reason to believe that supermarket profit margins have significantly increased recently. The overall profits of Tesco and Sainsbury’s fell by 51% and 62% respectively in 2022-23. On the link with Northern Ireland, I will certainly look at my answer, and I may well write to the noble Lord.

[Lord Marlesford (Con)]

My Lords, does the Minister agree that the big problem is with processed food—the more processing, the higher the prices? Fresh food is another matter. The price of wheat this time last year was more than £300 a tonne; it is currently less than £200 a tonne. That is actually less than it was before the Ukraine war started. What effect does the Minister think that will soon start to have on the price of bread and meat?

[Viscount Younger of Leckie (Con)]

The truth is that many people on low incomes find it easier, and sometimes cheaper, to buy processed food. That is a fact. Having said that, we would encourage people to go to the local market to buy food. Again, the supermarkets are really stepping up to help those on low incomes.

[Lord Palmer of Childs Hill (LD)]

My Lords, I heard what the Minister said about the Government doing everything they can to help, but I do not think that it is everything. Are they considering extending free school meals? What are they doing about energy bills? An earlier questioner asked about this, but there was no real answer. What are they doing to crack down on the profiteering by supermarkets? The Minister gave an example of one or two supermarkets, but they are not helping people on low incomes.

[Viscount Younger of Leckie (Con)]

I take issue with the noble Lord, because they are, and I have made that clear with some examples. On his point about free school meals, under this Government eligibility has been extended several times, and to more groups of children than under any other Government over the past half a century. That includes the introduction of universal infant free school meals and further education free school meals. Approximately 1.9 million pupils are claiming free school meals, and it cost about £1 billion a year. A lot has been done in this area.

Child Support (Enforcement) Bill

Viscount Younger of Leckie Excerpts

2nd reading
Friday 19th May 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I congratulate my noble friend Lady Redfern on her excellent introduction to the Bill and for initiating this important debate on Child Maintenance Service processes. As has been said, it has the full backing of His Majesty’s Government, and it gives me great pleasure to speak in support of it today. I will say something about my role, just to reassure the House: far from being a hospital pass, it is generally a great privilege to take on. There is a lot to do in this respect on the Child Maintenance Service, and I want to take forward many of the initiatives and changes that my noble friend Lady Stedman-Scott commenced.

There were a number of questions from the noble Baroness, Lady Sherlock, and I am very grateful for some advance notice of them. I may not be able to answer all of them, but I will do my best. I will answer most of them towards the end of my remarks.

As has been said, this is ultimately about helping children who have faced a particularly traumatic experience. Parental separation can be devastating for children. The work of the CMS cannot entirely put that right, but it can help to give those children a much better start in life that they otherwise would not have had. That is why the Child Maintenance Service exists. I am particularly grateful to my noble friend Lady Bottomley for giving us some history and context, going back to two redoubtable ladies, Barbara Castle and Margaret Thatcher.

Let me start by giving the Bill some of my own context. The purpose of the CMS is to facilitate the payment of child maintenance between separated parents who cannot reach their own agreement. In the financial year ending 2022, it is estimated that there were 2.5 million separated families in Great Britain. In the three-year period covering the financial years from 2020 to 2022, it is estimated that parents with care in separated families received a total of £2.6 billion annually in child maintenance payments, through both private and CMS arrangements. These payments helped to keep around 160,000 children out of poverty each year, a subject raised by my noble friend Lady Bottomley. I hope this has helped to answer one or two points she raised.

I understand how complex and traumatic separation can be for families, and we know that the vast majority of parents want to do the right thing and provide financial support for children they no longer live with. This is a challenging job undertaken in very difficult circumstances; these points have already been made by some other Peers in this short debate. CMS staff work incredibly hard to collect maintenance so that separated families receive the financial support they are due.

My noble friend Lady Redfern so eloquently explained how the CMS manages cases through one of two service types, and how it will take action to re-establish compliance and collect any unpaid amounts that have accrued. For parents who choose not to comply with their obligations, the CMS will attempt to deduct their maintenance and any arrears directly from their earnings. This is done via a deduction from earnings order or request, and employers are obliged by law to take this action. Where parents are self-employed, deductions can be made directly from solely held, joint and business bank accounts.

The aim of enforcement is to recover money needed to support children, as mentioned earlier, not to punish paying parents. However, where parents refuse to pay and all other avenues have been exhausted, the CMS can apply to the magistrates’ court, or sheriff courts in Scotland, to obtain a liability order. This enables the use of more stringent enforcement powers, such as instructing enforcement agents and other court-based enforcement actions.

However, the liability order process is now outdated, and making an application to court in each case is administratively burdensome. Currently, applications to court for liability orders typically take about 20 weeks to process, meaning five months where no tangible activity can take place to get that money where it is needed. Moreover, the debt will accumulate, putting the parent further into debt and making it harder to exit that spiralling situation.

This Bill, through my noble friend, amends existing powers which, once commenced, will allow the Secretary of State to make an administrative liability order where the paying parent has failed to pay an amount of child maintenance, without the need to make an application to court. This means that the CMS can react quickly and start those crucial first steps on the enforcement journey much sooner, which will substantially speed up the enforcement process, as was raised by my noble friend Lady Stedman-Scott in her eloquent speech. I applaud her, adding to the complimentary comments made by my noble friend Lady Bottomley. She has made vital important improvements to the CMS. She was a staunch advocate for its work securing money for children, as she said.

Most paying parents want to do the right thing and support their children, but we recognise that some of those parents might be struggling. I was struck by the important comments made by the noble Lord, Lord Palmer, who highlighted that some of them genuinely struggle and that there is a sensitivity involved in ensuring that we remember that. The noble Lord asked how often assessments are revalued if paying parents are struggling. Parents can report changes of income at any time. Where the change is greater than 25% of the income recorded in our system, we will alter the liability. He will know that the calculations are reviewed annually. In these tragic cases where parents cannot afford to pay their arrears because of other debt, which does happen, in most circumstances the CMS will aim to agree an affordable and sustainable payment arrangement which settles the outstanding arrears within two years. The CMS can also signpost paying parents to relevant organisations if there is a declaration of hardship. I say again that these are very sensitive issues. I add my comments to those of noble Lords concerning those on the front line for the Child Maintenance Service, who do their best in these difficult circumstances.

However, rest assured, as I know that the noble Baroness would wish me to say, we will not hesitate to use our enforcement powers wherever necessary for those relatively few parents who will find every which way not to pay. We are targeting our use of enforcement agents and liability orders more effectively, and the processes are more efficient. To answer a question raised by my noble friend Lady Stedman-Scott, in the year to December 2022, the CMS was granted 9,600 liability orders in England and Wales. The CMS has worked to target the use of liability orders more effectively. Processes are now more efficient and on average the CMS is collecting more money per liability order in process. To ensure that these powers are used proportionately, the Bill will stipulate that they will only be used where a deduction from earnings order is inappropriate or has been ineffective. The Bill will also allow the liability order to be varied if, for example, the amount of arrears upon which the liability order is based is subsequently found to be incorrect because investigations have revealed further details about a paying parent’s finances which were divulged to the CMS previously.

Further protections will be made available through secondary legislation, which will give parents the right of appeal while setting out some parameters around the appeal process—including the period within which the right of appeal may be exercised, the powers of the court in respect of those appeals, and for a reliability order not to come into force in specified circumstances. I will say more about secondary legislation in response to the questions raised by the noble Baroness, Lady Sherlock.

The appeal provisions through secondary legislation will be reflective of powers already in use and working well for other child maintenance enforcement measures, such as those which allow for deductions directly from a parent’s bank account. Where a valid appeal has been made, the CMS will not act on a liability order until the appeal has been resolved by a court. I hope this answers the question raised by my noble friend Lady Stedman-Scott. They will also reflect current provisions for liability orders by preventing the court questioning the maintenance calculation as part of the enforcement process. Where a parent disagrees with the calculation, there are already alternative routes they can take. They can ask the CMS to reconsider it through the mandatory reconsideration process and subsequently appeal to the Tribunals Service if they are dissatisfied, or they can report a new change of circumstances, which could lead to a new calculation.

To develop the secondary legislation on the Bill, my department will consult and engage with stakeholder groups, as well as other government departments, such as the Ministry of Justice, and the devolved Administrations, where appropriate, to ensure that parents are suitably supported. The secondary legislation will follow the affirmative procedure, so this House will be able to debate the proposals put forward.

My noble friend Lady Bottomley touched on enforcement improvements, and I shall go a little further and reassure her. The House will know that the CMS has made improvements to enforcement processes to increase the effective use of powers. This includes simplifying deductions from earnings and increasing efficiency by reducing the manual intervention required, and the CMS is also making better use of deductions from bank accounts. This has increased the volume of deductions and means that money is being collected more quickly for children even before the Bill. Working in partnership, the CMS has improved court processing times by introducing virtual court presenting and electronic exchange of documentation. Only 8% of the total maintenance due to be paid since the start of the CMS remains to be collected through collect and pay. Just to put this in context, this was as high as 17% in March 2015.

My noble friend Lady Bottomley also touched on paying parents—there was a theme anyway about paying parents and some of them avoiding their obligation to pay. I say again that we are aware of a small number of parents whose maintenance liability is inconsistent with their financial resources. Cases involving complex income or suspected fraudulent behaviour can be looked into by the FIU, the financial investigation unit. This is a specialist team that can request information from a wide range of sources to check the accuracy of information that the CMS is given.

The noble Baroness, Lady Sherlock, asked about Section 33(5) of the 1991 Act. I can give her some assurance—it may be that I have to follow up with more detail—that this power is not used because, since 2015, regulations have allowed the CMS to share information directly with credit reference agencies. The Bill does not affect those data-sharing provisions and the CMS will retain the means of disclosing information to credit reference agencies when required.

The noble Baroness also asked why the provisions that the Bill amends are not shown in the 1991 Act on GOV.UK. I may have to follow up with a letter on this, but they are not on GOV.UK in the 1991 Act because they are uncommenced. I think that is what the noble Baroness said, but I will look at my reply and see if I can enhance what I have just said.

I have a very short reply to the noble Baroness’s very important point about the missing letter to Matt Rodda: yes, we have written and, yes, it is now deposited in the Library, so I hope that is helpful for the House in general.

The noble Baroness, Lady Sherlock, asked a broader question about what the Bill actually does. I think she knows what the Bill does, but she focused on the commencing of administrative liability orders and the appeal routes, and I will say a little more about that. One of the questions was why the provisions were not commenced in 2012. We considered commencing these powers in the past, but the powers as originally drafted included a right of appeal to the First-tier Tribunal. This would be an expensive option for the Child Maintenance Service and would create unnecessary demand for the Tribunals Service. Linked to that is the question of why there is a change to the appeal route; I think this is central to the questions she raised. Our intention is now to commence these powers with certain changes we are making through the Bill, including replacing the requirement to create a right of appeal to the First-tier Tribunal with a more appropriate court-based appeal. Provisions relating to appeal rights will be set out in regulations, so there is more discussion to be had on this and I hope that provides some help.

I am aware of the time. I hope the House recognises the importance of this Bill; it has the full support of His Majesty’s Government and I very much welcome it.

Carers: Financial Support

Viscount Younger of Leckie Excerpts

Tuesday 16th May 2023 Lords Chamber

[Baroness Pitkeathley]

To ask His Majesty’s Government whether they plan to review the financial support available to unpaid carers following new research by Carers UK and the University of Sheffield which found that they contribute £445 million daily to the economy in England and Wales.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the Government recognise the vital role played by millions of unpaid carers across the country. We are already providing them with record amounts of financial support through the benefits system, including nearly £3.5 billion per year to around 1 million carers through the carer’s allowance alone. Those unpaid carers in lower-income households could also receive an additional £2,200 per year through the universal credit carer element.

[Baroness Pitkeathley (Lab)]

My Lords, I was only asking for a review; it seems a modest enough request in view of the £445 million contributed every day by unpaid carers. May I ask the Minister something very specific which, if there should be a review, he would be able to consider? The earnings limit for carer’s allowance is not rising as quickly as the national living wage. The number of hours carers are allowed to work will reduce from 14 to 13 before they lose their entitlement to the benefit. This means that carers are very limited in their ability to undertake paid work and combine it with their caring, which many of them wish to do. Does the Minister agree that deterring carers from working is really not sensible, and that the earnings limit should be increased to a minimum of 21 hours at national living wage rates?

[Viscount Younger of Leckie (Con)]

I know the noble Baroness has much experience in this particular area. On the carer’s allowance, I can reassure her that we continue to review the limit and make changes where we feel they are warranted and affordable. The carer’s allowance has an earnings limit, which she alluded to, which permits carers to undertake some part-time work; it also recognises the benefits of staying in touch with the workplace, which we regard as important, including providing greater financial independence and social interaction. As the noble Baroness will know, it can be extremely lonely and very hard work being a carer, as the hours are often long and the work very demanding.

[Baroness Walmsley (LD)]

My Lords, a place in a local authority care home will cost a local authority a minimum of £800 a week, which is over £700 more than is paid to a carer who cares for more than 35 hours a week, as carer’s allowance is only £76.75. Does the Minister agree that the Government and local taxpayers are getting a very good deal on the backs of unpaid carers?

[Viscount Younger of Leckie (Con)]

We definitely want to applaud the huge number of unpaid carers who work in our society. Caring for a family member or friend, as we know, can be enormously hard work but it can also be incredibly rewarding. To pick up on the noble Baroness’s point, means testing comes into this and this can increase weekly income and act as a passport to other support, including help with fuel costs through schemes such as the warm home discount and cold weather payments, and more recently payments to help with increases in the cost of living.

[Lord Farmer (Con)]

My Lords, as an officer of the APPG on 22q—a genetic syndrome that is half as prevalent as Down’s syndrome, with similarly far-reaching effects—I know carers who are parents of disabled children who can suddenly find that they have to be in hospital with their child for several days. They also attend far more medical appointments than normal. Do the Government perceive a need to encourage and enable employers to show greater flexibility in these unavoidable circumstances, and how might they do that?

[Viscount Younger of Leckie (Con)]

My noble friend makes a very good point. As I said earlier, we are committed to supporting unpaid carers to balance the care they may give alongside work, if they are able to do so. Some caring responsibilities are extremely demanding. My noble friend may know that the Carer’s Leave Bill is currently going through Parliament. This will introduce a new leave entitlement as a right from day one to those being employed, available to all employees who are providing care to a dependant with a long-term care or support need.

[Baroness Andrews (Lab)]

My Lords, we have received the Government’s response to the report from the Adult Social Care Committee and we are grateful for it. Is the Minister aware that in that report we recommended that carer’s allowance be reviewed in the next year? We recommended that the threshold for the hours of caring be reduced so that people could access carer’s allowance more easily, and that the allowance be uprated in line with the national living wage. All those recommendations have been rejected. Can the noble Viscount tell me why?

[Viscount Younger of Leckie (Con)]

First, I wish the noble Baroness a very happy birthday. Moving on swiftly to her question, I very much note the points the report has produced; I read it over the weekend and it makes some important points. I said earlier how much we value the role of unpaid carers. Yes, the rate of carer’s allowance is £76.75 a week. The total caseload is 1.4 million and I think it very important indeed that we continue to review the role of carers and the carer’s allowance, but, as I mentioned earlier, there is a means-tested element here and top-ups are available for those in need.

[The Lord Bishop of Gloucester]

My Lords, in addition to the issue of financial support for unpaid adult carers, we must not forget the contribution of young carers, who provide invaluable support to their families. What are the Government doing to ensure financial support for respite support, as well as access to a young carer’s lead in their school or college, as is currently available in Gloucestershire?

[Viscount Younger of Leckie (Con)]

The right reverend Prelate makes a very good point, and that is certainly an element of what we are doing and looking at. As I said, the main point is that we very much recognise the importance of carers and their work. Indeed, Carers Week runs from 5 to 11 June this year. On respite care, the right reverend Prelate makes an important point.

[Baroness Wheatcroft (CB)]

My Lords, there are many young carers between 16 and 25 in full-time education—around 375,000—but they seem to get a particularly raw deal, in that they are not eligible for any state financial support and have to look to charities. Will the Minister take a look at their predicament?

[Viscount Younger of Leckie (Con)]

I am very aware that some carers are extremely young, and I say again that I recognise the role of unpaid carers. The carer’s allowance is not intended to be a replacement for a wage or a payment for caring services, so we cannot compare it to the national minimum wage or the national living wage, for example. The noble Baroness raises another important point that we should continue to look at.

[Baroness Sherlock (Lab)]

My Lords, universal credit is a replacement for a wage, and there are people on it who can work only part time because of the need to care for a loved one, and, in some cases, because they simply cannot get hold of formal social care any more —things are pretty tough at the moment. They are not automatically excluded from the requirement to look for full-time work while on universal credit, so what guidance is given to universal credit work coaches in those circumstances?

[Viscount Younger of Leckie (Con)]

The guidance is continually updated for them. The noble Baroness will be aware of the link between the carer’s allowance and the universal credit tapering system, so that, if tapering is involved, you receive 55p for every £1.

[Baroness Fraser of Craigmaddie (Con)]

My Lords, I am glad to hear that the Government want to support unpaid carers, but one of the problems is that they are invisible to all systems, whether that is health and care services, benefits or other government departments. So what are the Government doing to ensure that we identify carers who have this important role?

[Viscount Younger of Leckie (Con)]

Again, there is more to be done to highlight the enormous amount of tremendous work that carers do. We are working on this, particularly in tandem with our colleagues in DHSC. I have certainly noted this and will take it forward. If there is something that I can write to my noble friend with, I will do so.

[Lord Laming (CB)]

My Lords, the whole House will recognise that, at any time, the whole lifestyle of any of us could be changed by a dramatic illness of a close relative. As indicated, the position of unpaid carers is largely not recognised or sometimes ignored, so that, when they are concerned about their relative and get in touch with one of the agencies, they are often disregarded because they are not the patient, and their views are not sought, even though they are providing a huge amount of care. Can the noble Viscount assure us that everything is being done to improve the recognition of unpaid carers’ contribution?

[Viscount Younger of Leckie (Con)]

Absolutely, and this ties in with my noble friend’s question. I reassure both the noble Lord and my noble friend that we are improving the recognition, identification and involvement of unpaid carers, particularly in local areas. There are new duties in the Health and Care Act 2022 around involving carers, including in hospital discharge, and new guidance has been prepared for the integrated care strategies, as well as new SCIE guidance for commissioners on breaks for adult carers.

State Pension Underpayment Errors

Viscount Younger of Leckie Excerpts

Tuesday 16th May 2023 Lords Chamber

[Lord Davies of Brixton]

To ask His Majesty’s Government what steps they are taking to tackle under-payment errors in state pensions.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the Government are fully committed to ensuring that state pension error is put right as quickly as possible. More than 1,300 staff have been recruited or redeployed to the ongoing state pension underpayment correction exercise, with case reviews expected to significantly increase this year. This is an issue that dates back many years, and we are working hard to correct these historic errors and to ensure that they do not happen again.

[Lord Davies of Brixton (Lab)]

My Lords, I thank the noble Viscount for his reply and I know that he takes the issue seriously. However, it is notable that the figures published last week by the Office for National Statistics showed that the main cause of underpayment was what it termed “official error”, and in the last financial year, the underpayments totalled £580 million—£50 million more than in the previous year. It is getting worse. I note what the Minister says about additional staff, but it is clear that more needs to be done.

[Viscount Younger of Leckie (Con)]

The noble Lord is right. We know that 700,000 cases require review; an estimated 230,000 customers will be affected. In terms of what we have actually done, 173,538 cases have been reviewed; 46,760 underpayments have been identified, and just over £300 million was paid in arrears. As for the reasons that were highlighted by the noble Lord, they are multifarious. One is that DWP staff sometimes fail to manually set an action system prompt on state pension accounts to review payments, such as reaching an 80th birthday.

[Lord Geddes (Con)]

Is my noble friend aware of the beneficence of his department in that those who have reached their fourscore years get a huge 25p a week supplement, which, to the best of my knowledge, has never been reviewed since 1971? Is this good value for money?

[Viscount Younger of Leckie (Con)]

I take note of what my noble friend has said. It is interesting to note that we are talking about an overpayment rather than an underpayment. Far from me to authorise taking away 25p from my noble friend, despite the fact that I am a Scotsman.

[Lord Palmer of Childs Hill (LD)]

My Lords, the department has said that the current large-scale correction for those cheated of their full entitlement should be completed by the end of 2024, but in its most recent annual report it admitted a different error, relating to home responsibilities protection, where thousands of mothers are missing out on NI credits. Can the Minister assure the House that the department will not wait until the end of the current correction exercise before it starts on this new category of cheated errors?

[Viscount Younger of Leckie (Con)]

The noble Lord makes a good point about home responsibilities protection, which is one of the issues that we are looking at in a timely fashion. We will be providing estimates and next steps for corrective action in the summer. Obviously, we are looking to move at pace to resolve these issues.

[Baroness Lister of Burtersett (Lab)]

My Lords, the noble Viscount’s Written Statement last week celebrated the fall in fraud and overpayment error in the social security system as a whole, but it rather glossed over the increase in underpayment to £3.3 billion. That is money which is not going into the pockets of people who need it. Do the Government not think that under- payments are as important as overpayments, and what are they doing to minimise underpayments?

[Viscount Younger of Leckie (Con)]

Of course they are important. Any underpayment is incredibly important, as I am sure the noble Baroness would agree. The department became aware of issues with state pension underpayments in 2020 and, as mentioned earlier, the issues go back several decades and through different Governments. We have taken immediate action to investigate the extent of the problem and are carrying out highly complex scans of computer systems. Correction activity commenced on 11 January 2021; I say again that this is an important matter and we are moving at pace.

[Baroness Altmann (Con)]

My Lords, as the exercise is focusing on women, and women’s state pensions are still noticeably lower than those of men, are those who are entitled to arrears also entitled to some kind of compensation or consolation payment? How is my noble friend’s department prioritising the work?

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

I note what my noble friend says about the gender disparities, which we are alert to. Indeed, the department has a discretionary scheme which allows special payments to be made to customers to address any hardship, but particularly injustice caused by DWP maladministration. Consistent with other large-scale LEAP exercises, special payments under the DWP discretionary scheme will not, however, routinely be made, but I assure the House that they are regarded or assessed on a case-by-case basis. Finally, on prioritising, it is important to note that we are prioritising those who are alive over those who are deceased.

[Baroness Deech (CB)]

My Lords, I am one of those women who were underpaid. For years, I got £6 a week—I was very exercised over how to spend it—whereas many of my women friends who had never worked at all were getting much more than that. With expert advice, I was able to access the department and it was set right, but it seemed to me that the problem was how to access the department. Once it had the issue in hand it responded, but people need to know the email addresses and there need to be pamphlets in post offices. There need to be easy ways for older people to speak to someone in the department and get an answer when they write—without, of course, having to hold on to the phone for ages. Will the Minister ensure that that happens?

[Viscount Younger of Leckie (Con)]

Indeed, and it is very important that we engage much more closely with the customer base. Where underpayments are identified, the DWP will contact the individual to inform them of any changes to their state pension amount and of any arrears involved. There is now, I am pleased to say, a more direct route for those inquiring about underpaid state pension. Guidance on this, the House may not be surprised to hear, is on GOV.UK and went live in July last year.

[Baroness Sherlock (Lab)]

My Lords, these cases are very urgent for some people; 25p may be an issue for the over-80s, but in just January and February 14,500 over-80s were found to have been underpaid—out of a total of 46,000 underpayments. The worst affected were those who had been widowed, who were underpaid by, on average, £11,500. We all know how quickly the DWP will go after you if you get overpaid, so can the Minister assure us of two things? First, is priority being given to those who most need the money and who, frankly, may need it rather more urgently for reasons such as more advanced age? Secondly, the NAO suggested in its very damning report that the department assess all underpayments to see whether there is a systemic cause which might affect other cases. Is that now being done?

[Viscount Younger of Leckie (Con)]

Very much so; it is being done. I think I alluded to this earlier. Any systemic problem has to be looked at as a matter of urgency. On the other question the noble Baroness raised, I mentioned the number of extra people we have put on to this particular case. I reassure her and the House that the data shows that we have reviewed an average of more than 15,000 cases per month between November 2022 and February 2023, compared with an average of only 5,000 per month over the first 22 months of the exercise.

[Lord Sikka (Lab)]

My lords, it is estimated that between 20,000 and 25,000 pensioners die each year because of low income and the hard choices they have to make between heating and eating. Can the Minister explain whether any assessment has been made of the deaths and hardship caused by underpayment of state pension over the last 13 years?

[Viscount Younger of Leckie (Con)]

No, I do not have any figures to support the argument that the noble Lord is proffering. What I can say is that we very much take note of wanting to support the most vulnerable. We have increased benefits in line with the September 2022 consumer prices index of 10.1%, including around 12 million pensions.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, is the Minister aware that, due to their incompetence, the Scottish Government have underspent their budget in the last financial year by £2 billion, which could have been spent helping carers and others? Will the Minister confirm that this money will now go back to the Treasury and not be spent helping poor people in Scotland?

[Viscount Younger of Leckie (Con)]

Allow me to look into that and provide an answer to the noble Lord. I think it is normally the case that the money goes back to the Treasury but, without knowing here, I do not want to stick my neck out on it.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, could the Minister indicate what corrective action will be taken to address the needs of the WASPI women, who have been underpaid for many years and are not entitled to their pensions from the age of 60?

[Viscount Younger of Leckie (Con)]

I am aware, as we all are, of the WASPI issue. The noble Baroness will be aware of the judicial review against the PHSO. We are aware of it, but I am unable to comment because of the judicial review.

Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023

Viscount Younger of Leckie Excerpts

Wednesday 26th April 2023 Grand Committee

[Baroness Sherlock (Lab)]

My Lords, I thank all noble Lords who have spoken, especially my noble friend Lord Davies of Brixton for giving us this opportunity to reflect on the role and operation of the Pension Protection Fund.

My noble friend Lady Drake was right to remind the Committee of the huge value of the PPF to the thousands of members of DB schemes—both those who benefit directly from the £1 billion-plus of compensation it pays out every year and those who are happily sailing in calm pension waters but benefit from the security of knowing that the lifeboat is there, should they find they need it. Certainly, every day is a school day. I have learned a certain amount of history today, for which I thank noble Lords who have spoken, including the noble Baroness, Lady Altmann, and my noble friends on this side. They reminded me that the PPF was created by the Labour Government to protect the hard-earned pension savings of workers. It is important that we never take it for granted and that we, in our time, do all we can to keep it sustainable.

The Pensions Act 2004 requires the DWP to make an annual order to increase the PPF levy ceiling in line with the growth in earnings. As my noble friend Lord Davies noted, this year we have had two orders, as the first draft omitted the relevant figures in favour of “X”s. I do not want to make life harder for whichever poor person found that they had done that by accident, but I have to note that it is not the first error in recent times that we have had in a DWP order. When I was a non-exec on boards, we were always told that if an error is reported, the question to ask is: is it systemic? Clearly, one error is not systemic, but this is not the first. Can the Minister tell the Committee whether he is confident that his department is sufficiently well resourced with the people whose job it is to draft legislation and make sure that it is checked before it goes out?

The levy ceiling was set in primary legislation to be uprated annually in line with the growth in average weekly earnings, the rationale being that this would allow the increases in the ceiling roughly to track the increases in the pension liabilities of DB schemes, which are, in turn, linked to members’ earnings. In its 30th report, the Secondary Legislation Scrutiny Committee asked whether the policy of annual increase by the growth in earnings is still producing a sensible outcome, or whether it is far outstripping actual usage. It highlighted the gap between the levy ceiling and the actual levy. As we have heard, in 2023-24, the levy will be 16% of the ceiling, compared with 33% in 2022-23 and 43% in 2021-22.

The answer provided to the committee in that 30th report was that

“PPF investment performance has consistently performed ahead of target and combined with the PPF’s levy collection and risk reduction strategies, has resulted in a reserve of £11.7 billion and assets of £39 billion (as of 31 March 2022)”—

as mentioned by my noble friend Lord Davies. It was this which enabled the drop in the levy. The recent PPF funding review concluded that

“the PPF’s financial position has significantly strengthened in recent years, driven principally by strong investment performance, and a changed risk profile. As a result, the PPF is making a step change in its approach and entering a new phase where the focus will shift from building to maintaining its financial resilience”.

As somebody who likes the Janet and John version, I think that means that it has been building up reserves steadily and feels that the time has come to build them up more slowly in future.

The challenge for the PPF is that it has to tack a course between levying enough for its likely needs in the year ahead while ensuring that it is still able to bring in enough additional revenue if it suddenly faces large claims or a significantly riskier environment. Since it can increase the levy by only 25% a year, the decision on the levy can never just be a short-term consideration with a 12-month horizon. Is the Minister confident that the PPF has landed in the sweet spot?

I am also interested to hear the answers to the questions raised by the noble Baroness, Lady Altmann, and my noble friend Lady Drake about the consideration that is being given by the department and the PPF as to whether there is a need for more flexibility in the way that the levy is set and constructed.

Clearly, if the PPF is deemed to have more reserves than it needs, it can do one of two things: reduce the levy or spend more. My noble friend Lord Davies has come down clearly on one side of that, namely that it should choose to spend more. He rightly pointed out that this is a time of very high inflation and, therefore, the impact of the 2.5% cap on indexing is being felt particularly acutely at the moment. Clearly, that has put pressures on all pensioners, including those who rely on PPF payouts. My noble friend’s proposal has attracted support in principle from the committee. The obvious question to the Minister is: has any modelling been done on the cost of removing or raising the cap and, if so, what can he share with us on that—what did it show?

My noble friend Lord Davies also raised two of the questions from the independent review of the PPF. Can the Minister tell me whether the Government have responded to that review? I could not find it, but that may just be because of my search skills. Perhaps he could let us know.

I add another question that had been raised. The costs of administering the PPF are borne by the PPF administration fund and amounted, I gather, to £13.3 million last year. The independent review recommended folding the administration levy into the general PPF levy. Did that proposal find favour?

I am interested to hear the Minister’s take on this delicate balance facing the PPF, especially as it matures. It has been suggested that is in a healthier position than ever, but also that, as more schemes prepare to move into buyouts, the environment could get riskier in future than it has been in the past. It is perhaps time for more of the workings to be made manifest so that there is more clarity for all stakeholders—pension schemes, savers and pensioners—as to the balance of decisions that are being taken. I look forward to hearing the Minister’s reply.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I thank the noble Lord, Lord Davies of Brixton, for providing this opportunity to discuss the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023. This order enables the board of the Pension Protection Fund to raise a pension protection levy that is sufficient to ensure the safe funding of the compensation it provides, while providing reassurance to business that the levy will not be set above a certain amount in any one year.

I thank all noble Lords who have spoken in this short debate. As ever, I am somewhat daunted by the level of expertise, bar none, in this Committee. A good number of questions have been raised and, as ever, I will endeavour to answer them all—mostly at the end of my remarks, just to manage expectations.

I emphasise the Government’s continued commitment to supporting pensioners and protecting their hard-earned retirement savings. Ensuring that those who have worked hard all their lives receive a retirement income that provides them with dignity and financial security is one of our core objectives, and so it should be. We recognise that recent increases in the cost of living have placed particular pressure on pensioners’ household budgets, so we are taking action to target support specifically at pensioners. Around 12 million pensioners in Great Britain will benefit from the 10.1% increase to their state pensions from this month, fulfilling the Government’s manifesto commitment to apply the triple lock. More than 8 million pensioner households across the UK will receive an additional £300 cost of living payment this winter. To aid the most vulnerable, the pension credit standard minimum guarantee has also been increased by 10.1%.

As the Committee will know, combating inflation is one of the Government’s top priorities. Forecasts indicate that inflation is still likely to fall sharply by the end of 2023, in line with the Prime Minister’s pledge to reduce it by half by the end of the year.

I will return to the Pension Protection Fund in a moment, but first I will take a step back to consider the wider context of the schemes it protects. I pay tribute to the noble Lord, Lord Davies, for all that he has done; I was interested, pleased and perhaps not surprised that he had such a hand in the naming and setting up of the PPF—I am not sure of the precise date—back in the 1990s. With around £1.7 trillion of assets over 5,000 schemes and supporting nearly 10 million members as of March 2022, the defined benefit sector is critical for the UK population.

Set against this backdrop, the PPF’s £39 billion in assets under management as of March 2022, including £11.7 billion in reserves, certainly seem proportionate to the scale of its task. As of March 2022, since its inception in 2005 the scheme has stepped in to protect close to 300,000 members who might otherwise have received a greatly reduced retirement income. The noble Baronesses, Lady Drake and Lady Sherlock, referred to the success of this.

Despite the strength of its financial position, the PPF continues to face risks, the biggest being future claims for compensation and increased longevity. It uses its stochastic modelling tool, the “long-term risk model”, to help determine the funding it requires to protect against these future risks. Like other major financial institutions, the PPF protects against risk by holding reserves. The size of its reserve should therefore provide reassurance not only to existing members of the PPF but to members of all eligible pension schemes.

The noble Lord, Lord Davies, asked about the Pension Protection Fund’s reserve of £11.7 billion and asked whether that could be shared with its members—I think that was the gist of his question. It enables the Pension Protection Fund to protect financial security for current and future members. As I said, despite the strength of its financial position, the PPF continues to face a number of risks, the biggest being future claims to compensation and increased longevity, so there is a balance that I am sure the noble Lord could tell me much about.

The compensation provided by the PPF makes it a critical partner in delivering on the Government’s objective of ensuring financial security for pensioners. The PPF provides a crucial safety net to members of eligible pension schemes who are at risk of losing their pensions because of the insolvency of their employer. This safety net could not be more important in these challenging times.

I reiterate, however, that the Pension Protection Fund is therefore a compensation scheme; I know that my noble friend Lady Altmann defined it as an insurance scheme, which is fair enough. As such, it seeks not to replicate the benefits of underfunded pension schemes but rather to ensure that members are compensated fairly and sustainably. A balance must be struck between the interests of those who receive compensation and the levy payers who fund it. It is only by striking this delicate balance, perhaps, that the long-term stability of the PPF can be ensured.

--- Later in debate ---

[Baroness Drake (Lab)]

I appreciate that there is a lot out there, but there are three elements: the scope for raising the levy, the compensation levels and the resilience of the PPF over time. Clearly, there is a sort of inflection point for revisiting and managing that. It was just about understanding that and getting more transparency around it.

[Viscount Younger of Leckie (Con)]

Absolutely. That plays well into what I said in that I will reflect on what I and the noble Baroness have said, and there may well be a letter coming to add to the one that I will send to my noble friend.

I will address a couple more questions before I wind up finally. The noble Baroness, Lady Drake, and indeed the noble Baroness, Lady Sherlock, asked whether the PPF is right to build reserves at a slower pace than it has been doing. It is a fair question but that is, as the noble Baroness will expect me to say, very much a matter for the PPF board.

On whether there will be an update on the levy discussions, I may have alluded to this earlier—it was raised not only by the noble Baroness, Lady Drake, but by my noble friend Lady Altmann and indeed the noble Baroness, Lady Sherlock. I will certainly happily make inquiries, and that will be an addition to the letter which is growing bigger by the moment. There may be some other questions that I have not answered, but I will certainly look very closely with my team at Hansard.

To conclude, again I thank the noble Lord, Lord Davies, for providing us with this opportunity to discuss the UK’s flexible and robust regime for funding and protecting defined benefit pensions, which, as was mentioned, is an important subject. This regime has enabled most schemes to weather the severe economic downturns following the crash in 2007-08—the financial crisis, I should better call it—and the Covid pandemic, as well as the prolonged period of historically low interest rates. In fact, the aggregate scheme funding position on a Pension Protection Fund basis improved from 83.4% on 31 March 2012 to 113.1% on 31 March 2022 —an interesting statistic to reflect on. These improvements to scheme funding mean that fewer and fewer members of DB schemes will require the safety net of the PPF. That is of course good news for members, who are increasingly likely to receive their full pension entitlement. This is progress indeed but there is more to do, although of course we cannot eliminate all risk. When employers become insolvent, the PPF continues to stand by as a well-funded and responsibly managed safety net.

[Lord Davies of Brixton (Lab)]

I thank the Minister for his detailed and considered response to what I have certainly found a useful debate. I just need to say that I do not think that the issue will go away. As I suggested, the attrition of members’ benefits will continue, and pressure to do something will get stronger. It would be useful if a meeting could be organised—it is probably just as easy to do it directly with the PPF, but Ministers and officials might like to be involved in it as well, so I will write and suggest that. I thank the Minister again for his attention to this important topic.

Child Support Collection (Domestic Abuse) Bill

Viscount Younger of Leckie Excerpts

2nd reading
Friday 21st April 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I congratulate my noble friend Lord Farmer on his excellent introduction to the Bill. As my noble friend has stated, the Bill will create an additional layer of protection for domestic abuse victims and their children when using the Child Maintenance Service—the CMS. It has the full backing of His Majesty’s Government and it gives me great pleasure to speak in full support of it today.

I start off by saying a few words about Emma Day, because her death was a truly shocking and distressing event. The CMS took action immediately to review its processes and procedures, to ensure that it is doing everything it can to support victims and survivors of domestic abuse and to make maintenance arrangements safely, and to reduce the risk of CMS customers being subject to further domestic abuse. I wanted to say that at the outset because it has been raised as a very important and tragic theme this morning.

I was very pleased to be given ministerial responsibility for child maintenance in January and to continue the excellent work in this area of my noble friend Lady Stedman-Scott. Child maintenance provides a vital service for separated families and their children, through both private and CMS arrangements. It is estimated that separated families received £2.6 billion annually in maintenance payments between 2020 and 2022. This roughly equates to lifting around 160,000 children out of poverty each year, on an after housing costs basis. I will be raising the issue of children as a central theme during my speech.

I would also like to give some context to the Bill by talking about the current CMS service. I am aware of a number of questions that have been raised about this, notably from the noble Baronesses, Lady Burt and Lady Sherlock, and I will attempt to answer them. My noble friend Lord Farmer spoke eloquently about the service, so I will not go into too much more detail for fear of repetition, but the purpose of the CMS is to facilitate the payment of child maintenance between separated parents who are unable to reach their own agreement following separation. This is a very challenging job, undertaken in extremely difficult circumstances, and the CMS must operate in an unbiased manner. Separation is an extraordinarily difficult time for parents and, more importantly, the children, who are the CMS’s primary focus, as I said earlier. The CMS works incredibly hard to collect maintenance, so that children receive the financial support they are entitled to. In the past 12 months, the CMS has arranged over £1 billion in child maintenance payments.

Before moving on to the details of the Bill, I will say a few words about how the CMS operates for victims of domestic abuse. This Government take the issue of domestic abuse extremely seriously, and the department is committed to ensuring that victims of abuse get the help and support they need to use the CMS safely. Abuse may occur at either side, against paying or receiving parents, and at any point during the life of a case. My noble friend Lady Berridge gave some examples in her remarks.

The noble Baroness, Lady Burt, asked about guaranteeing payments, particularly when paying parents do not pay their maintenance liability, which is an important point. Operating a scheme where the Government guarantees child maintenance payments if the paying parent does not pay is not the intent of CMS policy. The role of the CMS, as I alluded to earlier, is to encourage parents to take financial responsibility for their children. The scheme is designed to encourage parents to agree their own family-based arrangements, wherever possible, as this tends to be in the best interests of the children. The statutory scheme exists as a fall-back if they are unable to do so. The Government do not believe that the state covering the shortfall in unpaid maintenance is the right or appropriate way to target additional funding, given that there is no means test for receiving parents.

The application fee, which I will say more about later on, is waived for applicants who have experienced domestic abuse. CMS caseworkers will signpost where needed to suitable domestic abuse support organisations. For parents using the direct pay service, the CMS can act as an intermediary to facilitate the exchange of bank details to ensure there is no unwanted contact between parents and that no personal information is shared. CMS caseworkers also provide information on how to set up bank accounts with a centralised sort code, which reduces the risk of a parent’s location being traced.

We continuously review our processes to ensure that domestic abuse victims are appropriately supported when using the CMS. I should therefore mention the excellent recently completed review concerning the CMS. I was very pleased to be able to publish this independent review of the ways in which the CMS supports victims of domestic abuse when I took ministerial responsibility for child maintenance.

As my noble friend Lord Farmer said, the review was published on 17 January this year and was conducted by Dr Samantha Callan, a leading expert on domestic abuse. The review finds that the CMS is an agency that has worked hard to develop and improve its domestic abuse practices. However, as the review also points out, there are further steps we can take to improve the CMS for victims of domestic abuse. We have accepted eight of the 10 recommendations in the review, and I am strongly committed to implementing these as soon as possible. I applaud the review, the findings of which are informed by extensive engagement with victims and survivors of domestic abuse and, of course, the domestic abuse sector. Your Lordships will have seen that Dr Callan’s report includes a recommendation to enable cases to be moved to collect and pay where there is evidence of domestic abuse—precisely what this Bill aims to do.

I turn to the important subject of training, raised by the noble Baroness, Lady Burt, and, in particular, by the noble Baroness, Lady Sherlock. The review also recommends that the CMS review its domestic abuse training. The CMS provides domestic abuse training for all caseworkers. It recognises that domestic abuse can take various forms, as the noble Baronesses will know, which include physical, psychological, coercive, overbearing, emotional and financial abuse. I stress that this can be against either parent involved.

As the noble Baronesses will know, the CMS reviewed its domestic abuse training in 2021 to ensure that caseworkers are equipped to support parents in vulnerable situations. To give a bit more detail, the training includes how to recognise the various forms of domestic abuse, checking for previous reports of abuse and appropriate signposting to domestic abuse support groups.

Following Dr Callan’s independent review of the ways in which the CMS supports survivors of domestic abuse, we will undertake a comprehensive review of training—I repeat myself, as this is a very important point—to ensure that it remains up to date. We will engage with external organisations where appropriate to ensure that the training reflects the needs of domestic abuse survivors when they use the CMS. The CMS also has a complex needs toolkit for its caseworkers, which includes clear steps to follow in order to support customers experiencing abuse. This toolkit is regularly reviewed and strengthened, particularly on the basis of customer insight.

Coercive control has been raised in this debate, in other debates and in the other place. The CMS is recognising this. The Domestic Abuse Act 2021, which was debated through both Houses, has brought in important changes for those who have experienced abuse. It has made coercive control a criminal offence, including in relation to ex-partners. The Home Office published new statutory guidance on controlling and coercive behaviour earlier this month. Although CMS domestic abuse training recognises that domestic abuse can take many forms, we are reviewing the guidance to determine the impact on CMS procedures.

This leads me to attempting to answer quite a technical question from my noble friend Lady Berridge in relation to matters raised by the Domestic Abuse Act. She touched on the review of the Matrimonial Causes Act. As she will know, our Domestic Abuse Act became law in April 2021. This truly game-changing piece of legislation transforms our response to victims in every region of England and Wales and ensures that perpetrators are brought to justice. It helps millions affected by these awful crimes by strengthening the response across all agencies, from the police and courts to local authorities and service providers. For the first time in history, there is a general-purpose legal definition of domestic abuse, which incorporates a range of abuses beyond physical violence, including emotional, controlling or coercive and economic abuse.

I note the question raised by my noble friend concerning the Matrimonial Causes Act, although divorce is a separate issue to child maintenance and not one dealt with by my department. The Child Maintenance Service exists to ensure that children receive the financial support they are entitled to. The welfare of the child, to mention it again, is at the heart of everything we do. This Government take domestic abuse very seriously. I will raise my noble friend’s question with ministerial colleagues and can assure her that she will receive a letter on this subject. I can assure her that Ministers in the department and across government regularly meet the Domestic Abuse Commissioner to discuss issues including the Child Maintenance Service. That also gives an answer to the question about cross-government support.

The Bill will amend primary legislation and allow either parent, or a child in Scotland, to request the collect and pay service on the grounds of domestic abuse, where there is evidence of abuse against them or children in their household by the other parent in the case. We recognise that abuse can be suffered by either parent or by children. A child in Scotland can apply for these provisions if they are the CMS applicant and either parent was the victim of domestic abuse, or if they themselves were.

To ensure that the Bill targets parents appropriately, the types of domestic abuse evidence that will be required will be set out in secondary legislation. To develop the secondary legislation, we will consult widely and engage with stakeholder groups, as well as other government departments, such as the Ministry of Justice and the Home Office, and with the devolved Administrations where appropriate, to ensure that parents are suitably supported. This will ensure that appropriate processes are established for verifying evidence requirements for domestic abuse.

A number of points were raised by the noble Baronesses, Lady Burt and Lady Sherlock, about the sort of questions they wish to propose. These questions will need to be discussed, debated thoroughly and drawn out as the secondary legislation is rolled out. The secondary legislation will follow the affirmative procedure so that your Lordships will have the opportunity to vote on proposals put forward. We will also consult widely to ensure that we get the proposals right, as mentioned earlier. We will aim to produce robust evidence requirements that are fully sensitive to the needs of those who have experienced domestic abuse and where all relevant data and insights have been thoroughly considered.

My noble friend Lady Berridge asked why there was a delay in publishing the independent review response. I was not particularly aware of that, but the review completed in spring 2022 and the Government received the report during the summer. It was important to get all the aspects right, so the full findings and 10 recommendations were published on 17 January 2023.

[Baroness Berridge (Con)]

Can I just correct that and make sure the record is clear? If I recollect my own contribution correctly, I was just commenting on the overall time it has taken from the 2017 murder to getting this rectified. If I said anything other than that, it was not what I intended to do.

[Viscount Younger of Leckie (Con)]

I note my noble friend’s point. Although I cannot answer on the particular delay after the tragic circumstances in 2017, I will certainly come back to her and perhaps add to the letter I am writing to her on that.

I go back to the secondary legislation and the questions raised on evidence of domestic abuse and on working across government. I can say—I have my noble and learned friend Lord Bellamy beside me—that we are working ever more closely across government on matters of domestic abuse and on supporting families, however they may be defined nowadays. As I said earlier, the focus across government is on children and their welfare.

On the timing of secondary legislation, which was raised by the noble Baroness, Lady Sherlock, I am afraid I cannot give her any timescale. In relation to all aspects of the Callan review, we want to move at pace. I think it is good news that this Private Member’s Bill and the next one, which is coming on 19 May, are both moving at pace.

The noble Baroness, Lady Sherlock, asked about domestic abuse training being developed with input from Women’s Aid. I assure her that the CMS domestic abuse training was shared with Women’s Aid for the review in May 2021. Women’s Aid’s concerns were mainly around the knowledge levels of DWP trainers with respect to domestic abuse and related to the content and design of the training itself. The CMS took Women’s Aid’s comments into account and updated the training, alongside using a new facilitator guide to better support the trainers. As she may know, this was published in November 2021—which seems quite a long time ago.

The noble Baroness, Lady Sherlock, also raised an important point about non-compliance. The percentage of parents who paid some maintenance on the collect and pay service has increased from 60% in the quarter ending in March 2018 to 65% in the quarter ending December 2022—these are the latest figures we have. In 2021, a new internal payment-compliance measure and approach was introduced to support customer expectations across its full case load, including CMS and CSA arrears-only cases. The measure requires 90% or more of the liability and any schedules arrears to be paid. This is measured monthly and on a rolling quarterly basis, including a measure to address cases not paying on time.

I am aware of the time and I should quickly conclude. I think I have answered most of the questions. I reiterate that I strongly believe that victims of domestic abuse and their children should feel as safe as possible when using the CMS. The Bill will provide an extra layer of legislative protection so that they can decide which service type is most appropriate for them, their circumstances and, most importantly, the welfare of their children, while also providing a fair service to both the receiving and the paying parent. I hope that the House recognises the importance of the Bill and supports my noble friend Lord Farmer in its passage today.

Pensions Dashboards (Prohibition of Indemnification) Bill

Viscount Younger of Leckie Excerpts

3rd reading
Friday 21st April 2023 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, before we commence proceedings on the Bill, I am obliged to make a statement on legislative consent in relation to it.

The Bill has been drafted so as to make provision across the United Kingdom. As noble Lords will know, pensions policy is transferred to the Northern Ireland Assembly and the usual process would be for the Assembly to provide a legislative consent Motion for any provision relating to a transferred area. However, due to the continued absence of the Northern Ireland Assembly and Executive, a legislative consent Motion cannot be secured.

Historically, the Northern Ireland legislation in this area has mirrored that in Great Britain and, following engagement with the Northern Ireland Department for Communities, the Government’s position is that it is important that this legislation proceeds to apply in Northern Ireland in the absence of a legislative consent Motion. This will ensure the people of Northern Ireland can benefit from the Bill’s important protections.

Motion

Moved by

--- Later in debate ---

[Baroness Sherlock (Lab)]

My Lords, I congratulate the noble Lord, Lord Young of Cookham, on piloting the Bill through the House with his usual flair, and it is very nice that we can all be here to see it on its way. It is a narrowly focused Bill which simply addresses a lacuna in the original legislation, and we are happy to support it. I also thank the noble Viscount for giving us an assurance at Second Reading that before long, we can look forward to an update on the likely implementation of the pensions dashboards themselves. It remains of paramount importance that people can save for their retirement with confidence and with an understanding of all the implications of the choices they are making or that have been made on their behalf. We support the creation of a pensions dashboard to contribute to that goal, although we will continue to debate with Ministers choices about how it can best be done. For today, we are pleased to wish this Bill on its way.

[Viscount Younger of Leckie (Con)]

My Lords, I, too, am grateful to my noble friend Lord Young of Cookham for presenting his Bill to the House, and to my honourable friend in the other place, Mary Robinson, for her skilled stewardship of the Bill. It is a pleasure again to offer my support for the Bill on behalf of the Government. I, like my noble friend, also thank all noble Lords who were present for Second Reading for their interest in the Bill and for supporting it as it moved towards its final stage.

I committed to follow up on the topics relating to this Bill and questions about pensions dashboards more broadly that were raised by noble Lords during the previous debate. I have placed copies of letters I sent after Second Reading in the House Library, and they are also available on the Bill’s webpage—hopefully, noble Lords have had a look at them. I hope the letters sent have helped to address these queries, which included asking for an update on progress on the department’s state pension records correction exercise, the readiness of public service pension schemes to connect to dashboards, and whether penalties could be incurred for loading incorrect data to pensions dashboards. Queries were also raised more specifically about the penalties which could be imposed on trustees and managers of occupational pension schemes under the proposals in the Bill, and for compliance breaches under the pensions dashboards regulations.

I further addressed questions about the challenges faced by the pensions dashboards programme in delivering the digital architecture underpinning pensions dashboards. On this final point, I made clear to the House during Second Reading the importance of this Bill, and that it is needed irrespective of the delivery timeline for pensions dashboards. To be helpful to the noble Baroness, Lady Sherlock, I also pledged—and I stick to that pledge—to update noble Lords as soon as is reasonably possible, and an invitation will be forthcoming.

To reiterate why the Bill is required, it corrects a legislative gap which, left as it is, means that no provision would prohibit trustees or managers from reimbursing themselves using pension scheme assets to pay penalties in respect of breaches of any relevant pensions dashboards regulations. There was unanimous agreement among noble Lords at Second Reading that this would be unacceptable.

The proposals under this Bill seek to deter rogue actors from reimbursing themselves using the assets of pensions scheme members by allowing criminal proceedings to be brought against trustees or managers of occupational pension schemes if they are reimbursed and knew or had reasonable grounds to believe that they had been reimbursed as such. If a trustee or manager is found guilty of this offence, the Bill’s provisions allow for a maximum sentence of up to two years in prison, or a fine, or indeed both.

As I emphasised at Second Reading, the Bill does not place any new requirements on trustees or managers of occupational pension schemes or burden them with additional costs. It simply extends an existing prohibition in Section 256 of the Pensions Act 2004, which already applies to a number of areas of pensions legislation, to include pensions dashboards.

To conclude, the Bill rightly increases protection for consumers saving for their retirement. I do hope, therefore, that the whole House will join me in its support for my noble friend’s Bill and agree to its passage.

[Lord Young of Cookham (Con)]

My Lords, I am grateful to both Front-Benchers for their support and to my noble friend the Minister for addressing in correspondence some of the broader issues that were raised in a recent meeting on the pensions dashboard.

Heritage Railways and Tramways (Voluntary Work) Bill [HL]

Viscount Younger of Leckie Excerpts

3rd reading
Friday 21st April 2023 Lords Chamber

[Baroness Sherlock (Lab)]

My Lords, I add our thanks to my noble friend Lord Faulkner, who has piloted the Bill. I regret that I could not find a relevant interest to confess at this point, but I commend those who have. I add my hope that Lady Forsyth has a forgiving nature when she comes to read Hansard.

Our heritage railways are a joy and a blessing to the nation, as well as a big contributor to the economy. It would certainly be a shame if children and young people were prevented engaging safely in voluntary activity down to legislation from a time when heritage railways were simply railways. In the earlier stages, the Government seemed confident that there is no legislative barrier. That is not completely accepted around the table, so I hope that the Minister is able to give some reassurance to my noble friend and that discussions are carrying on to make sure that this can happen. I am happy to wait to hear what the Minister has to say.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, I am also grateful to the noble Lord, Lord Faulkner, for bringing this debate to the House for the fourth time, for which he is to be applauded. I agree with him that it is important to protect heritage railways for future generations.

Modern health and safety legislation—in particular the Health and Safety at Work etc. Act 1974 and relevant secondary legislation—does not prevent children and young people volunteering on heritage railways or tramways. The current legislative framework already allows for this to happen. However, it is important that such activities are carried out in a safe way with employers, organisers and those supervising the activities making sure that any risks are properly controlled.

The Government support volunteers and volunteering; to that extent, I echo the words of my noble friend Lord Forsyth. It can be a rewarding experience for young people, and it allows them to gain new skills and make a difference in their community. Volunteering is vital for the future sustainability of the heritage rail sector, with more than 22,000 people, 800 of them young people, giving their time to support heritage railway organisations across the country.

At Second Reading, my predecessor, my noble friend Lady Stedman-Scott, offered to bring officials from the Health and Safety Executive, the Office of Rail and Road, the Department for Digital, Culture, Media and Sport and the noble Lord, Lord Faulkner, together with the Heritage Railway Association to discuss how its guidance can be further strengthened. Unfortunately, unforeseen circumstances prevented this meeting happening, but I would very much like to make this offer again.

Under the 1974 Act, duty holders are required to control the risks they create from their operation. Although the Health and Safety Executive has the policy responsibility for the 1920 Act, in the case of heritage railways, the Office of Rail and Road is the regulator for health and safety legislation. Both regulators have confirmed that they would not enforce the 1920 Act solely to prevent young people volunteering on heritage railways. It has not been used in a prosecution since 2009 and, when it was, it was used alongside more modern health and safety legislation to prosecute in cases where young people were employed illegally in dangerous environments. In total, the 1920 Act has been enforced on eight occasions since 1998, and none of these prosecutions was against a heritage railway.

The law protecting children in the UK is a complex area, and this Bill would have implications not only on health and safety protections but on education legislation and local authority by-laws. To repeal or amend the 1920 Act may initially seem the best course of action; however, because of the links to other legislation, the process of making changes would be extensive. There is no evidence that this legislative change would make a difference to the number of young people volunteering, and therefore it is not proportionate to proceed with it.

I promised also to be relatively short, so I conclude by saying that the Bill seeks to allow children to gain valuable experiences volunteering on heritage railways and tramways, and the Government support this aim. However, we believe that the current legislative framework does just that. Nothing would be gained from a change to legislation when other, simpler and more effective options are available—in particular, working with the regulators to explore the types of activities and tasks that are proportionate for young volunteers.

At Second Reading, the noble Lord, Lord Faulkner, remained concerned about what would happen should something go wrong with a young person working as a volunteer, and he wanted stronger guarantees in relation to the 1920 Act. I want to reassure him that if such an incident occurred, both the Health and Safety Executive and the Office of Rail and Road have confirmed that there would be a full investigation, taking account of the risks that the young person was exposed to and how they were controlled. The existing framework is fair and effective, which is why, unfortunately, the Government oppose the Bill.

[Lord Faulkner of Worcester (Lab)]

My Lords, I express my warmest thanks to the noble Lord, Lord Forsyth, for his kind and extremely generous remarks, which are not entirely justified, I am sure. It is very kind of him to say all those nice things. I also thank my noble friend Lady Sherlock for her generous comments.

The response from the Minister is all right as far as it goes—but there is a “but”. I accept absolutely the assurance that the ORR and the Health and Safety Executive have given that they have no intention of using the 1920 Act to prosecute in the case of young people on heritage railways. But the point that needs to be considered is what happens if something goes wrong that forces them to take a different view and may cause the provisions of that Act to apply. I have had a letter this week from the CEO of the Heritage Railway Association, Steve Oates, who said,

“I know of some railways who are not convinced. If it’s unlawful, it’s unlawful and the risk of prosecution or refusal of insurance cover, however remote, remains”.

That is also the view of the former legal adviser to the Department for Transport, Geoffrey Claydon CB, who wrote to me on Wednesday. He said:

“The Government are relying on the fact that HSE and ORR have said that they would not prosecute for any infringement of the 1920 Act in relation to young persons. But this ignores the possibility of private prosecutions, prosecutions by local authorities and insurers refusing to meet any claims on the basis that the law has not been followed”.


My Bill removes that element of doubt, and I urge the House to pass it this morning and send it to the other place.

In the meantime, I will take up with great pleasure the offer of the meeting that the Minister outlined; I hope that we are able to come to a satisfactory conclusion there. For now, I beg to move that the Bill do now pass.

Universal Credit

Viscount Younger of Leckie Excerpts

Tuesday 18th April 2023 Lords Chamber

[Baroness Thornhill]

To ask His Majesty’s Government what assessment they have made of the report by the Trussell Trust and Joseph Rowntree Foundation An Essentials Guarantee: Reforming Universal Credit to ensure we can all afford the essentials in hard times, published on 27 February; and in particular, the recommendation to introduce an ‘Essentials Guarantee’ to support those living in relative poverty.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, the department is aware of the report, but no formal assessment has been made. We have a long-term approach to tackling poverty and supporting people on lower incomes. The Government are increasing support for low-income and vulnerable households, with welfare expenditure forecast to rise from £251.8 billion in 2022-23 to £275.6 billion in 2023-24. As the Spring Statement made clear, the focus is on supporting workforce participation, helping people move into work and higher earnings.

[Baroness Thornhill (LD)]

I thank the Minister for his Answer. Of course, all increases will be welcome after years of freezes and below-inflation rises. However, the key issue is that universal credit levels today are based simply on the result of historical precedent and subsequent political assessments of what the Government can afford. Does the Minister agree that it is time for an objective, independent assessment based on evidence of real need and actual costs? Does he agree with the Rowntree analysis that the universal credit standard rate falls well below what is needed to afford basic essentials?

[Viscount Younger of Leckie (Con)]

We are certainly aware of the severe difficulties in some cases that households are experiencing. Our way of dealing with this—we are aware of the report, as I said earlier—is that, following the Autumn Statement announcement, measures directly aimed at helping households with cost of living pressures in the coming year 2023-24 are now better targeted to low-income households. Support provided from the £3,000 EPG and cost of living payment is on average more generous for households in the bottom four income deciles than our £2,500 cap alone.

[The Lord Bishop of Leeds]

My Lords, could the Minister remind the House what the point of the two-child limit is and what its impact is on the provision of essentials?

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

The House will be very aware of this subject, which does keep cropping up. The House will be aware that, since 6 April 2017, families have been able to claim support for up to two children and there may be further entitlement for other children if they were born before 6 April 2017 or if an exception applies. As the right reverend Prelate will know, there are a number of exceptions, including any child in a household who is adopted, any child living long-term with friends or family or who would otherwise be at risk of entering the care system.

[Baroness Stedman-Scott (Con)]

My Lords, can the Minister tell us what the Government are doing to help those having difficulty purchasing essentials due in some part to mandatory deductions from their universal credit?

[Viscount Younger of Leckie (Con)]

The Government recognise the importance of supporting claimants to manage their liabilities. It is true that some households get into quite severe debt. Under universal credit, there is a co-ordinated approach to deductions from benefits which supports claimants to manage their financial obligations. The primary aim of deductions from universal credit is to protect vulnerable claimants by providing a last-resort repayment method for arrears of essential services. The House might be aware that the Government have reduced the standard deduction cap from 40% to 25% of the standard allowance in recent years.

[Baroness Meacher (CB)]

My Lords, quite clearly, the universal credit level in recent years has not been sufficient to meet the cost of essentials. I would be grateful if the Minister could clarify what the Government now include as “essentials” to make sure that people can survive adequately on universal credit, without accessing food banks or starving.

[Viscount Younger of Leckie (Con)]

It is right to say that, although the Government are very aware of the severe issues at the moment, we do not look at every single essential item because we think that individuals and households have the right to spend how they like. The benefit cap, which is probably the gist of the noble Baroness’s question, provides a strong work incentive and fairness for hard-working tax-paying households, and it encourages people to move into work where possible. Let us not forget that households will still be able to receive benefits up to the value of gross earnings of around £26,500, or £31,300 in London.

[Baroness Sherlock (Lab)]

My Lords, of course households make their own choices, but the point of this report is that we all need certain things: somewhere to live, clothes to wear, food to eat and the ability to heat our homes. The suggestion is that there simply is not enough money in the system to do that. For most of the last decade, the Government have not uprated benefits by the rate of inflation, which results in a disconnect between the cost of living and what the social security system gives people to live on. Now, we are seeing poverty, destitution, homelessness and the use of food banks are all going up. Does the Minister think it would make a difference if benefits and tax credits were automatically uprated by inflation, rather than simply being down to what Ministers want to do that year?

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

The noble Baroness will be well aware that we have raised many benefits—particularly the benefit cap, by 10.1%, which we think is pretty generous. But we also acknowledge that it continues to be tough for households and businesses across the UK at the moment, which is why we continue to provide support with the cost of living, as I alluded to earlier. This totals £94 billion over the next two years, which is equivalent to an average of £3,300 per household this year and next year.

[Lord Forsyth of Drumlean (Con)]

My Lords, should we take that as a pledge that the Labour Party will uprate benefits by inflation, or is this just another example of the Opposition attacking the Government and having nothing to say?

[Viscount Younger of Leckie (Con)]

My noble friend makes a good point. I will add to what I said: we are still on track to deliver the Government’s pledge, with the OBR—it has to be the OBR—forecasting that inflation will reduce to 2.9% by the end of the year. In my newspaper today, I noticed that there are signs that food prices, which have been extraordinarily high, are beginning to slip, so I very much hope that this is going in the right direction.

[Lord Watts (Lab)]

Is it not correct that the Government have decided to increase pensions by 10%, for example, but not to do anything to change the system for families with more than two children? Is this not a direct choice of the Government? What are the implications for children living in those families?

[Viscount Younger of Leckie (Con)]

I think I made my position clear on the two-child limit, as I have over my three months in this role. Obviously, putting children first is extremely important, and that is why we have given huge support, as I said—a total of £94 billion over this year and the next—to help households and individuals. The focus on children is a very important point: that is key.

[Baroness Bennett of Manor Castle (GP)]

My Lords, the Centre for Health Economics found that the cost to the NHS of poverty in in-patient care alone was £4.8 billion. The Joseph Rowntree Foundation said that poverty was costing the NHS and social care, collectively, £28 billion a year. Putting aside the social and human cost, are the Government not being penny-wise and pound-foolish by not providing an essential guarantee, which would take a huge amount of pressure and cost off our schools, our NHS, our criminal justice system and so many other parts of public services?

[Viscount Younger of Leckie (Con)]

I made clear the Government’s position on essentials earlier, and I do not want to go over that again. On the noble Baroness’s point about poverty, I remind the House that in 2021-22 there were 1.7 million fewer people in absolute poverty after housing costs than in 2009-10, including 400,000 fewer children, 1 million fewer working-age adults and 200,000 fewer pensioners.

[Baroness Watkins of Tavistock (CB)]

My Lords, I will ask the Minister about the Healthy Start vouchers for the under-fours. They are really important and have moved from vouchers to a card system. Many people lost those benefits in the transfer system, because it was not simplified. Could the Minister look at how we ensure that benefits are simplified so that people can actually get what they are entitled to?

[Viscount Younger of Leckie (Con)]

The very fact that we have been rolling out a universal credit system over the last few years since 2013 comes to the essence of what we have been trying to do, which is to simplify the system. The noble Baroness makes a very good point about putting children first, as I said previously. One example of that is what we have done with free school meals.

[Baroness Browning (Con)]

My Lords, I declare a family interest in this Question. Over the next two years, people with long-term disabilities who currently receive employment and support allowance will be moved to universal credit, and there is already an acknowledgement that there will be some differences in the amount of money they will receive. What analysis has my noble friend the Minister and his department done to check whether that particular group—people with long-term, life-long disabilities—will not become part of the group we are discussing today, who cannot afford essentials?

[Viscount Younger of Leckie (Con)]

My noble friend makes an excellent point, because, apart from the fact that we spent around £67.9 billion last year on benefits to support disabled people and people with health conditions, we are doing more, as the Spring Budget said, to help those who are disabled, and particularly those who wish to go into work.

Occupational Pension Schemes (Administration, Investment, Charges and Governance) and Pensions Dashboards (Amendment) Regulations 2023

Viscount Younger of Leckie Excerpts

Tuesday 28th March 2023 Grand Committee

Moved by

[Viscount Younger of Leckie]

That the Grand Committee do consider the Occupational Pension Schemes (Administration, Investment, Charges and Governance) and Pensions Dashboards (Amendment) Regulations 2023.

Relevant document: 30th Report by the Secondary Legislation Scrutiny Committee. Special attention drawn to the instrument.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Viscount Younger of Leckie) (Con)]

My Lords, these draft regulations were laid before the House on 30 January. Good investments are central to well-run pension schemes and decisions made by the trustees of those schemes have a significant impact on growing savers’ pension pots. Subject to approval, these regulations will help occupational defined contribution pension schemes—the so-called DC schemes—make greater use of performance-based fees, which are payable to investment fund managers when they deliver healthy returns on their investments. This will put DC schemes on an even playing field with other institutional investors such as insurers, investment companies, defined benefit pension schemes and overseas investors when it comes to accessing the same range of investment choices that come with fees.

The regulations also place new duties on the trustees of most DC schemes to disclose additional information about their investments. They are designed to ensure that trustees reflect on the investment decisions they make, as part of their ongoing fiduciary duty to create a diversified investment strategy that delivers for savers. These regulations continue the Government’s commitment to ensure that millions of hard-working savers in occupational DC pension schemes are receiving the best possible value. I am satisfied that these regulations are compatible with the European Convention on Human Rights.

Let me take a step back and put this in a bit of context. Over the past decade, there has been a significant increase in the use of illiquid asset classes such as infrastructure, real estate and private equity within institutional investment portfolios globally. Meanwhile, DC schemes in the UK have relied on public markets to generate returns and diversify portfolio risk. Pension scheme trustees’ primary focus must always be on delivering an appropriate return to members. But by investing almost wholly in liquid investments such as publicly listed equity and debt, pension savers can miss out on the potential to achieve better returns from being invested for the long term. This is a particular concern in DC schemes, where decisions which reduce long-term returns will affect member incomes in retirement.

Currently, less than 10% of UK DC investments are estimated to be in illiquid assets. The Pension Charges Survey 2020 evidenced that two-thirds of DC schemes had no direct investment in illiquid assets within their default fund arrangements. This is at a time when the UK DC market is growing in scale and in ambition. DC pension schemes currently hold over £500 billion of assets, a figure that is set to double to £1 trillion by 2030. The Australian DC market, in comparison, invests somewhere in the region of 20% of assets, on average. This includes investment in major UK assets such as the King’s Cross redevelopment project and Manchester, Stansted and East Midlands airports.

The DWP has run several consultations to understand the reasons why DC schemes have largely avoided investing in private markets. The feedback received highlighted concerns that performance fees, typically associated with illiquid assets and levied by fund managers, would put schemes at risk of breaching the existing 75 basis-point regulatory charge cap. While the charge cap has successfully reduced costs, it has arguably led to more focus on costs than on the returns that different asset classes can provide. In January, the Minister for Pensions launched a consultation on proposals for a value-for-money framework, which aims to address this. These regulations continue that value-for-money theme. The essence of what we are trying to do here is to make it easier for DC schemes to access a broader range of investment opportunities that could generate higher return outcomes.

I will now say a bit more about the issues highlighted during the consultation. We listened carefully to earlier concerns raised during the consultation that this change to the cap could weaken existing saver protections, and we have acted on this feedback. Regulation 2 of this instrument sets out the criteria that “specified performance-based fees” must meet to be considered outside the charge cap. These include a requirement that fees must be paid only once returns to the scheme have exceeded a pre-agreed rate or amount agreed by trustees and the fund manager prior to investment.

The criteria include additional safeguards that trustees must also agree in advance, and that performance-based fee structures include mechanisms to guard against excessive risk-taking or fund managers being paid repeatedly for the same level of performance. The regulations provide for the use of high-water marks and fee caps, for instance, which are commonly applied in the investment market to give investors this extra level of protection.

The regulations are purposefully silent on what rate of returns or type of fee structure mechanisms must be applied. This is to allow trustees and fund managers to develop and negotiate terms that are in the best interests of savers. Provided that trustees and their advisers apply these terms, such performance fees will not erode retirement pots because they should arise only when savers have received a favourable return on their investments.

The DWP received positive responses to this change, particularly from larger DC pension schemes which said that the ability to remove these fees from their charge cap calculations will make it easier for them to consider new asset classes. The DWP has published statutory guidance to assist trustees with determining the criteria for performance-based fees that can be considered outside the charge cap. The guidance is very clear that trustees should seek professional advice on their investments where performance-based fees are prevalent.

To ensure transparency to members, performance-based fees incurred are required to be disclosed, and the value to members assessed, in the scheme’s annual chair’s statement. To be clear, these changes place no obligation on schemes to agree to investments that come with performance-based fee arrangements if this is not in their members’ best interest.

With any investment there is no guarantee of higher returns. In accordance with existing legal requirements, trustees must invest in a manner calculated to ensure security, liquidity and profitability, and have regard to the need to diversify investments. This provides that trustees are guided on assessing the risk of portfolios and, with this, managing the risk of lower as well as higher returns.

Regulation 3 of this instrument sets out new duties on DC trustees to include an explanation of their policy on investing in illiquid assets in their statement of investment principles. These explanatory statements, covered in the regulations, include whether investments in illiquid assets are held, the types of illiquid assets and why this policy is of advantage to members. Where investments will not include illiquid assets, trustees are expected to give reasons why, along with whether they have plans to invest in the future.

While some of our bigger DC schemes already provide this information, this is not the approach taken by all. Some master trust schemes also disclose information on the asset classes in which the scheme holds investments, but this is not commonplace and most members are not in receipt of this information. The regulations address this by placing a duty on trustees to disclose the percentage of different classes of assets held in the scheme’s default funds. Asset classes covering liquid and illiquid are prescribed in the regulations.

Greater understanding and accountability of the investment decisions made by trustees on behalf of their members will be key to improving value for members across all schemes. The industry’s response to these new duties was that the regulatory burden is reasonable and proportionate while still retaining the wider benefits these changes will bring. It is worth noting that asset allocation disclosure is already mandatory for Australian pension schemes.

The DWP will work with the Pensions Regulator to ensure that trustees are supported with the new duties. Information contained in chairs’ statements and statements of investment principles are monitored by the Pensions Regulator as part of its wider strategy on regulatory compliance.

We will also look closely to monitor the impact of our changes on investment performance. In addition, Regulation 7 of these regulations requires that a review of these regulatory provisions must be undertaken and published within five years of the regulations coming into force.

These regulations also correct a drafting error at cohort 1(b) of the staging profile in Part 1 of Schedule 2 to the Pensions Dashboards Regulations 2022. The error relates to the staging deadline for master trust schemes that provide money-purchase benefits only. While we are not aware of any schemes being affected by this minor error, it is none the less appropriate to amend the Pensions Dashboards Regulations 2022 to resolve this issue as soon as practically possible. With that, I commend this instrument to the Committee and beg to move.

[Lord Sharkey (LD)]

My Lords, as the Minister has said, this statutory instrument contains seven regulations. The first is to do with timings and commencement. We have no comment on this, except to ask why there will be a delay of 21 days in bringing the correcting dashboard regulation into effect.

Regulation 2 excludes specified performance-based fees from the charge cap, and the Explanatory Memorandum sets out the rationale. In paragraph 10.5, the Explanatory Memorandum speaks of

“sufficient safeguards for schemes and members to protect them from excessive charges”

consequent upon this regulation. This is clearly a critical area. The possibility of excessive charges is an obvious concern and was highlighted in the recent SLSC report on this instrument. Can the Minister set out what these safeguards are and on what basis and by whom they were judged to be satisfactory?

Regulation 3 will require schemes to include an explanation of their policy about investing in illiquid assets in their default statement of investment principles, as the Minister said. The taxonomy of asset classes is explained in detail in paragraph 25 of the statutory guidance and is given in Regulation 4(5). This has eight categories and does not attempt to define “illiquid”. In fact, I could find nothing in the instrument and its accompanying documents that approaches a definition. Of course, it may be that I have overlooked it somewhere; I would be grateful if the Minister could guide me on the matter, point to a definition and perhaps explain how it was arrived it and by whom. The chief purpose of this instrument is to remove barriers to investments in illiquid assets, and it would be rather odd if there were no criteria for assessing whether an asset was to be counted as illiquid.

Regulation 4 also requires trustees or managers to report on specified performance-based fees incurred by the scheme.

Regulation 5 requires such disclosures to be made public. This all seems very sensible, but nowhere is there any sense of an upper bound on these specified performance-based fees. In its report, the SLSC made this point.

Since the EM was produced, the DWP has published extensive statutory guidance—22 pages—which states that the rate or amount of these fees is for the trustees and managers of the scheme with support from their advisers and their fund manager to agree based on the nature of the investment proposed. At first reading, this seems a bit like an invitation to a fleecing. The Government were happy to install the charge cap in the first place. What consideration was given to capping these special performance-based fees? Paragraph 76 of the statutory guidance, “Volatility of returns and performance based fees”, states:

“The 2023 Regulations require that specified performance-based fees structures must include mechanisms that offer protections to pension schemes and their members. This is so fund managers are not taking excessive risk or being paid twice for the same level of performance or for performance which turns out to be impermanent.”


I cannot see where that is spelled out in the instrument as a must, and I would be grateful for the Minister’s help in clarifying the matter.

Regulation 6 corrects an error in the pensions dashboard, and we have no comment on that.

Regulation 7 provides for a review of the impact of Regulations 2 to 5 every five years, which seems sensible. We are particularly interested in seeing whether the modification of the charge gap and the disclosure requirements lead to an increase in investment in illiquid assets. The SLSC made this point in its formal recommendation to the House:

“As the fee changes made by these Regulations aim to encourage pension schemes to increase their investment in illiquid assets, the House may wish to ask the Minister how schemes’ subsequent exposure to an increased risk of lower, as well as higher, returns is to be monitored and how trustees are to be properly guided on assessing the risks to the portfolio.”


Those are very good questions, and I would grateful if the Minister could address them.

--- Later in debate ---

However, that is only advice. Can the Minister tell the Committee whether he is confident that this will not erode the protection for savers that was provided by the introduction of the charge cap in the first place? If he is confident that trustees can be relied on to make judgments of this complexity now, why was the charge cap needed in the first place? If they cannot be relied on, why is it safe to exclude these fees from the cap? I look forward to the Minister’s reply.

[Viscount Younger of Leckie (Con)]

My Lords, I thank the Committee for its input and for the lucid remarks made by the three Peers who spoke. I also thank noble Lords for their interest in this brief debate; I realise that all three Peers have taken a great interest in this issue in the past and are experts at different levels in this sphere. If I may say so, I also thank them for their general support for these regulations. However, I am aware that a number of quite specific and detailed questions have been asked, and I will, as ever, do my best to answer them.

I will start by answering the question about the definition of “illiquid” raised by the noble Lord, Lord Sharkey. Illiquid assets are defined in Regulation 3(2)(d) as those

“which cannot easily or quickly be sold or exchanged for cash”.

I hope that gives him some comfort.

The noble Baroness, Lady Drake, asked about the intention to mandate pension schemes in terms of how they must invest. Throughout the development of these regulations my department, DWP, has been clear that investment decisions, including whether illiquid assets are suitable investments for schemes, remain a matter for trustees, in line with their fiduciary duty to manage risk and reward in their members’ best interests. I alluded to that in my opening speech.

The noble Lord, Lord Sharkey, was the first to delve into the detail of the charging. I hope that I can answer all his questions and the follow-up questions from the noble Baronesses, Lady Drake and Lady Sherlock. The first question was: why amend the charge cap, which has been successful in ensuring that savers are not charged high fees? The charge cap remains an important protector. Our reform is intended to give pension schemes the opportunity to access a wider range of those investment opportunities that can come with fees. We believe that, where higher fees also bring higher total returns, the overall effect will be to grow pension pots—which is surely in the interests of savers.

The noble Lord, Lord Sharkey, further asked how one prevents fund managers taking excessive risk or, as he put it, being paid twice for the same level of performance. To come within the definition of specified performance-based fees in the regulations, a fee structure must be designed between the fund manager and the scheme trustees to mitigate the effects of short-term fluctuations in the investment performance or value of the managed investments. Different mechanisms can be in place within a fee structure that protects from excessive risk or repeated payment, such as so-called high-water marks, whole fund structures, clawback mechanisms, escrows and caps. Statutory guidance explains these mechanisms and trustees are encouraged to seek professional advice on them before they agree to invest. I will come on later to answer the question about protections for trustees. In fact, it was about guidance for trustees, which I will come back to.

The noble Lord, Lord Sharkey, asked further about how performance-based fees might be measured and apportioned fairly, which is linked to the question raised by the noble Baroness, Lady Sherlock, about smaller schemes. We recognise that this is a challenge, and trustees should work with fund managers to consider how performance-based fees should be charged to ensure fair allocation for members. This is particularly important in open-ended funds, where members can enter or exit at various points and may not always benefit from periods in the investment cycle where there is positive performance. Trustees are thus encouraged to review industry guides published in 2022, which provide useful help on member fairness and other challenges for DC pension scheme decision-makers when investing, or considering investing, in illiquid assets.

The noble Lord, Lord Sharkey, asked how the regulations ensure that members are protected against paying high fees for moderate performance, which is an interesting point. The regulations are clear that, for performance-based fees to fall outside the charge cap, scheme trustees must agree with fund managers methods to mitigate the risk of fees increasing due to market volatility and the time period by which any fee will be measured. To ensure transparency to members, payments of performance-based fees are required to be disclosed and the value to members assessed in the scheme’s annual chair’s statement, as I mentioned in my opening speech.

The noble Baronesses, Lady Drake and Lady Sherlock, asked an important question about how the Government will ensure that savers close to retirement or who exit a scheme do not pay higher fees without additional returns from illiquid investments. As I said before about another matter, this is a challenge. DWP statutory guidance sets out that trustees should work with fund managers to consider how performance-based fees should be charged to ensure fair allocation for members. As mentioned earlier, trustees are encouraged to review industry guides published in 2022, which provide useful help in this respect.

The noble Baroness, Lady Drake, asked what the value would be for members in terms of how it is assessed, and how it could be altered in the light of new risks arising from these regulations. Trustees who pay specified performance-based fees will be required to assess the extent to which these represent good value for members. This builds on existing requirements on all DC schemes to assess values for all costs and charges for members. Schemes with under £100 million in assets will not be required to include this as part of their extended value for member comparison against larger schemes. This may help to answer a question raised by the noble Baroness, Lady Sherlock. Moving forward, it is proposed that specified performance-based fees will be included in the costs and charges metric for the new value-for-money framework.

The noble Baroness, Lady Drake, asked further what new initiatives the Government expect the FCA to take up to regulate for fairness and consumer duty in all the private markets that these regulations cover, which is an important question. Existing FCA duties to authorise investment providers and vehicles, and regulate private markets, will apply. The Government expect trustees and their advisers to seek detailed confirmation—

--- Later in debate ---

[Viscount Younger of Leckie (Con)]

My Lords, as I was saying, I will conclude my remarks, although there are a number of questions that I still wish to address.

The first was from the noble Baroness, Lady Drake, concerning what new initiatives the Government expect the FCA to take on to regulate for fairness and consumer duty in all the private markets that these regulations cover. I started to answer this, but I will cover it again. The FCA’s existing duties to authorise investment providers and vehicles and regulate private markets will apply. The Government expect trustees and their advisers to seek detailed confirmation from fund managers as to how a proposed product complies with the charge cap regulations, including in relation to any specified performance-based fees, before assessing whether it is in the best interests of the scheme to invest.

I now turn to the question asked by the noble Baroness, Lady Sherlock, on guidance for trustees, which was a good point. It will be for trustees of pension schemes, considering professional advice, to determine their allocations to illiquid assets subject to their cash-flow obligations and subject to their duty to act in the best interests of their members. Many pension schemes are comfortable with the notion of segmenting their portfolios into a liquid component and an illiquid component. This allows separation of the portion of their assets that will not be needed for liquidity purposes for many years. The Pensions Regulator’s code of practice contains guidance for trustees on their investment approach. This includes how they should evaluate performance, and risk and reward profiles.

The noble Baroness, Lady Drake, asked why we should legislate so soon after the 2021 regulations came in, which gave schemes the option to smooth over multiple years of the presence of performance fees with the charge cap. Feedback from the industry suggests that changes introduced in 2021 would go only so far and were unlikely to move pension schemes away from a focus on cost to one of value, which is one of the key principles of what we are doing in these regulations. We want trustees to have the confidence to invest in illiquid assets that come with fees where it is in their members’ best interests, safe in the knowledge that, in targeting higher returns, they will not fall foul of this charge cap.

The noble Baroness, Lady Sherlock, asked about other challenges that DC schemes face when considering investment in illiquid assets. It is fair to say that our change removes a regulatory barrier. At the same time, we recognise there are other non-regulatory challenges for DC schemes, such as those relating to lack of scale, liquidity and regular pricing. We continue to discuss these with the industry and believe that, with government encouragement, it will be incentivised to come up with solutions to meet those particular challenges.

The noble Lord, Lord Sharkey, asked why there are 21 days before the dashboard regulations are brought into effect. He might know this, but for the benefit of the Committee, this is commensurate with Regulation 1 of the Pensions Dashboard Regulations 2022.

The noble Baroness, Lady Sherlock, asked a number of questions about the timing of dashboards legislation. We are considering legislative options to amend the connection deadlines and will update Parliament, if this is of help, before the Summer Recess. I hope that is not too far away.

The noble Baroness also asked whether the dashboards will ever happen. I was perhaps expecting that question, so I will use this opportunity to say that pensions dashboards will be a vital tool to help savers plan for their retirement, and the Government remain thoroughly committed to their delivery. I know that this commitment is shared across the pensions industry, but it is vital that the foundation upon which the dashboards ecosystem is built is safe, secure and works for both the pensions industry and individuals searching for their pensions. As the noble Baroness knows, more will be coming out on this shortly and I have also pledged to update Members when we think it is right. This could be in advance of the summer, as I think I have said in the past.

Illiquid investments have the potential to bring strong returns, and exempting specified performance-based fees from the charge cap will help to remove a barrier to investment in this area. Placing new duties on trustees to disclose their illiquid investment strategy and their asset classes will also ensure ongoing consideration of a diverse range of assets as part of a more balanced portfolio. Considering the financial challenges that many are facing, it is vital that decision-makers are continually reviewing investment propositions that can deliver the best possible outcomes for the millions of savers in occupational pension schemes. With that, I commend this instrument to the Committee.

[Baroness Sherlock (Lab)]

I thank the Minister for taking the time to answer those questions. I just want to ask him to explain the definition of an illiquid asset a bit more. He is right to point to Regulation 3(2)(d), which says that they are

“assets of a type which cannot easily or quickly be sold or exchanged for cash”.

I suppose most things can be sold or exchanged for cash reasonably quickly if you do not mind how much you get for them at a fire sale. I have two questions. If that means

“cannot easily or quickly be sold or exchanged for cash”

at a reasonable price, or at least at the price one had paid for them, would that apply to UK gilts last autumn? Secondly, the reason this matters is that there is a lot of money to be made from this definition. Where that is the case, the definition is likely to end up being the subject of some dispute. What is the mechanism to resolve this? Whose decision is it? Does someone just get to do it? Will the regulator push them, or will it end up in court? How will this be litigated?

[Viscount Younger of Leckie (Con)]

I hope I can be of some help. I think I should write a letter on this quite detailed question, as it takes us further from the question originally asked by the noble Lord, Lord Sharkey. Part of the answer could be—I will need to follow up with a letter—that we do not want to prescribe our approach too much. As I mentioned earlier, it will be very much up to the trustees and pension funds to decide for themselves. It might not be right to have too much prescription here, but I will go no further than that. The noble Baroness, Lady Drake, may know more than me, as one can go only so far with a definition. I will write to clarify further what we mean.

[Baroness Drake (Lab)]

Trustees cannot make investment decisions now without taking advice. These regulations may be adding a bit of extra detail, but that principle is already there. The department and regulators can mandate trustees to provide more information, and transparency is a great thing; I do not demur from that. The Minister has identified all the other things that need to be done and discussions that are going on.

However, there is an issue about which there is still not a clear answer. Organisations such as the PLSA, which is a trade body representing pension schemes and their administrators, do not think that this is the correct thing to do—and that is not the only one. I do understand why, in the absence of evidence and the presence of many other significant barriers, the Government have chosen to weaken a fundamental consumer protection in the as-yet-unverified belief that it will be a major driver of increased investment in illiquid assets.

That is the bit I cannot find anywhere. I can find assertions of views but the reasoning is, I am afraid, quite weak. What worries me is that this will start encroaching on what was such a fundamental protection. Most schemes come in way below 0.75%—there is so much headroom—and we know that leverage can come from the scale of the scheme master trusts that are coming. So why are you doing this when you cannot yet have confidence—because you have not tested it —that it will actually benefit the saver?

[Viscount Younger of Leckie (Con)]

I thank the noble Baroness for her further question. I will add some further detailed comments to the letter that I am going to write to the noble Baroness, Lady Sherlock, but let me say this: I am aware of the natural scepticism of the noble Baroness, Lady Drake, for what we are doing in bringing in performance-based fees. Her question is one that we have asked ourselves. I clearly have not managed to convince her about the consumer protections that we believe are there. I spent some time spelling out what those protections are, including the role of trustees, what is expected of trustees, the guidance for trustees and the role of the FCA and the regulator in all this. There is a lot that I would prefer to put down in writing. I am not sure whether I am going to be able to convince the noble Baroness but I hope that I have given her some comfort that I will at least try my best.

Motion agreed.