Oral Answers to Questions
Gordon Henderson Excerpts(3 weeks ago)
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Mims Davies
I am disappointed not to be enough of a bragger in this House, but I am very pleased that we are taking time to make sure that the tailored support is correct. We are working around fit notes and occupational health. We are also listening to those who are deaf and hard of hearing, who make up 36% of the total Access to Work expenditure, and I will be bringing more to the House on that matter. We are absolutely focused on improving this, with online 24/7 applications for Access to Work. On the other points the hon. Lady makes, if she listens to the BBC “Access All” podcast, she will hear me say that we are very disappointed about that report. We continue to work very hard for disabled people and we will be doing all we can to make sure they are listened to—unlike her not listening to a word I said just now.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
The Minister for Employment (Jo Churchill)
I thank my hon. Friend for his question. Fantastically, as the timing would have it, the team in his constituency are today holding a jobs fair at Swale leisure centre, with the support of 48 local employers. The local radio station is broadcasting live from the event to promote opportunities, and the DWP is working hard day in, day out to get people into work.
Gordon Henderson
I thank my hon. Friend for that reply, but does she agree that it is also important to ensure that people who are unemployed have the education and skills training needed to take the jobs on offer? Much of the unemployment in my constituency is on the Isle of Sheppey. With that in mind, will she join me in welcoming the radical shake-up of secondary education now taking place on the island, and in addition the extension of Sheppey College to provide additional post-16 skill training courses, which is being part-funded by the Government’s levelling-up fund?
Jo Churchill
I join my hon. Friend in that, because any way we can help lift skills across the piece, such as through boot camps and workplace academy programmes, to help people into high-skill, well-paid jobs, particularly in areas where perhaps that has not been the norm, is to be welcomed and congratulated.
Oral Answers to Questions
Gordon Henderson Excerpts(2 months, 2 weeks ago)
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Jo Churchill
That is why we have WorkWell, the back to work plan, and the occupational health group, led by Dame Carol Black, looking into fit note reform. It is also why we have youth employment coaches and the youth hubs. We are working to ensure that there is the right attenuated support, including kickstart, the sector-based work academy programme and boot camps. Only last week, I met Steph, who is 27, 10 years out of work and grateful for the help that she has had.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
The Secretary of State for Work and Pensions (Mel Stride)
Jobcentre Plus provides a variety of different support to encourage and support people into work, including training and one-to-one, face-to-face counselling by work coaches.
Gordon Henderson
In February, there were 615 claimants aged 18 to 24 out of work in Sittingbourne and Sheppey. Does my right hon. Friend agree that it is important that schools and businesses work together to ensure that young people have the qualifications and skills they need to progress into work once they finish full-time education?
Mel Stride
I could not agree more with my hon. Friend. It is exactly why we have youth hubs providing advice and support on not just getting into work but other important matters to young people, such as housing, their health and debt management.
Jo Churchill
May I make it clear that that was just scaremongering? The DWP has not changed its policy. There are merely improvements being made to the signposting slip, so that we comply with our obligations under the GDPR. We continue to provide guidance to customers, signposting them to emergency support, as is right.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Mel Stride
I thank my hon. Friend for raising this matter. I obviously cannot comment on an individual case. However, I am very happy to look closely into the matter he has raised, and either I or a relevant Minister will be happy to meet him.
Oral Answers to Questions
Gordon Henderson Excerpts(2 years, 11 months ago)
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Will Quince
The first thing I would say is that the Government have always been clear that the £20 increase to universal credit was a temporary measure to support households most affected by the economic shock of covid-19, and that decisions on whether to extend support would be made as the economic and health picture became clearer. There have been significant positive developments in the public health situation since the increase was first announced, with the vaccine roll-out now significantly gathering pace. I say to the right hon. Gentleman that any look at measures of that kind in terms of forecasting is purely speculative, but it is our expectation that this additional financial support and other direct covid support will end once our economy has opened.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Antony Higginbotham (Burnley) (Con)
The Parliamentary Under-Secretary of State for Work and Pensions (Mims Davies)
We have recruited thousands of new work coaches and expanded our jobcentre network through our plan for jobs. That, alongside our successful vaccine roll-out, means that we are seeing more claimants face-to-face in a covid-secure way. We are also delivering additional provision, including job-finding support, job entry targeted support, our £2 billion kickstart scheme and our restart scheme. We have also opened new Department for Work and Pensions youth hubs, expanded the sector-based work academy programme and increased our flexible support fund. Thanks to our work coaches and the plan for jobs, they now have more tools than ever to support claimants back into work.
Gordon Henderson [V]
I welcome the Minister’s response, but my two local jobcentres are seeing a number of people fail to turn up for their appointments with work coaches. That appears to be driven by the lack of sanctions because of the pandemic, so what is my hon. Friend doing to make it easier for jobcentres to use sanctions?
Mims Davies
I am proud that our jobcentres have remained open throughout the pandemic to support the most vulnerable customers. Claimant commitments have continued to be tailored to individual circumstances by work coaches since July last year, meaning that sanctions remain at record low levels as we fully consider individual circumstances before deciding whether to apply a sanction.
Universal Credit
Gordon Henderson Excerpts(5 years, 7 months ago)
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Gordon Henderson (Sittingbourne and Sheppey) (Con)
My constituency has been operating the universal credit full service since January this year, so I like to think that I know something about what is being delivered at a grassroots level and the effect it is having on my constituents who claim it.
Let me begin by saying that UC is not perfect, but nor is any benefits system that we have ever had in this country. UC replaced a legacy system that was deeply flawed and offered no incentive for people to work. It is true to say that despite a number of improvements that have been made to UC since its roll-out started, it still has a number of faults, which I will come to later. However, it is certainly not the disaster caricatured by right hon. and hon. Members on the Opposition Benches. For some time, the Labour party has been busy whipping up opposition to UC, criticising it at every opportunity. These continual criticisms are not only a metaphorical two-fingered insult to the incredibly hard-working staff in my local DWP offices—they are delivering an excellent service to my constituents—but are misleading the public and frightening some very vulnerable people.
Of course, the introduction of any system can be problematic. I, too, had concerns about how it would affect people in my area when it was rolled out, so I visited my local jobcentres and sat down with the staff to go through their plans with them to ensure that none of the claimants moving from the legacy system to UC would be disadvantaged. I was impressed by the commitment and enthusiasm of the staff and was satisfied that they would be prioritising the most vulnerable claimants.
At the time, I urged staff to contact me should they come into contact with anybody they were unable to help because of the system, and I promised to take up those problems with DWP Ministers. No such problems have been referred to me by the jobcentres.
Alex Chalk (Cheltenham) (Con)
I went along to the Jobcentre Plus in Cheltenham and I had the same experience as my hon. Friend. Staff were enthusiastic about the benefits that it was creating, and crucially, people in work were, on average, receiving an additional £600 a year. Does he not agree that that important factor should be weighed in this conversation?
Gordon Henderson
Yes, that is an important factor. I also point out that Opposition Members often quote concerns raised by citizens advice bureaux about the impact of UC on local people. Well, I visited my local citizens advice bureaux and suggested that they work closely with my office to identify people with a problem, so that they could be helped. I did the same thing with a local church group that contacted me expressing concerns about UC. In addition, I used social media to ask people to contact me if they were facing difficulties because of UC, or if they knew of somebody facing difficulties. I have had only a handful of people referred to me since we went live in January and all the problems raised were resolved quickly by my staff.
The Opposition have also made much of the use of food banks, and I want to touch on that issue. My first experience of food banks in my constituency was when our local steelworks closed down and some workers were left without any money to buy food for their families. There was a long delay in getting those people the financial help that they needed and to which they were entitled. That delay did not arise under UC, but under the legacy benefit system. We hear repeated claims from Opposition Members that the transition to UC has forced more people to use food banks, so to check their claims, I went to visit a food bank in my constituency last week to find out for myself. [Interruption.] The volunteers who run that food bank are wonderful people for whom I have the utmost respect, as are the volunteers in the other food banks in my constituency.
Heidi Allen
I hope that my friends in the Opposition will forgive me for saying this, but everybody in the Chamber genuinely wants to get UC right, and I would rather that Opposition Members did not belittle my hon. Friend, who is genuinely trying to do his best to find out what is happening in his constituency.
Gordon Henderson
As my hon. Friend will understand, the claim is being made that some people who use those food banks were forced to do so because of the difficulties faced when claiming UC. When I pressed them about those difficulties, they said that one was the requirement for claims to be made online, which was also raised by the shadow Secretary of State. Some people claimed that they either were not computer literate or did not have access to a computer.
Gordon Henderson
I will not give way again because I do not have time. I pointed out that such people could visit the local jobcentre, where they would be able to use one of the bank of computers installed there. In addition, they would be helped to navigate the system by a member of staff or a volunteer from one of the voluntary organisations that are now based in the jobcentre.
Of course, there were people who faced other difficulties, so I asked the food bank to provide me with details of those people so that I could get somebody to contact them to investigate and take up their cases with the DWP. When we received that information, we discovered that many of the people were living in a local hostel that provides temporary accommodation for homeless adults. A member of my staff contacted the people concerned and it soon became obvious that some of them suffered from underlying problems that affected their ability to manage the transition to UC, and that forced them into using the food bank. Those problems included drug addiction, alcoholism, mental health problems, an inability to manage money, or plain fecklessness. Automatically blaming their problems on UC, which is what the Opposition appear to be doing, is doing those people no favours. If somehow the delivery of UC could be made perfect overnight, that would not make people any less dependent on drugs or alcohol. It would not solve their mental health problems. It would not help them to manage their money better and it would not make them less feckless. Of course, we have to do something to help those people, but the truth is that they would still have the same problems, whatever benefits system was put in place.
Luckily, such people are in the minority. However, there are some people who have genuine concerns, which leads me nicely on to the faults in the system that I mentioned at the beginning of my speech. My No. 1 concern is the five weeks’ delay in the receipt of the first benefit payment made under UC. I urge the Department to look at whether there is a way in which that can be phased in over a longer period. Of course, people can get an advance payment, but some people are simply unable to manage that money well enough for it to last five weeks, so again, I ask for that to be looked at. I know of claimants, by the way, who spend the money in the first week and then have to resort to food banks for the remaining weeks.
The second problem is the repayment requirement for an advance payment. That is something else I would like the Department to look at to see whether it could be done over a two-year, rather than a one-year, period. The third problem is that under the legacy system, claimants were provided with a letter confirming what benefits they were receiving. Under UC, that is not provided and I would like that to be changed if possible. The final thing, which I have taken up with the NHS, is that there is no box for UC on the back of prescriptions, and I would like that to change as well.
Oral Answers to Questions
Gordon Henderson Excerpts(6 years, 3 months ago)
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Alok Sharma
I am happy to have a discussion with the hon. Gentleman on this point. All the policies we have put forward are based on being as fair as we can be to all recipients.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Alok Sharma
Of course I join my hon. Friend in congratulating the staff at Sittingbourne and Sheerness jobcentres. When I have spoken to work coaches in the visits I have made, they are incredibly enthused: they tell me this is the first time they are able to do what they want to do, which is help people into work.
Oral Answers to Questions
Gordon Henderson Excerpts(7 years, 6 months ago)
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Damian Green
The IFS’s projections are for the IFS to explain, but I can give the hon. Gentleman the facts: the proportion of people living in relative poverty is near its lowest level for more than 30 years; and, since 2010, 300,000 fewer people, 100,000 fewer working-age adults, and 100,000 fewer children are in poverty. The whole House should welcome those figures.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Penny Mordaunt
I point my hon. Friend towards the joint Department of Health and DWP Green Paper that we have just published. It represents a key opportunity. If we want to, it is early enough in this Parliament to reform things such as the work capability assessment to ensure that support—whether from our services or from healthcare—gets to the people who need it.
Allied Steel and Wire (Pensions)
Gordon Henderson Excerpts(9 years, 3 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Mr Philip Hollobone (in the Chair)
Kicking off this morning’s proceedings on the important topic of Allied Steel and Wire pensions is Mr Gordon Henderson.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Thank you, Mr Hollobone—it is a real delight to see such a cheery face in the Chair for a debate so early in the morning.
I want to raise an issue that has been of concern to a group of my constituents for the past 13 years. That group comprises ex-ASW workers who lost their pensions when the company went into receivership in July 2002 and was declared insolvent the following year. Of course, it was not just ASW workers in Cardiff and Sheerness who faced the loss of their pensions in that era, when a large number of final salary pension schemes were wound up. Indeed, 40,000 people were affected at the time, and many more have been affected since. However, I would like to concentrate most of my remarks on members of the ASW pension plan or the ASW Sheerness Steel Group pension fund, which were defined-benefit payment schemes based on final salary and length of service.
Many of those workers lived in my constituency, and they were treated disgracefully. Their story really starts following the raid on the Mirror pension scheme by Robert Maxwell, which led to the introduction of legislation in 1997 with the intention of ensuring that all company pension schemes were correctly funded and protected. The benchmark used was the minimum funding requirement. Pension schemes had to be funded to a level that met the MFR. Therefore, a scheme funded to 100% of the MFR would be properly funded and safe—or so most people believed. However, nothing was further from the truth. In fact, should a scheme funded at 100% of the MFR have been wound up, it would have bought only about 60% of the expected benefits.
The problem was that there was nothing in the legislation to force the higher levels of funding needed to deliver the expected pensions. The MFR was heavily criticised by the parliamentary ombudsman in the report “Trusting in the pensions promise”. The reality was that companies were penalised through increased taxation if their pension schemes were funded at more than 10% above the MFR. Pension funds considered able to finance full pensions were deemed to be overfunded. That led many companies to introduce pensions holidays during the 1990s. That included ASW, whose pension scheme was very healthy, standing at about 130% of the MFR. To avoid taxation, the company introduced a pensions holiday for several years, during which it made no contributions to its pension fund. It eventually reduced the scheme to just over 100% of the MFR.
When the ASW pension plan and the Sheerness Steel Group pension fund were terminated in 2002 and started to be wound up, it was found that there were insufficient assets to meet the schemes’ liabilities. Under the legislation in place at the time, if there were insufficient assets when a scheme was wound up, the employer was required to make up the difference, but an insolvent company such as ASW might not be able to do that. In such cases, those assets that were available had to be distributed in accordance with a statutory priority order—a provision introduced in 1997 under the Pensions Act 1995. Normally, that ensured that existing pensioners got all their due pension, but active and deferred scheme members might get only a small proportion of their entitlement. The proportion of their promised pension to which ASW workers were entitled was about 40%.
As hon. Members can imagine, that was a huge shock to the ASW workers in my constituency, particularly because, before the Sheerness Steel Group pension fund was wound up, the Government had assured them and many other workers that their pensions were safe. One Government booklet on occupational pensions posed the following question:
“How do I know my money is safe?”
It obligingly gave the following answer:
“Occupational pension schemes in the private sector are set up under trust law. The trustees must run the scheme in the interests of the members and in line with…trust law…the trust deed (a legal document) and rules; and…specific laws about pensions.”
It went on to explain:
“Although your employer pays into the scheme and may be a trustee, the assets of the pension scheme belong to the scheme, not to your employer. As a scheme member, you are protected by a number of laws designed to make sure schemes are run properly and to make sure funds are used properly.”
Like workers in many other companies, ASW pensioners believed what they were told. If they had not been given those assurances, they might have transferred to a different scheme, although it is worth noting that independent financial advisers were told by the pension regulator at the time not to transfer people out of “safe” final salary schemes.
Helped by my predecessor in Sittingbourne and Sheppey, Derek Wyatt, and by my right hon. Friend the Member for Thornbury and Yate (Steve Webb), who is now the Pensions Minister, ASW made a complaint to the parliamentary ombudsman, whose subsequent report stated that the general public had every reason to believe that their occupational pensions were safe, because of statements repeatedly made by the Department for Work and Pensions and because of other Government actions.
The then Government rejected that report and took no action. The Pensions Action Group initiated a judicial review of that rejection, and the High Court found in its favour. The Government appealed the ruling, but the Appeal Court upheld the High Court judgment. In 2003, the Government sought to improve protection for members of pension schemes by proposing to introduce the Pension Protection Fund, a levy-based scheme that eventually came into being in April 2005. However, the PPF did not provide protection for workers who had lost pension rights before the legislation came into force.
Following considerable pressure from right hon. and hon. Members on both sides of the House and determined campaigning from the Pensions Action Group, the Government eventually introduced the financial assistance scheme in 2004. The FAS promised 90% of earned pension to workers who had lost their pensions before the introduction of the PPF. However, 90% of an earned pension was not the same as 90% of an expected pension based on any particular scheme, such as that in which ASW workers had invested. Compensation payments were much lower, so for the Government continually to quote a 90% figure was, at best, disingenuous. The FAS also provided little inflation protection. In addition, a £26,000 payments cap was introduced, badly affecting people with good salaries, such as steel workers, and particularly those with long service.
When the PPF was eventually introduced in 2005, it acted like an insurance scheme funded by pension funds and without the input of any Government money.
David Simpson (Upper Bann) (DUP)
I congratulate the hon. Gentleman on bringing this important issue to the House. What he has described thus far is almost a mirror image of a number of cases in my constituency, where adequate funding was not in place to deal with pensions and insolvency. After 15 years, families in my area are still suffering the aftermath. The attitude is that the funding of pensions was not regulated properly. Does he agree?
Gordon Henderson
Yes, I certainly do, and I will come to the problems relating to that.
Like the FAS, the PPF gives 90% of earned pension, and it gives protection against inflation for employment post-1997. That indexation ensures that protection under the PPF is much better than protection under the FAS, because it improves over time. Under the FAS there is very little post-1997 inflation protection, and the pre-1997 pensionable service has no inflation protection at all, even though most of the ASW workers in my constituency had paid for indexation with enhanced contributions to the Sheerness Steel Group pension fund. For most ASW FAS members, the pre-1997 element of their pension represents the majority, if not all, of their pensionable service.
I want to give an example of what that means in practice to a typical employee at the steelworks—and, I am sure, to constituents of the hon. Member for Upper Bann (David Simpson)who have been affected. Someone who joined the pension scheme in 1980, with an anticipated retirement date in 2010 at the age of 62—the Sheerness steelworkers’ retirement age—and a salary of £30,000 a year in 2002, would have expected when he retired in 2010, after 30 years of service, to receive a pension equal to 30 sixtieths of at least a £30,000 salary, which would equate to £15,000 a year. However, by the time the steelworks went into liquidation in 2002, that worker had only 22 years of service, so his pension entitlement would have been 22 sixtieths of £30,000, or about £11,000 per annum. However, the FAS paid only 90% of that amount, which is £9,900 per annum.
The FAS then applied limited inflation protection, at 2.5%, but only for service post-1997 until the steelworks went into liquidation—about 4.5 years in total. The employee would therefore have inflation protection on just 4.5 twenty-seconds of £9,900, which equates to £2,025—that sounds a bit complicated, and I have the figures before me which makes it easier for me, but trust me, they are right. However, there would be no inflation protection on the remaining 17.5 twenty-seconds, which would have been £7,875. The maximum indexation that the employee would get was therefore 2.5% of £2,025, which is £50 per year. That is equivalent to a total indexation of about 0.5% maximum over the full amount of the pension.
Jonathan Evans (Cardiff North) (Con)
My hon. Friend may recall that a couple of years ago I obtained an Adjournment debate on this very issue, which affected constituents of mine who were ASW workers. What they tell me endlessly is that when the very arrangements he describes were outlined before the last election, all politicians made it clear to them that it was an injustice, which would be corrected. The fact that it has still not been corrected undermines the Government’s record on pensions generally, in my constituents’ view.
Gordon Henderson
I fully accept that, and I want to talk about the reasons why the Government have been unable to pursue the matter.
In the example I have been outlining, that typical worker, having expected a pension of £15,000 but with an actual FAS pension of £9,900 and a maximum of 0.5% indexation compared with an average inflation rate over the relevant years of more than 2%, lost an awful lot of money.
An ASW pensioner told me recently that he received his first FAS payment in 2006 and reckons that today it is worth only about 80% of its initial value—which was, of course, only 90% of his actual entitlement. That person calculates that he is actually getting about 75% of his entitlement, a figure that reduces year by year. That is why the DWP-quoted figure of 90% is misleading. The brutal truth for ASW pensioners is that the longer their service, the more negative the effect on their income the lack of proper indexation is. The PPF uses very similar rules, but as the number of years since 1997 is increasing, the multiplier becomes more favourable. There have been 18 years since 1997, so someone with 20 years’ service going into the PPF now will have inflation protection on 18 twentieths, or 90%, of his pension; and only two twentieths, or 10%, will be without protection. Those proportions will become more favourable as time progresses. Under the FAS, indexation is very limited, whereas under the PPF, as each year goes by, the amount of post-1997 service increases and, through Pensions Act disclosure requirements, PPF members are kept fully informed about funding levels and about what would happen if their employer became insolvent.
There is another problem under the FAS, in connection with the period between members reaching retirement and the May 2004 date, when the FAS was introduced. Anyone affected by that gets nothing from the FAS for that period; yet that is not the case under the PPF scheme. Ministers in the previous Government insisted consistently that the country could not afford to provide pre-1997 indexation to ASW pensioners under the financial assistance scheme. However, the very same Government bailed out Northern Rock and fully protected the pensions of the employees and well as investors’ funds. The Government also offered a 100% bail-out to UK investors in Icelandic banks, despite the fact that those investors were fully aware of the risk in such investments. Subsequently, the Government bailed out other British banks to prevent their bankruptcy and fully protected the final salary schemes of the employees. That smacks of double standards.
Furthermore, on the question of the affordability of pre-1997 indexation, £2 billion is being transferred to the Treasury from residual pension scheme assets from failed companies. The total FAS costs are estimated at the same figure of £2 billion, albeit spread over a number of years, and there should be more than enough to fund indexation for ASW pensioners pre-1997. It is likely also that the final costs of the scheme will be well below the original estimate, because more than 10,000 people who were eligible for FAS payments have died since its introduction.
I want to raise one other matter: overpayment of FAS payments. Some ASW FAS members have been overpaid because of errors by either the scheme’s trustees or FAS staff. Almost none of those members knows how the calculations that led to the overpayments were done, and they are unable to check whether the FAS payments were right or not. When the FAS discovers an overpayment, it imposes an inequitable repayment plan; it is harsh and unfair. In some cases the repayment plan results in the total loss of pension payments, as happened to one of my constituents, who raised the matter with me at a recent advice surgery. He alleges that the FAS never even contacted him to negotiate a suitable repayment plan. Instead it simply stopped his pension entirely and without warning. That simply cannot be right.
Another problem with those repayment plans, which, let us remember, are to recover overpayments resulting from mistakes by the FAS, not the pensioners involved, is that because the way they are calculated—a bit like an annuity—members can actually repay significantly more than the overpayment itself. That, too, cannot be right.
I must admit that, unlike my right hon. Friend the Member for Thornbury and Yate, I am no expert on pensions. When writing this speech, I relied heavily on the help of my friend and constituent, Andrew Parr, who is himself an ASW pensioner who has been badly let down by the financial assistance scheme. However, although I am no pensions expert, I recognise injustice when I see it. I genuinely believe that ASW pensioners in my constituency have been hard done by, and I urge the Government to take the following action to improve the situation for ASW pensioners: first, reconsider the decision not to provide pre-1997 indexation to ensure that ASW pensioners receive the inflation-proof pensions for which they paid; secondly, increase the FAS payments cap to help long-service pensioners; and thirdly, look again at the way that overpayments are calculated and recovered.
ASW pensioners have never given up their fight for justice. Working with the Pensioners Action Group, they have campaigned tirelessly, lobbying MPs, demonstrating at party conferences and staging protest marches. In March 2006, I was honoured to join ASW workers from my constituency on a march in Cardiff, and in November of the same year, I marched down Whitehall with the very same workers. My speech today is a reminder to the Government that the protests will continue until ASW pensioners get the justice they deserve.
The Minister for Disabled People (Mr Mark Harper)
It is a great pleasure to serve under your chairmanship, Mr Hollobone. I pay tribute to my hon. Friend the Member for Sittingbourne and Sheppey (Gordon Henderson) for securing the debate.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont)referred to my right hon. Friend the Minister for Pensions. I should be clear that my right hon. Friend, like the shadow Minister, was scheduled to be in a Committee considering regulations for an hour and a half, so he prudently ensured that a Minister was available from the Department to answer this debate. Due to the fact that the regulations were clearly excellent and that the Opposition had very few questions and did not challenge them, the Committee unexpectedly finished early. However, the Pensions Minister had secured my cover for this debate, which is why I am here and he is not. I am sorry that that is so disappointing to the shadow Minister.
I thank those Members who have contributed to the debate, as well as other Members and those outside the House who worked to establish the financial assistance scheme in the first place. The scheme ensures that people who were members of schemes that went into wind-up prior to the introduction of the Pension Protection Fund will get some financial help, which they otherwise would not.
It is also worth saying—the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East acknowledged this point—that I understand the views of all the pensioners who have been affected, but the fact is that the pension schemes that were wound up without sufficient funds in them to pay those pensions mean that those pensions effectively do not exist and have been lost. Without the financial assistance scheme, there would not be the funds to pay those pensioners either in part or at all, so they would be in a far worse situation. What we are discussing is the amount of help people can expect from the Government, and of course, there is no Government money; what we are talking about is the amount of money that taxpayers more generally are prepared to make available.
My hon. Friend the Member for Sittingbourne and Sheppey made the point about what people could expect. My understanding is that the financial assistance scheme has always promised that people would get 90% of their expected pension accrued at the point of winding-up, subject to a cap. That is obviously not the same as the amount that someone who had continued their working life would have expected had the scheme been fully funded. My understanding is that that is not what the Government ever promised. When the previous Government set up the financial assistance scheme, they promised 90% of what would have been accrued at the point of wind-up, and I think that is what has been delivered.
My hon. Friend referred to the cap, whereby when someone was entitled to a higher pension, the FAS caps the amount of assistance paid. That cap was put in place to target the payments on the lowest-paid pensioners. The cap was £26,000 for anyone who began to be paid before April 2007. It is increased annually and is now £33,454, and the amount paid depends on the level of cap in place when the payments begin. For example, a person whose payments began in 2012-13 would have a cap of £31,873, which is more than twice the average occupational pension in the UK in the same period.
When the changes to the PPF cap legislation were made, the Minister for Pensions said that he was considering whether a similar change could be made to the financial assistance scheme. He continues to keep the matter under review and is having discussions with his Treasury colleagues about whether that is doable and affordable. No doubt he will keep the House fully informed on the progress of those discussions.
One point made by my hon. Friend the Member for Sittingbourne and Sheppey and others was about indexing what was accrued before 1997. The FAS reflects the statutory requirement on all schemes, which is to index post-April 1997 accruals in line with the consumer prices index, capped at 2.5%. My hon. Friend did not think that was in line with the PPF, but in fact it is. The PPF has the same indexation post-April 1997, which is CPI, capped at 2.5%. The PPF also pays 90% of the expected pension, so the FAS is in line with the PPF. It would be difficult to argue that the FAS, largely funded by the taxpayer, should be more generous by paying to index pre-1997 accruals than the PPF, which is partly funded from a levy on pension schemes.
If we did index the pre-1997 accruals, that would not be inexpensive. It was estimated in 2010 that providing indexation on all assistance to all FAS recipients in line with the retail prices index, as it was then done, capped at 2.5%, would cost an extra £845 million of taxpayers’ money. That would be the net present value. If we accept that the money available is limited, a choice has to be made. We could provide more generous indexation, which would benefit those pensioners who live longer, but the cost of doing that is that we would pay a smaller percentage of pensions at the beginning. I think the scheme has made the right judgment.
I want to cover one point on the cost. I listened carefully to my hon. Friend and I have heard the point before about the value of the assets of schemes transferred into the FAS being broadly similar to the cost of the scheme. That is not right. In December 2007, the Government announced a significant extension to the FAS. That was funded by a combination of the money transferred in from schemes that were not wound up, which was an estimated £1.7 billion, and an increase in the taxpayer contribution, taking the total taxpayer contribution to the FAS to £12.5 billion. The net sum from the taxpayer to stand behind this pension promise was nearly £11 billion. I think that is very significant.
The hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is right to say that the promise was made by the previous Government, but of course this is an ongoing commitment, which is being met and stood behind by the present Government. It is an ongoing commitment for taxpayers today and it is a very significant cost. It clearly is not covered by all the assets being transferred in, because if all the assets being transferred in matched the cost of delivering the promise, there would of course be no need for a financial assistance scheme in the first place. The whole point is that the assets in the pension schemes do not, for all sorts of reasons, fund the promises that were made.
On the issue of funding, I listened very carefully to the hon. Gentleman, who seemed to be giving the impression that the Opposition were going to do something significant. I simply wanted to probe him on that and be clear that he was not making any financial commitments. I am not aware that my party made any financial commitments that we have gone back on. Indeed, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who is no longer in his place, referred to Equitable Life. I will be brief on this, Mr Hollobone, because I am getting slightly off the subject of the debate, but as the point was made, let me say that my party did make some commitments on Equitable Life—I followed that very closely, because I have constituents who were affected—and we have delivered on what we promised to do for Equitable Life annuity holders. I have had lots of correspondence with Ministers and with my constituents, and we absolutely have delivered on that, so I do not quite know what point the hon. Gentleman was making.
I was not sure, either, where the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East was going with the promises that my party makes. I was listening carefully and I did not hear any specific promise that we were alleged to have gone back on. We have stood behind the very significant commitment that the previous Government made, which is an ongoing commitment, and we have done that in the context of inheriting a very difficult financial situation—in the words of the former Chief Secretary to the Treasury, there was no money left.
This is a significant commitment. It was the right commitment for the previous Government to make, and this Government have honoured the commitment even in the very difficult financial circumstances that we inherited. We are right to have done so, but it does mean—this is where I agree with the hon. Gentleman —it is difficult to justify putting even more taxpayers’ money into a scheme to do the things that my hon. Friend the Member for Sittingbourne and Sheppey and his constituents want. I completely understand that, but we have to recognise that other taxpayers would have to foot the bill.
Gordon Henderson
I accept everything that my hon. Friend the Minister has said, but does he not accept that there is a principle involved? The principle is very clear: the Government of the day misled people into believing that their occupational pension would be safe and was safe to invest in. That is what the parliamentary ombudsman, the High Court and the Court of Appeal decided—that those pensioners had been misled—and therefore it is morally wrong for any Government, of whatever complexion, to use finance as a reason for not giving those people justice.
Mr Harper
Following on from that point, I think, having read through the detail of the case, that what my hon. Friend says is exactly why a financial assistance scheme was set up in the first place, and very significant amounts of taxpayers’ money were put into it. As I said, the total commitment from the taxpayer is now about £12.5 billion and about £1.7 billion has come in from the schemes that were not wound up. That is a very significant commitment from the taxpayer in order to provide protection for pensioners who are not getting support from pension schemes because those schemes were not adequately funded to meet the promises that had been made.
My hon. Friend said that a number of pensioners in the schemes covered by the FAS have died over time and that in some way reduces the cost. It does not, because the calculation of the total cost will have taken into account the age profile of the pensioners and the expected number of deaths—that is the rather brutal science in which actuaries are involved. That factor will have been taken into account in the costings, so no extra money arises from the fact that some pensioners in schemes covered by the FAS are, sadly, no longer with us.
My hon. Friend made a point about workers who became pensioners before the FAS was first announced, in May 2004. As is normal with all Government schemes, assistance payments are not backdated to before the announcement date, so anyone who became a pensioner before May 2004 gets assistance from that date only. The same applies to the PPF: it does not pay compensation for any period before it was introduced.
I listened carefully to my hon. Friend’s point about overpayments. Because a scheme does not know at the beginning of the winding-up process the exact value of the assets it has and what each member is entitled to, it pays interim pensions—its best guess of what the member will get when the scheme does wind up. At the end of the winding-up, the scheme balances its payments, paying less in the future if a person has been overpaid during the winding-up period. Where possible, the FAS balances overpayments and underpayments once it has the full data, which is the same as the approach taken by schemes. During the winding-up period, the FAS tops up any interim pension to 90% of the expected pension, based on data provided by the scheme. I understand that it used to be 80%, but in response to representations from the various groups, the then Government raised the limit to 90%. That narrows the margin for error, so if there is an error in the data provided by the scheme, that increases the chances of having to recover an overpayment.
The reason why the overpayments are not simply written off is because the FAS is largely funded by the taxpayer. The Department uses the guidance “Managing public money”, which is issued by the Treasury. That is the same guidance used when, for example, the Government overpay benefits and have to recover them. The FAS does what the schemes would do to recover overpayments: it turns the amount that has been overpaid into a notional annuity and deducts it from the assistance due, so that over the individual’s lifetime, they will receive the correct amount.
I listened carefully to my hon. Friend, and I think he said that one of his constituents did not receive good communication from the FAS about the fact that they had been overpaid and that the overpayment would be recovered. I am sure that my hon. Friend will correct me if I am wrong. If that is the case, there is no excuse for poor communication. If I have correctly understood that that came as a surprise, it would be helpful if he wrote to the Minister for Pensions, if he has not done so already, so that we can look into that breakdown of communication.
Gordon Henderson
May I clarify that point? My constituent’s complaint was that he is aware of other people in similar situations whom the PPF contacted to negotiate a repayment plan to ensure that it recovered the money over time, but he was not given that opportunity. I have already written to the PPF to ask why it did not negotiate, and why it immediately stopped his pension entirely. That was his point; he was not given an opportunity to negotiate and say, “Right, I will pay off x amount per month.”
Mr Harper
I am grateful to my hon. Friend for that clarification. He has already written to the scheme, so I will draw his comments to the attention of the Minister for Pensions. It may be helpful for the Minister to look at the case and perhaps write to my hon. Friend about it, because it is difficult to go into the specifics of an individual case in an Adjournment debate.
My hon. Friend rightly raised the subject in his role as Member of Parliament for his constituents. He acknowledged in his speech the assistance he has received from those in his constituency who have campaigned on the matter. I recognise that he and those whom he represents are probably disappointed by what I have had to say. However, I hope he understands that, given the very significant contribution that taxpayers rightly continue to make to the financial assistance scheme, there is a limit to the amount of support that taxpayers can give. I fear that it will not, therefore, be possible to deliver the things that he has requested, given the circumstances that we still face in the public finances because we are dealing with the legacy that we inherited from the previous Government.
Welfare Reform Bill
Gordon Henderson Excerpts(12 years, 4 months ago)
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Dame Anne Begg
Indeed. As I said earlier, the people who will be punished most are those who have done the right thing. They are the ones who have been in work, the ones who have saved, and the ones who have partners who have been in work and remain in work. It would be much easier for their partners to drop out of work as well, because they and their partners would then, as a household, qualify for the benefit. That would probably be the wrong thing to do from the point of view of the family, but given such a benefits system—I was going to say “a benefits system that would make them better off”, but it might not do that—it will become a logical choice for a working partner in those circumstances to give up work. Although it would probably be wrong, it would be logical.
Gordon Henderson (Sittingbourne and Sheppey) (Con)
Does the hon. Lady accept the principle of means-testing? That is my first question. If so, what level would she set?
Dame Anne Begg
I do accept the principle of means-testing, but I am not sure why that is relevant.
Dame Anne Begg
Will the hon. Gentleman sit down while I answer his question? The whole point of contributory ESA is that it is based on national insurance contributions. These are people who may have worked for 30 or 40 years, paying into what they thought was an insurance scheme. Does the hon. Gentleman, if he has insurance, expect the insurers not to pay out at the point at which the money is due to be paid?
Gordon Henderson
I thank the hon. Lady for giving way to me again. I have been made redundant twice in my life, and on both occasions, because I had capital, I was not entitled to any employment relief. I was given no benefits at all, because I had about £20,000 in the bank, and although I had been paying into the system since I was 16, I had to accept that.
Social Security
Gordon Henderson Excerpts(13 years, 3 months ago)
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Gordon Henderson (Sittingbourne and Sheppey) (Con)
A lot has been said about CPI and RPI, but I will avoid the technical aspects of that and restrict my comments to two others.
First, my hon. Friend the Member for Cardiff Central (Jenny Willott) mentioned that it was a Conservative Government who many years ago broke the link between the basic state pension and earnings. I was one of few Conservatives to oppose that at the time. About 11 years ago, when I was the parliamentary candidate in Luton South, I went to see the late Jack Jones, who was president of the National Pensioners Convention, to offer my support to the campaign to restore the link. Jack, sitting at the other side of a desk, was astounded that a Tory had come to offer his support, and he said, “Gordon, I really appreciate that you’re backing me, but I have to tell you, son, you’re never going to get your party to agree to restore the link.” Jack died a couple of years ago, and I wish he was alive today to see that a Conservative-led coalition is restoring the link.
That is long overdue. I shall not make any partisan points about the previous Government not delivering, because looking after our pensioners is beyond party politics. When I supported the pensioners way back in 2001, I was one of few parliamentary candidates who went into the election wanting to restore the link—I was certainly the only such Conservative candidate—but it was not Labour party, Conservative party or Lib Dem policy at that time. I am delighted that we have moved on and that we will restore the link.
I am even more pleased with the Government, because many of the pensioners in my constituency did not want us just to restore the link to earnings, because RPI is sometimes higher than earnings. Jack Jones mentioned that too. We then started campaigning not for the restoration of the link with earnings, but to ensure that we used whichever of earnings inflation or prices inflation was the higher. As I said, I will not go into the technical differences between CPI and RPI, because the pensioners in my constituency just want a decent increase in their pensions based on the higher measure of inflation. The triple lock now includes the 2.5% stipulation, so if either inflation measure is less than that, the increase will be 2.5%. They welcome that, so I thank Ministers and my coalition Government for delivering on a long-standing promise.
The second aspect of the orders that I want to talk about relates to a problem that is experienced by many women pensioners who have worked in the civil service. I will give one example. One woman who retired early on a civil service pension came to see me in my surgery recently—I have written to the Minister, and hope to get a response some time soon. She had reached the age of 60, and told me that some arcane measure in the civil service pension scheme means that there is a reduction in the amount that is paid once someone starts to receive the basic state pension. I am not sure of the technicalities, but she explained how she was written to way back in November to say that now she was 60, her civil service pension would be reduced, because she was receiving the basic state pension. Of course, however, because she is a woman and the age at which women start to receive their pension is to be higher, she will not start to get her basic state pension until May this year. Although the period is only a few short months, there will be women for whom the gap is a lot longer. I would be extremely grateful if the Minister addressed that point when he winds up. I listened carefully to his opening remarks, and I thought that he put a very good case for CPI which will help me when I talk to my pensioners. I thank him.
John McDonnell (Hayes and Harlington) (Lab)
I will not apologise for breaking the consensus—although I was about to apologise to the hon. Member for Cardiff Central (Jenny Willott), who welcomed the consensus across the House. I oppose the order, and will seek to vote against it. I do not accept that the installation of CPI will be of benefit in either the long term or the short term. I am grateful that the Government have not introduced it for the basic state pension at least for this year, but its installation across all the other benefits will result in detriment. To take £6 billion out of the payments to the poorest in our society is unacceptable. My hon. Friend the Member for Aberdeen South (Dame Anne Begg) said that the order is indivisible, so by not voting for it we would prevent other overall increases from going ahead. However, it is not beyond the wit of any Government to introduce another order within hours—or at least days—that could amend what is in this order to enable us to get some justice for pensioners.
I am reticent about criticising the Minister. I think that I have moved a Budget amendment on restoring the link with earnings every year for the past 13 years, and I think that we walked through the Lobby together on an annual basis in that endeavour. I am grateful, therefore, for the restoration of the link with earnings. I know that it was in the Labour party’s most recent manifesto to restore the link in due course. I just wish that we had done it earlier, because that would have demonstrated our overall commitment to tackling pensioner poverty. However, I know how much the previous Government did to tackle pensioner poverty. Many people, particularly pensioners and many on benefits, are now living lives so much better than they would have been had it not been for the previous Government’s policies.
I was a critic of the extension of the means-testing system. I thought that it was a disincentive to saving and costly to administer. Nevertheless, I welcome what the previous Government did. I still think, however, that in a civilised society it is a mark of shame that reflects on all of us that there are still 2 million pensioners living in poverty, given that we are the fifth richest country in the world. It behoves all parties to tackle this issue. The question has been asked time and time again: how should we do it? For me the answer is straightforward, and expresses an argument that we have been putting forward since the foundation of the Labour party—fairer taxation and redistribution of wealth.
I have listened to the debate on moving from RPI to CPI. We can all marshal different battalions on the field of this debate—quotes from the Institute for Fiscal Studies, the Office for National Statistics, and so on. Most Members will have received through the post this week an assessment of the Government’s welfare reform policies by the Social Policy Association. I concur with the chapter in the report by Alan Walker of the University of Sheffield, who states:
“The Government claims that the CPI represents low income groups’ expenditure better than RPI but there is no convincing evidence to support this claim and according to IFS (2010) it is the RPI that provides a ‘superior’ coverage of goods and services.”
To some extent, we can dance angels on the head of a pin on this subject. As someone who has studied some statistics in the past, I have gone into the debates on the difference between the geometric mean and the arithmetic mean. From that, I conclude that CPI is 0.5% minimum off the calculation compared with RPI. However, there are concerns that the use of CPI will result in a reduction. As my right hon. Friend the Member for East Ham (Stephen Timms) asked, if that was not the case, why would the Government need to try to protect pensions this year? As my hon. Friend the Member for Aberdeen South said, the reduction from 4.6% to 3.1% is nearly one third of people’s overall increase. That is significant, so I am pleased that the Government are protecting the increase for this year, but the pensioners in my constituency will be worried about the introduction of CPI for future years.
I remain unconvinced about housing costs, partly because of some of the arguments that have been presented about the 7% of people—that still represents a sizeable number not to be taken into account—who will be affected, who do have housing costs. As my right hon. Friend said, there is an ageing profile of people who are taking on mortgages later in life, so housing costs will become a more significant factor.
In addition, one of the burdens that many pensioners feel in particular is increased council tax. I do not believe that that element is covered by the CPI calculation as it was with RPI.
The hon. Member for Sittingbourne—
John McDonnell
I would not want to miss out Sheppey. Let us take the common-sense approach of the hon. Member for Sittingbourne and Sheppey (Gordon Henderson) and ask, “What do pensioners feel like at the moment?” I think that they feel that they are under significant pressure as a result of inflation. The researchers’ evidence shows that inflationary pressures hit pensioners harder than the average household.
I am concerned about the shift, which I oppose. It is a momentous shift: it represents one third off an increase. I say to the Minister that this should have been properly debated before the election if it was to be a long-term shift. I can understand, though I do not believe, the argument that when the Government came to power they opened the books and found that they had to introduce emergency measures. However, that is not being argued. It is being argued that this proposal, per se, is the beneficial or right thing to do. If that were the case, it should have been outlined before the election with examples of the implications for pensions and benefits overall. To make this change at this time casts doubt on the motivation for the change from RPI to CPI. We should have been more honest in the debate before the election.
As for the knock-on effects on occupational pensions, I chair the PCS trade union parliamentary group, and we have circulated fairly detailed evidence of the implications for public sector workers. It looks as though, on average, there will be a loss of between £500 and £700 a year. The cumulative effect of that in the long term is significant, and I am grateful that other Members have read its implications into the record.
My right hon. Friend quoted the Hutton report. I take those concerns seriously—a 15% cut, and possibly a consequential cut of up to 25% in the long term. I firmly believe that those are accrued rights—we have had that debate on the civil service compensation scheme—and that people have planned their lives on the basis of what they thought they could expect as a pension in the long term. To undermine those accrued rights is not only wrong and immoral but legally dubious, and there may be challenges to that effect.
The effects spread far beyond that. The right hon. Member for Uxbridge and South Ruislip (Mr Randall) and I have constituents who work at Heathrow airport for British Airways and are members of the British Airways pension scheme. They work for a former nationalised industry, so their pensions shadow what happens in the public sector. We have had letters demonstrating the potential consequences in terms of cuts in their pensions in the long term. Again, the problem came upon them relatively suddenly, and should have been properly explained and discussed before the general election.
My concern now is that the change will have an immediate detrimental effect over the next few years. Like most London Members, and many others, I deal in my constituency surgery with people living in poverty and on the margins of dignity. Any cut, in the short or long term, in their pensions or benefits will push some of them over the edge into virtual destitution. That is why I am anxious about anything that will decrease their incomes. On that basis, I cannot support this order. I understand why some of my hon. Friends do not wish to participate in a vote, but I want to put my opposition on record, because the change will have an impact on my constituents. It will also add to poverty and deprivation in our society—something that any Government should tackle.
We should, collectively, be ashamed of the way in which we have treated pensioners over decades. Our pension is now 16% of average earnings, whereas in France it is 60% and in the Netherlands 82%. Over time and incrementally, we have allowed our pensioners to lose their right to a decent pension, and therefore to a decent quality of life. This order will add to that incremental undermining of the quality of life of my constituents, and on that basis I will seek a Division on it.