Public Service Pensions Bill

Debate between Baroness Donaghy and Baroness Hollins

Wednesday 9th January 2013 Lords Chamber

[Baroness Hollins]

My Lords, much concern has been expressed about the Bill’s granting of sweeping powers to the Government to make future further changes without adequate public or parliamentary scrutiny. Clause 3 grants extremely wide and retrospective powers to the Government for further radical public sector pension changes adversely affecting public sector employees’ pensions. This undermines the Government’s claim that this would be a “settlement for a generation”. It is generally accepted that public sector pensions represent an element of deferred public sector pay. Clause 3 is an extreme example of a Henry VIII clause. It is one that gives successive Governments the power to make unilateral and retrospective changes to accrued benefits in public sector pension schemes, changing the retirement age without effective parliamentary scrutiny.

This clause should be severely limited, in the view of the BMA, in which I should declare an interest as president, and other health unions. It has expressed concern about the wide scope of powers and has called for limits. The provision runs directly contrary to the Government’s pension guarantee for no more reform for at least 25 years, safeguarding the current generation of public sector workers, and that the Bill protects the benefits already earned by members of existing public sector pension schemes. Instead of protecting accrued rights and making a once-in-a-working-lifetime change to public service pensions, the Bill allows for those very rights to be undermined, throwing public sector workers into uncertainty surrounding their future financial security, even those who will shortly reach retirement age.

The powers granted to the Government in the Bill go beyond the stated purpose as set out in its Explanatory Notes, which is to make changes where legislation is inconsistent with, or requires modification as a consequence of, scheme regulations. Instead, and without justification, this clause allows the Government to make radical changes—for example, to reduce accrued final salary rights without the need for primary legislation and with minimal safeguards of the affirmative procedure, and to drastically change the design of pension schemes and scheme regulations—for instance, making different provisions for different cases or descriptions of persons without having to come back to Parliament to debate primary legislation. It would allow any person to exercise a discretion that was not defined in the Bill, and to breach the 25-year guarantee with no effective means of resisting any breach. The power to retrospectively amend means that accrued pension rights could be affected, which would likely result in a challenge under the Human Rights Act 1998 and may well lead to a declaration of incompatibility and other legal challenges.

During the debate on the Bill in another place, the Government stated that most changes affecting members’ rights would be minor and technical, but the Bill is not explicit in this regard. If the Government intend the changes to be minor and technical, then the Bill should say so to avoid this or any future Government having the power to undermine the 25-year guarantee.

[Baroness Donaghy]

My Lords, I know that the Minister thought that I overdid it a bit at Second Reading when I said that the confidence of public servants was shattered by two successive large sets of negotiations on their pensions. However, I think that this comes back to an issue of trust, and obviously everyone is going through the Bill line by line to see where that trust might be undermined in future.

I support everything that my noble friend Lord Whitty said. As currently drafted, the Bill would allow scheme regulations to make retrospective changes. I made it clear that in principle I did not disagree with that. However, the absolute crunch would be that scheme members or their representatives should agree to any retrospective change and the Government’s commitment that accrued rights up to the date when the scheme was changed would not be reduced. As has already been said, this would simply ensure that workers in public service pension schemes enjoyed the same protection in relation to their accrued pension rights as exist for workers in the private sector under pensions law.

I was concerned about the noble Lord’s reply on this issue at Second Reading. I understand that there is no set standard of protection across the current schemes, as he said. Apparently the Government have chosen not to carry across the protections in retrospectivity that can be seen in previous legislation, such as the Superannuation Act 1972. They are concerned that what the Minister referred to as the “most extreme” of these protections—member consent locks—is not the way forward. The Government say that they are trying to strike the right balance between the protection of members and the efficiency of the scheme, and no one can disagree with that. However, I cannot help thinking that this obsession with member consent locks is all about not getting unanimous agreement to the deal, and that is throwing out the baby with the bath water. What these very reasoned amendments do is codify the Minister’s precise intention. He said that he would take this issue back and further consider the provisions of the Bill, and I hope that he will give the reassurances that we are seeking.

Welfare Reform Bill

Debate between Baroness Donaghy and Baroness Hollins

Monday 21st November 2011 Grand Committee

[Baroness Donaghy]

My Lords, Amendment 99ZC is by way of an interval in the big picture, but I hope that noble Lords will not go out and get an ice-cream while I am speaking.

This is a probing amendment to ensure that industrial injuries disablement benefit is not counted towards the benefit cap. At present, industrial injuries will be among the benefits that count towards total benefit income for benefit cap purposes. The Government have indicated that the constant attendance allowance under the industrial injuries scheme will be exempted in the same way as disability living allowance, and I shall say a little more about constant attendance allowance later.

Benefits under the industrial injuries scheme are different in character from the rest of the benefits system. Whereas other benefits are designed to prevent or ameliorate poverty, to help people to cope with extra costs or to substitute for lost income, the industrial injuries scheme is a system of no-fault compensation. In November last year, the Industrial Injuries Advisory Council wrote to the Minister to argue that IIDB should not count towards the cap for just this reason.

Employers and unions both support the industrial injuries scheme, which eliminates the need for an adversarial approach to compensating for a large number of injuries and diseases that are agreed to be a risk to employment. Damages won through civil litigation are a closer parallel to the industrial injuries scheme than disability or other benefits. Including damages awarded by the courts in the total that is subject to the cap would plainly be unfair, but industrial injuries disablement benefit is also a form of compensation and including it is just as unfair. Payments under the vaccine damages payment scheme are not to count towards the cap but they, too, are a form of compensation.

On 10 November in this Committee, my noble friend Lady Hayter took the opportunity to raise a number of questions and she put the issue very well. She said,

“it seems that to include these payments, which are compensation for injuries at work, within a calculation of the total support that a family could receive from the state would be somewhat unfair. It would mean that for a young person living with their family, any such support would be taken away from the total family entitlement, which would effectively turn the benefit into a means-tested benefit”.

The Minister replied:

“We can discuss that entire area when we look at the whole range of benefits”. —[Official Report, 10/11/11; col.112.]

Well, my Lords, the time is now.

The Government have put forward three reasons for introducing the benefit cap. All these reasons are weak when one looks at the industrial injuries disablement benefit. The Government have said that they are introducing the benefit cap partly to reduce benefit expenditure but IIDB accounts for a very small amount of social security expenditure. It stood at 0.58 per cent of DWP annually managed expenditure in 2010-11. However, IIDB will account for an even smaller proportion of benefit cap savings, most of which will affect large, younger families, especially those in receipt of housing benefit. Claimants of benefits from the industrial injuries scheme tend to be older—50.9 per cent of expenditure is on people who are over pension age—and will therefore count for significantly less than the 0.58 per cent. It is unlikely that counting IIDB towards the benefit cap would save as much as £1 million a year, but I appreciate that I am really talking about an issue of principle here and not just expenditure.

The Government’s equality impact assessment also indicated that a further purpose is to improve working incentives for those on benefits. It must be emphasised that IIDB does not create a work disincentive. Half of all spending on it is accounted for by pensioners, and working-age claimants can continue to receive the benefit if they stay in work or find work.

Ministers have given great prominence to the argument that it is not fair for a workless family to receive more in benefits than an average family would receive in wages. In last year’s spending review, the Treasury listed the benefit cap under the heading of “Fairness … Reducing the deficit fairly while protecting the vulnerable”. However, a working family, one of whose members has suffered an industrial disease or injury, would not be in a worse position than a workless family. They would have the same right to IIDB.

The Government have not said a great deal about why it should count towards the cap. The Minister has made a distinction between recipients of disability living allowance and IIDB claimants. People do not get industrial injuries benefit to meet extra costs, which can be dealt with by an award of DLA if necessary, and the Minister has used this difference to justify excluding DLA but not IIDB. This argument is not a sufficient rebuttal because it fails to address the point that I made about the nature of the industrial injuries scheme. Furthermore, if having extra costs were to be the reason for excluding the benefit, how would we explain the decision to exclude retirement pension and pension credit?

Informally, officials sometimes argue that excluding IIDB would open the floodgates for a long list of special cases, which would complicate the benefit cap. I hope that tidiness is never the deciding factor in matters like this and that simplicity is not a sufficient reason for proceeding with an unfair change.

The Government’s decision to exclude constant attendance allowance is of course welcome. It is worth remembering, however, that this is one of the industrial injury scheme benefits abolished by the previous Conservative Government and there are now comparatively few claimants. In fact, the cost of the constant attendance allowance is just 1 per cent of the industrial injuries scheme. I hope that the Government will agree with me that the industrial injuries disablement benefit should not be counted towards the benefit cap.

[Baroness Hollins]

My Lords, Amendment 99A calls for a new exemption from the benefit cap for households in which a resident claims carers’ allowance and for carers in receipt of the additional amount in universal credit for those with caring responsibilities. I am grateful to my noble friend Lady Meacher, the noble Baroness, Lady Hayter, and the noble Lord, Lord McKenzie, who have added their names to the amendment.

Why is it wrong to cap carers’ benefits? Carers UK and the Disability Benefits Consortium, representing more than 50 disability charities, are concerned that, as it stands, a cap could be devastating for some carers. It would also send out an extremely negative message about how the Government value family care and risk the perverse outcomes of disincentivising family care and potentially making caring for older or disabled relatives financially untenable for some families.

Carers make a huge contribution to society, estimated this year by Carers UK and the University of Leeds to be £119 billion each year. From the Minister’s response to an earlier amendment, we know how much the Government value that contribution. However, that only emphasises the fundamental unfairness of including carers’ allowance within this cap. This is perhaps best illustrated by the justification given by the Secretary of State for Work and Pensions when he introduced the Bill in the Commons, stating that the benefit cap was,

“a matter of fairness, so that those who are working hard and paying their taxes do not feel that someone else will benefit more by not playing a full part in society”.—[Official Report, Commons, 9/3/11; col. 922.]

If this cap is designed to be fair to individuals who are working hard and playing a full part in society, then it cannot be right that it applies to carers.

In order to receive their benefit, carers must be caring for a minimum of 35 hours a week—the equivalent of a full working week. Many care around the clock, with NHS Information Centre figures showing that a fifth of carers are caring for more than 50 hours a week. It would not be possible to say that these individuals are not working hard. Nor could it be said that they are not contributing to society, as they represent so many of the social values that the Government are working to promote in this Bill and beyond—strong families and communities, and taking personal responsibility. Indeed, such carers are not required to seek work and conditionality does not apply to them.

However, there are some inconsistencies in the existing proposals. While the Government have stated that the exemption for DLA protects families affected by disability, this is not the case for all such families. A lot depends on the definition of the word “household”. The DLA exemption protects households that include a DLA claimant, but what is considered to be a household in universal credit includes children under 18 and partners but not adult children or other adult relatives. Therefore, while carers looking after disabled partners and disabled young children would be exempt from the cap, those caring for adult disabled children or elderly parents or disabled siblings would not be exempt. Families caring for disabled children under 18 would therefore be exempt from the cap, but those caring for adult disabled children would be subject to it because the DLA claimant, as an adult, would no longer be considered to live in the same benefits household, even if they were living together.

Let me give an example of a family who would be affected. Imagine a single father with three sons, the eldest of whom is 19, has learning disabilities and a variety of other health conditions. The father has two other children of school age. While his eldest son receives DLA and he himself gets carers’ allowance for supporting him full-time, the father’s benefits, including child benefit and housing benefit, would be capped because his adult son would not be considered to be in the same benefits household as his father, despite living with him. The financial impact of the cap could be significant. With local housing allowance and council tax benefit totalling £305.22, income support £42.95, child tax credit £108.75, child benefit £33.70 and carers’ allowance £55.55, he would be in receipt of £546.17 a week. A cap of the level announced by the Government would result in a loss of £46 a week or £184 a month.

Such a drop in income could force carers such as this father to stop caring and instead turn to social services to provide full-time care for his son because he feels that he has no choice but to look for paid work rather than be a full time carer—a distressing situation for the family and ultimately far more costly to the state. According to Carers UK, to which I am grateful to for providing me with an excellent briefing for today, carers giving up work in order to care lose an average of £11,000 a year.

This kind of situation is neither logical nor fair. The best way to ensure that the carer’s contribution is better recognised and rewarded, and that carers are not penalised for taking on caring responsibilities, would be to give carers exemption from this cap. I ask the Minister: why is carers’ allowance included in the benefit cap when the Government’s intention is to protect those affected by disability? Or is it simply a mistake?