Welfare Reform Bill

Lord Fowler Excerpts

Wednesday 25th January 2012 Lords Chamber

[Lord Skelmersdale]

My Lords, the key to this amendment—I go a long way with my noble friend Lord Newton on what he has just said—is the settlement letter. What I think the House will need to know is what happens when the local government organisation in question does not abide by the settlement letter. On the answer to that, I suspect, will depend the decision of the noble Baroness on whether or not to call a Division.

[Lord Fowler]

My Lords, there is an amazing coincidence here. I remember back in 1985-86 being strongly opposed on the introduction of the Social Fund by someone with the same name as the noble Baroness, Lady Lister, who proposed this amendment. I have to say that she was not alone. It was one of the most controversial changes that we made at that time. We were strongly opposed by the welfare groups and the party opposite. From memory, we were strongly opposed by the noble Lord, Lord Kirkwood, as well—I do not think that he is in his place. Another group who strongly opposed us—I am not sure that even my noble friend knows this—comprised my social security successors at DHSS who also did not want to introduce the measure. They said that it was far too radical. They put it to a meeting held after the 1987 election and around the table at No. 10, with Margaret Thatcher in the chair, that it should be dropped. Happily, they were defeated. Now I see that 20 voluntary organisations have signed up to it being retained.

The Public and Commercial Services Union, with more than 80,000 members in the Department for Work and Pensions, also regrets its passing. Therefore, I hope that it will be of some comfort to the Minister when he is attacked from the other side that sometimes you find after 10 or 20 years that positions change, as has the attitude taken on this measure. It is not altogether surprising that I have a lot of sympathy with the view taken on the Social Fund. I think it is common ground that we need a system for dealing with emergency payments of one kind or another. I think it is also common ground that some of the 67,000 families who will be affected by the cap will need such help. I think that is common ground all round.

As regards the mechanism, I have to say that I still rather support the Social Fund. That is not surprising as my noble friend Lord Newton and I invented it in the first place. It did have, and does have, a number of advantages. The department has experience of how such a scheme works and has local offices with local knowledge which are, however, kept within a national programme with a national budget. Therefore, I should have thought that from the Government’s point of view as well as from the claimant’s point of view it had substantial advantages. There is a risk that different local authorities will pursue different policies with regard to it.

My view is slightly unlike that of my noble friend, to whom I pay the usual tribute. We worked together for a long time. I made the popular announcements and he did the unpopular ones. I see that he agrees with that. The Government have decided to go this particular way and, as I said on Monday, I do not intend to trample over my successors’ proposals. However, I give just one warning, which is the warning of the noble Baroness, Lady Lister, who knows so much. I pay tribute to her for all the work that she has done on social security over the years. If money is to be made available to local authorities for what I shall call Social Fund purposes, we must do everything that we can to ensure that that money reaches the proper destination—otherwise the exercise is all slightly pointless.

We have seen in the health service where this has not happened. Money intended by the previous Government for prevention of ill-health was siphoned off and used for other more general purposes. Whether my noble friend accepts this amendment —it seems unlikely that he will accept it—the House will wish to be assured that we have some way of checking that the money reaches its proper destination. That seems to me to be the crucial point and that is the assurance that the House seeks.

Welfare Reform Bill

Lord Fowler Excerpts

Monday 23rd January 2012 Lords Chamber

[Lord Elystan-Morgan]

My Lords, there is nothing inherently immoral or unjust in the concept of a cap. It all depends upon the way in which it is handled. It might be handled in an understanding, intelligent, sensible and equitable way, although it might not be so easy to save money in net terms or indeed eradicate a fundamental injustice; I accept that.

The Minister has quoted the court of public opinion, where there is, I accept, an overwhelming majority verdict in favour of the Government’s attitude to a cap. I say with humility and the utmost respect that this depends entirely on how well founded that decision on the part of the great public was. It is possible, and I respectfully suggest, that it is a fool’s gold concept of justice—and noble Lords will remember what fool’s gold is. As a small boy I remember being handed a large lump of quartz, and inside that quartz was a gleaming vein of dull metal that seemed to be the real thing, but it was iron pyrite—utterly worthless and totally misleading. I ask the Government to consider very deeply whether this is not a fool’s gold kind of justice.

If you deal with families that have arrived at a certain economic situation from very different directions in exactly the same way, are you doing justice? The Government’s policy draws no distinction between a family that is totally workshy and has had no one working for the past quarter of a century, and another family that had an excellent work record until the head of that family, through redundancy and no fault of his own, lost his job in the past six months. A family with a small number of children might not be affected by the cap even though it is totally workshy, while another family with every merit possible in its favour might be totally impoverished. That is the injustice.

I do not know the exact answer, but I suspect it is in this direction: that one should look not just at the totality of income that comes into a household but at how much of that income is disposable. That, to my mind, is a much more real and indeed equitable test. That is why I support this amendment. It may well not be perfect—likewise the other amendments for that purpose—but it has the ring of justice about it.

[Lord Fowler]

My Lords, it is not my habit to trample on the territory of my Conservative social security successors, but perhaps I could just intervene briefly. First, by common consent, we are at a time when public spending needs to be drawn back. The total social security and pensions bill at the moment is £200 billion. The truth is that if the social security budget is to be subject to all kinds of exceptions, we might as well not start the whole process of looking for social security economies. I say this as a former Secretary of State who worked closely with my noble friend Lord Newton, to whom I pay sincere and undying tribute. We spent six years fighting battles on the one hand with the Treasury and on the other with different welfare groups, not always successfully. Rummaging through my desk at the weekend, I found a badge that was distributed when I was Secretary of State, which says, “Action for benefits—more not less from DHSS. Stop Fowler’s cuts”, so this is not remotely the first Government who have sought to limit the social security bill. Nor is it remotely the first Government who have run into flak. I would claim, and I think that anyone with responsibility in a department for social security would confirm this, that it is almost impossible to make changes in the social security budget without running into controversy and flak.

One of the most extraordinary things about the proposal which the Government are now putting forward is that, first, the public seem to be overwhelmingly on the side of making this change. Secondly, on the cap that is being set, £26,000 per annum—the equal of £35,000 a year before tax—is a not ungenerous limit, and most people in this country would regard it in that way. On the cap itself, we tend to get into figures that rather overegg the number affected. I am not going to downplay this, but we should accept that the number is 67,000 households, or perhaps a little more than that on the latest figures: that is, only 1 per cent of the total claimant population.

As I say, everything must be done to prevent hardship to such people. One of the rather irritating things about how this debate is being organised is that the debate on the next amendment will be very similar to this one, so, if I may, I will discuss during the next debate some of the measures that can be taken to prevent that hardship. However, first and foremost, this change will be introduced in 2013, so we have the time to sort out the problems before that change takes place. We really cannot have the situation in which beneficiaries living in houses that they cannot afford, or could not afford when in work, will never be able to get back into work because of that situation.

Perhaps I may say this to the noble Lord, Lord McKenzie, who proposed this amendment. I am rather intrigued by where the Opposition stand on these issues. The noble Lord started with how much he supported the principle of the changes, but ended with words about human misery being caused by them. I had rather gathered from their Commons spokesman that the Opposition supported the changes and did not intend to try and vote them down. I simply point out to the House that they have so far supported amendments that, far from saving money, will cost, I am told, something like £5 billion over the next five years. I do not want to be offensive—or no more than usual—but their policy seems to be one of, “Now you see it, now you don't”, and, frankly, mostly we do not. Goodness knows how much they would have spent had they not supported the principle of the Government’s policies, so it would be fair for us to ask the noble Lord where precisely the Opposition stand on this issue.

Above all, I put it to the House that there is a very great prize in the Government's plans: that of universal credit, which both parties have been seeking to achieve for the past half-century. That prize is something worth fighting for and the benefit cap is a crucial part of it. There is no question that the Government’s own plans allow us to deal with the 1 per cent who will be adversely affected. The amendment should be opposed and the Government’s policy should be supported.

[Lord Newton of Braintree]

Irresistibly, in view of what my noble friend Lord Fowler has said, I find it necessary to make what I hope will be a brief intervention.

This is a rather grandiose claim but I am going to make it: probably I alone, but certainly I and my noble friend together, have more experience of social security and its reform than any other people in history, let alone currently present in your Lordships’ House. We had our difficulties and our rows with the Treasury and, as my noble friend has just said, we would have given our eye teeth to have been able to bring forward this proposal for a universal credit, which is a huge achievement by the Secretary of State and the Minister on our Front Bench together. Everyone acknowledges that and supports it, yet now large numbers of people are trying to shoot it full of holes before it is even off the launch pad. That is not sensible.

I am not going to put a lot of weight on the point about deficit reduction. It is valid but others have made and will make it, and people can make up their own minds about how important it is. Personally, having caused some trouble for the Government on this on a number of occasions, I do not think it sensible or reasonable to go on voting twice a week, in whatever form, to make the deficit worse than it otherwise would be. That is all I will say; if people want to do it, they can.

I have a straightforward social security reason for being opposed to this and every other amendment on our agenda today. It is a great pity, as my noble friend said, that they are being debated in such a disorderly fashion; there are linkages between all of them. For example, the amendment of the noble Baroness, Lady Howe of Idlicote, on regional variations in housing clearly links with what we are discussing at the moment, and it would have been far better if these things had been discussed together.

For a long while as Social Security Minister—I was sometimes attacked for this—I made sure that social security legislation left wide powers in secondary legislation because you would never get it all right in primary legislation and you needed the flexibility to be able to respond to the things that you had not spotted in advance. However much work you do, that will happen. There is no doubt, though, that we have here a series of amendments, designed—some of them pretty hastily and off the cuff—to write requirements and restraints into the primary legislation that would certainly prove a drag when the detailed work was done.

As with the DLA last week, there is a right course for the House to take, and I will join it in taking it. Ministers know from me, privately and publicly, the importance that I attach to transitional measures and protection, but the place for that is in the secondary legislation. If the House wants to vote for enhanced affirmative procedures, as I said last week, I would be inclined to support that so that we would all get a proper opportunity to consider the detail when it had been done. However, I am not in favour of tying the Government’s hands and writing anything into the concrete of primary legislation that we shall regret in six or eight months’ time. I hope that the House will accept that and not vote to put this stuff in, in the way that is proposed today.

Pensions: Automatic Enrolment

Lord Fowler Excerpts

Thursday 10th June 2010 Lords Chamber

[Lord Fowler]

My Lords, I congratulate my noble friend on his speech. We have spent most of our time in the other place and here debating against each other, but it is extremely good that on this, and I suspect many other issues, we are very much on the same side. He made an excellent speech. I also congratulate the Minister on his appointment. He comes with a wealth of knowledge and we wish him the very best of fortune in his new post.

I start in a way which may seem a little away from the detail of automatic enrolment, but I hope that the House will soon see the relevance. Next week is the 40th anniversary of my coming to Westminster in June 1970. I spent 31 years in the House of Commons and nine in this House. I have to say that 1970 was another age. There was no Portcullis House with private offices and research assistants. I shared an all-party office. On one side I had Kenneth Clarke with his smelly cigars and dark brown Hush Puppies—or was it the other way around? Facing me was John Prescott—soon to be of this parish—who visibly scowled as I dictated down the telephone press releases defending the Government of Ted Heath. At the end of the room was our very much non-coalition partner, Cyril Smith, who happily did not come too often to the office. The noble Lord, Lord Pendry, and I tried to find space as best we could. To add to my problems, the first Queen’s Speech of the new Government abolished my then constituency of Nottingham South. It was not altogether a happy beginning at Westminster.

What is the purpose of this example, apart from alerting news editors throughout the country of this significant anniversary next week? My purpose is to make a fundamental point about the history of pensions policy in the 40 years that I have been at Westminster. In this period, we have had one government scheme after another. In my first Parliament, we dealt with the pension plan of Dick Crossman and then that of Keith Joseph. When in opposition I became my party’s spokesman on pensions and social security—to universal surprise, including my own—we had to deal with the Barbara Castle-Brian O’Malley plan and, in particular, the unlovely-named state earnings-related pensions scheme, SERPS. I learnt during that first debate how it is in Westminster that when the subject of pensions goes up on the screen, Chambers—here and in the Commons—miraculously empty, much to the disadvantage of our debates.

I admit that when I got into office, Parliament had to deal with the Fowler plan on personal pensions and the end of discrimination against early leavers. Then we had the plans of Peter Lilley in the Conservative Government, while under the party opposite the ideas of Frank Field were considered—briefly. His ideas were so unthinkable that he was immediately sacked. Later, when plans were subcontracted to the noble Lord, Lord Turner, we made more substantial progress.

In the past 40 years, we had the basic pension which was earnings-related; then it was price-indexed; now it will be earnings-related again. Also, there has been one variation after another of the state second pension. We have had SERPS; we have had modified SERPS; we have had son of SERPS; and now we have an ailing cousin of SERPS called S2P. At the same time, we have seen the decline, and almost fall, of final salary occupational pension schemes in this country, for which, frankly, the party opposite must bear some responsibility. I am trying to put that in the most moderate way by saying “some responsibility”. The noble Lord on the Front Bench shakes his head but I think that the party opposite must bear some responsibility for it, although I certainly accept that it does not have total responsibility. However, we should now be trying to get as much agreement between the parties as we possibly can on the way forward.

Pensions are a long-term investment and require long-term policy-making. In the current economic circumstances, it may not be possible to introduce every part of such an agreement at the same time, but I do not think that that should dissuade us, even at this point, from seeking as much agreement as we can. Indeed, I think it can be argued that in the past we have been too impatient in trying to introduce pension plans—not least in implementing the original Beveridge proposals. Therefore, my first point in this debate is that we should seek to agree on the goal of a pensions policy, getting as much agreement between the parties as we conceivably can and, above all, seeking to avert a pensions crisis whereby many of those in retirement will be living in hardship. That, I believe, is a cause that all parties can embrace.

I suggest that the basis for such an agreement—in a sense, it is what I proposed 25 years ago—is a twin-pillar system. The first pillar is undoubtedly state provision. The second pillar is personal provision, very much including workplace pension schemes of the kind that my noble friend has described. I say in parenthesis that such a twin-pillar system has been in place in Switzerland for many years, and it has worked to the great satisfaction of the public there. However, the important point is that both sides are essential. Without good state provision, you will not sufficiently encourage personal saving. The basis must be as generous a platform state pension as can conceivably be afforded. The structure that we have at present is not particularly generous but it is, without doubt, extremely complex and administratively extremely expensive. It is, above all, ill understood by the public. I remember that when we carried out our own pension review in the 1980s, most people who were members of the state earnings-related pension scheme did not know what the scheme was. I wonder how many today know the detail, or even the outline, of S2P. I would guess not very many. I also wonder how you can plan for old age if you do not know the basis of your pension provision.

Therefore, I think that the basic state pension should now be put together with the state second pension with the aim of lifting the pension level above pension credit. There would then be a decent platform pension. I accept that it may not be possible to do all that at the same time but affordability can come, for example, from adjusting the pension age. Again, it was a quarter of a century ago that I advocated flexible retirement up to the age of 70. As for paying the pension, I propose—it has already been proposed and I think it is very sensible—that you start with the over-75s and then move down the age scale. However, my basic point is that even in the present circumstances we can make some moves towards the goal of better pensions in this country.

I then come to the second pillar—personal provision. Here workplace pension schemes are fundamental and I certainly support everything that my noble friend has said about that, particularly what he said about automatic enrolment. As he said, the policy must be right in the long term. Automatic enrolment is an important step forward. I listened with concern, as I am sure the House did, to the figures of the survey that he quoted. That is not good news for future policy. He made important points about the detail of the automatic assessment. I shall not repeat all those points but they are important.

The essential point is that we know enough about how people put off making a contribution to realise that something of this kind is needed in the public interest. It is also entirely fair that personal pensions should be a combination of personal contribution, employer contribution and tax relief. Again I remember when we were going round this course in the 1980s with the state earnings-related pension scheme. At one stage we were proposing that it should go and considering what we should put in its place. I proposed exactly the kind of workplace pensions now in legislation. I think that we proposed a rather bigger contribution from employers than that being proposed today. The Treasury predictably opposed us on grounds of the tax relief bill and the decisive intervention in that debate came from the Prime Minister, Margaret Thatcher, who supported absolutely our proposal, including employer contribution.

It should be emphasised and underlined that a pension contribution is a very good investment for any company that is intent on trying to keep good staff and employees. We are also trying to make saving as attractive as we possibly can. In that respect I welcome very much the decision of the Government to do away with the absurd restriction that you must take an annuity at the age of 75. We have been fighting about that in the previous Parliament and before. There was never any particular justification for that policy and it is encouraging to see the Government moving so quickly. I am sure that my noble friend needs no instruction here, but I observe that not all pensions policy is made in his department. I am sure that the ex-Pensions Ministers from the previous Government who seem to be around the House today did not have their hearts set entirely on defending compulsory annuities at 75. I note that the noble Lord does not shake his head on this occasion.

However, that is what the Treasury decreed. Let us make no mistake; it is not something exclusive to Labour Governments. I say from personal experience that such interference is not unique. I could write a chapter of a book on how my own review was damaged. In fact, from memory, I think that I have written a chapter of a book on that. Let us hope that the sensible decisions on annuity mark a new era in the intervention of the Treasury.

I always said when carrying out my own review that we were making policy in a cold climate. If it was cold then, it is positively arctic today. Even so, I believe that we can make progress. The Chancellor has already shown that on annuities. As for the parties, we can certainly debate the speed of improvement and the other important improvements that can be made for, say, married women and the details of automatic enrolment. It would be of enormous benefit if the parties, after 40 years of debate, could agree the principles and the structure of what we want to achieve. That would be an enormous step forward and it would also be in the spirit of today when we are all seeking as much common ground as we conceivably can in all areas of policy-making. We are seeking to prevent hardship in old age and pensions policy is a crucial part of that.

[Lord Lea of Crondall]

Can I be clear that the noble Lord is strongly supporting the automatic enrolment principle? There is all this talk about people not being aware of it, not supporting it, and so on. We have had the big review—the Turner review—and we have a policy to make sure that for the first time everybody has some buy-in through the company for which they work. It includes both employers and employees, and we have heard neither the noble Lord, Lord Kirkwood, whose speech I very much admired, nor the noble Lord, Lord Fowler, saying that we have to sell this harder despite some of the propaganda against it by the private insurance industry.

[Lord Fowler]

It is marvellous that when one tries to reach agreement the noble Lord immediately looks for disagreement. There is no disagreement with him on that point; there is no disagreement from my noble friend and none from me. We want automatic enrolment. I said that about five times but the noble Lord may not have been listening at the time. Of course we need to promote and sell it, but let us not have a bashing match and go back to the old business at which the noble Lord is rather adept of having a go at the industry or whoever his latest target happens to be. Of course I agree with automatic enrolment and of course it needs to be sold. That is also the view of my noble friend.