Universal Credit: Farmers
Alistair Carmichael Excerpts(6 days ago)
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Wendy Chamberlain
The hon. Gentleman always gets straight to the key issues in his interventions. I will talk about a number of the things that he referenced. Indeed, the monthly aspect of universal credit is one of the key challenges.
Let me start with the basic point: the Government are asking the vast majority of farmers to go through the process of transitioning to universal credit from tax credits now, right in the middle of peak farming months. For example, it is the middle of lambing season. Let me be blunt: sheep farmers do not currently have the time to sort through accounts, visit the jobcentre or have interviews by phone. We all recognise that farming is not a 9 to 5 job where appointments can be scheduled. The sheep three fields down having a difficult birth will not be able to hold on just because the jobcentre is due to call. The farmer who cares deeply for their animals and also cannot afford to lose income if things go wrong will not be able to stay in the farmhouse to wait for that call. They will be down in the field with the sheep to keep an eye on things and intervene if need be. Even if there is a phone signal, which is not always guaranteed, a farmer can hardly talk through the viability of his or her business while elbow deep in that sheep.
I appreciate that that sounds slightly comical, but it is deeply frustrating for farmers and incredibly stressful when they are worried about losing their income. It shows a failure within the DWP system to understand how farming works, so I ask the Minister: what thought and consideration was given to farmers when the decision to roll out the transition to universal credit was made? I know the National Farmers Union raised concerns about the transition as early as 2018 in evidence to the Work and Pensions Committee. Did the Government pay any attention to that? Even if they are talking to the NFU, I cannot see the outcome in those policy decisions.
I recently tabled a written question asking for an impact assessment on how the roll-out of universal credit to farmers has been done. The response—I will be honest—did not exactly answer the question, so I will make the assumption that the answer is no. If I am wrong, I am happy to be corrected on that, and I hope the Minister will use her time to set out the findings from that assessment. But the response I received did point me to the latest findings from the “Move to Universal Credit”, in which there was only one paragraph relevant to farmers—an observation that additional checks on self-employed claimants may be a factor in the low take-up of universal credit. Obviously, that is a part of it, but it somewhat understates the issue, and it also conflates all self-employment businesses. Farming is very different to somebody, for example, running a shop, selling handmade products, or a tradesperson such as a joiner. Here we are: I am going to assume that the Minister has heard the warnings from the NFU, has seen correspondence from MPs, has spoken to farmers herself, has had her officials carry out research into the farming industry, and has seen the media coverage on the radio, specialist farming news and print media.
In any case, I will explain why universal credit fails farmers. Universal credit does not account for variable incomes and does not allow for those incomes to be averaged out. The very nature of farming means that farming income varies significantly through the year, or even over multiple years. I want to go back to that sheep farmer who is busy saving their animals and bringing new ones into the world, rather than speaking to a work coach. That lamb will not be ready for sale until much later in the year, meanwhile the sheep and the lamb will require food, shelter, water, shearing and possibly extra hands on the farm to help out in the busy months. An animal farmer might in some cases try their hardest to grow crops to be harvested in each season, but often that is not practical. Not all areas are suitable for all produce, and even if they were, economies of scale mean that it can be more profitable to specialise. That does not mean there is no work that needs to be done until harvest and sale time; just that the work done by farmers does not get paid for many months. Meanwhile, seed, fertiliser and fuel costs are all going up. That is arguably one of the reasons why some farmers need extra support in the first instance.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Like my hon. Friend, I have had correspondence with the Government on this issue. The sheep farmer example is a very good one. That sheep farmer will have income, possibly in the autumn from the sale of the sheep, possibly from a basic payment, and possibly from something like the less favoured area support scheme. There might be a small wool cheque at some time in the late summer or early autumn, but apart from that, that is all the income, which then has to be spread and harvested throughout the rest of the year. That is the reality for the sheep farmers to which my hon. Friend refers, and it shows the virtual impossibility of shoehorning that into a universal credit scheme that looks at things on a monthly basis.
Wendy Chamberlain
I am grateful to my right hon. Friend, and he has illustrated part of the challenge. We are finding that, when that income spike happens, that is the very point where farmers are losing the benefit to which they should be entitled. It is important to recognise that sometimes it all goes wrong: a really bad harvest; illness among livestock; a year of barely breaking even; or worse. Otherwise, in the main, hopefully all that hard work and waiting pays off and payments come in. After months of very little, there is a significant income boost, and a boost that—as I have just said—will write off universal credit for that month, even though that income boost will have to stretch over the many months until the next sale day.
Tax credits allowed farmers to average out their income over a multiple-year cycle to truly reflect their monthly income over time. Universal credit only takes a one-month snapshot, and I know that people have experienced difficulties with universal credit in occupations such as farming for that very reason. Given that work coaches are required to assess whether self-employment is gainful, there is a significant risk of months of loss being seen as not real work. Recently, on that very issue, a headline in the Telegraph stated: “Farmers claiming benefits told their farms are ‘hobbies’ and to get jobs”. Some work coaches might understand how farming works, but it is clear that others certainly will not and do not—it cannot be left to luck. I doubt the Department has spare funds to train all work coaches in farming practices, so a standard reform of how income is assessed would surely be a much fairer and efficient path to take.
Another related issue that I will highlight is the imposition of the minimum income floor after the 12-month transition period. I fully accept that there must be measures to stop people being able to potentially manipulate benefits to prop up an unsustainable small or hobby business. Applying a deemed minimum income when calculating universal credit works in those cases, but I seriously question why it is useful to take vital income support away from farming families in those months where their produce is being produced rather than sold. Farmers are not earning the minimum wage in those months, so why on earth are we pretending that they do?
The 12-month transition period is welcome, but the nature of farming will not change in the course of a year. Arguably, all that will do is push the problem down the road, so I urge the Minister to go away and review it. If she is genuinely concerned about farmers exploiting universal credit, there must be other anti-abuse provisions that we could be looking at. The minimum income floor is a blunt tool that is doing more harm than good.
My final point is similar to my first, because after the administrative burden of applying to universal credit, farmers must continue providing monthly income updates. Farmers are not accountants; they often operate in partnerships and, most importantly, they work full time doing the actual farming. Their definition of full time is different from others, because it means well over 12 hours per day, seven days a week. When exactly does the Minister think that farmers will have the time to meet those obligations?
I ask the Minister to not just repeat the same platitudes that have been signed off and sent in a standard letter, which my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) and I have both received. I have seen that letter shared online many times, and I assure the Minister that it has done nothing to reassure anyone.
The good news for the Minister is that she needs only to look back to the tax credit system to find out what works; she does not need to reinvent the wheel. What farmers need is a system that allows for averaging income over multiple months and years, where benefits are paid during income spikes and where there is no assumed minimum income when it is low. They need a system without the administrative burden of monthly appointments and paperwork, and with an understanding of how farming works and the variety of set-ups, be that tenant farmers, those in partnerships, and everything in between.
It is not just farmers saying that. I have an example from a rural land and property agent, who has published a blog entitled “Why the Universal Credit System Isn’t Working for Farmers”. The Farming Forum threads on the change currently have nine pages of comments on one thread, while another thread has 24 pages. There is a Facebook support group for farming families that has been deliberately kept open so that MPs, journalists and others can see what farmers are saying about this change.
Yesterday, on that Facebook page, someone anonymously posted that because their family were so busy on the farm they could not get to the job centre, and their benefits had been stopped. The writer went on to say, in their own words, that they wanted to chuck themselves off a bridge as a result. A few days before that, someone wrote that they were able to feed their children but they could not afford to eat that day themselves. They used to get £700 in tax credits a month, but the assessment for universal credit does not take into account the difference between income paid to the family and income used to meet farming bills.
The system change means that someone who is producing our food cannot afford to eat. That is just not okay. Farmers are literally the reason why we are here in the Chamber with full stomachs, why our children have the energy to go to school and learn, why we can go to the supermarket and make our dinners tonight and why our restaurants are some of the best in the world. It is not an issue that will go away; it is a crisis for too many farming families. We must support them, and I hope that the Minister’s response recognises the gravity of the situation.
The Minister for Employment (Jo Churchill)
It is a pleasure to see you in the Chair, Mrs Murray. Before I respond, I would like to pay tribute to Lord Field, whose passing was announced earlier today. He was a wonderful individual who contributed over many decades to the important issue of welfare. My personal memories are of his kindness and compassion during my early days here. As a former Work and Pensions Committee Chair, I know he would have taken great interest in all the activity happening across the House on welfare issues, not only this week but in the recent past.
I congratulate the hon. Member for North East Fife (Wendy Chamberlain) on securing this debate. First, let me put it on record that the Government recognise the vital contribution of farmers to the country and to the economy as a whole. It is worth the most enormous amount to us, in not only the growing sector, but the manufacturing sector. From my own early days as a young farmer, right through to my representing a rural community, I have been more than embedded, and I understand the challenges. The hon. Lady will know—as I do—that, as with many business areas and sectors, these businesses come in a multitude of forms. Although I appreciate what she said about her farmers lambing, my farmers are trying to get seeds in the ground after the most appalling rainfall. I say gently that they are not the only businesses dealing with fluctuating incomes, transitions throughout their year or lives where they put in 12-hour days. We are working with them, and I agree that that point is important.
For clarity, I met the representatives from the National Farmers Union on 19 March, and I am very grateful to them. As soon as the issue of the migration of those in the farming community from tax credits to universal credit was flagged to me, I reached out to the NFU directly, it responded and we had the meeting to discuss that issue. I cannot answer the specifics that the hon. Lady brought up, but I am interested in them, because the tax credit migration notices have only just gone out, so I am confused as to why there would have been the stories she mentioned. Perhaps if I might be facilitated with those individual challenges, I can make sure they are addressed swiftly.
Officials in my Department are continuing that engagement to ensure that farming communities are communicated with clearly, that the transition to universal credit is as smooth as possible and that the concerns are heard. At official level, I had meetings on 9 and 10 April with officials from my Department and the NFU. Engagement has been constructive. Actions include sharing the third-party information pack on the move to UC with the NFU, which will share it with farming charities—the pack supports welfare rights organisations and charities in understanding the process of making claims and what support is available; the NFU promoting the move to UC activity to the farming community via its regular communication channels; work with the NFU to produce a product for work coaches explaining the farming sector, because I, too, do not like that term; and inviting the NFU external affairs team to a monthly UC stakeholders forum. I have also asked whether we can have somebody with the right expertise at our county shows throughout the country to have a session in the NFU tent, the CLA tent or wherever is appropriate, so that people can have discreet conversations where they are most likely to be facilitated.
The Department is providing that support, including assistance when making a claim for universal credit to those who need it. Importantly, that also includes comprehensive transitional protection if they are eligible. Transitional protection is an extra payment in a customer’s UC award ensuring that their entitlement is not lower than what they would have received on tax credits at the point of movement. Transitional protection is there to smooth the change, which is why individuals should fill in the migration notice when they get it. Importantly, self-employed customers are also exempt from the application of the minimum income floor for a 12-month period, providing significant time for the adjustment to UC to take place.
It is therefore vital that customers take action when the migration notices are received, so that they do not miss out on the important transitional protections we are trying to provide to make sure that a worried customer—today we are talking about farming, but they could come from various other sectors—is helped and managed through the migration. When I discussed this with the NFU in March, it understood the need to avoid delay and indicated that it stood ready to support individuals and ensure they engage.
Mr Carmichael
I am sure we can all play a role in ensuring that this transitional relief and the importance of returning the form are understood—doubtless, the NFU and others will do that, too. The difficulty I have, however, is that even at the end of that transitional period, I do not see what in the farming business model will have changed. There will still be self-employed people with income coming in significant sums, but at small points in the year. At the end of the transition, we will still be where we are today—that will not change. If there is going to be change, it must come from the UC system.
Jo Churchill
I thank the right hon. Gentleman for his comments. If he will allow me, I will come on to those shortly. I gently say that he comes from a tourist-driven area, where those incomes for those individuals fluctuate, and we expect them to have moved over to the UC system.
With regard to self-employment, universal credit addresses a number of flaws with the tax credit system. The Government stand by these reforms, which were first introduced in 2013. To give context, self-employed individuals have previously been able to report very low earnings from their business activity while receiving much of their income from tax credits. That can act as a disincentive to grow a business or look elsewhere for employment, if a business is not viable. All of us in this room know that businesses vary in their viability. This is an arguably unfair situation for the taxpayer and risks trapping individuals in low-earning self-employment and thereby, in some instances, more of a dependency on the welfare system.
All customers moving to universal credit, including farmers, are asked and expected to attend a one-off meeting with a work coach to confirm their employment status. This means confirming that farming is their main employment, being regular, organised and developed, and trying to making a profit—not that it has to, but just that it is their main job. I am sure the hon. Member for North East Fife would not disagree with this approach, as it is focused on fairness. We consider each claimant’s circumstances individually, and it is no different for farmers. They are most likely to be considered gainfully self-employed, for the exact reasons she laid out: they have livestock, they have to be there every single day, or they have crops to grow and so on. They will therefore be free to work on their business with no expectation to look for other work or take it up while in receipt of universal credit.
During a farmer’s first year in receipt of the new benefit, they might be expected to meet their work coach up to four times more, but to minimise this, multiple appointment channels are available, which I am assured includes digital, so it might just be a short meeting over Teams. With all due respect, that is not any more onerous than engaging with a feed supplier or with accountants. After 12 months, the minimum income floor is applied, and no further work coach interactions are required if an individual’s or a household’s circumstances stay the same. Again, once established—that is what the transition period is about—that stability is carried through.
I know that concerns have been expressed about the impacts on farmers through the way their earnings are reported and the administrative burden that this might cause, but I would like to reassure hon. and right hon. Members that my officials are working with the NFU to better understand whether farmers are worrying about this challenge in anticipation, or whether there are things we can do to assist. That includes the NFU’s attendance at monthly stakeholder engagement sessions and our offering to speak at NFU events. It is not to anyone’s benefit to have people worried in this situation.
Universal credit seeks to take earnings into account in a way that is fair and transparent, with earnings considered in the assessment period in which they are received, with a customer’s award adjusted accordingly. That does mean that individuals are required to report their earnings more frequently than with tax credits and in a slightly different way. However, the system has been designed to be simple and straightforward, with customers needing to provide only the total income from receipts into the business and high-level details of payments out during the assessment period.
While we are debating universal credit and farmers, I gently say that the farming community, as I alluded to earlier, is not the only profession experiencing these large monthly fluctuations, with retail and tourism also doing so. I am sure that the hon. Member for North East Fife agrees that it is important that we work with our farmers, vital as they are to all of us, given the food they put on our plate, to alleviate concerns, overcome barriers and help with the transition to UC.
Assessing earnings monthly rather than annually may have a greater impact on all self-employed people with large monthly fluctuations, but steps have been taken to account for that. Where a self-employed customer reports a loss, the value of the loss is carried forward and taken into account when assessing earnings in future assessment periods. Similarly, when customers experience a spike in their earnings, only earnings that have exceeded £2,500 more than the amount that would normally reduce their universal credit award to zero will be carried forward to affect a future assessment period.
Universal credit is a broad system of support that takes account of all individual household circumstances. I am a little concerned that the assumption today is that every engagement a farmer might have with the Department for Work and Pensions would be a negative one; that is not the case. Where additional help is available—for example, with childcare or other assistance—individuals will be signposted to the support they are eligible for, which they might not have been aware of prior to making their claim.
Finally, I want to put on record my thanks to the NFU, which swiftly engaged with us when asked and was honest and forthright about the challenges. It has stepped up to working with us. I hope that we can work together to assist the broader farming community, which is hugely important to the nation. I strongly encourage people to engage with the migration notice so that they can access the support and income protection as we make the move to universal credit.
Mr Carmichael
On a point of order, Mrs Murray. It was remiss of me while intervening in the debate not to remind the House of my entry in the Register of Members’ Financial Interests. I hope you will allow me to do so now for the record.
Defined-Benefit Pension Schemes
Alistair Carmichael Excerpts(3 months, 2 weeks ago)
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Mr Alistair Carmichael (Orkney and Shetland) (LD)
I beg to move,
That this House has considered the regulation of defined benefit pension schemes.
After the heat of the debate on High Speed 2 that has just ended, I hope that we might be able to generate a little more light. The subject of defined-benefit pension schemes and their regulation does not always lead to that sort of excitement, important though it undoubtedly is. I suppose that in speaking about defined-benefit pension schemes I should declare an interest. Defined-benefit pension schemes, many of which are of course final salary schemes, were what people like me were part of when we were first elected to serve here. Then, in about 2011 or 2012, I think, we moved to a career average earnings scheme.
The Institute and Faculty of Actuaries, in a briefing provided ahead of today, says:
“This is a particularly broad and complex topic”—
a warning that I think we should all be willing to take. I am not much given to dealing with broad and complex topics, especially where hard sums are involved. I always take a fairly simple view of these things, and when it comes to pensions, some things are worth bearing in mind and never losing sight of. The first of those—I will come back to this point in a minute—is that a pension is in effect a matter of contract between an employer and an employee. It is, in other words, simply salary paid at a later stage in the employee’s life. The relevance of that is that when we anticipate changes in the way in which pensions are to be provided, we have to make allowance for the fact that people will have made decisions in their life about how they are going to provide for themselves at a later stage in their life.
Thirty years ago, I was a part of the established civil service. I was a prosecutor, a procurator fiscal depute, working at the Crown Office in Edinburgh. I worked with many talented lawyers who were able to do remarkable things as prosecutors, and most of them would have been able to command much higher salaries had they worked in private practice. They did not do so for a variety of reasons. Some had a particular commitment to prosecution and to public service, but they also had an understanding that as members of the civil service with a final salary scheme, a defined-benefit scheme, they would trade that off against the higher salary that they could have got when they were working. It is worth noting in passing in relation to the BP pension scheme, about which I will speak later, that when BP closed its scheme to new entrants, it compensated for that with a 20% increase in salary for those who were still in employment.
When we anticipate a change, we always recognise that there is a greater importance of maintaining benefits for those who are in a later stage of their career. This is currently coming to my attention and to the attention of many right hon. and hon. Members. Indeed, the Select Committee on Work and Pensions has recently taken an interest in it, because of the experience of pensioners who are beneficiaries of schemes such as BP’s, and Shell’s scheme is another. Although there are differences in the terms of the trust deed for the Shell scheme, the outcome in terms of the beneficiaries is that they are actually in lockstep with each other.
Justin Madders (Ellesmere Port and Neston) (Lab)
The right hon. Gentleman will not be surprised to learn that there are many Shell pensioners in my constituency. I have been in correspondence with Shell about its decision last year not to award an inflation-matching increase in the pension, and it told me that it did not have to do that. When it was pointed out that it had given a similar inflation-matching rise to Dutch pensioners, Shell’s response was that there are different rules and regulations for managing the Dutch schemes. That highlights the essence of the problem that we are trying to deal with.
Mr Carmichael
It absolutely does. Representing a constituency that had the Sullom Voe oil terminal managed by BP for many years, I suspect that the reasons why the hon. Gentleman has Shell pensioners in his constituency and I have BP pensioners in mine are very similar.
Jim Shannon (Strangford) (DUP)
I commend the right hon. Gentleman for bringing forward this debate. It is a critical issue, and it goes beyond the two pensions that he has referred to. Does he agree that the Government—I say this with great respect to them—have had adequate warning that we are heading towards a UK-wide pension crisis if we do not make changes to pension schemes soon? Will he join me in asking the Department for Work and Pensions to begin, today, to take adequate steps to rectify the precarious position we are currently in, on behalf of our constituents?
Mr Carmichael
The hon. Gentleman strikes at the reasons why I brought forward this debate. We might benefit from a wider and longer ventilation of the issues at some later stage, but we have 30 minutes today, so let us use it. I had the opportunity to discuss the issues yesterday with the Minister, and he is alive to the concerns.
When it comes to regulating pensions, and indeed other similar financial provisions, the law of unintended consequences is never far away. The Government are right to be cautious, but they have to be alive to the fact that this is an emerging crisis. What happens to the beneficiaries of the BP and Shell pension schemes today could happen to just about any pensioner the future. As those pension funds come to a point of greater maturity, the concern that we hear from BP, Shell and other pensioners is that decisions are being taken not in relation to their best interests, which is the primary fiduciary duty of the trustees, but because of other concerns. There is a significant number of significant issues for the Government to look at in relation to pension regulation, not least of which is the balance between the companies that have created these pension funds in the first place and the independence of the trustees.
Wendy Chamberlain (North East Fife) (LD)
With 60,000 BP pensioners impacted, it is unsurprising that I too have been contacted by constituents. There is a wider debate about the fact that if multinational companies such as BP and Shell are making these decisions, smaller companies will end up making similar decisions if something is not done. My right hon. Friend mentioned appointed trustees. Does he agree that BP has a duty to take the advice of its appointed trustees to prevent real-terms cuts to pensions? Otherwise, what is the point in having trustees at all?
Mr Carmichael
I almost entirely agree with my hon. Friend. The way in which the BP pension fund works is that the trustees have virtually no discretion up to 5%, and then from 5% to 9% there is a discretionary level. In the last year, the BP trustees recommended 9% but the company refused to pay it. I can see that there might be good reasons why a company does not want to be tied to that discretionary level, but there must be a reason for refusing to pay it. As far as I can see, the BP and Shell response has been, “No, we don’t need to give you a reason.” They play off defined benefit against defined contribution; they play off against pensioners in other parts of the world because they are transnational corporations; and they come up with other points.
That is why it is so important that when we talk about this issue, we hold right at the top of our minds that this is a matter of contract between the employer and the employee. If they were still working and receiving this money instead of receiving it as a pension, we would not tolerate it. If it is not a good enough way of dealing with somebody’s salary, it is not a good enough way of dealing with somebody’s pension.
When Nick Coleman from the BP Pensioner Group, who provided me with an invaluable briefing in the last few weeks, gave evidence to the Work and Pensions Committee, he touched on the point about the relationship between the trustees and the company, and the independence of the trustees. He produced something that, frankly, shocked me and shocked Committee members as well. He said:
“We checked the pension fund company’s annual returns to Companies House the other day and found that for the first time ever, they had added some words saying the duty of the directors, among the normal things you would expect, was also to maximise BP’s long-term shareholder value.”
As a trustee, that is a quite remarkable addition to the trust’s purposes, because the fiduciary duty is the duty of utmost good faith to the beneficiaries. If there is a conflict between the beneficiaries and the company, the trustees’ duty is to protect the interests of the beneficiaries. Nick Coleman went on:
“We are saying that the solution here is to somehow reinforce the requirement that trustee boards are demonstrably and fully independent. For example, the majority of members should be demonstrably independent rather than, in our case, the majority being company employees. They also need to be expert. Some of them have only been hired by BP two years ago and they are now trustees of the Pension Fund. They know very little about pensions, whereas they replaced people with 12 years’ experience. Expertise is a very big deal.”
It is pretty clear that these problems and pressures will become more acute. It is widely believed by BP’s beneficiaries that it wants to reduce the level of outgoings from the pension fund so that it will be a more attractive prospect for being hived off, perhaps to an insurance company or others. Such things are legally possible, but it comes back to the relationship between the employer or former employer and the employee or pensioner. If the pension fund is owned and administered by an insurance company, for argument’s sake, where will that relationship be and how will that impact on the outcome for the beneficiaries?
I raised that question in discussion with BP yesterday. Incidentally, BP has eventually come to talk to me about this, but it is still not talking to its pensioners. If BP is to avoid the reputational damage that could come from this, it would be well advised to spend time talking to its pensioners and employees in a meaningful and serious way, which it has failed to do thus far.
The BP pension fund was established 95 years ago. It has 58,000 members and 42,000 pensioners in payment, 30,000 of whom are more than 70 years old. BP closed access to the defined-benefit scheme in 2010 and closed it to new accruals by existing members in 2021. Over the years, however, BP has made significant undertakings to its employees and pensioners, a number of which I have had the benefit of considering. As far back as 1996, there was a Pensions News for BP’s pensioners, which stated:
“It is important to remember that the BP Scheme guarantees pension increases equivalent to the annual increase in the Retail Prices Index (RPI) up to 5% and the Trustees, with the agreement of the Company have stated that they intend to follow a policy of increasing pensions in line with RPI wherever possible even when this exceeds 5%, so long as the BP Pension Fund has sufficient resources to permit this.”
I will come back to the resources question. It continues:
“In times of high inflation, this would be a valuable underpinning to the purchasing power of your pension.”
This material was given to BP pensioners then. Underneath those words, the benefits of scheme membership are listed:
“The security of a large well funded arrangement…A pension linked to your earnings at, or close to retirement, part of which can be taken as a lump sum…Guaranteed increases to protect the value of your pension over the years of your retirement”.
It was on the basis of undertakings such as those given by BP to its employees that many of them made the decisions they did for their future provision. That is why, when I questioned the Minister on this in the Chamber last month, I said that BP was effectively dealing from the bottom of the pack. I hold very much to that view, which is why I think this House is right to highlight what BP has done. As I said, it could happen to others.
Fast forward to 18 months ago when BP first withheld consent for a pension increase according to the retail prices index: inflation then was at 7.5%, but it agreed to a 5% increase only six months ago when inflation was at 13.4%. The net effect of that was a 11% decrease in the pension value received by the beneficiaries.
The oil industry obviously has a reputation for high salaries, but it is worth bearing in mind that the average pension paid out by the BP pension fund is only £18,000. BP’s defence is quite revealing. It has referred me to the funds made available for payment from its Helios fund, which is effectively a lump sum payment of £2,500 for people in receipt of a household income of less than £30,000. Again, we are breaking the link between the former employer, the salary and the pension recipient. Pensions are not charitable hand-outs; this is money that people have earned in the course of their working life.
BP seeks every step of the way to play one group off against the other. It plays the defined-benefit recipients off against the defined-contribution recipients. It says, “We are a multinational company and we have liabilities to pensioners in other parts of the world.” It absolutely does, of course, but it pays people different salaries in different parts of the world. If it pays something during a person’s working life, it should be prepared to accept the logic that it should pay that at the end of a person’s working life and into retirement.
The funding ratio of the BP pension fund at the moment stands at 132%. If it were to meet the extra 4% this year, the funding ratio would still stand at 129%. There is no reason, from the position of the fund, why that should be regarded as an unsustainable payment, but of course it would make an enormous difference to the beneficiaries—the pensioners themselves.
BP has generally had a well-funded and well-managed pension fund. From 1990 to 2020, it made virtually no extra payments to the pension fund at all. It is worth reflecting on the fact that BP has announced that its new chief executive will be Murray Auchincloss, who, as chief financial officer, was the author of many of these decisions. Mr Auchincloss will enjoy a salary of £1.4 million plus a variety of other benefits in kind. I have not had the time to work out exactly what those other benefits will be, but when BP sacked his predecessor, it clawed back £32 million, never mind what it paid him. It is fair to say that Mr Auchincloss, and probably Mr Looney too, will have to go some way before they are eligible for universal credit.
The final word in this debate should go to the BP pensioners themselves. Some truly heart-rending contributions have been quoted to me. One came from a pensioner who said:
“In the 1990s, BP introduced an option for staff to put 15% of their salary into accruing pension at a faster rate which I did because my wife had no pension of her own. It was not an easy decision as we had just started a family and money was very tight.”
The other one that really jumped off the page for me was from a pensioner who had 20 years’ service with BP working in IT. They said:
“I am dying from cancer and emphysema, suddenly I am informed by bp that my widow and family will no longer be protected from inflation in the way I had always believed. Now please tell me how you would react if your loved ones came under attack in this way. And how would you feel when the man responsible for this assault is claiming to be a champion of mental health and to care about people?”
That is the human cost of the decisions that BP has taken and continues to take.
BP and Shell are just the canary in the coalmine; what happens to them can happen to others. That is why this is a matter to which the Government must now pay the most urgent attention.
The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)
It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful to the right hon. Member for Orkney and Shetland (Mr Carmichael) for securing this debate. We had a good discussion on this matter yesterday, but I hope I can say a bit more today.
First and foremost, I am very pleased that people are showing more interest in pension schemes more generally and the pensions they receive. I always think that we, as a nation, do not show enough interest in our pensions at the right time in our lives. I have heard very clearly the points made about individual schemes. Today I will not talk about specific schemes but will comment in more general terms about how these pension schemes are supposed to work. I recognise that many people depend on these schemes for their retirement income, but let me talk about the issues more broadly.
I understand the upset caused by schemes when pension scheme members no longer receive the discretionary increases that they had received previously. It is important to stress that legislation does not seek to set out exactly what every scheme must do in every conceivable circumstance; rather, legislation sets out minimum standards for indexation. That does not prevent more generous arrangements, which may be brought into a scheme through its rules or provided on a discretionary basis.
It is quite right that there should be some minimum standards—statutory requirements for DB indexation that all schemes must follow. These requirements are in place for all schemes, and they try to achieve a balance between providing members with some measure of protection against inflation without increasing a scheme’s costs beyond what most schemes can generally afford. That is a critical balance to strike.
It is important to provide a measure of protection for members, but we also need to have an eye to the future viability of a scheme, which could be compromised by creating significant additional liabilities. We also have to consider employer affordability. The best possible protection for the members’ future benefits is a strong and profitable employer, and we must remember that not all DB schemes are sponsored by monolithic employers with deep pockets. The setting of a statutory minimum is therefore a delicate balance to strike.
Some pension schemes go beyond the legal requirements and do indeed provide more generous indexation. Of course, if higher levels of indexation are set out in scheme rules, those levels of indexation must be paid. The scheme rules set out the pension package that the members have the right to receive.
Mr Carmichael
I agree with most of what the Minister is saying, but there is something more that comes into play here, which is the question of light-touch regulation. Light-touch regulation only works if it is possible to proceed on the basis of good-faith acting by both parties, particularly the companies. Where there is evidence of the lack of good-faith acting, as we have with BP and Shell, is it not necessary to adjust the system to ensure that at the end of the day the beneficiaries are not suffering as a consequence?
Paul Maynard
I note the right hon. Gentleman’s point. I am also conscious of time, so I do not think that I will be able to make my entire legal presentation. He very kindly said in his speech that I was alive to the issues, which I hope I can demonstrate towards the end of my speech by setting out where my thinking is moving to.
As the right hon. Gentleman rightly said, the Government’s role is to ensure that the fundamental promise of a DB scheme, as set out in its rules, is met. Whether discretionary payments are made must be a matter for the trustees and the sponsoring employer. The Government have no power to intervene to require a scheme to pay an annual increase above that required by the law or to go beyond the rules of the scheme.
It is up to trustees and sponsors to agree how their specific scheme should be run in the best long-term interests of all parties. It would not be appropriate for the Government to interfere in decisions made by individual schemes, beyond setting clear and reasonable minimum standards that apply to all schemes, including through regulation.
Cost of Living: Pensioners
Alistair Carmichael Excerpts(3 months, 2 weeks ago)
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Wendy Chamberlain
I am grateful to the hon. Member. I agree that many people feel they are being held hostage by the vagaries of energy prices and systems. Although the cap and other measures have gone some way to helping with that, there is no doubt that it is a huge challenge. It also demonstrates why the triple lock remains required.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
While we are on energy prices, I am acutely aware that, as we speak, pensioners in my constituency are having to brave serious snow conditions and, because we have the highest level of fuel poverty anywhere in the country, they will feel literally and metaphorically out in the cold. Does my hon. Friend agree that Ofgem has a role to play in the creation of a social tariff, or even a geographically-based tariff?
Wendy Chamberlain
One challenge in my right hon. Friend’s constituency is the number of his constituents who are off grid. We know that there is a lack of regulation in the sector off grid. One other challenge for the Government in responding to energy price fluctuations was getting a lot of money out to many people easily, and administrative issues materialised for those off grid. Many of them have still not seen the money to which they are entitled. We need to look at better regulation of our energy system.
I was talking about the Future Pension Centre and the challenges experienced by many constituents across the UK in topping up their pensions. I tabled a presentation Bill on the issue to extend the deadline and was glad that the Government took that up. In responding, will the Minister tell us what discussions he is having with His Majesty’s Revenue and Customs about making its systems align and function properly? If those systems were working as they should, many constituents would not have a gap to fill in the first instance. Will he consider implementing a proper receipting system so that older people have proof of payment as they do with any other transaction?
We know that errors by the Department for Work and Pensions are all too commonplace; we need only to look at the experience of the WASPI women—the Women Against State Pension Inequality—to see that. Those women, through no fault of their own, lost their ability to plan for their retirements. They lost their financial autonomy. Many of them continue to live in poverty, while others have sadly died without seeing any compensation.
I know that we are all awaiting the final report of the ombudsman setting out its recommendations for compensation for the WASPI women, but in the meantime will the Minister agree to meet me to discuss the next steps? He and I worked successfully together on the all-party parliamentary group on ending the need for food banks before he took on his current role, and I hope that we can do so again.
I return to pension income and want to raise pension credit with the Minister. This top-up benefit is the simplest tool at the Government’s disposal to lift pensioners out of poverty. It feels like every year we have a new attempt at increasing uptake with a fancy leaflet or other information campaign. I am sure we all go to the drop-ins, have our pictures taken and share them with our constituents, but pension credit take-up remains stuck at 63%, which suggests that the campaigns simply are not working. Pensioners either do not know about the benefit or do not realise they are eligible, or some struggle with the stigma of being seen to claim it.
I have been in this role for more than three years, and I have spent a lot of time having conversations about how to improve uptake. Clearly, an annual leaflet is not doing the trick. We need a long-term strategy on pension credit uptake with two key focuses: how we share data to identify people eligible for pension benefit, and how we target them efficiently and effectively so that they actually claim it and do not feel stigmatised?
Oral Answers to Questions
Alistair Carmichael Excerpts(4 months, 2 weeks ago)
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Jo Churchill
The UK hospitality industry does a fantastic job, particularly at this time of the year when it is helping us to enjoy the festive season. I am providing help and collaboration by delivering pilot schemes across the industry. In particular, we are developing a more standardised approach to training, which includes a proposal to award a hospitality skills passport. We need to do all we can with workers to build confidence and the right skills. I am interested by my hon. Friend’s idea of helping employers to refocus where the needs are, and I shall be happy to work with him, because hospitality offers a great career and transferable skills.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Parliamentary Under-Secretary of State for Work and Pensions (Paul Maynard)
I am fortunate in having already been able to meet representatives of the Pensions Regulator twice since my appointment to discuss the full gamut of their responsibilities.
Mr Carmichael
Members of the BP pension scheme, a defined-benefit scheme, have seen the value of their pensions fall by 11% in real terms as a consequence of their senior management’s refusal to upgrade them in line with the cost of living, although the pension fund itself has a £5 billion surplus. Does the Minister agree that if the rules allow companies such as BP to deal from the bottom of the deck when it comes to their own pensioners, these are rules that need to be changed?
Paul Maynard
That is certainly something I need to look into. When people raise the issue of specific pension schemes, I am always conscious of just how many thousands of scheme members are potentially watching, so I do not wish to speak off the cuff and raise hopes that I may not be able to fulfil. However, I shall be happy to meet the right hon. Gentleman to discuss the circumstances in greater detail and see what can be done.
Oral Answers to Questions
Alistair Carmichael Excerpts(5 months, 2 weeks ago)
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Mel Stride
The hon. Gentleman raises mortgage payments in particular; we have extended the scope of the support for mortgage interest arrangements, particularly for those who have not long been on universal credit. I cannot comment on what may or may not be in the autumn statement, but I can assure him that the kind of issues he has raised are always at the centre of our thinking.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Minister for Disabled People, Health and Work (Tom Pursglove)
The Department closely monitors all aspects of the assessment process, including how we assess fluctuating health conditions such as multiple sclerosis. Following the publication of the recent White Paper, we are looking at ways to further enhance the delivery of personal independence payments to all disabled people.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Orkney has the highest prevalence of multiple sclerosis anywhere in the world, so we have seen the problems caused by PIP assessments that do not cope properly with fluctuating conditions. We now have the adult disability payment in Scotland, but that still uses some of the same eligibility criteria. As the Minister carries out the review, will he speak to Scottish Ministers to make sure that we have a system that works for every MS sufferer, wherever they are in the United Kingdom?
Tom Pursglove
It is fair to say that I have a collaborative and strong working relationship with Ministers in the Scottish Government, and I would definitely be keen to talk them about the tests and trials that we are introducing, which I hope will help to better capture fluctuating conditions and help people to provide all of the right evidence as early as possible in the claim journey, so that we get people’s awards rights and make the right decisions. We should certainly look to work UK-wide where we can.
Budget Resolutions and Economic Situation
Alistair Carmichael Excerpts(1 year, 1 month ago)
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Mr Alistair Carmichael (Orkney and Shetland) (LD)
On a point of order, Madam Deputy Speaker. You will be aware that, earlier today, the Chancellor of the Duchy of Lancaster came to the House to make a statement on the security of Government devices. Apparently, in the future, Ministers and officials will not be allowed to have TikTok on their Government-provided device. I am sure that much of the support in the Chamber for that came as a result of the presumption that many of us made: that it would mean that we would no longer have to endure the sight of the Secretary of State for Energy Security and Net Zero on this young person’s app. It is now reported, however, that the right hon. Gentleman—who, I understand, wishes to be known as “the wolf of Whitehall” in future—has posted a meme on the app saying, “I’m not leaving.” Madam Deputy Speaker, how do we get some clarity on the Government’s messaging here? Surely a risk is a risk, whether it is on a Minister’s private phone or one provided by the Government?
Madam Deputy Speaker (Dame Rosie Winterton)
I thank the right hon. Gentleman for that point of order. As he says, there was a statement about this issue earlier. I am afraid that it is, in fact, not a matter for the Chair to rule on this particular aspect of TikTok and anybody’s name on it, but the right hon. Gentleman has obviously put his point on the record. I am sure that if Members sitting on the Treasury Bench feel that there is anything they need to feed back to any particular Department, they will do so. I think that we had probably better leave it at that, frankly.
Oral Answers to Questions
Alistair Carmichael Excerpts(3 years, 10 months ago)
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Guy Opperman
As the hon. Gentleman is aware, this dates from March 2008, when married women receiving a low-level state pension based on their national insurance record should have had their entitlement reviewed when their husband reached state pension age. The Department for Work and Pensions is looking into the matter, and we invite any individual who feels that they are affected to claim a state pension increase by contacting the Pension Service helpline or Pension Wise.[Official Report, 8 July 2020, Vol. 678, c. 4MC.]
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Secretary of State for Work and Pensions (Dr Thérèse Coffey)
I have regular conversations with my right hon. Friend the Chancellor, who is responsible for the coronavirus job retention scheme and the self-employment income support scheme, which have supported 9.2 million and 2.6 million people respectively—nearly 12 million people in total. He has set out how the schemes will be phased out during the autumn. The furlough scheme continues until the end of October.
Mr Carmichael
The position for people in the visitor economy in my constituency is particularly acute because of the highly seasonal nature of the trade. It has been described to me as being like three winters in a row. Does the Secretary of State accept, and will she prosecute the case within Government, that if some industries in some areas are to have a viable future, there will need to be special consideration?
Dr Coffey
I too have a coastal constituency with a significant tourism economy. As my right hon. Friend the Secretary of State for Digital, Culture, Media and Sport said, we are looking to get the tourist sector up and running as strong as possible, and extending it for as long as we can. That is a key part of the campaign. When it is back, we will invest heavily and ensure that we have a major campaign to encourage British people to take British staycations.
Oral Answers to Questions
Alistair Carmichael Excerpts(3 years, 11 months ago)
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James Cleverly
As I said, our long-standing position is that we do not support the annexation of parts of the west bank, as doing so could make a sustainable two-state solution harder. We support actions by the Israeli Government and the Palestinian Authority that take us closer to a sustainable two-state solution, and we express our concerns about anything that might put that at risk.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Minister for Asia (Nigel Adams) [V]
There have been a number of concerning recent developments in Hong Kong. As co-signatory of the joint declaration, the UK expects the mainland Chinese authorities to respect Hong Kong’s high degree of autonomy and the rights and freedoms provided in that legally binding treaty. We are monitoring the situation very closely and will provide a full assessment of implementation of the joint declaration in six-monthly reports to Parliament.
Mr Carmichael [V]
Beijing’s top political office in Hong Kong recently referred to pro-democracy protesters as a “political virus” and declared itself as being entitled to interfere in Hong Kong as it sees fit—clear breaches of the joint declaration. What plan do the Government have to help British national (overseas) passport holders in Hong Kong, should the deterioration of relations continue?
Oral Answers to Questions
Alistair Carmichael Excerpts(5 years, 5 months ago)
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Amber Rudd
The hon. Gentleman has raised quite a few points. Let me start by congratulating his constituency and celebrating the fact that there are only 220 people there without work. I hope that the roll-out of universal credit will help them to find the additional work that they seek. He has raised a number of issues about the cost of living in his constituency. If I may, I will come back to him on those matters.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Parliamentary Under-Secretary of State for Work and Pensions (Justin Tomlinson)
The Welfare Reform and Work Act 2016 froze the majority of working-age benefits for four tax years from 2016-17. Those provisions will lapse in 2020, and the pre-existing statutory arrangements will come back into force.
Mr Carmichael
According to the Resolution Foundation, the value of working-age benefits has fallen by 6.4% since 2014. What does the Minister think it tells us about the Government of which he is a part that the Chancellor’s priority in the Budget was to give a tax cut to higher rate taxpayers like him and me, rather than addressing that?
Justin Tomlinson
The reality is that the poorest fifth in society are £400 a year better off in real terms, and the richest fifth in society are £800 worse off.
Oral Answers to Questions
Alistair Carmichael Excerpts(5 years, 6 months ago)
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Ms McVey
The hon. Gentleman is correct: there is a big disability gap in employment rates. That has come down, but we need it to come down even further. We have pledged to get 1 million more disabled people into work by 2027. Between 2013 and 2017, there were 600,000 more disabled people in work, but there is always more that we can do.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Secretary of State for Work and Pensions (Ms Esther McVey)
We are working closely with Her Majesty’s Revenue and Customs and stakeholders to ensure that our testing covers the full range of tax credit claimants. With parliamentary approval, our managed migration regulations will allow for transitional protection. This will make sure that nobody loses out financially when they are moved to universal credit.
Mr Carmichael
Yes, but for how long? One of the fundamental principles of universal credit was to design a welfare system where people would always choose to be in work. The money that the Chancellor took out in 2015 fundamentally undermined that principle, so will the Secretary of State speak to the current Chancellor about restoring work allowances to the levels originally planned?