Housing Benefit (Abolition of Social Sector Size Criteria)

Debate between Anne Begg and Steve Webb

Wednesday 17th December 2014 Commons Chamber

[Steve Webb]

I give way.

[Dame Anne Begg]

Will the Minister tell my Select Committee when we can expect the Government’s response to our report on housing costs, which was published in April?

[Steve Webb]

Even as we speak, officials are working on it and the hon. Lady will have it shortly.

The hon. Member for Edinburgh East (Sheila Gilmore) suggested that the comparison with the private rented sector was something of an afterthought. Uncharacteristically for her, she had not read the impact assessment we published in 2012, in which we made that very point.

We heard from some of my hon. Friends about how their local authorities have been very proactive in this area. We heard how, in Henley and in South Derbyshire, local authorities had substantially reduced the number of people affected by working with tenants. That is exactly the sort of thing that we want to see.

My hon. Friend the Member for St Ives (Andrew George), to whom I pay tribute on this issue, raised whether further mitigations were needed. Let me come to that point. We have a second motion before us, the Government’s amendment, which sets out the areas on which we agree. The areas where we agree are clear: we agree that it is unfair to say to private tenants and low-paid workers not on benefit that they have to pay for a spare room, but that for social tenants there should be a blanket exemption. The coalition parties also agree that the blanket application of the policy would not have been fair. That is why we have exempted pensioners, foster families, serving personnel living at home and disabled children who cannot share a room. In addition, we accepted that further mitigation would be needed. That is why large amounts of discretionary housing payments have been found. That is why an additional fund to bid for was found in 2013-14, and why additional money was found for rural areas. There is agreement between us on that.

In the light of the summer report that indicated the impact of the policy, the Liberal Democrats took the view that further mitigation was needed. Our view is that mitigation is needed for disabled people, adults who cannot share a bedroom, and those who do not have an alternative offer of accommodation. That point is made very clearly in the amendment. I hope my hon. Friends will support the amendment.

It is very easy to put down a simple motion saying, “Let’s have some free money. Let’s spend half a billion pounds reversing a policy, with no idea where the money will come from. Let’s not address the issue of overcrowding. Let’s not address the issue of the welfare budget. Let’s simply promise the voters more money and hope that they will buy it.” Evidence shows that they will not buy it. I therefore urge the House to accept our amendment.

Question put (Standing Order No. 31(2)), That the original words stand part of the Question.

Post Office Card Account

Debate between Anne Begg and Steve Webb

Tuesday 16th December 2014 Commons Chamber

[Steve Webb]

Yes, my hon. Friend is right. The front office counter framework was competitively tendered. The Post Office won because of its unrivalled network and what it was offering, and that meant that the contract could be awarded much more straightforwardly. Using the framework, we have already been able to award other contracts for DVLA counter services, for example, and the Post Office will be able to bid for other Government contracts as they arise.

[Dame Anne Begg (Aberdeen South) (Lab)]

In his statement and his reply to my hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Gregg McClymont), the Minister made it clear that the POCA will not become a transactional account, and it is therefore less likely to be suitable for people who have been moved on to universal credit. The Government promised that jam jar accounts would be developed. Clearly, the POCA is not going to be a jam jar account, as some people had hoped. What are the Government doing about this? Who is going to provide these jam jar accounts, because as yet we do not know of any?

[Steve Webb]

I am grateful to the Chair of the Work and Pensions Committee. We have not added features to the Post Office card account because, for example, adding direct debit means that the credit check threshold suddenly gets much more serious. Instinctively, I am with the hon. Lady on this. My approach would have been that the POCA is a good thing, so why should we not add nice things to it? We have not upgraded it, however, because one of its attractions is that people who have poor credit histories or who would struggle with some of the identity checks can be enabled to access it. In developing universal credit, my right hon. Friend the Work and Pensions Secretary is working with local authorities and the banking industry to look at different sorts of accounts, including, as the hon. Lady suggests, budgeting accounts. The basic bank accounts that were improved yesterday will be part of a suite. We intend that there should be the right sort of accounts for the right people.

Pension Schemes Bill

Debate between Anne Begg and Steve Webb

Tuesday 2nd September 2014 Commons Chamber

[Steve Webb]

I am grateful to my hon. Friend for that question. The number is substantially higher. I had to apologise to the Select Committee in oral evidence recently that we had grossly underestimated the success of our policy. We had thought that the staying-in rates for workplace pensions might be as high as two thirds, but in reality the number of people who, having been automatically enrolled, are staying in is touching nine tenths. Even so, with each passing month, as new figures come out, the sceptics keep saying, “Oh, as we get to smaller firms, the opt-out rates will shoot up,” but we are certainly seeing no evidence of that so far. I think there is a sense that people knew that they needed a pension and knew the value of an employer contribution and tax relief, and when we remove the barriers for them they are delighted to accept it.

[Dame Anne Begg (Aberdeen South) (Lab)]

May I be very clear that both the Select Committee and the Opposition welcome auto-enrolment and are very glad that it has been so successful, because one of the good things the coalition Government did was carry on the policy legislated for by the previous Labour Government? Perhaps some credit should be paid to them.

[Steve Webb]

The hon. Lady will be aware that there was a decade between the first stirrings of the Turner report and the implementation of automatic enrolment. She will also be aware that there is a risk—this is an important point and although I would not accuse the hon. Lady of doing this, perhaps it is relevant to her more partisan colleagues—of rewriting history on this issue. Had we implemented automatic enrolment as envisaged by the Opposition, it would have crashed and burned. Let me explain why I say that, because it is very important.

Had we auto-enrolled people into schemes without any prospect of a charge cap, they could have been exposed to something the Opposition call rip-off pension charges. When in government, the Opposition proposed no consumer protection on charges. Secondly, they would have auto-enrolled people the second their earnings were a pound above the threshold, so people would have been enrolled into pension schemes into which literally pennies were being put by employers and employees. That would have created derision and undermined auto-enrolment. Thirdly and crucially, auto-enrolment was envisaged without any reform of the state pension, so we would have had a state pension of about £5,000 a year and a means test of about £7,000 a year. Therefore, the first £2,000 a year of private saving would have been largely clawed back by means- testing. There would have been stories in the press of mis-selling and of people saying, “Why did I bother saving for a small pension?” I still remember a national newspaper journalist telling me that only when we reformed the state pension did we remove the fundamental objection to auto-enrolment for people on a low wage.

We would, therefore, have had rip-off charges, nugatory amounts going in and means-testing of savings; if we had not addressed those things, auto-enrolment would have failed. I believe that the coalition made that policy work and were right to do so.

As well as making sure that we have mass membership of workplace pensions, we have had to address a number of other crucial issues, including, as I have mentioned, scheme quality and ensuring that people do not face excessive charges. From next April, default funds for auto-enrolment schemes will be capped at 0.75%. Certain forms of charges over the coming years will be banned altogether. The so-called active member discounts, which mysteriously increase charges when someone is no longer an active member of a pension scheme, and commission charges and consultancy charges are all banned by this coalition Government. We are putting in place new measures to ensure quality governance of schemes—not just trust-based schemes but contract-based ones—with independent governance committees acting in the members’ interests for the first time.

This is a huge, positive agenda, but there are two big areas where further work is needed. The first is the move from defined benefit to defined contribution—a long-term, decades-long trend transferring risk from being wholly on the employer to being wholly on the individual. We remain concerned that that transference of risk causes problems for individuals and that we need to enable, encourage and foster risk-sharing models, and that is what this Bill does.

Secondly, what happens at the end? What happens when someone has accumulated a pension pot? What can they do with it? Again, the previous Government failed to address the fact that, all too often, people with a pension pot defaulted into an annuity with the provider they had already saved with and did not get the best value for money—they made a once-in-a-lifetime retirement choice that all too often resulted in poor value for money. That is why the Chancellor’s groundbreaking Budget announcements, which the Opposition are still fundamentally ambivalent about at best, were so important. They gave people freedom and choice in what to do when they have accumulated a pension pot. This Bill and the amendments that will follow provide for guaranteed independent guidance for people making those choices, which is something that far too many people do not have at present.

Quality Workplace Pensions

Debate between Anne Begg and Steve Webb

Thursday 27th March 2014 Commons Chamber

[Steve Webb]

I certain will, and it was very much the savers of Suffolk Coastal we had in mind. Active member discounts have been going on far too long. They are one of the hidden charges, and people are ignorant enough already of the charges in their pension schemes, through no fault of their own, even when they are active members, but when they move on to a new firm and a new scheme they probably have no clue what the charges are in the scheme they have left. Therefore, from April 2015 even schemes that retain active member discounts will be unable to go above 0.75%, which will stop many of them, and by April 2016 they will have to have been worked out of the system altogether.

[Dame Anne Begg (Aberdeen South) (Lab)]

The shadow Minister failed to persuade the Minister that the Opposition might have been responsible for some of these changes, but I wonder whether he will acknowledge that many of the measures he has announced today were recommended by the Work and Pensions Committee. In particular, we hope that we have played some part in ensuring that costs and charges are capped and transparent. He said that transaction costs will not be part of the cap but that there is some action on them. How likely is it that transaction charges will be part of the cap at some time in the future?

[Steve Webb]

I am grateful to the hon. Lady and hope that I acknowledged in my statement the contribution her Committee has made to some of the measures. On transaction costs, from this time next year trustees and governance committees will have a legal duty to obtain information about all costs and charges; we will be working with the Financial Conduct Authority, staring immediately, to try to define them all. The shadow Minister came up with a list the other day, but there will be things missing from it. As soon as a phrase appears in an Act of Parliament, the industry will change the name of it. We must therefore ensure that we are as comprehensive as possible. We are certainly open to the possibility that that should go in a charge cap. We would not want to do that in a way that discourages transactions that are in the interests of members, but clearly we want to avoid gratuitous transactions intended only to generate charge income, rather than to further the interests of members. It is certainly something we will return to, particularly in the light of the transparent information that will become available for the first time because of these measures.

Pensions Bill

Debate between Anne Begg and Steve Webb

Tuesday 29th October 2013 Commons Chamber

[Steve Webb]

My particular responsibility is automatic enrolment. We are about to put 10 million people into mainly defined-contribution pensions, the vast majority of whom, all things being equal, will then buy an annuity at the end. For understandable reasons, our focus in the past few years has been to get the infrastructure in place to get those 10 million people into pension saving and building up pension pots. Then, when they have a pension pot, we will ensure that they receive good value at the other end. There will be a set of people who will be auto-enrolled today and will retire tomorrow, but they are a minority. We need to get to grips with this issue. Annuity policy is led by our colleagues in the Treasury, which is why we are working closely with them. We hope to make further announcements soon.

Government amendment 31 relates to the Pension Protection Fund compensation cap. In Committee, we amended the Bill so that workers entering the PPF would have a more generous cap if they had been long-serving employees. The amendment applies the same provisions to people who are already in the PPF. We will not go back years and increase pensions retrospectively, but once the Bill and secondary legislation are passed we will increase their pensions going forward in line with the provisions we have already made for new employees going into the PPF.

[Dame Anne Begg (Aberdeen South) (Lab)]

Will the Minister explain what the position will be with regard to the cap for those who are in the financial assistance scheme and are not yet in the PPF?

[Steve Webb]

I am grateful to the Chair of the Select Committee. As she knows, the PPF scheme is funded by the PPF levy, and the financial assistance scheme is funded directly by the taxpayer. I think the FAS will be moving next year to the Department’s annually managed expenditure budget, so we will then have to find taxpayers’ money to make a parallel change to the FAS. We are continuing to reflect on whether we should do so. No final decision has been made, but I understand the case for some matching change.

To conclude, the change to the compensation cap will mean that relatively small numbers of people—who, having worked for their firm all their life, should have got a good pension, but on whom the cap was biting particularly harshly—will now get a fairer pension, which has been widely welcomed by those affected.

In summary, this section of the Bill deals with making automatic enrolment and private pensions work. Automatic enrolment has been a great success so far, but there have always been a lot more aspects to sort out, small pension pots being one in particular, scheme quality another. I am delighted to say, therefore, that this is the week we finally tackle the scourge of excessive pension charges, and I commend the Government amendments to the House.

Debate on the Address

Debate between Anne Begg and Steve Webb

Wednesday 8th May 2013 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

I am glad to be given the opportunity to speak in this debate.

There have been a few comments, particularly from Opposition Members, suggesting it is a rather thin Queen’s Speech, containing not many Bills, but one of its meatier measures is the pensions Bill, which will set up a single-tier state pension. I hope you do not mind, Mr Speaker, if I spend all my time talking about that Bill, partly because my Select Committee, the Work and Pensions Committee, was asked to carry out the pre-legislative scrutiny. It is the one Bill in the Queen’s Speech that is greatly relevant to my Committee’s work, and I understand it will be published tomorrow, so today is my last chance to record some of the Committee’s observations. I understand that the Government’s response to our report will be published as a Command Paper at the end of the week. I suspect that both the Bill and the Command Paper have already gone to the printer, so what I say this afternoon will probably not change the Government’s intention, but it is worth rehearsing some of the arguments that my Committee found important enough for the Government to take into account during the deliberations on the Bill in both Houses.

Why is the Bill so important? Anybody who is under state pension age as of April 2016 will be affected by it. The only people who will not be affected by the introduction of the single-tier state pension are those who will have already reached their pensionable age. The fact that 2016 is the year in question is a bit of a bone of contention, because when my Committee undertook its scrutiny and asked for evidence from a range of people, including the industry, individuals and anybody who wanted to have a say, we thought that the starting date would be April 2017. When we took oral evidence, including from the Minister of State, Department for Work and Pensions, the hon. Member for Thornbury and Yate (Steve Webb), at the end of our inquiry, we still thought that the implementation date would be April 2017. It came as a bit of a shock, and was a wee bit to our annoyance, that the Chancellor announced in the Budget that the implementation date was to come forward a year to April 2016.

We interrogated the Minister thoroughly about whether even April 2017 was an achievable time scale or would slip, because we thought it was a pretty tight time scale in which to implement the changes. It therefore came as a bit of a shock to discover that the Government hoped to do it a year sooner. We had not been in a position to ask the industry and employers, in particular, whether they would be ready to implement the changes in 2016.

Notwithstanding the fact that we generally welcome the introduction of a single-tier state pension, it is inevitable and obvious that the Government have continued to roll out auto-enrolment, for which they should be commended. Given that more and more people will have their own second-tier occupational pension, some kind of reform of the first-tier basic state pension has become almost imperative. However, it will not be easy to get from the extremely complicated and convoluted pensions landscape of today, which has a second tier through the state earnings-related pension scheme or the state second pension as well as occupational pensions, to something straightforward and simple. That is what the Government are attempting to do in the pensions Bill.

As the Government have brought forward the implementation date by a year, the Committee thinks it is even more important—we thought it was important anyway—that a proper impact assessment of the changes is done sooner rather than later. We hope that when the Government publish their response to our report at the end of this week, there will be a promise to that effect.

Different sectors will be affected differently, and some groups will inevitably lose out. In any major change there are bound to be winners and losers, but it is not yet clear who they will be under these changes. I hope that a further impact assessment will be performed because we need to know how the changes will impact on individuals, the pensions industry, and particularly employers.

[The Minister of State, Department for Work and Pensions (Steve Webb)]

May I record my appreciation of the work done by the Work and Pensions Committee in scrutinising our Bill on a compressed timetable? We will publish a new impact assessment on Friday alongside the Bill, and a response to the Committee. I assure the hon. Lady that the Bill will be amended in the light of her Committee’s recommendations.

[Dame Anne Begg]

I am delighted to hear that and perhaps we will come back to the Bill if it is not amended enough.

We welcome the single-tier pension because it will generally mean more state pension for those who have the least. Groups that have lost out in the past with regard to the state pension will benefit—they will generally be women, carers, people with broken work records, and those such as the self-employed who have been unable to build up any kind of second state pension. They will see the immediate benefits of the introduction of this system.

There will, however, be those who lose out, and one main change will affect those who have already made decisions about their retirement. At the moment, someone can qualify for a full state pension after 30 years of national insurance contributions. The Bill increases that to 35 years, but there is already a group of people who have decided to retire although they have not reached pensionable age. They will not necessarily be in a position to build up 35 years of national insurance contributions before they reach the new single-tier pension. The Committee makes recommendations about buying back national insurance years and contributions, but a huge communications job will be necessary to ensure that people are aware that the number of qualifying years has now changed. I will say more about communications in a minute.

It was interesting that the Minister went on the airwaves earlier this week with regard to one group of people who will definitely lose out—women who get only a pension derived from their husband’s contributions. I am not sure why the Minister spoke about that in terms of the wives of expats, but it was possibly because a large number of those who will be affected by this measure live abroad. The measure will, of course, also affect women in this country. That seems to have come as a complete surprise to many and perhaps explains why a lot of people think they will be better off under the new system when in fact they will not because their spouse will not qualify for any of the new derived rights. Basically, what used to be known as the married woman’s allowance is going for everyone.

The Committee has a recommendation for the Government:

“We welcome the Government’s sensible transitional solution to the potential adverse impact on employed women who chose to pay reduced NI contributions under the Reduced Rate Election—”.

That was often called the small stamp or the married woman’s stamp. It was a long-running sore that had never been cured, so good on the Government because it has now been solved. They have come up with a transitional arrangement that will allow women who paid the small stamp to get full credits and qualify for the single-tier extension.

That does not apply, however, to those who will get nothing as a result of the abolition of their derived rights. The Committee report states:

“We believe that it should also be possible to find a solution for another small group of women: those who did not build up their own NI record because they had a legitimate expectation that they would be able to rely on their husband’s contributions to give them entitlement to a Basic State Pension. One option might be that women in this position who are within 15 years of State Pension Age should be able to retain this right. We recommend that the Government assesses and publishes the cost of providing this option for the relatively small number of women affected. We believe that, for those further from retirement, there is sufficient time for them to plan on the basis of the new rules.”

One reason we chose the period of 15 years from retirement was that it had to be more than 10 years. The Bill says seven or 10 years, but the Committee recommends that it should state anything up to 10 years, because people will probably need to have 10 years’ worth of contributions before they get any state pension—they will get nothing for less than 10 years’ worth of contributions. The Committee believes that people within 15 years of retirement with no national insurance contribution, who would have expected to get their pension through their spouse, should be protected, and that there should be transitional arrangements for them. Anyone further away can make up some of the shortfall—not all of it—in the intervening time.

Housing Benefit (Under-occupancy Penalty)

Debate between Anne Begg and Steve Webb

Wednesday 27th February 2013 Commons Chamber

[Steve Webb]

I have given way three times to the right hon. Gentleman, and I want to make further progress.

[Dame Anne Begg]

Will the Minister give way?

[Steve Webb]

Before I do, I shall give way to the hon. Lady.

[Dame Anne Begg]

The Minister seems hell-bent on introducing this policy, but he might be able to protect some people. I think he accepts that some people will not be able to move because no suitable property is available. They will not be able to afford the shortfall and will therefore fall into housing rent arrears and could be evicted. At that stage, they become “intentionally homeless” and end up at the bottom of any housing list. Will the Minister look at that further to see whether he can do anything to ensure that someone in that position because of housing debt is not deemed intentionally homeless? Otherwise, such a person stands no chance of getting social housing again.

[Steve Webb]

I am grateful to the hon. Lady. The point of the policy is not for people to be evicted, which would raise costs for the Exchequer and for the individual, but to ensure that existing housing stock is fully occupied.

Let me try directly to address the issue of the shortfall. There were two ways in which we could have approached the matter, one of which was blanket exemptions, which is what we did for pensioners. I am grateful to the hon. Member for Banff and Buchan for making it absolutely clear in opening the debate that pensioners are not covered by this change.

It is clear that we wanted to protect another set of people. Let me deal with the example of foster children, whom my right hon. Friend the Member for Bermondsey and Old Southwark (Simon Hughes) mentioned. The position on foster families is, I think, shared across the House. If people need a spare bedroom for a foster child, we want to make sure that they have one, and we want to support fosterers. The question is whether that is done better by some blanket exemption or by what we have done in costing what it would take to meet the shortfall for those families and giving the money to local authorities so that a foster family for which this was an issue—it might not be an issue for all of them—can approach the authority and have the shortfall made up.

My right hon. Friend the Secretary of State and I are entirely open to discussing whether that is the most effective way of delivering that support. Our judgment was that discretionary housing payments gave local authorities the discretion we would want them to have. If for any reason that message is not getting through and is causing anxieties to foster families who do not know about DHPs, for example, or if local authorities have not communicated well enough, we would be happy to look at whether this is the most effective way of supporting families. Where there is a shortfall, discretionary housing payments for this and other measures are available. We want to make sure that people use them when they are in genuine need. Eviction is clearly not something that we are seeking to achieve.

State Pension Reform

Debate between Anne Begg and Steve Webb

Monday 14th January 2013 Commons Chamber

[Steve Webb]

My hon. Friend is right. In every interview I have done today, we have had to spend about 20 minutes explaining how the current system works before we deal with the change. I welcome the fact that consumer organisations such as Age UK, although it has questions about the details, has warmly welcomed the principles of our reform.

[Dame Anne Begg (Aberdeen South) (Lab)]

I thank the Minister for his statement and for listening to the most recent report on pensions by the Work and Pensions Committee. When we looked at auto-enrolment, we said that a flat-rate state pension was important. On behalf of the Committee, I accept his invitation to conduct pre-legislative scrutiny.

The final outcome of the pension reform will, we hope, be a simple and easy-to-understand state pension, but already, from this afternoon’s exchange, it sounds as though getting there will be incredibly complicated. Will the Minister give us an idea of how long the transitional arrangements will be in place? I suspect that the Committee will spend a great deal of time analysing those arrangements to ensure that they are fair.

[Steve Webb]

I am grateful to the hon. Lady both for her Committee’s report calling for the state pension to be sorted out and for her willingness to undertake the scrutiny. We will work closely with, and support, her Committee in doing that. She is absolutely right: transition is the messy bit. With pension reform, it would be lovely to start with no history and a blank sheet of paper, but we cannot do that. The straight answer to her question, however, is that transition is particularly important for those closest to pension age, who will have a complex history and rights built up. For younger workers, it is straightforward: they will do the 35 years and get the £144. Transition is complicated and messy in the early years, but it quickly works its way through the system, and we have worked hard on the statements we will send to people. They will be clear and say, as it were, “Under the bonnet, the workings might be complicated, but you’ve got this so far. Do this many years, and you’ll get £144.”

Benefits Uprating

Debate between Anne Begg and Steve Webb

Tuesday 6th December 2011 Commons Chamber

[Steve Webb]

My hon. Friend is quite right that we have already taken, I think, just over 1 million families or individuals out of tax. We have a long-term goal of a £10,000 tax-free allowance, which would take out millions more, but what is often not understood is that couples in which both members go out to work to make ends meet get twice as much benefit. Each benefits from the personal tax allowance increase, so it helps precisely those most hard-pressed families in which both parents work all hours to keep their family going.

[Dame Anne Begg (Aberdeen South) (Lab)]

People can get the uprating only if they get the benefit in the first place, and, despite what the Minister said about protecting those who have worked hard all their lives, there is a measure in the Welfare Reform Bill which time-limits contributory employment support allowance to one year, so a large number of people who work all their lives but drop out of work because of ill health will get nothing after that.

[Steve Webb]

As the hon. Lady, the Chair of the Work and Pensions Committee, knows, that is a measure in the Welfare Reform Bill being considered in another place, but we have put in place two safeguards—that the most sick and the most poor are protected. In other words, those in the support group will continue on an un-time-limited basis to get ESA, and those with no other household income will continue, through income-related ESA, to be helped. So, at a time when we have to find savings, protecting the most vulnerable and the poorest seems to us to be a priority.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 28th November 2011 Commons Chamber

[Steve Webb]

As my hon. Friend points out, at the moment not only do literally millions of people in the private sector not have a moderate pension; they have no pension at all. Auto-enrolment remains key to our policy goals, and as I just observed, more than half the work force will have been auto-enrolled by the next election.

[Dame Anne Begg (Aberdeen South) (Lab)]

I am disappointed to hear that there will be a delay in the roll-out of auto-enrolment, but I appreciate that the Minister was under a lot of pressure from noises off to bring in some exemptions, so I am pleased that that is not to be. What guarantee can he give to businesses, however? They need an absolute guarantee that the scheme will go ahead on time and to a new timetable, and that there will be no stepping back by the Government.

Pensions Bill [Lords]

Debate between Anne Begg and Steve Webb

Tuesday 18th October 2011 Commons Chamber

[Steve Webb]

I hope that the hon. Lady will forgive me if I do not; I have given way to her twice already.

New clauses 9 and 10 relate to the role of NEST, which I mentioned a moment ago. New clause 9 suggests that in a couple of years’ time we should review transfers into NEST, and new clause 10 suggests that we review contribution limits at the same time. It is worth reminding the House why NEST was constrained when it was established. There was a recognition that there is a market for big firms and higher earners—pension providers are willing to provide at a reasonable cost and to go to such firms. However, for small firms and lower-paid workers, there was a market failure. NEST was designed to fill that gap in the market.

First, the Government created a legal duty for firms to enrol people, so we ensured that there was something to enrol people in. That is what NEST is for. Secondly, we could have created NEST and imposed no constraints, and it could have been just another provider, but because we constrained NEST to consider lower-paid workers and smaller firms, it has innovated in an impressive manner. The previous Government envisaged such constraints. The Work and Pensions Committee has visited NEST and was positive about what it found. Forcing NEST to focus on lower-paid workers, smaller firms, and people who do not speak “pensions” or who are uninterested in them, has created impressive product, investment strategy and technological innovation, which is entirely welcome. Creating NEST with constraints was the right thing to do, and it has been beneficial.

[Dame Anne Begg]

If NEST is to work, people must have confidence in the products that are going to be delivered. However, there is a danger that other providers muddy the waters of what is on offer. For instance, a Federation of Small Businesses booklet says that it will offer a comparable pension provider with which firms can auto-enrol their workers. The charge is 0.75% to FSB members and 1% to non-members, but they are not comparable prices. What can the Minister do to ensure that such misinformation does not divert people away from NEST?

[Steve Webb]

I am grateful to the Chair of the Work and Pensions Committee for drawing my attention to that document, and I am keen to see a copy. Pensions selling is, broadly speaking, regulated by the Financial Services Authority. Claims about pensions need to be accurate. NEST charges are the equivalent—on an average pension—of around 0.5%, as the hon. Lady knows. The suggestion is that a charge of 0.75% or 1% is “comparable”. We can compare anything with anything, but the comparison is not always favourable. She raises an important point, and the pensions regulator and the FSA will seek to ensure that people are given accurate information about pensions.

The right hon. Member for East Ham (Stephen Timms), who speaks for the Opposition, will be well aware that the Government already have a duty to review NEST after the five-year roll-out of auto-enrolment. New clauses 9 and 10 would not repeal the other duty, so they would mean a review in two years and another one three years after that. The earlier review would be premature and unhelpful in the middle of the roll-out. One might want to tweak 1,001 things, but a review in the middle of roll-out would create uncertainty when the next tranche of firms is choosing which provider to go for. Will NEST have its limit lifted? Will the transfer ban go? Those questions would mean yet more turmoil. An element of certainty in the auto-enrolment process, which has been iterated quite a lot, would be welcome.

The right hon. Gentleman will know that the Government had our own review—“Making automatic enrolment work”—last summer. It said that in the end, in 2017, the restrictions should go. I am entirely sympathetic to that proposition, but deciding that today, or reviewing the situation in the middle of the roll-out, is not the best way forward.

--- Later in debate ---

[Steve Webb]

As we have made clear, people still have the right to opt in to auto-enrolment, but obviously the bulk duty will be at the tax threshold. There is a trade-off: we can have a low threshold, but that results in people being brought in for what are technically known as piddling amounts of money, for which the costs are disproportionate. The tax threshold appears to us to be broadly the right level, but as the hon. Gentleman will be aware, we have discretion in the Bill to look each year at the labour market and at what has happened to earnings and prices, and to make a judgment. That is the broad direction of travel, as recommended to us—

[Dame Anne Begg]

The concern that some of us have is not that the tax threshold will go up to £10,000—although that is the avowed intention of the Government—but that the gap between £7,400 and £10,000 is about £2,500. That group of workers earning under £10,000 might be ruled out of auto-enrolment, when they are the very people who should be auto-enrolled. The situation would be different if the threshold were going up by the rate of inflation, but can the Minister give some assurance that if there is such a leap, he will reconsider the threshold?

[Steve Webb]

It will clearly vary from individual to individual, but for many people, earning £8,000 or £9,000 is a transitory phase in their labour market experience, and they will move on to earn more than the tax threshold and so come within the scope of the provision. So even if the threshold is not raised, it will not make a lot of difference if someone is not in the scheme for that year. For some people, they or their household will already have pension rights accrued and it might even be right for them to opt out. People will have the chance to opt in to pension provision if it is particularly important for them, and it is right that they should. I accept that there are issues for that group, but for any line drawn one can ask, “What about the people just below?” If we enrol people for trivial amounts of money, we will undermine the whole credibility of the scheme.

We have now had a whistle-stop tour through half a dozen private pensions issues, and I look forward to hearing hon. Members’ comments. I commend new clause 2 to the House.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 18th July 2011 Commons Chamber

[Dame Anne Begg (Aberdeen South) (Lab)]

It was the Government who created the anomaly of half a million women being affected by the acceleration in the increase in the pension age, and it was the Government who said that they would make transitional arrangements. I was therefore astonished to hear the Pensions Minister say earlier that he was looking to the Opposition to come up with ideas for those arrangements. The Government have dug this hole, and it should be the Government who get themselves out of it.

[Steve Webb]

My right hon. Friend the Secretary of State said on Second Reading of the Pensions Bill that while we stand by its principles, we will indeed consider those who are most affected. We had hoped that the way to listen to the views of the House would be to listen to some fresh views in Committee, but unfortunately none was forthcoming.

Pensions Bill [Lords]

Debate between Anne Begg and Steve Webb

Monday 20th June 2011 Commons Chamber

[Dame Anne Begg]

There are much wider issues with raising the state pension age such as the fact that, towards the end of their working life, many people may start to take on less paid employment because they have taken on caring roles. My generation of women is often called the sandwich generation in as much as they are looking after elderly parents or other elderly relatives as well as looking after their own grandchildren, to allow their sons and daughters to go to work. That is the generation that is caught by the anomaly—a generation of women who, perhaps, were not able to work throughout their married life and have not necessarily built up the national insurance contributions that will give them a full state pension.

I am curious about the Government’s argument that the flat rate pension will miraculously mean that all women will get a state pension, when my understanding is that that pension will still be based on the number of years of national insurance contributions. That was brought down to 30 years in the Pensions Act 2007, so women can already qualify. That Act also made it easier for carers to qualify for credits. I see the pensions Minister is about to jump up. Perhaps he can clarify whether the qualification for the flat rate pension will not be 30 years of national insurance credits.

[Steve Webb]

The hon. Lady raises serious points. She is absolutely right—for the basic pension, those credits are already in place. The problem is that many of the women we are discussing will have done their child rearing before credits for the state second pension came in, so they will still retire with inadequate state pensions, which would be corrected under our proposals.

[Dame Anne Begg]

So those women will still have to have the 30 years of credits, but in respect of the SERPS element they will be the winners. But for every winner in all these changes, there will inevitably be losers, and there will be those who have paid their SERPS all their working life, including women who have paid the big stamp but not the small stamp. They are the ones who often feel aggrieved. As the Minister knows, pensions policy is a minefield covered in all those booby traps. As soon as one presses down on one thing, another pops up, making it all very difficult.

It is the group of women who were born in 1953 and 1954 who are being expected, at very, very short notice—five years’ notice—somehow to change their whole financial planning for their retirement. As I pointed out to the Secretary of State in an intervention, when the equalisation came in the warning that people were given ranged from 15 to 25 years. The evidence that I received from Age UK showed that 20% of women still have not realised that they are not going to get the state pension at 60 but will have to wait until they are 64 or 65.

That proves not that we have been lax in trying to inform or educate women about what state pension they can expect, but that it takes a long time for such things to sink in and for people to make arrangements. In the case of the current proposal, the women who will be most affected have just over five years’ notice. That is unfair and I hope the Government will look again.

State Pension Reform

Debate between Anne Begg and Steve Webb

Monday 4th April 2011 Commons Chamber

[Steve Webb]

I am grateful to my hon. Friend, who brings his great knowledge of these issues to the House and to the Select Committee of which he is a member. As he says, we need a simpler system. He will appreciate that these things take time; we will need to consult and then respond. In due course, we hope to legislate to re-programme the computers and so forth. As the Chancellor said, we are talking about some years to implement the reforms, but we are clearly keen to move forward as fast as we possibly can.

[Dame Anne Begg (Aberdeen South) (Lab)]

I was listening hard to the Minister’s reply to the shadow Minister, my hon. Friend the Member for Leeds West (Rachel Reeves), and I noticed that he provided no examples, in response to her request, of those who would be worse off as a result of these changes. There must be some losers. Presumably, they will include the group who enjoy pension credit now, but have not paid enough contributions to justify the new flat-rate pension. What will happen to that group? As for women, surely if they have not made the contributions, they will not be any better off than they are now.

[Steve Webb]

I am grateful to the Select Committee Chair for her questions. To be clear on the role of pension credit, we envisage that there will have to be a safety net under any system, and the Green Paper provides for consultation about what exactly that might look like. There will still be a guaranteed credit type system—a floor below which people cannot fall. In a single-tier pension world, the savings credit would no longer be necessary for new pensioners. In other words, the savings credit was invented by the previous Government to deal with the fact that 100% marginal tax rates were paid on any saving. Because we are not doing that any more, we will not need the savings credit for new pensioners, which helps to pay for the reform. It is less means-testing, more universal pension.

The hon. Lady rightly mentions the position of women and my point is that women under the current system, who often did their child rearing before the state second pension was introduced, have no protection at all, whereas they have basic pension protection. Under a single-tier world, they get protection at the full rate, so they will benefit from the reforms we are introducing.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 28th March 2011 Commons Chamber

[Steve Webb]

We recognise that payments do not always get through to landlords. There is a provision that allows direct payment when there are eight weeks of arrears, and we have added a provision under our new rules so that direct payment can be made to a landlord when it will secure or maintain a tenancy.

[Dame Anne Begg (Aberdeen South) (Lab)]

I was contacted last week by a constituent who is in her 50s, has advanced multiple sclerosis and lives in a residential home. Her elderly mother has moved into a nursing home on the other side of Aberdeen. The taxi that allows my constituent to visit her mother costs £50 there and back—exactly the amount she gets from the mobility component of disability living allowance. Will the Minister guarantee that my constituent will continue to have access to those funds after the changes to DLA, and that she will not have to go through a reassessment to make sure that she really deserves it?

Housing Benefit

Debate between Anne Begg and Steve Webb

Thursday 10th March 2011 Westminster Hall

[Steve Webb]

The phrase “lose their homes” is rather evocative and misleading. When people say that they have lost their home, they are usually describing repossession—their home; their loss. What the hon. Lady describes is someone who has presumably managed to sustain a very high rent—if the shortfall is £5,000 in three months, the rent must be enormous.

The suggestion that the taxpayer should keep paying a vast rent while the claimant decides whether to stay in the property brings me back to my fundamental concern about the tone of the debate, which relates to balancing the responsibilities of the individual and of the Government. It was evident to some extent in the remarks made by the hon. Member for Aberdeen South, and particularly in other contributions, that almost every combination of circumstances, every possible need and every possible variation was deemed to be responsibility of the Government.

The hon. Member for Hampstead and Kilburn (Glenda Jackson) mentioned our response to the Committee’s report and some specific needs. For instance, she said that people living in a larger house might need somewhere to put a wheelchair and questioned whether it should be included in statute. The implication of what Committee members were saying is that they did not want it decided on a discretionary basis, but wanted it written into law. The point about our allowing an extra bedroom for carers is that we have legislated for it; after deciding on a category of clearly identified people and clearly specified needs, we wrote it into legislation, and it has become a right. However, there is a dividing line between identifiable, clearly categorised groups with particular needs and the much broader group listed in the Committee’s recommendations that may need a room for a wheelchair or something else.

The question is not, “Do we give a damn?”—I am sorry; I mean, “Do we care?” The hon. Lady implied that the Government do not care and that we are telling people to get lost. No; as my hon. Friend the Member for Cardiff Central (Jenny Willott) said, the Government believe that some needs should be written into statute, which we have done in cases where previous Governments did not act. However, other needs are so diverse that we should have the local flexibility to respond when the need arises. That is better than sitting down in Whitehall, trying to think of all possible circumstances and writing primary legislation to deal with them, which is not a sensible way to proceed.

[Dame Anne Begg]

That is not what I or others were asking for. In other areas, we use proxies or other measures to help passport people into getting greater help. For instance, there is a good chance that someone on the highest rate of the disability living allowance care element will need extra housing. That factor would give them the right to apply for more housing benefit. It works with the council tax system, under which those who need more space as a result of a disability can get the council tax reduced to a lower band. It is straightforward and simple. The problem with discretionary payments is that not everyone gets them, because they can be refused.

[Steve Webb]

The hon. Lady has said that proxies can be used, which means that we can identify categories of people to whom additional concessions should be made. That is what we did with the extra bedroom for the carer. The report specifically mentions people who need an extra room for a wheelchair. People on certain rates of disability benefit will almost certainly have a wheelchair but live in a house that can accommodate it; others will live in houses that need another room for the wheelchair. Rather than trying to categorise everyone in the same way, the flexibility of the discretionary system allows us to cater for those differences.

I was pleased to hear the hon. Member for Westminster North say that we have to work within our resources. That was a heartening comment, because every pound spent on another recipient or on further delays and concessions—on everything that has been asked for today—comes either from someone else covered by the housing benefit system or from our contribution to tackling the deficit, which is one reason for the reforms.

The hon. Member for Stockton North (Alex Cunningham) said that it is a difficult time for local government, implying that the Government just fancied cutting council budgets by 25% because of what he called an evil Tory-led, or Liberal Democrat-Conservative coalition plot. We all knew that this would happen, because substantial cuts in local government were coming down the track anyway. It is important to acknowledge that that is the backdrop against which we are operating. This is not an environment in which there is money kicking around. It is not as if we can resolve all these problems and delay tackling the remorseless rise in the housing benefit budget. Every £1 billion that goes on housing benefit every year is £1 billion that the low-paid, hard-working taxpayers, who are our constituents, will have to find.

--- Later in debate ---

[Steve Webb]

That is where I fundamentally disagree with the hon. Lady. The flaw in her analysis is this static view of the world: housing stock and the private sector is as it is and nothing can ever change. The figures that she quoted from the impact assessment assume that nothing changes. The losses she quoted assume nothing changes. Nobody can find somewhere cheaper to live; they just stay where they are and lose the money. Rents do not go down; they stay exactly as they are. The impact assessment from which she quoted is the worst-case scenario.

However, what actually happens is different. Let me give an example. If we were able to reduce rents by £10, that would wipe out nearly 500,000 people with shortfalls. One of the questions that was asked in the debate was: how will landlords respond? Guess what? When landlords were surveyed, they said, “Oh, we won’t cut our rent.” Well, there is a shock. Of course they would. They do not want these cuts because they are the ones who will be most affected. I was very surprised by the hon. Member for Brighton, Pavilion (Caroline Lucas) for whom I have a lot of respect—sadly, her contribution was 90% polemic and 10% substance—because she seemed to be defending private landlords. They are the people who get this money. They are the people who have got the £21 billion that used to be £11 billion 10 years ago. I did not know that they were her best friends. That is where the money is going.

The question is: if we go to direct payment in cases in which it will secure a tenancy, will landlords bite? We have 1 million private sector tenants on housing benefit. We have all seen adverts that say, “No housing benefit” but there are also 1 million people with private sector landlords getting housing benefit. Therefore, someone out there is renting to people on housing benefit. If a private sector landlord is renting to someone whose housing benefit gets squeezed and they or the council says to them, “You can have a guaranteed rental stream straight into your bank account month after month if you will reduce your rent to a level that will enable the tenancy to carry on” that is hugely attractive. It is turning a tenant into a triple A credit-rated tenant rather than someone who may or may not pass on the rent.

[Dame Anne Begg]

rose—

[Glenda Jackson]

rose—

[Steve Webb]

I will give way in a moment. Landlords are quite clear that that is hugely attractive to them. It is worth shaving the rent for, and that is often all that it would take.

[Dame Anne Begg]

It is actually possible to accept the Minister’s argument. The problem is the Government are about to introduce universal credit, which will make direct payments impossible, unless he has a different idea.

[Steve Webb]

We are focusing specifically on the roll-out of these changes over the next two years. Over that period, before universal credit comes in, this mechanism will be in place. Clearly, there is plenty of time to work out ways of underwriting the rent to the landlords combined with the universal credit. The crucial point is that this is a transitional issue, although there are longer-term aspects as well. It is in this transition—the crucial period in which the housing market adjusts—that the mechanism will be most effective.

[Dame Anne Begg]

May I make a suggestion to the Minister? It is that very point that concerns the housing associations, which already have direct payments. They are terrified that under universal credit, there will be no direct payment, which could undermine their whole ability to get us out of this mess by building more houses because they are not able to borrow the money. That is a serious concern.

--- Later in debate ---

[Steve Webb]

As such a wide range of issues were raised during the debate and a number of hon. Members have contributed to it, I will make a bit more headway and then I will be happy to give way again.

I was about to describe the evaluation and assessments that we will be carrying out, because a lot of the points that were raised during the debate were about particular groups of people. I want to identify the facets of the research that we will be undertaking.

To ensure that we gather the evidence required on key areas of concern, such as the behavioural and market responses of claimants, landlords and external organisations, we will commission primary fieldwork that will cover a number of issues, which I will now take the House through. They are: homelessness and moves; the single shared accommodation rent, which I will come back to later because there were a lot of misconceptions about that during the debate; the impact on Greater London, which is explicitly in the terms of reference for the research; the impact on rural communities, which I think has been mentioned in the debate; the impact on black and minority ethnic households, which has been mentioned; large families, family life and children’s education, and schools, for example, were mentioned in the debate; older people, who were mentioned in the debate; people with disabilities; working claimants; landlords, and housing and labour markets. There will be comprehensive evaluation that will start imminently and that will run over a two-year period. We will be watching—very carefully—what goes on and we will be reforming the system, with measures such as the allocation of discretionary housing payments.

Discretionary housing payments are quite important. Although the allocation of those payments for 2011-12 has been determined, the allocation has not been determined beyond that time. The total budget has been determined and it will treble. This year, it will be £20 million and then it will be £60 million a year for the next three years. We will treble the total budget. However, where the money goes will be informed by the early roll-out and by the research. We will base the policy on the evidence about the impact on the ground. If there are particular areas—hot spots—where there is particular pressure, we will be able to gear the discretionary housing payments money to those areas.

I enjoyed the observations of the hon. Member for Aberdeen South, who is the chair of the Work and Pensions Committee, about how often we refer to discretionary housing payments. I take her point. I read the Government response myself and I noticed the same thing. However, there is a reason for it. It is that the Select Committee’s report quite properly identified specific sets of circumstances that need to be addressed and they will be addressed by a response that is tailored to the local situation. If there are particular geographical areas where there are particular local pressures—we heard about a number of such areas during the debate—the DHP system will be tailored to those areas. It is almost a circular argument. That is the reason why the DHP system is our answer to most of the questions put to us, because it is the best way to respond to different but equally significant local issues of the type that have been raised during the debate.

I now come to the issue of the shared accommodation rate. Technically, I know that the title of the Committee’s report is, “Changes to Housing Benefit announced in the June 2010 Budget”, but as the shared accommodation rate was covered in the report I will address it.

The question is, “Why do we pay a shared accommodation rate to the under-25s only, because many young people are sharing and is it fair”—to come back to the point about fairness made by my hon. Friend the Member for Ealing Central and Acton (Angie Bray)—“that someone in their early 20s on housing benefit can, in principle, get a flat to themselves but someone in their early 20s who is in work and beyond the reach of the housing benefit system has to share, because they cannot afford a flat of their own?” That is the thinking and in fact that was why the shared accommodation rate was introduced. I think that it was introduced about 15 years ago, if I remember correctly. It has certainly been a feature of the system for many years.

When we have looked at the 25 to 35 age group, we have found it striking that a very high proportion of individuals who are not on housing benefit in that age group are also sharing accommodation. The number of people sharing accommodation does not tail off dramatically at the age of 25. More than 40% of non-students—single people—in this age range are sharing accommodation in a range of situations.

Various questions were asked about shared accommodation during the debate. For example, “Is any of this sort of accommodation available?” One of the notable things is that about 50% of those being paid the shared accommodation rate now are over 25. We have to think about that for a moment. The shared accommodation rate is only imposed on the under-25s, but if someone applies for housing benefit from shared accommodation and they are over 25 they receive the shared accommodation rate, even though they could receive housing benefit for a one-bedroom flat. There is a set of people over the age of 25, therefore, who could receive housing benefit for a one-bedroom flat but who are living in shared accommodation. That suggests, first, that some of those people have chosen to do so and, secondly, that the properties of that type exist. That helps to counter the suggestion that those properties simply do not exist.

Of course, there will be local variations. I accept that point and I will come back later to the point about houses in multiple occupation. However, I think that the hon. Member for Aberdeen South, the Chair of the Select Committee, wants to intervene.

[Dame Anne Begg]

Again, I suspect that the group of people that the Minister is talking about were already in that shared accommodation, which illustrates that people do not like to move house because of the upheaval involved. It also illustrates that not everybody is out to milk the system and receive the maximum amount of housing benefit. It does not illustrate at all what the Minister said it illustrated.

[Steve Webb]

I do not think that I have ever said that everybody is out to milk the system. Moreover, the hon. Lady is guessing what the figures tell us. Clearly, the information demonstrates that such properties exist. It was asserted during the debate that, “You just can’t find these properties”.

--- Later in debate ---

[Steve Webb]

I will give way to the hon. Member for Aberdeen South, the Chair of the Committee, and then I will give way to the hon. Member for Hampstead and Kilburn.

[Dame Anne Begg]

I am sorry, but I have now forgotten what my point was.

[Steve Webb]

Okay, I shall give way to the other hon. Lady.

Social Security

Debate between Anne Begg and Steve Webb

Thursday 17th February 2011 Commons Chamber

[Steve Webb]

The hon. Lady is absolutely right that home insulation is an important part of this: it is not just about helping people to pay their fuel bills, but about improving the insulation standards of their homes. Our colleagues at the Department of Energy and Climate Change are working on the issue and will shortly introduce proposals that will build on the energy rebate scheme, which took place in 2010, whereby low-income pensioners and others—the most vulnerable households—received direct payments. I understand that a further scheme will shortly be brought forward that will benefit exactly the people she talks about.

Despite the pressure on public expenditure, the coalition, through these orders, will spend an extra £4.3 billion in 2011-12 to ensure that people are protected against cost of living increases, and, of that, fully £3.4 billion will be spent on pensioners.

Let me move on to the second landmark change—the move to the consumer prices index. At one stage, the House thought that it might have a jolly three hours on price indices after an all-night sitting, so we are probably all relieved that we got a bit more sleep before entering this territory. The purpose of the annual uprating exercise is to ensure that the purchasing power of social security benefits is protected against inflation. We view the CPI as the most appropriate measure of price inflation for this purpose, although we would acknowledge no single index is perfect. The CPI is

“more reliable because, taking account of spending by all consumers, this consumer prices index gives a better measure than the old RPIX measure of spending patterns. It is more precise because, as in America and the euro area, it takes better account of consumers substituting cheaper for more expensive goods.”—[Official Report, 10 December 2003; Vol. 415, c. 1063.]

They are not my words, but those of the then Chancellor, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown). I could not agree more. Increases in line with the growth in the CPI maintain benefit and pension value. The CPI is the country’s headline measure of inflation, forming the target for the Bank of England’s Monetary Policy Committee. I remind the House that the legislation under which this order is made requires that we reflect the “general level of prices”.

It would be remiss of me not to thank the Leader of the Opposition for his support for our position on this issue. When Laura Kuenssberg of the BBC challenged him at a press conference on 11 January, saying,

“You’ve said time and time again that you will not oppose every cut; but four months into the job, the list of cuts that you will support remains pretty short,”

the Leader of the Opposition said:

“Let me just say on the cuts, I listed four cuts that we had not opposed, but it’s not just four cuts...from Employment Support Allowance to some of the changes to Disability Living Allowance, to the changes to the Consumer Price Index and RPI, to a range of other measures, we’re not opposing all the cuts.”

I am very grateful to him for his support.

[Dame Anne Begg (Aberdeen South) (Lab)]

Would the hon. Gentleman like to quote the Leader of the Opposition further, where he said that if there were a case to be made for shifting to the CPI, it would be a temporary move, not a permanent one?

[Steve Webb]

I am grateful to the hon. Lady. I have heard it intimated that the Opposition support using a temporary measure of inflation before using a different one in the future. I can see the politics of that, but not its coherence. The duty on my right hon. Friend the Secretary of State is to measure the general increase in price levels in an appropriate way, and it would be very odd if he were to decide one year that the CPI, with its method of calculating on a basket of goods, was the right answer, and then four years later, because there was a bit more money, that there was a different answer. That is not the legal duty on my right hon. Friend.

[Dame Anne Begg]

Will the hon. Gentleman clarify whether the move from RPI to CPI has anything to do with deficit reduction, which would be a reasonable argument as to why it might be temporary?

[Steve Webb]

The hon. Lady asks an important question. I will deal specifically with the budget deficit. However, when we looked at this issue as a new Government, we were prompted particularly by the context of a year in which the RPI had been negative. We arrived in May 2010. In April 2010, uprating had been nil for the state earnings-related pension scheme, public sector pensions and all the connected pensions. That is not because inflation for pensioners had been nil—I have never met a pensioner who thought they had negative inflation in the year to September 2009—but because that is what the RPI said. The RPI was clearly not doing its job then, and that focused our mind on whether it was the right thing. It is true that, on average, the CPI tends to be lower—not always, but generally. I have looked at the past 20 years, and in five of those the RPI has been lower than the CPI. That improves the situation in a difficult financial position; I would not pretend that it does not. However, our job is to have an appropriate, stable measure of inflation, and that is what the CPI achieves. [Interruption.] Indeed, it is much less volatile.

I sometimes think—perhaps this makes me sound a bit sad—that if the CPI were a person, it would be taking people to court for slander and libel for some of the things that have been said about it over the past few weeks and months. It is almost as if it is a stray number that we found on the back of a fag packet and decided to use to up-rate benefits. In fact, it is a careful calculation by the Office for National Statistics, with excruciating amounts of thorough methodological detail about the general increase in consumer prices. It is not the only measure, but it is an entirely decent and proper one.

I want to respond to some of the myths that have grown up about CPI, and to stress that this is not a choice between a good index and a bad index, but about trying to find the most appropriate measure for the purpose. The first argument that is made is that CPI is always lower. As I have pointed out, that is not true, although it is lower on average over the long term. People criticise the methodology that is used. I will explain what the difference is and why we think it is appropriate. Somewhat more than half the difference between RPI and CPI is to do with the way in which CPI assumes that people change their behaviour when prices change. CPI uses a substitution method, which assumes that people substitute for cheaper goods. Interestingly, the Institute for Fiscal Studies, which has looked at this issue, has said that that difference is a

“sound rationale for the switch”

that we are making today. RPI does not do that. Even the Royal Statistical Society, which has been critical of aspects of our proposals, states that RPI arguably overstates inflation as a result. I stress that we are trying to find not a high number or a low number, but an appropriate number with an appropriate method. Particularly for those on benefits, the substitution approach is important.

It is worth adding in parenthesis that people who say that RPI is the only possible way in which we can uprate pensions, because it is appropriate for pensioners, seem to be oblivious to the fact that RPI excludes the poorest fifth of pensioners from its consumption patterns. Their spending patterns are deliberately excluded in the construction of RPI. It seems odd that people are so wedded to RPI on purity grounds when it excludes the most vulnerable pensioners, about whom we should be most concerned.

The second myth is that the UK Statistics Authority does not think that CPI is a proper measure of inflation. [Interruption.] The hon. Member for Leeds West (Rachel Reeves) says that she has not said that, but I assure her that I have seen it in plenty of letters. The UK Statistics Authority oversees the Office for National Statistics, so it would be very odd if it thought that the ONS was producing dodgy figures. CPI is the headline measure and it is the target for the Bank of England, so it is hard to see how it is not a proper measure of inflation.

Thirdly, some say that the Royal Statistical Society does not like CPI. It has certainly criticised some aspects of the change, but it takes a more balanced view and sees limitations in CPI and RPI. As I have said, no single measure is perfect. The Royal Statistical Society has highlighted the issue of housing costs, and I will come on to that because it is clearly important.

The fourth thing that people say is that this is a real cut to the value of benefits. [Interruption.] The hon. Member for Glasgow East (Margaret Curran) says that it is, but it is not. What we are doing is measuring inflation in an entirely proper manner and increasing benefits—revaluing and reflating them—every year in line with inflation, measured in an appropriate way. That is what indexation is meant to do. There is no argument for saying that it is a cut when we are increasing benefits and pensions by inflation. Only a couple of nights ago, the lead story on the BBC news was “Inflation hits 4%”. Indeed, CPI inflation had hit 4%. That was the headline, that is inflation, and that is what we are uprating benefits by.

--- Later in debate ---

[Steve Webb]

I am grateful to the hon. Lady for raising that point. We are, of course, driven by the Office for National Statistics, so we are not cobbling together our own index. It is undertaking careful work over the next two years. We will then look at its findings and consider whether it is appropriate to use a CPIH-type measure. We are governed by the ONS’s time scales.

I will comment briefly on benefits for people of working age. Unfortunately, last year the Government got themselves into a bit of a mess over uprating. As I have said, RPI was showing negative inflation, mainly as a result of falling mortgage interest. As a result, benefits such as additional state pensions did not increase at all. They would have done under CPI. Other benefits, mainly the disability and carers’ benefits, were the subject of what my notes call a bewildering fudge—I think that roughly sums it up. In the end, disability and carers’ benefits last year were increased by 1.5%, but on the proviso that the pre-election—sorry, that word slipped out again—increase in 2010 would be clawed back in 2011. In other words, that would have happened this year in this order. [Interruption.] The Secretary of State says that we had to decide whether to pick up the ticking time bomb of that 1.5% clawback as well.

Members will be pleased to know that the 2011 uprating order before the House today contains no such sleight of hand. It is based on the straightforward proposition that, aside from increases in the basic pension and pension credit that have already been explained, the other mainstream social security benefits and statutory payments will increase by 3.1%, in line with the annual growth in RPI. There will be no attempt to recoup the value of the 1.5% fudge that we inherited from the previous Government.[Official Report, 7 March 2011, Vol. 524, c. 3MC.]

Finally, I will touch on occupational pensions. Such pensions are not directly the subject of the orders. The changes that relate to the revaluation and indexation of most occupational pensions were the subject of the revaluation order that was tabled before Christmas. However, because of the close link in all pensions matters—everything is connected to everything else—I ought to say a word about this matter. CPI is being used for all social security benefits and additional state pensions, and through statutory linkage, CPI applies to public sector pensions. We had to decide what to do for private sector pensions. I stress that the role of Government is to set the floor for increases to private sector pensions and we had to make a judgment on that. We took the view that the Secretary of State could not decide that inflation was CPI for things that we pay out, but RPI for things that other people pay out. As far as we are concerned, inflation is inflation and we have to be consistent. CPI is therefore the right floor for occupational pensions. However, I stress the word “floor”. Schemes are entirely at liberty to make more generous increases if they wish. This statutory requirement increases only in respect of service after 1997, whereas some schemes index service before that.

[Dame Anne Begg]

Will the Minister quantify the number of private occupational pensions that will not adopt the floor? When the initial announcement was made, the impression was that all private occupational pensions would move to CPI rather than use RPI. I understand a number of them have RPI in their schemes and therefore will not move to the new index. Can the Minister say anything about the volume of such occupational pensions?

[Steve Webb]

When we produced the initial impact assessment on the changes, we divided schemes into four groups according to whether they revalued by RPI or CPI and whether they indexed by RPI or CPI. We found that a good deal of revaluation was done in terms of the revaluation order and hence would go to CPI, but that a lot of the indexation was in terms of RPI. We have gone out into the field and talked to those administrating schemes, and we are revising our estimates of the proportion that will respond to this change.

The hon. Lady brings me on to the point that I wanted to make: some schemes have RPI hard-wired—for want of a better phrase—into them. We faced the difficult decision of whether to override that and put CPI in or whether to say, “Rules are rules, scheme promises are scheme promises,” and keep it how it was. We announced at the start of December that we felt that people’s confidence in pensions is important, and therefore that we would not override scheme rules. If someone has joined a private sector occupational scheme that has RPI in the scheme rules, we will not override it. Obviously, each scheme will make its own decision on how to respond if they have the flexibility to do so, but many schemes do not have that, and therefore will not make the change. We will publish updated estimates of the proportions.

--- Later in debate ---

[Dame Anne Begg]

But that is assuming that the only income that pensioners have is the basic state pension, which is not the case. Most pensioners supplement the basic state pension with an occupational pension or, if they worked in the public sector, with a public sector pension. That is where the Government have sometimes missed a trick. In obsessing about the triple lock and the basic state pension, they have taken their eye off the ball with regard to all other pension income.

Because other pension income will be reduced as a result of the link with CPI, many pensioners will find themselves worse off, or certainly not as well off as they expected or as the rhetoric from the Government would suggest. To listen to the Government, one would think they are doing everything that pensioners ever wanted, whereas they have taken action only on the narrow area of the basic state pension.

We already know that inflation is going up. VAT went up, thanks to the Chancellor. The Opposition expect inflation to go up much further because we do not think the Chancellor has the right policies. We know from the most recent inflation figures for January this year that CPI is now up to 4%—good news, one would think, for pensioners—but RPI is up to 5%. It is that differential that will cause problems.

We are considering not just pensions, but uprating for the whole benefits system. Even the Minister must recognise that there is an enormous irony in using CPI to uprate housing benefit—CPI being the one inflation measure that does not include housing costs, notwithstanding the point that the hon. Member for Cardiff Central (Jenny Willott) made about the poorest people being in social housing. That is not the case in cities such as London, and it is not the case because of the shortage of housing.

We know that large numbers of people are dependent on housing benefit—or, more accurately, local housing allowance—and they will be hit. When the Select Committee on Work and Pensions looked into the matter, we thought there were some figures to show that within a very short time nobody on housing benefit would be able to afford houses in the private rented sector that fit into the 30th percentile.

[Steve Webb]

For the avoidance of doubt—this has been said incorrectly twice in the debate—the CPI includes rent, so it is owner-occupiers’ housing costs that are not included. As rent is included in CPI, it is entirely appropriate to index housing benefit by it.

--- Later in debate ---

[Dame Anne Begg]

My hon. Friend is right. There is a triple whammy on people who live in London in high rent areas: the local housing allowance is to be capped, possibly below the level of the rents; they will have access only to houses within the 30th percentile; and they will not see the inflationary increases in the indexation of their housing benefit to meet those conditions. They will be hit more than once with regard to the affordability of their rents. That certainly came over loud and clear when the Select Committee looked at what was happening to local housing allowance.

The effects of the Welfare Reform Bill have been mentioned. The universal credit will make it difficult to project benefit uprating into the future to work out what percentage of their incomes people are likely to loose. There will be no straight line from the current benefits to the universal benefit, because they will be mixed up. It is difficult to see what will happen. The compounding effect will probably be seen in pensions, particularly for those in receipt of the state pension, and the level of pension will be less.

In reply to my hon. Friend the Member for Eastbourne (Stephen Lloyd)—I am sorry, Madam Deputy Speaker; I always refer to fellow Committee members as hon. Friends—I said that the assumption is that the largest part of a pensioner’s income is the basic state pension, but we know that for many people that is not the case. Even if the state pension makes up a large part of their pension, it is often not all of it. Many people on the lower pension are dependent on SERPS, which of course will now be moving up in line with CPI, rather than RPI.

On the basic state pension, I accept the Minister’s figures indicating that it will rise from £97.65 to £102.15, an increase of around £4.50 a week. No one would say that that is wrong, because we all agree that £234 a year is great. However, the average public sector pension of £7,800 will be reduced by around £117 because of the difference between RPI and CPI. I am not very good at the arithmetic, but that means that instead of getting a rise in income of 4.6%, the people affected will get a rise of less than 2%. It is a rise, but it is not as much as they were expecting, and we must remember that we are living in a time when inflation is increasing.

A woman who receives the average local government pension of £2,600 will be £40 worse off than if her pension had been linked to RPI. If she has paid the small stamp, she might get no extra money through the basic state pension anyway, not even the compensatory increase in it. She might not have made full contributions and so will get some of it, but not all. The Government’s proposal is unfair to pensioners, and it is particularly unfair to women.

My right hon. Friend the Member for East Ham has already mentioned the particular unfairness of raising the state pension age to 66 by 2020. To be clear on the Opposition’s position, we have no qualms about raising the state pension age to 66 in principle, but we are concerned about the speed with which the Government are doing so. That overrides what was already in place for women who were born in the 1950s, who were going to see their pension age rise to 65 by 2020 anyway.

Women who began their working lives expecting to get a state pension at 60—that happens to include me—will now have to wait another six years for it. On a quick calculation, that will save the Government £32,000 on today’s basic state pension. It will come out of the pockets of women who are roughly my age and will stay with the Government. We will have to increase the indexation an awful lot more to make up for the £32,000 that those women will lose as a result of the increase in the state pension age by six years.

I appreciate that the measure whereby women born in 1955 would have to wait until 2020, when they were 65, to receive their income was already in train, but what about the women born between 6 October 1953 and 5 April 1955, who had already made all their financial plans but will now have to work for more than one further year before they can receive their basic state pension? The Minister has said on numerous occasions that that measure alone will save the Government £10 billion. All that is a win-win for the Government: the Government win, because they do not have to pay the money out, and because they have changed the indexation. The people who lose are those who expected to receive their pensions at a certain point, and in this case those people are women.

I would understand the Government’s rationale if the measure was part of their deficit reduction plan, but they have already said that they intend to get the deficit off the books in four years’ time, and none of this stuff comes in until after the deficit is meant to have been reduced, so it cannot be part of a deficit reduction plan. The Government should be more honest. We have heard that the change to CPI is going to be permanent, so they should say, “We’re doing this as a long-term measure, because we want to save money.” That is part and parcel of what the Government are about: saving money.

[Steve Webb]

The hon. Lady is a thoughtful person who will know that there is an issue of short-term deficit reduction and an issue of the long-term sustainability of the public finances. Leaving aside the £1.3 trillion of public debt, which will still exist and need to be dealt with even when the deficit is no longer adding to it, does she not accept that the Office for Budget Responsibility has challenged the Government to do something the previous Government did not do and get a grip on the long-term sustainability of spending, particularly on older people?

[Dame Anne Begg]

My right hon. Friend the Member for East Ham claimed that there might be a case for deficit reduction in the short term. We are considering women and the accelerated increase in the state retirement age to 66, however, and, in terms of the 50-year pension policy and the long term, why could not the Government have waited another year or even two before equalising the state pension age at 66? The Minister keeps bandying about the £10 billion figure, but in terms of equity and fairness it would have been much more sensible if the Government had taken a long-term view. Theirs is a very short-term view, meaning that a large number of women—half a million—will lose out.

The Government could have introduced a measure that people considered fair, rational and part of a long-term decision to ensure that pensions are affordable, and it is ironic that, while they have made the decision on equalisation, they have forgotten about the long-term sustainability of the basic state pension. They have done so because the Liberal Democrats had an election promise—the one they seem to have kept to, when they have managed to ditch all the others—that was all to do with the triple lock. The Minister will not accept this point in the Chamber, although he might do privately, but the triple lock debate has skewed the Government’s entire pension policy. We are not looking at the issue in the round or over the long term, when perhaps we should be.

We do not know what inflation will be in years to come, so in the private and public occupational pensions sectors in particular it is difficult to work out exactly how much people will lose compared with what they expected to receive. Lord Hutton, in his interim report, thought that on average they would lose up to 15% of their pension’s worth, but I have seen lots of other figures for, and various calculations of, what a pensioner would have expected if their pension had been linked to RPI as opposed to CPI.

This measure cannot just be about paying off the deficit, because we know that the big-time savings kick in well after the Government propose to have paid off the deficit. The Government will win, but the people who will lose are, unfortunately, the pensioners of this country.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 14th February 2011 Commons Chamber

[Steve Webb]

The budget for discretionary housing payments across the country will be trebled over the coming years, so that additional funding will be available for particular difficult cases. One thing we want to do is enable people to get back to work, where jobs are available, and the universal credit process will increase the financial return and people who take low-paid jobs will have a greater ability to afford somewhere to rent.

[Dame Anne Begg (Aberdeen South) (Lab)]

18. If he will put in place provisions to ensure that the expertise of small employment providers is retained in the transition from existing employment programmes to the Work programme.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 10th January 2011 Commons Chamber

[Steve Webb]

The hon. Gentleman is right that, on average, people of lower social classes and on lower incomes tend to have a shorter life expectancy. The good news is that life expectancy is rising for people on all income levels, so as we raise the state pension age, it is only right and proper that we raise the starting point for pension credit. It would be very strange to go on paying at 60 something called pension credit when the state pension age rises, as under the previous Government’s plans, to 66, 67 and 68.

[Dame Anne Begg (Aberdeen South) (Lab)]

In a reply to a written answer, the Minister admitted that half a million women will have to carry on working for longer than a year as a result of accelerating the equalisation of the state retirement age. In particular, women who were born in 1954 and expected to retire in 2018 aged 64 will not now get their state pension until they are 66 in 2020. That strikes me as incredibly unfair. What is the Minister going to do about it?

[Steve Webb]

The hon. Lady is right: of the 5 million people who will be affected by the increase in the state pension, a relatively small age group will be affected as she describes. It would be an option to go more slowly, as the previous Government did, but, if we deferred all changes until 2020 in order to deal with the point that she makes, it would cost an extra £10 billion. Once again, we have a suggestion for £10 billion of extra spending but no suggestion of where the £10 billion might come from.

Oral Answers to Questions

Debate between Anne Begg and Steve Webb

Monday 19th July 2010 Commons Chamber

[Steve Webb]

It pains me to suggest that the hon. Lady is being selective in her use of statistics, but if she looks at the increase in pensions as a whole—the basic state pension and additional pensions—she will see that we have linked the basic state pension to earnings, which over the course of 20 years, for a typical person retiring this year, will add £15,000 in extra state pension compared with price indexation, which was the policy of her Government.

[Miss Anne Begg (Aberdeen South) (Lab)]

In a written statement, the Minister said that the Government would force occupational pensions to be linked to the consumer prices index instead of the retail prices index. What powers do they have, or will they have, to take to make that happen?

[Steve Webb]

I am grateful to the Chair of the Select Committee on Work and Pensions for her question, as this matter has not been well understood. Statute provides a floor above which occupational pension schemes have to operate. In other words, we will not force occupational pension schemes to cut their increases; we simply provide a floor, which used to be linked to the RPI and is now linked to the CPI. Schemes remain entirely free to go beyond that if they wish.