Banking

Eilidh Whiteford Excerpts

Wednesday 15th January 2014 Commons Chamber

[Sajid Javid]

As always, my hon. Friend is spot on. Because of the changes that Labour made in the regulatory system, no one knew what was going on, and if they did, they were absolutely powerless to act, especially those in the Bank of England. That is the legacy of the last Government.

Let me now say something that the Labour party seems to be scared of saying. We need well-run successful banks in this country. We need the services that they provide. We need the loans that they give to small businesses, and the mortgages that they offer to home owners. We need the jobs that they produce—more than 450,000 throughout this country, and more than two thirds of those are outside London. We, as a Government, also need the huge taxes that the financial sector and its employees pay—some £60 billion last year—so that we can run our schools and hospitals.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Small businesses have been among the biggest victims of the financial crisis, because banks have stopped lending to them. I share some of the Minister’s scepticism about the advantages of shutting bank branches, which may indeed only harm banking and access to financial services in rural areas, but I nevertheless think that the Government could be doing a great deal more to ensure that the banks lend more to small businesses on fairer terms. What will the Minister do about that?

[Sajid Javid]

I agree with the hon. Lady that businesses rely on the banks for the lending that they need. The action that we have already taken through, for example, the funding for lending scheme has ensured that the banking sector has had more money at lower rates to on-lend to small businesses and, indeed, households. We also recently announced a consultation on collecting small and medium-sized enterprises credit lending data, which will help to spur further competition in that sector.

Public Service Pensions Bill

Eilidh Whiteford Excerpts

Wednesday 24th April 2013 Commons Chamber

[Sajid Javid]

Yes, absolutely. It is of course a full Government position; it represents the views of not only the Treasury, but the MOD. In fact, I discussed the matter only yesterday with the Secretary of State for Defence.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the Minister on seeing sense and reaching an accommodation with the Lords on the amendment. Can he assure me that he will continue to work with the representatives of the MOD police and firefighters to ensure that the work force representations are brought into the process?

[Sajid Javid]

I am not used to getting warm words from the hon. Lady, and when I do I take them with good grace. I thank her for her warm welcome. I can assure her that when the MOD commences the review—it has already begun the preliminary work on it—it will include all stakeholders, and that of course includes the representatives of the two work forces in question.

The clock is already ticking and a delay would make implementation of the schemes all the more challenging. Moreover, I should emphasise that the time scale is already much tighter than that which Members requested during our debate on Monday. My colleague Lord Newby stated yesterday that the Government would not kick the review into the long grass. I reiterate that statement today and fully endorse his comments. I give the House my assurance that the MOD and the Treasury will work to ensure not only that clause 9 and the new clause set out in our amendment are commenced as soon as possible, but that preliminary work on the review will start before the new clause is commenced. I hope that hon. Members will agree that rejecting the amendment passed to us for consideration from the Lords and replacing it with the Government’s slightly more refined version is the most sensible way forward.

Public Service Pensions Bill

Eilidh Whiteford Excerpts

Monday 22nd April 2013 Commons Chamber

[Stephen McPartland]

I genuinely believe that people should have the opportunity to make that decision and consult the Government and the trade unions. I do not want a broad-brush approach to this matter. It is not that I do not trust the shadow Minister, but he is trying to pull me into a political trap. I am not interested in politics in that sense; I am interested in representing my constituents and I do not want to accept an amendment that could technically make those fire and police officers worse off in the future. I would like to know far more about the details behind the amendment and what accepting it would mean.

The Minister mentioned a figure of around 8% that could be a reduction in net pay. If we accept such an amendment, and the mistake made by the previous Government in 2007 is reversed, I think we should negotiate with trade unions and fire and police officers so that we fully understand what its impact will be on their take-home salary at the end of each month, and how it will affect decisions in their careers and moving forward. I want everybody to have a fair opportunity, and as I have said, I am proud of the public sector and the work it does. Although the amendment seems fair, I do not feel that I can support it because of the broad-brush approach that could lead to MOD police officers and fire service personnel having a worse set of circumstances in a year or two, just so that party political points can be scored. Unfortunately, I will not be able to support the amendment, but I urge the Minister to provide us with more detail in his winding-up speech about how he will encourage the MOD to sit down with the unions and ensure that the pension age will not rise above 65, and that any decision on the pension age will be about 65 and downwards.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I wish to make a few brief points in support of Lords amendments 78 and 79, which seem eminently sensible and seek simply to bring the normal pension age for MOD police and defence fire and rescue personnel in line with arrangements for other fire and police personnel who do broadly similar jobs. As others have pointed out, when the amendments were first debated in the other place, Lord Hutton seems to have acknowledged that the omission of MOD police and firefighters from his original considerations was an oversight. I agree wholeheartedly with his remarks when he said:

“It is incumbent on us to address that issue and not to use the technical arguments as an excuse for not addressing this fundamental discrepancy.”—[Official Report, House of Lords, 12 February 2013; Vol. 743, c. 570.]

I support the Lords amendments because MOD police and firefighting officers need consistent treatment with other police and firefighters.

Lord Hutton’s conclusion in recommendation 14 of his report was by no means arbitrary. In recommending a normal pension age of 60 for uniformed services personnel, the Hutton report drew on a wide evidence base. It recognised that the nature of the job places intense physical demands on officers and requires them to maintain levels of health and fitness that are not necessary in other day-to-day jobs. That acknowledgment has underpinned the design of terms and conditions for police and firefighters for many years, and remains as pertinent and relevant as it ever was, even if the age at which those personnel will be eligible for retirement has shifted.

It is useful to remember that changing demographics and increases in life expectancy have underpinned the process of pension reform. However, although life expectancy has increased significantly in recent decades, the increase in healthy life expectancy has not kept pace. People are living longer, but they are more likely to live with debilitating health conditions or disabilities. I made general observations on that in earlier stages of the Bill, but it is particularly relevant to the uniformed services, because it is imperative that officers are physically capable of meeting the demands of the job. Hutton implicitly acknowledged that when he called for the increase in normal pension age for the uniformed services to be kept under regular review.

We must be realistic about the physical limitations of mere mortals. Hard physical work takes its toll on human bodies. It is clear that people who work in heavier, more demanding jobs suffer more physical strain as they get older. Like the hon. Member for Argyll and Bute (Mr Reid), I was struck by the briefing ahead of the debate from the Defence Fire Risk Management Organisation, which set out in some detail not only the physical demands placed on defence fire and rescue personnel, but the risks to officers, which increase with age—they rise exponentially for officers aged 50 and over. We must be realistic about what we ask people to do. We should not do the sums on paper without thinking of the real cost.

We need to be careful when we talk about the monetary cost. The Minister relied on the argument that the measure will cost too much, but we need to be careful if we assume that the higher pension age will save us money. All hon. Members know that staff retiring on health grounds can be an expensive business. It is all the more expensive when the reasons for a person leaving their job are linked to their occupation. That is an extremely expensive way to do things. We need to look at both sides of the balance sheet before we jump to the conclusion that treating MOD police and firefighters differently from other police and firefighters will save us money.

At the end of the day, this comes down to the fact that MOD police and the defence fire and rescue officers are, to all intents and purposes, uniformed service personnel. They need to be fit and strong, and physically and mentally capable of carrying out their duties in an emergency. We need to recognise that and treat them in exactly the same way—as far as possible—as we treat other police and firefighters.

Another important part of the context is that morale in those services has been put under considerable strain in recent times owing to changes to terms and conditions and proposed reductions to services. Like the hon. Member for Colchester (Sir Bob Russell), who intervened earlier, I have MOD police in my constituency—they look after the St Fergus gas terminal. I am therefore very much aware of the great uncertainty that has overshadowed the service because of MOD reviews. I am also aware that a proposed voluntary early release scheme, for which, I believe, 600 officers applied, has been subject to a rethink. I am glad that the MOD has recognised the folly of rushing in with ill-thought-through cuts, but officers who had applied for early release have been left in a kind of limbo. The service needs to ensure that younger officers come up through the ranks, but the uncertainties of the past few years have undermined morale and the good will of officers, who take substantial risks in their day-to-day working lives, and who we expect to be on the front line during any crisis.

That is why I do not have confidence in the solution set out by the Minister. I know that some of his Liberal Democrat colleagues in the coalition have accepted it—if I had not seen officers being mucked about by the MOD’s prevarication over the early release scheme, I would have more confidence in the Government’s proposals. However, having witnessed that, and seeing that the issue is still unresolved, I really do not have that confidence. In that context, I would be keen to see the amendments go through as they are, and I urge Liberal Democrats to come through the Lobby and make their voices heard on behalf of their constituents.

[Mr Reid]

I want to make it clear on the record that I believe the Government when they say that they want to keep the retirement age at 65, instead of increasing it progressively to 68 when the state pension age goes up. The Government have made that offer. My argument was that the retirement age should be 60, because of the decline in their physical ability to perform at peak fitness after that age.

[Dr Whiteford]

The hon. Gentleman makes a valid point. Like me, he has constituents who have applied for the early release scheme and been mucked about. That is why we should settle the matter today on the Floor of the House, instead of allowing it to be sent off into the long grass where we can prevaricate some more before failing to reach the conclusion that people need to be treated with consistency.

The question of consistency underpins everything. There is recognition that other police and firefighters need a lower normal pension age than those in less physically demanding roles. People who do the same jobs, but for the MOD, need to be recognised in exactly the same way. I urge the Government to observe the spirit of the Hutton report, accept that this was an oversight, and do the right thing by our MOD police and firefighters by accepting the Lords amendments. I hope, even at this very late stage, that the Minister will capitulate.

[Sir Bob Russell]

It is regrettable that no Defence Minister is here, because we could be putting the cart before the horse. What is crucial is the fitness for the purpose for which our MOD firefighters and police are employed. That should be the first, driving principle, and then we can move on to retirement ages and pensions. Does the country really want its nuclear bases to be defended by people of my age? Is it really safe for someone of my age to put out a fire on a nuclear submarine? The clear answer is no. It is therefore regrettable that the MOD is not represented in this important debate. This debate must be important, because I have missed the welcome home parade of 4th Mechanised Brigade. As a member of the Defence Committee, I always wish to welcome home our troops. I hope the fact that I am here will be read as an indication of how seriously I take this debate.

I draw the attention of the House to what Lord Hutton of Furness said in the other place:

“I do not believe that there is any substantive technical reason why we cannot look again at the role of the MoD firefighters and the MoD police.”

He went on to say:

“Surely there has to be a way of doing the right thing for these people.”—[Official Report, House of Lords, 12 February 2013; Vol. 743, c. 570.]

I came to this debate fully intending to vote in support of the Lords amendments, but their unintended consequences could well lead to our MOD firefighters and police being financially worse off, albeit while retiring at a younger age. I will therefore take the Minister at his word—he is a Minister whom I trust—and give the matter further consideration in the spirit and intention of what Lord Hutton has said.

Public Service Pensions Bill

Eilidh Whiteford Excerpts

Tuesday 4th December 2012 Commons Chamber

[Robert Neill]

The hon. Gentleman and I once worked out that we might have a very, very, very—however many “verys” we put into it—distant relative in common, but with every gentleness and respect, I would have to tell him that we do no good service at all to our public services by being unrealistic about the affordability of pension arrangements.

I talked about the intent with which we approach these matters and about honesty, transparency and being frank about the financial realities that underpin the schemes. This measure is a critical part of that. The most important service we can provide is to be frank and to produce a scheme, which I am satisfied the Bill does, that is financially sustainable for the future. We have talked about the technical issues, but the overall thrust of being financially honest about the affordability of our public sector pension schemes is absolutely critical—and the Government have got that right.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I begin by expressing my gratitude to the Clerks and to Mr Speaker for their forbearance in ensuring that the amendment tabled in my name is debated in the most appropriate group this afternoon. That said, there is but one lonely little amendment—amendment 32, which would amend clause 16—in my name in this group. In some ways, it is a very technical and practical amendment, but it would allow for the closure of existing Scottish schemes by 1 April 2016 instead of 2015. It would put these reforms on a much more realistic time scale.

I am sure Members will be aware that the Scottish Government have devolved executive competence for a number of aspects of a number of Scottish public sector pension schemes. There have been considerable delays in establishing exactly what flexibilities are open to the Scottish Government in those areas for which they have responsibility, and it has been difficult to gain clarity over what that process might look like. That has obviously had an impact on the negotiating process.

Gaining clarity has happened in an extremely piecemeal fashion. Back in March 2012, Ministers initiated partnership negotiations with employers and trade unions about the pension schemes of the NHS, teachers, police and firefighters. On 28 March, a letter arrived from the Chief Secretary to the Treasury—I am sorry he is not with us for this debate—setting out some new constraints regarding the links between normal pension age and state pension age, which we will debate later. In May, there was more communication from the Chief Secretary, who informed the Scottish Government that they would require explicit Treasury consent for cost-sensitive changes to the teachers or the NHS schemes, and in July the Scottish Government were informed that the UK Government wanted to extend the Bill to non-departmental public bodies and Scottish judicial offices. At that stage, there was still no clarity on flexibilities relating to the pension age requirements, which everyone knows is a key sticking point in the negotiations.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I understand the hon. Lady’s point and I know that some of the trade unions have commented on the matter. Is she aware of the correspondence between the Chief Secretary to the Treasury and the Scottish Government in October, in which the Scottish Government were invited to suggest some amendments to the Bill? Is her amendment one of those that the Scottish Government suggested to the Chief Secretary or to other Ministers?

[Dr Whiteford]

I am afraid that I am not privy to the Scottish Government’s processes on this, so I cannot answer the hon. Lady’s question with any certainty whatever. What I can say is that the Scottish Government got clarity only a few weeks ago on the extent to which they can deviate from the proposals for England and Wales, and that the degree is quite limited indeed. I think the Scottish Government will have some flexibilities on accrual rates and some revaluation bases.

[Mr MacNeil]

Will my hon. Friend give way?

[Dr Whiteford]

I will not give way to my hon. Friend at the moment because I want to make some short remarks in this part of the debate, and save my fuller comments for later.

The Scottish Government also require explicit consent from the Treasury for any cost-sensitive changes to the NHS or teachers schemes.

Will the Minister accept my amendment and recognise how tight the time scales are, given the complex range of responsibilities—varying responsibilities relating to different schemes—and how tough the negotiations are? Not all partners to the negotiations even accept the need for this set of reforms. In 28 months’ time, when the provisions would otherwise commence, the Scottish Government would have had not only to complete the negotiations and prepare and pass legislation, but ensure that the employers and scheme administrators could prepare their systems and processes before the 2015 deadline.

This is a very technical amendment in some respects, but it is a very important one. I hope that the Minister will have listened carefully and will be pragmatic in his response to it later.

[John Healey]

I rise to support my hon. Friend the Member for Nottingham East (Chris Leslie) in the amendments he has tabled. Each and every one of them is important. Given that we are having a reflective debate on Report, I hope we will get a reflective response from the Economic Secretary at the end of our debate on this group.

Let me start where it seems to me that there has been a strong measure of agreement across the House—on the importance of having good, regular and accurate pensions information for scheme members. I think we could all agree that what should underpin our pension schemes—this relates to new clause 2—are higher standards of governance, openness and administration. Such underpinning, then, should be provided in this Bill’s provisions for those public service pension schemes in the future. There is bound to be greater confidence and trust in the schemes, along with better understanding of them, if members are given more information.

--- Later in debate ---

[Sheila Gilmore]

I was going to come to that point, because I am surprised that that opportunity has not been taken, given the context. As my right hon. Friend will know, this is a difficult and sensitive subject, but—this point might well be speculative and I am sure that people will wish to deny that it is the case—it is no secret that we are in a particular stage of politics in Scotland, and it would—

[Dr Whiteford]

I think I might be rescuing the hon. Lady from the point she was trying to make. Earlier, she stressed the importance of considering what is actually in the legislation rather than the world as we would like it to be. Does she welcome the fact that John Swinney has not exercised his flexibility to increase contributions to the local government pension scheme?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The hon. Member for Edinburgh East (Sheila Gilmore) will comment on that point only if it is relevant to the amendments we are considering. I remind hon. Members that we are not yet on Third Reading. The debate is going rather wide of the new clauses and amendments, so perhaps the hon. Lady could return to them.

--- Later in debate ---

[Sajid Javid]

I hope that I have made the Government’s commitment to defined benefit schemes very clear; I do not think I can make it any clearer than I have already from the Dispatch Box today. That commitment clearly has not changed.

Finally, on amendment 32, I am confident that the Scottish Government can achieve the 2015 timetable. Even more importantly, I have no reason to believe that the Scottish Government share the concerns expressed by the hon. Member for Banff and Buchan (Dr Whiteford). The Scottish Government’s Finance Minister, Mr John Swinney, has not requested that the Bill be amended to allow for a delay for implementation in Scotland. Indeed, such a delay would disadvantage lower and middle-income public service workers, who often benefit from a move to career average schemes. Furthermore, a delay in implementing the reforms would result in additional liabilities being built up in those schemes. These additional costs, running to hundreds of millions of pounds, would have to be paid for through the Scottish budget.

[Dr Whiteford]

Let me reiterate that I have no problem whatsoever with the move to career average schemes. Does the Minister accept, though, that this process has been subject to unnecessary prevarication and lack of clarity? In relation to amendment 11, tabled by the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), does he accept that these proposals will roll back the existing provisions of the devolution settlement?

[Sajid Javid]

No, I do not. The Scottish Government have had plenty of time to look at the proposals, which originated with Lord Hutton’s report. They may feel that they should have acted earlier, but they clearly had control over that.

--- Later in debate ---

[Sajid Javid]

If the Scottish Government wanted to suggest any amendments, we would of course have a sensible discussion with them about that.

Over the past year the Chief Secretary has written on a monthly basis to the Scottish Government about the public service pension reforms, and we have asked many times whether they would like to consider amending the Bill. They have not requested any such changes so far, and it would therefore be inappropriate to accept the amendment now.

[Dr Whiteford]

Does the Minister think that nine days’ notice is sufficient time for the Scottish Government to be able to make those plans before the First Reading of the Bill?

[Sajid Javid]

As I said, virtually every month the Chief Secretary has written to the Scottish Government, and they have had plenty of opportunity to respond. As I said to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), if, even at this stage, the Scottish Government wanted to suggest amendments, those amendments would be given serious thought in the other place.

I commend Government amendments 35 to 39 to the House.

--- Later in debate ---

[Dr Whiteford]

I am glad to have an opportunity to speak briefly about amendments 29, 30 and 31, which stand in my name and which would exempt Scottish schemes from the requirement that new schemes should link pension age with state pension age. Amendment 33 is simply a definition of what is meant by “Scottish scheme”—namely a scheme relating to those in local government, teachers, NHS workers, firefighters or the police—for the purpose of clarifying the other amendments.

On Second Reading, it was clear that the linking of normal pension age to state pension age was a central bone of contention. It has certainly been the main topic of concern mentioned to me by constituents who will be affected by the proposed changes, including teachers, NHS workers and prison officers. It has also been the top priority for unions and other staff representatives taking part in negotiations. It has been the key sticking point in those negotiations, and has caused a great deal of anxiety and uncertainty among employers.

As has been pointed out by other Members, many people who do physically demanding and stressful jobs will struggle to work into their late 60s. The change will create real difficulties and hardships for those who develop health conditions as they age. It will also make life much more complicated for employers who will have to work around and adapt to the physical limitations of employees who should really have retired.

The reason this is such an acute issue in Scotland is very simple: our life expectancy is almost two years lower than the UK average. In fact, ours is among the lowest life expectancy levels in Europe. Even given recent improvements and an upward trajectory, male life expectancy in Scotland is only 76 years and female life expectancy just over 80. We also have an unenviable health record. I have previously referred to the widening gap between rising life expectancy and what is defined as “healthy life expectancy”—the years before the average age at which people develop serious physical health problems that impair their normal day-to-day life. At present, women in Scotland have a healthy life expectancy of only 61.9 years, while for men the figure drops to 59.5. In other words, people are already having to work beyond the age at which they can expect to be in reasonably good health.

[Sheila Gilmore]

Will the hon. Lady give way?

[Dr Whiteford]

I am sorry, but Mr. Speaker has asked me to keep my remarks brief. I hope that the hon. Lady will bear with me.

A large number of people end up taking early retirement or receiving disability benefit in later middle age. The TUC has done some sterling work in highlighting the large proportion of people who are in that position. Many are having to retire early on reduced pensions, in some cases at a significant cost to their employers. When workplace pressures have contributed to the premature collapse of an employee’s health, that becomes a very costly exercise for everyone involved. I am thinking particularly of prison officers.

We know that people in physically demanding occupations and those on lower incomes die significantly earlier than affluent people in white-collar jobs. The new hon. Member for Corby (Andy Sawford) mentioned that earlier. Our public sector encompasses a range of occupations, from civil service desk and office jobs to the work done by people such as prison officers, paramedics and nurses, which places intense physical demands on them.

Although the Bill has acknowledged the physical strain that is placed on some workers, such as firefighters and police officers, it does not take proper account of the human limitations of our work force as a whole. In applying such a broad brush to changing demographics, it takes no account of occupational and geographic variances that cut across other aspects of social class. We can legislate on paper as much as we like, but forcing people to work until their health caves in is not a sustainable long-term solution for pensioners. A little more pragmatism from the Government would go a long way, not only in enabling meaningful negotiations to progress, but in designing genuinely sustainable public sector pension provision in the Scottish context for the longer term. If we do not get the design of schemes right, public sector employees are likely to lose confidence in the process, and we will run the risk of individuals choosing to opt out, with all the negative unintended consequences that entails, with additional cost to the state through means-tested benefits.

--- Later in debate ---

[Dr Whiteford]

Most people in Scotland, whether they work in the public sector or not, recognise that these pension reforms—particularly the increase in contributions and the requirement to work for longer—have little to do with designing better pension schemes and everything to do with the short-term aim of deficit reduction. I do not think that public sector employees should be picking up that tab.

Ministers have relentlessly pursued affordability while abandoning sustainability and fairness. That is the wrong approach at this time. Most public sector workers have faced a pay freeze for the past three years. Their wages have fallen in real terms while they have experienced substantial increases in their cost of living, through increases in the price of food, petrol and domestic heating bills. They are being asked to pay more, to work longer and to accept significantly lower pensions thereafter. To me, that is just not a reasonable proposition. Public sector employees do demanding jobs, often under pressure and in difficult circumstances.

[Mr Alan Reid (Argyll and Bute) (LD)]

Will the hon. Lady give way?

[Dr Whiteford]

I will not; I am conscious that other Members want to speak.

Many of those public sector workers are already on quite modest wages, and they deserve measured and proportionate schemes that will give them confidence that they are saving adequately for their old age. They want to know that the goalposts will not be shifted yet again as they approach an ever-increasing retirement age. The Bill fails those tests, which is why I will oppose it this evening.

Small Charitable Donations Bill

Eilidh Whiteford Excerpts

Monday 26th November 2012 Commons Chamber

[Susan Elan Jones (Clwyd South) (Lab)]

It is a privilege to speak in this debate. As hon. Members present at the time will know, we had some good, positive and, indeed, consensual discussions in Committee. Labour Members are keen to see the Bill passed, because we recognise that much of it is an extension of what previous Labour Governments did. That is why we want to get it 100% right. Things such as the compact for the voluntary sector and the immense growth and development of gift aid happened on Labour’s watch, and we are keen to see that trend continue in the Bill.

Certain groups will rightly be especially pleased with the Bill. It is fair to say that the dioceses, Churches and faith groups welcome the Bill, as do we, and it is right that we support those groups and the tremendous work they do in communities across the country. A range of other charitable groups will also benefit.

I am pleased with certain changes in the matching principle: I am not a betting person, but, on this occasion, 10:1 is clearly better than 2:1. Nevertheless, we are asking the Minister to listen to the voice of the national charities’ voluntary organisation, the Institute of Fundraising, as well as the Charities Aid Foundation and other groups, which are saying, “If you are prepared to improve the Bill in certain ways, as you have been, please think again about having the link with gift aid, if we really want charities, including those not currently claiming gift aid, to benefit.” I urge the Minister to have at least a little think about that. He and the Government have gone some way towards accepting some of the changes that those groups wanted. Let us get it 100% right. I urge him to consider those other changes too.

I want to look at the issue of reviewing the legislation, about which my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) spoke with great eloquence. We know that many things in the Bill will work, but if the development of community and voluntary sector groups over the last 10 to 20 years is anything to go by, we know too that fundraising has changed dramatically. What worked yesterday will not work today, and what will work tomorrow will probably not have worked today. It will change over time. That is why we ask the Minister to consider having a review.

Mention has been made about the way donations are made, and I am confident that more mention will be made of it. What interests me is that if one made a £10 cash donation, there could be benefits under this Bill, but not if the same donation was made on a mobile phone or with a bank card. As someone from generation X—I have not actually checked, but I think I am—that strikes me as a little odd, but let us think about the new donors we want to cultivate in generation Y, as I think it is called. If we are to build a new philanthropic culture that encourages younger and newer donors, we must at least be open on that point. I urge the Minister to look carefully at that provision, which I know has already been mentioned by my hon. Friend the Member for Kilmarnock and Loudoun, and I know it will be mentioned later. I urge him to reconsider and to support the concept of an ongoing review so that future charities Ministers and other Ministers can look at this legislation and say, “Let us make it work for today’s generation.”

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Let me begin by declaring an interest. Until relatively recently I was a trustee of two charities registered in Scotland and I remain a trustee of the Parliament Choir, which also has charitable status.

I acknowledge the progress made on the Bill in Committee and the steps people have made across the House to come up with constructive solutions to the acknowledged weaknesses of the legislation in its original form. I hope the Minister will take on board some of this evening’s amendments, not least the two in my name in this group—amendment 32 and the consequential amendment 33. My amendments are designed to provide a mechanism to allow smaller and project-specific charities to benefit from gift aid top-up payments without having to have made a successful gift aid exemption claim in three of the last seven years, or two of the last four—I am conscious that the Government have tabled an amendment to improve that part of the legislation. For the sake of clarity and simplicity, I propose that a “small charity” be defined as one with a gross annual income of £25,000 or less. As with other amendments in the group, the aim is to bring more small charities within the ambit of the legislation, which is a shared aim across the House this evening.

The reason I urge the Government to look closely at my amendments is simply that smaller charities often do not benefit from gift aid, and in some cases do not even register for it. The very charities that this Bill is intended to benefit are among those that are least likely to be registered for gift aid or to have claimed it regularly even when they are. As the proposals stand, an eligible charity has to have been registered with Her Majesty’s Revenue and Customs for a minimum of three years, made a gift aid claim in three of the past seven years, and not had a penalty imposed in making a gift aid claim. We know that around 100,000 organisations are registered with HMRC for gift aid, but only 65,000 claim each year, which is a significant gap. They include not just general charities, but excepted charities, such as churches, exempt charities, such as museums and foundation schools, and community amateur sports clubs. At the moment, many small charities are not registered with HMRC and do not have a three-year track record of making gift aid claims, which particularly affects charities run solely by volunteers—those that do not have professional staff, including fundraisers, or the time and resources that other, more professionalised charities do. Such charities are often involved in the very projects that attract the largest active community involvement and support, which in my view are exactly the sorts of activities that we should use the Bill to incentivise in our civil society.

--- Later in debate ---

[Dr Whiteford]

The charities in question would be registered with charity regulators on both sides of the border, and those are surely the bodies that decide whether their purposes are charitable. What benefit will the Bill bring to people raising money for a one-off or fixed-term good cause?

[Sajid Javid]

The Bill is intended to complement gift aid, because the Government received many representations from charities that when they received cash donations, such as in bucket collections, they were unable to take the information necessary for gift aid, such as whether the individual was a taxpayer and their name, address and other information. The scheme is intended to address that. One-off charities, including those set up in response to a disaster, are worthy causes but do not fit into how we intend the scheme to complement gift aid.

To answer the last part of the hon. Lady’s question, if a charity is created in response to a particular event or disaster, there is nothing to prevent it from registering for gift aid immediately and taking advantage of the gift aid provisions that already exist. If it stayed in existence for a number of years and therefore met the new eligibility criteria, it could also take advantage of what is available under the Bill. For the reasons that I have given, although she introduced her amendments with the best of intentions, I ask her kindly to consider not pressing them.

Amendments 8 to 16 would abolish the three-year start-up period and allow charities that have made a gift aid claim in the previous year to claim under the scheme. The maximum donations that could be claimed on would be £2,000, instead of £5,000. Proposals for a reduced rate for new charities have been put forward several times, and I am afraid that I cannot support them. Reducing the eligibility period to a year or less would increase costs, which would include a lot of costs caused by fraud. Requiring just one gift aid claim would leave the scheme open to unacceptable abuse.

The amendments would also make the scheme very complicated for some charities. Charities would need to know which other charities connected with them had claimed, and at which rate, because the rules would be different depending on those factors. The Government have listened to all the concerns that have been expressed about the eligibility rules, and we have put forward our own proposals. Our amendments are safe and affordable, and they will minimise complexity. I therefore ask Opposition Members not to press amendments 8 to 16.

I turn to the amendments that I have tabled on eligibility. Amendments 24 to 27 will reduce the eligibility period for the scheme to two years, and amendment 31 will introduce a power to enable us to amend the criteria in future if necessary. The eligibility criteria have been a key issue raised by the charity sector throughout the development of the scheme, and by Members in our earlier debates. The sector has welcomed the amendments since I tabled them last week, and I hope that hon. Members will support them, too.

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[Cathy Jamieson]

I beg to ask leave to withdraw the amendment.

Amendment 4, by leave, withdrawn.

Amendment made: 23, page 2, line 1, leave out ‘double’ and insert ‘10 times’—(Sajid Javid.).

This amendment changes the gift aid “matching” rate from 2:1 to 10:1. In other words, to make a claim in respect of £5,000 of small donations, a charity would need to make successful gift aid claims in respect of £500 of donations, rather than £2,500.

Clause 2

Meaning of “eligible charity”

Amendments made: 24, page 2, line 12, leave out ‘3 of the previous 7’ and insert ‘2 of the previous 4’.

This amendment, and amendments 25 to 27, change the criteria for determining a charity’s eligibility for the small donations scheme. Under this amendment, the charity must have made successful gift aid claims in 2 out of the previous 4 tax years, rather than 3 out of the previous 7.

Amendment 25, page 2, line 16, leave out ‘3’ and insert ‘2’.

Under clause 2(2), earlier gift aid claims are ignored for the purpose of the eligibility rules where a charity doesn’t claim for 3 consecutive tax years. This amendment reduces that period to 2 consecutive tax years.

Amendment 26, page 2, line 22, leave out ‘2 tax years’ and insert ‘tax year’.

This amendment reduces the period for which a charity is not eligible where a penalty is imposed on the charity. Under the amendment, the period will be the tax year the claim was made and the next tax year (rather than that year and the next 2 tax years).

Amendment 27, page 2, line 26, leave out ‘3’ and insert ‘2’.—(Sajid Javid.)

This amendment reduces the “start-up period” for a charity to the first period of 2 (rather than 3) consecutive tax years during which it is at all times a charity.

Clause 7

Meaning of “running charitable activities in a community building” etc

Amendment made: 28, page 5, line 24, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)

This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 7(3).

Clause 8

Meaning of “community building”

Amendment made: 29, page 6, line 4, leave out ‘HMRC’ and insert ‘The Treasury’.—(Sajid Javid.)

This amendment makes the Treasury, rather than HMRC, responsible for making orders under clause 8(5).

Clause 14

Power to alter specified amount etc

Amendments made: 30, page 11, line 5, at end insert—

‘(1A) The Treasury may by order amend this Act for the purpose of—

(a) amending the gift aid matching rule;

(b) abolishing that rule;

(c) reinstating that rule (if previously abolished), with or without amendment.

(1B) In subsection (1A) “the gift aid matching rule” means the rule that limits the amount of top-up payments to which a charity is entitled by reference to the amount of gifts made to the charity in respect of which it has made successful gift aid exemption claims.’.

This amendment gives the Treasury power by order to amend the gift aid matching rule (see clause 1(3), (4)(a) and (5)), to abolish the rule or to reinstate it. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).

Amendment 31, page 11, line 5, at end insert—

‘(1C) The Treasury may by order amend section 2 (meaning of “eligible charity”).

(1D) Section 2, as amended by an order under subsection (1C), must as a minimum include a condition requiring the making of a successful gift aid exemption claim in a previous tax year.’.—(Sajid Javid.)

This amendment gives the Treasury power by order to alter the eligibility rules in clause 2. But the altered rules must include a condition requiring the making of previous gift aid claims. The order would be made by statutory instrument subject to draft affirmative procedure in this House (clause 17).

Schedule 1

Meaning of “small donation”: conditions

[Dr Whiteford]

I beg to move amendment 34, page 14, line 4, leave out ‘in cash’.

This amendment allows for gifts made by contactless cash card and mobile telephone transactions where it is impractical to obtain a gift aid declaration.

[Madam Deputy Speaker (Dawn Primarolo)]

With this it will be convenient to discuss the following:

Amendment 35, page 14, line 5, leave out ‘of cash’.

Consequential on amendment 34.

Amendment 36, page 14, line 9, leave out ‘“cash” means coins and notes in any currency’.

Consequential on amendment 34.

Amendment 22, page 14, leave out line 9 and insert—

‘“cash” means coins, notes, cheques and money donated electronically in any currency.’.

This amendment seeks to include non-cash donations within the Gift Aid Small Donations Scheme.

Amendment 2, page 14, line 9, after ‘currency’, insert ‘and any equivalent electronic payment as may from time to time be prescribed by the Treasury by order.’.

To future proof the Bill by enabling the Treasury to allow electronic payments to be treated as allowable donations.

Amendment 37, page 14, line 16, leave out ‘cash’ and insert ‘gift’.

Consequential on amendment 34.

[Dr Whiteford]

The last time the House debated the Bill, I raised the challenge of new ways of donating to charity. The purpose of the amendment is to take account of changes in the way people donate to charities, recognising the sea change that has occurred over the past 10 years or so in how they donate and the fact that people increasingly donate small amounts through text message giving. The technology driving us in that direction is developing rapidly. Conversely, and perhaps somewhat paradoxically, the amendment would also allow charities to benefit more from small donations made by cheque.

The thinking behind the amendment is derived from work done by the Institute of Fundraising. In a previous life, when I worked in the charity sector, I worked closely with the institute and so pay tribute to the immensely valuable research it undertakes to understand how and why people support charities in order to promote good charity governance and support large and small voluntary sector organisations alike.

The reality is that technological developments, especially with smartphones and tablets, mean that the number of electronic cashless donation options is growing. For instance, I am sure that many of us watched and donated to the BBC’s “Children in Need” appeal a couple of weeks ago, many of us doing so through text message donations. The use of mobile phones as cashless wallets is growing, and I think that the Bill would benefit by reflecting that. UK high street banks are already working on a mobile payments scheme to create a common infrastructure to link bank accounts to mobile phone numbers. That will help keep account details more secure, but it also heralds further changes in how we conduct transactions, including charitable donations.

There are now more than 30 million contactless cash cards in circulation, contactless functionality is now available on an increasing number of mobile phones, and 68 national retailers are already live with contactless payments, including the Post Office, Marks and Spencer and W.H. Smith. There are 135,000 terminals across the UK where donations can be made. I have to confess that I personally have not yet caught up with this technology beyond automatic top-ups for my Oyster card. However, I am aware that the Cabinet Office is working with the National Endowment for Science, Technology and the Arts to explore the possibility of using Oyster cards for spontaneous charitable giving through the “Chip In” project. We should encourage this kind of small electronic donation, as it has significant advantages over bucket-rattling. These donations are a lot more secure, they are significantly more auditable, and they are substantially less susceptible to fraud, particularly the small-scale fraud that has always been a risk associated with spontaneous cash donations. The upper limit of payments by contactless cash cards is currently £20, which could provide a nice compliance with the Bill.

Another aspect is online transactions, which continue to grow. Between 2007 and 2012, the number of adults buying goods online increased by 9 million to 37.6 million —74% of the UK population. It would be valuable for the Bill more overtly to keep pace with these significant changes in behaviour. The Government’s impact assessment for the Bill suggests that current text giving systems make it easy to comply with the gift aid scheme, but I am not convinced that this is borne out by the evidence. Fundraisers say that only 20% to 25% of donors properly complete gift aid declarations for text donations, but some charities report that the figure is as low as 5%. That compares with 85% of sign-ups for online donations.

The Institute of Fundraising points out that when a text donation has been made the provider usually sends a bounce-back text message with a link to a website page that the donor needs to visit to make a declaration. This is because the donor needs to complete their full name and address and to provide a declaration statement, which is a rather long thing to include in a text message. We do not have typical texting rates across the sector because providers do not give that information, but we do know that charities that have spoken out on the issue are concerned about the amount that they lose through people not completing this rather cumbersome bureaucratic process. Nevertheless, those forms of giving are auditable and would fit quite closely with the spirit of the Bill with regard to cash donations in recognising that, as time moves on, more and more of us are using different forms of contactless payments to make donations.

JustTextGiving does not give people’s phone numbers to charities, so if someone does not respond to the initial text bounce-back there is no other way for the charity to get the donation, and declaration rates therefore remain very low. Where charities get the details, they will typically call the donor back if they have not had a response to the bounce-back. However, we have to bear in mind that if it is a mobile number, it might be a fairly expensive phone call, and if the donation has been only the £1 that the donor would otherwise have thrown in the bucket, we have to measure the cost-effectiveness of that relative to the amount of gift aid that might come back. This only really works for higher value donations.

In its evidence to the Committee, Camphill Scotland said that as a charitable organisation it frequently uses the newer methods of collection, and that it was keen that the Bill should start to explore the possibility of new ways of enabling donations by text messages. It went so far as to say that

“the Bill as drafted would either discriminate against those choosing to use this technology, or discourage charities from making use of this technology.”

My amendment—this is somewhat ironic—would also cover small donations made by cheque. Very often, cheque donations are made by donors who are already known to a charity, but cheques handed over at one-off fundraising events or plate collections at funerals, for example, might not be so easy to identify, and it might not be worth the administrative costs of chasing up the donor. In some circumstances, filling in the gift aid declaration is a time-consuming process, and therefore not something that everyone will be able to do.

Another reason why the amendment would strengthen the Bill is that younger people have different giving habits from other parts of the population. The Charities Aid Foundation, with Bristol university, commissioned a report entitled, “Mind the Gap—The growing generational divide in charitable giving”, published in September 2012, which identified a widening gap in giving between the over-60s and under-30s. Of course, many young people do give very generously to charity and are very involved in charitable activities, but a lower proportion of younger people are giving than older people. Making electronic giving more relevant and attractive could be one way to help to reverse this decline.

Reputational risk is one of the greatest threats to charitable giving. A failure by one charity is felt by other charities in the same sector. While collection cans still have a valuable part to play and are a very effective means of raising money quickly, they carry an inherent susceptibility to fraud. Electronic giving diminishes the opportunity for money to go astray. It is a win-win situation. The amendment would strengthen the Bill, increase the benefits to charities, and help legislation to keep pace with the accelerating changes in technologies. I therefore commend it to the House.

--- Later in debate ---

[Sajid Javid]

I thank the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) for her comments, and I also thank the hon. Member for Banff and Buchan (Dr Whiteford) and my hon. Friend the Member for Amber Valley (Nigel Mills) for their contributions. I will try to respond to their points, which they made very well.

The amendments would do slightly different things, but, in general, they all seek to broaden the gift aid small donations scheme to include not only cash donations but donations in the form of electronic payments. Amendment 2 seeks to do that by introducing a power to allow the Treasury, by order, to broaden the scheme, whereas amendment 22 and the group of amendments 34 to 37 seek to expand the scope of the scheme immediately. I thank my hon. Friend for his original amendment on the issue and for all his contributions on this particular topic in Committee.

It might be worth reminding Members of the scheme’s primary objective, which is to provide a gift aid-style top-up payment when it is difficult or unduly burdensome to collect a gift aid declaration from the donor. The most obvious examples are when a charity is making a street collection or when a religious group is passing around a collection plate during a service. In such situations it would be difficult to ask everybody who makes a contribution to fill out a gift aid declaration form. They would have to stop, confirm they were a UK taxpayer and then fill in a form with their name, address and other details. I think we would all agree that that would be unrealistic for a donation of just a few pounds. As a result, charities are missing out on potential gift aid on such donations. That is exactly why the gift aid small donations scheme is being introduced—that is what it is designed to tackle. It will fill the gap in gift aid for donations for which it is difficult or unduly burdensome to collect the necessary paperwork.

Giving by using digital technology means that the donor is already providing some or all of their details to the charity. If any extra information is needed to make a gift aid declaration, it will be relatively small. When a charity has an ongoing relationship with a donor, they should use gift aid, if at all possible. Compared with a bucket collection on a busy street, it is considerably less burdensome to ask someone to provide their details if they are donating through a website or a text message. It is easy to use gift aid when making a donation through a website and it is also possible to attach gift aid donations to a text message.

I want to sound a note of caution about complexity. Text messages and internet donations can be made from anywhere in the world, but I hope Members will agree that the UK Government should not make a top-up payment on donations made from outside the UK unless there is firm evidence that the donor is a UK taxpayer or resident. Introducing other forms of giving to the small donations scheme would make it more complicated. In order to make a top-up payment on UK donations only, charities would need to keep records of the donation’s origin. That is comparatively straightforward when rattling a tin on a UK high street, but it would become much more burdensome, if not impossible, for some charities if donations were made through texts and website visits from around the world.

Hon. Members mentioned the possibility of making the gift aid system easier via text giving. The hon. Member for Kilmarnock and Loudoun will be aware that the Government are in discussions with a number of charities and their representative organisations about how we can do just that. The discussions are going very well and have been constructive. The Government are open to the possibility that, eventually, we might have to pass legislation to make the gift aid system easier and we are working with charities to try to achieve that.

It is possible that new forms of electronic giving will be developed in the future that are completely anonymous. Indeed, my hon. Friend mentioned the possibility of using Oyster cards, which are anonymous. It is very early at this stage, however, to understand what technology might come along in a few years’ time, so it would be difficult to set out the circumstances in which the power he proposed could be used. Without complete knowledge of Oyster cards or other developing technologies for giving, it is difficult to know whether they would fall under the scheme’s scope and rationale. It is, therefore, possible that the power could never be used.

I understand my hon. Friend’s concerns and he has made some important points, so I want a review of the forms of giving to be undertaken when we review the scheme after its first three years. If people are able to make completely anonymous electronic donations, we shall look again at whether the scope of the scheme should be extended. That is the Government’s commitment.

It is harder for charities to collect gift aid declarations in the street or at a religious meeting than through other channels. That is why the focus of the scheme is on cash donations. I accept that things may change, so I am committing the Government to review the situation after three years. I therefore ask hon. Members not to press their amendments to a Division.

[Dr Whiteford]

Madam Deputy Speaker, I am sure that you will be as pleased as other Members to hear that I do not intend to detain the House for long.

We have heard a few contributions on this group of amendments. The hon. Member for Amber Valley (Nigel Mills) was on the same page as me in looking to the future and in considering ways of giving that are already developing in the charitable sector. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) alluded to some of the technical challenges that the proposals might meet and pressed the Minister on amendment 22, which she tabled.

I have listened carefully to the Minister and heard his commitment to review the forms of giving after three years. I am sorry that he did not go further, but I do not intend to press the amendment on the basis that there will be an opportunity for the “Chip-in” pilot scheme to be evaluated. I suspect that the technology will have moved far beyond that by the time of the review. I urge him to recognise the technological advances in giving that have already taken place.

Making a £1 text donation is like throwing a pound in a bucket. That is how we will give in the future. It will provide a better way for charities to create an audit trail. We do not know whether the people who give to someone who is shaking a bucket are taxpayers. Many of them may not be for one reason or another, whether they be pensioners or overseas students. In the same way, people making text donations may or may not be taxpayers, but I am sure that it is not beyond the wit of humanity to work out where the phones are or where the numbers are registered. Just as we are allowing this scheme to work in a proportionate way for cash donations that are collected in a bucket, we should respect the spirit of the Bill for contactless payments.

I look forward to the review in three years and hope that the Minister will take those points on board. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Third Reading

Fuel Duty

Eilidh Whiteford Excerpts

Monday 12th November 2012 Commons Chamber

[Cathy Jamieson]

I have given way to the hon. Gentleman already and want to make some progress.

We believe that the Chancellor should rethink his plan to give a tax cut to millionaires in April while putting up taxes for pensioners. As the shadow Chancellor announced on Friday, we believe that the Chancellor should cancel the 3p rise in fuel duty planned for January until at least April.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Does the hon. Lady agree that one of the unfairest aspects of the planned duty rise is the disproportionate effect of such taxation on folk in rural areas, as they have no alternative forms of transport and have further to travel?

[Cathy Jamieson]

The hon. Lady makes a valid point. I am certainly well aware of the problems faced by people in rural areas where there might be no alternative. I hope that she will support our motion this evening.

The Chancellor and the Prime Minister might never have had to worry about the cost of filling up their cars, but millions of people across the country worry about that every day, as we are hearing. To be fair, some Government Members recognise that and have been vocal about it, or at least they were until today, when they suddenly appeared to go quiet.

--- Later in debate ---

[Dr Whiteford]

We all know that the Government inherited a mess, but does the Minister accept that the increase in fuel duty will harm recovery by holding back businesses and households?

[Sajid Javid]

I think that the hon. Lady would welcome the action that the Government have already taken on the cost of living and on fuel duty.

This Government have also been working hard to get people into work. There are more people in employment than ever before. Unlike Labour, we have no problem in welcoming the fact that the private sector has created over 1 million jobs over the past two years. That equates to more net new jobs created in the private sector in two years than were created in 10 years under Labour. With this support in place, we have strained every sinew to cut taxes where we can to ease the cost of living. We have cut fuel duty—a cut that Labour opposed—and frozen it for nearly two years. Fuel is now 10p cheaper than it would have been under Labour, helping family budgets. We have cut income tax for 25 million people and lifted 2 million people out of income tax altogether. We have frozen council tax for two years and announced that we will do it again next year. This Government have saved families £220 per annum on the average council tax bill. We have capped increases in rail fares so that commuters do not face substantially above-inflation rises.

Beer Duty Escalator

Eilidh Whiteford Excerpts

Thursday 1st November 2012 Commons Chamber

[Mr David Hamilton (Midlothian) (Lab)]

I will try not to take up too much time. I want to be specific, because it appears from the interventions on the hon. Member for Burton (Andrew Griffiths) that hon. Members have a wide range of opinions that all go in the same direction. They will give the facts and figures during the debate.

When I was a young man, there were 23 pubs in Dalkeith high street. Times have changed. The price of alcohol has created problems for the brewing industry, but so have changes in habits and priorities. There is no doubt that taxation is one of the many factors that have created a problem for our pubs. Every day, we see on television and in the newspapers the problems on high streets at weekends, but no one talks about the thousands of pubs in villages and housing estates where there are no problems whatever. We want to protect those pubs.

No doubt the Minister will say that treating alcohol-related diseases costs 3% of the NHS budget; that only £10.6 billion is raised in tax; and that £21 billion is spent through the NHS on treating alcohol-related injuries and so on. I understand that, but I have a specific point for him to consider. Many hon. Members will talk about draught beer and cider, which are disproportionately affected by what happens in the supermarkets. In Scotland, there will be a threshold for alcohol pricing in supermarkets, but a minimum pricing regime will mean that the supermarkets take the money—nobody else will get it. Will the Treasury consider transferring the duty, and reducing the tax on some products and increasing it on others?

If hon. Members go to Tesco across the road from the Palace, they will find that four cans of John Smith’s will cost them £3.50—so I am told. A pint of the same beer will cost them £4.10 in The Red Lion. The tax on alcohol in supermarkets is completely disproportionate to the tax on alcohol bought at the bar.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

The hon. Gentleman makes a serious point about the health impact of alcohol on our society. Does he agree that pubs are a more controlled environment for drinking, and that people are less likely to abuse alcohol in pubs than if they buy cheap booze from the supermarket?

[Mr Hamilton]

I could not agree more. As a side issue, the central location of television soap operas is the pub. Things might be exaggerated on television, but pubs are about families and people getting together. Pubs are controlled environments where people look after one another. It is not uncommon for the bar steward to say to someone who is too drunk, “You’ve had enough. Away you go.” Somebody might look after someone who is too drunk in the pub. Drinking at home is uncontrolled and causes far more bother. Another problem we must face is that, nowadays, people—youngsters especially—meet in houses and get drink-fuelled before going out to the nightclubs.

Public Service Pensions Bill

Eilidh Whiteford Excerpts

Monday 29th October 2012 Commons Chamber

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I will try to keep my remarks to the point, Madam Deputy Speaker, and enable other Members to get in.

We have heard a lot about some of the changes that have already started to take effect, but one aspect of the Bill that is undoubtedly causing most concern, and proving a sticking point in negotiations with the public sector work force, concerns the equalisation of the normal pension age with the state pension age, and the implications of that for those who may have to work until they are 68.

Although I welcome the exemptions that have been conceded for some of the more obviously physically demanding public sector occupations—police officers, firefighters, members of the armed forces—that is by no means an exhaustive list of public sector jobs that can be extremely physically challenging. Most people would struggle to do many of those jobs into their mid and late-60s, and I hope the Government will listen carefully to employee representatives, and look again at the proposal and at what it might mean for nurses, paramedics, auxiliaries, prison officers and teachers, and others who do stressful and physically demanding jobs. That was one of the principal issues raised across the spectrum of trade unions and other employee representative groups, and the Bill does not currently seem to contain any flexibility to look at the issue in the context of overall negotiations, which is a particular issue in the devolved context.

We need to look at the normal pension age and its alignment with the state pension age in a slightly wider contextual framework, and inject a bit more practical realism into our actuarial spreadsheets. It was a pleasure to follow the hon. Member for Bromley and Chislehurst (Robert Neill), and the issue of life expectancy that he mentioned is important. We all acknowledge that life expectancy is increasing, but that top line trajectory masks great and very marked divergences on a range of demographic and geographic indicators. At this point, may I add my tribute to those of other hon. Members who have mentioned the late right hon. Member for Croydon North, (Malcolm Wicks)? It was he who raised some of these important points during previous debates.

People who have worked in heavy industry, for example, tend to die younger than those who have worked in professional occupations. People in deprived neighbourhoods live shorter lives than those in affluent areas, and on average women tend to live several years longer than men. One aspect of that divergence that does not receive nearly enough attention yet is pertinent to the debate is healthy life expectancy—the number of years in which we can expect to enjoy good health. Healthy life expectancy is rising, but it is not rising as quickly as life expectancy.

In Scotland we have one of the lowest life expectancies in Europe, and men and women can expect to live almost two years less than the UK average, at just over 76 years for men, and just over 80 years for women. The key point, however, is that healthy life expectancy is only 61.9 years for women and 59.5 years for men. The health of many men has already been seriously compromised several years before they reach the current retirement age. Those figures come from the Registrar General for Scotland; they are official Government figures.

Last month, the TUC published research indicating that in the UK as a whole, only 54% of men aged between 60 and 64 are actually in work, which, on the face of it, seems fairly consistent with official figures on healthy life expectancy. Women can obviously claim their state pension at an earlier age so they fare a bit better, but even then only 62% of women between 56 and 60 are in work. We as legislators must be a lot more realistic about how long we can expect people to be fit for work. Furthermore, those figures do not include people who have moved into part-time work because of their health, or taken on unpaid caring responsibilities for a spouse whose health has been compromised. Many people also leave the workplace to look after grandchildren.

I am sure all Members know people who work into their 70s and beyond with robust health and enviable levels of energy, and thanks to equality legislation fewer barriers are now in the way of older people who want—or need—to continue working beyond the state pension age and are able to do so. However, we cannot just cross our fingers and hope that older people will be able to continue in their jobs until they are 68. All the evidence tells us that most people will have developed some serious health problems by that stage in their lives, which may well affect their ability to work. That is not just in heavy occupations, but across the board.

Even if we allow for continued improvement in health outcomes, which I am sure everyone aspires to, and if life expectancy continues to rise, we need to factor in the realistic likelihood that a significant proportion of people will not be fit for work in physically demanding jobs by the time they reach 68. My worry is that those who are forced to leave their jobs early because of ill health face having to live on actuarially reduced pensions. That might well save the public pension schemes money, but it will significantly reduce their standard of living and quality of life in old age. It might even force some to rely on state benefits. The hon. Member for North Ayrshire and Arran (Katy Clark) alluded to that. We currently spend about £13 billion a year in means-tested benefits for older people, most of whom have worked hard all their lives, often in low-paid jobs or in unpaid caring, and do not have occupational pensions. Supporting those people through means-tested benefits is probably the least efficient way we could ensure they have a dignified old age.

As other hon. Members have said, today is not the day to debate the chronic problems with, and abysmal state of, private sector pensions and the reasons for them, but the warning is there: we should not pull the public sector down to the base level—the absolutely inadequate level—of private and voluntary sector pension schemes. That would be a recipe for spending a lot more on means-tested benefits in the long term.

I was struck by the briefing from the Prison Officers Association, not least because the proposed reforms will affect hundreds of prison officers in my constituency who work at Peterhead prison. The POA points out that, although the average age of prison officers in the UK is rising, prisoners are getting younger, and, in its words, “more dangerous”. It is concerned that many prison officers in their 60s might struggle to pass the physical fitness test that all prison officers undertake to ensure they have the physical strength, stamina and stability to, for example, use control and restraint techniques in the course of their duties. Prison officers make the case that there is a direct parallel between their job and that of police officers, and cannot understand why the recognition that police officers might not be able to do their job effectively beyond 60 has not been extended to them. Will the Minister offer some clarification on the Government’s thinking? Is there scope to reconsider the situation for prison officers? Prison officers point out that, if people are forced to leave their job early through ill health, they could put greater financial strain on the system. For example, it could cost a great deal more if they retire on work-related medical grounds than if they retire normally at a sensible age.

Nurses are another group who do heavy work, so the pension age has potentially significant implications for them. The Royal College of Nursing has formally rejected part of the Government’s proposal, but it makes the point that the Government need to keep the link between the normal pension age and the state retirement age under review, as recommended by Lord Hutton. It has asked that that commitment is made explicit in the Bill, and that the review process is conducted independently. I hope Ministers take that on board.

The RCN has also asked the Government to postpone making a decision on the equalisation of the normal pension age and state pension age until the working longer review in England has reported and the Government have had time to consider its recommendations. In the light of what I have said, I hope the Government take that point seriously, because it would be a sensible approach—the review will help to inform good decision making in the longer term.

Another major concern of trade unions and employee representatives—hon. Members have made points on this, so I will not repeat them—is that the retrospective powers in the Bill allow the Government to amend it with limited consultation. Trade unions and employee representatives are legitimately concerned about instability and uncertainty for scheme members. The consequences of people losing confidence in the pension system and dropping out of it are much bigger—that has happened in other sectors when pensions have become unsustainable. I hope the Government consider that in Committee.

The hon. Member for North Ayrshire and Arran raised specific aspects of devolved pensions regulation. I am by no means a spokesperson for the Scottish Government—I urge hon. Members to direct their questions to the Ministers responsible—but I hope I can shed some light on certain parts of the Chief Secretary to the Treasury’s opening remarks. I also want to ask questions for clarification from him and the Minister who will wind up the debate. My understanding is that occupational pensions policy is largely reserved, although Scottish Ministers have Executive responsibilities for the NHS, teachers, firefighters, police and local government pensions schemes, subject to a number of constraints. The major constraint is budgetary—the Treasury controls the purse strings, and Barnett consequentials have a knock-on impact on a Government who are working on a fixed budget and have no borrowing powers.

Will the Minister confirm that formal approval is needed from the Treasury for any legislative changes to the NHS and teachers schemes? What is the Government’s thinking on the Treasury approval required in relation to the firefighters and police schemes? My understanding is that the Government are trying to introduce a Treasury approval requirement for those schemes. Will Ministers confirm what they are doing? Are they seeking a memorandum of understanding to claw back powers from the Scottish Government on police and firefighters’ pensions? Scottish Ministers have had discretion to determine the design of the police and firefighters schemes, although the settlements have always mirrored agreements in other parts of the UK. So far, the benefits of consistency have been thought to outweigh any benefits of divergence. I am not sure whether that balance of opportunity will be seen in the same light if the proposals are implemented.

I believe Scottish Ministers have responsibilities in relation to the local government scheme, provided the powers are exercised within primary legislation. In practice, that scheme, too, has mirrored that of the rest of the UK. To return to points made earlier, I understand that the local government scheme has been reformed, and that “cap and share” arrangements are in place. It is funded differently from other public sector schemes, and decisions on it are made in Scotland by those who manage it. It is worth pointing out that, in Scotland, the public sector local government scheme does not seem to have any financial problems. There is no immediate shortfall—in fact, it is currently running a surplus—and neither the Convention of Scottish Local Authorities nor trade unions are of the view that there is any need for reform. The Government could helpfully clarify why they believe that scheme needs to be reformed. Is this the right time to do so? Public sector workers are in tight financial situations. Most have seen their contributions increase dramatically, and many had their incomes squeezed.

I cannot with any confidence answer the question put to me by the hon. Member for North Ayrshire and Arran on the legislative consent motion. My understanding is that there is no need for a legislative consent motion for most of the Bill, because pensions policy is largely reserved. However, I believe legislative consent would be required for some of the reforms to non-departmental public bodies and some judicial offices. I am guided by the Bill’s explanatory notes, so perhaps the Minister could explain if the situation is different. The Unison briefing asserts that further legislative consent is required with regard to the local government scheme, but I have not seen the legal arguments that back that up or substantiate it. Perhaps UK Ministers are in a position to clarify the UK Government’s understanding of the situation.

[Katy Clark]

I am grateful to the hon. Lady for going through the detail as she understands it. The Bill will have massive implications for our constituents. Does she agree that, if the Unison legal advice is correct—that a legislative consent motion is necessary in relation to the local government pension scheme—everything should be done by the Scottish Government to ensure that the negotiations taking place in Scotland between them and trade unions take precedence in terms of the outcome for our constituents?

[Dr Whiteford]

I certainly agree that it is important that we get a fair and equitable solution in the local government pension scheme. I cannot speak for the Government, but I know that some of the negotiations have been very difficult. From speaking to trade union representatives in recent weeks, it is clear that they recognise the constraints within which the Government are working—and they value the tone of some of the negotiations that have taken place so far—but Ministers in Scotland have been negotiating with one hand tied behind their backs. Greater flexibility, especially on age, would go a long way to helping to reach an equitable conclusion.

Underlying this debate is the need to maintain confidence in public sector pensions, which are really very modest. They keep people just above the poverty line, especially women who have worked in low-paid jobs most of their lives and have very modest pensions that keep them just above the level of means-tested benefits. People are not unreasonable in their expectations, but asking them to pay more, work longer and receive less is not a reasonable proposition to put to our public sector workers. I hope that the Government can and will do better.

[Several hon. Members]

rose—

--- Later in debate ---

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

It is ironic that we are discussing pensions today, given that much of what we have seen in the press over the past 10 days or so has been about the comments of the Secretary of State for Work and Pensions on whether we, as taxpayers, should support unemployed families with two or more children. No thought has been given to who those children are, but they will become the next few generations of taxpayers who will be making contributions to support pensions, either through public sector pensions or by putting money into the pot to provide benefits for others. I am pleased that we have moved on from having a go at households in which no one is working to looking at a different group of people.

I want to put on record the fact that some of the poorest paid people in our country are public sector workers. As my good friend and colleague, my right hon. Friend the Member for Wentworth and Dearne (John Healey), said earlier, pensions in the public sector are actually pay deferred. That is exactly right, and when we end up with poor pay in the public sector, we also end up with poor pensions.

Much has been said about Lord Hutton’s report. The commission firmly rejected the claim that current public sector pensions were gold-plated, and we have heard that the average pension paid to public sector scheme members is about £7,800 a year, while the median payment is about £5,600. We have also heard that half of women public sector pensioners get less than £4,000 a year.

Labour Members recognise that public sector pensions need to be reformed, which is why we have consistently argued that there will need to be some kind of an increase in contributions and, as the population gets older, an increase in the retirement age. We have also been clear that any settlement or agreement should meet three tests, which are slightly different from the Government’s four tests, although there are elements on which we agree.

The first test is affordability: will the changes deliver a fair deal for taxpayers when times are tight, when taxes are rising and when spending is being cut? The second test is fairness: will the changes deliver a fair deal for public sector workers on low and middle incomes whose pensions are far from being gold-plated and who have given a great deal to the services in which they work and on which each and every one of us—in the House and throughout the country—depend? The third test is sustainability, because anything that any Government do needs to be sustainable. Will the changes deliver a workable settlement for the long term that does not undermine the sustainability of existing schemes and that can be flexible in the face of rising life expectancy?

I recently took the opportunity to meet several serving police officers in my constituency, and I have been tasked with raising their concerns in the Chamber this evening. We often talk about the good job that the police do, but I almost never hear people talking about police service pensions. For the sake of clarity, I should point out that although certain public sector pensions in Scotland are administered by the Scottish Government, the reality is that the decisions reached here in Westminster are followed—or mirrored, as the hon. Member for Banff and Buchan (Dr Whiteford) said—north of the border.

Despite the stated opposition of the Scottish Government’s Finance Secretary, John Swinney, to the increase in pension contributions, he confirmed in a statement to the Scottish Parliament on 21 September 2011 that the Scottish Government would apply the increase in employee contributions for the NHS, teachers, police and firefighters schemes in Scotland. As my right hon. Friend the Member for Wentworth and Dearne said, that represents an additional 3% tax on those workers in the public sector.

[Dr Whiteford]

Is the hon. Gentleman aware that, before that decision was made, the Chief Secretary to the Treasury wrote to the Scottish Finance Secretary to say that if those contributions were not increased, £8.4 million a month would be removed from the Scottish Government’s financial settlement until such time as the Scottish Government followed the lead of other parts of the UK? I do not know what the hon. Gentleman thinks John Swinney should have done in those circumstances, but I believe that his hands were completely tied. Not only would the Scottish Government have lost that money out of the block grant, but they would have had to find it from another budget. In effect, therefore, they would have had to pay for those contributions twice.

[Mr Brown]

I am pleased that the hon. Lady has come into the debate. I am not sure whether she was here when I intervened on the Chief Secretary to the Treasury to ask whether any such penalty had been suggested, but he did not answer my question in a straight manner, so I thank her for that intervention.

The serving police officers whom I have met are seriously concerned and feel that they have been let down by their representative body, the Scottish Police Federation. We all know about the technique of divide and conquer, yet with regard to the pension changes, it has become clear that we are seeing protection—understandably—for those nearing retirement age, but that that is being provided at a cost to those who joined the police service between 1992 and 2006. Those who fall into that category feel that they have been abandoned and hung out to dry.

Those people joined the police service under certain terms and conditions, one of which was that after paying their contributions into the pension fund, they could retire after 30 years and then qualify for a lump sum and a pension. One officer pointed out that he was halfway through that 30-year period. It was difficult for him to get a forecast, but the closest he could get was an indication that having worked an extra seven years, his lump sum would be about 30% of what was first anticipated, while the pension would be about 70% of what was expected. We all go through life making plans, and for some of us retirement comes that little bit sooner. When people cannot recover ground as they move towards retirement age, it leaves them in a real dilemma. As one chap pointed out, “I had looked at retiring at a specific age. My lump sum would have cleared my mortgage. I now need to rethink where I am going.”

There is a strong belief that section 2 of the Pensions Act 1995 prevents the Government from changing pensions, so I hope that the Economic Secretary will put a clarification of that point on record. The first Winsor report of many years ago stated that officers could not work beyond the age of 55, but we are now seeing a significant change. Officers will be subject to a fitness test, but what will happen if someone fails such a test? Will they be made compulsorily redundant?

We know about some of the activity on our streets today. We should not just condemn groups of people, but there are criminals out there, and I would hate to think that police officers will be trying to chase younger people on foot. If officers are between the ages of 55 and 60, there is every chance that criminals will be significantly younger than them. We will be asking the police to do a task that is beyond many people’s comprehension.

Police officers are asking the Government why there is a further review, given that the scheme was changed in 2006 and every officer who joined after that time is on the new 35-year scheme. Many who joined after 1992 are halfway through their service period and their financial future looks extremely uncertain. We all recognise that police officers are not in a position to take strike action—in all honesty, I do not think that they would—but the fact is that those who joined between 1992 and 2006 feel as if they have been singled out.

Although, according to my Front-Bench team, we will not divide the House on Second Reading, I share colleagues’ real concern about retrospection, which has been raised on several occasions. I look forward to colleagues seeking to improve the Bill in Committee and working to offer some protection to those who work —day in, day out—to deliver the services in our public sector that each and every one of us demands.

--- Later in debate ---

[Andrea Leadsom (South Northamptonshire) (Con)]

I was rather delighted by the Bill. I think it is an unmitigated good news story, so it is rather depressing to follow the hon. Member for Blaydon (Mr Anderson) who, more than any other contributor today, is talking down an extraordinarily fair, logical and sensible settlement. I would draw to his attention the comments of his colleague the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), who told the TUC annual congress on 11 September this year:

“We must be honest with the British people that under Labour there would have been cuts, and that on spending, pay and pensions there will be disappointments and difficult decisions from which we will not flinch. Because the question the public will ask is: who can I trust?”

It is a great shame when Opposition Members deliberately talk down a settlement that is extraordinarily fair to both the taxpayer and our public sector workers.

This is an unmitigated good news story, of course, because we in Britain have some of the best public service sector servants in the world and the best public services in the world. Is it not fantastic that we are all living longer—that we can now expect to live a good 10 years longer than in the 1970s? That is an unmitigated good, but it has enormous consequences for public policy.

One of the consequences is that people will need to work for longer. It is ridiculous for people to be retired for a third of their lives. That is not only unaffordable; it is nonsensical for those individuals. It is appalling to think of people spending 20 or 30 years fully retired with nothing to do but tend their garden and look after their grandchildren. People do not want to do that. It is completely ludicrous to suggest that people should continue to retire at the age of 60 when they are going to continue to live for another 20, 30 or even 40 years. That is completely unsustainable and illogical. The Bill makes sense of such points in a way that is completely fair to the taxpayer and the public sector workers. I congratulate the Government on producing such an extraordinarily fair Bill.

I want to disabuse the Opposition of a couple of the myths. They say that the unions claim that average local government pensions are just £3,800, and that for women they are less than £2,800, but they fail to point out that that includes people who have worked for only a very short time in the public sector. They should be talking about what people would be retiring on if they were to spend their entire career in the public sector. The fact is that many women will be far better off than is claimed. Members on both sides of the House have been very concerned about lower paid women in both the public and private sectors retiring in poverty. Under our proposals, women will be far better off because the Bill safeguards the lowest earners’ pensions. They will not face increased contributions to their pensions, and they will be better off than they previously were. That is very good news.

[Dr Whiteford]

One misleading aspect of the pensions contribution debate is the claim that people earning under £15,000 will be protected. It is often overlooked that these figures are calculated on a full-time equivalent basis. Many women work part time, and they will find that they have to pay high pension contributions even though their salaries are very modest.

[Andrea Leadsom]

I think what the hon. Lady is saying is that somebody who would be on, perhaps, £60,000 a year but who is working a day a week and is therefore taking home about £12,000 a year will have to pay higher contributions. Is that what she is saying?

[Dr Whiteford]

I am thinking of nurses or teachers, whose salaries would be more in the average earnings category. If they work half-time, they will find that their pensions contributions increases will be calculated on the basis of a full-time equivalent so this measure will not help women on low incomes.

[Andrea Leadsom]

That is a rather extraordinary point. Public sector pensions will be paid and calculated on the basis of a full-time equivalent salary, so our approach is entirely consistent. Moving to career average schemes will also make things much fairer for women. It will mean that high flyers who are promoted late in their career and then earn a significantly higher salary will no longer retire on an extremely generous pension. Those who have spent their career sometimes doing part-time work and sometimes doing full-time work will have a career average pension, which will be much fairer.

It is also right that we link public sector pensions to the normal state retirement age—that is a matter of fairness. If the state retirement pension kicks in at 66, it is right that, with exceptions—notably those who have armed forces, firefighter and police pensions—people start to draw their public sector pension at the same time as their state pension. That is all about fairness.

--- Later in debate ---

[Sajid Javid]

Since we received the first interim report from Lord Hutton, we have been in negotiations with trade union representatives from almost all the major trade unions. I am pleased to say that most of them have taken a very constructive approach. As I said, trade unions that represent two thirds of trade union members have accepted the schemes we have put forward.

These reforms are not easy, but they are the right thing to do for the long term because they are in everybody’s interests. We must stop the cost of these pensions spiralling out of control. I shall now turn to some of the issues raised today.

Several Members, including the hon. Members for Banff and Buchan (Dr Whiteford) and for Blaydon (Mr Anderson), mentioned the link between the normal pension age and the state pension age. The reality is that we are all living longer and enjoying healthier lives in retirement. The average 60-year-old is now expected to live 10 years longer than in the 1970s. Pension ages of 60 and 65 were set in times when people spent only a few years in retirement, but that is no longer the case. Some fortunate people spend more years drawing their pension than earning their salary. If everyone is living longer, it is only fair that people work a bit longer, too; otherwise we will be asking those in the private sector to work longer and pay more so that those in the public sector can retire earlier having paid less. We cannot ask those people to pay twice over—once for their own pensions and once for those of public servants.

Let me be clear, however: this Government are not forcing anybody to work for longer. As now, it will remain possible to retire earlier than the normal pension age and draw a reduced pension, subject to any minimum age rules that exist. Of course, any benefits from the current schemes can be assessed in full and reduced at the current pension age for those schemes.

Secondly, I must remind the House that the Government have honoured their commitment to protect the rights of those closest to retirement. The Chief Secretary has made it clear that people who were 10 years or less from their normal pension age on 1 April 2012 will see no change in their pension. The Bill delivers that in clause 16.

[Dr Whiteford]

I take the Minister back to the point he made a moment ago. Will he concede that most people who give up work early do so not through choice but because their health has collapsed or they have developed long-term debilitating conditions that prevent them from doing their job?

[Sajid Javid]

The hon. Lady makes a fair point, which is why in many of the schemes, particularly those where that might be a bigger issue, the rules try to take it into account. I hope that she will welcome that.

I do not have much time left and I wish to address some of the specific points that have been made. Some questions were asked about the cost cap embedded in the Bill. That cap is designed as a backstop only, and it will be triggered in unforeseen circumstances that lead to large potential changes in costs. It ensures that cost increases do not go unchecked again, as they did for decades before the introduction of this Bill.

A number of Opposition Members talked of the “cap and share” arrangement put in place by the previous Government as though it meant that no further changes were required to public sector pensions. Let me remind hon. Members of what Lord Hutton said in his report:

“cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer.”

Had we kept the arrangements introduced by the previous Government, these questions would not have been answered.

A number of hon. Members also talked about opt-outs. As my hon. Friend the Member for Bromley and Chislehurst said, and as my hon. Friend the Member for Gloucester (Richard Graham) explained well, the incidence of opt-outs as a result of the changes to payments that have already been introduced has had no discernible effect on the use of these pension schemes, but the Government will continue to monitor opt-outs and take opt-out data fully into account before making any decisions on individual schemes.

A number of Opposition Members also raised the issue of public sector pay. Again, Lord Hutton’s commission examined that, and said that public sector workers, on average, had higher pay if account was taken of different qualifications, ages and experience levels. That was also borne out in a report by the Institute for Fiscal Studies.

We also heard some questions about the devolved parts of this Bill, with the hon. Member for Banff and Buchan asking a number. I will not have time to go into them all, but she is right to say that for parts of the Bill we will require a legislative consent motion, and we hope that that will be forthcoming. For the small parts of pension legislation where there is some flexibility for Scotland, Scotland has the flexibility to do something differently, but that would involve a change.

Small Charitable Donations Bill

Eilidh Whiteford Excerpts

Tuesday 4th September 2012 Commons Chamber

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

May I first declare an interest? Until relatively recently, I was a trustee and non-remunerated director of two charities and am currently a trustee of the Parliament Choir, which has charitable status.

Charities, and particularly small charities, are the backbone of our civil society. The contribution they make to our communities is immeasurable. It would be remiss of hon. Members if we did not acknowledge the people around these islands—in my constituency and those of all hon. Members—who give up their time and money for the public benefit. The Government could never replicate, reproduce or replace what they do, and it is right that they remain at the forefront of our consideration of the Bill.

These have been difficult times for charities; their capacity to fundraise in tough economic circumstances has been stretched ever tighter and greater demand has been placed on their services. Gift aid has been immeasurably and immensely valuable to many charities large and small, so it is a good innovation and a step forward that small charities can start to benefit from it too. I therefore welcome and support the principles behind the Bill—it will be a meaningful step forward for a number of charities.

Having said that, however, previous speakers have highlighted feedback from stakeholders making it clear that, as things stand, the scheme is still too complex and will not be accessible to all the charities that could legitimately benefit from it. The Economic Secretary introduced the scheme with the intention of providing opportunities for charities, but the National Council for Voluntary Organisations, the Institute of Fundraising and the Charity Finance Group have all expressed concerns about the complexity of some of the preconditions and about the difficulties that they will create for some charities.

I am sure that we all realise that getting a scheme of this nature right is tricky, and we would acknowledge that a balance needs to be struck between enabling charities to maximise the value of small cash donations, and protecting both the Treasury and charities themselves from fraud. Nevertheless, cash giving remains an important method of fundraising for the charitable giving sector. As the hon. Member for Stafford (Jeremy Lefroy) said a few moments ago, almost 47% of donations are made in cash, and, according to the NCVO and the Charities Aid Foundation, it remains very much a part of our giving sector, even though other forms of giving are coming on stream.

I am sure that I am not the only person in the Chamber with lots of experience rattling a bucket to raise cash for projects. It can be a very effective way of raising money, particularly for certain situations and kinds of appeal, but it is only fair to recognise that it is open to abuse. It is not only the Treasury that might lose out; I have seen how easy it is for people to put a logo—particularly the logo of a big charity that is a well-known household name—on a bucket, shake it and collect money that will never benefit anyone in any part of the world. There have to be protections, and reasonable steps have to be taken to prevent that from happening.

Many charities, particularly those that have professionalised over the past 20 years or so, have made a great effort to encourage people to give regularly. That is good for charities, because it means that their donations are predictable and that they know what revenues are likely to be coming in. It also helps them to communicate with their donors, makes them much more accountable to the people giving money and helps people to understand what their donations are being used for. On the whole, therefore, this move is a good thing, and I welcome the fact that, even in tough times and a recession, more and more people are signing up for direct debits and finding more long-term and sustainable ways of giving to charity. But that does not mean that there is no place for bucket rattling, and the Bill will help smaller charities that want to collect in that way from people who do not want, or are not in a position, to give a regular amount.

Although in recent years we have moved in that direction, an awful lot of charities still work entirely through volunteers—they do not function with staff but are still dependent on people who selflessly give up their spare time and weekends for fundraising activities and the bureaucratic administration on which charities—large and small—depend. Just as it is important that the laws regulating charities take a proportionate approach to governance and regulation—that important principle has underlined the charity regulation changes of recent years—it is important that we recognise the difference between large professionalised charities delivering public services and small organisations raising money for a local community project with no paid staff. It is also important that the opportunities open to charities through gift aid-related schemes demand a proportionate level of administration.

I listened carefully to the Minister’s opening remarks, and I think the Government seem to be trying to find a middle path, but as we manage risk in a proportionate way, there are still things we could be doing. The concerns of the umbrella bodies in the charity and voluntary sector should be taken on board. I encourage Ministers to keep engaging with those organisations as the process goes forward and to look at some of the detail, particularly in implementation. Charities are conscious of their reputations, especially when it comes to managing cash. In my experience charity managers desperately want to encourage regular giving not in cash, but in other ways.

I am interested in what has been said about the restrictions on gift aid. Some of them are reasonable—it is quite reasonable to have a track record with charities—but we have to recognise that there will be a detrimental impact on people raising for, say, a one-off event to install a piece of community equipment or for a community project. They will not be able to benefit from the scheme. I would be keen for Ministers to come back to us on that point and see whether there is a way round it. There are also questions about the matching provision. It could be useful for charities trying to comply with the requirements, as it would help them to build up more knowledge of who is giving them money. Charities should not be afraid of that—indeed, I would encourage them to do it—but in the meantime let us find a way forward through the detail.

I am also interested in the explosion in the number of people giving through their mobile phones in recent years or finding other ways to give—for example, through websites such as JustGiving. All are innovative ways of raising funds which have been developing rapidly as the technologies develop and people come up with innovative solutions. Again, however, smaller charities find it harder and more expensive to access such schemes. They do not come free; they come with a cost, which erodes the benefit of gift aid schemes for smaller charities in particular. Will the Minister consider working with the Charity Commission and the Office of the Scottish Charity Regulator to see whether it is possible to develop some HMRC-approved tools that might help smaller charities to take such schemes forward and benefit from the gift aid small donation scheme? I would be interested to hear what the Minister has to say about that. Such strategic investment in the sector could protect public money and at the same time help grass-roots charities that do not have big infrastructure and bureaucracy at their disposal, keeping costs down for everyone.

I also reiterate what the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) said about clause 17(2)(a). These points have been raised by the Law Society of Scotland in particular, which, in recognising that a balance needs to be struck in the Bill, has pointed out that there is a difference between how “charitable purpose” is defined in Scots law and how it is defined in English law. I urge Ministers to engage with the relevant bodies to ensure that the Bill is absolutely devolution-proof and works equally well in both jurisdictions.

To conclude, the Bill is a step in the right direction. I support its principles, but as we go forward I urge the Government to look carefully at how it might be implemented more effectively and benefit more of the charities that currently will not manage to be part of the scheme. The hurdles are surmountable, and I hope those issues can be ironed out.

Finance (No. 4) Bill

Eilidh Whiteford Excerpts

Thursday 19th April 2012 Commons Chamber

[Ben Gummer]

I will, but before I do, let me say in response to that intervention that there are many pensioners in my constituency who are on very low incomes. They are suffering considerably at the moment. Most of them do not have incomes anywhere close to the current allowance. What we are trying to do—in improving their lot through the triple lock guarantee, as well as protecting the pension credit, the winter fuel payments, the cold weather payments and the free TV licences—is protect the benefits of those who are least able to look after themselves.

My hon. Friend the Member for Broxtowe (Anna Soubry) is right in another sense. It is not just today’s vulnerable pensioners whom we must look after and seek to help, but the vulnerable pensioners in 20 and 30 years’ time. If we do not make changes now and try to protect the state’s income to some degree, we will not be in a position even to afford the benefits and pensions that we promise people now, let alone to anything like that degree in 20 or 30 years’ time, and that will be a problem for both parties.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

Obviously the proposals that we are talking about today do not apply to the very poorest pensioners or the better-off pensioners. However, let me ask the hon. Gentleman a simple question: what incentive will there be for people to save for their retirement?

[Ben Gummer]

The hon. Lady is entirely right. One of the terrifying things that comes out of all public opinion surveys is the lack of savings and even the lack of people expecting to save for their old age. I hope that the reforms brought in by the Minister responsible for pensions—the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb)—for auto-enrolment and encouraging savings will be the beginning of a fully funded pensions system.

However, that is for another debate. I am aware of the strictures regarding Committee time and the fact that other Members wish to speak. I would therefore like to make one final comment. Lord Turner’s 2005 report, which was commissioned by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), said that

“unless new government initiatives can make a major difference to behaviour, the present voluntary system of pension savings, combined with the present state system, is unlikely to deliver adequate pension provision.”

Moreover, he went on to say that the only means of achieving that would be through cross-party consensus. If we are to be serious about providing decent pensions, not only to people today, but to people in five, 10 and 15 years’ time—that includes people retiring this year and next year, who will be in their 80s and 90s when we will really be starting to pick up the bill—all parties must, between us, come to some sort of consensus about the difficult decisions that need to be made.

--- Later in debate ---

[Dr Whiteford]

I will try to keep my remarks short. I have listened to today’s debate with great interest. First and foremost, it is important that we take proper account of the long-term erosion of pensioners’ incomes over the past three decades, since the link between earnings and the state pension was broken, and of the more recent pressures in the wake of the financial crisis.

The changes to age-related allowances that we are discussing will not affect the poorest pensioners or those who are comfortably off. They will, however, affect the 40% of pensioners who have modest incomes. Those people have saved for their retirement, and 4.4 million older people will be worse off as a result of the changes.

[Katy Clark]

I agree with everything that the hon. Lady has said so far. Does she agree that a subject that we do not discuss often enough is that of pensioners who rely on their savings? Low interest rates mean that they are currently getting a far lower income from their savings than they had envisaged.

[Dr Whiteford]

I absolutely agree. In fact, that was one of the points that I wanted to make, because that subject has been eclipsed in the debate about the changes.

The Government have made great play of the recent increases to the state pension, and seem to suggest that they will somehow offset the changes to the tax allowances. As the hon. Member for Leeds West (Rachel Reeves) pointed out, however, we must remember that that is simply an inflationary rise. It will only keep pace with prices; it is not an increase. It is only a small step in the right direction towards restoring pensioners’ incomes to a level that most of us would recognise as providing a decent standard of living.

I have mentioned in the House before that the way in which pensioners experience inflation can differ markedly from the way in which the general population as a whole experiences it. One of the most obvious and significant examples of that relates to heating and domestic fuel costs. Retired people are more likely to have to heat their homes during the day, while the rest of us enjoy the benefit of our workplace heating systems. Many pensioners also find it harder to keep warm because of their age and the fact that they are not moving about so much. So any inflation in the cost of energy is felt disproportionately by pensioners, and nowhere more so than in those parts of these islands that experience consistently colder weather.

Last year, we saw sharp and dramatic increases in home energy costs, which played a big part in driving inflation up to over 5%. Energy prices have come down since that peak, but I heard on the news this morning that some economic commentators believe that inflation this year is going to be well above the Bank of England forecasts that the Government are using, and that we could experience inflation of over 3% this year as well. The welcome increases in the state pension have only kept it in line with inflation and might not keep it in line with inflation as it is experienced by people of pensionable age. That is why the Government’s argument that the changes to age-related tax allowances are compensated for by the increases in the state pension is somewhat spurious. In real terms, this tax grab squeezes the incomes of pensioners on modest incomes.

It is also all too easy to forget that pensioners have already paid a heavy price for the financial crisis. Those pensioners affected by these new changes to age-related allowances are in many cases the same people who saw the value of their savings and investments plummet in the wake of the financial crisis. Since then, they have had to contend with record low interest rates, coupled with high inflation. As the Treasury Committee reminded us earlier this week, quantitative easing, whatever its intended consequences, has had some very nasty side effects for those reaching retirement age and looking to buy an annuity in the last few years.

[Fiona O'Donnell]

The hon. Lady, like me, has many pensioners in her constituency who are on modest incomes and thought they could afford to live out their retirement and be able to cope with running a car, higher food prices and all the other added costs of rural living. Does she agree that this change is going to wreck the plans of many of those pensioners?

[Dr Whiteford]

I agree entirely. It is about not only rural and transport costs, but increases in VAT, cuts in fuel allowances and so forth. All these things have put a real squeeze on people living on fixed incomes, who have little opportunity to find money from any other source. These have not been easy financial times for those on fixed incomes, who have been the forgotten victims of the financial crisis. It is not fair to say that pensioners have got off lightly so far from the public spending squeeze—quite the reverse. In considering changes to age-related allowances, we need to understand that the granny tax will tighten the screw on people who have already had significantly to tighten their belts in recent times.

Those affected by this measure are all living on below-average incomes. Most will have paid tax throughout their working lives, and most thought they were doing the responsible thing by saving for their retirement. Crucially, they do not have the opportunity to find alternative sources of income. They are on fixed incomes and are living off savings.

[Stephen Williams (Bristol West) (LD)]

Will the hon. Lady give way?

[Dr Whiteford]

I was about to wind up, but I would be delighted to take an intervention.

[Stephen Williams]

The hon. Lady just said that this group of people are on below-average incomes. That might be true across the broad span of the population, which includes people in work on enormous salaries, but for pensioners, surely they are on way-above-average incomes.

[Dr Whiteford]

The hon. Member for Leeds West pointed out that nobody on an income of more than £25,500 a year will be affected by this measure. Frankly, with average earnings above that, I do think that most of those pensioners are living in what most people would consider to be quite modest circumstances, particularly when, as I have already argued, they have to pay much greater heating costs. Their lifestyles are not without particular burdens that they have to bear, and they do not have a chance to improve them.

[David Mowat (Warrington South) (Con)]

rose—

[Dr Whiteford]

I shall not take another intervention; I am trying to conclude my remarks.

The Government had a chance to regain the confidence of pensioners after a long hiatus and much erosion of the position of pensioners over a number of decades, but they have squandered that opportunity. They are sneaking through these proposals in the fine print, claiming that they are for simplification. That undermines whatever confidence pensioners had left in them. On the streets of my constituency, people have been angry to see that what has been given with one hand as a modest increase in the state pension has been taken away from their occupational pension with the other hand.

We are leaving pensioners without any real incentive to save. We are not going to tackle the challenges of our changing demographics with that kind of attitude because people will question whether it is worth their while putting money aside for their retirement. I do not think that is a way forward, and I hope the Government will step back from this very regressive measure.

[Margot James (Stourbridge) (Con)]

I welcome the Budget, which has been a Budget for enterprise and growth, and I would defend the reduction in the top rate of tax, which seems to be the Opposition’s main bone of contention. I think older people have a stake in the future of our economy just as great as everybody else. There is no doubt in my mind that the introduction of that 50p top rate of tax by the last Government—right in the last throes of the last Government—was extremely damaging to our country’s image as a place of business, growth and prosperity. I am glad that the Chancellor has taken the brave step of reversing it in part.

--- Later in debate ---

[Mr Gauke]

I recognise that not everyone wants to address the matter and that there are those who do not want to change the position whereby people earning £20,000 or £25,000 a year are paying taxes to fund child benefit for substantially wealthier families, and I realise that arguments are made to defend that. But if we are to do something about it, we have a choice. Do we do this through a tax credit system, which means putting everybody through that system, and doing it on a household basis, or do we try to find an alternative way of doing it that reduces the administrative demands? I do not deny that there is complexity in this method, but relatively, we believe that this is the simpler way of doing it.

[Dr Whiteford]

It is misleading to insinuate that poorer families are subsidising better-off families. If there is a need to address income inequalities, why should people who have children pay the price of that rather than people who do and do not have children according to their means?

[Mr Gauke]

The only benefit received by those in the top 10% of earners, which includes all of us, is child benefit, if they have children. That is the only benefit that we receive, so it is the only one that can be reduced or withdrawn. That is why we have this approach. It is perfectly fair that steps are taken to remove child benefit from those households that contain people in the top 10%.