Pension Schemes Bill [ Lords ] (Fourth sitting)
Ian Blackford ExcerptsThursday 9th February 2017
(7 years, 3 months ago)
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The Chair
I understand that following the debate this morning, Mr Blackford no longer wishes to move new clause 8. Is that correct?
Ian Blackford (Ross, Skye and Lochaber) (SNP)
That is correct.
New Clause 11
Asset protection for unincorporated businesses
“The Secretary of State must, by regulations, make provision to amend section 75 of the Pensions Act 1995 in order to protect unincorporated businesses at risk of losing their personal assets including their homes.”—(Ian Blackford.)
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 12—Review of actuarial mechanisms for valuing pension scheme liabilities—
“Within six calendar months from the day on which this Act comes into force, the Secretary of State must conduct a review of the actuarial mechanisms used to value pension scheme liabilities under section 75 of the Pensions Act 1995.”
New clause 13—Non-associated multi-employer schemes: orphan debt—
“The Secretary of State must, by regulations, exclude from the calculation in section 75 of the Pensions Act 1995 the orphan debt in any non-associated multi-employer scheme.”
Ian Blackford
It is a pleasure to serve under your chairmanship, Ms Buck. I thank the Committee for its assistance in taking new clauses 11 to 13 earlier than planned.
New clause 11 would help to deal with an issue facing plumbers in Scotland. Plumbing Pensions (UK) Ltd was established in 1975 to provide pensions for the plumbing and heating industry UK-wide. The scheme is managed by a group of trustee directors appointed from nominees of the Association of Plumbing and Heating Contractors in England and Wales, the Scottish and Northern Ireland Plumbing Employers Federation and Unite the union. The scheme has more than 36,000 members and assets in excess of £1.5 billion.
Under section 75 of the Pensions Act 1995, employers may, in certain circumstances, become liable for what is known as a section 75 employer debt. That debt is calculated on a buy-out basis, which tests whether there would be sufficient assets in a scheme to secure all members’ benefits by buying annuity contracts from an insurance company. Legislation specifies that a section 75 employer debt becomes payable when an employer becomes insolvent, winds up, changes its legal status or ceases to have any active members in the scheme. Although we must be mindful that the purpose of those rules is to protect pension benefits, the way they are currently framed creates problems for some stakeholders, and we are sympathetic to SNIPEF’s concerns, which I know it has also raised directly with the Minister.
The solution is not clearcut. There are several options for the Government to consider, but each has complications for pension schemes, employers and scheme members. We urge the Government to balance employers’ interests with the need to protect benefits for scheme members. The previous Pensions Minister, who sits in the House of Lords, indicated that she would look closely at how a solution to this complex issue could be reached. We need the same assurances from the current Minister that the Government will work to find a solution for the industry. They could use the Bill to bring forward such a solution.
SNIPEF aims to achieve an amendment to the section 75 debt legislation. Its main concern is for unincorporated businesses where people risk losing their personal assets, including their homes. It wants the Government to review the actuarial methods that are used to value pension scheme liabilities, as it believes that given the current economic conditions, the calculation of section 75 employer debt on a full annuity buy-out basis is inappropriate and detrimental to non-associated multi-employer schemes.
SNIPEF argues that orphan debt in any non-associated multi-employer scheme should be excluded from the calculation of section 75 employer debt. It also suggests that, provided that schemes are deemed to be prudently funded, the Pension Protection Fund should act as guarantor of last resort for orphan liabilities. SNIPEF believes that any changes in legislation should apply retrospectively to all employers from 2005. It would be helpful to hear the Government’s view on that request.
As I mentioned, SNIPEF recently met the Minister, and it has advised several MPs that he confirmed that those objectives could be incorporated in a Green Paper, but I want to use the opportunity of the Bill to address these matters. We are eager to hear whether the Government intend to include a solution in the Bill, and I look forward to the Minister’s comments.
The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
It is appropriate, given the temperature in which we are working, that plumbers are mentioned. I only wish that some of them were in the Public Gallery to make repairs so that hon. Members would not have to wear their coats.
I joke about that, but I accept that this is a serious matter. When it was brought to my attention, it was my duty and pleasure to meet representatives of not just the plumbers but others. The Government are not ignoring the issue. Although some stakeholders have run an effective public campaign, as is their right, it was the job of the Department for Work and Pensions anyway to get to grips with this, despite the fact that MPs have contacted us individually, such as the hon. Member for Ross, Skye and Lochaber—
Richard Harrington
Thank you. I have finally got it. I shall provide tuition for other hon. Members.
This issue is important. For the record, I should remind hon. Members who are not as familiar with it as the hon. Member for Ross, Skye and Lochaber why the employer debt legislation is in place. It is to help ensure that members of salary-related occupational pension schemes receive the pensions they worked for and have been promised when their own employer cannot provide them. I think everyone would agree that that is a noble aim. Were that not a rule, it would have led to even more difficulties.
When I see representatives of those in such positions, I try to think about this key question: if they are not responsible for the debt, who is? Someone has to be responsible for it. As hon. Members will have picked up from the hon. Gentleman’s speech, people who have been working quite properly and, typically in this field, running their own businesses find themselves with—I do not know what the legal term is—a contingent liability that could be called upon. It is not as though they have received an invoice or a demand, or people have been banging on the door to repossess something, but it is understandably on their minds that that could and might happen, which is a serious matter.
Ian Blackford
That is exactly the point. We are talking about often small businesses that have done the right things in making sure their employees are protected and have adequate pension provision, but there is a sword of Damocles hanging over them with the worry and uncertainty, caused purely by this debt, that they may lose their businesses and houses.
Richard Harrington
I accept the hon. Gentleman’s point. We all agree there is a problem. I do not see how anyone could disagree with that. These people are simply in an unfortunate position, but the Government have to decide, “If not this, what?” and “What are the alternatives?” The hon. Gentleman said, as the groups involved have, that the debt should be passed to the Pension Protection Fund, which everyone would agree has been a very successful mechanism. We mentioned the Maxwell case before lunch. The PPF was intended to deal with failing schemes. It is paid for by the levy payer—by all the successful pension schemes—and I am sure they complain because it is a significant amount of money, but everyone would agree that it has been successful.
In this case, we would place an unfair burden on the PPF, because we are not talking about failing schemes. Many of them are successful and proper. That is why I mentioned a contingent liability. If it is your liability— I do not mean yours, Ms Buck, but anyone’s—it is real to you. It is not quite as real as having an invoice or a demand, but it is there all the time. I do not deny that. However, passing the debt to the PPF would place an unfair burden on the PPF and its levy payers.
Like so many issues facing defined-benefit schemes, the problem is complex and finding a solution is difficult. I accept that it is for the Government to address it. That is what we are elected and paid for. But like everything else in government, there is not an instant, easy solution. It is worth highlighting the fact that the Government have already made significant changes to the legislation in response to representations made by some employers. A number of mechanisms have been made available in employer debt regulations whereby only part of the debt or none may be payable. There are eight such mechanisms in legislation. A wide variety of circumstances can arise, because there are a lot of diverse scheme structures. The best example, which has been discussed with the plumbers and those making similar representations, is flexible apportionment arrangements, which permit an employer debt attributable to the departing employer to be shared among the remaining employers. That sounds attractive, but it is part of a triangle of previous employers, remaining employers and the PPF—it is about which of them gets kicked with this liability. Each group is obviously going to be in favour of the others getting it. I say that not to cast any aspersions or to make a value judgment, but it has to go somewhere, and in the end that is for Government to decide. On the face of it, however, that would be such a solution.
New clause 11 calls specifically for a change by regulations to the employer debt legislation in the Pensions Act 1995. It is aimed at providing protection for the owners of unincorporated businesses. Many of the plumbers who have made representations happen to be self-employed because that is the structure of their business, but they are not self-employed and running a large business. They just happen to be a business owner who is self-employed. A mandatory provision to protect one group of employers from their responsibility for an employer debt, for which there may be personal liability, again boils down to that debt needing to be met in some way by others in order to safeguard members’ pensions. It is true to say that such an approach would also conflict with existing employer debt provision that recognises the wide range of employers who participate in occupational pension schemes. It does not differentiate between different types of business structure in relation to employer debt duties.
Secondary legislation, in the form of the 2005 employer debt regulations, already includes a range of mechanisms to facilitate the management of an employer debt when an employer ceases to employ active members of a pension scheme. The regulations operate so that in some circumstances, only part of the debt or no debt may be payable. Those regulations are currently under review. We had a call for evidence about the operation of employer debt legislation in non-associated multi-employer schemes. We needed to call for evidence because there are losers and winners. It is the role of Government to try to assess interests, and some form of judgment has to be made. This area of legislation is extremely complex, and we have to check and consider things carefully.
I reiterate that we are not kicking the can down the road—it is not that we do not want to make a decision. It is a complex issue, and we are looking to consult on specific proposals in the very near future. In any case, a whole range of new proposals might come about in our Green Paper on defined-benefit schemes. If I say the release of that Green Paper is imminent, that could mean anything from tomorrow onwards, but it will be very soon.
Ian Blackford
I think the Minister will accept that I am trying to be helpful to the Government in trying to find a resolution to this situation. Let us look at the wording of new clause 11 again:
“The Secretary of State must, by regulations, make provision to amend section 75 of the Pensions Act 1995 in order to protect unincorporated businesses at risk of losing their personal assets including their homes.”
I would be content if we could get an assurance that the Government are willing to work together with us to solve this problem. The Green Paper will be coming forward, and I appreciate that the Minister has said he is prepared to look at this matter and see whether there is a resolution that can be found that would not have any unintended consequences,. I seek assurance from the Government that that will be the case. I know the Minister cannot be too prescriptive about the Green Paper at this stage, but I hope there is willingness to ensure that these issues of actuarial valuations will be taken into account in it.
The Chair
Order. I remind hon. Gentleman that he is making an intervention, not a speech.
Ian Blackford
Sorry, Ms Buck; I will sum up. I am trying to get to a consensus, so that we can work together on this.
Craig Mackinlay (South Thanet) (Con)
It is a pleasure to see you in the Chair and to serve under your chairmanship, Ms Buck. The experience of the hon. Member for Ross, Skye and Lochaber comes through very clearly.
I hope I can offer some help to the Committee. I realise that this is a complex area, but the hon. Gentleman’s new clause does not actually encompass the extent of the problem, which goes further. Under the old rules—extra-statutory concession C16 on the winding-up of companies, which was used widely until 2012—a group of directors or owners could wind up a company using a very informal method, but that did not cease their liabilities to that company. That liability extended for 20 years afterwards. That was then formalised under section 1030A of the Corporation Tax Act 2010, which gave a statutory basis to the informal winding up of companies with assets of less than £25,000. That provision is still used very widely. Directors or owners of such companies being wound up under that statutory method could still face 20 years of future liabilities, so although the hon. Gentleman has identified a problem in the system, it does not just apply to unincorporated associations.
The effect of the section 1030A of the 2010 Act, which came into force on 1 March 2012, is that directors and owners of slightly larger companies are going down the route of a formal liquidation, which terminates their liabilities for ever more. However, hundreds—if not thousands—of old, smaller companies using the old extra-statutory concession will still be caught by a section 75 notice. This is a very wide issue that does not apply only to unincorporated associations, so I do not think the hon. Gentleman’s new clause is enough to close down his concerns on future liabilities. Personally, I accept the Minister’s assurances, but I think this is the start of a wider debate as to how those liabilities can be cut down.
In the hon. Gentleman’s new clause 12, there is a problem with determining the proper value of a pension liability. It is not as sharp as just the transfer value that is often given, and we will need in future to be a little bit cleverer in how we actuarially assess pension liabilities.
Ian Blackford
On the basis of the Minister’s response, I will certainly not push the new clause to a vote. We have received assurances that the Government will look at these issues; I hope they will not only be addressed in the Green Paper, but that there is the possibility of legislation as a result of that. I think we all recognise—there is a consensus on this—that we have to make sure we can resolve this problem for the benefit or incorporated and unincorporated businesses. On that basis, I will happily leave things as they are for now. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Investment Strategy
“(1) A Master Trust, after taking proper advice, formulate an investment strategy which must be in accordance with guidance issued from time to time by the Secretary of State,
(2) The Trust must consult scheme members on—
(a) the Trust’s assessment of the suitability of particular investment and types of investment;
(b) the Trust’s approach to risk, including the ways in which risks are to be assessed and managed;
(c) the Trust’s policy on how social, environmental, and corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments;
(d) the Trust’s policy on the exercise of the rights (including voting rights) attaching to investments; and
(e) the right of scheme members to consider non-financial issues relating to their investments and be consulted on these issues.
(3) The Trust must review the strategy at least once a year, and revise if appropriate
(4) The Trust must revise the strategy at any time if there is any significant change to the information included in it.
(5) In the event of (4) above, the Trust must consult with scheme members, and the revise the strategy in the light of comments made.
(6) The Secretary of State may make regulations with a view to ensuring that the information disclosed under subsection (1) is provided in a timely and comprehensible manner.”.—(Alex Cunningham.)
A Master Trust must include an investment strategy which outlines what the Master Trust should consult scheme members on in areas of investment.
Brought up, and read the First time.
Alex Cunningham (Stockton North) (Lab)
I beg to move, That the clause be read a Second time.
Welcome to our walk-in fridge, Ms Buck. I had a discussion with the Government Whip, the hon. Member for Winchester.
Alex Cunningham
I was talking about the conversation that I had with the Government Whip about whether we should invoke the Factories Act. He reminded me that, unhelpfully, said law does not apply to the Palace of Westminster. The Minister mentioned kicking a can, and I remember playing kick the can in the street as a young boy. Perhaps you can provide us with a can, Ms Buck, and we can have a game after we debate the next new clause to warm ourselves up.
New clause 2 continues our theme of transparency and member engagement. It is designed to improve the way that master trusts consult their members about their investment strategies and ensure that members are aware of the guidelines that trustees establish for the management of members’ assets. The new clause would modernise the approach to fiduciary—I find that word even more difficult to say than “Lochaber”—management of savers’ assets and update the statement of investment principles approach currently required of master trusts. A master trust would have to have an investment strategy and consult scheme members about that strategy and about socially responsible investment—commonly known as environmental, social and governance issues.
Until now, every occupational pension scheme has been legally required to prepare and maintain a statement of investment principles, which is expected to cover the trustees’ plans for securing compliance with their statutory duties, their policies on investments, risks and returns, and how they will exercise their voting rights. In short, it allows trustees to consider factors that they believe will influence the financial performance of their investments and consult members about those issues. As long as pension funds can show that any investment or policy decision was made on a fiduciary basis and members were consulted, they can avoid the charge that they have not considered members’ best interests.
Public opinion tends to position the average citizen as a helpless bystander in this drama, but in fact it is their money that underpins the entire system. Anyone with a pension is, indirectly, an owner of Britain’s biggest companies. The new clause seeks to create a world in which people feel that their savings give them a positive stake in the economy and a voice in how the companies in which they invest are run. Although we may hope or even expect that scheme members have a say, the reverse is true: power has become increasingly concentrated in the hands of a relatively small number of opaque and unaccountable financial institutions. As the Kay report showed, those institutions often face systematic pressures to act in ways that may not serve savers’ interests. Direct accountability to savers is a vital component of a healthy economic and financial system. As millions more savers are about to enter the capital markets through pensions auto-enrolment, now is the right time to build a more accountable system.
In June 2011, the Government invited Professor John Kay to conduct a review of UK equity markets and long-term decision making. The Kay review considered how well equity markets were achieving their core purposes—to enhance the performance of UK companies and enable savers to benefit from the activity of those businesses through returns to direct and indirect ownership of shares in UK companies. The review identified that short-termism is a problem in UK equity markets. Professor Kay recommended that company directors, asset managers and asset holders should adopt measures to promote both stewardship and long-term decision making. He stressed in particular:
“Asset managers can contribute more to the performance of British business (and in consequence to overall returns to their savers) through greater involvement with the companies in which they invest.”
He concluded that adopting such responsible investment practices would prove beneficial for investors and markets alike. In practice, responsible investment could involve making long-term investment decisions, as well as playing an active role in corporate governance by exercising shareholder voting rights.
I hope that master trusts will want to consider the Kay review’s findings when developing their proposals, including what governance procedures and mechanisms are needed to facilitate long-term responsible investing and stewardship through the funds that they choose for members to save into. The UK stewardship code published by the Financial Reporting Council also provides master trusts with guidance on good practice in monitoring and engaging with the companies in which they invest. The new clause would ensure sure that trustees are guided by the members of the scheme whose money they invest.
In recent decades, efforts to improve the way companies are run have focused heavily on making directors more accountable to their shareholders—for example, the recent introduction of a binding “say on pay”—but the job is only half done. Ownership rights are exercised largely by institutions that are themselves intermediaries. Accountability to the underlying savers who provide the capital remains weak. The logical next step must be for institutional investors to extend the same accountability they expect from companies to the savers they represent.
The UK stewardship code was introduced in the aftermath of the financial crisis to address concerns that shareholders were behaving as absentee landlords. Rather than being enforced by regulators, it is a voluntary code that relies on scrutiny from below to promote compliance, mirroring the corporate governance code for companies. The investment regulations currently require master trusts to set out within the statement of investment principles the extent to which social, environmental or corporate governance considerations are taken into account in the selection, retention and realisation of investments, but savers are left out of the loop. Just as I have argued for greater engagement with members on other issues, I believe it is needed here too.
In addition, accountability should build trust in the system even among those who do not choose to engage, thus encouraging people to keep saving. That is an important consideration in a market where just 7% of retail investors trust investment firms to do the right thing and consumers cite lack of trust as the No. 1 reason for opting out of private pension saving. Practical objections on the grounds that savers are not interested or not capable of engaging with their money simply perpetuate a vicious circle of disengagement. Savers may be put off by the language of investment, but that does not mean they are not interested in where their money goes. The onus must be on the master trusts and the wider investment sector to communicate with savers in a way they find meaningful. Likewise, savers may lack understanding of the technicalities of investment, but there are many matters on which they are qualified to comment, including the way their scheme behaves as an owner of major companies or its policy on social, environment and governance issues.
Transparency is necessary, but not sufficient for a more accountable investment system. Savers must also have the right to engage directly with decisions about their money, in the same way that shareholders engage with companies. Of course, we are not suggesting that all savers should be consulted on every decision. In our view, engagement with savers has three key elements. Savers should have the right to be consulted about investment policies, particularly those that should be firmly grounded in the views of savers, such as socially responsible investment policies. It is sometimes argued that since savers will inevitably disagree, acting on their views can prove difficult, but that objection can be refuted by example: schemes such as the National Employment Savings Trust demonstrate the possibilities of using face-to-face engagement with savers to inform the development of policy. Savers should be able to subject decisions made on their behalf to healthy scrutiny and challenge. While companies are obliged to hold annual meetings at which the board accounts to their shareholders, no such requirement extends to pension schemes.
Making capital markets more answerable to the individuals whose money they invest offers a potential lever for rebuilding trust in the City and for promoting more responsible and long-termist corporate behaviour. Such accountability must be nurtured over time by institutional investors such as master trusts, other pension savers and civil society in general. As Mark Carney said back in 2013, if it is
“finance that becomes disconnected from the economy, from society, finance that only talks to itself and deals with each other, that becomes socially useless.”
We have an opportunity here to change the landscape that sees pension savers as passive uninterested participants by engaging with them on decisions that affect their lives. When I started this speech, I said I was continuing the theme of member engagement. The new clause would extend what currently happens in relation to investment decisions, and I commend it to the Committee.
Ian Blackford
Before the hon. Gentleman concludes his speech, I wanted to ask about subsections (3) and (4) of the new clause, which state:
“The Trust must review the strategy at least once a year…The Trust must revise the strategy at any time if there is any significant change to the information”.
Can he explain what form that review would take and what role investment advisers would have, if any, in that review?
Alex Cunningham
That is an extremely difficult question to answer. [Interruption.] Everyone can laugh, but the Government talk about regulations and laying down guidance, and I hope that they would be able to provide the necessary guidance.
Ian Blackford
This is actually a very serious point. The hon. Gentleman’s new clause would require an annual review, so it is pertinent to ask how that would be conducted and what role, if any, investment advisers would have.
Alex Cunningham
There has to be a role for investment advisers, but the crux of my point is that members should have some say in the investment decisions that affect them.
Ian Blackford
Can I deduce from that that the hon. Gentleman actually has no idea how such reviews should be conducted?
Alex Cunningham
That is not exactly the case. It is clear that we need a set of circumstances in which members are properly engaged, equipped and informed. If they are, they will be able to contribute.
Richard Harrington
I absolutely agree with my hon. Friend; member engagement and involvement sounds very good—it is a laudable objective—but I have been around for nearly 60 years, of which I was in business for nearly 30, and I do not feel qualified to assess an investment strategy. I say that not to insult the vast majority of people, but because, although independent financial advisers and accountants may be able to do that, it is almost impossible for an individual to do so. We have to look at a way of ensuring that the investment strategy is the correct one for the majority of members, and that the regulatory system, the supervisory system and so on are in place. Hon. Members mentioned NEST, which already has more than 4 million members and 230,000 employers. This idea is very interesting but not at all practical.
I remind hon. Members that trustees play a key role in managing assets. They have overall accountability for the investment strategy. They have a legal duty; the hon. Members for Stockton North and for Ross, Skye and Lochaber—I can just about manage to say that now—used the expression “fiduciary duty,” and the trustees have a fiduciary duty to the members.
Laudable as new clause 2 is, pensions legislation already includes requirements for investment decisions to be transparent and in the best interests of members. The Government fully recognise the possible impact of investment decisions on members’ retirement outcomes. Even without the new clause, the Bill will add to those requirements. Clause 12(4)(d) already sets out that regulations made by the Secretary of State
“may include provision about…processes relating to transactions and investment decisions”,
while clause 12(2) states:
“In deciding whether it is satisfied that the systems and processes used in running the scheme are sufficient…the Pensions Regulator must take into account any matters specified in regulations”.
The new amendment would duplicate the provisions for master trust schemes that already exist under the Occupational Pension Schemes (Investment) Regulations 2005. The regulations require trustees of all schemes with 100 or more members to set out a statement of investment principles for their scheme. That statement must be made available to members on request and
“must cover…their policies in relation to…the kinds of investments to be held…the balance between different kinds of investments…risks, including the ways in which risks are to be measured”
and other key issues. The trustees must ensure
“that the statement of investment principles…is reviewed at least every three years…and without delay after any significant change in investment policy.”
Most people who are automatically enrolled into pension schemes are likely to remain in their scheme’s default fund and will not actively engage themselves in the governance of the scheme. That is why legislation makes requirements about governance and oversight of these matters, and why most schemes, including master trust schemes, need to provide a default strategy that covers similar areas.
Finally, multi-employer schemes have a legal duty under the Occupational Pension Schemes (Scheme Administration) Regulations 1996 to make arrangements to encourage members of the scheme or their representatives to report their views on matters that relate to the scheme, including areas about which the new clause proposes that the trustees should consult scheme members.
Ian Blackford
I am listening carefully to the Minister, and I broadly agree with him. Obviously there will be ongoing reviews of investment strategy, which should be communicated to members where appropriate. One way in which that could be done, as a matter of best practice for these schemes, would be for a statement of investment principles to be mailed to members as part of the annual report. That would give more clarity on the direction of travel of the fund’s investments.
Richard Harrington
As usual, the hon. Gentleman makes a very sensible suggestion, which should be considered. However, I believe that everything in the new clause is already included in legislation and that it is therefore unnecessary, so I urge the hon. Member for Stockton North to withdraw it.
Pension Schemes Bill [ Lords ] (Third sitting)
Ian Blackford Excerpts(7 years, 3 months ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Richard Harrington
The hon. Gentleman is correct, but of course it is at the discretion of the regulator, which will be dealing with all the circumstances. It could also be a very short period—that is the intention. I hope he agrees that the regulator has to have flexibility to deal with the specific circumstances of a particular case.
The scheme would have to be in a triggering event period, which means that one of the key risk events, which I explained previously, has occurred in relation to the scheme, the obvious one being that the scheme funder has become insolvent. Alternatively, the order could be made in relation to an existing scheme if it has submitted its application for authorisation and the decision on that application is not yet final. To satisfy the criteria, further conditions must be met. The regulator has to be satisfied that if a pause order is not made, there is or is likely to be an immediate risk to the interests of members in the scheme or the assets of the scheme.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
I am listening carefully to the Minister. We all understand the circumstances that would end up with a triggering event and what he describes as the potential insolvency of the scheme funder, but we have all been keen to make sure that in those circumstances the assets of the plan holders are protected. I want to tease out with him that scenario where we believe that the funds are protected. On the basis of the fear and alarm that could be spread when people see that their pensions are not being paid, I have a predilection for making sure that both payments into funds, whether it is a new fund that is created in the short term, or payments out of funds are maintained. There is a threat to confidence in master trusts and auto-enrolment if there is a pause in payments being made. On the basis that it always should be the case that the fund assets are protected, although I understand that there are certain circumstances where the regulator may want to take particular action, we have to be careful to scope out exactly what those circumstances might be.
Richard Harrington
The hon. Gentleman tries to tease things out from me and I am afraid I have to tease him back by saying that it is impossible to state the particular circumstances of every case. I was going to say later, in response to SNP amendment in this group, that no one wants to cause panic among members. There are many triggering events and there will be cases where the regulator might need to issue one of these pause orders, but they will be sorted out hopefully quite quickly; that is the idea. I do not see how, in those circumstances, writing thousands of letters to people would not cause precisely the kind of panic and lack of confidence that we are all trying to prevent.
I will return to that point. As with everything in the Bill, this is not a question of one side making stupid points and the other making sensible points; this is about trying to envisage different circumstances that might arise. It is my duty and my job to make sure that the regulator has flexibility, although I quite understand the hon. Gentleman’s point of view.
Ian Blackford
I absolutely understand and have no reason in principle to believe that the regulator may not have to have such a power. However, I am trying to understand what kind of event might lead to such action taking place if it is the case that plan holders’ assets are protected. Is it to do with any particular costs of administration for delivering all this? I am not clear what kind of event might lead to such action having to be taken.
Richard Harrington
It has been mentioned that, for example, suspicions of fraudulent activity might, in extremis, be such an event. Alternatively, the regulator might not yet be satisfied with respect to the administration of the scheme. The pause order clause is intended to apply in extremis. I am certain that most things will be taken care of in the normal course of things, but we felt that the regulator needed that power in extremis. That does not necessarily mean that the sky has to be falling in. A pause order might be used to concentrate people’s minds on resolving the situation quickly. Nevertheless, the power is there. It can be used
“during a triggering event period…if…the Pensions Regulator is satisfied that making a pause order will help the trustees to carry out the implementation strategy.”
The order is designed for quite particular and limited circumstances. I know that we keep using sledgehammer and nut analogies—on Tuesday I mentioned kernels— but I really believe that if it did trigger the kind of communication that the Opposition referred to, it might cause a major panic, which is something that we have to avoid and that the system exists to resolve.
Ian Blackford
It is a pleasure to see you back in the Chair, Mr Rosindell. I know that, in the interests of brevity, we are considering this slightly the wrong way round, in that I will speak to the amendment that the Minister has already responded to.
We all share the desire to ensure that the plan holders’ funds are protected in both the accumulation and decumulation phases. We are concerned about the impact of a pause order on a member’s savings, as there are no mechanisms in place that allow ongoing contributions to be collected and held on behalf of the saver. I know that the Minister has said that there are issues about where the funds would go and what kind of protection would be given, but those are exactly the kinds of things that we have to resolve in this Committee. It is clear that any additional contributions that savers make at a time of a pause order have to be protected properly, but surely it is within our gift to architect that properly.
It is unacceptable that a member should be penalised, and in effect lose wages in the form of employer contributions, due to events that are out of their control. The Society of Pension Professionals has also said that it will be necessary to ensure that the period of effect of a pause order cannot start before the trustees receive notification of the pause order. That would mean that any contravention could occur only after the trustees are in receipt of the order. The society argues that without that notification, the trustees could be in breach of a pause order through no fault of their own if a direction is not complied with during the period between the date the regulator makes the order and the date the regulator notifies the trustees of it. That could happen, for example, if new members joined the scheme in that period contrary to a direction under clause 32(5)(a). The Government should clarify whether they intend to take action to protect savers.
Richard Harrington
Mr Rosindell, before we end our debates on this clause, I would like to make a point of clarification regarding an error on my part. In previous sittings, when I was referring to the regulations generally, I said that they are subject to the affirmative procedure. However, I made a mistake in referring to clause 28 in that context, because the negative procedure applies there. I apologise for that. Obviously, it was not done on purpose. I hope that Members will forgive me.
Regarding the amendment itself, I have adequately covered the points that have been raised, and I reiterate the Government’s position that we reject the amendment.
Alex Cunningham
I am afraid I have to disappoint the Minister. I am not going to withdraw the amendment. The bottom line is that there is always a real possibility—a quite long word with an extremely long meaning—that there could be a failure in the system, and that failure could result in a loss of income to some of the most vulnerable people in our society. For that reason, I intend to press the amendment to a Division.
Ian Blackford
I will support the amendment. We have to feel satisfied that there are reasoned arguments why a pause order should be made and why payments should not be paid to pensioners. I am certainly willing to listen to further arguments, but I do not think a clear case has been put for why it should be made, except in very extreme cases of fraud and so on, and that case has not been made. Equally, in terms of retaining confidence, I wish to press our own amendment on the basis that it is important that plan holders continue to make payments, even in a triggering event. I want to test the will of the Committee and press our amendment to a Division as well.
Question put, That the amendment be made.
Richard Harrington
As hon. Members will be aware, what we are now discussing is not restricted only to master trusts; the rest of our discussions today have been. It is a bit of a change. We are now talking about all occupational pension schemes.
The clause will cap exit charges and member-borne commission, which is the sort of thing we all want. Like most of the measures in the Bill, it relates to what we all accept is a problem; in this case it is exit charges—where they come from, who pays them, how they are calculated and so on. The hon. Gentleman refers to protecting members, which I perfectly understand, but that is the point of the legislation. I say that in case anybody reading about the Bill in Hansard or elsewhere thought that the Opposition were trying to protect members and the Government were not. The intention of the Bill is to protect members. I have laboured that point—I hope that the hon. Gentleman will excuse the pun on his party’s name—because it is fundamental.
The clause amends the existing legislation—the Pensions Act 2014—to allow regulations to be made that enable a term of a relevant contract on charges to be overridden if that contract conflicts with a provision in those regulations. I emphasise that the power will allow for a contract to be overridden only if it conflicts with a provision in the regulations, which will ensure that relevant contracts are consistent with regulations and will provide certainty to the parties involved.
At this point it might be helpful if I clarified that the clause is distinct from previous clauses in the Bill that refer to charges, which all relate to the proposed master trust authorisation scheme. The discussions on charges and capping before now were specific, whereas this discussion is general. We intend to use the clause alongside existing powers in the 2014 Act to make regulations clearly to cap or ban early exit charges. Those charges are any administration charges paid by a member for leaving their pension scheme early when they are eligible to access pension freedoms, which in the past they would not have faced at their normal retiring date.
I mentioned early exit charges before in a different context. Cynical commentators might say that providers impose those charges to take advantage of a situation—a kind of last hurrah—because they know they are going to lose the value of a pension. The industry’s converse argument, which I have some sympathy with, is that they calculate the value of a pension over a period of years, and early exit means that value may then be x years minus 10. That is not a ridiculous argument, but the Bill makes it clear that the Government do not have much sympathy for it.
As has been mentioned, the Financial Conduct Authority will make rules to ensure that the cap or ban on early exit charges in personal and workplace pension schemes, which they regulate, will comes into effect on 31 March 2017. That has already been approved by Parliament through amendments to the Financial Services and Markets Act 2000, which broadly allows for a contract to be overridden. The consultations we undertook on early exit charges and member-borne commission showed that the charges generally arise in contracts between trustees or managers of certain occupational pension schemes and those who provide administration services to the scheme.
Our existing powers in schedule 18 to the Pensions Act 2014 enable us to make regulations that override any provision of a relevant scheme where it conflicts with a provision in those regulations. For example, we have used that power in relation to the appointment of service providers in the scheme administration regulations. The reason we are taking this new power is that the existing power does not extend to the contracts under which these charges arise. That is why clause 42 contains a power to allow the overriding of a term of a relevant contract that conflicts with a provision of the regulations under schedule 18. What is a relevant contract? It is defined as one between a trustee or a manager of a pension scheme and someone providing services to the scheme.
The regulations that we intend to make will apply to charges imposed from the date the regulations come into force, even where these arise under existing contracts. We expect the regulations to come into force in October this year, so it is not a long difference. It is a difference for legislation reasons, but on the scale of things it is not a lot.
Richard Harrington
If the hon. Gentleman would bear with me, I will answer the question asked by the hon. Member for Stockton North before giving way, unless it is really urgent.
Ian Blackford
My point is in relation to new clause 8, which I have tabled. I want to be clear that the Minister is saying that there will be no exit charges for anyone exiting a master trust, whether a new saver or someone who is currently in a master trust plan. If the answer is in the affirmative, I would be happy not to press new clause 8, because it would be superfluous.
Richard Harrington
I will come to that point in a minute, if I may first respond to the question from the hon. Member for Stockton North—I am not ignoring what the hon. Gentleman has just said, but I think that the answer will become apparent.
There was public consultation in 2015 that concluded in August. Since then we have had various discussions with providers and other industry bodies; we are really trying to get everyone involved. Again, we do not want to be unfair to one side or to create loopholes that should have been anticipated. I think that the hon. Member for Stockton North will accept that this area is complex.
Richard Harrington
If I may, I will answer the question from the hon. Member for Ross, Skye and Lochaber concerning new clause 8 and the point about no exit charges from a master trust. I confirm that when a master trust is closing the scheme cannot levy a charge for leaving. I believe that responds to his question, unless I misunderstood it.
Ian Blackford
No, I do not think it does. To be absolutely specific: in any circumstances of any exit of an individual from the master trust there would be no exit fee. If the Minister is responding to that statement in the affirmative, I would happily withdraw new clause 8, if that is permissible.
Richard Harrington
When the master trust is closing it cannot levy a charge. That is as clear as I can be. Perhaps we can discuss the point in more detail. I am not trying to mislead the hon. Gentleman and he knows that, I hope.
The pensions market is continuously evolving and modernising and that extends to charging practices. It may be necessary to alter the charges requirements at pace to reflect any changes in the pensions market that may disadvantage members. I revert to the point I made to the hon. Member for Stockton North: that is the purpose of the whole exercise; we are doing it for that reason. That is why we intend to consult on the draft regulations later this year. I am aware that people outside the House, and sometimes hon. Members, groan when a further consultation is announced, as though the Government are doing it to kick the can down the road. I can assure them that that is not the case. We intend to get it right and public consultation is very important.
The regulations would also be subject to parliamentary scrutiny, as I have explained, through the negative procedure. The Delegated Powers and Regulatory Reform Committee was content with that approach because it would allow future legislation to be amended quickly to provide the member protection that the hon. Gentleman and I both want.
Before I conclude on this clause, I will address the point made by the hon. Member for Ross, Skye and Lochaber. I have learned the name of his constituency now and look forward to visiting. He was satisfied by my answer to his earlier question but he wants to know what happens if the master trust is not closing. In that case, the normal exit charge protections apply; there is no difference. I believe that is a clear answer to his question.
Ian Blackford
The proposed new clause contains a principle that I think we would all like to encourage concerning member engagement. There is the issue of democracy and the fact that these are members’ funds, and I think that we all get that point. The salient point for me is that addressed by other hon. Members: trustees are to act in the best interests of their members. We all recognise the duty and obligations that trustees must have. It is important, whether they are independent or member trustees, that they are aware of their responsibilities.
The key matter, in what is becoming a very complex world, rightly with increasing regulation, for which we understand the reasons, is that trustees can discharge their obligations and duties. Although I would encourage member trustees to be involved, and it is important that they are given adequate training, I would find it difficult to support the compulsion in the proposed new clause that member trustees must make up 50% of the board. That would be the case in an ideal world.
Alex Cunningham
I did not say 50%. That was an example. We would need a situation in which we can have some member trustees.
Ian Blackford
Reference has been made to member trustees making up 50% of the board, which is something I could not support. I can support the general principle that member trustees should be represented, that there should be elections and that they should be able to take the time they need to devote to this and get proper training, but I cannot support at this stage having compulsion as part of that, on the basis of the responsibilities that trustees have to represent all member interests.
Craig Mackinlay
I can understand the laudable aims of the hon. Member for Stockton North, but where such boards have had member participation, the reality has not always been a fantastic success. I had an oblique interest in the Maxwell pensions fiasco because I belonged to a firm of chartered accountants appointed to look into that big mess, so I have some experience of that. I was also a member of the Joint Committee that looked into the BHS pension schemes, which also had member participation. That really did not come out as a great success. There was no issue of fraud, but were those employee members really tough enough to stand up to an overpowering sponsoring employer?
What we have is different from the occupational pension scheme arrangement, for which I think it is good, right and proper for its members to participate. We are considering master trusts, in which thousands of employers may be involved. I am sure that there may be only a few hundred master trusts that would bother to adhere to the new clause’s regulations after they come into place. The National Employment Savings Trust is probably going to be the biggest master trust for some time to come, with possibly millions of employees involved, and I cannot understand how on earth we could have an election process involving millions of people and different employers.
Craig Mackinlay
I thank my hon. Friend for outlining further the complexities of what the hon. Member for Stockton North is proposing. What we are looking for from master trusts is that they are well run, safe and that they actually perform for the pensioners of the future. With the greatest respect, the administrative costs of what he is proposing could actually outweigh any positive parts that he thinks will come out of it, so I cannot support his new clause.
Ian Blackford
I know that the hon. Member for Stockton North has stated that he is not asking for a majority of trustees to be elected, but that is exactly what new clause 1 calls for—it calls for at least half of the trustees of a scheme to be member trustees. I just wanted to clarify that point. For that reason, I cannot support the new clause.
Question put, That the clause be read a Second time.
Pension Schemes Bill [ Lords ] (Second sitting)
Ian Blackford Excerpts(7 years, 3 months ago)
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The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)
It is a pleasure to serve under your chairmanship today, Ms Buck. This morning seems a long time ago, but when we adjourned I had just risen to confirm to the hon. Member for Ross, Skye and Lochaber that members’ savings are not at risk. The hon. Member for Stockton North might have given the impression of mixing up members’ savings and the funders of the scheme. Though I am sure he knows this, I want to be clear. There are various protections around the savings invested—in trust law, in occupational pensions law and through the regulation of investment managers.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to serve under your chairmanship, Ms Buck. When the Minister rose at the end of this morning’s sitting, I had actually concluded, so I will now resume my seat.
Richard Harrington
The hon. Member for Stockton North made various points, and I would like to briefly rebut them. I have already made my first point, in response to the hon. Member for Ross, Skye and Lochaber. The Bill adds to the protections by prohibiting increased or additional charges that could be levied on members for the cost of winding up or transfer during a triggering event period, so members’ savings are safe. As was discussed extensively in the other place, the clause addresses the situation where the scheme does not have sufficient funds to pay for the transfer of accrued rights or the wind-up of the scheme during a triggering event period. The Bill provides that a master trust scheme must have resources available to pay for those costs.
The hon. Member for Stockton North asked me a clear question: how frequently will the Pensions Regulator monitor this? To be clear, the supervisory measures allowed for in clauses 14 to 20 state clearly that the regulator is under a duty to authorise these schemes. That is a new approach for the regulator, which will be working with all the master trusts, both before and after authorisation. The regulatory regime is therefore an active process, which rightly focuses the most attention on the highest risk schemes, while maintaining regular contact with all master trusts in the market. It is based on a case management approach, which is not random or ad hoc because it is underpinned by the existing reporting and regulatory framework and activities. Those in turn are strengthened by the new supervisory return and significant events negotiation requirements, which the hon. Gentleman will be familiar with.
The hon. Gentleman seemed to imply that the Government have not made any provision to pick up the pieces if a scheme fails. I maintain that that is not the case. The triggering event regime outlined in the Bill means that the regulator will be closely involved with how the scheme proceeds to resolve its difficulty or close—it has to do one of the two. The regulator already has powers that can be used to support a failing scheme. A good example is the power to appoint a trustee to get into a scheme and act as a trustee—so it can impose a trustee on a scheme and help to sort it out.
The hon. Gentleman also suggested that if the risk is so minimal, the clause does no harm as a back-up measure. He used the sledgehammer and nut analogy, which I think Lord Freud used in the House of Lords, so it is a cross-party analogy. If it is a nut, it might be a small nut, but what is going to happen to the nut? That is not said in a very Hansard-like way, but I think we know what it means. I would say that that underestimates the impact of having an unspecified government intervention of this nature.
Richard Harrington
I apologise if I put words into the hon. Gentleman’s mouth. It is currently unspecified; I agree it could be specified with compensation. The core point and, excuse the pun, the kernel of the nut is that it would still be a Government scheme, with moral hazard.
Secondly, the hon. Gentleman has probably heard significant players in the master trust industry voice serious concerns to us about clause 9. They believe that it could give rise to a rush to exit the market by otherwise successful schemes thinking, for example, that, not unusually in this field, they would have to pay a significant levy over not very much. The hon. Gentleman’s points are all valid in their way but Government have to make a judgment. That is why there is a respectable disagreement over clause 9. We have all thought about it carefully.
I believe the Bill strikes a delicate balance between prevention and self-regulation and Government intervention —something that is very hard to do. The clause would disrupt that balance and confuse the regulatory approach. I do not believe that it is a harmless catch-all. I accept the point, as shown by the banking crisis, Equitable Life and other incidents, that such things happen—I would not say it was because it was a Labour Government during the banking crisis or another Government with Equitable Life that those issues arose. It is not possible to give absolute guarantees, but we can reduce risk to the lowest possible level and that is what the Bill aims to do.
In our view, the risk level is already very low for this type of master trust scheme. That is backed up by the Pensions Regulator’s current information about the very small number of schemes that are in trouble. That will be published but is not quite ready. To create a Government-backed scheme would perversely create a moral hazard, as I have explained.
Ian Blackford
I am trying to find a helpful way out of this because I can understand why there is a disagreement. We can all accept that the risk we are talking about is to the master trust itself, not to the underlying assets; that is understood. I can understand the Government’s position on giving a commitment to this, but might there not be another approach? The Pensions Regulator would take the responsibility after a triggering event and it would have the power to step in. We have the power for the regulator to appoint a trustee; perhaps the regulator might have powers in extreme cases to intervene in the short term to ensure that there is a smooth transition. I know that is not directly within the clause but there might be another way to effect this where we can give guarantees.
Richard Harrington
I thank the hon. Gentleman for his positive intervention. The regulator has a huge number of powers, and the Bill gives a lot of powers that I think would prevent the problem he is talking about.
The hon. Member for Stockton North is forgetting— I understand why—the general rule that the fraud compensation scheme, which applies in many fields, does and will apply to master trusts. I therefore reject his point about fraud. I am not saying fraud could not happen, but there is already a mechanism in place to deal with that.
In our view, therefore, the risk level is already very low. We are against creating a Government-backed scheme because we think it would create a moral hazard. Schemes are currently working to ensure their systems are robust and we do not want them to feel comfortable that there is an entity that will always bail them out. That would not give comfort to scheme members. Indeed, for the Government to say we feel the risk is large enough to warrant a funder of last resort would create uncertainty—in effect, creating the very problem that the Opposition honourably are saying they are trying to avoid.
Question put, That the clause stand part of the Bill.
Alex Cunningham
I am delighted to serve under your chairmanship, Ms Buck, albeit with a frog in my throat. Our concern with this clause regards the strict nature of requiring a master trust to be a separate legal entity, which could have numerous consequences across the board. Since the contents of the Bill have become known, I have tried to meet as many parties and groups as possible that have an interest in the Bill, to hear their perspectives, thoughts and concerns. This clause came up often. I note that the Minister has tabled amendments to it, which I welcome as a first step towards recognising that the original clause was not fit for purpose.
Amendment 3 widens the definition of the two legal characteristics that a scheme funder must meet in order for a master trust to be authorised by the Pensions Regulator. It gives the Secretary of State greater discretion in exempting a scheme from the second requirement. However, the amendment does not make clear what policy considerations will apply to how that discretion is applied. Will the Minister confirm that insurance companies regulated by the Financial Conduct Authority with master trusts will be exempt from the second requirement, giving members access to the full resources of the insurance company, which will carry full liability for costs in the event of a master trust scheme failure? Our amendment 26 seeks to clarify just that—namely, that if an organisation is already regulated by the Financial Conduct Authority, which is incredibly thorough with its regulation, it does not need to register as a separate legal entity as well.
As the Minister said, my colleagues in the Lords raised concerns about the clause, proposing instead that the scheme funder be approved by the Pensions Regulator, but that was rejected with the argument that it would be more difficult for the regulator to obtain transparency on the financial position of the funder and its financial arrangements with the master trust. Instead, colleagues tabled a motion requiring the scheme funder to be constituted and to carry out its activities in a manner that enables its financial position, and the financial arrangements between it and the master trust, to be transparent to the regulator. However, that was withdrawn on the assurance that the Government would be considering that later in the legislative stages.
So here we are, with an amendment from both the Opposition and the Government on how to ensure that we are not unnecessarily enforcing regulation on companies that are already bound by strict regulation elsewhere. The difference here is that the Government’s amendment is on the vague side. The second requirement for the scheme funder that the Government have proposed is that it carries out only activities that relate directly to master trust schemes of which it is a scheme funder or prospective scheme funder. The line in amendment 3 following on from the second requirement gives the Secretary of State the power to
“make regulations providing for exceptions from the second requirement.”
That needs more detail and clarity. What possible exceptions do the Government have in mind? Has the Minister yet considered what these exceptions may be?
We need stability, and to provide stability for the numerous businesses and companies that rely on us to provide effective laws governing their livelihoods and, particularly in relation to master trusts, the livelihoods of millions of people in this country. This is not largely a matter that we disagree on—I think we share the same aims—but I want to be able to provide more assurance to the companies watching today that we will not seek to bear down on them with extra costs and paperwork when they are already abiding by regulation from the Financial Conduct Authority.
Although the Government’s amendment does not give me enough specifics about the type of exceptions that they would give the Secretary of State the power to decide, I welcome their approach and their acknowledgement that it is counterproductive to place extra requirements on companies that already follow the rules diligently. We had a particular concern that forcing a restructuring on master trust schemes could weaken the position of the funder, which is especially important when one considers the debate on the issue of the funder of last resort. We need larger companies to be in a position to pick up failing master trusts, and should ensure that they are well equipped to do that.
I welcome the amendment from the Scottish National party Members, which would also allow exceptions to the requirement that a scheme funder carries out only activities directly relating to the scheme for which it is a funder. I am optimistic that we will leave here today having made positive progress on this matter, as we largely seem to agree on the principle of exceptions.
Amendment 26 would except insurers that operate under stringent Financial Conduct Authority regulation. Where insurers with master trusts operate under both sets of regulation, it must be ensured that unnecessary duplication or overlapping of the requirements is avoided. In particular, insurers should not have to reserve even more additional funds to meet the requirements set out for master trusts, as they already hold the resources needed for this purpose under other regulatory regimes. Members of master trust schemes used for automatic enrolment should meet high solvency and reporting standards, but these organisations have already met standards set under other frameworks, such as that of the FCA. We believe that it is not necessary to expect large companies with significant capital to be required to hold additional capital on top of that in order to meet the new obligations in the Bill.
Can the Minister provide assurance right now that insurance companies that are already under strict regulation by the Financial Conduct Authority will be exempt from the separate legal entity clause, and will he provide clarity on when we can expect to see the Secretary of State’s regulations? The scheme funder requirements in the Bill will bring no additional benefit to the many people in master trust schemes operated by insurers, which are already well protected. Additional requirements on FCA-regulated insurance companies will lead to significant additional costs. I hope that the Government can address my concerns, and that they will outline exactly what regulations the Secretary of State will look to implement.
Ian Blackford
The Minister’s amendment of 31 January —Government amendment 3—gives the Secretary of State power to make regulations providing for exceptions to the requirement that a scheme funder must carry out only activities directly relating to the master trust. We do not know what conditions will attach to the exceptions, or even if the Secretary of State will exercise that power. An indication of the Government’s intentions would be helpful. However, the indication that there will be some discretion is positive. I would welcome clarification from the Government on how and when the regulatory powers outlined in the amendment will apply, and in what circumstances they might be used.
Will the Government confirm whether they plan to consult with the insurance industry before defining “information” and “additional requirements”? Zurich has said that the approach taken by the shadow Pensions Minister in amendment 26 and the SNP’s amendment give greater certainty, which would be preferable. As far as Labour’s amendment 26 is concerned, we share the concerns about the unnecessary duplication of requirements for insurers, which already operate under stringent regulatory standards. Our amendments 34 and 35 would have a similar effect to amendment 26, as they state that the requirement need not apply to firms whose activities are already restricted by virtue of existing regulation.
The Prudential Regulation Authority’s rules mean that insurers’ activities are restricted. This will mean that the activities of the scheme funder not directly related to the master trust are transparent and do not threaten the solvency and sustainability of the master trust. Amendment 35 makes provision for the Secretary of State to define “restricted activities” in regulations, including through a list of specific activities restricted in order to minimise risk of loss by master trust scheme funders.
Richard Harrington
This is a very good and laudable example of Government and Opposition Members trying to achieve the same objective. I have already heard many of the arguments used today by the Opposition; the Association of British Insurers and others have made similar arguments. As I have often said before, this is not black and white. It is not as though one argument makes absolute sense and the other is absolutely stupid; that is not the case at all. The argument is legitimate. We have had to think about this following representations, and following the Lords debate. However, I do not think that the amendments would achieve the level of transparency needed for the regulator’s financial assessment of the scheme.
Amendment 26 would disapply the requirement on an FCA-regulated insurance company that is also a scheme funder of the trust to set up a legal entity. The amendment would hamper the regulator’s assessment of the final sustainability of the scheme. The matters overseen by the FCA in relation to the prudential and financial conduct of the insurance provider are not the only aim behind the clause; they are aims, but not the only aims, and are not the only aspect that the regulator needs to take into account in the assessment.
The hon. Member for Stockton North asked me to clarify quite a few points. He asked whether the FCA-regulated companies will be exempt. They will be exempt if they meet the prescribed requirements in the regulations. He asked how we will get to the regulations. We will consult on them; we are not simply going to make them up. They are not something that the Secretary of State will dream up in his office. I promise that they will be comprehensive. The intent is to ensure that there is no duplication of regulation; that is why we have created the extra flexibility of the Secretary of State’s discretion.
Ian Blackford
On a point of order, Ms Buck. We are all keen to get through the Bill. I am sitting here listening to the hon. Gentleman and wondering what relevance what he says has to the amendment. Quite frankly, it seems to have very little relevance.
Alex Cunningham
Although I am grateful to the hon. Gentleman for his intervention, it is perhaps a typical response from a Conservative politician: just leave everything to the market. In my opinion, we should not leave everything to the market.
When offering investment funds to employers and members, master trusts need to prove the value of the investment post-charges and that active strategies are no more costly than passive. They should remember that the transaction cost issue, badly delivered in 2013, is up for review in 2017 and forms part of the auto-enrolment review.
The People’s Pension, the not-for-profit master trust launched by construction sector financial provider, B&CE, with 1.7 million members, is NEST’s closest private sector rival.
Ian Blackford
Could the hon. Gentleman recap and clarify what he just said—that active fund management is no more expensive than passive fund management?
The Chair
Before I call any other Members or the Minister, let me say that I am minded not to have a broad debate on stand part, because we have already covered a lot of the ground. Perhaps the Minister in particular will reflect on that before he speaks.
Ian Blackford
I will be brief. I want to pick up that issue of active versus passive fund management, because if anyone thinks that an active fund manager will not have higher costs than a passive fund manager, I am afraid that they have betrayed that they know nothing about the fund management industry. Put simply, anyone engaged in active fund management will have to deploy research and fund management skills; someone investing as a passive fund manager is exactly that, a passive fund manager.
Richard Harrington
Itching though I am to rebut some of the general points on transparency, I will do my best to stick to the amendment. As a point of clarification, however, the bit of the FCA review that the hon. Members for Stockton North and for Ross, Skye and Lochaber mentioned in fact makes the point not that active fund managers have more costs, but that over a period of time there is not much difference in returns. That is a totally different matter, but I think that was the point intended—I, too, read the report.
A final matter, given your instructions, Ms Buck, is to point out to the Committee that 1 trillion is 1 million million. A keen if somewhat nerdish Government Member—I am not sure who—came up with that information, of which I was not aware. I hope that the Opposition spokesperson will at least look at Hansard to see what 1 trillion is, since he missed all that.
I will not rebut the general transparency point, although I am itching to do so. However, I confirm to the Committee that I do in fact read The Guardian. That was the allegation made by the hon. Member for Stockton North. I will, however, refer only to the transparency bit of the amendment.
The amendment would insert a new subsection making it clear that regulations about the processes used to run the scheme may include a provision regarding a minimum requirement of annual reporting of administration, fund management and transaction costs. On the face of it, that takes into consideration a lot of the transparency points made by the Investment Association one way and the various lobby groups to which we have all spoken the other way—as the hon. Gentleman mentioned. The Government are taking action on that. The FCA report is an interim one and lots of things are in process. I am committed to transparency, but the question is what is relevant to the Bill.
The objective of the clause is to ensure that schemes are run effectively. It contains powers to make regulations that will specify what aspects of the scheme’s systems and processes the regulator must take into account in deciding whether they are sufficient to ensure that the scheme is run effectively. Examples of what such regulations may cover are listed in the Bill. The list already includes processes relating to transactions and investment decisions. We have been clear that the examples given are not exhaustive and that regulations may include other matters relevant to systems and processes. A guiding principle in setting the scope for the authorisation regime has been ensuring that master trust regulation is proportionate.
I should point out that existing legislative requirements already require trustees of occupational pension schemes offering money purchase benefits, including master trust schemes, to make an annual statement. The hon. Gentleman did not mention that: they are already required to make an annual statement regarding governance, which is known as the chair’s statement. It is appended to the scheme’s annual report and accounts.
The Government have an obligation under section 113 of the Pension Schemes Act 1993, as amended, to make regulations requiring transaction costs and administration charges of money purchase schemes to be published. We intend to consult, because the subject is very complex, and we are not, as the hon. Gentleman asserted, kicking it down the line. It is not that the Department for Work and Pensions does not want to do it. We intend to consult this year about how this information is published and proactively reported to pension scheme members.
Pension Schemes Bill [ Lords ] (First sitting)
Ian Blackford Excerpts(7 years, 3 months ago)
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Nigel Mills (Amber Valley) (Con)
It is a pleasure to serve under your chairmanship, Mr Rosindell, and to follow the shadow Minister. My remarks will be in a similar spirit to his, trying to probe the Government on how exactly they see master trusts being used, how they see the pensions landscape and how the two will mesh.
Amendment 32, which stands in my name, relates to how we deal with self-employed people who may end up in a master trust. That starts out as a technical question—as the Minister may know, I like to ask technical questions of legislation to see whether he has read it all and can trace it all through, because these things can be chased around. Under the definition in the Bill, a master trust must be an occupational pension scheme, which takes us back to the Pension Schemes Act 1993. An occupational pension scheme has to provide benefits in respect of earners with a qualifying service in an employment—such schemes do not provide benefits to earners who are self-employed in that situation. Therefore, on a high-level reading, if a scheme is providing benefits for people who are self-employed, technically it should not be an occupational pension scheme.
I assume that the answer to that particularly technical point will be that if in a master trust there are 5 million people who are employed and there are 10,000 who are self-employed, it does not get suddenly blasted out of being an occupational pension scheme and out of the regulations and drop back into the personal pension scheme regulations. I assume that the National Employment Savings Trust, which I think already markets itself to the self-employed, will not somehow have a change in its regulatory position by serving a few self-employed people.
It is not hard to foresee that the landscape might change, and it is pretty clear that we would quite like the landscape to change quite dramatically. We have a big problem with the lack of pension provision among people who are self-employed and, sadly, that problem is going the wrong way. Auto-enrolment has enrolled millions more employed people than ever before in a pension, but over the course of this century the number of people who are self-employed and actively in a pension scheme has decreased from about 1.2 million in 2002-03 to 380,000—and that is as the number of people who are self-employed has risen to more than 3.5 million. That is going completely the wrong way. Far more people are self-employed, yet far fewer of them are saving in a pension. That is not a healthy situation for them and their prospects in retirement, and it is not a particularly healthy position for us, considering how people will be able to look after themselves when they reach that age.
It is pretty clear that we need to find solutions that encourage more self-employed people to save into a pension and to take the various tax advantages that that provides. Hopefully, when the Government conduct their auto-enrolment review later in the year, one issue they will look at is whether we can extend, tweak or amend auto-enrolment to get to those many millions of people who are self-employed. Let us be honest: probably quite a large number of them would like to be employed or think they are employed—or perhaps we think they are legally, in substance, employed, yet their non-employer is somehow tweaking the rules to treat them as self-employed. How do we get those people to realise that pension savings is important to them? How do we get them into a simple scheme that is easy to administer?
It looks like auto-enrolment master trusts are the obvious vehicle that could cope with the scale of several million more people, who are probably generally on relatively low earnings, joining a pension scheme. They have the infrastructure and it is not hard to see how self-employed people could self-manage such schemes via online portals. It looks like, as a matter of policy, we would quite like to encourage all the big master trusts out there to start taking people who are self-employed. I suspect we would like to find a way.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
The hon. Gentleman is making some important points that I fully subscribe to. As much as I welcome the Bill and its overall thrust, is this not perhaps a little bit of a missed opportunity? We could have made sure that the review of auto-enrolment came alongside it, which would have informed our present debate on how we deal with self-employed people, and indeed those under the earnings threshold. We want people to be investing in pensions for the long term.
Richard Harrington
My hon. Friend makes a good point. That is very common in other systems of regulation, sometimes to the chagrin of employers and people involved, but for many companies in other financial fields there are different systems of regulation for the different products they offer. That is not uncommon. As to what we must avoid, the hon. Member for Stockton North will accept that Governments must try to think how things work in practice, which is not to say that he has not considered it. However, we must have workshops of interested parties and consult widely. How things work in practice is important.
The end product for all hon. Members is predominantly consumer protection—the Bill is a consumer protection Bill. We have different views, but we are discussing the extent of consumer protection provided. I and my officials have considered Opposition amendments respectfully. They are not spurious and have been thought through. In fact, many were quite properly put to us—it is a democratic system—by groups such as the Association of British Insurers. They are not created out of thin air. However, we have had to think about whether in practice they will add to consumer protection. That is the test. Alternatively, will they just increase the regulatory burden? We have also been lobbied about that—again, quite legitimately—by those concerned. It is the Government’s job to try to come up with something in the middle.
My hon. Friend the Member for Amber Valley, who tabled amendment 32, discussed self-employed people, and attempted to ensure that I have in fact read the Bill. I do not think I should have the arrogance to stand here if I had not, but it is perfectly proper that he should ask. I certainly accept that my hon. Friend, given his years of experience and attention to detail, has read it. I shall try to answer his general and specific points.
On the question of the role of self-employed people, not just in the master trust schemes but generally, my hon. Friend is correct to identify that the number of self-employed people has grown exponentially in the past 10 to 20 years, even more than in the days of the Turner commission, of which Baroness Drake was a member. She has been most helpful with the Bill. I acknowledge her role and that of Lord McKenzie in helping both the Opposition and the Government very constructively.
The commission perceived self-employed people as those with their own business, who, by implication, would have an accountant or, at least, an adviser or someone similar. My hon. Friend was saying that, with the big growth in self-employment over the period, the people in question are typically not very high earners. Like him, I make no comment as to whether they should be self-employed—the fact is that legally they are. They do not have an accountant and the things necessary for someone who is running a business and employing people despite being self-employed. They are at the moment outwith the auto-enrolment scheme. I know we are here to discuss that from a regulatory point of view but, as politicians, we also want those people to have pensions, because the House agrees that that is a good thing.
I want to answer the hon. Member, who is going to be cross with me again, for Loch—
Richard Harrington
Have a little patience—I was going to say the hon. Member for Ross, Skye and Lochaber. Watford is much easier to pronounce, but I accept that he has a wonderful constituency that is very lucky to have him representing it. I have got it now.
The hon. Gentleman’s point was about why the review is different in timing and scope to the Bill. The main reason is statutory. We were obliged by statute to have the review in 2017, which means it cannot report until the end of 2017. In fact, 2017 is too early because we do not have enough figures to see people’s behaviour or habits since auto-enrolment came in. We are doing the review—it is being announced and will report—but we could not consider holding up this regulation until it came out.
Alex Cunningham
The mantra for this Bill should be: “Members at the centre of everything we do.” Communication and engagement is vital for trust in the system. It is good for business and good for members. Effective communication and engagement is an essential component in helping to implement improvement. Across all industries, transparency has never been more important to a successful business model, regardless of size. When it comes to employee engagement, this particular business practice is proven to be essential on a global scale, and what is seen as an essential tool for all manner of other business and industry areas, I see as equally essential for the pensions industry.
My noble Friend Lord McKenzie of Luton in the other House put the case very clearly and compellingly for master trusts to be required to have a full and effective member engagement strategy as part of the qualifying requirements for authorisation by the Pensions Regulator to operate as a master trust. In response to my noble Friend on Report, Lord Young of Cookham, replying on behalf of the Government, said:
“I can also confirm that the Government would intend—subject, of course, to consultation—to use the regulations under Clause 11 to ensure that the regulator specifically considers a scheme’s systems and processes in relation to these important communication matters when deciding whether the scheme is run effectively.”—[Official Report, House of Lords, 19 December 2016; Vol. 777, c. 1487.]
He went on to speak of wider communications, including how the review of auto-enrolment would include the engagement of individuals with workplace pension savings.
In an earlier written statement to the Commons, the Minister said that the review would include
“how engagement with individuals can be improved so that savers have a stronger sense of personal ownership and are better enabled to maximise savings.”—[Official Report, 12 December 2016; Vol. 618, c. 38WS.]
That is all very grand, but there were no new clauses or amendments addressing the issue specifically when the Bill left the Lords, nor since. We could save time and add value to the communications process by requiring a member engagement strategy in the Bill.
Some will say that most people have no real interest in pensions, and that we could be placing all manner of costs on the industry for the few who do take pensions seriously. We should never discount the few who may be interested. Recent research by the accounting firm Price Bailey has revealed some interesting statistics in its 2016 report on public interest and awareness of workplace pension scheme arrangements and retirement options. A sample of 2,000 stakeholders were interviewed across the English regions, with a good split between male and female respondents, white-collar and blue-collar occupations and income bands. Nearly 75% of those interviewed had a total household income, before taxes, of £55,000 a year or less. I wish the people in my constituency had an average income of £55,000 a year. It is encouraging to note that only one person in nine—11%—said that they were not interested in pensions. That seems to lay the lie.
It is also encouraging that more than half—55%— of pension scheme members said that they take an active, regular interest in their pension savings and retirement planning, and I do not think we will be very surprised that within the 55 to 65 age bracket the proportion rises to about two thirds, with some 66% of people taking a real interest in their pension—I wonder why. The highest levels of engagement were among males, those with higher incomes—more than £55,000 a year—those in white-collar occupations and active scheme members.
Labour Members believe that the role of trustees is crucial in providing retirement education and helping to raise levels of member engagement. Regular communication, whether written, online or in person, is key to achieving that, with different techniques for different audiences. It is important that employers consider that when communicating with current and potential scheme members. We urge master trust employers and trustees to consider carefully their strategy for scheme member engagement. It should be made a legal requirement for them to produce and execute such a strategy. Putting some thought and effort into that now will undoubtedly prove beneficial to scheme members in the long run, and it need not be a tremendous financial burden on the industry, given that we are in a digital age. Nowadays, there is no excuse for failing to communicate effectively. Using social media to communicate means expanding a multi-channel communication strategy to encompass new channels. It used to be the counter, the telephone and, later, the website, but now we have the Twitter hashtag and the Facebook page—just some of the channels open for communication today.
Real engagement, however, is something else. It is about figuring out where people are already having conversations about which an organisation needs to be aware. It is about bringing information and dialogue to places where people want that dialogue to happen—their Facebook groups, their Twitter streams and the master trust intranet networks. Good communication and engagement over members’ money and pension drawdown are prerequisites for a successful master trust.
Our amendments seek to ensure that as part of the defined-contribution code of practice, there is a requirement for the authorisation process principally to ensure that the application to the Pensions Regulator includes a member engagement strategy and a communication strategy. The Pensions Regulator’s code of practice for DC pension schemes, published in July 2016, sets out the standards that pension trustees need to meet to comply with legislation. The code, which applies to all schemes offering money purchase benefits, is supported by a series of “how to” guides that provide more detail about how trustees can meet the standards in practice.
The Pensions Regulator has also produced a tool to help trustees to assess their scheme against the standards in the code so that they can identify areas requiring improvement. The DC code sets out a number of areas in which an understanding of members is key, particularly those of gauging members’ views to inform the design of investment strategies and the assessment of value for members. The regulator suggests:
“Member nominated trustees in particular may be able to provide feedback, as might union representatives, other employee representatives or existing staff forums.”
It is because of the valuable role that scheme members can play that we have tabled the amendments on scheme member trustees. We need to improve the Bill to make it more scheme member-friendly. The members are, after all, our main concern. I will return to member trustees later. It seems only sensible to require the master trust to demonstrate its engagement and communication strategies to the Pensions Regulator, who has an obligation to ensure that the trust complies with the DC code of conduct.
The Bill sets out a requirement for the latest accounts, business plan and continuity strategy, yet it has nothing on issues that would ensure that the scheme met the required standards on member engagement and communication. There is no point authorising a master trust if it has poor communication and engagement with its members. The chances of members engaging with the issues that affect them can be greatly improved by communicating with them in the most effective way. That is the thrust of our amendments. We need to see members at the very heart of the process.
Master trusts will grow over time to cover millions of members and billions of pounds of assets under management. They will underpin the very success of the auto-enrolment policy and rebuild a long-term pension-saving system. The principle of an obligation on master trusts to have a clear strategy for engaging with scheme members should not be left to ministerial discretion or future consultation. We want to ensure that master trusts are at the leading edge of communication and engagement, and hope that the Minister will not just remain open to the idea, but will do something about it in this Bill. I look forward to his comments.
Ian Blackford
It is a pleasure to serve under your chairmanship, Mr Rosindell. I will be brief. Those of us who want to encourage pension saving, as we all do in this room, should encourage as much member engagement as is possible. That is the right thing to do to ensure that we have as much transparency as possible. It is perhaps relevant not just to this amendment, but to others, that the issue of members being trustees is important. We must recognise that we are talking about assets belonging to the plan holders and take into account the fact that a number of master trusts are also profit making. It is important that that process of transparency is open to members of the scheme and that there is full engagement by members, with members being part of the board of trustees and having effective training. We happily support that.
Craig Mackinlay (South Thanet) (Con)
I am delighted to serve under your chairmanship, Mr Rosindell. I will probably say something more about my opposition to member trustees, which would be a step very much in the wrong direction, and I fear that the amendment tabled by the hon. Member for Stockton North would do that, but in a different way.
I agree entirely that the regulations under clause 12 will be subject to the Secretary of State’s involvement in laying out those regulations in due course, and under clause 13 the continuity strategy—what that might mean and what regulations we may expect are fairly well laid out—but I am afraid that, to my mind, “member engagement strategy” is wording that is rather too loose. If we encouraged such a strategy, I would like to see in any amendment what that might involve and an expectation of what we may see in regulations from the Secretary of State. I would not want a perfectly good scheme to fail because of an interpretation that might mean lots of different things to different people. My member engagement strategy might be rather different from that of the hon. Gentleman, so I will not support the amendment.
Richard Harrington
That is up to the regulator. If the hon. Gentleman bears with me, I will get to that particular point. If he is not then satisfied, I will willingly give way.
Member engagement is a challenge in pensions both legally—that is, what should people know?—and in terms of getting them engaged in a general sense. It would be unacceptable to have a hugely expensive exercise writing tens of thousands of letters that may or may not be read, but which would confuse people. However, we accept that it is important that the members get the right communications.
A situation such as the hon. Gentleman mentioned, in which members get absolutely nothing, which the regulator would find unacceptable, would not be at all acceptable for two reasons. The first is the general point that I mentioned about getting people engaged and understanding their pension and everything that goes with it. We have all received these communications. Probably, the hon. Member for Ross, Skye and Lochaber will have always looked at his pension statements, but a lot of us have received them—very comprehensive ones, in many cases—and just put them at the bottom of the desk drawer, in the hope of reading them sometime. I hope that the hon. Gentleman is not offended by that comment; it was meant to be complimentary.
Ian Blackford
I shudder to think that the Minister would ever offend me, at least willingly. The regulator has a very important role to play—I think we all understand that—but there is also the fact that the trustees are responsible to the scheme members, and it is important that we ensure that trustees recognise the responsibilities they have. No one is talking about bringing in a cumbersome system that will be costly. This is about ensuring that the members have that relationship with the trustees. It is important that the trustees are answerable to the scheme members, not least because of the profit-making capability that some trusts have.
Richard Harrington
The hon. Gentleman is right, and this is not just a question of communication as in a formality—communication if there is a problem. We will be speaking to those points later. This is a point about communication and making sure that people know what they have, in the same way as a bank communicates, now mainly by the internet, so that people—
Richard Harrington
I can absolutely confirm that for my hon. Friend. I hope that he will agree that the fit and proper person test is quite well established across different regulatory regimes. By definition, it has to allow a certain subjectivity, because otherwise it becomes the low-level box-ticking that he fears. Having discussed this with the Pensions Regulator—both the chief executive and other people—I know that this would never happen under its regime. I hope that most people would not regard the fit and proper person test as the kind of thing to which my hon. Friend refers, but he makes a sensible point.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8
Financial sustainability requirement
Ian Blackford
I beg to move amendment 33, in clause 8, page 5, line 39, after “scheme” insert “or scheme funder”.
The financial sustainability of the scheme funder must be taken into account when assessing a Master Trust scheme’s financial sustainability.
Amendment 33, which stands in my name and that of my hon. Friend the Member for Paisley and Renfrewshire South, seeks to ensure that the financial stability of the scheme fund is taken into account when the regulator is assessing the financial stability of the scheme funder. A number of insurance companies have told us that they already hold a very significant amount of capital under the European regulatory framework for insurance solvency. In this case, it seems unnecessary for insurers to be required to hold separate or additional capital on top of this in order to meet their new obligations as master trust providers under the Bill.
It would be helpful to know more from the Government on the restrictions on the use of member funds to meet costs, which need to be more clearly defined. We have also heard from the Association of Pension Lawyers, which has called for clarity on the policy intentions behind the clause and for the detail to be fleshed out. It would be appropriate for the Government to take the opportunity to do that today.
Ian Blackford
I will not detain the Committee longer than absolutely necessary. I am relatively satisfied with the Minister’s response, particularly in the light of ongoing consultation, and on that basis I will not press the amendment to a vote just now. However, there are obviously some remaining concerns about insurance companies, particularly under the obligations, and I would like those to be highlighted today. We will move on for now. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 ordered to stand part of the Bill.
Clause 9
Scheme funder of last resort
Question proposed, That the clause stand part of the Bill.
Richard Harrington
The clause was introduced by the Opposition in the other place. It is intended to require the Government to make provision for a scheme funder of last resort, which would take effect if a master trust had insufficient resources to meet the costs of complying with duties arising from a triggering event and the costs of continuing to run the scheme for a further prescribed period.
Since the clause’s introduction, I have reflected a lot on how it would work. I have had formal and informal discussions with Members of the other place and have met officials, in the presence of the Opposition spokesman, the hon. Member for Stockton North, to discuss this subject. I have concluded that it is unnecessary to place such an additional requirement on the Government, and I will do my best to persuade the Committee of that view.
I think that we all agree that the Bill’s primary purpose is, quite simply, to bring in safeguards and controls for employers and employees who have opted to save through a master trust pension scheme. The Bill includes new powers for the Pensions Regulator, which will be responsible for the effective operation of a new authorisation and monitoring regime for master trusts. Schemes that do not meet or maintain the specified standards simply will not be allowed to operate. We have just discussed two of the authorisation criteria; as I explained, clause 7 sets out the requirements that those involved in a scheme must meet to be considered fit and proper persons, and clause 8 describes the financial sustainability requirements that will apply to master trusts. The remaining criteria—the business plan requirement, the scheme funder requirements, the systems and processes requirements and the continuity strategy requirement—are dealt with by clauses 10 to 13.
The Bill’s later clauses define the events that, when experienced by a scheme, will trigger a series of specified actions and additional requirements that must be undertaken by the scheme and the regulator. The nature of such events may mean that a scheme is operating under increased risk. Those additional requirements will ensure that increased scrutiny and controls are put in place until the new risk has been dealt with and nullified, or the scheme is wound up in an orderly manner and the interests of employers and members are successfully transferred out to a new scheme.
In addition to the new regulatory framework, the regulator is working closely with individual master trust schemes. That work provides us with insight into the scale of current risk, which the clause has been designed to guard against, and may be followed by the publication of new supporting data by the regulator. In addition, the indications are that market forces are operating effectively prior to the new regulatory regime coming into force. For example, some master trusts have left the market and transferred their members without issue.
As I have explained in previous debates, it is very attractive for existing successful master trusts—the vast majority of them—to take on members from smaller master trusts that might appear to be failing in their administration, since that allows them to add members without adding very much to their costs. I realise that is commercial rather than structural, but I believe that will happen, as it has in other regulated areas of financial services. New, larger schemes are also now entering the market. Such schemes are on a sound financial footing and will actively seek to increase their market share. All that further supports our belief that the risk of scheme members being left stranded is absolutely minimal.
Hon. Members might continue to be concerned that, were a master trust to fail, the members of that scheme might be left stranded. I perfectly understand their thinking, but we consider the risk to be negligible. However, we recognise that we cannot completely rule it out, which is also recognised by the pensions industry. We are currently working with the Pensions and Lifetime Savings Association, which is exploring establishing a panel of “white knights.” That panel would aim to guarantee that, if a master trust was required by the regulator to leave the market, the affected master trust scheme members would be transferred to a new scheme. That happens all the time in other regulated fields of the financial services market.
I believe, after consideration, that as drafted clause 9 does not work as intended. If I may expand on that, a couple of illustrations might help. The clause does not contain a power, such as a regulation-making power, enabling the Secretary of State to make further provisions relating to the scheme. That would include provisions relating to the scheme’s procedure and operations. The clause provides that the Secretary of State should consider only the resources held by a master trust and not the scheme funder.
Given the imprecise nature of the clause, I am concerned that it could lead to perverse behaviour, with schemes shifting funds about, knowing that the taxpayer will pick up the bill. We are also concerned that, given the clause’s lack of clarity regarding funding of a Government-backed scheme of last resort, stable master trust schemes might be concerned that they are at risk of paying for failing master trusts and, as a result, opt to leave the market. For the reasons outlined, I call for the clause not to stand part of the Bill.
Alex Cunningham
My hon. Friend is correct. People want to know that everything is 100% safe. I know that the Minister said that we can never guarantee 100% safety, but we are talking about some of our society’s most financially vulnerable people who are investing relatively small amounts of money in their master trust. They are not going to get a tremendous pension—nothing like what a Member of Parliament receives—but they want to know that their small pot will actually mean something for them. That is why we must have those protections.
We were talking about regularly monitored business. How regular—every three months, every two years, every five years?—and what type of monitoring? Can the Government say for certain that, by the time the regulator has identified a problem with record management, it will still be within the timeframe to resolve the issue without a funder of last resort?
The Government argue that the Bill already achieves what clause 9 is trying to achieve, but I must question the real reason why they do not want it in the Bill. If they support the idea of master trusts having regulations in place to avoid a disastrous situation if one failed, why will they not just support the clause? If they are so sure that it would never reach the stage of needing a funder of last resort, what is their opposition to including the clause just to ensure that, in a worst-case scenario when things do not go to plan, there is extra protection in place? Unless, of course, they are ideologically opposed to the concept of a funder of last resort. It would be a safety net; a guarantee from the Government that they will need to do everything in their power to protect workers’ retirement funds. If that is the case, I am disappointed that the Government do not believe that it is their duty to step in when business fails and that they would leave innocent people paying the price.
One argument that the Government Lords kept repeating was that, in the event of regulatory failure and a trust not having the means to finance a wind-up, it will not be members that will have to pay the price, but the Government have yet to tell us who it will be. When a number of master trusts and pension experts are calling for there to be a funder of last resort, why are the Government not listening? We have heard a lot of words in the other place and here today, but we have seen not action. Verbal assurance is not good enough when we are talking about people’s livelihoods in older age. We need action and robust legislation to ensure that we take every precaution. In the absence of greater clarity about the Government’s insistence that the Bill already addresses areas raised in this debate, it is vital that clause 9 is not removed. We should be covering every base in order to say confidently that we have taken every possible measure to protect members’ money 100%.
Ian Blackford
I think we all understand that the pension pots themselves are not at risk from the mechanisms we are talking about; it is about the funding of the master trusts. My appeal to the Government is that we have to find a solution to this that will give trust to those who are investing, so that they know that the master trusts themselves will be secure, whether that is from the definition of a funder of last resort, or from particular powers that the regulator has to make sure that, in the event of a trust failure, those assets can be managed in the interests of the fund holder. There is an element of risk—albeit a relatively small one—and we have to try to see whether we can close that down. In the absence of another solution, the Government should think about this clause remaining part of the Bill for now.
Pension Schemes Bill [Lords]
Ian Blackford ExcerptsMonday 30th January 2017
(7 years, 3 months ago)
Commons ChamberRead Full debate Pension Schemes Act 2017 View all Pension Schemes Act 2017 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 87(a) Amendment for Third Reading (PDF, 49KB) - (9 Jan 2017)
Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to follow the hon. Member for Amber Valley (Nigel Mills), who has made some good points about the importance of advice and about the decumulation phase. I hope that we will have an opportunity to come back to those matters at a later stage.
I welcome the Government’s initiative in bringing forward the Bill. A desire to create trust in pensions savings should unite us across the House. We want all workers to be able to attain a standard of living that will be consistent in allowing them to save while in work in order to have dignity in retirement, secure in the knowledge that a regular income from a state pension and a workplace pension will allow them to enjoy their retirement without financial worry and without living in pensioner poverty. In our view, pensions savings are the best way for most workers to achieve that dignity in retirement. We need to deliver the appropriate level of protection for savers, and the Bill is an important step forward in that regard, albeit one that could be enhanced through constructive amendments in Committee.
Given the growth in master trusts and the desire to ensure that we protect savers’ interests, the Bill is overdue in some regards. Auto-enrolment has led to a significant increase in the use of master trusts. The impact assessment published this month informs us that some 200,000 savers were in master trusts in 2010, increasing to 4 million by 2015. According to estimates from the Pensions Regulator, that may now have risen to 4.3 million savers with around £8.1 billion of assets in master trusts. When we take into account the Government estimate that 10 million workers will be in auto-enrolment schemes by 2018 and that they will be saving as much as £17 billion by 2019-20, with the vast bulk of them in master trusts, the need for robust, effective protection is clear.
The master trust market has grown rapidly, with as many as 84 such trusts in operation today. While there are a small number of larger trusts, it is clearly a fragmented market, with risk of failure in certain cases. Indeed, the Work and Pensions Committee called for stronger regulation in March 2016 when it concluded that:
“Gaps in pension law and regulation have allowed potentially unstable trusts onto the market. Should one of these trusts collapse, there is a real danger that ordinary scheme members could lose retirement savings. There is a risk that faith in auto-enrolment as a whole will be undermined.”
That is a stark warning and underscores the requirement to take this Bill forward. We need to regulate to remove the prospect of inadequately resourced schemes collapsing and to offer protection against scammers entering the marketplace. The warning signs are already there. Two small schemes have already collapsed, affecting 7,500 members. It is currently extremely easy for anyone to set up a master trust and accept savers’ funds, and there is no established mechanism for responding to the collapse of a master trust.
The rules of many schemes currently allow the use of members’ funds to wind up a scheme should it collapse. That is simply not acceptable. As a consequence of the Bill, there will be a requirement for master trusts to be approved, requiring minimum standards of trustees and obliging schemes to prove access to capital that can be used in case of wind-up. There has been widespread support for the need for such a Bill. The Pensions Regulator welcomed the announcement of new powers to regulate master trusts and said:
“We have been calling for a significantly higher bar regarding authorisation and supervision, and we are pleased that today’s announcement proposes to give us the power to implement these safeguards.”
The ABI has said:
“We have previously called for tighter regulation of Master Trusts, and are supportive of the proposed direction set out in the Bill.”
The Pension and Lifetime Savings Association welcomed the Bill as
“essential to protect savers and ensure that only good Master Trusts operate in the market.”
I concur with all those remarks.
Some of the Bill’s requirements may have unintended consequences and require further attention. As the Bill represents a significant change in the role of the Pensions Regulator, the Government must ensure that the regulator is adequately resourced to deliver accordingly. Addressing some of the following concerns could go some way to getting the Bill watertight and satisfying the concerns of many stakeholders. My first point relates to clause 8. If a scheme funder is an FCA and PRA-authorised insurer, the ABI contends that it will already have to comply with solvency II and therefore the regulations under clause 8 should not apply as they would be onerous and costly. The Government should clarify whether they have assessed that potential impact and whether the additional regulation adds a further safeguard, making the provision necessary.
Clause 9 requires the Pensions Regulator to be satisfied that a master trust has sufficient financial resources to meet the costs of setting up and running the scheme and to protect members in the event of wind up. A master trust must therefore hold capital equivalent to six to 24 months’ worth of running costs. However, it is argued that there is little clarity over how that provision would be applied. The TUC argues that there is an assumption that other master trusts would have an appetite to absorb a collapsed rival’s book of business, but that may not always be the case, particularly if costs are involved. Some savers are more attractive to providers than others. In the absence of greater clarity over the robustness of the proposed capital regime, the TUC contends that clause 9 should be retained. It was accepted in the Lords and provides that the Secretary of State can
“make provision for a funder of last resort, to manage any cases where the Master Trust has insufficient resources to meet the cost of complying with subsection (3)(b)”
after a triggering event. I would support that as a principle.
On clause 10, concerns have been expressed about the additional costs that master trusts could face, such as those offered by insurers due to duplicated regulation enforced by the Pensions Regulator. The ABI has said that that would be to the detriment of existing scheme members, as these schemes already operate under stringent FCA and PRA regulation.
The key issue raised by the ABI is the definition of a “scheme funder” in clause 10. Concerns centre on the fact that the Government state that the clause is intended better to enable the Pensions Regulator to assess the financial sustainability of the scheme by increasing transparency on the assets, liabilities, costs and income of the master trust. The ABI is concerned that the clause does not meet the policy intent of providing transparency because, as a separate legal entity, master trusts can still transfer risk to other entities.
That issue was raised in the Lords, and the ABI continues to ask that, in order to protect the benefits to scheme members and minimise costs, the requirements under clause 10 should not apply where the scheme funder is an FCA and PRA-authorised insurer. There is also a need for greater transparency on fee charging, which needs to encompass transaction costs as well as any ongoing administration fees.
It is welcome that the Government are placing a 1% cap on exit fees for current members and no exit fee for new members. We know that large fees have been charged on exit in the past, and it is clear that we need to protect savers, although if new members are to be excluded from exit fees why should it be permissible for exit fees to remain in place for existing plan holders?
Under clause 12, at least one third of trustees of single-employer workplace pension schemes have to be member-nominated. There is no such obligation on master trusts. The Bill presents an opportunity to explore member involvement, and I hope we can pick up that topic in Committee.
Clause 32 creates a new power enabling the Pensions Regulator to make a pause order requiring certain activities to be paused once a master trust has experienced a triggering event. That includes accepting new members, making payments, accepting contributions and discharging benefits. There is concern about the impact of a pause order on a member’s savings, as there are no mechanisms in place to allow ongoing contributions to be collected and held on behalf of a saver. It is unacceptable that a member should be penalised and, in effect, lose wages in the form of employer contributions due to events out of their control. The Government should clarify whether they intend to take action to protect savers in that area.
We look forward to clarification from the Government on those issues, and we will work in the next stages, where necessary, to improve the Bill. This is therefore a pressing matter and, on behalf of the Scottish National party, I signal our intent to work with the Government to deliver a Bill of which we can all be proud.
The Bill, however, is a missed opportunity to undertake much-needed major reform of the pensions system, rather than patchwork attempts to plug holes in the system. We need a fundamental overhaul of the pensions system, and the UK Government need to introduce more ambitious plans on pension reform. We are disappointed not to have a Bill that looks at the issues with the state pension, particularly the need to address state pension age inequality for the WASPI women.
Madam Deputy Speaker, I take your comments about the WASPI women but, given that the SNP was traduced by the Chair of the Select Committee on Work and Pensions, I make the point that the SNP has raised the issue of the WASPI women at least 44 times in this House and has commissioned independent research. It is completely disingenuous for anyone to suggest that the SNP has refused to support the campaign. A reasoned amendment to kill the Bill was suggested. However, that would help no one and would only remove the Bill’s helpful regulation provisions relating to master trusts.
Frank Field
I am grateful to the hon. Gentleman for giving way. The plan was not to kill the Bill but just to hold it up for a bit so that we could hopefully highlight the position of WASPI pensioners, for soon they will all be retired and the horror will have been completed. We have no other weapon against the Government, because they have made it plain that they are going to sit out this issue. The Scottish nationalists were not prepared to form an alliance with those of us who want to block the Bill in order to actually raise this issue and perhaps implement the recommendation of a previous Select Committee report.
Madam Deputy Speaker
I also appreciate that he is not going to be speaking in tonight’s debate, but I just want to say that it is a very narrow Bill about something very specific and this is not the forum for discussing all that. People might be very disappointed that we are not debating transport policy, but we are not; we are debating master trusts, so I ask the hon. Member for Ross, Skye and Lochaber (Ian Blackford) to keep just to that. I know he is trying to skim over things, but if he could skim away from other issues and get back to the main point, we would all be very grateful to him.
Ian Blackford
I will endeavour to skim away, Madam Deputy Speaker. You made the point that this is a narrow Bill, which is exactly why it would have been impossible to amend it to take account of the WASPI case. The right hon. Gentleman should know that an attempt to kill the Bill would have done exactly that, and we do not solve the problem faced by WASPI women by defeating this Bill, which is so necessary to protect pension savers. Frankly, he should be thoroughly ashamed of himself; he does no justice for the WASPI women with his campaign and the remarks he is making.
Let me conclude the remarks I was making. The sheer fact that the Cridland review is currently looking at the state pension age, without looking at the existing problems, limits the ability to learn and develop a more progressive outlook, which could safeguard dignity in retirement for pensioners. Generally, the threat of pensions scams and transfers from pensions to high-risk schemes needs to be urgently addressed. [Interruption.] I have got to the bits I am not allowed to say any more. [Laughter.]
We reiterate our call for the establishment of an independent pension and savings commission to look holistically at pension reform, focusing on existing inequalities and paving the way for a fair, universal pensions system. The entire pensions landscape is in need of fundamental reform, particularly with a pressing need now to review and enhance auto-enrolment. The Government are set to review auto-enrolment this year, but reports seem to suggest there may not be substantial changes from the review, and with many missing out on auto-enrolment we need to ensure that this policy is moved forward. Although 7 million workers have been auto-enrolled, a further 6 million workers have missed out. The Pensions Policy Institute revealed that 3.3 million of the people excluded from auto-enrolment had been excluded because they earned less than £10,000 a year. It also found that three quarters of the employees earning less than the auto-enrolment trigger were women.
We believe that lowering or removing the auto-enrolment trigger would significantly increase the number of people saving through auto-enrolment and in master trusts. It would also go some way to alleviating some of the historical inequalities women face, whereby their occupational pension savings are already well below those of men. There are clear disadvantages here, particularly for part-time and the low-paid workers. For example, somebody earning £10,000 per annum will not benefit from the 8% contribution; they will benefit by only 3.4% because over half the earnings are excluded. Although self-employed workers are growing vastly in number, they have fewer incentives to save. If the Government were to review auto-enrolment sufficiently, they could consider moving to a flat rate of pension tax relief and allowing self-employed people to deduct pension contributions from profits to end the disparity.
Looking at the age at which auto-enrolment is triggered could also be more progressive. Just on 26 January, Zurich Insurance called on the Government to take
“a steady approach to increasing minimum auto-enrolment contributions above 8%”.
While there is an acceptance that the levels need to rise, it must be done in a way whereby workers do not opt out.
In conclusion, I welcome this Bill. It contains much we can support and we will work constructively with the Government to enhance it further. I hope that when the Minister winds up he will join with us in that spirit of consensus.
Oral Answers to Questions
Ian Blackford Excerpts(7 years, 4 months ago)
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Richard Harrington
The hon. Lady will be aware, because the WASPI women have been discussed in the House and I have discussed this matter personally with her on many occasions, that the changes affecting them were in the Pensions Act 1995, and that a lot of time and resources were devoted to informing them of the situation, including millions of letters being sent out from 2011.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
A happy new year to you and everyone in the House, Mr Speaker, and particularly to the WASPI women. I hope that they have a better year this year.
The leaflet entitled “Ways to save in 2017” recently published by the Treasury mentioned the junior ISA, the help to buy ISA, premium bonds, cash and stocks and shares ISAs and the new lifetime ISA, but it completely omitted to mention pensions. That is an absolute disgrace, and it confirms my fears that the Government have downgraded the role of pensions and are using the gimmick of ISAs to distract attention from pensionable savings. Does the Minister agree that pensionable saving is the best form of saving for retirement? Will he establish a pensions and savings commission to ensure that dignity in retirement is promoted and protected?
Richard Harrington
I must totally disagree with the hon. Gentleman’s analysis of the importance that the Government place on pensions. A lot of effort goes into communicating with people, on television and elsewhere, about auto-enrolment. The auto-enrolment of so many people has been one of the great successes of this Government and of the coalition, and I hope that that continues.
Welfare Cap
Ian Blackford Excerpts(7 years, 5 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
It is a pleasure to follow the hon. Member for North Swindon (Justin Tomlinson). He has been a loyal supporter of the Government from the Back Benches during the past few months, and it sounds very much as though he is putting in a job application to the Prime Minister as much as to anyone else—[Interruption.] Well, you never know.
Another breach of the cap calls into question what its actual point was in the first place. As a means to reduce welfare spending, it continues to be inflexible and unworkable. When we look at the motion and words of the Minister from the Dispatch Box, we see a mea culpa. The Government are admitting that the cap has in effect gone for the next four years. The Minister will not have to continue to come back to the Dispatch Box to say that it is not working, because we have now given them a blank cheque for the next three or four years, which I guess we should welcome.
We should really be talking about the fundamentals of the economic circumstances that got us into this situation in the first place. We need not the soundbites we used to hear about the long-term economic plan, but a real plan to make sure that we are boosting investment in productivity in this country. The challenge in delivering that has just got a little bit harder as a consequence of Brexit, which I suspect is really why we are having this debate today. It was always going to be about circumstances, and Brexit—the fall in the value of the pound, the declining confidence in future growth—has had the impact of bringing the Government to the Dispatch Box with the display we have seen this evening.
On social security, the Chancellor missed his opportunity to be the reformer he claims to be for “just about managing” families. He should instead have focused on addressing the underlying root causes of poverty by working to address unemployment and employment support. We acknowledge that the Government have now had to abandon their own targets on the welfare cap, and the projected increases in resources are welcome, after they had used the cap for so long as a source for cuts.
The welfare cap is a reprehensive and regressive measure that places the burden of the UK Government’s failed economic strategy on the shoulders of the most disadvantaged in society. We should remind ourselves that the welfare cap was a flagship policy for the Government in the last Parliament, but it ended up as a tool to find more cuts that the Treasury has used and abused to squeeze resources from the Department for Work and Pensions.
The new Chancellor will again have to breach the target set for him, but we ask him to acknowledge that the sheer fact this Government cannot even stick to their own targets proves that the inflexibility of the welfare cap makes it unworkable. The fact that they will breach the cap again and again illustrates a desire not to provide guidance about forgoing the cap for the next four years, but to abandon for good the policy of having a cap. An arbitrary cap in these times of uncertainty is neither useful nor adequate, as the Government’s previous breaches have shown.
The best way to reduce and manage welfare spending is to restore the economy to a healthy state, not to hit the most disadvantaged with the bill. The cap will not address the underlying structural problems that are keeping people reliant on social security, including low pay and wider labour market inequality. The fact that people in well-paid jobs cannot afford to pay rent, because of high housing costs, should at least provoke the Government to listen to the point that reliance on welfare is more than what they perceive as a culture of dependency. We keep coming back to the issue of housing and housing costs, but the only way to address that is to make sure we address the issue of supply in the housing market, which the Government have singularly failed to do.
The Institute for Fiscal Studies has said of the welfare cap target:
“The Conservative government already has the unimpressive record of meeting nought-out-of three of its fiscal targets.”
The Joseph Rowntree Foundation said in March 2014:
“The government’s newly-announced welfare cap will disproportionately target benefits claimed by the least well off”.
The IFS green budget, from February 2016, said that
“in practice, the welfare cap has proved much less binding. Spending is already forecast to exceed the cap that was set in July 2015 for each of the next three fiscal years. In other words, even though the welfare cap has only been in operation for less than two years (since the March 2014 Budget), it has already been broken by the Chancellor. It is therefore not clear whether it remains a real constraint on the government’s actions.”
The IFS was right then and is right today. What is the point of the welfare cap as a principle if it is breached time and again? It is, in effect, no constraint on what the Government are doing, or at least on what they should be doing. It is unworkable and meaningless. It was simply a sop to show that the Government were talking tough, and pays no regard to changing circumstances. It is intellectually, morally and ethically daft.
The £1 billion allocation to benefits in the autumn statement is a drop in the ocean, with billions of savings still to come from cuts to social security benefits over the next few years. Changing the taper rates will not, on its own, mitigate the impact of those cuts on low-income families. Instead, the Government should reverse cuts to the work allowance in full, so that working parents in low-paid jobs—people whom we, as a House, should want to support—do not lose out. Changing that taper rate—the rate at which support is withdrawn from low-income working households under universal credit—will be less effective at targeting support towards low earners with children than simply reversing the cuts to the work allowance would be.
The Scottish National party has consistently argued against the reductions in the work allowance and helped to force a Tory U-turn on tax credit cuts last year. Although the UK Government kicked the cut to the work allowance down the line, it will come back to bite next April, hitting “just about managing” families on low and middle incomes. The maximum gain from the 2% reduction in the taper is only around £500, which will fall short of what low and middle-income families need to manage when the maximum losses from the work allowance cuts are around £2,800. That is the reality of what is happening under this Government.
Torsten Bell, director of the Resolution Foundation, has said:
“When it comes to boosting ‘just managing’ family budgets, all roads lead to universal credit. The most effective way to support families would be by reversing the £3bn cut to work allowances announced by the last chancellor”.
He added that a modest reduction in the taper rate would
“leave a bittersweet taste among just about managing families.”
Analysis by the Institute for Public Policy Research suggested the partial U-turn would cost £700 million a year by 2020-21, compared with the £3 billion a year taken out of work allowances previously announced. Now that the welfare cap has gone, why do the Government not reassess these challenges, and make sure that they support the families that so desperately need that support?
With losses for families on universal credit, the repugnant rape clause—let us not forget that—and cuts for the sick and the disabled still to come down the line, it is clear the Tories have not abandoned their obsession with austerity. For all their rhetoric on the JAMs, they are still unwilling to deliver. Although it is welcome that there are to be no more welfare spending cuts, the sheer fact that the Tories are ploughing ahead with the pre-planned cuts next year, hitting low and middle-income families, shows that there are real-time cuts for families across the UK in this Parliament.
In a report to the Scottish Parliament’s Social Security Committee, researchers from Sheffield Hallam University showed that by 2020-21 Scotland can expect to lose just over £1 billion a year as a result of the latest welfare reforms introduced by the UK Government. That is £1 billion of cuts that have yet to hit ordinary working people in Scotland, delivered by this Westminster Government—happy Christmas. Sheffield Hallam University also estimates that the pre-2015 reforms are already costing claimants in Scotland just over £1.1 billion a year. That brings the cumulative loss expected from all the post-2010 welfare reforms up to more than £2 billion a year. We will not grow the economy by taking cash out of the pockets of the poorest. We will fix the economy, the debt and the deficit by putting in place measures that will grow the economy. This obsession with punishing the poor must stop.
The UK Government are saving a whopping £30 million in 2017-18, rising to £450 million in 2020-21, from the cuts to the employment and support allowance work-related activity group and the component in universal credit, according to figures published by the Treasury in the summer Budget 2015 and updated in March 2016. Already we have seen Tory Back Benchers rise again and again to vote with us on the Opposition Benches against those regressive policies. Even if the Government will not listen to those of us on the Opposition Benches, it is high time they listened to their own Members. Analysis by the Institute for Public Policy Research suggested the partial U-turn on the universal credit taper rate would cost £700 million. Why will the Government not do the right thing by the people affected?
Any move to increase the national living wage, as the Government call it, is to be welcomed, but the UK Government are still dragging their feet; they lack the ambition to really tackle low pay. The UK Government’s national living wage is not a living wage; it is simply a further tier of the national minimum wage. The real living wage is calculated according to the basic cost of living and therefore takes account of the adequacy of household incomes for achieving an acceptable minimum living standard.
Why will the Government not accept that definition and recognise that that should be the bare minimum for those who are working hard in our society? The UK Government’s decision to set an arbitrary rate for their national living wage fundamentally challenges the value of having an organisation providing independent advice on wage levels across the UK. I therefore ask the Minister: will the Government start to accept that impartially provided advice?
The Scottish National party supports the payment and promotion of the real living wage and, in Scotland, continues to set the bar on fair work. Leading the way, on Monday 31 October, the First Minister welcomed the new living wage rate of £8.45 per hour, which will benefit thousands of staff in Scotland, and urged more Scottish organisations to sign up as accredited living wage employers. That rise of 20p will benefit thousands of employees at living wage accredited organisations in Scotland.
The best way to reduce and manage welfare spending is to restore the economy to a healthy state, not to hit the most disadvantaged with the bill. Austerity is a choice, not a necessity—an obsession that has been proved, time and again, to fail. It is time for an economic strategy that focuses on inclusive and fair growth. The SNP is delivering for Scotland; Westminster is delivering ongoing austerity. We are all paying the price for that.
Question put and agreed to.
Resolved,
That pursuant to the Charter for Budget Responsibility: Autumn 2015 update, which was approved by this House on 14 October 2015, under Section 1 of the Budget Responsibility and National Audit Act 2011, this House agrees that the breach of the Welfare Cap in 2019-20 and 2020-21, due to higher forecast inflation and spend on disability benefits, is justified and that no further debate will be required in relation to this specific breach.
State Pension Age: Women
Ian Blackford Excerpts(7 years, 5 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
I beg to move,
That this House is concerned that the Government is not taking action to alleviate the injustice facing women affected by the acceleration of the increase in the state pension age, despite the House previously voting in favour of such action; welcomes the Landman Economics report into the impact of the changes to pension arrangements for women born in the 1950s, which identifies an affordable solution which would slow down that increase in order to give adequate time for women affected by the acceleration to make alternative arrangements; and calls on the Government to work with the Women Against State Pension Inequality and Women Against State Pension Inequality Voice campaigns further to explore transitional protection for those affected.
It is a pleasure to move this motion in the name of the leader of the Scottish National party, my right hon. Friend the Member for Moray (Angus Robertson), and many of my right hon. and hon. Friends. We have long argued that the Government need to slow down the pace of the increase in women’s pensionable age, and that the increase in pensionable age is happening over too short a timescale. There has also been an argument about whether women were given enough notice of the increase in their pensionable age. Indeed, some Government Members, such as the hon. Member for Gloucester (Richard Graham), have conceded that there were issues with communication. That is putting it mildly.
Thanks to freedom of information requests, we learned two weeks ago that only in April 2009 did the Department for Work and Pensions begin writing to women born between April 1950 and April 1955, and it did not complete the process until February 2012.
Ian Blackford
I will make some progress, and then I will give way.
The DWP wrote to women to inform them about changes in legislation that go back to the Pensions Act 1995, but it did not start the formal period of notification for 14 years. To take 14 years to begin informing people that the pension that they had paid in for was being deferred—that is quite something. Can we imagine the outcry if a private pension provider behaved in such a way? There would be an outcry in this House and, no doubt, legal action. This is quite stunning when we consider that entitlement to a state pension is earned through national insurance contributions, which many women have made for more than 40 years.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Does my hon. Friend agree that these pension entitlements are not a benefit or a privilege but a contract, and they should be honoured?
Ian Blackford
My hon. Friend makes an important point. We are talking about women who have paid national insurance contributions on the basis that they would get a pension. This is not a benefit. It should be a contractual arrangement between the Government and the women involved, and that is what the Government have wilfully removed.
David T. C. Davies
Given the hon. Gentleman’s strong view on the matter, could he tell us whether the Scottish Government have written to pensioners in Scotland about it? Could he also tell us whether the Scottish Government are going to use their many fiscal and tax-raising powers, and their huge budget of some £30 billion, to compensate women in Scotland?
Ian Blackford
The hon. Gentleman might treat pensioners in Scotland and the rest of the UK with a little bit more respect than he has shown by asking that nonsense of a question. Just in case he does not know, pensions are a reserved matter. I would very much like the Scottish Government to have responsibility for pensions. Let us be quite clear: if this Government gave us access to the national insurance fund, we would not treat pensioners in such a shabby way as the Government are doing. That is the reality.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
I want to go back to the first part of the hon. Gentleman’s argument, when he described the absolute injustice that many of the women who are affected feel. I have met many from my constituency and from across Wales who feel that this is a terrible thing, which must be righted. They expected something; they are not getting it and we need to right that injustice.
Ian Blackford
I thank the hon. Gentleman for that point, and he is absolutely spot on. This is about justice and fairness. It is about people who have paid into a pension and who expected to get that pension—in the case of most of these women, at age 60. The discovery that they were not given adequate notice is a clear reason why the Government must change course and act in a responsible manner.
Mr Jim Cunningham (Coventry South) (Lab)
The hon. Gentleman has spoken in many debates on this issue, and I pay tribute to him for that. The situation gets worse. The Government, through the back door, are examining the triple lock for existing pensioners. More importantly, responsibility for television licences for pensioners over 75 is being shoved on to the BBC, which will get the blame instead of the Government.
Ian Blackford
Again, I find myself agreeing with the hon. Gentleman.
As a House, we must reflect on the situation in which there are still 1.2 million pensioners in this country living in poverty. I am ashamed when I hear Members of the House saying that we should examine the triple lock, because we should protect our pensioners. One thing on which I will give an absolute commitment is that if we had responsibility for pensions, the triple lock would be secured by the Scottish National party. Pensioners would be secured with the SNP.
Ian Blackford
I will make some progress and then take more interventions. I am aware that many people want to speak.
The Government have changed the entitlement for something that women have paid in for with an expectation of retiring at 60. When the goalposts were moved, the Government could not get around to informing the women affected in a timely manner. A woman born on 6 April 1953, who under the previous legislation would have retired on 6 April 2013, received a letter from the Department for Work and Pensions in January 2012 with the bombshell that she would now be retiring on 6 July 2016. That is three years and three months later than she might have expected, but she received only 15 months’ notice. That is what this Government have done to many women throughout the United Kingdom: 15 months’ written notice on what they thought was a contract they had with the Government, but which has now been ripped up. That is the contempt that this Government have shown for the 2.6 million Women Against State Pension Inequality campaign women throughout the UK.
George Kerevan (East Lothian) (SNP)
Does my hon. Friend agree that the attack was made on the WASPI women because they were an easy target, and that it is the first stage in a Conservative plan to downsize and dismantle the state pension altogether?
Ian Blackford
My hon. Friend may well be right. The Government are of course hoping that with the passage of time this issue will go away, but it will not go away, because the women are angry. If they do not begin to recognise the need to do something, each and every Member of the House will have the WASPI women coming to their surgeries and demanding action. Not only will they be demanding action, but that will run the risk that this Government will be taken to court.
James Cartlidge
The hon. Gentleman is being generous in giving way. Is it still his policy to pay for this change from the national insurance surplus?
Ian Blackford
I will come on to cover that point, but the fact remains that the national insurance fund will be sitting with a surplus of close to £30 billion by the end of this decade. There will be £30 billion of contributions in the national insurance fund. There is no question but that the Government can afford to do this: there is a surplus. The national insurance fund has to retain two months’ cash flow, but that can still be done by putting in place what we are asking the House to do today, which is—as in the Landman report—to push back the increase in women’s pensionable age and to make sure that the women worst affected get recompense and fairness.
Mr Dennis Skinner (Bolsover) (Lab)
The hon. Gentleman has mentioned that the WASPI women will not go away. That is one of the most delightful things about them. Way back, we carried a vote on a Back-Bench motion supporting them in this House. They were not satisfied that there had already been a debate in Westminster Hall, and they were not satisfied that they were holding meetings in every constituency, city and town in Britain. They are like the Grunwick women of 40 years ago, the little Gujarati women who would not give in, and the Tory Government had better realise that the WASPI women ain’t going to give in either.
Ian Blackford
The hon. Gentleman is absolutely correct. He is right that the WASPI women are not for giving in, and those of us on the Opposition Benches—and, I hope, some Conservative Members—are not for giving in either.
Ian Blackford
I want to make some progress, but I will let the hon. Gentleman in later.
The Government, despite not giving reasonable notice, have so far not apologised for how they have treated these women. It is utterly, utterly shameful, and it raises the question: how much notice should be given for changes to the state pension age? The Pensions Commission, which reported in 2005, suggested that at least 15 years’ notice be given on any further increase in pensionable age—15 years, not the 15 months given to so many women. Will the Government not recognise that appropriate notice has to be given and make changes?
Given the Government’s failure to give proper notice, I tabled a written question to the Secretary of State, which I received an answer to yesterday. My question was:
“To ask the Secretary of State for Work and Pensions, what his policy is on the minimum written notice to be given to people who will be affected by future changes to the state pension age.”
I received the following response:
“The Government has committed not to change the legislation relating to State Pension age for those people who are within 10 years of reaching it. This provides these individuals with the certainty they need to plan for the future. We recognise the importance of ensuring people are aware of any changes to their State Pension age and we use a number of different means to do this…Anyone can find out their State Pension age with our online calculator or the ‘Check your State Pension’ statement service.”
According to the Minister who responded, the Government accept that they should not change legislation for those within 10 years of pensionable age. That is all well and good, but what is the point if they do not inform those directly affected?
Yesterday, in response to a further question, a Minister stated that,
“following the Pensions Act 1995, State Pension estimates, issued to individuals on request, made the changes clear.”
“On request”! It should not be done on request. People should not have to ask the Government to inform them; that is this Government’s responsibility. It almost seems like a script from the comedy, “Yes Minister”, rather than a Government acting in a proper manner.
Ian Murray
The hon. Gentleman has been dogged in pursuing this matter with colleagues from all Opposition parties. He mentioned “Yes Minister”. In 2011, I sat on these Benches as the then Liberal Democrat Minister pushed through the Pensions Act. Is he as astonished as I am that, having now left the House, that former Minister now says that the Act was wrong and unfair to women?
Ian Blackford
The hon. Gentleman is absolutely correct that the previous Pensions Minister has made these comments. In fact, the last Pensions Minister in the other place, Baroness Altmann, made similar comments. Everyone can see the deficiencies in the Government’s policy except the Government themselves.
Mr Shailesh Vara (North West Cambridgeshire) (Con)
If the former Pensions Minister is to be referred to, it would be helpful to put the facts correctly. He said that the difference required was £30 billion. He went to the then Chancellor of the Exchequer and Prime Minister and asked for £3 billion. Then, when he was given a concession of £1.1 billion, he said, “That’s a hell of a lot of money.” So let us be clear: the difference was £30 billion but he only asked for £3 billion, which is a tenth of what the hon. Gentleman is arguing about.
Ian Blackford
We are not talking about concessions; we are talking about these women’s pension entitlement. How dare the Government talk about concessions, when people have paid into their pension and deserve to get it!
This is not a comedy but the reality of a Government letting women down.
Callum McCaig (Aberdeen South) (SNP)
There are suggestions from Conservative Members that money does not grow on trees, and that is correct, but this money came from these women paying in through national insurance. It did not grow on trees; it came, hard-earned, from their own pockets.
Ian Blackford
My hon. Friend is quite correct. We keep hearing about fiscal responsibility and how we cannot afford it, but of course we can, because the surplus is there in the national insurance fund.
When the new Prime Minister took office, the first thing she did was bring a motion before the House asking us to renew the Trident missile system, and effectively every single Conservative Member went through the Lobby and gave the Government a blank cheque. They can invest in weapons of mass destruction but they are not prepared to give women pensioners their just deserts.
Several hon. Members rose—
Ian Blackford
I will take some more interventions later, but I must make some progress.
As I have mentioned, this is not a comedy; it is the reality of a Government letting women down. The failure to write to those affected is a failure of responsibility. It is an abrogation of responsibility. To pass the buck and say that anyone can use the online calculator is, frankly, stunning. All prospective pensioners ought to be treated with respect. Some 2.6 million women were not effectively communicated with, and many are now struggling to cope financially with a later pensionable age than the one they had planned for.
Let us look at what is taking place currently. I have highlighted the current sharp increases in pensionable age, but they need to be gone over again for the simple reason that, so far, the Government have simply not got it and will certainly need to do so. A woman born on 6 March 1953 will have retired on 6 March 2016 at the age of 63. A woman born a month later, on 6 April 1953, will have retired on 6 July aged 63 and three months. A woman born on 6 May 1953 will have retired a few days ago, on 6 November, aged 63 and six months. A woman born on 6 June will have to wait until 6 March 2017, when she will be aged 63 and nine months. A woman born on 6 July 1953 will not get her pension until her 64th birthday in July 2017.
Ian Blackford
I hope that the Government are beginning to get the picture. For each month that passes, women’s pensionable age is increasing by as much as three months. We should just dwell on that—a three-month addition to pensionable age for each month that someone was born later than their neighbour, friend or colleague.
I spoke about a woman born in March 1953 who retired this year at age 63, but a woman born a year later, in March 1954, will not retire until September 2019, when she will be aged 65 and a half. [Interruption.] Conservative Members seem to think that this is funny, but we are talking about women who are being significantly disadvantaged over too sharp an increase in women’s pensionable age. Those Members might find that acceptable, but I am afraid that I, my colleagues and many millions of other people in the country certainly do not. A woman born six months later, in September 1954, will have to wait until she is 66 in September 2020. Over an 18-month period, a woman’s pensionable age will have increased by three years.
As we keep saying, we are not against equalisation of the state pension age—[Interruption.] My colleagues and I have said that in every speech we have given in this House. We have made it crystal clear, as have the WASPI women, that we agree with equalisation. It is the pace of change that is the problem, and Conservative Members are burying their heads in the sand over it and are refusing to face the reality.
Mhairi Black (Paisley and Renfrewshire South) (SNP)
I must echo the very clear position that my hon. Friend has outlined. Does he agree that anybody who believes that, purely because someone is a woman and happens to have been born at a certain time they should lose out, is advocating a very warped and strange definition of equality?
Ian Blackford
Absolutely. Of course we have to face the gender inequality that has been with us, with women paid less for such a long time and women gaining less access to occupational pension schemes, but Government Members just seem to want to make things worse. As we keep saying, we are not against equalisation of the state pension age; it is the pace of change and the lack of appropriate notice that are the real issues.
Graham Evans
I am most grateful. If Germany can introduce equalisation of the pension age in 2009, why cannot the United Kingdom do the same? We are behind the game.
Ian Blackford
I am absolutely dumbstruck! I do not know how many times we have to say it, but we are not against equalisation. We support it. It is the pace of change imposed by the Government that is the problem.
While we are on the subject, the Government might wish to consider the fact that the Polish Parliament met on the 16th of this month and agreed to reverse the increases in pensionable age because they recognised the unfairness. Perhaps we should take a leaf out of the Poles’ book, rather than this one.
Ian Blackford
I want to make some progress, because I know that many other Members want to speak.
We should remind ourselves what a pension is. It is deferred income. Women, and men, have paid national insurance in the expectation of receiving a state pension. That is the deal, plain and simple. You pay in, and you get your entitlement. You do not expect the Government, without effective notice, to change the rules. What has been done to the WASPI women has undermined fairness and equity. The 2.6 million women affected by the increase in pensionable age have an entitlement to a pension and a right to be treated fairly: no more, no less.
The Government often state that the increase in pensionable age under the 2011 Act means that no women will have to wait longer than 18 months for their pensions. That is disingenuous, as it comes in addition to the changes in the 1995 Act, which are still in the process of being implemented. It is a fact that women’s pensionable age is increasing by six years over a very short period. That is the issue. That is the reality. It is the impact of both Acts. The Government have a duty to be truthful about this matter.
Let me now turn to the Prime Minister’s amendment. So much for her comments about supporting those who were “just about managing”. Many of the WASPI women are not managing, and this ill-conceived, patronising amendment from the Government is frankly contemptible. Although the Chancellor confirmed in last week’s autumn statement that the triple lock would remain for the duration of the current Parliament, he has ordered a review of the cost of the guarantee and whether it is affordable. We in the SNP remain fully committed to the future of the triple lock to ensure dignity in retirement for all our pensioners. Any roll-back by the UK Government will leave pensioners vulnerable.
The Government’s commitment to pensioners needs to be questioned. We already know that, in reality, although the new headline flat-rate state pension will be £159.55 a week, many people will get less if they contracted out of second or additional state pension top-ups over the years. With the Chancellor and others wavering on the future of the triple lock, only the Scottish National party can be trusted to protect the rights of pensioners in Scotland. [Laughter.] Members may laugh, but I am glad to say that pensioners throughout the United Kingdom will be listening, and they will be watching the behaviour on the Government Benches.
The amendment is something that we might expect from a student debating society, but not from a Government who are taking the plight of the WASPI women seriously. What is it going to take for the Government to recognise that they must do something to deal with the unfairness of the sharp increase in pensionable age? Over the last few weeks, 240 petitions relating to the WASPI campaign have been presented to Parliament by Members on both sides of the House, which shows that this issue affects all parts of the UK. Parliament and the petitioners should be given more respect by the Government, and I hope that when the Minister responds to the debate he will withdraw their amendment. The issue is not going to go away: the WASPI woman are angry, and will be lobbying MPs in the weeks and months ahead. The Government must act.
This is not the first time that women have had to campaign to defend their rights. In the House, we frequently pay homage to those in the suffragette movement who campaigned for voting rights for women. There are similarities between the suffragettes and the WASPI women. The suffragettes were known by the acronym WSPU, which stood for the Women’s Social and Political Union, and they were well known for wearing purple, as do the WASPI women. The Government of the day, of course, stood steadfast against the demands of the suffragettes for many years before they were eventually forced into doing the right thing. My message to the present Government is not to be as pig-headed as previous Governments in opposing a campaign which, as I have said—and as was pointed out earlier by the hon. Member for Bolsover (Mr Skinner)—is not going to go away. I say to them. “Show compassion. Show that you can do the right thing.”
Kirsty Blackman (Aberdeen North) (SNP)
Does my hon. Friend share my bafflement that in the face of evidence, in the face of campaigning and in the face of the many women who come through the doors of our surgeries to raise this issue, the Government have not yet changed their mind? This is not about equalisation; this is about a campaign against the WASPI women.
Ian Blackford
My hon. Friend is quite correct. The Government ought to reflect on all the petitions that have been launched in good faith, including by Conservative Members.
Lady Hermon (North Down) (Ind)
The hon. Gentleman will understand that in Northern Ireland this change is having a negative impact on thousands of women. I am one of them, but I will have a pension from this House; thousands of women will not enjoy that privileged status. On 13 July, a new Prime Minister walked into No. 10, giving an opportunity for this Government to set a different tone. The Prime Minister has a golden opportunity to deliver on the hopes and expectations that she revealed on the steps of No. 10.
Ian Blackford
The hon. Lady makes a strong point. I appeal to the Government to listen to what is said by Members in all parts of the House, including on the Government Benches. They can do the right thing today and deliver justice for the WASPI women. They have a chance to show that they really do care about the women who have been left behind.
Although it is simply shocking that we are still debating this issue without resolution, should we be surprised? Historically, women have suffered decades of gender inequality, and while the Tories tell us that the changes are about equalisation and fairness, they continue to push women further into hardship by delaying their pensions and ensuring that their austerity cuts continue to fall firmly on their shoulders.
Dr Alasdair McDonnell (Belfast South) (SDLP)
Does the hon. Gentleman agree that the WASPI women should be commended for the civil, decent and reasonable way they have campaigned? We have met them all in our constituencies. He just made the point that women had a gender pay gap and a resulting pension gap even before the changes, so an already unfair situation is compounded. Does he agree that the failure to introduce better transitional arrangements exacerbates the existing inequality?
Ian Blackford
I fully agree. I commend the dignity shown by the WASPI women in their campaign. They have been an inspiration to us all.
Ian Blackford
No. I have to make progress, because many others want to speak. I have been generous in giving way.
We also need to remind the Government that the House has already backed a motion calling on them to take action. It was passed on 7 January this year, and it is worth reflecting on its contents. It called on the Government
“to immediately introduce transitional arrangements for those women negatively affected by that equalisation.”
Why have the Government ignored the will of this House? Does parliamentary democracy mean anything, or can it simply be ignored by a Government who choose to disrespect not only this House but the 2.6 million WASPI women? It is an affront to democracy that despite this House having voted for the Government to take
“action to alleviate the injustice facing women affected by the acceleration of the increase in the state pension age”,
the Tories are intent on resisting the will of the people. It is abundantly clear that we have won the argument. As well as winning the vote unanimously in Parliament for the UK Government to introduce transitional arrangements for the WASPI women, the Tories continue to shrug their shoulders at the will of the House. In various debates on this issue, we have won the argument. The UK Government must realise that, with the support of Members on both sides of the House, we will not be abandoning the WASPI women as they have done. We and the constituents we represent should be given more respect and consideration by the UK Government.
David Rutley (Macclesfield) (Con)
On the point of fairness, will the hon. Gentleman give way?
Ian Blackford
Fairness! [Laughter.] For the last time, and because of his sheer cheek, I give way to the hon. Gentleman.
David Rutley
Not once has the hon. Gentleman told the House that he will pay the £38 billion price tag. That will increase national debt, and future generations will have to pay for it by having a much higher pensionable age. How does he answer that question about fairness?
Ian Blackford
That was pathetic.
There will come a time when not only the SNP but the Government Back Benchers who have pledged to support the WASPI women and the general public will question the role of this place, if it is not to listen and respect the will of the people. With internal dissent growing in the Tory party over cuts to employment and support allowance and the reduction in the work allowance, the cracks are beginning to appear. Maybe now is the time for them to change tactics and start listening to the Conservatives they claim to represent. I understand the motivation of those Members who have put their names to amendments (a) and (b), but I ask them to support the SNP today.
The SNP commissioned research to challenge the UK Government’s figures. A number of options are available to the Government, but we believe option two can give immediate relief to those women who are next to face delay in this Parliament. The Government must act now.
Several hon. Members rose—
Ian Blackford
With your forbearance, Mr Speaker, I am aware that I have been on my feet for quite some time and I want to move on to my concluding remarks. I have been generous in allowing others to come in, but I will not be taking any further interventions so that I can finish and allow others to speak.
Our report is a stepping stone. It should be adopted to help to end this injustice. We hope the UK Government welcome the report and act now to end this inequality. The SNP Westminster parliamentary group’s report detailed modelling by Landman Economics of the impact of different options for compensating women affected by the 2011 Act. One option was a return to the timetable in the 1995 Act, whereby women’s state pension age would rise from 63 in March 2016, to 65 in April 2020. The report estimates that reverting back to the 1995 Act for women would cost £7.9 billion between 2016-17 and 2020-21.
The Government estimate that the accelerated state pension age in the Pensions Act 2011 saved about £30 billion from both women and men from 2016-17 to 2025-26. However, that is simply not the case. The £8 billion cost is affordable given the surplus in the national insurance fund, which rightly should be used to end this injustice. The fund is in surplus and, according to the Government’s own Actuary’s Dept, is projected to be at a £30 billion surplus at the end of 2017-18. It is time the Government paid out. After all, the WASPI women paid in and helped to create this surplus. They now need to be given their due.
The Minister said that it is simply too expensive and that public spending is complicated. We will not be fobbed off. The report was carried out by a credible and sound model that has been used previously by independent economists. Again, the matter returns to priorities—too expensive by comparison with what other expenses? The Tories have a choice here: this is not a necessity.
While we are trying to get the Government to act, others elsewhere are doing just that. Measures were brought forward by the Polish Government on 16 November to reverse the increase in pensionable age from the previous planned state pensionable age of 67 to 60 for women and 65 for men as of October 2017. The Polish Prime Minister claimed that there were enough state funds from more efficient tax collection for earlier pensions. Well, well! Of course, the parallel here is that we know the national insurance fund is in surplus. We can afford to put in place mitigation. If Poland can do it, what about a rich country like the UK? It is all about choices.
We published in our report the scale of increase in pensionable age in each European country. Only two countries are seeing a rapid acceleration of pensionable age for women in line with the UK: Italy and Greece. Is anyone on the Government Benches prepared to defend the increase in women’s pensionable age of three months per month? We have given the Government an option and, unlike their Trident nuclear weapons commitment, it is costed. I say to the Government that we are not going away. More importantly, the WASPI women are not going away.
In conclusion, today is Scotland’s national day. With deference to Rabbie Burns, if he will forgive me, I would like to adapt one of his better known pieces of work:
“Women, wha hae wi’ WASPI bled,
Women, wham WASPI has af times led;
Welcome to your gory bed,
Or to victory!
Now’s the day, and now’s the hour;
See the front o’ battle lour;
See approach proud Theresa’s power—
Chains and slavery!
Wha will be a traitor knave?
Wha can fill a coward’s grave!
Wha sae base as be a slave?
Let her turn and flee!
Wha for Pensions rightly earned
Freedom’s sword will strongly draw,
WASPIs stand, or WASPIs fa’,
Let them follow me!
By oppression’s woes and pains!
By your daughters in servile chains!
We will drain our dearest veins,
But they shall be free!
Lay the proud usurpers low!
Tyrants fall in every foe!
Liberty’s in every blow!—
Let us do or die!”
Justice for the WASPI women!
The Tory Government have ducked their responsibility for the WASPI women for too long. It is time to face up to the reality. Pensions are not a privilege; they are a contract and the UK Government have broken it.
Several hon. Members rose—
Damian Green
It is obviously impossible to talk about individual cases without talking to the individuals. All I can say is that the DWP tried hard after the 2011 Act and wrote more than 5 million letters to people’s most recent addresses.
Damian Green
I feel that the hon. Gentleman has had his fair share of the time, having used more than 35 minutes of a three-hour debate, and I want to turn to the specific option that he proposed. He mentioned the Landman Economics report that modelled the impact of several options. The SNP’s preferred option would roll back the 2011 Act entirely, returning to the timetable in the 1995 Act. He said that that option would cost £8 billion, but I disagree. Our analysis suggests that the cost has to go beyond 2020-21 and must include the effects on national insurance payments and tax collection, which his economic model entirely ignores, and that it would cost over £30 billion.
Even if we accept the hon. Gentleman’s figures, his other suggestion is that the costs could be met from the surplus in the national insurance fund that he conveniently discovered. In fact, there is no surplus in the fund because it is all used to pay contributory benefits. If we take from the national insurance fund £8 billion, £30 billion or whatever number one cares to mention, we take it from people who receive benefits. The surplus of £16 billion that he identified is two months’ expenditure—an advisory level recommended by the Government Actuary as a prudent working balance. The money has been put there by a Treasury grant to maintain the fund at the recommended long-term balance. The Government Actuary does not forecast a long-term surplus, so this convenient pot of money for the SNP does not actually exist.
Ian Blackford
I am grateful. I actually talked about a cost of £8 billion for this Parliament, which is affordable given the current surplus in the national insurance fund. Please do not twist what I said.
Damian Green
I did not twist what the hon. Gentleman said at all. Is he prepared to take £8 billion from people who receive contributory benefits? That is the only way that he could pay for it.
Returning to the hon. Gentleman’s characterisation of the national insurance fund, he gave the impression that it involved an individual contract. As he knows perfectly well, the national insurance scheme operates on a pay-as-you-go basis, meaning that today’s contributors are paying for today’s social security entitlements and pensions. Those who previously paid contributions were paying for the pensioners of that time. In other words, contributors do not accumulate an individual pension fund. It is not like any individual’s pension fund of moneys paid, which is personal to them. Instead, payment of contributions allows them, or their spouses, to access a range of social security entitlements. It is not an individual contract or fund. I gently suggest that the hon. Gentleman knows that perfectly well.
Moving on to the issues that affect the WASPI women, I absolutely accept that getting into work will be difficult for some older women, so I want to say what we are doing to help them and also what we are doing for those who simply cannot work.
Mr Vara
I will not give way, because I want to leave other hon. Members as much time as possible in which to speak.
We must also mention other countries. Nine EU countries, including Germany, Denmark and the Netherlands, introduced equalisation as far back as 2009. I conclude by simply saying one thing: we have had many debates on this issue and the Government have repeatedly made their position clear, which is that they do not intend to revisit this issue. The issue was not in the Labour or the SNP manifesto, and by continuing to debate it, Labour and SNP Members are doing a disservice to the good women affected by giving them false hope. They should understand that doing so is opportunism pure and simple and political irresponsibility of the highest order. They should not give these good women false hope, and they should recognise that the Government will not give way.
Ian Blackford
On a point of order, Mr Deputy Speaker. We are being traduced by the hon. Gentleman. For clarification, this matter was in our manifesto, and perhaps the hon. Gentleman will correct what he has said.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I think we all know that that is not a point of order, but, not to worry, it has been put on the record.
Alex Cunningham
No, I will not.
Assuming that the SNP Scottish Government do have the powers to help the WASPI women, Scottish Ministers should overcome their shyness, make a real decision and agree to step in and aid the 250,000 women in Scotland. Not to do so will be seen as a missed opportunity.
Alex Cunningham
The hon. Gentleman, who opened this debate, spoke for 35 minutes; I have 10 minutes.
If the Scottish National party in government in Scotland did that, it would further highlight the injustice faced by other WASPI women across the rest of the UK who would still get nothing. That is why we must have a UK-wide solution to the problem. We do not want one that sees British women in different parts of the United Kingdom treated differently on social security because of where they live.
We have said that the proposals are not fair, have not been implemented properly and are damaging the most vulnerable, but the Government have made it clear that they do not care about the plight of women up and down this country. Those women are frightened of these proposals because they do not know how they will cope. The Secretary of State spoke about the older people’s champion. We could have a champion in each and every department across the country, providing a special helpline for the women affected.
Under our proposals, we are calling on the Government to extend pension credit to those who would have been eligible under the 1995 timetable, so that women affected by the chaotic mismanagement of equalisation will be offered some support until they retire. That will make hundreds of thousands of WASPI women eligible for up to £156 a week. We will not stop there. We are developing further proposals to support as many of the WASPI women as possible. Importantly, they will be financially credible and will be based on sound evidence and supported by the WASPI women themselves.
It is disappointing that the SNP chooses to cost only the option in the Landman report—the one mentioned in the motion—to the end of this Parliament. This accounting trick has led it to promise the WASPI women that it has a long-term solution, but that is not the case. The measure will cost £8 billion until 2020, but more than £30 billion if it is to help affected women up to 2026. Sadly, this has confused the debate, when clarity was needed. As I have mentioned, if the SNP actually wanted to support the WASPI women rather than play games, it would have acted already in Scotland.
The Government could have done something in the autumn statement to support these women and then used the Pension Schemes Bill currently in the other place to put the changes into law. They still have time to do so in the new year.
I have had numerous emails, phone calls and meetings with women all over the country who are begging and pleading for Parliament to act. They are at their wits end. If they are not already suffering the full impact of the changes, they are dreading them, as they know this Government will require them to survive on very little—including those who are single or incapable of working.
My party believes in standing up for the most vulnerable, and that is what we are doing today. We will to do that tomorrow, and we will continue to support the WASPI women in this fight. For that reason, we will support the SNP motion today, but we hope to have the real cost of its proposed solution up to 2026 properly acknowledged. Only Labour is taking a detailed look at the evidence and trying to find the best way forward to help dig both the Scottish and UK Governments out of the hole they are now in. Let us make it clear once again: it is not a Scottish, English, Irish or Welsh solution that we need, but a UK-wide solution, and this Government must act.
Richard Harrington
I am sorry, but, for the moment, there is not time to take interventions.
Governments have to take hard decisions. The can that was kicked down the road for many years by the Labour party had to be dealt with by the coalition Government. I would just like to refer to some of the fallacies mentioned by Opposition Members. The hon. Member for Ross, Skye and Lochaber, in moving the motion, talked about the 1995 Act as if there was absolutely no communication from the Government—as if the DWP and everybody else suddenly forgot to talk about it. Well, that is not true. There were leaflets produced. There was an extensive advertising campaign. There were articles in women’s papers. In addition, millions of people, who decided they were going to sort out their pension, applied, quite properly, to the DWP; in fact, more than 14 million people applied and received full details of what their pensions were. I mention that because it would appear that there was absolutely no communication whatever. After the 2011 Act, that was a direct mail campaign, where individual letters—
Richard Harrington
I will not give way. I have a very short time left.
There was actually very good communication. However, I would like to mention the various contributions we have had. My hon. Friend the Member for Mid Bedfordshire (Nadine Dorries), who was among many speakers from the Government side, said that women, including herself, were not informed following the 2011 Act. In fact, as I have just shown, millions of letters were sent between January 2012 and November 2013. She said it is difficult for women over the age of 60 to find employment, and she said nobody would employ her. Actually, more than 4 million women in her age group are in employment—more than ever.
From the Opposition, we have had the argument, which I have had to deal with on many occasions, about the state pension being a contract. It is not a view but a question of fact that the state pension is a benefit, not a contract. As my hon. Friend the Member for North West Cambridgeshire (Mr Vara) said, promises are cheap. The Government have to actually deal with facts.
I have much sympathy for Members who spoke of constituents who are finding it difficult to access the benefits system. [Interruption.] Someone has shouted from a sedentary position, “What are you going to do about it?” As hon. Members will be aware, and as the Secretary of State mentioned, we have a system of helping through the benefits system people who may need looking at. We have older claimants’ champions, and we are getting more of them. We will find a way to help people to find their way into the benefits system. For any constituents who are finding this difficult, if the Department can have their name, address and national insurance number—I have asked for this on many occasions—I will be very happy to personally see what the position is and get them the help they need to get through the benefits system. We hear a lot of talk from hon. Members about their constituents, but the actual factual details I get are few and far between.
Let me move on to the famous economic report from the Scots Nats. I commend my hon. Friend the Member for Gloucester (Richard Graham), who described it as irresponsible and inaccurate. I really could not have put it better myself, because it is, as my hon. Friend the Member for North West Cambridgeshire said, raising false hopes by saying to our constituents that this is a small problem that can quite easily be dealt with. I remind hon. Members that even the SNP costs this at £8 billion, and the Department, as I have written to the hon. Member for Ross, Skye and Lochaber, has assessed it at nearer £30 billion. We have looked at every alternative. We have looked at more than 25 options that have been mentioned to us about the WASPIs, and there simply is not a viable option, either because of cost, complexity or practicality.
The luxury of opposition is promising everybody money without having to consider how to pay for it. I view this as very irresponsible.
Ian Blackford
I must tell the House that the figures in this report, which has been produced by Landman Economics, are based on the Institute for Public Policy Research model, which has been tried and tested. It really ill behoves the House to traduce the economists who have produced these figures based on a Treasury model. When we had the debate two weeks ago, the Minister said that the cost was £14 billion. How come we have gone from £14 billion to £30 billion? It is the Government’s figures that do not make any sense.
Richard Harrington
I apologise to the hon. Gentleman—I could not hear the end of what he said because of the noise. I am not disputing that this was produced by proper economists—I accept that fact—but it is about what timescale they look at, in this case going to 2021, and how they brief. But okay, fair enough: even by the SNP’s calculations the figure is £7.9 billion, which should apparently come from millionaires or from Trident. Government is not like that; these are completely separate issues. This country has a proud record on state pensions. This Government, and the predecessor coalition before it, did not have the luxury, partly because of the economic mess Labour left us in, of kicking the can down the road and ignoring these very, very serious issues.
The benefits system is available to people, and if they are not having the access to it they should, we will help them. I give an undertaking to look at every way that the benefits system can be used to help people who are in difficulty. Contrary to what some hon. Members have said, my door is open to people so I can speak to them. I hope I have shown that. I took this job to help pensioners, not to not help pensioners. It has been irresponsible to imply—
Autumn Statement Distributional Analysis, Universal Credit and ESA
Ian Blackford Excerpts(7 years, 6 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
The UK Government must commit to protecting disadvantaged people from the impact of future budget cuts in their autumn statement. Post-Brexit, it is essential, that with the risks to economy and with inflation rising and set to rise further, the Government act now.
Analysis by the IFS is the latest sign that the UK leaving the EU is having a negative impact on the UK economy even before article 50 is triggered. The IFS said that “virtually all” forecasters revised down their predications for growth and revised up their expectations for inflation in the years ahead. The collapse in the value of the pound, combined with potential rises in inflation, will hit the poorest and the most disadvantaged in society hardest. It will mean more of their income will have to be spent on day-to-day costs and living standards will push people into poverty.
James Cartlidge
If the hon. Gentleman is so concerned about the disadvantaged, will he explain why it has been reported that the Scottish Government will defer, until April 2020, taking powers from the UK Government to administer the welfare system?
Ian Blackford
I expected this issue to be raised, given press speculation. Let me tell the hon. Gentleman the facts of the matter: with the powers coming to us, we will control 15% of welfare spending in Scotland. We have to put in place the mechanisms for us to deliver fairness with the revenues we have at our disposal. We certainly would not punish the poorest in our society in the way that this Government have, and we certainly would not be punishing the Women Against State Pension Inequality Campaign women, who are not getting their just rights when they have had only a year’s notice. What I would be saying to this Government is, “Give us the powers over welfare so that we can protect the people in Scotland.” When we have put in place the mechanisms to allow us to look after people, we will certainly be doing a better job than the Government are doing today.
Hannah Bardell (Livingston) (SNP)
Does my hon. Friend agree that the point about powers is that, unlike this Tory Government, we are able to help and support people properly? We should not have to fill the black hole they have created in our budget. When we get those powers and have that agency, they will be set up properly. We will protect the people in Scotland properly.
Ian Blackford
My hon. Friend makes a very valuable point, because this is about powers and responsibilities. For us to protect people in Scotland in the way that we want to, we need powers. We were promised—since this has been raised—devo to the max. We were promised home rule for Scotland. How on earth can we have home rule for Scotland when we control 30% of our revenues and 15% of social security? I am afraid that the UK Government’s failure to protect the disabled and pensioners demonstrates that if we want to do what is necessary in Scotland, we will ultimately have to have the independent powers to do so. I am sure we will get to that point.
Let me return to what I want to address. [Interruption.] I am only responding to the Conservatives’ uninformed distractions, with which we are all too familiar.
The IFS stated:
“Normally, working-age benefit recipients would also be at least partly protected as benefits usually rise in line with prices, but, as we have discussed before, their benefits have been largely frozen in cash terms, meaning that their income from this source is fully exposed to future inflation. Those in work will, unless they are able to negotiate a bigger pay rise, find that their earnings will stretch less far than they otherwise would have done.”
Why should the most disadvantaged pay the price for Brexit and its consequences? That is what the Conservative Back Benchers should be addressing today rather than making an undisguised attack on the Scottish Government. What we need to address this afternoon is why working people will suffer from rising inflation. The weakest in our society deserve to be protected and their benefits ought to be inflation-proofed. Why are the UK Government not doing that? Why are they not seeking to protect the vulnerable in our society?
Hannah Bardell
Does my hon. Friend agree that while the tax gap in the UK sits at £36 billion, this Government should be focusing on closing that gap, and not marginalising and targeting some of the most vulnerable people in our society?
Ian Blackford
I fundamentally agree. There is a £36 billion tax gap, so let us fix that hole. I listened to the Minister talk earlier about the challenges the Government face in fixing the deficit. What they fail to recognise is the interaction between fiscal and monetary policy. It is the richest who have benefited most from quantitative easing. We should have had a fiscal stimulus package. That would have driven investment and productivity into the economy, and got more people back into work. That is what we should be doing.
Jeremy Quin
This is not the first time I have heard the hon. Gentleman refer to the great fiscal reflation he is planning. I welcome the fact that in the same speech he is also talking about the problems with inflation, but is that not a contradiction in terms?
Ian Blackford
It most certainly is not. The reason for the rise in inflation—to something between 2% and 3% next year, according to commentators—is, quite simply, that the pound has crashed, and the reason the pound has crashed is that investors do not have confidence in the UK economy, and who caused that? It is a direct consequence of Brexit, through the referendum, which was the misjudgment of the previous Prime Minister.
James Cleverly (Braintree) (Con)
Does the hon. Gentleman not see an inconsistency in his argument, given that only a few years ago, his party was campaigning to leave the United Kingdom and, by virtue of doing so, the EU?
Ian Blackford
The hon. Gentleman has made a gross misjudgment. When we were campaigning for independence for Scotland, it was about securing Scotland’s future as a European nation. Those in the Better Together campaign continually told the people of Scotland that our European future would be secured only by staying with the UK. Well how has that worked out? I am glad that the Scottish Parliament has given a mandate to the Government of Scotland to make sure we protect Scotland’s position as a European nation and remain within the single market, and, through that, to ensure we protect the prosperity and jobs of the people of our country.
Let me come back, if I may, to the subject we are supposed to be discussing.
Alison McGovern (Wirral South) (Lab)
While half of me is loth to continue this debate, I want us to be clear. We have here an economic crisis brought about by political instability caused by the rupturing of unions between countries. So for the hon. Gentleman to argue that Scottish independence would not have had similar disastrous effects for the Scottish economy is, frankly, disingenuous.
Mr Deputy Speaker (Mr Lindsay Hoyle)
I remind Members to be cautious with the language they use. Also, I do not want this to degenerate into a debate about independence, and I know that the hon. Member for Ross, Skye and Lochaber (Ian Blackford) wants to get back to his brief and not to be tempted by those who want to go out fishing today. To those Members intervening, I say this: when your speaking time is reduced to four minutes, do not blame me.
Ian Blackford
I will take your guidance, Mr Deputy Speaker. I only say to the hon. Member for Wirral South (Alison McGovern) that she has demonstrated once again that Better Together is still alive and well—and how did that work out for the Labour party in Scotland?
I will return to the issue we are dealing with. We have inflation created by Brexit and a falling the pound, and the result of this failure will be a fall in living standards for many of our poorest—falling living standards brought to you by this Government. On top of the benefit cuts next year, the Prime Minister is sleepwalking into a perfect storm for low-income families, rather than living up to her promise of delivering for just-managing families. The UK Government must use the autumn statement to end their austerity obsession and instead bring forward an inclusive programme that will truly support low-income families and their children.
The UK Government’s U-turn on tax credits last year was simply a delaying tactic that kicked cuts to universal credit further down the line. The Government should take the opportunity to reverse the cuts to universal credit work allowance in their autumn statement. The original intention of universal credit was to increase work incentives and make sure that, as the Government put it, work paid. On top of damning economic forecasts, however, which will push up the cost of living, the work allowance cut will simply push more working people into poverty. It has slashed the income of working universal credit claimants. The IFS has calculated that in the long term more than 3 million working families will lose an average of more than £1,000 a year as a result of the work allowance cut.
Ian Blackford
As my hon. Friend says, it is shameful. The Child Poverty Action Group estimates that the resulting cut in income will mean that many low-income parents cannot protect the income levels they had before April 2016.
House of Commons Library analysis from February 2016 calculates that lone parents without housing costs will experience the largest reduction in their work allowance, from £8,800 in 2015-16 to £4,764 in 2016-17—a loss of over £4,000. Is that what the Government want to defend? A person or couple without housing costs who claim universal credit where one or both are disabled will see their allowance reduced from £7,764 in 2015-16 to £4,764—a loss of £3,000. The U-turn on tax credits in the short term saved families and working people from having their benefits cut, but in the long term the work allowance cut will have a similar impact.
The House of Commons Library analysis also states that the work allowance reductions announced in the summer Budget
“will ultimately have a similar impact to the changes to tax credits which are not now going ahead, though the impact of changes to UC work allowances will not be fully felt until the roll out of Universal Credit is complete.”
By cutting the work allowance, the Government will impose an eye-watering level of marginal taxation on people in low-paid jobs and make it harder than ever for those in low-income households to break out of the poverty trap.
That point is well understood by many, including the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith), the previous Secretary of State for Work and Pensions, who said:
“At present, the 2016 Budget’s plan to reduce Universal Credit work allowances will not be the most effective way of controlling welfare expenditure and, moreover, it goes against the key principles. The planned reduction will affect more than three million people, reducing their income by an average of over £1,000 per year. This will reduce people’s incentive to move into work. Moreover, in November 2015 the previous Chancellor decided to reverse the reduction in working tax credits, increasing the pressure on Universal Credit as it created an artificial disincentive to move to Universal Credit from Tax Credits.”
I do not say this too often, but I fully agree with him. I would even say that, for the Government, the game is up when even the architect of much of the landscape on this issue can see the fatal flaws in what they are doing. When will they start to listen and begin to act?
We are having this debate today, and welcome though it is, it is important that we achieve a cross-party consensus on the substantive motion we are debating tomorrow, on the cuts to employment and support allowance. The House will have an opportunity to send a very clear signal to the Chancellor ahead of the autumn statement next week. It is a scandal that proposed cuts to ESA WRAG are still going ahead. The Chancellor must halt these planned cuts until the UK Government can deliver the long-awaited support promised for disabled people in and out of work. Almost 500,000 disabled people in the UK rely on ESA WRAG. This £30 cut will make the cost of living more expensive for many people—even more so in the context of the devalued pound and a possible inflation increase.
The UK Government said that these changes were introduced to
“remove the financial incentives that could otherwise discourage claimants from taking steps back to work”.
But Mencap’s review of this policy found
“no relevant evidence setting out a convincing case that the ESA WRAG payment acts as a financial disincentive to claimants work, or that reducing the payment would incentivise people to seek work”.
It is a positive step that the new Secretary of State has announced the Green Paper on support for disabled people in and out of work, and we look forward to assessing the detail of the Department’s proposals in due course. However, until the detail in the Green Paper comes to fruition, storming ahead with these cuts is simply putting the cart before the horse. The autumn statement is a key opportunity for the new Cabinet to prove it is true to its rhetoric about delivering for just-managing families. That can be achieved only by abandoning austerity by reversing these cuts and delivering an inclusive Budget fit for the post-referendum economic turmoil.
A failure to act will drive more people into poverty and the use of food banks. Recent data show that the Tories’ austerity agenda continues to push people into poverty across the UK. A survey for the End Child Poverty coalition suggested that 3.5 million children were living in poverty in the UK, with 220,000 of them in Scotland. A separate study by the Trussell Trust found that in the first half of this year there was an increase in food bank usage that included 500,000 three-day emergency food supplies distributed across the UK, of which 188,500 were for children.
A recent Resolution Foundation report has highlighted the need for the urgent delivery of support for families who are just managing. It also noted:
“Average incomes in the low to middle income group were no higher in 2014-15 than in 2004-05, reflecting not just the turmoil of the post-crisis period but also a sharp pre-crisis slowdown in income growth.”
It also points out that the projections for unemployment have been revised up since the March Budget following the referendum in June, and real pay growth is now projected to be lower than previously thought.
In conclusion, with this autumn statement, the Chancellor has the ability to re-prioritise the spending agenda to reflect the very real danger of economic turmoil resulting from the June referendum and ongoing negotiations with the EU. The Chancellor must use the autumn statement to propose measures that reverse benefit cuts and mitigate the impact of economic uncertainty on disadvantaged people.
Several hon. Members rose—
James Cartlidge (South Suffolk) (Con)
I applaud the hon. Member for Edinburgh East (Tommy Sheppard) for his great passion. He speaks very eloquently. I could not resist intervening on him about the currency because I think that the key economic challenge for the country involves rebalancing. Every aspect of what we are debating today is affected by the sustainability of our growth.
I want to focus on two key points. The first is why I support the move to a universal credit system in principle, based on my experience of running a small business. The second is that, when we talk about distributional analysis, we need an analysis of the intergenerational impacts of any changes. We have to start talking about all benefits in the system, not just those that are paid out to those of working age.
Last year, we had a number of debates about tax credits at the time when the changes were meant to be coming through. I spoke about this several times, and I said then—I say it again now—that tax credits were one of the greatest mistakes in the history of the welfare state, bringing in a £30 billion means-tested in-work benefit for healthy working people to make them completely dependent and to nationalise the income of the country for political purposes. I say that not out of ideology but out of experience.
My experience of running a small business taught me about the problems of the people who are trapped on the rough edges of the welfare state. I had a member of staff who told me that she did not want a pay rise because she would lose too much in tax credits. More commonly, people working 16 or 24 hours a week told me that they did not want to work any more hours. I heard that many times, and other business owners have told me exactly the same thing. People should be encouraged to make the most of the talents they were born with, and we should not have a system that stymies that aim or disincentivises people from making the most of their talents.
What I particularly welcome about universal credit is the fact that it smooths out the rough edges by being more generous in terms of childcare and support. I am sure we all agree that we want people who are unemployed to move off benefits and into work, but we never talk about people who are on in-work benefits needing to work harder to get off those benefits. To me, however, it should be the goal of our economic system to reduce dependency and help people to maximise their income from real employment. The other part of the system that I welcome is the extra support that it will give, not just to get people into work but to get people who work part time to work more hours. That is very much to be commended.
It is quite extraordinary that, for the first time ever, pensioners are now better off than the working-age population, once housing costs have been taken into account. This is something that we need to talk about, because 68% of benefits are paid out to pensioners. The point about housing costs is incredibly important.
Ian Blackford
Does the hon. Gentleman not recognise that a pension is not a benefit? People who have paid national insurance have an entitlement to a state pension, which they have paid for.
James Cartlidge
That is a very fair point. Our voters say, “Well, I’ve paid in so I should get it,” but that is not the case for the winter fuel allowance—as the hon. Gentleman knows, millionaires get that along with everybody else—the free TV licence or the Christmas bonus. Although the state pension is based on paying in, it is a pay-as-you-go system. The fact is that the current young working generation are paying in but they might not receive the triple lock. Also, we know for certain that many of them will still be paying their housing costs when they retire. We know that 94% of home-owning pensioners own their property outright. They have no housing costs. The young working generation are probably paying for the defined benefit pensions of those who are fortunate to receive them, and for the state pension of those who have the triple lock. They are also paying for those who possibly do not even have housing costs, yet they themselves will have housing costs perhaps well into their retirement. We are reaching a critical point here.
Ian Blackford
I am conscious that we should not be diverted from the topic, but the key point here is that the national insurance fund is currently running at a surplus that, according to the Government’s own figures, is due to increase. It is not the case that pensioners are taking their income from others. They have paid their national insurance contributions, which fund the amount that is paid out to pensioners.
James Cartlidge
It is a pay-as-you-go system, but the key to this is the triple lock. The hon. Gentleman is welcome to read the report on intergenerational payments produced by the Work and Pensions Committee. It has my name on it, although I have to say that I approved it having been on the Committee for only 15 minutes. I did not contribute to it, but I welcome all of it. It makes the point that we have a pay-as-you-go system and that the younger people currently paying in might not benefit from the present generosity, particularly in relation to the triple lock, which is unaffordable and unsustainable.
This is primarily a political question. During the leadership hustings, I asked the final two contestants the same question. I said, “Given the situation of many young people, is it morally defensible to continue to protect pensioner benefits?” The answer that both contestants gave me—quite rightly, given that we are a democracy and that we have elections—was that our manifesto had pledged to protect those benefits. However, as the shadow Chancellor has said—I am certainly not trying to pray him in aid—we also pledged to wipe out the deficit. That pledge is now coming home to roost. We are protecting so many budgets and forcing so many disproportionate cuts on others because of this huge cost which we will not touch, and I think we have to talk about it. This has to be done in a cross-party way. We all know the political reality of this situation. I am not naive, and I know the political price that can be paid if these things are not done correctly, but from canvassing in my constituency, I know that the older voters understand this point. They are as concerned about it as anybody else. We have to start talking about how the whole benefits system—not just the one for working-age people—can be reformed.
I very much welcome the speech made by my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), and I welcome what has happened with universal credit. It will smooth out some of the perverse incentives created by the tax credit system, and it will encourage people to make the most of their talents and reduce their benefit dependency. Just as we had radical reform on in-work benefits, we must now start to think about what will happen to those who are retired and who will live longer and longer, so that we can all live in a happy, one nation situation in which all the generations get a fair deal.
Justin Tomlinson (North Swindon) (Con)
It is a pleasure to contribute to the debate. Given the upcoming autumn statement and the incredibly important Green Paper, it represents a welcome opportunity for us to shape some of the decisions that will be taken. It is disappointing, however, that only two speakers so far—my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith) and my hon. Friend the Member for South Suffolk (James Cartlidge)—have actually made suggestions about where funding could come from should any changes be made.
I want to look first at the context of the debate. This Government have introduced the national living wage, benefiting 2.75 million of this country’s lowest earners, and we have committed to reach at least £9 an hour by 2020—a whole pound higher than what was in the Labour party manifesto at the election. The increase in the personal tax allowance, taking it from £6,495 to £11,000 with a commitment to reach £12,500 and then index-link it going forward, has lifted the lowest 3.2 million earners out of income tax altogether. Despite the doom and gloom of some speeches, we are delivering the strongest economic growth of any developed country, leading to record employment—461,000 more people are in work today than at this time last year. With my old Minister for disabled people’s hat on, I welcome the news that a further 590,000 disabled people are in work compared with three years ago—a 4% increase. There is still much more to be done, but we are making a genuine difference to some of those who are most desperate to be given an opportunity to work.
Wages are also increasing at 2.3% against inflation of 0.9%. I gently remind the SNP speakers, in particular the hon. Member for Ross, Skye and Lochaber (Ian Blackford), that inflation fell this week. I do not know whether that news escaped them.
Justin Tomlinson
The hon. Gentleman has had plenty of opportunities to contribute to this debate and other Members still want to speak.
We are also significantly extending childcare with a doubling of free childcare coming in.
Specifically on universal credit, the key difference is that it provides additional much-needed support. We know how important it is. Only 1% of ESA claimants came off the benefit every month despite the vast majority wanting the opportunity to work. There will be additional childcare, which will be beneficial for lone parents in particular, the provision and identification of training opportunities and specific job search help. Most importantly for me, in-work support will be offered for the first time. Many people coming off that benefit will go into low-paid jobs. They will often then stay at that low level and not benefit from a growing economy. In-work support will be provided. Someone may be told, “Look, you have been going for three months. You have turned up and been a diligent worker. Perhaps it is now time to push for greater responsibility and greater earning opportunities.” That is something that is very much welcomed by people I talk to.
My hon. Friend the Member for South Suffolk highlighted the 16-hour cliff edge. He pointed out that his staff did not want to work extra hours. That is not quite the case. They were desperate to work additional hours, but they were just unable to work them, and that was blocking opportunity for them.
On ESA, I wish to take a moment to pay tribute to the staff in the jobcentres, the Work programme providers, including Shaw Trust, plus many other organisations and charities that support those activities. They do a huge amount of work that often goes unseen. They are often not thanked, but I know that they have made a real difference to many people and we are seeing that in the jobs figures.
As my right hon. Friend the Member for Chingford and Woodford Green said, there has to be an emphasis on what people can do, rather than on what they cannot do. That is highlighted right the way through the very welcome Green Paper. I am proud to have made a small contribution to bringing that forward. It is very welcome that organisations such as Scope, Leonard Cheshire, the Royal National Institute Of Blind People, the National Autistic Society and hundreds of others are using their expertise and first-hand experience to help shape policy. I will continue to raise the importance of making them a priority in policy development and in delivering in the future.
We have already seen with the additional £60 million rising to £100 million that we will have more of a personalised and tailored approach. There will be quicker assessments, which is particularly important because 50% of people on ESA also have a mental health condition, and it is vital that we get support to them as quickly as possible. There will be a place on the new Work and Health programme, work choice for those who choose to volunteer, and additional places on the Specialist Employability Support programmes.
If anyone visits a jobcentre, they will understand how desperate people are to have those extra places. It is a bit like getting tickets for a very popular concert—first thing, once a month, it is about getting on the phone to try to grab those one or two available places. Job clubs will provide support, which will be delivered by peers, particularly those who have disabilities, who will give their first-hand experience and support. For many people, trying to return to the work environment is a very, very scary prospect.
There will be the new community partners and increased access to work for young people. There are also future opportunities, particularly through the Disability Confident campaign, which is very proactive in identifying to employers the huge wealth of talent that is out there if people will make a small change. I am particularly excited by the encouraging early results from the Small Employer Offer, which, in effect, doorsteps local employers saying that there is a wealth of talent out there. It asks what their skills gaps are and whether they can find the people to match them. Some really impressive results have been achieved.
We have seen increased funding for Access to Work. At the moment, it assists about 38,000 people. There will be funding in place for an additional 25,000 people. People who do not understand the scheme may say that it only helps 38,000. They ignore, or simply do not understand, how often we need to help people on only one occasion to then be able to get them into work. It could be by purchasing equipment, or by providing additional training. That person could then end up having a long-term sustainable career.
The other area is to make sure that the Fit for Work service supports people earlier than the four weeks, because, often, it is simple early advice, particularly to small employers, that will help keep people in work. It is far easier to keep people in work than to try to get them back in. Finally, we need to make sure that the charities are central to the delivery, because they have so much proactive experience. Their policy teams are constructive. When I was a Minister, it was a real pleasure to work with those organisations. Through the Green Paper, they can help to make a real difference.
State Pension Age: Women
Ian Blackford Excerpts(7 years, 6 months ago)
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Ian Blackford (Ross, Skye and Lochaber) (SNP)
I beg to move,
That this House has considered acceleration of the state pension age for women born in the 1950s.
It is a pleasure to serve under your chairmanship, Mr Nuttall, and to appear in front of the Minister. I look forward to a positive response from him to all the remarks made today.
A woman born on 6 March 1953 retired on 6 March 2016, aged 63. A woman born a month later, on 6 April 1953, retired on 6 July, aged 63 and three months. A woman born on 6 May 1953 retired a few days ago, on 6 November, aged 63 and six months. A woman born on 6 June 1953 has to wait until 6 March 2017, when she will be aged 63 and nine months. A woman born on 6 July 1953 will not receive her pension until her 64th birthday, in July 2017. We are beginning to get the picture. For each month that passes, women’s pensionable age increases by three months. Let us just dwell on that—a three-month addition to someone’s pensionable age for each month that they were born later than their neighbour, friend or colleague.
I spoke of a woman born in March 1953, who retired this year aged 63. A woman born a year later, in March 1954, will not retire until September 2019, when she will be aged 65 and a half. She will be two and a half years older than a woman born a year earlier before she receives her state pension. A woman born six months later, in September 1954, will have to wait until she is 66, in September 2020. Over an 18-month period, women’s pensionable age will have increased by a whopping three years. As we keep saying, we are not against equalisation of the state pension age. The issue is the pace of change, as well as the lack of appropriate notice.
Ms Margaret Ritchie (South Down) (SDLP)
I congratulate the hon. Gentleman on securing the debate and on making these compelling historical points about women. For that reason, and because of the documented evidence that he has submitted here today, does he agree that there is a compelling need—and an imperative on the Government—to bring about transitional protection and transitional payments for these women?
Ian Blackford
I am grateful to the hon. Lady for that intervention. She makes a telling point. The significance of having the debate today, for which I am grateful, is that next week we will have the autumn statement. That is the opportunity for the Government to respond to the injustices that women are facing and to do the right thing. We often hear about people who have been left behind. The Women Against State Pension Inequality have been left behind, and the Government must act.
Mr Jim Cunningham (Coventry South) (Lab)
I thank the hon. Gentleman for securing the debate. He has certainly done women a great service, because he has been working on this issue for a long time. The other dimension to the issue, which we see when we do an analysis of it, is that it affects women in different ways. There are different poverty levels involved, so things such as bus passes may not be accessible to them.
Ian Blackford
Absolutely. The hon. Gentleman makes a valid point. I will come later to the proposals that my party has made. We have been able to test the number of women who would be taken out of poverty as a consequence, and it is a very important point.
We should remind ourselves what a pension is. It is deferred income. Women and men have paid national insurance in the expectation of receiving a state pension. That is the deal, plain and simple: people pay in, and they get their entitlement. They do not expect the Government, without effective notice, to change the rules. What has been done to the WASPI women has undermined fairness and equity in this country.
Christina Rees (Neath) (Lab/Co-op)
The hon. Gentleman is certainly painting a picture. Does he agree that the impact of the changes to the state pension age cannot be seen in isolation from the impact of historical gender inequality?
Ian Blackford
Absolutely. The hon Lady makes a valid point, because women have faced inequality in pension entitlement, whether in the state pension or occupational pension schemes. In the past, they were even denied access to occupational pension schemes, and we are still battling for equal pay for women. It is simply not right that in addition to all the injustices that women have faced, they now face the injustice of having to wait much longer than they expected for their pension.
Peter Aldous (Waveney) (Con)
I congratulate the hon. Gentleman on securing the debate. He is making a compelling case and outlining the lottery of the current arrangements. The WASPI petition was signed by 2,249 of my constituents and I also received many letters. Does he agree that additional transitional arrangements are needed to support a group of women who in the past have often been working mothers and are now carers for elderly parents and sick husbands, and who have often had low-paid manual jobs and just have not been able to build up private pensions?
Ian Blackford
Absolutely. The hon. Gentleman makes a valid point and demonstrates, rightly, why hon. Members across the House need to unite. This is not about one party—let me make that absolutely clear.
Ian Blackford
I will in a second. This is about all of us recognising that, as a House, we have a responsibility to do the right thing. It is about giving encouragement to the Government, just as happened last year with tax credits when we realised that we were going to be punishing hard-working families, to do the right thing by the women affected by this issue. That is what the Government have to listen to and respond to in the autumn statement.
Dame Caroline Spelman
Further to the point made by my hon. Friend the Member for Waveney (Peter Aldous), the fact that this issue kicks in at the latter stages of a woman’s career, when her caring responsibilities can increase significantly because of elderly parents and her own health may start to deteriorate, means that the level of uncertainty and anxiety is greatly increased. Suddenly, the prepared-for pension does not materialise, and women with caring responsibilities are left in limbo.
Ian Blackford
The right hon. Lady makes a valid point, and I will come later to the notice period because the issues are both the lack of time that women have had to prepare for the changes and the caring responsibilities that many women in particular have. She is right to raise that point. I will take one more intervention and then move on.
Ian Austin
This is a very important point. I have lost count of the number of women in Dudley who have told me that they have not had time to make plans for the new arrangements. They have had to take time off to bring up their children, or reduce their hours or retire early to care for ageing parents or grandchildren. Other women have told me that they have lost their husbands and have not just had to come to terms with the bereavement, but have been thrown into financial turmoil as a result.
There is an additional unfairness in former industrial areas such as the black country, where women typically left school at 15 or 16, started work and did hard work all their lives. That is very different from someone graduating in their early twenties and doing an office job. Women in the black country have done their bit, and that is why the Government should be coming up with proper transitional arrangements so that they can plan properly for their retirement now.
Ian Blackford
I agree with that point. Many of the 2.6 million women affected have made more than 35 years’ worth of national insurance contributions. They have paid their way. They have paid their dues. This is about us accepting our responsibility. As I mentioned, 2.6 million women are affected by the increase in pensionable age and have an entitlement to a pension that they should have had. They need to be treated fairly—no more, no less.
The Government often state that the increase in pensionable age under the Pensions Act 2011 means that no woman will have to wait more than 18 months for their pension. That is disingenuous, as it came as an addition to the changes in the Pensions Act 1995, which are still being implemented. It is a fact that women’s pensionable age is increasing by six years over a very short period. That is the issue and the reality. It is about the combined impact of the 1995 Act and the 2011 Act. The Government have a duty to be truthful about the matter.
Several hon. Members rose—
Ian Blackford
I am conscious that many Members want to speak and I do want to take interventions, but I will press on, if I may, and take interventions later.
The issue is not only the sharp acceleration of pensionable age, but that many women were unaware of the increase in pensionable age. As the Select Committee on Work and Pensions reported in March this year,
“more could…have been done”
to communicate the changes, especially between 1995 and 2009. Women have been let down not only by the rapidly increasing pensionable age, but by a failure of communication. We face the rapid acceleration of pensionable age and also the nightmare scenario for many women that they were not aware that it was coming. They have had little notice and no time to prepare for an increase in pensionable age. They have not been able to adjust accordingly, and in many cases we are talking about women and families who are struggling.
The Prime Minister talks about those who have been left behind and the duty the Government have to deal with it; the WASPI women have been left behind and it is now our responsibility to deal with it. We cannot just shrug our shoulders and blame past Governments for the failure to give women notice. We have a collective responsibility to deal with this issue and we have to show leadership. We cannot take the line that the last Parliament made a decision and there is nothing we can do; that is an abrogation of responsibility by all of us.
When the Government came forward with proposed changes to working tax credits that would have damaged millions of families in the UK, after much opposition, the Government ultimately relented and removed the proposals. We need to campaign in Parliament and throughout the United Kingdom to achieve the same objective here. We are not going away. The Government have to recognise that women should not be punished in the way that they are being by this increase of three months for every month’s difference in their age.
The Government have asked what we would do. That is why, in September, we in the Scottish National party published our own report looking at various options. We suggested a return to the timeline of the 1995 Act, which would slow down the increase to a pensionable age of 65 by 18 months, and defer the increase to a pensionable age for women of 66 years into the next decade. The cost of deferring over an additional 18-month period would be £7.9 billion. The Government estimated that the acceleration of state pensionable age in the 2011 Act for both women and men saved around £30 billion from 2016-17 to 2025-26, but that is simply not the case. That was scaremongering from the Government and, not for the first time, they got their numbers wrong. Depending on the timescale for the increase to age 66, there will be additional costs in the next decade.
I am grateful that, through the Backbench Business Committee, we have secured this debate, which is supported on an all-party basis, with a number of Conservative Members supporting the motion that was originally put forward. Of course, that happened on the back of many of us here today and in Parliament putting petitions down on behalf of the WASPI women. The WASPI women are going to be knocking on Members’ doors this week, next week and until we do the right thing.
We are often told that this is about the money. “We can’t afford it,” they say. This is not about women getting something they are not entitled to; it is about entitlement based on national insurance payments and about the Government meeting their obligations out of the national insurance fund—yes, for those who were not aware, inside Her Majesty’s Revenue and Customs there is a national insurance fund. I am grateful to the Government, or more specifically the Government Actuary’s Department, for stating that there is a projected fund surplus of £26.3 billion at the end of 2016-17, rising to £30.7 billion in 2017-18. The argument that the Government cannot do this is therefore bunkum. The money is there. These women have paid into the fund and we should meet our obligations. Women have paid their dues, the fund is in surplus and the Government can make restitution.
Next week we will have the autumn statement. If the Minister chooses, he could tell the Chancellor of the Exchequer about the strength of feeling on this issue. Next week the Chancellor could, if he is minded, deliver some good news for the WASPI women. Will the Minister demand that the Chancellor uses the surplus to do so? The money is in the national insurance fund to allow the Government to take action—to right a wrong, to reflect on the injustice of a sharp increase in pensionable age, to show leadership and to recognise that Parliament collectively got it wrong with the timetabled increases. This is, after all, about fairness. Men are seeing a one-year increase in pensionable age; for women it is six years, over too short a period. The Minister can be a hero to 1950s women by addressing the injustices that many are facing.
We are often told that there was no choice in the scale of the increase or the timing, and Europe was forcing equalisation upon us. In our report, we published the scale of increases in pensionable age in each European country. There are only two countries that are seeing such a rapid increase in pensionable age: Italy and Greece. When the Prime Minister took office, the first debate she fronted was on Trident renewal. The motion did not have a price tag, but the Chair of the Select Committee on Foreign Affairs, the hon. Member for Reigate (Crispin Blunt), informed the House that it could be as much as £205 billion. The Government effectively asked Parliament to give them a blank cheque. We can find hundreds of billions of pounds for weapons that can blow humanity to smithereens, but we cannot meet what should be a contractual obligation to 1950s-born women. Where is the fairness? Where is the humanity? Of course, the Government will be prepared to find £7 billion to renovate this place. If I had a choice, I would fund the WASPI women’s pensions first, and not spend a fortune on this place.
I know that a number of Conservative Members are here, and they are broadly supportive of the WASPI campaign. It is a pity that we do not have those who so far do not support it, but I say to the Conservatives: is there anyone on the Government Benches who is prepared to stand up and say that it is right for women’s pensionable age to increase at the rate of three months per month? How can anybody possibly think it is right that pensionable age should increase by three months per month? I would be happy to give way to anyone who wants to stand up and say that it is right, but I suspect that we will get what we always get: silence—silence and the hope that we, the Opposition, the Tories who support this and the WASPI women will go away. As I have said, we are not going away. We have given the Government an option and, unlike their Trident nuclear weapons commitment, it is costed. More importantly, not only are we not going away; the WASPI women are not going away.
The Pensions Commission that reported in 2005 suggested that at least 15 years’ notice should be given on any future increase in pensionable age. Given that, I ask the Minister: how can the Government defend the 2011 Act and some women receiving pretty negligible notice? Does the Minister think that is acceptable? There would be uproar, and no doubt legal challenges, if occupational pension schemes behaved in such a way. Can we imagine the outcry from Members of Parliament if we were told, with little notice, that our pension payments would be deferred by an additional six years?
Ian Blackford
I want to make a little progress, and will take interventions later.
Just as workers pay into occupational schemes, men and women pay national insurance in return for a state pension. Why should women be treated so shoddily? It is little wonder that WASPI women are considering legal action. For too long women have suffered injustices as far as equal pay is concerned. They tend to have much poorer workplace pension protection than men and are now facing state pension inequality. Why do we not stop, take stock and put in place mitigation? Let us have equalisation, but let us do so fairly. When we consider what has been done as far as communication is concerned, it is dismal. Women should have been written to at the earliest opportunity, letting them know what was changing and allowing them to consider their options. Yet in 2011, the Government said their approach was to inform women through leaflets and publicity campaigns. That was a failure of responsibility to act and inform appropriately.
It was only in 2009 that the DWP began to take responsibility and proactively write to women to tell them about the 1995 Act. They started to tell women in 2009, but it took the DWP years to issue all the letters. Last night I was given the response to a freedom of information request on the timeline of the letters—perhaps the most damning thing about this whole debate. Women born between April 1953 and December 1953 were formally told of the increased pensionable age only in January 2012. Women born between December 1953 and April 1955 were told only in February 2012. A woman born in April 1953 under the old regime of retiring at 60 would have expected to retire in April 2013. She was given just one year of formal notice of her new retirement date of July 2016. It was 17 years after the 1995 legislation before the DWP could be bothered to formally tell the women involved—too little notice; too little, too late. We should all hang our heads in shame at the way the WASPI women have been treated. If there is one issue that should force the Government to agree to change now, it is that new information and the timeline of notice given.
Why have we been able to find this out through a freedom of information request from the WASPI women? Why have the Government not come clean about this before? Who knew about this in Government? Did the Minister know? I have had many letters on this issue from the women affected. Rosina wrote to me:
“When the 2011 Pensions Bill was announced, it accelerated these changes, so that Women’s SPA would be 65 by November 2018 and then both Men’s & Women’s SPA would rise together to 66 by 5th April...Letters began to be sent out...but many never received them. I received my letter in early 2013, just before my 58th Birthday and just 2 years before my expected retirement age of 60. The letter advising me that I would now have to wait until I was 66 before I could draw my pension! How can I be expected to plan for a 6 year increase with just 2 years notice? How can this be acceptable? I had already made plans for my retirement. I will lose over £40,000 of pension because of this. I have paid into the system in good faith and the system has now failed me. I want the Government to stand up and admit that they have ‘wronged’ us Women of the 50’s by their gross mismanagement and...that they will now do the right thing and pay us what we are due.”
I cannot put it any better than Rosina. Will the Minister now accept that we have a responsibility to Rosina and the 2.6 million women who have been cheated out of their entitlement?
Dr Eilidh Whiteford (Banff and Buchan) (SNP)
My hon. Friend has come forward with a shocking revelation today, thanks to the WASPI women who made the FOI request. Nearly half a million women had only a year’s notice to change their retirement plans. I do not think that is acceptable, particularly given everything we have heard about why women are more likely to be dependent on a state pension and likely to be in poverty in old age. Does he agree that it puts an absolute moral imperative on the Government to take responsibility for their failure to let women know before a year in advance that they were going to lose out in such a way?
Ian Blackford
Absolutely. My hon. Friend makes a powerful point. I know that the Minister is a decent and honourable man. I hope he listens to the evidence and will go back to his colleagues in Government and recognise that the surplus we talked about is there in the national insurance fund. He would make us all happy, but more importantly he would make the WASPI women happy, if the Government showed they were prepared to act.
Peter Aldous
The issue of notice is raised a great deal, and it has been said that notice was given in magazines and the like. Given the high-profile television campaign at the moment for workplace pensions, does the hon. Gentleman agree that the issue should have been on television 15 or 20 years ago?
Ian Blackford
Absolutely. There has been a gross failure of communication at all levels. Many of us have access to occupational pension schemes. We are members of the House of Commons scheme. We get an annual statement of our pension entitlement. That is what the DWP should have been providing, rather than waiting 17 years before communicating with the women involved.
I am conscious of time and I want to begin to wrap up. Much of what I have been talking about was picked up by the Select Committee report in March this year. It said:
“Well into this decade far too many affected women were unaware of the equalisation of state pension age at 65 legislated for in 1995.”
The National Centre for Social Research stated:
“In 2008, fewer than half...of the women who, at that point, would not be eligible for their state pension until they were 65 were aware of the...change.”
That statement referred to research carried out in 2011. Given that we knew there was a lack of appreciation of the 1995 changes, why pour oil on troubled waters by accelerating the timescales in 2011? That was simply vindictive and cruel. Today, let us correct that. Let us show compassion and deliver fairness to the WASPI women.
I have been dealing with this issue on a UK-wide basis, but I want to briefly touch on Scotland. To put this into context, there are 243,900 WASPI women in Scotland. I would dearly love for us to have responsibility for pensions in Scotland, but we do not. The commitment the SNP has given in supporting the slowdown of the increase in pensionable age is one we would legislate for if we had the powers, but we do not. The powers that Scotland has over social security are limited to 15% of such spending in Scotland. We have limited powers. Section 28 of the Scotland Act 2016 grants exceptions to reserved areas where we can top up payments, but this does not include pensions assistance or payments by reasons of age.
I mention that because the Secretary of State, responding to a question I asked about WASPI mitigation last month, said that the SNP
“now control a Government who have the power to do something about this and put their money where their mouth is.”—[Official Report, 17 October 2016; Vol. 615, c. 580.]
The Secretary of State created the impression that we hold powers in areas where we do not. I sought to be charitable to him in a point of order I raised later that day; rather incredibly, I received a letter from the Secretary of State on the 19th arguing that his statement was correct. Let me be clear: it was not. I then raised a further point of order on the 19th, when the Speaker suggested I apply for a face-to-face debate. I am grateful the Minister is here, but it is unfortunate that the Secretary of State is not. He should be dragged to this House and forced to accept that he cannot blame the Scottish Government when they do not have competency for the failures of this Government, and it must stop.
This is an important matter. We cannot have the UK Government suggesting that the Scottish Government have powers that they do not have. I wish we did have powers over pensions. If we had those powers, we would do the right thing by the WASPI women. Until such time as we have such powers we will push the Government to accept their obligations. This Tory Government have ducked their responsibility to the WASPI women for too long. It is time to face up to reality. Pensions are not a privilege; they are a contract, and the UK Government have broken that contract with the WASPI women.
Mr David Nuttall (in the Chair)
I am looking to start the contributions from Front Benchers at 10.30 am, so based on the number of speakers I have been notified of, that will mean about five minutes maximum per speaker. I call Tom Elliott.
Richard Harrington
I thank the right hon. Gentleman for his intervention, which I will attempt to answer in a moment, after I have thanked the hon. Member for Ross, Skye and Lochaber (Ian Blackford) for opening the debate and hon. Members from both sides who contributed.
I must say that this is the first time that my rather limited attempts at jurisprudence between 1976 and 1979 have been mentioned in the House. At least they will now be recounted in Hansard rather more than they are by my tutors of the time. The serious point that the right hon. Member for Knowsley (Mr Howarth) makes is that hon. Members feel that the Government have broken some form of contract, presumably non-written, with state pensioners generally or WASPI women specifically. I have heard that point made several times today, but the Government’s position is very clear: this was not a contract. State pensions are technically a benefit. I add no value judgments to that, but since he made a legal point, I felt I should place the answer to it on the record.
Richard Harrington
I think I should continue, but the hon. Gentleman will have time at the end.
Richard Harrington
I know about the eight and 15 minutes, but I was asked by the Chairman to leave some time for the hon. Member for Ross, Skye and Lochaber; I was not being discourteous at all.
Benefits are a complex subject that I am sure we will have plenty of time to discuss elsewhere. Suffice it to say that the range of benefits is quite wide. If the hon. Member for Stockton North (Alex Cunningham) feels that there are gaps in the benefits system, I would be pleased to discuss them with him, but obviously not now because there is not enough time. I am trying to make progress, as you requested, Mr Nuttall.
The hon. Member for Strangford (Jim Shannon) and many other MPs shared cases of hardship, and of course I am sympathetic to them.
Ian Blackford
The new information that I provided in my introductory speech was that a woman who was born in July 1953, who would have expected to retire in July 2013, was told by the DWP only in January 2012 that she would not be retiring until 2017. When did the Government and the Minister know of those facts? Why will they not now listen on that basis? The statement is that there will be no further changes, but these women have been seriously negatively impacted. The Minister must respond.
Richard Harrington
I shall respond in due course. I want to finish my point about the welfare system. The Government are spending £60 billion on supporting people on low incomes, £50 billion on supporting disabled people and £15 billion on incapacity benefits for working people. According to some of the contributions we have heard, it would appear that the Government are really not spending any money at all.
Ian Blackford
I thank all Members who have spoken in the debate. I have enormous respect for the Minister, as I think he knows, but I must say that I am plain disgusted with the response we have had this morning. To that end, I shall be contending that we have not considered the acceleration of the state pension age for women born in the 1950s.
This is not acceptable, because we are now looking at a cliff edge. As I explained, there is an increase in pensionable age of three months for every month that passes. The Minister talked about a leaflet—a leaflet!—that went to the women concerned. We now know that a woman born in 1953 was given just over one year’s notice in 2012 that her pension age was going to increase to July 2017. We now know that a woman born in September 1954 found out in February 2012 that, rather than retiring in 2014, she would be retiring in 2020. Where is the fairness? Where is the notice from this Government?
I have heard various figures from the Government, but this is the first time the House has been told about that £14 billion. The Minister should come with me and I will take him through the Institute for Public Policy Research model. I stand fully behind the £7.9 billion. To hear him dispute that figure is disingenuous, to say the least. The Government have failed to accept responsibility for the WASPI women. The Minister should hang his head in shame. The Government must act, and we will continue to push them.
Question put,
That this House has considered acceleration of the state pension age for women born in the 1950s.
The Chair’s opinion as to the decision of the Question was challenged.
Question not decided (Standing Order No. 10(13)).
Mr David Nuttall (in the Chair)
The fact that the Question is not decided shall be reported to the House. It is possible for the Question to be put to the House subsequently for a decision without further debate.
Ian Blackford
On a point of order, Mr Nuttall. Given that this debate was granted by the Backbench Business Committee, I understand that it is open to any Member to take this to the Committee and ask its members to push for a vote on the matter in the House. The Government must and will be held to account.
Mr David Nuttall (in the Chair)
As Mr Blackford will be aware, that is not a point of order for me. He is aware of the rules relating to access to the Backbench Business Committee, as all Members are.
Could Members who are not taking part in the next debate leave quietly and quickly, so we can make progress?