Pension Schemes Bill [HL]

Debate between Lord Freud and Lord McKenzie of Luton

Report stage (Hansard - continued): House of Lords
Monday 19th December 2016 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I shall also speak to our other amendments in this group, Amendments 20, 21 and 22. They take us back to another issue that we discussed in Committee: the substitution of a new scheme funder where a triggering event has occurred. Depending on the circumstances, one of two continuity options has to be pursued. Continuity option 1 requires the transfer out and winding up of the scheme, while option 2 involves an attempt to resolve the triggering event. At present, continuity option 1 is mandatory on the trustees where certain of the more significant triggering events are involved. These are where the Pensions Regulator issues a warning or determination notice concerning decisions to withdraw a scheme’s authorisation, or where a notification that the scheme is not authorised has been given.

In Committee we pursued an argument to the effect that the Pensions Regulator should be enabled to cause the matter to be resolved by the replacement of the scheme funder. We argued that transferring the responsibility for a master trust to a new scheme funder could provide a quick answer to a collapsing master trust, costing less and helping members because it keeps the scheme intact and avoids unnecessary investment transition costs and expenses for Members. This has been acknowledged by the Government. However, the Minister rejected our amendments, particularly on the grounds that it was the role of trustees to run and manage schemes. They have the fiduciary duty to act in the best interests of members and should not be second-guessed by the regulator in this regard.

The Minister asserted that the outcome of substituting a new scheme funder was available to the trustees under continuity option 2, subject to the full requirements of adoption including the preparation of a comprehensive implementation strategy. We accept that as far as it goes, and agree that the substitution of a new scheme funder can be a way of resolving the triggering event. However, it does not provide a route where option 1 is mandatory on the trustees. That is why our Amendment 19 would allow for a new scheme funder to be put in place under option 1, in accordance with regulations to be added to the long list included in Clause 24(4) under our Amendment 21. Amendment 22 would require the submission of an implementation strategy.

We have heard from the Government no good reason why the substitute scheme funder route should not be available for all triggering events, although the Government may argue that for triggering events one to three, matters are likely to be more serious than for a change in a scheme funder to be the way forward. Will the Minister confirm that he would routinely expect the regulation around option 2, including the substitute funder, to be considered before the regulator formally moves to withdraw authorisation?

Amendment 20 is a rerun of a debate in Committee, and on rereading Hansard we consider the matter sufficiently covered. I beg to move.

[Lord Freud]

I shall take the opportunity to go through the matter of transfers because there has been a lot of discussion of it and this at the heart of it. I will pick up what we did in Committee, where the amendment from my noble friend Lord Flight referred to automatic transfers. I confirm that we will look to revisit automatic transfers once the market has absorbed the recent reforms.

The next issue was that we announced in 2016 that we would ensure that the pensions industry launched the pensions dashboard, which would allow people to see in one place their retirement savings from across the industry, which they could consolidate, and the Government would support the industry in doing that.

We then moved on to touch on transfers between default funds—for example, where a trustee may wish to move members out of an old default fund into a new one because they think the old fund is not offering value for money. There, we were concerned whether members might get left behind. This would be for the trustees to consider and act on under their fiduciary duty, not for legislation.

Then we had issues about bulk transfers in place at the moment, which require an employer connection and an actuarial certificate. There, I confirm again that we would have a call for evidence to consider the potential changes to DC to DC transfers. The last point that we visited was about the transfer from a master trust which is failing. Again, I confirm that where a scheme is acting under option 1 following a triggering event, the Bill applies, not the current provision under legislation relating to bulk transfer without member consent.

I think that sets a useful context for consideration of the amendments. Amendment 20 makes two additions to what will be covered by the regulations that must be made under Clause 24. Clause 24 sets out the detail of continuity option 1 and the requirements. In this situation, the clause requires that the trustee must identify one or more master trusts to which members’ rights must be transferred. The regulation-making power set out a number of matters connected with how this process should work. The intent is for members to be able to continue to save with as little disruption as possible and to protect the rights that they have accrued.

The regulator is aware of the need for schemes to be available that have been authorised into which members can be transferred. Experience to date has shown that there are good-quality schemes in the market. From our discussions with both master trusts and pension industry bodies, we are aware that they are keen to demonstrate the reliability of master trusts and for members to have confidence in them as a vehicle for pension saving, and there are therefore likely to be some available to take in transfers. For many master trusts, making themselves available to take a transfer would offer the opportunity to take in a number of members that they have not had to actively source—clearly, they get the benefits of scale.

Employers and members also have reassurance provided by NEST. Although a master trust could not itself do a direct bulk transfer to NEST—as the employer must first establish a connection with NEST—an employer could chose to sign up to NEST and move its workers across. NEST is required to admit any employer and any worker enrolled by the employer to meet its automatic enrolment duties.

The master trust industry has expressed an interest in developing its own panel of providers to assist with addressing situations where a master trust fails. Although we cannot guarantee that there will be a large number of master trusts looking to take on members of any failed master trust, we are confident that there is adequate provision within the market overall.

The second part of Amendment 20 would require that regulations made under Clause 24 set out what would happen to any non-money purchase benefits where a master trust which has mixed benefits was going to transfer the money-purchase benefits out of the scheme and cease to operate in respect of those benefits. We do not believe that that is necessary. We have been careful to design the master trust authorisation to target the risks to money-purchase benefits in these structures.

Therefore, if authorisation is withdrawn from a master trust which offers mixed benefits, it will be required to stop operating in relation to the money-purchase benefits only. It may still continue to operate in respect of the non-money purchase benefits if it is compliant with the relevant requirements of the non-money purchase benefit regime.

Where the scheme as a whole is winding up, existing provisions governing how non-money purchase benefits are to be discharged will apply to those benefits. That is clearly an issue of avoiding duplication.

On the question asked by the noble Lord, Lord McKenzie, the regulator can decide to encourage the scheme to substitute the scheme funder where this is appropriate, and before it moves to withdraw authorisation. The flexibility is there. Adding on the requirement that one option must be looked at before the other would probably reduce flexibility.

Amendments 19, 21 and 22 seek to make provision that continuity option 1 also allows for the substitution of a new scheme funder. Clause 23 sets out the two continuity options that must be pursued by trustees when a master trust has a triggering event. Unless authorisation has been withdrawn or refused, trustees will have a choice as to which continuity option they pursue. Clause 24 describes continuity option 1. Continuity option 2, under Clause 25, is when a master trust resolves its triggering event itself. The legislation does not specify how the event can be resolved, which is deliberate. It means that it encompasses a wide range of options, including the substitution of a new scheme funder. The trustees have the freedom to choose how best to resolve the event their scheme has had.

Clause 26 sets out the duty on the trustees to submit an implementation strategy to the regulator. Our aim is that members continue to save in a pension. Under continuity option 1, the situation is such that to protect members’ rights it is necessary that the scheme transfer these rights out and wind up. The event that led to continuity option 1 will often not be about the scheme funder, so a new scheme funder would not rectify the issue. If the Pensions Regulator has had to withdraw authorisation, a new scheme funder will not be the right response. It is likely the regulator will have ensured the trustees considered this at an earlier stage. Under continuity option 2 the aim is that the triggering event is resolved.

The amendments seek to provide that continuity option 1 also covers the substitution of a new scheme funder, which seems to be a misunderstanding of what is provided in the Bill and would cut across how the two options are intended to work. Where the trustees have the choice about which to pursue, they can try to resolve it. Identifying a new scheme funder is just one of the ways to get that resolution. We do not want to limit schemes’ options which is why we did not list particular solutions. The substitution of a new scheme funder already comes within continuity option 2 and its process.

We agree that where a master trust has experienced a triggering event, a new scheme funder could be identified, and could be the most appropriate resolution of a triggering event. This should be an option open to the trustees. That is why we have made the provision for continuity option 2. Continuity option 1 is solely about transfer out and wind up. The amendments would cut across the way in which the options and indeed, the regime as a whole, works in the Bill. With these explanations I ask the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

My Lords, I am grateful to the noble Lord for setting the context and picking up on some of our previous debate on transfers. The purpose of the amendment was to test whether it is possible to have a replacement of a scheme funder when you are in the triggering circumstances that take you into continuity option 1. As it stands, if you are in continuity 1 processes, you have to follow the route of transfer and wind-up; you cannot have a replacement scheme funder. The purpose of the probe is to try to understand why that is. One route to deal with it is that, before getting to a triggering event, 1, 2 or 3, the regulator will have a process with trustees and there can be a nudge which takes us into continuity 2. I understand that, but I think the Minister has confirmed that if it is just straight continuity then that is it, you have no hope of having a replacement scheme funder. I am still a little unclear as to why that would be so.

I think the noble Lord said that substituting new scheme funders would not generally be appropriate given the state of the scheme, so it has to be addressed by these other arrangements. But that does not mean that there would not be arrangements where that could be entirely appropriate. So I think that there is still a bit of a gap in the Bill. However, having said that, I think that we have given it a good airing. I beg leave to withdraw the amendment.

Pension Schemes Bill [HL]

Debate between Lord Freud and Lord McKenzie of Luton

Report stage (Hansard): House of Lords
Monday 19th December 2016 Lords Chamber

[Lord Kirkwood of Kirkhope]

My Lords, obviously I welcome the Minister’s amendments, which are a very appropriate response to our discussions in Committee. The compromise that he has struck is useful—and not just in these circumstances. It is actually not a bad idea for legislation to start adopting some of these things because it might avoid some of the tensions we have seen in the past in social security legislation in terms of trying to get access to the secondary legislation. Taking the first regulations under the affirmative procedure is an excellent way out of the problem we saw in Committee.

The timetable that the Minister has laid out is very reassuring and gives people an idea of what to expect in terms of the consultation and the timeframe available. I understand Amendment 24. I know that such provision has been used previously in pensions legislation, but Ministers at the Dispatch Box will be well advised to note that this clause will be particularly carefully looked at not just by the House committees that scrutinise these matters but by the usual suspects on the Back Benches who crawl over the fine print of these things. If the use of such procedure is deemed to be inappropriate, the negative procedure is always available to us to make sure that there is no abuse of the powers taken under Amendment 24. Otherwise, the noble Lord, Lord McKenzie, and the rest of us are doing quite well so far. I hope that we can keep up this strike rate for the rest of Report.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for the introduction of these amendments, which are very welcome. He has been true to his word and we thank him for taking us through the process of dealing with the regulations. One of our criticisms of the Bill was the plethora of regulation-making powers therein contained without the prospect of sight of even drafts of such regulations by the time we had to conclude our deliberations.

It was for this reason that we sought to strengthen the parliamentary process for this secondary legislation by subjecting it to the affirmative regulation procedure. The Government are meeting us part way on this matter by requiring in some key areas that the affirmative procedure apply to the first regulations made under various provisions. As we have heard, the changes apply to fit and proper person requirements, financial sustainability, the business plan, systems and process, continuity strategies and significant events.

We have also had the benefit of briefings with the Minister and the Bill team, which have aided our understanding of the regime and how it is meant to operate in respect of a range of issues including non-money purchase benefits, significant events, tax and pause orders and connected employers. As our continuing amendments should signal, we are not in total accord with the Bill as it stands and consider further change desirable.

As to the Henry VIII clause introduced by Amendment 24, the Minister is right that we discussed it before it was laid and I was grateful for that opportunity to engage. We are not enamoured generally of such provisions, particularly when they emerge at the tail end of our deliberations. As originally explained to us, they will be constrained by being used only to make the implementation of the regulations effective. In the event, they seem to go further than that. I wonder whether the Minister might comment. We recognise also that these types of provision have been used by Governments of all persuasions.

We recognise the complexity of the provisions in the Bill as well as the agility of the sector in adapting to change and sometimes circumventing it. Our own scrutiny of the Bill has caused us to conclude that the primary legislation is not in perfect shape even after being improved by our amendments, but until the detail of the regulations has been consulted on, it is difficult to foresee in every respect ideally what changes might have been appropriate. This is notwithstanding the flexibility that the Government have already taken for themselves; for example, in Clause 39.

For us, the imperative is to see a fit-for-purpose Bill on the statute book as quickly as possible. We will therefore not oppose this amendment.

[Lord Freud]

My Lords, I thank your Lordships for your understanding. I thank again the whole House and its committees, which made the point forcefully about making all these substantial regulations subject to the negative procedure. This was an occasion where we went back. There was a good suggestion—I am sure it was from the noble Lord, Lord McKenzie—that we should do it the first time via the affirmative procedure. I am with the noble Lord on this in thinking that that is a pretty smart way of doing this kind of legislation, because one can really clog up Parliament with affirmatives. I have to do quite a few of them and really, when one looks at them, it is overkill. This compromise may be something that we can look at becoming more of an institution in future. Let us just see on that.

On the power in Clause 37 and the pointed question put by the noble Lord, Lord McKenzie, about its use, I assure noble Lords that that power is narrow in scope. It will be limited to consequential amendments to allow for necessary technical fixes. It will apply only to existing legislation and legislation passed in this Session. Just to make it absolutely clear, it can be used to amend primary legislation but only in this consequential context to allow necessary amendments to make the Bill work.

I am grateful for the understanding of the House on all these amendments—the last of them in particular. I beg to move.

[Lord McKenzie of Luton]

I do not want to prolong this but may I just check one point? The noble Lord said that the Henry VIII provisions would be used only in respect of Acts passed in this same Session of Parliament. The wording sent to me says,

“an Act passed before or in the same session as this Act”.

Could the Minister clarify that?

[Lord Freud]

To make it clear, it incorporates legislation that now exists and the legislation that we will prospectively pass with this Bill.

Pension Schemes Bill [HL]

Debate between Lord Freud and Lord McKenzie of Luton

Committee: 2nd sitting (Hansard): House of Lords
Monday 28th November 2016 Lords Chamber

[Lord Freud]

I think that the situation is the same—the fact that you have primary legislation will allow that to happen. I will clarify that, but I think that is the point of primary legislation.

I make the point to the noble Baroness, Lady Drake, that the Pensions Regulator will make a pause order only under carefully considered circumstances. The pause order may last for the duration of a triggering event period but is not likely to continue for a significant length of time, and the regulator must weigh up the potential impacts on members when considering whether to issue such an order.

I shall now turn to the government amendments on the pause power.

[Lord McKenzie of Luton (Lab)]

My Lords, perhaps I might speak to my amendment in this group, which he has answered in part. That might make it a tidier process.

The purpose of Amendment 47A is to look at the issue of tax relief, as the Minister has identified. Under the pause provisions, an order can direct that no new members are to be admitted to the scheme and no further contributions and payments are to be paid towards the scheme by, or on behalf of, any employer or members. This does not apply, under Clause 31(6), to,

“contributions due to be paid before the order takes effect … and … references to payments … include payments in respect of pension credits”.

Our amendment seeks to make it clear that amounts recoverable by the provider from HMRC in respect of tax relief attributable to the permitted contributions—that is, those paid before the order—will still be available to the master trust. For the purposes of Clause 31(6)(a), it is presumed that the tax component is a contribution or payment. If so, do the mechanics of how relief at source operates mean that the HMRC payment is due to be paid before the order if the related contribution is—there is a timing issue here—or is it proposed that there will be some form of carve-out for the tax relief under Clause 31(5)(b)?

The intention behind the amendment was to probe that narrow issue rather than to achieve a wider objective, but of course it raises the wider issue of the amounts of the two forms of tax relief, touched upon in particular at Second Reading by the noble Lord, Lord Flight, and the noble Baroness, Lady Altmann. They set down very clearly the problem for schemes operating net pay arrangements for individuals who do not pay income tax, in contrast to those who use the relief at source method and can get tax relief at 20% on the first £2,880 paid into a pension—equivalent to a gross of £3,600. Those who are not subject to income tax and are within the net pay method are clearly missing out. The extent to which they miss out in aggregate may not be dramatic at present and will be influenced by auto-enrolment thresholds or current required contribution levels and the income tax threshold—the personal allowance. However, this will increase as more and more auto-enrolment takes place, the required contribution increases to 3% and there is still a gap—possibly a widening gap—between the threshold and the income tax personal allowance.

Can the Minister tell us how many non-taxpayers are currently contributing to a pension under net pay arrangements and could benefit from relief at source, and what is the aggregate tax benefit forgone? Going back to my earlier point, the amendment is intended specifically to focus on the technical issue of how that tax is garnered and paid before the cut-off point of the pause order.

[Lord Freud]

My Lords, on that narrow point, I hope that I can again reassure the noble Lord that, when those rebates are due, before the pause order is in place, we have a way of making sure that they are paid—through Clause 31(6)(a). It may be easier for me to write to the noble Lord and describe that process, but I think that it achieves what he is looking for. I will have to provide the figures on the net pay separately but will write to him on those, too.

[Lord McKenzie of Luton]

I would be grateful if the noble Lord could write on that specific point because I am struggling to see how a contribution—particularly one which comes in fairly late in relation to the date of the pause order—could immediately be converted into a receipt from HMRC, which is what I think the Bill requires.

[Lord Freud]

This is really a specific point, but I will write to the noble Lord both on the numbers and on how the process will work. I hope that that will be satisfactory and that we can then dispose of the matter for the purposes of later stages of the Bill.

I turn to government Amendments 47, 48, 49 and 52. These are intended to provide further clarity and some tidying up of the provision. They are based on further consideration of the comparisons with the Pension Regulator’s freezing-order power in the Pensions Act 2004, and are intended to ensure that they work sufficiently in a triggering event period. Amendment 47 makes clear that the pause power can be used to prevent benefits being paid out. Following the introduction of the Bill to the House, we have received some inquiries as to whether this is achieved through the provisions in the Bill. That was our intent, and as the freezing-order power makes separate provision to cover this aspect, we have, through Amendment 47, made an equivalent and explicit provision in respect of the pause order. Amendment 48 inserts a missing definition of “pension credit”, which was an oversight, and mirrors the freezing-order power. Amendment 49 is consequential to Amendment 47, and ensures that members retain their entitlement to any benefit payments affected by the pause order.

--- Later in debate ---

[Lord Freud]

I thank noble Lords for allowing me to speak to these amendments. Once again, please accept my sincere apologies for proposing these amendments now rather than including them in the draft Bill as introduced. Most of my proposed amendments modify the procedures the Pensions Regulator must follow when exercising some of the new functions introduced by the Bill.

Amendments 58 to 65 and Amendments 73 and 76 change the procedure that the regulator must follow when making a decision on an application for authorisation from an existing master trust scheme. The majority of the Pensions Regulator’s statutory functions are exercised through internal procedure known as “standard procedure”, with “special procedure” applying to certain functions where there is an immediate risk to members or assets. These procedures are set out in the Pensions Act 2004. The Bill as introduced provides for standard and special procedure to apply to the power to grant or refuse authorisation to an existing master trust scheme. However, on further consideration, we do not believe that some of the steps involved in these procedures would be appropriate.

The standard procedure provides for the issuing of a “warning notice” to such persons who, in the view of the regulator, would be directly affected by the regulatory action under consideration. They would then have the opportunity to make representations before a decision could be made about whether to exercise the regulatory function. This means that the Pensions Regulator would be obliged to send the trustees of an existing scheme such a notice after the trustees submit an application for authorisation.

In this instance, the regulatory action the notice would refer to would be the power to grant or refuse authorisation. It would not be necessary to warn the trustees that the regulator intends to take this regulatory action and make this decision, nor would it be appropriate to invite further representations at this point as the trustees would have submitted all necessary representations in their application. Special procedure, which dispenses with the warning notice and representations steps in the first instance, could be used only when the regulator considers there is an immediate risk to the interests of the members or assets of the scheme.

Amendments 58 to 65 and Amendments 73 and 76 would align the process of deciding whether to grant authorisation to an existing master trust with the process the Bill specifies for making this decision for new schemes. However, the amendments retain the requirement that the decision to grant or refuse authorisations must be made by the determinations panel of the Pensions Regulator. This is appropriate because in both situations a scheme operating in the market will be required to transfer members out to an authorised master trust scheme and to wind up. The impact of this is significant, and under these circumstances it is appropriate for the determinations panel to make the decision. The amendments I propose would maintain rights of appeal to the First-tier or Upper Tribunal should the decision be to refuse authorisation. The amendments would simply remove unnecessary steps and delay.

Amendment 55 has a slightly different purpose. It would ensure that if an existing master trust scheme—that is, a master trust in operation before the commencement date—submits an application for authorisation and the Pensions Regulator decides to refuse authorisation, it would not have to commence the process of transferring members out and winding up until any appeals are disposed of.

The final amendments I seek to move within this group are Amendments 72 and 77, which also deal with changes in procedure, but in relation to different regulatory powers within the Bill. The regulator has a power to direct the trustees of an authorised master trust to comply with the requirements of Clause 26 in relation to the implementation strategy. Where there is no strong reason to specify a different procedure, it is right that the regulator’s functions should be subject to the standard procedure, and for this reason Amendment 72 makes this power to direct subject to that procedure. In addition, where the trustees of a master trust should be following an approved implementation strategy but are failing to do so, under Clause 28(4) the regulator has the power to direct the trustees to pursue the continuity option identified in the strategy and to take such steps as are identified in the strategy to carry it out.

Amendment 77 makes this a power which can only be exercised by the determinations panel under standard procedure. The Government consider this appropriate, as it is a power which may have a significant impact on the scheme and its members. I hope I have given a thorough explanation of my proposed amendments. I thank noble Lords again for bearing with me in bringing these amendments at this stage of the Bill process, and I beg to move.

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his full explanation of these provisions. I am bound to say that we would like to study them a bit further and bring something forward on Report, if necessary, but I thank the Minister and the Bill team for supplying us with a Keeling schedule, which made these provisions somewhat less impenetrable than they might otherwise have been. As far as the panel is concerned, we discussed the issue of resources available to the regulator before. Will the determinations panel have the necessary resources available to it, and how speedily can it act and pick up these matters?

I have two brief questions on Amendments 73 and 76, which delete particular provisions in the Bill. Amendment 76, for example, deletes:

“The power to grant or refuse authorisation of a Master Trust scheme in operation on the commencement date under section 5”.

I presume that power is being deleted because it flows to the determinations panel, but will the Minister just clarify that for us?

[Lord Freud]

I am pleased to do that. My understanding is that the second assumption is correct: Amendment 76 moves it over to the determinations panel and I spelled out last Monday the process by which we will get the financial resources required by the Pensions Regulator. Clearly, one of the issues in that process will be the funds required to operate the determinations panel.

--- Later in debate ---

[Lord McKenzie of Luton]

I will be brief as I do not want to echo the fantastic contributions made by the noble Baroness, Lady Bakewell, my noble friend Lady Drake, the noble Baroness, Lady Altmann, and the noble Lord, Lord Flight. I can see that if an intelligence unit were part of a wider cross-government approach, it could well pay dividends. However, I fear that we would simply replicate arrangements whereby HMRC constantly chases tax avoiders, alights on some and then there is a change, and then somebody draws a line somewhere else and it is a never-ending process. Nevertheless, it may be worth while pursuing that.

The noble Baroness, Lady Bakewell, should be congratulated on bringing forward this amendment, the thrust of which we clearly support—although I disagreed with her on her last amendment. As others have said, events have to a certain extent overtaken it because we heard from the Chancellor last Wednesday the welcome news that the Government will shortly publish a consultation on options to tackle pension scams, including cold calling. It proposes giving firms greater powers to block suspicious transfers and making it harder for scammers to abuse “small self-administered schemes”. So this approach appears to take us a little further than the strict terms of the amendment, but if we are to forgo the opportunity to legislate now, at least on cold calling, we need some reassurance from the Minister on how short is “shortly” and what legislative vehicles will give effect to these conclusions.

I do not seek to repeat a number of the awful situations that noble Lords have identified, of people being deprived of their life savings. We have argued before that insufficient groundwork was undertaken by the coalition Government when they introduced these reforms; my noble friend Lady Drake made that point. One omission was clearly to anticipate the opportunities for fraud which these changes attracted. So if the Government are not able to convince us how quickly they can introduce measures to tackle these problems, we will be minded to support the amendment in the name of the noble Baroness, Lady Bakewell, at least as an interim measure.

[Lord Freud]

This amendment seeks to make it a criminal offence to make a cold call or send other unsolicited electronic mail or communications for the purpose of scamming a pension scheme member of their pension savings or to make changes to their existing arrangements; for example, inducing them to participate in high-risk investments. The noble Baroness, Lady Bakewell, focuses on a substantial issue. The figures are enormous. According to the ONS—the Office for National Statistics—eight scam calls happen every second in the UK, or over 250 million a year. Almost 11 million pensioners are targeted annually by cold callers, and savers have reported losses of nearly £19 million to pensions scams between April 2015 and March 2016. The amendment also stipulates that a person convicted of such an offence is liable to a term of imprisonment not exceeding six months, or a fine, or both, so it aims to deter scammers from such activity.

I state firmly that this is a priority for the Government, and we are determined to tackle the scourge of fraudulent nuisance calls. We want to send a strong message to consumers that they should not respond to such approaches. However, as my noble friends Lady Altmann and Lord Flight and the noble Baroness, Lady Drake, pointed out, that is not enough—banning cold calling alone will not stem the flow of transfers in scam vehicles or the establishment of those vehicles in the first place. Scammers who make cold calls are criminals and will continue to cold call and incite people to part with their savings. It probably does not make a huge amount of difference to the savers whether the criminals are based in this country or elsewhere in the world where we find it difficult to get hold of them.

The Government have explored this issue in detail, which is why in the Autumn Statement last week we announced that we will consult on how best to ban pensions cold calling. That needs to be supported by a wider package of proposed measures intended to tackle pension scams themselves. With regard to timing, on which I have been pushed by the noble Lord, Lord McKenzie, the plan is to publish a consultation on these measures before Christmas and to have the next steps ready for the 2017 Budget—I think it is still called a Budget—which will be in the spring. Comments can then be made on proposals to: ban cold calling in relation to pensions investments, and tackling inducements to do that; placing restrictions on certain types of transfer, which seeks to limit the flow of funds into scams; and making it harder for scammers to set up and run fraudulent small self-administered schemes, which tackles the potential vehicles for scams. We intend to provide more detail on these proposals in the consultation document.

To tackle the scams effectively, it is clearly vital to get this right and to do so in a way that does not impact on legitimate businesses. The consultation will seek to understand what impact these proposals would have on legitimate firms and member transfer activity, and what, if any, legislative solutions might be available and proportionate to disrupt the scams. In answer to the noble Baroness’s question, we will also be consulting on appropriate custodial sentences, although imposing them on people in different parts of the world is harder to achieve.

As I said, we need to ensure that we get this right, and the consultation, alongside existing engagement with experts from the pensions industry and consumer groups, will help inform our thinking. With that in mind, I ask the noble Baroness to withdraw the amendment, with which we are entirely in sympathy.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, the amendment of the noble Lord, Lord Flight, seeks a way of tackling the concern about the calculation of DB pension liabilities and deficits, particularly their volatility and the impact a large deficit can have on a company’s balance sheet.

By way of illustration, the LCP annual survey of FTSE 100 company schemes estimated deficits at 31 July 2016 of £46 billion, compared with £25 billion a year earlier and an estimated surplus in February 2016—big swings, clearly. Of course, a significant factor in these calculations is bond yields, which reduced sharply following the EU referendum, pushing up liabilities, although it is suggested that some of this reduction has been negated by interest-rate hedging and that foreign currency-denominated assets have benefited from some decline in sterling.

The reality is that a number of factors feature in how DB schemes should be accounted for: life expectancy, inflation and discount rates, as well as contribution levels and benefits. In seeking to understand the sensitivity of this, for FTSE 100 companies, as reflected on the basis of International Accounting Standard 19, the aggregate pension deficit of £46 billion in July 2016 comprised liabilities of £628 billion and assets of some £582 billion. These are very large aggregates.

The noble Lord’s amendment concentrates on the calculation of defined benefit pension liabilities and would enable directors to use an alternative method if,

“they are satisfied that accounts give a true and fair view”.

It provides that the Secretary of State must,

“set out one or more alternative methods”,

for these purposes—I understand that this is based on actuarial advice—and that an alternative method of valuing DB liabilities must not be,

“contrary to international accounting requirements”.

I am grateful to the Institute of Chartered Accountants in England and Wales for the information it provided in helping me to frame this contribution. At present, listed companies have to adopt international accounting standards. In other cases, companies can choose to use IFRS or FRS 102, which replaced FRS 17. However, it is understood that so far as pension scheme liabilities are concerned, the two standards are broadly consistent. The amendment of the noble Lord, Lord Flight, would not appear to apply to listed companies which are bound by international accounting standards—but for how long? He raised that interesting question. FRS 102 sets out how defined benefit plan liabilities are to be measured and recognised. It requires a defined benefit obligation to be calculated on a discounted present-value basis, using a rate of discount by reference to market yields at the reporting date on high-quality corporate bonds. This has to be recognised in full on the balance sheets.

We have sympathy with the amendment to the extent that it seeks to dampen the volatility of the measurement of liabilities for accounting purposes, but not if it is seen as a route to lessen employer contributions to DB schemes. We recognise that the current accounting treatment which generates this volatility is not ideal, although it is not helped by government policies such as quantitative easing. However, we have concerns about this approach. The Financial Reporting Council is responsible for setting UK accounting standards, not the Secretary of State.

A process in which generally applied standards are overridden on particular issues would set a precedent that could lead to a confusing regime and not help transparency and confidence in financial reporting. It begs the question of what alternative method of valuing DB liabilities would enable directors to be satisfied that the accounts give a true and fair view. What would this mean for trustee scheme valuations? The era of very low interest rates has brought the matter into sharp focus. In winding up our Second Reading, I think the Minister said that the Government had this issue in their sights and would explore it in the upcoming winter Green Paper. We look forward to that but, in the interim, we seek an update on where the thinking is going.

[Lord Freud]

I thank my noble friend Lord Flight for this amendment, which opens up a fascinating area. Amendment 81 would require the Secretary of State to make regulations which would have the effect of allowing companies to disregard any method of valuing defined benefit pension liabilities required by accounting standards. I recognise and understand the concerns that have been expressed in this debate and during Second Reading about the measurement of the liabilities under accounting standards, particularly when we are in what one would hope is an unusual period of interest rates being low not for reasons of the economy but because of quantitative easing.

Following its recent public consultation on its future agenda, the International Accounting Standards Board concluded that,

“there was no evidence of problems that were sufficiently widespread and significant to require a comprehensive review of IAS 19”.

However, I assure my noble friend that this is not the end of the matter. The UK’s Financial Reporting Council is in the early stages of considering the impacts of the current approach and will be examining the case for an alternative approach. I believe that this is the most appropriate way forward compared with the approach proposed by this amendment. The independence of the standard-setting approach is widely regarded as one of its strengths. I do not think it would be right for government to intervene directly—here I echo the wise words of the noble Lord, Lord McKenzie. It should not effectively set aside the accounting standards framework that has been developed to deal with these complex matters. If the Financial Reporting Council finds objective evidence or broad stakeholder demand for change, any proposals would need to take fully into account the risks they may pose to members’ benefits and would need to be tested through public consultation.

My noble friend talked about the experience in the US. When he did so at Second Reading, he got me to do some work—I always resent that—to look at that. In the US, schemes may move to calculate their funding based on yields from high-quality bonds averaged over the past 25 years. That approach would effectively discount rates by 1% and lead to employers paying significantly less into their pension schemes. What we must not allow to happen—again I echo the noble Lord, Lord McKenzie, and it is not often that that happens—is a change that releases pressure on employers, only to find that that leads to their pension scheme being less well funded and members losing out.

I do not think there is a quick and easy solution here. Nobody who looks into this issue can be in any doubt that this is an extremely complex and technical area. To come up with an alternative accounting methodology would require a number of substantial steps. Those would include: undertaking a detailed analysis of the current commercial, financial and broader economic impacts of the current methodology to determine whether there is a need for that change; developing alternative approaches, which would also have to model transition impacts between the two regimes; seeking views from the market through public consultation on identifying the costs and benefits and any adverse impacts; and, finally, developing the detailed standard itself, which again would require a further round of public consultation.

We are planning to publish a Green Paper over the winter, and I can reassure noble Lords that it will explore the issue of how liabilities are measured and reported in the round. We want to ensure that measures of liabilities and deficits are properly understood and are being used and interpreted appropriately. We will explore and seek views on whether the measures used could, in some cases, be driving investment behaviour that is not in the best interests of members or employers, and we will look at what the alternatives might be. I hope I have reassured my noble friend that his concerns are being addressed and that he will withdraw his amendment.

Pension Schemes Bill [HL]

Debate between Lord Freud and Lord McKenzie of Luton

Committee: 1st sitting (Hansard - continued): House of Lords
Monday 21st November 2016 Lords Chamber

[Lord McKenzie of Luton]

My Lords, I shall speak also against Clause 16 standing part of the Bill. The amendment is an alternative formulation that requires the affirmative procedure to operate for the regulations. We touched on this issue earlier this evening. The clause imposes a duty on a range of persons involved in running a master trust to give notice of the fact that a “significant event” has occurred. Civil penalties can be applied to anybody failing to comply. The only hint of what might constitute a significant event is what the Secretary of State sets out in regulations. No hint is given in the Explanatory Notes to the Bill. The information provided to the Delegated Powers Committee simply refers to a significant event being one that might affect the ability of the scheme to meet the authorisation criteria, such as a change of trustee or scheme administrator.

As the Delegated Powers and Regulatory Reform Committee pointed out, the delegated power confirmed by Clause 16(3) is a very wide one. It emphasised that the definition of what constitutes a significant event is fundamental to determining the duty imposed by Clause 16. It says that the width of the power appears to be needed because the Government have not yet decided on the policy or purposes for which the power is to be used. Its conclusion is that the power is inappropriate in the absence of any convincing reasons to justify its scope. We agree that as things stand the Government have more work to do to justify the change in the clause. I beg to move.

[Lord Freud]

I will begin by explaining why it is important that the clause stands part of the Bill, and then I shall set out my thoughts on the proposed change in the parliamentary scrutiny procedure.

Clause 16 addresses one of the requirements that will be placed on a master trust scheme once it has been authorised. One of the great strengths of the authorisation regime is that it is an ongoing system. This means that, in order to continue operating in the market, the Pensions Regulator must remain satisfied that the master trust continues to meet the authorisation criteria. This makes it particularly important for the Pensions Regulator to remain informed about the scheme. Indeed, I hark back to our discussion a little earlier about whether there should be someone to compensate as a last resort. It is really important that we make sure that the Pensions Regulator knows what is happening in schemes. That is one of the key ways in which to make that happen.

The regulator will collect information from authorised master trust schemes on a regular basis through a combination of existing requirements on occupational pension schemes and new requirements on authorised master trust schemes, introduced as part of the Bill. For example, all occupational pension schemes are already required to submit an annual scheme return to the Pensions Regulator and, under Clause 15, master trusts will be required to submit a supervisory return as well. In addition, Clause 14 introduces a requirement on the trustees of master trust schemes to submit the scheme’s annual accounts, and on the scheme funder to submit its accounts to the Pensions Regulator. These returns allow the Pensions Regulator to collect information from schemes on a regular basis in order to determine whether they still meet the authorisation criteria.

This clause provides that the Pensions Regulator must be notified in writing if significant events occur in relation to an authorised master trust scheme. The Secretary of State, following consultation with the industry, will set out in regulations what constitutes “significant events” for the purposes of this clause. These might include, for example, change of scheme trustee, change of scheme administrator, changes to the continuity strategy or changes to the business plan. The Government intend that the events which will be prescribed as significant events will be events of the type which the regulator would need to be made aware of promptly due to the potential impact on the scheme’s authorised status or because they are indicators that support or intervention may be required.

To be clear, the occurrence of a significant event in a master trust scheme will not necessarily affect the ability of the scheme to meet the authorisation criteria. It just may have such an effect or it may be a warning sign. For example, a scheme may have a change of trustee. As the fitness and propriety of a trustee is linked to the authorisation criteria, the Pensions Regulator must be informed of this change so that the new trustee may be assessed against the relevant standards. The new trustee may well meet the required standards, in which case the scheme’s authorisation status will not be affected—but there could be an impact. A civil penalty will apply to a person who fails to comply with this reporting requirement. For that reason, it is important to be as clear as possible about who will be subject to this requirement in the Bill. This clause therefore lists the persons subject to this requirement in subsection (2). Further persons may be listed in regulations.

There is a precedent for this requirement. Section 69 of the Pensions Act 2004 provides that key persons involved in the running of defined benefit occupational pension schemes must report the occurrence of certain events to the Pensions Regulator. That provision was made to warn the Pensions Regulator that such a scheme may require the support of the Pension Protection Fund. The provision in this Bill is made to warn the Pensions Regulator that an authorised master trust scheme may need support or intervention or be at risk of not meeting the authorisation criteria. This provision will protect scheme members and it will assist the Pensions Regulator to carry out its functions. That is why it is important that this clause stands part of the Bill.

Amendment 35 concerns the affirmative as opposed to the negative procedure. We have discussed that and we will also consider it in this context. On that basis, I hope that the noble Lord will see fit to withdraw both his opposition to the clause and his amendment. I hope that I have provided clarity on the wider purpose of Clause 16 and I commend it to the Committee.

[Lord McKenzie of Luton]

I thank the Minister for that response. I think we understand what the intent of this provision is. Obviously, the persons to whom this obligation applies are listed in detail in the Bill. Why, therefore, is it not possible to list at least some examples in the Bill—for example, a change of scheme trustees—as one of the significant events which might require action? There is silence on that side of the equation. However, there is a list of persons who are subject to this provision.

[Lord Freud]

I think the reason is that it is pretty odd to have a hybrid approach to a list of requirements some of which are in the Bill and some in regulations. We are looking to put them all together in a coherent way in regulations, which we will consider how best to introduce to the House.

[Lord Freud]

The noble Lord has opened himself up to a letter from me.

[Lord McKenzie of Luton]

My Lords, I think we need to read the record. In the meantime, I beg leave to withdraw the amendment.

Pension Schemes Bill [HL]

Debate between Lord Freud and Lord McKenzie of Luton

Committee: 1st sitting (Hansard): House of Lords
Monday 21st November 2016 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

Clause 1 is critical to the Bill. It sets out the scope for the regime, so I welcome these considered amendments, which give us the opportunity to explore this important clause in detail.

We have taken considerable care in defining master trusts and setting the scope for the new authorisation regime. The guiding principles throughout have been twofold: the first is to ensure that members are protected against the risks that arise in these new structures; the second is to ensure that the extent of any regulation is proportionate.

For example, the definition applies to schemes which are open to more than one employer because the level of engagement and involvement of the employers and scale of such a scheme is likely to be very different from that of a single employer scheme or a scheme in which all the employers are part of the same corporate group. It applies only to schemes which offer money purchase benefits because of the risks that the member bears in relation to such benefits, but we have been careful not to create a loophole for schemes which offer mixed benefits—as we will come on to later.

However, we also need to be mindful of the fact that master trusts are a recent development in a rapidly changing pensions landscape, and the master trust market is evolving all the time. A one-size-fits-all regime may not be proportionate, and we therefore need flexibility to be able to respond to the needs and changes. It is for this reason that Clause 39—which we will come to later in Committee—makes provision allowing for the disapplication of some or all provisions of the Bill for certain schemes.

Turning to the specific amendments, my noble friend Lord Flight seeks to exclude from the definition “AVC only” and “relevant centralised” schemes. I have sympathy with his intentions. Many defined benefit schemes offer AVCs for historic reasons and could be considered to be DB schemes to all intents and purposes, but schemes such as this could be excluded from regulation under our powers under Clause 39, and we prefer to use this power rather than to create a list of exemptions in the Bill, allowing time for more detailed consultation with industry about the diverse types of scheme that currently exist.

I put it on record that our intent is to propose such a carve-out. That is: we intend to consult on regulations under Clause 39(1)(b) to disapply some or all of the provisions of the regime for a mixed benefit master trust scheme, where the only money purchase benefits are those related to additional voluntary contributions of non-money purchase members, but we will also be considering carefully the need to avoid creating any avoidance loopholes as we go through that process.

In relation to the relevant centralised schemes, I am concerned that my noble friend’s amendment may go too far. The definition to which he refers is not confined to industry-wide or not-for-profit schemes, and although there may be a case for excluding some such schemes, I am wary of creating a loophole.

Our aim is to protect members from the risks that are particular to master trusts, and these may equally arise in industry-wide schemes. Similarly, although it is true that most master trusts are run for profit, and that this gives rise to certain risks which the regime seeks to protect, it is not this feature alone which determines the nature of master trusts.

I am grateful for the amendment tabled by the noble Lord, Lord McKenzie, and the noble Baroness, Lady Drake. As the noble Lord said, it is a probing amendment to investigate the boundaries of the definition. The amendment would change the definition of master trusts in the Bill and extend it to all schemes which offer money purchase benefits, including those which are used by only a single employer or employers connected to each other.

On the noble Lord’s question of how and when we plan to consult on draft regulations, and indeed on the question asked by the noble Lord, Lord Kirkwood, we have worked with the industry and the regulator to establish the key criteria for master trust authorisation. We intend to continue these discussions to develop more detailed policy and secondary legislation. We will follow the published government principles to ensure that consultation is an ongoing process, using the most appropriate forms of communication. The timing of that formal consultation on draft regulations will depend on a number of factors. We anticipate that the initial consultation to inform the regulations may take place in autumn 2017. I hope that that gives the noble Lord, Lord Kirkwood, some reassurance about the process.

The amendment would extend the scope of the definition and the authorisation regime considerably and would do so in a way that would be disproportionate. To take the example of the scheme starting as a single group employer picking up a non-associated one and moving back and forth, if the scheme is intended to be used for more than one unconnected employer, it is within the scope of the regime. If it starts with only connected employers but takes on an unconnected employer, it will fall within the regime at the point that it takes on the unconnected employer.

[Lord McKenzie of Luton]

Will the noble Lord help me on that point while it is on my mind? If you take on an associated entity and therefore have to join the scheme, what happens if you have a joint venture and that joint venture comes to an end? Are you perpetually in and out of the scheme? How does that work?

[Lord Freud]

In practice, one has to be fairly formal about the definition. The noble Lord has drawn up an example of a potential revolving door which I suspect may be in the black swan category. I will take that point away. I need not write to him on it because we will have a chance to come back to it, or I will make sure that we do. He describes a very volatile situation, but I suspect the very existence of a precise regime will tend to stop people doing that kind of thing unnecessarily, or without a very good reason.

On the question of bringing into the regulations schemes that have only one employer, we are currently considering whether some schemes offering decumulation-only benefits have the same rules as some master trusts. Any use of the powers to deal with this issue will clearly be subject to the affirmative procedure. My noble friend Lady Altmann asked whether PPF could be extended; an amendment has been tabled—I think it is Amendment 18—to explore this issue, and we will deal with it when we reach that point.

Much of our debate at Second Reading indicated that there is general acknowledgement that further regulation of master trusts is both desirable and necessary. Master trusts have developed in part in response to the success of the automatic enrolment programme emerging as a different kind of beast to the traditional structures that have existed in the occupational pensions sphere.

There is much to recommend master trusts as the schemes of choice for employers and members. They can drive value for money due to competition in the market and the economies of scale and offer a neat solution for smaller employers, for whom setting up an individual pension scheme for employees would be impractical and burdensome. But these very qualities also give rise to new risks that are not present in single employer defined contribution schemes in the same way. In a single employer scheme, the employer is typically far more closely involved in the running of the scheme and tends to have a more active relationship with the trustees. With master trusts used for automatic enrolment, employer involvement is generally limited to paying over the employer contribution. The different dynamics that exist in master trusts give rise to the need for a different approach to ensure that members are properly protected. These issues do not arise in the same way in single employer or connected employer schemes, and it is for this reason that we have been careful to confine the definition to multi-employer schemes in which the employers are not all connected.

--- Later in debate ---

[Lord Freud]

At the moment, these schemes would not be within the master trusts legislation. I cannot give a full answer now because I am not sure what other protections there may be for people in this situation, but we will have a chance to come back to this issue again and again and I shall make sure that we have a dialogue on this point later, as we consider the Bill in Committee.

This Bill addresses the risks that arise in master trusts. It is important to remember that these risks are specific to this particular type of structure, and it is therefore important that the definition reflects those structures and does not go wider. This ensures that the regulation in the Bill is a proportionate response to the issues arising. I hope that with these explanations and assurances particularly on the process of consultation, noble Lords are reassured, and I ask them not to press their amendments.

[Lord McKenzie of Luton]

In relation to the use of Clause 39 for carve-outs, is it envisaged that that will be done on a broad scheme basis or on an individual scheme basis? How will it work in practice? Will it be a carve-out for a defined type of scheme, as in the AVC scheme referred to, or could it be more specific?

[Lord Freud]

We will come on to discussing Clause 39 later, but I think that it will be fairly specific—sorry, no, I think that it will not be specific. It will be general types.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I thank the Minister for his response. I should say to the noble Lord, Lord Flight, that I accept that having this in the Bill in those terms would not be appropriate. The purpose of the amendment is to try to have a debate around the issue and thus have something on the record. I accept entirely the proposition around annual business planning and the assurance given that there is a need and recognition that the Pensions Regulator must be properly resourced to carry out these important functions.

Although there is an impact assessment, it is quite thin. It takes up lots of paper but it is thin in terms of the numbers that were on some of the schedules. The Minister has reiterated what was in that report about how there will be a further impact assessment at the secondary legislation stage. What precisely does that mean? Is it that when the regulations are in place and have been agreed there will be a comprehensive review, or that it is going be done piecemeal as each of the components of these regulations is put in place? If we tot up the number of regulations in the Bill—I have not done it—I am sure that they will run into the several tens. How is that actually going to work and when would the secondary legislation be laid for these purposes? Will there be an aggregate impact assessment at that stage?

[Lord Freud]

One of the things I have committed to do is to go back and think about how we make these regulations in the context of the noble Lord’s own suggestion of perhaps looking at the balance between the affirmative and negative procedures. In that context, the exact way in which the Government decide to present the regulations would clearly change. Regulations made under the negative procedure tend to be less of a set piece, while affirmative regulations do tend to be more of a set piece for obvious reasons. The answer to the noble Lord’s question will depend on our reflections on what we do with his proposition.

Work Capability Assessments

Debate between Lord Freud and Lord McKenzie of Luton

Tuesday 8th November 2016 Lords Chamber

[Lord Freud]

We do not yet have a formalised programme. We are in the middle of a consultation, as the noble Baroness knows. We will take the results of the consultation very seriously, come to the appropriate conclusions and develop the policies and the means of implementation.

[Lord McKenzie of Luton (Lab)]

My Lords, is any part of the consultation to consider the appropriateness of maintaining cuts to the employment and support allowance, which, as the Minister will know, is denying some £30 a week to thousands of the most vulnerable households in the country?

[Lord Freud]

We announced earlier this year that there would be no more welfare savings but we would go through with those that had already been announced. The job of the Government is to implement what has been announced, but there will be no more. This Green Paper looks at how we can have a better system of managing health issues with getting people into work. We have got half a million more disabled people into work in the last three years, and we need to keep that trajectory going.

Pensions: Women’s State Pension Age

Debate between Lord Freud and Lord McKenzie of Luton

Wednesday 2nd November 2016 Lords Chamber

[Lord Freud]

One of the odd things about this is that we are providing equality between men and women. Men have had to retire at 65 for many decades and we are bringing women’s retirement age to the same level. Women actually have longer in retirement, even after 65, because they still live longer. One of the reasons is that we are being blessed by greater longevity. In the period since 1995, men are living longer by four years and women by three years.

[Lord McKenzie of Luton (Lab)]

My Lords, we know that the Government have a poor record of communicating changes to pension arrangements, despite what the Minister has said, as evidenced of course by the confusion over the introduction of the single state pension. The issue here as touched on by my noble friend is not that there was no communication about state pension age changes, but that there was not effective communication. That is why there is a proper sense of injustice articulated by the WASPI campaign, and why it argues for the promised transitional provisions now to be offered up by the Government. I ask the Minister again, despite what he has said: will the Government reconsider this matter?

[Lord Freud]

I can only repeat that we have made it clear—and the Pensions Minister went as firmly on the record as he could—that there will be no further moves in this area.

Pensions Act 2014 (Consequential Amendments) Order 2016

Debate between Lord Freud and Lord McKenzie of Luton

Thursday 8th September 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, I shall follow the usual incisive contribution of my noble friend Lady Drake and the contribution of the noble Lord, Lord Kirkwood of Kirkhope, in thanking the Minister for his introduction of this order. It is quite like old times. I also take the opportunity to thank the officials who spent a bit of time yesterday with us trying to unlock for us some of the intricacies of these provisions which, although small in terms of drafting, are quite complicated.

We note the Minister has confirmed at least in one respect the judgment of his predecessor, concerning compatibility with the European Convention on Human Rights. I state from the outset that we do not seek to challenge these provisions, although we add our concerns to that expressed by the Secondary Legislation Scrutiny Committee, that overlooking an appeals mechanism within three months of a new pension scheme starting does not inspire confidence. My noble friend Lady Drake has rightly chided the Government in stronger terms, and the noble Lord, Lord Kirkwood, made the point that two omissions are two too many.

As we have heard, the order seeks to address two distinct issues. First, it extends the automatic adjustment of certain benefits where a recipient or their family are in receipt of another benefit which is uprated. In particular, it ensures that the definition of benefit income includes the state pension under the Pensions Act 2014—that is, the new state pension—and that definitions of alteration include those transitional provisions of the new state pension which have to be uprated by no less than the increase in prices. That includes protected payments, certain increments inherited from a deceased spouse or civil partner, and certain other deferred amounts inherited under the state pension. Secondly, as the noble Lord explained, there are appeal rights to secure certain national insurance credits.

On the first issue, the automatic adjustment would apply only to income-related benefits including income support, JSA, ESA, pension credit and universal credit. The Explanatory Note to the order sets out the limited circumstances where the state pension will form part of the benefit income of a person claiming a working-age benefit. Its application is asserted to be—perhaps the Minister will confirm this—for pension credit awards and potentially for so-called “mixed” couples, where there is currently a choice of pension credit or the working-age benefit. We are told that this choice is to be phased out. Perhaps the Minister will also confirm the timing and mechanism for this to happen.

To the extent that income support, JSA and ESA are to be replaced by universal credit, the Government anticipate that these arrangements in due course will apply to universal credit and pension credit only. This raises a number of questions. First, there is the timetable for universal credit. It is understood that the most recent plans—pre the resignation of IDS—were for universal credit to be rolled out for all new claimants between 2016 and June 2018, with gateway areas becoming full service areas. This was to be followed by migration of current claims of legacy benefits to be completed in 2021. Is this still the plan?

How does the Minister respond to the article in Tuesday’s Times, which refers to the involvement of GCHQ in alerting No. 10 to security flaws in the programme, with significant numbers of claimants facing significant issues? Can the Minister assure us that, now IDS is out of the way, the reported chaos under every stone has been dealt with? Quite apart from this order, however, we should find time to debate this fully.

So far as pension uprating is concerned, Sections 150, 150A and 151A make reference variously to uprating by not less than earnings or prices. My noble friend Lady Drake pressed this issue. There is of course no specific reference to the triple lock in these statutory provisions, although it can be catered for within the drafting formulation. I press the Minister, as has my noble friend, to confirm the Government’s position on this matter, particularly in light of his predecessor’s recent comments. Will the triple lock continue to be applied, as now, at least until the end of this Parliament?

We have been told that Article 3 amends an omission of a consequential amendment arising from the 2014 Pensions Act, and this omission being included in the right of appeal for decisions concerning awards for credits made under Part 8 of the State Pension Regulations 2015. We are told that any credit decisions under these provisions in respect of the tax year 2016-17 will need to be reconsidered once the law has changed. My noble friend, again, pressed on that matter. As my noble friend said, these could relate to decisions on credits for spouses and civil partners of members of HM Forces, people caring for a child under 12, foster carers and people approaching pensionable age. These are important provisions.

The Explanatory Note suggests that this omission will have very little effect because it concerns only one class of credits—post-April 2016 class 3 credits to cover gaps in the records of those accompanying HM Forces, as spouses or civil partners, in a posting outside the UK. This seems to be on the basis that generally decisions on tax credits for 2016-17 will be relevant only in determining the new state pension for those reaching state pension age for 2017-18, by which time the problem will have been fixed. The exception appears to be spouses and civil partners of HM Forces personnel, where credit from 1975-76 can be relevant to pension awards for 2016-17. Can the Minister confirm that that is correct and that is why it is of limited effect?

Can the Minister say generally whether the appeals rights apply only to those credits which have to be claimed and not those applied automatically? I think he did that in his presentation, but I ask: if that is the case, what is the remedy, should the latter be subject to error? Is this a matter of administrative adjustment?

The Explanatory Note seems to be suggesting that, notwithstanding that there is no current right of appeal in certain circumstances, HMRC can in the interim undertake a reconsideration, which would be the first stage of an appeal should the right to one exist. Again, I think that that is what the Minister said, but perhaps he would confirm that.

The issue of National Insurance credits takes us back to an earlier debate about generally improving take-up of these credits, which are not awarded automatically—again a point pressed by my noble friend Lady Drake. In resisting a reporting process to Parliament on a take-up strategy, the noble Lord said that,

“we intend to review these systems to identify what efficiencies can be put in place to make the system of national insurance credits as simple as possible”.—[Official Report, 18/12/13; col. 353.]

Would the noble Lord please now offer us an update?

[Lord Freud]

My Lords, I thank noble Lords for their contributions, which made it rather a more interesting debate than I had anticipated. I will go straight into the questions that were raised rather than reprising the content.

There have been two omissions. One was something that has actually potentially affected people; we are getting that first one back in time. We take this seriously. It is not the first time that I have had to grovel somewhat about redoing regulations; I suspect that some noble Lords on the other Benches have had similar experiences.

[Lord Freud]

Never! So, clearly we need to take this seriously. In this case, however, the impacts have not been great. On how the feedback works, we have an established complaints and resolution procedure—and it is particularly valuable doing it this way because, as the noble Lord said, the numbers are small—whereby people can either write or phone in. We will catch these and assess what is happening.

I say to the noble Baroness, Lady Drake, that I described in my speech a process that, so far, no one has tried to appeal. If they do, there is a workaround, so in practice there will be no gap at all for people. The minimum guarantee for the pension credit standard will continue to be uprated, at least by earnings every year. I am in a position, I think, to confirm to noble Lords that the triple lock is in place through this Parliament, as has been said several times in the past.

On the question raised by the noble Baroness, Lady Drake, about credit decisions, the oversight affects all decisions on credits—which includes grandparents—made under the powers in the Pensions Act 2014 from 6 April 2016 to when the law is changed. The specific decisions affected relate to credits for spouses and civil partners of members of Her Majesty’s Forces, child benefit recipients, people caring for a child under 12, foster carers and people approaching pensionable age—and, as I mentioned, it includes grandparents. I am afraid that we do not have data on the numbers. There are around 400,000 eligible for carer’s credit and, in August, there were 10,900 recipients. There are 200,000 service spouses eligible and, since April, we have had 1,850 applicants.

The noble Lord, Lord McKenzie, enjoys reading newspaper articles on universal credit. I can confirm that there was a most imaginative use of the present tense in the Times—all references to spies are pretty historical by now. We have been working with GCHQ all the way through to make sure that universal credit is secure. It has monitored and is content with the system; that is something that has been of immense value to us as we have developed the system.

We made an announcement in July on the timetable. We now envisage universal credit being completed by March 2022 instead of March 2021, but nine months of that difference is contingency.

The noble Lord, Lord McKenzie, asked about credit applications. Decisions on credit applications made in respect of 2016-17 will be relevant in determining the new state pension entitlement only of people reaching state pension age from 2017-18, as this will be the first cohort for which 2016-17 will be a relevant tax year. What he was asking was therefore correct.

On his question about a review, we carried out a review and found that the main issue was lack of information. This is being addressed in the new state pension awareness campaign. I think I have covered most of the questions, but I will go over them carefully afterwards and I will write to noble Lords.

[Lord McKenzie of Luton]

Before the noble Lord sits down, I imagine he has a note from the Box ready, so perhaps I could ask him to comment on the right of appeal in respect of credits where they are awarded automatically. From what he said, I think the right of appeal applies to credits that have to be claimed. If there is an error in the application of automatic credits, what is the remedy and how is it applied?

[Lord Freud]

I will confirm this in writing, but my impression is that there is a right of appeal in these circumstances. It may be that there was no gap in the legislation. I will confirm that, but that is my starting position for 10.

Universal Credit: Rent Arrears

Debate between Lord Freud and Lord McKenzie of Luton

Wednesday 13th July 2016 Lords Chamber

[Lord McKenzie of Luton]

To ask Her Majesty’s Government how they will address the causes of the increase in the number of council tenants in receipt of Universal Credit who are in rent arrears.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

I appreciate the concern with this. The reality is that there are a lot of factors at play and universal credit is not the sole issue. Many people are coming into universal credit with pre-existing arrears. Safeguards are in place for claimants, including advances, budgeting support and alternative payment arrangement. Research shows that over time claimants successfully reduce their arrears. I have commissioned work from the department to help understand the true level and causes of these arrears.

[Lord McKenzie of Luton (Lab)]

I thank the Minister for his reply. He will be aware of the survey conducted by the National Federation of ALMOs and ARCH which details the shocking build-up of rent arrears by council tenants. Of those covered by the survey, 79% in receipt of universal credit were in arrears and only half of those previously had been in arrears. Despite what the noble Lord says, it seems that the rollout of universal credit is causing a build-up of debt among social tenants, creating financial hardship and reportedly driving some into the arms of loan sharks. That is not surprising, given the long processing times and the recently introduced imposition of a further seven-day waiting period before the benefit can kick in—an imposition opposed by the Social Security Advisory Committee. As the rollout of universal credit is to widen, does the Minister agree that these arrangements have to be reviewed urgently, from the point of view of both landlords and tenants, and the seven-day waiting period scrapped?

[Lord Freud]

The best evidence I have got at the moment is a gateway review, which shows that a rather high figure—48%—of the singles on UC have got arrears, but, interestingly, half of them were pre-existing arrears. That compares with 31%—so it is higher—but the interesting thing is how quickly it comes down. In the second wave—that is, three months later—it comes right down to very close to the JSA figure. There is a lot of complexity here; it is not straightforward at all. I am looking at it with some urgency.

Welfare

Debate between Lord Freud and Lord McKenzie of Luton

Monday 21st March 2016 Lords Chamber

[Lord Freud]

At one level, the new Secretary of State will clearly look at his whole portfolio with a critical eye. At another level, there may be changes in who gets the higher-rate mobility component to allow them to qualify for the Motability scheme. More people are on the higher rate under PIP than was the case under DLA. Indeed, more people with mental health issues are going on to PIP than would have received DLA. So, while there is a change in who gets the top-level mobility component and is therefore entitled to the Motability scheme, the absolute number qualifying for the Motability scheme is now moving up. As I said, there are now 24,000 more people on the Motability scheme than there were in 2013.

[Lord McKenzie of Luton (Lab)]

My Lords, the Minister will recall that we recently debated issues around rent restriction policy and local housing allowance changes for supported accommodation. There is a commitment in the Statement that there are no further plans to make welfare savings beyond the substantial savings legislated for recently. Are the proposed changes to supported accommodation now off the table, and does the commitment also run to pensions and pensioner benefits?

[Lord Freud]

Supported accommodation is a vital issue and I am grateful for the noble Lord’s question as it gives me a chance to offer the industry as much reassurance as possible. We have delayed two of the changes—the rent reductions and the LHA cap on supported accommodation—for a year because that will give us time to really understand the sector. In the short term, I expect to get a report on how the sector works so that we can look at how to support it most efficiently with funding and finance. The noble Lord will probably not remember how it is financed, as I do not think that anyone knew at that time. It has been quite a complicated issue. As for his question about the commitment and pensions, the pension element is growing rather rapidly, so, far from cuts, that becomes an irrelevant consideration.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 29th February 2016 Lords Chamber

[Lord McKenzie of Luton]

My Lords, as the Minister has anticipated, we have a sense of déjà vu on this drafting. We have lost count of the number of amendments and changes the Government have made to their own legislation. Again, the Commons are disagreeing with an amendment that the Government themselves laid in your Lordships’ House and replacing it with an alternative. So confident are they now that they will get it right on this occasion that they have decided to address the point at hand in regulations.

However, the substantive point is serious and it is important that the legislation is right. It is understood that the issue is to properly identify those cases where the 1% per annum reduction will apply to only the rent and to where it will apply to rents and the amount of the service charge. The former will apply to rents determined by a formula social rent approach; the latter to what is known as affordable rents, which are determined on a percentage of market value. It is understood that the sector is content with this differentiation—the Minister has confirmed that—and so are we. We look forward to the regulations in due course. There will, doubtless, be various iterations of them.

[Lord Freud]

I thank the noble Lord, Lord McKenzie, for being merciful in his remarks. As I said at the start of this brief debate, this Motion has been tabled as a result of representations made by the providers—I confirm that again—and the regulator. We welcome their input, as the noble Lord does. I urge noble Lords to support this Motion.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Tuesday 9th February 2016 Lords Chamber

[Lord Freud]

My Lords, the amendment to paragraph 3(5) of Schedule 2 is to address ambiguity in the drafting and clarify that, in a case where the tenancy begins after the beginning of the first relevant year but not at the beginning of the second or third relevant year, the rent should be calculated in the following relevant year. The amendment also removes a redundant cross-reference to paragraph 3(2), which is a drafting error we had regrettably not spotted previously.

I would like to inform the House that a number of social housing providers have alerted us to an unintended consequence of the government amendment brought forward on Report, which sought to enable continuation of existing policy that affordable rents are inclusive of service charge when determined on the percentage of market rent principle, but exclusive of service charge when determined on the social rent model. We have looked at this and agree there is an issue in the drafting that we need to address. The Government will therefore be seeking to do so during Commons consideration of Lords amendments. I thank the providers who raised that issue with us, and apologise to the House that this has come up at such a late stage, and that we are dealing with it in this way.

The Bill returns to the other place without the proposed changes to the ESA WRAG, and the limited capability for work element in universal credit. It also now places a requirement on the Government to publish and report on income measures of child poverty. In sending these amendments back, the Cross-Benchers, in particular, have sent a clear message and I will say only this: there will now be a process between the two Houses, as is conventional. We have discussed many other matters during the passage of the Bill. Many of them are important and we will continue to reflect on them and seek to obtain the best outcomes we can. I beg to move.

[Lord McKenzie of Luton (Lab)]

My Lords, I thank the Minister for his explanation of Amendment 5. It makes the drafting of this area somewhat less impenetrable. I was going to say that it would be churlish, given the occasion, to point out that this is the third or fourth attempt to get this drafting right but clearly there will need to be a fourth or fifth, from what the Minister has said, and we welcome the point to which he has alerted us.

I take this opportunity to welcome the Minister’s action in deferring the impact of the rent reduction policy for a period and holding back on the local housing allowance. We will have to see where that leads. Of course, this point was pursued rigorously by the noble Lords, Lord Best and Lord Kerslake. My understanding is that this has not necessarily allayed the concerns of providers sufficiently and there is the risk of holding back on some key projects in relation to supported accommodation, which would be a great pity. So I think there is a task for the Government there.

With regard to the amendments that go back with the Bill to the other place, all we can do is urge the Minister to send it on its way with his wholehearted support.

Housing Benefit (Abolition of the Family Premium and Date of Claim Amendment) Regulations 2015

Debate between Lord Freud and Lord McKenzie of Luton

Wednesday 3rd February 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we should be grateful to the noble Lord, Lord Kirkwood, for giving us the opportunity to range over this issue this evening and to the noble Lord, Lord Low, for his very extensive analysis of some of the risks around homelessness that these changes will create. Given the hour and the business to follow, I shall raise one or two brief questions.

On the family premium, the Explanatory Note with the regulations says:

“Removing the Family Premium helps to simplify the overly-complex HB system … and should therefore reduce administration costs”.

Can the Minister seriously tell me how much of a reduction in administration costs is anticipated just from removing this one component of what is and can be quite a complex calculation? It seems to me that it should be built into the system, so whether it is there or removed would make very little difference to the cost.

As for backdating, we have heard the arguments against the Government’s position that effectively we want to get equality with universal credit and if universal credit only needs one month’s backdating why does the housing benefit system need longer? I should have thought that it was recognised—and the noble Lord, Lord Low, has made it clear—that the housing benefit system is more complex. Indeed, is that not one of the boasts of the Government about universal credit, which we have supported—that it is an easier system whether you are in or out of work? You simply move up the scale; you do not have to come off one system of benefits and go on to another, or seek to return to them in due course.

We are in danger of overlooking a fundamental point here—that this is about backdating if there can be shown to be good cause. It is not something that is awarded willy-nilly. There are particular concerns around people with mental health conditions and the extent to which they are supported to make the right sort of decisions and judgments about their claim for benefits. That seems to sweep aside that issue.

There is one technical issue that the Minister may be able to help with. If somebody is awarded JSA after making a claim, they would be entitled to a three-month backdating of that benefit. The award of that benefit could automatically transport somebody on to maximum housing benefit—somebody who was not previously eligible for housing benefit. So we get somebody on JSA with a three-month backdating, which opens up the opportunity for housing benefit for somebody not previously entitled. There is something in the text that suggests that that backdating would apply to housing benefit as well, but I cannot quite see technically how that comes about. I would be grateful if the Minister could clarify that on the record tonight, because clearly there would be an anomaly with accessing one benefit opening up the opportunity for another benefit and giving rise to different backdating results, as a result particularly of these regulations.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords—

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Wednesday 27th January 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, in the spirit of comradeship and friendship with the Liberal Democrats, we are very happy to support that request.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

I think there were two parts involved in that question, so let me go through them. In answer to the first part, I will meet the noble Baroness and the CPAG. In answer to the second, I am happy to meet her and the CPAG.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, we support each of the amendments set down in this group and have added our names to some of them. On Amendments 50, 51 and 52, we join other noble Lords in congratulating the noble Lord, Lord Best, on his negotiating skills—doubtless assisted in that endeavour by the noble Lord, Lord Kerslake—and the Minister for listening and helping with at least a partial solution.

The deferral of the rent reduction programme is clearly welcome. The clarification on the comfort in respect of LHA caps is clearly important as well. The more that the Minister can say on that, the better. My noble friend Lady Warwick has outlined some of the problems because of the known existence of that aspiration. The Minister could, I hope, therefore go further. It is always the way that Ministers come forward with concessions, and then everybody piles in and wants just that little bit more, but this is a very important issue.

That raises the question of where that leaves the amendments, as the Minister’s proposition in his correspondence effectively covers co-operatives, almshouses and community land trusts, as well as housing associations. Are the Government going to accept the amendments, substitute something for them or simply rely on what is on the record of this debate?

The noble Lord, Lord Kerslake, spoke to Amendments 53, 61 and 63, each of which we can support. He stressed the importance of an independent evaluation of what has gone on, in good time for rent policy for the subsequent period to be settled. In respect of Amendments 61 and 63, the noble Lord explained the importance of flexibility in respect of new-build, particularly for schemes of marginal feasibility. We had a very helpful meeting with members of the Bill team and the noble Baroness, Lady Williams, on this. Hopefully, embedded in this long list of government amendments is one that addresses that issue specifically. It may not necessarily have the breadth or flexibility the noble Lord is seeking, but I think it at least seeks to address the principle.

Amendment 59A, in the name of the noble Baroness, Lady Manzoor, proposes a report on local housing allowance rates. We debated this in Committee, but the Minister probably still owes us a reply. The purpose of that discussion was to recognise that, with the moratorium following the 1% limitation, LHA rates are increasingly going to move away from the reality of what renting in the private sector actually entails.

The noble Lord, Lord Ramsbotham, was clearly pleased with the outcome for almshouses. All in all, we should be grateful to the Minister for responding as he has—or hopefully will—at the Dispatch Box in confirming this. This is a real issue of substance which was worrying many people.

The noble Lord, Lord Best, is probably happy with the definition of supported housing that we have here, which is the broadest possible. I know there have been issues with specified support—what is in and what is out—but I take it from the correspondence and what has gone before that the moratorium is in respect of the widest definition of supported accommodation.

[Lord Freud]

I will start by picking up a point made by the noble Lord, Lord Ramsbotham, on unintended consequences. The House of Lords has done its job in alerting us to some unintended consequences in time for us to sort them out. I know that I rely on this House for that again and again, and in this case I express my gratitude to a number of noble Lords—with the noble Lord, Lord Best, leading the field—for enabling us to deal with these issues.

Let me now do the business on these amendments. Amendments 50 and 51 would exempt housing co- operatives, community land trusts and supported accommodation, while Amendment 52 would extend that exemption to almshouses. I will just make a few comments before I turn to the rent reductions in social housing. We face a challenge on the overall housing benefit bill and believe that social housing providers need to play their part in helping to bring that bill down. However, we also recognise the vital role that many housing providers play in supporting people who need the most help.

The Government have always made it clear that our policy will protect the most vulnerable members of society. To achieve that, the Bill has built into it the flexibility to except some social housing and provide exemptions for providers facing financial difficulty as a result of the reduction. We have also made several amendments to the Bill, including some today, which we believe will be helpful.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, we strongly support the amendment moved by the noble Baroness, Lady Meacher. Indeed, it replicates part of an amendment moved in Committee by the noble Earl, Lord Cathcart. We know from the Government’s point of view that there is an article of faith here. Their starting point is that they overwhelmingly want and expect universal credit to be paid as a single monthly payment in arrears to the claimant. We know that there are opportunities for alternative payment arrangements and my noble friend Lady Sherlock set down our understanding in responding to the amendment in Committee.

The issue of eight weeks has been raised, but it is not eight weeks before you get to a solution. As I understand it, the guidance states that, when arrears reach one month’s rent, the DWP will review the situation—I am not sure how long it takes it to do that—following notification by the claimant or landlord. When they hit two months or eight weeks, either the landlord or the claimant can request an APA. Again, I think the point was raised about how long it takes the DWP to respond to those questions. Even then, there is no automatic right to one because the Government are still clinging to the concept that managing benefits should mirror choices in managing money which they say that those in work have to make.

The issue is one not only of having a nominal system in place under which alternative payments can be made, but of how those are put into practice and what realistic timescales are involved. Even if it were on the dot of eight weeks, that is a time for a landlord to wait. Some landlords might be left in a marginal economic situation.

A question was posed about what information we have about claimants of universal credit and other benefits being effectively denied access to properties available for rent. It might be quite hard to get hard statistics on that, but it would be interesting to know what the department has. The landlords fear, even if they may ultimately get paid, that they will have to wait eight weeks or even longer before they get their money.

My noble friend asked about what is happening with universal credit and how many people are in the system at the moment. At December 2015, there were 287,000 universal credit claims—I think that this is internal management information and therefore not fully verified—and some 37% of those payments included a housing element. Again only preliminary analysis showed that 19% of those had a managed payment to the landlord. I suppose that that gives a glimpse of something that is working to an extent, but clearly is not working in a sufficiently robust way to address the very real concerns that have been raised.

We debated this endlessly during the passage of the Welfare Reform Bill. My noble friend will remember it, and jam-jar accounts have featured already this evening. The arguments were strongly made against not only monthly payments but the opportunity for direct payments, particularly in relation to housing. My noble friend Lady Hollis made an extremely important point that the fundamental is a roof over your head—pretty much everything else flows from that. How can you get a job if you do not have secure accommodation? How do the kids get to school if you do not have secure accommodation? It is a fundamental issue. Just a relatively small change to the system, giving people the choice of having direct payments, means the prospect of removing what is clearly a growing problem, as explained, and fixing it in an effective way, so we support the amendment.

[Lord Freud]

This amendment requires the Secretary of State to make regulations that would allow universal credit claimants to opt to have the housing cost element of their award paid direct to the landlord, irrespective of the reason. One key principle of UC is that the single, monthly payment mirrors the payment of monthly wages that most claimants would receive if they were in full-time employment. Whether they are receiving UC or are working, tenants need to make similar decisions on managing their money, including paying their own rent.

The Government understand that a move to a single, monthly household payment is a significant change for many claimants and that some will require help and support. Regulations came into force in February last year to allow DWP to inform social landlords whenever one of their tenants makes a claim for or is awarded universal credit with housing costs or when an existing universal credit claimant moves to one of their properties. This enables the social landlord to decide whether the claimant requires advice, support or assistance in budgeting so that they can manage their rental payments.

There will, of course, be instances where the claimant needs additional support and, to this end, the Secretary of State already has powers to pay all or some of a claimant’s UC entitlement to a third party through alternative payment arrangements—or APAs, in the trade. There are three APAs: paying rent directly to the landlord; making more frequent than monthly payments; or splitting the payment within the household. APAs can be considered by the Secretary of State at any point during the universal credit claim, whether at the outset or later on, if a claimant cannot manage the monthly payment arrangement.

Recent improvements allow the landlord to email their APA requests, which are dealt with in a matter of days as a priority—so some of the early teething problems as we started rolling out the system have been addressed to speed up that process. Wherever possible, these arrangements are time-limited and delivered with appropriate budgeting support to help claimants make the transition to monthly budgeting.

The arrangement also covers claimants who are in rent arrears, and managed payments to the landlord will be considered where claimants have arrears of at least one month due to repeated underpayment or where the claimant owes arrears of at least two months and is at risk of eviction. These protections, combined with the measures enabling landlords to recover arrears from a tenant’s UC award, already mitigate any impact on landlords’ income or on homelessness.

We are in fact making a series of initiatives in this area and one of the most interesting is the trusted partner trials, where we are working with local authorities so that they decide the people who should be put on an APA, at least initially, and then look to see the budgeting support that a person needs to run their own funding.

Picking up the point made by my noble friend Lord Cathcart on experience, in terms of arrears we did an elaborate direct payment project and we found that, in the early stages, the numbers who paid in full were running at 95.5%, compared with 99% of those where the state paid. However, by the 18th payment—these were weekly payments in the comparator in this project—the direct payments figure had risen to 99%. Interestingly, this happened when the removal of the spare room subsidy came in, and those tenants who had become used to managing their own rent handled the removal of the spare room subsidy better than the ones who had been on the state-managed payments system. That is not surprising because the managed payments system is not necessarily an easy option where there are reductions for non-dependants, the spare room subsidy and so on, because the claimant will still need to pay the shortfall to the landlord.

The other factor, which I am surprised that noble Lords have not clocked, is that a large number of the families on universal credit are in work. It is not like the old legacy system where you have one lot out of work and one lot in work; this is a blended group and people are moving from the out-of-work group into the in-work group. Therefore, the idea that you can be halfway down the taper—in the jargon—and have a managed payment would be incredibly hard for any organisation, including the DWP and the tenant, to manage. Two million households is equivalent to a quarter of the case load.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 25th January 2016 Lords Chamber

[Lord Freud]

Amendment 27 seeks to exempt people in temporary accommodation from the benefit cap. I do not agree that it is appropriate to have a blanket exemption from the cap for people living in temporary accommodation. Rather, the best approach is to provide targeted support early so that people may better address their barriers to work. As I said in Committee, an exemption might, in fact, prolong a stay in temporary accommodation if it is likely that the cap will apply when a household moves to more permanent accommodation. That is an incentive both on the local authority and on the family.

I have already explained how £870 million in discretionary housing payments will be available for those households that need additional support in adjusting to the cap. Provision already exists to support the most vulnerable people who might be affected by the cap. Housing benefit paid to households in specified accommodation is disregarded from the benefit cap, and we included refuges within the definition of “specified accommodation”. While this does not mean that such households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these cases will not be affected in practice by the benefit cap.

From April 2017, the weekly management fee in respect of temporary accommodation, currently £40 in London and £60 elsewhere, will be abolished and replaced with a grant that devolves this funding to local authorities. Unlike the existing management fee, this new grant will not count towards the benefit cap and that will help local authorities tackle homelessness more effectively. I therefore ask the noble Lord to withdraw his amendment.

[Lord McKenzie of Luton]

I thank the Minister for his reply. None of it was a surprise, and I will, of course, withdraw the amendment in due course. I would just like to ask the Minister a few questions. He said that if there were a blanket exemption, this would prolong the stay of people in temporary accommodation. What evidence is there for that? Is it not generally the case that temporary accommodation is not of the best quality, and some of it pretty grotty? Why would families not want to move out of temporary accommodation as soon as they could to put down their roots in a more permanent arrangement? In relation to the grant, that seems helpful in principle, but on what basis is that grant going to be made available? Is it going to be ring-fenced for these situations, or just generally devolved to local authorities and caught up in the morass of funding and cuts that they are having to face?

[Lord Freud]

One of the most worrying aspects about temporary accommodation is that many cases have not been temporary. There have been cases where people have been kept in temporary accommodation for months, stretching to years. One of the reasons for that was that the only way it could be extinguished was by going into social housing. People were quite keen on that route through. That was changed in the 2012 Act so that it can be extinguished by going into private housing. Nevertheless, we want to incentivise councils to move people into settled housing as quickly as they can. Indeed, I think that the limit is 13 weeks. There are just too many examples; I do not have the exact number, but there are too many cases where it has gone on too long.

On the fee, funding previously paid to local authorities will become an upfront payment no longer tied to households remaining in temporary accommodation. The fund will be administered by the DCLG and the devolved Administrations. We will be able to give further details of that process in due course. That is all I have at the moment.

[Lord McKenzie of Luton]

I am grateful to the Minister for that. I will read the record, but I am not sure that I would agree with the proposition about local authorities not wanting to move people into more permanent accommodation as quickly as they can, and away from temporary accommodation, which is expensive for them. Having said that, and given the hour, I beg leave to withdraw the amendment.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 25th January 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, this is an interesting group of amendments. If I heard correctly from each of the speakers, the thrust of it is that government should be entitled to a whole range of information that will best inform it across the piece as to how to tackle a range of issues. Specifically, the group of amendments seeks to add to the reporting requirements to Parliament: the progress of children at five in areas of cognitive, personal, social, emotional and physical development—likewise for children living in disadvantaged households; the health and well-being of children living in workless and long-term workless households; and maternal nutrition in workless and long-term workless households.

The noble Lord, Lord Ramsbotham, referred to a range of matters. In particular he spoke about the collection of disadvantage that you get: homelessness, mental health, fuel poverty and low income—it is that collection of issues which makes more difficult the life chances of individuals. A number of speakers emphasised the importance of education—the noble Baroness, Lady Manzoor, picked up again the point she made in Committee about key stage 1 for education, and the noble Baroness, Lady Hollins, spoke about the importance of health and well-being boards. I understand that the Office for National Statistics produces data on national well-being and on the well-being of children; I think it reported in 2014 and again just last year. It is interesting that a whole range of data goes into those measures. It is said with regard to children that there are something like seven domains and 30-odd measures of children’s well-being, which is a whole collection of stuff to have to handle and deal with.

At the end of the day, government ought to welcome the information that this collection of amendments seeks to be reported on, which is a range of information across the piece. The key issue that flows from it is what you do with it, or what strategies or interventions will flow from that collection of data which will make a difference to the life chances of young people—which is the thrust of this.

The noble Lord, Lord Ramsbotham, made the point that we do not have a collective figure for the consequences of all the changes in the tax and benefit system in recent times. I know that the IFS did a calculation of what had happened under the coalition Government with regard to tax and benefit changes and concluded that if you look at those changes—the percentage of the income of various groups of people—the lowest two percentiles bore the greatest burden. If you look at it in terms of absolute amounts, the top 10% bore the most, but if you look at it as a percentage of income, the poorest have had the worst outcome from all these changes the Government have introduced—and that is before we get into ones that are reflected in the Bill we have debated to date.

When we talk about health and well-being, we need to be clearer about our distinctions. We have the national statistics data and the background to that, which is a very broad measure. The issue around health and well-being boards’ and local authorities’ responsibility is a slightly different focus, but important nevertheless. So far as we are concerned, we can see the benefits of this range of amendments, which try to encourage the bringing-forward of data to underline just what the consequences of these policies are. I think the noble Earl, Lord Listowel, talked a moment ago about how it is all too easy for us in this Chamber to see this in perhaps rather abstract terms and not the reality. People out there have to face the reality of what these policies mean, and the collection of data of which noble Lords speak will help bring that home to government as well as to campaigners generally, so that those who bear the largest burden feel that that is understood, reflected and challenged—which is our job here.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, these amendments on Clause 4 have been grouped together quite widely. I will start by making a general point about adding to the reporting duties that the Government have already set out. The best way of securing progress by government is to have a focused set of measures. I echo the implication of what the noble Lord, Lord McKenzie, said. The more you have, the more likely you are to have a diluted effort and distraction from the key issues, which in this case the evidence tells us are worklessness and educational attainment. Of course many factors contribute to these headline measures. For example, we know that children’s health is an important factor in their educational attainment. Tackling health at work will help ensure that more adults are able to work. Therefore delivering on worklessness and educational attainment calls for a wide set of actions. However, it is important that we focus government on its core objectives that will tackle the root causes of child poverty.

First, with regard to additional statutory reporting duties, I turn to Amendment 3. With this amendment the noble Lord, Lord Ramsbotham, seeks to introduce an additional reporting duty on the Secretary of State. The report must contain data on maternal nutrition in workless and long-term workless households in England. I have already set out that our evidence review published in 2014 makes it clear that worklessness and educational attainment are the factors that have the biggest impact on child poverty and children’s life chances. We are committed to supporting families at the earliest stage and to helping parents move into work and earn more through universal credit or investment in childcare, the national living wage and increases to the personal allowance in the tax system. This is the best way to secure children’s life chances and ensure that parents are able to care for themselves, too.

I cannot overstate the importance of ensuring that we focus on measures that tackle the root causes of child poverty and not be distracted by others that do not do so. Of course, the issue raised by the noble Lord, Lord Ramsbotham, is important. The Government take action. They provide advice for parents on maternal and infant nutrition via NHS Choices and Start4Life. Government also operates the Healthy Start vouchers scheme, which provides low-income people with vouchers that can be spent on milk, plain fresh and frozen fruit and vegetables, and infant formula. It already publishes the results from the National Diet and Nutrition Survey, which includes results by age and gender. There are a variety of reasons why adults have poor diets, and it is important that we look at the whole picture, which gives us valuable information and helps shape interventions. I therefore cannot support this amendment.

Through Amendment 4, the noble Lord, Lord Ramsbotham, seeks to expand the duty placed on the Secretary of State to include a duty to report on the progress of children and disadvantaged children living in England at age five in their cognitive, personal, social, emotional and physical development. It is vital that all pupils thrive and develop in their early years. Monitoring children’s personal development is already a core function of every education setting. This monitoring then enables teachers to tailor their support based on how each individual is progressing. I assure your Lordships that we do not take this issue lightly. As the Prime Minister said during his speech about children’s life chances—quoted by noble Lords—we want,

“stable families and good parenting, because we know the importance of those early years in setting children up for a good life”.

There are two key issues at the heart of the life chances reforms—action on work and action on education. Lives can be transformed by focusing on these two most significant drivers of poverty. The Bill will start to realise the vision set out by the Prime Minister when he said that,

“we can rescue a generation from poverty and extend life chances right across our country”.

We all know that the end of key stage 4 is a vital juncture in a young person’s education. It represents the culmination of primary and secondary schooling and provides a consistent point at which to measure attainment across all young people. Pupils who fail to achieve at the end of key stage 4 are at high risk of not being in employment, education or training, so the Secretary of State is committed, through the life chances measures in the Bill—

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 25th January 2016 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, we support Amendment 1 for the reasons advanced with conviction by the noble Baroness, Lady Campbell, strongly supported by the noble Lord, Lord Low, and pretty much every other Peer who has spoken in this debate so far. We heard from the noble Baroness, Lady Doocey, about the importance of proper reporting to the ability to deliver proper parliamentary scrutiny. The right reverend Prelate the Bishop of St Albans raised the very important issue of the need to have data on different groups, otherwise there is a risk that targets will be achieved by dealing just with those closest to the labour market. The noble Lord, Lord Wigley, reminded us about the impact of specific, detailed reports which come before Parliament. The noble Baroness, Lady Thomas, said that we can get full employment only if we make progress on the disability employment gap. The noble Baroness, Lady Hollins, and other noble Lords, talked about the failure of the Work Programme at the moment—a running theme on these issues. I am delighted that the noble Lord, Lord Lansley, and the noble Baroness, Lady Meacher, touched on Amendments 42 and 43. That enables me, in the absence of my colleagues, to address those and I will do so in a minute. The noble Baroness, Lady Afshar, made an important point about tackling the stigma around mental health which, sadly, still pertains in some communities.

We, too, welcome the Government’s commitment to halving the disability employment gap by 2020. We are grateful to the Minister for organising a meeting last week, together with his colleague, Justin Tomlinson MP, although the message delivered was that the amendment would be resisted by the Government. I hope there has been a change of heart in the interim. This is notwithstanding the generally encouraging noises and the promise of a White Paper. We know that the disability employment gap has stayed stubbornly persistent—the noble Lord, Lord Low, referred to it as intractable—for too long and cross-government effort will be needed to deliver on the commitment.

The reasons why we need regular reporting have also been summarised, too, by Leonard Cheshire in its briefing paper and these include, in particular, the incentive for action in that it will provide a departmental and cross-government focus on the gap. As the Minister himself has frequently opined, it is that which gets measured and reported on which gets government attention. That briefing highlighted the somewhat conflicting messages we have received from the Government. The Employment Minister in another place stated that the Government did not see the need to report on disability employment, as the measure was essential to achieving the wider commitment to full employment. However, the more enlightened Minister for Disabled People did promise that the annual report on progress to full employment would include an update on the Government’s progress towards halving the disability employment gap.

We need some clarification on this, particularly considering the comments made by the noble Lord, Lord Freud, in Committee, to which the noble Baroness, Lady Campbell, referred. The thrust of those comments was that the management information which this amendment seeks has not been built into the current plans and would not represent value for money, given the timeline to just 2020. Do the Government have no ambition after that? It would also disrupt the universal credit timeline, wherever that currently stands. If the Minister rejects the amendment, but promises regular reporting, will he make it clear what that will entail and what the sources of the data will be? The amendment is seeking not just aggregated data reporting but a proper analysis of progress over a range of conditions. If we do not have clarity on this and the noble Baroness, Lady Campbell, is minded to test the opinion of the House, we will support her.

Amendment 42, in the name of the noble Baroness, Lady Howe, seeks, as we have heard, to add people with mental health problems to the list of groups which are exempt from the conditionality element of back-to-work support schemes. We have received a very helpful briefing from Mind which covers this and other issues. It is suggested that conditionality, with its threat of sanctions, has a negative impact on people with mental health problems, that it undermines the relationship between claimant and adviser, removes choice and control, and has no evidence to support it working for people with mental health problems. It seems to us that this is fundamentally about having the right sort of support for people with mental health problems. Mind and others point out that the mainstream back-to-work support is currently often generic, as we have heard today, untailored and does not address the barriers to work which disabled people face. The lack of specialist support is undermining the opportunities for individuals to access work. This is a constant complaint from those who engage with these issues, so perhaps the Minister will tell us how he is to address this in the context of halving the disability employment gap.

Amendment 43, in the name of my noble friend Lord Layard, refers us back to psychological therapies, as we have heard. I am grateful for the interventions of the noble Lord, Lord Lansley, and the noble Baroness, Lady Meacher, so that we can at least debate this a little today. On the matter of drafting, we need to reflect on the reference to “primary medical condition” given that entitlement to the WRAG is determined by a range of descriptors which can be for physical or mental health factors. Drafting aside, my noble friend's objective is to encourage and assist those with a mental health or behavioural disorder to access assessment and, if appropriate, treatment. This is an objective which we wholeheartedly support.

My noble friend Lord Layard has previously made a powerful case in identifying that nearly a million people are on ESA due to depression or anxiety disorders but that only about half are getting treatment. We have heard that improving access to psychological therapies can make a real difference, as the noble Baroness, Lady Meacher, confirmed. The pilots that took place were 10 years ago. My noble friend has previously explained that around half of those treated under the programme last year recovered during treatment. Such results could obviously assist the path for people back to work and we know of the evidence that work—good work—is good for people’s health. His amendment does not mandate anyone for treatment—we have been down that path before—neither is it instructing the NHS to treat in a specific way a group of individuals. But it requires that those with a mental health problem be encouraged and assisted to be referred for assessment and treatment. There is no conditionality attached and no suggestion that such individuals should somehow jump the queue.

If assessment and treatment is key to making individuals well and helping them move closer to the labour market, is that not exactly what the system should be about? This of course begs the question of what the process should be. I hope that the Minister will accept the thrust of this amendment and follow up with my noble friend and others who have been engaged in the past. We used to have mental health champions in Jobcentre Plus; perhaps the Minister could tell us what has happened to this role.

I finish where I started: fundamentally, we are very happy to support Amendment 1, which is very important, and to help the noble Baroness test the opinion of the House if that is her decision.

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, Amendment 1 would build on Clause 1, which sets out the Government’s commitment to report to Parliament annually on the progress made towards full employment. Producing an annual report which illustrates progress towards full employment across the UK demonstrates this Government’s clear intention and continuing commitment to building a strong economy, growing business and ensuring labour market opportunities for all.

The purpose of this amendment is to require a further annual report to Parliament on the progress that has been made towards narrowing the disability employment gap. The amendment would also require the report to include how the Government have defined the disability employment gap, how they will assess whether progress has been sufficient and what remedial action will be taken if progress is insufficient. The amendment also requires that the report should include data on progress in increasing the employment rates of specific groups of disabled people, including people with autism, a learning disability, mental health problems and visual impairments.

I hereby formally commit the Government to report on our progress towards halving the disability employment gap in the annual report on full employment—no ifs, no buts. Halving the disability employment gap is a crucial part of achieving our full employment aspirations and a key priority for this Government in its own right. I hope also that, following my meeting with Peers on this very subject last week, they are assured of my commitment and that of my honourable friend, the Minister for Disabled People, who was also at that meeting.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 21st December 2015 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, this amendment requires certain financial and governance arrangements to be put in place in respect of the providers of motor vehicles under Motability arrangements. As we have heard, it is attached to Clause 20, which contains a provision enabling the Secretary of State to recover the costs of administering the scheme under which mobility components of DLA and PIP are made available, on the claimants’ request, to Motability. I understand that the annual charges will be under £1 million per annum and that Motability will absorb this so that it will not be passed on to lessees, but perhaps the Minister will confirm that.

The noble Lord, Lord Kirkwood, and my noble friend Lord Rooker have raised concerns before over the governance issues and in particular the level of remuneration of the chief executive of the operating company. We should acknowledge that Motability has been a major force in helping disabled people to have access to suitable vehicles. Since its creation in 1977, it has supplied more than 3.5 million vehicles and currently has some 637,000 customers—a 1.8% increase on the year.

Noble Lords will be aware—my noble friend spelled this out—that there are basically two separate entities: Motability, which is a registered charity incorporated under royal charter; and Motability Operations Ltd, an entity regulated by the FCA and owned by four major banks. The latter is contracted to carry out the acquisition and leasing operations on behalf of the charity. Each of them publishes extensive annual accounts, the former in accordance with the Charities Act 2011. The latter is financed by a combination of bonds in the capital markets and bank borrowing. Obviously, the main source of income for the scheme comes from individuals who choose to spend either their higher rate mobility component of DLA or the enhanced mobility component rate of PIP.

It will be recalled that the introduction of PIP as a replacement for DLA was discussed extensively during the passage of the Welfare Reform Act 2012, with the prospect of the revised mobility thresholds meaning that some disabled people would drop out of entitlement. Can the Minster please update us on the progress of this, which is due to be completed in 2018? How many DLA recipients have been reassessed and how many have fallen out of eligibility for Motability? One-off transitional support has been introduced for those who would lose the use of their vehicle, and perhaps we can know how many have availed themselves of this. This level of support was said to be subject to review during 2015. Has this happened and what changes are proposed? Was there any consultation with the DWP involved?

It would seem that the operating group is funding the cost of this transitional support via the charity. Does this mean that the costs are ultimately being borne by the vehicle lessees—that is, the very disabled people the scheme was meant to support?

The DWP also provides funding to the charity for the Specialised Vehicles Fund, which enables disabled people to lease a drive-from-wheelchair vehicle. Is it the case that, faced with funding being frozen on an annual basis, Motability has restricted access to the fund and apparently did this without consultation? Can the Minister say whether this restriction was discussed with the department at all and whether it agrees with the approach adopted?

As my noble friend made clear, public funding is involved in these arrangements in various ways: the application of Motability components of DLA and PIP; funding for the Specialised Vehicles Fund; and taxation benefits by way of zero VAT on the lease of vehicles and their sale at the end of the lease period. On this basis, notwithstanding the published report and financial statements, noble Lords are justified in testing matters of value for money, transparency and probity, and we look forward to the Minister’s response.

[Lord Freud]

My Lords, that was a thoroughly enjoyable debate for this time of the evening. The amendment moved by the noble Lord, Lord Kirkwood, is directed at Motability, which provides vehicles at discounted rates to people whose disability or long-term health condition has a significant effect on their mobility. It is run on a day-to-day basis by Motability Operations, a limited company, and is overseen by the Motability charity.

On the specific questions about Clause 20 that were raised by the noble Lord, Lord Kirkwood, I can say that the Government divert benefit payments directly to Motability but the administrative costs of the diversion have been borne by the Government, who do not have the power to recoup them. Clause 20 gives the Secretary of State the power to make regulations to do so. Such a power would currently apply only to Motability but it is drafted broadly to enable the provision to apply to any organisation running a future scheme.

I can confirm to the noble Lord, Lord McKenzie, that the cost is small—less than £1 million, I think—and Motability has confirmed that it will not change its pricing or the level of service it provides. Therefore, it will have no impact on its members.

The noble Lord, Lord Rooker, asked about information on directors’ remuneration and relevant interests. That is available in the annual and interim accounts of Motability Operations, in compliance with international financial reporting standards. These can be found on its website, which is where I found them on the occasion referred to by the noble Lord, Lord Rooker. Indeed, it publishes information on its board meetings in the same place.

The department meets regularly with Motability to discuss the scheme’s performance. I know that this does not overly impress the noble Lord, Lord Rooker, but as a charity, Motability is accountable to the Charity Commission. It is therefore unnecessary to require Motability to submit the annual report that is the formal subject of the amendment, because the information is there.

I will run through some of the rather surprising number of other issues. On overhead costs, Ernst & Young found that Motability was driving down its overhead costs, while satisfaction was rising. On the monopoly question, we have regular meetings and consider the value for money that Motability provides. The banks own Motability shares but they have waived all dividends and received no profit.

--- Later in debate ---

[Lord Freud]

There is a key issue about charities having to attract the best people when they are very substantial operations, which Motability is. I know, because I was involved for a period in a foundation in the charitable area, that to attract the kind of people who are commercially competent puts you into that bracket. I have said enough.

[Lord McKenzie of Luton]

One can understand the argument that the Minister has advanced in respect of the operations entity, but it seems much more difficult to justify the position he has taken in respect of the charity.

--- Later in debate ---

[Lord Freud]

I should have made clear before that that is not departmental money; it is users’ money that we transfer. That is the reason that the salaries are set by Motability and not by government. Government does get itself into quite a lot of problems because there are areas of commercial endeavour where salaries, bluntly, are much higher than the Prime Minister’s salary. There is a different set of rates in the outside world. I know that the noble Lord, Lord Rooker, is not going to let this one go and I will watch him—from a distance—to see how far he gets on this.

Finally, the noble Lord, Lord McKenzie, asked where we are. It is too early to tell the full picture. This started on a control basis only in July 2015, so I do not have a reliable figure for him. I remind noble Lords that customers who return their vehicle in good condition will get the benefit of up to £2,000-worth of support from Motability, which will in practice allow many to continue to be mobile through purchasing a used car.

[Lord McKenzie of Luton]

Would the Minister just mind dealing with two residual points? One is about the transitional protection—how that is funded and whether it is dealt with by the charity from contributions to the operating company or otherwise. The second is that the specialised vehicle fund has been frozen for a couple of years, which has obviously had an impact in terms of the opportunity to take advantage of that in an inflationary situation. Were the Government consulted on the changed criteria that were put in place for that?

[Lord Freud]

I will have to write on that latter point. The funding for the £2,000 comes from Motability itself—the charity—as I understand it, based out of the reserves it has built up. It needs very substantial reserves because the risk in a leasing business is in the residuals, which can be very volatile, even though you are the biggest. You need very substantial reserves, but it took a view that it had some excess which it was prepared to spend in this way. I urge the noble Lord to withdraw his amendment.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 21st December 2015 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, Amendment 72, tabled by the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, would retain the benefit cap at its current levels and have those levels apply across Great Britain. We introduced the benefit cap to increase incentives to work, to promote fairness between those in work and those on benefits and to help address the deficit, and it is clear from the evidence that the cap is working. Since it was introduced in 2013, more than 18,000 previously capped households have moved into work.

The evaluation evidence shows that capped households are 41% more likely to go into work than similar uncapped households. This is even more marked in London alone, where households were 70% more likely to go into work than similar uncapped households.

I am heartened to hear from the noble Baroness, Lady Sherlock, that she now supports the existing benefit cap. I happen to remember that that was not necessarily the position on the Opposition Benches in 2012. Indeed, I seem to remember that the counter proposition from them was that we should have a regional cap, so I hope that the Opposition are now delighted that we are beginning to move in the direction suggested. Perhaps in another three years, in 2018, the Opposition—

[Lord McKenzie of Luton (Lab)]

When we debated the regional cap at that time, did the noble Lord support it?

[Lord Freud]

Of course I did not support it; I am on the record as not supporting it. This is not an absolute regional cap—this is a two-tier cap, London and the regions—but, the Opposition may feel that it is better late than never. I look forward, by 2018, in another three years, to the full-hearted support of the Opposition for the current proposals.

--- Later in debate ---

[Lord McKenzie of Luton]

My Lords, I speak to Amendment 86, which is in my name and that of my noble friend Lady Sherlock. I also speak in support of Amendment 73 moved by the noble Lord, Lord Best, and Amendment 90A in the name of the noble Lord, Lord Kerslake. As we have heard, regardless of whether the benefit cap has played a role, local authorities remain legally obliged to rehouse families who are demonstrably homeless through no fault of their own, are vulnerable in some way or are in priority need for rehousing.

Families will be placed in temporary accommodation while a council decides whether it owes them a rehousing duty and then until a settled home can be found. For some families, the wait for rehousing can be considerable. I note that the noble Lord, Lord Best, has a 39-week grace period. I understand that that is likely to be sufficient in the overwhelming majority of cases but not in all cases, particularly in London. While in temporary accommodation, councils charge families rent to cover their own costs and expenses, and this is commonly paid for by housing benefit. In some cases, councils have to top up additional costs out of their own funds or, as we have heard, the limited pot of discretionary housing payments.

Temporary accommodation is generally leased by local authorities from the private sector at a premium, placing a considerable burden on them. Councils are already struggling to secure enough temporary accommodation as a result of the combined effect of limited funding and a shortage of self-contained accommodation. This is already leading to an increase in bed-and-breakfast use or people being rehoused away from their local area. The lower benefit cap will increase demand for homelessness services and exacerbate the pressure on the local authority supply of temporary accommodation. With more homeless families affected by the cap, local authorities are likely to be forced into further subsidising the cost of temporary accommodation. This will be difficult for cash-strapped councils, increasing the incentive to place families in the cheapest areas far away from their support networks.

It will also make it harder to permanently rehouse homeless families, as the benefit cap will make alternative housing options unaffordable. For larger families, even social housing will be subject to the cap. The policy therefore risks the perverse scenario in which families are made homeless because of the benefit cap and trapped in the limbo of temporary accommodation by the benefit cap at the expense of the public purse. The amount that can be reimbursed through the local housing allowance is limited to £500 a week, which means that other costs over and above that amount must be met by local authorities. In some cases, this will come from funding for discretionary housing payments, but often the necessary funds will have to come from elsewhere, given that DHP funds are in such short supply in the context of seemingly insatiable demand.

We know that the Government have declined to collect statistics which might help them measure the extent to which any purported savings from capping household benefits are simply being shifted on to local authorities in the form of additional homelessness costs. Our honourable friend Emily Thornberry MP sent freedom of information requests to every local authority in London over the summer and the findings throw doubt on the idea of the cap as a savings measure.

In the first year following the introduction of the cap, London councils spent a combined total of £19.2 million supporting households which had been hit by it. In the second year, this rose to £23.3 million altogether. Some boroughs spend more than 80% of their total DHP allocations on supporting capped households, and in most boroughs the proportion is increasing each year. To date, local authorities in the capital have spent almost £47 million in DHP funding as a direct result of the benefit cap and it is likely that this is just the tip of the iceberg in terms of the overall costs involved. Reliance on temporary accommodation is a significant driver of these additional costs.

As we have heard, across London more than a quarter of households currently affected by the benefit cap are living in temporary accommodation and in some boroughs it is much higher. In Waltham Forest, apparently a staggering 58% of capped households live in temporary accommodation. This compares with less than 1.5% of the overall population of people claiming housing benefit. The disproportionate presence of families in temporary accommodation among households affected by the cap is a huge issue for local authority spending. It is also a real source of human misery as, increasingly, councils are having to house homeless families in temporary accommodation outside their area, and sometimes many miles away from their support networks and their children’s schools.

Our amendment would exempt newly homeless households from the benefit cap. This would allow councils to continue to procure nearby temporary accommodation and make it easier for them to move households into affordable accommodation. It will also help councils focus their DHPs and their own budgets on homelessness prevention. If the Government are serious about cutting back on public expenditure associated with the benefit system, and in targeting the benefit cap at families in a position to make choices about where they can afford to live, it is hard to see why they should argue against exempting homeless families being housed in temporary accommodation.

[Lord Freud]

My Lords, these amendments seek to exempt people in temporary accommodation from the benefit cap. I cannot agree that it is appropriate to have a blanket exemption from the cap for all those living in temporary accommodation, even if it is time limited in the case of Amendment 73. Rather, I believe that the best approach is to provide support so that people may better address their barriers to work. My challenge to the noble Lord, Lord Best, is: if there were to be a 39-week exemption, how would that not have a perverse incentive on people staying in temporary accommodation longer term if it is likely that the cap will apply to them when they move? That is the reason for our approach.

Discretionary housing payments are available from local authorities for those households who need additional support in adjusting to the cap. We have made £800 million available over the next five years for all the welfare reforms. However, in particular areas, one of which is London, this will be a substantial element. In the Autumn Statement, it was announced that further DHP funding will be made available for the most vulnerable people, including those who may be in supported accommodation. In 2016-17 it will go up from the current level to £150 million, and the allocation of those funds reflects the new measures we are bringing in, as does the timing of their introduction.

We have already made provision to support the most vulnerable people who might be affected by the cap. Housing benefit paid to households in specified accommodation is disregarded from the benefit cap and we have included refuges within the definition of “specified accommodation”. The disregard applies to benefit cap cases under both housing benefit and universal credit. While this does not mean that these households are exempt, by not including housing benefit in the calculation we expect that the vast majority of these vulnerable cases will not be affected by the benefit cap.

Finally, from April 2017 the weekly management fee, currently £40 in London and £60 elsewhere, will be abolished and replaced with a grant that devolves this funding to local authorities. Unlike the existing management fee, the new grant will not count towards the benefit cap and will help local authorities tackle homelessness more effectively. I would therefore ask the noble Lord to withdraw his amendment.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 14th December 2015 Lords Chamber

[Lord McKenzie of Luton (Lab)]

My Lords, as your Lordships have heard, we have added out name to Amendment 60 in the name of the noble Baroness, Lady Manzoor, and I cannot think why we did not do likewise for Amendment 62C, which we support and which also has the support of the noble Baroness, Lady Hollins, the noble Lord, Lord Best, and the noble Earl, Lord Listowel.

The proposition to remove access to the housing element of universal credit for 18 to 21 year-olds from April 2017 has been some time in the making. Its progression—or, more likely, regression—can be tracked from a series of references by the Prime Minister at his party conference. Its original focus was to remove housing benefit for people aged 16 to 24, but this has now been narrowed, as we have heard, to 18 to 21 year-olds for universal credit. There are of course already lower levels of housing benefit allowances for single people under 25 and couples under 18, as well as restrictions under the shared accommodation rate. Can the Minister confirm that the Prime Minister’s desire to have an extended denial of housing benefit or universal credit for 16 to 25 year-olds is now off the agenda? The rationale for the policy has a familiar refrain:

“This will ensure young people in the benefits system face the same choices as young people who work and who may not be able to afford to leave home”.

That is a simplistic view of the choices facing many young people and in any event ignores the fact that housing benefit can be claimed by those in work.

This policy is being introduced at the same time as the new youth obligation for 18 to 21 year-olds on universal credit—the so-called boot camp. As the noble Lord, Lord Low, points out, we are promised that there will be exemptions, and the amendment is probing what might be available. The policy starts from April 2017 for 18 to 21 year-olds who are out of work. Can the Minister confirm specifically that there will be protection for vulnerable claimants, as spelt out by the noble Lord, Lord Low, and that they will definitely include those with recent experience of work, young people living in homeless hostels or domestic violence refugees, care leavers, those with dependent children, those receiving ESA, or its equivalent, or income support and those who cannot live at home?

Like the noble Lord, Lord Low, we are grateful for the briefing provided by Crisis and its insights into the consequences of these proposals should they not be ameliorated—in particular, the consequences for those who are homeless or who have experienced or are at risk of homelessness. Its briefing reminds us that if the protections and exemptions are not sufficient, any savings from this measure will be wiped out by costs elsewhere, mostly from increased homelessness.

The policy has generated a range of criticism, as we have heard. The Chartered Institute of Housing says that it could mean young people being less willing to take risks in moving for work because of the removal of a safety net. Centrepoint says that claiming housing benefit is for many a short-term solution to a situation they find themselves in, providing them with a safety net from which they can get their lives back on track. Shelter opposes the measure because it asserts that,

“every young adult deserves somewhere safe and decent to live”—

and who could disagree with that?

House of Commons briefing paper number No. 06473 of 26 August 2015 refers to the Uncertain Futures paper published by YMCA England. This points out that, of the estimated 3.2 million 18 to 21 year-olds, just over 19,000 young people are currently claiming jobseeker’s allowance and housing benefit, and that 71% of the 18 to 21 year olds who access JSA do so for less than six months. It also points out that 7,200 young care leavers between 19 and 21 years-old in England are currently out of work and would potentially be able to claim JSA and housing benefit and that nearly 1,400 18 to 21 year-olds are currently living in YMCA supported accommodation and claim JSA and housing benefit. It points out, on lifestyle choice and the assertion that people just want to live on the dole, that most young people are entitled to £57.90 a week in JSA—frankly, what we would blow on a meal at the weekend.

YMCA England concludes:

“By removing automatic entitlement to Housing Benefit for 18 to 21 year olds the Government could be in danger of inadvertently taking away support from the young people who need it most and in doing so, exposing many more vulnerable young people to the risk of becoming homeless and therefore damaging their prospects of finding work in the future. Action is needed to address youth unemployment, but without protections thousands of vulnerable young people will face uncertain futures, not knowing if they will have anywhere they can call home and leaving them less able to find work”.

[Lord Freud]

My Lords, the Government’s policy proposal is to remove automatic entitlement to the housing cost elements of universal credit for certain young people aged 18 to 21. I confirm to the noble Lord, Lord McKenzie, that that is the Government’s policy. It will apply only to relevant 18 to 21 year-old claimants who make new claims in the areas where UC digital has rolled out. This will ensure young people in the benefits system face the same choices as young people who work and who may not be able to afford to leave the family home.

I start with the amendments tabled by the noble Baroness, Lady Manzoor. It is not fair that taxpayers should have to pay for young people who are not working to be able to live independently when young people in work or education may not be able to afford to do so. Having said that, the Government recognise that vulnerable people need to be protected. Work is currently being undertaken with a wide range of stakeholder groups to understand who these vulnerable young people may be. I can reassure the noble Baroness that the policy will not stop people looking for work in other areas of the country in the same way that young people not reliant on benefits can look for opportunities away from where they live.

We need to complete the consultation work in order to ensure that a robust policy is put in place. I acknowledge the remarks of a wide range of noble Lords, including the noble Lord, Lord Low, the noble Baroness, Lady Hollins, and the noble Lords, Lord Best and Lord McKenzie, but we are doing this work. It is too soon to make decisions on the specific exemptions that will be applied, but we will bring forward detailed proposals once the work is completed—although, to anticipate the question, that will not be in time for Report. Indeed, to jog back to the previous amendment, I do not anticipate that the work on the work allowances that we discussed in UC would be done in time for Report. As I mentioned previously, the change will apply only to new universal credit claims from April 2017.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Wednesday 9th December 2015 Lords Chamber

[The Minister of State, Department for Work and Pensions (Lord Freud) (Con)]

I can answer that. It is a general way across the world that social scientists compare family to family of different sizes so there are ways of weighting each child or adult in the family.

[Lord McKenzie of Luton (Lab)]

My Lords, this has been a thoughtful and extensive debate. Amendments 24 and 26 in the name of my noble friend Lady Lister and the noble Lord, Lord Kirkwood, would cause data on low-income families where one or both parents are in work—that is, in-work poverty—to be reported.

We support these amendments. We know, as we have heard, that some two-thirds of children living in poverty are in working families and that whatever the climbdown on tax credits, the Government have in-work support in their sights. If we are concerned with measures that look at the current experience of poverty as well as the risk of poverty, there seems no logic in including out-of-work but not in-work poverty, although the policy levers may be different.

Amendment 25 in the names of the noble Baroness, Lady Grey-Thompson, and the noble Earl, Lord Listowel, seeks to retain the current income measures in the Child Poverty Act. We, of course, support that. Our Amendment 46 does the same but retains that Act’s targets as well.

The absence of income measures cannot be justified and runs counter to pretty much all the evidence or views of those engaged with child poverty. The Government’s suggestion that income measures are a symptom of poverty, rather than a cause, is too simplistic. My noble friend Lady Blackstone gave us a great example relating to educational attainment. If people are poor they do not have the same opportunity to have the same equipment at home; they do not necessarily have books at home and they do not necessarily go to school with a meal inside them so that they can be more attentive at school. It is simplistic to say that one is looking at the experience of poverty and that it is not a symptom of poverty.

In its July 2015 response to the Government’s child poverty statement—a number of noble Lords referred to this—the Social Mobility and Child Poverty Commission stated:

“The commission has argued in the past that a more rounded way of measuring poverty—taking … account of causal risk factors—is sensible. The life chances of children, the poorest especially, depend on many things … It is not credible, however, to try to improve the life chances of the poor without acknowledging the most obvious symptom of poverty, lack of money”.

Pretty much every noble Lord who has spoken in this debate, with the possible exception of the noble Baroness, Lady Stroud, agreed with that proposition. She asserts that looking at simplistic measures of income contains a number of flaws, but my noble friend Lady Hollis made clear that the Child Poverty Act 2010 had four measures. You need to look at the circumstances in aggregate, not just at one snapshot in time.

CPAG says:

“We believe that poverty is a condition marked by a lack of adequate resources, some of which may not be financial. Nonetheless, an inadequate income remains the decisive characteristic of poverty and must remain central to any poverty measurement”.

A number of noble Lords referred to the Centre for Analysis of Social Exclusion at the LSE and the work that it did. It looked at the responses to the DWP’s consultation on child poverty measures, which sought to test the level of support for replacing the existing measures with new dimensions, including those provided for in the Bill. As we have heard, the research shows that there is a very high level of support for the existing measures in the current Act. Most wanted no change and those who countenanced additional dimensions saw this as supplementary information, but not as measures of child poverty itself. Most respondents were of the view that lack of material resources— income—was the very core of child poverty. We agree with that. It is suggested that respondents to the consultation saw the proposals to change the measures as bringing to an end the official measurement of child poverty in the UK. How does the Minister respond to that? He will doubtless tell us that the HBAI figures will still be published as now, but we know from our prior deliberations—the noble Baroness, Lady Grey-Thompson, made this point—that what gets reported under Clause 4 will be the focus of the Government’s attention. That is why they are approaching it this way.

[Lord McKenzie of Luton]

I thank my noble friend for that intervention. I doubt there is much that she does not understand or is incapable of understanding, but she asked a highly relevant question. I hope that the Minister will give that assurance.

We have had a number of contributions to this debate. My noble friend Lord Liddle took us back in history but stressed the importance of the work that went into developing these measures in the first instance, enjoining the skills of Tony Atkinson. The right reverend Prelate the Bishop of Durham recognised the value of having worklessness and educational attainment as part of a measure. However, he said that that was not sufficient; there needs to be a focus on income if life chances are to be influenced and addressed.

The noble Earl, Lord Listowel, supported the existing measures in legislation. I think that the Child Poverty Act was the first legislation that the Minister worked on in opposition when he joined this place. At the end of the day, I thought that we had pretty much cross-party agreement, although it is fair to say that the Minister said there were other aspects of poverty which he thought should be reported as well. However, I do not believe that is the same as tearing up the Child Poverty Act, which is what this piece of legislation seeks to do. This is a very important issue because, unless we look at income, we will not address the here and now of poverty. It is all very well looking at some of those factors which have medium and long-term effects on people’s life chances, but we also need to address how people without resources exist today. That is why we need these amendments.

[Lord Freud]

My Lords, if we are taking a trip down memory lane, I remind the noble Lord, Lord McKenzie, that he unceremoniously threw out my amendment to put in four key life chance measures, which I said at the time would better reflect the real drivers of poverty, so clearly the debate has not moved on a lot.

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[Lord McKenzie of Luton]

Does the noble Lord accept that the issues he was talking about were quite properly to be included in the building blocks of the strategy, which the Bill also required? It did not eschew the measures themselves.

[Lord Freud]

I shall address the amendments. I am sure the noble Lord will come back to me on some of these issues as I go through my remarks. Amendment 25, in the names of the noble Earl, Lord Listowel, and the noble Baroness, Lady Grey-Thompson, seeks to expand the report to include data on children living in households with low relative income combined with the other three income measures in the current Act, as we have discussed. The reason that we do not want to include those is that they fail to tackle the root causes of child poverty and focus on symptoms, which we want to replace. I will set out my argument in full. The effect of Amendment 46, in the names of the noble Baroness, Lady Sherlock, and the noble Lord, Lord McKenzie, is wider still. It would prevent the repeal of those measures from the Child Poverty Act 2010.

I shall try to explain why we find the four income-related measures unfit for purpose, particularly as regards treating them as targets. The income measures they are based on are a poor test of whether children’s lives are really improving. As my noble friend Lady Stroud pointed out, in the past, they have shown child poverty falling when the economy was in recession. Much more importantly, when you look at them as a driver of decisions by a Government, they are inherently unpredictable and would lead a Government to spend finite resources on action that does not produce the best results for children.

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[Baroness Blackstone]

My Lords, though the Minister makes a commitment, will he accept that, as is so often said in this House, if there is no statutory requirement and nothing on the statute book any one of his successors could abandon that commitment? That is why we who have concerns about children in poverty want this measure to go on being collected and to be done under statute.

[Lord McKenzie of Luton]

I agree that we should have this in legislation but can the Minister confirm that his personal commitment will cover the circumstances and the work that needs to be done to identify whether somebody is experiencing material deprivation? That is not just an income issue.

[Lord Freud]

I think the noble Baroness, Lady Lister, will support me here but my memory is that the material deprivation figures are in the HBAI statistics. She nods that that is the case, so I can confirm that.

I shall summarise briefly. I am not in a position to give noble Lords the one word they want, but hope I have indicated that the measures will be available to see what is happening to relative child poverty. I am convinced that it is our new life chances measures—the measures rejected six years ago by the noble Lord, Lord McKenzie, which focus on the key drivers of worklessness and educational attainment—that will make the biggest difference to children, and that these amendments, were they on a statutory basis, would dilute that focus. We want to focus on the measures that make a real difference to children’s lives. I therefore invite the noble Baroness to withdraw her amendment.

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[Lord McKenzie of Luton]

My Lords, I shall be brief because I know that we want to make progress today. I support wholeheartedly my noble friend Lady Lister, with her brilliant exposition as to why we should substitute “life chances” for “social mobility”. I join her in opposing the proposition that Clause 5 stand part of the Bill. We have a very specific amendment in this group, Amendment 41, which is merely to delete the words, “on request”, so that the commission, whatever its final title and remit, can be proactive in offering advice to the Minister. That obviously carries the implication that the commission must be appropriately resourced. Perhaps the Minister will tell us what is intended in this regard. I hesitated to raise that issue, because I feared that the Minister was going to tell me that we put it there when we were in government, but I hope that he will not. Even if we did, it seems to be entirely reasonable that it should now be expunged from the provision.

I also support those who argue that there should be proper strategies, so that you do not just have odd reporting obligations: there must be an intent to come forward with a strategy focused on life chances and on fuel poverty. As the noble Baroness, Lady Grey-Thompson, said, if we do not have a strategy, where is all this reporting going to lead? Given the hour, I think I will leave it there.

[Lord Freud]

I hope that what I have to say on this group of amendments will be a little more pleasing, although I do not think it will please everyone on everything. I will divide my remarks into two areas: the first on strategy and targets, and the second on the commission. It is a wide group of amendments, and that is the way they break down.

Starting with Amendment 33, I think that noble Lords who put that forward would accept that we have dealt with that pretty thoroughly when we considered Amendment 25, so I shall not reiterate all of my arguments on that matter. Noble Lords have heard my concerns about the implications of legal targets when the financial figures are so difficult to forecast.

Amendment 31 sets out exactly what information should be in the Secretary of State’s report. I think that I am going to please the noble Baroness, Lady Lister, when I explain where we are. We will publish a strategy on life chances, so that is the noble Baroness’s strategy. We will then publish an annual statutory report on the new measures: I think that is effectively what the noble Baroness is driving at. The Government have produced major new strategies, and I think that noble Lords all around the Chamber will accept that we have tried to transform all the structures of the benefits system and the support we provide for people in a coherent way.

Welfare Reform and Work Bill

Debate between Lord Freud and Lord McKenzie of Luton

Monday 7th December 2015 Lords Chamber

[Lord Freud]

There have been studies showing the numbers who are addicted to one or the other. I remember producing some figures on that in the debate on the last Welfare Bill. Clearly, one of the points of developing a life chances strategy is to get a better grip both of those areas and, indeed, the figures on debt. As the noble Baroness hinted, the figures are imperfect, and that is one of the reasons we want to get a better grip on it. When we look at the levels of debt, that will tell us about impacts, and we can start to analyse what those impacts are. That would of course include any government measures and the impacts would be revealed.

[Lord McKenzie of Luton]

I am still a little unclear on one fairly key point. When responding to the consultation on the measurement of poverty, the commission recommended almost a two-pronged approach. One was that there should be a multidimensional focus on the causes of poverty, but a clear focus on recording the experience of poverty and dealing with poverty here and now with an income measure. I understand what the Minister has been saying about focusing on the causes. One can see the longer-term impact of that; but what, precisely, are the Government going to do differently in respect of the here and now of people’s actual experience of poverty—people who simply do not have enough income today, and will not tomorrow or the day after, to get by and play their part in society? That is what I find to be missing, so far at least, from the Minister’s response.

[Lord Freud]

I am not sure that the Government would do much different from what they are doing. They have a safety net and there are various measures to support people. We are building at speed now the universal support system in which we are combining with local authorities to help the most vulnerable, but in a very different way from how people have been helped in the past, which was through crisis loans that they went on and on building in a random way, without anyone looking at the root causes of their problems and trying to help them out of them. This approach accords with that. Clearly, we will be spending our money on the root causes of poverty and on life chances. But there will be income measures published, because we have said that we will go on publishing the HBAI. If people want to see what is happening, that gets a lot of publicity every year. That is the change: the money that we will be spending on life chances. Those are some of the mechanisms by which we will do it. Universal support is one of the key things, but there are a lot of other things. Getting mental health right is something that has evaded Governments for a long time, and we are now spending more money on that than any Government have before.

I urge noble Lords not to press these amendments.

[Lord McKenzie of Luton]

Could we perhaps have one more brief run-through of the issue of income? The Minister says that the Government are not doing anything specific to address income poverty other than the application of their current broad benefit regime, with all the cuts that that is now having to endure. Is that it, in terms of actually tackling current poverty? How does the Minister deal with the point that pretty much every expert out there has concluded—certainly the commission has—that we need to have consistent, robust measures of poverty? What the key driver is, and all the other stuff, is subsidiary to that. There seems to be an overwhelming view coming from the experts on that. Is that not a view that the Government share?

[Lord Freud]

No. Every year I stand here because there is a forecast that says that child poverty is going up, has gone up or will go up, but when we actually see the figures we find that child poverty has actually gone down; the Government have been impressed and shocked by that. When you transform the economy, change the culture so that work is what has been driving things, and move up the employment rates and the earning rates in the way that we have, you find that the behavioural impacts are very different from the static analysis that many of the external experts tell us about.

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[Lord McKenzie of Luton]

I will follow up on the point about local authorities that my noble friend Lady Lister raised. The Minister will be aware that we are in the era of devolution deals, particularly with combined authorities—Manchester was the first, and there are others as well. As part of that process, is the department engaged in inputting into the package with a particular focus on child poverty issues?

[Lord Freud]

As noble Lords will be aware, the Government’s emphasis is to put authority into the hands of local authorities, which is what devolution is about. Therefore they cannot have devolution on the one hand and then send a whole series of specific requirements down on the other.