Fit for Work Scheme
Lord McKenzie of Luton Excerpts(9 years, 3 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton (Lab)
My Lords, this has been an informed but brief debate and we should be grateful to the noble Lord, Lord Luce, who rightly prompted us to seek an update on the Fit for Work scheme, which has now been under way for more than a year. The particular focus of the noble Lord—and of others—was on chronic pain, for the reasons he outlined. The noble Lord also, in common with a number of other contributors, made the point forcefully that the service is as yet not well known.
The service has a direct link to the work of Dame Carol Black, and in particular to the analysis that she undertook, together with David Frost, that looked at sickness absence in the UK. Its focus on the period when people first became vulnerable to disconnection from the labour market was an important development and a component of emerging strands of policy that spanned Governments. Introduction of the service followed a series of pilots between April and June 2010 which looked at different ways of supporting employees in ill health to stay in or return to work after a period of sickness absence. These pilots grew out of Dame Carol’s review of the health of Britain’s working-age population, which showed the staggering annual economic cost of ill health in working days lost and worklessness to be over £100 billion.
Over recent years, the understanding of the relationship between work and health has changed and indeed improved. We have moved away from the notion that it is always in the best interests of someone with a health condition to be absent from the workplace. Being in work is good for health, and worklessness leads to poorer health—including mental health, a point noted by the noble Lord, Lord Fink. Hence the need to promote the benefits of work to health for individuals, employers and healthcare professionals, a proposition most strongly advanced by Waddell and Burton.
However, there is a need to go further. Bringing the expertise of health professionals directly to bear in support of individuals who are off sick or in danger of being so is something which we support. This is what the Fit for Work service is seeking to do. It is an early intervention, involving a referral after four weeks of sickness—although the noble Baroness, Lady Walmsley, made an interesting point about the relevance of that—for an assessment from a GP or, if not, potentially from an employer. That assessment should lead to a return to work plan. So far, so good, but we need to take stock to see how it is all working out in practice. I have some questions, some of which overlap those presented by other noble Lords. In England the service is contracted to Health Management Ltd. Can the Minister say something about the qualifications of the individuals allowed to deliver these services? What range of qualifications does this cover and what review of quality is being undertaken?
It is understood that the contract is for five years, at an initial value of something like £132 million, although this may have been increased. Can the Minister say how many Fit for Work interventions it is expected this would cover, and can we have an update on how many referrals have been made to date? Can the Minister say what level of referrals was anticipated when the contract was entered into?
Press comment, as others have noted, has suggested there is some confusion about the interpretation over the referral guidelines, at least so far as GPs are concerned. Is the Minister aware of this and can he say what the problem is? A DWP study apparently suggested GPs are likely to refer some 36% of their eligible case load to the service, but referral rates in practice vary. Why is this? The process involves at least the first assessment being undertaken by phone rather than face to face, and the nature of the assessment is determined by the occupational health professional. How many assessments are undertaken face to face and how many by phone? It is understood that a re-referral cannot be made within 12 months of a previous one where a return to work plan has been agreed. What is the position where an assessment is under way? Is it an iterative process, with potentially several telephone calls and meetings until a return to work plan is agreed? What is the experience of eligible employees who refuse consent for a referral? What information does the service hold on the outcome of return to work plans, in particular on whether they lead to long-term, sustainable, positive outcomes? The right reverend Prelate the Bishop of Derby offered an interesting parallel with asset-based community development and the potential that offers the Fit for Work service.
The Question of the noble Lord, Lord Luce, specifically refers to long-term, chronic pain, but of course the service is also available to those with a mental health condition. Can the Minister give us an update on the levels of referral for such individuals? Are such assessments always undertaken on a face-to-face basis, at least initially? It has also been reported that the Fit for Work service is less well used by SMEs, a point that a number of noble Lords made. Is this the Government’s understanding, and what amendments might be made to the service to address that?
The Fit for Work service notwithstanding, major challenges exist. As the Work Foundation report due to launch next week sets out, managing a long-term health condition while also working is a challenge. People who experience multiple long-term health conditions have poorer outcomes from a range of employment-related conditions, which is perhaps not surprising. The Work Foundation reports that one in three current employees has at least one long-term health condition and that 42% report that their health affects their work. This, together with the stigma of discrimination associated with poor health, is argued to be a major contributor to the gap in employment outcomes.
We know that mental illness has a substantial and highly detrimental impact on employment outcomes when it occurs on its own, but an even greater impact when it occurs alongside a physical health condition. Nevertheless, it seems clear that for many people with multiple, long-term health conditions, work is a positive part of their lives. The question is what the Fit for Work service contributes to helping them remain in work. More needs to be done, as noble Lords have said, to enhance awareness of what it can do.
Pensions Act 2014 (Consequential Amendments) Order 2016
Lord McKenzie of Luton Excerpts(9 years, 4 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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
Lord McKenzie of Luton Excerpts(9 years, 6 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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.
Personal Independence Payment
Lord McKenzie of Luton Excerpts(9 years, 8 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton
To ask Her Majesty’s Government whether they have any plans to amend the Personal Independence Payment mobility criteria.
The Minister of State, Department for Work and Pensions (Baroness Altmann) (Con)
My Lords, there are no plans to amend the mobility criteria in personal independence payment. The Government consulted extensively when designing the criteria, including a specific consultation on the “moving around” activity. The criteria provide a more consistent assessment for claimants with both physical and non-physical impairments, and there are now 22,000 more people on the Motability scheme than before PIP was introduced.
Lord McKenzie of Luton (Lab)
My Lords, I note the Minister’s reply. As she will recognise, this Question arises from a debate that was led by the noble Baroness, Lady Thomas of Winchester, about a month ago. That was about the qualifying criteria for the enhanced mobility component under PIP—particularly that those who could reliably walk no more than just 20 metres will not qualify, losing £35 a week and vital support to live independent lives. When the Minister responded to that debate, she asserted that claimants who cannot walk up to 50 metres would be guaranteed the enhanced rate. I think there has been some pulling back from that position, which is regrettable. Given that the Minister was clearly content to enunciate the policy relating to 50 metres, will she not now actively join others in seeking the reinstatement of the 50-metre benchmark as a research base measure of significant mobility impairment?
Baroness Altmann
My Lords, I have issued a correction of the response to the Official Report. It is indeed possible for those who are unable reliably to walk more than 20 metres to get the enhanced rate, but there is no generally accepted measurement of distance that will be recognised as appropriate. The aim of the enhanced rate is, and always was under DLA, to help people who are either unable or virtually unable to walk. Under PIP, the test is widened so that it is not just those who are unable or virtually unable to walk, but those who have barriers to mobility and who find it difficult to get around. These issues need to be addressed on a case-by-case basis. They are expertly assessed. Indeed, we engaged directly with the noble Baroness, Lady Thomas, subsequent to that debate as we want to get this right.
Personal Independence Payment: Mobility Criterion
Lord McKenzie of Luton Excerpts(9 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Doocey (LD)
My Lords, my noble friend Lady Thomas of Winchester has been a tireless advocate for disabled people, using her skills, knowledge and empathy to try to influence government’s attitude to disabled people, their independence and their well-being. However, the 20-metre rule has little to do either with well-being or independence; it is a crude measure to save money. Once again, the Treasury’s guns are trained on those of working age.
Ministers must know, when they reflect privately, that it is short-sighted in the extreme to take away from disabled people who are at an age where it is hoped they could get paid work the very thing that might help get them to and from work. The Motability scheme is well known and understood by its users, and hinges on providing their independence. The Access to Work scheme is a much more limited scheme than Motability and will never be considered a substitute by the people who matter in this—the end-users. What money is saved by snatching cars away from disabled people will almost certainly be lost again in reduced tax revenues as people slip away from employment through no fault of their own. The Government have said that they are sticking with 20 metres because there is “no consensus” around an alternative distance. Other government departments use 50 metres, so it is not that there is a lack of consensus but that the DWP refuses to join the consensus.
As a former local councillor, I know only too well the problems that used to be associated with blue badge parking discs. Yet when the regulations around eligibility and enforcement were tightened up by the coalition Government, the key criterion that they chose to maintain was that a person should be unable to walk more than 50 metres. The Minister must recognise the sense of having some symmetry in the rules about who has special parking rights because of their lack of mobility and who is entitled to some help with having a car in the first instance—also because of their lack of mobility. Do the Government seriously suppose that a person capable of walking only 25 metres, for example, can access public transport with ease? The suggestion beggars belief.
The 20-metre rule is an appalling change, which will be keenly felt in the lives of the hundreds of thousands of people whom it will affect. My noble friend has given the House a clear opportunity to send a strong message to the Government that they must think again. I hope that noble Lords on all sides of the House will make sure that that message is loud and clear.
Lord McKenzie of Luton (Lab)
My Lords, I congratulate the noble Baroness, Lady Thomas, on securing this debate tonight. As others have said, she is tenacious on this issue. I have been on the receiving end of some of that at former times when I was a Minister, so I know it is for real. The issue that has been raised tonight was debated intensely when we considered the Welfare Reform Bill in 2012. The usual voices have been heard again tonight. We had an extensive debate around the nature of disability in the social and medical model and there were concerns that the approach to PIP would become very much a tick-box exercise. That has proved to be the case.
As other noble Lords said, the 50-metre threshold is used in the DLA and in ESA. The criteria are not necessarily directed in the same manner, but it is a tried and tested threshold. The Government at the time prayed in aid for the 20-metre rule that they had had discussions with people, eventually. If that is the Government’s justification, it is impossible for them now to argue against having urgent discussions with those same people to address the problems that are clearly emerging from the application of what has turned out to be a pernicious rule.
This Motion has our wholehearted support. My noble friend will reinforce that in a moment, but I congratulate the noble Baroness, Lady Thomas: this is a real issue and she should stick at it.
Baroness Altmann
I thank the noble Lord, and I stress again that we were always aware that there would be people who would lose their Motability cars when we changed from a system that relied on lifetime awards and did not assess people’s current circumstances, to one that does. If someone’s is going through a PIP assessment whose circumstances have changed—who previously was not seen face to face, perhaps, and who had a lifetime award—and they are judged no longer to be unable, or almost unable, to walk, they will therefore not be entitled to the enhanced rate component and will lose their car. We knew that that was a result, but that is part of the process.
When making his Statement to Parliament, the Secretary of State said:
“I want to start a new conversation with disabled people”,—[Official Report, Commons, 21/3/16; col. 1269.]
and disability organisations. So I say once again that we are listening; our door is open. We have recently changed the rules, for example, for terminally ill claimants to ensure they no longer have to wait 28 days to receive the enhanced rates of PIP if they transfer from DLA. We are also revisiting our approach to award reviews to make better use of the evidence we already have, so that claimants do not have to give us the same information again if their circumstances have not changed. We are listening to the views of noble Lords; we want their views and those of disability groups; we value the expertise of noble Lords in this House and I say again that we are happy to meet the organisations.
Lord McKenzie of Luton
Before the Minister sits down, can we just revert to the discussion about the 20-metre and 50-metre rule, and whether it is a rule or not? As I understand it, she was saying that it is possible for somebody who can walk more than 20 metres to qualify for the highest mobility component. Of the total number of people who qualify, how many qualify on that basis and how many qualify because the 20-metre rule operates?
State Pension
Lord McKenzie of Luton Excerpts(9 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Altmann
The noble Lord makes an important point; it is one that the Government have already been looking at. The new state pension will give much more clarity and generosity to the base on which the self-employed can build. The new lifetime ISA may be an opportunity for the self-employed to save in a way that they might be more comfortable with, rather than locking money irrevocably into a pension in their 20s and 30s.
Lord McKenzie of Luton (Lab)
My Lords, we know, and the Minister has confirmed, that overall expenditure on pensioner benefits is projected to be broadly the same under the new system as under the old until about 2040. Thereafter, expenditure growth is slower, so the Government plan to save money. There will be winners and losers. In particular among the losing category will be those currently in their 20s and 30s. The Government are pocketing some £4 billion to £5 billion extra a year from national insurance contributions because of the abolition of contracting out. Following another Budget disaster this year, the Government were forced to commit that there will be no more welfare cuts this Parliament. Will the Minister confirm that this applies to all existing pensioner benefits and that the triple lock, including that applied to the new state pension, will be applied as now? Further, should the UK leave the EU as the result of the referendum, what route, if any, will the Government take to preserve existing reciprocal pension uprating arrangements?
Baroness Altmann
The noble Lord has asked about five questions. However, I can certainly reassure the House that there is an absolute commitment to protect pensioner benefits up to 2020, and the basic state pension and the full new state pension, through the triple lock. As regards the expenditure on state pension, the reason that there are losers, if you like, in the long run—although I would not call them losers—is that we need to make the state pension system sustainable. That is exactly what the new state pension system will do. Indeed, with the introduction of the state pension, 75% of women and 70% of men will get more state pension. In the long term, the aim is for the auto-enrolment private pension to make up for the loss of earnings-linked state pensions.
Welfare
Lord McKenzie of Luton Excerpts(9 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
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.
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2016
Lord McKenzie of Luton Excerpts(9 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton (Lab)
My Lords, I thank the Minister for introducing this order. We support the progress which has been made on auto-enrolment and we should take this opportunity to pay tribute to those who helped to create it. My noble friend Lady Drake was there at the start, or indeed before it, and she has expressed her concerns that the system still does not seem to be dealing adequately with the concerns and needs of low-paid women. It will be interesting to hear the Minister’s response to all that.
In her introduction, the Minister referred to the fact that those between the LEL and qualifying earnings can opt into the system. Do we have any data about how many actually do that? I think she cited that there was equality in 2014, in so far as 63% of eligible men and 63% of women opted in. The trouble is that the numbers of men and women were not equal, which meant that many more men opted in, so her statistic was a bit unfortunate.
As my noble friend Lady Drake has recognised, freezing the earnings trigger for a second year has a modest impact in drawing more people in and will help women, who are of course disproportionately represented among the lower paid and have missed out on auto-enrolment previously. One of the effects of freezing the trigger at £10,000 is a widening gap between the contributions and the income tax threshold, which means that, as a practical matter, those who are on the net pay tax relief arrangements are not actually getting effective tax relief. There are, of course, two ways in which you can get your tax relief: one is through the net pay arrangement and the other, the name of which escapes me—
Lord McKenzie of Luton
It is indeed relief at source. I am grateful to the Minister. What is happening to try to ensure that those people who are subject to the net pay arrangements are getting their tax relief? I am not quite sure what the arrangement with NEST is. I think that relief at source, which generally operates for NEST, will obviously cover a good many people, but how many people are missing out? These are people at the low end of the income scale who are not getting their tax relief, which was an important ingredient of the overall arithmetic.
Has there been any progress on aggregating mini-jobs for the purposes of the trigger and qualifying earnings band? If our noble friend Lady Hollis were here rather than in the debate on the Housing and Planning Bill, she would be on her feet extensively.
Lord McKenzie of Luton
It was about people with mini-jobs being able to aggregate to reach the thresholds. We understand some of the practicalities, but has any progress been made on that?
I have another question to which I genuinely do not know the answer, about the impact of zero- hours contracts and fluctuating earnings on take-up arrangements. Looking at the varying pay periods, how does this work when somebody is within a pay period and above the threshold for one month but not for the subsequent period, so that they fluctuate in and out of the system? I think those were all the questions that I had. We will obviously not be opposing these provisions, and I look forward to the Minister’s response.
Baroness Altmann
My Lords, I thank the noble Baroness, Lady Drake, and the noble Lord, Lord McKenzie, for their excellent contributions. I certainly join in the tribute paid to the noble Baroness by the noble Lord for her role in setting up and being responsible for the successful programme of auto-enrolment.
I am delighted and welcome the fact that the noble Baroness welcomes the decision to freeze the earnings trigger. I am also delighted that she is as pleased as we are with the low opt-out rate and that, so far, this programme has indeed been a real success. All the points raised by the noble Baroness are valid, and are ones that I have raised in the past. However, there is a further reason why we have to be mindful of where we set the earnings trigger, and be very careful as we move forward with this policy not to derail what is already such a success. Part of the reason why it is such a success is that there is widespread consensus among employers as well as the pensions industry that this is the right thing for the country. Employers have accepted—willingly, in many cases—the idea that it is normal, and should be normal, for an employer to be responsible for not only the national insurance and tax of their employees but also a pension for their workforce.
However, as the noble Baroness knows, that consensus was hard won. It was the result of a very long period of negotiation and renegotiation, part of which concerned the costs to the employer. Although the earnings trigger is higher than might have been expected a few years ago, we have put other burdens on employers. Were we to reduce the earnings trigger significantly at this stage, given that we have the rollout of the national living wage, the apprenticeship levy and other elements that will impact on employers’ labour costs, it would be right to be mindful and careful about how quickly we move to include significantly more people in pension saving. However, notwithstanding that, as I said, 130,000 more people will be brought into pension saving—71% of whom are expected to be women—as a result of keeping the earnings trigger at the £10,000 level rather than moving it up, as was one of the considerations.
The noble Lord, Lord McKenzie, also referred to women. I once again confirm that the coverage of pensions for eligible workers is the same for women and men. As most noble Lords are probably aware, I would certainly like to see more women being brought into auto-enrolment. In time, I am sure that we will be able to do that. Of course, they can now opt in anyway if they are earning more than £5,824 a year and receive an employer contribution. That still means that they do not get the same behavioural nudge, but I can report that the latest figures suggest that 5% of those who are not eligible and are earning below the relevant figure are opting into their employers’ pension scheme. It is a start. I hope that, in time, we will go further as we establish this as the norm and as more workers become aware of the fact that this could be effectively free money from their employer, and that a significant extra contribution on top of their own pension savings is on offer if they wish to take it up. Of course, it takes time for those messages to come through.
As the noble Lord may well be aware, the issue of net pay arrangements is something significant that I have raised since I became aware of it a few months ago. Clearly, it is not acceptable that the very lowest earners might be required to pay about 20% to 25% more for the same pension as someone who earns more than them. That is the potential result of their employer choosing to use this net pay arrangement-type of scheme rather than a relief-at-source scheme.
Occupational Pension Schemes (Scheme Administration) (Amendment) Regulations 2016
Lord McKenzie of Luton Excerpts(9 years, 10 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord McKenzie of Luton (Lab)
My Lords, I thank the noble Baroness, Lady Altmann, for introducing these regulations in such a clear manner. We share the commitment to the importance of schemes being well governed. It is accepted that these regulations are generally focused on several technical amendments following on from governance requirements that were introduced last year, driven in part by the requirement to ensure that the growth of money-purchase schemes flowing from auto-enrolment is fit for purpose.
As we have heard, the thrust of these amendments seeks: to put beyond doubt that multiemployer group schemes are excluded from the additional governance requirements; to remove the chair of NEST from the required appointment timescale, because this is otherwise dealt with in statute; to allow a deputy to sign the chair’s statement when the latter is not in place; to enable a statutory override where scheme rules are in conflict with the trust deed requirements; and to let those schemes established by statute have a limited period to comply with the trustee appointments so that the current exclusion can expire—as well as some other tidying up.
We have no quarrel with those amendments, but seek clarification on just one aspect. In regulation 4, the substituted sub-paragraph (2ZA)(a)(ii), participating employers are “connected” if, inter alia, they are,
“are or have been partnerships, each having the same persons as at least half of its partners”.
The test seems to be a head count rather than being a sufficient commonality of shares of partnership activities. Is this what was intended?
That having been said, I should like to return to some points that my colleague, Angela Rayner MP, raised when these matters were debated in another place, particularly as they received scant response from the Minister in the Commons. Of course, we know that our Lords Minister, particularly being forewarned, will be able to do better. These issues concerned the growth of multiemployer schemes or master trusts. It was said that there is no official list of master trust providers although as many as 70 or 80 could be operating at the moment. What is the Minister’s understanding? My honourable friend cited two pieces of evidence given to the Work and Pensions Select Committee, one from the ABI and the other from the Pensions Regulator. The former pointed out that:
“Trust-based … schemes (including master trusts) … are not currently subject to the same stringent regulatory standards as contract-based schemes, which are regulated by the FCA”.
The latter pointed out that:
“Due to their scale, commercial purpose and design for use by multiple employers, master trusts represent different risks to members and consumer protection … master trusts themselves are not authorised prior to market entry and the regulatory framework is not designed for similar levels of ongoing supervision”,
unlike providers regulated by the FCA.
Does the Minister share these concerns? To what extent if at all has the position been ameliorated by the governance arrangements that we are discussing today? Is it satisfactory that the take-up of the voluntary master trust assurance framework seems to be so low? Does the Minister have an update on the previous figure of just five schemes? Is the Minister satisfied that the fit and proper persons test is being applied rigorously? Is it the case that master trusts are not protected either by the Financial Services Compensation Scheme or the Pension Protection Fund and is this an acceptable position?
The Minister will have read the Hansard record of other concerns expressed in the debate. I will not go over them all. It is understood that the Minister is on record as asserting that legislation is needed, particularly to deal with master trusts given their proliferation and the ongoing progress of auto-enrolment. We will have to wait and see what is in the Queen’s Speech in a few weeks’ time but one way or another, there are substantial issues here that need to be addressed.
Baroness Altmann
My Lords, I thank the noble Lord, Lord McKenzie, for his remarks. I am grateful that he shares our commitment that schemes should be well governed and welcome that he has no quarrel with our proposed regulations on these measures. I shall try to respond to some of his questions.
The noble Lord asked if the Minister shares the concerns that have been raised, and I can tell him that the Minister does share those concerns. It is true that trust-based schemes are not subject to the same regulatory controls. The authorisation of master trusts and trust-based schemes is the responsibility of HMRC. There is a “fit and proper persons” test now, but clearly even if that is applied rigorously more protection may be required. That is under active consideration. Such schemes are not, unless they are defined benefit, protected by the Pension Protection Fund, and even if the assets are protected by the FSCS, it is true that the costs of winding up the scheme could be deducted from the protected assets. Therefore, there is still a requirement for us to make sure that we protect as many people as possible in auto-enrolment and protect their pensions. These regulations, however, will ensure that there are improvements in governance standards. They will ensure that multiemployer schemes are better run and will clarify the governance requirements, which of course are such an important part of our pension system, to ensure that trustees are in place who can protect the interests of members.
With regard to the figures, over 90% of members who automatically enrolled into master trusts have been enrolled into those schemes that had signed up to the master trust assurance framework, which ensures that some quality features apply but is not, in and of itself, sufficient as a guarantee. It is a good indication of well-run schemes. There are a number of large master trusts available for auto-enrolment, and the Pensions Regulator is obviously trying to signal to employers that they have been through some quality assurance testing. Again, that is important because the worker who is auto-enrolled into a pension scheme has no control over the scheme chosen for them by their employer. It is therefore essential that we help employers to know how to choose a good pension scheme for their staff that is safe and secure, and indeed that they do so.
Well-run master trusts can and do offer good value for consumers and their employers, and of course we are keen that this market develops in the right way. We are aware that there are some potential issues and, as I am sure the noble Lord is aware, we are working with the Pensions Regulator to improve protection and ensure that the right protection is in place, which is likely to require legislation. We will come back to the noble Lord when the measures can be further elaborated upon.
There are a number of governance requirements that master trusts already have to meet under the current law, and I believe that the voluntary master trust framework covers seven schemes—is that right? I understand that it covers five at the moment, but others are in the pipeline. Still, we need to be sure that we are exploring, and will succeed in achieving, other protections in addition to those that already exist as auto-enrolment moves forward. Currently the contribution levels are extremely low, but numbers will increase—contribution levels will be quadrupling by 2019—so we must ensure that we have protections in place for those who enter auto-enrolment in the coming years.
On the noble Lord’s question about the head-count issue in partnerships, the purpose of the definition of “connectedness” is to help schemes to establish the degree of connection within a corporate group or partnership. If they are sufficiently connected, it can be exempted from the requirements. The partnerships definition is designed to ensure that two employers that are partners share a sufficient number of partners—that is, at least half—in order to be connected. This is about not just numbers but connection. As long as the multiemployer scheme is multiowner only because of connected employers, it is treated more like a single-employer scheme, but if a scheme promotes itself to bring in other employers rather than just being within the group then it is a multiemployer scheme, and we are trying to clarify that with these regulations. We hope that that will be clear.
Lord McKenzie of Luton
I will perhaps expand a little on the question, although maybe we should follow it up outside this session. I understand the thrust of employers needing to be “connected” for these purposes and, so far as partnerships are concerned, connection looks to be driven by a certain commonality of numbers of partners. However, numbers of partners may not tell you very much about where the weight and financial interest of any particular partner is. It would have been quite easy to construct something where you had a sufficient number of partners but all the clout and financial substance was with just one or two partners. I wonder how the “connected” rules would operate in those circumstances. I am afraid that this is a bit of a nerdy issue, and maybe we should deal with it outside this session if the Minister is not able to cover it fully today.
Baroness Altmann
Regarding these regulations, as I have just described, if employers that are outside the group can fit within these corporate scenarios—that will include where an employer was part of the corporate group but has now left the group and continues to participate in the scheme—they are considered a corporate group scheme.
Lord McKenzie of Luton
If that is the end of the exchange, I thank the Minister for a very full and quite frank response. It is very helpful to get that on the record.
Baroness Altmann
I thank the noble Lord. I am grateful for noble Lords’ careful attention and scrutiny of these draft regulations. We believe that good governance is fundamental to securing good member outcomes and these draft regulations will help ensure that schemes are better run, in members’ interests. The regulations that we have put forward today will make amendments that will help to clarify the scope of the governance provisions. I am grateful for Members’ contributions to this debate. I hope I have set out the need for these regulations, and have responded as best as I can to the matters raised. If necessary, I will continue to answer any further questions that noble Lords may have. I commend these draft regulations to the Committee.
Welfare Reform and Work Bill
Lord McKenzie of Luton Excerpts(9 years, 10 months ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Deech (CB)
My Lords, I rise to speak in support of my noble friend Lord Low. Until about a year ago, I was by no means an expert in this field, and I am still not, but I have had the privilege for nearly a year of chairing the House of Lords Select Committee on the Equality Act 2010 and Disability. This afternoon, we have listened to a litany of shameful government actions that will undermine the struggles of disabled people. Disabled people are not “them over there”; any one of us could become disabled tomorrow by an accident or an illness. This applies to all of us; it is not something to be put in a corner. I find it quite shameful that we are removing Motability cars and that we are not carrying out an impact assessment.
My conclusion is that there is nobody in the Commons to champion the rights of disabled people in a holistic manner, and that it falls to this House, which has, fortunately, a good share of disabled people and those who are experts, to do so. I want this House to put on record its dismay, disagreement and disappointment with the way that disabled people are being treated—the very people who are trying to get back to work and trying to be independent. And it could be you, tomorrow.
Lord McKenzie of Luton (Lab)
My Lords, as others have said, this is a sorry occasion when we have to accept that the Government will have their way on the £1,500 a year reduction in ESA WRAG and universal credit limited capability for work component for new claims from April 2017, but in doing so we should make it clear that we reject the Secretary of State’s assertion that this House was somehow usurping parliamentary procedure in asking the Commons to defer its introduction until there is a proper impact assessment. We remain concerned that, in pressing ahead with this measure, the Government have continued to fail their public sector equality duty, which is to consider the impact of their policies on the elimination of discrimination, the advancement of equality of opportunity and the fostering of good relations.
Noble Lords may have had circulated to them correspondence between the Equality and Human Rights Commission and Roger Godsiff MP, which commented on the very limited analysis of the ESA work-related activity proposals. It said:
“These are the kinds of matters that we might have expected a more thorough analysis to have considered. Without this level of evidence, the assessment does not, in our opinion, sufficiently support consideration of alternative options which might have less of an impact on people with particular protected characteristics”.
We know that the EHRC wrote to the Secretary of State last September, offering to work more closely with the DWP on the Bill, but we understand that the offer was rejected. Will the Minister confirm that that was the case?
At Third Reading, my noble friend Lady Sherlock, while acknowledging some improvements along the way—the Minister outlined those and we thank him for his engagement—asserted that this is still “a bad Bill”. My noble friend was right. The retention of Clauses 13 and 14 is a particular manifestation of its unfairness. It is therefore a regret that, given what this House considers to be the right thing to do, as expressed by strong votes, we have been unable to convince a sufficient number of the elected House to our point of view.
We hold fast to the view that including these provisions will not act as an incentive to work—quite the reverse. We remain dismayed at the paucity of the analysis that underpins the Government’s position and their refusal to hold back until a proper impact assessment has been undertaken. It seems perverse in the extreme to rush ahead with these changes and at the same time promise the publication of a White Paper to address in part the disability employment gap. It is not helped much, either, by some meagre concessions that bring some uncertainties in their wake.
We should express our thanks to the noble Lord, Lord Low, for the leadership that he has shown on this issue, and for the work that he and the noble Baronesses, Lady Meacher, Lady Grey-Thompson and Lady Campbell, have done in the Halving the Gap? review. It seems to us that this stands in stark contrast with the Government’s effort by helping us better to understand the lives which many disabled people live, their aspirations for work, the barriers that they face to getting and sustaining work, and the poverty and poor health which challenges so many of their lives—issues that are brought home to us also by the work of the Disability Benefits Consortium. As we have heard, it has asserted that these clauses will bring savings of £640 million to government by the last year of this Parliament. In a couple of weeks’ time we will hear from the Chancellor who is to be favoured in his next Budget. We will hold in our minds the price that is being extracted from disabled people as a contribution. But our task in the mean time, as others have said, is to continue to press the Government on how these cuts are affecting disabled people both in and out of work and, as the DBC urges, to argue for a proper impact assessment about the consequences for their physical and mental health, and for their finances.