Oral Answers to Questions

Pat McFadden Excerpts

Monday 27th October 2025 Commons Chamber

[Mr Lee Dillon (Newbury) (LD)]

1. What assessment he has made of the potential implications for his Department’s policies of the report by the Institute for Fiscal Studies entitled, “How do people already out of employment fare when the state pension age rises”, published on 17 September 2025.

[The Secretary of State for Work and Pensions (Pat McFadden)]

The clocks went back at the weekend, and you nearly put them forward again, Mr Speaker.

I am pleased to be here answering my first set of questions as the Secretary of State for Work and Pensions. I look forward to my exchanges with the shadow Secretary of State, the hon. Member for Faversham and Mid Kent (Helen Whately), and the other spokespeople in the House.

The state pension age will rise to 67 from 2028. We continue to support later-life planning by helping people review their health, finances and skills—for example, by having specific work coaches for over-50s in our jobcentres. Consideration of the future of the state pension age is already under way, as asked for under the Pensions Act 2014.

[Mr Dillon]

I welcome the Secretary of State to his new position. In my seat of Newbury, over 5,200 women have been unfairly affected by changes to the state pension age. Those women were wronged through no fault of their own, and they deserve justice. With a High Court hearing due in December, this could be a crucial moment for the Government—a moment to finally do the right thing. Will the Secretary of State now listen to the ombudsman’s recommendations and commit to providing compensation to women of the Women Against State Pension Inequality Campaign?

[Pat McFadden]

I have to remind the hon. Member that when his party was in government, it supported the acceleration in the rise of the basic state pension age, and that has given rise to some of the questions he raises. You would not expect me to comment on ongoing litigation, Mr Speaker, and I will not, but I can assure the hon. Member and the House that we will take all relevant factors into account when considering the process for the future.

[Chris Vince (Harlow) (Lab/Co-op)]

Previous to my election to this place, I worked for a homeless charity in Harlow called Streets2Homes. One of its cases involved a man who was homeless due to delays in getting his state pension. How is the Department ensuring that delays like that are not commonplace?

[Pat McFadden]

We hope that those entitled to the basic state pension receive a seamless and fast service. This is a pension that people contribute to throughout their life, and when they reach state pension age, we of course hope that they get it as soon as possible.

[Bobby Dean (Carshalton and Wallington) (LD)]

2. What steps his Department is taking to assess the effectiveness of the Access to Work scheme in helping to enable long-term career progression for disabled people.

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[Helen Hayes (Dulwich and West Norwood) (Lab)]

6. What steps he is taking with Cabinet colleagues to help ensure that post-16 education provides the necessary skills to support the economy.

[The Secretary of State for Work and Pensions (Pat McFadden)]

Skills are vital to give young people opportunity, for economic growth and to our country’s renewal. That is why, as part of our youth guarantee, we are increasing short courses for high-demand sectors such as artificial intelligence and construction, expanding the number of youth hubs, and partnering with sports clubs to get help to people where they are in the community. Last week, we published the skills White Paper, which sets out the next steps for training the workforce of the future.

[Baggy Shanker]

I still want every young person in Derby to see technical education and apprenticeships as first-class, not second-best, routes to success. University technical colleges, from which students are four times more likely to progress on to apprenticeships, are key to unlocking that success. Will my right hon. Friend meet Pride Park UTC to discuss its plans to give young people in Derby real choice and real opportunity by rolling out a new technical centre in our city?

[Pat McFadden]

My hon. Friend has spoken often about this, and I believe that he started his career as an apprentice. As a former Rolls-Royce worker, he will have noted the skills White Paper, and of course he knows all about the importance of that company to the city of Derby. I congratulate Pride Park UTC on its plans for a new technical skills centre, and I will ensure that he gets a meeting with me or with the relevant Minister.

[Helen Hayes]

My Committee’s recent report on further education and skills highlights the poor amount of information on vocational and technical training opportunities, including apprenticeships, available to young people while they are in school. We recommend that UCAS be expanded to provide a single portal for information on academic, vocational and technical opportunities, so that every young person is aware of how they can train in the skills that they need to access a good job. Will the Secretary of State consider this recommendation, and work with the Department for Education to deliver it?

[Pat McFadden]

I welcome that question, as my hon. Friend raises a very important point. If we are going to have equal status for higher education and apprenticeship routes, we should look at how the information about them is disseminated to potential applicants. I hope that she will be pleased to hear that I have already asked the Department to begin work in this area.

[Damian Hinds (East Hampshire) (Con)]

One of the worries about the new regime and Skills England is the loss of independence, and the loss of what we had in the former Institute for Apprenticeships and Technical Education: a guaranteed business voice, written into law. How will the Secretary of State ensure that business has a voice in setting standards, and in making sure that those standards are upheld, so that everybody can have confidence in the changed system?

[Pat McFadden]

The right hon. Gentleman is right to say that the business voice and employers’ voice is very important in this. When I wrote the new remit letter to Skills England, I asked it to take into account the views of employers, because it is very important that the skills system is training people in a way that employers want, and that meets the future demands of the labour market.

[Sir Ashley Fox (Bridgwater) (Con)]

I welcome the Secretary of State to his place, and to his new responsibility for skills. The Government recently reduced the amount of funding for level 7 apprenticeships, so can he tell the House what assessment his Department has made of the potential impact of this reduced funding on the number of nurses in training?

[Pat McFadden]

The apprenticeships and skills budget, like every other budget, demands choices. We are choosing to prioritise the level that we need in the economy, and the areas where the value is greatest. That does imply certain choices, and I am confident that the choices we have made will benefit the workforce as a whole, and future opportunities.

[Steve Race (Exeter) (Lab)]

4. What steps he is taking to support people with health conditions into work.

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[Kirsteen Sullivan (Bathgate and Linlithgow) (Lab/Co-op)]

7. What steps he is taking to support young people into employment, education or training.

[The Secretary of State for Work and Pensions (Pat McFadden)]

When we came to office, almost 1 million young people were not in education, employment or training. This Government are determined to offer young people proper opportunities. Our youth guarantee will ensure that 18 to 21-year-olds are learning or earning, helping to prevent them from becoming economically inactive almost before their careers have even begun. As my hon. Friend might have seen, the Chancellor has announced that a jobs guarantee scheme will be a future part of this work.

[Kirsteen Sullivan]

With one in six young Scots not in education, employment or training, including hundreds across my constituency, I welcome the Government’s youth guarantee to give young people the training or job support they need. However, with stubborn youth unemployment, the Scottish Government’s swingeing cuts to the college sector and employers warning that Scottish apprenticeships are less favourable than those in England, how will the Secretary of State work to ensure that young people across the UK can benefit from this Government’s ambition?

[Pat McFadden]

Not for the first time, we have to point out that the Scottish Government have benefited from the biggest financial settlement since the introduction of devolution. It should not be too much to expect that at least a proportion of that should be spent on expanding opportunity for young people in my hon. Friend’s constituency and throughout Scotland. Scotland has given so much to the world in creativity and innovation, and it is absolutely critical that the next generation of young Scots get the chance to do the same.

[Tim Farron (Westmorland and Lonsdale) (LD)]

Skills bootcamps in Cumbria have provided a great opportunity: 60 hours of training for young people in disciplines as varied as coding, scaffolding and project management. The cost to deliver those bootcamps across the whole of Cumbria is £2.7 million—chicken feed compared with the benefit that those young people and their future employers get out of them. What conversations has the Secretary of State had with his friends in the Treasury to ensure that that scheme is maintained and continued?

[Pat McFadden]

I am always having conversations with my friends in the Treasury. I agree with the hon. Member that flexibility and some short courses in the skills and training system are very important. Not everything has to be done according to the exact same formula and recipe, and shorter training courses have a big part to play.

[Mr Speaker]

I call the shadow Secretary of State.

[Helen Whately (Faversham and Mid Kent) (Con)]

I welcome the Secretary of State to his new job and wish him luck in it—especially because, with every day that passes under this Government, we see fewer people enjoying the chance to start a new job. Unemployment has gone up month after month. Nearly 1 million young people are not in education, employment or training because of this Government’s policies, jobs tax and business red tape; even the Pensions Minister’s former think-tank agrees with me. People all around the country are out looking for work—young people who want to get on in life and all those trying to provide for their families—so can the Secretary of State tell us and them when he will get unemployment down?

[Pat McFadden]

The hon. Lady has a short memory. The Government in which she served presided over the biggest slowdown in living standards in recent memory, and there are 358,000 more people in work now than there were at the start of the year. We will keep supporting young people into work and will change the system that we inherited, which had the wrong incentives and a lack of support. We are putting both of those things to rights.

[Helen Whately]

No surprises there, Mr Speaker; the Prime Minister can put new faces on the Front Bench, but they still do not have the answers. The right hon. Gentleman criticised the previous Conservative Government, but we got unemployment down to a 40-year low—a record Labour could only dream of. The Government do not want to be held to account. Worse still, the right hon. Gentleman knows that what he is doing will not work, because the country is looking down the barrel of more tax rises in next month’s Budget, which will kill yet more jobs and opportunities. Whether it is graduates looking for their first job or older people being made redundant, people are crying out for a Government who are on their side. What will it take to get the Chancellor to understand that it is businesses that create jobs, not the Government, and does the right hon. Gentleman not agree that the more the Chancellor damages the economy, the bigger the welfare bill will get?

[Pat McFadden]

Since we came into office, interest rates have been cut five times, helping businesses and households. According to Lloyds, business confidence is at a nine-year high, and there is to be much more private investment, including the £150 billion announced during the recent state visit. Add to that the trade deals that the Conservatives could not secure—there are reasons to be optimistic about the future of the economy and I hope the hon. Lady shares them.

[Seamus Logan (Aberdeenshire North and Moray East) (SNP)]

8. What steps he is taking with Cabinet colleagues to reduce the number of children in poverty.

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[Claire Young (Thornbury and Yate) (LD)]

10. What steps he is taking to ensure that skills provision meets the needs of employers.

[The Secretary of State for Work and Pensions (Pat McFadden)]

The skills White Paper, which we published last week, will create more opportunities. As I said in response to an earlier question, my remit letter to Skills England makes clear the importance of working closely with employers. Employers have told us that they want more flexibility in the apprenticeships levy, so the growth and skills offer is delivering that, with more foundation courses and short courses launching next year.

[Claire Young]

At a recent roundtable meeting in my Thornbury and Yate constituency, small businesses told me about the particular challenges they face in delivering apprenticeships. Given that the Secretary of State’s Department is now responsible for this important policy area, what is he doing to reform apprenticeships to make them easier for small and medium-sized enterprises to deliver, and what support will he provide so that more can do so?

[Pat McFadden]

We want apprenticeships to be available to employers of all sizes. We have reduced the length of time an apprenticeship needs to take, and I think we can go further with short course flexibility, which should be particularly helpful to small and medium-sized employers.

[Jessica Morden (Newport East) (Lab)]

I recently visited Premier Forest Products in Newport to learn more about the vocational training and employment opportunities that the business is offering to care-experienced young school leavers in Newport, with some wonderful success stories. Will the Department look at the model that company is creating and can the Secretary of State say more about how the Government are working with businesses to make sure that such opportunities are more accessible for people from all backgrounds, including those who are care-experienced?

[Pat McFadden]

I am happy to look at the experience of that particular employer. I enjoyed a recent visit to a different part of south Wales to open an opportunity hub, which is aimed precisely at getting more young people into work, particularly those who have been out of the labour market through long-term sickness issues. We want to support Wales in doing that, and we have allocated an extra £10 million to this work over the coming year.

[Dame Nia Griffith (Llanelli) (Lab)]

12. If he will take legislative steps to ensure that companies who previously provided indexation of pension rights accrued before April 1997 but have since lapsed, reintroduce indexation from April 2026.

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[The Secretary of State for Work and Pensions (Pat McFadden)]

The trailblazers are up and running and have been delivering support for young people since earlier this year. That includes, for example, mental health support and flexible work experience sessions. We have extended the programme for a further year, bringing the total funding to £90 million. The insights from those trailblazers will inform the national roll-out of our youth guarantee.

[Patricia Ferguson]

Does my right hon. Friend agree that the actions of this Government, in supporting young people, are in stark contrast to the situation in Scotland, where we have had 18 years of SNP neglect, with the college sector suffering a 20% cut over the past five years? Does he also agree that, as the energy sector in Scotland transitions to greener forms of energy production, the jobs and skills needed to bolster that industry could be taught at those colleges, and that we risk having a double whammy of young people not being able to take on these important jobs, while lecturers are paid off and our colleges are in dire financial straits?

[Pat McFadden]

My hon. Friend is absolutely right to draw attention to the importance of the energy transition. As I said, the Scottish Government are receiving the largest spending review settlement in real terms since devolution was established. We know that young people in Scotland have the talent, but are their Government backing them by giving them the opportunity? We believe that a proportion of those funds should be devoted to that. I am pleased to say that, for example, BAE Systems will be a major beneficiary of the £10 billion deal to build Type 26 frigates for Norway—a critical investment in European security, and one that I hope the Scottish Government have got around to supporting.

[Jim Shannon (Strangford) (DUP)]

I welcome the Secretary of State to his place and wish him well in his new role. I am quite confident that he will give us all the answers we wish to have. Northern Ireland continues to have a higher proportion of young people not in employment, education or training—some 11% to 13%—compared with the UK average, so what discussions has he had with the relevant Minister in Northern Ireland to ensure that the necessary support and opportunities are provided to young people in Northern Ireland?

[Pat McFadden]

There should be no part of the United Kingdom in which we do not give young people the maximum opportunity. I had a good working relationship with the Northern Ireland Executive in my previous post, and I hope to have a good working relationship with them in this post, with the shared agenda of giving our young people the best possible chance in life.

[Josh Babarinde (Eastbourne) (LD)]

15. What steps his Department is taking to ensure that benefit sanctions are proportionate when considering neurodiverse claimants.

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[Catherine Fookes (Monmouthshire) (Lab)]

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Work and Pensions (Pat McFadden)]

I am very conscious of the responsibilities of the Department, which touches millions of lives in this country every month. We have joined up skills and employment support in the Department to bring the skills system closer to the labour market, and, as part of our youth guarantee, we have announced that it will include a backstop jobs guarantee. Together with that and Connect to Work, we are both tackling the incentives in the system and providing critical support, because my priority is to have a welfare state that looks after people when times are tough, but also provides a platform of opportunity to help get them out of welfare and into work.

[Catherine Fookes]

At the Conservative party conference, the shadow Chief Secretary to the Treasury called for the state pension to be means-tested. This has caused deep concern to pensioners in Monmouthshire who have worked hard all their lives and built up modest savings. Under the Conservative party’s plans, they would risk losing their state pension. Will the Secretary of State confirm that, under this Labour Government, the state pension will remain available to all?

[Pat McFadden]

I am happy to say that what my hon. Friend says about means-testing is not the Government’s policy, but can the Conservatives confirm whether it is theirs? The shadow Chief Secretary let the cat out of the bag. Can she confirm that this is not her policy, or is it that her leader still sticks to the position she set out earlier this year when she said:

“We are going to look at means-testing”?

Are they still looking at it, or are they not?

[Mr Speaker]

The good thing is that the Government are only responsible for their own problems. I call the shadow Secretary of the State.

[Helen Whately (Faversham and Mid Kent) (Con)]

Indeed, questions are to be answered by the Government on this occasion.

The right hon. Gentleman has an important and not always easy job. I am sure that we all remember the fiasco before the summer when the Government tried to make welfare savings and ended up legislating for welfare spending. Since then, the Prime Minister has said that there is a “clear moral case” for welfare cuts, and the Chancellor has said that she “can’t leave welfare untouched”. Does the Secretary of State agree?

[Pat McFadden]

I notice that the hon. Lady did not want to clarify the position on means-testing the state pension. Welfare reform is happening all the time. We passed important changes to the universal credit system that were voted through by the House and, as I said, we are putting in place important employment support to help not only long-term sick and disabled people but young people into work through many of the policies that I have talked about today.

[Helen Whately]

I cannot help but notice that the Secretary of State continues to attempt to deflect from his job of answering the questions. The fact is, we just heard that he will not commit to making the welfare savings that his Prime Minister and his Chancellor have said they need to make. I thought the Prime Minister was meant to be in charge.

Getting people off welfare and into work not only saves money; it is morally wrong to condemn people to a life on benefits. Without welfare reform, this country is stuck on Labour’s broken record of higher taxes and lower growth. We have even offered to help the Secretary of State, so why will he not commit to making welfare savings?

[Pat McFadden]

We inherited a situation that had 3 million people inactive and almost 1 million people not in employment, education or training. We are putting in place critical employment support to help long-term sick and disabled people into work, we have changed the incentives through legislation on the universal credit system, and we are increasing the number of face-to-face checks in the system, which fell on the Conservatives’ watch. What do people think it fell by? Do we think it fell by 10%? Do we think it fell by 30%? No, it fell by 90% under the system over which the hon. Lady’s Government presided.

[Peter Lamb (Crawley) (Lab)]

T2. Many other hon. Members have today outlined the proven track record of Access to Work in enabling disabled constituents to access employment, in addition to the challenges posed by the current shortfall in funding. Some £1 billion-worth of additional employment support funding has been announced this year. Can the Minister reassure the House that Access to Work remains one of the potential avenues for that funding?

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[Emma Foody (Cramlington and Killingworth) (Lab/Co-op)]

T3. For too long, too many people in the north-east have been left behind due to stubbornly high unemployment, but the economic inactivity trailblazer offers an opportunity to tackle the often complex reasons that sit behind that. Can the Secretary of State set out how this will work alongside existing programmes such as the new deal for north-east workers to support people into fulfilling productive employment?

[Pat McFadden]

People should not be denied the opportunity to work, which is why the Department has backed the economic inactivity trailblazer in the north-east with £10 million this year and a further £10 million next year. It is testing new ways to help people overcome barriers to work. We are determined to turn around the situation that we inherited from the Conservative party, and we are working closely with the excellent Mayor of the North East to bring these policies together.

[Sarah Dyke (Glastonbury and Somerton) (LD)]

T4. Only 30% of people with autism are in work, compared with nearly 55% of disabled people. Charlie, who is celebrating his 31st birthday on Saturday, lives in Baltonsborough with his parents, but like many young adults with autism, he has struggled to find employment. His mother, Jenny, told me yesterday that Charlie is a classic example of wasted talent, so what steps is the Minister taking to ensure that adults with autism and other special educational needs can find fulfilling and secure employment?

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[Joe Powell (Kensington and Bayswater) (Lab)]

T7. Earlier this month I visited the Spear programme in north Kensington, which is doing fantastic work in supporting young people back into employment through programmes that the DWP data lab has found to have a significant impact. Could the Secretary of State outline how evidence produced by units such as the data lab will help guide the trailblazer funding to get young people back into work?

[Pat McFadden]

The Spear programme was one of the first organisations to go through an evaluation with the data lab a few years ago. I am pleased to tell my hon. Friend that the findings from that were really positive, and I am delighted that his constituency is located in one of the youth guarantee trailblazer areas. As we have reiterated several times, it is crucial that we do everything we can to help young people into work and address the issue, which we inherited, of people not in employment, education or training.

[Liz Jarvis (Eastleigh) (LD)]

T8. Many young care leavers living in supported housing want to increase their hours at work but find themselves caught in the benefits trap. YMCA Eastleigh tells me that this is impacting care leavers in my constituency. What recent discussions has the Minister had with Cabinet colleagues on reforms to the tax and benefit system to make work pay for young care leavers?

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[Andrew George (St Ives) (LD)]

The Trussell Trust recently reported that three in 10 people who were referred to food banks in 2024 were in working households and that the majority, 72%, were on universal credit. What more can the Government do to ensure that work pays and we can take low-paid workers out of poverty?

[Pat McFadden]

I recently spoke at an event in Parliament hosted by that organisation. I am pleased to say that its report said there had been a small drop in the use of food banks over the past year. We have put the household support fund, now the crisis and resilience fund, on a proper basis for the next three years to support those families in the most desperate need.

[Rachael Maskell (York Central) (Ind)]

Giving sick and disabled people agency and drawing on lived experience sets the only path to getting policy right, so that they can access work appointments and get out of their homes, avoiding worklessness, health decline and isolation, with their mobility support needs recognised through PIP. Further to the Minister’s previous answer, will he ensure that any policy reforms to PIP mobility payments are fully co-produced with sick and disabled people?

[Jerome Mayhew (Broadland and Fakenham) (Con)]

Business is crying out that the Employment Rights Bill will cost jobs. Now, the Tony Blair Institute for Global Change, the spiritual home of the Secretary of State— [Laughter.]—says it will cripple the jobs market, especially for young people. It is not a laughing matter. What is the Secretary of State’s view? Will the Employment Rights Bill help his Department to increase employment, or will it cost even more jobs?

[Pat McFadden]

It should be no surprise that a Labour party supports better rights at work for people. History is replete with warnings that better employment rights would result in fewer jobs. Those were the warnings the Conservative party gave when we introduced the national minimum wage many, many years ago. Of course, it is important that when legislating on these issues we do it closely in consultation with employers. That is precisely what we intend to do.

[Kim Johnson (Liverpool Riverside) (Lab)]

Some 47% of children in my constituency live in poverty. The Minister mentioned that he will consider all levers. Does that include speaking with the Treasury to look at a wealth tax to bring in much-needed money to the Treasury to remove the two-child cap?

[Pat McFadden]

As we have discussed a number of times, of course we want to reduce child poverty. My hon. Friend will not be surprised to hear that, when it comes to tax, that is a matter for the Chancellor and not for me.

[Iqbal Mohamed (Dewsbury and Batley) (Ind)]

I welcome the Secretary of State to his place and wish him well. Last week, I attended a drop-in for the Women Against State Pension Inequality Campaign where I was informed that there are currently 4,320 women in Dewsbury and Batley affected by the WASPI scandal. That number was previously higher, but many of the women have already passed away without justice. On 27 July I wrote to the former Secretary of State regarding her support for the WASPI campaign after being contacted by more than 40 of my constituents, but I have yet to receive a response. With the Government still refusing to engage in civil mediation to deliver justice to the WASPI women, will the new Secretary of State reconsider meeting campaigners to find a just way forward?

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[Leigh Ingham (Stafford) (Lab)]

I recently visited Drake Hall women’s prison in my constituency of Stafford, Eccleshall and the villages, which has the brilliant initiative of a Halfords training centre to support people into employment once they leave the prison estate. It supports people all over the country, not just in my constituency. Can the Secretary of State tell me what conversations are happening with the Ministry of Justice about supporting or expanding schemes like that?

[Pat McFadden]

That sounds like an excellent initiative. Of course, if we are to rehabilitate prisoners, it is important that they get training and the chance to get into constructive employment after their sentence. I am sure that that applies not just to the prison in my hon. Friend’s constituency but throughout the country.

[Ben Obese-Jecty (Huntingdon) (Con)]

Alan Marnes is a constituent of mine in Southoe who has staunchly campaigned since 2002 on the issue of the lack of indexation for pre-1997 pension rights, having been one of 140,000 people who lost their occupational pension. I wrote to the Secretary of State more than two months ago asking whether the newly revived Pensions Commission will address the issue of failed pension funds and I have still not received a response. Will the Secretary of State agree to meet me and Alan to provide some much-needed clarity on such a long-standing issue?

[Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)]

One in three children in my constituency is growing up in poverty. With the Budget approaching, what discussions has the Secretary of State had with the Chancellor of the Exchequer about scrapping the two-child limit—a policy widely recognised as one of the biggest drivers of child poverty in Britain today?

[Pat McFadden]

We have already taken action to reduce child poverty, by extending free school meals to all families on universal credit, and we will of course explore other avenues. We want to reduce child poverty—in stark contrast to the record of the Conservatives.

[Sir Oliver Dowden (Hertsmere) (Con)]

When my constituents move into new social housing, they find it stripped of perfectly good white goods, curtains, carpets and so on. What can the Government do to address this? It is driving my constituents further into poverty and benefit dependency. It is also environmentally destructive. Surely there is a way through this issue, so can I call on the Minister to work with others across Government to address it?

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Pat McFadden Excerpts

Report stage & 3rd reading
Wednesday 22nd September 2021 Commons Chamber

[Gareth Thomas]

The hon. Member may be right. I simply put out the idea at this stage, and I hope Ministers will be sympathetic to it, that we should not just accept the sense that, following Dame Elizabeth Gloster’s report, the payment of compensation and the introduction by the FCA of this new consumer duty, everything is suddenly all right in the world of consumer financial regulation. Perhaps Ministers on the Treasury Bench are inadvertently suggesting that. I think another step needs to be taken to hold the feet of regulators to the fire.

I will briefly raise two other concerns about financial regulation and some of the lessons that need to be taken from the LCF debacle, which the amendment from the hon. Member for Glenrothes helpfully gives me the opportunity to raise. The first is the idea that all the information available to the boards and the management of companies that has to be shared with the FCA and the PRA from time to time should be regarded as commercially sensitive. Clearly, there is genuinely commercially sensitive information that it is right for companies and businesses to keep for themselves. However, I fear—certainly in the case of Liverpool Victoria, which I have been looking at—that the excuse that information is financially sensitive is being used to deny consumers’ legitimate rights to know what the future holds for the business in which they have invested their savings or money. I gently suggest that that topic is worthy of a review in itself, potentially with changes to regulatory practice and, if need be, to legislation.

Lastly, the existence in legislation at the moment of provisions for so-called independent experts to look at the decisions that boards are taking in the context of demutualisations are a recipe for regulatory failure. In the case of Liverpool Victoria, independent experts are being appointed by the board, paid by the board and briefed by the board. Obviously, it is fairly easy to predict what the outcome of the independent experts’ work is going to be: to recommend largely what the board wants to happen. That is another issue that needs to be looked at.

I put those points on the record to suggest that Ministers should not be complacent about the quality of the FCA’s performance. There needs to be a bit more of a robust challenge and a look again at how financial regulation works.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I want to use the opportunity provided by the amendment to raise a few points, particularly about clause 1, and to put them to the Minister. I thank Dame Elizabeth Gloster and both the Treasury Committee and the Work and Pensions Committee for the work they have done on this issue.

The issues covered by the Bill have been widely set out in debates on Second Reading and in Committee. They include: the wholly deficient practices at the FCA that meant that hundreds of reports of harm were not acted on, which was described by Dame Elizabeth Gloster as an “egregious” failure of the FCA to fulfil its statutory duties; the fact that this failure allowed LCF to continue in operation for years longer than it might otherwise have, thereby multiplying the harm to investors; the reassurance at one point from the FCA that what was happening was not a scam; the impact of the halo effect in having a regulated firm selling unregulated products, leading unsuspecting investors to believe that these products were far safer than they actually were; the loss of a whistleblower’s letter three years before the firm’s collapse, and the damning conclusion from Dame Elizabeth Gloster that the loss of that letter probably did not make any difference, because the FCA was so dysfunctional that, even if it had not been lost, it would not have been acted on; the repeated failure to join the dots and the treating of each LCF transgression—for example, on its use of financial promotions—as an isolated incident, when instead it was a pattern of behaviour designed to use its regulated status to bolster confidence in unregulated products; and the public disagreement between Dame Elizabeth and the Governor of the Bank of England about the issues of responsibility and personal culpability.

I served on the Parliamentary Commission on Banking Standards, which said that

“a buck that does not stop with an individual stops nowhere.”

That quote has been much used in the debate about this issue, which has raised sharply the limitations of collective accountability and the question of whether in this case the buck really stopped with anyone. Of course, most importantly of all, there is the issue of the distress and the financial loss to investors and the question of how they should be compensated. All of this has led to the Government stepping in with this Bill to authorise compensation up to a certain level for investors.

Based on the amendment, I want to put a number of questions to the Minister arising from the Bill. First, why has compensation been set at 80% of the Financial Services Compensation Scheme maximum of £86,000, not the full level? That is probably the main outstanding concern of LCF investors, who are grateful that compensation will come but who cannot understand the 80% cap given the manifest failures set out in Dame Elizabeth’s report. Are the Government completely fixed on this 80% figure, or is there any prospect of that being reconsidered?

[Rehman Chishti]

I thank the shadow Minister for giving way, and I will of course raise the same point with the Minister in due course. The right hon. Gentleman says that the victims will of course welcome the compensation coming their way, but the point raised with me by those who have suffered a loss is whether the Government can look to prioritise those who have suffered the most due to their loss. There has been a lot of data gathering by the FSCS, the FCA and the Serious Fraud Office, so that should be easily apparent. What is his view about ensuring that compensation is quickly given out and prioritised to those who have suffered the most?

[Mr McFadden]

The hon. Member raises a very fair point. It has already been referenced in the debate that this is not just about amounts, but about the timescale, and we all want the Government and whoever is administering this scheme to be able to get on with it.

[Sammy Wilson]

I understand the point, but does the right hon. Gentleman accept that defining those who have suffered the most could be quite difficult? Are those who have suffered the most those who have lost the most, or perhaps those who are not all that well-off and have found that they had lost all of their savings, even though all of their savings would not have been the same as the loss of some of the bigger investors? Does he accept that that is a difficult definition?

[Mr McFadden]

The right hon. Member raises a very fair point. If we pluck a sum of money out of the air, it could be a lot of money to one person and perhaps less to somebody else, depending on their wealth.

Let me return to the questions for the Minister arising from the amendment and the Bill. The second is the important question of where the decision to compensate the LCF investors leaves investors in other firms where regulatory failure is alleged. Where has the bar now been set for future compensation in the event of regulatory failure? The taxpayer cannot stand behind every investment loss. Some investors will make money and some will lose. That is in the nature of a market economy. However, the question of compensation arises when there is a clear regulatory failure, because that is considered to be a different matter. Having come up with this scheme, where do the Government now draw the line?

How can we be sure this will not happen again? There are two aspects to this question. The first is the role of the regulator. The FCA is going through a transformation programme designed to ensure that changes are made to prevent a similar thing from happening in the future.

[Peter Grant]

There is clearly a need to specify which kinds of investment losses might be compensated, and which ones will not be. Given that the Financial Conduct Authority has outlawed the targeting of mini-bonds at retail investors, is that a clear indication that something was fundamentally flawed with all selling of those bonds, whether it was done by LCF, Blackmore Bond, or anybody else?

[Mr McFadden]

The hon. Gentleman makes a fair point. On how we can be sure that this will not happen again, and the transformation programme, it is to be expected that companies would go through such a programme, given the damning nature of Dame Elizabeth’s findings. There is also, however—and this is not just about this specific case—understandable public scepticism when a scandal happens, people talk about lessons being learned, there are some changes to management, and the organisation moves on. How do we ensure that, while understandable, such public scepticism is not justified in this case because something different is happening, and that we will not end up back here, some time in the future, debating another investment scam that was not spotted and acted on in time?

The second aspect to the question of how we can ensure that this does not happen again relates to legislative protections. This scam was promoted by a lot of online advertising. The online safety Bill is coming up, and at the moment paid-for advertising is excluded from that. Why should that be the case? Surely the LCF case shows that paid-for advertising must be included. As the Minister will be aware, there is a growing coalition behind the argument that the online safety Bill must offer greater protection against financial scams and fraud, and that is bound to be a major issue as the Bill goes through the House.

That issue is important, because consumers are being targeted every day with adverts, text messages, emails, and phone calls geared either to obtaining their financial details, or promising get-rich-quick schemes. As covid has pushed more of our lives online, it is imperative that legislation keeps pace with the increased use of online scams that are designed to strip people of their money. It is becoming more and more difficult for consumers to ascertain the difference between a genuine approach and a scam approach. We in this House have a legislative duty to keep pace with what organised criminals are trying to do.

[Rehman Chishti]

rose—

[Mr McFadden]

I am coming to the end of my remarks; I hope the hon. Gentleman does not mind. I leave the Minister with this: is it not better to try to stop people being ripped off in the first place, than to have to ask the taxpayer or, as in clause 2, members of pension schemes, to compensate people after such scams have already happened? I will leave it there, although I will later have a few remarks and questions about clause 2.

--- Later in debate ---

[Mr McFadden]

We have just had a short debate on an amendment that was largely focused on clause 1. Before we finish the Commons stages, I want to put a few questions to the Minister, mainly relating to clause 2 and pensions.

We discussed some of these issues in Committee. Clause 2 imposes a levy on the pension schemes to pay for the consequences of the Dalriada case, which means that the pension fund compensation scheme has to raise what Ministers expect to be around £300 million. I have a few questions about that.

My first question is about the flat-rate way of raising such levies. It leaves schemes with large numbers of members, many of whom have small pension pots—for example, those on auto-enrolment schemes—paying a significant proportion of the levy, even though they are run in a completely honest way that has never been near any kind of pension fraud. Have the Government considered a more proportionate way of raising such levies, to protect pension scheme members with very small pots?

My second question is about the relationship between the greater pension freedoms in recent years and the risks of scams and financial fraud. The advent of these freedoms has resulted in a number of examples where unsuspecting pensioners have been persuaded to transfer their pensions in ways that were not in their interests or, even worse, that led to fraud and a loss of their hard-earned savings. The Select Committee on Work and Pensions has shown significant interest in the issue, and it has received estimates from the Pension Scams Industry Group that 40,000 people may have lost up to £10 billion since the pension freedoms were introduced in 2015.

Thirdly, great fanfare was made of advice and guidance when the pension freedoms legislation was introduced, but take-up has been very low, and efforts by the Department to improve it have not radically changed the proportion of people accessing good advice. Without good advice, pension scheme members are left much more vulnerable to unscrupulous sales pitches or, alternatively, bad decisions that are clearly not in their interests but may be in the interests of the financial adviser advising them. What are the Minister and his colleagues doing to change the situation with regard to pensions advice?

Finally, those accessing their pensions under the age of 55 are subject to a hefty tax charge, but sometimes people are persuaded to do this because they are advised that there is no tax charge and they will not have to pay any tax. They then find themselves not just victims of a scam but pursued by Her Majesty’s Revenue and Customs. What can the Minister do to persuade HMRC to take account of the difference between someone acting on false information and someone knowing that they will incur a tax charge? I would be grateful if the Minister could address those questions before we finish.

In my last contribution to the debates on this Bill, I want to thank the Minister and his colleague the Economic Secretary to the Treasury for their consideration of the points that have been raised throughout by hon. Members. I also thank the Clerks and the Bill team for their responses to inquiries. We will support the Bill because we want this compensation to be paid out, but I hope that the Minister will consider some of the questions we have raised about the nature of scams and the need to do more to protect consumers. Although this Bill will go through tonight, I have no doubt that consumer protection, frauds, scams and the amount of things happening online will be raised again when we debate the Online Safety Bill in the weeks and months to come.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill (First sitting)

Pat McFadden Excerpts

Committee stage
Tuesday 15th June 2021 Public Bill Committees

[The Chair]

Before we hear from the witnesses, do any Members wish to make declarations of interest in connection with the Bill? I take that as a no.

I remind all Members that questions should be limited to matters within the scope of the Bill and that we must stick to the timing in the programme motion. The Committee has agreed that we have only until 10.15 am for this session. Will the witnesses please introduce themselves for the record?

Sheree Howard: Good morning. My name is Sheree Howard and I am the executive director of risk and compliance oversight at the Financial Conduct Authority.

Robin Jones: Good morning. I am Robin Jones and I am a director within the risk and compliance oversight function of the FCA.

Simon Wilson: Good morning. I am Simon Wilson, the interim head of resolution at the Financial Services Compensation Scheme.

Casey McGrath: Good morning. I am Casey McGrath, head of legal at the FSCS.

James Darbyshire: Good morning. I am James Darbyshire, chief counsel and a member of the executive team at the FSCS.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Q I thank all the witnesses for appearing before us this morning. I would like to begin with a question for the witnesses from the Financial Services Compensation Scheme. Clause 2 of the Bill authorises a Government loan in the case of pension fraud and mis-selling. Simon, what is your estimate of the level of fraud and mis-selling in pensions and investments? Do you think that phenomenon is growing or has it always been with us?

Simon Wilson: Thank you for the question. If it is okay, I will pass it over to my colleague, James Darbyshire.

James Darbyshire: It is difficult to put a figure on the extent of pension mis-selling going on at the moment. We are certainly seeing an increase, and certainly an increase through the covid crisis. It is important to make it clear that there is a clear distinction between the two compensation schemes. Here at the FSCS it is triggered in relation to authorised firms that go bust and regulated activities, whereas the fraud compensation scheme is triggered by dishonesty in occupational pension schemes. There will be differences, but the mis-selling we see is through authorised financial advisers as well as unregulated firms.

[Mr McFadden]

Q Can you tell us a bit more about how it works? Give us a picture of the common mis-selling techniques and scams that are out there. How do these people operate?

James Darbyshire: The typical cases of mis-selling that we see at the FSCS involve scenarios in which somebody has been misadvised to transfer from a vanilla pension into a self-invested personal pension and, within that, invest in illiquid, esoteric and high-risk investments. Sometimes there is a fraud element as well, but they are certainly very high risk and often lead to that person losing all their pension savings. That is our most typical scenario.

[Mr McFadden]

Q Do you think that online advertising and selling exacerbates the problem because it might remove the kind of face-to-face discussion that you would have with an adviser? Or should we not look at it that way because the advisers might sometimes be part of the problem?

James Darbyshire: We are triggered because a regulated firm is involved, so there is an adviser who has mis-sold. But we have also seen an increase in pure scams, if we can call them that, that relate to investments that have been advertised through search engines. They are scams and not genuine investments. As part of the FSCS’s strategic role for prevention and our strategies for the 2020s, we are identifying those kinds of scams and ensuring that we pass the information, data and insights that we see on to the relevant enforcement agencies so that they can take action. We work very closely with the FCA and last year, for example, we signed a memorandum of understanding with the Serious Fraud Office to ensure that we share information in the right way.

[Mr McFadden]

Q Thank you. I now have a couple of questions for the FCA’s representatives. The findings in the Gloster report are pretty damning in a number of ways. I will not go through them all but they include repeated phone calls about what was happening in London Capital & Finance not being acted on, interventions by the financial promotions team not being passed up the line, different bits of the organisation not speaking to one another and so on. After this report, I suppose the most important question is this: how confidently can you say that this could not happen again?

Sheree Howard: Thank you for the question. Obviously you are correct that Dame Elizabeth Gloster undertook a very thorough and detailed investigation and produced a detailed report. It has identified a range of issues and mistakes that the FCA made, for which we are profoundly sorry. We know that it has had a devastating impact on many people.

We embarked on a range of initiatives and interventions as a result. We have done a significant amount of work on mini-bonds, in particular, and on other high-risk investments in the investment space and financial promotions arena. Actions are under way in all of them: some are closed, some are ongoing and some will take some time to be sustainable and to embed.

Financial firms do fail due to a variety of circumstances. We are investing heavily in an ongoing transformations programme, but can I give you an absolute assurance that something will not happen again? Sitting here today, I cannot give that absolute assurance, no.

[Mr McFadden]

Q You are right that financial firms fail, but the issue is not just their failure. The reason for the Bill is that the Government judge that such was the degree of regulatory failure that a compensation scheme is in order. The question is not whether financial firms can fail—of course they can—but whether, following Dame Elizabeth’s report, there has been such a degree of change in the FCA’s operations that that degree of regulatory failure could not happen again.

Sheree Howard: A significant range of action has already been undertaken and is still under way to ensure that we make the embedded change that makes the FCA fit for the digitised future. A huge amount has been done. If you are asking whether we have changed, for example, our approach to financial promotions, we now escalate much earlier—we have a much clearer escalation process with a clear route through it. We have changed policies—for example, our contact centre policy—around areas highlighted in Dame Elizabeth’s report.

[Mr McFadden]

Q In 2014, the FCA took on responsibility for supervising tens of thousands more firms as a result of the transfer of responsibilities from the Office of Fair Trading. Should we understand that that created significant difficulties for the FCA in absorbing tens of thousands of firms to supervise, or do you think other organisational things were going on that were unrelated to the size of its responsibilities?

Sheree Howard: Dame Elizabeth Gloster’s report outlined the circumstances and nature of the changes that occurred at the time that consumer credit was transferred from the OFT to the FCA in 2014. The report is clear about the state of supervision within the FCA at that point and the changes that were implemented by the then executive members of supervision and others in the light of issues that they identified when they came into the organisation. It was a very substantial change of responsibilities, and it came from a regime where there was not a supervisory regime.

[Mr McFadden]

Q Are you telling us that it was a difficult thing to swallow but you now have the systems in place to deal with it?

Sheree Howard: I was not in the FCA at the time, but it was a very large assumption of remit. We have changed systems. We have implemented various programmes highlighted in Dame Elizabeth’s report on delivering effective supervision and effective authorisation programmes.

As I have already outlined, the financial services market is not sitting still; the FCA cannot sit still—hence the changes that are under way and will be a fact of life going forward. We are undertaking a significant programme to ensure that we invest in digital and data and have much greater access to the information, given the quantum of firms that we oversee.

[Peter Grant (Glenrothes) (SNP)]

Q May I start with the witnesses from the Financial Services Compensation Scheme? I am happy to let you decide among yourselves who is best placed to answer. One of the major problems with LCF was that mini-bonds were unregulated, and the same applies to a lot of other unregulated businesses involved in the same activity. If a decision was taken to make the sale of mini-bonds a regulated activity, would it cause administrative difficulties for the FSCS to start to include them in its compensation scheme?

James Darbyshire: I don’t think it would cause administrative difficulties; it would just mean an additional area of coverage for the FSCS. The cost to levy payers—to the financial services industry—would potentially go up, depending on whether there were any failures involving mini-bonds.

--- Later in debate ---

[The Chair]

I call the shadow Minister, Mr Pat McFadden.

[Mr McFadden]

Q Good morning. Thank you very much for giving evidence today. Clause 2 of the Bill authorises a Government loan that will subsequently be paid for by a levy on the industry over a period of years. Can you tell us how that levy will work and how the burden of it will be divided between different types of pension schemes, for example the auto-enrolment schemes that have been established over the last decade or so?

David Taylor: Absolutely. We have the power to set the levy up to limits set out in legislation. Since we got clarity on the eligibility of scam schemes for compensation in the last year, we have raised the levy to the maximum we can at the moment. That is 75p per member for schemes in general, and 30p per member for master trusts. Any change to those maximum levels is a legislative matter that the Government plan to consult on in the autumn.

[Mr McFadden]

Q The reason for that is the growth of pension fraud and mis-selling. Obviously, you are the ultimate backstop at the Pension Protection Fund. What is your view of the trajectory of pension fraud and mis-selling? Is it growing in nature? If so, how could the Government and the regulators do more to combat it?

David Taylor: Our role in relation to this is, as you say, as the backstop to pay compensation in the particular circumstances where there is a pension scheme that has been defrauded, or where money has been lost from the scheme due to dishonesty. The sorts of cases that we are talking about here, and for which the loan will be required, are actually predominantly historical in nature. As you will no doubt hear from other witnesses, there have been a number of measures since then that have tightened up in various respects and mean that cases like the ones we are talking about here are less likely to happen in the future.

[Mr McFadden]

Q My final question is about information to consumers. We have the Pension Protection Fund, we have the financial services compensation scheme, and now we have the Fraud Compensation Fund as well. If a pension scheme member finds themselves in need of redress, how will they navigate their way through this? How will people know whom to contact? What efforts will be made to let people know that this help is available to them?

David Taylor: The Fraud Compensation Fund has been in existence since the main Pension Protection Fund was set up in 2004-05, but it has actually had relatively few claims on it prior to this raft of pensions liberation cases. I believe you will be hearing later from the transparency taskforce, which very helpfully flagged to us that information on the Fraud Compensation Fund was not perhaps as successful as it could be. We have taken various steps to increase visibility. We are in the process of creating a separate website for the Fraud Compensation Fund, where it is very straightforward for members to find information about how the fund works. For the sorts of members we are talking about, their first port of call is also the scheme trustees or professional trustees who have been put in place by the Pensions Regulator and who will be able to keep them posted as to where their applications have got to.

[The Chair]

I turn now to the SNP spokesperson, Mr Peter Grant.

--- Later in debate ---

[The Chair]

I thank all the witnesses for giving evidence today. I urge them to keep their answers short so we can get through all the Members who wish to contribute. I call the shadow Minister, Pat McFadden.

[Mr McFadden]

Q Thank you, Ms Ghani, and I thank all the witnesses for giving us their time. Dame Elizabeth, I would like to begin with you. You produced a hefty, detailed report of hundreds of pages with a number of different recommendations. Having looked into the collapse of London Capital & Finance so deeply, what is the single biggest lesson that you would like us to take from your report?

Dame Elizabeth Gloster: It is probably set out in the executive summary of my report, in chapter 2. I think the biggest lesson that should be taken away is that there has to be a cultural change at the Financial Conduct Authority in order to ensure that the FCA is able to regulate in accordance with its obligations in a digitalised world.

[Mr McFadden]

Q You were, of course, asked to look into the collapse of one particular firm. At the heart of quite a lot of your findings is the tension of a regulated firm selling unregulated products. Although you were asked to look into the collapse of one firm, do you think that the kind of regulatory failure that you identified could apply in other cases? After all, LCF is certainly not the only regulated firm that is selling unregulated products—many firms do that.

Dame Elizabeth Gloster: Let me make it clear, as I think I did in my letter to the Committee, that I only looked—and was only instructed to look—at the regulation of LCF. I did not look at the regulation of other firms that may or may not have been similar. Having said that, some of the criticisms my report made could potentially apply to other firms. First, for example, the restricted approach to the regulatory perimeter when dealing with authorised firms; secondly, the failure to consider LCF’s business holistically in the application, variation and the regulation supervision processes; and thirdly, the absence of training that we pointed to of those employees at the FCA who had to review financial material. Those are all three failings that potentially could apply to other businesses.

[Mr McFadden]

Q Thank you. This is my final question to you, Dame Elizabeth. You made a recommendation about dealing with the lacuna in how ISA status were dealt with between the FCA and HMRC. Could you tell us a bit more about this? What is this lacuna? ISA status is important. It is a trusted and successful brand. People may think that you cannot lose money on an ISA—of course you can—but certainly putting your money in one is regarded as a safe and responsible thing to do.

Dame Elizabeth Gloster: The gap we identified—I would be grateful if John or Dorothy could direct me to the particular chapter in my report—was that neither the FCA, nor HMRC, at any time checked on or seemed to conduct any analysis of, either as part of a regulatory or a taxation process, whether or not the product being flogged to the investors was ISA compliant. John, do you have the chapter?

John Bedford: Yes, Dame Elizabeth. It is chapter 14, page 303 of your report.

Dame Elizabeth Gloster: Thank you. The fact that LCF bonds could be acquired in an ISA wrapper was absolutely critical to attracting investment because bondholders believed that the ISA status indicated that LCF’s products were subject to an additional level of regulatory security and assurance. Once LCF got its approval, and marketed its bonds as ISA-eligible, the sales significantly increased. That was our concern—this gap with neither the FCA nor HMRC actually looking at the question—and was something that should be addressed.

[Mr McFadden]

Q Thank you. That is a very important finding. I have one further question to the Transparency Task Force about the uniqueness, or otherwise, of the LCF case. The Government’s case is that the LCF collapse— rather not the collapse but this response to it—is unique because, as both Ministers said on Second Reading,

“LCF is the only mini-bond firm that was authorised by the FCA and sold bonds in order to on-lend to other companies.”—[Official Report, 8 June 2021; Vol. 696, c. 905.]

My question is whether the case of LCF is unique and, if not, why not?

Mark Bishop: Shall I take this one? If you look at what the Minister said, then no doubt it is unique. I am not aware of any other situation where there is a regulated product being sold by an authorised firm who is conducting literally no regulated business, and is also allowed into an ISA. Those are exceptional circumstances.

However, if you look at the many other financial services scandals that have occurred where regulatory failure is either proven, as in the Connaught case, or is alleged with very good reason, they all have exclusive and specific circumstances. I think the question for this Committee is whether you want to use the opportunity of this Bill to create a right for consumers—with a high bar—to have their claims for compensation considered, where they are able to demonstrate significant regulatory failure and that that failure has led to loss.

[The Chair]

I call the SNP spokesperson, Mr Peter Grant.

Compensation (London Capital & Finance plc and Fraud Compensation Fund) Bill

Pat McFadden Excerpts

2nd reading
Tuesday 8th June 2021 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am grateful to the Minister. As he said, the Bill does two things: it enables a Government compensation scheme for the victims of the collapse of London Capital and Finance, and it authorises a Government loan to the Fraud Compensation Fund—part of the Pension Protection Fund—to be paid for through a levy on the pensions industry. Let me take each of those of turn.

I will start with clause 1 on the LCF compensation scheme. The Minister set out the background and I do not need to repeat it in this short debate, but it involves 11,500 investors losing a total of about £237 million. Some £56 million has been paid out by the Financial Services Compensation Scheme to just under 3,000 of those investors, covering those parts of LCF activity that came under the remit of the Financial Conduct Authority’s regulated activities. The Bill aims to compensate the rest up to 80% of the £85,000 FSCS limit, meaning pay-outs of up to £68,000 for those eligible. This is expected to cost the taxpayer about £120 million.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Talking about the cost to the taxpayer, I wonder if my right hon. Friend continues to be shocked by the fact that a Member of this House, the hon. Member for Plymouth, Moor View (Johnny Mercer), received over £85,000 from subsidiaries that were mis-selling, like a company in my constituency that defrauded my constituents. That money has never been paid back, but that Member received money from the taxpayer, and actually we should be looking at ourselves—

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order.

[Mr McFadden]

I am grateful to my hon. Friend, and I do think it ill behoves any Member, given the scale of the losses and given the necessity of the Government to bring in this Bill to compensate people for their losses, to profit from this either directly or indirectly. I think that should be clear to all of us.

The Government are legislating on this because of the litany of regulatory failures set out in the report on this issue carried out by Dame Elizabeth Gloster. These failures included failures to respond to repeated warnings from investors and potential investors, LCF repeatedly running promotions implying its products were regulated by the FCA, and failures of communication between different parts of the FCA, all in the end leading to this collapse and financial loss. Had the FCA acted earlier, far fewer people would have invested through this firm, losses would have been lower and the taxpayer would not be faced with the £120 million we are talking about today.

[Neale Hanvey]

Will the right hon. Gentleman give way?

[Mr McFadden]

I will give way once more.

[Neale Hanvey]

I would like to ask the right hon. Gentleman’s view about a couple in my Kirkcaldy and Cowdenbeath constituency who invested £10,000 each—or £20,000 in total—and did so because the FCA backed the scheme. They feel that the real responsibility lies with FCA and the derogation of its responsibility in ignoring warning signs, while many responsible lenders such as them have lost money they can ill afford to lose. Does he not find it, as I do, a bit rich for the Minister now to say that the Government cannot back every scheme when actually the regulator was at fault in encouraging other people, as he has just said, to invest in that scheme?

--- Later in debate ---

[Mr McFadden]

Many investors did invest because they thought that these mini-bonds were authorised by the FCA, and they were not. A big part of the problem here is having a regulated firm marketing unregulated products. If I am right, the hon. Member’s constituents may be eligible for the compensation authorised by the Bill.

Dame Elizabeth’s report makes it clear how badly the investors were let down by the regulator, and both the Government and the FCA have said that they accept the findings. I have a number of questions that I want to put to the Minister for his wind-up at the end of the debate. First, why is the level of compensation he has chosen 80% of the FSCS level? On what basis was that decision made? Secondly, how will this work practically? I understand that the Government want to avoid the involvement of claims management companies, and that is something I think we would all endorse. How will the Government do that and avoid repeated rounds of claims?

The Bill also gives rise to some important broader questions about policy. The failings identified were serious and substantial, and have to be addressed. The first of those broader questions is: when should compensation paid for by the taxpayer be paid and when not? The Minister quite rightly said that the taxpayer cannot stand behind every investment policy. It would be unfair on taxpayers to expect them to do so, and it would produce perverse incentives. After all, we all know that the value of investments can go down as well as up.

In the case of LCF, it was bonds that were being sold, and the advertising implied a guaranteed pay-out when such pay-outs could not, in practice, be guaranteed. Regulation is not aimed at enabling people to make reasonably informed choices and to understand the risks they are taking. Having made the decision to offer taxpayer-funded compensation in this case, when does the Minister believe it justifiable that the taxpayer should be asked to do that, and when does he not? What was the discussion in the Treasury about how to ring-fence this failure and this company from broader claims for financial compensation? There are calls for compensation quite regularly when investment failures happen. How confident is the Minister that the Treasury will not be subject to legal action from victims of other investment failings?

How confident is the Minister that the FCA can actually make the changes necessary to avoid a repeat of the findings set out in Dame Elizabeth’s report? Callers were phoning the FCA for three years before the company’s collapse. Appendix 6 of Dame Elizabeth’s report states that the FCA received 611 queries from consumers regarding LCF. That is not a random phone call at five o’clock on a Friday that can be missed; it is a pattern of people trying repeatedly to raise red flags and getting nowhere

Individual A said on 15 July 2016:

“This company is doing exactly what the pyramid scams are doing. What they’re doing is they’re paying the money out, the interest out from money which people are paying on the bond… In other words, it’s just a pyramid scam… they’re saying they’ve got charges on their property, security on them, assets on their property, of course they don’t have any assets. It’s all horrendous really, the whole thing”.

There was call after call like that, and they were not acted on. They were not passed up the line, partly because the mini bonds were not regulated. In fact, one caller was told by the FCA call handler that it was not a scam.

There was also the letter from individual financial adviser Neil Liversidge in 2015, three full years before the collapse of the company. He warned that LCF had one customer who was worth—bear with me on the language, Madam Deputy Speaker; I am quoting—

“the square root of bugger all”

and he tried to raise warnings about the practices and health of the company. It appears that that letter was lost.

One of the more damning findings in Dame Elizabeth’s report is that, even if the letter had not been lost,

“It is unlikely that it would have resulted in any, or any substantive, action or re-action by the FCA.”

So little faith did she have in the processes that she appears to have argued that it did not matter that that warning letter had been lost because it would not have been acted on. Imagine if the FCA had acted, in 2015 or 2016, when those reports were received, rather than only at the end of 2018. Another question for the Minister is this: what will the FCA do to improve its handling of reports like this?

Then, there is the so-called halo effect of regulated companies selling unregulated products. Being regulated by the FCA featured heavily in LCF promotions. The financial promotions team at the FCA did warn LCF to dial back on the advertising, but the pattern went on and on, and no one drew the conclusion that this was not just an advertising problem, but a problem with the content of what it was actually selling. Dame Elizabeth states in her report:

“A substantial proportion of the Bondholders said that they would not have invested in LCF had it not been for the fact that it was regulated by the FCA.”

How will the FCA avoid the difference between unregulated activity and regulated companies from being exploited in the future?

The Gloster report was also the subject of a well-publicised disagreement between Andrew Bailey, the Governor of the Bank of England, and Dame Elizabeth, about the nature of responsibility and accountability. Where do the Government stand on this issue? It was all played out before the Treasury Committee in several hearings. Is it the Treasury’s view that senior officials in leading regulatory bodies are responsible for the failing that happen on their watch, or should responsibility apply only to the organisation collectively?

Does the Minister agree with the statement in the report that

“It is difficult to see why an individuals’ willingness to take on challenging tasks in public bodies should absolve them from accountability”?

Or does the Treasury accept the statement from the Parliamentary Commission on Banking Standards quoted in the report that

“A buck that does not stop with an individual...stops nowhere”?

These broader questions matter, because with ever more complex financial markets, the regulators have to be equipped to do the job—equipped through their leadership and their systems, but also through the resources at their disposal. Part of the backdrop to this is the FCA taking on responsibility for tens of thousands more firms after it took on the responsibilities of the Office of Fair Trading back in 2014. Is the Minister confident that it has the resources after the LCF collapse?

Let me turn to clause 2 and the fraud compensation fund. The Bill authorises a loan to be made as a consequence of greater than expected claims on that fund arising from the Dalriada case. It is estimated that the judgment in that case could result in claims of over £300 million. The loan will be funded by a levy on the pensions industry, to be paid back over the next 10 to 15 years. That comes on top of the levy to pay for the Financial Services Compensation Scheme rising sharply since the introduction of the Government’s pension freedom legislation in 2015. Back then, the levy was £300 million; this year, it will be over £1 billion pounds. That is a 48% increase on the previous year and more than triple the level of five years ago. Why does the Minister think the FSCS levy has had to increase so much since the pension freedoms legislation was introduced in 2015? Now we have a new fraud levy to boot.

Surely the right way to tackle this issue is to ask why more and more pensioners are being exposed to fraud and scams in the first place. Why does the Minister think that is happening? Why are more pensioners losing their money? When the previous Chancellor introduced the pension freedoms changes, he said that

“there will be free impartial guidance available to all.”

Six years on, the take-up of that advice is just 3%. Even when the Department for Work and Pensions made a targeted push to increase it, it only got up to 11%, so the vast majority of people using these freedoms are not using that service. Of the small number who take up the option, 72% say they do something different from their first inclination after receiving advice, so it is clear that such advice can help people to make a better decision, yet take-up is nowhere near the promise made at the time.

The promise of pension freedoms being matched with good, trustworthy financial advice has not been kept, and these levies, which will have to be paid by the pension schemes that have been nowhere near fraud and are trying to offer a good service to their members, are being put in place at least in part as a result of the Government’s own pension reforms, which have left more pensioners exposed to fraud and scams. That conclusion was endorsed by the Work and Pensions Committee in its recent report.

What unites both these clauses is people being subject to fraud, often through online advertising. There is a clear need for greater action on this. People are being bombarded on a daily basis with adverts for investments, some of which are scams and attempts at fraud. Financial innovation can be a great thing, but consumers need help in navigating this world, and they are currently being failed by a regulatory system that is lagging behind what is actually happening in the financial markets. There is an online harms Bill coming that, as things stand, does not include plans to crack down on financial crime. I urge the Government to think again on that. To proceed with that Bill without tackling online financial harm would be an enormous lost opportunity to protect consumers against this type of crime.

The answer is not just compensation when people lose money; it is to protect people against financial scams happening before they lose their money, to crack down on the fraudsters while they are peddling their scams and to stop these adverts reaching people in the first place. Not all thieves wear masks. It is possible to rob people of their money through misleading websites and illusory promises of financial gain. It is critical that the laws that we pass in this place keep pace with the innovations in fraud and financial crime that are taking place. For that to happen, it will take a lot more than the two clauses on compensation in this Bill.

[Madam Deputy Speaker (Dame Rosie Winterton)]

We now go to the Chair of the Treasury Committee, who has four minutes.

Universal Credit

Pat McFadden Excerpts

Tuesday 16th October 2018 Commons Chamber

[Alok Sharma]

I do not know whether the hon. Gentleman is referring to the claimant count, but people both in and out of work receive universal credit. I encourage him to look at the universal credit business case that we produced, which shows that, as a result of the universal credit roll-out, another 200,000 people will be in work.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Wolverhampton Homes, which runs council housing in Wolverhampton, reports that 67% of universal credit claimants are in rent arrears and that those rent arrears are going up by £60,000 a month. Will the Minister call a halt to the roll-out until the problems of debt, stress and, possibly, impending homelessness are addressed?

[Alok Sharma]

We have put in support for individuals—I have talked about that. Of course, also very importantly, we now have this partnership with Citizens Advice, which is a respected, nationwide, independent organisation. It is there to help and assist the most vulnerable.

PIP Back Payments

Pat McFadden Excerpts

Tuesday 30th January 2018 Commons Chamber

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

The system is in fundamental need of review. My constituent Martin Wright suffered a terrible life-changing accident at work several years ago. Despite that, he has been reassessed three times in three years and has now had his payments reduced. We will take Martin’s case to appeal, and I have to tell the Minister that every single case from my constituency office that we have taken to appeal in the past year has been overturned. Does that not show that this system is broken, inhumane at times, and in urgent need of fundamental change?

[Sarah Newton]

Of course I do not like to hear of individual cases when things have not worked out as we would like them to. If the right hon. Gentleman would like to meet me to discuss his constituent’s case, I would be very happy to do so. I hold meetings twice a month so that Members or their caseworkers can come along and meet my officials to review such cases.

It is worth setting all we are doing in context. We have made 2.9 million—I repeat, 2.9 million—PIP assessments, and 8% of those go to appeal, of which 4% are upheld, so the vast majority of people are getting the benefits to which they are richly entitled. If we look at the claimant work we do—the customer satisfaction surveys—we find that most people are satisfied with the process. Of course, until we have no appeals and 100% satisfaction rates, we will constantly be seeking to improve the situation, but the facts do speak for themselves.

Pension Equality for Women

Pat McFadden Excerpts

Thursday 14th December 2017 Commons Chamber

[Liz Twist (Blaydon) (Lab)]

First, may I declare an interest as one of those 1950s-born women who are directly affected by changes to the state pension age? Unlike many—some are sitting in the Public Gallery—I am fortunate to be able to raise the issue in the Chamber. The fact is that many of these 1950s-born women have been hit not just once but twice by changes to the state pension age.

Those of us born in the 1950s were first hit by the equalisation of the state pension age to that of men, with transitional arrangements in place according to date of birth up to 2020. Sadly, the then Government did not see fit to tell the women affected about the change, so many remained unaware and looked forward to receiving their state pension at 60. As they approached 60, they were devastated to find the financial ground shifting beneath their feet. In 2011, the coalition Government sped up the changes, so the state pension age for women reached 65 by 2018, and would rise with an increase in the state pension age for men and women to 66 by April 2020. Many women were left completely unable to make up that financial gap, and that would have been the case even if they had been aware of the earlier changes, which many of them were not. It is ironic that measures that were designed to increase state pension equality should have such a discriminatory effect on women in particular. They have indeed had a discriminatory effect, as many 1950s-born women face real hardship.

Out of the thousands of women in my constituency, I wish to refer to two whose cases particularly struck me. Barbara, whose door I knocked on during the election campaign, had worked all her life; indeed, she was working until just before I knocked on her door. She had worked for British Home Stores, but following the collapse of that company, she found herself without a state pension and, in a classic double whammy, without a company pension at that stage. Then there was the woman who approached me, quite unsolicited, in Blaydon shopping centre who said, “We need to do something.” She said that she had retired early to look after her mum, thinking that she would get her state pension at 60, only to find, after her mum’s death, that she could not get her pension. She had to rely on benefits and family support, and that was after working most of her life.

These cases are not unique, so the issue will not go away. Many women still contact me to say that they have joined the WASPI campaign and registered cases for maladministration with the Department for Work and Pensions, leading to even more of a backlog with the independent complaints examiner who is considering this issue.

Where do we go from here? The Government must address the issue as a matter of urgency. I have no doubt that we will hear about the measures that the Government have put in place to help people into work or apprenticeships. That is absolutely fabulous for any woman who wants to work and is able to do so, but there are many women whose circumstances mean that they are not able to do so. They were not expecting these changes and they find themselves unable to work, having looked after parents or family. Frankly, in a competitive market, it is just not that easy for 1950s-born women to find work.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Does my hon. Friend agree that whatever measures the Government might have taken, those measures have not worked and nor have they dealt with the problem? The continuing sense of injustice is still there, which is why we are having this debate.

[Liz Twist]

Yes, I most certainly do agree. I am asking the Government to meet the WASPI campaigners, explore solutions, look at transitional state pension arrangements, and make resolving this issue a priority for the 3.8 million women affected. This is a campaign powered by women with determination and courage, and I commend all who are determined that this cause will be addressed.

State Pension Age: Women

Pat McFadden Excerpts

Wednesday 30th November 2016 Commons Chamber

[Graham Evans (Weaver Vale) (Con)]

I am grateful to you, Mr Deputy Speaker, for giving me the opportunity to speak in this important debate. I am a little surprised that there are so few Members on the SNP Benches.

There is a clear need for equalisation of the state pension age. We are all agreed on that. We have an ageing population. People are leading healthier, longer lives. Given that an ever greater proportion of the population are drawing pensions, while an ever smaller proportion are contributing through national insurance, the pension system risks becoming unsustainable without the important measure that we debated and voted on in 2011.

On the most fundamental level, however, we as a House should champion equality. The new single-tier pension is much fairer and simpler. People who have worked for 35 years will receive £8,000 a year. It is a very simple process: 35 years of work will give us £8,000. I have already worked for 35 years, but I will not qualify for my pension until I am 67; the same applies to Mrs Evans. As we all live longer and healthier lives, that will increase, I am sure. Let us make that clear, here and now. The single-tier pension also takes into consideration for the first time the time off that people take to have children—maternity and paternity leave.

I supported the measure. When I was a member of the Work and Pensions Committee we investigated the matter. I contacted the DWP to find out my retirement date, and I have to say to the Minister that the document I received was rather drab—not the most exciting document to read. The first time I went through that process, in 2013, I was told I was going to retire at 65; when I did it in 2014, the answer was 66; and the following year it went up to 67. I had to read the documents very carefully indeed, so I think people can be forgiven for not realising that their retirement date had changed. I encourage the Government to take a look at the personalised documents that are regularly produced, with a view to perhaps introducing a little colour—for example, making the retirement date red and easier to see.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

I am grateful to the hon. Gentleman for his comments about information, but this is not a small mistake. I have constituents who will lose £30,000 or more by the shifting of the goalposts. Does he not think that because of the failure to communicate the changes, the Government have a duty to look again at transitional arrangements for the women affected?

Employment Support

Pat McFadden Excerpts

Wednesday 7th March 2012 Commons Chamber

[Maria Miller]

I can reassure my hon. Friend that every penny that is saved in the programme will be reinvested in supporting disabled people. Indeed, we will spend £15 million more as a result of the real, clear need to ensure that we have sufficient support in place. I can also reassure him that we already have the detailed programme of support for Remploy employees who are affected by today’s announcements. Several Opposition Members attended a meeting that I held earlier to ensure that people have the information to hand. I will continue to hold meetings with hon. Members to ensure that everybody is aware of the support that is in place.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

Seventeen hundred people will lose their jobs as a result of this statement, including 1,500 disabled people. The Minister’s case rests on the argument that there are better ways to help disabled people into work than through Remploy. Will she therefore guarantee to come to the House six months after the closures have taken place and detail exactly how many of the 1,500 disabled people who will lose their jobs have gained alternative employment?

[Maria Miller]

The right hon. Gentleman is absolutely right. We need to ensure that we know what happens to individuals who are affected by the measures announced today. Unfortunately, under the previous Administration, no such tracking was put in place. That was a mistake, and one that this Government will not be repeating. I hope that he is not advocating our retaining segregated employment, but I can absolutely undertake to him that we will monitor and keep track of these measures, because we want to ensure that as many people as possible can enter employment.

Remploy

Pat McFadden Excerpts

Thursday 15th December 2011 Westminster Hall

[Ann Clwyd]

I cannot emphasise enough the pride that people who work in Remploy factories have in their work. They do not want to sit there doing nothing—they want to work—but one of the problems with procurement, or the lack of it, is that too many of them are sitting, waiting for work that has not come. Members may have seen the recent lists of those local authorities that are procuring work through Remploy factories and those that are not. Some local authorities in this country are not getting any work done by the Remploy factories in their area, which is a tragedy.

In a period in which unemployment is rising, it is pie in the sky and cruelly misleading to suggest that expanding the Access to Work programme will result in more work for disabled people. In my area, people would like any opportunity to work, but it is particularly difficult for disabled people and always has been. I remember when the disablement resettlement officers tried to get work for disabled people and how difficult it was for them in a very different environment from the one we are in now.

Remploy is at a crossroads. All 54 Remploy factories are under threat of closure when the current public funding ends in April 2013. The threat is compounded by the factories being deliberately run at 50% of their capacity. It is crucial that, instead of deliberately running down the factories in order to, in my opinion, justify closure, an alternative Government strategy is devised to maintain funding and enable individual factories to secure work.

[Mr Pat McFadden (Wolverhampton South East) (Lab)]

In the House a couple of months ago, I asked the Minister a similar question about the factories. An allegation has been made that, although the performance of the factories varies from place to place, some are actually turning work away, perhaps in order to create the self-fulfilling prophecy of being financially inviable. The Minister said that she had not heard that that is the case, but has my right hon. Friend heard that it is? Since that exchange in the House, the allegation has continued to be made. When we talk about viability, it is important to establish whether that is what has been happening.

[Ann Clwyd]

I thank my right hon. Friend for making that point. I received a letter about half an hour ago from my hon. Friend the Member for Copeland (Mr Reed), who would have liked to have been present but could not make it. He wants me to mention the Cleator Moor factory in his constituency and says that it has operated very successfully for many years and currently has a large order book. Some factories, therefore, have large order books and are, in fact, turning work away.