The Secretary of State’s Handling of Universal Credit

Paul Masterton Excerpts

Wednesday 11th July 2018 Commons Chamber

[Neil Gray]

The hon. Lady is absolutely right. One of the central tenets of what the NAO called for in its report was that that type of evidence gathering needs to be done.

[Paul Masterton (East Renfrewshire) (Con)]

Will the hon. Gentleman give way?

[Neil Gray]

I said that that was the last intervention I would take.

The evidence is there—it is in black and white—with the clear researched correlation between universal credit and housing debt. It is not even close; any responsible organisation, never mind a Government, would look at that type of key performance indicator and say, “Right, how do we fix this, because it’s failing?” Why are this Government so determined to push back, ignore the evidence, plough on in the face of the evidence and pile more misery on more families? That is what is behind these statistics—people and families, such as the two constituents in tears at my Airdrie surgery a week past on Friday. For some reason, on universal credit this Government ignore the evidence and the lived experience, but are happy to deceive and never accept responsibility.

It is to responsibility that I turn in directly addressing the thrust of Labour’s motion. Labour has suggested that it tabled this motion to stop the Secretary of State’s salary for a month to replicate the experiences of people on universal credit who are sanctioned and, I suppose, so that the Secretary of State had a chance to make the same choices as those on whom she inflicts her policies, to paraphrase the right hon. Lady. The universal credit sanctions regime is utterly punitive, and in the words of the Joseph Rowntree Foundation, is akin to “destitution by design”. I was therefore hesitant last night, when contemplating the motion, about whether we should support it or rise above the deplorable conduct of the Secretary of State’s sanctioning regime. For the reasons I have already outlined, however, I think the Secretary of State should be considering her position.

Of course, a new Secretary of State will not necessarily fix the problems with universal credit. Perhaps the right hon. Lady could redeem herself by honouring the original concept of universal credit on which she worked, in a previous role, with the right hon. Member for Chingford and Woodford Green (Mr Duncan Smith). He of course resigned because the Treasury was cutting universal credit to ribbons. In spite of this motion, I reiterate the calls I have made in the past about working with the Government to improve universal credit. I am sure all Members on both sides of the House would take such an opportunity should a genuinely listening ear be afforded to us.

Of course, the Government are not short of suggestions from expert agencies and the third sector. We have already heard about the suggestions of the NAO, which I have not actually heard the Secretary of State comment on or respond to. Those include improving the tracking and transparency of progress towards universal credit’s intended benefits, and working with delivery partners to establish a shared evidence base on how UC is working in practice, as the hon. Member for Wallasey (Ms Eagle) mentioned.

Housing associations have talked this week about issues, on top of the process improvements, that the Government could easily sort out, such as getting payments on time or allowing housing associations and other advocacy organisations to negotiate on behalf of recipients. Housing associations want implicit consent restored and the two-child limit and benefit cap to be scrapped, and they also want to see work allowances restored and the self-employed protected. At my meeting with the Scottish Federation of Housing Associations this morning, I was reminded of just how unusual it is for the four federations to campaign collectively on such an issue, given the devolved nature of housing policy. That is how seriously they see the threat of the further roll-out of universal credit without significant changes.

We in the Scottish National party have talked about allowing people the choice of split payments, restoring work allowances to honour the founding principles of UC and sorting out the disability elements. This call has been echoed by Scope, which wants disability premiums to be restored. It says that, once the Government transitions run out, a single disabled person who receives the severe disability premium and is in the ESA work-related activity group could lose up to £4,745.40 a year on universal credit.

The point of universal credit was to make social security easier to navigate: it does not. It was supposed to be easier and cheaper to administer: it is not. It was supposed to make work pay: it does not. In reality, the cuts being made to universal credit may be saving the Treasury on the DWP budget line, but they will be costing it significantly more in other areas. With worsening mental health, it is costing NHS services. In increased requirement for conditionality and cuts to income, it is costing our local authorities in welfare rights officers and rent arrears. In allowing children to go hungry, it is costing our education outcomes.

Rather than working in silos, we need a new cross-departmental and cross-party approach, and we need that before universal credit reaches our largest cities, such as Glasgow, Edinburgh and Aberdeen, which are due to be migrated soon. The NAO stressed its concern about any further roll-out until the issues it raised are addressed. We agree. We have been saying so for years. So my appeal to the Secretary of State is to work across the House and with the third sector to take a strong coalition to persuade the Chancellor to invest in universal credit at the autumn Budget.

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[Heidi Allen (South Cambridgeshire) (Con)]

I suspect that everybody in the House became an MP because they wanted to make a difference—I most certainly did, and I know the Secretary of State did too—so I find the motion to be nothing other than an unacceptable personal attack on her. Perhaps President Trump’s visit to the UK this week can serve as a reminder: they go low and we go high.

I have yet to talk to any organisation with deep knowledge of our benefits system past and present that does not agree that universal credit is a vast improvement on legacy systems. Everyone who cares about alleviating poverty and improving the life chances of the vulnerable wants universal credit to succeed. I could look back and say I wish we had had more ministerial stability at the Department, that the roll-out in the last 12 months could have been slower or that the £1.5 billion in the Budget last year could have come a bit sooner, but since she has taken the reins at the DWP the Secretary of State has listened, just as her predecessor did. Deciding not to pursue the court challenges over PIP, and the severe disability payments, which we have heard about today, were both the right things to do. I am confident that when those of us who have constructively assessed the system tell her what more we can do, she will listen.

Let us start with the current system. We need to upgrade universal support to Martini status. Given that just 54% of claimants can enrol for universal credit without assistance, we need to ensure that universal support is available anywhere, everywhere and at any time. This means a full service specification with quality standards that can be monitored. It needs to provide more than was originally envisaged, including debt advice, which should be available through a trusted provider and to every claimant who needs it. I would suggest contracting it out to Citizens Advice, housing associations or some other such organisation.

The universal credit system as a whole needs quality indicators. What does good look like? What payment timeliness are we aiming for? What about accessibility, advanced payments and debt monitoring? Let us think of claimants as valuable clients, as citizens and taxpayers who deserve excellence in their interactions with the DWP. I want us to focus on the most vulnerable claimants—those at risk of ending up in our surgeries and food banks—such as victims of domestic abuse and modern slavery, those with mental health issues and the disabled.

Let us treat them as a special set of customers—platinum customers—and make it our mission to ensure they do not fall through the net. Let us think about fast-tracking them through the system and treating advanced payments as first payments, not loans to be collected back in. Since we pay universal credit in arrears, that advanced payment should be collected right at the end, when, all being well, the customer, with all the positive support of universal credit and the skills and passion of their work coach, has moved into good sustainable employment.

[Paul Masterton]

My hon. Friend mentions work coaches. I was disappointed that the Opposition spokesperson expressed no gratitude to the incredible men and women all over the country working on the frontline of our jobcentres with some of the most vulnerable people in our society. Does she agree that they deserve our support?

[Heidi Allen]

Absolutely, and they care deeply. I have spent time with work coaches all over the country in different jobcentres. They are proud of what they do and deserve our support. Working with them, we need to identify every crack in the system and ensure that our most precious customers—our platinum customers—do not slip through them. In that regard, I am pleased that the Chancellor has agreed to keep an eye on the taper rate.

None of my asks so far would incur big financial costs, but there is one we should ask the Chancellor for: we have to release working-age claimants from the benefits freeze. Universal credit can be the most positive and efficient system in the world, but if people cannot afford to live on it, it will not matter a jot. Furthermore, all this has to be sorted out before we push the button for managed migration. This is important, because when we do that, about two thirds of the claimants who will move across will be ESA claimants. They are our platinum customers and everything has to be perfect for them before we move them across. I will need to be reassured of that before I can vote for that legislation.

Conservative Members want universal credit to work. It is brilliant that we will be working with Citizens Advice, the Trussell Trust, Save the Children and others as they are desperate to engage positively and collaboratively. Getting universal credit right and, in doing so, helping millions of people in this country—that is a motion worth supporting.

Defined-benefit Pension Schemes

Paul Masterton Excerpts

Tuesday 10th July 2018 Westminster Hall

[Paul Masterton (East Renfrewshire) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I refer the House to my entry in the Register of Members’ Financial Interests. For the 10 years before I was elected, I was a pensions specialist solicitor. I must say to the hon. Member for Crewe and Nantwich (Laura Smith) that, for someone who claims not to be an expert, she demonstrated an incredible grasp of the key issues in a good opening speech, which certainly puts me to shame.

When we talk about protecting DB schemes, it is worth remembering that the fiduciary duty on the part of trustees is to protect the benefits already built up. Their responsibility is to ensure that the benefits accrued can be paid, not to ensure that an employer continues with ongoing DB provision. That is fundamentally an employment matter. On many occasions, the best way to protect DB benefits is to reduce future accrual, to close the scheme or—in the most nuclear option—to tip the employer into insolvency and have the scheme move into the Pension Protection Fund, so we must be careful about what we mean by protecting DB benefits and DB schemes.

It goes without saying that DB schemes face major challenges, and the Government have recognised that through the Green Paper and then the White Paper. When the Green Paper came out, I was not sure whether I agreed with the statement that DB schemes were not largely unaffordable simply due to my case load in the office at that time. Generally, the system works well for most employers, but we need a tougher approach for those failing to act responsibly.

I am pleased that the regulator was granted many of the powers it sought, because one of my big frustrations in practice was that it was largely toothless. It would send a lot of letters and have conference calls. Those who were really unfortunate would be dragged down to Brighton for an awful meeting where nothing really happened.

[The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)]

My hon. Friend will be pleased to know that I am not being dragged but going voluntarily down to Brighton, where the Pensions Regulator is based, this Thursday for a proper five-hour sit-down. In that, I will certainly take up some of the concerns of the hon. Member for Crewe and Nantwich (Laura Smith).

--- Later in debate ---

[Paul Masterton]

I am pleased to hear that, because the Pensions Regulator performs a vital role in overseeing occupational pension schemes. One of the big frustrations on the trustee side—not usually on the employer side—was that the regulator did not seem to have the time or resources to get stuck in or do anything serious to encourage or require an employer to change course. Some of the suggested improvements are very good.

In the past, pension schemes operated in a world of high interest rates and good equity returns. We now live in a different world. Investment decisions reflect ongoing uncertainty and volatility, which has led to widespread de-risking and a preference for investing in bonds and gilts. That has been a huge loss to the UK economy, with funding being taken out of equities. We could do more to look at how to unlock some of the vast sums that sit behind pension schemes.

[Julian Knight]

Does my hon. Friend share my frustration that often UK infrastructure is owned by overseas pension schemes and that, despite exhortations from the Government for schemes to invest more in the UK and in these stable, high-producing assets, they still seem reluctant to do so?

[Paul Masterton]

I do. Big pension funds—Canadian pension schemes and many others—invest a lot, and those investment projects provide good returns. We could unlock huge amounts of money.

Final salary pension schemes will end up in one of two places. They will either be successful and be bought out with an insurance company or fail and end up in the PPF. The hon. Member for Crewe and Nantwich was right that deficits have been pushed up by low gilt yields and low interest rates. Many employers, pushed by their trustees, and to a certain extent by the regulator, have prudent assumptions in their valuation setting, which increases the amount they have to pay in. That can provide a false picture of the deficit, but it does match the reality of trying to buy on the market. There is flexibility in the system, and one thing the regulator is looking at is being more akin to employer affordability in the valuation assumption setting, which should help with some of these problems.

Fundamentally, this drives to a system that is completely linked to the employer covenant. The stronger the employer, the more flexibility there is, which gives much more leverage to play around with assumptions. A weak employer cannot afford to take as much risk, so it is much tighter with its assumptions. That pushes the deficit up, which means more money has to be paid in. It is a self-perpetuating cycle where the weakest schemes, which need the greatest support, do not get it. They need the breathing space, but they have to pay high levels of deficit repair contributions. As my hon. Friend the Member for Solihull (Julian Knight) said, we should consider that many such schemes are legacy schemes, predominantly in old-school manufacturing industries, and many of those companies are shells of what they were in the ’70s and ’80s when their schemes were brought in. Those employers already provide weak covenants, and that situation may only get worse as we move forward.

It is remarkable that “The Purple Book” from the PPF estimates that 3 million DB members have only a 50% chance of seeing their benefits paid in full. The PPF is a fantastic lifeboat scheme to ensure that people still get decent payment of pensions, but we do not really want people to be reliant on it.

I disagree with the hon. Lady about consolidation. What the Government have been looking to do on that is sensible. Lack of scale is crucial. Two thirds of the UK’s defined-benefit schemes have fewer than 1,000 members, and small schemes cannot access the same sophisticated investment opportunities as bigger schemes. Even costs such as advisory fees, accountancy fees, actuarial fees and legal fees are disproportionately high for small schemes. There is a good place for consolidation, but she is right to worry about governance and ensuring that we do not go from a situation under an employer scheme with high levels of governance to one under a bigger scheme where that gets lost. That can probably be worked through in a scheme’s design and set-up. Ultimately, the solution to protecting DB schemes is not governmental but in the economy and the strength of the sponsor or, where available, the parent company. One of the big difficulties is volatility and the lack of certainty around risk.

The Government continue to take steps to pick apart the issues faced by the DB sector. They are doing good work, but fundamentally we need a clear understanding that governance, funding and covenants are intrinsically linked. I look forward to hearing the good story the Minister has to tell on what the Government are doing.

Oral Answers to Questions

Paul Masterton Excerpts

Monday 2nd July 2018 Commons Chamber

The Secretary of State was asked—

[Paul Masterton (East Renfrewshire) (Con)]

1. What recent steps the Government has taken to protect the welfare of vulnerable universal credit claimants.

[The Secretary of State for Work and Pensions (Ms Esther McVey)]

Universal credit is a person-centred benefit focused on the needs of the individual. We are working continuously with a variety of stakeholders to ensure that we provide the right support for vulnerable claimants, and our work coaches undertake awareness training to identify claimants with complex needs.

[Paul Masterton]

During a recent visit with the Secretary of State to the Barrhead jobcentre in my constituency, one of the things we discussed with staff was the payment of advances as a single payment potentially to claimants who have difficulty managing budgets or who are struggling with addiction. Will she take into account those concerns when reviewing how the advance system is operating?

[Ms McVey]

I was delighted to visit my hon. Friend’s constituency and local jobcentre and to visit the Greenhouse Café, which he champions and which helps vulnerable people to get closer to the workplace. On the question that he and the work coaches raised about the advance, those advances could be given up to 100%, and with the personal relationship that the work coaches have, through this training they can assess what the right needs are. That is the right thing to do.

Universal Credit

Paul Masterton Excerpts

Tuesday 13th March 2018 Commons Chamber

[Thelma Walker (Colne Valley) (Lab)]

It is time to be frank. Universal credit is currently a failure. It is not working how it was meant to. It is not supporting the people who need it. Its roll-out happened too fast, which meant that there has not been time to fix the many issues that have been brought to the House’s attention.

Twenty-four per cent. of children in my constituency live in poverty. In some areas, that figure increases to 40%. For some of the children whose parents are on universal credit, the hot, nutritionally balanced meal they have for lunch at school will be their main meal of the day. In no way is that a good situation to face, but at least those children are being fed. Well, not if Government Front Benchers have anything to do with it. Removing free school meals from those families who are claiming universal credit and who need them the most is deplorable. What kind of society do we want to live in? What Government in their right mind would take a hot meal off a child in need?

[Paul Masterton (East Renfrewshire) (Con)]

rose—

[Thelma Walker]

I am going to make progress.

Let me take hon. Members back to the 2016 Conservative party conference, where the Prime Minister said:

“I want to set our party and our country on the path towards the new centre ground of British politics built on the values of fairness and opportunity where everyone plays by the same rules and where every single person—regardless of their background, or that of their parents—is given the chance to be all they want to be. And as I do so, I want to be clear about something else: that a vision is nothing without the determination to see it through. No vision ever built a business by itself. No vision ever clothed a family or fed a hungry child. No vision ever changed a country on its own. You need to put the hours in and the effort too.”

Why are the Government not following the Prime Minister’s vision? Is it another sign of how she is in position but not in power? If she still believes in her own words, she must stand up and stop this attack on the poorest in our society.

My local authority, Kirklees Council, has seen a 20% increase in pupils claiming free school meals over the last four years, which goes to show how hard the Government’s austerity programme is hitting families. There has been a huge spike in food bank use, which also shows that we are a country on the cliff edge. Food banks do an amazing job of supporting those in need, and I commend the work of local food banks such as the Welcome Centre, which serves my constituency.

What kind of country do we want to live in? Do we want to live in a country where a child clings to a teacher’s hand as the school holidays approach, not wanting to leave school because they know they will be hungry for the next six weeks? Do we want to live in a country that chooses to let disadvantaged children go hungry? Do we want to live in a country where a child comes to school with a lunchbox filled only with a slice of stale bread? I have witnessed those things, and I can say that it is certainly not the kind of country I want to live in. Some 6,400 children in Kirklees will lose their free school meals because of the Government’s actions. I will bring my remarks to a close with a thought from Buzz Aldrin: if we can conquer space, we can conquer childhood hunger.

--- Later in debate ---

[Damian Hinds]

I cannot. No child who is receiving free meals now or who gained them during the roll-out of universal credit will lose their entitlement during the roll-out, even if family earnings rise above the threshold, as my hon. Friends the Members for Nuneaton (Mr Jones) and for Harborough (Neil O’Brien) mentioned. Once roll-out is complete, those children will be protected until the end of their phase of education—primary or secondary—as my hon. Friend the Member for Charnwood (Edward Argar) reminded us.

The protection arrangements will enable hundreds of thousands of children to continue to receive a meal during the roll-out, even if family earnings exceed the threshold. The £7,400 threshold relates to earned income, and it does not include additional incomings through universal credit. Depending on their exact circumstances, a typical family earning around our threshold would have a total annual household income of between £18,000 and £24,000.

The hon. Member for Manchester Central (Lucy Powell) said that the threshold was arbitrary. It is not arbitrary; the thresholds for these passported benefits are set at such a level as to hold the eligibility cohort steady, except that in the case of free school meals we took the decision to make it somewhat more generous than the previous system. The threshold is comparable, by the way, to that in the approach in Scotland, where there is a net earnings threshold equivalent of £7,320.

It is simply not true to say that we are introducing a cliff edge; there has always been one. The simple fact is that a child either gets a lunch or does not. A plate of food does not lend itself well to being tapered, as my hon. Friend the Member for South Cambridgeshire (Heidi Allen) has said. Some have suggested that we could convert the benefit into cash—that is true, of course—so that we could have a taper, but the whole point of free school meals is to guarantee that an individual child will receive a nutritious and healthy lunch.

Extending eligibility to all children in households on universal credit would result in around half of pupils becoming eligible. We estimate that that would cost in excess of £3 billion a year more by 2022. The additional meal costs alone, excepting the deprivation funding, would be in excess of £450 million a year—quite close to the figure mentioned by the hon. Member for Washington and Sunderland West. I reiterate that eligibility is going up, not down, as my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke) said.

I am running short of time, so I will turn to the regulations on universal credit. My right hon. Friend the Secretary of State for Work and Pensions earlier outlined the changes in these regulations for UC. They include the removal of waiting days, which will put an average of £160 extra in people’s pockets and get them into the monthly routine sooner, and an additional two weeks of housing benefit to smooth the transition to universal credit. That one-off, additional, non-recoverable payment is worth an average of £233 to 2.3 million claimants over the roll-out period. Those measures form part of the £1.5 billion package of reforms that the Chancellor announced at the Budget. My hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) said that he was surprised to hear that Labour Members would be voting against those measures. I suggest that their constituents will be even more surprised.

[Paul Masterton]

Wil my right hon. Friend give way?

[Damian Hinds]

I hope my hon. Friend will forgive me if I do not; we are very short of time. As my hon. Friend the Member for Lewes (Maria Caulfield) reminded us in her unique style, the Government are committed to tackling injustices, removing barriers and widening opportunity. Because of the strong economic management that my right hon. Friend the Chancellor recapped for us earlier, we are able to continue our bold and ambitious programme of social reform extremely quickly.

Pensions Auto-enrolment

Paul Masterton Excerpts

Wednesday 28th February 2018 Westminster Hall

[Paul Masterton (East Renfrewshire) (Con)]

Thank you, Mr Davies. I am pleased to speak in the debate, and I congratulate my hon. Friend the Member for Chippenham (Michelle Donelan) on securing it. We are here to debate one of the most successful savings policies in pensions history. As a result of auto-enrolment, more than 9 million additional people are saving for their retirement, including 5,000 in East Renfrewshire and more than 63,000 in Scotland as a whole. Four in five of today’s eligible workers are saving, and those benefiting the most are the lowest earners, those aged 20 to 29, and women. Opt-out rates still sit at under 10%.

There is wide consensus in both politics and the industry that the policy is working, and that holds true even for some groups who people feared would struggle with implementation, such as small businesses. Those businesses make up a large proportion of the 990 businesses in East Renfrewshire now complying with their auto-enrolment duties.

As others have said, the utilisation of inertia to build a savings culture with a new generation of savers is the key element of the policy. As the People’s Pension—a master trust serving just under 3 million savers in auto-enrolment—said when I met it a few months ago,

“the policy was developed following a variety of failed pension saving initiatives which lacked the necessary incentives to encourage low and moderate earners to save for retirement in practice.”

I am incredibly proud of the Government and this policy, which—I do not think this is overstating it—is a savings revolution that has become the envy of Governments across the globe.

DWP analysis shows that reforms could increase median weekly private pension income by up to £261 a week by 2070—hopefully even I will be retired then. If sustained, the reforms could significantly reduce the risk of pensioner poverty over the longer term, which in turn will reduce levels of dependency on the state.

So far, auto-enrolment has been rightly heralded as a great policy success. However, it is a fragile policy. The test of its robustness will come when savers’ and employers’ contributions begin to be raised to a meaningful level. The rates of required contributions are too low and even at the final rate of escalation they will still be too low. Such contributions are also often combined with investments in a default fund that is not regularly and properly scrutinised, leading to poor investment returns.

While Pension Wise is sensible Government policy, it is predicated on individuals becoming engaged investors as they get to their 50s, so it will not mitigate the risks for most people, who do not think about pensions until six months out from retirement age. Pension providers should be tasked to establish high-quality default products, with appropriate and aligned governance. The Financial Guidance and Claims Bill, working its way through the Commons, is a good piece of legislation that can help address that.

Like others, I was delighted by the Government’s announcement before Christmas of reforms to auto-enrolment to ensure that saving was from the first pound. The system with the lower earnings limit was basically just an administrative hassle, and in many cases it was ignored by employers. It will particularly help those with multiple jobs, and expand auto-enrolment to cover those over 18 and under 22. I agree that there seems to be no good reason not to look at 16 and 17-year-olds, particularly those who have left school and are working full-time, earning more than £10,000.

Bringing a new generation into an immediate culture of pensions saving is incredibly significant and will have long-term benefits for society as a whole. That is why the Government must not slow down the escalation timetable for contributions. Yes, workers and employers need time to adjust, and we need to strike a careful balance so we do not get a sudden increase in the opt-out rate, but the current timetable is suitable, sustainable and should be stuck to.

Key to the success of auto-enrolment is a new culture of pension saving through better and more creative financial education and engagement. Again, the Financial Guidance and Claims Bill does a good deal of work on that. Although I will save default guidance for another day, the Minister has my full support for the work he is doing on that, and particularly on the pensions dashboard —an exciting development that will be hugely useful for people however much they are earning and wherever they are working.

Moving forward, the Government need to link pension provision and the next auto-enrolment review with further consideration of the Taylor report. The definition of “worker” in auto-enrolment regulations is becoming increasingly ambiguous, with employment status uncertainty growing. That needs to be addressed to determine precisely who falls within the scope of auto-enrolment so that business and individuals have certainty. Since auto-enrolment was brought in, I spent a heck of a lot of time giving legal advice on that, and it was always an absolute nightmare. We need to do some work to tighten up who falls within and outside the scope of the auto-enrolment regime.

I will not touch on self-employment, because my hon. Friend the Member for Chippenham did a good job on that. I am interested to see what she has up her sleeve, and if she ever wants any assistance in “banging on about it”, as she said, I am more than happy to help.

In 1948, a 65-year-old could expect to spend 13.5 years in the retirement phase of life. They now can expect it to be 33.6% of their life. The UK must remain one of the best places in the world to grow old, and ensuring that people have a decent income in retirement must be at the heart of that. I commend the Government, and this Pensions Minister—who is well liked in the industry and who I hope remains in place for a long time—for their work to make that a reality for everyone.

Financial Guidance and Claims Bill [Lords]

Paul Masterton Excerpts

2nd reading: House of Commons
Monday 22nd January 2018 Commons Chamber

[Paul Masterton (East Renfrewshire) (Con)]

I am pleased to speak in support of this Bill, which is of real significance to my constituents, given the demography of East Renfrewshire. I refer Members to my entry in the Register of Members’ Financial Interests. Prior to coming into this place, I spent nine years as a specialist pensions advisory solicitor and I was a member of various fun organisations such as the Association of Pension Lawyers—it is, I assure Members, as exciting as it sounds.

Part 1 of the Bill creates a single financial guidance body to replace three existing services. It is a much-needed move to make public financial guidance more accessible and more integrated. The services offered by the Money Advice Service, the Pensions Advisory Service and Pension Wise are somewhat disjointed, and there is a lack of communication and co-ordination between the three services. That is why only 3% of Pension Wise users say that they first heard about the service from the Money Advice Service, for example. As we are talking about public financial guidance services, those figures should be much higher.

That is why it is important that the three services are replaced with one body. Instead of having to contact two or more services for different aspects of financial guidance, people will be able to access one integrated and holistic service. It is absolutely critical that people across the UK can access independent, impartial and high-quality financial guidance.

It should go without saying that the ultimate measure of a guidance service is whether the guidance it provides is useful. I would, therefore, like the single body to be subject to rigorous evaluations based on consumer outcomes, not just outputs, to ensure that it is fulfilling its role. Much of the anticipated success of the new SFGB assumes that the new body publicises itself effectively. According to Which? around two thirds of people are aware of each of the three existing bodies. It is crucial that the single financial guidance body quickly achieves and then surpasses those levels of awareness, so that as many people as possible can access its services. Linking in with the pensions dashboard to give users a prompt would be a simple step.

Pension freedom and choice was mentioned earlier in the debate. It has changed the pensions landscape, but while Pension Wise is sensible Government policy, it is predicated on individuals becoming engaged investors, so it does not mitigate risks for most people. Research by the Pensions and Lifetime Savings Association found that only 22% of individuals used the Pension Wise website. That is nowhere near good enough if we are serious about ensuring people are going to provide a sustainable retirement for themselves.

In its comprehensive Financial Lives survey, the FCA identified further detail on the shockingly low levels of guidance usage among key age groups, with only 7% of all 55 to 64-year-olds using the service in the last 12 months. Perhaps it is not surprising that the PLSA found that, of the 3 million individuals between the ages of 55 and 70 with defined-contribution pots not yet in payment, 300,000 had taken no action whatever. Of those who had, 15% had used the new freedom to take more than their 25% tax-free cash lump sum. When they took that cash, 20% spent it all—what is sometimes colloquially known as the Lamborghini option.

Freedom and choice is great. I like it, but it brings with it the inherent risk of life-destroying choices, and the role of the SFGB has to be to provide guidance to try to prevent people from making those mistakes. Individuals face really complex risks when selecting how to use their pension savings. The language, concepts and risks are all unfamiliar to most people. How we use our retirement funds is one of the most important decisions we will make in our lives, and impartial, independent support to help us to make an informed decision is absolutely vital. It is clear to me at least that the new SFGB is integral to the success of freedom and choice. It has to be the anchor in terms of accessing high-quality guidance, so that people can evaluate their options and make best use of what they have saved.

Given everything I saw and experienced before coming into this place, I remain hugely attracted to the principle of default guidance, mirroring the approach taken to auto-enrolment, with statutory opt-out provisions. Clause 5(2) could be strengthened, as was recommended by the Work and Pensions Committee. The Minister has made some positive noises about that, but if we are looking for something as close as possible to a silver bullet, default guidance is probably it.

I would also question precisely how the SFGB is going to work alongside the new pensions dashboard. The dashboard is long overdue. It is a tool that brings together an individual’s pension entitlements—state, workplace and personal—and it will be really widely used. However, I have a slight worry that providers will be, and indeed are, setting up their own branded variations.

[Guy Opperman]

In contemplating my hon. Friend’s outstanding speech, let me help him with a couple of points. The dashboard is being proceeded with, and I will be making a statement to the House before the end of March, giving an update on the process by which these things are taking place. I will address some of the other remarks in his speech at a later stage.

[Paul Masterton]

I thank the Minister for his intervention. On that basis, I will move on to clause 4 and pensions cold calling.

Losses from pension scams rose to £8 million in March last year, and over £40 million has been lost to pensions liberation—something I dealt with a lot in practice —with individuals being tempted to transfer out of generous final salary schemes to access their pension pot prior to age 55, with the 55% tax charge that came with that.

Though big steps have been taken, the scammers are clever, and their approaches are becoming more sophisticated. Citizens Advice believes that around 2.4 million 55 to 64-year-olds received unsolicited contact about their pension in the year after pension freedom and choice was introduced. A cold call ban will narrow the scope for scammers, but if we have a default guidance requirement, there is more chance of the individual being alerted, before they take the option to transfer, to the risk they are facing.

Other Members have been through clauses 7 and 8 in detail. Like all things, the debt arrangement scheme we have in Scotland is not perfect, but it is a good place to start, as I think the Government recognised in bringing forward the provisions they did on Third Reading in the other place. A statutory debt management plan is a good thing, not least because it should avoid insolvency.

Under Clause 11, arrangements are introduced for the funding of debt advice in Scotland, Wales and Northern Ireland. The delivery of debt advice will be devolved, but raising a levy to fund the provision of that advice is reserved. I do have some concerns here. While I completely understand the rationale for devolving debt advice, given the other advice and guidance services commissioned from Edinburgh, Cardiff and Belfast, I am not precisely clear how this is going to work in practice.

The functions of the new single body fall into two categories: the debt advice function, under which it will provide members of the public only in England with information and advice on debt; and the strategic debt function. That strategic function is UK-wide, so we will have a situation where the single body’s functions in relation to financial capability, money guidance and the strategic debt function are UK-wide, but the debt advice function is not. That debt advice function really does have to dovetail with the UK-wide elements of the SFGB, irrespective of its delivery by the devolved Administrations, if this is going to work. I am not entirely clear how we are going to ensure that that happens.

Clauses 10 and 11 require the SFGB to set and enforce standards across the debt advice partners it commissions, because debt services are predominantly provided by service providers, many of whom operate cross-border. However, with the procurement and provision of debt advice services devolved, that role sits not with the SFGB in Scotland, Wales or Northern Ireland, but with the devolved Administrations. As was pointed out by many bodies in the consultation, that could raise issues. Of course, the devolved Administrations may want to tailor services to meet particular requirements, but there really is a strong case for ensuring that standards are aligned, both for providers who operate cross-border and for UK consumers. I ask the Minister to outline how he intends to work with the devolved Administrations to ensure that the commissioning of debt advice services is joined up as far as possible to ensure we get the dovetailing I mentioned earlier.

I am conscious of time, so I will not go into part 2 in much detail, other than to say that I am pleased that the Scottish Government have changed their position from not wanting part 2 to extend to Scotland to agreeing that it should now extend to Scotland. That, combined with some of the measures going through the Scottish Parliament at the minute, particularly around no win, no fee solicitors, will make a big difference on some of the issues around claims management companies north of the border.

The Bill has two pillars, both of which are much needed. Although the provisions allowing for a single, integrated financial guidance service are not the end of the story, they are important advances. I am absolutely delighted to support the Bill, and I thank the Minister and his team for bringing it forward. This is a really difficult area, and he has grasped the nettle—or, as we are in Burns season, the thistle—and brought to this House legislation with real intent and purpose, which will, along with the Government’s other initiatives on pension saving, make huge positive changes to how people monitor and manage their finances.

Private Sector Pensions

Paul Masterton Excerpts

Monday 22nd January 2018 Commons Chamber

[Ms McVey]

I am aware that that was debated with the Pensions Minister 10 days ago, and he is looking specifically at the points the hon. Gentleman raised then. The hon. Gentleman is fighting a good cause, and I am sure that we will be able to come up with a solution.

[Paul Masterton (East Renfrewshire) (Con)]

The best form of pension protection that anyone can have is a sustainable employer. While the Pensions Regulator has wide-ranging powers, they are rarely used and it is often a bit toothless. Is the Secretary of State satisfied that any new powers, welcome though they may be, will be backed by proper resources?

[Ms McVey]

When we bring forward new powers, it is vital that they are workable, that they have a strong, secure footing and that they are affordable. We are looking at that as we review how to introduce stronger legislation.

State Pension Age: Women

Paul Masterton Excerpts

Wednesday 29th November 2017 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

Many of the WASPI women watching this debate may feel disappointed that instead of trying to build some consensus, we have had finger pointing, Pontius Pilate-style hand washing and rancour. It is important to note that this is not a party political issue for many women, and certainly not for those I have spoken to. It is a personal issue that has affected their day-to-day lives, so they want Parliament’s collective attention. The hon. Member for Eastbourne (Stephen Lloyd) has been an exception today, as he was very honest in accepting that all Administrations have played a part in this situation.

We will support the motion for a number of reasons. The first is that it is quite clear—even from successive Governments’ own admissions and from the actions of the Department for Work and Pensions—that people were not given adequate notice of the change. The Pensions Commission said that there should be about 15 years’ advance warning for such changes, but some people had less than five.

[Paul Masterton (East Renfrewshire) (Con)]

There are 4,000 WASPI women in East Renfrewshire. None of those whom I have met have an issue with their state pension age going up; they simply feel that they were not given enough notice. Is there not a broader question about how the Government communicate with individuals who face serious consequences and life changes as a result of this policy? We need to look at the communication, not just at pensions.

Oral Answers to Questions

Paul Masterton Excerpts

Monday 13th November 2017 Commons Chamber

[Guy Opperman]

The hon. Lady suggests one thing. I can only refer her to the two parliamentary debates that dealt specifically with this matter; this was set out by her own Lib Dem colleague Sir Steve Webb in March 2015, when he was part of the coalition.

[Paul Masterton (East Renfrewshire) (Con)]

The PPF is a vital lifeboat for individuals whose employers become insolvent. Will the Minister update us on when his White Paper looking at the affordability of defined benefit pension schemes will be available?