House of Commons
Tuesday 22 April 2008
The House met at half-past Two o’clock
[Mr. Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Roads (Permitted Vehicles)
With permission, Mr. Speaker, I would like to take this opportunity to pay tribute to Gwyneth Dunwoody, who died last week. It is on occasions such as these that her absence will be sorely felt. Gwyneth had a passion for social justice, was incredibly knowledgeable about transport issues, as was clear from her chairmanship of the Transport Committee, and always made pertinent, if sometimes mischievous, contributions to debates. I am sure that the House will agree that Gwyneth was a truly outstanding parliamentarian and a great servant of the people. She will be sadly missed in all parts of this House.
In respect of Question 1, I am yet to receive the research report on this subject, but I have no plans to allow so-called super-lorries on UK roads.
I served on the Transport Committee under Gwyneth Dunwoody, and I think that she would appreciate the Secretary of State’s comments.
Rail freight groups estimate that every tonne of freight carried by rail saves about 80 per cent. of the carbon emissions that that freight would have generated if it had been transported by road. Why have the Government abandoned their target to increase rail freight by 80 per cent. by 2010?
The hon. Gentleman completely misunderstands the facts of the case. In fact, last year, we invested £17 million in removing 1 million lorry journeys from UK roads. We are committed to building on that success and, in the past year, we announced the single biggest package of investment in rail freight infrastructure for decades—£150 million. Rail freight has already gone up by 50 per cent. We are committed to a review, leading to a Green Paper that examines the transport challenges for the UK economy. As part of that, we will perform a specific piece of work to review the contribution that freight can make to our economic success.
My hon. Friend makes a valid point about whether there is fair, or indeed unfair, competition on British roads. I am completely committed to ensuring a level playing field for UK hauliers and foreign hauliers. It was absolutely right that we considered the so-called vignette scheme, which proposed a daily charge for non-British lorries that use UK roads, although even the haulage industry decided that that was probably too complex and costly to implement. However, I am stepping up significantly enforcement against hauliers on road safety grounds, and have just announced additional investment of £24 million to ensure that there are no infringements of road safety rules.
May I make a plea to the Secretary of State not to allow any longer heavier vehicles on the A14 through Cambridgeshire, which has one of the worst accident records in the country, with 52 fatalities in the past 10 years alone? The latest, only three weeks ago, in which a heavy lorry killed a young single mother, was highlighted in a campaign by Cambridge News. Will the Minister undertake to prioritise all the Cambridgeshire A14 improvements so that heavier lorries can make safe passage through Cambridgeshire from the east coast ports to the midlands and the north?
The hon. Gentleman is absolutely right that safety should be a key consideration when deciding whether road improvement schemes should go ahead. That is one of the issues that we will consider in determining whether the A14 is a priority for additional investment. We are reviewing all our road schemes and intend shortly to make an announcement on which will be priorities.
May I associate myself with my right hon. Friend’s comments about Gwyneth Dunwoody? She was a tough cookie, but she was our tough cookie. She will be very much missed.
The hon. Member for North-East Cambridgeshire (Mr. Moss) does not seem to realise that it is Conservative party policy to allow longer heavier lorries on the roads of Great Britain. Will my right hon. Friend think very carefully before she allows that, because they will almost certainly be taken through our rural villages causing untold damage?
My hon. Friend takes a huge interest in this subject, and I know that he has a track record of considering the case for longer heavier vehicles. He makes a pertinent point about the Conservatives’ policy, and I have a huge amount of sympathy with his points. We should be concerned about congestion and road safety and, on environmental grounds, we should think about the most effective way of moving freight around this country. That is why I have said that I would need a huge amount of persuasion to allow so-called super-lorries on British roads.
We have taken a long detailed look at the issues, not just in government, but through our work with the road haulage industry, to see whether it would be possible to introduce a scheme that would take account of the infrastructure and maintenance costs for British roads. The study concluded that it would not make sense to introduce such a scheme within the current framework of EU legislation; it would be too complex and costly to introduce, and the benefits would not exceed the costs.
There are alternative ways of ensuring that British hauliers do not suffer from unfair competition. I am determined to ensure that they do not, and the key to that is considering the impact on road safety. We need to ensure that there are no incentives for non-UK hauliers to break the rules. That is why enforcement is so important and it is why we have stepped up significantly the level of enforcement against hauliers who break the rules—indeed, we have doubled it in the past year.
One of the problems with the larger lorries already allowed on British roads is that they use not only the slow lane on motorways or dual carriageways, but often overtake, sometimes sandwiching smaller cars. Will the Secretary of State consider rolling out throughout the whole UK the pilot that has been introduced in one part of the country so that, as in other European countries, lorries may drive only in the slow lane?
My hon. Friend makes an absolutely excellent point. I am determined to ensure that rather than automatically jumping to the conclusion that extra capacity is needed on British roads, we think first and foremost about the best use of our existing network. That might mean bringing the hard shoulder into use, and if we decide to do so, we should think about how that extra space is used. One possibility is that we reserve it for car-share lanes, but we could also think about whether crawler lanes might be appropriate for longer heavier vehicles. We will review, motorway by motorway, the use of extra capacity to ensure that it is used to best effect.
On 19 November, the Under-Secretary of State for Transport, the hon. Member for Poplar and Canning Town (Jim Fitzpatrick), told me that this already overdue report would be published in three months. It is now six months later, and people are starting to wonder whether someone is sitting on it. The Conservative party has not come to a view on longer heavier vehicles, but the evidence in the report might help us to do so. Will the Secretary of State at least publish the evidence, even if she cannot reach her own conclusions?
I have already made it clear that this is a complex issue. The report should be published in a matter of months, if not weeks, but it certainly should be published before the summer recess, when everyone in the House will have the opportunity to determine their view on longer heavier vehicles. I have already said that I would need a huge amount of persuasion that super-lorries are the answer to congestion on our roads, but I look forward to hearing any policy pronouncement of any kind from the Conservatives on congestion.
Rail Services (Edinburgh to North-West England)
Journey times will be accelerated on most trains between Edinburgh and Manchester, Warrington and Preston from the start of the December 2008 timetable. From the same date, the train operator for the Edinburgh to Manchester airport route intends to increase the number of services that it provides.
It takes almost as long to go by train from Edinburgh to Manchester as it does to go from Edinburgh to London, even though the latter journey is twice the distance. Some welcome improvements have been made, but there is a real opportunity, even with existing rolling stock—and certainly with the new rolling stock that is coming in—substantially to improve journey times between Edinburgh and north-west England, which would benefit business and leisure passengers and help to shift air and road passengers on to the railways. I urge my hon. Friend to meet the rail companies to ensure that such improvement continues, with further improvements in the timetable next year.
My hon. Friend has a long track record of campaigning on these issues. He will know that I meet all the train operating companies regularly to discuss levels of service, including the journey times between particular stations. As I have already said, the journey times that concern my hon. Friend will improve from the end of this year. We are always in the market to achieve improvements to journey times, but there is a trade-off between the number of stations that any service can serve and end-to-end journey time. Once we have struck the correct balance, I am sure that services serving my hon. Friend’s constituency will improve in the long and short term.
May I associate myself with the tributes to Gwyneth Dunwoody? Those of us in the long line of former Transport Ministers who withered under her scrutiny will remember her fondly and miss her greatly.
I thank the Minister for the news of faster train journeys, but would he not agree that most passengers actually want a more regular pattern of service and trains that are punctual and reliable?
My right hon. Friend is absolutely correct. Under this Government, performance has improved by 10 per cent. over the past five years. We are committed also to improving rolling stock, with the introduction of 1,300 brand new carriages over the next five years. As he will be aware, today we have the youngest rolling stock of any European country.
M6 (New Junctions)
The Government’s policy on the construction of new junctions on the motorway network, including the M6, is set out in “Circular 2/07: Planning and the Strategic Road Network”, which the Department published in March 2007. The policy states that there is a general presumption against additional access to motorways and other routes of strategic national importance.
Because of the urban spread in my constituency around Preston and Blackpool, my local A roads are under tremendous traffic pressure. Lancashire county council’s solutions for relieving that involve two options—a new junction on the M6 or a new one on the M55—so will the Minister consider reviewing that guidance?
Guidance is exactly that: guidance. Ministers have some discretion to go beyond that guidance when that seems necessary. For example, if it is necessary to create a new junction on a strategic road to accommodate a growth area or an attraction, that option is open to us. I would have expected the local authorities in the hon. Gentleman’s constituency to work with the Highways Agency to come up with alternative solutions so that we did not need to create any extra junctions on any motorway. However, we analyse all situations case by case. If there is a case for creating an extra junction, I will be happy to consider it, but I would be reluctant to move from the stated policy as it is designed to ensure the free flow of traffic and maintain our high levels of road safety.
May I associate myself with the remarks about my fellow Cheshire Member, Gwyneth Dunwoody? She was a formidable lady, although, sadly, at the end of her life here I was in disagreement with her.
Will my hon. Friend the Minister think particularly about junctions at the northern end of the M6? However, before he gives that any priority, will he ensure that he cross-references his studies with his work on railways? I am convinced that significant gains could be made to the flow of freight by getting more freight on the railway on the southern side of the River Mersey. If we do that, there will be less need to change the structure of the M6.
My hon. Friend makes the particularly valid point that road and rail planning should go hand in hand. I want to get as much freight on to the railways as possible. We have to assume that roads will continue to carry the vast majority of freight in the long term. However, with that in mind, it is incumbent on local authorities and the Highways Agency to ensure that our infrastructure is fit for purpose.
The Minister will know that many of my constituents travelling south from Shropshire use either the M6 or the M6 toll road. Will he give my constituents an update on the extension of the M6 toll road connected to the M54 and, most importantly, give a commitment to them and me today that no toll will be introduced on the M54?
I can confirm that there are no plans to impose a toll on the M56.[Official Report, 29 April 2008, Vol. 475, c. 4MC.] I can also tell the hon. Gentleman that the plans to extend the toll road northwards are no longer going to be progressed. However, the whole policy on the strategic road network, and the question of how we make the most effective use of its capacity, are the subject of a study being undertaken by the Department. That study will consider not only road pricing, but active traffic management, which has been such a success on the M42.
Local Transport Plans
The Department for Transport issued guidance to local authorities about local transport plans in December 2004. It also issued advice in 2007 about reviewing progress on delivery of transport plans.
I thank the Minister for her response. May I say, on behalf of the people I represent, that they are very glad that, at long last, they are going to get back some local control over public transport services? Does my right hon. Friend agree that the Conservatives oppose these plans simply because they would still rather put private profit before public services?
My hon. Friend is quite right to express amazement at the fact that the Conservatives decided to vote against the Local Transport Bill on Second Reading. All Labour Members appreciate the need to improve our bus services, to increase the integration of public transport and to improve community transport. It is beyond belief that the Conservatives do not support those principles. I also believe that they are completely out of step with Conservative local councillors whom I meet around the country, who say that this is exactly—
May I join the Secretary of State in paying tribute to Gwyneth Dunwoody? A corner of this Chamber will be for ever Gwyneth’s.
I invite the Minister to explain the role of regional development agencies in strategic transport planning, in particular for roads such as the A64 between York and Scarborough that have a strategic role but are inherently unsafe. Between us, we need to find the money to improve that road.
The regional transport board has responsibility for prioritising the regional funding allocation and it decides the priority for allocations to roads such as that mentioned by the hon. Lady. In the proposals on the sub-national review, transport comes under the auspices of the regional development agencies, and the agencies and the regional assemblies are responding to those proposals and determining how they would like such strategic transport issues to work. The consultation on that closes in June, and the hon. Lady will no doubt wish to respond to it herself.
Does the Minister agree that it is important that local authorities retain a role in planning local transport services to ensure that buses cannot be removed or rerouted because they are deemed to be unprofitable, regardless of their value to local residents?
My hon. Friend is quite right. That was why the Government introduced local transport plans—for which, incidentally, funding has doubled since 2001—which made local authorities responsible for taking an integrated approach on local transport. The Local Transport Bill, which is now going through Parliament, will give local authorities more powers to introduce quality partnership schemes and quality contracts, which have been widely welcomed by local authorities in all parts of the country, and, incidentally, by all political parties. During our discussions on the Bill, I hope that we will be able to persuade Conservative Front Benchers at last to support these proposals.
Following the opening of the new railway line between Kettering and Corby later this year, there will be a danger that the bus service operating between the two towns will be lost. It provides an important service for local people, particularly to the local hospital. Will the Minister encourage, through her departmental guidance, the relevant local authorities to retain this important bus service when the rail link is established?
We ask local authorities, when framing their local transport plans, to look into how to integrate their transport services. The Local Transport Bill will give local authorities greater powers over bus services, so the hon. Gentleman might like to talk to his local authority—and, perhaps, his Conservative councillors—about what plans they might like to bring in under the Bill and then perhaps persuade Front Benchers to support them.
May I pay my tribute to Gwyneth Dunwoody, who will be sadly missed by all who knew her and who worked for her?
Does the Minister agree that the best way to achieve successful local transport plans is to ensure that transport authorities continue to be made up of democratically elected and accountable local representatives?
I know that my hon. Friend will be feeling very deeply the departing of Mrs. Dunwoody? I know from my most recent appearance before the Transport Committee that he was with her when she was conducting its inquiry into blue badges.
On having elected people on passenger transport authorities and the future integrated transport authorities, it is true that we want to give local areas the right to co-opt other members—for example, representatives of passenger groups—on to those authorities, if it is felt that that would be helpful. However, we have said very firmly that the majority of voting members must be elected councillors. I hope that that reassures my hon. Friend.
I, too, would like to pay tribute to Gwyneth Dunwoody. Indeed, it seems very strange to be here at Transport questions without her watchful eye over proceedings.
Will the Minister tell us what guidance has been issued on light rail, with particular reference to light rail in Merseyside?
Concessionary Bus Travel
From 1 April—chop, chop—the Government implemented the new statutory minimum entitlement to concessionary travel so that up to 11 million older people and eligible disabled people could travel free at off-peak times on buses in any part of England, not just in the area where they live.
Notwithstanding the millions of pounds that the Minister boasts of having distributed, is she aware of the disaster being visited on communities, particularly those on the western edges of counties, as county councils attempt to balance the interests of the council charge payer with the traveller and reduce the service in order to be able to afford concessionary fares? Does she realise that it is a fat lot of use having a free bus pass if there is no bus to travel on as a result? Does she know that although 11 million passes have been issued, there are hardly any buses that can process them?
The additional allocation in the hon. Gentleman’s area for 2008-09 was £493,000, which represents a 48 per cent. increase—48 per cent.—over the spending in 2006-07. I would hope that the hon. Gentleman welcomes a scheme introduced by a Labour Government to help older people in this country and to save them considerable amounts. I hope that he will encourage people in his local area to take it up.
As for the hon. Gentleman’s point about bus services, I urge him to ask local councillors what they feel about the Local Transport Bill. I shall be very surprised if they are not supporting our plans for quality partnership schemes and quality contracts.
I agree. Certainly everyone I have met supports our proposals. If the hon. Member for New Forest, West (Mr. Swayne) has that conversation with local councillors, I suggest that he then discuss with Conservative Front Benchers whether they will support them as well.
As a former Transport Minister, I, too, pay tribute to Gwyneth Dunwoody. She was a great parliamentarian.
I congratulate my right hon. Friend and her colleagues on the introduction this month of the English national concessionary travel scheme. In Scotland, we have had such a scheme for some years, and it has given a tremendous boost to elderly people in particular. However, some elderly people living close to the English border with Wales and Scotland do not enjoy as much free travel as we should like. Is it possible that in due course concessionary travel can be extended throughout Great Britain?
It is refreshing to hear my right hon. Friend welcome and celebrate the proposals for older people, rather than adopting the mealy-mouthed approach of the Conservative party. As he might know, we have had some discussions about the issue of cross-border travel, and many services can already cross county borders. We want to ensure that the English scheme settles down before looking further, but although that has been a priority, it does not rule out further discussions in the future.
What the Government are doing to improve bus services is introducing the Local Transport Bill, which gives local authorities more powers to improve services and work with operators in their areas. I am glad that the hon. Gentleman supports that direction of travel, as it were. I urge him, too, to talk to local Conservative councillors about their views, and then talk to his party’s Front Benchers.
I welcome the Minister’s remarks about cross-border travel. What discussions are taking place with the Welsh Assembly Government to enable my constituents to travel freely on buses between Wales and England, and within what time scale will we see that benefit?
As I explained earlier, if buses are simply to cross the border, agreements can be made between the local authorities concerned. We wanted to ensure that the system in England was implemented from 1 April and that all the passes were issued before proceeding to further discussions. There are, of course, enormous financial implications for the extension of the scheme to Wales and Scotland, and I am sure that my hon. Friend will understand that we must take them very seriously.
May I add my voice to the tributes paid to Gwyneth Dunwoody? She was a great friend of my party and its leader, and a great friend to the people of Northern Ireland, where she was held in high esteem.
How does the Minister expect the concessionary travel schemes across the United Kingdom to interlock in the coming years, and what is her estimate of the increase in the number of people availing themselves of the schemes?
As I have explained, our first priority was to ensure that the English scheme was implemented and the cards sent out. The option remains for us to extend the scheme more widely, but we need to consider issues such as financial implications. The extension of the scheme has not been ruled out, but we must take those issues into account.
Will my right hon. Friend congratulate London and its Mayor on the comprehensive bus pass and the very efficient bus service in the capital? There is currently a proposal before the capital to get rid of the modern single-decker buses that have been provided and to replace them with the old Routemaster. Has my right hon. Friend done a cost-benefit analysis of the use of the Routemaster, and is that bus appropriate in the 21st century for a capital city such as London?
My hon. Friend is right to congratulate the Mayor of London on the freedom pass; it has been immensely valuable to the residents of London. What they ought to be worried about to start with is the fact that the Conservative Front Bench has said that if—[Interruption.]
Thank you, Mr. Speaker. Now we can hear the authentic voice of the Conservative Front Bench. National free bus travel was supposed to start on 1 April. Amidst all the contributions today, the Minister is forgetting that because of its botched introduction hundreds of thousands of pensioners were unable to travel as the smartcards and temporary passes the Government had promised them were not available. Why did the Government so badly botch the introduction of national concessionary travel, and how many hundreds of thousands of pensioners were prevented from travelling—and how many are still prevented from travelling?
Once again the Conservative Front Bench is attacking local authorities who actually have done quite a lot of—[Interruption.] Obviously, the hon. Gentleman does not understand how passes are distributed. That was done by local authorities. The Government purchased 4 million temporary passes in case local authorities got into difficulties, because distributing more than 11 million passes over the course of a year was a huge undertaking. The authorities should be congratulated on the work that they did, instead of once again being beaten over the head, which is what the Opposition Front Bench wants to do. About 99 per cent. of passes have been distributed. Some people who applied later—they might not have been aware of the introduction of the free pass—have experienced a delay. However, the Department for Transport bought 4 million temporary passes, which can be used with people’s existing passes up until September of this year. I congratulate the local authorities and others who worked very hard to get these passes distributed, and the Conservative Front Bench should join me in that.
Will my right hon. Friend ensure that her Department urgently holds talks with Stoke-on-Trent city council about the damaging impacts on road congestion and the worrying increased risks to pedestrians and other road users if the city council’s misguided and misinformed decision to close Trentham high school and Longton high school goes ahead?
I am afraid that I am not familiar with the school closures proposed in my hon. Friend’s constituency, although I know he has been a great champion for his constituents. Local councils should think seriously about congestion across their boroughs and make sensible local decisions that support tackling that. I would be happy to look into the case my hon. Friend raises, and to meet him to talk about it.
May I, as a Cheshire MP, pay my tribute to Gwyneth Dunwoody? She was a robustly independent socialist, and she did great credit to this House over many years.
Macclesfield in east Cheshire looks to Stoke-on-Trent, part of which is represented by the hon. Member for Stoke-on-Trent, South (Mr. Flello), with great envy. Huge sums of money—multi-millions of pounds—have been spent on the A50 and the A500. Will the Secretary of State ensure that there is a fairer distribution of funds to other areas that need the sort of road improvement that has taken place in Stoke-on-Trent? Macclesfield deserves a better deal.
I certainly believe in devolution; all my political life I have argued that local authorities and regions should have more funds at their disposal and more authority about how they use those resources. I am sure that the hon. Gentleman will be pleased to learn that we have introduced the regional funding allocation, which gives local regions the power to determine what their own priorities are. I suggest that he makes the case to them that they should be spending the money in Macclesfield.
Does the Secretary of State agree that this approach should involve more park and ride schemes? If she does, does she also agree about the importance of discussion and agreement between her Department and the Department for Communities and Local Government, which often makes decisions on planning applications, to ensure that park and ride schemes, particularly those that can make a major contribution to reducing congestion, such as schemes on the A449 in my constituency, go ahead with all the normal safeguards as quickly as possible?
I agree with the point that my hon. Friend is making. Park and ride schemes can make a tremendous contribution to tackling congestion. In fact, local authorities should be free to determine how they tackle congestion in their local areas, and how they get people out of their cars and on to buses. I know that the local authorities are welcoming the powers that we are giving them to have more say over how buses are regulated. I hope that the hon. Member for Chipping Barnet (Mrs. Villiers) will take that into account when she explains to local authorities up and down the country why the Conservatives voted against the Local Transport Bill just last month.
The highly successful and expanding port of Dover is putting 100 miles of lorries a day on to Kent’s road network. What steps is the Secretary of State taking to discuss with Kent county council measures to tackle the problems of Operation Stack and its knock-on effect on the wider road system?
I know that the Under-Secretary of State for Transport, my hon. Friend the Member for Glasgow, South (Mr. Harris), who deals with these issues, is having lots of discussions, including some with Kent county council, about how to take container lorries off British roads and encourage freight on to the rail network. It is right that we examine these matters on a scheme-by-scheme basis across the country, and that we consider how we can move freight around in the most efficient way possible and how we can do that with the minimum impact on the environment. That is why last year we invested the single biggest sum for a generation—£150 million—in encouraging rail freight infrastructure and why, in the rail White Paper, we committed ourselves to investing another £200 million in the strategic freight network. Those investments will provide real benefits to the freight industry, and I hope that they will keep the lid on road container traffic and encourage more vehicles off the roads and on to rail.
Speed Cameras/Vehicle-activated Signs
No comparative assessment has been made. Safety cameras and vehicle-activated signs are used to tackle different road safety problems. Safety cameras are effective in tackling excessive speed—speeds over the posted speed limit. Vehicle-activated signs are generally used to tackle inappropriate speed, and have proven particularly effective when used to warn drivers of approaching hazards on rural roads.
The cost of a speed camera, including installation, is about £50,000, whereas the cost of a vehicle-activated sign is only £1,000. The Department for Transport’s own figures say that 2.2 accidents are estimated to be prevented by a speed camera in one year, whereas vehicle-activated signs are estimated to prevent 3.1 accidents. Does the Minister therefore agree that the Department’s own figures show that not only are vehicle-activated signs more effective in improving road safety, but they are very much better value for money? Will he consider introducing a policy that vehicle-activated signs should be given preference over speed cameras wherever the location is appropriate?
The decision about which type of camera to deploy and where is very much a matter for local road safety partnerships, which receive £110 million extra a year to do that. I am not sure where the hon. Lady found her figures. The four-year independent evaluation report on the 4,100 speed camera sites, published in 2005, recorded a 42 per cent. reduction in serious crashes a year, meaning 100 fewer deaths and 1,600 fewer seriously injured—as opposed to the two or three that she mentions. Our figures are at variance and I would be happy to discuss them with her, because I know that the objective for the whole House is to reduce the numbers needlessly killed or seriously injured on our roads.
The Minister will know that nationally many road safety cameras are subject to vandalism, presumably by motorists who have been caught by them. Does the Minister agree that people who are found guilty of such crimes should be severely punished?
It is easy to answer that question by simply saying yes. Speed cameras are delivering road safety targets that we all want to see. Some 3,000-plus people die and nearly 30,000 are seriously injured every year on our roads. Speed cameras are demonstrably helping to reduce those figures, and anybody who is selfish enough to damage the cameras because they have been careless enough to have been caught breaking the rules should feel the full weight of the law.
Free off-peak concessionary bus travel throughout England was introduced on 1 April, enabling 11 million older and disabled people in England to use buses anywhere across the country. I also announced that Passenger Focus would be the first national bus passenger champion, speaking up on behalf of millions of bus users.
Today I laid a written ministerial statement announcing a review of the framework of economic regulation of the UK airport system. The review will be advised by a panel of independent experts led by Professor Martin Cave.
Is the Secretary of State aware that the Highways Agency is refusing to increase the capacity of junction 21 of the M5 in my constituency until more local jobs have been created to reduce the number of people who commute into Bristol each day? The regional spatial strategy, which would have achieved exactly that, has just been amended by Government-appointed planners to allow even more houses to be built without the necessary local jobs. The result is deadlock and misery for my constituents, stuck in the resulting appalling jams. Will she therefore liaise urgently with her colleagues at the Department for Communities and Local Government to ensure that the Government’s left hand knows what their right hand is doing?
It is important not only that we have the housing that future generations will desperately need, but that we have the appropriate transport infrastructure to support that housing growth. In fact, my Department has been working closely with the Department for Communities and Local Government to support, for example, new growth points, where we have invested £4 billion to support new housing developments. Of course I am happy to look into the specific case that the hon. Gentleman cites, but he can rest assured that the Government work to provide both the appropriate housing and the appropriate infrastructure.
I know how concerned my hon. Friend is about these issues and he is right to point to the global impact of rising food prices. I am sure that he will appreciate that biofuels account for only some 2 per cent. of total food production and that other international factors are involved, such as recent droughts and an increasing demand for meat in preference to crops. Our system for supporting biofuel production in the UK must be sustainable. That is why we have introduced a world class sustainability reporting mechanism and the renewable transport fuels obligation at the cautious level of 2.5 per cent. It is why we are determined not to go beyond the level of 5 per cent. in 2010 without making sure that there are mandatory sustainability standards in place. My hon. Friend will know, too, that I have commissioned an independent study led by Professor Gallagher of the Renewable Fuels Agency to consider all the indirect effects of biofuel production.
I start by joining the hundreds of people inside and outside the House who have paid tribute to Gwyneth Dunwoody. She was a great parliamentarian. We will not only miss her today; I am sure that the House will miss her for many years to come. She was hugely influential on all transport matters and her outspoken approach was a real asset not only to the House but to the wider transport community, for which she did so much hugely valuable work.
My question for the Secretary of State is: if the Competition Commission recommends the break-up of BAA’s monopoly over airports in the south-east, will she promise to implement that recommendation?
I think that the hon. Lady will realise that the Government have a history of respecting the conclusions of the independent Competition Commission. It is of course the expert in that matter and it is right that it should have the time and space to consider the issues carefully. It is right, too, that we should think in government about how to raise standards of service for passengers. That is why this morning I commissioned a review led by an independent professor, Professor Martin Cave, to advise the Government on what the appropriate economic regulatory regime ought to be for the future.
We still cannot get a straight answer from the Government on the future of the monopoly enjoyed by their friends at BAA. Anyone who has been through the notorious Heathrow hassle or experienced the T5 debacle knows that BAA too often gives a dismal standard of service to its customers, yet the regulator recently awarded it with double-digit price increases. Is it not time to call time on the BAA monopoly on airports in the south-east, toughen up a toothless regulatory regime and put the interests of passengers first?
I suggest that the hon. Lady actually reads the Competition Commission’s report. I spent several hours this morning going through the 160-odd pages of the report. Surely she will have noticed that it says clearly on page 12:
“Lack of capacity, particularly runway capacity, at the south-east airports…appears to be a main reason for the current poor standards of service at the airports and lack of resilience at times of disruption.”
Surely it is now time for the hon. Lady, rather than criticising the Government, to wake up to the facts of the situation and reconsider her opposition to expansion at Heathrow subject to the local environmental conditions—a policy that has everything to do with short-term political opportunism and nothing to do with Britain’s long-term prosperity.
My hon. Friend has campaigned on that issue for a long time. I share his concern that we have to see some progress on that project. However, he knows that widening that section of the A1 is likely to be complex and costly and will take time to deliver. However, the Highways Agency is aware of my concern to make progress. I am happy to discuss the matter with my hon. Friend in the near future. He will also know that the Highways Agency is investigating the possibility in the meantime of low-cost measures to improve the operation of the A1, including options for improving accident and incident management and speeding up the clearance of accidents.
The remedial plan, which has now been contractualised in the First Great Western franchise, will be monitored on an ongoing basis. As far as the latter part of the hon. Gentleman’s question is concerned, I expect and hope that we will see significant improvements in First Great Western’s performance in the next few months.
On behalf of my Liberal Democrat colleagues, may I, too, say how sad we were to learn of Gwyneth Dunwoody’s death? She was an independent spirit, and we on these Benches had a lot of time for her.
On aviation—I note in passing that the Tory Members of the Transport Committee voted against breaking up BAA—the Minister will be aware that the average carbon emissions from air travel per passenger mile are considerably higher than they are by rail. Yet a parliamentary answer that I received yesterday showed that the cost of travelling by air had decreased by 50 per cent. over the past 10 years, whereas the cost of travelling by rail had increased by 6 per cent. What will the Secretary of State do to try to ensure that the cost of travelling bears more relation to the carbon emissions?
I know how deeply the hon. Gentleman cares about carbon emissions and the difference in the amount of carbon emitted by different means of travel. I know, too, that he is in favour of high-speed rail, but the fact of the matter is that we cannot jump to conclusions on any of these issues. The speed of the railway service is intimately connected with the amount of carbon produced. A high-speed rail line, for example, emits approximately double the carbon of a lower-speed rail service. We are going to need in this country both aviation, which will serve the interests not just of London but of the wider UK economy, and a decent rail service, at prices that people can afford.
I looked at rail fares recently and discovered that 80 per cent. of journeys between London and Manchester could be taken at a price that I think was less than £35. There is clearly a huge difference between turning up and asking for a premium rate fare and booking in advance. I encourage the hon. Gentleman to keep these things in perspective and recognise the fact that it is this Government who are taking the tough decisions on aviation and who are determined to make the necessary investment in rail too.
Naturally, I am beside myself with excitement about my visit to my hon. Friend’s constituency, which I believe is in approximately six weeks. I am counting the days. She will know that the regional funding allocation process through which the extension would go has not at this point prioritised the extension of the Metro. Those involved are looking at these issues on each occasion that they examine the priorities, and I very much look forward to learning more about the extension when I come to visit her constituency.
The hon. Gentleman may be aware that this Government introduced the rural bus subsidy grant, which has played an important part in sustaining rural bus services. Again I must return to the Local Transport Bill, which will give local councils greater powers to work with operators to run services. It will also introduce improvements in community transport, and that is particularly relevant to rural areas. I therefore urge the hon. Gentleman to encourage his Front-Bench colleagues to support the Bill as, until now, they have failed to do so.
My hon. Friend raises a very relevant point. On top of the 1 million vehicles without an MOT certificate, I understand that the certificates for some 4 million vehicles are renewed up to four weeks after they should be. A problem clearly exists, therefore, although owners can use a peel-off part of the certificate to remind themselves about when renewal falls due. Many garages and MOT testers send out renewal reminders, but we have asked the Driver and Vehicle Licensing Agency to look at other methods that we can use. Obviously, as there are 31 million vehicles in this country, it would be very expensive to send out reminders to all owners, but we are looking for better ways to remind people about when their MOT is due.
A shop steward in the PCS union has sent me an e-mail to inform me that the Maritime and Coastguard Agency’s own figures show that coastguards saved 48,000 lives last year. That equates to many billions of pounds saved for the economy, so what are the Government doing to help resolve the current dispute with our coastguards?
The dispute with the coastguards is obviously regrettable. Safety is of paramount importance, and the Government are doing everything possible to make sure that emergency services are provided while MCA members take strike action. They believe that that is the best way to prosecute their pay claim, but we consider that the settlement that they received last year and this year was appropriate and in line with Government recommendations. We are offering talks on a multi-year pay deal for the future, but at present we are making sure that the contingency plans needed for the safety of mariners are in place.
The case for the reopening of the Woodhead line across the Pennines has been made many times in this Chamber, as it would enhance the north’s economic development. Will my hon. Friend the Minister of State update the House on the discussions between the Government and representatives of the National Grid and Network Rail about the preservation of the third Woodhead tunnel—called the “53 tunnel” because it was built in 1953—for future use?
As promised, I met representatives of both Network Rail and National Grid last Friday. We discussed the issues arising from the Adjournment debate to which my hon. Friend and many other hon. Members contributed. Both companies agreed to study the feasibility of ensuring, when the Woodhead tunnels are sealed, that access for the purposes of ongoing inspection is retained. In addition, I discussed Network Rail’s utilisation strategy for the future use of the rail network by both freight and passenger services. The company agreed to take into account any representations about the future use of the Woodhead tunnel for freight.
Road Traffic (Safety)
I beg to move,
That leave be given to bring in a Bill to make provision about the content of driving tests; to create offences relating to dangerous driving; and for connected purposes.
In introducing this Bill, I wish to make specific acknowledgment of the work of the children and young people’s think tank “Kids Count”, and of the “Drive to Survive” campaign. I also want to recognise the work of Inspector Toby Day of Leicestershire police and of the all-party parliamentary group on child and youth crime. I want to thank all of them for their assistance on the matters that I am bringing before the House this afternoon.
In 2006, the last year for which figures are available, 3,200 drivers, passengers and pedestrians lost their lives as a result of road accidents, but no figures, numbers and statistics can convey the underlying tragedy of each case—the loss of friends, family members and loved ones whose lives have been cut short, and the lifelong impact on those left behind. The headline figures mask some disturbing trends and patterns of behaviour. Although the total number of fatalities has decreased over the past five years, the number of fatalities among young drivers under 25 has gone up from 537 to 606—an increase of 13 per cent. The number of young drivers under the age of 25 convicted of driving while intoxicated due to drink or drugs also increased in that period.
There is also the serious issue of deaths arising from high-speed chases. In 2006-07, some 155 people were killed or seriously injured as a result of road traffic collisions on public roads during emergency responses and police pursuits. Some of the recent headlines say it all. A police officer was injured after his patrol car collided with a stolen caravan during a chase on the M6, a woman was killed and four people taken to hospital when a car collided with a Mercedes that was fleeing police in east London, and friends of a teenager who died in a car that crashed after it was involved in a police pursuit have been paying tribute to him ahead of his funeral. At the end of last year the Independent Police Complaints Commission published its two-year review of road traffic incidents involving police vehicles that resulted in a fatality or serious injury. It made 29 recommendations about how police practice could and should be changed.
More should be done to reduce the number of deaths and injuries arising from accidents involving young drivers and pursuits. That will partly involve prevention through demonstrating, and bringing home very clearly, the reality of being involved in a serious car accident. I was moved by a recent presentation organised by Drive Survive, a multi-agency partnership based in Cheshire. Partners involved in the project and the presentations that Drive Survive offer include the police, the fire brigade, the Highways Agency, the ambulance service and hospital accident and emergency services. By dramatically highlighting the consequences of inappropriate driving and vehicle control, Drive Survive seeks to educate young people aged between 16 and 25 of the risks involved in driving dangerously or recklessly, and to prevent serious injury or worse.
Having sat through part of the presentation, I can confirm that the content is deliberately graphic and hard-hitting. It shows real-life images of accident scenes and direct testimony from those who do an amazing job in responding to emergency call-outs. Most importantly, it includes personal accounts from families affected by the loss of a relative in a car crash. The project has received very positive feedback from local colleges and other stakeholders, who testify to the impact that it has had. I believe that such education, understanding and recognition of the consequences of dangerous driving could have a wider impact and could start to change attitudes, altering the approach of young, normally male, drivers who think that it is impressive or the right thing to do to try to show off to their mates about the limits of what their cars can do, or indeed of what they can do behind the wheel of a car.
My Bill would amend the Road Traffic Act 1988 by including a specific reference in the driving test to the impact of being involved in an accident involving a motor vehicle, and in relation to the powers of the Secretary of State and local authorities to provide road safety information and training. I believe that that small change to the law would assist, encourage and facilitate a national programme to temper the behaviour of young drivers through hard-hitting education and training programmes focused on the reality of driving dangerously. By providing such a real-life context as part of the theory exam in the current driving test, it will make the test more relevant and emphasise other existing safety aspects of the theory requirements.
This approach is intended to build on the current Arrive Alive road safety programme conducted by the Driving Standards Agency, and to extend the concepts of what happens when an accident occurs—the types of injuries sustained, the likelihood of survival, and so on—so that they form an important part of the preparation for learning to drive.
The second part of my proposals addresses the legal sanctions available in circumstances where there is a pursuit. To date the focus has been on dealing with the effects of pursuits, instead of the cause. Pursuits are inherently dangerous and are difficult to manage and contain operationally. If drivers did not make off from the police, there would be no reason to pursue them.
The instant that drivers decide to accelerate away from police vehicles to avoid capture, for whatever reason, they make the decision to enter an extremely high-risk arena where a number of lives, including their own, are put at risk. Many of them have driven vehicles at horrendous speeds along public roads for up to an hour before they are stopped, and are prepared to take any steps to evade arrest, yet even when they are caught, most walk away with little or no punishment.
A number of pursuits occur when offenders choose to make an escape having committed relatively minor offences. Research has shown that the main reason why offenders flee in a vehicle is that they are not deterred by the low level of punishment that they perceive will result from their actions. Some reports indicate that the prospect of a custodial sentence would cause offenders to abandon their vehicle at an early stage and make off on foot. Although current sentencing guidelines for the offence of dangerous driving allow for evading arrest to be taken into account, this approach is not acting as a deterrent, and in my judgment is not working well in practice.
My Bill would therefore create a new offence aimed at someone refusing to stop when requested by a police officer and then engaging in sustained and extreme dangerous driving. It would achieve this by creating an aggravated driving offence punishable by an unlimited fine, mandatory disqualification and up to three years’ imprisonment. A key part of the new offence is that it would require intent; in other words, where someone is asked to stop, knowingly fails to do so and then drives dangerously, an offence would be committed.
This approach has the support of the Association of Chief Police Officers and the Police Federation. Too many lives continue to be lost on our roads. We need to cut the annual death toll. The measures that I have outlined are practical, proportionate and deliverable. They can play an important part in changing the mindset behind the wheel, and in so doing, reduce the number of individual tragedies that so many of us see in our constituency surgeries each week. I commend them to the House.
Question put and agreed to.
Bill ordered to be brought in by James Brokenshire, Mike Penning, Mr. John Leech, Mr. Stewart Jackson, Mr. Lee Scott and David T.C. Davies.
Road Traffic (Safety)
James Brokenshire accordingly presented a Bill to make provision about the content of driving tests; to create offences relating to dangerous driving; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 20 June, and to be printed [Bill 98].
Orders of the Day
As amended in the Public Bill Committee, to be considered.
New Clause 17
‘(1) This Part has effect in relation to employment by or under the Crown as it has effect in relation to other employment.
(2) For the purposes of the application of the provisions of this Part in accordance with subsection (1)—
(a) references to a worker are to be construed as references to a person employed by or under the Crown;
(b) references to a worker’s contract are to be construed as references to the terms of employment of a person employed by or under the Crown.
(3) This section does not impose criminal liability on the Crown.
(4) But on the application of the Pensions Regulator the High Court or the Court of Session may declare unlawful a failure by the Crown to comply with any of the duties mentioned in section 40(1).’.—[Mr. Mike O'Brien.]
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
It is a pleasure to join hon. Members to debate the Bill on Report. The Bill has been marked by a considerable degree of consensus not only among parties in the House, but among those outside the House, who have contributed enormously.
This group of new clauses and amendments relates to the application of the employer duties established by this Bill. Three groups require special provision—the Crown, the armed forces and the police. New clause 17 brings the Crown sovereign and executive within the scope of the employer duty. As a result, workers employed by the Crown will have the same opportunities as other workers to save for retirement under the reforms. Of course, I reassure the House that, in accordance with long-established principles of constitutional law, the Crown will not be exposed to criminal sanctions. Instead, this amended provision enables the regulator to apply to the High Court or to the Court of Session for a failure by the Crown to comply with duties set out in clause 40(1) to be declared unlawful. That follows the approach adopted for most modern employment legislation.
As trailed in Committee, new clause 18 excludes the armed forces and the reserve forces from the reforms set out in the Bill. It also excludes cadet force adult volunteers from the scope of the reforms. Members of the armed forces have a special position in law. They are subject to service law rather than general employment law, except in specific circumstances relating to discrimination in relation to race and sex, but not to age or disability. For that reason, and in view of the 100 per cent. take-up of pension saving by the regular forces, the Government consider it appropriate to exclude the armed forces from the reforms. Members of the regular armed forces are automatically enrolled in non-contributory pension schemes, and the Ministry of Defence has no record of anyone opting out: there isn’t a problem, so let’s not mess with it. Of course, references to the armed forces in pensionable service include not only regular forces, but those undertaking certain forms of service while mobilised or undertaking full-time reserve service.
Obviously, how much someone gets depends on the length of time for which they contribute and the pot that they build up, so there is not a straight answer to that question. I will ask my officials to consider the balance, because many soldiers will serve for less time than many employees will have to build up a pension pot in regular, non-military employment. I will examine the figures carefully and write to the hon. Gentleman, who has asked a reasonable question.
Reservists may accrue benefit under the reserve forces pension scheme, if they enter full-time reserve service. That is also one of the options available to mobilised reservists. Another option is remaining with their existing pension scheme—their employer scheme—in which case the Ministry of Defence would pay the employer contribution. Separately, cadet force adult volunteers offer their time without receiving a wage or pension contributions. Although they may receive occasional remuneration for training, this clause makes it clear there will be no access to pension saving.
Finally, new clause 19 brings members of the constabulary and police cadet forces of Great Britain within the scope of the reforms. It is necessary, because some police officers are “office holders” and do not therefore routinely fall within the definition of “employee” or “worker”. Accordingly, those members who are not employed under an employment or worker’s contract are included by being treated as workers. We include constables and trainees appointed by the chief officer of police as “police cadets”. Police officers in a Home Office or Scottish force become members of the police pension scheme. The great majority are members of the 1987 scheme, but since April 2006 entrants have become members of the new police pension scheme 2006. Both schemes are defined-benefit pension schemes.
The officers’ contribution rate for each scheme is relatively high. Although we think that it provides good value for money, it can and does cause a very small number of officers to opt out, particularly during early years of service when earnings are lower. The new clause will ensure that any officer who opts out of the police pension scheme will receive the same protection as others in employment—that the employer retains the duty to seek to re-enrol non-participating officers at key intervals during their work with the police, to nudge job holders into reconsidering an earlier decision; I was about to say “employment” with the police, but of course the very point is that it is not employment.
There is no plan for any change. I hesitate only for this reason: I have been in discussions with the Home Office about a particular change that will result in payments being made to the parents of police officers who die in service. I have had a particular case in my constituency, so I hesitate slightly on the issue. However, there is no intention that the rules and regulations that I have been discussing should change that provision. If it was changed, that would happen through police regulations, not as part of anything in the Bill.
I have a question on a separate issue, although it is related to the points that the hon. and learned Gentleman has just made. He is describing particular sections of the public sector work force that will be excluded from the Bill’s provisions. Yet further on in the Bill, as the Minister will obviously know, a procedure is laid out for occupational schemes to exempt themselves from applying personal accounts because they already have in place occupational schemes of satisfactory quality. Why have the Government decided to take a different route for these public sector employees by making them specifically exempt in the Bill, rather than just allowing them to follow that exemption procedure, as private sector firms will be required to do?
I would give a comprehensive answer to the hon. Gentleman, but that would take an awfully long time. I am afraid that there have been lengthy negotiations with the armed forces, for example, about whether they wanted to be included or not. The Ministry of Defence has had various discussions with us at different stages. Our original view was that it would be better for the armed forces to be in, but now we have taken the view that they want to be out. In respect of the long-term impact, I should say that all the armed forces sign up to the pension scheme anyway. That scheme works very well and we do not want to mess with it. If the MOD wants this exemption, I am happy to go along with that. Broadly, I try to deal with the issues raised in relation to the Bill by looking at them on their merits. Over a period, we have seen that the views of some of the stakeholders have changed. That is the case with the armed forces, and I am happy with the position that we have now got to.
With the police, there was the issue about the definition and whether they were workers or not, and we have taken the view reflected in the new clause.
I thank the Minister for that reply. I suppose that the underlying concern behind my question is that many private sector firms are worried that the process for opting out is over-complicated, and some would like it to be simplified. I completely applaud the Minister’s reasons for why one would want to exempt the groups that he has just described. However, if an exemption is given to public sector firms through a different mechanism, the private sector people concerned about that extra complexity will be worried that they are not being treated fairly, and that there is not a level playing field.
Early in the consideration of the Bill I picked up some concerns from employers about the complexity of the provision to exempt them from having to enrol in this form of personal accounts. We kept it very simple. Essentially, they must have a provision that matches personal accounts and makes a minimum 3 per cent. employer contribution, with a 4 per cent. contribution from the employee. The exemption is very straightforward, and they should be able to identify whether they may be exempt. Certainly, the pension providers who provide the pension to employers should be able to say immediately whether their scheme is exempt. It will not apply to some schemes because the contribution levels are too low, and we have been clear that we want to increase those contribution levels where that is the case.
By and large, I have not picked up any recent concerns. The CBI, the Federation of Small Businesses and others have been broadly supportive of the way in which we have undertaken this. The hon. Member for Weston-super-Mare seems to be flashing some document at me. If it is from an organisation, I have met most of the organisations concerned and we have had broad support for the Bill as a whole, although there are specific concerns. We have tried to keep the issue of exemption as simple and straightforward as possible. We are conscious that the Bill will apply to small-scale employers such as the chippie down the road or the hairdresser round the corner, who may employ just a couple of people, and we wanted to ensure that the provisions were not so complex that they would have to do an awful lot of reading or examination of the issues. Concerns have been expressed to me about one problem that we will no doubt come to later on—how earnings are calculated. That can get quite complicated, but we are looking into technology to try to deal with that for some of the smaller-scale employers.
These specific exemptions are included in the Bill primarily because they deal with public sector employees who have their own particular provisions. On that basis, they are justified and I hope that the House will support them.
May I take the Minister back a few moments, to when we were discussing the armed forces? I fully appreciate that most members of the armed forces would not wish to opt out, least of all those who serve 22 years-plus. However, there is a group of people who leave the armed forces early and wish to transfer their rights into another scheme. For instance, when I left the armed forces—the Grenadier Guards—I transferred my rights into the fire service. I appreciate that the Minister may not be able to answer me now, but this is a very important issue for those of our armed forces who are not going to serve for 22 years but have a pension provision to take with them. Will any parts of the Bill affect their right to transfer into other schemes?
To some extent, but it would not affect the sort of situation that the hon. Gentleman identifies with people transferring from the armed forces into the fire service. Because there are restrictions on the amount that can be transferred into personal accounts, the person concerned would not be able simply to transfer in a certain amount. One of the approaches that we have taken is to say that there is no transfer in and no transfer out of personal accounts, so amounts are not transferred in in that way. Many employers who currently have pension schemes will continue with those schemes. The personal accounts scheme is there as a default scheme for employers who do not have an adequate occupational pension scheme. Our intention is that employers who already have good-quality occupational pension schemes should continue with those schemes.
The point that I was trying to make is that there are tiny amounts frozen within the armed forces schemes, which are useless in the long term as regards when people will get their pensions, but would be useful if they could be transferred into the personal accounts scheme.
I have a considerable degree of sympathy with that point. As part of the process of developing a consensus, we arrived at the “no transfers in and no transfers out” rule. However, I have repeatedly been told that some employees, including members of the armed forces, have quite small pension pots and that leaving them there is a hassle, so getting them into personal accounts or another scheme would be a better way.
However, some of the providers of pensions, and particularly insurance-based products, have concerns about the provisions that allow transfers in, even of small pension pots. We have said that at the start, transfers will not be allowed into personal accounts. However, we will review the situation in 2015, with a view to ensuring that we look at the matter again. My personal view, which is not reflected in the Bill because it is not part of the consensus, and we have reached an agreement, is that it should be possible to transfer in small pension pots, because it will just be a hassle if that cannot happen. There is no such provision in this Bill, but there will be a review in due course, and at that point, I hope that the practice will be allowed.
The court would then have to determine what it was able to do, under the provisions relating to various immunities and so on, and what redress there would be. That would be a matter for the court to determine. Obviously, such redresses are limited.
I commend the new clause to the House.
I begin by echoing the Minister’s opening remarks. I thank all members of the Committee—some of whom have retained their enthusiasm for the Bill, while others clearly have not—the officials, Clerks and everyone else involved. I pay particular tribute to my hon. Friend the Member for South-West Bedfordshire (Andrew Selous), who sadly cannot be with us today because of ill health. He made a signal contribution in Committee, and as a former officer in the Territorial Army, he did so in particular on the provisions concerning the armed forces and reservists.
New clause 17 seems fairly clear to me; I suppose it might be called the “Backstairs Billy” new clause, dealing with those employed directly by the Queen or members of the royal family. Sadly, Backstairs Billy is no longer with us, so he will not be able to benefit from the provision. It is right that the Crown’s direct employees are swept into this provision. My right hon. Friend the Member for Wokingham (Mr. Redwood) made a point about enforcement a moment ago; as I understand it, the best that the Pensions Regulator can do is apply to the courts for a declaration that the Crown has failed to comply with any of the duties set out in clause 40(1), which concerns the enrolling of employees into the system of personal accounts. There is no criminal liability at all. I believe that the matter is based on legislation concerning the working time directive. I guess that we will just have to rely on the sovereign doing the decent thing when such a declaration is made.
The important issue of reservists was raised in Committee by my hon. Friend the Member for South-West Bedfordshire, who felt quite strongly that the distinction between regulars and Territorials has been eroded in recent years. Many Territorials spend a great deal of time on active service in Iraq, Afghanistan or wherever, and therefore they should not be treated any differently from regular members of the armed forces. It was helpful to hear both what the Minister said and what he set out in the letter he wrote to the Committee in February, in which he made clear that reservists can accrue their own benefits under the reserve forces pension scheme.
The Territorial Army, in particular, is a component part of the reserve forces and there is pension provision for reservists who are mobilised or who enter into commitments that require regular attendance under the Reserve Forces Act 1996. However, I remain keen to hear from the Minister about the level of contribution, as well as about the level of likely pension benefit for regular members of the armed forces who have what I assume is, in all essentials, a non-contributory defined- benefit scheme. It is important to see not only what the likely benefits will be over a given period, but what contribution the taxpayer will make.
I am sure that the Minister would agree that, broadly speaking, the benefits obtainable under that scheme should be at least as good as those that would be available under personal accounts, albeit without the contribution from the employee, in this case a member of the armed forces. I suspect that if there is any inadequacy in that comparison our colleagues in the Lords will wish to come back to the issue at some stage. Broadly speaking, however, we have no difficulty at all with the new clauses or the amendments in the group and would be happy to see them in the Bill.
I should like to delay the House briefly to comment on what the Minister said. I understand that he has reached a consensus on people opting in or out of the provisions in the Bill and that he feels it difficult to move from that until 2015. However, the armed forces are an exceptional group of people, the vast majority of whom do not serve their full 22 years—or these days up to 30 years. When welcoming members of the armed forces from my constituency back from Afghanistan, I met someone who has just agreed to do another five years after serving for 22 years and who even hopes to do another five after that, making 32 years’ service in the armed forces. However, that is quite rare. The vast majority of men and women in our armed forces serve for between three and five years. The amount of money in the pension pots that they accrue is minuscule. The administrative costs on the state—in this case on the MOD—of running those schemes from within, rather than their being opted out of, into another Government scheme that could be administered separately, are huge as a proportion of the benefits of the scheme.
I would like the Minister to look into the issue again and to reconsider that exceptional group of people earlier than 2015, to see whether he could reach a consensus among the members of the other groups with which he has been dealing. I am sure that they would understand that our armed forces are particularly affected. There could be groups of people who have served for short periods in the armed forces—perhaps they served only in training, but were injured through no fault of their own and had to leave the armed forces. It seems ludicrous that there should be a tiny pot that will sit until they are 60 years old, but which could be brought into such schemes quite easily.
I am getting nods from those who have served in the armed forces and are better informed. However, I will write to the hon. Member for Eastbourne on levels of contribution.
The hon. Member for Hemel Hempstead (Mike Penning) made his point well and I have sympathy for him. That point came up during our evidence sessions in Committee and we heard various views on it. The concern among some stakeholders is that there will be a transfer into personal accounts of a significant number of pension schemes, which some of those running such schemes are concerned might lead to what is called a levelling down of the quality of provision. To avoid that, we have said that that should not happen at the start. That provision will run on, and we will look into it when we hold the review.
The process will start in 2012 and the review will happen not long afterwards. In any event, there will be a three-year running-in phase. Reaching the compromise involves precisely the problem that the hon. Gentleman has identified; I do not dispute anything that he has said. Some people will end up with very small pension pots not being transferred in, although it would be better to do so. However, this is part of getting broad consensus and support and, although it is not what we might otherwise have wanted, it is a price worth paying to get everyone to sign up to agreeing that this is the right way to proceed. I understand the hon. Gentleman’s point. Indeed, it was discussed in Committee. Having said that I sympathise with him even though I cannot deliver exactly what he wants, I hope that he will none the less offer his support to the new clause.
Question put and agreed to.
Clause read a Second time, and added to the Bill.
New Clause 18
‘(1) A person serving as a member of the naval, military or air forces of the Crown is not, by virtue of that service, a worker for the purposes of this Part.
(2) A member of any of the forces specified in subsection (3) who assists the activities of any of those forces is not, by virtue of anything done in assisting those activities, a worker for the purposes of this Part.
(3) The forces are—
(a) the Combined Cadet Force;
(b) the Sea Cadet Corps;
(c) the Army Cadet Force;
(d) the Air Training Corps.’.—[Mr. Mike O’Brien.]
Brought up, read the First and Second time, and added to the Bill.
New Clause 19
‘(1) This Part has effect in relation to a person who—
(a) holds the office of constable or an appointment as a police cadet, and
(b) does not hold that office or appointment under a contract of employment, as if the person were employed by the relevant police authority under a worker’s contract.
(2) A police authority that maintains a police force is the relevant police authority—
(a) in relation to a constable, if the constable is a member of that police force;
(b) in relation to a police cadet, if the cadet is undergoing training with a view to becoming a member of that police force.’. —[Mr. Mike O’Brien.]
Brought up, read the First and Second time, and added to the Bill.
New Clause 1
Start date of personal accounts
‘The pension scheme established by the Secretary of State under section 58 of this Act shall commence operation with effect from 1st April 2012.’.—[Mr. Waterson.]
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 3—Costs incurred by Pensions Regulator-
‘The set-up costs incurred by the Pensions Regulator in carrying out its duties under Chapter 1 of this Act shall be funded from the Consolidated Fund.’.
New clause 4—Costs incurred by Personal Accounts Delivery Authority-
‘The set-up costs incurred by the Personal Accounts Delivery Authority in carrying out its duties under section 58 of this Act shall be recouped through charges to members over a period of five years from 1st April 2012.’.
New clause 5—Financial assistance to Personal Accounts Delivery Authority-
‘Any financial assistance given to the Personal Accounts Delivery Authority by the Secretary of State must include conditions about repayment and interest at commercial rates.’.
Amendment No. 15, in clause 66, page 33, line 7, leave out paragraph (b).
Amendment No. 16, page 33, line 9, leave out subsection (4).
Amendment No. 9, in clause 69, page 34, line 11, at end insert—
‘(3A) The Authority must within 12 months of the passing of this Act, and at such other time as the Secretary of State directs, publish a report analysing the potential impact on the financial position of a scheme under section 50(1) of different rates of—
(a) take-up of,
(b) persistency in, and
(c) contributions to
the scheme, and setting out appropriate options for managing the financial risks associated with different outcomes.
(3B) In preparing the report under subsection (3A) the Authority must have regard to such independent actuarial advice as it considers appropriate.’.
Amendment No. 13, in clause 70, page 34, line 31, at end insert—
‘and initially based on an annual management charge of no more than 0.3 per cent. per annum.’.
Amendment No. 27, in clause 72, page 35, line 13, leave out ‘grants’.
Amendment No. 28, page 35, line 15, leave out from ‘(which’ to end of line 16 and insert—
‘shall include conditions about repayment and interest at commercial rates.’.
Amendment No. 14, page 35, line 16, at end insert—
‘(3) For the avoidance of doubt, all the costs incurred by the Authority in establishing the pension scheme under section 58 of the Pensions Act 2008 (c. ) shall be recouped through charges to members over a period of five years from 2012.’.
Amendment No. 10, in schedule 1, page 62, line 11, leave out ‘grants’.
Amendment No. 11, page 62, line 12, leave out from ‘which’ to end of line 13 and insert—
‘shall include conditions about repayment and interest at commercial rates.’.
Amendment No. 12, page 62, line 14, leave out from ‘may’ and insert ‘is required to make’.
It is a great pleasure to commend to the House new clause 1 and the associated new clauses and amendments in this group. This group falls neatly into two distinct categories, and it is important for hon. Members to understand that there are two major issues involved. One is the commencement of the personal accounts system. The second is what was referred to in Committee as the level playing field issue, namely the extent to which personal accounts will or will not compete on equal terms with existing alternative pension provisions.
For once, I can say with hand on heart that there is no shadow of a doubt about the Government’s policy. It is that the new system should commence in 2012. Of course, even that is a couple of years late, because the Turner commission originally foreshadowed personal accounts as a new system to be set up in 2010. None the less, the Government have made it abundantly clear—as did the Minister in Committee—that 2012 was to be the start date, and that continues to be the Government’s firm intention.
We might therefore wonder why a similarly worded amendment in Committee did not find favour with Ministers. New clause 1 is pretty simple in its drafting, and all that it seeks to do is to ensure that personal accounts established
“under section 58 of this Act shall commence operation with effect from 1st April 2012.”
If it is to be that year, that seems to be the logical date to start. If we investigate a little more closely, however, we find that there is some doubt as to whether that date will be the due date.
We had a lengthy debate in Committee, following the interview given by the chief executive of the Personal Accounts Delivery Authority, Mr. Tim Jones, with Mr. Paul Lewis of “Money Box” in December. In that interview, Mr. Jones hinted for the first time at the possibility that personal accounts would not be ready in time. Paul Lewis asked him the rather direct question:
“This scheme is scheduled to start in April 2012, just over four years away. Is that a realistic target?”
Mr. Jones said:
“The honest answer is I do not know yet.”
When put to him later that it might be another date in the future, he said:
“There is that possibility, yeah, and that’s the purpose of bringing somebody like me from the private sector in to look at what is a realistic balance of the desire to get started as quickly as reasonably possible with the need to manage risks to make sure this starts with quality when it starts.”
On the Opposition side of the House, not least because Conservative Members have some slight ambitions that we might be in the driving seat in 2012, we accept, of course, that a bungled launch of personal accounts would not be ideal, but the prospect of the start date being postponed is almost as difficult to contemplate. The Secretary of State, who is sadly no longer in his place, made a rather good speech a while ago about the sort of planning blight that affects people’s saving for their retirement; they may have read that something is going to happen in 2012, which might be taken as a reason for not doing something now. On any view, a gap of several years, which can never be redeemed, for some people who could and should be saving for their retirement, is unfortunate.
One particularly interesting thing that emerged from Committee debates was that a review was going on, as Mr. Jones accepted in the Radio 4 interview. Having been brought into the new job, he was carrying out a review, as we would expect, of how practical all this would be. There was some to-ing and fro-ing between the Minister and myself about whether Mr. Jones would produce a report at the end of the process. We know that PADA currently employs some 100 different consultants, presumably trying to get the right answers to these questions, but there seemed to be some doubt—at least in the Minister’s mind—as to whether, by the end of these deliberations, Mr. Jones would actually produce a report on how likely it was that personal accounts would be up and running in 2012.
I say in passing that it was my first experience of a Public Bill Committee taking oral evidence, and I thought that it was an extremely helpful procedure—certainly in respect of this Bill. That view was held generally by members of the Committee of all political parties. When I asked Mr. Jones in the Public Bill Committee
“Will this new scheme be up and running in 2012, or is there a plan B?”
“The policy intention”—
which I assume is a polite way of expressing a distance between himself and Ministers,
“is that the personal accounts scheme will launch in 2012, and it is my job, and the delivery authority’s job, to meet that intention. We have no evidence at this stage that that is unachievable.”––[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 7, Q11.]
That is hardly the most ringing endorsement of how likely it is to be ready. We ended up having a Division in Committee simply because the Minister was unwilling to bring himself to agree to let us have a copy of any report that he received from Mr. Jones on the matter.
Having reflected on the issue since, I still take the view that it is inconceivable that Mr. Jones, in view of his meticulous nature and experience in these matters, will not produce a pretty hefty report for somebody—presumably his chairman and/or Ministers—at the end of the review process. We are simply saying, as part of the general air of amity and consensus that has been evident throughout most of the Bill’s passage so far, that we should be privy to those conclusions. We all have a problem if there are real, practical difficulties—with IT or other systems or for any other reason—in delivering the project on time. None of us should underestimate the significance or the size of the challenge facing Mr. Jones and his team. I am quite sure that, because of his past experience, he is up to the job, but that is really why we wanted the matter out in the open on Report.
My right hon. Friend has put his finger on the nub of the problem. It would be extremely unfair on an incoming Pensions Minister, whoever it might be, to find at the top of his in-tray or in his first red box a report, already some months or years old, saying “We’re sorry, mate, this can’t happen in 2012.” It is overwhelmingly important to all of us for whom personal accounts are the only game in town to know almost as quickly as Ministers if there is a problem, and how it can be fixed.
The other new clauses and amendments in this group are largely self-explanatory, so I will not go through them in enormous detail. The central issue is that of the level playing field. It has always been an absolute principle—in fairness, for the Government as well—that apart from some seedcorn for PADA to set itself up and perform its initial task, the personal accounts system should wash its own face in financial terms. The costs should be recovered not from the taxpayer but from the scheme itself and its members, possibly over a period of years.
What worried us in Committee was loose wording in the Bill about grants, advances and loans from the Treasury to PADA and, perhaps, its successor body, and the lack of provision for a commercial rate of interest or terms for repayment. We firmly believe that a clear line must be drawn between the set-up costs envisaged not in this Bill but in its predecessor, the Pensions Act 2007. If I remember rightly, that Act provided for an initial £21 million for PADA to set itself up and get organised. If more funds are needed thereafter, either the issue must return to the House or the scheme must pay its own way when it is up and running.
Ministers are able to give evidence to Committees as well, which is great. In his evidence to our Committee, this Minister said:
“Indeed, it is the role of the members to pay for the operation of that pension scheme”,
by which he meant personal accounts. He went on to say:
“Once we move into the new system, our aim is that it should operate on a self-funding basis.”
When I mentioned the money voted under the 2007 Act, he said:
“We are not planning to increase it at the moment; it is about £21 million for 2007–08. We will look at what costs PADA will need in the future, and it has an ability to raise funds if it needs to do so.”––[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113-4, Q138-9.]
Now let us fast-forward to the Reuters report of 12 March about the spiralling costs of the project. That report states:
“The government’s new ‘personal accounts’ regime will cost an estimated 2 million pounds to set up, a four-fold increase on an initial budget of 500 million pounds, two sources close to the situation told Reuters… the total cost of… PADA… has mounted as management has gone back to the drawing board.”
I assume that that is a reference to Mr. Jones’s review, which I mentioned a few moments ago. One of Reuters’s sources is quoted as saying
“they've got dozens and dozens and dozens of expensive consultants working on nothing other than devising a plan and supporting the passage of a Bill, which is wrapped up in red tape and time-consuming government process.
In line with that, the costs are rising astronomically. Value for money is the big thing. It's scandalous.”
It then talks about a management team led by chief executive Tim Jones. It says the team
“started re-planning the work in October when Jones took the reins.”
The final comment from the sources that I wish to quote is as follows:
“Around 100 consultants are working on the project, earning anything between 800 and 2,500 pounds each per day”.
If that is true, or even partially true, we need to know from the Minister—if not today, then soon—precisely how PADA’s costs are developing. What are they projected to be? Have we passed the £21 million figure already? How much will this project cost before it hands over to the board and trustees who will run the operation?
As my hon. Friend knows, I served on the Public Bill Committee, and I have also been present today, and I have not previously heard the figures he has just announced. I find them shocking and alarming. Given his knowledge of what has been going on, will he speculate on why the original costs envisaged have risen to such enormous sums? Is that just to do with management consultancy fees, or is something much more complicated leaving us in this position, which could undermine the whole purpose of the Bill?
I am grateful to my hon. Friend, and I am delighted to see that she is present today following her sterling service in Committee. The short answer to her question is that I do not know. I hope that the Minister does, however, and that he will share that with the House. Once Report and Third Reading are out of the way, I hope to organise a meeting—which has been envisaged for some time—with Mr. Jones and his chairman, Paul Myners, and perhaps we can get to the bottom of some of this. However, if costs are running at such a level, it can mean only two things. The first of them is that the overall projected costs will be much higher than forecast. It also suggests—unless the consultants are, heaven forfend, not earning their keep—that there are practical problems to do with the time scale for delivery of personal accounts by 2012 about which we are currently ignorant, and I do not think we should remain so for much longer.
Let me return to the fundamental question. The situation is perfectly plain from what Ministers have said, and also from the impact assessment of the Bill, which states in paragraph 3.80 that
“in the long run, the personal accounts scheme is intended to be self-financing”.
We all know what John Maynard Keynes said about the meaning of the “long run”, but how long is this long run and how much will all this cost?
I commend this group of amendments to the House, because it tries to pin down the Government and PADA on recouping the costs of set-up over five years, in terms of grants not being made by the Treasury, and in terms of repayment over a set period and on the basis of a commercial rate of interest for any loans advanced to PADA by the Treasury. If the Minister is aware of any such proposals or plans, it will be helpful if he shares them with the House now.
I pay tribute to members of the Public Bill Committee—some of them are present—such as the Minister and, in particular, my hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), and to the Clerks for their assistance in the preparation of amendments.
The measures tabled by the hon. Member for Eastbourne (Mr. Waterson) fall into three categories: the timing of the introduction of personal accounts, reporting on that introduction, and costs—what he termed the level playing fields. No one can underestimate the complexity of the introduction of personal accounts. Even the largest occupational pension scheme is unlikely to have more than 10,000 members. However, we are talking about a scheme that could have up to 5 million members and, as the Minister said, that could include the local hairdresser and their staff as well as large companies, so this is a mammoth undertaking. The Government have committed themselves to a commencement date in 2012. It is right that there should be a lead-in period and that an organisation such as PADA has the task of getting things under way.
We require an answer from the Minister on where we are with the development of the process and we need him to assure us that there will be regular reporting back. Amendment No. 9 would require the production, within 12 months, of a report analysing the financial position, take-up and different options and costs. When introducing something so complex, it is right and proper that we have an undertaking from the Minister that we will be given a regular report on how the scheme is developing.
We need a response to the point made by the hon. Member for Eastbourne about the Reuters report on costs. When Mr. Jones came to the evidence sessions, we were not given an indication that the costs had escalated so much. It is worrying if costs have rocketed to such an extent at this early stage, so I hope that the Minister will assure us that there will be regular reporting back, as envisaged under amendment No. 9, and that any escalation of costs will be properly reported. I do not underestimate the complexity of the task, but I am concerned that Reuters is reporting such an escalation of costs when we have not even finished considering the Bill.
On the other proposals tabled by the hon. Member for Eastbourne, I should point out the importance of a level playing field. We all made it abundantly clear in Committee that personal accounts are not to be in competition with existing pension schemes; they are primarily designed for a large section of the community who are not saving for their pension and who will end up in a poor financial position when they are pensioners.
We thus have a duty and a responsibility to ensure that money contributed by employees and employers, or through a tax rebate from the taxpayer, will not be eaten up in consultants’ costs. Although I agree that we should keep an eye on costs, I cannot agree with the hon. Gentleman’s proposal that they should be set at 0.3 per cent. right from the start. That should be the long-term objective, but it is probably right and understandable that in the initial years, when the scheme is growing, costs will be greater. For the same reason, I cannot support him when he says that we should restrict the trust’s ability to borrow money. If the long-term objective is for the scheme to be self-funding, money will have to be borrowed in the initial stages and then recouped as the fund grows. If that is not done, the people who are contributing at the beginning when the scheme is set up will pay a much higher proportion in respect of what they are putting into the pot than those who are involved later on, which is why it is inflexible to set an upper limit. That might well be a long-term objective, but it will not be achievable to start with. Restricting the ability to borrow money—albeit that it will be expected to be paid back—is not a sensible option.
Does the hon. Gentleman agree, therefore, that the PADA consultation document about the possible different charging structures for personal accounts might well be affected significantly by the cost overrun that we are talking about, because it could affect the pros and cons of an initial charge, an annual management charge, or whatever other option is considered?
I agree. It is important that the Minister answers the point about cost overrun and addresses how it will be met. My point was made in response to the totality of the amendments and the fact that the Bill allows grants or loans to be made—or at least provides for some flexibility within the consultation that is taking place. Rather than Parliament imposing a structure on the industry, which is far more expert on such issues than we are, it is important that the industry is allowed to suggest the most cost-effective approach. I accept some of the amendments—the hon. Member for Eastbourne is right to want to ensure that we have a proper understanding of the start date and the costs—but I do not support their overall thrust, which would be too restrictive.
The hon. Gentleman says that it might be appropriate to allow grants or loans to be made, but those two things are very different. He has explained his position on loans clearly, but the implication of grants is that the money given does not have to be repaid. That might cross a boundary in terms of providing unfair subsidy in comparison with other providers of pensions. Did he mean to use both those words, or was it a slip of the tongue?
I was about to come to the distinction between grants and loans. There is only one area in which a grant may be appropriate. We had some discussion in Committee about the provision of information and advice, but such advice would be generic, not specific to particular saving. There is an argument for saying that the Government should encourage the provision of generic information and advice, and it might be appropriate for a grant to be made to set that up. It would not be set up to compete with existing provision, nor would it provide information that would allow someone to make a choice between an existing private scheme and personal accounts.
The hon. Gentleman is right. I would also add that because of the nature of personal accounts PADA will give some advice to the Pensions Regulator on how the compliance regime will be set up. Such advice is not something that other, commercial pension schemes would be required to provide.
I am grateful to the Minister for that intervention and his point is right. We are setting up a whole new structure that does not have to be in competition with what already exists. It is clearly new, and some aspects will be specific to what personal accounts are trying to do, in which case it is appropriate to have grants.
I hope that the Minister can answer the concerns raised by the hon. Member for Eastbourne and me about costs and how we will ensure that the date is set. I hope that he can give us some assurances, or a breakdown of how the costs will be recouped as PADA develops its work. Once the consultation is finished, I hope that he will tell us how the chosen model will be used to deliver the funds that the trust will need to deliver the service.
Some of the issues under discussion are complex and important, so I am afraid that it will take me some time to go through them.
On the start date, our intention has always been that the reports should be introduced in 2012. That has not changed, but, quite naturally, Tim Jones wanted to assure himself that the plans that he inherited as chief executive were deliverable. He has now completed his review. I am afraid that it was not the sort of hefty report that the hon. Member for Eastbourne (Mr. Waterson) may expect, but Tim Jones met me and produced his report bang on time. He now has a credible set of plans that are consistent with starting to deliver the scheme from 2012.
If the Liberal Democrat spokesmen—both the hon. Member for Rochdale (Paul Rowen) and the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander)—want to meet Tim Jones, he would be delighted to do so. The hon. Member for Eastbourne is probably aware that the hon. Member for Wantage (Mr. Vaizey) has already met Tim Jones to discuss some of the cost issues and some other issues, including those of commercial confidentiality as contracts of a substantial value will be offered to set up the scheme. It is therefore important that the scheme’s commercial confidentiality, and therefore its viability, is maintained. For that reason, with due undertakings from the hon. Members concerned, I am sure that Tim Jones will be able to discuss some of the issues in detail, provided that that detail does not cross into the public arena, where it might prejudice the various contracts.
We are still four years away from the go-live date for a complex programme that delivers ground-breaking reforms. It would be ludicrous to stand here and say that there are not uncertainties, risks or events around the corner that might change how we see things. We must not lose sight of the fact that it is not just Tim Jones, the Pensions Regulator and the Government who need to deliver to make some of the reforms a success. For instance, the date for Royal Assent for the Bill is, to use a Donald Rumsfeldism, an example of a “known unknown”. We do not know when the Bill might be delivered. We have made good time in scrutinising it in Committee, but I cannot be sure, even with the best will of the House, of the exact date of Royal Assent. That means that I cannot be sure of the exact date that PADA will get the legal authority that it needs to begin to implement the personal accounts scheme. I anticipate that that will not have much impact on the delivery of the IT or the systems supporting the personal accounts scheme, but we will need to understand the impact on a range of supporting activity, including when we can deliver the information needed by employers and pension schemes so that they have time to prepare.
There are other unavoidable uncertainties, to use a different phrase. The pension accounts scheme will be unlike any other scheme in that it will be the largest occupational scheme in the UK, with 4 million to 7 million active members, and it will interact with nearly 1 million employers. It will be specifically targeted at a part of the market that, by and large, existing providers find uneconomic to serve. No other scheme has restrictions like a contributions cap, and it will be required to admit anyone eligible to join, irrespective of whether the revenue that they might bring in will cover the cost of their account. So although some of the infrastructure needed will already exist in the market, some of it will need to be developed.
We have made assumptions about how long the procurement and build processes will take, and they are good and robust assumptions, but we will not know exactly what is involved until PADA has engaged with potential private sector suppliers and found out what they can do and how they will deliver what we need.
We must also build into our plans the needs of employers, the pensions industry and individuals to ensure that they understand the reforms and can take the necessary steps to be ready for go-live. We have already said that we will bring employers into the reforms in stages and phase in the rate of contributions that they are required to make. We will need to get those aspects of implementation right and ensure that the right employers have the right information at the right time to meet their new duties. We need to avoid a big bang implementation so that the pensions industry, including the personal accounts scheme, and the supporting infrastructure such as advice services for employers and individuals can take on their new roles and responsibilities in a measured and controlled way.
It would be wrong for me to predict exactly what will happen on an exact date in 2012, but I am confident that that is a realistic start date for the reforms, provided that we get the staging and implementation right. That has been the basis of my conversations with Tim Jones, and I am happy for the hon. Member for Eastbourne to have conversations with him about his plans and the outcome of his review. As I understand it, much of that review is on charts and so on, so there is paperwork. If the hon. Gentleman wishes, he can look at the charts, which show the timing involved and various other things—I had a glance at them, but I rely more on the discussions with Tim Jones than on all those charts, which he drew up for his own purposes.
I very much appreciate the points that my hon. Friend the Minister is making, but they leave me with the feeling that the start date of 1 April 2012 for the personal accounts is now surrounded by a certain amount of doubt on practical grounds. Can he assure me that the year of 2012 will not be affected? He will obviously see the implications of that year, which we might come to later.
I do not know quite where my hon. Friend got the date of 1 April from, but 2012 has always been the year in which we have envisaged the scheme starting, and we continue to do so. That is the plan and the proposal, and it is what Tim Jones has been signed up to deliver and designed plans to implement. I acknowledge the hon. Member for Eastbourne’s point that the project is very big and has all sorts of implications, and in reply may I say that the plan is to start to deliver in the course of 2012. Let us see, when we get a little closer, what precise month or day in 2012 it will be.
It has always been envisaged that this will not be a big bang, and that the scheme will be phased in over a three-year period, with employers starting by making 1 per cent. contributions, then making 2 per cent. contributions in the following year and then 3 per cent. contributions. The scheme will not suddenly appear on one day in 2012 and all be in place. It will be a phased-in project. The question is when we are going to start the reforms, and the answer is 2012. That is what we envisage, but I accept some of the hon. Gentleman’s points. There will always be issues that we must examine, not least when the Bill finally becomes law, and all of them will have to be factored into the management of any project date. As far as we are concerned, though, Tim Jones has done as we asked and drawn up plans for delivery in 2012. That is when we envisage that the proposals will come into force.
The second element of this group of amendments and new clauses relates to the funding arrangements for PADA, but first I shall say something about the Reuters story, which appears to derive from something said by a person claiming to have worked as a consultant at PADA for a time. The £500 million figure seems to be based on the Pensions Commission’s assumption in respect of the loan needed to set up the scheme, an estimate that preceded two White Papers on pension reform, the Pensions Act 2007 and this Bill. We now know much more about the scheme, but we cannot say exactly how much it will cost until its full design, as well as the procurement of the services underpinning it, has been completed. Moreover, we cannot even begin those processes until this Bill has received Royal Assent.
This legislation authorises PADA to do the job for which the hon. Member for Eastbourne wants me to provide figures as to cost but, until PADA has started talking to the people who will provide its IT and other infrastructural requirements, it will be very difficult to know the costs involved. In any event, the size of the contracts means that anyone who had a detailed breakdown of the cost figures would be at a considerable commercial advantage. Because of that, I am happy for the hon. Gentleman to talk to Tim Jones, as long as the conversation is in appropriate confidence. We do not want to read about it in the papers afterwards, but I am sure that we can trust him in that regard.
My hon. and learned Friend is right to say that it would be wrong to introduce the changes in a big bang on one day, as that would be like asking for a terminal 5 debut for something that is very important to a lot of people. However, some of us are worried that all the other costs being talked about might prevent him from delivering on his promise to consider certain other matters, such as the small number of schemes that are known to fall between the Pension Protection Fund and the financial assistance scheme. Will he assure me that the costs that we have been discussing will not have implications for any decisions made about those few schemes?
I know that my hon. Friend has concerns about those few schemes, involving a limited number of people, which fall between the FAS and PPF schemes because of the dates involved. I hope that we can move to deal with them in the other place, and I am still in discussion with colleagues to that end. I encourage him to retain some hope, but I cannot give him any guarantee. I want to make it explicit that I have still to talk to colleagues about some of these matters, although I assure him that this Bill will not affect the outcome of those talks.
I understand what the Minister has said about commercial confidentiality preventing him from saying too much about costs, but may I press him a little further on the matter? If PADA has done enough detailed work to know that the timings involved can be achieved, at least in theory, it must also have made some estimates of the costs involved. I appreciate that there could be commercial ramifications if we were to go into the detail of those costs, but will he offer the House some reassurances that the total costs being considered are not wildly different from the numbers that have been projected? It is important that the House understands that, because if the numbers are twice or three times as high as those in the projections, to choose a deliberately extreme example, the implications for the long-term overall costs of the scheme will be negative and very serious. Will the Minister at least give us the basic assurance that there are no show-stoppingly large and unexpected figures in the plans that he has seen so far?
The hon. Gentleman is right that there are time scales, and it looks as though they can be delivered on, all other things being equal, by 2012. There are also estimates about various contracts. Again, for the reasons that he gave, I do not want to go into that.
The hon. Member for Eastbourne is wrong when it comes to the figure of £500 million, which came from the Pensions Commission years ago. That was just an estimate that it made. We have not, at this stage, put forward another, separate figure, but the figure cited is not the figure that we are aware of; however, I cannot go any further than that at this stage, as regards broad figures.
I suppose that the bottom line is that everyone will want reassurance that the Minister has not seen anything to lead him to believe that in the long term we will not be able to reach the target number of basis points of the long-term cost, which the hon. Member for Rochdale (Paul Rowen) mentioned earlier. Has the Minister seen anything that leads him to believe that that is not possible in the long term?
If the hon. Gentleman is asking at what point we will make the transition from PADA to the Personal Accounts Board—the delivery authority for the pension scheme—it is envisaged that we will come to that point in 2012. That is when the Personal Accounts Board—the trustee corporation, in effect—will take over and start to deliver a pension scheme. The aim of PADA is to create the mechanism that will deliver the scheme. The Personal Accounts Board, which will control the trustee corporation, will then provide a personal accounts pension scheme. It is envisaged that that will come into effect in 2012. Does that deal with his point?
There will be an overlap. There will not be a sudden cut-off of PADA and then creation of the Personal Accounts Board. There will be a period when the board runs alongside PADA in a shadow process. When PADA goes live—when it starts taking in money and building up a pension scheme—that is when we will know that the handover has in effect taken place. PADA may have to continue to exist for a short period thereafter before being wound up, so that we can ensure that the processes are properly carried out; there may be some advice given to it, and there may be services that it is providing. However, it is envisaged that PADA will start to wind up around 2012. I do not have an end date for it, but it will not go on long after that. It will then hand over completely to the Personal Accounts Board and the trustee corporation, which will run the pension scheme.
Let me deal with some of the issues in relation to funding. The unique nature of personal accounts will present a challenge in developing a funding strategy. Before any decisions can be taken, the authority must first complete the design of the scheme and commercial negotiations with private contractors. It cannot do this until after Royal Assent. The measures in the Bill provide it with a degree of flexibility in developing funding options. That is vital in ensuring that we do not rule out options that could later prove to be in the best interests of members.
However, we have been absolutely clear that any funding strategy must meet a core set of aims. We have always said that we would bring employers into the reforms in stages and that we will phase in the rate of contribution that they are required to make. We will need to get those aspects of implementation right, as well as ensure that the right employers have the appropriate information.
That is the basis on which we are proceeding, and we intend to ensure that that is how we deliver. The unique nature of personal accounts is the key. We want to ensure that the strategy delivers low charges to members, and that it is based on our intention that the scheme will be self-financing and delivered at no cost to the taxpayer in the long run. We want to ensure that the scheme is commercially viable, consistent with European law and not unfairly advantaged.
The hon. Member for Eastbourne tabled a series of amendments that seek assurances and answers to specific questions about funding. As I have explained and for the reasons that I have given, the authority is not yet in a position to provide all the detailed answers. Our intention is that the costs of setting up and operating the scheme would ultimately be recouped from revenues from membership charges. However, during the period of set-up and in the early years of operation, membership charges will not cover all costs. The Bill therefore contains provisions to allow the authority and trustee corporation to bridge the gap through borrowing, and for the Secretary of State to provide financial assistance through grants, loans, guarantees or indemnities. This does not mean that any of these specific provisions will be used, but it does mean that the authority’s ability to maximise value in its commercial negotiations will be strengthened.
Borrowing from the private or the public sector could be one option to achieve our intention for the scheme to be self-financing. However, that would be prevented by amendment No. 15, which is why I cannot accept it. New clause 5 and amendments Nos. 11 and 28 would require any loans from the Government to the authority or the trustee corporation to be made on a commercial basis. If there is any funding from the public sector, it is intended that that would not provide an unfair advantage and would comply fully with European state aid rules. This is a guiding principle of the funding strategy.
Amendment No. 16 appears to be designed to ensure that the independence of the trustee corporation—the Personal Accounts Board—is not compromised by the requirement to gain the Secretary of State’s consent for any borrowing or investment. The Bill clearly establishes the trustee corporation as independent of Government. However, as a non-departmental public body, the trustee corporation’s financial arrangements would be taken into account in the Department’s budget. It is therefore right that this should be subject to scrutiny by the Secretary of State to ensure that the wider interests of the taxpayer are taken into account.
The hon. Member for Rochdale had a brief exchange with me on the subject of grants. There are some areas of the authority’s work that he is right to say envisage giving advice to Government and others, and providing services which, because of the sheer scale of the undertaking, would be unlike those that other commercial bodies have to operate. Grants from Government to the trustee corporation may be necessary in the future—for example, if the Government asked the trustee corporation to provide advice or information to help them and Parliament to assess the success of our overall public policy ambitions. As this would not directly benefit scheme members, it would be unfair to expect them to meet the cost. I therefore cannot accept amendments Nos. 27, 10 or 12.
At this point I would like to reassure Members that the costs that the regulator incurs in establishing the compliance regime will be borne by the Government. That will be done through existing powers, achieving the same aim as new clause 3. I have made it clear that low charges will be at the heart of the personal accounts scheme. However, difficult trade-offs will need to be made between the initial level and structure of charges and how quickly the scheme becomes self-financing. That is one of the issues that PADA is exploring in its public consultation on the best charging structure for the personal accounts scheme.
New clause 4 and amendments Nos. 13 and 14 demonstrate why we should wait for PADA’s advice before taking decisions in this area. New Clause 4 and amendment No. 14 would require the scheme to repay the costs of establishing the personal accounts scheme within five years. That would be likely to lead to unreasonably high charges for the first cohort of members, impacting adversely on their savings and potentially leading to high levels of opt-out at the time when we most need to establish the confidence of savers. I am not saying that it is a wrecking amendment, but it is not far off it.
Amendment No. 13 would initially cap charges at an annual management charge of 0.3 per cent. It therefore pre-empts PADA’s charges consultation and risks inappropriately extending the time that it will take for the scheme to become self-financing. I am not prepared to pre-empt decisions on the funding strategy in this way and therefore cannot accept the amendment.
Finally, the hon. Member for Rochdale asked for various reports. Amendment No. 9 would require the authority to report on the financial management of the scheme within 12 months of Royal Assent. The financial position of PADA and the corporate trustee as non-departmental public bodies will be reported to Parliament on an annual basis. Further, as a trust-based pension scheme, the trustee corporation will be required to provide annual statements to its members. I see no reason to add to those reporting requirements, which would involve additional bureaucracy.
I reassure hon. Members that the authority will continue analysing the assumptions and risks around take-up, persistency and contributions as part of its work to develop the funding strategy. However, I will not commit the authority to making public its latest assumptions on funding when it is likely to be in the midst of sensitive commercial negotiations.
Developing the funding strategy for personal accounts is already a complex and challenging piece of work. I welcome the support expressed by Opposition Members for the project, but I cannot provide them with the guarantees that they want in relation to 2012. I have always said that we envisage that the scheme will start to deliver in 2012, but this is a big project and I cannot guarantee that it will happen. There are tight time scales, and some of the things are not in the control of either the Government or PADA, so we must be realistic.
We have employed a high quality chief executive and a high quality chairman, who can deliver in the commercial sector. They have both shown that they have the skills, and they are recruiting good quality staff; we need to let them get on with the job. They have given us their proposals to deliver in the broad terms of the Government’s policy on 2012, which is what I want to allow them to do. I have acknowledged that they may have to take all sorts of issues into account, if certain matters do not work out precisely as envisaged in the plans, which is always the case with a project on this scale.
We have got a policy aim—there is nothing dubious about describing it as a policy aim—and we have got a plan for delivering it in 2012. The plans are tight, but they are deliverable. We should let PADA get on and deliver the project. If the hon. Gentleman wants to discuss how that will be done—the costings and so forth—I have already offered the facility of meeting Tim Jones in order to do so.
I am not minded to press the new clause to a vote, but that does not mean to say that I am wholly satisfied by what the Minister has said. In an attempt to be reassuring, he kept telling the House that the introduction of personal accounts is not going to be a big bang. I am delighted to hear that, but as has been said, we do not want a terminal 5 moment, either. Terminal 5 was a massive project of its sort, and it was not a big bang—it was phased in, but phase 1 turned into an unmitigated disaster.
That is the kind of issue that I am trying to get at in this debate—the nature of the review and its conclusions. I shall certainly take the opportunity to see Tim Jones and get to the bottom of where he thinks things now stand, and yes, of course, if I am told things in commercial confidence I shall not tell anybody else. However, we need to find out precisely what is happening in practical terms.
The Minister said—I wrote it down—that Tim Jones had delivered his report on time. Is the report in such a condition that it can be placed in the Library or made available in what lawyers call a “redacted version”, so that we can at least see the highlights? The issue is not as simple as whether we will get from now to 2012 in one piece, as it were. Presumably, there is a series of triggers, or things that have to happen by a certain date between now and then, hence the charts to which the Minister referred. Once those deadlines start not to be met, the whole thing begins to slide off schedule. That is the key, and without wishing today to detain the House for any great time on the issue, I should say that that is the sort of thing that we will look for.
The hon. Member for Newcastle upon Tyne, Central (Jim Cousins) reminded us that the measures are part of the Turner package. According to Turner, they were to have been delivered two years earlier, in 2010. We have had this debate on other parts of the Turner package, such as on decoupling, and I hope that we shall come to the issue of restoring the earnings link, which is another key part of the package. Such things, including increasing the state pension age, all go together and we let the timings of the essential ingredients of the Turner package start to drift apart at our peril.
I was surprised that the Minister put a lot of emphasis on Royal Assent. Technically, of course, lots of things can happen only when the Bill gets Royal Assent. I do not want to be churlish, but the Bill has been a long time out of Committee and only now are we having Report stage and Third Reading; moving a bit faster was in the Government’s gift. However, leaving that aside, I should say that the Minister talked about contracts of substantial value being put out for tender. I accept that. However, unless he is making out that the Reuters report is a complete fabrication, it should be clear that lots of people—allegedly 100 consultants—are already working night and day to do something. They are not waiting for Royal Assent, and nor will their bills. What are they doing in the absence of Royal Assent, and how much is it costing? One or two distinguished members of the Select Committee on Work and Pensions are here; it is not for me to say, but perhaps the Committee thinks it is important to look into the potential costs overrun and how the project is being managed.
That brings me to the Donald Rumsfeld—the “known unknowns”—point. We do not expect Mr. Jones, and certainly not the Minister, to walk on water. We expect Mr. Jones and his team to deal with the known unknowns, and I presume that the things that he knows are outside his control are clearly flagged up in the report. Even on the Conservative Benches, we do not expect him to be aware of the unknown unknowns, about which the Minister was also concerned. No one expects the Minister to guarantee absolutely April 2012 as the start date—all sorts of things could have happened by then, not least to the economy as a whole.
However, to come to the costs overrun point, it would be worrying enough if the Minister had said to the House, “We can’t tell at this stage what the cost overruns are or are likely to be,” but as I understood it—I accept that I paraphrase—he said, “We can’t say in any event whether there are cost overruns because we do not know what the cost should be.” It seems even more worrying that at the moment we have no idea about what the costs will be, apart from a vague figure plucked out of the Turner process. However, it is clear that costs are being incurred, Royal Assent or no Royal Assent, and we need a clearer notion of what rate and level they have already reached.
The costs that are being incurred are those that were envisaged under the Pensions Act 2007 in terms of providing advice, creating the initial framework and doing the consultations to which the hon. Gentleman has referred. However, the actual procurement operation will need to wait until the Bill gets through.
I am grateful to the Minister. I assume that it follows that the £21 million that was allocated in the 2007 Act is yet to be spent and that there is still some money in the kitty; otherwise, somebody would presumably have told us.
It is clear that costs are being incurred, and at quite a high rate. I cannot vouch for the Reuters story, but Reuters sturdily stands by it and by its sources. Of course, I intend to meet Mr. Jones and hear what he has to stay. It would still be helpful, though, if the Minister could produce a copy of the report that he has received, stripped of the commercially confidential issues, so that the House as a whole can get a feel for how this project is likely to develop, or indeed how it has developed so far. As I said, that may be a matter for the Select Committee.
Given that I am not able to deliver exactly what the hon. Gentleman is asking for but am anxious to be helpful, I wonder whether I could ask Tim Jones to provide a written report for the House indicating where he has got to and how he envisages moving forward. It would obviously be stripped of commercial issues but it would at least allow the House to feel that it is better informed and to see some of the detail of how he plans to take this project forward.
I am grateful to the Minister for that helpful response. If that can be done without producing something that is not very useful, then so be it; I think that it would be worth while in any event.
Terminal 5 was an instance of a massive project that had lots of clever people and lots of money thrown at it—it even had some 3,000 people brought in as extras, as it were, to try to test the system before it went online—but it still failed on day one, day two, day three and so on, and it was being phased in. I have never managed a project of this size or anything remotely like it—nor, I suspect, has the Minister—but Mr. Jones has, although there has never been a project quite like it. We all need to know about this; again, perhaps it is something that the Select Committee might want to take an interest in. I beg to ask leave to withdraw the motion.
Motion and clause, by leave, withdrawn.
New Clause 2
‘(1) On or before 1st April 2009, the Secretary of State shall publish his projections of the numbers of people likely to be subject to means-tested benefits (including housing benefit) and in “at risk” groups following the introduction of personal accounts.
(2) If the projected figure published in accordance with subsection (1) exceeds 10 per cent. of the pensioner population, the implementation of the scheme under section 58 of this Act shall be postponed for at least 12 months after the date of publication.
(3) The Secretary of State shall publish any proposals for reform to address the findings in subsection (1) above concurrently with the publication of the projections thereunder.’.—[Mr. Waterson.]
Brought up, and read the First time.
With this it will be convenient to discuss amendment No. 38, in clause 3, page 2, line 37, at end insert—
‘(8) The Secretary of State must publish an annual report on the impact of means-tested benefits on automatically enrolled members of the scheme established under section 58.
(9) Any report published under subsection (8) shall include details on the number of pensioners facing marginal deduction rates of 40 per cent. and above.’.
On the face of it, new clause 2 looks fairly straightforward and inoffensive. It merely says that the Secretary of State should publish projections of the numbers of people likely to be subject to means-tested benefits, including housing benefit, which is particularly important, and to be in so-called at-risk groups following the introduction of personal accounts. It touches on one of the big concerns about personal accounts; the other one is often referred to as levelling down. Those are the two big question marks hanging over the system. To be blunt, in the past we have made it clear as an Opposition that if we cannot square the circle on means-testing, that could affect the likely success of the whole system. There was a time when that was not the consensus view, but I am delighted that it now seems to be so. This has to be addressed, not necessarily during the Bill’s passage through this House, but through a process that has already started, which I very much welcome. That is what new clause 2 does. The Liberals’ amendment No. 38—I am sure that they will speak about it themselves—would require an annual report on the impact of means-testing.
This is, as I have said, a very big issue. In this country, rightly or wrongly—that is not the purpose of this debate—we have gone down a path whereby means-testing has grown very fast. Nearly half of pensioners retiring now do so subject to means-tested benefits. People might well be auto-enrolled who will not be receiving specific advice, because the nature of the Turner settlement means that they will receive so-called generic advice. They might be specifically advised not to auto-enrol into personal accounts, and may save a not insignificant pensions pot as a result, but then end up no better off—or even worse off.
The issue is not an easy one, and I am the last person to suggest that it is. Far cleverer people than I are wrestling with it, such as those in the Pensions Policy Institute, and Professor John Hills, among other luminaries. The issue is difficult, but that does not mean it is intractable. It is pretty clear that just about everyone who could be considered a serious stakeholder in the process now agrees with that proposition. I was looking at the briefing prepared for this debate by the Equality and Human Rights Commission, which emphasises that it is a strong supporter of the personal accounts system and the principle of auto-enrolment, but goes on to say:
“However, we have raised concerns that there may be some individuals for whom saving will not pay, as saving in PAs…will serve to merely replace means-tested benefits (such as Pension Credit, Housing Benefit or Council Tax Benefit)”.
“We have previously called for the Government to commit to a public report on the ‘pays to save’ issue, including modelling the number of individuals likely to be at risk, an assessment of the tradeoffs between different proposals for reform and public consultation with key stakeholders.”
It also says:
“We were therefore extremely encouraged by the Minister’s assurance during committee stage to work with the Opposition and various stakeholders to consider possible solutions”.
That view is echoed by other stakeholders, such as Age Concern, which says:
“The Government has made some important moves since introducing the Bill to underline its commitment on this issue, most importantly an announcement that it will review the interaction between means tested benefits and personal accounts.”
Rather kindly, it also goes on to say:
“We also welcome the positive response to this approach from the opposition spokespeople.”
Presumably, that includes me. It continues:
“This process has now started and we welcome the opportunity to contribute.”
I might be forgiven for slightly correcting recent history. Although I stress that I welcome what is now happening, and I shall touch on it in a bit more detail, there was a time not that long ago, under the previous Secretary of State, where Opposition Members were painted as the bad guys, who were rocking the boat and letting the side down by suggesting that there was a major problem. In fact, Ministers and some of the outside organisations have made a major shift, and it is now quite difficult to find anyone who does not accept that there is a major problem that needs to be addressed.
That is not to say that there may not be a solution at the end of the process, which I shall describe in a little detail. Various possible solutions have been punted around, but this is not the occasion to go into them in any detail. Attempts to look at trivial commutation, income disregard and a variety of other possibilities that might have an effect on the problem have all been considered. However, the fact remains that almost all the options that have been floated so far carry their own problems, which need to be gone into in detail.
I am glad that my hon. Friend has put on record the fact that our party was the first to talk about the issue, and it is good that there is now more widespread agreement that it needs to be considered. It is also worth putting on the record the fact that we already receive representations from constituents with personal pensions, who were therefore probably higher up the income chain in their working lives to be able to save for them, who feel extremely aggrieved that, say, their neighbour or someone else they know is accessing benefits from which they are excluded because of that income. Now that we are going further down the chain of income, that problem will become much more acute and affect people with much more modest savings, incomes and pensions. We do not want to undermine the idea that everyone should save for a pension by arousing widespread resentment, so I welcome the greater interest that the Government are showing in the matter.
I am grateful to my hon. Friend, who makes a fair point. Almost by definition, the 6 million, 7 million, 8 million, 9 million, 10 million or however many people who, it is hoped, will be attracted into personal accounts will be those who are currently outside existing pension provision. Many may simply be seen as unattractive propositions by the pensions industry and will be in a marginal situation as to whether the scheme will be good or bad for them.
My hon. Friend’s key point, to which I was coming, was about confidence. At one time, the argument was advanced that there would not be a problem until 2020 or even later, when it would become apparent to people, after they had saved for some years under personal accounts following the assumed start date of 2012, that they were not receiving the returns that they had been led to expect. It has been clear to our party, and it is now clear to everyone, that in the run-up to 2012, and not later, journalists and others, whether we like it or not, will be writing a story to the effect that some people in similar situations will be benefiting and others will not be. If, as journalists say, that story has legs, it could cause untold damage to confidence in the system, not least as a tool for the unscrupulous employer who wants to persuade people not to auto-enrol in the first place.
Now is a good moment to pay full tribute to the Pensions Policy Institute, which has done so much work on that and the other big issue, the so-called levelling down, to which we shall come. The PPI set the foundations of the work that will now be carried forward by identifying the at-risk groups of people—whether low, medium or high risk—under the proposals. The PPI came up with the expression “the funnel of doubt” to refer to the likely level of means-testing even after the reforms.
There is no doubt at all that the level of means-testing will fall somewhat when the reforms are introduced. However, there is still a difference between the Government and the PPI and other experts on what that level will be. As John Hills and others have picked up, it is particularly difficult for people at the beginning of a career or a lifetime of work to predict where they will end up, with respect to a broken work record, marital break-up or whatever else. It is important that we should consider carefully the likely effects of the interaction between means-tested benefits and personal accounts.
No matter how much work has been done by outside bodies, particularly the PPI, all are now at the point at which they can make progress only by having access to the sort of model that the Department for Work and Pensions uses—the Pensim2 model, as it is called. I am particularly pleased that, as a separate and parallel process to the passage of the legislation, we are now all engaged in an attempt to establish the size of the problem, within certain parameters, and to run a slide rule over the suggested solutions. The Minister has been extremely helpful in allowing people access to Pensim2, and in putting together a series of meetings, seminars and all those wonderful things that come to us who are involved in the pensions world. The initial phase has involved ensuring that we are all signed up to the basic assumptions that go into any proposition that is run through the model.
There has already been one big step forward, for which I claim no credit whatever because it was nothing to do with me. There was a problem, as despite its no doubt excellent other characteristics, the Pensim2 model did not take any account of housing benefit. I am told that that is no longer the case, and that it does now incorporate housing benefit. Why does that matter? It matters enormously because one of the major factors in the at-risk groups identified by the PPI is the question whether people rent their home in retirement. That makes a massive difference to many of those people.
There is a whole range of issues to be addressed. Assumptions are made about take-up rates, the likely success of personal accounts and the whole question of behavioural reactions to the new policy. This is not an easy task, and we have always said that we did not necessarily expect it to be resolved within the lifetime of this legislation. We did expect, however, that the process should start off in a serious fashion, and in a way that we could sign up to during the passage of the Bill. So far, so good. There is clearly a lot of work still to be done, however, and we might not agree on all the parameters and the options and how they should be looked at.
I hope that the Minister will say a few words on this issue in a moment, but I think that I am right in saying that the ultimate aim is to produce a document—perhaps a report that will be available to all and sundry—at the end of the process, possibly in the autumn, which will try to nail some of the uncertainties that are in the system at the moment. Perhaps it will admit defeat on the known unknowns, to go back to Rumsfeld, but it should at least set out some of the options more clearly and possibly eliminate some of them, if that will be helpful. This will not be a problem for this Government, but it will be one for future Governments of whatever political colour, and it is important that we tackle it now.
I am not trying to tempt the hon. Gentleman on to some rather difficult rocks here, but is it not possible that, unless we get this right, many people will seek to take a double advantage of the new system by using the trivial commutation rules? That could well involve the people who have very small pension pots because they have very small incomes, and a lot of unscrupulous people could target those people precisely to get them trivially to commute their small pension pots. We need to be clear about this point if we are to achieve integrity in the new system.
That is an important issue that we need to guard against. Furthermore, it is clear from the work carried out by the PPI that there is a whole tranche of people—we do not know how many there are—who would be better off taking a lump sum and spending it as quickly as possible. That rather goes against the public policy aim that we all hold, which is that people should save for their retirement and have that money available for when they retire. The hon. Gentleman makes an important point, but that is just one of many issues that we need to grapple with.
I said earlier that there was now a kind of reverse consensus on this issue. It is a big issue that needs to be addressed and we have all joined up in addressing it. I was therefore just a trifle taken aback the other day when I saw the reported remarks of the new chairman of the Personal Accounts Delivery Authority, Paul Myners. In a speech to the National Association of Pension Funds conference in Edinburgh, he was reported to have compared this situation to the introduction of mandatory seat belts in cars. He is reported to have said:
“There are a small number of people whose injuries are increased and even some people have died because they were wearing seatbelts”.
He went on to make the point that that did not outweigh the point of having compulsory seatbelts. I think that we can all agree with that in the context of seatbelts. I took the trouble of finding out how many people are injured each year because of wearing seatbelts as opposed to not wearing them. According to the Royal Society for the Prevention of Accidents, about 1,100 people a year are injured in some way because they are wearing seatbelts rather than the opposite, but compared with the number of people with driving licences, that is a tiny proportion. I am a bit worried about whether anyone making the kind of assumption that Mr. Myners appears to be making would realise that such a tiny proportion was involved.
The real issue here is that nobody knows. The numbers in the at-risk groups could be hundreds of thousands or millions. I suspect—this is my own hunch—that the figure is in the high hundreds of thousands, but we simply do not know, and we will not know until the modelling has been properly done. We are all working to that end. This is not a problem that can be dealt with head on by saying, “Well, just because there is going to be some rough justice for some people, it does not mean to say that it is not a good idea.” Yes, the prize is that, hopefully, millions will be drawn into saving for their retirement, admittedly by the use of inertia in most cases, when they are not doing so now. That has to be a major prize, but it cannot be achieved at the price of large numbers of people, often on very low incomes, being worse off or no better off.
That is why the issue is important and why I greatly welcome the Government’s change of heart, if I may put it that way. I am looking forward to our playing our full part in the process. It does matter, not just to the credibility of and confidence in the new system of personal accounts, but to all these people, however many there are, who are involved.
I agree with what my hon. Friend is saying. Presumably, in looking at the flowcharts and projections for the numbers of people who will be affected by the means test, researchers will also have to make assumptions about the minimum income guarantee. In the past, that has also been an issue for means-tested benefits, as it poses the question of the reliability of the Government’s promises that the minimum income guarantee will continue to rise in line with earnings—until time ends or whenever it might be. I presume that that will make a big impact on the projections for how many people will fall foul of the means test.
My hon. Friend is absolutely right. For the time being at least, the Government are committed to increasing pension credit in line with earnings, but a whole series of assumptions will, of course, have to be made and spelled out in the making when the calculations are done. One has to make assumptions some way out into the future about a range of things—not least the level of means-tested benefits available under successive Governments of the same or different political colours. That is an important issue, but dealing with it is a bit like trying to put up a tent in a high wind: unless we nail down one corner, we will not make a lot of progress, so a shared set of assumptions will have to be agreed so we can move forward. There will still be the known unknowns, but that is the way it is always going to be.
To make one final point, on the basis of all the research done so far, I am utterly convinced that the starting point has to be the at-risk groups identified and then refined by the PPI, and then identification, within parameters, of the numbers of people likely to fall into each of those categories, why they are likely to do so and what can be done to help them. Failing all that, we will have to see what can be done within the system of generic advice to ensure that people opt out if it is in their best interests to do so. There are some massive questions here, which makes this one of the two biggest single issues underlying this entire legislation. We are certainly keen to play our part in finding a solution if there is one.
I agree with the hon. Member for Eastbourne (Mr. Waterson) that means-testing is a vital issue. We need some clear answers on it before the legislation becomes operational in 2012. I need not remind the Government of the mess that they have got themselves into with the abolition of the 10p income tax rate to illustrate what happens when Governments fiddle with benefits and charges. When that cut was announced last year, we were not told that 5.2 million people would end up worse off. That is not the figure that we were given. I doubt that members of the Government would have supported the then Chancellor, now the Prime Minister, as readily had they known how many people would be affected.
As for the 5 million to 7 million people who may save for their pensions with personal accounts, it is vital for us to understand the impact of their benefits on their pensions. It would clearly be wrong for us to encourage people to enter into a scheme enabling them to save money and make contributions if, on retirement, they would find that the Government had given with one hand and taken away with the other. That often happens as a result of the current benefit trap, and it is a powerful disincentive for many people to go back to work. That is not the purpose of the Bill; it is intended to encourage more people to save and become prosperous in retirement. Cutting their benefits will defeat the object. I presume the Government can assure us that the Bill is intended not to save money for the Exchequer in terms of the benefits paid out, but to ensure that pensioners are better off.
I agree with the hon. Member for Eastbourne that we owe a great debt to the Pensions Policy Institute for its estimates in this vital area. The number of eligible pensioners who are means-tested to establish their entitlement has risen dramatically under the present Government, from 37 per cent. back in 1997 to around 57 per cent. today. We know what the effects of the means-testing system have been. Although the Government laud the benefits of pension credit, we know that a large number of pensioners—some 1.5 million—are not claiming it. We also know that council tax bills have already risen by 87 per cent. under the present Government.
I am giving a broad figure. At the same time, only 53 per cent. of pensioners who are eligible for council tax benefit claim it. If pensioners who have saved find that as a result of their saving, the benefits to which they are entitled are dramatically reduced, incentives to save will be eroded and the Bill’s objective will be destroyed.
Housing benefit can involve a high marginal deduction rate. We know who some of the high-risk groups are. Single people are likely to be worse off because they generally do not save as much for their retirement, and they may well rent their properties. There are medium-risk groups, such as those in their 40s and 50s who are not currently saving for their retirement. They could well lose out, although that will depend on what happens when they retire. Clearly, it would be wrong if people who put money into the personal pension scheme were to find that as a result they were worse off.
We need some analysis of the scale of the problem. How many of the 5 million to 7 million people are likely to be worse off? There must be one of two options. I admit that it will be impossible to tell someone in their 20s or 30s, “By the time you get to retirement, it won’t be worth you saving,” but we need to be able to advise people in the medium and high-risk groups at the beginning that they ought to opt out. If we cannot do that, we will be misleading people. I do not agree with the hon. Member for Eastbourne, who said, “It’s a seat belt, and some people have got to be worse off.” We must give two pieces of advice. We must make amendments to the benefit system to ensure that people are not disadvantaged—and we must be clear in our analysis of what changes need to be made to deliver that—or we need to advise people that they had better not save through a personal pension scheme, because they would be worse off.
The hon. Gentleman’s comments highlight a crucial point about all future pensions. It is to do with confidence. The people in the schemes, many of whom will be at the lower end of the income bracket, must have the confidence to look forward. This is a Government-sponsored scheme, and if they do not get this advice we may well find 20 years from now that the ombudsman is looking at Government advice yet again; we have already had the debacle with the occupational pension schemes. It is crucial that people have the information, in order for them to build confidence so that they are willing to invest in their pensions.
I agree with the hon. Gentleman; I am a member of the Public Administration Committee, which has championed the cause of those who lost out on their pensions through occupational pension schemes. We do not want people to lose out in this case. Therefore, I welcome what the Minister has done in response to the discussions we had in Committee, by setting up the working group to carry out the detailed analysis and by making that information available to all parties as the Bill progresses through Parliament. That is important.
Once the analysis is completed and we have a clear idea of what is happening, it will be important to have an agreement that changes will be made to the system over time. I accept that some issues may arise 10 or 20 years down the line, but we need to set in train those necessary changes. We also need to be flexible as time moves on. I appreciate that the Minister cannot commit future Governments, but we have to accept that market conditions change and so does the entire employment situation, and what we may be legislating for today may not be appropriate 30 years down the line. We need to be aware that this is a problem—the benefits trap is a problem now in any case, as it is a disincentive to work—and we need to put in place the flexibility so that as more information becomes available the Department can respond to the issues and ensure that people are not worse off.
We all subscribe to the overall broad aim of the Bill—to get more people saving so that they have a more prosperous old age. When we address some later clauses and look at the earnings link, it will become clear that in terms of pensions this country is the poor relation in Europe. We are almost celebrating 100 years of the pension, but we are not delivering what our forefathers originally intended. So, I hope that the Minister will accept that we all have serious concerns about this issue. It is important that the information is shared and that, over time, we have a strategy that delivers the overall aim of ensuring that all pensioners are better off. It is unacceptable to say that small numbers might not be. Although we cannot legislate for every possibility, we must have the flexibility to be able to guarantee people that saving in this way will benefit them; if that cannot be delivered, we should not be encouraging them to save.
The Minister will know that I have supported the Bill in principle from its outset, but he will also know that this issue is the one area where we must take radical and courageous action. The Government must do that if they are to make this a worthwhile Bill.
I do not intend to reiterate the problems about which many hon. Members have spoken. It is true that we are dealing with a group of people who will not be able to afford to take independent advice, and thus will be reliant on generic advice. Generic advice will not be good enough to overcome the problem that we will encounter if nothing is done. We can all remember the mis-selling scandals of the past, and I fear that we might be sowing the seeds of mis-selling today, unless something certain is put into the Bill to deal with the problem.
The other alternative, if we do nothing, is that very large numbers of people will be advised in the media and elsewhere to opt out. That would defeat the whole object of the Bill; we want people to save for their retirement and to have better financial security. If they are being advised in their newspapers that they would be mad not to opt out, who would blame them for deciding to opt out? The hon. Member for Newcastle upon Tyne, Central (Jim Cousins), who is well versed in these matters, made it clear that even those who stay in the scheme may opt for trivial commutation, which would be almost equally bad as opting out in many cases. It is incumbent on us now to put into the Bill something that will deal with the problem.
There is only one way of dealing with the problem. We can play around with all sorts of formulae, but some element of disregard is the only true way to encourage people to save in that way. Only if they know that they will inevitably be better off staying in the scheme rather than opting out, and if that is reinforced by the newspapers they read and by television and radio programmes, will they not opt out. We can argue about how the disregard should operate—whether it is an absolute disregard, whether it is a mechanism, whether it is phased, what the timing is and so on—but something must be put into the Bill that makes it clear that people will be better off staying in the scheme rather than opting out. Unless we include such a provision, the Bill will be worthless.
I promise not to delay the House for too long. I support new clause 2. I was fascinated to hear the common-sense approach that, yet again, the Minister took to the issue. The nature of means-testing means that we are dealing with the most vulnerable people in our society: those whom the state feels are below the threshold that we would all like people to be at, without needing a means-tested benefit. As a result, such people are the most ill-informed and cannot purchase the information that Members of this House and other members of the public could; such people will not receive independent financial advice.
My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) just alluded to the fact that such people will rely extensively on the information that the Government and the schemes’ actuaries put out to the public. Above all—this is where I agree with my hon. Friend—they will rely on the tabloid press. If the tabloid press start saying that opting out is probably people’s best option because it will be safer, and that people should not worry because they can always fall back on means-tested benefits because they might not be better off, that would make this part of the Bill, at least, fall apart. The Minister would probably agree about that.
It is therefore imperative to put as much basic information as possible into the public domain as early as possible, to enable people to make a conscious decision to stay in the scheme, because there could be an exodus. I remember that back in the 1980s, it was “opt in, opt out”; lots of different schemes were in operation and things were very complicated. Financial representatives phoned people up to say, “I think you should opt out of SERPS,” or, “You should opt in to SERPS.” We made decisions about that specific matter, many of them wrong. I made wrong decisions, but I was persuaded to do so by a financial representative.
What worries me enormously is that because we are dealing with the most vulnerable people, who we are trying to get off benefits and into a pension scheme that prevents them from needing means-tested benefits as they reach their more mature years, all the hard work, everything that has been going on with all the different consortiums and all the consensus that has been built up could fall apart so easily, and even more people might end up on means-tested benefits. None of us would look forward to that situation.
I welcome the way in which the Front-Bench spokesmen for the Opposition parties, and, indeed, all hon. Members, have sought to deal with this issue. Some months ago, it was a matter of some controversy, but I think that we have found a way of at least examining what the hon. Member for Eastbourne (Mr. Waterson) rightly said is an enormously complex and difficult issue. Whether we are able to find ways of resolving it is another matter, but we envisage that the process we have set up will enable an examination of the issues. As he mentioned, we also envisage publishing later this year a report that examines the parameters of the debate and establishes ground rules and understandings about the nature and extent of the problem, the policy ways in which it might be examined and the implications of some of those, without coming to a recommendation. That would be a matter for debate between the parties and between various stakeholders afterwards.
The debate was interesting not least for the various descriptions given. I believe that tents in high winds and seat belts were mentioned. I was reminded of the fact that, in evidence to the Committee, Lord Turner gave a further analogy, which is relevant to the discussion. He said that
“you cannot treat the fact that some people post facto will not have done well out of saving as proof that it is a bad idea to advise them to save. An analogy would be that if at the end of the year your house has not been burgled, it does not mean that it was bad advice to buy a household insurance”.––[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 98.]
We are examining a difficult issue. It is clear that we all have constituents who are on pension credit, yet they have a second pension. How we are able to predict which people are likely to end up in that position, whether we are able to do so and what advice such people should be given if the circumstances that they will find themselves in are not always predictable are complex matters. Personal accounts will not create such a new circumstance that we are not already, in a sense, facing it. A large number of people are automatically enrolled into a pension scheme. Tesco has its own automatic enrolment scheme—I understand it to be a reasonably good defined-benefit scheme—and it is therefore allowing people to build up pension pots. There is no guarantee that those people will be able to have an uninterrupted career at Tesco and that they will never fall on pension credit.
We have said throughout—the point was made by the Liberal Democrats earlier today—that personal accounts should not provide advantages over and above those schemes with which they will compete. Therefore, we are trying to set up a basic scheme that people can use if no better scheme is available. It will complement, rather than compete with, other schemes.
If we were to provide, solely for personal accounts, a guarantee that whatever happened anyone holding one would not lose out, it would give personal accounts a commercial advantage over and above any existing private sector schemes. Therefore, we would undermine the very principle of complementing what we currently have. If a low-paid employee can choose whether to enter their employer’s scheme—it might be a good scheme with perhaps a higher contribution from the employer than personal accounts—or a personal account, and they get a guarantee from the latter that they do not get from the other scheme, personal accounts would have a commercial advantage. We need to be careful to bear in mind the basic principles behind the creation of personal accounts and ensure that, in dealing with one problem—and I accept that it is an issue—we do not undermine any of those principles.
I accept the point that the Minister makes, but does he agree that one sure way around that problem is to restore the earnings link to the state pension so that that increases in value? We could also move to a citizens pension, as we have proposed, that would provide a guaranteed minimum pension in retirement, with anything else a bonus.
I certainly agree with the hon. Gentleman about restoring the earnings link in due course, and I will come to that in a moment. I would welcome his views on how we could find enough dosh to introduce his citizens pension without taxing people vastly. The money we spend comes from the taxpayer, and we have to balance the interests of the taxpayer with those of the pensioner.
The point that I was trying to make earlier is that we must give our best shot at predicting what will be in the pot in the years ahead. That is obviously very difficult, but if I went to a private insurance company and said that I wished to invest £30,000 in a scheme, the actuaries would make some sort of prediction about the outcome, and the state pension would be included in that. It is therefore incumbent on the Government to give their best shot at prediction. I accept that it will be difficult. We cannot predict the future, but it has always been the job of actuaries to try to predict the size of the pot. That is why it is important not to guarantee more—it would skew the whole market if people were guaranteed a greater amount than they would get from a separate pension scheme—but to provide a knowledge base and give people some idea of how much they will get. People must have that information.
My hon. and learned Friend mentioned providing an unfair advantage, but it is an important principle that people’s savings should not undermine their ability to collect state benefits. As he says, that point will be discussed when we come to the issue of the earnings link, but it is an important principle in reducing means testing. He mentions taxpayers’ money, but the people who take up the scheme to save for their pension will be low paid. They are taxpayers too, and the fairness agenda means that we must also be fair to those on low incomes who are putting small amounts of money—whatever they can afford—into such schemes. We must ensure that they do not miss out on state benefits later.
My hon. Friend is right, especially about trying to ensure that we have a state system that provides a proper basis for people. One of the key aspects is the restoration of the link. One argument for restoration arises from this very debate. If we did not restore the link, we would end up with some 60 per cent. of pensioners on pension credit, and we do not want that to happen. We can reduce the numbers on pension credit by about half if we restore the link and provide opportunities for private savings so that people can build up a pension pot that will increase the amount that they would get just by relying on pension credit. The reforms in the state sector are part of the process, and the private sector changes will also help to ensure that pensioners get a better deal—and get more money in the end.