Grand Committee
Monday, 27 February 2012.
Arrangement of Business
Announcement
My Lords, before the first Motion is considered I remind noble Lords that, in respect of each item of business today, the Motion before the Committee is that the Committee do consider the statutory instrument in question. The Motions to approve the instruments will subsequently be moved in the Chamber in the usual way. I further remind noble Lords that if there is a Division in the Chamber, we shall immediately adjourn for 10 minutes.
Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2012.
Relevant document: 39th Report from the Joint Committee on Statutory Instruments.
My Lords, the Jobseeker’s Allowance (Domestic Violence) (Amendment) Regulations 2012 were laid in draft before the House on 19 January. They are regarded as being compatible with rights under the European Convention on Human Rights and are being introduced so that recipients of jobseeker’s allowance who have been victims of actual or threatened domestic violence can continue to receive jobseeker’s allowance without having to meet the requirements to be available for and actively seek employment, and to have a jobseeker’s agreement. The term “domestic violence” is defined in the regulations and includes physical, psychological, financial, emotional and sexual abuse.
The regulations apply to victims of actual or threatened domestic violence by a partner, former partner or certain family members of the claimant, their partner or former partner, and allow them to access the exemption from the jobseeking conditions for an initial period of four weeks if the incident took place within the 26 weeks before the claimant notifies Jobcentre Plus about it, provided that the claimant is not living at the same address as the perpetrator at the time of the notification. If the claimant then provides written evidence of the kind required by the regulations during the initial four-week period, the easement period will in effect be extended to 13 weeks. Claimants will be able to access the easement only once in any 12-month period.
During debates on the Welfare Reform Act 2009, the Lords requested an automatic 13-week period due to concerns that jobcentre advisers might refuse access to the existing domestic emergency exemption in such cases because they may not understand the impact of domestic abuse on individuals and their children. The domestic emergency deferrals are allowed at the discretion of Jobcentre Plus advisers and allow four one-week periods within 12 months for individual incidents of emergency, such as a death in the family or domestic violence. These four one-week periods can run consecutively, if appropriate. For those with dependent children, one of the weeks may be extended to eight weeks, resulting in a total maximum of 11 weeks’ deferral.
The main differences between the domestic emergency process and the new domestic violence process is the need for evidence in the 13-week deferral and the fact that victims without dependent children receive the same number of weeks’ exemption as those who do not have dependent children. Clearly the domestic emergency exemption also covers a wider range of situations. We would not expect victims of domestic violence to use both exemptions routinely, but the fact that they have an alternative available when they do not want to produce evidence, and in appropriate cases could use both exemptions in order to extend the time they are exempted from the jobseeking conditions, shows how seriously the Government take this issue.
During the debates on the Welfare Reform Bill 2009, noble Lords were concerned about the impact of domestic violence on lone parents with older children as, prior to the introduction of changes to entitlement to income support for lone parents, this group would have claimed income support and not have been required actively to seek work until their youngest child reached the age of 16.
Currently, a lone parent can claim income support only until their youngest child reaches the age of seven and this age is being lowered to five later this year, subject to Royal Assent of relevant provisions in the Welfare Reform Bill and the making of regulations. There is strong evidence to support the amendment. Although no research exists on the impact of domestic violence on JSA recipients in particular, there are data on the incidence of domestic violence in the wider community.
We are aware that 7 per cent of women and 5 per cent of men reported having experienced domestic abuse in 2010-11. This is the equivalent to an estimated 1.2 million female victims of domestic abuse and 800,000 male victims. We also know that non-physical abuse, such as emotional and financial abuse, was the most common type of abuse, with the figures showing around 57 per cent of women and 46 per cent of men being victims. Furthermore, the British Crime Survey 2010-11 showed that three-quarters of all incidents of domestic violence were experienced by previous victims. Of the victims interviewed, just under one-half had been victimised more than once and nearly one-quarter had been victimised three or more times. We are also aware that four out of 10 lone parents reported domestic abuse in their previous relationship.
The proposed exemption is designed to reflect the fact that victims may experience domestic abuse at the hands not just of partners but of other family members. This can include parents and a range of other relatives, including children. This is wider than the group originally envisaged by noble Lords in the original debates in 2009 as the Government recognise that domestic violence is not restricted to those in intimate relationships and believe that support should be offered to those victimised by family members, including members of a partner or a former partner’s family.
For victims on JSA to take advantage of the exemption they would need to disclose the abuse. There is a consensus within the evidence that domestic abuse is underreported and that victims may be unwilling to disclose abuse, particularly to officials. For example, figures from the British Crime Survey 2008-09 show that only 3 per cent of victims have disclosed abuse to a benefits agency. For this reason we think that the exemption may be taken up by about 3,000 JSA claimants per year.
In order to help formulate the policy, the department undertook informal consultations with specialist organisations, such as Women’s Aid and the Child Poverty Action Group. As a result, a number of changes were accepted. These included the first four weeks to be consecutive; all claimants will be able to access this time, if they meet the conditions, without the need to provide evidence. The remaining nine weeks need not be consecutive and can be accessed only on the production of relevant evidence.
Jobcentre Plus will introduce a pro forma for use by victims and organisations who wish to use it; and employers and trade union representatives were added to the list of those eligible to provide evidence. Those consulted expressed concern about imposing limits on the time a claimant can have to obtain evidence and about having a maximum allowable deferral period. This was because research on behaviour in abuse cases shows that victims may take two or three years to leave the abusive relationship permanently, there may be a number of incidents of abuse in that time and the victim may therefore need support over a longer period than 13 weeks.
The Government consider it unacceptable to offer longer periods on jobseeker’s allowance without the need to meet the jobseeking conditions, because JSA must remain a benefit for those able to seek and undertake work. It is therefore necessary to limit the time that claimants can be treated as meeting the jobseeking conditions. Those with problems that cannot be resolved within the 13 weeks of the deferral may be able to be treated as available for and actively seeking employment for up to a further 11 weeks under the procedures for claimants experiencing domestic emergencies. The Government consider that anyone who is not able to undertake jobseeking activity after the maximum periods that these two deferral periods allow should not be eligible for JSA.
Although the easement has much to commend it, thanks in large part to the research and consultation that have been undertaken since the introduction of the easement under the Welfare Reform Act 2009, it leaves us with duplicate processes that are more complex to operate than we would wish. I have therefore requested that, in advance of the introduction of universal credit in October 2013, staff should consider ways of streamlining the support system for victims of domestic violence who are jobseekers to keep the best of the two systems and to simplify the process.
I hope noble Lords will agree that these current changes are worth while and necessary to ensure that victims of domestic violence receive the support they require to help them achieve financial independence at a time when they are unable to take up work. With those words, I commend the regulations to the Committee.
My Lords, I am grateful to the Minister for introducing these regulations so comprehensively and for setting out the scale of domestic violence, which sadly is prevalent in our society. As he says, the measure flows from the Welfare Reform Act 2009. I recall being pressed hard on some of the issues in which we engaged at that time.
I have a few questions for the Minister. I understood that he referred to a definition that included psychological pressure. However, the definition in the regulations states that,
“‘domestic violence’ means abuse of a kind specified on page 11 of section 2.2 of ‘Responding to domestic abuse: a handbook for health professionals’”.
I raise that in particular because a cross-government consultation has been undertaken to look at a general definition of “domestic violence” that could be shared across all departments. I want to be clear about that. I am not sure whether I have missed anything, but that is what I understand the position to be.
Why does the measure apply only once in a 12-month period? Why is that a “magic” cut-off point and does it reflect reality? Why can it operate only when the victim, or potential victim, of domestic violence is not living at the same address as the alleged perpetrator? That seems to me to be a valid point, particularly as part of the rationale for the four-week and 13-week periods was to enable someone to look for alternative accommodation. They may have short-term accommodation in a refuge, but I am not sure that an individual would be able to move out of a house in all circumstances, particularly if the abuse is threatened rather than actual. I wonder why that constraint is included. How will the measure be carried into universal credit? I accept entirely what the Minister said about rationalising the two systems so that they operate more effectively, which I think includes the assurance that the measure will be carried forward into universal credit.
In a similar vein, there are provisions in the housing benefit regulations that allow housing benefit to continue to be paid—I think sometimes for two addresses—when someone has had to move out of accommodation because of domestic violence or a threat of domestic violence. Do we have an alignment of the definitions for those purposes so that the two concepts sit together? The reforms to legal aid will restrict access to representation in family court proceedings, which makes these provisions all the more important. As regards legal aid, there are concerns about the high level of evidence that has to be produced. I do not know whether the Minister can comment further on the type of evidence that it is envisaged will be needed to access the benefit of these easements. I was pleased that, as I understand it, after 13 weeks there can be, if necessary, a further 11 weeks under the domestic emergency provisions, after which someone should cease to be on JSA if they are traumatised and in difficulty because of these circumstances.
As I understand it, the cross-government consultation has not just looked at making sure that coercive control using power and psychological control is brought within the definition of domestic violence or threats of domestic violence but at the age cut-off point. Currently, the definition extends only to someone who is 18 or over and not to 16 or 17 year-olds. Clearly there could be some circumstances in which 16 or 17 year-olds come within the scope and are able to claim JSA. There is a mismatch here, and I wonder how it will be dealt with.
All in all, I am pleased that the regulations have been brought forward and I congratulate the Government. However, I would be grateful for the answers to my few questions.
My Lords, I will follow the noble Lord’s questions with a number of other issues that relate to these regulations. The first concerns the title. I am always in favour of government being connected across the piece. The regulations refer to page 11 of the handbook for health professionals. On page 10 there is a straightforward definition of domestic abuse that was provided by the Home Office and adopted across government. I will read the subsequent paragraph because it refers to something that is in the title of these regulations and to a change that it is seeking. Perhaps the Minister will consider it.
The handbook states:
“The term ‘domestic violence’ obviously covers a wide range of abuse—physical and otherwise. It also covers issues that mainly concern women from minority ethnic backgrounds, such as forced marriage, female genital mutilation and so-called ‘honour violence’. Throughout this handbook, we use the term ‘domestic abuse’ instead of ‘domestic violence’ wherever possible, because we are concerned that the latter might be interpreted as physical abuse only. We have, however, made use of information and statistics on ‘domestic violence’ and so have kept to that terminology in those instances”—
of straightforward domestic violence. Over the page are the definitions, which the regulations refer to. They are really a set of examples—physical, sexual, psychological, financial and emotional. If there is a cross-governmental approach to this, why do the regulations not use the term “domestic abuse” instead of “domestic violence”? It is a wider definition. The examples on page 11, which the regulations refer to, are not examples of domestic violence but of domestic abuse—the term used on the previous page. Perhaps my noble friend will consider whether the title of the regulations is wholly appropriate.
My second question concerns the evidence that should be provided. A broad range of people—Members of the House of Lords are not mentioned—can produce evidence on behalf of a claimant. The group includes the police. I presume that this is because when someone has resorted to making a complaint to the police, the police will be required to provide that evidence. Perhaps my noble friend will explain what evidence the police will be expected to provide in order to justify the continuation of a claim before them for discretionary easement.
My third question concerns discretion levels. There is a clear process that moves from four weeks to a total of 11, with individual weeks being added up as necessary rather than being taken en bloc, and with nine of the 13 weeks being taken in blocks as necessary. However, sometimes in the first four weeks that people have to provide the evidence, it may not be possible to provide that evidence if they require a public body such as the police to provide a letter or a pro forma to be completed, because sometimes the public bodies are not quite as quick as you might wish them to be. Is there any discretion for the Jobcentre Plus adviser to ease that four-week period and make it a little longer, if evidence is on its way from a public body that might exceed the four-week exemption period, and extend it to a further nine weeks?
I welcome the order before us. It seems a very sensible and very helpful move, and I commend the Minister for bringing it forward.
My Lords, I, too, welcome the order. I particularly welcome the very broad consultation that appears to have taken place, and the fact that—for once—there have been changes as a result of that consultation, which is very good to see.
The Explanatory Memorandum says that concerns were raised about some of the detail. In particular, it discusses:
“imposing time limits on the time a claimant can have to obtain evidence, and about having a maximum allowable deferral period”.
Were any other concerns raised that are not discussed in the Explanatory Memorandum? If so, perhaps the Minister could relay them.
The main issue I want to raise is in support of what my noble friend Lord McKenzie said about this being confined to victims of domestic violence or abuse where the perpetrator is living at a different address. Research in the United States shows that it is not unusual for a man who is abusing his partner to use violence to prevent her seeking paid work—for the obvious reason that he wants that woman under his control and if she gets paid work she can be independent of him economically. We know that economic dependence is linked to psychological dependence and makes women much more vulnerable to abuse. I am not aware of similar research having been done in this country but it seems quite plausible, now that partners are subjected to conditionality rules, that there will be situations in which someone may be prevented from seeking work by the violence or abuse of someone they are living with—and this will not allow for that. I would welcome the Minister’s response on that.
My Lords, as one would expect, this has been an interesting debate with some valuable contributions. I shall try to deal with the questions—slightly at random, if noble Lords will forgive me.
The evidence can be supplied by a very wide range of bodies: healthcare professionals, the police, registered social workers, employers, trade union reps, and public, voluntary or charitable bodies. My noble friend Lord German was concerned about the process being slow, but that is probably a pretty rare circumstance. Clearly there is the back-up of the domestic emergency discretion that is allowed to Jobcentre Plus when, after four weeks, the letter has not arrived and it looks as though the body is being slow in supplying it.
Both the noble Lord, Lord McKenzie, and the noble Baroness, Lady Lister, raised the issue of not living at the same address. Of course, that is how the primary legislation was framed; it says something about having to leave the address. The regulations provide financial support for a person when they have left the address, and the support is provided in order to help a person to move on. However, this is an interesting point. The noble Baroness, Lady Lister, talked about the interplay between conditionality and violence. I will bear that in mind as we look at universal credit, for which we are ramping up the conditionality. There might be households in which on the one hand the state says “go to work” and on the other hand the partner is using violence to prevent that. I suggest that that is an interesting, although I suspect rather narrow, group, but we need to keep it in mind. Overall, the purpose of this easement is to support changes in individual circumstances. That is what it is for, and clearly staying in the same place would not mean that such a change was made.
It would be consistent with what the noble Lord has just said if a claim could be made without the claimant having had to have moved out of the accommodation. The claimant might wish to do that and be in the process of trying to move on. I am not sure how this is framed in the primary legislation and maybe that is where the problem lies. The prohibition seems to relate to living at the same address at the point when the claim is made, but that might just be a temporary transitional arrangement as someone seeks to move on for obvious reasons.
I will come back with formal written confirmation, but my understanding is that the legislation is framed in terms of there having been a move rather than a move being contemplated. As I say, I will write to confirm that, but I feel relatively confident about that point.
I want to pick up on the point made by my noble friend Lord German and by the noble Lord, Lord McKenzie, about the definition. For technical reasons the word “abuse” was not used in 2009. The term used was “violence”, but I think that things are moving on. However, the substance of the title makes it clear that we are not referring to situations in which there is physical abuse—my noble friend read out the wide definition set out in the handbook. On the point made by the noble Lord, Lord McKenzie, we are using a wider definition than the cross-government one that is in current use. I refer in particular to the point about the under-18s because we do have people who are less than 18 years old and they are not excluded from this regulation. That is one of the issues that the Government are looking at in the cross-government discussion.
In response to the noble Baroness, Lady Lister, I must say that I think that all the areas of concern have been dealt with in the Explanatory Memorandum—both those that we accepted and the couple that we did not. I think that I have responded to all the questions that I can remember, although I will quickly double check. There is a last one: why does the provision apply only once in a 12-month period? There are other reasons. I talked about the domestic emergency provisions that are available. This regulation reflects what was agreed in the primary regulation, which is why it applies once in every 12-month period.
As I said earlier, this provision clearly protects a vulnerable group, and it is important to do so. This is even more important in light of the reduction in the age at which the youngest child moves from income support to jobseeker’s allowance. As I said earlier, I am concerned about the level of complexity in the interplay between discretionary and automatic. I am trying with universal credit to drive towards a system that is simple both in enabling the claimants to understand their rights and for Jobcentre Plus to operate. As we are talking about 3,000-odd people who are currently likely to claim under this scheme, that is not much more than three or four people per Jobcentre Plus. Having two sets of regulations to cover what is in practice a very rare occurrence is not a very clever way to run any kind of business. I am therefore very keen to simplify this without losing any of the protections. Indeed, I am determined to maintain them. People need to understand what kind of protection they can look for without needing a PhD in reading regulations. With that, I commend these regulations to the House.
Motion agreed.
Social Security Benefits Up-rating Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Social Security Benefits Up-rating Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
My Lords, the Social Security Benefits Up-rating Order 2012, the Guaranteed Minimum Pensions Increase Order 2012 and the Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2012 were laid before the House on 30 January 2012, and I am satisfied that they are compatible with the European Convention on Human Rights. I will speak first to the two smaller orders: the first order makes minor amendments to protected rights; the second order increases guaranteed minimum pensions—GMPs. We will then discuss the up rating of state pensions and benefits.
The Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2012 makes minor amendments to the Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) Order 2011 in relation to amendments to be made to the Insolvency Act 1986 and the Pensions Schemes Act 1993 in respect of protected rights payments. By way of context, the 2011 order, which was approved by the House early in June last year, makes consequential amendments to primary legislation as a result of abolishing contracting out on a defined contribution basis on 6 April 2012, which is provided for in the Pensions Act 2007 and the Pensions Act 2008.
Just before the debate in the House last June, an issue was noted that related to how the proposed amendments in Article 3 of the 2011 order would work. When introducing the debate, I therefore outlined the background to the Committee and said that we would address the issue, which we are doing now. Having previously made that statement, I do not propose to take up more time with further explanation, other than to say that the instrument before the Committee amends the 2011 order, before it comes into force, to remove the exclusion of protected rights payments from what counts as income for the purposes of income payments orders made under Section 310 of the Insolvency Act 1986, and from the scope of Section 159 of the Pension Schemes Act 1993, which provides that GMPs and protected rights payments cannot be assigned or charged. Both the amendments will ensure consistency with changes made to the Bankruptcy (Scotland) Act 1985 by Article 2 of the 2011 order. This is consistent with our original policy intention that the tracking of protected rights would cease after the abolition of DC contracting out.
The Guaranteed Minimum Pensions Increase Order 2012 provides for contracted out, defined benefit schemes to increase their members’ guaranteed minimum pensions that accrued between 1988 and 1997 by 3 per cent. Such increases are in line with the growth in prices or 3 per cent, whichever is the lower, and this year the 3 per cent cap will apply as inflation is higher.
On the uprating order, I am sure noble Lords will welcome our decisions on increases to benefits in 2012. In total, the Government will spend £6.6 billion on uprating benefits in 2012. Alongside other measures that we have taken, it will deliver fairness to those who have worked hard all their lives, and protection to the most vulnerable in society during these difficult economic times.
The consumer prices index, the CPI, remains our preferred measure for pensions and benefits indexation. We made this change at last year’s uprating; some noble Lords may remember our extensive discussion on the relative merits of the price indices. I will not repeat myself on these points—despite the enjoyment I would gain—save to reiterate that the CPI is the Bank of England’s target and the headline measure of inflation in the UK. It relates to a basket of goods, which is more appropriate for pensioners and benefit recipients because it excludes mortgage interest and is less volatile than the retail prices index, the RPI, which fell negative two years ago, with the result that many pensioners had their additional state pension frozen. The CPI methodology takes into account how consumers respond to price changes—an advantage that has won the support of many experts. Last year, the High Court upheld the Government’s decision that the CPI could be used for pensions and benefits uprating, and we have robustly defended our case in the Court of Appeal. In April the Government will implement the full September CPI increase of 5.2 per cent across pensions and social security benefits.
I will now discuss in more detail the individual benefit rates amended by the legislation. One of this Government’s first actions was to restore the earnings link with the basic state pension. We went a step further and promised a triple guarantee to increase the basic state pension by the highest of the growth in earnings, the growth in prices or 2.5 per cent. In line with the triple guarantee, the basic state pension will rise 5.2 per cent to £107.45 per week, in line with the growth in the consumer prices index. This is an increase of £5.30—the largest ever cash increase to the basic state pension. This means that this year the basic state pension is forecast to increase to 17.1 per cent of average earnings, which is a higher share of average earnings than in any year since 1997.
The basic state pension goes to more than 11 million pensioners in this country, and both this year and in the long term the triple guarantee will ensure that the basic state pension will provide a solid foundation on which recipients can build a retirement income. The triple guarantee will protect the value of the basic state pension in the long term. It is estimated that the average pensioner retiring this year on a full basic state pension will gain £13,000 over the course of their retirement as a result of the triple guarantee, compared with the old prices link.
From April this year the additional state pension will also rise by 5.2 per cent, which will mean that those with a state second pension or state earnings-related pension, SERPs, will see the 5.2 per cent increase in both their basic and additional state pension income. This means that the increase in total state pension income for someone with a full basic state pension and an average additional state pension will be about £6.70 a week: £348 a year.
The standard minimum guarantee in pension credit is the means-tested support that ensures all pensioners a minimum level of income in retirement. The legislation requires us to increase the minimum guarantee at least in line with earnings, so that over the long term the poorest pensioners see their incomes rise in line with that of the working population. However, this year the relevant earnings index stood below inflation at 2.8 per cent. We judged it unacceptable that the poorest pensioners on the guarantee credit would see the lowest increases. We wanted to ensure that those pensioners saw the full increase given to the basic state pension, and we will therefore increase the single rate of the standard minimum guarantee by £5.35, taking it to £142.70 per week in 2012.
To ensure that the overindexation of the guaranteed credit is affordable, we will make some changes to the savings credit element of pension credit. In April, we will increase the savings credit threshold to £111.80 for individuals. This will mean that those with higher levels of income may see less of an increase, but no one should have a lower weekly income as a result of the uprating. This policy also enables us to focus spending on the poorest pensioners on guaranteed credit.
On working age benefits, the Government have ensured that, even in these difficult economic times, benefits for disabled people and their carers and for those out of work and seeking employment will see the full CPI increase of 5.2 per cent. This increase will ensure that the most vulnerable people in society are protected and that those looking for work get the support they need to move into the labour market.
Through the uprating order, the Government are spending an additional £6.6 billion in 2012. This means £4.5 billion more on pensioners, more than £1 billion more on disabled people and their carers, and more than £1 billion more on people who are unable to work through sickness or unemployment. Even in these tough economic times, the uprating commitment that I have outlined today will give real support to the poorest and most vulnerable in society. I therefore commend the orders to the House. I beg to move.
My Lords, at the start, we acknowledge that the Government have rejected the voices within their ranks that would have watered down even the full CPI increase for these upratings. The order before us deals with most out-of-work benefits, but it of course does not deal with changes to tax credits, which we shall debate shortly.
We have heard from the Minister that the upratings order amounts to increasing benefits by £6.6 billion, but that is dealing on one basis with the effects of inflation; it is not addressing the real cuts that are being made to employment support allowance, housing benefit, support for disabled children, DLA, council tax benefit, child benefit and tax credits. By 2015-16, just three years hence, the Government will be pocketing £10 billion-plus per year from the CPI switch to benefits, tax credits and public service pensions.
We have no points to raise on the Guaranteed Minimum Pensions Increase Order, and support it.
On the abolition of protected rights consequential amendments order, we have some brief questions. Post-abolition of contracting out on a DC basis, schemes will not be required to keep track of protected rights payments, so, as we have heard, the court will not be able to identify them when setting income payment orders for a debtor. Consequently, protection of accrued rights payments from income payment orders will now be retrospectively removed. Does that mean that creditors can ask for income payment orders to be revisited in the light of that loss of protection? If trustees amend their scheme rules to reflect the abolition of protected rights and a scheme member is subsequently subject to an income payment order, could the trustees be in breach of Section 67 of the Pensions Act 1995, a section that protects accrued rights and for which there is no statutory override? The order has the consequence of retrospectively removing protected rights accrued, albeit in the instance of an income payments order being issued. Is a precedent being set here, and would it not have been possible to set some sort of pension income threshold below which the courts cannot take account of income when issuing income payment orders as an alternative approach?
As in the other place, the Minister referred to the triple lock for pensioners, but without being too repetitive, as my right honourable friend Stephen Timms made clear it had to be set aside last year, with RPI being used to uprate the basic state pension rather than the CPI. For 2012-13, the CPI again gives a lower increase, but on this occasion it is not to be set aside. The basic state pension increase is 5.2 per cent—the relevant inflation factor under the triple lock, as we have heard—but the minimum guarantee element of pension credit is being increased by 3.9 per cent, which is equal to the cash value of the increase in the basic state pension.
The earnings increase for the relevant period was 2.8 per cent. We recognise that both the basic state pension and the guaranteed pension credit have increased by more than earnings, but the guaranteed credit has fallen in relation to the basic state pension, which means that the poorest pensioners have become poorer relative to those on a full state entitlement. The pension reforms intended that pension credit should keep its value relative to the basic state pension so that the poorest pensioners did not get relatively poorer. This will be the consequence of applying the triple lock to basic state pension but not to the guaranteed credit. Although state pension reforms will improve the position for future pensioners, research produced by the PPI confirms that pension credit will continue to play a significant role in addressing pensioner poverty for some time to come. Perhaps the Minister will confirm the Government’s intention as to the value of the guaranteed pension credit over time when compared with the basic state pension.
On some further points of detail, I would be grateful if the Minister could respond to the following questions. Last year, the uprating statement was accompanied by an equality impact assessment. Is an updated one to be prepared? Paragraph 4.7 of the Explanatory Memorandum explains that, as for last year, certain rates of invalidity allowance, age addition and age-related additions payable with any capacity benefits are to be reduced to further align rates of incapacity benefit with those of ESA prior to completion of the IB reassessment process. Can the Minister say how this sits with the commitments to transitional protection on migration to ESA and remind us of what those commitments were?
Paragraph 7.5 refers to the savings credit threshold increases that, it recites, are to fund the increases in the standard minimum guarantee—indeed, the Minister confirmed that a moment ago. However, can he please provide us with a breakdown of the figures? How many people will cease to be eligible for pension savings credit because of this level of increase? How many will suffer a reduction in the savings credit? Have the savings on passported benefits been taken into account, and what are these benefits? With regard to non-dependant deductions, can the Minister tell us what the estimated reduction in housing benefit and council tax benefit arising from the above-inflation increase is for those items in 2012-13?
Paragraph 7.11 refers to deductions made where a service charge is included in a rental agreement. The deduction is to be uprated by 18.3 per cent, which we understand is the CPI rate for fuel. How is this supposed to work? Is this increased deduction to be applied only to any component of the service charge that relates to heating and lighting, and is it irrespective of the actual rates of increase of the particular service charge involved?
I turn to a point that cropped up in the other place. Can the Minister also confirm that local housing allowance rates are to be frozen from April 2012 in preparation for the linking to CPI? Can he further say what CPI measure will be applied: that is, the CPI at what date?
Paragraph 11 relates to the impact on small business. It confirms that small businesses are fully reimbursed for statutory adoption pay, statutory paternity pay and statutory maternity pay, and small businesses are defined as those whose annual gross national insurance payments are £45,000 or less. Can the Minister tell us when the £45,000 figure was last uprated, and approximately how many small businesses now benefit from the full reimbursement?
Paragraph 10 of the Explanatory Memorandum states that the full impact assessment has not been published for the uprating order because the annually recurring costs are already in the government expenditure plans. This raises the obvious question of the performance of the work programme, because any slippage in performance will mean that uprated benefits dealt with in this order will increase government expenditure. There are lots of issues swirling around this programme and its effectiveness, not least the participation of A4e, which was awarded five contracts in April last year, and press reports express concerns about the position of subcontractors, especially from the voluntary sector. As part of an impact assessment on this uprating, especially as it affects JSA and ESA, can we now have the publication of performance data, and can the Minister say what guidance providers have been given about data that they should be gathering for monitoring purposes?
As explained in the other place, some elements of these orders are acceptable but some are not—in particular, the permanent adoption of a lower rate of inflation uprating for pensions and other benefits, which we cannot support. Had it been adopted as a temporary measure to support the deficit reduction programme, we would have considered supporting it. However, we know from the DWP’s own figures that over a 15-year period it would impact on, for example, occupational pensions to the tune of £70 billion. Over a longer period, the hit on pensioners would be even greater, and this is why we cannot support it.
Nevertheless, can the Minister say whether, should the CPI be refined—and there is some work going on to do this—to show a higher rate for inflation than the current basis, the Government would adopt that?
My Lords, I will focus on the Social Security Benefits Up-rating Order, particularly its implications for people of working age.
As someone who is always quick to criticise the Government when I think they are doing the wrong thing, it is only proper to acknowledge and applaud the Government when they are doing the right thing. As my noble friend Lord McKenzie said, they have ignored the siren voices calling on them to tamper with the normal uprating mechanism in order to save money simply because inflation happened to peak in the month on which the uprating is based.
One reason why it is so important that the uprating is maintained, as the Minister himself said in a Written Answer on 10 January, is that:
“The increase in the cost of living faced by those receiving benefits is likely to be higher than for other groups, as those on the lowest incomes spend a greater proportion of their incomes on food, fuel and energy, the prices of which are rising particularly rapidly”.—[Official Report, 10/1/12; col. WA 9.]
This was borne out by a recent Resolution Foundation report, which states:
“Because the costs of essential goods and services have been rising much faster than standard rates of inflation for some time, households on modest incomes have fared far worse than official data suggests … With the cost of an essential basket of goods now rising significantly faster than general inflation, more and more low to middle income households will not just fall behind those above them, but also behind what is widely considered to be a minimum acceptable standard of living”.
The report further states that,
“indices based on average spending, like the CPI or RPI, are much more appropriate for households at the average than for households on lower incomes”.
The Resolution Foundation suggests a new index based on the minimum income standard, which, as the Minister will remember, we discussed at some length in Grand Committee on the Welfare Reform Bill. It is an idea that is worth looking at. The Resolution Foundation report also points out how the switch from the RPI to the CPI aggravates the situation. This is where I have to part company with the Minister, as I am sure he would expect.
An Institute for Fiscal Studies press release on the September inflation rate points out that the adoption of the CPI means that many,
“benefit recipients will be worse off than they would otherwise have been … Over time this change will prove to be the biggest change to the welfare system so far implemented by the government”.
Although the impact so far is relatively small, it will compound indefinitely over time. Even a small impact is significant for people on very low incomes.
Like the Minister, I will not go into all the technical arguments that we had on the previous occasion about CPI. The Minister said something about economists being very supportive of this, but after our previous debate I received a letter from a retired economist who had written to the Minister challenging what he had said in the debate about the technical arguments. I will not bore the Committee with it now but I should just remind him that it is perhaps just as well that he did not repeat them today.
My noble friend Lord McKenzie referred briefly to my final point. Steve Webb in the House of Commons talked about the burdens on the low paid. He said:
“That is why we are keen to raise the tax-free personal allowance”.—[Official Report, Commons, 23/2/12; col. 1070.]
In that debate in the Commons, however, no one mentioned child benefit. I talked about this last year. I do not apologise for talking about it this year and I will talk about it again next year. As long as child benefit is frozen, it is crucial that we remind people of its significance and tell those who are too young to know that child benefit replaced personal tax allowances as well as family allowances. It therefore should be treated as the equivalent of personal tax allowances. It makes no sense to freeze child benefit when so much emphasis is being put on raising personal tax allowances as a way to help low income people in work, in particular those with children. Obviously, child benefit will help only those with children, but it helps those whose income from work is too low to pay tax. The more that the Government succeed in raising personal tax allowances, the more people will be in that situation every year and their child benefit will be frozen.
This message is perhaps as much for Liberal Democrat colleagues. I hope that they will take it back to the Deputy Prime Minister in the very public negotiations that are going on about the Budget at present.
My Lords, I am happy to add that to my long list of things that I will be taking to the Deputy Prime Minister from time to time. I am pleased to make a short intervention in this debate. I, too, was massively relieved that the full uprating undertaking was delivered. It must have been very difficult for Ministers. I was frightened to death that the pressures on them would make them buckle and I am genuinely pleased, as well as massively relieved, that the commitment was held to. It is a very important signal. I do not care who gets the credit in the coalition. Ministers did well and I want to recognise that openly.
I have a couple of technical, almost philosophical matters with which to worry the Minister. We always have these arguments. I know that this is a pay-as-you-go system and that this is not money just lying in a bank. The thing that has changed for me is the table at item 6, where the Government Actuary is looking at projections beyond April 2013. The balance in the National Insurance Fund goes from 55 per cent in 2010-11 to 30 per cent in 2016-17. That is a dramatic drop. Can the Minister explain that? It may be a deliberate contribution to deficit reduction, but the balance in the National Insurance Fund has been quite high for some time. Perhaps that reflects the buoyancy of the economy. I am not an actuary, but perhaps the Minister could say a word about that. If he cannot, a letter would do. The Committee would like to hear a little more about going from 55 per cent to 30 per cent in that relatively short space of time, because we may want to return to it.
The Chancellor made the interesting comment, almost as an aside because there are so many other things happening at the moment, that he was going to look at how the national insurance contributory system fitted with income tax and all that. It may have a significant effect on the orders in front of us this afternoon if that work was to mature any time soon. It may be too early to say anything about that, but I encourage grown-up consideration of what can be done. That plays into the absolutely sensible point made by the Minister, who brings a fresh mind to all this. All this stuff is too ineffably complicated to make any sense. This is not just about domestic violence. You need to study algebra to understand this document, with 20 pages of different rates and changes at different times. I know that that is part of the Minister's core reason for getting up in the morning, and I encourage him to see what he can do to consider how we simplify all that.
I am sure that universal credit will help, but the Minister should look at going beyond that. I serve on the council of the IFS, which made the important point to me the other day about how these benefits change over time. It is hard to anticipate how the relativities change over a 30-year period and, year on year, to get a grip of that. We should have an indexation policy that is rational and simple. If we want to change benefit rates, we should change the level, not the uprating. That would be a much more transparent way to orchestrate debates. I have concerns about the working poor. We would have a much better grasp of the costs and benefits, the winners and losers, if we looked at levels rather than upratings over time to change how those big spends are made.
The quantities of money are also very confusing for ordinary people. The noble Lord, Lord McKenzie, was quite right to say that this is inflation-proofing, but to the man and woman in the high street these are colossal sums of money and people get frightened. The terms of the debate can be skewed unreasonably, especially when the press get hold of the raw figures, because they are enormous sums of money that frighten people.
The consumer prices index versus the retail prices index debate is not yet finished. I am pleased that the Government have recognised that with local housing allowances. It is absolutely correct that we should look at that for three years. I am confident that the Minister will be as good as his word, because otherwise people will find themselves priced out of all sorts of housing markets. The debate that continues to be held with statistical authorities needs to play into the consumer prices index, with all its attendant dangers. It is correct to say that, over a long period, the relativities go poorly against low-income households. The very least we need to do is continue the work on housing. Owner-occupied housing costs within the consumer prices index is still a work in progress and I am not yet entirely convinced that the CPI is the right measure for a number of reasons. I am sure that the Government are alive to the fact that these arguments will continue, but I would settle for coming back and looking at these things over the longer term.
As I say, the Minister brings a fresh approach to some of this and he has not been daunted by taking on universal credit. I hope he will not be daunted when he turns his attention to the importance of simplification so that we have a debate that ordinary people can understand. That is now the important thing we can do beyond looking at the facts of benefit levels, pressures on the squeezed middle and so on. I am confident that, if the Minister can find the time, he could do a lot of technical work on these, and I will support him. It might be hard territory because there will be winners and losers, but we should be brave about it so that the debate becomes more intelligent and future policy-makers can make rational choices. I support these orders and, again, I am relieved beyond belief that we have managed to get the full uprating delivered. That is a massive accolade to the work of Ministers and I am pleased to acknowledge it.
My Lords, I shall take up the point on which my noble friend concluded, and that is about the certainty which the Government have provided for those with pensions. The Government have done what they said they intended to do in terms of providing the triple lock, to which I shall come back in a moment. I am a little sorry that we have not been able to engage the Minister on geometric means. We had a very interesting discussion about that. He may want to refer, of course, to the ratio of averages or the average of relatives. These are important matters in relation to the CPI and the RPI. However, I will say this. For those who are advocates of one firm RPI framework, we need to look carefully at what makes up the CPI framework because we can derive a lot of benefit from it.
By way of illustration, the weighting that is given for food and clothing, which are the staples that underpin the prices index for poorer families, is 16.4 per cent for the CPI and 16.2 per cent for RPI. There is not a great deal of difference, but those are the staples. However, if you look at it carefully, you can see that, strangely, alcohol and tobacco are weighted at 9.1 per cent under RPI, yet only 4 per cent under CPI. I think that these are factors which we need to consider carefully when we try to come down heavily on RPI. It is the case, of course, that the CPI includes rent and the RPI includes mortgage interest payments. The Government have acknowledged that the discussion about the whole issue of housing costs is moving on and that there will be further debate as evidence comes forward from the various bodies that the Government are consulting on this matter. What we should celebrate, however, is the fact that we are providing certainty and that we have included the full 5.2 per cent in uprating both pensions and benefits.
I worry that those who seek a single lock rather than a triple lock do not get the real message that seems to come out of the triple lock, which is that in some years it is costs, in other years it is wages, and in others it is the increase in prices. The triple lock itself means that it will be the highest of those three which is provided. For those who advocate only the RPI, if you do not have a lock with those three mechanisms, you will not do well for people in the future. The actuary’s analysis provided under table 3 of the key assumptions looks at the CPI increase from year to year, and for the year we are currently looking at, it is 5.2 per cent, which falls to 2 per cent by 2014, and in fact to 2.1 per cent by 2013. If you were to take only that as the prices figure, no matter what measure you choose you would not fulfil the obligation which you get from a triple lock, which gives the highest of the three measures—wages, prices and costs. All three form part of what the Government are providing as a measure for the future. Those on pensions will know that in future years, whatever geometric means or factors relating to housing are improved or changed within the CPI, there will always be a firm basis on which those pensions will be increased. Uncertainty was a factor in the past as reliance on a single lock produced increases for pensioners in the early 2000s that amounted to pence. At the same time, we did not get the benefit of being able to keep up with those factors which influence most people’s lives. Therefore, we need to celebrate the triple lock and ensure that it is a permanent—not temporary—feature, and that it is built into any discussion on CPI.
I understand that two factors are involved in the switch from the savings credit to the guarantee credit, one of which is the need to provide support for poorer pensioners. The savings credit involves switching provision from pensioners with more income to those with less. The challenge was to provide a higher figure than the £5.30 pensions increase. As I understand it, the relevant figure would be about £5.35. Was the figure chosen to ensure that it was higher than the pensions increase? If it was, that was an admirable thing to do.
Do the Government expect there to be a much broader debate about spending a further £4.5 billion or £5 billion in the 12 months after April? Sometimes our debates focus on small amounts of money, but this is a substantial amount of money. We should celebrate the fact that we are able to provide that money to those who need it most.
I will gladly take messages to the Deputy Prime Minister, but as regards the working poor, whom my noble friend mentioned, I would like to raise the tax-free threshold as rapidly as possible. That is the message I would like to take to the Deputy Prime Minister.
My Lords, it is a lot easier to spend £6.6 billion extra than to remove it. I accept that noble Lords are pleased that we are sticking to the CPI September figure—the 5.2 per cent—even though it is a high figure. It is important for the Government to do that because once you start moving the figure around to suit your convenience the suspicion arises that there is no principle behind that decision and that it is done to save money. Therefore, you save money in one year but there is a lack of confidence in the longer-term strategy. The point about the CPI is that these things even out, although the figure that is arrived at in a particular year might be painful for the Government’s finances. Clearly, this year it is painful to stick with that figure. However, if you stick with the same month, given that it is an annualised figure—it lasts a whole year—it should even out. Albeit that this is a very difficult year, there were some siren voices demanding that we take a particular course, as the noble Baroness, Lady Lister, said. However, it was decided that to do something other than what we have done would undermine the principle of the measure.
I would like to pick up on the point about the triple lock. I think that the noble Lord, Lord McKenzie, has been a little grudging about what we are doing with that, which is trying to drive up, over the long term, the level of the basic pension compared with average earnings, because it has lost that relationship. The problem with that is that more and more people go on means-tested pension support, with all the complexity that noble Lords complain about. Clearly one thing that we are trying to do with the pension reform that we have consulted on is to get a liveable rate without all these special levels of support, and the triple lock is another mechanism to do that.
While I am on the topic, I confirm to my noble friend Lord German that the switch from the guaranteed credit to the savings credit and the closing of the thresholds was done precisely so there would not be a cut in the basic pension for those pensioners. While I am touching on CPI versus RPI—we will not have a major debate on that, although we all enjoy it—I want to make the point that there is work going on on the CPI. Only a relatively small proportion of the difference between RPI and CPI is because of the housing element; the rest is the substitution effect—the bulk, as noble Lords will all remember. When that work on a new CPI comes in, the Government will need to look at it and take a decision on what to do. I think that that is the best response I can give to the noble Lord, Lord McKenzie.
However, I need to defend myself slightly from the noble Baroness, Lady Lister, on what was a very interesting and excellent letter that I got on my description of the differences between CPI and RPI. I must point out that it was only one letter, which is unusual—I did not get every economist in the world writing to complain or differentiate—but I did enjoy it.
The noble Lord, Lord McKenzie, asked a large number of very good questions—as I would expect—some of which I can answer and others I will write to him about. In particular, I will write to him on the issue of guaranteed minimum protections on contracted-out pensions. That really is complex and I need to provide specific chapter and verse on those protected arrangements.
The noble Lord asked about the local housing allowance. It will be set in April 2012 to establish the baseline, and it will be uprated from a year on, based on September-to-September figures. On the migration from IB to ESA, these are technical provisions but there are some potential effects for individuals. Again, I think that that is a matter for a letter. On service charges, it is the elements of the individual items such as fuel that are raised in line with their particular price increases, and that is done—and has been done for some time—by convention rather than the aggregate.
On non-dependant deductions, as noble Lords will remember, there was an announcement that they would be moved up to match the level that they would have been at if they had not been frozen in 2001. The increases in 2012-13 have been calculated based on forecast rent growth. New income bands determine the amount of the deduction, based on earnings growth. Will passported benefits be taken into account? The answer is yes, when looking at the financial effects of uprating individual benefit elements that give rise to derived entitlements.
With regard to the effect of statutory payments on small businesses, again, I think that that is a matter for writing. We will discuss this with colleagues in BIS who are responsible for those payments and get the most up-to-date figure for the number of small businesses that have been reimbursed.
On the savings credit changes, the £200 million savings on savings credit are recycled into the guaranteed credit, so there is no net saving to the Government. This means that 30,000 fewer people will receive savings credit. Some will have their entitlement extinguished because their income is above the new maximum savings credit level. I say that in response to my noble friend Lord McKenzie—sorry, the noble Lord, Lord McKenzie. I was looking at my noble friend Lord Kirkwood, who is the other person who asks impossible questions.
The noble Lord, Lord McKenzie, asked about the impact assessment. In practice, last year’s assessment sets out the shape of the effects of applying CPI as the preferred index. That is why we have only conducted an additional equality impact assessment this year for the pension credit measures, as they are the novel measures.
I will talk to my noble friend Lord Kirkwood about his particular interest, the national insurance fund, where he looks at the way that the fund balance is moving. It is expected that it will be above the recommended level, which is a sixth of annual benefit expenditure, but I think that I will need to write to him about any change in the balance in recent years.
I think that I have dealt with all the questions. If I have missed anything, I will, of course, write. In the words of the Chancellor of the Exchequer, the uprating order of 2012 will provide support for those who have worked hard all their lives—
Perhaps I may intervene. I am sorry, but I did not know whether the Minister was about to wind up, so perhaps I could revert to a couple of the questions which are left outstanding.
In relation to the savings credit and passported benefit, the issue is that if there are, as we now know, 30,000 fewer people claiming savings credit, presumably there are some savings in respect of passported benefits that would go with that. The question is whether those savings are factored into the savings needed to produce the guaranteed credit upratings.
There were a couple of other items. In relation to non-dependant deductions, it was asked whether we could be told what the reduction in housing benefit and council tax benefit is estimated to be as a result of those changes. In relation to the small business issue, and the £45,000 threshold, I was trying to determine whether, because of increases in national insurance and fiscal or national insurance drift, the same thing would happen as with tax drift, where effectively more people are being excluded from the benefit of 100 per cent reimbursement, because in real terms it is declining.
There is one other issue—perhaps the Minister could deal with it in writing—which is the relationship between the uprating of guaranteed credit and the basic state pension. I am indebted to my noble friend Lady Drake for bringing to my attention some interesting material produced by the PPI showing the impact of pension credit over several years. The component that would produce the biggest reduction in the percentage of pensioners living below 60 per cent of median income would be if the current policy plus guaranteed credit were indexed to the triple lock. That would have a more beneficial outcome than the current policy, where guaranteed credit is indexed to earnings, although I accept that this year it is earnings-plus, but that is still not the same as earnings plus the 5.2 per cent.
To save the Minister getting up and down, I would appreciate a comment on the point that I made about child benefit. Perhaps it is more appropriate for the noble Lord, Lord Sassoon. What is the logic of putting so much emphasis on increasing personal tax allowance in real terms and then freezing child benefit, which is the equivalent of a personal tax allowance?
Perhaps I may deal first with the point made by the noble Baroness, Lady Lister, although I am sure that my noble friend Lord Sassoon will provide a much more sparkling answer. My answer is that, as we look forward into a world where the poorest are supported by universal credit, which is very targeted—
Sitting suspended for a Division in the House.
My Lords, I was talking about child benefit, which was an issue raised by the noble Baroness, Lady Lister. She referred to the relationship between child benefit and tax thresholds. As you move towards the universal credit system, that is the way you keep the incomes of the poorest in line. That can be done elegantly and in a more focused way than by using universal benefits, which of course is what child benefit is—using a lot of money and giving it to all in order to target the poorest. That is certainly the direction of travel that I am taking. We could possibly debate this at great length at some stage, and no doubt we will.
I will write to the noble Lord, Lord McKenzie, on the question of those excluded on the non-dependant deductions. That is a matter for a letter. I will also write on the point about small businesses because I do not have all the information to hand. On the point about passported benefits and savings credit, the 30,000 who will not receive savings credit would actually not have been passported to the full housing benefit or council tax benefit, so they could establish a claim on the ground of low income. However, the £200 million being recycled to the poorest pensioners includes an assessment of the additional cost of passporting more of those pensioners by disproportionately uprating the standard minimum guarantee.
As regards the triple lock on guaranteed credit, we are planning to retain the link with earnings. Clearly, our aims are to reduce reliance on means-testing, which is why we are protecting the position of those receiving the contributory state pension. But we do not have the funding to uprate the guarantee credit on the same basis as the underlying state pension. Depending on how we change the system, the basic pension would be larger and protected in that way.
This order will provide support for those who have worked hard all their lives, poorer pensioners, people who are not able to work through their disabilities and those who through no fault of their own have lost their jobs and are trying to find work.
I tried to avoid getting to my feet but there is an outstanding issue related to the Work Programme and the reports on that.
My concentration has been completely broken as to that point.
Because there was no impact assessment with the orders and the issues around the Work Programme, can we have an update on its performance?
I thank the noble Lord for reminding me. Because the Work Programme is a payment-by-results system, you see the results later than with those programmes paid for on a pro forma basis. I am not sure of the exact date but I think that we are looking to publish the entrants to the programme in the next couple of months. We expect to start publishing the performance figures of the Work Programme providers in the autumn. These figures are being done to the sophisticated standards required in order to become national statistics.
Perhaps I may correct myself as regards referrals. They are expected rather sooner than in two months’ time. The first set of figures is expected this month.
Are they expected in February?
Yes, so we are expecting them reasonably soon. I can say to the noble Lord—I cannot give anything away and I have only anecdotal feedback—that I am looking forward very much to these figures. I know that he will want, as he has in the past, to say that the Work Programme was a stepping stone from some of the programmes introduced by the previous Government. I am happy with that and I think that he will want to be associated with it. I feel that I will enjoy myself when I make some of these announcements later in the year. I just want to let him know that, because it is based on my own feelings.
Despite these difficult economic times, this year’s uprating will put an additional £6.6 billion into the pockets of the poorest in our society. We have discussed the GMP increase and the amendment order to the Pensions Act 2008. I commend the order to the House.
Motion agreed.
Guaranteed Minimum Pensions Increase Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Guaranteed Minimum Pensions Increase Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
Motion agreed.
Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) (Amendment) Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Pensions Act 2008 (Abolition of Protected Rights) (Consequential Amendments) (No. 2) (Amendment) Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
Motion agreed.
Social Security (Contributions) (Re-rating) Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Social Security (Contributions) (Re-rating) Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
My Lords, I am pleased to introduce the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2012 and the Social Security (Contributions) (Re-rating) Order 2012 to the Committee. As both the regulations and the order deal with national insurance contributions, it seems sensible to debate them together. I can confirm that the provisions in the regulations and the order are compatible with the European Convention on Human Rights.
All the changes covered by these two instruments were announced as part of the Chancellor’s Autumn Statement last November. It is worth noting from the start that the basis of indexation that has been used to calculate most of the changes covered by these two instruments is different from that used for the 2011-12 tax year. In the Budget last year we announced that from the 2012-13 tax year the basis for indexation of most national insurance contribution rate limits and thresholds would be the consumer prices index, CPI, instead of the retail prices index, RPI. This is because the Government believe that the CPI is the most appropriate measure of the general level of prices. The exceptions to this are the secondary threshold and the upper earnings and upper profits limits. I will explain why in a moment.
I will start with the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations. These regulations are necessary in order to set the class 1 national insurance contributions lower earnings limit, primary and secondary thresholds and the upper earnings limit for the 2012-13 tax year. The class 1 lower earnings limit will be increased from £102 to £107 per week from 6 April 2012. The lower earnings limit is the level of earnings at which contributory benefit entitlement is secured. However, NICs do not need to be paid by the employee until earnings reach the primary threshold. The class 1 primary threshold will be increased to £146 per week from 6 April 2012. The secondary threshold is the point at which employers start to pay class 1 NICs. In line with the commitment given in last year’s Budget, this is being increased by RPI to £144 per week. This will help employers, large and small, during this difficult economic climate.
From April, the personal allowance for people under 65 will be increased above indexation by £630 from £7,475 to £8,105, and the basic rate limit will be decreased by £630 to £34,370. This means that the point at which higher tax kicks in will remain at £42,475 in 2012-13. As I mentioned, the upper earnings limit is not subject to CPI indexation. In order to maintain the existing alignment of the upper earnings limit with the point at which higher rate tax is paid, the UEL will remain at £817 per week. The regulations also set the prescribed equivalents of the primary and secondary thresholds for employees paid monthly or annually.
There will be no changes to NICs rates in 2012-13. Employees will continue to pay 12 per cent on earnings between the primary threshold and the upper earnings limit, and 2 per cent on earnings above that. Employers will continue to pay contributions at 13.8 per cent on all earnings above the secondary threshold.
The social security order sets out the NICs rates and thresholds for the self-employed and those paying voluntary contributions. Starting with the self-employed, the order raises the small earnings exception below which the self-employed may claim exemption from paying class 2 contributions. The exception will rise in April from £5,315 to £5,595 a year. Many self-employed people choose to pay these contributions to protect their benefit entitlement, although they may claim exemption from paying class 2 contributions. The rate of class 2 contributions for 2012-13 will rise from £2.50 to £2.65 a week. The rate of voluntary class 3 contributions will also increase from £12.60 to £13.25 a week.
Today’s order also sets the profit limit from which main rate class 4 contributions are paid. The lower limit at which these contributions are due will increase from £7,225 to £7,605 a year, in line with the increase to the class 1 primary threshold.
At the other end of the scale, the upper profits limit will remain at the same level as the 2011-12 tax year. This is to maintain the alignment of the upper profits limit with the upper earnings limit for employees. The changes to class 4 limits will ensure that the self-employed pay contributions at the main rate of 9 per cent on a similar range of earnings as employees paying class 1 contributions at the main rate of 12 per cent. Profits above the upper profits limit are subject to the additional rate of 2 per cent, in line with the 2 per cent paid by employees.
My Lords, I commend the draft Social Security Contributions Limits and Thresholds Amendment Regulations 2012 and the draft Social Security Contributions Re-rating Order 2012 to the Committee.
My Lords, when the index number used to calculate and evaluate the performance of the Bank of England was changed from RPI to CPI a few years ago, the target inflation rate was lowered from 2.5 per cent to 2 per cent to take account of the difference in the indices. No such change has been enjoyed by the rest of us. The Bank of England has a better arm-lock on the Treasury than does the general public, particularly those of us who pay national insurance contributions or, as we shall discuss later, receive tax credits.
As someone who has taught a course on index number theory for a number of years, one of the most important lessons one can take from index number analysis is that there is no such thing as a true measure of any particular variable in a complex index. In this case, there is no such thing as a true measure of inflation. The choice of index is purely a matter of the purpose for which it is to be used. In the cases before us today, the purpose of the change in the index is to increase taxation by stealth. The role of indexation is supposed to be to protect real positions, whether of benefits or contributions. As is evident from the Government’s own impact statement, which shows a benefit to the Treasury of £1 billion a year by the fiscal year 2015-16, real values are not being protected in this case.
Much has been made in the discussion of the changes to personal taxation and national insurance of the increase in the personal tax threshold. The change in the level of national insurance contributions debated today may appear minor in comparison and has received far less attention—but as it stands, the decision to index direct taxes by CPI and to contract out national insurance rebates produces a net increase to the Treasury revenue of £1 billion.
There is more to come. The two orders combine to create a fiscal drag which by 2015-16 will increase the tax burden by £1 billion a year, as I mentioned. With contribution thresholds increasing at CPI—the lower of the two standard measures of inflation—more workers will be caught in the higher bracket of payments than would otherwise have been the case. I note with interest that the impact assessment note issued by the Treasury indicates that 21 million employees will lose out by £6 a year on average in the next fiscal year. The Government are rather coy and do not tell us what will happen in the subsequent fiscal years of 2013-14, 2014-15 and 2015-16, even though they give the aggregate figure, so they must know what is happening. Why are they not telling us? If they do not know, the aggregate figure is simply a fiction. I believe the aggregate figure, so what is happening to individuals in this case? Given that the Treasury expects to raise £1 billion in 2015-16, what is the impact of the change on individuals over the course of the Parliament?
Finally, I would be grateful if the Minister could offer his view on what the benefit is of a whole variety of uprating mechanisms being used by the Government across various departments, different benefits and payments, and contributions. For example, he will be aware that other price rises such as student loan repayments or rail fares continue to be uprated at RPI. Why is one on the CPI and the other on the RPI? The answer is simply that it maximises the benefit to the Treasury. We all know that. The Minister will also be aware that the Chancellor has previously stated that he has an ambition for the default indexation assumption for indirect taxes to be moved to CPI when the fiscal position allows. Why can we not move to it now? The answer is that it would reduce the rate of taxation, and so we are sticking with the higher rate on indirect taxes so as to get the biggest benefit for the Treasury.
Let us not be deceived by this uprating story. It is a minimalist move, and one which with respect to thresholds has been designed to extract more from the contributor to national insurance. That is what is clearly conveyed in the Government’s own assessment of the figures. So in presenting the changes to thresholds and contributions, why does the Minister not simply come clean and say, “We have increased contributions”? The last Budget was one that actually increased direct taxation, contrary to what the Chancellor of the Exchequer told us.
My Lords, that was a brief and focused debate, and I am grateful to the noble Lord, Lord Eatwell, for focusing on what is clearly an important issue, which is the question of the basis on which benefits and contributions are uprated. The noble Lord asked about the targeting of the Bank of England as changed by the previous Government of rail fares and a host of other things. Certainly the starting point on which we agree is one on which he is the acknowledged expert and I am not: that the measurement of inflation is far from an easy matter, as was shown when the last Government moved the targeting of the Bank of England but did not seek to change the basis on which a number of other government-related measures, such as the ones we are talking about today were not changed. Getting consistency across the piece, even if that is theoretically the right answer, is something which his Government certainly did not do.
In answer to the questions about the effects of the move of some of the indexation to the CPI it is important to point out, first, that in some cases lower increases may be beneficial. For example, increasing the lower earnings limit by the CPI, which is typically lower than the RPI, means that over time more people will qualify for contributory benefits because the lower earnings limit will rise more slowly. Similarly, the weekly class 2 and class 3 national insurance contribution rates will rise more slowly over time under CPI indexation.
If you look at national insurance contributions in isolation, some people will be worse off because the primary thresholds and the lower profits limit—the point at which they start to pay class 1 or class 4 national insurance contributions—has risen by less in 2012-13, but I should point out, as I did in my opening remarks, that the income tax personal allowance will go up significantly, by £630.
We are trying to get what the Government believe to be the most appropriate measure of the general level of prices, given that CPI is calculated in a way that more accurately reflects consumer shopping habits in response to price changes. I see a wry smile across the face of the noble Lord, Lord Eatwell. We probably do not have time for an intellectual analysis, but that is the underlying basis on which the switch has been made. As has already been pointed out, the CPI forms the basis of the Bank of England’s inflation target and is indeed more consistent with the European Central Bank harmonised index of consumer prices. I am not sure that there were questions about that, but there were assertions about it, and I hope that that clarifies the Government’s position on the noble Lord’s main points about the RPI and CPI.
On the question of the impact on individuals, let me give as much information as I have to hand. About 40,000 people will have to pay national insurance contributions because of the changes; 21 million people will lose by £6 a year; but the increase in the income tax personal allowance to £8,105 in 2012-13, to which I just referred, reduces tax bills by £214 for basic rate taxpayers, easily outweighing the small increase in national insurance contributions through the CPI indexation—£6 versus £214 as the impact of those two offsetting measures.
In addition, the Government have introduced a significant above-indexation increase in the primary threshold in 2011-12 of £29 per week, so all class 1 national insurance contribution payers earning up to about £21,600 will pay less in national insurance contributions in 2012-13 than they would have done under the usual indexation of national insurance contribution thresholds since 2010-11. I am not aware that there is available information on the impact on individuals, which clearly depends on all sorts of future decisions, not least about what happens to personal allowances in future years.
Perhaps the noble Lord can help me. The Treasury document tells us that the overall impact of the changes and benefits to the Treasury will exceed £1 billion by 2015-16. That figure must be made up of the assessment of the impact on the various people who are contributing to national insurance. If we have the overall figure, why can we not be told what are the components?
I was going on to say that I will certainly undertake to take that question away. As the noble Lord will be aware, sometimes only aggregate figures can be given up to the auditable standard that is required. If the information is available, subject to the usual way that these things are announced, I will see whether I can help. I will look at that and write if there is something I can do to be helpful to the Committee. However, the changes to the contribution rates generally speak for themselves. They are in the normal form of these things that are done on an annual basis other than the major change which we have debated. I commend the regulations and order to the Committee.
Motion agreed.
Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
Motion agreed.
Guardian’s Allowance Up-rating Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
My Lords, I am pleased to introduce the draft Tax Credits Up-rating Regulations 2012, the draft Guardian’s Allowance Up-rating Order 2012 and the draft Guardian’s Allowance Up-rating (Northern Ireland) Order 2012. In my view these regulations and orders are all compatible with the European Convention on Human Rights.
The regulations and orders before the Committee put into effect a number of reforms to tax credits announced in Budget 2010 and the Autumn Statement last November. The changes I will now outline will ensure that we tackle the deficit in a fair way and that tax credits are targeted at those who need them most. Tax credits are made up of a number of different elements for people in different circumstances. Some of these elements will continue to be increased by the CPI at 5.2 per cent, including elements for disabled workers and severely disabled workers, for children, disabled children and severely disabled children. However, the couple and lone parent elements of working tax credit will be frozen and the basic element and 30 working- hour element will remain frozen.
The family element of child tax credit is currently payable to families with an income of up to £40,000. From April 2012, this threshold will be removed and therefore the family element will be withdrawn immediately after the child element. A disregard of £2,500 for falls in income will be introduced, meaning that any in-year falls of less than £2,500 will be disregarded when recalculating the award. The 50+ element of working tax credit will also be removed. This is time limited to one year and will not affect anyone who is currently claiming. Couples with children will need to work at least 24 hours combined, with one partner working at least 16 hours per week, to qualify for working tax credit. Previously, depending on a family’s circumstances, new claims and changes of circumstance could be backdated by 93 days. From April 2012, this will be reduced to one month.
The changes the Government have made will ensure that we tackle the deficit in a fair way and ensure that tax credits are targeted at those who need them most. Reforms to tax credits included within these regulations and orders mean that support for higher income households will be reduced by increasing the rate at which tax credits are withdrawn while reducing the threshold at which tax credits are paid. Under the previous system around nine out of 10 families with children were eligible for tax credits. This reduced to closer to seven out of 10 families in April 2011 and will be reduced further to six out of 10 from April 2012.
Spending on tax credits has increased from £18 billion in 2003-04 to an estimated £30 billion in 2010-11. The system of tax credits under the previous Government was not only unsustainable in fiscal terms, it was also unrealistic in terms of meeting its stated policy objectives. Let me be clear that this Government are committed to making work pay. The best way to help working people is by taking them out of tax altogether. In April 2012 we will make a £630 increase in the income tax personal allowance, taking it up to £8,105. This is in addition to the £1,000 increase in April 2011. Together, these increases will benefit 25 million individuals and take 1.1 million low-income individuals out of tax from April 2012.
Universal credit will unify the current complex system of means-tested out-of-work benefits, tax credits and support for housing in one single payment. The award will be withdrawn at a single rate, with the aim of offering a smooth transition into work and encouraging progression in work. For parents on working tax credit, the Government continue to provide support for 70 per cent of childcare costs, up to a weekly limit of £175 for families with one child and £300 for two or more children. This support will be extended under universal credit to those working fewer than 16 hours, allowing 80,000 additional families to receive help with childcare costs. This will give second earners and lone parents, typically women, a stronger incentive to work.
This Government are committed to restoring the country to sustainable growth and prosperity. We know that it is not an easy path to tread and we have not shirked our responsibility to take the tough decisions to return the UK to economic stability. It is in that context that I commend these regulations and orders to the Committee.
My Lords, once again these indexing procedures are being used as a stealth tax. As the noble Lord has actually admitted, the shift imposes a significant cost on the poorest families. He has described this as providing an incentive to work. When the economy is growing at 0 per cent a year, there are no extra jobs. What is the point of an incentive to work when there are no jobs for people to work in? In these circumstances, the overall effect is exacerbated by the number of technical changes and by a failure to uprate various thresholds even at the rate of the CPI.
Will the Minister tell us the net benefit to the Treasury—that is, the net loss to the receivers of tax credits—of the changes that are made in these orders? The changes that derive from uprating less than the CPI, and various technical changes, represent one set of losses to the recipients of tax credits. Will he also tell us the overall impact on recipients of tax credits of using the CPI rather than the RPI? Those are the two components of the extra burden that the Government have decided to impose in increasing the incentive to work—while their policies are destroying jobs.
Will the Minister also confirm that the shift from the RPI to the CPI is deemed by the Government to be a permanent aspect of future policies rather than a measure to deal simply with any fiscal difficulties that the Government are encountering? Will he tell us the Treasury’s estimate of the reduction in tax credits by the time the universal credit is introduced?
Finally, the Explanatory Memorandum contains the extraordinary statement:
“This instrument has no impact on business, charities or voluntary bodies”.
Surely this cannot be the case. All charities and voluntary bodies that provide services—for example, to poor children, to the disabled or indeed to anyone struggling to get by—will be shocked by this pathetic excuse for failing to estimate the impact of the Government’s actions. How can the Government justify the statement that there is no impact on the charitable or voluntary sector, which at its most obvious and trivial level is untrue?
My Lords, I have a few brief points to make about the Tax Credits Up-Rating Regulations 2012. The Minister mentioned the change for couples, the 16 to 24-hour rule. Can he tell the Committee how many people are going to lose tax credits as a result of this and how this improves incentives for that group to take mini-jobs?
The Minister also mentioned working tax credit and childcare costs and went on to talk about how the measures are improving incentives to work, especially for women. I am sure that he is aware of the report published today by the Daycare Trust about childcare and how the cuts in the level of childcare costs to be met by tax credits are contributing to the crisis in childcare. Growing numbers are unable to afford childcare because no affordable and accessible childcare is available. This certainly does not improve incentives for women to take paid work. On the contrary, some women are having to leave paid work because they cannot afford the childcare, particularly when this is combined with the changes that will come in with universal credit where the withdrawal rate will be worse for second earners, the great majority of whom are women. It is difficult to see how these will be a great improvement in incentives for women.
I want to raise one other point. When the Minister repeated the Autumn Statement in your Lordships’ House, I asked him about the decision to renege on the pledge to increase child tax credit in real terms and what impact that would have on children living in poverty. I was referred to the Treasury website. I realised why, of course, when I discovered that the impact would be to increase the number of children living in poverty by 100,000. Perhaps that was not something the Minister particularly wanted to tell the House. I then had another go with the noble Lord, Lord Freud, in Oral Questions when I asked him why the Government had dismissed the projected 100,000 increase in child poverty due to the change in tax credits—reneging on the tax credits increase—as a statistical quirk that arose from the relative nature of that poverty, even though in opposition the Prime Minister had made the loud and clear promise that,
“the Conservative Party recognises, will measure and will act on relative poverty”.
The answer that I received from the noble Lord, Lord Freud, seemed to be a response to a different question. I hope that perhaps the noble Lord, Lord Sassoon, may now be able to give me the answer to that question, given its relevance to the tax credits uprating order.
My Lords, let me deal with some of those questions. I do not like to do this, but I think this may be a case where I had better go away and follow up by writing to the noble Lord, Lord Eatwell, and the noble Baroness, Lady Lister of Burtersett, because I suspect that I will not cover all their questions in the detail that they merit. I shall make one or two broad points in response and then, as I say, I will follow those up with detailed answers.
The noble Lord, Lord Eatwell, talked about the context in which these orders and regulations are coming forward. It is clear that the level of unemployment is higher than the Government would wish to see. Of course that is the case, but nevertheless, it is a level of unemployment within which the private sector has been vigorously generating new jobs—in excess of half a million new jobs in that sector in the past two years. On the specific point raised by the noble Lord about the availability of jobs, the latest monthly figures show that there are some 476,000 vacancies in the country.
It is simply not the case that jobs are unavailable, and the private sector has been investing vigorously in what are very difficult economic circumstances as we rebalance the economy from an overreliance on the public sector and on excessive leverage. It is critically important that we press on with everything we are doing to encourage people into work, partly through the construct we are talking about this afternoon, by raising the starting rate of tax and with the other measures we are taking.
The noble Lord, Lord Eatwell, raised the question of RPI and CPI. Again, this is not a measure that we take lightly or will reverse in some way. It is a change that we are making because, as I explained in our previous debate and on other occasions, we believe that CPI is the better measure in this instance.
The overall impact of the effects of the measures is best looked at in the distributional effects set out in each of the Budgets and Autumn Statements since the election. These distributional analyses were never published by previous Governments. They are all laid out. If one looks at the cumulative impact on households of tax, tax credit and benefit reforms introduced up to the Autumn Statement, and including the previous fiscal events, the critical thing is that the top income decile sees the largest reduction in income, both in cash terms and as a percentage of net income. In cash terms, the top income decile sees losses 9.8 times that of the bottom decile. The cash losses of the bottom expenditure decile are less than one-tenth—in fact, 6 per cent—of that for the top expenditure decile.
The Government have been concerned to make absolutely sure that the distributional effects of the measures taken as a whole are progressive and that the top 20 per cent of households will make the greatest contribution to what is a challenging deficit reduction.
My Lords, would the noble Lord concede that the impact on the upper decile is almost entirely due to the 50 per cent tax rate introduced by my right honourable friend Mr Alistair Darling?
What I will concede is that we look at the effects of tax, tax credits and benefits together. Therefore, whatever makes up the bundle—some of it inherited, some not—comes in to that mix. Regardless of where individual measures came from, it is important to look at them in the round, which is what we have done and will continue to do.
In relation to the questions of the noble Baroness, Lady Lister, I concede that I will probably fall into the trap of answering in a way that does not quite get to the nub of one or two of them, but I will come back to them. In headline terms, regarding the impact of the Autumn Statement on the number of children in relative income poverty, analysis shows an estimated increase of around 100,000 in 2012-13 on the measure used previously. However, this does not represent a forecast of the actual change in child poverty year on year because the measurement does not take into account, among other things, the value of public services that benefit children such as education and healthcare. These are very important in improving life chances, particularly among poorer households. Again, we have to be very careful here about whether we are using measures that properly capture the full effect of government policies.
In relation specifically to childcare, as I am sure the noble Baroness knows, the Government are investing a further £380 million a year by 2014-15 to extend the offer of 15 hours’ free education and care a week to disadvantaged two year-olds, and to cover an extra 130,000 children. Under the universal credit we are investing an extra £300 million so that 80,000 more families will get help with their childcare costs. However, I have not had a chance to see what has been published today. As I say, I will write on those points.
As I said in my opening remarks, the employment situation in this country is not easy. However, we had to take urgent action to tackle the deficit that we inherited, particularly the unsustainable welfare bill. I have mentioned the extraordinary increase in expenditure on tax credits in seven years from £18 billion to £30 billion a year. It is spending that is poorly targeted and totally unsustainable. The reforms to tax credits in these regulations and orders that we have been discussing are a fair and proportionate way to deal with this very difficult inheritance, as I have explained.
Essentially we have ensured that those most able to contribute to the deficit do so while those with the lowest incomes continue to be supported. It is because of that commitment that the highest decile of earners will make the greatest contribution towards reducing the deficit both in cash terms and as a percentage of their income, as I think the noble Lord, Lord Eatwell, recognises. In that context, the orders and regulations before the Committee are an important step towards realising our ambition to restore the UK to economic stability, but in a way that drives prosperity and means that we tackle the deficit in a fair and responsible manner. I commend the orders and regulations to the Committee.
Will the noble Lord write to me on the question I asked about the impact on couples of the change from 16 to 24 hours?
I will write. I do not know what information I will be able to give but I assure the noble Baroness that I will cover the point.
Motion agreed.
Guardian’s Allowance Up-rating (Northern Ireland) Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Guardian’s Allowance Up-rating (Northern Ireland) Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
Motion agreed.
Tax Credits Up-rating Regulations 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Tax Credits Up-rating Regulations 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
Motion agreed.
Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2012
Considered in Grand Committee
Moved by
That the Grand Committee do report to the House that it has considered the Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2012.
Relevant document: 40th Report from the Joint Committee on Statutory Instruments.
My Lords, the Government Resources and Accounts Act 2000 (Audit of Public Bodies) Order 2012 has been laid under the Government Resources and Accounts Act 2000. It is intended to give the Comptroller and Auditor-General public audit responsibility for auditing the accounts of a number of public sector bodies and companies. It also removes the Comptroller and Auditor-General from auditing a number of public bodies and companies because they have been abolished, merged or ceased to meet the criteria for public sector audit.
The main provision in the order is to give the Comptroller and Auditor-General statutory audit responsibility for 34 English probation trusts. The English probation trusts are currently subject to audit by the Audit Commission. As noble Lords will be aware, the Audit Commission is to be abolished and it is necessary to find suitable auditors for the probation trusts to take the Audit Commission’s place. While there are plans to introduce an Audit Bill to implement a new local audit framework, the parliamentary timetable is uncertain. In line with discussions with the probation trusts, it makes sense to make the change now, using the powers in the Government Resources and Accounts Act 2000.
It is already the case that the Comptroller and Auditor-General exerts his influence over the external audit of trust accounts by the issue of group instructions. Those instructions are necessary to obtain the assurance needed to certify the consolidated accounts of the National Offender Management Service. The new arrangements envisaged under this order will not lead to any loss of autonomy for the trusts.
The Horserace Betting Levy Board is also included in the order. It is not the role of government to be involved in horseracing matters and Ministers are exploring how the body might be reformed or replaced. Until final decisions are made on the future of the levy or the board, it remains a central government body and should be audited by the Comptroller and Auditor-General. This order also removes four museums from the C&AG audit, as they have been subsumed within the new National Museum of the Royal Navy and their accounts will be consolidated with the accounts of the new body. The National Museum of the Royal Navy is one of the companies made subject to C&AG audit, thus retaining parliamentary accountability for the museums. The other two companies are HS2 Ltd and UK Anti-Doping. I think that that is not to do with horseracing explicitly but with other aspects of sport. We will come to that later.
HS2 was set up to carry out a feasibility study for a new rail line in the UK. Following a triennial review of its future, it was decided that HS2 should remain a non-departmental public body and continue to focus on the West Midlands line from London to Birmingham and the link to Heathrow. As a non-departmental public body, it is right that HS2 be audited by the Comptroller and Auditor-General. As the principal adviser to government on drug-free sport, UK Anti-Doping is responsible for protecting sport from the threat of doping in the UK. It is an NDPB and therefore also should be audited by the C&AG.
Finally, the order removes three non-profit-making companies from the scope of the Government Resources and Accounts Act 2000 (Audit of Non-Profit-Making Companies) Order 2009 because they are no longer eligible for audit by the C&AG either because they have been moved into the private sector or have ceased operation. These companies are Firebuy Ltd, Phoenix Sports and the School Food Trust.
In conclusion, the proposals in the draft order confirm the Government’s commitment to achieve consistency in the public audit arrangements for public bodies and provide a net gain for Parliament and the public. I commend the order to the Committee.
My Lords, I have no comments on this order.
My Lords, I am sorry to detain the Committee. A number of years ago I was an adviser to the School Food Trust and I should simply like to ask which of the two categories it falls into. I believe that it has become a private sector body rather than abolished. Both the Explanatory Memorandum and the Minister’s speech have failed to clarify into which of those two groupings it falls.
I am very grateful to the noble Lord, Lord Eatwell, for giving me an easier time. I hope that this is a precedent he will follow on many occasions after this. In answer to my noble friend Lord Newby, the School Food Trust has been redesignated as of September 2011 by the ONS to the NPISH. In effect, it is removed from the public sector and has become a private-sector body. I can confirm that he is right in his supposition. There is no more that I need to say other than to commend this order to the Committee.
Motion agreed.
Committee adjourned at 6.05 pm.