Wednesday, 25 February 2015.
Arrangement of Business
My Lords, I should advise the Committee that if there is a Division in the Chamber the Committee will adjourn for 10 minutes.
Infrastructure Planning (Radioactive Waste Geological Disposal Facilities) Order 2015
Motion to Consider
That the Grand Committee do consider the Infrastructure Planning (Radioactive Waste Geological Disposal Facilities) Order 2015.
Relevant documents: 19th Report from the Joint Committee on Statutory Instruments, 24th Report from the Secondary Legislation Scrutiny Committee
My Lords, I will introduce the order before providing background on geological disposal and why the Government recommend that this order should be approved.
On 12 January, my right honourable friend the Secretary of State for Energy and Climate Change laid before the House a draft order to bring certain development relating to geological disposal facilities for radioactive waste within the definition of “nationally significant infrastructure projects” in the Planning Act 2008. Making this legislative change will help us to implement geological disposal, an action vital for both for our energy past and energy future. As a pioneer of nuclear technology, the UK has accumulated a legacy of higher-activity radioactive waste and materials. More will arise as existing nuclear facilities reach the end of their lifetime and are decommissioned and cleaned up, and through the operation and decommissioning of any new nuclear power stations.
Most noble Lords will be aware, but it is worth reiterating, that geological disposal is recognised across the world, and by our own independent Committee on Radioactive Waste Management, as being the best available approach for the long-term management of higher-activity radioactive waste. A geological disposal facility, or GDF, is a highly engineered facility capable of isolating radioactive waste within multiple protective barriers, deep underground, so that no harmful quantities of radioactivity ever reach the surface.
Last year, my department published a White Paper to move the process of implementing geological disposal forward. It set out three initial actions for government and the developer, Radioactive Waste Management Ltd, which were informed by a review of the GDF siting process that had operated since 2008. The purpose of these actions is to better inform communities on issues of geology, development impacts, community representation and investment before they are asked to get involved in discussions about potentially hosting a GDF. A national geological screening exercise will consider the available geological information across the country and provide guidance on features relevant to building a safe GDF. The detail of how the Government and the developer will work together with communities will also be developed. These are important and challenging issues, on which there must be clarity before communities are asked to get involved in formal discussions with the developer, from which they will have an ongoing right of withdrawal.
A GDF for the UK’s higher-activity radioactive waste is clearly an infrastructure project of national significance. The Government believe that it is appropriate that the approach to land use planning decisions reflects this. The Planning Act 2008 created a new regime for development consent for certain types of nationally significant infrastructure, such as major energy, transport and waste projects. The process is designed to streamline the decision-making process for these projects and, while ensuring there is still a thorough examination of the benefits and impacts of the projects, make it fairer and faster for communities and developers alike.
The purpose of this order is to bring both a GDF, and the deep borehole investigations necessary to assess and characterise the suitability of potential sites, within the scope of this process. This will provide a clear process for the developer seeking consent, as well as placing specific requirements on the developer to consult local communities, local authorities, and other interested parties.
I wish to make it very clear that the process of seeking development consent to assess or develop a site for a GDF is distinct from any process to identify a potential site. The Government continue to favour an approach to siting a GDF that is based on local communities’ willingness to participate in the process. The 2014 Implementing Geological Disposal White Paper is clear that the final decision to apply for development consent and regulatory approvals for a GDF will not be taken until, and unless, there is a positive test of public support for hosting a GDF at the site in question.
In support of this approach to land use planning, the Government will produce a national policy statement to set out their policy on the need for these types of infrastructure in more detail. This will be subject to an appraisal of sustainability. The Government intend to bring forward the preparation of a generic national policy statement as soon as is practicable to help inform the process of working with communities on GDF siting. This approach to land use planning would of course apply only to the development of a GDF in England. The development of a GDF elsewhere in the UK would need to be progressed through the appropriate devolved planning system.
The purpose of this order is to put in place an appropriate process for land use planning decisions in relation to geological disposal facilities and facilitate the provision of greater upfront information to interested communities through the production of a national policy statement. In this way, it will help to ensure that we are able to implement geological disposal, which will contribute to securing our energy past and our energy future. With this in mind, I commend the order to the Committee.
My Lords, I declare an interest as a Cumbrian resident and a member of Cumbria County Council. I want to set my position on record right at the outset: I think that the Minister should withdraw this order. I do not believe it is right that the Government should be able to impose what we all colloquially refer to as a nuclear dump on Cumbria, regardless of the views of the whole Cumbria community and its county council, which is essentially what the Government are trying to do.
I emphasise that I am a strong supporter of nuclear power and always have been. It would be a tragedy for the country if we were to retreat from the proposed programme of new nuclear power stations, one of which is at Moorside, adjacent to Sellafield in Cumbria. To sacrifice the nuclear programme because of some temporary fall in the oil price—and because a lot of people are talking about the prospects for fracking in Britain and Europe, which are extremely uncertain—would be to risk our long-term energy security, as well as our ability to meet our carbon reduction targets.
I also believe that a long-term solution to the problem of nuclear waste must be found. Indeed, I would like to see a massive research programme undertaken into this issue because it cannot be beyond the wit of scientific ingenuity to find new solutions to this problem in the next 20 or 30 years. However, had I been a member of Cumbria County Council in 2013—which I was not because I was elected only in the May of that year—I would have personally advocated that our cabinet take forward the exploratory work of locating a geological repository in Cumbria on the basis that it was not an irrevocable commitment and that there was a clear legislative commitment on the part of the Government to establish the right to withdrawal, which we still await. I would have wanted to put the Government on the spot as to what they were actually prepared to deliver for Cumbria if, scientifically, it could be shown on the basis of independent geological advice that a safe site could be found. As a democrat and a Cumbria citizen, I just cannot support the current proposal that the final decision is taken out of the hands of anyone in Cumbria and left to the Secretary of State.
I know that the noble Baroness, Lady Verma, has been extremely conscientious in her efforts on this issue, and I have no personal criticism of her role whatever. The Government argue that they have given the clear assurance that nothing will go ahead without a clear demonstration of local support. However, it is clear from the consultation document that the Government issued last year that they do not regard the support of the county council as an essential element of that clear demonstration of local support. I think that there are very strong objections to the position that the Government are now taking—objections both in logic and in terms of democracy.
If community benefits, which the Government talk about if this major development—something on the scale of the Channel Tunnel—goes ahead, are to be meaningful, they will involve huge infrastructure investments that stretch well beyond Sellafield and Copeland Borough Council, which covers the Sellafield area. For example, at present there is no dual carriageway road to the Sellafield site. If there were to be a proper connection to the M6 by one route or another, surely the county council should be involved in that decision. Similarly, it takes longer to go by train from Carlisle round the Cumbria coast through Whitehaven, Sellafield and Barrow to Lancaster than it does to go from Carlisle to London, so primitive is the infrastructure in this area. Indeed, the latest proposals from the Department for Transport will worsen services on this line as a result of the refranchising of the TransPennine and Northern rail services. Therefore, if we were talking seriously about community benefits, we would be talking about how to improve rail services, making them modern and efficient, between Sellafield and the west coast main line. Again, how could you conceivably do this without involving and getting the support of the county council? It would be both impractical and a democratic outrage.
However, there is another reason why I do not like the Government’s policy. We are currently generating a very important debate in Cumbria about local government reorganisation. The creation of a unitary authority for the county is, in my view, an extremely desirable goal and would spare local government in the county the necessity of making £28 million of cuts to local services—that is according to a recent independent report that Ernst & Young has done for the county council. My suspicion is that the Government will be determined to block any efforts to create a unitary council in Cumbria and to spare Cumbria this scale of local government cuts because they want to retain Copeland Borough Council as their badge of demonstrating local support. If so, that would be quite wrong. If they are serious about this, I would like to see the Government do something now to prevent our having to make £28 million of cuts to local services, which would be devastating for libraries, children’s centres and the rest.
At the moment, many people in Cumbria believe that, on this issue, the Government are playing games to demonstrate a measure of seriousness about their long-term ambitions for a repository simply to justify the grant of planning permission for new nuclear power stations, when there is not the slightest prospect of anything going ahead or the Treasury agreeing to the vast expenditure involved. The consequences for Cumbria would be very serious indeed.
For all these reasons, I believe that it is wrong for us to endorse an order that basically gives the Secretary of State the power to do what he wants and ride roughshod over the elected, democratic representatives of the county. That is why I would like to see this order withdrawn.
My Lords, as the Minister said, this order is simply to bring GDFs within the nationally significant infrastructure project regime of the Planning Act 2008. I am sorry that the noble Lord, Lord Liddle, has had to find out the hard way that that Act, brought in by Labour in 2008, has such an anti-democratic flavour, which at the time we feared it would. As he said, the order will remove from local planning authorities and their respective communities the final say in the planning process. I find that extraordinary when we are looking at something that we have never had before. It is not like a road, which can be a nationally significant infrastructure project if the Government choose to designate it as such; we have lots of roads. A railway, such as HS2, might be one. We have not had GDFs before; this is new. That is another reason why it should be subject to the proper rigours of a democratic planning process.
Perhaps one of the best things that the Labour Party did in the previous Government, during the time when it brought in the Planning Act, was in February 2005 when the UK ratified the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, which became known as the Aarhus convention. That is the main thing I want to ask the Minister about today.
I am very pleased to see the noble Lord, Lord Rooker, in his place. Back in 2006, I asked him whether any of the provisions in the Aarhus convention had yet to be implemented in the United Kingdom. He confirmed that we had ratified it and that the full lists of what that meant were now available. Those set out the UK’s range of obligations on access to information and public participation. I think that this GDF proposal would fall within Annex I to the Aarhus convention. It would be most helpful if the Minister could make some reference to that in her reply.
Having looked at the Government’s response, which was handed out with these papers today, it is very hard to balance the Government’s statement that they will not proceed without a positive test of public support without thinking that the ultimate test of public support for a planning issue is exactly that the local authorities involved make planning decisions. That is why the system was invented in the way that it was: so that there could be democratic representation and people could have a say. Something as important as this is not only about burying waste in the ground. Bear in mind that it is also about the transport of waste to that facility, which will have an enormous impact.
For all those reasons, I should like the Minister to assure us, for a start, that it complies with the Aarhus convention and, secondly, to consider whether the exceptional nature of GDFs should make them inapplicable to the process envisaged by the 2008 Act.
My Lords, as a humble citizen of Cumbria, I was very reassured to hear my noble friend Lord Liddle speaking as powerfully as he did. He certainly reflects widespread feeling within the county. It is sometimes easy to exaggerate but I think that there is almost a breakdown in trust. There is a feeling that the Government have for a long time been absolutely determined to drive through this project in west Cumbria, and that everything will therefore be done to ensure that it happens. Scepticism, to use a milder word, is inevitable if you have a situation in which, under the established rules, the permissions of the local authorities—and very much the county council—were essential if the project were to go ahead. When it turned out that the county council, with its greater strategic responsibilities, was not in favour of the recent attempt to develop further research into the possibilities, the rules of the game were revised so that in further consultations it would not be necessary to involve the county council but other local authorities could be involved. This inevitably leads to doubt.
It is also important to realise that while my noble friend Lord Liddle was absolutely right to emphasise the strategic issues of transport and all the rest—just think of the A66, the Penrith junction with the M6 and the consequences right across to Scotch Corner—this has immense implications for the wider region. That is why the local authority most responsible for the wider region, since this goes well beyond the county, should be closely involved.
I want to raise one other issue that we do not like talking about. The difficulty is that if you raise it, you will be accused of scaremongering. However, there are risks in a development of any kind to do with nuclear energy and nuclear power. We are living in an absolute world of absurdity if we believe that the consequences of anything going seriously wrong would be limited to Cumbria. It would be the whole north-west, to say the very least, and would probably be wider than that. These are issues on which we need a great deal of reassurance. I have not yet heard anything that reassures at the level necessary.
We must also recognise that there is a fundamental contradiction in the approach to governance because, as I understand it, the Government have been insistent that they favour localism—and very much on any project of this kind, because the involvement and approval of the local community has repeatedly been stated as essential. Yet the whole idea of strategic projects of this kind is to cut back and streamline what has been there traditionally and was very hard won: the possibility for local communities to pursue the things that disturb them and their consequences.
I must emphasise an interest here. Apart from being a citizen of Cumbria, I am also a patron of the Friends of the Lake District and a vice-president of the Campaign for National Parks. It seems to me that these issues about which we started talking in relation to Cumbria apply to the country as a whole. I like the idea of localism but I am not the slightest bit persuaded—and I do not believe that I could be persuaded—that issues of strategic significance such as this can be shuffled on to local authorities, with their limited resources, for them ultimately to decide whether or not to go ahead with them.
Although I am by no means an enthusiast for nuclear energy, I accept that a new generation of nuclear energy will be necessary. It seems to me that, by definition, nuclear energy and its development is a national responsibility, and that the consequences of that must be seen as a national responsibility. Therefore, I would like specific assurance from the Minister that at the outset of any such project it will be considered essential to undertake a transparent and convincing national survey to establish the best, most favourable and least dangerous place in which to develop it. When that has been established, then, of course, local involvement becomes crucial.
I make my position clear: I have said all along that I have very strong views on this project. However, I have also said all along that if, at the end of such a national convincing exercise, it became clear to me that the least dangerous place for such a project was west Cumbria, I would put myself 200% behind it and consider how we could make it the safest and least environmentally and scenically damaging project possible. That would be the responsible thing to do. However, we are nowhere near that point. We are being asked to approve the means before we have had the wider strategic assurances—of course, that will add to doubt. My noble friend was right to say that we are not in a position to approve this measure at all.
I hope that the Minister, with whom I have had many consultations on this issue in the past, can now reassure us. I believe that there is widespread anxiety, not only in the county, but certainly in the county as a whole and beyond it. This is my last point, although I could make many more. If I may use the terms in this place, there is, in an authoritative sense, an intellectual dimension to this issue. Many geologists of great distinction are already saying, and have done for some time, that Cumbria is not the place to have a project of this kind because of the situation with subterranean water. There is a feeling that these scientists of distinction have never been given the hearing on the project that they should have had. Some have made their work available at their own expense as they feel so concerned about it and have put it on public record.
We have to face the fact that nuclear waste exists and there is a whole realm of anxieties about its security and the integrity of the facilities that contain it. We are going ahead to the next generation of nuclear power, which will generate more waste, so we have to find a solution—that is the bottom line—for both existing and future waste. When we have found the right place and mobilised public confidence that everything possible has been done to make the project as safe and secure as possible—I do not believe that it will ever be made completely safe for future generations—we can get into that debate. However, we must be reassured that a national survey has been done and that there is a list—preferably prioritised—of the sites that are right and those that are not, and of those that are better and those that are less well suited. That has not happened. The Minister must put us in the picture about this and give us specific reassurances.
My Lords, like previous speakers in this debate, I am a Cumbrian, and I declare that with pride. I also have a number of interests associated with Cumbria. They are in the register, but I am not sure that there is any particular need to enumerate them now.
I am not an enemy of nuclear power. I am not a fanatical supporter of it either; I stand in the middle. As the noble Lord, Lord Judd, said, we have a lot of nuclear waste and we will have to deal with it. We are likely, almost certainly for the right reasons, to generate more of it in the immediate future. I come from that perspective.
In the context of discussion of any possible disposal facility in west Cumbria, it is important that we stop trying to blur the issues about the locality. In my view, Cumbria County Council is right in thinking that this is a matter that affects the entire county. I do not think that you can curtail the definition by saying that it is simply Allerdale and Copeland. It may be that they have a greater interest than the rest of Cumbria, but Cumbria as a whole has an interest that is different from the rest of the country. That is important and needs to be properly taken into account in considering this matter.
Secondly, it is important to appreciate that, in the context of the immediate history, the order is interpreted locally as sour grapes. It is perceived by a large number of Cumbrians that the Government in Westminster wished, one way or another, to get their way and have a long-term geological disposal facility in the county. Having set up a system to do that, when that form of democracy produced the wrong answer, rather like a number of countries in the Middle East and further afield, they just changed the rules. That is deeply unfortunate and has not helped the progress of the debate about this important topic.
Having said that, I want to touch on three things. First, in his opening remarks, my noble friend said that this relates only to a geological disposal facility in England. The nuclear industry in this island—in the United Kingdom—covers England and Scotland. What steps are being taken to ensure that there is a consistent and homogenous process across the two jurisdictions—if I can put it that way—to ensure that a sensible outcome is reached not only for the English, and not only for the Scottish, but for the country as a whole? That is very important. One thing that is deeply felt by those concerned about these matters is that, to put it in the vernacular, Scottish nuclear waste will be dumped at Sellafield and nobody will get in the way of that.
Secondly, going back to a point made by my noble friend Lady Miller of Chilthorne Domer, if you write local authorities out of the process in the manner that has been described, how do you at the same time ensure that that will not take place in Cumbria without local support? Will the Minister spell out to us exactly how that local support will be measured and dealt with—and at what point in the process, because that is terribly important? I understand the argument that this is a national infrastructure project and that the way in which it is handled should take that into account. I am not criticising that, but, against that background, how, if it must have local support as a condition of proceeding, will that local support be measured?
Finally, it is also important in the context of the county of Cumbria that the proposal is not a stand-alone measure; it will bring a great deal of benefit with it. Against that background, it is very important that the benefits are spelt out and fully explained in the same detail and at the same time as the project itself. You cannot simply salami-slice the bits off each other. I very much hope that my noble friend will be able to give me some responses to the points I have raised that will reassure me.
My Lords, I am not Cumbrian and I have absolutely no connection with Cumbria—I live in Southwark—but I support the noble Lord, Lord Liddle, in his request that this order be withdrawn. It is clear that he was speaking from a democratic point of view, which is an incredibly valid thing to be concerned about. The fact that it is Labour legislation does not mean that it has to be used; there is a lot of quite bad legislation still on the books that really ought to be repealed.
There are a few environmental concerns expressed in a report called Rock Solid?, which was produced for Greenpeace specifically for this sort of action. There are concerns that have to be answered and the relative risks and dangers, as the noble Lord, Lord Judd, said, have perhaps not been assessed as stringently as they might have been. For example, copper and steel canisters and overpack containing spent nuclear fuel or high-level radioactive waste could corrode more quickly than expected; we do not know. The effects of intense heat generated by radioactive decay and the chemical and physical disturbance due to corrosion, gas generation and biomineralisation could impair the ability of backfill material to trap some radionuclides.
The build-up of gas pressure in the repository, as a result of the corrosion of metals and/or the degradation of organic material, could damage the barriers and force fast routes out through crystalline rock fractures or clay rock pores. There are also poorly understood chemical effects, such as the formation of colloids, which could speed up some of the more radiotoxic elements such as plutonium. Unidentified fractures and faults, or a poor understanding of how water and gas might flow through the ground, could lead to the release of toxic materials into groundwater. These are concerns that cannot be ignored, and the order needs a little more research about whether this is an activity that can be supported with a view to complete public safety. I would argue that it is not, but I look forward to the Minister reassuring us.
My Lords, I am also not from Cumbria, although I shall have the pleasure of visiting Sellafield in two weeks’ time. I know that it consumes a vast proportion of the Minister’s budget in DECC, and I look forward to that visit.
My question is more one of logic. The Explanatory Memorandum states clearly, as does the legislation itself:
“This Order will bring certain development relating to geological disposal facilities for radioactive waste, and the deep borehole investigations necessary to determine the suitability of potential sites, within the nationally significant infrastructure project (NSIP)”.
I suppose that my question is this: whether one likes it or not—whether one is pro-nuclear or anti-nuclear—there is a certain logic to the idea that a radioactive waste disposal site would come within the decision-making of a major project. This was set up by the previous Government, as my noble friend Lady Miller has pointed out, and taken on by this one. It sort of fits within that. The exploratory deep borehole investigations seem to be a measure on a completely different scale, so I do not understand the logic of having both of those in. The exploration side seems logically to fit far more within the standard local authority planning system. I would be interested to hear a comment from my noble friend about why both these scales of project have been put into this order, rather than just one or the other.
While I am on my feet and we are on nuclear waste, at the beginning of this Parliament we looked at the national policy statement for nuclear power generation, and it has always slightly amused me that a footnote states:
“Geological disposal of higher activity waste from new nuclear power stations is currently programmed to be available from around 2130”,
some 115 years from now. I wondered whether the Government intended to keep their foot on the accelerator on that policy.
My Lords, we seem to have overlooked that regular high-level nuclear waste is being generated at Sellafield already and plans have to be made for its safe storage and ultimate disposal. If plans go ahead to use the 140 tonnes of plutonium that have been stored up from previous nuclear programmes at Sellafield to generate electricity, as in the two proposals that have been put forward by CANDU and GE Hitachi respectively, there will be nuclear reactors on the Sellafield site using that plutonium and generating further waste. I suppose part of the Government’s thinking in having their eye on Cumbria is that this large quantity of nuclear waste has to be moved from the Sellafield site to the ultimate place of disposal. That concentrates their attention on Cumbria. However, when the noble Lord, Lord Liddle, said that he would like to see a survey of all the sites that might be suitable for this purpose, I was under the impression that a lot of work had already been done on the subject and that nobody had any thoughts of alternative sites that would be superior to Cumbria. I may be wrong and would be very interested to hear from the Minister whether that work has already been in train and, if so, what the results were.
This is what I am hoping we will hear more about from the Minister when she sums up: whether that work has been done or whether she agrees with the case that has been made for a national survey, which would obviously cause considerable delay.
That brings me to question of why this matter is urgent. Is it really necessary for a decision to be made now, for reasons that may be connected with the development of Sellafield, when we already have these additional reactors on the site, coupled with the existence of large quantities of high-level waste? Is it a matter of immediate necessity that we should have this GDF in the timescale that would be possible with the order and not without it? Suppose we were forced to wait for five years or so: would that have a catastrophic effect on how we dispose of the nuclear waste at Sellafield? Would lacking the GDF impose impossible or very difficult restrictions on the work that can be done at Sellafield because of the quantity of high-level waste that has to be stored there?
Other things being equal, obviously it is better for the GDF to be in the neighbourhood of Sellafield because the high-level waste has only to move a short distance and it avoids the necessity for rail facilities to move all this waste from Sellafield, where it is at the moment, to whatever alternative site is chosen. That would add enormously to the cost, I suppose, and is something we would like to avoid if possible.
My Lords, I am grateful to the Minister for introducing the order and to all noble Lords who have contributed to the debate. We should focus on the topic at hand, which is whether the GDF, as described, should be classed as a nationally significant development project. Many speakers have reinforced the sense that this is clearly of national importance. There has been widespread support for continued use of nuclear power and acceptance that much of the waste derives from legacy projects that have accrued since the 1940s and 1950s. It is high time that we came up with a solution for the long-term storage of high-level nuclear waste.
Personally, I support the logic behind the order and believe that the wider debate about the siting—where in the country this should go, public engagement and the tests that we apply to the siting decision—is relevant, but it is not the matter before us. The noble Baroness, Lady Miller of Chilthorne Domer, is correct that this all stems from a significant shift in how we view planning, through the 2008 Act, which was designed to enable us to move forward on nationally important projects in a way that respected democracy, but equally made it clear that there will always be tension between projects of national significance and particular local concerns. We have to get that balance right.
I will echo some of the questions that were asked about the tests that the Government propose to apply. The noble Baroness mentioned that there would have to be a positive test of public support. It is true that a county council’s decision could be used as a proxy for that. However, in such a project, which has such a long timescale and such huge significance for the country—we must look at it as a continuum from 1940, when we started developing nuclear power, to probably 100 years from now, when we will still use nuclear power—we do not allow shorter-timeframe decision-making or slightly more local concerns to override the national importance. That is not to say it should not be taken into account; it certainly should. I am sure that the noble Baroness is already preparing to respond to the noble Lord’s comment on this; could she say a bit more about that public test? It will be important.
In that context, it probably is time for a national debate. We have had this discussion before on people’s responses to and views about nuclear risk. As we now embark on a new era of nuclear build, it is probably high time for a discussion about the risks from radiation relative to other sources of hazardous waste, which we deal with, manage and store in different ways. Radiation seems to have a particular resonance in the public mind, some of which is justified and some of which is not. It is high time that we had a basic and scientifically grounded discussion about the nature of radiation. It is a fact that radiation is natural. We have evolved living with radiation; if you want to avoid radiation altogether, the safest place to be is in a hot air balloon, hovering about a mile off the ground. We are exposed to radiation from the ground naturally and from the skies.
I fear that this has become a polarised debate and that at times it departs from the science. We need to have a better understanding of the three types of radiation and the containment measures, which are very capable of containing them. We need to better understand what half-lives are and how radioactive material decays and becomes less of a problem over time. These are things that we really get to only when we get into the detail. We need to try to have a better education process. I hope that that will then allow us to have a more considered conversation about the fears that some local residents have over the GDF and the potential for ionising radiation to seep out, which is very unlikely. That is not to dismiss local concerns. There will be a big discussion about the transport infrastructure questions that were raised. I ask the Minister to clarify my reading.
I appreciate the noble Baroness’s point about getting a debate going on radiation, but we should put this in context. I, like many others, am not from Cumbria, but historically those of us in my part of the United Kingdom saw, over several decades, the flushing of material into the Irish Sea that today would be a criminal offence. We were assured in those days that the levels were perfectly okay and that neither fish nor other wildlife would be affected. However, by today’s standards, such activity would be regarded as outrageous. This is all a continuum. I support what the noble Baroness says, but we have to see where we came from. What I am saying is that, within living memory, vast amounts of toxic material were flushed into the sea, so let us at least take comfort from the fact that that has stopped.
It is actually a matter of millennia, if you want to put nuclear into its proper context. I do not dispute that the pendulum of regulatory approaches to nuclear swings. I have visited Oak Ridge, the home of nuclear fission research, where nuclear gases used to be vented into the woods because people did not perceive it to be a risk—indeed, there is something to be said for the view that that was not a very risky activity. We have swung back towards very tight regulation for good reason, but that is not to say that that has to be set in stone and that our approach today is right—there is a constantly shifting understanding. I said that background radiation is natural to make the basic point that we as human beings have evolved in a radioactive environment. People are not always aware of that.
This is about getting back to the basics and having another look at the physics of nuclear, so that we can perhaps defuse some of the fears. There is probably no riskier way of storing nuclear waste—if there is indeed a large risk—than the way we use today. I am grateful to the noble Lord, Lord Avebury, for pointing out that we seem to be speaking as if there is no waste and that we are suddenly creating waste to put into a depository. The waste exists and it sits around the country, although it is correct to say that a large proportion sits in Sellafield. We need to find a solution, but that is not to say that this is the greatest risk that man has ever faced. The risk is manageable and engineered and we should see it in that context.
I will not detain the Committee any longer. I am grateful for the debate. I reiterate my request from our last debate that we should begin to have a national public conversation about nuclear and the risks involved. As other noble Lords have said, the issue has to be seen in the context of the much broader environmental risks that we face. There is an inherent logic behind the regulations. This is a nationally significant project and, although we do not wish local involvement to be excluded, we need to get the balance right, so we support the regulations.
My Lords, I am extremely grateful for all the contributions. As always, this issue needs greater debate. I agree with the noble Baroness, Lady Worthington, that this is an important national debate, which we cannot reduce down to one area or region.
I start by responding to the suggestion made by the noble Lord, Lord Liddle, that this is a “dump”. Such terminology is unhelpful. If we are to have an informed debate, we need to ensure that the language that we use does not generate fears among communities. Taking things seriously, we need to be able to express an informed view to the broader public, who may not be as well informed as the noble Lord, Lord Liddle.
I think that I talked about—I hope that I did, anyway—what is commonly referred to as the nuclear dump. That is certainly how the local paper refers to it. I also emphasise to the Minister that, whenever the issue of the dump comes up, I point out that Cumbria is home to an extremely dangerous dump on the existing Sellafield site, about which something has to be done as a matter of urgency.
I hope that I may be allowed to intervene in support of the noble Lord, Lord Liddle. It is indeed the case that this is known in the general locality as the nuclear dump. I must put my hands up and say, “Mea culpa”, as I am chairman of the newspaper company to which the noble Lord referred. However, we on the board do not exercise editorial control.
My Lords, I reiterate that it is important that the usage of language informs the debate. Wherever we sit, we must be careful that the language used is informed and does not excite people even further.
A number of questions were raised and I will try to go through them as quickly as possible but I would like to go back to the points made by the noble Baroness, Lady Worthington. These matters are nationally significant and nationally important. We live with this currently. As my noble friend Lord Avebury pointed out, this is not something that is going to happen. It is already here and we need to deal with the issue. We are already dealing with it in the short to medium-term and, even then, we are talking about many decades rather than a few years. It is right that after the last process came to a halt, the Government took the sensible approach by stepping back to reflect and see what more could be done to make it a better informed debate. When I looked at the process, it was particularly to see how we could better engage with the public and other stakeholders, beyond the elected members. I agree that the role of the elected members is really important but the debate has to reach much further. Those communities that will ultimately be involved must be assured that they have the final say.
The noble Lord, Lord Liddle, said that the Government do not care about the county council being part of public support but the consultation has made it clear that the detailed process of how community representation operates from 2016 will set out that all stakeholders, including elected members, will be a part of the process. They will be able to feed in and be involved in looking at the processes before any formal discussions take place. We have two years within which that process is going to take place and the noble Lord, Lord Liddle, is fully aware of that. I look forward to his participation in it, along with his colleagues’.
However, I would also reiterate that noble Lords from Cumbria have just assumed that Cumbria is the given choice. At this time, no community has been identified. No site has been identified and we must not pre-empt, or be premature in, the assumption that it will be Cumbria. I also made it clear that, from looking at the last process, the debate needed to go much wider and further. Communities needed better information to come forward. That is why I continue to push back when people say, “This is ultimately going to be in Cumbria”. We do not know at this stage. We have two years in which people will be involved and able to be better informed.
The noble Lord also asked whether the siting process would be voluntary and why we are taking decisions away. The process of obtaining consent to develop a site is separate from the process of identifying a site in the first place. The final decision to apply for the development consent will not be taken until—and, as I think I reiterated in my opening remarks, unless—there is a positive test of public support for the GDF site in question.
The noble Baroness, Lady Jones, asked whether I could guarantee that the GDF would be safe. She read off a number of scenarios where she believes that there is risk. Let us first be very proud of the fact that we in the UK have regulators who are among the toughest in the world. As with all standards around nuclear, the standards for the GDF are incredibly high. If we cannot satisfy ourselves and the independent regulators that a GDF is safe then it will not be built. We would need to be reassured that the standards of the stringent international and national regulations were met before we would even endeavour to construct and operate a GDF.
My noble friend Lord Inglewood asked about the England and Scotland question. The nuclear industry covers England, Scotland and Wales. However, the planning legislation—which is what we are discussing today—covers only England. Planning and radioactive waste policy are devolved issues, and colleagues in Scotland and Wales will have their own processes to deal with planning and waste policy issues in their jurisdictions.
The UK nuclear industry is UK-wide. My noble friend fairly described the scope of this order and how the devolved powers work, but what is happening to make sure that we have a UK-wide policy for dealing with this? However you look at it, if we were to end up with three geological waste facilities, that would seem a bit foolish.
I re-emphasise that planning remains a devolved issue for those devolved areas.
My noble friend Lady Miller asked whether the local planning system was not the means for testing public support. The process of identifying a site and demonstrating public support is separate from, and additional to, the process of obtaining development consent. The planning consent process will not replace the siting process. A GDF is clearly a nationally significant piece of infrastructure, and it is appropriate that an application for development consent should be made under the system which was designed to examine such projects.
The noble Lord, Lord Judd, asked whether the screening exercise ruled out Cumbria, which has already been shown several times to be unsuitable for a GDF. The national geological screening exercise will treat all parts of the country equally, as I have already said, and the first step will be the development of guidance based on safety requirements for a GDF. The guidance will be developed openly and—a point made by the noble Lord—transparently through engagement with interested parties and the public. It will then be applied to produce maps and accompanying information about the potential for the development of a robust GDF safety case in different settings across the country. I hope that the noble Lord is reassured that we do not focus, as he and others have done, just on Cumbria.
If I may say so, the Minister knows very well that this is not the first time she has given me such reassurances. All I can say is, “We hear the words”, but it will be the transparency, to which she refers, and the convincing nature of this operation of national research for all to see that will be crucial.
While I am on this point, we have referred to Northern Ireland and Scotland in this context. However, in terms of the hazards, presumably at some point the Irish Government have to be taken on board.
My Lords, as I said, those discussions are always ongoing and I will broaden them out to all devolved Assemblies and Governments.
Coming back to the question on transparency, I hope that the noble Lord will think that the process we are taking forward this time is far more transparent than the previous process. It takes into account far more exploration and discussion with a greater number of stakeholders to get a positive view of where communities lie. I urge the noble Lord to be reassured by the work that has been undertaken on the process since 30 January 2013, when the process came to a stop.
If I may just finish my point, I will happily give way. We need to look carefully at why an issue as important as this did not generate the breadth of engagement that I believe it deserves, and why there was not much broader input from the wider community. Indeed, a number of organisations told me that they had been excluded.
Will the Minister reassure us that, as part of these discussions, consideration will be given to the fact that these facilities will store waste for a period, so that if technology develops it can be reprocessed? Many other countries, particularly Sweden, have a policy of putting the waste in rock formations. I believe that many nuclear energy programmes around the world are looking at the possibility of reprocessing this material when the relevant technology has been developed. However, there are other solutions whereby it is put in the ground permanently. As the noble Baroness, Lady Worthington, commented, it has a decay life of perhaps 10,000 or more years. Therefore, an important aspect of the discussion concerns whether this is a temporary process, as I believe it should be.
My Lords, as with all these things, we are talking about thousands of years. I am sure that as technologies evolve, those who have to take decisions thousands of years from now—it will not be me—will look at the decisions that we are taking now and consider whether our planning measures are as robust as they can be. Of course, new technologies and techniques will be developed that will change the sector. The nuclear industry itself will evolve, as will other technologies that will provide energy. However, we need to ensure that the decisions that we are taking now are being taken on the basis that we need a long-term solution to high-radioactivity waste, which needs to be put away safely so that it is secure and poses little danger to us all.
My noble friend Lady Miller asked about the Aarhus convention. The Planning Act 2008 provides for extensive levels of community engagement and public consultation but it also requires environmental assessments to be carried out at various stages of the planning process. Therefore, the Government believe that the process is compatible with the requirements of the convention and with associated European Union legislation.
My noble friend Lord Avebury and the noble Lord, Lord Judd, asked whether geological screening was being carried out. Radioactive Waste Management Ltd has begun the work, including engaging with interested stakeholders. It will produce draft screening guidance for public consultation. This, and the final screening results, will be reviewed by an independent group formed by the Geological Society of London. As stated in the 2014 White Paper, that will be carried out over the next two years.
I hope that I have managed to answer most of the questions. However, coming back to what we are discussing today, the Committee is simply being asked to consider the order, not to approve it. The Motion to approve will be tabled in the Chamber and noble Lords can oppose it then if they are strongly opposed to it. However, I suggest that if we are to make progress in finding a long-term solution to this significant national programme, we need to ensure that we provide the public with facts and not just bear in on myths that have been peddled over many years.
As the noble Baroness, Lady Worthington, pointed out, this debate needs to be properly informed. I would be happy—I am sure that the noble Baroness will welcome this—to widen that engagement and make the debate much more informed, so that people understand what we are trying to develop here.
I hope that there is nothing in the order that precludes the decision being made including whatever Scotland decides it needs in the way of long-term facilities for the disposal of high-level nuclear waste. As the noble Baroness was asked earlier, surely we are not going to have GDSs in all the jurisdictions of the United Kingdom. I want an assurance that there is a facility within the ambit of the order for the Scots to come along to talk to us about what they are doing about long-term disposal, so that we do not have to have two separate facilities.
I thank the noble Baroness for her comprehensive reply to the debate. However, I seek clarification. In her speech, she emphasised the difference between the siting decision and the planning decision. Clearly, if the order goes through, Cumbria County Council becomes a consultee on the planning decision taken by the Secretary of State—I would hope, a prominent consultee.
However, the planning decision would come only after the siting decision. I would like an assurance—I realise that it may involve consulting DCLG as well as the Minister’s department, so she may not be able to answer this today—that, if Cumbria decides to go ahead with a local government reorganisation that gets rid of the district councils and has one or two unitary authorities, they would become the key bodies that would have to approve a siting decision.
My Lords, given that there is no inspiration floating from behind me, I undertake to put my response in detail to the noble Lord. I finish by saying that, even with all those processes, it will still have to go out to the public for public support. Ultimately, it is for the public to decide.
Warm Home Discount (Miscellaneous Amendments) Regulations 2015
Motion to Consider
My Lords, in introducing this debate on the Warm Home Discount (Miscellaneous Amendments) Regulations 2015, I will first give some background on fuel poverty and the warm home discount scheme to provide context to these regulations.
Fuel poverty remains a huge challenge and the coalition Government are committed to tackling that challenge and to helping people, especially low-income vulnerable households, heat their homes. Improving the energy efficiency of homes is the most effective way of reducing energy bills and providing lasting support to the fuel poor. Our current policies are already making a difference. For example, more than 580,000 low-income and vulnerable households will be warmer after receiving measures under the energy company obligation. We also announced, as part of the Autumn Statement, a new £25 million fund that will see up to 8,000 low-income off-grid households benefit from first-time central heating in 2015-16.
However, upgrading our housing stock is a long-term programme and fuel-poor households need help each winter. That is why the Government have a number of schemes in place, including the warm home discount, which provides direct support to customers with their energy. Introduced in 2011, the warm home discount requires electricity suppliers with more than 250,000 domestic customer accounts to provide financial support to their vulnerable customers in respect of energy costs. This winter the eligible customers received a £140 rebate on their electricity bill.
The existing regulations for the warm home discount scheme end in March 2015 and these amendments extend the scheme for another year. This will ensure that 2 million low-income and vulnerable customers can benefit from a rebate again next winter. The warm home discount scheme currently assists two groups of customers: first, the poorest pensioners who are customers of participating electricity suppliers, described in the regulations as the core group customers; and secondly, low-income and vulnerable customers, including poor families and those with disabilities, described as broader group customers. Under the core group, all the poorest pensioners eligible for the scheme who are customers of a participating supplier receive a bill rebate of £140 from their supplier. Customers who fall into the broader group, such as low-income families and those with long-term disabilities, can apply for rebates through their supplier. Customers eligible for the core and broader groups can also benefit from the industry initiatives section of the scheme. Participating energy suppliers are permitted to spend a share of £30 million annually to provide debt assistance, energy efficiency measures and energy advice, among other forms of support, to help these groups of customers make a lasting change to their energy bills.
Since we launched the scheme, around 2 million households in, or at risk of living in, fuel poverty have benefited from lower energy bills each year. As a result of the success of the warm home discount, the Government have committed to extending the support to 2016, with a spending target of £320 million. This is in addition to the £1.1 billion that has been spent over the first four years of the scheme to continue support for the people who need it most. The Government consulted on extending the scheme last October and proposed some small changes to improve its effectiveness, making it simpler and more accessible. Respondents to the consultation were supportive of extending the scheme and on 29 January we published the government response to the consultation.
I turn to the key aspects of the warm home discount next winter that would be implemented by the regulations that we are debating today. First, the core group will remain unchanged. People who have an electricity account with a participating supplier and receive pension credit guarantee will be entitled to a rebate. However, we propose to change the broader group section of the scheme. We intend to introduce a standard set of eligibility criteria. All participating suppliers will have to adopt these while continuing to have the flexibility to offer other criteria alongside.
The standard criteria are based on a variation of the current eligibility criteria for the cold weather payments group—households on certain means-tested benefits. In addition, we have now included low-income working families with an income of £16,190 or less that have a disabled child or a child under five. This change is consistent with the low-income high-cost fuel poverty indicator adopted in England, under which low-income families are the largest group in fuel poverty. This change will simplify the scheme, making it more accessible to this group of customers and removing some of the barriers to switching.
We propose to maintain the value of the rebate at £140 for the extension to the scheme. This means that participating energy suppliers can deliver 71,000 more rebates than would have been the case if we had increased it to £145. These extra rebates will be delivered under the broader group, mostly focused on low-income working-age families.
We also plan to widen the list of approved activities under the industry initiatives section of the warm home discount. First, we have enabled the provision of a £140 rebate to eligible low-income mobile home residents, primarily park homes. Mobile home residents are currently ineligible because in the majority of cases they do not have an electricity account with a participating supplier. What we envisage is that from now on they will be able to apply for a rebate if they are on qualifying benefits. This will be a voluntary measure. However, my officials are working with key stakeholders, including energy suppliers and the Department for Communities and Local Government, to develop a suitable scheme.
Secondly, we are supporting the inclusion of activities that would provide extra support to low-income customers living in non-gas homes or in disadvantaged areas, or to those with health problems or a disability. Customers with a long-term health problem or disability can be detrimentally affected by living in a cold or badly insulated home. The amendments to the scheme would encourage suppliers to provide support to these groups, who may struggle to get assistance through other policies. The consultation response also set out that it could be cost-effective to target low-income customers in disadvantaged communities. If this were the case, participating suppliers could find that they were able to help a larger number of customers at a lower cost. We will also make it compulsory for energy suppliers to provide energy advice to customers when delivering all other industry initiatives, wherever possible. Vulnerable customers will be able to make lasting positive changes as a result of such advice.
We also propose to make some technical changes to improve the operation of the scheme. First, we will put in place a mechanism to apportion any overspend or underspend in this scheme year, based on the suppliers’ market shares this year. Under the current regulations, they would be apportioned based on market shares next year. This is more equitable, particularly given the rising number of energy suppliers participating in the scheme. Secondly, in the event that suppliers overspend by up to 5% this scheme year, they can reduce their obligations by a corresponding amount next scheme year. This applies to the broader group and industry initiative elements of the scheme, and is an increase on the 1% flexibility that existed previously.
The amendments to the warm home discount regulations are necessary to help another 2 million households next winter. The changes that we are making will mean that suppliers will provide assistance to a greater number of low-income families, make the scheme simpler and improve its operation. I commend the regulations to the Committee.
My Lords, I am grateful to the Minister for introducing the regulations. Tackling fuel poverty is of the utmost importance. It is an ongoing embarrassment for a country of our wealth and standing to have so many people suffering from poor housing quality combined with low incomes, who are unable to afford to heat their homes and keep them in a habitable state. We really must crack that.
I understand the rationale for extending the order by another year, but I have a fundamental question. We are extending it for one year. Why is the programme so short term? It lasted for four years, now for five. Will it last for six or seven, or will we more fundamentally address the issue? I ask that because either the scheme is working, in which case we should put it on a more permanent basis and assess how well it is delivering against our objectives of tackling fuel poverty; or, if we are just using it as a stopgap while we try to find a better solution, should we not get on with that better solution? That is my fundamental question.
The longer-term solution is of course both raising people’s incomes and improving the housing stock. I question whether we are getting the right agents involved in delivering this. We are essentially relying on the suppliers to mediate between those poorer households and fuel poverty. Are suppliers the right people to do that? From my experience of working for a supplier, given a regulation such as this, from which they will see no possibility of making any profit, they will simply find the cheapest possible way to comply and constantly lobby the Government to enable them to do it more cheaply and with less onerous bureaucracy on them. They will not enter into it in the spirit of asking how we crack the problem, because they do not perceive the problem as theirs. They provide electricity and gas, and that is pretty much how they would like to keep it. They do not see themselves as responsible for people’s incomes or the fabric of people’s homes.
On top of that, there is a perverse incentive. We already see demand for electricity and gas falling in this country, and that is having an impact on the power companies’ bottom line. Therefore, I worry that they will try to find ways to meet their obligation without reducing the amount of product that they sell. It does not surprise me that we are now looking at extending the definition to allow them to take measures in non-gas and electricity grid-connected homes, because that suits the business model of them protecting their customers and continuing to sell their products while meeting the broader objective.
That is a very cynical presentation, and I am sure that the Minister can reassure me that some brilliant things are happening under the scheme, but I have not seen evidence that reassures me that that is the best way to approach the fuel poverty problem and that suppliers are the right agents to do this on our behalf. Perhaps the DWP could become more involved. I know that some suppliers will complain that it is hard to find those customers because they do not hold the data. The Government have the data. We are responsible for welfare and the DWP has a role here. Perhaps we should look again at a combination of different government departments being more involved, and getting local authorities more involved. I am not saying that that is the answer, but I raise the question of how, in our attempts to tackle this distressing element of our modern society, we keep scrutinising what we are doing, ensure that it is delivering value for money and ask ourselves: is this working and getting to the root of the problem? Perhaps the noble Baroness can reassure me that this has been, or will be, done. Can she also answer my first question, which was: for how long will we just keep extending this mechanism, and do we need a rethink as to how we approach this problem?
My Lords, in very broad terms I welcome the extension, although the noble Baroness, Lady Worthington, makes a fair point about its annual nature. However, there is one part of the regulations that concerns me, and that is the territorial extent and application. The regulations are confined to Great Britain. I have no doubt that the noble Baroness will say, “There’s devolution and therefore the Northern Ireland Assembly has a role”. However, the Welsh Assembly Government have a role. Indeed, they have a fuel poverty strategy and a budget. The Scottish Government also have a role. They have a very substantial budget and are involved as well.
Fuel poverty exists throughout the United Kingdom but the area with the highest level of fuel poverty is Northern Ireland. There are two reasons for that: first, earnings are lower and, secondly, energy costs are dramatically higher. The lack of an extension of the natural gas network to very large parts of the Province has meant an overdependence on kerosene for heating. Until comparatively recently, kerosene has been extremely expensive, and electricity has been notoriously expensive for more than 30 years.
I do not have a fundamental objection to the proposal before us but I am concerned to know precisely what part of our devolution settlement distinguishes Northern Ireland from Scotland and Wales in regard to this issue. It is perfectly clear that Scotland and Wales have policies, strategies and budgets and that they are involved in this. Energy suppliers throughout the country are of course involved as well, and I understand that. However, some years ago the Government conceded that there was a gap in the system, because devolution is an evolving process. We have just had a discussion about planning, in which it was said that planning in Scotland is separate from planning in England. That is fine, but it is just not realistic to imagine that expertise in an area such as nuclear waste disposal can be devolved and spread around the country.
I just make the point that there appears to be a difference of opinion here. Age Sector Platform in Northern Ireland lobbies Parliament every year. It did so towards the end of last year and it spoke to Members of both the House of Commons and your Lordships’ House. It has consistently argued that this is a national as well as a local issue. I would be very grateful if the Minister could explain to me precisely what differentiates Northern Ireland from Scotland and Wales in this matter. If the response is not immediately available, I shall be very happy if she writes to me, as I accept that there are complications. However, I just wanted to flag up for the record that we have doubts as to whether this is something that is entirely devolved in our case. The noble Baroness may say, “Of course, if we spent more money”—and money has been allocated here—“there would be Barnett consequentials for Northern Ireland, as there would be for Scotland and Wales”. That is true, but Barnett consequentials are not necessarily spent in devolved regions on the matters for which they receive the money. To take an extreme example, if there were a Barnett consequential as a result of this proposal, a devolved Administration could spend it on transport or anything else—there is no link. In other words, the money is not ring-fenced, yet Northern Ireland has the highest level of fuel poverty compared with anywhere in the United Kingdom. No one argues about that; it is a fact.
We have here a proposal that I broadly support, but I am concerned that I, and a number of people in Northern Ireland, are not clear on why there is this differentiation. As the noble Lord, Lord Rooker, will know, the devolved Administration has energy responsibilities; indeed, I was Energy Minister myself for three years in the early stages of devolution. I know that our Department for Social Development also has a role: it promotes boiler replacement schemes and other measures that I know are very important to people. We have had insulation proposals and draught-proofing—the routine sorts of things that we all have. However, it is the differentiation between Scotland and ourselves in particular that I am unclear about, and I would be grateful if the Minister could clarify it, either today or at a later date.
My Lords, I am extremely grateful to the noble Lord, Lord Empey, and the noble Baroness, Lady Worthington, for their contributions. I agree with the noble Baroness—we are agreeing a lot today—that it is criminal to have so many of our citizens living in fuel poverty. However, we also have among the most energy-inefficient housing stock in Europe, and we need to address a number of issues at the same time. The scale of this is huge.
To return to today’s order, the response to the question of why it should be extended for a year if it is working so well is that we want to extend it to a year but, as the noble Baroness is aware, the commitments will then be dependent on the next spending round. While we can commit to the extension this year, the next Government will have to make commitments for further extensions, or not. We need to look at the core reasons underpinning why people are living in such inefficient homes and at how we better ensure that we resolve that part of the difficulty. The measures that we have undertaken, whether it is the Green Deal, the ECO or the rollout of the smart metering programme, will all add to helping consumers to take greater charge of how they have control over their own energy needs.
I agree with the noble Baroness that we have a long and high hill to climb, which is why, as she points out, we need to work much better across government. We are working with the Cabinet Office on how we can better data-share. On her question, “Why use energy suppliers?”, the mechanism to deliver this is cost-effective. It is right that we also try to ensure that we do not add extra costs in delivery. If it is in the interests of the suppliers, given that competition is now greater in the marketplace, it will ensure that they deliver better, more effectively and more efficiently; otherwise, they know that the process of switching to another supplier is much easier. There are lots of processes going on, and we need to ensure that those people who need to benefit the most have access to the information.
I say to the noble Lord, Lord Empey, that it would be better to write to him. He has laid out rather a detailed question on Northern Ireland. He has already mentioned the Department for Social Development, which, as he will know well, already offers energy efficiency improvement schemes for low-income households. It would not do justice to his question if I were to skimp on replying now; I would rather write to him and perhaps send a copy to the Committee, if that is agreeable.
I am sorry to rekindle the debate. While the Minister was responding, I was thinking that it may be time to introduce some form of test for energy policy to articulate the impact of energy policy decisions on fuel poverty. One of the reasons why I think that might be necessary is, if we look at what is happening with some of the extensive costs coming from last year’s Energy Act—by this I mean the cost of CFDs, for example—it is proposed that those costs should fall only on consumers, not on industrial participants. I can see the logic for that, but it will have the effect of loading those extra costs on to consumers at a time when we have a problem with fuel poverty. I wonder whether we can have a discussion on having a fuel poverty test on policies. We would then at least be aware, when we decide where costs should fall, that we are not blind to the impacts on fuel poverty.
As the noble Baroness is always aware, I am very happy to take that away and have discussions outside of the Committee with her and any other noble Lord who would be interested in the subject matter. The ultimate goal for all of us is to try to reduce the impact of any extra cost on those who can least afford it. I am very happy to take that away and have discussions with the noble Baroness and others.
I am very happy that the Minister has said that she will write to me; I appreciate that. For clarity, I am aware of the Department for Social Development’s role, but my precise point is that similar roles appear to be played by the Scottish and Welsh Governments. I am trying to get at the precise difference between those three. I am very grateful to the noble Baroness.
Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2015
Motion to Consider
My Lords, I beg to move that the Grand Committee do report to the House that it has considered the draft Pneumoconiosis etc (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2015, and the Mesothelioma Lump Sum Payments (Conditions and Amounts) (Amendment) Regulations 2015. I am required to confirm to the Committee that these provisions are compatible with the European Convention on Human Rights, and I am happy to do so.
These two regulations will increase by 1.2% the lump sum amounts payable under the Pneumoconiosis etc. (Workers’ Compensation) Act 1979 and the diffuse mesothelioma scheme set up by the Child Maintenance and Other Payments Act 2008. These new amounts will be paid to those who first satisfy all the conditions of entitlement on or after 1 April 2015. These two schemes stand apart from the main social security benefits uprating procedure and there is no legislative requirement to review the level of payments each year. None the less, I am happy to confirm the increase of the amounts payable for 2015 by the consumer price index. This is the same 1.2% rate that is being applied to industrial injuries disablement benefit and some other social security disability benefits under the main social security uprating provisions.
The Government recognise that people suffering from diseases as a result of exposure to asbestos or one of a number of other listed agents may be unable to bring a successful claim for civil damages relating to their disease. This is mainly due to the long latency period between exposure and onset of the disease, often stretching back decades. Also, even pursuing a claim can take some time. We therefore fulfil an important role by providing lump sum compensation payments to sufferers of certain asbestos-related diseases through these two schemes. This does not debar a civil claim, which can still be pursued. These government schemes also aim to ensure that sufferers receive compensation while they themselves can still benefit from it, without first having to await the outcome of civil litigation.
Improved health and safety procedures have restricted the use of asbestos and provided a safer environment for its handling. However, the historic legacy of the common use of asbestos is still with us. That is why we are ensuring that financial compensation from both these schemes is available to those affected. I will very briefly summarise the specific purpose of these lump sum compensation schemes. The Pneumoconiosis etc (Workers’ Compensation) Act 1979 scheme—which for simplicity I shall refer to as the 1979 Act scheme—provides a lump sum compensation payment to those who suffer from one of five dust-related respiratory diseases covered by the scheme but are unable to claim damages from employers because they have gone out of business and have not brought any action against others for damages. The five diseases covered by the 1979 Act scheme are diffuse mesothelioma, bilateral diffuse pleural thickening, pneumoconiosis, byssinosis and primary carcinoma of the lung, if accompanied by asbestosis or bilateral diffuse pleural thickening. The 2008 mesothelioma lump sum payments scheme was introduced to provide compensation to people who contracted diffuse mesothelioma but were unable to claim compensation for that disease under the 1979 Act—for example, because their exposure to asbestos was not due to their work. The 2008 scheme means that payments can be made quickly to diffuse mesothelioma sufferers at their time of greatest need. Under both schemes, a claim can be made by a dependant if the sufferer has died before being able to make a claim.
The rates payable under the 1979 Act scheme are based on the level of the disablement assessment and the age of the sufferer at the time the disease is diagnosed. The highest amounts are made to those diagnosed at an early age and with the highest level of disablement. All payments for diffuse mesothelioma under the 1979 Act scheme are made at the 100% disablement rate—the highest rate of payment. Similarly, all payments under the 2008 scheme are made at that 100% rate and based on age, with the highest payments going to the youngest sufferers.
I will give some detailed figures on claims and monies paid out under the two schemes. In the last full year from April 2013 to March 2014, 3,300 people received payments under the 1979 Act, amounting to £45.1 million; 440 people received payments under the 2008 scheme, amounting to £9.4 million. The total compensation paid out under both schemes during this period was therefore £54.5 million.
Around half of payments made under the Government’s 1979 Act scheme are for diffuse mesothelioma. I know the occurrences of diffuse mesothelioma are a particular concern of Members, with the number of deaths in Great Britain continuing to rise. It is a fatal disease caused almost exclusively by exposure to asbestos. Those diagnosed usually have a short life expectancy, generally between nine and 12 months, with the sufferer becoming severely disabled soon after diagnosis. The rise in the number of cases reflects the long latency period of the disease, which can take decades to become apparent. Latest available information suggests that deaths will continue to increase to a peak of around 2,500 in 2018 and then start to fall, reflecting a reduction in asbestos exposures following its peak use in the 1960s and 1970s.
These regulations increase the levels of support through the government compensation schemes and I am sure we all agree that while no amount of money can ever compensate individuals and families for the suffering and loss caused by this disease and the other dust-related diseases covered by the 1979 Act scheme, those who are suffering rightly deserve some form of monetary compensation. The government schemes go some way to ensuring that they receive it as soon as possible. I commend the increase of the payment scales and ask approval to implement them. I beg to move.
My Lords, I think we are all grateful to the Minister for the way in which he has introduced the regulations today. He has talked about some very significant sums of money to assist some of those who, through either pneumoconiosis or mesothelioma, have had a death sentence merely as a result of their going out to work. I commend the Government for the uprating that they have announced today.
I have some questions for the Minister. He rightly said that Members from all sides of your Lordships’ House have been anxious, first in supporting the Government in the provisions of the Mesothelioma Act last year, but also in pressing for far more resources to be made available, both to those who have been victims of mesothelioma and for the important work involved in research in finding cures and the causes of mesothelioma.
I notice that the Government say in the Explanatory Note:
“An impact assessment has not been prepared for this instrument”.
Although I realise that that is a fairly technical thing and it is not a requirement for the Government to do that in this case, I wonder if that might be reviewed for the future, with regard to such an impact statement and assessment along the lines that the Minister has just referred to. I was not certain what he meant about the year in which he said the number of mesothelioma victims was likely to peak. Perhaps he could repeat it.
The year is 2018. It is very helpful to know that that is the case. That seems to differ from some of the dates that have previously been given by Ministers and in parliamentary replies.
Will the Minister assure me about continuing assessments, so that when these regulations come forward—alas, they will come forward on a regular basis—we can have much more up-to-date information about the total numbers and how the trajectory appears to be working out? I hear very different accounts from people who say that, as a result of diagnosis now being made in a different way from the past, the numbers are being assessed in different ways. Quite alarmingly, we see the incidence of mesothelioma in non-traditional groups. Those of us who have represented sufferers—through the trade union movement, in the case of some noble Lords here, or by representing constituencies, particularly in urban areas—have always been used to meeting people who worked as tunnellers or masons, or in traditional heavy industries. However, there is no doubt that there has been a significant increase in the number of people who present with the disease for no apparent reason—people who are domestic workers, who perhaps have just been at home or who work in schools, and particularly people in the Armed Forces.
I think it was the noble Lord, Lord West of Spithead, who mentioned in the House people he had been at Dartmouth with and literally playing snowballs with asbestos at that time, not realising the dangers. He mentioned the number of significant figures in the Royal Navy who had contracted mesothelioma and subsequently died. One of the things that I would specifically like to see in an impact statement would be categories of workers, such as those in the Armed Forces, for which we monitored the number of deaths from mesothelioma that were recorded so that we had a far better idea of the impact that this was having. I know that there will be particular interest from a number of those from the Armed Forces who have been following our debates. It was wonderful that the noble Lord, Lord West, along with the noble Lord, Lord Hunt of Kings Heath, and others, were able to meet some of those from the Royal Navy who have contracted mesothelioma, here in your Lordships’ House just a couple of weeks ago.
The Explanatory Note also says:
“It is intended that these rates will be reviewed each year”.
Perhaps the Minister could confirm whether that will always be in accordance with the consumer prices index, as it has been on this occasion.
I shall return to a Question that I raised on the Floor of your Lordships’ House on 9 December, which was answered by the noble Lord, Lord Faulks, on behalf of the Government. It touches directly on the allocation of money, and where it comes from, regarding some of the payments that are made to those who have become victims of mesothelioma. During the passage of the 2014 Act, Ministers said that the levy on the insurance industry would be set at 3%; in fact, the quote from the Minister in another place was:
“Three per cent. is 3% and we have no intention of moving away from it”.––[Official Report, Commons, Mesothelioma Public Bill Committee, 12/12/2013; col. 117.]
I asked this on 9 December and I ask it again today: why then has it been set at 2.2% when that original undertaking was given by the Government? That represents a shortfall from the insurance industry of around £11 million, so this is not a small sum of money. Although I welcome the subsequent uprating that the Government have announced in the total amounts of money that victims will be awarded under that legislation, I wonder whether there is a shortfall that still can be reclaimed from the industry and which might therefore be used to assist with the problem of research.
I moved an amendment in your Lordships’ House—I think it was defeated by a majority of about seven—which would have placed a requirement on all insurance companies to contribute to another levy to provide for mesothelioma research. I commend those insurance companies, and there are two big players, which have continued to step up to the plate to provide contributions towards research, voluntarily and without a statute. They put the other companies, of which around 150 are involved, to shame but what they contribute is far from enough. It also raises the question of why more public funding is not provided to tackle the disease.
I would be grateful if the Minister could confirm a figure. The Government have previously said to me that around 50,000 to 60,000 people will die of mesothelioma over the next 20 to 30 years. The Chief Medical Officer, Professor Dame Sally Davies, who is also the Government’s chief scientific adviser for health, has said:
“I hope the research community will now respond by generating new research proposals that will provide robust evidence to help people with mesothelioma”.
What I have quoted was also said by the Minister, the noble Lord, Lord Faulks, in response to a question from the noble Lord, Lord Wigley, who said:
“There needs to be a certainty that the money is there but the top-level researchers also need to be aware of it so that the money and the level of the research capability are brought together”.
The noble Lord, Lord Faulks, also said:
“The funding is very much there”.—[Official Report, 9/12/14; col. 1711.]
However, that seems to contrast with both the Question that I tabled in your Lordships’ House and a letter which I have received from him.
The Question I refer to was answered as recently as 23 February where, in a table, the Government say that there have been four successful applications. One of them is “Subject to contract” and the others have been successful in coming forward to tackle mesothelioma. But then there are several applications which have been turned down, and which were for substantial sums of money. I would be grateful if the Minister could tell us how this therefore accords with the idea that there are plenty of applications and that they have been sufficiently successful, because that does not seem to be the case.
In the letter that the noble Lord, Lord Faulks, wrote to me on 16 December 2014, following the exchanges on the Floor of the House, he said:
“In the last five financial years, the MRC and NICR have received just over twenty applications for grants or fellowships that relate to research on mesothelioma. Of these eight applications were successful resulting in an average success rate of 40%”.
That does not seem to be a very high success rate when we are dealing with the potential loss of life of so many British people, who have contracted this disease simply as a result of going out to work.
During the debate on my Question the noble Lord, Lord Giddens, told your Lordships that his own wife had died of mesothelioma. A few days ago, along with the noble Lords, Lord Giddens and Lord Saatchi, I met the British Lung Foundation. I met a brilliant young woman who is a registrar in London. She told me that she is the only person working anywhere in the world on an innovatory treatment, using adult stem cells which are targeted at mesothelioma cells. She says that that has proved extremely successful in the animal models that have been used. My heart rose when I heard that, and there are other examples that I could cite but I do not want to take up too much of your Lordships’ time today. Surely this is how we must proceed. During that meeting, she told us that it would take £2.5 million to move from the stage that she has reached now on to clinical trials. Again, that does not seem an outrageous sum of money in terms of what we need to do.
As a result of bringing forward these regulations today, I hope that the Minister will give us some assurances that he will return to the House—with a letter that can be sent to Members of the Committee, with further written replies to Parliamentary Questions or in Statements to the House—to tell us what progress is being made to ensure that we tackle this problem at source. Otherwise, I suspect that year after year, for the next 20 or 30 years, we will be gathering in places like the Moses Room and looking at lists of people for whom compensation is being given to deal with the effects of a disease which at the moment has no cure and which wreaks such tragedy in the lives of so many ordinary working people in the United Kingdom.
My Lords, I pay tribute to the noble Lord, Lord Alton, for the assiduity with which he pursues the case for the sufferers of mesothelioma, and in particular for the plea that he has just made that those conducting research into a cure for this horrible disease should receive more favourable treatment. Whether that should come out of the 3% levy or from some other source is a matter that we were talking about just before we came into this debate. I know that there are other sources and I hope that the researcher whom he mentioned, who has got as far as she has in using adult stem cells to treat sufferers of mesothelioma, will be able to secure grants from one of them. The noble Lord showed me a list of other applications that have been made but which have not been successful. I very much regret that the sources of funding for research into a cure for mesothelioma have not been more forthcoming in the cases that he mentioned.
I am most grateful to the Minister for his careful explanation of the regulations. I have discussed them with Mr Doug Jewell, the chairman of the Asbestos Victims Support Groups Forum UK, who told me that the forum is pleased that the Government are raising the payments by 1.2%—the same as the increase in social security payments—although they were not obliged to do so by the primary legislation. I thought that it would be even better if the Government undertook to make uprating in line with social security payments obligatory, in primary legislation, when a suitable opportunity arose. It seems that they have every intention of following that path, but it could be an additional safeguard under future Governments if these upratings were in line with those promised for social security payments. Perhaps the Minister could say something about that in the course of his reply.
The forum is also happy with the statement that was made by my noble friend Lord Freud on 10 February, increasing the tariff of payments made under the Diffuse Mesothelioma Payment Scheme—the DMPS—from 80% to 100% of the average payment made on civil claims for those diagnosed from that day onwards. My noble friend said that this was possible because the Employers’ Liability Tracing Office—the ELTO—had been increasingly successful in tracing insurance policies, enabling victims of the disease to pursue a remedy from the companies that issued the policies.
My honourable friend the Member for the Forest of Dean said that that uprating could not be retrospective to the start of the DMPS last July because it was usual for upratings of benefits to be paid from the date of the announcement. In this case, however, the initial decision to pay only 80% of the average civil claims payment was based on a miscalculation of the success rate in tracing insurers. The Government may have needed to be careful not to exceed the 3% gross premiums cap on the contribution to the scheme which had been agreed with the insurance industry, so I assume that they worked on the assumption that the number of successful civil claims would remain constant, and so would the number of claims under the scheme, making no allowance for the work of ELTO. If that is the case, and the decision to pay only 80% was based on a miscalculation, will the Minister please tell your Lordships what the levy is expected to be as a percentage of gross premiums in its first year with the scheme as it is, and what it would have been if the scheme had paid out 100% from the start? I understand that 3% of gross premiums would be £43.6 million, that the cost of the scheme as it is would be £32 million, and that backdating the payment of 100% of civil claims to last July would be £5 million, so that the total would still be well within the 3% gross premiums cap.
These regulations cover the related question of payments under the 2008 lump-sum payments scheme and the workers compensation Act 1979, as my noble friend has explained. These payments are also uprated by 1.2%, so that a person of the Minister’s age—I am talking about my noble friend Lord Freud—and diagnosed in July would receive the princely sum of £23,881. Someone of my age would receive £13,445. Neither of those amounts would provide financial security for the victim’s partner or dependants when the patient died, as they do within an average of 12 months from diagnosis.
But the situation is even worse if the claim is submitted after the victim dies. Patients with mesothelioma realise only too well that their life expectancy is limited, and one of their main concerns is the financial security of their dependants after they die. Most of them manage to submit claims themselves, obviously while they are still living, knowing that the amount paid out in a posthumous claim is greatly reduced. In the case of a patient of my age, a surviving spouse would receive £7,462. Thus, of the 3,770 payments that were made in 2014, only 360 were posthumous. The DWP estimates that it would cost another £2 million to equalise payments between sufferers and their nearest and dearest. Will the Minister please explain on what assumptions that calculation has been based? Does it take into account the substantial incentive that patients have to make a claim so that the number of posthumous claims would decline as time passes?
The forum also suggests that the DWP’s figure does not take into account the sums that are recouped when the applicant is eligible for the DMPS, which they say would amount to £960,000, making the net cost of uprating just over £1 million instead of £2 million. The argument for moving towards equalisation relies not on the relatively small cost in relation to the social security budget as a whole, but on the fact that because of sufferers’ short life expectancy, the beneficiaries of compensation schemes were always going to be mainly their spouses and children, not the applicants themselves, and it was illogical to divide them into two classes according to the date when the claim was made.
The forum also points out the unanimous view of parliamentarians and stakeholders, which was acknowledged by the DWP in the person of the noble Lord, Lord McKenzie, when he was Minister in 2010, that the difference in payments was “unfair and unhelpful”. He added £5,000 to the amount that dependants would otherwise have received under the regulations then under consideration, which he said went some way towards our commitment to bridge the gap.
It is an ancient principle of law that when Governments enter into commitments the public faith is thereby pledged and cannot be lightly abrogated by their successors. I know that neither my noble friend Lord Freud nor his predecessors since the coalition came into office have said that equalisation has been abandoned, but they rely on the argument that in the prevailing economic climate the cost would be too high. I hope my noble friend can say in replying to this debate that the Government are still committed in principle to eliminating the difference and that if the economic conditions continue on their present trajectory, they will do so if they remain in office after the election.
My Lords, as a former president of the TUC, I reiterate the tribute to the trade union movement for its identification and campaigning on this issue. As the noble Lord, Lord Alton, has mentioned, it was a tremendously long time after the start of the trade unions’ campaign before there was any official recognition. I also speak having had a sister-in-law who died of mesothelioma. I am currently the chair of the oversight committee of the mesothelioma fund. The fund was set up after debate by this Parliament and is a matter for congratulation on all sides. I will not say too much about the work of that committee as I am not sure how appropriate that is.
I will say something first about the non-traditional industries that the noble Lord, Lord Alton, mentioned. It would not be appropriate for the oversight committee to take responsibility for this, but the DWP could undertake more publicity about the so-called non-traditional industries. I will mention jewellery repairs as an example that may surprise some. In the old days, particularly in the big centres where there was a jewellery quarter, the glossy shops would take the jewellery that needed repairing off to somewhere else. There would be asbestos benches and the workers would sit with their chin virtually on the bench, scraping grooves into the asbestos to put the mould in so that they could secure the jewellery. Some people worked in these sorts of surroundings for years, but it may not have been an obvious area for others to identify what was wrong with them. They therefore may not know that the disease could have happened as a result of their work in the 1950s and 1960s. In some of the non-traditional industries there was consistent exposure to asbestos but it is not so well known as in some of the traditional industries.
Often when people worked in factories, they were called, for instance, warehousemen. That covered a multitude of sins in the 1950s and 1960s. They were not always warehousemen at all; sometimes they swept up pure asbestos from factory floors. The term “warehouseman” was simply a designation of the grade or the pay rather than an accurate job description. We were all a bit more casual about job descriptions in those days, compared with the rather minute detail that we seem to go into now. Again, it would be useful if some publicity could be given to the fact that job descriptions did not always accurately describe the work that was done. Some publicity by the DWP would be very welcome.
One of the awful things about this dreadful disease is that by the time it is diagnosed people are sometimes so ill, and their families so upset, that the last thing they think of doing is filling in a form. I know that we are supposed to live in a “compensation culture” age, although personally I do not believe that, but some of these families have to be dragged kicking and screaming to fill in a form when all they want to do is think about their loved one. Any publicity or ease of access into the system that the DWP can provide would perform a genuinely good social service.
My Lords, I thank the Minister for his explanation of these regulations, and all noble Lords who have spoken. It is a privilege to be gathered with the same cast of people with whom we have debated these issues over the past couple of years. This is a terribly cruel disease. Some of the stories that we heard from the noble Lord, Lord Alton, and my noble friend Lady Donaghy, which reminded us of the ways people contracted these conditions, should give us pause for thought about what we are missing today. As the Minister has indicated, there is no requirement to uprate these payments. We welcome the uprating by 1.2%, particularly since it is broadly in line with increases to some other social security disability benefits and industrial disablement benefits.
The point raised by the noble Lord, Lord Avebury, on whether the Government would consider putting these upratings on to a statutory footing, was also raised by my honourable friend Kate Green when these regulations were considered in another place. As she noted when the regulations were considered last year in a Delegated Legislation Committee in another place, the then Minister for Disabled People said that the Government were actively reviewing the way that the uprating could be done. Kate Green asked how that was getting on. The answer she got this year was that the matter was still under review. Could the Minister tell the Committee something about the nature of that review and how much longer it might take? Could he share the barriers found during the past year to putting this uprating on a statutory footing in the way described by the noble Lord, Lord Avebury? Has the Minister any sense of the timescale for when that might be resolved?
Secondly, I want to revisit the question of differential treatment of dependants and sufferers under the scheme, also raised by the noble Lord, Lord Avebury. This came up when these regulations were being uprated last year. Dependants receive lower awards than sufferers in these two schemes, in three broad ways. The cut-off age for dependants to be in receipt of an award is 67 for dependants, compared with 77 for in-life claims. Some in-life claimants can receive a 10% enhancement under the 1979 scheme, although not, I acknowledge, under the 2008 scheme.
Awards for sufferers are also set at a higher level than those for dependants. As we discussed last year, that is at odds with the treatment of civil claims for mesothelioma compensation in the courts, where dependants receive higher awards. Because sufferers live for such a short time, as the Minister acknowledged, this can become a real problem. I very much agree with my noble friend Lady Donaghy about the fact that when someone is diagnosed, often the last thing that people want to do is spend the little bit of time left to them having to worry about money. Because the awards are lower to dependants, though, there could be pressure on a sufferer to spend that bit of time trying to sort out a claim because they are worried about what will happen to their dependants. Because the amount is lower if the claim does not get in before they die, that can add to the pressure on them. Have the Government been able to think any more about that?
As was mentioned by the noble Lord, Lord Avebury, when my noble friend Lord McKenzie was the Minister in 2010 he began to eliminate that difference in treatment and began to work towards equalising payments for dependants and sufferers. However, there has been no progress since then in narrowing the gap. When we debated the uprating last year, the noble Lord, Lord Freud, said that the Government were also keeping this issue under review. I had hoped that the Minister would come back to it. Perhaps he can tell us how that review is going: is there any intention to revisit it? Since he told us that we are now looking at deaths from mesothelioma peaking in 2018, the amount of time for this to be addressed is beginning to run out. Can the Minister tell us anything today?
Finally, before I come on to the points raised by the noble Lord, Lord Alton, I have a brief question about education. When the noble Lord, Lord Freud, wrote last year after our uprating discussion to all of us who had contributed to the debates, he mentioned an awareness-raising campaign due to launch in Autumn 2014 with a budget of £1.3 million. He also kindly gave details about what the campaign would cover and how it would be run. Will the Minister update the Committee as to whether the campaign was launched and is proceeding in line with the information given in that letter a year ago? How will the campaign be evaluated and will the evaluation be published?
I turn to the Mesothelioma Act 2014 and the important points raised by the noble Lord, Lord Alton. The question of 3% is very important. We spent a huge amount of time in this House at every stage when the Bill was going through discussing the appropriate level. We negotiated in careful detail about the amount of the levy, who would be covered, what the backdating period would be and the levels of the payment. We were absolutely reassured that that was the most that could possibly be afforded. So be it.
When the Bill then went to another place, the amount of compensation was raised from 75% to 80%, which was very welcome, but the question of the level of the levy was raised then. On Report in another place, my honourable friend Kate Green moved an amendment to enshrine the 3% in law. The response given by the then Minister for Disabled People was:
“Three per cent. is 3% and we have no intention of moving away from it”.––[Official Report, Commons, Mesothelioma Public Bill Committee, 12/12/2013; col. 117.]
and that the amendment was therefore unnecessary.
Now, of course, the amount has come out at 2.2%. When the order was debated in another place, the Minister said that it is not a target, it is a cap. What has happened to move from what was clearly a flat 3% to something that becomes a cap, not a target, in the intervening period? One indication being given, as has been suggested, is that the take-up rate is lower than expected. I very much hope that the Minister can give us some information to help us to understand why the take-up rate is so low and what action the Government are taking to look into either the success rate or the coverage, the reach, being taken into non-traditional areas—a point made by my noble friend Lady Donaghy. That would be very helpful.
If more money is available, there are plenty of ways in which it could be spent, which were pushed for when the Bill was going through Parliament but we were told that the money was not there. The noble Lord, Lord Alton, made a point about research, to which he has returned more than once on the Floor of the House. The noble Lord, Lord Avebury, made a point about entry. There was much pressure on the Government at the time to backdate claims to earlier than 25 July 2012, which was the date eventually settled on. Did the Government consider that?
I echo the request from the noble Lord, Lord Alton, and my noble friend Lady Donaghy for more information about what is happening. If the Minister can give information about the categories of workers affected, can he also give us further information about those who were not workers at all, whom we discussed at length, such as spouses? There was much discussion when the Bill was going through of spouses who had contracted mesothelioma from washing the overalls and work clothes of people of people who contracted it, but who were not covered because they were not workers. Is there any more information about that? I thank all noble Lords who have spoken, and I look forward to the Minister’s reply.
My Lords, I thank noble Lords for their helpful contributions to the debate. The Government recognise that the two schemes form an important part of the support available to sufferers of mesothelioma and certain other dust-related diseases, and the regulations will ensure that the value of those schemes is maintained. As the noble Baroness, Lady Sherlock, said, there is no statutory liability to uprate them but, like other noble Lords, I am pleased that this has been managed this year as it was last year.
Let me try to deal with the many valid points raised. In so far as I cannot supply information, or if I miss anything, I will ensure that we write to all noble Lords who have participated in the debate. I will try to take the points in the order in which they were raised.
I thank the noble Lord, Lord Alton, for his support and acknowledgement of the assistance that we have provided. We believe that the impact will be greatest in 2018. That is our best information but we will double check that, and will certainly write to noble Lords if that is inaccurate. We do not intend to make an annual impact assessment but we will look at whether it is possible. We certainly will have access to the indication of the estimates of the people who are likely to contract the disease, and I hope that we are able to do something around those in terms of the increase as it comes each year—hopefully, it will—to indicate that in some sort of impact assessment.
I am extremely grateful to the noble Lord for intimating that at least the proposal will be looked at. It is pretty clear from all the interventions that have been made in these proceedings that it would be incredibly helpful if a narrative could be provided annually, along with these upratings, of where we stand on the broader horizon of the issues that have been referred to during the debate. For me, it would be a very useful outcome of these proceedings if we could have an undertaking that an impact assessment will be provided routinely each year.
I can certainly undertake to look at this and I hope that we will be able to do so. I need to go back to the department to make sure that it can be done, but the noble Lord can have my undertaking that we will certainly look at that.
The measure currently being used is the CPI, and many people have suggested that that could be put on a statutory basis. We are still looking at that and certainly have not ruled it out. That would require a statute, but we are continuing to look at the evidence as to whether it is something that we should be doing. In the mean time, we have flexibility and I think the record speaks for itself: we have been seeking to do what we can.
The noble Lord was keen to push for more research money for projects on mesothelioma. Like him, I was delighted to see that Aviva and Zurich have agreed to pay £1 million to the British Lung Foundation, which does fantastic work. I remember the work that it did when I was in the National Assembly for Wales. It is indeed an excellent organisation. We have set up a partnership that includes patients and clinicians to identify mesothelioma research priorities, and the results were published in December. I will make sure that those are circulated to noble Lords so that they have a record of what is happening in that connection.
I turn to the 3% levy, which has been raised by many noble Lords: the noble Lord, Lord Alton, my noble friend Lord Avebury and the noble Baroness, Lady Sherlock. It is a cap, and setting it at 3% was a hard-fought agreement with the insurance industry. It is not, as it were, a budget; it is a cap and it was set at that level because we wanted to ensure that there would be sufficient funds in the scheme to pay out the money. We have to take account of the cost of the scheme, and that is what the agreement was—it was not to fund research. However, I hope that other insurance companies will follow the excellent example set by Aviva and Zurich, which I have mentioned.
My Lords, I am sorry to interrupt the noble Lord again, but this is an important point. It seems grievously unfair on the two companies that the noble Lord has rightly referred to, which for purely voluntary reasons have stepped forward and provided £1 million of funding to the British Lung Foundation, when there are around 125 insurance companies involved in this. The two companies that have provided these resources have asked why other companies are not being required to do the same. There is a question of equity here, apart from anything else. I am sure that the Minister will agree that, welcome though the £1 million is, even the one suggestion that I have made, which would require £2.5 million to bring it forward to clinical trials, indicates that the sum really is a drop in the ocean. When compared with all other cancers, mesothelioma has traditionally always been at the bottom of the league table in terms of private and public funding.
I think that the noble Lord is being a little inventive in suggesting that we should compel other insurance companies to follow the voluntary effort being made by two. I certainly commend that effort but it is a voluntary one, and there is always room for voluntary effort. We would not want to see insurers having to pass on additional costs of the scheme to their customers. As I say, a hard-fought, robust agreement has been made with the insurance industry. That is not to say that it cannot ever be revisited but, as things stand at the moment, it was set as a cap, not as a budget.
My Lords, I agree with the Minister that you cannot compel the rest of the insurance companies involved to pay money when two companies have voluntarily come forward and made contributions, but perhaps he would write to the 125 other companies asking whether they consider that they are in any way morally obliged to follow the lead which has been set by those two companies and make a voluntary contribution.
I do not undertake to write to the 125 companies involved, but we will make sure that a copy of the debate and a covering note is sent to the Association of British Insurers so that it can pass it on. The noble Lord made a very fair point.
Equalisation with dependants has been raised. The rules on the status of dependants and the amounts they get are not straightforward because it depends slightly on the nature of the dependency, when the sufferer died and so on. We certainly have not ruled out equalisation but it is not a top priority. The top priority is to get money to sufferers quickly, which we do under the 1979 and 2008 Act schemes. That remains our priority. I am not saying that equalisation will never be looked at. I think that the noble Lord, Lord Avebury, along with other noble Lords, asked about an indicative estimate of the cost. It is about £2 million per annum. We will review the situation in more detail and I will write to noble Lords on that issue.
I acknowledge the work the noble Baroness, Lady Donaghy, has done as a former president of the TUC and, indeed, the role of the TUC in campaigning on this issue. It has certainly done more than its ration in this regard. The noble Baroness usefully highlighted some of the hazardous industries which are not immediately obvious, such as the jewellery repair business, which she mentioned, and gave the example of a warehouseman who was exposed to the substance we are discussing while sweeping up.
The noble Baroness, Lady Sherlock, referred to publicity on this issue and the campaign mentioned by my noble friend Lord Freud on a previous occasion. My honourable friend the Minister for Disabled People helped to launch the current £1.13 million Health and Safety Executive asbestos awareness campaign in October 2014, to which the noble Baroness referred. The campaign aims to help at-risk workers recognise that asbestos is relevant to them and their work, encourages them to seek reliable information on how they can protect themselves and encourages safer working with asbestos through behavioural change. The campaign is not due to end until March 2015, and a full evaluation will be undertaken before any decision is made about a further campaign so that we are able to take that information onboard in framing any future campaign. However, we will, of course, report back after the evaluation has concluded. I do not have a date for that, but I suspect that the evaluation will be completed some time in the spring or early summer of this year.
I think that I have covered the points made by the noble Baroness, Lady Donaghy. I am very grateful to the noble Baroness, Lady Sherlock, for her comments on, and general support for, the uprating. As I say, we have not ruled out the statutory footing and I have just referred to the awareness campaign. I think that I have dealt with the other points that she raised. Do we think that the low uptake is a communications issue? I do not think so. Specialist health workers and clinicians support sufferers and are fully aware of the nature of asbestos. Our schemes are in addition to that. However, I am not being complacent. Obviously, we will make an assessment of the current campaign. We also make use of social media to ensure that we get messages across.
I think that I have dealt with the points that noble Lords have made. This is a really important issue. I am very pleased that we have been able to bring in uprating at 1.2%. I will write to noble Lords with the points that I have mentioned and any other points that I have missed. In the mean time, I commend the uprating of the payment scales and ask for noble Lords’ approval to implement them.
Pneumoconiosis etc. (Workers’ Compensation) (Payment of Claims) (Amendment) Regulations 2015
Motion to Consider
Social Security Benefits Up-rating Order 2015
Motion to Consider
My Lords, the Guaranteed Minimum Pensions Increase Order 2015 and the Social Security Benefits Up-rating Order 2015 were laid before the House on 19 January 2015, and I am satisfied that they are compatible with the European Convention on Human Rights.
I start by touching briefly on the Guaranteed Minimum Pensions Increase Order. The order provides for contracted-out defined benefits schemes to increase their members’ guaranteed minimum pensions which accrued between 1988 and 1997 by 1.2%, in line with price inflation as at September 2014. As the Committee will be aware, we are not here to discuss the Welfare Benefits Up-rating Order 2015, which was made on 14 January. The rates increased under that order, by 1%, were debated in Parliament during the passage of what became the Welfare Benefits Up-rating Act 2013.
Turning to the Social Security Benefits Up-rating Order, I start with the increase in the basic state pension. One of this Government’s first acts was to restore the earnings link to the basic state pension. Indeed, we went a step further and provided for a triple lock for pensioners: a commitment from the Government to increase the basic state pension each year by earnings, prices or 2.5%, whichever is the highest. This year, as 2.5% is greater than the increases in prices and average earnings, the basic state pension will increase by 2.5%, twice the increase in prices and four times the increase in earnings, which is the minimum required by law. The new rate of basic state pension will be £115.95 a week for a single person, an increase of £2.85 from last year. We estimate this means that the basic state pension will be around 18% of average earnings, its highest comparative level for more than two decades.
Our triple-lock commitment means that someone on a full basic state pension can expect to receive £560 a year more than if it had been uprated by earnings since the start of this Parliament. This commitment also means that, since coming into office, the coalition has increased the basic state pension by around £950 a year.
On pension credit, we have taken an important decision to ensure that the poorest pensioners are able to benefit from the effects of our triple lock. That means that rather than rising in line with earnings at 0.6%, the minimum required by legislation, the standard minimum guarantee credit in pension credit will be increased by 1.9%, so that the poorest pensioners benefit from the full cash value of the increase in basic state pension. Single people will therefore receive an increase of £2.85 a week, while couples will receive an increase of £4.35 a week. Consistent with our approach last year, the resources needed to pay for that above-earnings increase to the standard minimum guarantee have been found by increasing the savings credit threshold, which means that those with higher levels of income will see less of an increase.
Turning to additional state pensions, I can confirm that these will again rise in line with price inflation in 2015-16 and so will be increased by 1.2%, which is the CPI level. The decisions we have taken on pensioners reflect the Government’s belief that even in difficult economic times, it is important to protect those who are less able to increase their spending power. This belief is reflected in our decision to ensure that those benefits that reflect the additional costs because of disability will be protected, too, and will be increased by the full value of CPI at 1.2%. These payments are the personal independence payment, disability living allowance, attendance allowance, incapacity benefit, the disability-related premia paid with pension credit and working-age benefits, the support component of the employment and support allowance, and the limited capability for work and work-related activity element of universal credit. Carer’s allowance and carer premia paid with pension credit and working-age benefits will also be protected and increased by the full value of CPI at 1.2%.
I ask noble Lords to note that, at a time when the nation’s finances remain under real pressure, this Government will be spending an extra £2.5 billion in 2015-16. Of that, about £2 billion is for state pensions, including an above inflation increase for the basic state pension, around £300 million will go to disabled people and their carers, and nearly £200 million will go to people who are unable to work because of sickness and unemployment.
The up-rating commitment that I have outlined today provides for increases above both inflation and earnings in the basic state pension and the standard minimum guarantee credit in pension credit. It also protects benefits that reflect the additional costs that disabled people face against increases in the cost of living. On that basis, I commend these orders to the Committee. I beg to move.
My Lords, I suppose that I should declare an interest as a recipient of one of the pension benefits that the Minister has just announced. I should get that on the record. When he read out the increases, I was reminded that I was the 75p Pensions Minister. He took me back down memory lane as he spoke.
I remember it well, too.
I want to raise a very narrow point on this order. Article 10 under Part 2 concerns the rates of the personal independence payment. Within the PIP is the mobility component, which enables people to access the mobility scheme for the lease of vehicles. I was in the Commons in the 1970s when the scheme replaced the old invalid trike, so I am well aware of the positive change. I make no comment on the scheme, save to say that it has given safe access to mobility for many thousands—indeed, millions—over the years, and I hope that it will for years to come. Given that it is public money that we are dealing with, I want to call now for a full inquiry in the next Parliament by the National Audit Office, the Public Accounts Committee and the Work and Pensions Select Committee into the finances of the scheme and particularly the banker-sized salaries paid to certain individuals.
The DWP is paying the Motability charity around £20 million per annum. The charity receives about £7 million in lease levy from the vehicles used. It has a total income of about £30 million. The £20 million from the DWP is paid to a company in respect of advance payments and adaptations. The charity itself—I will come to another one in a moment—is dependent on the money in this order. The chief executive of the charity, which is over 60% dependent on public funds—the money paid from the DWP—was paid £160,000-plus in 2013.
However, the main vehicle scheme is operated by Motability Operations Group plc, a company owned by four banks—Barclays, Lloyds, HSBC and RBS. It operates as a contractor to, and is overseen by, the charity. This point is crucial because it is the link with the money in this order. The revenue of the operations company is broadly £4 billion: £2 billion from operating leases and £2 billion from the sale of vehicles at the end of the three-year lease. Six hundred cars a day are placed on the second-hand car market, and I am aware that one in my family was once such a car.
The company, Motability Operations Group, claims, on page 4 of its report, that it gets no money from the Government, but the £2 billion for leases is in fact the DWP payment—now, the PIP—paid to over half a million people. Because the people receiving the PIP have agreed to assign the DWP allowance to the scheme, it is paid directly to the operations company and it is clearly government funding. I call that public money.
The company CEO receives a pay package of £923,000, as set out on page 82 of the accounts. On the same page I see that the chair of the operations company receives a pay package of £195,000, and a small number of directors share some £3.3 million. In addition, there are long-term incentive arrangements for the CEO and the directors. The whole system is dependent on the DWP payment, which is being uprated in paragraph 10. In fact, it is the only example I know of where a social security benefit creates, supports and finances a large private sector operation. As such, the National Audit Office, with its duty to ensure value for money, and the PAC should take a look at this arrangement. I think that the DWP Select Committee should also show some interest.
The Charity Commission should also be interested in the governance of the charity, which is 60% funded by the DWP. It could ask, for example, why the chair of the company operations remuneration committee considers it right to stand down after two terms of three years, as set out on page 43, and yet the charity trustees have served for decades—term after term after term. For decades the same people have served. The Charity Commission could ask why there is a need for a second charity. According to its report, the Motability Tenth Anniversary Trust is sitting on assets of £176 million, spending £5 million with no employees and no volunteers. It could ask if the Nolan principles are being followed.
The commission might also want to take a look at an interesting article I came across the other day at www.accountingweb.co.uk entitled “Motability: An interesting charity”. In short, we have a service that everyone agrees is a public good and which is based on public funds where they dress up the risk factors, which are minimal by comparison with the private sector, and use them as a flimsy excuse to pay banker-size salaries. I accept that the second-hand car market is highly specialised and that there are some risks but, let’s face it, this company is putting into the market 600 cars a day seven days a week. It virtually controls the entire market. The risks are ones that they can manage. The whole edifice is built on the way the scheme started in 1977-78. It was then a public good, but in my view it has got out of control.
I should add that I am never clear on what the banks get out of the arrangement. The Library has not been able to explain it to me and says that it does not have any financial accounting experts. But the banks are not doing this for altruistic reasons. Given that paragraph 10 of Part 2 of the uprating order is the start point and end point, I think that it is right that, after 40 years, Parliament should review this aspect of public expenditure and the value for money that it is providing for the taxpayer.
In conclusion, I am well aware that the changes in the PIP, which I am not going to go into at the moment, mean that some people will lose their vehicles in the next couple of years. The company I have referred to has just made a charitable donation of £150 million to the charity to help fund people who are going to lose their vehicles. It has come out of their profits. I am not arguing about it and I am not even raising it. My point is a much more targeted one. This is a public company which is funded by a social security benefit and is providing a public good. I cannot see the need for the extra money to pay those banker-size salaries.
I fully admit that I do not expect the Minister to answer these points. He can tell his colleagues that I would not be on my feet today if it were not for the fact that on Monday, 2 December 2013, during a very busy and crowded session of Oral Questions, the noble Lord, Lord Wigley, asked a Question about this issue. Half way through the supplementaries, my friend in this respect, the noble Lord, Lord Forsyth, popped up and asked the Minister about the salaries in the charity. The Minister said, “£800,000”. When Hansard reports what I am about to say—“Noble Lords: Oh!”—that is an occasion when the House indicated, “Oh!”. I rang the Minister’s office and asked whether he meant £80,000, not £800,000; was it a slip of the tongue, it is easy to do? “No, Lord Rooker,” they said, “but it is the operations company he meant, not the charity”. The charity supervises and oversees the operations company. There is a link. The whole thing depends on all those people assigning their Motability allowance in the PIP over to the company for the vehicles, so the scheme itself works all right. My question is, why the banker-size salaries on what is effectively a public good paid for out of public benefits?
My Lords, it is pleasure as always to follow the noble Lord, Lord Rooker. I was the chairman of the Social Security Select Committee when he appeared in front us with his 75p increase. When I asked him if he thought he could live on that, he was honest enough to say, “No”. His reputation for honesty derives from that moment, as far as I am concerned.
The noble Lord has made a very effective intervention, even if it is on a narrow point, and I support what he is saying. I certainly think it needs to be looked at in the Select Committee in the other place and if not, the PAC is certainly the place to do it. There is a huge amount of uncertainty about the consequences of the changes. It is not just a question of transparency and proper use of public funds; there is a public policy downside that might cause great concern to large numbers of people. I do not want to detain the Committee. I just did not want to miss an uprating order because I have done 18 of them in the past 18 years and I would not want to be left out—people would think I was not well if I did not appear.
My first question is a broader one about the process we are now in. The Minister was quite correct to say that the 2013 uprating Act supersedes the Government’s usual review process for establishing value for money. What are the consequences of that? This is a unique uprating order in that sense. Was any review of any kind undertaken? Obviously, working-age benefits are largely absent from this order, except, as he said, disability carer benefits and ESA support components. What are the consequences for the future? Can we be given an assurance that when the three-year period of the 1% uplift, which was automatic under the 2013 Act—I got very excited about that at the time and I am still concerned about it—is over, we will go back to business as usual and there will be serious modelling in the department? I understand that Ministers review everything all the time and they always have done but in the old days of the Rooker-Wise amendment, for example, these things were seriously discussed on the Floor of both Chambers and that gave confidence to people that some serious modelling was done. I am nervous that that process is being eroded; it was always a valuable protection. There is a lot of corporate knowledge in the department and if it is deployed properly it can inform Ministers and Parliament. If that goes or is considered to be downgraded by the experience of the 2013 uprating Act I would be the first to queue up at the Minister’s front door and complain about it.
The other thing I noticed was the Minister’s references to the uprating of the basic state pension. The coalition Government have made some substantial progress with the uplift and the triple lock. I hope that that can be taken forward and enshrined in perpetuity, if the economy can bear the weight. The other side of that is the interesting front-page story in the Financial Times yesterday about the £7 billion reduction there has been in working age benefits that are not in these orders. I do not know if the Minister saw it.
My point is that there has been a dramatically increasing trend, in my view, of support for people past retirement age—both the noble Lord, Lord Rooker, and I are beneficiaries of that and, as I say, I welcome what has been done—but it should not be consistently at the expense, over long periods, of the working-age cohort of our society. There are two reasons for that. First, as colleagues know, the value of the CPI versus the RPI erodes. There has been another erosion, too: the change to the CPI in the 12 months to September 2014 was 1.2%, while the change in the RPI in the same period was 2.3%. That is another salami slice in the erosion of the respective relative benefits available to the retired population as opposed to the working-age population. Other benefits are involved, too. No doubt the upcoming election will allow everyone to talk about this—hopefully, more intelligently than some of the debates in the past. It cannot go on like this; the working-age population cannot be expected to be the source of increased resources for people who are past retirement age. I hope that that point can be addressed.
Schedules 9 and 10 of the order talk about some of the changes to the jobseeker’s allowance provisions. I am very worried about the impact of sanctions now on the jobseeker’s allowance, and they are covered in this order. One of the big increases in poverty that we have seen—the use of food banks—both in my experience and in the intelligence available to me, is among people who are temporarily out of work. I think that the great British public perceive people who are out of work as being a static group, as opposed to those who are in work. That is not the reality, as I am sure the Minister knows; there is a churn all the time and there are families going in and out of benefit. I am really surprised at the extent to which sanctions are being applied; I never for a moment expected 800,000 to 900,000 sanctions to be applied each year—I am really concerned about that.
My third point is that the department should weigh in the balance the fact that in 2010, when the Autumn Statement set some of this policy in place, there was a clear expectation, certainly in my mind, that by now universal credit would be bringing relief to big numbers of low-income households. We all know that there have been difficulties with the IT, but I am not satisfied that it is on the right track. We need to get it in as soon as we can. It will probably be 2019 before it is finished. In 2010 we were saying, “Well, this will provide some comfort”, but the fact that it is absent except for 61,000 people—and half of them are under 25-ish—will be weighed in the balance of benefit uprating, if not in this one then certainly in the next. If universal credit had been as operational as expected, and I think 2 million people were expected to be in place by now, that would have been a significant assistance to some of these low-income households. The early rushes that I have seen from the early evaluation of universal credit show that it is working; the cohorts are actually going into work, and it is sustained work. If the anti-poverty strategy is all about getting people into work, then the main engine of getting people into work, as far as I can see, is absent. I am really quite nervous about that; it needs to be thought about more carefully.
My final point, because disabilities are involved in this uprating order, is that single-parent families are under stress. Low-income households with disabilities, and some of those people are working-age, are really struggling. The Minister said that there was an uplift of £300 million. That is very welcome, but it does not match the demonstrated need that my intelligence leads me to believe is necessary to do this job properly. We have to be very careful. We are right to pursue universal credit progressively and positively, and to pursue the Work Programme and help people in that direction. We need a housing policy because, in the long run, it is the only way that we will deal with the burgeoning housing benefit bill, which is far too big and a waste of public money in the sense that it does not build any houses.
This uprating order is unusual in that it is constrained. When we get back to normal business and the economy starts to flourish, as we all hope it will in the coming months, I hope that we can get an assurance that we will not lose any of the important mechanisms that we have had for protecting the ability of Parliament to cross-examine government, just because we have had three years of a different system. I hope that the Minister can give the Committee some assurance on that point.
My Lords, I thank the Minister for his explanation of these orders and all noble Lords who have spoken. I shall be waiting with bated breath for his answer to my noble friend Lord Rooker; I look forward to hearing what he has to say about that. It is always a pleasure to be reunited with the noble Lord, Lord Kirkwood. Had he not appeared, a search party would have been sent out for him. It is very good that he has saved us all the trouble. It is always good to come back and do this.
I was going to play really nicely, but the Minister kicked off by boasting about the wonderful triple lock. I just cannot let that go. I am sorry, I know that time presses on, but I will say just a brief word. This is the first time since it was invented that the triple lock has delivered a higher rise in the state pension than the formula that was linked to the RPI which was in place before 2010. If the Minister is looking a little baffled, I am sure that inspiration from behind him will confirm that.
It is worth reflecting on the triple lock’s history. In its first year it was announced but not used because it would have given too small a rise—75p was probably ringing in ears. For the next three years the triple lock was applied but each year it delivered a pension increase lower than what would have been delivered had the previous formula linked to the RPI been used. This is the first year in which it has been higher than what would have been delivered under the system that was around pre-2010—the increase here is 2.5%; an increase of only 2.3% would have come from the RPI. This is the first year that it has actually kicked in. That is a little bit of context; I shall calm down and return to my more specific questions.
I notice that yet again the Government have decided effectively to pass through the pension credit effect, which is welcome, but to fund it yet again essentially at the expense of the savings credit. Can the Minister unpack for the Committee what effect that will have on the incentive to save? Inevitably, it is not a cost-free element. Could he tell us what the consequence of that will be?
As well as the state pension, the order contains uprating details for some elements of universal credit, as we have heard. Does the Minister have an estimate of how many people are likely to be affected by these? I think that the noble Lord, Lord Kirkwood, made a very important point. When the Welfare Benefits Up-rating Bill was going through Parliament, the Opposition and other noble Lords expressed concern about the effect on poorer households, particularly working households. At Second Reading, the noble Baroness, Lady Stowell of Beeston, prayed in aid universal credit in seeking to persuade noble Lords to back that Bill. That is exactly the point made by the noble Lord, Lord Kirkwood. She said,
“I would ask your Lordships to remember that we are working to restore the welfare system as well. This year will see the introduction of universal credit, an historic change that will create a welfare system that is simpler, more effective, and designed to ensure that work pays. We expect some 3.1 million households to gain from the move to universal credit, on average by £168 per month”.—[Official Report, 11/2/13; col. 460.]
We are some way from having 3.1 million households; I am not sure that we have even 10% of that. Could the Minister tell us what the current number is? Could he also tell us whether the Government still expect the average household to gain by £168 a month from the move to universal credit? If that is not the case, the point made by the noble Lord, Lord Kirkwood, is significant. Universal credit was offered up as being the reason why lots of other things had to happen, but that it would all be okay. If it is not, Parliament needs to know that.
I would also like to ask a very specific question about universal credit. One of the problems about having disaggregated all the ways in which uprating happens is that it is quite a job of work to track down where any particular element of any particular benefit is being uprated. The hardest thing to find is what is missing. What is happening to work allowances in universal credit? I fully admit that I may well have missed them. I tried to go through but I could not see them here. When I raised this last year, I was told that there was no requirement to mention them unless they were changing. If they are here, could the Minister point me to them and tell me what percentage they are being increased by? If they are not here, does that mean that they are not being increased for the second year in a row, so they are being cut in real terms?
I was asking about the work allowances in universal credit. I think that inspiration may be coming on this point. That information may be in the document, but last year I could not find it and was told that the reason it was not there was because the measure was not changing; in other words, it was not being increased even by the rate of inflation. I have not been able to find it this year.
However, what I have found this year is the childcare costs element—the maximum amounts. Again, they look to me as if they have not changed in cash terms. Is that right? We debated this issue at length when the Welfare Reform Bill was going through the House and we were told in careful detail what the improved work incentives would be under universal credit. However, if we keep effectively having real terms cuts in the work allowances and childcare elements, then each time we do that we are eroding the gains to work. Therefore, it is important that the Government are open and transparent with the Committee about what they expect the work incentives to look like. I understand that the Minister may not be in a position to give me that information today, but I would be very grateful if he would write and tell me what changes have been made to the new work incentives, and gains to work in particular, as a result of those moves.
The noble Lord, Lord Kirkwood, referred to the overall impact on living standards of the various measures that have been taken. I understand that the argument for the Welfare Benefits Up-rating Act was that it was a temporary deficit reduction measure. However, one of the things it has made harder to understand is what the cumulative impact has been on low-income households. As the Minister will be aware, there have been repeated calls from outside as well as inside Parliament for a cumulative impact assessment of the effects. We have always been told by Ministers that that could not be done. Recently, the Institute for Fiscal Studies published a report, The Effect of the Coalition’s Tax and Benefit Changes on Household Incomes and Work Incentives. The opening sentences say:
“Tax and benefit changes introduced by the coalition have reduced household incomes by £1,127 a year or 3.3% on average”.
The report points out that the average loss was made up of an increase due to reductions in direct taxes which was more than compensated for—badly—by increases in indirect taxes, and that is before the benefit cuts were taken into account. The IFS found that the result of that was that households with children have been hit hardest by tax and benefit changes and that the poorest households have lost more than 6% of their incomes. Meanwhile, those without kids in the middle of the income distribution saw their incomes rise. Whenever the Government mention the rise in the income tax personal allowance, of course what they do not point out is that that benefits those richer people who do not lose out as a result of social security changes such as those to tax credits, so the effect is regressive in that respect. Can the Minister tell the Committee what has been the impact of the combination of the Welfare Benefits Up-rating Act 1% increase and the uprating decisions on the benefits covered by these orders on those low-income households? If he cannot do so, will he write? Finally, what difference has the delay in rolling out universal credit made to the anticipated impact of its uprating strategy?
My Lords, I am grateful to noble Lords who have participated in this informative debate. I shall try to deal with the points in the order in which they were raised. The noble Lord, Lord Rooker, rightly has a reputation for being independent and honest, as was indicated by the reference to the 75p amount. That took me completely by surprise. I have spoken to officials and we obviously take it very seriously. We will look at it in some detail and I will make sure that the Minister for Disabled People—Mark Harper—the noble Lord, Lord Freud, and the Secretary of State are aware of it, and will write to noble Lords accordingly.
Coming to the points raised by the noble Lord, Lord Kirkwood—although not necessarily in the order in which they were raised, as Eric Morecombe might have said—first: why is CPI used over RPI? I knew that I was not going to agree with much of what the noble Baroness, Lady Sherlock, said when she said that she was going to be a good girl but then changed her mind at the last minute. I know her sense of humour, so I regard that as having been said tongue in cheek. I will come back to her points about RPI.
The CPI is now the correct index for use, as recognised by the Paul Johnson review which was commissioned by the Office for National Statistics. Internationally, it is now the recognised medium for adjusting benefits. I have not heard the Labour Party commit itself to going back to RPI, but perhaps the noble Baroness wants to intervene at this stage to say that of course it will. Perhaps she wants to keep her tinder dry—understandably. The CPI is internationally recognised as the right way to review benefits.
In relation to the three-year welfare order of 1%—I phrased that somewhat clumsily—it will obviously be a matter for the next Government what processes are followed in future. I cannot give any undertaking on that, for obvious reasons. It will depend on the shape of the next Government what the policy is. I cannot anticipate that.
In response to the comments of the noble Lord, Lord Kirkwood, on the state pension, I welcome the fact that he welcomed the growth of the state pension—at least I think he did. It has grown—if we accept that there would have been a move away from RPI to CPI—it has undoubtedly grown positively. Many pensioners are very vulnerable and poor, and they do not have the same access to the jobs market at that age as other people. Necessarily, they are in a different position from people of working age. I recognise what the noble Lord says, and there are many cases where one wishes that we could do more, but these are the economic times in which we live. If it was a time of great expansion, no doubt we would be looking at it differently.
The number of JSA sanctions actually decreased in the year to September 2014, the last year for which we have figures, but the Oakley review stressed that they are a key element of the mutual obligation that underpins the effectiveness and fairness of the social security system. We need to recognise that they are an essential part of the system. On food banks, as the most reverend Primate the Archbishop of Canterbury has said, this is a complex issue. It should not be a party-political issue. It is far more complex than just the level of benefits. There is high take-up of food banks—higher than in the UK, I believe—in the US and in Germany, for example, so it is a complex issue. I pay tribute to the work that food banks have done and continue to do.
On universal credit, it is right to say that we have taken a softly softly, test-and-learn approach. It is also fair to say that the evidence is pretty irrefutable, certainly in the north-west, where it has been rolled out more substantially than elsewhere, that it is working. There has been very successful work with local authorities, for example, in getting people into jobs. We are having some success. On rollout, we are hoping that the great bulk of those affected by universal credit will migrate to it by 2019.
Using evidence from claimants in the north-west of England, the analysis found that compared to similar claimants on jobseeker’s allowance, universal credit claimants are more likely to enter work and spend more time in work. They are consistently more likely to be in work and to earn more. The results are statistically significant. It is only early evidence and we cannot be totally complacent, but it is very encouraging. I hope that noble Lords will welcome that.
Points were raised about housing benefit—I forget who raised the issue; perhaps it was the noble Lord, Lord Kirkwood—and house building. I could not agree more: that has to be part of the solution. We are committed to that in projects such as Ebbsfleet, which will help.
I do not have the points raised by the noble Baroness, Lady Sherlock. The figures for savings credit used by the Labour Party—
My Lords, there is a Division in the Chamber. We will adjourn for 10 minutes, so we will come back at 10 minutes past seven.
Sitting suspended for a Division in the House.
I was dealing with the point about savings credit, raised by the noble Baroness, Lady Sherlock. An assessment has been made regarding helping the most vulnerable, which we took to be those people who were not on savings credit. It is worth noting that, while no detailed assessment has been made of the number of people affected, there are more than 500,000 savings credit customers who qualify for other payments, which are being uprated by CPI, so a significant number of them are getting other benefits, as it were.
No, I said that we have no precise figure for the number of people affected, which is somewhat different. I will write to the noble Baroness giving any information that we have but, as I understand it, we do not have a detailed figure on the number of people affected. What we know, though, is that more than 500,000 savings credit customers qualify for additional amounts under other benefits, which are being operated by CPI, so it is not something one can look at in isolation.
The noble Baroness made some points about universal credit. More than 3 million households will gain £176 per month on average when it is fully rolled out. She will have noted today’s PAC report, which recognises that the programme is more open and transparent and better governed, and that the twin-track approach is the best course of action. As I say, our approach appears to be working well, and that is borne out by the figures from the north-west.
She asked about the work allowances and the childcare element. Both of those are frozen. She is quite right to suggest that they are not being uprated; they are frozen at where they were last year. I think it is right to say that we are intending that there should be a move from 70% of childcare costs to 85%. I think we are aiming for 2016, so that is some good news on that front.
The noble Baroness referred to an overall assessment of the impact of benefits and tax changes. I will write to her on that; it would be a complex assessment to do over the length of the Parliament but, as I see it, it is certainly not an unreasonable request. I think that some of the figures produced by the Labour Party that I have seen knocking around—in fairness, the noble Baroness did not refer to them; she referred to independent ones—do not take account of the tax changes and seem to concentrate only on the benefits. To get the full picture, as I am sure she would acknowledge, we have to look at both—the increases in personal allowances, for example—and some of the figures that I have seen also use RPI rather than CPI. However, I will take that back and write to her, copying in other noble Lords, about how we see it playing out. I hope that I have covered the main points, although obviously I have not covered everything.
I thank the Minister for offering to write to me. On the question of cumulative impact, if he does not like the figures used by the Labour Party, the best thing to do is to offer the Government’s own, so I look forward to receiving them.
On the question of universal credit, I had hoped that he might be able to provide more information to interested noble Lords about the effect on what we are now likely to see in terms of gains to work and work incentives, because they will be affected by the changes to work allowances. Is that something that he might be able to do in due course?
On the first point, as I say, we will look at that to see how we can do it, but we will come up with figures only if we can be sure that they are sustainable, which I do not think the Labour Party figures are. That is the point that I was seeking to make. We can toss that one backwards and forwards all evening—or night, if this goes on—but yes, we will have a look at that and I will write to the noble Baroness about it.
On universal credit, I will pick up the point that she makes, but it is worth noting—I hope that she is not going to be churlish about this—that we have more people in employment than ever before. The evidence is that the impact is very favourable in the north-west, and it is best that we acknowledge this, along with the efforts that are being made by the Government and by local authorities—not necessarily being run by the Conservatives—to make sure that this is a success. The early signs are very favourable.
As I say, I will ensure that any other points that I have not taken up fully or not taken up at all are covered in writing to noble Lords. I hope that I have explained that we are spending an extra £2.5 billion on uprating pensions and other benefits in 2015-16, enabling us to protect key benefits. The order protects pensioners, many of whom have worked hard all their lives and are no longer in a position to increase their income through work, and also benefits disabled people, reflecting our commitment to protect those who are least able to increase their spending power. These are the principles behind the order, and on that basis I commend it to the Committee.
Guaranteed Minimum Pensions Increase Order 2015
Motion to Consider
Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2015
Motion to Consider
My Lords, I am pleased to introduce this instrument, which was laid before the House on 19 January. I am satisfied that it is compatible with the European Convention on Human Rights.
The order amends the automatic enrolment figures that will set minimum savings levels from April of this year. The automatic enrolment earnings trigger sets the automatic entry point to determine who saves in a workplace pension. The qualifying earnings band then determines how much people save and sets employer minimum contribution levels. These figures must be reviewed annually; indeed, this is the fourth such annual debate we have had.
Given that automatic enrolment is in its fourth year, I think that it is a good time to take stock. To date, more than 5.1 million workers have been automatically enrolled by around 43,000 employers. Automatic enrolment has been a significant success, with opt-out remaining significantly lower than expected, but there are still important challenges ahead. Next year, small and micro employers will be brought into automatic enrolment for the first time. It remains as important as ever that automatic enrolment and the figures we are debating today remain easy to explain, understand and administer. It is also important that we target the right people. There is a balance to be struck between those who should save and those who can decide to save. As such, the Government decided that the timing was right to conduct a formal consultation as part of this year’s review. We wanted to learn about employers’ experience of live running and to test whether it remained right to maintain alignment between the earnings trigger and the income tax personal allowance in the light of proposed increases to the allowance and lower than expected earnings growth. The earnings trigger is key to targeting and striking the balance that I have outlined.
Automatic enrolment is a tailored policy. It does not force pension saving on to everyone, regardless of earnings. Our overall aim in setting the figures in this instrument is to maximise the number of people saving who can afford it, while excluding those who cannot. The new state pension full rate of nearly £7,900 per year is a significant factor in determining who should save. The Pension Commission suggested that for those earning around £10,000 a year, a sensible replacement rate in retirement would be 80%. As my honourable friend set out in another place, once you disregard national insurance, those earning under £10,000 will already receive around an 80% replacement from the new state pension. Therefore, this order does not amend the earnings trigger and it remains frozen at £10,000 for 2015-16.
As part of the consultation and review, we considered some alternative options for setting the trigger, including increasing it in line with the income tax threshold, as we have done in previous years. This option has the benefit of administrative simplicity for some but, given the above inflation rises to the tax threshold, we did not believe it was the right approach in 2015-16.
In the recent debate in the other place, it was suggested that the trigger should be lowered. We disagree. Automatic enrolment should continue to exclude low earners for whom saving, on top of the pension they will get from the state, may not make economic sense, and they should be relied on, instead, to opt in. It is important to stress that we are not excluding people from pension saving; people earning under the threshold can choose to opt in or join a pension scheme. It has also been argued that we should enrol everyone and rely on opt-out instead. Again, there is a balance to be struck. As I told noble Lords earlier, opt-out is currently somewhat unusual. The risk of having a much lower threshold is that opt-out will become much more common and start to undermine the principle of automatic enrolment. Opt-out also comes with an administration overhead. Employers have to refund moneys and unwind membership. High opt-out rates increase nugatory work, so we firmly believe that it is better not to enrol people who are likely to walk away.
I am aware from previous debates on this issue that noble Lords will be interested in the impact that this instrument will have on the number of women savers. Freezing the trigger at £10,000 represents a real-terms decrease in the trigger, resulting in around 20,000 extra people being brought into automatic enrolment in 2015-16. Fourteen thousand, or 70%, of these are women.
The automatic enrolment earnings trigger does not exist in isolation. It is the entry point to pension saving that works alongside the qualifying earnings band. The band sets a minimum definition of pensionable pay. If you earn £10,000 a year, you will pay pension contributions on anything over £5,824. The qualifying earnings band also needs to cap minimum employer contributions for higher-paid staff and let existing arrangements cater for this market. The Government believe that aligning the qualifying earnings bands with the national insurance lower and upper limits remains the right approach.
The Secretary of State has a lot of discretion to determine the right level for the automatic enrolment thresholds and what factors to consider. This year, we consulted on these factors and on a number of options for setting the earnings trigger. Freezing the earnings trigger in 2015-16 strikes the right balance between administrative simplicity for employers and ensuring that the right people are brought into pension savings. Continuing to align the qualifying earnings band with national insurance thresholds ensures that people continue to build meaningful pension pots. It is straightforward to administer and caps minimum employer contributions for higher-paid staff. I commend this instrument to the Committee.
My Lords, each year with some predictability, I am sorry to say, I contribute to the debate on the relevant statutory instrument to express my concern that in linking the earnings trigger for auto-enrolment to the income tax threshold it is being set too high, and that too many women are excluded such that only one in three workers targeted for auto-enrolment is female. So many women are excluded because their earnings are below the level required to trigger the new employer duty to auto-enrol a worker into a pension scheme.
Given my persistency in raising this issue, it would be lacking in grace not to say that I am therefore pleased that the Government have chosen to freeze the trigger at its current level and not increase it further. I understand that as a consequence 20,000 people, 70% of whom would be women, will no longer be excluded from auto-enrolment when they otherwise would have been. Therefore, the Government’s decision to break the link between the earnings trigger and the income tax threshold is welcome.
I am also pleased that the Government’s decision supports the argument that it is wrong always to say that simplicity for employers, by linking the trigger to the tax threshold, is worth the price of excluding yet more thousands of women from the benefits of auto-enrolment.
I also welcome the Government’s decision that it is not right to maintain the alignment between the earnings trigger for auto-enrolment and the income tax threshold in the light of the proposed increases and the relatively low earnings growth. Low earners are likely to have lower earnings growth, and the UK has a greater concentration of low-wage jobs than some other advanced European economies, so the earnings trigger remaining linked to a rising income tax threshold would exclude even more workers over time. Those excluded, who are mostly women, would suffer a loss in lifetime pay because they would not have received the employer contribution, but they would still lose out due to any general reduction in wage levels that flowed from the cost to the employer of automatic enrolment contributions. Those are my positives, and they are three or four things that I welcome.
However, I remain concerned that, even with the freeze on the trigger at £10,000, far too many people will still be excluded from auto-enrolment. I would have liked to have seen it decreased under Section 14 of the Pensions Act 2008, as is permissible. I do not agree with some of the arguments which have been deployed by the Government for retaining it at its current level. The Government have argued that low earners for whom saving on top of their state pension does not make economic sense, and because the state pension gives them a high replacement income in retirement, should be excluded from auto-enrolment, but earnings are not static for many workers—men or women. They can change significantly over a lifetime. Most low earners go on to earn more—a point confirmed in the Johnson review commissioned by the Government. Therefore, auto-enrolment would be beneficial because it would increase persistency of pension contributions over their working lives.
Millions of women have a life pattern in which periods of full-time work are interspersed with periods of part-time work when caring responsibilities are at their greatest. But the effect of a high earnings trigger is a policy which asserts that women should not be auto-enrolled when they are working part-time and caring. That is in fact the consequence, and the figures confirm it. Almost half of those in the lowest earnings group are in couples where one works part time and the other full time. Most very low earners are women who live in households with others on higher earnings and they are receiving working tax credits. As the Johnson review confirmed—it is his analysis as much as my observation—these are precisely the people who should be automatically enrolled in saving, yet they are excluded.
The Government argue that if people on low earnings are auto-enrolled, they will build up their pots in pennies, not pounds, and that anyway the state pension gives them a sufficient replacement rate. But the problem with that argument is that pension savings are no longer reserved for pensions or replacement income. Freedom of choice means that the purpose of private pension saving is wealth accumulation. People can do what they wish with their money. There is now a complete separation between pension saving and securing a replacement income, which makes the Government’s support for a high earnings trigger even more tenuous. Why should low earners not be allowed to accumulate assets to build up their pot of wealth for their personal use? Why should an asset accumulation facility be available only to the better off?
Talking about “pennies, not pounds” resonates with that outdated and now unacceptable argument that women working part time are doing it only for pin money. It is possible to lower the earnings trigger below £10,000 without running up against the pennies argument. If, for example, the lower value of the qualifying earnings band is £5,824 and the earnings trigger is £8,000, then on a default contribution of 8% this would produce pension savings of £174 per annum. Taking a nominal value, this would produce £1,740 after 10 years and £5,220 after 30 years. For persistent low earners, that is a pot worth having, and it is arrogant to apply an analysis that because you are on low pay, asset accumulation even of that modest pot—which to them will not be modest—should not be available. That is simply a base case. It assumes a persistent low earner with no other changes but ignores that many employers are contributing above the minimum statutory level and that most low earners go on to earn more. I am sure that, over time, the employers’ statutory minimum contribution will rise. Excluding so many low-paid workers from auto-enrolment is another example of the weakness of public policy in assisting low-paid workers to accumulate capital or assets.
The Government argue that a lower auto-enrolment earnings trigger will increase opt-out rates, but there is no clear evidence that setting a trigger at, say, £8,000 will produce significantly higher opt-out rates. Attitude surveys do not necessarily confirm what actual behaviour will be—that is a speech in itself. For women who move from a full-time to a part-time job with another employer when they become carers, the higher trigger will take them out of the previous pattern of persistent saving.
The Pensions Minister in the House of Commons, Steve Webb, referred to the attitude surveys on pensions and said that they indicated that at about £5,000 the opt-out rates would be 30%. I was surprised that it revealed that that level would still deliver a participation rate at 70%, so at an £8,000 earnings trigger the participation rate is likely to be much higher. The evidence on these financial decisions also shows that when you apply inertia, participation rates are higher than the evidence produced by attitude surveys.
As a consequence of raising the auto-enrolment earnings trigger, we can go through the years—this is in the impact assessment from the department—showing the number excluded from auto-enrolment: 600,000 as a result of the trigger in 2011-12, 78% of them women; in 2012-13, another 100,000, 82% of them women; in 2013-14, another 420,000, 72% of them women. In 2014-15, the increase to £10,000 excluded another 170,000, 69% of them women. At least some of those excluded, even if not all, could be re-embraced by a modest reduction in the earnings trigger to, say, £9,000 or £8,000 a year. That could still pick up more than half a million low-paid workers into auto-enrolment in pensions.
The population targeted to benefit from workplace pension reform now comprises approximately two men for every woman, which, as I consistently say, breaches a basic principle that the private pension system should work for women. If you maintain a higher earnings trigger, although women can go from full-time employment to lower pay during their working life, thousands of women are carved out of the UK private pensions system. I will continue to argue that with passion, because it is such a weakness in the design of the private pension system to set an earnings trigger that delivers one woman auto-enrolled for every two men.
To end on a positive note, I am pleased that the trigger has been frozen and that the Government have not maintained the alignment between the earnings trigger for auto-enrolment and the income tax threshold. At the very least, I hope that they do not consider raising the trigger for a few years to come.
My Lords, I thank the Minister for his explanation of this order and my noble friend Lady Drake for a characteristically forensic and impressive contribution. Like her, I welcome the fact that the Government have seen the light—there is more rejoicing in heaven over one sinner returned, et cetera. I am delighted that they have accepted our long-standing argument that the trigger threshold for auto-enrolment should not simply be tied to the personal allowance, as it has been hitherto under this Government.
We on these Benches have argued for many years that the problem with the approach taken by the Government is that it undermines the basic consensus on which auto-enrolment was built: that it should be a mass pension system encompassing as many people as possible, a point made clearly by my noble friend Lady Drake. It should encompass the low-paid as well as the better off, women as well as men and those in multiple part-time jobs as well as those in single, steady employment in one job. Viewed from that perspective, the Government’s tying of the auto-enrolment threshold to the personal allowance has had significant weaknesses.
When we debated these orders last year, my noble friend Lady Drake built a completely damning indictment of the effect of the Government’s approach to setting the threshold, which I suspect may have contributed to their change of heart. We recalled last year that the original idea proposed by the Pensions Commission, chaired by the noble Lord, Lord Turner, and of which my noble friend was such a distinguished member, was that the qualifying earnings band should start at the primary threshold for national insurance purposes and finish at the NI upper earnings limit. The previous Government said in their 2006 pensions White Paper that they would adopt broadly that approach, so the lower and upper limits of the qualifying earnings band were set at £5,035 and £33,540 respectively, with provision for them to be increased in line with earnings.
When this Government brought in the Pensions Act 2011, though, they introduced an earnings trigger for auto-enrolment at a level higher than the lower equivalent of the qualifying earnings band, and every year since then we have seen more and more people excluded. For 2011-12 the trigger was set at £7,475 rather than the planned threshold of £5,035 and 600,000 people were excluded, 75% of them women. The next year 100,000 people were excluded, 82% of them women. In 2013-14, 420,000 people were excluded, of whom 72% were women. Last year, when the threshold rose to £10,000, it excluded another 170,000 people, of whom 69% were women. So although I genuinely welcome the decision to freeze the threshold, and the confirmation from the Minister that the measure will bring 20,000 more people into the system, 14,000 of them women, does he accept that by tying the threshold to the personal allowance for the last four years more than 1 million low-paid people, most of them women, have been excluded from auto-enrolment?
I want to ask the Minister about the coverage of women by auto-enrolment. Can he remind the Committee how many people the Government now estimate will be covered by auto-enrolment, when it is fully rolled out? Does he accept the figure given by my noble friend Lady Drake that one in three of the target enrolment population are now women? If so, do the Government regard that as a problem? Last year I noticed that the Government had offered the defence that so many women are affected because they work part-time and are likely to earn less than men, so they are disproportionately represented. That is true, of course, but it is not a defence; it is simply a description. Do the Government regard it as a problem that so many women are excluded?
The other defence offered by the Minister was that workers paid below the earnings trigger, as the Government have set it, were likely to be able to achieve their target replacement rates through the new state pension if they remained low earners. Presumably, therefore, it is not beneficial to direct income from working life into workplace pension savings—and, presumably, that applies particularly to low-paid women. But, as has recently been widely discussed, when it kicks off in 2016 only 45% of those who reach state pension age will get the new state pension, so there is a significant issue there.
I will not detain the Committee any further at this point. Labour invented auto-enrolment but the Government deserve credit for having rolled it out. We all think it is a good thing. I am very pleased that the Government have broken their ill advised link between the trigger threshold and the personal allowance, but I look forward to hearing from the Minister a better account of how the Government will ensure that the benefits of auto-enrolment can reach the masses for whom it was designed.
My Lords, I thank noble Lords who have participated in this debate on the clearly important issue of auto-enrolment and the trigger. I shall seek to deal with the points made by the noble Baronesses in the order in which they were raised. The noble Baroness, Lady Drake, was extremely gracious—at least initially—in welcoming the change, and I welcome her welcome. I appreciate that the noble Baroness, Lady Sherlock, would want to go on a historical journey rather than review the current good news in the present order, but 20,000 more people being brought within auto-enrolment, 70% of whom are women, is of course good news.
On the issue raised by the noble Baroness, Lady Drake, of whether the trigger should be set at a lower limit, such as the national insurance limit—I think that she used £8,000 as another example—it is worth restating that this does not prevent people opting in to a pension. Auto-enrolment means that they will not be automatically enrolled, but it does not stop them saving. If they are above the national insurance limit they can opt in to their scheme and their employer will be obliged to contribute the 1%, as they currently are. Those figures are on an upward trend. I will ensure that I write to noble Lords about the percentage figures in future years because they are set to go up for employees and employers. That is an important point to nail. Also, if your earnings go above the threshold in a particular year, you will of course be automatically enrolled. The assumption is then that you can opt to stay in the pension, even if your earnings dip. You are not automatically de-enrolled; if you want to stay in, you can. That is a significant point to make, and one that I am perhaps able to clarify here.
On the fluctuating income argument, if you are above automatic enrolment in a particular year you can stay in the scheme if you want to do so, provided that your income does not dip below the national insurance limit. You could even stay in then, but you would not be entitled as a right to the employer contribution—although, anecdotally, quite a few employers pay it if an employee is in the scheme. It is a relatively low cost and while that is not a statutory obligation, it is happening. There is some good news there. We have clearly broken the link with the income tax threshold, so there is of course no question about whether we can break it. We will look at the experience of this.
We should restate that auto-enrolment has been a massive success. It has been supported by all parties; I pay tribute to the support that has been given. The priority now is to make sure that small and micro-employers are brought within the system. As noble Lords would expect, we will look at the evidence on how it is progressing. In answer to the noble Baroness, Lady Sherlock, on how many people will be covered by automatic enrolment, we estimate that 8 million to 9 million will be newly saving or saving more. I will write to her on the percentage of women; of those, I think that it is roughly 3 million.
I think that is borne out. I will write with a more detailed figure if we have it. I thank the noble Baroness for her helpful intervention. As I was just saying, we believe that it is roughly 3 million, which I think would be consistent with the figure that she presented.
With that, if there is anything that I have missed I will write to noble Lords who have participated in the debate. I thank them for the general support and welcome for what we have done this year and commend the order to the Committee.
Employment Allowance (Care and Support Workers) Regulations 2015
Motion to Consider
My Lords, I am pleased to introduce the two regulations and the order standing in my name on the Order Paper. I can confirm at the outset that the provisions in them are compatible with the European Convention on Human Rights.
The changes to the NICs rates and thresholds and the extension of the employment allowance covered by these three instruments were announced as part of the Chancellor’s Autumn Statement on 3 December last year. In the Budget on 23 March 2011, we announced that for the duration of this Parliament the basis of indexation for most NICs rates, limits and thresholds would be the consumer prices index instead of the retail prices index. I can confirm that the basis of indexation used to calculate the changes follows that approach. The exceptions to this are the secondary threshold and the upper earnings and upper profits limits.
I will start with the Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations. These 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 2015-16 tax year. The class 1 lower earnings limit will be increased from £111 to £112 per week from 6 April this year. 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 from £153 to £155 per week from 6 April. The secondary threshold is the point at which employers start to pay class 1 NICs. In line with the commitment in Budget 2011, this is being increased by RPI from £153 to £156 per week.
From this April, the income tax personal allowance for people born after 5 April 1948 will be increased above indexation from £10,000 to £10,600, and the point at which higher-rate tax is payable will be increased from £41,865 to £42,385 in the 2015-16 tax year. As I mentioned, the upper earnings limit is not subject to CPI indexation. This is in order to maintain the existing alignment of the upper earnings limit with the point at which higher-rate tax is paid. The upper earnings limit will be increased from £805 to £815 per week from 6 April.
Employers have to pay NICs at 13.8% on earnings above the secondary threshold. In the Autumn Statement, the Chancellor of the Exchequer announced a zero-rate earnings band for employers’ NICs for earnings of employees under the age of 21 from 6 April. The introduction of the zero-rate earnings band for employees under the age of 21 is expected to benefit about 340,000 employers, helping to support the jobs of almost 1.5 million young people currently in employment.
The zero-rate earnings band applies only to earnings up to the equivalent of a new threshold called the upper secondary threshold, which is to be set at the same level as the upper earnings limit for the 2015-16 tax year. These regulations introduce the upper secondary threshold and set it at the same level as the upper earnings limit of £815 per week from 6 April.
Finally, these regulations also set the prescribed equivalents of thresholds and limits that I have mentioned for employees paid monthly or annually. Apart from the introduction of the zero-rate earnings band for employees under the age of 21, there will be no other changes to NICs rates in the 2015-16 tax year. Employers will continue to pay contributions at 13.8% on all earnings above the secondary threshold. Employees will continue to pay 12% on earnings between the secondary threshold and the upper earnings limit, and 2% on earnings above that.
The social security order sets the class 3 contribution rate for those paying voluntary contributions and the class 4 profits limits for the self-employed, as well as providing for a Treasury grant.
Starting with voluntary class 3 contributions, the weekly rate will increase from £13.90 to £14.10 a week for the 2015-16 tax year. Moving on to the self-employed, today’s order also sets the profit limits for class 4 contribution liability. The lower profits limit on which these contributions are due will increase from £7,956 to £8,060, in line with the increase to the class 1 primary threshold.
At the other end of the scale, the upper profits limit will increase from £41,865 to £42,385 for the 2015-16 tax year. This is to maintain the alignment of the upper profits limit with the upper earnings limit for employees. The changes to the class 4 limits will ensure that the self-employed pay contributions at the main class 4 rate of 9% on a similar range of earnings as employees paying class 1 contributions at the main rate of 12%. Profits above the upper profits limit are subject to the additional rate of 2% in line with the 2% paid by employees on earnings above the upper earnings limit. For completeness, I mention that the weekly rate of class 2 NICs, which are also paid by the self-employed, will increase from £2.75 per week to £2.80 per week from 6 April.
From 6 April, class 2 contributions will be due only if taxable profits for the 2015-16 tax year are at or above the small profits threshold of £5,965. This threshold replaces the class 2 small earnings exception and, along with the class 2 rate, was set in the National Insurance Contributions Act 2015.
The Government need to ensure that the National Insurance Fund can maintain a working balance throughout the coming year, which the Government Actuary recommends should be one-sixth of benefit expenditure for the year. The re-rating order provides for a Treasury grant of up to 10% of benefit expenditure to be made available to the fund for the 2015-16 tax year. A similar provision will also be made in respect of the Northern Ireland National Insurance Fund.
Lastly, I turn to the regulations relating to the employment allowance for employers of care and support workers. The Government wish to support individuals and families with the cost of care. These regulations will allow employers of care and support workers to claim the NICs employment allowance. As a result, they will be able to reduce their employer NICs bill by up to £2,000 a year. Claiming the NICs employment allowance is quick and simple. Employers, or their agents, simply tick a box in their payroll software to confirm that they are eligible for the allowance and wish to claim, and their employer NICs liabilities will be reduced accordingly. Employers need to tick the box only once and this will be transferred to future years as well.
In the first six months since its introduction, the NICs employment allowance has already been enjoyed by more than 850,000 businesses and charities. We estimate that a further 20,000 employers of care and support workers will benefit from the extension of the allowance. I commend the order and regulations to the Committee.
My Lords, I thank the Minister for introducing the regulations and order. This is something of an annual feast, and I commend him for the speed at which he read out his speech. The same three statutory instruments were debated yesterday in the Seventh Delegated Legislation Committee of the other place, where the Opposition put their traditional questions and got detailed responses. I am going to give everyone encouragement by saying that I do not intend to ask exactly the same questions to receive exactly the same answers. I commend the Commons report of the proceedings to anyone present who is interested in those detailed questions.
I have a couple of questions on the first of the three instruments that we are considering—the Employment Allowance (Care and Support Workers) Regulations. Three questions asked in the Commons were detailed in nature, but the fourth question asked by my colleagues in the other place was: why have the Government made this change? They introduced the NICs employment allowance to aid small businesses, and we did not oppose that. At the time, there was a debate about the care issue. The Government resolutely set their face against that but then, rather suddenly, they changed their mind. I am genuinely curious as to which road to Damascus the Government went down to come to this conclusion. It is not a conclusion that we particularly dissent from but we are interested in whether there is any further logic behind the reasoning.
As far as I can see, the only problem with these regulations is that the decision to make the change seems to have been reasonably recent. I worry a little, as do my colleagues in the other place, about the extent to which it might induce tax avoidance, which both sides of the House are firmly against. It seems to me that the simplicity with which this allowance can be claimed, as the Minister outlined, is essentially, in tax avoidance terms, also its intrinsic weakness. The difference between a personal servant and a care worker seems somewhat semantic. I have read the regulations, and of course the employer or the person being cared for has to fall within the definition in them. Nevertheless, those definitions could be rather nudged by people who are seeking to avoid NICs. I would value some further comment from the noble Lord as to the extent to which the Government expect this to be used for tax avoidance, because somebody is going to use it. It is inevitable that any new tax or national insurance regulation will be exploited by tax avoiders. Somebody will use it. What are the Government going to do to make sure that does not happen? What additional resource is that likely to cost HMRC?
The other thing about this is that, as far as I can see, it does not have an impact assessment and I am curious as to what the Government’s assessment is of the cost of this move. They estimate 20,000 may qualify for it and stress that it could be up to £2,000 per annum. I can do the arithmetic and I think that is £40 million per annum. I do not think there is an expectation that all will be at the maximum by quite a margin. I would value the Government’s estimate of the cost of this policy move.
My Lords, I am grateful to the noble Lord, Lord Tunnicliffe, for his welcome of these SIs. He asked me a number of specific questions. Why did the Government change their mind? We saw the error of our ways. We listened to our stakeholders and they thought that this was a very strong idea, so we decided, in line with our general commitment to reducing the cost of care and helping with care needs, that we would make this change.
The noble Lord asked whether this opens up a big new scope for avoidance. Given the scope of the change, we do not anticipate that it will really broaden the scope for avoidance. HMRC uses its routine compliance checks to identify and tackle potential avoidance and we have an anti-avoidance rule in the primary legislation. The incentive for avoidance here is relatively small and we think that the benefits of introducing the scheme more than outweigh any small potential for avoidance.
The noble Lord’s final question was about the cost. We estimate it will cost about an extra £10 million a year. I hope I have answered his questions and that he will now be happy to support the measures.
Social Security (Contributions) (Re-rating and National Insurance Funds Payments) Order 2015
Motion to Consider
Social Security (Contributions) (Limits and Thresholds) (Amendment) Regulations 2015
Motion to Consider
Childcare Payments (Eligibility) Regulations 2015
Motion to Consider
My Lords, the regulations before the Committee today were laid on 13 January under powers set out in the Childcare Payments Act 2014, which introduced the new tax-free childcare scheme. They were announced by the Chancellor of the Exchequer at the 2013 Budget and will provide financial support to working families with their costs of childcare. Once the scheme is in place, the Government will meet 20% of eligible working families’ childcare costs up to an annual maximum of £2,000 for each child. Support will be delivered through childcare accounts, into which a parent will deposit their funds to pay for childcare and into which the Government will add a 20% top-up payment.
The regulations before us today were published for consultation between 14 July and 3 October last year, and I would like to put on the record my thanks to all those organisations and individuals who responded. As I will explain in a moment, the Government listened to the suggestions which were made and introduced some small but important changes to the way in which some of these regulations operate.
There are 18 regulations in all, but I am pleased to say that I do not intend to describe each of them in detail. However, I would like to give an overview of who will qualify for support once the new scheme is introduced. First, a person must be in the UK, over the age of 16 and have responsibility for looking after a qualifying child. It does not matter whether they are the child’s biological parent; they simply need to be responsible for their care. Secondly, the person responsible for the child must be in paid work, either for an employer or self-employed in their own business. If they have a partner, both partners will need to be in work. Providing support to the self-employed with their childcare costs is a significant, perhaps the most significant, advantage of the new scheme over the one it replaces; namely, the employer supported childcare scheme. As its name implies, that scheme was available only to people in employment.
The third eligibility condition is that the person’s income, and that of their partner if they have one, must be below the level which would make them liable to pay income tax at the additional rate of 45%. This currently applies to individuals with an income of more than £150,000 per year. Finally, someone will not be able to qualify for this scheme if they are already in receipt of support with their childcare costs from other government-funded schemes, most notably tax credits, universal credit and employer supported childcare. These are the eligibility conditions as they are set out in the Act. However, it is essential that the Government should retain the necessary flexibility to make adjustments to these conditions to ensure that the scheme remains properly targeted where it is most needed. This is why some of the detailed rules determining eligibility for support are set out in these regulations rather than in primary legislation.
I would like to draw the attention of noble Lords to some specific aspects of the regulations. First, regulation 5 sets out what is meant by a “qualifying child” for the purposes of the scheme. In broad terms, this is any child under the age of 12 or, in the case of a disabled child, under the age of 17. Regulation 9 defines what is meant by being in paid work for the purposes of the scheme. This is that a person will meet this condition if they receive as little as what someone would earn if they worked for one day a week at the prevailing rate of the national minimum wage, equivalent to around £52 a week, or £676 a quarter. Regulation 10 defines income in the case of self-employed parents. This broadly follows the well-established approach used for income tax purposes and is based on the net profit they generate from their business over the relevant period.
I will turn briefly to the ways in which the regulations have been amended following the consultation. Two significant amendments were made to the regulations as they apply to self-employed parents. The first concerns the requirement to generate a specified amount of profit every quarter. The point was rightly made that this had the potential to exclude self-employed people in very seasonal businesses where they are able to make a profit only at certain times of the year. To address this, the regulations were amended to give self-employed parents the option of meeting the minimum income level across a full tax year rather than in each quarter, as had been the case originally.
The second change applies to newly self-employed parents and again concerns the minimum income rule. The point was made that it is very common for new businesses not to make a profit immediately and that therefore it would be unreasonable to require them to reach the minimum income rule straightaway. The regulations were therefore changed so that someone starting out as self-employed will not be required to reach that level in their first entire year of trading. This will mean that they will not be disqualified from using the scheme as they struggle to make a profit when they are starting to establish their business.
A further change to which I would draw your Lordships’ attention concerns parents who are about to return to the workplace. The point was made during consultation that such parents need sufficient time to put suitable childcare arrangements in place before they start working. As originally drafted, the regulations provided a seven-day window during which a person could apply to open a childcare account in anticipation of starting a new job. The argument was made that seven days is simply too short to allow parents to make adequate childcare arrangements before they take up work after an absence. The regulations were therefore amended to allow someone to be treated as being in paid work where they have accepted the offer of a job up to 14 days before they actually start work. This will help to smooth the transition back to work and encourage parents back to the workplace.
Finally, I would like to refer to the position of those with responsibility for disabled children. As both the noble Earl, Lord Listowel, and the right reverend Prelate the Bishop of Sheffield rightly pointed out at Second Reading of the Bill, such parents can face significantly higher childcare costs than other parents. The Government are keen to ensure that this is reflected in the way that the new scheme will operate.
As I said at that time, the Exchequer Secretary to the Treasury made a commitment in another place to consider whether it would be possible to increase the maximum amount which families with disabled children could receive from the Government. I am glad to confirm that the Minister has honoured that commitment. She has said that such parents will be able to receive up to double the amount of support that other parents will be entitled to. This will mean that they will be able to receive support of up to £4,000 a year for each disabled child, rather than £2,000 a year as is the case for other parents. This change, which has been warmly received by the childcare sector as a positive step for disabled children and their families, does not feature in the regulations which we are considering but will be brought into effect by a separate instrument. However, given the interest shown in the matter at Second Reading, I thought that it would be appropriate to mention it now. I beg to move.
My Lords, I thank the Minister for explaining the regulations. I particularly thank him for the way in which the Government have reacted to the consultation by introducing some detailed changes. I also thank him for what he has said about disabled children, in giving us notice of further regulation to follow. I have only one or two points to make about these regulations, which we are not going to oppose as we see value in more money being put into the whole issue of childcare. First, I have a couple of detailed questions about them and then some questions about whether the right balance has been achieved in terms of the distributive effect that the Act has.
Of the two questions about implementation the first is about NS&I, which has been the chosen instrument for these accounts. If I have read the impact assessment properly, I believe that there could be 2 million such accounts. I understand that when NS&I introduced what I think were called pensioner bonds in the new year, it processed 30,000 accounts and its systems failed. Can the Minister assure me that by the time this scheme is introduced, the NS&I systems will be robust enough to cope with the volume?
Secondly, the choices that people will have to make between this, the current scheme which is being phased out and other potential state sources of support are really quite complex. The Government acknowledged this by assuring us during the debate on the primary legislation that there would be an online calculator to help individuals. I wonder whether the Minister can give us some indication of progress on the online calculator. I think that these regulations are expected to be rolled out in the autumn which, in terms of delivering things, is relatively close.
The substance of my concern is in regulation 15. The Minister does not have to look it up; it is the £150,000 regulation. These regulations existed in draft when the original primary legislation was debated.
I think this is the order that specifies that it will be £150,000. That is a large figure. Perhaps this is because of the paucity of my friends, but I do not know a lot of people on £150,000. Indeed, the figure could rise to £300,000 in a household with an affluent wife and an affluent husband together. That seems to be a pretty high figure. I wonder why the Government have chosen such a high figure, because of the subsequent distributive effects.
In effect, the order was debated when the primary legislation was debated in the other place. I draw attention to the Public Bill Committee in the other place on 16 October 2014, when Vidhya Alakeson, then deputy chief executive of the Resolution Foundation, said in evidence;
“Our analysis shows that 80% of families that will benefit from tax-free child care are in the top 40% of the income distribution. The evidence on how parents respond to child care investment is reasonably limited, but we know from self-reported surveys that parents with a family income of more than about £60,000 a year are not predominantly making work decisions and suchlike on the basis of the affordability of child care. The vast majority of this funding is targeted at those families, which suggests to me that you are unlikely to see much of a change in behaviour, but you will get a cost shift from parents to Government”.—[Official Report, Commons, Childcare Payments Bill Committee, 16/10/14; cols. 100-01.]
Does the Minister accept the Resolution Foundation’s analysis that 80% of the benefit will go to the top 40% of households? If not, does he have some Treasury-based analysis to counter that claim? I know of no other analysis. So far, the Government have not revealed any analysis that they have done; there is certainly no distributive analysis in the impact assessment. Therefore, I have to take the Resolution Foundation’s statement as the best analysis available.
The scheme will cost, say, £600 million a year—it varies by year in the impact assessment, but it is £600 million-plus. Well, 80% of that is half a billion pounds, which is a not inconsiderable sum. Is it true that half a billion pounds is being directed at the top 40% of households? Was that the Government’s intention, was it a mistake or do they not know?
The position that we took in the other place during the passage of the Bill is that if the upper limit had been lower, money would have been saved that could have been used to increase the percentage relief to those who qualify. Therefore, the distributive effect would not have been this apparently amazing situation where half a billion pounds is going to the top 40% of the income distribution. The Minister’s colleague in the other place, Priti Patel, was pressed on the matter of distributional analysis. At the end of one of her responses—before she was interrupted—to the Public Bill Committee on 21 October, 2014, which is now some time ago, she said:
“Officials are discussing with colleagues across Government the possibility of considering the matter in more detail and of carrying out distributional analysis of all Government child care support. Much child care support is outside the Treasury’s remit and lies with the Department for Education, and many of the schemes that exist have been touched on in the Committee”.—[Official Report, Commons, Childcare Payments Bill Committee, 21/10/14; col. 164.]
That seems to me like a promise of a report about the distributional analysis of government childcare support. Am I right in interpreting it as such a promise? If so, when do the Government intend to produce such a report, which I think we would all find very interesting?
As I said, the Opposition will not be resisting these regulations. We find them surprising. We find the very high figure that directs this money at such households sad. We are sorry that the Government have not pondered on representations that have been made on the various scales and introduced a lower figure, but nevertheless we will not oppose it. However, our view is that we should go much further. When a Labour Government is elected, we intend to extend free childcare from 15 to 25 hours a week for working parents with three and four year-olds, paid for by an increase in the bank levy. We intend to introduce a legal guarantee that parents of primary school-age children can access childcare from 8 am to 6 pm through their local school and we intend to reinvigorate Sure Start, returning the way local services work together to shift from sticking-plaster services to radically early help. We believe those reforms will direct appropriate public money, properly funded, at the real places of need with relation to childcare.
My Lords, the noble Lord asked me a number of questions about these regulations. First, is NS&I up to it, given the teething problems with the pensioner bonds? NS&I is up to it. It is an established provider of payment processor services within government. It manages the premium bonds. The difference between this and pensioner bonds is that those bonds suddenly became available and there was a great rush. These provisions will be introduced on a phased basis and there will be no incentive for hundreds of thousands of people, even if the phasing worked that way, all to want to do it within an hour or two of each other.
The noble Lord asked about the online calculator. As he pointed out, the scheme is due to be introduced from the autumn. The online calculator will be introduced in good time before implementation. It would be of no particular benefit to anybody if the calculator were available now, but it will be available well before the scheme is implemented.
I think the main burden of the noble Lord’s comments is about whether the £150,000 cut off is appropriate. It is worth pointing out two aspects of the context here. First, this scheme replaces one that has no limits to the income at which people can benefit. It also does not cover the self-employed, many of whom will not be high earners. In that respect, it is a more inclusive and fairer scheme. The other element of context is that the Government’s overall system of childcare support remains focused on people with lower incomes. Families in receipt of tax credits already receive more generous support with childcare costs than under universal credit. Support will be intended to cover up to 85% of the cost of childcare and will be available regardless of the number of hours worked. It is not a scheme about helping the wealthy. There is a question about where you put the cap. The only two logical places would be at the thresholds for the 40% or 45% tax rate. Any other limit between those two would involve a disproportionate amount of effort and administrative change. The Government took the view that, given the history of this scheme and the fact that the cap on those who can benefit is being reduced, the 40% threshold was too low. We want to support people with childcare at incomes above that level. Therefore, we went for this limit. An intermediate limit would have been complicated and confusing.
The noble Lord’s final question concerned what had happened to the commitment given by my colleague in another place, Priti Patel, to carry out a cross-departmental distribution analysis of all childcare support. I reassure him that officials across government are currently examining the feasibility of carrying out distributional analysis across all childcare support schemes, but this is taking time because of the complexities involved.
Committee adjourned at 8.21 pm.