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General Committees

Debated on Wednesday 8 March 2017

Delegated Legislation Committee

Draft Water Industry Designated Codes (Appeals to the Competition and Markets Authority) Regulations 2017 Draft Water Supply Licence and Sewerage Licence (Modification of Standard Conditions) Order 2017 Draft Water Act 2014 (Consequential Amendments etc.) Order 2017

The Committee consisted of the following Members:

Chair: Mr David Nuttall

Ali, Rushanara (Bethnal Green and Bow) (Lab)

Allen, Mr Graham (Nottingham North) (Lab)

† Arkless, Richard (Dumfries and Galloway) (SNP)

† Coffey, Dr Thérèse (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)

† Debbonaire, Thangam (Bristol West) (Lab)

† Glindon, Mary (North Tyneside) (Lab)

† Green, Chris (Bolton West) (Con)

† Harper, Mr Mark (Forest of Dean) (Con)

† Merriman, Huw (Bexhill and Battle) (Con)

† Milling, Amanda (Cannock Chase) (Con)

† Morris, David (Morecambe and Lunesdale) (Con)

† Murray, Mrs Sheryll (South East Cornwall) (Con)

† Poulter, Dr Daniel (Central Suffolk and North Ipswich) (Con)

† Selous, Andrew (South West Bedfordshire) (Con)

Sheerman, Mr Barry (Huddersfield) (Lab/Co-op)

† Smyth, Karin (Bristol South) (Lab)

† Spencer, Mark (Sherwood) (Con)

Gail Bartlett, Committee Clerk

† attended the Committee

Seventh Delegated Legislation Committee

Wednesday 8 March 2017

[Mr David Nuttall in the Chair]

Draft Water Industry Designated Codes (Appeals to the Competition and Markets Authority) Regulations 2017

We have a little housekeeping before we start. If anyone wishes to take their jackets off, as Mr Spencer has already done, they may do so.

I beg to move,

That the Committee has considered the draft Water Industry Designated Codes (Appeals to the Competition and Markets Authority) Regulations 2017.

With this it will be convenient to consider the draft Water Supply Licence and Sewerage Licence (Modification of Standard Conditions) Order 2017 and the draft Water Act 2014 (Consequential Amendments etc.) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Nuttall. The three statutory instruments are part of a larger package of reforms introduced through the Water Act 2014 that will provide more competition in the water industry for non-household customers. A new market in water and wastewater services, which is due to open on 1 April, will allow all eligible business, charity and public sector customers in England to choose a new supplier to provide customer-facing services such as billing, call handling and water efficiency advice. My Department has worked closely with our delivery partners, Ofwat and Market Operator Services Ltd, as well as the water industry, to complete a huge programme of work, including the last remaining pieces of the legislative framework for the new market, which we are debating.

The draft Water Industry Designated Codes (Appeals to the Competition and Markets Authority) Regulations 2017 will provide a fast-track appeal process whereby market participants who are materially affected by a decision made by Ofwat to revise or not revise a code may apply to the Competition and Markets Authority for that decision to be reconsidered. Codes form an important part of the regulatory framework because they contain the rules and processes that incumbent water companies and new entrant retailers participating within the retail market must meet when making their agreements on providing services in the new market. The regulations incentivise Ofwat to make code proposals that benefit the retail market and provide a transparent and predictable fast-track appeal mechanism for market participants to challenge those decisions should they wish to.

The draft Water Supply Licence and Sewerage Licence (Modification of Standard Conditions) Order 2017 sets the percentage of licensees by market share that must agree proposals made by Ofwat to change standard conditions in their licences before such changes may be imposed on all licensees. The order provides a means for Ofwat to modify standard licence conditions when at least 80% of licensees by market share agree to those changes. That will prevent a minority of licensees blocking or delaying the implementation of important changes to licences. Where more than 20% do not agree to an Ofwat proposal, the matter may be referred to the Competition and Markets Authority for a determination on whether the proposed change is in the public interest. The order will contribute to the smooth running of the retail market by ensuring that Ofwat can make important changes to licences without negotiating individually with each licensee.

The draft Water Act 2014 (Consequential Amendments etc.) Order 2017 includes amendments to primary and secondary legislation that are required because of changes introduced by the Water Act 2014. The amendments mainly relate to the opening of the retail market in April 2017 and are minor and technical in nature. The order includes changes to legislation relating to the existing water supply licensing regime and makes consequential changes needed because of the introduction of the sewerage licensing regime.

These SIs form a small but important part of the regulatory framework that will allow the competitive market to run smoothly and to function and evolve effectively. I commend them to the Committee.

It is a pleasure to serve under your chairmanship, Mr Nuttall. I thank the Minister for presenting the statutory instruments. I will highlight the issues that Opposition Members consider important.

The draft water industry designated codes regulations set up a right of appeal to the Competition and Markets Authority against a decision by the water services regulation authority to revise or not revise a code designated for the purposes of section 207A(2) of the Water Industry Act 1991.

The draft water supply licence and sewerage licence order relates to the 1991 Act, as amended by the Water Act 2014, allowing the Secretary of State for Environment, Food and Rural Affairs to determine standard conditions in water supply and sewerage licences. The order specifies relevant percentages in relation to the condition that specified percentages of licence holders do not object to such modification. Modifications cannot proceed without reference to the Competition and Markets Authority if objections are made by 20% or more of relevant licence holders. The order specifies how licence holders are weighted in order to measure market share.

The draft Water Act 2014 order relates to the 1991 Act, as amended by the 2014 Act, which makes changes to the water supply licensing regime and introduces a new sewerage licensing regime in the areas of sewerage undertakers wholly or mainly in England. The order makes amendments to primary legislation in consequence of those changes and of the Water Act 2003, and also makes modifications to secondary legislation.

The Labour party broadly welcomes these measures and does not intend to divide the Committee on them.

I thank the hon. Lady for her support on behalf of Her Majesty’s loyal Opposition. The Government are committed to opening the water retail market on 1 April, giving businesses, charities and public sector customers choice over their water retailer.

Question put and agreed to.

Draft Water Supply Licence and Sewerage Licence (Modification of Standard Conditions) Order 2017


That the Committee has considered the draft Water Supply Licence and Sewerage Licence (Modification of Standard Conditions) Order 2017.—(Dr Thérèse Coffey.)

Draft Water Act 2014 (Consequential Amendments etc.) Order 2017


That the Committee has considered the draft Water Act 2014 (Consequential Amendments etc.) Order 2017.—(Dr Thérèse Coffey.)

Committee rose.

Draft Liverpool City Region Combined Authority (Functions and Amendment) Order 2017

The Committee consisted of the following Members:

Chair: Mr Andrew Turner

† Bingham, Andrew (High Peak) (Con)

† Doyle-Price, Jackie (Thurrock) (Con)

† Eagle, Ms Angela (Wallasey) (Lab)

† Foxcroft, Vicky (Lewisham, Deptford) (Lab)

† Grant, Mrs Helen (Maidstone and The Weald) (Con)

† Harris, Rebecca (Castle Point) (Con)

† Johnson, Gareth (Dartford) (Con)

† McMahon, Jim (Oldham West and Royton) (Lab)

McGinn, Conor (St Helens North) (Lab)

† McGovern, Alison (Wirral South) (Lab)

† Mathias, Dr Tania (Twickenham) (Con)

† Mitchell, Mr Andrew (Sutton Coldfield) (Con)

† Percy, Andrew (Parliamentary Under-Secretary of State for Communities and Local Government)

† Quince, Will (Colchester) (Con)

† Tracey, Craig (North Warwickshire) (Con)

† Twigg, Derek (Halton) (Lab)

Dr Glenn McKee, Committee Clerk

† attended the Committee

Sixth Delegated Legislation Committee

Wednesday 8 March 2017

[Mr Andrew Turner in the Chair]

Draft Liverpool City Region Combined Authority (Functions and Amendment) Order 2017

I beg to move,

That the Committee has considered the draft Liverpool City Region Combined Authority (Functions and Amendment) Order 2017.

It is a pleasure to serve under your chairmanship, Mr Turner. The order was laid before the House on 6 February 2017. If approved and made, it will bring to life the devolution deal that the Government negotiated with the Liverpool City Region in November 2015. We are taking the deal forward with six councils in the area: Halton, Knowsley, Liverpool, St Helens, Sefton and Wirral. The order will put in place essential elements of that deal and will also confer new powers on the Mayor and the combined authority, as set out in the devolution deal—particularly on planning, housing, land acquisition and transport. The overall result will be to create arrangements that will materially contribute to the promotion of economic growth, improve productivity and facilitate investment across the Liverpool City Region.

The devolution deal is one of a number of deals that we have put in place in fulfilment of our manifesto commitment to devolve far-reaching powers and, more importantly, some money to areas that choose to have elected Mayors. Through this deal, the Liverpool City Region will receive a devolved transport budget to help to provide a more modern and better connected network, and it will be able to choose how to spend that budget. It will also receive new planning and housing powers to provide a strategic, local approach to tackling the issues in the region, and control over an investment fund of £30 million for 30 years to boost growth and prosperity. Parliament made an order in July last year to create the role of elected Mayor of the Liverpool City Region, with the first elections taking place this May.

The order will be made under the Local Democracy, Economic Development and Construction Act 2009, as amended by the Cities and Local Government Devolution Act 2016. As required by the latter Act, along with the order we have laid a report that provides details about the powers that are being devolved to the Liverpool City Region. As provided for by the 2009 Act, the relevant councils and combined authorities were consulted on proposals for the powers in the order, and the consultation ran from June to August last year. As statute requires, the councils provided the Secretary of State with a summary of the responses to the consultation at the end of last year. Before laying the draft order, the Secretary of State considered the statutory tests in the 2009 Act, and he is satisfied that those requirements are met. Further, as required by the legislation, each of the six constituent councils and the combined authority have consented to the making of the order.

More directly, the order provides for the conferral of functions on the combined authority, to be exercised by the combined authority, on the day following the day on which the order, if approved by Parliament, is made. Conferral of functions on the combined authority that are to be exercised by the Mayor will take effect on the day the Mayor takes office—8 May 2017. The powers and functions conferred on the combined authority to be exercised by the Mayor include a duty to prepare a Liverpool City Region combined authority spatial development strategy and powers of land acquisition, disposal and housing. The same powers as those available to the Homes and Communities Agency will be devolved, including the power of compulsory purchase.

The Mayor will have the power to call in planning applications of strategic importance and the power to designate mayoral development areas, leading to the creation of mayoral development corporations, although those will require further orders to be brought into being. The Mayor will work with the combined authority to draw up a local transport plan that will lead to a joined-up approach to transport across the area. The Mayor will also be able to enter into agreements with constituent authorities to establish and manage a key route network of strategic roads in the combined authority area.

In addition to its existing transport and economic development powers, the combined authority will exercise powers and functions, including having the final say on the Mayor’s spatial development strategy, which is important to ensure that the views of all constituent councils are adhered to, and the local transport plan. It will also have a role in promoting road safety and the regulation of traffic. The new powers will enable the Liverpool City Region to take a strategic approach to driving development and regeneration and stimulating economic growth, supporting the effective use of the £900 million of devolved funding that will come with the devolution deal. The order also provides for the necessary constitutional and funding arrangements, as I am sure hon. Members have seen.

The draft order before the Committee devolves brand new, far-ranging powers to the Liverpool City Region, putting more decision making in the hands of local people and helping the area to fulfil its long-term ambitions. There is already a great deal of positive work being done there, and the devolution deal is aimed at going even further for the people. The draft order is a significant milestone, which we hope will contribute to greater prosperity in the Liverpool City Region. Of course we all hope that it will result in an improved and more balanced economy.

It is a pleasure to serve under your chairmanship, Mr Turner. I am pleased to be considering the order today, not least because postal votes will be landing on doormats in about four weeks. We are cutting it slightly fine in dealing with the statutory instruments, but the order is nevertheless welcome. It is the result of a great deal of hard work by council leaders and the Mayor of Liverpool to bring together a deal.

We need to put the devolution package into perspective. Hearing the warm words from the Minister we might believe that there is a giveaway to Merseyside local authorities from the Government, but nothing could be further from the truth. The scale of public sector cuts affecting Merseyside’s local authorities, police and fire services, primary and secondary schools and Sure Start centres far overshadows the very small investment that the Government are making.

Furthermore, if the £900 million is meant to rebalance the economy and allow Merseyside and the wider north-west to compete with London and the south-east, we need to put it into perspective. It works out as £21 per resident per year. The transport imbalance between London and Merseyside is £1,600 a year, so what is happening is not the type of investment that would deliver the Government’s northern powerhouse narrative. The foundations on which devolution rests are hacked away every year by central Government cuts. Many authorities in the region will be wondering whether they will still exist by the time of the second Merseyside mayoral election—and no wonder, given the scale of the cuts there.

I make no apology for repeating that Labour Front-Bench Members remain concerned at the absence of a devolution framework in England. To take the north-west region, mayoral elections are now coming in Greater Manchester, and we are today agreeing the framework to allow elections to take place in Merseyside, but a meaningful devolution deal has still not been agreed for Cumbria or for Lancashire, and we have not yet seen full details of what the Cheshire and Warrington devolution deal will mean. Just within one region of a diverse country the levels of devolution are fragmented and contradictory.

The Government will celebrate the devolution of post-16 education, which will come with significant funding reductions. At the same time as they seem happy to devolve that funding, they do not trust the same local authorities to deliver primary and secondary education in schools; the Government are snatching power and resources away from local authorities and effectively disbanding the local education authorities.

A framework for devolution would get over many of the issues I have raised, where there are inherent contradictions in Government policy. I do not necessarily blame the Minister; it would not be fair to do that. It is clear that other Secretaries of State and Ministers just do not want to give up power. As much as there are champions of devolution who are trying to send power downwards, there are also some non-believers, shall we say, in the Cabinet, in the Government. They do not believe in devolution; they believe in a centralised state, where power, wealth and opportunity are held by the few, not the many, and where decisions that affect many millions of people are made by a few individuals, not by the people who will be affected by those decisions.

Let me say this, in the spirit of trying to move this matter forward. Clearly, the Minister is struggling to get broader support across the Cabinet and other Departments. I can understand the tensions in the Government machinery in trying to do that. If he is struggling to make progress with his own colleagues and there is anything that I can do to assist him to make better progress and which would advantage the people that I and other Labour MPs are here to represent, I feel obliged to offer the Minister that support. If he is not able, for whatever reason, to accept my support, let me gently encourage him to do slightly better in bringing other people on board.

I think that this is the first time I have served on a statutory instrument Committee with you in the Chair, Mr Turner, and it is good to do so.

I want to set my brief remarks in context, as I regard this development as a small step forward in the right direction, although it is not nearly radical enough. I wish that the coalition Government had not cut regional development off at the knees by abolishing the regional development agencies, setting back devolved economic development by at least a Parliament, because it has taken local enterprise partnerships far longer to become established and get up and running. Even in the document before us today, there are only the beginnings of efforts to reassemble some of the strategic approach to regional economic development that I believe we need if we are to ensure that this country can have a prosperous future after we exit the European Union. I will not oppose or speak against this small step forward in the right direction, but I want to raise a couple of issues and ask the Minister a couple of questions.

My hon. Friend the Member for Oldham West and Royton has pointed out the rather modest nature of the funds that have been devolved to the Liverpool City Region. The amount is £30 million a year for the next 30 years which, when we do the addition, comes to £900 million over the next 30 years. However, if we look at the funding cuts that have been made to the five authorities in the city region in the past seven years and if we include, to the end of this Parliament, the cuts that are expected to continue, subject to a sudden, damascene conversion in the Budget later today, we see something very interesting.

Liverpool City Council has had to make total budget reductions of £330 million. Between 2010 and 2016, my own borough, Wirral, has cut £156 million from its budget, and it has to find a further £132 million over the next four years. Sefton has faced a funding cut of £169 million over the past six years. Halton will have lost £63 million, which is 61% of its funding, over this period, and we are talking about 57% of the funding for Wirral and 58% of the funding for Liverpool City Council. Knowsley has seen its funding cut by £86 million since 2010, and over the next three years the council has to find another £14.8 million. The general grant for St Helens will be cut by £90 million by 2020. When we add all that up over the 10 years from 2010 to 2020, it comes to more than £1 billion. We are being asked to welcome a funding settlement of £900 million over 30 years, even though we are seeing funding cuts to our local authorities of more than £1 billion in these 10 years.

That is without talking about European funding, which will be gone after 2020 because of our exit from the European Union. If we look at the European social fund and the European regional development fund, we see that between 2007 and 2020—the two funding periods that are relevant for those funds—our area will be allocated £557 million. There is absolutely no guarantee whatever that a single penny of extra assistance will be available for our city region after 2020—there has been no guarantee from the Chancellor about that. I speak as someone who grew up dealing with the devastation of our local authority areas in the 1980s, when the only money allocated for basic programmes came from the European Union social and industrial development funds. Those will be gone.

Notwithstanding this tiny step in the right direction, what guarantees can the Minister give that his Government understand the importance of continuing to support locally based economic regeneration and development in the areas of the north where there are scant numbers, if any, of Conservative MPs and which tend not to get access to gentlemen’s agreements, sweetheart deals and the things making the news at the moment? In the time that we have left, which is quite a lot, will the Minister reassure us about future funding, which will enable our local authorities and communities to do what they do best—come together to help grow economic opportunity and development from our local region up?

We have fantastic positives in our area that we can develop from. The Liverpool City Region is on the right side of the country to trade with the rest of the world; its history is as a port and an outward-looking trading part of the country. This development is a tiny step in the right direction. When we hopefully manage to get our new metro Mayor Steve Rotheram elected in May, we will have a great local champion who can help us to make progress. I am interested in what further assurances the Minister can give, apart from this very modest allocation of money that has been announced to date, so that we can help to plan and develop our own future in the Liverpool City Region.

Well, I suppose I should begin by welcoming what seemed to be some positive comments. I am getting used to the shadow Minister in particular being positive, then panning the entire policy for the rest of his contribution, but we are making progress all the same.

One of the things I should have done in my speech, as the shadow Minister did, is pay tribute to the work of those people in the local authorities who have brought this deal into being and have worked incredibly hard on it. I have met them a number of times since I took on this role and have been very impressed by the way in which they have engaged in the process and buried some of the traditional challenges that local authorities sometimes have with one another in neighbouring areas to come together on this deal. Obviously, the Mayor of Liverpool is in the same boat. It is very impressive and they deserve credit for it.

I cannot let the shadow Minister’s comments on northern powerhouse funding and the general commitment to it go answered. It is simply not the case that substantial resource has not been put behind it. Only two weeks ago, I was in Manchester launching the £400 million investment fund that is going to provide anything from £25,000 to £2 million of support—funding and borrowing—to small and medium-sized enterprises across the north of England. It was only at the beginning of this year that we announced how £556 million of growth funding from the Government to the north was going to be allocated.

I am sure Greater Manchester council leaders fully appreciate the £400 million—not least for the fact that the Government were cutting more than £400 million from their budgets this year alone.

I do not mind taking lectures from people on any area of policy if their own position is consistent, but the Opposition’s position going into the general election was to promise not a penny more for local government. They were elected on the same mandate as we were when it came to local government funding, which was not a penny more. That was their policy.

No, we have done this before. That was the policy of the Opposition, so lectures on local government finance when those were the words of the former shadow Chancellor are a little bit difficult to take.

To get back to my point on funding, the £556 million from the local growth fund for the north is the lion’s share of the bigger £1.8 billion pot, and we announced £71.95 million of that for the Liverpool City Region in January. If we consider those funding figures, as well as what my area in the north is getting per head compared with what Londoners got, it is simply not the case that resources are being provided to other parts of England that are not being provided to the north. We did much better out of that funding than many parts of the south of England. We are also committed to £13 billion of investment in Transport for the North and the growth funding I mentioned is part of a broader £3.4 billion package.

I recall that at the 2010 election—not going too far back in history, although I think the Labour party was still electable at that point—the policy of the Opposition, who were the Government of the time, was to cut infrastructure spending if they won. That was their policy. So, again, lectures on infrastructure spending are a little bit difficult to take.

The shadow Minister talked about future devolution agreements and criticised me and the Government, and whoever else, for failing to bring those deals forward. Progress in Cheshire was paused by Warrington. That was not a decision by Government—it was a decision by Warrington. I have met Warrington Council since then. I sat down only yesterday with the Labour leader of Cheshire West and Chester Council. In the case of Warrington, they have now taken that pause off and wish to proceed with a deal and a proposal. It is for the local area to come up what they think that deal should be and what they want to see in it. The Government remain open to that.

The hon. Member for Oldham West and Royton mentioned Lancashire and criticised me or the Government again. We have not been presented with a devolution deal for Lancashire. We have been presented with a proposal for a combined authority non-mayoral, for which several local district councils have now withdrawn their consent.

Well, it is called local democracy. It was a Labour council in Warrington that decided to pause the deal in Cheshire, and it was Labour councils in the north-east.

The hon. Lady shouts about Merseyside. The shadow Minister asked me very directly about Cheshire and Lancashire, and I am answering the point—I should have thought that in this place that would be cause for congratulation. I will move on all the same, not mentioning the Labour councils in the north-east who pulled the deal, which has denied the people £1 billion of extra funding.

The hon. Member for Wallasey talked about the abolition of regional development agencies. Having spent 10 years on a city council in Yorkshire, I do not have quite the same positive view as she does of regional development agencies, although I accept that they did many very good things. They have not simply been abolished. They were replaced with local enterprise partnerships, which many people would conclude have been better at giving a voice to their area on a more local geography. All I can say is that we should look at the evidence, which is that we are seeing foreign direct investment in the north of England growing at twice the UK average. We have seen bigger economic growth in large parts of the north than in the south of England. We have seen record low unemployment rates. In my own constituency—

I am talking about the LEPs versus RDAs, which were an England-wide policy, and that is what the hon. Lady asked me about. In terms of EU funding for Merseyside, we have been quite clear on that as well, with the commitment until 2020. At the end of the day, all European funding is British taxpayers’ money because we are a net contributor. If the hon. Lady has read the industrial strategy, she will see that we have been really clear. We have committed in the industrial strategy to looking at what will replace European funding and local growth funding. That commitment is there in the industrial strategy and work is ongoing on that at the moment.

Is the Minister giving a commitment that the kind of support we have had—£0.5 billion in the two previous rounds of European funding—will be maintained by the Government, and that the Government see the importance of ensuring that whatever replaces the European structural and investment funds and the European social fund will be targeted at those areas most in need?

We have a very strong record on investing in local growth and infrastructure, through the local growth fund and transport funding more generally. The beauty of holding a consultation, which is what the industrial strategy Green Paper proposes, is to seek people’s views on what they want to see us progress on.

Yes, there is work ongoing on what the future of local growth funding should look like. That is in the context of local growth funding ending. We have gone through the third round, which was always going to be the final one. That is in the context of our exit from the European Union, for which the people of the north voted strongly.

We have plenty of time to discuss these issues, so I appreciate the Minister giving way. I shall press him again. In the development process for these new funds, does he agree that areas of need that are in need of economic development because they are poorer than other areas of the country ought to take priority when the Government decide their new process of regional development assistance?

I have made it absolutely clear that there is a consultation with a Green Paper, in which we have made absolutely clear that the Government are looking at how to replace both local growth funding, which is our domestic programme, and European funding. There is a range of European funding streams that have to be replaced. We are looking at that—it is all part of the consultation. I am sure that the hon. Lady has already responded to the industrial strategy Green Paper with her views on the matter, which is important. She made a point about need, but we need to look at what happened with the recent iteration of growth funding, which was very generous to the north compared with some other parts of the country where, perhaps, there is greater need.

The hon. Lady mentioned sweetheart deals. The idea of sweetheart deals has been widely panned. I think we all know which council the hon. Lady refers to.

I am sorry. She can keep saying a line but, when everybody has panned this being from our side or from the council itself in the case of Surrey, she should bring forward evidence of a sweetheart deal. I tell the Committee that all Surrey has asked for is exactly what Liverpool is already getting, which is a pilot for business rate retention. The difference is that the Liverpool City Region will get it a year earlier. Unless we have done a sweetheart deal with Liverpool, we have not done a sweetheart deal with anybody else. The Opposition should stop peddling that particular line.

Committee rose.

Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017

The Committee consisted of the following Members:

Chair: Mr David Hanson

† Brine, Steve (Winchester) (Con)

† Cunningham, Alex (Stockton North) (Lab)

† Docherty-Hughes, Martin (West Dunbartonshire) (SNP)

† Elphicke, Charlie (Dover) (Con)

† Harrington, Richard (Parliamentary Under-Secretary of State for Pensions)

† Howlett, Ben (Bath) (Con)

† Jayawardena, Mr Ranil (North East Hampshire) (Con)

† Jones, Graham (Hyndburn) (Lab)

† Mann, Scott (North Cornwall) (Con)

† Marris, Rob (Wolverhampton South West) (Lab)

† Pawsey, Mark (Rugby) (Con)

† Sharma, Mr Virendra (Ealing, Southall) (Lab)

Siddiq, Tulip (Hampstead and Kilburn) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Soubry, Anna (Broxtowe) (Con)

† Tomlinson, Justin (North Swindon) (Con)

† Warman, Matt (Boston and Skegness) (Con)

Juliet Levy, Kenneth Fox, Committee Clerks

† attended the Committee

Fifth Delegated Legislation Committee

Wednesday 8 March 2017

[Mr David Hanson in the Chair]

Draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017

The Minister may move the motion and then make a speech accordingly, but if he moves it formally, I will invite the Opposition to speak.

I beg to move,

That the Committee has considered the draft Automatic Enrolment (Earnings Trigger and Qualifying Earnings Band) Order 2017.

I am delighted to serve under your chairmanship, Mr Hanson. For the clarity of the record, I did not mean moving the motion formally in the parliamentary sense; I meant doing so in a formal manner, which means being properly dressed and addressing the Chair properly. I hope that I have dealt with that issue satisfactorily.

The order was laid before the House on 2 February 2017. It reflects the conclusions of this year’s annual review of the automatic enrolment earnings thresholds required under the Pensions Act 2008. The review considered both the automatic enrolment earnings trigger, which determines the point when someone becomes eligible to be automatically enrolled in one of the qualifying workplace pensions, and the qualifying earnings band, which determines those earnings of which the enrolled employee and their employer must pay a proportion into a workplace pension. The order sets a new lower and upper limit for the qualifying earnings band, and is effective from 6 April 2017. The earnings trigger is not changed, so no further provision is required in the order; it remains at the level set in the automatic enrolment threshold review order for 2014-15.

The automatic enrolment programme has received support from right hon. and hon. Members on both sides of the House. It was implemented under the previous Labour Government and came about as a result of the Pensions Commission, which was a successful and, I think it is fair to say, non-political body. The programme is working. More than 7 million people have already been enrolled and more than 400,000 employers have carried out their duty to provide a workplace pension for their employees. We are now in the final year of roll-out, which I think is the most challenging phase, because the majority of the employers joining are small and micro-employers. Against that backdrop, it is more important than ever to maintain simplicity and consistency for employers. That is the reason for this year’s order, which will provide those things through to the end of roll-out in February 2018.

I am pleased to say that we are at an exciting juncture in the development of automatic enrolment, as my Department is embarking this year on a review of the policy and its operation. It is the right time to reflect on the successes we have achieved so far, and also to look to the future. We are taking stock of the current position and considering how to build on what has been done, so that AE continues its success into the future. I think we all look forward to the result of the 2017 review, but given that it has just begun, it is important that this year’s threshold decision does not pre-empt the outcome. Nevertheless, we must obviously continue the principle of increasing opportunity for people to make meaningful savings in a workplace pension, while balancing costs for employers.

I shall describe the impact of the order, and will first consider the qualifying earnings band. Past reviews have generally linked it to the national insurance lower and upper earnings limits, and I think that is common sense and has been uncontroversial. As signalled in my written statement of 12 December 2016, the order will, as its predecessors did, align both the lower and upper limits of the qualifying earnings band with the national insurance lower and upper earnings limits, so that the trigger is the same: £5,876 for the lower limit and £45,000 for the peak.

Maintaining the alignment with national insurance thresholds at the points where contributions start for low earners and are capped for higher earners—remembering that employers are the conduit to the pension—fits exactly to existing payroll systems, without further changes. The decision ensures simplicity and minimises the administrative burden of compliance for employers in 2017-18, while maintaining consistency for hundreds of thousands of small and micro-employers who are implementing AE over the coming year. It is done in the way they expect it to be done, and there is consistency.

The order does not change the earnings trigger, which remains at £10,000, as set in the 2014-15 order. The maintenance of that trigger and anticipated wage growth mean that we expect about 70,000 additional individuals to now meet the earnings criteria and be brought into the automatic enrolment population. Individuals earning below the £10,000 trigger, but above the lower earnings threshold, can still have the option to opt-in to a workplace pension and benefit from their employer’s contributions, should they wish. The decision to maintain the earnings trigger at £10,000 will increase the number of low earners who meet the earnings criteria and who are therefore automatically enrolled into a workplace pension.

Paragraph 7.4 of the explanatory notes says:

“The Secretary of State has re-considered all the review factors against the latest analytical evidence”.

Paragraph 18 of the impact assessment also says that

“the Secretary of State has re-considered all the review factors against the latest analytical evidence”.

To my mind, the impact assessment does not include that analytical evidence. Will the Minister tell us what that analytical evidence is and where it be found?

If the hon. Gentleman will have a little patience, I intend to cover that a little later in summing up. Perhaps he will intervene again, and if he is not satisfied, I will write to him with more detail. I hope that is okay; I am not fobbing him off.

The important thing to remember is that the decision to maintain the alignment of the lower and upper earnings qualifying bands with those for national insurance contributions is about maintaining simplicity and consistency for employers, because this is a crucial stage. It does not mean that that will not change in the future—that is what the review is for—but, for the moment, we feel that this is an interim arrangement, at the end of the roll-out, rather than at the beginning of the next phase, which I hope will happen, depending on the outcomes of the review.

In the end, because of wages going up, total pension saving—that is what everyone is interested in—is expected to increase by £71 million. The order therefore ensures that automatic enrolment will continue to provide greater access and opportunity for individuals to save in a workplace pension and build up meaningful pension savings. I commend the order to the Committee.

It is a pleasure to serve under your chairmanship, Mr Hanson—for the second time in nine days, I believe. I begin by wishing everybody and all the women in the room a happy International Women’s Day. Let us hope that when the Chancellor rises to his feet this afternoon, he delivers a Budget that delivers a little more equality in our society for the women.

I am proud that it was a previous Labour Government who introduced auto-enrolment for pensions. Although we feel that the current Government are building on that work, we certainly feel that much more needs to be done now to bring other groups into the world of auto-enrolment. That said, we very much welcome the Government’s freeze on the £10,000 earnings trigger, which will bring some new people into the system.

On my hon. Friend’s opening theme, he will no doubt be pleased to see in paragraph 25 of the impact assessment that an estimated 75% of the newly included group are women.

I am grateful for that intervention, even though it takes away the question I was about to ask the Minister, who has already confirmed that 70,000 extra people will be auto-enrolled. I was going to pose the question: what is the breakdown between men and women? My hon. Friend is ahead of me and the Minister.

I would also like to know the Minister’s intentions for future years. Can we look forward to a long-term freeze, thus tipping even more people into the system, or is this simply a one-off proposal? The freeze, of course, does not recognise our argument that more low earners should be enfranchised into pension savings through the auto-enrolment scheme.

The original policy, developed by the last Labour Government, was to align the trigger to the lower earnings limit of national insurance. We maintain that the Government should lower the trigger to that level to widen the number of low earners who are saving. However, this statutory instrument is a small step in the right direction and we will not stand in the way of its implementation.

During the Committee stage of the Pension Schemes Bill, the Government rejected our amendment requiring them to consider how excluded groups could be brought into auto-enrolment, including the self-employed, lower earners and those working in multiple jobs. We know that the review of auto-enrolment is ongoing, but the Government need to be clear about their intentions on how to broaden access. One group that could have been covered by this SI are people working in multiple jobs, earning a combined income above the threshold, but who do not benefit from having a workplace pension. How is the Minister planning to address that issue? Assuming that he is, can he also confirm that he has the necessary powers to create regulations without having to resort to primary legislation? Lowering the trigger even further would also help to enfranchise some of those working in multiple jobs, as well as those with single roles.

We have also raised concerns about those who are self-employed. We supposedly encourage and support entrepreneurs in the UK, but their lack of access to building up a workplace pension is detrimental to innovation and to their future retirement. Will the Minister say how he plans to ensure that all workers have access to workplace pensions, even if they are self-employed? There are a number of other areas where we think auto-enrolment could go further. I know that the Minister will be looking forward to the debate around those issues, which we will continue to raise over the coming months.

It has been argued that lower earners are already earning such a small amount that auto-enrolling them would be to their detriment. I disagree with that analysis. No matter how little someone earns, they need to be secure and settled in retirement. A workplace pension goes some way to securing that, even for the lowest earners. If there is a problem with lower earners not having enough money to put into workplace pensions, perhaps the Government should look at how to ensure that people have adequate wages to be able to live, provide for their dependants and save for their retirement.

It is particularly important that we ensure that women are better protected in future retirement through auto-enrolment and their workplace pension, as I fear that this Government have severely let women down, given that they are the hardest hit by their austerity measures and cuts—but as we all know, the Chancellor is going to put that right today. The Minister would be surprised if I did not include among those let down the thousands of ‘50s-born women affected by the acceleration of the state pension age. I know that many of them will be outside today protesting about that on various parts of the estate.

The Minister is fond of saying that there is probably more that unites us than divides us on pensions, but I believe that the recent Bill might contradict that somewhat. The Government are taking the smallest of baby steps to increase participation in auto-enrolment, but they are nevertheless welcome. We look forward to them taking big, adult steps in future, so that we can all ensure that when it comes to pension provision, nobody—

I take issue with the tenor of the hon. Gentleman’s speech. Auto-enrolment and the need for reforms of pensions would not have been necessary if a previous Labour Government had not entirely and systematically destroyed the brilliant pension system that we used to have.

I do not accept the second part of the hon. Gentleman’s intervention, and as for taking issue with the general tone of my speech, I thought I was being quite conciliatory and kind to the Government on this occasion, and the Minister seems to agree, even if the hon. Gentleman does not.

Order. I have been very conciliatory, given that the hon. Gentleman has gone very wide of the order. I would be grateful if he and all hon. Members focused on the order.

I will certainly do that in the last sentence of my speech, Mr Hanson. As I said, we look forward to the Minister taking big, adult steps in future, when we can ensure that, when it comes to pension provision, nobody is left behind, no matter whether they are a low earner, self-employed or a carer, or have multiple jobs.

It is pleasure to appear before you, Mr Hanson. I have a small, though concerning point that I would like the Minister to clarify. There is support across the House for auto-enrolment and there have been historical difficulties with pensions. However, paragraph 25 of the impact assessment says:

“Freezing the value of the automatic enrolment trigger at £10,000…brings an additional 70,000 individuals into the target population.”

We know from the impact assessment that three quarters of those are women. Paragraph 25 continues:

“This will result in an associated increase in total pension saving of £4.3 million in 2017/18.”

According to my calculations, that means on average, for each of those 70,000 additional people, £61 of pension savings in one financial year. That does sound awfully low and a bit worrying. Will the Minister look at that? I know that there are other measures and this is part of a whole, but an additional £61 of pension saving, as an average for each of those additional 70,000 people brought in by freezing the limit, does not sound very progressive or helpful to those people. Off the top of my head, they would have to live about 50,000 years at that rate to get some pension.

I would like to respond in full to the hon. Member for Stockton North. I accept that some of the matters that he and I discuss regularly in the main Chamber are really meant for outside this room. I will confine my comments on his speech to the fact that all the points he has made about multiple jobs and getting self-employed workers involved in auto-enrolment are very much on our radar for the review. I look forward to sharing with him publicly and in our conversations what we have in mind.

The Government are committed to expanding the number of people in the auto-enrolment system. Having said that, I think the right decision was taken when it started to keep it as simple as possible because, in a British way, it was quite a revolution. It was a complete change. At the start it was a compulsory workplace pension, and a lot has been achieved by the National Employment Savings Trust, other pension providers and the Government, with strong political support from all concerned. That does not mean that this is the end of the story. If I may attempt to be a little Churchillian, I would say that it is the end of the beginning, not the beginning of the end—or vice versa; I am never quite sure which order to put it in, but that is what it is. With that in mind, I will confine my comments on the hon. Gentleman’s speech, given your guidance on the scope of the order, Mr Hanson—that also gives me an excuse not to mention the Women Against State Pension Inequality demonstration today.

In response to the hon. Member for Wolverhampton South West, I do have the supporting analysis for the review, in “Review of the automatic enrolment earnings trigger and qualifying earnings band for 2017/18: supporting analysis”. Rather than take the time of the Committee, I will hand it to him, if that is acceptable. It is a comprehensive analysis, and if the hon. Gentleman wishes to take it up further with me, he is welcome to do so.

I am grateful for the Minister’s generous offer, which I accept. Perhaps he could give the Committee the edited highlights of that evidence.

The edited highlights are that there was a full analysis that supports the earnings trigger.

The order increases the qualifying earnings limit in line with national insurance to a £5,876 minimum and an upper earnings limit of £45,000. It maintains the status quo for the system of organising the limits. The earnings trigger, at £10,000, remains at its existing level. I know that I have said this several times, but I would ask hon. Members to be aware that that is because we are doing a review. The Government’s intention is to do the opposite of trying to reduce the number of people who are brought within auto-enrolment.

As for the figure that the hon. Member for Wolverhampton South West mentioned—this marginal amount—there is a calculator that worked out the amount of money, and I intend to write to him on that basis. He will remember that the minimum to start is 1% for the employer and 1% for the employee. If someone had been brought in at £10,000, remembering that £5,000-and-whatever is the minimum, then I can see a number in my head—obviously quite a crude number, because I have not worked out exactly where that could come from—but this is the very beginning. If someone has a small part-time job in their early twenties and has not gone into full-time employment, then I can see that, but of course they are not going to work for 50,000 years. The whole purpose of auto-enrolment is to get people thinking about their savings, to get employers involved, to show the Government’s part with tax relief, and to ensure that, with their state pension and workplace pension, they have enough money for a comfortable retirement.

I believe that I have covered most of the points raised about the order. I thank the Opposition and other hon. Members for their contributions. I do not want to pre-empt the 2017 review. Enough people are involved from the pensions world, the consumer world, the trade union movement and business. A very wide group of people are taking part, not just a few civil servants at the Department for Work and Pensions. I hope that I have set out for the Committee the need for the order and responded to the matters raised, albeit briefly, for reasons I have explained.

Question put and agreed to.

Committee rose.