James
Purnell indicated
assent.
Mr.
Laws: I am pleased to see that the Minister was paying
homage to the Prime Minister, as Ministers should. I thought that I
heard the Prime Minister say, when questioned by a Government Member,
that he agreed that we should keep the terms of the scheme under
review. That is encouraging, but I was not entirely sure whether the
Prime Minister was fobbing off a friendly Labour Back Bencher or
whether the
Government really were intent on keeping the terms of the scheme under
review, as was their clearly stated position prior to the announcement
about the improvements that we are discussing.
My first request to the
Minister is to find out how much the financial assistance scheme will
be under review in future. Was today’s statement from the Prime
Minister news to the Minister or was it entirely in line with
departmental policy? If so, was the Minister therefore encouraged to
hear the Prime Minister repeating the Government’s position?
People out there need to know whether we have reached the end of the
road, with the Government no longer being willing to make concessions
towards greater generosity, or whether they are still approaching the
issue in the relatively helpful way that they approached it before
making the announcements. At that time they acknowledged that the
previous scheme was almost fantastically ungenerous and unquestionably
needed improvement, although that had to be set in the context of the
spending review. We
heard further announcements from the Chancellor in today’s
pre-Budget report about the amount of money that will be available to
each Department in the next spending review period. However, most of
that seemed to relate to administrative expenditure. It is possible
that there is still some uncertainty about aspects of the budget for
the Department for Work and Pensions in the next spending review
period, so I should be grateful to know whether, once that has been
set, in the middle of next year, the Government will be willing to look
again at the financial assistance scheme—in the sort of time
that they initially indicated would be needed for the review to take
place. I want to raise
three issues that relate to our concerns about the regulations. The
first is speed of payment, which the Minister has touched on and the
hon. Member for Eastbourne also mentioned. Then there are the holes
that exist in the financial assistance scheme, even with these changes.
Finally, I should like to ask about the way in which people who have
terminal illnesses are going to be dealt with, because that, too, is
touched on by the regulations.
It was reassuring to hear the
news that additional payments have been made to people since the
Government made their announcements at the beginning of this year and
in May, indicating that almost no individuals were benefiting from the
scheme. During this debate, we have heard four separate figures from
the Minister relating to the total payments. I hope that that reflects
a fast-moving situation, in whichhis departmental colleagues
are stepping on the accelerator in the knowledge that this debate is
taking place. Perhaps he can give us an update at the end of our
proceedings, in case anybody else has received a payment during this
exchange.
Notwithstanding the big
increase in percentage terms since May, the overall figures are still
risibly low in light of the number of people who are affected by the
problems. I know that Ministers do not always like to make predictions
on such issues, but could the Minister give us some idea where he
thinks he will be at the end of the year in relation to the payments?
He
indicated that some of the payments were close to being made. Can he
give any estimates, or set any targets, for progress in the first
couple of quarters of next year? Has he any idea how many payments he
expects to have been made by the end of March 2007 and by the mid-year
point? Can the information that he is receiving from scheme managers
and the pace at which it is coming in offer any clue as to how rapidly
the numbers will build
up? The second big
area of debate is the generosity,or lack of it, of the scheme.
The hon. Member for Eastbourne touched on a number of the points that I
wish to make, and I should like to reinforce some of them. They concern
matters that will undoubtedly be aired in our debate in the Chamber
tomorrow. At the beginning of this debate, the Minister helpfully
indicated the scale of the cost of the scheme. He was talking about a
total over 50 years of some £2.3 billion, and the net present
value of the cost increasing from £243 million for the old
scheme to £783 million for the new one.
Will the Minister indicate
whether those figures include the consequent impact on means-tested
benefit entitlements? Have any offsets been assumed in the figure that
the Government have prepared, and has he made any estimate of the cost
in relation to the offsets that will be made through tax revenues? I
understand that the payments will, on the whole, subject to
people’s normal personal allowances, be subject to taxation. If
those two factors—means-tested benefit offsets and
taxation—were taken into account, would that offset the figures
that the Minister has given us, or has he given us merely the gross
cost without netting off the benefits that will be
made? The hon. Member
for Eastbourne made an important point—I must not go too far,
but he made one important point at the very least—about the
Government’s possible exaggeration or people’s
misunderstanding of what the financial assistance scheme’s
levels of compensation add up to. Although the impression given to many
who see only the headline figures is that compensation is quite
large—80 per cent. figures have been bandied around so that
peoplewill get the impression that they will receive in
compensation a large amount of the pension that they would have
received—it seems in reality to be only a portion of the core
pension entitlement.
The hon. Gentleman said that
even those in different bandings can therefore expect much lower
amounts in terms of actual scheme values than the headline rates
indicated. I think that he mentioned that although it might appear that
some people will get 50 per cent. of their scheme entitlement, by the
time the Government pays 50 per cent. of the core entitlement, it might
only be one quarter of the scheme value. One quarter sounds, and is,
very different from 50 per cent., 60 per cent. or 80 per
cent. Will the
Minister confirm the figures that the hon. Member for Eastbourne cited
and tell us whether he has made any similar calculations, so that he
can put on record what the various percentages will relate
to—core value or scheme value? The point about generosity, or
lack of generosity, is reinforced by the fact that scheme payments
under the financial assistance scheme will be fully taxed in the normal
way.
They will not be the tax-free lump sums that schemes would generally
pay, and their value therefore diminishes. The hon. Gentleman then listed
a number of other aspects of the scheme’s lack of generosity,
and it is worth putting them on the record: different tax treatment;
the necessity of waiting till age 65 to receive compensation, even
where the scheme’s pension age is earlier; the fact that the
payments are not inflation-linked, which will erode them over time; the
fact that the cap is set very low at £12,000 and is not
inflation-linked; the fact that spouse benefits will not be as generous
as they would be in schemes; and the important fact that although the
Government have been quite helpful in moving the previous very mean
cut-off of a few years before pension age to 50 years, a lot of people
who may have been in schemes for many years will receive no
compensation whatever.
The point that Ros Altmann and
others have made—I pay tribute to her for all the work that she
has done in leading the debate outside this place—is that some
of the people who do not get assistance from the financial assistance
scheme will lose out from its operation, as the cost of administering
it will fall on the schemes themselves, which will have to be
withdrawn. Some of the people who do not receive FAS assistance might
lose out as a consequence of a scheme designed to deliver
compensation. For all
those reasons, although this is a better scheme, it is better only than
a very low base. I took some comfort from the fact that the Prime
Minister is so keen to keep the scheme details under review, and I look
forward to the Minister’s confirmation of that and of whether
there is a timetable for triggering that review. Will it be triggered
by the spending review announcements next
year? Will the
Minister comment in a bit more detail on the very sensitive issues
touched on by some of the regulations that relate to people with
terminal illnesses? That is of particular concern. Although it will
affect only a relatively small number, I hope that the Government are
seeking to do everything that they can for people in that particularly
difficult position. Members who are more than 15 years from the scheme
pension age and who have a terminal illness will get no compensation
whatever, as I understand the scheme. I should be grateful to know
whether that is one of the issues under review if, as the Prime
Minister said today, the scheme might still be considered. In addition,
terminally ill people might in some cases receive interim payments, but
those are at a lower level than ordinary scheme payments.
The regulations cover appeal
rights for people with terminal illness, and it would be helpful to
know a little more about how that matter will be dealt with,
particularly in the case of people expected to live for a short time.
The idea that they would have to go through a stressful or prolonged
appeal process would concern all hon.
Members. We shall
return to the issue tomorrow, and Ilook forward to hearing the
Minister’s comments, particularly on the Prime Minister’s
commitment today to keep the details of the scheme under
review.
3.15
pm
James
Purnell: I thank both Opposition parties for their support
for the regulations. We shall debate the matter again tomorrow. It is
worth saying that the quote that the hon. Member for Eastbourne gave
about the ombudsman’s view of the FAS related to the previous
version of the scheme. I recognise that the ombudsman does not believe
that the current version is sufficient either, but we took her views
into account when we decided to extend the scheme. However, as the
Committee will know, we do not accept that we were liable or
responsible for the losses
incurred. I shall try
to deal with as many as possible of the points raised. If I fail to
answer particular questions, there will be an opportunity to ask them
again tomorrow, or I will happily write to hon. Members. The financial
assistance scheme payments are making a significant
difference—some people are getting thousands of pounds of extra
support through the scheme, which is important. That was welcomed by my
hon. Friend the Member for Ayr, Carrick and Cumnock (Sandra Osborne),
who questioned the Prime Minister today. The hon. Member for Yeovil
tried to tempt me to go from saying that the policy is under review to
saying that there is a formal review of the policy, which I do not
think is what the Prime Minister said, as Hansard will show. We
keep all policies under review, and if there are further ways in which
to help people we shall continue to examine them as well as the
operation of the scheme. However, we believe that the taxpayer’s
contribution to the scheme strikes the right balance between our duty
of helping people who have lost out and our duty to the House to use
public finance
properly.
Mr.
Laws: I am grateful to the Minister for his patience in
giving way so early. I noted down what the Prime Minister said today as
soon as he said it. He said that the Government would keep the terms of
the scheme under review. That seems to indicate that the change in its
terms provided in the regulations is not necessarily the last change
that the Government will make. Will the Minister confirm
that?
James
Purnell: As the hon. Gentleman says, we are amending the
terms of the scheme as we speak. That is why we are in this Room. His
intervention did not show that the Prime Minister had announced a
review. The hon. Gentleman spoke about the review that my predecessor
had mentioned, which was expedited by the Prime Minister, and the
regulations are the culmination of that review. We keep all policies
under review and will continue to do so, but we believe that the
regulations will provide an appropriate balance. They will help about
half the people who have had significant losses, which we believe is
the right balance for the taxpayer to be expected to
fund. We have made it
clear that we expect schemes to wind up within two years of the
publication of our response to the Public Administration
Committee’s report. We are serious about that, and we have
powers to make schemes wind up if they do not do so, in partnership
with the PPF. We have written to a number of schemes under the FAS to
encourage them to make faster progress, and we have issued a notice to
one
organisation to ensure that it does. The pensions regulator has a wide
range of powers, for instance to change an independent trustee or to
fine people, and we will not be worried about using them if necessary.
We do, however, co-operate extremely well with most people who are
administering schemes that could benefit from the FAS. We are grateful
for all their support. Most of the payments that we
are making are initial payments because the vast majority of schemes
that could qualify for FAS have not yet wound up. It is important to
make it clear that we can pay people before the scheme is wound up.
They can get a payment of 60 per cent., rather than 80 per cent., and
anything which they have missed out on can then be backdated at a later
stage. Some 519 of our payments are initial payments and if that number
increases during this speech, I will let the Committee know. We will
continue to monitor that and to work with trustees to get as many
people to apply for initial payments as possible. I have made it clear
that we would like people to apply for initial payments where that is
in the interests of their scheme.
The hon. Member for Eastbourne
asked about the cut-off date. I can confirm that we will do everything
that we can to ensure that people are aware of it. It is worth
remembering that there is a 12-month extension from the previous
cut-off date, which was this February. We have had discretion to take
applications later than that. We have written to all the schemes. We
have had interviews with 75 per cent. of the schemes. A huge amount of
work has been done to ensure that people are aware of their potential
entitlement, so we would be surprised if many schemes were not aware
that they should be looking at whether they were entitled to FAS
payments. The hon.
Gentleman mentioned companies that are not technically insolvent. We
are not sure that there are any companies in that situation. This is
not a widening of the scheme to allow solvent companies in. These
companies may have been dormant. They may not have been filing
accounts, rather than going through an insolvency event. Their assets
may have been so low that they could not afford to go through a formal
insolvency event. As I understand it, in those circumstances they may
simply not have filed accounts for three years and then found
themselves dissolved at the end of that process. The provision acts as
belt and braces for people in those circumstances, although we are not
aware of any. The hon.
Gentleman also raised the important point about paying survivors before
Christmas. We are certainly striving to do that. Obviously we cannot
prejudge the process of these regulations going through Parliament, but
we have been working with schemes
to identify qualifying survivors and, if the date we receive the data
allows, we are confident that we will make some payments under these
regulations before Christmas. I hope that that gives him the assurance
of our intention, which is the most that we can do at this
stage. The cost
includes tax, which is deducted at source. We have not been able to
model the effect of the means test because the population affected is
not necessarily typical of the overall population. Normally, to model
the effect of a means test on any future policy, we take a rough
proportion of the overall population to map out the overall costs. That
may not be statistically appropriate in this case because that section
of the population would typically be better off than the rest of the
population. Therefore, it has not been possible to model that part of
the net cost. The hon.
Member for Yeovil invited me to estimate the proportion of benefits for
which the FAS may be able to pay. I am afraid that that is not possible
because the whole point about the core expected pension is that it is
not a replacement for every single detail of individual schemes.
Schemes differ in a variety of ways in terms of the lump sums they make
available, the early retirement provisions, health insurance, death
insurance and so on. It is not possible for us to replicate all those
changes. Given that they vary between schemes, it is not possible to
say what proportion of benefits overall the FAS will pay for. The
intention of the legislation has always been to pay people a proportion
of the core expected pension. That is exactly what the measure
does. I thank the
Opposition and my hon. Friends who have been delayed from going for
their Christmas shopping. This has been an important debate. It is
important that we scrutinise these policies. Clearly, we will have
another opportunity to do so tomorrow. I recognise that there are
different views about the extent and generosity of the scheme. I do not
believe that any of the political parties has a commitment to finding
further public funds to extend the generosity of the scheme. I know
that the Conservatives have been borrowing the Liberal
Democrats’ money tree in making a number of uncosted spending
promises, but the hon. Member for Eastbourne confirmed in a recent
debate that the Conservatives have not made a commitment in this
area. We recognise
the great difficulty that members face and that is exactly why we are
extending the provisions today. I commend them to the
Committee. Question
put and agreed
to. Resolved,
That the Committee has
considered the draft Financial Assistance Scheme (Miscellaneous
Amendments) Regulations
2006. Committee
rose at twenty-five minutes past Three
o’clock.
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