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Both noble Lords asked about appealing the High Court’s decision in relation to the ombudsman’s report. We have appealed the finding of maladministration because the judgment raises important constitutional issues that need to be resolved. This appeal will not prevent us reconsidering the ombudsman's recommendation with regard to compensation in line with the High Court's direction. We have real sympathy for people who lost their pension when their schemes went into wind-up and appreciate that they need to know where they stand.
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The Secretary of State said on 27 February in another place that his aim is to return to Parliament with conclusions and proposals before the end of proceedings of the Pensions Bill. That remains the case and will not be affected by the outcome of the appeal. I hope that that answers that question.
It was asked whether we will be merging any of the Pension Protection Fund functions with the FSA or the ombudsman. Paul Thornton is carrying out an independent and transparent external review of the functions of the pensions institutions at the request of the Government. Part of that process is seeking views and encouraging debate in the area. We will consider his findings when he provides a final report to Ministers in spring 2007. At this point, nothing is ruled in or out and no decisions have been taken.
Lord Oakeshott of Seagrove Bay: I forgot to ask this. There is a report in the current edition of Personal Pensions, stating that both the Pension Protection Fund and the Pensions Regulator rule out the possibility of a merger. It quotes the Pension Protection Fund extensively as saying that it is not in favour of one, but I am not sure that that is the view of the Pensions Regulator. During the passage of the Pensions Bill, several of us argued for cost savings by merging the two bodies. Although they are both doing a good job now, there is still a good case for that. Can the Minister confirm whether the view of the Pensions Regulator really is as reported: that it does not want a merger? Obviously, I am not asking for his conclusions yet, but is that correct, because it should be seriously considered?
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Lord McKenzie of Luton: I do not know whether it is. I shall certainly seek advice on whether there is anything meaningful that I can say other than the assurance that I gave in relation to the review currently under way and write to the noble Lord.
The noble Lord, Lord Skelmersdale, asked about the difference between the 3.4 per cent uprating and the 3.8 per cent. For the compensation cap, the 3.4 per cent uprating is based on the annual review of the general level of earnings under Section 148(2) of the Social Security and Administration Act 1992, which is linked to the tax year and also links to increases in the guaranteed minimum pension and additional amounts. Average earnings, as measured by the average earnings index and published by the Office for National Statistics, increased by 3.4 per cent in that tax year—the 2005-06 tax year, which was the base for the 3.4 per cent increase. The 3.8 per cent uprating of the levy ceiling is used because the Secretary of State must review any increase in the general level of earnings in Great Britain for the period of 12 months ending on 31 July in the previous financial year. So they concern different periods.
To revert to my response to the noble Lord, Lord Oakeshott, I am advised that it is not the TPR’s view that it is against merger.
Lord Oakeshott of Seagrove Bay: They are not against it?
Lord McKenzie of Luton: That is correct.
The noble Lord, Lord Oakeshott, asked about the number of schemes. In my introduction, I said that there were 147 schemes covering a total of 102,000 scheme members in an assessment period at the end of February 2007. A further 80 schemes are expected to enter an assessment period in each of the next two financial years, with 65 of them transferring into the PPF by the end of 2007-08. I do not have information on the question about deficits and assets relating to those schemes, but, again, it is readily available. I will write to the noble Lord with whatever information is meaningful.
The noble Lord, Lord Oakeshott, asked for some clarification on administration costs. I shall try to provide that. Whether or not depreciation is included in the headline operating figure is just a presentational matter. To recap, the planned operating costs, excluding depreciation, for 2006-07 were £12.4 million, projected to be £14.2 million next year. The planned depreciation in that is £0.3 million for the current year and £1.1 million projected for next year. Obviously there is a smaller amount of depreciation in the current year because there is presumably a build-up—an acquisition—of assets over that period.
So far as the department’s costs are concerned, the department bore some of the setup costs and is entitled to recover those from the PPF. It seeks to do that, and is doing that, over a three-year period. Those costs are actual setup costs, including a depreciation element, so again there are two components, but it is being recovered over three years. The final year of recovery is 2007-08, so that bit of the administration costs will fall out of the equation for the year 2008-09.
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The noble Lord, Lord Oakeshott, asked about the impact of private equity buyouts on all this. It is an interesting but quite involved question, as I am sure he knows. The issue is whether it will affect the solvency of employers. One would not think that it should. The thrust of a private equity buyout is to get better use of the overall assets. There is a broader debate about the consequences of private equity. In some respects we know that private equity brings some liquidity into markets and focuses on efficiency, but there are clearly risks associated with that for employers. I am trying to see the correlation and impact of private equity on pension funds, which are separately funded assets held by trustees, and how the existence and involvement of private equity might have an adverse consequence. Perhaps I could reflect on that.
Lord Oakeshott of Seagrove Bay: Perhaps I can help the Minister here. Even if, overall, private equity is helpful, I think everyone would agree that introducing a lot of debt into a company means there is more risk if things go wrong. The reason it is relevant to pension funds, given that most defined-benefit pension funds in this country are in deficit and the sponsoring employers are having to pay quite large amounts of money into the fund every year, is that if you end up with a weakened employer, it will inevitably be harder for it to keep paying in and covering the deficit. That is why people are worried.
Lord McKenzie of Luton: I understand the noble Lord’s point, but that presupposes that the involvement of private equity would lead to the weakening of employers. Often it might be argued that the involvement of private equity could have the reverse impact. It is difficult to generalise on these things, although I acknowledge that there are risks associated with private equity that are not necessarily not present in other forms of investment into the corporate sector.
Was there a question about the number of schemes or the number of complaints before the Pension Protection Fund Ombudsman? I think that was raised. There is one case before the PPF Ombudsman, but that was information that was not requested. I hope I have dealt with each of the points noble Lords have raised, but if not I will be happy to try to provide further information.
Lord Skelmersdale: I commented on the fact that the ceiling order was a ceiling. The Minister will remember. The ceiling order constructed a ceiling, and I do not think he has answered my question about how close to the ceiling the actual takings of the PPF were last year.
Lord McKenzie of Luton: The noble Lord is quite right, I did not deal with that. I will try to do so now. The ceiling is one of the protections that are available to ensure that the PPF can only call upon a certain level of funding. It is the cap on which a levy can be raised. The levy itself will be computed by what is expected to be the need and the call on the protection of the PPF. The ceiling for the current year, ending in April 2007, was £775 million. The estimate of the levy for that period was £575 million. There was a gap; it was within the ceiling. It was recognising part of the
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Lord Skelmersdale: The point of my question and the answer the Minister has just given is that there is something like a £200 million gap between the ceiling at the top and the actual gross levy at the bottom. Therefore one must begin to wonder whether the ceiling is a bit on the generous side. As I said earlier, I accept that it is too early to make that sort of judgment, but one ought to be thinking about it.
Lord McKenzie of Luton: We have to look at this over a longer period. Particularly in the early years, there will be a build-up of schemes in the assessment phase and potentially then under the protection of the fund. I would imagine that there will be a convergence of the levy and the ceiling in later years as more schemes move into the fund. In the early years there is scope for a gap, but I think it would be wrong to try to close it by imposing a higher levy, taking more than is necessary in the short term.
I hope that I have dealt with all the queries and accordingly I urge noble Lords to agree to these orders and regulations.
On Question, Motion agreed to.
Occupational Pension Schemes (Levies) (Amendment) Regulations 2007
Lord McKenzie of Luton: I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levies)(Amendment) Regulations 2007—(Lord McKenzie of Luton.)
On Question, Motion agreed to.
Occupational Pension Schemes (Levy Ceiling) Order 2007
Lord McKenzie of Luton: I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levy Ceiling) Order 2007.—(Lord McKenzie of Luton.)
On Question, Motion agreed to.
Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007
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Lord McKenzie of Luton rose to move, That the Grand Committee do report to the House that it has considered the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007.
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The noble Lord said: I beg to move that the draft Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007 that were laid before the House on 26 February 2007 be approved. I thank noble Lords for the opportunity to introduce the debate on the draft regulations. They use the powers contained in Section 29 of the Jobseekers Act 1995 that permit us to make regulations to pilot changes, but limit the duration of such regulations to 12 months. At the end of this period, if appropriate, the regulations may be replaced by similar provisions for a further 12 months. My noble friend Lord Hunt introduced the pilot scheme on 13 December 2005 through the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2005. As my noble friend said at the time, given that this was a two-year pilot commencing in April 2006, it would be necessary to introduce further regulations to enable the pilot to be completed. The regulations before noble Lords today will enable the pilot to continue as planned for a further 12-month period.
A full evaluation of the pilot is already under way and the completed evaluation will provide a clear view on the value of early interventions with jobseekers and will be used to inform future policy development. Initial evaluation evidence suggests that jobseekers have most valued the practical support provided to them in the three-day courses. This has included help with CV writing, help preparing for interviews, and help with letter writing. Many jobseekers have indicated that the action planning process has helped to increase their confidence and has improved their motivation to find work. It would be premature to terminate the pilot after just under 12 months in operation. The need for the pilot continues because the evaluation, although under way, is incomplete. It is important that the pilot is allowed to continue for a further 12 months as planned in order that the evaluation—both qualitative and quantitative—can be completed. Only then can we make reasoned judgments about the success or otherwise of the pilot.
The regulations will apply in the same geographical areas where the current pilot scheme operates. They will permit the same programme of assistance that is currently available.
I am satisfied that the regulations are compatible with the European Convention on Human Rights. This pilot is part of the Government’s clear strategy to help jobseekers move from relying on benefits back into work. We know that the majority of people claiming jobseeker’s allowance terminate their claim within the first six months of claiming benefit. Our New Deal programmes for those aged over 25 already provide valuable assistance to jobseekers who remain out of work for more than 18 months. This pilot looks at whether an earlier intervention after jobseekers have been out of work for just six months is beneficial, and whether this early intervention helps jobseekers return to employment at an earlier stage than otherwise might occur.
Research suggests that the longer that unemployment continues the harder it is to enter employment. For many, the six-month point is when motivation and confidence begin to decline. After a jobseeker has been out of work for six months, the pilot provides for a
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Even after a short period away from employment, some jobseekers may be concerned about their ability to adjust to new working environments, new technology and new types of work. The three-day courses are designed to address such concerns and to provide opportunities for confidence building and self-motivation. The follow-up personal adviser interviews are conducted by experienced staff from Jobcentre Plus on Jobcentre Plus premises.
The interviews help to ensure that the commitments detailed within the action plan are not overlooked, and are used to provide a clear focus on seeking employment. We are seeking through the pilot to determine the value of targeted and individual help, giving early direction, support and guidance to customers. It is important that all eligible jobseekers take the opportunity to improve their employability and avail themselves of the practical assistance available through the pilot. Therefore, the regulations make it mandatory for all eligible jobseekers to participate in the programme provided for them. A one-week sanction is applied for each failure to attend either the course or, indeed, any of the three follow-up interviews.
A one-week sanction is considered appropriate to the short duration of the pilot programme rather than the longer sanctions for non-attendance on the New Deal programme. Appropriate safeguards exist to ensure that those who have good cause for failing to participate will not be sanctioned. We have made process changes to help ensure that any sanction decisions relating to the pilot are made quickly. The Social Security Advisory Committee has considered the draft regulations and advised that it does not wish to have the proposed regulations formally referred.
In conclusion, the draft regulations form an important element of the Government’s back-to-work agenda. They enable the pilot to continue to its planned conclusion, and for the evaluation to be completed. I commend the regulations to noble Lords. I beg to move.
Moved, That the Grand Committee do report to the House that it has considered the Jobseeker’s Allowance (Jobseeker Mandatory Activity) Pilot Regulations 2007.—(Lord McKenzie of Luton.)
Lord Skelmersdale: We are nothing if not versatile this afternoon. We have now turned our attention to the subject of jobseeker’s allowance. I thought that the true versatility of the Minister was going to be proven by answering our questions on his own, but he managed to speak long enough to get some back-up, which is probably no bad thing. Essentially, we are being asked to give the go-ahead to an extension of the pilot
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This order extends that trial for a further year. That is all well and good, although it strikes me as more than a little odd not to have a break between the ending of one trial and the beginning of the next. Two years ago we were told that qualitative research, about which I remember the noble Lord, Lord Oakeshott, had quite a lot to say, would be conducted by Sheffield Hallam University, and would be available to us for study in March 2008—in other words, this time next year. It was hoped that that pilot, and the research into it, would inform the future conduct of JSA for some time to come. This could, I suppose, still happen, but the Minister should expand on what he has just said in his introduction about the initial findings of that pilot and justify this one. I say “this one”, because the order we are debating today marks, as the Minister said in his helpful letter to me on 12 March, for which I am grateful, a number of changes to the Government’s original thinking.
First, it reinforces the principle of coercion by making any person who fails to participate in the jobseeker mandatory activity programme liable to lose one week’s benefit for each failure. That is the three-day course that the Minister has just mentioned. The horrible word “conditionality” is much in our minds at the moment, and this is something that has clearly been translated from the thinking on the Welfare Reform Bill. Only this morning the Minister and I established that in that Bill there is to be a minimum level beyond which sanctions will not bite. I stand to be corrected, but I cannot recall any mention of sanctions in the 2005 regulations. I hope the Minister can confirm that. The question is, therefore, does the same apply here as with ESA, or is the customer expected to live on his savings—or, at worst, thin air?
Secondly, I am perhaps on rather stronger ground when I note that eligibility is now to commence when a person claims benefit, rather than when he receives it, so reflecting the original policy intention of the pilot. That poses another question: why was the original policy not followed? I hope the Minister can answer that one.
Lastly, I have a more general point. Before the 2005 order came into effect, there was mandatory intervention after 18 months. That order reduced it to six months. Last week the Government published the Freud report, which is pretty firm that there should be intervention at only three months into a claim for JSA. What is the Minister’s take on that proposal? Indeed, when do the Government expect to come up with their response to the Freud report? Given that the report was prepared by civil servants, it must already be highly illustrative of the Government’s thinking. Again, I am not going to object to this order, but we are owed rather more about its background.
Lord Oakeshott of Seagrove Bay: I start by thanking the noble Lord, Lord Skelmersdale, for reminding me about my questions about the evaluation process. I am
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There is a problem with continually rolling out pilots without any ability for us in this House or the public outside to evaluate the results. Perhaps the Minister could remind me what the cost of the pilots was last year and what the estimate is for this year. I certainly hope that the timetable for the independent, or relatively independent, evaluation does not slip in any way. We are now sufficiently far into the process that the Minister could give us a little more information now, or perhaps promise to write to us, about the department’s initial assessment. Just to roll it forward for another year, when we are a year away from the assessment, is taking a little too much on trust.
We support the principle of these pilots, but I wonder if the Minister could also give me an estimate, if he has one, of how widespread he thinks the effect of this new sanction of the loss of one week’s benefit for each failure is likely to be. Is there any conclusion that one can draw from how the interview process and the co-operation, or lack of it, has been going so far? We are being asked to take quite a bit on trust on a programme whose aims and broad thrust we all support. We want to be sure that the resources are there to support it, and we want more of a feeling of how it is going now, rather than waiting until 2008.
Lord McKenzie of Luton: I thank both noble Lords who contributed to our consideration of these regulations. Both probed why we were running-on the first year’s pilot without more detailed feedback in the interim. As I said, when the trial was started, it was envisaged that it would be a two-year trial. The regulations required us to do it in 12-month bites, but it is the same trial, the same process, the same pilot areas and the same rules. It is a continuation of what is already under way.
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