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House of Lords

Tuesday, 3 December 2013.

2.30 pm

Prayers—read by the Lord Bishop of Derby.

Education: Proficiency Levels


2.37 pm

Asked by Lord Sharkey

To ask Her Majesty’s Government what assessment they have made of progress in achieving satisfactory levels of proficiency amongst 15 year-olds in reading, mathematics and science.

Baroness Northover (LD): My Lords, OECD’s PISA results allow us to compare ourselves with the world’s best. The UK’s performance in mathematics, science and reading has not changed significantly since 2009. It remains at the OECD average in maths and reading, and above in science. The highest-achieving jurisdictions are in east Asia. We understand the significance of this and the need to ensure that our children are just as prepared as others to compete in the global economy.

Lord Sharkey (LD): My Lords, today’s PISA report makes for gloomy reading about mathematics education in our secondary schools. We are stuck in 26th position, and 22% of our 15 year-olds are ranked as low achievers. The situation looks as though it is going to get worse. A quarter of our secondary school maths teachers have only A-level mathematics. Only half of our newly qualified maths teachers have a maths degree, and well over half of training posts for maths teachers are unfilled. What additional steps will the Government take to halt this very steep decline in the number of qualified maths teachers?

Baroness Northover: My Lords, we are well aware of the importance of ensuring that we have sufficient numbers of maths teachers, and have been putting a great deal of effort into this. We recruited 2,230 maths teachers in 2013-14, and we are continuing to focus efforts on recruiting the best graduates for the subjects we need most, which of course include maths. We have increased the number of maths places and the scholarships for teacher training. These scholarships amount to £25,000. We have increased the value of maths bursaries because we need to attract the top graduates. We have also introduced bursaries for graduates with good A-levels in maths or physics who train to teach maths, because we recognise the importance of what my noble friend is saying.

Baroness Perry of Southwark (Con): Does my noble friend agree that the hugely encouraging increase in performance that has taken place in many of the new academies bodes very well for the results of the PISA in three years’ time, when the young people who have been through them will be tested?

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Baroness Northover: My noble friend is right that we need to make a long-term assessment. Obviously, the 15 year-old students being assessed at the moment have had a number of years of education, and these results represent how they have done during those years. We hope to move things forward in the way that my noble friend suggests.

Baroness Hughes of Stretford (Lab): In the area performing best in the OECD results published today, all teachers must have a teaching qualification and have to undertake 240 hours of professional development in the first five years of their career. In the UK now, academies and free schools can employ an unqualified person as a teacher even in these core subjects. The South Leeds Academy has just advertised for an unqualified person to teach maths, with a minimum qualification of just four GCSEs. Given what the Minister has just said, how does she think that unqualified people can make a contribution to raising standards in English, maths and science?

Baroness Northover: The noble Baroness will know that the proportion of qualified teachers in the state sector has increased. It now stands at 96.7%. I am sure that she heard my right honourable friend Michael Gove in the other place giving the numbers of unqualified teachers. In 2009 there were 17,400 unqualified teachers. Now the number has dropped to 14,800.

Lord Howe of Aberavon (Con): My Lords, is the performance of our children not to be admired because of their achievement in mathematics? That subject is far more difficult that it should ever have been allowed to become, granted the fact that Magna Carta specifically requires the establishment of a single, uniform system of mathematics and measurements, such as has been achieved in many former British colonies, such as Australia and New Zealand, and even including the United States and Ireland. In almost all other territories, what should have been achieved has not been achieved in the simplicity of our measurement systems in this country. There is all the more reason to do so, given our abolition of the Metrication Board, which we introduced to give us one system during my time as Minister for Trade and Consumer Affairs. Alas, I confess that, as Chancellor of the Exchequer, I abolished the Metrication Board, disregarding its achievement, and so created the difficulties which I felt I had to spell out with candour in posing my question.

Baroness Northover: I pay tribute to my noble and learned friend for what he achieved—using the metric system rather than anything else certainly made things much easier when my kids were studying—and for his candour. I note that the PISA report is extremely long, complex and very interesting. I urge noble Lords to have a really good look at it. If they look at the breakdown on maths, for example, they will see that students in the United Kingdom do relatively better than some countries on uncertainty,

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data and probability, but are less strong on space and shape. In east Asia, they are doing much better in the other direction.

Baroness Armstrong of Hill Top (Lab): My Lords, I thank the noble Baroness for her replies. I am interested that she acknowledges that the only way to enthuse young people is with a committed, knowledgeable and enthusiastic teacher. The Government need to do more to recruit the very best. We know that if you get the top 10% of graduates into education, you will do much better. I ask the Minister to look again at the messages that have been given to free schools and academies—I declare my interest as a governor—that qualifications do not matter.

Baroness Northover: I thank the noble Baroness for her initial tribute. It was very striking to see a steady increase in the number of high-quality candidates entering teaching. That is immensely encouraging, and we have to take it further forward. The proportion of postgrad entrants with a first class or 2.1 degree is now 74%, compared with 61% in 2009. That is moving in the right direction and shows that students recognise that it is worth teaching. The noble Baroness is absolutely right that all of us remember our outstanding, inspiring teachers. The report emphasises that autonomy for head teachers, along with accountability, is crucial to moving things forward.

Taxation: Rental Income


2.45 pm

Asked by Lord Campbell-Savours

To ask Her Majesty’s Government what plans they have to ensure that taxation is paid on rental income on property owned by persons from overseas.

Lord Newby (LD): My Lords, the Government believe that non-resident landlords should pay tax as appropriate, and HMRC operates a withholding scheme to ensure compliance. Tenants and letting agents are required to withhold and pay HMRC basic rate tax. Landlords whose UK tax affairs are up to date may apply not to have tax withheld and be automatically entered into self-assessment. Non-resident landlords in self-assessment are subject to HMRC’s usual rigorous compliance checks.

Lord Campbell-Savours (Lab): My Lords, that only applies where a landlord uses an agent—I listened very carefully to the Minister’s response. How is it possible to quantify the scale of evasion on rental income without a means of establishing who owns what, what rents are paid, and to whom those rents are paid? Is there not a real need to establish a local authority-based national register of all domestic and overseas-based landlord rented-out property—a register that is accessible by HMRC? Is it not true that there is vast evasion in this area?

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Lord Newby: It is not true that the scheme just covers letting agents. As I said, there are two other categories of people who should pay tax in this case: one, in the case of tenants, if their non-resident landlord wishes to go that way; and the other for the non-resident landlord to register for self-assessment. Perhaps I may give the noble Lord and the House some sense of the scale of the income generated from this scheme. In 2011-12, companies that held residential property in the UK on which tax was paid paid a total of some £375 million.

Lord Mackay of Clashfern (Con): My Lords, is there not scope for using the deduction-at-source method against rents? It seems to be at least as effective as any other likely way of getting money from people who are overseas.

Lord Newby: My Lords, that is basically how this scheme operates. A letting agent has to take some 20% of the rent and pay it over to HMRC for the non-resident landlord.

Lord Howarth of Newport (Lab): My Lords, is the noble Lord able to confirm what I have been told—and I do not know whether this is correct—that in France, if you are a non-resident owner of residential property, you are taxed on the rentable value of that property whether or not you have let it? Does he know whether that is the case; and if it is, does he think that it is worth considering introducing it here?

Lord Newby: My Lords, I do not know whether that is the case. I think that I might take advice from the noble Lord, Lord Lawson of Blaby.

Baroness Maddock (LD): My Lords, I agree very much with what the noble Lord, Lord Campbell-Savours, said in his opening comments. There is a lack of transparency around who owns rental properties in this country. I do not know what the Government will do about that. If we want to improve the quality and standard of our rented properties, particularly the energy efficiency, it is vital that we know who owns the properties.

Lord Newby: My Lords, as the noble Lord mentioned and the noble Baroness raised again, this is an extremely important and live issue, which I will raise again with my colleagues in the DCLG.

Lord Davies of Oldham (Lab): My Lords, is the Minister, a member of the Liberal Democrat Party, in favour of a mansion tax, which would certainly go a long way to dealing with this in terms of transparency of who owns property? He should be a little careful if he denies the validity of that, because the Chancellor has an awkward habit at present of listening to what the Labour Front-Bench says one day and doing something similar to it the next.

Lord Newby: My Lords, I am sure that the whole House knows that the Liberal Democrats are in favour of a mansion tax. I remind the House that, in the recent Budget, the Government introduced an annual

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tax on high-value dwellings—so-called enveloped dwellings —owned by companies, which will generate from £15,000 a year for properties worth between £2 million and £5 million to £140,000 a year for properties worth more than £20 million.

Lord Anderson of Swansea (Lab): My Lords, what advice is given to our local authorities to ensure that, when housing benefit is paid, the recipient landlord pays UK income tax?

Lord Newby: I do not know the strict answer to that question, but HMRC makes strong efforts to bring home to everybody who should be paying tax that they should be doing that, which is why the Government have put in almost an extra £1 billion a year towards tackling tax avoidance and evasion.

Lord Phillips of Sudbury (LD): My Lords, would my noble friend the Minister contemplate the fact that, in many London boroughs, 70% and more of the housing being purchased is purchased by foreign buyers? Many of them have poor credentials as to their abidance by law in their own states, let alone laws here. Might we not be getting near the time when we need to consider limiting the extent to which foreign buyers can dominate the housing market in London?

Lord Newby: My Lords, there is a very disparate housing market in London. At the bottom end of the market, the vast bulk of houses are purchased domestically. At the very top end, the vast bulk of houses are purchased by foreign buyers, particularly from Russia, eastern Europe and the Far East. One key thing that we are very keen to try to achieve is a greater degree of housebuilding in London and elsewhere. Only by building a lot more houses will it be possible to satisfy the demands of a growing population.

Baroness Farrington of Ribbleton (Lab): My Lords, why has the Minister not undertaken to investigate the value of a register? Surely, it would help the Government, HMRC and taxpayers were a register to be established.

Lord Newby: I thought that I had said that I would take that matter up with colleagues in the DCLG.

Health: Talking Therapy


2.52 pm

Asked by Baroness Royall of Blaisdon

To ask Her Majesty’s Government whether they have plans to create a legal right to talking therapy as part of their commitment to ensure parity of esteem between mental and physical health.

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con): My Lords, the department has no plans to create a legal right to talking therapies. Mental health and parity of esteem are key priorities

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for NHS England. The Government’s mandate to NHS England makes it clear that everyone who needs it should have timely access to evidence-based services, which involves extending access to talking therapies. We are working with NHS England to develop standards on access and waiting times across mental health from 2015.

Baroness Royall of Blaisdon (Lab): My Lords, I am grateful to the noble Earl for his Answer, but I still have serious concerns about the services that mental health patients receive. I do not often quote the noble Lord, Lord Freud, but last month he said that,

“the association between poor mental health and poverty is clear”.—[

Official Report

, 7/11/13; col. 324.]

However, despite people’s increasing stress due to poverty, the cost of living and zero-hours contracts, the Government have cut mental health spending in real terms in the past two years. Funding for therapies not included in IAPT has been cut by 5%, despite ministerial assurances that this would not happen. Last week, the We Need to Talk coalition released a report that revealed that more than half of mental health patients are waiting at least three months for treatment. Can the Minister commit to reducing those waiting times by March 2015, the date by which time the Government are committed to making progress towards that important parity of esteem?

Earl Howe: My Lords, I agree that waiting times for talking therapies are too long, and we are taking energetic steps to address that within the bounds of affordability. In the context of the noble Baroness’s main Question, what surely matters is the quality of outcomes, rather than just the extent of inputs. We set the outcomes that we expect the NHS to achieve in the NHS outcomes framework. There are a number of outcomes in there specifically for people with mental health problems, and others, about the quality of services. It is up to commissioners to prioritise their resources to meet those outcomes for the population based on assessments of need, and we will hold them to account for that.

Lord Alderdice (LD): My Lords, I entirely support my noble friend’s commitment to good outcomes, but those also require sufficient inputs. If the noble Baroness’s request for a right to talking therapy were implemented tomorrow, it would completely collapse because there simply are not enough trained therapists to provide the care that is required. What measures are the Government taking to ensure that in future there will be sufficient trained therapists to provide the parity of care for those with mental illness that is available to those with physical illness?

Earl Howe: I can assure my noble friend that Health Education England has it in its sights to make sure that sufficient numbers of professionals are trained in the talking therapies, and that work is ongoing.

Lord Patel of Bradford (Lab): My Lords, following on from what the noble Lord, Lord Alderdice, said about having staff who can provide appropriate talking

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therapies, and what the Minister himself said about someone who needs a service receiving it, we have a long history in the mental health field of mental health practitioners not referring certain minority-ethnic groups such as the south Asian and black African communities for talking therapies. I believe that that is still the case with referrals to the CBT programme. What are the Government doing to address this imbalance?

Earl Howe: I can tell the noble Lord that IAPT is working with a number of BME groups to promote wider access to the service from all sections of the community. A grant scheme will shortly be launched to encourage community-based interventions to increase uptake of talking therapies, including from BME groups.

Lord Elystan-Morgan (CB): My Lords, will the Minister kindly tell the House roughly what percentage of in-patients and out-patients suffer from mental health problems compared with those who suffer from physical health problems? Can he say, roughly, how the resources of the NHS are divided between the two camps on a revenue basis? I have the clear impression that traditionally mental health has been short-changed for very many years.

Earl Howe: My Lords, the noble Lord’s perception would be shared by many, which is why we have been very clear in our mandate to NHS England that parity of esteem is of the essence, and we will hold the service to account for that. I do not have the specific statistics that the noble Lord seeks but we know that more people are being treated in secondary mental health services now than two or three years ago. However, the proportion who needed to be admitted to in-patient psychiatric care fell over that period, and that reflects increasing emphasis on care in the community.

Baroness McIntosh of Hudnall (Lab): My Lords, as someone who has benefited from CBT on a number of occasions, may I ask whether the noble Earl agrees that it is not just a question of whether people need the therapy but rather that they receive enough of it? Following the question of the noble Lord, Lord Alderdice, about the number of people who could benefit from this, what is the average number of sessions of talking therapy that a National Health Service mental health patient will receive and is it, generally speaking, enough?

Earl Howe: My Lords, I apologise to the noble Baroness as I do not have that information in my brief. If it is available, I will write to her with the answer.

Lord Elton (Con): Will my noble friend assure the House that this rule of parity will be introduced in the Prison Service as well as the National Health Service generally?

Earl Howe: My Lords, we are very clear that parity of esteem in mental health compared with physical health should apply in all clinical settings.

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The Earl of Sandwich (CB): Does the noble Earl share my concern about the overprescription of psychiatric drugs? Can he think of anything to do about this apart from encouraging CBT and talking therapies?

Earl Howe: My Lords, the noble Earl is right. I share his concern, and I think it has been a widespread concern across the mental health community. Nowadays, the guidance given to doctors is much broader than the guidance that was given some years ago. It embraces the talking therapies in particular and it seeks to avoid the overprescription of sometimes very strong pharmaceutical products.

Global Fund to Fight AIDS, Tuberculosis and Malaria


3 pm

Asked by Lord Avebury

To ask Her Majesty’s Government what contribution the United Kingdom will make to the fourth replenishment of the Global Fund to Fight AIDS, Tuberculosis and Malaria.

Baroness Northover (LD): As World AIDS Day reminded us, we have made great strides in our fight against AIDS, malaria and TB, but more still needs to be done. In 2011, AIDS killed 1.7 million people and TB killed 1.4 million people. In 2010, malaria killed 660,000 people. That is why the UK has pledged £1 billion to the global fund, provided that our contribution does not exceed 10% of the replenishment value.

Lord Avebury (LD): My Lords, it was great that DfID was able to say recently that it had met most of the targets that were forecast in the 2011 paper Towards Zero Infections. However, will the new contribution enable the global fund to reduce the number of new infections among women by half a million, as was scheduled in the 2011 paper, to make a step change in prevention and to reduce further the cost of treatment?

Baroness Northover: My noble friend is right that the international effort directed through the global fund has had stunning achievements. The rate of new HIV infections among women and girls has declined. The pace of the decline is not as fast as we would wish it to be and that is something that the UK is putting renewed effort into, as will the global fund. Clearly, the focus on prevention will particularly benefit women. There has been far greater coverage of the population as a result of the global fund’s efforts and stunning reductions in the cost of, for example, HIV treatment. In 2000, treating a patient cost about $10,000 a year and that has now dropped to $125 per patient.

Lord McConnell of Glenscorrodale (Lab): My Lords, the work of the global fund and the continuing UK commitment to it are to be welcomed, as that work is very important. However, I think that a new dimension

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is developing, particularly in sub-Saharan Africa, concerning the teenagers and young adults who were born with HIV/AIDS and who have survived due to the quality and quantity of those medical interventions but are now facing the prospect of relationships, marriage and having children as they move into adulthood. Either through the global fund or perhaps directly, might the UK Government pioneer some schemes to assist those young people with the advice and counselling that will be required to help them through that transition?

Baroness Northover: The noble Lord is right that a generation affected by HIV is growing up. He will also know that a lot of work has gone into trying to make sure that there is no mother-to-child transmission of the disease, and that is very important for these young people. The global fund is well aware that there is a young population whose needs it has to address.

Lord Fowler (Con): I wonder whether my noble friend saw the BBC “Panorama” programme on the global fund last night, with the best tabloid title “Where’s Our Aid Money Gone?”. Over the past 18 months, I have been to more than a dozen countries looking at the HIV position. Is my noble friend aware that, without the help of the global fund and the President’s fund in the United States, the world would be in a desperate position, with escalating disease? Although there have been exceptions, overwhelmingly this money has been well spent and has resulted in millions of lives being saved. Would it not be nice if “Panorama” reported that?

Baroness Northover: My noble friend is absolutely right. Cambodia, for example, which was highlighted in the programme, has seen an 80% decline in malaria deaths, a 45% fall in TB and a 50% decline in HIV cases. I pay tribute to what my noble friend has done to highlight the challenge of HIV/AIDS and to his fight for the global fund, which has been transformative in this area.

Baroness Masham of Ilton (CB): My Lords, does the Minister agree that it is in the interests of the world to prevent these conditions? I congratulate the UK on what it has done, but will the noble Baroness encourage other countries to do more?

Baroness Northover: The noble Baroness is right in terms of the impact. Yesterday, President Obama pledged $5 billion to the global fund. The US has said that it does not wish to contribute more than one-third to the fund. In other words, it wants to bring in other partners. Other countries, including Canada and the Nordic countries, have put in money and are coming forward in an encouraging fashion.

Lord Collins of Highbury (Lab): My Lords, having identified TB-HIV as a strategic priority and the global fund as the lead provider for dealing with the TB epidemic and TB-HIV co-infection, will the noble Baroness tell us whether the department will follow the global fund in mandating that all HIV programming in high-burden TB and HIV countries includes specific strategies to reduce TB and TB-HIV incidence?

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Baroness Northover: As the noble Lord knows, the two things go closely together. I will have to look carefully at what his question implied. Of course, both the global fund and DfID are well aware of that interrelationship. Where you have patients suffering from TB, especially when it is multidrug resistant TB, you often have HIV going alongside, so the two are being tackled together. I will need to look at the noble Lord’s question to see whether there is something in it that I did not understand.

Baroness Hayman (CB): My Lords, I echo the remarks of the noble Lord, Lord Fowler, about the enormous benefits that the global fund has brought to international health and its commitment to transparency and to dealing with these issues when they arise. I declare my interest in malaria and neglected tropical diseases. Will Her Majesty’s Government encourage the global fund to look at partnership working and integrating programmes, particularly on maternal and child health and neglected tropical diseases, as part of the post-2015 commitment to strengthening health systems and doing that from the bottom up rather than the top down?

Baroness Northover: The noble Baroness is absolutely right. The global fund has had an effect across all those areas and I pay tribute to her work on neglected tropical diseases. DfID has been strongly supportive of that. There are a number of areas where obviously the work of the global fund is complementary. If you look at its aim to raise $15 billion, at the moment $37 billion across this whole area is coming from the developing countries, supporting the kind of work that the noble Baroness is talking about.

London Local Authorities and Transport for London (No. 2) Bill [HL]

Commons Amendments

3.08 pm

Motion on Commons Amendments

Moved by The Chairman of Committees

That this House do agree with the Commons in their Amendments 1 to 52.

1: Page 1, line 10, leave out paragraph (5)

2: Clause 1, page 2, line 13, leave out “2009” and insert “2012”

3: Page 2, line 14, leave out “subsections (3) and (4)” and insert “subsection (3)”

4: Page 2, line 19, leave out “section 11” and insert “Part 3”

5: Page 2, line 20, leave out subsection (4)

6: Clause 2, page 2, leave out lines 26 to 28

7: Page 2, line 31, leave out from “authority” to the end of the line

8: Clause 3, page 3, line 13, leave out from “area” where it first appears to the end of line 14

9: Page 3, line 18, leave out “a” and insert “the”

10: Clause 4, page 4, line 6, leave out “Lands” and insert “Upper”

11: Page 4, line 37, at the end insert—

“( ) If a notice specifies an earliest date under subsection (5)(d), the authority may not begin the work after the expiry of four months beginning with that date (but that does not prevent the authority from serving a fresh notice).”

3 Dec 2013 : Column 127

12: Page 5, line 26, at the end insert—

“( ) This section and section 5 shall not apply in respect of a theatre.”

13: Page 5, line 43, leave out “exceeding 5 years” and insert “of five years or more”

14: Page 6, line 6, at the end insert—

““theatre” means any building or part of a building used wholly or mainly for the public performance of plays and “public performance” and “play” have the same meanings as in the Theatres Act 1968, but with the words “dance performance” substituted for “ballet”;”

15: Clause 6, page 6, leave out lines 31 to 42

16: Page7, leave out lines 1 to 23

17: Page 7, leave out lines 35 to 41

18: Clause 7, please out clause 7

19: Clause 10, page 9, line 39, leave out “and” and insert “or”

20: Page 9, line 41, leave out “and” and insert “or”

21: Page 10, line 41, leave out subsection (9)

22: Page 11, line 4, leave out “2009” and insert “2012”

23: Page 11, line 6, leave out "2003 Act" and insert "London Local Authorities and Transport for London Act 2003”

24: Page 11, line 8, leave out subsection (13)

25: Clause 11, page 11, line 13, before “skips” insert “builders’ ”

26: Clause 13, page 12, line 9, leave out “vehicle” and insert “skip”

27: Page 12, line 9, leave out “regulation” and insert “section”

28: Clause 14, page 12, line 24, leave out “vehicle” and insert “skip”

29: Clause 17, leave out clause 17

30: Clause 18, Page 15, line 13, at end insert—

“( ) For the purposes of this Part, a person to whom permission is granted under subsection (2) is referred to as an “authorised person”.”

31: Page 15, line 15, at the end insert “by a London authority”

32: Page 15, line 17, at the end insert “by a council”

33: Page 15, line 18, leave out “The powers under this section may not be exercised in relation to” and insert “No charging apparatus may be provided on”

34: Page 15, line 41, after “determining” insert “, in any proceedings in a court of civil jurisdiction,”

35: Page 16, line 17, at the end insert—

““operate” in relation to charging apparatus for electrically powered motor vehicles includes supply or sell electricity by means of such charging apparatus;

“public off-street car park” means a place, whether above or below ground and whether or not consisting of or including buildings, where off-street parking accommodation is made available to the public, whether or not for payment.”

36: Clause 19, page 16, line 19, leave out “— (a)”

37: Page 16, line 20, leave out from “section 18(1)” to the end of line 21

38: Page 16, line 22, at the end insert—

“( ) An authorised person shall not provide or operate charging apparatus in accordance with a permission given under section 18(2) unless the authorised person has first published a notice under this section.

39: Page 16, line 23, after “London authority” insert “or an authorised person, as the case may be,”

40: Page 16, line 27, after “London authority” insert “or the authorised person”

41: Page 16, line 33, at the end insert “or authorised person”

42: Page 16, line 34, after “London authority have” insert “or an authorised person has”

43: Page 16, line 37, at the end insert—

“( ) In this section “the proposal” means the proposal to provide or operate charging apparatus.”

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44: Clause 20, page 16, line 39, leave out “— (a)”

45: Page 16, leave out from “section 18(1)” on line 40 to the end of line 41

46: Page 16, line 42, leave out “in relation to a highway”

47: Page 16, line 42, leave out from “have” to “consulted” on page 17, line 3

48: Page 17, line 5, leave out “, as the case may be,”

49: Page 17, line 6, leave out “or to which the proposed permission would relate”

50: Page 17, line 6, at the end insert—

“( ) An authorised person shall not provide or operate charging apparatus in accordance with a permission given under section 18(2) unless the authorised person has consulted any authority (other than the London authority who gave the permission) who are a local planning authority for the area to which the permission relates.

( ) Consultation carried out by an authorised person before that person was given a permission under section 18(2) counts as consultation for the purposes of subsection ( ).”

51: Clause 21, leave out clause 21

52: Clause 22, page 17, leave out from the beginning of line 30 to the end of line 7 on page 18 and insert—

“(1) A person shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale if he uses charging apparatus in contravention of a sign displayed on the apparatus which indicates that —

(a) the apparatus is not to be used for any purpose other than charging a vehicle; and

(b) it is an offence to so use the apparatus.

(2) A person is not guilty of an offence under subsection (1) if—

(a) he had the permission of the person who operated the charging apparatus at the time to use the charging apparatus for the purpose in question; or

(b) he had reasonable cause to believe he had such permission; or

(b) at the time there was on the charging apparatus an indication given by the person who operated the charging apparatus that it could be used for the purpose for which it was used.”

The Chairman of Committees (Lord Sewel): My Lords, with the leave of the House, I beg to move that the House do agree with the Commons in their Amendments 1 to 52 en bloc. I do not intend to move these amendments individually as they all refer to minor matters. I hope that the House will agree to the amendments made in another place.

Motion agreed.

European Parliamentary Elections (Northern Ireland) (Amendment) (No. 2) Regulations 2013

Motion to Approve

3.09 pm

Moved by Baroness Randerson

That the draft Regulations laid before the House on 24 October be approved.

Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.

Motion agreed.

3 Dec 2013 : Column 129

Local Elections (Northern Ireland)Order 2013

Motion to Approve

3.09 pm

Moved by Baroness Randerson

That the draft Order laid before the House on 30 October be approved.

Relevant documents: 12th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 26 November.

Motion agreed.

Education: PISA Results


3.10 pm

The Parliamentary Under-Secretary of State for Schools (Lord Nash) (Con): My Lords, with your permission, I would like to repeat a Statement made by my right honourable friend the Secretary of State for Education in another place earlier today about the PISA league tables of educational performance published earlier today by the OECD.

“Before I go into the detail of what the league tables show about the common features of high-performing systems, may I take a moment—as I try to in every public statement I make—to thank our teachers for their hard work, dedication and idealism. Whatever conclusions we draw about what needs to change, I hope we in this House can agree that we are fortunate to have the best generation of young teachers ever in our schools.

The data show that the new recruits now entering the classroom are better equipped than ever before. I would like in particular to thank those head teachers who are, through the new school direct programme of teacher training, recruiting more superb new graduates to teach in our state schools. But while the quality of our teachers is improving, today’s league tables sadly show that that is not enough. When people ask why, if teachers are better than ever, we need to press ahead with further reform to the system, today’s results make the case more eloquently than any number of speeches.

Since the 1990s, our performance in these league tables has been at best stagnant, at worst declining. In the latest results, we are 21st in the world for science, 23rd for reading and 26th for mathematics. For all the well intentioned efforts of past Governments, we are still falling further behind the best-performing school systems in the world. In Shanghai and Singapore, South Korea and Hong Kong, indeed even in Taiwan and Vietnam, children are learning more and performing better with every year that passes, leaving our children behind in the global race.

That matters because business is more mobile than ever, and employers are more determined than ever to seek out the best-qualified workers. Global economic pressures, far from leading to a race to the bottom, are driving all nations to pursue educational excellence more energetically than ever before, and

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today’s league tables show that nations that have had the courage radically to reform their education systems, such as Germany and Poland, have significantly improved their performance and their children's opportunities.

There is no single intervention or single nation which has all the answers to our education challenges, but if we look at all the high-performing and fast-improving education systems, certain common features recur. There is an emphasis on social justice and helping every child to succeed. There is a commitment to an aspirational academic core curriculum for all students. There is a high level of autonomy from bureaucracy for head teachers. There is a rigorous system of accountability for performance, and head teachers have the critical power to hire who they want, remove underperformers and reward the best with the recognition that they deserve.

Those principles have driven this coalition’s education reforms since 2010. The first reform imperative is securing greater social justice. It is notable that many of the high-performing jurisdictions set demanding standards for every child, whatever their background, and Germany in particular has improved its standing in these league tables by doing more to promote greater equity to ensure more children from poorer backgrounds catch up with their peers.

The good news from the PISA research is that in England we have one of the most progressive and socially just systems of education funding in the world. But we in the coalition Government believe that we must go further to help the most disadvantaged. That is why we have made funding even more progressive with the pupil premium, extended free pre-school education to the most disadvantaged two year-olds and changed how we hold schools accountable so that they have to give even greater attention to the performance of poor children. I hope that today the Opposition will acknowledge these steps forward and give their support to our reforms.

The second reform imperative is a more aspirational curriculum. In successful Asian nations all students are introduced to more stretching mathematical content at an earlier age than has been the case here; and in the fastest-improving European nation, Poland, every child now follows a core academic curriculum to the age of 16. Our new national curriculum is explicitly more demanding, especially in mathematics. It is modelled on the approach of high-performing Asian nations such as Singapore. The mathematical content is matched by a new level of ambition in technology, with the introduction of programming and coding in the national curriculum for the first time.

In our drive to eliminate illiteracy, we have introduced a screening check at age six to make sure that every child is reading fluently. Our introduction of the English baccalaureate, which is awarded to students who secure GCSEs in English, maths, the sciences, languages and history or geography, matches Poland by embedding an expectation of academic excellence for every 16 year- old. I hope that today the Labour Front Bench will confirm its support for our new curriculum, the phonics screening check and the English baccalaureate. Our children deserve to have these higher standards adopted universally.

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The third reform imperative is greater autonomy for head teachers. There is a direct correlation in these league tables between freedom for heads and improved results. That is why we have dramatically increased the number of academies and free schools and given heads more control over teacher training, continuous professional development and the improvement of underperforming schools. By giving heads control of teacher recruitment, the School Direct programme has improved the quality of new teachers. The creation of more than 300 teaching schools has put our most outstanding heads in charge of helping existing teachers to do even better. The academies programme has allowed great heads, such as those in the Harris and Ark chains, to take over underperforming schools, such as Downhills Primary in Tottenham. I hope that today the Front Bench will signal its support for these reforms and show that, like us, it trusts our outstanding heads to drive improvement.

The fourth pillar of reform is accountability. Those systems which have autonomy without accountability often underperform, but accountability has to be intelligent. That is why we have sharpened Ofsted inspections, recruited more outstanding serving teachers to inspect schools and demanded that underperforming schools improve far faster. The old league table system relied too much on a narrow measurement of C passes at GCSE, which generated the wrong incentives and wrote too many children off. We have changed league tables to ensure that every child’s progress is rewarded and ensured that children are not entered early, or multiple times, for GCSEs simply to influence league tables. I hope that today the Opposition Front Bench will endorse those changes and join us in demanding greater rigour and higher standards from all schools.

The fifth pillar of reform is freedom for heads to recruit and reward the best. Shanghai, the world’s best-performing education system, has a rigorous system of performance-related pay. We have given head teachers the same freedoms here. I hope that today we can have a clear commitment from all sides of the House to support those brave and principled heads who want to pay the best teachers more.

The programme of reform we have set out draws on what happens in the best school systems, because we want nothing but the best for our children. Unless we can provide them with a school system that is one of the best in the world, we will not give them the opportunities they need to flourish and succeed. That is why it is so important that we have a unified national commitment to excellence in all our schools for all our pupils”.

I commend the Statement to the House.

3.19 pm

Baroness Hughes of Stretford (Lab): My Lords, I thank the Minister for his Statement, which had a much more measured tone than the public pronouncements on the PISA results that we heard yesterday and this morning from the Secretary of State.

The results show that after three and a half years in government, the coalition has so far failed to make any further progress in improving standards in these core subjects of English, maths and science, compared

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to other countries. Any serious Secretary of State would regard these results as a call to action and a reason to scrutinise very carefully government policy in the light of the findings.

Instead, and typically, this Secretary of State’s line of defence has been one of attack, I think to try to divert attention from his own record. The Secretary of State claims that the UK’s current position in the international league tables is,

“a verdict on the last government”.

I say to the Minister, and believe profoundly, that if we had not had a Labour Government prioritising and investing in education year on year, the UK would be at the bottom of the league table. Without doubt, if the OECD had been comparing countries in 1996—it was not—the UK would have been on the floor. After 18 years of a Conservative Government, the education system in this country was in tatters, with crumbling schools, standards flatlining, teacher morale at rock bottom and a school system in chaos. The Labour Government, quite simply, had to rebuild that system from top to bottom.

That is why we saw the first and biggest transformation ever for pre-school children, with free early years education for all three and four year-olds and, later, for disadvantaged two year-olds. We also saw capped class sizes in primary schools and radical reform of the secondary curriculum. We introduced academies in disadvantaged areas because the Labour Government really did care about social justice and equity in our education system. We also saw massive investment in teacher and head teacher training and development, including the introduction of Teach First, and year-on-year improvements in GCSE and A-level results—achievements which this Secretary of State has ridiculed and said were a fiddle.

When we left office in 2010, the coalition inherited record results and the best cadre of teachers this country has ever had, by common acclaim, including from Ofsted. That was a solid foundation for the continued progress that we agree is undoubtedly still needed for us to compete with the rising economies elsewhere in the world. It would have been good to hear the Secretary of State acknowledge that progress, but instead of doing that and trying to build on it, this Secretary of State is in danger of squandering those advances by taking our education system backwards to didactic teaching and a rampant free market between schools.

The Minister selected certain factors that he thinks these results tell us. However, if PISA tells us anything, it is that the countries doing better have understood and are relentlessly implementing three important lessons. First, as a teacher using the Singapore maths model said on the news this morning, learning by rote is simply not good enough for the innovative technological world in which our children will work. However, this Secretary of State is returning the UK to an obsolete curriculum and an exam system that measures what children remember, not what they can actually do.

The second lesson is that collaboration between schools and schools challenging each other drive up standards. However, this Secretary of State has abolished the London Challenge, where schools worked together,

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challenged each other and produced the fastest rise in achievements. He also abolished the Greater Manchester and Black Country Challenges, which were beginning to produce similar results in some of the most disadvantaged parts of the country. If the Minister cares about social justice and equity in education, that should not have been done, as the scheme was addressing extreme disadvantage in our education system.

The third lesson is that qualifications, along with continuing development of teachers, is the single most important factor in improving education and achievement. However, this Secretary of State, as we just discussed in Questions, has allowed academies and free schools to employ unqualified people to work as teachers, even in core subjects. As I said, we have seen some academies putting out adverts for unqualified people with four GCSEs to teach maths.

I could not agree more with the Minister about the need to focus on social justice and equity, to introduce rigour and standards into the education system and, particularly, to make sure that those from disadvantaged backgrounds can gain the most. However, although we support some of the Government’s reforms, I cannot agree that all of their measures, taken together, will achieve those ends. Will the Minister explain to the House why the Government’s policies are flying in the face of the lessons from elsewhere in the world, which I have just outlined, that emanate from the PISA results today?

I agree that this is a most important subject and we should use the OECD findings to our advantage as far as we can. Will the Government bring forward a considered and comprehensive analysis of the OECD findings so that we can have an informed debate in public about the implications for the UK, and regear some of the Government’s reforms to ensure that we can position our young people to compete with the best in the tiger economies?

3.25 pm

Lord Nash: I am grateful for the noble Baroness’s considered analysis. With her experience, she probably knows better than to suggest that we can be expected to have turned round the education system after only three and a half years, as Andreas Schleicher acknowledged only yesterday. It is far too early to form a verdict on the coalition’s reforms. However, we have stopped the decline. Between 2000 and 2009 we fell from fourth to 16th in science, eighth to 28th in maths, and seventh to 25th in literacy. We have now stabilised at 23rd in literacy and 26th in maths, although we have done worse in science.

I agree that the Labour Government spent 87% more in real terms on the education system, but it is all about what results you get rather than how much money you spend. We must have a concept of value for money. It does not look as though we got very good value for money. We are now building schools at half the cost per pupil of Labour’s Building Schools for the Future programme; we are building many more purpose-designed schools, and more quickly.

I acknowledge that Teach First was a splendid idea. We have expanded that dramatically. I acknowledge that the academy programme was a splendid idea—indeed,

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I would not be here if it was not for the academy programme. The London Challenge was an excellent example of co-operation between schools. That is why we have taken these ideas and expanded them dramatically; for example, from 200 to 3,500 academies, working together in close geographic local clusters, with schools supporting each other locally, which we believe is the only model. We agree entirely with the collaborative approach.

The unqualified teacher story seems to run and run. It is a bit of a red herring. We have brought the numbers down to 14,800 from 17,800 under Labour. It is still a tiny proportion. It is interesting that the area that the noble Baroness refers to—London, which had some of the best results—has the highest incidence of unqualified teachers. It is also true that we have a high incidence of unqualified teachers in our academies and free schools because we have nationalised quite a few independent schools. However, we are interested in the best teachers with the best qualifications and now 75%—up from 61%—of our teachers enter the profession with a 2.1 or better.

However, it would be so much better if, rather than throwing stones at each other, we all acknowledged that these PISA statistics are a wake-up call for our school system and that we should work together in a unified way to improve it. I am delighted that the noble Baroness supports some of our reforms. I know that my right honourable friend the Secretary of State for Education would love to know which reforms, and I look forward to discussing that with her further.

The PISA report contains an extremely intelligent analysis, which I recommend to everyone in this House. In particular, it states that the schools that succeed are those with high levels of autonomy and accountability—both of which the Government are focusing on—and a core academic curriculum.

3.29 pm

Lord Storey (LD): My Lords, I am grateful to my noble friend the Minister for repeating the Statement. I agree with him 100% that the time for throwing stones at each other, as he puts it, should be past. That is something that schools get absolutely fed up with.

The Statement highlights the importance of head teachers. We all know that strong leadership in a school produces the results and the progress that we all want. Hong Kong, Shanghai and Singapore have been mentioned. What they have in common are focused and clear ways in which to become a head teacher, to train a head teacher and to put somebody into that role. Does my noble friend agree that we need to look carefully at how we prepare people for school leadership, that we cannot just have any unqualified person leading a school and that there needs to be proper training? On reflection, was it perhaps the wrong decision to do away with the leadership college and the leadership qualification for aspiring head teachers?

Lord Nash: I agree entirely with my noble friend that we need to grow a new generation of head teachers. We are going to be short of head teachers because many of them are retiring. We will have to promote younger people, which is why it is so encouraging that

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so many more highly qualified people are motivated to become head teachers. Many of the academy chains have very sophisticated training programmes for their heads to ensure that we grow the next generation of head teachers.

Lord Quirk (CB): My Lords, the Statement made no reference to one issue which must have caused a certain amount of buzzing in the DfE yesterday. His ministerial colleague, Liz Truss, addressed the Publishers Association and very largely deplored the disappearance —which may surprise many of us—of the textbook from the classrooms of both primary and secondary schools. I was astonished to learn from a Telegraph report today that, as compared with 10% use of textbooks in primary schools here, Germany and Poland have around 80% or 90%. Only 8% of pupils in English secondary schools have textbooks in their hands, whereas the figure for Finland is 80%. I compare the UK largely with other European countries because of the huge cultural differences which make comparison with Taiwan and Hong Kong a bit difficult. In view of what Liz Truss said yesterday, why does the Minister think that there is such a gap between our countries and other European countries in the simple use of textbooks in classes? Does he think that this gap between the two lots of teachers and the two lots of procedures may account for our disappointing performance and the much more hopeful performance that he has drawn attention to in Poland and Germany?

Lord Nash: I agree entirely with the noble Lord. I think that the answer to his questions in brief, although I will elaborate, is that this situation has been caused by a lack of rigour in the curriculum and in teaching methodology. I agree entirely that this lack of rigour and methodology, which is expressed in one way in textbooks, is one of the reasons why we have declined. One also needs to look at workbooks. In far too many state-maintained schools, there is a complete absence of workbooks. We are finding that some of the much more successful schools—not just academies but maintained schools—insist that all their pupils have a workbook. A workbook is something pupils can be proud of and it can be marked. Pupils do more homework and they get more feedback. In all senses, we need to instil more rigour in our school system.

Lord Knight of Weymouth (Lab): My Lords, the Government’s reforms borrow more from Sweden than from any other jurisdiction, but the position of Sweden in these tables is going backwards. As we have heard, the reforms also built on what the previous Government did on academies. Therefore, regardless of politics—and I regret the highly political tone of the Statement—should we not learn from the top three, from Shanghai, Hong Kong and Singapore? There, parents are much more involved in their child’s learning, and those jurisdictions are designing-in collaborative problem-solving to meet the needs of employers. Given that those skills will be tested by PISA in 2015, how does the Minister think our children will fare then, given the Government’s new emphasis on rote learning and individual testing?

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Lord Nash: I know that the noble Lord is very experienced in these matters. I was recently visited by a delegation from Sweden consisting of MPs and others involved in education. They were here to study our accountability system because they acknowledge that they have half of the equation right—autonomy—but not the other half. They have been impressed with what they have seen here in Ofsted and our move to a more rigorous accountability system in examination analysis. That is why they acknowledged that they have failed; I do not think that it has anything to do with autonomy.

We are learning from Singapore, Hong Kong and Shanghai, particularly in maths. We sent 50 of our head teachers, with their heads of department in maths and science, to Shanghai earlier this year. I agree entirely that parents need to get more involved. When I first got involved in the academy programme, we had one ghastly meeting in Pimlico with all the antis. They were clearly not representative of parents, so to reach out to the parents, we organised eight one-hour meetings in Camberwell and Brixton, where the parents lived, to tell them what we were doing. There were 1,300 pupils so you would think that there would be 2,500 parents. I would like to ask noble Lords to guess how many parents turned up but I will tell you—one parent came to all eight meetings. We now have more than 90% attendance at parents’ meetings, because all state schools must now send out a message to their parents that if their children go to that school, they must turn up. That is what happens in independent schools and we must try to replicate that in the state system. I entirely agree with the noble Lord.

Lord Cormack (Con): My Lords, I follow on from the wise, perceptive question asked by the noble Lord, Lord Quirk, and my noble friend’s response to it. Is not one secret a proper, disciplined framework in every school? In 10 years as a schoolmaster and 40 years visiting schools in my constituency, it was always the case that where there was proper discipline—allied to parental enthusiasm, I would add with reference to the noble Lord, Lord Knight—and children could learn in a disciplined framework, they made real progress. Should not our primary aim when we are talking of rigour be to ensure that there is real, rigorous discipline in every school?

Lord Nash: I agree entirely with my noble friend. Across the academy system a great many sponsors have taken over schools where, frankly, the previous behaviour was very poor indeed, and put in place a very effective behaviour management system. I saw a behaviour management system in America which I thought was particularly effective. You start the pupils on the left-hand side of the page, where they basically behave because they will get into trouble if they do not, and you slowly move them across to the right-hand side of the page, where they behave because that is the society they want. They want a calm society in their school because that is the only way they can learn. More sophisticated behaviour management systems are coming into place. We have strengthened teachers’ ability to confiscate mobile phones, particularly in the appalling incidents of sexting, and given more power for detention, and so on, but I agree entirely with my noble friend.

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Lord Rooker (Lab):Can the Minister confirm that although this is December 2013, the tests on those half a million children actually took place in 2012? I have to say that it is ludicrous beyond belief, and silly, for my friends in the Opposition to complain that it is the fault of the coalition. Two years is a nanosecond for change and it is ludicrous to make such connections. I would argue that although the Secretary of State went a bit far in his Statement in throwing stones, it is also a case of “What’s sauce for the goose”.

I do not go on many school visits these days but I was in a secondary school about a month ago. It has been dramatically turned around in the last six months, since a new head arrived. He described his office to me as being set out like a war room, with all the key five factors. I asked him, “What about the staff turnover in this period?”. There were very few changes; I had walked around the school and talked to the staff as well. In other words, the dramatic changes in the school had been brought about by leadership—not by going in to clear out teachers but by leading them. Even this head will therefore require help in future. I take the point about the leadership of schools being absolutely crucial. You cannot just put the best teacher in the role of head teacher. They have to be trained to lead but it can be done. Finally, if this is a wake-up call to the schools, it is equally a wake-up call to the governing bodies. More work needs to be done there because if governing bodies take the issues seriously, it is more likely that parents will take them seriously.

Lord Nash: I am grateful to the noble Lord for his comments. He made his opening point extremely eloquently and I think we all realise that you do not turn around an ocean liner in a couple of years. He is absolutely right and we should all just avoid having that conversation in the future.

Baroness Hughes of Stretford: If the Minister will give way, I have to clarify the points I made in my opening speech. It was not that I expected the Government to have turned around a tanker. What I said was that substantial progress had been made during the years of the Labour Government, and necessarily so because of the state of the education system in 1997. In their three and a half years, the Government could have built on that progress rather than starting again with some very destructive reforms.

Lord Nash: We will have to beg to disagree on this because I do not see our going from seventh to 25th in literacy, from eighth to 28th in science or from fourth to 16th in maths as progress.

The noble Lord, Lord Rooker, referred to a war room. I look forward to him perhaps taking me to visit that school at some stage. I entirely agree on the question of leadership. I was particularly impressed when I visited the Perry Beeches schools in Birmingham, which are run by an inspirational head, Liam Nolan, and by how he has managed to turn around a number of failing schools. He has not only kept in place people who were clearly not performing well under the previous regime but promoted them to very senior positions.

I entirely agree, too, about governing bodies. Whether the school is a local authority maintained school, a church school or an academy chain, real decisions can

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often be made in the governing bodies and we are focusing much more on them. We have recently made it absolutely clear that governing bodies should focus on a few key things: the vision and strategy of the school, holding the head to account for the attainment and progression of pupils, the performance management of his or her staff, and the finance. We need smaller governing bodies, in many cases, but with many more of the appropriate skills.

Baroness Humphreys (LD): My Lords, I thank the Minister for his Statement. For many years I worked as a teacher in Wales, so it was with a great deal of sadness and disappointment that I read the PISA results for Wales today. Wales performed worse than the OECD average in all measures: maths, science and reading. Since 2009, Welsh pupils have slipped from 40th to 43rd in maths, from 30th to 38th in science, and from 38th to 41st in reading—a disastrous performance which shows Wales to be the poorest performing nation in the UK.

All this makes the ambition of Wales’s Labour First Minister to be in the top 20 by 2015 almost laughable, if it were not so serious. This is the culmination of nearly 15 years of Labour control of the struggling Welsh education system. I recognise that education is a devolved matter, but will the Minister be having discussions with Ministers from the devolved nations to ensure that standards improve throughout the United Kingdom?

Lord Nash: I know that my right honourable friend the Secretary of State for Education is deeply concerned about the situation in Wales, which—quite deliberately, it seems—lacks many of the systems of accountability and rigour that we are putting in place here. My noble friend puts it extremely well: if anyone wants a case study of how not to do it, Wales seems to be it. We would be happy to have conversations with them if they were prepared to engage in conversations.

Lord Grocott (Lab): When he read out the Statement, the Minister began by paying tribute to the work and dedication of teachers, which is the right thing to do. I hope that it was meant sincerely, not by him but by the Secretary of State who wrote it. However, I have to say to him, although I am sure that he will know this if he visits schools, as I know he does, that that respect and affection is not reciprocated by teachers up and down the country. He will know that dedicated and committed teachers see the Secretary of State as being arrogant and failing to value the commitment and quality of teachers, their advice and their experience, which in my judgment is a very bad position for any Secretary of State to take. They do not feel valued and understood by him, and they do not feel, when they express strongly held opinions, based on experience, about how and what to teach and how to manage schools, that they are respected by this Government.

I will not say that I modestly suggest this because it is not a modest suggestion, but I simply suggest as a matter of common sense that if the Secretary of State wants to make changes in our education system, then a fundamental principle of management on his part should be to get on his side the people who have to implement those changes and improvements.

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Lord Nash: I think that the Secretary of State wants to improve the lot particularly of underprivileged children in this country far more than he wants to be liked. He greatly values the advice of teachers and constantly has teachers and head teachers in and out of his office. It is a fact that where you have an organisation—I have seen this in business many times—that needs to go through change because it has slipped so dramatically down the international tables, we have to make a lot of changes. That is why we are making a lot of changes quickly, because we have slipped so fast. People are always reluctant to embrace change, and I understand that teachers feel under pressure from so much change. However, we have to do it if we are to do the right thing for our teachers. Both my right honourable friend and I constantly have conversations with head teachers around the country that go along the lines of, “I know you’re unpopular and I know that teachers don’t like it, but you’re doing the right thing. Keep going”.

Lord Elton (Con): My Lords, can my noble friend give us a little more insight into the view that he takes of the comparison between examination systems—their design, their management and use—in competitor countries? How do they differ from ours, and is that in itself one element that needs to be improved?

Lord Nash: I am grateful to my noble friend for that question. We have looked at examination systems across the world in improving the examination systems in this country. We have reduced, or rather will be reducing—again, going to the point about turning the ship around quickly, a lot of these reforms have not even come into effect yet—the number of modules and the amount of coursework and continuous assessment in exams, and we will be reducing the scandal of equivalence that went on in recent years. You could take a higher diploma in construction, a subject that even someone as hamfisted as myself would probably pass because there were no exams at all and it was entirely continuous assessment, and it counted for four GCSE equivalents. I could give noble Lords many other examples of exams that were massively overrated, doing their pupils no favours at all and not valued by employers. We have taken into account a lot of what we have seen in international systems in our reform of the exam system.

Pensions Bill

Second Reading

3.50 pm

Moved by Lord Freud

That the Bill be read a second time.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con):My Lords, the Bill contains important reforms to both state and private pensions, as well as to bereavement benefits, and representsa fundamental step forward in tackling a number of significant challenges facing today’s working-age population.

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Before I turn to the provisions in the Bill, I would like to commend my colleague, the Minister of State for Pensions, Steve Webb, who has been instrumental in delivering the Bill before us and who continues to make such an important contribution to improving the pensions landscape. I also pay tribute to the noble Lord, Lord Turner, and the noble Baroness, Lady Drake, whose work as former pension commissioners provides the framework for much of what we will discuss today. Pension reform has traditionally proved the ability of the legislature to build consensus on an issue, and I am sure that noble Lords will endeavour to continue in this vein.

Automatic enrolment is a product of this consensus and is creating a substantial shift in the landscape of pension saving. The latest figures from the Pensions Regulator confirm that 1.9 million people had been automatically enrolled into a workplace pension by the end of October this year, and we expect to see a total of between 6 million and 9 million people newly participating or saving more in a workplace pension by the time automatic enrolment is fully rolled out, but this Bill was introduced to Parliament because we should not stop here.

In the latest DWP report Attitudes to Pension: The 2012 Survey, only 21% of respondents felt that they knew,

“enough about pensions to decide with confidence how to save for retirement”.

No fewer than 17 Social Security Acts covering pensions since 1975 and thousands of lines of secondary legislation have meant that considerable complexity has built up in the state pension system over time.

At the core of the Bill, therefore, is the provision for the new single-tier pension: a flagship reform which will simplify the current state pension system and provide a firm foundation for pension saving. These reforms will replace the current, two-tiered pension system with a simpler single-tier state pension for future pensioners—those who reach state pension age on or after 6 April 2016.

The full rate of the new state pension will be set above the basic means test. This will help to clarify the incentive to save privately for retirement without the need for the complex savings credit element of state pension credit. The savings credit will therefore close to those reaching state pension age on or after 6 April 2016. The introduction of the single-tier pension thus reduces means-testing in the pension system, halving the proportion of new pensioners qualifying for pension credit.

There will be far less variation in state pension payments under the new system. We estimate that more than 80% of people reaching state pension age by the mid- 2030s will receive the full single-tier pension. Those who have historically done poorly in the current system, such as the self-employed, carers and those with interrupted work histories, who are often women, will benefit from the introduction of the single-tier pension. Around 650,000 women who reach state pension age in the first 10 years after the single-tier pension is introduced will receive an average of £8 per week more in state pension due to the single-tier valuation.

There will be a minimum qualifying period for entitlement to the new single-tier pension. This period will be set out in regulations, but I am able to advise

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noble Lords that the Government have today announced that this is to be set at 10 years, in line with the assumptions made in the White Paper and the impact assessment. Integral to the single-tier reforms is the closure of the state second pension for people reaching state pension age on or after 6 April 2016. Contracting out of the state second pension for defined benefit schemes will therefore come to an end in April 2016 and all employees will pay the same rate of national insurance and become entitled to state pension in the same way. As part of the simplification of the system, the outdated provisions which allow a spouse or civil partner to boost their state pension on the basis of the record of their partner or ex-partner will end. These provisions, introduced in the 1940s, are no longer appropriate for today’s society, where the vast majority of men and women get a full basic state pension in their own right.

In addition to reforming the state pension system to make it simpler, the Government are taking action on state pension age to ensure the system remains affordable and fair between generations in light of continuing increases in life expectancy across all socioeconomic groups. The Pensions Act 2007 set the original timetable for increasing the state pension age to 66, 67, and 68. Since then, the average life expectancy of a man reaching age 65 in 2013 has increased by over a year. We are therefore bringing forward the increase in state pension age to 67 by eight years, so that it gradually increases from 66 to 67 between 2026 and 2028. No one will experience a rise in state pension age of more than 1 year compared to the original timetable that was set by the Pensions Act 2007 and I can assure noble Lords that this will not affect anyone whose pension age was changed by the Pensions Act 2011.

The fact that people are living longer is to be welcomed. Yet continued increases in life expectancy place a great deal of pressure on the pensions system. The Bill therefore also provides for a regular review of the state pension age so that is it considered once every Parliament. This will ensure that the state pension age is examined in an open and transparent way on a regular basis and prevent future Governments from needing to take emergency action. As part of these reviews, the Government of the day will ask the Government Actuary and an independently led review to report on life expectancy and a whole range of other factors relevant to setting the state pension age. The Government will then consider what adjustments, if any, should be made to pensionable age. This is not an automatic mechanism for future increases, however, and any resulting proposals to change the state pension age would still need to be set out in primary legislation.

I turn now to Part 3 of the Bill, which provides for the abolition of the assessed income period in pension credit. The assessed income period was introduced as part of pension credit in 2003 and was a new approach to case maintenance for customers aged 65 and over. This was based on the assumption that pensioners were more likely to have relatively stable incomes with fewer changes in their circumstances and so a lighter touch maintenance and review regime was deemed appropriate. However, it has proved more complex than originally anticipated and the assessed income period has allowed inaccuracies to build up in the

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system. As customers with an assessed income period do not need to inform the department if they experience changes in their capital or the make-up of their retirement income, an increase—for example, a windfall—can legitimately be ignored until the end of the period. Many see this as unfair, particularly in the current economic climate. The Bill will therefore abolish the assessed income period from April 2016. Older customers will be protected through the continuation of existing indefinite assessed income periods for those aged over 75.

Moving on from state pensions, the Bill contains measures to reform the bereavement benefits system through the introduction of the bereavement support payment, which will both simplify and modernise the current complex payment and contribution system of bereavement benefits. The current system was introduced at a time when women were not seen as workers and when widows were left destitute. However, society has changed. Women are no longer expected to be dependent on their partners and we now have an expectation for people to work, with universal credit to support those who cannot.

However, we recognise that many working-age people, regardless of income, do not make contingencies for the loss of a spouse or civil partner and are unprepared for the significant financial impact in the period immediately following the bereavement. We have therefore designed the new payment to focus on this period. It will support people with the additional financial pressures associated with bereavement, helping them plan during the readjustment period and better understand what they will receive from the state while encouraging a supported return to work for those without employment. An additional £110 million will be invested in bereavement benefits during the first four years of reform, so that existing recipients are protected over the course of the next Parliament and those who claim the new bereavement support payment get the help they need when they need it most.

Finally, the Bill contains a number of private pensions measures. As I said earlier, 13 million people are currently not saving enough to ensure an adequate income in retirement. Furthermore, the number of employees saving into a workplace pension has declined from 12.9 million in 1997 to 12.1 million in 2012. It is expected that automatic enrolment will see between 6 million and 9 million people either starting to save or saving more into workplace pensions, and the introduction of the single-tier pension will ensure that the state provides a good platform for private saving. Measures in the Bill are therefore designed to build on these reforms and give people greater confidence in pension saving.

As a result of more people saving into a private pension we expect to see more dormant pension pots as people move jobs—up to 50 million by 2050. The Bill therefore contains powers to introduce a pot-follows-member system of automatic transfers of small pension pots. This will help people to better keep track of their pension savings and ensure that they reap the benefits of consolidating those small pots.

The automatic enrolment of people into pension schemes and the introduction of automatic transfers make it all the more important that schemes used for workplace pensions are well governed, well administered

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and offer value for money. The Bill therefore extends powers to set minimum quality requirements for workplace pension schemes and to limit or prohibit charges to allow the Government to respond to the recent consultations on these issues accordingly. In addition, the Bill contains a number of measures to clarify and strengthen existing private pensions legislation, including a power to prohibit the offering of incentives to transfer pension rights. Finally, the Bill gives the Pensions Regulator a new objective to minimise the impact on the sustainable growth of an employer when regulating defined benefit pension scheme funding, and it also makes changes to the calculation of the Pension Protection Fund’s compensation cap to reflect long service.

Following further work done by my department and the report from the esteemed Delegated Powers and Regulatory Reform Committee, I plan to bring forward a small number of amendments during the Committee stage. I will ensure that noble Lords are made aware of those in good time. I very much look forward to an informed and constructive debate on the reforms and measures in the Bill, both this afternoon and over the coming months. I particularly look forward to hearing the maiden speech from my noble friend Lord Balfe, who I am sure will make an erudite contribution to this afternoon’s discussion.

To sum up, this Bill introduces significant reforms to state and private pensions and will bring our pensions system into the 21st century. It will allow security in old age and provide a firm foundation for today’s working-age people so they can save with confidence for their retirement, an ambition with which I am sure noble Lords will wholeheartedly agree. I commend this Bill to the House. I beg to move.

4.05 pm

Baroness Sherlock (Lab): My Lords, I thank the Minister for that introduction. This Bill builds on the foundations laid by the Labour Government and, for that reason, we support many of its provisions. I hope that with the Minister we can find some consensus around the major direction of travel. I also hope that he will work with me in seeing what we can do during the passage of the Bill to make pensions interesting. I do not promise that my contribution today will advance that cause greatly, but it falls to all of us, if we want to raise the level of saving in this country, to try to raise the level of interest in it as well. So far, when anyone asks me what I am working on and I tell them that it is the Pensions Bill, I find that they have looked at their watch before I finish the sentence. I look forward to all the speeches, including the maiden speech, and to seeing what we can do to advance “Project Interesting”.

Moving firmly away from that agenda, I may say that one reason why we agree with the idea of a single-tier pension is that it is very much the direction of travel that the previous Labour Government took. However, we have some significant questions about the way in which this Government are doing it and about the decision to go with what is known in the trade as a hard/fast transition. We agree, too, with the need to address the way the state pension age is raised, but we have different views on the best way to achieve consensus around that.

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The project of overhauling both state and private pension provision is of crucial importance to the future of our country. We on these Benches will do all that we can to improve this Bill to ensure that it is fit for the job ahead. But that job is a tough one, made harder by the climate of mistrust which obtains at present—mistrust of the industry, which we must all address, and, I regret to say, mistrust of government. People can become cynical, and sometimes have, in the welfare area, when something presented as a reform turns out all too often to be really just a cut. It is popularly assumed that with financial services products the bad news and exclusions are buried in the small print. The same may be true here, of course. Parliament does not yet have the small print, or the regulations, as we call them, but I hope that the Minister can tell us how soon we can get them. But we must maintain an appropriate degree of scepticism until we see what the detail is. That is particularly important in the light of the 13th report of the Delegated Powers and Regulatory Reform Committee, to which the Minister referred, which has a great deal to say about how this Bill uses regulations. So I look forward very much to the amendments that will come forward from the Government shortly.

Before moving on to the detail, I, too, would like to say a few words about the context of this Bill and background. When Labour came to office in 1997, we inherited two challenges in relation to pensions from the previous Conservative Government. First, there were disgracefully high levels of pensioner poverty, much of it among generations who worked hard to rebuild Britain after the last war. The second problem was the degree of mistrust in the pensions industry, some of it caused by the mis-selling scandals of the 1980s and 1990s. Labour addressed both challenges head on. We introduced a minimum income guarantee for pensioners, lifting incomes from £68.80 per week in 1997 to more than £132 by 2010. Under Labour, pensioner poverty fell to the lowest level for 30 years. We pegged pensions to increase in line with earnings and brought in pension savings credit to tackle the 100% marginal deduction rate facing many savers. We brought low earners and carers into the state second pension and introduced legislation for auto-enrolment. I pay tribute to the Government for taking that forward and implementing it. Crucially, we reduced the years of national insurance contributions required for a full state pension from 44 years to 30 years for men and from 39 years to 30 years for women. We also set up the Turner commission, to which the Minister referred. I, too, add my congratulations to the noble Lord, Lord Turner, and my noble friend Lady Drake on the excellent work that they did.

Labour supports the creation of a simple state pension system, and we are committed to the goal of encouraging people to save into private pensions in which they can have confidence. But we believe there are three tests that this Bill must pass if it is to achieve those objectives. First, is it fair to all those who have contributed? Secondly, is it sustainable in the long term? Thirdly, does it create a decent standard of living for all and, within that, will it encourage the private pensions saving that the Government are banking on to ensure decent retirement income? We will apply those three tests to the Bill as we scrutinise it over the weeks ahead.

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I turn briefly to each part of the Bill. The biggest challenge to understanding the reforms to state pension provision in Part 1 is figuring out who are the winners and losers. The Minister has graciously allowed us access to his officials so we hope to dig down into that before Committee. However, I wish to lay out some big questions, on which I hope he can come back. First, as the Bill goes through the House, the Minister will need to confirm the precise level at which the single-tier pension will be introduced. The reason for that is twofold. First, the Work and Pensions Select Committee recommended that, given the importance of the principle that the STP is above the level of the pension credit guarantee, the level should be on the face of the Bill. Furthermore, paragraph 3 of the DPRRC report said that the Bill is drawn in a way which means that,

“for the first time, the rate of the state pension will be specified only in subordinate legislation”.

Given that, the Minister needs to tell the House what the level of the STP will be.

Secondly, there is the issue of those 700,000 women born between 1951 and 1953 who will have to wait longer to retire but will not get the new single-tier pension, unlike men of the same age. While a line has to be drawn somewhere, I think the House will want to reflect carefully before concluding that, after a reform of this scale, a twin brother and sister should find themselves in such markedly different positions.

Thirdly, some people who are married or widowed will receive a lower pension because the derived entitlements to which the Minister referred have been taken away. In other words, they would have expected to get a higher pension based on their husband’s or wife’s contributions, and they will now not be able to do so. Although state pension rules of course change over time, this is a long-standing provision around which some couples have planned their retirement income. The Work and Pensions Select Committee recommended that women within 15 years of state pension age should retain that right, so I would be very interested to know why the Government decided not to accept that advice.

Fourthly, the move from 30 to 35 qualifying years could mean that a number of people, especially women and the low paid, are less likely to get a full state pension, and someone with 9.5 years of national insurance contributions will get not a penny in state pension. The House will want to understand more about the rationale for that and the consequences of that shift which reverses a significant Labour reform which reduced the number of years to 30. I would also be grateful if the Minister could confirm for the record what the safety net will be for those who do not have 10 years of contributions.

Then we have the issue of the abolition of the savings credit element of pension credit. We are concerned that that will penalise those who have savings and could discourage saving in future. We will want to understand who will lose out and by how much and whether there is an issue about passported benefits which are currently attached to that. I hope that the Minister can tell us more about that either today or as we go through Committee.

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Finally in Part 1, we will want to examine the impact on both public and private sector pension schemes of the changes relating to the ending of contracting out. In addition, when these reforms are implemented, national insurance contributions for contracted out workers will rise, as will those for their employers. The Bill allows private pension schemes to amend their terms to take account of the increase in employers’ contributions but public sector schemes cannot do that, presumably to avoid destabilising the public sector pension settlements. That leaves an unfunded cost on the shoulders of public sector employers. Can the Minister tell the House whether the Government have committed to meeting that cost for those public sector employers, perhaps from the £5.5 billion windfall the Treasury will get as a result of increased national insurance contributions?

In Part 2 of the Bill on pensionable age, the major issue relates to the proposal to have regular reviews of pensionable age, at least every six years. We agree with the need for periodic review, but the Minister is right to say that everything around this needs to be consensual. We agree with the principle but we think that, done badly, this could be very bad and could remove certainty for future pensioners and damage trust in the system, undermining incentives to save for the future. It is vital that the way the state pension age is reviewed is not just fair, but seen to be fair, ideally delivering cross-party consensual support for reforms in which the public can then have confidence. We believe that the best way to do that is for the reviews to be overseen by an independent cross-party panel, including a Cross-Bench Member of this House, and for it to have a broad remit. It should be tasked to consider not just the latest trends in life expectancy and the long-range public expenditure issues but also, for example, differences in life expectancy for different socioeconomic groups and the degree to which health and ageing go hand in hand.

I will return to Part 3 on assessed income periods when we get to Committee.

Part 4 is very interesting, proposing, as it does, a complete overhaul of bereavement support. As I understand it, bereaved people under 45 without children will benefit, receiving a flat-rate grant for one year for the first time, but I think that bereaved parents with children will be the losers. At the moment, they can claim widowed parent’s allowance for as long as they claim child benefit, although in fact the average length of claim is just five years. However, in future their support will last for only a year, and that is a major shift. We have received strong representations from charities which work with families with children, particularly bereaved families, and which are worried about the impact of this reform on bereaved parents. It would be helpful if the Minister could explain the Government’s rationale behind this. Although there may be more investment in the short term, I understand that over the long term the measure will save money, or at least be neutral, and effectively it will therefore redistribute money from parents with children who lose a partner to people who do not have children. Understanding why that choice was made would be helpful.

We are also very concerned about the conditionality requirements. The Minister mentioned that society has changed and that people are expected to work.

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They are, but early widowhood is not just an ordinary time for someone to go out to work. When families lose one parent, the effect on the other parent can be very severe. I hope that the Minister will think again about the conditionality requirements so that a person will not be expected to go out to work just six months after losing a partner. That would be very difficult.

Finally, I turn to Part 5 on private pensions. The Government have explained to us the numbers coming into auto-enrolment. If we think about this, it is clear that the state owes a very serious duty of care to those who have auto-enrolled into the pension system. If we are going to ask people, at a time of wage stagnation and a cost-of-living crisis, to forgo spending on themselves and their family today in order to invest for the future, they absolutely must be able to trust their pension providers.

This is a huge industry in the UK. About £180 billion is invested in trust schemes and £275 billion of assets is invested for DC schemes. Some 180,000 people with assets worth £2.65 billion have money in pension pots with annual management charges of over 1%, and 400,000 people a year buy an annuity. The numbers are eye-watering but the principles are pretty simple: the pension industry has to deliver value for money. However, the OFT study published this year made it clear that there are some serious issues in this industry which need addressing.

We propose a number of ways in which the Bill could address the challenge of building a private pension sector that people can trust. The first is to improve pension schemes. We will argue for the full disclosure of all costs and charges, including the costs extracted by fund managers, and stronger trustee-based governance of savers’ pension money, including the extension of fiduciary duties to all intermediaries who handle pension savings and policies, with the aim of encouraging bigger, better, stronger, well resourced and expert pension schemes which are more able to provide value for money for savers.

The second proposal is better management of pension pots when people move jobs. We absolutely agree about the need to make sure that people do not lose track of pension pots when they move to a new job, but we absolutely disagree with the way that the Government have decided to do this. The Government have chosen “pot follows member”, as it is known in the trade, but that raises some really serious questions. The most important are probably, first, the potential for customer detriment if, for example, the new employer’s pension scheme is worse than the one that the person is leaving, and, secondly, the real concerns about administrative complexity and the cost of this way of doing things. We will need to drill down to that in Committee.

Our preferred solution would be for the pot, by default, to move to an aggregator such as NEST, or one of its competitors, rather than to the new employer’s scheme. That is not just a Labour position; it is backed by many key experts, as we will come back to in Committee. In fact, the DWP went out to consultation on this and, even though a majority of respondents preferred the aggregator model, the Government

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chose to plough on with “pot follows member” instead. I would be very interested to understand why the Government are so set on this mistaken path. I genuinely cannot see why they are so set on it. None the less, we shall seek to improve the Bill in Committee by bringing the aggregator model firmly into play.

Thirdly, pension charges have to be reasonable if people are to have confidence to invest their hard-earned money. I am sorry to say that it has taken the Government a long time to wake up to this issue. More than one year ago, my right honourable friend Ed Miliband raised the issue of pension charges and Ministers accused him of scaremongering. They said that no action was needed because the market was “vibrant”. In another place, the Pensions Minister ignored the evidence presented by experts. He stonewalled the determined efforts of my honourable friend Gregg McClymont as the Bill went through elsewhere to try to do something about pension charges. I am delighted to say that Ministers have now acknowledged that there is an issue and we are promised a consultation and a cap on charges. I absolutely welcome this change of heart. As I am sure the right reverend Prelate the Bishop of Derby will confirm, there is more rejoicing in heaven for the one sinner who has repented than there is for the 99 who have always been there. I welcome the Minister and the Government to the happy place which Labour has happily occupied for some time. However, we will need to drill down on this in Committee. We will need to understand exactly where the Government are going on this, the right level for the cap, whether the cap will include the full range of charges and deductions, and how soon action will be taken.

Finally, there is the means by which people turn their pension pot into an income for retirement—decumulation, in the jargon. Most people use their pension pot to buy an annuity. We are the annuity capital of the world. More than half of all annuities are sold in the UK but the annuity market has some serious issues and is badly in need of reform. Performance is hugely variable, charges are often unreasonably high and the margins are such as to raise serious questions about whether they are value for money for savers. We will seek to amend the Bill in Committee and on Report to ensure that people approaching retirement receive good quality, independent advice, something that is already best practice and available in many of the larger schemes.

In conclusion, there is much to do to improve the Bill but we very much welcome the direction of travel. At heart, pensions are about trust; trust that the system is fair and sustainable, trust for savers that their contributions are safe, and trust that the market is working fairly and in the interest of savers. People in Britain must trust us to ensure that, having contributed to pensions for their whole life, they will have the income to afford a decent standard of living and to enjoy their later years. We hope that the Minister will work with us in Committee and on Report to provide the House with all the information that it needs and help us all to make the Bill the best that it can be. That is what the pensioners of tomorrow expect and it is what they deserve.

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4.22 pm

Lord German (LD): My Lords, the noble Baroness, Lady Sherlock, has set me quite a challenge in making pensions interesting, although I might venture to say that the capping of pension charges has appeared on the front pages of a large number of newspapers in recent weeks. I must say to her that calling my honourable friend Steve Webb a sinner is perhaps a step too far.

This Bill will transform the state pension system by introducing its new single flat-rate pension. I, too, pay tribute at the outset to all those who have contributed to its happening. I particularly want to acknowledge the hard work and dedication of my honourable friend the Pensions Minister, Steve Webb, not just for bringing this Bill to Parliament but for bringing to fruition a policy which reflects my party’s long-standing aspiration for a citizen’s pension. We have worked for that for many years.

The new single-tier state pension will particularly benefit women and the self-employed. It will also make it easier for people to understand what they will receive from the state when they retire. It will help to promote private saving and build on the base of auto-enrolment, which in itself has had a most encouraging start. Under the current state pension, a woman on average receives £40 less a week than a man. The new single-tier system will treat men and women alike. The Institute for Fiscal Studies estimates that of women arriving at state pension age in the first four years of this policy—between 2016 and 2020—61% will see their pension income increased as a result, and that there will be further progress as time passes by.

The IFS analysis also shows that the gains are greatest for those who have spent periods not in work, caring for children, and for those men and women who have had long periods of self-employment. The new system will fully count time spent out of work caring for children, which is of particular benefit to women, who are still more likely to take time out of work as a result of starting a family. The new system also benefits self-employed people, who currently lose out as a result, among other things, of irregular working patterns and the difficulty of applying a means test to them.

The benefit of simplicity cannot be overvalued. Simplification is very worthwhile. It enables people easily to understand their future position in respect of a state pension, which in turn should act as a spur to help people save more for their retirement. Coupled with automatic enrolment, we should see the quality and cost of private saving schemes improve. That is why the Government’s proposal to cap pension charges is so important. It is a crucial part of the mix in creating a strong, good-value and sustainable future pensions offer.

Reading through speeches from the other House and responses from a wide variety of interest groups, there would appear to be broad support for the single-tier proposal, and in particular for where it will stand when brought fully to fruition. At that point, the vast majority of people will have 30 or more qualifying years, and they will get at least as good a pension from the single-tier proposal as they would had the current system continued. However, as with so many policy changes, transitioning from one system to another is where we find the most difficulties.

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Of course, as pensions provision has a long timespan tail, transitioning becomes even more difficult. The Government have made significant changes to the transitioning arrangements from when they first appeared as a policy proposal, but I know that your Lordships’ House will wish to examine and probe to see if the best balance, in the light of all the circumstances, has been struck. This is a complex issue, but there are some broad issues in the Bill that I would now like to highlight.

The first relates to public sector contracting out in pensions. As it stands, the Bill provides for private sector pension schemes to be able to amend their rules to accommodate the loss of income from national insurance contribution rebates. These permitted scheme changes can go no further than recouping the loss of these rebates, but can be used more than once to achieve any objective—perhaps by staging changes according to the strength of their overall funds. But this ability to modify does not apply to public sector pension schemes.

Public sector schemes cannot alter contribution levels into their funds, nor can they alter the benefits offered. Yet there will be a reduction to these schemes in national insurance contributions, of 1.4% from employees and 3.4% from employers. Meanwhile, the Government retain this money—which some estimate at £5.5 billion a year from 2016 onwards—for, among things, forward-funding the requirements of this new pension.

A helping hand to employers has been introduced to allow them from next April to offset the first £2,000 against their national insurance bill. This means that many small companies will pay no national insurance at all. Some of the retained government finance has already been committed to meeting the financial demands of other age-related policies, such as funding the care proposal cap outlined in the Dilnot report. Roughly on a 5:7 to 2:7 ratio, two-sevenths of the retained money has been allocated and five-sevenths remains to be allocated. That is an annual unallocated multibillion-pound sum.

I recognise that this could be seen as a decision to be taken by the Chancellor of the Exchequer at some stage in the future, at the beginning or after the beginning of the single-tier proposal. However, just as the current Chancellor has allocated support in certain areas in advance of retaining the current national insurance contribution rebates, I would like to understand why the Government cannot go further at this time.

By way of example, if we were in times of plenty, with public sector pension funds running strong surpluses, pension schemes would be able to deal with the changes in contributions. However, many funds are not. I wonder if my noble friend would agree that without the power to amend their schemes, any shortfalls will have to be made up by the public sector organisations responsible; and that this could mean local authorities, who are currently so stretched for resources to meet the urgent demands of their communities, having to find the extra cash needed to sustain their pension funds. It would therefore make sense for the Government to give some forward commitment to pension funds to enable them to bridge the transfer to the new regime.

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There are also mixed schemes, with both private and public contributors, which will be treated as a public sector scheme, and others with public and private sector contributors that perhaps will be treated as a private sector scheme. I will quote my own example, and declare an interest. I receive a pension from a public sector pension scheme, but my contributions are, and were, made by a charity—a company limited by guarantee—which obviously was not in the public sector. Some of these anomalies are not immediately obvious, and I believe that we need further clarification on this very important issue during the course of the Bill through your Lordships’ House.

I am sure that my noble friend will be pleased to note that I do not intend to press for a review of the overseas frozen pensions issue, as raised by Clause 20. I am well aware of the costs to the Exchequer, and of the European Court of Justice decision. However, this issue is an anomaly and I can understand the feelings of many UK pensioners living in those countries, where no agreement was reached so many decades ago. Will the Minister tell the House how many Governments of countries with whom there was no such agreement have expressed an opinion on this matter to the UK Government—and, if so, whether any of them had a deal to offer? I would be grateful if the Minister could make any such correspondence available.

This Bill, not unusually, has tacked on to it a measure that is only loosely related to its principle—that of bereavement benefit. The current system pays people a relatively small lump sum and then a taxable weekly benefit over a longer period of time. It also uses a complex system of contribution conditions that makes it difficult to calculate what people will receive.

We are told that the reforms in the Bill are based on what people have told the Government would provide them with the most support. I understand that the Government believe they are not about reducing entitlement or saving money. However, there is one part of the reforms that is particularly harsh—and, some might argue, cruel. The Government will expect parents of bereaved children to look for work just six months after the child’s mother or father has died. Kinship carers, by contrast, will be exempt from full work-search requirements for a year after a child comes to live with them, to allow the child to settle. As charities have pointed out, this could lead to the perverse situation where a father caring for his daughter after his wife's death would be required to work within six months, whereas if the child went to live with an auntie, a full year could be dedicated to helping her adjust. Subjecting widows and widowers to full conditionality at such an early stage in their grief may be counterproductive; it may increase stress and anxiety, which in turn may lengthen time away from work.

In most families, the current weekly payments of bereavement benefit assist with general living expenses, with many finding those essential to meet basic living costs. Where the person who died was the main breadwinner, the benefit goes some way to replacing their income, allowing some continuity with arrangements for looking after the children. For others, it allows the surviving parent more flexibility to work fewer hours

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or to change jobs or even sector to fit with their new responsibilities as sole carer of their child. Requiring bereaved parents to complete a readjustment in just six months is harsh indeed, and I hope that the Government will reconsider it.

We will have an opportunity to examine this matter as well as other matters related to transition issues during the Bill’s passage through this House. We on these Benches will not lose sight of the value of this measure to our country.

This Bill is to be welcomed. It sets in train a new pensions settlement for the people of this country. It treats men and women, employed and self-employed, equally. It is easy to understand and simplifies the complexities that are a huge fault in the current system. It will help people of working age to make sensible choices about the need for additional saving for retirement. Whatever changes are sought, I hope your Lordships will recognise that this vision of a better pension is a goal worth pursuing.

4.35 pm

Lord Brooke of Sutton Mandeville (Con): My Lords, it is always a pleasure and privilege to follow my noble friend Lord German on DWP matters, where his own knowledge shames my ignorance but reassures me that the Government’s position is being knowledgeably defended.

When we debate subjects other than specific legislation, there is a happy convention that we congratulate the noble Lord who has secured the debate on having done so, and we can normally find it in us to congratulate him or her on the manner in which he or she has opened the debate and developed the underlying issues. We then speak to a time limit that is rationed by the time available for the debate. The latter does not apply to Second Reading, where we receive polite advice, on some occasions, from the Captain of the Gentlemen-at-Arms as to how long individual Back-Benchers can speak, if they are as anxious as the rest of your Lordships’ House to conclude the debate by 10 pm. Ironically, the more speakers, the more likely it is that some individual speakers will exceed the ration suggested by the Chief Whip. Today, this privation does not apply and, perhaps equally ironically, I propose to make a very short speech.

As to the absence of the normal advance congratulations to the Minister opening the debate, I find myself in the position of congratulating my noble friend not only on having secured the debate but on his substance. He has of course secured it through his and his DWP colleagues’ persuasive logic in L Committee and I join your Lordships’ House in its commendation of the Pensions Minister himself.

I am not myself competent to take up the challenge from the noble Baroness, Lady Sherlock, to make pensions interesting, but I entirely welcome her challenge to your Lordships’ House at large. In the note from our Library on the Bill, I was struck by the reasoned explanation of how British state pension legislation had evolved over the past century since our noble friends the Liberal Democrats initiated this provision in their pre-World War I legislation. I am perhaps one of the rare Members of your Lordships’ House who can truthfully say that, as in the old saw,

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Lloyd George knew my father, as my noble kinsman arrived in the House of Commons at the first by-election after Munich.

The Library note goes on to describe the state of the state pension in 1945 when World War II ended. It goes beyond that to say that much of the relevant legislation since then has been attaching legislative barnacles to the good ship “Provision for Old Age”. When I say that I congratulate my noble friend on the substance of the Bill, I am congratulating him and his department not only on riding the two bareback horses of welfare reform and pension revision at the same time, but on the extent to which the pension revision in the Bill improves the hull of the good ship “Provision for Old Age”—to the extent that the Official Opposition in the other place, echoed today by the noble Baroness on the opposition Front Bench, have felt able to launch it in our House with their support, whatever continuing gaps they have identified.

I ask my noble friend, in his wind-up speech, not to omit to acknowledge what gaps still need attention. Ideally, he should identify how he thinks they should be tackled and refined, even if it may be in the next Parliament. If he can do that with candour, and avoid some of the things that have gone wrong since 1945, a grandchild of mine, especially if he or she reaches either House of this Parliament, may be able to follow the Lloyd George saw with his or her own version: “Lord Freud knew my grandpa”; and, in yet another place, I shall smile quietly.

4.39 pm

Lord Hutton of Furness (Lab): My Lords, I draw your Lordships’ attention to the interests that I have declared in the register. I am an unremunerated non-executive director of Pension Quality Mark Ltd and advisory director to Dimensional Fund Advisors.

There is a great deal in the Bill that can be welcomed and supported. I genuinely believe that it takes forward much of the consensus that has recently been established in this country about the best way to ensure that more people retire with an adequate pension. That is a very important thing to be doing. There are some people—maybe even in this House—who recoil from the concept of a consensus in politics, but when it comes to pensions policy, consensus is a very important thing to strive for, in that it establishes the conditions for people to plan for the future with some confidence. The one thing that has bedevilled pensions policy in the UK in recent years has been the constant stop and start, chop and change, which has acted as a deterrent to people saving.

I, too, pay tribute to the noble Lord, Lord Turner, my noble friend Lady Drake and Sir John Hills—the three commissioners who made up the Turner commission —for helping us to focus our collective attention on two fundamental problems that we face in this country. If the goal is to ensure that more people retire with an adequate income, which I think is the right policy because we cannot ask the taxpayer to shoulder the principal burden in future years in the way that it has done in the past, we know that we have to address these two fundamental problems.

Not enough people are saving and what they are saving is probably not going to be enough to give them an adequate retirement income, so we have to address

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that. We are addressing that now with auto-enrolment. The speakers in this debate have already drawn attention to the progress that we are making. The Minister referred to the nearly 2 million savings accounts that have been established under auto-enrolment. That is to be welcomed, there is no question at all about that, but we need a reality check here. These are early days for auto-enrolment. The big challenge and the big test for auto-enrolment are still to come, but so far so good: we are making good progress.

However, we should never lose sight of one very important factor: it is wrong to say that we have an established or developed savings culture in this country. In fact, the opposite is true. We know from the Office for National Statistics survey of occupational pensions that in the year running up to auto-enrolment the number of occupational pension savers in this country fell by almost half a million—in one year. It is going to be a significant challenge to move from a culture that honours and pays homage to debt, consumerism and spending to one that puts a premium value on saving, but we have to make that transition. Auto-enrolment is the right policy to ensure that we make progress in that direction. The Bill makes some changes to auto-enrolment, such as the technical changes in Clauses 36 to 40. Some of those are to be welcomed. There is quite a lot of detail that needs to be fleshed out as we move to Committee and Report.

The issue of how much people are saving is altogether more complicated. Today is probably not the time for a debate about how much people are contributing via auto-enrolment into these new savings accounts, but the time is probably not far off when we will have to have a very honest debate in this country about whether 8% or 9% of earnings going into a defined contribution pension will be sufficient to guarantee people a decent and adequate pension in retirement. I, for one, do not believe it is.

The group of savers that we should be most concerned about are actually not those who are the lowest paid. They will do well in auto-enrolment, together with reforms to the state pension that I want to say a word or two about in a minute. The people we in this House should be most concerned about are those on median earnings, who are above the lowest threshold of earnings, who are almost certainly not heading in the right direction at the moment when it comes to ensuring that they have adequate pensions. That debate cannot be postponed for very much longer.

The second of the two big problems that we face in this country concerns the state pension. It has been clear to all of us—it was certainly clear to my colleagues in the previous Government—that the state pension has become far too complicated and far too wrapped up in means-testing, and there is a serious risk that it will act as a deterrent to people taking the principal responsibility themselves to save for their retirement. That would have been a major, mortal threat to auto-enrolment and the principle behind it, which is to shift over time the burden of responsibility for saving from the state to the individual.

Like my noble friend Lady Sherlock, who made an excellent speech from the Front Bench—to be fair, the Minister did too—I think that moving to a single state

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pension represents an historic opportunity to make sure that we avoid that car crash. Moving to a single state pension can complement auto-enrolment and not undermine it—and there would have been a good chance of that happening if we had continued on the path that we were on.

All I shall say about the single state pension today on Second Reading is that reform, very important and welcome though it is, is not going to be straightforward. I remember well the time when I had just become Secretary of State for Work and Pensions. I was going through a briefing with my officials on the nature of the state pension. We had a full discussion about that—there were pages in my briefing note about it and I hoped that I had got my head around it. When I turned the volume over to deal with the state second pension, there was nothing in the folder. I asked the Permanent Secretary at the time, “Where is the briefing on the state second pension?”. He said to me, “Secretary of State, it’s too complicated for us to explain it”. I was never quite sure whether he meant, “You aren’t capable of understanding it so I’m not going to bother with trying to do that”, or whether they were saying something which was actually true—that is, that it had become too complicated. I think that the latter is the case. There is no doubt in my mind that it has become complicated. As a consequence, there are some genuine transitional issues to sort out. I am quite sure that it is the right thing in principle to be doing. We know that some people will lose out; for example, people who due to their earnings would have built up a higher state second pension if these changes had not been made. It will be very important, although the principle is right, for Ministers to keep their minds open about how this change can best be implemented. However, as I have said, I think that it is the right thing to do.

Like others, I welcome Part 2 of the Bill, in particular the commitment to keep the pensionable age under regular review. This change will be necessary if we are to stay ahead of the demographic changes that have already had a tremendous impact on our society and that, if anything is true, are accelerating. Many think that at some point this trend for longer life expectancy will flip into reverse; I really doubt that to be true. There is no doubt that the pressures, both financial and societal, will build up unless we stay ahead of the process of demographic change.

That is easier said than done in many respects, and I say that for one reason: the age at which people retire, certainly for men, and for women in fact, had not changed for several generations. My grandfather would have retired at the age of 65. We have all come to expect as a natural order of things to get to that age and then retire. That is the old world and it has to be left behind, but it is sometimes difficult to persuade people to understand that. The good news is that I think that people have generally taken a very pragmatic view. If you compare the response in Britain to the increasing age at which the state pension is payable with the response to similar reforms in other European countries, you can detect a degree of welcome pragmatism here in the UK, and that bodes well for the future. However, further change is necessary and it is right

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that we make sure that the process is as objective and non-partisan as possible, which is why Part 2 is to be welcomed.

There is therefore a great deal to be welcomed in the Bill. I would like to say that the same is true of Part 5, particularly the clauses dealing with the transfer of pension benefits, but I really cannot say that to your Lordships’ House. The Government have made a significant mistake, or stand on the threshold of doing so, in their reforms around pot follows member.

The Minister made it clear that there could as a result of auto-enrolment be up to 50 million small pension pots being established. People will change employment fairly regularly, particularly early on in their working careers, and there is a danger of lots of small pension pots being developed and basically left dormant. We should not be complacent about that; we have got to decide what to do about it. The Government have come up with the idea of pot follows member. The other obvious course open to them, which my noble friend referred to from the Front Bench, to use aggregation as the default option, has been rejected.

I say to the Minister that I hope he can reflect on this with his colleagues. I think that a mistake is about to be made here and I hope that we can avoid it even at this late stage. I have nothing in principle against pot follows member—there is a logic to it—but making it the default option through legislation is the wrong decision. I say that it is wrong because it lacks ambition. It exposes some savers to the risk that they will move from well run, well managed, good value-for-money schemes into schemes that are less well run and provide less value for money. I am not entirely sure that the minimum standards will iron out or rule out that hazard.

When it comes to setting policy in this area, we must keep asking ourselves: what is the best thing for people who are saving? It is not necessarily the same thing to ask ourselves: what is the least risky reform for Ministers to make? The question is: what is in the best interests of savers? I accept that aggregation poses some significant challenges—there needs to be a clearing house, proper data, and so on—but that route genuinely offers the prospect of higher pensions in retirement than pot follows member.

The National Association of Pension Funds has made that argument very clearly. In my experience as a Minister, when the NAPF says, “You really need to think carefully about that”, Ministers really need to think carefully about the course of action that they have proposed. But it is not just the NAPF, it is other commentators, too. I am a great admirer of Michael Johnson and his recent pamphlet for the Centre for Policy Studies, which is not an organisation that I would naturally find myself standing up in the House to support. He has basically said the same thing to Ministers.

My noble friend is right to say that we need to debate those provisions in due course, and I am sure that we will. I hope that the Minister and the Government are open, even at this late stage, to taking a different perspective. The issue is: what should be the default option? I genuinely think that it is a mistake to offer pot follows member.

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With that, I end my remarks. I look forward to taking part in Committee and on Report. I echo the congratulations that many others have offered to the Pensions Minister on taking forward these important historic reforms to the state pension. I am sure that it is the ardent wish of everyone in the House that the reforms work to support the savings culture that we so desperately need.

4.52 pm

The Lord Bishop of Derby: My Lords, in terms of the terminology in this debate, I am not sure if my opening remark will be interesting, but it should be of interest to everybody. That is that Steve Webb is not alone; we are all sinners. I can say that, from these Benches, we all have the hope of heaven. That, of course, may be another understanding of the term “universal credit” that the Minister may like to note.

I understand pensions to be providing stability and continuity in life through a time of transition and adjustment and offering proper responses so that people can continue to live their lives securely and flourish. I see the Government’s role as creating a frame for that flourishing, stability and continuity to happen.

I want to raise a specific point about Part 4 concerning bereaved parents and their continuing family life. The Minister rightly said that society is changing rapidly, but my contention is that bereavement does not change much at all, and we need to think carefully about the notion of bereavement.

The new proposals provide for a lump sum and then bereaved support payment for one year, instead of longer term support which could last as long as you have a child on child benefit, so it is a very radical change of provision for bereavement for families who have lost a parent.

We all know that bereavement is devastating and complex and most others here, I guess, have experienced it. In my work as a priest, as your Lordships can imagine, I have a lot of engagement with people at the time of death and immediate bereavement, organising funerals, follow-up visits and then supporting the family in an ongoing way.

I suggest that one year is a very short time within which to encapsulate bereavement. Many people who work in this area in the voluntary sector would concur with that. I propose to the Minister that we should consider a three-year term to provide the stability and continuity that family life requires. I am not an experienced politician so I am not offering three years and thinking that the Minister might negotiate down to 18 months, I am saying that, from my pastoral experience, three years would be the right kind of timeframe if pensions are about providing continuity and stability.

I want to give three or four brief reasons why I propose three years. The first is in terms of the pastoral situation of the family concerned. If this support ends after one year, that comes at a very raw time. I can tell your Lordships, from my ministry, that many people who have nothing to do with the church will come back on the first anniversary to light a candle, come to Evensong and pray with a priest. We could be giving people a double loss if this support was withdrawn after one year.

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Secondly, if we stop after one year, many who would then be lone parents, with children to look after, would probably have to face the prospect of working more hours to make up their income. Some people project that 75% of new claimants will be worse off under these proposals. This is just when children need more care and attention because their bereavement happens in phases, not just over a few weeks or months. Two or three years is a fair time to enable children to adjust but just when they need more time, the person who would now be their single parent might have to look to spend more time away from them at work.

Thirdly, would this be a withdrawal of the net of support for continuity and stability, and are these proposals more like a death grant than care in bereavement? There is a big difference between offering a grant, even if it is extended over a year on death, and care and bereavement. Pensions are about ongoing care and stability at a time of change into a new life.

My fourth point is on universal credit, the provision that is offered in its place. Just as families are having higher costs as children grow older and more expensive, the universal credit system which would take over after the year, as I understand it, would mean that the now lone parent would have to be willing to prepare for work while their children are three or four years old, and be available for work when they are five. That may be well within the three years during which children need special care and attention for their bereavement. Can the Minister comment on that point? Is this proposal about bereavement or an extended death grant? Bereavement is a proposal that takes pensions seriously; a death grant is nothing to do with pensions but something rather different. If pensions are to provide appropriate stability and continuity in life through times of great change into another way of living, and especially if children are involved, is there a case for having a three-year support rather than a one-year support and universal credit?

4.58 pm

Baroness Drake (Lab): My Lords, I refer to my interests in the register and mention that I am a trustee of both the Santander and Telefónica/O2 pension schemes. These state reforms accelerate the direction of travel set, with political consensus, under the Labour Government. The single tier is intended to be fairer, reduce reliance on means-tested benefits, provide a firm foundation for private savings and assist ordinary people to achieve a reasonable income in retirement. To achieve those intentions, it depends in part on the starting value of that single-tier pension and the uprating of its value over time.

The Government’s impact assessment assumes uprating will be by the triple lock but assumptions about pensions’ adequacy could be significantly different if it is not. I also note that the extent to which the single-tier pension is set above the guarantee credit is lower in the White Paper than in the Green Paper. I hope that we can explore these matters further in Committee because it is very important to understand where the consensus is settling on the value and uprating of the single tier.

The state pension age needs to rise in the face of increasing life expectancy. Five-yearly reviews by government will be informed by reports from the

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Government Actuary but it is less clear how much importance will be given to the report of the independent panel which will consider other relevant factors specified by the Secretary of State. Hopefully, these will include geographical, occupational and socioeconomic differences in morbidity and mortality. There is a need for greater clarity about the process and for clear public evidence to inform the debate.

The Bill also provides for the statutory override to allow private employers with contracted-out schemes to adjust members’ future pension accruals or contributions to recoup the employer’s loss of national insurance contribution rebates consequent on the abolition of contracting out. However, employers should not be able to make disproportionate adjustments. Will the actuarial advice of the trustee take precedence over that of the employer? What if adjustments disproportionately impact on one group of members compared to the other? What are the protections to be?

Many of the provisions on private pensions are to be welcomed: the abolition of incentives to induce a member to transfer their rights out of a salary-related scheme; the abolition of short-service refunds; the protection to workers’ pension contributions from the national insurance fund in the event of employer insolvency; and the granting of powers to the Secretary of State to impose requirements on work-based pension schemes on administration, governance and charges.

However, the question is whether the Government will be sufficiently bold in exercising these powers. Auto-enrolment utilises inertia, not active engagement, to get people saving. The employer chooses the pension product while employee choice is largely restricted to joining or not joining the employer’s scheme. The state harnessing inertia—together with the OFT finding that the demand side, the buyer, of the DC workplace pensions market is one of the weakest that it has analysed in years—raises the bar inexorably on governance requirements, especially as auto-enrolment drives a level of demand that the industry would not achieve under a voluntary system. Poor governance, a lack of transparency or scrutiny and conflicts of interest are to be found abundantly on the supply side. To quote the OFT,

“we have concluded that … competition cannot be relied upon to ensure value for money for savers in the DC workplace pensions market”.

Ordinary people are embracing auto-enrolment. Relatively few have opted out so far, and employers are fulfilling their duty. However, this places a reciprocal responsibility on the Government to protect ordinary people against poor standards and conflicts of interest. The challenge that the Minister is grappling with is apparent from the plethora of consultations and investigations: the FCA on annuity markets and asset management charges; the OFT on the workplace pensions market; the DWP on quality standards, governance and charges; the Law Commission on how the law of fiduciary duties applies to investment intermediaries, using pensions as an exemplar; and TPR on codes of practice. The imbalance between the buyer and the supplier sides of the pensions market, and the systemic inequalities of knowledge and understanding between

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saver and provider, mean that seeking an alignment of interests is not sufficient—the interests of the saver must come first. There must be a duty to act in the saver’s best interests and, where there is a conflict of interest, priority must go to the saver. No shareholder has a right to gain a dividend from selling or managing a pension product that fails to meet the interests of the saver. The product proposition cannot be designed with sub-optimal features simply to facilitate a profit.

I was therefore anxious to read that in investigating the workplace pensions market, the OFT had reached agreement with the industry to introduce independent governance committees to address the governance challenge, but before a wider community had had the chance to comment on that solution. As the Law Commission says:

“There are many difficult questions about how these committees will work”.


“will not have the power to change investment strategies or investment managers … Furthermore, it is not clear whether … the committees will be under explicit legal duties to act in the interests of”,

the savers. Achieving low charges and good quality in pensions must be inseparable. Sound governance will ensure their delivery. Complexity and lack of transparency put employers and savers at a disadvantage. The OFT identified no fewer than 18 different charges. Full transparency is essential to those who are to be the guardians of the consumer’s interest.

The Secretary of State’s new powers must also be applied retrospectively to cover legacy pension savings. MoneyMarketing, in reporting that the Association of British Insurers has missed the deadline for the pension charge cap consultation, suggested that it was because providers cannot agree on whether existing pension arrangements should be included and quotes Adrian Boulding, Legal and General’s pension strategy director, saying:

“This is all about legacy and the L&G view that existing pension schemes should be able to enjoy the 0.5 per cent charge level that is widely available for new pension schemes. We are morally uncomfortable with the concept that an employer buying new in the market gets one price but an employer that has already bought and is a loyal customer is getting a worse deal for their staff … a charge cap … should apply to new schemes and existing schemes”.

Even if Legal and General has its own competitive considerations for saying those words, they still capture the issue well. We will have to see in the ABI’s crafted response where the common denominator comes to rest.

The Bill addresses the real problem of small, dormant pension pots by giving the Secretary of State power to provide for the automatic transfer of a worker’s pension savings to their new employer’s scheme up to a pot value of £10,000. “Pot follows member” cannot be implemented without raising quality standards or the Government risk transferring the savings of millions of ordinary people into myriad schemes over which they currently have little quality control. Generally, transfers take weeks, if not months. Lots of paperwork, bureaucracy, poor data and lack of standardisation combine to slow the process and increase costs.

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All pension savers should easily be able to transfer and consolidate their pension savings, but some savers will never make an active decision, so an effective private pension system requires a series of efficient default arrangements over the life cycle of the saver. I have real concerns about pot follows member as the automatic default arrangement for small pots rather than the alternative of a scheme that can aggregate people’s savings.

I fear pot follows member does not accommodate people who leave the labour force or become self-employed as they have no employer to transfer to, but their ex-employer may nevertheless default them into a poorer personal pension because they do not want to provide for ex-employees in their existing scheme. PFM increases the regulatory burden to oversee the myriad workplace schemes into which automatic transfers would be made rather than focusing on leveraging extremely high quality in a few aggregator schemes. Pot follows member may prove complex for the industry to implement and increase risks to savers. Pot follows member increases risks of charges and transaction costs being incurred on the whole pension pot each time a worker changes their job and transfers rather than on the incremental amount of savings accrued with the previous employer. An efficient pot consolidation mechanism is needed, but I fear that PFM may not best meet this need.

Furthermore, many pots above £10,000 will be defaulted into a personal pension on which there is little quality control because employers increasingly will not let ex-employees stay in their workplaces scheme. The Government argue that significant sums accumulating in aggregator schemes will potentially disrupt the market, but in a dysfunctional market where competition cannot be relied upon to deliver value for money—the words of the OFT, not mine—the driver, as my noble friend said, should be the interests of the saver.

5.09 pm

Lord Balfe (Con): My Lords, I begin with a declaration of interest as a specialist director of the CERN pension scheme in Geneva, and as chair of the European Parliament members’ pension scheme. May I now move on to thanking your Lordships for the warmth of the welcome that I have received in this House? First, I thank my two sponsors: my noble friend Lord Plumb of Coleshill, who is in the Chamber tonight and whom I have known since we joined the newly elected European Parliament in July 1979; and my noble friend Lord Inglewood, whom I have also known for more than 24 years, since he similarly joined the European Parliament in July 1989. My introduction has been smoothed by many people, particularly my mentor, my noble friend Lady Fookes, and the staff of this House. I have discovered that the words, “I’m new here, can you possibly help me?” bring forth an instant and always helpful response.

This small area of London has played a very large part in my life. Foreign affairs have interested me, even from my schooldays. My working life began in January 1961 when, at the age of 16, I joined the Civil Service as a clerical officer in the Crown Agents for Overseas Governments and Administrations, based just across

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the road at 4 Millbank. I first came to this House because it was a nice, warm place to come to towards the end of the month when one’s money tended to run out and you needed some sort of intellectual stimulation that was free.

In the same month that I joined the Crown Agents, I first joined my trade union. I am proud to say that, from then to today, I have always been a member of a TUC-affiliated trade union. Subsequent to the Crown Agents, I went via the Foreign Office, of all places, to the London School of Economics, where I studied social policy and administration under the guidance of the late and great Richard Titmuss, with my first tutor being the noble Baroness, Lady Blackstone, who is in the Chamber tonight. I recall that on the first essay I ever gave her she wrote, “This is journalese”. You can tell how naive I was because I thought it was a compliment until I went to the tutorial, where I discovered it was not quite the compliment I had thought.

After that I went to the DHSS where, with the late Keith Joseph as Secretary of State, I served as research officer for the Finer committee on one-parent families. It was during this time that another interest, in statistics, which had started at LSE, developed. I recall that we were looking at the impact of work on women’s mortality. We discovered in a preliminary way that women subjected to the same work and life experiences as men had quite similar mortality and that the female differentiation then taken for granted was not, in fact, in all cases completely sustainable. However, the Government Actuary’s Department was not impressed with the finding and I must admit it was far from proven. It was, however, a straw in the wind and has been at least partially confirmed as time has passed. Today, differential mortality between sexes and social classes is an accepted fact, even if the contributing factors are still in need of further evaluation. My other achievement from this period was becoming a fellow of the Royal Statistical Society, which I remain to this day.