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House of Lords

Wednesday, 12 March 2014.

3 pm

Prayers—read by the Lord Bishop of Newcastle.

BBC World Service

Question

3.06 pm

Asked by Baroness Rawlings

To ask Her Majesty’s Government what recent discussions they have had with the BBC regarding future funding for the BBC World Service.

The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con): My Lords, the FCO has regular discussions with the World Service about its future. On 1 April the World Service transfers from FCO grant in aid to licence fee funding. Future funding will be decided by the BBC Trust. DCMS is now in discussion with the BBC about additional external funding proposals. The Government remain fully committed to the global role and work of the World Service.

Baroness Rawlings (Con): My Lords, I thank the Minister for her Answer. Through the BBC World Service many listeners have a faith in the UK’s image, our influence and our beliefs. These qualities should not be lost at any price. Many of your Lordships are not only admirers of the BBC World Service but concerned citizens, despite the warm words that we hear from the noble Lords, Lord Patten and Lord Hall. When will the Government produce the plans and figures with the BBC Trust for future funding for the following three years—that is, before the end of the charter? The BBC World Service has only one year’s guarantee of £245 million, and that is within all the BBC’s budget, with no mechanism to protect the World Service. Can the Minister say whether she will continue to be responsible after 1 April, as the Foreign Secretary will still approve the objectives?

Baroness Warsi: My noble friend asks an incredibly important question. She may be aware that we have funding of about £238 million allocated for the current financial year. In the financial year starting in April the BBC World Service licence fee funding will increase to £245 million, an increase on the current year’s funding of about £6 million, and thereafter it will be for the BBC to decide what it feels the appropriate level of funding should be. The Secretary of State for Culture, Media and Sport will continue to have overall responsibility for remitting the licence fee money to the BBC under the new arrangements. As my noble friend said, the current charter runs until December 2016. The Government have yet to announce the scope, timing and process for the review of the charter. In terms of Foreign Office involvement, the Foreign Secretary will continue to approve the opening and closing of the World Service language services, as he does at present, based on recommendations put to him by the World Service.

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Lord Morris of Aberavon (Lab): My Lords, since S4C has also been partially funded in recent years by the BBC, in the same way as the World Service is, what consideration has been given to the future funding of S4C?

Baroness Warsi: I will have to write to the noble and learned Lord on that one.

Lord Alton of Liverpool (CB): My Lords, did the Minister see the comments in yesterday’s edition of the Independent by Justice Michael Kirby, who chaired the recent commission of inquiry established by the United Nations to investigate human rights abuses in North Korea? He said that the extension of BBC World Service transmissions to North Korea—

“a country that has been largely cut off from the rest of the world”—

would make a considerable difference in fighting against those abuses of human rights. Given our Article 19 obligations and the BBC’s historic role in promoting democratic values above the heads of dictators, is this not a moment for the Government to urge the BBC World Service to play its part?

Baroness Warsi: The noble Lord has asked me this question on a number of occasions; indeed I have answered it here from the Dispatch Box and also written to him. As he and other noble Lords may be aware, in 2013 the World Service reviewed the possible options for a Korean language service and concluded after a fact-finding mission that questions of likely audience reach, cost and technical feasibility meant that such a service was not appropriate at this stage. I am aware of the UN commissioner’s report. The noble Lord will be aware that that contained two quite specific approaches to how engagement could happen: the first was through the broadcasting route and the second through encouraging people-to-people contact. We are one of the few countries that has extensive people-to-people contract because of our embassy in North Korea. The UN report also recognised that that is one of the ways in which we can engage in dialogue.

Lord Kinnock (Lab): Does the Minister accept that the BBC World Service, together with the British Council, constitutes the most effective expression of so-called soft power available to the United Kingdom and, indeed, excels beyond any comparable services in the rest of the world? In light of that reality, does she agree that there are no circumstances in this dangerous, confused and, in too many places, oppressed world for a reduction in the scope or service of the BBC World Service? If any reductions were to take place it would not just contradict the interests of our country but diminish the efforts for freedom being made in so many other countries.

Baroness Warsi: The noble Lord makes an important point: we have indeed been referred to as a soft power superpower because of our organisations and the work that we do. Indeed, my noble friend Lord Howell has been leading discussions on this issue with other colleagues. However, I stress to the noble Lord that the BBC World Service is, of course, operationally, editorially and managerially independent and has to make these decisions in accordance with those headings.

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Lord Hannay of Chiswick (CB): Does the noble Baroness agree that, after listening to her first and subsequent replies, one might say that the Government are flying on a wing and a prayer in this matter? Does she not recognise that it is high time that there was a structured solution to the future funding of the World Service within the BBC and not just one that relies on the vague network of bureaucratic lines that she mentioned?

Baroness Warsi: The sense was that long-term financial stability will come from licence fee funding as opposed to the way in which the BBC World Service has been funded in the past. Indeed, the BBC World Service is in contact with DCMS to consider how alternative forms of funding could come on tap in due course.

Baroness Bonham-Carter of Yarnbury (LD): My noble friend clearly agrees about the importance of a healthy and vibrant World Service. In February, Peter Horrocks, the director of the service, told the Foreign Affairs Committee of ambitious plans to extend the service it offers. He said:

“We are launching and creating many new digital and TV services”,

including a Burmese TV service. Does my noble friend think that, from a practical perspective, this very important long-term planning must be extremely hard for a corporation that does not know what its funding is going to be in 14 months’ time? How can the FCO help the charter review process ensure that the BBC World Service does not face a diminished future?

Baroness Warsi: Perhaps I may refer my noble friend to the way that I answered this question before. This matter was dealt with as part of the spending review in 2010. It was felt that the licence fee funding footing on which the BBC was placed was the appropriate way forward. The noble Baroness is right to refer to the opening of services such as the Burmese television service at the beginning of 2014—and services have been closed in the years preceding that. These are the managerial and editorial decisions that the BBC has to take.

Banks: Small and Medium-sized Enterprises

Question

3.15 pm

Asked by Lord Sharkey

To ask Her Majesty’s Government what steps they are taking to encourage banks to refer small and medium-sized enterprises which apply unsuccessfully for credit to other sources of credit.

Lord Popat (Con): My Lords, banks are focal points for small businesses seeking finance and the Government want to see them do more in response to client applications. In December 2013, we published Small Business: GREAT Ambition, in which we committed to work with the banks and the BBA to improve the referral by the end of this year. The Government are determined to make real progress on this matter and are considering all possible options.

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Lord Sharkey (LD): Only yesterday the OFT raised a concern that the big banks were hindering access to alternative forms of financing such as peer-to-peer lending. For existing and new referral schemes, we need to know exactly what the banks are up to and what they are doing. Can the Minister assure the House that all referral schemes will require the banks to publish meaningful data, as they do now for lending?

Lord Popat: The noble Lord makes an important point and I pay tribute to the work he has done on driving greater transparency in local lending. An effective referral system needs to be transparent to build trust among businesses and alternative finance providers. I welcome the recent comments made to the Treasury Select Committee by the independent external reviewer of the banking appeals process, Professor Russel Griggs. He agreed that more could usefully be done to integrate banks in terms of the outcome of referrals and on signposting processes.

Lord Howarth of Newport (Lab): My Lords, why do the Government not do more to use the leverage that they have over Lloyds Bank and RBS to require the management of those two banks, at any rate, to focus more on the interests of the economy and society and less on feathering their own nests?

Lord Popat: My Lords, the taxpayer had to bail out both RBS and Lloyds Bank under the previous Government and we continue to pay for the mistakes of the past. Both banks are now becoming smaller and safer, but there is a long way to go. Since the launch of the Funding for Lending scheme, RBS and Lloyds Bank are now both lending more money to our SMEs.

Lord Mitchell (Lab): My Lords, despite what the Minister says, the latest Funding for Lending figures are yet again down on what they were previously, and the high street banks are just not playing their part. Does the Minister agree that peer-to-peer lenders are in many cases much better able to serve small businesses and should receive even greater government assistance?

Lord Popat: My Lords, gross lending has gone up by 16% over the past 12 months. We intend to lend £4 billion per month compared with around £3.1 billion this time last year. We encourage peer-to-peer lending and more is happening in the area. One of the reasons that net lending might have dropped, which is probably the gist of the noble Lord’s question, is that a large number of businesses are either repaying or going for alternative financing, including factoring, leasing and hire purchase. There are also a number of schemes from the British Business Bank.

Baroness Wheatcroft (Con): My Lords, debt is not always the safest way for small firms to finance their expansion. Does my noble friend agree that encouraging smaller firms to look at equity financing may be the sensible way forward?

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Lord Popat: I agree with my noble friend. We now have three different schemes for equity financing within the British Business Bank.

Lord Cotter (LD): My noble friend has just said that, following the consultation, the Government will look at all options. Does this include the previous commitment to producing legislation to address this very serious issue of funding for small businesses and others?

Lord Popat: My Lords, as I said, we are looking at all the options. If the need arises because we are not successful by the end of 2014, I am sure that the department will look at maybe coming up with some sort of legislation to see what we can do to make the banks more transparent.

Lord McFall of Alcluith (Lab): My Lords, the consistent lament for the past eight years from both the political and business communities has been that banks are not lending to SMEs and that there is less competition and innovation today in the banking sector. The OFT stated yesterday that there are competition concerns in this vital driver for the economy. Can the Minister ensure that the new competition authority will undertake a full investigation forthwith into this issue, which has been an impediment to the economic progress of this country for the past eight to 10 years?

Lord Popat: My Lords, the noble Lord makes a very important point. One way to solve the problem we have with SME lending is to bring in more competition. We are spinning out Williams and Glyn’s from the Royal Bank of Scotland and TSB from Lloyds Bank. The regulators have relaxed the regulations to issue new banking licences, and I am pleased to say that we have 21 applications in place. We have launched the British Business Bank. More competition will solve some of the problems, and of course more lending to our businesses will help the economy.

Lord Haskel (Lab): My Lords, along with equity funding, the hedge funds and equity funds are doing the work of the banks to some extent. Is the Minister satisfied that they are being properly regulated in doing this work?

Lord Popat: My Lords, equity funding is within the government department and is currently being consolidated with the British Business Bank, which will obviously be regulated in its equity funding. So will the FCA.

Lord Flight (Con): My Lords, is the Minister aware of the growing volume of funds being raised under the EIS scheme, which roughly doubled in 2011-12 and look as if they will double again when the figures come through for 2012-13? The Government made improvements to the scheme on coming into office, but it has prospered through both Labour and Conservative Administrations and is now a key source of equity money for small businesses.

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Lord Popat: My noble friend makes another very important point. The scheme is a key source for equity lending. We also now have what we call the business growth fund, which was launched very recently by the five clearing banks to help mid-sized businesses in the UK by lending money in return for equity.

Scottish Independence: Currency Union

Question

3.22 pm

Asked by Lord Sherbourne of Didsbury

To ask Her Majesty’s Government whether they have made any assessment of the constitutional, political, financial and economic implications if there were to be a currency union between an independent Scotland and the rest of the United Kingdom; and, if so, whether they intend to publish it.

Lord Newby (LD): My Lords, Her Majesty’s Government assessed these issues in the recent paper Scotland Analysis: Assessment of a Sterling Currency Union. This is the analytical basis on which the Chancellor of the Exchequer has said that he could not recommend that the other parts of the UK share the pound with an independent Scottish state, because it would not be in the economic interests of either the continuing UK or of Scotland.

Lord Sherbourne of Didsbury (Con): Does my noble friend agree that the sure way for Scotland to keep the pound is to vote to stay in the UK, which I hope it will? If it were to vote to leave the UK and any future Westminster Government were ever to be minded to enter a currency union with Scotland—or, for that matter, with the eurozone—would that not require a referendum so that the people could decide?

Lord Newby: My Lords, before you got to that point, it would require the rest of the UK Government to wish to recommend such an outcome. It is worth quoting the conclusion of the official Treasury study, which says:

“On the basis of the scale of the challenges, and the Scottish Government’s proposals for addressing them, HM Treasury would advise the UK Government against entering into a currency union. There is no evidence that adequate proposals or policy changes to enable the formation of a durable currency union could be devised, agreed and implemented by both governments”.

As a result, I do not think we will get to that point.

Lord Wigley (PC): My Lords, does the Minister accept that, in the event of there being a yes vote for independence, it is in the interests of business not only in Scotland but in the rest of the United Kingdom that there is a parity and stability of currency? How would the Government provide that?

Lord Newby: It is always in the interests of all Governments to have a stable currency. The question for the Scottish Government is how they think they would provide that. If they opted to keep the pound outside a currency union, they would face very serious problems in managing their budget and the economy of Scotland.

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Lord Stephen (LD): My Lords, does my noble friend the Minister agree that the position of the UK Government on this issue is now crystal clear, as indeed are the positions of the Labour Party, the Conservative Party and the Liberal Democrats, and it is now for the Scottish Government and the SNP to do the explaining, as their policy position looks increasingly incredible, unclear and completely unconvincing?

Lord Newby: My Lords, I completely agree with my noble friend. It is highly irresponsible of the Scottish Government to have no plan B, when it has been made absolutely clear that the kind of currency union that they want is simply not on the cards. They have other interesting questions to answer in this respect. As the Governor of the Bank of England pointed out yesterday, Scotland, as a new EU applicant, would have to agree at some point to join the euro. I think at one point Mr Salmond was in favour of that; I am not so sure what his policy is on it now.

Lord Forsyth of Drumlean (Con): My Lords, does my noble friend not think it extraordinary that Alex Salmond has had 40 years to think about how to answer this question and is unable to do so? Furthermore, does my noble friend not think that this is the height of irresponsibility, given that we are not discussing some abstract economic concept here, we are talking about the amount that people will have to pay on their mortgages and the future of Scotland’s families? What advice would he give to the leader of the Scottish separatists at this point?

Lord Newby: My Lords, I have many burdens in your Lordships’ House but, fortunately, advising the leader of the Scottish National Party is not one of them. I will point out, however, that on all the available analysis, the likelihood is that were Scotland to adopt the pound, the interest rates that would be payable in Scotland would be significantly higher than they are here—possibly up to 1.65% higher. For an average Scottish mortgage holder, that works out as an extra £1,700 to pay.

Lord Martin of Springburn (CB): My Lords, many people in Scotland, including myself, appreciate the fact that UK Ministers have come forward and explained the difficulties of separation. The Chancellor of the Exchequer is one of them. It is a nonsense for the First Minister to say that whenever a UK Minister comes forward to talk about the difficulties, that is bullying and bluffing. I say to the noble Lord from Plaid Cymru that the worst thing that could happen is to say to the Scottish people, “Vote yes and the following morning we will do a deal with the Chancellor of the Exchequer because he is only bluffing”. That is absolute nonsense and it shows the type of irresponsibility that exists within the Scottish Government.

Lord Newby: My Lords, one thing I find slightly surprising, at a bit of a distance from this debate, is that any aspect of independence that is tricky seems to be met by the response from the Scottish First Minister that, “No, it’s not tricky. Don’t worry, it’ll be fine”—often with zero evidence to back it up. I hope that colleagues

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in my party and other parties in Scotland will carry on pointing out to the Scottish people the hollowness of many of his assertions.

Lord McAvoy (Lab): My Lords, the establishment of a single currency between a separate Scotland and the rest of the United Kingdom would require negotiations with a trusted partner. There would be great difficulty in trusting Mr Salmond, the First Minister, who only last year described the pound as a millstone around Scotland’s neck. Where is the trusted partner there?

Lord Newby: Quite.

The Duke of Montrose (Con): My Lords, at what point will Her Majesty’s Government assess the amount of trade in goods and services from the rest of the United Kingdom into Scotland? Will they also look at the trade between Scotland and the rest of the UK?

Lord Newby: Yes, my Lords. Proportionately, the amount of trade from Scotland to the rest of the UK is much greater than it is from the rest of the UK to Scotland. About 70% of Scotland’s trade is to the rest of the UK and only about 10% of the rest of the UK’s trade is to Scotland. There is therefore a big imbalance in the importance to the two parties of the trade between them.

Justice: Academic Research on Jury Decision-making

Question

3.30 pm

Asked by Lord Blair of Boughton

To ask Her Majesty’s Government whether they have any plans to reconsider the ban on academic research into the process of decision-making by juries in criminal trials under Section 8 of the Contempt of Court Act 1981.

Lord Blair of Boughton (CB): My Lords, I beg leave to ask the Question standing in my name on the Order Paper. At the same time, I should make clear to the House that this Question is not topical, as would be normal for a fourth Question on a Wednesday, and it is not connected to any verdict in any recent trial.

The Minister of State, Ministry of Justice (Lord Faulks) (Con): My Lords, it is the Government’s general position that juror deliberations should be confidential. The noble Lord will know that the Law Commission’s recent report, published in December last year, Contempt of Court (1): Juror Misconduct and Internet Publications, recommends a limited exception to the general prohibition to allow for academic research. The Government are considering that recommendation and will respond in due course.

Lord Blair of Boughton: I am grateful to the Minister for that considered reply. However, it is a fact that this provision in the Contempt of Court Act 1981 was not aimed at academic research but has had the effect of stifling it. We simply do not know how juries work.

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We have no objective or academic window into these rooms. Lord Devlin described juries as,

“the lamp that shows that freedom lives”.

If so, it is a lamp which is certainly being kept under a bushel. Is the Minister aware of any other area of public policy and expenditure in relation to which objective and academic-based research is illegal? If he is not, does he agree with me that, more than 30 years on from that Act, it must be possible in the internet age to design research that anonymises individual jurors and verdicts, and that it is now time to reconsider this legislation fully?

Lord Faulks: My Lords, at the present time, any researcher into this area has to obtain authorisation sponsorship from HM Courts & Tribunals Service and then apply to the data access panel, whereafter various safeguards, including anonymity and safeguards to ensure that the conviction or the innocence of a particular defendant is not called into question, will be made part of that condition. There is research. For example, Professor Cheryl Thomas has provided valuable research on this issue.

Lord Thomas of Gresford (LD): The Minister has referred to Professor Cheryl Thomas of UCL, who produced a report for the MoJ in 2010, Are Juries Fair? One of her findings through talking to 797 jurors was that only 31% of them understood the directions in law that the judge was giving to them at the end of the trial. She recommended that, in every case, written direction should be given by the judge to the jury. Has that been carried out?

Lord Faulks: Directions to the jury are a matter for the judge in the individual case. Judges are making ever more use of written directions, particularly in difficult cases. Very often, they will provide a direction having heard submissions from both prosecution and defence counsel so that they can arrive at an agreed direction. They will give the direction orally and then again in writing. In simple cases, that may not be necessary, but in other cases it is clearly desirable.

Lord Hope of Craighead (CB): My Lords, is the Minister aware that academic research of this kind has been permitted in New Zealand for at least 20 years and the product of that research is in the public domain? Its system of justice is very similar to ours. Does the Minister think that we might have something to learn from its experience?

Lord Faulks: In answer to the first Question, I indicated that the Ministry of Justice is considering the Law Commission’s recommendation and will of course bear in mind what is said there. The safeguards identified in that report are the same safeguards as exist at the moment. We remain open to persuasion. A Bill will in due course be coming to your Lordships’ House containing various provisions about juries. It is possible that there may be some amendment to that effect.

Lord Beecham (Lab): My Lords, in addition to the recommendations about research, the Law Commission has proposed the creation of some new offences that apply to juries in the light of current developments, particularly in technology, and that better guidance be

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given, not merely in the form referred to in the question of the noble Lord, Lord Thomas. Are the Government in a position to respond to them, and to the recent suggestion by the Lord Chief Justice that in serious fraud cases, for example, a different method might be instituted which would mean that juries would not try such cases?

Lord Faulks: As to the latter question, as the noble Lord will know, that is no new suggestion. It dates back as long ago as when the Roskill commission made suggestions to that effect. There are no current plans to remove trial by jury. As to other changes in the jury system and legislating to that effect, the noble Lord may be aware that there are provisions in Part 3 of the Criminal Justice and Courts Bill dealing with, among other things, questions of electronic communication devices and the restriction on them and the restriction on jurors using the internet to obtain information during the course of the trial, which can of course compromise a fair trial, which is in no one’s interest.

Lord Taverne (LD): My Lords, will the Minister bear in mind that the legal profession has traditionally been very conservative about certain changes? When, in the 1960s, I was a Home Office Minister and we introduced majority verdicts, the general view of the Bar was that the sky would fall and that that would be the end of justice as we knew it. More recently, it has been accepted that that is one of the most important changes that has taken place. Is it not highly desirable that we should know how juries proceed and work, based not on anecdotal evidence but on solid evidence of the kind that the noble Lord, Lord Blair, described? That is obviously in the interests of justice.

Lord Faulks: I have considerable sympathy with what my noble friend says. He will probably be familiar with Professor Cheryl Thomas’s work in which, despite certain doubts about the ability of some jurors to reach reasoned decisions, she remains a considerable enthusiast for the jury system. I accept that no system of trial should be beyond research or examination.

Pensions Bill

Third Reading

3.37 pm

Lord Newby (LD): My Lords, I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Pensions Bill, has consented to place her interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Clause 23: Amendments

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Lord McKenzie of Luton (Lab): My Lords, I begin by thanking the noble Lord, Lord Freud, for facilitating discussion on this amendment at Third Reading. It should normally have been dispatched earlier in our proceedings.

The amendment is very straightforward and calls for a report to Parliament on alternative arrangements for accessing cold weather payments and the warm home discount scheme currently available to recipients of pension credit. I seek an explanation of what is to happen to those who reach state pension age on or after 6 April 2016 because, for such individuals, the savings credit is abolished and some will see the substitution of a single-tier pension for an income which is currently topped up by the guaranteed credit.

Receipt of one or both of those elements is currently a passport to cold weather payments. There is of course a range of other benefits to which pension credit is currently the passport, but there are generally other routes to those benefits, typically on low-income grounds. This raises issues for those of working age of how low income is to be determined under universal credit, but these are matters for another day. This amendment deals in the first part only with cold weather payments.

At present, cold weather payments are payable when the temperature in an area is recorded or forecast to be at or below zero degrees for seven consecutive days—one hopes, behind us for this year. It depends on temperatures recorded at individual weather stations. The current level of payment for eligible recipients is £25 per week. Payments are part of the regulated Social Fund. Eligibility for working-age claimants is dependent on them being subject to income-related income support, JSA and ESA where there is a disability component or where such a claimant is responsible for a young child or getting child tax credit that includes a disability element. Obviously, the position of working-age claimants is not generally affected by the Bill, although the Minister could just take the opportunity to say how eligibility will work for those in receipt of universal credit.

As I have said, the Bill affects those reaching state pension age on or after 6 April 2016. It does so because the savings credit is removed from that date, and for some the single-tier pension will be sufficient to obviate the need to access the guarantee credit. Our briefing note suggests that by 2021 the pension credit caseload will be some 80,000 fewer than would have been the position under the current system, with 20,000 of these previously entitled to guarantee credit and 60,000 entitled only to the savings credit. Over time, these numbers will increase.

Of course that does not necessarily mean that all these would be missing out on cold weather payments. It depends on where they live and the incidence of cold weather. Our briefing note suggests that initially the Government’s saving would be around £2 million per year if those notionally missing out in this way were not to be somehow brought back into the system, but this saving would increase in nominal terms over time as more and more individuals retired into the new system. In the scheme of things these are modest amounts, but nevertheless they are literally a lifeline to some.

The impact assessment of the Bill says:

“Under the single tier, eligibility for Pension Credit is halved compared to the current system in the first few years following implementation, and ultimately falls to around five per cent

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by 2060 … Ending Savings Credit for single-tier pensioners is the main driver of the reduction in the number of people qualifying for Pension Credit, although there is also a reduction in the proportion of pensioners eligible for Guarantee Credit. The reduction in the numbers within scope of the Guarantee Credit is the result of most single-tier pensioners under the single tier having a state pension above the level of the Standard Minimum Guarantee”.

I invite the Government to say whether, and if so how, they propose to retain access to cold weather payments for those who notionally miss out in this manner.

In similar vein, the amendment calls on the Government to report on future access to the warm home discount scheme. This is a rebate scheme, worth £135 per annum, given by suppliers to vulnerable and low-income households as a deduction from their electricity bills. It is available to two groups: the core group and a broader group. The qualifications for the core group are statutory obligations and suppliers must provide the rebate to all who qualify. Suppliers have more flexibility about who qualifies for assistance under the broader group. For the core group, eligibility is dependent on receipt of the guarantee credit.

It is accepted that the current regulations for this programme cease in April 2015, although the Government have rightly signalled their intention to extend the scheme. I acknowledge receipt of a letter on Monday from the Minister’s colleague, the noble Lord, Lord Gardiner of Kimble, following some amendment regulations that were discussed in the Moses Room last week. This signals an intent to consult in the spring on an extended scheme, taking account of the changes to the welfare system.

3.45 pm

Clearly, reliance in future on the guarantee credit as the passport to the core group will exclude an increasing number of people who would currently qualify. This would include those whose income under STP will be above the level of the guarantee credit, but not necessarily materially so. It is understood that for the broader group the energy suppliers set eligibility criteria which are agreed with Ofgem. These criteria include those in receipt of pension credit, including the savings credit. Can the Minister tell us what discussions have taken place with the energy suppliers about the impact of the Pensions Bill on their approach? As spring is almost upon us, we might at least be informed of alternative eligibility criteria which are being contemplated for entitlement to the warm home discount scheme.

We know that rising energy costs are a key component of the cost of living crisis that is engulfing so many households and it is invariably the poor who are hit the hardest. The proximity of spring should not diminish our concern about the ongoing issues of fuel poverty which still affect some 2.4 million households in England. That is why the cold weather payments and the warm home discount scheme are vital support arrangements. Before this Bill goes on its way, we are entitled to seek reassurance that it will not diminish such support in the future. I beg to move.

Lord German (LD): I shall say a few words about the two issues raised by this amendment. They are important issues, albeit for a small number of beneficiaries, although that number will increase over time, as the

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noble Lord, Lord McKenzie, has just said. It strikes me that because of the loss of one part of pension credit, the part that gives this passported benefit for cold weather payments, the Government presumably have to have something in place to ensure that people are in receipt of that payment. Will my noble friend reassure the House that it is not the intention that eligibility for cold weather payments will be reduced so that only a few will be able to receive them for the very important purpose for which they are drawn? Can he tell us about the fuel poverty strategy which I understand the Government are consulting on and whether these issues are rightfully the sorts of issues which could be debated and discussed during the consultation? If that is the case, there is clearly a route forward, but I seek reassurance from my noble friend that both these schemes are intended to continue and that their purpose and scope will not be diminished.

Baroness Sherlock (Lab): My Lords, I am pleased to support Amendment 1 which is tabled in the name of my noble friend Lord McKenzie of Luton. My noble friend has been like a terrier chasing the Minister on the subject of passported benefits and payments. The Minister may have thought he had shaken him off as he left the Moses Room at the end of the Committee stage, but I am sure he knew better. Indeed, it is to the Minister’s credit that he was content to return to this subject at Third Reading, knowing that he would face the onslaught of yet more gentle but expert and determined questioning from my noble friend Lord McKenzie.

I express my appreciation to the Minister for allowing his officials to brief us and to his officials for giving us for the first time a detailed list of all the benefits that are being passported from pension credit. However, that left some clear question marks about the future strategy for passported benefits. If the Minister is in a position to tell us where the Government’s forward plans are taking them, not just on these two, but on any of the other benefits that are not clearly passported from pension credit, I think the House would appreciate that.

My noble friend has set out the case characteristically clearly, and I need add little to it, but the House and the country will want to hear the Minister answer the questions asked by the noble Lord, Lord German. We want to be satisfied that people will not lose out and that there is an alternative plan for arrangements to replace the passporting of cold weather payments and access to the warm home discount scheme.

The point made by my noble friend Lord McKenzie about the role of rising energy prices in the cost of living crisis is visible to all noble Lords at the moment. This is a particular issue in relation to these two benefits in parts of the country that obviously suffer from lower temperatures. I should perhaps declare an interest as a resident of Durham where, despite the fact that we have a world heritage site and much to commend us, with lower rainfall on average, even I have to confess that our temperatures are on average perhaps a whisker below those on the tropical Riviera of Cornwall. On the other hand, this will not affect me until I reach state pension age and that is receding ahead of me at some rate, so perhaps no declaration of interest is needed.

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The Government have indicated that they propose to introduce the new single-tier pension above the current level of the guarantee credit in pension credit. But it is clear that that could come in at just a shade above. If Ministers want to carry on asserting that reducing means-testing is an important part of these pension reforms, then they have to have a strategy on passporting—otherwise they will end up with the kind of cliff-edges which anyone who worries about means-testing will know can really be a trap for the unwary.

Maybe the Government have had the opportunity since Report stage to think through how this will be taken forward and can give the House the kind of assurances that have been sought by both noble Lords who have spoken. If they have not, which I will understand, I very much hope that the Minister can accept the amendment. Parliament has a right to know what will happen to these payments, and by the time we get regulations it will be too late. I look forward to the Minister’s reply.

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con): My Lords, I am glad to have the opportunity to discuss the amendment, which the noble Lord, Lord McKenzie, was understandably unable to move on Report. I hope that I will be able to offer him some reassurance about the current arrangements and the further work that we are planning.

As noble Lords will be aware, pension credit acts as a passport to a number of other benefits, most of which are linked to an individual being in receipt of the guarantee credit element. That element will continue to be available for the poorest, whether they reach state pension age before or after the introduction of the single-tier pension, and will continue to act as a passport to cold weather payments.

I also remind noble Lords that the single-tier pension itself promotes savings, removing the need for savings credit. The full single tier will be set above the level of the basic means test, removing the current problem whereby the state pension has not kept pace with the means test and therefore the need for a complex reward system. Together with other reforms to the pension system over time, the poorest pensioners are also the most likely to have higher incomes than they would have done if the current system had been rolled forward.

While I understand concerns about knock-on effects for vulnerable pensioners, there is actually relatively little in the pensioner welfare system that depends entirely on receipt of pension credit. For example, housing benefit and council tax reductions can already be claimed on low-income grounds, regardless of receipt of pension credit, and this will continue. Other benefits such as free television licences and travel concessions can be claimed on the grounds of age. The only significant benefits that are truly passported from pension credit are cold weather payments and the warm home discount scheme.

Cold weather payments, as noble Lords are of course aware, provide help with the additional costs of heating during periods of severe weather. The scheme runs from 1 November to 31 March each winter. A payment of £25 is made to someone when the average temperature has been recorded as, or is forecast to be, zero degrees or below over seven consecutive days at

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the weather station linked to their postcode. In some winters there are relatively few triggers, in some years there are many triggers; in fact, there have been very few indeed this year.

Cold weather payments are made to people who receive certain income-related benefits and satisfy the eligibility conditions set out in the Social Fund Cold Weather Payments (General) Regulations 1988. All those who receive pension credit are eligible, whether they receive the guarantee credit or the savings credit element, or both.

The noble Lord, Lord McKenzie, asked about universal credit. Those eligible for cold weather payments are those who are not employed or self-employed and they or their partner receive either a limited capability for work element or a limited capability for work element with a work-related activity element, or who receive a disabled child element within their assessment, or who have a child under the age of five years in the family. Universal credit recipients who are employed or self-employed will be eligible for cold weather payments only if they have a disabled child in the family.

Our predicted expenditure on cold weather payments is based on the average number of payments over the past 10 years. On that basis, while we cannot predict the actual impacts, we might expect around £2 million to have been spent in 2020 on cold weather payments for people who would have received pension credit under the current system, but who would not under the single -tier system. That is based on our calculation of 20,000 single-tier pensioners being raised above the standard minimum guarantee, and 60,000 who would have been entitled to a savings credit under the pre-single tier system.

That expenditure is of course by no means certain, which is why we have not assumed any savings from cold weather payments as a result of the Bill. However, we are not complacent about that issue and that group of people. That is why we are already considering ways in which it might be possible to identify, for cold weather payment purposes, single-tier pensioners whose income will be above but close to the level of the standard minimum guarantee.

In response to the question from my noble friend Lord German, I can reassure the House that it is not our intention to reduce eligibility.

The noble Lord, Lord McKenzie, also asked about the warm home discount scheme. That is a rebate on electricity bills for pensioners aged 75 or over who receive the guarantee credit in pension credit, and for pensioners under 75 who receive the guarantee credit without a savings credit. From 2014-15 it will be extended to all pensioners receiving the guarantee credit. Rebates may also be available for a broader group including those in receipt of the savings credit as well as certain other groups below pension age, but those broader group rebates are subject to a cash limit and to the policies of individual suppliers, as agreed with Ofgem. We have committed to extending the warm home discount scheme into 2015-16, but we have not made plans for 2016-17 and beyond.

On the question asked by the noble Lord about discussions with electricity suppliers, that will be part of the consultation in the spring on extending support

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for the core group. Access to cold weather payments and the future of the warm home discount scheme are part of a broader set of issues around targeting spending to combat fuel poverty among older people. As I said, we will consult later in the spring on a new fuel poverty strategy, which will include the question of reducing fuel costs for those pensioners in the second income quintile, which is where savings credit recipients are clustered.

For single-tier cohorts, it will not be possible to identify exactly which household might have been entitled to a savings credit without retaining the savings credit assessment itself. We are assessing the cost and capacity issues of doing that, as well as the trade-off for intrusion into pensioner households. However, the department’s initial assessment is that there are likely to be better and more cost-effective ways of reducing fuel costs for that group, especially by using recently developed datasets that allow us to identify poorly insulated homes and the characteristics of the households living there, with a view to making infrastructural as well as cash interventions.

I can reassure noble Lords that cold weather payments and the warm home discount scheme are an important part of our fuel poverty strategy, and major components of our work to improve the well-being of older people. However, that is a separate issue from promoting savings through pension reform, and we are not wedded to particular ways of meshing the two together.

On the question put by the noble Baroness, Lady Sherlock, on our passporting strategy, we will continue to use a mixture of age, low-income and passporting from means-tested benefits to target different benefits and services to different groups. I understand the concerns raised by the noble Lord, Lord McKenzie, and I hope that I have been able to provide him with reassurances.

4 pm

Baroness Hollis of Heigham (Lab): I am slightly puzzled, but I think that the Minister is saying that if you could devise a way in which to find out that those who are on the new state single pension were in the very bottom decile, that or a similar group would be an appropriate one to be eligible for a cold weather payment, because it would be the group that under the previous regime would have got pension credit. I would have thought that anyone getting the new single state pension without any other supplementary income coming their way, whether through savings or an occupational pension, would, in the past, have automatically qualified for pension credit—in which case, he already has his population.

Lord Freud: I am always grateful to the noble Baroness when she comes up with solutions for us, and I can see her yearning to be on this side—perhaps not in this particular coalition but in this particular ministry—sorting out these issues. She has gone to the issue of what the best way might be in which to help this group, which, clearly, we will look at precisely when we consider that matter. I shall pass on her thoughts to the consultation in the hope that it will speed it up.

As I say, we will consult on our strategy, and that will cover the two schemes referred to in the amendment of the noble Lord, Lord McKenzie, as well as broader

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approaches to combating and preventing fuel poverty, which the noble Baroness, Lady Hollis, indicated. On that basis, I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton: My Lords, I certainly intend to withdraw the amendment. I am grateful to my noble friend Lady Sherlock for her support and for raising the wider issue of the impact of the new pension arrangements on passporting. I am grateful, too, to the noble Lord, Lord German, for probing the same points in seeking reassurance on the continuation of the cold weather payment scheme and the warm homes discount scheme. I am grateful, as ever, to my noble friend Lady Hollis for providing a solution to the Minister.

I took comfort from what the Minister said, but I would like to read the record on precisely where he has ended up in looking at some sort of definition of low income—whether it is somebody just on the basic single -tier pension—and at a broader review of fuel poverty strategy. I am confident that there will be an opportunity going forward to address and, I hope, influence those issues. Accordingly, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Clause 44: Disclosure of information about transaction costs to members etc

Lord Freud: My Lords, in moving Amendment 2, I shall speak also to government Amendments 3, 4 and 5.

As I have said in previous debates, the Government are committed to ensuring that costs and charges in defined contribution workplace pension schemes are made as transparent as possible. This is one part of the programme to ensure that consumers, especially those who are automatically enrolled, receive value for money from their pension savings. The full programme of measures will be published soon.

These amendments build on those made on Report to require regulations to be made providing for the disclosure of transaction costs. Following the points raised by my noble friend Lord Lawson during that discussion, I agreed to consider how to make explicit the Government’s commitment to publishing the information on transaction costs. I am pleased to say that these amendments would require the information about costs and charges to be made publicly available. We will have further work to do to establish the best way to enable this publication, not least to ensure that we do so in a way that allows for meaningful and helpful comparisons. However, I can confirm that we will work to achieve publication in a way that enables scrutiny and comparison by any interested member of the public.

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As noble Lords have said in previous debates, it is clear that for disclosure of information on costs and charges to be meaningful the full range of costs and charges that may be borne by members must be made transparent, and that this must be done in a way that enables scrutiny of the total amount that may be deducted from an individual’s pension pot. It is particularly vital that those with a fiduciary duty—namely, the trustees and independent governance committees who will have a role in representing members’ interests—can see both itemised and total costs and charges borne by members.

As I assured the House in our previous discussion on this matter, the “some or all” formulation in the drafting of this provision has been used to future-proof the legislation and provide flexibility to amend it as new types of cost and charge become apparent over time. This flexibility, and our existing powers to require disclosure of information, will enable us to provide for full transparency of all pension scheme costs and charges.

These amendments also make a technical change to this provision since the issue was last considered by noble Lords. The amendments now place a corresponding duty on the Financial Conduct Authority to that which we have placed on the Secretary of State. In this way, it provides a better fit with the shared approach to regulation of pensions that exists between the Pensions Regulator and the Financial Conduct Authority. It provides for regulations and rules to be made that apply in a consistent way across both trust and contract-based provision. The duty on the Financial Conduct Authority mirrors the duty on the Secretary of State requiring both disclosure and publication of information about costs.

These duties apply only to defined contribution schemes. As I touched on in our latest discussion on this subject, this is narrower than the provision of our existing power. This focus reflects the Government’s concerns about the failures in the defined contribution workplace pensions market that have been identified by the Office of Fair Trading. The nature of defined benefit schemes means that members are effectively shielded from the impact of costs and charges. As for employers and trustees, both have a keen interest and ability to achieve value for money in the administration and governance of their schemes.

However, as I said during our debate on Report, the Government do have the power to require transparency of costs and charges in defined benefit as well as defined contribution schemes, and I indicated that we would continue to consider whether this is necessary. Having begun to consider the question, we think that it merits further examination and consultation with a range of interested parties. It may be that such a measure would enable trustees of defined benefit schemes to better discharge their fiduciary duties.

We will formally consult before making regulations for disclosure of information about costs and charges in defined contribution schemes. When we carry out that consultation, we will also examine whether some form of disclosure requirements should be extended to defined benefit schemes.

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As I have said previously, this Government are committed to ensuring that consumers receive value for money from their pension savings and we will publish our full programme of measures soon. I am pleased that these amendments build on the commitments made on Report and will ensure there is full transparency and publication of costs and charges. I beg to move Amendment 2.

Lord Lawson of Blaby (Con): My Lords, I need not detain the House long because, I am glad to say, my noble friend the Minister has met pretty well in full the points that we made at earlier stages of the Bill. I am extremely grateful to him for that. There is a real mischief in the huge range of costs which bear no relation whatever to investment performance incurred in different pension schemes. It has always been known, but it was documented fully by the Pensions Commission some time back. That we have been able to improve the Bill in this way is a tribute to this House, but particularly to my noble friend the Minister, who has listened carefully, accepted the need to deal with that mischief, and put forward a practical and sensible way of doing it.

There is only one loose end, and although the Minister dealt with it I would like to spend a minute or two on it. The amendment says “some or all” costs, but that is purely a legal technicality and in fact it means all costs, itemised. That is the firm intention. They will be published generally, not just given to the members of the schemes, so that all can see. However, as the Minister said, the provision deals exclusively with defined contribution schemes and not with defined benefit schemes. I understand his reason for that—because it is only in the defined contribution schemes that pensioners are, in effect, from time to time ripped off by investment managers who charge far too much in the way of costs. There are five times as many people in defined benefit schemes as in defined contribution schemes, however, and the money in defined benefit schemes is well over £1 trillion.

Of course, if the same kind of ripping off goes on—obviously it does; there is no difference in the investment manager’s behaviour from one to the other—it is not a victimless crime. The pensioners may not be the victims, but the shareholders in the companies certainly are. The Government cannot desire to see shareholders ripped off when it can so easily be prevented by extending to defined benefit schemes the disclosure and transparency requirements that the Minister will put in place for defined contribution schemes. He says that he will consult on that. I am delighted to hear it, but I very much hope that the result of the consultation will be to require the same disclosure and transparency for defined benefit schemes as for defined contribution schemes.

Baroness Drake (Lab): My Lords, I declare my interests in the area: I am a trustee of the Santander and Telefónica pension schemes, and a member of the NAPF Pension Quality Mark board. As no doubt other noble Lords here today are, I am concerned to understand the extent to which Amendments 2 to 5 provide for full transparency on transaction costs and deliver on the assurances that the noble Lord, Lord Freud, gave on Report. I would therefore like to ask the Minister several questions.

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The Minister confirmed that the Secretary of State would be divested of the power to set the requirements for securing transparency of transaction costs in relation to money purchase personal pension schemes, by giving that responsibility to the FCA. As he said, the amendment does not extend the existing powers of the FCA but imposes a duty on it to make rules on the disclosure of information, following consultation with the Secretary of State and the Treasury, to ensure consistency between FCA rules and the regulations made by the Secretary of State. If the FCA response to that consultation is not considered adequate in achieving such consistency, which Minister will be responsible for ensuring that the FCA fulfils its duty in that regard, and with which powers?

There will no doubt be much consultation and lobbying prior to regulations and rules being set, and no doubt various interests will be brought to bear in those considerations. However, does the Minister agree that the draft statement of recommended practice put forward by the Investment Management Association to the FCA does not provide a sufficient set of requirements for full reporting on transaction costs by investment managers?

4.15 pm

On a further point, it would be helpful if the Minister could advise on whether the Prudential Regulation Authority has the power to overrule the proposed FCA rules on transparency of transaction costs if it considers that they could have a negative effect on the sustainability of a provider such as an insurance company. If so, how does he anticipate such a tension would be resolved? Such a tension was identified in the Government’s consultation document on charges. It would be interesting to hear the Minister’s comments in respect of transparency on charges.

It was disappointing to hear that the Government were not taking the opportunity to extend this power to cover transparency on transaction costs in respect of DC schemes and were instead restricting themselves to failures in the DC workplace provision because of what was identified by the OFT. The Minister said that DB members were shielded from these costs but that is not strictly true; they are shielded to a point but the costs go to the funding level of their funds and to the requirement on the employers to make contributions. If I were an employer sponsoring a DB scheme I would consider that undue or unnecessary costs—which I may not even be aware I am bearing—are putting stress on me, as an employer, in supporting that covenant. If I cannot finally support the covenant then the member will of course bear it in the event of default risk. Even in the public services we have the Local Government Pension Scheme, where the ultimate covenant comes from the taxpayer. I am sure that the taxpayer would want to have, or know that those who are discharging responsibilities for that scheme have, full access to transparency on costs.

It is worth reflecting that, according to the PPF index, assets in the private sector defined benefit schemes are in the order of £1,148.6 billion. The ONS figures published in April showed that there was £1,444 billion in assets in DB schemes and approximately, in terms of the public services, £145 billion in the funded local

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government scheme. Given the scale of these figures it is disappointing that these powers currently do not cover DB schemes. I hope the consultation exercise that was referred to will result in the Government changing their mind on these issues. These are substantial sums and deserve their share of the sunlight as much as DC schemes do. However, this prompts a question: how will these regulations apply to hybrid schemes? Will they apply just to the relevant part of such schemes?

I refer, finally, to the issue of European requirements, because it has been raised in the debate on the transparency of transaction costs. I know from speaking to one or two colleagues that there is a little uncertainty about the extent to which European requirements may be brought to bear on any action taken by the Government on the transparency requirements on transaction costs. Can the Minister confirm that the UK Government are free to set requirements on the transparency of transaction costs for occupational and money purchase personal pensions; that the Government will do so; and that they are not constrained from doing so by the EU rules on retail investment products?

Baroness Sherlock (Lab): My Lords, I remind the House of my registered interest as a non-executive director of the Financial Ombudsman Service.

I thank the Minister for explaining his amendments and all noble Lords who have contributed to this debate for their insights. On Report the Government were understandably worried by the alliance building up between the noble Lord, Lord Lawson, and my noble friend Lord Browne, who regrets that he is unable to be here as a result of the date of Third Reading being moved. In order to head off a possible defeat, the Minister made a speech offering strong reassurances. It is against those reassurances that the House should judge the amendments that the Government have brought forward today. Let us remind ourselves what those reassurances were.

The Government were keen to assure the House that whatever their amendment said, their intention was that all costs would be covered by their proposals. On 26 February, the noble Lord, Lord Freud, told the House:

“We are looking for transparency on all charges. We are looking to ensure that that is published”.

He reinforced that point today. I think that I heard him say that there will be full transparency on all costs and charges.

My noble friend Lord Browne then intervened on Report to seek clarification on how transparency would be handled in relation to transaction costs, since it seemed that the Government were proposing to exempt areas where there were existing FCA rules in relation to transparency. The existing FCA rules on transparency exempt transaction costs, he noted, so how would the transaction costs in such cases be dealt with? The Minister replied:

“I am putting it on the record that we will aim to capture all costs, including all transaction costs”.

A little later, he went on to say:

“It is not to do with the EU”.—[Official Report, 26/2/14; cols. 967-68.]

What could be clearer? However, the current government amendments give the Secretary of State the responsibility

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for regulating disclosure of charges only for occupational schemes, leaving it to the FCA to do so for money purchase schemes.

Therefore, the first and most obvious question to the Minister, touched on by my noble friend Lady Drake, is: why is the Secretary of State divesting himself of the power to set the requirements for securing transparency of transaction costs in relation to money purchase personal pension schemes by giving the responsibility for the requirements on disclosure of information to the FCA?

Secondly, Amendment 3 has the effect of explicitly excluding defined benefit schemes from the regulations on the publication of costs and charges, and the Minister gave some indication of the Government’s thinking on that. However, I was very pleased that the noble Lord, Lord Lawson, raised the questions that he did, supported by my noble friend Lady Drake, because this is indeed not a victimless area. Not only are there costs to the companies that are the employers but there are potential risks to the sustainability of the pension schemes if employers find themselves carrying unreasonable and unnecessary levels of cost. It must be remembered that there are employers who may be well equipped to understand and challenge the nature of the charging structure but there are many others who are not, and they deserve protection as well. Perhaps the Government could explain some more about that. In particular, can the Minister tell the House what the timescale will be for this consultation and, if the Government decide to bring forward regulations, when the House may expect to hear more about that?

My noble friend Lady Drake then raised a series of important questions regarding what this dual regulatory regime will mean in practice, given that the FCA currently does not require transaction costs to be published for DC pensions. Amendment 4 makes it clear that the FCA must consult the Treasury and the Secretary of State before making rules about the disclosure of costs. The supplementary memorandum from the DWP to the Delegated Powers and Regulatory Reform Committee on the Bill reminds us that Section 138(1) of the Financial Services and Markets Act 2000, known as FiSMA, requires the FCA also to consult the Prudential Regulation Authority before making rules and then to publish those rules in draft, to seek representations and not to make rules without having regard to those representations.

Therefore, the Minister is left with the crucial question from my noble friend Lady Drake as to the extent to which the PRA’s concern for the sustainability of financial services companies may constrain the Government’s apparent desire for the FCA to make rules to ensure disclosure of all transaction costs, as again promised by the Minister today. What happens if the Secretary of State believes that the decisions that the FCA takes in this respect are not properly aligned with his or her own decisions on transparency in relation to occupational schemes? As my noble friend asked: what happens then?

Finally, there is the interesting question of the role of the EU. The Minister has said clearly that this is not a matter for the EU but my noble friend has sought clarification. I certainly understand that the publication of transaction costs with respect to retail

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products is covered by EU rules but that the publication of transaction costs with respect to workplace pensions is not, and I look forward to the Minister confirming that. However, one hears that EU rules may or may not lead to increased transparency of all transaction costs some time after 2016. I should like to test the Minister. Does he think that it would be acceptable if the FCA decided not to do anything about transaction costs but simply to await the decision of the EU? One assumes not, as not only would that not seem to chime with the Government’s general rhetoric about ceding powers to Europe but it is hard to see that the Minister’s words to the House on Report would imply that level of uncertainty, since he made it clear that it was nothing to do with the EU.

In the end, it is up to this House to decide whether it believes that the government amendments brought forward today have the ability to honour the cheque that they wrote to the noble Lord, Lord Lawson, on Report. The Opposition are not, as yet, persuaded. However, it is for the Minister to tell the House how precisely he can guarantee to deliver on the assurance that the Government will capture all costs and charges and, crucially, by what date that will happen.

Finally, and even more importantly, there remains the unresolved issue of a cap on charges. In his extremely impressive speech when we debated these matters on Report, the noble Lord, Lord Turner, put the matter succinctly when he said:

“I do not think that transparency is an alternative to a charge cap”.—[Official Report, 26/2/14; col. 966.]

Nor do I. If the Government really have the interests of consumers at heart, they will take much stronger action right now.

Lord Freud: My Lords, let me start by dealing with the question raised by the noble Baronesses, Lady Drake and Lady Sherlock, on the way in which the regulation works between two groups. The Pensions Regulator and the FCA work closely together to ensure that the regulatory frameworks for trust-based pensions under the regulator and contract-based pensions under the FCA are aligned and provide for a robust system of governance and fair treatment for members. The Government are not looking to change the current regulatory structure, as was confirmed in the DWP’s Triennial Review of Pensions Bodies, which was published in December 2013. Structuring the duties in this way is necessary to reflect the dual regulation structure and the fact that the FCA is an independent body in statute. Without this approach, there would be no duty on the FCA to make these rules.

In addition to their existing duties to consult, the amendments mean that both the Secretary of State and the FCA will be under statutory duties to consult one another in making regulations and rules, enabling us as far as possible to ensure consistency of approach with the rules following the regulations. There is absolute commitment from the Government and from the FCA to aim for consistency. The FCA would not propose to deviate from government regulations. The aim of a separate duty is not to provide room for inconsistency—far from it; it is about giving the FCA the flexibility that it needs to use its powers and expertise to respond as an independent regulator.

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The noble Baroness, Lady Drake, raised a question on hybrid schemes. The regulations will be able to extend the disclosure rules to the DC element of hybrid schemes. The duty is in addition to the existing power in Section 113 of the Pension Schemes Act 1993.

The noble Baroness also raised a question on the relative position of the PRA—the prudential regulator—and the FCA. The FCA, as per its rules, will be consulting on the development of disclosure and requirements and will work closely with both Her Majesty’s Treasury and the PRA. Treasury Ministers are committed to strong disclosure of member-borne costs and believe that the FCA is best placed to make those rules.

On the question of the SORP code, raised by the noble Baroness, Lady Drake, the Government recognise industry initiatives to improve transparency of pension costs and charges, but as the OFT noted, such measures are voluntary and can be piecemeal. That is why the Government believe that transparency measures should be compulsory and standardised.

Baroness Drake: The Minister’s response on the SORP is helpful to a point. The Minister is making a distinction between a compulsory and a voluntary regime. My more detailed point was about the proposals as to what there should be transparency on, and the costs involved. I was asking whether the Minister could give an assurance that he accepts that the range of costs proposed in SORP would not be sufficient to meet a full transparency criterion.

4.30 pm

Lord Freud: My Lords, I have not carried out a detailed analysis of the SORP code. I can assure the noble Baroness that, under the regulations and rules that we will now develop, we will capture all costs. To the extent that those are not in the SORP code, that would be a wider requirement.

On what will happen if the FCA rules are not found to be adequate, the Secretary of State retains the power in Section 113 of the Pension Schemes Act 1993 to make regulations about both occupational and personal pension schemes disclosure.

On the timescale issue raised by the noble Baroness, Lady Sherlock, assuming that this Bill receives Royal Assent, I believe that regulations will be brought forward later this year. The Government will consult on these regulations before they are laid. The Government’s proposals on charges, transparency and governance will be published soon. I have not changed the position on that after our rather enjoyable debate on the matter on Report.

Baroness Sherlock: Is the Minister saying that the Government propose to consult on whether DB schemes should be included and then publish a single set of regulations, or will they go ahead on the basis he has outlined and subsequently consult on DB?

Lord Freud: The DB element will be part of the consultation. Depending on that consultation, we will have to decide how to treat that particular aspect.

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On the questions around the EU, clearly right now we are free to write these regulations and rules and there are no EU rules to hinder that. However, that might change in the future. One of the attractions of pulling the FCA into this process is that it has technical expertise in this area and is the body negotiating in Europe on relevant EU legislation. It is therefore best placed to work with DWP on determining how costs and charges can be defined, captured, measured and disclosed. By using its own rule-making power, the FCA may be able to respond quicker than the parliamentary process to changes in the market or from the EU.

I think I have dealt with all the issues.

Baroness Drake: I hope the Minister does not think I am being pushy, but this is probably the last chance we will have to question him on this before we complete this stage of the Bill. On the issue of EU regulations, the Minister has confirmed that at the moment there are no EU rules constraining the Government from pushing for full transparency on transaction costs. Hopefully, any product from the EU in favour of transparency would work to the Government’s remit. However, one of the underlying concerns is that the earliest there could be any impact from any change that comes out of the European Parliament and from the EU would be 2016, maybe later. People are looking for an assurance—I certainly was asking for one—that the FCA would fulfil its duty without being constrained to await the outcome of any EU discussions and would push ahead to an early timetable consistent with the spirit of the point the Minister made on Report.

Lord Freud: I am pleased to be able to confirm that it is not tied to the EU in any way. We will be pushing ahead with this at the speed I indicated, which is—

Noble Lords: Soon.

Lord Freud: I thank noble Lords for helping me with my vocabulary.

I should finish by thanking my noble friend Lord Lawson, whose help I found immensely useful in thinking through these issues and working out responses in what is actually quite a complicated environment, as I suspect noble Lords fully appreciate.

Amendment 2 agreed.

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(9) Before making regulations by virtue of subsection (5) or (6), the Secretary of State must consult—

(a) the Financial Conduct Authority, and

(b) the Treasury;

(in addition to any other persons consulted in accordance with section 185(1)).

(10) In this section—

“administration charge” has the meaning given by paragraph 1(5) of Schedule 18 to the Pensions Act 2014;

“relevant scheme” means a money purchase scheme that is an occupational pension scheme.””

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(b) to whom a provision of Part 1 of that Act applies as if the person were a worker because of a provision of Chapter 8 of that Part;

but for the purposes of paragraph (b), ignore section 92 of that Act.””

Amendments 3 to 5 agreed.

Schedule 20: Pension Protection Fund: increased compensation cap for long service

Lord Freud: My Lords, on Report I regrettably said that we had completed the legislation required to cover the change to the Pension Protection Fund compensation cap. Clearly, that was tempting fate because we have noticed that the wording in a particular place is not as clear as it could be, and this amendment addresses that. We made an amendment on Report to the PPF compensation cap measures setting out how the length of pensionable service should be determined for an individual who was a member of connected schemes; that is, for someone who was a member of a multi-employer scheme and who had worked for two or more of the companies attached to that scheme. That amendment allowed for the discrete periods of pensionable service to be added together. Crucially, if the person had worked for two employers at the same time—that is, the periods of employment overlapped—the amendment sought to prevent the overlapping period from being counted twice. Unfortunately, the wording of the amendment could be read as meaning that the period of overlap should not be counted at all. This would clearly not be right. This amendment therefore clarifies the wording to ensure it cannot be read in that manner. As a result, overlapping periods of employment will be counted correctly—in other words, once.

This is the final amendment to which I will speak and so before I sit down, I would like to take a moment to thank all those who have worked so hard on this Bill. Many colleagues across the House have contributed their time and substantial expertise to understanding and improving these landmark reforms. In particular, I am delighted that the Bill now contains measures that will help improve the retirement income of the spouses of service personnel. Preparing a Bill and supporting its passage through both Houses is a significant undertaking. This Bill contains a wide range of measures relating to state pensions, private pensions and bereavement benefits, and so has involved a large number of different policy teams. I estimate that close to 200 policy officials, analysts and lawyers have been involved. Many of them have been directly involved in attending briefing meetings or providing materials that have contributed to the excellent level of debate we have seen.

It has been especially gratifying to hear so many noble Lords mention the assistance of DWP officials in their speeches both in this Chamber and during Committee stage. It is a fitting tribute that their work is recognised in this way. I am grateful to them and to

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the excellent draftsmen in the Office of the Parliamentary Counsel who have worked so hard on this Bill. The Bill team deserves a special mention and so I would like to take this opportunity to thank Rez Mossavat, Jo Foakes, Megan Rooney, Helen Kelly and the Bill manager, Michael Cordy, for all their work and support. With that, I beg to move.

Baroness Sherlock: My Lords, I congratulate the Minister on having spotted the error before Royal Assent and the Opposition have no problem with the amendment.

I, too, would like to take this opportunity to say a few words of thanks to my colleagues for all their wisdom and support. I thank especially my noble friend Lord Browne of Ladyton for doing so much work on this Bill and for being such a constant source of support. I would also very much like to thank the Minister for the way he has handled the Bill—for his openness and his willingness to engage with appeals from all parties and to share the information and knowledge of his department. I thank the noble Lord, Lord Bates, for adopting a similar style and for his engagement. I thank the officials, too, for their helpfulness and their willingness to answer so many questions—in my case, often very stupid ones, which they have answered with graciousness and lots of information. We have all very much appreciated that.

The Bill has benefited from scrutiny in this House and leaves this place a better Bill than when it arrived, as is so often the case. It is the first Bill I have taken all the way through from the Front Bench and I have learnt a great deal from noble Lords on all sides. I have been grateful for the kindness and indulgence of the House as I have learnt on the job—a sort of apprenticeship, as one might have it. As the Minister said, the Bill has now benefited not only from the one victory that the House scored on mini-jobs—we hope very much that the other end will see the wisdom of that but, if not, we stand by our beds awaiting its return should that prove necessary—but from concessions around things such as service wives, auto-enrolment and categories of employer, and in other ways as we have gone through it. I pass my thanks to all noble Lords who have contributed at any point in the process. We all share a common objective of getting people in Britain saving for their retirement and I hope this Bill will help contribute to that objective.

Lord German: My Lords, I add thanks from these Benches to my noble friend and to the staff who have been behind all the detailed benefits we have received from having such a deep level of understanding and knowledge of the Bill throughout. I want to mention two particular things. One is the recognition during the Bill’s passage through this House that my noble friend will look very carefully at the needs of children who are in distress. I look forward to seeing that coming forward again in future months as we come to a response to whatever my noble friend is able to deduce from that investigation.

The second piece of thanks that I have to give to my noble friend is for his ability to bring Her Majesty’s Treasury to a meeting with officials of the DWP. That way, there was a coalition not only of Members of

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your Lordships’ House but of my noble friend’s staff. That ensured that we got a recognition that where pensions in the public sector would be affected by some of the matters in the Bill, they would put an architecture in place for whenever some new money might become available.

While using this opportunity to put this on the record, I want to thank my noble friend for all the support that he has given. The quantity of literature and number of pages that we have received is something that we will weigh with great pleasure during the years to come, because of course the measures which this House is taking in this Bill will affect the population of this country for many generations in the future. It has been very significant to see the Bill pass through the House.

Amendment 6 agreed.

Bill passed and returned to the Commons with amendments.

Immigration Bill

Committee (4th Day)

4.43 pm

Relevant documents: 22nd Report from the Delegated Powers Committee, 8th and 12th Report from the Joint Committee on Human Rights, and 6th Report from the Constitution Committee.

Schedule 3: Excluded residential tenancy agreements

Lord Best (CB): My Lords, we return to residential tenancies and come to a group of 12 amendments, of which the first nine are in my name, beginning with Amendment 54ZZA. I apologise for the number of amendments, but I will be brief in setting them out this afternoon. I am helped in speeding up the process by the very helpful points made by the Minister in our Committee session on Monday.

All these amendments are concerned with the practicalities of requiring landlords to check the immigration status of their tenants. We are past the stage of arguing whether the whole idea of imposing this new burden on landlords is a good one; rather, these amendments attempt to make the concept more workable and reduce the unfortunate consequences for tenants that it could create.

Amendment 54ZZA is about letting to students. The Minister made two welcome announcements on Monday. The first heralded the Government’s plans for an initial stage—I hope I am allowed to call it a pilot—in a single place to test the practicalities of the new scheme. The second announcement was that student lettings that are controlled, owned, managed or arranged by a registered educational institution will face no further need for immigration checking by landlords. This is obviously right since the student has been thoroughly vetted already by the higher education establishment.

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Capturing the wider definition of what comprises a student letting will need a new form of words. The new clause to come before us on Report may go beyond the scope of my amendment, and the Minister may tell me that Amendment 54ZZA is now quite redundant. But perhaps the Government’s revised measure, which I think will pick up student digs that are lettings in ordinary street properties, may also benefit from the formula in my amendment, which comes from the experts at the British Property Federation.

I will explain Amendment 54ZZA. Sensibly, paragraph 11 of Schedule 3 already excludes specialist lettings to students in higher education, since they have been thoroughly checked by the university or the higher education provider. The Bill exempts traditional halls of residence using the definition that is used for council tax purposes. That definition dates back to 1991, since when there has been extensive private sector provision of purpose-built student accommodation. Amendment 54ZZA extends the exemption from the traditional university halls of residence to embrace privately provided purpose-built student halls—the smart new blocks of student flats now appearing in many university towns and cities.

To avoid going too wide, the amendment specifies that the provider must be a body covered by a code of practice officially approved under Section 233 of the Housing Act 2004. This confines the extension to private sector providers that are properly recognised as managing bona fide student accommodation in partnership with higher education bodies. The amendment avoids the bureaucracy, hassle and duplication of effort for student accommodation providers, who would otherwise have to recheck the status of the students they house when this has been done already by a higher education establishment.

Now that the Minister is willing to extend the exemption for student lettings—I know colleagues will be very pleased with that—I hope that the definition in my amendment covers at least some of the ground. To cover more of that ground, will the Minister comment on the idea put forward by the noble Baroness, Lady Hamwee, on Monday? She suggested that the perfect solution to this problem might be to allow the letter that universities issue to students to exempt them from council tax to also be proof of their exemption from immigration checks. Such an approach would exempt the great majority of students and their landlords, bringing comfort to the many Members of your Lordships’ House who are very keen to ensure that the new measure does not deter overseas students from choosing the UK for their studies.

Let me go swiftly through the rest of my amendments in this group. Amendment 54A would add to the list of exclusions from the Bill’s obligations on landlords, under the list of “excluded residential tenancy agreements”. I know that Crisis has been pleased with some helpful changes already made to the Bill, but tenancies organised for people who are or will be homeless and are placed in the private sector by a responsible body need to go on the list of exclusions in Schedule 3. Organisations such as Crisis are funded by the Department for Communities and Local Government to persuade landlords to take on homeless or potentially

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homeless people—indeed, the DCLG last week announced extra resources for this valuable work—but, at present, the landlord will still have responsibility for checking the immigration status of these nominees, even though they have been vetted already by the local authority, a charity or a regulated housing association.

The amendment would excuse the landlord from the potential threat that someone whose papers are not in order and who turns out to be here illegally renders the landlord subject to a fine. The arrangements for placing homeless households in the rented sector are extremely important in giving confidence to landlords to take in vulnerable tenants, including those leaving prison, who are perceived to be a high risk. It is not easy to negotiate with landlords who are understandably hesitant to take in people on the edge of homelessness. Telling landlords that they will ultimately carry the can if a household is found later to be here illegally sets up a new barrier. I hope that it is not contentious to exclude placements of this kind from the rigours of the Bill. I hope that the Minister will be able to respond sympathetically.

Amendments 55B, 55D and 55E attempt to head off a major problem with the proposed arrangements: namely, the requirement on the landlord to check the credentials not just of the tenant but of other people who come into the accommodation with the tenant, usually family members. These people are not named in the tenancy agreement and the landlord has no direct relationship with them. Here, the Bill introduces a duty for landlords that goes well beyond the comparable duty for employers. Employers are not required to make inquiries about a potential employee’s family or friends, but landlords will be expected to make thorough checks in relation to other people over the age of 18 who live with the tenant. This is fraught with difficulty and, of all the many reasons that a landlord may avoid getting involved with a particular household and risking a £3,000 fine, this scenario is about the most off-putting. The amendments would remove this extra and unreasonable duty on the landlord and confine the obligation to checking the status of the tenant or tenants who are on the tenancy agreement.

Amendment 55H would remove the obligation on the landlord to notify the Secretary of State of a change to the status of a tenant whom they have already housed. It would take away the need to recheck their immigration status after a tenancy has started. Instead, the landlord would have to reconsider the tenant’s status only when the tenancy ends and the tenant wants to renew it. Once a tenancy has been signed, the landlord clearly would not wish to engage further in these checks, and it seems a step too far to require landlords to look out for and report so-called post-grant contraventions, except when the tenancy comes up for renewal.

Amendment 55R would enable the Secretary of State to give extra time for a landlord who has received a penalty notice to bring forward an appeal if the prescribed 28 days appears in the circumstances to be too short a time. With the complexities involved in these matters, the Secretary of State might well be glad of some flexibility here in the future.

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Amendment 56F addresses the tricky issue of the landlord’s obligation to establish whether a person is over 18 years old. We all know that supermarkets find it very difficult to verify a customer’s age when a young person wants to buy alcohol or tobacco. My previous amendments would remove the onerous obligation on landlords to account for the immigration status of people who are not on the tenancy agreement and with whom they have no direct dealings. This amendment is a safety net if the duty to check up on others in a household finds its way on to the statute book. It puts the onus on the Secretary of State to set out an order which makes clear that as long as the landlord or their agent takes specified steps to establish the age of the occupiers, they will not be in danger of being penalised later. Without the amendment, landlords will go in fear of a transgression, despite their best efforts, and the presence of teenage children in a household will present another reason for a landlord not to house a family for fear of breaking the new law.

Amendment 56H is my final amendment. I think it could be helpful in tackling the central problem here: namely, that respectable landlords will henceforth be extremely wary about accepting anyone for a tenancy who just possibly might be a migrant without the correct papers. The amendment shifts the burden of checking out tenants’ credentials to one or more bodies which take on that responsibility and are approved by the Secretary of State for that purpose. Those verifying bodies would no doubt charge for the service, but could make the cost quite modest through economies of scale, dealing with many hundreds or thousands of cases, and would become absolute experts in ascertaining who was and was not an illegal immigrant. As long as the landlord had received the all-clear from the approved body, which might be part of a trade association or a credit referencing agency, the landlord would not need to worry about the new liabilities that they face.

The concept of a body approved by government taking responsibility for a key aspect of the affairs of private landlords is the model used for handling tenants’ deposits. Initially three and now four agencies have been cleared to provide tenancy deposit schemes to deal with all the tricky aspects of collecting and returning deposits. Similarly, the Secretary of State approves bodies to provide ombudsman services to the sector. A similar approval mechanism could lift the burden on landlords struggling to undertake accurate immigration checks and would, I think, reduce the cost to landlords, which may get passed on to tenants if agents are involved, from about £50 a shot to, perhaps, £25.

That measure would be particularly helpful to the Home Office inquiries team, removing a lot of the pressure of fielding queries from amateur landlords up and down the country who would no longer need to bother the Home Office. That arrangement would, I hope, achieve everything that the Government want from this part of the Bill, while reducing a significant financial and administrative burden for the Home Office and greatly reassuring good landlords that they need not turn away people who might just be here illegally, because the checking has been done for them.

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I hope that that idea appeals to the Minister, and I am grateful to Richard Jones of the Residential Landlords’ Association for devising it. I look forward to hearing the Minister’s response to the amendments.

Baroness Hamwee (LD): My Lords, I have three amendments in this group. The noble Lord, Lord Best, has raised a lot of important issues—in some cases as to principle and in some as to workability, with which all of us have been concerned.

On his Amendment 56H, allowing for verifying bodies, it speaks volumes about the views of the Home Office, which we have heard in this Chamber and outside it, that such a suggestion has been brought forward. One sees the comments about the current standards of the Home Office and one looks forward to much improvement, but one can see how such a proposal has come about. I suspect that some such agencies might well grow up outside the statute if we do not provide for them. I can imagine what the Minister may say in response to the amendment—that no third party can be authoritative on this—but I can envisage small landlords casting around for an organisation that can help them with this work.

The first of my amendments, Amendment 56J, is much the same as the noble Lord’s amendment with regard to a person that a landlord thinks is under 18 but in fact turns out to be an adult, for the reasons that the noble Lord has given. Amendments 56K and 56L are to Clause 32. The first would ensure that the Secretary of State could increase only the range of agreements not treated as falling within the scheme—in other words, could increase the range of exemptions but could not bring in through this mechanism agreements that would otherwise fall outside the scheme—while the second would ensure, similarly with regard to occupants, that the Secretary of State could increase only the range of people treated as not occupying premises but could not bring in agreements that would otherwise fall outside the scheme.

I understand that a degree of modification needs to be provided for in the light of experience if the pilot—I shall continue to call it a pilot—proves to be unsuccessful. However, we should understand to whom the scheme is intended to apply at the outset—to whom and to what, I suppose. I am grateful to the noble Lord for raising such a range of issues. He is expressing the concern that we have heard already from all around the House.

5 pm

Baroness Williams of Crosby (LD): My Lords, I share the view of my noble friend Lady Hamwee about the useful contribution made by the noble Lord, Lord Best. Some of us know what a tremendous contribution he has made over the years, both to the whole position of immigrants to this country and, not least, to the position of people seeking to study at our universities.

I want to ask two questions. The first is about the desperate pressures on the housing market, not least in London, which remains a magnet for many overseas students. This was exemplified again to me this morning when in one post I received no fewer than two letters

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from distinguished estate agents in London begging me kindly to sell my rather humble single-bed flat, in a rather seedy part of Victoria, on the grounds that I would make thousands of pounds of profit if I did so. Such lettings or sales almost certainly do not go to students in any situation. Given that there is a huge pressure of demand on the market, not least from people working in this country, often in a fairly short-term capacity, let alone from the literally thousands of houses in London that are now being let or sold to overseas investors who have no intention of living in them or inhabiting them—as anyone can see who takes a good look at Highgate or some other fashionable areas of London, many of those properties remain empty for several years on end—it really is something of a scandal that that is the way that the housing market has played out. It is becoming close to impossible for many overseas students of modest means to find anywhere to live at all, which is why we see increasing numbers of people packed into overcrowded rooms, flats or basements in a desperate attempt to find somewhere to live.

We have been helped by the noble Lord, Lord Best, and my noble friend Lady Hamwee, who gave specific and concrete suggestions about ways in which this situation might to some extent be eased. In the end, it can be seriously eased only by a deliberate attempt to create more student accommodation, but that is not going to happen in the very short run, and therefore anything that exempts accommodation specifically directed to and planned for students is of great benefit in this desperate situation.

Secondly, I want to draw attention to a group who are not assisted by being specifically registered by their university and helped by student unions and the like. I reiterate what I said in an earlier session of this Committee when I pointed out that no less than 33% of academics currently serving in Russell group universities come from overseas. The figure is about 28% for universities as a whole. These men and women are here because they are outstanding in their line of study or profession. They bring to that study their knowledge of another part of the world and the ways in which in different cultures different answers are found. They do not have the benefit we have given to overseas undergraduate students who are registered at their university. They are mostly out there looking for accommodation for themselves, and many of them have no knowledge of this country or its housing market and are quite easily persuaded to make not very sensible arrangements.

Yet let us be quite clear that, without those academics, the quality of first-class higher education would deeply suffer because it is increasingly a global situation and a global statement about the quality of a university. Anybody who knows the Russell group and some of the outstanding new universities will know that it is that huge input of talent and ability from other countries that makes a university not just a good place but a great place. What the noble Lord, Lord Best, has proposed, not least in his final amendment, could be very helpful to people who are without the kind of expert advice that undergraduates can at least hope to get. It is essential that we recognise the importance of tackling this matter.

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The noble Lord, Lord Best, referred to children. Many academics will be married with children and will want to bring their dependants with them. The noble Lord, Lord Best, pointed out the problem of trying to sort out the migrant status of family members who have come with the head of household who is taking up an academic position, particularly children over the age of 18 who still live with their parents, as many do abroad. How big an obstacle are we placing in the way of such men and women unless we adapt and attract the kinds of solutions that he and my noble friend have tried to put forward this afternoon?

I shall not continue at greater length. Members of this House will know of my huge concern about one of the greatest and most effective exports of this country. Incidentally, it is one of its sources of innovation and enterprise with no less than one in seven new firms and 14% of new jobs being created by migrants, and those figures are higher than the proportion for their British-born equivalents. They make such a huge contribution to this country’s ability to maintain and improve its economic position that it takes my breath away that we should have this kind of legislation before us. I shall not pursue that matter, but I hope the Minister, for whom I have great respect, as we all do, will look very seriously at the proposals in this area of the Bill to deal with the dangers that could arise from the insistence on tenants being, effectively, monitored and overseen by landlords with all the rather frightening consequences of that concept.

Baroness Smith of Basildon (Lab): When the noble Lord, Lord Best, with his experience and expertise on housing, speaks on issues such as this, we all do well to listen. I am sure the Minister has taken on board his comments. On the issue he raised about students, the Minister has made clear that the Government will bring forward an amendment to address this issue, and I welcome that. I hope he will listen, take on board and incorporate the comments made by the noble Lord, Lord Best, which are very helpful indeed. I welcome the fact that the Minister has listened and intends to table an amendment. I also welcome this recognition by the Government of how clumsy this provision in the Bill is, and the consequences of that. I will not speak at length today, because I spoke at length on earlier amendments covering the same issues.

The amendments tabled by the noble Baroness, Lady Hamwee, and the noble Lord, Lord Best, address, as the noble Baroness, Lady Hamwee, said, the principle, practicality and workability of the provisions on landlords. Notwithstanding the comments of the noble Baroness, Lady Williams, the provisions do not just affect students, as I know she has acknowledged. These provisions on landlords will impact on many people to the detriment of many UK-born and British citizens and those who have a legal right to be here. I welcome the opportunity to look at some of the practicalities.

I notice that the impact assessment for the Bill comes straight to one of the points made by the noble Lord, Lord Best. Under the heading, “What is the problem under consideration? Why is government intervention necessary?”, the impact assessment comments:

“Housing is a key enabler of illegal migration. … Government intervention is necessary to deter illegal immigration”.

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I disagree with that. The problem here—the concerns that have been raised in the amendments—is about whether it is the landlord’s role to take action to deter illegal immigration in the way that the Government suggest.

What I am concerned about is highlighted by the comments of the noble Baroness, Lady Hamwee, and the noble Lord, Lord Best. It is becoming increasingly clear what limitations, pressures, problems and responsibilities these provisions are going to have and what impact they will have on those entitled to live and work in the UK, including UK citizens. The noble Lord, Lord Best, and the amendment of the noble Baroness, Lady Hamwee, have highlighted concerns regarding the impact on landlords.

The Government estimate in their impact assessment that they will take fines of £6.8 million from landlords over the next 10 years. The point has been made to the Minister that that could be seen as, and could well become, a disincentive to those who currently rent out. It would be helpful if the Minister could tell us whether, given that this also includes rooms which have been rented to lodgers, any assessment has been made on the impact of availability of homes or rooms to rent in the private rented sector. The noble Baroness, Lady Williams, mentioned the letters that she has received from estate agents wanting to rent or buy her property. Anybody who has lived in London will have regularly received such letters from companies offering vast amounts of money to rent a room. Can the Minister tell us whether any assessment has been undertaken of the impact that these proposals could have on the availability of properties or rooms to rent?

I will not go through each amendment—I raised a number of questions which I had on Monday—but the amendments would bring some clarity to the issue. If we take the questions raised by these amendments, those that will be raised in the next group of amendments, those that were raised in yesterday’s discussion on whether the clause should stand part of the Bill, and proposals for a pilot—I welcome the Minister’s letter and look forward to discussing the Government’s proposals for a pilot—it is increasingly clear that there is little to commend these clauses. I hope that, in his response today, the Minister is able to address the concerns that have been raised by noble Lords here today and some of those still outstanding from our previous debates.

Baroness Neville-Rolfe (Con): My Lords, I will make two brief points. First, I welcome the broadening of the exemption for students which my noble friend outlined late in the debate on Monday. That seems to be relevant to Amendment 54ZZA, and we all look forward to seeing the new wording on Report, recognising the importance of our student population.

Secondly, I will comment on the idea outlined by the noble Lord, Lord Best, for an approved agency arrangement. This may be a good idea, but it will of course come at a cost. I would prefer a simple system that would allow landlords to do the checking themselves by having proper guidance for small landlords, both through the normal trade associations and guidance and on gov.uk. In that way enforcement can be minimised, fines avoided, and compliance maximised. The trial

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run that all noble Lords seemed to be agreed on in the earlier discussion in Committee should be used to test the workability of these important proposals.

5.15 pm

The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach) (Con): I am delighted that we now have another name for the rollout and the trial run; we are accumulating quite a vocabulary of descriptions for this important part of the development of this legislation. I am grateful to all noble Lords who have spoken. We have moved down to some detail, which it is important that we use Committee to tackle. I am grateful in particular to the noble Lord, Lord Best, for tabling his very thoughtful amendments, and to my noble friend Lady Hamwee for hers. They are clearly intended to improve this part of the Bill. I welcome the opportunity I had to meet with the noble Lord, Lord Best, as I explained already, and with a number of interested bodies to discuss these provisions. My door remains open to the noble Lord; some of the suggestions he has made today require further exploration jointly between government and their advocates, so I hope that this will be a beginning.

This group of amendments includes some interesting suggestions, which I will reflect on further, as is right and proper. However, some of them would represent a retrograde step. We can take things in a different direction and further forward than perhaps the amendments aim to take them. I remind noble Lords that the aim of the legislation is to require landlords to conduct immigration checks on all adults who it is intended will occupy the property when the tenancy is created. It does not require all such adults to be named on the tenancy, although that may become common practice in future, and the Bill allows landlords to delegate the task of performing checks to a letting agent. The checking requirement applies only where the property is occupied for rent or lodging as the person’s main or only home.

That is an important measure, and the Government are right to identify housing as one of those facilities which, if controlled by measures as provided for in the Bill, will serve as a deterrent to illegal immigration. I am sure that the noble Baroness will share that view, just as both parties agreed that employers’ checks on people seeking work have been effective in that regard.

The Bill does not require the landlord to monitor who is living at the property once the tenancy has been created. While some landlords already require their tenants to inform them of changes to the composition of the household, some do not, and we recognise that. Where a tenant sublets the property or accepts a lodger without the landlord’s knowledge, that tenant effectively becomes the landlord under the scheme, so to a degree the landlord’s responsibility applies to the person who occupies the house as a principal home.

Baroness Smith of Basildon: Can the Minister clarify whether that is the case only if the tenant accepts payment by the lodger? Presumably, if they accept someone to stay in the property as a guest, nobody will be liable to check their immigration status.

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Lord Taylor of Holbeach: It is not a question of payment, but of whether that is their principal or main home. If it is not, and they are just a guest for the weekend or for a month, or whatever, that would be a different matter, but if it is the person’s main home, whether there is payment is not relevant to their status. I hope that that is clear.

Baroness Hamwee: On the same point, it is common in leases and tenancy agreements to provide a prohibition against subletting or having a subtenancy. In some of the less formal arrangements that the noble Baroness and I are aware of—I am thinking now about the head landlord and tenant—it may not be normal to provide for that, even though a mortgage company that has lent on property would expect it. I hope that landlords, as we understand them in the normal way, would not be penalised if they had a fairly informal arrangement with a tenant of the sort that would fall within this that did not preclude a subtenancy or sublicence. I hope that I am being clear about that. I can see that there may be more calls on what the landlord should do by precluding the possibility of somebody coming in and lodging or having a sublicence without the landlord himself knowing—and I would not like a landlord to be penalised because of that. It is an allied point; I am seeking for there not to be more requirements on the landlord.

Lord Taylor of Holbeach: I am sorry because, as my noble friend Lord Attlee whispered to me, “You’re wrong”. He is so delicate in these matters. But I am wrong. This transfer of responsibility occurs when rent is paid; when no rent is paid, that is not an arrangement under this scheme. I hope that that is understood, and that it helps to clarify the border as to where the reporting happens.

Baroness Smith of Basildon: I am grateful to the Minister and thank him for clarifying that—we all make mistakes. Does that not seem some kind of a massive loophole in the law—the landlord will have to undertake all these checks to ensure that the landlord’s tenant is a legal citizen of this country and entitled to stay, but the person who is renting the property could then allow guests to stay permanently, with it as their main home and with no payment? It would be possible for a rogue landlord to charge exorbitant rent to one person and for the others to stay for free. There seem to be complications around that, allowing a significant loophole in this legislation, if I am correct—but I may be wrong.

Baroness Hamwee: My Lords, I might add to the complications by pointing to the provision that, although the residential tenancy agreement of rent must provide for payment of rent, it need not be a market rent.

Lord Taylor of Holbeach: Yes, a further elaboration of the point is that the restriction applies only when the person is under an agreement, formal or informal, where the tenant pays rent. The immediate landlord is responsible; if the tenant sublets without the superior landlord’s knowledge, the tenant is responsible for the subtenant. This is quite convoluted language, if I may say so, and it might help noble Lords if I wrote to

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clarify that point. I see the importance of making it clear where the responsibility lies in these matters; I thank the noble Baroness for raising the issue in the first place and my noble friend Lady Hamwee for her comments.

Baroness Smith of Basildon: I am grateful—that is very helpful. But perhaps the Minister could address the point made by the noble Baroness, Lady Hamwee, and myself about a loophole. It does not have to be the market rent; it could be an exorbitant rent to one tenant to allow others to stay there for free. If he could address in the letter whether that is a loophole, that would be very helpful.

Lord Taylor of Holbeach: Yes, I will do it in the letter. I feel that if I try to do so here today, I might get into even deeper water than I am already swimming in.

Home Office immigration enforcement will enforce the scheme in the normal course of its activities. Where illegal immigrants are detected during illegal working operations, when arrested for criminal offences, or as a result of intelligence, immigration enforcement will investigate where the person is living. This will include establishing whether the new duty on landlords has been breached, who owns or controls access to the property, and who is collecting the rent. That ties up with the consideration that the noble Baroness asked me to look at earlier.

The checking requirement will apply only to adults, and the person’s age as a matter of fact will be apparent from the documents presented. The system of document checks has been adjusted, following consultation with landlords, to reflect closely existing check practice by landlords. Where these simple checks are completed, the Bill makes it clear that the landlord will have an excuse, and therefore will not be culpable under the provisions of the Bill. Only original documents can be accepted in view of the obvious risk of forgeries, as noble Lords will understand.

Earlier in the Committee’s deliberations—I am grateful for the comments of my noble friends Lady Neville-Rolfe and Lady Williams of Crosby—I announced the Government’s intention to bring forward on Report an amendment to broaden the exemption for student accommodation owned, managed or arranged by higher education institutions in all parts of the UK. Obviously, we await the full detail of the amendment, but I think this very much meets the point that noble Lords have made. This is an important area for two reasons: first, because it reinforces the message that I am trying to get over that we want to make it clear that we are supportive of the university sector in this country; and, secondly, because it introduces the concept that there can be no need for double checking in this area given that the university has already satisfied itself that its students are properly entitled to be in this country. I note the suggestion about the engagement of Section 233 in the amendment of the noble Lord, Lord Best, and I have already noted my noble friend’s contribution on the council tax exemption point.

The noble Lord, Lord Best, has raised concerns about people who are in need of support at a time of homelessness or the threat of homelessness. The exemptions in Schedule 3 already deal directly with

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the work of hostels and refuges and the work of local authorities, where they are providing assistance to comply with their duties, or are providing assistance on a discretionary basis to a person who is homeless or threatened with homelessness. Therefore, we have made this clear in the Bill.

The noble Lord makes a very interesting suggestion in advocating, and elaborating on, a role for a verifying body to support small landlords in performing the required checks. I say, in the modest way that Ministers do, that I undertake to reflect further on the merits of this suggestion. This is an interesting matter for us and the noble Lord to discuss. The Government want these arrangements to be workable in practice. I think my replies have shown that the Government see this as an important aspect of policy but it must be practical and work for landlords and people who want housing. We also want these arrangements to be successful in achieving the policy objective of deterring illegal migration.

I think I have made it plain that I want to engage with noble Lords. I hope that, in the light of the reassurance I have given, and, indeed, my promise to write in detail specifically on the division of responsibility—that is essentially what we are talking about in relation to the definition of a tenancy and landlords’ responsibilities—the noble Lord will withdraw the amendment.

5.30 pm

The Earl of Caithness (Con): My Lords, can my noble friend confirm that this part of the Bill applies equally to agricultural landlords as to the more urban and residential landlords that most of the Committee would think of in the first instance?

Lord Taylor of Holbeach: Yes, I can confirm that. An agricultural tenancy or a house occupied in connection with any employment would clearly be covered. However, it should not be forgotten that the owner of that property, as an employer, would have already checked the person’s entitlement to be in occupation.

Lord Best: My Lords, I am grateful for support for the amendments in differing degrees from all around the House, including the noble Baroness, Lady Williams of Crosby, who makes the point that it is already incredibly difficult for overseas students to find anywhere to live that they can afford in London—and in other cities. We must not make life more difficult by putting up a new barrier that puts landlords off; that is such an important and fundamental point.

I am grateful to the noble Baroness, Lady Smith of Basildon, who raised a couple of significant points. The Rent a Room scheme that we already have is getting a bit tired; this is the opportunity to let a room in your house and pay no tax—indeed, fill in no forms and just get on with the letting on your own. It will make a difference to the individual who owns that property if having to check the immigration status of anyone whom they take in is added to the requirements on them. We need to look at the Rent a Room scheme again. The tax threshold—the amount you can receive in rent from someone in your own home—has not been changed for something like 11 years; we have to revise that. This is an important moment to look at

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that. The case is similar for lodgers and guests—these look like awfully murky waters. The Minister said that he would respond in writing, which will be helpful.

The noble Baroness, Lady Neville-Rolfe, picked up on having approved verifying bodies that take all the hassle away from landlords—indeed, that take it away from the Home Office. However, she felt that it would be better to produce guidance and let landlords do their own thing. A voluntary scheme means that landlords who want to use it would just get on with doing so. Some 60% of private renting is through local agents. Rather than agents having their own mini-schemes—how many agents will become expert enough at this?—a central approved body that can verify people’s status would cut the cost to the landlord, and that might be passed on to the tenant. It would give landlords greater reassurance. I declare an interest: I chair the Property Ombudsman, which looks after letting agents and estate agents and the complaints about them. In the world of property ombudsman-ery, there is a system of the Secretary of State approving certain bodies as ombudsmen. That works well: it means that people can join a scheme knowing that it is properly approved, so people can stand behind it. Applying that technique in this field could be a clever move to help everybody to get this right.

The Minister made some important points. He underlined that the student lettings amendment that will be brought forward on Report will be a really good one. We will look at it with care, but it sounds as though it will do a great deal of what we hope that it will. On people being placed with a private landlord by an agency such as Crisis, a charity that takes potentially homeless people and persuades an individual landlord somewhere to take them on, he was not quite able to give me the reassurance that I had hoped for that that would be treated—as I understand it—like a hostel specifically for the homeless. These are specialist schemes in which the vetting will be done by Crisis. To say to the landlord, “I am sorry, we are unable to take away from you the responsibility for checking the migration status of the people we are bringing”, just adds another difficulty when it is difficult enough to get landlords to take in people, even with rent guarantees and other useful techniques. It would therefore be good to talk about that further.

I am grateful to the Minister for earlier discussions and his agreement that we should jointly explore some of these matters further. I look forward to such meetings and, in the light of his reassurances, I beg leave to withdraw the amendment.

Amendment 54ZZA withdrawn.

Amendments 54ZA and 54A not moved.

Schedule 3 agreed.

Clause 16: Persons disqualified by immigration status or with limited right to rent

Amendment 55 not moved.

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Baroness Hamwee: My Lords, Amendment 55A is the first in a group of 12 amendments all about who falls within and outside these provisions. This may be stretching it a little bit, but something occurred to me when listening to the noble Lord, Lord Best, talk about a proposed verifying body. However, I have completely lost my train of thought. I had a really good example to support that proposal and it may come back, but I will move on to the specific amendment.

In Amendment 55A, the first paragraph would provide for not only those asylum seekers whose accommodation is provided by the Home Office—they are covered by Schedule 3—but asylum seekers who make their own arrangements for accommodation. It seems to me that they should be excluded also. On a practical level, the state might be forced to provide for those who could otherwise provide for themselves, which is one of those unintended consequences.

As regards paragraphs (b) and (c) in Amendment 55A, provision is made in Schedule 3 for accommodation from or involving local authorities, but that provision is drafted in terms of the homelessness legislation and does not cover other accommodation such as that provided under the Children Act 1989. Section 17 of that Act is used primarily to support children with their families, Section 20 to support unaccompanied children, and subsequent sections to support care leavers. Where a person is without leave to remain, they will not be entitled to social housing or homelessness assistance from the local authority but in limited circumstances a person at particular risk may be accommodated by social services under relevant legislation because of their disability or ill health.

Paragraph (d) in Amendment 55A deals with students, which I think we will come back to. I suspect that I will be pressing the Minister to go further than the amendments being dangled in front of us may go, but I look forward to seeing them. Lastly, Amendment 55A covers young people accommodated in “homestay accommodation”—I think it should have a capital H—while undertaking language courses.

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Amendment 55C would provide that there should be no breach when, after entering into an agreement, a tenant becomes disqualified because of his immigration status. This is a matter that the landlords associations expressed concern about in their evidence to the Public Bill Committee in the Commons. It is a probing amendment through which I seek to understand how a landlord is to ensure that he is not in breach without frequent checks. I think that the noble Lord, Lord Best, referred to this on a previous day. If the landlord is satisfied that the tenant is a British citizen, that is one matter, but if the status is complicated or is not permanent, what is the landlord to do? It seems to me that he must keep on asking, which is impractical.

Amendments 55F and 55J are amendments to Clauses 19 and 21, dealing with excuses—that is the term used—available to landlords and agents. Clauses 19(2) and 21(2) excuse the landlord or agent from paying a penalty, having been given notice of the contravention. There is a world of difference between a contravention and merely not paying the penalty when in fact there was no contravention or, in the case of a landlord with an agent, when it was the agent’s responsibility. Therefore, I am seeking to put the position as I think it should be put, because I do not think that it is just a matter of semantics.

Amendments 55G and 55K are amendments to Clauses 19(7) and 21(7). Similarly, Amendment 55H in the name of the noble Lord, Lord Best, is an amendment to Clause 19(7). These amendments allow me to ask whether it is necessary both to have complied with the requirements during the period and to have notified the Secretary of State without delay. The amendments also enable me to ask whether the phrase,

“as soon as reasonably practicable”,

in these clauses means “without delay” in the eyes of the Government. They are not synonyms in ordinary language. I also ask the Minister to confirm that it is possible to notify the Secretary of State “as soon as reasonably practicable” under subsection (6)(a) without following the route in subsection (7)—in other words, that subsection (7) is not the only way to satisfy subsection (6)(a). I appreciate that this is not language that is holding the Committee riveted at the moment, but these small amendments could be important in practice.

Amendment 55L addresses whether or not the documents need to be “of a prescribed description”. The amendment would mean that any document could be used to prove that a person from outside the EEA had a right under European law to be in the UK or, in the case of other persons, that a document granting leave could be used. In other words, how is immigration status to be proved? I appreciate that in many ways it will be easier if there is a list. However, the list of documents has to be complete and accurate, and I am aware of the frequency of the change in immigration rules, which will affect which documents can be prayed in aid in this situation.

European nationals can bring family members with them. I was thinking about that when we were talking about people who are under or over the age of 18. Those family members may be persons from outside

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the EU if they have a right to be here and are not under an obligation to possess a document issued by the Home Office. They can apply for one and the Home Office is supposed to provide it within six months. Perhaps the Minister can tell us whether the Home Office wants people falling within this category to apply for documents, as I suspect that that will cause a considerable amount of extra work.

EEA nationals, as a matter of law, should be treated as well as any third-country nationals. It looks as if third-country family members will find it harder to prove their entitlement to be in the UK—even those from a family composed entirely of non-EEA citizens who have visas. There are some small categories of British citizens who do not have passports but can show that they are British through the use of a birth certificate. Is the landlord expected to know that the birth certificate belongs to the individual? The guidance for employers on checking documents, as we have already heard, is very long—more than 80 pages. The amendment probes that area further.

5.45 pm

If the documents are to be of a prescribed description —the Minister alluded to that this afternoon—the Home Office is expecting them to be originals, which should be produced for the obvious reasons of avoiding fraud. Amendment 55M suggests a mechanism for certifying them as true and complete copies as a matter of practicality. What if a landlord says, “Thanks, I’ll take your document away and make sure that it is right”? One would have to be rather trusting of someone holding one of those very precious original documents. What if the Home Office has the papers at the time? There are many situations in which a notary public or solicitor empowered to administer oaths, and so on, can certify original documents showing that they are true and complete copies. Amendment 55M probes that point.

Amendments 55N and 55P would remove the power of the Secretary of State to issue a penalty notice without having established that the landlord has a statutory excuse. The lawyer in me protests that the Secretary of State can issue a penalty notice as soon as he establishes that the person cannot prove a relevant nationality or a right to rent. There will be disputes about liability even before it is established that there is a defence. It would be inappropriate to accuse a private citizen of having broken the law before making any effort to investigate the circumstances.

On Amendment 55Q, under Clause 24(5)(c) the Secretary of State can “increase the penalty” if the landlord or agent receives a penalty notice. In the Public Bill Committee in the Commons, the Minister indicated that an increase would be applied in circumstances when new facts came to light. That was in column 272. I shall not weary the Committee by reading the extract but that is what it amounted to. I am concerned that, by having an unconstrained right to increase the penalty, there will be a danger that objections will not be made and that this provision would act as a deterrent to a perfectly proper notice of objection. I speak as somebody who has not objected to a notice of having jumped a red light when I know

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perfectly well that I did not. We know that we cannot defeat the system so we might as well pay up. I see this as an equivalent position.

Finally, Amendment 55S would require the Secretary of State to issue a substantive claim giving the landlord an opportunity to raise the defence before the matter is determined—rather in the way to which I have just alluded, to separate out liability as the first issue from the penalty. I beg to move.

Baroness Smith of Basildon: My Lords, these amendments build on the two previous debates that we have had on this issue and highlight its difficulties and complexities. I know that the Minister will give an explanation of these but I ask him to take on board the points that have been raised today, and the other points raised on Monday at Questions, which strike at the heart of what these clauses seek to do.

What worries me is that if landlords are going to rent out their properties and want to abide by the law, they will need to have absolute clarity about what is expected of them. The noble Baroness, Lady Hamwee, thought that she was testing the patience of the Committee. I do not think she was because, for example, Amendment 55Q makes an important point. I worry that the measure outlined in that amendment could be a further deterrent to landlords to rent.

The noble Baroness mentioned the code of practice and the documents available. As I said on Monday, the Government have tried to be helpful by increasing the number of documents available. However, I am not sure how helpful that is because it creates even greater complexities. I had hoped for an explanation of why under List A of acceptable documents, 10f has only a full stop. Presumably there is something missing and there will be another document at some point.

Lord Taylor of Holbeach: It is only a draft document. There may well have been other matters under consideration at the time.

Baroness Smith of Basildon: So there may be further documents which are acceptable. I appreciate that.

However, clarity for landlords is crucial, particularly if they are expected, according to the impact assessment, to pay £6.8 million-worth of fines, which is the Government’s break-even policy objective. Every time I read the landlords’ guidance it raises more questions than answers and I am sure it will be the same for landlords. If I were a potential landlord I would regard this as a disincentive.

In the previous debate I asked the Minister a question about landlords seeking to play safe and the noble Baroness, Lady Hamwee, has reminded me that I did not receive a response. The worry is that landlords will look at the obligations placed on them and want to choose tenants who most look like, sound like and are easier to identify as, in their eyes, British citizens. Rather than choosing those who may even have permanent leave to remain, they are going to play safe. There is a discriminatory aspect to that. However, the specific question I asked was whether the Government have made any impact assessment of the impact of the

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legislation on the availability of rooms to rent in the private rented sector. It would be helpful to know if any consideration has been given to that point.

Lord Taylor of Holbeach: I am grateful for both the debate and the amendments tabled by my noble friend. They contain constructive suggestions and are designed to make this part of the Bill work, an aim which noble Lords will share. The amendments seek to exclude vulnerable people and students from the provisions of these clauses. I have already referred to the Government’s plans in relation to students. However, I wish to provide some reassurance in relation to those who may be vulnerable.

On the point made by the noble Baroness, Lady Smith, discrimination is a concern. Certainly if it became widespread it would destroy the credibility of these arrangements. That is why there is a code on discrimination running parallel with the code of practice. As noble Lords will know, to breach this code and to act in a discriminatory fashion is against the law in any event, and so it is part and parcel of the package of non-regulatory measures being brought forward to reinforce these particular provisions.

Clause 16 provides discretionary powers for the Secretary of State to authorise a tenant who has no lawful status to rent property. This will include asylum seekers, who will be able to confirm that they have a right to rent with the landlords’ checking service, or a landlord may conduct a check directly with the service. This discretion will be exercised where a failed asylum seeker is unable to return home because of a recognised barrier.

Tenants housed by virtue of children or national assistance duties are also covered in exclusions. Schedule 3 provides that any accommodation provided to a person as a result of a duty on a local authority is excluded—that is, a duty on a local authority in respect of any obligations to vulnerable people. It does not seek to particularise the duties, including the respective Acts and orders relating to children or social care; it is a general obligation which local authorities may have to individuals. Therefore the amendment proposed by my noble friend is not necessary given the wide scope of this exclusion.