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The Earl of Listowel: My Lords, given the Minister’s previous brief, will he look particularly carefully at the possibility of granting homeless families with young children free bus travel and at how family friendly buses are in enabling pushchairs to be carried on
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Lord Adonis: My Lords, the noble Earl makes a good point. Modern standards of bus design ensure the accessibility that he seeks and many local authorities have in place concessionary fare arrangements of the kind that he mentions, which also promote the interests of lone parents and children. However, I very much bear in mind the points that he makes.
Lord Faulkner of Worcester: My Lords, following on from that question, will my noble friend confirm that the introduction of free travel for senior citizens on buses has been a huge success? Will he in his new role as the lead Minister for railways in his department look at ways in which rail travel can become more affordable for older people?
Lord Adonis: My Lords, free concessionary travel for the elderly is one of the great achievements of this Government and we can take great pride in it. This year, we are spending around £1 billion on concessionary fares, which is a huge increase in investment in this area. I fear that I cannot wave a magic wand to reduce rail fares immediately, but I shall bear in mind my noble friend’s remarks.
The Countess of Mar: My Lords, does the Minister recall the indefatigable battle of the late Lord Peyton of Yeovil against holes in the road? In recent months, transport in the centre of London has frequently come to a standstill because of holes in the road. Can he say what Her Majesty’s Government are doing to avoid them?
Lord Adonis: Not immediately, my Lords. I think that this is more under our control than the weather, which I was asked to seek to change yesterday, but I will need to come back to the noble Countess to set out the precise measures that we are taking in this area.
Lord McNally: My Lords, some 15 years ago, I was employed by the organisation NJUG—the National Joint Utilities Group—which was trying to co-ordinate road works to prevent traffic problems. I believe that a previous Government tried to get legislation on this and I see that Boris Johnson, the Mayor of London, is taking new initiatives. However, despite those efforts, the fact remains that utility companies still seem to dig up the roads at random, do not co-ordinate and cause massive problems in traffic disruption. Although this may seem a slightly frivolous question, I urge the Minister to take it seriously and perhaps to take it up with the utilities.
Lord Adonis: My Lords, no question from the noble Lord could possibly be frivolous, by definition, and I take his point seriously. I did not have immediately to hand the reply, but that was no comment at all on the seriousness of the issue, which I fully recognise. I know how inconvenient it is to pedestrians, cyclists
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Banking: Savings
3 pm
Lord Forsyth of Drumlean asked Her Majesty’s Government:
What proportion of savers’ deposits, as opposed to accounts, will be covered by the proposed increase in the limit of the guarantee scheme to £50,000, and what is their estimate of the value of savings which remain unprotected.
Lord Davies of Oldham: My Lords, the FSA has published estimates of the effect of an increase in the deposit compensation limit to £50,000 in its consultation paper issued last Friday. For banks, the estimates are that a £50,000 compensation limit would cover 98 per cent of accounts and 60 per cent of deposits. The £35,000 compensation limit covered 96 per cent of accounts and 52 per cent of deposits. For building societies, the estimates are that a £50,000 compensation limit would cover 97 per cent of individuals and 77 per cent of balances. The £35,000 compensation limit covered 95 per cent of individuals and 69 per cent of balances.
Lord Forsyth of Drumlean: My Lords, with very substantial sums not covered by the guarantee, is it any wonder that people are moving their money about and adding to the pressure on banks and building societies? Does the Minister not see that what is needed is action this day to guarantee deposits, and to end the uncertainty and the leaks about government discussions with the banks, which is undermining confidence and making a serious situation worse?
Lord Davies of Oldham: My Lords, the noble Lord will appreciate the fact that the FSA has acted in increasing these figures, which is proof of the urgency of the situation and the necessity of a prompt response. The Government have gone to Europe to discuss with the other major economies there the fact that there should be some co-ordination on the degree of support. We are all well aware of the fact that in one or two cases co-ordination has been remarkably absent. We must look towards a European-wide standard for that co-ordination. In the mean time, the Government will do all that they should to safeguard the interests of taxpayers and depositors.
Lord Barnett: My Lords, while recognising that the noble Lord, Lord Forsyth, could turn almost anything into a party-political point, would my noble friend accept that even under the £35,000 limit it would be perfectly proper for anyone to move their account to a different bank without harming the bank? In any event—taking the point that I made to him yesterday—would it not be better if the Government made it quite clear that there was no likelihood of any depositor losing any money in existing banks or building societies?
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Lord Davies of Oldham: My Lords, there is no such likelihood, because our major banks and building societies are entirely secure. However, we have had one or two instances of runs on banks and building societies which did require prompt action, which has been carried out—action which in the case of Northern Rock, as the Chancellor was able to report yesterday, has already produced some significant beneficial effects. The Government always make sure that any support that they give is against longer term securities, which safeguard the interests of the taxpayer in the longer term.
Lord Tanlaw: My Lords, could the Minister help to relieve some uncertainty? If a deposit is held off-balance sheet or in a liquidity fund offshore, will that count for an assurance of replacement of up to £50,000?
Lord Davies of Oldham: My Lords, the noble Lord will recognise that the scheme, and the increase in the limit, is there to protect relatively small depositors. Very large tranches of money through institutional investors are not covered by the scheme, but no one in this House would expect them to be.
The Minister of State, Department of Energy and Climate Change & Department for Environment, Food and Rural Affairs (Lord Hunt of Kings Heath): My Lords, there is time for both noble Lords. Perhaps the noble Lord, Lord Higgins, could go first.
Lord Higgins: My Lords, the noble Lord did not answer the final part of the Question; namely,
and how does that compare, percentage-wise, with those which are?
Lord Davies of Oldham: My Lords, that is an extremely difficult calculation to make. We are not in a position to make it. We are in a position to protect the retail depositor, and that is what we have carried out. The noble Lord will be all too well aware of the fluctuations in resources between banks and countries which reflect the global position which we all confront at present. The authorities’ concern is to reassure depositors with limited resources—not institutional investors—who have the right to see that their deposits are safe, and they are.
Lord Newby: My Lords, the Minister knows from our discussions yesterday that there is great concern about the situation of the banks in Iceland. Will he give an assurance that, if Icelandic banks go bust, UK citizens with deposits in those banks will be able to claim the full £50,000 compensation from the UK compensation scheme, with the Government then going to Iceland to get the proportion due, rather than expecting depositors in this country to tramp the streets of Reykjavik looking for redress?
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Lord Davies of Oldham: My Lords, the situation with regard to Icelandic banks is a difficult one and changing each hour. My note says quite clearly that the Government are continuing to work closely with Icelandic authorities to understand fully the developments in the Icelandic banking sector. I therefore cannot add a great deal more enlightenment, except to reassure the noble Lord that of course the financial services compensation scheme and the UK authorities will work with the Icelandic authorities to achieve exactly the results that he enjoins on me.
Baroness Symons of Vernham Dean: My Lords, I confess to having some concerns still. Maybe it is because I have misunderstood the scheme. What about the small business person or the person on very modest income but not on PAYE who uses their bank deposit to, in effect, save for their tax liability and therefore forfeits some of the safety net for their personal savings which would otherwise be available to them? Surely those people, who may be of very modest means, are placed at some disadvantage?
Lord Davies of Oldham: My Lords, the Financial Services Authority is all too well aware of exactly the category to which my noble friend rightly draws attention; namely, those who have temporary high balances because of the businesses they transact. The FSA is addressing itself to that issue.
Deputy Chairmen of Committees
Select Committees
Administration and Works Committee
3.08 pm
The Chairman of Committees (Lord Brabazon of Tara): My Lords, I beg to move the four Motions standing in my name on the Order Paper.
Moved, That Lord Bassam of Brighton be appointed a member of the panel of Deputy Chairmen of Committees, in the place of the Lord President (Baroness Royall of Blaisdon).
Moved, That the Lord President (Baroness Royall of Blaisdon) be appointed a member of the following committees, in the place of Baroness Ashton of Upholland: House and Liaison.
Moved, That Lord Bassam of Brighton be appointed a member of the following committees, in the place of Baroness Ashton of Upholland: Privileges, Procedure and Selection.
Administration and Works Committee
Moved, That Lord Bassam of Brighton be appointed a member of the Administration and Works Committee, in the place of the Lord President (Baroness Royall of Blaisdon).—(The Chairman of Committees.)
On Question, Motions agreed to.
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Pensions Bill
3.09 pm
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton) moved Amendment No. 1:
Clause 1, page 1, line 11, leave out from earnings” to end of line 12 and insert “are payable by the employer in the relevant pay reference period (see sections 13 and 15)”
The noble Lord said: My Lords, I shall also speak to the other government amendments in the group. Ministers and officials have held a series of meetings with stakeholders over the summer to discuss qualifying earnings and, in particular, the impact on employers using money purchase schemes.
In response to the concerns raised and debated in Committee we have tabled a group of government amendments that together make clear that employers may meet the test on the basis of an assessment of the value of contributions paid into a scheme over an annual period regardless of the method by which these contributions are calculated.
This enables employers to assess the flow of contributions over a whole year and avoid any difficulty created by irregular payments if the assessment were done on a monthly basis, for example in a month when bonuses are paid. In effect, employers and their schemes will be able to smooth the flow of contributions into workplace pension saving over the course of a year while ensuring that all members receive the minimum standard. These amendments achieve the use of an annual assessment by making three broad sets of changes.
Amendments Nos. 1, 17, 18, 19, 20, 24, 26, 29 and 30 relate to the pay reference period that may be prescribed in relation to the money purchase qualifying test. Pay reference periods are used to determine the value of qualifying earnings for different purposes in the Bill, including for the purposes of assessing contributions in money purchase schemes. Stakeholders initially raised concerns that the test would require minimum contributions to be made every week or month depending on when the jobholder was paid. They feared this would mean a scheme would fail to qualify in periods when irregular payments such as bonuses were paid, even where the worker received contributions higher than the minimum in all other periods.
Taken together the amendments make it clear that regulations can require different pay reference periods for the different purpose in the Bill. They also clarify that the values of qualifying earnings in Clause 13 are expressed annually. This means that we can set the pay reference period for assessing the contributions required into a money purchase scheme at one year.
Amendments Nos. 13, 22, 34 and 35 address the risk highlighted by stakeholders that the reference to scheme rules in the quality test might be narrowly interpreted. Contribution arrangements can be contained
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Amendment No. 22 therefore removes any confusion that the contribution requirements have to sit in a single “scheme rules” document. This amendment makes clear that, provided the scheme requires the minimum contributions in respect of the member, it does not matter if this requirement arises by virtue of the scheme rules or from any other form of scheme documentation. Amendments Nos. 13, 34 and 35 are for consistency with Amendment No. 22.
Amendments Nos. 23, 25, 28 and 31 seek to address the concern of stakeholders that the wording of the quality requirement could be interpreted to force employers to replicate the minimum contributions formula of 8 per cent of qualifying earnings into their scheme documentation. The amendments therefore confirm that a scheme can use any formula for calculating pension contributions or any definition of pensionable pay provided the actual value of contributions required by the scheme is equal to or higher than the value of 8 per cent of qualifying earnings. This makes clear that employers with money purchase schemes will not be obliged to adopt the same method for calculating contributions as is used to express the minimum contribution requirement. Amendments Nos. 27, 51 and 67 are consequential to those dealing with pay reference periods. They ensure that the definition of “tax year” where it is used in Part 1 is clear.
When taken together, these amendments will enable the overwhelming majority of employers who already provide a headline contribution rate of 8 per cent to meet the test using their own definition of pensionable pay without the need for any changes. Departmental analysis shows that 98 per cent of the members who currently receive total contributions of 8 per cent and 3 per cent employer contributions under their DC scheme today will meet the test. We believe the annual equivalence assessment provided for by these amendments addresses the concerns raised by stakeholders at and around Committee stage.
Over the summer, stakeholders articulated further concerns and, as a consequence, I recognise that some do not feel that these amendments go far enough. However, we are still working with them and looking at further options. We need to be satisfied that any further options do not have an adverse effect on pension outcomes for individuals and do not introduce unnecessary additional administration. I believe that some of the remaining concerns of the stakeholders have been reflected in the amendments that have been tabled by the noble Baroness, so I will give way at this point to enable her to speak to her amendments. I will comment further when I make my winding-up speech. I beg to move.
3.15 pm
Baroness Noakes: My Lords, I have Amendments Nos. 21 and 32 in this group, as the Minister said. They also address qualifying earnings, but from a slightly different perspective from the government
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Let me say at the outset that we recognise that during the summer the Government remained in dialogue with the organisations that have expressed concern about qualifying earnings and the way they are worked out in the Bill. Those organisations include the ABI, the CBI, the Institute of Chartered Accountants, the Society of Pension Consultants and the NAPF. We had also understood that dialogue was continuing, though I gather that last weekend’s reshuffle—which fortunately did not involve the Minister—may have caused some delay. I hope that the Minister can confirm that discussions will now continue in the search for a satisfactory solution.
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