21 July 2014 : Column 95WS

Written Statements

Monday 21 July 2014

Treasury

Decommissioning Relief Deeds

The Exchequer Secretary to the Treasury (Priti Patel): At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represent a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.

Since October last year, the Government have entered into 61 decommissioning relief deeds (50 were signed in financial year 2013-14). Oil & Gas UK estimates that these deeds have so far unlocked at least £2.2 billion of capital, which can now be invested elsewhere.

The Government committed to report to Parliament every year on progress with the deeds. The report for financial year 2013-14 is provided below.

(a) The number of decommissioning relief agreements entered into—The Government entered into 50 decommissioning relief agreements in 2013-14.

(b) The total number of decommissioning relief agreements in force at the end of that year—Fifty decommissioning relief agreements were in force at the end of the year.

(c) The number of payments made under any decommissioning relief agreements during that year, and the amount of each payment—No payments were made under any decommissioning relief agreements in 2013-14.

(d) The total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments—No payments had been made under any decommissioning relief agreement as at the end of the 2013-14 financial year.

(e) An estimate of the maximum amount liable to be paid under any decommissioning relief agreements—The Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements.

Pensions

The Chancellor of the Exchequer (Mr George Osborne): This Government believe that individuals should be trusted to make their own decisions with their pension savings. One of the most important stages in life everybody has to save for is retirement, and one of the biggest financial decisions people will take is what to do with those savings when retiring. Under the old system, only those with very large or very small pension pots could access them with any flexibility.

That is why at the Budget I announced the most radical change to how people can access their pension in almost a century. From April 2015, everyone over the age of 55 with defined contribution pension savings will be able to access them as they wish, regardless of their total pension wealth, subject to their marginal tax rate.

21 July 2014 : Column 96WS

Those who want the security of an annuity will still be able to purchase one. Equally, those who want to access all of their pension savings will be able to take them as a lump sum. Those who do not want to purchase an annuity or withdraw their money in one go, will be able to keep their pension invested and access it overtime, for instance through a draw-down product.

These reforms mark a radical departure, by giving choice back to individuals, and since the Budget the Government have consulted extensively on how best to implement the changes. I am pleased to say the reforms have overwhelmingly been positively received.

Later today I will lay the Government’s full response to the consultation on delivering these changes before Parliament. Before then I wanted to provide a high-level summary of the response, information about the resource expenditure for the guidance guarantee and the full details of the decisions with regard to private sector defined benefit pension schemes, which I am setting out in full this morning before markets open.

These reforms create more choices for individuals, and the Government want people to be equipped and ready to make informed decisions. The right to free and impartial guidance I announced at the Budget will empower savers and ensure that they are clear on their retirement income options before they make any decisions about what to do with their savings.

Given the need for guidance to be trusted by savers, I can confirm today that the guidance guarantee will be provided by independent organisations—with no actual or potential conflict of interest—in order to ensure complete impartiality. Delivery partners will include the Pensions Advisory Service (TPAS) and the Money Advice Service (MAS). The Government welcome expressions of interest from a range of trusted consumer-facing organisations, including Citizens Advice and Age UK, and looks forward to discussing further with these and other independent organisations how they can be involved.

The Treasury has obtained approval for an advance from the Contingencies Fund of £10,000,000 (out of the £20,000,000 development fund for the guidance guarantee announced at Budget) for preparatory work for the guidance guarantee in advance of Parliament’s approval. Parliamentary approval for additional resource of £10,000,000 for this new expenditure will be sought in a supplementary estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £10,000,000 will be met by repayable cash advances from the Contingencies Fund. The repayment is expected to be made in the financial year 2014-15.

I can also confirm today that a new override will be introduced to ensure that pension schemes are able to offer individuals flexible access to their savings, and the tax rules will be amended to allow providers to develop new retirement income products that are tailored to the needs of individual consumers.

The Government want to maximise freedom and choice for retirement savings, but not if this were to be at the expense of the wider economy. For most defined benefit scheme members, it will be in their best financial interest to remain within their scheme. However, the Government, having considered the issues carefully, agree with the view of many stakeholders (including the Confederation of British Industry, Association of British Insurers and the National Association of Pension Funds)

21 July 2014 : Column 97WS

who have argued it is right to preserve the existing freedom to transfer out of a defined benefit scheme under the new arrangement. The Government will therefore continue to allow transfers from private sector defined benefit to defined contribution schemes, excluding pensions already in payment, subject to additional and important safeguards.

The Government continue to believe that transfers from unfunded public service defined benefit schemes should be banned, in order to protect the Exchequer and taxpayers. Transfers from funded public service defined benefit to defined contribution schemes will be permitted, and safeguards similar to those in the private sector will be introduced where appropriate.

The Government will present the document “Freedom and choice in pensions: Government response to the consultation” to Parliament and place copies of the document in the Libraries of both Houses. The relevant extracts from the defined benefit chapter of the consultation response document are copied below.

Extract from Freedom and choice in pensions: Government response to the consultation.

For the majority of individuals, retained membership of a defined benefit pension is likely to be their best option, as defined benefit pensions offer a level of security and guaranteed indexation that defined contribution pensions do not. Furthermore, the transfer values offered when requesting to transfer out are often less than the net present value of the benefits that an individual would ultimately receive from their defined benefit pension.

Nonetheless, it is likely that some individuals will request transfers out of their defined benefit pensions, and for some individuals, this may be in their best interests.

Discussions with stakeholders during the consultation highlighted a range of estimates of the proportion of those who would seek to transfer from a defined benefit scheme. The majority of estimates were between 10% and 20% but with a number expecting transfers to be below 10%. These estimates are consistent with stakeholder feedback that the Budget announcements had resulted in only a very small number of additional requests for transfers.

A precise figure of the proportion of transfers will be inherently difficult to determine, being dependent on a number of factors, including: whether pension schemes actively promote transfers; the attractiveness of new financial products being offered in the defined contribution market; and any requirements to take, and the quality of financial advice.

Pensioners are excluded from the right to transfer

Currently, existing (as opposed to future) pensioners are prevented from transferring out of their defined benefit schemes by law. A number of stakeholders highlighted the risks of changing the current position; very few representations were received arguing to do so.

Stakeholders highlighted the significant adverse selection risk of allowing current pensioners to transfer out of their defined benefit schemes. Such a scenario would place significant risk onto the pension fund, and would be unfair to remaining members, and could require schemes to increase their funding requirements. Stakeholders noted that retaining the current position whereby pensioners

21 July 2014 : Column 98WS

have no statutory right to transfer would retain equality with those who have already purchased annuities with their defined contribution savings. The Government have therefore decided to retain the current ban on existing pensioners transferring out of defined benefit schemes. Netting out pensions in payment from the total asset base reduces substantially the amount of assets potentially subject to transfers.

Timing of transfers out of defined benefit schemes

The timing of any transfers out of a defined benefit scheme will also make a difference to the impact on scheme investments.

Stakeholders noted that members of private sector defined benefit pension schemes who wish to transfer would benefit by doing so as close as possible to the point they crystallise their pension. It is unlikely that transferring to a defined contribution scheme earlier in life would lead to greater pension wealth in retirement compared to accruing more years of defined benefit pension, or, for those with deferred benefits, benefitting from index linked uplifting. This means that any transfers would be likely to take place over a number of years, in line with the age profile of members, rather than all at once.

Wider defined benefit investment trends

As a number of responses to the consultation highlighted, in recent years, there has been a significant trend of de-risking by defined benefit pension schemes, characterised by shifts in asset allocation from equities into fixed income. This trend has been driven by changes in the regulatory approach, accounting standards, increasing risks from longevity, and the increasing maturity of schemes, with most closed to new members (and some to future accruals).

Therefore it is expected that there will still be a strong continuing demand for high-quality fixed income assets, including Government and corporate bonds, in the future from defined benefit schemes, even allowing for a possible reduction in demand due to transfers out.

Impact on financial markets

Taking into account the exclusion of pensioners from the right to transfer; the limited number of active and deferred scheme members for whom it would be in their best interests to transfer; and the likelihood that those transferring would do so when they reach the scheme’s normal age for crystallising their pension pots, the Government believe that the overall impact on the existing defined benefit asset base is likely to be limited if private sector defined benefit to defined contribution transfers continue to be allowed.

From a market perspective the impact of maintaining defined benefit flexibility will at the margins necessitate greater liquidity in asset holdings. However, the main driver underpinning portfolio restructuring in the future is likely to continue to be increasing maturity of defined benefit schemes and corresponding de-risking, irrespective of any decision on defined benefit flexibility.

Therefore, the Government have decided that retaining the existing flexibility of transfers out of private sector defined benefit schemes for all pension members (other than those whose pensions are already in payment), together with the additional safeguards outlined below, is appropriate.

21 July 2014 : Column 99WS

Introducing additional safeguardssupporting individuals to make an informed choice

A number of stakeholders who supported retaining the current right for private sector transfer suggested that current safeguards could be improved.

At present, although the majority of defined contribution schemes will only accept transfers if professional financial advice is taken, guidance for transfers from defined benefit schemes only stipulates that such advice has to be taken when transfers are instigated by the employer not when they are instigated by the employee. The Government intend to make it a statutory requirement on the transferring scheme for all individuals who are considering transferring out of defined benefit schemes to take advice, from a professional financial adviser who is independent from the defined benefit scheme and authorised by the FCA, before transferring. The FCA are today publishing a thematic report on enhanced transfer values out of defined benefit schemes, summarising examples of good and bad advisory practice.

As a result, defined benefit schemes will be required to check that a member has taken advice from a professional financial adviser who is independent from the defined benefit scheme and authorised by the FCA before allowing a transfer out of the scheme. In most cases the individual pension member will need to pay for the financial advice. However, responsibility for paying for the financial advice will fall on the employer if the transfer is from defined benefit to defined contribution schemes within the same scheme, or as a result of an employer led incentive exercise.

The proposal to make it a statutory requirement to take professional financial advice was recommended by a large number of stakeholders including the ABI and CBI. It will ensure that all pension fund members are fully informed before taking any decision, and counteract the risk that a significant number of pension scheme members act against their own best interests or are coerced out of their scheme. This requirement for professional financial advice would not apply to small pot holders with pension savings below £30,000 as the trivial commutation rules would still apply.

Introducing additional safeguards - protecting pension schemes

Although it is unlikely that the number of members of defined benefit schemes wishing to transfer would be sufficient to destabilise any individual scheme, this was nonetheless a concern raised by a number of stakeholders who were supportive of allowing continued flexibility.

At present pension fund trustees have the power to ask the regulator for longer to make transfer payments if the interests of the members of the scheme generally will be prejudiced by making the payments within the usual period. Trustees are also able to reduce the transfer values offered to individual members to reflect the schemes current funding position. As it stands current powers available to trustees are sufficient to keep schemes viable under the new flexible pensions regime. However, the Government want to ensure that trustees are fully aware of these powers and are prepared to use them should the need arise. The Government therefore intend to ensure that there is new guidance to trustees on the powers available to them to maintain the sustainability of schemes. The Government will work with the pensions regulator, employers and trustees to develop the guidance.

21 July 2014 : Column 100WS

Future changes to private sector defined benefit transfers

A number of stakeholders raised the issue during the consultation of allowing full or partial withdrawals direct from a defined benefit scheme, rather than an individual first needing to transfer to a defined contribution scheme. The argument being that requiring members first to transfer to defined contribution schemes creates additional unnecessary burdens and that allowing full or partial withdrawals from defined benefit schemes would better enable the pensions industry to provide the pension products that their members want. The Government intend to consult further on this issue.

Communities and Local Government

Doncaster Metropolitan Borough Council

The Secretary of State for Communities and Local Government (Mr Eric Pickles): In 2010, I decided to make Doncaster metropolitan borough council subject to statutory intervention involving the council being overseen by three commissioners, appointed by me, and who are also responsible for exercising certain of the council’s functions such as appointing senior staff.

This intervention was necessary given serious failings in the council’s corporate governance, and no capacity among those leading the council to make improvement. The council’s previous attempts to address its problems had failed, allowing poor and failing services to continue. In particular, the council operated to frustrate what the (then) mayor and cabinet sought to do, the mayor and cabinet showed a lack of efficient leadership, and the desire to pursue long-standing political antagonisms was given priority over much-needed improvements to services for the public.

The intervention is scheduled to end on 31 July 2015.

Alongside this intervention, my right hon. Friend the Secretary of State for Education and I are, with the council, implementing a separate intervention focused on children’s social care services, involving transferring responsibility for those services away from the council to an independent trust. This intervention is designed to deliver sustainable improvements in children’s social care in Doncaster, addressing the long-standing serious weaknesses in those services.

In June this year the Local Government Association undertook a peer review of the council. That review has now reported, concluding that the council’s performance has materially improved, both politically and managerially, and that the council is no longer an outlier in terms of the performance expected of a local authority, except with regard to children’s services. Following that peer review, on 1 July my hon. Friend the former Minister for local government, the hon. Member for Great Yarmouth (Brandon Lewis), had a meeting with the lead commissioner on the corporate governance intervention, together with the council’s mayor and chief executive. At that meeting the mayor explained the improvements that the council had achieved and described the further progress the council were planning to make.

It is clear to me that, given the level of improvement that Doncaster has now achieved, its firm plans for the future, and its readiness to engage with the wider local government sector on improvement, continuing the statutory corporate intervention will add little, if any, value. The lead commissioner shares this view as he explained when he met my hon. Friend.

21 July 2014 : Column 101WS

Accordingly, I intend to bring the statutory corporate intervention to an early close. It is also important that we now finalise the statutory intervention on children’s social care and take the final steps to establish the Children’s Services Trust; we will very shortly be consulting the council on the statutory direction which is the final technical step to establish the trust.

In these circumstances, I am proposing to end the statutory corporate intervention as soon as the trust is fully up and running, which I expect to be by the end of September. While statutory intervention is rightly a measure of last resort, its use at Doncaster is a clear demonstration of how appropriate intervention can be a powerful means of successfully addressing deep-rooted failings in a council and ensuring that it is able to provide the leadership and local services that local communities rightly expect.

Environment, Food and Rural Affairs

Public Procurement of Food and Catering

The Secretary of State for Environment, Food and Rural Affairs (Elizabeth Truss): The public sector is a significant buyer of food and catering services. This market offers an opportunity for Government to open up the market to allow more small businesses to compete for Government contracts, ensuring that our schoolchildren, hospital patients and soldiers are fed healthy, nutritious food that is produced to high standards, in an affordable way.

Today, I will launch “A Plan for Public Procurement of Food and Catering Services”, and place a copy in the Libraries of both Houses. This work was led by Dr Peter Bonfield OBE; it aims to make excellent procurement the norm across the country. The plan complements other Government initiatives, including the Government’s procurement pledge, the school food plan, the work of the hospital food standards panel, and the GREAT initiative. The plan strengthens the Government buying standard for food and catering and offers public procurers a toolkit to help them deliver a good service, through a clearer and more consistent approach to buying food or catering services.

By using a simplified and more consistent approach. Government procurement can open up the public sector market to small and local businesses, which means more competition and good value for the taxpayer. It will allow more locally-sourced food to be served in our public sector organisations, which means more money into the local economy. It is also good for the environment, as the approach supports UK farm production standards and measures to reduce food waste. It will encourage healthier eating, foster a great connection with food, and celebrate local food.

Foreign and Commonwealth Office

Afghanistan (Monthly Progress Report)

The Secretary of State for Foreign and Commonwealth Affairs (Mr Philip Hammond): I wish to inform the House that the Foreign and Commonwealth Office, together with the Ministry of Defence and the Department

21 July 2014 : Column 102WS

for International Development, is today publishing the 39th progress report on developments in Afghanistan since November 2010.

The second round of the presidential election took place on 14 June. Both candidates alleged widespread fraud; the IEC chief electoral officer resigned following the release of an audio tape by the Abdullah campaign, allegedly of him discussing how to commit fraud. Abdullah rejected IEC proposals to audit the vote and withdrew from the process. Although outside the timeframe of the June report, the House will be aware that the situation deteriorated following the release of preliminary election results by the IEC on 7 July, which gave Ashraf Ghani a commanding lead over Abdullah. Strong international community action, led by the United States, succeeded in bringing both sides to agree to a comprehensive and intrusive audit of 100% of the vote, and to work together towards a Government of national unity. These events will be covered more fully in the July parliamentary report.

Anti-money laundering and counter-terrorism finance legislation was passed by Parliament. The Taliban launched a major offensive in northern Helmand. After the insurgents captured some isolated checkpoints and inflicted heavy casualties on the security forces, ANSF reinforcements stabilised the situation and retook much of the ground lost to the insurgents. NATO Foreign Ministers endorsed the operational plan for the NATO resolute support mission, and most countries reaffirmed their commitments from the 2012 Chicago conference.

I am placing the report in the Library of the House. It will also be published on the gov.uk website (www.gov. uk/government/publications/afghanistan-progress-reports).

Home Department

ACMD, NDNADEG and ASC (Triennial Review)

The Secretary of State for the Home Department (Mrs Theresa May): I am today announcing the start of the triennial review of the Advisory Council on the Misuse of Drugs (ACMD), the National DNA Database Ethics Group (NDNADEG) and the Animals in Science Committee (ASC).

Triennial reviews are part of the Government’s commitment to ensuring that non-departmental public bodies continue to have regular independent challenge. The review will examine whether there is a continuing need for the functions and form of the ACMD, NDNADEG and ASC and whether they should continue to exist at arm’s length from Government. Should the review conclude there is a continuing need for each of these bodies, it will go on to examine whether the body’s control and governance arrangements continue to meet the recognised principles of good corporate governance.

I shall inform the House of the outcome of the reviews.

Prime Minister

Special European Council

The Prime Minister (Mr David Cameron): I attended the special European Council held in Brussels on 16 July.

21 July 2014 : Column 103WS

This special Council had been called principally to discuss the appointment of a new President of the European Council to succeed Herman Van Rompuy when he completes his term later this year, and on the nomination of a new High Representative for Foreign Affairs and Security Policy to succeed Lady Ashton when the next European Commission takes office in November.

In discussion, it became clear that it would not be possible to reach consensus on either appointment at this point, and that further discussions would be required. A further special European Council will be held on 30 August, at which decisions are now expected.

The President-elect of the European Commission, Jean-Claude Juncker, joined the Council for a discussion of priorities for the European Union for the next five years. He confirmed his commitment to the principle that the institutions of the European Union should concentrate their work in areas where the Union can add real value; and that other areas should be left to member states.

The focus of much discussion at this Council was the ongoing crisis in Ukraine. I made it plain before the Council that I believed that a clear signal should be sent to Russia that it must change course and act to bring the crisis to an end. The Council agreed that Russia had not adequately implemented the steps set out in its 27 June conclusions. As a consequence, it agreed to expand the restrictive measures already adopted. In addition to the steps decided immediately, it tasked the Foreign Affairs Council to pursue further action by the end of this month. I would expect the European Council to return to this issue on 30 August if the situation in Ukraine has not improved by then.

The Council also discussed the current violence in Israel and Gaza. It condemned the firing of rockets from Gaza into Israel and the indiscriminate targeting of civilians. It called on both sides to de-escalate the situation and to end the suffering of the civilian population.

Copies of the Council conclusions have been placed in the Libraries of both Houses.

Electoral Commission Committee

Electoral Commission Report (May Elections)

Mr Gary Streeter (South West Devon) (Representing the Speaker’s Committee on the Electoral Commission): The Electoral Commission has today published its report on the European parliamentary elections in the UK and the local government elections in England and Northern Ireland that took place on 22 May 2014.

The Commission reports that overall the elections were well run and there were high levels of voter confidence in the administration of the elections. Nearly nine in 10 voters surveyed (88%) were confident that the elections were well run, and nearly all were satisfied with their experience of voting, whether in person or by post, reflecting positively on the work of local authority returning officers and their staff.

In the run-up to the elections, the Commission worked closely with both returning officers and the police in those local authorities it had identified as being at greater risk of allegations of electoral fraud, to ensure appropriate measures were put in place to prevent and detect it. The Commission reports that, across the UK

21 July 2014 : Column 104WS

as a whole, there have been fewer allegations of electoral fraud than at previous polls, and where allegations have arisen the Commission is confident that the police have taken swift and robust action to investigate them.

These elections were the first time that the Commission’s new performance standards framework for returning officers was used at a set of polls. As part of the framework, the Commission monitored the work being undertaken by regional returning officers and a principally risk-based sample of local returning officers in Great Britain to plan for and deliver the polls.

There were a small number of instances where the Commission intervened to recommend minor improvements. However, there were two issues with the printing of election stationery which led the Commission to conclude that the returning officers at Reading borough council and Reigate and Banstead borough council did not fully meet its performance standards.

Despite the high levels of voter confidence overall, the Commission’s report sets out some problems that occurred during the elections.

There were concerns about delays affecting the election count in the London borough of Tower Hamlets. The Commission reported separately on these problems ahead of the countermanded poll held in one of the wards in the borough on Thursday 3 July. The Commission was pleased to see that the returning officer has already started to take forward its recommendations.

More broadly in Tower Hamlets, there were concerns raised about campaigners outside polling stations, where some voters felt intimidated by the presence of campaigners and what they felt were aggressive appeals for them to vote for particular candidates.

In other areas of the UK some voters at the elections were not able to vote by post because of the way campaigners handled postal vote applications. The Commission believes that campaigners should not handle completed postal vote application forms or postal ballot packs and will be consulting political parties over the coming months to seek their agreement to a revised voluntary code of conduct for campaigners by November this year, in time for the May 2015 UK parliamentary general election.

The Commission’s report also notes issues with party descriptions on ballot papers at the elections. Candidates standing for political parties and the parties themselves are allowed to use these descriptions on ballot papers, provided the Electoral Commission has registered the description. In the light of the issues highlighted in the report, the Commission now wants the Government to consider the case for changing the current rules, with a view to reducing the risk of voter confusion.

The report makes a number of recommendations for changes which will be an important part of preparing for the May 2015 UK parliamentary general election and for the next European parliamentary elections in 2019. But there will be a range of other preparations that the Commission will want to see in place well before May 2015. The Commission will make these clear over the next few months as it issues further guidance and advice for returning officers, electoral registration officers and their staff; and for political parties, candidates and others who plan to campaign.

Copies of the Commission’s report have been placed in the Library and it is also available on its website at: www.electoralcommission.org.uk.