House of Lords
(11 years, 10 months ago)
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Introduction: The Lord Bishop of Coventry
(11 years, 10 months ago)
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Introduction: Lord Williams of Oystermouth
(11 years, 10 months ago)
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Thames Tideway Tunnel
(11 years, 10 months ago)
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Lord Berkeley
To ask Her Majesty’s Government what will be the costs to the consumer of the Thames Tideway Tunnel.
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley)
My Lords, for Thames Water’s 13.8 million domestic sewerage customers, the tunnel is estimated to have an average maximum annual impact on bills of £70 to £80 at 2011 prices. This includes the cost of financing the project. The exact profile and duration of the cost to customers continues to be analysed. Spread over several decades, bills could gradually be affected from 2014-15, with the maximum impact estimated from around 2019.
Lord Berkeley
I am grateful to the Minister, and glad that they are still looking at the finances. Does he agree that if Thames Water had paid a reasonable dividend appropriate to a utility for the past 12 years and Macquarie Bank had not taken £48 million a year on management fees, this project could have been funded out of Thames Water’s assets without any extra charge on the customers? Will he therefore instruct the regulator Ofwat to look at all this again—to look at alternatives such as a sustainable drainage system—so that customers can perhaps get a reduction in their fees rather than this horrendous increase?
Lord De Mauley
My Lords, Ofwat has ensured that the regulatory ring-fence in Thames Water’s licence was tightened following its acquisition by Macquarie. The ring-fence licence conditions on Thames Water already include a condition requiring Thames Water to ensure that its dividend policy will not impair the company’s ability to finance its functions. As for alternatives to the tunnel, studies have looked at all kinds of alternatives over the past decade but none has shown a viable cheaper solution that would simultaneously address the current sewer overflow problems within a decade, deliver value for money and meet environmental objectives.
Lord Stoddart of Swindon
My Lords, this project has been known about for decades, I imagine, but over the past 10 years Thames Water has paid out £3.5 billion to shareholders. Should it not have known that that sort of money should have been saved to provide this essential ring system in London? Why should every customer of Thames Water pay for this project? Would it not be better if Thames Water did not pay any dividends for the next 10 years at the rate that they paid in 2012, and that covered the whole of the cost of the new project?
Lord De Mauley
What an interesting suggestion, my Lords. The standard model in the water sector is for customers to pay the financing costs of the company’s capital expenditure on underground assets together with a charge to reflect expenditure required to keep them in a serviceable state. I do not think that we would find investors if we were not able to finance it in this way.
Lord Stoneham of Droxford
My Lords, over the past two years Thames Water has paid out £650 million in dividends and £100 million in management fees. Can the Minister assure the House that Thames Water is not simply a private equity vehicle designed to save tax for its overseas investors at the expense of London customers and UK taxpayers, who are supposed to stump up for its infrastructure investment?
Lord De Mauley
Yes, my Lords; Thames Water pays its tax. All UK companies are allowed to claim capital allowances when they spend on capital investment programmes. Tax relief is allowable against the capital expenditure incurred with the aim of encouraging investment by companies. Water and sewerage companies have significant capital programmes in comparison with their revenues. They therefore benefit from tax allowances proportionately more than others. HMRC remains vigilant in ensuring that companies operating within the UK pay the tax they are legally obliged to pay.
Lord Bradshaw
Does my noble friend believe that the people who privatised our utilities expected that within 10 years they would be in the hands not only of foreign administrations and foreign countries but actually of the Governments of those countries? We have denationalised here and renationalised from abroad. Surely the regulator should get a lot tougher on these people who are making absolute fools of people who have to subscribe increasing sums to the maintenance of essential services.
Lord De Mauley
My noble friend makes a fair point, my Lords, but we believe in free capital markets.
Lord Harris of Haringey
My Lords, does the answer to the noble Lord, Lord Bradshaw, mean that the Government are indifferent to the extent of foreign ownership of our critical national infrastructure? Are they indifferent to the possible implications of that?
Lord De Mauley
No, my Lords, we are not indifferent; we take these things very seriously. As I say, however, we believe in free access to our capital markets.
Lord Lea of Crondall
My Lords, has the noble Lord seriously considered whether he has given adequate answers to all the questions that have been asked in the last five minutes? Will he write, and put in the Library, a full letter on the considerations in the Government’s mind about where we go from here on all these matters?
Lord De Mauley
I cannot think of anything that I would like to expand upon but I will look at the record and, if there is anything, of course I will write.
Lord Bowness
My Lords, I apologise to my noble friend for not giving him advance notice of this question. My understanding is that properties not connected to mains drainage do not pay sewerage charges. By analogy, are those properties within the Thames Water area which have no physical benefit from this proposal actually liable to pay the charges, or should there not be the equivalent of what used to be described as differential precepts? I declare an interest as somebody who lives in a property that may be in that kind of position.
Lord De Mauley
My Lords, my understanding is that those who are not connected and not currently paying sewerage charges will not pay this charge. If that is not correct, I will write to my noble friend.
Lord Knight of Weymouth
My Lords, I, too, live in a property that may be affected by the construction of the tunnel and I, too, have not given advance notice of my question to the Minister.
Although I see no other option but to proceed with the project, I agree with my noble friend Lord Berkeley that the huge cost to the consumer is of great concern. How will the Minister ensure that, in the interests of consumers, there is proper parliamentary scrutiny—in this House and in the other place—of the cost, which may well rise, and of the funding vehicle, which has now, by ministerial answer, been guaranteed by the taxpayer?
Lord De Mauley
That is a fair point. Anything that needs to come to Parliament will, of course, do so. If there is anything else that the noble Lord and I think it would be appropriate to debate, we will put it up for debate.
NHS: Liverpool Care Pathway
(11 years, 10 months ago)
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Baroness Knight of Collingtree
To ask Her Majesty’s Government what procedures will be adopted in carrying out the NHS inquiry into the Liverpool Care Pathway announced on Monday 26 November 2012.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, as we announced today, the noble Baroness, Lady Neuberger, has been appointed to oversee the review of the Liverpool care pathway and is currently determining its procedures. The review will examine how the Liverpool care pathway is used in practice, and will look in particular at the experience of the Liverpool care pathway by patients, families and health professionals, as well as considering the role of financial incentives in its use. It will report by the summer.
Baroness Knight of Collingtree
My Lords, there will be very much satisfaction at the appointment of the noble Baroness concerned as chairman. Does my noble friend agree that this inquiry was set up following the receipt of more than 1,000 complaints from relatives of patients who had been put on the Liverpool care pathway, and that the Government are not ignoring their complaints, as those about Stafford were avoided some time ago? Is it acceptable that, out of 130,000 people who die yearly on the pathway—everyone who is put on it—only half are told that they are being put on it and neither they nor their relatives are allowed to know or complain that that is the case?
My noble friend the Minister is very widely respected for his fairness. Will he now consider attending a meeting sponsored by five Peers and a Bishop and addressed by two professors, two consultants and patients’ representative, to hear the case against what is going on?
Earl Howe
My Lords, I am grateful to my noble friend for her endorsement of the appointment of the noble Baroness, Lady Neuberger, whom the whole House greatly respects. She is right that after seeing recent criticisms in the media and having received a great many letters in the department, the Minister of State for Care and Support, my honourable friend Norman Lamb, held a meeting at the end of November with patients, families and professionals, both supporters and opponents of the Liverpool care pathway. At that meeting, he announced his decision that there would be an independent chair to oversee a review of the experience of the pathway. However, it is important to emphasise that the pathway itself has not been called into question but, rather, how it is being used. My noble friend is right to draw attention to the concerns around the lack of engagement with patients and their families, which is often a feature of the complaints received.
Lord Walton of Detchant
My Lords, does the Minister accept that the principles of the Liverpool care pathway, when precisely defined and carefully applied at the right time and in the right circumstances, make an invaluable contribution to the care and passing of individuals with terminal illness? In light of the circumstances referred to by the noble Baroness, does he further accept that the unfortunate recent publicity has been the result of circumstances in which those principles have been misinterpreted and misapplied?
Earl Howe
Yes, my Lords. The LCP, if I may use the abbreviation, is internationally recognised good practice as a framework for managing care for people in their last few days or hours of life. It was created as a way of bringing hospice-style care into hospitals and helping staff who may not be palliative care specialists to provide appropriate care to allow people to die in comfort and with dignity. However, we have consistently made clear in guidance for implementation that the pathway cannot replace clinical judgment and it should not be treated as a simple tick-box exercise. I am afraid that, from the complaints that have been received, that sometimes appears to be what has happened.
Baroness Browning
My Lords, I, too, welcome the appointment of the noble Baroness, Lady Neuberger; I am sure that we all have confidence in her as chair of this review. Can my noble friend confirm that the terms of reference will specifically make sure that a direct comparison is made between what is appropriate in terms of the expertise and continuity to be found in the hospice movement and the rapid changes of staffing, including bank staff used in general wards of general hospitals?
Earl Howe
I am grateful to my noble friend for drawing attention to a very important point. It has always been emphasised in connection with the LCP that to ensure that it is used properly it is important that staff receive appropriate training and support, and that relevant education and training programmes are always in place. In view of the degree of staff turnover to which my noble friend refers, I am confident that the noble Baroness, Lady Neuberger, will have that fact in her sights.
The Lord Bishop of Exeter
My Lords, does the noble Earl agree that if there is to be full confidence in what is undoubtedly a useful clinical tool that has helped many thousands of people to experience better care in the last hours and days of their life, non-clinical priorities in the use of the pathway, especially financial priorities, must be eradicated, and every patient should be treated solely according to their needs? Does he further agree that it would be far better to link CQUIN payments to staff training in the use of the pathway, rather than the numbers of patients being placed upon it?
Earl Howe
My Lords, once again, I am sure that the noble Baroness, Lady Neuberger, will wish to look at that very issue. The CQUIN payment framework that the right reverend Prelate mentioned was designed to incentivise good practice, and the LCP is considered internationally to be best practice. In one sense, it is therefore logical that the two should be combined. It is equally important for me to emphasise that the Department of Health has not attached any set financial targets to the LCP; on the other hand, some commissioners in the NHS have introduced local incentives. The way in which those incentives have been applied should be the subject of close attention.
Baroness Jolly
My Lords, the Liverpool care pathway is widely used, but some care providers choose to use a slightly different pathway. Will my noble friend confirm that all similar pathways will be included in the inquiry led by the noble Baroness, Lady Neuberger?
Earl Howe
I will be happy to speak to the noble Baroness about that. I was not aware that she had that in mind. I do not think that there would be an objection on anyone’s part if she did, but it will really depend on the extent to which there is widespread concern about the use of those other pathways.
Health: HIV Strategy for England
(11 years, 10 months ago)
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Lord Collins of Highbury
To ask Her Majesty’s Government what plans they have to publish a cross-departmental HIV Strategy for England, in line with the Political Declaration made at the United Nations General Assembly in 2011.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, tackling HIV remains a priority for the Government. We believe the way forward is to develop a framework that covers both HIV and broader sexual health issues. We therefore plan to publish a policy document on sexual health and HIV shortly.
Lord Collins of Highbury
I thank the Minister for that response. One issue that is obviously of big concern is testing. Half of the people diagnosed with HIV are diagnosed late. With the commissioning of HIV testing being highly fragmented under the new NHS arrangements in England, how will the Government ensure that HIV testing recommendations from NICE and the British HIV Association are implemented consistently across the country?
Earl Howe
My Lords, the new commissioning arrangements will allow each commissioning organisation to play to its strengths and will mean better services for patients. Local authorities will be able to link sexual health provision into other public health provision and other services such as family support and social care. HIV treatment is complex, specialist and expensive. That is why the NHS Commissioning Board will commission the NHS to provide treatment. During the White Paper consultation there was wide support for that. The key will be for local health and well-being boards and Public Health England to have a role in supporting integration at a local level to make sure that the commissioning of services is joined up in all parts of the country.
Lord May of Oxford
My Lords, the Minister will undoubtedly be familiar with the relatively recent and very thoughtful Select Committee report from this House urging specific measures aimed at reversing the regrettable rise in the incidence of new infections of HIV. Already one of those measures has been mentioned; not all of them are highly technical. Some of them address the fact that, in several studies, young people today show themselves to be much less well informed about sexually transmitted infection than in the past. Could the Minister assure me that these underlying problems outlined in that report will be taken account of in the proposed cross-departmental strategy and if not, why not?
Earl Howe
My Lords, the noble Lord is right to draw attention to the need for targeted prevention messages in this area. Following a competitive tender last year my department awarded the Terrence Higgins Trust a contract worth £6.7 million for three years. Known as HIV Prevention England, the programme targets gay men and African communities, the groups that remain the most at risk of HIV in the UK. That work includes promoting HIV testing through the Think HIV campaign; primary prevention messages, which we must get to the right audiences; and developing the evidence base on what works in HIV prevention. That DoH programme, I emphasise, is in addition to work funded by the NHS and local authorities.
Baroness Hussein-Ece
My Lords, the Minister will be aware of the links between HIV and tuberculosis, and of how important it is that when we talk about HIV we also talk about TB. Are there any plans in the strategy that is mentioned to include TB, given that cases of both HIV and TB are on the rise?
Earl Howe
My noble friend is absolutely right to mention the connection between HIV and TB. The complexities that arise from comorbidity of that order are fully taken account of in the approach taken by both the health service and local authorities to the testing and treatment of HIV patients. The individuals attending a TB clinic are offered and recommended an HIV test as part of their routine care. This is applicable to all patients irrespective of age. NICE has issued guidelines which recommend the use of a specialist test for people with HIV, and if the test is positive a clinical assessment will be performed to exclude TB and consider treating latent TB infection.
Baroness Gould of Potternewton
My Lords, is the Minister aware of a recent study undertaken on behalf of the British HIV Association on the relationship between women with HIV and domestic violence, which shows that half the women interviewed have shared a lifetime of what is called intimate partner violence—IPV? In the light of that evidence, can the Minister indicate what action is being taken by government to raise awareness of this very serious level of violence against women with HIV and, secondly, whether there will be any routine screening to find out the level of IPV among these women? Furthermore, does he agree that if we had a national strategy for HIV, surely issues such as this and things such as unemployment, as well as other areas, could be taken into account?
Earl Howe
My Lords, the noble Baroness raises an extremely important issue about violence against women. There is a great deal of activity in my department designed to bear down on that and I should be happy to write to her about it. On the issue that she specifically alluded to at the end of her question, we think that, as most HIV is transmissible sexually, it makes much more sense to build that dimension into a sexual health strategy which embraces not only HIV but all transmissible sexual conditions.
Baroness Masham of Ilton
My Lords, is the Minister aware that there are many commissioning bodies for various aspects of HIV, such as CCGs, a commissioning board, local authorities, community nurses and voluntary organisations? Does he therefore agree that it is most important to have some strict guidelines and a strategy so that there is not a muddle?
Earl Howe
The noble Baroness makes a very good point. I can tell her that the sexual health policy document, which we will be publishing shortly, will set out our plans for improving sexual health generally, as well as our plans for offering support to women facing unwanted pregnancy. It is an important document. It is crucial that we take the time to get it right and make it clear that, as she points out, all the commissioners in the system need to work together with the benefit of advice not only from the commissioning board but from local health and well-being boards at a local level.
NHS: Reconfiguration of Services
(11 years, 10 months ago)
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Lord Hunt of Kings Heath
To ask Her Majesty’s Government what the implications are for the future reconfiguration of NHS services in the light of the decision by the Office of Fair Trading to refer the proposed merger of hospitals in Dorset to the Competition Commission.
Lord Hunt of Kings Heath
My Lords, I beg leave to ask the Question standing in my name on the Order Paper and refer noble Lords to my health interests in the register.
The Parliamentary Under-Secretary of State, Department of Health (Earl Howe)
My Lords, patients’ interests must remain the paramount consideration in any NHS reconfiguration, including merger. We expect the competition authorities to consider the costs and benefits of proposals and to make a final decision based on the balance of impact on patients.
Lord Hunt of Kings Heath
My Lords, the noble Earl will recall that the Health and Social Care Bill was amended to emphasise the importance of the integration of services. This merger was designed to integrate services and to provide a higher quality of care in the hospitals concerned. Does he recognise that this intervention by the OFT, which knows virtually nothing about the health service, will send a signal throughout the National Health Service that the ideology of competition is graded as being more important than either the integration of service or the quality of service? Can we expect the Government to send a signal to the OFT that it should desist? Otherwise, this will cause great concern in the National Health Service.
Earl Howe
My Lords, the referral of this merger proposal by the OFT to the Competition Commission is not at all a result of the measures brought in by the current Government; it is a result of the provisions of the Enterprise Act 2002. Even if there had been no Health and Social Care Act last year, we would have found ourselves in this situation. This is the very first time that a proposed merger of two foundation trusts has raised competition issues and there is no doubt that the OFT would have had an interest whatever the situation. In the Act we avoided double jeopardy, whereby the Co-operation and Competition Panel, set up by the previous Administration, might have determined its view on this merger and then there would have been a second-guessing process by the competition authorities. We have avoided that and that is very positive. Aspects of this merger obviously impact on patients and patient choice, and it is right, in the judgment of the OFT, that scrutiny should be given to the matter.
Lord Marks of Henley-on-Thames
My Lords, will my noble friend confirm that before the decision was taken to refer the proposed Dorset merger to the Competition Commission Monitor’s advice was obtained by the OFT, as it should have been pursuant to Section 79 of the 2012 Act? Is it right that in giving that advice Monitor’s duty was to have regard to the quality of healthcare services? If that is right, is this not an example of this part of the 2012 legislation working in precisely the way it was designed—putting patient care at the heart of decision-making in this difficult area of hospital mergers?
Earl Howe
I am grateful to my noble friend and I can give the confirmation that he seeks. Monitor’s advice was sought and obtained by the OFT. He is quite right that that it is one of the benefits from the Health and Social Care Act. In situations of this kind we expect Monitor and the NHS Commissioning Board to engage with the Competition Commission on FT mergers but before that with the OFT because Monitor, as a health-specific regulator, has the insight into the considerations that bear most closely on the interests of patients.
Lord Winston
My Lords, does the noble Earl agree that, whatever the explanation, the involvement of the OFT suggests an increasing privatisation of the health service? Given that the health service so often does not cost out individual treatments per patient very successfully, that raises the issue of competition between private providers in such areas as this. Would the noble Earl be kind enough to comment on that?
Earl Howe
I do not agree with the noble Lord. Competition issues arise within the health service and the matter in the noble Lord’s Question is specifically a health service issue. There are, of course, competition issues involving the independent sector and the charitable sector as well but that is not the focus here. It was the previous Government who recognised the benefits of competition for patients. Our attitude to it is very pragmatic. The key objective for commissioners is to ensure that patients receive the best possible services irrespective of whether they are from the public, voluntary or private sectors. It is for commissioners working with patients to decide where competition is appropriate. It is a means rather than an end in itself.
Earl Howe
I am aware of that issue. It is very much in the sights of Monitor as it conducts the fair playing field review which, as the noble Lord will remember, was the product of an amendment proposed by the noble Lord, Lord Patel of Bradford, and passed in your Lordships’ House. The report that will ensue from that commitment by the Government will be published later this year and I am quite sure it will embrace the point mentioned by the noble Lord.
Business of the House
(11 years, 10 months ago)
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Lord Hill of Oareford
That Standing Order 40 (Arrangement of the order paper) be dispensed with on Thursday 17 January to allow the motion standing in the name of Baroness Hollis of Heigham to be taken before the motion standing in the name of Lord Smith of Leigh.
The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)
I beg to move the Motion standing in my name on the Order Paper.
Lord Forsyth of Drumlean
My Lords, there are reports in the blogosphere that the Prime Minister has suspended Cabinet collective responsibility for the purposes of the Boundary Commission matters. Does this apply to consideration of the remaining stages of the Bill, following the extraordinary spectacle of Liberal Ministers voting against the Government’s measure last night?
Lord Hill of Oareford
My Lords, I assume that my noble friend meant to raise that question on the second Motion standing in my name. We are still on the first Motion. For the convenience of the House, I can take the matter early. The situation is that the Prime Minister and the Deputy Prime Minister, as leaders of their respective parties, have agreed that they will take different positions on this issue. That is in line with the approach that they have taken on a number of other specific issues. It does not affect collective responsibility for all other matters. Due to the specific agreement on this issue, it does not offend the doctrine of collective responsibility.
Business of the House
(11 years, 10 months ago)
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Lord Hill of Oareford
That Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Wednesday 23 January to allow the remaining stages of the Electoral Registration and Administration Bill to be taken that day.
The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)
I beg to move the second Motion standing in my name on the Order Paper.
Lord Forsyth of Drumlean
My Lords, as we are now on the correct Motion, perhaps I could ask my noble friend this question: when he says that it has been agreed that the Prime Minister and the Deputy Prime Minister will differ as regards collective responsibility, is that solely limited to the issue of boundaries, or does it apply to the remaining stages of this Bill?
Lord Hill of Oareford
I do not think that I have a huge amount to add to the first answer that I gave to my noble friend. The Prime Minister and the Deputy Prime Minister have taken their respective positions and that does not offend against the principle of collective responsibility. That issue will now move forward.
Prisoner Voting
(11 years, 10 months ago)
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Lord Hill of Oareford
That it is expedient that a joint committee of Lords and Commons be appointed to consider and report on the draft Voting Eligibility (Prisoners) Bill presented to both Houses on 22 November 2012 (Cm 8499).
Disabled Persons’ Parking Badges Bill
(11 years, 10 months ago)
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Public Service Pensions Bill
(11 years, 10 months ago)
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Lord Newby
Lord Newby
My Lords, this group of amendments is concerned with the recommendation of the noble Lord, Lord Hutton, that each public service pension scheme should have an advisory group.
The Deputy Chairman of Committees (Baroness Anelay of St Johns)
My Lords, we are joined seamlessly at the hip—my noble friend Lord Forsyth will be pleased. On this occasion, I hope that noble Lords will feel it right to leave the Chamber quietly so that the aficionados of the pensions Bill can continue with their work.
Lord Newby
My Lords, as I was saying, this group of amendments is concerned with the recommendation of the noble Lord, Lord Hutton, that each public service pension scheme should have an advisory group. Although these have always been dealt with administratively, we have listened to concerns raised in another place and proposals from stakeholders. As a result, we have decided to make these groups plain on the face of the Bill.
Amendment 45 introduces a new clause to require scheme regulations to establish a scheme advisory board. The central purpose of the scheme advisory board will be to consider and advise on the desirability of future changes to the schemes. The board will advise the responsible authority on any matter that it asks the board to consider, whether wide-ranging or focused on a single issue. The board’s role will supplement, rather than replace, the role of other persons and bodies in responding to consultations under Clauses 11, 19 or 20.
The scheme advisory boards may play an additional role in the locally administered police, fire and local government schemes. In those schemes, the board may also advise the scheme managers and pension boards when such advice is requested or on their own initiative. Subsection (2) provides that the board can advise them on the effective and efficient administration of the scheme, any connected scheme and any pension fund that relates to them.
This amendment is in light of proposals that employer and employee representatives have put forward in respect of the local government scheme in England and Wales. While the precise role will be a matter for scheme regulations, we envisage that the locally administered schemes will want to provide for the advisory board to offer central support to scheme managers. That advice is likely to cover matters such as best practice and ensuring consistent approaches to the management of the schemes.
The advisory board will identify policy and operational issues that need to be resolved, either by better practices at a local authority level or perhaps through changes to scheme regulations or guidance. In turn, the advisory board will be able to advise the relevant parties on how changes should be made to improve the management and administration of the schemes and their pension funds. For example, there will almost certainly be an advisory board role to agree and advise on the interpretation of the legislative requirements—potentially around co-commissioning of expert advice and systems—and the co-ordination and co-commissioning of services. It is likely that, for the funded local government scheme, it will monitor fund performance across the pension funds. The employer and employee representatives in that scheme envisage a role to support scheme managers and pension boards to improve fund management across the scheme. These amendments allow for that.
The scheme advisory board will not have a separate role in advising the scheme managers and pension boards in the nationally administered schemes. That is not needed in those schemes. Unlike the locally administered schemes, the scheme manager and responsible authority will be the same person. Importantly, the amendments maintain a clear separation between the advisory board’s policy role and the scheme manager and pension boards’ responsibilities for the management, administration and governance of the scheme. The noble Lord, Lord Hutton, highlighted the importance of this separation of roles in his report.
Finally, the amendment requires that scheme advisory board members must not have a conflict of interest that could prejudice the way they undertake their role. This does not prevent a scheme member, or an employer or employee representative, being a board member. Those are not interests that would prejudice the way they undertake the role—indeed, they are instead interests that support such an undertaking. I commend these amendments to the Committee.
Baroness Donaghy
My Lords, I want to speak to Amendment 45. The Local Government Association and the relevant unions welcome this amendment as it ensures an effective separation of responsibilities for boards at local level and at national level, as was required. While it is a positive step, a concern for the LGA and the unions is the scope of the role of the board as contained in the amendment, particularly the nature of the advice which the scheme advisory board can offer. The current wording of Amendment 45 restricts this advice to that of desired changes to the scheme. The LGA and unions believe that the introduction of a scheme advisory board offers the potential for advice, not only on scheme changes but also other areas including scheme governance, technical advice and cost management. Will the Minister comment on this?
Lord Hutton of Furness
My Lords, I briefly add to the welcome that my noble friend has given to this amendment. I am very pleased the Government have brought forward this amendment; as the Minister has said, it is in line with my report and its recommendations and so I welcome it unreservedly.
I have one question that the Minister may be able to answer; I hope he will forgive me for being a little technical. I have noticed there is a different definition of conflict of interest in his new clause to that in Clause 5. The definition in Amendment 45 does not include any membership of a connected scheme; is that a deliberate change in the definition or does he have further thoughts about the matter?
Lord Newby
My Lords, on the noble Baroness’s question about the broader scope for the local authority scheme, I direct her to subsection (2) of Amendment 45, which states:
“Where the scheme manager of a scheme mentioned in subsection (1) is a local authority or a committee of such an authority, the regulations may also provide for the board to provide advice (on request or otherwise) to the scheme manager or the scheme’s pension board in relation to the effective and efficient administration and management of … the scheme”.
That goes beyond simply the scheme content. It relates to the way that the scheme is run as well. There is already a much broader role in respect of the local authority scheme than for the nationally administered schemes.
I hope that the noble Lord, Lord Hutton, will not mind if I write to him to answer his question.
Lord Newby
“Scheme advisory board
(1) Scheme regulations for a scheme under section 1 which is a defined benefits scheme must provide for the establishment of a board with responsibility for providing advice to the responsible authority, at the authority’s request, on the desirability of changes to the scheme.
(2) Where the scheme manager of a scheme mentioned in subsection (1) is a local authority or a committee of such an authority, the regulations may also provide for the board to provide advice (on request or otherwise) to the scheme manager or the scheme’s pension board in relation to the effective and efficient administration and management of—
(a) the scheme and any statutory pension scheme that is connected with it, or(b) any pension fund of the scheme and any connected scheme.(3) A person to whom advice is given by virtue of subsection (1) or (2) must have regard to the advice.
(4) The regulations must include provision—
(a) requiring the responsible authority—(i) to be satisfied that a person to be appointed as a member of the board does not have a conflict of interest, and(ii) to be satisfied from time to time that none of the members of the board has a conflict of interest;(b) requiring a member of the board, or a person proposed to be appointed as a member of the board, to provide the responsible authority with such information as the authority reasonably requires for the purposes of provision under paragraph (a).(5) In subsection (4)(a) “conflict of interest”, in relation to a person, means a financial or other interest which is likely to prejudice the person’s exercise of functions as a member of the board (but does not include a financial or other interest arising merely by virtue of membership of the scheme).
(6) In this Act, a board established under this section is called a “scheme advisory board”.”
Lord Eatwell
“Pension policy groups
(1) The Treasury shall make directions providing for the establishment of a pension policy group for each scheme established under section 1.
(2) The pension policy groups will consider and advise on proposals to make significant changes to scheme regulations.
(3) Treasury directions under subsection (1) shall establish a single pension policy group relating to all schemes for local government workers.”
Lord Eatwell
My Lords, this also refers to administrative matters concerning particular pension schemes. The amendment would implement my noble friend Lord Hutton’s recommendation that pension policy groups should be established for each scheme at national level. To quote my noble friend’s report, he said that,
“even if all schemes have a pension board in future, there will still be a need for separate pension policy groups to consider at national level major changes to scheme rules”.
Many schemes already have such groups or bodies at national level, such as the National Health Service and Civil Service pension scheme governance groups, the teachers’ pensions committee, the Police Negotiating Board, the Firefighters’ Pension Committee and so forth. Part of the role of these groups would, as my noble friend recommended, be to ensure that information about key proposals for change and related costs are publicly available. It is very important to maintain confidence in these proposals to ensure good relations with scheme members and the smooth implementation of any changes.
My noble friend’s report also notes that these existing bodies were often established as part of the consultation and negotiation machinery for handling pensions as an element of a remuneration package, and have member and employer representation as appropriate. The appropriateness of member representation would, we hope, be taken into account if this amendment is accepted and pension groups established.
When this issue was considered in another place, the Minister replied to my honourable friend Mr Chris Leslie, who put forward a similar amendment. Mr Sajid Javid said:
“We will give further consideration as to whether it would be necessary or appropriate for the Bill to provide for a scheme-level group for the local government scheme in England and Wales”.—[Official Report, Commons, Public Service Pensions Bill Committee, 22/11/12; col. 453.]
It was on the basis of that commitment by the Minister in the other place that my honourable friend withdrew his amendment.
I would like to hear from the Minister this afternoon the nature of the consideration given by the Government, which the Minister in another place committed the Government to, and why they have not brought forward their own amendment to place the position of pension policy groups in the Bill. After all, if the advisory measures that we have just passed are administrative measures and are in the Bill, these are also essentially administrative measures, as Mr Javid pointed out, and surely they should be in the Bill as well. I beg to move.
Lord Whitty
I fully support the amendment put down by the Front Bench. However, with regard to the arrangements for the Local Government Pension Scheme, would it not have been better if the Government had set out in one place the totality of the arrangements that were intended for the local government scheme, rather than attempt yet again to generalise the provisions to cover most of the public sector schemes? It is probably too late for the Government to do that; in which case, I hope that they will support my noble friend’s amendment.
Lord Newby
My Lords, I am genuinely confused. In our view, Amendment 45 establishes pension policy groups. I do not know what the noble Lord’s Amendment 46 will do that our Amendment 45 does not. What is the function of his groups that goes beyond the functions of our scheme advisory board? In tabling this amendment, we thought that we had done exactly what my colleague in another place suggested, which was to take it away and bring forward proposals that did what the noble Lord wanted. My view was that our amendment not only does what the noble Lord wants but goes rather further, in providing for the scheme advisory board to advise the responsible authority on any proposed change in the scheme regulations, not just significant changes.
Lord Eatwell
Perhaps I might respond to the point that the noble Lord has just made. I think that he is being a bit obtuse. Amendment 45 refers to an advisory board to be established for each scheme; it does not refer to general national boards, which would cover a range of schemes that may be within a particular area of concern. This is a different animal. If he thinks that it is the same, it would have been enormously helpful if he had made it clear when he introduced the amendment, which he failed to do.
As I read this, the scheme advisory board refers only to defined benefits schemes. We know that there a small number of defined contribution schemes. Why are they left out? Amendment 45 also states that:
“Scheme regulations … must provide for the establishment of a board”,
which suggests a board related to each scheme, not the overall national bodies referred to in Amendment 46.
Lord Newby
Perhaps I may quote the noble Lord’s Amendment 46:
“The Treasury shall make directions providing for the establishment of a pension policy group for each scheme”.
That is what Amendment 45 says. What is the difference?
Lord Eatwell
Perhaps we are arguing over the definition, but it seems to me that the whole issue of the policy boards was that they were national boards. If we look at the actual boards that have been established, they are national boards, which have a national overview. If that is what was meant by Amendment 45, I am very happy. However, it would have been enormously helpful if the Minister had said so when introducing his amendment.
Lord Newby
I apologise to the noble Lord. There is no doubt in my mind that when government Amendment 45 says:
“Scheme regulations … must provide for the establishment of a board”,
for each scheme, that is the same definition of “scheme” as in Amendment 46. I am sorry if I did not make that clear to the noble Lord. I made in error the assumption that it was relatively straightforward.
Lord Eatwell
“(3A) A scheme under section 1 which replaces a defined benefit scheme may only be established as a defined benefits scheme.”
Lord Eatwell
My Lords, we come now to a series of amendments that have a common theme. We are all aware that the nature of the new structures defined in the Bill will involve a significant change in the terms and conditions of employees in the public sector and, to be frank, in many cases a deterioration of those terms and conditions. The Bill is the outcome both of the careful consideration made by my noble friend in his report and of the negotiations between the Government, the Local Government Association, the trade unions and so on, which reached a deal. What is extraordinary about the series of clauses we are about to consider is that one side of the deal has been put in the Bill—that is, the Government side—while the positions gained by the trade unions in the negotiations have been left out. Instead, those are supposed to be covered by the Government’s declaration that they have no intention of changing things. The Minister at the Dispatch Box can say quite happily that everything will be all right, even though this is a Bill which is intended to last for 25 years and no Administration can bind their successors.
Amendment 47 is characteristic of the problem to which I have just referred. The Government promised to provide public sector workers with defined benefit pension schemes in the form of career average pensions. That was the position put in place so skilfully by my noble friend. The striking thing is that the Bill does not honour that commitment because in Clause 7 it provides that schemes created under the Bill can be defined benefit, defined contribution or,
“a scheme of any other description”.
The only restriction on the type of scheme is that it cannot be a final salary scheme, and that of course was the important gain made by the Government in the deal. Where is the gain for the other side? This greatly undermines the security and confidence that public sector workers can have in their pension provision as they will know that this Bill allows the Government to renege on their promise to replace final salary schemes with career average defined benefit schemes. This amendment merely puts the Government’s promise on a statutory footing.
Noble Lords may think that I am exaggerating the concern that workers may feel about the possibility of the Government reneging on their side of the deal, but let me refer to the speech made by the noble Lord, Lord Newby, at Second Reading where he says that,
“although the Government have absolutely no intention to change the basis of the schemes, it makes sense for a piece of legislation which we hope has a long life itself to allow flexibility in the future if there are unforeseen changes”.—[Official Report, 19/12/12; col. 1585.]
It does not make sense to create a structure in the Bill that could result in a reneging by one significant side of the deal which has been made on people’s pensions for the next 25 years. If, at some future stage because of changes in economic circumstances, pressures on the public purse or whatever it might be, it became necessary to rethink the position established by my noble friend in his report and say, “I am afraid that because of changes in the world, we cannot even maintain career average defined benefit schemes”, it is not appropriate that the removal of career average defined benefit schemes could be done just on the nod.
It is surely important that if that were to happen the Government of the day should come back to Parliament and say that circumstances have changed and that they have to make another major change to public service pensions. When a Minister stands up and says that they have no intention of doing so, the immediate thought is that they are going to do it. As the Government have received the agreement of all parties to the change in the structure of defined benefit schemes, they should keep their part of the deal and have in the Bill that the removal of a defined benefit scheme will result in its replacement by a newly designed one. I beg to move.
Lord Newby
My Lords, this issue has been debated in another place on a number of occasions. There is a technical problem with the amendment over the concept of “replacing schemes”, which is pretty difficult to express in law. The key thing here is not the drafting but the principle that is raised by the amendment.
I am pleased to be able to add my assurances to those of the Chief Secretary and the Economic Secretary in another place. The Government have no—zero—intention of replacing the defined benefit schemes that have been negotiated with different scheme designs. Officials and members’ representatives have worked very hard to ensure that these reforms are sustainable. I am confident that they will last for a generation. The Government would not have invested so much time and energy in developing and legislating for the mechanisms in the Bill if we were intending to do anything other than retain defined benefit schemes. It is not the case that these mechanisms could be amended on the nod. If any future Government wanted to move away from the current defined benefit system, they would have to go through the procedures in Clause 20.
However, that is not really the point. As I have made clear, there is no possibility of this Government wanting to replace the defined benefit schemes that we have worked so hard to develop. We therefore feel that this amendment is unnecessary and I hope that the noble Lord, Lord Eatwell, will withdraw it.
Lord Eatwell
My Lords, that is extraordinary. The noble Lord, Lord Newby, has simply reinforced the argument that I made. We are expected to accept assertions about intentions in the future and that that is to be enough to cover this particular circumstance. I accept that there may be difficult technical issues in drafting but that is not the point, as the Minister himself said.
The point is that those members who have given up their final salary defined benefit schemes, and reached a deal that agrees to the Government implementing career average defined benefit schemes, should have confidence in the Government keeping their part of the deal. It should not just be the Minister standing here and this Government but Governments stretching over the next couple of decades doing this. That confidence would rest in the commitment to maintaining a defined benefit structure.
What I hear from the Minister is an unwillingness to do that. All he will do is say, “I will give assurances”. How can he give an assurance for someone standing at that Dispatch Box, whoever it may be, in 10 years’ time? He cannot, so the point of this amendment, ill drafted though it may be, is to ensure that any Government of the day changing the status of pension schemes for so many of the public servants who make our lives worth while and secure would have to come back to Parliament with primary legislation to change the nature of the scheme. I did not hear any commitment on the part of the Government to do any such thing and to include such security in their pension provision for those who serve us so well. I shall look at the drafting, but we shall certainly return to this on Report. I beg leave to withdraw the amendment.
Lord Whitty
“( ) Where the change is negative, the order shall specify a zero increase.”
Lord Whitty
My Lords, I beg to move Amendment 48 and I support Amendments 49 and 50, which are in this group.
I appreciate that the Minister is a bit pained about this, but the need for this amendment is exactly the area to which my noble friend has just referred. There is distrust out there. In respect of this amendment, the distrust was blown out of all proportion by the sudden decision to replace RPI with CPI. I know that for those who run schemes it is quite a useful change as it has put funding on an easier basis, but for millions of pensioners it has reduced their pension expectations and caused considerable distress. What I am addressing here is the continued anxiety that the Government may once again change the terms on which it is based.
This amendment relates to the agreement to which my noble friend referred within the local government scheme between the local government unions and the LGA, which the DCLG and, by implication, the Treasury greatly welcomed. At the moment, the provision in this amendment is the understanding carried forward from the previous scheme in that agreement, which is not reflected in the Bill. Without the amendment, Clause 8 appears to allow the Treasury to change the revaluation again, more generally, from the CPI to another index that may in future be created by the Treasury. That would significantly alter the scheme costs and funding and the likely benefits for pensioners and future pensioners. The scheme design proposal in the agreement between the LGA and the trade unions clearly specifies that the revaluation of pensions shall use the CPI. In setting this revaluation, careful consideration was also given to the value of the accrual rate to be used and to the overall scheme design. In other words, it was a balanced package. The overall cost of the scheme contained that balance and should it change again, clearly those arrangements fall.
These designs were put forward to the employers and were agreed with the unions. There was a vote of union members and a whip around local government employers and, in the circumstances, there was overwhelming support for that agreement. The apparent ability, if we do not adopt this clause, of the Treasury to introduce changes in those arrangements and, in specific terms, to impose a decrease, in certain circumstances, in the accrued pension without consultation or agreement with those affected would seriously undermine the basis of that agreement. One of the benefits—undeserved, in one sense—of the Government’s approach to public service pensions in general was that it forced local government employers and unions to work out what they wanted for the long term. They have done so, and the Government endorsed that agreement. Part of that agreement is that there should be no such reduction and no change away from the CPI. Without provisions similar to those which my noble friend has moved and which are also included in very specific terms in this amendment, the issue of distrust will continue.
This is a relatively simple amendment, but I suspect from the puzzled look on the Minister’s face that he did not even think that the Bill, as it stood, would have allowed a negative adjustment, but it does; while the agreement between the unions and the LGA does not. I therefore hope, for clarification and for some reduction in the degree of distrust out there, that the Minister will be prepared to accept this amendment. I beg to move.
Lord Eatwell
My Lords, my noble friend Lord Whitty has reinforced the issue that I raised in the discussion of the previous amendment. The Government seem to be content to make a deal and then put only their gains in the Bill and cover everything else by declaration of intent. Revaluation is absolutely central to the maintenance particularly of a career averaging scheme. A career averaging scheme requires a structure of revaluation whereby past earnings are revalued to take account of inflation, and earnings related to earlier years of pensionable service will be subject to revaluation year on year—over a very considerable timeframe now that we are looking at a career average as opposed to a final salary scheme, where revaluation is a rather simpler process.
As it stands, the Bill makes this extraordinary statement with respect to revaluation:
“For the purposes of making such an order the Treasury may determine the change in prices or earnings in any period by reference to the general level of prices or earnings estimated in such manner as the Treasury consider appropriate”.
In other words: any way they like. It does not refer particularly to RPI or CPI; it can just be any way they think appropriate.
The amendment tabled in my name and that of my noble and learned friend Lord Davidson would simply require the Treasury to act reasonably in determining the system of revaluation or the particular index structure that it identifies. This imports into the Bill the objective test of acting fairly. If the Treasury plans to be unreasonable and unfair, I would be grateful if the Minister would tell us. It seems to me that the very least we can ask is that the Government—not just this Government but future Administrations—should act reasonably in their selection of a particular index or revaluation scheme. That is the purpose of Amendment 49, which is grouped with the amendment moved by my noble friend Lord Whitty.
Amendment 50 is, if you like, a belt-and-braces amendment. If the Minister were to accept that the Treasury will act reasonably, we would be quite happy to withdraw this amendment. If there is an arbitrary and unreasonable change in the methods of revaluation, the House has to approve such a change by an affirmative resolution. That is the sort of belt and braces standing behind this notion of reasonableness. However, if the Minister is content to say that the Treasury will act reasonably—which also imports, I am advised, the notion of acting fairly—we will be content to withdraw Amendment 50, which is there in case the Treasury is going to be unreasonable and unfair.
Baroness Donaghy
My Lords, I support this group of amendments. Lest my noble friend Lord Whitty and I are accused of running or producing the local government show, I want to deal with the Civil Service pension scheme in relation to this subject. According to the First Division Association, the current wording of the Bill does not reflect the discussions with the unions on revaluation, and seeks to extend the Treasury’s control far beyond that which is necessary and prudent. In the light of the FDA and others v the Secretary of State for Work and Pensions and others in 2012, there is no need for this clause to be in primary legislation, as it is better suited to the scheme regulations that will lay down the parameters for each distinct scheme. There is no similar clause setting out the terms of the indexation of pensions in payment, even though that element is consistent across all schemes.
Fundamental to the agreement reached with the Civil Service was the understanding that, as with indexation of pensions in payment, revaluation would never be negative. If the relevant index was negative, as has been the case in recent history, the figure of zero is used and there are no increases or decreases applied. This is vital to the confidence of pension saving. Just as pensions in payment should not fall from one year to the next, a principle held by successive Governments, so pensions being accrued should not similarly be reduced. That reflects existing practice.
The FDA was not informed at any stage that the Government intended to deviate from that approach in the new scheme, and to do so now would be a fundamental challenge to the agreement. The continued inclusion in the Bill of a provision allowing negative revaluation to occur could have a profound effect on member behaviour, and specifically opt-outs. Scheme members are likely to react to an announcement that their whole pension is to be revalued downwards as a result of a negative figure for the consumer prices index in September; their response is likely to be one of mass opt-out. This is a hugely counterproductive approach for the Treasury to take on the pretext of share and risk, and the cost of management mechanisms already accounts for inflation—yet the Treasury wants additional cost to be accepted by members through this provision, which puts participation at risk.
Lord Newby
My Lords, the amendment proposed by the noble Lord, Lord Whitty, raises the important question about how negative growth should be treated in these new schemes. For the revaluation of active members’ accruals each year the Treasury will lay an order which will establish the changes in earnings or prices. Scheme regulations will then use these changes when applying the revaluation mechanism that they decided on in their proposed final scheme designs. This approach mimics the current arrangements for the indexation of public service pensions in payment; it allows for the agreed scheme-specific variations, but also ensures that the underlying growth measures are transparent and consistent.
As the noble Lords have pointed out, this approach allows for the growth measure to be negative. I am not looking bemused because I did not realise that that was the case; we have never sought to hide that fact. Before explaining the rationale behind this, I should point out that brief periods of negative growth are unlikely to impact significantly upon the total value of any pension, in much the same way that brief periods of unusually high growth would not. After all, pensions are built up over a long period. I should remind the Committee that negative growth is exceptionally rare. It is not the case that in recent times the preferred index has been negative; the CPI has never been negative. The Committee should also be aware that this clause impacts only on those scheme members who are in employment, building up their pensions. It does not impact at all on pensions in payment.
However rare negative growth might be, if scheme members can benefit from the upside risk of revaluation—which they will, since there are no plans to cap revaluation rates—it would be unfair, in our view, for them to be shielded from any potential downside risk. Furthermore, by imposing a revaluation floor, scheme costs would rise and could lead to a breach of the cost cap set out in Clause 11. This is because previous scheme valuations based on standard, long-term growth assumptions would have essentially underestimated the cost of future accruals. If this were the case, it would be likely to lead to an increase in members’ contributions or a reduction in the scheme accrual rate. This would be unfair to anybody reaching pension age when positive growth returns. Their benefits would have been reduced to pay for those people who benefited from the revaluation floor.
It is only right that public servants receive their defined benefit pensions so that they can plan properly for their retirement. However, there is no logic in going beyond this by protecting their accruing benefits from any brief periods of deflation before their pensions come into payment. I believe the approach of directly tracking growth—with no caps or floors—is the fairest way forward. As I have said before, the noble Lord, Lord Hutton, described the idea of an indexation floor as an “asymmetric sharing of risk”. We agree. It is fair to say that the Local Government Pension Scheme does not specify, as the noble Lord, Lord Whitty, implied, that there will be no decrease possible within the scheme rules. My understanding is that it says that the basis of revaluation would be CPI.
Another point was raised about legislating for the measure. I am now coming on to the amendment of the noble Lord, Lord Eatwell, about whether we should legislate for a specific measure and whether the Treasury is being given too much discretion. It has obviously been the case within the last generation that the basis of measuring prices has changed: it has changed from the RPI to the CPI. Our expectation is that the CPI would continue for a very long time, but these things sometimes change and we therefore believe that the best way of dealing with it is in primary legislation. Incidentally, I am not implying that if the measure changed, the pensions would change. It would simply be that the scheme rules would have to reflect any new measure that came into general use.
Moving on to Amendment 49, it is worth re-emphasising that the annual revaluation will set out the general changes determined by the Government’s preferred measure, which is CPI at the present time. As I said, it is necessary to give a limited amount of discretion to the Treasury to determine the measures, but we do not believe that this is going to be a likely or common thing. It is apparent from the wording of the clause that the estimates of changes must be made in a reasonable and appropriate manner. Any attempt to exercise this discretion in such a way that did not produce accurate and appropriate estimates, with reference to a reasonable index of prices or earnings, could be challenged by scheme members. Any decision which is not reasonable—even without this amendment—could be challenged by judicial review and struck down by the High Court, so we do not believe that this amendment would change the position or provide any additional protection to members.
Lord Eatwell
I have listened very carefully to what the Minister had to say. Of course, my amendment does not in any way restrict any necessary flexibility in the future in adjusting the manner in which revaluation takes place. However, it would—if I may use the term—sensitise the Treasury when making decisions of this sort to be aware that it is required to act in a reasonable and fair manner.
At the moment, the expression in the Bill provides the Treasury with such a carte blanche—
“estimated in such manner as the Treasury consider appropriate”—
that not even the words “reasonably” or “fairly” appear in the Bill. All we were trying to do was to avoid any rounds of judicial review over these matters and instead to ensure that when Treasury officials look at the calculation of an index—whether they are moving to geometric means or whatever they are doing—they consider very carefully whether this would be deemed reasonable in the public domain. The Minister himself has used the expression “reasonable and fair” in referring to what the Treasury will do, so surely this amendment has either no effect or a positive effect. We may disagree about whether it has no effect or a positive effect, but it does no harm and reinforces what the Minister has said. Surely, he would regard that as a good thing.
Lord Newby
My Lords, this question of putting “reasonable” into the Bill came up in a number of contexts on the Financial Services Bill. It would be perfectly possible to spatter this Bill, that Bill and every Bill with “reasonable”. The view that we took then, and which I take now, is that, of course, the Treasury always operates in a fair and reasonable way, but because it already has a broad legal obligation to do so it is simply unnecessary to put it into the Bill.
Lord Whitty
My Lords, I thank the Minister for that. I am very glad that he is not bemused. Regrettably, his certainty and clarity in at least part of what he said does very little to assuage anxiety about the possible undermining of this scheme. Indeed, he has just said that the CPI is the preferred index at present. We have had the CPI for only 10 minutes. That reminds me of one partner in a long-standing relationship referring to the other as “my current boyfriend”. The Minister’s comments raise alarm, anxiety and uncertainty to an even greater extent than I presumed would be the case when we started this debate. I do not think that the noble Lord has answered that question.
On the question of whether past practice in the local government scheme has had a special provision for having a floor or negative valuation, certainly there has been no negative downward movement. When the new agreement was reached, the presumption was that that would not be the case in this measure either. Whether I need a clause on the front page of primary legislation is arguable. Nevertheless, it would have been helpful to seek an assurance that that understanding between the employers and the trade unions would stand. However, I will read the rest of what the noble Lord says. Meanwhile, I beg leave to withdraw the amendment.
Lord Whitty
“Basis of valuation
(1) Within six months of the passing of this Act, the Government shall establish a review body to assess the appropriateness of current methods of valuation of a pension scheme’s liabilities and assets, and, if appropriate, to recommend changes that provide a broader base of valuation.
(2) The review body shall report within 18 months of the passing of this Act.”
Lord Whitty
My Lords, unfortunately, I have lost my notes at this point. I would describe this amendment as a probing amendment but it is actually more of a kite-flyer. It raises a very basic issue about how pensions are valued.
At the moment, certainly in relation to the local government scheme and probably others, a pension scheme has to be revalued every three years, which is a fairly substantial exercise based on all sorts of actuarial presumptions working out the value of the current assets, the value of future flows into and out of the scheme, and making an estimation of the future liabilities of the scheme. Those future liabilities can stretch over 80 years or so for future pensioners and, depending on the nature of the scheme, their dependants. Given that, it is important that it is properly reflected in the way in which that evaluation is carried out.
Lord Flight
I thank the noble Lord for giving way. Perhaps I might suggest that the real cause of the trouble is the IFRS accounting standards that require companies to disclose pension liabilities discounted at government gilt yields. That, in turn, has made companies pay contributions to cover the resulting alleged deficits. As the noble Lord points out, that has led companies to close their final salary schemes and to the false rate of interest resulting from QE. However, the real problem has been the uncritical acceptance by Governments of both persuasions of what I believe to be profoundly wrong IFRS accounting standards.
Lord Whitty
I thank the noble Lord for that intervention. I had not expected to agree with him this afternoon, particularly on subsequent amendments, but I agree with him on that issue. It is important to recognise that the acceptance of those accountancy standards is causing the problem. That is why the noble Lord, Lord MacGregor, in the speech to which I referred, suggested that the Bank of England, government actuaries and the accounting profession sat down and looked at those assumptions. Slightly more tangentially, the Treasury Select Committee in another place has also touched on this point.
I am suggesting that the Government take the initiative whereby, once the Bill is passed by this House in whatever form, they set up a review looking at whether the present conventions and the way in which these public service pensions are assessed are correct—although there is a wider application—and whether we are getting a seriously misleading impression that has a detrimental effect. As the noble Lord said, there has been a devastating effect on large numbers of private sector providers.
The amendment would have no effect on the rest of the Bill but would give the Government a lever to look at the issue again and provide for expert assessment, which, given that the newly formed schemes are not coming in until 2014, could come into place before the first revaluation of those schemes. I hope that the Government will take this matter seriously and have a look at it. I certainly hope that the House and anyone involved in looking at public and private pension schemes will recognise that this is a serious problem. I beg to move.
Lord Newby
My Lords, perhaps I might start by saying that the Government take the issue seriously, and it clearly is serious. However, I wish to set out the ways in which different public servants’ pension schemes are, and will be, valued when the Bill comes into effect.
As noble Lords are aware, the majority of the main public service schemes are unfunded. There is no pot of assets that can be valued; future benefit payments are paid out of general tax revenue. They need to be valued in a different way from funded schemes. It is important that these schemes are valued to ensure that contributions paid reflect the costs of employing staff. The Government therefore carry out valuations of unfunded pension schemes to determine the level of contributions. This is done using a number of assumptions and methodologies that adapt to changing circumstances and improvements in the method. These valuations will also be used to set the level of the employer cost cap. The assumptions used in these valuations take account of the risk profile faced by government in providing pension benefits. The valuations can therefore be different from those used by typical private sector funded schemes, where the primary purpose of valuations is to provide security to member benefits.
However, the Local Government Pension Scheme is in a different position. As has been discussed, it is a funded scheme, with benefits paid out of one of 89 different LGPS funds in England and Wales. These funds, as we have discussed many times in our consideration of the Bill, are individually managed. Valuations of the funds perform a similar function to those in unfunded schemes by assessing whether fund assets will be sufficient to meet liabilities and setting the contribution rates to be paid into the funds. This valuation process is managed at the local level and is dealt with in greater detail in Clause 12.
The amendment would place a statutory obligation on the Government to appoint a body to carry out a review of the way in which valuations are carried out in the public service schemes. This is unnecessary for either the funded or unfunded schemes. Under Clause 10, Treasury directions will set out the details of how valuations of unfunded schemes will be carried out. The Treasury will be obliged to consult the Government Actuary before these directions are made to ensure that they are fit for purpose. The Treasury has also committed to involving other stakeholders, such as public service employers, scheme actuaries and trade unions, when considering the approach to valuations.
Turning to the funded schemes, the Bill already provides for a greater level of scrutiny of LGPS fund valuations. Clause 12 specifies that employer contributions to these funds must be sufficient to ensure the solvency of the funds, which is an existing feature of the regulations. The clause also requires that contributions are set at a level that will ensure the long-term cost efficiency of the scheme. This is a new provision, which aims to prevent employers deferring the payment of any costs needed to meet the long-term liabilities. The clause will ensure that local fund managers take this approach. It requires an independent review of each fund’s valuation and the employer contribution rates that result from it. These reviews will result in a report covering all the LGPS funds, which will be made public.
The Government intend to publish a single report for the local government scheme in England and Wales. This will allow straightforward comparisons to be made across each of the 89 funds in the scheme. This new and enhanced level of scrutiny will provide a consistent basis for assessing the assets and liabilities of all LGPS funds, improving their transparency and management of these funds.
In addition, the scheme advisory board proposed by Amendment 45, which we have just debated, may also oversee and advise on the management of pension funds in the local government schemes. These boards will play a role in ensuring that the schemes—and individual LGPS funds—are well managed. As such, there will be an ongoing role for pension boards in the scrutiny of pension fund management and valuations.
Under the existing provisions in the Bill, there are a number of ways in which we can achieve what the noble Lord, Lord Whitty, seeks to achieve. I will go away and look again to make sure that I am not missing anything or whether we do need a belt and braces. I am not sure that we would do it in the way that the noble Lord suggests and I am not sure that we need to do it, but this is definitely a serious issue. The Government want to make sure that nothing in the Bill means that we cannot take that initiative if we decide to do so anyway. I will go away and look at it again. If I think there is anything further that I can usefully say, I will write to the noble Lord, but I am not absolutely guaranteeing the letter.
Lord Whitty
My Lords, I am very grateful to the Minister. I am glad that the Government see this as a serious issue and I am grateful to him for setting out what will be the procedure and structure of valuation in the future, specifically for the LGPS and more generally. I should have said at the beginning that my comments were primarily related to funded schemes, but of course post-2014 will bring a lot of the other public service schemes closer to being fully funded schemes—not quite in most cases. This means that the ratio between liabilities and assets and their correct valuation will be an important issue for all funded defined benefits schemes.
My amendment was intended to allow the Government at some future stage to look at the way in which these schemes would in future be assessed. I do not disagree with the mechanism but, as the noble Lord, Lord Flight, says, some of the presumptions and the passive acceptance of the accounting conventions could mean that the schemes looked seriously underfunded when in practice they were not. There may be other problems with the conventions and it would be wise for the Government to undertake this review whether or not it is seen as part of this Bill. I think it is something that the Government need to deal with.
I am grateful to the Minister for indicating that he is prepared to look at this again, and I think that in some contexts the Government will need to do so. Meanwhile, I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, this group of amendments deals with various issues associated with pension age and the way it is adjusted relative to movements in the state pension age.
First, perhaps I may speak to Amendments 52, 55 and 57. These are minor amendments tabled to address what we see as a drafting anomaly. If it is not an anomaly, it would be very helpful if the Minister could explain why. The exemptions outlined in Clause 9(2) refer only to a person’s normal pension age, not to their deferred pension age. We believe that this means that the exemptions will apply only to active members of pension schemes and not to those who have moved on from their occupation and are classified as deferred members. In another place when this point was raised, time ran out, as it tends to there, and the Minister did not address this question at all.
I now turn to much more substantial amendments. Amendment 56 would insert a caveat with respect to changes in pension age. It says that such changes would not apply to members of a public service pension scheme who would be exempted from the operation of subsection (1) as a result of a scheme-specific capability review—in other words, those who do not come just within the broad categories of the fire and rescue services, a police force or the Armed Forces. There would be a scheme-specific review looking at the necessary capabilities of workers within a particular scheme. After all, some public sector workers not covered by the broad categories in Clause 9(2) have physically demanding jobs and it would not be appropriate to increase their pension age in line with the planned increases in the state pension age. For example, we could refer to mental health nurses, who occasionally have to physically restrain patients, and paramedics might also be considered.
However, what is really important with respect to the examples I have just given is that capability reviews are already under way. In fact, the Department of Health is undertaking the working longer review in relation to the NHS. This will make recommendations about the appropriateness of certain NHS staff working beyond the age of 65. However, the Bill does not exempt any NHS staff from the state pension age link; nor does it make any provision for the findings of a review—including the working longer review, which is now under way—to be taken into account, even though the review has not yet published its conclusions. Therefore, effectively the Bill makes this aspect of that review redundant, and the people working on it might as well just pack up and go home because the Bill effectively excludes any recommendation that they might make with respect to changes in the pension age of specific workers in the NHS. Amendment 56 would insert a caveat into Clause 9 so that a change in pension age would not apply to members of public service pension schemes who should be exempted from the operation of subsection (1) as a result of a scheme-specific capability review.
In another place the Government rejected this review on the basis that the amendment would create confusion and uncertainty. Why it would do that when you have specific capability reviews I am at a loss to understand. Secondly, the reason that certain professions are excluded is not just because of physicality but because they perform a specific public function. Again, that could clearly be undertaken and expressed in the terms of reference of a capability review, wherever that might take place. In this case the Government really have to think very carefully again. They set up the working longer review. They recognise that, in some specific cases not covered by the generality of Clause 9(2), there are cases where the link to state pension age should not be made and yet the Bill does not provide the means of incorporating the results of appropriate reviews.
I shall now speak to Amendment 59 which is also in this group. This refers to a recommendation made by my noble friend Lord Hutton in his review that the link between the state pension age and the normal or deferred pension age should be kept under review and should be reviewed regularly. The report recommends:
“The Government should increase the member’s Normal Pension Age … in most schemes so that it is in line with their State Pension Age”.
That, after all, is one of the key themes of this Bill. Then the report says,
“However, the link between the SPA and NPA should be regularly reviewed to make sure it is still appropriate, with a preference for keeping the two pension ages linked”.
Therefore, it should be reviewed in the light of circumstances. This Bill is implementing one half of my noble friend’s recommendation and leaving out the other half for a regular review.
A regular and independent review into the state pension age link would help to ensure that public service schemes remain sustainable if life expectancy is rising or whatever happens to it. One of the great mysteries of academic life is that one would expect demographers always to be incredibly accurate because they have such a range of data. They know how many people have been born in a particular year and they should be able to look forward to what will happen. However, one learns that demography is a very inexact science and demographers make—and admit that they do—a lot of mistakes and their circumstances change. After all, their profession would die if they did not have new things to worry about as the world changes. We need the possibility of a regular review of the link with the state pension age so we can ensure that members are being treated fairly and that the funding of the schemes, where they are funded, and the provision for non-funded schemes fit within the framework of the Government’s finances.
In another place the Government recognised the recommendation of the noble Lord, Lord Hutton, and said they expected reviews to be undertaken as and when future changes to the state pension age are announced—so they expect it to happen. However, it was not necessary to put it in the Bill as the Government will in due course make announcements about the review process, which is not desirable as it would restrict flexibility. How does it restrict flexibility? This is one of those blanket excuses, like “it is unnecessary”. It does not restrict flexibility at all; it just says, as the Government have conceded, that it would be desirable to have a review whenever the normal pension age is changed.
I have a particular question for the Minister in this respect. Suppose there is a review and it finds that the link is not working and something has gone wrong. What would happen then? Without having the review on the face of the Bill, it seems to me that the Government would have to return with primary legislation. Therefore, we are increasing the flexibility of the Bill by removing that threat to the flexibility of the operation of the Bill as a whole. I beg to move.
Lord Kennedy of Southwark
My Lords, I speak to Amendment 53, which is in my name. When the noble Lord responds to this group, I hope that he will be able to give the Committee some assurances in respect of the Government’s understanding of the special situation that firefighters find themselves in. They put their lives at risk on a regular basis to help and to protect members of the public and their property. I also hope that the noble Lord will confirm that he accepts and understands fully that maintaining high levels of fitness is crucial for firefighters and that there is evidence that, as we get older, cardio-respiratory fitness declines over the whole population. Therefore, asking firefighters to work until they are 60 in these front-line roles is not sensible and not safe for firefighters or the public.
I would like the noble Lord to comment on the review that has been undertaken by Dr Williams and his committee on the normal pension age for firefighters. The committee and Dr Williams were appointed by the previous Fire Minister, Mr Bob Neill, the Member for Bromley and Chislehurst in the other place. Let us be clear that the Department for Communities and Local Government’s document Firefighters’ Pension Scheme: Heads of Agreement in 2012 includes a requirement for the national pension age to be subject to regular review, informed by research carried out by the firefighters’ pension committee. I think that the Bill, coming at this time and relating to firefighters, has pre-empted the review, and that seems odd to me.
These decisions are really important and should be informed by evidence-based research, so I want to understand how the Government will use the research that they commissioned to inform the decisions that they make and the proposals that they will bring before Parliament.
Baroness Donaghy
My Lords, I shall speak to Amendment 54. At Second Reading I referred to ambulance service staff. I am hoping for the inclusion of ambulance service staff in the protected uniform services section of the pension regulations. I propose that the Bill should refer to ambulance service staff providing 999 responder services as opposed to referring to particular occupational groups such as paramedics, as there is a large number of non-registered ambulance staff who provide 999 responder services and registered paramedics who fulfil administration and managerial roles.
It is well documented that the main cause of ill-health retirement in the ambulance service is muscular-skeletal injuries and mental and behavioural disorders. These occupational hazards are not limited to staff working in paramedic grades and above but can be experienced by all staff providing 999 responder services. In addition, as a cost-saving measure, many ambulance services have created new support roles for 999 staff. Although the level of clinical intervention is different from that of a registered paramedic, their exposure to hazards and highly distressing circumstances remains the same. You have only to walk through the town centre of practically anywhere in the UK on a Saturday night to know that. They should be exempt from working longer.
The current NHS job evaluation scheme recognises these occupational hazards in job profiling for ambulance service staff. All ambulance grades that provide 999 responder services receive the same job evaluation level on the factors that contribute most to ill-health retirement. For example, an ambulance practitioner at the bottom of the Agenda for Change band 4 and an advanced ambulance practitioner on the top of band 6 score the same job evaluation level on physical effort, emotional effort and working conditions despite there being a difference of 19 pay points between these two jobs. The factors that heighten the risk of ill-health retirement remain the same.
In 2008, NHS Pension Scheme research indicated that the average retirement age in the NHS was 63, while in the ambulance service it is estimated that only one in 100 front-line staff reach normal retirement age. Staff working in the ambulance services are four to six times more likely to retire on the grounds of ill health compared with the rest of the NHS. A UNISON freedom of information request has shown that between 2008 and 2011 the average age of ambulance staff retiring on the grounds of ill health was 52. Muscular-skeletal injuries and mental and behavioural disorders—for example, post-traumatic stress disorder—represent more than 50% of the reasons for ill-health retirement. For that reason I believe that ambulance service staff providing 999 responder services should be included in these regulations.
Lord Sharkey
My Lords, I rise to speak in support of Amendment 56. I also have great sympathy for Amendment 54 in the name of the noble Baroness, Lady Donaghy. As the noble Baroness has so eloquently said, the working conditions and physical requirements of ambulance service staff who are 999 responders are very similar to those of the other exempt categories. However, the problem may be that there are quite a few other occupations whose members feel there is an equally strong case for inclusion within the exempt categories. Some of these occupations were discussed when this issue was debated in the Commons. I have heard Northern Ireland prison warders and staff in secure psychiatric institutions mentioned in this context and I know there are other claimants, too.
It is obviously very difficult to make judgments about which groups, if any, should be included alongside the uniform groups recommended by the noble Lord, Lord Hutton. I am not at all certain that it would be appropriate to add one particular category to those groups without considering, in detail, the claims of the other groups. That is not to say that there are no other groups that should be exempted from the standard state retirement age. In fact, I am personally convinced of the case put forward for ambulance service staff who are 999 responders. I think a sensible approach to this is contained in the amendment of the noble Lord, Lord Eatwell, to which he has spoken so forcefully. It is surely sensible to give the Secretary of State the power by order to include other occupations in the exempt groups if he thinks the case has been objectively made and thoroughly examined by a scheme-specific capability review.
A very similar, or perhaps even identical, clause to that of the noble Lord, Lord Eatwell, was put forward by Chris Leslie in the Commons. I have read Hansard carefully and the Government’s response did not seem entirely convincing. I am glad that our different rules of procedure in this House will enable the case for Amendment 56 to be put once more and I am glad that the Minister will have the opportunity to reply in full. I hope that when he does reply he will find himself in sympathy with Amendment 56.
Baroness Wall of New Barnet
My Lords, I, too, would like to support in particular Amendment 53 and to some degree Amendment 54, especially with regard to the front-line staff in the ambulance service. I am sure the Minister is aware that in the private sector the task of the job and the onerous nature of that task is always directly related to age regarding how pensions are dealt with. Very often there is mood music around that says the public sector wants to be treated differently from elsewhere. As I know from my work with ICI, there were always certain jobs that were absolutely prescriptive in the task of the job and the risk of the job being associated with the age of individuals. We are really asking for that responsibility to be taken by employers in that context.
Lord Newby
My Lords, although these amendments all have a common theme, they are quite specific, so I will start with Amendments 52, 55 and 57. It is important to note that the link between the normal pension age and state pension age in most schemes is not the only provision in the Bill which is designed to manage the longevity risk. The link between the deferred pension age and state pension age in all schemes is just as important. This link is universal, with no exceptions. It therefore applies to former members of the police, firefighters and Armed Forces schemes with deferred pensions in those schemes.
There are two reasons why the Government have not extended the exemption from the state pension age link for these workforces to apply to the deferred as well as their normal pension ages. First, it would not be fair to other former public servants whose deferred benefits would not be payable until state pension age. We have been clear that exceptions to normal pension age have been made for police officers, firefighters, and members of the Armed Forces because of the unique nature of the work they do, which we value very much. Once police, firefighters and Armed Forces personnel leave their jobs and no longer carry out those unique duties, there is, in our view, no justification for them to be able to take their deferred benefits earlier than anyone else.
Secondly, there would be cost implications. As we are all aware, increases in—
Lord Eatwell
Perhaps I may deal with that first point about leaving the scheme. I accept that in the case of somebody becoming a police officer at the age of 20 or 21 and leaving at 25 the noble Lord has a good case. But let us suppose that the police officer leaves at the age of 55. Is the case the same? Here is someone who has worked in a physically onerous profession for all that time—34 years, let us say. He has moved to another job because an opportunity has come up but he has performed that physically onerous task for a considerable time, which will have had an effect on his overall well-being. Would it not therefore be reasonable in that case for the deferred pension age to be the same as for those who stay on for just a few years more?
Lord Newby
My Lords, the noble Lord gives an example. I was literally just about to give another example. I will come back to his example. My example concerns a former police officer who leaves service aged 35 to work as an office-based local government worker for the rest of their career. It is by no means an unusual or impossible example. Should their police pension still be available, unreduced, at 60? That is the question, particularly when a local government colleague sitting at a nearby desk must wait until the state pension age to take his or her full pension. Surely the answer can only be no. The strength of that argument is greatest if someone left the police after a year aged 22 and is weakest if they left it aged 59. I agree with that. The argument is not exactly the same at every age.
However, in looking at this, the noble Lord, Lord Hutton, recommended that we should go to the provision that we have indeed gone to, which is that all deferred pensions are payable in full from the state pension age. If we were to move towards what the noble Lord suggests, we would have an extremely complicated position where there were grades of deferment, if you like. We wanted first of all to have a relatively simple approach. We have followed the recommendations of the noble Lord, Lord Hutton, and we think that we have come up with a sensible, practical solution. We understand the argument, but we have deliberatively taken the view that deferred pension age should be the same as normal pension age.
On Amendment 53 in the name of the noble Lord, Lord Kennedy, the noble Lord was asking about the position of firefighters and the Williams review, and where we had got to with that. The starting point, as we know, is that firefighters continue to have their normal pension age at 60, as set out in the new Firefighters’ Pension Scheme in 2006. The Williams review of the normal pension age recognised that, as long as firefighters maintain their physical activity levels and adopt a healthy lifestyle, there is no reason why they cannot maintain operational fitness levels until the age of 60. The report does not call for a change in the normal pension age. However, as the report recommends, firefighters who wish to retire early will continue to be able to do so from 55, with an actuarial adjustment to their pensions. There were other detailed recommendations within the Williams review and the Government are still considering them.
Lord Kennedy of Southwark
I thank the noble Lord. I will not press him further on this. He is right: the review has just come out and we are in the middle of debating the Bill. However, would the Minister agree to meet with representatives of the Fire Brigades Union and me between now and Report? The Williams report raises a number of issues that have a direct bearing on this, and further discussion is important.
Lord Newby
My Lords, I am always willing to meet the noble Lord. However, I will do so on the basis that we are not reopening the whole of the scheme. The Williams review has made it clear that there is no reason why the retirement age should not be 60. That, certainly, is not up for discussion. If there are other issues around it we can discuss those, although my initial view is that it is highly unlikely that anything else he is discussing would require amendments to primary legislation, although it may require amendments to the scheme rules. On that basis, I am very happy to have a meeting.
The next amendment in this group is Amendment 54, tabled by the noble Baroness, Lady Donaghy. It looks at further exemptions from the state pension link. We have set the current exemptions in line with historical precedent and the Hutton review. There are no other groups that are currently recognised in such a way through their normal pension age provisions as the three set out in the Bill. In fact, as a result of the previous Administration’s reforms, new employees in all other groups of public servants already have a normal pension age of 65. This includes ambulance service staff under the most recent changes to the NHS scheme, which were agreed to by unions.
As we are all aware, this Bill seeks to rationalise provisions across the public services, not to add further diversity. We are trying to move away from the general inconsistencies in the current schemes, which lead only to unfairness for subsections of particular workforces. That is not to say that we do not recognise the physical nature of the work that is carried out by groups such as ambulance service staff, or the risks attached to that work. The schemes introduced under Clause 1 have been developed very carefully with this in mind. They follow extensive discussions with members, trade unions and other member representatives to ensure that they best meet the needs of all members of each scheme. This includes ambulance service staff in the development of the NHS scheme. It would be wrong to reopen those negotiations—not least because, as my noble friend Lord Sharkey alluded to, there are many groups with degrees of stress in their job that are greater than those in others. We could spend a vast amount of time assessing afresh all those groups. Over the years that work has been done and it has led to the schemes we have now. It was also looked at again by Hutton. I am therefore extremely unwilling to start a long process of looking at a raft of groups when they have been considered before. I understand only too well the stresses and strains faced by 999 responders, but other groups face stresses and strains as well. As I say, we have decided that the three groups which are already exempt from the normal retirement age provisions are the only ones that we believe are in a distinctly different category from any others.
Amendment 56 also relates to this issue, but the difference from this amendment is that it would allow any group to be exempted from the state pension age link should a capability review recommend it. Presumably that would mean that the pension ages for these groups would be set out in secondary legislation. I have just explained why I do not agree with the spirit of the amendment. The link was a key feature of the Hutton report and was a cornerstone of the constructive discussions we held with unions and member representatives over the course of 18 months. The outcome of those discussions was the proposed final scheme designs, including the universal retirement age link which the Bill honours in full. We have no plans to reopen those designs, although we have made it clear that we will review the link to the state pension age as and when future changes to the state pension age are announced. The DWP White Paper published yesterday says that we intend to hold a review every five years, so the link will be reviewed when a review is announced.
The Bill as it stands takes a sensible future-proof approach to review the provisions when it is most appropriate to do so; that is, when there are other pension age changes that affect public servants. Naturally, those reviews will take into account any evidence submitted by interested parties—
Lord Eatwell
I understand what the noble Lord is saying, but can he tell us what the status of the working longer review in the NHS is?
Lord Newby
The noble Lord has an uncanny ability to ask me a question as I am getting to the relevant paragraph. I was about to say that the capability reviews are not reviewing the pension age link. They are considering the implications of working longer in the light of increased longevity and looking at how people are deployed as they move towards retirement. There is no question of these capability reviews reaching the conclusion that people should retire earlier as a block; rather they say, “If there are professions which have a significant physical component, how can we make sure that, as people move towards retirement age, the proportion of their work which has a significant physical element is reduced?”. A simplistic approach is to say, “Why can we not have firemen doing desk jobs from the age of 55?”. It is not as simple as that because there are not enough of those jobs, but that is the basic thought process we are going through in the reviews.
This is a challenge not just for public sector workers, but for the whole of society. People are living longer and the pension age is going up. Some people who are doing physical work will not be able to maintain the same degree of intensity at the age of 67 as they could at 47 or 27. As a society, how do we deal with this? What sort of mechanisms can we put in place to enable people to work towards a later retirement age in a way that avoids their facing undue stress?
To take an extreme example that does not cover the public services, I have a number of lawyer friends in their early 60s. Traditionally, solicitors in big firms would be forced out at that age because they were not earning as much as they did when they were 40. A very welcome development is that partners, with the encouragement of their firms, are thinking about what they can do that does not necessarily mean that they are expected to generate the profits and income that they did 20 years before, and in this way they can keep their expertise. That is at a different level from the public sector but it is still entirely welcome. The working longer reviews, about which we are talking here, look at exactly that kind of thing for people in the public sector. It is not about pension age but about how to ensure that we manage people who, as they move into their 60s, may not be able to work at the same intensity as they did when younger.
Finally, I turn to Amendment 59 regarding the reviews of the pension age provisions in the Bill. The Government have made a clear commitment to undertake these as and when future changes to the state pension age are announced. These reviews will look at, among other things, whether the provisions remain appropriate in light of scheme members’ longevity. This will ensure a consistent cross-government approach to all pension age policy and follows the recommendation by the noble Lord, Lord Hutton, that the provisions should be kept under review.
The state pension age review process that I have mentioned should mean that the core principle of this amendment, to ensure the public service pension age provisions continue to track appropriately changes in members’ longevity, will happen automatically. The work on state pension age reviews is still in its early stages. Yesterday the DWP published a White Paper that proposed a review every five years. We are still at a consultation stage and it may be that we move on from that but I do not know.
It would be premature at this point to seek to lock down the details of the reviews for public service pension ages. The state pension age reviews will obviously apply to more than just the pensions established in the Bill. It is therefore important that the Bill does not restrict the flexibility to design those reviews. Even though the reviews are not in the Bill, this does not restrict the powers to change the pension age provisions. Changes to state pension age will require primary legislation, so any consequent changes to this Bill could be made in at the same time.
Furthermore, it would be misleading to put reviews in the Bill and give the impression that these provisions may be continually changed when that is not the intention. The Government believe that we have appropriate provisions at the moment and we do not plan to change them. It is important that these are made clear to members so that they can plan for their retirement. I therefore urge the noble Lord to withdraw the amendment.
Lord Eatwell
My Lords, I note the comments in general of the noble Lord, Lord Newby, and I am grateful for the support of the noble Lord, Lord Sharkey, for Amendment 56 in particular. This strengthens the position of those administering public service pensions by incorporating the notion of a specific capability review and therefore providing a standardised mechanism across the various sectors in public service. These could be utilised both to include groups in the exemption and, indeed, to confirm that groups should not be included in it.
The examples given by the Minister, of changes in working practices among his lawyer friends, indicate just the sort of thing that a capability review would take into consideration. It is regrettable that he has dismissed this in rather a cavalier manner, by just saying that it would make the thing too complicated. People’s lives are complicated. People lead very different lives, and we need a degree of flexibility to take account of those differences that they encounter. Simply having a one-size-fits-all approach to the public services, which is the case in the Bill—with the exception, of course, of the uniformed services, which we discussed earlier—does not seem to future-proof the Bill, a factor that the Government are so continuously concerned with. What will happen is that some real anomaly will appear; it will become a scandal and suddenly a matter of major press interest. You can just imagine the sort of the thing: for example, some elderly ambulance worker being unable to assist a prominent celebrity in distress. You can imagine how the tabloids would go for that. Or it could be a much more serious scandal. Being able to perform capability reviews would provide a degree of flexibility, which is exactly what future-proofing this sort of legislation really means.
The Government are being a bit blinkered over this. They are standing on the podium of simplicity, but simplicity does not always make for true effectiveness. However, I am sure that the noble Lord, Lord Sharkey, and I will return to this on Report. I beg leave to withdraw the amendment.
Lord Eatwell
“(4A) A person’s normal or deferred pension age under a scheme under section 1 will not change by operation of this section unless 10 years’ or more notice of the change has been given.”
Lord Eatwell
This is another amendment dealing with the issue of retirement age, but here it is a question of giving notice of a change in retirement age. The essence of this is that if people are aware a significant time in advance that their retirement age is going to change, then they have the opportunity of making provision for that change. If it is only a few years before the date at which they retire, it is much more difficult for them to change their circumstances or their arrangements in the light of the changed pension age.
This amendment is necessary because the Bill links the normal or deferred pension age in public service pension schemes to the state pension age and the state pension age can be changed in law with no protection for those approaching retirement. The Government have recently imposed changes to the state pension age when they gave women in their 50s only six years’ notice of an increase. I think that was excessively short. That meant that women in those circumstances had a relatively short time to make adjustments in their circumstances appropriate to the new change in the pension age that they face.
This amendment would ensure that if the Government were again to act in this arbitrary manner with respect to an increase in the state pension age it would not have a similar rapid knock-on effect for public service pensions. When the noble Lord, Lord Turner, carried out a review of state pensions for the previous Government, he recommended that a 15-year notice period be given before changing the state pension age, and the Pensions Policy Institute, which also looked at this with some care, recommended a 10-year period. During the Second Reading debate in another place, a Conservative Member, Mr Richard Graham, the Member for Gloucester, said:
“The Bill also protects everybody who is within 10 years of retirement, which is very important for so many of our constituents who are in their 40s and early 50s”.—[Official Report, Commons, 29/10/12; col. 114.]
Unfortunately, this Conservative Member had actually got it wrong because there is no such protection in the Bill for those within 10 years of retirement. Given that he was a Conservative Member, perhaps he had had some whispers from the Front Bench that there was an intention to include such a provision and this was left out by an oversight. So now we are giving the Government the opportunity to rescue their omission. Providing that the Government are not planning to increase pension ages with less than 10 years’ notice, they surely can have no objection to this amendment.
Lord Newby
My Lords, we agree with the underlying concept of this amendment that the pension age for those close to it should not change without sufficient notice. When normal and deferred pension ages change, there must be consideration of how such changes will impact on all those who are most affected. However, I hope I have made it clear that a key pillar of the Bill is the clear link that it will provide between the normal pension age and the state pension age. The DWP’s White Paper on state pension reform, published yesterday, sets out that future changes to the state pension age will be subject to a 10-year notice period. It therefore follows that the normal pension age changes will be subject to the same minimum notice period while the link remains in place. Therefore, from the noble Lord’s point of view, fortunately this amendment is unnecessary.
Lord Newby
Lord Eatwell
“Fair Deal
A member of a public service pension scheme is entitled to remain an active member of that scheme following—(a) the compulsory transfer of his contract of employment to an independent contractor; and(b) any subsequent compulsory transfer of his contract of employment.”
Lord Eatwell
My Lords, this is part of the deal that was made between the Government, the local authorities and the trade unions in putting together the agreement that was reached following the report by my noble friend Lord Hutton. It is a part on which the Government seem to be reneging. I really think that this is very important. This so-called fair deal amendment will ensure that a member of a public service pension scheme who is compulsorily transferred from his contract of employment to an independent contractor will be entitled to remain an active member of that scheme; and, indeed, if there is any subsequent compulsory transfer of his contract of employment, he could still remain a member of that scheme. This was a key part of the agreement reached with public sector employees and their representatives—this notion of a fair deal for outsourced workers. It would ensure that all public service workers compulsorily transferred would stay as active members.
As I say, the Chief Secretary to the Treasury confirmed the Government’s commitment to the new fair deal in July, in a Written Statement. He said:
“I can … confirm that the Government have reviewed the fair deal policy and agreed to maintain the overall approach, but deliver this by offering access to public service pension schemes for transferring staff. When implemented, this means that all staff whose employment is compulsorily transferred from the public service under TUPE, including subsequent TUPE transfers, to independent providers of public services will retain membership of their current employer’s pension arrangements.”.—[Official Report, Commons, 4/7/12; col. 54WS.]
Where is that promise on the face of the Bill? This is a promise that the Chief Secretary to the Treasury made, but it now seems to have evaporated. Where has it gone? As it stands, the Bill is very one-sided in how it reflects the negotiated agreement. The Government are happy to include the size of the agreement which suits them—for example, the requirement that no schemes are final salary schemes—but are not forthcoming with their corresponding promises made to public sector workers.
The Minister has repeatedly said that the Government’s word is adequate for protection of workers, and that government promises do not need to be enshrined in legislation. But if we take what the Chief Secretary to the Treasury said, surely the public would be rather bemused that that promise was made in terms and it has now evaporated. It is not there—where is it on the face of the Bill?
One issue to which we have continuously referred is that of the future-proofing of the Bill. Future-proofing does not mean not sticking to a deal or not making coherent commitments; it means having a degree of flexibility over major changes in circumstances discussed and agreed by the parties to the agreement. It does not mean just leaving part of the agreement out, as seems to be the case here.
Given the Statement from the Chief Secretary to the Treasury, I feel that this amendment could have been moved by him, and indeed I move it on his behalf.
Baroness Donaghy
My Lords, I support my noble friend Lord Eatwell on this important amendment. This was a key part of the national agreement between employers’ unions and the Government. In the local government scheme, which is a funded scheme, employers choosing to withdraw from that scheme could leave substantial costs relating to future fund income to be paid by the council tax payer. Information is already coming in that some higher and further education employers, and recently an academy school, are seeking to find ways in which to get around their obligations to provide the local government pension scheme for support staff. We should bear it in mind that those jobs are often low paid and part time. We should also remind ourselves that having an occupational pension will make sure that those people are self-sufficient when they retire and do not become dependent on the state. So it is in all our interest that these schemes are upheld.
The news that we are hearing is that shared services companies are being created, or that people are attempting to create them, as a way of getting round the obligations that they entered into by allowing their staff to remain in the local government pension scheme. I remind the Minister that, as I am sure he is aware, a big drift away by employers could undermine all the schemes.
Lord Newby
I thank the noble Lord for moving this amendment on behalf of my colleague, the Chief Secretary. I am sure he will be very pleased when I tell him that he did so. The Government are completely committed to the fair deal policy and to its reform. Commitments have been made, both in this House and in the other place, to ensure that members of the schemes who are compulsorily transferred to independent contractors can retain membership of those schemes.
The noble Lord asked about the provisions in the Bill that are relevant to achieve this. Clause 26 will extend access to the existing civil service pension scheme to allow those members who are compulsorily transferred out to stay in the scheme. Clause 22 will allow scheme regulations to make provisions for pensions for other employees who would not otherwise be members of the scheme. The policy will be delivered via the contracts made with independent providers. This will ensure that members of the schemes will be entitled to accrue future benefits through the scheme after the first tender and any subsequent retendering.
There are specific reasons why the proposed amendment cannot be accepted. The Government are currently considering when and how the new fair deal policy will be implemented. We are also consulting on how the new fair deal should be applied to those who have already been transferred out of the public sector under the old arrangements. It would be premature to put something on the statute book while this work is under way.
The amendment also captures the Local Government Pension Scheme. We have been absolutely clear that the principles of the new fair deal policy should apply to the reformed Local Government Pension Scheme, but the policy has always operated differently in that scheme. The Department for Communities and Local Government will bring forward detailed proposals in due course; again, in our view it would be premature to legislate while this work is under way. However, if the noble Baroness, Lady Donaghy, has some specific instances which she can show us of how the current arrangements might be being subverted, we would obviously look at exactly what is going on and how we might deal with that. My guess is that the most effective way of doing it would not necessarily be via this amendment. Obviously, however, because we are committed to the principle, if that principle is being undermined, we would want to look at how that is happening and what we could do to stop it. With those comments, I hope the noble Lord would feel able to withdraw his amendment.
Lord Eatwell
My Lords, I looked carefully at Clauses 22 and 26 and they seem to be enabling clauses. They enable members who are compulsorily transferred to retain their membership of a public sector scheme, but they do not ensure that they will. That is the import of our Amendment 61. It seems to me that it was also the import of the Chief Secretary’s Statement. He said very clearly that following transfers, those members “will retain membership”. He did not say that they “may” or “could”, or that “facilities will be made available for them to”, but that they “will” retain membership. The Bill certainly does not make that provision.
The noble Lord also said that considerations are under way to find a means of implementing the Chief Secretary’s promise in an appropriate manner. I must say that it would have been a jolly good idea if that had been done before we got to this stage of the Bill, but people are busy and I understand that. Let us hope that this is resolved by Report, so that the Government can then bring forward the results of those considerations in the form of an appropriate amendment in order to keep their fair deal promise. They have made the promise, and we want to see that promise in the Bill—as, I presume, do they—in an appropriate form. If those considerations could be expedited over the next couple of weeks, we look forward to considering an appropriate fair deal amendment on Report. In the mean time, I beg leave to withdraw the amendment.
Baroness Donaghy
Baroness Donaghy
My Lords, in moving Amendment 62, I wish to speak also to Amendment 65. Clause 10 sets the Treasury powers to dictate to the individual public service schemes how they are to conduct their valuations and the assumptions, data and methodology they should use. I seek to clarify two issues through amendment to the wording of this clause.
The first issue, contained in Amendment 62, is that the Local Government Pension Scheme in England and Wales consists of 89 funds. Each fund appoints its own actuary and agrees with that actuary the assumptions and methodology most appropriate to its specific fund. Funds vary significantly in their size, demographics and proportion of active contributing members to retirees and those who have left with deferred pensions. It would be unworkable for the Treasury simply to impose central assumptions on individual funds.
The Local Government Pension Scheme regulations already set out when funds have to undertake valuations, while control of fund valuations is set out in Clause 12. Therefore, I seek to amend Clause 10(2) to make clear that these valuations do not apply to the Local Government Pension Scheme, as the Government have already acknowledged. The Bill states:
“Such a valuation is to be carried out in accordance with Treasury directions”.
I want Amendment 62 to amend the subsection so that,
“Treasury directions would not apply to individual Local Government Pension … funds”.
The second issue, in Amendment 65, is that the assumptions, methodology and data used in scheme-wide valuations will determine the cost of the scheme. To ensure that the assumptions used in scheme valuations are robust and appropriate will require the input of scheme pension boards and scheme managers, which is why I seek to amend Clause 10(4). I beg to move.
Lord Eatwell
My Lords, my noble friend Lady Donaghy has identified a considerable problem with cost control as expressed in Clause 10—the valuations section of the cost control part of the Bill. My noble friend’s amendment is very direct and clear with respect to the Treasury directions that she would like to see. My Amendment 63 takes a somewhat more ameliorative and subdued approach to dealing with this problem. However, it would ensure that Treasury directions are tailored to each local government fund and would therefore be much more accurate, rather than the possibility of a single set of directions being expected to apply to 89 local government funds which have significantly different characteristics. After all, each local government fund has its own assets and investment strategy. Different employers are involved and, crucially, most of the funds have different demographics. This means that each valuation needs to take into account the individual characteristics of those funds.
Considerable concern has been expressed about Clause 10 by well informed persons who are much better informed than me. For example, Alison Hamilton, the chair of the local government committee of the Association of Consulting Actuaries, said:
“Clause 10 certainly gives me cause for concern. … It is very important that the valuation takes account of the local demographics, and the local investment of the assets backing those pension funds. I attended a meeting where the Bill team tried to give some sort of reassurance that the valuation would be carried out as a one-size-fits-all under Treasury directions. That was not intended for the local government pension scheme. I would like the Committee to explore that and get something drafted”.—[Official Report, Commons, Public Service Pensions Bill Committee, 6/11/12; col. 169.]
Similar concerns have been expressed by the National Association of Pension Funds. I will not repeat what it said as it echoes what was said by Ms Hamilton.
When faced with this argument in the other place, the Government acknowledged that there was merit in it and stated that the Treasury would,
“take into account the individual nuances and features of the various … schemes”,—[Official Report, Commons, Public Service Pensions Bill Committee, 13/11/12; col. 347.]
when setting directions. They felt that the clause already allows enough flexibility for directions to take account of the differences between schemes. However, our amendment simply states what the Government’s intention apparently is—that the Treasury directions should not be based on, or be rigidly bound by, but should take into account,
“the individual nature of each of the different funded schemes”.
That is in accord not only with what is obviously sensible practice, according to the views of experts, but with what Ministers claimed in another place was their intention.
Lord Whitty
My Lords, I strongly support Amendment 62 and the other amendments that have been spoken to. I have a simple amendment in this group—Amendment 64. Clause 10(4) states:
“Treasury directions … variations and revocations … may only be made after the Treasury has consulted the Government Actuary”.
My amendment probably reflects my general suspicion of the Treasury, which is deplorable, as the Minister is indicating. Nevertheless it is shared by many in the pensions industry and beyond. I would have thought that it should be agreed with the Government Actuary’s Department that the Treasury or that department should come to an accommodation on what the basis for the variations, revocations and directions should be.
I accepted the Government’s argument that in relation to other sorts of consultation—for example, consultation with stakeholders—regrettably, agreement, or certainly consensus, is not usually the outcome. However, as regards an issue relating to the basis of valuation between the Treasury and the Government’s own actuary, surely the Bill should state that those provisions are agreed rather than that the Treasury may act after what may be quite a superficial consultation with the GAD. I hope that that was the Government’s intention anyway but I wish to make the position clear through my amendment. I hope that the Government will agree to it.
Lord Newby
My Lords, the Bill makes provision for pension scheme valuations across all the public service schemes. These will be carried out in accordance with Treasury directions to ensure that valuations are carried out on a clear and consistent basis.
Amendments 62 and 63 seek to clarify how Clause 10 will apply to the valuation of the individual funds in the local government pension scheme or to disapply the provisions of the clause to those valuations. The Government are well aware of the concerns referred to by the noble Lord, Lord Eatwell, and other noble Lords who have spoken, that this clause will be used by the Treasury to impose inappropriate valuation assumptions on individual LGPS funds. The amendments would ensure that this could not happen by removing these funds’ valuations from the scope of the clause or requiring the Treasury to take account of the nature of individual funds when making directions.
I hope that I can reassure noble Lords that these amendments are not necessary. First, the Government have no intention of making directions relating to the valuations of individual LGPS funds. This commitment has already been made in this House and in the policy paper published by the Treasury in November 2012, copies of which are in the Library. Secondly, Clause 10 needs to be read in the light of the Bill as a whole. It is clearly intended to deal with valuation at the scheme level, as can be seen from Clause 12, which makes provision for valuations at the level of individual pension funds. While that clause would provide for greater oversight of the local fund valuations, it will not mandate how they are to be carried out. Accordingly, we do not think that Amendment 63 is necessary.
In relation to the Local Government Pension Scheme, Clause 10 will be used only—I repeat, only—to set directions of how the model fund, an aggregation of the scheme costs at the national level, will be valued. We need to do that for the operation of the cost-control mechanism at a scheme level in LGPS but it will not directly affect the contributions paid into individual funds.
Turning to Amendment 64, Clause 10 already requires that the Government consult with the Government Actuary before making directions on scheme valuations. That amendment would add an additional requirement that the Government Actuary agrees the directions rather than just being consulted. The intention is to ensure that these directions form a sound basis for the scheme valuations and the Government, of course, support this aim. However, the Government cannot accept this amendment, as it does not achieve this aim and has unwelcome consequences.
The aim of the Government Actuary’s Department is to be,
“a highly valued principal provider of actuarial analysis and advice to all parts of the UK Government and other relevant UK and overseas public bodies”.
The highly valuable, actuarial advice that it provides is independent and professional and this aim would be compromised by the amendment. If this change were made, the Government Actuary’s decisions would inevitably influence the policy on valuations and he could come under pressure to determine elements of the directions themselves. This would fundamentally compromise his position as a truly independent adviser. This is not an outcome which anyone, including the Government Actuary, wants to see.
Amendment 65 highlights the importance of Treasury directions that will be made under Clause 10. These directions will set out the detail of how valuations of public service pension schemes should be carried out. Everybody has agreed that these valuations are of vital importance given their implications on both employer contributions and the employer cost cap. As such, all scheme stakeholders will need to be involved as the valuations are developed. However, the statutory consultation requirement that would be imposed by this amendment is unnecessary. I can reassure the Committee that we will seek to discuss these directions as they are developed. All stakeholders, including scheme managers, their actuaries, pension boards, and member representatives, will be given the opportunity to participate in this process.
I hope this reassures the noble Baroness that the consultation of scheme managers and pension boards that she has proposed will be carried out without the need for Amendment 65 and that she will feel able to withdraw the amendment.
Baroness Donaghy
I thank noble Lords who have participated in this debate. There is a certain irony, particularly on Amendment 65. This was a very mild response to the Minister’s reply at Second Reading when I, like the noble Lord, Lord Whitty, asked for the agreement of the Government Actuary’s Department. He commented then that it did not wish to participate in what would be seen to be a political event, but wanted to maintain its independence. Amendment 65 was an attempt to recognise the reality of that and write in the involvement of scheme managers and scheme boards as a mild substitute. I am still sorry that the Minister is not willing to include that. However, until I have had a chance to study the official record of the Minister’s reply, I beg leave to withdraw the amendment.
Lord Whitty
“( ) This section does not apply to the fund valuations of the Local Government Pension Scheme.”
Lord Whitty
My Lords, Amendments 66 and 70 propose the exclusion of LGPS funds from the aspects of the Bill covered by Clauses 10 and 11 because those aspects are primarily related to the unfunded schemes. Clause 10 attempts to impose criteria commonly determined by the Treasury on valuations of all schemes covered by the Bill. Amendment 66 will clarify that Clause 10 is intended to apply to scheme level valuations only, thus preventing future misunderstandings, particularly in relation to the 89 different local government schemes. Without the amendment, there is a lack of clarity around the impact of fund valuations which are included in the Treasury’s scope within Clause 10. This lack of clarity surrounds the apparent inclusion of both local fund valuations and the national, notional model fund valuation under the control of Treasury regulations.
Individual fund valuations are currently undertaken by fund actuaries under parameters set out in different scheme regulations and assumptions are agreed with the individual fund. It would be a marked change if such valuations were to come directly under Treasury control. If it is intended to include only the notional model fund in the Treasury’s scope, this clause will need to be amended to prevent any further misunderstandings. There are concerns that the assumptions, data and models to be used as directed by the Treasury would not reflect what is currently being used at fund level, thus also undermining the validity of national modelling of costs. The easiest way out of this dilemma is to exclude the LGPS from the operation of those aspects of Clause 10.
Clause 11, which we will discuss later, covers the employment cost cap. The LGA and the trade unions involved in local government believe that this clause should be amended so that we again embed the agreement, reached by employers, unions and Governments, for a separate cost-management process. That agreement ensures that the principal stakeholders of the scheme are responsible for the control of cost management. There is concern that, as it stands, Clause 11 gives the Treasury discretion over how the cost cap is set. This could mean that there would be nothing to prevent the Treasury setting the cap in such a way that it would be easily exceeded, resulting in an increase of employee—and probably employer—contributions or a decrease in benefits. Amendment 70 would make this clear because it would exclude the funded local government pension schemes and funds from the effects of this clause and would better reflect the agreement, supported by the Government, that exists within the LGPS scheme. I beg to move.
Lord Newby
My Lords, I will start with Amendment 66. As previously discussed, the Bill makes provision for pension scheme valuations to be carried out in accordance with Treasury directions. This amendment seeks to clarify that the clause does not apply to valuations of the Local Government Pension Scheme. It would ensure that Treasury directions on valuations would not affect these valuations, which are carried out at the local level. In that respect, it would have a very similar effect to Amendment 62.
The arguments discussed under that amendment also apply here and Amendment 66 is unnecessary. I hope that the Government’s previous commitments, which I have just repeated, have made that clear. The Government simply do not intend to make directions affecting the valuations of individual LGPS funds. Alternative provisions for oversight of these valuations are made elsewhere in the Bill. The amendment is not needed.
Amendment 70 seeks to provide a specific exclusion for the LGPS from the employer cost-cap provisions in Clause 11. A robust cost-control mechanism, on a statutory basis, is still required for the LGPS, even though it is a funded scheme. Clause 11 should apply to the LGPS, as with any other scheme. The Government have had extensive discussions with the Local Government Association and the local government trade unions on this issue. As a result of these discussions, and to reflect the unique position of the LGPS as a funded scheme, the Government will give additional flexibility to the LGA and the trade unions in the management of scheme costs. The full details of these additional flexibilities will be finalised in consultation with key stakeholders and then enacted via the Treasury directions made under this clause and in the scheme regulations.
However, it is vital that the Government maintain a statutory backstop to provide reassurance to the taxpayer that action will always be taken if the cost of the scheme becomes unsustainable. This backstop, which will sit behind the cost-control arrangements that I have described, will apply in the same way as in other schemes. If the costs of accruing LGPS benefits, as measured at a national level by the GAD’s model fund, rise or fall by more than two percentage points, action will be required to bring costs back to the level of the cap, as in any other scheme. The requirement to consult on the action to be taken, with a view to reaching agreement, will apply as in any other scheme. If agreement cannot be reached, scheme regulations will set out a default action to be taken, as in any other scheme.
The cost-control mechanism is a key part of delivering good and sustainable pensions that will last for a generation. Without it, there is a risk that costs will once again spiral out of control and leave us with the choice of looking for higher contributions from, and lower benefits for, members or shunting the extra costs unfairly onto the taxpayer. Given these considerations, I hope that the noble Lord will feel able to withdraw or not move both amendments.
Lord Whitty
My Lords, as regards Amendment 66, I am pleased that the Government are prepared to be explicit in their assurances that they do not intend to set directions in relation to individual local government funds. If I understood the Minister clearly, the situation is to some extent similar to that in Amendment 62. A statement that “the Government do not intend” is not a copper-bottomed guarantee, as we know. Nevertheless, I suspect that it is as far as we will get in our consideration of the Bill, and I therefore thank him for that.
As regards Clause 11 on the employer cap, it is clear that in whatever circumstances there needs to be cost control. The point that I am making is that within the local government schemes it is the responsibility of their governance to ensure that cost control applies. There is a Treasury engagement with the national notional scheme and other provisions oblige the Treasury to ensure that the schemes do not get out of control, as the Minister indicated. In fact, the local government scheme has not got out of control. There have been occasions when individual funds’ investment policies have been less than ideal, which have led to short-term problems, but in no period has the local government scheme, which has operated for decades, got out of control.
Given the ongoing governance of individual schemes and the new provisions that we have just agreed in relation to the national scheme, there is little likelihood of the scheme getting out of control in any case. It is therefore otiose for the Treasury to be able to impose individual employer contribution caps in the crude way in which it may need to do so in relation to unfunded schemes that have historically—on the odd occasion and possibly now—got out of control. I regret that the Government do not recognise that. We will discuss employer caps in more general terms in a moment, but I should have thought that it would be less trouble to the Treasury, and would make it clearer that the responsibility to ensure that cost controls operate rests fairly and squarely on the shoulders of the stakeholders in the local government schemes, if they were exempted from the ability of the Treasury to impose its own cost controls.
However, that is clearly not the road that the Government are prepared to go down. I will therefore not press Amendment 70 and beg leave to withdraw Amendment 66.
Lord Eatwell
“(4A) Treasury directions under subsection (3) may only be made after consultation with the persons or representatives of the persons who appear to the Treasury to be likely to be affected by the employer cost cap.”
Lord Eatwell
My Lords, as my noble friend Lord Whitty said, we turn to the general issue of employer cost caps. There is no doubt whatever that a cost cap is an appropriate measure with which we agree, as a means of ensuring that schemes are managed in a cost-efficient way. However, the way in which the cost cap is set is of crucial importance, not least because Clause 11(7) allows a scheme’s regulations to reduce members’ benefits or increase their contributions to meet a target cost for the scheme. How the cost cap is set is therefore important.
What does Clause 11 say? It states that the cost cap will,
“be set in accordance with Treasury directions”.
That is all. There is no requirement for the Treasury to consult or to relate cost considerations to any other set of criteria or measurement. The Treasury therefore has the widest possible discretion on how the cost cap could be set. This means, as my noble friend Lord Whitty suggested with respect to local government schemes—but it is true with respect to schemes in general—that there is nothing to prevent the Treasury setting the cap in such a way that it is easily exceeded, thus triggering the sort of reduction in benefits or increase in contributions anticipated in Clause 11(7).
All that the amendment seeks is to say, “Look, if you are going to change the cost cap, you should consult the people to whom this is being done, the people actually running the schemes, and you may find a degree of information that you otherwise did not have. You may find that measures can be taken, perhaps with mutual advice, to reduce the costs and bring them more into line with what is deemed appropriate”. The failure to consult on even the imposition of cost caps is a serious matter that reduces trust in the overall management of the scheme—and particularly in the Treasury’s role in the management of the scheme. All that the amendment says is, “Okay, the Treasury still has the role of setting the cost cap but it should at least consult before changing the cost cap or setting it in the first place”.
A point about this arose from our discussions in Committee on 9 January, when the noble Lord, Lord Newby, referred to the extension of Treasury regulations specifically to Scotland. He sought to reassure the Committee that the Treasury really was going to stay at arm’s length, as it has done in the past, and would not impose any rules on the Scots. They would have the opportunity, as they have now, to manage the details of their scheme, subject to this ultimate backstop in the sky that will never be used. I therefore ask the Minister specifically whether the cost-cap regulations, as set out in Clause 11, will apply in Scotland—in particular, to local government pension schemes. If they do, and there is no requirement for consultation, there is trouble ahead. This amendment will not only bolster the Government’s position with respect to the confidence with which their changes to public sector pension schemes are received, but will also secure the Government’s position with respect to any amendments to the cost cap in Scotland. I beg to move.
Lord Newby
My Lords, we absolutely share the intention of the noble Lord, Lord Eatwell, behind this amendment. As I hope I can demonstrate, we have already made adequate provision in the Bill and in the way we are behaving to reassure him.
The first general point is that the Government set out general principles of consultation which will apply to Treasury directions, as to any another legislation. We have discussed these pension reforms extensively with all stakeholders and we will make clear commitments to do so in the future. These consultations will cover the cost cap and the details will be discussed with representatives of all the schemes via the normal scheme governance rules.
The key point is the existing provision in the Bill for consultation on the level of the cap in each scheme as part of the consultation on scheme regulations. The details of the cap will be set out in the scheme regulations, which will be subject to the consultation requirements contained in Clause 19, which states:
“Before making scheme regulations the responsible authority must consult such persons (or representatives of such persons) as appear to the authority likely to be affected by them”.
As with any other scheme changes, we are required by the Bill to consult on the cost cap.
The noble Lord asked whether the cost-cap regulations would apply to Scotland. The answer is yes, it would. The cost cap is clearly a reserved matter and the details about how it would work, which are covered by the scheme regulations, are in exactly the same position as all the other provisions of the regulations that will apply to Scotland as they do to the rest of Great Britain, but not Northern Ireland.
Lord Eatwell
My Lords, I wish the Minister well in his negotiations with the Scottish Government in this respect. I recognise the general issue of the regulation set in Clause 19, but it is of such importance, as I will illustrate when we come to Amendment 68, that it would be of particular relevance to have the notion of consultation included at this point. However, I will elaborate that argument when I turn to Amendment 68. In the mean time, I beg leave to withdraw Amendment 67.
Lord Flight
Lord Flight
My Lords, my five amendments to Clause 11 and one to Clause 20 are about fleshing out how the cost-control mechanism will work. I should like to make the point up front that I well understand the sense of the Government endeavouring to achieve broad agreements with the public sector trade unions in a territory which is thus long term. I pay tribute to the honest broker work done by the noble Lord, Lord Hutton, in examining the territory in such detail.
There is a third party in addition to public sector employees and the Government, which is self-evidently the taxpayer. With pay-as-you-go pensions, the theoretical actuarial deficit or surplus is essentially irrelevant—no doubt, the wrong rate of interest is used anyway in discounting the liabilities—as is, in a way, the percentage of GDP as a cost. As long as we have a pay-as-you-go system, what matters is the cash-flow deficit which other taxpayers have to cover. As I pointed out last week, it was quite surprising to see the OBR forecasting a cash deficit of £15.4 billion by 2016-17. Subsequent to that calculation, the OBR, in its report of 12 December, pointed out that expected longevity is six years longer than the assumptions made when the figures I have just quoted were produced. That implies at least an additional £7 billion of cash-flow shortage. As things stand, from 2016-17 onwards there will be a cash deficit of some £22 billion or £23 billion per annum to be financed by other taxpayers. That is not satisfactory and it certainly follows that there needs to be a cost cap that functions and can deal with all possible options if costs get further out of kilter.
As it stands, the Bill does not cover costs effectively. Most of the key points will be in subsequent regulations. Clause 11 provides a legal framework for the system of cost controls but with virtually no details. It appears to give the Treasury greater future flexibility and control if, for example, there is a change in the inflation index. It is unclear what will happen if no agreement is reached in the areas that are set out in Clause 11 to achieve agreement.
The details of the cost-cap mechanism are yet to be agreed. The Treasury has published a more detailed document, which establishes an employer cost cap in public service pension schemes. In a way it is that document that we should be discussing as it has more detail in it. The Treasury has also published an actuarial valuation of public service pension schemes. The actuarial valuation is of less fundamental importance. However, it is that which drives the cost-cap mechanism, so it is important in that context.
The Bill specifies that all schemes must set a cap expressed as a fixed percentage of pensionable pay but it does not define what the percentage might be. It is difficult for the legislation to be costed at present and it is somewhat inadequate to be reviewing the Bill without knowing the percentage caps that will be recommended. There are no details as to what will happen if there is no agreement to any required cost adjustments and there is no specific regard to the cash- flow deficit that is being achieved. The HM Treasury paper establishes an employer cost cap in principle. It sets out the mismatch between the contribution rate which employees pay and the rate controlled by the cap, but that, too, has not been addressed. The Treasury paper provides that the cap mechanism deals only with cost changes relating directly to active members and not to deferred or pensioner members or to cost increases arising from other forms of charge.
In a sense, my amendments are not of huge significance but they endeavour to put a few more clothes on the arrangements. Amendment 67A would provide the principle that, if no agreement was reached once a cap was exceeded, the guidelines provided by the Treasury would need to be applied. Amendment 67B would provide for the cap to include increases in pension payments if cost cuts were required. As with the private sector in many circumstances, it would introduce an element of fairness whereby pensioners would share some of the pain if the funding had reached the stage where the deficit was so great that it had to be cut back.
Amendment 69A would require an affirmative Commons procedure if reductions in pensions in payment were proposed. Given the lack of detailed prescription, Amendment 70A would provide for how the cost cap should operate. It would require the Office for Budget Responsibility to publish periodic appraisals of employer cost-cap arrangements, quadrennially for unfunded pay-as-you-go schemes and triennially for funded local government schemes. It would also require the publication of the schemes’ valuation reports. The key is requiring the reporting of the annual cash-flow shortfall for the next five years, with comparisons between the Independent Public Service Pensions Commission’s projections for benefit payments as a percentage of GDP and the actual anticipated percentage of GDP. Obviously, the point here is that if GDP growth is a lot less than expected or hoped, which is proving to be the case, that will alter that figure. The GDP figure is important as projections are based on better GDP growth reducing the overall cost of public sector pensions as a percentage of GDP.
Amendment 71A would remove any government responsibility—that is, taxpayer responsibility—for financial support for any local government pension scheme. I hope that this is not necessary but there could be a potential financial liability for trustees—the Minister has a trustee role—if a local government scheme were in trouble.
The Bill does not refer to the ongoing constitution of local government pension schemes or specific regulation thereof. The Local Government Pension Scheme’s national standards boards feature in the consultation but have not been picked up in the Bill.
Finally, Amendment 118A adds “pensions in payment” as a protected element in relation to a scheme for which proposals for retrospective change may be made by the responsible authority. I have said that I think that is a fair point if such extreme measures are needed.
The bottom line is straightforward. If the cash-flow deficit becomes an unacceptable burden on other taxpayers, there are only four ways—or a mixture of four ways—in which it can be controlled. One is obviously through an increase in employee contributions, but the sort of increase required is, I think, too large for this to be practical as a sole solution. A second is reducing the accrual of pension rights, on which Clause 11 focuses. The next is reducing pensions in payment, to which two of my amendments relate, and the fourth is increasing the pension age. Although that is addressed elsewhere in the Bill, it is not specifically addressed as one of the ways of controlling costs. The Treasury paper on the employer cost cap does not make any specific reference to reducing pensions and it excludes any impact of cost increases from other sources.
I hope that the Minister will respond that my amendments are not necessary and that empowering the Treasury to do anything covers virtually everything. However, I am quite surprised that the deal that has been done comes before both Houses with the sort of cash-flow deficit that it has at a time when it seems obvious that public spending will in due course need to be cut significantly more than it has been or the public finances will be in a complete shambles. Adding £23 billion per annum to public expenditure through the cash subsidy of public sector pensions seems to be a pretty tall order. Although I understand the position and interests of members of public sector pension schemes, I repeat that I am surprised that we have not arrived at a proposal which is, in essence, cash neutral.
Lord Whitty
My Lords, I am afraid that I cannot really support the noble Lord, Lord Flight, in these measures. I point out to him that they are internally inconsistent and, indeed, contradictory. On the one hand, Amendment 71A effectively removes all responsibility from the Government in relation to any potential, unlikely though it may be, default on the Local Government Pension Scheme.
Lord Flight
That amendment is intended to remove any financial liability, not to remove any obligation to get it dealt with.
Lord Whitty
Just so, my Lords, but the legitimacy of the Government being able to lay down the detailed criteria which his other amendments and indeed many of the Government’s stipulations in the Bill provide in relation to the local government scheme relies on the fact that everybody assumes that the local government scheme has the Government as its underwriter of last resort and that therefore that underwriter has the right to intervene in what is otherwise the equivalent of a private scheme between private institutions; namely, local government and private trade unions. They are not central government creatures. They have certain statutory responsibilities but they are separate entities. Therefore, the legitimacy of the Treasury in any sense making directions, stipulations and interventions, as the Bill provides and as the noble Lord’s other amendments would consolidate or take further, depends, so far as concerns the local government scheme, on that implicit underwriting. It is hoped that it would never be called upon. Nevertheless, it is there in the background. The situation in relation to the other schemes is different, but Amendment 71A relates specifically to the local government scheme and I think that it is contradictory to everything else that the noble Lord was advocating and much of what the Minister is advocating.
Lord Newby
My Lords, I agree with the noble Lord, Lord Flight, about the need to keep the ballooning cost of public sector pension schemes under control. That is one of the key features of this Bill. The challenge, which I will come to in a minute, is that it is not straightforward, or indeed possible, to turn the tap off in pensions as you can in some other areas of expenditure.
I think everybody agrees that the cost cap is one of the key elements of these reforms and in order for it to be credible and robust we must ensure that costs will always be adjusted if the cap is breached. This can be done in a number of ways. While it would be preferable if all stakeholders were agreed on the way to do it, we have to allow for the possibility that agreement might not be reached. Clause 11 therefore specifies that scheme regulations must set out the steps to be taken to achieve the target cost if there is no agreement; there simply has to be a default adjustment.
The amendment seeks to strengthen this requirement by specifying that this element of scheme regulations must be in accordance with guidelines provided by the Treasury. This would ensure that the default action mandated in scheme regulations would be more consistent across schemes. I understand my noble friend’s intention in this amendment but it is simply unnecessary. Clause 3 sets out that the majority of scheme regulations made under the Bill require the consent of the Treasury before they are made. This requirement for Treasury approval will provide the assurances my noble friend is seeking because it covers the cost cap. He said in relation more generally to the cap that, for all the schemes, cash flow was more important than theoretical deficits and surpluses. At one level it is, but valuations of the theoretical surpluses or deficits are needed in the unfunded schemes because we have to plan how the Government will meet the cash-flow costs of the schemes over a long period going forward.
The intention behind Amendments 67B, 69B and 118A is to allow pensions already in payment to be altered, should action to adjust the costs of the pension schemes be required as a result of the employer cost-cap mechanism. In theory, this is one of the ways in which you constrain the costs. Unfortunately for the noble Lord, the Government cannot accept these amendments. Amendment 67B would allow pensioners’ accrued benefits to be reduced to reduce the cost of the scheme. As the Government have made clear, both in this House and in the other place, we are committed to protecting accrued benefits. Indeed, I hope to bring forward amendments on Report which entrench that view.
There are also significant legal hurdles to altering pensions in payment. In law, pensions in payment are owned by pensioners in exactly the same way as other possessions. Article 1 of Protocol 1 of the European Convention on Human Rights protects these possessions from any interference by the Government that is not only lawful but proportionate. We agree with that provision. Any Government attempting to alter pensions in payment would face a serious risk of legal challenge from pensioners arguing that their possessions should not be taken away in favour of protecting active members in employment from cost control. This would make it very hard for this amendment to work in practice even if we thought it was a good idea, which, sadly for the noble Lord, we do not.
Legal difficulties aside, it is right that those benefits that have already been paid for cannot be reduced. The ability to provide retrospective changes of this nature would mean significant uncertainty for all members of the schemes and potentially destroy any trust in them.
Baroness Noakes
Can the Minister clarify what he is referring to when he says that not being able to adjust existing accrued rights would also affect increases in pensions that were already in payment? One way of using the amendment proposed by my noble friend would be to constrain future increases through whatever indexation is in use at the time. Would it not be sensible for the Government to have that available to them for getting cost control? It is different from saying that you reduce the number of years accrued or the absolute amount of an accrued pension.
Lord Newby
It is, but I think that the same considerations apply. The employee or former employee in effect has a pension contract, which says that he or she is making a payment into a scheme; the employer is making a payment into a scheme and certain payments flow from that. Whether we are talking about rates of accrual or any other component of an agreed pension scheme, my understanding is that retrospective reductions—however they are done; even if we are not talking about a reduction but a freeze, it is a reduction of the implied or explicit rights already in the scheme—would fall foul of the legal issues I raised as much as any other component of the scheme.
I think that I had just about got to the end of what I was going to say on that amendment. Turning to Amendment 70A, I understand my noble friend’s intention in providing for an independent assessment of the operation of the cost-cap mechanism, and for transparency around the cost of public service pensions. However, the Government cannot accept this amendment. The role of the OBR is to improve the accountability of the Government by examining the state of the public finances and the long-term impact of government decisions. While it has a clear remit to analyse the long-term sustainability of the public finances, it has full independence in determining how to fulfil this obligation. The Government cannot specify that the OBR provides any specific data or analysis.
However, as my noble friend alluded to, much of the data that would be required under this amendment is already provided by the OBR. The OBR’s economic and fiscal forecasts, produced twice a year, have included a forecast of public sector pension payments and contributions over a five-year period. Indeed, the noble Lord referred to some of the figures it produced in November. For noble Lords who have not had the opportunity to look at them, I refer them to page 146 of the OBR’s Economic and Fiscal Outlook produced in December.
My noble friend’s amendments would also include provision for the OBR to pass judgment on the effectiveness of the cost-cap mechanism. This would change the role of the OBR. It is not a policy-based organisation and must be seen as impartial and independent. For the OBR to be seen to advocate or arbitrate on policies would draw it into political debate and could undermine this independence. If you allow the OBR to start giving advice or arbitrating on policies across the piece, that would completely undermine the role set for it. For that reason, policy on the cost cap, and public service pensions more broadly, must remain the responsibility of the Government.
Amendment 71A seeks to prevent the pension liabilities of local authorities falling to the Government. I should start by highlighting that the Secretary of State for Communities and Local Government is not a trustee of the pension scheme. Rather, the Secretary of State is the person who may make regulations to establish the scheme. Local authorities are responsible for managing and administering both their own budgets and the Local Government Pension Scheme. The authorities, not the Minister, are responsible for their liabilities under the scheme. Legislation requires local authorities to establish and manage pension funds and then set the appropriate level of employer contribution rates to ensure that those funds are able to meet the liabilities of the scheme. In addition, the new requirements in Clause 12 of the Bill will provide additional scrutiny of LGPS fund valuations. There are, of course, safeguards in place.
Baroness Noakes
What the Minister is saying is very helpful. Can he say explicitly that what the noble Lord, Lord Whitty, said—about there being a broad assumption that the Government stood behind local authority pension schemes—is wrong?
Lord Newby
My Lords, I shall write to the noble Baroness if I get this wrong—and the noble Lord, Lord Whitty, will shake his head or nod depending on whether or not I get it right—but I think that the responsibility for meeting obligations under local authority pension schemes falls to taxpayers within the local authority areas covered by the schemes.
Baroness Noakes
The point that the noble Lord, Lord Whitty, was making was not to dispute the basic legal position but to say if that were defaulted upon, there is an assumption underpinning these schemes that the Government stand behind them. That is why I asked the Minister to clarify his view of that.
Lord Newby
I will be very happy to write to the noble Baroness about it but the whole purpose of the cost cap is to ensure that we do not get into that mess. Given the experience of the noble Lord, Lord Whitty, in this area, I am very reassured by his confidence that the local government schemes will not get into this mess. The reason why the cost cap covers local government schemes is that, however unlikely it is, we feel that we need a method of dealing with them in this extremely unlikely eventuality.
Lord Whitty
My Lords, I think we all hope that it is an extremely unlikely eventuality and I genuinely believe that it is an extremely unlikely eventuality. Standing behind this is a slightly theological but nevertheless psychologically important matter. I suspect you cannot find it anywhere in statute but, as the noble Lord, Lord Newby, says, the ultimate responsibility of any failure of a local government scheme would rest, in some context or other, on taxpayers, and it therefore becomes the Government’s responsibility. I hope that the noble Lord can write to me as well, and perhaps to other colleagues in the House. I expect it will be quite a difficult letter to write.
Lord Newby
We look forward to that intellectual exercise. I think that I had just about dealt with Amendment 71A. Amendment 118A, to my mind, is grouped with Amendments 67B and 69A. They all relate to the same point about being able to constrain payments. All the considerations that apply to Amendment 67B and 69A apply to Amendment 118A as well.
Lord Flight
My Lords, the Minister has done a pretty effective job in removing the practicality of my amendment. I will just make the point about pensions in payment. I accept the argument that a contract is a contract, but for new people joining the public sector, a term of their employment could be that their pension right includes the possibility that, if their pension arrangements were in a mess, their pension could be reduced. In the case of an existing contract, I grant that it cannot be removed.
To the extent that it is possible, there ought to be broad similarity between what happens in the private sector and what happens in the public sector. Obviously, in the private sector, if a final salary scheme gets into a mess and the employer cannot finance the deficit, even though it goes to the Pension Protection Fund, people will not necessarily continue to get their full pensions with inflation increases and so forth. I think it is worth looking at seeking to design a scheme that is reasonably fair on both sides. I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, we return to the issue that I anticipated in my remarks a few moments ago, of the relationship between the cost cap and the benefits to be received.
I remind the House that Clause 11(7), in referring to the cost cap, says that the steps taken in conditions where the cost cap is not met,
“may include the increase or decrease of members’ benefits or contributions”.
Clause 11(7) is entirely unqualified in that respect. It could lead to an increase or a decrease in benefits. As currently drafted, there is absolutely nothing to prevent accrued benefits from being reduced. Indeed, one of the main concerns of the noble Lord, Lord Hutton, about the Bill, which he expressed in written evidence, is that it does not offer proper protection for accrued rights.
Interestingly enough, there is a Treasury paper on the issue of the employer cost cap. On page 6 of that paper it says:
“There is no intention to make changes to benefits already accrued via the cost cap mechanism”.
The very statement that there is no intention to reduce accrued benefits demonstrates that the clause as drafted includes the possibility of the reduction in accrued benefits. As we all know, in politics, the phrase “we have no intention” means “we are going to do it in due course”.
Surely the Minister can have no objection to this amendment, as he has promised that the Government will not reduce any accrued benefits. What is more, this amendment would not change the Bill in any way that is detrimental to the Government. It would be of enormous benefit, providing millions of public service workers with the confidence that the accrued benefits of their pensions are safe. After all, the Government may declare that they have no intention of using Clause 11(7) to reduce accrued benefits but, as we have said several times this afternoon, it cannot bind future Administrations. If the Minister really wants to ensure that accrued rights are safe, why not include this amendment in the Bill so that if the cost cap were ever to be used to attack accrued benefits, any future Administration would have to come to Parliament to amend the legislation?
I stress that this is not a repeat of our discussion about retrospection in Clause 3(3)(c). This is a different issue. It speaks specifically to a statement that benefits might be reduced and does not qualify which benefits might be reduced. It would be enormously helpful to the Government if they accepted this amendment and made it clear that not only do they have no intention but that they intend to legislate to ensure that members’ accrued benefits are not reduced, let us say, unintentionally by the cost cap coming in to exercise its role in maintaining efficiency in the provision of pensions. I beg to move.
Baroness Donaghy
I will speak briefly in support of my noble friend Lord Eatwell. I think I said at Second Reading that the issue of accrued benefits is a deal-breaker as far as the negotiations are concerned. It is about keeping one’s word. Enshrining this in the Bill would do a huge amount to reassure public servants, particularly those in Scotland who have not yet been properly consulted. I believe that if a public servant sat down and did an audit of all the discussions that we have had on Committee days one and two, they would see the Government’s unwillingness to put in the Bill all the areas in those agreements, saying, “No, we do not think that this, this or this needs to go in” and so on. I realise that this Bill is a legal framework but we are talking about the confidence that people can have in their pensions in the future.
We should not forget that it is not only Governments that can opt out of these things; individuals will make assessments about their own benefits and welfare and future, and it is very important for all our sakes that we maintain some kind of stability in this turmoil. If I can use a pun, the accrued failure of the Government to put any real assurances in the Bill might be viewed in a negative light by a lot of people who are very involved in this debate.
Lord Newby
My Lords, I will respond first to the noble Baroness, Lady Donaghy, before returning to the specific issue raised by the amendment. The vast bulk of the provisions that will affect people are not in the Bill; they are under the schemes. I have circulated the draft Civil Service scheme, an extremely long and detailed document that has in it most of the things—the headlines—that people will look at in determining whether they think the pensions they will get are fair and reasonable. I hope that those who worry that the Bill does not cover a lot of the things that they want covered can be reassured, as I have sought to reassure the House, that in the vast bulk of cases these points will be in the regulations, which obviously have the same force as the Bill.
With regard to Amendment 68, I will not repeat at great length that we have no intention to do what the amendment seeks to prevent. I do not need to refer the noble Lord, Lord Eatwell, to the Treasury paper because he has read it. I do not need to remind people about the UK and European legislation that would limit the Government’s freedom to do what the amendment prevents because I have already done so. What I will say is that we are committed to giving further consideration to the protection of accrued benefits, of all sorts, in all circumstances. I plan to have amendments to that effect ready for Report; they will cover this point along with accrued benefits, so I hope that is a reassurance to the noble Lord.
Lord Eatwell
My Lords, I am grateful to the Minister for that. Of course, he made that commitment at the previous day of Committee when we were discussing the whole issue of retrospection. I am delighted to hear that the amendments he will bring forward—relatively soon, I hope, so that we will have the opportunity to examine them carefully before we discuss them on the first day of Report—will also cover this particular eventuality. On the basis of that assurance I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, this is again a belt-and-braces amendment. If the Government had not made a commitment to protect accrued benefits in an appropriate way, including benefits in general as referred to in Clause 11(7), we would want any change in the cost cap and the consequences of such to be considered on the basis of an affirmative Motion. Given that the Minister has made a commitment to bring forward amendments to deal with the issue of accrued benefits I will not move Amendment 69.
Lord Newby
Lord Newby
“Information about benefits
(1) Scheme regulations must require the scheme manager for a scheme under section 1 which is a defined benefits scheme to provide benefit information statements to each person in pensionable service under the scheme in accordance with this section.
(2) A benefit information statement must include—
(a) a description of the benefits earned by the person in respect of his or her pensionable service, and(b) such other information as Treasury directions may specify.(3) The information included in a benefit information statement must comply with such requirements as Treasury directions may specify.
(4) A benefit information statement must be provided—
(a) no later than the relevant date, and(b) at least once in each year ending with the anniversary of that date. (5) The relevant date is the last day of the period of 17 months beginning with the day on which scheme regulations establishing the scheme come into force.
(6) A benefit information statement must be provided in such manner as Treasury directions may specify.”
Lord Newby
My Lords, Amendment 72 delivers on the Government’s commitment to come forward with an amendment to require scheme members to be provided with information about their pension benefits. Amendment 83, in the name of the noble Lord, Lord Eatwell, is also in this group and is based on an amendment, tabled in another place, which we believe is not quite right for a number of reasons. I hope the noble Lord will be satisfied that Amendment 72 is an appropriate alternative.
The new clause will apply to each public service pension scheme made under Clause 1 of the Bill and, by virtue of Amendment 137, all new public body pension schemes. It requires that every active member of the schemes must be regularly provided with information about the pension benefits they have earned. The clause allows for this to be done in a number of ways, including via electronic media. The first statement must be provided within 17 months of the new schemes coming into effect and at least annually thereafter. Like me, noble Lords may wonder why 17 months has been chosen as the period in the amendment. The reason is that 17 months would take us to September of next year, which would mean that scheme members would have this information before they needed to submit their tax return. This is relevant only to high- end earners, who may need to take account of the contributions going into their schemes for tax purposes. This period will ensure that the schemes have the correct infrastructure in place to carry out this commitment. They can, of course, provide statements earlier where they are ready.
In developing the clause we have been mindful of the obligations that already apply to all occupational pension schemes, including the public service schemes. Regulations made under Section 113 of the Pension Schemes Act 1993 set out various information requirements. These are known as the disclosure regulations and include requirements to provide deferred members with information about the benefits they have earned up to the point at which they leave the scheme. As this legislation already requires information to be provided to those members, it would not be appropriate for our amendment to address them. The disclosure regulations also require defined benefit pension schemes to provide information to active members, but only upon request. The effect of our amendments will be to require each of the public service pension schemes to go further than this. Once they are up and running, information will automatically be provided to all active members at least once a year.
The disclosure regulations specify the information that all schemes must provide on request, how it may be provided and certain detailed points about how it must be calculated. Our policy is for the new benefit statements provided under this clause to be produced to the same standards. Rather than mirror the requirements of the disclosure regulations in the Bill, our amendment provides for Treasury directions to specify the information that must be provided to members. We have taken this approach because we are mindful that the disclosure regulations themselves may change over time and we will want the public schemes to keep in step. In fact, the regulations governing the disclosure of information in occupational pension schemes are currently under review. We have set out a commitment to consult on those provisions later this year.
We propose to retain parity between the Bill provisions and the disclosure regulations wherever appropriate. It is important that members are given consistent and complementary information about their pension scheme benefits. This approach is also consistent with that we have taken elsewhere in the Bill in extending the role of the Pensions Regulator to the public schemes. The Pensions Regulator will also have a role in overseeing the provision of benefit information to members of the public schemes.
Amendment 86 adds annual benefit information to the list of matters that the regulator will issue guidance on. Amendments 84 and 87 also include the new clause in the areas that the regulator will oversee and on which they can take enforcement action should schemes fail to comply with their duties. The amendments meet the commitment that we made on making information available and I hope that noble Lords will agree with them.
Lord Eatwell
My Lords, I listened carefully to what the noble Lord had to say and I am cognisant that this is a response to the arguments made in another place by my honourable friend about the disclosure and availability of information. My Amendment 83, which is in this group, also seeks to enhance communication to members. I will not go into in any great detail the argument about why that should be done because the noble Lord has already said why it should be done. But I would be grateful if he could set out what are deemed to be the deficiencies of Amendment 83 so that I have the opportunity to study his arguments between now and Report.
Lord Newby
My Lords, the main difference between the two is that the noble Lord’s amendment sets out what information would be included in the benefit statement. We are saying that we wish the information to mirror the disclosure regulations that apply to private sector schemes. These will change from time to time. They have improved over the years and become less opaque. They may change again and we want the information that people under public sector schemes receive to keep up with what is, if not the gold standard, the best practice under those regulations.
We will provide information that mirrors the regulations, which may change. The noble Lord’s amendment is very prescriptive about what the information is. I have not gone through it to see what it misses, if anything, beyond what we are planning, but I hope that when he reads what I have said he will find that we are covering rather more than he wants covered and enabling a certain amount of flexibility to meet best practice.
“(1) The Treasury shall make directions requiring the scheme manager or responsible authority of a scheme under section 1 to publish scheme information.
(1A) The Treasury may make directions requiring the scheme manager or responsible authority of a scheme under section 1 to provide scheme information to the Treasury.”
Lord Davidson of Glen Clova
My Lords, this amendment makes it a requirement for the Treasury to make directions for the publication of scheme data. It retains the permissive nature for Treasury directions in respect of data that are for the Treasury’s own use.
In his report, my noble friend Lord Hutton condemned the data presently available for public sector pension schemes. His report stated that,
“the Commission has concluded that at present the availability of such data is at best patchy: some key data is not available, at least not publicly. This needs to be improved”.
My noble friend Lord Hutton stressed the need to improve the quality and accessibility of scheme data so that comparison can be made between schemes and individual administrators. With better data, comparison could be made in respect of administration costs, membership profiles and, for the 89 funded local government pension scheme funds that manage more than £150 billion worth of assets, with a return on investments, which noble Lords will doubtless consider rather important.
Comparison, as in many areas, allows good practice and permits weak performance to be identified. Once identified, rectification may then be put in place in relation to that performance. It also enables good practice to be distributed throughout the various funds. In terms of accessibility, my noble friend Lord Hutton recommended that data be published as far as possible to common standards and methodologies and collated centrally. Currently, there is no central, publicly available depository of information.
Clause 13(1) of the Bill is permissive and thus fails to ensure that the Government will implement any changes to the current system for collating public service pension scheme data. Given the importance of full and reliable data in assessing the performance of public sector pension funds, that is not a desirable position.
Amendment 74 would replace the permissive language of “information may relate” with the compulsory language of “information shall include”. Over the decades, the argument about “may”, “maybe”, “must” and so on in context has been a fruitful source of income for many lawyers, and I declare my interest as a lawyer. However, in trying to get clarity in this important area, I suggest that the option that means either you do it or do not do it should be replaced with a mandatory position. The permissive nature of the language is not adequate in this area. My noble friend Lord Hutton in his report was very clear that current pension scheme data were not adequate—in his words, “at best patchy”—and some key data were not publicly available.
The report stresses that data should enable the assessment and scrutiny of performance, viability and key facts associated with the different schemes. This cannot be done unless the data are placed in the public domain. I suggest that the Bill should ensure that key data are published and not merely list types of data that the Treasury “may” include should it decide to make directions under Clause 31.
The Minister has frequently referred to flexibility and in many areas that is very useful, but in certain other areas such as this it can be termed, in my noble friend Lord Hutton’s phrase, patchy, which is undesirable in this area. The amendment does not set out to establish every detail of the information to be published but to provide a framework for information requirements.
In Amendment 75 there is an effort to specify that scheme information should include full valuation reports. Again, my noble friend Lord Hutton’s report specifically stated that full valuation reports should be published by our public service pension schemes, yet they are not mentioned in the types of scheme information in Clause 13(3). Without the publication of full valuation reports, comparison between schemes, as noble Lords will immediately appreciate, becomes very difficult. Proposed new subsection (3A) would allow the Treasury to require scheme information to be published to common standards to make it easier to collate. That in turn would help better comparisons between schemes. This is a permissive amendment.
Amendment 76 would require the Office for Budget Responsibility to report at regular intervals on the long-term impact of public service pension schemes. As my noble friend Lord Hutton stressed, there is a need for fiscal policy to take account of the sustainability of public service pension schemes. In that regard, I assume that the view is entirely common. For fiscal policy to be properly informed in relation to the cost of future and past pension promises, there needs to be accurate and independent analysis of the long-term impact of public sector pension schemes on public finances. That is why my noble friend Lord Hutton recommended that the Office for Budget Responsibility should provide a regular published analysis of the long-term fiscal impact of the main public service pension schemes, including the Local Government Pension Scheme. This amendment would ensure that fiscal policy is better informed, and that policymakers and the public are more regularly and reliably informed about the cost of public service pension schemes. Again, one assumes that that is a common objective on all sides of the House.
The Minister in another place said that the amendment was unnecessary, given that the Office for Budget Responsibility already has a responsibility to examine and report on the sustainability of public finances. From this side we suggest that this amendment be accepted, because it facilitates the understanding of the various trends and developments that may take place within the economy that have an impact on fiscal policy, which in turn can have an impact on pension matters. I beg to move.
Lord Newby
My Lords, as the noble and learned Lord, Lord Davidson of Glen Clova, has said, in his final report the noble Lord, Lord Hutton, set out the need for improved transparency of information concerning the public service pension schemes. His report highlighted the range of information that is currently published, including data published by the Office for National Statistics, the OBR, the Treasury and the schemes themselves. However, as he explained, despite this range of data there is no centrally collated information that allows the total impact of the schemes to be readily assessed. Also, differences in the presentation and underlying methodologies and assumptions hamper comparisons between the schemes and, for local government, the funds within them.
Amendments 73 to 75 seek to ensure that Treasury directions require scheme information to be published and specify what that information must include. This is distinct from the current permissive drafting of Clause 13. Greater transparency is absolutely essential if we are to invite analysis and debate on the performance of the schemes. I can reassure the noble and learned Lord that we are committed to improving the information that is made available. It is our intention to use a central direction to ensure that such publications are helpful and consistent across the schemes, and to set out what information will be available—which I think goes a long way towards what the noble and learned Lord is seeking to achieve.
Amendment 74 seeks to require that all information set out in Clause 13(3) is published. However, that list is not intended to be a fixed or exhaustive list of the matters that schemes will be required to publish. Rather, it is intended to set out the core areas of scheme information that the detailed requirements will be built around. The list provides a starting point. The Government are committed to greater transparency, but it is fair to say that there is more work to be done to identify what information should be published, what common methodologies and assumptions should underpin it, and how best to collate or co-ordinate its publication. Once we are doing it on a more systematic basis, we will also want to change or amend the information that is published in the light of comments that are made. I do not necessarily think that even the Treasury will get it absolutely right first time so it would not be helpful to determine a mandatory list now, when information requirements will undoubtedly change as a result of comments made on our first attempts, and over time.
I hope that I can assure the noble and learned Lord that Amendment 75 is not necessary. Clause 13 already allows for Treasury directions to require information to be provided in a particular format. That is the key. Further, Clause 13(3) is not exhaustive, and already allows for schemes to be required to provide or publish full scheme valuation reports.
Finally, I turn to Amendment 76. The OBR already includes the impact of public service pensions in its spring and autumn Economic and Fiscal Outlook reports and in its July Fiscal Sustainability Report. The OBR’s role is established by the Budget Responsibility and National Audit Act 2011. Section 4 of that Act places a duty on the OBR to consider and report on the fiscal sustainability of the public finances, of which the public service pension schemes clearly form a significant part. As we discussed on an earlier amendment, the OBR has already started doing this. The report it produced at the time of the Pre-Budget Report in December does exactly, I think, what the noble and learned Lord is seeking to achieve. The OBR clearly intends to carry on doing that, so that amendment is not necessary either. I urge the noble and learned Lord to withdraw this amendment.
Lord Davidson of Glen Clova
I am grateful to the Minister for his clarification on a broad number of areas. One is gratified to discover that we are ad idem in terms of our objectives. I will consider what has been said by the noble Lord and I congratulate him, again, on the openness of Her Majesty’s Treasury to change, which is always useful. I will reflect on what has been said and will seek to withdraw this amendment.
Lord Newby
Lord Newby
“Review of standards of administration
(1) Within six months of the day on which this Act is passed, the Treasury shall commission an independent review into the standards of administration in public service pension schemes and how those standards could be improved.
(2) The Treasury shall lay before Parliament the report produced by the review as soon as reasonably practical after the report has been published.”
Lord Davidson of Glen Clova
This amendment would require Her Majesty’s Treasury to commission an independent review into the standards of administration in public service pension schemes. I refer again to my noble friend Lord Hutton’s report, recommendation 22 of which expresses the desire that:
“Government should set what good standards of administration should consist of in the public service pension schemes based on independent expert advice. The Pensions Regulator might have a role, building on its objective to promote good administration. A benchmarking exercise should then be conducted across all the schemes to assist in the raising of standards where appropriate”.
The proposed new clause implements this recommendation by ensuring that the Government will receive independent advice on how standards of administration can be improved in public sector schemes. It also ensures that independent review will be publicly accessible, so that its implementation may be scrutinised and the recommendations easily accessed and implemented by schemes that wish to do so.
The Bill makes provision for the regulator to issue codes of practice at paragraph 14 of Schedule 4, but we say that this provision does not require the regulator or another independent expert to carry out, first, a review and then set out clear principles regarding good administration in public sector pension schemes. Were that to be done, it would, of course, enable these codes to be informed. An independent review would identify areas for improvement in the inevitable drive for better administration. As well as identifying best practice, it could inform future codes of practice and look at the possibility of streamlining and combining the administrative functions of schemes. In his report, my noble friend Lord Hutton observed that the commission,
“received suggestions and evidence from a number of commentators that public service pension schemes offer scope for streamlining and combining of their administrative functions”.
It is suggested that via this amendment one could examine ways in which the Local Government Pension Scheme in particular might benefit from economies of scale. It follows, therefore, that there is potential for sharing administrative costs and services, and creating broad contracts. I beg to move.
Lord Newby
My Lords, we have already taken steps in the Bill to ensure the effective and efficient administration of public service pension schemes. Until now, the schemes have been exempt from much of the legislation that applies to the governance and administration of other occupational pension schemes, but through Schedule 4 we are significantly extending the administration requirements on public service pension schemes. I would not necessarily commend Schedule 4 as it is extremely detailed, but to this extent I would do so because it sets out how we are changing the current arrangements by extending the administration requirements.
The schedule also extends the role of the independent Pensions Regulator in regulating the governance and administration of public service schemes, bringing it into line with the regulator’s role in regulating all other occupational pension schemes. As the noble and learned Lord has pointed out, the regulator will issue codes of practice relating to the responsibilities of public service schemes and be able to enforce compliance where schemes do not meet the requirements of the legislation. We are also taking steps to improve the transparency of the schemes and their governance by introducing pension boards, as we have discussed, as well as scheme advisory boards. Taken together, our changes will deliver the commitment to establish and monitor standards of administration in the public schemes.
The burden of the noble and learned Lord’s amendment is that before the codes can be introduced you need to have a review, and indeed he talked about an independent review. We think that we have dealt with the point about independence by the fact that the regulator is independent. Further, you cannot produce codes without reviewing what is already there. You do not simply sit down with a blank sheet of paper and not look at what already exists in terms of best practice elsewhere in the industry. Our expectation is that the Pensions Regulator will of necessity have to review existing best practice before it can produce its own codes. For those reasons, we think that the amendment is unnecessary. We think that we are going to do what the noble and learned Lord is seeking to achieve, but we do not need a belt-and-braces approach in the form of further cover in the Bill to ensure that it actually happens.
Lord Davidson of Glen Clova
Again, I am obliged to the Minister for his clarification. However, if this side has a prejudice it is that it is always better to be better informed. I will reflect on the Minister’s words to see whether what he has said matches our common objective. Once again, I respectfully seek leave to withdraw the amendment.
Lord Newby
Lord Davidson of Glen Clova
This amendment would provide that the regulator must issue codes of practice by changing the permissive expression “may”. As I said earlier, when one comes across this language, one is always presented with an option either to do it or not, and plainly in this context it is not an enabling use of the word “may”. It does not suggest “shall”, so we suggest in this amendment that “shall” would be the better way of proceeding. That is because the desirability of codes of practice must be common, given what the Minister has already said.
As it stands, Schedule 4 allows but does not require the Pensions Regulator to issue codes of practice for public service pension schemes. Under the schedule, these codes of practice would include guidance in relation to the exercise of functions and standards of conduct and practice. Plainly, the intention of these codes is to bring about high standards of scheme governance and administration. We say that there should be a clear requirement that the codes are produced by the Pensions Regulator rather than leaving this as a potentially permissive provision. I believe that the Minister in another place said that this amendment was not necessary, but we take the opposite view in that it introduces a compulsitor on the regulator to make these codes of practice clear to all.
I should say immediately that there are many aspects of Schedule 4 that this side welcomes, specifically the requirement in paragraph 19 that pension board members must have appropriate knowledge and understanding to enable them properly to exercise their functions, and the requirement for public service schemes to establish internal controls, as set out in paragraph 21. However, we are concerned that the regulator is not obliged by this Bill to produce codes of practice for public service schemes. I beg to move.
Lord Newby
My Lords, it would be an interesting little exercise to look at how many hours of your Lordships’ time is spent debating across the Floor of the House whether to use “may” or “shall”, and vice versa. In my view, they are certainly too many.
As we have just debated, Schedule 4 sets out the new role for the Pensions Regulator in providing regulatory oversight of the administration and governance of public service schemes. A key part of that new role is to issue codes of practice. These codes set out in more detail the legal requirements on schemes and how to fulfil them. The regulator already issues codes of practice for private sector schemes and the drafting in this Bill closely mirrors the drafting in the Pensions Act 2004. These amendments would turn the overarching power for the regulator to issue codes of practice into a duty.
Proposed new Section 90A(2), set out in paragraph 14 of Schedule 4, already imposes a duty on the regulator to issue codes of practice in relation to the 11 matters listed in that provision. This sits under the broader power in proposed new Section 90A(1) to issue codes of practice in relation to the exercise of functions under pensions legislation and the standards of conduct of those exercising these functions. The result is that as currently drafted, the regulator will already be under an obligation to issue codes in relation to certain areas of pensions legislation. The power in new Section 90A(1) allows the regulator to issue codes on other areas in addition to those already required by new Section 90A(2).
New Section 90A(2)(j) provides, as does existing Section 90 of the Pensions Act 2004 on which this provision is based, for the Secretary of State for Work and Pensions to add to the list of matters in relation to which codes of practice must be issued. I can therefore assure noble Lords that the regulator will be obliged to issue codes of practice for the public service schemes. These are a key part of implementing the independent oversight and regulation of public service schemes, as recommended by the noble Lord, Lord Hutton.
Amendment 91 in this group relates to codes of practice in Northern Ireland. However, those provisions are all proposed for deletion by Amendment 90, which has already been debated. However, on the main point, I hope that with the reassurances I have given, the noble and learned Lord will feel able to withdraw the amendment.
Lord Davidson of Glen Clova
If the Minister is surprised at the amount of time spent by this Chamber in debate on the potential differences between “may” and “shall”, perhaps he should reflect on the decades that are spent in court having to consider and implement what this House and the other place have actually traduced. I am endeavouring to reduce by a few decades debate in the pensions area on the use of “must” or “shall” instead of “may”.
It is clear that the Government accept that there is a duty for the codes of practice and we welcome that. The difference between us is how far these codes of practice must go. The Minister takes the private sector as the comparator. Sometimes it might be an idea for the public sector to aspire to a slightly higher standard. However, given that no doubt difficult proposition for the coalition Government, I beg leave to withdraw this amendment.
Lord Newby
“( ) the discharge of duties imposed under section (Information about benefits) of that Act (information about benefits);”
“(1) New scheme regulations made under sections 1 and 3 shall replace existing schemes’ current regulations and shall take effect on the amendment date.
(1A) Following the implementation of new scheme regulations under subsection (1), benefits shall only be provided in accordance with those new regulations.”
Lord Davidson of Glen Clova
Amendment 91A and the other amendments in the group are designed to address the concerns with Clause 16, in particular relating to the Local Government Pension Scheme, as it allows for the closure of each of the 89 funds that make up the LGPS.
Our concern is that allowing closure could have a number of unintended consequences. It was mentioned in Committee that local government schemes are exempt from Section 75 of the Pensions Act 1995, so “closure” would therefore not trigger debts under that section. But that is by no means the only risk of the use of the operative word, “closure”.
There are thousands of employers in local government pension funds, each of which has individual admission agreements governing the terms of the employer’s participation in the fund. Those agreements are not necessarily in standard form, meaning that there are potentially thousands of different admission contracts. It is likely that at least some of these agreements will set out various powers for the local authority in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. This could put a massive strain on participating employers and has the potential to put some of them out of business.
The Minister in the other place assured the House that the Government will not close the Local Government Pension Schemes but, respectfully, this misses the point that the Bill allows local authorities to close their funds and the Government cannot prevent them doing so. For their own reasons, local authorities may wish to close schemes in order to crystallise debts from certain employers. The Government have insisted that the word “closure” be used in Clause 16 but this does not in fact mean closure. We suggest that this might be approached differently, to avoid this explanation.
Closing a pension fund means that there are no longer any active members in the scheme but that the scheme continues. However, the Government insist that in the context of Clause 16, “close” does not mean “close”. Rather, it means that no benefits will be provided under the scheme. That is what I understand the position to be.
As Clause 16 is currently drafted, the word “closure” is not given the different meaning that the Government contend. Clause 16(1) provides that,
“no benefits are to be provided under an existing scheme ... after the closing date”.
That is not sufficient to change the word “closure” from its accepted meaning in pensions law.
If the Government want the word “closure” to have this different meaning, they should explicitly define this in the Bill. These amendments would ensure that schemes do not close but that they are amended. It is suggested that “amendment” is by far a better way of proceeding than continuing with the word “closure”. These amendments are designed to achieve the Government’s desired aims, which we share, but prevent what we suspect would be the unintended consequences that could arise if the Bill continues to allow “closure”.
Amendment 91D is new and provides that the closing date for a Scottish scheme is 1 April 2016. This is to address the fact that administration of the scheme in Scotland is more complex and that more time will be needed. The Bill requires that existing schemes are closed on 5 April 2015. This means that Scottish local government pension schemes have to be renegotiated and scheme regulations drafted. There has to be consultation, approval by the Scottish Parliament and then administrative implementation. This may be achievable in England, because negotiations over the schemes have been concluded and significant work has been undertaken on scheme regulations, as we have already heard. Sadly, this is not the case in Scotland as until this Bill there was no necessity to do so.
A new Scottish Local Government Pension Scheme was implemented as recently as April 2009. The focus was to implement the cost sharing and other provisions of that new scheme. This Bill imposes the principle of the English-negotiated solutions, which were not sought in Scotland.
Two years may seem enough time for the Scots to sort themselves out, but the reality is somewhat different. If one works back from April 2015, the timetable is as follows. At least a full year is required to implement the scheme administratively, which includes software changes; that, I gather, is a minimum period. At least a further year is required to undertake the legal process, including the drafting of regulations, public consultation, ministerial approval and the laying of regulations in the Scottish Parliament. This is based on Civil Service estimates, approved by a Scottish Minister. It is not simply a construct by this side of the House.
That timeframe leaves about two months for initial union consultation with members, negotiation with stakeholders, and then consultation with members and other stakeholders—councils, admitted bodies and so on—about heads of agreement. Pension negotiations, as the Minister will immediately accept, are complex and require extensive data that take a long time to produce. Agreements also require an equality impact assessment, which takes time too.
This timetable assumes that stages progress smoothly, with no significant difficulties. However, as in England, not everything in Scotland necessarily proceeds smoothly—in fact, in Scotland it is possibly less so. Making changes to the Scottish Local Government Pension Scheme is significantly different to doing the same to the English scheme. So far it has taken about a year for the Scottish scheme to catch up with its English counterpart. The last major change in England was in 2008 and 2009 in Scotland. An amendment that delayed implementation in Scotland until 5 April 2016 would therefore have the support of the trade unions, of the Scottish local authority body, COSLA, and of Scottish Ministers. I beg to move.
Lord Newby
My Lords, before I turn to these amendments I would like to notify the Committee of a development with regard to certain Scottish pension schemes.
The regulations made for local government, police or firefighters’ pension schemes in Scotland must follow the framework set by this Bill. However, Clause 3 does not require the Treasury to consent to them before they are made. This reflects existing devolution arrangements. The Chief Secretary sought to agree a mechanism to ensure that both Governments were kept appropriately informed of any changes to these regulations, or factors affecting them with the Scottish Government. This would have operated via a non-binding memorandum of understanding.
However the Scottish Government have now informed the Treasury that they do not consider there to be a need for such a memorandum. I can assure noble Lords that these schemes will not operate in a vacuum. Existing agreements will continue to apply to these schemes, and we will continue to support the Scottish Government in making these regulations fair and sustainable.
Lord Davidson of Glen Clova
Will the Minister briefly elucidate the reasons that the Scottish Government have given for why they do not consider that consent is required? If the Minister cannot do that immediately, I would be happy for him to write to me.
Lord Newby
I think I will have to write to the noble and learned Lord. I am very happy to do so.
I shall return to the amendments and start with Amendment 91D regarding the Scottish scheme. I heard what the noble and learned Lord said about the Scottish Government being unable to implement the reformed schemes in the 27 months available, but the Scottish Government have at no stage asked a Minister for a delay to the implementation of the schemes, and we think there are very good reasons for avoiding a delay.
A delay in implementing the reforms would, for example, result in hundreds of millions of pounds of additional liabilities being accrued in the Scottish schemes. These additional costs would have to be met from the Scottish budget at the expense of Scottish jobs and services. Furthermore, a delay would disadvantage Scottish public service workers on lower and middle incomes by prolonging the period that they will continue to subsidise the pensions of high flyers. I am sure that the noble and learned Lord does not think that that is desirable. The only thing I would say by way of general comment is that it has been clear since the point at which this legislation was introduced that it would apply to Scotland and how it would apply to Scotland. My right honourable friend the Chief Secretary has written repeatedly to the Scottish Government about what is going on in England and how we are making progress, and therefore there is no objective reason why the Scottish Government should not be absolutely marching in lockstep with the Government in London in terms of producing the scheme rules. We think that the time has come for the Scottish Government to get their skates on, and we do not believe that there should be a delay in Scotland for the reasons that I have given.
Baroness Donaghy
As the Minister knows, I am extremely concerned about equality of consultation on this issue. Can he say objectively if the same applies to local government employers and all public servants in Scotland and that they are equally in step and are fully involved?
Lord Newby
I am afraid I cannot because it is not the responsibility of the London Government. We do not seek to micromanage what is happening in Scotland or to follow every minute of what the Scottish Government are doing in relation to these things, not least because if we did, we would be excoriated by the Scottish Government for interfering in Scottish affairs. These are Scottish affairs and I am afraid we cannot second-guess every bit of discussion that is going on in Scotland. It would make us extremely unpopular for no benefit because we are not responsible for the way those scheme negotiations are progressed.
I shall move to Amendments 92A and 93A. Concerns were raised in another place about the closing dates as originally drafted. Although I am confident that the dates as drafted would have worked as intended, to address the concerns echoed here, and following discussions with each of the schemes about their planned timetable for reform, the Government have tabled Amendments 92 and 93 to revise the closing dates. I hope that noble Lords feel that their concerns have therefore been addressed.
On Amendments 91A, 91C and 93B to 93G, I shall attempt to address noble Lords’ concerns relating to the extent and effect of the closure of the existing schemes. Taken together, these amendments seek to provide for the replacement of the existing regulations in order to make these reforms. This would mean that the new scheme regulations made under Clause 1 would have to provide for both accrued rights prior to reform and new service after reform with different rules pertaining to each. That would be unnecessarily complex and inefficient.
The Bill already enables new and existing arrangements for each workforce to be managed and administered together by virtue of Clauses 4 and 5. The new and existing schemes will have the same scheme manager and the same pension board. From the perspective of a scheme member, their existing and new pension benefits and the administration of their pensions will be seamless. I hope I can also reassure noble Lords that there is no need to place in the Bill any requirement to legislate for the new schemes. The Government have made a number of commitments in this House, in another place and elsewhere to enact the schemes in accordance with the relevant heads of agreement.
I realise that a number of concerns have been raised in another place about the use of the phrase “closing date”. We have given lengthy reassurances that these words have only the meaning that can be attributed to them in the context of the clause; that is, that they close the schemes to future accrual only. This was the subject of the correspondence between the Economic Secretary, the shadow Financial Secretary and the chair of the Local Government Association which I circulated to noble Lords a couple of weeks ago in which we sought to minimise confusion about the use of the word “close”. Government Amendments 111 to 114, to which we will come later, have been drafted to achieve that. I hope that noble Lords can now put their minds at rest on the subject.
We have been clear that our intention is to simplify and consolidate the existing legislation relating to the provision of pensions to public servants. In future, public service pension schemes will be made under the powers in the Bill. These amendments, as drafted, would not allow for such consolidation. Although I know what the noble and learned Lord was seeking to achieve, I hope he will understand why I cannot accept his amendments.
Lord Davidson of Glen Clova
I am obliged to the Minister. I remind him that when I referred to Scotland, I said that things do not always seem to move smoothly there. There certainly seems to be a different understanding on this side about what Scottish Ministers, who I take to be the Scottish Government, have expressed by way of a view in relation to timing. As I said, things do not always move smoothly north of the border.
If my learned friend the Minister—he may be learned for all I know and may be my friend—wishes to avoid unpopularity in Scotland, perhaps I may suggest that he refrains from suggesting that the Scottish Government move in lock step with the UK Government and that they get their skates on. In any event, I hear what he says, and we will perhaps return to this in due course when we are both better informed.
In relation to closure, the Minister described possible confusion between the Economic Secretary and his shadow. It may be that this is in effect a difference of approach. I suspect that we will return to this on Report, but at this stage I beg leave to withdraw the amendment.
Lord Newby
Lord Newby
My Lords, Clause 16 provides that no person may accrue further benefits in the existing pension schemes after a given date. However, while this is referred to as “the closing date”, it is important to note that this does not mean that these schemes will be closed or wound up on that date. They will continue to exist to pay the benefits accrued up until the closing date, and beyond that date for those who are eligible for transitional provisions.
Although the closing dates as originally drafted would have worked as intended, they were a cause of concern in another place. To address these concerns, and following discussions with each of the schemes about their planned timetable for reform, Amendments 92 and 93 will revise the closing dates. Therefore, for local government workers in England and Wales, the closing date is 31 March 2014, and for all other schemes the closing date is 31 March 2015.
Amendments 111 to 114 are designed to minimise the potential for misinterpretation regarding how the Bill will affect the current schemes. Perhaps I may reiterate what was made clear in another place. There will be no subsequent crystallisation of liabilities when the Bill closes the current schemes to future accruals. To provide further clarity on this point, these amendments will remove references to schemes that are closed and instead signpost to the clauses that restrict the build-up of future accruals in the schemes. I beg to move.
Lord Davidson of Glen Clova
There was initially a spark of hope that these amendments might have addressed the question of closure. That spark has died. However, I hear what has been said. I will confine myself to saying that we may return to this matter on Report.
Lord Newby
Lord Newby
Lord Newby
“Exception: benefits payable to or in respect of a holder of a devolved office.”
Lord Newby
“27A A scheme under section 48 of the Police and Fire Reform (Scotland) Act 2012.
Exceptions: injury benefits and compensation benefits.”
Lord Newby
“14A A scheme under section 48 of the Police and Fire Reform (Scotland) Act 2012.
Specified benefits: injury benefits and compensation benefits.”
Lord Newby
Lord Newby
Arrangement of Business
(11 years, 10 months ago)
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Baroness Anelay of St Johns
My Lords, there appears to have been what is, to me, an extraordinary misunderstanding about an agreement in the usual channels about the process by which we would deal with business today. I had anticipated that on this Bill my noble friend Lord Newby would be proceeding beyond Amendment 92 and that group, and that we would be going to 10 pm; this was the agreement very clearly set out. This was the process on this particular Bill but I understand that, despite discussion with me personally this afternoon, when I went through the procedure, what I thought was a careful explanation by me was misunderstood. Therefore, the opposition Front Bench finds itself in a difficult position and believes that it is unable to proceed with further amendments on this Bill.
There are, from time to time, misunderstandings about matters of business. This one has surprised me, but it is a matter that one just deals with and this House likes to proceed in a businesslike manner. Therefore, unexpectedly, we are in a position where the Bill will now stop for today. The remainder will conclude on Monday, although clearly it could have progressed much further tonight. Instead, there is a bonus for those who are now taking part in a very interesting Question for Short Debate. The only people for whom it is not a bonus, I regret to say, are the noble Lord asking the Question for Short Debate and the Minister responding, whose speaking times remain the same. My quick bit of maths as I rushed out of the Chamber leads me to believe that it would now be in order that the QSD goes to one and a half hours, since it is the last business, and that therefore, apart from the opening speaker and the Minister, every other speaker, including the opposition Front Bench spokesperson, is allowed seven minutes instead of four.
Prisoners: Work Programmes
(11 years, 10 months ago)
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Lord Carlile of Berriew
To ask Her Majesty’s Government what opportunities for re-training for prisoners will be provided by the newly developed policies for work in prisons; and how such work programmes will be commissioned.
Lord Carlile of Berriew
My Lords, I feel as though I have won a very small lottery this evening, and I am very pleased that we will have an extended time to deal with what I believe is the important issue of work in prison. I welcome, too, the significant interest in this debate, not least from the noble Lord, Lord Myners, who recently succeeded me as the president of the Howard League for Penal Reform, which I welcome very much. I regret that my noble friend Lady Hamwee is indisposed tonight and will not be speaking in this debate.
I mention the Howard League not least because it is the only organisation, as I understand it, ever to have run a real free-standing business inside a prison; that is, a business paying the rate for the job and with the prisoners wishing—though failing—to pay tax. Because of bureaucratic obstruction—I anticipate that the noble Lord, Lord Myners, may say a little about this later—it proved impossible to run it as a true business.
In my capacity as a lawyer and as a politician, I visited a very large number of prisons over a great many years. If you visit any prison, you will of course find prisoners doing some work. It may be a bit of gardening, some cleaning or some good or indifferent training courses. Some do contracted work. There are in fact about 100 firms that are contracted through NOMS to engage prisoners in work. However, that work goes to some 9,000 prisoners only—less than 12% of the prison population. Even for those who work, the average number of hours of work in 2010 was 11.8 hours per week, which hardly equates to a working week, and they were paid an average of £9.60.
Prison has several functions, including the protection of the public and retribution. Surely an important function is to release a human being who can live in the real world, which may be a confusing place for someone who left it several years earlier. Former prisoners need to be able to survive—therefore, they need money. Absent earnings in some cases, or in many cases, they will steal to survive. They need to pay rent for decent accommodation. Otherwise, prison may unfortunately provide their softest option for warmth and sustenance. Believe me, there are more than a few prisoners who have chosen prison as the most comfortable place to live. Prisoners need activity, otherwise idle hands may return all too swiftly to the twin devils of acquisitive and violent crime.
The advantage of work for prisoners while they are in prison is that when they become ex-prisoners and obtain jobs with their acquired skills, they can obtain not merely activity and earnings. Work involves other people, and working with other people includes the companionship, discipline and, above all, the self-respect that almost all regular work gives, whatever its nature. The benefits of work in your Lordships’ House require no advocacy.
Most male prisoners—shockingly, more than half—did not work in the year before they entered custody. That is a depressing figure, particularly because there is a correlation between that figure and crime. An even sorrier tale is that in 2009, of those leaving prison, 27% of men entered work, which means that more than seven out of 10 men did not get jobs when they left prison; and 13% of women entered work, which means that nearly 90% of women did not obtain jobs when they left prison. If you look at schemes that have been run abroad, particularly in America, you will find that former prisoners employed by good managers, who provide high-quality training, become extremely enthusiastic and reliable workers. That is surely to be encouraged. The cost-benefit analysis is self-evident. But the fact that seven out of 10 men and nine out of 10 women leave prison without a hope of a job is in truth the narrative leading to the prison revolving door.
There is an unanswerable case for work, especially for longer-term prisoners serving three years or more. I look forward to hearing the Minister’s response to that point. For such longer-term prisoners, there would be time to train them and the opportunity to teach them new skills. Many prisoners are much brighter than their pre-imprisonment qualifications would suggest. I recall going into a cell not many years ago where a young man showed me his maths GCSE A* certificate. When I asked him what he was proposing to do, he said, “I’m going to be a maths teacher, sir. I’m going to take maths A-level and go to university”. He was obviously very talented at, and loved, mathematics. When I asked him how he had done in mathematics at school, he said, “I never went to school, sir”. There is one single example from my own experience of someone who could be greatly upskilled in prison and be given the opportunity to have not just a job but a real career.
My suggestion to the Government is that if real work is to be brought into prisons, prisoners should earn the going rate for that job, thus avoiding the criticism that by doing such work they would undercut other producers. If a real effort were made to bring contractors into prison to provide work, they would come and provide that work. They would know, after all, that their workforce would at least turn up every day, or in most cases, anyway. The prisoners would pay tax—why not?—and national insurance, make payments towards a pension, contribute towards their families, earn something that is entirely free—namely pride—and, above all, be much fitter for release. In return for their work, they could be allowed privileges and extra purchases and, as the Howard League has suggested, there could be a levy on their earnings to compensate victims.
Mr Kenneth Clarke announced in May last year, as Lord Chancellor, the Government’s One3One initiative. That is welcome but there is precious little sign of it bearing fruit. I am sure that the House would be interested to know what is being done. There is no sign of a proactive approach by the Department for Business, Innovation and Skills, for example, or from other parts of the statutory sector, to bring One3One to effect.
In the couple of minutes remaining, I want to add something about new prisons. The cause of fitting prisoners for the world outside and putting them to employed work depends on a number of factors. It depends on giving them work that provides some meaning for their future lives and on them being able to maintain a relationship with their families while they serve their sentences. I read with dismay the repeated proposal, which comes from any Government, from time to time, that a Titan prison should be built to replace some smaller prisons. A Titan prison would give rise to the usual government procurement problems; it would almost certainly cost a few hundred million pounds more than was estimated. There would be very serious security issues, which would force the authorities to break it down into a number of smaller prisons within a prison. There would be potential staffing problems for a massive establishment, particularly if it was on the sites that have been trailed in the media this week. It would be less likely to produce a Titan than a Titanic, and it is a voyage that sound penal policy should and could do without. I invite my noble friend, when he replies to this debate, to make it clear that at worst a Titan prison is just a thought, and that it is far yet from being a proposal.
Baroness Stedman-Scott
My Lords, I congratulate the noble Lord, Lord Carlile, on securing this debate. I declare an interest in that I am a chief executive of Tomorrow’s People and try to work with some of the people that the noble Lord spoke about to make sure that they secure sustained employment.
It will come as no surprise to anyone here that I believe wholeheartedly that acquiring skills, undertaking training and being prepared for employment during any stay in prison—most importantly, on leaving prison—is critical if we are to ensure that people are supported and helped to secure sustained employment and to stop reoffending.
I would like to speak in support of the newly developed policies for work in prison. The focus of my contribution to this debate is on the benefits to prisoners and ex-offenders, rather than on the commissioning process. The objectives speak for themselves—of prisoners on a working week of 35 to 40 hours, their day focused on routine and work, with the economic benefits to them of being paid and having a wage and some control, in a very controlled environment, as well as the economic benefits to the prisons themselves. There should be links to business—getting businesses involved in this work is very important—and, of course, the creation of jobs through businesses and their supply chains.
Education, training and equipping prisoners for the world of work is very important. The noble Lord, Lord Carlile, referred to somebody who wanted to be a maths teacher after being in prison. I suggest that there are many people in our prisons who are very clever in ways we wish they were not, but if that were channelled in the right direction they could become exemplary employees, contributing to society while securing qualifications during the process.
While all of these objectives are good, I suggest that, for those who are responsible for the programme, it should not be seen as a two-part, two-section approach—something that happens in prison and then something that happens when you come out. For me, the journey that prisoners would take while working in prisons should be seamless. From day one when they start work, it should be part of their journey into sustained employment. Therefore, it is not just about securing the skills to work or to be involved in a business; it is about getting them ready for that time when they leave prison and—we hope, if the links with business are as they should be—they will continue to work for that business or supply chain. The other things that should be put in place are a network of support and somewhere to live so that all the things that would burden them on release are completely taken away. It would be reliant on their becoming good employees, adding value to the business and being what I would call economically independent.
There are examples around the world of work of a similar nature. If you look at this country, we have Timpson—a terrific organisation. We have probably all had our shoes repaired, keys cut or dog tags engraved by it. It has its academies in prisons and employs these people when they leave prison—people who are forever grateful to have had the opportunity to realise their destiny. We all know about the national grid service: this, too, is a great thing.
I have been particularly struck by a project I have seen in America called Delancey Street, which is a programme to stop people reoffending and make sure that they achieve their potential. They themselves run real businesses which trade for profit and do not rely on the Government for any money. It is a true inspiration; there is a four-star restaurant which is well worth patronising. It also has a car service that drives executives around—from companies such as Gap—and is paid for its service. It also has a removal company, which is quite remarkable because it is paid to remove things from people’s houses and put them somewhere else. I have to tell noble Lords that its first customer was Getty; he was moving and the people did not turn up with the removal van, so this lady—Mimi Silbert, who started this up and is about four feet tall and a human dynamo—went over and said, “My boys will move you”. He had no choice and she guaranteed that nothing would be stolen—maybe broken, but that was it. It is now the biggest removal company on the west coast of America, trading for profit. Moreover, it owns a Christmas tree plantation, where it sells all its trees to people in San Francisco. The customers pay a premium because they know where the profits are going. It is absolutely true that Delancey Street got the contract to decorate Tiffany’s.
I believe this is a tremendous thing for us to be doing. It is commercially sound, economically sensible, professional in every sense and shows a commercial compassion that we so need in this country.
Lord Wills
My Lords, I, too, congratulate the noble Lord, Lord Carlile, on securing this debate on this important subject. He has set out the issues compellingly and I do not want to rehearse them here again or go over the ground set out so well just now by the noble Baroness, Lady Stedman-Scott.
I want to focus my remarks on the difficulties that small voluntary organisations face in making a contribution to the important work that is the subject of this debate, particularly if these organisations are offering activities that do not fit within conventional models of the work that prisoners do. I want to illustrate this through the experience of Fine Cell Work, a charity with which members of my family have been involved for some years. Fine Cell Work is a social enterprise that trains prisoners in paid, skilled, creative needlework; it is taught and supported by volunteers from the Embroiderers’ and Quilters’ Guilds. The prisoners are paid for their work, which is then sold around the world. The pieces are high-quality craftwork, interior design commissions and heritage pieces for organisations such as the V&A, English Heritage, Tate Modern and the National Gallery. Fine Cell Work has had great success in the 17 prisons where it currently works.
Craftwork in prison has been shown to help prisoners develop the more constructive and disciplined aspects of their personalities as they learn new skills and support their families with the money that they earn. It connects inmates to wider society and gives them hope for their future. This is exactly the sort of work that NOMS should be supporting. Apart from everything else, through the combination of work in cells and in studio workshops, it enables prisoners to do practical, skilled vocational work in a 50-hour week—which I think is unprecedented in prisons—with a focused link to employment opportunities on release. It is significant that 80% of the work of Fine Cell Work is done in cells. At a time when budget cuts are leading to more time being spent in cells, it means that prisoners can continue to learn skills that will make them more employable with minimal cost and supervision.
However, because this work does not fit within recognised categories, it has faced real obstacles in realising its full potential. Many prison managers still call it “hobby work” in spite of the professionalism of the products and its commercial success. More than £200,000 worth of goods are sold annually. Prisons have been reluctant to support the training side of the work by seconding education staff to support the charity’s volunteers. To reinforce the prisoners’ sense of achievement and encourage their rehabilitation, their skilled production work should be accredited, but the volunteers are not qualified to deliver accredited training on their own.
Fine Cell Work’s ability to progress has been obstructed by such lack of support and the difficulties it faces in meeting bureaucratic criteria. This is an innovative, small social enterprise but if it is to expand, it needs to work in partnership. It is not a normal business because 70% of its income comes from grants and donations, and it is discounted as a factor in rehabilitation because the very specific NOMS methodology makes it impossible to prove that Fine Cell Work on its own prevents reoffending. Therefore, in this new world, can the Minister say what NOMS can do to safeguard such unorthodox training and rehabilitation programmes over and above work regimes that generate revenue for prisons? What will NOMS do to help small organisations such as this provide the evaluation data that NOMS rightly requires to enable it to make judgments on what sort of providers it wants to operate in prisons? What must small, hard-pressed organisations such as Fine Cell Work provide from their own slender resources? What can NOMS do to facilitate partnerships between small organisations such as Fine Cell Work to enable them to achieve the critical mass they need to meet the requirements of the Ministry of Justice?
I hope the Minister will recognise the threat that the failure to nurture small organisations poses to creativity and innovation in these programmes. I hope he recognises that, over and over again, experience under this Government and the previous Government has shown that the default option of delivering public services by commissioning large organisations—whose main talent has often been only to comply with the bureaucratic procurement criteria of central government—has failed all too often to produce value for money. If we are to get value for money, and if we are to pioneer new approaches to delivering public services, we need these innovative, small organisations to flourish. They have a vital role to play in delivering public services, but to do that work they need a system in place that encourages them to do so and does not place unnecessary obstacles in their way. I hope that the Minister, in his response, can reassure your Lordships’ House on all these points.
The Lord Bishop of Liverpool
My Lords, although I am very sorry that we shall not be hearing from the noble Baroness, Lady Hamwee, this evening, I am delighted to follow the noble Lord, Lord Wills, not least because one of my Christmas presents this year was an embroidered cushion from Fine Cell Work. It has attracted lots of comment as it has pride of place in my study. I am very grateful for this opportunity to commend the excellent work about which we have already heard.
This is a timely debate as old prisons are closing and new prisons are opening. Our old prisons were built on monastic lines with cells modelled on monastic cells so that prisoners would be encouraged to contemplate their crime, and reform. While we should never lose sight of that purpose, the architecture of new prisons should reflect the evidence that training and work programmes for prisoners can be transformative in rehabilitating offenders. Therefore, my question to the Minister is: will the architecture of new prisons reflect this aspect of government policy?
In my capacity as Bishop to Prisons and in the process of making a series of programmes for BBC Radio 4 last year called “The Bishop and the Prisoner”, I have observed closely two retraining and work programmes: the Clink and the Timpson workshops, about which we have already heard. In both cases, training of the prisoners is done on the job, skilling them for future employment.
The Clink is a high-quality, West End-style restaurant created inside a prison, with professional chefs training prisoners to cook and serve paying clients. Two restaurants are already established in our prisons and a further eight are planned. Of the 35 prisoners who have been through the Clink and released, 29 have found jobs and only three have reoffended. Those are remarkable statistics. If those statistics are replicated in the planned further eight prisons, the Government must surely take note of the success of this programme. I have not only seen the statistics, I have tasted the food—I suppose that I ought to declare an interest. I have also met the prisoners without any staff being present and have seen the impact of this programme on their lives in improving their self-esteem and raising their aspirations.
The Timpson workshops, to which the noble Baroness referred, operate in three prisons at the moment. These prisoners learn to repair shoes and as they learn they are paid for their improving productivity as they gain more competence. The brilliance of these schemes is that when they leave prison, the best get jobs in the Timpson business. In other words, the job in prison is the pathway to employment on the outside. It is a great incentive for these offenders to work and retrain. I have listened to prisoners in these workshops and seen how acquiring a skill for the first time is transformative of their outlook and prospects.
I underline the fact that this is all to the credit of NOMS. The noble Lord, Lord Carlile, has visited many prisons and so have I. It is clear to me that the determining factor in each prison is the visionary outlook of the governor. These schemes have benefited from the enthusiastic endorsement of the governors of the prisons concerned. Although Mr James Timpson, who provides much of the dynamism for these projects, says that from time to time his experience of getting NOMS to be more commercial is a bit like asking the North Korean Government to run Disneyland—to use his phrase—I am sure that NOMS will take that in the spirit in which it is offered. However, that comment highlights the fact that there is great scope within NOMS for a visionary governor to come alongside Fine Cell Work as well as the commercial enterprises and to use these to the benefit of offenders and to address the Government’s hope of reducing reoffending. Will the Minister engage the visionaries behind these and other projects in the design of prisons so that transformative training and work can be at the heart of prisons, both physically and metaphorically?
Lord Myners
My Lords, it is a pleasure to follow the right reverend Prelate in this debate secured by the noble Lord, Lord Carlile. It is a timely debate in the context of the Government’s announcement last week of planned changes to the prison estate and to post-release supervision and support. I look forward to the Minister’s response. I know that he has taken an active interest in prisons. He told me that he has recently visited Peterborough prison, where no doubt he had the opportunity to see, among other things, the excellent initiatives being developed there by Social Finance under the chairmanship of Bernard Horn and the leadership of David Hutchinson. I declare my interest as the successor to the noble Lord, Lord Carlile, as president of the Howard League for Penal Reform.
As the noble Lord, Lord Carlile, said, some prisoners are paid for doing chores but it is a derisory sum. It is pocket money; in fact, it is less than the average pocket money paid per week to teenagers. It does not constitute employment or a meaningful preparation for release. Prison may, necessarily, have a punitive element but it should not deny the dignity of prisoners. It should focus instead on preparing offenders for a return to the community in an economically and socially purposeful and productive manner.
For many prisoners, life behind bars is sluggish and boring. Too little time is spent on education and helping them to develop the skills necessary to overcome what, for many of them, have been chaotic and painful life circumstances. As the noble Lord, Lord Carlile, noted, and I saw in a recent visit to Brixton prison, there is a great wealth of talent in prison. There are prisoners who want to stop lives of crime and re-establish productive lives which are no longer chaotic, but we are failing them in not taking as much action as we could to prepare them to return to the community and not be drawn back into offending and a life of crime. I found it painful to listen to two extremely bright prisoners who had the right motivation but were desperate about what was going to happen on their release because they did not feel in any way prepared to walk out through those gates and back into a safe, secure and hopeful life.
One of the most productive things prison can do is to prepare offenders for the world of regular and paid work. For some of them, this might be the first opportunity in their lives to develop work skills that can be applied in the formal economy. The way to get good outcomes—for prisoners and society—from the time spent in prison, is to provide a life-changing opportunity rather than the current practice, prevalent in so many prisons, of the prison being a warehouse or even worse.
I therefore urge the Government to focus their resources and ability to mobilise employers, to seek ways to create opportunities for prisoners to be gainfully employed, earning a fair wage and paying tax, and to provide the opportunity for prisoners to make a contribution out of their earnings to their families. Many of them feel that the link with their partners, wives, husbands and children is completely broken. I endorse the observation made by the noble Lord, Lord Carlile, about Titan prisons, which will inevitably increase the distance of travel between a prisoner and his family. If the Government want to reflect on this, I suggest they look at the views expressed by Mr Dominic Grieve, who, when he was shadow Justice Secretary, demolished the proposals for Titan prisons made by the Government of which I was a member.
We want to provide effective linkages between prisoners and their families. Through paid employment at a competitive and fair rate, prisoners will be able to make monetary contributions to their families, which will make them feel a continued link, a responsibility and a sense that they have retained their dignity, rather than the current conventional practice in which the conceit of treating a prisoner’s partner as a single parent ignores any opportunity for continuing economic linkage between the prisoner and their family. We want to seize the opportunity to allow prisoners to learn transferable employment skills that will reduce the risk of reoffending, to their own benefit and that of the community.
This is not going soft on prisons or prisoners. It makes assuredly good economic and social sense. It reduces the risk of a vicious circle. Providing training and work is a very real way of breaking that circle. Paid work creates additional motivation and fosters a sense of near-normality. In so doing, we might be making a positive step to address the desperation of prisoners released with little support and little prospect of employment in the formal economy because of the absence of any training or working experience during the period of their imprisonment.
There are, of course, practical issues. What is the right rate for the job? How do employers have access to the prison estate? How do we ensure the continuity of service that a business will require? These challenges can be overcome if everybody has the will to do so. The right reverend Prelate has referred to the importance of the governor. I would also emphasise the importance of ministerial activity and leadership. I read in the Sunday Times Mr Steve Hilton’s views on how difficult it was for Ministers to make change. I urge the Minister to take a personal interest in this area. Can he get together with other Ministers, including in the Department for Business, with employers and trade unions—we will hear in a moment from my noble friend Lady Dean—and with other agencies like the Howard League to see if he can place his mark on this particular area and be the Minister who changed the way in which prisons operate in preparing people to return to the economy as effective workers?
Lord Addington
My Lords, I congratulate my noble friend on bringing this subject forward. Whenever we discuss, do any work on or pay attention to the subject of prisons, we are always struck by how repetitive the problems are, both for the people concerned and for those of us who have been talking about them over time.
Generally speaking, you take into prison someone who is an educational failure and has usually finished their education—at their own decision, or that of their group—at the age of about 14. They commit a series of petty offences and most are on a roundabout of increasing but short-term sentences. They usually finish their offending pattern by the age of about 35. By that time, they have no work pattern, they have broken down several family relationships, and the best that they can expect is a life on benefits. That is a depressing scenario on which there is absolutely no disagreement in this debate. I agree with the suggestions that have been made by my noble friends and everyone in the House who has spoken on this; getting people into a pattern of work is probably the most important thing that can happen to them. If we are to try to achieve any form of preparing people for adult life, that is a very good way forward.
One of the things that initially attracted me to this debate was the problem of getting training and qualifications for that group of people. In the debate and my preparations for it, I realised that the idea of providing the activity and experience of work—particularly given what the noble Baroness, Lady Stedman-Scott, has said—is a positive step forward because this group is probably one of the most difficult to train. What attracted me initially to the activity within prisons, and led to my ongoing interest in it, was the incredibly large number of people there with special educational needs, particularly dyslexia. My interests in dyslexia have been broadcast far too often in this Chamber.
Most of the assessments reckon that 50% of the prison population are within the dyslexia spectrum. The lowest figure that I have seen is 30%, and that was on an assessment of a group of 300. Assessments could not be carried out on 200 of them because they were too violent. Why does that not surprise anyone who has worked in this area? It is for the simple reason that if you have to admit that you cannot do the basic functions of reading and writing, you are going to resent someone who presents you with something on which you are going to be tested. You might not be dyslexic; you might just be stupid in the way that you have always been told.
I could give examples from my life, such as the discovery that my daughter could spell better than I could when she was seven. This is something that I never thought I would do but I recommend to noble Lords a programme on channel Five about Shane Lynch. I do not know if the House of Lords has a large following of the band Boyzone, but he is one of its members. He made a moving and articulate programme about someone who is dyslexic going through the problem of having to admit, “What if I am not dyslexic? What if I am thick? What if I have failed?”. This was someone who had a soft landing. He was going to get involved in the garage that his father ran and that was his way forward. The music opportunity came along and he went off there. However, that very successful, rich and well known person was literally terrified at the thought that he might actually just be stupid in the way that people had told him, or in the way that he had assumed he was. In our prisons, we have people who have gone through the justice system for whom the idea of picking up a pencil and writing in public is a humiliating and painful experience. You have to reach them.
Recent government publications now mention special educational needs and take that idea on, but the one place that you cannot get this group of people into is a classroom—not unless you drive them there with whips and guns. For them, it is a frightening place where you reaffirm an unpleasant experience. It is quite obvious, once you think about it. Dyslexics are not the only group affected; you will find an overrepresentation of people with ADHD, Asperger’s and head injury. People who cannot communicate do not handle the criminal justice system well.
I recommend a document, Dyslexia Behind Bars, which is the result of a study run by someone I saw in Chelmsford prison that initially looked at head injury and dyslexia. Here, successful intervention was achieved, primarily by developing and training mentors to go in, speak to a prisoner on an equal level and communicate. Once you have that level of communication, other things become possible. Formalised training and help become possible, but only once you have established that degree of communication. The formalised classroom will not achieve this because people will not use it.
I hope that the Government will embrace the Chelmsford project because I presented a copy of the report to my noble friend Lord McNally, in the company of my noble friend Lady Hamwee, who is much missed. It describes how, when you go in and talk to people on their own level because they trust you, you can begin that communication process. If you are going to strive for formal qualifications in the modern world, you generally have to pass a written test or know how to say why you should get help with that test. In both cases you need information.
I hope that when the Minister replies he will pay attention to the very high number of people in prison who need help with accessing all forms of formalised training and, indeed, with filling out benefit forms when they leave. If we do not pay attention to this, we will create more trouble.
Baroness Uddin
My Lords, I am most grateful to the noble Lord, Lord Carlile, for bringing this matter before the House in a most poignant manner. It gives me an opportunity to share my experience of working with Kazuri, a social enterprise working to re-house female ex-offenders and women who have suffered domestic violence.
I had the privilege recently to launch Kazuri’s report in the House, attended by grass-root practitioners and campaigning organisations, as well as NOMS and the Ministry of Justice. There were more than 80 individuals present. The meeting was addressed by the human rights lawyer, Imran Khan, and the barrister and legal specialist, Flo Krause, as well as by Julia Gibby, who had also prepared evidence to the Justice Committee’s inquiry on women in the criminal justice system.
There are 4,133 women in prison and, staggeringly, 224 of them are Muslim. The report calls for a dismantling of the existing female estate, saying it has no relevance to the needs of women in prison. I commend the report to the House and hope that many noble Lords will take the opportunity to read it, as it makes a harrowing case about the level of misogyny against women in prison. Women serving the end of their sentences at an open prison were surveyed by Kazuri, which identified consistent gaps in provision in training and educational opportunities.
In the current climate of privatisation of public services, the recent probation service announcements and the building of yet more Titan prisons, women are punished far more heavily in prisons that lack trained staff. Kazuri’s report states that underfunded privatised education and resettlement departments are ill equipped to facilitate resettlement and rehabilitation.
We must ensure that there is no further replication of the Work Programme, which has not been a successful example of large private sector companies working with the smaller social enterprises and charities, which walked away. I hope that the Minister will say how the Government intend to work with smaller companies and organisations to deliver more ethical and appropriate services, where large-scale organisations and providers have thus far failed.
It is alarming that, according to the charity Women in Prison, 87% of women who are serving custodial sentences have been victims of violence. According to the Chief Inspector of Prisons, HMP Holloway, which I have visited, no longer offers any courses in understanding domestic violence for the women prisoners.
While the Government are making strides generally to bring violence against women to a higher level on the policy agenda, this must be reflected in the prison estate. If women are not empowered to deal with the impact and long-standing trauma of prison, they will be released and simply fall back into cycles of abuse and—inevitably—crime, to which the noble Lord, Lord Carlile, has eloquently referred.
As a Parliament committed to rooting out violence against women, we cannot leave women in prison out of this equation. Interestingly, the noble lord, Lord McNally, in response to a Question from my noble friend Lady Corston, agreed to yet another review when asked whether custodial care and offender management should be organised to meet gender-specific requirements. The Corston report is the most comprehensive review of women in the criminal justice system. It seems perverse that this universally accepted framework to look at the needs of women across the raft of ministries and statutory duties appears to have been sidelined by this Government.
I respectfully submit that the time for reviews is over. There have been numerous reports on and reviews into the plight of women in the criminal justice system, and I urge Her Majesty’s Government to look at the wealth of evidence collated by the Justice Committee as a result of its recent inquiry. Kazuri’s submission to the Justice Committee says that more women than men lose their homes and children as a result of their incarceration, and that more children and public services are affected in profound ways by the incarceration of women. Some 17,000 children suffer every year because their mothers have been placed in custody. Will the Minister say how the Government intend to tackle the disproportionate inequalities faced by women in the criminal justice system?
I submit that the eradication of inequality is not synonymous with treating everybody equally. This is both disingenuous and deeply flawed. It is disingenuous because it gives supremacy to a concept that few would be hard pushed to criticise—namely, upholding the prima facie eradication of inequality—without actually and actively giving weight to evidence and outcomes. It is also deeply flawed because the criminal law and indeed equalities law do not require that criminal offences, maximum penalties and the principles of sentencing should be the same irrespective of the sex of the offender.
When it comes to women offenders, we know what needs to be done. Small alternatives to custody units, intensive therapeutic interventions and the increased use of community-based sentences have all shown tremendous results in reducing reoffending in women and are far less expensive. Can the Minister tell me and the House what we are waiting for and when the directive will be announced to make the seemingly obvious happen?
Baroness Dean of Thornton-le-Fylde
My Lords, I join other noble Lords in thanking the noble Lord, Lord Carlile of Berriew, and congratulating him on obtaining this debate this evening. Had he been here, the late Lord Corbett of Castle Vale would certainly have been one of the participants. Over his 34 years in Parliament, both in the other place and here, prison reform was at the top of his agenda. Indeed, one of his many successes in that area was introducing his Private Member’s Bill guaranteeing anonymity for victims of rape. Over the years, the issues that he raised were not very popular, so it is encouraging this evening to listen to and participate in this debate, which is being approached by every speaker in a compassionate but very realistic way. Debates on this subject have not always been like that.
Prison, I am told, is about retribution and reform, but all too often the end result is the brutalisation of the individuals who are incarcerated. Sometimes they come out much more bruised and damaged than when they went in. The area of this debate that I should like to concentrate on is work and being paid for work.
When people go to prison, they sit around and do nothing for hours and hours, yet on their release we expect them to come out as whole human beings. Part of life is having self-esteem and feeling that we have a role to play in society. If a prisoner has a family, he or she wants to be able to hold their head up in that family and say, “I have paid the price. I want to pick up the strands of being part of the family and move forward”. Yet, as we have heard from the noble Lord, Lord Carlile, their chance of employment is very low. Work does not come naturally. It is about discipline; it is about getting up; and it is about contributing and feeling that you are doing something worth while. If in prison you come out with just over £9 for any work you get—and that is not £9 an hour but a week—the message is that what you are doing is not worth while. You are not a worthwhile person; you are in prison; you have offended against society; you are not even worth a half-decent payment or, in too many cases, any kind of training at all.
These are some of the reasons why the trade union movement supports this proposal very strongly. Prisoners work and prisoners get paid. Can the Minister be very clear about the Government’s approach and their policy and strategy going forward? We know that it cannot be resolved overnight. Trade unions would support prisoners being paid a decent wage. The national minimum wage is the obvious benchmark, as we do now have a benchmark. Any employer outside employing someone at below the national minimum wage can be prosecuted.
Work does not have to be done in the prison. It can be done outside under supervised control. It can be in the industrial scene, in the agricultural world or in a whole range of areas. It is at least trying to equip someone when they leave prison to be able to hold their head up and say, “I have had some training. I know what work is; I have done it, I have been paid for it, and I am now ready to take my place in society,”.
The Howard League statistics show that something like 30,000 male adult prisoners have long-term sentences. I just cannot conceive what it must be like to be a human being incarcerated for a long time in prison, with nothing to do or whatever work I am doing to be such a low grade that it is regarded as menial. Yet maybe I have the intelligence and ability, with some training, to do better. To then come outside and try to pick up the strands is an almost impossible task.
This debate this evening is an important one. It is probably one step down a long road but certainly there is no reason why the outcome cannot be very constructive. Of course, that depends almost entirely on the answer from the Minister this evening. I urge him to give us as much encouragement as possible and to set out just what the Government’s policy is in this area.
Lord Beecham
My Lords, I join all other previous speakers in congratulating the noble Lord, Lord Carlile, on securing the debate and on opening it so eloquently and so fully. The European Convention on Human Rights proclaims the right of citizens, including prisoners, to have access to education and to vocational and continuing training. That is at the forefront of what the noble Lord has been discussing tonight. In fairness to the Government, it is something to which they have now addressed their minds. I welcome also their commitment to rehabilitation, while not necessarily agreeing with all the methods, including payment by results, which they propose to use.
However, it is quite clear—and the noble Lord, Lord Carlile, effectively referred to this—that the biggest contributing factors to avoiding reoffending are if prisoners and ex-offenders have a home and a job to go to. Between them, those factors make something like a 50% difference to their chances of avoiding reoffending. It is interesting that a report from the Prison Reform Trust, Out For Good, demonstrates that one-third of prisoners with a home to go to also had a job to go to, which was three times as many as those without a home to go to. There is clearly a correlation there. One-quarter of those leaving prison enter a job on release but a survey of prisoners shows that half of them felt that they needed help to get a job. Equally, half lacked the skills required for no less than 96% of jobs, so there is a clear gap that has to be filled in their interests and in the interests of the community at large.
As my noble friend Lord Myners pointed out, sustaining links with family and employers is also key to reintegrating prisoners into the community and increasing significantly their chances of avoiding reoffending. I join with my noble friend Lord Myners and the noble Lord, Lord Carlile, in being extremely doubtful about the proposal to build vast prisons. They may be a very long way from centres of communication, from people’s families and from potential employers. That is not likely to contribute to the ready access to employment that one would hope to see.
However, it is not only the building of prisons that causes problems but the transfer of prisoners between different establishments. The National Audit Office pointed out that a third of training courses and the like in prisons are not completed, of which half are due to prisoners being transferred. It also pointed out that learning records are often lost when prisoners are transferred. Timpson and other organisations do valuable work with prisoners, but if they are involved and prisoners are transferred, again there is a potential break.
Of course, there are low levels of literacy and numeracy among prisoners. However, I note that Ofsted no longer judges the effectiveness of learning, skills and work in prison. I wonder why that is so and whether the Government should not look again at the issue and encourage Ofsted to become involved in carrying out precisely that kind of assessment. It seems to fall within its province.
In the past, when Ofsted reported, it found that only 15 out of 24 prisons had a satisfactory record on training and that there were too few links with employers. There was also a view formed by the Education and Skills Committee in the House of Commons that not enough is done for more able offenders. The estimates of the proportion vary quite considerably but a significant number of offenders have qualifications or the ability to obtain qualifications and, on being surveyed, they often feel that they are not given sufficient support in maximising their potential. The Education and Skills Committee expressed doubts about that. Again, it would be interesting to know what, if anything, the Government have concluded about that and whether they would seek to improve matters.
As we have heard, work does not necessarily need to be carried out within the prison establishment. It can be, and often it is helpful to be, outside in the community, in workplaces, or with voluntary organisations. I join my noble friend Lord Wills in encouraging the Government to promote the role of the voluntary sector and social enterprises in developing the skills and assisting not only in training but in employment.
In terms of employment, I wonder whether the Minister would be able to indicate the current thinking of the Government about how bringing contractors into prisons might work. There are already some in prisons but if that is to be developed, will the Government ensure that those employers are not able to undercut their competitors in the marketplace, for example, by paying very modest amounts either to the Government or indeed to the prisoners? I hope that the Government will recognise the force of the argument of the noble Lord, Lord Carlile, that a proper wage should be paid and that certainly some of it should be taken to compensate victims of crime. We all know the story of prisoners leaving prison with a very limited amount of money, whereas, as the noble Lord, Lord Carlile, has pointed out, they could be allowed to retain some, which would assist their reintegration into society on the basis that they had actually earned the money while in prison.
Have the Government looked at the report produced by the Prison Reform Trust, Time Well Spent: A Practical Guide to Active Citizenship and Volunteering in Prison? What responses have the Government had in terms of not just the employment side but the relationship and developmental sides of non-employment skills, which can clearly help people gain employment in the marketplace? The Minister may not be able to respond to all of these questions across the Dispatch Box tonight; perhaps he would write in due course. However, what has happened about the mandatory work placement programme that was announced in the document on employment support for prisoners, published last year? Given the general low level of performance of the Work Programme, has this had the anticipated impact on prisoners?
Finally, there are one or two points raised by the Prisoners Education Trust. Having surveyed a number of prisoners, it discloses that many felt they were unable to give a specific label to their learning difficulties, when they had them, because they had not had a proper screening or official diagnosis. It also noted that BME respondents achieved fewer qualifications in prison than white respondents. There was a request for increased access to computers and a wide range of books and materials to help prisoners with their learning. I do not know whether the Government have considered this document as a whole. Perhaps in due course the Minister could indicate whether they have done so and whether they are prepared to look at the issues raised, which clearly could contribute to meeting the important demand and requirement for assisting people to emerge from prison with skills, experience and a capacity to reintegrate into society. In particular, it would help them into a way of life which will diminish the chances of reoffending.
Lord Ahmad of Wimbledon
My Lords, I join noble Lords in paying tribute to my noble friend Lord Carlile for securing this debate and for his work with the Howard League. Its stewardship is in good hands as my noble friend hands over to the noble Lord, Lord Myners. I look forward to working with him on new initiatives. As the noble Lord, Lord Myners, pointed out, I am relatively new to this role but I have had the opportunity to visit a prison and have been looking into the initiatives. I shall share my thoughts on those over the next few minutes.
I welcome the opportunity to talk about prisoner work. I believe it is a key factor in ensuring that we deliver significantly less reoffending. Last week, the Government published proposals for transforming the rehabilitation of offenders, reinforcing the commitment to bring major change in the way we tackle reoffending. We acknowledge the contribution that businesses and community and voluntary organisations make in supporting the work of prisons and probation services. The noble Baroness, Lady Uddin, and the noble Lord, Lord Wills, mentioned some of these and I will come on to talk about specifics in a moment. The proposals will provide more opportunities for a payment by results model to generate innovation from our partners in mentoring and supporting prisoners to lead law- abiding lives. Their success much depends on finding and holding down a job. I welcome the words of the noble Lord, Lord Beecham, and associate myself with his concluding remarks.
In a Ministry of Justice survey carried out in 2010, 68% of prisoners reported that having a job would be important in helping them to stop offending. Some 13% reported that they had never been in paid employment. Work in prisons provides a rich environment for learning and qualifications and our current thinking places a strong focus on identifying labour market needs in the areas into which prisoners will resettle and designing the learning and skills curriculum to reflect this. Employability training will be paramount during the year leading up to release to ensure that prisoners have the best possible opportunity of finding work.
My noble friend Lord Carlile mentioned various statistics. In looking at some of the figures, I was startled to read that 58% of newly sentenced prisoners regarded themselves as having been regular truants while in the education system. Some 40% were excluded from school and 46% left school with no qualifications. That is the challenge which lies ahead.
It is not just about vocational training. We know that lots of prisoners lack basic numeracy and literacy. I saw it myself when I visited Peterborough. That acts as a major barrier to employment. We have therefore introduced a greater emphasis on assessing and addressing a prisoner’s literacy and numeracy skills when they first come into custody. Included within this is provision for foreign national prisoners for whom English may not be their native tongue. English language skills are about empowering people and empowering prisoners to become productive citizens when they leave prison. English language skills will not only be important for them in the labour market but also in helping them successfully to integrate within the prison environment, communicate with prison staff and participate in programmes that support their rehabilitation.
We have also increased opportunities for prisoners to take up apprenticeships and work is in progress to increase apprenticeship opportunities for prisoners through release on temporary licence and potentially in prison work areas. For example, four prisoners from Springhill prison are being released on licence to undertake land-based apprenticeships working on a 90-acre patch of Forestry Commission land near Henley-on-Thames.
On traineeships, the Government published a discussion paper last week. Traineeships will provide a new opportunity to help young people aged between 16 and 24 develop the skills and attitudes that employers look for. We would like traineeships to be available to prisoners, supporting them into apprenticeships and other opportunities at a later stage. We are still in the design stage, but the government discussion paper suggested three core elements: a focused period of work preparation training, including areas such as CV writing, interview preparation and job search; a substantial, high quality placement to give the young person a chance to develop workplace skills and prove themselves to an employer; and English and maths for those who have not achieved a GCSE grade C or equivalent. The availability of high quality work placements will clearly be an issue for prisoners. We would welcome ideas about how such placements might be made available. Indeed, I invite all noble Lords to contribute to this process.
Several noble Lords, including my noble friend Lord Carlile and the noble Baroness, Lady Dean, talked about prisoners being idle. I come from a family where sitting idle was not an option; going out to work was. We must create those conditions for prisoners as well. We must do that by engaging them in the world of work. Work itself is rehabilitative, as many noble Lords have already said. But in my own brief experience of talking to prisoners, it is not just about the skills. It is about learning to get to work on time and the expectation that you are accountable and responsible not just for yourself but for the work that you do. It is the expectation that you will work a full day and then build leisure and other activities around your work, as we have all learnt to do over many years. It is about the ability, importantly, to work as part of a team taking and giving responsibility and following instructions. We must increase the opportunities for work within all prisons, and we are doing this.
We are looking to work closely with businesses as well. I was touched by my noble friend Lady Stedman-Scott’s personal experience of working constructively with local and national businesses. We need to make it as simple as possible for our commercial partners to join in. This will support UK industry, enable growth and offer opportunities to deliver work in the UK, which may currently be offshore due to economic constraints and labour shortages.
Prisons are increasingly structuring their regimes to accommodate longer working hours; for example, by moving recreation activities to evenings and providing for prisoners to eat lunch in work areas. This has helped to increase the number of hours worked by prisoners and the number of prisoners working the average length of a working week across the prison estate.
The right reverend Prelate raised the issue of new prisons. I fully concur with his experiences and I assure him that any new prison will be designed to provide sufficient activities for those in custody to ensure that we get the best out of prisoners for their constructive benefit for the future.
As well as engaging prisoners in delivering production and service work there are substantial numbers of prisoners who work within prisons, as we all know, to keep them running—serving meals, in maintenance and cleaning. Indeed, I have seen that for myself. Many more prisoners participate in a broad range of activities to tackle their particular needs, including addressing thinking skills, anger management and so on and so forth.
The noble Lord, Lord Beecham, drew particular attention to training shortfalls. The important thing is that this is not a one-size-fits-all for every prisoner. We need to identify prisoner training needs and prisoner abilities as soon as they enter the prison environment so that they can live productively with tailored programmes suited to them.
If I may touch on the issue of tax and salaries, are prisoners paid for undertaking schemes? Certainly, prisoners who work outside the establishment in paid jobs pay national insurance and tax, while prisoners who are employed inside the prison are exempt from national minimum wage legislation. There are added elements, but in view of the shortage of time, I will write to noble Lords specifically on the issue of pay and tax.
However, as many noble Lords have mentioned, we cannot stop at the prison gate. This was a point well made by the noble Lord, Lord Myners. We want to ensure that offenders are better supported on release. Those prisoners who are eligible to claim jobseeker’s allowance are now immediately referred to the Government’s Work Programme. Work Programme providers are also encouraged to work with prisoners prior to their release, together with a number of other local partners, including Jobcentre Plus, the National Careers Service and education providers, who are all working collaboratively across clusters of prisons between which prisoners often transfer, to share information and drive this work.
We also mentioned different innovations in prisons. As I alluded to earlier, when I visited Peterborough prison, I was very impressed with its post-release support service, where ex-prisoners can call into a centre outside the gate, to receive help, information and support. The new reforms that we are proposing will look for and allow similar schemes to be replicated across the country.
My noble friend Lord Addington talked about dyslexia and learning disabilities. Making Prisons Work calls for a new focus on assessing and then addressing the needs of those with learning difficulties or disabilities. Again, referring to my personal experience in Peterborough, I learnt about issues such as resistance in the classroom. The classroom environment was created within the prison to help prisoners, but not in an intimidating way, to ensure that there was one-on-one training. Peer mentors are also very effective, involving prisoners who understand and have been through those experiences and share them. Most important is the element of trust; I saw that working well in Peterborough. I am sure that other prisons across the country replicate similar schemes.
The noble Lord, Lord Wills, talked about Fine Cell Work. I have read with interest about the work of that particular initiative. I assure him that I would be quite happy to put Fine Cell Work in touch with officials of NOMS; I am keen to learn more about this service. Indeed, as I was leaving Peterborough I was handed a pair of cufflinks made by the Jailbirds initiative, which are quite quaint. I should have worn them for this debate, but perhaps I will wear them another time. I assure the noble Lord, Lord Wills, and the noble Baroness, Lady Uddin, who made reference to the particularly notable feature of Women in Prison, that we are also reviewing the women’s estate to ensure that it is organised as effectively as possible to meet gender-specific needs, including learning and development activities.
My noble friend Lord Carlile and the noble Lord, Lord Myners, touched upon the whole issue of Titan prisons. It is a bit of a scary term in itself. I assure both noble Lords that no decision has been taken on the potential size of any new prison. The Secretary of State has announced a review to examine the feasibility of constructing a new prison.
Let me assure your Lordships’ House that this is a very important issue. In my short time in charge of this brief, I have committed to seeing that we make progress, and I believe that noble Lords across the Chamber have much to offer in this respect. I would encourage them and I look forward to working with them. Our rehabilitation revolution is being supported by other initiatives such as the provision of more support and challenge to get prisoners off drugs, building on the success of the drug recovery wings and a review of the Incentives and Earned Privilege Scheme. I will continue to welcome all views, as will the Secretary of State, on taking forward this important policy initiative. Perhaps I may close by using his words when he launched the Transforming Rehabilitation consultation:
“Transforming rehabilitation will help to ensure that all of those sentenced … are properly punished while being fully supported to turn their backs on crime for good—meaning lower crime, fewer victims and safer communities”.—[Official Report, Commons, 9/1/13; col. 19WS.]
Those are sentiments which I am sure will resonate across your Lordships’ House.