Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2018
(5 years, 11 months ago)
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Baroness Buscombe
That the draft Regulations laid before the House on 3 December 2018 be approved.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)
My Lords, these regulations make minor and technical changes to domestic legislation that would otherwise no longer operate effectively once the UK withdraws from the European Union. The regulations were specifically designed to ensure that domestic legislation continues to operate effectively in the event that the United Kingdom leaves the EU without a deal. In the event that a deal is reached, after the implementation period there will be a need to make legislative changes, but the nature of those changes will be informed by the nature of the relationship that exists between the EU and the UK.
Before I discuss the details of the regulations, it may be useful if I give some context and background. The UK is not reliant on any European institutions or agencies for essential functions in respect of private pensions such as approvals, licences, decisions or rights. The Pensions Regulator’s powers are derived from UK law. This means that the UK does not need to create any legislation to replicate domestically any EU-level activities relating to occupational and personal pensions after the UK’s exit from the EU.
Nevertheless, we must ensure that domestic legislation relating to occupational and personal pensions continues to work and does not rely on any definitions, obligations or reciprocal arrangements that will no longer apply once the UK is no longer an EU or European Economic Area member state. UK domestic legislation contains various instances of references to EU law, and to the UK as a member state of the EU, which will no longer be the case once the UK exits the Union. This includes where distinctions have been made between EU or EEA member states and overseas entities that will no longer apply, where the UK is referred to as an EU or EEA member state or where the UK is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.
These regulations are made using powers in the European Union (Withdrawal) Act 2018 to fix legal inoperabilities and other deficiencies in retained EU law that will arise when we leave the Union. The legal powers used are those provided for under the European Union (Withdrawal) Act, and the amendments made are completely in line with both the policy and legal intent of that Act. The use of secondary legislation to amend primary legislation—so-called Henry VIII powers—was debated at length during the passage of the withdrawal Act. The Explanatory Memorandum that supports these regulations sets out the legislation in Great Britain that is being changed.
Lord Adonis (Lab)
The noble Baroness has just said that the regulations are completely in line with the EU withdrawal Act and do not go beyond any provisions in that Act. But from reading the Explanatory Memorandum and the impact assessment, my understanding is that the regulations had to be revised and re-laid, and that this is the second version of the regulations, because in the first version the regulations were defective. They were not properly consulted on and would have required pension funds to disinvest from European funds because they had not been subject to a proper consultation procedure. Furthermore, there has been no formal process of consultation on these regulations either. Could the noble Baroness inform the House about these matters?
Baroness Buscombe
I can inform the noble Lord. He is absolutely right that a formal consultation was not considered necessary for these changes as there is no policy change and they make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.
Baroness Buscombe
I will give way to my noble friend. However, I would like to answer the question on making the changes and re-laying the regulations.
Lord Deben
I interrupted only because my noble friend might be able to answer my question at the same time. The question is this: if it were not thought necessary to have the consultation in the first place, but then it was found that by not having the consultation the orders had to be taken and re-laid, would it not have been better to have had the consultation in the first place—and would it not now be better to have consultation, because that is the fundamental issue in all these matters? It is not that they somehow get outside the withdrawal Act, but that they do not have the proper consultation we need.
Baroness Buscombe
My Lords, it was as a result of ongoing communication with our industry stakeholders that we discovered that it was important to re-lay the regulations. In a sense, there was not a formal consultation, but we do have ongoing and constant communication with industry stakeholders who will be affected by these minor and technical amendments when we leave the European Union. I stress that we were very concerned to correct a fault in terminology, which is why we withdrew the original draft.
Lord Foulkes of Cumnock (Lab Co-op)
The Minister read from paragraph 10.1 of the Explanatory Memorandum for my noble friend Lord Adonis. That paragraph does confirm what she has just read out: that,
“the Department did engage with and respond to industry concerns over one aspect of the draft regulations that created an unintended consequence”.
How can she know, without carrying out a full consultation, that other aspects would not create unintended consequences?
Baroness Buscombe
The noble Lord, with all his experience, will know that all legislation, however much it is consulted upon, runs the risk of unintended consequences. However, in this case, there was ongoing communication and involvement with industry, and it was industry that pointed out the risk we were taking by laying the regulations with the wrong terminology—the words “UK regulated market”. We redrafted regulations that were originally laid in draft on 24 October so that we could fix an unintended consequence that industry stakeholders highlighted for us. They were concerned that the use of the term “UK regulated market” in the original draft regulations could have resulted in occupational pension schemes having to disinvest from regulated markets outside the UK. So there was a concern that this could impact further than was intended. The redrafted regulations re-laid on 3 December addressed the issue by clarifying the definition of “regulated market” to include United Kingdom, European Economic Area and other regulated markets. Industry stakeholders have welcomed the change.
The Explanatory Memorandum that supports these regulations sets out the legislation in Great Britain that is being changed. Noble Lords will see there a list of all the Acts where changes are required to be made. Primarily, the regulations make changes to reflect the UK’s new status as a state independent of the EU in the event of no deal and to ensure that domestic legislation continues to operate effectively following the UK’s exit from the Union. Consequently, they deal with the authorisation of cross-border pension schemes—that is what they are really about.
The EU’s cross-border authorisation regime applies to cross-border activity between member states and requires pension schemes to seek authorisation from their regulator to undertake such activity. Broadly speaking, cross-border activity is when an employer in one member state selects to base its occupational pension scheme in another.
These regulations recognise that once the UK ceases to be a member state following its exit from the Union, it will no longer be subject to the rules of the regime for any cross-border activity. Consequently, the regulations remove the requirement for UK occupational pension schemes to obtain authorisation from the Pensions Regulator to carry out cross-border activities.
As I have said, but I will repeat it for all noble Lords to make sure that I have got the message across, these regulations were originally laid on 24 October and were intended to make changes to domestic legislation. It was at that point that industry stakeholders in conversation with our department identified an unintended consequence of the draft regulations relating to its use of “UK regulated market” as a definition of regulated markets rather than “other regulated markets”. Industry stakeholders were concerned that this could have resulted in occupational pension schemes having to disinvest from regulated markets outside the UK.
As this was not the original policy intent, and following engagement with industry stakeholders, we redrafted the regulations to correct this unintended consequence. The draft regulations that were re-laid on 3 December addressed this issue by extending the definition of “regulated market” to include UK, EEA and other regulated markets. A corresponding change has been made to the Northern Ireland regulations, which I will speak to shortly.
These instruments are part of a wider legislation package that my department is laying. We have already laid statutory instruments relating to social security and to the European job mobility portal, more commonly known as the EURES regime.
As I have said to noble Lords, a formal consultation on these regulations was not carried out by the Department for Work and Pensions. It was not considered to be necessary because the regulations do not make any policy changes and make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.
Similarly, we expect the regulations to have no significant impact on business, charities, voluntary bodies or the public sector. In fact, in their absence, if elements of the UK’s occupational and personal pensions legislation do not work effectively after the UK departs the EU, it will result in associated costs on all involved parties; for example, extra resource invested in trying to clarify the situation. These instruments make the changes needed to avoid this situation and, on this basis, are assessed to be at least cost-neutral or beneficial on balance to all involved parties, charities and voluntary bodies. In other words, we felt it was very important to make sure that the legislation was clear prior to leaving the EU.
Lord Adonis
The Minister said that the regulations would be cost neutral and the Explanatory Memorandum says, as she has just noted, that they,
“make minor and technical changes”,
but that does not appear to be the view of the sector. The journal Professional Pensions, which did a long article on these regulations, quoted Faye Jarvis from Hogan Lovells who said the regulations,
“could result in significant costs being incurred, the magnitude of which will depend upon the level and type of exposure that would need to be relocated to comply with the rules in the event of … no deal”.
Since there has been no impact assessment, what the Minister is saying to House this afternoon is pure assertion. The only response that I have been able to discover—because although an impact assessment has not been conducted there has been a certain amount of response in the media—suggests that there might be significant costs. How does she think that the House can make a judgment between the claims of people in the sector that there could be significant costs and her assertion that there are no costs, when no impact assessment of any kind has been conducted?
Baroness Buscombe
My Lords, it is interesting that the noble Lord has taken one quote from one article on this. Certainly, our understanding from our discussions with industry is that because this focuses on cross-border activity, it is up to the industry to decide whether to do something different if we leave the EU with no deal. Our focus has to be on the resulting associated costs to all parties involved—for example, extra resources invested in trying to clarify the situation: in other words, certainty of the law post exit from the European Union.
Our focus is on what happens if there is no deal. Should different companies in the pensions industry choose to do something different post exit, there may of course be other impacts on business, but certainly in our discussions with business, that was not the impression we received.
Lord Adonis
Since there has been no formal consultation, the House has no basis on which to make any judgment at all. The Minister has simply made a number of assertions which appear to be at variance with the actual public response. She said that there have been ongoing consultations and dialogue. Can she tell the House more about them?
Baroness Buscombe
My Lords, we are constantly in touch with the Pensions Regulator, with which we have a very good relationship. We work very closely with industry. My honourable friend in another place, the Minister for Pensions and Financial Inclusion, also has ongoing discussions with the Pensions Regulator and individual companies within the pensions industry. The noble Lord will recall that I have stated that there was no formal consultation because there was no change to policy. Given that there is no change to policy and that we are dealing with minor and technical amendments, and given our constant and ongoing involvement with the industry—those in the industry are very much in touch with each other; it is not an industry that is hard to be in touch with—and this niche area of cross-border activity of pension companies and pensions, it is fair to say that the department has done all that is reasonably necessary and, indeed, cost-effective to limit our consultation to an informal ongoing communication with both the Pensions Regulator and industry stakeholders.
Lord Foulkes of Cumnock
On this constant and ongoing activity with the industry, I wonder whether the Minister can help me. The territorial extent of this provision is the United Kingdom. What is the position if my pension is based in the Channel Islands or the Isle of Man, or if my employer has a base in the Channel Islands or the Isle of Man? How is that covered?
Baroness Buscombe
My Lords, we are talking about occupational pensions and private pension schemes. If the noble Lord has a pension in that area, it would be important for him to make sure that he is in touch with his pension provider, to make sure that payment will continue. However, these regulations have nothing to do with payment of pensions.
Lord Foulkes of Cumnock
I am not asking that. I should make it clear that I do not have a pension based in the Channel Islands or the Isle of Man. At least, if I do, then Brian Donohoe is going to be in trouble, because he is in charge of parliamentary pensions, which is all I have. I asked the question as a Member of this House, scrutinising this on behalf of people outside who may have pensions based in the Channel Islands and the Isle of Man. I have read through the whole document and there is nothing related to either. What discussions have taken place? As the Minister knows, the Channel Islands and the Isle of Man have large financial sectors. They are providers of pensions and investments that are the basis for other pension funds that may be based in the United Kingdom or elsewhere in the European Union. How are the funds in the Channel Islands and Isle of Man affected by the proposed changes? It is not clear in any part of the document and I hope the Minister can tell the House.
Baroness Buscombe
My Lords, if I am unable to give the noble Lord a full reply, or after this debate my officials tell me that there is something else to say about the Channel Islands, I will certainly write to him and share my letter with all noble Lords. We are not moving away from current legislation. We are just introducing minor technical amendments to make sure that current UK legislation carries on working seamlessly in the event of no deal. There is nothing in UK private occupational pensions legislation that prevents occupational pension schemes making pension payments overseas. We do not expect this to change as a result of the UK withdrawing from the EU. We also do not expect there to be any issues with EEA schemes making occupational pension payments to residents in the UK. However, as I have said, individuals should contact their EEA scheme to clarify whether they expect any changes as a result of the UK leaving the EU.
These regulations are not about pay, but if a pension is paid into a UK bank account the bank should contact the scheme member if it expects any changes as a result of the UK leaving the EU. In the same way, those points would extend to any arrangements that an individual had with pension providers in the Channel Islands and elsewhere.
I would like to progress and complete my opening statement. We expect these regulations to have no significant impact on business, charities, voluntary bodies or the public sector. These instruments make the changes needed to avoid a situation that could be other than cost-neutral or beneficial. All noble Lords will know that the European Union (Withdrawal) Act is a crucial piece of legislation that will ensure that, whatever the outcome of negotiations, we have a functioning statute book on exit day, providing certainty to people and businesses across the UK. The Act enables this by providing a power for Ministers in the UK Government and devolved Administrations to deal with deficiencies in the law arising as a result of our exit from the EU. I beg to move.
The Senior Deputy Speaker (Lord McFall of Alcluith)
The Question is that the two Motions in the name of the noble Baroness, Lady Buscombe—
The Senior Deputy Speaker
If the noble Lord wishes to object, he can come in when the Speaker calls the voices.
Lord Foulkes of Cumnock
The noble Lord is a long-standing friend but my understanding is that things have changed. It was originally planned that the two would be taken together but the Minister has moved only one. This was before the noble Lord was in the Chair.
The Senior Deputy Speaker
To save any problems, the Minister’s Motion to move these Motions en bloc has been objected to, so the Minister should now move the first Motion on its own.
Lord Kirkwood of Kirkhope (LD)
My Lords, I am grateful to the Minister for that extended explanation. It was quite clear, but perhaps it is easier for me to say that because I am a serving member of the Secondary Legislation Scrutiny Committee, which has been looking very carefully on the House’s behalf at all of these points. These regulations were cleared, and the SLSC does not clear regulations that are not properly looked at. All of the important questions were addressed. While I would encourage your Lordships to ask more questions about some regulations—because there are occasions when regulations are laid before Parliament that deserve a lot more scrutiny than they normally get—this is not one of them. This regulation is technical and I take the point that has been made about the lack of consultation. That is always something that the committee is very solicitous to understand and the explanation that we got, which was crystal clear to me, was that the objection that came in and was found by bilateral consultations with the industry was so technical that you would not expect a member of the public to be able to volunteer something of that kind.
There are two kinds of consultation, and we are always looking for consultations where there is any case for making them. In regard to this regulation, this was not a sensible judgment to make, so the department was right both to take the advice from industry and to make the change. It is standard that regulations, in the gestation between Parliament and the department, often get relaid. Often the Explanatory Memoranda are changed and that is all to the good.
Lord Foulkes of Cumnock
My noble friend—I have known him for many years—is an expert on social security and a member of the Secondary Legislation Scrutiny Committee. The two committees under the noble Lord, Lord Trefgarne, and my noble friend Lord Cunningham do a terrific job. However, is it not perfectly possible, because of the huge avalanche of legislation—the statutory instruments now coming to these committees—for things to be overlooked? Therefore, it is absolutely right that the Grand Committee and the House, where there is a wider membership and people might have looked at the regulations in some detail, might raise some of the issues. I fear that a lot of things will get through and these unintended consequences—few and far between as they have been in the past—will just become an avalanche themselves.
Lord Kirkwood of Kirkhope
My noble friend makes a good point. I certainly have serious concerns about the scale, complexity and volume—not just the number, but the extent—of some of these SIs that the two committees upstairs are struggling to deal with. One thing that we are very solicitous of—and it supports the point—is that it is very easy to reduce the standards of scrutiny, which is one thing that we must not do. I gently say to the noble Lord, however, that if parliamentary procedures are tested to the extent that it takes up more time than this normally would, there are emergency procedures available to Governments which they might resort to if you push them too hard on the Floor on the time necessary to discuss these things. Therefore, I am absolutely happy to spend time when time is due to be spent, but these regulations are not of sufficient weight or concern to justify spending a lot of time, or more time than is necessary, on them.
The point about consultation has been made. The important thing is that we need to be more agile and more flexible about how we handle these statutory instruments. But I support the regulations and I hope the Government will take on board the important points that have been made about when consultations are and are not needed.
Lord Deben
My Lords, if I had not gone through earlier debates, I would have agreed with the noble Lord. I want to make it clear that whatever certain government sources may say, there may well be some sort of arrangement as far as the Opposition are concerned but it is not one in which I have been involved at all. I went to listen to some later SIs last week. In listening to the debate, it became clear to me that a number of assertions were being made by the Government which, frankly, did not stand up.
Of course, the whole problem with these SIs is that the Government constantly remind us that they hope they will never be implemented and this is all about the possibility of there being an exit with no deal. But that does not mean, as I am sure the noble Lord, Lord Kirkwood, will agree, that we can ignore these SIs because they probably will not happen. Of course, as the days go on, that becomes less and less probable, in my view. Now that the Prime Minister has said that it is more likely that we will have no Brexit than a no-deal Brexit, perhaps one may be happier about it. But I am not here because I happen to believe that Brexit is a nonsense. I am here because I believe that there are some really fundamental things in these SIs.
The first is the assertion that we do not need to work too hard on them because they are not going to happen. That seems unacceptable.
Baroness Buscombe
When have I made the assertion that we do not need to take time on them? We have spent an enormous amount of time in the department ensuring that what we carry out in relation to these SIs is detailed and careful, to the best of our ability.
Lord Deben
I was not making the assertion about my noble friend; I was referring to the meeting of the Grand Committee last week, when that was very much the underlying assertion. That is all I was doing. I do not wish to make any such implication or accusation about my noble friend, whose presentation was perfectly right and reasonable, except that it is based on falsities. I will go on to the other falsities on which it is based.
The second falsehood is that this SI is not making much difference and therefore we do not have to go through the usual procedure. The difficulty with that is that there is a definition here which I find very peculiar. The definition of “impact” refers only to the direct impact of what is in this—the impact on people in the United Kingdom who do not have anything outside the United Kingdom, and who are concerned only with the United Kingdom. There is no reference to the cost of or the damage done by these regulations to those who are in the United Kingdom but have arrangements outside the United Kingdom within the European Union, who will be seriously disadvantaged because the UK will not be within the same arrangements. I realise that that is a result of Brexit but the idea that you can assess the impact without mentioning that seems very peculiar. If you mention that, you have to have an impact assessment. I am very suspicious of this because I think the Government do not want an impact assessment that explains to people precisely why exit from the European Union is so damaging. I do not understand how we are supposed to deal with an SI when it says simply that there is no, or no significant,
“impact on business, charities or voluntary bodies”.
That is the second reason that it seems to me that this is a kind of fudge.
The third reason, and this is the most important thing that I want to say, is about consultation.
Lord Adonis
The noble Lord and I have spent some time with other noble Lords in Grand Committee scrutinising a whole swathe of these regulations. Does he agree that a pattern is becoming very clear in that there has been no formal consultation on any of these regulations, whether or not they are making minor changes? In parenthesis, I say to the noble Lord, Lord Kirkwood, that the deficiencies in the first set of regulations were not minor but major in their impact and were not picked up by the engagement of the department with the industry. However, even those that involve substantial changes have not been consulted on formally. He will recall that in Grand Committee yesterday we were told that there had been selective engagement with “trusted” individuals. It became clear to us during those debates that there was a huge reluctance on the Government’s part to engage formally in consultation because—until the moment that we have just reached, when it has become public knowledge—they did not want the degree of preparation made for no deal to be known. The very scale of the problem to be encountered in respect of no deal and the alarm it would create was a reason why the Government have not been consulting, as they should have been, on these and other regulations. That ought to give the House very great concern about the state of the regulations and the degree to which the Government have engaged with those who are going to be very significantly affected in the way that he suggested.
Lord Deben
The only problem is that the noble Lord’s intervention was so long that my name has been changed to his on the annunciator.
Lord Deben
I have to say, there are many fates which are worse than death—though I am not quite sure that that is one.
I wonder whether I could go on to the question of consultation. It is very difficult to uphold the argument that there was no need for consultation when you have had to withdraw the SI because, as a result of publishing it, it turns out that there was a need for consultation because a very serious mistake was found in it. If this were the only case—I say this to the noble Lord, Lord Kirkwood—I would be less concerned, but last week and yesterday we found a series of really serious changes which needed to be made which had been brought to our attention by the very industry with which the particular ministry concerned had claimed to have had ongoing and general discussions.
There is, for example, a very major problem for the pharmaceutical industry because there was no such consultation. I do not want to go into detail on that because obviously that is not the subject here, but it is important to say that this is a case where, had there been consultation, there would not have had to have been a second draft of this SI. My noble friend said, “Well, we have changed it”, but she has not. She has not, I think, convinced the House that there might not be something else that needs to be changed. Because you have changed one thing does not mean to say that there will not be any other.
Lord Warner (CB)
Will the noble Lord agree with me, having sat through six sets of regulations which have been negatived, that there is a pattern emerging? Does he agree that the pattern is real doubt about whether there are accurate impact assessments and real doubt about whether any worthwhile consultation has taken place with interested parties? I am asking the question because this is of great importance to the House as a whole. There is a continuing assertion that these were minor and technical issues which did not involve a change of policy; but on further investigation, all showed that there were serious concerns about impact assessments, there were changes of policy, and there were great deficiencies in the consultation. As this House in Grand Committee has negatived six sets of regulations, one after the other, one can be excused for being a little sceptical about assertions from the Dispatch Box.
Baroness Buscombe
My Lords, if I may be helpful to the House, I think I made it clear to all noble Lords that, because of consultation with the industry concerning this fairly niche area within the pensions industry of cross-border activity with the EU, we learned that one word was wrong within the draft regulations. Therefore, notwithstanding what may have happened with other SIs that noble Lords have been debating in recent weeks, with regard to this SI, one word was out of place and, quite rightly, the pensions industry alerted the department, which withdrew the draft regulations. As the noble Lord, Lord Kirkwood, so helpfully stated, the reality is that this happens. It does not happen on a regular basis. I cannot believe that, when my noble friend was Secretary of State, every piece of legislation he brought forward was perfect the first time round.
Lord Deben
I perfectly agree with my noble friend that I did not always produce legislation that was perfect the first time round. However, I did consult. I would not have dreamed of having a situation like this, where after I had published the legislation and told people that there was no need for consultation, I then found that there was a need for consultation. In this case, my noble friend is coming to the House and saying, “Although we got it wrong the first time, we know we are not getting it wrong the second time”. I know that she does not wish me to refer to what has gone on in other SIs, but the trouble is that there is beginning to be a pattern here. There is an assertion that proper consultation is not needed but it is then found, after they publish the document, that a series of people from the industry come up with really very serious matters. In two cases, those matters could affect the lives of people in this country because of the way in which the legislation has been framed. My noble friend really does have to understand that we are not having this argument for some esoteric reason or because we happen not to like the withdrawal Act. We are having it because, by accident, we have come to understand that when you work this out, discuss it and think about it, it does not turn out to be quite the legislation that we were told it was. That is the next reason why I find it difficult to accept this SI.
Then there is the question of cost. Evidently, it was not thought necessary to have a consultation because it would not be cost effective to have one. I do not know how much it costs to withdraw an SI and then to replace it, but that does not seem to be a cheap alternative to having a proper discussion in the first place. I do not understand why there could not be a consultation. After all, if the consultation had taken place at the time the original SI was laid, it would have happened, it would have been over, and we would have known that there had been such a consultation.
Lastly, I will talk for just one moment about the whole question of cross-border activity. This SI says, “If we leave the European Union, and if we leave it without an agreement, we are putting in place something that will enable us to be an island which does not have any outside connections at all but our own internal arrangements”. This means that we are going to reduplicate what are, at the moment, some of the arrangements which are done across the whole EU. I do not see here the cost of having entirely our own system and the cost to pension operators in this country of having to make new cross-border arrangements themselves. That does not come into the impact assessment. There is no question about that cost, but it is not here. All we have here are the costs of that very narrow area which the Government have decided is what is defined as “cost”. Yet the Government are going to have to accept that pension people in this country will have the cost of making arrangements so that they can do the things they are doing at the moment inside the European Union. This is a cost, but it is not here.
I know my noble friend is bored with it and thinks that we should let this all pass, but this House is about revision. We have made a mistake with this particular SI. We should recognise that all these SIs need to have at least a formal consultation. There should be a time when people can be asked to put in their concerns; the ability for a Minister to get up and say, “We have had a consultation”. I think it is unfair on my noble friend. She can only get up and say, “Well, there has been an informal series of talks”.
Viscount Eccles (Con)
Over how many weeks would the noble Lord suggest that the consultation should take place?
Lord Deben
My noble friend is right to say that the problem with all this legislation is that it takes time. If you are going to make fundamental changes, you have to face it: it is better to have short consultation periods in which everyone is told that there is a consultation, rather than this egregious kind of concept where you say, “We have had a bit of a consultation and we have ongoing talks”. We cannot get up in this House and say that we have had a consultation that shows that we have covered everything. I agree with my noble friend that you have to have a short consultation but it must be public and clear. It is frankly not our fault that we have lost a lot of time. It is because the Government did not start two years ago to prepare for what might be a no-deal exit.
Lord Adonis
The noble Lord raises an extremely important point about the need to consult before regulations are published, rather than after. The Minister said that these were technical and that there was ongoing engagement. Responses from practitioners in the sector show that they were concerned about the mistakes made the first time round. Unlike the noble Lord, Lord Kirkwood, who thought that everything would be perfect the second time round, the response of Faye Jarvis, a partner at Hogan Lovells whom I quoted earlier, was that they were getting very significant impacts from the original version of these regulations. She warned schemes to pay attention to any further changes to the regulations in case they brought such unintended consequences again, saying:
“People will need to be scrutinising and seeing what else is coming out in terms of draft regulations to make sure there aren’t any other inadvertent errors but also to check there aren’t any unexpected impacts”.
Does the noble Lord agree that the whole reason one consults before presenting regulations for approval to Parliament is so that these kinds of inadvertent changes do not take place? The fact that partners in pensions law firms are saying that they have not been consulted and are not content that these regulations will not produce more inadvertent errors with a major impact entirely supports the noble Lord’s argument. We need proper consultation and not the rushed, informal dialogue which is taking place because of the very rushed nature of these no-deal preparations.
Lord Deben
I will answer the noble Lord, but I do not want to prolong my remarks. I am already a bit fed up with being told that I must not talk about these things because it takes too long. I find it extremely difficult but it has to be talked about. The noble Lord is entirely right. This will be true and, if so, I have to declare my interest as chairman of PIMFA. I have some allied interests, but not as far as pensions are concerned.
I come back to my noble friend. There is national concern about the responsibility of government and Parliament. That leads me to say very seriously to her that if it looks as though you are hiding the consequences of decisions that you make, that does a great deal of harm. Not having the proper costs here—
Baroness Buscombe
My Lords, I must intervene at this point. I take great exception to any suggestion that I am seeking to hide anything at this Dispatch Box. I hope that the noble Lord—my noble friend—will apologise.
Lord Deben
Frankly, I did not say that my noble friend was hiding it. I said, “If it looks as if you”—and I am not referring to my noble friend but to the Government who have laid this SI—“are hiding”. She really cannot take exception to that—well, she has taken it, and if exception was taken, I apologise for any reasonable exception—but really, I say to my noble friend that we are trying to debate this issue. I was saying that if it looks as if you are hiding something because you do not include the costs of withdrawal, the public will find that difficult to accept. I do not think that I have accused her of anything, and trying to get upset about it is not acceptable.
All I am saying to her is that I hope that she will talk to the people who have laid these instruments and have not told us directly the costs. I believe that they intended not to tell us the costs, because if people add up the costs of Brexit in each of these SIs, they will begin to see why some of us have been so concerned.
I end by saying simply this. We need to have proper consultation and proper costings—not just generalised ones—and, when we have a changed SI such as this, which has been changed because we did not have a consultation, it would have been much more reasonable to have had a consultation before this SI was produced. I do not believe that it is possible for a Minister to get up and say that there is no need for consultation because we know that it is perfectly right. So, for all those reasons, I think it is perfectly correct that we should be having the kind of debate that we are on this SI.
Lord Tyler (LD)
I intended to intervene on the noble Lord, but I realised that it would be incredibly embarrassing if my name were to be attached to his speech, so I spared him the embarrassment. However, I shall quote him in a moment.
I was struck by a point made by my noble friend Lord Kirkwood of Kirkhope about the sheer quantity of secondary legislation coming through, and the great work that he and other members of those committees are doing. I am involved in a small way because I am on the Delegated Powers and Regulatory Reform Committee, which is involved at an early stage. My noble friend rightly made the point that the sheer quantity of SIs coming before your Lordships’ House is causing us real problems. I very much concur with what was said by the noble Lords, Lord Deben and Lord Warner, because we were together in the Grand Committee both last week and yesterday. A pattern seems to be developing. If I may illustrate it in this way, each time we come to one of these SIs—it is happening again today—the Minister says that this is contingency planning. It is fairly set out in the Explanatory Memorandum and very well explained that it will become applicable, relevant and of interest to Members of your Lordships’ House only if there is a no-deal outcome.
So all this is speculative; it is hypothetical. When I used to ask questions of the noble Lord, Lord Deben, in the other place, he would say to the House, “The question from Mr Tyler is hypothetical and I refuse to answer it”. That was perfectly reasonable. Now the Government are making a hypothetical statement: if there is no deal, this will be necessary. Most of the SIs coming before the committees of your Lordships’ House, let alone here in the Chamber, are hypothetical in that sense. This is a real problem—and, as the noble Lord, Lord Deben, said a few moments ago, it is becoming more of a problem every day.
In our vote yesterday, there was a huge majority against a no-deal outcome. The Prime Minister is increasingly saying that she is against a no-deal outcome—she even thinks it is more likely that there will be no Brexit. In those circumstances, the pressure on us all—and on the Government—to get consultation right, to get the impact statement right, to get the costs allocations right are becoming, in the words of the noble Lord, Lord Deben, more and more difficult and taking up more and more of the time of Ministers, their civil servants and your Lordships’ House. That means that we may be neglecting the “normal” SIs, if I may call them that, which are not related to a no-deal situation.
As we all know from the European Court of Justice judgment before Christmas, the only circumstances now in which a no-deal outcome, on which this SI is based, could happen would be as a result of a deliberate decision by the Government. It is not going to happen by accident. We were told in previous debates that there was a risk of an accidental no deal, but that is now impossible as a result of that judgment.
I will quote very speedily from the noble Lord, Lord Deben, who I hope will not be even more embarrassed than he was by being given my name. He said in Grand Committee last Wednesday that,
“I do not think this House is doing itself any good by conniving in what is manifestly a total nonsense … There is no no-deal scenario which does not mean chaos, so there is no point in having legislation which pretends that it will stop a no-deal scenario being chaos. That is inevitable, ineluctable and inextricable from the whole process”.—[Official Report, 9/1/19; col. GC203.]
We are back at that point. Here we are, inevitably finding that in a number of ways that have been well illustrated by other Members of your Lordships’ House, this SI may have serious problems. The Government are entitled to say, “We have no intention of going there. We do not want a no deal. We want the Government’s deal”. In that respect we are, unfortunately, jamming up and putting so much new work into your Lordships’ House at every level, which may be a complete waste of time. That will distract us from doing a good job on other SIs, and that is a very regrettable situation.
Lord Adonis
Does the noble Lord not agree that another theme that came out of the Grand Committee’s consideration of these statutory instruments was a more fundamental issue? The House of Commons debated and voted on no deal last Tuesday in one of the largest Divisions on Brexit since this whole process started two and a half years ago. It voted by a majority of seven against no deal and in favour of an amendment to the Finance (No.3) Bill, under which the disbursement of public funds in respect of no deal was conditional on the House of Commons having a specific vote on no deal, with it being clearly understood—because that amendment had been passed—that the House of Commons would not be favourable to it. So there is real concern among Members of your Lordships’ House about the legitimacy and validity of all this planning, given that in the one opportunity the House of Commons had to express its view, it expressed a firm view against there being no-deal planning.
Lord Tyler
In the interests of brevity, all I need to say is that I agree with the noble Lord—but this evening we may of course find that there is an additional expression of opinion by the other place. In that case, all this work may well turn out to be even more absurdly out of place.
The Archbishop of York
My Lords, I just wanted to ask the Minister: how much consultation was undertaken with industry before the first regulations were produced? Did industry suggest, rightly, that this would cause trouble for the Pensions Regulator and others because it was bigger than just the United Kingdom? I listened to the noble Lord who said that he did not think that these small, technical changes required the same amount of consultation. If that is the case, we must distinguish each regulation from others. If one takes a generalised view of consultation, one can never have proper legislation that requires greater scrutiny than other legislation.
As far I am concerned, I was persuaded by the noble Lord that this is purely technical. From what I am hearing, it is. If, of course, as happened yesterday, there is no question of a no deal and the House of Commons says the same thing, and the same thing happens today, these regulations may not be necessary. But any sensible planner must always plan for all contingencies. You cannot go blindly in one direction alone—so I want to know.
Lord McKenzie of Luton (Lab)
My Lords, I have stayed out of this to date and I propose to do so in the future. I want to make just one point before we lose sight of it. The Minister talked about the change involving just one word. I think that we should recognise that that word is “UK”, which is a pretty substantial one.
Baroness Drake (Lab)
My Lords, these draft regulations are part of a suite of instruments intended to plan for the no-deal scenario, necessitating a sweep across the stock of pension law. Such contingency regulations may well amend both primary and secondary legislation, the remit of the Pensions Regulator, the Pension Protection Fund and the Financial Assistance Scheme. What we have not received, however, is a broader assessment of what the pension landscape would look like in a no-deal scenario which sets the context for the consideration of these SIs individually. That is because to call them technical, when we stand back and look at the wider implications of no deal, is not to see some of the serious challenges and loss of member protections that could flow as the consequence of a sudden dropping out of EU legislation in a no-deal scenario.
These particular regulations address cross-border activity where an employer in one member state selects to base its occupational scheme in another member state, but they remove from the Pensions Act 2004 the requirement for occupational pension schemes to obtain authorisation from the Pensions Regulator for cross-border activities. They repeal the cross-border regime.
The UK and Ireland are the two countries between which there is significant cross-border pension provision, which will be another complication in future UK-Ireland relationships. Recent amendments to the Occupational Pension Schemes (Cross-border Activities) Regulations 2005 were made to allow for the IORP II strengthened requirements on cross-border activity which would be revoked if there is no deal. The acronym IORP comes from the EU directive meaning “Institutions for Occupational Retirement Provision”. Thus a new set of regulations that has just been accepted and which puts in place protections for cross-border activity would be revoked. In the event of no deal, the Pensions Regulator would need to provide guidance to those pension schemes which are currently authorised for cross-border activities within the EU. They exist now and they will not cease to exist simply because we may leave with no deal. Can I ask the Minister what would be the effect of substituting existing Pensions Regulator authorisation with a weaker system of Pensions Regulator guidance for cross-border activities? How would the effect of that weaken the level of protection afforded to scheme members in respect of both contributions and the protection of their assets? When will the regulator’s guidance be published so that we can more fully understand the implications of no deal?
Could the Minister advise whether there have been any discussions between the Pensions Regulator in the UK and Ireland on pension cross-border activities in the event of a no-deal scenario? Will the IORP II new authorisation process for schemes wishing to undertake bulk transfers of assets with a separate scheme located in another EEA state include ensuring that the cross-border transfer is approved by a majority of the members and beneficiaries or, where applicable, by a majority of their representatives? What will happen to those protections in a no-deal scenario? I do not know because I cannot find the answers to those questions. There will be UK citizens whose assets are in occupational schemes in other EU states that may be protected by ring-fencing or whatever.
The original draft of these regulations, as has been said on numerous occasions, required pension schemes to invest predominantly in UK-regulated markets. Regulation 29, the one being referred to, has been revised to allow schemes to invest in regulated markets more generally and therefore avoids the unintended consequence of large numbers of occupational pension schemes having to divest themselves of investments in regulated markets outside the UK. It illustrates how the impossible speed and pressure our departments and regulators are expected to work under to prepare simultaneously for a possible no deal and a withdrawal deal can lead to unintended consequences, which worries me. I fear that in retrospect, in the rush to prepare for no deal against a self-imposed deadline of 29 March, we will discover more unintended consequences in the canon of UK law, not simply in pension law. We have seen others, on trademarks or wherever, where people are beginning to identify unintended consequences.
I will not refer to Northern Ireland because we are now taking that separately, but on the broader point of how impact is defined and measured, there is a series of cliff-edge issues that could pose material risk to our financial markets in a no-deal scenario. UK providers will also be unable to rely on current passporting rights, could experience difficulties in servicing cross-border contracts and will not be part of the legal framework for moving data between the EU and the UK. In the absence of regulatory co-operation agreements or memoranda of understanding between the UK and the EU in a no-deal scenario, the operation of pension schemes and the value of members’ pension pots will be negatively impacted.
This takes me back to my opening point that, in considering these statutory instruments individually, the House lacks a broader assessment of what the pension landscape will look like in a no-deal scenario. To argue that somehow there is no need for consultation if the impact of no deal does not result in a change of policy is to completely fail to understand that the effect of no deal in weakening the protectors of members’ rights is a policy choice if one chooses no deal, because it will consequently affect members’ rights. It seems so narrow to argue that you cannot find a change of policy, though really the issue around consultation is not well argued. Although I accept that these regulations deal with the more narrow issue of cross-border activity, they are indicative of the problem of trying to look at any SI on pensions without the context of understanding the impact on pensions generally under no deal. Pension schemes everywhere are sitting and worrying about the consequences of this, particularly in financial markets. There are also UK citizens whose assets are in pension schemes in other EU states. Just walking away from the regime without any understanding, even with the Irish regulator, does not seem to be good preparation.
Lord Adonis
My Lords, my noble friend made an extremely powerful argument, which corresponds to a pattern that has emerged to those of us who have spent time in the Grand Committee discussing these regulations. They have all been prepared in a rush to meet an imminent deadline. Because of the rush, the need to meet the deadline and the secrecy inside the departments with which these regulations have been drafted and all no-deal planning has taken place, the pattern that has emerged in the debates in the House and the Grand Committee is that much wider issues have become apparent that could only become apparent through consultation.
The conclusion I can see we are already reaching—my noble friend makes an extremely powerful argument—is that it is not just the technical changes of the regulation and the precise changes in UK law, though clearly those have been very badly handled and have potentially had a dramatic impact on UK pension funds, but the whole wider context in which these funds and the professionals engaged in them will have to operate under no deal that will bring about fundamental changes. That is precisely why one would wish to have a full consultation, which has not taken place.
The noble Viscount opposite asked how long we would wish a consultation to be. There are established Cabinet Office rules on this which, when I was a Minister, we observed as a matter of course for any changes in the law; he will know this better than anyone, having dealt in this area so frequently. The rules say 12-week consultations. That is the norm. In my day, when we had a quality of Government rather higher than the one now engaging in all this helter-skelter planning for no deal, you needed a special exemption based on special emergency requirements not to go down the 12-week route, and that could happen only if the changes concerned were exceptionally minor. In this case, the Government themselves have imposed the deadline and the changes under consideration have a very wide potential impact. It is abundantly clear that the right thing to do in this and other cases is to have a 12-week consultation, with the wider policy environment under consideration being subject to consultation too.
I would like to ask the Minister some other questions about the detail of these regulations. For those of us who are not experts, it is not clear precisely how deep the impact will be. Paragraph 2.5 of the Explanatory Memorandum says that,
“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.
I take that not to be a minor change in the regulatory regime but a fairly significant one, on which the Pensions Regulator should have been asked to give advice—including to the House—when we were considering these changes. Can the Minister tell us what the impact of that change will be and why the Pensions Regulator was not invited to give us advice?
On the wider issue of no-deal planning, which of course underlies all these regulations, the Government have said that they do not wish to see no deal take place. Last week, when the House of Commons debated no deal and voted that it should not take place, Robert Jenrick, the Exchequer Secretary to the Treasury, said that,
“the Government do not want or expect a no-deal scenario”.—[Official Report, Commons, 8/1/19; col. 269.]
It is entirely within the purview of the Government not to have a no-deal scenario; if they do not want it, they can ensure that it does not take place, not least because of the ruling of the European Court of Justice before Christmas. They could revoke the notice under Article 50 to ensure absolutely that there will not be no deal.
A point was raised perfectly properly by the most reverend Primate the Archbishop of York that one should prepare for contingencies, but these are contingencies entirely of the Government’s making. They are not talking about preparing contingencies for, if I may say so, acts of God or other things that happen for which one cannot be accountable. When I was Secretary of State for Transport, a volcano went off and we had to get planes flying when there were big ash clouds. One should be expected to make contingencies for those kinds of things over which one has no control. In the case of the contingency for which we are discarding all our normal consultation mechanisms, playing fast and loose with a regulatory regime and, as my noble friend said, not taking account of the wider policy context and what may happen as a result of no deal, it is all self-inflicted by the Government because they are sticking to a self-imposed deadline.
The response of noble Lords who have sat in Grand Committee is that this does not sufficiently justify not going through established consultation routes. A whole stream of statutory instruments will be coming from Grand Committee where big concerns have been raised, not least by the noble Lord, Lord Warner, in respect of a set of pharmaceutical-related SIs that we debated yesterday. Key affected partners were not consulted at all; the reason for that, it appears, is that the department did not want to hold a consultation that would have made people aware that no-deal planning was taking place. Indeed, in the debate we held yesterday on one of the key regulations, the only person who we could establish firmly had been consulted was the noble Lord, Lord Warner, himself; he had phoned the relevant public authority that was engaged in the no-deal planning.
Lord Deben
My Lords, I invite the noble Lord to give way, because it gives me the opportunity to say that I think my noble friend the Minister will now understand that when I said that if one looks as if one is hiding something, I did not refer to her at all. I referred to a very long experience of exactly what the noble Lord refers to: a refusal to consult the very people who could have made sure that the SI was correct. In the case we talked about yesterday, it seems to me that the Government are very likely to have to withdraw that SI and then replace it, as they did with this SI. I did not think it was unreasonable to point that out.
Lord Adonis
The noble Lord makes an extremely good point. I invite noble Lords to read the debate in the House of Commons on 8 January on no-deal planning. It lasted about an hour and, as I say, it had a vote that led to the Government being defeated on a specific proposal to rule out no-deal planning. It became very clear in that debate that Members from all sides of the House of Commons were not prepared to contemplate no deal; that they wished to rule it out and did so in their vote; and that they regarded no-deal planning as an immoral activity. The only reason it is being kept in play and detaining the House at huge length, as it has done today and in the consideration of these regulations in Grand Committee, is as a means of trying to scare Members of Parliament into thinking that if they do not vote through the Prime Minister’s deal, there may be a no-deal Brexit. This is a straightforwardly immoral activity if it does not command a majority and the confidence of the House of Commons in the first place.
Lord Blackwell (Con)
I must tell the noble Lord that I listen to his interventions with growing frustration, as very little of what he says is about the merits of the statutory instrument we are supposed to be debating. The noble Lord might wish it were otherwise, but Parliament voted to enact legislation which is now an Act of Parliament and states that the UK will leave the European Union on 29 March. The only way to avoid that is for Parliament to agree a deal, or repealing that legislation. Until either of those events happens, it is only sensible that we should plan for what is now on the statute book, as the most reverend Primate said. The noble Lord is wasting the time of this House.
Lord Adonis
My Lords, I do not accept that for a moment. The whole basis on which we engage in no-deal planning is fundamental to these regulations. If no-deal planning does not have the authority of the House of Commons—and it appears from the vote last week that the other place is not prepared to contemplate no-deal planning—why on earth are we detaining the House at huge length in making clearly unsatisfactory arrangements? They have not been properly consulted on and are leading to regulations that are not properly drafted, in pursuit of a contingency that will not arise. I flatly disagree with the noble Lord.
We are the subordinate House, but it appears that leading Members of the House of Commons are concerned with these affairs. The amendment last week which led to a majority against no-deal planning was a cross-party amendment tabled by Nicky Morgan and Yvette Cooper, two very senior Members of the House of Commons. In moving it, Yvette Cooper said:
“I have heard some say that they want the imminent threat of no deal to persuade people to back the Prime Minister’s deal, if not now, then later. But brinkmanship in Parliament is not the way to resolve this and get the best deal for the country. This is too serious for us to play a massive Brexit game of chicken”.—[Official Report, Commons, 9/1/19; col. 263.]
I entirely agree with that statement and so did a majority. That leads to a huge question mark over the validity and legitimacy of all this no-deal planning and puts a particular duty on this House to see that we do not pass regulations which have been inadequately consulted on, inadequately drafted and inadequately scrutinised in pursuit of a deadline artificially imposed by the Government. The Government have the power to change it if they wish, because the European Union (Notification of Withdrawal) Act 2017, which the noble Lord just referred to, gives them the power to change the exit date and unilaterally revoke Article 50. It also does not appear to have the confidence of the House of Commons in the first place. I hope noble Lords will in no way be dissuaded by the ardent partisans of a no-deal Brexit from giving these regulations the scrutiny which they not only deserve in respect of those affected by them, but which we have a duty to give them if we are to follow the will of Parliament as expressed by the House of Commons.
Lord Warner
My Lords, I am not going to continue the discussion about our previous experiences of SIs. I just have a question that I want to put to the Minister on this set of regulations, prompted by the helpful remarks of the noble Baroness, Lady Drake. To what extent, if any, would this set of regulations require pension funds to shift their investment strategies, which could be deleterious to the beneficiaries of those pension funds?
Lord McKenzie of Luton
Forgive me; I was waiting because I thought the Minister was going to answer the question.
Lord McKenzie of Luton
My Lords, this has been a wider debate than I anticipated when I signed to speak on these regulations but, I suggest, relevant nevertheless. Some important issues have been raised. The noble Lord, Lord Deben, implicitly shared my noble friend Lady Drake’s view of the squeezing of time to look at these things properly. My noble friend Lord Adonis went to the root of the problem and the challenges that we face on no deal.
My noble friend Lord Adonis talked about secrecy in the departments. I have to say that I have been disappointed in one respect because I have always been a supporter of the DWP. There is a note attached to each information note saying, “X at the Department for Work and Pensions, telephone number Y and email Z, can be contacted with any queries regarding the instrument”. When I tried to do so, I was told that that was not really for opposition Members to use. Given that these are situations where there is highly technical stuff, I found that disappointing. We had always thought that we would have a basis of sharing technical issues, even if our conclusions may be different.
The noble Lord, Lord Kirkwood, started off by giving us robust reassurances about the degree of scrutiny and sufficient time. What came from that bit of the debates, which involved my noble friend Lord Adonis and the noble Lords, Lord Kirkwood and Lord Deben, was that we need to reflect on this issue. What started off as a narrow technical piece of legislation has raised a lot of questions about scrutiny—not only the scrutiny of this legislation but other things that we do as a result of Brexit.
I am again indebted to my noble friend Lady Drake, who has done the heavy lifting for us on this SI. She has focused particularly on the challenge caused by the absence of the Northern Ireland Assembly, and raised an important point about a weaker regulatory system for cross-border activities and the broader question of what the pensions context should look like.
I thank the Minister for her explanation of these regulations. They have a fairly straightforward intent, so we are told, despite the seemingly technical nature of the proposed adjustments. As we heard, the regulations are part of the planning that would enable UK law to operate effectively if the UK leaves the EU without a withdrawal agreement in place. One example would be the obvious problems where the UK is currently particularised in relation to the EEA, either as “with the UK” or as “other than in the UK”.
The Explanatory Memorandum asserts that we do not need to make policy changes to ensure UK law in the field of occupational and personal pensions continues to operate effectively in the event of withdrawal without an agreement. I am not sure that is right; at what point is a change a policy change, and at what point is it not? For example, Regulation 2(3), among others, in reference to insurance policies or annuity contracts of security, would,
“omit ‘or any other EEA state’”.
Is that a minor tactical detail or a change of policy? The Pensions Act 2008 excludes Article 6 of the IORP directive, with its main administration in the EEA. Is that not a change of policy? The regulations enter into force on exit day, so could the Minister confirm what date this is? It is not specified in the regulation so far as I can see. If the UK should exit the EU on an agreed basis, how does this impact the entry-into-force date? Does it simply fade away? How much of this SI still stands or is necessary should—however unlikely—the Prime Minister’s deal be supported by the Commons? Indeed, can the Minister remind us of what is in the Prime Minister’s deal on the issue of pensions? The amendment to the Pension Schemes Act 1993 is focused on the security for GMP not to be allowed to be an instrument of an EEA state. May I ask the Minister why that is the case?
Further provisions are a bit convoluted; perhaps the Minister can comment on some, starting with Part 2 and Regulation 2, which amends the Pension Schemes Act 1993; what is this detail about? I tried to get clarification from the department. Can the Minister please give us a detailed explanation of this and the amendment to the Pensions Act 2004?
These are important provisions. I share with many the view that we may never have to deal with them in practice, but they should be properly introduced and scrutinised in the interim.
Baroness Buscombe
I thank all noble Lords who have taken part in the debate, and I will do my best to respond. My notes are somewhat spread, so if I may I will begin by responding to the noble Lord, Lord McKenzie. On his not being able to contact the department, I took 27 pieces of legislation through this House on behalf of Her Majesty’s Opposition, and not once was I given access to civil servants or to support from any department. I recall the wonderful Lord McIntosh of Haringey, who sat in my place and whom I miss still, because he was utterly brilliant when it came to the most technical and difficult regulations. I would telephone him and he would laugh at the suggestion that I should have access to any of his civil servants. However, on one occasion he did relent, because he agreed that the support I had from industry was so exceptional that he would share his expertise with me if I shared mine with him.
My department responded to a question from the noble Lord only this morning, confirming that these regulations are focused on what will happen in the event of no deal, but in the event that there is a deal, it is very important to stress that they will no longer be required. We would then expect to defer, revoke or amend the instruments in time for the end of the implementation period to ensure that they properly reflect whatever deal scenario might be in existence. It is important to make it clear that these regulations are about legal certainty on exit day; they are not about trying with a crystal ball to know what would happen in any particular deal situation. They are about ensuring legal certainty in the event of a no deal, which would mean that we walked away from the EU on 29 March.
Lord Warner
May I just correct the Minister, as someone who was highly involved in the Human Rights Act? There was extensive consultation before the 1997 election with a whole raft of interests concerned with that Act. It therefore came as no surprise, and many external lawyers were highly involved in drafting the policy and advising on the legislation. It is simply not true that the Act was suddenly sprung on Parliament without any consultation. It was also in the Labour Party manifesto that it would be introduced after the 1997 election.
Baroness Buscombe
The noble Lord has clarified the situation, in that the Act came in some time after his then party came into power and the consultation took place prior to the general election that brought it into power.
Baroness Buscombe
I want to progress, my Lords, and do not have to accept any more interventions.
Lord Harris of Haringey
I am sorry, but the Minister is misleading the House on a specific point which she chose to introduce on the passage of the Human Rights Act and the consultation on it. I was a member of a body set up called the Human Rights Act taskforce, which was designed to consult and involve stakeholders in how the Act should be implemented. There was consultation because I was part of it. I was not a Member of this House at that stage; it was something that the then Government did.
Baroness Buscombe
My Lords, let me turn to the consultation that took place in relation to these statutory instruments. Other noble Lords have insinuated that there was no consultation. I made it clear at the outset that there was a form of consultation. As the noble Lord, Lord Kirkwood, made clear, there is in a sense consultation and consultation. We are talking here about consultation with those very closely connected with the industry. The Department for Work and Pensions engaged with a pension provider, an advisory firm and a trade body for occupational pension schemes, that trade body obviously representing a fair number of those in occupational pension schemes. Any suggestion by noble Lords that there has been no consultation is simply not true. I reassure the most reverend Primate the Archbishop of York that consultation took place with those involved in the bespoke part of the industry concerning cross-border activity within the EU. These SIs do not have any policy intent. They do not change policy; they are minor and technical amendments. It is not our role to look at the implications of a deal or no deal; it is more about ensuring that there is preparedness for a no deal and legal certainty when we leave the EU on 29 March.
I am grateful to the noble Lord, Lord Kirkwood, for his support and to hear that the Secondary Legislation Scrutiny Committee decided that the regulations were clear. Of course, it was necessary to re-lay them when an incorrect reference to UK regulated markets was found, but we were very quick to do that. We withdrew the draft regulations and re-laid them on 3 December. It is about making sure that we can be agile and flexible and therefore respond with certainty when we need to. Any question of there not having been consultation with those in the industry whom the regulations impact is simply not the case.
As always, the noble Baroness, Lady Drake, asked the more challenging questions. I will do my best to reply, but, if I fail with regard to any aspect of these very technical regulations, I will write to her. These statutory instruments fix elements of the UK’s occupational and personal pensions legislation that will not work effectively after the UK departs the EU, including where distinctions have been made between EU or EEA member states and overseas entities, such as EEA central banks, that will no longer apply, where the UK is referred to as an EU or EEA member state, or where it is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.
If someone lives in the European Economic Area and has a personal pension or annuity with a UK-based firm, the firm should have made plans to ensure that the person can still receive payments from the personal pension or annuity even if the UK leaves the EU without a deal. If the firm needs to make any changes to the personal pension or annuity, or to the way in which it provides it, it should contact the person. If the person has any concerns about whether they might be affected, they should contact their firm. The UK state pension will still be payable cross border into the EEA.
The European Union (Withdrawal) Act repeals the European Communities Act 1972 and converts into UK domestic law the existing body of directly applicable EU law and UK laws relating to EU membership. So, this body is referred to as retained EU law. The Act also gives Ministers a power,
“to prevent, remedy or mitigate … any failure of retained EU law to operate effectively, or … any other deficiency in retained EU law, arising from the withdrawal of the United Kingdom from the EU”,
through statutory instruments such as these regulations.
We believe it is in the interests of both the EU and the UK for the UK to have a smooth and orderly exit from the EU, as set out in the withdrawal agreement. But it is our duty to continue to prepare for a range of potential outcomes, including no deal.
To answer the question from the noble Lord, Lord Warner, when companies invest in pension schemes it is up to those schemes and pension providers to think about their investment opportunities in future. It is not something that we can reflect through these statutory instruments.
I want to be sure that I have covered as much as I can to the best of my ability. Noble Lords have been concerned that we have not given these statutory instruments enough attention. I can only repeat that that simply is not the case.
Lord Adonis
The Minister is doing a great job of responding to the points raised. I raised the point about paragraph 2.5 of the Explanatory Memorandum, which says,
“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.
Can she explain what the impact of that would be and what the regulator has said about the effect it would have on the pensions industry?
Baroness Buscombe
The noble Lord is talking about cross-border pensions that do not have to come to our Pensions Regulator once we leave the European Union. The whole point is that we have to make sure that our Pensions Regulator no longer retains a power to influence cross-border activity where it ceases after we leave the European Union.
Lord Adonis
It says “UK occupational pensions schemes”. It does not say other schemes.
Baroness Buscombe
These are pension schemes operating in member states. If they are operating in member states they do not then have to make sure they abide by UK law and the UK Pensions Regulator. If they happen to be operating in the EU, they do not have to abide by UK law if we leave the EU. Does that make sense? I hope it does.
Baroness Drake
I did understand what the Minister said, and I completely accept that she always seeks to answer my questions. One of my concerns is that it is impossible. I found it difficult from the SI and the memorandum to understand, in the traffic both ways, how individuals’ assets are protected if the UK is no longer in the IORP regime. I could not trace that. Given the volume of cross-border activity on pensions between Ireland and the UK, what is the realistic prospect, even in a no deal, of getting a memorandum of understanding to address that and to try to have a common regime?
Baroness Buscombe
I will be turning to the Northern Ireland regulations shortly. If we leave with no deal it is not possible at that point for our Pensions Regulator to continue to protect assets beyond what will become our borders. That is where there is a great hope that there will be a deal, so that during the implementation period we can make sure that we introduce legislation that will protect our pension assets—the very thing that concerns the noble Baroness. We hope we will be able to bring it before the House prior to the end of the implementation period. Then we could revoke the statutory instruments before your Lordships’ House today.
Baroness Altmann (Con)
Might it be helpful if my noble friend went back to the department and asked it to reassure itself that pension assets can be protected in the event of no deal? It strikes me that there may be an issue that has not yet come to light, and that some cross-border issues might need to be addressed a little more carefully.
Baroness Buscombe
I take on board my noble friend’s question. We have to be realistic about this. I am sure noble Lords will accept that we cannot impose any legal rights, certainties and protections prior to the end of March, or prior to knowing whether we will have a deal. In the event of a no deal, it would be impossible for us to be certain on that day that we can protect things. I put my hand on my heart and say that in the event of no deal, I am sure that those in my department who are focused on this subject—including my honourable friend in another place, the Minister for Pensions—will do all they can post exit to ensure that we can negotiate and work closely with those with whom we currently have a cross-border relationship, and to reassure them that we can continue in the same vein.
However, I can make no guarantees at the Dispatch Box. It would be wrong for me to seek to try until we have certainty. I repeat: these regulations give legal certainty at the moment when we leave the EU with no deal. I hope that all noble Lords will accept that I have done my best to reassure them that these regulations are in good shape. Again, I thank most particularly the noble Lord, Lord Kirkwood—who sits on the SI Committee and has access to a whole host of regulations—for his support, saying that these regulations are effective. I hope noble Lords will show their support for them.