Arrangement of Business
The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)
My Lords, if there is a Division while the Committee is sitting, we will adjourn for 10 minutes.
Pension Schemes Bill
(1 day, 4 hours ago)
Grand CommitteeRead Hansard Text Read Debate Ministerial Extracts
“Purpose of the Act(1) The purpose of this Act is to—(a) deliver higher and more sustainable returns for pension savers;(b) address fragmentation across the pensions sector;(c) improve transparency and comparability in value for money;(d) enable clearer and fairer communication with members;(e) support greater consistency across pension provision;(f) support innovative and flexible approaches to saving;(g) provide employers with greater clarity to support their employees’ pension provision;(h) enable responsible and innovative use of pension scheme surplus;(i) improve understanding of pension liabilities and costs for local authorities;(j) strengthen actuarial transparency and routes to challenge contribution rates in the LGPS.(2) The Secretary of State, and any other persons taking actions under the provisions of this Act, must have regard to the purpose specified in subsection (1).”Member’s explanatory statement
This amendment sets out the overarching purposes of the Act, including improving returns for pension savers, addressing fragmentation, strengthening value for money and transparency, supporting innovation and flexibility in pension provision, and improving outcomes for members, employers, and local authorities.
Viscount Younger of Leckie (Con)
My Lords, it is a privilege to open today’s debate and to begin what I am sure will be five engaging and constructive days of scrutiny on this Bill in Committee. The proposed new purpose clause, in my name and those of my noble friend Lady Stedman-Scott and the noble Baroness, Lady Bowles, is not an attempt to rehearse the arguments advanced at Second Reading. Rather, it is intended to address a specific issue arising from the way in which the Bill has been framed and from the legislative approach that the Government have chosen to adopt.
The debate I seek to initiate is a principled one about legislative clarity and certainty, particularly in the context of what is, by any reasonable definition, a framework Bill. We believe that the Bill, as currently drafted, is light on detail and relies heavily on delegated powers. This has inevitably left your Lordships debating intentions, aspirations and hypothetical outcomes, rather than the Government’s settled policy. In those circumstances, is it not all the more important that Parliament is clear on the face of the legislation about what it actually intends to achieve?
The purpose clause amendment therefore intends to establish an overarching statement of intent, setting out the objectives against which the Bill and the regulations made under it should be understood and scrutinised. Where detailed provision is deferred to secondary legislation, such a statement provides Parliament, regulators and stakeholders with a clear point of reference. Without it, how are we to assess whether the powers being taken are exercised consistently with the will of Parliament, rather than merely within the scope of ministerial discretion?
More broadly, the amendment invites the House to reflect on whether Parliament is being asked to confer wide-ranging powers without sufficient clarity as to how they are intended to be used. At what point does flexibility begin to shade into uncertainty? How can proper legislative certainty be maintained when substantive policy choices are deferred, potentially amended repeatedly and then removed from direct parliamentary scrutiny? If there were an alternative procedural route that allowed the House to engage meaningfully with these questions, we would of course be willing to consider it. However, in the absence of such a mechanism, is it not reasonable to seek to debate these matters through a proposed new purpose clause, which would allow the House to test the Government’s intent within the normal amending stages of the Bill?
This concern is particularly acute in relation to value for money. Much of what this legislation seeks to achieve will ultimately stand or fall on the effectiveness of the value-for-money framework. Yet the provisions before us are thin and largely skeletal, despite the central role that the framework is expected to play. How can Parliament properly assess the merits of this approach when so much turns on detail that has yet to be set out?
I say at the outset that we are supportive of the value-for-money framework in principle, but its success will depend almost entirely on the detail of its design, the consistency of its application across schemes and the robustness of its enforcement. Without greater clarity on these points, how are trustees, regulators and members to understand the standards against which they will be judged?
That leads me to a wider question about the long-term purpose of the Bill. How do the Government envisage the pensions landscape to look like in 10, 15 or even 20 years’ time? Is the objective consolidation, greater scale, improved outcomes for savers or some combination of all three? How will we know whether this legislation has succeeded in delivering that vision?
We wish to engage not only with the immediate legislative mechanisms but with the broader strategic direction that underpins them. We fully accept that legislation must allow Ministers a degree of flexibility to respond to changing circumstances, but flexibility without a clear, articulated destination risks leaving Parliament and the industry uncertain about the direction of travel. Is it unreasonable to ask for the House to be told not only what powers are being taken but to what end they are intended to be used? It is in that spirit that this purpose clause has been tabled and I very much look forward to the debate that I hope it will provoke.
I wish to return briefly to the question of mandation, which, although I have not directly mentioned it, is an underlying issue in the Bill. It illustrates precisely why questions of purpose, process and limitation matter so greatly in the context of a framework Bill of this kind. We will of course turn to this in greater detail later in Committee but, as we are discussing the purpose of the Bill in this clause, it would be remiss of me not to mention it here at the outset as one of the most contentious provisions in the Bill—as we heard, broadly around the House, at Second Reading.
As drafted, the Bill establishes a broad enabling framework but leaves a great deal of substantive policy to be determined later through regulation. That approach inevitably creates uncertainty. It also places a heightened responsibility on Parliament to ensure that any powers taken are clearly bounded, carefully justified and firmly anchored to a stated purpose. In that context, we do not consider there to be a compelling case that asset allocation mandates are necessary to increase productive investment in the United Kingdom. Indeed, mandation risks cutting across the fundamental principle that investment decisions should be taken in the best interests of savers by trustees and providers who are properly accountable for the outcomes. I am sure that we will hear more about these arguments in Committee.
When the Bill itself provides only a skeletal framework, the absence of clarity around how such powers might be used becomes all the more concerning. If any future Government were ever minded to pursue mandation, it is essential that any such power be tightly limited, that savers’ outcomes are clearly protected and that asset allocation decisions are insulated as far as possible from political cycles and short-term pressures. Investment decisions should remain with those charged with fiduciary responsibility and not be directed by Ministers, however well intentioned. Those safeguards cannot simply be assumed; in a framework Bill, they must be explicit.
Moreover, the case for mandation is further weakened by the existence of credible and constructive alternative routes to unlocking greater levels of UK investment. Industry participants, including Phoenix Group, have identified a number of areas where policy reform could make a meaningful difference without recourse to compulsion. Government institutions such as the National Wealth Fund and Great British Energy could play a significant role by aligning guarantee products with insurers’ matching adjustment requirements, by engaging institutional investors earlier so that projects are structured to meet long-term investment needs and by continuing collaboration with the ABI Investment Delivery Forum to deliver investable infrastructure pipelines.
Similarly, the Mansion House Accord, building on the 2023 compact, has already driven tangible industry action. In our view, the priority now should be delivery, rather than the creation of new and potentially far-reaching powers. That includes implementing a robust value-for-money framework with standardised metrics; introducing minimum default fund size requirements, whether £25 billion or £10 billion, with a credible growth plan; and aligning the defined contribution charge cap with the Pensions Regulator’s approach by excluding performance fees where appropriate.
More broadly still, stronger capital markets are essential if the United Kingdom is to attract both domestic and international investment. This includes supporting the work of the Capital Markets Industry Taskforce, exploring measures to foster a stronger home bias in UK equities, considering whether stamp duty on share transactions is acting as a drag on competitiveness, and examining targeted tax incentives for pension fund investment in UK infrastructure. Ultimately, rather than mandating investment, policy should focus on understanding why UK investment has lagged. That requires serious engagement with questions of market structure, regulatory design, the quality of investment pipelines and the underlying risk-return characteristics of UK assets. Mandation risks treating the symptoms rather than addressing the causes.
I look forward to the Minister’s response. I make no apology for laying out certain aspects that I believe fit with the purpose of the Bill. However, as I said at the outset, I hope that we have a productive and interesting Committee. I beg to move.
Lord Davies of Brixton (Lab)
It is a pleasure to be here. Although for a while I was feeling a bit lonely, I very much welcome my noble friends; what we do not make up in numbers, I am sure my friends will more than make up for in the quality of their contributions. I declare an interest as a fellow of the Institute and Faculty of Actuaries.
It is worth at this stage spelling out that I have spent a lifetime advising people about pensions. I was the TUC’s pensions officer for a number of years. I was also a partner in a leading firm of consulting actuaries, and I worked for a number of years with a scheme actuaries certificate undertaking scheme valuations. In terms of sheer experience, I can fairly say that this is unique to noble Members of this House. I will not go on at length on future occasions, except when it is directly relevant.
The noble Viscount, Lord Younger of Leckie, declared his intention to avoid repeating a Second Reading speech—it is arguable as to whether he achieved that intention—but, in a sense, I welcome the opportunity to look at the Bill as a whole. While I support the Bill and I support my noble friends—there are some really good measures in here—the text underlying the opposition amendment suggests that we have a pensions system in chronically bad condition.
It suggests that returns are inadequate, that the system is fragmented and that it lacks transparency, with people unable to assess what they are getting. It provides inadequate communications. It is inconsistent across the different forms of provision. It prevents, or makes hard, innovative and flexible solutions to the problems that are faced. It needs to provide greater clarity for employers. It currently does not achieve responsible and innovative use of pension surpluses. To me, this suggests a system at risk of chronic failure.
To be honest, I accept those criticisms because underlying this system is the personal pension revolution introduced by the Conservative Government 40 years ago, which has proved to be unfit for purpose. We are having to make all these changes because of the failure of the system that the Conservative Government introduced. We need these changes because personal pensions did not work out. Collective provision is the answer to decent pension provision, and the Bill supports and develops collective provision and moves across this idea that everyone can have their own pot which they look after for themselves. I oppose the amendment and look forward to further discussions on the individual issues as they arise.
Lord Fuller (Con)
My Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Brixton. He reminds me of that old joke about the dinner of actuaries where they are all complaining that everyone is living longer and it is getting worse.
I agree with this purpose clause, although I am surprised that it does not establish the balance between risk and reward, where pensions help people build secure futures by taking appropriate qualified risks. The pensions industry seems obsessed with risk minimisation, but without any form of risk there can be no reward; even cash is at risk from inflation.
The success of this Bill and why we need a purpose clause is to be grounded in how it makes it easier for people to take personal responsibility, to save for their futures, themselves and their families and to make their savings secure while permitting appropriate and manageable returns and providing risk capital to grow the economy. Inspiring people to save for their future is important, and pensions are long-term savings plans. Long-term returns dynamised through dividends, and boosted by employer contributions in many cases, are the best way to set yourselves up for later life.
Viscount Thurso (LD)
My Lords, I am not entirely certain that I am wholly in favour of the concept of a clause at the beginning of a Bill that sets out its purpose in the way that the noble Viscount has set down, but I appreciate the opportunity to speak to one of the points that it makes.
First, I am not sure whether it is a declarable interest but I will declare it anyway: I am a trustee of the Parliamentary Contributory Pension Fund, for which I do not get remunerated—none of us does. As far as I am aware, nothing in the Bill affects that scheme, and therefore I am declaring it just in case. Secondly, I apologise for not having been here at Second Reading. I had to attend something extraordinarily rare: a hospital appointment in Inverness. I am afraid that not even I could get from Inverness to here in the required time for the Second Reading. I apologise for that, but I have read the Second Reading debate and was very taken by what was said.
The specific point that I want to come to is the point that the noble Viscount makes in proposed new subsection (1)(h) and his reference to
“responsible and innovative use of pension scheme surplus”.
What does he mean by an innovative use of the surplus? When the Minister comes to respond, will she say what the Government’s purpose was behind what they are doing on surpluses? I know we will come to that in much greater detail later on.
It seems to me that two things are behind this. One is doing something with a surplus, which begs the question: how much of a surplus should actually be taken? Also, how is that surplus calculated, bearing in mind that a range of actuarial factors—including the strength of the employer covenant, the level of risk of the investment, the actuarial factors regarding life and death, and so on—go into making up a surplus? All those factors can, at each valuation, move the surplus considerably. Therefore, how much is considered surplus surplus, as it were, as opposed to prudent management by the trustees?
The second thing is, I think, the underlying thought that the money given back to the employer will be used for investment. I see no evidence to suspect that will be the case. I have a horrible suspicion that, although we might have a desire to have more money for companies to invest, with the best will in the world, it is more likely that they will take the money, run it through the P&L and use it to pay dividends.
Those are the two issues I am looking at: the quantum of surplus and, in general terms, the principle behind that; and, secondly, the extent to which the Government expect it to be used for investment. If they do expect it to be used for investment, how do they hope that will happen?
Lord Kirkhope of Harrogate (Con)
My Lords, I declare my interests as a current member and director of a pension trust. I want to take us back to the amendment for a moment. I shall refer to the reference to surpluses made by the noble Viscount, Lord Thurso, because it is an indicator of how this Bill is going to move; I suspect we shall get a surplus of comments about surpluses.
I go back to the amendment. We are starting to hear remarks suggesting that this amendment is critical. I do not criticise it at all because this is an enormously complex and comprehensive piece of legislation. Bringing our minds closely to the purpose of what we are going to debate, if ever a piece of legislation required it, this amendment is an essential ingredient. I fully support all parts of this amendment, which seem to encapsulate all the different areas to which we shall give more detailed consideration as we proceed.
However, I want to refer briefly to something already referred to: the matter of pension scheme surpluses under subsection (1)(h) of the proposed new clause to be inserted by Amendment 1. I referred to this at Second Reading; I will not repeat word for word what I said then—that would not be appropriate—but I want to probe my noble friend and, in particular, the Minister on this matter a little.
We all know that, historically, when we had low interest rates in this country, deficits often used to be repaired with any surpluses that might occur in schemes. As a result, employers that did not have DB schemes were obviously at a disadvantage. I am interested in how we might deploy surpluses in future. For instance, will they be deployable for capital expenditure? That seems quite desirable, particularly looking at the economy at present.
My second point concerns crossovers, referred to here, enhancing the contributions that already exist in DC schemes. How on earth can crossovers be legitimately and properly handled? That seems rather difficult to me.
Finally, I turn to surplus sharing. There is a case going on at the moment; I referred to it in my speech at Second Reading so I will not go back to it now. The encouragement of surplus sharing between employers and between members is terribly important. How can that be done fairly and equally? Will we be able to rely—as we should, I believe—on the powers of trustees always to do everything in the best interests of members? Pressures from employers, for instance, must be curbed when it comes to those decisions that might be taken.
It is a difficult area. I know that we will look at it in more detail, but it is worth mentioning at this starting point because this list is perhaps another example of how complicated things are and how we need to get a grip. Whoever has been responsible in the past for legislation in this field, this is an ideal opportunity, which I greatly support, for us to get this right. I therefore fully support Amendment 1 and hope that, as we move forward, we will use those objects as the basis for our discussions.
Lord Wigley (PC)
My Lords, I apologise that I, too, missed Second Reading, for reasons outside my control. When you are in a party with two or three Members, it is very difficult to spread yourself in all directions. I have an interest in this area going back to when I was a trustee of the National Assembly’s pension scheme some years ago and, before that, I had involvement as financial controller of the Hoover Company and with Mars Ltd, which is one of the foremost companies in these islands.
I want to flag up one point as we look at the generalities in this comprehensive umbrella amendment—the position of employees such as those of Allied Steel and Wire in Cardiff in 2002, who found themselves on their backs without adequate safeguards for the pensions that they had. Over the almost quarter of a century since, those still surviving did not get justice out of the system. Whatever balance we have to strike in terms of risk—which is inevitably part of the equation—benefits, security and the longer term against the shorter term, we must also have some safety nets for those who fall through, through no fault of their own, as did the employees of Allied Steel and Wire.
I commend the Government for the steps they have taken for the coal miners, who have been in a difficult position, but if the coal miners were justified so are the workers at Allied Steel and Wire. I draw to the Government’s attention that the First Minister of Wales, the noble Baroness, Lady Morgan, spoke about this last month and called on them to take action to recompense those who have lost out so badly.
Baroness Bowles of Berkhamsted (LD)
I no longer have any financial interests to declare, having retired from the board of the London Stock Exchange at the end of 2025 after a long tenure, although that indicates that I have some history in that regard. I also have a history of policy engagement with local authority pension funds, the Local Authority Pension Fund Forum and IPO test marketing with various local authority pension funds. That is for background, so that people can understand some of where I have obtained my information.
I added my name to this amendment because I thought it was a good idea to have a list of purposes. We have before us a very long list of regulatory empowerments and, in some places, to do with value for money, I put a little list on the front of them. Somewhere or other, whether in this proposed list at the front, listed throughout or as a mixture of both, it would help us with structure and understanding. We ought to make our Acts of Parliament as readable as possible for the non-specialist. It is also quite important in that regard. It may not be a perfect list; you could ask for “more” instead of “greater” or take the “-er” off the end of words and make it look like it is not criticising. I do not want to go into that, but I did not take it as a criticism. I thought it was a list of what we are trying to do to make things better and, on that basis, I support it.
I would be very pleased if we could all work together to build a list that we were all happy with and that reflected a true convergence of minds. During the passage of the previous Pension Schemes Act, there was an awful lot of working together to try to find the right wording. The Minister was on this side then, and we went through it together with many of the other people in this Room. We should be getting something good up front that tells everybody what it is about, not using it as a way to tie the Government’s hands. I do not look at it like that; I look at it as something that is explanatory. But if it helps in the interpretation, so be it.
If we cannot produce a list like that, I have reservations about whether one should go forward and jump straight into a list. If you do not want it here, you have to put one in every clause, so maybe it is better to try to do a shorter one here. Those are the reasons why I support the amendment. I support the principle of it, and I am more than happy to work at trying to make it something that everybody could sign up to.
Baroness Altmann (Non-Afl)
My Lords, I will be brief. I declare my interests as a board adviser to a pension scheme and a non-executive director of a pension administration and consultancy firm.
I support this amendment because, with such wide Henry VIII powers, it is really important to have some framework to hang our discussions and thoughts on or for future people looking at the Bill to understand its intentions. I was tempted to try to amend this amendment to change the word “savers”, which pervades the discussion about the Bill and lots of the background reading about it. Anyone who thinks that someone who is invested for the long term in a pension is a saver has misunderstood what saving is about. It should be “investors”, “members” or “customers” rather than “savers”. That is an important distinction when talking about providing for the long-term future of retirees in this country via a savings or investment mechanism which uses money that is put in to build up funds for the long term.
I would also have added to this list something that I think is really important. I hope, perhaps against hope, that we might be able to improve the excellent measures in the Bill by improving the compensation and payments for pre-1997 accrual by the Pension Protection Fund and the Financial Assistance Scheme, in particular for members who have been denied inflation protection. We ought—within this Bill, I hope—be able to give them extra for the future.
Viscount Trenchard (Con)
My Lords, I support this amendment, which was so well introduced by my noble friend Lord Younger and so well spoken to by the noble Baroness, Lady Bowles of Berkhamsted. The Bill is very complicated. It is not absolutely clear to me what it means. It is also, as my noble friend Lord Younger explained, a skeletal Bill without a clear purpose to improve the outcomes for savers. In particular, looking at the value-for-money part of the Bill, it is not clear how this is going to work, what the metrics will be and how they will be assessed.
I think it is right to table this amendment in order to understand the purpose of the Bill. I am not clear that the Bill is primarily intended to improve the outcomes for pensioners or to find ways to fund government initiatives to make certain investments with pension savings that the trustees and managers might not have decided to make, which may require them to compromise on what should be their complete and clear duty to exercise their fiduciary responsibilities.
Can the Minister tell the Committee how the Bill is certain to improve outcomes for pensioners beyond what they would have been without government interference in the management of these funds? The Bill interferes with the trustees’ fiduciary duties not only with the mandation powers to direct investments, which apply only to very large DC schemes—the kind to which less well-off pensioners have contributed—but with the powers to require the 93 local government pension schemes to pool their funds together. How is this going to work if, at the same time, the Government are forcing many local authorities to merge or demerge under local government reorganisation?
I look forward to hearing the Minister’s response and approach to this amendment.
Lord Palmer of Childs Hill (LD)
My Lords, I thank everyone for their contributions. I do not intend to go on at length.
It is a novel view, is it not, that a Bill should have a purpose? This ought to be applied to many other Bills to show what their purposes are. This Bill has a wide range of powers affecting consolidation, investment, surplus extraction, defaults and retirement outcomes, but nowhere is a clear statement of purpose listed. I do not think that is symbolic; it is very useful. I have a simple question for the Minister: what is lost by clarity? We are looking here for a piece of clarity that does not undermine the Bill in any way but sets out what people are meant to see and expect from the Bill. It would set a pathway for other Bills to set out their purposes. From these Benches, I support this amendment.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I am grateful to the noble Viscount, Lord Younger, for introducing his amendment, and all noble Lords who have spoken. It is a particular delight to hear from so many colleagues so early in Committee.
I should begin by saying two things. First, I am a member of the parliamentary pension scheme, so I thank the noble Viscount, Lord Thurso, for his service and urge him to give the scheme even greater attentiveness in future; I would be very grateful for that. Secondly, I am about to disappoint most Members of the Committee, but I may as well start as I mean to go on. Many of the points made and questions asked will come up in subsequent Committee days—that is what Committee is for—so I hope that noble Lords will forgive me if I do not go into the detail of how surplus operates, how value for money operates or how asset allocation will work; I will come back to all of those. I should probably apologise to the noble Lord, Lord Fuller, because I cannot promise to go back to Star Wars figurines, but I will try to pick up most of the rest of the points at some stage.
The Bill delivers vital reforms to strengthen the UK pensions system, safeguarding the financial future of around 20 million savers while driving long-term economic growth. The Bill focuses on improving value and efficiency for workers’ pension savings, with an average earner potentially gaining up to £29,000 more by retirement. These measures will accelerate the shift towards a pensions landscape with fewer, larger and better-governed schemes that deliver for both members and the wider economy.
To support market consolidation, the Bill introduces superfunds, megafunds and Local Government Pension Scheme pools, creating scale and resilience. The value-for-money framework will ensure that schemes provide the best outcomes for savers, while guided retirement provisions will help members when accessing their savings. Other measures in the Bill will enable pension schemes to operate more effectively by streamlining governance, improving transparency and reducing unnecessary complexity. The reforms delivered through the Bill will create a more efficient, resilient pension landscape; they will also lay the foundation for the Pensions Commission to examine outcomes for pensioners and set out how to develop a fair and sustainable system, ultimately benefiting both individual savers and the UK economy.
To achieve these ambitions, the Bill makes a number of essential changes to the framework of law relating to private pension schemes and the LGPS, rather than pursuing a single overarching objective. To insert a purpose clause could cause legal uncertainty as a court could assume that a provision included in a Bill was intended to have some additional operative effect. The practical effect of the requirement to have regard to the purpose of the Bill, as expressed in this proposed new clause, is unclear.
The purposes of individual provisions are instead made clear through their drafting and the accompanying explanatory material, including the Explanatory Notes and the impact assessment. There is no need for an additional new clause at the start of the Bill setting out the purposes, as this is covered elsewhere more appropriately. This approach is in keeping with established practice; for example, the Financial Services and Markets Act 2023 was twice the size of the Pension Schemes Bill. Like the Bill, it deals with a complex legal landscape and made a number of separate and necessary changes to the law relating to financial services and markets. There is no purpose provision in that Act, just as no overarching purpose clause has been included in the Pension Schemes Bill. We will return to matters related to secondary legislation in the debate on a subsequent group of amendments tabled by the noble Lord, Lord Sharkey.
I will pick up the point made by the noble Viscount, Lord Younger, about this being a framework Bill; he used that as an argument for a purpose clause. I say to the noble Lord, Lord Palmer, that, if he has not seen a purpose clause debate, he has not been in many debates in the Chamber recently, because they have appeared; unfortunately and inadvertently, they mostly resulted in long Second Reading debates at the start of many other pieces of legislation. I stress that that was neither the purpose nor the result here, but many of those debates have happened.
We do not consider this to be a framework Bill. The noble Viscount mentioned the idea of setting legislation now and setting policy later. Manifestly, that is not what is happening. The Bill clearly sets out the policy decisions and the parameters within which delegated powers must operate. It brings together a broad package of reforms in pensions into a single piece of legislation. Many of those reforms build on long-established statutory regimes, where Parliament has historically set the policy in primary legislation and provided for detailed measures that will apply to schemes to be set out in regulations. The policy direction is clearly set out here.
As we all know, the successful implementation of pensions depends heavily on trustees, schemes, providers and regulators, which makes engagement and operational detail essential rather than optional. There has been extensive consultation and there will be further extensive consultation. I do not think that this matter will be solved any further by adding a purpose clause.
Finally, the Long Title of the Financial Services and Markets Act 2023 was also described in neutral terms—
“to make provision about the regulation of financial services and markets”—
rather than providing a practically unworkable narrative explanation of the purpose of that legislation. The same applies here.
While I welcome the comments and look forward to returning to many of them in our debates, I hope that I have made the case not only for the Bill as a whole but as to why it is unnecessary and unhelpful to add a purpose clause. I ask the noble Viscount to withdraw his amendment.
Viscount Younger of Leckie (Con)
My Lords, I thank all noble Lords who have contributed to this relatively short debate. Many of the points raised strongly reinforce the view that my noble friend and I are seeking to advance: that this is indeed a framework Bill, which in its current form would benefit from greater explanation, greater articulation of purpose and more fully developed safeguards. I believe that the debate has drawn out views on some of those listed purposes and that it has been helpful at the outset of Committee.
As my noble friend Lord Trenchard said, it is complicated—that adds to my argument. I was very grateful to have the support of the noble Baroness, Lady Bowles. I am grateful to the Minister for her response and for beginning to provide some additional context around the Government’s intentions. It has been helpful up to a point, but I am not quite sure why she thinks a purpose clause would provide some uncertainty.
I remain of the view that a broader and more holistic articulation of where the Government would like the pensions system to be in five, 10 and 15 years’ time is still lacking. In fairness, that is likely to extend beyond what the Minister can reasonably be expected to provide today; I understand that. I accept her valid point that Committee is for delving into the detail of these matters, which we will be doing.
I will pick up just a few points from the debate. First, my noble friend Lord Fuller is absolutely right that we need a purpose clause to inspire people, particularly young people, to save for the future. That is a very valid point; it levels us, or brings us down to base, in terms of what we are trying to do here with this complicated Bill.
Member’s explanatory statement
This amendment seeks to probe why the Secretary of State requires the power in subsection (2) to direct scheme managers to participate in, or withdraw from, particular asset pool companies, given the need to preserve their independence and fiduciary duty to act in members’ best interests.
Viscount Younger of Leckie (Con)
My Lords, the amendments in this group begin a series of groups related to the Local Government Pension Scheme. We start with amendments that seek to improve what is already in the Bill. However, as later groups will demonstrate, the Bill remains light on the LGPS.
I am sure that the Minister and other noble Lords will have noticed that we have de-grouped a number of our amendments ahead of today, where they are most relevant to this group. I shall briefly explain our reasoning at the outset. We have no intention of frustrating the passage of the Bill. Rather, we have de-grouped those amendments where we felt it would facilitate a clearer and more focused discussion, enabling noble Lords to put more targeted questions to the Minister without requiring her, or indeed other noble Lords in Committee, to traverse an undue amount of technical detail in a single debate. I hope that our intentions on this point have been made clear.
I do not accept the characterisation that this is simply a private pensions Bill—the Local Government Pension Scheme is clearly included within its scope—nor do I accept the argument that addressing the problems of the LGPS is either too complicated or not a priority. If we are legislating on pensions, we must be prepared to deal properly with the LGPS. I will refrain at this stage from going into the specifics, but later we will bring forward six additional proposed new clauses about the LGPS aimed at making the scheme operate in a more coherent, transparent and practical way. We very much hope that the Minister will engage seriously with these proposals. They go to the root causes of the problems facing the LGPS: how contribution rates are set; how these rates can be challenged; why transparency matters; how opacity undermines confidence in the system; why valuations and methodologies are so important; and, crucially, why many employers are currently getting a bad deal.
However, let us begin with what is already before us in the Bill and why it must be properly probed. These amendments give rise to specific and important questions that we wish to put to the Minister. They concern not only the intent of the provisions but how they will operate in practice, how they will interact with existing LGPS governance and funding arrangements, and whether they genuinely address the problems that they are purported to solve. Clarity on these points is essential if we are to ensure that the Bill strengthens, rather than inadvertently weakens, confidence in the Local Government Pension Scheme.
The first amendment in this group, Amendment 2, would remove subsections (2) to (8) of Clause 1 in order to probe the breadth and necessity of the powers being taken by the Secretary of State. As drafted, Clause 1 goes far beyond enabling regulation. It gives the Secretary of State the power to direct individual scheme managers to participate in or withdraw from specific asset pool companies and to issue binding directions not only to those scheme managers but to the asset pool companies themselves. Trustees have clear and well-established fiduciary duties to act in the best interests of their members and beneficiaries. Decisions about investment structure, risk, performance and value for money are central to those duties. The question this amendment seeks to pose is therefore simple: why does the Secretary of State require the power to override those fiduciary judgments by direction?
The Government have already made clear their policy objective of encouraging greater pooling. What is not yet clear is why compulsion, backed by direction-making powers of this breadth, is considered necessary. I am also concerned about the precedent this sets. Once Ministers have the power to dictate where pension assets must be pooled, it is not difficult to imagine future pressure, real or perceived, for an overinvestment strategy, asset allocation or wider policy objectives, even where these may conflict with members’ best interests.
The amendment therefore invites the Minister to explain, first, what safeguards will exist to ensure that any direction does not conflict with the fiduciary duty of scheme managers to their members. Secondly, over what timeframe will a scheme manager be expected to comply with a direction to enter or leave an asset pool? How will this align with long-term investment strategies? Thirdly, have the Government consulted the Border To Coast Pensions Partnership and other LGPS pools about the potential impact of this power? Fourthly, does the Minister recognise that forced entry or exit from asset pools could disrupt investment strategy, reduce stability and deter private sector partnerships? Have the Government considered this risk?
I am afraid there are a lot of questions, but they are worth putting. How do the Government propose to deal with the risks of cross-subsidisation of employers with very different funding positions that are merged into the same asset pool by direction of the Secretary of State? What safeguards will be put in place to ensure that deficit management remains fair and proportionate across employers after such a merger? Will administering authorities be given the ability to ring-fence liabilities or negotiate separate funding arrangements if they are compelled to merge? Have the Government undertaken any modelling of the financial consequences of merging employers with very different funding positions? If so, will this analysis be published? Can the Minister set out what these prescribed circumstances might be?
I appreciate the letter the Minister sent to noble Lords last week, in which she set out the Government’s recognition of the importance of fiduciary duty. I recognise that and I am sure the whole Committee would therefore welcome some clarity on this question and how these powers can operate while satisfying that duty.
I appreciate that I have asked a lot of questions of the Minister. I do not expect a reply to them all now, but will she write to me to address any points she is unable to speak to today, copying in those who are in Committee today? As she will be aware, these questions are being asked by the industry as well as by noble Lords in Committee, and it is important that we get proper responses to them. This is a probing amendment, intended to elicit reassurance and clarity. Asset pooling can and should be done well, but it must be done in a way that respects trustee independence and preserves confidence in the governance of the Local Government Pension Scheme.
The second amendment in this group, Amendment 4, would remove Clause 2(2)(b), not because we are necessarily opposed to asset pooling but to probe why the Bill places a clear and binding destination in primary legislation while saying almost nothing about the journey required to get there. As drafted, Clause 2 requires the vast majority of Local Government Pension Scheme assets to be held and managed by asset pool companies, with the only acknowledgment of the practical complexities of that transition being a brief reference to
“transitional arrangements permitted by the regulations”.
We are talking about the transfer of very substantial sums across multiple funds with differing asset mixes, contractual arrangements and liquidity profiles. The question that this amendment poses is straightforward: why are transitional arrangements not set out in the Bill, even at a high level? Parliament is being asked to approve a mandatory structure without being shown how legacy assets, illiquid investments, existing mandates and contractual obligations will be unwound or migrated, and over what timescale. That is a significant delegation of policy detail to secondary legislation, particularly given the scale of assets involved.
I would be grateful if the Minister could explain how the Government envisage this transition being managed in practice, what safeguards will be in place to prevent forced or value-destructive transfers and how scheme managers can be confident that they will not be required to move assets in a way that conflicts with their fiduciary duties. The approach set out in our amendment would avoid ambiguity, provide greater clarity for scheme members and reassure taxpayers that pension funds are being managed in a consistent and accountable manner.
Local government pension schemes vary significantly in size, resources and operational approach and without clear statutory provision, there is a risk that practice could diverge across schemes. Given that pension funds involve very substantial sums of public money, it is appropriate that the most fundamental rules governing their management are set out in primary legislation rather than left solely to regulations. Doing so would ensure a higher level of parliamentary scrutiny and durability and help guard against the risk of standards being diluted in future through ministerial discretion.
This is also a probing amendment intended to elicit reassurance. We are clear, and I know the Minister appreciates, that confidence in the system depends on clarity about the transition, not simply an end state written into primary legislation. I hope she will take this opportunity to address that point today.
My Amendment 5 would remove Clause 2(2)(c). To be clear, this is not because we are opposed to local or place-based investment. Rather, it is a probing amendment designed to explore how the Government envisage the relationship between scheme managers and so-called strategic authorities operating in practice. Clause 2 introduces a new statutory duty requiring scheme managers to co-operate with strategic authorities to identify and develop appropriate investment opportunities. However, the Bill does not define what is meant by “appropriate” or set out the process by which this co-operation is to occur, the weight to be given to the priorities of strategic authorities or how disagreements are to be resolved. This vagueness will create a degree of ambiguity which could prove problematic in practice, particularly where different actors may have very different interpretations of what constitutes an appropriate investment.
One obvious question, therefore, is whether such opportunities are intended to be those defined by a fund’s investment strategy statement. As the Minister will know, the investment strategy statement sets out the fund’s objectives, asset allocation, risk management framework, ESG considerations and approach to pooling. If “appropriate” is not clearly anchored to that framework, there is a risk that scheme managers, strategic authorities and Ministers could each apply the term in rather different ways. This matters because scheme managers are trustees, bound by fiduciary duties to act in the best financial interests of scheme members. Strategic authorities, by contrast, have mandates to pursue local growth, regeneration and wider place-based objectives. Those aims may often align, but they will not always do so. Without clarity, there is a risk of politicisation, however unintended, whereby investments that are politically attractive or locally popular, such as particular infrastructure projects, are promoted despite not meeting the risk and return criteria appropriate for pension funds.
This amendment therefore seeks to probe how the Government will ensure that the statutory duty to co-operate does not place scheme managers under implicit pressure to prioritise wider government or regional objectives over their core fiduciary obligations. Is this duty intended to be advisory or directive? Will scheme managers be expected to justify decisions not to invest in opportunities advanced by strategic authorities? What safeguards will exist to ensure that pension investment strategies remain firmly anchored in members’ best financial interests?
Baroness Bowles of Berkhamsted (LD)
My Lords, I share some of the concerns that have been expressed. I added my name to Amendment 6, and I could have added it to Amendment 5 as well. Before I go further, as it is an early part of discussing this Bill, I should say that I am a great supporter of the notion that there should be investment in productive assets that support the UK economy. Although I am not that heavy on mandation, if anything I lean in that direction quite a lot. It is obviously done through advisers, and maybe that is one reason for being concerned about advisers—perhaps they have pushed it too much the other way in times past. Noble Lords can take it as background that I am very supportive.
I am concerned about too much forcing of particular kinds of investment, and restricting the routes to those investments or the resistance of the opportunity if the trustees think that it is not the right thing to do. That is why I have some support for Amendments 5 and 6, because I think they may go too far. One of the good things about Clause 2(3) and (4) is that they are optional. However, it still hints at a lot of things that could be done.
I am concerned about any kind of dictation on which advisers can be used, because they have been very powerful. If there is any control over which advisers are used, that is another way of controlling the fund. Given the obligations of trustees to consult advisers, and the liabilities attached to that, they have to remain independent. That is the direction that I am coming from; therefore, I do not want the Bill to give powers that could go too far. That is why I added my name to Amendment 6, and why I have some sort of regard for the content of Amendment 5 around the investment opportunities.
Lord Davies of Brixton (Lab)
This group is about asset pools in the Local Government Pension Scheme. I had not intended to intervene on this group, but I want to comment on the remarks made by the noble Viscount, Lord Younger, in introducing this group of amendments on the Local Government Pension Scheme. I am relatively agnostic about asset pools. I am not sure that I am totally convinced by the Government’s line that big is necessarily beautiful, but I am open to that debate.
In introducing this group, the noble Viscount set it in the context of a large group of amendments introduced on much wider issues around the Local Government Pension Scheme than were originally expected—it was really just about investment in the Local Government Pension Scheme—and at a very late stage. It makes no difference to me personally, but fundamental questioning of the structure, running and management of the Local Government Pension Scheme was introduced at such short notice; we found about it only on Thursday or Friday. I can live with that, but I think that it was a little unfair to the people working in and running the scheme suddenly to produce this level of uncertainty. That was unwise. When you want to discuss these things, you start talking to the people involved first, but it is my understanding that it came out of the blue and everyone was totally surprised. Obviously, the issue was always there for discussion, so the fact that it has come up is not a surprise, but doing things at this moment and in this way was unfortunate and is causing problems for those trying to provide the pensions.
I believe that the fundamental premise introduced by the noble Viscount is wrong. The Local Government Pension Scheme is a notable success. Rather than setting up inquiries to discover what went wrong, we should be inquiring about what it got right, because it provides good pensions for a large number of people providing essential services. The average pension in the Local Government Pension Scheme is £5,000; that is because the scheme provides pensions mainly for people on low pay. It provides good pensions for people—often, for women with part-time jobs. It does so in a way whereby, in the forthcoming valuations—as I will expand on and discuss at greater length when we get on to the eighth group of amendments, because that is where the substantive discussion will take place—it faces a better record than private sector occupational pension schemes. We should be looking at its success and not, as the noble Viscount argued, the difficulties and failures.
Lord Fuller (Con)
My Lords, once again, I follow the noble Lord, Lord Davies of Brixton. I wish, perhaps uncharacteristically, to associate myself with many of his comments. I support the thrust of Amendment 2, and offer wider support for the other amendments in this group.
My qualifications to speak on this Bill as far as the LGPS elements are concerned is that I led a local authority for 20 years and have been a member of the Norfolk Pension Fund’s Pensions Committee since 2007. I have also been a member of the Local Government Pension Scheme’s advisory board since its inception in 2014. I am a past member of the fire service scheme’s advisory board, as well as a trustee of a number of private schemes. I also benefit from my own SSIP.
Today is about the LGPS. It is different, because not many of the public sector schemes have money put aside for their members’ retirements—although I accept that the scheme for MPs is one of them. In aggregate, the LGPS comprises 89 separate schemes cast throughout the entirety of the four home nations. Collectively, the 2024 scheme census reports a total of 6.7 million members, a third of whom are, directionally speaking, active; a third of whom are deferred; and a third of whom are actually in payment. In 2024, its total assets under management were worth £390 billion; it is much more than that now. These things change but, by whatever measure, the LGPS is the world’s fourth-largest or fifth-largest pension scheme.
When I came on to the Norfolk board in 2007, assets under management were £1.8 billion. They are now more than £6 billion. I echo the comment of the noble Lord, Lord Davies, that if only the UK economy had risen in that proportion. The LGPS delivers significant value. The typical member is a 47 year-old woman earning about £18,000 a year, for whom the pension is, as the noble Lord, Lord Davies, said, about £5,000. It is incredibly efficient. Operational costs are about half those of typical unfunded schemes. In the Norfolk scheme, of which I am a member, the cost per member is less than £20 per head. I accept that other schemes have costs higher than that, but it is an enviable record. We have saved for our future, but you would not know any of this from the thrust of the Bill and its overbearing tinkering.
What is the problem to be solved here? After some difficult times when interest rates were low, most schemes are now fully funded. It is a British success story that will be undermined by fettering the independence of schemes to make the best long-term investment decisions for their members and local taxpayers, muddling accountabilities by divorcing assets from liabilities and introducing new conflicts of interest. That cannot be right. The success has been delivered despite being buffeted by complications such as McCloud, the pre-2015 and post-2015 schemes, GMP, the rule of 75, dashboards, changing rules on inheritance and divorce and all the other things that happen when you have the best interests of 6.7 million workers in mind. The truth is that the LGPS is a million miles away from the fat cattery that the popular newspapers would have you believe.
That brings me on to the substance of Amendment 2. I have the greatest concerns that the fiduciary duty contemplated to members in this Bill, fairness to the taxpayer and ham-fisted interference from a merry-go-round of Local Government Finance Ministers will weaken this jewel in our economic crown. Taken together, subsections (2) to (8) promote the notion that the government nanny knows best, with broad powers down to the level of detail to determine the fine structure of the pooled schemes. This approach has already damaged the scheme for no good reason. The exemplar ACCESS band has been told to disband. It was doing a good job. With nearly £40 billion-worth of assets under management, it rented the best globally viewed FCA-qualified professionals in the City of London, one of the world’s top three financial centres. Now it is being forced to join a pool of other authorities headquartered miles away in the provinces, miles away from the cut and thrust and that leading intellectual property. There is a provision in subsection (7) that these pools should take steps to get FCA accreditation—I suppose we should be grateful for that—but these pools have no business even being on the battlefield until they are FCA qualified. Thus is the muddle of this Bill. In essence, this enforced uniformity means that star strikers have been replaced by subs from the reserve team. A global success story has been weakened with the risk of lower returns for members.
Moving on, this Bill talks about local government members, but the scheme is not about just councils. In the Norfolk scheme, which I know best, there are eight principal councils, but we now have more than 500 sponsoring employers—parish councils, care homes, catering companies, youth and social workers, classroom assistants and charities. Each has different scale, covenant strength and longevity. It is complex. Yet ministerial interference wants to shove them all into a one-size scheme that cannot fit all. In subsection (5) we see touching faith in the judgment of the experts and regulators who forced private schemes into LDIs and ruined them. I do not know why the Pensions Regulator and GAD are not on the Government’s list. I suppose we should be grateful that they are not. This whole Bill promulgates pensions groupthink on the altar of reduced risk and lower returns.
I will deal with Amendment 5 later because it talks about investment and there is a later group for that. I have heard the Minister say that bigger is better. Here again, I align myself with the noble Lord, Lord Davies. It is the thrust and the theme of this Bill more widely. Indeed, I heard the noble Baroness at the Dispatch Box lionise the Ontario teachers’ scheme in the week that it was rinsed for £1 billion in the collapse of Thames Water.
We see in Clause 2 that there will be directions as to what things can be invested in. When they tried that in Sweden, the public schemes lost another £1 billion in the Northvolt disaster, where virtue-signalling political investment directions made the members and taxpayers poorer. The harsh lesson is that the schemes become the plaything of meddlesome Ministers to require or prohibit, or to opine on lofty ideas, but without the responsibility or accountability of paying out. It is wrong.
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
Order. The noble Lord can see that he has reached his 10 minutes.
Lord Fuller (Con)
I am coming to a conclusion. I spent 20 years at the coalface with some of the brightest and smartest professionals from around the world. If we persist with subsections (2) to (8), we will be further in hock to a Treasury that has demonstrated that it does not understand the interplay between revenue and capital, or the underlying principles of a capitalist economy. If it ain’t broke, don’t fix it. Now is not the time to meddle in the LGPS.
Baroness Altmann (Non-Afl)
My Lords, I will be brief. I have added my name to Amendments 2, 5 and 6. I support the thrust of these amendments. I agree wholeheartedly with the noble Lord, Lord Davies, that the local government pension schemes have been successful. One reason is that they have been able to take higher risks—in other words, earn higher returns—than many of the traditional private sector pension schemes, which were so constrained and had the problem of LDI.
I have concerns about the cost to taxpayers because the Bill effectively suggests that, by reducing the number of asset pools for local government pension schemes from eight to six, somehow the returns will magically improve and the Government will be able to direct local authority pension schemes into the right place. As we have heard from so many noble Lords, it does not appear to me that the Government are best placed to direct where people invest.
With £402 billion in these schemes at March 2025, with about a quarter of council tax being spent on contributions into them and with so many areas of the economy needing investment, it is right that we expect local authority schemes to be able to support the local—and, potentially, the national—economy. The Government might well be tempted to turn this £400 billion into a sovereign wealth fund, given that taxpayers at the national scale underwrite local authority pension schemes—they do not belong to the PPF; they do not pay a PPF level. If a council goes bust, taxpayers bail it out and the pensions are still paid. I argue that, unless the Government want to do that—
Baroness Altmann (Non-Afl)
My Lords, I had basically finished—I just wanted to say that, if we are not going to turn the £400 billion or so into a sovereign wealth fund, it would be preferable if the Government did not try to direct the investments.
Lord Palmer of Childs Hill (LD)
I simply ask the Minister to explain how local accountability will be preserved, how fiduciary duties will be protected in practice and why so much of this is not in the Bill.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, I am grateful to noble Lords for these amendments in the names of the noble Viscount, Lord Younger, and the noble Baronesses, Lady Stedman-Scott, Lady Bowles of Berkhamsted and Lady Altmann. Before I proceed, as we have had a bout of putting things on the record and making declarations, I should say that I served for a mercifully short time as a councillor in the London Borough of Camden from 2010 to 2014 and, as a consequence, am a member of that council’s pension scheme, but I think that has pretty scant bearing on our discussions this afternoon.
On Amendments 2 and 6, I recognise the intention to preserve the independence of the Local Government Pension Scheme administering authorities and to reduce the burden of regulation on their function. I will say now, so that I do not forget, that I appreciate that the noble Viscount, Lord Younger, asked a great deal of questions on amendments not just in this group but in groups to come. It was very helpful to have his explanation about degrouping; we are very happy to debate the Bill in the way the Committee sees best. I also put on record the welcome recognition by many Members who spoke on this group, particularly the noble Lords, Lord Davies and Lord Fuller—although in slightly different ways—of the importance and success of the LGPS. It is worth being clear that the Government are determined to make sure that success continues.
The Deputy Chairman of Committees (Baroness Watkins of Tavistock) (CB)
There is a Division in the House. The Committee will adjourn and resume after 10 minutes.
The Division has been cancelled. If noble Lords are content that everybody is back who needs to be, the Committee stands resumed.
Lord Katz (Lab)
My Lords, the Government share the noble Viscount’s aim of ensuring that administering authorities can continue to comply with their fiduciary duty to act in LGPS members’ best interests. I assure the Committee that the Government are not seeking to undermine the fiduciary duty of local pension funds in any way. The responsibility to set an investment strategy, which is the key driver of investment returns, will remain with funds.
As part of the reforms, we are consolidating all assets under the management of the LGPS asset pools; internal advisory capability is a key benefit of that scale. Integrated models in which strategic advice and investment management are both delivered by the same fiduciary manager are commonly used both in private sector schemes and internationally. These models can deliver greater value for money and economies of scale, and can reduce conflicts of interest. The Government recognise that there will be situations where administering authorities may feel that the advice of pools needs to be supplemented with or tested against advice from other sources. However, the Government are clear that such cases should be exceptional rather than routine.
This is probably a good point to address a couple of questions. The noble Viscount, Lord Younger, asked about cross-subsidising. It is fair to say that asset pooling does not lead to one administering authority subsidising the surplus of another. Administering authorities will remain responsible for the surplus or deficit of the fund that they manage, and each fund will continue to be valued separately.
The noble Lord, Lord Fuller, asked about the scale of the pools disincentivising investment in smaller British businesses and creating bubbles; he used the example of AI. Pools will be able to invest in small companies, including small and growing businesses that contribute to the economy. This could be achieved at scale by using actively managed funds, which aggregate opportunities. As set out in the Pensions Investment Review: Final Report, there is
“clear evidence that, in general, larger schemes are better able to invest in productive asset classes”.
This includes investment in private markets, which are key to financing fast-growing British companies. So I believe that the new pooling model will see more money invested in small British companies.
The Government are pleased that decisions about which of the six continuing asset pool companies LGPS funds wish to work with have been made on a voluntary basis and at a local level, and certainly do not intend to intervene in these decisions. However, the Bill provides for regulations to include powers to direct which asset pool a pension fund participates in, so as to be able to safeguard the scheme in future in the unlikely event that satisfactory arrangements cannot be agreed at the local level; this may include where relationships have broken down within a pool or where an administering authority finds itself without a pool willing to accept it.
The noble Viscount, Lord Younger, asked about consultation on the powers; basically, he asked why we are introducing a power to direct which asset pool an administering authority participates in. The Government’s strong preference is for decisions on pool membership to be made on a voluntary basis and at a local level. However, the Government need to be able to safeguard the scheme in the unlikely event that satisfactory arrangements cannot be agreed at a local level, such as if an administering authority were to find itself without a pool willing to accept it or, as I said, if relationships break down. Regulations are expected to require consultation; that is carried out prior to using the power, of course.
The noble Viscount, Lord Younger, also asked about the transition of assets that are held or managed. The guidance allows room for pools’ discretion where transfer of ownership is not reasonably practical, so there will not be any need for authorities to make such unnecessary losses in the process of pooling.
More generally, the noble Viscount and other noble Lords asked about the fiduciary duty and it being undermined. This provision is not a new power. It replicates a provision in the existing Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016, which will be repealed when the new Local Government Pension Scheme (Pooling, Management and Investment of Funds) Regulations come into force.
I do not want to single out anyone in particular, but the noble Lord, Lord Fuller, talked about meddling. To be clear, this power is a backstop power that would be used only as a last resort to safeguard the scheme, following, as I said, consultation with the relevant administering authority.
On Amendment 4, I recognise that the noble Viscount’s intention is to test why transitional arrangements for LGPS administering authorities are not set out in the Bill. There is more than 50 years’ precedent for the rules of the Local Government Pension Scheme being set out in secondary legislation, going back to the Superannuation Act 1972. We therefore consider that it is more appropriate to change what may and must be included in the rules of the Local Government Pension Scheme through the use of secondary legislation created using existing powers and, where necessary, new powers provided in the Bill, rather than using primary legislation to amend existing secondary legislation. Moreover, given the range of circumstances faced by administering authorities and asset pool companies, the Government will retain some flexibility by setting out transitional arrangements in regulations and can work with the sector to ensure that new requirements are workable and agreeable.
My noble friend Lord Davies of Brixton raised the spectre of this introducing uncertainty. We collectively have a duty to ensure that every penny of members’ hard-earned money is well invested and that the LGPS’s extraordinary scale is harnessed. That includes making the best use of some of the excellent capabilities that exist in the LGPS, rather than building from scratch, which is why we are moving to fewer pools. We recognise that implementing these reforms may cause significant upheaval and require resources, but the reward is enabling a bigger and better LGPS to fulfil its potential as an engine for growth. The Government are considering responses on the proposed transitional arrangements included in the recent technical consultation on the pooling, management and investment of funds regulations and will set out their response in due course.
Regarding Amendment 5 in the name of the noble Viscount, Lord Younger, I recognise the intention to examine the practicalities of co-operation between administering authorities and strategic authorities, especially in the light of the English Devolution and Community Empowerment Bill. The English Devolution White Paper published in December 2024 set out our plan to rewire England by devolving power and funding from central government to local leaders who know their area best. A key aspect of this is the development of ambitious local growth plans by mayoral strategic authorities, including local investment opportunities for institutional investors, including the LGPS.
Clause 2 includes a requirement for LGPS administering authorities to co-operate with strategic authorities, including corporate joint committees in Wales, in order to identify and develop appropriate investment opportunities. This will mean that the investment potential and requirements for pension investments are factored into thinking on local strategic projects from the beginning. It will be for the asset pools, not politicians, to conduct due diligence and take the final decisions on whether to invest. I hope that that addresses the questions posed by the noble Viscount, Lord Younger, around ensuring that schemes are acting in their members’ interests and the interplay between strategic authorities and other authorities.
This high-level requirement to co-operate allows strategic pools and administering authorities to design the most effective ways of working. To ensure a clear, firm trajectory to consolidation and benefits of scales for the scheme as a whole, along with the assurances that I have provided, I think that it is important to understand that the intention behind the LGPS clauses that we have been discussing is to get a balance between retaining flexibility and introducing scale.
There is one remaining question that I have yet to respond to, which was from the noble Baroness, Lady Bowles, about using the power to direct asset pools as to the manner of their investments. The Government are introducing the backstop power to be used, as I said, as a last resort to protect the scheme in the unlikely event that a pool’s decision-making puts it or the underlying pension funds at risk. This power is consistent with existing powers that the Government have to direct administering authorities in specified circumstances, which include powers to give directions about how they should exercise their investment functions. To safeguard the scheme, these powers will need to apply to asset pools instead of administering authorities in future. The Government’s intention is that scheme regulations will require all LGPS asset pool companies to be authorised by the Financial Conduct Authority. It would not make sense for government direction to contradict any requirements of such authorisation.
As I said when I began responding to this group of amendments, there were a lot of questions. I hope that I have answered most of them, but we will of course revisit Hansard after the debate, and I undertake to write to anyone whose questions I have missed. Given that, I respectfully ask the noble Viscount to withdraw his amendment.
Lord Fuller (Con)
May I gently invite the Minister to review the comment he made about the ACCESS pool voluntarily asking to disband itself and then, if necessary, write to me afterwards and make a correction on the record? My understanding is that the ACCESS pool did not wish to be disbanded and, in fact, the response to the fit-for-the-future consultation was that the ACCESS pool’s
“proposal does not meet the Government’s vision for the future of the LGPS”.
There was compulsion; it was not voluntary.
Lord Katz (Lab)
I had better write to the noble Lord. I am afraid I do not have the details of that particular case to hand, but it is our understanding that it was coming from a voluntary perspective. But rather than speculating—I do not have the details here—I am very happy to write to him with more detail.
Baroness Noakes (Con)
I listened carefully to the Minister’s response, but I am not sure that he answered the question about why the Government need to take power to specify the sources of advice that scheme managers must take and whether that would result in a closed list of scheme advisers that had to be used in any event. Not only is that undesirable from a competition standpoint; it also seems likely to work against producing better returns longer term, because you will just ossify the situation as you find it at the point that the Government decide to make that decision.
Lord Katz (Lab)
I thank the noble Baroness for that question. I do not know whether this will give her complete satisfaction, but I understand that requiring funds to take advice from their pool could potentially be a conflict of interest. I would say that, first, asset pool companies will be required to have robust conflict of interest policies and procedures for identifying and managing those areas of conflict. As I said fairly early on in my remarks, integrated models—
Baroness Noakes (Con)
It has nothing to do with conflicts of interest; it is about whether the Government can specify a limited number of sources of advice that can be given to scheme managers, what the purpose of that is and whether that does not in fact work against achieving the best returns for members over time.
Lord Katz (Lab)
I am sorry; I probably misunderstood the direction of the noble Baroness’s questions. I had better write to her to set that out. I think it is fair to say that—this might help a little—in contrast to external advisers, because asset pools are solely owned by old GPS administering authorities, they exist to provide services of their interests and they do not stand to gain financially, even from partner funds taking their advice or providing poor-quality advice. I am not entirely sure that that gets at her question, but the point is that we do not feel that there will be that impact from limiting sources of advice. I will write to her to provide more detail on that point.
Baroness Bowles of Berkhamsted (LD)
I got a bit lost in the explanation, because the Minister also mentioned internal advisers. In replying, will he lay out where he thinks the advice is and what that power is doing? If it is providing a sort of override, as the noble Baroness, Lady Noakes, suggested, to a particular type of adviser, as I was trying to suggest it might, then that is unacceptable. Perhaps if the Minister just lays out exactly what is there, that might clarify it. I hope that he will tell us that he will not override anything.
Lord Katz (Lab)
That is very helpful. When I write to the noble Baroness, I will certainly make sure that we address the point around independent advisers. I appreciate the noble Baroness, Lady Bowles, asking for that kind of clarification, so my written remarks will address that point.
Viscount Younger of Leckie (Con)
My Lords, I am grateful to the Minister for his responses; I am also grateful for the debate we have had on this group of amendments.
I am grateful to all noble Lords beyond me who have asked further questions, particularly in the latter stage of this short debate. It is fair to say—I am saying this against myself—that, with so many questions having been directed originally to the noble Baroness, Lady Sherlock, but applying to both Ministers, it would be extremely helpful to have a full letter with the answers. This has been an important debate; some clear issues have been spoken to, and answers are required.
I will start by picking up some points made by the noble Lord, Lord Davies. He gave the impression—indeed, he said this; I cannot remember his expression—that I was being negative about the Local Government Pension Scheme. I reiterate the point made by my noble friend Lord Fuller: the Local Government Pension Scheme is efficient and is very much a British success story. In addition to that, my noble friend Lord Fuller set out—very eloquently, I thought—the concerns around both the complexities in the Bill and the unintended consequences. There are two clear sides to this. I agree with the noble Lord, Lord Davies, on the success aspect; I want to be quite clear that he knows my position on this.
What unites the amendments in this group is not opposition to reform, nor hostility to pooling local investment or good governance. Rather, it is a concern about how far the Bill reaches into areas that have traditionally, and rightly, been the responsibility of trustees exercising fiduciary judgment. The noble Lord, Lord Katz, said that intervention by government is very much a last resort. I accept what he says but, as the noble Baroness, Lady Altmann, asked—very tellingly—are the Government best placed to direct? Further, she made an interesting point on whether the £400 billion should be part of a sovereign wealth fund. That just shows that it is worth having this sort of debate on this important area of the Bill.
Across these clauses, the Bill moves from setting a framework to conferring powers of direction, compulsion and prescription; direction over participation in asset pools; compulsion towards a particular end state without a clear transition; duties to co-operate with strategic authorities without defined boundaries; and regulation-making powers that reach into advisory pathways and the content of investment strategies themselves. I feel from the debate that each of these elements raises the same underlying question: how will these powers be exercised in a way that is genuinely compatible with fiduciary duty, rather than merely being stated to be so?
With that, I beg leave to withdraw the amendment, but I also acknowledge that there is much work to be done in this area.
Lord Sharkey
“(7A) Scheme regulations made under this section are subject to the super-affirmative procedure, as defined by section (Super-affirmative procedure).”Member’s explanatory statement
This probing amendment seeks to clarify the Government’s willingness to subject regulations made under this section to the super-affirmative procedure, as defined in another amendment in the name of Lord Sharkey to after clause 120. It is connected to other amendments to clause 120 in Lord Sharkey’s name.
Lord Sharkey (LD)
My Lords, in moving Amendment 3, I will speak also to Amendments 221 and 222. These amendments would enable meaningful scrutiny of any of the Bill’s nearly 130 delegated parts when it seemed appropriate to Parliament.
The Bill before us is a skeleton Bill. The DPRRC says that the test for a skeleton Bill is whether it is
“legislation containing so many significant delegated powers that the real operation of the legislation depends entirely or in very large part on regulations made under it”.
This Bill, with nearly 130 delegated powers, clearly passes that test; in fact, it is an obvious and extreme example of a skeleton Bill. This means that parliamentary scrutiny of the Bill is severely restricted. That is because, as things stand, statutory instruments cannot be amended and, by convention, are not rejected. As a result, the Government are taking powers to make policy before they have decided what that policy should be or before critical policy details are in place.
The Constitution Committee was clear in its 2018 report The Legislative Process that:
“Without a genuine risk of defeat, and no amendment possible, Parliament is doing little more than rubber-stamping the Government’s secondary legislation. This is constitutionally unacceptable”.
The DPRRC, in its recent report on the Bill, is equally critical and alarming. It says, among other things:
“We take the view that this Bill is in large part a licence for Ministers to make subordinate legislation … We would have found helpful an explicit declaration from the Department that the bill is a skeleton bill, accompanied by a full justification for adopting that approach, including why no other approach was reasonable to adopt and how the scope of the skeleton provision is constrained”.
The committee’s report, one of the most damning and disturbing that I have read, goes on to say:
“We would also have welcomed an opportunity to examine indicative regulations for at least some of the more important delegated powers given the large part played by delegated powers in this Bill”.
Can the Minister say whether and when the Government will comply with the committee’s suggestion on indicative regulations? We have seen no such indicative draft regulations. I understand that such drafts were circulating among government and industry after the summer. Is that the case? If it is, why has Parliament not been included in the circulation? It is hard to avoid the conclusion that Parliament is being deliberately bypassed.
The affirmative procedure proposed in my Amendments 3, 221 and 222 is designed to deliver a measure of real scrutiny. Together, they would deliver a form of super-affirmative statutory instrument. Paragraph 31.14 of Part 4 of Erskine May characterises the super-affirmative procedure like this:
“The super-affirmative procedure provides both Houses with opportunities to comment on proposals for secondary legislation and to recommend amendments before orders for affirmative approval are brought forward in their final form. (It should be noted that the power to amend the proposed instrument remains with the Minister: the two Houses and their committees can only recommend changes, not make them”.
The noble Baroness, Lady Penn, who is not in her place at the moment, when a Minister gave this House a helpful summary of how the procedure would work in practice, once the House had decided that the procedure should be followed in a particular case. She said that
“that procedure would require an initial draft of the regulations to be laid before Parliament alongside an explanatory statement and that a committee must be convened to report on those draft regulations within 30 days of publication. Only after a minimum of 30 days following the publication of the initial draft regulations may the Secretary of State lay regulations, accompanied by a further published statement on any changes to the regulations. They must then be debated as normal in both Houses and approved by resolution”.—[Official Report, 19/10/20; col. GC 376.]
According to the Library, the last time I asked, the last recorded insertion into a Bill of a super-affirmative procedure was by the Government in October 2017 into what became the Financial Guidance and Claims Act. When they are not doing it themselves, they have traditionally opposed its use on any or all of three grounds. The first is that it is unnecessary because the affirmative procedure provides sufficient parliamentary scrutiny. The second is that it takes too long and the third is that it is cumbersome. We may hear any or all of these objections from the Minister today.
The first objection, that the affirmative procedure provides sufficient scrutiny, is plainly and simply wrong—unless the Government regard no effective scrutiny as sufficient. The second objection, that it takes too long, is to misread its purpose; the super-affirmative procedure takes longer, but that is because it contains provisions for real scrutiny, which necessarily takes time. This is not a negative—it is the merit of the procedure and the point of it. The third traditional objection, that the super-affirmative could turn out to be cumbersome and a disproportionate use of parliamentary time, has no force in the proposed use of the super-affirmative procedure set out in my three amendments. The procedure would be used only if either House decided that an issue was important enough to require the extra scrutiny that the procedure provides.
The House has debated the use of super-affirmatives before. In 2021, we addressed the matter in Committee and on Report on the Medicines and Medical Devices Bill and other notorious skeleton Bills. There was very broad support for using super-affirmatives from around the Chamber, including from the late and much-lamented Lord Judge, who said:
“The wider use of the super-affirmative process would ensure better parliamentary scrutiny and control of the Executive, which for too long have simply ignored the constant urgings of the parliamentary committees in this House”.—[Official Report, 12/1/21; col. 654.]
When the proposal on that Bill was put to a vote, the result was: Content 320, Not-Content 236. Many distinguished Members voted for the use of super-affirmatives, including the noble Baroness, Lady Sherlock. I beg to move Amendment 3.
Baroness Neville-Rolfe (Con)
I will speak simply to support the noble Lord, Lord Sharkey. It seems to me that there is an extraordinarily wide use of delegated powers in the Bill and, for all the reasons that he set out, we should look at that again. If the Government do not feel able to make a change to respond to his very persuasive points, we should at least have a full list of every delegated power that will be used, what the plans are in each case, and perhaps some specimen regulations of the kind that we have seen in some of the Department for Business and Trade legislation.
Viscount Younger of Leckie (Con)
My Lords, this group of amendments focuses on scrutiny, clarity and responsibility, and I am grateful to the noble Lord, Lord Sharkey, for setting out the merits of the super-affirmative procedures and their historical context. It was interesting to hear what he had to say.
As the Committee will have seen, the provisions to which these super-affirmative procedures would pertain allow Ministers, through secondary legislation, to impose requirements and prohibitions on scheme managers, to direct participation in asset pool companies, to require withdrawal from them and to impose obligations on those companies themselves. These are significant powers, exercised in an area that is highly technical, operationally sensitive and financially consequential.
This is precisely the sort of context in which unintended consequences can arise, as alluded to by the noble Lord, Lord Sharkey. These clauses are dense, complex and interconnected. They interact with fiduciary duties, local accountability, financial regulation and long-term investment strategy. Small changes in drafting or approach could have material effects on risk, returns, governance or market behaviour.
That is why I am glad that the amendment places particular emphasis on representations. The ability for Parliament, and expert stakeholders, to examine draft regulations, to make these representations, and for those representations to be meaningfully considered before regulations are finalised, is essential to the responsible exercise of these powers.
The super-affirmative procedure would ensure that Parliament is not simply asked to approve a finished product but is given the opportunity to understand the Government’s intent, to hear from those with deep expertise in pensions, asset management and regulation, and to see how concerns raised have been addressed. That is especially important where the primary legislation quite deliberately leaves so much to be filled in by regulation, as I explained earlier in Committee.
I hope the Minister will engage constructively with this point and explain why the Government believe the ordinary affirmative procedure provides sufficient scrutiny in this case, given the scale, complexity and potential impact of the powers being taken. I appreciate the short debate on this matter.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Lord, Lord Sharkey, for introducing his amendments, and to all noble Lords who have spoken. This gives us an opportunity to talk about how best to balance the way we structure matters between primary and secondary legislation. However, the proposals from the noble Lord, Lord Sharkey, would significantly expand the way Parliament scrutinises regulations made under the Bill. I understand why he would want to do that, but his proposals would introduce a level of rigidity into the process that is not only unusual in this area but obviously would be markedly more elaborate than the Bill currently provides for.
The super-affirmative procedure is generally reserved for exceptional circumstances, such as legislative reform orders or remedial orders under the Human Rights Act. I am not aware of any examples of it being applied to pensions regulations, but I am very open to being advised on that. In our view, it would be disproportionate to the nature of the powers conferred by the Bill, and I will explain why.
I will look first at Clause 1. The coalition Government introduced the Public Service Pensions Act 2013. Through that, Parliament established the way it would go about governing the making of scheme regulations. It was a comprehensive and well-tested scrutiny framework. It still operates today, including where new powers were created, for example, by the Public Service Pensions and Judicial Offices Act 2022. The framework created by that Act provides extensive safeguards, including mandatory consultation, enhanced consultation if changes have or might have retrospective effect, and Treasury consent. Introducing a substantially more onerous procedure for regulations under Clause 1, as proposed by Amendment 3, would sit uneasily alongside that established approach.
There are also practical considerations. Administering authorities and asset pool companies are preparing for regulations to be introduced shortly after the Bill has passed its parliamentary scrutiny. The Government have already published draft regulations on the LGPS measure. They were open to public consultation, which has recently closed. Adding a 30-day pre-scrutiny stage through the super-affirmative procedure would clearly extend that timetable and risk creating more uncertainty at a critical moment for those involved in implementing this.
Amendment 221 would allow either House to require that any affirmative regulations made under this Bill be subject to the super-affirmative process. That would already represent a significant expansion of parliamentary involvement compared with the long-standing approach to pensions.
Amendment 222 would go further still. It does not simply describe how the super-affirmative procedure would operate in this context; it would create a new statutory scrutiny process, more prescriptive and more inflexible than the mechanisms Parliament has used to date for pension regulations—or indeed most regulations. It would require a fixed 30-day scrutiny period in any case where either House decided to impose the new procedure. It would mandate a committee report, even for minor or technical regulations, and would prevent regulations being laid until Ministers had responded formally to all representations. The result would be a significant departure from the flexible way Parliament normally manages delegated legislation.
I hear the concerns the noble Lord has expressed about the way Parliament deals with secondary legislation, but scrutiny procedures are normally determined by the House through its practices and Standing Orders. Replacing those arrangements with a rigid statutory framework of this kind for this Bill would set a far-reaching precedent for delegated legislation more broadly, extending well beyond the requirements of this Bill.
I would submit that such a process would also make it harder for Parliament to focus scrutiny on the most significant instruments and would slow down the making of regulations in areas where timely and predictable implementation is crucial for funds, administering authorities and scheme members.
A certain amount of this comes down to whether the Committee accepts that the level of delegated powers is appropriate. I fully understand that the noble Lord does not. I disagree and I will tell him why. In answer to the noble Viscount, Lord Younger of Leckie, in the previous group I said that the Government do not regard this as a framework or skeleton Bill, because it sets out clearly the policy decisions and parameters within which the delegated powers must operate. The Bill brings together a broad package of reforms. Many of those reforms build on long-established statutory regimes set out by previous Governments—Governments of all persuasions, as well as previous Labour Governments—in which Parliament has historically set the policy in primary legislation and provided for the detailed measures that will apply to schemes to be set out in regulations.
The noble Baroness, Lady Neville-Rolfe, asked for a full list of delegated powers. My department produced a very detailed delegated powers memorandum, which went through all the delegated powers at some length and in some detail, explaining what they meant. I would be very happy to direct the noble Baroness to that if that would be helpful.
One of the key questions the noble Lord, Lord Sharkey, asked was: why are there so many delegated powers? Our view is that this is not out of kilter with other similar transformative pension Bills. We counted 119 delegated powers covering 11 major topics plus some smaller topics. For example, in the Pension Schemes Act 2021, there were almost 100 delegated powers covering three major topics. In the Pensions Act 1995, which was a transformative Bill, there were approximately 150 delegated powers.
This Bill brings together a number of distinct pensions measures in a single legislative vehicle, many of which amend or build on existing regimes that are already heavily reliant on secondary legislation for their detailed operation. In many areas, we are simply reflecting a similar framework to previous pensions legislation or amending it, so there is continuity rather than a step change.
A crucial point I want to lodge is that pensions policy is not delivered directly by government. Implementation depends on trustees, pension schemes, pension providers, administrators and regulators who have to design systems, processes and administration that work in practice. That level of detailed operational design can begin only once there is sufficient certainty that legislation will proceed. As noble Lords who have worked in or with industry will recognise, before there is sufficient certainty, industry cannot reasonably commit the significant time and resources needed to work through complex delivery arrangements where the legal basis may still change or not materialise. Delegated powers therefore allow the Government to set the policy framework in primary legislation and then work with those responsible for delivery to ensure that the technical detail is workable in practice, rather than attempting to prescribe detailed operational rules in primary legislation. That reflects established pensions practice and good lawmaking in a complex and fast-moving regulatory environment.
Lord Fuller (Con)
I am conscious that this is not the Minister’s area of specialism, because we are talking about the Local Government Pension Scheme, which is under MHCLG, not the DWP, so I do not expect her to be fully up to speed with this part of the Bill. Members of the various pensions committees of the administrating committees—by and large within county councils, but there are some joint arrangements as well—are legally not trustees. I accept that what the Minister said is correct for the generality of private schemes and some other schemes, but I do not believe it is for the LGPS. I do not expect her to respond immediately, but it is important. It is a shame that we do not have an MHCLG Minister here, because this scheme is the closest we have to a national wealth fund and we are transacting this business without the appropriate expertise here. However, clarity on that is important.
Baroness Sherlock (Lab)
I was going to say that I am grateful to the noble Lord, but I am not sure that I am, really. I am sure he has not missed the fact that the amendments put forward by the noble Lord, Lord Sharkey, do not apply simply to the LGPS provisions in the Bill. They would have widespread application throughout the Bill and implications beyond it. I say that they would have all these implications and I am talking about trustees because they would have a significant impact on the way that all those actors in the pension space would be able to engage in future.
In the past, I have heard people around the House criticise Governments for making decisions at the centre without engaging with those in industry and business who have to deliver them. I know that, if the Government had given huge amounts of certainty and left nothing out there, the criticism would simply be the reverse of what we have heard today. We have to find a balance. The Government believe we have found the right balance. Some Members of the Committee will disagree. I have looked carefully into this, and I am defending the balance that the Government have come to, but I accept that if noble Lords disagree, we will have to come back to this in due course.
We think the existing framework already strikes the right balance between scrutiny and practicality, enabling Parliament to oversee policy development while allowing essential regulations to be made in a timely and orderly way. In the light of my comments, particularly about the proportionality of this, its comparability with previous pensions legislation and the degree to which it is in continuity with the way pensions legislation has traditionally been made by successive Governments, I hope the noble Lord will feel able to withdraw his amendment.
Lord Sharkey (LD)
I am grateful to all those who have contributed to this brief debate. The complexity described by the Minister is obviously real and clearly important, but one of the ways of dealing with complexity is to have the instruments to simplify it and discuss it. My response to the scenario painted by the Minister would be to say: let us have super-affirmative procedures and accept that they will take up a bit more time and involve a bit more work, but, as I pointed out, that is their entire point.
Skeleton Bills always limit parliamentary scrutiny, and the Pension Schemes Bill is not an exception to that; in some ways, it is a confirmation of it. I understood the Minister’s case, but the Government’s desire to limit parliamentary scrutiny is a mistake. The SIs generated by this Bill will have real consequences for the real economy. We cannot usefully discuss these consequences until we have the detail. It seems to me as simple as that. Of course, having the detail helps only if we can do something about it, and the super-affirmative procedure provides that opportunity.
Lord Davies of Brixton (Lab)
I am still mystified as to why Amendment 220 is not included in this group. It is left bereft, right at the end of the Marshalled List. Is there a reason?
Lord Sharkey (LD)
If the noble Lord is asking why it is there, I am afraid I will have to plead the Public Bill Office.
Baroness Sherlock (Lab)
I am advised that Amendment 220 had been withdrawn, not just not debated. We will look into that, and the noble Lord will need to clarify it.
Lord Davies of Brixton
Member’s explanatory statement
This is a probing amendment that seeks to explore how and to what extent LGPS assets might be used to provide social housing as an investment.
Lord Davies of Brixton (Lab)
I emphasise that this is not about mandation. Mandation is a big issue, but this is not about that; it is about the possible ways in which Local Government Pension Scheme assets could be invested. It is a probing amendment and I am sure that it is not word perfect in achieving its objective.
It arises under subsection (4) of this clause. It mentions various issues with how the strategy that is set out should be implemented. It is a probing amendment that seeks to explore how, and to what extent, Local Government Pension Scheme assets might be used to provide social housing as an investment. The oddity about this debate is that I am sure we all share the belief—tell me if I am wrong—that housing is an ideal investment for a pension fund. What I want to know from the Government is the extent to which that will be possible within the structure being established by this Bill.
I start with the fund, which is a long-term defined benefit pension scheme with inflation-linked liabilities. Social housing assets provide long-dated stable income streams that closely match this profile, so the sheer logic of these funds investing in local housing is clear. This issue has been debated extensively, within the relevant field, among the think tanks and so on that support local authorities and are interested in the investments of the Local Government Pension Scheme. For example, a think tank called Localis produced a report recommending that council pension assets should be a funding solution to the UK’s affordable housing crisis; that issue is widely discussed and widely supported.
Of course, that has already happened and is already happening. The London CIV has a substantial investment on behalf of the London pool of investments in social housing. I refer to social housing; personally, I have a preference for council housing, but the issue is broader and includes all forms of social housing. For example, the head of real estate at the London CIV says:
“Our UK Housing Fund is designed to help increase the supply of good quality affordable housing while delivering income-driven returns to our Partner Funds”.
Again, in the heart of the industry and the sector, the value of this approach is strongly supported.
More specifically, are funds investing in local housing? They might be investing in housing, but it could be anywhere. However, the synergy with a local fund investing in local housing has a massive attraction in terms of both the councils involved and the members of a scheme seeing how their funds are being invested in the local community. That is a very attractive perspective on how the funds should be decided.
At the same time—this point does not need spelling out—we face a severe housing crisis. There is a need for extensive housebuilding. We have the resources and the need, so why do we not just get on and do it? Council pension funds are, by their nature, patient, long-term investments; that is such a good match for housing delivery. Of course, it is accepted, from the number of funds that have already gone this way, that the fiduciary responsibility is suitable. The committees managing these funds see that investing in housing matches their fiduciary responsibility.
Everyone agrees that there is a great deal of synergy here. Local pension schemes investing in social housing is financially prudent and low-risk, provides a long-term strategy and delivers clear public value. What is there not to like? Can my noble friend the Minister assure the Committee that this synergy will be recognised in the forthcoming regulations and the accompanying statutory guidance?
We are debating this matter in terms of the Bill here, but, as the previous debate made clear, it is the regulations that count. The regulations that will govern how these pools can invest are currently being discussed—an extensive consultation is taking place—but, alongside that, is a closed consultation on the statutory guidance that will accompany the regulations. There may be a debate as to why it is not a public consultation on the statutory guidance, because the two things—the regulations and the guidance—mash together closely.
The problem is that the draft statutory guidance limits the extent to which local funds can set requirements on the actual decisions that will be taken by the pools. I am getting into the detailed structure of how the administering authorities and the investment pools will work together. The point relates generally to all forms of local investment but it is particularly acute in this area, where we are talking about building houses for local people. More specifically, does the proposed pooling framework act as a potential barrier to Local Government Pension Scheme investment in social housing?
There is a broader, more general issue here; I am gear-shifting. The specific issue is whether the pooling arrangements interfere with local investments, particularly in housing, but there is the general issue of whether administering authorities—local councils, in effect, for these purposes—can pass their ESG considerations, for example, on to the pooling arrangements. We need to be clear at this stage. I have raised this issue specifically in relation to housing—it would be good to get a clear answer on that—but there is a wider point around the other ways in which these funds should be investing in the local community. Are the new structures going to stop that happening in practice?
On the other amendments in this group, I think that I agree with Amendment 9, but I will listen to my noble friend the Minister’s response on it. I look forward to hearing the reasons for Amendment 10; I do not understand it, but I shall listen carefully. I do not really understand Amendment 11 either, so, again, I look forward to the explanation from the noble Viscount. In the meantime, I beg to move the amendment standing in my name.
Baroness Warwick of Undercliffe (Lab)
My Lords, I have no extant interests to declare—my interest in pension schemes is in the past—but I have considerable sympathy with my noble friend Lord Davies’s Amendment 7.
We suffer from chronic underinvestment in genuinely affordable and social housing, which is undermining the social fabric of this country and limiting the opportunity for the growth that we so badly need. The Government have vowed to build 1.5 million homes by the end of this Parliament, with a longer-term aim of resolving the housing crisis; other Governments have attempted to do the same. The Government have already committed substantial sums towards that aim, but demands on public funding are increasing and more resources will clearly be needed to deliver it.
I had a particular interest in housing associations in the past. These raise private debt to put alongside public grant to fund social housebuilding, and currently have more than £130 billion of debt facilities in place. The social housing sector is a great example of harnessing public and private investment to drive economic growth and build the homes that we need. Net additional dwelling figures for the 2024-25 financial year showed that 208,600 homes were added to England’s stock—well short of the 300,000 homes a year needed to meet the Government’s target of 1.5 million homes by the end of this Parliament. With the right funding, investment and financial capacity in place, social and affordable housing can play a key role in boosting supply and meeting that ambitious homes target.
There is a general recognition of the need to increase institutional investment in the UK and that pension schemes, with their long-term characteristics, could and should be part of that solution. This part of the Bill refers specifically to the LGPS. The Chancellor has already cited the LGPS as a means of achieving that necessary level of investment. In fact, several LGPS funds already have a strong track record of co-investment in affordable housing, and that potential needs to be maximised. I hope that the Government will ensure that all large pension schemes have the right incentives and strategic tools, coupled with an effective regulatory regime, to provide returns to the scheme while protecting scheme members’ interests and ensuring enduring social impact.
Baroness Bowles of Berkhamsted (LD)
My Lords, I will speak to my Amendment 12 in this group. I hate to disappoint the noble Lord, Lord Davies, but he will have to wait a while before we get to Amendment 10.
As I mentioned earlier, a few years ago I had engagement with local authority pension funds concerning investment opportunities that could be tailored to their own areas. I discovered that they did not want it only in their own areas. They wanted to look at wider areas that included nearby local authorities, in some instances, as well as those further away where the economic responses to recession had fared better. There were some that wished that they had not just invested in some shopping centres in their own area but also in some in London and the south-east that had not lost so much money. That is not what I was trying to involve them in at the time, but these were the examples that came to me.
Those that were in more rural areas wanted some action from the cities. They viewed local investment through a broader lens of meaning things that help localities generally. They wanted to invest in local-sized infrastructure, but not necessarily only in their own areas—especially where some of these things could serve their areas from the outside. There is an example of waste management in Milton Keynes that goes beyond its area. Another example is that of a local waste management facility that recycles all the waste from kitchens. Normally, because there is quite a lot of toxic stuff in it, that waste will go to landfill, but this facility deals with all the nasties and converts it into energy. That facility is not just of interest to the local authority area in which it sits but to other ones too.
There is no suggestion that I wish to compel this in any way; I just want to draw attention to the fact that my personal experience brought this, which I was quite surprised about at the time. There was a focus on saying, “Do good in your own area”, but there was also a desire for the diversity to do good in other areas as well. Maybe you need it under a separate heading, but I just thought I would table this amendment to draw attention to this point and to make sure that, when it comes to regulations, maybe it is in the mind of the Minister and others that there should be some wriggle room around what is defined as local.
Baroness Altmann (Non-Afl)
My Lords, I added my name to the amendment tabled by the noble Lord, Lord Davies, and I endorse his remarks. There is a clear need for social housing and I would be grateful if the Minister could explain to the Committee the impact of asset pooling and whether it perhaps interferes with funds from local authority pension schemes being invested in social housing.
There is a clear need across the country for improvements in the housing stock. Local areas can know what the need for build-to-rent might be or the need for social housing that is disability friendly or friendly for an ageing population. These areas are not necessarily the focus of some of the private sector housebuilders. Using this resource to improve the lives of local residents—perhaps it would improve the futures of pension scheme members themselves—as well as areas around the country, would be important and I would be grateful to hear the Minister’s views.
I also support Amendment 12, which was so well introduced by the noble Baroness, Lady Bowles. It is essential that the resources in both local and national pension schemes are invested to benefit local and national growth. The diversification benefits of investing in areas much wider than just the local area are clear in terms of using pension fund assets to boost long-term growth, which is an aim the Government rightly have.
I know the Government want to use pension fund assets to benefit Britain, and it seems that local authority pension schemes offer an ideal opportunity for that. If these asset pools can invest more broadly than just the local area, and local authority pension schemes are encouraged to have a diversification spread across the country, I hope that would be a significant improvement and a tangible benefit from the funding that goes into these schemes and from the strong position they have built.
Lord Fuller (Con)
My Lords, I want to focus in this group on the nature of local investment. Once again I find myself in broad agreement with the noble Lord, Lord Davies; I am not quite sure whether I should be concerned or he should be.
Clause 2 of the Bill places a duty on LGPS administering authorities to co-operate with strategic authorities, which are defined in the Bill, to
“identify and develop appropriate investment opportunities”
in relation to local investments.
The Bill defines what a local investment is and encourages co-operation, but does not define what constitutes appropriate investment opportunities, how co-operation is to be structured and what the core governance is. Of course, governance leads to covenant strength—in turn to coupon and thus to viability, so this is quite important—and the metrics for assessing local impact. We need further explanation of the duty to co-operate between LGPS authorities, not just within the pool but possibly elsewhere.
If you restrict investment opportunities just to a local area, as other noble Lords have said, it leads you to concentration risk, which is bad for two reasons. First, it is inherently more risky, but it also locks other investors out of the closed shop that then exists between the local pool and its home strategic authority. I have to ask the Minister, who I assume is going to respond here: why would the Government want to make it harder for a northern pension fund to invest in the south—or, probably the other way around, why would they make it difficult for a southern pool to be able to invest in a northern opportunity? As we heard in the previous group, there are provisions in the Bill that will prevent a scheme being involved in any more than one pool.
For “co-operation” I sometimes read “connivance”, and that can never be a good thing when you get a statutory and enforced failure of the separation of duties between those selling investment opportunities and those buying them. Thinking more widely, we know that there is a national infrastructure bank, which is to morph into the National Wealth Fund—I am possibly not the only noble Lord to have been invited to a reception it is holding in our House on 28 January. But the clue is in the name: it is the National Wealth Fund, not the local one. So, where might the order of priority be in the funding and financing here: national or local? When we think about local, we need to have a deep understanding, if we are to start making these investments, of greenfield versus brownfield, and I am concerned about the capacity and capability of funds to manage greenfield development, especially under pooling. That is another perverse consequence of getting too big.
This is where I align myself with the noble Lord, Lord Davies, because during the passage of the Planning and Infrastructure Act, I proposed amendments so that mayoral development corporations could have the financial instruments to go to bodies such as local pension funds and issue debt, so we could build affordable housing or new towns and so on. I divided the House, and noble Lords on the government side defeated us. So, now that the principle of development corporations for the purposes of new towns or affordable housing has been taken off the table, can the noble Lord say how they intend to legislate to enable these local investments with strategic authorities? By their votes they have shown that they are dead against that.
However, there is more, because I am very anxious about the definition of a “responsible investment”, which is in Clause 2(4). Clearly, nobody wants irresponsible investment, but what is responsible? Do we prohibit investments in alcohol, tobacco or sugar, or in supermarkets because they sell the sugar, tobacco and alcohol, or in arms, oil or bookmakers? I have seen it all before. Everybody has an opinion, and some beneficiary members sometimes think they own the scheme. There is much virtue signalling to be had, where long-term returns take a back seat, which results in fewer returns and less business ideas with solid, repeatable cash flows, and the poor member and the taxpayer ultimately suffer from the vanity.
I have seen with my own eyes the letter writing from these people who purport to tell pension committee members and trustees what they should invest in, but where does it end? It ends in the limits of the constellation of investment ideas, so that everybody else ends up chasing the same stocks in a value-destroying bubble, creating systemic risks when everyone does the same thing. It also ends up with the so-called ethical investment funds that disproportionately have gone into ESG investments, putting those ahead of returns, being the lemons in the market. Yet that is what the Bill encourages. There should be no role for ministerial direction in the type of investments. If we want a dynamic economy, you do not create it by wrapping the flow of capital in red tape.
If the Government wish to make infrastructure more investible, whether nationally or locally, they need to create investible opportunities. I know that toll roads are not popular and that a flood defence does not pay rent, but the Government would be better employed creating new asset classes where desirable investments can be matched with long-term returns, rather than herding them into the same old asset classes.
I realise that this is a probing amendment, but I accept that the Government should seek to promote the alignment between pension funds, affordable housing, new towns and other investment opportunities. However, by their actions, they put every obstacle in the way. Can the Minister say what steps will be taken, presumably when we get to Report, to breathe fresh life into the possibility, which was contemplated in the Planning and Infrastructure Act, whereby local bodies may issue local bonds for debt or whatever else, so that we can get the flow of capital to make this country richer, rather than just herding into the same old asset classes that we compete with everybody else for?
Viscount Thurso (LD)
My Lords, I will briefly give my support to the noble Lord, Lord Davies. I believe that many schemes would absolutely like to put money into social housing. The scheme of which I am a trustee, and which I mentioned earlier, has recently put 5% into social housing—it is entitled to do that, and it did so based on an investment case. It has put a further 5% into social infrastructure—it has also done that based on an investment case; it is part of the protection assets within the fund. We are allowed to do that, so can the Minister therefore say whether anything in the Bill prevents the funds that we are discussing from doing exactly the same thing?
Baroness Stedman-Scott (Con)
My Lords, we come to another group of largely probing amendments, which I welcome. A good deal of the process on the Bill will be about unpacking what the Government intend, how these provisions will work in practice and what the industry can anticipate. Certainly, those are the questions that have been raised with me in my engagement with representatives.
I will speak briefly to the amendments in the names of other noble Lords, many of which are clearly probing in nature and raise important and legitimate questions about how Local Government Pension Scheme assets might be deployed to support wider economic and social objectives. We welcome that debate. It is right that Parliament explores how long-term patient capital can help support UK growth, infrastructure and social outcomes. I recognise the spirit in which these amendments have been brought forward.
However, from our side, we believe that it is important to be clear about a central principle: LGPS funds are, first and foremost, fiduciary vehicles. Scheme managers have a legal duty to act in the best financial interests of members and beneficiaries, and that duty must remain paramount. However, I note that the Local Government Pension Scheme’s advisory board has already warned that:
“New government regulations could ‘directly usurp’ the most fundamental duty of council pension funds”.
Could the Minister address that in his response?
Opportunities for investments in areas such as UK growth assets or social housing should therefore be presented, structured and made investable in a way that meets risk-adjusted return requirements and not mandated or directed through statute. There is a clear difference between creating a strong pipeline of investable opportunities and compelling capital allocation. Once we move from encouragement to prescription, we risk undermining trustee independence.
Many of the amendments in this group helpfully test where that boundary should sit, and I hope that the Minister can reassure the Committee that the Government’s approach is to enable, not to direct, in order to attract pension investment through quality and value, not through compulsion. If we keep fiduciary duty at the centre and focus on making UK opportunities genuinely competitive investments, growth and good pensions will go hand in hand. That is the balance that we are keen to see maintained.
I shall speak to my two amendments in this group, Amendments 9 and 11, which are intended to improve clarity, accountability and future-proofing in Clause 2, rather than to change the underlying investment powers of the scheme managers.
Amendment 9 would require scheme managers to publish an annual report on the local investments held within their asset pool companies, including both the extent of those investments and their financial performance. If local investment is to play an increasing role within LGPS portfolios, transparency is essential. Members, employers and taxpayers are entitled to understand not only where capital is being deployed but how it is performing. This amendment would not mandate local investment; nor would it direct decision-making. It simply asks that where such investments are made, they are visible, measurable and open to scrutiny. The question it poses to the Government is straightforward: is transparency, rather than compulsion, the right way to build confidence in local investment? We believe that it is.
I add at this point that a great many Bills are coming before your Lordships’ House in which the interaction with post-devolution structures is far from clear. The Government should be making more of an effort to provide clarity on the post-devolution picture when drafting legislation. I therefore ask the Minister—here come the exam questions—how do the Government intend to keep the definition of strategic authorities under review as devolution evolves? What assurances can be given that future legislation will align properly with the new devolved arrangements? Do the Government accept that there is a risk of confusion and overlap if these definitions are not regularly updated to reflect constitutional changes? More broadly, what steps are the Government taking to ensure a coherent and consistent approach to the interaction between the new powers and devolution settlements? Crucially, how will assets and liabilities be carved up post devolution, and can the Minister assure us that this will be done independently? I am very happy for the Minister to write, rather than bombarding him with a massive amount of work now—although maybe we should; I do not know.
Amendment 11 is probing in nature and concerns the definition of strategic authorities. Currently, the Bill hard-codes a specific list of bodies in primary legislation, yet the architecture of English devolution is changing rapidly, not least through the forthcoming English devolution Bill. This amendment therefore asks whether that definition is sufficiently agile and future-proofed or whether it risks becoming outdated almost as soon as it is enacted. It invites the Minister to explain how the Government intend to ensure that LGPS governance can adapt to evolving local and regional structures without requiring repeated primary legislation.
Taken together, these amendments seek to strengthen Clause 2 by reinforcing accountability on the one hand and flexibility on the other, while preserving the core principle that investment decisions must remain firmly rooted in fiduciary duty. I look forward to the Minister’s response to the questions the amendments raise and his reassurance that the Government’s approach is to enable good investment decisions through transparency and clarity rather than prescription.
Lord Katz (Lab)
My Lords, I am grateful to noble Lords for these amendments and for the probing and helpful debate that we have had on this group.
I turn first to Amendment 7 in the name of my noble friend Lord Davies of Brixton, which explores how LGPS assets might be used to provide social housing. The Government aim to ensure that LGPS investments support the prosperity and well-being of their local communities, just as members did throughout their working lives—an aim that is certainly reflected in my noble friend’s amendment. However, the Government do not wish to direct asset pools as to the manner of their investments—to be fair to my noble friend, he said that this was not about mandation. To respect the independence of LGPS funds, it remains the responsibility of administering authorities to set their investment strategy.
The reforms will require administering authorities to co-operate with strategic authorities to identify and develop appropriate investment opportunities, which may include social housing-related investments. While social housing is a high priority for local areas and may provide suitable opportunities for investment, it should be for strategic authorities to consider and set priorities appropriate for their areas.
My noble friend asked whether the revised regulations might act as a barrier to investing in social housing. We would say that that is not the case; there will not be a barrier. Administering authorities will continue to set the investment strategy for their fund, including local investment priorities. They must have regard to local growth priorities in setting their investment strategy and can recommend opportunities to their pool. Local investments are not restricted to any asset classes. The Government see housing as one of as the investment sectors with the greatest potential for local government impact.
My noble friend Lady Warwick of Undercliffe spoke cogently and with some passion on the importance of increasing social housing. That is something the Government would align with. She asked whether we were confident that, without reference to social housing in the Bill, the LGPS will invest in it. I say to her—to be fair there was some acknowledgement of this in her comments and in those of my noble friend Lord Davies—that there is a long history of local investment by the LGPS. Cornwall Pension Fund, for example, has committed more than £100 million to a local impact fund with a focus on solar farms and affordable housing. Greater Manchester Pension Fund has backed major housing and regeneration projects in the north-west, to which it commits 5% of its total assets. The LPP pool is a major investor in the Haweswater Aqueduct Resilience Programme. The London and LPP pools have established the £250 million London fund, to which my noble friend Lord Davies referred. It invests in opportunities in London, including in residential property and affordable housing, as well as community regeneration, digital infrastructure and clean energy.
My noble friend Lady Warwick asked whether the Government would ensure that all LGPS have the right tools to provide the best returns for members. The Government’s expectation is that the reforms will deliver the wider benefits of professionalised asset management, including long-term savings and efficiency. We are also aiming to strengthen LGPS fund governance. Better governance ensures decisions are more effective, with decision-makers able to be agile, better at managing risk and able to pick up opportunities.
Amendment 11 was mentioned by a number of noble Lords and was tabled by the noble Baroness, Lady Stedman-Scott. I agree that the definition of strategic authority should be consistent across all relevant legislation. This Bill and the draft regulations that the Government have prepared will ensure that the authorities that are treated as strategic authorities in England for the purpose of the English Devolution and Community Empowerment Bill are treated as such for the purpose of LGPS investments. If any new authorities become strategic authorities, the Government will use the regulation-making powers to ensure that their treatment remains the same. I hope that addresses some of the concerns raised by the noble Baroness, Lady Stedman-Scott. She talked about her concerns about potential confusion over a changing and emerging landscape. I am happy to write to her with more details, as she was so kind in setting so few exam questions compared with her Front Bench colleague on my earlier group. Her restraint is commendable.
Regarding Amendment 12, I understand the noble Lord’s intention is to encourage greater domestic investment across the whole of the UK and, indeed, growth is the number on mission of this Government. The LGPS already invests approximately 30% of its assets in the UK. Greater consolidation will build on this success story as the pools will have greater capacity and expertise to invest domestically, including in infrastructure and unlisted assets.
The noble Lord, Lord Fuller, asked about the duty to co-operate and whether it would make it difficult for schemes to invest outside their locality. I reassure him that the proposals do not prevent investment outside the area of the funds or the pool. Administering authorities are free to set whatever local investment target they consider appropriate. While investment across the UK is strongly encouraged, the purpose of this requirement is to promote investment that has tangible benefits to the fund or its pool. Expanding the definition to the whole of the UK would go too far and local benefits would be diluted.
Viscount Thurso (LD)
Does the Minister agree that ESG and responsible investing is perhaps best summed up in the stewardship code, which most responsible investors use?
Lord Katz (Lab)
I could not have put it better myself. We have to be careful in regarding ESG as fashionable politics, inserting itself into a fashionable investment space. We have to be careful not to throw the baby out with the bathwater and to really appreciate that there are good reasons why certain investments are more popular and investments in other areas are being shunned. There are trends in industry and society as to what products and classes of investment are popular. Sometimes, we can overthink these things.
I am pleased that the noble Viscount, Lord Thurso, popped up because I was just about to address his question about the Bill preventing funds setting targets on local investment, on this theme. I hope this answers his question: they must set a target, but it can be any value that the fund considers appropriate. They retain that element of flexibility, which I hope is helpful.
Regarding Amendment 9, the Government will require some administering authorities to report on their local investments, including the total investment, and on the impact of investments, in their annual reports through guidance. We consider that Amendment 9 would be an unnecessary duplication of a requirement that was already set out in guidance and in regulations. We think that it would not add anything to the Bill, as that regulation is already good practice—it is already there.
Amendment 12, spoken to by noble Baronesses, Lady Bowles and Lady Altmann, seeks to expand the definition of local investments beyond stretching point: it could mean investments for the benefit of persons living or working in any of the administering authorities’ local areas. Our fear here is that the amendment would, in effect, break the definition of local investment, as it could mean any investment in England and Wales. We contend that local investment, as it stands, has a broad definition, as it can refer to investments that have measurable beneficial impact for people living or working in areas local to, or in the region of, the administering authority, or of its pool partner administering authorities. As a consequence, this is broad enough to capture an appropriately wide geographic range while ensuring that there are still benefits for the local area.
To ensure a clear and firm trajectory to consolidation and benefits at scale for the scheme as a whole, along with the assurance I hope I have provided to the noble Lords in discussing these amendments, I respectfully ask my noble friend Lord Davies to withdraw his amendment.
Lord Davies of Brixton (Lab)
I thank my noble friend the Minister for his reply. As I made clear, my amendment was not about mandation or compulsion but the ability for local authority funds to invest in ways which are seen as socially beneficial. There was general agreement about the synergy, as I put it, between investing in social housing and the investment needs of local authority funds. The Minister was clear that it should not be a barrier, but, as the regulations are still being discussed, and as the statutory guidance has not been agreed yet, this is a moving feast. I hope that, at some stage, we will be able to get a specific statement on the ability of funds to invest in housing, and in the other ways which have been suggested. I beg leave to withdraw the amendment.
Baroness Altmann
“(d) specifying the percentage of new contributions which must be invested in United Kingdom growth assets.”Member's explanatory statement
This probing amendment would allow investment strategies to require a particular percentage of new contributions, which include added taxpayer reliefs, to be invested in UK assets which could improve the outlook for UK growth and provide a better retirement environment for members in future.
Baroness Altmann (Non-Afl)
My Lords, in moving Amendment 8, I will speak also to Amendment 13, in my name. The aim of this amendment is to focus on the flow of money going into these schemes, rather than just the investment of the stock of assets that are already held, which has been the focus so far and is generally the focus of everything else in the Bill. Both are important.
Take, for example, value for money for taxpayers and members. With so much money going in each year—the latest estimates are £10 billion a year of employer contributions alone, let alone the members who are local workers—there seem to be strong reasons why we should expect targets to be set. If we are setting targets for other types of areas of investment, and for the investment of new contributions, we should have a local or national focus, or both.
This is obviously a probing amendment. As I declared at Second Reading, I support all private pension schemes also having an incentive to invest a certain percentage—I have suggested 25%—in UK growth assets. I have described UK growth assets in Amendment 13 as including listed and unlisted equities, infrastructure and property, as we have been discussing, all designed to boost long-term UK growth. I hope that the Minister will be able to explain whether the Government have specific objections to this idea and, if so, why?
If the Government are intent on mandating specific asset pools to invest in certain ways, why would they be reluctant to set certain aims or requirements for the new contributions of what are, in effect, publicly underwritten pension schemes? If we are intent on having mandation, requiring asset pools to invest in certain ways and requiring these funds to invest in them, and if we are not, as we will come to later, looking at ways of permitting employers to either significantly reduce their contributions or have a contribution holiday, would it not be sensible for the Government to look at directing those contributions—which are being paid into a scheme that does not need the money, as far as the actuarial certifications are concerned—to invest to boost long-term growth? I beg to move Amendment 8.
Lord Palmer of Childs Hill (LD)
This is an important, basic matter. Directing investment by asset types raises difficulties. If pension funds or individuals knew which assets were going to go up, there would be no problem, but there is no guarantee of that, so, my question to the Minister is: are pension funds primarily long-term investors acting for members or instruments of policy delivery? The answer matters a lot for confidence in Local Government Pension Scheme governance. I am all for productive investment, but it can be a slippery slope if you get it wrong. I wonder whether the Minister can give us some guidance on that.
Viscount Younger of Leckie (Con)
My Lords, I thank the noble Baroness, Lady Altmann, for her two amendments in this group, for the remarkably brief discussion that has been prompted and for the opportunity that they provided for her and us to probe the Minister on these important issues. Noble Lords will be pleased to hear that I will not rehearse the arguments at length, as I touched on them in some detail earlier. However, I wish briefly to reiterate what I regard as a central and non-negotiable principle: the Local Government Pension Scheme exists first and foremost as a fiduciary vehicle. Scheme managers are under a clear legal duty to act in the best financial interests of members and beneficiaries, and that duty must remain paramount.
Against that background, Amendment 13 raises a particularly important question, one that has been put to us repeatedly by industry representatives from a wide range of backgrounds; namely, what type of assets do the Government have in mind in which funds should be directed to invest? I think this is the essential argument of the noble Baroness, Lady Altmann. Is the intention to focus on infrastructure, debt servicing or supporting new towns and similar developments? The noble Baroness also raised the point of what percentage should be invested in UK assets. As she pointed out, perhaps 25% should be invested in UK growth assets, and, therefore, what is the definition of growth? Lots of questions arise from the noble Baroness’s amendments.
I recognise, and I think the noble Baroness alluded to this, that we will return to this issue in greater detail when we come to consider the reserve power, but like the noble Baroness, I wish to flag this matter at this stage as it has been a theme this afternoon on this first day of Committee and a live and pressing question not only for us but, I reiterate, for the many third-party stakeholders with whom we have engaged.
Lord Katz (Lab)
My Lords, I, too, thank the noble Baroness, Lady Altmann, for tabling these amendments. I cannot speak on behalf of the whole Committee, but I would say that it is most people’s intention to encourage greater investment in UK assets. Growth is certainly the number one mission of this Government. If you did not realise that, you have probably been hiding under a rock these past few months and years.
These amendments would direct LGPS funds to make investments in certain UK asset classes. Supporting UK growth by making investments in such assets, in tandem with seeking appropriate returns, is a valuable function of the scheme and the noble Baroness is right to be interested in this important topic. As I have mentioned, the LGPS already invests around 30% of assets in the UK. Greater consolidation will build on this success story, as the pools will have greater capacity and expertise to invest domestically.
Baroness Altmann (Non-Afl)
I stress that the amendment is a “may” or “must”; the group does not require a “must”. This was intended to help the Government understand that there are merits in considering the flow and the stock. If there is new contribution flow of a particular size going into an area—this can be part of regulations; it is not required—that could well have a less damaging impact on the market than mandating or aiming. For example, Clause 2(4)(c) talks about “target ranges” for strategic asset allocation to growth assets and income assets. With a fund of this size, when talking about a target range for growth assets or any other assets, we might be moving the markets, because so much money would need to be shifted around. That is much less of an issue with the new contribution flow, but it could still achieve some of the objectives that the Government are seeking to attain.
Lord Katz (Lab)
I thank the noble Baroness for that intervention and clarification. I do not want to comment specifically on whether the scale of that investment would be market moving; I do not have the expertise to say that. I want to underline that, ultimately, we think it is for administering authorities and the pools to decide where these investments are made. That is right, because it is the way they fulfil their fiduciary duties. I am happy to look at her contribution again and, if I can add to that explanation, I will happily write to her.
The noble Lord, Lord Palmer of Childs Hill, asked whether pension funds are investments of policy delivery. As I stated earlier, the responsibility for setting investment strategy remains with the funds. The Government are not taking powers to direct asset pools to make or not make investments in specific projects. To be clear, it goes back to the fact that it is for those administering authorities and pools to make those decisions.
Baroness Altmann (Non-Afl)
I am so sorry, but this is a really important point. In Clause 2(4), paragraphs (a), (b) and (c)—in particular paragraph (c), to which my amendment seeks to add something—state that we are talking about
“strategic asset allocation or target ranges for growth and income”.
That absolutely sounds as though the Government could—it is “may”, not “must”, so it may not happen—leave the door open to directing investments in the way the Minister says the Government do not wish to do. I would be grateful for some clarification; I do not need it now, as I am happy either for the Minister to write or for us to meet to discuss it.
Lord Palmer of Childs Hill (LD)
I have always reckoned that the duty of pension fund managers is to the members. What we are trying to do now is say that they have other duties; however, it is not very clear where the borderline is.
Baroness Stedman-Scott (Con)
I know how frustrating it is when Members keep getting up to ask questions, but I have to do this. The Minister referred to a backstop. For what purpose? In what circumstances would it be used? Can the Minister help us understand that?
Lord Katz (Lab)
The backstop power relates to our earlier discussion on previous amendments. It would be used in extremis. The problem is that the noble Baroness is asking me to conject on what are hypothetical situations. Some of these issues will be set out in some of the regulations that will follow.
I am happy to go back a couple of interventions and pick up the point made by the noble Baroness, Lady Altmann. I would be happy to write to try to clarify the distinction that we are making. Of course we want to see good levels of investment in a range of different asset classes, but we are absolutely not saying that this is a slippery slope to taking powers of direction or mandation. We are very clear on that. Ultimately, this is the nature of pensions legislation: some of the clarity comes down stream. We are clear that the Government’s intention in the Bill is purely to provide the framework to ensure that we can harness the potential of these asset pools to make some meaningful investments.
Baroness Stedman-Scott (Con)
This is in the Bill. I know that the Minister cannot do this now—I accept that he can write to me—but can he please help us? If it is in the Bill, we need to know what it means before regulations come.
Lord Katz (Lab)
I am not sure whether I can provide much more clarity than I have done so far, so I would be very happy to write to the noble Baroness to spell that out.
I realise that I have not given the levels of satisfaction and clarity that Members perhaps wanted but, as these are probing amendments, we contend that they would have a minimal impact. On that basis, I ask the noble Baroness to withdraw her amendment.
Baroness Altmann (Non-Afl)
I thank the Minister for his answers; I feel for him in his position. I am happy to withdraw the amendment; we can have further interaction at a later stage.
“(4A) An investment strategy under subsection (3)(b) may not specify preferences between comparable or competing investment vehicles.”
Baroness Bowles of Berkhamsted (LD)
My Lords, Amendment 10 says simply:
“An investment strategy under subsection (3)(b) may not specify preferences between comparable or competing investment vehicles”.
This concerns the same part of the Bill that we were discussing in the previous group. In other words, if the Government are taking powers over what assets pension schemes may hold, even if that is a reserve power, those powers must not discriminate between comparable routes to access those assets.
It is a defensive amendment. Why do I need to table such a basic safeguard? It is because, later in the Bill, in new Section 28C of FSMA, the Government do discriminate for DC default funds. It excludes listed investment companies even when they can hold exactly the same underlying assets as the favoured long-term asset fund, the LTAF wrapper. That is how creeping cartels begin. Who is to say such direction will not next be targeted at a local authority pension fund, many of which have historically favoured listed investment companies as ideal for local infrastructure investment?
The Minister’s letter, which arrived on Friday, explains how the Government are now creeping the cartel onwards. The letter puts this front and centre. The Minister confirms that the exclusion of listed investment companies is deliberate and that the purpose of these powers is to
“support the Mansion House Accord”.
We have already been alerted to the competition law risks around the Mansion House Accord. An article by competition lawyer Matthew Hall in the Times last May warned that the accord risked co-ordinated investment intentions that could raise competition law concerns, and that government encouragement does not create a legal exemption. Those comments came before we learned about exclusions. Government legislation—which would mean regulations, not just the framework of this Bill—could override competition law, but only with a clear public interest justification and far more scrutiny than cosy discussions behind closed doors.
Let us look at the public record. In public, the accord—from the ABI, the City of London and the Pensions and Lifetime Savings Association—refers simply to
“allocating at least 10% to private markets … and within that, at least 5% … to UK private markets”.
At the bottom, it defines UK private markets as being
“where the underlying assets are based in the UK”.
Thus, it is not looking at the wrapper they sit in; it does not exclude listed investment companies; and it does not require the use of LTAFs. It explicitly acknowledges looking through to the underlying assets.
In the Bill, that has been transposed to an exemplary asset list and a definition that deliberately excludes listed securities, and for that to cover listed investment companies, despite the fact that they are slightly different as they have exemptions for growth markets. Rhetoric has followed that anything listed is excluded. If the accord does not say it and no consultation or public document has said it, but according to the Minister it is being done in the name of the accord, something has happened in private—what and with whom?
Baroness Altmann (Non-Afl)
My Lords, I strongly support the amendment in the name of the noble Baroness, Lady Bowles, and all that she has said so far on the ramifications and the importance of this issue to the Bill—indeed, to the wider UK financial market landscape.
The Government require from the Mansion House Accord investment in unlisted assets, private equity, infrastructure and so on. The Minister stressed in writing that she can confirm that the aim is broadly limited to unlisted assets and consistent with the scope of the Mansion House Accord. If that is the aim of the reserve powers and an overriding objective of this Government, it makes the explicit exclusion later on of this particular asset type—the wrapper, as the noble Baroness, Lady Bowles, called it—even more mystifying.
I have amendments later to the relevant clauses that would specifically make the Bill include these closed-ended investment companies, rather than exclude them, which is more opaque.
As regards the LGPS, using closed-ended listed companies is an ideal way for these funds to invest in local infrastructure where the council and local residents can see the impact. It fits with the Government’s aim too. But by explicitly excluding closed-ended funds and because of the regulatory undermining of this type of fund, which makes up one-third of the FTSE 250 and is an important element of the asset management industry of the City of London and, in particular, of Edinburgh, we are starting to see—I am told that West Yorkshire is an example—that local authorities which have previously invested are disinvesting from these investments.
At the moment, there is a regulatory driver making these closed-ended investment companies appear more expensive than they are. Trying to favour open-ended structures over closed-ended structures, even when the closed-ended structure is the most suitable for holding long-term illiquid investments, makes no sense to me or to many in the industry. Why should investors have to be told that investing in a closed-ended company is costly to them when the costs are paid by the company? They are merely a shareholder. They are not directly charged. With an open-ended fund they are, but not with a closed-ended fund.
Will the Minister explain or write to me to explain—I recognise that there are complexities here that he may not wish or be able to deal with at the moment—why the Bill has excluded these types of investment, reassure the Committee that local authorities will not be directed to exclude these investments and explain why our Government seem to be moving in the opposite direction from other countries, which are apparently now considering launching closed-end investment companies to invest in these kinds of assets?
The FCA designed and authorised the long-term asset funds which the Government seem to favour. They are open-ended structures. One argument that illustrates perfectly the perversity of the Government’s position and the importance of this issue—I make no apology for labouring the point because it is so important to pension scheme investments—is that long-term asset funds will be allowed to hold up to 50% in listed assets. Although the Government want long-term asset funds specifically to promote and guide the investment of long-term pension funds into unlisted assets, their favoured structure—the long-term asset fund, or open-ended funds in general—will have to have listed assets to help manage their liquidity. Closed-ended funds are not constrained in the same way.
Lord Davies of Brixton (Lab)
This is really a debate by proxy on Section 40 and new Section 28C; I am sure that we can all look forward to a repeat of this discussion.
I am not against mandation in principle; it is entirely reasonable for a Government to adopt that approach. What worries me here is that, for some reason, they are putting investment classes into statute. That is just wrong. The point here is broader than the one just made by the noble Baronesses. To pick out sectors of investment, the Government are giving their imprimatur to these particular classes of investment; however, they will go wrong at some stage, and the Government will be on the hook for having advocated for them. I am against having any of these references in the Bill. I do not want to see anything added; I want them to be taken out.
Lord Fuller (Con)
My Lords, now I am really worried—every time I have followed the noble Lord, Lord Davies of Brixton, I have tried to amplify the points he has made.
I congratulate the noble Baroness, Lady Bowles, on her masterful exposition of a technical piece of detail; she brought it down to the ground and made it alive. She put her finger on it when many of us have not been able to put our finger on what makes us so uncomfortable about the Bill. We know that it is not right. When you get meddlesome Ministers fiddling around in stuff where they do not really know what they are doing, there is not just co-operation but—as the noble Baroness exposed—a connivance and a cartel. She explained how those two things have led to conflicts of interest; there will be a lot of Cs in the words I am about to use. It is anti-competitive, and it has restricted choice.
The noble Baroness has wedged open the door because, later on in the Bill, there are provisions—I will not defer to them too much now—for the existing operators to lock out new entrants. I was instinctively uncomfortable with that but, now, I am worried because there seems to be a guiding hand here to reduce choice, stifle innovation and damage the reputation of the City. I do not think that that was purposeful, but this is what happens when you get a Bill that is so overly complicated and takes people away from saving for their long-term retirement.
I nearly feel sorry for the noble Lord, Lord Katz, because I have never seen such an evisceration. I am sure he is going to defend it and do the best he can. But what the noble Baroness, Lady Bowles, has shown is that it is rather like the Chancellor, who now says she had no idea what was really happening when she put the rates on the pubs. It was a mistake, and she did not have all the information to hand. While I accept that the noble Lord, Lord Davies, has said we will come back to this on another day, I thank the noble Baroness, Lady Bowles, because she has given an opportunity—a breathing space or an air gap—for the Government to now go back to look at this in more detail.
The noble Baroness, Lady Altmann, also laid out the import of this amendment when she said that one-third of all the FTSE 350 is engaged in this. I expect the Minister in winding to say, for a third time, that growth is the number one priority of this Government. Let us hope he does say that because, if he does, he will either accept this amendment here and now, or give an undertaking that, at some stage before we get to this in the main part of the debate, it will be accepted and we can move on.
It is not just casting a shadow over the LGPS and the parts of Yorkshire which are disinvesting; it is accidentally casting a shadow over the City of London, which is the world’s second or third largest financial centre. It must be stopped. I think the noble Baroness, Lady Bowles, has done the Committee and our nation a great service in the last half an hour, and she is to be congratulated for it.
Viscount Younger of Leckie (Con)
My Lords, I was due to give a very short speech. It is still short, but it has got slightly longer in terms of the content of this debate. I am particularly grateful to the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for tabling Amendment 10, which we welcome and which I understand to be a sensible and proportionate safeguarding measure. I want to go a bit further because there were two particularly powerful speeches, in particular that from the noble Baroness, Lady Bowles.
As we read it, the amendment seeks to ensure that investment strategies cannot be used to favour particular investment vehicles over comparable or competing alternatives. In doing so, it would help to guard against strategies becoming a back-door means of directing capital, rather than serving their proper purpose as high-level statements of investment policy.
That distinction matters. Investment strategies should guide objectives, risk appetite and approach and not hardwire specific vehicles or delivery mechanisms into statute or regulation. Preventing the embedding of such preferences also reduces the risk of political or regulatory pressure or—I will use the word—interference, being reflected in investment strategy documents and helps to preserve trustee independence and proper decision-making. Although it is a serious subject, the noble Baroness, Lady Bowles, gave us a succinct, well-argued speech with her bucket wrapper analogy. She gave a hard-hitting speech with some important questions which I hope the Minister will be able to answer.
One issue that has been made clear today, which has arisen in a number of debates, and was encapsulated in this short debate, is the opaqueness of “government direction”. I was very taken by the equally hard-hitting speech from my noble friend Lord Fuller. The confusion—by the way, the C is for confusion, just to add that in—is over the responsibility with the grey areas, notably in respect to the understandings, or not, from the Mansion House Accord and those who were the signatories.
One question to ask is whether those signatories now realise what they have got themselves into, or what their understanding was then and what it is now. I ask that as an open question, particularly in relation to the inclusion or exclusion of different types of investment. The noble Baroness, Lady Altmann, focused particularly on open-ended or close-ended. There is a lot of emphasis here. Most unusually, I was in total agreement with the noble Lord, Lord Davies. I am not sure that that has happened with me in the past.
To conclude, we therefore welcome the intent of Amendment 10. It would be very helpful if the Minister could indicate whether—and if so, how—the Bill as currently drafted already guards against this risk. It is a crucial question and relates to all the questions that have been asked. What assurances can be given that investment strategies will not be used to prescribe or favour particular investment vehicles in practice?
Lord Katz (Lab)
My Lords, I am grateful to the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for this amendment. I agree with them that funds in the LGPS should not be specifying preferences between similar investment vehicles in their investment strategies. I fear that the rest of my response may well disappoint the noble Baroness, Lady Bowles, and—though perhaps not to such a great extent—the noble Baroness, Lady Altmann. I say in passing to the Committee that it is always good to hear consensus breaking out, even if it rather gets to the horseshoe theory of politics when it is my noble friend Lord Davies and the noble Lord, Lord Fuller. But let us try to end today’s Committee session on a positive note.
I will now go into the detail. Under our reforms, decisions on implementation of strategies, including selection of appropriate vehicles and managers, will be made by the LGPS pools, which will have the capacity and expertise to deliver the benefits of scale that we have discussed. It is the Government’s view that the draft regulations are already clear in that respect. This will be supported by guidance, setting out that investment manager selection is solely the responsibility of the pool. LGPS pools will make the decision on whether to invest through external managers and which managers to use, and there is nothing whatever to prevent them using investment trusts should they consider it beneficial.
This is where the space for disappointment potentially arises. I am aware of the concerns expressed in relation to the treatment of listed investment funds, notably investment companies and trusts, under the reserve asset allocation powers, which are relevant to DC pension schemes. That was set out very powerfully by the noble Baroness, Lady Bowles. The Committee will have the chance to debate these concerns when we reach Clause 40 and discuss Chapter 3, which deals with asset allocation for DC schemes.
To get to the heart of it, the noble Baroness, Lady Altmann, asked about the impact on the LGPS. To give reassurance, we are not excluding closed-ended investment funds from the LGPS. I can be absolutely clear that that is the case. We are not excluding them, and neither will local authorities be directed to exclude them. I hope that provides clarity as we discuss the LGPS elements of the Bill.
Having said that, we have had comments around investment and asset types, particularly from my noble friend Lord Davies, as well as others, on this group of amendments. We will take what has been said and consider it in time for the debate on this issue when we get to it in greater detail. In anticipation of that day—which we are all looking forward to, particularly at two minutes to Committee rising—I ask the noble Baroness, Lady Bowles, to withdraw her amendment.
Baroness Bowles of Berkhamsted (LD)
I will be as brief as I can. I thank all those who have spoken in the debate, particularly for the support that I have received. The noble Lord, Lord Davies, is to some extent correct in that this is a proxy for what comes later, but I wanted to give the Committee that reflection time over competition law issues, because it is not necessary: exactly the same will happen without defaming listed investment companies and doing them down. The channels of how the investments are going to go will be the same. But the Minister has still not answered the question. Who asked for the exclusion? It is not in the accord. We have been told that it is in the accord but, as I have explained, the wording gives the opposite direction.
We have been told by Ministers that it is the pension funds, or anybody except the Government. It is somebody’s fault that it is there. I regret that I think it is deliberate rather than accidental but never mind that as long as it goes because it is not necessary to defend what the Government want to defend. That would be fine by me. It is relevant to local government funds because they invest so much that way. Therefore, it was a genuine concern that a reserved power could begin to replicate the reserved power in new Section 28C. It was not a totally bogus proxy, if I could put it that way. I have elaborated the point; as I have said I can do much more yet. With that, I beg leave to withdraw my amendment.
Message from the King
The Lord Chamberlain Lord Benyon
My Lords, I have the honour to notify your Lordships that His Majesty the King, having been informed that your Lordships have elected Lord Forsyth of Drumlean to be Lord Speaker, has pleasure in confirming your Lordships’ choice of him as your Speaker.
Election of Lord Speaker
(1 day, 4 hours ago)
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The Lord Privy Seal (Baroness Smith of Basildon) (Lab)
My Lords, on behalf of the whole House, I congratulate the noble Lord, Lord Forsyth, on being elected our Lord Speaker. I look forward to working closely with him in his new role when he takes up the post next month. I know he will represent the House rigorously and will act robustly—as he is known to—in the role for Members across your Lordships’ House. I also pay tribute to the noble Baroness, Lady Bull.
Baroness Smith of Basildon (Lab)
Hers was a dedicated campaign and candidacy. Both candidates were an absolute credit to your Lordships’ House and I thank them. The campaign process was courteous and dignified, showing that, despite being the unelected House, we can run a good election. I also extend thanks to all the House staff involved in the election, particularly those in the Journal Office, the Hansard Society and the digital team for supporting all Members to take part and making sure that a right and proper procedure was followed.
As usual, time will be made available for the House to pay tribute to my noble friend Lord McFall when he leaves the Woolsack, and I have promised him, under pain of retaliation, that we will not be paying tribute to him today and pre-empting the tributes we will pay later, but I know that the whole House will want to thank him for what has been really sterling service to the House for so many years. Thank you.
Lord True (Con)
My Lords, I entirely endorse everything the Leader of the House has said on our behalf. I congratulate my noble friend Lord Forsyth—and he is my friend. However, I remember that, when I first became a Minister in your Lordships’ House, it fell to my noble friend to ask the first Question. I was very pleased and went up to him and said, “I’m glad it’s you asking a Question” and he said, “Yes, yes, good”. And, my Lords, he asked me a right bastard of a Question! I am sorry: that may not be parliamentary language. He asked me a really difficult Question. I said to him afterwards, “So what’s going on?” He gave me that seraphic smile and said, “Well, you did very well”.
I only tell that story to show that I know my noble friend, as the Leader of the House said, is rigorous in his scrutiny. He was as rigorous in his scrutiny of us on our side when we were in Government as he is here. He is a great parliamentarian and will be a wonderful servant of your Lordships’ House in his new role, I have no doubt.
Like the Leader, I would like to pay a most sincere tribute to—if I may say—my noble friend Lady Bull, who conducted herself with her habitual decorum and charm. I hope she will take from this election a sense of the respect and affection in which she is held. The Cross Benches are a vital part of this House, and long may that remain.
Like others, I accept the strictures that there should be no tributes to the Lord Speaker today. I regret, however, that I will not be present on the day assigned for tributes, for personal reasons. Therefore, I hope noble Lords will forgive me if I take 30 seconds to express my deepest sense of friendship, affection and gratitude for his service as Lord Speaker, as chair of the commission and in so many other ways. I worked with him as both Leader of the House and Leader of the Opposition, and he treated me in the same way on both occasions. He is a consummate servant of the House, in often not easy circumstances, and some of that may come out in the tributes, along with, in particular and as we all know, his love for and dedication to his wife. He is an outstanding servant of the House and will continue to be so for the rest of the month. I hope he will accept my apologies that I will not be present on the assigned day but will know that these brief words are no less deeply and sincerely meant.
Lord Purvis of Tweed (LD)
My Lords, on behalf of the Liberal Democrat Benches, I too give warm congratulations to the noble Lord, Lord Forsyth, on his election and an efficiently run election. I suspect that Ministers of all party persuasions will feel a slight relief that he will no longer be asking those types of questions of any Minister. I also thank the noble Baroness, Lady Bull, for her candidacy and the way in which she conducted it with a sense of integrity, commitment and optimism: the House thanks her for that.
We wish the noble Lord, Lord Forsyth, well in his work on the Woolsack, and perhaps the noble Earl, Lord Kinnoull, and I can be forgiven for rather liking the Caledonian continuity in the noble Lord, Lord Forsyth, following the noble Lord, Lord McFall. They also have another thing in common: a deeply held passion for parliamentary accountability. Their politics are based on ideas, crafting an argument, shrewdness and, yes, wit. I know that all his estimable skills are going to be put to good use in his service to the House and we wish him well for it.
The Earl of Kinnoull (CB)
My Lords, I will be very brief. I am very much looking forward on the commission to seeing the forensic skills of the noble Lord, Lord Forsyth, as he questions the many people we have to question. I dare say that matters such as the door will have a very rough ride indeed. It is a little hard for us sometimes to recruit Members to the Cross Bench, but I am much looking forward to his arrival in five years’ time. That will be wonderful, and I will reserve everything that I have to say about the many warm and happy memories that I have of the Lord Speaker.
I finish by turning to my noble friend and colleague who ran the very finest of campaigns. I am very glad I am going to be able to carry on sitting next to her; she brings much-needed glamour to our Front Bench.
The Lord Speaker (Lord McFall of Alcluith)
My Lords, I have known and worked alongside the noble Lord, Lord Forsyth, for many years, since we represented neighbouring constituencies in the House of Commons in the 1980s. Michael was Conservative MP for Stirling, on the east bank of Loch Lomond, while I was a Labour representative for Dumbarton on the west side. It is fair to say that we did not see eye to eye on every issue. When there was turbulence in the waters of Loch Lomond, locals would say, “Aye, that’s McFall and Forsyth rowing again”. But, although we locked horns many times, I always recognised Michael as an honourable and distinguished public servant, dedicated to the good governance of our nation and the well-being of its people. That impression has been further cemented by his work here in the House of Lords, particularly as chair of the Economic Affairs Committee and the Financial Services Regulation Committee. After more than 40 years’ service in both Houses of Parliament, I am sure the noble Lord will find, as I have done, that the post of Lord Speaker is both the most rewarding job of his career and the honour of a lifetime.
I thank both the noble Lord, Lord Forsyth, and the noble Baroness, Lady Bull, for putting themselves forward as candidates to serve this House and congratulate them on the constructive way they conducted the election, and I also thank all those involved in the administration of the contest. But above all I congratulate the noble Lord, Lord Forsyth, on his election and offer him my best wishes and support in his new role as Lord Speaker.
Lord Forsyth of Drumlean (Con)
My Lords, I am most grateful for these very flattering tributes from all the Front Benches. My father would have been astonished and my mother would have believed them. I am overwhelmed and slightly humbled, believe it or not—I do not know why noble Lords are all laughing—by the confidence and trust that have been put in me by those who supported my election. Not all noble Lords voted for me and, for those who did not vote for me, I would just like to say that I completely understand why. That is because I had in my opponent a formidable candidate and I echo all the words that have been said about the noble Baroness, Lady Bull.
The Clerk of the House was very kind and told both of us the result on Friday, so we have had quite an interesting weekend trying not to tell anyone what was happening. I rang the noble Baroness, Lady Bull, and she has very kindly agreed to continue to support me as Deputy Speaker. We will work together to deliver what were so many common issues across the Benches—that you can be sure of.
I am sorry we are not allowed to say anything at this stage about the Lord Speaker. I think he has done a brilliant job and it is a great privilege for me to have the opportunity to build on the great work that he has done on increasing accountability in the House and moving us forward. I look forward to serving all noble Lords, whether they voted for me or not, with pleasure, and I will try to avoid being political—which for people like me must be a bit like coming off heroin as an addict.
Independent Water Commission
Baroness McIntosh of Pickering
To ask His Majesty’s Government when they plan to introduce legislation giving effect to the recommendations of the Independent Water Commission chaired by Sir Jon Cunliffe.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, the Government have carefully considered the Independent Water Commission’s final recommendations and will respond in a forthcoming White Paper. A new water reform Bill will then follow, during this Parliament, to bring forward root-and-branch reform that secures better outcomes for customers, protects the environment, stimulates investment and restores trust and accountability. Together with steps already taken by the Government, this will mark the most fundamental reset to our water system in a generation.
Baroness McIntosh of Pickering (Con)
My Lords, among the recommendations made by Sir Jon Cunliffe were proposals to have mandatory statutory provisions for sustainable drains and the end to the automatic right to connect to main sewers. Given the outage and the water leaks in Kent and Sussex, whereby tens of thousands of homes have been without water, have the Government made an assessment, given that that area has had the most dramatic housebuilding development, of whether the fact that there are no statutory provisions for SUDS or end to the automatic right to connect to main sewers has contributed to the loss of water in those cases?
Lord Katz (Lab)
I know that the noble Baroness has taken a long interest in SUDS, and I want to reassure her and the House that the Government are strongly committed to improving the implementation of sustainable drainage systems. In December 2024, we made changes to the National Planning Policy Framework to support increased delivery of SUDS; the new planning policy framework now requires all developments to utilise SUDS where they could have drainage impacts appropriate to the nature and scale of the development. In June last year, the Government introduced new national standards to make clear that SUDS should be used to cope with the change in climatic conditions and deliver wider benefits. We are now consulting on a revised National Planning Policy Framework, including for flood risk and sustainable drainage systems, and separately on proposals to increase the adoption of shared amenities with guidance to ensure lifetime maintenance.
As the noble Baroness has raised the current situation on the ground in Kent and parts of Sussex, I want to make it clear that restoring supply must be the company’s priority and every possible measure must be taken to protect vulnerable customers and ensure that those affected receive decent and proper compensation. To that extent, Defra Ministers are meeting daily with the chief executive of the water company and local MPs to reinforce the fact that this level of service failure cannot continue.
Baroness Grender (LD)
My Lords, given the commitment from the Minister, the noble Baroness, Lady Taylor, on 20 November to publish a White Paper by the end of last year, does the Minister now regret the assurances given to those of us who pressed for urgent legislation to protect chalk streams—protections abandoned at the time by the Conservatives? What assurances can he now give that these vital measures will be delivered without further delay?
Lord Katz (Lab)
When we are delivering a once-in-a-generation reset of a system that has not been touched in, frankly, decades—in the last 14 years of the last Government—it is important that we make sure that we get the reforms right. If that means that there is a delay in publishing the White Paper, it is better to make sure that we measure twice and cut once. It is important that we provide certainty to customers, the industry, regulators and, indeed, investors in making that delay. That does not mean that we have not been doing anything. There has been constant dialogue with key stakeholders, including companies and investors, throughout the development of the White Paper. Obviously, we have also already legislated through the Water (Special Measures) Act to make sure that we a have a really strong regulatory regime. It has already seen over £4 million in bonuses to company executives banned by Ofwat in six out of the nine water companies. So, it is not as if action has not been taken.
Lord Hunt of Kings Heath (Lab)
My Lords, in considering the response of the Government, my noble friend the Minister mentioned the chief executive of South East Water. He will be aware of the criticism that the chief executive failed to show up for many days when the crisis hit Tunbridge Wells and that, at a recent Select Committee hearing, he gave what the Drinking Water Inspectorate politely described as misleading evidence. In the response to the review, can we be assured that, when chief executives behave in such a despicable way, they will be removed from their position?
Lord Katz (Lab)
I say to my noble friend that Defra takes this matter with the utmost seriousness. It simply cannot be the case that people are left to go days on end without an adequate water supply. As I have said, we will take every step to make sure that the chief executive and the executives in the water company are held to account on delivery. As I said in response to the previous question, we have already taken action to legislate and toughen up the regulatory framework. As a consequence, we have already seen, in six out of nine water companies, bonuses banned. We are willing to take action. I am not going to set out the exact details of the White Paper now, but it is important that water company executives realise that they are there to serve their customers, not simply to feather their nest.
Lord Cromwell (CB)
My Lords, this is a useful and substantive report that I welcome—in particular, its suggestion to merge the regulators into one super-regulator, which we certainly need. The underlying problem, which it identifies, is the need for long-term investment. I was surprised, therefore, that there is very little reference to the regulator needing skills in the financial engineering which has bedevilled the way that water companies have been run in the past. There is one reference, on page 197, to needing financial skills, but that is about it, I think. Does that give the Minister cause for concern?
Lord Katz (Lab)
The noble Lord is certainly right to recognise the importance of the recommendation by Sir Jon, in the commission report, of establishing a single powerful regulator for the entire water sector that will stand on the side of customers. He is right that the new regulator needs a wide range of skills, not only in terms of knowledge and understanding of the environment, customer service and regulation but also in terms of financial incentives. In the price review of 2024, we have seen the commitment to more than £100 billion of future investment in water infrastructure. In fact, since Ofwat announced its final determination, water companies have already raised over £2 billion in new equity investment. There is work going on, but he is absolutely right that there is no point having a single powerful regulator that is not able to regulate across the land and across the entire water sector’s activity.
Baroness Jones of Moulsecoomb (GP)
My Lords, does the Minister understand the depth of disappointment that a lot of environmental campaigners have felt because the remit did not include taking water out of private hands? There is a general feeling of absolute anger that public ownership was not considered. Does the Minister accept that? I include Feargal Sharkey and myself among those environmental campaigners who are horribly disappointed.
Lord Katz (Lab)
I am afraid to say to the noble Baroness that I do not accept that there was widespread public anger that nationalisation was not used as a solution. We have committed to a once-in-a-generation reset of the water sector; we have been very clear that we have no intention of nationalising it. It would cost around £100 billion to do that, it would be immensely disruptive and it would create more problems and more costs than solutions. As a Government, we are determined, as we have already demonstrated through the legislation of the Water (Special Measures) Act and the hard work we are doing with Sir Jon Cunliffe, to get a system that works on the side of consumers and on the side of the environment and not worry about structural nostrums.
Lord Roborough (Con)
The Cunliffe report highlighted eroded trust in water industry regulators among stakeholders and has recommended a new integrated regulator. Can the Minister confirm that this new regulator will be fully accountable to the Secretary of State and, by extension, will be fully exposed to parliamentary scrutiny?
Lord Katz (Lab)
Absolutely. One of the key parts of Sir Jon Cunliffe’s report is around the importance of setting a strategic direction for the industry, and one of the things that are set out there is the importance of that ministerial and strategic direction. I imagine that the development of that will of course involve both Houses of Parliament. However, it is really important to understand that, in other areas of accountability, one of the important things that Sir Jon recommended was ending the years of water companies marking their own homework by introducing open monitoring. It is important that we see accountability and transparency across the piece.
Lord Sikka (Lab)
My Lords, the Minister has once again mentioned the £100 billion possible cost of bringing water into public ownership. That is a bogus number, and no Minister has publicly engaged in any debate about it. The Government had a chance to silence critics by asking the Water Commission to consider public ownership as an option and independently calculate its cost. Why did the Government not ask the Water Commission to do that?
Lord Katz (Lab)
At the risk of repeating myself, we were very clear as a Government that we had no intention of nationalising the water sector. The £100 billion figure is not bogus, because it is based on the regulated capital value of the water sector. My noble friend has to remember that it is not just the capitalised value of the companies as they currently exist but the equity and the debt that you would be bringing on to the books if you were to nationalise. Defra has provided a comprehensive note on its website that explains that calculation; I gently suggest to my noble friend that he has a look at that to understand the workings.
Defending Democracy Taskforce
(1 day, 4 hours ago)
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Baroness Alexander of Cleveden
To ask His Majesty’s Government what recent progress the Defending Democracy Taskforce has made on protecting democratic institutions.
The Minister of State, Home Office (Lord Hanson of Flint) (Lab)
The taskforce is driving forward a whole-of-government response to the threats to our democratic institutions. Recent progress includes developing new legislation to address the abhorrent harassment and intimidation experienced by elected representatives, the provision of personal cyber security advice, and the rollout of new National Protective Security Authority guidance to help protect those working in our democracy.
Baroness Alexander of Cleveden (Lab)
My Lords, I thank my noble friend the Minister. It seems wholly appropriate to have a Question this afternoon on defending democracy and democratic elections, although that is, of course, entirely coincidental. The Defending Democracy Taskforce is the main mechanism for tackling foreign interference in our elections. It is concerning that there has been no action to date by Ofcom under the foreign interference offence in the Online Safety Act. In this fast-moving arena, will my noble friend the Minister consider enhancing the status of the Defending Democracy Taskforce by bringing an annual Statement to Parliament about its work and key findings, and, as a signal of intent prior to any elections, consider publishing an overview of key threats identified to date to the UK’s electoral processes?
Lord Hanson of Flint (Lab)
My noble friend makes some valuable points. The Security Minister, the honourable Dan Jarvis, has already announced in November that he is co-ordinating a cross-government, counterpolitical interference and espionage action plan, which will report back to Parliament, in due course, from Ministers across government. A significant number of achievements have been made to date. I will take away my noble friend’s suggestions and report back to her in due course.
Lord Alton of Liverpool (CB)
My Lords, on 30 July, the Joint Committee on Human Rights published its report on transnational repression. Can the Minister tell us what weight he attaches to its conclusion that the UK has become a hunting ground for authoritarian regimes around the world to harass and intimidate, and its finding that the Government are failing to provide adequate protections? In particular, what has he got to say about those Hong Kong residents in the UK, such as Chloe Cheung, aged 20, who has had a 1 million Hong Kong dollar bounty placed on her head? What does he have to say about the evidence we received about Iranian pro-democracy activists in the United Kingdom, who have even had their lives put at risk by Iranian state agents?
Lord Hanson of Flint (Lab)
It is not acceptable for foreign nations to threaten individuals who happen to reside in the United Kingdom, and I condemn any actions taken by foreign nations to do that. As I have said to the noble Lord on a number of occasions previously, if there are particular individuals who wish to draw concerns to the attention of the Home Office, we will examine those concerns and look at how we can protect those individuals.
Lord Davies of Gower (Con)
My Lords, following on from the last question, the Defending Democracy Taskforce has the explicit aim of protecting the democratic integrity of the United Kingdom. Given that Reform UK’s former leader in Wales has been sentenced for taking bribes from Russia, and that Iranian bots have been found to be behind thousands of pro-Scottish independence social media accounts, what are the Government doing—indeed, what can they do—to deal with and counter such threats to the integrity of the union by the Russian and Iranian regimes?
Lord Hanson of Flint (Lab)
Mr Gill is in prison now because the counterterrorism police of the security services in the United Kingdom brought evidence together, sufficient for prosecution, which proved he was acting as a traitor to this country by promoting information on behalf of a foreign nation and that he had taken money to do that. That is not acceptable and should send a warning to all who would potentially undertake that type of activity in the future. We keep under constant review potential threats and misinformation. We will continue to take action through the Online Safety Act and the review that my honourable friend the Security Minister is currently undertaking. Foreign interference in our democratic process is not acceptable and Mr Gill’s jail sentence is evidence that we will take action.
Lord Wallace of Saltaire (LD)
My Lords, I understand why some of the investigations that the Defending Democracy Taskforce is undertaking have to be kept highly confidential, but if we are going to defend democracy effectively, the public and parliamentarians need to be well informed as to the nature of the threats. I understand that Sir Philip Rycroft’s review of foreign financial influence and interference in UK elections, due in March, is to be presented to the Security Minister. Before this House has the elections Bill, which we expect in the next few months, it would be helpful for us to be informed as fully as possible of what that report says. If much of it is not allowed to be published for the public, can parliamentarians at least have as full a briefing as possible?
Lord Hanson of Flint (Lab)
It is important that any information that comes from Sir Philip Rycroft’s review or from the separate review from the Security Minister is analysed. There will always obviously be restrictions on the information we can put into the public domain, but I will take away what the noble Lord has requested and find a mechanism to ensure that, for the information we can put into the public domain, that is done.
Baroness Winterton of Doncaster (Lab)
My Lords, can my noble friend the Minister assure me that the Government are looking carefully at the election monitoring work of the Organization for Security and Co-operation in Europe, especially with regard to combatting foreign interference? I am sure that a lot of this work needs to be done and co-ordinated on an international level. Can he further assure me that, if legislation is needed, which I think it will be, it can be introduced quickly so that it can be effective by the next general election?
Lord Hanson of Flint (Lab)
My noble friend is right to say that those who help support election monitoring overseas do a valuable job. I know that she has recently been undertaking election monitoring in Moldova. It is extremely important that the integrity of elections, not just in the United Kingdom, is maintained in the face of threats on the ground and disinformation. We are examining whether legislation is required, which my honourable friend the Security Minister is currently undertaking. If there are areas where action is needed, it is important that we address those speedily.
Lord Jackson of Peterborough (Con)
My Lords, the Minister and the House will know from the media—it was reported in the press last week—about the threats of intimidation and serious violence that were aimed at the former Labour MP for Blackburn, Kate Hollern, by supporters of the victorious candidate in the general election in July 2024. What steps is the taskforce taking to address intimidation of elected representatives, particularly where such activity may be linked to extremist groups or foreign influencers?
Lord Hanson of Flint (Lab)
The noble Lord will know that, first and foremost, we are taking measures through the police and crime Bill to protect the homes of elected and public figures, even such as Members of the House of Lords, from that level of intimidation and protest. We will examine the allegations that have been made by Kate Hollern in relation to the activity in Blackburn. It is important that, for the sake of democracy as a whole, individuals are entitled to put forward their ideas free of intimidation and threat. There is existing legislation in place to tackle that. This matter has come to light just in the last week, so we will need to reflect upon it.
Lord Walney (CB)
My Lords, there are indeed horrifying examples of abuse being directed at elected representatives. I was pleased last month to have been elected as co-chair of the All-party Parliamentary Group for Defending Democracy, and I urge everyone in this House, particularly the noble Baroness, to join and play an active role. Will the Minister pledge that he and his colleagues, particularly the Security Minister, will use the new APPG as a way of engaging with parliamentarians across the House on these vital issues?
Lord Hanson of Flint (Lab)
I welcome the all-party parliamentary group and the fact that the noble Lord is one of the officers, along with Nick Timothy, Member of Parliament for West Suffolk, and John Slinger, who is a Labour Back-Bench Member of Parliament. It is extremely important that the all-party group contributes to the debate, looks at where the Government need to improve performance and holds them to account for their performance on these areas. We have a common interest in protecting the security of Members and protecting electoral processes.
Lord Rennard (LD)
My Lords, given the recent warnings to parliamentarians about Chinese intelligence officers seeking to cultivate relationships with them, and the evidence that we have of Chinese agents paying people who work for MPs, would it not be appropriate to rule out permission for the huge Chinese embassy, which may act as a centre for spying operations, undermining democracy in this country and threatening citizens of other countries who campaign for democracy?
Lord Hanson of Flint (Lab)
The noble Lord will know that there is a judicial process ongoing about the application for the new embassy for the Chinese authority. As part of that ongoing discussion, the Home Office and security services have been consulted. There will be an outcome, but that outcome has not yet been made, and the noble Lord tempts me to opine on matters which are still under consideration pending legal discussion. I cannot offer him any solution today, except to say that it is absolutely vital that any foreign country knows that the UK Government will not accept the type of influence that he has mentioned.
Heritage Craft and Building Sector
(1 day, 4 hours ago)
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The Earl of Clancarty
To ask His Majesty’s Government what steps they intend to take to support the heritage craft and building sector; and how they will develop its skills pipeline.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)
The Government are committed to supporting the heritage, craft and building sectors to protect, maintain and adapt heritage for future generations. Last year, I hosted a round table on challenges facing the heritage skills sector and met my noble friend Lady Smith of Malvern, the Minister for Skills, to discuss the sector’s specific needs. A follow-up sector round table is being organised. The Government are providing an additional £1.2 billion a year towards skills development until 2028-29. We are working across government to ensure heritage skills are supported.
The Earl of Clancarty (CB)
My Lords, I thank the Minister for the meetings we have had in this area. Does she agree that, with our heritage in crisis with regard to the repair and maintenance not just of our historic homes and churches but of much pre-1919 build, specialist skills are needed more than ever for an industry that is split across government departments but crying out for a co-ordinated policy? Will the Government provide clear training pathways from school to professional practice, including better level 3 funding and, post-18, a better choice of university-comparable practical courses, building on examples such as York Minster’s apprenticeship centre?
Baroness Twycross (Lab)
I agree with the noble Earl about the need for specialist skills and the many organisations around the country that are doing excellent work in this area. I was hugely impressed by the offer at York Minster when I visited last year, and by the calibre and commitment of the apprentices and teaching staff. We are currently working with the heritage sector to identify key skills gaps and on how to protect the future of heritage skills. Through fully funded SME apprenticeships for under-25s, this Government are giving every smaller heritage organisation the opportunity to deliver flexible, affordable apprenticeships.
Lord Swire (Con)
My Lords, there are approximately 60,000 thatched properties in the United Kingdom. The great majority are in the county of Devon in which I live; in fact, I live in a thatched property. Thatch used to be a sign of poverty; it is now deemed to be a sign of wealth—I cannot quite get my head around that when you look at the levels of insurance we are obliged to pay. The problem is that 75% of thatched properties are listed properties and therefore extremely expensive to maintain. Can the Minister give some encouragement to the idea that there might be parity and that we can get rid of the anomaly between VAT on newbuild and VAT on repair once and for all? Given that there are now only about 1,000 thatchers in the country, what can the Government do to encourage that skill and to encourage better access to authentic reed and thatch to maintain and enhance an important part of our built rural heritage?
Baroness Twycross (Lab)
I am very aware, as the noble Lord clearly is, of the shortage of specialist thatchers. Since I have been in this role, I have learned a huge amount about the different types of techniques that are used around the country. This is one of the issues we have been talking about with the sector. I point to the work of museums such as the Weald & Downland Living Museum in this area, as well as other organisations.
On VAT, noble Lords will be aware that that is a matter for the Treasury. However, I ask the noble Lord to note that a blanket VAT cut for all historic building repairs would be a significant fiscal intervention and potentially subsidise repairs that might have happened anyway. In a tight fiscal climate, it is arguably better value for money to direct taxpayers’ money into targeted funds such as the heritage at risk grants or the Heritage Revival Fund, where we can ensure that every pound delivers genuine public benefit and regeneration rather than a broad tax relief.
Baroness Garden of Frognal (LD)
My Lords, the time was when schools—particularly boys’ schools, sadly—routinely taught woodwork and metalwork, which led young people into the crafts and skills that are now in such short supply. Given the importance of heritage craft skills to the economy, as well as to well-being, what steps are being taken to reintroduce these important subjects into schools to encourage enthusiasm for skills so that the shortages in the workforce can begin to be remedied?
Baroness Twycross (Lab)
Helpfully, my noble friend Lady Smith is sitting next to me, and I have confirmed with her what I understood to be the case, which is that schools still routinely teach children those skills. One of the challenges is how we make sure young people understand the exciting careers available. Within some of the work that is going on with regard to building skills and the targets for new homes, there are a lot of retrofitting skills and expertise being rolled out, which is clearly one way in which we can make sure that we restore heritage buildings given the amount of our built environment that is over a particular age.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
It is the turn of the Labour Benches.
Baroness Andrews (Lab)
My Lords, I thank the Chief Whip. I am very interested in what the noble Baroness has said about the range of initiatives, and very glad that she is talking to the rest of the heritage sector. The question that was raised, however, was about the strategic direction and need for systematic and scaled-up investment on a credible and systematic basis in terms of heritage skills. Although we need the skills to bring the historic environment up to scratch and to make the most of it, whether we are repurposing buildings or restoring them, this is not a niche issue. These skills are transferable into the whole of the construction economy, and we desperately need a lot of additional quality in that sector as well. Can the Minister give me some assurance that there is an endgame here where we will see a significant increase in the quality of apprenticeships and other qualification routes, whereby we will build our capacity to do these jobs over the next decade?
Baroness Twycross (Lab)
I am sure that my noble friend is in no doubt about the commitment of the Prime Minister and this Government to apprenticeships. From my perspective, it is an exciting opportunity for us to make sure that we increase the number of apprenticeships available in heritage skills. We have a problem in that heritage construction is not recruiting fast enough to replace an ageing workforce; that will become critical if we do not address it. Rather than tell the sector what we think should happen, I want to work with it to make sure that we get the workforce we need for the future to restore and maintain our incredible built environment within the heritage realm, which we know the public value hugely.
Lord Parkinson of Whitley Bay (Con)
My Lords, as the Minister recognised, our historic churches do not just rely on the talents of skilled craftspeople; they provide fantastic opportunities to acquire new skills and pass them on—I have met some of the stonemasons at Gloucester Cathedral who are apprentices there. For a second year running, the custodians of our churches and cathedrals are uncertain about whether the Listed Places of Worship Grant Scheme will continue beyond March. Some 260 churches and cathedrals have said that they have put essential repair works to one side while they wait to see whether this will happen. Can the Minister shed some light on whether the scheme will go beyond March and whether the cap that was imposed last year might be lifted?
Baroness Twycross (Lab)
The noble Lord is aware that the current scheme is funded until the end of March, when the budget is reached. We are very clear as a department that huge value is placed on listed places of worship by local communities and by their congregations. We extended the scheme in recognition of the importance of the listed places of worship scheme. The cap has not affected the majority of applications—94% of applications will be unaffected by the change; most claims are under £5,000. Immediately before Christmas, I met key stakeholders such as the National Churches Trust and the Church of England to make sure that they are kept up to date on where we are going as a department. I appreciate that people will be anxious to know about potential future funding and potential changes, and I will provide an update as soon as possible.
Baroness Freeman of Steventon (CB)
My Lords, government funding for level 2 and 3 diploma courses in some building crafts, such as stonemasonry, has recently been withdrawn. For a craftsperson, who is usually a micro-entity business, to take on a novice apprentice without previous foundational training is a big risk and potentially a big immediate cost. How are the Government planning to support busy craftspeople to take on novice apprentices?
Baroness Twycross (Lab)
I recognise what the noble Baroness said about the issues faced by some craftspeople in taking on apprentices. That is why I met my noble friend last year and why we are working with the sector to make sure that what we put in place, and what is put in place by the sector and supported by government, reflects the needs of the heritage sector so that we get the workforce that we need.
Sexual Harassment in Educational Settings
(1 day, 4 hours ago)
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Baroness Hussein-Ece
To ask His Majesty’s Government what assessment they have made of the level of sexual harassment and inappropriate behaviour experienced by women and girls in educational settings.
The Minister of State, Department for Education and Department for Work and Pensions (Baroness Smith of Malvern) (Lab)
My Lords, sexual abuse in any form is abhorrent, and tackling it is a top priority for this Government. The Department for Education and the Office for Students assess levels of sexual harassment, violence and inappropriate behaviour through surveys of pupils, students and staff. Results, combined with national surveys such as the Crime Survey for England and Wales, suggest that young women are particularly at risk, which is why the Government’s VAWG strategy focuses particularly on young people.
Baroness Hussein-Ece (LD)
I thank the Minister for her response and welcome the action that she has set out. As she said, the Office for Students survey revealed that one in four students who responded, mainly young women, reported experiencing sexual harassment, including rape, attempted rape and unwanted touching, and we know that many more incidents go unreported. Is the Minister confident that, with the measures that she set out, all colleges and universities will consistently tackle sexual harassment—for example, by creating safe and anonymous reporting systems—and, importantly, tackle the culture of harassment itself by ensuring that there is a whole-institution policy approach, with clear leadership and resources for victims? How will there be accountability to ensure that these measures are upheld?
Baroness Smith of Malvern (Lab)
The noble Baroness identifies the shocking level of sexual abuse in higher education, which is why it is important that the Office for Students introduced new conditions last August and put in place guidance to support higher education providers precisely to implement robust measures to prevent and address sexual misconduct, including, as the noble Baroness says, clear reporting procedures, staff and student training, transparent investigations, and a ban on non-disclosure agreements in harassment cases. Those steps are aimed at creating safer campus environments and improving institutional accountability.
Baroness Chisholm of Owlpen (Non-Afl)
My Lords, is the Expect Respect educational toolkit being used in all schools throughout the country, and higher education places, are people who use it being properly trained in how to use it, and is there any feedback on whether it is a success and how it is doing and whether pupils and students find it the right way to help them deal with this problem?
Baroness Smith of Malvern (Lab)
I have to say I am not sure about the specific toolkit that the noble Baroness references, but last year we produced new guidance in respect of relationships, sex and health education, and we will be supporting that with additional training and support for teachers.
Baroness Bousted (Lab)
My Lords, in 2017 the National Education Union published, with UK Feminista, a report on girls’ experiences of sexual harassment in schools, called “It’s Just Everywhere”. The report found that over a third of girls experienced sexual harassment at school, a quarter experienced unwanted physical touching of a sexual nature, and over a quarter of secondary teachers did not feel confident in tackling a sexist incident. Does the Minister therefore agree that the Government need to emphasise secondary teacher training to spot and tackle misogyny and that high-risk pupils should be sent on behavioural courses? These measures are absolutely necessary.
Baroness Smith of Malvern (Lab)
I agree with my noble friend. There are unacceptable levels of sexual harassment and abuse of girls within our schools and universities. That is why, as part of the violence against women and girls strategy published in December 2025, specific resources are made available in our schools—in particular, three pilot programmes to support RSHE teaching, to encourage healthy relationships and to tackle harmful sexual behaviour—as well as an innovation fund to enable us to work out the most effective methods of tackling this abhorrent activity.
Baroness Barran (Con)
My Lords, what impact does the Minister think that access to social media for children under 16 has on these behaviours in school?
Baroness Smith of Malvern (Lab)
I am very aware that there was misogyny, sexual abuse and harassment long before there was social media. However, of course, some of the vile attitudes towards women and girls disseminated online are precisely why we need strong relationships, sex and health education and why we need to ensure that the Online Safety Act, which has some of the strongest controls over social media anywhere in the world, is fully actioned and that action is taken where there is inappropriate behaviour, including by the companies responsible.
The Lord Bishop of Gloucester
My Lords, following on from that question, I am very grateful for the action being taken by Ofcom to investigate X and the Grok AI chatbot, but what are the Government doing to create a robust framework so that AI will be used responsibly in this whole landscape of sexual harassment experienced by women and girls?
Baroness Smith of Malvern (Lab)
The right reverend Prelate identifies some of the concern that has been expressed in recent days—including by my right honourable friend the Secretary of State for Science, Innovation and Technology—about the use of Grok. As she identifies, the issue goes much wider than that, which is why we need support for schools to ensure appropriate filtering, monitoring and use of AI and why we need to take strong action against companies using AI for some of the reasons that have been identified recently with respect to Grok. Some of that action is being taken in legislation already going through this House.
Baroness Boycott (CB)
My Lords, it is a follow-up question to the previous one. As I understand it from Ofcom, the maximum fine that X will receive for having Grok on its website is £18 million. This is a pathetic fine for a company of this size. Do we not have any more robust tools to stop this type of behaviour?
Baroness Smith of Malvern (Lab)
As I say, the Technology Secretary has already made it clear that X needs to deal urgently with the issue of Grok. Ofcom has already contacted X and xAI to understand what steps they have taken to comply with their legal duties to protect users in the UK. If services fail to adhere, Ofcom can impose fines of up to 10% of qualifying worldwide revenue and, in the most serious cases of non-compliance, could apply to the courts to block services.
Lord Mohammed of Tinsley (LD)
Can I just quiz the Minister about research by Girlguiding last year? Its Girls’ Attitude Survey 2025 found that one in 10 young girls aged between 11 and 16 was missing education, deeply affecting their life chances going forward. I take the point that sexism and harassment existed before social media, but there is now clear evidence that social media is playing a huge role. I ask the question that other noble Lords have asked: will the Government now reconsider their position, particularly on mobile phones in schools but also on social media access for under-16s?
Baroness Smith of Malvern (Lab)
I think I have responded to that point. I have pointed out that one of the most appropriate things that schools can do—recognising that misogyny and abuse are not innate to children but are learned, including through the internet—is to help teach children different attitudes and to reinforce the decency that I think we all know most children and young boys have. To support schools to do that, we are investing through the provision that I talked about earlier, providing new guidance through the relationships, sex and health education guidance and supporting our teachers and parents to be able to do that.
Baroness Chakrabarti (Lab)
My Lords, I am grateful to my noble friend the Minister for her cross-cutting brief and the personal commitment she has to this issue. I understand the rightful concerns of noble Lords around the House that social media and big tech have played a negative role in all this. None the less, what can the Government do in their own media rounds—that is, every single Minister when in front of a microphone—and what can the Opposition do, given that they are led by a woman, to integrate this anti-misogynistic message in everything we do?
Baroness Smith of Malvern (Lab)
My noble friend is right that the type of misogyny we are seeing, particularly impacting young people, needs a wide policy response. But it also needs cultural and political leadership, and it needs everybody to work together to condemn it and ensure that the positive behaviour which most young men and boys show is reinforced and that, where there are misogynistic attitudes in schools, we support teachers and parents to tackle them.
Iran: Protests
Baroness Kennedy of The Shaws
To ask Her Majesty’s Government (1) what assessment they have made of the treatment of protesters in Iran, and (2) how they are engaging with the government of the United States on proposed responses to ensure that these are in accordance with international law.
Baroness Kennedy of The Shaws (Lab)
My Lords, I should declare that I am the director of the International Bar Association’s Human Rights Institute, which has been monitoring human rights abuses in Iran for many years.
A grave human rights crisis is unfolding in Iran. As many noble Lords will know, a nationwide uprising has been taking place in 111 cities across Iran. This is not confined to Tehran, or to its students or young women; it is across all classes and all the peoples of Iran. The regime is using live ammunition against unarmed citizens. There are mass arrests as well as a total internet and telecommunications blackout. Bodies are piling up in morgues, but families cannot locate their loved ones. Hospitals are overwhelmed and even Starlink connectivity is reported to be jammed. What assessment have the Government made of the treatment of protesters in Iran? What do they feel that they can do, and how are they engaging with the Government of the United States on proposed responses to ensure that those are in accordance with international law? The people of Iran want democracy; they do not want outside entities to bring about regime change.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
I am grateful to my noble friend for her Question and commend her for her many years of work and dedication to this issue, and to the people of Iran. We too are deeply concerned about the use of violence against protesters and strongly condemn the killing of protesters. Iranians must be able to exercise their right to peaceful protest without fear or reprisal, and we urge Iran to immediately restore access to the internet and communications. With regards to engagement with the United States, its policy towards Iran is, obviously, a matter for the US Government. The UK remains absolutely committed to international law and expects other countries to do the same. That is essential for global security and stability.
Lord Callanan (Con)
My Lords, I thank the noble Baroness for her Question. I am sure that we are all watching the news reports with interest. Personally, I find it deeply humbling to watch the astonishing bravery of hundreds of thousands of ordinary Iranians in facing the guns and murderous tactics of that brutal regime. If they are arrested, they also now face execution. It is quite astonishing to watch their desire for freedom and democracy. Can I please ask the Minister two questions? First, what is being done to challenge the Iranian regime over the violence it is conducting? I know that we have diplomats in Tehran; what role are they playing, what reports is the Minister receiving back from them, and why has the Foreign Secretary not yet summoned the Iranian ambassador to protest at the brutality? Secondly, given the statements from President Trump, what discussions have taken place with the US Administration over their plans and their challenge to this brutal regime?
Baroness Chapman of Darlington (Lab)
The UK is clear in its condemnation of the regime’s brutality towards protesters. For many different reasons, we fundamentally support the right of those who are bravely taking to the streets and showing enormous courage to make their case in the way that they wish. Communication with the Iranian regime is something that my friend the Foreign Secretary will be actively considering.
Lord Purvis of Tweed (LD)
My Lords, the murder of those people in Iran who wish simply to have a say in who governs them is utterly contemptible. There are early signs that these protests will become more widespread, but there are not early signs that there will be mass rebellions in the Iranian military. Is now not the time that we should proscribe as terrorist organisations all those bodies within Iran that are actively suppressing their own population, as well as putting UK national interests at risk? Secondly, and perversely, I have read that our ambassador has been summoned by Iranian Ministers to view the protests. Should we not summon the Iranian ambassador to ensure that there is no repression of Iranian nationals or any British interests here in the United Kingdom, and show that we are now willing rapidly to expand the human rights sanctions regime for all aspects of the Iranian Government that are carrying out these repressive actions?
Baroness Chapman of Darlington (Lab)
First, it is not correct that our ambassador in Tehran was summoned. They had a conversation when they attended the MFA for another purpose, but that is a very different situation from the one reported, which I think the noble Lord will have read. We do not comment about proscriptions ahead of time and we keep them under close review. However, I point noble Lords to the work done by Jonathan Hall and the suggestions that he made about proscription-like measures. The Government intend to implement these in due course.
Lord Alton of Liverpool (CB)
My Lords, has the Minister seen the report today about the killing of 23 year-old Rubina Aminian, a young woman who was shot at close range in the back of her head? She is one of thousands of pro-democracy protesters who have lost their lives already. They join the 1,922 who were executed by the regime last year alone, as well as Mahsa Amini, the young woman who died after discarding her hijab. It is not unreasonable to ask, as the noble Lord, Lord Purvis, did, whether we will take further action on the proscription of the Islamic Revolutionary Guard Corps. Additionally, what we can do to try to restore communications in Iran in any way, so that people can know what is going on? What advice are we giving to British nationals and dual citizens who are in Iran at present?
Baroness Chapman of Darlington (Lab)
One of the issues that we face is our current inability to get verifiable information out of Iran, because the regime has closed the internet. That makes life very difficult. However, the noble Lord is absolutely right to remind us of some of the horrors that we know about already. As more information emerges, we will want to respond. I have said what I have said about proscription and the IRGC, but we are concerned about British nationals and we have clear travel advice not to travel to Iran. There are British nationals there at the moment. Sadly, we know of some who are being wrongly held. The Foremans have even been charged with espionage, which is clearly wrong. They should be released immediately.
The Lord Bishop of Gloucester
My Lords, following on from that question, we have a number of Iranians in our churches in the diocese of Gloucester who are desperately trying to make contact with loved ones. What update can the Minister give the House about the support being given to Iranians in this country who are endeavouring to contact family and friends in Iran?
Baroness Chapman of Darlington (Lab)
That must be an incredibly difficult situation to be in. Communications are limited at best or non-existent, and the support that our team in Tehran is able to provide is incredibly limited. I can only imagine the concern, worry and heartache currently being felt by those with people who they love and care for in Iran.
Lord Hamilton of Epsom (Con)
My Lords, the noble Baroness, Lady Kennedy, has stated that the Iranians do not want outside interference to achieve regime change, but, without outside interference, how will the regime be changed?
Baroness Chapman of Darlington (Lab)
We are mindful of how we express our views, because of the reasons that I think are implied by the noble Lord’s question: the regime in Iran attempts to suggest that those who, of their own free will, take to the streets to protest are somehow foreign interference or meddling by external powers. They are clearly not. These are people who feel so strongly and who, at great risk and sometimes at the cost of their lives, are taking to the streets to call for the freedom that we so wish they could enjoy.
Lord Hannay of Chiswick (CB)
My Lords, as someone who served in Her Majesty’s embassy in Tehran many years ago, I express my anguish at what we are seeing being meted out to citizens of Iran who are simply using their rights to demonstrate. Does the Minister not think that one message that could be sent out is that, should they have a Government who are prepared to come into full conformity with all the international rules put forward in recent years—with regard to their nuclear programme and other aspects of their policy—we would respond positively, but we will not respond positively while what is going on before our eyes is as horrifying as it is?
Baroness Chapman of Darlington (Lab)
We stand proudly for freedom and human rights for the people of Iran, as the noble Lord suggests we should. The snap-back measures that he refers to took place as a last resort, and it would be very good for the people of Iran, and for regional and global stability, if we were able to have a more productive and positive relationship with a Government in Iran who represent the wishes of their people.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
We will hear from the Lib Dem Benches next.
Lord Hussain (LD)
My Lords, I agree with all those who have condemned the killing of innocent protesters in Iran, but will the Minister agree that the Iranian nation is very resilient? We have seen that the Iranian public know how to change their Governments. We saw the end of the King of Iran’s time, when the protesters were on the roads in their tens of thousands, and in the end they forced the King to leave the country. Whether we liked it or not, there was a change of Government. Similarly, now, when the people of Iran have had enough of this regime and want a change, they are capable of changing their Government on their own, and they do not need external invasion or plans for a change of regime to be practised in their country.
Baroness Chapman of Darlington (Lab)
The noble Lord speaks from his own perspective of the people of Iran and their capability of changing the regime in their country. All I would say is that much has changed in the decades since the events that he alludes to. I hope that the people of Iran, through their own voice, their own protests and the things that they are able to do themselves, are able, sooner rather than later, to bring about a Government who represent them so that they are able to live in freedom and to live their lives in the way that we are all able to.
Lord Swire (Con)
We owe the security services our respect and thanks for thwarting over 20 assassination attempts on British soil against Iranians. This situation will not die down. I suspect that both sides will become more entrenched and the regime, if it is trying to hold on, is likely to become more violent towards those who oppose it. With that in mind, what can the Minister say to reassure those brave Iranians living in the United Kingdom that everything will be done to protect them from agents of a foreign power who may seek to carry out atrocities against them on British soil?
Baroness Chapman of Darlington (Lab)
That is such an important point. As the noble Lord reminds us, our security services have done amazing things in preventing so many attempts at attacks on this country. We will not stand for it; we will take whatever measures necessary to keep everybody in this country safe. The noble Lord is talking in particular about those who have drawn the attention of the Iranian regime, and we will continue to do that. Our security services are alive to the increased threat that they face at present, and they will continue.
Lord West of Spithead (Lab)
My Lords, when I was First Sea Lord, I tended to send warships towards the sound of the guns. If things go wrong in Iran, as it looks as if they might well do, the whole of that region will be in great difficulty and trouble. We currently have one mine-hunter in Bahrain—that is all. Is there any intention to beef up our military presence there, bearing in mind the huge threat to the waterways should things go up in the air?
Baroness Chapman of Darlington (Lab)
I am grateful to the noble Lord for his question. I make a very clear point of never responding to that kind of hypothetical question; I shall not break that today, but I note what he says, in particular about Iran’s importance in terms of security in that part of the wo0rld.
Baroness Hoey (Non-Afl)
My Lords, we saw the appalling pictures of the security guards displaying the bodies thanks to the work of very brave Iranians getting the message out before all the social media was locked down. Does the Minister agree that social media has shown its importance in the first two weeks of these protests? Would she congratulate Elon Musk on being able to get Starlink into Iran so that some opportunity will be given for Iranians to get their message out?
Baroness Chapman of Darlington (Lab)
Do you know what: the noble Baroness is right about this. Because we have been unable to gain access for journalists, citizen journalism has become all that we have, and the reports that have been able to be shared have been vital in alerting the world to what is going on. That can be said for very many of these precarious locations and places where it is difficult to gain access. The extent to which I am prepared to stand here and thank Elon Musk for anything is a different question, but I agree with her about the vital role that social media has played.
Lord Singh of Wimbledon (CB)
My Lords, to go back to the original Question, it is difficult to get President Trump’s support for international law when he is on record as saying that he does not agree with international law. Will the Minister try to ensure that no attempt is made to try to install the son of the disgraced ruler of Iran, whose behaviour led to the influx of the present regime, and instead give support to the National Council of Resistance of Iran, led by Madame Rajavi? She has a 10-point plan for democratic rule, free from religious interference and with equal rights for women, which is very important when we remember that one of the present rulers in the current regime said that women have smaller brains than men.
Baroness Chapman of Darlington (Lab)
That is the noble Lord’s view of what should happen next in Iran. The UK Government’s view is that the future of Iran and its leadership should be firmly in the hands of the people of Iran.
Diego Garcia Military Base and British Indian Ocean Territory Bill
17:05 - Division on Lord Callanan’s amendment to the Motion - Ayes: 201 / Noes: 169 - Lord Callanan’s amendment to the Motion agreed.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, I have it in command from His Majesty the King to acquaint the House that His Majesty, having been informed of the Report of the Diego Garcia Military Base and British Indian Ocean Territory Bill, has consented to place his interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Clause 6: Commencement and short title
Amendment 1
Member’s explanatory statement
This amendment would make all orders under clause 6(1) subject to parliamentary control in the form of negative procedure.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, this government amendment will change the parliamentary procedure applicable to the delegated power in Clause 6. With this amendment, all instruments made using that power would be subject to the negative procedure. Previously, no parliamentary procedure applied unless the power was used to amend, repeal or revoke Acts of Parliament or statutory instruments made under them.
I thank the noble Lord, Lord Lansley, for his contribution to this. I am glad that we were able to agree on a sensible compromise which puts into effect one of the recommendations of the Delegated Powers and Regulatory Reform Committee. I hope that this assures the noble Lord and the DPRRC that the Government have listened to the views of noble Lords and are willing to find compromises where they are sensible. I beg to move.
Lord Lansley (Con)
My Lords, I want to say a big thank you to the Minister for her engagement following Report and for tabling this amendment by way of, as she says, what I hope is very much an agreeable compromise.
While the Delegated Powers and Regulatory Reform Committee made the good point that Henry VIII powers should only exceptionally be subject to other than the affirmative procedure, in fact, when one looks at the detail of the Bill in the Government’s further response, it is quite clear that it would be excessive for the House to be detained on an affirmative debate on some of this legislation in relation to what are clearly not controversial matters. However, establishing the principle that all statutory orders should be subject to parliamentary scrutiny is, I think, important. I am very glad that the Government have accepted that.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
I am grateful to noble Lords for their engagement on this crucial legislation, which secures a vital element of the UK’s national security and the UK’s transatlantic defence partnership. I thank noble Lords across the House for their expertise, which they have used to scrutinise the security of the base, the costs of the treaty, support mechanisms for the Chagossian community and environmental conservation provisions, to name a few.
The UK-Mauritius treaty protects the Diego Garcia military base and ensures that the UK retains full control over this vital asset. This in turn will protect our national security for generations, ensure that the UK keeps unique and vital capabilities to deal with a wide range of threats, and keep the British people safe. The Bill ensures that the treaty can be ratified. As the world grows more dangerous, so too does the importance of the base for our national security. Noble Lords will not need to be told how crucial it is that the treaty is ratified and the base protected in the ever-shifting geopolitical landscape of our age.
We have had extensive debate in this House, and it has been good debate. I thank noble Lords on this side of the Floor, including my noble friend Lord Beamish, for their thoughtful and insightful contributions. I thank noble Lords from across the House for their thoughtful contributions throughout the passage of the Bill, in particular the noble Lords, Lord Kerr of Kinlochard, Lord Hannay, Lord Jay and Lord Purvis of Tweed. I thank the noble Lords, Lord Hannan and Lord Lilley, for their exuberant speeches, even if I have not always agreed with them. I thank the noble Baronesses, Lady Foster and Lady Hoey, and the noble Lords, Lord Morrow and Lord Weir, for their passionate speeches. I thank my noble friend Lord Coaker for his support on leading the Bill. I thank my honourable friends in the other place, the Minister for Overseas Territories and the Minister for Defence Readiness and Industry, who have spoken at length with Peers about the detail of the Bill.
Finally, I thank the officials who have supported the Bill. I thank those on the Bill team—notably Helena Brice, our indefatigable Bill manager—and the policy teams in the Foreign, Commonwealth and Development Office and the Ministry of Defence. They have worked tirelessly behind the scenes, often working to challenging deadlines. I thank those in my private office, in particular Bola, who have of course been crucial in supporting me. My thanks must be offered to all the parliamentary staff who have ensured the smooth process of this Bill.
Amendment to the Motion
Lord Callanan
At end insert “but that this House regrets that the UK-Mauritius Agreement concerning the Chagos Archipelago including Diego Garcia does not secure the long-term future of the Diego Garcia Military Base, creates uncertainty over the continuing unrestricted use of the Military Base and imposes £35 billion of costs on UK taxpayers for which the Government has no mandate, and that the Government failed to consult the Chagossian people before signing the Treaty”.
Lord Callanan (Con)
My Lords, throughout our debates on the Bill, we have had, as the Minister said, many robust exchanges, and the Bill will go to the other place with four amendments passed by your Lordships’ House. However, it has become increasingly clear throughout those debates that this deal fails even on the terms set out for it by its ministerial proponents.
They have told us repeatedly that we need this deal to provide legal certainty—“Look at the advisory opinion by the ICJ”, they tell us. We are told that if we do not give away the islands then all sorts of unpleasant judgments might follow in various unspecified fora. My noble friend Lord Lilley has been forensic in questioning the Government on exactly where these adverse rulings might emanate, given that the ICJ itself would surely be excluded from any such decisions and that disputes involving the UK and Commonwealth countries were specifically excluded from its mandate when we first acceded to it. We have heard various mutterings about the UN Convention on the Law of the Sea and even the International Telecommunication Union, but no definitive response. Therefore, we have an advisory ICJ opinion, from a panel containing Russian and Chinese judge—those doughty campaigners for the concept of international law, seemingly applying to everyone except themselves—and, with great seriousness, Ministers tell us that this opinion must be respected.
However, we now have an additional opinion from another UN body: the Committee on the Elimination of Racial Discrimination, which, ironically, contains Mauritius as a member. A few weeks ago, this committee published a formal decision calling for the suspension of treaty ratification. As far as I am aware, the Foreign Office has ignored it and is yet to even comment on the ruling. So we have two diametrically opposed opinions from different UN bodies, one of which is to be obeyed without hesitation while the other, apparently, is to be completely ignored.
Ministers then tell us that they have fully secured the future of the Diego Garcia base, which will be able to continue operations exactly as before. However, they have manifestly failed to explain how that can possibly be the case when Mauritius is a signatory to the Pelindaba treaty which prohibits the placing of any nuclear weapons on any African territory, which Diego Garcia would become under this deal. Nobody has been asking Ministers to disclose secret defence information, but we know from openly published sources that the base has been utilised for the transportation of nuclear weapons on planes and submarines. How can that possibly be compatible with Mauritius’s obligations under the Pelindaba treaty?
The agreement is completely silent on this matter. Even in the face of robust questioning from my noble friend Lady Goldie, a former Defence Minister, we have received no ministerial answers. If base operation is to continue unhindered, as Ministers tell us it will, we can only assume there exists some kind of secret agreement along the lines of the old disgraced US policy on gays in the military: don’t ask and don’t tell.
The current Mauritian Government might play along with this fiction, but what about any future Mauritian Governments? What about all the other African signatories to the treaty? Any one of them could also take action in the international courts to force Mauritius to abide by its treaty obligations. For an agreement supposedly predicated on providing both military and legal certainty, it seems destined to do the exact opposite.
Baroness Goldie (Con)
My Lords, I first of all associate myself with the remarks of my noble friend Lord Callanan. I preface my further remarks by saying there was a very useful debate on Report, which brought out a number of important points which command attention. In that context, I spoke then exclusively on the defence and security implications of this treaty. I thank the Minister, the noble Lord, Lord Coaker, for both listening to my concerns and undertaking to write to me, which he has indeed done. That attentive and helpful approach bears all the hallmarks of a responsible and helpful persona which a Defence Minister should be, and of which the noble Lord, Lord Coaker, is the embodiment; the content of the response bears all the hallmarks of a letter drafted by someone blind to the basic precepts of defence and security but who finds much more comfortable the languorous corridors of the FCDO and the limiting confines of the minutiae of the text of this treaty.
It is the other treaty, the Pelindaba treaty, about which I sought clarification. Instead, I received a letter about how this treaty guarantees this, stops that and binds Mauritius to the other. The letter is silent on how, once Mauritius gains sovereignty of the Diego Garcia base under this botched treaty, Mauritius can stop the co-signatories of the Pelindaba treaty, either on their own account or egged on by others, from challenging Mauritius on alleged misuse of the base under the terms of the Pelindaba treaty. I suspect the reason for the silence is because you cannot stop that third-party interference.
That strikes at the heart of why we currently have sovereignty over the base, how we use it, how the United States uses it and how our allies may need to use it. That unfettered, unchallengeable usage and access is possible only because we have sovereignty. While we can have bilateral discussions with Mauritius and enter into bilateral agreements and treaties with Mauritius, they are only as good as Mauritius has competence to give the protections, undertakings and reassurances. If the hands of Mauritius are tied by a preceding undertaking such as the Pelindaba treaty, then these protections, undertakings and reassurances are not worth the paper they are written on—just a load of flummery.
I did not put down an amendment at Report, because this flaw is irremediable. I was prepared to allow the Government a final opportunity to provide clarification and reassurance, but, unsurprisingly, they have been unable to do that. The question then is: what should a responsible Opposition do? My naturally bellicose nature inclined towards voting against this Bill, but I am not indifferent to the constitutional status of this House and the respective conventions which regulate our proceedings in relation to government Bills. Fortunately, my leader, my noble friend Lord True, and my Chief Whip, my noble friend Lady Williams of Trafford, are far less hot-headed than I am and infinitely more thoughtful and strategic in outlook. It is their view, which I accept, that, however wrong-headed and naive we think this treaty to be, voting down the Bill on Third Reading is not an appropriate way, in this instance, to proceed.
Our regret Motion places on the record all our misgivings and apprehensions. If this precarious, ill-starred government adventure comes to grief, it will give me no pleasure to say, “We told you so”, but at least His Majesty’s Opposition can hold their head up and say, “We did our job”; what a pity the Government cannot make the same claim. I support the amendment in the name of my noble friend Lord Callanan.
Lord Altrincham (Con)
I thank the Minister for her courtesy and patience throughout this very unusual Bill and its passage through this House. I will make a few remarks on the financial costs.
The treaty makes provision for a financial agreement that requires the UK to make payments to the Republic of Mauritius for the next 99 years. The agreement is very unusual, and that is because the payments are not known. The payments are not known from year 14 for the next 85 years because the payments are linked not to events in the Indian Ocean but to UK domestic inflation. It is an extraordinarily long contract for the taxpayer to be exposed like this to UK domestic inflation.
Inflation in the future is unknown, unknowable and uncapped. That means the payments under this contract are unknown, unknowable and uncapped. Maybe the Foreign Office, in looking at the projections, imagined a very benign opportunity for UK inflation and maybe it hoped that the numbers would stay very low, but if we had inflation as high as it was in this country two years ago, at any point in the 85 years of this contract the payments would get completely out of hand and be completely unaffordable to the UK.
This is why Ministers and Parliament have been poorly briefed on the contents of the treaty and why there is this extraordinary difference between the £3.4 billion accounting valuation, which was done under the Treasury Green Book procedure for UK domestic infrastructure spending, and what this is actually going to cost. As my noble friend Lord Callanan mentioned, the Government’s own internal estimate of the cost is around £34 billion to £35 billion, which is a very substantial amount to be paying.
We might hope, at this stage of the Bill, to have some good advice from the OBR, but the OBR has been quite unhelpful to the Government—and, possibly, to Parliament—and said that it has nothing to do with this. We might hope for clarification from His Majesty’s Treasury. Of course, the treaty was not negotiated by the Treasury; it was negotiated by another department. But, in the middle of the holidays, the Chief Secretary to the Treasury slipped out an announcement on 16 December—it is on GOV.UK—to say that the Treasury would be changing its Green Book methodology. So, we can be sure that the Treasury does not even agree with the accounting valuation, let alone the actuarial true cost of this agreement.
When the Minister said to us during the passage of the Bill that the total cost was £3.4 billion—she said it to us in this Chamber—it was not correct, because the total cost is not known. That needs to be corrected in the treaty, because it is quite clear that that is the intention of the Government. The Government wish, for their own reasons, not well understood by the Opposition, to pay the Republic of Mauritius £3.4 billion. It is their intention and it appears to be their understanding—but it is not what is in the treaty.
Lord in Waiting/Government Whip (Lord Leong) (Lab)
My Lords, this is Third Reading. Arguments made at previous—
Lord Leong (Lab)
This is Third Reading and the noble Lord is repeating what has been debated before.
Lord Altrincham (Con)
I will speak briefly to the rest of the amendment.
The amounts referenced in the Chamber and during the passage of the Bill have not been correct. We need to make sure that the treaty is amended to reflect what the Government’s intention is: that it should be a payment of £3.4 billion and not an open-ended economic exposure. Given the extremely unusual and long-dated nature of this contract, we need to make sure the treaty is amended to protect UK taxpayers and, indeed, to maintain confidence in the sovereign credit of the UK.
Lord Weir of Ballyholme (DUP)
My Lords, I join with others in welcoming the robust yet civilised and courteous way in which this legislation has been debated. Obviously, at Third Reading, it is not appropriate to regurgitate all the arguments. However, given the significance of the Bill, it is also the case that it merits some level of, albeit brief, comment. While we have gone through this process, and I welcome the amendments that have been tabled to the Bill, they cannot render acceptable what is totally unacceptable.
We are still left with a Bill that is bad for the United Kingdom. We are not simply handing over sovereignty to Mauritius; we are paying it an expensive dowry to take over what has been British sovereign territory for 200 years.
From a defence point of view, we are left with a flawed situation. Rather than perhaps the jewel in the crown, we are left with a situation where, despite the assurances that have been given, we know, from a practical point of view, that we will see Mauritius in effect leasing out, in either official or unofficial form, to foreign powers—particularly the Chinese Government—surrounding islands. So, instead of a jewel in the crown, we will be left with a military base with a noose around it, ever tightening as time moves on.
In particular, even with the amendments, we have not dealt with the situation as regards our debt and duty to the Chagossians themselves. We have been left in a situation in which they have been denied complete access to the islands. They have no right of full self-return. More importantly, they have also been left without the right of self-determination.
This House has been united, as we saw a few moments ago, in rightly condemning what has been happening in Iran and supporting the Iranian people in their right of self-determination. This House, on a number of occasions, has utterly condemned the invasion of Ukraine and supported the right of Ukrainians to decide their own future. Similarly, I suspect that this House would be united in saying that the Greenlanders have the right to determine their own future and that it should not be imposed from the United States or anywhere else. The thread that runs through all three of these situations is the right of self-determination and democracy. That is the golden thread to which should be standing.
Yet, we are in a situation, as regards the Chagossians, that this can apply elsewhere in the world but, shamefully, not to the people who have actually looked to us to deliver for them. If we simply let this go through and the Government let this go through unaltered, we will lack the moral or political authority to dictate elsewhere in the world on the issue of self-determination. So I support the regret amendment in the perhaps vain hope that, by sending a signal today, we can at least say to the Government, “Think again before it is entirely too late”.
Baroness Hoey (Non-Afl)
My Lords, I very much support the amendment of regret and I am pleased it has been tabled. I find the word “regret” not nearly strong enough, because for me this will be a very sad day if the Bill goes through from the House of Lords to the other place.
Lord Beamish (Lab)
My Lords, the noble Baroness, Lady Hoey, has just said that this was not part of a Labour manifesto, but it was part of the last Government’s determination to get a deal on the issue of Diego Garcia. I accept that there are genuine arguments in this debate around environmental issues, and issues around the Chagossian people. I have to say that, from certain quarters, that has come a bit late. We have had quietness, certainly during the last Government, about the rights of Chagossians. I accept that there are noble exceptions in this House and in the other place who have campaigned for many years for their rights, but that was never an issue at the forefront of the last Government’s negotiations with regard to the Bill. What the last Government did was very sensible. They wanted to enter into a long-term agreement to ensure the security and long-term use of Diego Garcia, which was under threat, obviously because of the unusual nature of that island territory.
In terms of Diego Garcia, the agreement is vital not only to our national interests but to our international allies, including the United States. Much has been said about the United States being against this deal. It is not; it sees the long-term benefits. I accept what the noble Lord, Lord Callanan, said about the investment, but that pales into insignificance compared to the amount of investment that the US and other allies will be putting in to secure not only the long-term interests of that base but its capabilities. It is not something we can play party politics with. Alas, I accept that some people are playing party politics with this.
Lord Lilley (Con)
My Lords, apart from thanking the Minister and her noble colleague for the courteous way in which they have responded the points I made—which she found exuberant and my noble colleague found forensic—I can limit my remarks to four sentences, two of which are questions.
First, the Government have acknowledged that neither the International Court of Justice nor the tribunal of the UN Convention on the Law of the Sea could produce a ruling that was binding on us as to the sovereignty of the Chagos Islands. The Government none the less assert that other countries might respond, even to rulings which were non-binding on us, by withholding goods, services or facilities which could render the base inoperable.
My two questions are: what goods and what services, and supplied by which countries? Secondly, if the base could be rendered inoperable by foreign states withholding goods and services, is it not vulnerable to such action even in the absence of legal rulings and even if we surrender sovereignty if other countries object to our possession or use of the base? Why have the Government not replied to these questions?
Lord Deben (Con)
My Lords, I will just come back to the issue of the environment, which is crucial here. I have a direct question to the Minister, whom I particularly respect in this area. Why on earth was there not a clear connection between our payments and the upkeep of this, the most important marine environment area in the world? We have a very proud record on this, yet we are now giving this into the hands of a country which, however good its words, has one of the worst records on marine protection in the entire world. We are giving it power over the most important marine protection area in the entire world, and we have not connected the money we are paying with its ability to pay for the protection of this area. My question to the Minister is very simple: why not? Why on earth have we not done that?
I do not like this agreement at all; I am opposed to it for all the reasons that the noble Lord, Lord Callanan, has so rightly put forward. But at the heart of my concern is that we are letting down the whole of the international community by giving out something which we have protected and which has set the example for marine preservation throughout the world. Without the Chagos agreement, we would never have had all the others which have followed, and which have been crucial to the environmental health of this planet. I ask the Minister again: can she explain how this arrangement has been made when there is no connection between what we pay and what we expect in terms of protection?
Lord Howell of Guildford (Con)
My Lords, I have one final question to the Minister, while confessing, quite frankly, that I have taken zero part in the earlier Committee stage—but Third Reading, contrary to what was suggested earlier, is an opportunity to look at the overall aim and underlying strategy of a measure. Some earlier remarks, which were fascinating, about the financial side should have been ones we were allowed to hear a bit more of.
My question is quite simple. Why does the Minister think that, in looking at this issue, we have not heard a single mention of the Commonwealth system, the largest—although not very centralised—organisation in the world? Why does there appear to have been no discussion between the Foreign and Commonwealth Office—its relevant office—and the new and very lively Commonwealth Secretary-General? Why does she think we have not seen any understanding that the Commonwealth, although it has been described as “friends with a purpose”, is of course deeply concerned with the rights of islanders, and the rights of countries as to their status—whether they should be protected and be free and open members of the Commonwealth or associated with the Commonwealth? Such engagement would be in the knowledge that we have many friends and that they could discuss matters with Mauritius, and indeed with India, as well as their own status in an age of delegated and digitalised activity in which very small countries can assume a very important role, as no doubt the Chagos Islands and Diego Garcia will be doing for some years. Given that new and changing pattern of organisations as a new world emerges, as everyone admits, and that entire makeover and difference in our international relations for years ahead, why does she think we have not applied the sensible duty that we should have applied as an active member—not a hub—of the Commonwealth network and left the decisions that we are now being asked to make for much further discussion in a changing world?
Lord Kempsell (Con)
My Lords, what a privilege it is to follow the incisive questions of my noble friends who spoke before me and to add my support to the regret amendment in the name of my noble friend Lord Callanan, whose speech crystallised the litany of reasons that there are to oppose the Bill and to continue opposing it. The speeches already made in this debate have been a mirror of the way in which your Lordships’ House has conducted the difficult work of scrutinising the Bill—forensic, effective and in depth.
I will restrict myself only to a point, which occurred to me just now as the Minister was speaking, and which we have not heard so much of in previous stages. As the Minister was delivering her paean to all those who have been involved in working on the Bill, and no doubt they have worked very hard to achieve this outcome, I felt some disquiet at the Government indulging themselves in the way in which they have handled this policy. That is for one reason—the consultation of the Chagossians themselves. We know that only a handful, despite the huge machinery at the Government’s disposal, have been asked for their thoughts and views. Moreover, there is the way in which Ministers have adumbrated reasons, explanations and theories for the deal—first, that it was designed to push back on hostile states, and then we learn that only a week later, representatives of hostile states have visited the Government of Mauritius and openly praised the deal. There was also the argument that the deal was necessary for the policing of the electromagnetic spectrum over Diego Garcia, an argument that we heard so much about and that then fell away when it emerged that the UN Committee on the Elimination of Racial Discrimination—not the International Telecommunication Union this time—criticised the Bill in the sternest possible terms.
Some Governments blunder into historic foreign policy disasters; some have their hand forced by world events; but never have a Government in modern British administration walked so voluntarily into a strategic bear trap, as this Government are doing with this Bill. Can I ask the Minister to clarify, as the Bill returns to the other place, what plans are in place now to make good the deficit in consultation of Chagossians? Even at this very late hour, what plans do the Government have for that?
I say to the Minister that the Bill remains so confusing, including the pace at which the Government brought it forward and the way they handled questions and scrutiny, not least my own Written Question in September 2024, in which I asked the Government to explain their intentions for the Chagos deal. The Minister answered, saying that it was too early to say. Only nine days later, the Government announced the entire plan. These are deficits in consultation and scrutiny. How does the Minister plan to make them good?
There is, of course, a suspicion that behind every great fortune—a fortune in taxpayers’ money is being spent on this deal, as my noble friend Lord Altrincham explained—there is a crime. There are many of us who consider this deal to be a historical crime. I think we will see the final answers that we seek with the implementation of the Bill, as the truth about this deal emerges.
Baroness Foster of Aghadrumsee (Non-Afl)
My Lords, when I first started to ask questions about the treaty in this place, I asked about the trust fund. I am sure the Minister will remember that question because, in her answer, she accused me of not respecting national security, which was quite a thing for me, having spent all my political life standing up for self-determination and, indeed, security in its widest possible sense.
To echo what the noble Lord, Lord Kempsell, said, the greatest problem with this treaty is the idea that we cannot have national security alongside respecting the rights of the Chagossian people. I do not accept that that is the case. We could have respected the Chagossians’ very clear desire. I know there are some here who will say there are different views among the Chagossian communities, but, given the recent report by the International Relations and Defence Committee of this House, which we heard about on Report, it is clear that those who communicated volunteered the fact that they wanted the Chagos Islands to remain British.
There are many reasons, which we have heard from the noble Lord, Lord Callanan, why the treaty is a bad treaty, and the Bill is a bad Bill. There are fiscal reasons, which were made by the noble Baroness, Lady Noakes, in Committee and echoed again today by the noble Lord, Lord Altrincham. There are environmental issues on a monumental scale, which we heard about from the noble Baroness, Lady Cash, and the noble Lords, Lord Deben and Lord Goldsmith. There are, of course, defence issues, which the noble Baroness, Lady Goldie, rightly mentioned again today. This is all in the context of a live judicial review, which has still not given a judgment, and, of course, the report by the UN Committee on the Elimination of Racial Discrimination in December. Yet, the Government are determined to push ahead.
This is a bad Bill. I thank the noble Lord, Lord Callanan, for tabling his amendment to this Third Reading Motion, because reasonable questions about the Bill were put to the Government in Committee and on Report, and were met with a wall of denial. Now, the Chagossian people have set up a Government in exile. What does it say about the United Kingdom that the Chagossian people have to do that? Many of them are here again today in the Gallery.
Even if Third Reading goes ahead, the denial of rights will not disappear and the Chagossian people will not disappear—that is very clear. I plead with the Government, even at this late stage, to think again.
Lord Hannan of Kingsclere (Con)
My Lords, what are we here for if not to think again? We are wriggling painfully on a hook. In the early days, a lot of people, hearing that the Chagos Islands were to be handed over, understood it to be some kind of restitution to the indigenous Chagossians, whom we all agree were very badly treated in the late 1960s and early 1970s. But, with every week that has passed since that initial announcement was made, the arguments have crumbled.
It has become clear that the Chagossians do not want to be handed to a foreign power that has never governed them and whose interest in the archipelago is financial. The Chagossians are here, as always, watching in the Gallery—their silence a neat symbol of how they have been overlooked in this entire debate. It has become clear that Mauritius does not have the capacity to maintain, as my noble friend Lord Deben says, the world’s greatest marine conservation area. It has become clear that the price tag is vastly higher than we were initially led to believe. It has become clear that foreign powers and unfriendly foreign powers are in favour of this deal. It has become clear that we are steamrolling over democracy.
If, as the upper House and the revising Chamber, we are not prepared to take a stand on something of this magnitude and as permanent in its impact in changing the size of the United Kingdom and changing the maps—this is going to be remembered long after people have forgotten what the inflation rate was in 2026 or whether we banned X—then what on earth are we here for?
Lord Murray of Blidworth (Con)
My Lords, I wish to address just one point made by the noble Lord, Lord Beamish. He said that the previous Government would inevitably have done a deal. Plainly, this is not so. As my right honourable friend Tom Tugendhat made clear in the debates on this Bill in the other place, both he and I, when he was Minister for Security, made clear our opposition to adopting this course of negotiations. Furthermore, when my noble friend Lord Cameron was Foreign Secretary, he was offered a similar deal to the present one and we know that he stopped the process. The current treaty is and remains an act of wanton strategic self-harm.
Lord Purvis of Tweed (LD)
My Lords, this has been an important debate on an important Bill and a considerable treaty that impacts on people’s lives and on international law, and which has direct relevance to UK national security. But this regret amendment has a bit of a Cambodia year zero feel to it, as if it all started last summer.
A casual observer would not be aware from this debate—notwithstanding the point that the noble Lord, Lord Murray, just indicated—that the previous Government chose to open negotiations to cede sovereignty in November 2022, without a mandate or consulting the Chagossian people. That decision by the previous Government, which we now know was opposed by the noble Lord, Lord Murray, and considered a mistake by the noble Lord, Lord Bellingham, was done without consultation and was not predicated on guaranteeing Chagossian rights. Furthermore, we now know that it was actively ongoing in April 2024. It was at that point that the then Foreign Secretary, the noble Lord, Lord Cameron, wrote to the Commons Foreign Affairs Committee to confirm the continuation of the negotiations, but also, regrettably, the ongoing denial of the resettlement and consultation rights of the community. So if we are to have regrets, perhaps there is quite a lot that can be shared around the Chamber.
I have previously said, and I do not want to repeat it, that we have a deep regret with the current Government. They have chosen not to change the path of the previous Government in coming to office, and they chose not to conclude the process differently. That has been the essence of the votes on the amendments in this House. At each step of the way, I have sought to raise the concern about a lack of consultation, consent and rights. I am very pleased that the House backed my amendments to seek to address this, and I hope very much that the Commons will now back this too. Putting the permissive elements of Chagossian rights in the treaty on a Mauritian and UK statutory footing should now be the priority. I hope this will get cross-party support.
From the outset, I have raised concerns over the lack of transparency in the financial arrangements and value for money. I was also very pleased that the House backed my amendments to give Parliament, and through it the wider Chagossian community, a much greater say—indeed, a final say—on ceasing making payments if Mauritius does not honour its commitments as part of the treaty. As the House knows, there are mechanisms in place only if the UK renege on commitments, not Mauritius. I am not saying that it will and I am sure both parties have entered into the agreement in good faith, but if, for whatever reason, they fail to honour commitments, Parliament must have the ability to cease the financial elements of the agreement. I hope that the Government will move on these areas as they are the view expressed by this House.
I turn to some of the wider political arguments that we have heard—and we have heard quite a lot. Notwithstanding the “year zero” feel of this amendment, anyone listening to the debate or reading it in Hansard should understand the basic numbers of this House, because some external messaging about stopping the Bill, and the last-ditch efforts of people who have not stopped it, need to be put into context. There are—and I like many of them—281 Conservative Members of this House, while my Benches have 75. There is a separate argument as to the numbers, of course, but the number of Conservative Peers alone could sway the decision today if the Motion is voted on, and I understand that it will be. It is basically a regret Motion. The Conservatives have chosen, with the fire and fury that we have heard in opposition, not to oppose the Bill today but to complain about it. The whole public should be aware that that is the reality of what will be happening today, and we will see how many of those 281 will at least complain about it, even though they are not seeking to stop it.
As we reach the end of this Bill, I thank most particularly the Chagossian community, many members of which have watched our debates. I have regretted some of the language that they have had to listen to, but I hope many of them feel that there are many people in this House who believe sincerely in their rights.
I thank Ministers who have been willing to listen, engage and—on certain occasions, as we have heard today from the noble Lord, Lord Lansley—agree. I want to chat with the noble Lord, Lord Lansley, about how persuasive he was, because I hope the Minister will now act on the other amendments that we have heard, but presumably that will have to be for ping-pong.
I support those who have helped me in the debate, including Adam Bull in our whips’ office, and many other people who have been in touch. I hope we can make progress and focus now on the priorities, which are Chagossian legal rights of resettlement, active consultation and participation, value for money and finance. We should return to these issues after the Commons has considered our sensible amendments.
Baroness Chapman of Darlington (Lab)
My Lords, this Government are doing the tough and vital work necessary to protect our national security. We were in opposition for a long time, 14 years, so I understand the temptation to play political games whenever you get the chance—I completely get that. However, one thing that we never did was put our national security at risk.
I do not aim these remarks at all the noble Lords and Baronesses opposite; I know for a fact that the noble Baronesses, Lady Foster and Lady Hoey, whose aim is true, have genuine, long-standing support for the Chagossian community, and they apply that to this debate. However, I have not seen that same integrity and care expressed by some others. Over the years, I often shadowed the noble Lord, Lord Callanan, but I do not think I have ever heard him mention the way that the Chagossian community has been treated or their rights or needs. I am the first to say that they have been badly treated, and have said so many times throughout the passage of the Bill.
I disagree with everything in the Motion. The deal secures the long-term future of the critically important military base on Diego Garcia. If we had not done a deal then that would have left the future of the base, as well as current operations, in jeopardy, with likely further wide-ranging litigation, which would have undermined base operations. Waiting for that risk to crystallise, as some noble Lords opposite encouraged us to do, would have placed us in a much weaker position from which to negotiate. Either there was legal jeopardy, which is presumably why the previous Government embarked upon round after round of negotiation, or, as they now ask us to believe, there was never any legal jeopardy, in which case what on earth were they doing with their time and that of officials undertaking negotiation in bad faith?
Unlike the previous Conservative Government’s strategy with the Rwanda deal, we have been upfront about the costs. We have set them out clearly in our Explanatory Memorandum and in the finance exchange of letters, which were published on the same day as the treaty and have been debated many times since.
Lord Lilley (Con)
I am sorry that the Minister has chosen to end this debate adopting a totally different tone from that which she pursued during Committee and Report. I asked a clear question: which goods, services and facilities will be withheld by which countries if we do not do this deal? She has not answered. She has said that there must be an answer to that question because the previous Government negotiated. She is the Minister and they are the Government; she must give us the answer and not say that there must be an answer from someone else.
Baroness Chapman of Darlington (Lab)
I have clearly annoyed the noble Lord, given the finger-pointing this afternoon. My tone comes because this is the conclusion to these considerations. I would invite noble Lords to consider, when we talk about legal jeopardy and our reliance on third states, the remoteness of these islands and the complexity of sustaining a base of this nature. We rely on other states for supplies, for refuelling and for communications purposes. That is why we rest part of our argument on the need to resolve the legal jeopardy that the previous Government, as well as this Government and other states, could see existed here. We were determined to resolve this because, left unresolved, our position becomes weaker and weaker over time. This needed to be settled.
Lord Callanan (Con)
My Lords, I thank the noble Baroness for her replies. I do not think she said anything different from the points she made earlier. We had a lot of party-political insults but, yet again, no dealing with the actual issues that we raised. The one concession that I thought I heard from her—I will check Hansard—was an admission of what we have been saying all along: Mauritius does not in fact have the capabilities to resource the protection of the marine protected area. She has never said that in any previous assertions. Anyway, there are lots of points that I could take up more of the House’s time with, but I will not do that. I will just say that I would like to test the opinion of the House on my Motion.
The Deputy Speaker (Baroness Pitkeathley) (Lab)
The Question is that the original Motion, as amended, be agreed to.
The Deputy Speaker (Baroness Pitkeathley) (Lab)
I am informed that I should take the voices again. The Question is that the original Motion, as amended, be agreed to.
The Deputy Speaker (Baroness Pitkeathley) (Lab)
I called the original Motion, as amended, as a result of the vote that your Lordships have just taken part in. I will take the voices again. The Question is that the original Motion, as amended, be agreed to.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
The Opposition have put their amendment to the House and it has been carried. They are now going to vote against the Motion that they have just won on. I do not understand that at all. It seems to me that the normal thing is that, when a regret amendment is won, the Motion is amended and then the House approves the Motion as amended. We have tried to do that three times.
The Deputy Speaker (Baroness Pitkeathley) (Lab)
My Lords, I will try putting the Question once again. The Question is that the original Motion, as amended, be agreed to.
Sentencing Bill
(1 day, 4 hours ago)
Lords ChamberRead Hansard Text Read Debate Ministerial Extracts
The Minister of State, Ministry of Justice (Lord Timpson) (Lab)
Before I begin, I can update the House that the Scottish Government have granted an LCM. This covers the provisions in the Sentencing Bill on the treatment of national security offenders, which affect the executive competence of Scottish Ministers. I am very grateful to the Scottish Parliament for working with us.
I start by thanking the many noble Lords who have contributed to the Bill through debates in this Chamber and the extensive discussions that have taken place beyond it. Those contributions have shown the very best of this House. I am especially grateful to the noble Lord, Lord Marks, and the noble Baroness, Lady Hamwee, for their support and engagement on key measures in the Bill. I also thank the noble and learned Lord, Lord Keen, and the noble Lord, Lord Sandhurst, for their informed interventions and constructive challenge. Lastly, I thank my noble friends Lady Chakrabarti and Lord Blunkett for their contributions. I have enjoyed working with, and have learned a lot from, all noble Lords in your Lordships’ House. I also want to thank the officials who have been involved in the Bill’s preparation and passage, who have supported me so ably.
This is a significant Bill. As I said at Second Reading, it will put our justice system on a sustainable footing fit for the future, one that prioritises victims, fairness and accountability, and one that prioritises punishment that works, but, with the help of your Lordships’ House, we have gone even further to strengthen the Bill. Through its passage, we have added safeguards, and increased transparency, around the new approvals processes for the Sentencing Council; made it a statutory requirement for the Government to lay an annual Statement on prison capacity before Parliament; agreed to remove the power for providers of probation services to publish names, and photos, of individuals subject to an unpaid work requirement; and brought hope to those serving IPP sentences, and their families, by offering a faster and safe route to the end of their sentence.
Alongside this, we extended the whole life order starting point to include the murder of probation officers, and we made sure that this extends to current or former police, prison and probation officers where they are murdered in connection with their duties, even if it occurs while they are off duty or after they have left the service. I pause here to again pay tribute to former prison custody officer Lenny Scott as well as his family, who I am meeting tomorrow, for their dignified and determined advocacy on his behalf.
Finally, I again recognise the noble Lord, Lord Foster, for his tireless and tenacious leadership on tackling gambling addiction. As he knows, I share his concerns, and this is something I have committed to look at very closely.
I finish by again thanking the many noble Lords and officials who have helped shape, strengthen and support this Bill through to its Third Reading. It will prioritise victims, bring stability to our justice system, and better protect the public. I am very proud of this Bill and look forward to working on its implementation. I beg to move.
Lord Marks of Henley-on-Thames (LD)
My Lords, I start by thanking the noble Lord, Lord Timpson, for his kind and generous introduction. This is an important Bill and we on these Benches have supported its principal purposes throughout—those being to address the extreme prison capacity crisis, to move away from reliance on more and longer prison sentences, and to introduce a presumption against short sentences of immediate imprisonment and switch to greater use of suspended sentences, coupled with community supervision. Our concerns now are to ensure that the Government’s ambitions for probation are properly resourced and met, and I know the noble Lord knows how challenging achieving those ambitions will be. It will involve better use of technology, effective use of tagging and in particular making a real success of the recruitment, training and motivation of the Prison and Probation Service.
The noble Lord also knows how much we on these Benches appreciate the engagement that he and the whole Bill team have had with us, but also with other noble Lords across the House. His approach to this Bill, and that of the noble Lord, Lord Lemos, have been a fine example of co-operation across the House driving significant improvement in legislation. We have made important changes and, I think, without wasting time. Among other welcome changes, we are particularly grateful to the Government for agreeing to the removal of Clause 35, with its unfortunate proposals for probation officers to take and publish photographs of offenders undertaking unpaid work. We are also very grateful for the Government’s commitment to thorough, open and regular reporting on prison and probation capacity and staffing. I pay credit to the contributions of my noble friend Lord Foster in this area, as well as for his contributions on gambling.
We believe that the Bill has the potential to move us towards a more effective and humane sentencing system that concentrates on rehabilitation of offenders and reducing reoffending and puts victims at its heart.
One issue that will need further consideration from the Commons, and again here, is the provision of free transcripts, for which this House voted, which would benefit public understanding, and particularly victims’ understanding, of how the justice system works. I hope we will find an agreed and acceptable way forward on this issue, despite the Government’s concern, which I understand, as to the initial cost of providing free transcripts.
Finally, on the other side of the balance, it is a shame that we have not made the progress that we sought in ending the scandal of IPP prisoners still in prison or on licence for years after their tariff sentences have been served. That is serious unfinished business, and the appalling injustice involved remains to be fully addressed. I know that Members around the House hope that it will be effectively addressed soon. Nevertheless, we are extremely pleased to see the successful passage of the Bill through the House.
Lord Stewart of Dirleton (Con)
My Lords, I too am grateful to all noble Lords for their constructive engagement on this important Bill at every stage of its passage. On behalf of my noble and learned friend Lord Keen of Elie and my noble friend Lord Sandhurst, I echo the words of the noble Lord, Lord Marks of Henley-on-Thames, in thanking the Minister for the open and courteous manner in which he engaged with the House throughout the Bill’s consideration.
We on these Benches are particularly pleased that the Government tabled Amendment 53. We are proud to have championed the case for addressing a serious and unjust gap in the law relating to the imposition of whole life orders for the murder of police and prison officers. We too acknowledge the determined campaigning work carried out by the parents of Lenny Scott after the murder of their son in February 2024. We also welcome the Government’s decision to extend this provision to probation officers, who carry out exceptionally demanding and important work in the service of the public.
I also thank the Minister for Amendment 58, which introduces an annual report on prison capacity. This is an issue which we pressed strongly in Committee. If Parliament is to legislate for significant changes in sentencing and release policy, it is only right that the public are provided with a regular and transparent account of the prison estate. While we would have preferred the Government to commit to a more detailed report, this none the less represents a welcome step forward.
Lord Russell of Liverpool (CB)
My Lords, I will not follow the noble and learned Lord who has just sat down and go into the politics of this because I do not think this is the time or place. I do, however, congratulate the Minister on the way he has managed the Bill through this House. It is an exemplary example of someone coming in from the private sector with a successful track record of leading an unusual business and transferring that expertise, apparently effortlessly and flawlessly, into your Lordships’ House. He is an example for other new arrivals on the Front Bench alongside him to learn from; a few seminars with him would do them the world of good.
I will now briefly return to a subject that will not surprise the Minister or the noble and learned Lord, Lord Stewart, which is an issue we spoke about and had meetings about: perpetrators of domestic abuse and stalkers being released earlier than they should be. The Minister has been kind enough to suggest another meeting, so I can tell him that knocking on his door will be the Domestic Abuse Commissioner Dame Nicole Jacobs and the new Victims’ Commissioner Claire Waxman; her diary permitting, the Minister can also expect the noble Baroness, Lady May of Maidenhead, who will provide some real weight, and I gather she is one of the people who made the Minister actually think about going into public life. Finally, I will be there as the token male.
Lord Timpson (Lab)
I thank all noble and learned and noble Lords for their very kind feedback. I have never had an appraisal in my career; this is the first one I have had, and I will take the feedback. All noble Lords are welcome to knock on my door at any time, because I learn so much from what they bring, which makes what I am trying to do far better. I am extremely grateful to all noble Lords and my noble friend Lord Lemos for guiding me along the way on this and for contributing on very important parts of this Bill. Everyone has contributed to make this a very good Bill. Again, I thank all noble Lords and I beg to move.
Biodiversity Beyond National Jurisdiction Bill
“Power to make regulations: Scotland and Northern Ireland (1) The appropriate national authority may by regulations make provision that is within section 9(2) (read with section 9(3) to (6)) for the purposes of implementing the United Kingdom’s obligations under Part 2 of the Agreement.(2) Regulations under this section may—(a) confer a function (including a discretion) on any person;(b) make different provision for different purposes or for different areas;(c) make consequential, supplementary, incidental, transitional, transitory or saving provision.(3) Regulations under this section that provide for civil sanctions—(a) must provide a right of appeal against the imposition of any such sanction; (b) may make any provision corresponding to, or dealing with similar matters to, provision made by or capable of being made under the Regulatory Enforcement and Sanctions Act 2008.(4) For the purposes of this section, “appropriate national authority”, in relation to the making of regulations, means—(a) the Scottish Ministers, so far as provision made by the regulations would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament;(b) the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, so far as provision made by the regulations—(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.(5) The consequential provision that may be made by regulations in reliance on subsection (2)(c) includes provision amending—(a) in relation to regulations made by the Scottish Ministers, an enactment within the meaning given by Schedule 1 to the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10) (whenever passed or made), and(b) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, any statutory provision within the meaning given by section 1(f) of the Interpretation Act (Northern Ireland) 1954.”Member’s explanatory statement
This new clause would give the Scottish Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland a power to make provision within devolved legislative competence corresponding to the provision that the Secretary of State can make under clause 9.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
My Lords, I am pleased to open this debate with the government amendments tabled in my name relating the role of devolved Governments in the implementation of the BBNJ agreement. As noble Lords will be aware, the BBNJ Bill extends to the whole of the United Kingdom, apart from certain clauses which extend to Scotland only. Foreign affairs, including the negotiation and signature of international treaties, are a reserved matter under the devolution settlements. However, observation and implementation of obligations arising under treaties in domestic law are excepted from the foreign affairs reservation so far as those obligations relate to devolved matters. Working closely with Ministers and officials in the devolved Governments, we have agreed that the legislative consent motion process is engaged for Scotland and Northern Ireland, to varying extents, by Parts 2, 3 and 4 of the Bill.
The Government have been in sustained discussions with both devolved Governments to seek consent for this Bill, and I can confirm to the House that Motions on consent will be debated shortly in both the Scottish Parliament and the Northern Ireland Assembly. Throughout these discussions, the Government have sought to ensure that devolved competencies are fully respected. That is why we have tabled amendments on Report to strengthen the role of the devolved Governments in the future implementation of the BBNJ agreement.
Clauses 9 and 11 confer powers on the Secretary of State to make regulations to implement the UK’s obligations under Parts II and III of the BBNJ agreement. Government Amendments 1, 2, 5 and 6 provide Scottish Ministers and the Northern Ireland Department of Agriculture, Environment and Rural Affairs with concurrent powers to make regulations within devolved competence. In addition, Amendments 3 and 7 place a duty on the Secretary of State to consult Scotland and Northern Ireland before exercising the powers in Clauses 9 and 11 where regulations engage devolved matters. This approach will ensure that devolved Governments are engaged in advance of regulations being made and enable them to make their own provision on devolved aspects where they wish to do so, and it reflects their responsibilities while supporting timely and effective implementation of the agreement.
Government Amendments 10 and 11 ensure that Clause 23, which sets out procedures for the making of regulations under the Act, does not apply to regulations made under the new clauses introduced by government Amendments 1 and 5. Instead, the procedures for regulations set out in government Amendments 2 and 6 respectively will apply.
Finally, government Amendment 12 amends Clause 26 so that Clause 18 comes into force on such a day as the Secretary of State appoints by regulations, rather than upon Royal Assent. This change will ensure a consistent approach across the Bill with regards to the environmental impact assessment regulations that are being amended. I beg to move.
Lord Teverson (LD)
My Lords, I thank the Minister for going through those technicalities. These Benches welcome the effectiveness of devolution for this sort of implementation legislation, as I am sure the whole House does. The one question I have for the Minister, although she does not have power over it, is whether she has been assured by the devolved Assemblies that the correct and needed authorities will be given, so that we can keep up the momentum and participate as a party that has ratified this agreement when the first Conference of the Parties takes place?
Lord Callanan (Con)
My Lords, the Bill enables the Government to go ahead and ratify the treaty, which we signed when we were in government and we still support. We have discussed the treaty and the Bill at length in Committee, and we are pleased that the Government are continuing with this work to implement the treaty.
The amendments in this group seek to grant powers to the Scottish and Northern Ireland Ministers that are broadly equivalent to those granted to the Secretary of State under the Bill. Although the content of these amendments is not especially concerning, it feels a little late for the Government to make substantive changes to their Bill. The Bill has progressed through all stages in the House of Commons and Committee in your Lordships’ House. By making amendments at this late stage, Peers are denied the opportunity of proper scrutiny in Committee. We believe that this is happening too often. We were clear when it happened under the previous Government that it was unacceptable, and it remains so under this Government. Can the Minister please explain why the Government have waited until Report in this House to make these changes?
Baroness Chapman of Darlington (Lab)
I do not want to fall out with the noble Lord today, but the reason these changes have come at this stage is that we have listened to our friends and colleagues in the devolved Administrations who have said that they feel they need these powers, and we respect their view, having had a look at it as well. This has not always been the approach of the UK Government, but it is what we are trying to do, so that is why they have come at this stage.
In response to the noble Lord, Lord Teverson, I believe that the correct authorities are to be given. I have every confidence that that is the case, and I hope that we do not need to return to make changes to this as a consequence. These amendments demonstrate our commitment to collaborating with the devolved Governments at the same time as ensuring that the UK is able to implement the agreement in a timely manner.
“Procedure for regulations under section (Power to make regulations: Scotland and Northern Ireland)(1) Regulations under section (Power to make regulations: Scotland and Northern Ireland) that include provision—(a) amending an Act of Parliament, an Act of the Scottish Parliament or Northern Ireland legislation,(b) made in reliance on section 9(2)(b), or(c) creating a civil sanction or varying the maximum amount of any monetary penalty,are subject to the affirmative procedure.(2) Any other regulations under section (Power to make regulations: Scotland and Northern Ireland) are subject to the negative procedure.(3) Any provision that may be made by regulations under section (Power to make regulations: Scotland and Northern Ireland) subject to the negative procedure may be made in regulations subject to the affirmative procedure. (4) The power of the Department of Agriculture, Environment and Rural Affairs in Northern Ireland to make regulations under section (Power to make regulations: Scotland and Northern Ireland) is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).(5) For the purposes of this section—(a) in relation to regulations made by the Scottish Ministers, see sections 28 and 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 for the meanings of “subject to the negative procedure” and “subject to the affirmative procedure”, and(b) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland—(i) where the regulations are subject to the affirmative procedure, the regulations may not be made unless a draft of the regulations has been laid before and approved by a resolution of the Northern Ireland Assembly, and(ii) where the regulations are subject to the negative procedure, the regulations are subject to negative resolution within the meaning given by section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).”Member's explanatory statement
This new clause would make provision for procedure relating to regulations under new clause (Power to make regulations: Scotland and Northern Ireland), which would be inserted after clause 9.
“Consultation: Scotland and Northern Ireland(1) The Secretary of State must consult the Scottish Ministers before making regulations under section 9 that contain provision that would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament.(2) The Secretary of State must consult the Department of Agriculture, Environment and Rural Affairs in Northern Ireland before making regulations under section 9 that contain provision that—(a) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and(b) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.”Member's explanatory statement
This amendment would require the Secretary of State to consult the Scottish Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland before making regulations under section 9 that contain provision with the legislative competence of the Scottish Parliament or the Northern Ireland Assembly.
“Control of plastic pellet pollution in areas beyond national jurisdiction(1) The Secretary of State must, by regulations and through the exercise of functions under this Act and other enactments, and through co-operation in relevant international organisations and bodies, make provision for the prevention, control and remediation of pollution in areas beyond national jurisdiction arising from the manufacture, handling, transport, storage, loading or unloading of plastic pellets, flakes or powders.(2) Measures taken under this section must aim to secure a level of environmental protection that is no less effective than the measures set out in the International Maritime Organization Marine Environment Protection Committee Circular MEPC.1/Circ.909, as approved in 2024.(3) Regulations under this section must, in particular, include provision—(a) requiring operators to implement mandatory procedures to prevent the loss of plastic pellets throughout the supply chain in areas beyond national jurisdiction;(b) requiring containment, spill-prevention, recovery and clean-up measures in areas beyond national jurisdiction consistent with internationally recognised best practice; (c) requiring training, documentation and internal controls relating to pellet loss prevention in areas beyond national jurisdiction;(d) requiring the prompt reporting of any loss of plastic pellets in areas beyond national jurisdiction to the appropriate authority;(e) providing for the remediation of environmental harm and the recovery of associated costs from the responsible operator;(f) providing for monitoring, inspection of, and enforcement against, the loss of plastic pellets in areas beyond national jurisdiction, including civil sanctions;(g) requiring the Secretary of State to have regard to evidence of the effectiveness of measures adopted by parties to the International Maritime Organization, including measures adopted pursuant to the implementation of MEPC.1/Circ.909 by international signatories, including the European Union.(4) Regulations under this section must be made within 12 months of the day on which this Act is passed.(5) Regulations under this section are subject to the affirmative resolution procedure.”Member's explanatory statement
This new clause would require the Secretary of State to make regulations on the control of plastic pellet pollution.
Baroness Miller of Chilthorne Domer (LD)
My Lords, in moving Amendment 4, I thank the noble Baroness, Lady Jones of Moulsecoomb, for putting her name to it as well. This is a very important issue that we debated at length in Committee. The reason I am bringing something back on Report, albeit in a more focused form just dealing with plastic pellets, is that plastic generally is one of the huge problems that the ocean needs to have addressed, but the plastic pellet issue is something that the Government could choose to do a lot more about monitoring, evaluating and regulating.
It is notable that the European Union has made regulations about pellets. The loss at sea during shipping of these pellets, which form the basis of plastic wherever it is manufactured, is estimated to be 10 trillion pellets annually, with 10 million tonnes apparently lost within European Union waters, so it is a massive problem the sheer scale of which is hard to imagine. Some of the losses get into the sea and wash out from our own sewage plants—that, again, is something that I am sure the Government will look at. I would like the Minister’s assurance today that through some vehicle in the future, whether it is the forthcoming water White Paper or whatever, they will address this issue of plastic pellets, firming up on how people shipping them are trained, the regulation of it and how they are contained on ships—everything to do with the shipping of them—because the scale of the loss is unsupportable and every country needs to take action on it. I beg to move.
Baroness Jones of Moulsecoomb (GP)
My Lords, I support the amendment tabled by the noble Baroness, Lady Miller. It is an extremely good amendment, and I urge the Minister to pick it up at some future date. This is such a good amendment that it should go into legislation somewhere.
In Committee, we heard at length and with real concern about the scale and persistence of plastic pollution in our oceans. Much of that discussion centred on consumable plastics and waste, but plastic pellets, flakes and powders are equally serious and often overlooked in legislation. These losses might be small in individual incidents, although some might be extremely large, but they are cumulative and, in effect, irretrievable and irreversible once they have happened.
We are looking ahead, apparently, to a global plastics treaty, which I am very excited about. That process is obviously welcome, but the urgency of the problem means that we should take every available opportunity to act now, particularly where there is already an international consensus on best practice.
What I welcome very much about this amendment is its practical focus. This would stop the plastic pellets getting into the sea in the first place instead of our trying to mop them up and recover them later which is, as I said, impossible.
I will also speak to my Amendment 9 on the exemptions in the Bill. Clause 18 seeks to strengthen confidence in how environmental impact assessments are applied. It worries me that there are so many exemptions. Again, I would very much appreciate it if the Minister took this issue up. My amendment is supported by WildFish, an organisation with extensive expertise in marine conservation, whose work highlights the importance of making sure that decisions to rely on exemptions are transparent, on a case-by-case basis, and ensure that there is an equivalence that meets Part IV of the BBNJ agreement and Article 206 of UNCLOS. This amendment would clearly set out that test. Where an appropriate authority determines that a formal environmental impact assessment is not required, that determination should rest on the existence of another assessment being in place that is equivalently robust.
The amendment would also ensure that the reasoning behind such decisions was recorded and published, with the idea to keep decisions transparent and uphold public trust. In particular, there are difficulties in relying on regional fisheries management organisations as a substitute for BBNJ-aligned environmental assessment. Although RFMOs play an important role in managing fishing effort and target stocks, their processes do not routinely deliver full assessment of cumulative impacts across sectors, of effects on food webs and non-target species, or of the full implications for migratory species that cross jurisdictional boundaries. I would be very happy to talk to the Minister in more detail about this and I hope to see it in a future Bill. I would like to have moved this amendment, but we are obviously in a hurry to complete the Bill, so I have held off, but it is incredibly important that we do not allow exemptions without understanding why they have happened and the fact that they have not been recorded properly.
As interest grows in new industries, such as open ocean aquaculture, the potential environmental impacts, ranging from disease and growth in parasites to genetic impacts from escapes and reliance on wild-caught fish, are even more important. We are seeing this in salmon farms at the moment: escaped fish covered in all sorts of rather nasty things spread to wild fish and cross-breed, which is deeply unhealthy for the wild fish. I would welcome the Minister putting on record how the Government intend to apply these equivalence criteria in practice, particularly in view of the regional fisheries management organisations. I would like reassurance that exemptions in any future legislation will be applied narrowly and cautiously; that equivalence will be actively tested and not just assumed; that reliance on regional organisations alone will not automatically justify exemption; and that future high-risk activities will be subject to BBNJ-aligned screening.
Lord Teverson (LD)
My Lords, we on these Benches support the intent of the amendment tabled by the noble Baroness, Lady Jones. I hope the Minister will have a useful reply to it.
On plastics and the amendment tabled by my noble friend Lady Miller, one of the things that is clear is that, even in terms of human health and the food chain, plastics discarded anywhere, let alone in the ocean, are a huge issue for the future. I have one question for the Minister. One of the tragedies of last year was that the plastics treaty was not concluded, despite expectation. It is largely thought that that was because of the lobbying of the plastics industry. Certainly, the United States has not exactly been supportive of international agreements over the past 12 months. It would be great if, despite my pessimism about the future of that treaty, there was some feeling within her department that perhaps it is not dead, as it is supposed not to be, and there is still some mileage and hope that we might be able to find a conclusion to it.
Lord Callanan (Con)
I thank the noble Baroness, Lady Miller of Chilthorne Domer, for leading this group. The objective of the treaty is to protect areas of the ocean that lie beyond national jurisdiction in line with the treaty that we agreed. Plastic pellet pollution is a concerning environmental risk, and I thank the noble Baroness for bringing the matter forward for debate. I hope the Minister will be able to respond to the noble Baroness’s concerns and take this opportunity to set out the steps the Government are taking to tackle the menace of plastic pellet pollution. Does the Minister think that that action is sufficient? Do Ministers have plans to go further on plastic pollution during this Parliament? While we do not feel that the amendment is a necessary improvement to the Bill, we share the noble Baroness’s concerns about the harmful effects of plastic pollution.
The amendment in the name of the noble Baroness, Lady Jones of Moulsecoomb, seeks to ensure that environmental impact assessments are undertaken where appropriate. Again, while we do not think that this is necessary in the Bill, I hope the Minister will be able to reassure the noble Baroness that environmental impact assessments will continue to be required where appropriate.
Baroness Chapman of Darlington (Lab)
My Lords, these amendments relate to environmental protection and plastic pellet pollution in areas beyond national jurisdiction. Amendment 4, tabled by the noble Baroness, Lady Miller, and supported by the noble Baroness, Lady Jones—I thank them for it—would require the Secretary of State to make regulations on the control of plastic pellet pollution in areas beyond national jurisdiction within 12 months of the BBNJ Act being passed.
The Government fully recognise the seriousness of plastic pollution in the marine environment, including the particular harms caused by plastic pellet loss. It is a matter of genuine public concern as well. The noble Baronesses have been tireless advocates for action in this area, and I am pleased that they have used the opportunity today to raise this issue again.
The Government are taking steps to address the issue through existing regulatory channels. For example, the International Convention for the Prevention of Pollution from Ships under the International Maritime Organization already requires the reporting of the discharge, both accidental or deliberate, of any harmful substance covered by the convention and sets out how this report must be made. Discussions on regulating plastic pellets under the convention are currently ongoing in the IMO, and the Maritime and Coastguard Agency will be responsible for addressing the implementation of these regulations. The UK implements Annex V of this convention through the Merchant Shipping (Prevention of Pollution by Garbage from Ships) Regulations 2020, which prohibits any discharge of plastic into the sea.
Further, as of 1 January, a new requirement under the International Convention for the Safety of Life at Sea came into force internationally, which mandates the reporting of lost containers to the nearest coastal state and flag state so that speedy efforts to recover the containers can be made. Additionally, there is a separate process under way to agree a global plastic pollution treaty. Pellet loss is a global issue, and the UK has called for specific provisions in the new treaty on plastic pollution to address pellet loss throughout the supply chain. I appreciate that things have not got to where we would wish them to with this treaty, but we continue to support it. Notwithstanding the long amount of time that has already elapsed in getting the treaty to where it is today, we do not walk away; we continue to advocate for the treaty.
While I recognise the important issue raised by the amendment, for the purpose of the Bill, this is about enabling the UK to comply with the legal obligations under the BBNJ agreement. I know that the noble Baronesses understand this and are using this opportunity to raise these issues, and so they should. We do not think this particular Bill is the most suitable vehicle for addressing plastic pollution across its full life cycle. Elements of the proposed new clause may become duplicative of measures currently being taken by the UK to manage plastic pollution at sea.
Amendment 9 was specifically tabled by the noble Baroness, Lady Jones. She rightly highlights the importance of ensuring that, under the marine licensing regime, an appropriate authority cannot defer to another equivalent assessment unless that assessment meets the biodiversity beyond national jurisdiction agreement Part IV requirements. I fully agree with what she is trying to do through the amendment. I reassure her that these changes are not needed, because it is already the case that the appropriate authority will not, under the Marine Works (Environmental Impact Assessment) Regulations, be able to defer to another equivalent assessment unless that assessment meets the requirements of Part IV of the biodiversity beyond national jurisdiction agreement. This would include all the procedural consultation and public participation requirements of Part IV of the agreement. The respective Marine Works (Environmental Impact Assessment) Regulations set out various additional procedural and public notification requirements that the appropriate authority must undertake if it decides to defer to an equivalent assessment.
Given that these requirements already ensure that, under the marine licensing regimes, an equivalent assessment must be appropriately rigorous and meet the Part IV requirements, including for public participation and transparency, I am pleased that I can, I think, reassure the noble Baroness that the amendment is not needed today. I am happy to continue, as she suggests, talking about this, alongside my colleagues in Defra. For these reasons, I hope that the noble Baronesses will not press their amendments.
Baroness Miller of Chilthorne Domer (LD)
I thank the Minister for her helpful reply. It is constructive that the loss of containers has to be reported, but I look forward to a time when we are not just hearing that the horse has bolted but have actually got bolts on the stable door. I am sure that the Government will continue to press for that aim too. In withdrawing the amendment, I thank the noble Lord, Lord Callanan, and the noble Baroness, Lady Jones, for contributing to this debate. I beg leave to withdraw the amendment.
“Power to make regulations: Scotland and Northern Ireland (No. 2)(1) Where section 11 applies, the appropriate national authority may by regulations make such provision as the authority considers appropriate for the purpose mentioned in section 11(2).(2) Subsections (3) to (5) of section 11 apply to regulations under this section as they apply to regulations under that section.(3) Regulations under this section may—(a) confer a function (including a discretion) on any person; (b) make different provision for different purposes or for different areas;(c) make consequential, supplementary, incidental, transitional, transitory or saving provision.(4) Regulations under this section that provide for civil sanctions—(a) must provide a right of appeal against the imposition of any such sanction;(b) may make any provision corresponding to, or dealing with similar matters to, provision made by or capable of being made under the Regulatory Enforcement and Sanctions Act 2008.(5) For the purposes of this section, “appropriate national authority”, in relation to the making of regulations, means—(a) the Scottish Ministers, so far as provision made by the regulations would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament; (b) the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, so far as provision made by the regulations—(i) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and(ii) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.(6) The consequential provision that may be made by regulations in reliance on subsection (3)(c) includes provision amending—(a) in relation to regulations made by the Scottish Ministers, an enactment within the meaning given by Schedule 1 to the Interpretation and Legislative Reform (Scotland) Act 2010 (asp 10) (whenever passed or made), and(b) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, any statutory provision within the meaning given by section 1(f) of the Interpretation Act (Northern Ireland) 1954.”Member’s explanatory statement
This new clause would give the Scottish Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland a power to make provision within devolved legislative competence corresponding to the provision that the Secretary of State can make under clause 11.
“Procedure for regulations under section (Power to make regulations: Scotland and Northern Ireland (No. 2))(1) Subject to subsection (3), regulations under section (Power to make regulations: Scotland and Northern Ireland (No. 2)) that include provision—(a) amending an Act of Parliament, an Act of the Scottish Parliament or Northern Ireland legislation,(b) creating a civil sanction or varying the maximum amount of any monetary penalty, or(c) creating a criminal offence,are subject to the affirmative procedure.(2) Subsection (3) applies where the provision within subsection (1) of this section relates to a decision under Article 24(1) of the Agreement.(3) Where the person making the regulations considers that the regulations need to be made urgently in order to give effect to the measure to which they relate, the regulations are subject to the made affirmative procedure. (4) Any other regulations under section (Power to make regulations: Scotland and Northern Ireland (No. 2)) are subject to the negative procedure.(5) Any provision that may be made by regulations under section (Power to make regulations: Scotland and Northern Ireland (No. 2)) subject to the negative procedure may be made in regulations subject to the affirmative procedure or the made affirmative procedure.(6) The power of the Department of Agriculture, Environment and Rural Affairs in Northern Ireland to make regulations under section (Power to make regulations: Scotland and Northern Ireland (No. 2)) is exercisable by statutory rule for the purposes of the Statutory Rules (Northern Ireland) Order 1979 (S.I. 1979/1573 (N.I. 12)).(7) For the purposes of this section—(a) in relation to regulations made by the Scottish Ministers, see sections 28 and 29 of the Interpretation and Legislative Reform (Scotland) Act 2010 for the meanings of “subject to the negative procedure” and “subject to the affirmative procedure”, (b) in relation to regulations made by the Scottish Ministers that are subject to the “made affirmative procedure”, the regulations—(i) must be laid before the Scottish Parliament as soon as reasonably practicable after being made, and(ii) cease to have effect at the end of the period of 28 days beginning with the day on which they are made unless, during that period, the regulations are approved by resolution of the Scottish Parliament,(c) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland that are subject to the “affirmative procedure”, the regulations may not be made unless a draft of the regulations has been laid before and approved by a resolution of the Northern Ireland Assembly,(d) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland that are subject to the “made affirmative procedure”, the regulations—(i) must be laid before the Northern Ireland Assembly as soon as reasonably practicable after being made, and(ii) cease to have effect at the end of the period of 28 days beginning with the day on which the regulations are made unless, during that period, the regulations are approved by a resolution of the Northern Ireland Assembly, and (e) in relation to regulations made by the Department of Agriculture, Environment and Rural Affairs in Northern Ireland that are subject to “the negative procedure”, the regulations are subject to negative resolution within the meaning given by section 41(6) of the Interpretation Act (Northern Ireland) 1954 (c. 33 (N.I.)).(8) In calculating the period of 28 days mentioned in subsection (7)(b)(ii), no account is to be taken of any time during which the Scottish Parliament is—(a) dissolved, or(b) in recess for more than 4 days.(9) In calculating the period of 28 days mentioned in subsection (7)(d)(ii), no account is to be taken of any time during which the Northern Ireland Assembly is—(a) dissolved,(b) in recess for more than 4 days, or(c) adjourned for more than 6 days.(10) Where regulations cease to have effect as a result of subsection (7)(b)(ii) or (d)(ii), that does not— (a) affect anything previously done under or by virtue of the regulations, or(b) prevent the making of new regulations.”Member’s explanatory statement
This new clause would make provision for procedure relating to regulations under new clause (Power to make regulations: Scotland and Northern Ireland (No. 2)), which would be inserted after clause 12.
“Consultation: Scotland and Northern Ireland (No. 2)(1) The Secretary of State must consult the Scottish Ministers before making regulations under section 11 that contain provision that would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament.(2) The Secretary of State must consult the Department of Agriculture, Environment and Rural Affairs in Northern Ireland before making regulations under section 11 that contain provision that— (a) would be within the legislative competence of the Northern Ireland Assembly if it were contained in an Act of that Assembly, and(b) would not, if it were contained in a Bill in the Northern Ireland Assembly, result in the Bill requiring the consent of the Secretary of State under section 8 of the Northern Ireland Act 1998.(3) Subsections (1) and (2) do not apply where the Secretary of State considers that the regulations need to be made urgently in order to give effect to a measure adopted under Article 24(1) of the Agreement (decisions to adopt measures to be applied on an emergency basis).”Member’s explanatory statement
This amendment would require the Secretary of State to consult the Scottish Ministers and the Department of Agriculture, Environment and Rural Affairs in Northern Ireland before making regulations under section 11 that contain provision with the legislative competence of the Scottish Parliament or the Northern Ireland Assembly, except in the case of regulations that need to be made urgently.
Lord Teverson
“(2A) In section 69 (determination of applications), after subsection (1)(c) insert—“(d) the need to ensure the human rights of those at sea in areas beyond national jurisdiction,””
Lord Teverson (LD)
My Lords, one of the core characteristics of the Bill is, obviously, a treaty that is about actions beyond national jurisdictions. In fact, we should celebrate it even more, because I suspect it will be one of the last of these treaties that we shall enjoy and be able to make over the next few years. I think that there will not be many that follow this.
One of the areas that has been left out of the treaty, but which is important, because this is beyond national jurisdiction, is around human rights—hence the amendment. I thank the Minister and her team for the conversations that we have had recently about this area. Human rights are, by definition, universal, but they are very differently applied, in practice, terrestrially from how they are on the high seas. The reason for that is that, terrestrially, they can be enforced; those who feel that their human rights are being threatened can go to authorities, normally. Their cases and instances can be pursued, whether it be through legal processes or whatever.
Out on the high seas, that is very different indeed. There is effectively a vacuum in terms of enforcement once the national boundaries at sea have been crossed. There is also an asymmetric situation in terms of power. Whether it be crew, passengers or researchers in this instance, once they are on the high seas, they have very little power in comparison to the skipper or captain, or what the owners might instruct the skipper or captain to do. For instance, unlike on land, there is no contact by mobile telephone; you cannot get in touch with authorities to pursue your case or ask for help or get protection. None of that is necessarily available.
That is compounded by flags of convenience, which we talked about in Committee. Often, those flag states, which would be the enforcement authority for a vessel on the high seas, do not have the capacity, the interest or the ability to be communicated with to enforce those human rights on that vessel; hence why I ask that we also include human rights in the terms of the licensing requirement. I noted, going through the coastal access Act, that human health was one of the considerations, but human rights are obviously much broader than that.
So, who are the sorts of people who might be the problem? I suspect it is not the researchers on a research vessel, but you still have crew beyond that. The problem is usually because they are either indentured employees, migrants who are unable to communicate easily with the ship owners or the authority of the port where they are, being unable to communicate in the same language. There is quite wide-scale abuse, mainly in the fishing industry, but there are also instances in the cruise industry and risks in this sector as well.
That is why I feel it is important that the licensing authorities are able to check, purely in the case of licences for research beyond national jurisdiction, and that they have to consider whether the boat owner, operator and licensee are able and have the will to protect the human rights of the persons on board those vessels. I beg to move.
Lord Callanan (Con)
I thank the noble Lord, Lord Teverson, for his amendment. Of course, we share his desire to see the rights of those who are at sea beyond national jurisdiction protected. This is an important issue and I understand why he has tabled his amendment, but I am sure that even the noble Lord will probably accept that the Bill is possibly not the right vehicle for his concerns to be addressed.
The amendment would add an additional duty on marine licensing authorities to have regard to the need to ensure that the rights of those at sea beyond national jurisdiction are protected. Obviously, I am interested to hear the Minister’s response, and I am sure she can tell us what work her department has done to understand whether this new duty would be at all workable and how licensing authorities could go about assessing the necessary information to comply with any new duty. I am sure she will also tell us whether Ministers have considered any other possible approaches to ensure protection for those at sea beyond national jurisdiction. Ultimately, given that this is an issue relating by definition to issues and activities beyond national jurisdiction, perhaps the noble Lord, Lord Teverson, would consider that a multilateral approach, rather than the UK acting unilaterally on this, would probably have more luck in ensuring that his concerns are addressed.
Baroness Chapman of Darlington (Lab)
I thank the noble Lord for taking the time to speak with me about his Amendment 8 last week. He is a long-standing and committed advocate for human rights at sea, and he is right to draw attention to the seriousness of these issues, including, as he described, the challenges of enforcement on the high seas.
Lord Teverson (LD)
My Lords, the greatest delight is that the noble Lord and the noble Baroness actually agreed with each other; that seemed highly unusual, having sat through the previous debate. I have brought about a coming together of the two of them—at least that is positive.
I agree absolutely with the noble Lord, Lord Callanan, that this issue should be dealt with multilaterally. That is clearly the case. However, I am a pessimist. Unfortunately, I do not think that is on the cards in the near future, in any way. This would be a way to address that, and perhaps the UK could once again show a lead to other nations and other signatories of the treaty.
However, I agree with much of what the Minister said. I hope that we can continue this conversation more productively, perhaps in other legislation, because this issue affects a significant number of people who trade, research and fish on the high seas. They need our support and our understanding that there can be some very difficult times for those people in those circumstances. However, on this occasion, I beg leave to withdraw my amendment.
“(za) section (Power to make regulations: Scotland and Northern Ireland),”Member’s explanatory statement
This amendment is consequential on my amendment inserting new clause (Power to make regulations: Scotland and Northern Ireland) after clause 9.
“(za) section (Power to make regulations: Scotland and Northern Ireland (No. 2)),”Member’s explanatory statement
This amendment is consequential on my amendment inserting new clause (Power to make regulations: Scotland and Northern Ireland (No. 2)) after clause 12.
Member’s explanatory statement
This amendment would provide for clause 18 to come into force on such day as the Secretary of State may by regulations appoints.
Ukraine and Wider Operational Update
(1 day, 4 hours ago)
Lords ChamberRead Hansard Text Read Debate Ministerial Extracts
Baroness Goldie (Con)
My Lords, I begin by echoing the comments of my right honourable friends in the other place, the Leader of the Opposition and the shadow Defence Secretary, in supporting the Government in taking measures to tackle the ongoing scourge of sanctions-busting shipping activity.
The enforcement of sanctions on Russia and Iran is crucial to defending our interests both at home and abroad and critical to upholding our ongoing support for Ukraine, and any action we can take to weaken Putin’s war machine is welcome. I thank all those service personnel who took part in the operation to assist the United States in the capture of the MV “Bella 1”. As ever, their commitment to our country and our security is exemplary.
On the substance of the declaration of intent signed by the Prime Minister and the President of France, there is a list of unanswered questions. I understand that the Minister will not be able to go into operational specifics—I would not want him to do that—but I hope he can shed some further light on this plan.
The Secretary of State’s Statement in the other place mentioned that the meeting in Paris last week was
“the largest meeting yet of the coalition of the willing”,—[Official Report, Commons, 7/1/26; col. 384.]
with 39 nations present. But as far as I can tell, it was only Britain and France that agreed to send troops to Ukraine in the event of a peace agreement. Can the Minister confirm that all members of the so-called coalition of the willing will be contributing to the multinational force for Ukraine in that eventuality? Does he know which other countries have expressed a willingness to also make such deployments?
There is a matter of critical, fundamental principle we must acknowledge here: any peace agreement between Russia and Ukraine will be fragile. Russia has not exactly garnered a reputation for reliability, and there is always a risk in the event of a peace deal being negotiated that Russia could violate any such agreement.
I do not need to spell out to the House what the consequences of that would be if we had British troops in that country who could then find themselves forced into direct combat with Russian troops. It is an outcome that none of us would wish to see happen, but the Government and the British people must be prepared for that scenario.
I therefore ask the Minister: does this not heighten the importance of the national conversation on defence, as outlined in the SDR and committed to by the Government? Surely we must now prepare the British public for a future which in reality will be less secure and less peaceful. The prospect I have just outlined is very important for the British public to understand, so I would be grateful if the Minister could confirm how the progress on the national conversation is proceeding.
The other point is support for our troops. Are the Government absolutely satisfied that they will be going in as best equipped as we can possibly make them? This rather underlines how important it is that the Government not only ramp up defence spending but that we begin to see this much-delayed defence investment plan.
I confess to disappointment that despite repeated undertakings which the Government have given, that investment plan has not yet materialised. We were told just before Christmas that we would see it before the end of the year, but there has been no sign of it. I understand that we might not now see it until spring this year. Given the scenario that the Prime Minister is outlining, this is beyond the theoretical and the hypothetical. This is actually getting into the very real and raw territory of what we need to fund the MoD to make sure these troops will have everything they require. I would be grateful if the Minister could clarify what he understands the position to be in relation to that investment plan.
We also have the helicopter factory in Yeovil teetering and the frigate-building programme stalling, and our munitions supplies have not been replaced at anything like the speed necessary. All of that I adduce in support of my proposition that we must now have clarity. There is a need for this defence investment plan, in whatever form it is in, to see the light of day. The most important thing is that we ask a lot of our Armed Forces; we all hugely respect what they do. If troops are to be deployed in Ukraine as part of a multinational mission post some peace agreement, they need to be safe in the knowledge that our Government—and all of us—care about them, and the Government have their back.
Baroness Smith of Newnham (LD)
My Lords, during the previous Government, there was a bit of a triumvirate when the noble Baroness, Lady Goldie, was the Minister. Many times, the noble Lord, Lord Coaker, and I would stand up and ask questions, and I would associate myself immediately with his comments. Today, I find myself in a similar position, standing up to associate myself and these Benches with the comments and questions raised by the noble Baroness, Lady Goldie, which are extremely important. My questions should therefore be seen very much as additional to those of the noble Baroness, Lady Goldie.
I first thank His Majesty’s Armed Forces, particularly at the start of a new year, and say how important it is that we support them. Obviously, our personnel were not actively involved last week, but we support them and we want to ensure that the situation for our Armed Forces will be such that we are ready to deal with all the international situations that may come up in 2026. Although this Statement was officially labelled, “Ukraine and Wider Operational Update”, already in 2026 we have had Iran, Ukraine and Russia, and the other issue, of course, is the situation with Venezuela.
I do not propose to ask the Minister questions specifically about Venezuela, but I stress that the importance of supporting the United States last week in tackling the tanker and dealing with the shadow fleet is precisely that we understand that that was in accordance with international law. It is important to stress that we support His Majesty’s Government as long as the action taken is in accordance with international law. Will His Majesty’s Government ensure that, where actions are taken, even by our closest ally, the United States, we will hold them to account if we believe that they are not acting according to international law?
We clearly have a difficult situation where, on some issues, we agree entirely with the United States and on other issues we find ourselves perhaps at one remove. Could the Minister help the House understand where the United Kingdom is in discussing with the United States the situation of another sovereign entity—namely, Greenland? We have had reassuring answers from the FCDO, suggesting that the future of Greenland is a matter for the Greenlanders and for the Kingdom of Denmark. But Greenland is a significant geographical part of NATO. There are questions around what support we as the United Kingdom, particularly the MoD, are giving to Greenland and to the Kingdom of Denmark.
Building on questions from the noble Baroness, Lady Goldie, if the United Kingdom were to commit troops to Ukraine, what would the conditions be? I understand that there would be a vote in the other place, but would it be just the United Kingdom and France? Are His Majesty’s Government sure that, if we did that, we would not actually be creating vulnerabilities for our own troops, because the prospect of peace in Ukraine still seems a long way off?
Finally, is the Minister convinced that the commitments to defence expenditure are adequate? He said in the Chamber last week and the Secretary of State said in the Commons as part of this Statement—or in response on this Statement—that we have our 3% commitment, but as the noble Baroness, Lady Goldie, asked, if we are not spending that money, and if we are not letting the contracts and there are vulnerabilities for our frigates and helicopter services, where does that leave us in terms of national security? Supporting the United States in supporting Ukraine is important, but so is our national security.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
First, I thank the noble Baronesses, Lady Goldie and Lady Smith, for their general support for what the Government have been doing, which, to be fair, carries on from the last Government. It is a source of strength for our country that that is the case and that there is a degree of consensus between us all about that. As a statement of the obvious, it is extremely important for our adversaries to see that unity of purpose between us all.
I also join the noble Baronesses, Lady Smith and Lady Goldie, in thanking our service personnel for the various operations that they have been involved in in different ways. I want to praise the American forces as well for their bravery in what they did in conducting that operation. Again, I thank both noble Baronesses for their support for that operation, which was of huge significance. The noble Baroness talked about the importance of tackling sanctioned vessels. I remind her that we have sanctioned 544 shadow vessels, of which we believe 200 have been forced off the water, which has led to a decline in Russian oil revenues of 27% since October 2024. While we all wish we could do more, some progress has been made, and indeed we always consider what more can be done.
The noble Baroness asked about the 39 nations—they will contribute in different ways. As she will have read, France and the UK are at the forefront, and discussions are going on about what different countries will do. Most importantly, we need a peace agreement, and Russia is the impediment to that. If we get a peace agreement, a multinational force—whatever form that takes, but with France and Britain at the lead—can then provide that security guarantee which makes it a reality.
I also say to both noble Baronesses and other people the House that it was particularly important to hear the remarks of the Americans, such as Steve Witkoff, at the conference in Paris, where he said that the discussions that had taken place were very significant. Given the way in which we sometimes question whether the involvement of the Americans is as strong as it might be, that was a particularly important point that he made and one that we were very pleased with and are keen to continue to support.
I will mention two other strategic points, because we talk a lot about the Americans. There was a lot of talk a couple of months ago about the new American national security strategy. Less attention was given to the National Defense Authorization Act that the Americans passed at the same time, which laid out the Americans’ military budget, which included significant sums of money for Ukraine and significant troop numbers in Europe and confirmed the American general as SACEUR, which is important. So, in answer to the noble Baroness’s point about America, we continue to work very closely with the Americans. They are a very important ally to us, and we talk to them. I will come to Greenland in a minute, but we talk to them, and that is particularly important.
The noble Baroness is quite right to raise the point about the national conversation. We are starting with that work, but there is an awful lot to do to alert the British people much more to the challenges that they face, not necessarily just in terms of troops invading but certainly hybrid threats, cyber attacks and some of the activity we have seen on our streets, not least in Salisbury a few years ago.
The protection of critical national infrastructure and the development of the reserves will become increasingly important. We certainly live, to put it mildly, in unsettled and uncertain times, and the national conversation is a really important point. If the noble Baronesses, or indeed other Members, have ideas about how we take that forward, I would very much welcome them because it is an important national endeavour that is taking place.
Going back to Ukraine, of course, planning is being undertaken. The Chief of the Defence Staff has been talking about what may be done. There is a lot of planning going on—I am not going to go into details—certainly in terms of making sure that the various equipment and materials that would be needed to deliver the reassurance are available.
The noble Baroness has heard what I said about the defence investment plan. We are working at pace to try to get that developed as quickly as possible. There is a debate and discussion about the defence investment plan but this country does an awful lot militarily, even within the existing budget. I reflected on that when the noble Baroness was asking that question. I was thinking about the RAF Typhoons that, with France, took action in Syria just a week or so ago.
We have the commitment we are going to make to Ukraine and the commitment in the Arctic; we have marines training in Norway and troops in Estonia; we had the carrier strike group recently out in the Indo-Pacific and, of course, the support we gave to the Americans, so notwithstanding the debate about whether enough is being spent, this country does an awful lot militarily, and sometimes we should remind ourselves of that.
On helicopters, the noble Baroness will be pleased to know that the Philippines has just placed an order with Leonardo for six helicopters. That does not answer the question about the defence investment plan and the British Government’s investment, which is still being considered, but certainly those six orders will be welcome news for Leonardo.
Of course, we operate on a legal basis. The action against the shadow vessel was against a sanctioned stateless vessel, which carries a long history of nefarious activity and shares close links with Iran and Russia. It is a sanctions-busting ship. It was stateless: the noble Baroness will know it changed its flag when it sailed towards the eastern Caribbean. It was flying a Guyanese flag, and then when it sailed away, it changed it to a Russian flag.
There is a strategic point, which will not be lost on some colleagues here, that sometimes America’s attitude towards Russia is questioned—whether it sees Russia as a country it ought to take action against—but that was a very clear demonstration that where the United States believes it is in its interest to do so, it will take action.
The noble Baroness asked me about Greenland. She is quite right. We believe that Greenland is an autonomous territory within the Kingdom of Denmark, and it has the right to determine its own future. There is a question about Arctic security, and we have discussed in this Chamber at great length the need for us to consider how we develop that. I have mentioned in debates that climate change and the melting of some of that ice opens up that territory in a way which means that we will have to consider its security even more.
The noble Baroness asked again about the commitment to invest. She will know what I have said about investment, and that debate will go on. The Government have made their commitments. I would argue that even within the existing budget, we make a significant military contribution to the defence of democracy and of our values. We shall continue to do that, not least in Ukraine, which is at the forefront of our minds all the time, and in supporting the Americans where we believe that that should happen, as we have proved just recently in the last few weeks.
Lord Jopling (Con)
My Lords, I was impressed by two points that arose in the debate in another place last week. First, the Statement itself said that
“if Putin prevails, he will not stop at Ukraine”.
Secondly, Rishi Sunak said that we must have
“credible and durable security guarantees”.—[Official Report, Commons, 7/1/26; col. 390.]
I very much agree with those two points. Is the Minister seized of the vital need to ensure that any settlement with Putin over Ukraine does not ignore the possibility of him just jumping in and repeating the operation elsewhere? I am thinking particularly of Georgia and Moldova, where there are striking similarities to the Ukraine situation. Putin would argue, with the same dishonest and disgraceful justifications he used over Ukraine, first, that they used to be under Russian influence and, secondly, that Russia already has a military foothold in Moldova and Georgia in a similar way to what it had in Ukraine. I have been to both places. In South Ossetia in Georgia, I looked down over the Russian military base, materiel and equipment with which it illegally invaded some time ago. In Moldova, I have been to Transnistria and met the generals and colonels, who told us in those days that they had only 1,500 troops there, which was a total lie. Will the Minister agree that a settlement with Putin is not just about Ukraine?
Lord Coaker (Lab)
The noble Lord made a series of very good points, and I could say that I agree with him about the need for all the things he said. I completely agree with him about the need for there to be a security guarantee for Ukraine. Any arrangement that is made has to have the support of the Ukrainians. That is why we have gone to such extraordinary lengths to try to put together a coalition of the willing. There are still discussions going on about that. It is good that the UK and France have been at the forefront of it. We have tried very hard, and it was good to hear what the Americans said at the meeting of the coalition of the willing in Paris. Their involvement is essential as well, and sends a strong signal to Russia.
The noble Lord made a point about Moldova and Georgia. He will know that in Moldova we supported the facilitation of free and fair elections, which led to a result that Russia did not want. We would certainly wish to see similar in Georgia. The noble Lord makes a really good point—Putin has to know he cannot be seen to have won, and we are doing all we can to ensure that that is the case—and he is right to point out that the front line in Ukraine is our front line as well.
Lord Skidelsky (CB)
My Lords, the Statement leaves me puzzled. Are the Government insisting on boots on the ground in Ukraine as a condition of a ceasefire? As the Russian Government have said that under no conditions will they accept NATO boots on the ground, is that not equivalent to a policy of prolonging the war rather than hastening the arrival of peace? Leading on from that, what other plans or ideas do the Government have for security guarantees for Ukraine?
Lord Coaker (Lab)
The whole point of us saying that we are willing to deploy troops to Ukraine, with France and perhaps others, is precisely to ensure that any peace agreement arrived at is guaranteed and acceptable to the Ukrainians. That is important. It is what the Ukrainians want and have asked for, and we negotiated on that. As I said to other noble Lords, the Americans are working with us to provide some sort of security guarantee. Putin needs to negotiate with us. He is the impediment to peace in Ukraine. We say to him: let us negotiate in a way that is acceptable to the Ukrainians.
Lord Harper (Con)
My Lords, to take the Minister back to the question of resources, he will be aware that the Chief of the Defence Staff gave evidence to a Select Committee this afternoon and confirmed that there is a gap between the funds available and the ability to spend on current strategic defence programmes. For reasons I do not quite understand, he said that the size of that gap is a secret. Can the Minister be a little more open with us?
The real point of my question comes back to what I said last week. The defence industrial plan is a signal of how serious the Government are about putting our money where their mouth is. Last week, the Secretary of State said that the Government were working flat out on it. There are indications that it will not be published until the spring. He will know that, in government, “spring” is an elastic concept. I would not want the Minister to have to work flat out for six months. Can he give the House a bit of an indication as to whether we are talking about something that will be here in the next few weeks, or is it months away? We will draw conclusions from his answer.
Lord Coaker (Lab)
I do not want to disappoint the noble Lord but I will not be a hostage to fortune and say that it will be in a few weeks, or when it will be. All I can say is that we are working as hard as we can to deliver as soon as we can a defence industrial plan that meets the needs of the budget we have and the needs of the country to deliver the military force and capabilities we need. That is what we are seeking to do. The noble Lord will continue to argue the case for more money and resources. We are working with the resources we have and seeking to deliver the military capability we need.
In my answer to the noble Baroness, I was trying to point out that, even within the existing budget, this country does an awful lot of which we can be proud with our existing military and the Armed Forces personnel that we have. But there is no doubt that the debate that the noble Lord quite rightly raises will continue.
Baroness Stuart of Edgbaston (CB)
My Lords, when asked about the deployment of a multinational force, the Secretary of State for Defence in the House of Commons said:
“Any deployment of a multinational force into Ukraine will take place only after a peace deal”.
That is fine. He then said:
“Secondly, the role of that force is primarily one of reassurance, the regeneration of the Ukraine forces, and deterrence of any future Russian aggression”.—[Official Report, Commons, 7/1/26; col. 395.]
To that last point, if it is supposed to serve as a deterrence to future Russian aggression then the national debate has to start with what would happen if that peace agreement were breached and what our response would be. The Minister will say that these are hypothetical questions, but I think the national debate will have to prepare people for that possibility.
Lord Coaker (Lab)
It is a hypothetical situation. It goes back to the point I was trying to make in response to the noble Baroness, Lady Goldie. There is a need for a national conversation about the threat that we face. There is a national conversation about the state-on-state threat that exists now in a way that people would not have predicted a few years ago. The Cold War and Russia and one country versus another country were supposed to be the wars of the past; we were supposed to be combating terrorist activity, counterinsurgency and those sorts of things. Although those threats have not totally gone away, the state-on-state threat has now re-emerged. Part of the national conversation has to be about what that means for our country and our Armed Forces.
Baroness Bennett of Manor Castle (GP)
My Lords, my question is also about the national conversation. To put it on the record, the Green Party supports the principle of UK troops serving in a peacekeeping role in Ukraine, following a negotiated settlement with a robust international mandate and standards. We are very pleased that the Statement says there will be a debate and a vote in the other place beforehand; that is the minimum democratic standard. Can the Minister reassure me that MPs will be able to scrutinise robustly the Government’s proposal, so that they will have before them—this follows on from the noble Baroness’s questions—details about the size and the composition of the force, what weapons they would have, the rules of engagement, and measurable indicators of what success looks like? It is important that it is not just a debate but a full debate.
Lord Coaker (Lab)
There will be as wide a debate as possible. Some of it will not be debated on the Floor of the House necessarily—for example, rules of engagement and so on. Having said that, let me reiterate what the Prime Minister stated last week, because it is important to make sure that I am accurate:
“If there were a decision to deploy under the agreement that was signed yesterday, I would put that matter to the House for a debate beforehand and for a vote on that deployment.”.—[Official Report, Commons, 7/1/26; col. 254.]
The noble Baroness can read into that the answer to her question.
Lord Hannay of Chiswick (CB)
My Lords, will the Minister tell the House whether the Government have had any indication from any Russian source that Russia would accept either British and French peacekeeping troops or troops deployed to uphold an agreement in Ukraine, or a ceasefire, which has been proposed on a number of occasions by President Trump? Then, could he perhaps also say whether the very high-level American attendance last week in Paris, where the commitments were made by the President and by the Prime Minister, meant that the United States Administration is firmly supportive of what the Prime Minister and the President were saying they would be ready to do if there was a settlement?
Lord Coaker (Lab)
I have no knowledge at all of any commitment by Russia regarding the points the noble Lord made. On the American commitment to the discussions and the declaration of intent in Paris last week, it was very significant that people such as Steve Witkoff were saying how strong those commitments were and how much they welcomed them. That is extremely important. The Americans’ part in any security guarantee is really important and something we will continue to work on. As the noble Lord says, the fact that there was such high-level American representation is hugely significant.
Lord Teverson (LD)
My Lords, let us be quite clear that Mr Putin does not want a ceasefire under any circumstances—it is not going to happen. Without wanting to sound trite, I pay tribute to the armed forces of Ukraine, which are defending our freedom in Europe with their lives, blood and treasure. I am sure we all agree with that, but it is worth saying again.
The question I want to ask is slightly different. It strikes me that, over the past 12 or 18 months, when it comes to propaganda, Ukraine and its right cause has been on the defensive. During 2025, the Russian forces occupied a further 1%, to the nearest percentage point, I believe, of Ukrainian territory, with huge and obscene losses of their own troops and population, yet we still have the feeling that the White House understands that Ukraine has no cards, the cause is lost, and there is no future in successfully stopping Putin from winning. It is all very difficult, but those are the facts of military change over the past year. What are the Minister’s thoughts on how we can reverse some of that feeling, so that we can be more positive about what Ukraine is achieving in its work and its firepower and that side of the conflict? How can we change the narrative?
Lord Coaker (Lab)
That is an important question. I join the noble Lord in congratulating the Ukrainian armed forces, and acknowledge the stoicism and bravery of the Ukrainian people for resisting in the way that they have.
Whatever the debate about defence investment and how much we should be spending, we should remember what we actually are doing. Notwithstanding the difficulties and challenges that Ukraine faces in re-equipping and so on, we should remind ourselves that Russia was not expecting to be in the position that it is now. When it attacked, it was expecting to take Kyiv within a few days, put a puppet Government in place and have a vassal state. That was the intention. Has Russia been successful in doing that? Not at all. Instead of saying that this is where we are now, sometimes you need to go back and look at what the original objective was. I say to this House, this Parliament and this country that Russia has totally failed in its original objective. Ultimately, it has failed because of the bravery of the Ukrainian people and the support that most countries have given to them.
What else did Russia expect? It expected NATO to be weakened and implode. What has happened? Notwithstanding the discussions we have had about the United States, NATO has been strengthened. Who would have said at the beginning of the conflict that Finland and Sweden would join NATO? They have, and that has strengthened NATO. As well as looking at the challenges and difficulties that we face, we ought to remind ourselves sometimes about what has been done and is working well. Russia has failed in its original objectives, and we should remind people of that.
Lord Cromwell (CB)
I want to take the Minister back to the issue of conversation. He and I have discussed in the past that, these days, social media is a weapon of war. I quoted to him a senior military figure who said to me, “We should spend as much on social media as we do on hard kit”. I suspect that comes pretty hard to those with a military background, but what does he think of that suggestion?
Lord Coaker (Lab)
It is important to recognise that warfare is changing, and that part of the battle now is understanding what is fake news and what is happening in reality. In every area of life, what appears online is an important part of any battle. The noble Lord will know that, both in Ukraine and in other parts of the world, the battlespace is online. Part of the Government’s response to that is to open up new cyber recruitment routes into the Armed Forces. To develop that, we have a new cyber offensive command as well as our defensive operations. That is how warfare is changing. I am not sure that everyone who will come in through the cyber route would naturally have got in via the soldier route before, but they are the soldiers of the future as well as those whom we would regard as soldiers in the more traditional sense. So, that is a good point. The war of the future is going to have many of the features of the past but also features along the lines that the noble Lord has just outlined.
Lord Sentamu (CB)
My Lords, may I speak like a fool? I do not have all the facts, so I am speaking like a fool. Ukraine has spent a lot of hours in all those conversations and discussions about peace, attending endless meetings, when everyone knows that Putin is not interested in any of that. By encouraging conversations about peace, have we drained the energy that Ukraine had before the talks started? Is the coalition of the willing giving Ukraine the weapons that it needs, especially since a few days ago a ballistic missile was used to devasting effect in Ukraine and surrounding areas? Are we letting Ukraine down?
Lord Coaker (Lab)
No, I do not think we are. Conversations and discussions take place on how to bring about peace, but alongside those we continue to stand with Ukraine and arm it to defend itself against Russian aggression.