House of Lords
UK Public Servants: International Secondments
(1 day, 4 hours ago)
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Baroness Falkner of Margravine
To ask His Majesty’s Government what standards of behaviour apply to UK public servants on secondment to international organisations where UK civil service standards may be higher than those of the temporary secondment.
The Parliamentary Secretary, Cabinet Office (Baroness Anderson of Stoke-on-Trent) (Lab)
Civil servants seconded outside the Civil Service, including internationally, do not cease to be civil servants and are expected to carry out their role with dedication and a commitment to the Civil Service and its core values of integrity, honesty, objectivity and impartiality. The provisions in the Civil Service Code and of their employing department continue to apply to them at all times.
Baroness Falkner of Margravine (CB)
I thank the Minister. I should declare from the outset that my Question is not related to any individuals but, rather, is a question of policy. She will know about both the reputational damage to Civil Service morale and the fact that public confidence takes a hit when perceptions of lower standards take hold in public life. If, as the Minister explained, oversight by the home department continues and the Civil Service Code continues to apply, why is misconduct investigated not by the UK Civil Service but rather by the international organisation, which may represent lower standards than we would have? Are the Government minded to conduct a review to make sure that there is joined-up appraisal and performance assessment of people who may be away for several years?
Baroness Anderson of Stoke-on-Trent (Lab)
I thank the noble Baroness for her question. Obviously, standards are an important part of the regime—not least because the Prime Minister has now given me responsibility for them. On the specifics that she asked for, whether the individual is on secondment nationally or internationally, as best practice, the department should continue to conduct the performance reviews of the secondee. The host will provide the department with appropriate input for these purposes, to agreed timescales. Alternatively, the department can agree that, for the duration of the secondment, the host conducts performance reviews. The host organisation is required to seek consent from the department to do so. The department must also consult the HR, pay and reward, and legal team where appropriate. This was reviewed last September, so we have no additional plans to review.
Lord Hunt of Kings Heath (Lab)
My Lords, it is right that we expect the highest standards of our civil servants, but what does my noble friend make of the statement that emanated from Reform UK that a Reform UK Government would expect to dismiss the top civil servants in every government department and replace them with people seen as more likely to implement the party’s priorities? Does she agree that if we go down that path, we will undermine the integrity of the Civil Service and do this country a great disservice?
Baroness Anderson of Stoke-on-Trent (Lab)
My noble friend is absolutely right, and it suggests quite how unserious Reform UK is about governing. We have an independent Civil Service for a reason. It acts without fear or favour; it is subject to a stringent code of conduct, and it is there to make sure that our public services are delivered. Any suggestion otherwise is for the birds.
Lord Pack (LD)
My Lords, the latest Civil Service staff survey, published last month, shows that, for example, more than one in 10 Foreign, Commonwealth and Development Office staff and one in 10 Cabinet Office staff report having experienced bullying or harassment in the workplace in the last year. Can the Minister tell us what safeguards the Government have in place to ensure that such highly inappropriate behaviour is not exported inadvertently to international organisations?
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Lord raises an interesting point. Every member of the Civil Service is subject to the Civil Service Code, regardless of seniority, and we expect them to be held accountable and to treat all staff with appropriate levels of respect. Obviously, Ministers are subject to the Ministerial Code. There is extensive HR support within government departments, both within the FCDO and my own department, and I would expect everyone to undertake the appropriate training—and to be dismissed, where appropriate, if such behaviour was found.
Baroness Finn (Con)
My Lords, as the Infected Blood and Grenfell Tower inquiries made clear, having a Civil Service Code is one thing but ensuring that it is properly followed is quite another. Can the Minister therefore set out what specific consequences apply when the code is breached—whether by those in conventional employment or by those on secondment—and confirm whether serious instances of non-compliance are routinely escalated to senior Ministers and to No. 10, including in cases involving secondees or officials posted overseas? Furthermore, will she also explain how conduct is reflected in performance management and in decisions about future appointments, in particular how an individual’s conduct and performance while on secondment is assessed and taken into account?
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Baroness has asked four questions, so I will answer as many as I can. For all of them, the answer is the same, which is that chapter 4 of the Civil Service management code outlines what conduct we expect, the disciplinary process and how civil servants should apply it. I would expect every civil servant to stick to everything within the code and, if not, to be managed appropriately.
Lord Tyrie (Non-Afl)
Having worked in an international organisation for five years and having seen some shocking conduct, it crosses my mind that the Government could do well to ask the British-appointed directors of those organisations to keep a very close eye on what goes on with respect to standards and to report back regularly, and for the Government to make public reports where they can on such information. Will the Government consider putting such an arrangement in place?
Baroness Anderson of Stoke-on-Trent (Lab)
I am not sure how many secondments would work on that basis, but we already have in place keeping-in-touch conversations, where those who have been seconded must have regular conversations with their home department, as well as everything determined within the secondment agreement. Every secondment undertaken, both into and out of the Civil Service, is done on a case-by-case basis, so there is a bespoke secondment agreement which would allow some of those conversations to be formalised.
Baroness Royall of Blaisdon (Lab)
My Lords, clearly, as my noble friend has said, there are procedures and codes in place for our own civil servants, whom I hold in the highest regard. The noble Lord mentioned our own civil servants who are working in international organisations. I wonder what, if anything, we can do to ensure that bullying and harassment, for example, are properly dealt with in international organisations when it is not happening to our own civil servants who have been seconded to those organisations.
Baroness Anderson of Stoke-on-Trent (Lab)
My noble friend raises an interesting point. This is about who we end up seconding staff to and what happens while they are there, and the things they may see. There is a clear process for any concerns that arise during a secondment process. The secondment can be terminated early and we can withdraw people, especially in the international space. It is also one of the reasons why we have those keeping-in-touch conversations, because, as our employees, we still have a duty of care towards them regardless of where they are working. We need to make sure that we know what environment they are operating in and that we can protect them wherever they are.
Baroness Falkner of Margravine (CB)
My Lords, I do not believe the noble Baroness answered the last part of my question. Why are misconduct investigations undertaken by the international organisation, which may have lower standards, when the Civil Service Code applies, which may have higher standards? Should they not be undertaken by the home department from where the secondee goes abroad?
Baroness Anderson of Stoke-on-Trent (Lab)
I apologise; I thought I had answered the question. If a member of our staff is on secondment elsewhere and there are disciplinary concerns, the secondment process is likely to end and the disciplinary process will be dealt with in their home department and not by where they are seconded.
Lord Watts (Lab)
My Lords, does the Minister agree that accountability of the Civil Service is crucial as well? It is important that Ministers can hold civil servants to account. Do we know how that is best managed? It seems to me as though we need to hold them to account, but there needs to be no bullying involved.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank my noble friend, but I suggest that it is always about your individual management style; for example, as a Minister, working with people and bringing them on a journey with you, making sure that you are able to deliver collectively and collaboratively in your policy area. But it is also about ensuring that culture change exists both within the Civil Service and elsewhere, so that anything considered as bullying and harassment is not acceptable in the 21st century.
Baroness Goldie (Con)
My Lords, is the Minister completely satisfied about the complexity and glacial progress which confronts civil servants who wish to make a complaint about another civil servant? In my experience, that seems to be a ponderous, unnecessarily arduous, distressing and very long-standing procedure.
Baroness Anderson of Stoke-on-Trent (Lab)
The noble Baroness has had significant experience of ministerial office. I have not, but among the civil servants who I have worked with, if there are those who may have made complaints, I am not aware that they have faced that experience, but if she has specifics she would like to raise with me in terms of where there are challenges in the system, I would be more than happy to have that conversation with her outside the Chamber.
NHS: In-house Software Capabilities
(1 day, 4 hours ago)
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Viscount Hanworth
To ask His Majesty’s Government what plans they have for sustaining and enhancing the in-house software capabilities of the NHS.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, NHS Digital services are built and run to rigorous Government Digital Service standards. They are secure, user-centred, interoperable and continually improving. National Health Service England has significantly expanded its in-house engineering and data capability, and it is reducing its reliance on outsourced systems and strengthening operational resilience. These measures ensure that health and care data is available in all clinical settings to improve outcomes for patients, while delivering value for money to the taxpayer.
Viscount Hanworth (Lab)
I thank the Minister for that reassuring Answer. The NHS has had a disastrous history of outsourcing its IT technology, which has wasted millions of pounds. A requirement of outsourcing is that there must be sufficient in-house expertise to properly assess the need for outside assistance and the quality of whatever assistance is on offer. In the absence of such expertise, outsourcing can be perilous. Moreover, given the requisite in-house expertise, outsourcing may become unnecessary. At a time when a host of novel IT solutions are becoming available, the IT staff of NHS England are seeing their numbers radically reduced. At the same time, the NHS is becoming increasingly dependent on the services of large American IT corporations. Can we be assured—genuinely assured—that history will not be repeating itself?
Baroness Merron (Lab)
My noble friend is right to point out the history. The NHS previously relied very heavily on large, outsourced IT systems that, in some cases, led to inflexibility, high long-term costs and limited NHS control over core platforms and data. I was glad to arrange for my noble friend to meet the chief data and analytics officer at NHS England last Wednesday. I hope that, like me, he was reassured that NHS England has very much shifted its model towards building and operating critical digital services in-house, in line with the standards that I referred to in my initial Answer.
Baroness Watkins of Tavistock (CB)
My Lords, cyber security is an essential element in any system, but nowhere more so than when people’s health records are being maintained. Many security breaches are attributed, at least in part, to human error. What investment are His Majesty’s Government making to train front-line staff in the new systems and provide continuous professional development to achieve the 10-year digital healthcare plan?
Baroness Merron (Lab)
The straightforward answer is that we are doing exactly that. It is important to say that our front-line digitisation—our move from analogue to digital—is not something for the sake of it; we are doing it because it is improving efficiency and outcomes. For example, a 94% coverage of electronic patient records is expected by the end of this month, and the digitally mature trusts show a 13% lower cost per admission. That is a prize worth having, but we can do it only through the systems and training that the noble Baroness seeks.
Lord Kirkhope of Harrogate (Con)
My Lords, I support what the noble Viscount said. The history of software in the National Health Service is nothing less than a disaster. Coupled with that is a very unfortunate situation where some of the companies that have been responsible for these messes in the NHS are still on the Government’s procurement lists and are still getting contracts from the Government. Surely more attention should be paid to that, and we should curb that as soon as possible.
Baroness Merron (Lab)
If the noble Lord has particular companies in mind, he is most welcome to raise them with me. It is important that we look at what NHS teams have done: they have designed, built and maintained national platforms. The NHS app is an example; I am sure that many noble Lords will be familiar with it. That is going to be our digital front door to the NHS. In addition, there is the NHS login and core national infrastructure. All these mean full NHS ownership, governance and control. Supported by £2.5 billion of investment in 2025-26, we are, as the noble Lord seeks, expanding NHS in-house digital capability to reduce the reliance on large suppliers.
Lord Scriven (LD)
My Lords, last week’s catastrophic attack on Stryker by Iranian-linked actors paralysed supply of some critical surgical equipment across the NHS. Does the Minister agree that our total reliance on vulnerable third-party global medtech platforms is a serious security risk? How will the Government ensure in-house expertise and procurement software so that the NHS can bypass compromised commercial networks during such crises?
Baroness Merron (Lab)
Cyber attacks across our whole government are extremely concerning, and that is why we have built resilience. On health and social care specifically, I can assure the noble Lord that, in 2025-26, we invested £75 million across health and social care; that built on the £375 million invested since 2017. When I had responsibility for the blood transfusion service, my own experience was that, where there was a cyber attack, we had the systems in place.
Lord Kamall (Con)
My Lords, there is always a very difficult balance between keeping something in-house or outsourcing it, and we should not forget the national programme for IT in the NHS in the early 2000s, which ended up costing between £10 billion and £20 billion. My question is on the company Palantir. The Minister will be aware that there are a range of views on Palantir. Some say that it is the best software available and that no one can match it; others say that they are worried that it will lock the NHS in long-term and scrape data for other uses. What specific measures have NHS England and the department put in place so that, in the event that the Palantir contract is not renewed, the healthcare system will be able to move seamlessly to another supplier?
Baroness Merron (Lab)
That seamless movement is an important point generally, but the federated data platform does not centralise or sell patient data. Data remains firmly under NHS control, and access is strictly governed. It is fully auditable and used only for approved patient benefit and NHS benefit. Palantir operates strictly under the instruction of NHS England and it does not, as I said, own or control NHS data. That access is tightly governed. In response to the earlier question, I note that the federated data platform to which the noble Lord refers is cyber resilient and subject to rigorous contractual, legal and information governance controls.
Baroness Bennett of Manor Castle (GP)
My Lords, my question also relates to the federated data platform. I am sure the noble Baroness is aware that more than 50,000 patients have written to their local trust boards asking not to have their data placed on it. The Greater Manchester ICB, serving 2.8 million patients, has said that this does not present value for money and is a big public trust issue. Palantir is of course owned by Peter Thiel and Alex Karp, who are closely associated with the Trump regime and have very right-wing and anti-democratic views. Does the Minister acknowledge that this association with Palantir is damaging our NHS?
Baroness Merron (Lab)
I would first look at delivery: the federated data platform has enabled nearly 100,000 extra operations, removed over 600,000 patients from waiting lists and reduced unnecessary bed days by 15%, as well as driving a 10% improvement in cancer diagnosis—so people are being diagnosed sooner because the system is working more efficiently, and that is important. This is a three-year contract given in 2023. I refer the noble Baroness to the comments I made to the noble Lord, Lord Kamall, about the rigorous contract due diligence for all commercial agreements, including with Palantir.
Lord Patel (CB)
My Lords, it is historically true that the NHS wasted a lot of money, but this was partly because the development of digital services was in-house. Currently, things are looking much better, and the classic example is the development of the NHS app. However, I will ask the Minister about the health research data service that will be established. Patients should have confidence in data that is used and collected for research, partly because of the recent report on UK Biobank, where the researchers published the codes they were using to access data for research. It has to be made absolutely certain that the public have the confidence in the data that is used.
Baroness Merron (Lab)
Absolutely—public confidence is really important, and the debate around this today perhaps emphasises the need to communicate the realities of what is going on. But giving the NHS greater control and long-term value for money, as well as protecting privacy and improving public trust while improving outcomes, is the way forward. But the noble Lord is quite right, and we will ensure that we seek to build that confidence still further.
Humanist Weddings
(1 day, 4 hours ago)
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Baroness Thornton
To ask His Majesty’s Government what assessment they have made of the progress and timetable towards legal humanist weddings.
The Parliamentary Under-Secretary of State, Ministry of Justice (Baroness Levitt) (Lab)
My Lords, the Government announced on 2 October last year that they intend to reform weddings law when parliamentary time allows. Our reforms will reflect a commitment to making marriage law fairer, simpler and more modern, while protecting the solemnity and dignity of marriage. We want to create a level playing field for all groups, and this will include allowing humanist weddings to be legally recognised for the first time. We will consult on the details early this year.
Baroness Thornton (Lab)
I thank my noble friend for that Answer. I apologise to the House for my repeated appearances on this matter. Can my noble friend the Minister provide further clarity on the timeframe and next steps? It is already early 2026 and the consultation does not appear to be here yet. It is 13 years and counting since the Government acquired the right to legally recognise humanist marriages by order, and it is nearly six years since the High Court found the lack of legal recognition of humanist marriages to be discriminatory. Given the years of delay faced by humanist couples, can my noble friend the Minister assure the House that it will be our Labour Government who finally legally recognise humanist marriages, as has been done in Scotland and Northern Ireland in the interim while they have been looking at this matter? Perhaps she could meet with me to discuss in more detail the path to legal recognition.
Baroness Levitt (Lab)
My noble friend should not apologise for raising this matter again; I think the entire House will want to thank her for her continued commitment to driving this forward. I had a feeling that, if my noble friend did not ask what “early” meant, somebody else would. I thought about replying “at pace” but then thought that that would make me deeply unpopular, so I am going for “as soon as possible”.
On a more serious point, my noble friend asked a number of questions which it is possible several other noble Lords may also wish to raise. The Government are not planning on using the order-making power. We do not want to create other inequalities with other groups; we want to make sure that there is a level playing field for all groups.
Lord Birt (CB)
My Lords, in Scotland in 2024, there were more humanist weddings than there were weddings of all religious faiths combined—evidence not only of the substantial demand for humanist marriage but of the accelerating decline of traditional religions. Nine months ago, the noble Lord, Lord Ponsonby, assured the House that the Government were “working at pace”; later, he said that they were “making haste” on the issue. The Minister is obviously aware of this, and I do not apologise for requoting what she has just said. I wonder whether she can help us understand exactly what and when “working at pace” will deliver.
Baroness Levitt (Lab)
This was one of the reasons why I thought I should probably not use the expression “at pace” a second time. The Government are going to run two consultations on three closely related issues, all to do with how families are formed and what happens when they break down. There will be a consultation on weddings reform and a consultation on cohabitation reform, which is a manifesto commitment. There is also going to be a consultation on financial remedies on divorce or dissolution of civil partnerships, including nuptial agreements. The Government are committed to doing this as early as possible.
Baroness Whitaker (Lab)
My Lords, my noble friend is against making an order. Is she aware that the lead civil servant on the Equality Act and the Marriage (Same Sex Couples) Act thinks that the evidence for removing the discrimination against humanists by making an order, even if there is an interim measure pending a final order, is overwhelming? She further adds that it would not introduce any new inconsistency in the rules—that is to say, laying the order would not discriminate against any other group. So is it not such a bad idea after all?
Baroness Levitt (Lab)
My Lords, I am not sure that I can do better than to quote from the Law Commission report, which looked specifically at this issue. It said that it would be anomalous and unfair to privilege these non-religious belief organisations over religious groups, which are subject to greater legal regulation. In particular, it would be very difficult to justify why the fewest restrictions should be applied to the newest categories. It is for that reason that the Government are not going to use the order-making power to single out humanists.
Lord Hayward (Con)
My Lords, a few years ago, despite major constitutional issues, a Labour MP in the other place, and I in this place, were able to steer same-sex marriage legislation through in relation to Northern Ireland in a very short time. When there is agreement on all sides, as there is here, why cannot we get the legislation through as quickly as we did a few years ago?
Baroness Levitt (Lab)
The answer to that is that there is not agreement on all sides as to what this should look like. I mentioned earlier the Law Commission’s report; its conclusions were greeted with some reservation by the humanists and the Church of England, while being widely welcomed by other groups. We absolutely need to make sure that we get this right and that we do not, in solving one set of inequalities, create some more.
Lord Meston (CB)
My Lords, the deficiencies and complexities of our marriage law were addressed by the Law Commission as long ago as 2022, followed by a government response three years later. The common objective is simple enough: to provide legally binding and reasonably dignified marriage ceremonies. Can the Minister agree that when these long-awaited and necessary reforms arrive, they should benefit not just humanists but other groups that are equally disadvantaged by the current law? If that does not happen soon, there will be increasing and possibly justified pressure for less satisfactory, piecemeal measures. At the same time, can the Minister indicate whether there will be a role for properly regulated independent celebrants?
Baroness Levitt (Lab)
The noble Lord makes a number of good points. One of the issues here is the question of the independent celebrant, because not everybody thinks it is a good idea to license independent celebrants—for example, humanists think it is not a good idea to license independent celebrants. That is why this has to be looked at and why we have to consult widely. However, we have given the commitment that we will legalise humanist marriages—it is just a question of making sure that we do it in a way that does not create further inequalities.
Baroness Burt of Solihull (LD)
My Lords, what advice do the Government have for humanist couples who are waiting to be wed and have heard that there is going to be a fourth consultation, as well as the introduction of complex and potentially controversial marriage law ahead of this much-needed change? What assurance can they offer to couples that humanists will soon have the choice of getting married in line with their beliefs, the same as their religious counterparts?
Baroness Levitt (Lab)
The assurance is that we have made the commitment and it is going to happen.
The Lord Bishop of Southwell and Nottingham
My Lords, I welcome the Government’s intention to make it easier for couples to marry in legally binding ceremonies that reflect their religious, or non-religious, beliefs. However, I am concerned by the potential direction of travel of some aspects of these reforms, particularly the possible authorisation of this new category of commercial celebrants, which the Minister has referred to. I understand that, as has already been acknowledged, Humanists UK shares this concern. Can the Minister set out how the Government will ensure that safeguards are in place to protect against the commercialisation of weddings?
Baroness Levitt (Lab)
One of the things the Government are consulting on is how to ensure that all marriages, no matter by whom they are conducted, are dignified, solemn and worthy of the name. In that, they are reflecting the fact that the Government believe that marriage is more than just a ceremony between two individuals; it says something about the way society sees itself, about relations between society and families, and about the way families are formed. That is one of the reasons why we are consulting.
Baroness Griffin of Princethorpe (Lab)
Are there are any protections for those who may be at risk of forced or predatory marriage?
Baroness Levitt (Lab)
Tackling forced marriage is part of our mission to halve violence against women and girls within a decade. In 2024, the forced marriage unit worked with the General Register Office to introduce bespoke workshops for registrars to help them to recognise these things. When it is suspected that a person is not entering a marriage of their own free will or lacks mental capacity, the proceedings will be stopped until the registrar is satisfied that the individual has the capacity to make an informed decision. It is also a criminal offence to cause a person who lacks mental capacity to enter into a marriage.
UK Domestic Visitor Levy
(1 day, 4 hours ago)
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Lord Sharpe of Epsom
To ask His Majesty’s Government what assessment they have made of the impact of introducing a visitor levy on the cost of domestic travel and holidays within the United Kingdom.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, the precise design and scope of the visitor levy power is still under development. Our consultation closed on 18 February and the Government will publish our official response in due course. Mayors will need to decide whether to implement a levy and, if so, consult on specific proposals. This will inform their decisions regarding whether and how a levy will be applied and how any revenue is invested. Evidence from international schemes suggests that modest rates have a minimal impact on visitor numbers. Improved destinations and visitor experiences may also offset price sensitivity over time.
Lord Sharpe of Epsom (Con)
My Lords, I am grateful to the Minister for her Answer, but the facts in this country are probably a little different from those she has given. According to the World Economic Forum’s travel and tourism development index, the United Kingdom currently ranks 113th for price competitiveness. A soon to be published Oxford Economics study suggests that, even under the most benign visitor levy scenario, which is a £2 per room per night charge, the effect in 2030 would be millions fewer nights in paid accommodation, nearly £0.5 billion less in total tourism spending and thousands of fewer jobs. Given those figures, why are the Government contemplating a holiday tax at all?
Baroness Taylor of Stevenage (Lab)
I certainly agree with the noble Lord that the Government want to see the tourism economy in Britain reach its full potential. The decision on whether to introduce a levy will be for mayors, and they will need to consult ahead of making those decisions. As a mayoral power, the ability to create a visitor levy will ensure that those with the best understanding of their region can tailor investment towards growing the local economy, whether that be in tourism or other areas, bearing in mind its needs, including those of the accommodation sector. This puts the power back in the hands of mayors to develop their own tourism economy in the way that they see fit, and it may lead to new visitor attractions and better quality of accommodation.
Lord Fox (LD)
My Lords, can the Minister confirm that, where there are no mayors, it will be up to local authorities whether to implement this levy? Will she undertake that, whether this levy is implemented locally or nationally, there is a consistent system of collection right across the country? Will she make sure that it is not as cluttered and badly designed as the Scottish system is now?
Baroness Taylor of Stevenage (Lab)
The power will be devolved to mayoral strategic authorities, because they cover the functional economic areas and mayors have strategic roles in driving growth. The power is principally linked to the growth remit that we have given our mayors and to the powers of mayors, and any revenue is expected to be invested in growth, an agenda for which mayors are responsible and accountable. They can use their mandate for change and take the difficult decisions necessary to drive it. That could include, for example, subject to consultation, giving a portion of revenue to local authorities to deliver the services that support growth, including in tourism and the visitor economy. It is important that mayors have those powers. It is for mayors to design the system that works for their local area.
The Earl of Clancarty (CB)
My Lords, I welcome this levy, which should be used to help support what visitors come to see—namely, arts and cultural attractions. Do the Government recognise that reintroducing tax-free shopping would significantly boost the number of visitors and hotel revenue, as well as being a boon to the economy more widely, including creating thousands of jobs?
Baroness Taylor of Stevenage (Lab)
I always appreciate the noble Earl’s championing of culture and leisure, including the impact that that has on tourism, and I am grateful to him for the work that he does in that area. I am afraid the consideration that he asked about is very much the responsibility of His Majesty’s Treasury and not my department. However, we are proposing that revenues from the visitor levy will support local economic growth, including the visitor economy, and that can take the form of capital investment and the provision of growth-related services. Mayors can then take decisions informed by their consultation on how the revenue raise should be invested in their region.
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 Winterton of Doncaster (Lab)
Does my noble friend the Minister agree that one of the key achievements of the last Labour Government was free entry into museums, which had a huge effect on boosting tourism? Can she assure me that this Labour Government will continue to do all they can to boost tourism in that way and keep free entry to museums and other cultural visitor attractions in this country?
Baroness Taylor of Stevenage (Lab)
I agree with my noble friend that that was a great step forward. I should declare an interest, as I benefit from that free entry when I am on my granny duty in the recesses. She makes an important point about access to leisure and culture, which we should always aim to make as widely available as possible, because it opens the eyes of not just young people but all of us to the richness of our history and culture.
Lord Naseby (Con)
My Lords, with regard to the introduction of a levy, which I personally do not support, will the Minister look at the situation in relation to current tourists who are taken ill? Those who have emergencies are well looked after by the NHS, but, at least in my own research, half of our NHS hospitals are not charging tourists who are not in an emergency when they should be.
Baroness Taylor of Stevenage (Lab)
I am sure that my noble friend Lady Merron, who is sitting next to me, will be happy to respond to that question. It is important that people who find themselves in a medical emergency get treated promptly and that that is dealt with as quickly as possible. It is reassuring for tourists who come to this country to know that they will receive support if they are taken ill while they are on holiday here. On the issue of charging, I will defer to my noble friend.
Lord Scriven (LD)
My Lords, there are some major tourist areas in England that are not part of a devolution deal and have no plans at present for a mayor. Why should they be disadvantaged in their areas and growth, based on not having a particular elected person in that area?
Baroness Taylor of Stevenage (Lab)
I have much sympathy with the noble Lord’s point. We have consulted on whether and how to extend the power to local leaders with similar geographic footprints and powers relating to transport skills and strategic planning, such as the leaders of the foundation strategic authorities. We will look at the responses to that and I will be able to inform the House in due course.
Lord Wigley (PC)
My Lords, for the avoidance of doubt, can the Minister clarify that the scheme that she is talking about would be applicable to England and not to Wales? That must be the case for two reasons: first, there is a facility in Wales for having these sorts of charges; and, secondly, elected mayors to take this forward do not exist.
Baroness Taylor of Stevenage (Lab)
My understanding is that this system is for English mayors.
Lord Harper (Con)
My Lords, the Government’s priority today appears to be to reduce the cost of living. If that is the case, why do they feel that introducing new taxes to make holidays in the United Kingdom more expensive for British people is a good idea?
Baroness Taylor of Stevenage (Lab)
We would not have such a problem with the cost of living if the previous Government had not driven up cost of living pressures, as evidenced by the action we had to take in this Budget to take an average £150 off household energy bills from April and to freeze rail fares and prescription fees for a year. We understand that potential visitors may have concerns about the effects of a new levy. That is why local leaders will run a formal local consultation before making use of the new power.
Baroness Butler-Sloss (CB)
Will the money raised from visitor levies stay with the local area?
Baroness Taylor of Stevenage (Lab)
There is a very simple answer to that question, and it is yes.
Lord Shamash (Lab)
My Lords, I ask a question by way of clarification. Will I have to pay this levy when I go up to watch my beloved Manchester United every week?
Baroness Taylor of Stevenage (Lab)
I suggest that the noble Lord, Lord Shamash, may want to think about a team closer to home—there are some very good ones near to where he lives. However, football allegiance apart, it depends on the accommodation that people are staying in. This applies only to commercially let short-term accommodation—only that will be in scope of the visitor levy. This includes holiday lets, hotels and guest houses, subject to local decisions on the scheme. The noble Lord always has the option to support a team closer to home.
Antisemitism on University Campuses
(1 day, 4 hours ago)
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Lord Cryer
To ask His Majesty’s Government what assessment they have made of the prevalence of anti-Semitism on university campuses.
The Deputy Leader of the House of Lords (Lord Collins of Highbury) (Lab)
My Lords, there is no place for antisemitism on university campuses, and it is essential that Jewish students feel safe along with everyone else, regardless of race or religion. That is why we have strengthened the Office for Students’ monitoring and universities’ Prevent duties, and updated guidance on managing external speakers and events. We are working with students to codesign a campus cohesion charter setting clearer expectations around conduct and shared values.
Lord Cryer (Lab)
I am grateful to my noble friend for the Answer, but this PNQ arises from Time for Change, a report produced by the Union of Jewish Students. It is crammed with disturbing figures, including the fact that one in four students has witnessed antisemitic behaviour. However, the report’s central finding is that antisemitism is being normalised on campus after campus, very often at the behest of wayward academics. Can my noble friend say what further action the Government will take to ensure that universities confront the normalisation of antisemitism and protect Jewish students?
Lord Collins of Highbury (Lab)
I thank my noble friend. If anyone was listening to the “Today” programme, they would have heard first-hand the experience of many Jewish students. It was pretty outrageous. It is not only about verbal abuse; there are stories of people being kicked out of their accommodation, and so on and so forth. I reassure my noble friend the Government are investing £7 million to tackle antisemitism in education programmes, train university staff and support Jewish students. Last week, we announced plans to simplify the higher education complaint system, strengthen whistleblowing routes and increase oversight of Prevent compliance with the new OfS guidance from 2027. Additional non-statutory guidance on external speakers will be issued in the spring and the department is working with the Union of Jewish Students on new good practice training for universities. My noble friend Lady Smith will host a round table on 24 March to address these issues.
Lord Pickles (Con)
My Lords, many noble Lords had the opportunity in the last few weeks to hear directly from students. This report confirms all the things that they said. Does the Minister regard it as significant that the report found that both the college authorities and the police were slow and reluctant to take this on? What concrete action will the Government take to remind authorities and the police that it is their job and duty to make Jewish students feel safe?
Lord Collins of Highbury (Lab)
I made that clear in my initial response. There is absolutely no place for antisemitic abuse or incitement to violence. I heard the debate on the radio this morning and I read the foreword to the report by the noble Lord, Lord Finkelstein. There is a legitimate debate to be had; personally, I find some of it quite insensitive and not acceptable, but people have a legitimate right to express views about Zionism and the State of Israel. They also have a right to express concerns about the Government of Israel and some of their policies and plans. However, we are absolutely clear that they do not have a right to any abuse that attacks the individual or to incitement to physical violence. We are protecting the rights that we have fought so hard for, including the right to be educated in our universities.
Lord Addington (LD)
My Lords, the Minister has accepted that every individual, regardless of when or how they pray, has a right to be educated and feel safe while that is going on. Can he go a little further and tell us what process the Government will introduce to ensure that those groups feel safe while they are being educated?
Lord Collins of Highbury (Lab)
I hope I have indicated the range of actions we are taking in my responses so far. Of course the Government condemn all racial and religious hatred in the strongest possible terms, and we strongly encourage universities to take steps to foster the cohesion on campuses that I mentioned earlier. However, we make no apology for acting decisively to tackle the unprecedented rise in antisemitic abuse in universities, particularly since October 2023.
Baroness Deech (CB)
My Lords, I hope the Minister will not make the mistake—I ask him not to—of linking what is happening to Gaza and the events in the Middle East. What is happening is that antisemitism is being used as an excuse. It has always been there—I was talking about this 15 or 20 years ago—and it reveals a certain rot in the culture of our universities. Will the Minister agree that there is a gap in the Lords’ scrutiny? We do not have a Select Committee on education. We should, because that will be a way of bringing the lax vice-chancellors here to answer for their lack of action. I hope the Minister agrees.
Lord Collins of Highbury (Lab)
A Select Committee is not a matter for the Government, of course. The noble Baroness may also be putting me in a different position because I am a member of the Liaison Committee, so I would not want to take a position that may inhibit my ability to make a view on that committee. I totally accept what she says: as we debated on the Holocaust Memorial Bill, antisemitism has been around for a long time and events globally are often an excuse to exploit it. I accept that completely.
However, that does not mitigate the fact that people have genuine concerns about what is going on in the Middle East and the actions of the Israeli Government. They have a right to express those concerns and differences, but the noble Baroness, Lady Deech, is absolutely right about what they do not have a right to be. I have seen antisemitic abuse being addressed in tube stations; I have seen it when I go home. It is based on what people perceive others to look like and it is terrible. We need to address it very strongly.
Baroness Berger (Lab)
My Lords, I declare an interest as vice-chair of the advisory board of the Union of Jewish Students, and I wrote the other foreword in the shocking Time for Change report, which is out today. Polling for the report of 2,000 students in this country found that one in five—20%—said that they
“would be reluctant to, or would never, houseshare with a Jewish student”.
There are terrifying case studies in the report, including the experience of Jewish students in Birmingham who were followed home, and whose pursuers lingered outside for several nights and told passersby to
“remember this address as Jews live here”.
I have listened very closely to my noble friend the Minister. We have had a number of debates in this place, but the situation is unfortunately getting worse, not better. In the wake of today’s report, what urgent action can be taken to reverse these horrific findings?
Lord Collins of Highbury (Lab)
I reassure my noble friend that I read her foreword too; I did not just focus on that of the noble Lord, Lord Finkelstein. She is absolutely right to draw attention to this, and I urge people to use BBC Sounds to listen to the debate and discussions on the radio. The Government are not at all complacent; I have already indicated the specific actions we will take, which included my noble friend Lady Smith hosting a round table to bring together Ministers from the Home Office and MHCLG with Jewish community stakeholders, including Jewish students. We are trying to bring people together to ensure that specific action is taken.
I also reassure my noble friend Lady Berger that condition of registration E6, introduced by the Office for Students on 1 August last year, requires English universities to publish and implement comprehensive policies to prevent, investigate and tackle incidents of harassment against students. It is vital this work continues, but my noble friend is right that we have to draw attention to the rise of antisemitism.
The Lord Bishop of Manchester
My Lords, this has been a significant issue in Manchester for all my time as Bishop and I am glad we are having this chance to consider it. What assessment is being made of the extent to which external actors—we have heard about university lecturers, but maybe even foreign Governments—are fuelling this? To what extent can the multifaith chaplaincy teams that many of our universities have be part of the means of addressing it?
Lord Collins of Highbury (Lab)
The right reverend Prelate raises a really important point. After the outrageous events in Manchester, my right honourable friend Bridget Phillipson wrote to all universities, drawing attention to their responsibility to address this issue. Our universities have a world-class reputation, which makes them a prime target for foreign states and hostile actors that seek to erode their reputation by shaping or censoring what universities can offer, as we are seeing at this moment. We are tackling that threat by investing £3 million to bolster existing support and access to expert advice on national security risk management, including a new academic interference reporting route and new guidance.
Lord Polak (Con)
My Lords, we are in a dark place. The Union of Jewish Students has been around for over 100 years to look after the welfare of the Jewish students on campus, but the fact is that Louis Danker, the chair of UJS, had to write this report, Time for Change, when he should be looking after the welfare—and the fun—of Jewish students on campus. In this report, 82% of students regard calls to “globalise the intifada” as antisemitic—I am unsure what the other 18% are thinking. Jewish students and the Jewish community hear that phrase as a call for violence against the Jewish community. Does the Minister accept that allowing such rhetoric on campus and on our streets undermines the safety of Jews throughout this country? Like others have asked, what practical steps can HMG take to rid us of this despicable intimidation?
Lord Collins of Highbury (Lab)
I agree with the noble Lord that people’s political views about the Middle East are often used in a very abusive way that I personally find very offensive, but this does not actually stop individuals saying that they do not agree with Zionism, or with the State of Israel, et cetera. It is not illegal to express those opinions. What is very much illegal is to incite the hatred that we have seen evidenced in this report. That is where we need to take clear action.
I am sorry to keep quoting the noble Lord, Lord Finkelstein—I am trying to prompt him to get up—but he pointed out in one of his articles that his own father, or grandfather, was very much an anti-Zionist and that Zionism was not a tradition in the family. But the experience of Jewish communities throughout the world after the Second World War and the horrendous Holocaust has meant that the State of Israel represents something else: it represents that security and that place they can go to when facing the horrendous antisemitism that we are seeing on the rise. I agree with the noble Lord, Lord Polak, but we have to be very clear about free speech and balancing it with addressing the horrible things that antisemitism can give rise to.
Captain of the King’s Bodyguard of the Yeomen of the Guard and Deputy Chief Whip (Baroness Wheeler) (Lab)
We will hear from the Lib Dems. Thank you.
Lord Palmer of Childs Hill (LD)
I had not intended to speak, but when I listen to the Minister linking over and again the problems in the Middle East with antisemitism, I am disappointed. They are two separate things. There is an incredible rise in antisemitism where Jews cannot go around in the street wearing a head covering or a Star of David—a Magen David. That is the problem. The Minister talks about confusion because of events in the Middle East, but it is not the same thing. Zionism can mean different things to different people. The Zionism I believe in is that there should be a homeland for the Jews. After the events of October 2023, there has to be a homeland for the Jews. That is my Zionism. It has nothing to do with treatment of Palestinians, because Palestinians have rights as well. The Minister constantly muddles up the two in his reply. Antisemitism in this country needs to be handled and I want to know what the Government are going to do about it.
Lord Collins of Highbury (Lab)
Can I be very clear? I hope noble Lords were listening to what I said. I was not conflating the two. There has to be a clear separation. Let us not confuse the two. I have been a strong supporter of the State of Israel for many years and I was an active supporter of Poale Zion, so my views are clear. We are more effective in addressing antisemitism by calling it out for what the noble Baroness, Lady Deech, said it was. It has been around for 2,000 years and has nothing to do with the situation in the Middle East, but people are inciting hatred by using the Middle East. That is what I was trying to convey. I hope the noble Lord will understand that my position is very clear.
Conduct Committee
Lord Kakkar
That the Report from the Select Committee The conduct of Lord Chadlington (10th Report, HL Paper 272) be agreed to.
Lord Kakkar (CB)
My Lords, this report is the outcome of the third detailed investigation into Lord Chadlington’s interactions with Ministers and advisers in the Department of Health and Social Care during the Covid-19 pandemic. Given that Lord Chadlington retired from the House following publication of the Conduct Committee’s report, there is no Motion to suspend him on the Order Paper and I shall not take up the House’s time by setting out the facts of the case. However, Lord Chadlington has sent communications to noble Lords following his retirement in which he accused the Conduct Committee of procedural unfairness and of ignoring points raised in an opinion prepared on the instructions of his solicitors by the noble and learned Lord, Lord Goldsmith. I want to assure the House that, far from ignoring these points of process, the committee considered them with great care, but we did not agree with them for reasons that are set out in detail in our report. Our decision to dismiss Lord Chadlington’s appeal was based on the facts and the evidence. I beg to move.
The Deputy Speaker (Baroness McIntosh of Hudnall) (Lab)
My Lords, under Standing Order 68, no debate is allowed on this Motion. I must therefore now put the Question that this Motion be agreed to.
Pension Schemes Bill
(1 day, 4 hours ago)
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16:33 - Division on Amendment 4 - Ayes: 276 / Noes: 165 - Amendment 4 agreed.
17:13 - Division on Amendment 9 - Ayes: 201 / Noes: 177 - Amendment 9 agreed.
17:43 - Division on Amendment 12 - Ayes: 198 / Noes: 171 - Amendment 12 agreed.
Lord Fuller
“(ca) the Government Actuary’s Department;(cb) the Pensions Regulator;”
Lord Fuller (Con)
My Lords, it is a pleasure to open Report on the Pension Schemes Bill. As we start, we should be clear that the Bill’s success will be measured on the extent to which it makes it easier for people to take personal responsibility and save for their future, and make their savings secure, while permitting appropriate risk-taking and capital to grow the economy.
I should declare some interests. I have been a trustee of the Norfolk pension scheme for well over 20 years and a member of the Local Government Pension Scheme advisory board since its inception—in fact, I will retire from that on Monday. During that period, I have served on the Firefighters’ Pension Scheme and been chair and vice-chair of the Local Government Pension Committee, which is the body representing the employers in the scheme.
Today is about the Local Government Pension Scheme. The LGPS is different from most of the other public schemes because members have put money aside for their retirement—and that is important. My Amendments 1, 2 and 5—to which the noble Baroness, Lady Altmann, has added her name—relate to the overarching structural organisation of the 87 schemes that feed into a number of pools.
Let us dispose of Amendment 1 first. In my personal experience, I have found that just limiting the list of consultees to the FCA would be insufficient. I think there has probably been a misunderstanding in the department about the fact that the Government Actuary’s Department and the Pensions Regulator really do get involved there. While I would not press the amendment to a vote, I think it is pretty straightforward. If we do not have the Pensions Regulator and GAD—which look after 50 or so other things, apart from investment—the Bill would be holey.
I have my reservations about government interference in the structure of pools. It damages the purity of the relationship and accountability of the trustees to act in the members’ best interests. Rachel Reeves will be a footnote in history by the time the cows come home with the consequences of some of the provisions in Clause 1. The approach of mandating pools has already damaged the scheme. For no good reason, the exemplar access scheme was told to disband; it had £40 billion-worth of assets under management, but that was not good enough. It had access to the best FCA global professionals in the City of London. Now it is being forced to join a provincial pool, which—for goodness’ sake—does not even have an FCA qualification.
Elsewhere in the Bill, there are restrictions that prevent a scheme from belonging to more than one pool. For reasons I will now explain, this incomprehensible restriction will mean that the Government thwart their own ambitions to bring the LGPS assets to bear to invest in other wise and appropriate investible infrastructure opportunities outside their home patch.
My amendment would allow any good opportunity that has been signed off, so to speak, by one LGPS fund to be available to all the others, whether the fund was in that pool or not. The LGPS is the closest we have to a national wealth fund. Two years ago, its total assets under management were valued at more than £390 billion—and it is much more than that now. These things change but, by some measures, it is the world’s fourth- or fifth-largest scheme. Some 6.68 million Britons belong to that scheme. It may be a large scheme, but the members are not fat cats: the typical member is a 47 year-old person earning £18,000 a year and who may, after a period of very long service, attain a pension of £5,000 a year. In the next group, I will refer to this number, but investment returns for 2024 on the LGPS were 8.9%, with a broad asset allocation of equities, bonds, property, and so forth. The investment and management costs grew by much less than inflation—2.9%.
The scheme that I am a member of in Norfolk has a cost per member of less than £20; it is half the cost of anywhere else. When I came to that scheme in 2007, there were £1.8 billion of assets. That is now nearly £6 billion. When I leave the trusteeship in May, I will look back with satisfaction. It is a British success story. The noble Lord, Lord Davies, trumpeted this in Committee. With all this interference and fettering of the ability of the trustees to put the members’ best interests first, what is the problem that the Government are trying to solve here?
I make no apology for rehearsing this as I open Report. The success story that is the LGPS should play an important part in investing in and renewing our nation. I am not against scale. I know there are some schemes at £500 million that need to bulk up, although I am bound to say that one of the smaller schemes in the Orkneys has the best performance of all the schemes in the whole scheme. There is something to be learned there.
Baroness Noakes (Con)
My Lords, I have Amendment 4 in this group. This concerns mandation, which we will debate more extensively later this week in connection with defined contribution schemes. Amendment 4 seeks to ensure that mandation cannot apply to the LGPS. This amendment should be easy for the Government to accept. This mandation amendment, unlike the ones we shall debate on Thursday, reflects what the Government have said is their policy.
Clause 1 gives the Government very extensive powers to tell local government pension funds what they may or may not do in relation to asset pool companies and scheme managers. Clause 2 says that any Clause 1 regulations must—not may—
“make provision about the management of the funds and other assets”.
As is usual with regulation-making powers, they are unconstrained. While Clause 2 lists some of the things that could be included in the regulations, it contains no restrictions on the use of the power.
I have tabled Amendment 4 seeking to ensure that the power cannot be used to tell local government schemes to invest in particular assets, asset classes or locations of investment. I firmly believe that fiduciary duties are paramount and should never be interfered with by the Government, whether in relation to public sector schemes such as the LGPS or private sector ones, which we will debate on Thursday. The noble Lord, Lord Katz, said in Grand Committee on 12 January:
“To be absolutely clear … we are not mandating asset pools to invest in certain ways in the LGPS. The power to direct pools is a backstop power. It does not allow government to mandate investment in specific assets or asset classes”.—[Official Report, 12/1/26; col. GC 244.]
The issue is not whether the power is a backstop power or whether the Government intend to use it but whether the Bill could be used—by this Government or some future Government—to mandate investments in the LGPS.
Clause 2 is clear that regulations under Clause 1
“must make provision about the management of the funds and other assets for which the scheme managers are responsible”.
Subsection (2) goes on to require an investment strategy, and subsections (3) and (4) allow the Secretary of State to specify what is in that strategy, including strategic asset allocation. On any ordinary interpretation, this adds up to very considerable power over LGPS investments.
In the other place, the Government removed from the original Bill a more explicit power of direction that would have allowed the Secretary of State to direct LGPS investment activities. It was pretty shocking, and the Government sensibly removed it before the Bill arrived in your Lordships’ House. That removal, however, does not mean that the Bill we now have before us could not be used to mandate investments using the powers that remain in Clauses 1 and 2. I hope the Government will agree that certainty is required in this area. My amendment would put matters beyond doubt. If the Government do not accept Amendment 4, I am currently minded to test the opinion of House when it is reached.
Baroness Bowles of Berkhamsted (LD)
My Lords, I will speak to Amendments 2 and 5, which address the same underlying issue—whether pooling and expertise in the Local Government Pension Scheme is intended to support good investment decisions or to constrain them. I will speak in support of Amendment 4, to which I have added my name.
No one disputes that there can be value in scale, but scale does not require exclusivity. Nothing in the case for pooling requires funds to confine to a single pool, unable to access specialist expertise developed elsewhere. The LGPS is a federation of, I think, 89 funds with different demographics, liabilities and investment strategies. It is entirely foreseeable—indeed, it is already happening—that one pool will develop a particular strength in, say, infrastructure, and another in renewables or local investment opportunities, or, as has already been outlined, it may be that the investment opportunity is large and accessible only by more than one joining together. Why should a fund be prevented from accessing that expertise or that scale simply because it sits in a different pool? Looking at it from the non-scale end, I have personally spoken to fund managers who wanted to invest local to support infrastructure at local scale but who do not want all that exposure in their own area, for reasons of diversification. They have had their fingers burned with shopping centres. The current drafting would make that unnecessarily difficult.
In Committee, the Government were clear that they want to avoid forced or value-destructive transfers of assets between pools. Allowing funds to participate in more than one pool and allowing cross-pool investment is one of the simplest ways to avoid exactly that. If a fund can access a specialist vehicle without having to replicate it internally or move assets unnecessarily then that is a win for the scheme members. The purpose of pooling was to broaden access to expertise, not to narrow it; to create economies of scale, not to create silos; and to support better long-term investment decisions, not to restrict the routes through which those decisions could be implemented.
The noble Lord, Lord Fuller, has reminded us of many of these issues, as he did in Committee. The LGPS is a British success story, delivering strong returns, low costs and high efficiency for 6.7 million members. His warning was and is that the Bill risks fettering the independence of schemes to make the best long-term decisions for their members. These amendments go directly to that point, and it would be beneficial if the Government could recognise this—I really cannot see what they would take away.
I therefore suggest that the Government seriously consider adopting these amendments. They are modest but important. They would not weaken pooling but strengthen it, they would not undermine scale but enhance it, and they would not challenge the Government’s policy direction. They would simply ensure that the LGPS could operate as a coherent system, rather than a set of sealed compartments. I hope that the Minister will see them as constructive corrections to support fiduciary duty, improve efficiency and help deliver the very outcomes that the Government say they want.
I turn to Amendment 4. The noble Baroness, Lady Noakes, has already explained in detail why it is a good amendment, and we on these Benches support it. It would be a safeguard to make sure that the same kind of mandation that the Bill contains for default pension funds did not creep across through regulations into the LGPS. That may not be the intention now, but, as elsewhere in the Bill, there are no safeguards against the future intentions of we-do-not-know-who in a change of circumstances. It is a bad thing in legislation to continually have these open abilities to make regulations, billed as doing one thing but completely open sometimes to do almost the opposite. The precedent has been set elsewhere in the Bill by the drafting and, no matter how it ends up, we need to be certain that it cannot creep into local government. I therefore support Amendment 4, and we will support the noble Baroness, Lady Noakes, if she is minded to divide the House.
Baroness Altmann (Non-Afl)
My Lords, I have added my name to Amendments 2, 4 and 5, so I will speak to those. I support the noble Lord, Lord Fuller, in his Amendment 1. The addition of the Pensions Regulator, alongside the FCA, is very important. I must declare my interest as a non-executive director of a pensions administration company and as a board adviser to a pensions DC master trust.
Amendments 2 and 5 are really important in the context of the Local Government Pension Scheme. The LGPS is an unusual type of defined benefit scheme; it is not like any of the others which are funded, because it is underwritten by the Government. It does not pay a levy to the Pension Protection Fund and the Government completely underwrite all liabilities, so of course the trustees are able, perhaps, to feel that they can take more risks than a defined benefit scheme, which is supported only by an employer which may fail and the members end up in the PPF. Having said that, unless the Government wish to change the Local Government Pension Scheme into another unfunded public sector scheme and just take all the assets in—which they could do—surely it is important to ensure that the trustees can make investment decisions that they believe are best, rather than the Government suggesting they know better and telling them what to do.
Amendments 2 and 5 both address restrictions on the ways in which the Local Government Pension Scheme can invest, whereby it has to choose to belong to one asset pool and that is it—it could not participate in another pool, even if it felt that that other pool had attractive attributes. I understand the Government’s intent—they would like pension schemes to support both local and national projects, as would I—but it should not be that you can support only the local projects that happen to be part of the asset pool that you must belong to. That is bound to turn these into discrete pools, rather than diversified pools where the trustees have a much freer choice.
The Government may be muddling the idea of scale with the idea of diversification. Both are important and both can deliver better outcomes for members, but trustees have to be able to choose which managers they believe can do the best for them. Quite frankly, usually it is the case that any one pool cannot be the best at everything. There will always be the need, as the noble Lord, Lord Fuller, said, for specialist expertise to be offered to pension schemes.
Amendment 4 is in the name of the noble Baroness, Lady Noakes, and she excellently explained what she intends it to do. The idea is that the Government should not dictate specific assets that pension schemes can invest in.
Although I have no problem with the Government incentivising particular types of investment, whether by offering better returns or different tax reliefs for investing in the ways the Government might wish—they might encourage a local pension fund to invest in its local area—the idea of mandating it with no option but to follow seems a step too far. I hope the Minister will understand that there is support for the ideas the Government wish to achieve, and which lie behind the stipulations in the Bill. It is just that the powers extend so far that we have no idea what might come next on mandation.
We are not talking about incentivising. We are talking about forcing schemes to invest in ways that Ministers see fit, rather than supporting the economy in general in ways that the trustees and their managers decide would deliver the best outcomes for the scheme.
Lord Palmer of Childs Hill (LD)
My Lords, first, I have to declare an interest because after 28 years as a councillor in the London Borough of Barnet, I am in receipt of a modest local government pension. I sometimes forget to declare that and I do so now. We have been lucky to have incisive speeches from the noble Lord, Lord Fuller, the noble Baroness, Lady Noakes, my colleague and noble friend Lady Bowles and the noble Baroness, Lady Altmann. After them, I almost want to ask, “Is there anything else one should say?”, but as a politician, I will do so.
This has been a useful debate on the future governance of the Local Government Pension Scheme, and there is a common theme running through it: the need to protect fiduciary responsibility while ensuring that governance is modern, credible and transparent. The amendments in this group range from consultation requirements to the possibility of participation in more than one asset pool, and to the important question of whether Ministers should be able to steer investments towards particular assets and places. I hope that Amendment 4 will be moved at the end of this debate; I would certainly want to support that amendment, if the noble Baroness decides to move it.
We on these Benches recognise that pooling can bring efficiencies and expertise, and we generally welcome the provisions on the Local Government Pension Scheme in the Bill, but bigger is not always better simply because it is bigger. Flexibility matters: if one pool has genuine expertise in a special asset class, there is an argument for allowing schemes to benefit from that knowledge, rather than being locked into a single route for all purposes. Equally, if powers are to be used over asset pools, proper consultees matter. It is hard to object to hearing from bodies such as the Government Actuary’s Department and the Pensions Regulator before directions are given. These are basic disciplines of good administration; I only hope that the Local Government Pension Scheme uses those provisions.
Our wider concern remains the same one raised repeatedly in Committee: that the Bill is too ready to create broad powers first and to explain the practical boundaries later. On the Local Government Pension Scheme, that is particularly sensitive because we are dealing with very large sums, long-term liabilities and members who expect prudence—that was probably why they went into local government in the beginning—not improvisation. So our test is straightforward: does the provision strengthen scheme governance, preserve proper fiduciary decision-making and protect members from political or poorly evidenced intervention? Where it does, it deserves support; where it does not, Ministers still have work to do.
The amendments in this group are pretty modest. As we go through the Bill, we will come to other amendments that would go further. The Minister and her colleagues should think again about whether these amendments improve the Bill. They are not against the Bill or the Government; they are prudent. They would provide fiduciary powers and the power to use them. I invite Ministers to take a step back and consider giving their support to these early amendments and asking their colleagues in the other House to do so. These are reasonable amendments. As I say, later in this debate there will be other amendments that go further. I would like to hear that Ministers feel there is some credibility in the amendments in this group, particularly Amendment 4.
Viscount Younger of Leckie (Con)
My Lords, I want to start by thanking my noble friend Lord Fuller for commencing our discussions on this important Bill, which is now on Report. We on these Benches look forward to an effective and constructive Report and hope that we can work with noble Lords across the House to make the improvements to the Bill that, in our view and that of many in the pension sector, are desperately needed.
Towards the end of my remarks, I will speak to the important Amendment 4, in the name of my noble friend Lady Noakes, but first I will speak briefly in support of Amendment 1, in the name of my noble friend Lord Fuller, and Amendments 2 and 5, in the names of my noble friend Lord Fuller and the noble Baroness, Lady Altmann. Taken together, these amendments would make constructive improvements to the Bill.
Amendment 1 would ensure that both the Government Actuary’s Department and the Pensions Regulator are formally consulted before directions are given in relation to asset pool companies. This seems an eminently sensible and proportionate safeguard. The provisions in the Bill give the Government significant powers to direct changes relating to LGPS pooling arrangements—changes that, in practice, may reshape the investment structures of some of the largest pension funds in the country.
Decisions of that magnitude should not be taken without the benefit of the best available expertise. Requiring consultation with the Government Actuary’s Department and the Pensions Regulator would ensure precisely that: actuarial and regulatory oversight would be brought to bear before such directions are issued. This would help to ensure that decisions that could materially affect the funding, governance and investment strategy of the LGPS are taken with expert input. That seems an entirely reasonable expectation when we are dealing with funds that collectively safeguard the retirement incomes—we must not forget this—of millions of public servants.
Amendment 2 addresses another important point. As the Bill stands, regulations may prohibit a scheme manager from participating in more than one asset pool company at the same time. This amendment would remove that provision. Doing so would give scheme managers greater independence in determining how best to structure their investments. If, as was mentioned earlier, one asset pool develops particular expertise in, say, infrastructure, private markets or another specialist asset class—akin to a centre of excellence, perhaps—there may well be circumstances in which it is entirely sensible for multiple schemes to participate in that pool for that purpose.
The noble Baronesses, Lady Bowles and Lady Altmann, put it very eloquently. Preventing scheme managers accessing such expertise simply because they already participate in another pool risks imposing unnecessary rigidity on the system and is unnecessarily prescriptive and inflexible. By removing that restriction, this amendment would allow scheme managers greater freedom to act in the interests of their members—which, as the Government sometimes forget, must remain the central principle guiding all decisions in the management of pension assets.
Amendment 5 follows a similar logic. It would remove wording that restricts how asset pool companies can undertake investment management activities, thereby allowing investment opportunities created within one pool or by one scheme manager to be accessed more widely across the LGPS. In practical terms, this would facilitate cross-pool collaboration within the scheme. Rather than forcing each pool to operate in isolation, it would allow expertise and opportunities to be shared, broadening the menu of options open to scheme managers when determining how to allocate assets and pursue long-term returns. At a time when the Government are encouraging greater scale and collaboration within pension investment, it seems entirely sensible that the legislative framework should not inadvertently constrain that collaboration if that is the choice of the scheme manager, to the ultimate benefit of members of that scheme.
More broadly, these amendments recognise an important principle. As structural changes are made to the way that LGPS operates that could significantly reshape the pensions landscape as a “coherent system”—as the noble Baroness, Lady Bowles, well put it—it is essential that those responsible for managing pension funds retain the flexibility to exercise their judgment in the interests of their members. Pooling can bring benefits, but it should not come at the expense of professional discretion or fiduciary responsibility. These amendments strike a reasonable balance: they would strengthen oversight where central powers were exercised, while preserving the ability of scheme managers to make decisions that best served the members whose pensions they are entrusted to protect.
Lord in Waiting/Government Whip (Lord Katz) (Lab)
My Lords, I am grateful for our discussion on this first group. I am indebted to the noble Lord, Lord Palmer of Childs Hill, for reminding me too that I should declare my membership, as a former Camden councillor, of its members’ pension scheme—although I defer to him in terms of seniority in years of service: I did a paltry one term, as opposed to his gazillion, I think it was, in the neighbouring council in Barnet.
I share the interest raised in this discussion in fostering greater collaboration and sharing of expertise across the LGPS and ensuring that there are appropriate safeguards in the Bill. On Amendment 1, tabled by the noble Lord, Lord Fuller, it is right that we ensure that appropriate safeguards are in place on the use of direction powers. To reiterate, these are included in the Bill as backstops to ensure that the Government can fulfil their role as stewards of the scheme, but let me be clear that the direction powers in the Bill are not designed to allow the Government to direct investment into specific assets or asset classes, and the Government are satisfied that they cannot be used in this way.
The Bill already requires the Secretary of State to consult the asset pool company, its participating partner authorities, the FCA and any other body that the Secretary of State considers appropriate, prior to the exercise of the direction powers. I do not believe that the Pensions Regulator is an appropriate body for this list. Asset pool companies will be regulated by the FCA and do not fall under the remit of the Pensions Regulator.
In moving his amendment, the noble Lord, Lord Fuller, took issue with the closure of the access pool. To be clear, access went through the same process as all the pools. Outsourcing all its investing was not value for money. The pools that access funds are going to are all FCA regulated. I hope this provides reassurance not just for the noble Lord, Lord Fuller, but for your Lordships’ House.
The Ministry of Housing, Communities and Local Government will work closely with the Government Actuary’s Department to provide actuarial advice to the department on the LGPS. It can be expected that the department would seek advice from it prior to issuing a direction wherever it was relevant to do so. Furthermore, the Secretary of State has a duty to consult anyone whom they consider appropriate under Clause 1(5)(d), which could include the Government Actuary’s Department. This may not always be appropriate, however, depending on the type of direction being issued. Overly burdensome and formal consultation requirements can slow decision-making. It would therefore seem potentially onerous to have the Government Actuary as a compulsory consultee under these direction powers.
The noble Lord, Lord Fuller, also talked about the impact of local government reorganisation on pooling in the LGPS. Many administering authorities are forming new pool partnerships to deliver the standards of pooling which we have set. I know that authorities have taken the impact of local government reorganisation into account when deciding which pool to join. The Government stand ready to support authorities with any concerns that they may have about the impact of local government reorganisation on the administration of the LGPS in their area. For the avoidance of doubt, and to address the point made by the noble Baroness, Lady Bowles, there is nothing in the legislation that says that the Government underwrite the liabilities of the LGPS. These are locally managed schemes, which includes responsibility for liabilities.
Amendment 2 seeks to encourage collaboration and competition across the LGPS by permitting administering authorities to participate in more than one asset pool company. This Government strongly believe that pools should work together wherever this can improve outcomes for members, employers and taxpayers. Asset pools becoming centres of excellence in specialist asset classes would reduce duplication and enable investments at scale, both within pools and across the whole scheme. Joint ventures are already operating in the scheme—such as LPPI and Northern LGPS’s collaboration through the GLIL Infrastructure fund, which invests in assets ranging from upgraded rail rolling stock to green energy and water projects. These show how collective investment can unlock the scheme’s potential to invest in the UK.
To encourage further collaboration of this kind, Clause 4 removes procurement barriers so that pools can invest in one another’s vehicles without limitation. Nothing in this legislation prevents administering authorities benefiting from specialist expertise in other asset pools. It certainly does not impose an arbitrary north/south boundary or other such divisions, as the noble Lord, Lord Fuller, intimated. However, under the reformed system, this will appropriately be done via their own asset pool, because decisions to contract with, or invest alongside, another pool are a matter for the regulated pool company, not for individual authorities.
The Bill establishes a clear division of responsibilities. Administering authorities will set the investment strategy, while asset pools will implement that strategy. This places investment decisions with professional managers, enabling the scheme to achieve scale and deepen capability. This amendment would undermine those benefits by returning investment decisions to individual authorities, rather than the expertise developed at the pools. I therefore believe that the amendment is neither necessary nor an appropriate measure to enable collaboration across the scheme.
I should like to reassure the noble Baroness, Lady Altmann, on the points that she raised. First, pooling is not about limited choice. Pools will select managers on behalf of their funds under the fund’s direction. Secondly, the investment strategy will set funding objectives and an asset allocation. Thirdly, responsibility for setting the investment strategy will remain with funds. Nothing in the Bill allows the Government to tell funds what to invest in, nor will pools make that decision. It will be made by the LGPS funds for pools to deliver.
I turn to Amendment 5, also from the noble Lord, Lord Fuller, and the noble Baroness, Lady Altmann. I understand that the intention behind this amendment is to allow investment in opportunities created by other administering authorities and asset pools. As I have said, this is already possible under the legislation as drafted. What the amendment would actually do is to allow administering authorities to count as local any investment to the benefit of people living or working anywhere in England and Wales. This definition is relevant only when administering authorities are setting their approach to, and targets for, local investment in their investment strategy, and when reporting on the extent and impact of local investment.
Of course, the Government are all for UK investment. Indeed, as we have heard, the LGPS is the country’s largest UK pensions investor already. However, the purpose of requiring a specifically local, not national, investment objective in the investment strategy is to encourage investment into all regions of the UK, and directly into the communities in which scheme members have worked. Administering authorities can set any target they want for local investment, and asset pools are free to invest assets over and above this target in the UK or worldwide, as best fits the investment strategy. There is therefore nothing stopping administering authorities from benefiting from investments anywhere in the country, regardless of their geographic location.
I turn to Amendment 4 from the noble Baroness, Lady Noakes. Clause 2, specifically the provision in subsections (3)(b) and (4), allows the Government to make regulations specifying matters that administering authorities must or may cover in their investment strategy. It is not designed to permit government to dictate what that strategy says. The power that we removed from the Bill in the other place was equivalent to the powers that the Secretary of State has over funds, which the Government’s initial judgment was that it was appropriate to have over pools under the new system. We have heard feedback from stakeholders and feel that it is not necessary for the Secretary of State to have those powers.
This provision will be used to require that LGPS investment strategies include: an approach and target range for local investment; high-level funding objectives and an approach to responsible investment; and a strategic asset allocation completed to a standard template, to be included in guidance. In each case, it remains for LGPS administering authorities to determine what those objectives, approaches, asset allocations and target ranges will be. Some may be concerned about how a future Government might use this provision. I reassure them that the Government do not consider the clause to permit regulations compelling authorities to adopt any particular position in their investment strategy. I hope that the noble Baroness will therefore be reassured that the Bill does not enable what her amendment seeks to guard against.
The purpose of the government amendments to Clause 4, Amendments 6 to 8, is to ensure that changes made under the clause do not have any wider application than intended. Clause 4 amends the Procurement Act 2023 to create a new exemption for investment and fund management contracts between Local Government Pension Scheme managers and their LGPS asset pool companies. This is required because the existing exemption in the Procurement Act contains a turnover test that would cap the potential for LGPS asset pools to collaborate through joint ventures. Clause 4 addresses this by ensuring that LGPS pools are not subject to this turnover test where a pool is acting in the interests of Local Government Pension Scheme managers. However, it is appropriate that the effect of the clause does not go any wider than intended. The amendments therefore put it beyond doubt that these changes apply only when Local Government Pension Scheme managers are acting in their capacity as Local Government Pension Scheme managers, and not in any other scheme management capacity they might have.
I hope my response demonstrates that the Government have considered carefully the points raised through Amendments 1, 2, 4 and 5. To pick up on the comments made by the noble Lord, Lord Palmer, we understand the intentions behind the amendments—we just do not think that they are necessary. We understand the motivation behind them, and I hope that my explanation makes that clear. We are also responding to the wider point, which we discussed at some length in Committee. The nature of the Bill, called by some skeletal, is that this is how pensions and other financial management legislation is passed. A lot has to be done through regulation, because that is how one responds to changing marketplaces and sector demands. We make no apologies for that. However, the Government welcome collaboration across the scheme and, as I have explained, the provision in the Bill and our proposed regulations already allow for it. Amendments 2 and 5 would undermine the pooling and local investment reforms without promoting further collaboration.
This Government also recognise the desire to ensure that there are appropriate safeguards on the use of direction powers. I hope I have reassured your Lordships’ House that the consultation requirements in place are already sufficient and that it is not necessary to introduce additional references to the Government Actuary and the Pensions Regulator. Finally, I hope that I have reassured your Lordships’ House that the provisions in the Bill do not allow the Government to introduce mandation via regulation. I therefore ask the Lord, Lord Fuller, to withdraw Amendment 1.
Lord Gove (Con)
Before the Minister sits down, he said that Amendment 4 is unnecessary because the Bill does not do what the promoters of Amendment 4 argue that it does. He did not say that it would be malign, that it would frustrate the efforts of the Government, that it was wrong in any way; he merely said that the Bill already achieved what the promoters of the amendment want and therefore it would be superfluous. What damage would therefore be done if Amendment 4 were accepted? In what way would it damage the Government, damage pension fund trustees or damage pension fund members? It is not good enough to say simply that the noble Baronesses, Lady Altmann and Lady Bowles, and the noble Lord, Lord Palmer, are wrong, and for us to take it on trust. That is not what we should do.
Lord Katz (Lab)
I say simply that if we took that approach to all legislation, we would end up with Bills hundreds or thousands of pages long, because we might pile on more amendments simply because they are well-intentioned. It is important that we are clear about the legislation that we are drafting, so that people in the pensions sector, lawyers, et cetera, can properly interpret what we intend—by any legislation, not just this Bill. When we say that something is superfluous, we do not add it in: I think that is a perfectly decent criterion by which to legislate. The noble Lord, Lord Gove, shakes his head. I say to him gently that both this and the previous Government have had a lot of criticism for large Bills and there is always an onus on us to have slimmer legislation. We will not get slimmer legislation by accepting willy-nilly amendments that we think are superfluous.
Lord Gove (Con)
My Lords, I am afraid that that answer is completely inadequate.
Lord Fuller (Con)
My Lords, it has been an interesting debate. The LGPS is special. It is the closest thing, as a number of noble Lords have said, to having a sovereign wealth fund in our islands, and I am unconvinced by the points made by the noble Lord, Lord Katz. He has misunderstood what local investments are. I do not accept for a moment his reassurances around the creation of specialist pools. As my noble friend Lord Younger said from the Front Bench, this increases unnecessary rigidity, damages coherence and misunderstands the distinction between funding and financing.
I suppose noble Lords can be grateful for at least one thing: as the noble Lord, Lord Katz, was at the Dispatch Box, it saved the Minister, the noble Baroness, Lady Sherlock, repeating the old trope that the large Ontario and Canadian pension funds are the sorts of things against which the LGPS should be marked. Today, the Financial Times reported that the Ontario funds have fallen away by 5.3% over the last year, while the LGPS has grown by 9%. This is what happens. I am conscious that I am winding. I will not press Amendments 1, 2 and 5 to a vote, but I will support my noble friend Lady Noakes in the Lobby if she chooses to divide the House.
Baroness Noakes
“(4A) The provision made by virtue of subsection (1) may not include any provision about investment in specific assets or asset classes or about the location of investments.”
Member's explanatory statement
This is a drafting amendment to clarify that only contracts made by a local government pension scheme manager acting in its capacity as such can be exempt contracts under clause 4.
Member's explanatory statement
This is a drafting amendment to clarify that the “80% condition” refers only to investment management activities carried out for local government pension scheme managers acting in their capacity as such.
Member's explanatory statement
This is a drafting amendment to clarify that in the definition of “investment management activities” the reference is to funds or other assets for which a local government pension scheme manager is responsible.
Baroness Stedman-Scott
“Benchmarking of Local Government Pension Scheme liabilities(1) For each actuarial valuation relating to a scheme for local government workers which has pension funds, an administering authority must obtain and publish—(a) the primary valuation used for funding purposes, and(b) one or more benchmark valuations of scheme liabilities based on—(i) prevailing bulk annuity pricing, and(ii) a gilt-based discount rate.(2) The valuations published under subsection (1) must be published at the same time as the funding strategy statement, and alongside the employer contribution rates arising from the funding valuation.(3) Where the funding valuation is materially more prudent than the benchmark valuations, the administering authority must publish a statement explaining—(a) the risks being guarded against,(b) why those risks justify a higher degree of prudence than that reflected in insurer pricing, and(c) the impact on employer contribution rates.(4) The funding strategy statement must include appendices explaining the valuation assumptions, benchmarks, and their effect on contribution rates in a form that is reasonably accessible to a person who is not a qualified actuary.(5) The statement must be communicated to the relevant local authority and made publicly available.(6) The documents published under this section must be made available in a manner that enables meaningful consultation by scheme employers and scheme members.(7) In this section—“administering authority” has the same meaning as in Regulation 2 of the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356);“funding strategy statement” has the same meaning as in Regulation 58 of the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356).”Member's explanatory statement
This amendment requires Local Government Pension Scheme valuations to be benchmarked against insurer pricing and gilt-based discount rates, with explanations where significantly greater prudence is applied. It also requires those benchmarks, the funding strategy statement, and employer contribution rates to be published together, with accessible explanatory material to support meaningful consultation.
Baroness Stedman-Scott (Con)
My Lords, I move Amendment 9 standing in the names of my noble friend Lord Younger of Leckie and myself. During the passage of this Bill, we on these Benches have had a great many discussions not only in this Chamber but with industry experts, scheme managers, employers and others who will be directly affected by the provisions before us. Those conversations have been extremely valuable and have revealed something that many of us have found increasingly concerning. We have been made aware that, in a number of cases across the Local Government Pension Scheme, employers are being asked to contribute very substantial sums into pension funds; these levels of contribution appear to go well beyond what would be required for those funds to be fully funded, even on a very prudent basis.
Of course, prudence is essential in pension funding, and no one in this House would dispute that. Pension promises stretch decades into the future, and it is right that those responsible for safeguarding them take a cautious and responsible approach when assessing liabilities and setting contribution rates. What we are seeing in some cases, however, appears to move beyond prudence into excessive prudence. When contribution requirements are set significantly above what would be necessary even under extremely cautious valuation assumptions, the consequences are that employers, local authorities, academies, housing associations and others are required to divert even greater sums of money into pension funds.
The money does not come from nowhere; it comes from taxpayers and from public budgets, which might otherwise be used to fund and support local services, improve communities, invest in schools, support vulnerable people and deliver the many things we all want councils and public bodies to be able to do. If those employers are being asked to contribute significantly more than is necessary to secure the pensions of their members, we have to ask whether the balance between prudence and proportionality has shifted too far. That is precisely the issue this amendment seeks to address.
Amendment 9 would introduce an important requirement for transparency, requiring Local Government Pension Scheme valuations to be benchmarked against two widely recognised measures: insurer pricing—specifically, bulk annuity pricing—and evaluation based on gilt discount rates. Those benchmarks would then be published alongside the scheme’s official funding valuation.
Crucially, where the scheme’s official valuation is materially more prudent than those benchmarks, the administrating authority would be required to publish a clear statement explaining three things: first, what risk the scheme was seeking to guard against; secondly, why those risks justified the high level of prudence being applied; and, thirdly, what the impact of that additional prudence would be on employer contribution rates. In other words, the amendment would introduce transparency around the actuarial assumptions being used; it would allow employers, scheme members and the wider public to see how prudence affects contribution cost; and it would give those who are paying into the scheme the ability to understand—and where appropriate, question—the basis on which those cost are being set.
This intention should not be controversial. Indeed, one might reasonably argue that it should be a basic feature of the system. Where decisions are being taken which require significant contributions from public bodies, there should be transparency about how those decisions are reached, there should be honesty about the assumptions being applied and those affected should have the information necessary to exercise agency and scrutiny.
What this amendment seeks to achieve is not to undermine prudence—quite the opposite. Prudence remains vital in pension funding. But prudence must be accompanied by accountability, and when additional prudence is applied, particularly where it carries significant cost implications, it should be clearly explained and justified. The fact that our amendment would require those benchmarks, the funding strategy statement and employer contribution rates to be published together, is another key point. It would allow stakeholders to see the full chain from market comparison to actuarial judgment to the costs ultimately borne by employers.
This amendment therefore strikes a sensible balance. It would preserve the independence of actuaries and the integrity of the valuation process, while ensuring that the consequences of those decisions are visible and understood. For employers, it would provide clarity; for scheme members, it would provide reassurance; and for taxpayers, it would ensure that the significant sums being directed into pension funds are subject to appropriate transparency. For those reasons, this amendment represents a constructive and proportionate improvement to the Bill. It asks only that, where high levels of prudence are applied, they are accompanied by explanation and openness. That seems to me an entirely reasonable expectation, and I will test the opinion of the House when it is called.
Lord Fuller (Con)
My Lords, I support Amendment 9 in the names of my noble friends on the Front Bench and place on record that there are some very good behaviours among the Local Government Pension Scheme administering authorities that already follow the path laid out in the amendment, which would then be placed on a statutory basis.
I would not want people to think that none of that best practice happens, or that the numbers are just plucked out of the air—that is not the way it is at all. The purpose is that all schemes reach expectations and assess their liabilities in aggregate, not just for each of the councils—most people without this House would think the LGPS is a scheme for councils—but all the other admitted bodies as well. As I said in the previous group, when I first joined the Norfolk scheme about 20 years ago, there were about 70 admitted bodies; there are now 500, so it is extraordinarily complicated. Nationally, on a whole-of-LGPS basis, there are 6,160 scheduled bodies, 3,639 admitted bodies, 478 designated bodies—I do not know what they are, but I think they might be with the Environment Agency—and 15,049 employers with active members.
The key thing, in support of my noble friend Lady Stedman-Scott, is that when we look at all these contribution rates, it is not just taking the scheme in aggregate; we have to drill down to all the particular liabilities for each employer in the scheme. I am now drifting into the complication we often hear so much about, which is used to obfuscate the scheme. What I really like about this amendment is that it stops people who know about the Local Government Pension Scheme from hiding behind that complexity and obfuscation. It will require members to publish in plain language how the numbers are arrived at and what this amendment seeks to achieve.
Again, to repeat some of my history, when I first joined the Norfolk scheme, which is a good example, it was 79% funded. We shovelled in cash like it was going out of fashion. Now, 20 years later, it is 130% funded. In the last three years it has gone up 25%. These big swings militate against stability and sustainability. Over the years there has been a pessimism bias, which has meant that council tax, councils and admitted bodies have put much more money into the scheme. Partly, there was groupthink from the regulators, which forced us down this path.
However, I want to provide reassurance. When you look at the assumptions that I have been involved in, over five triennial revaluations now, there is a fan of opportunities and scenarios that the actuaries run on the membership of the scheme, sponsoring employers, even the life expectancy of members calibrated by postcode. There are about a thousand different scenarios in the scheme that I have seen. Of course, one of those scenarios is a wipeout. We should not confuse a scenario with a likelihood. With the benefit of hindsight, I think what has happened is that the extreme cases have been taken and split down the middle, whereas if there was more clustering around the middle then we would not have had to put in so much. That is why the amendment looks in a much more focused way at the funding strategy statement. That way, we can take the true costs into account.
On seeing the noble Lord, Lord Davies, again, who is an actuary, I am reminded of an old actuaries’ joke I told in Grand Committee. I am going to repeat it, because it was a small audience then: “We’re all living longer and it’s getting worse”. Some of the assumptions have possibly overcooked life expectancy and undercooked the effects of Covid, and so forth. There is a balance to be struck between overoptimism on one hand and excessive prudence on the other. It is a complicated scheme, but the amendment works out a method by which we can communicate that texture in language that the man in the street can understand, so that taxpayers can be reassured that they are not being overtaxed and members can be reassured that, over the life of the tail liabilities of the whole scheme, they will be paid in full at the right moment. As I said on the previous group, the LGPS is the closest thing we have to a sovereign wealth fund and it is important that we do not take an excessive pessimism bias, as the story of the last 20 years has shown.
Lord Davies of Brixton (Lab)
I do not mean to be unkind to the tablers of this amendment, but it is nonsense, in my view. As the noble Lord, Lord Fuller, explained, I can confirm that I am a fellow of the Institute and Faculty of Actuaries. To be honest, this amendment would mean more work for actuaries, on the face of it. Who will do these independent assessments? It is presumably people who know what the technical nature of a pension scheme is—to that extent, maybe I am not against the amendment. It suggests that it should be benchmarked against two things that are irrelevant. The Local Government Pension Scheme is not insured. It is not invested totally in gilt-edged securities. You could calculate those figures, but what do they tell you? Absolutely nothing.
The fundamental problem with this proposal is that it is the administering authority that decides on the contribution rate, not the actuary. It is not the actuary who decides how much prudence should be in the figures. The actuary provides advice and the administering authority decides. If, for whatever reason, the administering authorities feel that they do not have enough control over the situation then that is a matter for them to sort out. It does not require legislation to say that administering authorities should do their job—it is already their job, and they should get on and do it.
Finally, even if an appropriate level of prudence was applied when deciding the contribution rate, that money—which, for the sake of prudence, is paid into the fund—is not lost and has not disappeared. It is still available and will be available for the purposes of the scheme; it will be taken into account the next time there is a valuation. Valuations roll on one after the other. If perchance, because of incorrect advice, a bit too much money is put in initially then it will be there at the next valuation and will be taken into account. Presumably the administering authority, as long as it is doing its job, will adjust the contribution rate appropriately. What we have in the amendment is additional unnecessary bureaucracy and, as far as I can see, the only people who will gain will be the professional advisers.
Lord Palmer of Childs Hill (LD)
My Lords, this group asks for greater transparency around Local Government Pension Scheme valuations by requiring benchmarking against insurer pricing and gilt-based discount rates, with clearer explanations where more prudent assumptions are used. There is value in greater openness and comparability, but there is also a risk in appearing to imply that one benchmark can neatly settle what is, in practice, a complex actuarial judgment.
I was taken by the contribution from the noble Lord, Lord Davies. He really killed off the amendment by saying that it would give more work for actuaries. The tendency is for the actuary then to say, “On the one hand this and on the other hand that”. Very often, the advice is not even that definite anyway, which is why actuaries are there to confuse the issue altogether.
We should be honest about two things at once. First, employers and scheme participants need clearer information. If valuation choices materially affect contribution rates, local authority budgets and, ultimately, local services then those choices should be explained in language that non-specialists can understand. Secondly, the Local Government Pension Scheme is not simply an insurer in another form; it is a long-term, open, public sector scheme with characteristics that very much differ from closed private arrangements. Although comparison can illuminate, it must not mislead, as is the danger. A benchmark should be a tool for understanding, not a back-door instruction about how every valuation ought to be done.
That is why we on these Benches are cautious. We are sympathetic to calls for clearer publication, accessible material and meaningful consultation. Sadly, we are less persuaded by any suggestion that the right answer can be derived by mechanically comparing one prudence basis with another. The real issue is whether assumptions are evidence-based, proportionate and properly explained. If the Government believe that the present system already secures that then they should show it—I hope the Minister will do that when he responds. If not, there is merit in considering reforms that improve transparency without oversimplifying a technical process.
On that basis, we on these Benches do not oppose the spirit of scrutiny here, but we are not convinced that the amendment, as drafted, is the full answer. Therefore, we are not against what the amendment says, but we would not support it if it were moved to a vote.
Lord Katz (Lab)
I thank the noble Viscount, Lord Younger of Leckie, for the amendment, moved very ably by the noble Baroness, Lady Stedman-Scott. It seeks to improve the transparency of the assumptions and level of prudence applied in LGPS actuarial variations, including through the introduction of additional benchmarks.
The 2025 triennial valuation will conclude on 1 April, and at present we do not have a complete picture of its outcomes across the 87 different funds and more than 20,000 employers in the scheme. The amendment seeks to prescribe remedies before any diagnosis has been made or, indeed, any maladies have been fully understood.
Many of the matters raised will be covered by the Government Actuary’s Department report under Section 13 of the Public Service Pensions Act 2013. The report will assess whether employer contributions have been set at levels appropriate to ensure solvency and long-term cost efficiency, whether funds’ valuations comply with the regulations and the degree of consistency between them. Recommendations will then be taken forward by the Ministry of Housing, Communities and Local Government and the scheme advisory board.
Officials are already engaging with the Government Actuary’s Department, which is targeting a publication date of spring 2027 for its report and recommendations. Your Lordships’ House will be pleased to hear that this is earlier than previous valuations, which I hope demonstrates the seriousness with which we are taking the issues raised by noble Lords in Committee. The Government Actuary’s Department will engage widely with funds, actuaries and advisers to develop a comprehensive understanding of the 2025 valuation.
It is appropriate for different funds and their advisers to use different discount rates, reflecting variations in risk appetite, employer profile and investment mix. It is helpful to understand how these approaches compare across the sector. The Section 13 review uses benchmarks to place local valuations on a comparable footing and may, in the first instance, provide useful insight into funds’ decision-making. There is a delicate balance to be struck. Members’ benefits are guaranteed in statute, but funds must ensure that they hold sufficient resources to pay those benefits over the long term through investment income and contributions.
My noble friend Lord Davies is right in his assertion that actuaries advise and funds decide. I salute, in making these contributions, his forbearance in not arguing for the interests of the national union of actuaries, of which I am sure is a founder member—at least he ought to be, if it does not exist.
We heard a fair amount on prudence, as we did in Committee, from the noble Lord, Lord Fuller, using his experience. In a locally managed scheme, it is for funds to work with their actuarial advisers and employers to set a contribution rate that supports the long-term viability of employers and the fund. The Section 13 report prepared by the GAD will consider questions of prudence—that is, how the discount rate is set and how stability is applied to contribution rates. Were the Government to set correct valuation assumptions, they would risk undermining the principle that funds and expert actuarial advisers are responsible for ensuring the long-term sustainability.
A push for greater intervention at the valuation risks moving from a locally managed scheme to a centrally managed scheme. We heard much about that in the discussion on the previous group of amendments. The implications are real and far reaching, decreasing rather than increasing the role for locally elected representatives.
On transparency, the amendment would require additional detail on assumptions and benchmarks in the funding strategy statements and these to be communicated in a more user-friendly way. I believe we are broadly aligned on the value of valuation reports and supporting material, such as funding strategy statements, being easier to understand for the lay reader. There is already transparency in the process. Administering authorities should consult all employers in the fund on their funding strategy statement. This statement should outline how surpluses and deficits will be managed, outline the approach to contribution stability and summarise the main actuarial assumptions used at the valuation.
To respond to the noble Lord, Lord Fuller, the funding strategy statement is consulted on, and the SAB guidance already says that the purpose of the FSS is to establish a “clear and transparent” strategy that explains how liabilities will be met and
“how the fund balances the interests of different employers”.
We must not jump to conclusions about how the valuation has played out for every fund and employer. There are already examples of good practice, including meaningful employer consultation and capable pension committees with the confidence to interrogate their actuary’s advice to fully understand the proposed contribution rates.
In his evidence to the Committee on the Bill in the other place, Roger Phillips, chair of the LGPS advisory board, said about the treatment of surplus that
“we live in a very volatile situation, and circumstances can change. You have to be careful, because if you reduce contribution rates considerably, that is a great benefit at this moment in time, but if you then turn around and start to increase them again, that can be very difficult for all employers to deal with, including local government”.—[Official Report, Commons, Pension Schemes Bill Committee, 2/9/25; col. 41.]
Until the valuation has concluded, we cannot reach a definitive view on how the interpretation of regulations and guidance and the quality of employer consultation have shaped the results that will apply from 1 April. As part of their review, the Government will ask the Government Actuary’s Department to focus on methods for managing risk and reflecting the long-term funding objectives of the scheme including discount rates, application of stability mechanisms and buffers and the effectiveness of employer engagement. I have committed to additional work with the GAD on how discount rates and the application of stability mechanisms affect contribution rates and whether employer engagement processes are operating effectively.
Following the publication of the Section 13 report, the Ministry of Housing, Communities and Local Government will undertake a review of the regulations and guidance governing the triennial valuation ahead of the 2028 valuation. I appreciate that your Lordships’ House may wish for more immediate action, but we must ensure that we are in possession of the valuation results before we determine the right course of action. I therefore ask the noble Viscount, Lord Younger, or the noble Baroness, Lady Stedman-Scott, to withdraw the amendment.
Baroness Stedman-Scott (Con)
I did not say it for that to happen—just to clarify matters.
I am grateful to all noble Lords who have contributed to this debate and thank the Minister for his response. It has become clear in our discussion that the issue this amendment raises is not simply a technical question about actuarial methodology or valuation frameworks; it is about the very real pressure being felt by employers across the Local Government Pension Scheme and the consequences of those pressures for local services and for the taxpayers who ultimately fund them. We remain concerned that this is not yet something that appears to be firmly on the Government’s radar, yet the evidence we have heard from employers, advisers and those operating within the system suggests that it is an issue that requires attention.
This is not something that we have plucked out of the air, made up or brought to the Chamber today based on a whim. It is from interviews and meetings that we have had with experts in the system who say that this needs looking at. We were told about one local government pension scheme that is 189% provided for. While we have to be careful, balance things and rely on the experts, that is just a bit out of kilter. Across the country, councils and other employers are facing extremely difficult financial circumstances. Many are asking for emergency support simply to maintain the services on which their communities depend. In that context, it cannot be right that questions about whether pension contributions are being set at excessively prudent levels are simply left to drift until the next review cycle arrives.
For those reasons, we believe this amendment addresses an issue that is real, immediate and important. It introduces transparency where transparency is needed, and it does so in a way that is constructive and proportionate. I therefore seek to test the opinion of the House.
Viscount Younger of Leckie
“Interim reviews of employer contributions rates in the Local Government Pension Scheme(1) The Secretary of State must by regulations made under section 3 of the Public Service Pensions Act 2013 (scheme regulations) amend the Local Government Pension Scheme Regulations 2013 (S.I. 2013/2356) as follows. (2) After regulation 58(4) (funding strategy statement), insert—“(5) The funding strategy statement must comply with regulation 64A(2) and be published in a form accessible to non-specialist readers.”(3) Regulation 64A (revision of rates and adjustments certificate: scheme employer contributions) is amended as set out in subsection (4).(4) For paragraphs (1) and (2), substitute—“(1) The administering authority may obtain a revised rates and adjustments certificate where the funding strategy statement sets out the administering authority’s policy on revising contributions between valuations and one or more of the following conditions is met—(a) there has been a significant change in the liabilities arising or likely to arise since the last valuation;(b) there has been a significant change in the employer’s ability to meet its obligations to the Scheme, consistent with that employer’s obligations to deliver value for money and services for local taxpayers;(c) the employer requests a review and agrees to meet the reasonable costs of that review.(2) The funding strategy statement must include a clear and accessible policy on revising contributions between valuations, including—(a) the process and evidential requirements for employers to request a review,(b) indicative timescales for the administering authority to determine such a request,(c) the criteria the administering authority and fund actuary will apply (including risk appetite and prudence levels), and(d) the approach to apportioning reasonable costs of any review.(3) Where an employer makes a request under paragraph (1)(c), the administering authority must—(a) acknowledge the request within 10 working days,(b) determine the request within 12 weeks (or such longer period as is agreed with the employer), and(c) provide written reasons for its decision.(4) For any review under this regulation, the fund actuary must prepare an Actuarial Methods Statement which—(a) explains, step by step, the models and methodologies used to project liabilities, assets and funding needs,(b) sets out all material assumptions, including discount rates, inflation, salary growth, mortality, longevity improvements and any smoothing or damping mechanisms,(c) specified the level of prudence applied and how that prudence has been determined, and(d) provides sensitivity and scenario analysis showing potential outcomes under varying market conditions and employer covenant assessments.(5) The administering authority must publish the Actuarial Methods Statement alongside the decision under paragraph (3)(c), subject only to the redaction of information which is commercially sensitive or relates to individuals.(6) The Secretary of State must issue statutory guidance on—(a) how councils and other employers may make requests under paragraph (1)(c), (b) the matters administering authorities should take into account when considering such requests, including the balance between Scheme solvency and local taxpayers’ interests in the continued delivery of core services, and(c) the minimum standards for actuarial transparency under paragraph (5).(7) Administering authorities must have regard to guidance issued under paragraph (6)(a).(8) The Secretary of State must publish the guidance within six months of the day on which the Pension Schemes Act 2026 is passed.””Member's explanatory statement
This new clause aims to strengthens regulation 64A of the Local Government Pension Scheme Regulations 2013 to make interim reviews of employer contribution rates more accessible and transparent.
Viscount Younger of Leckie (Con)
My Lords, I will address Amendment 12, which stands in my name and that of my noble friend Lady Stedman-Scott. This amendment addresses an issue that sits at the very centre of the concerns we have raised throughout the passage of the Bill: how contribution rates in the Local Government Pension Scheme are set, reviewed and scrutinised. This debate will take us further than the previous debate on a related issue.
Throughout the passage of the Bill, we have returned repeatedly to a central concern about the Local Government Pension Scheme: whether the system as it currently operates is truly striking the right balance between prudence and responsibility to members. We touched on that during the last debate. Prudence is essential; no one disputes that. Pension promises stretch across decades and it is entirely right that those responsible for safeguarding them adopt a careful and responsible approach—I feel sure that when or if he chooses to speak, the noble Lord, Lord Davies, will have something to say on this matter—because prudence must also be proportionate, transparent and sustainable.
A pension system must not only protect members’ benefits; it must also operate in a way that is affordable for those who are required to fund it. That balance is fundamental to the long-term health of the scheme and a key consideration for many admitted bodies considering if they should remain a member of it. The noble Lord, Lord Katz, alluded to this in a previous debate, but at present employer contribution rates are set through the actuarial valuation cycle which takes place, as he may have said, every three years—note: every three years. That process is well established and plays an important role in maintaining the long-term stability of the scheme. But it also means that once those rates are set, employers can find themselves locked into them for a considerable time, even if the financial circumstances of the scheme or of the employer itself change significantly during that interval. We believe that rigidity is increasingly difficult to justify.
We know that financial conditions can change quickly. Employer finances can change, liabilities can change and market conditions can shift. We know that from recent experience, yet, under the current framework, the mechanisms for reviewing contribution rates between valuation cycles are limited and, in practice, often opaque. Amendment 12 seeks to address that problem by creating a clearer and more transparent framework for reviewing employer contribution rates earlier when circumstances change.
Under this amendment, administering authorities would be able to carry out an interim review of contribution rates where there has been a significant change in scheme liabilities or in an employer’s financial position, or where an employer formally requests a review and agrees to cover the reasonable costs of undertaking it. We believe this is a very reasonable and sensible change. It makes the process more accessible to employers who believe that the contribution rates they are being asked to pay no longer reflect reality. It recognises that financial circumstances do not move neatly in three-year cycles—and nor do they—and allows the system to respond when material changes occur.
However, the amendment goes further than simply enabling reviews. It also strengthens transparency around the actuarial assumptions that underpin those decisions. That level of transparency is essential, as was again debated in the previous group. Contribution rates have few real consequences for employers participating in the scheme, whether local authorities, academies, housing associations or many others. Those organisations must plan budgets, allocate resources and deliver services on the basis of the costs they are required to meet. They should therefore be able to understand the assumptions and methodologies that determine those costs, so this amendment helps to ensure that contribution rates can respond to changing financial circumstances. It would ensure that employers are not locked into potentially outdated rates for three years at a time and that the actuarial assumptions underlying those decisions are transparent and, very importantly, open to scrutiny.
Ultimately, this is about responsibility. We all expect public bodies to act responsibly when they handle public money, and pension funds are no exception. As we have heard, they manage very substantial sums of money, and the decisions taken within those systems have consequences for not only scheme members but employers and taxpayers. With responsibility must come transparency and accountability, and where contribution requirements change or are reviewed, the assumptions behind those decisions should be visible and understandable.
However, crucially, this amendment would not undermine the role of actuaries; nor would it weaken the prudence that underpins pension funding. It would ensure that the system remains responsive and more flexible, transparent and accountable to those who are required to fund it. For those reasons, this amendment represents a constructive and necessary improvement to the framework governing the Local Government Pension Scheme, and I urge the Government to adopt it. I will, of course, listen very carefully to the upcoming debate, short or long, but I give notice that I am minded to test the opinion of the House. I beg to move.
Baroness Altmann (Non-Afl)
My Lords, I support this amendment. This is an important time to talk about the contribution rates to the Local Government Pension Scheme. When funding has changed so substantially in a very short period of time, having an interim review clearly makes sense, for not only the local authority but the council tax payer.
As we heard in a previous debate, we are seeing councils with significant surpluses continuing to spend council tax income on pension contributions to schemes that do not need them because they are in significant surplus. Further, fixing contribution rates in a three-year cycle underestimates the timeframe that has gone into the setting of those rates, because the valuations on which those rates are based were done more than three years before the third year of the cycle. It takes about a year for the scheme valuation to be done and the contribution rates to be set, so they could easily be four years behind. A lot can happen, and has happened, in that timeframe.
I hope the Government will accept that this principle of allowing councils to be more flexible with the revenue that they receive from council taxes could benefit local authorities and the country. We know that councils have been forced to increase council tax due to their inability to meet their basic spending commitments. If the amount that councils spend on pension contributions could instead be spent on social care, or other local authority needs, they would require less money from local residents—which would improve the local economy, as tax rates would not be so high—and central government. The pressure on public spending could therefore be ameliorated.
I know that there is a principle of trying to achieve what is referred to as stability in contribution rates, so that they do not change too much from one year to the next. However, when there are significant changed circumstances, forcing schemes to fiddle the assumptions on which the scheme funding is based so that local authorities can somehow justify maintaining contributions to a fund that, in the private sector, would not need the money and would normally be having a contribution holiday, strikes me as not serving the best interests of either the local or the national economy. A review of how pension contribution rates are set at local authority level is probably long overdue, given the big changes that we have seen, and could help the Government with some of the funding strains that they have been feeling, and their desire to improve growth.
If a local authority is spending, say, 20% or more of its council tax revenue on putting money into a pension scheme that does not need it, and if that pension scheme is underwritten by the Government anyway, so its members’ benefits are not at risk, you have a very different scenario from that a private sector employer’s trustees might be facing: if the contributions stop and the employer gets into trouble, there is nothing much that can be done to ameliorate the position for members. That risk does not really exist in a local authority pension scheme. As I say, there is no contribution to the Pension Protection Fund and no underwriting; this is guaranteed by taxpayers.
Therefore, if you are raising taxpayer revenue from council tax, why not simply use it where it is needed, rather than putting it where it is not needed for now? You can always come back later and impose contributions when or if the funding position changes, but the scheme is not going to run out of money in any short-term period; that is not how pension schemes work. I therefore hope that the Government will appreciate the logic of this amendment, which was so ably moved by my noble friend on the Front Bench.
Lord Katz (Lab)
I thank the noble Viscount, Lord Younger of Leckie, for his amendment, and I share the interest in ensuring that interim valuations are accessible and transparent for all employers in this scheme.
Amendment 12 proposes changes to Regulation 64A of the Local Government Pension Scheme Regulations 2013, which concerns valuations carried out outside of the triennial valuation cycle. In Committee, I committed that the Government will consult on changes to Regulation 64A this year, and we will consider the matters raised as part of that consultation.
I reiterate the point I made in Committee: any changes to regulations need to be properly considered to avoid unforeseen consequences. The views of employers, funds and other sector groups are vital to this process, and amending legislation now would prevent them contributing to the policy design and therefore ensuring our ability to get the best possible outcome. There is clearly value in having a mechanism that allows employers to review contribution rates, especially where employer covenants or liabilities change significantly, but this must remain consistent with the triennial valuation and be workable for all participants across the sector.
Amendment 12 aims for additional transparency, in a similar vein to the other amendments we have discussed this afternoon. The noble Viscount should note that the policy on interim valuation contribution reviews is set out in the funding strategy statement, on which employers are consulted.
The noble Baroness, Lady Altmann, spoke in detail about the time lag of valuations and the impact of events in the financial cycle. As everyone will be aware from geopolitical events, markets can vary from one day to another. Simply requesting a valuation on the basis of a change in the day’s markets would be excessive, and indeed many funding strategy statements state this. The current regulations provide for interim valuations on the basis of changes in liabilities or covenant. The risk of liabilities not being met is that the burden goes up not for the Government but for the council tax payer, as a council that may not be in a good financial position, as the noble Baroness says, needs to increase council tax to cover liabilities. The Government do not underwrite the scheme. Your Lordships’ House should remember that 50% of LGPS employer contributions are not from local authorities, so we are not talking about a situation where it is exclusively local authorities that would cope with the change.
I said in Committee—and I could have said this in response to the previous group as well—that it is marvellous to see the Benches opposite show concern now about the funding of local authorities. We are concerned about it, and we were concerned about it for the previous 14 years when the Benches opposite were in government and had a differing view of imposing austerity on local government. I will say no more, and I apologise to your Lordships’ House—I could not help myself, having been very good on the previous group.
I hope my response demonstrates that the Government have considered the points raised through this amendment carefully. I therefore ask the noble Viscount, Lord Younger of Leckie, to withdraw Amendment 12.
Viscount Younger of Leckie (Con)
I am grateful to the Minister and to my noble friend Lady Altmann for her supportive remarks. This amendment raises a simple but important question: how do we ensure that the Local Government Pension Scheme remains responsive, transparent and accountable when the financial circumstances surrounding it change? It sounds to me very reasonable.
I have taken note of the remarks made by my noble friend Lady Altmann, from her long experience. It was interesting that she pointed out that the timeframe of three years could easily be four years for the delays that necessarily have to be there, and she made further powerful points. By accepting this amendment, the Government could have a greater chance of achieving their growth targets with a domino effect—they might like to take that point on board.
Across the country, as my noble friend Lady Stedman-Scott said in the previous debate, many local authorities and other participating employers are operating under immense financial pressure. We know that councils are already struggling to balance their books, and some are being forced to seek emergency support simply to maintain basic services. In that context, the ability to review contribution rates where circumstances have materially changed is surely a matter of responsible governance.
The amendment is simple. It would establish a clearer framework through which contribution rates could be reviewed when there is a good reason to do so. For those reasons, I believe this amendment represents a sensible, reasonable and proportionate improvement to the current framework. It would reinforce the principles of transparency, accountability and responsible stewardship of public funds. I therefore stick to what I said at the beginning: when my amendment is called, I will wish to test the opinion of the House.
Finally, I do not think that the Minister is correct. He said the policy should “remain consistent”, which shows a great lack of understanding of what many in the industry are actually saying and a great inflexibility from this Government. I wish to test the opinion of the House.
Baroness Altmann
“(6A) Prior to making modifications to scheme rules in line with this section, trustees must commission and consider relevant formal actuarial advice regarding the impact of surplus distribution on scheme funding and future member or employer benefits and must consider alternative approaches for dealing with a surplus that include—(a) running the scheme on without new contributions,(b) transferring to a superfund, and(c) buying annuities.”Member’s explanatory statement
This amendment would require trustees to ensure they have had formal advice about surplus distribution before changing scheme rules, and the impact of alternative ways to deal with scheme funding.
Baroness Altmann (Non-Afl)
My Lords, Amendment 13 is in my name. I shall also speak to Amendment 15, which is very similar. I also support the aims of Amendments 14 and 16 to 19, which seek to make sure that members’ interests are taken into account when trustees distribute, or consider distributing, a surplus to employers.
Amendment 13 seeks to build on the important discussions we had in Committee. I thank the Minister for her thoughtful responses to those discussions. I appreciate the Government’s commitment to ensuring that defined benefit pension schemes can contribute to economic growth through the prudent and efficient use of their substantial surpluses. With around £1.2 trillion in private sector defined benefit assets—and that is on prudent measures—the potential for positive impact is huge, given the estimated £240 billion surplus from those 4,500 schemes.
Trustees who have stewardship over these assets on behalf of around 9 million scheme members are now being encouraged to make strategic decisions which could reshape some schemes for the future and deliver broader benefits, potentially both to members and to the economy. The Bill is correct in encouraging that to happen. Of course, trustees have significant responsibilities when they assess a scheme’s surplus and whether to it pay out or to preserve it. As the noble Lord, Lord Davies of Brixton, has so often reminded us, a surplus is merely a reserve—a buffer against future bad markets, perhaps. In some schemes, the extent of that surplus is so significant, with the employer having put in so much money during the past few years, because of the impact that quantitative easing had for so long on pension schemes’ liabilities, that it is perhaps appropriate for trustees to consider whether employers should be able to get some of that money back, especially if they could invest some of it into their business and help grow the strength of the employer behind the scheme.
As trustees have these greater responsibilities, my amendment seeks to ensure that the relevant comparisons are being made before any surplus is distributed, so that the trustees have considered the available options. The current Technical Actuarial Standard 300 would properly inform them. This would include not just paying out a surplus but running the scheme on for the benefit of the members. It could also include possibly finding a new employer sponsor who could manage the scheme with a greater strength behind it and take advantage of the surplus to some degree both to enhance member benefits and to return some money to the employer.
The noble Lord, Lord Davies, may well tell us that these technical actuarial standards and the reports, such as TAS 300, are already in place, so why do we need the amendment? I am informed by significant areas in the pension industry that advise many DB schemes that, although there is a requirement for these reports, trustees do not always take note of them. They are not even always presented to the trustees. This is under the aegis of the Financial Reporting Council, which does not have sufficient resource to enforce the standards that it would, perhaps, otherwise wish to do.
This amendment makes it clear to trustees that they must consider the broader actuarial advice—not just asking whether they should pay out the surplus and how much they should pay out but considering the other options that would be available. Many trustees will consider paying out a surplus alongside a scheme buyout, for example. This actuarial report would help to inform the trustees of the potential benefits and improvements to members that could be achieved by not buying out and by running the scheme on, for example.
At the moment, for each £1 billion of buyout funding that exists in a scheme, if they buy out, approximately £150 million to £250 million then goes to the insurance company in profit because it takes in the money but then rerisks it but invests in higher return assets—so it makes that profit. It is entirely feasible to imagine that a scheme that carries on could itself get that extra profit by running the investment policy in a kind of low-risk way, just as an insurance company would do, but that money could then go to the members or be shared between the members and the sponsor.
Viscount Thurso (LD)
My Lords, I shall speak to my Amendments 14, 16, 17 and 18, in my name and that of my noble friend Lord Palmer. It is always a pleasure to follow the noble Baroness, and I thank her for her support, which I am happy to reciprocate. As it is the first time that I have spoken on Report, I reiterate my interest as a trustee of the Parliamentary Contributory Pension Fund. I do not think that this Bill affects that fund, but for clarity I declare it. I also thank the Minister for the engagement that she has had with me and other colleagues—but particularly with me—on this subject. I came away feeling that I had had tea and sympathy, although possibly not with the greatest expectation for the future. But I thank her for engaging with me.
We debated this matter at some considerable length in Committee, and I shall not go over it. The key issue in this set of amendments is about permitting, when there is a surplus, that surplus to be fairly used, in part to give some inflationary uplift, if that would be the appropriate thing, to members of a scheme. There is nothing in any of the amendments that mandates that course of action; these are designed to permit it and also perhaps to draw attention to some of the historic injustices, as they might be called.
I cannot hear the word “surplus” in relation to pension funds without immediately putting quotation marks around it, as I said in Committee. I was grateful to the noble Lord, Lord Davies, for his suggestion that we really ought to talk about “assets” rather than a “surplus”, which is a best guess by some intelligent professionals. The starting point is a known—the actual market value of the fund on a given day—to which are added a series of known unknowns, in the form of what the guesstimated inflation rate might be, what the likely actuarial longevity of the members might be, and a variety of other things, to arrive at a best guesstimate of what the value of the assets might be at a time in future and what the liabilities might be. If you take one from the other, you come up with a surplus or a deficit. Like many who have spoken, I am extremely cautious about the notion of surplus, and I know from the funds that I have been involved in that, if you are at the top of the cycle, as I suspect we are getting close to now, a larger surplus is much needed to cushion you against the volatility of the shocks to come, whereas if you are at the bottom of the cycle, you are probably very near parallel and possibly slightly in deficit—and you have to have regard to that.
There is a general principle, which I shall speak to more on my next amendment later on tonight, that there is a contract between the employer and the employee that is, in the case of a direct benefit pension, that they are remunerated and, as part of their remuneration, there is a future remuneration, which is the pension. In the case of those schemes that have in their rules full indexation and there is a large surplus, the principle is that that surplus should, by whichever means are chosen, be returned to the employer. The schemes that I am concerned about are schemes which are in surplus and which, in their documentation, made clear that it was the intention at the time to uprate for inflation—but, for whatever reason, usually prudence, the designers of the scheme did not mandate that but allowed a degree of flexibility so that the employer or the scheme could choose not to uprate in whatever circumstances. In that circumstance, when a surplus arises and when indexation arises that had been indicated, if not absolutely promised, part of that surplus belongs to the pensioners, and it is only fair and just that they should have it. This set of amendments is designed to make that possible.
Lord Davies of Brixton (Lab)
I have worked in the pension sphere for far longer than I care to remember, and so-called surpluses have been a big issue throughout. They have come and gone. Sometimes they have been negative surpluses—deficits—but they are still central to the health or otherwise of a pension scheme. They have been totally embedded in my working life, so I hope the House will forgive me if I choose to make a longer contribution on this issue.
I support all the amendments in this group. The noble Baroness, Lady Altmann, suggested that I might not like her amendments, and maybe they are a bit unnecessary in principle, but in practice, the idea that trustees should consider all these issues when they make a decision about releasing surplus to the employer is a good one, so I support Amendments 13 and 15. I also support the amendments in the name of the noble Viscount, Lord Thurso. I particularly welcome his Amendment 17, which effectively points out that the existing legislation on the release of surpluses says explicitly that the trustees should do so only when it is in the interests of members. This legislation removes that guarantee.
We debated this issue in Committee and we have heard the Government’s argument, which, essentially, is, “We can leave it to the trustees to look after it”. My experience is that that is not a safe basis to rely upon. Some trustees are fine and they do a great job; others do not consider their role to be to help the members. They see their role as very restricted, so not having something in the Bill about members is a massive disadvantage.
In introducing this legislation, Ministers said extensively that members are going to benefit from the release of surpluses. Any bystander not deeply engaged in the issue, listening to what Ministers have said, would come to the conclusion that members are going to benefit. Indeed, I quoted about half a dozen ways in which different Ministers have given that impression, but for the purposes of this debate, I shall just quote the Minister for Pensions, my honourable friend Torsten Bell. He argued consistently and rightly that the release of assets is not just for employers but for members as well. The Government’s road map for pensions, to which he put his name, states under the heading, “Surplus Flexibilities”:
“We will allow well-funded … pension schemes to safely release some of the £160 billion surplus funds to be reinvested across the UK economy and to improve outcomes for members”.
The Government’s case is that this change in the legislation is required to benefit members, yet there is nothing at all in the Bill about benefit for members. This has been highlighted in the amendment from the noble Viscount, Lord Thurso. It is a big gap in the Bill, and it needs to be rectified.
My Amendment 19 goes together with Amendment 16 from the noble Viscount, Lord Thurso. His amendment adds the word “consulted”, saying that members should not only be notified of the trustees’ intention to release surplus to the employer, they should be consulted about that decision. Consultation is obviously a good thing. The structure for trustees to consult scheme members is not, to my mind, strong enough to provide a helpful way forward. The better way forward is the one suggested in my amendment. There is already provision in legislation for employers to consult members about changes in occupational pension schemes. There is a list of changes to or actions in relation to pension schemes, whereby the employer—if they are involved—has to consult with the independent recognised trade unions. I am very much a trade unionist here. The point of trade unions is to provide a viable means of consultation, and it applies here.
Baroness Stedman-Scott (Con)
My Lords, I will speak briefly to some of the amendments in this group. At the outset, I thank all noble Lords who have tabled amendments and contributed to the constructive discussions we have been able to have on these issues. While I will focus my remarks on some of the amendments, we understand the direction of travel intended across this group.
Taken together, these amendments largely seek to ensure that the process of releasing surplus funds from defined benefit schemes is carried out on the basis of sound professional advice, in close communication with scheme members and with their interests properly safeguarded. The group also includes a technical amendment from the Government, which tightens up the drafting of the Bill and which we are content to support.
Amendment 13 in the name of the noble Baroness, Lady Altmann, would introduce a formal decision-making safeguard before schemes even create the legal power to pay surpluses to employers. In practical terms, it would ensure that trustees have received and considered formal actuarial advice before making such a change to the rules of the scheme. That matters because altering the rules of a scheme to enable surplus extraction has potential implications for the long-term funding position of the scheme and for the security of members’ benefits.
Amendment 13 therefore performs two important functions. First, it seeks to ensure that trustees properly understand the impact that surplus distribution could have on scheme funding before rule changes are made. Secondly, it requires them to consider alternative approaches to dealing with surplus that may benefit members instead, such as running the scheme on, transferring to a superfund or securing benefits through annuities. In other words, it ensures that sound professional advice is formally incorporated into the process before it can be completed.
That process is then complemented by Amendment 15, which addresses the next stage of the decision. While Amendment 13 concerns the creation of the power, Amendment 15 would ensure that advice is taken when trustees decide whether to exercise that power and pay surpluses to the employer. Under this amendment, trustees would be required to obtain actuarial advice and to consider the risks and benefits of alternative approaches before distributing surplus. They would therefore need to evaluate options such as reducing or pausing contributions, running the scheme on, transferring to a superfund or buying out liabilities. Ensuring that these risks and alternatives are considered in sufficient depth is critical. It helps to make sure that trustees’ fiduciary duties remain at the centre of the process and that decisions about surplus are taken in a careful, balanced and professionally informed way.
Amendment 17 would retain the existing requirement that trustees must be satisfied that the exercise of the power to pay surplus is in the interest of scheme members. As noble Lords will know, that protection currently exists in the Pensions Act 1995, but the Bill as drafted would remove it. Retaining that test would represent a major governance safeguard. It ensures that trustees continue to place members’ interests at the heart of their decision-making when considering whether surplus should be returned to the employer. That seems to us both sensible and entirely legitimate. The Government should give serious consideration to adopting this change because members’ interests should always remain central to the operation of pension schemes.
The reforms proposed in the Bill potentially open a pathway for surplus to be released from defined benefit schemes. If that pathway is to command confidence, it must be underpinned by strong governance, professional advice and meaningful member engagement. The amendments in this group help to reinforce these principles. We welcome the opportunity we have had to debate and discuss these important issues.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I am grateful to the noble Baroness, Lady Altmann, my noble friend Lord Davies and the noble Viscount, Lord Thurso, for introducing their amendments. During our various deliberations, many noble Lords have highlighted the fact that the level to which a DB scheme is funded is subject to volatility and to changes in the underpinning assumptions used to ensure that schemes remain able to meet the promised pensions. This is something we take seriously as we all want to ensure that the policy aim here can be achieved: for surplus funds to be used to benefit members and employers, but with the right protections so that every member’s pension can be paid.
As I have outlined previously, the DB funding code and the underpinning legislation require trustees to aim to maintain a strong funding position. Our changes preserve trustee discretion over surplus release. Crucially, trustees must receive actuarial certification that the scheme meets a prudent funding threshold, and members must be notified before surplus is released. Let us not forget that these changes are simply levelling the playing field, as some schemes can already release surplus.
Amendments 16 and 19 would both require a consultation to take place before surplus is released. I understand the wish of noble Lords for the voice of members to be heard when decisions are being taken about releasing surplus. We agree with that observation; that is precisely why the decision to release surplus remains in the hands of trustees, who are there to represent their members. Trustees will consider a range of scheme-specific circumstances, including the employer covenant and wider endgame planning, when discharging their duty to members. It is, however, entirely for trustees to decide whether they may seek broader views before taking a decision to release surplus. It is their decision, not that of the employer.
In our view, a legislative requirement to consult is not proportionate. The existing framework gives trustees scope to seek broader views as required, and the fact remains that, ultimately, trustees must act in the best interests of scheme beneficiaries when taking a decision to release surplus. Furthermore, under our changes, trustees will continue to be subject to a requirement to notify members in advance of any surplus release, maintaining this key protection for scheme members. I can assure my noble friend Lord Davies that we will be monitoring closely how schemes intend to use, and are using, these powers.
Amendment 17 seeks to retain the statutory requirement that trustees be satisfied that it is in the interests of members before agreeing to surplus release. We discussed this in some detail in Committee. Trustees already have a clear overarching duty to act in the interests of scheme beneficiaries. We have had clear feedback from industry-wide stakeholders, including trustees, who have welcomed the repeal of this statutory requirement. Existing legislation is perceived by trustees as a barrier to considering the release of surplus because they are not sure how this additional test is reconciled with their existing overarching duties. This could clearly lead to indecision on whether to release surplus, which may ultimately lead to members losing out. We are making this change to put it beyond doubt for trustees that they are not subject to any additional tests beyond their existing, clear duties of acting in the interests of scheme beneficiaries.
Amendments 14 and 18 cover the consideration of discretionary awards upon the release of surplus. I understand the concerns raised by scheme members whose pensions have not kept pace with inflation. But the Government do not think that these amendments would be helpful to trustees or members. These amendments address only a single element of the matters that trustees must consider when determining whether to release a surplus. In practice, trustees’ overarching duty to act in the interests of all beneficiaries requires them to weigh a broad range of criteria before deciding whether a surplus should be released and, if so, how members might appropriately benefit. This may include the award of discretionary increases but, by narrowing the scope of these considerations, the amendments would risk constraining trustees in the proper discharge of their responsibilities.
The noble Viscount highlighted some matters that we may return to when we discuss his Amendment 22. I will touch on them now—what happens in circumstances where there appears to be a decent surplus and trustees may be minded but employers are reluctant—but, if it is okay with the noble Viscount, I will come back to that in the debate on his Amendment 22 as it is probably more closely focused on that.
The Government therefore believe that it is important that trustees remain in the driving seat. They are best placed to understand the individual circumstance of their scheme, its characteristics and history, and to decide how members may benefit from the release of surplus. By extending the power to return surplus to more trustees, we are levelling that playing field, with strong safeguards in place to protect member benefits. Trustees will be in a better position to negotiate member improvements in return for agreeing to release surplus.
There is clearly an appetite out there for trustees to enable members to benefit from this. Recent industry research shows that over 40% of employers intend to share DB surplus with members. We are confident that there is an appetite. We need to be careful not to create so many new restrictions that the policy aim of allowing more trustees to share surplus is not achieved, because that would prevent surplus delivering real value not just to employers but to members and the wider economy.
I turn to Amendments 13 and 15 in the name of the noble Baroness, Lady Altmann. Amendment 15 would require regulations to include a condition that trustees receive and consider actuarial advice on scheme funding. Amendment 13 would create a legislative requirement for trustees to commission actuarial advice on future benefits and alternative approaches to surplus release before modifying a scheme to allow for payment of surplus to the employer. I am not going to revisit our discussion on TAS 300, which is a particularly delightful memory from Committee, but I understand the concerns raised by the noble Baroness about trustees having appropriate advice to be able to make an informed decision about their endgame choices and whether to release surplus. Trustees will be required to take into account the scheme’s long-term funding objective when making decisions on surplus. This will include the factors that are listed in these amendments. Under the funding code, trustees are already required to set out their funding and investment strategy, describing how they intend to meet members’ benefits over the long term—in other words, their long-term objective. They will already be seeking appropriate advice before determining the long-term objective for their scheme. That objective is reviewed in line with each triennial valuation at a minimum.
Putting in place additional legislative steps that require trustees to commission and receive actuarial advice before releasing surplus could result in additional unnecessary bureaucracy. Hardwiring specific legislative considerations that trustees must take into account will remove their flexibility to gather the most appropriate advice for individual schemes. The Pensions Regulator—TPR—has set out guidance for schemes considering their long-term objective and options, including buyout, superfunds and run-on, which sets out clear expectations of trustees. In particular, the guidance says that trustees
“should regularly review the best way to deliver members’ promised benefits”.
It is not the responsibility of the FRC; it is for TPR to set out the requirements on trustees and monitor them.
Baroness Altmann (Non-Afl)
My Lords, I thank the Minister for her thoughtful and considered response. I also thank all noble Lords who have supported my amendment, including the noble Lord, Lord Davies, and the noble Viscount, Lord Thurso. I had hoped that the noble Lords on the Opposition Front Bench might be willing to support me if I were to press this to a vote, but it sounds as if that is not the case. I hope that the Government will be successful in ensuring that when pension scheme surpluses are paid out, members are considered carefully. I know that the Minister considered this would be unnecessary bureaucracy. I have to say that it is a requirement, but one that is not always adhered to, and the mechanisms for overseeing it do not seem to have been working.
More particularly, what I had hoped this amendment could help achieve was not only helping the trustees meet member benefits but, in many circumstances, potentially improving member benefits beyond what is currently payable. Yes, they need appropriate advice but, given the state of pension schemes, there is a significant opportunity to improve the amount of money paid to members alongside the decisions to pay out surpluses. Therefore, if the noble Viscount, Lord Thurso, decides to move Amendment 14 and test the opinion of the House, I certainly would be minded to support him. However, I beg leave to withdraw Amendment 13.
Lord Katz (Lab)
My Lords, before we go any further, I am afraid we will need to adjourn during pleasure for a few minutes. There has been an incident which means we do not have full access to the areas of the House that are needed to get to the voting Lobbies. I suggest we adjourn during pleasure and keep an eye on the annunciator. It should be a few minutes, but I do not want to specify a time because we do not know quite how long it will take to clear up. Apologies for this inconvenience, but I think it is for the best.
Social Cohesion Action Plan
(1 day, 4 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Scott of Bybrook (Con)
My Lords, I am grateful for the Minister’s Statement. When it comes to social cohesion, the penny has clearly started to drop in government departments that something must be done.
As has been highlighted by the leader of the Opposition in the other place, there are groups in the United Kingdom whose loyalties do not always align with our national interest. We should call it out as what it is—separatism: groups of people living apart from our country’s way of life, our behaviours, norms, customs, expectations and standards. That is what matters. We should be a multiracial country, not a multicultural one. This policy paper does not go far enough, in our opinion, as to admit that truth, which is why we have serious questions about whether the measures proposed will be enough to solve the problems we face.
We are all familiar with the rise of extremism. This paper sets out a new social cohesion measure framework, which will try to monitor levels of social cohesion. However, increased monitoring of the problems needs to be followed through with enforcement to make an actual difference. In addition, the paper promises an annual state of extremism report to set out the nature of extremism in the United Kingdom, with a new state threats designation power. These extremists need to be faced head on. Can the Minister confirm whether the Government will name specific organisations?
Last week, I spoke to a group of Jewish university students. Their testimonies of life on campus were harrowing. The Government say that the Office for Students will strengthen its monitoring of universities’ efforts to prevent individuals becoming involved in terrorism. The Government have also said they will codesign a cohesion charter for conduct on campuses, which universities will be encouraged to incorporate into their own codes of conduct. Is “encouraged” enough? Again, will increased monitoring and an optional charter be enough to help those students I spoke to? Which groups will be involved in codesigning this cohesion charter?
The paper seeks to link schools with children of different backgrounds. I would be interested to hear what sort of “social and educational opportunities” are envisaged as part of this initiative. To stop children growing up in communities which are fenced off from wider society, we on these Benches advocate replacing the promotion of multiculturalism in our schools with a curriculum that teaches a national story—one which helps children belong to something bigger than themselves and gives them confidence as to why our culture matters. I understand that my noble friend Lady Spielman will be working with the shadow education team on this issue. I really look forward to seeing their proposals.
I now turn to what has perhaps received the most attention in this policy statement, namely, the new anti-Muslim hostility definition. The previous Conservative Government adopted the International Holocaust Remembrance Alliance definition of antisemitism, using language based on existing hate crime laws. Others have asked what this non-statutory definition will do to tackle these specific crimes. The accompanying note also insists that the definition allows things to be said which are “in the public interest”. I ask the Minister once again: who decides what the public interest is and how? What criteria are they going to use?
This definition is complex and we deserve to have all the facts, so can the Minister commit to publishing the working group’s report in full? Moreover, the Government met with so-called relevant stakeholders following the working group’s report. Can the Minister please clarify who those stakeholders are?
Protecting What Matters recognises the importance of having a shared language. This is hardly ground-breaking. Indeed, we should not be campaigning in foreign languages, as was seen recently in Gorton and Denton. It undermines integration. Will the Government support the guidance issued to councils in 2013 by the then Secretary of State, which advised against routine translation into foreign languages? Will the social cohesion measurement framework also measure English language proficiency? These are basics which any social cohesion plan should grasp.
Earlier in my speech, I referenced the leader of my party. She also said this:
“Anyone can throw a match and walk away, but the point of this is not to divide or provoke. It is the opposite”.
Our queries to the Minister today reflect genuine concerns about what the policies mean in practice. We need a plan that is honest about the issues we face and which, crucially, has the teeth to solve them. I look forward to the Minister’s response.
Baroness Hussein-Ece (LD)
My Lords, I welcome the Government’s action plan for social cohesion, and I pay tribute to the working group for all the work that has been put into this over the past few years.
I am proud that I grew up in a multicultural, multiracial society. I was born in this country, but my parents were not. When I started school at the age of five, I could not speak English, but I learned it very quickly, like most children do, so I am bilingual, like most children who come from backgrounds such as mine, and it is a good thing. Much has been said recently about how multiculturalism has failed. Maybe it is because I grew up in inner London, but I do not think it is a failure at all. I think it is a huge success and something that this country should be proud of. London is the most multicultural, multifaith city in the world, certainly the most successful and the most visited. I am not going to take criticism of that, because I have lived it, and I totally respect people from all faiths and backgrounds who I grew up alongside and went to school with.
I turn to some of the most contentious issues, as someone who grew up in a Muslim household as well. Home Office statistics show that Muslims have been the most targeted religious faith group in terms of numbers and overall share in nearly every single year since records began in 2017-18. Hate crimes against British Muslims now account for the highest share, at 45%, with a 19% rise in anti-Muslim offences and a sharp spike since August 2024 following the tragic Southport murders. During the riots that ensued in July and August 2024, hundreds of rioters attacked the Southport mosque within 24 hours, hurling bricks and bottles, smashing windows, and setting a police van on fire. More than 50 police officers were injured. Violence spread across nearly 30 towns and cities in England and Northern Ireland. Mosques were vandalised, Muslim-owned businesses attacked, and hotels housing asylum seekers set ablaze. The Southport attack had no connection to Islam or Muslims, but on social media word spread that it did.
Mosque attacks have soared and become more widespread. Between July and October 2025, the Government’s own appointed monitoring body, the British Muslim Trust, recorded 27 verified attacks targeting 25 mosques across the UK in a report titled A Summer of Division. Attacks included arson at the Peacehaven mosque in East Sussex, described by the Muslim Council of Britain as coming after
“a disturbing pattern of violence and intimidation”.
The BMT found that perpetrators were now acting
“with growing confidence and a visible sense of impunity”.
It takes me back to when I was young, when the BNP marched openly in the streets of London. But then we had legislation that changed all that. I find myself thinking that we are going back to those days of division and a lack of social cohesion, and that people now are being proudly racist and aggressive towards sections of community. I include antisemitism in this. I have Jewish cousins so I know what that can be like. I just feel we are going backwards instead of forwards. That is why I welcome this action plan wholeheartedly.
The BMT also found that perpetrators were directly linked to the surge of far-right campaigns, including Tommy Robinson’s Unite the Kingdom rally. In recent weeks, we have seen much disinformation disseminated by the media on various online platforms. Although it is clear that a working definition of anti-Muslim hostility is legally non-binding, exactly like the IHRA’s working definition of antisemitism, in the past few weeks since the report was leaked and then published, we have seen outright misinformation spread widely and deliberately put out by these far-right groups, publications and broadcasters.
If we turn to the significant contribution made by Muslim communities in the NHS, for example, an estimated 46,200 British Muslim staff work in the NHS, including 15% of NHS doctors, which is quite remarkable when the Muslim population in the entire UK is only 6%. They are in the front line and face greater anti-Muslim intolerance and hatred. We have Muslim staff working here in Parliament who we rely on to look after us. They are also aware of growing anti-Muslim hate and language. It pains me to say this, but offensive comments have been repeated by a few individuals in your Lordships’ House over a number of years. Our staff deserve more respect. It is important for public bodies, councils, universities and employers to understand what anti-Muslim hatred looks like so that they can identify it, record it, and act on it—nothing more. There have been outlandish assertions from, among others, the vice-chair of Reform who stated as a fact that this will stop any debate about Islam. It will not, so debate away.
Many of us from a Muslim background strongly believe that the protection of British citizens from hatred and violence is not conditional on the approval of those who have made a habit of treating one community as uniquely suspect. Those who claim this is an Islamophobia law or a blasphemy law are deliberately spreading disinformation. There is no difference in substance from the antisemitism definition already in place. There is therefore no principled basis for opposing this one. Does the Minister agree that we need to repeat clearly and loudly that we are not legislating on belief or restricting criticism of ideas, we are protecting people? How will the Government ensure that these important guidelines will be disseminated to combat this disinformation? How will they ensure that British Muslim communities will be protected, just like all communities, especially the most vulnerable?
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, I am grateful for the thoughtful comments from the noble Baronesses.
Last week, the Secretary of State responsible for housing, communities and local government announced this publication, Protecting What Matters, which sets out the first steps towards a more confident, cohesive and resilient United Kingdom, focusing on three key pillars.
First, we will build confident communities. Cohesion relies on confidence in the social contract, yet when people look out from their doorstep, too often they see a future that they did not ask for. Put simply, there is a direct link between the degradation of the public realm and the division that we see happening in our communities. The Pride in Place programme will commit more than £5 billion across almost 300 constituencies to be spent through neighbourhood boards. This alone is not enough: we must meet our responsibility to protect young people. That is why this section includes tougher regulation of home schooling.
Secondly, we will build cohesive communities through a social cohesion measurement framework. This means consistent clearer metrics to identify risks early and to act quickly. We will set clearer integration expectations, based on British values, for existing communities and new arrivals, focused on a shared language, participation and respect for British values. We will develop a cross-government integration strategy and conduct a review of English language provision to identify best practice. Strengthening cohesion also means managing the pace of change. We will deliver an immigration system that is fair and transparent, and works better for communities.
We will boldly confront hatred in all its forms, head on. As the noble Baroness, Lady Hussein-Ece, said, Muslim communities are facing growing hostility, discrimination and abuse. Anti-Muslim hate crimes are at record levels, and they now make up almost half of all religious hate crimes. We have a duty to act. However, we cannot tackle something if we cannot describe what it is. That is why we have announced that we are adopting a non-statutory definition of anti-Muslim hostility. This makes clear what is unacceptable prejudice, discrimination and hatred directed at Muslims or those perceived to be Muslims. By describing these distinct forms of hostility, the definition will increase understanding across wider society; give victims confidence that what they face will be recognised and taken seriously; and help organisations to take action, as the noble Baroness said.
By setting clearer boundaries around what is and is not anti-Muslim hostility, the definition helps create space for more open and honest discussion of sensitive but wholly legitimate issues. Critically, the definition safeguards our fundamental right to freedom of speech. It is about the unacceptable behaviour towards people, not the protection of belief systems. It will not impede the raising of concerns in the public interest. I take this opportunity to thank Dominic Grieve KC and the members of the independent working group who have provided advice to Ministers on this. I thank two Members of our House who have done a lot of work on it, the noble Baroness, Lady Gohir, and my noble friend Lord Khan, who took on this work when he was in MHCLG. We will now work with various groups across society to consider how this definition can work most effectively in different sectors.
We remain absolutely committed to stamping out antisemitism. We have seen horrific antisemitic terrorist attacks both here in the UK and abroad in recent months. Since coming to power, this Government have taken decisive steps. We have invested record funding for security at synagogues and schools, and millions of pounds to tackle antisemitism in schools and universities. We have changed the law to address pernicious protests by places of worship. In this plan, we are going even further by tackling antisemitic extremism and addressing antisemitism in schools and colleges, the healthcare system and the workplace. Work is under way across government as we continue to root out antisemitic hatred from every part of British life.
Finally, our third pillar is building resilient communities. That means confronting extremism in all its forms. We will deliver where the previous Government failed, including by embedding the extremism definition, producing an annual state of extremism report with lists of the groups that meet the definition—to answer a question from the noble Baroness, Lady Scott—and transforming our disruption capabilities. We will introduce a state threats designation power to disrupt hostile state and proxy organisations; strengthen the Charity Commission’s ability to tackle extremist abuse; expand the reach of the visa taskforce; and promote safe, respectful campuses and workplaces.
Our universities should be beacons of free speech, but in recent years that has been undermined, as we heard in the debate in your Lordships’ House earlier today. We are now introducing new measures to tackle the rise in extremism on our college and university campuses since the 7 October attacks. That means strengthening the monitoring of extremism on campuses, and providing oversight of compliance with the Prevent duty and our ability to take robust enforcement action where needed. We will also hear concerns about hatred and discrimination in workplaces and build on protections in our landmark Employment Rights Act. By global standards, Britain is cohesive, and that underpins our economic strength, democratic resilience and national security.
I will try to pick up a couple of the questions from the noble Baronesses in the minute I have left. On the public interest test that the noble Baroness, Lady Scott, asked me about, it is probably better if I send a full reply in writing. Broadly speaking, the definition does not create a new test. “Public interest” should be understood in its ordinary and commonly used meaning in UK law and policy: matters that serve society’s wider interests. There is no single person or authority who decides that, and the application of the definition depends on the context. The definition provides a framework, and decisions will be made by the relevant body in that context using their existing judgment and powers.
I have picked up the questions on schools and universities. There will be a curriculum on civic education for all levels. That is really important.
On stakeholders, we consulted with a very long list of stakeholders during this work. I can provide a list, if Peers would like to see that.
I thank the noble Baroness, Lady Hussein-Ece, for her comments. I am very proud of the multiculturalism in this country. I was at an iftar ceremony on Friday evening, and it was great to see members of the Jewish, Hindu and Christian communities, and others of no faith, there celebrating together. That is part of our culture. The Southport mosque incidents were absolutely terrible, but it was good to see the community come out and do the clean-up afterwards.
Finally, the noble Baroness mentioned attacks, both online and in person, on NHS staff. I commend my colleague Shabina Qayyum, the leader of Peterborough City Council. Since she became leader recently, she has suffered some of the most horrendous abuse. Shabina is not only leader of the council but an NHS doctor, and she gets abuse in both sides of her life. It is unacceptable and we have to do everything we can to stop it. I hope Members will support this action plan, and I commend it to the House.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, I remind the House that the next 20 minutes are reserved for questions from Back-Benchers only. I know the whole House would appreciate these rules being adhered to, in order to ensure that as many noble Lords as possible get a suitable opportunity to ask questions of the Minister.
Baroness Verma (Con)
My Lords, can the Minister say why, in the report, there is no mention of Sikhs or Buddhists, one mention of Christians and only two mentions of Hindus? We are incredibly worried that we constantly are being ignored, and yet we are also victims of hate crime—and often from other minority communities. It is about time that we started to address this. As my noble friend on the Front Bench said, we need to talk about one Britain, where everybody is treated equally. I am really disappointed by the report that was issued by SOAS on the riots in Leicester; it is a very poor reflection of what actually happened.
Baroness Taylor of Stevenage (Lab)
I agree with the noble Baroness that everyone deserves to feel safe in our country. We will work with and celebrate our faith and belief communities to improve understanding of different religions, support tolerance and build a more cohesive and resilient country.
We need to continue to support programmes such as Near Neighbours, which brings people together in religiously and ethnically diverse neighbourhoods to collaborate on community initiatives. We also want to grow Inter Faith Week. I have seen a lot of the very good work that is done in interfaith initiatives in my community. It builds an understanding and interaction between people of different faiths. We also need to promote the role of the Standing Advisory Council on Religious Education by supporting improved analysis of its annual reports to understand the role that it can help to play in communities, leading to cohesion. We are taking action to deliver the £92 million places of worship renewal fund to champion freedom of religion or belief globally through sustained diplomatic engagement and multilateral partnerships.
I understand the point that the noble Baroness made. The reason for the definition in the report was to tackle the very large percentage of our Muslim community who are suffering from crimes at the moment. I will run a session next week on the whole report, and I hope that people come along to that. The whole programme is directed to making sure that we have more cohesive communities overall.
Baroness Gohir (CB)
My Lords, I declare an interest as the CEO of the Muslim Women’s Network UK. I was also a member of the working group on the definition. There was an orchestrated campaign to derail the work. Thankfully, it did not, and I thank the Government for adopting the definition.
Are the Government going to compile a list of all the misleading arguments that are being spread out there—the campaign is continuing—so that the public are aware of the counterarguments? The consequence of the misinformation—the disinformation, more accurately—is abuse of Muslim women. They are being targeted. We got a call today with a report of a Muslim woman on the Tube who was told to take off her headscarf. Why are the Government not addressing the safety of Muslim women? I would appreciate it if the Minister did not give the standard answers that I have received before from the Government—£40 million to mosques, millions to the British Muslim Trust and Pride in Place. What specific action is there for Muslim women? It almost feels as if the safety of Muslim women does not matter.
Baroness Taylor of Stevenage (Lab)
I start by reassuring the noble Baroness that the safety of Muslim women matters a great deal indeed. I could quote the figures of the sums. We are working with the British Muslim Trust to help tackle anti-Muslim hostility. We all have to concentrate on making sure that this actually happens in reality. Through our work across communities on cohesion, combined with the education programme—that will probably be slower—we need make sure that people understand different religions. I hope that will start to tackle the hostility. Having a definition in place is important in helping organisations right across the board—in the case of the Tube line, for example, it might be Transport for London—to understand what this means.
Lord Harris of Haringey (Lab)
My Lords, I spent 25 years of my life trying to build community cohesion in a north London borough. Like the noble Baroness, Lady Hussein-Ece, I realised how important that is. That period, which is a generation ago, felt difficult at the time, but it is actually much more difficult now because of the tide of misinformation, disinformation, and the deliberate attempts to breed extremism and create division. That is what this paper is all about and why it is so important.
I will ask two specific questions. There are references in this paper to doing more in schools about citizenship and critical thinking. It is crucial that we equip children and young people to challenge the misinformation and disinformation that they receive and to question its sources. I would like some more information as to what is being done about that. The second point is that there is a vague statement about using all the powers to deal with misinformation and disinformation online. I am sure that the Government will try to do that, but could they tell us what is being done to make sure that authoritative material is put out and clearly labelled so that people can have trust in the information they receive?
Baroness Taylor of Stevenage (Lab)
I am grateful to my noble friend for his many years of work to create cohesive communities. I will just briefly outline some of the measures that are in schools and universities. As he says, it is very important that we make sure that those who are trying to radicalise the minds of our children and young people face the education that stops that happening and that will encourage our young people to engage in the kind of critical thinking that makes them able to ask the questions themselves.
First, we are co-designing a cohesion charter with students to bring together a set of agreed principles that guide students’ conduct and engagement on issues that underpin or undermine campus cohesion.
Secondly, the Office for Students will further strengthen its monitoring of universities’ efforts to prevent individuals becoming involved in or supporting terrorism. Universities should be alert not only to violent extremism but non-violent extremism, including the certain divisive and intolerant narratives that can reasonably be linked to terrorism.
We want to strengthen the Department for Education’s oversight of compliance issues and take appropriate enforcement action. There will be enforcement powers for the Department for Education, and it is important that people have those powers.
We are working with the Office for Students to bring together clear and concise information on higher education complaints into a single online portal, so that staff and students have quick and easy access to organisations best placed to support them. We are also enhancing the higher education sector-wide capability to meet Prevent duty obligations, while, of course, upholding freedom of speech. It is very important that we do that as well. So, there are a number of steps in the action plan.
On my noble friend’s point about online platforms, we need to increase transparency about how those online platforms operate and comply with the Act. Platforms will be required to publish regular reports, summarised by Ofcom for public understanding, to give the public a clearer picture of platform compliance.
Lord Foster of Bath (LD)
My Lords, there is much to welcome in the plan, including the agreement to produce an integration plan. It would obviously be very helpful if the Minister could tell us when that is expected to be produced. But it also includes a commitment to refresh the Life in the UK Test. Only last week, in the other place, the Minister for Immigration was unable to answer one of the test questions, namely, “What is the height of the London Eye?” More importantly, he was unable to justify the inclusion of that question in the test. Further, we discovered that there are questions such as, “What is the largest denomination in the United Kingdom?”, to which, apparently, the “correct” answer is £50, whereas, in truth, in Scotland, it is £100. So, the answer that is given is incorrect. We understand that that will last until 2027. Are we really going to have to wait all that time until the Government take action on a test that has received ridicule around the world?
Baroness Taylor of Stevenage (Lab)
I do not think I know the height of the London Eye either—I will be straight up about that. I will look it up after this.
We recognise that a new approach to integration must consider the broader immigration system and what level of immigration is tenable in maintaining a cohesive society and meeting the needs of existing communities. Integration is of course a two-way process. Society must enable participation, while newcomers are expected to engage, learn English, respect our values and contribute.
I agree with the noble Lord, in that the test must have sensible questions. I do not have a date for when that will be reviewed, but I will find out for him after this evening.
As part of this publication, we will set clear expectations for integration, including English language proficiency and participation in work, and we will develop a cross-government integration strategy. Efforts will focus on removing barriers to participation, supporting underrepresented groups and fostering the shared sense of values across the UK that I know, right across the Chamber, we all want to see.
Lord Harper (Con)
My Lords, I take the Minister back to the question that she was asked by my noble friend Lady Scott in the context of the excellent report Time for Change by the Union of Jewish Students. This unfortunately makes it clear that antisemitism is being normalised across campuses. If university leaders fail to take action, how will they be held accountable? I have looked in the plan that has been published and there is nothing there about holding those university leaders accountable, so what specifically are the Government going to do to make sure that antisemitism is not normalised on our university campuses?
Baroness Taylor of Stevenage (Lab)
It is clear that there are some shocking statistics in that report. We must focus on making sure that Jewish students, along with students of all faiths, feel safe in our universities. On the noble Lord’s specific question about sanctions for university leaders, I will have to come back to him. I do not have the information on that in front of me. With all the very concerted work that is set out in the programme in relation to campuses and universities, the Government have a clear intent to make sure that our students can feel safe and be safe on a university campus.
Baroness Falkner of Margravine (CB)
My Lords, I exhort the Whip, since he started by asking people to be extremely brief in their questions, to give some practical effort to controlling the Chamber in that regard.
I welcome the Government’s overall strategy but want to ask specifically about anti-Muslim hostility. The paper accompanying the definition says that if you are unable to define an issue, you are far less able to tackle it. Can the Government define hostility and give examples of what behaviour would be covered by hostility? The other aspect of the paper, in Chapter 5, says that it will need to evolve over time. What tests will be used for the evolution over time, and what do the Government anticipate doing over time in terms of a public consultation?
Baroness Taylor of Stevenage (Lab)
As the noble Baroness says, the reason for a definition is that if you cannot clearly define an issue, you cannot properly identify it, measure it or address it. This definition provides the clarity needed to respond consistently and effectively. It helps to distinguish between legitimate debate—which remains fully protected—and unacceptable hostility, prejudice and discrimination directed at individuals, enabling people to name and describe specific forms of hostility that Muslims experience, helping to build understanding in wider society and giving victims confidence that they will be taken seriously.
Government and organisations will then have a consistent framework for training, reporting, data collection and prevention work to improve how incidents are recognised and addressed. That is the longer-term process. This is protecting people, not beliefs, and helping to prevent harmful behaviour while safeguarding open discussion and criticism of ideas.
Lord Roe of West Wickham (Lab)
My Lords, I thank my noble friend the Minister for the Statement. I strongly support this action plan. Like my noble friend Lord Harris, I say this in the context of having spent decades on the front line of where cohesion fails. Very few people in this House have had to pick up the bodies at the endpoint of failure, where cohesion has fractured and where enmity has played out on our streets. I have seen that in my career as a soldier and as a firefighter in the most terrible way.
I would like to see non-partisan politics in this space because, regardless of which Government have brought this plan forward, we should all support it. We should all support it with the way we use our language because not doing so—with an increasingly divided politics—ends in a most terrible way. How will we measure early the impact and effectiveness of this plan? If we do not, I am afraid that the first we will know of its ineffectiveness is when the most terrible things play out.
Baroness Taylor of Stevenage (Lab)
I thank my noble friend not just for his very important question but for all his work on this during his career. We are setting out a bold new approach here, not just tackling hate speech but countering extremism by adopting and implementing definitions of extremism. We will publish the annual state of extremism report. That is one way of making sure that we are keeping a focus on the issue. We are strengthening Charity Commission powers to tackle extremist abuse, including the power to shut down charities and suspend trustees—and there are the measures I have already mentioned on tackling extremism on university campuses and in health.
We will work to implement the definition to make sure it has real effect, making sure that public bodies do not confer legitimacy, funding or influence on extremist groups. We will work with the Crown Prosecution Service and the police to ensure robust use of existing legislation on that harmful extremist conduct. As my noble friend said, the consequences of not taking action here are critical and dangerous. We will make sure that all organisations, now that they have this definition, can take action and monitor what is happening.
Lord Young of Acton (Con)
My Lords, I declare my interest as the director of the Free Speech Union. It is not particularly helpful to accuse those who have expressed concern that this definition will operate like a Muslim blasphemy law by the backdoor of spreading dangerous disinformation, not least because knowingly spreading dangerous disinformation is a criminal offence under Section 179 of the Online Safety Act. Suggesting that those who raise the alarm about the chilling effect of this definition on free speech should be prosecuted makes the point far more eloquently than we could.
I note that when the Communities Secretary unveiled the definition of anti-Muslim hatred in the other place, he said that he hoped it would be taken up by the police; the Minister just expressed the same view. Is it the Government’s intention that when someone is found to have said or done something that meets the definition of anti-Muslim hostility, it will be recorded by the police? Could it then be disclosed in an enhanced criminal record check if that person applies for a job as, say, a teacher at a school in a Muslim neighbourhood?
Baroness Taylor of Stevenage (Lab)
I set out very clearly that this is a non-statutory definition. It is there to assist organisations to understand what we mean by anti-Muslim hostility. I remind the noble Lord that there is no blasphemy law in this country and that this Government have no intention of introducing one.
Lord Scriven (LD)
My Lords, the strategy places significant emphasis on engaging faith leaders as key arbiters of community cohesion. However, does the Minister agree that true social cohesion is built not on the mediation of religious blocs but on the primacy of civic values and a singular secular rule of law? When religious sensitivities collide with fundamental civic rights, such as LGBT equality, will the Government prioritise civic democratic values over the avoidance of religious offence?
Baroness Taylor of Stevenage (Lab)
The importance of this strategy is that it concentrates on all these angles, including creating confident communities and protecting that confidence. We have to create the conditions for cohesion. Our aim is to bring people together through community-led schooling, youth and sports infrastructure, trusted local venues and major cultural and sporting events with strong community legacies, focusing on restoring pride in place through long-term investment in left-behind areas, support for local media and high streets, improved digital connectivity, neighbourhood policing, tackling anti-social behaviour and reducing reoffending. All these things are positioned as essential to safety, pride and cohesion. I hope that this action plan will take us a long way towards doing that.
Arrangement of Business
(1 day, 4 hours ago)
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Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, I advise the House that one of our colleagues has been taken ill. I thank the usual channels and all Members for coming together in order to do the Statement an hour early. Our friend and colleague has now been moved to hospital, so the Lobbies are now open. Before we adjourned, we were about to vote on Amendment 14, so if that amendment is divided on, we can vote on it straight away and carry on with our business for the rest of the evening.
Lord Austin of Dudley (Non-Afl)
I am sure the whole House will want to echo the comments just made about our colleague who has been taken ill. However, we have had just 20 minutes’ debate on a significant change that the Government are introducing. It will be introduced with no proper debate. We have had 11 questions—that is all we had time for—and there will be no proper discussion of the proposal to introduce a definition of anti-Muslim hostility. The Government really should allocate proper time to debate the introduction of such significant changes.
Lord Kennedy of Southwark (Lab Co-op)
I thank the noble Lord for those comments. Obviously, I am happy to chat to him outside the Chamber, but we have allocated the proper time of 40 minutes—20 for the Front Benches and 20 for the Back Benches—which is quite normal for these Statements.
We should now move on to the next business, but again, on behalf of the whole House, I thank our colleagues, the doorkeepers and all the other staff who assisted our friend and colleague, as well as the ambulance staff who dealt with our friend so professionally.
Baroness Falkner of Margravine (CB)
My Lords, before the Chief Whip sits down, he has been sorely missed in this Chamber today because the conduct of business has been all over the place, including on the Private Notice Question. While the Whip sitting here on the Bench exhorted people to be extremely brief and to ask questions, that was entirely disregarded by the Chamber.
Lord Kennedy of Southwark (Lab Co-op)
I am sorry to hear that. Maybe it is time for me to make another announcement to the House in the next few days. It is important that the Government are properly scrutinised, and that during Questions we ask questions that are short, sharp and to the point. What we do not want at any time is speeches and stuff. If need be, I will come back to the Chamber fairly shortly to remind colleagues of how the Companion should be operated, and that we all need to work to ensure that the Government are properly scrutinised. If we follow the Companion, we will not go far wrong.
Pension Schemes Bill
(1 day, 4 hours ago)
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19:42 - Division on Amendment 14 - Ayes: 48 / Noes: 142 - Amendment 14 disagreed.
Viscount Thurso
“(2AA) Without prejudice to the generality of subsection (2A), regulations made under that subsection must include provision that takes into account the particular circumstances of occupational pension schemes established before the coming into force of the Pensions Act 1995 which, prior to that Act, possessed or were understood to possess a power to pay surplus to an employer.”Member's explanatory statement
This amendment would allow schemes where people are affected by pre-1997 arrangements to offer discretionary indexation where funding allows, with appropriate regulatory oversight.
Baroness Sherlock
Member's explanatory statement
This amendment corrects a mistake in a cross-reference to the Pensions Act 1995.
Viscount Thurso
“Report on fiduciary duty and discretionary indexation of pre-1997 benefits(1) The Secretary of State must, within 12 months of day on which this Act is passed, publish a report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.(2) The report must consider—(a) the impact of current fiduciary obligations on trustees’ ability to award discretionary increases to pre-1997 pension benefits;(b) the potential benefits of permitting such discretionary indexation for affected pensioners;(c) the funding conditions and thresholds under which discretionary indexation could be considered sustainable;(d) the appropriate level of regulatory oversight and guidance required to ensure that discretionary increases are granted in a fair, transparent, and financially responsible manner;(e) international approaches to indexation of legacy pension benefits;(f) the legal and actuarial implications of amending fiduciary duties in this context.(3) In preparing the report, the Secretary of State must consult—(a) the Pensions Regulator,(b) the Financial Conduct Authority,(c) representatives of pension scheme trustees, members, and sponsoring employers, and(d) such other experts or bodies as the Secretary of State considers appropriate.(4) The Secretary of State must lay a copy of the report before both Houses of Parliament.”Member's explanatory statement
This new clause requires the Secretary of State to report on whether the fiduciary duties of trustees of occupational pension schemes should be amended to permit discretionary indexation of pre-1997 accrued rights, where scheme funding allows.
Viscount Thurso (LD)
My Lords, as the Minister indicated earlier, we left much of the meat for this debate around pre-1997 indexation to this group, not anticipating the events that happened outside, which I know we all regret. Knowing who was involved, who was a friend, I very much hope that the outcome is the best it may be.
This amendment, which is similar to one we moved in Committee, basically looks at the situation of those people who, for one reason or another, have not had their pensions uprated for inflation. Basically, it sets out that:
“The Secretary of State must, within 12 months of day on which this Act is passed, publish a report”.
When I discussed this with the Minister, I think we agreed that having a review is not necessarily the best way forward, but the problem is finding a way to bring this to the attention of government in a manner that might result in some sort of outcome for those affected. The problem we were discussing around surpluses was very much around how a surplus is made, who can have it, and so on. I would just like to go back to the argument I was making in relation to the fact that defined benefit schemes to me are a contract between the employee and the employer.
I know that in Committee, on a different group much later on, one of the noble Lords present commented that, in his view, a DB scheme is just a giant Ponzi scheme. I thought that comment was a bit uncalled for and indicated that he neither fully understands the evil impact of a Ponzi scheme nor the benefit of a properly constructed DB scheme. In a DB scheme where there are sufficient contributions from the employee and the employer and well-run trustees follow a good investment strategy, the great likelihood is that, at the end of the day, a good solid pension will be paid.
What we are discussing here is really whether trustees who are in a position to do so can in fact share the benefits of a surplus. In some circumstances, that is written into the contract between the employee and the employer, as in the case of the PCPF, which is the one I know—it is absolute and we have to pay it; it is uprated by CPI, and that is in our investment objectives and we invest in order to achieve that. There were a number of schemes where the scheme rules did not actually mandate that to happen, but if you read the literature produced for many of these schemes at the time, it made clear that the anticipation was that that would happen. The amendment seeks to highlight the fact that a great many people could reasonably have expected to receive a pension that broadly kept pace with the cost of living but which today is substantially less than it might have been.
As I woke up this morning, listening to the “Today” programme and the ministerial rounds that were going on, I could not help but note that what was on the grid for today was how much the Government are concerned by the cost of living, so it is apt that this amendment is being discussed today. I completely accept that this amendment may not move the dial hugely and that it may be somewhat imperfect, but I think we owe it to those who are now in some considerable hardship to make at least some effort to try and get them back to where they might have been.
Finally, in looking at all the different economic inputs that go into growth, one of the most important is the ability for the consumer to spend. One of the things I learnt when I was still in business was the power of grey purchasing power, as it was known in marketing terms in those days. The pensioners who were earning their pension in the 1960s, 1970s and 1980s and who retired in the 1990s had that strong purchasing power and spent a great deal of money on activities that supported the economy. Therefore, I think there is merit—moral merit, if you like—in looking after these people, and there is also sound economic merit in looking after these people. Having rehearsed all the detailed arguments before, I leave it there. I beg to move.
Viscount Younger of Leckie (Con)
My Lords, we again understand the intention behind this amendment from the noble Viscount, Lord Thurso, supported by the noble Lord, Lord Palmer. We also recognise the strength of feeling that exists on the question of pre-1997 indexation; I listened carefully just now to that strength of feeling behind the noble Viscount’s remarks. It is an issue that has been raised in this House and, separately, we have had discussions ourselves with representatives of a number of the campaigns that have taken a close interest in this matter. We have heard the arguments that they have put forward and understand clearly where this amendment is coming from and why it has been tabled.
However, we feel that there is an important principle at stake here. The noble Viscount said that his amendment was not perfect, but I will continue. The foundation of the occupational pensions system is fiduciary duty. Trustees and scheme managers are entrusted with the stewardship of pension funds on the basis that they must act in the best interests of scheme members and beneficiaries. That is the basic and fundamental point on which the entire system operates. It is also the basis on which people engage with the system in the first place: members can have confidence that those responsible for managing their pension savings are legally bound to act in their interests.
Once we begin to qualify or redefine what those best interests are, however well-intentioned the objective may be, we risk undermining that principle. If Parliament starts directing or reshaping how that duty should be interpreted in particular circumstances, we may end up tying the hands of the very people who are trusted to make those judgments. Trustees could find themselves placed in a position where they are, effectively, required to act in a way that they themselves do not believe is in the best interests of members, based on their professional judgment and their understanding of the scheme’s funding position.
I believe that would represent a concerning precedent. The strength of the current framework lies precisely in the fact that those decisions are taken by trustees exercising their fiduciary responsibilities, not by central direction or legislative qualification of what those responsibilities ought to mean in practice. We will, of course, hear more about the point that I am making on Thursday.
For these reasons, although we recognise the concerns that have given rise to this amendment and the sincerity with which they are held, we are cautious about moving in a direction that could weaken the clarity and independence of fiduciary duty within our pensions system. We regret that we are therefore not in a position to support this provision becoming a feature of the pensions landscape. I am sorry to disappoint the noble Viscount to that extent.
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, I am grateful to the noble Viscount, Lord Thurso, for introducing his Amendment 22. Many members of defined benefit, or DB, schemes have seen inflation erode the value of their pensions, as he said. That is especially true where any uplift on older benefits depends on decisions made at the level of the scheme. I want him to know that I hear those concerns loud and clear. I have heard them expressed by affected pensioners, as many Members will, and I understand the strength of feeling among them.
As the House will know, schemes take different approaches to indexation: some schemes have to provide increases under their rules; some do not require them at all; and a significant number allow discretionary increases, but usually only where both trustees and the sponsoring employer agree. This amendment focuses on the role of trustees in relation to pre-1997 discretionary indexation. The fact is that, in many schemes, such indexation can be awarded only where the sponsoring employer provides consent, which reflects the scheme rules. It means that trustees may be unable to award uplifts where employers are unwilling to agree, even in well-funded schemes.
I recognise why many schemes give employers a central role. Employers ultimately stand behind the scheme and may have legitimate concerns about future affordability and their long-term liabilities. But the result is that when employers are unwilling to support discretionary increases, even when the scheme is in a strong funding position, trustees are, effectively, prevented from acting. I understand that that limitation creates concern, especially in schemes that appear well-funded and may be running surpluses but are not providing discretionary uplifts on older benefits.
However, although I understand the challenge, we cannot accept Amendment 22 because—the noble Viscount identified this himself—it would require a statutory review of trustees’ fiduciary duty in a complex area. Fiduciary duties underpin trustees’ responsibilities to protect all members and ensure the long-term solvency of their scheme. Changes that go beyond trustees freely acting in line with their fiduciary duties on this issue and removing trustee discretion, or removing the employer from any decisions, could have significant consequences for scheme funding, employer sustainability and member security. In any action they take, the Government have to consider all schemes, not only those that are well funded or have historically paid discretionary increases. Mandating a statutory review thus risks creating uncertainty for all trustees and employers, while we are undertaking wider work on surplus and helping schemes make endgame choices.
The key point, as I know the noble Viscount, Lord Thurso, recognises, is that the difficulty in the hard cases is not typically that trustees lack the willingness or the legal ability to act. They are often acutely aware of the pressures their members are experiencing. However, I agree it would be helpful to develop a clearer understanding of the factors that prevent some well-funded schemes awarding discretionary increases, particularly where employer consent is not forthcoming. I am aware that the Pensions Regulator has been considering how it might build its evidence base in this area, and any insights from that work would be helpful in informing future thinking.
The Government recognise the importance of this issue. As I indicated in earlier debates, the wider package on surplus, including giving trustees the ability to agree surplus payments to employers, is intended to support more balanced negotiations so that both members and employers can benefit. I hope that has given at least an explanation to the noble Viscount, Lord Thurso, as to the position that the Government are in but, for all those reasons, although I recognise the concerns he has raised, I hope he can withdraw his amendment.
Viscount Thurso (LD)
My Lords, I am grateful for the comments of the noble Viscount, Lord Younger, and only sorry that I was not persuasive enough to get him to join my side. I am also grateful to the Minister, because the tea and sympathy has actually gone further than I might have expected. What she said in her response is very encouraging. It indicates that the Government are very much in listening mode on this. If we can find a way to encourage some of those schemes, particularly the BP scheme which I mentioned in Committee, to share those surpluses, and if the Government have a mind to perhaps put a bit of a wind behind that then that would be very good. In the light of that, I beg leave to withdraw my amendment.
Baroness Altmann
“(14) Value for money regulations must include criteria relating to member service quality, including—(a) accuracy of recorded contributions;(b) reliability of valuation data;(c) efficiency of administration;(d) jargon-light communications in plain English;(e) availability of education or guidance for all members;(f) specific support for vulnerable members.”Member’s explanatory statement
This amendment seeks to ensure that value for money assessments consider the quality of member services and communications, as well as data and administrative accuracy.
Baroness Altmann (Non-Afl)
My Lords, I will speak to various of my amendments in this group. We have moved on now to value for money. Of course, I fully support the Government’s aim of moving from talking about cost as the only arbiter of whether a scheme is good, and low cost being the measure of good, to looking at a much wider area of benefits for members in terms of value for money.
The particular amendments that I tabled, which I also tabled in Committee, focus on language in particular. I am grateful to the noble Baroness, Lady Bowles, for her support for Amendments 24 and 25. These amendments are trying to outline more clearly what criteria a scheme that is good value for money should be able to fulfil, so that it is much clearer what “value for money” means beyond whether it is low cost, and indeed beyond the aims of just saying whether a scheme has been performing well.
Ultimately, when we are discussing the value of a pension scheme with members, one thing that has in the past not typically factored into the thinking of the industry is the idea that the scheme might encourage members to understand pensions and give them a better idea of what the pension fund does and the benefits it can bring to them. So often in the past, there has been a reliance on member inertia, where they do not have to do anything and the pension is done for them.
The aim of the various requirements I suggest in Amendment 24 is to make the accuracy of contributions important. At the moment, schemes are generally riddled with data errors. I know that the Pensions Regulator has been looking at this recently, but part of the assessment of a good scheme should be whether its administration is capable and competent in managing scheme assets and recording the contributions correctly. I therefore suggest assessment criteria that includes reliability of the valuation data and efficiency of administration. Those are other areas that I hope will form part of the value-for-money judgments, and I hope that a requirement that regulations must include them will be included in the Bill.
I have also included what I call
“jargon-light communications in plain English”.
So often when you get a pension statement, or when anyone talks about pensions, it is in jargon that makes no sense to ordinary human beings. It is pension speak, which everyone in the pensions industry automatically understands, but, unfortunately, when the member gets their information about pensions it is usually something that they ignore, throw away or put in a file for later, rather than looking at what it means.
That leads on to my next point, which is the
“availability of education or guidance for all members”.
Members of the scheme would then have a provider that tries to help them understand what is happening to their pension fund.
Along with that, of course, would be specific “support for vulnerable members”. To some extent, vulnerable members are better taken care of, but I argue that, when we are looking at value for money—I stress that the Government are right to suggest that we need to look at value for money—there are important areas that should be in the regulations. I am trying to highlight them here.
The remainder of the amendments look at the language that will be used to assess value for money, apart from Amendment 32,which I will come back to. The other amendments deal with the Government’s assessment of whether a scheme is good value—which in the Bill is called “fully delivering”, though I am not sure that that is the kind of language that an ordinary person would relate to when thinking a scheme is good value. I am suggesting that rather than “fully delivering”, why not use “good value”? By the same token, when a scheme is judged to be “not delivering”, could we not say that it is “poor value”? That is what the ordinary person would immediately relate to when they look at what a value-for-money assessment says.
I appreciate that the Government and the consultations around this have looked at different red, amber and green ratings—RAG ratings—such as light green, dark green and so on, but I am trying to signal that there are ways in which we could talk about pensions that would resonate much better with the ordinary person. I hope that the Government might consider that.
The pensions industry, of course, loves its jargon and is very wedded to it, but I am not sure that it helps encourage people to want to put more money in pensions, for example—an aim which I believe the Government want. It would be more achievable if pension providers spoke to ordinary people in language that they understand—and their members are ordinary people, such as workers and so on.
Viscount Thurso (LD)
My Lords, I rise briefly to offer support from these Benches, particularly for Amendments 24 and 25 and more broadly across all the amendments that the noble Baroness indicated.
In particular, I was taken by Amendment 24 and the idea that value for money regulations should include, among other things, the
“accuracy of recorded contributions … reliability of valuation data”
and the “efficiency of administration”. As any poor civil servant who is currently trying to get hold of a pension administered by Capita is finding out, these things are not a given. Making sure that the small number of quite large firms in the marketplace actually deliver with the necessary competence is a really important part of whether pensioners get value for money. As I say, I broadly welcome and support the amendment.
Lord Lucas (Con)
My Lords, it is a long time since I was managing big pension funds in the 1980s. In those days, we were in the happy position of considering it a bit underweight if you had less than half your money in British stocks; now, it is 5%. It is extraordinary for politicians to have done that to the economy—and it is because of us that it has dropped. The way we have framed our regulations and organised how pension funds are assessed has, over time, resulted in that extraordinary diminution. This has left us with a stock market that is cash negative and a City that is immensely weaker than it would be. We will address this later, but the solutions to that problem perhaps lie in this part of the Bill.
If we communicate better with pensioners and say to them, “Do you really trust the country you live in, are part of and benefit from so little that you want only 5% of your pension in it?”, I think we would get a positive response to the idea that perhaps that figure should be higher. Through the mechanisms in this part of the Bill, we could ask pension fund managers to respond to that, and I hope that we would be able then to get away from the bits in the Bill about compulsion and direction that are causing difficulty to my noble friends, whose concerns I share. I think we would get a good response if we informed members of pension funds, as my noble friend said, so that they could take good decisions, and then empowered them to say that they want to back their own, with a good chunk of their money going to improve, invest in and support this country and take it forward. This bit of the Bill would be a good place to do that.
I hope the Minister can confirm that, in the governance aspects of this, it will be expected that pension fund managers should vote their shares. It is extraordinary that we have moved to a position where the owners of companies just do not vote—they do not use that power to decide what their opinion is on what companies have been doing; they merely buy and sell. That is a huge diminution in the mechanism by which companies are held to account. We need people to vote and to take an interest. Having a direction on pension funds that they should participate and be a real part of the corporate governance process would be a useful thing to come out of this Bill.
Lord Davies of Brixton (Lab)
I have three points. First, I profoundly disagree with the noble Lord, Lord Lucas. To pin the blame just on politicians lets everyone else off scot-free. It is more like Murder on the Orient Express—everyone had a hand. My particular favourite is the accountants, who had a big hand; the way they defined accounting for pension costs was pernicious. Let us not blame just the politicians.
Secondly, one cannot not be in favour of value for money. Obviously, we are all in favour of people getting value for money from their pension schemes. However, I think the Government underestimate the difficulty of providing something useful. As the noble Baroness, Lady Altmann, pointed out, there are more than two or three factors to be taken into account. It is particularly difficult when one starts including prospective factors—how are these to be judged? It is very difficult, and it is not just the factors. The pension holders’ circumstances vary so widely. How can there be a simple, straightforward way of assessing whether someone has had value for money when their needs are so different from those of other people who are saving for their pension?
Thirdly, I apologise for not being present in the Chamber to support the amendment in the name of the noble Viscount, Lord Thurso, in the previous group. I realise I am cheating here, but I was elsewhere. I had not realised that one of the groups had disappeared; otherwise, I would have been here and supported his amendment.
Baroness Stedman-Scott (Con)
My Lords, I begin by thanking the noble Baroness, Lady Altmann, for her opening remarks, which set the scene effectively on an important part of the Bill. She has done so at the close of what has been a long first day on Report—longer than we would have thought. She has once again brought clarity to a set of issues that are central to the operation of the reforms before us.
The amendments in this group are, in large part, concerned with ensuring that the value-for-money framework works well—both in how it is constructed in legislation and how it is communicated to and understood by those who will ultimately be operating under it. If this framework is to achieve its objective of improving outcomes for savers, it must be both robust in its design and clear in its application.
Amendment 24, in the names of the noble Baronesses, Lady Altmann and Lady Bowles, is both welcome and important. Throughout our discussions today and, indeed, in Committee, we have spoken a great deal about fiduciary duty: the principle that those responsible for managing pension schemes must act in the best interests of their members. Amendment 24 would help ensure that this vital principle is properly reflected within the value-for-money framework. It would require the regulations underpinning the framework to include explicit criteria relating to the quality of service provided to members. It would include matters such as the accuracy of recorded contributions; the reliability of scheme data; the efficiency of administration; the clarity of communication; the provision of guidance and education for members; and the support available to vulnerable members. Thus it recognises that value for money in pensions is a question not simply of investment performance and cost but of how effectively schemes serve the people whose savings they are entrusted to manage.
Amendment 25 has a complementary effect of strengthening transparency. It would require the value-for-money framework to provide separate assessment and reporting for each asset type in which a scheme invests. Rather than relying on a single aggregated measure of performance, schemes would need to report performance by asset class; for example, equities, bonds or infrastructure. This would allow for a clearer and more granular understanding of how investment strategies are performing, and therefore enhance transparency and accountability.
We also welcome the amendments in the name of the noble Baroness, Lady Altmann, which seek to ensure that the language used within the value-for-money framework is both intelligible and meaningful. The framework can succeed only if it is understood by those who are subject to it and by those whose savings it is designed to protect. Replacing more technical or opaque terminology with clearer expressions, such as “good value” and “poor value”, may seem a small change, but it is a practical one that helps ensure that the framework communicates effectively with members and the wider public.
Amendment 32 addresses another important issue: the practical realities facing pension schemes as they adapt to a rapidly changing regulatory landscape. This amendment would ensure that schemes are given time to improve before facing additional regulatory obligations. We have heard considerable concern throughout our debates about the sequencing of reforms in the Bill. Funds are being asked to do a great deal at once and to respond to a system that is evolving significantly under these provisions. Allowing a longer period before additional reporting requirements are triggered therefore seems both sensible and pragmatic. If schemes are to improve performance, they must first be given the time and space to adjust.
Finally, I turn to Amendment 44 in my name and that of my noble friend Lord Younger, which would require the Secretary of State to establish the value-for-money framework within 12 months of the Act being passed. This again speaks to the issue of sequencing: those who operate the system need clarity about the framework within which they are expected to operate. Providing that framework in a timely manner gives funds the greatest possible opportunity to understand its requirements and prepare for implementation. That, in turn, makes compliance more achievable and the reforms themselves more effective.
I thank the Minister for the technical amendments in this group. These drafting corrections help to ensure that the framework is expressed clearly and consistently in legislation, and we welcome that work. Taken together, the amendments before us seek to ensure that the value-for-money framework is clear, transparent and workable. If we are to ask pension schemes to operate within a new regulatory structure, it is only right that we ensure that structure is robust in its design and comprehensible in its operation. These amendments help us to move in that direction.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who have spoken this evening. I am grateful to the noble Baroness, Lady Altmann, for her support on the principle of the shift to value for money. Before I move on to the detail of her amendments and others, I say to the noble Lord, Lord Lucas, that I am not going to get in between him and my noble friend Lord Davies in fighting it out on who got us here. Of particular relevance to this debate is that we would probably all agree on the need to move from cost to value—and that is only one of the things that has been going wrong. If we have pension funds competing for business with employers on cost rather than value, we are never going to move to the kind of scale that we want to see, which is a consolidated pensions market with large and better-performing pension schemes, improving the opportunity to invest in a wider range of assets and, I hope, taking us in a direction that would make the noble Lord happy.
I start with Amendment 24. I recognise the consistent commitment of the noble Baroness, Lady Altmann, to improving outcomes for members, particularly through better service quality and clear communications for vulnerable members. The Government entirely share these aims. Where we differ is that we think that the Bill already provides the necessary powers to deliver them. Let me explain why.
Service quality is a core part of the VFM framework. The Bill ensures that these metrics remain central to assessments, while allowing detailed definitions to be set in regulations so they can evolve with member expectations and industry practice. Clause 12 makes it clear that trustees may be required to disclose data on service quality. However, defining a comparable quality of service is complicated, as I am sure the noble Baroness will appreciate. We have consulted with industry on appropriate metrics and how these should be measured to ensure that they represent the nuances involved in determining quality, without inadvertently disadvantaging those arrangements—for example, with a less engaged member demographic.
Defining this through regulations provides us with the scope to develop comparable data in this area in an adaptable, consultative and proportionate way, while still acknowledging the technical nuance required here. For these reasons, while fully supportive of its intent, we cannot accept the amendment as the Bill already provides the powers needed to achieve its aims.
I turn to another matter for the noble Baroness, Lady Altmann, I fear. Her Amendment 32 would limit the Government’s ability to specify the consequences for intermediate ratings unless received for at least three consecutive years. I listened carefully to what the noble Baroness said, but the Government cannot support the amendment. Reducing reporting for such schemes risks missing early warning signals that changes are needed to protect savers. We believe that thorough, regular reporting ensures the long-term health and security of pension schemes for all members.
As the noble Baroness said, Clause 16 gives the Secretary of State discretion to set different consequences for different grades of intermediate rating. As proposed in recent consultations, amber-rated arrangements would face consequences, while light-green arrangements would not. A three-year threshold would mean potential problems going unchecked for too long. Instead, we propose giving schemes up to two VFM cycles to make improvements. We believe that is the right approach, and essential to protecting members.
Turning to Amendment 44 from the noble Baroness, Lady Stedman-Scott, while I appreciate the desire for a statutory timetable, we cannot accept this amendment, as a fixed 12-month deadline risks pre-empting the essential consultation and undermining the co-ordinated regulatory process which is already under way. Our published road map aims for the first data disclosures and assessments in 2028, based on 2027 data. Providing clear powers in the Bill, with the technical detail and timelines set out transparently in secondary legislation, remains the most proportionate approach here. A government amendment, to which I will come later, deals further with this. Industry’s responses to the latest VFM consultation will inform draft regulations and guidance.
Moving on to the group of amendments from the noble Baroness, Lady Altmann, on simplifying language in VFM assessments with a view to making them more intuitive for members to understand, this is another area where we completely agree with the aim but disagree with the proposals. Let me explain. “Fully delivering”, as set out in the Bill, is a more objective term, which is aligned with the structure of the framework. The language in the Bill has to allow regulators to make clear, consistent and, crucially, legally robust determinations, and “fully delivering” gives them the scope they need to apply the framework as intended. By contrast, the term “good value” risks weakening regulatory clarity by introducing a term that is broader, more subjective and less tightly aligned with the evidence-based metrics underpinning VFM assessments. Given what will flow from these assessments, clarity is crucial.
The same argument applies to amendments looking to change the terminology of “not delivering” to “poor value”. Crucially, these statutory terms will not be used in public-facing communications. Instead, members and employers will see the simple and intuitive RAGG ratings—red, amber, light green and dark green. Simplicity and accessibility will be appropriately delivered, without sacrificing the robustness required in the legislation. That is why we cannot accept the amendments.
I turn to the amendments tabled by the Government. As drafted, Clause 122, “Commencement”, provides that the value-for-money measures come into force on the day on which the Bill is passed. Our amendments allow the VFM provisions to be commenced via regulations. This provides the Government with greater flexibility to introduce elements of the VFM framework in stages, following detailed design work and informed by consultation. That brings the VFM clauses in line with other parts of the Bill which are commenced by regulations. The FCA and TPR have recently concluded their consultation on the VFM framework, and we are using the valuable insights and feedback from industry to shape final proposals in order to ensure that the regime is fit for purpose across both the trust-based and contract-based sides of the market.
We recognise that introducing the VFM framework is a significant undertaking for industry that requires adjusting to the administrative and data obligations to which it will be subject. I want to be clear that it is and remains the Government’s strong intention that the first VFM data disclosures and assessment reports will be required in 2028. However, this amendment provides us with the option, if necessary, to stagger the introduction of parts of the framework to allow more time for industry and regulators to adjust to its introduction.
In Committee, we debated amendments from the noble Baroness, Lady Altmann, on reporting requirements for intermediate schemes. The consultation paper from the FCA and TPR sets out our proposed approach, which is to require improvement plans for amber-rated but not light-green-rated arrangements, and action plans for red-rated arrangements. Templates will help keep requirements proportionate. Taking the flexibility to smooth the introduction of different elements of the framework, should that emerge as a pragmatic way forward, enables us to continue working closely with industry to fully understand the potential implications of the VFM measures. I hope that this provides the House with reassurance that we recognise the potential burden for industry. This has informed our approach—to reach a balance between ensuring that members receive the value they deserve, and that industry is in a position to comply with these new requirements.
Lastly, I clarify that government Amendments 36, 37, 38, 39 and 26 to Clauses 18 and 12 are of a minor and technical nature and correct consistency mistakes. In light of all that I have said, I hope that noble Lords will feel able not to press their amendments and to support those in my name.
Baroness Altmann (Non-Afl)
My Lords, I thank the Minister for her remarks. I also thank all noble Lords who have spoken in support of my amendments, in particular Amendment 24, which I had hoped the Government might be a little more favourable towards than they seem to have been. I understand that the Minister says that the Government have consulted industry and that has fed into the production of the Bill. I hope that the Government will also consult consumer groups and members because it is they who really need to understand the value-for-money framework. It is those groups that I was addressing with my proposals because from the point of view of industry it looks rather different, perhaps, from how it does from that of the ordinary workers who are having their money put into the pension.
I understand that the Government do not wish to accept Amendment 24 but it will, I hope, still help provide a framework for some further discussions as we develop the value-for-money framework. I beg leave to withdraw the amendment.
Baroness Sherlock
Member’s explanatory statement
This amendment corrects a consistency mistake.