Lords Chamber

Monday 23rd March 2026

(began 2 weeks, 6 days ago)

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None Portrait peer taking oath
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First First Oral First Oral Question First Oral Question Lord Teverson.
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None Portrait Oral questions: Repowering onshore wind farms
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None Portrait Oral questions: Effect of companies holding their annual general meetings solely online on individual shareholders’ ability to hold directors to account
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>> Beg leave to ask the question. Standing in my name on the Order Paper. >> My Lords, the.
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None Portrait Private Notice Question: UK defence: Iranian missile capability
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Iranian missile capability Lord Harris of Haringey.
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Lord Coaker Portrait Lord Coaker, The Minister of State, Ministry of Defence (Labour)
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I'm hoping the noble Lord was going to start with the Leona Leonardo's announcement, which he pressed me for in terms of spending pressed me for in terms of spending and what. OK, that's we pocketed that one and moved on. But I mean, the, the the but I mean, Leonardo's was a huge investment that the noble Lord was demanding that I do something about. I went back, argued with the department, talk to other Ministers. So I just make the point. There is a point about defence in the investment plan, and I answered the noble Baroness with respect to that.

But let's be clear. Defence is not standing still. There are. There are many projects on the. In Scotland, on the Clyde and Rosyth ships being built in the Plymouth Dockyard. Billions of pounds being spent on the dockyards being built. Billions of pounds being spent on renovating military housing, Leonardo's helicopters that. The contracts that I announced earlier on. So, of course, there's a debate about what the total sum of money should be, what the total outlay by the government should be. And we heard from the noble and gallant Lord Lord Stewart and my noble friend Lord Best about those matters.

But the the the belief that the government is not spending anything, not doing anything, we should dispel that because there's billions of pounds worth of investment being being put into the defence of this country, including as we progress into the air and missile defence of the country. And I think that's something we could also be proud of and actually talk about, as well as the challenges that we face.
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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Amendment proposed after clause 96 insert the following new clause is printed on the Marshalled List.

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My Lords.

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Sorry my Lords, I just arrived briefly to support amendment 1112. Oh in the name of the noble Lord

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Oh in the name of the noble Lord Palmer, I think it is important to look at the issues. That he has.

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That he has. Rightly raised in relation to the market and indeed, amendment 165 is particularly important given that the injustices, some of which we will come on to in later groups, seem to have little redress roots, whereas I think it would be incumbent upon us for a good pension system to have a better system to identify and remedy occupational pension injustices. I'd just like briefly to speak to my amendment 160, which is about having a review to ensure data in pension schemes must be accurate.

There at the moment is no legal requirement to ensure that the amounts of money being paid into pension schemes for auto enrolment workers or anyone else. But I'm particularly concerned about auto enrolment have to be correct. The pensions regulator has to make sure pension contributions are being paid, but there isn't this requirement to make sure the amount of money is the correct amount of money. So what I'm trying to suggest is that in the Pensions Act 2008, the Quality Requirements requirement section should include something that will confirm regular checking of the pension contributions in the clauses about regulations relating to deducting contributions.

These must require employers to obtain confirmation from trustees or managers that the amounts paid in are regularly checked and recorded and corrected as soon as possible, and in the requirements to keep records section schemes have to provide confirmation that regular data accuracy checks and contribution verification, including the amounts of tax relief and National Insurance relief, are correctly reported. As so often I have seen pension scheme records riddled with errors. So, my Lords, it is surprising that the requirements to actually make sure the amounts of money going in are correct are not in the legislation, and I would be interested to hear the comments of the noble Lady on the front bench.

As to the government's thinking on whether this might be something they will consider.
15:43
Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Conservative)
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Put it right this time. OK. My Lords, I rise to speak broadly in support of this group of amendments. support of this group of amendments. They reflect a thoughtful and welcome focus from across the House on some of the most important structural issues within our pension system. In particular, I welcome the attention given by noble Lords to the effects of consolidation on competition and market entry, and to the importance of robust data accuracy checks. A market that consolidates without sufficient scrutiny, risks reducing innovation and choice, while poor data integrity undermines trust at its very foundation.

These are therefore welcome points of focus, and I thank the noble Lord, Lord Palmer, and the noble Baroness Altmann for raising them. However, I will speak primarily to amendment 169 in my name and that of my noble friend. This amendment would require a review of pension, communications and financial promotion laws, examining whether the current framework unduly restricts providers from communicating clearly with members, particularly in relation to risks, guidance and comparative information. This is, I believe, a profoundly important issue.

My Lords, the reality is this pensions are complex, technical and often opaque. For many people. They're also distant, something to be thought about later rather than now. But that distance is illusionary. These, the decisions made or not made today will shape financial security decades into the future. Knowledge in this area is power. Yet too often individuals lack both the information and the confidence to engage meaningfully with their pensions. Communications can be overly cautious, overly technical, or constrained in ways that make it difficult for providers to present information in a way that is clear, comparative, and genuinely useful.

We have heard several times from our discussions with industry at that professionals can be hesitant to provide what would be sound and helpful advice because of concerns that rules like those set out in the privacy and electronic communications regulations, can impose significant uncertainty and burdens on pension providers and make it more difficult to provide scheme members with timely and helpful information. The result is confusing disengagement and in turn, poorer outcomes. Our amendment asked a fundamental question are we striking the right balance between protecting consumers and empowering them? Are the rules enabling clear, accessible, and honest communication, or are they inadvertently limiting it? If we are serious about building a pension system that works for everyone, then we must ensure that people are able to understand it and that the rules do not prevent them from receiving timely and helpful advice from experts.

Engagement and understanding must be enabled, and it can only be enabled if individuals and professionals are given the tools, the information and the clarity they need to take ownership of their financial futures. This amendment is therefore more about about modern communications. It's about trust, transparency and ultimately outcomes. I will therefore be listening carefully to the minister's response to the points that I and other noble Lords have raised in this group, and I want to provide notice that I will seek to test the opinion of the House on amendment 169 when it is called.
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Lord Davies of Brixton Portrait Lord Davies of Brixton (Labour)
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I'm grateful to all noble Lords who have spoken. Oh, I'm so sorry. >> Can I just ask, is the lower Lord Low Lord Palmer of Childs Hill Lord Low Lord Palmer of Childs Hill going to intervene in this debate?

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We spoke about?

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Yes. OK, so this demonstrates a clear fact. I am still suffering from my cold, which is so bad it from my cold, which is so bad it kept me from attending the second kept me from attending the second day of the Report stage. But there day of the Report stage. But there is an important issue there which. I think does need to be highlighted, and that's under 165. I just wanted to say a word on behalf of the.

Members of a number of different schemes. NatWest is one, but there are others where they feel aggrieved because they were not properly informed of their rights under the scheme and when they reach state pension age. This is the major complaint. I think that others, when they reach state pension age, they suffer a diminution in their benefits. Now these rules were all introduced in all good faith and I participated all good faith and I participated in such negotiations myself.

But. It's the failure of the employer to ensure adequate information for members that's led to the complaint. So I did want to highlight that point. Have I got a different grouping to everyone else? Because I'm talking to amendment one, six five, which is in the first group, is that correct? Yes. Good. OK. As I say, my head is still very thick and I hope the House will indulge, but I think it's important to make but I think it's important to make the point on those members behalf.
15:49
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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My Lords, I am grateful to all noble Lords who have spoken. I think the noble Lord, Lord Palmer, think the noble Lord, Lord Palmer, decided not to dwell on a number of his amendments because there's more to come, I suspect, in later groups. So I had a nice long speech written in response to all of these, but I may spare the house parts of that. Let me concentrate on the areas, the issues that were raised during the debate. Briefly on the question of consolidation. I think in general, I would just say we all agree on the importance of understanding and monitoring the impact of the reforms and in this bill.

But the government has already taken steps to do this. A comprehensive green rated impact assessment was produced and an updated version was published as the bill entered this House, with details of our monitoring and evaluation plans, including critical success factors and collaboration across regulators and departments. And we have published a roadmap setting out clearly what each measure will come in. And so the kind of review envisaged, I think, in the First Amendment would not be helpful. But let me turn my Lords to amendment 160 from the noble Lady Baroness Altmann that would give new powers to the Secretary of State to require employers and pension providers to undertake regular data accuracy checks in relation to contributions paid into workplace pension schemes.

Now, I completely agree about the importance of ensuring members get the contributions they're due. However, I do not agree. My Lord Dannatt the additional requirements proposed are necessary or proportionate given the robustness of the current regulatory framework. Compliance with automatic enrolment duties remains high. The Pensions Regulator TPR runs a proportionate and effective compliance regime, underpinned by detailed guidance. As I explained at committee, employers, together with the trustees or managers of pension schemes, are already required to keep certain records.

That includes details of both employer contributions and deductions from member's earnings. For each relevant pay reference period, employers have to keep payment schedules and contribution records for six years, and opt out information for at least four, and TPR has issued codes of practice, setting out clearly how trustees of DC schemes and managers of personal pension schemes should monitor the payment of contributions. These also cover the provision of information to scheme members, enabling them to check their contributions are paid correctly and they establish clear expectations around the reporting of material payment failures.

There is already a requirement for scheme providers to have sufficient monitoring processes in place, and that includes a risk based approach to monitor employers who should have appropriate internal controls to ensure correct and timely

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payment of contributions. And if a trustee. Thank you for giving way. But

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Thank you for giving way. But could could she confirm for the House whether there are actually House whether there are actually any checks or reporting on accuracy of the contributions? There is a requirement. But if anybody requirement. But if anybody actually checking whether the amounts are correct.

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amounts are correct. I might invite them to come back at the end if she feels I haven't answered that. But the two things I would say to it. One, of course, is that the duties on the trustees or managers, if they become aware that the appropriate things are not being done by employers, or that an employer does not appear to be taking adequate steps to remedy a situation where things have gone wrong, for example, there are repetitive or regular payment failures, then they have a duty to report it to the regulator.

But crucially, of course, the proposed value for money framework introduces an assessment of quality of service metrics, and that directly addresses the accuracy and promptness of core administrative functions, including the secure, timely and accurate processing of contributions. Metrics related to safer engagement will be phased in at a later date, but schemes will be required to disclose how often they review and correct both common and scheme specific data, as well as the proportion of members with complete and accurate records. They also will have to report on the timeliness and accuracy of core financial transactions, such as paying in contributions.

Lord Dear are currently considering the feedback received from industry on the latest VfM consultation. In order to make sure we develop a VfM regime that will drive greater transparency and higher standards around data quality and contribution accuracy, which I hope is exactly what the noble Baroness wants, and I hope that that has encouraged her. But together, I think these measures demonstrate there is a well established, effective framework which, together with the VfM measures, will make all the things that she wants come into place.

I won't dwell on amendment 163 from the noble Lord Lord Farmer about universal pension advice. I think we gave that a fair outing, I think, at committee, but simply to say that we completely share the view that we want to make sure people get the appropriate advice at the time that they need it. But there is already a very large amount of support out there. And I think being realistic that the option proposed in his amendment would probably be best guess on first estimate costs around £2 billion and require us probably to double to double the size of the financial advice sector.

So I know he isn't pushing that, but he's pushing the important underlying point, which is to make sure people have access to the support that they need. And we believe between what's available at the moment and what's coming on stream. So between between pension wise, between stronger nudge and guidance, between what's coming on with targeted support, guided retirement, there is a lot out there that will do that job. Let me turn to amendment 169 from the noble Lady Baroness Stedman-Scott. It's always faintly dispiriting when someone announces at the start both that they'll listen to you, but they're going to vote on it anyway, which but let me do let me do my best, notwithstanding that, that challenge.

And maybe I can persuade you and she'll change her mind. One never knows this. This is related to pension communications. And I understand the aim of this amendment is to ensure that pension providers can communicate effectively with their members, so they can navigate their choices with confidence. We share that aim, which is why we are acting to reduce complexity and strengthen the support available to pension members. The government has heard extensive feedback from firms on how targeted support may interact with the direct marketing rules contained in the Privacy and Electronic Communications regulations.

Having considered this feedback, the government has committed to take forward secondary legislation to amend those regulations. This change will enable workplace pension providers to send targeted support recommendations, which amount to direct marketing to members who have not opted out of receiving it. That reflects the fact that workplace pension providers have fewer opportunities to obtain consent for direct marketing, limiting the level of engagement they have with their members. We aim to deliver this legislative change quickly to ensure targeted support can reach as many pension members as possible, while maintaining robust protections from unwanted marketing.

We will continue to engage with stakeholders and the regulators throughout to ensure we get the right balance. Our committee concerns were also raised around communications that may be required under guided retirement. The government has examined this carefully in developing the policy, including including engaging with the sector and with the Information Commissioner's Office. We will seek further stakeholder views through a public consultation expected later in the year. This will cover proposed requirements on the information and communications journey for pension members, including the extent to which trustees can intervene to provide support, but that's the best way to consider any such interactions in a timely manner.

Running a separate review to a different timescale would make it difficult to incorporate any findings in the design and implementation of the policy, but I hope that reassures the noble Lady that the government is taking action, and she will not feel the need to test the opinion of the House. Finally, amendment 165 for the noble Lord, Lord Palmer, although he didn't speak to it, my noble friend Lord Davis did I think. I don't want to dwell on any particular scheme, but simply to say the government recognises the importance of pension security in retirement and pensions for those saving and protections for those saving into pension schemes, and those concerns are at the heart of this bill.

But as we're also acting where previous governments haven't, by introducing, for example, annual increases on compensation payments from the PPF and efforts relating to pensions built up before the 6th April 1997, where the scheme provided for this. And there are clear and established routes for members to raise concerns or complaints with their scheme when they feel things have gone wrong. The Pensions Ombudsman provides an independent and impartial service to resolve pension related complaints that cannot be resolved through a scheme's internal dispute resolution process that gives a route to settle issues fairly and ensure member's rights are upheld by Lordships has been a good chance to have a canter across the waterfront of pensions, but I hope in the light of my responses, noble Lords feel able to withdraw their amendments.
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Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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My my, my Lords, I thank the hon. Lady, the Minister for her hon. Lady, the Minister for her reply. And she did get to the crux of it, because what I'm what we're trying to do is make sure there's information, advice for people who don't have easy access to that information, advice. And I take her reassurances that the government are looking to give that information and advice by whatever means is available. And I think our comment from these benches, we were looking and keeping abreast of what advice is given, what information is given and whether it's causally sufficient of, and I hope the noble Lady, the Minister, if we feel it's not, we can come back to her, even if informally, to see, is this what we want? Because that's what we're after.

I think we're after the same thing. We're just looking different way. I kept my words brief, too brief because I want to get through things today as much as we can. So. So I didn't concentrate on some of the some of those matters. The problem with the how we deal with things in your Lordships house is one, six, nine happens to be a very high number. The highest number is around 170, I think. So it's going to come right at the end of the day.

And that is very much in our minds when we think about it. But my feeling is from these benches, if there's anybody left in the house, we will support it. If the noble Lady puts it to a vote, it's not the top of my wish list, but I think it does make points. And and I think if it was an earlier amendment than one, six, nine, I think it would get a lot more support. But the practicalities is that it wouldn't.

So in the light of all that, my Lords, I withdraw the amendments in my name.
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Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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Is it your Lordships amendment be withdrawn? Amendment is by Lee. be withdrawn? Amendment is by Lee. Withdrawn. Amendment 121 Baroness

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Sherlock. I beg to move lead amendment one two, one in my name and to speak to two, one in my name and to speak to the other government amendments. We've already debated our reforms, introducing prospective increases on compensation payments from the Pension Protection Fund, the PPF and the Financial Assistance Scheme FAS on pensions built up before the 6th of April 1997. These will be CPI linked, capped at 2.5% and applied prospectively to payments going forward. For members whose former schemes provided for these increases.

But as I've tabled two groups of minor and technical amendments to ensure that the measures operate as intended, all of the government amendments in this group, apart from 144, apply to schemes that, in relation to pre 97, pensionable service only provided for statutory increases on guaranteed minimum pensions earned on or after 6th April 1988 post 88 G MPs, but have at some point equalised their gmps as noble Lords may be aware, gmps differ for men and women, reflecting historical inequalities of treatment.

Men and women receive gmps at different ages 65 and 60 respectively, but the principle of equal pensions for men and women has long been established through a series of court judgements. Pension schemes use different methods to equalise their gmps to address the historical inequalities of treatment between male and female pension scheme members. Some schemes provide for increases on benefits over and above the GMP for the member with the lower value GMP, in order to equalise with the comparator opposite sex. GMP provisions in this bill create an unintentional inconsistency of treatment for members of the subset of schemes that only provided statutory increases on post 88 Gmps, but also equalise their gmps by increasing benefits over and above the GMP order.

With me still, where Gmps have been equalised in this way, these amendments to the legislation introducing p97 increases ensure consistent treatment between men and women. Amendment G 144 relates to PFAs. It restores the original policy intention by removing from clause 110 references to schedule three and five to the PFAs regulations. We've understood that the changes made to the schedules would have the unintended consequence that some members would have received higher payments than those to which they are entitled. This amendment corrects that PFAs members will receive the higher of the pension that their original scheme could have notionally offered to secure with the remaining assets or the standard PFAs assistance.

My Lords,

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I beg to move. Where are we? Amendment proposed, page 116, line five after scheme insert or for the purposes of complying with the GMP equalisation

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obligation. I hope the House will stir. So
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Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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My Lords, I rise to speak to my amendment. 155 and I'm grateful for the support of the noble Viscount Thurso and these. This amendment and Viscount Thurso amendment 162, which I have added my name to deal with the same point, which is something we talked about at committee. And the aim of this is to try to ensure that provisions that were made in the 2004 Pensions Act, which would allow schemes to be extracted from the Pension Protection Fund if there was a new opportunity, for example, for the pension scheme members to be treated to better pensions than those available in the Pension Protection Fund itself, that provision in clause 169, subsection two D of the Bill of the act has never been commenced, which means that if an employer, maybe somebody who had 2 or 3 workers in a in a pension scheme, the company fell on hard times and the company became insolvent.

The members pensions went into the PPF at the time, but the employer perhaps has had a particularly fortunate experience subsequently, and finds himself or herself in a position where they could try to remedy the shortfalls of the members pensions and want to be able to take the scheme back out of the PPF. That that would be possible. Currently, even though the provision is in the 2004 Pensions Act, it is against the law because the provision hasn't been commenced.

So the these amendments would seek to ensure that that was at least a possibility, especially now that employers may start to be more attracted to running pension schemes, given the surpluses and the different financial situation that surrounds pension schemes in the current period. Now that we don't have quantitative easing anymore and schemes are finding themselves more often in surplus. Therefore, I hope that the noble Lady might be minded to accept that this is a possibility.

It does not commit the government to spending any money. It does not commit anyone to spending any money. It merely brings into force a provision that was already provided for in 2004.
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Lord Palmer of Childs Hill Portrait Lord Palmer of Childs Hill (Liberal Democrat)
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My. My Lords, people often wonder about and speak about and wonder about and speak about and write about whether the House of Lords performs a valid function or not. This group of amendments tends to justify the House of Lords in one fell swoop. The government is proposing this particular group 20 amendments of its own to its own Bill, which shows that it hadn't been thought out properly in the beginning. And now? Now we're trying to amend it in your Lordships' House and amend it correctly, I might add.

So it's not against the amendments, it's the fact that things are coming to us so ill prepared. And the fact that there's 20 amendments, one one sees this very, very clearly. My Lords, this group raises an important issue of fairness for members of the Pension Protection Fund and the Financial Assistance Scheme, particularly in relation to pre 1997, serves alongside a number of government technical amendments to which I've just referred. There are amendments probing whether members should, in some circumstances, be allowed to move to a better supported arrangement or receive more meaningful redress.

Where historic indexation has been lacking from these benches, our instinct is that member protection must remain the starting point. But protection should not become an unnecessary rigid rigidity. There is a secure and proper, properly funded route to a better outcome for members. The government should at least be willing to consider this, and I hope the noble Lady, the Minister, will say some positive words on that on pre 1997. Right. In particular, Parliament's entitled to ask whether the proposed remedy is full enough or whether fairness is justified.

The noble author and the noble Baroness Altmann have referred to amendments one, five five and 162. They both seek to do a similar thing. And of course, as I said before, when the high numbers. We're going to vote on them later, which one we vote on or whether we vote on them both, I don't know. But certainly from these benches we agree with the principle of both and and we should see later in the evening whether we have some success in persuading the government to support these amendments from the Viscount Thurso and the Baroness Altmann.
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Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Conservative)
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My Lords, I'd like to start by just referring to the reference that the noble Lord, Lord Davis, that the noble Lord, Lord Davis, made to mastermind. So I'm tempted to say that I've started so that I will finish. My Lord, I thank the government for bringing forward these technical amendments, which seek to protect schemes from unintended consequences arising from the Bill to ensure that GMP equalisation is properly treated as a narrow legal correction, rather than as full indexation, and to provide greater technical clarity and consistency across the relevant legislative framework.

These seem to me to be very sensible and constructive changes, and I do thank the noble Baroness, the Minister, for her clarifications and the detail that she gave. Turning to the amendments in the names of the noble Baroness Levitt Altmann and the noble Viscount Thurso, I thank them for the points they have raised succinctly. As we have heard, amendment 162 would require the Secretary of State to bring into force the currently UN commenced power in the Pensions Act 2004, allowing the PPF to discharge certain compensation liabilities by paying a cash lump sum.

Activating this long dormant paragraph would add a pragmatic fourth option alongside insurance policies, annuity contracts or transfers. And, as the noble Baroness Suttie Altmann said, it does not cost any money to do so. So we support the amendment because it widens the Ppf's toolkit to act in the best interests of members, giving flexibility to settle appropriate cases efficiently. Where regulations specify the safeguards and calculation method while retaining parliamentary oversight under the negative procedure and the Ppf's core purpose of protecting members of failed schemes.

So I would therefore say to the noble Viscount Thurso and to the House that should he wish to seek the opinion of the House on amendment 162, we will be minded to support him on this.
16:12
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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My Lords, I am grateful to the >> My Lords, I am grateful to the noble Lords for introducing their amendments. The. The amendments, the noble Lady Baroness Altmann, the noble Lady Baroness Altmann, and from the noble Viscount Viscount Thurso would commence the regulation making power in section 1692D of the Pensions Act, 2004, to allow the PPF board to discharge its liabilities through a lump sum and as we have heard, amendment 155 will have the additional effect of enabling PPF members to transfer out of the PPF to an arrangement that offers benefits higher than PPF compensation, where an alternative sponsor can be found.

But let me say first, the PPF is designed to discharge its liabilities by making regular payments to its members. That enables investment returns plus levy payments to make good the funding of schemes that transfer to the PPF and to build a buffer against future risk. This. This model has put the PPF on a strong financial position, but allowing transfers out would undermine its operation before the PPF board takes responsibility for a scheme. There is an assessment period and during that assessment period it becomes clear.

Its aim is to make clear that the scheme does not go into the PPF until it is clear that no linked employer will rescue the scheme, given that for schemes that have transferred into the PPF, nobody took up the option originally. It's hard to see related employers who would want to do so many years later, but amendment 155 opens up this possibility, including from non-related entities. It could therefore require a fundamental restructuring of the PPF funding and investment strategy to reflect transfers out.

This is not a minor option which costs nobody any money in practice. What it does is to arrange arrange to raise a range of complex issues to be addressed. Importantly, these include how to safeguard members by ensuring that their destination is appropriately secure. The complexity could be significant, but enabling transfers out of the PPF would require a fundamental rethink of how it operates, of its compensation structure, and of how the compensation compensation system more broadly is managed at this time. If any willing sponsors were identified, there is no framework to assess how adequate their funding would have to be to minimise the risk of returning to the PPF, but also if the sponsor were to fail subsequently, the scheme could end up transferring back to the PPF and members potentially receiving benefits at PPF levels, which could even be lower than they had been before they were taken out in the first place.

But also, the government cannot agree to commence a regulation making power which would enable lump sums to be paid. In this way, the prevention provisions in section 169 were only meant to be used in exceptional circumstances which have not yet come to pass. To open it up more widely would not be wise when the potential costs and risks of the PPF are unclear. Let me attempt to respond to my noble friend on his question about Gmps and my Lords, I confess if I ever went on mastermind, I can confidently assure the House my specialist subject would not be guaranteed minimum pension schemes, but let me do my best.

On the 6th of April 2016, the old state pension was replaced by the new state pension. I know my noble friend knows this, but for the benefit of the House and the record and at that point contracting out ceased. That meant that the in effect indexation of GMP ended for people reaching state pension age from the 6th of April 2016. Transitional arrangements in the new state pension are particularly beneficial to contracted out people, including those with gmps, accrued between 1978 and 1988.

However, some people will still lose out because of the loss of ineffective, in effect, indexation. I would encourage my friend, my friend to read the Hansard, and if that's not enough, then I will both write to him and perhaps even consider applying for mastermind and who knows where that will take me. My Lord, the amendments I haven't said that I would encourage. I just say a word to noble Lord Lord Farmer. I thought it was uncharacteristically harsh about the government amendments. These are very minor and technical, and they don't reflect a lack of clarity of the policy objective.

But we were really clear as to what happens every now and again. Some aspect of pensions law is especially complex. It turns out there is an unintended consequence in the way it was drafted, and that's what these amendments are doing. They are simply making sure the original policy intent is followed through. I apologise to the House for the fact that they're necessary, but I would say to them that does not reflect anything about the clarity of the policy which MPs were intended to do.

I'm grateful to him for his gracious response. My Lords, in the light of what I've said, I do hope that the House Bill is able to support the government amendments and the noble Viscount Viscount Thurso noble Lady Baroness

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Altmann will withdraw theirs. The question is that amendment

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The question is that amendment 121 be agreed to. As many as that have been in, say, content of the have been in, say, content of the contrary, not content. the contents have it amendments 122 and 123 move have it amendments 122 and 123 move formally En bloc. The question is that amendment 122 and 123 be agreed to En bloc as many as of agreed to En bloc as many as of that opinion, the same content, the contrary, not content. The contents have it.

That brings us to the third group in clause 108, amendment 124, Baroness Altmann.
16:17
Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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My Lords, firstly, I apologise. I should have declared my interests originally in my first speech as a non-executive director of a pensions administration company and a board advisor to a master trust, and may I also take this opportunity to wish the noble Lord Davies of Brixton a full and speedy recovery. We miss him, my Lords, these amendments and I'm very grateful again for the support of the noble Viscount Thurso are all related to providing for either the Pension Protection Fund or the Financial Assistance Scheme to be able to recognise the losses suffered by the oldest members of the schemes who have lost the inflation increases that they would have had in their schemes.

I understand and appreciate that the government has decided that it will increase for inflation, all pre 1997 benefits that were available to the scheme members in their original scheme for the future. But my Lords, that doesn't really help those who are towards the end of their lives whose pension or compensation is mostly comprised of pre 1997 accruals. And although the government is reluctant, and I understand that to commit to an open ended amount for the future, which of course the current proposals will do and we are grateful for that.

My amendments are seeking to find an alternative way of recognising the losses in a one off type of payment, a lump sum. And that is something that I have drafted the amendments carefully to allow the government to to authorise, to enable the Pension Protection Fund, to push some of its reserves into this kind of payment. I haven't specified an amount. Obviously, it would need to be related to the amount that each member has lost, but if the member is going to qualify for future uplifts, these amendments would allow also for an extra payment to recognise the amounts that were unpaid because of the inflation increases that they had in the scheme, but have lost the failure to pay any increases has resulted in these oldest members finding their pensions have been whittled away in many cases to less than half their value.

And I also pay tribute to members such as John Benson, John Benson from Allied Steel and Wire, Phil Jones from Allied Steel, and Wire, who himself is seriously ill and is now living on less than half his promised pension after 20 years of losing, the inflation uplifts and Richard Nicoll, Terry Monk these are elderly gentlemen who have campaigned for years and I see the noble Lord Hain in his place, and he was so instrumental in achieving the financial assistance scheme breakthrough that we achieved in 2007, for which, again, these members are extremely grateful.

Protection Fund is radically different from that which prevailed in 2004 and indeed, in 2007, it was in those days unclear how the PPF would fare. The rationale for getting rid of the pre 1997 increases was based on the fact that there wasn't a legal requirement for employers to do that, and a recognition of the need to control costs, potentially in future, were a massive number of large schemes to fail and the PPF to be unable to afford the benefits.

It was unclear how many employers might become insolvent, what types of scheme and how much the PPF would have to pay. It was going to be able to collect its revenues from employer levies, assets from the unfunded schemes, assets of insolvent employers that were recovered and investment returns. But none of that was clear at the time in terms of how it would pan out. But in practice, the PPS have has been an amazing success. It now finds itself with a significant surplus with assets relative to its compensation liabilities of far in excess of what is required to pay all the future pensions.

The Pensions Act 2004 provisions also state that these huge reserves of well over £14 billion cannot be used for anything other than member compensation or funding related to the PPF itself. The PPF is a separate statutory fund. It's not the property of government. Therefore, I am trying to suggest that the payment of a portion of that money, we have 14 billion full retrospection is calculated to to cost 3.5 billion. I am not talking about that.

But even after that payment, the scheme, the PPF itself would still be 150% funded, 50% more than it needs for paying its expected liabilities. But I'm not talking about that. The government or the PPF could work out a sum, whatever it might be, a billion that could be allocated to paying the lump sums for those members who were promised and had lost. It would be hugely welcomed by those members. As I say, they tend to be the oldest ones and often the ones that have campaigned for so long at such personal cost.

For the other members of the Pension Protection Fund and indeed the Financial Assistance Scheme amendments 124128132136 are related to the Pension Protection Fund. Paying these lump sum payments. Amendment 154 is about mirroring that for the financial assistance scheme, and I accept that potentially the government may have to find public money for that. But I would argue that after allocating billions of pounds to the Mineworkers Pension Scheme and the British Coal Staff Pension Scheme to increase the already full benefits that those members were receiving at the expense of the taxpayer, spending a small fraction of that on remedying this injustice.

For so many people who are becoming gradually poorer every year would be a sensible way to spend some of the surplus in the Pension Protection Fund. As the members say. The government's hugely welcome. Current proposals to increase for inflation in the future won't make any of them better off. It will, of course, stop them getting all, make sure they get worse off more slowly. But is that really all we can achieve given the success of the Pension

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Protection Fund? My Lords. I take it the noble Baroness
16:26
Lord Hain Portrait Lord Hain (Labour)
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>> I take it the noble Baroness Winterton move. A member. Proposed

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Winterton move. A member. Proposed page 119, line 44 and insert the words as printed on the Marshalled List. Sir, I apologise.

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Sir, I apologise. For jumping in. Too quickly. Can I support strongly support what the noble strongly support what the noble Baroness has said and commend her for her work in the Pensions Action Group? I was Secretary of State at the time for DWP for Work and Pensions, and was lobbied effectively by her in a very good campaign, which I managed to persuade the Prime Minister at the time, Gordon Brown, much against his initial will as a result of a fierce argument during which my private office thought I might be sacked and that policy was succeeded, and pensioners who had suffered a terrible injustice, 150,000 of them robbed their pensions when their companies went bust and took those pensions down with them were given the assistance, which I believe they deserved.

Now, how exactly this is is done to remedy the the issue which was not addressed, which is the lack of indexation, whether it's by the noble Baroness Shah proposal as down in these amendments, which seems to make sense to me, but I can understand why my noble friend the Minister would find that difficult to concede. But there is an injustice that needs to be addressed, and I simply wanted to make that point. I met particularly personally members of Allied Steel and workers in S.W.

in Cardiff, who had many of them had served some 30 years, suddenly found themselves on the point of retirement when they lost their pensions. All their plans had gone up in smoke. This was a terrible injustice. 150,000 workers across the country were in that predicament. The government acted and I'm proud that we did to remedy that. But there was this one gap that was not addressed, which the noble Baroness Altman's amendments are seeking to do. And I do hope the government will find a way of accepting that basic case that she put.



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Lord Moraes very briefly to support the noble Baroness in her support the noble Baroness in her amendments, to which I have added my name. As usual, she has done a my name. As usual, she has done a splendid technical exposition around the amendments, but also more importantly, as the noble Lord more importantly, as the noble Lord Lord Hain has also spoken to the immense emotional damage that was done to so many people, and I feel done to so many people, and I feel we should all be looking for a way to remedy that.

And therefore the noble Baroness has my full support.
16:29
Lord Wigley Portrait Lord Wigley (Plaid Cymru)
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My Lord, I wish to speak in support of amendment one, two, four, support of amendment one, two, four, one, two eight and 154, whose objectives I very strongly support. objectives I very strongly support. And also the similar provision made for Northern Ireland and amendments one, three, two and 136. And may I thank the noble Lady, Baroness Altmann, for all the work that she has done on this matter and continues to do, and I hope will continue until this one has been one.

My Lords, I spoke at Committee stage about the failure to provide full compensation or equivalent assistance to the former workers of Allied Steel and Wire in Cardiff, about whom we heard a moment ago by the noble Lord Lord Hain. I paid tribute to the work he did in 2007. Was it when this matter was largely sorted, but left one group very much out in the cold, whom we're addressing now. Over the two decades that have elapsed since they discovered that they were in danger of losing the full value of their pension, for which they had worked for decades.

As noble Lord Lord Hain will recall, there has been a campaign running by the Allied steel and wire workers and by others in order to try and get justice for them. And while some assistance has been provided, as described by the noble Lady Baroness Altmann and by Lord Hain in the way he facilitated it, and that was substantial and very much worth having, the plight of those dependent partly on pre 1997 pension benefits has still not been adequately addressed.

They have lost out in the value of a pension for which they had worked for years. And this happened to very many at an age when it just wasn't possible to recoup the full value of those lost entitlements. My Lords, the position of steelworkers as of coal miners has to be given some special attention. We are talking about workers who have given the best years of their working lives to those strategic industries, and it's heavy work and it's arduous work, often unhealthy working environments, and that takes its toll.

Whereas we who have worked in representative politics for most of our lives, can continue to work at our chosen profession well beyond the age of 65, as many here are doing today. That just isn't practical for workers in industries such as coal and steel. By their retiring age, they have earned their pensions and they deserve the full value of those pensions without any loss of the sort of describing. So when it is in part taken away from them for reasons well outside their control, they have every right to hope and to expect that a government of a civilised society can take steps to safeguard their financial position.

My Lords, there has been a coal miners who, for no fault of their own, had difficulties with part of their pension. The government, to their credit, have taken steps to help them and I pay tribute to that. But if it is right in principle for the miners to be so helped, then it is equally right for steelworkers and others, other similar pensioners. That and that is the objective of the amendments moved or introduced by noble Baroness Altmann. These amendments deal with the financial impact made through the loss of the inflation protection for the pre 1997 pension benefits, and I understand there are adequate excess reserves in the Pension Protection Fund to meet such needs.

More than meet them. There is an abundance of resource there for that purpose. My Lords, we shall in the dinner break be hearing a statement delivered on Thursday. In the other place, on the importance the strategic importance of the UK steel industry. It was opened by a statement that the steel production is essential as a driver of social justice and is an industry that underpins communities. My Lords, that has a rather hollow ring in these communities where Allied Steel and Wire pensioners live on a dwindling income that fails to maintain, let alone repay, the debt to society, to those who gave their working lives to those industries and often sacrificed their health in so doing.

My Lords, I conclude in thinking back to my first full Parliament in the other place where I gave my campaigning priority to securing compensation for slate quarrymen who had lost their health and often their lives to pneumoconiosis. We secured this with the vital help of that great parliamentarian, Michael Foot, who represented Ebbw Vale, a steelmaking constituency constituency and without whose involvement, we never would have got that compensation. In this, my last full Parliament, I look around

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this House to see Seeks similar support for the steelworkers who lost the full benefits of the pension for which they had worked so hard. Are there parliamentarians today willing to parliamentarians today willing to make the same stand as did Michael Foot in 1979, in support of a Foot in 1979, in support of a relatively small group of workers, and to give them the justice for which they have long struggled. I urge this House to vote for Baroness Altmann amendment.
16:35
Lord Davies of Brixton Portrait Lord Davies of Brixton (Labour)
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I want to thank the noble Lady >> I want to thank the noble Lady Baroness Altmann for moving these amendments. We've discussed this amendments. We've discussed this issue a number of times during the passage of the bill. And the other noble Lords who have spoken so far have all spoken so strongly in support of necessary action. The facts are established. These people were poorly treated, and it's the government's policy that they should be better treated that's established.

There's no debate about that. I've heard no one suggesting that it doesn't really matter that these people don't get any money. We've agreed to give them some money extra by revaluing these pensions from next year onwards. But because of the structure of who has lost out, the age profile when the losses occurred, these people stand to make very little gain from that proposal. So the government's proposal to help these people just doesn't hack it.

Something more needs to be done. I've argued at previous stages that the shortfall over the number of years since their compensation started should be made good, and the pension that's increased in future should start from that higher level. Clearly, that wasn't going to receive the support of the government. So the noble Lady has proposed an alternative that the money that is in the Pension Protection Fund should be used as a lump sum to compensate those who have lost out.

And clearly, when you're in your 70s and 80, a lump sum is a much better, greater advantage than future increases. That's the point of these amendments. So this is a compromise. This isn't what those affected have actually called for. These people, as has been said, are towards the end of their life and they need help now. Now we know what it's going to cost when the scheme was set up by my noble friend Lord Hain.

There was some debate about the benefits. I was advising the TSC at the time, and I think we accepted. We. We might have argued against the restrictions, but it was accepted to get the show on the road. We would accept these benefits, but we now know what it's going to cost and we now know that the money is there. It's all in the Pension Protection fund. And if it doesn't go to these people who have lost out, eventually it will end up in the government's coffers.

The government won't be entitled to it, but where else is it going to go? So I think we need to act now to help these people now, not the government in the future. And so I'm strongly in support of the proposals. There's one additional point which my noble friend the Minister might make, which of course, is there's two groups of pensioners here. There's those who are receiving benefits from the Pension Protection Fund, and there's another group receiving benefits from the financial assistance scheme.

It's important to understand that the only reason they're in the financial assistance scheme is the government failed to accept its responsibilities early enough. That only in the past, because the government failed to comply with its legal requirement to introduce this sort of compensation arrangements. On redundancy. And so there's no argument that the people should be treated any different to the people in the PPF. I think they're entitled to money to make good the deficiency and enjoy them to get some sort of benefit in what some sort of benefit in what remains of their lives.

Yes.
16:40
Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Conservative)
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My Lords, I will speak briefly to this group and we welcome the to this group and we welcome the intent behind these amendments. We have spoken ourselves with campaigners and representatives of campaigners and representatives of affected members, and we really do understand the concerns that sit behind them. Those concerns are real, my Lords, and they deserve to be taken seriously. And I have listened very carefully to the remarks from the noble Baroness, Lady Altmann. Noble Lord Lord Hain of noble Lord Lord Wigley, and of course the noble Lord, Lord Davis, with the case studies that they've cited relating to the losses suffered by individuals and also with the emotional consequences.

However, we do have reservations about the approach proposed. As drafted. These amendments would in certain circumstances compel the payment of lump sums. That does not sit comfortably with the core principle that we have adopted throughout the passage of this bill, namely, that we should not seek to direct or constrain pension funds in a way that limits their ability to act in the best interests of their members. So if the PPF determines that using surplus to provide such payment is appropriate, proportionate and in members best interests, then of course we would support that.

But that judgement is properly one for the fund itself, not something that should be prescribed. Now it is for the government, of course, to offer a response to the questions and the points raised by other speakers, and I do look forward to the remarks from the noble Baroness Sater Minister. So while we have a sympathy with the objective these amendments seek to achieve, we do not believe that mandating this approach is the right way to do so. And so for those reasons, I'm afraid that we're unable to support them.

I thank the noble.
16:41
16:42
16:42
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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My Lords, I'm grateful to all noble Lords who have spoken. I thank Baroness Altmann for introducing her amendments. I understand her concerns, and we did understand her concerns, and we did discuss this at committee at some length. Amendments 124128132 and 136 would require the payment of arrears to members of the PPF, whose original scheme provided for increases on pensions built up before the 6th of April 1997. That's pre 97 increases. The amendments would also enable members to receive a one off lump sum payment to be paid from the PPF.

Reserve amendment 154 would require the Secretary of State to determine how these lump sum payments are to be funded in the Financial Assistance Scheme. My Lords, I fully understand that many affected PPF and FAS members are faced with having to adjust to a level of income less than they were expecting at retirement after their employer's became insolvent on their pension schemes wound up being underfunded. And I do understand the distress that has caused to many of them. My Lords. My my, my just in the comments made by my by my noble friend Lord Hain and the noble Lord Lord Wigley Allied Steel and Wire.

My friend the Minister of Pensions has met with a range of members, including former Allied Steel and Wire workers who. Scheme qualified for the Financial Assistance Scheme and he has heard their cases. My Lords, these amendments go much wider than that and I think the challenge one of the things I would say at least, is that this government has acted to address this issue through measures in the Bill which address prospective pre 97 indexation to eligible PPF and FAS members. But I do understand that doesn't go as far as some affected members and some members of the House would have wanted.

But, my Lords, I would say these reforms nonetheless represent a step change that will significantly strengthen the protection offered by the two compensation schemes. We have taken action and now want to implement it. Now the noble Lady Baroness Altmann is quite right that, as I understand it, I think we would need to legislate, I think, to allow lump sums. But of course, that does have significant public finance implications, which I spelled out at committee. Providing for the payment of arrears to members Who schemes provided for pre 97 increases is not a limited measure.

My Lords, I think it potentially paves the way for future long calls on both the PPF and FAS. The amendments would further reduce the PPF reserve, which is there to protect the PPF and to protect against future risks across the defined benefit system and Lord Carlile risks faced by the PPF are lower given improved scheme funding levels. The reserves it's built up provide security for its current members and the near 9 million members of DB schemes that it protects. The reserve remains essential for it to manage any future challenges, and to fulfil its role as the ultimate backstop to the near £1 trillion of liabilities in DB schemes, a part of which is still open and accruing benefits.

Historically, the PPF has supported nearly £10 billion in claims funded in part by the amount collected through levies. Without future levies, the reserve must cover upcoming claims. The noble Baroness said that the cost of PFAs might potentially come from the Exchequer. It will come from the Exchequer when there is no other place from which it could come, and any implications for the public purse like that on that scale would need very careful consideration. My Lords, I would simply stress that these issues have been around for a long time.

No previous government has done anything about any of them. This government has acted where previous governments have not. In making the decision, however, it has been difficult. We had to strike a balance between the needs and interests of all parties, including members, levy payers, taxpayers and the PPF ability to manage future risk. We believe that our approach providing prospective pre 97 indexation to eligible PPF and FAS members strikes the right balance. I know that will not be able to be disappointing to the Baroness Altmann, but I regret that the the government's position.

We think we've gone a long way. That is as far as we can go, and I hope amendments.
16:46
Baroness Altmann Portrait Baroness Altmann (Non-affiliated)
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My Lords, I thank the noble Lady, >> My Lords, I thank the noble Lady, the Minister, for her response and her understanding. Obviously, her her understanding. Obviously, her actual reply is extremely disappointing and I would like to thank all noble Lords who have spoken without exception, in support of helping these particular members who are the oldest and who have lost typically the most as a have lost typically the most as a result of their scheme failing.

I. Would like, I feel in all good conscience, having heard the support across the House for these principles and having worked for more than 20 years with many of those who have lost out, that I am morally obliged to test the opinion of the House, but I will not do so on one, two, four, I give notice that I will do so on the Financial Assistance Scheme amendment 154. Later in the report.

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Yeah. Or amendment 124.

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Or amendment 124. Is it your Lordships pleasure this amendment be withdrawn? The amendment is by leave. Withdrawn. Amendments 125 to 127. Move Amendments 125 to 127. Move formally. En bloc. The question is that amendments 125 to 127 be agreed to. En bloc as many as of that opinion will say content the contrary, not content. The contents contrary, not content. The contents have it. Amendment 128 not moved. Amendment 129 to 131. Move formally. En bloc. The question is that amendments 129 to 131 be agreed to.

En bloc as many as that opinion will say content the contrary, not content. The contents have it. Member 132 Baroness Altmann not Member 132 Baroness Altmann not moved. Are amendments 133 to 135 move formally. En bloc. Now the question is that amendment 135 133 sorry, to 135 be agreed to En bloc as many as that opinion will say content. To the contrary, not content. The contents have it. Amendment 136 Baroness Altmann not Amendment 136 Baroness Altmann not moved.

Amendments 137 to 144. Move formally. En bloc. Now the question is that amendments 137 to 144 be agreed to. En bloc as amended, that opinion will say content the contrary, not content. The contents have it. Now that brings us to the fourth group after clause 110, amendment 145 Baroness Hallett.
16:49
None Portrait AMDT: 145 Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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That my Lords, I beg to move amendment 145 and speak to the government amendments in this group. Let me start with the context for these amendments. The AWP Pension Scheme is a trust, trust based, defined benefit, or DBE pension scheme for employees and former employees of AWP plc, the atomic weapons establishment. Since 2021, AWG plc has been wholly owned by the Ministry of Defence and the Pension Scheme is backed by a Crown Guarantee. These clauses will allow the government to defund the existing scheme and establish a new central government pension scheme for its members.

They apply only to the DB Pension Scheme. Aiui DC contract based scheme is not affected. The assets held by the scheme will be sold and proceeds transferred to the Treasury. This measure was announced by the Chancellor in her 2025 budget, but the principle was announced in a written ministerial statement on the 6th of July 2022 by the previous government. The new scheme will be a public pension scheme. This is in accordance with wider government policy that when a financial risk sits wholly with government, as it does here, it should not hold assets to cover that liability.

The taxpayer is already exposed to the risks and the liability can be managed more efficiently in the round, along with other unfunded liabilities met out of general taxation. This measure will help ensure that liabilities are funded in the most efficient way, while ensuring the long term security of members benefits. This will also support the government's fiscal strategy by reducing near-term borrowing, as it will reduce the amount to be raised in debt markets. I want to assure the House that the amendments tabled explicitly protect the accrued rights of all members.

At the point of transfer. The new public scheme must make provision that is, in all material respects, at least as good as that under the pension scheme. This includes any right to discretionary benefits that may exist under that scheme. At the point of transfer, the new statutory scheme will be based on the existing rules and the Discretions exercised under the existing rules by the trustee, by AWG plc and indeed by the Secretary of State for defence will be codified into the rules of the new statutory scheme.

The rules of the new scheme will be drafted in consultation with the trustee of the present scheme. The government will work with the trustees and future administrator of the scheme to ensure that there is transparency and clarity at the point of transfer. AWB will also work with the current trustee and the future administration to ensure members receive all the information they need at that time. The new clauses and amendments 145 and 146 provide that the new scheme should be established by regulations and set out the kind of provision that may be made by these regulations and any amending regulations.

Although these are fairly standard for public schemes, I'd like to assure the House that the government has considered carefully how these may be relevant to this scheme. The new clause, an amendment 148, ensures that scheme rules cannot be amended unless prescribed procedures have been followed. In most cases, the requirement is to consult. However, if the proposed amendment might adversely affect members rights, the regulations must prescribe additional procedures to protect the interests of members, including obtaining the consent of interested persons or their representatives.

This will include the employer, the members and their representatives. AWB have already engaged with both of their recognised trade unions, Unite and Prospect, and will continue to have regular contact with the unions about future changes. The new clause and amendment 149 will enable the government to direct the disposal of the assets currently held by the Pension scheme for the benefit of the Exchequer. We expect the bulk of the assets to be sold before the new scheme is established. Regulations under this clause must ensure that trustees liabilities following the sale of assets will be met by public funds, thus ensuring that pensions in payment and any other trustee expenses will not be affected.

Regulations under this clause will also ensure that the trustee and AWG plc are protected against any liability that might otherwise arise, because they have complied with the government's direction to sell assets. This clause includes the Henry the Eighth power to Disapply or modified specified statutory provisions. To be clear, these powers can only be used in relation to regulations made under this clause and are intended to enable protection for the trustee. For example, we expect we will need to disapply the scheme funding regime in relation to the scheme.

Once the sale of assets begins, builds. The new clause in amendment 150 will allow the Treasury to amend tax legislation to ensure that the transfer of AWP pension scheme to a new public scheme will be tax neutral, meaning no additional or unexpected tax liabilities will arise. For those affected by the changes. The Treasury will use these powers to modify the application of relevant tax law tax law where it is needed. Following the precedent set by the Royal Mail Pension Scheme when that was defunded.

Indeed, this clause is based very closely on that legislation. The new clause and amendment 151 provides a legal gateway to permit the sharing of information between named parties to facilitate the establishment of and administration of the new scheme. It also gives the government the power to make regulations requiring individuals or organisations to provide the information needed to establish and administer the new public scheme and transfer the accrued rights. This should not be needed as government is working collaboratively with the relevant parties for the provision will only be required.

In the unlikely case, a party does not provide the necessary information upon request. The clause in amendment 152 ensures proper consultation and parliamentary scrutiny for regulations made under this part of the Bill, particularly those affecting the establishment and operation of the new Public Pension Scheme and the transfer of assets, the government is required to consult the trustee of the AWI Pension Scheme before making regulations to establish the new public scheme to transfer accrued rights or to transfer assets and liabilities. That ensures that the interests of scheme members will be fully considered before these regulations are made.

In addition, any regulations that could adversely affect existing rights that have retrospective effect or that set financial penalties are subject to the affirmative procedure that ensures significant changes are subject to parliamentary approval and scrutiny. Other regulations under this part of the Bill are subject to the negative procedure, although I note that the taxation regulations are subject also only to annulment and pursuance of a resolution in the other place, as is usual for such legislation, my Lords, I beg to move.
16:55
16:56
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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a comprehensive framework for the transfer of the AWU pension scheme into a new public sector arrangement, while seeking to arrangement, while seeking to preserve the accrued rights of members, ensure appropriate handling of assets and liabilities, handling of assets and liabilities, and provide for the necessary technical matters including tax treatment, information sharing and parliamentary oversight. So I thank the Honourable Baroness Symons for setting out her approach just now setting out her approach just now with such detail and given the reassurances that we have received on the procedural point, we are content with the approach set out in this group.



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I'm thrilled and grateful to both noble Lords for this outbreak of consensus, and long may it of consensus, and long may it continue. I have some other lovely amendments coming next. I encourage them to support those as well. Just to say thank you very much to the to say thank you very much to the Viscount and the noble Lord Lord Farmer, because a concern was raised at committee that these these amendments might make the these amendments might make the bill hybrid. We were very happy to withdraw them until everybody was happy that they're not.

I'm very glad that we never thought they glad that we never thought they were hybrid, but I'm really grateful that the noble has taken the time to satisfy himself of that,

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too. And given that and given the lack of opposition, we'll also beg to move. My Lords, the question is that

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My Lords, the question is that amendment 145 be agreed to. As many as that opinion will say content as that opinion will say content contrary, not content. The contents have it. Amendments 146 to 153 move have it. Amendments 146 to 153 move formally En bloc. The question is that amendment 146 to 153 be agreed that amendment 146 to 153 be agreed to En bloc, as amended. Of that opinion will say content the contrary, not content. The contents contrary, not content.

The contents have it. 53. Amendment 154 Baroness Altmann.
16:58
16:58
17:09
Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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Lords I beg to move government amendments 156 and 178 in my name. I am delighted to be bringing forward an important amendment to this Bill, delivering on a commitment made by my friend, the Minister for pensions in the other place, to provide greater clarity and support for trustees exercising their existing investment duties. Trustees and others tell us that although their duties are well established in law, they lack practical tools to apply them in today's complex investment environment. These amendments respond to that need by requiring the Secretary of State to issue statutory guidance explaining how these duties operate within the existing legal framework.

For the first time, there'll be a statutory obligation to provide accessible and authoritative guidance on the meaning and application of key legal concepts contained in regulations made under sections 35 and 36 of the Pensions Act 1995, including the Statement of Investment Principles and the provisions governing the choosing of investments. Let me be clear these amendments do not change trustees duties or prescribe outcomes. What the amendments provide is guidance that clarifies how the law works in practice. Across DB, DC and hybrid schemes, trustees and advisors have asked for concise, practical and legally grounded guidance.

They want confidence that the law gives them the room to take proper account of long term financial and material risks such as climate change, biodiversity loss and evolving economic conditions when determining how best to invest in members interests. At a recent roundtable chaired by the Pensions Minister, stakeholders stressed the need for guidance that Distils existing law into simple, usable terms supported by real world examples. They were equally clear that the guidance must remain flexible and able to evolve as investment practice develops.

The government's view that fast moving concepts such as standards of living, member views or complex system level risks should not be hardwired into primary legislation, is because they risk creating rigidity and could quickly become outdated. By contrast, statutory guidance offers a pragmatic, responsive approach that can evolve alongside the the global investment environment, stewardship expectations and emerging environmental, social and governance data. Under these amendments, the Secretary of State will issue guidance explaining such aspects of the law as they consider appropriate.

This includes clarifying key expressions such as financial and material considerations and the best interests of members covered in existing regulations. The guidance will also use examples and case studies to illustrate how these concepts should be interpreted, something trustees and advisers have repeatedly said will be of real value to ensure the guidance is genuinely useful. DWP has convened a technical working group chaired by Sir Robin Knowles, a serving High Court judge whose leadership of the Financial Markets Law Commission's work on fiduciary duties and sustainability brings deep expertise to this task.

The group brings together experienced DB, DC and LGPS trustees, actuaries, investment practitioners, stewardship specialists, civil society representatives and senior pensions lawyers. The group has
17:12
None Portrait Amdt. 156 Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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already met and agreed terms of reference. Its objectives include supporting DWP and developing statutory guidance that provides statutory guidance that provides clarity and confidence to trustees without imposing undue prescription, translating existing law into practical expectations, supported by real world examples, for instance, showing how trustees instance, showing how trustees might assess long term financial risks linked to climate change, biodiversity loss, supply chain exposures, nature related dependencies and stewardship escalation, as well as financial and material risks and other forms.

Drawing on good practice from schemes such as nest, Brunel and People's Partnership, the guidance will outline reasonable sources of evidence, data, member views and professional advice on which trustees may rely. The group will also look to recognising guidance the differing capacities of schemes, with case studies showing how schemes of various sizes can meet the same principles in different ways. It will also identify appropriate areas of alignment with LGPS and FCA guidance to promote coherence across the pensions landscape. I know this will be a particular interest to the noble Lady Baroness Hayman, who has asked about the interaction of this guidance with other pension schemes, and I pay tribute to her for her work in this area and for the amendment she tabled, which, along with similar work in the other place, has prompted the government to respond in the way that it has.

As we've indicated previously, this guidance is intended only for occupational trust based schemes, where questions of legal clarity arise most acutely. FCA regulated providers operate under the consumer duty, and the LGPS already has its own guidance to LGPS administering authorities, setting out. They must include preferences on financial and material ESG factors in their investment strategies. However, my Lords, I can assure the House that the FCA, the Pensions Regulator and MCHLG for the LGPS are fully engaged in the statutory guidance work to help support alignment and share best practice.

I've been asked previously about the legal effect of the duty to have regard to the guidance. Our members make clear that trustees and delegated fund managers must genuinely consider the guidance and ensure they've taken it into account, but they are not bound to follow it where they have rational grounds to depart, trustees retain full discretion and independent judgement. These amendments also provide transparency and accountability. The Secretary of State must consult widely before issuing the guidance, and the final version must be laid before Parliament.

Prior to publication. The Secretary of State must also keep the guidance under review and may revise and reissue its a trustees receive up to date support as the investment landscape and systemic risks evolve and the guidance must be issued within 12 months of the provision coming into force two months after Royal Assent. But I know some have argued in the past that only primary legislation can move the dial on trustee duties, but trustees and experts consistently tell us the opposite that the existing law has much to offer.

It is sufficient, but its application is sometimes misunderstood or inconsistently interpreted. They have been clear trustees do not need new obligations. They need assurance. This amendment provides that assurance by creating statutory guidance to which trustees must have regard. It strengthens the defensibility of trustee decision making and reduces the scope for legal challenge. In doing so, it supports better long term investment, improves consistency across schemes and ensure trustees are equipped to consider the risks and opportunities that increasingly shape member outcomes. These amendments strengthen trustee confidence, enhance governance and modernise the interpretive framework that underpins pension

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savings. My Lords, I beg to move. Amendment proposed after clause 117. Insert the following new

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117. Insert the following new clause as printed on the Marshalled List. When I came into.
17:16
Baroness Hayman Portrait Baroness Hayman (Crossbench)
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>> When I came into. >> The chamber today, a crossbench. >> Colleague said to me.

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Colleague said to me. Congratulations on the way in which this matter of your amendment has this matter of your amendment has been handled. It's absolutely perfect example of how the House of Lords should operate. We're very aware, all of us. I think that we're not operating sometimes at our best. At the moment that an amendment is put forward on a cross-party basis, negotiations then go on with the Minister. We manage to thrash out an amendment.

We don't get everything we wanted, but we certainly get the legislative basis on which guidance can be issued. And that guidance has been asked for by trustees, it has been asked for by the industry. It has been considered by working groups. I certainly first got involved with the issue and knew that there was a request for clarity some 5 or 6 years ago when we had another Pension Schemes Bill. So I'm very disappointed, seriously disappointed that what I thought was a consensus that this was a good way forward has not been accepted across the House.

And if I may say I say so, I'm particularly distressed that the I understand Liberal Democrat ventures will not be supporting the government amendment today, because my understanding up to this morning was that the concerns that existed there related to the fact that my amendment had been in some way watered down, that it was less tough, it put less into statute and gave more reassurance to those who were concerned about overinvolvement. I think the Minister set out very clearly that this is not a case of overinvolvement.

It's certainly not a case of mandation. I was once told that it was the Secretary of State in a previous government who said that he loved, didn't worry at all about having regard amendments because have regard amendments could be ignored if there was a basis for so doing so. I am, as I say, very upset. I won't go through all the arguments. I've done it at Second Reading. I've done it at Committee stage. The Minister has done it for me today.

On the reasons why this would be valuable. Pension investments are the. I'm no expert. I accept there are experts in the room that pension investments are the ultimate long term investments, the ultimate investments in which the long term. The systemic risks should be taken into account and the anxiety that some pension fund trustees have about taking those into account was holding back from those funds, acting in the best interests of their pensioners. And that, quite simply, was what we were trying to put right in this amendment.

So I still hope, even at this late stage, that given the compelling case that the Minister who has taken infinite care and her officials have taken infinite care to bring forward this amendment, that those who were thinking of not supporting it will reconsider and support it strongly as I do.
17:20
Lord Thomas of Cwmgiedd Portrait Lord Thomas of Cwmgiedd (Crossbench)
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My Lords, can I address a few >> My Lords, can I address a few brief remarks in support of the government in relation to this? I wish to declare an interest as wish to declare an interest as chairman of the Financial Markets Law Committee, who issued a paper about two years ago now to try and explain the very complicated problems. Now, this would be an easy matter to solve if lawyers were not paid at the extortionate rates at which they are paid, because each bunch of trustees could take their own legal advice.

But unfortunately, we live in a world where lawyers are grossly over remunerated and it is not practicable for trustees of pension schemes to take legal advice. It is therefore necessary to provide some guidance in relation to fiduciary duties. This is a. They are complicated, partly because they have a very ancient history, but which has worked well, partly because the Law Commission issued a paper some years ago which wasn't entirely clear, and what the Financial Markets Law Committee issued is not something, although it was agreed unanimously by the committee, it is not something that is entirely easy to follow.

Therefore, what was needed was something that ordinary trustees could look at and be guided by in the exercise of their fiduciary duties. The as the Minister has explained, the guidance is going to be prepared by an independent group and having, as my understanding is. And having had to see some of those who've been involved. Independent is a correct description of them. Pension lawyers are tough people, and I have no doubt whatsoever that they will produce independent advice.

They will not be cowed by any Minister into providing something that doesn't accord with the law. And what they're doing is giving guidance on the law. Now, there's one point upon which I disagree with the Minister. She says the advice will be all the guidance will be authoritative. Yes, in one sense, but not authoritative in the sense in which it's popularly understood it. They cannot give advice that in any way whatsoever changes the law, because that would be ultra vires what they were intending to do.

And if they get it and if it does go before it, one can go to the court and say the Secretary of State's guidance does not represent the law. Therefore, the argument that this in some senses is changing the law. It may be because someone hasn't read the section very. The amendment very clearly is totally misconceived. This is simply guidance. And when you look at fiduciary duties, you look at the 2005 pension regulations as amended in 2018. There are phrases in it which are not easy to understand and therefore what the Secretary of State is going to do.

It seems to me entirely sensible. Get a group of independent and jolly independent. They are to presided over by Sir Robin Knowles, who is fiercely independent, and all they will be doing is trying to explain the law to people without having the people concerned, having to pay the fees of lawyers. I cannot understand how anyone could possibly oppose this. If there's something in the wording that isn't quite right, it would be wonderful if someone could say what it is.

No doubt it could be corrected in time for the Third Reading, but to deprive pension trustees of advice, to force them into the hands of lawyers, and who pays the fees of the lawyers? The pension funds is quite wrong. This is a good piece of legislation, and we ought to support Her Majesty's Government.
17:25
Lord Hendy Portrait Lord Hendy (Labour)
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The Lord. >> Pleasure to follow the noble. The noble and learned Lord Thomas of Cwmgiedd in supporting the government's amendments and amendment 167 in the name of the noble Lady. Baroness Hayman and others both proposed that the Secretary of State should publish statutory guidance for trustees in investing their funds. Lord John in Committee I and Baroness Janke proposed an amendment to require regulations to guide trustees investment in particular, so that trustees should avoid incompatibility with international law.

My noble friend the Minister was against regulating in a way which could strain the could, which would constrain the autonomy of trustees. And we haven't pursued that amendment on report. The proposal for guidance rather than regulations is an attractive one. My request today is that the factors to which the guidance should have regard should include not just pension law, but also the international legal obligations of the UK to ensure that pension scheme investments do not, directly or indirectly cause or contribute to activities which are inconsistent with the provisions of human rights and international law.

Otherwise, UK pension schemes, particularly those which are an arm of the UK state such as the Local Government Pension Scheme risk, involve risk involving the UK in breaches of its international obligations. The UK is obliged not to authorise, explicitly or implicitly serious breaches of international norms by other states, nor must it render aid or assistance to any entity involved in serious breaches of such norms by another state, and the UK must cooperate with other states and take all reasonably available measures to bring an end to any violations of such norms by another state.

Lord Geddes self-evidently applies to the entities involved in the activities of the Israeli government in Gaza and the West Bank, but it also, sadly applies to many other states too. It also applies to entities in supply chains which involve the UK and other states breaching the minimum labour standards of the International Labour Organisation and the Council of Europe, through its European Social Charter laws. I ask that my noble friend, the Minister, if she will ensure that the guidance proposed, encourages pension fund trustees, amongst other things, to take into account the obligations of international law in making their investment decisions pending that guidance.

An expression of such encouragement from the noble Lady would be much

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appreciated. Sits down. Could I just ask him

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Sits down. Could I just ask him a question? This the instrument a question? This the instrument says on the law, and we know that English law operates so that there are some obligations that are performable only by Her Majesty's government, and there are other government, and there are other obligations that are accorded only into domestic law. He surely isn't suggesting that obligations that go beyond domestic law are somehow to be brought within the guidance. If so, that would be a massive change in the law and well beyond anything that this group of people or the Secretary of State was permitted to do.



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The answer to that question is a complex one. But there is one proposition which is not complex, proposition which is not complex, and that is that institutions which constitute an arm of the state are constitute an arm of the state are bound by international law, and that would apply to the local Government pension scheme. And as I understand it, other pension schemes as well.
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17:31
Baroness Stedman-Scott Portrait Baroness Stedman-Scott (Conservative)
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I'm going. concerns about the direction of travel shown by the government from their amendments in this group. These amendments risk opening the door to Mandation by the back door, and that is something we just cannot support. Government amendment 156 would require the Secretary of State to issue guidance explaining key aspects of pensions law, including fundamental concepts such as financial and material considerations and, crucially, what constitutes the best interest of members. If the government are given the power to define what is in the member's best interest, what is it? What? What is to prevent that definition from shifting over time to reflect political priorities? What is what is to stop a future Secretary of State from asserting that particular forms of investment, perhaps in UK assets of their choosing, are by definition in members best interests? And if that becomes the case, have we simply.

Have we not simply recreated Mandation in another form? Throughout the passage of this bill, we've been clear that decisions about investment must remain, with trustees acting in the interest of their members, not directed implicitly or explicitly from the centre. These amendments risk undermining that principle by centralising significant interpretive power in the hands of the government. When the government issues guidance to schools, to the health service and to other areas in its preview is purview, the effect can be to clarify and support operations.

In a practical sense, the sort of guidance the government is proposing to issue on this point goes precisely the wrong way, and can only serve to limit the options open for trustees to act in their members best interest. For those reasons, we believe these amendments represent a step in the wrong direction. They risked politicising what should remain independent fiduciary judgements. Accordingly, I put the House on notice that we will oppose these government amendments when they're called.

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My Lords, let me start where we just finished. I can only assume that the noble Baroness Stedman-Scott didn't listen to the words of the noble and learned Lord, Lord Thomas, because he made clear, Lord Thomas, because he made clear, and I would hope she would take it from him if not from me. And this guidance does not change the law. It simply seeks to explain how the law can be applied. And as the noble and learned Lord pointed out, were any government this or any were any government this or any subsequent government to try to make that guidance represent something that the law is not, the courts would very quickly set that aside.

So, my Lords, I find these objections frankly, risible. They they simply do not stack up at all. Just to be really clear, the guidance would simply the amendment simply require the Secretary of State to issue guidance that explains existing law, not instructing trustees how to invest does not give Ministers any power to set investment policies, or require trustees to invest in any assets. Trustees must consider the guidance, but they can depart from it if they have rational grounds for doing so.

Trustees retain full discretion and independent judgement. The amendment does not change trustees duties or prescribe investment outcomes. It simply clarifies how the existing duties operate. The aim of the guidance is to clarify, not to control. Trustees and industry stakeholders have asked for clearer, practical explanations of legal concepts and my Lords, that is what the guidance will do and the technical Working Group noble and learned Lord pointed out. My Lords, I am. I certainly have no intention of expecting the kind of people in that group to to bow to the wishes of this or any other government, and we will not be disappointed in that respect.

But Lord, just to be really clear, guidance cannot override the law. Trustees must still make investment decisions based solely on what they judge to be in a member's best financial interests, and they can depart from the guidance if they explain their reasoning and set that out. Nothing in the guidance allows Ministers to mandate their investment choices. A briefly, in response to my noble friend Lord Hendy, I regret that I cannot agree to his request to expand the guidance in the way he describes, and I should clarify that the amendment.

The amendment does not apply to the local government pension scheme. As I think I've made clear in previous stages. My Lords, I was disappointed that no one from the Lib Dem frontbench got up to explain the decision that they've taken. I was as surprised as the noble Baroness, Lady Heyman, to find that they were not proposing to support what we had all thought was was a proper consensus. I pay tribute to the noble Baroness, Lady Heyman. I thought she's done a really good job in putting forward the case of trying to make sure that trustees who want to take appropriate account of long term factors such as climate risk, are unable to do that.

That is what this government has brought forward, and if the House votes it down, so be it. But, my Lords, it would be a major mistake. I beg to move.
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17:48
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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I. >> To move my amendment. >> 157 requiring the Secretary of State to conduct. >> And publish a review of unfunded

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And publish a review of unfunded public sector pensions. And I'm very grateful to my noble friend Lord Moynihan of Chelsea and Lord Moynihan of Chelsea and Baroness Noakes for their support. My amendment is the same as I moved at Committee stage, but in the light.

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Of our debate, then there is one major point I want to stress. My major point I want to stress. My motivation is in no way to denigrate public servants, nor to assert that they are not entitled assert that they are not entitled to proper pensions, nor that we should renege on entitlements should renege on entitlements already earned. My aims are to draw attention to the fact that there are no saving pots or funds from are no saving pots or funds from which these public sector defined pension pensions are paid, that with increasing numbers of public servants, the long term burden is increasing.

That when public servant DB pensions are paid, they have to be funded from current taxation and that the fact is insufficiently and obscurely reflected in national accounts, and that there's a real risk that the burden posed by these pensions will eventually come to be seen as unsupportable. Hence, my Lords, we should set up a high powered review. Given these concerns, it is unfortunate in the extreme that this Bill does nothing to address them. The numbers are big. There are over 3 million active members in the NHS, teachers, civil Service and armed forces schemes, 2.2 million deferred members and 2.8 pensioners, a total of 8 million individuals.

As people live longer and public sector employment grows. Proportion receiving gold plated defined benefit pensions will grow if nothing is done. Now, most people are aware that Britain has a huge national debt, which is growing and sits at 2.9 trillion, or 97% of GDP. However, the obligations of future public sector DB pensions is equivalent to 75% of GDP and probably growing now. When I first learned that, I was amazed. But I'm afraid it's true. And at the heart of the problem is the fact that this is a very long term problem, like like the national debt with reform difficult to reconcile with electoral cycles.

However, on the surface, things look fine in 2025 to 26, according to the Pisa and PSA analyses of 2025. As a Treasury analysis, there was 56.8 billion worth of these public sector pensions being paid to some 3.5 million pensioners. This compares to a total of employer and employee contributions of 57.3 billion, which have dramatically risen in recent years. And indeed, according to the March OBR, because of the growth in the public sector, payroll receipts from working employees are growing more quickly than the growth in pensions paid, which are operated by CPI, with net spending forecast to be 1.4 billion lower by 2030 31.

So apparently all is well, but I am afraid that that is not the case. The sums paid in pension contributions by employees do not go towards their pensions, but to pay the pensions of those already retired. There are no savings to pay future retirees. The future liability figure from the OBR in July 2025 is 1.4 trillion, somewhat lower than other estimates. But it is partly a question of how you do the calculations. Estimates on longevity and long term public sector salaries are particularly difficult to predict, and my main point today is that on any credible estimates, with people happily living longer, the numbers are frighteningly large.

Moreover, the situation may actually be getting worse as commitments grow over time and per capita growth, which could transform the situation recedes. It's unfortunate and regrettable that the scale of the problem is not properly reflected in the national accounts. As the OBR commented in their July report. Well worth a read. My Lords. Unfunded pension liabilities represent the second largest government liability after gilts, but they are not included in public sector net financial liabilities, and the scale of the problem is hidden by a combination of accounting conventions and the moves in interest and gilt rates, which have made things look temporarily much healthier than they are.

One of the most important variables in pensions is the interest rate applied to notionally invested contributions, and higher interest rates result, according to standard accounting conventions in lower pension costs and vice versa. When the facts are unravelled. Even if no new pension commitments are made from this point, that is, for all the current schemes were closed to new accruals. Existing public sector pension payments will continue to rise until the early 2060s, which on best estimates will be then amount to some 130 billion annually, with no capping mechanism of any sort.

You'll struggle, my Lords, to find any acknowledgement of that in our national accounts. More generally, comparison with the private sector is enlightening, particularly now. Most of the generous defined benefit schemes in that sector have been closed. The net effect for those under 40 is that most practice, those in the private sector will have to rely on defined contribution pensions augmented by non pension savings and the state pension. This contrasts starkly with the position of the public sector. Now, one salient and growing cause of the problem is the sheer size of the public sector.

The generous pay settlements in 2024 and the barely noticed drift upwards in grading, which increases pension costs. For example, in the civil service in 2016, before Covid, there were 420,000 employees. Today there are 550,000 and the numbers are growing and the extra pension contributions paid by a bigger workforce make the situation look better in the very short term, as I acknowledge. But this is illusory. They in fact store up trouble for the future when the pensions have to be paid out of current income.

This is very, very different to the private sector where we have funded schemes. I turn to incentives. One reason why this problem has arisen, I suggest, is that pension costs are not properly taken into account in public sector decision making. Those adding to the workforce or making people redundant rarely take into account or know what the long term consequences of their decisions are for pension costs, consequences are simply passed on to the Treasury and, in other words, onto taxpayers great and small.

So even if officials want to do the right thing, they can't calculate what it is. And that brings me on to the final area of intergenerational unfairness. We're constantly adding to the burden on coming generations, without any thought as to how the burden can be paid off. That can't be sensible or fair to those already facing the challenges of housing, of childcare, student loans and now inflation. If nothing is done once the youngsters get to pension age, the pensions promised to them will be unaffordable.

So there will be a crisis and hard and damaging decisions will have to be taken. It's becoming clearer by the day that we need much more transparency in the government accounts, and a proper and realistic look at the implications of present policies now in committee. The noble Lord Lord Davies of Brixton argued against our proposed review and cited a written statement relating to the Civil Service scheme. He quoted the Cabinet Office Minister, who was speaking on 20th of December 2011 as having given a guarantee outside of the scheme design parameters of no further reform for the next 25 years.

The noble, noble Lady, the Minister picked this up. She said that was, in effect, committing to no further major reforms in public service pensions and 12 2040. My Lords, that is a generous interpretation. Referring, we should note to the public sector, not just to the civil service. It was not a legal guarantee. In any case, such a guarantee in no way precludes examining the situation, even if such an examination ended in recommendations for action, these would take time to implement.

Much time in my experience, and I'm surprised the Minister does not see value in a review, particularly as a number of issues on accounting and transparency have already been raised by the Public Accounts Committee. I fully accept, my Lords, that all this is not the fault of the present government. Only the situation has developed over many years, but we need to act now before the situation deteriorates further. I'm conscious that it is an uncomfortable subject, but for the reasons I've set out, there is a strong case for a special review.

This is not a call for a public or independent inquiry, which would cost a deal, a great deal and drag on. Nor am I making any policy recommendations, but I do want Ministers to grip the problem and to do so with an open mind. Because of the long timescales involved in pensions and the importance of public servants, all parties have an interest. So, my Lords, I beg to move and I may seek to test the opinion of the House.
17:57
Baroness Noakes Portrait Baroness Noakes (Conservative)
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My Lords amendment proposed after clause 117 insert the following new clause is printed on the Marshalled List. >> I was just going to ask a question because I'm slightly question because I'm slightly confused. You did say that it wasn't just a problem of this government, but could you explain why the previous government didn't why the previous government didn't take this on?

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Don't worry.

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My Lord. I added my name to my noble friend amendment and I congratulate friend amendment and I congratulate her on pursuing this important topic. I just want to make three topic. I just want to make three brief points in support of my the review that my noble Friend review that my noble Friend amendment calls for. First, we need greater transparency about the current and future costs of public sector pension obligations. The government's whole of government accounts provide some information, but it's massively out of date.

The latest available for 20 2324, and the only certain conclusion from those accounts is that the value of future pension liabilities is so dependent on the underlying accounting and actuarial assumptions that the numbers have no real meaning. That's why the Public Accounts Committee of the Other place has constantly called for more information to be given on the gross cash amounts and timing of the pension liabilities. So far, the government have refused. Secondly, the real question is not about numbers.

Interestingly. Interestingly, though, those are to people like me. It is a political question. It is a fact that defined benefit private sector pensions are now unaffordable and will likely never be seen again in the private sector. How fair is it that private sector pays the taxes which fund the public sector pension benefits that cannot be afforded in the private sector? How long will the British public accept that? Thirdly, my Lords, the government's policies are biased against private sector pension provision.

The. The private sector has had to pick up the tab for Gordon Brown's pension tax raid. The regulatory burdens are imposed by the pension regulator. They've had to fund the huge deficits which emerged after the long period of low interest rates. And they've had to fund the Pension Protection Fund and the Chancellor's latest raid on salary sacrifice schemes with National Insurance was aimed fairly at the poor, squarely at the private sector. All of this ever affects public sector pensions.

But when the rules which affect all employees start to impact public sector employees, for example, judges and doctors, the government bail them out. This is a policy bias that does not stand up to scrutiny. My noble friend review is long overdue.
18:01
Lord Lucas Portrait Lord Lucas (Conservative)
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My Lords. >> To see this series of requests for reviews. I very much support my for reviews. I very much support my noble friend in amendment 157. I support also my noble friend on the front bench in 159, which you will doubtless speak to in due course, which echoes what Lord Vaux of Harrowden said on an earlier day that we really need to understand the causes of the drop in investment in the UK and address them, rather than trying to apply some layer of instruction on the top without dealing with the foundations.

And I have particular fondness for amendment 170 A My Lords, I feel that the government is as shown by the last Division and previous divisions, getting itself into some difficulty on the question of Mandation. Surely it should not be the government telling pension funds what to do. It should be their members when it comes to. Should we invest more in the UK, that should be something on which their members have a say and influence. Should we invest more in protecting us from climate change? That again should be their members.

It should not be mandation from such centrally which, however well intentioned it may be from this government has such huge potential for going wrong under future governments. Members, other people who have to suffer. If their investments go wrong, they should be the people whose views are taken into account.

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Yeah. My Lords, this this group brings together a number of review clauses on the wider, wider health clauses on the wider, wider health and fairness of the pension system, public service, pension. Can you public service, pension. Can you forgive me? This? Very sorry. It should have been turned off. My Lords, this group brings together a
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Lord Davies of Brixton Portrait Lord Davies of Brixton (Labour)
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I welcome the comments of Lord Palmer of Childs Hill on the police Palmer of Childs Hill on the police pensions. It's a clear injustice that my noble friend the Minister that my noble friend the Minister will understand. The truth is, the only objection is the classic phrase of read across the implications it has for other groups, but I can't see that that is a good reason to continue with an injustice, and I am happy to express my support for amendment one six, for I'm not in support of amendment 157 calling for a review of public service pensions, although in truth, I'd be happy to support.

I think the House deserves a proper full debate on the issue and not as a by-product of this particular bill. And if other members want to take the necessary steps to have a proper debate on the issue, it's something I would welcome, and I'm confident because I know that this review, when it takes place, will come up with the same conclusion as the last review. It's of no surprise to anyone, or should be of no surprise to anyone, that an unfunded pension scheme isn't funded.

It's inherent. It's in the name. The assumption. Why do we fund private sector pensions in order to provide members with a guarantee? There's no sort of ideological issue involved here. In order for members to feel safe about receiving their pension, they want to see the employer putting aside their money and the member's money into a fund which will be there to provide the pensions when they get to retirement. That's why we've got to fund. If the pension is being provided by the government, we can rely on the government.

We always have relied on the government. So a fund is unnecessary, a fund is not necessary. And so calculating what the fund would be if it were funded is an interesting exercise. I do it myself for a reasonable fee, but it doesn't actually tell you anything about the management of that particular arrangement. An unfunded pension scheme and the noble Baroness Neville-Rolfe and introducing the her amendment mentioned interest rates. Interest rates make no difference whatsoever to the cost of an unfunded scheme because it's not funded.

It does make a difference to the figure that you calculate at the current time, but that's a purely a ghost figure. That is not the cost of the scheme. The cost is the scheme is what arises when you pay the benefits, which is not affected in any way by interest rates. There is in this, and I look forward to the introduction from the noble Lord Viscount Younger. The amendment on member engagement. And if I'd seen this before this weekend, I would have been minded to add my name to this amendment.

I like the amendment. I don't know whether my noble friend the Minister will accept the amendment, but I think it is time for a review of how members are engaged with their pension scheme. The system we have at the moment dates back almost 30 years. Post max.well. It was the bill introduced by the noble Lord Lord Hague in 1995 Pensions Act, which established the present structure, and things have moved on so much since then in terms of how pension schemes operate.

An interesting wrinkle on the. The legislation. It was in the light of the good report, Professor Goode was asked to provide advice on member involvement in the wake of the Maxwell scandal, and he recommended that there should be member nominated trustees and. This legislation was adopted by the conservative government. Interesting fact is that in DC schemes, the Good Commission actually recommended that there should be a majority of member nominated trustees defined contribution schemes, which of course is the majority form of provision at the moment.

And if we were to adopt their approaches as part of the noble Viscount Astor review, we would see much greater member involvement in looking after their money and taking investment decisions, which I regard as a very good thing. Big changes. Since 95, there's been massive growth in corporate trustees, single corporate trustees, which of course precludes the possibility of member nominated trustees. So again, another good reason to support the noble Viscount Amendment and of course, how you have member involvement in schemes that are closed is a much more difficult issue than when they're active, are open with active members.

So I think there are good reasons for having the view of how members are engaged in occupational in their occupational pension provision. My guess is I haven't discussed it with my noble friend. My my guess is my noble friend will reject the amendment, which I think is a bit of a pity. But I will. Of course, as almost always, support the whip.
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Lord Moynihan of Chelsea Portrait Lord Moynihan of Chelsea (Conservative)
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Well. >> My Lords, I revert to the amendment of my noble friend noble Baroness Wolf and thank her for this important contribution and this important contribution and welcome the the contributions from my noble friends and the. The news from Lord noble Lord Farmer that he would be minded to support this amendment and even the. The super news from the noble Lord Lord Davies of Brixton that he too might might support some form of inquiry. I've been. I've been struggling, my Lords for some weeks now to try and think how I could persuade this House that the noble Baroness Neville-Rolfe amendment was crucial to persuade them of the urgency and.

And really dangerous situation that we have got ourselves into with public sector pensions, because we discussed this in committee, the noble Lord Viscount Thurso. Gave a speech in which he seemed to believe that these pensions were necessary because pay was, I think the number given was 30% below that for the private sector. Whereas as as I think we know, studies show that public sector workers get about 6% for the same job as a private sector worker before these generous pensions.

Now, yes, a commitment was made for these pensions. So was it made to the civil servants of Greece, of Ireland, and suddenly there was no money and suddenly those commitments were reneged on. We don't want to get to that situation, noble Lords. But the fact of the matter is that although the mood of the House is always to say, look, these people are working hard, they need a good retirement. There's a wonderful security in being promised a salary increasing with inflation.

That's about two thirds of what you were getting before until you die. All of that is wonderful and we should be generous. It would be an injustice to take it away. But the fact is, my Lords, this House also is a scrutiny house that looks at the finances of this country, not just at where we can give more money to people. I've listened early this afternoon to people arguing for more money to be laid out. It's always what we tend to be quite good at.

But the fact of the matter is, my Lords, we now know there is no money, there is no money when when we can't afford to spend enough on defence, when my noble friend the noble Lord Elliott of Mickle Fell said we are now paying out more in benefits than we are receiving in income tax. When in area after area. My Lords, there are calls for money that is not available and the government quite rightly rejects those calls for more money to be spent.

There is no more money. So let's look. Can we afford these public sector pensions? Let's let's let's look, for example, at the numbers that my noble friend Baroness Neville Rolfe came up with. Totally coincidentally, we're paying about £57 billion out and we're putting contributions of about £58 billion in. Now, I've spoken to many civil servants, public sector workers who have harangued me and said, oh, my pensions are short. I'm paying in every year. And I say to them, well, well, do you know that your money is being used to pay people who've already retired? They say, no, no, that can't be right.

And I show them, I showed them the numbers, I explained to them, and they are appalled to discover that no money is being put aside to pay those pensions, that they have been promised. So, so, so even the public sector workers are being fooled, fooled by this, my Lord. Now, let's say we did the very minimum thing and we took those contributions by public sector workers and we ringfence them and we said, now that's yours. We're not it's not going to be used for anything else.

It's not going to be used to pay out other people's pensions. We're just going to take your contributions and ring fence them. No other change immediately. My Lords, there would be a £57 billion black hole in the nation's accounts, which would reflect the reality of the situation. Even on a pay as you go measure. Now imagine, you know, we've heard all about I, we had to endure months, even years of the £20 billion black hole that the previous government was meant to have left.

For, for the government. Oh, it varied. It was 20. It was 40. You know, it was it was a moveable feast. Never was it anywhere near as high my Lord's as 57 or £8 billion, which would immediately occur. What would what would the government do then? I it's not their fault. It's not their fault. This is a long standing problem. But that. What I've just explained is the reality of the situation, which we're all carefully ignoring. Now, let's say we went even a little bit further and said, OK, we're going to stop these defined benefit pension plans right now.

We'll secure your benefits as of now that we promised you. But from now on, those contributions that you put in will be given to you for defined contribution scheme, not a defined benefit scheme. Just like as has had to happen in the public sector, because that's all a proper look can really afford in the private sector. Excuse me, that's all we can afford. OK. If we did that, if

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we kept our promises that we made so far. Lord Low might I ask the noble

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Lord Low might I ask the noble Lord what is the notional employer's contribution he's putting into his calculation?

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putting into his calculation? I'm putting the same contribution in that is made by contribution in that is made by employers, but by by the government right now. Right. So you carry on doing that. You carry on doing that, and you've just now got a bunch of obligations for past promises. And in future, everybody has a a defined contribution scheme, but you've got the defined benefit scheme up to now by 2060. As the noble Baroness Neville-Rolfe told us, those obligations will be resulting in £130 billion of annual payments.

Even if we stop now, even if we stop now, those will. If the economy grows by a considerable amount more than it's been growing in the past few years, they will amount to 3% of GDP being paid to pensioners of the public sector. Now, if you think that £58 billion black hole is bad enough, fancy that 130 billion black hole that you have left to future generations. Because we fail to act, because we refuse even the reasonable request of the noble Baroness to have an inquiry.

And if we go beyond that, if we go beyond that and actually keep each year on with these schemes, then that 130 billion will be dwarfed by a far larger amount, because we're paying civil servants more, we've got more civil servants, and they are living longer. And so the payments each year will rack up and rack up until at some point it'll be like Greece or Ireland. I mean, right now, my Lords, the, the, the bond markets aren't at all impressed with us both.

The tenure of eight and the 30 of eight are well above that. Those rates that you claimed were evidence that Liz Truss crashed the economy. So. So if she did then goodness, you've crashed it much more. So. So the the the bond markets are saying we've got you on watch. And if this goes on, if you keep on with the deficits that you've got, then you're going to get into considerable trouble. Now my Lords, we have the opportunity to think about this.

We have the opportunity at least to look at it. And so I hope I hope that noble Lords will agree to this amendment. And I hope, by the way, that if there is an inquiry, it is headed by somebody who is not in receipt of such a pension, because in the private sector we have a rule if you have a great employee and they come to you and they start talking gibberish, strangely, you think, oh, it's going to be about their remuneration because people, when it comes to their own remuneration, find it very difficult to be realistic and logical and fair.

So I hope not only will the government accept this, this, this amendment for an inquiry, but it will put somebody in charge of it who is not a captive of that public sector

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pensions system. If I may very briefly just rise to say that I will support our front bench Baroness Neville-Rolfe, because I think it's quite a wise thing to have an inquiry. I wholly reject the argument of the noble Lord Lord Moylan has just made. I think his maths was suspect and his think his maths was suspect and his conclusions are wrong. I have a son who is a. Well, he's actually now a special constable. Until very recently he was a consular.

I have a daughter in law's a constable, and I have another son who's a primary school teacher. And as I said to him then I say, now tell it to them that their pensions are not part of their remuneration. And I say, you'll be looking for teachers and policemen and nurses till kingdom come.
18:22
Viscount Younger of Leckie Portrait Viscount Younger of Leckie (Conservative)
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My Lords, I want to begin by welcoming the amendment in the name of my noble friend, Lady Neville Rolfe, because it addresses a matter of real and enduring importance the long term affordability, the intergenerational fairness, fiscal sustainability and accounting treatment of public service pension schemes. We had a powerful speech from her at committee and from my noble friend Lord Moynihan, and they gave two further powerful speeches just now. Fundamentally, this amendment asks the government to examine how very large sums of public money are being managed, how liabilities are being accounted for, and what this means for the sustainability of public spending over the long term.

These schemes represent a significant and growing commitment, and it is entirely right that Parliament should have a clear and transparent understanding of their implications, both for today's taxpayers and for future generations. The figures seem to be stark, as set out by the members of the amendment, and some strong arguments have been put backed up by evidence. But I very much noted the remarks from the noble Viscount Lord Forsyth and perhaps some further debate and discussion should go on about the veracity of the figures after this debate.

Indeed, when the government are choosing to place additional burdens on private pension saving through measures such as the National Insurance changes and restrictions on salary sacrifice, in part to sustain these very substantial public sector commitments, then the question of balance of fairness and sustainability does become more and more pressing. So for these reasons, we strongly support my noble friend's amendment and we will support her should she seek to divide the house on it when it is called. Turning to the other amendments in this group, including those in our names, they seek to address two further fundamental issues.

First, the question of pensions adequacy, ensuring that reforms are judged by their real world impact on the retirement incomes of individuals. And secondly, the question of why pension funds are not investing more in the United Kingdom. And this is a critical issue which was covered at committee, not least by the noble Lord Lord Faulks. If the government wished to see greater domestic investment, the answer surely, is not to reach instinctively for the levers of mandation, but to understand and to address the underlying barriers, whether regulatory, tax related or rooted in fiduciary duties.

And this was a point that was made when we discussed the issue only last week as well, and I'm glad to say, voted to remove this dangerous power from the bill. And this was repeated today by the noble Lord, Lord Lucas, I should say. So. This is essential work that needs to be done. The government are planning to intervene in the system without first properly understanding why it is behaving as it is. There is a risk that the government are seeking to correct the symptoms of a problem that they have not even diagnosed, rather than addressing its causes.

And we have been clear from the beginning that the government must not mandate investment, but we have also been clear that we should understand why we aren't seeing the investment we need in our country, and our amendment allows the government to do that work and then take the responsible and necessary steps to start promoting investment in a responsible way. I will close my Lords by speaking to amendment 178 in my name and that of my noble friend, Lady Stedman-scott. But I am also grateful to the noble Lord Lord Lucas for his work on this amendment.

I am also grateful for the support, perhaps the unusual support from the noble Lord Lord Davies of Brixton on having a review, which is our wish on member engagement on rights in Pension schemes. Amendment 178 raises the fundamental question of agency, namely the extent to which members of pension schemes are able to influence the governance and decision making of the schemes to which they belong. And we believe this is an important issue, and it invites the government to reflect on whether pension savers truly have that meaningful voice in shaping their financial futures.

It is right that we consider not only the existence of engagement mechanisms, but whether they operate effectively in practice, particularly in relation to investment decisions and scheme governance. I will therefore listen very carefully to the Baroness Sater Minister's response on these points. I'm grateful to all noble Lords for introducing their varied amendments, calling for a series of reviews. I've been trying to keep track and I think we were now up to 23 reviews called for in committee, and I think we're up to 14 amendments that report calling for
18:27
Baroness Sherlock Portrait Baroness Sherlock (Labour)
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reviews. If you pursue all of them, I know the party opposite would like to have fewer civil servants. like to have fewer civil servants. Half of the ones left are doing reviews, but let me at least try and work through what we have here. Let me start with amendment 157 for the noble Lady Baroness Neville-Rolfe, which proposes a review of public service pension schemes. And as we discussed at schemes. And as we discussed at committee, a major review took place through Lord Hutton's Independent Public Service Pensions Commission that happened under the coalition government in 2015.

The reformed schemes were introduced from April 2015. Just to remind the House of the changes that were made then to make the schemes more affordable, the scheme design changed from final salary to career average pension ages were increased to state pension age for most schemes and to 60 for the police, firefighters and armed forces. Member contribution rates were increased across the scheme except the Non-contributory Armed Forces Pension Scheme and other aspects of scheme design were modernised, for example supporting more flexible retirement.

At the time, it was estimated these reforms would save £400 billion over 50 years. My Lords, the noble Baroness Neville-Rolfe asked about the 25 year guarantee. The signal was that this doesn't mean, of course, that pensions cannot be changed in any way until 2040. Nor was a guarantee written into individual members, but essential elements of the reforms introduced in the 2013 PSP were designed to last for at least 25 years, and a high barrier was set out in that act. For any proposed changes to the key design elements, including a requirement for consultation with scheme members or their representatives, with a view to reaching agreement to help deliver that stability.

My Lords, the just look at some of the specifics that have been raised. Firstly, just to say those reforms have only been fully bedding in from April 2022 and their full effects will be seen over the coming years following reforms introduced by the noble Ladies Party. Schemes now meet the benchmark set by the Hutton Commission and the public service. Pensions continue to form an important part of overall public service public sector remuneration which is taking account in pay setting, and that was a key point made by the Honourable Viscount Viscount Thurso.

Pay is part of pension, pension is part of a pay package and is taken account of in the review bodies and making those judgements on pay well. As much of the information that's called for in this review is already published on a regular basis. The OBR published a forecast of in-year balancing payments between the Exchequer and the unfunded public service pension schemes and projections of long term spending as a share of GDP in its fiscal risks and sustainability reports. And as I indicated at committee, these projections show spending falling over the long term from around 1.9% to 1.4% of GDP, indicating the schemes are expected to become more, not less, affordable for future generations.

In addition, valuation reports and the whole of government accounts set out the different accounting treatment of scheme liabilities and how to interpret the headline

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figures and on that point. Does the Minister acknowledge

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Does the Minister acknowledge that in 2012, the report, the Hutton report, said that the cost Hutton report, said that the cost would fall, as in an uncanny replication of what she just said replication of what she just said to 1.2%, and that it did not. It remained at around 2%. It says now remained at around 2%. It says now that it will fall to 1.2%. But as I said, these are people with skin in the game and, and their, their their record in forecasting.

I hope she will agree is not strong.

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My Lords, I'm going to go back and read Hansard because I very much hope the noble Lord does not much hope the noble Lord does not just accuse the OBR of having skin in the game. Who else? If it wasn't the OBR, maybe he'd like to write the OBR, maybe he'd like to write to me and tell me who it was accusing of having skin in the game, because I don't recognise the point that he just made. And we continue on the point on the whole of government accounts, because that was raised, I think, by the noble Baroness, Lady Neville-rolfe, my Lords, the whole of government accounts they report presenting the liability in accordance with the International Financial Reporting Standards.

There are no plans to change that approach and I don't think there should be. However, my Lords, I recognise that members of the pack asked if the liability could be presented on a more permanent basis to show how it would change in the absence of changes to the discount rate, to make it easier for people to understand it. And I did say at committee that the Treasury is exploring options to present pension liabilities on a constant basis. But to be clear, that presentation will be supplementary.

It wouldn't affect the underlying pension liability calculations in any way. Of course, all the way that they're preventing the financial statements, but they are looking at whether there's a ways to present that in a supplementary way to aid understanding. My Lords, given the reforms have already been implemented and all the relevant information is already available, I just think a government commissioned review would largely replicate and collate existing material. I also need to address briefly the point about unfunded schemes. Of course, it's true that the scheme's references are unfunded, but unfunded doesn't equal unaffordable and unsustainable.

I set out the costs are projected to fall as a share of GDP. It's also a long standing government policy not to hold assets against liabilities that sit fully under the control of the Exchequer, as I explained in an earlier group. Moving from unfunded to funded provision on a like for like basis would simply require additional borrowing to build up assets and wouldn't improve the overall fiscal position. However, if the noble Lord Lord Moynihan wants to recommend cutting the value of public sector pensions, that's a different matter.

And that's not what we are discussing here today. And obviously that's something that could be discussed within the House of Lords. Of course, factors such as longevity was mentioned and that can affect costs over time. But again, the current framework is designed to capture and manage that. Changes and assumptions are reflected through scheme valuations which affect employer contribution rates. A point flagged up by the Viscount Viscount Younger and the cost control mechanism then operates to require adjustments to member benefits if costs move outside the agreed corridor.

So, my Lords, the government does not accept this amendment and it does think that the previous government had this felt important. It reviewed, reformed the system itself. It had 14 years to be able to make a decision. It's been left government less than two years ago, and now all of a sudden it has to be done on our watch. But we don't think that is the appropriate way forward. Let me turn to the other amendments in this group. Amendment 164 from the noble Lord, Lord Palmer. I know he recognises we had an exchange in committee, but since others have raised it, I would simply say that these rules were a feature of legacy public service pension schemes.

As I know he knows, those legacy schemes are now closed and members are accruing benefits in reform schemes that do not contain those provisions. The government generally does not believe it's appropriate to improve retrospectively the terms of previously accrued public service pension schemes, consistent with the approach taken when the reforms were introduced under the coalition government. In response to the questions to the noble Lady Baroness Altmann, I think that civil service position is similar to the police, the NHS. I believe forfeiture applies to those who left service before April 2008.

But if I've got that wrong, I'll write to her. But I believe that's the position. So I hope that's cleared that up. Amendment 158 from the noble Viscount Viscount Younger also seeks to reduce statutory requirement. The Secretary of State to conduct a review on retirement incomes. Now, I understand the the attention, but again, as I explained at committee, this bill contains a range of reforms which will be implemented in phases over the next decade. A review in the next five years simply won't have allowed many of the reforms at any time to take effect.

As we know, changes to retirement outcomes can take a long time to have effect as people build savings and then retire, someone else may simply don't think that's appropriate. An updated version of the impact assessment, as I said in a previous group, was published, and when the bill entered this House and it set out details of our monitoring and evaluation plans, and the monitoring has already started. Research is underway with employers, DWP, the Treasury and the regulators are scoping out further data and research plans, developing key metrics across the core aims of the bill and committing to regularly monitoring and publishing, as well as having new research to fill evidence gaps.

Furthermore, the measures contained in this bill will help build greater and more consistent data, particularly through the value for Money framework, helping to create a strong evidence base to monitor and analyse trends and Lord Spellar. We consider it appropriate to keep measures under review. We've included a review clause such as the review of any exercise of powers under section 28 C in clause 4013 of the Bill that is proportionate and tailored to the specific interventions, and I think that's the appropriate way forward. And I'll set out in my letter to noble Lords on the 4th of March.

The Pensions Commission has been tasked with making recommendations about pensions adequacy and support for those approaching retirement. It will publish an interim report this spring, setting out the evidence base and strategic direction for its work by Lord Doyle and final recommendations early next year. So a separate statutory review would create confusion and overlap and is not helpful. Amendment 159 from the noble Lord Viscount Younger wants another review, this time on the barriers to UK investment by Lords. I recognise what the noble Lord wants as assurance that the government is taking a holistic approach to increasing UK pensions investment.

I'm not going to relitigate all the other things he brought up, some of them relevant to this bill, some from other bills. But my Lords, the government, of course, has already completed a detailed review of pension investment. The Pensions Investment Review. The clue was in the name, consulted widely and considered a range of investment barriers it reported last year and led directly to many of the measures in this bill. The review considered not only the questions of scale and asset allocation, but the regulatory environment, fee structures and wider factors that affect how pension schemes invest.

It was a serious and comprehensive piece of work. The bill already requires the government, if it decides ever to use the reserve power to consult on, publish a report, and that will be the time to consider the investment landscape. My Lords Amendment 17OA from 178 from the noble Viscount Viscount Younger wants a review on how how the views of members are considered in the effective governance of pension schemes, because pensions are a significant part of workers pay and their future security in retirement.

So it is important that the voice of the member is heard and considered in the governance of schemes. That's one of the reasons we focus so much on the role of trustees and their duty to act in the best interests of members. Well, performing pension schemes already clearly take account of members views through their governance and engagement processes. That includes member nominated trustees. As mentioned by my noble friend Lord Davis, it includes regular surveys and consultations and feedback gathered through helplines, portals and member meetings that helps trustees by ensuring decision making is better informed, more aligned with member needs and more credible occupational pension schemes.

With 100 or more members are required by regulations to publish a statement of Investment principles and an annual implementation statement setting out their investment policies, stewardship approach, including voting and engagement, and the regulations also require trustees to disclose the extent to which, in non-financial matters such as ethical or personal preferences, are taken into account in investment decisions. These disclosure tools are important for members views because they enhance transparency, they strengthen accountability, and they give a structured way for trustees to explain how member driven considerations have been reflected in their policies, and guidance from DWP helps trustees better articulate how such views have been considered.

When they choose to do so, we will run pension schemes, recognise members have different investment needs and respond to them. So my Lord Swire trustees consider member views and they must do. They ultimately must balance these against their fiduciary duty to act in the interests of beneficiaries. My Lords. But finally, I think on that point, the government has also recently consulted concluded a consultation on trusteeship and governance in trust based schemes, and that consultation emphasised the importance of ensuring members voices are better represented in decision making and sought feedback on how we can ensure the voice of members are heard in the market.

My Lords, there's a lot of reviews being called for here. I hope I've explained why the government is doing a great deal in all these spaces already. I welcome the debate, but my Lords, I would ask noble Lords to withdraw their amendments.
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None Portrait Amdt. 161 Viscount Thurso (Liberal Democrat)
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another review, I apologise. Can I just say at the outset to the Minister that I do recognise how much the government have done in many of the areas that we have been pushing and notwithstanding my pushing and notwithstanding my sometimes ingratitude, that is actually greatly appreciated. And also, again, I appreciate the talks also, again, I appreciate the talks that she has had with me, although I think I think I'm still in the tea and sympathy department and no further forward, my Lords, this amendment seeks to give effect to recommendation two of the PAC report of 2023.

The PAC wrote the former civil servants who transferred their pensions to a technology when it was privatised were badly informed by government at the time, with some losing considerable sums, and their recommendation was the government should ensure that members complaints about the a e t pension case can be independently reviewed, for example, by a relevant ombudsman. Now there is no relevant ombudsman, but it would have to be reviewed by somebody else in committee. When I raised this matter, the noble Lady, the Minister said to me and I.

If I may, I'll just reiterate what she said. I will not go into this in detail, but I'm advised that the government Actuary's Department offered to. Members at the time did not imply a guarantee. The Gad note referred specifically to a risk that the Iati pension scheme could fail, and did not seem to compare levels of risk across the different options. The note was not intended as advice, and made it clear that the information provided was not intended to suggest that any one course of action was better than another.

It did not take into account people's individual circumstances, and the note indicated that people should seek their own independent advice. But since then, I had the opportunity to actually get hold of a copy of the guard note, as well as the two brochures that were issued at the time by the UK HR fund. And I'd like to go through the points that the Minister made. Firstly, she said the note did not imply a guarantee. Now, it is correct that the note did not offer a guarantee, but far more importantly, it made no mention of the material change implied by the loss of the guarantee for anything that was transferred into the new scheme.

Every professional I have spoken to has said that this is material, a material and relevant factor which should have been in the note and its submission is surprising. The second point she made was the note referred specifically to a risk that the a e t pension scheme could fail. I can find no specific reference to failure in that note, other than a statement at paragraph 3.2.3, which says the effect of preserving your UK benefits is that your total benefits will be payable from two independent sources.

Whilst it's unlikely that the benefits promise made by either the UK, EEA scheme or the EEA scheme would ever be broken, it is still more unlikely that both schemes would be broken, and this could be viewed as a reason to opt for preservation. However, this consideration should not normally outweigh those in relation to salary and inflation. I would suggest that no one reading that note would consider this a specific reference to a risk of scheme failure. Furthermore, the Minister went on to say it did not seem to compare levels of risk across the different options.

The note sets out clearly the pros and cons of every option, and in doing so, makes it very clear how special the special transfer option was. Further, it makes it clear that the personal pension option would be more costly and risky. And at 311 specifically advises that transfer to the new Iati closed scheme was likely to offer the best financial result, and it does so in such strong terms that I feel I must quote them. The main advantage of opting for the special transfer terms is that benefits based on transferred service in the Iati scheme are likely to be higher than preserved benefits in the UK scheme, and this is because the former will be based on your earnings at the time you leave the scheme.

Whilst the preserved UK scheme benefits will be based on your final earnings in the UK scheme plus the cost of living, the two reasons why your earnings at retirement are likely to be greater than your current earnings cost of living increases. Both of these reasons apply more strongly the further away you get from retirement. The first is that over the long term, a standards of living increase. General pay levels increase faster than price levels. And the second is that your pay level may increase further still as a result of performance and promotional award, the Minister said the information provided was not intended to suggest that any one course of action was better than another, and it is true that at 113 the statement that statement is made.

However, notwithstanding that statement, if you read the note as a whole, it's pretty obvious that the transfer scheme, which was time limited, would be the way to go. Finally, the note indicated that people should seek their own independent advice again at 113, the note states if you're unsure of the most suitable course of action, you should seek independent financial advice which should take into account your particular circumstances. But given the note had been prepared by the government actually department verified by the UK and is pretty unambiguous advice to Trump for regarding the transfer.

This statement being qualified by. If you are unsure I would submit renders it meaningless. Having read the documentation myself and looked at it, it seems to me that this is actually a straightforward case of mis selling and that at the time it wouldn't happen. Today. We know that the rules have changed, everything has changed, but at the time, insufficient evidence or insufficient advice was actually given and people made choices which they are paying for today. Now, the fact that they're paying for those choices is because a e t went bust, and that is not something that should be treated any differently to everybody else.

But the fact that people transferred their pensions. And as I told the Minister, in one case, a doctor who worked in the UK, EEA and was transferred out to EA technology had previously been in the National Health and she took her so, so sure was she. By what she'd heard, she took her pension from the NHS and put it into EA technology because it was part of the Civil Service club and remained in it up until, I believe, 2002 or 3.

So, my Lords, the case that I'm making and the reason why I think a review is necessary, is that this was a case where the case made up at that time by the UK, EU was not accurate. The reassurances that were given by the then Minister at the despatch box in this House in 1995, I can't say I remember him saying these words, but I remember him very well. Lord Fraser of Carmyllie gave an assurance that these pensions would be on the same terms, and I am of the view they are not so.

My Lords, I would seriously ask the government to to look at this. Now, I'm not actually going to press this 161 to a vote, because I think I've got the message from all around the House that we're not into reviews, but I will do is the previous amendment I put, which I had laid consequential to this one, six two, which is the remedy in part for the wrong. I will want to test the opinion of the House, but I hope the Minister can at least say something not too discouraging in respect of 161.

With that, I beg to move.
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Has Has taken Has taken action Has taken action to

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The The question The question is The question is that The question is that this My My Lords, there have voted. Contents 198. Not One. One. Amendment One. Amendment 163. One. Amendment 163. Lord One. Amendment 163. Lord Farmer not moved. Not moved, not moved. One. Six. Four. Lord Farmer not moved. Second. One six. Five. Somewhere.

One six. Five. Lord Farmer not moved. 166 is withdrawn and 167 Baroness Hayman not not moved.

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Earlier debate not moved.

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OK. One six. Seven. Not moved. One six. Eight. Oh, sorry. The One six. Eight. Oh, sorry. The pages are sticking. Is Baroness Altmann and withdrawn. So we come to 169 Baroness Stedman-Scott moved.

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The question is that 169 be agreed to. As many as I have that opinion will say content Of the

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contrary, not content. Not content. The question will be decided by division. I will notify the House division. I will notify the House division. I will notify the House when voting is open. Voting is open. The The question The question is

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The question is that amendment 169 be agreed to. As many as 22nd, ten. Ten.

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Ten. Not content. The contents of Noes to the right by the throne. Not contents right by the throne. Not contents

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No, No, no. The The amendment. The amendment. The amendment. You You Bishop You Bishop of You Bishop of And. And. When And. When I And. When I did And. When I did

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The question is The question is that The question is that this My My Lords, there have voted content 188 not content 155 so the contents have it. Content. My Lords amendment 170 Lord Sharkey not moved. Oh, sorry. I'm so.
19:37
Lord Sharkey Portrait Lord Sharkey (Liberal Democrat)
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Nice. Try. Nice try. Try.

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I will speak. To amendment 170, which is in my name in the names of Baroness name in the names of Baroness Bennett, Griffiths and Heyman, and I'm very grateful for their support and look forward to hearing their and look forward to hearing their contributions. I've reflected carefully on the helpful feedback I received at Committee stage from received at Committee stage from the noble Lady, the Minister and as a result, amendment 170 does not attempt to mandate pension schemes to exit from any investments.

It aims to be helpful in addressing the minister's acknowledged concerns about thermal coal investment, in particular, and in proposing solutions. Along the lines she identified. And I briefly remind noble Lords of the problems we face. Research by the Finance Innovation Lab, an independent charity jointly established by the Institute of Chartered Accountants and World Wide Fund for nature, shows that UK schemes still invest more than £10 billion in companies with significant operations in thermal coal. That is enough to cancel out all the reductions in greenhouse gas emissions achieved by decarbonisation in the UK.

Since the grid in the UK since 2019. So on the one hand, we have the government phasing out thermal coal at home, cutting off funding by ending export guarantees and encouraging other countries to exit from coal fired power. On the other hand, we have the government defaulting savers into pension savings, compelling employers to contribute, and providing tax payer top ups to pension schemes to invest in thermal coal extraction and coal fired power in those same countries. The Minister said that the government recognises that some funds could and should be doing more.

She recognised the high financial and climate risks associated with thermal coal investment. She welcomed industry led reductions in Co exposure and reiterated that the government wanted to see more of this. The Minister argued that the right levers were better governance, of which there are already quite a few duties in law and better data and better transparency, of which there is currently very little. Indeed, there is so little that the government, in its October 2025 Responses to Written questions, the.

Tabled by my hon. Friend Manuela Portugal in the Commons showed. It really does not have a good handle on the data. The same is true of the Pensions Regulator in its February 2026 responses to the Minister's hon. Friends Doctor Simon and Neil Duncan Jordan. The responses indicated that neither DWP nor TPR had carried out an assessment of the level of UK expansion, investments in thermal, coal or other fossil fuels, the expansion of fossil fuel use or the risks of any of those assets becoming stranded.

Our amendment reflects on the government's ambition and the current level of insight, and seeks to plug the gap. Subsections 1 to 3 focus on the private sector occupational schemes. They make it clear that the proposed duties should be seen in the context of climate risk to savers, not ethics or disapproval. Subsection two gives the Secretary of State a duty to collect data or estimate an annual report. The amount and change in the amount of relevant assets held by occupational schemes.

Section 41 BB outlines what constitutes a relevant asset. Importantly, neither section requires government to draft, consult on and tailor regulations. But it could do this if it wanted to. An obvious disclosure vehicle would be the annual implementation statement published by most pension funds, but a simpler method, which would be less burdensome for the whole industry, would be for Ministers to write annually to some or all of the larger schemes and simply request the data. And in fact, DWP Ministers have done this before several times, including under the conservative administration, in relation to climate risk.

Just to extend, the government does not know the level of exposure or the level of risk. Not only does it not know how fast it is declining, it doesn't really know whether it's declining at all. This amendment would allow government to satisfy itself and to satisfy savers, employers and taxpayers that the that the pension schemes are putting into thermal coal. The amount that pension schemes are putting into thermal coal is going down. It also allows government to provide a nudge, especially to the larger schemes to remain invested in thermal coal, and will likely be monitored every year to consider their level of exposure and to lower it significantly.

Government will be able to set an expectation of thermal coal decline and exit if it is not satisfied that this has been substantially achieved. To consult on what further measures might need to be taken in the medium term, the issues are not limited to thermal coal, which is why subsection two of section 41 BB gives the Secretary of State a duty to consider whether to expand the range of assets they might request information about, such as hugely destructive and economically marginal activities like tar sands or Arctic drilling, or new issuance issuance by firms expanding or exploring for new fossil fuels.

Subsection three of the new section 41 BB gives the Secretary of State the power to make regulations to achieve reporting again if they wish, through an addition to the implementation statement, but it doesn't mandate it. Subsection four of new section 41 BB makes clear that we are talking about thermal coal, not coking or metallurgical coal used in steelmaking. And finally, subsection three sets out the appropriate oversight provisions. Taken as a whole, this amendment relies on governance, better data and transparency.

As the Minister said it should. It does not direct pension scheme investments. It would not impose burdens on smaller schemes. It's only necessary to survey large and well resourced schemes to get an estimate of relevant assets, because that is where the money is. It does, however, allow the government to put a marker down to say, we are concerned about these investments. We want you to tell us how much you're investing so we can assess whether there is a problem and what might need to be done.

I know from committee that the Minister shares my concerns about the high risk investment and thermal coal, and she would like schemes to do more. The amendment identifies a way forward, which I hope meets her tests. It does not prohibit any investments. It does not undermine trustees ability to exercise informed judgement or require them to act against the interests of their members, but it will provide the information required to assess the progress, if any, towards the reduction in pension funds, investments in thermal coal, and I look forward to hearing the minister's response and.
19:44
Baroness Griffin of Princethorpe Portrait Baroness Griffin of Princethorpe (Labour)
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After clause 117, insert the new >> After clause 117, insert the new clause as printed on the master list. My Lords.

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list. My Lords. I have added my name to amendment 170 and will speak briefly in support. Lord Sharkey has comprehensively set out the amendment and following very helpful feedback from my noble friend, the Minister. I will simply respond to a few points which were made by other peers at committee. It was suggested that the UK is a small player in thermal coal and won't make a difference. We actually have the largest volume of pension assets in Europe and the third largest globally.

There isn't a limitless demand for high risk assets. So were the UK pension sector to sharply lower its exposure, this wouldn't lead to a rush for companies whom everyone knows to have a limited lifespan, as was said, and I quote, it seems absolutely bonkers that new money is going into new coal mines. It doesn't make sense in terms of protecting the environment, and it doesn't make sense economically to invest in stranded assets. And these investments are not only in equities but also in bonds.

You to buying equities on the secondary market may not be instant, but over the long term it is likely to support the reduction in the cost of borrowing or increase the returns on equity funding. This ultimately supports more investment. The Transition Pathway initiative established by the LSE, has assessed the decarbonisation plans of the top coal mining firms after two decades or more of engagement. None are remotely close to being aligned with the Paris Agreement and, as was admitted, opportunities for future company level engagement are strictly limited by the threat of litigation in the US.

Indeed, the suggestion that an exit strategy from thermal coal inevitably means exit from tobacco, sugar or energy using forms is scaremongering. We should be judging the amendment on the basis of what it does. And as my noble Lord Sharkey has said, amendment 170 does not require an exit from anything. It only seeks to give government the tools to monitor and manage a risk, which it has quite rightly admitted it does not currently have a handle on. Risk management is a part of fiduciary duty from investments with financial and climate risk.

My Lords, every child deserves to breathe clean air. I look forward to hearing from my noble friend, the Minister. I'm extremely grateful for her genuine engagement so far about the government's plans for further action in this area. Thank you.
19:48
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (Green Party)
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Lords. It's a. speaking to amendment 170 and like the noble Lord Lord Sharkey, I want to reflect back to what was said at committee when the noble Lady Minister said she shared the cross party concern about pension scheme investment in thermal coal. She recognised the high financial and climate risks and welcomed some industry led reductions in exposure. And she said the government would support and challenge the sector to rising to that task. And that better leavers included the levers to do that included better data and better transparency.

That's what this amendment is aiming to deliver because the transparency is just not there now. Now, transition plans are often cited as a solution to this. These were a manifesto commitment in July 2024 to meet Paris alignment transition plans. But 18 months into this Parliament, there's not been a response to a consultation which took a year to emerge and more or less asked, should we do all of this? Recently, the Pensions Minister, Torsten Bell, said that transition plans for pension schemes were not a priority, which is reinforced by the fact that they're not taking.

The government is not taking powers in this bill. They've also been suggestions that consolidation will fix all of this. But in fact, an analysis by Corporate Advisor Intelligence shows that the DC multi-employer schemes most commonly used for automatic enrolment are in fact, the largest of them are more invested in thermal coal than the mid-size schemes who would be consolidated are less exposed. It's. And I think it's also really worth stressing that there is a precedent, both for Ministers directly writing to the largest pension schemes to understand their responsible investment practices, and for the government seeking non-statutory expectation about pension schemes, investment practices.

Now the front bench in front of me probably won't thank me for pointing out that when they were in government, they set out a non-statutory expectation. In the 2019 green Finance strategy that pension schemes and others would disclose climate risks in line with the Taskforce on Climate Related Financial Disclosures by 2022. Later, the pensions Minister, then pensions Minister Guy Opperman, wrote to the 50 largest pension schemes to request their policies and understand their climate investment strategies. But there is actually, you know, that was what the previous government was doing.

Surely this government does not want to be behind that. And it's clear that there is actually a latent appetite to go further. Two thirds of the audience, mostly representatives of pension funds at the recent pensions UK conference debate between Caroline Lucas. My former hon. Friend and Lord Gove of this House agreed that pension funds were not now doing enough to tackle the climate change risks. These are, as I said, at committee, financial risks as well as climate risks.

So we just simply are not taking the steps that are needed. What this amendment does is provides a way forward. A way forward that the noble Lady, the Minister suggested at committee. She wanted to see. So here it is. So I would hope to hear positive news from the government on this amendment.
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Baroness Sherlock Portrait Baroness Sherlock, The Minister of State, Department for Work and Pensions (Labour)
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My Lords, I am grateful to the Lord Lord Sharkey for introducing his amendment. 170. It is good to have the opportunity to discuss again the climate related risks with which pension schemes need. All investors are grappling. And while I recognise the intent behind this amendment, the government believes the existing framework for responsible investment already enables trustees to identify, assess and manage climate related financial risks. Introducing further reporting duties at this stage risks additional burdens without clear benefit. Trustees of occupational trust based schemes are already required to take account of financial and material considerations, including environmental, social and governance factors.

The statement of Investment principles must set out their policy on these matters. The larger schemes are also required to publish annual climate related financial disclosures, including total greenhouse gas emissions from their portfolios and carbon footprint metrics. These provide trustees with important information to support investment decision making. Equivalent disclosure requirements apply to FCA regulated providers, and the LGPS has its own requirements on explaining how ESG factors influence investment decisions. There is evidence that this framework is delivering real progress, and Lord Lord Sharkey cited data from the Finance Innovation Lab that more than 10.5 billion of UK pension savings remained invested in companies involved in the extraction or burning of thermal coal overseas.

I am sure he is aware that figures based on just three pension providers and is not necessarily reflective of what members are invested in. Recent corporate advisor data indicates that around 65% of UK occupational schemes now have a net zero target, including 18 of the 19 major DC master trusts. DC schemes have reduced the carbon footprint of their investment by nearly 20% in the last year. Many schemes are also taking decisive action on thermal coal, for example, USS rail, Penn and Border to Coast exclude companies with significant revenue from thermal coal, while Neste supplies a 10% revenue cap.

While this progress is welcome, the government agrees that further data on exposure to thermal coal and other fossil fuels will be helpful. We expect trustees to continue strengthening their disclosures, particularly around the actions they are taking to reduce such exposures within the existing responsible investment framework. Complementing these expectations for stronger disclosures, the Pensions Regulator is deepening its supervisory approach by requesting increasingly granular investment data from schemes. My Lords, the government is taking significant steps to enhance sustainability reporting more broadly.

DTE has published final UK sustainability reporting standards, closely aligned to the International Sustainability Standards Board framework. These are available for voluntary adoption and the government will consult later this year on potential mandatory use. DWP is also reviewing the Taskforce on Climate Related Financial Disclosures, reporting obligations through a comprehensive evidence gathering exercise with conclusions to be published later this year. My Lords pension schemes are already helped by the UK's Transition Plan task force established by the previous government, having published a gold standard framework to help companies produce credible, consistent and decision useful climate transition plans aligned with net zero goals.

The taskforce has also released sector specific guidance, including for metals and mining, to support both pension schemes and the companies in which they invest. Future reforms are designed to modernise the sustainability disclosure regime and equip trustees with clearer, more decision useful information. This will. This will support better informed decisions on investment, divestment and exclusions, including, where necessary, in relation to thermal coal. Finally, my Lords, at this point I was going to say that the government is legislating to bring forward statutory guidance on trustee investment duties as a further opportunity to include clear examples of good practice to help schemes strengthen their management of climate related risks, including those highlighted by this amendment.

But oh no, we won't be doing it because the House voted and the noble Lord and his party voted against that. So that won't be happening. My Lords, the existing disclosure framework is already driving greater transparency around schemes, climate related risks and further reforms are strengthening this approach. So the government does not believe this amendment is necessary. However, we do recognise that improved data on thermal coal and other fossil based fuels fossil fuel investments would be helpful. This is an area we will continue to monitor and keep under active review within the existing reporting regime.

I hope the noble Lord can withdraw his amendment.
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Lord Sharkey Portrait Lord Sharkey (Liberal Democrat)
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I thank the Minister for that response, but that probably means in practice, I think, over the last sentence, some of the other stuff I found difficult to agree with, and I would point out that our proposal was to collect data or produce estimates only for the larger schemes and funds in order to get a reliable picture. So I don't think the issue of the burden on the companies is actually quite as complicated or as difficult as perhaps might have been said.

But having said all that, I beg leave

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to withdraw the amendment. Is it your Lordships pleasure that this amendment be withdrawn? that this amendment be withdrawn? It is by leave withdrawn. Amendment 178 Viscount Younger of Leckie not 178 Viscount Younger of Leckie not moved. Amendment 171 Baroness Sherlock moved formally. The question is that amendment 171 be agreed to. As many of that opinion say content of the contrary, not say content of the contrary, not content. the contents have it amendments one seven 3 to 1 seven five move formally.

Baroness Sherlock En bloc. The question is that amendments 1732175 be agreed to. En bloc as many of that opinion will say, content, the contrary is not content. The contents have it. Amendment 176 Baroness Bowles not Amendment 176 Baroness Bowles not moved. Move formally. Move formally. Consequential. Yeah. Apologies. Baroness Bowles. The question is that amendment 176 be agreed to. As many people say, content. The country is not content. The contents have it amendments one seven 7 to 1 seven eight move formally.

En bloc Baroness Sherlock. The question is that amendments 177 and 178 be agreed to. As many of us will say, content, the contrary is not content. The contents have it. That completes the Report stage and I'll give a couple of minutes while we figure ourselves out for the statement.
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None Portrait Statement: UK Steel Strategy (dinner break business) Lord Sharpe of Epsom (Conservative)
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made in the House of Commons on Thursday, the 19th of March, on UK steel strategy.

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steel strategy. My Lords. Only last year, Ministers were forced to rush through the Steel Industry Special Measures Act, which was an Measures Act, which was an emergency nationalisation of British Steel in an industry that it had helped to destabilise. But my Lord Paddick told us everything. We need to know that socialists must seize the means of production because they're utterly incapable of creating, maintaining or managing it. And unfortunately, this strategy is a testament to that, my Lord. Since the intervention of British Steel, the National Audit Office has now reported on the actual cost and the taxpayer has been paying £1.28 million to British Steel every single day.

Oh my Lords, this strategy was meant to be published last year, but has been delayed many times because the government has said they needed to get it right. What they actually needed, it appears, was time to construct a protectionist nightmare, a scheme that throws up tariff wars, potentially up to 50% and a subsidy upon a narrow set of domestic producers, while leaving the downstream industries that depend on affordable steel to fend for themselves. Now, the government tell us this strategy is necessary because British steel producers face crippling energy costs and unsustainable labour costs.

But my Lords, whose fault is that? It is this government that has driven energy costs higher through the contradictions of its own net zero agenda. And it's this government that has loaded employers with higher national insurance contributions, and the cumulative regulatory burden and costs of the Employment Rights Act. They now arrive with subsidies, presenting themselves as the saviours of the very sector that they've helped to cripple. We've seen this pattern before. My Lords, it's the logic of the youth job subsidy, government manufacturers, hostile conditions, and then spends taxpayers money papering over the consequences of its own failure while the underlying damage festers untouched.

It is always the taxpayer who must bear the full weight of this government's incompetence. And my Lords, even after subsidy in the steel sector, the UK's energy costs or prices will be almost two and a half times those of the US, 15% above France, 25% above Germany. And there was no mention at all of any Asian producers within the steel strategy. I wonder why, my Lords, on the matter of net zero, the government cannot have it both ways. They've banned new domestic coking coal production in the name of environmental responsibility.

But the United Kingdom now imports coking coal from abroad. 47% comes from the United States, 38% from the European Union. And we're not therefore reducing emissions. We're just offshoring them and paying a premium to do so while simultaneously claiming to be building a strong domestic primary steel industry on the very raw material that we've made it illegal to produce ourselves. My Lords, we are told this strategy is a response to global overcapacity, that the world is awash with cheap foreign steel undercutting our producers at every turn.

But I would invite the government to explain precisely what they mean, because they what they describe as overcapacity. Some might recognise as competitive pricing and cheap steel is not a threat to the British economy. It is a benefit to it. Lower input costs for our manufacturers, manufacturers, our construction firms, our aerospace and automotive sectors mean that those businesses can invest, grow and employ more people. The government proposed to eliminate that benefit artificially in order to protect a narrow band of domestic producers, and the bill, as ever, falls to the taxpayer.

We've already seen £377 million consumed by the emergency nationalisation, nationalisation of British Steel in under a year, and now they're announcing another 2.5 billion. The consequences of this decision will be felt most immediately by the industries that depend on steel as an input. Consider, for example, the automotive sector. There is on average 900kg of steel in every vehicle manufactured in this country. The sector supports over 150,000 jobs and is already under severe pressure. When President Trump imposed 25% tariffs on passenger vehicles, UK car exports to the United States fell 55.4% year on year.

My Lord's construction tells a similar story. It is the largest single consumer of steel in the United Kingdom, accounting for about 53% of all domestic steel demand, and it is already suffering its fourth consecutive quarter of falling output. So I'd like to ask the Minister directly, has the government assessed the cost that these tariffs will impose on the construction sector? Because if it has, that assessment is conspicuously absent from the strategy. My Lords, there is a deeper contradiction that the government must answer.

They offer two arguments for these tariffs, and the first is overcapacity. Too much foreign steel flooding, the market supply so abundant that it undercuts our producers at every turn. The second is national security that we are dangerously exposed to unstable foreign supply and cannot afford dependence on it. But, my Lords, these two arguments cannot coexist. If the world is drowning in cheap steel, supply is by definition abundant. If foreign supply is genuinely precarious and could be disrupted, then the overcapacity does not exist.

Which is it? Is there too much steel in the world or too little? Because until the government can answer that question honestly, this strategy has no coherent foundation whatsoever. And my Lords, the national security argument also deserves further scrutiny on its own terms. The government's own data reveals that direct defence procurement requires around 36,000 tonnes of steel per year. Total domestic steel demand runs between 9 and 11 million tonnes. Defence procurement, my Lords, represents less than 1% of total demand, less than 1%.

So the notion that we require up to 50% import tariffs and billions in state subsidy to secure that supply is a protectionist canard. Genuine strategic resilience is achieved through diversification, sourcing from the widest possible range of allies and partners. Supply chain built across allied democracies will be far more resistant to even the most radical geopolitical events. My Lords, if the government wishes to understand how world class industries are built, they need look no further than some of our other own financial services life sciences.

Scotch whisky between them are worth tens of billions in exports, and they are in many cases the envy of the world, and not one of them was built through the protectionism of the state. They were built through open markets, accumulated capital and the freedom to compete. The government has set a target of 50% steel production. Can I ask the Minister to commit today to providing this House with regular updates on progress towards that target? And will the government tell us what the exit strategy from public subsidy is? And when private sector investment is expected to replace it? What does the future of British steelmaking actually look like and who will build it? Because any new entrant to the British steel market today will still face high and rising electricity costs, banned domestic coking coal import quotas, raising the cost of scrap metal inputs and a market dominated by subsidised incumbents with the full backing of the state.

My Lords, this side of the House is not indifferent to the communities whose livelihoods depend on steel, nor to the genuine strategic importance of manufacturing in this country. But we do British industry no favours by raising input costs for every sector that demands depends on steel, and we do do this country no favours by abandoning the open, competitive, capital generating approach that made us a strong economy in exchange for protectionism that serves the few at the expense of the many here.
20:09
Lord Fox Portrait Lord Fox (Liberal Democrat)
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My Lords, I thank the Minister for repeating this statement and also welcome that there is a strategy here, although, as the noble Lord Sharpe said, we were expecting it for some time. But my Lords, given what is happening in the world, reading this document does conjure the image of someone trying to put up a tent in a howling blizzard. My Lords, at the heart of the blizzard is the energy market ructions caused by the Iran conflict. My Lords, UK industrial energy costs were already at least twice that of the EU and four times that of the USA.

I think the noble Lord Sharpe and I have different multiples, but they're all very large and it's not clear to me whether these distortions that are already there in the UK energy pricing system will increase the gap as a result of the Iran issue. As it bites, it's I doubt that the gaps will narrow now as the strategy sets out. The British Energy Supercharger scheme does help these companies. Those companies that benefit from it. However, the steel industry comprises very many businesses, large and small that do not qualify for the supercharger.

Now, of course, some may qualify for the British Industrial Competitiveness Scheme. That's Beccs, which. Now can the Minister say how many steel related businesses will benefit from Bics? But my Lords, Bics doesn't kick in until 2027, given what's happening internationally. Can the Minister undertake to speak with her Treasury colleagues with a view to bringing forward the implementation of Bics? But in any case, my Lords, we should note that whilst the supercharger scheme exempts recipients from network charges, Bics does not.

And those network charges are set to increase by a staggering 60%. These are just a few of the reasons why, unless the government resists, revisits the whole issue of energy costs, the steel strategy will quite simply be blown away. My Lords, turning to one of the more eye catching and particularly concerning parts of the strategy. And that is the new trade measures to introduce tariff rate quotas and the possibility of in future raising most favoured nation. MFN applied tariffs to 50%.

My Lords, late last year, the Trade Remedies Authority ran its rule over imports of rebar from Vietnam and made recommendations to the Secretary of State. This was an entirely appropriate use of that body. Indeed, it was what the body was created to do. Having worked on the trade bill at the at the trade bill at the start of this century, which established the Tra, it's clear that it has an important role, particularly given the wider scope of the potential actions set out in the strategy.

But I don't see any reference to the role of the Tra within the strategy. So has the government asked the Tra for its recommendations? And when could we expect its report? My Lords, it seems inappropriate to act without that authority. Second, in his answer to questions in the Commons, the Secretary of State confirmed that there has been discussion with his EU counterparts and that this discussion would continue when they meet at the WTO. Can the Minister confirm that for the purposes of these discussions, Steel's treatment in the.

In the TCA agreement, the Trade and Cooperation agreement with the EU is equivalent to the treatment in an FTA. In other words, from a WTO perspective, does the TCA agreement equal an FTA? Furthermore, can the Minister say whether, for the purposes of these discussions, how the government is treating the MOU with the USA regarding steel. I assume it does not have the status of an FTA. So how will this modify what we can legally do under the WTO with the United States? My Lords, I turn to the local impact of this strategy and there remain significant question marks for a lot of our communities.

My friend in the Commons, David Chadwick MP, spoke very forcefully about the importance of steel to the to Wales and its economy. He also reinforced the need for faster action in ensuring that the electricity that will be used, for example, to to to power the arc furnaces is green energy and I strongly commend his comments. But in geographical terms, I would like to highlight the South Yorkshire area area, including Sheffield, where there are a host of important steel businesses. And it's not just down to the headline firms.

There are many other important businesses further down the supply chain that make up this vital steel ecosystem, and these kind of ecosystems are echoed all over the country. My Lords, the statement document says the defence Growth deal will be established. A will be established in five areas, including South Yorkshire, as part of its Defence Industrial Strategy. So can the Minister tell us when full details will be published, and when will a defence growth deal be operational to support the effectiveness of a growth deal? A colleague of mine from Sheffield Council, with a strong steel background, suggests that defence manufacturing supply chain database be built to include the hundreds of thousands of smaller tier two and tier three suppliers that are critical to our sovereign capability.

In this way, the whole sector can be explicitly brought into the realm of the defence growth deal. Because, my Lords, you will be surprised, I think, to know that there is no such survey, no such data available. My Lords, I was able to see how the Aerospace Growth Partnership worked effectively with its supply chain, and perhaps the Minister might like to look at how that operated and try to put the same principles in practice for steel. My Lords, we on these benches do do share the government's ambitions for for robust and growing steel sector.

But we also believe that and we also believe this strategy makes some steps in the right direction. But the already significant headwinds just got a whole lot worse. That's why with success will depend on further action on energy, clarity on tariffs and a truly inclusive growth strategy.
20:16
Baroness Lloyd of Effra Portrait Baroness Lloyd of Effra, Parliamentary Under Secretary of State (Department for Business and Trade) (Labour)
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I thank noble Lords for their rich contributions. They have rich contributions. They have raised many matters that are covered in the steel strategy and are of vital importance to the are of vital importance to the future of steel making and the central centrality of it to the UK's economic success. I mean, this steel strategy is the first one to be set out. It explains the vision. It sets out bold measures across the business environment, across trade, across electricity costs, across carbon leakage and public procurement.

And is that which distinguishes it from what has gone before. And we do not believe that it is inevitable that the although the sector does face challenges, that it will decline, we believe, and the steel strategies aim is to stabilise and rebuild our existing strategy. As the noble Lord opposite mentioned, with an aim to sustain 40 to 50% of domestic demand, which of course will be tracked over the coming years, and we can see the benefit of moving along with this vision to a greener, high production steel model at Sheffield Forgemasters electric arc furnaces have technical capability that we need to produce steel of the of the highest standards.

Now, coming on to the question of energy prices, naturally, businesses are worried about the impacts of the situation in the. In the Middle East, the Prime Minister chaired a meeting of Cobra this afternoon, and the Secretary of State is meeting with business organisations looking at the impact on energy prices and the impact on the supply chain. We have a a diverse and resilient energy system, but we are monitoring it extremely closely. I mean, if there is a lesson, it is that reducing dependence on externally produced fossil fuels and moving to clean, green, home produced energy has to be the way of the future.

And under that is exactly what we're doing with the clean energy mission to increase our energy security and reduce electricity bills over the long term. But as noble Lords have mentioned, there are measures in place right now, including the supercharger and and the Energy Intensive Industries Compensation Scheme. And for for those steel producers. And as a noble mentioned, the British Industry Competitiveness Scheme, which will reduce bills for other businesses in the sector more widely. And as I mentioned, the the Prime Minister, the Chancellor and the Secretary of State are looking very closely at what needs to be done in the current context.

So that our businesses can be supported during this during this tumultuous time. Now, just coming on to the question of the trade measure, the trade measure is designed to shield steel making from the damaging effects of overcapacity. This is not something that is unique to the the UK, the US, Canada and the all apply their own similar measures to tackle overcapacity. We want to do this so that Britain's steel industry contributes fully to Britain's crucial national security and defence, and to ensure the UK's resilience to global shocks.



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Without this action, The UK steel making capability faces real jeopardy, leaving us reliant on overseas suppliers. And that is what we do not want to let that is what we do not want to let happen. I would also like to just. happen. I would also like to just. Sort of stress that this measure follows the expiry of the UK steel follows the expiry of the UK steel safeguard measure on the 30th of June. This year, but it is a different measure and it has been carefully calibrated.

Follow following engagement with downstream importers to to get the right balance between measures to to to support our domestic steel industry, but also to ensure that that that those who use steel in the national economy can manage their businesses well. And following engagement with those downstream importers, we are exploring a transitional arrangement under which the new tariff would not apply to goods under contract agreed before the 14th of March and imported between the 1st of July and the 30th of September 2026.

And we're finalising those details to ensure it provides genuine support to firms facing unexpected costs while still protecting the UK market from excessive imports. And we will also review the measure after 12 months to ensure it remains effective. And just coming on to the question of how this fits with other international agreements. So on the on the t r a, this measure, as I mentioned, is distinct from the steel safeguard. It's not a replacement, it is separate from trade remedies such as the current safeguard, which is the Trade Remedies Authority's role to review.

So the Tra does not have a role in reviewing the new measure. And on the TCA, the TCA is the same as an FTA in the eyes of the WTO. I fear I have not addressed all the questions, but I am sure I will come back to them shortly.
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Lord Bishop of Oxford Portrait The Lord Bishop of Oxford (Bishops)
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My Lords, the noble Lady. The Minister, Bishop. Sorry. Minister, Bishop. Sorry. >> I have my notes. For seven years I was privileged to be the Bishop of Sheffield and I'm familiar with of Sheffield and I'm familiar with the complex ecology in South Yorkshire articulated by Lord Fox. For those seven years each year I was the guest of the Cutlers Company and who would invite a Minister always from London, normally the Chancellor. In those years it was the coalition and conservative governments and the script, followed by the speakers from the Cutlers company, who did not mince their words, was always the same.

And it was the neglect of manufacturing industry by government and in particular high energy costs. And this seems to me to be the key to the next chapter in this strategy. I'd be very grateful if the Minister could expand further and give some assurance that in five years time, the Cutler's company in Sheffield will not be making the same comments about higher electricity costs than their partners overseas. I'd also be grateful if the Minister could say something about the connection between advanced manufacturing and research, and the revitalisation of the steel industry.

It was said in my time in Sheffield that the industry that Sheffield Steel produced as much steel by volume, but employed a fraction of the number of people, and that was because of advanced manufacturing. And thirdly, I'd really be grateful for an unpacking, for the defence contingency and the importance of that and would underscore it.
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Lord Mohammed of Tinsley Portrait Lord Mohammed of Tinsley (Liberal Democrat)
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My Lords, the can I. that were made by the devil in the form of Bishop of Sheffield and I remember him well and his commitment to the city and in particular the issues around the Cutlers company. They're a tough bunch, but fair. And sometimes I think this speak truth to power and that's what's required. Often, I just want to follow up on the points that Manuel Friend Lord Fox was talking about, particularly the turmoil we see at the moment in terms of the energy market, with the ongoing conflict, firstly in Ukraine, but also more recently in the Middle East.

And I suspect he's been speaking to many people across the steel sector, not only in Sheffield, but I will stick to Sheffield and Stocksbridge and elsewhere. And this is point around the cost of energy. Now, I understand that large energy intensive businesses can hedge their energy prices over the longer period, but what I want to ask the Minister is that there are a number of smaller businesses and those with limited credit available to them, who are now really suffering at the moment, leading to, you know, vulnerability and volatility as energy prices are paid either a day ahead or short term.

So, for example, I want to give to the ministry is that when I was speaking to a steel contact over the weekend, they were saying that they had an order. They were preparing for it last week and all the materials, etc. and energy costs were factored in at the time, and they were about to just make a profit. But with what happened, particularly after the Israeli attack on the Iranian gas field and then the Iranian Iranian attack on Qatar, the gas price went up for them because they didn't have a great credit rating by 30%.

So from being a potential small profit, they're now going to run a loss. So these are organisations that are desperately looking for help right now, not in 2027. So can I ask the Minister what is the government doing, particularly at this moment in time, to help these small and medium sized businesses or those with issues around their credit rating? rating?
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None Portrait peer taking oath
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