Public Service Pensions and Judicial Offices Bill [HL]

Baroness Kramer Excerpts

2nd reading
Tuesday 7th September 2021 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I am absolutely no expert on pensions, and I have been absolutely delighted to listen to the speeches today, because there is obviously an expertise in this House that makes up for my very serious lack. I shall look forward also to receiving briefings from relevant groups as we move to Committee, because the Bill has so many technical aspects that I think we will need the help of relevant interests, including the trade unions, to negotiate our way through the remaining phases.

The history of public service pension change is rather littered with unanticipated consequences, and indeed we are here today because of the judgment in the McCloud case on discrimination, which was itself an unintended consequence. I also pick up the point made by the noble Lord, Lord Davies, that if we look at the broader context of public service pensions, we see a whole lot of issues that are not covered by this Bill—I think that some of them are meant to be addressed in the next Finance Bill—which makes it very difficult to shape the legislation before us today.

I had the privilege of being at the briefing that the Minister kindly offered to all Peers yesterday and I want to pick up on an issue raised by the noble and learned Lords, Lord Etherton and Lord Judge—although I would never want to put words into the mouth of the noble and learned Lord, Lord Judge; I think he will speak for himself in Committee. The issue is the impact on diversity of the change in the retirement age of the judiciary. I think that everybody in this House would say that it is important that our senior judges in the Court of Appeal and the Supreme Court reflect the society that we live in if they are to be respected and seen as part of our current era. At the moment, they do not. I am very concerned about the block that will be created. The noble and learned Lord, Lord Etherton, essentially said that we would not see a lot of turnover in the Court of Appeal for some 12 to 13 years, so the possibility of people from ethnic minority backgrounds and of women being seen in the Court of Appeal will be significantly impacted by the increase in the retirement age—and I do think that matters.

When we discussed this yesterday, the Government took the position that a blockage for somewhere between five and 12 years would advantage women—for example, those who have taken maternity leave will be able to make up the experience to make them more eligible to be put on the court. My answer was, “Have you talked to those women? Have you talked to the ethnic minorities?”—the people who will be impacted by what will be effectively a block on the turnover of appointments.

I understand that there were questions on diversity in the relevant consultation, but we all know that consultations are dealt with by the usual suspects—those are the people who reply. It is incumbent on the Government, if they are going to put in place what effectively is a very significant block on seeing diversity among our senior judges, to go back to that pool of people and talk to them about their views on the impact this will have. That is not a very difficult thing to do, and I hope we will see it.

There are quite a number of issues in the Bill. Again, I wish I had greater expertise, but from looking at the various briefings I have been able to lay on my hands on and replies to the consultation, it appears that there are a number of pension traps. People who find themselves in both the legacy system and the new system may be trying to make career decisions and find that they are disadvantaged in one scheme but advantaged in another and they have no idea how to put the various pieces together. The Police Federation is particularly concerned. It raised the issue of women in the police force who take maternity leave and have been able to work for additional years to make up the lost pension under their scheme. That is now not going to work. People who work part-time will be paying much more into the scheme, pound for pound, than full-time workers.

There is a whole series of flaws here and I would like the Minister to deal with them. There is no point repeating another Bill that has a lot of unintended consequences. I join very much with my colleagues, particularly with my noble friend Lady Janke’s comments. With a system that is now so complex, many people will need advice to know what to do. Surely there ought to be some provision to fund that or at least give them reasonable access.

The noble Lord, Lord Davies, raised on the cost control mechanism. I am appalled that the 2016 valuation is still hanging fire. I know that it will be resolved, but, like him, I am very concerned about how a rational 2020 valuation scheme will be put in place. We are in such economic flux. This is a really difficult time to put in place frameworks for something like a valuation. If you add to that the fact that the change in the scheme presumably means that people will be making all kinds of pension choices which will put pressure on any kind of set ceiling, the notion that the members will all have to pick up the cost strikes me as extraordinary. We need the Minister to elaborate on that and to understand what the consequences will be.

At the meeting yesterday, the Minister said that as a new scheme is developed for 2020 and the review that is currently under way is completed, it will require primary legislation to bring it into effect. I would like some confirmation of that, because if something that significant is going to come to us, either through Treasury direction as the noble Lord, Lord Davies, described, or even through a statutory instrument, it will be very hard for us to get a grip on the way the system works.

Lastly, I will tackle an issue that I have raised many times in this House, which is very relevant to this Bill. The problems judges faced following the changes in 2015 were a consequence of the annual and lifetime pension relief allowances and the taper system included with those changes. When they were initially put in place they were not a problem because of where the thresholds were set, but as those changed over the years they have become a major problem. Indeed, lawyers found that if they became judges, they would lose not only any additional income, but pension as well. That is an impossible situation.

This did not apply just to judges: consultants in the NHS faced exactly the same problem if they worked for a weekend. Because of the way the NHS pension scheme is set up they would have to pay tax that not only wiped out the additional income but went way beyond that. In our Armed Forces—to me this is utterly outrageous and got me involved in this issue in the first place—two-star colonels are basically refusing to become three-star because the consequences would be so bad. They would either have to pay very large tax bills, wiping out any additional income by, or take severely reduced pensions. That is insanity.

The Government dealt with some of that for the NHS and the armed services by changing the thresholds in the last Budget, but it is a sticking plaster, and what we see now for the justices is a permanent way to resolve the problem. Essentially, the scheme will no longer be tax registered and therefore the problem goes away for the justices, but we should be using this Bill to fix the problem for everybody else. If it is not going to be fixed in this Bill, when is it going to be fixed? It is insanity to say to our senior military, “You’re going to be on the battlefield, you’re obviously not going to leave after you’ve done so many hours and come home, and the consequence is that you will find yourself with a huge tax bill that will, frankly, cause havoc for your family.”

We have lost most of our two-star colonels—they have refused to go to three-star and have gone to civvy street—and we have consultants who worked during the pandemic knowing that they would essentially be paying a very large price as a consequence because it would impact on their taxes or pensions, depending on the way they set up their arrangements.

I believe that it is vital to this country that our public servants are properly and fairly compensated with both pay and pensions. The Government really made a hash of reforming these schemes in 2015; the Bill is part of the clean-up, but let us make sure that it brings clarity and fairness to all parts of the public service pension arrangement.