Public Service Pensions and Judicial Offices Bill [HL]

Lord Davies of Brixton Excerpts

2nd reading
Tuesday 7th September 2021 Lords Chamber

[Lord Davies of Brixton (Lab)]

My Lords, first, I need to mention my entry in the register of interests. I have had an actuarial career, largely advising a range of trade unions about their members’ pension schemes, including most public service schemes covered by the Bill, but I am no longer actively engaged in such work.

I very much welcome the Minister’s careful and lucid explanation of what he rightly says is a complicated subject; it was a fine introduction to the work that faces us over the next few months. I also very much welcome the fact that I have a pensions Bill to get my teeth into, and I will be a committed and active member of the Committee when it considers the Bill. I look forward to interesting and detailed discussions.

I ask the Minister to say something about the expected timetable for passing the legislation. Much detailed work is being undertaken at the moment in parallel with the Bill going through Parliament. The government departments and scheme advisory boards are busy implementing the measures in the Bill, and it would be good to have some idea of exactly how that process will work because, clearly, they need certainty about the legislation’s outcome before they can reach final decisions.

My major issues with the Bill arise from Chapter 1, about public service schemes. The problem is that we have here only part of the story. It deals with the consequences of the decisions in McCloud and Sargeant, which, as the Minister explained, ruled against transitional protection. In its place, we have this remedy to sort out what is undoubtedly a significant mess, but the difficulty is that this is only part of the story of what is happening to public service pensions at the moment. These measures can be fully understood only in the context of the other things occurring at the same time, which the Minister did not mention—they are not in the Bill—but I think we need to understand the context in which this particular part of the picture is being considered.

There is a range of matters. The most significant is getting the 2016 valuation concluded. The 2016 valuation—the results of which should have been implemented some years ago—is ongoing and must still be resolved. At the same time, the Government are reviewing the cost-control mechanism. As explained by the Minister, this is highly contentious, because the Government are attempting to make changes which the unions consider go against the spirit of the Government’s agreement made 10 years ago. At the same time, the Government are reviewing the SCAPE discount rate mechanism—a particular element in the cost-control mechanism.

What is the effect of all those changes on the 2020 valuation? You might think that in 2021 the 2020 valuation would be done and dusted but, as I explained, we have not finished the 2016 valuation yet, so there is a certain amount of slippage here. It is difficult to understand. A sequence of events needs to be taken into account and, unless we have some picture of how this will affect the 2020 valuation, it is difficult fully to assess this legislation without putting it in the context of the other things happening.

One significant additional issue which must be resolved is whether the cost of the remedy this Act sets out is to be met by the members. This is taken for granted by the Government; the members contest it. It is currently the subject of a legal process but it is crucially important. When considering the legislation, we must consider the effect of that issue. So, while this Bill is presented to us as a set of standalone measures, it is difficult to be confident that the solution, the remedy proposed here, is just and workable when all these other factors are still in play.

I have gone over the allotted time; I apologise. I will quickly mention some other issues that I will seek to raise in Committee. We must carefully consider the use of Treasury directions. It raises constitutional issues that must at least be clarified. Concern has been expressed by various groups of employees, most notably the police service and firefighters, that the specific way in which the remedy is being implemented has an adverse effect because of their particular past pension structures.

I am heavily outnumbered here by the lawyers, but finally, I will stray into Chapter 2. Clearly, there is a strong case for the special tax treatment being afforded to the judicial pension scheme, but it raises the possibility of circumstances in which other groups of employees deserve special tax treatment as well. These are all issues that we will have to resolve, or at least discuss, in Committee.