Pension Fund Clearing Obligation Exemption (Amendment) Regulations 2025

Debate between Lord Davies of Brixton and Baroness Neville-Rolfe

Thursday 5th June 2025 Grand Committee

[Lord Davies of Brixton (Lab)]

I thank my noble friend the Minister for his clear and helpful introduction of these regulations.

I just have two issues to raise; it would overegg them to describe them as issues of concern, but we need to recognise them. First, these clearing obligations are there to protect investors. The level of risk is materially increased by removing those obligations; we need to understand that. On balance, it may still be a reasonable thing to do, but we need to recognise that there is risk involved.

The second, bigger issue is that the Pension Schemes Bill, which was published an hour ago—I am holding it in my hand—makes significant on pension schemes in terms of the investments that they hold and the way in which they undertake their investment policy. It needs to be recognised that this very minor measure is part of that more general review, which will take place because of the Bill. I was very glad to hear my noble friend the Minister report that the policy will be kept under review. The fact that we have this pensions Bill means that it will inevitably be part of that process. The whole thing needs to fit together both to provide the investments that secure members’ benefits and to provide members with the reassurance that their money is being kept well.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for bringing this important debate before the Grand Committee today. While technical in nature, the debate strikes at the very heart of our pensions system. It concerns the management of risk, the generation of returns for pension schemes and the financial security of our country. Derivatives play a crucial role in the operation of pension funds. They allow for efficient exposure to asset classes without necessitating the purchase of the underlying assets. They enable tactical asset allocation decisions to be executed more swiftly and cost-effectively than physical rebalancing and, through leverage, they offer the ability to increase market exposure without tying up significant amounts of capital. I know all of this from my experience as a trustee of the Tesco pension fund some years ago. Above all, derivatives are essential because pension funds face long-term liabilities that are highly sensitive to changes in interest rates, to inflation and to currency fluctuations.

These instruments are vital in managing such risks, especially in an uncertain and volatile world. Interest rate swaps hedge against fluctuations in interest rates that affect the valuation of liabilities. Inflation swaps protect against unexpected shifts in inflation, which is especially relevant where pensions are index-linked. Currency forwards and options manage foreign exchange risk where assets or liabilities are denominated in non-sterling currencies. It is the management of risk more than anything else that justifies their inclusion in the portfolio strategies of pension funds and, as the noble Lord, Lord Davies of Brixton, said, the level of risk is materially increased by this regulation. He also rightly referred to the Pension Schemes Bill, which has only just been published. I am afraid that due to other commitments, I have not yet had time to study it.

Since the European Market Infrastructure Regulation was introduced in 2012, pension funds have been granted an exemption from the central clearing obligation, recognising their unique challenge in meeting margin requirements as central counterparties. Pension funds operate on a long-term, illiquid investment model, and this fundamentally mismatches the short-term, high-frequency liquidity demands of CCPs, particularly under stressed market conditions.

Will the Minister outline the contingency plans in place should the absence of mandatory clearing suddenly appear to increase the risk of counterparty defaults?

I have to say that the exemption from these insurance-type arrangements of a CCP carries its own risks. The Government bear a heavy responsibility to maintain confidence in a financial system upon which livelihoods depend. The government review mentioned by the Minister concluded that removing the exemption could impair the ability of pension funds to invest in productive assets. That must be weighed carefully against the imperative of effective risk management. Can the Minister clarify how bilateral arrangements will be monitored for resilience, given that derivatives are no longer subject to central clearing? He talked about keeping this under review, which I think was helpful.

Our financial markets are deeply embedded in the global system. Can the Minister explain how this move aligns with international financial regulatory frameworks and, indeed, with the EU and US, which have slightly different rules from the UK? Furthermore, has the Minister assessed the potential reputational impact on the UK’s standing in international markets, particularly in the context of post-G20 commitments to mandatory central clearing, which the Minister referred to? Finally, will the Minister publish the underlying risk analysis or cost benefit assessment that supports the decisions to go for an indefinite extension period? Without such transparency, it is difficult to understand how the Government have reached their conclusion and indeed why they have chosen this policy path.

The current impact assessment states that the measure

“mitigates the risk of disruption to the market”

that might occur if pension funds were required to restructure their investment strategies “at short notice”. This would be ahead of the exemptions expiring, which happens to be 18 June—the week after next. However, this is a narrow, short-term cost analysis. I am interested in the wider picture of longer-term cost versus the benefits of alternative systems, so I very much look forward to the Minister’s response on whether he is willing to publish his cost-benefit assessment or, perhaps, to say bit more about the detail.

I urge the Minister to engage deeply with the concerns raised and to provide reassurance that the Government’s decision rests on a sound and transparent evidential foundation. We are dealing with an important subject and a risk that, as I am sure we all agree, needs to be properly managed in the interests of UK plc.

Economic Activity of Public Bodies (Overseas Matters) Bill

Debate between Lord Davies of Brixton and Baroness Neville-Rolfe

Committee stage
Wednesday 20th March 2024 Lords Chamber

[Lord Davies of Brixton (Lab)]

The Minister used the word “pressurised”. Did she do so advisedly—“pressurised” as opposed to “called on” or “suggested”? Is “pressurised” defined in the Bill?

[Baroness Neville-Rolfe (Con)]

I think I used the word “pressure”. Certainly, I was reading “pressure”, but perhaps I blurred the wording and said “pressurised”. I could equally have used “influenced” or some other word. I was trying to explain what we were getting at on the education side of things.

I have a couple of examples of student union pressure, which I mentioned earlier. Warwick student union held an all-student vote in 2020 to pressure the University of Warwick to fully divest from all unethical industries and release all investments. That included divesting from companies in support of a boycott of Israel, and divesting from international companies that are complicit in violations of Palestinian rights. There was also the example of Sussex University, which I mentioned a little earlier.

Official Statistics Order 2023

Debate between Lord Davies of Brixton and Baroness Neville-Rolfe

Wednesday 19th July 2023 Grand Committee

[The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)]

My Lords, I will begin with the purpose of the order and briefly take the Committee through what we are considering.

The order updates the list of non-Crown organisations that produce official statistics, as defined in the Statistics and Registration Service Act 2007. The Government and the UK Statistics Authority want to see official statistics enabling sound policy decisions and providing a firm evidence base for decision-making both inside and outside government. The role of the authority and the need for timely and high-quality statistics were never more evident than during the Covid-19 pandemic. The code of practice for statistics plays an important role in ensuring that producers of official statistics inspire public confidence by demonstrating trustworthiness, quality and value in the statistics they produce.

The order revokes and replaces the Official Statistics Order 2018, updating the list of UK non-Crown bodies that may produce official statistics. The Statistics and Registration Service Act 2007 established the non-ministerial department, the Statistics Board—known colloquially as the UK Statistics Authority—as an independent statutory body to promote and safeguard the production and publication of official statistics that serve the public good. The Act allows the flexibility to add non-Crown bodies to, or remove them from, the authority’s remit by order. The order provides an updated list of bodies whose statistical activities will be official statistics and so will be monitored by the authority.

The authority will work with bodies designated as producers of official statistics to promote good practice for the production and publication of official statistics, including through the code of practice for statistics; to monitor and report on the production and publication of official statistics; and to assess the treatment by producers of official statistics, at the request of those producers, against the code of practice and publish the results of those assessments. If statistics comply with the code, the authority will designate them as national statistics.

These changes are applied to UK-wide and English organisations. The UK statistical system follows the principle that the devolution of statistics should mirror the devolution of policy areas. This order takes the same approach to devolution as the order it replaces. Regularly updating the orders ensures that the scope of official statistics remains accurate and relevant in light of the establishment, abolition or name changes of public bodies. Section 6 of the 2007 Act provides that Scottish Ministers, Welsh Ministers or Northern Ireland departments can determine that statistics produced by non-Crown bodies are brought into scope. There have been equivalent amending orders for Wales, Scotland and Northern Ireland.

It is important to note that, although the order covers a wide range of bodies, which are listed in the Schedule, the vast majority were already designated under the previous order, so this is a very minor adjustment. It adds five new bodies to the list in the 2018 order: the Equality and Human Rights Commission, the Joint Information Systems Committee, the Regulator of Social Housing, Skills for Care Ltd and the Trade Remedies Authority. It removes five bodies from the list in the 2018 order that are no longer legal entities: the Health and Social Care Information Centre, the Higher Education Statistics Agency, Monitor, the NHS Trust Development Authority and the Natural Environment Research Council.

The order also alters the names of two bodies that were contained in the last order. The NHS Commissioning Board is now recorded as NHS England, and Her Majesty’s Inspectorate of Constabulary is now recorded as His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services—and long may he live.

The UK Statistics Authority was consulted in preparing the order, in accordance with the Act, and is content for it to be laid. My department has laid the order on behalf of other government departments in preference to each department laying an order for the bodies for which it is responsible. That is intended to make the best use of parliamentary time.

[Lord Davies of Brixton (Lab)]

My Lords, it is important for us to discuss this order. It may appear on the face of it to be simply a technical, procedural or managerial matter, but it does have a political import.

Rt Hon Dominic Raab MP: Resignation Letter

Debate between Lord Davies of Brixton and Baroness Neville-Rolfe

Thursday 27th April 2023 Lords Chamber

[The Minister of State, Cabinet Office (Baroness Neville-Rolfe) (Con)]

My Lords, the Prime Minister has been clear that the Civil Service is vital to the work of the Government. The Government greatly value the work of civil servants who, together with Ministers, are working to deliver for the British people. The Prime Minister has accepted the resignation of the right honourable Dominic Raab, the former Deputy Prime Minister, following the findings of Adam Tolley KC, in a published exchange of letters.

[Lord Davies of Brixton (Lab)]

My Lords, I welcome much of the Minister’s reply, but does she accept that the emerging pattern we see is not civil servants conspiring against their Ministers? The pattern documented is of Conservative Ministers bullying their staff, with three examples in the current Parliament, two of which led to resignations and one of which should have led to a resignation.

[Baroness Neville-Rolfe (Con)]

I cannot accept the conclusion of the noble Lord. Of course, as the Prime Minister said, we need to learn from these cases

“how to better handle such matters better in future”,

and a credible complaints process needs to have the confidence of Ministers and civil servants alike. Work is under way on that. Ministers and civil servants work together on difficult issues every day and, in the main, very constructively.