Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2018

Lord Deben Excerpts

Tuesday 15th January 2019 Lords Chamber

[Baroness Buscombe]

I can inform the noble Lord. He is absolutely right that a formal consultation was not considered necessary for these changes as there is no policy change and they make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.

[Lord Deben (Con)]

My Lords—

[Baroness Buscombe]

I will give way to my noble friend. However, I would like to answer the question on making the changes and re-laying the regulations.

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[Lord Deben]

I interrupted only because my noble friend might be able to answer my question at the same time. The question is this: if it were not thought necessary to have the consultation in the first place, but then it was found that by not having the consultation the orders had to be taken and re-laid, would it not have been better to have had the consultation in the first place—and would it not now be better to have consultation, because that is the fundamental issue in all these matters? It is not that they somehow get outside the withdrawal Act, but that they do not have the proper consultation we need.

[Baroness Buscombe]

My Lords, it was as a result of ongoing communication with our industry stakeholders that we discovered that it was important to re-lay the regulations. In a sense, there was not a formal consultation, but we do have ongoing and constant communication with industry stakeholders who will be affected by these minor and technical amendments when we leave the European Union. I stress that we were very concerned to correct a fault in terminology, which is why we withdrew the original draft.

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[Lord Deben]

My Lords, if I had not gone through earlier debates, I would have agreed with the noble Lord. I want to make it clear that whatever certain government sources may say, there may well be some sort of arrangement as far as the Opposition are concerned but it is not one in which I have been involved at all. I went to listen to some later SIs last week. In listening to the debate, it became clear to me that a number of assertions were being made by the Government which, frankly, did not stand up.

Of course, the whole problem with these SIs is that the Government constantly remind us that they hope they will never be implemented and this is all about the possibility of there being an exit with no deal. But that does not mean, as I am sure the noble Lord, Lord Kirkwood, will agree, that we can ignore these SIs because they probably will not happen. Of course, as the days go on, that becomes less and less probable, in my view. Now that the Prime Minister has said that it is more likely that we will have no Brexit than a no-deal Brexit, perhaps one may be happier about it. But I am not here because I happen to believe that Brexit is a nonsense. I am here because I believe that there are some really fundamental things in these SIs.

The first is the assertion that we do not need to work too hard on them because they are not going to happen. That seems unacceptable.

[Baroness Buscombe]

When have I made the assertion that we do not need to take time on them? We have spent an enormous amount of time in the department ensuring that what we carry out in relation to these SIs is detailed and careful, to the best of our ability.

[Lord Deben]

I was not making the assertion about my noble friend; I was referring to the meeting of the Grand Committee last week, when that was very much the underlying assertion. That is all I was doing. I do not wish to make any such implication or accusation about my noble friend, whose presentation was perfectly right and reasonable, except that it is based on falsities. I will go on to the other falsities on which it is based.

The second falsehood is that this SI is not making much difference and therefore we do not have to go through the usual procedure. The difficulty with that is that there is a definition here which I find very peculiar. The definition of “impact” refers only to the direct impact of what is in this—the impact on people in the United Kingdom who do not have anything outside the United Kingdom, and who are concerned only with the United Kingdom. There is no reference to the cost of or the damage done by these regulations to those who are in the United Kingdom but have arrangements outside the United Kingdom within the European Union, who will be seriously disadvantaged because the UK will not be within the same arrangements. I realise that that is a result of Brexit but the idea that you can assess the impact without mentioning that seems very peculiar. If you mention that, you have to have an impact assessment. I am very suspicious of this because I think the Government do not want an impact assessment that explains to people precisely why exit from the European Union is so damaging. I do not understand how we are supposed to deal with an SI when it says simply that there is no, or no significant,

“impact on business, charities or voluntary bodies”.

That is the second reason that it seems to me that this is a kind of fudge.

The third reason, and this is the most important thing that I want to say, is about consultation.

[Lord Adonis]

The noble Lord and I have spent some time with other noble Lords in Grand Committee scrutinising a whole swathe of these regulations. Does he agree that a pattern is becoming very clear in that there has been no formal consultation on any of these regulations, whether or not they are making minor changes? In parenthesis, I say to the noble Lord, Lord Kirkwood, that the deficiencies in the first set of regulations were not minor but major in their impact and were not picked up by the engagement of the department with the industry. However, even those that involve substantial changes have not been consulted on formally. He will recall that in Grand Committee yesterday we were told that there had been selective engagement with “trusted” individuals. It became clear to us during those debates that there was a huge reluctance on the Government’s part to engage formally in consultation because—until the moment that we have just reached, when it has become public knowledge—they did not want the degree of preparation made for no deal to be known. The very scale of the problem to be encountered in respect of no deal and the alarm it would create was a reason why the Government have not been consulting, as they should have been, on these and other regulations. That ought to give the House very great concern about the state of the regulations and the degree to which the Government have engaged with those who are going to be very significantly affected in the way that he suggested.

[Lord Deben]

The only problem is that the noble Lord’s intervention was so long that my name has been changed to his on the annunciator.

[Noble Lords]

Oh!

[Lord Deben]

I have to say, there are many fates which are worse than death—though I am not quite sure that that is one.

I wonder whether I could go on to the question of consultation. It is very difficult to uphold the argument that there was no need for consultation when you have had to withdraw the SI because, as a result of publishing it, it turns out that there was a need for consultation because a very serious mistake was found in it. If this were the only case—I say this to the noble Lord, Lord Kirkwood—I would be less concerned, but last week and yesterday we found a series of really serious changes which needed to be made which had been brought to our attention by the very industry with which the particular ministry concerned had claimed to have had ongoing and general discussions.

There is, for example, a very major problem for the pharmaceutical industry because there was no such consultation. I do not want to go into detail on that because obviously that is not the subject here, but it is important to say that this is a case where, had there been consultation, there would not have had to have been a second draft of this SI. My noble friend said, “Well, we have changed it”, but she has not. She has not, I think, convinced the House that there might not be something else that needs to be changed. Because you have changed one thing does not mean to say that there will not be any other.

[Lord Warner (CB)]

Will the noble Lord agree with me, having sat through six sets of regulations which have been negatived, that there is a pattern emerging? Does he agree that the pattern is real doubt about whether there are accurate impact assessments and real doubt about whether any worthwhile consultation has taken place with interested parties? I am asking the question because this is of great importance to the House as a whole. There is a continuing assertion that these were minor and technical issues which did not involve a change of policy; but on further investigation, all showed that there were serious concerns about impact assessments, there were changes of policy, and there were great deficiencies in the consultation. As this House in Grand Committee has negatived six sets of regulations, one after the other, one can be excused for being a little sceptical about assertions from the Dispatch Box.

[Baroness Buscombe]

My Lords, if I may be helpful to the House, I think I made it clear to all noble Lords that, because of consultation with the industry concerning this fairly niche area within the pensions industry of cross-border activity with the EU, we learned that one word was wrong within the draft regulations. Therefore, notwithstanding what may have happened with other SIs that noble Lords have been debating in recent weeks, with regard to this SI, one word was out of place and, quite rightly, the pensions industry alerted the department, which withdrew the draft regulations. As the noble Lord, Lord Kirkwood, so helpfully stated, the reality is that this happens. It does not happen on a regular basis. I cannot believe that, when my noble friend was Secretary of State, every piece of legislation he brought forward was perfect the first time round.

[Lord Deben]

I perfectly agree with my noble friend that I did not always produce legislation that was perfect the first time round. However, I did consult. I would not have dreamed of having a situation like this, where after I had published the legislation and told people that there was no need for consultation, I then found that there was a need for consultation. In this case, my noble friend is coming to the House and saying, “Although we got it wrong the first time, we know we are not getting it wrong the second time”. I know that she does not wish me to refer to what has gone on in other SIs, but the trouble is that there is beginning to be a pattern here. There is an assertion that proper consultation is not needed but it is then found, after they publish the document, that a series of people from the industry come up with really very serious matters. In two cases, those matters could affect the lives of people in this country because of the way in which the legislation has been framed. My noble friend really does have to understand that we are not having this argument for some esoteric reason or because we happen not to like the withdrawal Act. We are having it because, by accident, we have come to understand that when you work this out, discuss it and think about it, it does not turn out to be quite the legislation that we were told it was. That is the next reason why I find it difficult to accept this SI.

Then there is the question of cost. Evidently, it was not thought necessary to have a consultation because it would not be cost effective to have one. I do not know how much it costs to withdraw an SI and then to replace it, but that does not seem to be a cheap alternative to having a proper discussion in the first place. I do not understand why there could not be a consultation. After all, if the consultation had taken place at the time the original SI was laid, it would have happened, it would have been over, and we would have known that there had been such a consultation.

Lastly, I will talk for just one moment about the whole question of cross-border activity. This SI says, “If we leave the European Union, and if we leave it without an agreement, we are putting in place something that will enable us to be an island which does not have any outside connections at all but our own internal arrangements”. This means that we are going to reduplicate what are, at the moment, some of the arrangements which are done across the whole EU. I do not see here the cost of having entirely our own system and the cost to pension operators in this country of having to make new cross-border arrangements themselves. That does not come into the impact assessment. There is no question about that cost, but it is not here. All we have here are the costs of that very narrow area which the Government have decided is what is defined as “cost”. Yet the Government are going to have to accept that pension people in this country will have the cost of making arrangements so that they can do the things they are doing at the moment inside the European Union. This is a cost, but it is not here.

I know my noble friend is bored with it and thinks that we should let this all pass, but this House is about revision. We have made a mistake with this particular SI. We should recognise that all these SIs need to have at least a formal consultation. There should be a time when people can be asked to put in their concerns; the ability for a Minister to get up and say, “We have had a consultation”. I think it is unfair on my noble friend. She can only get up and say, “Well, there has been an informal series of talks”.

[Viscount Eccles (Con)]

Over how many weeks would the noble Lord suggest that the consultation should take place?

[Lord Deben]

My noble friend is right to say that the problem with all this legislation is that it takes time. If you are going to make fundamental changes, you have to face it: it is better to have short consultation periods in which everyone is told that there is a consultation, rather than this egregious kind of concept where you say, “We have had a bit of a consultation and we have ongoing talks”. We cannot get up in this House and say that we have had a consultation that shows that we have covered everything. I agree with my noble friend that you have to have a short consultation but it must be public and clear. It is frankly not our fault that we have lost a lot of time. It is because the Government did not start two years ago to prepare for what might be a no-deal exit.

[Lord Adonis]

The noble Lord raises an extremely important point about the need to consult before regulations are published, rather than after. The Minister said that these were technical and that there was ongoing engagement. Responses from practitioners in the sector show that they were concerned about the mistakes made the first time round. Unlike the noble Lord, Lord Kirkwood, who thought that everything would be perfect the second time round, the response of Faye Jarvis, a partner at Hogan Lovells whom I quoted earlier, was that they were getting very significant impacts from the original version of these regulations. She warned schemes to pay attention to any further changes to the regulations in case they brought such unintended consequences again, saying:

“People will need to be scrutinising and seeing what else is coming out in terms of draft regulations to make sure there aren’t any other inadvertent errors but also to check there aren’t any unexpected impacts”.


Does the noble Lord agree that the whole reason one consults before presenting regulations for approval to Parliament is so that these kinds of inadvertent changes do not take place? The fact that partners in pensions law firms are saying that they have not been consulted and are not content that these regulations will not produce more inadvertent errors with a major impact entirely supports the noble Lord’s argument. We need proper consultation and not the rushed, informal dialogue which is taking place because of the very rushed nature of these no-deal preparations.

[Lord Deben]

I will answer the noble Lord, but I do not want to prolong my remarks. I am already a bit fed up with being told that I must not talk about these things because it takes too long. I find it extremely difficult but it has to be talked about. The noble Lord is entirely right. This will be true and, if so, I have to declare my interest as chairman of PIMFA. I have some allied interests, but not as far as pensions are concerned.

I come back to my noble friend. There is national concern about the responsibility of government and Parliament. That leads me to say very seriously to her that if it looks as though you are hiding the consequences of decisions that you make, that does a great deal of harm. Not having the proper costs here—

[Baroness Buscombe]

My Lords, I must intervene at this point. I take great exception to any suggestion that I am seeking to hide anything at this Dispatch Box. I hope that the noble Lord—my noble friend—will apologise.

[Lord Deben]

Frankly, I did not say that my noble friend was hiding it. I said, “If it looks as if you”—and I am not referring to my noble friend but to the Government who have laid this SI—“are hiding”. She really cannot take exception to that—well, she has taken it, and if exception was taken, I apologise for any reasonable exception—but really, I say to my noble friend that we are trying to debate this issue. I was saying that if it looks as if you are hiding something because you do not include the costs of withdrawal, the public will find that difficult to accept. I do not think that I have accused her of anything, and trying to get upset about it is not acceptable.

All I am saying to her is that I hope that she will talk to the people who have laid these instruments and have not told us directly the costs. I believe that they intended not to tell us the costs, because if people add up the costs of Brexit in each of these SIs, they will begin to see why some of us have been so concerned.

I end by saying simply this. We need to have proper consultation and proper costings—not just generalised ones—and, when we have a changed SI such as this, which has been changed because we did not have a consultation, it would have been much more reasonable to have had a consultation before this SI was produced. I do not believe that it is possible for a Minister to get up and say that there is no need for consultation because we know that it is perfectly right. So, for all those reasons, I think it is perfectly correct that we should be having the kind of debate that we are on this SI.

[Lord Tyler (LD)]

I intended to intervene on the noble Lord, but I realised that it would be incredibly embarrassing if my name were to be attached to his speech, so I spared him the embarrassment. However, I shall quote him in a moment.

I was struck by a point made by my noble friend Lord Kirkwood of Kirkhope about the sheer quantity of secondary legislation coming through, and the great work that he and other members of those committees are doing. I am involved in a small way because I am on the Delegated Powers and Regulatory Reform Committee, which is involved at an early stage. My noble friend rightly made the point that the sheer quantity of SIs coming before your Lordships’ House is causing us real problems. I very much concur with what was said by the noble Lords, Lord Deben and Lord Warner, because we were together in the Grand Committee both last week and yesterday. A pattern seems to be developing. If I may illustrate it in this way, each time we come to one of these SIs—it is happening again today—the Minister says that this is contingency planning. It is fairly set out in the Explanatory Memorandum and very well explained that it will become applicable, relevant and of interest to Members of your Lordships’ House only if there is a no-deal outcome.

So all this is speculative; it is hypothetical. When I used to ask questions of the noble Lord, Lord Deben, in the other place, he would say to the House, “The question from Mr Tyler is hypothetical and I refuse to answer it”. That was perfectly reasonable. Now the Government are making a hypothetical statement: if there is no deal, this will be necessary. Most of the SIs coming before the committees of your Lordships’ House, let alone here in the Chamber, are hypothetical in that sense. This is a real problem—and, as the noble Lord, Lord Deben, said a few moments ago, it is becoming more of a problem every day.

In our vote yesterday, there was a huge majority against a no-deal outcome. The Prime Minister is increasingly saying that she is against a no-deal outcome—she even thinks it is more likely that there will be no Brexit. In those circumstances, the pressure on us all—and on the Government—to get consultation right, to get the impact statement right, to get the costs allocations right are becoming, in the words of the noble Lord, Lord Deben, more and more difficult and taking up more and more of the time of Ministers, their civil servants and your Lordships’ House. That means that we may be neglecting the “normal” SIs, if I may call them that, which are not related to a no-deal situation.

As we all know from the European Court of Justice judgment before Christmas, the only circumstances now in which a no-deal outcome, on which this SI is based, could happen would be as a result of a deliberate decision by the Government. It is not going to happen by accident. We were told in previous debates that there was a risk of an accidental no deal, but that is now impossible as a result of that judgment.

I will quote very speedily from the noble Lord, Lord Deben, who I hope will not be even more embarrassed than he was by being given my name. He said in Grand Committee last Wednesday that,

“I do not think this House is doing itself any good by conniving in what is manifestly a total nonsense … There is no no-deal scenario which does not mean chaos, so there is no point in having legislation which pretends that it will stop a no-deal scenario being chaos. That is inevitable, ineluctable and inextricable from the whole process”.—[Official Report, 9/1/19; col. GC203.]

We are back at that point. Here we are, inevitably finding that in a number of ways that have been well illustrated by other Members of your Lordships’ House, this SI may have serious problems. The Government are entitled to say, “We have no intention of going there. We do not want a no deal. We want the Government’s deal”. In that respect we are, unfortunately, jamming up and putting so much new work into your Lordships’ House at every level, which may be a complete waste of time. That will distract us from doing a good job on other SIs, and that is a very regrettable situation.

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[Lord Adonis]

My Lords, my noble friend made an extremely powerful argument, which corresponds to a pattern that has emerged to those of us who have spent time in the Grand Committee discussing these regulations. They have all been prepared in a rush to meet an imminent deadline. Because of the rush, the need to meet the deadline and the secrecy inside the departments with which these regulations have been drafted and all no-deal planning has taken place, the pattern that has emerged in the debates in the House and the Grand Committee is that much wider issues have become apparent that could only become apparent through consultation.

The conclusion I can see we are already reaching—my noble friend makes an extremely powerful argument—is that it is not just the technical changes of the regulation and the precise changes in UK law, though clearly those have been very badly handled and have potentially had a dramatic impact on UK pension funds, but the whole wider context in which these funds and the professionals engaged in them will have to operate under no deal that will bring about fundamental changes. That is precisely why one would wish to have a full consultation, which has not taken place.

The noble Viscount opposite asked how long we would wish a consultation to be. There are established Cabinet Office rules on this which, when I was a Minister, we observed as a matter of course for any changes in the law; he will know this better than anyone, having dealt in this area so frequently. The rules say 12-week consultations. That is the norm. In my day, when we had a quality of Government rather higher than the one now engaging in all this helter-skelter planning for no deal, you needed a special exemption based on special emergency requirements not to go down the 12-week route, and that could happen only if the changes concerned were exceptionally minor. In this case, the Government themselves have imposed the deadline and the changes under consideration have a very wide potential impact. It is abundantly clear that the right thing to do in this and other cases is to have a 12-week consultation, with the wider policy environment under consideration being subject to consultation too.

I would like to ask the Minister some other questions about the detail of these regulations. For those of us who are not experts, it is not clear precisely how deep the impact will be. Paragraph 2.5 of the Explanatory Memorandum says that,

“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.

I take that not to be a minor change in the regulatory regime but a fairly significant one, on which the Pensions Regulator should have been asked to give advice—including to the House—when we were considering these changes. Can the Minister tell us what the impact of that change will be and why the Pensions Regulator was not invited to give us advice?

On the wider issue of no-deal planning, which of course underlies all these regulations, the Government have said that they do not wish to see no deal take place. Last week, when the House of Commons debated no deal and voted that it should not take place, Robert Jenrick, the Exchequer Secretary to the Treasury, said that,

“the Government do not want or expect a no-deal scenario”.—[Official Report, Commons, 8/1/19; col. 269.]

It is entirely within the purview of the Government not to have a no-deal scenario; if they do not want it, they can ensure that it does not take place, not least because of the ruling of the European Court of Justice before Christmas. They could revoke the notice under Article 50 to ensure absolutely that there will not be no deal.

A point was raised perfectly properly by the most reverend Primate the Archbishop of York that one should prepare for contingencies, but these are contingencies entirely of the Government’s making. They are not talking about preparing contingencies for, if I may say so, acts of God or other things that happen for which one cannot be accountable. When I was Secretary of State for Transport, a volcano went off and we had to get planes flying when there were big ash clouds. One should be expected to make contingencies for those kinds of things over which one has no control. In the case of the contingency for which we are discarding all our normal consultation mechanisms, playing fast and loose with a regulatory regime and, as my noble friend said, not taking account of the wider policy context and what may happen as a result of no deal, it is all self-inflicted by the Government because they are sticking to a self-imposed deadline.

The response of noble Lords who have sat in Grand Committee is that this does not sufficiently justify not going through established consultation routes. A whole stream of statutory instruments will be coming from Grand Committee where big concerns have been raised, not least by the noble Lord, Lord Warner, in respect of a set of pharmaceutical-related SIs that we debated yesterday. Key affected partners were not consulted at all; the reason for that, it appears, is that the department did not want to hold a consultation that would have made people aware that no-deal planning was taking place. Indeed, in the debate we held yesterday on one of the key regulations, the only person who we could establish firmly had been consulted was the noble Lord, Lord Warner, himself; he had phoned the relevant public authority that was engaged in the no-deal planning.

[Lord Deben]

My Lords, I invite the noble Lord to give way, because it gives me the opportunity to say that I think my noble friend the Minister will now understand that when I said that if one looks as if one is hiding something, I did not refer to her at all. I referred to a very long experience of exactly what the noble Lord refers to: a refusal to consult the very people who could have made sure that the SI was correct. In the case we talked about yesterday, it seems to me that the Government are very likely to have to withdraw that SI and then replace it, as they did with this SI. I did not think it was unreasonable to point that out.