Pensions Bill [HL]
Lord Falconer of Thoroton Excerpts(13 years, 8 months ago)
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Lord Scott of Foscote
My Lords, I express my complete agreement with what has been said to your Lordships by the noble and learned Lord, Lord Mackay of Clashfern, the noble and learned Baroness, Lady Butler-Sloss, and the noble Baroness, Lady Murphy. I want to add a brief word on the nature of the judiciary in this country, which your Lordships will have to take into account in considering this amendment. I declare my own interest: I have been in the law for the whole of my working life, 23 years as a barrister and then 26 as a judge.
The judiciary in this country, and in many Commonwealth countries that have followed our system, is unusual in that it is not a profession that people decide to enter when they are at law school or when they leave law school. A number of continental countries have judiciaries of that sort: you decide that you want to go into the judiciary; you make an application; you become a member of some tribunal, whatever the country may be; if you are good, you work your way up the ladder; and then eventually you become a judge in a senior court. We do not do that.
The bulk of the judiciary in this country—perhaps all of them, barring a few who come from legal academia—come from the ranks of practising lawyers. As practising lawyers, they have a structure in their careers. If they stay in their firms, they can build up provision for their families and of course for themselves when they retire, and they can hope to leave something to their children. They can hope for affluence as the result of a successful professional career. In the old days, there would come a point in that professional career when the individual would get a tap on the shoulder and someone would say, “Now, would you consider becoming a judge?”. Now they have to apply, but I do not believe that that makes a significant difference to the type of people who become judges or to the stage of their career when that happens.
As has been said, an element of belief in public service influences the choice. If lawyers stay in their professions, they will have the expectation and hope—sometimes realised, sometimes not—of reaching comfortable affluence for their old age. When they enter the judiciary, it is and always has been a significant feature of the terms on which they enter that they will look towards a pension for themselves, and for their widow if they leave one, after service of an appropriate number of years on the Bench.
If there is a movement of the sort indicated by Clause 24 of the Bill, which establishes the ability of the Executive to alter to an individual’s disadvantage the terms under which they joined the judiciary—the terms on which they supposed that they would be able to rely for the purpose of building up whatever was necessary for a reasonably affluent old age and retirement—there is a danger that that may affect the type of judiciary that we have. It may affect the willingness of people to accept the degree of adoption of service as opposed to self-aggrandisement that is a feature of almost everybody’s decision to apply for—or previously to accept—a position on the Bench.
The noble and learned Lord, Lord Mackay of Clashfern, made the point strongly that for statute to interfere with the contractual terms of appointment is a very strong thing that must be carefully justified. In addition, I respectfully suggest that it is likely in the long run to change the nature of the judiciary in this country, to the disadvantage of us all. I support the amendment on that ground in particular.
Lord Falconer of Thoroton
My Lords, the amendment is in my name also. It is intended to prevent a fundamental break with the constitutional principle that we have adopted to protect the independence of the judiciary. We are talking about 800 or 900 people in all. The idea that the proposal would have a significant impact on the economy of the country is overstated.
The principle was clearly put by the noble and learned Lord, Lord Mackay of Clashfern, in the Second Reading debate on the Bill. He said:
“The principle that a serving judge shall not have his terms of service adversely affected without his consent during his term of service is a fundamental principle, part of the rule of law and internationally recognised. It has been followed by Governments in this country, so far as I know, as far back as I can tell”.—[Official Report, 15/2/11; col. 634.]
I agree with that; it is a brilliant statement of the position in relation to the terms and conditions of judges.
The amendment would give effect to principles agreed internationally—including by the United Kingdom—on the independence of judges, best expressed recently in the Bangalore principles, to which the United Kingdom is a signatory. The principles state:
“A judge shall not only be free from inappropriate connections with, and influence by, the executive and legislative branches of government, but must also appear to a reasonable observer to be free therefrom”.
It is important to emphasise what the consequence of Clause 24 will be. It will allow the Executive, first, to introduce contributions by a serving judge in respect of his or her pension. That is something that the Executive cannot currently do. Secondly, it allows the Executive in future, without the consent of the relevant judge, to increase the amount of those contributions without reference to any index or to any precedent contractual terms.
I invite noble Lords to consider the Bangalore principles again. Do the proposals give the Executive an inappropriate influence, or the appearance thereof, on what judges do? I say without a shadow of doubt that if, as Lord Chancellor, I had been asked to advise another country on these terms, I would have regarded them as an obvious breach of the principle enunciated by the noble and learned Lord, Lord Mackay of Clashfern, and in the Bangalore principles that the United Kingdom helped to draft, adheres to and promotes throughout the world.
If we are serious about the rule of law, we must preserve the independence of the judiciary. The noble and learned Lord, Lord Mackay of Clashfern, is right to say that if the provision goes forward in this form, it would be the first time—in my experience—we had broken our constitutional principle of not giving the Executive the power, by waving a wand, to say, for example, “We will reduce the judiciary’s terms”. We incorporated in the Senior Courts Act 1981 a provision that prevents the Executive from reducing judges’ pay to reflect in principle the substance of the memorandum that the noble Baroness, Lady Murphy, read out. That is why the noble and learned Lord, Lord Mackay of Clashfern, indicated at Second Reading that the pension changes that he introduced in 1993 could apply only to new judges. There is nothing to prevent the state from extracting significantly reduced terms from new judges, if that is what it wants to do, to show that we are all in this together. However, the one thing that I respectfully ask the Executive not to do is to introduce a power that means that they can hold the sword of Damocles over the judges and reduce their terms and conditions with a click of the fingers if the judges—as a group or individually—do something that they do not like. It would be a significant breach of the constitutional principle to which we have adhered for as long as I can remember and which records show to be the case. Therefore, I respectfully ask the Executive to think very carefully about the damage that they would do to our constitution with this rather mild-looking provision. I support the noble and learned Lord, Lord Mackay of Clashfern, and the noble Baroness, Lady Murphy.
Lord Stoneham of Droxford
My Lords, as a new Member of the House I am somewhat in awe of speaking against a very formidable lawyers’ lobby, although I am married to a solicitor. However, I am delighted to be the only person—it seems—to come to the assistance of my long-standing noble friend Lord McNally. I am reluctant to suggest that the esteemed noble and learned Lord, Lord Mackay, is the shop steward of judges, but I am less reluctant to hold back in respect of the noble and learned Lord, Lord Falconer, who has form in this respect.
Despite the assurances of the noble and learned Lord, Lord Mackay, that judges are not outside the tax system, noble Lords on this side of the Committee will remember the noble and learned Lord, Lord Falconer, defending judges being a special case in not having the tax-free limit imposed on their pension funds. The judges’ pension scheme is very generous. The formula is 20 out of 40 contributions: a judge on £170,000 will get a pension of £85,000 after 20 years’ contributions. This is on top of the provision that they will have made earlier in their careers. Most critically, the value of the contribution paid by the state is 32.6 per cent.
At Second Reading, two arguments were used against changing this very generous benefit. The first argument, put by the noble and learned Lord, Lord Mackay, was that we will undermine the excellence of our judicial system. I am sure that nobody wants that. The second argument, which has been emphasised today, is that we will break the spirit of the legislation that says that any salary payable to judges may be increased but never reduced. I would like to deal with both these arguments.
Nobody in this House would want to undermine the excellence of our judiciary. However, by accepting that the change can be applied to new judges, the amendment would abandon that concern as it would defend only sitting judges. The fact is that everyone in the outside world is having their pension schemes adjusted as defined benefit schemes prove too expensive, too beneficial and simply not sustainable. It is not easy for anyone. I accept the argument that judges cannot go back, but many people who face the prospect of losing their defined benefit scheme if they move jobs cannot go back either. There is a strong argument there.
Barristers 20 years ago were dependent on Equitable Life for their pensions, and the current judges’ scheme must seem more attractive to aspiring judges. The man on the Clapham omnibus will find it perverse if judges are not required to make some adjustment to the cost of their increasingly generous relative pension scheme, provided that everyone else in the public sector is doing so and they are doing it because they want to retain their defined benefit scheme. We know how defined benefit schemes have ended, and not only for new entrants in the private sector; many in existing schemes have lost them in mid-career. This was really the whole point of the Hutton report.
Lord Falconer of Thoroton
I apologise for rising again, but I should have made a declaration of interest; I made it at Second Reading but I should make it here, too. I was Lord Chancellor—I do not know whether anyone noticed—and therefore am covered by the judicial pension arrangements. However, none of this would affect me. Secondly and separately, I have close relatives who in future might be affected by this. I apologise profusely to the Committee for not making that declaration before. I also apologise if I have to leave before the end of the Front-Bench speeches. I hope that I will be able to hear them but I am also supposed to be in the main Chamber for the Fixed-term Parliaments Bill.
Lord McAvoy
My Lords, I rise as a former Unite shop steward to come to the rescue of my trade union colleagues among the legal fraternity. I am impressed by the campaign launched by my fraternal trade union colleagues. The noble and learned Lord, Lord Mackay of Clashfern, would have made a wonderful shop steward in Unite.
I started off by listening to the point, the sums and the principle. I am sure that it was not organised, but the turnout of legal colleagues had perhaps a whiff of vested interests about it—legitimate vested interests, but vested interests nevertheless. The more that I listened and thought about it, though, the more I thought that there is a trade union principle involved in this that has led me to support the amendment. That principle is that when you come to an agreement with your employer, it should not be changed in this manner. I hope that my saying this does not result in any more furniture being damaged but there is a principle here, a wonderful trade union principle, and I am delighted to be able to support my comrades.
Pensions Bill [HL]
Lord Falconer of Thoroton Excerpts(13 years, 9 months ago)
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Lord Falconer of Thoroton
My Lords, it is a privilege to follow the noble and learned Lord, Lord Woolf. I hope that your Lordships will listen to what he says. When I became Lord Chancellor, and he was Lord Chief Justice, I found that things went badly for me when I did not listen to him and that they went a lot better for me when I did. Like many noble Lords, I congratulate the noble Lord, Lord Freud, on the clarity and strength of his explanation. I also congratulate my noble friend Lady Drake. We are very lucky to have such an incredibly powerful team dealing with a Bill of this importance.
I should also like to express my profound regret that the noble Lord, Lord Brooke, who participated in our debates on a Bill which we debated over the past 450 years—namely, the Parliamentary Voting System and Constituencies Bill—did not deliver at approximately 3 am on one of those days when we were sitting late the same speech as he delivered about an hour ago. We would have enjoyed it immensely on that occasion.
Perhaps I may make two preliminary points. First, I declare an interest: I might have close relatives in the future who will become judges and be affected by the Bill. I was also Lord Chancellor and the Bill theoretically could affect entitlements that I have. But I do not think that it does, for the reasons which the noble and learned Lord, Lord Woolf, outlined. Secondly, the Bill has an effect on sitting judges. My remarks are entirely my own. They have not been suggested to me by sitting judges.
The issues that I want to talk about are judicial independence and the effect of Part 4—issues not touched upon by the noble Lord, Lord Freud, although they were touched upon by the noble Baroness, Lady Noakes, who said that she hoped the Government would not cave in as they did previously. I take pride in the fact that I was the caver-in on the previous occasion, and I believe that my caving in protected judicial independence and quality considerably.
The constitutional points at stake here are very significant. The Bill represents an identifiable departure from the stance that the state has previously taken. Our constitutional structure is based on democracy and the rule of law, which ensures that individual freedom is protected, in particular against oppression by the majority, and depends on there being an independent judiciary, free from any interference, including and in particular from the Executive in the making of judicial decisions. Part of that freedom involves the Executive not having the power directly or indirectly to influence a judge individually, or the judges collectively, as a whole, whether by pressure before a decision or extracting a price after a decision has been made by the courts. The protection of judges from both direct and indirect interference by the Executive has been reflected in a series of statutory and non-statutory steps taken by the legislature and the Executive over the past 30 years to enshrine those protections.
The obvious pressure point on the judiciary is judges’ salary. Although the Senior Salaries Review Body looks at their pay and makes recommendations, their salary is set by the Government. Section 12 of the Supreme Court Act 1981 specifies that judges' salaries shall be set by the Lord Chancellor in conjunction with the Minister for the Civil Service. Section 12(3) specifies that:
“Any salary payable under this section may be increased, but not reduced, by a determination … under this section”.
The purpose of the section is to avoid a Minister having the power to reduce the salary of the judges either because, in reality, the Government are annoyed with a decision that a judge or judges make or to give such an appearance.
It is plain from Section 12 of the 1981 Act that the same protection does not apply to judicial pensions. Depending on whether the individual judge was appointed before or after 1 April 1995, a judicial pension is payable under either the 1981 Act or the Judicial Pensions and Retirement Act 1993. Neither Act contains an express prohibition on alteration or reduction in the terms of the pension. The current position, which applies broadly to all judges, is that they each have a non-contributory pension for themselves and a scheme to which they have to contribute for their dependants' benefits.
The effect of Part 4 of the Bill is that the appropriate Minister can, by regulations made with the concurrence of the Treasury, require existing judges to make contributions to their own pensions. Crucially, as the noble Lord, Lord Freud, said, that allows for the imposition of contributions for the first time in respect of the judges’ personal pensions and, equally crucially, allows for their increase in those pensions from time to time. The effect of this, as the noble and learned Lord, Lord Woolf, said, is that judges who were employed and took up their office on the basis that they had to make no contributions for their own pension, on the basis of what the noble Lord, Lord Freud, said, will have to face some unspecified contribution. This is an obvious deterioration in their terms and conditions, made the more problematic for the individual judge for the reason given by the noble and learned Lord, Lord Woolf—namely, that while the Executive can change their position, the judge cannot change his or her position by returning to the profession that he or she left in order to become a judge. I should add that it is compulsory for a judge to be a member of the relevant judicial pension scheme, while the Bill specifies—under subsection (2)(c) of proposed new Clause 9A, which would be inserted into the Judicial Pensions and Retirement Act—that any contributions have to be made in,
“the form of deductions from the salary payable”,
to the judge.
The consequence of the Bill and the introduction of contributions from the judge to his or her personal pension is that there has to be a further deduction from the judge’s salary, meaning that there will be a reduced salary paid to the judge without any commensurate increase in the benefits obtained. On the face of it, this is at the very least a breach of the spirit of Section 12(3) of the Supreme Court Act 1981, which prohibits any reduction in salary. There will be such a reduction because, as the noble and learned Lord, Lord Woolf, has pointed out, there is at the moment a freeze in judicial pay. Even if that is not a breach of that spirit, it is certainly a breach of the basic principle that it should not be open to the Executive significantly to reduce a judge’s main remuneration.
From my own experience as Lord Chancellor, I believe that this is a matter that most emphatically should be dealt with by the legislature, not by the Executive. I believe that the Executive instinctively understands that they must not interfere with the decision in an individual case. In my experience, when I was among them, no member of the Executive—official or Minister—ever sought to interfere with an individual decision. However, throughout the period when I was Lord Chancellor I was aware that the Executive were occasionally irritated with decisions that were made. It never led to anything, but individual officials and Ministers occasionally expressed the view that the judges did not understand particular positions or were not sufficiently understanding of the Executive’s problems.
The potential for tension between judges and the Executive has inevitably increased over the past 30 years, for two reasons. First, there is a great increase in judicial review, which means that the judges are more frequently challenging, and sometimes striking down, decisions made by the Executive. Secondly, the effect of the Human Rights Act is that there are more direct challenges to the state by the courts—not by challenging their decisions but by having to make decisions in relation to them. That change can be seen from the fact that in the early 1970s the final Court of Appeal, which then sat in the House of Lords, dealt primarily with commercial and tax cases. If you look at the daily diet of the Supreme Court across the road now, you will see that it is made up of many more constitutional cases involving challenges to the Executive. The separation of the Executive from the legislature, and their different roles, has therefore become more important.
I say in parenthesis, picking up on a point made by the noble and learned Lord—and referring not to Russia but to the United Kingdom—that I read an article in the Daily Mail last week which said that Ministers were furious with the courts because of their striking down the cancellation of some or all of the Building Schools for the Future programme. I have no idea whether Ministers were furious, but, as I say, I know from my own experience that Ministers and officials sometimes could be upset, and I also know that this upset with the courts was always misplaced. In the context of future decisions by the courts that are unfavourable to the Government, it might be possible to say that a decision to exercise the power proposed in Clause 24 had been taken in response to that set of decisions. That would erode confidence in the Executive’s inability to interfere in judicial independence.
What is the solution to this problem? In my view, the solution is to put a provision into proposed new Section 9A of the Judicial Pensions and Retirement Act 1993 that says that nothing in this Bill will allow an existing judge’s pension entitlement to be reduced in any way, including by a right to impose or increase contributions where none are paid at the moment. The consequence of such a provision would be that existing judges’ entitlement would not be affected. It would mean, however, that the Government would be entitled to introduce a contract for new judges that had a provision for contributions. In relation to new judges who are subject to a provision for contributions, it would not be open to the Executive thereafter to increase the level of contributions. The position would be that no judge sitting at the moment could have his pension entitlement changed. In the future, it would be possible for a new judge to have contributions introduced, but those contributions would be fixed. They could be reduced but not increased.
That approach would exactly reflect the approach that the legislature has hitherto taken to salaries. It would take away from the state the ability to respond in any way to decisions that it did not like. I make it clear that I am not suggesting that this Government, or any future Government whom one can envisage, would do that. However, to give a Government that power in the future is to give them a classic tool with which to interfere with judicial independence. I agree with every word that the noble and learned Lord, Lord Woolf, said about the importance for our standing in the world not only of having judges of the high calibre that we have but of having judges who—not uniquely, but unusually—are regarded as completely free from influence by the Executive. For the state now to introduce a provision such as this, which we would deprecate if another country introduced it, would be a great mistake.