Pensions Bill [HL]

Debate between Lord Falconer of Thoroton and Lord Stoneham of Droxford

Tuesday 15th March 2011 Grand Committee

[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.