Pension Schemes Bill

Lord Palmer of Childs Hill Excerpts

Committee stage
Wednesday 14th January 2026 Grand Committee

[Baroness Stedman-Scott (Con)]

My Lords, it is a pleasure to open today’s debate on the remaining groups of amendments relating to the Local Government Pension Scheme. We are conscious that Ministers have already undertaken to write to the House on a number of points, and we do not wish to add unduly to that correspondence or set exam questions. However, we hope that today’s debate may allow some of these issues to be addressed in real time.

Let me be clear at the outset that this is a probing stand-part notice intended to seek clarity from the Government. Clause 6 is striking in its brevity, but the power it confers is anything but modest. It would allow scheme regulations to provide for the merger explicitly, including a compulsory merger, of local government pension funds. Compulsory merger is a significant and, in many cases, irreversible intervention. It has profound implications for governance, funding positions, local accountability and, ultimately, the retirement savings of millions of scheme members and the obligations of employers. We are dealing here with very substantial sums of public money and the livelihoods of millions of people.

Before such a power is afforded to a Secretary of State who may have little or no specialist expertise in pensions, it is only right that the Committee understands clearly how this power will be exercised and what safeguards will apply. The clause itself, however, tells us very little. It provides no indication of the process that will be followed, the criteria that will be applied or the protections that will be in place for members, employers and administering authorities. I therefore hope that the Minister can assist the Committee on a number of points.

First, on expertise and decision-making, pension scheme governance is highly complex and technical. What confidence can the Government offer that the Secretary of State is the appropriate decision-maker for imposing compulsory mergers, particularly in the absence of any requirement in the Bill to obtain independent expert pensions advice?

Secondly, on process, what precise procedural steps will be required before a compulsory merger can be ordered? Will there be a statutory consultation and, if so, with whom? Will affected scheme managers, administering authorities, employers and scheme members have a formal opportunity to make representations before a decision is taken?

Thirdly, on safeguards and accountability, what independent checks and balances will exist to ensure that the Secretary of State cannot act unilaterally? Will decisions be required to meet defined tests, such as necessity or proportionality, and to be supported by evidence? Will there be any right of review or challenge where a fund believes a compulsory merger is not in the best interests of its members?

Fourthly, on financial risk, given the scale of the assets involved, what assurances can the Government provide that members’ savings will not be exposed to undue risk or that decisions will not be influenced directly or indirectly by political or short-term considerations rather than long-term fiduciary interest?

Finally, on precedent, does the Minister accept that conferring such a broad enabling power sets an important precedent for ministerial intervention in pensions governance more widely? If so, how do the Government justify that approach, and why are the limits of this power left entirely to secondary legislation?

We ought to have answers to these questions before the conclusion and passing of the Bill. Clause 6 confers wide discretion in a highly technical and sensitive area, with potentially far-reaching consequences. It is therefore entirely appropriate for the Committee to press the Government to explain how this power will be exercised, what safeguards will be in place and how the interests of scheme members will be protected. I look forward to the Minister’s response.

[Lord Palmer of Childs Hill (LD)]

My Lords, as has been stated, this clause introduces compulsory mergers of Local Government Pension Scheme funds, and the word “compulsory” worries me. We on these Benches accept that consolidation can sometimes improve efficiency and governance, but compulsion—I emphasise this—is a serious step that demands strong justification and clear safeguards, as the noble Baroness, Lady Stedman-Scott, stated.

At present, the Bill establishes the power without clearly setting out the criteria, process or routes of challenge. That sequencing matters. Trustees, employers and members need confidence that mergers will occur only when there is compelling evidence of benefit to the people—that is, the pensioners themselves. We on these Benches are concerned that forced mergers, if poorly handled—and some may well be poorly handled—could undermine trust rather than strengthen it. Before endorsing compulsion, which we are asked to do, Parliament should understand how decisions will be made, how dissent will be treated and what protections exist if a merger proves detrimental.

At this stage, it is quite right that there should be probing as to what is behind all this and what will happen in all the various circumstances that need to be in place to protect members of the Local Government Pension Scheme. I wait to see further information as the Bill progresses.

[Baroness Noakes (Con)]

My Lords, I apologise for speaking after the Liberal Democrats—the noble Lord got up rather quickly.

[Lord Palmer of Childs Hill (LD)]

I apologise. I did not see you.

[Baroness Noakes (Con)]

I endorse everything that both speakers have said about understanding more about the use of this power. I want to go back to the Explanatory Notes. They say that Clause 6 amends Schedule 3, et cetera,

“to clarify that, in the case of the LGPS, the responsible authority’s powers also include the power to make regulations”.

That implies that the Government believe that this is a declaration of an existing power. If that is the case, can they explain why they feel it is necessary to put Clause 6 in this Bill? Can they also explain the history of mergers with the involvement of the regulatory authority and what problems, if any, have led to the need to insert this in Clause 6? As the noble Lords who have spoken said, it looks like a very draconian power to be taking and yet the Explanatory Notes imply that they already have the power. It would be useful to have some more background.

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[Baroness Altmann (Non-Afl)]

My Lords, I support Amendments 14 and 15; I thank the noble Baroness, Lady Stedman-Scott, for her explanation of the thinking behind them. I apologise to the noble Lord, Lord Davies, that on this occasion I find it difficult to agree with much of what he said.

I agree that these schemes have been a success. I do not see these amendments as suggesting that there is a massive failure, but I am frightened that we could be about to snatch defeat from the jaws of the victory that these schemes have so far been able to provide. It is vital that there is a cost and sustainability review, as well as a review of the actuarial valuation methodologies. I do not feel that this issue can be swept under the carpet; to some extent, there is, or has been, a desire to do just that.

Excessive prudence and hoarding of excess assets are not, in my opinion, good governance. At least part of the surplus belongs to the employer, who is the council tax payer. This series of amendments, and indeed the whole Bill, need to be approached with the view that defined benefit pension schemes are no longer a problem that needs solving. We had that mindset for so many years that it seems we cannot easily get away from it but, actually, these funds have turned into a national asset, which needs to be stewarded responsibly. It can help to deliver both good pensions and long-term support for the economy, if we just use the opportunity that is presenting itself now.

The LGPS has very much changed position, especially because the needs of local and national economies have also changed. Council tax should be used responsibly and not to keep putting money into pension funds that already have more than they need. The risk of non-payment of these pensions is extremely low anyway, but the risk of council failure has been rising. The same is true for some other employers that are contributing here, such as special schools, academies, care homes and housing associations; a number of authorities and groups that are really important to our national well-being have also been caught up in this situation.

I must thank Steve Simkins of Isio, who has been helping me to understand some of what is going on at the local authority level. I have found his insights extremely valuable. Although the noble Lord, Lord Davies, said that we had the 2013 review under the local authority regulations—I think he quoted LGPS Regulation 62. That is in place but, as the years have gone on, the review and its terms have been used as a smokescreen for super-prudence. I have something of a problem with the argument about stability, because we were not as worried when we thought there were massive deficits in schemes, but we do not seem to want to take even a temporary respite from the ongoing contributions, which actuaries say are not needed, when things have become better.

I support the comments made by the noble Baroness, Lady Stedman-Scott, about the need for these regulations. They are meant, as the noble Lord, Lord Davies, suggested, to help review contributions in the interim, but it is not clear what the definitions on which the review is based mean. The word “desirability” is so vague: desirable to whom? Even the word “stability” can be interpreted differently, depending on whether you are talking about stability immediately or over the long run. Does “long term cost efficiency” include the cost of holding too much money? Is that efficient? We also have “solvency”, of course; on what basis is that measured?

I have enormous sympathy with the noble Lord, Lord Davies, in imploring the Committee to have supreme confidence in the actuarial profession’s conclusions about these funds—I have to declare an interest in that my daughter is an actuary, although I stress not on the pension side. Of course, actuaries are a very professional, well-educated group, but the issue for me is not so much with the wording of the regulations but the mindset that is behind what is done with those valuations. The LGPS, the scheme advisory boards, the MHCLG and even the LGPS officers, advisers and investment managers themselves seem to want to interpret everything in the most negative way, so I think that the noble Baroness has done the Committee a service in raising these issues.

We will talk more about this in the next group, but I urge the Minister to consider carefully, in the context that councils are running out of money and cannot afford basic services, that 20% to 25% of council tax goes on employer pension contributions into schemes that do not, as I say, seem to need the money. Could we be stewarding this national resource, and even the local authority budgets, far better and use the opportunity of the pension success to drive better growth and better local well-being?

[Lord Palmer of Childs Hill (LD)]

My Lords, I must first remind myself to declare that I am a member of the Local Government Pension Scheme: I could not fail to be, having been 28 years on the London Borough of Barnet Council, but I tend to forget about it because it is quite a while ago. A payment does come monthly into my bank account, so I must declare that I am a recipient. I also served on the pensions committee of the London Borough of Barnet, so I have some knowledge of the things that the noble Lord, Lord Davies, has been very eloquent about.

These amendments propose reviews of the Local Government Pension Scheme, and I think we have to get back to exactly what these amendments are asking for, which is sustainability and actuarial practice. We on my Benches support both, in principle. The Local Government Pension Scheme is a long-term, open scheme with unique characteristics, and pressures on admitted bodies, including housing associations, merit careful examination.

The noble Lord, Lord Davies, spoke eloquently about the profession of actuaries. I have always found that actuaries do not have a unified view. There are different actuaries and different views, and as a chartered accountant I have always thought they were impressively prudent with what they said the funds needed to be protected against.

Similarly, actuarial practices such as desirability, stability and solvency are not always applied consistently, despite our applause for actuaries as a profession. Greater clarity would help employers plan and would reduce disputes. Reviews, which is what these amendments ask for, are not admissions of failure; they are tools of good governance. We on these Benches therefore see these amendments as constructive and not critical.

The noble Lord, Lord Fuller, spoke very eloquently about stabilisation and the noble Baroness, Lady Altmann, talked about cost and stabilisation review. Excess prudence, or super-prudence, is not sensible, and it is so easy to be prudent as the easy way out. There is an argument for temporary respite. All these come into the question of review, which is what these two amendments ask for. Our question is whether the Government can accept the value of structured, evidence-based review in strengthening confidence in the Local Government Pension Scheme. Review is not a question of failure; it is a question of prudence, which I would have thought actuaries would be in favour of.

[Lord Katz (Lab)]

My Lords, this has been another interesting and wide-ranging debate, and I am sorry to see that the accord that we had on Monday— the horseshoe accord, I am going to call it—between my noble friend Lord Davies and the noble Lord, Lord Fuller, has broken down. Sadly, in my experience these things do not last that long.

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[Lord Palmer of Childs Hill (LD)]

My Lords, I support these amendments because I believe that transparency is good. I will need to address some of the things that the noble Lord, Lord Davies, said. He is right from an actuarial point of view, obviously. He said the decision is made by the council; in fact, it is made by the management committee of that council. The management committee of most councils will consist of councillors who are neither actuaries nor particularly great financial wizards. What happens in practice is that those people on the council’s management committee that is deciding take the advice of its pensions advisers, stockbrokers and actuaries. It happens on that basis. Do they understand it? My general view is that they are swayed by the people who make the arguments to that committee.

So this group of amendments addresses transparency, benchmarking and surplus. To most people, these are technical matters and ones on which the noble Lord, Lord Davies, speaks with great expertise from an actuarial point of view. But the impact on employer contributions and public services is real. Where valuations are materially more prudent than market benchmarks, we need to understand why.

My noble friend Lord Thurso talked about risk appetite. Most local authority pension committees will not have a great deal of appetite for risk. Their idea is that they are custodians of their employees’ pensions and they will naturally fall on the opposite side of taking risk. That is probably quite right. These amendments are a step in the right direction: they are a clearer explanation of assumptions and benchmarks, which strengthens the local government pension schemes by improving accountability and understanding.

Our question is whether the Government and the Minister agree that transparency is a safeguard and not a threat. This is what the amendments talk about—transparency. We need to make it as transparent to the management committees of these pension funds as it can be. That is what these amendments try to do: they would bring this on to a more generalised basis, not just picking the ones that do well in the Orkneys or wherever, but ones that maybe need guidance. Therefore, these Benches support these amendments, and I hope that they see some light at the end of the tunnel.

[Lord Katz (Lab)]

My Lords, this has been another interesting and wide-ranging debate. I am pleased to see that the horseshoe accord has, to some small measure, broken out again. I must say that I am not as pleased to see the conversion—maybe I am being unfair in characterising it as a Damascene conversion—of the noble Lord, Lord Fuller, and other Members opposite into the prudence of having well-funded local government to provide local services, after the underfunding of local authorities for a fair amount of time. Would that that sentiment had been shown by the Benches opposite when they were on our side of the Committee, but we are where we are.

These amendments show a clear desire to provide greater transparency in the triennial valuation and contributions rate-setting process. I agree it is important that all scheme employers understand how their contribution rates have been set, and members need to have confidence in the long-term sustainability of the fund.

These amendments also show a keen interest in the funding level of the Local Government Pension Scheme and the balance that administering authorities must strike between the long-term sustainability of the fund and affordability to its employers. As a public sector scheme, it is right that we are mindful of the costs to the taxpayer of funding the scheme.

I will address up front why the surplus extraction measures in Clauses 9 and 10 do not apply to the LGPS, to avoid confusion. The LGPS already has a triennial valuation process where contribution rates for employers are set. This is effectively a point where surplus extraction can take place, as this is where contribution rates can be reduced in response to an improvement in the funding level. As we will come on to later, there is also an interim contribution review process for employers who find themselves in difficulty. Therefore, an additional surplus extraction process is not required.

Furthermore, I urge caution in viewing surpluses in the LGPS as a potential windfall or as a means of managing broader revenue pressures for scheme employers. As in all defined benefit schemes, surpluses are maintained to absorb future shocks, manage demographic risk and ensure that promises made to members are kept. Poor decision-making can now lead to higher costs for future generations of taxpayers.

For context, the 2025 valuation will conclude in a few weeks, as we have discussed, with employer contribution rates set for April 2026 onwards. Following this, the Government Actuary’s Department, under Section 13 of the Public Service Pensions Act 2013, will undertake a review for the Secretary of State of all fund valuations, on whether compliance, consistency, solvency and long-term cost efficiency in the scheme has been achieved. Under usual timeframes, the report will be published in mid-2027.

Although I appreciate that the Committee is concerned about rising surpluses in the scheme, it surely cannot be right that we make amendments that would have a material impact on future valuations without having a full review of the outcomes of the 2025 valuation. It is anticipated that there will be reductions in contribution rates for many employers from April, and we need to take account of how the current system has coped with the significant changes in market conditions since that 2022 valuation—we discussed that on both this and the previous group—before making changes to the valuation process.

The LGPS is a locally administered and managed scheme. It is administering authorities that are responsible for managing their surpluses through employer contribution rate changes, and for working with their actuaries to set appropriate assumptions as part of the valuation. Authorities are required under government regulations to provide valuation reports to employers to support them in their longer-term financial planning. So we must consider whether it is right for the Government to exert a more significant level of influence over the setting of contribution rates through these amendments, and whether this is compatible with local accountability.

It is right, in a locally managed scheme, that funds are able to set their own approaches to stability and prudence, reflecting both the needs of employers in understanding their medium-term financial obligations and the different risk profiles of their investments. The balance of these is key to delivering the intergenerational fairness mentioned by noble Lords opposite, particularly the noble Viscount, Lord Younger—and indeed we all want to see that.

On transparency, revised statutory guidance on the funding strategy statement, which all LGPS funds must publish, was issued by the scheme advisory board on behalf of MHCLG in January 2025. Under this guidance, administering authorities should consult all employers in the fund on their funding strategy statement, which should outline how administering authorities will manage surpluses and deficits, outline the approach to contribution rate stability, and summarise the main actuarial assumptions used at the valuation.

Amendment 16 would require the Secretary of State to set a statutory funding objective for LGPS funds, including considerations for administering authorities, setting their funding strategy and contribution rates. There is already detailed guidance on how funds should manage surpluses and deficits in their funding strategy, but, as locally managed schemes, it should be for administering authorities to consider how to strike the right balance in setting the contribution rates, with appropriate considerations of prudence and the long-term sustainability of the scheme and contributions. Furthermore, a funding objective would still require a degree of interpretation and so would not provide the clarity that the noble Lord seeks to achieve with his amendment.

In 2020, the Supreme Court found that LGPS money is not, in fact, public money, but that it belongs to its members, which further justifies why a statutory funding objective is not appropriate for the scheme.

Amendment 17 would require fund valuations to be benchmarked against insurer and gilt-based pricing, with a report laid before the relevant local authority. The triennial valuation and contribution rates-setting process is already a robust and collaborative process between administering authorities, actuaries and employers. Many authorities already follow best practice in consulting scheme employers alongside the contribution rate-setting process. This gives employers the opportunity to challenge contribution rates and consider whether they are sufficiently stable, or whether excessive prudence is built in.

Statutory guidance already sets out that funds should publish the actuarial assumptions used as part of the funding strategy statement. The noble Baroness, Lady Altmann, referenced the role of the Financial Reporting Council in the valuation. The valuation reports, which are publicly available, will include Financial Reporting Council compliance statements that technical actuarial standards have been complied with. In addition, I have already raised the Section 13 report by the GAD, which reviews the fund-level actuarial valuations. As part of the review into the 2022 valuation report, for example, when assessing consistency, there was a review of assumptions, including the discount rate.

Finally, this amendment points to a perceived excessive risk aversion undertaken by the LGPS. This is not an accurate characterisation. In fact, around three-quarters of LGPS assets are invested in return-seeking assets, vastly outweighing the equivalent figures in private schemes, which are heavily geared towards matching assets.

Amendment 18 would require administering authorities to publish and justify their approach to the treatment of surpluses over 120%. First, we must consider if this is the level that we would wish to set in the context of the LGPS. Elsewhere in defined benefit schemes, the Government are considering the funding threshold for surplus release, and there has already been consideration of what this would be. But we must remember that the valuation process already provides a route to return surplus to employers, which allows for changes every three years, whether or not a threshold—whatever it is—has been met.

Furthermore, each valuation is prepared on a local basis, meaning that the funding level will depend on the discount rate set. The discount rate converts the value of future benefits to a current value so it can be compared to the current value of assets; it is used to determine the employer contribution rate required to pay future benefits. It is based on the assumed future returns of the individual fund’s investments, taking into account the portfolio of assets held by the fund, the demographic profile of its members and its attitudes to risk. That means that a funding level of 120% in one fund will simply not be comparable to that of another if the discount rates applied are significantly different.

I think that the Committee will surely agree that the purpose of a buffer is to provide a surplus in well-funded times and guard against a fall into deficit in more challenging times. As a locally managed scheme, it is for the funds, not for the Government, to decide what the right level of surplus is. Introducing these additional reviews and requirements would risk undermining the valuation process and the locally managed nature of the scheme.

On Amendment 19, we had an interesting discussion on transparency—certainly transparency and accessibility is something that we should all seek. I appreciated the discussion between my noble friend Lord Davies and the noble Baronesses, Lady Altmann and Lady Noakes, on the accessibility of the actuarial statements. Maybe I would say this, but I thought that my noble friend put up a good defence of the professional standards that actuarial firms set themselves with regard to matters of accessibility.

I appreciate that the intent of Amendment 19 is to increase the transparency of actuarial valuations for all scheme employers and for members of the public. In addition to the requirements that I have already mentioned, regulations also require the administering authority to publish and send copies of any valuation, report or certificate made under Regulation 62, or Regulation 64, to all employers. I do not recognise that as limited transparency, but I concede that there is scope for greater visibility—and that is something that we should always seek to pursue. While there is scope to look at whether these publications could be made easier to understand for employers, that should be considered in the round—I suggest following the conclusion of the 2025 valuation.

The noble Viscount, Lord Younger, asked me to comment on his example of valuations increasing despite surpluses, and I would say that there is a robust valuation process in place into which employers feed. We must wait for completion of the scheme valuation and its formal result—but if this is the case as set out by the noble Viscount, the Government Actuary’s Department will review the results in the valuation under regulations in Section 13.

The noble Lord, Lord Fuller, asked about funds not using a discount rate that is more prudent than a gilt basis. I have already talked about the wider inaccurate characterisation of excessive risk aversion, but at this point I add that the LGPS is a funded scheme with diversified assets and its discount rates are set by fund actuaries on a scheme-specific, prudent basis that reflects long-term expected returns. The valuations are reviewed nationally by the GAD on compliance, solvency and long-term cost efficiency. Without the results of the 2025 valuation or the Section 13 review, we cannot say for certain what the current approach is, taken across all funds.

Integration and Community Cohesion

Lord Palmer of Childs Hill Excerpts

Thursday 13th March 2025 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, it is a pleasure to follow all these wonderful speeches. I thank the noble Baroness, Lady Verma, for initiating this debate and telling us her history. I congratulate the noble Lords, Lord Raval and Lord Rook, on their speeches and their entry to the House. I am sure they will make a great difference to it.

This is a very diverse House. To qualify to speak in this debate, I think I ought to stress that my mother came from Poland as a teenager, between the wars. She married my father, who also came from far away—Newcastle—while my maternal grandmother and other family died in the Holocaust. There are many strands of diversity in your Lordships’ House and we have heard many of them today. I was sure that many speakers would focus on their community in relation to cohesion. I will concentrate on how the UK Jewish community fits into this essential task.

We are fortunate in the UK in having numerous communal organisations, including the Community Security Trust, the Board of Deputies and the Jewish Leadership Council. There are many others. Sadly, external events can have a significant effect. Since Hamas killed and took hostages in Israel on 7 October 2023—as long ago as that—there has been a significant division in the UK. These divisions impact on Jewish life, resulting in tensions in the workplace, in educational institutions, on our streets and in communal spaces. There has, sadly, been a rise in anti-Semitism.

Many in the UK Jewish community feel more vulnerable than before and this is surely unacceptable. There are no easy answers. Interfaith initiatives need to be supported. Education needs to be improved on what is seen as anti-Semitism and how hurtful it is in the workplace, on the streets and in education. We have to face up to the fact that news travels faster than before, no more so than if that news is false or distorted. A lie once posted online soon becomes viral. Corrections, if made, are often ignored by those willing to believe those falsehoods.

It is often hard to explain to others that Israel plays an important part in the identity of the UK Jewish community due to religious, cultural, family and economic ties. It is not anti-Semitic to criticise Israel—after all, Jews and Israelis do it all the time—but it is an uncomfortable feeling to see the only Jewish state, comprising a population of only nine million, including non-Jews, singled out or held to higher standards than other nations. This can be seen in cases such as when a UK local authority supports the boycott and divestments campaign. We rarely hear of the 8 million Jews who fled Arab lands, mainly to settle in Israel. In the main that was because Israel, as we are trying to suggest today, integrates them into the general populace. There needs to be a stronger enforcement against extremism in the charity sector, which should be stamped on by the Charity Commission.

Of course, these falsehoods do not apply only to the UK Jewish community. In reflecting on the importance of community cohesion between Jewish and Muslim communities, I am heartened by initiatives such as Mitzvah Day, the UK’s largest day of social action. It brings together over 50,000 individuals from incredibly diverse backgrounds to engage in charitable activities that strengthen our social fabric. Notably, in 2024, Mitzvah Day’s theme was “Stronger Together”, emphasising unity in challenging times. Faith leaders from various traditions collaborated on projects supporting vulnerable families, exemplifying the power of collective action in fostering interfaith harmony. As examples, there were people knitting hats for premature babies in hospitals, while my wife was involved in cases for the homeless in Camden.

I acknowledge the contributions of many key figures in promoting interfaith relations. I know that the Liberal Democrat leader, Ed Davey, has been an ardent supporter of Mitzvah Day, a cross-religious and cross-cultural initiative, just for helping people. He has participated in its initiatives. The aim is to build bridges between communities. Additionally, the All-Party Parliamentary Group on women in faith has been instrumental in highlighting the vital role of women in fostering interfaith dialogue. We must all support initiatives aiming to deal with anti-Semitism, anti-Muslim hate, anti-Hindu hate—hate of all sorts. I await the Minister’s reply. I will not set out specific questions as so many other questions have been raised already, except to ask: what initiatives can we expect from His Majesty’s Government?

Leasehold and Freehold Reform Bill

Lord Palmer of Childs Hill Excerpts

2nd reading
Wednesday 27th March 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, I first thank the noble Lord, Lord Bailey, for his contribution; may it be the first of many. I declare my interest in the register as the chairman of the advisory board of the Property Redress Scheme, but I do not intend to speak on redress here today.

No one will disagree that the leasehold system has been plagued by cowboys and those seeking to exploit a broken system. The Government have sought to address these issues in the Bill. I am concerned that it does not go nearly far enough. That said, where they are acting, there are huge flaws that will fundamentally undermine our property rights and, as such, put our pension funds and economic prosperity at risk.

I draw the attention of the House to an aspect of the Leasehold and Freehold Reform Bill which has not, until this debate, received the attention I believe it warrants and very much needs. It concerns marriage value, referred to by the noble Lord, Lord Truscott, the noble Earl, Lord Lytton, and in detail by the noble Lord, Lord Howard. For those who are unfamiliar with this term, marriage value is defined as the increase in a property’s value once a lease below 80 years is extended or enfranchised. Existing legislation requires the financial benefit—or additional value—created when extending or enfranchising a lease and merging the freeholder and leaseholder interests to be shared equally by both parties, so they benefit, more or less, on equal terms.

As this House is no doubt aware, the Bill proposes to abolish marriage value. It concerns me deeply that this proposed change has not featured in public debate around ground rents and leaseholds. The change only very briefly featured in discussions during the Public Bill Committee’s scrutiny in the other House, and indeed much of that discussion, I might say, was about whether marriage value is a hypothetical concept. I can assure noble Lords, as other noble Lords have, that marriage value is certainly not hypothetical.

Furthermore, its immediate abolishment will cause a number of underassessed problems for the country. As I will outline, this is a highly inequitable measure that will disrupt investment in our property market and wider economy. Let me outline my concerns about the inequitable nature of the proposed measure.

The Government have stated that the abolition of marriage value will transfer £7.1 billion of freehold investors’ equity to leaseholders. In the broken feudal system of leasehold, this could initially be a warmly welcomed measure. However, if you scratch the surface, the assumed benefits of the measure fall apart. Of the 5.2 million leasehold properties in England and Wales, only 400,000 have leases under 80 years, the point at which marriage value is applied. As such, £7.1 billion will be transferred to just 8% of all leaseholders.

That sounds good, perhaps, but of these 400,000 properties—or 8% of all leaseholders—two-fifths are owned by private landlords. Many of these landlords would have made the decision to buy these short, and therefore cheaper, leases with the explicit intention of renting them out at proportionately high market rent, and therefore maximising the return of their investment, because they are not looking to the long-term. Worse still, four-fifths of the total value of this equity transfer will occur in London or the south-east, negatively impacting efforts to rebalance regional wealth disparities. However, what has struck me most significantly is that, of these higher-value properties, 60% of the leaseholds—and I do mean leaseholds—are held by foreign owners in central London.

Let me summarise that. Through this measure, the Government are transferring £7.1 billion of freeholder wealth to just 8% of all leaseholders. Two-fifths of these leaseholders are private landlords, four-fifths of the wealth transfer will occur in the already prosperous London and the south-east, and a huge amount of this wealth will be transferred out of the country into foreign ownership for leaseholders.

This is not the end of the inequitable consequences of immediately abolishing marriage value. Let us imagine that there are two flats next to each other at the point at which the properties have only 80 years remaining on their leases, when marriage value begins to be applied. One leaseholder did the right thing, and took money from their savings or remortgaged to be able to extend their lease and protect the value of their asset. Under this measure, those who did the right thing and protected their asset will be worse off than those who did not, who will now receive this benefit for free.

Essentially, the Government are principally transferring wealth not to those who require more support but to relatively wealthy individuals in the main, many of whom deliberately buy or remain in short-lease properties. The Government are about to deliver foreign leaseholders an enormous birthday present, while undermining the property rights that are the bedrock of UK pension funds. This is surely an unintended consequence that requires further consideration by the Government.

I move on to the wider implications for the property industry and our economy. I am sure noble Lords would agree that the UK has a world-leading reputation as a nation that respects property rights. This reputation has allowed us to build a strong domestic and foreign direct investment environment. I am concerned that retrospectively—I emphasise the word “retrospectively” —expropriating assets from property investment sends all the wrong messages to both domestic and international investors that British property rights are no longer sacrosanct. This failure to protect property rights will undermine the UK as a place to invest. Money will divert to the UK’s international competitors because of the risk that the UK Government can move the goalposts and retrospectively—I emphasise the word again—apply changes to existing investment returns. This will lead to uncertainty and a loss of confidence in the UK economy. The result will be fewer British businesses getting the investment they need, less housing being built, lower economic growth, and lower tax revenues to fund things such as the NHS and other vital public services relied on by the people of this country.

Abolishing marriage value threatens to completely undermine investor confidence in our property market and damage the wider economy. As we have seen in the media this weekend, the Treasury has intervened in the ground rents element of the Bill due to concerns about the impact on pension funds. Marriage value, although overlooked—but not today in this Chamber—bears similar risks for the Government. Additionally, it will lead to a tax-free gain for the leaseholders who are owner-occupiers, but the freeholders’ loss will in effect not be taxable, further impacting on the Treasury’s coffers. This needs to be reassessed.

Additionally, as has been mentioned in passing, the UK Supreme Court has observed that, as a minority group, landlords, although often unpopular, are entitled to protection of their so-called human rights, and the abolition of marriage value can be argued to be an unfair expropriation as it falls short of the fair balance principle. Marriage value has, quite rightly, been enshrined in law since 1993 to ensure that freeholders are fairly compensated when the lease is enfranchised or extended. This expropriation of wealth takes away an entitlement without a fair balancing aspect, which will lead possibly to an ECHR challenge—mentioned by another noble Peer—that could further saddle the taxpayer with a substantial bill.

Fortunately, there is a compromise to be made. I propose that the Bill needs a straightforward amendment which tweaks the legislation by grandfathering the current situation for those leases which have fewer than 80 years to run to reversion. If the term grandfathering is unfamiliar to some, I am referring to the well-established practice of excluding leases with fewer than 80 years remaining on the date of Royal Assent from the changes to marriage value. By grandfathering those existing leases with fewer than 80 years, where marriage value is already imputed into their reversion value, freehold investors will not suffer from the destruction of £7.1 billion of financial value. Any lease with more than 80 years remaining at the time of the Bill passing will not have marriage value included within the calculation of the premium for a lease extension or enfranchisement, now or in the future. The Government will therefore still have achieved the objective of abolishing marriage value.

To abolish marriage value would be to abolish investment confidence in our property market through a deeply inequitable measure. A grandfather clause would protect investors, thereby maintaining investor confidence in our property market. In case people do not understand the principle of marriage value and the abolition of it, I stress that this does not stop extending or enfranchising but affects purely the overvaluation or undervaluation of the property. I therefore trust that, in the course of the debates on the Bill, we might consider a grandfathering clause relating to property.

Holocaust Memorial Day

Lord Palmer of Childs Hill Excerpts

Friday 2nd February 2024 Lords Chamber

[Lord Palmer of Childs Hill (LD)]

My Lords, if I felt nervous at being a Jew, I feel doubly nervous after the worthy comments from the noble Lord, Lord Reid, which are very pertinent. I must first declare some of my interests. I am president of the Liberal Democrat Friends of Israel and a vice-president of the Jewish Leadership Council—and there is another long list which I will not bore your Lordships with.

I feel privileged to be part of this debate—although it seems to have taken a long time to get to the winding-up speeches. Wow; the speeches have been absolutely splendid and very moving. It is hard to pick one of them—it applies to every single one of them. The speech of the noble Lord, Lord Dubs, must be one, because his memories of the Kindertransport and having lived through it are very pertinent. I am also extremely grateful to those who are not Jewish but who have come along to support and to speak. As the noble Lord, Lord Reid, so rightly said, this affects so many people, and it is nice to know that there are people other than Jews who feel as strongly as I do about this.

Let us be clear; all genocides are terrible. Every genocide is terrible. Why is the Holocaust at times singled out? In my view, it is just a genocide, but it was industrial killing. It was not just going off and killing people; it was having people going into chambers in order to be gassed and killed. That is why the Holocaust is so different, as was referred to by my noble friend Lady Ludford.

Holocaust Memorial Day is necessary so that people remember and learn from the past’s horrific events. For most people, these are events which they at best read about, or perhaps they have seen a film about the horrors. We have heard some more personalised views this morning.

In 2023, a number of Holocaust survivors passed away. They were witnesses able to share their experiences, such as, as has been mentioned, the remarkable Sir Ben Helfgott, a survivor mentioned by the noble Baroness, Lady Scott, and my noble friend Lady Brinton. The works of the Holocaust organisations—the Holocaust Educational Trust and the Holocaust Memorial Day Trust—are to be highly commended.

Sadly, I am of an age—an age I do not always admit—where the Holocaust is more personal to me. My late mother and her five brothers were some of the 70,000 refugees from Nazi persecution who came to the UK before the Second World War, in between the wars. Her mother—my maternal grandmother—and her aunt and family, were alive at the end of the war in 1944, as far as we know. In 1945, they disappeared, completely without trace. It was mentioned earlier that it was not only the people in the camps who were killed; there were people who were alive during the war but who at the end of the war were never seen again. They lived in the small village of Szrensk in Poland.

Is it any wonder that Jews like me say—and I say the words mentioned so many times during this debate—“Never again”? Never again should that happen. Is it any wonder that Jews in Israel, the only state with a Jewish majority, have built into their psyche that they will not wait and accept that they should stand in line for the gas chambers? To my mind, that explains the Israeli reaction to the horrendous Hamas murders and abductions on 7 October, referred to by the noble Baroness, Lady Scott, and their relationship with the Holocaust. These were peaceful Israelis and their friends, almost all civilians, attacked in their homes by murderers, and murdered and mutilated. There were approximately 1,200 in the kibbutzim, and at a music festival, who were killed and mutilated—actually 1,200 killed. Over 200 hostages were taken—some now dead, some alive and almost forgotten.

A few days ago, I met some families of Holocaust survivors, which is always very sad and worrying. But the one who really affected me was a young woman in her early 20s who was present at the music festival in Israel on 7 October. When the murderous Hamas came and killed these innocent festivalgoers at this music festival, she found herself underneath a whole heap of dead people. She survived only because she was lying underneath this pile of dead people. How traumatising can that be? Can one wonder at Israel’s response to these horrors? No country could do nothing.

In my view, when Hamas attacked, it knew that it would get an armed response, and it welcomed that armed response, leading to untold suffering among the people of Gaza. But the people of Gaza were suffering under Hamas control; they still suffer, and will suffer while Hamas is there. Aid and building materials were misappropriated to build miles and miles of sophisticated tunnels. Have noble Lords seen those tunnels? They make the London Underground look antiquated.

What could have happened? All the money spent on underground tunnels could have been spent on making Gaza a sophisticated Singapore of the Middle East. It has a seaboard. It could have water produced from seawater and all sorts of things happening, but the money that went to Gaza was taken to build sophisticated tunnels in order to kill Jews.

It is hard to pick out all the comments made in the debate. The noble Lord, Lord Pickles, talked about students, as did the noble Lord, Lord Austin. It affects so many people. What worries us, as mentioned by other noble Lords, are the denials that some of these things happened—this modern view, of which President Trump is an exponent, of fake news. There are many stories, but this one particularly worried me. I saw reposted a picture of Israelis throwing people into a pit and killing them. I looked at it and said, “But they’re speaking Arabic and they’re not wearing Israeli uniforms”. I looked it up and found it was Syrians killing the people in the pit, but it was in the media as Israeli terror. There is so much of this.

The noble Baroness, Lady Anderson, movingly spoke about family and other genocides. It resonates when we talk about people’s stories. The noble Lord, Lord Polak, was very moving. I saw the young man he mentioned going off. I am sure he will talk for ages about his words being spoken in the House of Lords.

The noble Lord, Lord Polak, spoke about the late Lord Sacks. Jonathan and Elaine Sacks were, and she is, lifelong friends of my wife and me. They lived very near us, and we were friendly. His words would have been very resonant. He had a most marvellous turn of phrase. I mention him only because of how memories are stirred. Here we are on a Friday having a debate about the Holocaust, Israel, the Jewish community and others. I remember another debate obtained by the most reverend Primate the Archbishop of Canterbury on a Friday, in which Lord Sacks wanted to speak. He had a problem, because the Companion says you have to be present at the beginning and the end of a debate. I remember him telling me that he had special dispensation from the most reverend Primate to leave before the beginning of Shabbat. I say to the noble Lord, Lord Polak, that it is at 4.46 pm today, so he still has a bit of time.

The noble Lord, Lord Bilimoria, spoke as a Zoroastrian. I must admit that I found it good to find that there is a minority smaller than the one I belong to. My noble friend Lady Smith spoke as a Catholic and made a very good point about other genocides. We must remember that the Holocaust was special, but all genocides are special in that people are killed.

People talk about the future and what could happen in Israel, Gaza and the West Bank. Some years ago, I had coffee in London with a member of Fatah, the ruling party in the Palestinian Authority and the opposition to Hamas. I asked this member of Fatah what I, as someone who has always been known for trying to find a compromise, could encourage the UK Government to provide for Hamas that it wanted in order to be part of a peaceful solution in the Middle East. This member of Fatah said to me, “Lord Palmer, they want only two things”. I asked, “What are the two things?” The answer was the killing of Jews and the removal of Israel from the map. How do you deal with that?

I think it was the noble Lord, Lord Pickles, who mentioned the marches and the hate that comes from them. I will not go over all the points that he and other Members made very clearly, but there is one thing about the marches that really gets me. Let us say that a number of people go there because they are worried about the Palestinians. I understand that, but then they scream out, “From the river to the sea, Palestine shall be free”. They have not got the foggiest idea—or maybe they have—that “from the river to the sea” means, if noble Lords do not know, from the Jordan to the Mediterranean. There was a video—I am not sure whether it was a spoof—from Utah in America in which people were asked which river it was, and they got the wrong river, which sea it was, and they got the wrong sea. The point is that, “From the river to the sea”, this chant that goes along on the marches, means the complete removal of the State of Israel. Perhaps people should remember that.

Back to Holocaust Memorial Day, which we are talking about. It is a day set aside to remember 6 million Jewish men, women and children murdered by the Nazis and collaborators, not to forget the killing of Roma, gays, the disabled and political opponents. This has been a very stimulating debate. I am glad that it was had, I hope that it will be repeated in the future, and I congratulate all those all around the House who have stimulated so much discussion today. Shalom.

Regulation of Property Agents Working Group

Lord Palmer of Childs Hill Excerpts

Wednesday 20th October 2021 Lords Chamber

[The Lord Speaker (Lord McFall of Alcluith)]

The noble Lord, Lord Adonis, is not here.

[Lord Palmer of Childs Hill (LD)]

My Lords, I declare my interest as chair of the advisory board of the Property Redress Scheme. The noble Lord, Lord Best, put it very clearly: this report was two years ago, and still nothing concrete has happened. Some things can be done quite simply. The first recommendation is the appointment of a new independent regulator to lead matters in this instance. May I specifically ask the Minister when he expects such a regulator to be appointed?

[Lord Greenhalgh (Con)]

The noble Lord will know that the creation of a new regulatory regime requires a legislative underpinning. We are considering how to move forward on this and other areas and will come back to this House in due course.

UK Holocaust Memorial

Lord Palmer of Childs Hill Excerpts

Monday 20th January 2020 Lords Chamber

[Viscount Younger of Leckie]

On my noble friend’s second point, yes, we are pleased—and it is a commitment from this Government—to go ahead and build this Holocaust memorial. Of course, he is right, and I am sure the whole House will agree that the number of people involved—6 million Jewish men, women and children, and millions of others—is almost incomprehensible and absolutely horrendous. That is why the Holocaust has to stand out on its own. However, as I mentioned earlier, we must never forget other atrocities.

[Lord Palmer of Childs Hill (LD)]

My Lords, all genocide is horrific but, on the anniversary of the liberation of Auschwitz, surely we should recognise how the sheer industrialisation of the Holocaust differs from other genocides, appalling though they all are. There are still Holocaust deniers. Civilisation is only skin deep, and we need continual reminding of man’s inhumanity to man. Does the Minister agree that the UK needs to preserve the memories of survivors and educate future generations?

[Viscount Younger of Leckie]

The noble Lord is absolutely right. That is why the memorial exhibition and learning centre will explore the role of Britain’s Parliament and democratic institutions in the Holocaust— what we did and what more we could have done to tackle the persecution of the Jewish people and other groups.

Housing: Rental Market

Lord Palmer of Childs Hill Excerpts

Monday 28th October 2019 Lords Chamber

[Viscount Younger of Leckie]

I said in my initial Answer that the increase in Airbnb lettings is not having an effect on houses to rent. But on the noble Lord’s point about prices paid by rental tenants in the UK, prices rose by only 1.3% in the 12 months to September 2019, a rate unchanged since May 2019.

[Lord Palmer of Childs Hill (LD)]

My Lords, the Minister replied very blithely to the question asked by the noble Lord, Lord Bird, but Airbnb has become very profitable. Does the noble Viscount not agree that there has been a big decrease in properties for long-term rent and purchase, despite the percentages in his answer, and that the vast increase in short lets is not how to build communities?

[Viscount Younger of Leckie]

I can only quote the figures that I have given noble Lords, which show that there is an increase but it is not having an impact on private rented property. As I said, we want to continue to follow the advocation for self-regulation and to support local authorities. In 2018, the Short Term Accommodation Association implemented the considerate nightly letting charter with Westminster City Council. With the fines that have been imposed—I have the details of those—it seems to be working. As I said, we are determined to follow the voluntary approach at present.