Local Government Pension Scheme

Debate between Andrew Smith and Ian Blackford

Monday 24th October 2016 Westminster Hall

[Ian Blackford]

I thank the hon. Gentleman for his contribution and he makes an interesting point. We must have the wider debate about sustainability and ethical investment. There are certainly very attractive funds that exist in the area of sustainability, corporate social responsibility and so on, and it is very important that local authorities are allowed to have the debate about what is in their members’ best interests. They must be able to satisfy them that they are acting in their interests. It is entirely legitimate for pension schemes to have a debate about what they consider to be ethical investments, and they should be allowed to pursue them provided that they can demonstrate that they are acting in the best interests of their members.

[Mr Andrew Smith (Oxford East) (Lab)]

I am very grateful to the hon. Gentleman for giving way and I congratulate him on opening this debate. Further to an earlier intervention, we can all see some benefit from the proposed pooling arrangements, but we must also be cognisant that there can be risks, or a concentration of risks. Does the hon. Gentleman agree that there ought to be trade union representation on the governance structures for the pooling in order to stand up for members’ interests?

[Ian Blackford]

Very simply, yes, I agree. Stakeholders and trade unions are a very important part of the debate. We must also look at the training that is given to trustees in that regard, so that they can discharge their responsibilities fully, and indeed the important role that advisers play. In some senses, we have perhaps rushed these changes, rather than stood back and tried to get something on which I hope we can build consensus.

--- Later in debate ---

[Ian Blackford]

Thank you, Sir Edward. Again, I find myself in agreement with the hon. Member for Mansfield (Sir Alan Meale), because, as I mentioned, the funds belong to the scheme-owners—those who are working in local authorities that are engaged in that way. It rather ill behoves the Government to seek to interfere in the governance of the funds if they are acting in the best interests of their members—that is the test. That is why it is important for the Government listen to the debate, reflect and perhaps come back with some new thinking.

The whole infrastructure issue is important. I think we all recognise that we have to build capacity in our economies. We have all heard the debate about being left behind. It is absolutely necessary that local authority pension funds in the north of England, the midlands and my own country of Scotland play their part. Each local authority area must make its own determination as to what is right and invest in local schemes—social housing, perhaps—for the benefit of the community. At the same time, they should invest for the benefit of the pension schemes. It is about democratic accountability and investment opportunities. It should not be too complicated.

I urge the Government carefully to consider what has been done in Ontario and Quebec. They have been able to build consensus because they have not had the same compulsion and the Government in Canada cannot use the big stick against local authorities.

I commend the Library on a first-class briefing. On the legal framework, it states:

“Although the rules are set nationally by the Secretary of State,”

the scheme

“is administered at local level by ‘administering authorities’, which broadly correspond to county councils and London Boroughs. These administering authorities are responsible for managing scheme investments, within the statutory framework. The Local Government Association (LGA) explains that this means decisions are ‘taken by democratically elected local councillors working within the restraints of local authority budgets.’”

That local democratic accountability, which many right hon. and hon. Members have mentioned, is the nub of the matter.

The briefing continues:

“When making decisions on investment, the primary responsibilities of administering authorities are to deliver the returns needed to pay scheme members’ pensions, and to protect local taxpayers and employers from high pension costs. In this context, there have been questions about the extent to which investments can be made with other objectives in mind – for example, a desire to invest in infrastructure or avoid certain investments on ethical grounds. Legal advice published by the LGA in April 2014 said that the power of investment must be exercised for investment purposes and not for wider purposes. However, as long as this remained true, the precise choice of investment could be influenced by wider considerations.”

The briefing also states that the Department for Communities and Local Government has been considering how to “achieve economies of scale” and, as has been mentioned, pooling can lead to reduced costs and enhanced returns. The principle is fine and is to be lauded. However, it has become clear that the Government are going to use the stick approach as well as that of the carrot. If subtle inducement does not work, the Government could intervene by directing local authorities to invest in a certain way or by the Secretary of State exercising control. If we are to support local democracy throughout the United Kingdom, that cannot be right, and I can understand why local authorities might be alarmed.

[Mr Andrew Smith]

The hon. Gentleman is totally right about how undemocratic the measure is. Is there not a double jeopardy as well? Should the Government not be mindful of the fact that if they direct a fund to behave in a particular way and the investment goes wrong, they themselves will be liable? Do they not have to remember Equitable Life?

[Ian Blackford]

The right hon. Gentleman makes a valid point. I promised myself that I would not be too strident in the debate and not give the Government too much of a verbal kicking, but let us look at where we are on wider pensions policy and mark the Government’s report card because, frankly, it is not a good one. Let us take the issue of fairness for the women in the Women Against State Pension Inequality Campaign, and that of pensions freedom, on which just last week we saw a roll-back with the secondary annuity market being scrapped before it gets going. A systemic risk was identified by the previous Secretary of State for Work and Pensions, yet the Government have had nothing to say about their responsibilities. We can see the impact of the risk to pensioners, we all know what happened with Maxwell and recently we have had BHS—

EU Referendum Rules

Debate between Andrew Smith and Ian Blackford

Monday 5th September 2016 Westminster Hall

[Ian Blackford]

With respect, Mr Gray, that is precisely what I am trying to do. I am putting this in the context of what has happened in Scotland. On the basis of free speech, I ask that I be given the opportunity to present my argument in the way that I feel is appropriate to the people of my country. This is about the people of Scotland being listened to when they have, under the rules of the referendum, voted to remain. I am perfectly entitled to make that argument, which I intend to do.

The principle of the unlimited sovereignty of Parliament is a distinctly English one, which has no counterpart in Scottish constitutional law. The judgment in the case that I cited recognised the sovereignty of the people of Scotland, and that is something the Government in London will have to accept. Scotland voted to remain, so we could remain citizens of Europe, and that must be respected. Those who have signed the petition and pushed for a second referendum would, I hope, recognise that, as a Scottish MP seeking to hold the Government in London to account and standing up for the people of Scotland, who voted to remain, my primary responsibility is to the people of Scotland.

[Mr Andrew Smith (Oxford East) (Lab)]

On the sovereignty of the people of Scotland, did they not vote to remain in the United Kingdom? Is it therefore not implicit that they have accepted the constitutional arrangements of the United Kingdom?

[Ian Blackford]

We had a referendum in 2014, and 45% of those who voted in it voted for independence and 55% voted to remain in the UK, but the important point is that in that referendum debate, the Conservative-Liberal coalition Government and their partners in Better Together, the Labour party, told the people of Scotland that if they voted to remain in the UK, their position in Europe would be guaranteed. The people of Scotland were misled. I will come on to the mandate given to the Scottish Government by the Scottish Parliament, on a cross-party basis, which is to protect Scotland’s position in the EU with all measures, up to and including a second independence referendum, that might be necessary.