Local Government Pensions Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014

Baroness Hanham Excerpts

Tuesday 13th May 2014 Lords Chamber

[Lord Shipley (LD)]

I should first declare my interest, as I have a small pension resulting from six years’ contributions to the Local Government Pension Scheme as a councillor. This has been a very helpful debate in identifying the key issues that this decision has thrown up, because it is a very bad decision.

I recognise the role of my party in the coalition in ameliorating some aspects of the proposals. However, the fact remains that the Government’s decision is still poorly thought through and is a bad one, as I say. We should be very surprised and concerned by it because it discriminates against elected councillors, many of whom have heavy workloads as councillors and may have to give up other careers to take on the role, as we have heard. The decision also discriminates against those who have several part-time jobs, of which being a councillor is one. Again, we have heard an example of that.

Recently, during the passage of the Pensions Bill, time was spent discussing how best to recognise that some people may have several part-time jobs in their working lifetime. Being a councillor is such an activity, and it is work. It is formally treated as work in respect of tax and national insurance. Councillors are not, of course, formally employees of a council but because they are remunerated and pay tax and national insurance they are the equivalent of council employees. Therefore, it is very hard to understand why councillors should be excluded from a pension scheme which is available to those who are formally employed by a council.

Council employees may work in full-time or part-time posts and may do so for a short period. Councillors and elected mayors are no different: they may also be full time or part time and may be in post for a short period, should they not stand for re-election or lose their seat at an election. Equality of treatment is missing here. In pension terms, the right of council officers to join a pension scheme should apply also to councillors.

It is sometimes alleged—we have heard this in your Lordships’ House this afternoon—that being a councillor is a voluntary activity. We have also heard it said that it does not take up much time. It is, of course, true that it is a voluntary activity because people are not compelled to stand for election. However, that is not really the issue. In terms of time, being a councillor may not take up much time in a very small council but that is not true in the vast majority of cases.

Full-time elected mayors will not in future be able to join their local government contributory scheme. They may have to give up a contributory scheme in their current employment to become elected mayors but will have no right to continue contributing to a pension through the local government scheme. This seems wrong. Council leaders and cabinet members who carry substantial workloads, often between half and full time, are in the same position. Why should they be denied the right to contribute to a pension?

It has been said that not all councils offer membership of a scheme. My response to that is that I have real doubts about the work of the independent remuneration panels. I do not understand why there is no statutory national scheme for the payment of councillors’ allowances and for a pension scheme. That does not exist yet; I hope that it may do so in future. However, it remains the case that 58% of councils do offer membership. The fact that 42% do not may reflect workloads and the size of those councils, but in total just 17% of all councillors are part of the scheme. My noble friend Lord True asked a critical question—namely, what is the problem that the Government are trying to solve and why do they not simply permit the current scheme to continue? Attention has been drawn to the double standard that will now apply, because in Wales, Scotland and, I understand, Northern Ireland pension rights will continue.

My noble friend Lord Bourne of Aberystwyth asked about the financial consequences and I think said that the proposal may save money. The problem is this: it is unlikely to save any money because an independent remuneration panel will have the power to allocate a sum of money for councillors to purchase pension contributions. If that is done, it will have to be done for every councillor in that council area. Therefore, if that happens, it could end up costing more. At the moment, only 30% of councillors, where there are schemes, have joined them. The right voluntarily to join the contributory scheme is therefore the best way to approach the issue.

At its heart, this is a major issue of principle. The consequence may be that fewer people will be prepared to stand for election and fewer will be prepared to take on leadership roles. The consequences could well be that leadership roles will be undertaken by those who are older, with independent incomes. It would be a great loss to local government if younger people were less willing to serve, and I hope that the Minister will explain what problem the Government are trying to solve, what analysis was done of the consequences of the decision that has been made, and what the future for local government will be if fewer people are willing to come forward to stand for election.

[Baroness Hanham (Con)]

My Lords, I will be slightly out of line with other speakers, all of whom have local government experience as well. I have been listening carefully to the debate. As a former leader of a council and a former Minister who did not take a pension—I declare that interest—I am very conscious of the work that is done by local councillors and the extra amount that they do as a result of the changes to their responsibilities that have been made over the years.

However, I part from a number of the speeches, for which I am sorry because I am very fond of my noble friend Lord True and everyone who has spoken. I want to draw back because the noble Lord, Lord Shipley, and others have talked about the difficulty of recruiting people as councillors. I remember extremely well when allowances of any sort were first considered. The argument was that if we did not provide them, only the rich, the old and people who had time on their hands would be able to be councillors. We introduced allowances and some of them are very substantial indeed. I know that my noble friend Lord True says that they were reduced, but he is not necessarily in the majority. Over the years, council allowances have exponentially increased. I am not concerned about that but about the fact that we are beginning to use the same arguments that supported allowances for supporting the pension scheme. I have never understood why councillors were included in it, and I shall tell noble Lords why.

It is because local councillors are responsible for their position to their local electorate. They can be there, at elections, or they cannot—they can be taken away. They voluntarily stand for election. They do not know whether they are going to be councillors. They are totally reliant on the electorate to make sure that they are there and for how long. That underlines the voluntary nature of standing for a local council. The work that they do is, of course, immensely important. However, this work can be done alongside other jobs—and many people do that—and therefore I do not understand where the pension comes into it.

I understand why there are allowances. If I may say so, they were quite hard fought for at the time but the allowances are there. I do not think that my noble friend has a policy on which she is going to win very strongly but it is something where the Government have to grasp the nettle. If not, the argument will go on and on as people justify more and more expenditure for local councils.

Finally, I want to make a distinction between councillors and council officers. If councillors ever come to be seen as in any way doing officers’ work and running councils on the basis of officials, then we will have lost the plot. Councillors are there to represent people in the local community which they serve; they are not there to implement policy. There is a difference between employed people on the council and councillors, and I think that that is what drives the distinction between those who do and do not have a pension.

[Lord Palmer of Childs Hill (LD)]

My Lords, I, too, must declare an interest, having been a councillor for 28 years and being in receipt of a very modest council pension, to which I contributed. The point is that people like me have contributed to their pension and that seems to be forgotten when we talk about the largesse that is provided.

A councillor said to me that he runs a council with a budget of more than £500 million a year and he is paid £28,000 per annum. The noble Lord, Lord True, is probably a good example of someone in that position. It is a full-time job, and the councillor and the noble Lord are not alone in that. Many people have no income other than that provided with this job, and running a council is a job. Many councillors are not full time but they devote a large amount of time to their council. My noble friend Lady Hanham said that they may be here today and gone tomorrow, but what better reason for them to have some form of pension, however small? These people are giving their time when they are not able to contribute to a pension, and the fact that in many cases they are transitory adds to the argument for them having something of substance to fall on when they get older.

I make no apology for also referring to the insult and lack of understanding from the right honourable Grant Shapps when he said that the work that councillors do is the same as volunteering to run the local Scout troop. I do not want to undervalue the leaders of Scout troops but that comment shows complete ignorance. It is demeaning and insulting, and, quite honestly, it is idiotic to make that comparison. What do councillors of all parties and no parties do? They do a valuable job which takes a great deal of time, and the idea that one can take away or reduce pension rights seems quite unfair.

Various figures have been quoted for how much this is costing. I am not sure now what the correct figures are but one that I was given was that countrywide 18,000 councillors cost £3 million. Whether it is £3 million, £5 million or £8 million is irrelevant; it is fairly modest in terms of national expenditure. I should like to compare it to the cost of the 651 Members of Parliament of up to £10 million a year. It seems quite wrong that the other place can take away pension rights when they themselves will enjoy pension rights of much greater substance.

I said that I started work at Barnet Council 28 years ago. As the noble Lord, Lord Bourne, said, that was a time when one received a tiny attendance allowance of £20 if one turned up at a meeting. Life has moved on in terms of how people are attracted to the scheme. The point was made that a percentage of people are not in the scheme. That is their choice because it is a contributory scheme. People can make the choice that they do not wish to contribute to a scheme albeit that the local authority will also contribute to the scheme. That is their choice. They make their choice because, in most cases, they have a pension from another source, they are affluent from another source or have inherited money from another source. However, that does not apply to all the people that we want to be councillors and running our local authorities, with expenditure of something like £500 million per annum.

Reference was also made to the concessions my Government have made. I look with amazement at how we regard such small droppings as concessions. We are told that rather than access to the scheme being withdrawn immediately—that was horrific on 1 April—we have a big concession that eligibility will be phased out as councillors are re-elected on 22 or 23 May. What a concession. It really is insulting. It has been agreed that local authority remuneration panels can agree to replace the pension provision with a cash allowance for councillors. My local Conservative council administration—I am chairman of its audit committee and am very involved—a little while ago decided to up the allowances by 54%. There was a public outcry and the allowances were very much reduced as a result. The public will not take cognisance of the fact that pensions have disappeared and that remuneration and allowances of councillors will be substantially reduced to take account of the fact that they are not contributing to a pension scheme. That will be regarded by the public in a very poor light and councillors should not be put into that position. The Government made a commitment that they would not criticise councils which decided to allow such payments. The Government may not criticise them but I am sure that many other people will.

This is devaluing the people who are running local government. As central government devolves so much more to local government, what message is going out to local councillors who do not have an outside income? Their efforts are being devalued by the Government, of which I am part, and I regret these regulations.