Public Service Pensions Bill

Baroness Hollins Excerpts

Wednesday 9th January 2013 Lords Chamber

Amendments 116, 119 and 120 deal directly with the consultation to ensure that the levels of protection and consultation are maintained. Without these changes we would have a weaker framework. I ask the Minister to accept that these amendments need to be made in order that the current provisions against the detrimental use of retrospection are maintained for the local government scheme and, I hope at least in the first instance, for the other schemes as well, although my concern here is specifically for the local government scheme.

[Baroness Hollins]

My Lords, much concern has been expressed about the Bill’s granting of sweeping powers to the Government to make future further changes without adequate public or parliamentary scrutiny. Clause 3 grants extremely wide and retrospective powers to the Government for further radical public sector pension changes adversely affecting public sector employees’ pensions. This undermines the Government’s claim that this would be a “settlement for a generation”. It is generally accepted that public sector pensions represent an element of deferred public sector pay. Clause 3 is an extreme example of a Henry VIII clause. It is one that gives successive Governments the power to make unilateral and retrospective changes to accrued benefits in public sector pension schemes, changing the retirement age without effective parliamentary scrutiny.

This clause should be severely limited, in the view of the BMA, in which I should declare an interest as president, and other health unions. It has expressed concern about the wide scope of powers and has called for limits. The provision runs directly contrary to the Government’s pension guarantee for no more reform for at least 25 years, safeguarding the current generation of public sector workers, and that the Bill protects the benefits already earned by members of existing public sector pension schemes. Instead of protecting accrued rights and making a once-in-a-working-lifetime change to public service pensions, the Bill allows for those very rights to be undermined, throwing public sector workers into uncertainty surrounding their future financial security, even those who will shortly reach retirement age.

The powers granted to the Government in the Bill go beyond the stated purpose as set out in its Explanatory Notes, which is to make changes where legislation is inconsistent with, or requires modification as a consequence of, scheme regulations. Instead, and without justification, this clause allows the Government to make radical changes—for example, to reduce accrued final salary rights without the need for primary legislation and with minimal safeguards of the affirmative procedure, and to drastically change the design of pension schemes and scheme regulations—for instance, making different provisions for different cases or descriptions of persons without having to come back to Parliament to debate primary legislation. It would allow any person to exercise a discretion that was not defined in the Bill, and to breach the 25-year guarantee with no effective means of resisting any breach. The power to retrospectively amend means that accrued pension rights could be affected, which would likely result in a challenge under the Human Rights Act 1998 and may well lead to a declaration of incompatibility and other legal challenges.

During the debate on the Bill in another place, the Government stated that most changes affecting members’ rights would be minor and technical, but the Bill is not explicit in this regard. If the Government intend the changes to be minor and technical, then the Bill should say so to avoid this or any future Government having the power to undermine the 25-year guarantee.

[Baroness Donaghy]

My Lords, I know that the Minister thought that I overdid it a bit at Second Reading when I said that the confidence of public servants was shattered by two successive large sets of negotiations on their pensions. However, I think that this comes back to an issue of trust, and obviously everyone is going through the Bill line by line to see where that trust might be undermined in future.

I support everything that my noble friend Lord Whitty said. As currently drafted, the Bill would allow scheme regulations to make retrospective changes. I made it clear that in principle I did not disagree with that. However, the absolute crunch would be that scheme members or their representatives should agree to any retrospective change and the Government’s commitment that accrued rights up to the date when the scheme was changed would not be reduced. As has already been said, this would simply ensure that workers in public service pension schemes enjoyed the same protection in relation to their accrued pension rights as exist for workers in the private sector under pensions law.

I was concerned about the noble Lord’s reply on this issue at Second Reading. I understand that there is no set standard of protection across the current schemes, as he said. Apparently the Government have chosen not to carry across the protections in retrospectivity that can be seen in previous legislation, such as the Superannuation Act 1972. They are concerned that what the Minister referred to as the “most extreme” of these protections—member consent locks—is not the way forward. The Government say that they are trying to strike the right balance between the protection of members and the efficiency of the scheme, and no one can disagree with that. However, I cannot help thinking that this obsession with member consent locks is all about not getting unanimous agreement to the deal, and that is throwing out the baby with the bath water. What these very reasoned amendments do is codify the Minister’s precise intention. He said that he would take this issue back and further consider the provisions of the Bill, and I hope that he will give the reassurances that we are seeking.