Public Service Pensions Bill

Baroness Noakes Excerpts

Tuesday 12th February 2013 Lords Chamber

[Lord Newby]

My Lords, I simply do not know the answer to that question. I will have to write to the noble Lord. I hope that, in doing so, I will be able to reassure him.

I turn to the amendment of the noble Lord, Lord Eatwell, on the cost cap. Its operation has been extensively discussed here and I hope that noble Lords were reassured that we will not seek to use it to reduce accrued benefits. If noble Lords have not been reassured, I hope I can reassure them now by setting out the Government’s own detailed amendments on retrospective provisions and protections.

As I have stated, the new clause on retrospective protections will require that retrospective changes to pension benefits with significant adverse effects be subject to the consent of members or their representatives. This would include changes made as a result of the operation of the cost cap. I have already made clear that adjustments to benefits or contributions under the cost cap would not be retrospective. The new clause, set out in Amendment 36, also provides protections to this effect. First, there would be the procedure set out in Clause 12(6) for reaching agreement on changes that are contingent on the operation of that mechanism. Then, when scheme regulations were made to give effect to those agreed changes, those regulations would require consent for any provisions that were retrospective and had significant adverse effects on pensions.

Given this, I hope that noble Lords are convinced that Amendment 23 is not necessary either. As the noble Lord, Lord Eatwell, himself said in previous debates, this would be a belt-and-braces provision to provide further protection to members in the event that the cost cap is triggered. There is no need for this additional protection because the response to the cost cap calls for the approval of the members themselves. If that response were to involve a retrospective change with a serious adverse effect, the implementing provisions in scheme regulations would also require consent. So the belt and braces are already in the Bill, were that extremely unlikely scenario ever to happen. In these circumstances and with these reassurances, I hope noble Lords will not press their amendments.

The noble Lord, Lord Flight, asked a couple of questions about whether the changes relating to restricting retrospection would reduce the Government’s ability retrospectively to reduce provisions and thus make it easier, in his view, to get the costs under control. The problem about that from a legal point of view—leaving aside whether it is desirable in practice—is that tinkering with accrued rights falls foul of human rights legislation and the Government have made it absolutely clear that they have no intention of going down that road. On the question of figures in Michael Johnson’s report, the Government simply do not recognise them. The House should be reassured that the costings for these reforms and the single tier have been fully worked through. If, at some stage in the future, the schemes appear unfinanceable, we have the cost cap; that is the whole purpose of having a cost cap. If his worse fears were borne out—and, as I say, we do not recognise the figures that Michael Johnson has produced—

[Baroness Noakes]

I thank the Minister for giving way. He says that the Treasury does not recognise the figures in Michael Johnson’s helpful report, mentioned by my noble friend Lord Flight. Could he say what figures it does recognise because, clearly, the proposals for the single tier pension and the impact on contracted-out contributions came after the development of the public sector pensions and after the OBR report? There has to be a figure, given that he does not recognise that quoted by my noble friend, so what figure do the Government estimate it to be?

[Lord Newby]

The best way of dealing with this is by writing to the noble Baroness to explain how the Government believe that the proposals for the single-tier pension can be accommodated within the finances we think are available. I do not believe that a single figure here deals adequately with it, but we will write to her. We have not had a huge amount of time to analyse Michael Johnson’s figures, but on first sight, they do not look like ones that we can follow.

As regards the amendments in the name of the noble Lord, Lord Whitty, and whether “material” is different from “significant”, is one a higher bar than the other? As I said earlier, we believe that they are virtually synonymous. We do not believe that material is of a lesser or greater value than significant. Therefore, we do not think that there needs to be any concern in that respect.

Amendment 31 would require that any change to scheme regulations undergoes consultation with a view to reaching agreement. I understand why the noble Lord is concerned that there should be meaningful consultation with scheme members and their representatives when scheme regulations are made. The Government carry out consultations for a number of reasons. While it is always good to have agreement, this will not always be the appropriate focus. Pensions are complex issues and regulatory changes may often be needed for minor and technical reasons. It surely would be impractical for the Government to undergo a more onerous consultation process every time a minor change was made. Moreover, this amendment is not necessary to ensure that this consultation is meaningful. This already is a mandatory requirement of any consultation process. If any stakeholder felt that a consultation was not meaningful or fair they could challenge this in court.

Amendment 35 goes somewhat further than Amendment 36. It would require that any change to scheme regulations after the first set of regulations has been made should follow the higher standard of consultation and reporting requirements set out in Clause 22. As I have said previously, this would be simply impractical. Amendments to scheme regulations can be made for a wide range of reasons down to the most minor of changes. It cannot be right that the more extensive provisions in Clause 22 should apply to every circumstance. Very often these changes are to the benefit of members and I am sure that any delay in implementing such beneficial changes because of the legal requirement to carry out the kinds of consultation set out in Clause 22 would not be seen by members in a positive light. I hope that noble Lords can understand why such a blanket requirement would not be in anyone’s interest. The Government already are committed to proportionate levels of consultation on all scheme regulations, which is the appropriate and responsible course of action.

Amendment 35 would also change Clause 22 so that, instead of setting a high bar for changing the protected elements, it would be illegal to make any such change unless the members or their representatives consent. I fully understand the concerns of some members and their representatives around these issues but, again, such a blunt instrument does not seem to me to be a particularly sensible way forward.

The Government have committed themselves to the reformed schemes as they have been negotiated and they are even now working hard with members and their representatives to ensure that these are implemented by 2015. The Government believe that the deal which has been put in place is one which should stand for 25 years, perhaps longer. It is an arrangement which represents a good outcome for both individual members and the taxpayer. The provisions of this clause are intended to reflect that commitment. The amendment in the name of the noble Lord, Lord Whitty, would go far beyond that and would seek to bind all future Governments over the next 25 years in a way that this House does not tend to endorse.

None of us can foresee the future. I will reiterate again that the Government see no reason why these pensions should not still be fit for purpose in a quarter of a century from now. However, the responsible course of action is to ensure that, if any future Government were to take a different view, for whatever reason, strong but appropriate processes are put in place to protect scheme members and to scrutinise the rationale for any changes they might seek to make. But the protections must strike a fair balance between the interests of the taxpayer and members. The Government do not believe that this can be achieved by allowing members to veto any change to scheme design, contribution rates and benefits. On that basis, I hope that the noble Lord will feel able not to move his amendment.