Occupational and Personal Pension Schemes (Amendment etc.) (EU Exit) Regulations 2018

Lord Adonis Excerpts

Tuesday 15th January 2019 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, these regulations make minor and technical changes to domestic legislation that would otherwise no longer operate effectively once the UK withdraws from the European Union. The regulations were specifically designed to ensure that domestic legislation continues to operate effectively in the event that the United Kingdom leaves the EU without a deal. In the event that a deal is reached, after the implementation period there will be a need to make legislative changes, but the nature of those changes will be informed by the nature of the relationship that exists between the EU and the UK.

Before I discuss the details of the regulations, it may be useful if I give some context and background. The UK is not reliant on any European institutions or agencies for essential functions in respect of private pensions such as approvals, licences, decisions or rights. The Pensions Regulator’s powers are derived from UK law. This means that the UK does not need to create any legislation to replicate domestically any EU-level activities relating to occupational and personal pensions after the UK’s exit from the EU.

Nevertheless, we must ensure that domestic legislation relating to occupational and personal pensions continues to work and does not rely on any definitions, obligations or reciprocal arrangements that will no longer apply once the UK is no longer an EU or European Economic Area member state. UK domestic legislation contains various instances of references to EU law, and to the UK as a member state of the EU, which will no longer be the case once the UK exits the Union. This includes where distinctions have been made between EU or EEA member states and overseas entities that will no longer apply, where the UK is referred to as an EU or EEA member state or where the UK is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.

These regulations are made using powers in the European Union (Withdrawal) Act 2018 to fix legal inoperabilities and other deficiencies in retained EU law that will arise when we leave the Union. The legal powers used are those provided for under the European Union (Withdrawal) Act, and the amendments made are completely in line with both the policy and legal intent of that Act. The use of secondary legislation to amend primary legislation—so-called Henry VIII powers—was debated at length during the passage of the withdrawal Act. The Explanatory Memorandum that supports these regulations sets out the legislation in Great Britain that is being changed.

[Lord Adonis (Lab)]

The noble Baroness has just said that the regulations are completely in line with the EU withdrawal Act and do not go beyond any provisions in that Act. But from reading the Explanatory Memorandum and the impact assessment, my understanding is that the regulations had to be revised and re-laid, and that this is the second version of the regulations, because in the first version the regulations were defective. They were not properly consulted on and would have required pension funds to disinvest from European funds because they had not been subject to a proper consultation procedure. Furthermore, there has been no formal process of consultation on these regulations either. Could the noble Baroness inform the House about these matters?

[Baroness Buscombe]

I can inform the noble Lord. He is absolutely right that a formal consultation was not considered necessary for these changes as there is no policy change and they make only minor and technical amendments designed to ensure that UK legislation operates effectively on the day the UK leaves the EU.

--- Later in debate ---

[Lord Adonis]

The Minister said that the regulations would be cost neutral and the Explanatory Memorandum says, as she has just noted, that they,

“make minor and technical changes”,

but that does not appear to be the view of the sector. The journal Professional Pensions, which did a long article on these regulations, quoted Faye Jarvis from Hogan Lovells who said the regulations,

“could result in significant costs being incurred, the magnitude of which will depend upon the level and type of exposure that would need to be relocated to comply with the rules in the event of … no deal”.

Since there has been no impact assessment, what the Minister is saying to House this afternoon is pure assertion. The only response that I have been able to discover—because although an impact assessment has not been conducted there has been a certain amount of response in the media—suggests that there might be significant costs. How does she think that the House can make a judgment between the claims of people in the sector that there could be significant costs and her assertion that there are no costs, when no impact assessment of any kind has been conducted?

[Baroness Buscombe]

My Lords, it is interesting that the noble Lord has taken one quote from one article on this. Certainly, our understanding from our discussions with industry is that because this focuses on cross-border activity, it is up to the industry to decide whether to do something different if we leave the EU with no deal. Our focus has to be on the resulting associated costs to all parties involved—for example, extra resources invested in trying to clarify the situation: in other words, certainty of the law post exit from the European Union.

Our focus is on what happens if there is no deal. Should different companies in the pensions industry choose to do something different post exit, there may of course be other impacts on business, but certainly in our discussions with business, that was not the impression we received.

[Lord Adonis]

Since there has been no formal consultation, the House has no basis on which to make any judgment at all. The Minister has simply made a number of assertions which appear to be at variance with the actual public response. She said that there have been ongoing consultations and dialogue. Can she tell the House more about them?

[Baroness Buscombe]

My Lords, we are constantly in touch with the Pensions Regulator, with which we have a very good relationship. We work very closely with industry. My honourable friend in another place, the Minister for Pensions and Financial Inclusion, also has ongoing discussions with the Pensions Regulator and individual companies within the pensions industry. The noble Lord will recall that I have stated that there was no formal consultation because there was no change to policy. Given that there is no change to policy and that we are dealing with minor and technical amendments, and given our constant and ongoing involvement with the industry—those in the industry are very much in touch with each other; it is not an industry that is hard to be in touch with—and this niche area of cross-border activity of pension companies and pensions, it is fair to say that the department has done all that is reasonably necessary and, indeed, cost-effective to limit our consultation to an informal ongoing communication with both the Pensions Regulator and industry stakeholders.

--- Later in debate ---

[Lord Deben]

I was not making the assertion about my noble friend; I was referring to the meeting of the Grand Committee last week, when that was very much the underlying assertion. That is all I was doing. I do not wish to make any such implication or accusation about my noble friend, whose presentation was perfectly right and reasonable, except that it is based on falsities. I will go on to the other falsities on which it is based.

The second falsehood is that this SI is not making much difference and therefore we do not have to go through the usual procedure. The difficulty with that is that there is a definition here which I find very peculiar. The definition of “impact” refers only to the direct impact of what is in this—the impact on people in the United Kingdom who do not have anything outside the United Kingdom, and who are concerned only with the United Kingdom. There is no reference to the cost of or the damage done by these regulations to those who are in the United Kingdom but have arrangements outside the United Kingdom within the European Union, who will be seriously disadvantaged because the UK will not be within the same arrangements. I realise that that is a result of Brexit but the idea that you can assess the impact without mentioning that seems very peculiar. If you mention that, you have to have an impact assessment. I am very suspicious of this because I think the Government do not want an impact assessment that explains to people precisely why exit from the European Union is so damaging. I do not understand how we are supposed to deal with an SI when it says simply that there is no, or no significant,

“impact on business, charities or voluntary bodies”.

That is the second reason that it seems to me that this is a kind of fudge.

The third reason, and this is the most important thing that I want to say, is about consultation.

[Lord Adonis]

The noble Lord and I have spent some time with other noble Lords in Grand Committee scrutinising a whole swathe of these regulations. Does he agree that a pattern is becoming very clear in that there has been no formal consultation on any of these regulations, whether or not they are making minor changes? In parenthesis, I say to the noble Lord, Lord Kirkwood, that the deficiencies in the first set of regulations were not minor but major in their impact and were not picked up by the engagement of the department with the industry. However, even those that involve substantial changes have not been consulted on formally. He will recall that in Grand Committee yesterday we were told that there had been selective engagement with “trusted” individuals. It became clear to us during those debates that there was a huge reluctance on the Government’s part to engage formally in consultation because—until the moment that we have just reached, when it has become public knowledge—they did not want the degree of preparation made for no deal to be known. The very scale of the problem to be encountered in respect of no deal and the alarm it would create was a reason why the Government have not been consulting, as they should have been, on these and other regulations. That ought to give the House very great concern about the state of the regulations and the degree to which the Government have engaged with those who are going to be very significantly affected in the way that he suggested.

[Lord Deben]

The only problem is that the noble Lord’s intervention was so long that my name has been changed to his on the annunciator.

--- Later in debate ---

[Lord Deben]

My noble friend is right to say that the problem with all this legislation is that it takes time. If you are going to make fundamental changes, you have to face it: it is better to have short consultation periods in which everyone is told that there is a consultation, rather than this egregious kind of concept where you say, “We have had a bit of a consultation and we have ongoing talks”. We cannot get up in this House and say that we have had a consultation that shows that we have covered everything. I agree with my noble friend that you have to have a short consultation but it must be public and clear. It is frankly not our fault that we have lost a lot of time. It is because the Government did not start two years ago to prepare for what might be a no-deal exit.

[Lord Adonis]

The noble Lord raises an extremely important point about the need to consult before regulations are published, rather than after. The Minister said that these were technical and that there was ongoing engagement. Responses from practitioners in the sector show that they were concerned about the mistakes made the first time round. Unlike the noble Lord, Lord Kirkwood, who thought that everything would be perfect the second time round, the response of Faye Jarvis, a partner at Hogan Lovells whom I quoted earlier, was that they were getting very significant impacts from the original version of these regulations. She warned schemes to pay attention to any further changes to the regulations in case they brought such unintended consequences again, saying:

“People will need to be scrutinising and seeing what else is coming out in terms of draft regulations to make sure there aren’t any other inadvertent errors but also to check there aren’t any unexpected impacts”.


Does the noble Lord agree that the whole reason one consults before presenting regulations for approval to Parliament is so that these kinds of inadvertent changes do not take place? The fact that partners in pensions law firms are saying that they have not been consulted and are not content that these regulations will not produce more inadvertent errors with a major impact entirely supports the noble Lord’s argument. We need proper consultation and not the rushed, informal dialogue which is taking place because of the very rushed nature of these no-deal preparations.

[Lord Deben]

I will answer the noble Lord, but I do not want to prolong my remarks. I am already a bit fed up with being told that I must not talk about these things because it takes too long. I find it extremely difficult but it has to be talked about. The noble Lord is entirely right. This will be true and, if so, I have to declare my interest as chairman of PIMFA. I have some allied interests, but not as far as pensions are concerned.

I come back to my noble friend. There is national concern about the responsibility of government and Parliament. That leads me to say very seriously to her that if it looks as though you are hiding the consequences of decisions that you make, that does a great deal of harm. Not having the proper costs here—

--- Later in debate ---

[Lord Tyler (LD)]

I intended to intervene on the noble Lord, but I realised that it would be incredibly embarrassing if my name were to be attached to his speech, so I spared him the embarrassment. However, I shall quote him in a moment.

I was struck by a point made by my noble friend Lord Kirkwood of Kirkhope about the sheer quantity of secondary legislation coming through, and the great work that he and other members of those committees are doing. I am involved in a small way because I am on the Delegated Powers and Regulatory Reform Committee, which is involved at an early stage. My noble friend rightly made the point that the sheer quantity of SIs coming before your Lordships’ House is causing us real problems. I very much concur with what was said by the noble Lords, Lord Deben and Lord Warner, because we were together in the Grand Committee both last week and yesterday. A pattern seems to be developing. If I may illustrate it in this way, each time we come to one of these SIs—it is happening again today—the Minister says that this is contingency planning. It is fairly set out in the Explanatory Memorandum and very well explained that it will become applicable, relevant and of interest to Members of your Lordships’ House only if there is a no-deal outcome.

So all this is speculative; it is hypothetical. When I used to ask questions of the noble Lord, Lord Deben, in the other place, he would say to the House, “The question from Mr Tyler is hypothetical and I refuse to answer it”. That was perfectly reasonable. Now the Government are making a hypothetical statement: if there is no deal, this will be necessary. Most of the SIs coming before the committees of your Lordships’ House, let alone here in the Chamber, are hypothetical in that sense. This is a real problem—and, as the noble Lord, Lord Deben, said a few moments ago, it is becoming more of a problem every day.

In our vote yesterday, there was a huge majority against a no-deal outcome. The Prime Minister is increasingly saying that she is against a no-deal outcome—she even thinks it is more likely that there will be no Brexit. In those circumstances, the pressure on us all—and on the Government—to get consultation right, to get the impact statement right, to get the costs allocations right are becoming, in the words of the noble Lord, Lord Deben, more and more difficult and taking up more and more of the time of Ministers, their civil servants and your Lordships’ House. That means that we may be neglecting the “normal” SIs, if I may call them that, which are not related to a no-deal situation.

As we all know from the European Court of Justice judgment before Christmas, the only circumstances now in which a no-deal outcome, on which this SI is based, could happen would be as a result of a deliberate decision by the Government. It is not going to happen by accident. We were told in previous debates that there was a risk of an accidental no deal, but that is now impossible as a result of that judgment.

I will quote very speedily from the noble Lord, Lord Deben, who I hope will not be even more embarrassed than he was by being given my name. He said in Grand Committee last Wednesday that,

“I do not think this House is doing itself any good by conniving in what is manifestly a total nonsense … There is no no-deal scenario which does not mean chaos, so there is no point in having legislation which pretends that it will stop a no-deal scenario being chaos. That is inevitable, ineluctable and inextricable from the whole process”.—[Official Report, 9/1/19; col. GC203.]

We are back at that point. Here we are, inevitably finding that in a number of ways that have been well illustrated by other Members of your Lordships’ House, this SI may have serious problems. The Government are entitled to say, “We have no intention of going there. We do not want a no deal. We want the Government’s deal”. In that respect we are, unfortunately, jamming up and putting so much new work into your Lordships’ House at every level, which may be a complete waste of time. That will distract us from doing a good job on other SIs, and that is a very regrettable situation.

[Lord Adonis]

Does the noble Lord not agree that another theme that came out of the Grand Committee’s consideration of these statutory instruments was a more fundamental issue? The House of Commons debated and voted on no deal last Tuesday in one of the largest Divisions on Brexit since this whole process started two and a half years ago. It voted by a majority of seven against no deal and in favour of an amendment to the Finance (No.3) Bill, under which the disbursement of public funds in respect of no deal was conditional on the House of Commons having a specific vote on no deal, with it being clearly understood—because that amendment had been passed—that the House of Commons would not be favourable to it. So there is real concern among Members of your Lordships’ House about the legitimacy and validity of all this planning, given that in the one opportunity the House of Commons had to express its view, it expressed a firm view against there being no-deal planning.

[Lord Tyler]

In the interests of brevity, all I need to say is that I agree with the noble Lord—but this evening we may of course find that there is an additional expression of opinion by the other place. In that case, all this work may well turn out to be even more absurdly out of place.

--- Later in debate ---

[Baroness Drake (Lab)]

My Lords, these draft regulations are part of a suite of instruments intended to plan for the no-deal scenario, necessitating a sweep across the stock of pension law. Such contingency regulations may well amend both primary and secondary legislation, the remit of the Pensions Regulator, the Pension Protection Fund and the Financial Assistance Scheme. What we have not received, however, is a broader assessment of what the pension landscape would look like in a no-deal scenario which sets the context for the consideration of these SIs individually. That is because to call them technical, when we stand back and look at the wider implications of no deal, is not to see some of the serious challenges and loss of member protections that could flow as the consequence of a sudden dropping out of EU legislation in a no-deal scenario.

These particular regulations address cross-border activity where an employer in one member state selects to base its occupational scheme in another member state, but they remove from the Pensions Act 2004 the requirement for occupational pension schemes to obtain authorisation from the Pensions Regulator for cross-border activities. They repeal the cross-border regime.

The UK and Ireland are the two countries between which there is significant cross-border pension provision, which will be another complication in future UK-Ireland relationships. Recent amendments to the Occupational Pension Schemes (Cross-border Activities) Regulations 2005 were made to allow for the IORP II strengthened requirements on cross-border activity which would be revoked if there is no deal. The acronym IORP comes from the EU directive meaning “Institutions for Occupational Retirement Provision”. Thus a new set of regulations that has just been accepted and which puts in place protections for cross-border activity would be revoked. In the event of no deal, the Pensions Regulator would need to provide guidance to those pension schemes which are currently authorised for cross-border activities within the EU. They exist now and they will not cease to exist simply because we may leave with no deal. Can I ask the Minister what would be the effect of substituting existing Pensions Regulator authorisation with a weaker system of Pensions Regulator guidance for cross-border activities? How would the effect of that weaken the level of protection afforded to scheme members in respect of both contributions and the protection of their assets? When will the regulator’s guidance be published so that we can more fully understand the implications of no deal?

Could the Minister advise whether there have been any discussions between the Pensions Regulator in the UK and Ireland on pension cross-border activities in the event of a no-deal scenario? Will the IORP II new authorisation process for schemes wishing to undertake bulk transfers of assets with a separate scheme located in another EEA state include ensuring that the cross-border transfer is approved by a majority of the members and beneficiaries or, where applicable, by a majority of their representatives? What will happen to those protections in a no-deal scenario? I do not know because I cannot find the answers to those questions. There will be UK citizens whose assets are in occupational schemes in other EU states that may be protected by ring-fencing or whatever.

The original draft of these regulations, as has been said on numerous occasions, required pension schemes to invest predominantly in UK-regulated markets. Regulation 29, the one being referred to, has been revised to allow schemes to invest in regulated markets more generally and therefore avoids the unintended consequence of large numbers of occupational pension schemes having to divest themselves of investments in regulated markets outside the UK. It illustrates how the impossible speed and pressure our departments and regulators are expected to work under to prepare simultaneously for a possible no deal and a withdrawal deal can lead to unintended consequences, which worries me. I fear that in retrospect, in the rush to prepare for no deal against a self-imposed deadline of 29 March, we will discover more unintended consequences in the canon of UK law, not simply in pension law. We have seen others, on trademarks or wherever, where people are beginning to identify unintended consequences.

I will not refer to Northern Ireland because we are now taking that separately, but on the broader point of how impact is defined and measured, there is a series of cliff-edge issues that could pose material risk to our financial markets in a no-deal scenario. UK providers will also be unable to rely on current passporting rights, could experience difficulties in servicing cross-border contracts and will not be part of the legal framework for moving data between the EU and the UK. In the absence of regulatory co-operation agreements or memoranda of understanding between the UK and the EU in a no-deal scenario, the operation of pension schemes and the value of members’ pension pots will be negatively impacted.

This takes me back to my opening point that, in considering these statutory instruments individually, the House lacks a broader assessment of what the pension landscape will look like in a no-deal scenario. To argue that somehow there is no need for consultation if the impact of no deal does not result in a change of policy is to completely fail to understand that the effect of no deal in weakening the protectors of members’ rights is a policy choice if one chooses no deal, because it will consequently affect members’ rights. It seems so narrow to argue that you cannot find a change of policy, though really the issue around consultation is not well argued. Although I accept that these regulations deal with the more narrow issue of cross-border activity, they are indicative of the problem of trying to look at any SI on pensions without the context of understanding the impact on pensions generally under no deal. Pension schemes everywhere are sitting and worrying about the consequences of this, particularly in financial markets. There are also UK citizens whose assets are in pension schemes in other EU states. Just walking away from the regime without any understanding, even with the Irish regulator, does not seem to be good preparation.

[Lord Adonis]

My Lords, my noble friend made an extremely powerful argument, which corresponds to a pattern that has emerged to those of us who have spent time in the Grand Committee discussing these regulations. They have all been prepared in a rush to meet an imminent deadline. Because of the rush, the need to meet the deadline and the secrecy inside the departments with which these regulations have been drafted and all no-deal planning has taken place, the pattern that has emerged in the debates in the House and the Grand Committee is that much wider issues have become apparent that could only become apparent through consultation.

The conclusion I can see we are already reaching—my noble friend makes an extremely powerful argument—is that it is not just the technical changes of the regulation and the precise changes in UK law, though clearly those have been very badly handled and have potentially had a dramatic impact on UK pension funds, but the whole wider context in which these funds and the professionals engaged in them will have to operate under no deal that will bring about fundamental changes. That is precisely why one would wish to have a full consultation, which has not taken place.

The noble Viscount opposite asked how long we would wish a consultation to be. There are established Cabinet Office rules on this which, when I was a Minister, we observed as a matter of course for any changes in the law; he will know this better than anyone, having dealt in this area so frequently. The rules say 12-week consultations. That is the norm. In my day, when we had a quality of Government rather higher than the one now engaging in all this helter-skelter planning for no deal, you needed a special exemption based on special emergency requirements not to go down the 12-week route, and that could happen only if the changes concerned were exceptionally minor. In this case, the Government themselves have imposed the deadline and the changes under consideration have a very wide potential impact. It is abundantly clear that the right thing to do in this and other cases is to have a 12-week consultation, with the wider policy environment under consideration being subject to consultation too.

I would like to ask the Minister some other questions about the detail of these regulations. For those of us who are not experts, it is not clear precisely how deep the impact will be. Paragraph 2.5 of the Explanatory Memorandum says that,

“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.

I take that not to be a minor change in the regulatory regime but a fairly significant one, on which the Pensions Regulator should have been asked to give advice—including to the House—when we were considering these changes. Can the Minister tell us what the impact of that change will be and why the Pensions Regulator was not invited to give us advice?

On the wider issue of no-deal planning, which of course underlies all these regulations, the Government have said that they do not wish to see no deal take place. Last week, when the House of Commons debated no deal and voted that it should not take place, Robert Jenrick, the Exchequer Secretary to the Treasury, said that,

“the Government do not want or expect a no-deal scenario”.—[Official Report, Commons, 8/1/19; col. 269.]

It is entirely within the purview of the Government not to have a no-deal scenario; if they do not want it, they can ensure that it does not take place, not least because of the ruling of the European Court of Justice before Christmas. They could revoke the notice under Article 50 to ensure absolutely that there will not be no deal.

A point was raised perfectly properly by the most reverend Primate the Archbishop of York that one should prepare for contingencies, but these are contingencies entirely of the Government’s making. They are not talking about preparing contingencies for, if I may say so, acts of God or other things that happen for which one cannot be accountable. When I was Secretary of State for Transport, a volcano went off and we had to get planes flying when there were big ash clouds. One should be expected to make contingencies for those kinds of things over which one has no control. In the case of the contingency for which we are discarding all our normal consultation mechanisms, playing fast and loose with a regulatory regime and, as my noble friend said, not taking account of the wider policy context and what may happen as a result of no deal, it is all self-inflicted by the Government because they are sticking to a self-imposed deadline.

The response of noble Lords who have sat in Grand Committee is that this does not sufficiently justify not going through established consultation routes. A whole stream of statutory instruments will be coming from Grand Committee where big concerns have been raised, not least by the noble Lord, Lord Warner, in respect of a set of pharmaceutical-related SIs that we debated yesterday. Key affected partners were not consulted at all; the reason for that, it appears, is that the department did not want to hold a consultation that would have made people aware that no-deal planning was taking place. Indeed, in the debate we held yesterday on one of the key regulations, the only person who we could establish firmly had been consulted was the noble Lord, Lord Warner, himself; he had phoned the relevant public authority that was engaged in the no-deal planning.

[Lord Deben]

My Lords, I invite the noble Lord to give way, because it gives me the opportunity to say that I think my noble friend the Minister will now understand that when I said that if one looks as if one is hiding something, I did not refer to her at all. I referred to a very long experience of exactly what the noble Lord refers to: a refusal to consult the very people who could have made sure that the SI was correct. In the case we talked about yesterday, it seems to me that the Government are very likely to have to withdraw that SI and then replace it, as they did with this SI. I did not think it was unreasonable to point that out.

[Lord Adonis]

The noble Lord makes an extremely good point. I invite noble Lords to read the debate in the House of Commons on 8 January on no-deal planning. It lasted about an hour and, as I say, it had a vote that led to the Government being defeated on a specific proposal to rule out no-deal planning. It became very clear in that debate that Members from all sides of the House of Commons were not prepared to contemplate no deal; that they wished to rule it out and did so in their vote; and that they regarded no-deal planning as an immoral activity. The only reason it is being kept in play and detaining the House at huge length, as it has done today and in the consideration of these regulations in Grand Committee, is as a means of trying to scare Members of Parliament into thinking that if they do not vote through the Prime Minister’s deal, there may be a no-deal Brexit. This is a straightforwardly immoral activity if it does not command a majority and the confidence of the House of Commons in the first place.

[Lord Blackwell (Con)]

I must tell the noble Lord that I listen to his interventions with growing frustration, as very little of what he says is about the merits of the statutory instrument we are supposed to be debating. The noble Lord might wish it were otherwise, but Parliament voted to enact legislation which is now an Act of Parliament and states that the UK will leave the European Union on 29 March. The only way to avoid that is for Parliament to agree a deal, or repealing that legislation. Until either of those events happens, it is only sensible that we should plan for what is now on the statute book, as the most reverend Primate said. The noble Lord is wasting the time of this House.

[Lord Adonis]

My Lords, I do not accept that for a moment. The whole basis on which we engage in no-deal planning is fundamental to these regulations. If no-deal planning does not have the authority of the House of Commons—and it appears from the vote last week that the other place is not prepared to contemplate no-deal planning—why on earth are we detaining the House at huge length in making clearly unsatisfactory arrangements? They have not been properly consulted on and are leading to regulations that are not properly drafted, in pursuit of a contingency that will not arise. I flatly disagree with the noble Lord.

We are the subordinate House, but it appears that leading Members of the House of Commons are concerned with these affairs. The amendment last week which led to a majority against no-deal planning was a cross-party amendment tabled by Nicky Morgan and Yvette Cooper, two very senior Members of the House of Commons. In moving it, Yvette Cooper said:

“I have heard some say that they want the imminent threat of no deal to persuade people to back the Prime Minister’s deal, if not now, then later. But brinkmanship in Parliament is not the way to resolve this and get the best deal for the country. This is too serious for us to play a massive Brexit game of chicken”.—[Official Report, Commons, 9/1/19; col. 263.]


I entirely agree with that statement and so did a majority. That leads to a huge question mark over the validity and legitimacy of all this no-deal planning and puts a particular duty on this House to see that we do not pass regulations which have been inadequately consulted on, inadequately drafted and inadequately scrutinised in pursuit of a deadline artificially imposed by the Government. The Government have the power to change it if they wish, because the European Union (Notification of Withdrawal) Act 2017, which the noble Lord just referred to, gives them the power to change the exit date and unilaterally revoke Article 50. It also does not appear to have the confidence of the House of Commons in the first place. I hope noble Lords will in no way be dissuaded by the ardent partisans of a no-deal Brexit from giving these regulations the scrutiny which they not only deserve in respect of those affected by them, but which we have a duty to give them if we are to follow the will of Parliament as expressed by the House of Commons.

[Lord Warner]

My Lords, I am not going to continue the discussion about our previous experiences of SIs. I just have a question that I want to put to the Minister on this set of regulations, prompted by the helpful remarks of the noble Baroness, Lady Drake. To what extent, if any, would this set of regulations require pension funds to shift their investment strategies, which could be deleterious to the beneficiaries of those pension funds?

--- Later in debate ---

[Baroness Buscombe]

My Lords, let me turn to the consultation that took place in relation to these statutory instruments. Other noble Lords have insinuated that there was no consultation. I made it clear at the outset that there was a form of consultation. As the noble Lord, Lord Kirkwood, made clear, there is in a sense consultation and consultation. We are talking here about consultation with those very closely connected with the industry. The Department for Work and Pensions engaged with a pension provider, an advisory firm and a trade body for occupational pension schemes, that trade body obviously representing a fair number of those in occupational pension schemes. Any suggestion by noble Lords that there has been no consultation is simply not true. I reassure the most reverend Primate the Archbishop of York that consultation took place with those involved in the bespoke part of the industry concerning cross-border activity within the EU. These SIs do not have any policy intent. They do not change policy; they are minor and technical amendments. It is not our role to look at the implications of a deal or no deal; it is more about ensuring that there is preparedness for a no deal and legal certainty when we leave the EU on 29 March.

I am grateful to the noble Lord, Lord Kirkwood, for his support and to hear that the Secondary Legislation Scrutiny Committee decided that the regulations were clear. Of course, it was necessary to re-lay them when an incorrect reference to UK regulated markets was found, but we were very quick to do that. We withdrew the draft regulations and re-laid them on 3 December. It is about making sure that we can be agile and flexible and therefore respond with certainty when we need to. Any question of there not having been consultation with those in the industry whom the regulations impact is simply not the case.

As always, the noble Baroness, Lady Drake, asked the more challenging questions. I will do my best to reply, but, if I fail with regard to any aspect of these very technical regulations, I will write to her. These statutory instruments fix elements of the UK’s occupational and personal pensions legislation that will not work effectively after the UK departs the EU, including where distinctions have been made between EU or EEA member states and overseas entities, such as EEA central banks, that will no longer apply, where the UK is referred to as an EU or EEA member state, or where it is obliged to share data with EU agencies or member states under reciprocal arrangements that will no longer apply.

If someone lives in the European Economic Area and has a personal pension or annuity with a UK-based firm, the firm should have made plans to ensure that the person can still receive payments from the personal pension or annuity even if the UK leaves the EU without a deal. If the firm needs to make any changes to the personal pension or annuity, or to the way in which it provides it, it should contact the person. If the person has any concerns about whether they might be affected, they should contact their firm. The UK state pension will still be payable cross border into the EEA.

The European Union (Withdrawal) Act repeals the European Communities Act 1972 and converts into UK domestic law the existing body of directly applicable EU law and UK laws relating to EU membership. So, this body is referred to as retained EU law. The Act also gives Ministers a power,

“to prevent, remedy or mitigate … any failure of retained EU law to operate effectively, or … any other deficiency in retained EU law, arising from the withdrawal of the United Kingdom from the EU”,

through statutory instruments such as these regulations.

We believe it is in the interests of both the EU and the UK for the UK to have a smooth and orderly exit from the EU, as set out in the withdrawal agreement. But it is our duty to continue to prepare for a range of potential outcomes, including no deal.

To answer the question from the noble Lord, Lord Warner, when companies invest in pension schemes it is up to those schemes and pension providers to think about their investment opportunities in future. It is not something that we can reflect through these statutory instruments.

I want to be sure that I have covered as much as I can to the best of my ability. Noble Lords have been concerned that we have not given these statutory instruments enough attention. I can only repeat that that simply is not the case.

[Lord Adonis]

The Minister is doing a great job of responding to the points raised. I raised the point about paragraph 2.5 of the Explanatory Memorandum, which says,

“UK occupational pension schemes will no longer need to obtain authorisation from the Pensions Regulator for cross-border activities”.

Can she explain what the impact of that would be and what the regulator has said about the effect it would have on the pensions industry?

[Baroness Buscombe]

The noble Lord is talking about cross-border pensions that do not have to come to our Pensions Regulator once we leave the European Union. The whole point is that we have to make sure that our Pensions Regulator no longer retains a power to influence cross-border activity where it ceases after we leave the European Union.

[Lord Adonis]

It says “UK occupational pensions schemes”. It does not say other schemes.

[Baroness Buscombe]

These are pension schemes operating in member states. If they are operating in member states they do not then have to make sure they abide by UK law and the UK Pensions Regulator. If they happen to be operating in the EU, they do not have to abide by UK law if we leave the EU. Does that make sense? I hope it does.