Public Service Pensions Bill

Lord Davidson of Glen Clova Excerpts

Tuesday 12th February 2013 Lords Chamber

[Lord Newby]

My Lords, I will start with government Amendments 10 and 11, which would require equal numbers of employer and member representatives to be appointed to each pension board in the public service pension schemes.

The noble Lords, Lord Eatwell and Lord Sharkey, previously argued for an amendment that would have required one-third of pension board appointees to be member representatives. Their amendments essentially sought to create parity with requirements that apply to trust-based occupational pension schemes.

During Committee, I explained why simply importing those requirements was in our view inappropriate, but we accept the principle that employees should be properly represented, so, for the public schemes, we propose that there should be equal representation. That would mean that there will always be equal representation of employer and employee interests, regardless of the number of participating employers in a scheme. Given that public service pension boards will not have a role in setting the scheme regulations, there is no need to engineer a balance that favours either group.

The amendments would not prevent schemes appointing other types of board member. We anticipate that schemes will want to include scheme manager representatives, independent board members and other interests. It is of course right that other legitimate interests can be included alongside the core of employer and member representatives. We believe that our approach offers a fairer and better way to ensure that members’ interests are represented in the public schemes.

The other amendments in the group are straightforward clarifications and corrections. Amendment 9 would reinforce the appropriate reading of the Bill. As we know, there will be multiple scheme managers in the locally administered fire, police and local government pension schemes. The amendment makes it clearer that each of them shall have a pension board.

Amendments 12 and 13 are minor and technical corrections to ensure that the Bill operates as intended. Amendment 12 ensures that a scheme advisory board can be given a role in advising the scheme managers and pension boards in any public scheme that is administered by more than one scheme manager. The previous drafting inadvertently and incorrectly prevented a scheme advisory board being given such a role in the police scheme. The amendment corrects that.

Amendment 13 responds to a point raised by the noble Lord, Lord Hutton, in Committee, by adjusting the provisions that prevent a person with a conflict of interest being appointed to the scheme advisory board. The change means that mere membership of either the pension scheme or a connected scheme does not constitute a conflict of interest. The amendment would mean that the conflict of interest provisions in this clause exactly mirror those already in Clause 5. I commend the amendments to the House.

[Lord Davidson of Glen Clova]

My Lords, we on this side welcome the amendments. The Minister gave a commitment to the House which we are pleased has been honoured. We recognise that significant movement has been made by the Government in relation to governance and pension boards. In particular, we applaud what the Minister said about equal representation on pension boards. To have employees on such pension boards is a very welcome development.

Perhaps it is a small matter, but the Minister referred to the amendment dealing with conflict of interest. It is particularly gratifying to see that a small matter which might have been seen as an obstacle to equal representation on the pension board has been removed by careful drafting.

[Lord Sharkey]

My Lords, I shall speak briefly in support of Amendments 9, 10 and 11. I raised the issue of member representation on pension boards at Second Reading, and in Committee, as the Minister said, I tabled an amendment that would have required one-third of members of pension boards to be members of the underlying scheme. I was grateful then for the support of the noble Baroness, Lady Donaghy, and the noble Lord, Lord Eatwell, for the amendment.

With the amendments now before us, I think that the Government have taken a realistic and fair view of member representation. The equality of employer and employee representatives on pension boards is an entirely satisfactory resolution to the problems that we outlined earlier. In fact, I think that the amendments provide a better solution than those proposed previously here and in the Commons. Equality of representation is very simple and clear and completely unambiguous. I know that my noble friend has been instrumental in securing the amendments, along with my right honourable friend Danny Alexander, and I pay tribute to their efforts and thank the Government for proposing the amendments.

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Moved by

[Lord Davidson of Glen Clova]

21: After Clause 10, insert the following new Clause—
“Fair Deal
The Secretary of State will, within twelve months of this Act coming into force, bring forward proposals to ensure that a member of a public service pension scheme is entitled to remain an active member of that scheme following—(a) the compulsory transfer of his contract of employment to an independent contractor; and(b) any subsequent compulsory transfer of his contract of employment.”

[Lord Davidson of Glen Clova]

My Lords, this amendment, dealing with the fair deal, covers a lot of common ground. But rather as with the last grouping, one finds that the common ground is not found in the Bill. As my noble friend Lord Eatwell has already observed, there is a possibility of an erosion of trust, certainly on the union side, if the outcome of discussions does not find itself reflected in the Bill.

In Committee, the Minister observed that one was not able to accept this type of amendment because one was in the middle of a process of consulting and, therefore, such an amendment might be premature. But the principle appears to be held in common by all sides. The Minister has observed that,

“we are committed to the principle”.—[Official Report, 15/1/13; col. 627.]

We do not in any way doubt his sincerity, but we urge that it could be demonstrated that that commitment is found by putting it into the Bill.

The amendment that is before the House allows the principle to be put in the Bill, and allows for the consultation process. When one looks at the amendment, one sees that it permits the Secretary of State to bring forward the proposals within 12 months. That plainly allows any sensible consultation to take place and be concluded. It would also allow the commitment from Her Majesty’s Government to be honoured expressly.

Ahead of the government amendments in this grouping, I observe very briefly that we were genuinely puzzled as to what they were aimed at and why the Government have seen fit to bring them forward. Elucidation would be gratefully received. I beg to move.

[Lord Whitty]

My Lords, I speak now according to the convention, although it may be more logical for the Government to explain their amendments. My Amendment 49 is also in this group. It is another one of these whereby what appears to be the implication of this Bill, if nothing else is done, is that it would unravel what has been agreed between the LGA and the trade unions on the Local Government Pension Scheme.

Pensions payable by the LGPS are revalued using the Pensions (Increase) Act 1971. The amendment is required to enable the same methodology to be used for revaluation during service to continue once a scheme member is in receipt of their pensions. But there is a snag. The current situation, under Section 1 of the Local Government Act 2003, is that the Best Value Authorities Staff Transfers (Pensions) Direction 2007 requires this to be applied to those in the best value authorities. So under the existing scheme and direction the provisions relate only to those who are in best value authorities. It does not apply to those members of the LGPS who are employed by other local authorities and other members of the LGPS.

The agreement reached on the position beyond 2014 would provide for all LGPS members who are compulsorily transferred to be able to retain their membership of the scheme subject to the valuations provided in the scheme. I thought that the easiest thing to help the Government out of this one would be to tack on to the back end of the repeals process at the end of the Bill, when everybody is packing their bags to go home, something that simply says that we repeal the direction order. I am informed that it is not possible to do so in that form, but that one way or the other the Government intend to repeal the directions order. If the Minister could tell me how he proposes to do that, and preferably when, my particular concern about this group of amendments might be met.

The measure I am discussing is essentially part of the fair play aspects although the directions order covers slightly wider issues. However, the repeal is essential to achieve what I think most of us are agreed should apply beyond 2014 in the case of the local government scheme. I am really asking the Government to tell us how they are going to do the tidying up. If we cannot do it by repealing that order, how can we do it, and how can we do it so that there is no differentiation between LGPS members who happen to be employed by different member funds of the LGPS scheme? I would be grateful if the Minister could tell me that when he winds up. I hope that that will satisfy me.

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[Lord Davidson of Glen Clova]

My Lords, I have indicated in relation to the government amendments that elucidation would be gratefully received. Accordingly, I thank the Minister.

In relation to my amendment, I have listened carefully to him. We are clearly both trying to achieve the same objective and I immediately appreciate the complexity in having to draft these issues. What he has said is dense, but in a good way, and I wish to read it more carefully. In those circumstances, I beg leave to withdraw the amendment.

Amendment 21 withdrawn.

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Moved by

[Lord Davidson of Glen Clova]

25: Clause 18, page 10, line 25, after “scheme” insert “except for a Scottish scheme, where the closing date is 31 March 2016”

[Lord Davidson of Glen Clova]

My Lords, the aim of the amendment is to push back to 2016 the relative closing date for the Scottish LGPS.

As observed in Committee, it was thought that a greater time would be required for the Scottish scheme to be renegotiated, for scheme regulations to be drafted, for consultation to take place and for implementation to be laid down. There is certainly a view in Scotland that more time will be required for this process. Indeed, in a letter from the Scottish Finance Secretary to the Chief Secretary dated 7 September last year, it is stated that the date was “exceptionally challenging” if it were to be in 2014 or 2015. If the Minister can assure the House that the Scottish Government are now confident that they can meet the current timescale, and that trade unions and employers in Scotland have been consulted, I would plainly be in a position to reconsider whether the amendment should be advanced. At this point, however, pending what the Minister has to say, I beg to move.

[Lord Newby]

My Lords, the purpose of the amendment is extremely straightforward, and the noble and learned Lord has asked me a question about the attitude of the Scottish Government. As I explained in Committee, the Scottish Government may think that the timetable is challenging but they have not asked for the extension of time that the amendment proposes. There has been a series of correspondence between Westminster and the Scottish Government in which there have been no calls for a delay. In fact, when the Chief Secretary wrote to the Scottish Government asking if there were any particular amendments that they would like us to consider tabling, a request for a delay was not specifically made. I should take this opportunity to reiterate that we do not believe that a delay is necessary. There is ample time—just over two years—for the Scottish Government to prepare before the existing schemes are closed. These important reforms do not come as a surprise either north or south of the border.

The noble Lord, Lord Hutton, recommended back in March 2011 that the key scheme design features should be part of a UK-wide policy framework. Everything that has been done since then, for almost two years now, has proceeded on that basis. Furthermore, the new Whitehall-administered schemes provide an excellent basis for the Scottish Government to consider when finalising their scheme designs. We are not suddenly asking the Scottish Government to start these reforms from scratch.

I should also reiterate the financial implications of introducing a delay. This would result in hundreds of millions of pounds of additional liabilities being accrued in the Scottish schemes. These additional costs would have to be met from the Scottish budget at the expense of Scottish jobs and services, something that I am sure all noble Lords would want to avoid. In addition to the cost implications, we should also consider the disadvantages that Scottish public service workers on lower and middle incomes would face if the reforms were delayed. They would continue to subsidise the pensions of high flyers for another year. Taking all of this into consideration, I hope that the noble Lord would feel that it would be inappropriate for us to accept this amendment.

[Lord Davidson of Glen Clova]

I have listened carefully to what the Minister has said. It may be that the Scottish Government are treating this with a degree of insouciance because they may recognise that, after a certain event in 2014, they may have quite a lot of free time on their hands. At this point I shall withdraw the amendment.

Amendment 25 withdrawn.