Economic Activity of Public Bodies (Overseas Matters) Bill

Lord Davies of Brixton Excerpts

Committee stage
Tuesday 14th May 2024 Lords Chamber

[Lord Hannay of Chiswick (CB)]

My Lords, I will speak in support of the noble Baroness who has just spoken on Amendment 45, as well as Amendment 27 in the name of the noble Baroness, Lady Drake. As the noble Baroness, Lady Noakes, has eloquently drawn to the attention of the Committee, this is another of the points at which this legislation’s handling of Israel arises. The issue is the elision that has been made by the Government between the State of Israel and the Occupied Territories—the West Bank, the Golan Heights and east Jerusalem. Within the Occupied Territories there is a mass of illegal settlements, which the international community and the British Government regard as illegal. A whole rash of outposts have now been established from those settlements, which are also illegal. The elision between the State of Israel and the settlements is causing infinite trouble to this Bill, and I hope that the Minister will find some way to sort this out, because it really needs to be sorted out.

There is no disagreement, between the Government and those of us who wish to see this sorted out, about the settlements in the West Bank, Golan and east Jerusalem. We all agree that they are illegal under international law. I think we therefore agree—the Minister was very clear about this at Second Reading and when it came up in earlier amendments—that for British companies, pension funds or whatever else to invest in those illegal settlements, even unwittingly, would be to create an illegality. Presumably, the Government do not want a British company or a British pension fund to do that—and I hope that we would not want it either.

These amendments would make it somewhat easier for the bodies covered by the Bill to make sure that they were not being drawn into illegality in any way and thus acting in a way that would be contrary to government policy. I hope that the Minister will give careful consideration to the issue, because I am afraid that the elision between the State of Israel and the Occupied Territories is really damaging to the Bill’s prospects.

[Lord Davies of Brixton (Lab)]

I have made no secret that this is a bad Bill that is badly drafted, and I spoke against it at Second Reading. In this debate, my suggestion that we should not agree Clause 12 is narrowly focused.

Local government pension schemes should be treated in exactly the same way as every other funded occupational pension scheme—the point made by my noble friend Lady Blackstone. I agree totally with the amendments tabled by my noble friends, and I certainly support their proposals, but my question is: do we need separate legislation to cover the local government pension schemes? My strong view is that we do not; the schemes should all be treated the same. They should come under the same rules as the fiduciary duties on trustees or committees —whoever is responsible for taking the decisions—and they should be the same across the board.

I tabled my clause stand part notice just to ask what the effect would be of not having this provision. Would it mean that I achieve my objective and that, should the provision be removed from the Bill, the local government pension schemes would be treated like other pension schemes? I suspect not. I suspect that I would need a more detailed amendment that would place local government pension schemes under the same responsibilities and law as occupational pension schemes more generally. That is my objective, and I hope that we can have this debate again on Report so that all pension schemes are treated the same.

I listened carefully to the remarks from the noble Baroness, Lady Altmann, but I think her argument fails. First, there are private employers whose employees are within the local government pension scheme. Equally, there are public bodies whose pension schemes are not covered by this legislation, most obviously the universities superannuation scheme. So the division between the sheep and the goats in this respect is arbitrary. There is no consistency about—

[Baroness Altmann (Con)]

The noble Lord and I usually agree on so many pension issues—in fact, almost all of them. However, would he not agree that the fundamental difference between the local authority pension schemes and private schemes, or indeed the universities super- annuation scheme, is that the local authority pension schemes do not belong to the Pension Protection Fund and do not pay levies to it, and are therefore effectively underwritten by central government, not by local government? If a council goes bust, it is rather difficult to imagine that the burden of paying the pensions promised to local authority workers would not fall on government itself. That is indeed the reason why these schemes are not part of the Pension Protection Fund, and indeed do not pay any kind of levy. For me, that is a powerful reason—I would be grateful to hear the noble Lord’s view—why there should be a differentiation between those schemes and all other schemes. Typically, there is not, but that misses an important part of this debate.

[Lord Davies of Brixton (Lab)]

I am afraid to say that it is not that simple. Technically, the history is that the funds established by local authorities to pay the pensions of their employees were there to protect the ratepayer rather than the members. That is the history of it, but I think we have moved on from that. Certainly, the members of these schemes believe that the money they have paid is there for their benefit. What would happen if a local government pension fund were unable to pay the benefits that were due is actually an open question. There is no explicit government guarantee for the local government pension scheme.

In addition, under the present provisions of the cost-sharing enforced by the Government on the Local Government Pension Scheme, it is the members who are the residual fund source of any shortfall in money. If there is a shortfall in the Local Government Pension Scheme, the contribution from the local authority is capped; it is the members who will lose out by having to pay higher contributions or seeing their benefits reduced. It is not a simple matter of “The Government will always make things good”. Initially, the members have to make things good. If the members cannot afford it, I suspect that it is right that the Government will step in—but that is not in the rules, so there is a contingent possibility there. So the situation is far less clear-cut than the sheep and goats I identified earlier.

Of course, this all comes about because technically, I think, under present law, the administration of the Local Government Pension Scheme comes under the aegis of a public body or public authority. I am not really sure what the difference is between the different terms under the Bill. But that is not how it is perceived by scheme members. They do not see their pension scheme as being a public authority, and we should respect that. As I say, my central thought is that local government pension schemes should be treated like all other occupational pension schemes.

[Lord Sentamu (CB)]

I want to ask a simple question. At the moment, all pensions are in many ways looked at by the Pensions Regulator. Does that regulator distinguish between the local authority pension scheme and the pension scheme for me—for the Church of England —when, as you say, if there is not enough money within that pension fund, the members have to put it in? Is there a difference? Does the Pensions Regulator ever say, “Well, this is a local authority and I am going to look at them differently because the Government may put in money and I think your analysis is the right one?” If the regulator does not, why are we making a difference here?

[Lord Davies of Brixton (Lab)]

I thank the noble and right reverend Lord for his question. This comes up under group 5, where I have a lot to say about the role of the Pensions Regulator, but that comes under the issue of enforcement. Here I am just talking about the principle of how we should think about local government pension schemes. Whatever the legal niceties, my view is that they should be treated exactly like every other pension scheme.

My amendment at this stage is simply to ask: if we do not have Clause 12, does that mean that the same rules will apply to all pension schemes, including the Local Government Pension Scheme, or do I have to move a more difficult, technical amendment on Report in order to achieve that objective?

We have to remember that all pension scheme trustees are subject to the fiduciary responsibilities. In the remaining 30 seconds of my time, I think it is worth highlighting what the pensions officer of the Local Government Association said in evidence to the Public Bill Committee in the House of Commons. He said the association’s prime concern was the impact of these provisions—the way they will interfere with its fiduciary duties. He also mentioned the additional administrative costs that would be involved and having to deal with the inevitable legal challenges. So the LGA has those practical concerns. My belief is that we should just treat all schemes the same and that the trustees should be left to get on with their job of looking after their members’ money.