Public Service Pensions Bill

Lord Lester of Herne Hill Excerpts

Wednesday 9th January 2013 Lords Chamber

[Lord Eatwell]

My Lords, we now turn to Clause 3, which I believe to be the most unfortunate part of the Bill as drafted. Everything else, broadly, can be dealt with reasonably straightforwardly but this, I am afraid, goes a bit further. The clause undermines everything that was achieved by my noble friend Lord Hutton in building understanding and trust. It would give any Government of the day unprecedented powers over individuals’ property rights—powers which no ministerial assurances or blandishments can dilute.

The damage is all done in subsection (3) of Clause 3. In Clause 3(3)(b), scheme regulations may,

“make provision by amending any legislation (whenever passed or made)”.

It is no wonder that the Delegated Powers Committee of your Lordships’ House objected so strongly. It made the perfectly balanced and reasonable suggestion that Clause 3(3)(b) be limited,

“so far as it confers power to amend primary legislation, to amendments of Acts passed before the end of this session … and to making only consequential provision or provision that is necessary to ensure consistency”.

Our Amendment 26 is designed to do just this by eliminating the offending Clause 3(3)(b) and allowing Clause 3(2)(b) to take the strain of,

“consequential, supplementary, incidental or transitional provision”.

If the Minister has an alternative way of implementing the proposals of the Delegated Powers Committee, we on this side will be happy to support it. However, as the matter stands, the Henry VIII powers in Clause 3(3)(b) really cannot stand.

Of even greater moment is Clause 3(3)(c), which states that scheme regulations may “make retrospective provision”. Just like that: unqualified, unlimited, they may make any retrospective provision, including the withdrawal of previously accrued rights. A central tenet of pension provision is that benefits that have already accrued are deferred earnings and cannot be reduced. To do so would be akin to taking back a proportion of an employee’s wages that has already been paid.

Indeed, it may well be that Clause 3(3)(c) is actually contrary to the European Convention on Human Rights. The Government acknowledge this in the Explanatory Notes, where they say:

“Clause 3: Scheme regulations. This allows for scheme regulations to contain provisions with retrospective effect. Such retrospective changes … may constitute an interference with property within the meaning of Article 1 Protocol 1”.

The noble Lord, Lord Newby, signed the Bill as being not in contravention of the European Convention. It is striking that the Explanatory Notes devote several pages to discussion of this particular issue. Pages 44, 45 and 46 of the Explanatory Notes give detailed legal arguments and case citations on the issue of property rights as protected by the European Convention. Ministers have asserted consistently, both in another place and at Second Reading, that they have no intention of removing accrued rights and that this notion of retrospective legislation will never be used to reduce accrued rights. If that is so, why is there all this stuff in the Explanatory Notes about accrued rights? Why do we have all this material here if it is not relevant because Ministers have no intention? If they have no intention, why is that provision in the Bill?

[Lord Lester of Herne Hill]

I was not expecting to be on my feet at all, but the answer to the noble Lord, Lord Eatwell, is that the Joint Committee on Human Rights, to which I belong, has for many years persuaded successive Governments to be as full as possible in explaining compatibility statements to enable us to scrutinise whether or not those statements are, in our view, accurate. That is why we welcome the fact that any Explanatory Notes are as full as possible in explaining the Government’s view as to whether or not a Bill is compatible with convention rights. I hope that that is a helpful explanation.

[Lord Eatwell]

I am grateful to the noble Lord because he has reinforced my point in a very satisfactory way. My point is that the issue referred to here is the compatibility of the threat to accrued rights. That is what the full statement is about, and that is why I am so interested that the Explanatory Notes deal fully with the question of accrued rights. The noble Lord is quite right to say that the Explanatory Notes are full and comprehensive, but why are they there if accrued rights are not in any way under threat?

I return to the discussion of this issue. As the Bill proceeded in the Commons, the Chief Secretary to the Treasury asserted very clearly that the Government would not reduce accrued benefits, having previously said, in a speech on 20 June:

“I also want to make it absolutely clear that we are fully committed to protecting the pension that has been earned to date”.

That is great, but it is inconsistent with Clause 3(3)(c). When he was asked about the retrospective provisions in Clause 3 by Mark Durkan MP, the Chief Secretary replied:

“The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born”—

he is younger than me—

“and it has been used by a number of Governments to make adjustments to public service pensions … The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act”.—[Official Report, Commons, 29/10/12; col. 60.]

However, I am afraid that Mr Alexander misspoke. Section 2(3) of the Superannuation Act provides that accrued benefits can be reduced but only with the consent of affected members. However, the Bill as it stands allows for the reduction of accrued benefits without member consent. As such, it does not mirror the Superannuation Act, as the Chief Secretary said.

Amendment 28 gives effect to the Government’s intention for the Bill to mirror the Superannuation Act 1972 by providing exactly the same protection for members that Section 2(3) of the Act provides. As such, it is difficult to see how the Government could object to this amendment.

I move from the discussion in another place to the debate here at Second Reading. The noble Lord, Lord Newby, said:

“There is a lot of suspicion about this that is misconceived. Pensions legislation has historically contained such powers”—

actually, it has not—

“which have been seen to be necessary for the lawful and efficient operation of the scheme. They are generally used for minor and technical changes, for rectifying errors and making changes for the benefit of members. The intent of the Bill is simply to allow for these minor changes. There is no sinister intent”.—[Official Report, 19/12/12; col. 1584.]

If there is no sinister intent, why is Clause 3(3)(c) maintained in this wide form? Why is there no qualification? If this is indeed the way that pensions legislation has historically contained such powers—and I presume that the noble Lord, Lord Newby, was referring to the 1972 Act—why are there not the same protections for members as those contained in that Act?

It is also worth noting that the noble Lord, Lord Hutton, said:

“In relation to retrospectivity, the Government have a serious problem. We have to be mindful if there are to be DB schemes in the public sector. We know that there are fewer in the private sector, but those 2.6 million people in the private sector who still have access to a defined benefit scheme know for certain, because of the current law that their accrued rights cannot be changed”.

Accrued rights in the private sector cannot be changed unless members give their consent to a change, perhaps to deal with minor technicalities or deficiencies, which would ultimately improve the quality of their scheme. The noble Lord continued:

“The same rules should apply in the public sector. I do not believe that we can have a different set of rules in relation to accrued rights for people in public sector schemes”.—[Official Report, 19/12/12; col. 1582.]

Therefore, the scope of Clause 3(3)(c) is unreasonable, unethical and directly undermines the trust that is essential to the effective implementation of the Bill. Amendment 28 achieves what the Government claim they wish to achieve. If the Minister has another suggestion for better achieving the same goal, we will be happy to support it. However, I ask him: why is Clause 3(3)(c) written in these unqualified, global terms? Why do we have a clause in the Bill that states:

“Scheme regulations may … make retrospective provision”?

That is unqualified. Why is that provision there? Why is it not qualified in the way that it has been in previous legislation? I beg to move.