Local Government Pensions Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014

Lord McKenzie of Luton Excerpts

Tuesday 13th May 2014 Lords Chamber

Moved by

[Lord McKenzie of Luton]

That this House regrets that the Local Government Pensions Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 will unfairly exclude elected councillors in England, directly elected mayors, the Mayor of London, and members of the London Assembly from active membership of the Local Government Pension Scheme. (SI 2014/525).

[Lord McKenzie of Luton (Lab)]

My Lords, the new Local Government Pension Scheme came into effect on 1 April 2014. It is the first scheme to be introduced that follows the principles for reform of my noble friend Lord Hutton of Furness. The regulations before us set out transitional and savings provisions relating to members of the 2008 LGPS, which is to be replaced by the new scheme. They preserve benefits already accrued by members under the existing scheme and make provision to ensure that members within 10 years of their normal retirement age on 31 March 2012 do not suffer any detriment.

I will be clear: our Motion of Regret does not seek to comment on, revisit or revise what has gone before except in one respect. It regrets the inclusion of those transitional arrangements that deny the right of newly elected councillors to join the Local Government Pension Scheme and of existing council members to remain active after the end of their current term of office. Our Motion does not seek to influence the current consideration being given to a possible restructuring of the scheme or to involve a more collaborative approach. Nor does it purport to address the problems that arise as a consequence of the abolition of contracting out in April 2016, although the Minister might wish to update us on this issue.

Currently we are told that the scheme has assets of some £178 billion; annual employer contributions are in the region of £6 billion and there are some 4.68 million active, deferred and pensioner members. Councillors were given access to a special section of the LGPS where permitted by local authorities’ remuneration panels in 2003. Benefits include a pension based on an eightieth of career average earnings, together with a lump sum life cover and survival benefits. The councillor contribution rate is 6% of basic and special responsibility allowances, so the Government’s description of these arrangements as taxpayer-funded pensions for councillors is less than complete. The most recent data show some 5,000 councillors taking up the opportunity of membership, so while important for councillors, their membership is clearly a tiny part of the overall scheme and cannot in any serious way be said to affect its sustainability.

The proposal to deny access for councillors to the Local Government Pension Scheme was presaged in the Written Ministerial Statement to Parliament in December 2012. As justification for the proposition, the Minister, Brandon Lewis, described councillors as,

“volunteers undertaking public service; they are not and should not be employees of the council dependent on the municipal payroll. They are not professional, full-time politicians, nor should they be encouraged to become so”.

He complained about the allowance system being made worse—he said—by the pension arrangements,

“blurring the distinction between council staff and councillors”.

This was asserted as being,

“a corrosive influence on local democracy and independent thought”.—[Official Report, Commons, 19/12/12; col. 105WS.]

I ask the Minister for the evidence for this insulting nonsense. How does this corrosive influence manifest itself? How are things different from the pre-2003 period?

Initially, individuals were to be excluded from the scheme because they were categorised as volunteers. The Written Ministerial Statement was followed by a consultation last year that suggested adding the Mayor of London and other elected mayors and London Assembly members to those denied access, notwithstanding that it recognised that such positions could be full time and that they carried a salary. This was apparently based on another principle: that the LGPS should extend only to paid employees. Could the Minister enunciate more clearly for us the basis for this principle? Also, in what way is it considered that the Mayor of London, for example, has been unable to withstand the corrosive influence of the pension arrangements thus far? Indeed, if this principle is sacrosanct, why are police and crime commissioners to be allowed continued access to the scheme when all other elected officeholders, including those paid a salary, are to be excluded? To the extent that they remain in the scheme, what is to happen to their contribution rate? What is it that inures Commons Ministers from the corrosive influences of their largely taxpayer-funded juicy pension schemes? In seeking to explain the distinction between pension entitlements for paid employees and paid elected officeholders, how would the noble Baroness rationalise the situation where an elected mayor subsumed the role of chief executive?

It is not only the consequences of the Government’s decision that we regret but the manner in which it is presented and argued. The Government acknowledge that they have no central information about participation in the scheme yet pluck from the air a figure of £7 million that might be saved from the changes. Can we please be provided with the basis for this calculation? If cost is the driver, why have the Government eschewed the prospect of change in the member contribution rate? What consideration have the Government given to the prospects of local authorities setting up alternative collective arrangements for elected members?

The Written Ministerial Statement holds to the notion that councillors receive allowances to compensate them for out-of-pocket expenses, yet notes that they are slowly becoming a form of salary and that, as I said, pension entitlements are making this blurring worse. Of course, this issue will not be unfamiliar to Members of your Lordships’ House but for taxation purposes elected officeholders are treated in the same way as any other officeholder or employee. Their allowances are subject to income tax and, where appropriate, national insurance—after deduction of allowable expenses on the same basis as employees. To the extent that there is a blurring of the payment arrangements, it is suggested that this is a consequence of the diversity of roles and commitment that elected members are today called to undertake. It is spurious to use that as a reason to change the pension arrangements.

People are living longer. Notwithstanding changes to the state pension age and single-tier pensions, we have long recognised that the state alone will not provide sufficient for us all in retirement to live a full life. We have political consensus on the need to encourage greater take-up of occupational and private pension provision, and we have recognised the benefit of auto-enrolment in reversing the impact of individual inertia in this area.

However, the consequences of the Government’s actions for elected local officeholders are not only to shut off access to the Local Government Pension Scheme but to continue to exclude them, as councillors, from the benefits of auto-enrolment. Only to the extent that they have employment income elsewhere will they have the prospect of an employer contribution and the specific impetus to save which is provided by auto-enrolment. Because the thresholds for auto-enrolment are being continually raised by the Government, those elected members who devote more time to council matters and less to remunerative employment will miss out the most. That is hardly an example of valuing those who take on responsibilities for our benefit.

We need politics to be open to people from all walks of life. Some will be able to devote most of their time to the task of being a councillor, some less. That is the strength of our system. To see leaders of our major cities, who oversee billion pound budgets, as just volunteers, is frankly talking down the role of councillor. As the LGA Labour group points out:

“If we want to live in a democracy, then we have to ensure that those that give up their time to deliver it for their local communities are treated respectfully and fairly. Many Councillors make significant salary sacrifices”,

and accept reduced career opportunities in order to serve in public office.

In the words of Sir Merrick Cockell, there is a risk that being a local councillor will become the,

“preserve of a privileged few”.

He called it,

“perplexing that ministers who have been busy adding to the workload of councillors by transferring functions from central to local government”,

should seek to class those councillors as volunteers. We can all point to an impressive array of individuals, not just leaders, in all parties, who do a first-rate job as councillors at a time when we need their talents like never before. As the LGA points out, ending access for councillors in England creates a,

“double standard, as councillors in Wales, Scotland and Northern Ireland retain their entitlement to participate in the scheme”.

It goes on to say that that does not reflect differences in the responsibilities of councillors in any of the home nations or the dedication needed to serve local communities.

Only yesterday, an LGA report set out just how difficult life is to become for local authorities. Being a councillor, a Member of the Assembly or an elected mayor is not for the fainthearted. They are on the front line in dealing with the budget crisis, of embracing innovation, providing local leadership and driving the growth and skills agenda. They are to be encouraged and valued. In the scheme of things, the Government’s denial of their participation in the Local Government Pension Scheme is very much to be regretted. I beg to move.

--- Later in debate ---

[Baroness Stowell of Beeston]

The point about police and crime commissioners—this is an area which, in due course, we will want to examine—is that, since they were recently created, we felt that it was not appropriate to make this change at this time. I do not assume that it will be something that will be left unattended for ever.

My noble friend Lord True asked, when we were talking about savings, about the publicity budget for my department. He suggested that somebody in the Box would have the answer. Because I have a great bunch of officials with me, yes, indeed, I do have the answer, which is £2.5 million—which I would guess is a whole lot less than it was under the previous Government.

I can assure the House that the Government did not take this decision lightly. We certainly looked carefully at transitional arrangements for those councillors who are in the pension scheme. I note that the noble Lord, Lord Palmer, dismissed the concessions that we made following consultation that will see that existing members will leave the scheme only at the end of their existing fixed four-year term of office. That means that councillors’ membership of the scheme will be phased out between 2014 and 2017 and that no change to the reasonable expectations that councillors had when they ran for their fixed term will be made. I can also confirm to my noble friend Lord Vinson that he is right that nothing will stop councillors contributing to a personal private pension in future, but the key point is that they will not be able to join a scheme to which taxpayers contribute as their employers.

I firmly believe that the best thing we can do to encourage more people to take part in municipal public life is to decentralise power to local communities so that being a councillor is an even more meaningful and rewarding role. We need to attract and retain a wide range of enthusiastic councillors, and I agree with noble Lords who said that this is important. When we are talking about ensuring that we have a wide range of councillors—in fact my noble friend is back with me on the Front Bench—it is worth noting that one of her successors as leader of Trafford Council is 26 years old, comes from a modest background and put himself through university. It is simply not true to suggest that people do not want to put themselves forward to become councillors.

The reason we are starting to attract a wide range of people is that this Government have made many changes to local authorities that mean that councillors are in a greater position to deliver change. For example, we have abolished the Audit Commission and government offices. This means that councillors can rightly focus on meeting the needs of local people, rather than spending their time dancing to the tune of central government. We have introduced new rights for communities to lead and deliver change, including through neighbourhood planning. This gives exciting opportunities for councillors to support and encourage local people to help them deliver their own aspirations.

The noble Lord may laugh, but neighbourhood plans are seeing a fantastic turnout at referendums, when local people know that, as a result of getting engaged, they will see change and will be able to take control of decisions in their local area. We have introduced the general power of competence. This means that councillors now have greater scope to do things to meet local people’s needs. We have helped councillors better represent their constituents and better enrich local democratic debate by scrapping the Standards Board and clarifying the rules on predetermination. These are just a few examples of the steps this Government have taken to strengthen the contribution that councillors can make to their communities.

The LGA briefing note that was distributed to noble Lords prior to this afternoon’s debate said that,

“76% of people trust their local councillor the most to make decisions about how services are provided in their areas”.

That is great news, and the reason for that kind of result is that councillors have the power to lead their communities, to speak for their communities and to deliver for their communities. That is a very good thing.

[Lord McKenzie of Luton]

My Lords, I start by thanking all noble Lords who contributed to this debate. I apologise to the noble Baroness, Lady Williams, for being remiss in not recognising her first appearance on the Front Bench on CLG matters. Despite the fact that this is an emotive subject, the debate has been fulsome, knowledgeable and very measured.

We recognise that the Minister today paid fulsome tribute to the role of councillors, but part of the problem with this whole issue is that some of her colleagues did not display the same attitude, and certainly not in presenting and developing the pensions issue that we are discussing today. Also, the concept that somehow people are rushing to stand for election because of the abolition of the Audit Commission is a little far-fetched. The issue about the numbers of people standing is not perhaps so much whether there are new people wanting to come forward but how many people are not standing who stood before because of the financial pressures and challenges of being in local government today. We have not heard anything new from the Minister—that is not to be expected, perhaps—in justification of the policy the Government are pursuing here.

On this issue of not being reliant on the municipal payroll, if there is not some basis for elected members to earn a living, will we not end up in a situation where only the rich, the retired and—less so these days—those with benevolent employers who are happy to give their employees lots of time off can serve in local government? There must be some form of remuneration. Is not the issue about pensions the general point that if we encourage people in all other spheres to save for a private pension because the state will not be able to produce enough for them to have a full retirement, why—in the words in particular of the noble Lord, Lord Shipley, who is not in his place—are councillors being discriminated against in that respect?

I will pick up on some comments from other noble Lords. I think all but two who spoke were in support of the proposition before us today. The noble Baroness, Lady Jones, raised a very important point about the mayor and PCCs, although that has been clarified. The noble Lord, Lord Bourne, reminded us that we should be careful about how we use the term “volunteer”, and I take that point. The problem is that the Government, in characterising what local councillors do as “volunteering” in the same category as some of the work done in the voluntary sector, undervalue, underestimate and do not recognise the role and responsibilities that councillors undertake in the modern era. That is the key point.

The noble Lord asked whether we would commit to bringing this back, and I think the Minister said that we were in favour of scrapping the 2014 revised scheme. Was that what she said?

[Baroness Stowell of Beeston]

The point I made was that that EDM that the Leader of the Opposition in the other place tabled goes beyond the narrow scope of the regret Motion that the noble Lord tabled today and prays against the regs completely.

[Lord McKenzie of Luton]

Let me make it absolutely clear that it is my party’s position that we support the revised Local Government Pension Scheme. So far as these arrangements are concerned and whether we would reinstate this, I cannot give a blanket commitment that we would. No incoming Government would do that without looking across the piece at all the things that must be addressed. More particularly, the Local Government Pension Scheme is currently under consultation to restructure on a more effective, collaborative basis. That is part of the Government’s consultation. We do not yet know how and where that will lead. Also, the consequence of the Government’s position is that councillors will be driven into the private pensions market. How readily that can be unpicked would be a real issue as well, particularly because small pension pots stranded in private sector schemes cannot be transferred back into the local government scheme. A raft of issues would, quite properly, need to be considered.

My noble friend Lord Beecham, with his usual incisive approach, reminded us that Conservative legislation laid the groundwork for some of these proposals and that it depends upon independent panels enabling members to become part of the Local Government Pension Scheme at the moment.