Pensions Bill [HL]

Lord McNally Excerpts

Tuesday 15th March 2011 Grand Committee

[The Minister of State, Ministry of Justice (Lord McNally)]

My Lords, as always, this has been an interesting debate. It is always difficult to respond to the noble and learned Lord, Lord Mackay, because his wonderful accent means that if he read from the telephone book it would sound like he was reading tablets of stone. Nevertheless, I may have to challenge him before the end of my remarks. The noble Baroness, Lady Murphy, was almost unique in her contribution, until the 7th cavalry arrived in the shape of the noble Lord, Lord Stoneham, but she at least is a friend of judges. She was quick on the attack by calling the government plans a “short-term crowd pleaser”, and saying that the Executive were looking for short-term advantages and imposing a real-terms pay cut of 10 per cent.

Running through many of the contributions has been an “Apocalypse Now” threat that does not stand up against the content of the proposal. I listened to what the noble Baroness said about women and about black and other ethnic minorities in the judiciary. I am the diversity Minister at the MoJ. Having looked at the problem of diversity in the judiciary, I honestly do not think that a modest request for contribution to pensions is the real problem about the disgraceful level of employment of women and other groups in the judiciary. I assure her that I am in close touch with Dame Hazel Genn and the noble Baronesses, Lady Neuberger and Lady Prashar, on those issues.

We went right back to 1701 to find the threat to our judiciary. The noble and learned Baroness, Lady Butler-Sloss, is not only a judge but the daughter of a judge. She made a moving appeal for the middle ranking judiciary—the toilers in the field, as she put it. Nobody challenges the fact that we have a judiciary motivated by public service, independent and incorruptible. I believe, and the past 10 months have deepened my conviction, that we are extremely lucky in our judiciary. Again, the arguments deployed do not bear close examination against the Government’s modest proposals. I also have to disagree with the noble and learned Lord, Lord Scott. I do not think that the proposal will affect those applying for the Bench.

I understand why the noble and learned Lord, Lord Falconer, is not here. We are not arguing that the contributions will have a significant impact on the economy. Of course not; the numbers are not large enough. I will not even try to suggest that we are all in this together, but I take up the point made by the noble Lord, Lord McKenzie: before fighting this to the last ditch, the judiciary should look at their reputation in appearing to fight so hard on a matter of self-interest—even if dressed up in constitutional garb—when others much less well equipped to do so, as the noble Lord, Lord Stoneham, said, are having to face serious sacrifice.

I take up the challenge of the noble and learned Lord, Lord Falconer: is what we are proposing reasonable? I believe that the vast majority of people in this country would find what we are doing reasonable. To suggest that the Government are somehow threatening the independence of the judiciary or the rule of law is not sensible. There is no sword of Damocles or anything like it. I urge the judiciary not to cry wolf too loud on this.

I turn to the noble Lord, Lord McAvoy. My goodness, I am sorry that we are in the Moses Room, because his intervention deserved a much wider audience. I thought that he was going to say that even his old colleagues in the Unite shop stewards’ movement would have blushed at some of the arguments deployed today, but as he rises ever higher in the hierarchy of this House by defending its institutions, it did not surprise me when he intervened on the side of the judges.

I am grateful to the noble Lord, Lord Stoneham, for his intervention. Judges’ pensions are extremely generous: 648 former judicial officeholders receive a pension of between £40,000 and £70,000; 23 former judicial officeholders receive a pension of between £100,000 and £110,000. The average annual pension across the judiciary is just over £41,000. That is not at the lower end of the mass of our society.

That is why the noble Lord, Lord McKenzie, was quite right to warn about reputational risk. I do not believe that this is a slippery slope. I do not believe that it is a reputational risk. On the specific point of how we would handle the powers of the Bill, regulations would be brought forward by statutory instrument subject to negative resolution.

The noble Lord asked me: what is our response to the amendment? I have to tell your Lordships that we believe that it is simply incorrect to assert that the clause could have any impact on judicial independence or raise any concerns about judges’ terms of service. This measure is part of a wider action aimed at ensuring that public service pension provision remains fair and affordable. The Government will not do anything to undermine judicial independence and the rule of law, which is of fundamental constitutional importance. The measures will not affect the pension entitlement of judicial members in any way. Once a member of a judicial pension scheme satisfies the provisions regarding entitlement under the particular scheme, they will still be entitled to their pension benefits, which will not be affected by the contributions they have made. The aim of the measure is that the contributions, when payable, will go towards the cost of the scheme overall—a situation which, as the noble Lord, Lord Stoneham, pointed out, is not enjoyed by many people in many other pension schemes.

The principle that serving judges must pay contributions out of their salary towards the cost of pension provision is already well established. I am pleased to note that the amendment does not object to the principle of taking personal contributions from judges. To take the Judicial Pensions and Retirement Act 1993, which provides the main scheme referred to by the noble and learned Lord, Lord Mackay, members of that scheme pay contributions towards the cost of dependant benefits. That is provided for by Section 9. When the provision was implemented under the Judicial Pensions (Contributions) Regulations 1995, it applied to all those who held qualifying judicial office under the scheme at that time. There were no exceptions for serving judicial officeholders.

The inability of the Government to reduce judges’ pay is seen as an important element of judicial independence by a number of international agreements and recommendations, which have been referred to in the debate by several speakers—the fear being that in some parts of the world, judicial salaries may be reduced if justices do not make the right rulings. I am sure that none of us would seriously suggest that we are in danger of that in this country.

However, that aside, as a matter of ordinary language it would not be usual for a requirement to pay a contribution to a pension scheme to be characterised as a reduction of salary; gross levels of payment to judges will remain unaffected by this measure. Crucially, it would not be correct to assert that the Executive will establish and vary the level of personal judicial pension contributions because the rate at which such contributions will be taken will be set by secondary legislation and so will be subject to the scrutiny and will of Parliament.

Furthermore, this measure does not contravene the letter or the spirit of statutory provisions covering judicial salary protection. Just as it would be incorrect to assert that this measure could impact on judicial independence, so it would be wrong to state that it is inconsistent with the terms of appointment of judicial officeholders. The entitlement to, and benefits derived from, a judicial pension are set out in legislation. Judges’ terms of appointment do not add to, or repeal, the provisions of judicial pensions legislation and do not, therefore, provide any independent source of “right” to the maintenance of the present legislative arrangements in respect of those already appointed to qualifying judicial office.

Any expectation that Parliament may not legislate to alter judicial pension schemes enshrined in legislation cannot be right, particularly when the proposed measures are designed to ensure that such schemes remain affordable and are proposed as part of a consistent range of measures regarding public service pension schemes as a whole. Concerns about judicial independence and judges’ terms of service with regard to this measure are, therefore, unfounded.

It is important to be clear that this measure will apply to judicial officeholders in post in April 2012. However, I should also emphasise a point made by my noble friend Lord Freud during the Second Reading of this Bill; that is, that contributions will only be taken during the period in which an individual judge is accruing pension benefits. For those judges already entitled to a full pension before implementation in April 2012, contributions will not be taken from their salary. Those judges who have part completed their full accrual period before April 2012 will pay contributions only for the outstanding balance of that period. The value of the pension benefits accrued up to the point of introduction of the measure will be unaffected.

At the spending review, the coalition Government took the tough decision to put the economy back on a sustainable footing. To do this they had to consider carefully where spending could be reduced and where costs could be rebalanced to reduce the burden to taxpayers. The noble Baroness, Lady Murphy, called in aid the noble Lord, Lord Hutton, and so do I, for he states clearly that there is a strong case in the short term for increasing the contributions to meet the costs of providing these pensions. This is what we are doing. It is right that judges should begin to contribute towards their own pensions just as other public service pension scheme members will be expected to contribute more.

There are currently around 2,200 salaried judges. Of these, around 200 are estimated to have already accrued a full pension and so would not make personal pension contributions. Therefore, the requirement to pay personal pension contributions will apply to approximately 2,000 salaried judges when it is introduced.

On average, in recent years, around 120 salaried judges have joined the judiciary each year. To restrict the introduction of personal contributions only to new judges appointed from April 2012 would, therefore, either not allow us to make the level of short-term savings on judicial pensions costs which we need to seek in tackling the deficit, or would require an extremely high level of contribution by new judges to help cover the costs of existing judges’ pensions. There is, anyway, as I hope I have made clear, no justification for restricting the measure in this way.

As I said, I will not try to persuade noble Lords that we are all in this together but it would be widely misunderstood if judges seemed to opt themselves out of the realities faced by the rest of the population.

[Baroness Murphy]

Before the Minister sits down, will he clarify the point about the judicial additional voluntary contributions scheme? I believe that at the moment individuals can exercise their right to add up to 15 per cent. What impact would this new proposal have on the ability of individuals who have a relatively short time to make their contributions before retirement to add to that scheme?

[Lord McNally]

I apologise if I am wrong on this, and I will write to the noble Baroness, but I believe that the 15 per cent right will be retained and judges will be able to make voluntary contributions, as they do now. I should have asked the noble and learned Lord to withdraw his amendment, even if he intends to return to the fray on Report.

[Lord Mackay of Clashfern]

My Lords, I need not make a premature decision on that. I will certainly withdraw the amendment, but I will say one or two things about the speeches that we heard. I am grateful to all noble Lords who contributed. It was good to have the support of the noble Lord, Lord McAvoy, who shares something of my accent, though possibly not everything.

My only point at Second Reading concerned the terms of service. The noble Lord, Lord Stoneham, must have been thinking of somebody else when he said that at Second Reading I referred to the quality of the judiciary. I do not think that I did. At Second Reading, I made the point that when I introduced the 1992 Bill that became the 1993 Act, I faced a terrific barrage concerning the effect this would have on the judiciary of the future. Fortunately, Parliament as a whole decided that the gloomy forecast was not correct. I think that I am right in saying that nobody, looking back, would say now that it was correct. The quality of the judiciary has remained very high. However, I did not make the point about the quality of the judiciary: other noble Lords did. I restricted myself to saying that, in accordance with our understanding of the constitution, the terms of service of a serving judge cannot be altered adversely during his term of service.

The noble Lord, Lord Stoneham, referred to contracts being changed with changing circumstances. Of course, most employees are in a situation where their contract has a definite time. The contract will run for that time and, unless there is agreement, it will be very difficult to change it. Judges' terms of service are until retirement because of the security of tenure that the Act of Settlement gave them. There is no question in my mind that we have thought for many years now that the terms of service of judges needed to be set out in statute. In 1993, we set out new terms that applied only to new judges: that is to say, judges appointed after the Act came into effect.

The noble Lord, Lord McNally, said that the 1995 regulations applied to everybody without exception. With the greatest respect, that is not correct. The 1995 regulations applied only to the arrangements under the 1995 Act, which applied only to those appointed after the Act came into effect. The main regulations came into effect on the same day as the Act. Therefore, the regulations were in place when the Act came into effect. Judges who were serving before 31 March of whatever year it was—I think it was 1995—were not subject to the arrangements. They had the opportunity of opting in to the 1993 Act arrangements, but were not obliged to do so, and a number of serving judges still have a retirement age that is different from that laid down in the 1993 Act.

The noble and learned Lord, Lord Falconer, said that he had an interest in this matter which he should declare. I made it absolutely clear—I thought that I had done so originally, but perhaps I did not do so today—that I was the Lord Chancellor for a while, including at the time the 1993 Act came into force, as well as when it was being brought through Parliament. I was also a judge in the Supreme Court in Scotland and a Lord of Appeal in Ordinary. But so far as I know, I have no financial interest in this whatever, and I am certainly not a spokesman for the judiciary—not at all. The judiciary must speak for themselves, though they cannot speak for themselves in this House any longer as serving judges are not allowed to speak here. Therefore, they will have to speak to the Minister for themselves, and I have no doubt that they will have an opportunity to do that. I am not privy to the sort of consultations they may have, although I have heard a little about it. I will have to leave being a spokesman for the judiciary to others; it is certainly nothing to do with me.

I appreciate the difficulty we are in in the present situation. I can see that everyone is required to make sacrifices. Of course, that is something that one can do under the tax regime. I am not confident enough to suggest how this could be done, but I feel certain that the tax regime is pretty flexible in getting money out of people. So there is no question that tax could be used; it does not infringe the terms of service of the individual. When there was a general reduction in the salary of public servants in the Republic of Ireland, the judiciary was expressly excluded for the reason that the constitution had that arrangement in it. I agree that longevity is an important part of the value of a pension but the terms of service here are perfectly clear, as set out in the 1993 Act. My point is that this is a breach of the general understanding of our constitutional arrangement that a judge’s terms of service should not be altered adversely during his period of service. Of course, I shall withdraw the amendment. Whether I return to it may depend on a variety of circumstances which I am not in a position to control at the moment.