Lord Whitty
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(11 years, 9 months ago)
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Lord Whitty
Lord Whitty
My Lords, this amendment relates to revaluation. Clause 9 appears to allow the Treasury to change yet again the basis of revaluation, this time away from the CPI to something else. We discussed this in Committee and various assurances were given in that respect, although they are not as yet reflected in the Bill. However, no reassurances were given—indeed, the Minister was less than his usual emollient self—in relation to the provision in the Bill that in effect allows for negative revaluation in the light of changes in the CPI. That means that the Treasury can on the one hand amend the index and on the other impose a decrease in the accrued pension without any consultation with those affected, and in a way that, in the case of the LGPS, seriously undermines not only long-established practice but the recent agreement between the LGA and the trade unions.
I have looked at the history of the LGPS over the past 30 years, although it has actually run for a longer period than that, and there was only one point at which the relative index, at that point the RPI, actually fell at the point at which it was evaluated, and that was from September 2009 to the 2010 increase.
There were no precedents at that time. We had to refer back to the Pensions (Increase) Act 1971, which allows for increases but does not allow for decreases. The interpretation at that time was that that Act did not permit a decrease, so the 2010 adjustment was, in effect, zero. That is one aspect.
The other aspect of having the potential for a negative adjustment in revaluation is that it is inconsistent between those who are already receiving pensions or who are entitled to deferred benefits and are therefore governed by the Pensions (Increase) Act 1971, in which case their benefits would not be reduced, and active members who are still contributing to the scheme and who would, at precisely the same time when a negative revaluation could be made under this clause, see their benefits go down. We would therefore be treating active members disfavourably compared with members who have left the scheme or are already drawing their pension.
I am grateful for the assurances on the continuation of the CPI, but the fact is that the sudden and unexpected replacement of long-established RPI by the CPI has left a legacy of distrust in the schemes. Part of that is that if the CPI, as is expected, performs, if that is the word, less substantially than the RPI, there is a greater likelihood or possibility of a negative figure. The recent agreement between the LGA and the trade unions made it clear that past practice would continue to operate, and that if there were a negative change in the index there would be a nil adjustment. The implication of this clause is that it is attempting to override that commitment and agreement, which I think the Minister, and certainly some of his predecessors, would accept got the Government out of a very difficult position on pension reform in general and the LGPS in particular. Therefore, unravelling that aspect of the agreement—there are other amendments I will come to with a similar effect—is not helpful.
Amendment 15 would stipulate precisely what is already past practice and in the agreement: namely, that if there is a negative movement in the index, there will be a nil adjustment. I think the Government should accept the amendment. I appreciate the strong words of the Minister last time that the Government are not prepared so to do, despite the anomalies and distrust it would create. There are alternative amendments on this in this group in the name of my noble friend Lord Eatwell. Perhaps the Government could at least show their good will by accepting that if there were a negative increase, it would have to be subject to the affirmative procedure as provided for in my noble friend’s amendment, which no doubt he will speak to more ably than me shortly.
If the Government do not move at all, we are in some serious difficulty. It is causing considerable upset among employers, among those who have to engage in the new cost-management process within the Local Government Pension Scheme, among the unions and among the members of that scheme. The Minister could assuage those anxieties easily tonight by accepting my amendment or, in default of that, my noble friend’s amendment. It would be wrong for the Government to reject both. We would be on some sort of collusion course, whereas in general the LGPS and the arrangements for it from 2014 are done and dusted in a way that frankly was probably beyond the Government’s dreams only a year or so ago. I think that would be most unfortunate not only for the members of and employers in the scheme but for the Government and for future relations. I genuinely hope that the Government can move on this issue tonight. I beg to move.
Lord Eatwell
My Lords, I fully support the arguments put forward by my noble friend Lord Whitty, particularly on the complications that would arise with respect to the Local Government Pension Scheme. The amendment in my name and that of my noble and learned friend Lord Davidson refers to the general proposition in Clause 9(3) that,
“the Treasury may determine the change in prices or earnings in any period by reference to the general level of prices or earnings estimated in such manner as the Treasury consider appropriate”.
The Treasury has a completely free hand to determine the change in prices or earnings to be applied to the structure of the pension scheme. It seems to us on this side that this is really a step too far, so we have proposed that it should be subject not to a negative Commons procedure but to the affirmative procedure so that there can be a truly substantive debate on any particular proposal that might be unreasonable.
In Committee the Minister said:
“Any attempt to exercise this discretion in such a way that did not produce accurate and appropriate estimates”—
I must say as an economist that there is no such thing; there are estimates, but “accurate and appropriate” is something different—
“with reference to a reasonable index of prices or earnings”—
there is no such thing as that either—
“could be challenged by scheme members. Any decision which is not reasonable”—
that is fine—
“even without this amendment … could be challenged by judicial review and struck down by the High Court”.—[Official Report, 15/1/13; col. 608.]
What a cumbersome procedure. The affirmative procedure may be seen as taking somewhat more time and requiring more effort than the negative procedure, but how much better than saying, “Well, if this goes wrong, you’ve got to take it to the High Court”? That really is truly unsatisfactory.
Introducing this very minor amendment will provide an environment for the discussion of changes in the chosen index that can be deemed to be reasonable and to have the confidence of members of the schemes. I feel that this approach, perhaps allied with that suggested by my noble friend, would provide the confidence in the process of revaluation that from time to time can be enormously important in maintaining standards of living, particularly of more elderly pensioners.
Lord Newby
My Lords, as we are debating a group that started with an amendment moved by the noble Lord, Lord Whitty, I shall take this opportunity to answer the question he asked me earlier about whether the administering authority or the employing authority would determine whether an effect is significant. I am extremely pleased that I did not try to reply at the time because the answer is neither. It will be the “responsible authority”, because that is the authority that will be making the scheme regulations. In the local authority scheme, it would be not the employer but the Secretary of State. I hope that answers that question.
We have debated the amendments in this group before, so I shall try to be relatively brief in explaining why I do not believe it would be fair to restrict the revaluation of accruals from directly tracking growth, including when it is negative. Even though negative changes in prices or earnings are exceptionally rare, the Government firmly believe that if there is no revaluation ceiling, it would be unfair to have a revaluation floor to the benefit of members.
This is the sort of unbalanced risk-sharing between members and the taxpayer that the measures in this Bill seek to remove. The report by the noble Lord, Lord Hutton, specifically criticised this “asymmetric sharing of risk”. In addition, such a revaluation floor could lead to the cost cap being breached, to the detriment of future members who simply end up paying for past members’ accruals growing faster than the scheme revaluation rate. For those reasons, I will not be able to support the amendment of the noble Lord, Lord Whitty.
I am also unable to support the amendment of the noble Lord, Lord Eatwell, which would make the annual Treasury revaluation order affirmative rather than negative. As we have said before, this would not be an efficient use of parliamentary time and would be counter to the long-standing convention with other public service pension indexation. The order will be a run of the mill piece of legislation, and it would be incongruous for it to be subject to the affirmative procedure in each and every year.
However, I hope that I can go some way to meeting noble Lords’ concerns. In the years when the values in the order are negative, there will be a strong expectation that the Government of the day should ensure that there is a full parliamentary debate on the changes, not least because they would be so rare. Perhaps we can go further than that general statement and look at whether to require the affirmative procedure when, as unlikely as these events will be, the order sets out a negative figure. It seems that this would strike the appropriate balance between parliamentary scrutiny and sensible regulation-making.
I would therefore be willing, if the noble Lords were able not to press their amendments, to take this away to consider it further, with a view to returning to the matter at Third Reading with an amendment that would require any annual order to come before the House for affirmative procedure if the CPI index slipped into negative territory. I therefore hope that the noble Lord, Lord Whitty, will feel able to withdraw his amendment.
Lord Whitty
My Lords, I thank the Minister for at least part of that response. I also thank him for the clarification of “authority”, although it alarmed me somewhat more than I thought it would. The only more alarming thing would have been if he had said that it was the Treasury. It is clearly not within the bounds of the scheme to assess it, so my noble friend’s point in a previous debate is rather more valid than I was hoping it was. We will perhaps return to that at a later stage, at least informally.
On the amendments in this group, I read the Hutton report fairly thoroughly at the time. I do not recall the noble Lord, Lord Hutton, advocating that we should have negative adjustment. Clearly there is a balance of risk, which is reflected in the changes to the substance of the scheme that has been proposed by the Government and, in the case of the LGPS, has been accepted in the negotiations between the employers and unions. If the noble Lord seeks further rebalancing of the risk over and above what is already reflected in a scheme, which, I remind him, has been endorsed by the sponsoring department and, however grudgingly, by the Treasury, that reopens a can of worms.
Were I in the Minister’s shoes, which thank the Lord I am not, I would probably have said, “I will not accept the amendment of the noble Lord, Lord Whitty, but I will accept the amendment of the noble Lord, Lord Eatwell”. In that case, I would clearly have deferred to the amendment of the noble Lord, Lord Eatwell, and I and the rest of us could go home reasonably satisfied. As it is, the Minister on the one hand has said explicitly that he is going to reject that amendment, but on the other has described a process that did not seem a million miles from my noble friend’s advocacy of the affirmative procedure.
The Minister said that if there is a negative movement in the index, Parliament should have a full and thorough debate, having a couple of paragraphs earlier said that it was run of the mill legislation. It is clearly not run of the mill if it has not happened for 30 years. That full and thorough debate would normally be accompanied by an affirmative procedure, or something very like it. I am therefore not feeling quite so negative towards the Minister as I thought I would at the beginning of his remarks. He has said that he will go away and look at this. I think that if he looks at it carefully, he will come back and accept, or propose something equivalent to, my noble friend Lord Eatwell’s proposition. In that case, although I will not be completely satisfied, it gives a serious safeguard for the members of these schemes, and for the coherent administration of and trust in them, which are so important to tens of thousands of local authority workers and dozens of local authority employees.
I do not regard the Minister’s reply as satisfactory, but rather than press my amendment to the vote or encourage my noble friend so to do, we have to grab hold of the Minister’s offer of further consideration and see what he comes up with at this rather late stage of the Bill. Nevertheless, an important consideration now faces him. I am grateful for his commitment thus far, and therefore beg leave to withdraw the amendment on that understanding.
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.
Lord Newby
My Lords, I start with the amendment of the noble Lord, Lord Whitty. As he says, the LGPS differs from the unfunded schemes in several respects. While the current fair deal does not technically apply to that scheme, a similar principle is contained in the Local Government Act 2003. That Act requires the Secretary of State to make a direction to specify how pension issues are to be dealt with when staff are transferred out from a best value authority.
The noble Lord is understandably concerned to understand how the Government intend to implement the new fair deal policy for the LGPS, given this existing provision. The Department for Communities and Local Government is currently considering how best to do it. Should it prove necessary to amend the 2003 Act to implement the new fair deal policy, I can assure the noble Lord that the Government will do so at the earliest possible opportunity. I hope that I have given him the answers that he was seeking.
As regards the amendment of the noble and learned Lord, Lord Davidson, the Government have stated a number of times—both in this House and the other place—that we are committed to reforming the fair deal. There are provisions in the Bill to facilitate this. Indeed, the government amendments in this group are concerned with fair deal, which I shall come to in a minute, and work is under way to determine how this commitment will be implemented.
However, consultation closed only yesterday on some of the final policy details of fair deal. We are in the final stages of planning for its implementation. Therefore, in our view there is no need to refer to fair deal in the Bill in the way proposed and we believe that the amendment has serious flaws. As drafted, it would commit the Government to bringing forward proposals for ensuring that compulsorily transferred members of public service schemes can remain in those schemes. It would also seem to commit the Government to bring forward the proposals for the purpose of ensuring that compulsorily transferred staff can remain in their schemes, effectively committing government to implementing the proposals. However, it would not be appropriate to give any member of the scheme an unconditional right to remain an active member if their contract of employment was transferred to an independent contractor. While, of course, it is the Government’s aim that transferred employees would have a right to remain in the scheme when transferred out of the public sector, this right cannot be unconditional. While in the vast majority of circumstances it will be appropriate for fair deal to apply, there may be some cases when it would not.
There have been examples in the past, notably during the financial crisis, of highly paid specialist financial staff who have been brought into government for a time-limited period, and then transferred to independent employers. Although it may have been right to offer these staff access to the schemes while working in government, it would not be appropriate to allow them to retain access to the schemes when they leave, especially as the taxpayer is ultimately responsible for paying these pensions.
Similarly, on the wording of this amendment, a member of staff who was transferred out and then voluntarily moved off the public service contract to do purely private work could remain a member of the public service scheme. Again, this would not be right. The public service pension schemes are in place for those doing public service work, not for everyone who was once engaged in public service work at some point in their career.
These examples demonstrate that the implementation of the fair deal is complex. The Government are carefully considering these complexities to ensure there are no unintended consequences when the policy comes into force. Given this, it is the Government’s view that the fair deal commitment should not be on the face of the Bill. However, I can assure noble Lords that the fair deal will be implemented when we have done all the necessary work.
I hope that I can explain why government Amendment 42 is necessary. This amendment is concerned with people who are admitted to a public service pension scheme but who are not part of the main public service workforces listed in Clause 1. For example, it could apply to staff employed by a hospice who are offering services under a contract to the NHS and whose employer would like them to have the advantage of the NHS Pension Scheme. It is important to note that this amendment does not affect any of the main workforces in Clause 1. It can apply only to other people who are admitted into the scheme under the extension power in Clause 24.
Under the proposed new fair deal, a range of private and third sector bodies will be able to participate in these schemes in future. The amendment is concerned with ensuring that the schemes can be appropriately modified to reflect differences in the structure and nature of those diverse bodies. First, the amendment clarifies that scheme regulations may make special provisions in respect of people who are allowed to participate in the public schemes. The health and local government pension schemes already have a wealth of experience in providing for admitted bodies. The special provisions that are currently applied to those schemes include requirements for indemnities, guarantees, additional record-keeping, et cetera. These provisions are needed to ensure that the body meets the costs of participating in the scheme. The amendment would also allow for modifications that have already been made in respect of admitted bodies in the National Health scheme to be carried forward to the new schemes. Such modifications currently relate to about 60,000 scheme members and it is important that these can be maintained.
Secondly, the amendment allows for modifications to be made where bodies are admitted to the schemes in the future. Where scheme regulations provide for it, the responsible authority will be able to issue a direction to modify how the scheme applies to the staff of a body that is brought into the scheme. The NHS Pension Scheme currently makes between 100 and 150 such directions every year. Allowing for modifications to be made via an administrative direction will ensure that the scheme is applied appropriately in each case without the need to legislate for every single one or the delays that that would cause.
The Bill provides that a direction may be made only for permitted purposes. Those are that the modification is necessary to protect the public purse from costs arising from that body participating in the scheme, where additional information requirements are needed to allow the scheme and the risks to be managed properly by the scheme manager or to reflect the nature of the employment or the structure of the employer. This is not a new or novel power. The Secretary of State for Health has had broader powers to modify the health pension schemes since 1967. For those who wish to study the details, those powers are to be found in Section 7 of the Superannuation (Miscellaneous Provisions) Act 1967. The power explicitly set out by this amendment is more restrictive in scope than this existing power, which provides unfettered scope to modify the existing health schemes. The important safeguards set out in our amendment will ensure that any modifications are appropriate. Allowing bodies to participate in the schemes under Clause 24 will usually be as a result of fair deal. In such circumstances it would not be appropriate for modifications to alter members’ benefits in any way. Modifications that relate to fair deal transfers will, therefore, be limited to ensuring that employers meet their liabilities in full or provide the information necessary to run the schemes properly. I hope I have succeeded in explaining why we think that that amendment is necessary.
Amendment 43 relates to the locally administered public service pension schemes. Under Clause 24(3), scheme regulations may specify bodies or persons that may be permitted to participate in the scheme. It is anticipated that the regulations will prescribe the types of body that may be permitted: for example, a body that is providing services related to the main scheme workforce or a body that staff are transferred to under fair deal. Clause 24(5) then provides for an administrative determination to be made to extend the scheme to persons employed by such a body. Clause 24(8) requires an up-to-date list of persons to whom the scheme has been extended.
All these functions sit with the responsible authority. Our amendment allows for the functions in Clause 28(5) and (8) to be delegated to the scheme manager in a locally administered scheme. This is subject to any condition that the responsible authority considers appropriate. This reflects current practice in the local government scheme, in which it is the local authority that determines to admit a body to its pension fund. There are more than 5,000 admitted bodies in the local government scheme, and local authorities are best placed to determine their eligibility to participate in the scheme and to assist in administering the list of those who participate. They will do so within the limits of the scheme regulations set by the responsible authority. In turn, it is the local authorities that will be responsible for managing and administering the scheme for that body. They will collect data, contributions and provide benefit information and pensions to members.
I commend Amendments 42 and 43 to the House.
Lord Whitty
“(10) This section does not apply to the Local Government Superannuation Scheme.”
Lord Whitty
My Lords, I am sorry if this amendment appears to be another bit of LGPS exceptionalism but I hope that it can actually clarify the situation. There is a bit of confusion between Clauses 12 and 13. On my interpretation, Clause 12 applies to all schemes, whereas Clause 13, to which I have little objection, provides for funded schemes. However, if Clause 12 indeed applies to funded and unfunded schemes, it will cause some difficulty for the agreement that has been reached on the new cost-management system for the LGPS. As the clause stands, it does not reflect the dual process required by the LGPS and the separate cost management that was negotiated.
We have received some relatively friendly indications from the Treasury that it recognises this problem and we would like assurances from the Minister that the Government recognise the dual process. The other implication for the LGPS is that it is ahead of the other schemes in terms of the 2014 start date. I would therefore welcome reassurance from the Minister that the ability of the Treasury, at various points that are set out, to override a funded scheme—in this case, the LGPS—would not be applied to a scheme that had its own government-endorsed cost-management process in place. If I can have that confirmation, or something like it, I would not press the amendment. Clarification would also be useful on whether the whole of Clause 12 is indeed intended to apply to funded schemes. I beg to move.
Lord Newby
I hope that I can go at least some way in giving the noble Lord the reassurances that he seeks. The Government recognise the unique nature of the LGPS and that the cost-control mechanism for that scheme must reflect it. We have therefore developed a dual process to which the noble Lord referred, which will give scheme stakeholders additional flexibility to manage costs, while allowing the Government to retain final control over the costs and design of the scheme.
Clause 12 will provide for the Government to retain this overall control. They will use these provisions to put in place an automatic backstop which will apply if the scheme costs become unsustainable. The additional flexibilities that we will give to scheme stakeholders in their management of costs will operate alongside this backstop. As the noble Lord knows, this mechanism has been developed after extensive discussions with the LGA and the trade unions. We are confident that it will work and that the process envisaged is not inconsistent with the provisions in the Bill.
I know that this is not the noble Lord’s intention, but the effect of the amendment would be to remove the backstop that is part of the agreed mechanism. Given the importance of the cost-cap mechanism in ensuring the future sustainability of all the schemes, it is vital that the LGPS is covered by these statutory provisions in exactly the same way as the other schemes. All schemes need this mechanism to ensure that they are a sustainable way to provide good pensions that last. There is simply no reason to exempt the schemes. I hope that that will help to satisfy the noble Lord.
Lord Whitty
My Lords, I am grateful to the Minister, who clearly recognises the cost-management system that was agreed by the stakeholders of the LGPS. That is now on the record. I am not attempting to sabotage a backstop. However, Clause 12 looks to be a rather more interventionist clause than a backstop would imply. Nevertheless, if it is simply a backstop and the noble Lord recognises that the agreed system will work and will have government backing, then I will beg leave to withdraw the amendment.
Lord Whitty
My Lords, this is complicated territory. The way in which the Minister described the implications of my amendment is not the way in which I understand it. The LGA and the unions are concerned that Schedule 7, as it stands, could reintroduce an additional complication —an additional cost—into the LGPS scheme, which was expressly removed by the agreement between the LGA and the unions. That relates not so much to movement between the LGPS employer and different public sector employers but to the situation with people who have been employed by one LGPS employer, who then leave and come back. I do not specifically stand by the wording in the amendment, so I shall withdraw it shortly. However, the Government need to make it clear where the responsibility lies. It seems to us that responsibility for those in pensionable public service could see the original employer being liable rather than the final employer. That would give rise to unknown liabilities lying with the original employer and not with the employer of the individual once they return to LGPS employment.
This could carry on over a substantial number of decades, so the administrative costs of an employer trying to find out where their ex-employees have moved would be quite substantial. It is difficult to estimate, but some actuaries are telling the LGA that it could cost an additional 1% to the scheme. If that were anywhere near an accurate estimate, it would seriously jeopardise the 19.5% cost-management figure that has been built into the LGPS and would increase the overall cost to the LGPS over and above the ceiling.
I understand some of what the Minister says but, having outlined the dilemma, perhaps he could suggest some other way of doing it. At the moment, there is potentially a quite unnecessary cost loaded on to the management of the LGPS. As I say, actuaries are telling us that that could amount to a full 1% of the total cost. Even if it were half that figure, it would be a serious issue. It needs to be solved. My amendment may not solve it, but I would be grateful for more guidance from the Minister. Perhaps he could have some discussions with the LGA on this issue before the passage of this Bill is completed.
Lord Newby
My Lords, we realise that there is concern about the potential costs involved in this policy, but we do not believe that it generates unreasonable costs. It is about offering fairness and consistency. The likelihood is that most people who leave local government service for prolonged periods of time to work in different public service employment would not expect to return. It is therefore most likely that they will transfer their final salary benefits to their new employer’s final salary scheme. However, if liabilities for certain local government funds are increased by the risk of a final salary link attaching to future employment with different local government employers, it would be a matter for individual funds to make appropriate financial arrangements, with the help of scheme regulations if required. Undoubtedly, further discussion will be required on exactly how this should be carried forward. However, we do not believe that it is an insuperable problem for a very good feature of the scheme. We hope very much that negotiations and discussions will take place and that some of the fears of local government actuaries will turn out to be unfounded.
Lord Newby
My Lords, I turn to two government amendments to Clause 25. Amendment 44 is intended to remove any ambiguity as to the persons to whom Clause 25 applies. It has always been the Government’s intention that this clause should relate to any person who qualifies for a public service pension scheme under Clause 1(2) of the Bill, as well as any other persons to whom a scheme has been extended under Clause 24—that is, all those who are eligible for a public service scheme and not just those who are currently members of such a scheme. Doubts have been expressed about whether the clause has that effect. This amendment sets out the Government’s intentions unambiguously.
Noble Lords will remember that at Third Reading we debated a proposed amendment to Clause 25 moved by the noble Lord, Lord Whitty. Noble Lords were concerned that the clause was too general in its scope and could allow local authority employers to undermine the Local Government Pension Scheme by offering alternative pension arrangements as a matter of course. The noble Lord therefore sought to exempt the Local Government Pension Scheme from Clause 25. I gave assurances in that debate that these powers did not allow eligibility for the main schemes to be overridden, nor did they allow employers to make any alternative arrangements mandatory. I stand by those assurances. In short, Clause 25 does not allow scheme managers or employers to act in the unscrupulous manner that a number of noble Lords feared.
However, I am aware that some people, particularly in the local government sector, still have a lingering nervousness about the clause. The LGA and others have explained that, while they accept that the clause cannot lawfully be used in this way, they remain concerned that some employers will misrepresent it. To put the matter beyond doubt, the Government tabled this amendment, which makes the use of Clause 25 subject to any provisions contained in scheme regulations. It makes it clear that provisions in scheme regulations take priority. Furthermore, it will be open to scheme regulations to restrict how the Clause 25 power is used in the scheme, if that is thought appropriate. My officials discussed the amendment with the LGA and I understand that it is content with this approach. I trust that this provides a further level of reassurance. I beg to move.
Lord Whitty
My Lords, I simply thank the Minister for tabling these amendments. Amendment 45 in particular clarifies the position significantly.