Public Service Pensions and Judicial Offices Bill [Lords]

Peter Grant Excerpts

2nd reading
Wednesday 5th January 2022 Commons Chamber

[Peter Grant (Glenrothes) (SNP)]

I begin by wishing a somewhat belated bliadhna mhath ùr—happy new year—to you, Mr Deputy Speaker, and to colleagues. I include in that colleagues across the House who would have had something positive to contribute to tonight’s proceedings, or to the proceedings earlier in the day, but have been prevented from doing so because they are not able to travel to be here and for reasons that I will never understand are not allowed to participate without being physically present in this place.

The reason we have the Bill here today is that the court has ruled that the way that the Government have treated 3 million of our most valuable citizens is unfair, discriminatory and unlawful—a £17 billion mistake, as the right hon. Member for Wolverhampton South East (Mr McFadden) pointed out. We therefore have to approve either this Bill or something like it very soon. We cannot allow that illegality to continue. We will not oppose the Bill on Second Reading, although there are a number of areas where we have concerns, some of them echoing the concerns raised by the right hon. Gentleman. We may want to raise some of these matters in Committee in due course.

Before I go on to indicate some of the detailed concerns, I will set out some general principles. First, I entirely endorse the comments of the right hon. Member for Wolverhampton South East in that somebody who is giving valuable service anywhere in the public sector is absolutely entitled to a proper wage, to proper conditions of employment, and to a decent pension when they come to retire. This used to be quite a regular source of outrage for those on the Conservative Benches, egged on by their pals in the right-wing press—people like the Rothermeres and the Barclays who do not rely on a state pension, or any other kind of pension, all that much. They used to think it was outrageous that people who had worked a lifetime in the public sector were guaranteed a decent pension when they retired. It is not an outrage that somebody who gives 30 or 40 years of loyal service retires on a decent pension; it is an outrage that so many people who give 30 or 40 years of loyal service do not get to retire on a decent pension.

Although the Bill improves things following the mistake that was made, the Government have not even begun to look at possibly the single biggest weakness in a number of big public sector public schemes, including the ones that we are talking about tonight—that is, that they are unfunded. That does not mean that there is no money for them, but it means, effectively, that somebody making a pension contribution today is paying not their own pension but the pensions of previous generations that have already retired. They are just hoping that when they come to retire a future generation of workers will be there putting into the pot to pay their pension, while the Government—the taxpayer—have to pick up any shortfall. It is almost like a legalised Ponzi scheme.

I would love to know what the thinking was when the schemes were set up. Why did anyone think that that was a good way to set up an employee pension scheme? It is intrinsically unstable, especially if the number of people employed and contributing to the scheme changes significantly over time, because a smaller number of people are trying to pay the pensions of a bigger number of retired colleagues—and clearly over the years most areas of the public sector have seen a reduction in employment. That is why we have the difficulty in affordability and sustainability that we are trying to address just now. To be honest, I do not envy whatever Government Minister it is who will eventually have to find a fair way of squaring that circle, but we cannot afford to keep ignoring it for ever.

Secondly, I believe in principle that for someone in a defined-benefits occupational pension scheme, a career-average scheme will be fairer than a final-salary scheme. It does not necessarily mean that it is cheaper. It does not necessarily mean that they have to contribute more. It does not necessarily mean that their pension has to be less. It would be quite possible to set up a scheme where the workers did not have to contribute any more and where most of them got the same pension or better than they already had. When I say that I agree with the principle that the Government have stated previously that a career-average model will tend to be fairer to a lot of workers than the current final-salary scheme, that does not mean that I want it to be used as an excuse to cut pensions, to force workers to contribute more of their wages to the pension scheme, or indeed to increase the pension age. We can move to a career-average scheme without having to do any of those things.

The third general point is critical. When somebody chooses to contribute to an employer’s pension scheme on the basis of promises that have been made by the employer, by the scheme administrator or by the Government, those promises must be honoured. Retrospectively moving the goalposts is not acceptable. It is not acceptable for public sector workers with regard to their employment pension, and it was not acceptable for the WASPI women. I know that that means that it takes much longer for any changes to pension schemes to have their full effect, but there is an important question of trust at stake. In October 2010, the Independent Public Sector Pensions Commission said that protection of accrued benefits

“is a prerequisite for reform both to build trust and confidence and to protect current workers from a sudden change in their pension benefits or pension age.”

I know that the Government have said that they want to comply with that recommendation, but it remains to be seen whether the Bill, as it is now or as it may be amended later, achieves that.

The contribution that people have made to their final salary scheme gives them an entitlement to the benefits that they were promised from that scheme at the time that they made that contribution. The fact that there seems to be widespread acceptance now that those promises might no longer be affordable for the public sector finances is not the fault of the workers and it is not the fault of their employers. For decades, successive Governments have failed to provide a public sector pension scheme that was affordable and sustainable in the longer term.

The final general point is that we need the Bill because the Government got it catastrophically wrong. They passed legislation that embodied unlawful discrimination. Regardless of what remedy is eventually put forward and agreed, it will have a cost. It will have a direct cost in terms of changes to people’s retirement age, changes to pension contributions, and changes to the pension they get when they do retire, and a substantial indirect cost as a result of the mountain of extra administrative work that will be needed. There should not be any argument about where these costs should fall. They should fall on the Government, not on the workers because it is not their fault, not on the employers, because it is not their fault, and not on the scheme administrators, because it is not their fault either. The Government created the problem and the Government should be making sure that they and they alone carry the costs of fixing it not only in the short term but permanently.

Let me turn now to some of the more detailed provisions of the Bill. The Government’s impact assessment says that there is “a small number of people” who currently have a mix of legacy scheme and new scheme benefits and that that mix is more advantageous than it would be for them to have all of the eggs in one or other of those baskets. Clauses 6(7) and 10(5) will force those people to put all their eggs into one basket. They will lose out. The Government have said that they are only losing out on something that they should not have had, because the Government previously passed a bad law. That is a feeble excuse. I would like the Minister’s clarification on this point. Table 4 on page 68 of the Government’s equality impact assessment—this is not the same as an assessment of impacts, although, presumably, the two should be compatible with each other—says that about 245,000 people have what is termed tapered protection. What assessment have the Government made of the number of people who will lose out from clauses 6(7) and 10(5)? If that number is anywhere close to 245,000, is it right that the Government should just dismiss them as a small number of people? Two hundred and forty-five thousand livelihoods do not seem like a small matter to me.

Clause 5 allows regulations to be made that would let members opt back into a scheme if they opted out during what is termed a “remedy” period. That is only fair as it protects workers from losing out if the rules on which they based their decision are retrospectively changed. Later on in the same clause, subsections (5) and (6) appear to allow the regulations to require the member to provide certain information, including the reasons why they opted out or did not opt out at the time. An excellent briefing prepared for us by the House of Commons Library suggests that those subsections could be used in regulations to restrict the right to reinstatement except when the member can demonstrate that they opted out as a result of that unlawful discrimination.

A similar situation is explicitly set out in clause 24. It allows members retrospectively to pay additional voluntary contributions if they can show, on the balance of probabilities, that they would have done that during the remedy period had it not been for the unlawful discrimination. In both those scenarios, how is somebody supposed to prove, even only on the balance of probabilities, the reasons they did something or opted not to do something seven years ago? Who keeps that information for that length of time? Who will they have to convince—the Government or individual scheme administrators? If it is individual scheme administrators, how do we ensure that there is consistency and fairness in the way that different applications to different schemes are applied?

Most importantly, where will the legal risk lie if, as seems inevitable, somebody is aggrieved that they have been prevented from opting back into a scheme or from making backdated additional voluntary contributions and takes legal action? Will the legal risk lie with the Government who caused the problem or with the pension fund administrators who are desperately trying to fix it?

One further query concerns the admittedly hugely complex interplay that has been mentioned among the amount of money that someone contributes to a pension, the amount of money they get as a pension, and their tax liabilities when they are paying into a pension and when they are collecting it after they retire. Again, I do not want to give the impression that I doubt the Government’s sincerity; I appreciate that they are entirely sincere in trying to ensure that tax consequences do not undermine the intention behind the Bill. All too often, however, I have seen the irrational way that the UK tax system works, even before the Bill has been enacted, so I genuinely do not have a good feeling about it. It concerns me that in passing the Bill, we will be relying on clause 11 of the Finance (No. 2) Bill, which is still in Committee and has not received Royal Assent, to sort out the problem that the Bill creates in relation to the potential impact on someone’s pension annual allowance. I do not like the idea that we are deliberately giving Second Reading to a Bill tonight while relying on a Bill that is somewhere else in the parliamentary system to fix the problem that we are creating. It does not seem to be a good way to do business.

After Second Reading and several days of Committee in the Lords, the Government had to come back with 123 amendments on Lords Report, and we have just been told that they are preparing an unknown list of amendments to table on Commons Report. That should make us all wonder how many other serious flaws that nobody has yet spotted are still lurking in the 116 pages of the Bill. The Bill should receive its Second Reading tonight, but I fear that many further amendments may be required before it is close to being fit for its stated purpose.

Public Service Pensions and Judicial Offices Bill [ Lords ] (First sitting)

Peter Grant Excerpts

Committee stage
Thursday 27th January 2022 Public Bill Committees

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I will start by talking about our public sector workforce and the service they give to this country. The pandemic has highlighted how much we depend on the NHS and on teachers, police and other frontline professionals who keep us and our loved ones safe. It is only right that the state ensures that our public servants are secure in retirement by providing a decent pension on a fair and equal basis.

Labour therefore welcomes the main provisions in clause 1, in particular the attempt to introduce a remedy for the discrimination of younger members in the new pension schemes established by the coalition Government between 2014 and 2016. I recognise that the remedy the Government have opted to include in the Bill—the deferred choice underpin, or DCU—was the preferred option of the overwhelming majority of respondents to the Government’s consultation, including Unison and GMB—my trade union. However, I want to draw the Minister’s attention to the fact that trade unions continue to have concerns about the lack of clarity on how the remedy, expected to cost around £17 billion, will impact the future value of members’ pension schemes.

On Second Reading on 5 January, the Under-Secretary of State for Justice, the hon. Member for South Suffolk (James Cartlidge) said

“liability…will fall on the Exchequer.”—[Official Report, 5 January 2022; Vol. 706, c. 112.]

That is an important commitment, but as Lord Davies of Brixton, a Member of the other place and one of the country’s foremost pension experts, has said, it does not address the question of whether the remedy will be included in the cost control mechanism at a later date. If this cost were to be included in a future cost control mechanism valuation, it would result in members receiving lower benefits and having to make higher contributions to their pension schemes. As the Public Accounts Committee has warned, this would, in effect, be unfairly penalising our public sector workforce for the Government’s economic incompetence by passing on some of the cost of the Treasury’s £17 billion mistake to members.

Can I ask the Minister to confirm, once and for all, whether the estimated £17 billion cost of the remedy will be included in future valuations of the pension schemes under the cost-control mechanism? If it is to be included, can he please set out how that will impact on the future value of members’ benefits and contribution rates? I think he will agree with me that our public servants deserve better than to be left in the dark, so I hope he will clarify this in detail.

Today, the Government have failed to address concerns about how pension scheme members will be protected from unscrupulous advisers. I know that Minsters have been reluctant to include pension scams in the draft Online Safety Bill, despite the spiralling costs of pension fraud and mis-selling. I would like the Minister to set out what steps he is taking to protect members from scammers, who may try to exploit the greater choice that this Bill provides by getting people to transfer out of the pension schemes in a way that is not in their best interest.

[Peter Grant (Glenrothes) (SNP)]

It is a great pleasure to serve under your chairmanship, Mr Sharma. Some of the comments that I will make today will repeat the assurances I asked for on Second Reading. Looking back over the Hansard record, I think I was the only Member who spoke in that debate who did not have their queries addressed in the Minister’s summing up—not that I was keeping track or feeling got at, at all.

I am grateful to the Minister for clarifying the query from my hon. Friend the Member for Glasgow South West; it should concern all of us that such a massive injustice almost slipped through the net. There have been dozens of chances for amendments to be made and for this Bill to be got right. I said on Second Reading that I was concerned that the number of very late amendments that the Government tabled in the Lords was an indication that there were still big gaps. Something as vital as not denying a public service worker their pension rights was missed because, as a result of a dreadful piece of legislation, their job was sold off to the private sector and then brought back in house again. For that potential injustice to have got this far, until the Government spotted it and brought them in, will leave us all at the end of today’s proceedings—and Tuesday’s if we sit then—still wondering what else is left that has not been picked up.

It is quite clear that, with some of the later amendments, the Government did not identify issues for teachers, whose length of service provision and their age sometimes will not fall into line with each other in a way that would be expected. Some of the later amendments suggest that the Government forgot that sometimes the Treasury does not decide things in Northern Ireland, but rather, it is the Northern Ireland Department of Finance that decides. How could such a crucially important piece of legislation have got to that stage without basic facts of the UK constitution having been picked up somewhere within Government?

I hope that when we come to those sections that the Minister will have the good grace to admit that sometimes there have been simple blunders by the Government, that mean we will have to consider these things as amendments rather than them being part of the substantive Bill.

[Chris Stephens]

Does my hon. Friend agree that we are taking about deferred pay for public sector workers, and therefore we should be treating this Bill with a great deal of care and attention?

[Peter Grant]

I absolutely agree. I made it clear during my comments on Second Reading that I do not doubt the sincerity of the Minister’s and the Government’s intention to do the right thing. However, I believe it is a fundamental principle that if someone signs up to a pension scheme, they get what they were promised, even if it becomes inconvenient or the Government discover afterwards that it is going to cost more than they expected. That is why it is important we get clarity on who is going to pick up the tab for the £17 billion, for example. It concerns me that a group of workers who were very badly treated by legislation in the past would have lost even more than they thought they had done if the Bill had not been amended at such a late stage.

I hope that these will be the last substantive amendments that we need to see, but I suspect that on Report the Government will have another raft of big amendments for things that nobody spotted until now.

--- Later in debate ---

[Mr Clarke]

I thank all hon. Members for their contributions. It is important to clarify one of the misapprehensions about what has happened over the course of the passage of this legislation to the issue that we are working to address. The Government did not, as it has been described, make a mistake. We inserted transitional protections into the scheme after the recommendations of Lord Hutton, expressly at the request of the trade union movement. It is important to establish that the request for transitional protections to be inserted was a trade union-led request. That is what triggered the discrimination action against the Government, which we are now working to address. I would defend the Government’s record here quite strongly; this is not something that we have brought about. None the less, we are obviously working in good faith to seek to address it.

[Peter Grant]

It just will not wash for the Minister to blame the trade unions. If this Government were in the habit of paying a blind bit of attention to anything else the trade unions say, that might be credible. But the trade unions did not make the regulations that were proved to be unlawful; the Government made them. Why can the Minister not accept that the Government took the decision and got it wrong?

[Mr Clarke]

The Government obviously take responsibility for all of those things, but it is important to establish the full context. We inserted the changes at the request of the trade union movement, and they were found to be discriminatory in a way that could not have realistically been anticipated at the time that the legislation was brought forward. None the less, we are where we are, and I want to address some of the substantive concerns raised in particular about the cost of remedy. We will come back to this later as well in the course of the Committee, because it will arise again in the context of some of the other clauses.

It is really worth clarifying definitively that the Exchequer is responsible for paying out pensions due from unfunded public service pension schemes, to which this relates. This works in practice by current employer and member contribution incomes being used to meet the costs of paying current pensioners. Where contribution income does not match the cost of pensions in payments in any given year, the Treasury has to make the balancing payment. In this way, the Exchequer guarantees the benefit that members worked so hard to earn, as the hon. Member for Glenrothes rightly said, during their time in service.

Remedy increases the pension rights of eligible members over the period in question—2015 to 2022. As the hon. Member for Hampstead and Kilburn said, the estimated cost of this remedy for unfunded schemes is in the region of £17 billion, in terms of long-term liabilities for the Exchequer. The Exchequer will therefore pay out these increased pension benefits due to members over several decades as members retire. There should be no doubt that the ultimately liability sits with the Exchequer, rather than scheme members. It is worth noting that, overall, these reforms are estimated to save the Exchequer some £400 billion in long-term liabilities, which is important for the long-term sustainability of our public service pension schemes in an age of rising life expectancy.

On the question of remedy, which is really important in the cost control mechanism, I should be clear that member benefit levels and contribution rates are set out in individual scheme rules and can be adjusted through the cost control mechanism at scheme valuations. The cost control mechanism—again, I will expand on this later—is designed to both protect the value of schemes to members and to protect the Exchequer from unforeseen costs.

At each scheme valuation, the mechanism assesses the benefits that have accrued and are accruing to members to determine whether future benefit levels of member contribution rates need to be adjusted to manage the cost of the scheme. By increasing the pension rights of eligible members, the remedy we are talking about today increases the value of those schemes to members, which is why it is right that it is reflected in the cost control mechanism for the 2016 valuations.

However, because we are waiving the ceiling breaches while honouring floor breaches of the mechanism, it is vital that we establish now, for the avoidance of any doubt, that no member benefits will be cut and no member contribution rates will increase as a result of the 2016 valuations. Any benefit improvements due will be honoured, but no additional costs will be imposed. I reassure the hon. Lady, on her important question, that the costs of our remedy genuinely sit with the Exchequer, not scheme members.

I entirely agree with the hon. Lady’s important point regarding people not being caught up by pension fraud. Public service pensions schemes do not allow members to transfer to such arrangements, only to equivalent defined-benefit schemes, so there is a degree of protection against the most egregious fraud, but we are always happy to work with individual schemes and the industry to try to promote best practice and make sure that people do not fall victim to any form of mis-selling.

As I set out, this is a highly complex and technical Bill. The amendments in this group, and some we will come on to discuss, are crucial to ensuring that a robust remedy is in place—in this particular instance, for teachers with excess service and those who have a period of service that was subject to a local government contracting-out transfer. On the point that the hon. Member for Glenrothes raised, it is important to note that many of these amendments result from close discussion with individual schemes and stakeholders right up until this moment, not because we had not anticipated many of these questions but because, in truth, how best to resolve them—there are sometimes multiple ways—has been a matter for close discussion. We are confident that the remedies we are bringing forward and the amendments that fall within the scope of today’s proceedings are the optimal way of making sure that we have a new system that is fair and, crucially, provides the most robust possible remedy to the concerns being raised.

Amendment 2 agreed to.

Amendments made: 3, in clause 1, page 2, line 37, at end insert

“, or

(c) is, as a result of a local government contracting-out transfer, pensionable service under a pension scheme that offers pension arrangements that are broadly comparable with those offered to the person before the transfer.”.

This amendment amends the definition of “disqualifying gap in service” so that it includes a period during which the person was transferred to a private sector employer under local government contracting out arrangements.

Amendment 4, in clause 1, page 3, line 3, after “scheme” insert “or excess teacher service”.—(Mr Clarke.)

This amendment is consequential on the amendment of the second condition in this clause made by separate government amendment.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2

Remediable service treated as pensionable under Chapter 1 legacy schemes

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Mr Clarke]

Clause 5 requires scheme regulations to make provision to allow a member who opted out in relation to a period between 1 April 2015 and 31 March 2022 to elect for that service to be reinstated as though they had not opted out, if they satisfy conditions that may be specified in the regulations. This ensures that the member can be put back in the position that they would have been in had they not chosen to opt-out as a result of the discrimination.

[Peter Grant]

Can I raise with the Minister the concern that I raised on Second Reading but did not get an answer to? I welcome the vast majority of clause 5, because it is right that if a member of a pension scheme took a decision about opting in or out based on circumstances that have now changed beyond their control they should be given the opportunity to reconsider that decision. That is absolutely correct. And there has to be some kind of provision as to the conditions about when that right is put in place; I do not have a problem with that.

However, paragraphs (5)(c) and (6)(a) refer to conditions potentially being applied that would require the applicant to submit certain information before the application could be accepted? The House of Commons Library has suggested that one type of information that could be asked for would be for the individual to demonstrate that the reason that they took action was because of what we now know to have been unlawful discrimination built into the scheme.

My question to the Minister is this: is it reasonable to expect somebody to be able to demonstrate that? What standard of proof will be required? I need to remind the Minister that the Windrush scandal happened because the Government retrospectively decided to demand that citizens produce certain information in order to have their rights of citizens respected and they made completely unreasonable expectations on people to have retained information.

Okay, we are talking now about something five or seven years ago instead of 30, 40, 50 years ago, but the principle is still the same. Is it reasonable to assume that people will have kept documentation to demonstrate that they acted on the basis of information at the time and not for some other reason? Can we have an assurance that any regulations will not put an unreasonable burden of proof on people who may well have acted for the reasons set out in the clause, because the chance of them having kept any evidence to prove it five or 10 years later is pretty slim?

--- Later in debate ---

[Peter Grant]

Again, I have a question that I put on Second Reading that was not truly answered then.

In the background papers for the Bill, the Government suggested that clause 6(7) would apply to a fairly small number of people—I think that was how they described them. These are the people who would have a better deal if they were able to mix and match some provisions from one scheme and some from another, and they are now being told that they can opt for entirely one scheme or the other.

I understand the Government’s position, which is that these are people who have been given a benefit that they would not have had if there had not been unlawful discrimination, so they can have no reasonable objection if it is taken away. I suspect that the people who will lose that benefit will take a different view.

However, my real question was this: how many people are potentially affected? The information I have seen—this is the figure I quoted on Second Reading—is that we could be looking at somewhere up to 245,000 people. That is a small percentage of the total number of pensioners affected by this legislation, but a quarter of a million people cannot be described as a small number. Will the Minister confirm how many people he expects to be affected particularly by the restriction in clause 6(7)?

[Mr Clarke]

I can commit to write to the hon. Member with our best estimate, although it may be that my officials can provide me with such an estimate. In that case, I will relay it to him in a later answer as we make progress on the Bill.

Question put and agreed to. 

Clause 6 accordingly ordered to stand part of the Bill. 

Clauses 7 to 9 ordered to stand part of the Bill. 

Clause 10

Deferred choice to receive new scheme benefits

Question proposed, That the clause stand part of the Bill.

--- Later in debate ---

[Mr Clarke]

Clauses 23 to 25 are concerned with ensuring that schemes have further powers to remedy the discrimination that arose. Clause 23 provides a power for scheme managers to pay compensation in respect of any compensatable losses incurred by members as a result of the discrimination suffered. Clause 24 provides a power for scheme regulations to award a member additional benefits where a member has suffered a tax loss because of the discrimination. Finally, clause 25 provides that scheme regulations for a chapter 1 legacy scheme may make provision to give members with remediable service the facility to enter into new arrangements to pay voluntary contributions, to further address the discrimination.

[Peter Grant]

I have some similar questions to the one that I asked on clause 10, although the wording here is much more specific. I am looking at clause 25(3), where, again, there is a requirement that if someone wants to pay the additional voluntary contributions that they would have paid earlier but for the change in the scheme regulations, they can do so

“only if the scheme manager is satisfied that it is more likely than not”

that they would have chosen to pay them had they known that the change was coming.

I have a few questions for the Minister. First, how do we ensure consistency of treatment if we have scheme members applying to different scheme managers? Perhaps more importantly, what is the route of redress if someone is unhappy with the decision of the scheme manager? Do the Government plan to legislate in order to set out clearly what the redress is in those circumstances, or do members have to fall back on the grievance and dispute procedures that are built into their terms of employment or the terms of individual schemes? That could mean that we get inconsistency when people in similar circumstances put in similar applications, so that one is approved under the rules of one scheme, and one is not approved under the rules of another. That does not deliver the equality of treatment that the Bill is intended to deliver.

--- Later in debate ---

Finally, Labour Members are also concerned that the economic check is insufficiently transparent and provides too much room for ministerial interpretation of long-term economic assumptions, which could risk politicising the mechanism. I sincerely believe that the Government should rethink their approach to the economic check. We are opposed new clause 2 as it stands, and I will press it to a vote.

[Peter Grant]

I share a lot of the concerns that have just been expressed so eloquently from the Labour Front Bench. I have a couple of other issues with what is in the new clauses; perhaps the Minister will explain.

I understand why the Government want to build in growth in the economy, but at the same time I agree fully with the concerns expressed by the official Opposition. In new clause 1, in what circumstances does the Minister envisage

“or any sector of the economy”

becoming relevant? In which particular sectors of the economy does he think that growth will be particularly relevant to local government or other public sector pensions?

The provision goes on,

“the growth in the economy…of the United Kingdom or any part of the United Kingdom”.

Who takes the decision that the economic performance of one particular part of the United Kingdom is relevant to a particular pension scheme or to all pension schemes? What do we mean by a “part” of the United Kingdom? Is that simply the four constituent nations? Can it be influenced more by the economy in London than the economy in Yorkshire?

As the hon. Member for Hampstead and Kilburn mentioned a minute ago, the Bill will be far too vague at this point. It will put far too much power into the hands of, presumably, Ministers. There is no guarantee of any accountability or transparency as to the way this is operated. For that reason, my understanding is that a number of unions, although they support the intention behind new clause 1 in its entirety—I am struggling over whether to oppose the entire new clause, as I want to see a lot of stuff in there in the Bill—have significant concerns about that particular part of the economic check. If I were not opposing the new clause, I would be minded to table a more significant amendment at a later stage in proceedings. Will the Minister explain when he envisages a particular sector of the UK economy to be relevant, and when he expects that to be the economy in a particular part of the United Kingdom?

Finally, the Minister was keen to tell us what the unions had said about the previous transition arrangements. Will he tell us what the unions are saying about the economic check in this part of the Bill? Will he explain why he listened to the unions previously, but does not seem to be listening to them now?

[Matt Rodda]

I rise to support my hon. Friend the Member for Hampstead and Kilburn. She is making an excellent point, and I am glad that she will press for a vote. The issue here relates to the need for transparency and trust, and the Government must reassure worried public servants, who have worked hard and have every right to expect a decent pension and retirement, that there is no sleight of hand here.

One of the three issues the Minister mentioned is to be dealt with in regulations, and the other two are on the face of the Bill. I would like him to reassure the Committee about the nature of those regulations, how they will be dealt with by the House and when they will be brought forward. I also remind him of the views of the independent Public Accounts Committee, which urged the Government to take the matter seriously, saying that the Government should

“quickly resolve the challenges presented by the McCloud judgment and cost control mechanism”

and that that was important to rebuild trust. I hope the Minister will consider the PAC’s thoughtful advice on this matter.

--- Later in debate ---

[Mr Clarke]

We have modelled the full detail. In so far as there is any particular point of clarification that the hon. Lady would like, I will happily write to her after these proceedings to provide whatever we can.

[Peter Grant]

Will the Minister clarify something about the other part of my question? Who will decide whether the appropriate measure to use is the growth in the economy of the entire UK, the growth of the economy of one sector, or the growth in the economy of one nation or region? Is that decision within the remit of the OBR?

[Mr Clarke]

It is the OBR’s decision to make.

Question put and negatived.

Clause 86 accordingly disagreed to.



Clause 87

Amendments relating to the Secret Intelligence Service etc

Question proposed, That the clause stand part of the Bill.

Public Service Pensions and Judicial Offices Bill [ Lords ] (Second sitting)

Peter Grant Excerpts

Committee debates 2nd sitting & Committee stage
Thursday 27th January 2022 Public Bill Committees

[Mr Clarke]

I thank the hon. Gentleman for the spirit in which he asks his question. We always want to discuss these issues as fully as possible with a view to finding viable options where they exist. As I said, the Home Office has consulted on detailed regulations to implement the prospective McCloud remedy for the police pension scheme, and it will bring forward the outcome of that consultation in due course.

The Government must not take action that inadvertently creates a new form of the very discrimination that this legislation is designed to address. The Government must also safeguard the purpose of the reforms proposed by Lord Hutton and ensure that public service pension schemes are put on a sustainable fiscal footing. As the Independent Public Service Pensions Commission put it,

“Allowing current members to continue to accrue further benefits in the present schemes for many decades would be unfair and inequitable to the new members coming behind them.”

The reformed public service pension schemes remain among the most generous schemes available in the United Kingdom. Based on the Office for National Statistics’ most recent assessment, 6.3 million public sector workers participate in these valuable schemes, while only 0.7 million workers in the private sector have access to defined-benefit schemes that are open to new members.

I am concerned that the new clause ultimately seeks to oblige the Chancellor to devise measures that would contradict these crucial aims of the prospective McCloud remedy. Compensating members with remediable service for the difference in pension age between their legacy and reformed schemes would, effectively, leave a protected class of public service pension scheme members beyond 31 March 2022, which could perpetuate the discrimination identified by the courts, or give rise to new discrimination. It would also severely weaken the efficacy of the prospective remedy for many years to come, at very considerable cost to the taxpayer.

To summarise, I genuinely thank the hon. Member for Hampstead and Kilburn for bringing attention to this issue, and reassure her that the Government have been considering the position of these members. However, careful consideration must be given to the need to avoid perpetuating the discrimination identified by the courts, or introducing new discrimination against other pension scheme members, or inadvertently undoing much of the policy aims of this Bill, and this new clause asks the Chancellor to propose a means of doing just that. I therefore, respectfully, ask the hon. Lady to withdraw the new clause.

[Peter Grant (Glenrothes) (SNP)]

The Minister started off by suggesting his main concern was that the new clause seeks to go further than has been requested by the Police Superintendents Association. If that was the case, then the Minister could have easily tabled an amendment that came closer, in his view, to delivering what the PSA was asking for without going significantly further. He has not done that, so we have to wonder if he had any intention of addressing the issue had the new clause not been tabled.

We are asking the Chancellor to table a report and present it to Parliament. There is nothing in the new clause that would require the Chancellor to commit a single penny of additional spending. It does not tell the Chancellor what his or her conclusions have to be at the end of that. It is perfectly in line with the wording of the new clause for the Chancellor to produce a report to say, “We could remedy the situation by doing a, b, c, x, y and z, but I cannot recommend doing that because that would introduce unfair discrimination that would be contrary to the purpose of the Act.”

The Minister is trying to make it seem as if the new clause is about forcing the Government to incur additional expenditure. My reading of it is that it is deliberately worded to avoid asking for a commitment at this stage, but it seeks to force the Government to recognise that there might still be a massive weakness in the Bill and to force the Chancellor to come forward with a solution that might address that weakness. If the solution proves to be unworkable or to be unfair in other ways, Parliament has the option to reject it.

Surely, it is wrong, at this stage, that a potentially serious unfairness should be left sitting in the Bill just because we are not sure we can find a way of fixing it. That is not a fair response to give, either to the hon. Member for Hampstead and Kilburn, who moved the new clause, or to those officers who are likely to be affected by it.

[Matt Rodda (Reading East) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Graham. I pay tribute to our police and fire service. I appreciate that the Minister shares that sentiment. I want to underline the points made by my hon. Friend the Member for Hampstead and Kilburn and others that we are just asking the Government to consider this again and to produce a report. That seems to be the very least that could be asked of them at this point.

It is worth remembering that the police and fire service—these valuable services, which are at the frontline of our public service and respond to challenging issues in our communities—have been through the pandemic after 10 years of quite serious austerity cuts in staff numbers. Once again, I ask the Minister to consider this new clause that asks only for a report to be produced, which would allow further discussion to take place.

I have met the Police Federation and the Police Superintendents Association, both of which have genuine concerns, and I understand that the Fire Brigades Union does, too. We should listen to these public servants. They have genuine concerns. This is an important issue about the future and the status of these services. I ask the Minister to consider the new clause very seriously.

Public Service Pensions and Judicial Offices Bill [Lords]

Peter Grant Excerpts

Report stage
Tuesday 22nd February 2022 Commons Chamber

[Robert Jenrick (Newark) (Con)]

I rise to speak to new clause 1, which is in my name. The new clause empowers the Secretary of State to issue guidance to authorities that administer public sector pensions schemes that they may not make investments that conflict with the United Kingdom’s foreign and defence policy.

The new clause will resolve a long-standing issue that arose out of the Public Service Pensions Act 2013 and the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016. The issue was whether the Secretary of State had, under their general power to issue guidance provided under the 2013 Act, the ability to guide those who administer pension schemes, particularly local government pension schemes, away from making investment decisions that were contrary to the United Kingdom’s foreign and defence policy.

In 2020, the Supreme Court found by a split decision that the 2013 Act did not confer on the Secretary of State the necessary power to issue that guidance. The purpose of the new clause is to change that by explicitly laying out in law the Secretary of State’s power to offer the guidance to administrators of pension schemes within the public sector, including the local government pension schemes, that investment decisions—by which I mean both investments into a position and divestments from a position—should not conflict with UK foreign and defence policy.

There are multiple reasons for doing that. First and foremost, public service pension schemes that are paid for by the taxpayer by one means or another and underwritten by the state are clearly the preserve of the UK Government and, as such, it is perfectly legitimate that the UK Government have a say in regulating how public pension schemes manage the money that is provided to them by we the taxpayers of the country.

[Peter Grant (Glenrothes) (SNP)]

May I just probe the right hon. Gentleman’s last point a wee bit? My bank account is stuffed full of what was previously taxpayers’ money. Neither I nor my wife have had any significant income for years that did not come one way or another from the taxpayer. Is he suggesting that the Government should have some say as to how the bank can invest my money to make sure that I get it back when I need it? Is he suggesting that the private pensions that I am lucky enough to have should be subject to Government direction as to where they do and do not invest?

[Robert Jenrick]

I shall come on in a moment to my own personal views with respect to boycott, divestment and sanctions, but this new clause has no bearing on the actions of private citizens. This is about public sector pension schemes. The broader issue, which I will mention in a moment with respect to tackling BDS within public institutions and the public sector, is all about the public sector; it is not about limiting the freedom of speech or action of the individual.

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[Robert Jenrick]

I agree strongly with both my hon. Friend’s points. On his second point, the motion before Wirral Council is to ask its pensions officer to be the arbitrator of which business it should or should not be investing in within Israel and within settlements. Pity this poor individual, who, instead of going about his normal work as a respectable, hard-working local government officer, must suddenly spend hours, days, weeks or months attempting to understand the intricacies of the Israel-Palestine question and provide advice to a committee of local councillors. It is frankly an absurdity and an abuse of that individual. We should not be seeing this. These questions should rightly be taken forward by the United Kingdom Government.

BDS is ultimately yesterday’s war. In the middle east today things are rapidly changing, and thank goodness for that. As a result of the Abraham accords, we see Arab nations—Gulf states—coming forward to recognise the state of Israel and work with it through science, technology, education and commerce. If Bahrain, the United Arab Emirates, Jordan, Egypt and other nations can do this—even those countries, such as Saudi Arabia, that have not explicitly recognised the state of Israel but are none the less working with it on security matters and other issues—then we as a country should not be tolerating this kind of activity, and certainly not within the public sector. I urge hon. and right hon. Members across the House to support the new clause. I am grateful to the Government for indicating their support. I hope that in the Queen’s Speech later in the spring we will see a wider BDS Bill that makes the UK one of the first countries in the world to really grapple with this issue.

[Peter Grant]

As I said on Second Reading and in Committee, the SNP supports the intention behind this Bill and we will support it on Third Reading. The intention is to clear up a mess of the Government’s making. I also repeat that, as I said in Committee, I do not have any doubts at all about the sincerity of the Ministers who have led for the Government at various stages of the Bill. I am convinced that they want to get it right and to finish up with an Act that is as fair to everyone as it is possible to be. However, my concern with the Bill currently before us is that even after the Government’s amendments are added in, sizeable numbers of current or former public sector employees will lose out. Given where we have been forced to start from and the scale of the mess that the Government made of this previously, I am not sure that it would ever be possible to produce a Bill that would be fair to absolutely everyone, but the Bill as it stands can still be improved. To that end, we will support such amendments as Opposition Front Benchers want to press to a vote, particularly new clauses 8 and 9.

One of the issues I raised on Second Reading has certainly come to pass: the extraordinary number of amendments the Government had had to table to their own legislation during its passage through the House of Lords. We now know that including the 61 amendments they tabled in Committee and the 28 further amendments tabled today, by the time the Bill gets its Third Reading later on the Government will have had to amend their own legislation no fewer than 212 times. In fact, Members who attended the Bill Committee will have seen the spectacle of the Government tying themselves in knots trying to remove two entire clauses from the Bill and replace them with two entirely new clauses. It was only the speedy intervention of the Clerks and the Chair that prevented the Government from presenting us with a Bill that had all four clauses included despite the fact that some of them were completely contradictory to the others. Eventually the Government had to whip their own Members to vote down two clauses that the Minister had already moved, presumably by mistake.

That incident served only to highlight what many of us on the Opposition Benches have been saying from the beginning—that the Government still cannot reassure us that they are genuinely fully in control of this Bill. I worry that they are very quickly running out of last chances to put it right. There is still a danger that the Bill that receives its Third Reading later today will have flaws and weaknesses that neither the Government nor anybody else have spotted yet. Most of today’s Government amendments are part of the process of picking up flaws or ambiguities in the original Bill, and we will not oppose them. We have some concerns about new clause 7, which provides for a lessening of parliamentary scrutiny in some cases. The Minister has not yet convinced me that that is an appropriate thing to do. I hope that when he winds up he will explain why new clause 7 is appropriate and why, in some cases, parliamentary scrutiny should be diluted in any way.

As I indicated earlier, we will support new clauses 8 and 9 in the name of the hon. Member for Hampstead and Kilburn (Tulip Siddiq). New clause 8 would provide a means of compensating scheme members who, through no fault of their own, stand to lose out as a result of the Bill. The Bill rights a wrong for a very large number of people in public pension schemes but goes in the opposite direction for some, and we should not forget about them. The new clause does not commit the Government, or indeed the scheme employers, to any additional expenditure, but it would require the Chancellor of the Exchequer at least to recognise that this is an issue and to look at whether there are realistic and reasonable ways of resolving it.

New clause 9 would require the Government to review how the Bill operates in the real world—as opposed to the assessment, as with any Bill, before discussions on it began—with regard to equalities. Given how many substantial changes the Government have already had to make to the Bill, it is prudent to accept that, once it comes into force, it might have consequences that the Government have not foreseen, which the new clause would attempt to protect against.

New clause 1, in the name of the right hon. Member for Newark (Robert Jenrick), is a different matter altogether, and the SNP is minded to oppose it. We have heard some of the arguments in favour of it—they are similar to comments made on Second Reading—which simply do not wash. I will not get into an argument now about the BDS movement. If the Government genuinely think that that organisation is a threat to peace and stability in the middle east or elsewhere, they could bring forward legislation to address it—they have had over two years of this Parliament to do so, and they still have time—but this is not the Bill for that.

[Richard Burgon (Leeds East) (Lab)]

Does the hon. Gentleman share my concerns that the new clause tabled by the right hon. Member for Newark (Robert Jenrick) risks barring ethical investment decisions across the board—for example, in relation to Saudi Arabia? Given that future Governments might decide to support regimes that abuse trade unionists, for example—as we have seen in Colombia in recent years, or in Chile in the past—the new clause would be not only anti-democratic but would risk ethical investment decisions and human rights policies around the world.

[Peter Grant]

The hon. Member is absolutely right. If the new clause was intended purely to limit the activities of the BDS movement as a precursor to possible further restrictions later on, a very different new clause would have been tabled, and it might have been possible to word it in a way that we would not have significant problems with, but this new clause is far too wide. It could give the Secretary of State—any Secretary of State—the power to prevent any public pension fund from considering any kind of ethical, sustainability or other factors simply because they decide that they are contrary to UK foreign or defence policy.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

The hon. Gentleman is making an interesting argument about why the new clause is too wide. Is there not also the problem that it risks investments themselves due to a chilling effect for investors who might not withdraw from an investment when it is economically advisable to do so because of fear of breaking the rules under the new clause, so we could end up with the devaluation of pension schemes?

[Peter Grant]

I will come on to that later. We need to remember, in all of this, that the trustees of any pension scheme have an absolute fiduciary duty to those who rely on the performance of the fund for their current or future pension. We do not want anything that ties their hands, such as someone saying they should go only for very low-yield investments because that person has objections to the activities of companies that might give a higher yield. There are times when we must question whether it is right to put trustees under that kind of pressure. It is also wrong to suggest that pension trustees, in addition to or instead of their absolute duty to pension scheme members, should have some kind of duty to be a mouthpiece for the British Foreign and Commonwealth Office or the British Ministry of Defence. They are not an arm of Government; these are legally independent trustees, and they have to have that legal independence properly protected.

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[Stephen Crabb]

I am listening closely to the hon. Member’s argument, but I am afraid I just do not accept the points he is trying to string together in what is a fairly strange argument. The reason this amendment is so important and the reason we do not expect council chambers to be dabbling in foreign, defence or security policy is precisely that they are not given the competences over those policies. It is the same for the Welsh Senedd, and the Scottish Government have a limited number of competences. Yes, we want them to exercise their powers fully in those areas where they are given competence, but it is a complete diversion of activity and attention to say that we want councils to be getting involved in incredibly sensitive and complicated subjects of the kind that my right hon. Friend the Member for Newark (Robert Jenrick) has already described.

[Peter Grant]

I certainly cannot agree with the right hon. Gentleman. As I have made perfectly clear, how the British system works is that Ministers have the authority to take policy decisions, and Parliament is right to hold Ministers to account for that. Parliament has the ultimate right to decide what becomes law. If nobody else is allowed to discuss it, and councils are not allowed to express views in the interests of the people they are there to represent, the whole system starts to fall flat on its face.

It is as plain as the nose on my or anyone else’s face that decisions on foreign policy can easily have a disproportionate impact on residents in some parts of these islands. Certainly, decisions on defence policy can have a significantly greater impact on some places than others. Remember that councils are directly democratically elected by local people to represent their views. Are we suggesting that they should not be allowed to debate matters of foreign policy simply because they do not have the right to take the final decision? If that is what Government Members are saying, why is it that almost every Tory MP who pops up on their hindlegs at Prime Minister’s questions to ask a planted question invites the Prime Minister to interfere in local democratic decision making? We have had two examples today, with the right hon. Member for Newark expressing his views on possible decisions by councils that, with respect, are nothing to do with him, because they are not the council area he represents.

I do not know whether Wirral Council or Hertfordshire will take the right decision, but I am happy to trust the good people of the Wirral and Hertfordshire to sort out councillors who get it wrong too often. That is what local elections are about. I do not like to see the Government, having substantially stripped back the powers of local authorities, then deciding to give local authorities the power to take decisions they agree with, but taking away the power for local authorities to do things that might go in a different direction.

Among all this, we are losing sight of the vital fact that as a matter of law, the trustees of a pension fund are a completely different organisation and a completely different entity in most cases from the organisation whose current and former employees are members of that fund. My wife has for many years been a trustee of the Fife Council pension fund, as well as having clocked up nearly 30 years as a councillor. The decisions that the trustees of the pension fund make are completely different from the decisions many of the same people will take as members of Fife Council. Nobody believes that the decisions of the pension fund reflect the views of the council; the council is not allowed to try to whip pension trustees, for example.

[Robert Jenrick]

Will the hon. Member give way?

[Peter Grant]

I will give way once more, but I am aware of the time.

--- Later in debate ---

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. I am keen that we do not just have a whole debate about BDS. I want the amendments to be addressed, and there are a few other speakers trying to get in.

[Peter Grant]

I made the point much earlier that the amendment is not about BDS; BDS is not mentioned anywhere in it. Going back to the question of whose money it is, we can go round in constitutional or legalistic circles, but morally that money belongs to the people who rely on it for their pensions. If members of the pension scheme want to make strong representations to their trustees, saying, “I do not want to profit in my pension from investments that benefit countries that act in breach of international law”, why is it such a bad thing for pension scheme members to be allowed to make those representations to the trustees? Why is it such a bad thing for the trustees to be allowed to say, “At the request of our members, we will take a decision that might not deliver quite such a high yield for the pensioners, but the pensioners are happy to accept that, because they will be comfortable in their consciences about where the money is going and where the profits are coming from”?

We cannot support new clause 1, and we are minded to divide the House on it later. My final point is that every pension fund trustee has a duty entirely to look after the interests of their pensioners and future pensioners. I do not want to see anything being done that gets in the way of that. We will support the Bill on Third Reading, but I hope it will come to Third Reading without new clause 1 included. The fundamental point is that the £17 billion mistake was made by the Government. If we eventually pass the Bill into law to be an Act of Parliament that makes pensioners or their employing authorities pick up part of that tab, it has not done enough. I fear that by tonight we will still have a Bill that has not done enough and that the Government will not be made to take full responsibility for a mistake entirely of their making.

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest in that I am a member of the local government pension scheme. I want to address the amendments standing in my name—new clause 10 and amendments 22 and 24—but I would also like to comment on new clause 1.

On the debate about whether or not this is public money, I thought, as a member of the local government pension scheme, that the Supreme Court was pretty clear that this is not public money in the sense that would enable the Government to issue guidance. However, I have to say that new clause 1 goes further than guidance; it actually includes directions as well. I work on the basis, as I did when I was employed in local government, that the money I earned and the money forgone to invest in my pension scheme was my earned income; it was not public money under the control of the Government.

I think there is a lesson for us all here in that I believe that only in extremis—only in extremis—should the state interfere in one’s own privately earned income. I say that because, in the pension scheme regimes we have at the moment, we have an element of representative democracy with the trustees often being representatives of the workforce and other experts. That reassures me that, as a member of the pension fund, I have an element of say in what those trustees do, if they are appointed, and that enables me and other members of the pension fund to exercise an element of control over decision making, but also to exercise an element of conscience.