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.

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[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.