Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Baroness Scott of Needham Market) (LD)
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes.
Warm Home Discount (England and Wales) Regulations 2026
(1 day, 4 hours ago)
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Lord Whitehead
That the Grand Committee do consider the Warm Home Discount (England and Wales) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, these regulations were laid before this House on 2 February 2026. The warm home discount scheme has been a key policy in the Government’s approach to tackling fuel poverty and reducing the energy costs of low-income and vulnerable households, ever since its inception in 2011. Last year the Government expanded the scheme, removing the high cost to heat threshold to ensure that around an additional 2.7 million of the poorest households across Great Britain received a £150 rebate off their energy bills this winter, with nearly 6 million households now eligible. The current scheme period ends on 31 March 2026, and new regulations are required to continue the scheme beyond this date.
In September we consulted on continuing the warm home discount scheme up to and including the winter of 2030-31. The consultation respondents, including consumer and advocacy groups, charities and industry, strongly supported proposals to continue the scheme, and to continue to provide rebates via automatic data matching. Today we are discussing these regulations, as well as some additional changes to the scheme, which allow eligible households across England and Wales in or at risk of fuel poverty to continue to receive the rebate for the rest of this decade.
These regulations will extend the scheme in England and Wales for five more years from 2026, until they expire in 2031. The regulations will continue to oblige energy suppliers with more than 1,000 domestic accounts to participate in the scheme. These regulations will ensure that, as is the case currently, energy suppliers with fewer than 1,000 domestic accounts can choose to participate voluntarily in the scheme.
Under the scheme, participating energy suppliers are obliged to provide support to eligible households through a rebate provided directly to their energy bill, valued at £150. Eligibility for the rebate will continue to be set out by the Secretary of State with an eligibility statement, which is published for each scheme year. Following the removal of the high cost to heat threshold and the expansion of the scheme in 2025-26, the Government have committed to maintaining the current eligibility for the rebate in England and Wales, based on receipt of means-tested benefits, for a further five years.
Eligibility for the scheme remains unchanged but these regulations introduce a more streamlined approach to administration, without impacting eligibility. The existing core group 1 and core group 2 will be merged into one core group in England and Wales, with a view to enabling clearer communication and messaging to potentially eligible households. This change was broadly supported by consultation respondents.
We put out a range of communications ahead of and during each scheme year to eligible households, and will continue to do so for the next scheme period. The automatic data-matching process for the core group in England and Wales will continue, using data held and processed by the Department for Work and Pensions, with the majority of eligible households—typically around 96%—expected to be automatically data-matched, meaning that they will receive the rebate without taking any further action.
These regulations set out a range of permitted activities, overseen by Ofgem, through which energy suppliers can deliver towards their non-core obligation of supporting eligible households in fuel poverty or in a group that are at risk of fuel poverty. Permitted activities within industry initiatives include benefit entitlement checks, energy-efficiency measures, energy advice, debt relief and financial assistance payments of £150. Scheme energy suppliers can also choose to dedicate non-core spend towards the park home scheme, which provides eligible households with £150 of support towards their energy bill.
The regulations also introduce changes to the administration of the scheme and enhance consumer protections for eligible households. They include a new provision to enable the Secretary of State to direct suppliers to communicate directly with their own successfully data-matched customers to provide further information about the scheme, including information related to automated decision-making. In addition, the regulations will replace fixed spending targets with annual estimates, based on the number of eligible households expected to benefit from a rebate each winter, to better predict scheme costs.
Tackling fuel poverty is a priority for this Government. We recognise that too many people cannot afford to heat their homes at a reasonable cost. That is why in January we published our new fuel poverty strategy, alongside our Warm Homes Plan, to ensure that many more fuel-poor households are protected by 2030. Through these regulations, the warm home discount scheme will continue to provide vital support for eligible households each winter at the coldest time of year when support is most needed. I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I thank the Minister for introducing these regulations, which I broadly support. I declare my interest as the honorary president of National Energy Action, from which I am delighted to have had a written briefing.
I have a question for clarification at the outset. A piece on the Government’s website titled “Help with the cost of living in 2026” talks of
“an average of £150 off the costs of energy bills”.
It goes on to say:
“This support is on top of the Warm Home Discount Scheme—a one-off £150 discount off your electricity bill—a total package of £300”.
Do people have to apply separately for the £150 off the cost of living and for the £150 from the warm home discount scheme? The figure cited in the regulations, by the Minister and on the GOV.UK webpage is £150. From memory, I thought the figure for the warm home discount scheme was £350. If that is the case, £350 to help those most in need because they are suffering the most from fuel poverty will obviously go a lot further than £150. I do not know whether that is an erroneous memory on my part, but that is what I remember.
The NEA is concerned—this is my wording, not the NEA’s—about one potential consequence of the regulations. The idea is to lift 1 million homes out of fuel poverty, setting new standards for landlords to meet to help do so. However, as we saw with a recent Bill, whose name I forget, under which landlords were meant to improve housing, in fact they sold it because they simply did not have the means to upgrade it. Does the Minister share my concern that instead of rented properties being upgraded at the cost of the landlord or, potentially, with the help of the Government, the landlords may not have the means to do so and therefore the rented properties will go off the market? That is a very real concern.
Is any attention being focused on rural areas? My experience, having been in the European Parliament and represented two separate constituencies in the House of Commons, is that homes in rural areas tend to be less well insulated and more isolated. It is more expensive to heat a house than a flat. Is any particular attention being given to rural areas in that regard? That could make a real difference to reducing fuel poverty.
National Energy Action has a good record on giving advice and doing what it calls hand-holding to guide people through the system; I commend it for doing this. I like to think that I am moderately intelligent but, if I have difficulty in understanding the system, I can understand how tenants and others who wish to apply for the scheme may need help. Have the Government considered offering such help to those who are hopeful of benefiting from the warm home discount—and, indeed, from the cost of living reduction?
Are the Government planning to address the vexed issue of standing charges on energy bills? I know that this is a great theme of the energy champion, Martin Lewis. I never manage to watch his programme because we always seem to be voting here when it is on, but in my experience this is the only utility where the customer is paying up front for the infrastructure to be put in place. Normally, with telecoms and broadband, the customer pays for the infrastructure after it is in place.
The point that I would like the Government to consider is this: all of us can, as consumers, control our unit costs by using less power—that is, less electricity and less gas—and reducing our consumption in that way, but we have absolutely no control over the standing charge. When I go on to Uswitch, I see that it is creeping up: it was 40p per day last year but, this year, it is 50p or 60p per day. We have seen that energy bills are projected to come down from April for three months, but, given the backdrop of the Middle East, there is now an expectation that, if not from July then certainly from the next increase in September or October, people will face the very real issue of finding that they cannot control their household bills.
Finally, National Energy Action refers to the debt mountain. A growing number of households are averaging debt balances exceeding £1,200 a year. This is posing real problems for them. They are paying for last year’s electricity use before they have even saved up for next year’s electricity use. In the words of the NEA, many are trapped in a cycle of paying for last winter’s energy alongside current usage, often with no formal repayment arrangement in place. Are the Government looking at the possibility of trying to address this issue?
In conclusion, as I say when I have already used up all my “finally”s, can the Minister use his good offices to ensure that the warm homes plan is embedded not just in his department’s work but in the 10-year health plan, to make sure that this issue is reflected in health—older people can become unwell if they are not able to heat their houses properly—as well as in the new child poverty strategy, to make sure that there is completely joined-up government at this level? Otherwise, I like the regulations.
Lord Jones (Lab)
My Lords, it is always instructive to follow the noble Baroness. I thank the Minister for his shrewd analytical introduction and his insight. Tangentially, for me, it conjured up memories of chilblains, hot-water bottles and ice on the inside of the windowpanes—the considerable discomforts of a post-war Britain barely out of the VE Day and VJ Day celebrations. It was an era of greyness, rationing and lengthy bus queues—not to mention the frequent and unannounced power station electricity cuts in our ever-cold homes.
These regulations aim to help some 6 million households, with the best part of £1 billion of state money going to fellow citizens. The Minister might be pleased and these regulations are surely to be welcomed in these most uncertain times. Can he say how many Welsh households are in receipt of such moneys? It is the case that Wales is a place of low wages and unusual weather patterns.
Earl Russell (LD)
My Lords, I rise to respond to the Warm Home Discount (England and Wales) Regulations 2026. As we all know, we are at the start of another fossil fuel price crisis, at a time when individuals and the state can least afford it, so bringing down energy bills and speeding up the deployment of renewables must be an absolute national priority. The renewed crisis in the Middle East has once again exposed families and small businesses to the full volatility of the fossil fuel price market. We support the extension of this scheme, but the questions that we want to ask are around its efficiency and its design for the decades ahead. As I said, we welcome the extension of the scheme to 2031 and the improvement in transparency and data sharing that this instrument introduces.
Community matters, as does recognising that fuel poverty remains a persistent, not a temporary, problem. While I appreciate that this scheme was designed and extended before the present crisis, it will need to operate in its aftermath and the continuing process. The regulations fix the core rebate at £150 for the next five years. We all know how dramatically prices can move even in a single winter, let alone over half a decade. Energy markets are in flux at the moment, and these regulations will need to work over a long period of time. What concrete mechanisms will the Government use to review the adequacy of this £150 rebate during the life of the scheme? Are there any circumstances in which Ministers would consider increasing it—for example, if the fuel crisis continues? Without an automatic or at least a clearly defined review process, are we not effectively asking households in fuel poverty to gamble with their warmth in the face of a possible real rise in prices?
Similarly, we welcome the fact that the aggregate non-core spending obligation will rise under this scheme, but it will rise only modestly, from £78 million in 2026 to £84 million by 2030. Taking into account inflation over those years and the levels of fuel poverty at the moment, if the present fuel crisis continues, is there any intention or ability to revisit that non-core spending figure mid-scheme if economic conditions or energy prices continue to accelerate? Do the Government plan to publish an annual assessment of whether the level of support is still adequate in real terms, rather than waiting until 2031, particularly in light of this real change in circumstances?
Both previous noble Lords spoke about energy debt. Many households across the country are carrying unprecedented levels of energy arrears on their accounts. That continuing level of family debt is a real point of contention and a struggle for households. Against that, the industry-wide cap is to write off debts at a mere £6 million, with a £2,000 limit for individual households. That is absolutely welcome, but many families are already beyond those levels. Can more be done, and will there be a review within this programme? How did the Government arrive at £6 million? What assessment was made of the total scale of energy debt and have Ministers considered whether that cap should be more flexible, in case this crisis worsens?
If the Minister will excuse me, I want to go slightly off-piste. I do not like to do that too often, but I really welcome some of the moves in this SI around data and data sharing. A lot more work needs to be done there so that we can target support efficiently and fairly to those who need it most. I have been looking at some of the work that Stonehaven has done. It has been raising arguments about moving from crude, one-size-fits-all interventions to a more nuanced understanding of household vulnerability, looking at income, health, energy use and property characteristics together and setting up a safeguard score for each household, using better data so that help can be better provided. That would mean we could target bill credits, tailored repayment plans and more generous debt relief to those in most severe need.
I have a couple of questions for the Minister that perhaps go a bit beyond this SI. I really encourage the Government to do more work in this area. As they plan for a continuing fuel crisis, improving data sharing between government departments, moving beyond the DWP alone to include HMRC, health agencies and others, would be a really important exercise, particularly for the future.
I note that the Minister said that he is expecting 98% of these payments to be made automatically, but in volume that 2% is still a large number of households that are falling outside the system and bill support. I would like to see the Government doing more on data sharing, particularly multi-agency.
Far too often, people in fuel poverty are also in different kinds of poverty. There really should be a share-once support register, so I would also like the Government to do more on greater working between different utility providers so that, once someone is on a priority register, information can be shared across utilities and people do not have to give the same information over and over again. That is really important and it is something that we should include in Ofgem’s work with suppliers, but it is still a missing piece. Local authorities and charities often know much more about their local residents and households in poverty, so there is much more to do to make this data available and to include local authorities and charities in this process.
I will be brief but, above and beyond this, I think there is a need for more structural reform around these issues. Others have spoken on this, but we need to decouple electricity prices from gas so that consumers feel the full benefits of cheaper, clean power. I really want the Government to look again at the possibility of taking forward a social tariff if the energy crisis continues. We need to do more to support households struggling with energy and fuel poverty.
We welcome this SI. It is good to see these measures extended, as they are really important, but there is so much going on in this space. We welcome this SI as the start of a conversation, not the end of it.
Lord Moynihan (Con)
My Lords, I thank the noble Earl, Lord Russell, for raising the important issue of data. As I see it—but I am happy to be corrected by the Minister—this SI focuses on matching customers, and the data analysis is exceptionally important. It brings our approach to data up to date, because it enables the Secretary of State to direct suppliers to communicate with matched customers identified through automated data matching, and requires suppliers to provide information on eligibility, the use of automated decision-making and where to find the scheme’s privacy notice.
It goes further—again, I welcome this—in replacing annual fixed spending targets with annual estimates reflecting the number of eligible households on qualifying means-tested benefits. As I see it, and this is important and welcome, the SI addresses the need to recognise that data interpretation is not always 100% accurate. The noble Earl, Lord Russell, mentioned the 2%. I hope that was the reason why, under this SI, late rebate notices can be issued after the scheme year in cases where the Secretary of State is satisfied that a customer did not receive the rebate because of an administrative error by a supplier or, indeed, the Government. Data matching is such an important issue and, as it has been raised in the Committee, it would be helpful if the Minister could give us a little more colour on it.
The second point that has come up in conversation today is the question of affordability and whether the £150 warm home discount is sufficient. I was very grateful for my noble friend Lady McIntosh’s comments on that, which I will come to. Maybe the best way to encourage the Minister to respond is to quote from a couple of third-party commentaries that cover this issue. First, the director of policy and influencing at Independent Age, Morgan Vine, stated:
“We welcome the extension of the Warm Home Discount to 2030/31. The older people on low incomes we speak to tell us it is a vital lifeline that goes some way towards keeping their heating on during the coldest months. However, at just £150, the current value of the Warm Home Discount no longer goes far enough, as energy prices remain stubbornly high. We are urging the UK Government to increase the payment to £400 so it better reflects the real cost of heating a home. This increase needs to be delivered via government funding to avoid the cost being put on energy bills”.
I would be grateful if, in his response, the Minister could comment on this statement from Morgan Vine.
Lord Whitehead (Lab)
I thank noble Lords for their valuable and apposite contributions to this debate. They were quite extensive. I will do my best to respond to them, but if I miss anything I will be happy to write to noble Lords.
One particularly important element of this scheme, alluded to by a number of noble Lords, was data and data matching. One of the good things about this programme is that with data matching now as efficient as it is—as the noble Earl, Lord Russell, mentioned—probably 90% of an expanded group of potential recipients can be automatically data-matched. That is, they will not have to do anything more to receive their rebates because they have fallen into a matched category automatically. But 2% is not an insignificant amount. The Government are determined to continue to notify people who are deemed unmatched to contact the warm home discount helpline to determine their eligibility.
On data matching in general, with the actions that the Government are taking in some different areas, it is likely that data matching will become even more efficient. Indeed, the Government are actively pursuing a programme called Kickstarter to analyse how data matching across departments could become more efficient and effective in future.
Noble Lords, in particular the noble Baroness, Lady McIntosh, asked about what money counts as what for this relief. The £150 targeted as coming off energy bills—not that energy bills will not rise but that they will be £150 less than they might otherwise be—has been substantially discharged as far as the changes to legacy charges from levies to the Treasury, causing a £117 reduction in average energy bills next year. That is in addition to the £150 that will automatically go to 6 million households now through this measure. Of course, the funding that has recently gone into the cost of heating oil, particularly in rural areas and off-grid properties, is in addition to all that as well. These are not cross-cutting reductions or rebates: they are all piling up on top of each other.
Baroness McIntosh of Pickering (Con)
I hear what the Minister says, but £117 is obviously not £150. The Cabinet Office’s website—not that of the Minister’s own department—is clearly inaccurate because it leads you to believe that you might get £150 plus another £150, making a total of £300. I am grateful to the Minister for taking the time to explain that that is no longer the case, but I believe that web page should be updated.
Lord Whitehead (Lab)
I am delighted to tell the noble Baroness that I cannot speak for the Cabinet Office’s website, but I take her point that these things need to be clarified as much as possible.
The noble Baroness also asked about standing charges, both generally and in relation to this particular measure. She will be pleased to know that we have announced our intention to move warm home discount costs from the standing charge to the unit rate; Ofgem has confirmed that this charge will be included in the price cap from 1 April 2026. That will offer a cleaner and more accurate basis of cost recovery while addressing widely raised concerns around standing charges. It does not overcome the overall question of whether standing charges should exist at all. Obviously, that is a wider question for review of standing charges and how they impact on the costs of energy in general.
The noble Baroness, Lady McIntosh, the noble Earl, Lord Russell, and the noble Lord, Lord Moynihan, also mentioned debt. That is an important issue, because each consumer pays around £52 a year towards the cost of managing and writing off debt. If the debt were to become unsustainable, it would place an even higher cost on consumers, so we are working urgently with Ofgem to drive debt out of the energy system alongside delivering reforms that put people first. Ofgem has published an updated debt strategy, setting out its near-term actions and priorities to support suppliers to reduce the level of debt in the sector and subsequently lower the cost of managing this for consumers, lowering that £52 a year that is being paid. That includes proposals for a debt relief scheme to tackle debt built up by some consumers during the energy crisis.
Noble Lords mentioned the disproportionate impact of fuel poverty in rural areas and asked whether any additional measures were being looked at on that. This issue is very pertinent in Wales, as a larger number of people are off-grid and in fuel poverty than in England. I am pleased to inform noble Lords that about 300,000 Welsh households will benefit from this expanded scheme, a substantial increase from previously. As far as rural fuel poverty is concerned, some of the additional measures that can be undertaken by energy firms as part of the overall scheme are relevant to making sure that people who are in fuel poverty and in rural areas, and who have higher costs, are adequately addressed.
Noble Lords also asked about the adequacy of the £150. Certainly, the Government will keep that under close review, but we have taken the view that it is £150 for 2026-27, partly because of the substantial expansion of the scheme, how that indirectly falls on customers as a levy and how that can be sustained. The suggestions put forward this afternoon have certainly been heard and are well received, and we will keep those issues under close review.
I hope I have covered most of noble Lords’ points but, as I said, if I get back to my office and realise that I have completely missed a key point, I will try to make up for it by communicating with the particular noble Lord or noble Baroness at the earliest opportunity.
Tackling fuel poverty is a priority for this Government and the views expressed underline how critical it is that we continue to tackle it.
Lord Jones (Lab)
Did I hear the Minister answer the question on paragraph 5.3 of the Explanatory Memorandum about automated data matching and privacy?
Lord Whitehead (Lab)
I apologise to the noble Lord. I am afraid I did not address that question directly, but the privacy notice for the warm home discount is published on the GOV.UK website, where it can be easily accessed. That privacy notice is in line with those from other areas of government with regard to the privacy of people whose data is being shared.
Baroness McIntosh of Pickering (Con)
When this used to be debated next door, there was a real issue of the DWP not being able to share data, so that those potentially most at risk of fuel poverty could not be identified. Has that problem been resolved now? If the noble Lord is not familiar with it, could he take this issue away and let us know? That would be very helpful.
Lord Whitehead (Lab)
Yes, I am happy to take that away. I am aware that, although great strides have been taken in recent years in allowing data sharing to work efficiently across different departments and make sure that people do not keep filling in the same form over and over again, there are still deficiencies in this area. Indeed, the noble Baroness will recall that, when she and I were Members of Parliament many years ago, it seemed virtually impossible that this problem would ever be resolved. We have come a long way in making sure that it works properly now, with the right safeguards in place.
Lord Jones (Lab)
Shall there be an answer to the question about paragraph 5.3 of the Explanatory Memorandum? I am not sure I heard my noble friend answer that.
Lord Whitehead (Lab)
I will have to write to the noble Lord on that because I do not have paragraph 5.3 in front of me. I will certainly send him a letter to that effect.
In essence, this SI is a method of making sure that a much larger group of people receives the discount than has hitherto been the case, which is vital at this time of very high energy prices. It is about making a real impact on fuel poverty and continuing to expand that impact with the measures in the new scheme. It will be done on an affordable and manageable basis and in conjunction with the Warm Homes Plan, which, as the noble Baroness will know, is about driving down bills through energy efficiency and various other measures in homes. Together with those measures, this will make a real impact on fuel poverty over the next period. I urge noble Lords to support the new scheme, which we will have at least until 2030, subject to review. I hope we will see a substantial uptick in people’s warmth and energy welfare in that period, thanks to what is before us this afternoon.
Baroness McIntosh of Pickering (Con)
I am happy that the Minister will write to us, but I do not think he replied to one question. Does he share my concern that many landlords may feel that they cannot afford to do what we are asking them to do with the warm home discount and in the Warm Homes Plan, so they will sell their properties, which will then come off the market?
Lord Whitehead (Lab)
What we are asking landlords to do under the Warm Homes Plan is an extension of some of the work done to uprate properties from band E, whereby landlords could put some money, with some exemptions, into improving their properties for rent. The limit that landlords can put in before being exempted is, I think, about £10,000, but it means a higher level of warmth and efficiency in the home. There is no evidence that large numbers of landlords went out of business or sold their homes under the last scheme in operation, and we are confident that that will not be the case on this occasion.
Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026
(1 day, 4 hours ago)
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Lord Whitehead
That the Grand Committee do consider the Contracts for Difference (Sustainable Industry Rewards and Contract Budget Notice Amendments) Regulations 2026.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
My Lords, after all that, noble Lords have me all over again for this next one. We had a very interesting and absorbing debate on the last SI, with some very good points made, but I hope that this debate can move to a conclusion with reasonable alacrity. I will make a brief opening statement. These regulations were laid before the other place on 5 February 2026. I remind noble Lords that they still carry the legacy name of the policy, but it is now known as the clean industry bonus.
I will cover three points: first, the purpose and direction of the clean industry bonus in the next rounds of bidding for offshore and onshore wind, AR7, AR8 and AR9; secondly, how the regulations will support the continued evolution of the contracts for difference scheme; and, thirdly, why the clean industry bonus funding for offshore wind will now be conditional on applicants signing up to an offshore wind fair work charter and how we are using the policy to help drive a more strategic approach to skills.
I turn first to the scheme. Contracts for difference remain the Government’s principal mechanism for supporting new low-carbon electricity generation. The CfD has a strong track record in deploying renewables at pace while protecting consumers through competitive allocation. But as the offshore wind sector has matured, it has become increasingly clear that delivering clean power at the lowest cost is not on its own enough. We must also secure the industrial capability and resilient supply chains needed to build and maintain that infrastructure here in the UK.
That is the purpose of the clean industry bonus. It will provide additional CfD revenue support for offshore wind developers that commit to investing in UK supply chains, such as factories and ports, or those that invest in cleaner supply chains overall. Funding is allocated through a competitive process run ahead of the main CfD allocation round, with awards made on the basis of value for money and payments released only when commitments are delivered. The record of this is that, in allocation round 7, £204 million was allocated through the clean industry bonus, crowding in up to £3.4 billion of private investment into offshore wind factories, ports and supply chains across the UK. The scale of investment represents a significant vote of confidence in the UK’s supply chain and a strong return on public funding.
I now turn to the evolution of the scheme. These regulations will make targeted, practical improvements to allocation round 8—the next one coming up—simplifying the process for applicants, clarifying rules on budgets and ensuring that the scheme operates smoothly. In particular, the changes will speed up and streamline elements of the application process, reduce administrative burdens, provide a clearer legislative basis for how budgets can be set and communicated, and clarify the position where delivery is disrupted by events outside an applicant’s reasonable control. In addition, the regulations will update the scheme’s sunset arrangements so that the clean industry bonus may be applied only to a round established before 31 December 2028, unless Parliament wishes to prolong it. It is for AR7, AR8 and AR9. The Government also intend to extend the clean industry bonus to onshore wind from allocation round 9, providing a sensible lead-in period for that smaller industry to prepare.
My third and final point is on fair work and skills. The most significant change for allocation round 8 is that clean industry bonus applicants will need to sign up to the offshore wind fair work charter, a tripartite agreement between unions, business and government that aims to raise the standard of job quality in offshore wind and make jobs in the sector more attractive. The charter builds on forthcoming commitments in the Employment Rights Act 2025, in particular by asking that the offshore wind sector proactively implements voluntary access agreements for trade unions. It also includes a commitment to strive for best-practice health and safety standards that go beyond legal minima.
Our commitment to good jobs through the clean industry bonus does not stop at the fair work charter. We are pressing ahead with a skills investment fund that will help develop the skills needed for the clean energy transition. The idea is that offshore wind developers will pool together skills funding and initiatives rather than relying on individual projects trying to address short-term needs. The Government and the offshore wind industry have agreed that they will work together to set it up by 2027 and that it will be funded by existing developer contributions to the supply chain, not by asking for more money. Once that skills investment fund is up and running in 2027, developers will be asked to contribute to it as a condition of taking part in the CIB.
In conclusion, these regulations build on the foundations laid in allocation round 7. The success of that foundation is in front of us. They strengthen and supply the operation of the scheme and introduce provisions of fair work and skills. I beg to move.
Earl Russell (LD)
My Lords, I note at the outset that on these Benches we welcome the direction of travel as set out in this SI. These regulations aim to modernise the contracts for difference scheme and strengthen the clean industry bonus, previously the sustainable industry rewards, ensuring that our transition to net zero is not only greener but fairer and more locally grounded. We note the figures the Minister gave in his speech about just how much funding this SI can help levy into our green industry and our local green economies.
The Liberal Democrats have long championed the principle of clean industry growth that benefits and serves our communities, so we see the extension of the clean industry bonus framework to all CfD allocation rounds before December 2028 as a welcome and sensible move. Likewise, providing greater flexibility in budgets through new minima and maxima can, if well managed, encourage dynamism and adaptability in fast-changing energy markets. But that flexibility must be balanced, and we must make sure that obscurity does not creep in with that.
The move to express CfD budgets in total sums rather than pounds per gigawatt raises a question for us. How will Parliament and the public track whether these funds are allocated efficiently or indeed equitably between technologies and different technologies in different regions? If the Secretary of State can now set sub-budgets for different technologies, will there be transparent reporting mechanisms showing how these powerfully restrictive levers are used and on what evidence they are used?
The Government’s stated aim is to reward clean energy responsibility and community-based industry practices, and we support that wholeheartedly. Yet these regulations also compress the consultation window for future framework revisions from the original 30 days, I think it was, down to just 10. Are officials satisfied that the timescale is adequate, that it will not push out smaller-scale contractors and that they will genuinely be able to compete on a fair and level playing field?
The introduction of fair work standards for developers seeking the clean industry bonus is also welcome. If the green economy is to deliver social renewal alongside decarbonisation, it must be built on fair pay and secure conditions, with workers having a voice in their workplace. Requiring developers to adhere to the fair work charter negotiated with trade unions is overdue but is a very important and welcome reform. Can the Minister give me a sentence or two about how, when these measures come in, the Government plan to monitor and verify that they are being met? What reporting and monitoring mechanisms will exist, and how can the public have confidence in that?
Turning to the force majeure provision, I recognise why the Government have that clause in the contract, but it raises a question. Who makes judgments on that, and what are the objective criteria for making those judgments? Obviously, the Government want clear safeguards, as do we. We want to make sure this clause does not become a loophole through which binding supply chain commitments can quietly evaporate because of unforeseen circumstances.
The extension of the scheme’s life plan to the end of 2028 feels pragmatic, but it is also modest given that 2028 is not that far away. What are the Government doing to look beyond that 2028 framework, which is only three years away? Also, are they considering putting the clean industry bonus on a statutory footing and extending that timeline?
We welcome these commitments. Although we have a couple of questions, we very much welcome the direction of travel set out in this SI.
Lord Moynihan (Con)
My Lords, I declare my interest as the chairman of Acteon, a global specialist subsea services company that operates worldwide in offshore wind and oil and gas.
It is good that the Government are investing in UK supply chains. However, whether it is cables, batteries, inverters or critical minerals, the Government’s rush to meet their unrealistic clean power targets will make the UK more dependent on imports, particularly Chinese ones. With all the energy security risks that brings us, the world becomes more dangerous; I will concentrate on that in a moment.
The clean industry bonus provides additional CfD financial reward for offshore wind developers, provided they prioritise investment in regions that are most in demand or in cleaner supply chains—for example, traditional oil and gas. I assume that this also includes ex-industrial areas, ports and coastal towns. Ana Musat, the executive director of policy at RenewableUK, stated:
“The Clean Industry Bonus is a good starting point as part of a wider industrial strategy which the Government is due to unveil in full this summer, and which we hope will be complemented by new policies to support the expansion of UK ports. With larger ports, we could secure even more investment in offshore wind manufacturing and turbine assembly”.
We have already debated ports, particularly in the context of Northern Ireland, over three and a half hours in the Chamber. The reality is that most developments in ports are not going to take place for many years: in Belfast, electrification—the ability to charge—will not happen until 2035, and there is little sign of investment in ports across the United Kingdom. Can the Minister give the Committee greater clarity on exactly what he sees on the time of the rollout to support ports, modernisation and the level of investment?
On my reading, although it is good that the Government are investing in UK supply chains, the current timeline is too onerous on UK supplies; it is that timeline on which we really need to concentrate in the Minister’s response. Take NESO, which has observed that Clean Power 2030 will require more than £60 billion of private investment. It says that
“meeting the target would require the deployment of more supply-side technologies, such as onshore and offshore wind, solar energy and battery storage, on average each year to 2030 than there ever has been in a single year before”,
with
“nearly 1,000 km of onshore”
electricity network infrastructure
“and over 4,500 km of offshore network”.
It goes on to say:
“That is more than double over five years what has been built in total in the last ten”.
This is an issue: the question of timing and the headlong rush towards the target of 2030 are of major concern to my colleagues.
Two other aspects that cause concern have been raised; I hope the Minister will respond to them. The first is the supply chain and the offshore wind fair work charter, which has slipped in via the back door somewhat. In another place, the Minister stated that
“clean industry bonus applicants will need to sign up to the offshore wind fair work charter … The charter builds on forthcoming commitments in the Employment Rights Act 2025, in particular by asking that the offshore wind sector proactively implement voluntary access agreements for trade unions”.—[Official Report, Commons, Fourth Delegated Legislation Committee, 17/3/26; col. 4.]
We cannot see the final fair work charter that is intended. The draft charter and the draft code of practice for trade union access are still subject to government consultation so, as I understand it, are not final yet. I have certainly not seen the final drafts. It seems the wrong process to have this very important commitment at the centre of the SI without the opportunity for parliamentarians to review what is intended in detail.
We know that the draft code leans towards giving unions practical workplace facilities. It says that, “where practicable”, the employer should “provide a notice board” in a “prominent location”, allowing union material to be displayed without employer veto. Even if the employer or the employees do not want it, that is what is required. When needed, the employer should allow a union official on to the site to display it. It also points to meetings, surgeries and the use of workplace facilities. It even suggests joint meetings and joint notice boards as ways to deliver information.
It limits the employer’s ability to manage around union meetings. The employer should
“avoid the scheduling of other conflicting … events which would draw workers away from the union’s meeting. Unless reasonable in the circumstances, the employer should not offer inducements to workers not to attend”.
The example given is that employers should not tell workers that they can go home early instead of attending the union meeting.
The employer is expected to respond incredibly fast during that negotiation. If it rejects the union proposals, the code says that
“it should offer alternative arrangements … at the earliest opportunity, preferably within three working days of receiving the union’s initial proposals”.
This is probably the closest thing in the draft to the burden of very short notice that people are talking about. Many other aspects of this code are really concerning.
The central point I am making to the Minister is that it is vital to have sight of the final code and for us to be able to debate it. If that code is too onerous on the supply chain, we risk losing good-quality companies in the United Kingdom that could add value to the supply chain and to what the Government are seeking to achieve. We live in a highly competitive global market and, unless there is a reasonable approach towards what employers should and can do, we risk losing investment.
I emphasise to the Minister that the draft code of practice for trade union access is insufficient and, because it is still subject to government consultation, is not in final form yet. It really should have been presented to the House before these regulations were agreed.
My second point is about the security of our energy supplies and suppliers. Recent reports suggest that the Treasury may allow Ming Yang Smart Energy to supply turbines for the Green Volt North Sea wind farm. As I understand it—I look forward to the Minister’s confirmation—Ming Yang is planning £1.5 billion of investment to build the largest offshore wind turbine manufacturing facility, at Ardersier near Inverness. That this is a Chinese firm has led to considerable questioning from UK government officials who, I understand, are currently evaluating the proposal amid warnings from experts of potential security vulnerabilities—such as Chinese-manufactured sensors and potential kill switches in critical energy infrastructure. This comes on top of a series of initiatives that the Government have taken to engage with the Chinese, not least in our civil nuclear programme.
It concerns me that in wind and solar we now have the potential for our supply chain to be significantly impacted by Chinese manufacturers. We know that close to 90% of our solar panels come from China; all include polycrystalline. Of these imports, 45% are understood to come from the Xinjiang Uyghur Autonomous Region, where slave labour is known to have been used in the manufacture of solar panels. Despite the requirements introduced by the Secretary of State in the Great British Energy Act to take full responsibility for the ethical sourcing of solar panels, the Minister’s department has consistently been unable to assure parents, teachers and children alike that their newly installed solar panels have not been made by slave labour.
As I say, the secrecy surrounding the UK-China MoU aroused yet further suspicion on this, since co-operation with China has now been extended to the supply chains to include civil nuclear; charging infrastructure; battery storage; offshore wind; carbon capture, usage and storage; and renewable hydrogen. They are all identified in that MoU. Where are the resilience and security in our own energy sector to be found if we are opening wide the door to the Chinese, who are now setting up a wind turbine business in Ardersier?
I hope the Minister can respond to both those points. The fair work charter is a significant concern, as is the growing prominence of Chinese suppliers to meet the clean energy objectives that the Minister and the Government have set out.
Lord Whitehead (Lab)
I thank noble Lords for their important contributions to this debate. I did not hear any particular dissent from the idea that this is a good thing that will help British supply chains in offshore wind and, we hope, onshore wind, to develop significantly in the future. That will be done through a process whereby, in future rounds, those bidding for services will put in, as a pre-bid to the AR7, AR8 or AR9 bid itself, a notice of intent about what they will do as far as British supply chains are concerned and how they will source from them. When they get the additional CfD arrangement for doing that, the money will be released only when those commitments have been met. It is not a “money for pie in the sky” arrangement; it is very much a “money for pie firmly affixed to the ground” arrangement for the future.
Of course, one can never be sure exactly what commitments will be made by people putting forward their proposals to get into a particular realm but, certainly in AR7, they have covered all sorts of aspects of the supply chain, including port infrastructure, et cetera. The noble Earl raised the question of port development. A lot of investment is going into ports in general at the moment, and into the ability of ports to provide the sites for fabrication, et cetera, for offshore wind, as well as making sure that the ports are as well equipped as possible for Sea Jack-type erection vessels and so on. The idea is to thoroughly uprate investment in ports to support the offshore wind energy industry of the future.
The noble Lord, Lord Moynihan, was concerned about the fair work charter. I just looked it up: it appears on the government website and seems, pretty substantially, to be a final document. I am sorry not to have got my speech finished before the Division.
Lord Whitehead (Lab)
My Lords, votes in this House are tremendously helpful for securing clarity where maybe there was not clarity before in certain aspects. They are particularly helpful half way through a speech, enabling that speech to end on a clearer note than might otherwise have been the case.
I mentioned the offshore wind fair work charter to noble Lords just before we departed to vote this afternoon. It is true that the final offshore wind Fair Work Charter is now complete and live on GOV.UK, which I showed to noble Lords on my phone. However, it is also true to say that the Department for Business and Trade is pursuing a consultation on make work pay, which has many elements of the offshore wind fair work charter in it. That is what is not complete and is being consulted on at the moment. As far as the offshore wind industry is concerned, the charter that I have mentioned is complete and was, as far as I understand, extant before this SI.
Lord Moynihan (Con)
I am grateful to the Minister. Let me put to him my understanding of where we are at the moment, because this is a really important point. I majored on this so I have looked into it. We have the Fair Work Agency, of course, and we have the overview of what the offshore wind fair work charter will look like. A cornerstone of that charter for the offshore wind sector is the issue of trade union access. That was what I was concentrating on; I gave some examples on the record of the issues that trade union access would raise with companies. It is still a draft code of practice for trade union access. It is not finalised. It is still subject to consultation and, I assume, to an SI that will be brought before Parliament.
My position was therefore that while we were debating the importance of an offshore wind fair work charter, we were unable to be specific about what it would include, particularly on the cornerstone point of access for trade unions to companies in this sector. That is the important point. It has yet to be finalised, and I understand that there will be an SI in due course. My point was that it would have been better for us to look at that in the context of a complete offshore wind fair work charter, so that employers could understand the issues about trade union access, and a final code of practice for that access.
Lord Whitehead (Lab)
I thank the noble Lord for that clarifying intervention. Essentially—forgive me for putting it quite like this—both of us are more or less right: the charter is there and has been there for a little while. But obviously, once a charter is up on the noticeboard, as it were, there are details of its implementation still before us. One of them is that question of the detail—not the principle—of trade union involvement in the offshore wind industry as a whole, and the requirement that from AR8, the companies involved in bidding sign up to that fair work charter overall.
One important thing to say is that the whole process of the fair work charter has been tripartite throughout, with government, industry and unions all involved in setting up the charter itself and its consequences. It is not that anyone is going to impose anything on anybody; it will be a question of continuing tripartite involvement and interest in the detail of the fair work charter, as well as the charter itself. While I take the noble Lord’s point that in an absolutely ideal world it would have been a good idea if the sub-details of the fair work charter itself had all been worked through, in the real world it is very seldom possible to do that when something comes into place. I think he will appreciate that trying to get this in place so that it runs for AR8 and onwards, for example, is an important process of pace. Therefore, having the principle in place, with everyone clear what they are supposed to sign up to for AR8, is an important move in its own right.
Lord Moynihan (Con)
Indeed, the Minister is right as well. The key point, however, is one of emphasis. To me and to my colleagues, and to companies that may access government funding through this scheme, not to know the detail of what is proposed through the draft code of practice for trade union access negates, to a great extent, the initial tripartite agreement, because that agreement can hold only when all three parties to it know the details.
I am not disagreeing with the Minister’s overview about the Fair Work Agency being in place and the fair work charter being drafted. But I am genuinely concerned that if government money is to be made available to companies in this sector—and we are really looking to encourage UK companies and international companies to come and play an important role in the supply chain—we need to have those details before we trumpet an offshore wind fair work charter without actually seeing them. I do not think that is an unreasonable point to make.
Lord Whitehead (Lab)
I thank the noble Lord for that point, which confirms that we are both substantially rightish. In some subtexts of the overall charter, there are still some things to be sorted out, but not the charter itself. It should be pretty clear to companies what they are signing up for and what they will be required to undertake once they have signed up for it. The question of how that then works out in detail over the period is a live issue, but it is not an issue that overthrows the charter and its clarity. I am not sure we can take that any further today, but I am happy to engage with the noble Lord offline if he needs clarification on any further points.
The noble Lord also mentioned something we have discussed on several occasions: work practices in the supply of some components for low-carbon industry. He mentioned solar panels, obviously, but that issue potentially applies to other things as well. I can only repeat the points about the Government’s efforts to ensure that slave labour is not used in components that are coming to the UK, but I add a further qualification in that the money for which companies bid as they go into allocation rounds allows, among other things, for those companies to use not necessarily the cheapest tender but the tender that is most suitable for the development of both the UK supply chain and good, ethical working practices in the industry, which are part of the fair work charter. So one would expect those companies to be actively engaged in ensuring that what they are committing themselves to, as far as UK supply chains are concerned, includes the sorts of consideration that the noble Lord mentioned. Indeed, supply chains that one can absolutely say are not engaged in slave labour, because they are based in the UK, will be a substantial underpinning of this whole process.
We have exhausted pretty much all the available avenues on this SI, but I will briefly address the questions asked by the noble Earl, Lord Russell. He was very supportive of this measure but was particularly concerned about whether it should be a permanent part of the process. He questioned why there is a sunset clause in the Bill for 2028. Of course, that sunset clause encompasses three allocation rounds, and I hope an awful lot of investment will have been secured in those three rounds, but the Government wanted to make sure that, for the long term, that remains the right thing to do. There may well be, in future allocation rounds—if they have been a great success in the earlier rounds—better uses for those particular commitments than are in this SI today.
It is important that we learn from what happened in AR7. We will see what happens in AR8. That, hopefully, will culminate in AR9, at which point we can review and decide the long-term future of this mechanism and, indeed, whether it can be used for different and wider purposes in the future, as mentioned by some noble Lords today.
The overall welcome by noble Lords for this measure is certainly very welcome. On that basis, I hope the SI will secure unanimous support.
Train Driving Licences and Certificates (Amendment) Regulations 2026
(1 day, 4 hours ago)
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Lord Hendy of Richmond Hill
That the Grand Committee do consider the Train Driving Licences and Certificates (Amendment) Regulations 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, these regulations will lower the minimum age at which the Office of Rail and Road, ORR, can issue a train driving licence to a person to drive trains on the mainline railway in Great Britain from 20 to 18. Under the regime, applicants will continue to be required to satisfy the same conditions for driving trains contained in the Train Driving Licences and Certificates Regulations 2010, hereafter called the 2010 regulations. These licence conditions will remain unchanged. They include completion of at least nine years of primary and secondary education or vocational training equivalent to level 3 qualifications, and proof of passing medical, psychological fitness and general professional competence examinations.
By lowering the minimum age from 20 to 18, these regulations will bring Britain into line with several other countries including Germany, the Netherlands and Australia. They will also be consistent with the London Underground, where professional operating roles can begin at 18. These regulations will not change the minimum age to be a train driver in the Channel Tunnel, which will remain at 20, consistent with our international obligations.
I will begin by providing background information on the regulatory framework and the case for lowering the minimum age to be a train driver. The railway network currently depends on approximately 19,000 train drivers. These drivers operate passenger and freight services across the country. The 2010 regulations established the legal conditions required to drive trains on the mainline railway and cover both licences and certificates.
A train driving licence confirms that a driver has been medically and psychologically assessed as fit and has passed a general competence examination in train driving. As long as the driver continues to meet these conditions, the licence remains valid for 10 years. Drivers must also hold an employer-issued certificate showing that they are trained and authorised to drive specific trains on specific routes. A driver must hold both documents.
The 2010 regulations implemented the EU train driving directive, which sets a default minimum licensing age of 20 across the EU. The directive also allowed member states to adopt a lower age of 18 for domestic services, but the United Kingdom did not choose to do this in 2009. Since then, as I have mentioned, several countries have successfully implemented a lower age limit and others are actively considering it, including Japan.
In 2019 the Rail Safety and Standards Board, RSSB, undertook research to look at the case for lowering the minimum age in Britain. It published its findings in February 2024. The RSSB found that 18 and 19 year-olds can drive trains safely and professionally when held to the same training, assessment and supervision standards as older recruits. At the same time, lowering the age limit widens the talent pool, increasing driver numbers and improving representation.
The research found that experience, not age, is the determining factor in whether a new entrant to the profession will enjoy a successful career. This experience is gained through practice and exposure to train driving. Experience is a central feature of train driver training and can be gained through a structured training programme. Training and assessment typically take between 12 and 18 months and involve several months of classroom and simulator learning, alongside 225-plus hours of practical train driving. This is followed by mandatory examinations and post-qualification monitoring and assessments.
Support for the policy was reaffirmed in a May 2023 post-implementation review, prompting the previous Conservative Government to consult on the proposal. The consultation, published in May 2025, showed broad support from major industry bodies, including ASLEF—the train drivers’ union—and train operators, although some stakeholders sought assurances about transition arrangements.
For this reason, on 7 May 2025 my department confirmed that we would move forward with lowering the minimum train driver age, subject to receiving an industry implementation plan that would then determine the timetable for changing the law. The Rail Delivery Group, working through the Train Drivers Academy, co-ordinated the industry’s response, gathering industry specialists to review existing arrangements and identify opportunities to optimise the system. The industry confirmed that existing safeguards, testing and supervision remain appropriate for younger entrants, but recommended that operators update their procedures and ensure staff understand how best to support new trainees. Overall, the implementation plan demonstrated that a lower minimum age for train driving can be introduced safely and without requiring major changes to core safety or competence management systems.
The department and the ORR approved the implementation plan in December and published it on GOV.UK on 19 March. The plan proposed several practical improvements that industry will now implement to strengthen recruitment, assessment and training for all new drivers, not just younger applicants. These include fairer and more transparent recruitment processes, clearer information about the role, better support for managers working with younger colleagues, more consistent industry-wide communication, and development of a simple and accessible recruitment portal. To help monitor arrangements, a study is proposed to monitor the progress of younger drivers over time, which will use a small group of pathfinder operators to test, refine and share effective approaches.
Taken together, the industry has produced a clear and evidence-based strategy that will help bring younger entrants into the profession safely and confidently. We are confident that these arrangements will be in place by June this year, which is why we have scheduled the legislative change to take effect on 30 June. From that date, young people will be eligible for train driving positions.
I turn to the reasons why the Government are bringing forward these regulations and their intended objectives. The rail industry is facing significant skills shortages across several key areas, particularly train driving. Around 25% of the current workforce is expected to reach retirement age by 2030. We project that there will be a deficit of 2,500 train drivers by the end of the decade unless action is taken.
In some parts of the country, such as Wales, that figure is closer to 38%. Even in London, where the proportion is lowest, nearly a quarter of drivers will retire within the same period. Without a concerted effort, this presents a retirement cliff edge that risks the industry’s ability to maintain current service levels. Operators are already experiencing difficulties in recruiting new drivers and are too frequently reliant on overtime to sustain timetables.
At the same time, there is clear evidence that the rail industry is not yet drawing on the full breadth of talent available. The workforce remains relatively homogenous: the average train driver is 47 years old, fewer than 11% of them are women and fewer than 13% come from minority-ethnic backgrounds. This points to significant untapped potential across the country.
Lowering the minimum age of train drivers will not on its own solve driver shortages, and it is still the responsibility of operators to take steps to secure the workforce they need. This change is, however, an important first step and will help the industry to build a more resilient pipeline of drivers by creating a clearer route for school leavers to enter the profession. This is because the current minimum age of 20 has for many years acted as an arbitrary barrier to entry. By that age, many young people have already committed to other employment, vocations or further study. Lowering the minimum age to 18 will allow operators to engage school leavers and offer a clear, structured route into a highly skilled and respected profession. In doing so, it will help the industry respond to the demographic and operational pressures it will face in the coming years.
Baroness Pidgeon (LD)
My Lords, I thank the Minister for introducing these regulations so thoroughly. We on these Benches welcome the statutory instrument, which presents a pragmatic, evidence-based approach to modernising our railway workforce and opening up highly skilled and well-paid careers to the next generation.
For too long, the arbitrary age limit of 20 has meant that the rail industry has lost out on bright, capable school leavers who, when they finish their education at 18, have been forced to seek opportunities in other sectors. As we have heard, we are facing a demographic cliff edge in the railway in terms of age, while trying to make sure we have a workforce that represents the whole of our communities. That is really important. The statutory instrument allows for earlier training and that new talent pipeline. It is good to see that we are aligning ourselves with our European neighbours.
We need to take into account, though, the perspectives of those who operate our trains every day. Looking at the consultation, there were quite high numbers of respondents concerned about this, particularly current train drivers. I would therefore like to ask the Minister a few questions.
First, how is this going to be publicised? The Train Drivers Academy is going to have this comprehensive communications campaign, online guidance and so on, but how are the Government going to support the industry in co-ordinating this new outreach to attract new applicants? Secondly, can the Minister explain how the Government will work closely with the industry to reassure the existing workforce, who have expressed some concerns, and ensure that any issues are addressed? In achieving the policy objectives outlined in the post-implementation review, can the Minister outline additional measures the Government are actively considering, apart from this regulation, to promote rail careers and ensure that broader, diverse pipeline of workers in the sector? As long as this does not compromise rigorous recruitment and assessment processes, as the Minister has set out, and has high medical standards and so on, we gladly support this measure to empower our young people and secure the future of our rail workforce.
Lord Moylan (Con)
My Lords, I thank the Minister for setting out so clearly his succinct response to the issues raised by the Secondary Legislation Scrutiny Committee. It is good to have those comments on the record. It also saves me the trouble of asking all the questions that it asked and pressing him to give answers in his wrap-up. That has considerably shortened the remarks I entered the Room with.
On my part and on behalf of the Conservative Party, we wholly welcome this statutory instrument and the development it contains. It was, in fact, a Conservative initiative, as the Minister mentioned in his opening remarks. It is always good to have new measures that help youth employment at a time when youth unemployment is rising so dramatically under the current Government.
However, while I welcome the regulations wholeheartedly and without reservation, and while I think they are a very good thing in principle, I have slight doubts about whether they are going to make an enormous difference in practice. First, as the Government say, there is already a strong demand for train driver roles. Lots of people want to be train drivers, yet the fact is that the workforce is very restrictive. The Minister mentioned the retirement profile that is approaching, and I do not need to repeat that, but as far as I am aware, the average age is 47. Less than 3% are under 30, and women make up less than 11%. I wonder what has brought that about. It is not the restriction from the age of 20 that is causing that, and moving it to 18 is unlikely to change it, especially given that these are well-paid roles for which there is a great deal of demand.
What is in the process of happening as a result of the Government’s policies is that the Government are becoming the employer. The Government might say that Great British Rail is becoming the employer, but that does not exist and will not exists for several years at the rate things are going. The Government themselves—the Department for Transport, through its subsidiary companies—are the employer. So trying to understand, trying to tackle the root explanations for this strange profile in the workforce with a view to opening up the demographic of our train drivers, is a responsibility that falls squarely on the Government. I have not heard the Minister say what, as an employer, the Government are going to do about that.
I welcome that he has explained, I think quite convincingly, what he is going to do to make it easier for 16 to 18 year-olds to get on track in this direction, but what are they going to do about the existing profile of the workforce? How are they going to get people of other ages, who might be in their mid-20s or who might have done some other role, to enter the workforce at that stage—urgently—and get involved, given the cliff edge that we are promoting?
There are serious issues. We know that the workforce has tended to be restrictive about how one can enter it, and that its general profile is not reflective of the population at large. While I am not encouraging diversity for the sake of diversity, some of the problems we have are because the pool has been very narrow and widening it from 20 to 18 is not the key issue that will resolve it.
The Government’s impact assessment states that they have looked at other countries, including France, Germany and the Netherlands. If the Government are looking to other countries, they might also look to other working practices that need changing. One example is Sunday working, which in many countries is built into the contracts of train drivers. That is not so here, and we are dependent on voluntary overtime for Sunday running of the trains. It would be useful to know what the Government are thinking of doing about this as part of their general workforce programme, now that they are the employer.
On the question of age, I come back to the issue of Transport for London. The Government said that the age limit of 18 already applied at Transport for London, which is true, yet, as far as I can see, there are very few young drivers at Transport for London. We have the problem that, according to a freedom of information request, Transport for London does not currently employ a single train operator under the age of 23, and that person is a bit of an outlier anyway. Similar problems exist at Transport for London regarding retirement cliff edges, even though they operate this lower age limit for entry.
The general verdict is that we are in favour of the lower age limit and we recognise the problem, but we do not think this is enough. The Government will have to go a great deal further to solve the problems that the Minister set out in his opening remarks.
Lord Hendy of Richmond Hill (Lab)
My Lords, I thank noble Lords for their attention and for their comments about this instrument.
In response to the noble Baroness’s questions, I reassure her that I and my officials are working closely with all the people involved to ensure that we can capture the interests of young people and promote awareness of the opportunities. I think it will be easier with 18 year-olds than it is with 20 year-olds because of the measures that I talked about, including apprenticeships and the prior preparation for these jobs. We know that it will be easier, and we intend to do a great deal to make sure that, across the industry, we engage young people and showcase what a career in train driving can offer.
The industry is more co-ordinated than it was. For example, I draw noble Lords’ attention to the train circulating to celebrate the 200th anniversary of the national railway system. It has a carriage devoted to interesting young people in railway careers, which has been enthusiastically welcomed wherever it has been. On a more long-term basis, operators will work closely with schools and colleges to deliver talks by other young train drivers, share experience and support activities that will inspire young people to consider this as a career. We know that we need to do more across communities, and the opportunity of engaging younger people will be a stimulus to achieve that.
The noble Baroness referred to the consultation in which there were objections from existing drivers to this proposal, but we do not believe it is correct to say that the majority of drivers opposed it. I have met a number who are very keen on it, including some people of a relatively venerable age. We think that the objections are individual and not representative of the wider industry view. Certainly ASLEF, the largest train-driving union, which represents 95% of drivers on the network, strongly supports the measure. For any who have expressed concerns, I believe they are mostly about somehow compromising the rigorous high standards that existing drivers must meet. I hope I have reassured the Committee that that will not be the case, that standards will continue to be as high as they are now and the full competitive selection process will still be followed. In any event, we will monitor how the new arrangements are working in practice as part of the longitudinal study.
Finally, the noble Baroness asked what additional measures the Government are actively considering. Aside from what I have already said about updating and widening access to existing rail apprenticeships, the Government recently invested £1 billion into the national youth employment initiative, which will help to create 200,000 new jobs and apprenticeships. Those measures will strengthen generally high quality apprenticeships, while the rail industry having the new apprenticeships that I talked about will encourage young people into this industry.
There are already key initiatives across the railway industry, including women in rail, the National Skills Academy for Rail’s routes into rail campaign, Network Rail’s inspire and STEM programmes and the young rail professionals network. We will make sure that they all embrace 18 year-olds in the future so that we get a more diverse pipeline of talent into the sector. My department will also look at potential reforms to the legislative framework for train driving to ensure that it remains fit for purpose and continues to equip train drivers with the training they need in this evolving industry. Of course, Great British Railways will make it easier to work with the industry to develop proposals for consultation over the next years.
I am grateful to the noble Lord, Lord Moylan, for his general support for this measure and concur with him that it was initiated by the previous Government. He asks what else we will do. One of the answers is that there is a much more vigorous recruitment programme than under the previous Government. Severe shortages have developed since Covid. The Government are working extremely hard to make up the deficiency in vacancies and work out properly what the establishment of the railway is. Several operators clearly lost sight of that in the previous regime. We will raise the railway’s profile with schools and use the precedent of the bus industry, which similarly reduced the age some time ago and has found a good source of younger people.
The noble Lord referred to Sundays not being part of the working week. That is a real problem, and the industry has not been consistent on it. Some employers have Sundays within the working week. The Secretary of State in the other place has said a number of times that it is time that the railway employed people for seven days a week, since that is how it works. That will encourage employment characteristics that are more like the rest of the railway and, we hope, encourage people into the industry as well.
Lastly, the noble Lord raised the Underground’s lower limit and its apparent absence of young people as a consequence. My own surmise is that—I will write to him if this differs—recruitment to fill the night Tube, which he will recall, has distorted the age profile simply because there was a large recruitment of drivers for it. Subsequently, employment conditions changed again, and those people are now part of the normal workforce, so that distorted the age profile.
I hope that I have satisfactorily answered all the questions from noble Lords who have spoken in the debate. All that remains for me is to beg the Committee to consider the statutory instrument.
Sussex and Brighton Combined County Authority Regulations 2026
(1 day, 4 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Taylor of Stevenage
That the Grand Committee do consider the Sussex and Brighton Combined County Authority Regulations 2026.
Relevant document: 52nd Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
My Lords, these regulations were laid on 11 February 2026. Before I proceed, I draw the Committee’s attention to a correction slip that has been issued for these regulations. It corrects the name of the appropriate administering authority for pension purposes from East Sussex to West Sussex. This change was requested by, and agreed with, the constituent councils. When referring to the Sussex and Brighton Combined County Authority, I will use the term “strategic authority” hereafter unless there is a reason to be specific.
Devolution is a critical lever for delivering growth and prosperity, with mayors and local leaders being best placed to take the decisions that benefit local communities. This Government were elected on a manifesto commitment to widen and deepen devolution across England. The English Devolution White Paper set out our plans to achieve that. Much of that White Paper is now being taken through Parliament via the English Devolution and Community Empowerment Bill.
The White Paper also launched the devolution priority programme to provide a fast track to establish a new wave of mayoral strategic authorities. Following an expressions of interest process, in February 2025 we announced six places on the programme, including Sussex and Brighton. This statutory instrument will establish their strategic authority and provide for mayoral elections. In doing so, it represents substantial progress towards fulfilling our commitment to move power out of Whitehall and back to those who know their areas best.
The Government have worked closely with the constituent councils in Sussex and Brighton on the instrument. The constituent councils are West Sussex County Council, East Sussex County Council and Brighton and Hove City Council. All the constituent councils have consented to the making of this instrument, and I thank local leaders and their councils for their support in getting us to this point.
The instrument will, if Parliament approves, be made under the enabling provisions in the Levelling-up and Regeneration Act 2023. The strategic authority will be established on the day after the day on which the instrument is made. The inaugural mayoral election is due to take place on 4 May 2028, and the elected mayor will take office on 8 May 2028 for a four-year term.
The instrument makes provision for the governance arrangements of the strategic authority. Each constituent council will appoint two of its elected members to be a member of the strategic authority, with the mayor also a member once in office. The strategic authority can also appoint non-constituent and associate members to support its work. Each voting member is to have one vote, and the vast majority of decisions are to be determined by a simple majority of the members present and voting. Once the mayor takes office, that majority must include the mayor, or the deputy mayor when acting in place of the mayor.
The instrument provides some functions in relation to transport and economic development, but there is a strong link here with the English Devolution and Community Empowerment Bill. Subject to Royal Assent, the Sussex and Brighton strategic authority will be classed as a mayoral strategic authority and the functions reserved for that tier will automatically be conferred. Even before the mayor is in office, the strategic authority will be able to exercise mayoral strategic authority functions, with the exception of those that are specifically reserved for the mayor. That is why this instrument confers fewer functions than previous instruments establishing strategic authorities. The functions that it confers, focused around local transport and economic development, are designed to support the work of the strategic authority before the Bill is in force and enable it to deliver the benefits of devolution from day one.
MHCLG consulted on a proposal to establish the strategic authority between 17 February and 13 April 2025. The purpose of the consultation was to gather evidence and information on the effects of establishing the strategic authority. The consultation was promoted using social media, a communications campaign, a dedicated website, online and in-person events and distribution of consultation materials. Responses could be made online, by email or by post. They were received from a wide range of stakeholder groups, including members of the public, businesses, councils, universities, the third sector and other bodies. A summary has been published on GOV.UK. The Government carefully considered the responses and on 17 July confirmed to Parliament that the statutory tests to establish a strategic authority had been met.
Subject to the making of this instrument, the strategic authority will receive devolved funding. This will include devolved funding for transport and adult skills, capacity funding and a 30-year mayoral investment fund to support key local priorities.
To conclude, this instrument represents clear progress in our mission to widen and deepen devolution in England and will make this a reality in Sussex and Brighton. It will empower local leaders to deliver for their communities, improving the lives and opportunities of their residents. I hope noble Lords will join me in supporting the draft regulations, which I commend to the Committee. I beg to move.
Baroness Pinnock (LD)
My Lords, I thank the Minister for her introduction to this statutory instrument, one in a series of statutory instruments creating county combined authorities that we have discussed over several months.
I start with what the Minister said about the purpose of this statutory instrument: that the Government wish to “widen and deepen devolution”. We Liberal Democrats support devolution and have long advocated for it. However, the Secondary Legislation Scrutiny Committee noted in its report on this SI that of the more than 6,000 responses received from the public,
“71% disagreed that it would support … local communities”.
The SLSC asked, given that local opposition—the overwhelming majority of those 6,000 responses not in favour—how the Government will ensure that the mayor has a “firm democratic mandate” and that local residents are able to “engage” with the system. That seems to be fundamental for any devolution proposal—that it takes people with them. Clearly, from the response to the consultation, that is not the case. I hope that the Minister has some responses to that committee’s report.
The Government have given a formal response to the committee’s report, which included a commitment to future strengthening of scrutiny. As the Minister will know, every time we discuss this, I criticise the scrutiny arrangements in mayoral authorities as being totally inadequate for the range and depth of functions that the mayor will have. One of the easy ways to improve scrutiny would be by ensuring that pre-decision scrutiny is the norm. I wonder whether the Minister can give us any hope that this will be the case.
I have a couple of other points to make. The financing of the mayoral model—if I have read it right—is to be from the constituent councils until the mayoral elections. If that is the case, can the Minister quantify the financial call on the constituent local councils until that time?
The main concern I have is that the Government are proceeding with mayoral devolution alongside very significant local government reorganisation. Two major reorganisations in local government are taking place in that area, which will inevitably cause increased expenditure in the first instance. Establishing the different and new authorities will inevitably be a call on the constituent authorities’ finances. It will not all be funded by grants—it never is—and that will inevitably mean a call on financing of basic public services. Does the Minister agree with that?
Finally, the Government and the previous Government are very keen on the mayoral model, but at no point have we had an assessment or a review of its achievements and its failures. Looking across the metro mayors that have been established, there have been some notable successes. The bus transport system in Greater Manchester has been a success, but there are other parts of the country—looking towards the north-east of the country—where it has not been such an overwhelming success and great question marks have been raised about the way that the mayor and the authority have fulfilled their statutory requirements. It is important that the Government do a review and an assessment of the various mayoral models that have been instituted across the country.
Lord Porter of Spalding (Con)
I commend the Government on getting on with doing something on this agenda. I am a massive fan of mayoral authorities. If that is the price to pay to take power away from Whitehall and Westminster, it is a price worth paying. It could have been a bit cheaper, but nothing is cheap when you get it off the Government if the Treasury is involved with it.
I will ask a couple of questions. It will not start until 2028. That is unfortunate because 2027 is closer, so it would have been better if the department got its act together quicker, got the necessary work done and concentrated on those areas where it was doable. Sussex and Brighton are in a DPP area and are expecting an announcement on Wednesday this week about which of the six are likely to go ahead. There is money being laid now that it might be that five or fewer get announced. Do we know whether this is one area that will be announced? If it is going to be announced, do we know whether the constituent members are going to go from three to five? Does that mean that the council holding the ring on the pension pot will still be in existence after that process? If the constituent council is broken into more than one piece, where will the pension pot then sit?
Lord Jamieson (Con)
My Lords, I also thank the Minister for her introduction to these regulations. We on these Benches support the principle of devolution. As the Minister outlined, these regulations will establish a new combined county authority for Brighton, Hove, East Sussex and West Sussex under the framework set up in the previous Conservative Government’s Levelling-up and Regeneration Act 2023. However, there are some issues that merit closer scrutiny.
The noble Baroness, Lady Pinnock, has already raised the Secondary Legislation Scrutiny Committee’s comment on the consultation underpinning these proposals, which revealed significant public concern, particularly around the implementation of a mayoral model. A clear majority of respondents did not believe that such a structure would reflect local identities or deliver meaningful benefits. That raises an important question about how devolution is being delivered. If it is to succeed, it must carry public confidence. Does the Minister agree?
Secondly—I would welcome further clarification from the Minister here—there are questions about timing, funding and democratic accountability. The Government have been clear that they intend to establish mayoral strategic authorities in devolution priority programme areas as quickly as possible. Indeed, we are told that the legislation for Sussex and Brighton is already being progressed and that institutions will be set up with the consent of constituent councils. However, as my noble friend Lord Porter pointed out, at the same time the Government have confirmed that the inaugural mayoral elections in these areas have been delayed until May 2028. That is much later than originally planned and is accompanied with a delay to the full powers, such as strategic planning, CPO and, importantly, full mayoral funding, which will be only 40% of that originally promised in the interim. Parties had already selected their candidates and were preparing for an election, so why is the mayoral election being delayed? Why can the full funding not be implemented now? It was on that basis that the councils involved embarked on the devolution programme, but the Government are not fulfilling their end of the programme.
The justification offered for this delay is that it allows time for local government reorganisation and the establishment of robust institutions. That is a weak excuse. Having experienced devolution first hand, I know that previous programmes have been delivered to a tighter, clearer timetable without the need for constant postponement of elections or, more recently, their reinstatement. It creates an unusual and uncomfortable position. We are being asked to approve the creation of a new strategic authority, the transfer of powers to it and the establishment of an institutional framework without a directly elected mayor in place for another two years. In effect, structures of devolution are being put in place while the democratic leadership is deferred until later. Can the Minister clarify the interim governance arrangements and, in particular, who is ultimately accountable to the public during this interim period for the exercise of these new powers? We appreciate that this instrument does not in itself determine the timing of elections, but it is inseparable from that broader context, and it is entirely reasonable for this Committee to probe how these arrangements will operate in practice.
To be clear, we are supportive of the creation of the Sussex and Brighton combined county authority in principle, but we are aware that devolution must be locally supported and democratically grounded from the outset. Also, the terms of the deal with the residents of Sussex should not be changed half way through the process. On that basis, I hope that the Minister can provide some reassurance on how accountability will be maintained in the period before May 2028 and whether any consideration has been given to shortening that timetable. I also commend my noble friend Lord Porter on his important question regarding pensions and look forward to the Minister’s response on that.
Baroness Taylor of Stevenage (Lab)
My Lords, I thank noble Lords for their contributions and their broad support for the Sussex and Brighton authority, which I think is broadly welcomed in the local area.
The noble Baroness, Lady Pinnock, asked me about the 6,000 responses. The purpose of the consultation was to gather evidence and information on the effect of establishing a mayoral combined authority over that proposed geography. Unsurprisingly, respondents provided a range of views, including evidence setting out the potential benefits, as well as some concerns. The Government carefully considered the responses received. The results of the consultation formed part of the assessment made by the Secretary of State on the relevant statutory tests, as set out in Section 46 of the Levelling-up and Regeneration Act 2023. The Secretary of State’s decision was that those tests were met. It is not surprising that knowing how exactly this will work might have been a concern for some people, but I have looked at the evidence that came back and there was a pretty equal balance between the concerns and the things that people thought were a plus.
The noble Baroness mentioned scrutiny arrangements. I am not sure whether she was here the other day when we debated this on the English devolution Bill. The Government are bringing forward arrangements in that Bill to introduce local scrutiny committees with powers to scrutinise what the mayor is doing. Her noble friend Lord Shipley has raised this with me on a number of occasions, as he was concerned that those bodies should have powers to undertake pre-scrutiny. They will have those powers. This will be a powerful body to make sure that the mayor’s work gets scrutinised properly.
The noble Baroness and the noble Lord, Lord Jamieson, raised LGR and asked why the mayoral arrangements are not being put in place until the foundation strategic authorities have been set up. The Government’s carefully considered decision is that we need resilient and sustainable authorities in place, and then the mayors will be elected. That is how we are taking that forward.
On the noble Baroness’s point about the review of mayoral arrangements, there are a huge number of advantages to them. Mayors can use their mandate for change to take the difficult decisions needed to drive economic growth. They have standing and soft power to convene local partners to tackle shared problems, directly exercise devolved powers and attract inward investment. They also have a platform for tackling the obstacles to growth that need a regional approach. Mayors are accountable directly to their citizens and have the profile to stand up for them on the national stage. They are able to both partner with and challenge central government where needed. That partnering on the national stage is critical. We now have the mayoral council to enable the regions represented by mayors to sit around the table and represent them to national government, which is really powerful. We are seeing that voice being amplified for local people in many areas that already have mayors, including Manchester, which the noble Baroness mentioned, London and the West Midlands, as well as other areas that are still developing but nevertheless are exercising their mayoral role powerfully.
The noble Baroness also asked whether councils and taxpayers will fund the CCA. The Government will support with the costs associated with the new authority through capacity funding, and the authority will also receive its investment fund as well as devolved funding for specific functions such as transport and adult skills. Beyond the support provided by the Government, the budgets of strategic authorities and how any costs are funded will be a local decision. The extent to which the constituent councils need to contribute at all to the running of the authority will therefore be decided locally.
I thank the noble Lord, Lord Porter, for his comment about this being a price worth paying to get power out of Westminster. That has long been my view, and we have had many discussions about it over the years. First, on the pensions pot, we are still making decisions on how the LGR will be taken forward, but that has not yet been announced. The Government are considering those questions and will respond in due course, so the foundation strategic authorities will hold the ring on pension provision for now, until the mayors come into post.
The noble Lord, Lord Jamieson, asked why we cannot have mayoral authorities now. I think I have explained that we want to make sure that these foundation strategic authorities are on a firm footing before we bring in the mayoral arrangement. He spoke about democratic arrangements. Once they come into post, the mayors will be directly elected across the whole area. Nevertheless, representatives on the foundation strategic authorities have their own democratic mandate, because they will be nominated from the councils concerned.
On the funding that the strategic authorities will receive, we will support with the costs associated with the new authorities. Sussex and Brighton have received £1.5 million this year in capacity funding to help towards establishment, and will receive a further £7.5 million over the next three years to help with core running costs. They will also receive the 30-year mayoral investment fund once the mayor is in post, as I have said. That will be £38 million a year, £1.14 billion over the 30 years. They will receive a portion of this in the two years prior to the mayor being elected to support the early delivery of growth priorities, and will also receive other devolved funding such as for transport and adult skills.
It is essential that the benefits of devolution are not delayed, and that is why, in the interim period between the establishment of the mayoral strategic authority and the inaugural mayoral elections, we will provide the authorities with a proportion of their investment funds, so that they can start delivering on key local priorities and deliver some benefits ahead of the mayor taking office. The strategic authority will have a number of functions available in the interim period to enable and encourage investment in the area, subject to Royal Assent to the Bill. These include: the general power of competence, with the duty to develop a local growth plan and the power to borrow to an agreed cap; a health improvement and health inequalities duty; functions to acquire land, provide housing and build infrastructure, enabling it to make strategic interventions and support local growth ambitions; and responsibility for public transport and local transport planning, joining up the transport network across the region and helping people get to work, education and leisure activities.
In conclusion, this instrument delivers the commitment made with Sussex and Brighton to establish a combined county authority. I hope the Committee will welcome the regulations.
Lord Jamieson (Con)
When we have requested a timetable for devolution elsewhere, the Minister has said that elections in May 2028 would be held not only in the six priority areas but in a number of other authorities, as part of this devolution. I am slightly confused as, if there is a need for the six priority areas to have this period of time, having already started the process towards May 2028, how will those that have not even started the process be able to do it by then? By inference, if the others can do it more quickly, why can these not do it more quickly, so that we could have those elections earlier? My noble friend Lord Porter suggested possibly May 2027.
Baroness Taylor of Stevenage (Lab)
The time periods are quite compressed, as the next tranche of 14 areas will be decided before the Summer Recess. The decision-making is quite close together and it is up to us to make sure that we get these SIs through, so that the foundation strategic authorities are in place before the mayoral elections all take place in 2028.
Non-Domestic Rating (Rates Retention and Levy and Safety Net: Miscellaneous Amendments) Regulations 2026
(1 day, 4 hours ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Baroness Taylor of Stevenage
That the Grand Committee do consider the Non-Domestic Rating (Rates Retention and Levy and Safety Net: Miscellaneous Amendments) Regulations 2026.
The Parliamentary Under-Secretary of State, Ministry of Housing, Communities and Local Government (Baroness Taylor of Stevenage) (Lab)
The most exciting ones always come at the end.
As many noble Lords will know, the Government are embarking on a much-needed funding reform for English councils to ensure that resources are aligned with need across the sector, with the first multi-year settlement in a decade delivering that reform. The business rates retention system is a major part of the overall local government finance system under which English councils retain a share of the business rates they collect, as well as a portion of any growth in that income. Resetting the system is a key element of the wider reforms, ensuring that funding is better aligned with need while preserving the incentive for authorities to continue to drive local growth.
In parallel with these reforms, the Government are also implementing substantial changes to business rates tax policy, which I am sure noble Lords will agree is also an essential task. As a result, the Government must make technical updates to the business rates retention system to ensure that, as far as is practicable, local government funding is not impacted by these changes, which are outside the control of local councils.
The instrument before the Committee today will update the business rates retention system to factor in local government finance reform and to accommodate changes to the tax. It amends two key sets of regulations on which the rates retention system is run. The levy and safety net regulations establish the safety net through which authorities are protected from large drops in business rates income; they fund that protection by applying a levy to business rates growth. The rates retention regulations set out the fundamentals of how the system operates, including how business rates income is calculated and shared between central government, billing authorities and major precepting authorities. The amendments are technical but clear in purpose; I will explain them now.
The safety net and levy determine the balance of risk and reward in the business rates retention system. To ensure that this balance is appropriate through the multi-year settlement, the Government announced changes at the settlement; this instrument puts them in place. First, the level of safety net protection is being increased to 100% of baseline funding level or need, provided through rates income for 2026-27. This is something that local government has welcomed and which noble Lords will, I am sure, agree is sensible. Secondly, the levy on business rates growth will now operate on a marginal basis, with different rates applying as growth increases up to a maximum of 45%. This balances the reward of business rates growth with the need to fund safety net protections.
Moving on, in response to the reset and wider tax policy changes, we are making changes to ensure that grant compensation paid to councils in lieu of business rates is treated in the same way as the rates themselves, streamlining local government accounting.
Next, the instrument updates key formulae and figures that are used to run the rates retention system in order to reflect changes and updated values from the funding reforms delivered through this year’s settlement. This includes figures used to calculate different measures of local authority income for the year.
Finally, we are making a series of minor amendments that are aimed at reducing complexity across the system wherever possible, which noble Lords will, I am sure, value. These include disapplying provisions that are no longer required, future-proofing routine calculations and streamlining a number of small funding mechanisms.
These amending regulations make technical changes to the business rates retention system, putting into effect what is required due to funding reform and changes to business rates tax policy. If approved, they will ensure that councils receive the business rates income the system is designed to deliver. I beg to move.
Baroness Pinnock (LD)
My Lords, I draw the Grand Committee’s attention to my interest as a councillor on Kirklees Council.
This is a very technical measure and a bit of a mixed bag. The reset of the business rates retention system is long overdue and welcome. For too long, the distribution of resources has been based on figures from when the system was introduced in 2013, so recalculating each authority’s assessed need and business rate tax base to redistribute funding on a needs basis is welcome. Given that aim, it is surprising that the Government have not produced an impact assessment. The Explanatory Memorandum says within it that most authorities will find that the system works for them, but some will not, so an impact assessment would be very welcome to understand the winners and losers, and to what extent they are winning or losing. Can the Minister provide some basic impact assessment, not for all authorities but for those that will benefit most and least so that we can see how this will work in practice?
The safety net established in this SI is to be supported because, while any fundamental changes in the business rates system take place, it will enable local authorities to have stability in their known income. That is positive, but as far as I could see it is not explained how authorities already in a pooled system will be impacted, such as those in West Yorkshire. All the data provided is based not on a pool of authorities but on individual ones, so it would be helpful to understand how that works. The proposal for Section 31 grants is welcome, because it will also help remove the impact of volatility in the system.
The downside is, I guess, the move away from the whole purpose of the business rates retention system, when introduced 10 or 12 years ago, as an incentive for growth. The introduction of marginal tax rates—which is what they are—on growth that exceeds the limits could be viewed as a tax on success. That is somewhat at odds with the Government’s fundamental position that growth is everything. It does not seem to apply in this case. How far do they think that these marginal tax rates of 30% and 45% will encourage or discourage investment and growth in particular areas?
This is a mixed bag. The reset is necessary for fairness and a safety net is good for stability, but having worked figures would have been really helpful so that we could understand the consequences.
Lord Fuller (Con)
If I may speak before my Front Bench, of course we welcome the introduction of multi-year settlements. Local authorities have been crying out for that for many years, and I can see that this is part of the path that we are going down.
The noble Baroness, Lady Pinnock, identified the importance of incentives—incentives for councils to do the right thing and go the extra mile. Sometimes those incentives help the council, as a promoter or joint enterprise with those people who wish to invest in an area, to make the case to local residents who may not necessarily welcome development. In my nearly 20 years as a council leader, I used the new homes bonus, as well as business rates retention, as powerful examples to otherwise semi-hostile or reluctant residents for us to make those investments.
Back in those days—the noble Baroness, Lady Pinnock, talked about 10 years ago and it must have been all of that—there were really powerful and compelling reasons for our authority, which was a high-growth authority, to pal up with all our neighbours, not all of which were quite so pro-growth as we were. By giving away some of our growth, the pot over the entirety of Norfolk was greater; there was that compelling case for co-operation. But I can tell the Committee that, over subsequent years, particularly more recently—I should stress that I am no longer the council leader doing these negotiations, but they are fresh in my mind—
Lord Fuller (Con)
I was mid-flow. I was making the case that, in the early days of business rates retention and pooling, there was an exceptionally compelling case to co-operate. Even if we gave away a little of our own growth as a local authority—I was the leader—the pot was large enough that we did not lose out. However, ever since, the incentive to grow through business rates retention and, in particular, pooling has become weaker and less compelling. It has been harder to demonstrate the benefits of growth to a sceptical population.
The trouble is that, through this instrument, it is not just that the train tracks have narrowed and the bid offer spread has become more constrained; a series of disincentives have made it significantly less attractive. I understand why there has to be a reset, but the cliff edge of the reset means that those councils that have worked hard to do the right thing are seeing that growth be snatched away. That is a pretty powerful disincentive to do the right thing.
Increasing redistribution means that, however well you do above the baseline, more and more gets taken away. That is a further disincentive. Now, there is an additional factor that weighs against the co-operation that makes everybody better off: the tweaks. It is more than a tweak, in fact; it is a tilting of the playing field against those who are growing hard and in favour of the indices of multiple deprivation.
I do not deny that some areas are poorer than others but, when you take into account each of these detractors from the incentive to grow, you find out that there are rewards for sitting back and not pushing the envelope. Those councils that can just sit back and wait for the others to do well are the undeserved beneficiaries. This is not to say that there should not be any redistribution—I am not making that case at all—but through this instrument and, in fairness, others over the past three or four years, we are getting to a situation where, if nobody is really incentivised to do the right thing, why should anybody do the right thing? Why should any council leader go out on a limb, as I did, to sell the benefits of growth and explain to residents and businesses, “If you come with me on this one, you’ll pay less council tax, the economy will be stronger, there’ll be more jobs”, and so on?
There is no taste in nothing. Diluting the incentives to do the right thing even more, as this instrument does, means that we will all end up in a rather tasteless situation that achieves neither what the Government crave nor what this nation deserves.
Lord Jamieson (Con)
My Lords, first, I draw the Committee’s attention to my interest as a councillor in central Bedfordshire. I thank the Minister for introducing these regulations. I agree with the two previous speakers that it is positive that there is a three-year settlement.
This instrument forms part of a wider set of reforms to the business rates retention system ahead of the 2026 reset. It makes a number of technical changes to how the system operates in practice, particularly in relation to the levy on growth, the safety net and the treatment of compensation for reliefs and multiplier changes. However, as the noble Baroness, Lady Pinnock, and my noble friend Lord Fuller have said, these regulations will have an impact on growth and incentives.
We recognise the Government’s stated intentions both to realign local government funding with need and to ensure that the system continues to function smoothly as wider reforms are introduced, but those objectives cannot come at the expense of undermining incentives for local economic growth and for high-performing councils. It is the Government’s stated intention to promote growth; I query how this instrument fits with that intention.
These regulations replace the existing levy cap with a system of marginal rates on growth. In many cases, the effect will be that local authorities retain less of the proceeds of the very development they are being asked to support. That raises a fundamental question: if councils see a diminishing or even negative financial return from growth, why would they take on the costs and complexities that often come with approving new development? As my noble friend Lord Fuller said, new development is not free; you may need to invest in infrastructure or provide incentives for someone to come to your area. There are also social costs in the wider sense, such as busier roads, the loss of green fields, busier doctors, a lack of GP surgeries and so on. What is the incentive for local councils and councillors to promote growth if there is no financial recompense that they can use to invest in their communities?
Local authorities are not passive actors in this system. They make those difficult decisions concerning planning, infrastructure and local services. If the link between growth and local benefit is weakened, the Government risk tilting the system away from enterprise and towards dependency on redistribution. I ask the Minister directly: what assessment has been made of the impact of these changes on councils’ willingness to bring forward new development? Can the Minister set out more clearly which types of authorities stand to lose out under these changes? What assessment has been made of the impact on local financial planning and rates collection as a result? This largely mirrors what the noble Baroness, Lady Pinnock, raised around the idea of an impact assessment.
Baroness Taylor of Stevenage (Lab)
My Lords, I am grateful for all those comments. It is absolutely important to get the balance right between incentivising growth and ensuring that areas needing it benefit.
Like the noble Lord, Lord Fuller, I took the decision to go into a pooling arrangement. I will cite my area as an example of the difficulty. These are figures from a few years back, because I am not involved with it now, clearly. Our collection of business rates was around £44 million, and we got about £2 million back. We need to make sure that we continue to incentivise the growth we want to see. I will cover in a bit more detail some of the points that noble Lords raised.
On the impact assessment that the noble Baroness, Lady Pinnock, raised, the changes made by the instrument will put in place reforms delivered via the local government finance settlement. More information on the impacts of the charges is included as part of that settlement. The instrument will put in place the technical figures and formulas relating to that. I add that because these are technical regulation amendments, policy officials in the department have undertaken extensive engagement to prepare for their implementation, including consultations and targeted technical engagement with sector representatives and specialists, to make sure the proposed amendments achieve the correct policy intent. I hope that answers the noble Baroness’s points on impact assessment.
I am grateful to the noble Lord, Lord Fuller, for his welcome for multi-year settlements. He and I both argued long and hard for that over the years, and I am very pleased that we have been able to deliver that.
The noble Baroness, Lady Pinnock, asked about local authorities being affected by the Government changing how they are compensated for business rates relief. Now that we are compensating for reliefs via Section 31 grants, based on data collected from the authorities themselves, they will receive pound-for-pound reimbursement. They will be compensated by the usual annual data collection process, based on their returns, and this mirrors the way compensation for reliefs via Section 31 grants currently operates. Previously, authorities were funded for most reliefs through a reduction to their tariff or an increase in their top-up. Given that these amounts remained fixed in real terms over time, they were expected to absorb some of the costs associated with certain reliefs. We think that this will actually be of benefit to local authorities.
Both the noble Baroness, Lady Pinnock, and the noble Lord, Lord Fuller, raised questions about the pooling method used. Transitional arrangements are in place to take local authorities, including those in pools, from current arrangements to their new arrangements, and this includes a measurement of the income they started from, including any income from pooling. Following consultation, we are making a change to better reflect income from business rates pooling, which is included in local authority transitional funding baselines.
The Government’s objective across this process has always been to make the best possible estimate of current local authority income. The revised method will still ensure that pooling gains are allocated across the locally pooled area. Within each pool, 50% of levy savings will be allocated between tariff authorities and 50% will be allocated between top-up authorities. The complexity and variety of pooling arrangements, which the Government are not directly involved in, mean that a central assumption is used to estimate pooling gains for this specific purpose. To help councils adjust for the change, the Government will provide a one-off adjustment support grant in 2026-27 to authorities that would otherwise see their core spending power reduce in 2026-27. The pooling assumptions for 2027-28 and 2028-29 will be subject to consultation at the next settlement. I have already started talking to local authorities about this.
I think all Peers who have spoken referred to the potential for growth disincentive. The business rates retention system was designed to be reset periodically to update the way it redistributes locally retained business rates between local authorities, which is a core aspect of the system. The reset will move business rates income, which is retained locally by local authorities, to where it is needed most, based on an updated assessment of need. Recalculating available business rates alongside a new assessment of funding need will ensure that business rates income is reallocated to meet changes in relative need, restoring the business rates retention system to its intended purpose of providing a responsive funding stream for local government while also rewarding authorities for business rates growth. Business rates growth can be realised. A proportionate levy will be applied to growth to ensure that income protections can be offered to local authorities. Of course, business rates growth generated within designated areas such as freeports, enterprise zones and investment zones will be exempt, in line with the current policy.
In setting levy rates, the Government are balancing the reward of business rates growth with the need to fund safety net protections. This will always be a balance. I think all noble Lords agreed that the reset was necessary. The approach we are taking will better support growth across the sector, with a lower percentage levy charge for early business rates growth in comparison with the current scheme, and the highest margin at a lower rate than the current 50% levy that many authorities are currently subject to.
To conclude, the technical amendments made by this instrument are necessary to ensure that the business rates retention system operates as intended for the coming year. I hope that the Committee will join me in supporting it.
House of Lords
Oaths and Affirmations
Onshore Wind Farms
(1 day, 4 hours ago)
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Lord Teverson
To ask His Majesty’s Government what steps they are taking to facilitate the repowering of onshore wind farms.
The Minister of State, Department for Energy Security and Net Zero (Lord Whitehead) (Lab)
The Government recognise the importance of repowering to maximise the benefits from our existing fleet of turbines. We are working to remove barriers in the planning system to accelerate repowering and undertaking updates to planning policy in England. In addition, the Government have announced changes to enable repowered onshore wind projects that meet eligibility criteria to bid into the contracts for difference scheme from allocation round 7 onwards.
Lord Teverson (LD)
My Lords, I welcome the Minister’s positive reply. There are some 200 wind farm sites coming up for operational termination by 2030—some 3 megawatts of power. If we managed to repower those, we could have an additional 2 gigawatts without having new sites. That clearly makes sense. Will the Government strengthen the planning guidance for repowering, as the Minister has indicated, because that gets in the way, and will he integrate repowering into the strategic energy spatial plan? It is obvious—come on, let’s do it.
Lord Whitehead (Lab)
The Government are already undertaking changes to planning arrangements to make sure that schemes can proceed faster and more immediately. In the case of repowering, that is obviously the difference between having to treat a scheme as a brand new development and one that can proceed very quickly, with the necessary consents in place.
Baroness McIntosh of Pickering (Con)
Will the Government consider very carefully the cumulative impact of the repowering of overhead powerlines in conjunction with onshore wind farms? Does the Minister not see that it is creeping urbanisation of the countryside, which should be avoided at all costs? At the very least, we should use the electricity generated in that way locally, so that it is not transmitted the length of the country through overhead power lines.
Lord Whitehead (Lab)
I had thought that I was talking this afternoon about the repowering of wind turbines—that is, turbines that have completed their life in terms of their original blades and mountings, and which are out of the renewable obligation certificate period. The question for those sites is whether they repower, go merchant or close down. That is what the Question was about, but obviously, the issue of cable repowering is more about ensuring that the cables we have across the country can carry the new loads that we hope will be within their capability for the future. That is really a question of making sure that it is done in the most environmentally friendly way possible, but at the same time moving at considerable speed by changing the planning regulations as fast as possible.
Lord Lennie (Lab)
The planning presumption during the Tories’ 14 years in power was that if a single objector objected to an onshore power plant, it was rejected automatically. Can the noble Lord say whether the planning presumption will change in favour of onshore power plants rather than against them?
Lord Whitehead (Lab)
Well indeed. The first thing, literally, that the Department for Energy Security and Net Zero did upon the Labour Government taking office was to remove the ban on onshore wind and make sure that it could in future play a full part in the development of UK wind, as we have begun to see in the allocation rounds. It is a crying shame that onshore was effectively banned for such a long time and is only now recovering.
Lord Morse (CB)
My Lords, is the Minister aware of the deep anger and enduring resentment felt about the way in which the heritage coast of Suffolk, an area of outstanding natural beauty, is being laid waste by the enormous mess of both rebuilding Sizewell and bringing onshore a series of ill-reconciled offshore programmes? This annoyance is added to by the dismissal of many of the points being made in consultation as nimbyism. Are we going to have a similar performance with onshore power?
Lord Whitehead (Lab)
I am sure we will not, because onshore power, like offshore power and all other forms of renewable power, has to abide by planning guidelines and guidance and has to fit in well with all the environmental considerations that are being put forward. There will be no change in that requirement; it is just that with the speeding up of some of those processes, onshore wind, where it is requested and where it fits all those requirements, can proceed very quickly.
Lord Swire (Con)
My Lords, why are the Government so steadfast in their refusal to have a proper, open debate about the relative benefits, environmental and otherwise, of burying power lines as opposed to having overhead power lines? This is not an argument that is going to go away. It is about time the Government fessed up on this and stopped relying on hugely inflated figures provided by the national grid.
Lord Whitehead (Lab)
I am slightly puzzled by the noble Lord’s enunciation of that question, in that renewable wind and overhead power lines go closely together, because the overhead power lines have to deliver the power that is being generated by the renewable power sources. As for the requirement that that variable output be matched by various other sources of energy when, for example, the wind is not blowing and the sun is not shining, that is well taken care of by the back-up that is already in the system—due, I might add, to a number of renewable sources also being non-variable.
Baroness Hayman (CB)
My Lords, I declare my interest as a director of Peers for the Planet. Given what the noble Lord, Lord Teverson, said, in asking this Question, about the increased productivity of onshore wind when it is a replacement for existing infrastructure, is it not time that the Government did as he said and got on with it? I remind the Minister that the urgency of coming to conclusions on repowering existing onshore wind was included in the Private Member’s Bill that I introduced in your Lordships’ House some five years ago.
Lord Whitehead (Lab)
I pay tribute to the noble Baroness for all her work in this field and for introducing that Bill. As far as getting on with it is concerned, there is nobody who wants to get on with it more than I do. The noble Lord, Lord Teverson, has drawn attention to the fact that we have probably 10.7 gigawatts or more of onshore wind capacity that could retire between 2027 and 2042, and those onshore farms will be completely lost if they retire without any repowering. So repowering is clearly essential, not only to keep those wind farms going on the same sites but because of the tremendous power gain that could come about by using modern turbine methods and modern blades to increase the output by perhaps up to two-thirds when those existing sites are repowered.
Lord Moynihan (Con)
My Lords, when considering repowering our intermittent wind energy when, to use the Minister’s words, the sun does not shine or the wind does not blow, does the Minister agree that the main energy policy lesson from the current crisis is that, as a nation, we should prioritise our own firm power energy independence? Does he agree that the best way to achieve this is to reduce our LNG imports from the Gulf and the US by accelerating gas development in the North Sea, and for his department to provide the one piece of paper we are all waiting on—the approval of the Jackdaw gas field to heat 1.6 million British homes this autumn?
Lord Whitehead (Lab)
We have been around this path several times before recently. Suddenly introducing lots more gas into the system will make no difference to the resilience of this country against international prices, whereas developing genuinely homegrown power over a period makes all the difference. I should add that homegrown power is not just variable homegrown renewable power; it can be batteries, biomass and so on, which can be firm power in its own right. It is a question of getting the whole picture together to make sure that variable power and firm power on a renewable basis complement each other, so that you have reliable power that is homegrown and secure in the long term.
Ukraine: Reparation
(1 day, 4 hours ago)
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Baroness Goudie
To ask His Majesty’s Government what plans they have to earmark a dedicated proportion of any future UK financial assistance, loans, or aid packages to Ukraine to finance reparation.
The Minister of State, Foreign, Commonwealth and Development Office (Baroness Chapman of Darlington) (Lab)
We remain committed to the principle that Russia should pay for the damage that it has caused. We will continue to co-ordinate with international partners to ensure that Ukraine gets the funding it needs. In December 2025, the United Kingdom signed the convention to establish an international claims commission for Ukraine. The commission will assess claims submitted under the register of damage to determine future compensation amounts to be repaid by Russia.
Baroness Goudie (Lab)
My Lords, the United Kingdom’s support package for Ukraine must include financial reparation for survivors of human rights abuses. Frozen Russian assets must be utilised to support this objective. The Government must continue to work with the G7 and the European Union. The Ukraine Facility provides the financing for Ukraine, upon satisfactory fulfilment of the conditions laid down in the Ukraine plan 2024-27. This sets up both the investment and the reform agenda for Ukraine, including the measures to strengthen the rule of law. Assistance must be linked to policy conditions, including assistance for the financing of compensation as a form of reparation to individuals who have suffered damage from the illegal actions of Russia.
Baroness Chapman of Darlington (Lab)
I agree with my noble friend, and that is why the register and the commission are vital parts of the role the UK is playing to support Ukraine.
Baroness Bull (CB)
My Lords, as of late 2024, Ukraine’s Ministry of Culture has recorded at least 2,000 instances of damage to and looting of cultural sites and infrastructure—museums, libraries, religious sites, historical buildings and so on. Does the Minister agree that this wanton destruction of cultural heritage is a war crime and is a blatant act intended to destroy cultural identity and the distinct nationhood of Ukraine? If so, will the Government commit to ensuring that financial reparation will include restitution, repatriation and reconstruction of these cultural assets, which are so vital to Ukraine’s historic and future identity?
Baroness Chapman of Darlington (Lab)
The noble Baroness draws our attention to an important aspect of this hideous war: the attack on Ukrainian identity. One of the ways this is put into effect is through the deliberate, wanton destruction of cultural artefacts. They can be registered, and decisions will be made; I think there are 130,000 registered acts that have been included so far, though obviously there are far more that we can expect to be included. All of these things need to be considered, because this is not just about territory, it is about Ukrainian identity.
Lord Cameron of Chipping Norton (Con)
My Lords, does the Minister agree with me that we should not give up on the idea that the frozen Russian assets themselves should be used, rather than just making loans or payments on their behalf? They should be seen as a downpayment on the reparations that Russia will one day rightly have to pay.
While at the moment we clearly do not see the United States giving this conflict as much attention as we would like, I am sure the Minister has seen that the Ukrainians are inflicting record casualties on Russian troops through their brilliant use of drones. Does she agree that this proves this is a cause worth investing in and supporting, because the Ukrainians are in the right?
Baroness Chapman of Darlington (Lab)
Absolutely. We have all declared many times in this Chamber and elsewhere our admiration and respect for the people of Ukraine, and our determination to stand by them. The noble Lord’s last point was really quite important; we must remain focused on Ukraine, despite what is happening elsewhere. The innovation and learning that the Ukrainian fighters have been able to glean from their heroic efforts will be absolutely vital in defending against drone attacks in other parts of the world.
Lord Purvis of Tweed (LD)
My Lords, the excellent question the noble Lord, Lord Cameron of Chipping Norton, just asked the Minister was one that I asked him two years ago; regrettably, it is still a question that needs to be asked, however. The Government have now frozen upwards of £25 billion of Russian assets. Does the Minister agree that it would be inconceivable for the Putin regime to be rewarded by getting their assets back after all the horrors they have inflicted on the Ukrainian people? Should we not seize these funds and allow Ukraine to fight for its own sovereignty and repair the damage that has been inflicted on it?
Baroness Chapman of Darlington (Lab)
I think that is pretty much impossible to conceive of. I know the noble Lord and my noble friend are aware of the current sanctions regime, under which we can freeze assets but not seize them. However, we need to make sure that, however it is done, Russia will pay the price for its illegal aggression in Ukraine.
Baroness Chakrabarti (Lab)
My Lords, I agree with my noble friend the Minister that it will take careful work to construct an appropriate legal structure for the redirection of frozen assets in the future. In the meantime, what is happening to the interest?
Baroness Chapman of Darlington (Lab)
That is an interesting point. Any interest must be dealt with fairly and the principle that the aggressor pays must be maintained. On consideration of what is done with the interest, this is being dealt with differently and has been used to support loans to Ukraine. The fundamental point that really matters is that it is Russia that needs to pay for the consequences of what it has chosen to do.
Baroness Rawlings (Con)
What assessment have HMG earmarked for other refugee movements in the Middle East?
Baroness Chapman of Darlington (Lab)
We are working very closely with allies and partners in the Middle East. We have announced very recently some additional funding, particularly for Lebanon, which has been a long-standing host for displaced people, and the same in Jordan and elsewhere. We will continue to play the fullest role in supporting those displaced communities.
Lord Hannay of Chiswick (CB)
My Lords, can the Minister say whether, in the discussion that the Prime Minister had at the weekend with the President of the United States, he drew attention to the talks that President Zelensky had with us in Westminster last week and emphasised the need to keep the pressure on Russia? Given President Trump’s capacity to change his mind, might it not be worth having another go at that?
Baroness Chapman of Darlington (Lab)
The Prime Minister does not need me to remind him to raise the importance of standing shoulder to shoulder with President Zelensky and the people of Ukraine at every opportunity. I know that he does this and will continue to do so.
Lord Callanan (Con)
My Lords, I think there is unanimity across the House. I find myself agreeing on this matter with both the noble Lords, Lord Purvis and Lord Cameron, and the noble Baroness, in that Russia should fund the reparation of the appalling damages that it has inflicted on the people of Ukraine. To that end, can the Minister tell the House where the Government have got to in their pursuit of utilising the assets of the sale of Chelsea Football Club to help in that cause?
Baroness Chapman of Darlington (Lab)
We continue in our position that those assets should be used to support the people of Ukraine. We will continue to use whatever mechanisms we can to bring this about. It needs to be done in lockstep with our partners and that is the approach we have taken. We will act within the law, because we think that is the right thing to do. However, he is right to raise this and there is money there that should be going to the people of Ukraine—that is what was promised.
Lord Teverson (LD)
My Lords, given that Ukraine has gone slightly below the radar because of the Middle East, does the Minister agree that the coverage over the past year was quite negative about Ukraine, but it has turned out more recently that Ukraine does have the cards and is very successful in its resistance to the Russian invasion?
Baroness Chapman of Darlington (Lab)
This is a war that was meant to last three weeks, if that, and look at where we are in 2026, and what we are learning from—and how we are being inspired by—the people of Ukraine. This does need to end. Ukraine is ready for peace; it has said it is ready and willing for a ceasefire. It is Russia that is prolonging this dreadful conflict. We still have close to 20,000 Ukrainian children held in Russia. This is wrong and it could—and should—stop now.
Migraine Care: 10-year Health Plan
(1 day, 4 hours ago)
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Lord Londesborough
To ask His Majesty’s Government what plans they have to improve access to migraine care through the 10 Year Health Plan for England.
Lord Londesborough (CB)
My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I declare my interest as a migraine sufferer.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, the Government are committed to improving migraine care through the 10-year health plan. We are strengthening neurological services by expanding community-based care and community diagnostics for earlier identification, widening the availability of effective treatments, such as calcitonin gene-related peptide inhibitors, and enhancing the NHS app. NHS England’s neurology programmes are also expanding specialist capacity, reducing avoidable A&E attendances and helping people with migraine to remain in work and maintain their well-being.
Lord Londesborough (CB)
I thank the Minister for engaging on a subject that has been raised just once in this House since 1961—which is extraordinary, as we have 10 million migraine sufferers in the UK, more than half of whom have no diagnosis or access to preventive medication. Migraines cost the wider economy more than £10 billion per annum in lost productivity and tax revenues, with hundreds of thousands of capable people unable to work due to lack of treatment, so does the Minister agree that there is a compelling economic as well as compassionate argument for better GP training, more neurologists and including migraine in the NHS Pharmacy First scheme?
Baroness Merron (Lab)
I agree with the noble Lord. I appreciate the conversations we have had prior to this Question and acknowledge that he is one of the millions of people suffering from this condition. There is certainly a substantial economic and NHS impact from migraine. I am glad my department is working with the Department for Work and Pensions on a number of initiatives, including the WorkWell programme and the individual placement and support in primary care initiative, which are all focused on supporting those with migraine to stay in work and get back to work.
Baroness Winterton of Doncaster (Lab)
My Lords, the approach that my noble friend the Minister has outlined regarding migraine care is very welcome. The 10-year plan also talks about cholesterol management due to its links to cardiovascular disease, but the plan can quite often be confusing for the patient in terms of the care that is provided. A simple example would be suggesting that cheese is bad for cholesterol but good for osteoporosis. HEART UK has therefore raised the fact that there should be a holistic approach to the patient. Can my noble friend make sure this happens in the 10-year plan and the delivery of it?
Baroness Merron (Lab)
I can indeed say to my noble friend that a holistic approach is exactly at the core of the 10-year plan, as is the enhancement of care through expanded community diagnostics, better prevention and the use of personalised digital tools, including the NHS app. All these will be helpful in the way my noble friend seeks. The workforce plan, which we will see shortly to support the 10-year health plan, will also acknowledge the need to see people holistically and to staff up accordingly.
Lord Scriven (LD)
My Lords, there has been a more than 20% increase in the number of emergency hospital admissions since 2021 due to this condition. Will the Government include and fund migraine in the Pharmacy First scheme and empower pharmacists to prescribe for this high-volume condition?
Baroness Merron (Lab)
We constantly review and discuss with pharmacists the range of conditions they cover. It has been one of the highly successful ways of making community-based care available, and we certainly want to continue to work with pharmacists. It is also important to note that more modern treatments are available now on prescription, which will all also support people to manage their condition and will reduce unnecessary A&E admissions.
Baroness Manzoor (Con)
My Lords, as has already been mentioned, over 10 million people in the UK suffer from migraine, and it is highly prevalent in women. It is also linked to anxiety and depression. I welcome what the Government are doing in extending women’s health hubs and emphasising mental health in the 10-year plan but, unfortunately, there are no systematic gateways for migraine care in the 10-year plan. How can the Government address this in the light of the significant problem that there is? I am also sorry to hear that the noble Lord, Lord Londesborough, suffers from migraine.
Baroness Merron (Lab)
It is important that we acknowledge that this is a debilitating condition. The noble Baroness is right that it is one of the most common neurological conditions, affecting one in five women and one in 15 men. Indeed, it is a major cause of disability. The 10-year plan sets out the main pillars. For example, there will be an updated adult neurology service specification, which will come into being just next month. It was published in August, and I believe it will take account of the points the noble Baroness rightly raises.
Lord Hunt of Kings Heath (Lab)
My Lords, my noble friend the Minister, very welcomely talked in her first response about widening access to treatment. My understanding is that NICE guidelines can be very tight for some of those treatments. As part of the work she has put forward, can my noble friend ask NICE to review its guidelines to make sure they are absolutely up to speed?
Baroness Merron (Lab)
As I know my noble friend is well aware, the eligibility criteria are set independently by NICE. They are based on clinical evidence and cost-effectiveness, rather than being set by Ministers. However, it is worth saying that the introduction of oral CGRPs, which do not require specialist initiation, will significantly widen access through primary care and reduce the bottlenecks in the system. We are very keen that people can access effective drugs, and I take on board the point my noble friend made.
Lord Kamall (Con)
My Lords, I thank the noble Lord for the Question, because although many people think that migraines are just bad headaches, they are in fact a distinct, complex neurological condition. They are responsible for 43 million lost working days each year and are estimated to cost the UK economy up to £4.4 billion. The Minister rightly talked about calcitonin gene-related peptide therapies, but apparently only about 29% of trusts allow access to CGRPs. I welcome what the Minister said about increased access via primary care, but I note that these drugs prevent migraines by targeting a molecule involved in pain transmission. What specific steps is the Minister’s department taking to increase access to these treatments in addition to the primary care initiatives?
Baroness Merron (Lab)
We very much recognise the concerns that people may face unnecessary hurdles when trying to access CGRP treatments. NHS England is working with integrated care boards to ensure that the pathways being followed are consistent and timely. It would perhaps be helpful for me to mention some of the national tools, such as NHS RightCare’s headache and migraine toolkit and the Getting It Right First Time recommendations; they also speak to the clearer referral rates that the noble Lord called for and reduce variation. We want people to receive appropriate treatments; we do not want them to be delayed.
Lord Patel (CB)
My Lords, migraine as a symptom is a manifestation of a whole spectrum of different diseases, both neurological and vascular, and some are based on allergies. The important aspect of treating migraines is correct diagnosis, and advances in diagnostic techniques, including some of the treatments that the Minister mentioned, are now making that easier. Does she agree that, in addition to having a community-based service, it is important to train the right people to make the right diagnoses, so that patients can get the right treatment at the right time, no matter who dispenses or prescribes it?
Baroness Merron (Lab)
I certainly agree. NICE’s headache guidelines and the Royal College of GPs’ training modules support that better recognition and management.
Baroness Blower (Lab)
My Lords, speaking as a person who was identified as possibly prediabetic and having a significant heart and cholesterol problem, I can tell the House that, when I looked at the charts of what I might be able to eat from both of those sources, it seemed I was left with kale and cucumber. A holistic approach for this is very important, and I am pleased to say that I am very healthy and do not eat only kale and cucumber.
Baroness Merron (Lab)
I am sure your Lordships’ House is, like me, delighted to hear that about my noble friend.
Companies: Online AGMs
(1 day, 4 hours ago)
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Lord Lee of Trafford
To ask His Majesty’s Government what assessment they have made of the effect of companies holding their annual general meetings solely online on individual shareholders’ ability to hold directors to account.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Innovation and Technology (Baroness Lloyd of Effra) (Lab)
My Lords, the Government announced on 20 January that fully virtual annual general meetings would be included in the upcoming consultation on modernising corporate reporting. Officials are engaging with investors and businesses on the practicalities of this. We will ensure that fully virtual meetings take place only where shareholders agree and that any change is accompanied by appropriate shareholder safeguards, co-created with investors and business. A full assessment will be made following the consultation and engagement period.
Lord Lee of Trafford (LD)
My Lords, too often directors forget that it is shareholders who own the company. To hold AGMs entirely virtually, barring shareholders’ attendance, is in my view arrogant, unacceptable and sometimes, frankly, cowardly. Institutional shareholders have near-continuous access to boards, but the AGM is normally private shareholders’ only opportunity. It is not just the formal part of the meeting but the opportunity to meet and question directors in the margins of the meeting. Of course, sometimes only a handful of shareholders turn up, and, yes, there is a cost, but we are talking here of the principle of shareholders’ rights. Surely the way forward is hybrid AGMs, with a choice of either virtual or physical attendance.
Baroness Lloyd of Effra (Lab)
The Government are not mandating virtual AGMs and there will be nothing to stop companies holding hybrid AGMs. As the people best placed to make decisions about their businesses, we are giving companies and shareholders the legal certainty to undertake fully virtual AGMs if it is right for them. Many investor groups in favour of hybrid AGMs support fully virtual AGMs in extraordinary circumstances. This legal clarity will provide companies the certainty they need in those situations.
Viscount Hailsham (Con)
My Lords, may I suggest that members of the awkward squad are more readily controlled in virtual meetings, and that is thoroughly undesirable? It is much better to have open general meetings, when members of the awkward squad can speak out.
Baroness Lloyd of Effra (Lab)
What we are doing through the consultation on modernising corporate reporting is delivering on our commitment to provide legal clarity on the grey area of whether companies can hold fully virtual AGMs. It would be up to shareholders and businesses to decide whether to take that forward. The proposals that we put forward will be accompanied by appropriate shareholder safeguards.
Lord Sikka (Lab)
My Lords, there is nothing in the Companies Act to say that shareholders own companies. They may have controlling rights, but that is not the same as ownership. Besides, shareholders may have short-term interests in companies; therefore, is it somewhat foolish to leave them with the control to direct companies. It is workers and customers who have lifelong interests in companies, and it is time that the Government empowered those stakeholders to promote growth and the welfare of our whole society.
Baroness Lloyd of Effra (Lab)
If my noble friend is referring to Section 172 of the Companies Act, which already requires directors to have regard in their decision-making to employee interests and
“the impact of the company’s operations on the community and the environment”,
that is a very important principle.
Lord Livingston of Parkhead (Non-Afl)
My Lords, I have been a director, and not a cowardly one, at more than 50 AGMs over the last 30 years. Some AGMs have one attendee or none, some have a few tens, some have hundreds. The costs can often be thousands of pounds per attending shareholder. Given that shareholders can vote and ask questions remotely, should it not be up to the companies to decide—which shareholders can vote on—whether they wish to have in-person AGMs or to do it completely remotely, depending on the companies’ circumstances?
Baroness Lloyd of Effra (Lab)
The noble Lord sets out the rationale for why this will form part of the modernising corporate governance consultation. It will be in the hands of the shareholders and the businesses to decide. In fact, 85% of OECD Factbook countries, including the US, Germany and Japan, already allow virtual AGMs. So this is a proposal to bring the UK into line with other comparable countries, and to clarify the legal situation.
Baroness Bottomley of Nettlestone (Con)
The AGM is a more than convenient opportunity for shareholders in this sector to express their views. Of course, they all wish that the awkward squad would stay at home, as we do in this place, but we have to put up with the awkward squad—and my noble friend is very effective at that. The Minister will know that ShareAction provides evidence that online-only meetings allow boards to
“manipulate the agenda, ignore questions and avoid scrutiny”.
Investor groups describe in-person shareholder interactions as the “cornerstone” of the financial system. Even the FRC says that the AGM provides shareholders with the opportunity to see the whites of the directors’ eyes. From my point of view, it would be a great error to discontinue face-to-face meetings. We know it in politics, we know it in charity, and it is the same in business—even if only one person shows up to your board.
Baroness Lloyd of Effra (Lab)
We are putting this forward in the modernising corporate reporting consultation to clarify the legal situation for fully virtual AGMs, as I mentioned, to bring the certainty into line with other international jurisdictions. We are engaging with investors on what those shareholder rights and safeguards might look like, so that if shareholders and businesses want to move to fully virtual AGMs, we will know what they might be. Examples could include five-year shareholder votes or best practice or guidance of that kind.
Lord Fox (LD)
My Lords, if it is the Minister’s prediction that it is left up to shareholders to make the decision, the institutional shareholders will always outvote the individual shareholders. That is why individual shareholders should have their day at an AGM. When I organised AGMs for the three FTSE companies that I worked for, the chairman and I worked very hard on preparing for the questions that the awkward squad would be coming up with at those AGMs. To remove the proximity of the shareholder from the chairman is to lose that important check. Will the Minister go back and make sure that this is a firm part of the consultation?
Baroness Lloyd of Effra (Lab)
All noble Lords and the noble Baroness have raised the importance of AGMs. They are incredibly important. They are important for engaging shareholders, large and small, but particularly, as has been mentioned, those who perhaps do not have an institutional voice. We are engaging with investors and the shareholder representative organisations on what the shareholder safeguards should be, so that will be taken into account in the consultation.
Lord Hunt of Wirral (Con)
My Lords, one of this country’s greatest strengths is our financial services sector and yet many of our firms face unnecessary regulatory and administrative burdens that make it so much harder to focus on their primary duty, which is to shareholders. In the light of the Government’s commitment to cut regulation by 25%, and given those additional pressures that businesses already face from higher employment costs and growing compliance demands, will the Government now set out what specific steps they will take to reduce the regulatory burden on financial services so that this vital and growing sector can deliver better value for shareholders, attracting investment and economic growth?
Baroness Lloyd of Effra (Lab)
As the noble Lord mentioned, getting the right regulation and reducing the administrative costs is a priority for the Government and in many areas we have already taken action to do that; for example, we no longer require certain companies to produce a strategic report. We will continue to work through the sectors and across all companies on reducing those administrative costs.
Lord Leigh of Hurley (Con)
To get back to the Question from the noble Lord, Lord Lee, who speaks as an investor, I speak as chairman of a public company and a senior partner of Cavendish plc. We welcome shareholders coming to our AGM. It is quite true that there are some shareholders who go from AGM to AGM with plastic bags, hoovering up the biscuits, but others have very valid points to make. I have been to the AGM of a company with which I disagreed vehemently on the action the directors were taking, and I was able to get my view across. If that meeting had been virtual, I would have been shut down by the PR.
Baroness Lloyd of Effra (Lab)
As I mentioned earlier, we are not mandating virtual AGMs and there will be nothing to stop companies continuing to hold hybrid AGMs. Through this consultation we are clarifying the legal grey area and providing certainty about the legitimacy of hybrid AGMs where certain shareholder safeguards are in place.
UK Homeland Defence
(1 day, 4 hours ago)
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Lord Harris of Haringey
To ask His Majesty’s Government what assessment they have made of UK homeland defence in light of the long-range missile capabilities demonstrated by Iran in their strike on the Diego Garcia military base.
Lord Harris of Haringey (Lab)
My Lords, I beg leave to ask a Question of which I have given private notice, and in so doing I draw attention to my registered interest as chair of the National Preparedness Commission.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
My Lords, noble Lords will be aware that the Secretary of State for Defence will shortly make a Statement in the other place, and I will not pre-empt what he will say. However, I will say that the UK has taken a series of actions to strengthen our collective defence. NATO remains the cornerstone of allied deterrence and defence. NATO’s ballistic missile defence system was designed to deal with precisely this type of threat. We have already seen it in action during this crisis, successfully intercepting missiles that were aimed at Turkey. The MoD is strengthening homeland security, investing up to £1 billion in capability, including air and missile defence, improved munitions stockpiles and readiness at scale to deter and respond to threats.
Lord Harris of Haringey (Lab)
My Lords, I am very grateful to my noble friend the Minister for that response. I am reassured by some of what he has said. However, it looks as though this Iranian capability is not necessarily hugely accurate and under those circumstances it may be difficult to be precise in terms of interception. What thinking is going on regarding guidance to people in this country about what to do in the event of some form of alert? Will there be alerts through the telephone emergency system? What will the guidance be for what people should do in the event of some form of incoming missile?
Lord Coaker (Lab)
First, the priority of the Government is to intercept any missiles, and the NATO umbrella is designed precisely to tackle that. Of the £1 billion that I outlined as a result of the SDR, we have committed to air defence and already started to spend some of that on various initiatives, including a £118 million contract to deliver state-of-the-art Land Ceptor missile systems to deal with some of the threat. My noble friend is right that, alongside the actions that the Government take to intercept the missiles, we need to talk to the public about the potential threats that they may face. Our assessment is that Iran poses no threat at the current time to the UK. However, we will, as my noble friend rightly keeps asking us, take the action needed to inform the public of the appropriate action that they should take in the event of any such threat coming about.
Baroness Goldie (Con)
My Lords, this conflict has laid bare the acute geopolitical threat that we face and the embarrassing sparseness of readily deployable UK military assets. The first is frightening, the second completely unacceptable. Will the Minister confirm that the discredited UK-Mauritius treaty is now dead and beyond resuscitation and that the excessively and embarrassingly delayed defence investment plan will now be elevated to an issue of urgent national security and published immediately?
Lord Coaker (Lab)
On the issue of the defence investment plan, I have nothing further to add to what has been said by the Defence Secretary and the Prime Minister. It will be published when it is ready to be published and we have completed work on it, which will be as soon as possible. Discussions continue on the appropriate way forward with respect to Diego Garcia, so discussions continue on the treaty. The noble Baroness and I are completely united, as everybody in this House is, on the importance of the Diego Garcia base, as we can see at the current time. The difference between us is on how best to protect that base. I take the noble Baroness’s point, but let me reiterate that we see the base as strategically important for the UK and will seek to defend our interests there.
Lord Purvis of Tweed (LD)
My Lords, last June our best and biggest NATO ally said that the Iranian ballistic missile programme had been completely obliterated. President Trump has more recently called NATO both cowardly and unreliable. The UK air defence system is heavily reliant on satellite technology and, when it comes to the UK providing our contracts for this, would it not be better that we have a greater degree of integrity around our own capability, rather than perhaps relying on political allies of President Trump, who himself is an unreliable partner?
Lord Coaker (Lab)
Let me deal with two separate issues on that. First, should the UK develop its own sovereign capability and do as much as we can to have the industry and intelligence that we need ourselves? Of course we should. The Government are taking action to rebuild and develop our own capabilities and industry. I have to say, with respect to the US, as the noble Lord has heard me say many times from this Dispatch Box, let us be under no illusions: the US-UK relationship is fundamental to the defence of our nation and fundamental to the protection of our values not only in this country but in Europe and across the world. The intelligence sharing and military-to-military co-operation that takes place is still absolutely essential to the defence of that. I know the noble Lord agrees with that. I will not get into what the President has said or has not said. All I am saying is that, for the intents of defending this country, our alliance with the United States is fundamental, and we should respect it for that.
Lord Stirrup (CB)
My Lords, surely the point here is not the threat from Iranian missiles, which would be operating at extreme range with limited payload and very poor accuracy. The lessons to be drawn from this conflict are the vulnerability of military and civilian sites to combined missile and drone attack, which are capabilities Russia has in abundance and the targets set in the UK will be particularly vulnerable to. The Minister has pointed out some of the investment that has been made since the SDR, but it is wholly inadequate to restore the military capability we need to defend these islands and to provide the necessary degree of resilience to such attacks. If the Government do not do something urgently in financing these capabilities correctly, then this country will be vulnerable to such attacks for years to come.
Lord Coaker (Lab)
I say to the noble and gallant Lord that, of course, we await the defence investment plan, but we are not waiting for it before we do things. I have pointed out the investment we have made into some air defence systems already, but he is quite right to point out that we need to make progress at pace, as quickly as we can, to defend against potential missile threats but also against drone threats, which he quite rightly points out. We are assessing what we can do, are trying to work at pace on that, and will do all we can to protect our country—which, as everyone says, is the first duty of any Government.
Lord West of Spithead (Lab)
My Lords, we have to realise that it is almost impossible to defend against exoatmospheric ballistic missiles trying to strike one’s country. Indeed, those are the nuclear warheads—if Russia ever goes to war, nuclear-wise—that will be coming towards us. They are hugely expensive and really difficult to take down. Drones are a different issue, and I agree with the noble and gallant Lord, Lord Stirrup, that we have to start spending some money there. May I ask a slightly different question? We never, ever go to war nowadays; even when I fought in the Falklands, it was not a war. If someone starts lobbing missiles at one’s population, that is war, is it not? Would we go to war? If you go to war, there are a whole raft of things that a nation does, some of them quite horrifying; we have not done those, but, surely, we would if people started trying to kill our public with drones in our major cities.
Lord Coaker (Lab)
I do not want to get into hypotheticals of what may or may not happen in the future about “If this were to happen, what would be the Government’s reaction?” The Government and the Prime Minister can and should take credit for the way they and he have handled what is happening at the present time with Iran; indeed, the public can also take credit for the way in which they have responded. We did not join in the offensive action to start with, but, as soon as we saw the indiscriminate retaliation from Iran threatening our citizens, our interests and our partners and allies in the region—who themselves were astounded by the Iranians’ indiscriminate response—the Government did not stand by and say they would not get involved but, because it was a legitimate legal basis on which to do so, said they would get involved in defensive action that did all it could to protect us from that threat. That is at the same time a realistic and strong way to respond, while abiding by international law.
Lord Polak (Con)
My Lords, I will not dwell on it but the disgusting destruction in Golders Green last night was despicable.
We are told that there are 20 IRGC-linked plots under investigation here in the UK. I will not ask why the Minister has changed his mind on the IRGC, but I would like to understand how the Government are assessing the combined threat of external missile capability and internal hostile activity directed by Iran.
Lord Coaker (Lab)
The whole House will totally agree with what the noble Lord said about the abhorrent antisemitic attacks in Golders Green, which were absolutely disgraceful and should play no part in our society at all.
On the IRGC, the Government continue to keep it under review. The noble Lord will know that there have been many changes of opinion. When I look at some of the votes that took place two or three years ago, it is quite interesting—noble Lords might want to see who voted for what. On the other serious point that he made about the Government’s assessment, the Government of course work very closely with the services to ensure that we keep any threats under review. We can be thankful for the work that our services do to keep us all safe, and that work continues.
Lord Spellar (Lab)
My Lords, I take account of the point raised by the Minister regarding the direct threat from Iranian territory. However, is there not a long-standing concern about the increasing grip of jihadist groups in northern Africa with the ability to be supplied by Iran, given that they are already often sponsored by Iran, and the ability to launch on a route for which there is not the NATO defence, which is rightly focused on the eastern side of the eastern alliance, and which makes Madrid, Paris and London very vulnerable?
Lord Coaker (Lab)
My noble friend makes an important and good point about instability in other regions. Obviously, the focus at the present time is on the Middle East, but clearly we can see problems in north Africa and wider. Only last week, I met with people from Nigeria and west Africa to talk about some of the things that my noble friend talked about. Any assessment of where we go and what we do in the future has to take account not only of threats that we face now but threats that we may face in the future. It is difficult to have a crystal ball, but all of us need to look at the problems that are occurring and how they may impact on us in our own homeland rather than believing that it is thousands of miles away and will never have any impact.
Viscount Hailsham (Con)
My Lords, may I suggest that there is now widespread public support for a very substantial and rapid increase in expenditure on defence?
Lord Coaker (Lab)
As the noble Viscount will know, discussions continue around that. As the British public consider the threats that they face and the turmoil in certain parts of the world, there will be an interesting debate about that. From talking to many people who, frankly, do not share the noble Viscount’s opinion, I know that they would rather see money spent on other things—health, pensions, schools, children and so on—but my view is that the first priority of government is that to defend your country. Some of the rights that everybody enjoy are there only because of the people who fought in the past. Hopefully, nobody will have to fight again, but let us remember that and remember that it needs defence funding to fund it.
Baroness Antrobus (Lab)
My Lords, I would argue that societal resilience is very much part of a country’s aura—how it comes across to its adversaries and how it is perceived—and that adds to our deterrence presence. Some of us heard from President Zelenksy last week about what it is like to live in constant fear of attack from the air and how that affects everything in life. Reinforcing the point that my noble friend made in questions, now is the perfect time to use the opportunity—that is a terrible word, but the fact is that we are seeing what is playing out in the Middle East—to have a direct conversation with the public, this week, next week and over the next few weeks, because they are focused on this and it is super urgent that we do that.
Lord Coaker (Lab)
It is very urgent to have that conversation. I think everybody understands and accepts that. I go back to the noble Lord’s point about defence spending; it requires that conversation, so that will take place. To pick up the other point, I have said time and again from this Dispatch Box that NATO, we and many of our friends and allies need to rediscover the theory of deterrence. You prevent war by preparing for war. You prevent war by people believing that you will actually respond if they break international law. That is a really important point. The rediscovery of deterrence is important. My noble friend’s point about having a national conversation is really important.
Lord Fox (LD)
My Lords, the Minister has mentioned defence spending on a number of different occasions without mentioning the defence investment plan. It would be remiss of your Lordships if we did not go back to the Minister and ask: when will this plan be published? Our credibility in NATO requires us to demonstrate the spending that has been announced, so when will the plan be published?
Lord Coaker (Lab)
I was hoping the noble Lord was going to start with the Leonardo announcement, which he pressed me for in terms of spending; we pocketed that one and moved on. Leonardo was a huge investment that the noble Lord was demanding I do something about. I went back, argued with the department and talked to other Ministers. There is a point about the defence investment plan, and I have answered the questions of the noble Baroness with respect to that. But let us be clear: defence is not standing still. There are many projects.
In Scotland, on the Clyde and in Rosyth, there are ships being built. Billions of pounds are being spent on Plymouth dockyards and on renovating military housing. There is the contract with Leonardo helicopters I announced earlier. Of course, there is a debate about what the total outlay by the Government should be, and we heard from the noble and gallant Lord, Lord Stirrup, and my noble friend Lord West about those matters, but the belief that the Government are not spending anything and not doing anything is something we should dispel, because billions of pounds-worth of investment are being put into the defence of this country, including, as we progress, into the air and missile defence of the country. That is something we can also be proud of and talk about, as well as the challenges we face.
Pension Schemes Bill
(1 day, 4 hours ago)
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16:58 - Division on Amendment 154 - Ayes: 77 / Noes: 161 - Amendment 154 disagreed.
17:36 - Division on Amendment 156 - Ayes: 202 / Noes: 225 - Amendment 156 disagreed.
18:40 - Division on Amendment 157 - Ayes: 241 / Noes: 175 - Amendment 157 agreed.
19:15 - Division on Amendment 162 - Ayes: 198 / Noes: 159 - Amendment 162 agreed.
19:27 - Division on Amendment 169 - Ayes: 188 / Noes: 155 - Amendment 169 agreed.
“Report on the impact of pension market consolidation(1) The Secretary of State must, within 12 months of the day on which this Act is passed, publish a report on the impact of consolidation in the occupational pensions market.(2) The report must include an assessment of—(a) the level of market concentration among pension scheme providers, including trends in the number and size of schemes;(b) the effects of consolidation on competition, innovation, and consumer choice in the pensions market;(c) the potential barriers to entry and growth for small and medium-sized pension providers;(d) the adequacy of existing regulatory and competition safeguards in preventing anti-competitive behaviour regarding—(i) exclusivity arrangements,(ii) exit charges, and (iii) pricing structures;(e) the role of The Pensions Regulator and the Competition and Markets Authority in monitoring and responding to market concentration;(f) the merits of policy or regulatory measures to support new market entrants.(3) The Secretary of State must lay a copy of the report before both Houses of Parliament.”Member’s explanatory statement
This new clause would require the Government to report on the impact of market consolidation on competition and new market entrants.
Lord Palmer of Childs Hill (LD)
My Lords, in leading once again on this Bill, I say that this group is bound together by a simple question: is the pensions system working as it should for its members and do we have the evidence to judge this properly? The proposed review is on consolidation, access to impartial pension advice, injustices experienced by scheme members, communications and data accuracy. It all goes to trust, fairness and whether savers can navigate the system with confidence.
From these Benches, we think these are legitimate concerns. Consolidation may bring efficiencies but could also reduce competition and choice if left unchecked. Better access to impartial advice is plainly in members’ interest, especially at key decision points. If data is inaccurate or communications unclear then even a well-designated, well-designed system can fail the people it is meant to serve.
I am pleased to have raised in my amendments the issues of competition, access to impartial pensions advice, and injustice experienced by scheme members. These are matters that I raised in Committee and I appreciate the time of, and the response from, the Minister and her colleagues in government. With all the pressures on us, I will not use any more of your Lordships’ time and bring my remarks on my amendments to an end. I beg to move.
Baroness Altmann (Non-Afl)
My Lords, briefly, I support Amendment 120, in the name of the noble Lord, Lord Palmer. It is important to look at the issues he rightly raised that relate to the market. Indeed, Amendment 165 is particularly important, given that the injustices, some of which we will come on to in later groups, seem to have few redress routes. For a good pensions system, it is incumbent on us to have a better system to identify and remedy occupational pension injustices.
I will briefly speak to my Amendment 160, which would require a review to ensure that data in pension schemes must be accurate. Currently, there is no legal requirement to ensure that the amounts of money being paid into pension schemes for auto-enrolment workers or anyone else—I am particularly concerned about auto-enrolment—are correct. The Pensions Regulator has to make sure that pension contributions are being paid, but there is no requirement to make sure that this money is the correct amount.
I suggest amending the Pensions Act 2008 so that the section on “quality requirements” includes something that confirms regular checking of pension contributions; the regulations in Section 33 on “deduction of contributions”
“must require employers to obtain confirmation from the trustees or managers … that the amounts … paid into a scheme … are regularly checked … recorded and corrected as quickly as possible”;
and Section 60 on “requirement to keep records” would require schemes to provide confirmation that regular data accuracy checks and contribution verification, including for tax relief and national insurance relief, are correctly reported.
I have so often seen pension scheme records riddled with errors. It is surprising that there are no requirements in the legislation to make sure that the amounts of money going in are correct. I am interested to hear the Minister’s comments on the Government’s thinking as to whether they would consider this.
Baroness Stedman-Scott (Con)
My Lords, I will speak broadly in support of these amendments. They reflect a thoughtful and welcome focus from across the House on some of the most important structural issues in our pension system. In particular, I welcome the attention given by noble Lords to the effects of consolidation on competition and market entry, and to the importance of robust data accuracy checks. A market that consolidates without sufficient scrutiny risks reducing innovation and choice, while poor data integrity undermines trust at its very foundation. These are therefore welcome points of focus, and I thank the noble Lord, Lord Palmer, and the noble Baroness, Lady Altmann, for raising them.
However, I will speak primarily to Amendment 169 in my name and that of my noble friend. This amendment would require a review of pension communications and financial promotion rules, examining whether the current framework unduly restricts providers from communicating clearly with members, particularly in relation to risks, guidance and comparative information. This is, I believe, a profoundly important issue. The reality is this: pensions are complex, technical and often opaque. For many people, they are also distant—something to be thought about later rather than now—but that distance is illusory. The decisions made or not made today will shape financial security decades into the future. Knowledge in this area is power, yet too often, individuals lack both the information and the confidence to engage meaningfully with their pensions. Communications can be overly cautious, overly technical or constrained in ways that make it difficult for providers to present information in a way that is clear, comparative and genuinely useful.
Lord Davies of Brixton (Lab)
Is the noble Lord, Lord Palmer of Childs Hill, going to contribute to this debate?
The Minister of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
He has spoken already.
Lord Davies of Brixton (Lab)
Okay. This demonstrates the clear fact that I am still suffering from my cold, which is so bad that it kept me from attending the second day of Report.
There is an important issue that needs to be highlighted, and that is addressed in Amendment 165. I want to say a word on behalf of the members of a number of different schemes—NatWest is one, but there are others—who feel aggrieved because they were not properly informed of their rights under their scheme. Their major complaint is that when they reach state pension age, they suffer a diminution in their benefits. These rules were introduced in all good faith, and I participated in such negotiations myself, but it is the failure of the employer to ensure adequate information for members that has led to the complaint.
Do I have a different grouping from everyone else? I am speaking to Amendment 165, which is in the first group—is that correct?
Lord Davies of Brixton (Lab)
Okay; good. As I say, I am still suffering from my cold, and I hope the House will indulge me. But I think it is important to make the point on those members’ behalf.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who spoke. I think the noble Lord, Lord Palmer, decided not to dwell on a number of his amendments because there is more to come, I suspect, in later groups. I had a nice long speech written in response to all these, but I may spare the House parts of that and concentrate on the issues raised during the debate.
Briefly, on consolidation, I think in general we all agree on the importance of understanding and monitoring the impact of the reforms presaged in this Bill. The Government have already taken steps to do this. A comprehensive, green-rated impact assessment was produced and an updated version was published as the Bill entered this House, with details of our monitoring and evaluation plans, including critical success factors and collaboration across regulators and departments. We have published a pensions road map, setting out clearly when each measure will come in. So the kind of review envisaged in the first amendment would not be helpful.
Amendment 160 from the noble Baroness, Lady Altmann, would give new powers to the Secretary of State to require employers and pension providers to undertake regular data accuracy checks in relation to contributions paid into workplace pension schemes. I completely agree about the importance of ensuring that members get the contributions they are due. However, I do not agree that the additional requirements proposed are necessary or proportionate, given the robustness of the current regulatory framework. Compliance with automatic enrolment duties remains high. The Pensions Regulator—TPR—runs a proportionate and effective compliance regime, underpinned by detailed guidance.
As I explained in Committee, employers, together with the trustees or managers of pension schemes, are already required to keep certain records. That includes details of both employer contributions and deductions from members’ earnings for each relevant pay reference period. Employers have to keep payment schedules and contribution records for six years and opt-out information for at least four. TPR has issued codes of practice setting out clearly how trustees of DC schemes and managers of personal pension schemes should monitor the payment of contributions. These also cover the provision of information to scheme members, enabling them to check that their contributions are made correctly, and they establish clear expectations around the reporting of material payment failures.
There is already a requirement for scheme providers to have sufficient monitoring processes in place, which includes a risk-based approach to monitor employers, who should have appropriate internal controls to ensure correct and timely payment of contributions. If a trustee—
Baroness Altmann (Non-Afl)
Can the Minister confirm for the House whether there are any checks or reporting on accuracy of the contributions? There is a requirement, but is anybody actually checking whether the amounts are correct?
Baroness Sherlock (Lab)
I invite the noble Baroness to come back in at the end if she feels I have not answered that. I would say two things to her. One is that the duty is on the trustees or managers. If they become aware that the appropriate things are not being done by employers, or that an employer does not appear to be taking adequate steps to remedy a situation where things have gone wrong—for example, if there are repetitive or regular payment failures—they have a duty to report it to the regulator.
But crucially, the proposed value-for-money framework introduces an assessment of quality-of-service metrics, which directly addresses the accuracy and promptness of core administrative functions, including the secure, timely and accurate processing of contributions. Metrics related to saver engagement will be phased in at a later date, but schemes will be required to disclose how often they review and correct both common and scheme-specific data as well as the proportion of members with complete and accurate records. They also will have to report on the timeliness and accuracy of core financial transactions, such as paying in contributions.
We are currently considering the feedback received from industry on the latest VFM consultation in order to make sure that we develop a VFM regime that will drive greater transparency and higher standards around data quality and contribution accuracy. I hope that is exactly what the noble Baroness wants, and that that has encouraged her. These measures demonstrate that there is a well-established and effective framework that, together with the VFM measures, will make all the things she wants come into place.
I will not dwell on Amendment 163 from the noble Lord, Lord Palmer, about universal pension advice; we gave that a fair outing in Committee. I simply say that we completely share the view that we want to make sure that people get the appropriate advice at the time they need it. But there is already a very large amount of support out there. Being realistic, the option proposed in his amendment would probably, at the best guess on first estimates, cost around £2 billion and require us to double the size of the financial advice sector. I know he is not pushing that, but he is pushing the important underlying point: to make sure that people have access to the support they need. We believe that, between what is available at the moment and what is coming on stream—Pension Wise, stronger nudge and guidance, and targeted support and guided retirement—there is a lot out there that will do that job.
I turn to Amendment 169 from the noble Baroness, Lady Stedman-Scott. It is always faintly dispiriting when someone announces at the start that they will listen to you but they are going to vote on it anyway. But let me do my best, notwithstanding that challenge, and maybe I can persuade the noble Baroness and she will change her mind—one never knows.
This amendment relates to pension communications. I understand that its aim is to ensure that pension providers can communicate effectively with their members so that they can navigate their choices with confidence. We share that aim, which is why we are acting to reduce complexity and strengthen the support available to pension members. The Government have heard extensive feedback from firms on how targeted support may interact with the direct marketing rules contained in the privacy and electronic communications regulations.
Having considered this feedback, the Government have committed to take forward secondary legislation to amend those regulations. This change will enable workplace pension providers to send targeted support recommendations, which amount to direct marketing, to members who have not opted out of receiving it. That reflects the fact that workplace pension providers have fewer opportunities to obtain consent for direct marketing, limiting the level of engagement they have with their members. We aim to deliver this legislative change quickly to ensure that targeted support can reach as many pension members as possible, while maintaining robust protections from unwanted marketing. We will continue to engage with stakeholders and regulators throughout to ensure that we get the right balance.
In Committee, concerns were also raised around communications that may be required under guided retirement. The Government have examined this carefully in developing the policy, including engaging with the sector and the Information Commissioner’s Office. We will seek further stakeholder views through a public consultation, expected later in the year; this will cover proposed requirements on the information and communications journey for pension members, including the extent to which trustees can intervene to provide support, but that is the best way in which to consider any such interactions in a timely manner. Running a separate review to a different timescale would make it difficult to incorporate any findings in the design and implementation of the policy, but I hope that reassures the noble Baroness that the Government are taking action, and she will not feel the need to test the opinion of the House.
Finally, Amendment 165 is from the noble Lord, Lord Palmer, although he did not speak to it—my noble friend Lord Davies did. I do not want to dwell on any particular scheme but say simply that the Government recognise the importance of pension security in retirement and protections for those saving into pension schemes, and those concerns are at the heart of the Bill. We are also acting where previous Governments have not; for example, by introducing annual increases on compensation payments from the PPF and FAS relating to pensions built up before 6 April 1997, when the scheme provided for this. There are clear and established routes for members to raise concerns or complaints about their scheme when they feel that things have gone wrong. The Pensions Ombudsman provides an independent and impartial service to resolve pension-related complaints that cannot be resolved through a scheme’s internal dispute resolution process; that gives a route to settle issues fairly and ensure that members’ rights are upheld.
This has been a good chance to have a canter across the waterfront of pensions, but I hope, in the light of my responses, the noble Lord feels able to withdraw his amendment.
Lord Palmer of Childs Hill (LD)
My Lords, I thank the Minister for her reply—and she got to the crux of the matter. We are trying to make sure that there is information and advice for people who do not have easy access to that information and advice. I take her reassurances that the Government are looking to give that information and advice by whatever means available. These Benches will look at and keep abreast of what advice and information are given, and whether they are sufficient. I hope that we can come back to the Minister, even if informally, if we feel that they are not and to see whether they are what we want. I think that we are after the same thing—we are just looking at it in a different way. I kept my words brief because I want to get through things today, as much as we can, so I did not concentrate on some of those matters.
The problem with the how we deal with things in your Lordships’ House is that Amendment 169 happens to be a very high number—the highest-numbered amendment is around 170, I think, so the Division will come right at the end of the day, and that is very much in our minds when we think about it. My feeling from these Benches is that, if there is anybody left in the House, we will support it if the noble Baroness puts it to a vote. It is not at the top of my wish list, but I think it does make a point, and if it was an earlier amendment than Amendment 169 it would get a lot more support—but the practicalities mean that it will not.
In the light of all that, I beg leave to withdraw the amendment.
Baroness Sherlock
Member’s explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 28 of Schedule 7 to the Pensions Act 2004 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
Baroness Sherlock (Lab)
My Lords, in moving Amendment 121 in my name, I will speak also to the other government amendments. We have already debated our reforms introducing prospective increases in compensation payments from the Pension Protection Fund, PPF, and the Financial Assistance Scheme, FAS, on pensions built up before 6 April 1997. These will be CPI-linked, capped at 2.5% and applied prospectively to payments going forward for members whose former schemes provided for these increases. I have tabled two groups of minor and technical amendments to ensure that the measures operate as intended.
Lord Davies of Brixton (Lab)
I hope the House will bear with me. I once bragged that if I were ever on “Mastermind”, GMPs would be my specialist subject, so I feel compelled to ask a question. Of course, through the Pensions Act 2012 the coalition Government made significant changes to the impact that GMPs had on people who retired after 2016. In effect, they were abolished and forgotten about. That issue was corrected in public service schemes but not in private schemes. Perhaps my noble friend the Minister could write to me and assure me that there is no difference in the effect of these amendments between people who retired before and after 2016.
Baroness Altmann (Non-Afl)
My Lords, I shall speak to my Amendment 155, and I am grateful for the support of the noble Viscount, Lord Thurso. This amendment and the noble Viscount’s own Amendment 162, to which I have added my name, deal with the same point, which is something we talked about in Committee. They aim to secure provisions that were made in the Pensions Act 2004 which would allow schemes to be extracted from the Pension Protection Fund if there were a new opportunity; for example, for the pension scheme members to be treated to better pensions than those available in the Pension Protection Fund itself.
That provision, in Section 169(2)(d) of the Act, has never been commenced. That provision means that if an employer had two or three workers in a pension scheme, had a company which fell on hard times and became insolvent—at which point the members’ pensions went into the PPF—then had a particularly fortunate experience and found himself or herself in a position where they could try to remedy the shortfalls of the members’ pensions and wanted to be able to take the scheme back out of the PPF, then that would be possible. Currently, that would be against the law because the provision has not been commenced, even though it is in the Pension Act 2004.
These amendments seek to ensure that this is at least a possibility, especially now that employers may start to be more attracted to running pension schemes, given the different financial situation that surrounds pension schemes now that we no longer have quantitative easing, with schemes finding themselves more often in surplus. Therefore, I hope that the Minister might accept that this is a possibility. These amendments would not commit the Government—or anyone—to spending any money; they would merely bring into force a provision that was already provided for in 2004.
Viscount Thurso (LD)
My Lords, I support Amendment 155 from the noble Baroness, Lady Altmann, and will speak briefly to my Amendment 162, which seeks to achieve exactly the same effect. Since the noble Baroness has explained it so well, I do not have to repeat the arguments in favour of it. Amendment 162 was tabled shortly after I tabled Amendment 161, when I was looking for remedies for the problem that was being created around Amendment 161. As most of the arguments for that should properly be deployed when we get to Amendment 161, I will not make them at this point, which I hope the Minister will understand to be appropriate. However, I give notice that if we get to that point and we have not had anything helpful—you can always hope—then I will seek the opinion of the House on Amendment 162.
Lord Palmer of Childs Hill (LD)
My Lords, people often wonder, speak and write about whether the House of Lords performs a valid function. This group of amendments justifies the House of Lords in one fell swoop. In this group, the Government are proposing 20 amendments to their own Bill, which shows that it had not been thought out properly in the beginning and we are now trying to amend it in your Lordships’ House—and amend it correctly, I add. I am not speaking against the amendments but noting that things are coming to us ill prepared; that there are 20 amendments makes that clear to see.
This group has amendments that raise an important issue of fairness for members of the Pension Protection Fund and the Financial Assistance Scheme, particularly in relation to pre-1997 service, as well as technical government amendments, to which I just referred. There are amendments probing whether members should, in some circumstances, be allowed to move to a better supported arrangement or receive more meaningful redress where historic indexation has been lacking. On these Benches, our instinct is that member protection must remain the starting point, but protection should not become an unnecessary rigidity. There is a secure and properly funded route to a better outcome for members. The Government should at least be willing to consider this, and I hope that the Minister will say some positive words on it.
On pre-1997 rights in particular, Parliament is entitled to ask whether the proposed remedy is full enough or whether fairness is justified. The noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, referred to Amendments 155 and 162, which both seek to do a similar thing. As I said, we are going to vote on the amendments with high numbers later; which one we will vote on, or whether we will vote on both, I do not know. However, we on these Benches agree with the principle of both. We shall see later whether we have had some success in persuading the Government to support these amendments.
Viscount Younger of Leckie (Con)
My Lords, I start by referring to the reference the noble Lord, Lord Davies, made to “Mastermind”; I am tempted to say that I have started so I will finish. I thank the Government for bringing forward these technical amendments, which seek to protect schemes from unintended consequences arising from the Bill; to ensure that GMP equalisation is properly treated as a narrow legal correction rather than as full indexation; and to provide greater technical clarity and consistency across the relevant legislative framework. These seem very sensible and constructive changes, and I thank the Minister for her clarifications and the detail she gave.
I thank the noble Baroness, Lady Altmann, and the noble Viscount, Lord Thurso, for the points they succinctly raised on their amendments. As we have heard, Amendment 162 would require the Secretary of State to bring into force the currently uncommenced power in the Pensions Act 2004, allowing the PPF to discharge certain compensation liabilities by paying a cash lump sum. Activating this long-dormant paragraph would add a pragmatic fourth option alongside insurance policies, annuity contracts or transfers. As the noble Baroness, Lady Altmann, said, it would not cost any money to do so.
We therefore support the amendment because it would widen the PPF’s toolkit to act in the best interest of members, giving flexibility to settle appropriate cases efficiently where regulations specify the safeguards and calculation method while retaining parliamentary oversight under the negative procedure and the PPF’s core purpose of protecting members of failed schemes. I therefore say to the noble Viscount, Lord Thurso, and the House that, should he wish to seek the opinion of the House on Amendment 162, we will be minded to support him.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Lords for introducing their amendments. The amendments in the names of the noble Baroness, Lady Altmann, and the noble Viscount, Lord Thurso, would commence the regulation-making power in Section 169(2)(d) of the Pensions Act 2004 to allow the PPF board to discharge its liabilities through a lump sum. As we have heard, Amendment 155 would have the additional effect of enabling PPF members to transfer out of the PPF to an arrangement that offers benefits higher than PPF compensation, where an alternative sponsor can be found.
The PPF is designed to discharge its liabilities by making regular payments to its members. That enables investment returns, plus levy payments, to make good the funding of schemes that transfer to the PPF and to build a buffer against future risk. This model has put the PPF in a strong financial position, but allowing transfers out would undermine its operation. Before the PPF board takes responsibility for a scheme, there is an assessment period, the aim of which is to ensure that the scheme does not go into the PPF until it is clear that no linked employer will rescue the scheme. Given that nobody took up the option originally for schemes that have transferred into the PPF, it is hard to see related employers who would do so many years later.
However, Amendment 155 opens up this possibility, including from non-related entities. It could therefore require a fundamental restructuring of the PPF’s funding and investment strategy to reflect transfers out. This is not a minor option which costs nobody any money; in practice, it raises range of complex issues to be addressed. Importantly, these include how to safeguard members by ensuring that their destination is appropriately secure. The complexity could be significant.
Enabling transfers out of the PPF would require a fundamental rethink of how it operates, its compensation structure and how the compensation system more broadly is managed. At this time, if any willing sponsors were identified, there is no framework to assess how adequate their funding would have to be to minimise the risk of returning to the PPF. If the sponsor were to fail subsequently, the scheme could end up transferring back to the PPF, and members could receive benefits at PPF levels even lower than they had been before they were taken out in the first place. The Government cannot agree to commence a regulation-making power which would enable lump sums to be paid in this way. The provisions in Section 169 were meant to be used only in exceptional circumstances, which have not yet come to pass. To open it up more widely would not be wise when the potential costs and risks of the PPF are unclear.
Lord Palmer of Childs Hill (LD)
I accept the Minister’s answer.
Baroness Sherlock (Lab)
I am grateful to the noble Lord for his gracious response. In light of what I have said, I hope that the House feels able to support the government amendments and that the noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, will not press theirs.
Baroness Sherlock
“(c) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 116, line 5.
““GMP equalisation obligation” means any obligation under an enactment, a rule of law or the scheme rules which relates to the removal of inequalities as between men and women in respect of the provision of a guaranteed minimum pension;”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 116, line 5.
Baroness Altmann
“(2A) After paragraph 28, insert—28A “(1) In all cases which qualify for an increase in periodic compensation under paragraph 28(2A) to (2I), the person may also qualify for a lump sum payment or payments, the amount of which must be—(a) related to the loss of inflation protection on pre-1997 pension benefits, and(b) paid by the Pension Protection Fund out of excess reserves,in recognition of the years of pension increases that were unpaid since the failure of the pension scheme.(2) The Secretary of State may issue guidance about lump sum payments under this paragraph.””Member's explanatory statement
This amendment seeks to make provision for lump sum payments from the Pension Protection Fund to persons who qualify for an increase in periodic compensation for pre-1997 service to compensate for unpaid increases in the years since the failure of the pension scheme.
Baroness Altmann (Non-Afl)
My Lords, I apologise—during my first contribution I should have declared my interests as a non-executive director of a pensions administration company and as a board adviser to a master trust. I also take this opportunity to wish the noble Lord, Lord Davies of Brixton, a full and speedy recovery; we missed him.
These amendments—and I am very grateful for the support of the noble Viscount, Lord Thurso—are all related to enabling either the pension protection fund or the financial assistance scheme to recognise the losses suffered by the oldest members of the schemes, who have lost the inflation increases they would have had in their schemes. I understand and appreciate that the Government have decided that, for the future, they will increase for inflation all pre-1997 benefits that were available to the scheme members in their original scheme. However, that does not really help those who are towards the end of their lives and whose pension, or compensation, is mostly comprised of pre-1997 accruals.
Although I understand why the Government are reluctant to commit to an open-ended amount for the future—which the current proposals will of course do, and we are grateful for that—my amendments seek to find an alternative way of recognising the losses in a one-off payment, a lump sum. I have drafted the amendments carefully to allow the Government to authorise that, and to enable the Pension Protection Fund to push some of its reserves into this kind of payment. I have not specified an amount. It would obviously need to be related to the amount each member has lost, but if the member is going to qualify for future uplifts, these amendments would also allow for an extra payment to recognise the amounts that were unpaid because of the inflation increases they had in the scheme but have lost.
The failure to pay any increases has resulted in the oldest members finding that their pensions have been whittled away, in many cases to less than half their value. I pay tribute to members such as John Benson and Phil Jones from Allied Steel and Wire—Phil Jones is seriously ill and now living on less than half his promised pension after 20 years of losing the inflation uplifts—and Richard Nicholl and Terry Monk. These are elderly gentlemen who have campaigned for years. I see the noble Lord, Lord Hain, in his place: he was instrumental in achieving our financial assistance scheme breakthrough in 2007, for which these members are extremely grateful, after a long campaign from 2001 to 2007.
The reality of the situation for the Pension Protection Fund is radically different from that which prevailed in 2004, and indeed in 2007. In those days, it was unclear how the PPF would fare. The rationale for getting rid of the pre-1997 increases was based on the fact that there was no legal requirement for employers to do that, and a recognition of the need to control costs, potentially, in future, should a massive number of large schemes fail and the PPF prove unable to afford the benefits. It was unclear how many employers might become insolvent, what types of schemes would be affected, and how much the PPF would have to pay. It was going to be able to collect its revenues from employer levies, assets from the unfunded schemes, assets of insolvent employers that were recovered, and investment returns, but it was unclear at the time how any of that would pan out.
In practice, the PPF has been an amazing success. It now finds itself with a significant surplus, with assets relative to its compensation liabilities far in excess of what is required to pay all the future pensions. The provisions of the Pensions Act 2004 state that these huge reserves, of well over £14 billion, cannot be used for anything other than member compensation or funding related to the PPF itself. The PPF is a separate statutory fund; it is not the property of government. Therefore, I am trying to suggest the payment of a portion of that £14 billion. Full retrospection is calculated to cost £3.5 billion. I am not talking about that, but even after that payment, the PPF would still be 150% funded—50% more than it needs to pay its expected liabilities.
However, I am not talking about that. The Government or the PPF could work out a sum—whatever it might be; perhaps it could be £1 billion—that could be allocated to paying the lump sums for those members who were promised their money but have lost it. It would be hugely welcomed by those members. They tend to be the oldest ones, and often the ones who have campaigned for so long, at such personal cost, for the other members of the Pension Protection Fund and the Financial Assistance Scheme.
Amendments 124, 128, 132 and 136 relate to the Pension Protection Fund paying those lump sum payments. Amendment 154 is about mirroring that for the Financial Assistance Scheme. I accept that the Government may have to find public money for that, but I argue that—after allocating billions of pounds to the Mineworkers’ Pension Scheme and the British Coal Staff Superannuation Scheme to increase the already full benefits that those members were receiving at the expense of the taxpayer—spending a small fraction of that on remedying this injustice, for so many people who are becoming gradually poorer every year, would be a sensible way to spend some of the surplus in the Pension Protection Fund. As the members say, the Government’s hugely welcome current proposals to increase with inflation in the future will not make any of them better off now. It will make sure only that they get worse off more slowly—but is that really all we can achieve given the success of the Pension Protection Fund? I beg to move.
Lord Hain (Lab)
My Lords, I strongly support what the noble Baroness said and commend her for her work with the Pensions Action Group. I was Secretary of State in the DWP at the time and was lobbied effectively by her in a very good campaign. I managed to persuade the then Prime Minister, Gordon Brown, in favour of it—mostly against his initial will and as a result of a fierce argument, during which my private office thought I might be sacked. That policy succeeded. Pensioners who had suffered a terrible injustice—150,000 were robbed of their pensions when their companies went bust; those companies took those pensioners down with them—were given the assistance that I believe they deserved.
I do not know exactly how to remedy the issue that was not addressed then—the lack of indexation—and whether it is through the proposal set out in the noble Baroness’s amendments. That seems to make sense to me, but I can understand why my noble friend the Minister would find it difficult to concede. However, there is an injustice that needs to be addressed. I simply wanted to make that point.
I personally met members of Allied Steel and Wire—ASW—in Cardiff. Many who had served some 30 years suddenly found themselves, on the point of retirement, losing their pensions—all their plans had gone up in smoke. This was a terrible injustice. Some 150,000 workers across the country were in that predicament. The Government acted—I am proud that we did—to remedy that, but there was one gap that was not addressed, and the amendments from the noble Baroness, Lady Altmann, seek to do that. I hope that the Government will find a way to accept the basic case that she put.
Viscount Thurso (LD)
My Lords, briefly, I support the noble Baroness in her amendments, to which I have added my name. As usual, she has done a splendid technical exposition of the amendments. More importantly, as the noble Lord, Lord Hain, said, she outlined the immense emotional damage that was done to so many people. We should all look for a way to remedy that. Therefore, the noble Baroness has my full support.
Lord Wigley (PC)
My Lords, I strongly support the objectives of Amendments 124, 128 and 154, as well as the similar provision made for Northern Ireland in Amendments 132 and 136. I thank the noble Baroness, Lady Altmann, for all the work she has done, and continues to do, on this matter. I hope she will continue until this has been won.
Lord Davies of Brixton (Lab)
I thank the noble Baroness, Lady Altmann, for these amendments. We have discussed this issue a number of times during the passage of the Bill, and other noble Lords who have spoken so far have all spoken strongly in support of necessary action.
The facts are established. These people were poorly treated and it is the Government’s policy that they should be better treated. That is established: there is no debate about that. I have heard no one suggesting that it does not really matter that these people do not get any money. We have agreed to give them some extra money by revaluing these pensions from next year onwards. However, because of the structure of who has lost out—the age profile when the losses occurred—these people stand to make very little gain from that proposal, so the Government’s proposal to help these people just does not hack it. Something more needs to be done.
I have argued at previous stages that the shortfall over the number of years since their compensation started should be made good and the pension that has increased in future should start from that higher level. Clearly, that was not going to receive the support of the Government, so the noble Baroness has proposed an alternative: that the money that is in the Pension Protection Fund should be used as a lump sum to compensate those who have lost out. Clearly, when you are in your 70s and 80s, a lump sum is of much greater advantage than future increases. That is the point of these amendments. Therefore, this is a compromise; it is not what those affected have actually called for. As has been said, these people are towards the end of their life and they need help now.
We know what it is going to cost. When the scheme was set up by my noble friend Lord Hain, there was some debate about the benefits. I was advising the TUC at the time. We might have argued against the restrictions, but it was accepted that, to get the show on the road, we would accept these benefits. But we now know what it is going to cost and that the money is there. It is all in the Pension Protection Fund. If it does not go to these people who have lost out, eventually it will end up in the Government’s coffers. The Government will not be entitled to it, but where else is it going to go? We need to act now to help these people, not leave it to a future Government. So I am strongly in support of the proposal.
My noble friend the Minister might make one additional point. There are two groups of pensioners here. There are those who are receiving benefits from the Pension Protection Fund and there is another group receiving benefits from the Financial Assistance Scheme. It is important to understand that the only reason they are in the Financial Assistance Scheme is that the Government failed to accept their responsibilities early enough. They are only in the FAS because the Government failed to comply with their legal requirement to introduce this sort of compensation arrangement on redundancy. Therefore, there is no argument that the FAS people should be treated any differently from the people in the PPF. They are entitled to money to make good the deficiency and to allow them to enjoy some sort of benefit for what remains of their lives.
Viscount Younger of Leckie (Con)
My Lords, I will speak briefly. We welcome the intent behind these amendments. We have spoken with campaigners and representatives of affected members and understand the concerns that sit behind them. Those concerns are real and deserve to be taken seriously. I have listened very carefully to the remarks from the noble Baroness, Lady Altmann, and the noble Lords, Lord Hain, Lord Wigley and Lord Davies, with the case studies that they have cited relating to the losses suffered by individuals, and also the emotional consequences.
However, we have reservations about the proposed approach. As drafted, these amendments would, in certain circumstances, compel the payment of lump sums. That does not sit comfortably with the core principle that we have adopted throughout the passage of this Bill: that we should not seek to direct or constrain pension funds in a way that limits their ability to act in the best interests of their members. If the PPF determines that using surplus to provide such payment is appropriate, proportionate and in members’ best interests, of course we would support that. However, that judgment is properly one for the fund itself, not something that should be prescribed. It is for the Government to offer a response to the questions and the points raised by other speakers, and I look forward to the remarks from the Minister.
While we have sympathy with the objective of these amendments, we do not believe that mandating this approach is the right way to achieve it. Therefore, I am afraid that we are unable to support them.
Baroness Altmann (Non-Afl)
The Minister may correct me, but I do not believe that the Pension Protection Fund could itself agree to make these lump sum payments; they need to be enabled by legislation. I have not double-checked that, but that was what I was led to believe.
Viscount Younger of Leckie (Con)
The noble Baroness asks a fair question. Can the Minister clarify that? We have looked into this in some depth and come to our own conclusion, and I am afraid we will have to stick to that: but I do take the noble Baroness’s point.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords who have spoken and thank the noble Baroness, Lady Altmann, for introducing her amendments. I understand her concerns. We did discuss this in Committee at some length.
Amendments 124, 128, 132 and 136 would require the payment of arrears to members of the PPF whose original scheme provided for increases on pensions built up before 6 April 1997. The amendments would also enable members to receive a one-off lump sum payment from the PPF reserve. Amendment 154 would require the Secretary of State to determine how these lump sum payments are to be funded in the financial assistance scheme. I fully understand that many affected PPF and FAS members are having to adjust to a level of income less than they were expecting at retirement, after their employers became insolvent and the pension schemes wound up being underfunded. I understand the distress that has caused to many of them.
Regarding the comments made by my noble friend Lord Hain and the noble Lord, Lord Wigley, about Allied Steel and Wire, my honourable friend the Minister for Pensions has met with a range of members, including former Allied Steel and Wire workers whose scheme qualified for the financial assistance scheme, and he has heard their cases.
These amendments go much wider than that. This Government have acted to address this issue through measures in the Bill which address prospective pre-1997 indexation to eligible PPF and FAS members. However, I understand that this does not go as far as some affected members and some Members of the House would have wanted. None the less, these reforms represent a step change that will significantly strengthen the protection offered by the two compensation schemes. We have taken action and now want to implement it.
Baroness Altmann (Non-Afl)
My Lords, I thank the Minister for her response and her understanding. Obviously, her reply is extremely disappointing. I thank all noble Lords who have spoken, without exception, in support of helping these members, who are the oldest and have typically lost the most as a result of their scheme failing.
I would like—and I feel, in all good conscience, having heard the support across the House for these principles and having worked for more than 20 years with many of those who have lost out, that I am morally obliged—to test the opinion of the House, but I will not do so on Amendment 124. I give notice that I will do so on Amendment 154, on the Financial Assistance Scheme, later in this debate on Report.
Baroness Sherlock
Member's explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 17 of Schedule 5 to the Pensions Act 2008 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
“(d) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 120, line 40.
“(h) in paragraph (9), for the definition of “post-1997 service” substitute—““GMP equalisation obligation” has the same meaning as in paragraph 28 of Schedule 7 to the Pensions Act 2004 (annual increase in periodic pension compensation);“GMP indexation period” means the period beginning with 6 April 1988 and ending with 5 April 1997;“guaranteed minimum pension” has the same meaning as in the Pension Schemes Act 1993 (see section 8(2) of that Act);“post-1997 service” , “pre-1997 service” and “GMP indexed service” have the same meaning as in paragraph 28 of Schedule 7 to the Pensions Act 2004;“the assessment date” and “admissible rules”, in relation to a pension scheme, have the same meaning as in that Schedule (see paragraphs 2 and 35 of that Schedule);”.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 120, line 40 and inserts a missed definition.
Baroness Sherlock
Member's explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 28 of Schedule 6 to the Pensions (Northern Ireland) Order 2005 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
“(c) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 125, line 29.
““GMP equalisation obligation” means any obligation under an enactment, a rule of law or the scheme rules which relates to the removal of inequalities as between men and women in respect of the provision of a guaranteed minimum pension;” Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 125, line 29.
Baroness Sherlock
Member's explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 17 of Schedule 4 to the Pensions (No.2) Act (Northern Ireland) 2008 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
“(d) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 130, line 22.
““GMP equalisation obligation” has the same meaning as in paragraph 28 of Schedule 6 to the 2005 Order (annual increase in periodic pension compensation);“GMP indexation period” means the period beginning with 6 April 1988 and ending with 5 April 1997;“guaranteed minimum pension” has the same meaning as in the Pension Schemes Act (see section 4(2) of that Act);“post-1997 service” , “pre-1997 service” and “GMP indexed service” have the same meaning as in paragraph 28 of Schedule 6 to the 2005 Order;“the assessment date” and “admissible rules”, in relation to a pension scheme, have the same meaning as in that Schedule (see paragraphs 2 and 35 of that Schedule).””Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 130, line 22 and inserts a missed definition.
Baroness Sherlock
Member's explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 9 of Schedule 2 to the Financial Assistance Scheme Regulations 2005 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
“(c) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 135, line 35.
Member's explanatory statement
This amendment is consequential on the next amendment to this clause in my name.
““GMP equalisation obligation” means any obligation under an enactment, a rule of law or the scheme rules which relates to the removal of inequalities as between men and women in respect of the provision of a guaranteed minimum pension;”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 135, line 35.
Member's explanatory statement
This amendment makes clear that sub-paragraph (2B) (and not sub-paragraph (2A)) of paragraph 9 of Schedule 2A to the Financial Assistance Scheme Regulations 2005 (inserted by this clause) applies to a case where pension scheme rules required pre-1997 indexation only for the purposes of removing inequalities as between men and women arising from the provision of guaranteed minimum pensions.
“(c) sub-paragraph (2A) does not apply.”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 138, line 9.
““GMP equalisation obligation” means any obligation under an enactment, a rule of law or the scheme rules which relates to the removal of inequalities as between men and women in respect of the provision of a guaranteed minimum pension;”Member's explanatory statement
This amendment is consequential on the amendment to this clause in my name at page 138, line 9.
Member's explanatory statement
This amendment removes provision amending Schedules 3 and 5 to the Financial Assistance Scheme Regulations 2005.
Baroness Sherlock
“Chapter 2AAWE pension schemeNew public pension schemes
Establishment of new public schemes and transfer of rights(1) The Secretary of State may by regulations establish one or more schemes (“new public schemes”) which provide for pensions or other benefits to be payable to or in respect of persons who are or have been members of the AWE pension scheme (“qualifying persons”).(2) The Secretary of State may by regulations make provision for the transfer of qualifying accrued rights to a new public scheme (without the need for any approval or consent of the trustee company or AWE PLC, or any other person, to the transfer). (3) Regulations under subsection (2) may include provision for the discharge of liabilities in respect of qualifying accrued rights that are transferred.(4) In this Chapter—“qualifying accrued rights ” means— (a) any right to future benefits under the AWE pension scheme which, at the qualifying time, has accrued to or in respect of a qualifying person,(b) any entitlement under the AWE pension scheme to the present payment of a pension or other benefit which a qualifying person has at the qualifying time, or(c) any entitlement to benefits, or right to future benefits, under the AWE pension scheme which a survivor of a qualifying person has at the qualifying time in respect of the qualifying person;“the qualifying time ” means the time immediately before the date specified or described in regulations.(5) For the purposes of the definition of “qualifying accrued rights”—(a) references to pensions or other benefits (including future benefits) includes money purchase benefits, and(b) references to a right include a pension credit right.(6) Regulations under subsection (4) specifying or describing a date for the purposes of the definition of “the qualifying time” may make provision for the purposes of transfers of qualifying accrued rights generally, transfers of a particular description or a particular transfer.”Member’s explanatory statement
This new clause provides for the pension scheme of AWE PLC (a wholly owned government company) to be transferred to a new public sector pension scheme, while preserving existing rights of scheme members. It will be the first clause of a new Chapter in Part 4 of the Bill.
Baroness Sherlock (Lab)
My Lords, I shall speak also to the other government amendments in this group. I start with the context for these amendments. The AWE pension scheme is a trust-based defined benefit—DB—pension scheme for employees and former employees of AWE plc, the Atomic Weapons Establishment. Since 2021, AWE plc has been wholly owned by the Ministry of Defence, and the pension scheme is backed by a Crown guarantee.
The new clauses will allow the Government to defund the existing scheme and establish a new central government pension scheme for its members. They apply only to the DB pension scheme; AWE’s DC contract-based scheme is not affected.
The assets held by the scheme will be sold and proceeds transferred to the Treasury. This measure was announced by the Chancellor in her 2025 Budget, but the principle was announced by the previous Government in a Written Ministerial Statement on 6 July 2022. The new scheme will be a public pension scheme. This is in accordance with wider government policy that when a financial risk sits wholly with government, as it does here, it should not hold assets to cover that liability. The taxpayer is already exposed to the risks, and the liability can be managed more efficiently in the round along with other unfunded liabilities met out of general taxation.
This measure will help to ensure that liabilities are funded in the most efficient way while ensuring the long-term security of members’ benefits. This will also support the Government’s fiscal strategy by reducing near-term borrowing, as it will reduce the amount to be raised in debt markets.
I assure the House that the amendments in this group explicitly protect the accrued rights of all members at the point of transfer. The new public scheme must make provision that is, in all material respects, at least as good as that under the AWE pension scheme. This includes any rights to discretionary benefits that may exist under that scheme at the point of transfer.
The new statutory scheme will be based on the existing rules, and the discretions exercised under the existing rules by the trustee, AWE plc and, indeed, by the Secretary of State for Defence will be codified into the rules of the new statutory scheme. The rules of the new scheme will be drafted in consultation with the trustee of the present scheme. The Government will work with the trustees and future administrator of the scheme to ensure transparency and clarity at the point of transfer. AWE will also work with the current trustee and the future administration to ensure members receive all the information they need at that time.
The new clauses in Amendments 145 and 146 provide that the new scheme should be established by regulations and set out the kind of provision that may be made by these regulations and any amending regulations. Although they are fairly standard for public schemes, I assure the House that the Government have considered carefully how they may be relevant to this scheme.
The new clause in Amendment 148 ensures that scheme rules cannot be amended unless prescribed procedures have been followed. In most cases, the requirement is to consult. However, if the proposed amendment might adversely affect members’ rights, the regulations must prescribe additional procedures to protect the interests of members, including obtaining the consent of interested persons or their representatives. This will include the employer, the members and their representatives.
AWE has already engaged with both its recognised trade unions—Unite and Prospect—and will continue to have regular contact with the unions about future changes.
The new clause in Amendment 149 will enable the Government to direct the disposal of the assets currently held by the pension scheme for the benefit of the Exchequer. We expect the bulk of the assets to be sold before the new scheme is established. Regulations under this clause must ensure that trustees’ liabilities following the sale of assets will be met by public funds, thus ensuring that pensions in payment and any other trustee expenses will not be affected.
Regulations under this clause will also ensure that the trustee and AWE plc are protected against any liability that might otherwise arise because they have complied with the Government’s direction to sell assets. This clause includes a Henry VIII power to disapply or modify specified statutory provisions. To be clear, these powers can be used only in relation to regulations made under this clause and are intended to enable protection for the trustee. For example, we expect that we will need to disapply the scheme funding regime in relation to the scheme once the sale of assets begins.
The new clause in Amendment 150 will allow the Treasury to amend tax legislation to ensure that the transfer of the AWE pension scheme to a new public scheme will be tax-neutral, meaning no additional or unexpected tax liabilities will arise for those affected by the changes. The Treasury will use these powers to modify the application of relevant tax law where it is needed, following the precedent set when the Royal Mail pension scheme was defunded. Indeed, this clause is based closely on that legislation.
The new clause in Amendment 151 provides a legal gateway to permit the sharing of information between named parties to facilitate the establishment and administration of the new scheme. It also gives the Government the power to make regulations requiring individuals or organisations to provide the information needed to establish and administer the new public scheme and transfer the accrued rights. This should not be needed, as the Government are collaborating with the relevant parties. The provision will be required only in the unlikely case that a party does not provide the necessary information upon request.
The proposed new clause in Amendment 152 ensures proper consultation and parliamentary scrutiny for regulations made under this part of the Bill, particularly those affecting the establishment and operation of the new public pension scheme and the transfer of assets. The Government are required to consult the trustee of the AWE pension scheme before making regulations to establish the new public scheme, to transfer accrued rights, or to transfer assets and liabilities. That will ensure that the interests of scheme members will be fully considered before these regulations are made.
In addition, any regulations that could adversely affect existing rights that have retrospective effect or that set financial penalties are subject to the affirmative procedure. That will ensure that significant changes are subject to parliamentary approval and scrutiny. Other regulations under this part of the Bill are subject to the negative procedure, although I note that the taxation regulations are subject only to annulment in pursuance of a resolution in the other place, as is usual for such legislation. I beg to move.
Lord Palmer of Childs Hill (LD)
My Lords, what can I do but say that I welcome these amendments? They are overdue and I hope they will pass with no dissension.
Viscount Younger of Leckie (Con)
My Lords, in the spirit of consensus, we had some initial concerns with the Government’s approach, which we raised in Committee, specifically whether these provisions might render the Bill hybrid. That would be a serious procedural issue, and one we felt was important to explore fully. Since then, we have engaged constructively with the Government and the Public Bill Office on this question. As the Minister will know, there were a good number of meetings and exchanges. I am grateful to both for their time and careful consideration. We have been reassured that these provisions do not, in fact, make the Bill hybrid and we are content to proceed on that basis. I place on record our thanks for that engagement.
I turn briefly to the substance of the amendments, which set out a comprehensive framework for the transfer of the AWE pension scheme into a new public sector arrangement, while seeking to preserve the accrued rights of members, ensure appropriate handling of assets and liabilities, and provide for the necessary technical matters, including tax treatment, information sharing and parliamentary oversight. I thank the Minister for setting out her approach with such detail. Given the reassurances we have received on the procedural point, we are content with the approach set out in this group.
Baroness Sherlock (Lab)
My Lords, I am thrilled and grateful to both noble Lords for this outbreak of consensus; long may it continue. I have some other lovely amendments coming next, so I encourage them to support those as well. I thank the noble Viscount and to the noble Lord, Lord Palmer, very much.
A concern was raised in Committee that these amendments might make the Bill hybrid, so we were very happy not to move them until everybody was happy that they would not. We never thought they were hybrid, but I am really grateful that the noble Viscount has taken the time to satisfy himself of that too. Given that and the lack of opposition, I beg to move.
Baroness Sherlock
“New public schemes: further provision(1) A new public scheme may include provision—(a) for pensions or other benefits to be payable to or in respect of some or all persons described in section (Establishment of new public schemes and transfer of rights)(1);(b) for the provision of money purchase benefits or benefits that are not money purchase benefits (or both);(c) for increasing in particular circumstances the amounts payable in respect of qualifying accrued rights;(d) for the payment or receipt of transfer values or other lump sum payments for the purpose of creating rights to benefits under a new public scheme or otherwise;(e) in relation to any persons who are active members of the AWE Pension Scheme which differs from the provision made in relation to persons who are deferred members of the AWE Pension Scheme, other than provision in relation to qualifying accrued rights.(2) Regulations under section (Establishment of new public schemes and transfer of rights)(1) may—(a) provide for a new public scheme to be treated as an occupational pension scheme, a previously contracted-out scheme or another type of occupational pension scheme for the purposes of an enactment specified or described in the regulations; (b) provide for the enactment to apply in relation to a new public scheme subject to modifications specified in the regulations.(3) Regulations under section (Establishment of new public schemes and transfer of rights)(1) amending a new public scheme may make retrospective provision.(4) Regulations under section (Establishment of new public schemes and transfer of rights)(1) may—(a) confer functions on the Secretary of State or another person; (b) provide for a person to exercise a discretion in dealing with a matter.(5) The Secretary of State may—(a) make arrangements for a new public scheme to be administered by any person;(b) delegate to any person a function exercisable by the Secretary of State under a new public scheme.(6) In this section, a “previously contracted-out scheme” means a scheme that before 6 April 2016 was a salary related contracted-out scheme within the meaning of Part 3 of the Pension Schemes Act 1993.”Member's explanatory statement
This new clause contains further provision about the transfer of the AWE Pension Scheme. It will be the second clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Protection against adverse treatment: transfer of rights(1) When making regulations under section (Establishment of new public schemes and transfer of rights) which transfer qualifying accrued rights to a new public scheme, the Secretary of State must ensure that the following requirements are met in respect of each person whose qualifying accrued rights are transferred—(a) the general scheme requirement (see subsection (2)), and(b) where the qualifying accrued rights transferred are a person’s rights or entitlements to money purchase benefits other than pensions in payment, the money purchase requirement (see subsection (3)).(2) The general scheme requirement is that, so far as relevant to the qualifying accrued rights transferred by the regulations, the provision in the new public scheme immediately after the regulations are made is in all material respects at least as good as the provision in the AWE Pension Scheme immediately before that time.(3) The money purchase requirement is that the value of the rights or entitlements to money purchase benefits, other than pensions in payment, that a person has under the new public scheme immediately after, and as a result of, the transfer is at least equivalent to the value of the qualifying accrued rights of the person that are transferred.(4) The Secretary of State may by regulations make provision about the determination of the value of rights or entitlements for the purposes of subsection (3).(5) Regulations under subsection (4) may, among other things—(a) make provision about the person by whom, and the manner in which, the value of rights or entitlements is to be determined,(b) make provision about the date or period by reference to which the value of the qualifying accrued rights transferred is to be determined (subject to subsection (6)), and(c) make provision that applies generally or only for a specific purpose (for example, in relation to a particular transfer). (6) Regulations under subsection (4) may not make provision for the value of the qualifying accrued rights transferred to be determined by reference to a date which falls, or a period which ends, more than three months before the transfer.(7) Subsection (1) does not require provision to be included in a new public scheme if the Secretary of State is of the opinion that the provision would be incompatible with an enactment (including an enactment applying as a result of any provision made by or under this Chapter). (8) Nothing insubsections (1) to (3)is to be read as—(a) requiring particular provisions of a new public scheme to take a particular form,(b) requiring a new public scheme to be established in a particular way,(c) requiring any power or duty conferred or imposed by a new public scheme to be exercised or performed in a particular way, or(d) affecting any power of any person to amend a new public scheme.”Member's explanatory statement
This new clause contains provision about the protection of existing rights of members of the AWE Pension Scheme. It will be the third clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Protection against adverse treatment: amendment of new public schemes(1) The Secretary of State may not make regulations under section (Establishment of new public schemes and transfer of rights) amending a new public scheme unless—(a) in a case where the amendment, on coming into force, would or might adversely affect subsisting rights at that time, the consent requirements or the procedure requirements are satisfied in relation to the amendment, or(b) in any other case, the consultation requirements are satisfied in relation to the amendment.(2) The consent requirements are requirements specified or described in regulations made by the Secretary of State for the purpose of obtaining the consent of interested persons, or their representatives, to amendment of a new public scheme.(3) The consultation requirements are requirements specified or described in regulations made by the Secretary of State for the purpose of consulting interested persons, or their representatives, about amendment of a new public scheme.(4) The procedure requirements are requirements which—(a) are specified or described in regulations made by the Secretary of State for steps to be taken before amending a new public scheme, and(b) are not requirements for the purpose of obtaining the consent of, or consulting, interested persons or their representatives.(5) In this section, “subsisting rights”, in relation to any time, means—(a) any right to future benefits under a new public scheme which, at that time, has accrued to or in respect of a member of the scheme,(b) any entitlement under a new public scheme to the present payment of a pension or other benefit which a member of the scheme has at that time, or (c) any entitlement to benefits, or rights to future benefits, under a new public scheme which a survivor of a member of the scheme has at that time in respect of the member.(6) For the purposes of the definition of “subsisting rights”—(a) references to pensions or other benefits (including future benefits) include money purchase benefits, and(b) references to a right include a pension credit right. (7) In this section, “interested persons”, in relation to an amendment of a scheme, means persons who appear to the Secretary of State to be likely to be affected by the amendment.”Member's explanatory statement
This new clause contains further provision about the protection of existing rights of members of the AWE Pension Scheme. It will be the fourth clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Transfer of assets and liabilities(1) The Secretary of State may by regulations provide for the transfer of assets or liabilities of the AWE Pension Scheme (without the need for any approval or consent of the trustee company or AWE PLC, or any other person, to the transfer) to—(a) the Secretary of State,(b) a nominee of the Secretary of State or the Treasury, or(c) a company established by the Secretary of State or the Treasury for the purpose of holding the assets or the liabilities pending their disposal or discharge.(2) Where any assets of the AWE Pension Scheme are transferred before regulations under section (Establishment of new public schemes and transfer of rights)(2) are made, regulations under this section must make provision for the purposes of—(a) securing the ability of the trustee company to meet any liability it has, or may have, or(b) securing that any such liability is to be met by the Secretary of State or the Treasury.(3) The regulations may in connection with those purposes, or otherwise in connection with a transfer of assets or liabilities under the regulations—(a) make provision for the Secretary of State or the Treasury to give directions to the trustee company or AWE PLC;(b) exempt the trustee company, or AWE PLC, from liability in connection with acts or omissions pursuant to any such directions;(c) disapply (to such extent as is specified) any specified statutory provision or rule of law;(d) provide for any specified statutory provision to apply (whether or not it would otherwise apply) with specified modifications;(e) impose a moratorium on the commencement or continuation of proceedings or other legal processes of any specified description.(4) “Specified” means specified in the regulations.(5) Regulations under this section may include provision for the making of payments into the Consolidated Fund.”Member's explanatory statement
This new clause contains provision about transfer of assets and liabilities of the AWE Pension Scheme and provision securing scheme liabilities are met after assets are transferred. It will be the fifth clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Supplementary
Taxation(1) The Treasury may by regulations make provision for varying the way in which any relevant tax would, apart from the regulations, have effect in relation to— (a) a new public scheme;(b) members of a new public scheme;(c) persons who have survived a member of a new public scheme and who have an entitlement to benefits, or a right to future benefits, under the scheme in respect of the member;(d) a person within section (Transfer of assets and liabilities)(1)(a), (b) or (c).(2) Regulations under subsection (1) may include provision for treating a new public scheme as a registered pension scheme.(3) The Treasury may by regulations make provision for varying the way in which any relevant tax would, apart from the regulations, have effect in relation to, or in connection with, anything done by or under, or in consequence of, regulations made under this Chapter in relation to—(a) the AWE Pension Scheme;(b) the trustee company;(c) AWE PLC;(d) the Secretary of State;(e) a qualifying person;(f) a person who has survived a qualifying person and who has an entitlement to benefits, or a right to future benefits, under the scheme in respect of the qualifying person.(4) Regulations under subsection (1) or (3) may include provision for any of the following—(a) a tax provision not to apply or to apply with modifications;(b) anything done to have or not to have a specified consequence for the purposes of a tax provision;(c) the withdrawal of relief and the charging of a relevant tax.(5) Provision made by regulations under subsection (1) or (3), other than provision withdrawing a relief or charging a relevant tax, may make retrospective provision.(6) In this section—“relevant tax ” means—(a) income tax;(b) capital gains tax;(c) corporation tax;(d) inheritance tax;(e) stamp duty and stamp duty reserve tax;(f) stamp duty land tax;“registered pension scheme ” has the meaning given in Part 4 of the Finance Act 2004;“tax provision ” means any provision made by or under an enactment relating to a relevant tax.”Member's explanatory statement
This new clause contains provision to secure the right tax treatment in relation to the transfer of the scheme (for example, to avoid tax becoming due on any transfer). It will be the sixth clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Information(1) The Secretary of State may by regulations make provision requiring a person specified or described in the regulations to give the Secretary of State a document or other information specified or described in the regulations. (2) Regulations under subsection (1) may only make provision in respect of documents or other information which the Secretary of State reasonably requires for the purposes of—(a) making regulations under this Chapter, or(b) establishing or administering a new public scheme, including transferring qualifying accrued rights to such a scheme.(3) Regulations under subsection (1) may, among other things, include—(a) provision about the time when the document or other information must be given;(b) provision about the form and manner in which it must be given;(c) provision for the imposition of a financial penalty on a person who, without reasonable excuse, fails to comply with a requirement imposed by the regulations (including provision for appeals to a court or tribunal).(4) For the purposes of facilitating the establishment or administration of a new public scheme, including the transfer of qualifying accrued rights to such a scheme, information described in subsection (5) may be shared among the following persons—(a) the Secretary of State;(b) the Treasury;(c) a trustee company of the AWE Pension Scheme;(d) a person who exercises functions under the AWE Pension Scheme;(e) AWE PLC;(f) a person who administers, or exercises functions under, a new public scheme.(5) The information is information relating to—(a) rights or entitlements to pensions or other benefits under the AWE Pension Scheme;(b) the administration of the AWE Pension Scheme;(c) rights or entitlements to pensions or other benefits under a new public scheme, so far as they are rights or entitlements of, or in respect of, qualifying persons;(d) the administration of a new public scheme.(6) The disclosure of information in accordance with this section, or regulations made under this section, does not breach—(a) any obligation of confidence owed by a person in relation to that information, or(b) any other restriction on the disclosure of information (however imposed).”Member's explanatory statement
This new clause contains provision about powers to require information or to share information in connection with the transfer of the AWE Pension Scheme. It will be the seventh clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“Regulations(1) The Secretary of State must consult the trustee company before making—(a) regulations under section (Establishment of new public schemes and transfer of rights) which establish a new public scheme or transfer qualifying accrued rights to a new public scheme, or(b) regulations under section (Transfer of assets and liabilities) which make provision for the transfer of assets or liabilities. (2) The Secretary of State may not make regulations under any provision of this Chapter, other than under section (Information)(1), unless the Treasury have consented to the making of the regulations.(3) Regulations under section (Establishment of new public schemes and transfer of rights) are subject to the affirmative procedure if—(a) the making of the regulations is subject to the consent requirements (see section (Protection against adverse treatment: amendment of new public schemes)), or(b) the regulations make provision which has retrospective effect.(4) Regulations under section (Transfer of assets and liabilities) are subject to the affirmative procedure if they make provision falling with subsection (3)(c), (d) or (e) of that section.(5) Regulations under section (Information)(1) are subject to the affirmative procedure if they make provision about the amount of a financial penalty.(6) A statutory instrument containing regulations under section (Taxation) is subject to annulment in pursuance of a resolution of the House of Commons.(7) Any other regulations under this Chapter are subject to the negative procedure.”Member's explanatory statement
This new clause contains provision about consultation and parliamentary scrutiny of regulations about the transfer of the AWE Pension Scheme. It will be the eighth clause of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“InterpretationIn this Chapter—“active member” has the meaning given by section 124(1) of the Pensions Act 1995;“deferred member” has the meaning given by section 124(1) of the Pensions Act 1995;“enactment ” includes—(a) an enactment comprised in subordinate legislation (within the meaning given by section 21 of the Interpretation Act 1978),(b) an enactment comprised in, or in an instrument made under, a Measure or Act of Senedd Cymru,(c) an enactment comprised in, or in an instrument made under, an Act of the Scottish Parliament,(d) an enactment comprised in, or in an instrument made under, Northern Ireland legislation;“member ” has the meaning given by section 124(1) of the Pensions Act 1995;“money purchase benefits ” has the meaning given by section 181 of the Pension Schemes Act 1993;“new public scheme ” has the meaning given by section (Establishment of new public schemes and transfer of rights)(1); “occupational pension scheme ” has the meaning given by section 1 of the Pension Schemes Act 1993;“pension credit right ” has the meaning given by section 124(1) of the Pensions Act 1995;“qualifying person” has the meaning given by section (Establishment of new public schemes and transfer of rights)(1);“the trustee company” means AWE Pension Trustees Ltd.” Member's explanatory statement
This new clause contains definitions for the purposes of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”. It will be the ninth clause of that Chapter.
Baroness Altmann
“Lump sum payments for members of the Financial Assistance Scheme(1) Any member of the Financial Assistance Scheme, or their survivor or surviving dependent if the member is deceased, who would qualify for an increased Financial Assistance Payment after 2027 as a result of changes made to the Financial Assistance Scheme Regulations 2005 (S.I. 2005/1986) by section 110 of this Act, may also receive a lump sum payment or payments in recognition of the years of pension increases that were unpaid since the failure of the pension scheme.(2) The Secretary of State must, by regulations, determine the amount of the lump sum payments to be made under subsection (1) within one year of the day on which this Act is passed.(3) Regulations under subsection (2) must—(a) specify, in consultation with the Pension Protection Fund, the calculation methodology for the lump sum payments to be made in connection with the loss of inflation protection on pre-1997 pension benefits, and(b) require Ministers, in consultation with the Pension Protection Fund, to lay appropriate regulations to identify the resources to be used for the lump sum payments specified in paragraph (a).(4) Regulations made under this section are subject to the affirmative procedure.”Member's explanatory statement
This amendment seeks to make provision for lump sum payments to members of the Financial Assistance Scheme who qualify for an increase in periodic compensation for pre-1997 service to compensate for unpaid increases in the years since the failure of the pension scheme.
Baroness Altmann (Non-Afl)
My Lords, as we have already debated this amendment and I alerted the House that I would like to test its opinion after such strong support from nearly all sides, I beg leave to test the opinion of the House on Amendment 154.
Baroness Sherlock
“Investment principles and choosing investments: guidanceIn Part 1 of the Pensions Act 1995 (occupational pensions), after section 36 insert—“36ZA Investment principles and choosing investments: guidance(1) The Secretary of State must issue guidance explaining such aspects of the law contained in regulations made under section 35(4) (statement of investment principles) and section 36(1) (choosing investments) as the Secretary of State considers appropriate.(2) Guidance issued under this section may, in particular—(a) explain the meaning of any expression relevant to that law; (b) include examples to illustrate how that law applies to particular scenarios.(3) The trustees of a trust scheme, and any fund manager to whom any discretion has been delegated under section 34 (power of investment and delegation), must have regard to guidance issued under this section.(4) The Secretary of State—(a) must from time to time review any guidance issued under this section; (b) may from time to time revise and re-issue guidance under this section.(5) Before issuing guidance under this section, the Secretary of State must consult such persons as the Secretary of State considers appropriate.(6) The requirement to consult those persons may be satisfied by consultation carried out before this section comes into force.(7) The Secretary of State must—(a) lay guidance issued under this section before Parliament, and(b) publish such guidance in such manner as the Secretary of State considers appropriate.(8) The first guidance issued under this section must be laid before Parliament, and published, before the end of the period of 12 months beginning with the day on which this section comes into force.””Member’s explanatory statement
This amendment would require the Secretary of State to issue guidance explaining aspects of the law contained in certain pensions regulations. The guidance may in particular explain the meaning of expressions in those regulations, such as “financially material considerations” (including “environmental, social and governance considerations”) and “best interests of members”.
Baroness Sherlock (Lab)
My Lords, I will speak to government Amendments 156 and 178 in my name. I am delighted to bring forward an important amendment to this Bill, delivering on a commitment made by my honourable friend the Minister for Pensions in the other place to provide greater clarity and support for trustees exercising their existing investment duties.
Trustees and others tell us that, although their duties are well established in law, they lack practical tools to apply them in today’s complex investment environment. These amendments respond to that need by requiring the Secretary of State to issue statutory guidance explaining how these duties operate within the existing legal framework. For the first time, there will be a statutory obligation to provide accessible and authoritative guidance on the meaning and application of key legal concepts contained in regulations made under Sections 35 and 36 of the Pensions Act 1995, including the statement of investment principles and the provisions governing the choosing of investments.
Let me be clear: these amendments do not change trustees’ duties or prescribe outcomes. What the amendments provide is guidance that clarifies how the law works in practice. Across DB, DC and hybrid schemes, trustees and advisers have asked for concise, practical and legally grounded guidance. They want confidence that the law gives them the room to take proper account of long-term, financially material risks, such as climate change, biodiversity loss and evolving economic conditions when determining how best to invest in members’ interests.
At a recent round table chaired by the Pensions Minister, stakeholders stressed the need for guidance that distils existing law into simple usable terms supported by real-world examples. They were equally clear that the guidance must remain flexible and able to evolve as investment practice develops. The Government’s view is that fast-moving concepts such as standards of living, member views and complex system-level risks should not be hard-wired into primary legislation because they risk creating rigidity and could quickly become outdated. By contrast, statutory guidance offers a pragmatic responsive approach that can evolve alongside the global investment environment, stewardship expectations and emerging environmental, social and governance data.
Under these amendments, the Secretary of State will issue guidance explaining such aspects of the law as they consider appropriate. This includes clarifying key expressions, such as “financially material considerations” and the “best interests of members”, covered in existing regulations. The guidance will also use examples and case studies to illustrate how these concepts should be interpreted—something that trustees and advisers have repeatedly said would be of real value.
To ensure that the guidance is genuinely useful, DWP has convened a technical working group chaired by Sir Robin Knowles, a serving High Court judge whose leadership of the Financial Markets Law Committee’s work on fiduciary duties and sustainability brings deep expertise to this task. The group brings together experienced DB, DC and LGPS trustees, actuaries, investment practitioners, stewardship specialists, civil society representatives and senior pensions lawyers. The group has already met and agreed terms of reference. Its objectives include supporting DWP in developing statutory guidance that provides clarity and confidence to trustees without imposing undue prescription, translating existing law into practical expectations supported by real-world examples—for instance, showing how trustees might assess long-term financial risks linked to climate change, biodiversity loss, supply chain exposures, nature-related dependencies and stewardship escalation, as well as financially material social risks and other forms, drawing on good practice from schemes such as Nest, Brunel and People’s Partnership. The guidance will outline reasonable sources of evidence, data, member views and professional advice on which trustees may rely.
The group will look to recognise in guidance the differing capacities of schemes, with case studies showing how schemes of various sizes can meet the same principles in different ways. It will also identify appropriate areas of alignment with LGPS and FCA guidance to promote coherence across the pensions landscape. I know this will be of particular interest to the noble Baroness, Lady Hayman, who has asked about the interaction of this guidance with other pension schemes. I pay tribute to her for her work in this area and for the amendment she tabled, which, along with similar work in the other place, has prompted the Government to respond in the way they have.
As we have indicated previously, this guidance is intended only for occupational trust-based schemes, where questions of legal clarity arise most acutely. FCA-regulated providers operate under the consumer duty, and the LGPS already has its own guidance to LGPS administering authorities, setting out that they must include preferences on financially material ESG factors in their investment strategies. However, I can assure the House that the FCA, the Pensions Regulator and the MHCLG for the LGPS are fully engaged in the statutory guidance work to help to support alignment and share best practice.
Baroness Hayman (CB)
My Lords, when I came into the Chamber today, a Cross-Bench colleague congratulated me on the way in which my amendment has been handled; it is an absolutely perfect example of how the House of Lords should operate. We are all very aware, I think, that sometimes we are not operating at our best at the moment. In this case, an amendment was put forward on a cross-party basis and negotiations went on with the Minister; we managed to thrash out an amendment—and we did not get everything that we wanted, but we certainly got the legislative basis on which guidance could be issued. That guidance has been asked for by trustees and the industry and considered by working groups. I first got involved with the issue and knew that there was a request for clarity some five or six years ago, when we had another Pension Schemes Bill.
I am seriously disappointed that what I thought was a consensus that this was a good way forward has not been accepted across the House. I am particularly distressed that, as I understand, the Liberal Democrat Benches will not be supporting the government amendment today. My understanding up to this morning was that the concerns that existed there related to the fact that my amendment had in some way been watered down and was less tough, putting less into statute and giving more reassurance to those who were concerned about overinvolvement. The Minister set out very clearly that this was not a case of overinvolvement; it is certainly not a case of mandation. I was once told that a Secretary of State in a previous Government said that he did not worry at all about “have regard” amendments, because they could be ignored if there was a basis for so doing.
So I am, as I say, very upset. I will not go through all the arguments as to why this would be valuable—I did it at Second Reading and in Committee and the Minister has done it for me today. I am no expert, and I accept that there are experts in the Chamber, but pension investments are the ultimate long-term investments—the ultimate investments in which long-term, systemic risks should be taken into account. The anxiety that some pension fund trustees had about taking those into account was holding those funds back from acting in the best interests of their pensioners. That, quite simply, was what we were trying to put right in this amendment. The Minister has made a compelling case for this amendment, which she and her officials have taken infinite care over, and I still hope, even at this late stage, that those who are thinking of not supporting it will reconsider and support it strongly, as I do.
Lord Thomas of Cwmgiedd (CB)
My Lords, I shall make a few brief remarks in support of the Government. I declare an interest as chairman of the Financial Markets Law Committee, which issued a paper about two years ago now to try to explain the very complicated problems. This would be an easy matter to solve if lawyers were not paid at the extortionate rates at which they are paid, because each bunch of trustees could take their own legal advice, but unfortunately we live in a world where lawyers are grossly over-remunerated, and it is not practicable for trustees of pension schemes to take legal advice. It is therefore necessary to provide some guidance in relation to fiduciary duties.
These are complicated, partly because they have a very ancient history, albeit one that has worked well, and partly because the Law Commission issued a paper some years ago which was not entirely clear. The paper that the Financial Markets Law Committee issued, although it was agreed unanimously by the committee, is not entirely easy to follow. Therefore, what was needed was something that ordinary trustees could look at and be guided by in the exercise of their fiduciary duties. As the Minister has explained, and as my understanding is, the guidance is going to be prepared by an independent group. Having had to see some of those who have been involved, “independent” is a correct description of them. Pension lawyers are tough people and I have no doubt whatever that they will produce independent advice and will not be cowed by any Minister into providing something that does not accord with the law—what they will be doing is giving guidance on the law.
There is one point upon which I disagree with the Minister. She says that the guidance will be authoritative. Yes, in one sense, but not authoritative in the sense in which it is popularly understood. They cannot give advice that changes the law in any way whatever, because that would be ultra vires what they are intending to do, and if they did, one could go to the court and say, “The Secretary of State’s guidance does not represent the law”. Therefore, the argument that this is in some sense changing the law is totally misconceived, maybe because some have not read the amendment very closely. This is simply guidance.
When we look at fiduciary duties and at the 2005 pension regulations, as amended in 2018, there are phrases that are not easy to understand. Therefore, what the Secretary of State is going to do seems to me entirely sensible. She is going to get a group of independent people—and jolly independent they are too—presided over by Sir Robin Knowles, who is fiercely independent, and all they will be doing is trying to explain the law to people, without the people concerned having to pay the fees of lawyers.
I cannot understand how anyone could possibly oppose this. If there is something in the wording that is not quite right, it would be wonderful if someone could say what it is; no doubt it could be corrected in time for Third Reading. To deprive pension trustees of advice and force them into the hands of lawyers is quite wrong. Who pays the fees of the lawyers? The pension funds. This is a good piece of legislation, and we ought to support His Majesty’s Government.
Lord Hendy (Lab)
My Lords, what a pleasure it is to follow the noble and learned Lord, Lord Thomas of Cwmgiedd, in supporting the Government’s amendments and Amendment 167 in the name of the noble Baroness, Lady Hayman, and others, which all propose that the Secretary of State should publish statutory guidance for trustees in investing their funds. In Committee, the noble Baroness, Lady Janke, and I proposed an amendment to require regulations to guide trustees’ investment; in particular, so that trustees should avoid incompatibility with international law. My noble friend the Minister was against regulating in a way which would constrain the autonomy of trustees, and we have not pursued that amendment on Report.
The proposal for guidance rather than regulations is an attractive one. My request today is that the factors to which the guidance should have regard should include not just pension law but the international legal obligations of the UK, to ensure that pension scheme investments do not, directly or indirectly, cause or contribute to activities which are inconsistent with the provisions of human rights and international law; otherwise, UK pension schemes, particularly those which are an arm of the UK state, such as the Local Government Pension Scheme, risk involving the UK in breaches of its international obligations.
The UK is obliged not to authorise, explicitly or implicitly, serious breaches of peremptory international norms by other states; nor must it render aid or assistance to any entity involved in serious breaches of such norms by another state. The UK must co-operate with other states and take all reasonably available measures to bring an end to any violations of such norms by another state. This self-evidently applies to the entities involved in the activities of the Israeli Government in Gaza and the West Bank, but, sadly, it applies to many other states too. It also applies to entities in supply chains which involve the UK and other states breaching the minimum labour standards of the International Labour Organization and the Council of Europe through its European Social Charter.
I ask my noble friend the Minister: will she ensure that the guidance proposed encourages pension fund trustees to take into account, among other things, the obligations of international law in making their investment decisions? Pending that guidance, an expression of encouragement from her would be much appreciated.
Lord Thomas of Cwmgiedd (CB)
Before the noble Lord sits down, can I ask him a question? The instrument says, “on the law”. We know that English law operates so that there are some obligations that are performable only by His Majesty’s Government, and other obligations that are accorded only into domestic law. He surely is not suggesting that obligations that go beyond domestic law are somehow to be brought within the guidance. If so, that would be a massive change in the law and well beyond anything that this group of people or the Secretary of State were permitted to do.
Lord Hendy (Lab)
The answer to that question is complex, but there is one proposition that is not: institutions that constitute an arm of the state are bound by international law. That will apply to the Local Government Pension Scheme and, as I understand it, to other pension schemes.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise with some trepidation; I am not going to get into that particular discussion, although I entirely agree with the intention of the noble Lord, Lord Hendy, without getting into the legal details.
I rise briefly to express Green support for Amendment 167 from the noble Baroness, Lady Hayman, which she so ably introduced. As I understand it, the government amendment is, essentially, delivering the same purpose. I said at Second Reading, which I recall was the day before our Christmas Recess, that my festive conversations were entirely preoccupied by the term “fiduciary duty”, which was really appropriate to the season—but what we are talking about is really important.
Having got into the legal details, it is worth coming back to what we are talking about here. Pensioners are people. They have to live on this damaged and deeply unhealthy planet. They hope to live for many years, so what their money is invested into has real, concrete impacts on their lives. It is in their interests that their money is invested well for the future. That is why we support the government amendment.
Baroness Stedman-Scott (Con)
My Lords, we have significant concerns about the direction of travel shown by the Government with their amendments in this group. These amendments risk opening the door to mandation by the backdoor, and that is something we cannot support.
The Government’s Amendment 156 would require the Secretary of State to issue guidance explaining key aspects of pension law, including fundamental concepts such as “financially material considerations” and, crucially, what constitutes the “best interests of members”. If the Government are given the power to define what is in the members’ best interest, what is to prevent that definition shifting over time to reflect political priorities? What is to stop a future Secretary of State asserting that particular forms of investment—perhaps in UK assets of their choosing—are, by definition, in members’ best interests? If that becomes the case, have we not simply created mandation in another form?
Throughout the passage of the Bill, we have been clear that decisions about investment must remain with trustees acting in the interest of their members, and not be directed implicitly or explicitly from the centre. These amendments risk undermining that principle by centralising significant interpretive power in the hands of the Government. When the Government issue guidance to schools, the health service or other areas in their purview, the effect can be to clarify and support operations in a practical sense. The sort of guidance the Government propose to issue on this point goes precisely the wrong way and can serve only to limit the options open for trustees to act in their members’ best interest.
For these reasons, we believe that these amendments represent a step in the wrong direction. They risk politicising what should remain independent fiduciary judgments. Accordingly, I put the House on notice that we will oppose these government amendments when they are called.
Baroness Sherlock (Lab)
My Lords, I will start where we just finished. I can only assume that the noble Baroness, Lady Stedman-Scott, did not listen to the words of the noble and learned Lord, Lord Thomas; I hope she would take it from him if not from me. He made it clear that this guidance does not change the law; it simply seeks to explain how the law can be applied. As he pointed out, were any Government—this Government or a subsequent one—to try to make the guidance represent something that the law is not, the courts would very quickly set it aside. Frankly, I find the objections risible. They do not stack up at all.
To be really clear, the amendments require the Secretary of State to issue guidance that explains existing law. The guidance would not instruct trustees how to invest. It would not give Ministers any power to set investment policies or require trustees to invest in any assets. Trustees must consider the guidance, but they can depart from it if they have rational grounds for doing so. Trustees retain full discretion and independent judgment. The amendment does not change trustees’ duties or prescribe investment outcomes. It simply clarifies how the existing duties operate.
The aim of the guidance is to clarify, not control. Trustees and industry stakeholders have asked for clearer, practical explanations of legal concepts, and that is what the guidance will provide. There will be a technical working group, as the noble and learned Lord pointed out. I certainly have no intention of expecting the kind of people in that group to bow to the wishes of this or any other Government, and we will not be disappointed in that respect.
To be really clear: guidance cannot override the law. Trustees must still make investment decisions based solely on what they judge to be in members’ best financial interests. They can depart from the guidance if they explain their reasoning and set it out. Nothing in the guidance allows Ministers to mandate their investment choices.
I regret that I cannot agree to my noble friend Lord Hendy’s request to expand the guidance in the way he described. I clarify that the amendment does not apply to the Local Government Pension Scheme, as I think I made clear in previous stages.
I was disappointed that no one from the Lib Dem Front Bench got up to explain the decision they have taken. I was as surprised as the noble Baroness, Lady Hayman, to find that they did not propose to support what we had all thought was a proper consensus. I pay tribute to the noble Baroness, Lady Hayman, as I think she has done a really good job in putting forward the case of trying to make sure that trustees who want to take appropriate account of long-term factors, such as climate risk, are enabled to do that.
That is what this Government have brought forward. If the House votes it down then so be it, but it would be a major mistake.
Baroness Neville-Rolfe
“Review of public service pension schemes(1) The Secretary of State must, within 12 months of the day on which this Act is passed, conduct and publish a review of the long-term affordability, intergenerational fairness, fiscal sustainability, and accounting treatment of public service pension schemes.(2) In conducting the review under subsection (1), the Secretary of State must have regard to—(a) the current and projected cost to the Exchequer of such schemes,(b) their affordability in the context of long-term public finances,(c) the impact of such schemes on different generations of taxpayers and scheme members,(d) the implications of demographic change, including longevity and workforce participation, for the sustainability of such schemes, and(e) the manner in which the liabilities associated with such schemes are recorded, disclosed, and accounted for within the public sector balance sheet and related fiscal reporting frameworks. (3) In preparing the review, the Secretary of State must consult—(a) the Office for Budget Responsibility,(b) the National Audit Office,(c) His Majesty’s Treasury, and(d) such other persons or bodies as the Secretary of State considers appropriate.(4) The schemes to which subsection (1) applies are—(a) the NHS Pension Scheme,(b) the Teachers’ Pension Scheme,(c) the Civil Service Pension Scheme,(d) the Armed Forces Pension Scheme, (e) the Police Pension Scheme,(f) the Firefighters’ Pension Scheme, and(g) any other public service pension scheme designated by the Treasury by regulations as operating on an unfunded or pay-as-you-go basis.(5) The review must be laid before both Houses of Parliament.(6) Nothing in this section affects any pension entitlement accrued in respect of service.”Member’s explanatory statement
This new clause would require the Secretary of State to conduct and publish a review of the long-term affordability, intergenerational fairness, fiscal sustainability, and accounting treatment of public service pension schemes.
Baroness Neville-Rolfe (Con)
My Lords, my Amendment 157 would require the Secretary of State to conduct and publish a review of unfunded public sector pensions. I am very grateful to my noble friends Lord Moynihan of Chelsea and Lady Noakes for their support. My amendment is the same as the one I moved in Committee but, in the light of our debate then, there is one major point I want to stress. My motivation is in no way to denigrate public servants, nor to assert that they are not entitled to proper pensions, nor that we should renege on entitlements already earned. My aims are to draw attention to the fact that there are no savings pots or funds from which these public sector defined pensions are paid; that, with increasing numbers of public servants, the long-term burden is increasing; and that, when public servant DB pensions are paid, they have to be funded from current taxation, and that fact is insufficiently and obscurely reflected in national accounts. There is a real risk that the burden posed by these pensions will eventually come to be seen as unsupportable. Hence, we should set up a high-powered review.
Given these concerns, it is unfortunate in the extreme that this Bill does nothing to address them. The numbers are big: there are over 3 million active members in the NHS, teachers, Civil Service and Armed Forces schemes, 2.2 million deferred members and 2.8 million pensioners, which is a total of 8 million individuals. As people live longer and public sector employment grows, the proportion receiving gold-plated defined benefit pensions will grow if nothing is done.
Most people are aware that Britain has a huge national debt that is growing and sits at £2.9 trillion, or 97% of GDP. However, the obligations of future public sector DB pensions are equivalent to 75% of GDP and probably growing. When I first learned that, I was amazed, but I am afraid it is true. At the heart of the problem is the fact that this is a very long-term problem—like the national debt—with reform difficult to reconcile with electoral cycles.
However, on the surface things look fine. In 2025-26, according to the Treasury PESA analysis of 2025, there was £56.8 billion-worth of these public sector pensions being paid to some 3.5 million pensioners. This compares with a total of employer and employee contributions of £57.3 billion, which has dramatically risen in recent years. Indeed, according to the OBR in March, because of the growth in the public sector payroll, receipts from working employees are growing more quickly than the growth in pensions paid, which are uprated by CPI, with net spending forecast to be £1.4 billion lower by 2030-31.
So, apparently, all is well, but I am afraid that that is not the case. The sums paid in pension contributions by employees do not go towards their pensions but to pay the pensions of those already retired. There are no savings to pay future retirees. The future liability figure from the OBR in July 2025 is £1.4 trillion, somewhat lower than other estimates. However, it is partly a question of how you do the calculations. Estimates on longevity and long-term public sector salaries are particularly difficult to predict. My main point is that, on any credible estimate with, happily, people living longer, the numbers are frighteningly large.
Moreover, the situation may actually be getting worse, as commitments grow over time and per capita growth—which could transform the situation—recedes. It is unfortunate and regrettable that the scale of the problem is not properly reflected in the national accounts. As the OBR commented in its July report, which is well worth a read:
“Unfunded pension liabilities represent the second-largest government liability after gilts, but are not included in the PSNFL”—
public sector net financial liabilities.
The scale of the problem is hidden by a combination of accounting conventions and the moves in interest and gilt rates which have made things look temporarily much healthier than they are. One of the most important variables in pensions is the interest rate applied to notionally invested contributions. Higher interest rates result, according to standard accounting conventions, in lower pension costs, and vice versa.
When the facts are unravelled, even if no new pension commitments are made from this point—that is if all the current schemes were closed to new accruals—existing public sector pension payments will continue to rise until the early 2060s, which on best estimates will by then amount to some £130 billion annually, with no capping mechanism of any sort. Noble Lords will struggle to find any acknowledgement of that in our national accounts.
More generally, comparison with the private sector is enlightening, particularly now most of the generous defined benefit schemes in that sector have been closed. The net effect for those under 40 is that most—in practice, those in the private sector—will have to rely on defined contribution pensions augmented by non-pension savings and the state pension. This contrasts starkly with the position in the public sector.
One salient and growing cause of the problem is the sheer size of the public sector, the generous pay settlements in 2024 and the barely noticed drift upwards in grading which increases pension costs. For example, in the Civil Service in 2016, before Covid, there were 420,000 employees; today, there are 550,000, and the numbers are growing. The extra pension contributions paid by a bigger workforce make the situation look better in the very short term, as I have acknowledged, but this is illusory. They in fact store up trouble for the future when the pensions have to be paid out of current income. This is very different to the private sector, where we have funded schemes.
I turn now to incentives. One reason why this problem has arisen, I suggest, is that pension costs are not properly taken into account in public sector decision-making. Those adding to the workforce, or making people redundant, rarely take into account, or know, what the long-term consequences of their decisions are for pension costs. Consequences are simply passed on to the Treasury—in other words, on to taxpayers great and small. So even if officials want to do the right thing, they cannot calculate what it is.
That brings me on to the final area, which is intergenerational unfairness. We are constantly adding to the burden on coming generations without any thought as to how the burden can be paid off. That cannot be sensible or fair to those already facing the challenges of housing, childcare, student loans and now inflation. If nothing is done, once the youngsters get to pension age, the pensions promised to them will be unaffordable, so there will be a crisis, and hard and damaging decisions will have to be taken. It is becoming clearer by the day that we need much more transparency in the government accounts and a proper and realistic look at the implications of present policies.
In Committee, the noble Lord, Lord Davies of Brixton, argued against our proposed review and cited a Written Statement relating to the Civil Service scheme. He quoted the Cabinet Office Minister, speaking on 20 December 2011, as having given
“a guarantee, outside of the scheme designs parameters … of no further reform for the next 25 years”.—[Official Report, Commons, 20/12/11; col. 151WS.]
The Minister picked this up. She said that was
“in effect committing to no further major reforms”
in public service pensions
“until 2040”.—[Official Report, 23/2/26; col. GC 318.]
That is a generous interpretation, referring, we should note, to the public sector, not just to the Civil Service. It was not a legal guarantee. In any case, such a guarantee in no way precludes examining the situation. Even if such an examination ended in recommendations for action, these would take time to implement—much time, in my experience. I am surprised that the Minister does not see value in a review, particularly as a number of issues on accounting and transparency have already been raised by the Public Accounts Committee.
I fully accept that all this is not the fault of the present Government only. The situation has developed over many years, but we need to act now before the situation deteriorates further. I am conscious that it is an uncomfortable subject, but for the reasons I have set out, there is a strong case for a special review. This is not a call for a public or independent inquiry, which would cost a great deal and drag on, nor am I making any policy recommendations—but I want Ministers to grip the problem, and to do so with an open mind. Because of the long timescales involved in pensions and the importance of public servants, all parties have an interest. I beg to move, and I may seek to test the opinion of the House.
Baroness Nichols of Selby (Lab)
My Lords, I am just going to ask a question because I am slightly confused. The noble Baroness did say that it was not just a problem of this Government, but could she explain why the previous Government did not take this on?
Baroness Noakes (Con)
My Lords, I have added my name to the amendment of my noble friend Lady Neville-Rolfe, and I congratulate her on pursuing this important topic. I will make just three brief points in support of the review that my noble friend’s amendment calls for.
First, we need greater transparency about the current and future costs of public sector pension obligations. The Government’s Whole of Government Accounts provides some information, but it is massively out of date—the latest available are for 2023-24, and the only certain conclusion from those accounts is that the value of future pension liabilities is so dependent on the underlying accounting and actuarial assumptions that the numbers have no real meaning. That is why the Public Accounts Committee of the other place has constantly called for more information to be given on the gross cash amounts and timing of the pension liabilities—but so far, the Government have refused.
Secondly, the real question is not about numbers—interesting though they are to people such as me—but a political one. It is a fact that defined benefit private sector pensions are now unaffordable and will likely never be seen again in the private sector. How fair is it that the private sector pays the taxes that fund the public sector pension benefits that cannot be afforded in the private sector? How long will the British public accept that?
Thirdly, the Government’s policies are biased against private sector pension provision. The private sector has had to pick up the tab for Gordon Brown’s pension tax raid and the regulatory burdens imposed by the Pensions Regulator. It has had to fund the huge deficits that emerged after the long period of low interest rates, as well as the Pension Protection Fund. The Chancellor’s latest raid on salary sacrifice schemes with national insurance was aimed squarely at the private sector. Little of this ever affects public sector pensions. However, when the rules that affect all employees start to impact public sector employees—for example, judges and doctors—the Government bail them out. This is a policy bias that does not stand up to scrutiny. My noble friend’s review is long overdue.
Lord Lucas (Con)
My Lords, I am delighted to see this series of requests for reviews. I support my noble friend’s Amendment 157. I support also my noble friend on the Front Bench in his Amendment 159, which he will no doubt speak to in due course. It echoes what the noble Lord, Lord Vaux of Harrowden, said on a previous day: we really need to understand the causes of the drop in investment in the UK and address them, rather than try to apply some layer of instruction on top without dealing with the foundations.
I am particularly fond of Amendment 170A. As was shown by the last Division and previous Divisions, I feel that the Government are getting themselves into some difficulty on the question of mandation. Surely it should not be the Government telling pension funds what to do—it should be their members. Their members should have a say in and influence over the question of whether more should be invested in the UK. There is also the question of whether we should invest more in protecting us from climate change—again, that should be decided by members; it should not be mandated centrally. However well-intentioned this Government may be on mandation, there is such huge potential for it going wrong under future Governments. Members are the people who have to suffer if their investments go wrong; they should be the people whose views are taken into account.
Lord Palmer of Childs Hill (LD)
My Lords, this group brings together a number of proposed new clauses on the wider health and fairness of the pensions system: public service pension availability; intergenerational fairness; the impact of the Act on retirement incomes; barriers to UK investment; and member engagement and rights. In addition, my amendment proposes a new clause to address the fairness of police pension survivor benefits forfeiture rules. Taken together, the amendments reflect a wider concern that major structural reform should be accompanied by a proper review, transparency and evidence.
On these Benches, we believe that there is obvious merit in asking the Government to come back to Parliament on these questions, whether the issue is long-term sustainability, actual retirement outcomes or the obstacles that may prevent productive investment. They are not hostile to reform; they are part of legislating responsibly in an area as consequential and complex as pensions. On these Benches, we are minded to support Amendment 157, moved by the noble Baroness, Lady Neville-Rolfe.
Through the amendment in my name, I am pleased to have raised the issue of police pension survivor benefits in this Chamber. I raised the matter in Committee, and I feel strongly about it. I appreciate the Government’s response to our earlier discussion, so I will not pursue the amendment further today.
Lord Davies of Brixton (Lab)
I welcome the comments from the noble Lord, Lord Palmer of Childs Hill, on police pensions. It is a clear injustice that my noble friend the Minister will understand. The truth is that the only objection is the classic “read-across”—the implications it has for other groups—but I do not see that as a good reason to continue with an injustice. I am therefore happy to express my support for Amendment 164.
I do not support Amendment 157, calling for a review of public service pensions. In truth, the House deserves a proper, full debate on the issue and not as a by-product of this Bill. If other Members want to take the necessary steps to have a proper debate on the issue, I would welcome that. I am confident in that because I know that when such a review takes place, it will come up with the same conclusion as the last review.
It should be of no surprise to anyone that an unfunded pension scheme is not funded—it is inherent; it is in the name. Why do we fund private sector pensions? We do so to provide members with a guarantee. There is no ideological issue involved here. For members to feel safe about receiving their pensions, they want to see the employer putting aside the members’ money into a fund that will be there to provide the pensions when they get to retirement—that is why we have a fund. If the pension is being provided by the Government, we can rely on the Government. We have always relied on the Government, and so a fund is not necessary. Calculating what the fund would be, if it were funded, is an interesting exercise—I would do it myself for a reasonable fee—but it does not tell you anything about the management of that unfunded pension scheme arrangement.
The noble Baroness, Lady Neville-Rolfe, mentioned interest rates. Interest rates make no difference whatever to the cost of an unfunded scheme, because it is not funded. They do make a difference to the figure that you calculate at the current time, but that is purely a ghost figure—that is not the cost of the scheme. The cost of the scheme is what arises when you pay the benefits, which is not affected in any way by interest rates.
I look forward to the noble Viscount, Lord Younger, introducing his amendment on member engagement. If I had seen it before this weekend, I would have been minded to add my name to it—I like the amendment. I do not know whether my noble friend the Minister will accept it, but I agree that it is time for a review of how members are engaged in their pension scheme. The system we have now dates back almost 30 years; it is post Maxwell. The Pensions Act 1995, introduced by the noble Lord, Lord Hague—as he is now—established the structure, and the operation of pension schemes has moved on so much since then.
An interesting wrinkle in the legislation comes in the light of the Goode report. Professor Goode was asked to provide advice on member involvement in the wake of the Maxwell scandal. He recommended that there should be member-nominated trustees. This was adopted by the then Conservative Government. The interesting fact is that the Goode commission recommended that there should be a majority of member-nominated trustee in defined contribution schemes, which, of course, is the majority form of provision at the moment. If we were to adopt its approach, as part of the noble Viscount’s review, we would want much greater involvement in looking after the money and taking investment decisions, which I regard as a very good thing.
There have been big changes since 1995. There has been massive growth in single corporate trustees, which precludes the possibility of member-nominated trustees—again, another good reason to support the noble Viscount’s amendment. Of course, how you have member involvement in schemes that are closed is a much more difficult issue than when they are open with active members.
There are good reason for having a review of how members are engaged in occupational pension provision. I have not discussed this with my noble friend the Minister but my guess is that she will reject the amendment, which is a bit of a pity but I will of course, as almost always, support the Whip.
Baroness Altmann (Non-Afl)
My Lords, I support Amendment 164 in the name of the noble Lord, Lord Palmer. I agree that there seems to be something of an injustice in relation to survivor pensions for the police. For policemen who pass away, pensions for their spouse are suspended if the spouse remarries or even moves in with a partner. Do the same provisions apply in the Armed Forces, NHS and Civil Service pension schemes, or does the deceased member’s partner not lose their pension in those schemes if they remarry or cohabit, unlike for the police?
Lord Moynihan of Chelsea (Con)
My Lords, I revert to the amendment from my noble friend Lady Neville-Rolfe. I thank her for this important contribution and welcome the contributions from various noble friends, the news from the noble Lord, Lord Palmer, that he would be minded to support this amendment, and even the super news from the noble Lord, Lord Davies of Brixton, that he too might support some form of inquiry.
I have been struggling for some weeks now to think how I could persuade the House that my noble friend Lady Neville-Rolfe’s amendment was crucial and urgent, and how we have got ourselves into a really dangerous situation with public sector pensions. We discussed this in Committee. The noble Viscount, Lord Thurso, gave a speech in which he seemed to believe that these pensions were necessary because pay was—I think this is the number that was given—30% below that of the private sector. As I think we know, studies show that public sector workers get about 6% more for the same job as the private sector worker before these generous pensions. Yes, a commitment was made for these pensions, but so was it made to the civil servants of Greece and of Ireland—suddenly there was no money and those commitments were reneged on. We do not want to get to that situation.
The mood of the House is always to say, “Look, these people are working hard. They need a good a retirement. There is a wonderful security in being promised a salary increasing with inflation that is about two-thirds of what they were getting before until they die. All that is wonderful, we should be generous, and it would be an injustice to take it away”, but the fact is that this House is also for scrutiny and looks at the finances of this country, not just at where we can give more money to people. I listened earlier this afternoon to people arguing for more money to be laid out. It is what we tend to be quite good at, but the fact of the matter is that we now know that there is no money, when we cannot afford to spend enough on defence and when, as my noble friend, Lord Elliott of Mickle Fell, said, we are paying out more in benefits than we are receiving in income tax. In area after area, there are calls for money that is not available, and the Government, quite rightly, reject those calls for more money to be spent. There is no more money.
Viscount Thurso (LD)
Might I ask the noble Lord what the notional employer’s contribution is that he is putting into his calculation?
Lord Moynihan of Chelsea (Con)
I am putting the same contribution in that is made by employers—by the Government—right now. If you carry on doing it, you have a bunch of obligations for past promises. In the future everybody has a defined contribution scheme but you have the defined benefit scheme up to now. By 2060, as my noble friend Lady Neville-Rolfe told us, those obligations will result in £130 billion of annual payments, even if we stop now. If the economy grows by a considerable amount more than it has been growing in the past few years, those will amount to 3% of GDP being paid to pensioners of the public sector.
If you think that a £58 billion black hole is bad enough, fancy that £130 billion black hole that you have left to future generations because we failed to act—and because we refused even the reasonable request of the noble Baroness to have an inquiry. If we go beyond that and keep on with these schemes each year, that £130 billion will be dwarfed by a far larger amount. We are paying civil servants more, we have more civil servants and they are living longer, so the payments each year will rack up until at some point it will be like Greece or Ireland.
Right now, the bond markets are not at all impressed with us. Both the 10-year rate and the 30-year rate are well above those rates that noble Lords opposite claimed were evidence that Liz Truss crashed the economy. If she did, then goodness, they have crashed it much more. The bond markets are saying, “We’ve got you on watch and, if this goes on and you keep on with the deficits that you’ve got, you’re going to get into considerable trouble”.
We have the opportunity to think about this and, at least, to look at it. I hope that noble Lords will agree to this amendment. I also hope, by the way, that, if there is an inquiry, it is headed by somebody who is not in receipt of such a pension. In the private sector, we have a rule. If you have a great employee and they come to you and start talking gibberish, strangely, you think, “Oh, it’s going to be about their remuneration”. When it comes to their own remuneration, people find it very difficult to be realistic, logical and fair. So I hope not only that the Government will accept this amendment for an inquiry but that they will put somebody in charge of it who is not a captive of that public sector pensions system.
Viscount Thurso (LD)
My Lords, very briefly, I will support our Front Bench and the noble Baroness, Lady Neville-Rolfe, because it is quite a wise thing to have an inquiry. I wholly reject the argument the noble Lord, Lord Moynihan, just made: his maths is suspect and his conclusions are wrong. I have a son who is a special constable—until very recently he was a constable—a daughter-in-law who is a constable and another son who is a primary school teacher. As I said to him then, I say now: tell it to them that their pensions are not part of their remuneration, and I say you will be looking for teachers, policemen and nurses until kingdom come.
Viscount Younger of Leckie (Con)
My Lords, I begin by welcoming the amendment in the name of my noble friend Lady Neville-Rolfe, because it addresses a matter of real and enduring importance: the long-term affordability, intergenerational fairness, fiscal sustainability and accounting treatment of public service pension schemes. We heard a powerful speech from her in Committee and another from my noble friend Lord Moynihan, and they gave two further powerful speeches just now.
Fundamentally, this amendment asks the Government to examine how very large sums of public money are being managed, how liabilities are being accounted for, and what this means for the sustainability of public spending over the long term. These schemes represent a significant and growing commitment, and it is entirely right that Parliament should have a clear and transparent understanding of their implications, both for today’s taxpayers and for future generations.
The figures seem to be stark, as set out by the movers of the amendment, and some strong arguments have been put, backed up by evidence, but I very much noted the remarks from the noble Viscount, Lord Thurso, and perhaps some further debate and discussion should go on about the veracity of the figures after this debate.
Indeed, when the Government are choosing to place additional burdens on private pension saving through measures such as the national insurance changes and restrictions on salary sacrifice, in part to sustain these very substantial public sector commitments, the question of balance, fairness and sustainability becomes more and more pressing. For these reasons, we strongly support my noble friend’s amendment and we will support her should she seek to divide the House on it when it is called.
The other amendments in this group, including those in our names, seek to address two further fundamental issues: first, the question of pensions adequacy, ensuring that reforms are judged by their real-world impact on the retirement incomes of individuals, and, secondly, the question of why pension funds are not investing more in the United Kingdom. This is a critical issue, which was covered in Committee, not least by the noble Lord, Lord Vaux. If the Government wish to see greater domestic investment, the answer surely is not to reach instinctively for the levers of mandation but to understand and to address the underlying barriers, whether regulatory, tax-related or rooted in fiduciary duties. This point was made when we discussed the issue only last week, after which, I am glad to say, we voted to remove this dangerous power from the Bill. The point was repeated today by the noble Lord, Lord Lucas.
This is essential work that needs to be done. The Government are planning to intervene in the system without first properly understanding why it is behaving as it is. There is a risk that they are seeking to correct the symptoms of a problem that they have not even diagnosed, rather than addressing its causes. We have been clear from the beginning that the Government must not mandate investment, but we have also been clear that we should understand why we are not seeing the investment we need in our country. Our amendment allows the Government to do that work and then take the responsible and necessary steps to start promoting investment in a responsible way.
I close by speaking to Amendment 170A in my name and that of my noble friend Lady Stedman-Scott. I am grateful to the noble Lord, Lord Lucas, for his work on this amendment, as well as grateful for the—perhaps unusual—support from the noble Lord, Lord Davies of Brixton, for having a review, which is our wish, on member engagement on rights in pension schemes. Amendment 170A raises a fundamental question of agency: namely, the extent to which members of pension schemes are able to influence the governance and decision-making of the schemes to which they belong. We believe this is an important issue, and it invites the Government to reflect on whether pensions savers truly have a meaningful voice in shaping their financial futures. It is right that we consider not only the existence of engagement mechanisms but whether they operate effectively in practice, particularly in relation to investment decisions and scheme governance. I will therefore listen very carefully to the Minister’s response on these points.
Baroness Sherlock (Lab)
My Lords, I am grateful to all noble Lords for introducing their varied amendments calling for a series of reviews. I have been trying to keep track and I think we are now up to 23 reviews called for in Committee and up to 14 amendments on Report calling for reviews. I know that the party opposite would like to have fewer civil servants; if noble Lords pursue all the amendments, half the civil servants left will be doing reviews.
I will at least try to work through what we have here. Amendment 157 from the noble Baroness, Lady Neville-Rolfe, proposes a review of public service pension schemes. As we discussed in Committee, a major review took place through the Independent Public Service Pensions Commission of the noble Lord, Lord Hutton. That happened under the coalition Government and the reformed schemes were introduced from April 2015. I will just remind the House of the changes that were made then to make the schemes more affordable.
The scheme design changed from final salary to career average. Pension ages were increased to state pension age for most schemes and to 60 for the police, firefighters and Armed Forces. Member contribution rates were increased across the scheme, except the non-contributory Armed Forces Pension Scheme, and other aspects of scheme design were modernised: for example, supporting more flexible retirement. At the time, it was estimated that these reforms would save £400 billion over 50 years.
The noble Baroness, Lady Neville-Rolfe, asked about the 25-year guarantee. This does not mean of course that pensions cannot be changed in any way until 2040, nor was a guarantee written in to individual members. But the central elements of the reforms introduced in the PSPA 2013 were designed to last for at least 25 years, and a high barrier was set out in that Act for any proposed changes to the key design elements, including a requirement for consultation with scheme members or their representatives, with a view to reaching agreement to help deliver that stability.
I will look at some of the specifics that have been raised. First, those reforms have been fully bedding in only from April 2022, and their full effects will be seen over the coming years. Following reforms introduced by the noble Baroness’s party, schemes now meet the benchmarks set by the Hutton commission and public service pensions continue to form an important part of overall public sector remuneration, which is taken account in pay setting. That was a key point made by the noble Viscount, Lord Thurso: a pension is part of a pay package and is taken account of by the review bodies in making those judgments on pay.
Much of the information that is called for in this review is already published on a regular basis. The OBR publishes a forecast of in-year balancing payments between the Exchequer and the unfunded public service pension schemes—and projections of long-term spending as a share of GDP—in its fiscal risks and sustainability reports. As I indicated in Committee, these projections show spending falling over the long term from around 1.9% to 1.4% of GDP, indicating that the schemes are expected to become more affordable, not less, for future generations. In addition, valuation reports and the whole of government accounts set out the different accounting treatment of scheme liabilities and how to interpret the headline figures.
Lord Moynihan of Chelsea (Con)
Does the Minister acknowledge that in 2012 the Hutton report said that the cost would fall, in an uncanny replication of what she just said, to 1.2%, but that it did not? It remained at around 2%. It says now that it will fall to 1.2% but, as I said, these are people with skin in the game. I hope she will agree that their record in forecasting is not strong.
Baroness Sherlock (Lab)
My Lords, I am going to read Hansard, because I very much hope that the noble Lord has not just accused the OBR of having skin in the game. If it was not the OBR, perhaps he would like to write to tell me whom he was accusing of having skin in the game, because I do not recognise the point that he just made.
The point on the whole of government accounts was raised by the noble Baroness, Lady Neville-Rolfe. The whole of government accounts present the liability in accordance with the international financial reporting standards. There are no plans to change that approach and I do not think that there should be. However, I recognise that members of the PAC asked whether the liability could be presented on a more permanent basis to show how it would change in the absence of changes to the discount rate, to make it easier for people to understand it. As I said in Committee, the Treasury is exploring options to present pension liabilities on a constant basis. To be clear, that presentation would be supplementary and would not affect the underlying pension liability calculations in any way, or how they are presented in the financial statements, but the Treasury is looking at whether they can be presented in a supplementary way to aid understanding.
Given that the reforms have already been implemented and all the relevant information is already available, a government-commissioned review would largely replicate and collate existing material. On unfunded schemes, it is true that the schemes referenced are unfunded, but unfunded does not equal unaffordable or unsustainable. I set out that costs are projected to fall as a share of GDP. It is also a long-standing government policy not to hold assets against liabilities that sit fully under the control of the Exchequer, as I explained on an earlier group. Moving from unfunded to funded provision on a like-for-like basis would simply require additional borrowing to build up assets and would not improve the overall fiscal position. However, if the noble Lord, Lord Moynihan, wants to recommend cutting the value of public sector pensions, that is a different matter. It is not what we are discussing here today but it could be discussed within the House.
Factors such as longevity were mentioned, which can affect costs over time. Again, the current framework is designed to capture and manage that. Changes in assumptions are reflected through scheme valuations, which affect employer contribution rates—the point flagged up by the noble Viscount, Lord Younger. The cost control mechanism then operates to require adjustments to member benefits if costs move outside the agreed corridor. Therefore, the Government do not accept the amendment. Had the previous Government felt it to be important, having reviewed and reformed the system, they had 14 years to make a decision. They left government less than two years ago and suddenly this must be done on our watch. We do not think that is the appropriate way forward.
Amendment 164 was tabled by the noble Lord, Lord Palmer. He recognises that we had an exchange in Committee but, since others have raised it, I say simply that these rules were a feature of legacy public service pension schemes, as he knows. Those legacy schemes are now closed. Members are accruing benefits in reformed schemes that do not contain these provisions. The Government do not believe it appropriate to improve retrospectively the terms of previously accrued public service pensions, consistent with the approach taken when the reforms were introduced by the coalition Government.
In response to the question from the noble Baroness, Lady Altmann, I think the Civil Service position is similar to that of the police. With the NHS, forfeiture applies to those who left the service before April 2008. If I am wrong I will write to her, but I believe that is the position and I hope that clears that up.
Amendment 158, tabled by the noble Viscount, Lord Younger, seeks to introduce a statutory requirement for the Secretary of State to conduct a review on retirement incomes. I understand the intention behind this amendment but, as I explained in Committee, the Bill contains a range of reforms which will be implemented in phases over the next decade. A review in the next five years will not have allowed many of the reforms any time to take effect. Changes to retirement outcomes can take a long time to have effect as people build savings and then retire, so this is not appropriate.
An updated version of the impact assessment was published when the Bill entered this House. It detailed our monitoring and evaluation plans. The monitoring has already started. Research is under way with employers. The DWP, the Treasury and the regulators are scoping out further data and research plans, developing key metrics across the core aims of the Bill and committing to regularly monitoring and publishing, as well as conducting new research to fill evidence gaps. Furthermore, the measures contained in the Bill will help to build greater and more consistent data, particularly through the value-for-money framework, helping to create a strong evidence base to monitor and analyse trends. Where we consider it is appropriate to keep measures under review, we have included a review clause, such as the new clause
“Review of any exercise of powers under Section 28C”
in Clause 40(13). That is proportionate and tailored to the specific interventions, and it is the appropriate way forward.
As set out in my letter to noble Lords on 4 March, the Pensions Commission has been tasked with making recommendations about pensions adequacy and support for those approaching retirement. It will publish an interim report this spring, setting out the evidence base and a strategic direction for its work, with final recommendations early next year. A separate statutory review would create confusion and overlap, and would not be helpful.
Amendment 159, tabled by the noble Viscount, Lord Younger, seeks another review, this time on the barriers to UK investment. I recognise that the noble Viscount wants assurance that the Government are taking a holistic approach to increasing UK pensions investment. I will not relitigate all the things that he brought up, some of which are relevant to this Bill and some to other Bills. The Government have already completed a detailed review of pension investment. The pensions investment review—the clue is in the name—consulted widely and considered a range of investment barriers. It reported last year, which led directly to many of the measures in the Bill. The review considered not only the questions of scale and asset allocation but the regulatory environment, fee structures and wider factors that affect how pension schemes invest. It was a serious and comprehensive piece of work. The Bill already requires the Government, if they decide to use the reserve power, to consult and publish a report. That would be the time to consider the investment landscape.
Amendment 170A from the noble Viscount, Lord Younger, seeks a review of how members’ views are considered in the effective governance of pension schemes. Pensions are a significant part of workers’ pay and their security in retirement, so it is important that the voice of the member is heard and considered in the governance of pension schemes. That is one of the reasons why we have focused so much on the role of trustees and on their duty to act in the best interests of members. Well-performing pension schemes already take account of members’ views through their governance and engagement processes. This includes member-nominated trustees, as mentioned by my noble friend Lord Davies, regular surveys and consultations, and feedback gathered through helplines, portals and member meetings. That helps trustees by ensuring that decision-making is better informed, more aligned with member needs and more credible.
Occupational pension schemes with 100 or more members are required by regulations to publish a statement of investment principles and an annual implementation statement setting out their investment policies and stewardship approach, including voting and engagement. The regulations also require trustees to disclose the extent to which non-financial matters—such as members’ ethical or personal preferences—are taken into account in investment decisions. These disclosure tools are important for members’ views because they enhance transparency, strengthen accountability and give a structured way for trustees to explain how member-driven considerations have been reflected in their policies. Guidance from the DWP helps trustees articulate better how such views have been considered when they choose to do so. Well-run pension schemes recognise that members have different investment needs and respond to them. Although trustees consider member views, as they must, they ultimately balance them against their fiduciary duty to act in the interests of beneficiaries.
The Government recently concluded a consultation on trusteeship and governance in trust-based schemes. That consultation emphasised the importance of ensuring that members’ voices are better represented in decision-making and sought feedback on how we can ensure that the voices of members are heard in the market.
A lot of reviews have been called for here. I hope that I have explained why the Government are doing a great deal in all these spaces already. I welcome the debate but ask the noble Baroness to withdraw her amendment.
Baroness Neville-Rolfe (Con)
My Lords, I thank the Minister for her comments, and all those who have spoken on the wide variety of reviews that have been proposed, some of which I think will be picked up by the Pensions Commission, by action following the Bill and, indeed, by other reviews that may be undertaken in the coming years.
I return briefly to the uncomfortable subject of public service pensions. We face a serious and deteriorating state of public finances, and my subject represents one significant part of that. It is only sensible to examine whether we are on the right path. That is the thrust of the amendment before us because, as the Minister acknowledged, this is not really picked up by any other ongoing review or legislation.
To answer the question about the previous Government, I would say that we are not looking back but looking forward. In fact, I myself carried out an independent review of the state pension age, which alerted me to the problems of pension sustainability, the intergenerational unfairness and the problems we have with greater longevity. That is one of the reasons why I have come forward with this proposal for a review, which I hope the Government will look at positively.
I thank all those who have spoken. I urge the Government to reflect, but I would like to test the opinion of the House.
Viscount Thurso
“Review: AEA pension scheme(1) The Secretary of State must, within three months of the day on which this Act is passed, commission an independent review into—(a) the pension losses incurred by former employees of AEA Technology who transferred their accrued pension benefits out of the UK Atomic Energy Authority (UKAEA) public service scheme to AEA Technology (AEAT) on privatisation in 1996;(b) the financial losses suffered when AEA Technology went into administration in 2012 and the pension scheme entered the Pension Protection Fund (PPF). (2) The review must examine—(a) the extent and causes of pension losses incurred by affected individuals,(b) the role of Government policy and representations in the transfer of pensions during the privatisation of AEA Technology,(c) the adequacy of safeguards provided at the time of privatisation,(d) potential mechanisms for redress or compensation, and(e) the estimated financial cost of any such mechanisms.(3) The review must provide adequate mechanisms for redress and compensation for affected individuals and their dependents—(a) in line with the Third Report of Session 2023-2024, of the House of Commons Work and Pensions Committee;(b) in line with the Fifty-Seventh Report of Session 2022-23, of the Committee of Public Accounts; or alternative redress and compensation that may be developed through the process outlined under subsection (2).(4) The review must be—(a) conducted by an independent panel appointed by the Secretary of State, with relevant expertise in pensions, public policy, and administrative justice, and(b) transparent and consultative, including engagement with affected pensioners and their representatives.(5) The panel must report its findings and recommendations to the Secretary of State and lay a copy of its final report before Parliament within three months of its establishment.(6) The Secretary of State must, within three months of the publication of the report under subsection (5), lay before both Houses of Parliament a statement setting out the Secretary of State’s response to the report.”Member’s explanatory statement
This amendment seeks to require the Secretary of State to commission an independent review into the pension losses incurred by former employees of AEA Technology.
Viscount Thurso (LD)
My Lords, as I move my Amendment 161, I can hear the Minister saying, “Not another review”. I apologise. I say to her at the outset that I recognise how much the Government have done in many of the areas that we have been pushing. Notwithstanding my ingratitude sometimes, that is greatly appreciated. I also appreciate the talks that she has had with me, although I think I am still in the tea and sympathy department and no further forward.
This amendment seeks to give effect to recommendation 2 of the PAC report of 2023. The PAC wrote:
“The former civil servants who transferred their pensions to AEA Technology … when it was privatised were badly informed by government at the time, with some losing considerable sums”.
Its recommendation was:
“The government should ensure that members’ complaints about the AEAT pension case can be independently reviewed, for example by a relevant ombudsman”.
There is no relevant ombudsman. It would have to be reviewed by somebody else.
When I raised this matter in Committee, the Minister said:
“I will not go into this in detail, but I am advised that the Government Actuary’s Department note offered to members at the time did not imply a guarantee. The GAD note referred specifically to a risk that the AEAT pension scheme could fail and did not seem to compare levels of risk across the different options. The note was not intended as advice and made it clear that the information provided was not intended to suggest that any one course of action was better than another, and it did not take into account people’s individual circumstances. The note indicated that people should seek their own independent advice”.
Since then, I have had the opportunity to get hold of a copy of the GAD note as well as the two brochures that were issued at the time by the UKAEA HR fund. I will go through the points that the Minister made.
First, she said that the note did not imply a guarantee. It is correct that the note did not offer a guarantee but, far more importantly, it made no mention of the material change implied by the loss of the guarantee for anything that was transferred into the new scheme. Every professional I have spoken to has said that this is a material and relevant factor that should have been in the GAD note and its omission is surprising.
The second point the Minister made was that the GAD note referred specifically to a risk that the AEAT pension scheme could fail. I can find no specific reference to failure in that note other than a statement at paragraph 3.2.3 which says:
“The effect of preserving your UKAEA benefits is that your total benefits will be payable from two independent sources. Whilst it is unlikely that the benefit promise made by either UKAEA Scheme or the AEAT Scheme would ever be broken, it is still more unlikely that both promises would be broken, and this could be viewed as a reason to opt for preservation. However, this consideration should not normally outweigh those in relation to salary and inflation”.
I would suggest that no one reading that note would consider that a specific reference to a risk of scheme failure.
Furthermore, the Minister went on to say that the note
“did not seem to compare levels of risk across the different options”.
The note sets out clearly the pros and cons of every option and in doing so makes it very clear how special the special transfer option was. Further, it makes it clear that the personal pension option would be more costly and risky, and at paragraph 3.1.1 specifically advises that transferring to the new AEAT closed scheme was likely to offer the best financial result. It does so in such strong terms that I feel I must quote them:
“The main advantage of opting for the special transfer terms are that benefits based on transferred service in the AEAT Scheme are likely to be higher than preserved UKAEA Scheme benefits. This is because the former will be based on your earnings at the time you leave the AEAT Scheme, whilst preserved UKAEA Scheme benefits will be based on your final earnings in the UKAEA Scheme, plus cost-of-living increases thereafter. There are two reasons why your earnings at retirement are likely to be greater than your current earnings plus cost-of-living increases. Both of these reasons apply more strongly the further away from retirement age you are currently. The first reason is that, over the long term, as standards of living increase, general pay levels increase faster than price levels. The second reason is that your pay level may increase further still as the result of performance and promotional awards”.
The Minister said that
“the information provided was not intended to suggest that any one course of action was better than another”.—[Official Report, 23/2/26; col. GC 306.]
It is true that that statement is made at paragraph 1.1.3. However, notwithstanding that statement, if we read the note as a whole, we see that it is pretty obvious that the transfer scheme, which was time-limited, would be the way to go.
Finally, the note indicates that people should seek their own independent advice. Again, at paragraph 1.1.3, the note states that
“if you are unsure of the most suitable course of action you should seek Independent Financial Advice which would take into account your particular circumstances”.
But given that the note had been prepared by the Government Actuary’s Department, was verified by the UKAEA and has pretty unambiguous advice regarding the transfer, I would submit that that statement being qualified by “if you are unsure” renders it meaningless.
Having read the documentation, it seems to me that this is a straightforward case of mis-selling. It would not happen today, we know that. The rules have changed—everything has changed. But at the time, insufficient advice was given and people made choices that they are paying for today. The fact that they are paying for those choices is because AEAT went bust, and they should not be treated any differently to everybody else.
The fact is that people transferred their pensions. In one case, as I told the Minister, a doctor who worked at the UKAEA and was transferred out to AEA Technology had previously been in the National Health Service. So assured was she by what she had heard that she took her pension from the NHS and put it into AEA Technology, because it was part of the civil service club and remained in it until, I believe, 2002 or 2003.
Lord Davies of Brixton (Lab)
I support the amendment from the noble Viscount, Lord Thurso. I think that anyone who looks at the detail, as he has done, will be convinced that somewhere in this series of events there has been a serious injustice. There is no question of that. These people have suffered financially through no fault of their own.
Getting to the bottom of it is difficult. Whatever “a review” means, I think it is appropriate that there should be some form of investigation. The problem they face is that the existing methods of investigation—in particular, the Pensions Ombudsman—just do not work in this case, so a bespoke review is required.
I have to emphasise that nothing I say should be taken as a criticism of professional colleagues and certainly should not be taken as constituting professional advice. But the injustice is clear. Other cases have been quoted by those who have suffered an injustice where the Government have taken action to support members of other, not directly analogous, but similar schemes, and this only increases their sense of injustice.
I urge my noble friend the Minister to indicate in her reply that the Government’s mind is not totally closed on this issue, because there is undoubtedly unfairness involved.
Baroness Altmann (Non-Afl)
My Lords, I have added my name to this amendment, and I thank the noble Viscount, Lord Thurso, for the excellent explanation he has given. I agree completely with what the noble Lord, Lord Davies, said. This is clearly an injustice that has gone under the radar for far too long. Indeed, I have spent the last 20 years of my life trying to help people in this kind of position, where their pensions have been taken away from them, reduced or in some way impacted by problems that were not of their own making.
This is probably the worst example I have seen of instances where people were misled into moving their money into something that was totally different from what they were led to believe. For example, the members asked the Government Actuary’s Department, which reassured them before they moved their money that the scheme they were moving it into was pretty much the same as the one they left, without any mention of the risk that they could lose the whole thing. Indeed, in 1996 there was no Pension Protection Fund, and they could have lost the whole of their accrued benefit that was transferred over.
They asked:
“Did the GAD document state anywhere that the AEAT pension fund was at greater risk than the UKAEA pension fund?”—
the private fund that they transferred to. In the written reply, the Government Actuary’s Department said it did not. In the private sector, how many people have paid a fortune for mis-selling for much less lack of risk warning than that? In Parliament, Ministers at the time gave assurances, such as that from Richard Page MP in debate on the Atomic Energy Authority Bill, which did the privatisation. He said:
“I have made it absolutely clear that the Government have no intention whatever of selling employees short. Their terms and conditions and pension rights will be fully protected”.—[Official Report, Commons, 2/5/1995: col. 210.]
That is just not what has happened.
I do not think it was an intentional outcome, but it is a real outcome to the members who are trying to survive on so much less than they should have. The Pensions Ombudsman could not investigate this because the scheme was privatised in 1996 and failed in 2012. The statute of limitations expires after 15 years, but the company did not fail until 16 years later. The Parliamentary Ombudsman office could not investigate because it is involved with public sector pensions, but the ombudsman felt so strongly that this was an injustice that they helped to draft a Private Member’s Bill for the noble Lord, Lord Vaizey—he is not in his place and I had hoped he might make it; I think he is coming later—to try in that way to achieve proper justice for the AEAT members. We are talking about fewer than 1,000 people in the closed section who transferred their entire public sector pension accrual over into this new private scheme with a new company. The amendment tabled by the noble Lord, Lord Palmer, in the first group concerned a lacuna in protection. If this is not a huge lacuna in protection, I am not quite sure what is.
I remind noble Lords that in 2024 the Government allocated £1.5 billion to enhance by 32% the pensions of 112,000 former mineworkers. I am not criticising the Government for doing that. They also, in the last Budget in 2025, allocated £2.3 billion of taxpayers’ money to enhance coal staff pensions, even though that money would have come back to the public purse in 2029. That was given to those mineworkers. Again, I am not criticising the Government for that. However, I cannot help wondering whether the shortfall for 2029 that would arise as a result of this may have driven in some regard the £2,000 national insurance salary sacrifice cap, which will, perhaps coincidentally, kick in in 2029.
What I am saying is that, if this country can afford to enhance those pensions at taxpayers’ expense, how much more worthy and important is it for us as a country to honour the accrued rights of workers who in good faith transferred their pensions on the advice, as we have heard from the noble Viscount, Lord Thurso, of the Government Actuary’s Department? They believed they were doing the right thing and have ended up losing so much as a result.
I hope that the Minister and the Government might think carefully about the speeches that we have heard this evening and give serious consideration to addressing this injustice.
Baroness Stedman-Scott (Con)
My Lords, this is a thoughtful amendment from the noble Viscount, Lord Thurso, and the noble Baroness, Lady Altmann, and I am grateful to them for bringing it before the House. Where there is a credible concern that individuals have suffered material pension losses, it is right that those concerns are properly examined. This amendment seeks to ensure that the facts are established, the extent of any losses is understood, the causes are examined, and any lessons for policy, protection or redress are fully considered. That seems to us a measured and sensible approach. If the losses suffered by former employees of AEA Technology are indeed material, it makes sense that this issue should be looked into carefully, independently and transparently.
We will therefore listen closely to the Minister’s response, particularly on whether the Government believe that the existing framework is sufficient to address these concerns, or whether there is merit in undertaking the kind of review proposed in the amendment.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Viscount, Lord Thurso, for moving his Amendment 161, and for the conversations that we have had on this and other things. I have a lot of respect for him and the way that he approaches issues, and it has been a pleasure to talk. As we heard, the noble Viscount’s Amendment 161 would require the Secretary of State to establish an independent review into the pension losses incurred by former employees when AEAT went into administration and its pension scheme went into the Pension Protection Fund. It also seeks to explore mechanisms for redress or compensation.
The Government’s position was set out by me in Committee and subsequently by the Minister for Pensions during an Adjournment Debate in the other place at the end of February. I regret that I am not in a position to accept the noble Viscount’s amendment. I put on record my sympathy for all those who accrued public sector pensions and transferred their benefits into private sector schemes, only to end up, through no fault of their own, experiencing losses and not getting the full value that they were expecting from their pensions as a result.
In this specific case, AEAT has a very long history. It is not straightforward to turn the clock back 30 years and revisit decisions that were made then or look at the conditions that obtained at the time. Since 2013, through revised Fair Deal guidance, employees who are compulsorily transferred from the public sector into the private sector are offered continued access to a public service pension scheme, so the situation that AEAT members found themselves in could not happen now.
The fact is that these issues have spanned many years and Governments of all colours. AEAT was privatised in 1996 under a Conservative Government; the pension scheme entered the PPF in 2012 under the coalition Government; and, following the pension scheme’s entry into the PPF, AEAT members raised complaints to a number of bodies under successive Governments. There have been opportunities over the years for different Governments, and their Ministers, to provide redress or to address the issue, but, due to the impracticality of trying to go back all that time, none have done so.
One of the bodies that the noble Viscount mentioned as having looked into the matter is the Public Accounts Committee. The first recommendation from the committee’s inquiry was that the Government should consider introducing pre-1997 indexation within the PPF. This Government are taking action on that. We have brought forward legislation to introduce annual increases on compensation from the PPF and FAS that relate to pensions built up before 6 April 1997, where schemes provided for this. I am grateful to the noble Viscount for acknowledging that. Sometimes, when one gives something, it is simply banked, and then everything else is asked on top of it, so I really appreciate his grace in having acknowledged that. I also point out that if previous Governments had made that change sooner, it would have made much more of a difference to AEAT members, who would have found their pensions building up over that time. But we are introducing it now through this Bill, and AEAT members with pre-1997 accruals will benefit.
I recognise that I cannot offer everything that noble Lords want on this and other cases that have been brought to me and the Minister for Pensions. We are offering the concrete changes that we can, and that is all that I can offer. For that reason, I hope that the noble Viscount will withdraw his amendment.
Viscount Thurso (LD)
My Lords, I am very grateful to all noble Lords who have spoken, particularly the noble Lord, Lord Davies, for his support. As an actuary himself, his words were of great comfort and support. I am also grateful to the noble Baroness, Lady Altmann, who has worked on this case before and knows it through and through, and the noble Baroness, Lady Stedman-Scott, on the Conservative Front Bench. I am also grateful to the Minister for at least hearing me out.
I realise that I am probably asking the wrong ministry. Given that this mis-selling was presumably done by UKAEA in the first instance, I think the sponsor department at that point would have been the DTI—probably with the shareholder executive’s paw prints in it somewhere. The responsibility probably lies somewhere in there. I have listened to the mood of the House and realise that this is not something we should divide on, but I hope that the Government will continue to listen. Maybe, some time in the future, there will be an ability to do something to right the wrong for these poor people. With that, I beg leave to withdraw.
Viscount Thurso
“Discharge of liabilities in respect of compensation: commencement(1) The Secretary of State must, within three months of the day on which this Act is passed, make regulations to commence the provisions laid out in section 169(2)(d) of the Pensions Act 2004 (discharge of liabilities in respect of compensation: cash sum).(2) The regulations under this section are subject to the negative procedure.”
Baroness Hayman
“Clarification of pension scheme investment duties(1) In section 36 of the Pensions Act 1995 (choosing investments), after subsection (9) insert—“(10) In complying with requirements imposed by this section and regulations, a trustee or manager must have regard to guidance prepared from time to time by the Secretary of State.”(2) The Secretary of State must, within six months of the day on which this Act is passed, issue and thereafter maintain statutory guidance for trustees of trust schemes in relation to the discharge of their investment duties.(3) The statutory guidance must set out (amongst other matters) the ways in which trustees may, when investing the assets in the best interests of members and beneficiaries, take into account—(a) the risks and opportunities provided by matters such as climate change, environmental and social factors, and(b) members’ and beneficiaries’ standards of living.(4) The Secretary of State must issue and thereafter maintain corresponding guidance within the same six-month period for the Local Government Pension Scheme.(5) The Financial Conduct Authority must issue and thereafter maintain corresponding guidance within the same six-month period for providers of pension schemes to which Part 7A of the Financial Services and Markets Act 2000 (as inserted by section 48 of this Act) applies.(6) Before publishing the statutory guidance for the first time, the Secretary of State must lay the draft guidance before Parliament.(7) The Secretary of State must withdraw the draft guidance if, before the end of the 40-day period, either House of Parliament resolves not to approve it.”Member’s explanatory statement
This new clause seeks to ensures that statutory guidance, to which trustees must have regard, is issued within six months of Royal Assent to clarify investment duties of occupational pension schemes, including a range of risks and opportunities and beneficiaries’ standards of living. It also requires the FCA and Secretary of State for Housing, Communities and Local Government to issue corresponding guidance for workplace personal pension schemes and the Local Government Pension Scheme.
Baroness Hayman (CB)
Tempting though it is to reinitiate the earlier debate, I will not move Amendment 167.
Baroness Stedman-Scott
“Review of pension communications and financial promotion rules(1) The Secretary of State must, within 12 months of the day on which this Act is passed, conduct a review of all legislation, regulation and guidance governing marketing, financial promotion and member communications in relation to occupational and personal pension schemes. (2) The review must consider whether existing rules unduly restrict pension providers from—(a) communicating risks, warnings, and comparative information to scheme members;(b) providing guidance and targeted support on decumulation options, fund choice, consolidation, and value for money;(c) supporting informed member decision-making and actions without constituting regulated financial advice, through either guidance or targeted support.(3) The Secretary of State must lay a report of the review before both Houses of Parliament.”
Lord Sharkey
“Fossil fuels and climate risk(1) The Pensions Act 1995 is amended according to subsections (2) and (3).(2) After section 41B (climate change risk: publication of information), insert—“41BA Climate change risk and occupational pension schemes: Secretary of State duty(1) The Secretary of State must collect information on, or estimates of—(a) the amount, and(b) the change in the amount of, relevant assets held by the trustees of occupational pension schemes. (2) The Secretary of State must prepare and publish an annual report on the information collected under subsection (1).(3) Regulations may require the trustees or managers of an occupational pension scheme of a prescribed description to supply the information in subsection (1).41BB Climate change risk: relevant assets(1) The relevant assets in sections 41BA are issuance by issuers which—(a) derive 10% or more of their annual revenue from the production, transport or combustion of thermal coal,(b) produce more than 10 million tonnes of thermal coal each year,(c) are developing new mines, new power plants or new infrastructure for the extraction or use of thermal coal,(d) derive more than 5GW of power generation capacity from thermal coal, or(e) derive more than 10% of power generation capacity from thermal coal.(2) Within two years of the day on which the Pension Schemes Act 2026 is passed, and every three years thereafter, the Secretary of State must consider whether the definition of relevant assets should be extended to include certain forms of issuance by other issuers deriving a certain proportion or amount of revenue from certain other fossil fuel-related activities.(3) The Secretary of State may, by regulations, give effect to the outcome of the considerations in subsection (2).(4) In this section—“issuance” means all investable assets, including equity and debt;“thermal coal” means coal and lignite used in the generation of electricity and in providing heat for industrial or residential purposes.” (3) In section 41C (compliance) for “section 41A or 41B”, in each place it occurs, substitute “any of sections 41A to 41BB”.(4) The Financial Conduct Authority must make general rules with effects corresponding to the provisions inserted by subsection (2) for providers of pension schemes to which Part 7A of the Financial Services and Markets Act 2000 (inserted by section 48 of this Act) applies.(5) The Secretary of State must by regulations make provision with effects corresponding to the provisions inserted by subsection (2) for the Local Government Pension Scheme.(6) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This amendment would require pension investments in thermal coal by private sector occupational schemes, workplace personal pension schemes and the LGPS to be annually monitored and reported on. It also requires periodic consideration of whether the range of reported-on assets should be extended.
Lord Sharkey (LD)
My Lords, I will speak to Amendment 170 in my name and those of the noble Baronesses, Lady Bennett, Lady Griffin and Lady Hayman. I am grateful for their support and look forward to hearing their contributions. I have reflected carefully on the helpful feedback I received from the Minister in Committee and, as a result, Amendment 170 does not attempt to mandate pension schemes to exit from any investments. It aims to be helpful in addressing the Minister’s acknowledged concerns about thermal coal investment in particular, and in proposing solutions along the lines she identified.
I briefly remind noble Lords of the problems we face. Research by the Finance Innovation Lab, an independent charity jointly established by the Institute of Chartered Accountants and the World Wide Fund for Nature, shows that UK schemes still invest more than £10 billion in companies with significant operations in thermal coal. That is enough to cancel out all the reductions in greenhouse gas emissions achieved by decarbonisation of the grid in the UK since 2019. So, on the one hand, we have the Government phasing out thermal coal at home, cutting off funding by ending export guarantees and encouraging other countries to exit from coal-fired power. On the other hand, we have the Government defaulting savers into pension savings, compelling employers to contribute and providing taxpayer top-ups to pension schemes to invest in thermal coal extraction and coal-fired power in those same countries.
The Minister said that the Government
“recognise that some pension funds could, and should, be doing more”.
She recognised
“the high financial and climate risks associated with thermal coal investment”.
She welcomed
“industry-led reductions in coal exposure”.—[Official Report, 23/2/26; col. GC 290.]
and reiterated that the Government “want to see more” of this. The Minister argued that the right levers were “better governance”, for which there are already quite a few duties in law, as well as “better data” and “better transparency”, of which there is currently very little. Indeed, there is so little that, in their October 2025 responses to Written Questions tabled by my honourable friend Manuela Perteghella in the Commons, the Government showed that they really do not have a good handle on the data.
The same is true of the Pensions Regulator; in its February 2026 responses to the Minister’s honourable friends Dr Simon Opher and Neil Duncan-Jordan, the responses indicated that neither the DWP nor TPR had carried out an assessment of the level of UK expansion investments in thermal coal or other fossil fuels, the expansion of fossil fuel use or the risks of any of those assets becoming stranded. Our amendment reflects on the Government’s ambition and the current level of insight, and seeks to plug the gap.
Subsections (1) to (3) of the proposed new clause focus on the private sector occupational schemes; they make it clear that the proposed duties should be seen in the context of climate risk to savers, not ethics or disapproval. Subsection (2) gives the Secretary of State a duty to collect data or estimates, and publish in an annual report, the amount and change in the amount of relevant assets held by occupational schemes. Proposed new Section 41BB outlines what constitutes a relevant asset.
Importantly, neither proposed new section requires government to draft, consult on or table regulations, but it could do this if it wanted to. An obvious disclosure vehicle would be the annual implementation statement published by most pension funds, but a simpler method, less burdensome for the whole industry, would be for Ministers to write annually to some or all the larger schemes and simply request the data. In fact, DWP Ministers have done this before several times, including under a Conservative Administration, in relation to climate risk.
As things stand, the Government do not know the level of exposure or the level of risk. Not only do they not know how fast it is declining; they do not really know whether it is declining at all. This amendment would allow government to satisfy itself and to satisfy savers, employers and taxpayers that the amount that pension schemes are putting into thermal coal is going down. It also allows government to provide a nudge, especially to the larger schemes which remain invested in thermal coal and will likely be monitored every year to consider their level of exposure and lower it significantly. Government will be able to set an expectation of thermal coal decline and exit if it is not satisfied that this has been substantially achieved, to consult on what further measures might need to be taken.
In the medium term, the issues are not limited to thermal coal, which is why subsection (2) of proposed new Section 41BB gives the Secretary of State a duty to consider whether to expand the range of assets they might request information about, such as hugely destructive and economically marginal activities like tar sands or Arctic drilling, or new issuance by firms expanding or exploring for new fossil fuels.
Subsection (3) of the proposed new Section 41BB gives the Secretary of State the power to make regulations to achieve reporting—again, if they wish, through an addition to the implementation statement, but it does not mandate it. Subsection (4) of proposed new Section 41BB makes it clear that we are talking about thermal coal, not coking or metallurgical coal used in steelmaking. Finally, subsection (3) sets out the appropriate oversight provisions.
Taken as a whole, this amendment relies on governance, better data and transparency, as the Minister said it should. It would not direct pension scheme investments; it would not impose burdens on smaller schemes. It would be necessary to survey only large and well-resourced schemes to get an estimate of relevant assets, because that is where the money is. It would, however, allow the Government to put a marker down to say, “We are concerned about these investments and we want you to tell us how much you’re investing so we can assess whether there is a problem and what might need to be done”.
I know from Committee that the Minister shares my concerns about high-risk investment in thermal coal, and she would like schemes to do more. The amendment identifies a way forward, which I hope meets her tests. It would not prohibit any investments; it would not undermine trustees’ ability to exercise informed judgment or require them to act against the interests of their members; but it would provide the information required to assess the progress, if any, towards the reduction in pension funds’ investments in thermal coal. I look forward to hearing the Minister’s response.
Baroness Griffin of Princethorpe (Lab)
My Lords, I have added my name to Amendment 170 and will speak briefly in support. The noble Lord, Lord Sharkey, has comprehensively set out the amendment and, following very helpful feedback from my noble friend the Minister, I will simply respond to a few points which were made by other Peers in Committee.
It was suggested that the UK is a small player in thermal coal and will not make a difference. We actually have the largest volume of pension assets in Europe and the third largest globally. There is no limitless demand for high-risk assets, so were the UK pension sector to sharply lower its exposure, this would not lead to a rush for companies that everyone knows to have a limited lifespan. As was said:
“It seems absolutely bonkers that new money is going into new coal mines”.—[Official Report, 23/2/26; col. GC 285.]
It does not make sense in terms of protecting the environment, and it does not make sense economically to invest in stranded assets.
These investments are not only in equities but in bonds. The effect of buying equities on the secondary market may not be instant but, over the long term, it is likely to support the reduction in the cost of borrowing or increase the returns on equity funding. This ultimately supports more investment. The Transition Pathway Initiative, established by the LSE, has assessed the decarbonisation plans of the top coalmining firms. After two decades or more of engagement, none is remotely close to being aligned with the Paris agreement and, as was admitted, opportunities for future company-level engagement are strictly limited by the threat of litigation in the US. Indeed, the suggestion that an exit strategy from thermal coal inevitably means exit from tobacco, sugar or energy-using forms is scaremongering. We should judge the amendment on the basis of what it does.
As the noble Lord, Lord Sharkey, said, Amendment 170 does not require an exit from anything. It seeks only to give government the tools to monitor and manage a risk that it has quite rightly admitted that it does not currently have a handle on. Risk management is a core part of fiduciary duty on investments which have been variously judged by my noble friends as carrying high financial and climate risk. Every child deserves to breathe clean air.
I look forward to hearing from my noble friend the Minister. I am extremely grateful for her genuine engagement so far about the Government’s plans for further action in this area.
Baroness Bennett of Manor Castle (GP)
My Lords, it is a pleasure to join a distinguished cross-party group, signing and speaking to Amendment 170. Like the noble Lord, Lord Sharkey, I want to reflect back to what was said in Committee, when the Minister said that she shared the cross-party concern about pension scheme investment in thermal coal, that she recognised the high financial and climate risks, and that she welcomed some industry-led reductions in exposure. She said that the Government would
“support and challenge the sector in rising to that task”
and that the levers to do that included
“better data and better transparency”.—[Official Report, 23/2/26; col. GC 291.]
That is what this amendment aims to deliver, because the transparency is just not there now.
Transition plans are often cited as a solution to this. These were a manifesto commitment in July 2024, to meet Paris alignment transition plans, but 18 months into this Parliament, there has not been a response to a consultation which took a year to emerge, and more or less asked, “Should we do all of this?” Recently, the Pensions Minister, Torsten Bell, said that transition plans for pension schemes were not a priority, which is reinforced by the fact that the Government are not taking powers in this Bill. There have been suggestions that consolidation will fix all this, but an analysis by Corporate Adviser Intelligence shows that the DC multi-employer schemes most commonly used for automatic enrolment are in fact the largest of them and more invested in thermal coal, and that the mid-sized schemes that would be consolidated are less exposed.
It is also worth stressing that there is a precedent for Ministers writing directly to the largest pension schemes to understand their responsible investment practices and for the Government setting non-statutory expectations about pension schemes’ investment practices. Those on the Front Bench in front of me will probably not thank me for pointing out that when they were in government, they set out a non-statutory expectation in the 2019 green finance strategy that pension schemes and others would disclose climate risks in line with the Task Force on Climate-related Financial Disclosures by 2022. Later, the then Pensions Minister, Guy Opperman, wrote to the 50 largest pension schemes to request their policies and understand their climate investment strategies. That is what the previous Government were doing—surely this Government do not want to be behind that.
It is clear that there is actually a latent appetite to go further. Two-thirds of the audience, mostly representatives of pension funds, at the recent Pensions UK conference debate between Caroline Lucas, my former honourable friend, and the noble Lord, Lord Gove, agreed that pension funds were not now doing enough to tackle the climate change risks. These are, as I said in Committee, financial as well as climate risks. We simply are not taking the steps that are needed. This amendment would provide the way forward that the Minister suggested in Committee that she wanted to see. Here it is, so I hope to hear positive news from the Government on this amendment.
Baroness Hayman (CB)
My Lords, I have added my name to this amendment. Given the quality of the speeches that have explained exactly what it would do and its very limited but important purpose—simply to allow the Government to have a proper handle on the data and a proper understanding of the exposure that pension schemes have to thermal coal investment—I think it would be a valuable step forward, one that I hope will get support from all around the House. In Committee, the Minister rightly acknowledged the high financial and climate risks associated with thermal coal investment and indicated that it was the Government’s expectation that industry will do more to reduce levels of coal investment, but we need to understand exactly what those levels are and to monitor them. For that reason, I support the amendment.
Baroness Stedman-Scott (Con)
My Lords, I am grateful to the noble Lord, Lord Sharkey, and the noble Baronesses, Lady Hayman, Lady Griffin and Lady Bennett, for this amendment, and I fully recognise the principle that underpins it. However, we have some reservations about the approach taken here. In particular, we are concerned that it would impose an additional compliance burden on schemes, including the Local Government Pension Scheme. The LGPS should be focused on delivering the best possible outcomes for its members, and where there is surplus within the system, that should be directed towards supporting members’ interests, rather than being absorbed by additional reporting requirements.
More broadly, while this amendment is framed around thermal coal, it raises a wider question: introducing a requirement for annual reporting on specific categories of investment risks setting a precedent which could, over time, expand into a much broader set of ESG-related reporting obligations that, in our view, risk creating a cumulative regulatory burden which may not ultimately serve members as well as it intends. So, while we understand and respect the intent behind this amendment, we are not persuaded that this is the right way to proceed.
Baroness Sherlock (Lab)
My Lords, I am grateful to the noble Lord, Lord Sharkey, for moving his Amendment 170. It is good to have the opportunity to discuss again the climate-related risks with which pension schemes—indeed, all investors—are grappling. While I recognise the intent behind the amendment, the Government believe that the existing framework for responsible investment already enables trustees to identify, assess and manage climate-related financial risks. Introducing further reporting duties at this stage risks additional burdens without clear benefit.
Trustees of occupational trust-based schemes are already required to take account of financial and material considerations, including environmental, social and governance factors. Their statement of investment principles must set out their policy on these matters. Larger schemes are also required to publish annual climate-related financial disclosures, including on total greenhouse gas emissions from their portfolios and carbon footprint metrics. These provide trustees with important information to support investment decision-making. Equivalent disclosure requirements apply to FCA-regulated providers, and the LGPS has its own requirements on explaining how ESG factors influence investment decisions. There is evidence that this framework is delivering real progress.
The noble Lord, Lord Sharkey, cited data from the Finance Innovation Lab showing that more than £10.5 billion of UK pension savings remains invested in companies involved in the extraction or burning of thermal coal overseas. I am sure he is aware that that figure is based on just three pension providers and is not necessarily reflective of what members are invested in. Recent corporate adviser data indicates that around 65% of UK occupational schemes now have a net-zero target, including 18 of the 19 major DC master trusts. DC schemes have reduced the carbon footprint of their investment by nearly 20% in the last year. Many schemes are also taking decisive action on thermal coal. For example, USS, Railpen, and Border to Coast exclude companies with significant revenue from thermal coal, while Nest supplies a 10% revenue cap. While this progress is welcome, the Government agree that further data on exposure to thermal coal and other fossil fuels will be helpful. We expect trustees to continue to strengthen their disclosures, particularly around the actions they are taking to reduce such exposures within the existing responsible investment framework.
Complementing these expectations for stronger disclosures, the Pensions Regulator is deepening its supervisory approach by requesting increasingly granular investment data from schemes. The Government are taking significant steps to enhance sustainability reporting more broadly. DBT has published final UK sustainability reporting standards closely aligned to the International Sustainability Standards Board framework. These are available for voluntary adoption and the Government will consult later this year on potential mandatory use. DWP is also reviewing the Task Force on Climate-related Financial Disclosures reporting obligations through a comprehensive evidence-gathering exercise, with conclusions to be published this year.
Pension schemes are already helped by the UK’s Transition Plan Taskforce, established by the previous Government, having published a gold standard framework to help companies produce credible, consistent and decision-useful climate transition plans aligned with net-zero goals. The task force has also released sector-specific guidance, including for metals and mining, to support pension schemes and the companies in which they invest. Future reforms are designed to modernise the sustainability disclosure regime and equip trustees with clearer, more decision-useful information. This will support better-informed decisions on investment, divestment and exclusions, including, where necessary, in relation to thermal coal.
Finally, at this point, I was going to say that the Government are legislating to bring forward statutory guidance on trustee investment duties as a further opportunity to include clear examples of good practice to help schemes strengthen their management of climate-related risks, including those highlighted by this amendment. But—oh, no—we will not be doing it, because the noble Lord and his party voted against it, so it will not be happening.
The existing disclosure framework is already driving greater transparency around schemes’ climate-related risks, and further reforms are strengthening this approach, so the Government do not believe that this amendment is necessary. However, we recognise that improved data on thermal coal and other fossil fuel investments would be helpful. This is an area we will continue to monitor and keep under active review within the existing reporting regime. I therefore hope that the noble Lord will withdraw his amendment.
Lord Sharkey (LD)
I thank the Minister for that response, but that probably means in practice that I thank her for the last sentence. Some of the other stuff I found difficult to agree with. I point out that our proposal was to collect data or produce estimates only for the larger schemes and funds in order to get a reliable picture. I do not think that the issue of the burden on the companies is quite as complicated or as difficult as might have been said. Having said that, I beg leave to withdraw the amendment.
Baroness Sherlock
““(da) sections 20, 26 and 28A to 28I of the Pensions Act 2008 (scale and asset allocation),”;”Member's explanatory statement
This amendment would provide for the Pensions Regulator to issue codes of practice in relation to sections 20, 26 and 28A to 28I of the Pensions Act 2008 (scale and asset allocation).
Baroness Sherlock
“(2A) Chapter 2A of Part 4 extends to England and Wales, Scotland and Northern Ireland.”Member's explanatory statement
This amendment provides for the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights” to have UK extent (as the AWE Pension Scheme may have members living across the United Kingdom).
Baroness Sherlock
“(za) Chapter 1 comes into force on such day as the Secretary of State may by regulations appoint;”Member's explanatory statement
This amendment would provide for Chapter 1 of Part 2 of the Bill (value for money) to come into force on such day as the Secretary of State may by regulations appoint.
Member's explanatory statement
This amendment is consequential on the amendment in the name of Baroness Sherlock to clause 122 at page 154, line 9.
Baroness Sherlock
“(9A) Chapter 2A of Part 4 comes into force on the day on which this Act is passed (to the extent this is not already the case as a result of subsection (1)).”Member's explanatory statement
This amendment provides for commencement of the new Chapter referred to in the explanatory statement for the amendment in the name of Baroness Sherlock to insert the new clause “Establishment of new public schemes and transfer of rights”.
“(f) section (Investment principles and choosing investments: guidance) comes into force at the end of the period of two months beginning with the day on which this Act is passed.”Member's explanatory statement
This amendment is consequential on the new Clause in the name of Baroness Sherlock to be inserted after Clause 117 and relating to “Investment principles and choosing investments: guidance”.
UK Steel Strategy
(1 day, 4 hours ago)
Lords ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Sharpe of Epsom (Con)
My Lords, only last year Ministers were forced to rush through the Steel Industry (Special Measures) Act, which was an emergency nationalisation of British Steel in an industry that they had helped to destabilise. That Act told us everything we need to know—socialists must seize the means of production because they are utterly incapable of creating, maintaining or managing it. Unfortunately, this strategy is a testament to that.
Since the intervention at British Steel, the National Audit Office has now reported on the actual cost. The taxpayer has been paying £1.28 million to British Steel every single day. This strategy was meant to be published last year but has been delayed many times because the Government have said that they needed to get it right. What they needed, it appears, was time to construct a protectionist nightmare—a scheme that throws up tariff walls of potentially up to 50% and showers subsidies on a narrow set of domestic producers, while leaving the downstream industries that depend on affordable steel to fend for themselves.
The Government tell us that this strategy is necessary because British steel producers face crippling energy costs and unsustainable labour costs. Whose fault is that? This Government have driven energy costs higher through the contradictions of their own net-zero agenda. This Government have loaded employers with higher national insurance contributions and the cumulative regulatory burden and costs of the Employment Rights Act. They now arrive with subsidies, presenting themselves as the saviours of the very sector they have helped to cripple.
We have seen this pattern before. It is the logic of the youth jobs subsidy: the Government manufacture hostile conditions then spend taxpayers’ money papering over the consequences of their own failure while the underlying damage festers untouched. It is always the taxpayer who must bear the full weight of this Government’s incompetence. Even after subsidy, the UK’s energy prices in the steel sector will be almost two and a half times those of the US, 15% above France and 25% above Germany. There was no mention at all of any Asian producers in the steel strategy. I wonder why.
On net zero, the Government cannot have it both ways. They have banned new domestic coking coal production in the name of environmental responsibility, but the United Kingdom now imports coking coal from abroad: 47% comes from the United States and 38% from the European Union. We are not, therefore, reducing emissions. We are offshoring them, and paying a premium to do so, while simultaneously claiming to be building a strong domestic primary steel industry on the very raw material that we have made it illegal to produce ourselves.
We are told that this strategy is a response to global overcapacity and that the world is awash with cheap foreign steel, undercutting our producers at every turn. I invite the Government to explain precisely what they mean, because some might recognise what they describe as overcapacity as competitive pricing. Cheap steel is not a threat to the British economy; it is a benefit to it. Lower input costs for our manufacturers, our construction firms and our aerospace and automotive sectors mean that those businesses can invest, grow and employ more people.
The Government propose to eliminate that benefit artificially in order to protect a narrow band of domestic producers, and the bill, as ever, falls to the taxpayer. We have already seen £377 million consumed by the emergency nationalisation of British Steel in under a year. Now, the Government are announcing another £2.5 billion. The consequences of this decision will be felt most immediately by the industries that depend on steel as an input. Consider, for example, the automotive sector. There is, on average, 900 kilograms of steel in every vehicle manufactured in this country. The sector supports over 150,000 jobs and is already under severe pressure. When President Trump imposed 25% tariffs on passenger vehicles, UK car exports to the United States fell 55.4% year on year.
Construction tells a similar story. It is the largest single consumer of steel in the United Kingdom, accounting for about 53% of all domestic steel demand, and it is already suffering its fourth consecutive quarter of falling output. I ask the Minister directly: have the Government assessed the cost that these tariffs will impose on the construction sector? If they have, that assessment is conspicuously absent from the strategy.
There is a deeper contradiction that the Government must answer. They offer two arguments for these tariffs. The first is overcapacity: too much foreign steel flooding the market, creating supply so abundant that it undercuts our producers at every turn. The second is national security: we are dangerously exposed to unstable foreign supply and cannot afford dependence on it. But these two arguments cannot coexist: if the world is drowning in cheap steel then supply is, by definition, abundant; if foreign supply is genuinely precarious and could be disrupted then the overcapacity does not exist. Which is it? Is there too much steel in the world, or too little? Until the Government can answer that question honestly, this strategy has no coherent foundation whatever.
The national security argument also deserves further scrutiny on its own terms. The Government’s own data reveals that direct defence procurement requires around 36,000 tonnes of steel per year. Total domestic steel demand runs between 9 million and 11 million tonnes. Defence procurement represents less than 1% of total demand. The notion that we require up to 50% import tariffs and billions in state subsidy to secure that supply is a protectionist canard. Genuine strategic resilience is achieved through diversification—sourcing from the widest possible range of allies and partners. A supply chain built across allied democracies will be far more resistant to even the most radical geopolitical events.
If the Government wish to understand how world-class industries are built, they need look no further than some of our own. Financial services, life sciences and Scotch whisky between them are worth tens of billions in exports and, in many cases, are the envy of the world. Not one of them was built through the protectionism of the state. They were built through open markets, accumulated capital and the freedom to compete.
The Government have set a target of 50% steel production. Can the Minister commit today to providing the House with regular updates on progress toward that target? Will the Government tell us what the exit strategy from public subsidy is and when private sector investment is expected to replace it? What does the future of British steel-making actually look like, and who will build it? Any new entrant to the British steel market today will still face high and rising electricity costs, banned domestic coking coal, import quotas raising the cost of scrap metal inputs and a market dominated by subsidised incumbents with the full backing of the state.
This side of the House is not indifferent to the communities whose livelihoods depend on steel, nor to the genuine strategic importance of manufacturing in this country. But we do British industry no favours by raising input costs for every sector that depends on steel, and we do this country no favours by abandoning the open, competitive, capital-generating approach that made us a strong economy in exchange for a protectionism that serves the few at the expense of the many.
Lord Fox (LD)
My Lords, I thank the Minister for the Statement and welcome that there is a strategy here, although, as the noble Lord, Lord Sharpe, said, we were expecting it for some time. However, given what is happening in the world, reading this document conjures the image of someone trying to put up a tent in a howling blizzard, and at the heart of the blizzard are the energy market ructions caused by the Iran conflict.
The UK’s industrial energy costs were already at least twice those of the EU and four times those of the USA. The noble Lord, Lord Sharpe, and I have different multiples, but they are all very large. It is not clear to me whether these distortions that are already there in the UK energy pricing system will increase the gap as a result of the Iran issue as it bites. I doubt the gaps will narrow.
As the strategy sets out, the British industry supercharger scheme helps those companies that benefit from it. However, the steel industry comprises very many businesses, large and small, that do not qualify for the supercharger, although some may qualify for the British industrial competitiveness scheme—BICS. Can the Minister say how many steel-related businesses will benefit from BICS? However, BICS does not kick in until 2027. Given what is happening internationally, will the Minister undertake to speak with her Treasury colleagues about bringing forward the implementation of BICS? In any case, we should note that while the supercharger scheme exempts recipients from network charges, BICS does not, and those network charges are set to increase by a staggering 60%.
These are just a few of the reasons why, unless the Government revisit the energy costs issue, the steel strategy will quite simply be blown away.
Among the more eye-catching and concerning parts of the strategy are the new trade measures to introduce tariff-rate quotas and the possibility of, in future, raising most favoured nation—MFN—applied tariffs to 50%. Late last year, the Trade Remedies Authority ran its rule over imports of rebar from Vietnam and made recommendations to the Secretary of State. This was an entirely appropriate use of that body; indeed, it is what the body was created to do. Having worked on the Trade Act, which established the TRA, at the start of this decade, I see that it clearly has an important role, particularly given the wider scope of the potential actions set out in the strategy. But I do not see any reference in the strategy to the role of the TRA. Have the Government asked the TRA for its recommendations? When could we expect its report? It seems inappropriate to act without that authority.
Next, in his answer to questions in the Commons, the Secretary of State confirmed that there has been discussion with his EU counterparts and that the discussion would continue when they meet at the WTO. Can the Minister confirm that for the purposes of these discussions, steel’s treatment in the TCA—the trade and co-operation agreement with the EU—is equivalent to its treatment in an FTA; in other words, from a WTO perspective, is the TCA equal to an FTA? Furthermore, can the Minister say how, for the purposes of these discussions, the Government are treating the MoU with the USA regarding steel? I assume it does not have the status of an FTA, so how will this modify what we can legally do under the WTO with the United States?
I turn to the local impact of this strategy, which means that there remain question marks for a lot of our communities. My honourable friend in the Commons, David Chadwick MP, spoke very forcefully about the importance of steel to Wales and its economy. He also reinforced the need for faster action in ensuring that the electricity used, for example, to power the arc furnaces is green energy. I strongly commend his comments.
In geographical terms, I would like to highlight the South Yorkshire area, including Sheffield, where there is a host of important steel businesses. It is not just down to the headline firms; there are many other important businesses further down the supply chain that make up this vital steel ecosystem. These kinds of ecosystems are echoed all over the country. The Statement says the defence growth deal will be established in five areas, including South Yorkshire, as part of the defence industrial strategy. Can the Minister tell us when full details will be published? When will a defence growth deal be operational?
To support the effectiveness of a growth deal, a colleague of mine from Sheffield Council, with a strong steel background, suggests that a defence manufacturing supply chain database be built to include the hundreds of thousands of smaller tier 2 and tier 3 suppliers that are critical to our sovereign capability. In this way, the whole sector can be explicitly brought into the realm of the defence growth deal. Noble Lords will be surprised, I think, to know that there is no such survey and no such data available.
I was able to see how the Aerospace Growth Partnership worked effectively with its supply chain, and perhaps the Minister might like to look at how that operated and try to put the same principles into practice for steel. We on these Benches share the Government’s ambitions for a robust and growing steel sector, and we believe that this strategy makes some steps in the right direction. However, the already significant headwinds just got a whole lot worse. That is why success will depend on further action on energy, clarity on tariffs and a truly inclusive growth strategy.
The Parliamentary Under-Secretary of State, Department for Business and Trade and Department for Science, Innovation and Technology (Baroness Lloyd of Effra) (Lab)
I thank noble Lords for their rich contributions. They have raised many matters that are covered in the steel strategy and are of vital importance to the future of steel-making and its centrality to the UK’s economic success.
This steel strategy is the first one to be set out. It explains the vision and sets out bold measures across the business environment, trade, electricity costs, carbon leakage and public procurement, and it is that which distinguishes it from what has gone before. We do not believe that, although the sector does face challenges, it is inevitable that it will decline. The steel strategy’s aim is to stabilise and rebuild our existing strategy, as the noble Lord opposite mentioned, with an aim to sustain 40% to 50% of domestic demand, which of course will be tracked over the coming years. We can see the benefit of moving with this vision to a greener, high-production steel model. Sheffield Forgemasters’ electric arc furnaces have the technical capability that we need to produce steel of the highest standards.
On the question of energy prices, businesses are naturally worried about the impact of the situation in the Middle East. The Prime Minister chaired a meeting of COBRA this afternoon and the Secretary of State is meeting business organisations to look at the impact on energy prices and the supply chain. We have a diverse and resilient energy system, but we are monitoring it extremely closely. If there is a lesson, it is that reducing dependence on externally produced fossil fuels and moving to clean, green, home-produced energy has to be the way of the future. That is exactly what we are doing with the clean energy mission to increase our energy security and reduce electricity bills over the long term.
However, as noble Lords have mentioned, there are measures in place right now, including the supercharger, the energy-intensive industries compensation scheme for steel producers and, as the noble Lord mentioned, the British industrial competitiveness scheme, which will reduce bills for other businesses in the sector more widely. As I mentioned, the Prime Minister, the Chancellor and the Secretary of State are looking very closely at what needs to be done in the current context so that our businesses can be supported through this tumultuous time.
On the question of the trade measure, it is designed to shield steel-making from the damaging effects of overcapacity. This is not something that is unique to the UK. The US, Canada and the EU all apply their own similar measures to tackle overcapacity. We want to do this so that the British steel industry contributes fully to Britain’s crucial national security and defence, and to shore up the UK’s resilience to global shocks. Without this action, the UK steel-making capability faces real jeopardy, leaving us reliant on overseas suppliers. We do not want to let that happen.
I stress that this measure follows the expiry of the UK steel safeguard measure on 30 June this year, but it is a different measure and it has been carefully calibrated, following engagement with downstream importers, to get the right balance between measures to support our domestic steel industry and ensuring that those who use steel in the national economy can manage their businesses well. Following engagement with those downstream importers, we are exploring a transitional arrangement under which the new tariff would not apply to goods under contracts agreed before 14 March and imported between 1 July and 30 September 2026. We are finalising those details to ensure it provides genuine support to firms facing unexpected costs, while still protecting the UK market from excessive imports. We will also review the measure after 12 months to ensure it remains effective.
On the question of how it fits with other international agreements, with regard to the TRA, this measure is distinct from the steel safeguard and is not a replacement. It is separate from trade remedies, such as the current safeguard, which it is the Trade Remedies Authority’s role to review, so the TRA does not have a role in reviewing the new measure. On the TCA, I say that the TCA is the same as an FTA in the eyes of the WTO. I fear I have not addressed all the questions, but I am sure I will come back to them shortly.
Lord Jones (Lab)
My Lords, I thank the Minister for her Statement, delivered persuasively and helpfully. What good news might be given for the steelworkers of Wales? We once had a mighty industry, up until the late 1970s. Not any more. We employed tens of thousands in that once-great industry.
The ministerial foreword by the Secretary of State and Minister of State, Messrs Kyle and McDonald, was apposite. I liked their basic statement:
“This decline is not inevitable”.
I also liked their two concluding sentences:
“Steel built our past. It will shape our future”.
Certainly, the Welsh steelworker helped to defeat the Kaiser and Adolf Hitler. We have a mighty record: a case in point now is Port Talbot. What good news might be given for the steelworkers of Wales?
I declare an interest: I worked in a giant steelworks called Shotton in north-east Wales. At its tremendous best, as late as 1980, some 14,000 worked on site. Not now: there are much less than 1,000. When I worked there, I was a common labourer. I worked on the furnace stage of number 2 blast furnace, and my role was at the point when the metal burst from the furnace base.
Baroness Lloyd of Effra (Lab)
My noble friend brings his experience and wisdom to the House. Welsh steel is expected to account for half of future UK steelmaking. As he will be aware, we have also invested £500 million in the electric arc furnace in Port Talbot. In addition to that, the Secretary of State for Wales will convene the National Wealth Fund and the private sector in a new initiative to help unlock investment in Welsh steel projects to help and support communities across Wales that rely on the industry.
The Lord Bishop of Oxford
My Lords, for seven years I was privileged to be the Bishop of Sheffield, and I am familiar with the complex ecology of south Yorkshire, articulated by the noble Lord, Lord Fox. For those seven years, each year I was the guest of the Cutlers Company, who would invite a Minister, always from London and normally the Chancellor. In those years it was the coalition and Conservative Governments. The script followed by the speakers from the Cutlers Company, who did not mince their words, was always the same. It was about the neglect of the manufacturing industry by government and, in particular, high energy costs. This seems to me to be the key to the next chapter in this strategy.
I would be very grateful if the Minister could expand further and give some assurance that, in five years’ time, the Cutlers Company in Sheffield will not be making the same comments about higher electricity costs than for their partners overseas. I would also be grateful if the Minister could say something about the connection between advanced manufacturing and research, and the revitalisation of the steel industry. It was said in my time in Sheffield that Sheffield still produced as much steel by volume, but employed a fraction of the number of people, and that was because of advanced manufacturing. Thirdly, I would be really grateful for an unpacking of the defence contingency, the importance of which I would underscore.
Baroness Lloyd of Effra (Lab)
The right reverend Prelate raises some important issues. There are two elements here in respect of energy prices. The first is the immediate action we are taking, including the supercharger, to support the steel industry now. The second is the investment we are making in renewable energy, clean power and nuclear energy that will set this country on the right track to low-carbon energy that has high energy security here in the United Kingdom.
The other point, on advanced manufacturing and R&D, goes to one of the particular strengths of the United Kingdom, which is our expertise and the types of firms we have. One benefit of the industrial strategy is linking the sectors we have set out there, which of course include defence, with the importance of high-quality manufactured low-carbon steel, which is what the UK excels in.
Lord Harper (Con)
My Lords, the Minister knows that tariffs are a tax paid by the consumers of the steel that will be introduced. I have looked carefully in the steel strategy, and I cannot see any analysis of the impact of those increased costs on either our domestic construction sector or our domestic manufacturing sector. I ask the Minister, did the Government conduct such an analysis of the impact those tariffs are going to have? If they did not, why not? If they did, can they publish it, so that Members of your Lordships’ House can see the detail of the impact those taxes are going to have on our domestic manufacturing?
Baroness Lloyd of Effra (Lab)
We engaged carefully with the industry in constructing these tariffs, and we will review the measure after 12 months to ensure it remains effective.
Baroness Bennett of Manor Castle (GP)
My Lords, the Statement says:
“Britain can recycle more steel. Making better use of scrap steel is fundamental to the sector’s future growth”.
However, I am sure the Minister is aware that, currently, four-fifths of the UK’s scrap steel is exported, primarily to non-OECD countries with far lower environmental standards than us. I looked carefully at the strategy, but I could not see any actions planned by the Government to ensure that scrap steel stays in the UK to be recycled. I also could not find a target for the level of recycling that we expect of that scrap steel; I hope that it will eventually be 100%. How long will that take? If I have missed any actions and targets, I would love to hear about them.
Baroness Lloyd of Effra (Lab)
The noble Baroness is right that there is a strong emphasis on the importance of scrap steel. The move to using some of the electric arc furnaces will increase the demand for that scrap steel in our supply chain. Our move towards the aim of getting the domestic market share back to 50% will drive much more demand for domestic scrap steel.
Lord Mohammed of Tinsley (LD)
My Lords, I add my voice to the comments that were made by the right reverend Prelate, the former Bishop of Sheffield—I remember him well and his commitment to the city—particularly on the issues around the Company of Cutlers. Its members are a tough bunch but they are fair—sometimes they speak truth to power, and often that is what is required. I will follow up on the points raised by my noble friend Lord Fox, particularly on the current turmoil in the energy market with the ongoing conflicts, first, in Ukraine and, more recently, in the Middle East. I suspect that he has been speaking to many people across the steel sector and not only in Sheffield, but I will stick to Sheffield and Stocksbridge.
There is a point to be made about the cost of energy. I understand that large energy-intensive businesses can hedge energy prices over a longer period, but a number of smaller businesses, including those with limited credit available to them, are really suffering now, leading to vulnerability and volatility as energy prices are paid either a day ahead or in the short term. I will give the Minister an example. I spoke to a steel contractor over the weekend which had an order that it was preparing for last week. All the materials and energy costs were factored in at the time and it was just about to make a profit, but after the Israeli attack on the Iranian gas field and then the Iranian attack on Qatar its gas price went up by 30%, because it did not have a great credit rating. From making a potential small profit, it is now going to incur a loss. These organisations are desperately looking for help right now—not in 2027. Can the Minister say what the Government are doing, particularly now, to help small and medium-sized businesses, or those with issues with their credit rating?
Baroness Lloyd of Effra (Lab)
The noble Lord also brings his extensive interest and expertise to this. I agree that businesses will be worried about the impacts of the situation in the Middle East. The example he gave is very good at showing the practical impacts of what people are encountering day to day. We are monitoring this extremely closely and working with industry—the Secretary of State will meet with businesses in the coming days—to get a full picture of those types of impacts. The consultation on the British industrial competitiveness scheme is currently closed, but we will set out what it means in the coming period.
The Earl of Effingham (Con)
My noble friend Lord Sharpe quite rightly said that open markets are good and, following on from my noble friend Lord Harper, it is quite correct that economists may say that the uncertainty of tariff policy is not favourable for employment or investment. So I ask the Minister: why exactly do the Government think tariffs are a good idea and when can we see the assessment of the cost—the knock-on effect that tariffs will have on consumers?
Baroness Lloyd of Effra (Lab)
Like many countries, we have applied tariffs to counteract the damaging effects of global overcapacity. Our action is not unique; the US, Canada and the EU all apply similar measures to tackle overcapacity. As I mentioned, it has followed engagement and we are looking at transitional measures to ensure that those contracts that have already been put into place can be taken forward. We will also review the measure after 12 months to ensure that it remains effective.
Lord Wigley (PC)
My Lords, with the indulgence of the House, I welcome the strategy and the Statement, as far as it goes. The Government previously announced that £500 million would come to Port Talbot. Will any of the newly announced £2.5 billion come to Wales? Did the Welsh Government ask for part of that and were they given a full answer? The Minister will be aware that the steel-utilising industries that currently still exist in Wales may require high-quality steel. Is it possible for the electric arc furnaces to produce high-quality steel from recycled scrap?
Baroness Lloyd of Effra (Lab)
I thank the noble Lord for his questions. On the effectiveness of electric arc furnaces, there are a couple of points. First, at Sheffield Forgemasters, we see the technical capability to produce steel to the highest quality, for the nuclear industry, aerospace and defence. Independent experts’ view is that any grade can be made by electric arc furnaces, so that addresses the question about the quality of steel that can be made by this technology. On the other point about the benefit to Wales, we have already invested £500 million in the electric arc furnace for Port Talbot. We are working with the Secretary of State for Wales and the private sector to see what investment can be unlocked under the £2.5 billion that the National Wealth Fund will have allocated for steel projects.
Baroness Bennett of Manor Castle (GP)
My Lords, since there is time, I note that the Statement talks, I am happy to say, about the shift to “greener, decarbonised steel production”. However, will the Minister acknowledge that there is a rather great irony that when the Statement comes to consider the potential markets for this British-made steel, it talks about the third runway at Heathrow requiring 400,000 tonnes of steel? This is the third runway that, according to the Government’s own figures, uncovered by Politico last year, will result in an addition 2.4 million tonnes of CO2 equivalent being released into the atmosphere each year by 2050. This is at the same time as the Joint Intelligence Committee is warning what a great threat to our security the climate emergency is.
Baroness Lloyd of Effra (Lab)
The noble Baroness is right: there is a great market for green steel. Hatch estimates that over 90% of steel demand in the UK in 2050 will be steel produced with low emissions. The transition to net zero is across the entire economy, and we will take that forward across all sub-sectors.
Lord Harper (Con)
My Lords, since there is still time, can I just press the Minister on her attempted answer to my question? She did not confirm that there had been any kind of economic analysis. She said that there had been engagement with the sector. Can she tell us whether the customers of the steel industry—manufacturing and construction—support the introduction of 50% tariffs on their products, and that tax that they are going to have to pay?
Baroness Lloyd of Effra (Lab)
We are still in discussions with much of the sector, explaining what the precise tariffs mean across different sub-sectors, and we are gaining feedback following the publication. We continue to work across many sub-sectors and business areas on implementing the trade measure ahead of 1 July, and we will consider what information we further publish following those consultations.
Lord Mohammed of Tinsley (LD)
My Lords, given the extra time, can I just pose another question? Given that defence supply chains already receive special treatment in procurement and export controls, I wonder whether the Government would consider also extending that to energy policy.
I will give some examples: the right reverend Prelate will know exactly where I am going to come from. I live in Tinsley. Just down the road from me is the Meadowhall shopping centre, and just around the corner from there is Sheffield Forgemasters, where many members of my family worked from the 1970s and 1980s onwards. At the moment, when it comes to energy pricing, both those two—the commercial shopping centre and the steelworks—get priority in terms of the level. However, I want to push the Minister on whether the Government would consider prioritising defence, just as they do with other elements of defence, given that Sheffield Forgemasters and others will be working on that. If I was to speak to a couple of my steel contacts in the city, would the Minister consider an offer of a meeting, possibly on Zoom, to be able to go through some of these more technical issues with her and the department, rather than trying to do it from the Dispatch Box in your Lordships’ House?
Baroness Lloyd of Effra (Lab)
I thank the noble Lord. I will be happy to meet with the industry representatives he talks about and to explore this in more detail. As he knows, we have changed the steel procurement guidance more generally, updating it to ensure that UK-made steel is regularly considered in public projects, and we are requiring procurers to consult a digital catalogue of UK-made steel products. But, specifically in the realm of defence, I would be very happy to take that further with the noble Lord.
Lord Fox (LD)
My Lords, the answer that the Minister gave me on the Trade Remedies Authority was a little confusing—or it confused me, anyway. Can she set out in some detail in writing why the TRA is not involved in this? When you look at the Vietnam case, it is exactly analogous, only much less significant than the case we are looking at now. If it was good for the Vietnam rebar, why is it not good for the much larger and more important issue that we are discussing here? Perhaps a detailed letter would be helpful.
Baroness Lloyd of Effra (Lab)
This measure is distinct from the steel safeguard. It is distinct from trade remedies, which is why it is not the role of the Trade Remedies Authority to review it, because the TRA does not have a role in reviewing this measure.