Pension Schemes Bill

Lord Davies of Brixton Excerpts

Committee stage
Monday 12th January 2026 Grand Committee

[Viscount Younger of Leckie (Con)]

My Lords, it is a privilege to open today’s debate and to begin what I am sure will be five engaging and constructive days of scrutiny on this Bill in Committee. The proposed new purpose clause, in my name and those of my noble friend Lady Stedman-Scott and the noble Baroness, Lady Bowles, is not an attempt to rehearse the arguments advanced at Second Reading. Rather, it is intended to address a specific issue arising from the way in which the Bill has been framed and from the legislative approach that the Government have chosen to adopt.

The debate I seek to initiate is a principled one about legislative clarity and certainty, particularly in the context of what is, by any reasonable definition, a framework Bill. We believe that the Bill, as currently drafted, is light on detail and relies heavily on delegated powers. This has inevitably left your Lordships debating intentions, aspirations and hypothetical outcomes, rather than the Government’s settled policy. In those circumstances, is it not all the more important that Parliament is clear on the face of the legislation about what it actually intends to achieve?

The purpose clause amendment therefore intends to establish an overarching statement of intent, setting out the objectives against which the Bill and the regulations made under it should be understood and scrutinised. Where detailed provision is deferred to secondary legislation, such a statement provides Parliament, regulators and stakeholders with a clear point of reference. Without it, how are we to assess whether the powers being taken are exercised consistently with the will of Parliament, rather than merely within the scope of ministerial discretion?

More broadly, the amendment invites the House to reflect on whether Parliament is being asked to confer wide-ranging powers without sufficient clarity as to how they are intended to be used. At what point does flexibility begin to shade into uncertainty? How can proper legislative certainty be maintained when substantive policy choices are deferred, potentially amended repeatedly and then removed from direct parliamentary scrutiny? If there were an alternative procedural route that allowed the House to engage meaningfully with these questions, we would of course be willing to consider it. However, in the absence of such a mechanism, is it not reasonable to seek to debate these matters through a proposed new purpose clause, which would allow the House to test the Government’s intent within the normal amending stages of the Bill?

This concern is particularly acute in relation to value for money. Much of what this legislation seeks to achieve will ultimately stand or fall on the effectiveness of the value-for-money framework. Yet the provisions before us are thin and largely skeletal, despite the central role that the framework is expected to play. How can Parliament properly assess the merits of this approach when so much turns on detail that has yet to be set out?

I say at the outset that we are supportive of the value-for-money framework in principle, but its success will depend almost entirely on the detail of its design, the consistency of its application across schemes and the robustness of its enforcement. Without greater clarity on these points, how are trustees, regulators and members to understand the standards against which they will be judged?

That leads me to a wider question about the long-term purpose of the Bill. How do the Government envisage the pensions landscape to look like in 10, 15 or even 20 years’ time? Is the objective consolidation, greater scale, improved outcomes for savers or some combination of all three? How will we know whether this legislation has succeeded in delivering that vision?

We wish to engage not only with the immediate legislative mechanisms but with the broader strategic direction that underpins them. We fully accept that legislation must allow Ministers a degree of flexibility to respond to changing circumstances, but flexibility without a clear, articulated destination risks leaving Parliament and the industry uncertain about the direction of travel. Is it unreasonable to ask for the House to be told not only what powers are being taken but to what end they are intended to be used? It is in that spirit that this purpose clause has been tabled and I very much look forward to the debate that I hope it will provoke.

I wish to return briefly to the question of mandation, which, although I have not directly mentioned it, is an underlying issue in the Bill. It illustrates precisely why questions of purpose, process and limitation matter so greatly in the context of a framework Bill of this kind. We will of course turn to this in greater detail later in Committee but, as we are discussing the purpose of the Bill in this clause, it would be remiss of me not to mention it here at the outset as one of the most contentious provisions in the Bill—as we heard, broadly around the House, at Second Reading.

As drafted, the Bill establishes a broad enabling framework but leaves a great deal of substantive policy to be determined later through regulation. That approach inevitably creates uncertainty. It also places a heightened responsibility on Parliament to ensure that any powers taken are clearly bounded, carefully justified and firmly anchored to a stated purpose. In that context, we do not consider there to be a compelling case that asset allocation mandates are necessary to increase productive investment in the United Kingdom. Indeed, mandation risks cutting across the fundamental principle that investment decisions should be taken in the best interests of savers by trustees and providers who are properly accountable for the outcomes. I am sure that we will hear more about these arguments in Committee.

When the Bill itself provides only a skeletal framework, the absence of clarity around how such powers might be used becomes all the more concerning. If any future Government were ever minded to pursue mandation, it is essential that any such power be tightly limited, that savers’ outcomes are clearly protected and that asset allocation decisions are insulated as far as possible from political cycles and short-term pressures. Investment decisions should remain with those charged with fiduciary responsibility and not be directed by Ministers, however well intentioned. Those safeguards cannot simply be assumed; in a framework Bill, they must be explicit.

Moreover, the case for mandation is further weakened by the existence of credible and constructive alternative routes to unlocking greater levels of UK investment. Industry participants, including Phoenix Group, have identified a number of areas where policy reform could make a meaningful difference without recourse to compulsion. Government institutions such as the National Wealth Fund and Great British Energy could play a significant role by aligning guarantee products with insurers’ matching adjustment requirements, by engaging institutional investors earlier so that projects are structured to meet long-term investment needs and by continuing collaboration with the ABI Investment Delivery Forum to deliver investable infrastructure pipelines.

Similarly, the Mansion House Accord, building on the 2023 compact, has already driven tangible industry action. In our view, the priority now should be delivery, rather than the creation of new and potentially far-reaching powers. That includes implementing a robust value-for-money framework with standardised metrics; introducing minimum default fund size requirements, whether £25 billion or £10 billion, with a credible growth plan; and aligning the defined contribution charge cap with the Pensions Regulator’s approach by excluding performance fees where appropriate.

More broadly still, stronger capital markets are essential if the United Kingdom is to attract both domestic and international investment. This includes supporting the work of the Capital Markets Industry Taskforce, exploring measures to foster a stronger home bias in UK equities, considering whether stamp duty on share transactions is acting as a drag on competitiveness, and examining targeted tax incentives for pension fund investment in UK infrastructure. Ultimately, rather than mandating investment, policy should focus on understanding why UK investment has lagged. That requires serious engagement with questions of market structure, regulatory design, the quality of investment pipelines and the underlying risk-return characteristics of UK assets. Mandation risks treating the symptoms rather than addressing the causes.

I look forward to the Minister’s response. I make no apology for laying out certain aspects that I believe fit with the purpose of the Bill. However, as I said at the outset, I hope that we have a productive and interesting Committee. I beg to move.

[Lord Davies of Brixton (Lab)]

It is a pleasure to be here. Although for a while I was feeling a bit lonely, I very much welcome my noble friends; what we do not make up in numbers, I am sure my friends will more than make up for in the quality of their contributions. I declare an interest as a fellow of the Institute and Faculty of Actuaries.

It is worth at this stage spelling out that I have spent a lifetime advising people about pensions. I was the TUC’s pensions officer for a number of years. I was also a partner in a leading firm of consulting actuaries, and I worked for a number of years with a scheme actuaries certificate undertaking scheme valuations. In terms of sheer experience, I can fairly say that this is unique to noble Members of this House. I will not go on at length on future occasions, except when it is directly relevant.

The noble Viscount, Lord Younger of Leckie, declared his intention to avoid repeating a Second Reading speech—it is arguable as to whether he achieved that intention—but, in a sense, I welcome the opportunity to look at the Bill as a whole. While I support the Bill and I support my noble friends—there are some really good measures in here—the text underlying the opposition amendment suggests that we have a pensions system in chronically bad condition.

It suggests that returns are inadequate, that the system is fragmented and that it lacks transparency, with people unable to assess what they are getting. It provides inadequate communications. It is inconsistent across the different forms of provision. It prevents, or makes hard, innovative and flexible solutions to the problems that are faced. It needs to provide greater clarity for employers. It currently does not achieve responsible and innovative use of pension surpluses. To me, this suggests a system at risk of chronic failure.

To be honest, I accept those criticisms because underlying this system is the personal pension revolution introduced by the Conservative Government 40 years ago, which has proved to be unfit for purpose. We are having to make all these changes because of the failure of the system that the Conservative Government introduced. We need these changes because personal pensions did not work out. Collective provision is the answer to decent pension provision, and the Bill supports and develops collective provision and moves across this idea that everyone can have their own pot which they look after for themselves. I oppose the amendment and look forward to further discussions on the individual issues as they arise.

[Lord Fuller (Con)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Davies of Brixton. He reminds me of that old joke about the dinner of actuaries where they are all complaining that everyone is living longer and it is getting worse.

I agree with this purpose clause, although I am surprised that it does not establish the balance between risk and reward, where pensions help people build secure futures by taking appropriate qualified risks. The pensions industry seems obsessed with risk minimisation, but without any form of risk there can be no reward; even cash is at risk from inflation.

The success of this Bill and why we need a purpose clause is to be grounded in how it makes it easier for people to take personal responsibility, to save for their futures, themselves and their families and to make their savings secure while permitting appropriate and manageable returns and providing risk capital to grow the economy. Inspiring people to save for their future is important, and pensions are long-term savings plans. Long-term returns dynamised through dividends, and boosted by employer contributions in many cases, are the best way to set yourselves up for later life.

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[Baroness Bowles of Berkhamsted (LD)]

My Lords, I share some of the concerns that have been expressed. I added my name to Amendment 6, and I could have added it to Amendment 5 as well. Before I go further, as it is an early part of discussing this Bill, I should say that I am a great supporter of the notion that there should be investment in productive assets that support the UK economy. Although I am not that heavy on mandation, if anything I lean in that direction quite a lot. It is obviously done through advisers, and maybe that is one reason for being concerned about advisers—perhaps they have pushed it too much the other way in times past. Noble Lords can take it as background that I am very supportive.

I am concerned about too much forcing of particular kinds of investment, and restricting the routes to those investments or the resistance of the opportunity if the trustees think that it is not the right thing to do. That is why I have some support for Amendments 5 and 6, because I think they may go too far. One of the good things about Clause 2(3) and (4) is that they are optional. However, it still hints at a lot of things that could be done.

I am concerned about any kind of dictation on which advisers can be used, because they have been very powerful. If there is any control over which advisers are used, that is another way of controlling the fund. Given the obligations of trustees to consult advisers, and the liabilities attached to that, they have to remain independent. That is the direction that I am coming from; therefore, I do not want the Bill to give powers that could go too far. That is why I added my name to Amendment 6, and why I have some sort of regard for the content of Amendment 5 around the investment opportunities.

[Lord Davies of Brixton (Lab)]

This group is about asset pools in the Local Government Pension Scheme. I had not intended to intervene on this group, but I want to comment on the remarks made by the noble Viscount, Lord Younger, in introducing this group of amendments on the Local Government Pension Scheme. I am relatively agnostic about asset pools. I am not sure that I am totally convinced by the Government’s line that big is necessarily beautiful, but I am open to that debate.

In introducing this group, the noble Viscount set it in the context of a large group of amendments introduced on much wider issues around the Local Government Pension Scheme than were originally expected—it was really just about investment in the Local Government Pension Scheme—and at a very late stage. It makes no difference to me personally, but fundamental questioning of the structure, running and management of the Local Government Pension Scheme was introduced at such short notice; we found about it only on Thursday or Friday. I can live with that, but I think that it was a little unfair to the people working in and running the scheme suddenly to produce this level of uncertainty. That was unwise. When you want to discuss these things, you start talking to the people involved first, but it is my understanding that it came out of the blue and everyone was totally surprised. Obviously, the issue was always there for discussion, so the fact that it has come up is not a surprise, but doing things at this moment and in this way was unfortunate and is causing problems for those trying to provide the pensions.

I believe that the fundamental premise introduced by the noble Viscount is wrong. The Local Government Pension Scheme is a notable success. Rather than setting up inquiries to discover what went wrong, we should be inquiring about what it got right, because it provides good pensions for a large number of people providing essential services. The average pension in the Local Government Pension Scheme is £5,000; that is because the scheme provides pensions mainly for people on low pay. It provides good pensions for people—often, for women with part-time jobs. It does so in a way whereby, in the forthcoming valuations—as I will expand on and discuss at greater length when we get on to the eighth group of amendments, because that is where the substantive discussion will take place—it faces a better record than private sector occupational pension schemes. We should be looking at its success and not, as the noble Viscount argued, the difficulties and failures.

[Lord Fuller (Con)]

My Lords, once again, I follow the noble Lord, Lord Davies of Brixton. I wish, perhaps uncharacteristically, to associate myself with many of his comments. I support the thrust of Amendment 2, and offer wider support for the other amendments in this group.

My qualifications to speak on this Bill as far as the LGPS elements are concerned is that I led a local authority for 20 years and have been a member of the Norfolk Pension Fund’s Pensions Committee since 2007. I have also been a member of the Local Government Pension Scheme’s advisory board since its inception in 2014. I am a past member of the fire service scheme’s advisory board, as well as a trustee of a number of private schemes. I also benefit from my own SSIP.

Today is about the LGPS. It is different, because not many of the public sector schemes have money put aside for their members’ retirements—although I accept that the scheme for MPs is one of them. In aggregate, the LGPS comprises 89 separate schemes cast throughout the entirety of the four home nations. Collectively, the 2024 scheme census reports a total of 6.7 million members, a third of whom are, directionally speaking, active; a third of whom are deferred; and a third of whom are actually in payment. In 2024, its total assets under management were worth £390 billion; it is much more than that now. These things change but, by whatever measure, the LGPS is the world’s fourth-largest or fifth-largest pension scheme.

When I came on to the Norfolk board in 2007, assets under management were £1.8 billion. They are now more than £6 billion. I echo the comment of the noble Lord, Lord Davies, that if only the UK economy had risen in that proportion. The LGPS delivers significant value. The typical member is a 47 year-old woman earning about £18,000 a year, for whom the pension is, as the noble Lord, Lord Davies, said, about £5,000. It is incredibly efficient. Operational costs are about half those of typical unfunded schemes. In the Norfolk scheme, of which I am a member, the cost per member is less than £20 per head. I accept that other schemes have costs higher than that, but it is an enviable record. We have saved for our future, but you would not know any of this from the thrust of the Bill and its overbearing tinkering.

What is the problem to be solved here? After some difficult times when interest rates were low, most schemes are now fully funded. It is a British success story that will be undermined by fettering the independence of schemes to make the best long-term investment decisions for their members and local taxpayers, muddling accountabilities by divorcing assets from liabilities and introducing new conflicts of interest. That cannot be right. The success has been delivered despite being buffeted by complications such as McCloud, the pre-2015 and post-2015 schemes, GMP, the rule of 75, dashboards, changing rules on inheritance and divorce and all the other things that happen when you have the best interests of 6.7 million workers in mind. The truth is that the LGPS is a million miles away from the fat cattery that the popular newspapers would have you believe.

That brings me on to the substance of Amendment 2. I have the greatest concerns that the fiduciary duty contemplated to members in this Bill, fairness to the taxpayer and ham-fisted interference from a merry-go-round of Local Government Finance Ministers will weaken this jewel in our economic crown. Taken together, subsections (2) to (8) promote the notion that the government nanny knows best, with broad powers down to the level of detail to determine the fine structure of the pooled schemes. This approach has already damaged the scheme for no good reason. The exemplar ACCESS band has been told to disband. It was doing a good job. With nearly £40 billion-worth of assets under management, it rented the best globally viewed FCA-qualified professionals in the City of London, one of the world’s top three financial centres. Now it is being forced to join a pool of other authorities headquartered miles away in the provinces, miles away from the cut and thrust and that leading intellectual property. There is a provision in subsection (7) that these pools should take steps to get FCA accreditation—I suppose we should be grateful for that—but these pools have no business even being on the battlefield until they are FCA qualified. Thus is the muddle of this Bill. In essence, this enforced uniformity means that star strikers have been replaced by subs from the reserve team. A global success story has been weakened with the risk of lower returns for members.

Moving on, this Bill talks about local government members, but the scheme is not about just councils. In the Norfolk scheme, which I know best, there are eight principal councils, but we now have more than 500 sponsoring employers—parish councils, care homes, catering companies, youth and social workers, classroom assistants and charities. Each has different scale, covenant strength and longevity. It is complex. Yet ministerial interference wants to shove them all into a one-size scheme that cannot fit all. In subsection (5) we see touching faith in the judgment of the experts and regulators who forced private schemes into LDIs and ruined them. I do not know why the Pensions Regulator and GAD are not on the Government’s list. I suppose we should be grateful that they are not. This whole Bill promulgates pensions groupthink on the altar of reduced risk and lower returns.

I will deal with Amendment 5 later because it talks about investment and there is a later group for that. I have heard the Minister say that bigger is better. Here again, I align myself with the noble Lord, Lord Davies. It is the thrust and the theme of this Bill more widely. Indeed, I heard the noble Baroness at the Dispatch Box lionise the Ontario teachers’ scheme in the week that it was rinsed for £1 billion in the collapse of Thames Water.

We see in Clause 2 that there will be directions as to what things can be invested in. When they tried that in Sweden, the public schemes lost another £1 billion in the Northvolt disaster, where virtue-signalling political investment directions made the members and taxpayers poorer. The harsh lesson is that the schemes become the plaything of meddlesome Ministers to require or prohibit, or to opine on lofty ideas, but without the responsibility or accountability of paying out. It is wrong.

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The Minister was perfectly correct to say that we will return to this issue on Report. In the meantime, I beg leave to withdraw.

[Lord Davies of Brixton (Lab)]

I am still mystified as to why Amendment 220 is not included in this group. It is left bereft, right at the end of the Marshalled List. Is there a reason?

[Lord Sharkey (LD)]

If the noble Lord is asking why it is there, I am afraid I will have to plead the Public Bill Office.

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Moved by

[Lord Davies of Brixton]

7: Clause 2, page 4, line 23, after “investments” insert “including social housing”
Member’s explanatory statement
This is a probing amendment that seeks to explore how and to what extent LGPS assets might be used to provide social housing as an investment.

[Lord Davies of Brixton (Lab)]

I emphasise that this is not about mandation. Mandation is a big issue, but this is not about that; it is about the possible ways in which Local Government Pension Scheme assets could be invested. It is a probing amendment and I am sure that it is not word perfect in achieving its objective.

It arises under subsection (4) of this clause. It mentions various issues with how the strategy that is set out should be implemented. It is a probing amendment that seeks to explore how, and to what extent, Local Government Pension Scheme assets might be used to provide social housing as an investment. The oddity about this debate is that I am sure we all share the belief—tell me if I am wrong—that housing is an ideal investment for a pension fund. What I want to know from the Government is the extent to which that will be possible within the structure being established by this Bill.

I start with the fund, which is a long-term defined benefit pension scheme with inflation-linked liabilities. Social housing assets provide long-dated stable income streams that closely match this profile, so the sheer logic of these funds investing in local housing is clear. This issue has been debated extensively, within the relevant field, among the think tanks and so on that support local authorities and are interested in the investments of the Local Government Pension Scheme. For example, a think tank called Localis produced a report recommending that council pension assets should be a funding solution to the UK’s affordable housing crisis; that issue is widely discussed and widely supported.

Of course, that has already happened and is already happening. The London CIV has a substantial investment on behalf of the London pool of investments in social housing. I refer to social housing; personally, I have a preference for council housing, but the issue is broader and includes all forms of social housing. For example, the head of real estate at the London CIV says:

“Our UK Housing Fund is designed to help increase the supply of good quality affordable housing while delivering income-driven returns to our Partner Funds”.


Again, in the heart of the industry and the sector, the value of this approach is strongly supported.

More specifically, are funds investing in local housing? They might be investing in housing, but it could be anywhere. However, the synergy with a local fund investing in local housing has a massive attraction in terms of both the councils involved and the members of a scheme seeing how their funds are being invested in the local community. That is a very attractive perspective on how the funds should be decided.

At the same time—this point does not need spelling out—we face a severe housing crisis. There is a need for extensive housebuilding. We have the resources and the need, so why do we not just get on and do it? Council pension funds are, by their nature, patient, long-term investments; that is such a good match for housing delivery. Of course, it is accepted, from the number of funds that have already gone this way, that the fiduciary responsibility is suitable. The committees managing these funds see that investing in housing matches their fiduciary responsibility.

Everyone agrees that there is a great deal of synergy here. Local pension schemes investing in social housing is financially prudent and low-risk, provides a long-term strategy and delivers clear public value. What is there not to like? Can my noble friend the Minister assure the Committee that this synergy will be recognised in the forthcoming regulations and the accompanying statutory guidance?

We are debating this matter in terms of the Bill here, but, as the previous debate made clear, it is the regulations that count. The regulations that will govern how these pools can invest are currently being discussed—an extensive consultation is taking place—but, alongside that, is a closed consultation on the statutory guidance that will accompany the regulations. There may be a debate as to why it is not a public consultation on the statutory guidance, because the two things—the regulations and the guidance—mash together closely.

The problem is that the draft statutory guidance limits the extent to which local funds can set requirements on the actual decisions that will be taken by the pools. I am getting into the detailed structure of how the administering authorities and the investment pools will work together. The point relates generally to all forms of local investment but it is particularly acute in this area, where we are talking about building houses for local people. More specifically, does the proposed pooling framework act as a potential barrier to Local Government Pension Scheme investment in social housing?

There is a broader, more general issue here; I am gear-shifting. The specific issue is whether the pooling arrangements interfere with local investments, particularly in housing, but there is the general issue of whether administering authorities—local councils, in effect, for these purposes—can pass their ESG considerations, for example, on to the pooling arrangements. We need to be clear at this stage. I have raised this issue specifically in relation to housing—it would be good to get a clear answer on that—but there is a wider point around the other ways in which these funds should be investing in the local community. Are the new structures going to stop that happening in practice?

On the other amendments in this group, I think that I agree with Amendment 9, but I will listen to my noble friend the Minister’s response on it. I look forward to hearing the reasons for Amendment 10; I do not understand it, but I shall listen carefully. I do not really understand Amendment 11 either, so, again, I look forward to the explanation from the noble Viscount. In the meantime, I beg to move the amendment standing in my name.

[Baroness Warwick of Undercliffe (Lab)]

My Lords, I have no extant interests to declare—my interest in pension schemes is in the past—but I have considerable sympathy with my noble friend Lord Davies’s Amendment 7.

We suffer from chronic underinvestment in genuinely affordable and social housing, which is undermining the social fabric of this country and limiting the opportunity for the growth that we so badly need. The Government have vowed to build 1.5 million homes by the end of this Parliament, with a longer-term aim of resolving the housing crisis; other Governments have attempted to do the same. The Government have already committed substantial sums towards that aim, but demands on public funding are increasing and more resources will clearly be needed to deliver it.

I had a particular interest in housing associations in the past. These raise private debt to put alongside public grant to fund social housebuilding, and currently have more than £130 billion of debt facilities in place. The social housing sector is a great example of harnessing public and private investment to drive economic growth and build the homes that we need. Net additional dwelling figures for the 2024-25 financial year showed that 208,600 homes were added to England’s stock—well short of the 300,000 homes a year needed to meet the Government’s target of 1.5 million homes by the end of this Parliament. With the right funding, investment and financial capacity in place, social and affordable housing can play a key role in boosting supply and meeting that ambitious homes target.

There is a general recognition of the need to increase institutional investment in the UK and that pension schemes, with their long-term characteristics, could and should be part of that solution. This part of the Bill refers specifically to the LGPS. The Chancellor has already cited the LGPS as a means of achieving that necessary level of investment. In fact, several LGPS funds already have a strong track record of co-investment in affordable housing, and that potential needs to be maximised. I hope that the Government will ensure that all large pension schemes have the right incentives and strategic tools, coupled with an effective regulatory regime, to provide returns to the scheme while protecting scheme members’ interests and ensuring enduring social impact.

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[Lord Katz (Lab)]

I could not have put it better myself. We have to be careful in regarding ESG as fashionable politics, inserting itself into a fashionable investment space. We have to be careful not to throw the baby out with the bathwater and to really appreciate that there are good reasons why certain investments are more popular and investments in other areas are being shunned. There are trends in industry and society as to what products and classes of investment are popular. Sometimes, we can overthink these things.

I am pleased that the noble Viscount, Lord Thurso, popped up because I was just about to address his question about the Bill preventing funds setting targets on local investment, on this theme. I hope this answers his question: they must set a target, but it can be any value that the fund considers appropriate. They retain that element of flexibility, which I hope is helpful.

Regarding Amendment 9, the Government will require some administering authorities to report on their local investments, including the total investment, and on the impact of investments, in their annual reports through guidance. We consider that Amendment 9 would be an unnecessary duplication of a requirement that was already set out in guidance and in regulations. We think that it would not add anything to the Bill, as that regulation is already good practice—it is already there.

Amendment 12, spoken to by noble Baronesses, Lady Bowles and Lady Altmann, seeks to expand the definition of local investments beyond stretching point: it could mean investments for the benefit of persons living or working in any of the administering authorities’ local areas. Our fear here is that the amendment would, in effect, break the definition of local investment, as it could mean any investment in England and Wales. We contend that local investment, as it stands, has a broad definition, as it can refer to investments that have measurable beneficial impact for people living or working in areas local to, or in the region of, the administering authority, or of its pool partner administering authorities. As a consequence, this is broad enough to capture an appropriately wide geographic range while ensuring that there are still benefits for the local area.

To ensure a clear and firm trajectory to consolidation and benefits at scale for the scheme as a whole, along with the assurance I hope I have provided to the noble Lords in discussing these amendments, I respectfully ask my noble friend Lord Davies to withdraw his amendment.

[Lord Davies of Brixton (Lab)]

I thank my noble friend the Minister for his reply. As I made clear, my amendment was not about mandation or compulsion but the ability for local authority funds to invest in ways which are seen as socially beneficial. There was general agreement about the synergy, as I put it, between investing in social housing and the investment needs of local authority funds. The Minister was clear that it should not be a barrier, but, as the regulations are still being discussed, and as the statutory guidance has not been agreed yet, this is a moving feast. I hope that, at some stage, we will be able to get a specific statement on the ability of funds to invest in housing, and in the other ways which have been suggested. I beg leave to withdraw the amendment.

Amendment 7 withdrawn.

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Following on from what the noble Baroness, Lady Bowles, said, before we come to new Section 28C and the specific part of this Bill that deals with it—as well as my own amendments seeking specifically to include it, if that is where we end up—I would be grateful if we recognised that there is a problem here. Perhaps there is a misunderstanding on the part of the Government about how the real estate investment trust industry has reinvented itself in order to offer long-term investors, such as pension funds, diversified access to expertly managed infrastructure investments, alternative energy, real estate and so on—as well as private equity—in a closed-end structure. The industry has done that to give pension funds the option of investing in either type of asset so that the market will not continue to be skewed away from one of Britain’s investment success stories, which we are so proud of and which has served investors extremely well over many years.

[Lord Davies of Brixton (Lab)]

This is really a debate by proxy on Section 40 and new Section 28C; I am sure that we can all look forward to a repeat of this discussion.

I am not against mandation in principle; it is entirely reasonable for a Government to adopt that approach. What worries me here is that, for some reason, they are putting investment classes into statute. That is just wrong. The point here is broader than the one just made by the noble Baronesses. To pick out sectors of investment, the Government are giving their imprimatur to these particular classes of investment; however, they will go wrong at some stage, and the Government will be on the hook for having advocated for them. I am against having any of these references in the Bill. I do not want to see anything added; I want them to be taken out.

[Lord Fuller (Con)]

My Lords, now I am really worried—every time I have followed the noble Lord, Lord Davies of Brixton, I have tried to amplify the points he has made.

I congratulate the noble Baroness, Lady Bowles, on her masterful exposition of a technical piece of detail; she brought it down to the ground and made it alive. She put her finger on it when many of us have not been able to put our finger on what makes us so uncomfortable about the Bill. We know that it is not right. When you get meddlesome Ministers fiddling around in stuff where they do not really know what they are doing, there is not just co-operation but—as the noble Baroness exposed—a connivance and a cartel. She explained how those two things have led to conflicts of interest; there will be a lot of Cs in the words I am about to use. It is anti-competitive, and it has restricted choice.

The noble Baroness has wedged open the door because, later on in the Bill, there are provisions—I will not defer to them too much now—for the existing operators to lock out new entrants. I was instinctively uncomfortable with that but, now, I am worried because there seems to be a guiding hand here to reduce choice, stifle innovation and damage the reputation of the City. I do not think that that was purposeful, but this is what happens when you get a Bill that is so overly complicated and takes people away from saving for their long-term retirement.

I nearly feel sorry for the noble Lord, Lord Katz, because I have never seen such an evisceration. I am sure he is going to defend it and do the best he can. But what the noble Baroness, Lady Bowles, has shown is that it is rather like the Chancellor, who now says she had no idea what was really happening when she put the rates on the pubs. It was a mistake, and she did not have all the information to hand. While I accept that the noble Lord, Lord Davies, has said we will come back to this on another day, I thank the noble Baroness, Lady Bowles, because she has given an opportunity—a breathing space or an air gap—for the Government to now go back to look at this in more detail.

The noble Baroness, Lady Altmann, also laid out the import of this amendment when she said that one-third of all the FTSE 350 is engaged in this. I expect the Minister in winding to say, for a third time, that growth is the number one priority of this Government. Let us hope he does say that because, if he does, he will either accept this amendment here and now, or give an undertaking that, at some stage before we get to this in the main part of the debate, it will be accepted and we can move on.

It is not just casting a shadow over the LGPS and the parts of Yorkshire which are disinvesting; it is accidentally casting a shadow over the City of London, which is the world’s second or third largest financial centre. It must be stopped. I think the noble Baroness, Lady Bowles, has done the Committee and our nation a great service in the last half an hour, and she is to be congratulated for it.