Lord Eatwell
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(11 years, 4 months ago)
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Lord Newby
My Lords, this is an extremely long group of government amendments. I preface my remarks with an apology to noble Lords who have taken an interest in the Bill. The letter that I circulated about government amendments was done at an extremely late stage. There is nothing Machiavellian about that: it flows directly from the fact that we are having this debate two days after the end of the Christmas Recess. The Bill team, myself and others were not working over Christmas to the extent that would have permitted us to get the amendments down earlier and inform noble Lords about them. However, I hope that in most cases, if not all, noble Lords will find them helpful and so will forgive me for that.
I start by noting that I will not move government Amendment 3, which relates to Northern Ireland civil servants. On reflection, that amendment is considered unnecessary because Amendment 9 to Schedule 1 does what is needed to remove Northern Ireland civil servants from the scope of the Bill.
In line with the recommendations of the noble Lord, Lord Hutton of Furness, the Bill was drafted to provide a legislative vehicle for the reform of all public service pension schemes in the UK to make them fairer and sustainable. However, legislative competence for some of the pension schemes is devolved to the Administrations in Northern Ireland, Scotland and Wales. We have always been clear that the devolved Administrations would have the final decision as to whether or not the Bill should apply to their devolved pension schemes.
On 26 November, the Northern Ireland Executive announced their decision to bring forward their own legislation to reform the pension schemes of their public servants. These schemes will be based on the recommendations of the noble Lord, Lord Hutton. This will affect schemes relating to Northern Ireland civil servants, the devolved Northern Ireland judiciary and, in relation to Northern Ireland, local government workers, teachers, health service workers, fire and rescue workers, and police and public bodies whose pension provision has been devolved.
On 28 November, the Scottish Executive announced their decision to exclude the small schemes for which they have legislative competence from these reforms. This will affect a small number of members of the junior Scottish judiciary and some Scottish public bodies whose pension provision has been devolved. The Bill will still make provision for Scottish schemes for which Scottish Ministers have executive, but not legislative, competence. These are schemes relating to teachers, health service workers, firefighters, police and local government workers in Scotland. Consequently, I beg to move these amendments that will collectively ensure that the Bill is disapplied from those pension schemes for which the Northern Ireland Executive and the Scottish Government have legislative competence.
Amendments 102 and 109 relate to the Scottish Government’s wish to extend a power in the Police and Fire Reform (Scotland) Act 2012 to enable pension and other benefit schemes to be made for Scottish police cadets and special constables. This will be done by way of an order made under the Scotland Act 1998 which will be laid before Parliament shortly and is expected to commence in 2013. In anticipation of that order, these amendments will ensure that these pension schemes will be included in the reforms legislated for in the Bill. As such, the new pension schemes made for Scottish police cadets and special constables will be reformed in the same way as the other public service pension schemes in Scotland.
The amendments also ensure that any compensation or injury benefit schemes made under the extended powers will not be subject to the reforms. This is consistent with the Bill’s treatment of compensation and injury benefit schemes in other areas of public service, such as the main police schemes. I am sure that noble Lords will agree that such equitable treatment is fair and proper, and I beg to move these amendments to the Bill.
Lord Eatwell
My Lords, I am grateful to the Minister for introducing his amendments, and for his apology with respect to their late arrival. It is of course understandable that this comes after the holiday period, although I was slightly taken aback to hear just now that the Northern Ireland announcement was made on 26 November. What has been happening since then? Christmas started a month later. I am very surprised that we now have Northern Ireland effectively removed from the Bill on the day before Committee, and the House not being informed about this when the team apparently knew of it a month and a half ago.
Before commenting on these amendments, I myself apologise to the House for being unable to be here for Second Reading. I am grateful to my noble friend Lord Davies for having stood in on that occasion.
In considering the Bill most broadly, the first thing that strikes one is the list of professions under Clause 1. These people are the very bedrock of our society. It is crucial to ensure that they have the best conditions, including the best pensions, that are affordable. At the same time, we have to recognise the pressures that an ageing society places on pension provision. The key to squaring the circle is trust; this is going to be a theme in discussing all the amendments to come. We need to incorporate into the Bill a framework that provides clear assurance so that people who perform the public services on which we all depend can face the future with confidence. That means that the Government must place clear, unambiguous commitments in the Bill—not vague promises of Ministers—about what they may really intend. Ministerial promises are simply not good enough, because these measures are intended to be long-term. In the long term, Administrations change and no Administration can bind its successor, so in the long term ministerial assurances are virtually worthless. But if future Administrations are faced with clear primary legislation, then change can be made only by returning to Parliament.
It does not assist in the building of trust when the Government table well over 100 amendments on the day before Committee. Most of these—although not all, as the Minister pointed out and I will demonstrate—arise from the refusal of the Northern Ireland Administration to pass a legislative consent Motion in respect of the Bill. In effect, as we have heard, Northern Ireland is being written out of the Bill. It would be interesting to know what Northern Irish colleagues in this House feel about this. Moreover, given that an important objective of the Bill is to manage the cost of pensions, what implications does this last-minute decision have for the public finances? Presumably this will increase long-term deficit projections—by how much?
More importantly, what negotiations are under way with the Northern Ireland Administration about the future shape of pensions in Northern Ireland; and, indeed, with the Scottish Parliament about the future shape of pensions in Scotland; and, indeed, with the Welsh Assembly, which we are told is still to consider the matter? This Bill has passed the Commons and we do not even yet know who is to be included in it because the Welsh Assembly has not reached its decision.
I am astonished that we have this brief note, circulated the night before, with amendments. We have this brief introduction from the Minister when the Bill has been changed in such a radical and fundamental way. What are the Government going to do now about both Northern Ireland and Scotland? What are they going to do about Wales if the Welsh also refuse to pass a legislative consent Motion? Given that the terms of devolution are different in Northern Ireland, Scotland and Wales, the result of all this is going to be a confused plethora of pension conditions throughout the UK—exactly the sort of confused melange that the admirable report by my noble friend Lord Hutton sought to eliminate. Indeed, it was my noble friend’s recommendation 24 that the Government should introduce primary legislation to adopt a new common UK legal framework for public service schemes. This is clearly what the Government are failing to do.
The reference to Scotland is important, because not all the amendments in this group refer solely to Northern Ireland. The Minister referred to Amendment 96, to a “holder of devolved office”. That therefore applies to Northern Ireland and Scotland. Interestingly, the noble Lord did not refer to Amendment 148, which, in defining what a “devolved office” might actually be, excludes Wales. What will happen to Amendment 148 if the Welsh now refuse to accept being included in national procedures? We really ought to be told to whom this legislation is actually going to apply.
Amendments 102 and 109 expressly include Scottish schemes, established under the Police and Fire Reform (Scotland) Act 2012, within the scope of the Bill. Amendment 139 on the approval of new schemes again refers to all devolved Administrations. What does that mean? It certainly does not mean what is defined by Amendment 148, because we do not know what the Welsh are going to do.
What we have here is a bit of a mess. The Minister must tell us how this mess is going to be resolved. How are we going to try to have some degree of consistency in public pension provision in which people can have confidence throughout the United Kingdom? We can go two particular ways. One is to attempt to negotiate an all-UK structure, which has the sort of simplicity and clarity that was suggested by my noble friend Lord Hutton. The Minister should then tell me what negotiations are proceeding to establish that common UK structure, given the devolved responsibilities of the devolved Governments and Assemblies. We should be completely clear that pensions in Northern Ireland are different from pensions in Scotland, different from pensions in Wales and different from pensions in England, and that the relevant authorities have responsibilities for their particular jurisdictions. However, of course, we do not have that. In Scotland, we have a mixture: some pensions are the responsibility of the Scottish Parliament and some are not.
Our Amendment 28A—which noble Lords may have noticed is buried in this group so that it is almost undetectable, but it is there, although the noble Lord did not deign to refer to it in his opening remarks—seeks to make some sense of this mess by recognising that regulations relating to local government workers in Scotland should require the approval of the Scottish Government. I am well aware that local government pensions are a reserved power under the Scotland Act. In the past, as the noble Lord said, Scottish Ministers have had executive responsibility for making regulations for public service schemes, but they require Treasury approval. But these have typically concerned minor matters. There has not been any big issue which has been likely to bring about a significant difference of opinion between the Scottish Parliament and the Treasury.
However, this Bill completely transforms the situation. It is a framework Bill that will be followed by regulations that are very substantial indeed. Moreover, the local government workers’ schemes in Scotland, like those in England, are funded schemes. It is important, given the extensive powers of interference conferred on the Treasury by this Bill, that the Scottish authorities have appropriate responsibility for decision-making on those funded schemes.
Since, as I understand it, the UK Government have not used their reserve power on Scottish local pensions in the past—in other words there has not been any disagreement in the past, although I am quite willing to stand corrected as it is quite difficult to research these things—it is surely inappropriate to do so now. It is surely right that the Scottish authorities should be responsible if we are going to go for this devolved structure of pensions and give up on the idea of my noble friend Lord Hutton’s proposal for a common UK scheme.
Far from being technical, this huge swathe of amendments raises major questions over the scope of this Bill and introduces complexity where there was once consistency. If the devolved Administrations are to have entirely separate schemes, so be it, but make it clear, rather than this hotchpotch of amendments and qualifications. If we are to have a Public Service Pensions Bill, not a “some people in the public service and some others not” pensions Bill, the Government must reach agreement with the devolved Administrations. They must bring back to this House a proper, comprehensive structure so that we can understand the relationship between those schemes that will obviously be national, such as the schemes for the Armed Forces, who are of course servants of the Crown, and those schemes which are to be devolved. If we are to have a common scheme, let us get on with the negotiations and bring the common scheme to this House. Last-minute changes as far-reaching as these are entirely unacceptable.
Lord Newby
The distinction between the very small numbers that I have been talking about and the rest of the public servants in Scotland is that the rest of the public servants in Scotland are covered by the Bill. The schemes established under the Bill for public servants in Scotland were still negotiated in Scotland, but the framework for public sector pensions in Scotland, with the exception of those very small numbers, will be the same as in the rest of the UK. There is devolved power to the extent of the scheme negotiations within the framework of the Bill.
Lord Eatwell
In using the word “power” there, is the Minister aware that it will still require Treasury approval?
Lord Newby
I shall come to that in dealing with the noble Lord’s Amendment 28A. I did not fail to refer to it in any slight meant to the noble Lord. I thought that it was more courteous for me to allow him to make his case and then for me to reply to it.
Amendment 28A would change the current devolution settlement. I know how much importance many noble Lords across all sides of the House attach to devolution matters, but a Bill on the reserved matter of public service pensions is not, in the Government’s view, an appropriate vehicle for reworking the devolution settlement put in place by the Scotland Act 1998 or for rewriting the long-standing Sewel convention. I hope that I can explain what I mean by this.
Part II of Schedule 5 to the 1998 Act makes it clear that, with minor exceptions, this Parliament has exclusive competence to legislate for public service pensions in Scotland. This includes the local government pension scheme in Scotland. Requiring the approval of the Scottish Government in relation to reserved matters would run counter to the principles of the Sewel convention. In constitutional terms, approval of the Scottish Parliament in relation to primary legislation on Scottish local government pensions is not needed under the convention. Furthermore, as the Scottish Finance Minister told the Scottish Parliament on 28 November, the Bill does not contain any provisions,
“over pensions for local government, the national health service, teachers or police and fire staff—that would trigger the Sewel convention”.—[Official Report, Scottish Parliament, 28/11/12; col. 14014.]
I can reassure noble Lords that, although the Bill sets a legislative framework setting the parameters for pension scheme designs, Scottish Ministers have the freedom to decide on many of the details of scheme regulations relating to Scottish local government workers. This includes how generous the scheme is. The Treasury has not set a cost ceiling for any of the Scottish schemes. The cost of Scottish schemes will have to be met from the Scottish block grant. Furthermore, Clause 3 explicitly states that Treasury consent is not needed for Scottish local government scheme regulations. When pension regulations are made for the Scottish local government sector, the Scottish Government will design the terms of those pensions under the framework of the Bill, and will put them before the Scottish Parliament. That is how legislation on this topic falls to be dealt with under the devolution settlement. It would be a novel and unhelpful step to make the application to Scotland of legislation that is reserved to Westminster, subject to the prior approval of the Scottish Government in the way suggested by this amendment.
I hope that goes some way to explaining to the noble Baroness, Lady Donaghy, what the situation is in Scotland and why it is not for the Westminster Government to set out or agree the details of the schemes. It is for us to set out the framework and then, under the devolution settlement, for the Scottish Government to have negotiations that will lead to detailed scheme provisions.
Lord Eatwell
“(d) the Defence Fire and Rescue Service”
Lord Eatwell
My Lords, I shall speak also to Amendment 15. These amendments concern the position within the pensions system of Ministry of Defence firefighters and police. Clause 9 provides that the normal pension age of a person under the scheme must be the higher of the person’s state pension age or the age of 65, but three categories of workers are exempted from this provision—fire and rescue workers who are firefighters, members of the police force and members of the Armed Forces. Paragraph 6 of Schedule 1 defines fire and rescue workers as being persons employed by,
“a fire and rescue authority in England and Wales … the Scottish Fire and Rescue Service, or … the Northern Ireland Fire and Rescue Service Board”.
However, none of this includes firefighters who work for the Ministry of Defence. This issue seems not to have been noticed in another place when the Bill was considered there. Amendment 13 would rectify this omission by including the Defence Fire and Rescue Service in the definition of fire and rescue workers. Amendment 15 does the same job with respect to Ministry of Defence police.
We should make it clear that we are not seeking to extend the exemptions provided under Clause 9 but merely to rectify what appears to us to be an oversight and to ensure consistency of treatment across the same profession. In my years in this House, it has always puzzled me that when very obvious oversights appear in the middle of the discussion of a Bill, somehow Governments of whatever party think it necessary to defend their original position as if it was an ultimate truth and not admit that occasional oversights are made.
Let us turn to the fire and rescue service. There are two aspects to the job of defence fire and rescue service firefighter. They work at home on domestic military bases and other MoD premises and they work abroad when they are deployed in war zones. In the UK, defence fire and rescue firefighters deal with fires, accidents and floods, and firefighters deployed to war zones deal both with fires and the general catastrophic aftermaths of conflicts. The nature of the work they do—I am sure that the House will appreciate its physicality—is very similar to, if not beyond, that to be expected of a domestic firefighter.
The oversight became evident when the Government were contacted by an MoD firefighter in relation to this issue. In their reply, the Government justified—I was going to say invented—their decision to exclude MoD firefighters from the exemptions in the Bill as follows. First, they said that firefighters are covered by the Principal Civil Service Pension Scheme, and so the benefit structure and contribution rates which apply to MoD firefighters are those of that scheme and not those of the Firefighters’ Pension Scheme. The Civil Service unions accepted an increase in the normal pension age to 65 for all staff joining since 2007 for that general Civil Service scheme. On that basis the Government claimed that MoD firefighters are already subject to the normal pension age of 60 or 65 and so the recommendation of the noble Lord, Lord Hutton, to adopt the new pension age does not apply. The final proposed agreement issued by the Government to the unions on 9 March 2012 includes transitional protection for PCSPS members so that any member who is within 10 years of normal pension age on 1 April will see no change when they retire. However, beyond that there is the proposed tapering arrangement. Although there are many similarities between local authority and MoD firefighters, the Government claimed that the terms of employment, as well as the roles performed, are not identical. Here the Government are correct—the roles performed are more arduous in the MoD than they typically are for domestic firefighters.
During the Second Reading debate, which I had the chance to read, the Minister said:
“The noble Lord, Lord Davies, asked about MoD firefighters. MoD firefighters are in the Civil Service Pension Scheme at the moment. They will have their pension age linked to the state pension age to ensure consistency within the scheme. The Bill does not move any groups from their current schemes. Indeed, these MoD firefighters have always had different terms and conditions from other firefighters. This already includes a pension age of 65 for new joiners as a result of changes implemented by the previous Administration”.—[Official Report, 19/12/12; col. 1585.]
I will make a number of points about the Minister’s statement. First, I am afraid that he misspoke. It is not true that the Bill does not move any groups from their current schemes—it does. Clause 28 closes public body schemes listed in Schedule 10, and the Government have the power to move people from those schemes to schemes established under Clause 1 or to create new public body schemes for them. It is not true that people are not moved from one pension scheme to another in this Bill.
Secondly, there is no reason why the Civil Service scheme rules cannot provide for a different retirement age for MoD firefighters as well as for police. Why can that not simply be put into the Civil Service pension scheme rules?
Thirdly, the fact that MoD firefighters have always had different terms and conditions from other firefighters does not mean that their retirement age should not be aligned with that of local authority firefighters in the light of the recommendation of the noble Lord, Lord Hutton, that uniformed services should have a normal pension age of 60. To quote the noble Lord:
“The exception is in the case of the uniformed services where the Normal Pension Age should be set to reflect the unique characteristics of the work involved. The Government should therefore consider setting a new Normal Pension Age of 60 across the uniformed services”.
MoD firefighters are uniformed, as are the MoD police.
Fourthly, as it stands, the MoD firefighters who have joined since 2007 come under the new rules established then and have a normal pension age of 65, while the rest have a normal pension age of 60. It is true that we on this side of the House, when in Government, introduced the change in 2007, but that was well before the report of the noble Lord, Lord Hutton. In the light of his recommendations, which we accept, all firefighters, including MoD firefighters, should have a pension age of 60.
Finally, in his interim report, the noble Lord, Lord Hutton, said:
“The current public service pensions structure was not designed for modern working patterns and has been unable to respond flexibly to changes in this area and to demographic change over the past few decades. This has led to … unequal treatment of members within the same profession”.
That is what the noble Lord, Lord Hutton, sought to correct. The position of the MoD firefighters is a prime example of the growth of unequal treatment which we now have the opportunity to correct.
It is unfair for firefighters who serve our Armed Forces to have to work for up to seven years longer than other firefighters, remembering that they can—and do—serve in war zones. I hope that the Minister will listen to these concerns, recognise that the physical demands on these firefighters are equivalent to or indeed greater than those on other firefighters, and accept this amendment.
Turning to Amendment 15, I will not repeat all the issues that apply to the MoD police. However, I remind the House that MoD police officers are required to carry weapons and wear body armour in many of the areas in which they serve. The physical demands on them are significantly greater than the demands made on most of our police officers. It is true that some of our normal police officers also carry weapons and wear body armour, although it should be noted that the MoD police often carry heavy machine guns. It seems to me that there has simply been an oversight. Will the Government not own up, say that there has been a slip or oversight here, and accept that MoD firefighters and police, as a uniformed service, should have a pension age equivalent to that of other uniformed services? I beg to move.
Lord Newby
My Lords, these amendments seek to add members of the Ministry of Defence Fire and Rescue Service and the Ministry of Defence Police to the categories of “fire and rescue workers” and “members of a police force” set out in the Bill.
I would like to begin by setting out the current situation before responding to the proposals for change. First, as the noble Lord, Lord Eatwell, pointed out, members of these forces are civil servants who currently, and historically, have access to the Civil Service pension scheme. This scheme currently has a pension age of 65. The principle of working beyond 60 for the MoD fire and police services is already established and has existed for a number of years, while the retirement age for the police and fire services has been well below 60.
Secondly, we should remember that the Civil Service scheme is an extremely good pension scheme with benefits which are far beyond the aspirations of many in the private sector. The scheme has provisions in place to ensure that any individuals who face ill health can be provided with their pension early. Alongside this there is, of course, the option for individuals to retire before their retirement age on an actuarially reduced pension. The value of the Civil Service pension scheme is shown in the fact that DFRS and MDP staffing levels remain good and that individuals in this force have already taken employment on the basis of the package of terms and conditions currently in force. The Government do not believe that there are significant recruitment and retention issues associated with the continued use of the Civil Service pension scheme.
Thirdly, it is worth remembering that the employment status of those working in the Defence Fire and Rescue Service and the MoD Police is very different from those working for fire or police authorities. Members of the DFRS and the MDP are direct employees of the Secretary of State for Defence and their remuneration package is managed in a different way. The kind of changes that are suggested by the amendments would make most sense only as part of a fundamental restructuring of not only the terms and conditions of these forces but their roles and responsibilities and they way in which they are managed. They are currently part of a single scheme that is administered at a national level. There would be significant logistical and administrative difficulties in moving them to be part of a locally administered scheme. The Government do not believe that such a restructuring is a way forward.
Having said that, I should point out that, within the new Civil Service scheme, the flexibility will exist for the impact of the later retirement age to be mitigated for certain groups, should this be felt to be justified. This could, for example, be through fully funded early retirement or more generous early retirement factors.
As the noble Lord, Lord Eatwell, pointed out, these issues were not discussed substantively in another place and the amendments have gone down only in very recent days. However, I can give an assurance that the Government will give these matters extremely careful consideration between now and Report. We are very happy to meet members of the Ministry of Defence Police and the Defence Fire and Rescue Service if they would like to do that. I will be in a position to give a more considered response to movers of the amendments and to the House as a whole on or before Report. I therefore urge noble Lords to withdraw their amendment today.
Lord Eatwell
My Lords, I am grateful to the noble Baroness, Lady Harris, for her remarks. I rather pre-empted her discussion of Amendment 15 and I apologise for that. It was, after all, her sensible, balanced and valuable amendment to which we added our names rather than the other way around. I must, of course, accept the Minister’s offer of further consideration. In looking at further consideration, I urge him to put aside the canard of logistical and administrative difficulties. The phrase “logistical and administrative difficulties” is a wonderful excuse for doing nothing on all occasions. As an academic, I recognise that very clearly. It is the doctrine of unripe time: the time is not ripe and therefore we must not do anything. Logistical and administrative difficulties fall into the same pattern.
Nor is the recruitment argument a terribly good one. In this country, where we have 2.8 million people unemployed, it is not hard to recruit people in many professions. The idea that a lack of recruitment difficulties is somehow a justification for maintaining something that is manifestly unfair is not very good. I am delighted that the Government will take this away and consider it. I look forward very much—as, I am sure, does the noble Baroness, Lady Harris—to the Government taking a fair and balanced approach to this issue, which will result in amendments to the Bill that are akin, if not identical, to those we have put down. In the mean time, I beg leave to withdraw the amendment.
Lord Eatwell
Lord Eatwell
My Lords, we now turn to Clause 3, which I believe to be the most unfortunate part of the Bill as drafted. Everything else, broadly, can be dealt with reasonably straightforwardly but this, I am afraid, goes a bit further. The clause undermines everything that was achieved by my noble friend Lord Hutton in building understanding and trust. It would give any Government of the day unprecedented powers over individuals’ property rights—powers which no ministerial assurances or blandishments can dilute.
The damage is all done in subsection (3) of Clause 3. In Clause 3(3)(b), scheme regulations may,
“make provision by amending any legislation (whenever passed or made)”.
It is no wonder that the Delegated Powers Committee of your Lordships’ House objected so strongly. It made the perfectly balanced and reasonable suggestion that Clause 3(3)(b) be limited,
“so far as it confers power to amend primary legislation, to amendments of Acts passed before the end of this session … and to making only consequential provision or provision that is necessary to ensure consistency”.
Our Amendment 26 is designed to do just this by eliminating the offending Clause 3(3)(b) and allowing Clause 3(2)(b) to take the strain of,
“consequential, supplementary, incidental or transitional provision”.
If the Minister has an alternative way of implementing the proposals of the Delegated Powers Committee, we on this side will be happy to support it. However, as the matter stands, the Henry VIII powers in Clause 3(3)(b) really cannot stand.
Of even greater moment is Clause 3(3)(c), which states that scheme regulations may “make retrospective provision”. Just like that: unqualified, unlimited, they may make any retrospective provision, including the withdrawal of previously accrued rights. A central tenet of pension provision is that benefits that have already accrued are deferred earnings and cannot be reduced. To do so would be akin to taking back a proportion of an employee’s wages that has already been paid.
Indeed, it may well be that Clause 3(3)(c) is actually contrary to the European Convention on Human Rights. The Government acknowledge this in the Explanatory Notes, where they say:
“Clause 3: Scheme regulations. This allows for scheme regulations to contain provisions with retrospective effect. Such retrospective changes … may constitute an interference with property within the meaning of Article 1 Protocol 1”.
The noble Lord, Lord Newby, signed the Bill as being not in contravention of the European Convention. It is striking that the Explanatory Notes devote several pages to discussion of this particular issue. Pages 44, 45 and 46 of the Explanatory Notes give detailed legal arguments and case citations on the issue of property rights as protected by the European Convention. Ministers have asserted consistently, both in another place and at Second Reading, that they have no intention of removing accrued rights and that this notion of retrospective legislation will never be used to reduce accrued rights. If that is so, why is there all this stuff in the Explanatory Notes about accrued rights? Why do we have all this material here if it is not relevant because Ministers have no intention? If they have no intention, why is that provision in the Bill?
Lord Lester of Herne Hill
I was not expecting to be on my feet at all, but the answer to the noble Lord, Lord Eatwell, is that the Joint Committee on Human Rights, to which I belong, has for many years persuaded successive Governments to be as full as possible in explaining compatibility statements to enable us to scrutinise whether or not those statements are, in our view, accurate. That is why we welcome the fact that any Explanatory Notes are as full as possible in explaining the Government’s view as to whether or not a Bill is compatible with convention rights. I hope that that is a helpful explanation.
Lord Eatwell
I am grateful to the noble Lord because he has reinforced my point in a very satisfactory way. My point is that the issue referred to here is the compatibility of the threat to accrued rights. That is what the full statement is about, and that is why I am so interested that the Explanatory Notes deal fully with the question of accrued rights. The noble Lord is quite right to say that the Explanatory Notes are full and comprehensive, but why are they there if accrued rights are not in any way under threat?
I return to the discussion of this issue. As the Bill proceeded in the Commons, the Chief Secretary to the Treasury asserted very clearly that the Government would not reduce accrued benefits, having previously said, in a speech on 20 June:
“I also want to make it absolutely clear that we are fully committed to protecting the pension that has been earned to date”.
That is great, but it is inconsistent with Clause 3(3)(c). When he was asked about the retrospective provisions in Clause 3 by Mark Durkan MP, the Chief Secretary replied:
“The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born”—
he is younger than me—
“and it has been used by a number of Governments to make adjustments to public service pensions … The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act”.—[Official Report, Commons, 29/10/12; col. 60.]
However, I am afraid that Mr Alexander misspoke. Section 2(3) of the Superannuation Act provides that accrued benefits can be reduced but only with the consent of affected members. However, the Bill as it stands allows for the reduction of accrued benefits without member consent. As such, it does not mirror the Superannuation Act, as the Chief Secretary said.
Amendment 28 gives effect to the Government’s intention for the Bill to mirror the Superannuation Act 1972 by providing exactly the same protection for members that Section 2(3) of the Act provides. As such, it is difficult to see how the Government could object to this amendment.
I move from the discussion in another place to the debate here at Second Reading. The noble Lord, Lord Newby, said:
“There is a lot of suspicion about this that is misconceived. Pensions legislation has historically contained such powers”—
actually, it has not—
“which have been seen to be necessary for the lawful and efficient operation of the scheme. They are generally used for minor and technical changes, for rectifying errors and making changes for the benefit of members. The intent of the Bill is simply to allow for these minor changes. There is no sinister intent”.—[Official Report, 19/12/12; col. 1584.]
If there is no sinister intent, why is Clause 3(3)(c) maintained in this wide form? Why is there no qualification? If this is indeed the way that pensions legislation has historically contained such powers—and I presume that the noble Lord, Lord Newby, was referring to the 1972 Act—why are there not the same protections for members as those contained in that Act?
It is also worth noting that the noble Lord, Lord Hutton, said:
“In relation to retrospectivity, the Government have a serious problem. We have to be mindful if there are to be DB schemes in the public sector. We know that there are fewer in the private sector, but those 2.6 million people in the private sector who still have access to a defined benefit scheme know for certain, because of the current law that their accrued rights cannot be changed”.
Accrued rights in the private sector cannot be changed unless members give their consent to a change, perhaps to deal with minor technicalities or deficiencies, which would ultimately improve the quality of their scheme. The noble Lord continued:
“The same rules should apply in the public sector. I do not believe that we can have a different set of rules in relation to accrued rights for people in public sector schemes”.—[Official Report, 19/12/12; col. 1582.]
Therefore, the scope of Clause 3(3)(c) is unreasonable, unethical and directly undermines the trust that is essential to the effective implementation of the Bill. Amendment 28 achieves what the Government claim they wish to achieve. If the Minister has another suggestion for better achieving the same goal, we will be happy to support it. However, I ask him: why is Clause 3(3)(c) written in these unqualified, global terms? Why do we have a clause in the Bill that states:
“Scheme regulations may … make retrospective provision”?
That is unqualified. Why is that provision there? Why is it not qualified in the way that it has been in previous legislation? I beg to move.
Lord Whitty
My Lords, I have several amendments in the group that all relate to the same issue of retrospection and the way in which there should be consultation and negotiation on any such change.
Like my noble friend Lord Eatwell, I was not here at Second Reading, for which I apologise, but I thought I should make absolutely clear my overall view of the Bill and my approach to it in my amendments. It can be summarised simply: I do not like the Bill. I do not like the campaign that the Government and their media allies have conducted against the public sector workers who serve them, and against their pension entitlements. In many ways it has been a despicable campaign. In more technical terms, I do not like the way in which the Government have interpreted my noble friend Lord Hutton’s recommendations in terms of attempting to achieve a commonality of approach across all public sector schemes—an ambition in which, as it happens, they have singularly failed because we have ended up with a complete hotchpotch of schemes. The history of all these schemes is different. They relate to different sectors, different industries, different patterns of negotiation and different kinds of jobs. It was therefore difficult to get to commonality. Nevertheless, the Government have attempted to reach that commonality and have made a hash of it.
I have sympathy with all public servants who are detrimentally affected, prospectively and currently, by aspects of the Bill. I have sympathy with firefighters, teachers, civil servants, health service workers and so on. I even have some slight sympathy with the judiciary. However, I am going to focus all my subsequent remarks on the local government scheme. One of the differences between the schemes that exist currently in the public sector is that the local government scheme, unlike the vast majority of other schemes, is a fully funded scheme and always has been. It is therefore on a different basis and the Treasury should approach it differently from the way in which it is attempting to approach the other schemes. Ideally, I would like to exclude the local government scheme entirely from the Bill. I recognise we are not at that point, but it would be the more logical outcome.
Lord Newby
I am very relieved to have that qualification. However, I briefly repeat what I said at Second Reading. The schemes that are now going forward, covered by the legislative framework of this Bill, are, in our view, extremely sensible and generous provisions that reflect the importance that the Government attribute to the work undertaken by all the public servants covered by the schemes.
Having got that out of the way, we quite like the amendment of the noble Lord, Lord Whitty. It has the advantage of simplicity and would allow schemes to make minor and technical changes in the interests of efficiency but restrict changes that were materially detrimental to members. The wording that he has used in the amendment and the sentiments contained in it will certainly form part of our consideration of what we ourselves table on Report.
Amendment 28 deals with member consent locks. I should be clear, as my colleague the Economic Secretary was in the other place, that the Government have significant concerns about the consent locks contained in the amendment. We do not believe that this is the right way forward. I have previously mentioned that there are a number of options in terms of how to facilitate retrospective powers, and in our view consent locks are very much at the extreme end of this spectrum. We do not think that it is appropriate to give members, employers or anyone else the power unreasonably to hold each other or the Government to ransom and to inhibit changes for the greater good. There have been some damaging examples of this in the past. Therefore, the application of universal consent locks is not an avenue that we intend to investigate as we develop our amendment on this subject for Report.
Lord Eatwell
My Lords, perhaps it will assist the Minister if I point out that this is not a universal consent lock; it refers purely to accrued rights and indeed, as I said, it reflects the Superannuation Act 1972.
I am the chairman of a private sector pension fund; I did not declare an interest because, as this is about public sector pensions, there is no particular interest for me to declare. With regard to the extreme end of the spectrum, we have used consent locks in the private sector while negotiating various reforms of rights and have always found that negotiations with members are fruitful and produce generally positive results. I therefore do not think that so-called consent locks should be seen as extreme; they are simply the fruitful basis of consensual reform of a pension scheme.
Lord Newby
I hear what the noble Lord says and I hope that our amendments can satisfy him in this area; I suspect they will do so without having consent locks. However, it will be a good outcome if he is happy at the end.
On Amendment 30, discussed by the noble Lord, Lord Witty, as part of the debate about retrospective powers, our view is that it simply does not do that. Clause 3(5) deals with the generality of Treasury powers and this amendment would loosen up the area that the Treasury would have to consider. The Treasury would not then look at changes to schemes that were revenue-neutral. Our view is that in order to meet the requirement by the noble Lord, Lord Hutton, that we need a greater degree of consistency across the schemes, it would be sensible for the Treasury to look at changes, whether or not they have a financial implication, to try to ensure that we maintain consistency to the maximum possible extent.
Moving to Amendments 116 and 119, which deal with consultation, this takes us back to a debate in the other place about the appropriate statutory consultation requirements for changes in scheme regulations for the new schemes. In the other place the Government set out the reasons why it is not appropriate that primary legislation should require that all consultation on such changes be carried out with a view to agreement. As made clear in the Government’s consultation principles, consultation can have a number of purposes, including garnering views and preferences, understanding possible unintended consequences of a policy or getting views on implementation. The Bill already goes further than those consultation principles, not to mention the arrangements in place for a number of the existing public service pension schemes, in requiring that all changes to scheme regulations would undergo statutory consultation. However, such consultation must be proportionate; it would not be right for us to establish today that all consultation must seek to reach agreement, as that will not always be possible, or indeed the aim of the exercise.
Amendment 119 goes even further, requiring that all changes to scheme regulations should undergo not only consultation with a view to reaching agreement but also a parliamentary reporting process. In the case of changes to the protected elements set out in new subsection (6), scheme regulations could be changed only by agreement. We believe that this is an impractical measure. Changes are required to scheme regulations for the most minor of reasons. Surely it cannot be right or sensible that such an exhaustive consultation procedure be put in place for every such minor instance. Instead, the Government have established a balance in their consultation requirements. Clause 19 puts in place a statutory requirement for consultation. Clause 20 goes further than this and puts in place more onerous requirements for those situations where a future Government may seek to amend the core elements of the new schemes. This already goes further than some feel is appropriate in binding the hands of future Administrations. However, the Government are determined that this protection should remain in order to give confidence to members of those schemes that the Government are committed to the scheme designs that have been negotiated.
Amendment 119 also makes changes to the protected elements set out in Clause 20. These are the core elements of the schemes protected by the extra consultation requirements in the clause. The Government have included the career-average nature of the schemes, member contribution rates and benefit accrual rates in these protected elements, and are convinced that including these elements strikes the right balance between giving reassurance to members and ensuring that schemes are flexible enough to operate in the real world. Finally, Amendment 119 also seeks to require agreement through consultation to any change to the protected elements before such a change could be made.
The Government are committed to the reforms to pensions set out in the Bill and in the separate documents that describe the details of the new schemes that have been negotiated with member representatives. We have put a great amount of time and resource into developing these schemes and have come to what we believe are the right outcomes in the designs that have been established. However, it would be irresponsible and frankly unrealistic for this Government to seek to bind the hands of all future Governments within the next 25 years, as this part of the amendment would seek to do. Instead we have sought to put in place a more onerous process that would cause any future Governments seeking to fundamentally change these pensions to properly consider the impact of their actions and to justify the need for such changes to those affected and to Parliament.
Amendment 120 is intended to be consequential on some of these other changes and would amend the provision in Clause 21 to specify that scheme regulations will be subject to the negative procedure unless otherwise specified. However, the amendments in question do not propose any change to the procedure around scheme regulations, and therefore we believe that the amendment is unnecessary. I hope that in view of the assurance I have been able to give about amendments coming forward on Report, noble Lords will feel able to withdraw their amendments.
Lord Eatwell
My Lords, I am grateful for the support from around the House for the propositions that I advanced with respect to Amendment 26. I am grateful to my noble friend Lord Whitty, who had his own very sensible amendments, to the noble Baroness, Lady Hollins, to my noble friend Baroness Donaghy and to the noble Lord, Lord Newby. Those sympathetic noises and/or general support are most encouraging. I was also delighted to hear sympathy from the noble Lord, Lord Newby, for Amendment 27 and especially Amendment 28. As currently drafted, Clause 33(a) and (c) disfigure this Bill and we look forward with great interest to hearing the Government’s proposals. It would be enormously helpful if there could be a degree of consultation with those Members who have spoken from these Benches as well as, if she wishes, the noble Baroness, Lady Hollins, prior to those amendments finally being tabled. I hope that the Minister will be able to give the commitment that, whether or not there is consultation, the amendments revising these important clauses will be put down at least one week before Report to allow Members to consider what may be quite complex amendments with some care and be able therefore to respond effectively and appropriately on Report.
I am delighted these remarks have received a sympathetic response, and on that basis I beg leave to withdraw the amendment.