Robert Jenrick (Newark) (Con) I rise to speak to new clause 1,
which is in my name. The new clause empowers the Secretary of State
to issue guidance to authorities that administer public sector
pensions schemes that they may not make investments that conflict
with the United Kingdom’s foreign and defence policy. The new
clause will resolve a long-standing issue that arose out of the
Public Service Pensions Act 2013 and the Local Government Pension
Scheme (Management...Request free trial
(Newark) (Con)
I rise to speak to new clause 1, which is in my name. The new
clause empowers the Secretary of State to issue guidance to
authorities that administer public sector pensions schemes that
they may not make investments that conflict with the United
Kingdom’s foreign and defence policy.
The new clause will resolve a long-standing issue that arose out
of the Public Service Pensions Act 2013 and the Local Government
Pension Scheme (Management and Investment of Funds) Regulations
2016. The issue was whether the Secretary of State had, under
their general power to issue guidance provided under the 2013
Act, the ability to guide those who administer pension schemes,
particularly local government pension schemes, away from making
investment decisions that were contrary to the United Kingdom’s
foreign and defence policy.
In 2020, the Supreme Court found by a split decision that the
2013 Act did not confer on the Secretary of State the necessary
power to issue that guidance. The purpose of the new clause is to
change that by explicitly laying out in law the Secretary of
State’s power to offer the guidance to administrators of pension
schemes within the public sector, including the local government
pension schemes, that investment decisions—by which I mean both
investments into a position and divestments from a
position—should not conflict with UK foreign and defence
policy.
There are multiple reasons for doing that. First and foremost,
public service pension schemes that are paid for by the taxpayer
by one means or another and underwritten by the state are clearly
the preserve of the UK Government and, as such, it is perfectly
legitimate that the UK Government have a say in regulating how
public pension schemes manage the money that is provided to them
by we the taxpayers of the country.
(Glenrothes) (SNP)
May I just probe the right hon. Gentleman’s last point a wee bit?
My bank account is stuffed full of what was previously taxpayers’
money. Neither I nor my wife have had any significant income for
years that did not come one way or another from the taxpayer. Is
he suggesting that the Government should have some say as to how
the bank can invest my money to make sure that I get it back when
I need it? Is he suggesting that the private pensions that I am
lucky enough to have should be subject to Government direction as
to where they do and do not invest?
I shall come on in a moment to my own personal views with respect
to boycott, divestment and sanctions, but this new clause has no
bearing on the actions of private citizens. This is about public
sector pension schemes. The broader issue, which I will mention
in a moment with respect to tackling BDS within public
institutions and the public sector, is all about the public
sector; it is not about limiting the freedom of speech or action
of the individual.
(Hendon) (Con)
Will my right hon. Friend give way?
I would like to make some progress, but I will give way.
Dr Offord
Is my right hon. Friend aware that, only this morning,
Hertfordshire County Council was considering a petition submitted
by individuals to ask it to divest from its pension scheme? Does
he agree that it is the responsibility of elected representatives
to ensure that pension schemes have the best and most profitable
outcome to allow the members of that pension scheme to receive
the best possible income?
Yes, I do, and I will give some other examples of local
authorities considering the same actions that my hon. Friend
describes.
The argument that I wish to advance is that, for too long, we
have seen public pension schemes pursue pseudo foreign
policies.
(Hammersmith) (Lab)
Will the right hon. Gentleman give way?
I will make a bit of progress and then I will return to the hon.
Gentleman.
All too often, the foreign policy of these public pension schemes
is, I am afraid, exclusively focused on re-writing the UK’s
relationship with the world’s only Jewish state, Israel.
(Bury South) (Lab)
Will the right hon. Gentleman give way on that point?
I will come back to the hon. Gentleman. I appreciate his
interest.
The latest example of the politicisation of public pension
schemes is by Wirral Council, which is currently considering
realising almost £5 million-worth of investments in seven
companies. This pet project of a small minority who seek to
hijack the money of hard-working taxpayers for their own
political ends is of no interest to the public pension scheme
holders of the Wirral, or indeed, I suggest, to the public
pension scheme holders and rate payers of Hertfordshire.
The politicisation of public sector pension schemes, such as that
seen by Wirral Council, is also to the detriment of the UK
Government’s relations with states abroad. Supreme Court Justices
Lord Arden and Lord Sales established in their judgments that,
because the schemes are managed by councils that are part of the
machinery of the state, receive taxpayer funding and are
underwritten by state regulation outlined in the 2013 Act, they
are liable to be identified with the British state. It is
perfectly reasonable for an individual, an organisation or a
nation abroad to look to these decisions and believe that they
are the British state’s intentions. It would be wrong that, owing
to a minority of an extreme and well-organised clique, the UK
Government’s relationship with an ally has the potential to be
undermined. Ultimately, central Government must reclaim their
constitutional responsibility for the conduct of the UK’s
international affairs. It is for this House to be the place in
which those decisions are debated, as I am sure we will see later
today. Public service pension scheme trustees must return to
their primary duty of achieving maximum returns for scheme
members.
The right hon. Gentleman said earlier that this is public money.
He will be aware that the Supreme Court, in making a judgment on
the previous guidance, specifically said that it is not public
money when it is employee or employer contributions; it comes
from the rightful employment of the employees themselves. Why
does he think that his new clause is different from that? As he
has gone on to the specifics, while I am not talking about BDS
here, does he think there is a possibility that decisions on
investments, say, in illegal settlements, which the Government
advise against on economic grounds, could also be caught by his
new clause?
The hon. Gentleman makes an important point. The Supreme Court
raised two central arguments. One was whether the 2013 Act
explicitly gave the Secretary of State the power to issue
guidance with respect to investment decisions that conflicted
with UK foreign and defence policy. The second point that some
Supreme Court Justices raised was whether it was within the remit
of the Secretary of State to speak to all public service pension
schemes, including those that are funded and unfunded,
particularly the Local Government Pension Scheme.
This new clause explicitly provides the Secretary of State with
the power to issue that guidance. Were it to pass, and were this
ever to be litigated and reach that court, I expect that the
Supreme Court Justices would see clearly the intention of this
House, which is that the Secretary of State should be able to
issue guidance and that that guidance should be applicable to all
public service pension schemes. I hope that answers the hon.
Gentleman’s point, which is an important one for us all to be
clear on if the new clause is passed.
The new clause does nothing to stop private individuals making
individual choices about their consumer habits. They remain at
liberty to invest in or divest from, purchase from or boycott
whichever companies they wish and for whatever reason they so
choose. It does, however, make a distinction between the
liberties of the private individual and the obligations of public
bodies in receipt of public money, and it is grounded in the
principle that public money should be spent in accordance with
the wishes of the UK Government as expressed by this House.
I am one of those fortunate Members who sit on a local pension
board. One of the issues that is often feared, particularly by
smaller Jewish communities, is that, rather than focusing on
community cohesion, it is about bringing in foreign policy
matters that often bring division, when they really want to be
settled and to be able to progress and thrive within their local
community. Does the right hon. Gentleman agree that the worst
thing that could happen would be for the BDS movement to have a
say within pension boards and pension funds, and that the best
thing we could do is to accept this new clause and bring
stability to Jewish communities across the country?
I am grateful to the hon. Gentleman for his support for this new
clause, as I am to all those hon. Members across the House who
have indicated theirs, and for his long-standing interest in the
issue. He makes an extremely important point.
Let me be clear: it should not be assumed that someone expressing
their support for Palestine is antisemitic. Of course that is not
the case. Many are genuinely moved by the cause of Palestinian
statehood and are concerned at Israeli settlements and the
actions of the Israeli Government. It is the policy of this
Government to pursue a two-state solution. However, one does not
have to look very hard to find a pattern of antisemitic behaviour
in connection with campaigns promoting a boycott of Israel.
Successive studies have shown that the single best statistical
predictor of anti- Jewish hostility is the amount of BDS
activity, which comes as no surprise when one inspects the
ethical inconsistency within the movement. Why does its concern
for humanity, and for the welfare of Muslims in particular,
expire at the Jordan river? The BDS movement is mute on
neighbouring Jordan or Lebanon, where the Palestinian minority
really are second-class citizens, and fell silent when thousands
of Palestinians were killed at the hands of the murderous Assad
regime.
There has been no call for a boycott of ICICI Bank in response to
the egregious human rights abuses being committed against Muslims
in India, or for divestments from Huawei following the verdict by
an independent tribunal in London that a genocide is being
committed against the Uyghur Muslims. That selective concern for
humanity, and specifically for the welfare of Palestinians, poses
some alarming questions. Why is Israel held to a higher standard
than every other country in the world?
(Brigg and Goole) (Con)
rose—
(Preseli Pembrokeshire)
(Con)
rose—
I will give way to my right hon. Friend the Member for Preseli
Pembrokeshire () and then to my hon. Friend
the Member for Brigg and Goole ().
2.45pm
My right hon. Friend is making a powerful speech and I commend
him on how he has gone about bringing forward this new clause to
close a specific loophole on public sector pensions. In the
context of his point about the wider boycott, divestments and
sanctions movement, does he agree that it is a pernicious
movement that singles out Israel time and again, to undermine the
UK-Israel bilateral relationship and the very notion of the
integrity of the Israeli Jewish state? I very much hope the
Government will accept his new clause, but does he also accept
that there is a need for a broader piece of work by the
Government to address the BDS movement in its entirety when it
comes to public sector choices?
My right hon. Friend makes a series of powerful points, which I
entirely agree with. In particular, I agree that, were this new
clause to pass, it should merely be the beginning of a wider
effort to tackle BDS within the public sector and that we as the
Government should make good on our manifesto commitment to a full
BDS Bill, which I hope will be in the forthcoming Queen’s
Speech.
My right hon. Friend is making an excellent speech. The founder
of the BDS movement is, of course, somebody who denies the right
of Israel to exist—an antisemitic act in and of itself, given
that Israel exists in international law. My right hon. Friend
says that BDS is the biggest single indicator of antisemitism in
this country; I take him back to last year, where we saw the
highest number of incidents of antisemitism ever recorded in the
UK. The biggest month for those was May last year, following the
flare-up of the Israel-Gaza issues. That is a worrying trend, and
one that is in part promoted by those who do exactly as he says:
single out Israel for treatment they do not apply to other
countries and support the BDS movement. That is why we must see
this new clause passed and why the Government must move forward
quickly on those other issues.
I am grateful to my hon. Friend for his intervention and for the
work he does on antisemitism. He is absolutely right that we
cannot stand idly by and see levels of antisemitism in this
country continue to rise. We must take every opportunity to
tackle the issue, and this is one way that we can do so—there are
many others. None of us wants to see month after month pass with
the Community Security Trust reporting ever higher numbers of
egregious antisemitic attacks in this country.
I will make two final points. First, the BDS movement does
absolutely nothing to advance the cause of peace. It is because
it sees Israel as a colonial endeavour that it views the
Israel-Palestine question as an insurmountable framework of
conflict between the occupiers—in their eyes—the Israeli Jews,
and the occupied—in their eyes—the Palestinian Muslims. That is
why it apportions blame for the conflict entirely at Israel’s
door and denies the agency of other actors such as Hamas and
Hezbollah, both of which we as a country have rightly chosen to
proscribe. The sad reality is that many who practise BDS have no
intention or interest in brokering a two-state solution.
(Blackpool South) (Con)
My right hon. Friend is making an excellent speech and I commend
him on tabling this new clause. Does he agree that the BDS
movement has consistently opposed efforts from Israelis and
Palestinians to negotiate a peaceful settlement? He referred
earlier to Wirral Council and its pensions committee; does he
agree that it would be entirely inappropriate for a local
authority to be judge and jury on such complex matters as where
businesses should and should not invest in contested territory in
the middle east?
I agree strongly with both my hon. Friend’s points. On his second
point, the motion before Wirral Council is to ask its pensions
officer to be the arbitrator of which business it should or
should not be investing in within Israel and within settlements.
Pity this poor individual, who, instead of going about his normal
work as a respectable, hard-working local government officer,
must suddenly spend hours, days, weeks or months attempting to
understand the intricacies of the Israel-Palestine question and
provide advice to a committee of local councillors. It is frankly
an absurdity and an abuse of that individual. We should not be
seeing this. These questions should rightly be taken forward by
the United Kingdom Government.
BDS is ultimately yesterday’s war. In the middle east today
things are rapidly changing, and thank goodness for that. As a
result of the Abraham accords, we see Arab nations—Gulf
states—coming forward to recognise the state of Israel and work
with it through science, technology, education and commerce. If
Bahrain, the United Arab Emirates, Jordan, Egypt and other
nations can do this—even those countries, such as Saudi Arabia,
that have not explicitly recognised the state of Israel but are
none the less working with it on security matters and other
issues—then we as a country should not be tolerating this kind of
activity, and certainly not within the public sector. I urge hon.
and right hon. Members across the House to support the new
clause. I am grateful to the Government for indicating their
support. I hope that in the Queen’s Speech later in the spring we
will see a wider BDS Bill that makes the UK one of the first
countries in the world to really grapple with this issue.
As I said on Second Reading and in Committee, the SNP supports
the intention behind this Bill and we will support it on Third
Reading. The intention is to clear up a mess of the Government’s
making. I also repeat that, as I said in Committee, I do not have
any doubts at all about the sincerity of the Ministers who have
led for the Government at various stages of the Bill. I am
convinced that they want to get it right and to finish up with an
Act that is as fair to everyone as it is possible to be. However,
my concern with the Bill currently before us is that even after
the Government’s amendments are added in, sizeable numbers of
current or former public sector employees will lose out. Given
where we have been forced to start from and the scale of the mess
that the Government made of this previously, I am not sure that
it would ever be possible to produce a Bill that would be fair to
absolutely everyone, but the Bill as it stands can still be
improved. To that end, we will support such amendments as
Opposition Front Benchers want to press to a vote, particularly
new clauses 8 and 9.
One of the issues I raised on Second Reading has certainly come
to pass: the extraordinary number of amendments the Government
had had to table to their own legislation during its passage
through the House of Lords. We now know that including the 61
amendments they tabled in Committee and the 28 further amendments
tabled today, by the time the Bill gets its Third Reading later
on the Government will have had to amend their own legislation no
fewer than 212 times. In fact, Members who attended the Bill
Committee will have seen the spectacle of the Government tying
themselves in knots trying to remove two entire clauses from the
Bill and replace them with two entirely new clauses. It was only
the speedy intervention of the Clerks and the Chair that
prevented the Government from presenting us with a Bill that had
all four clauses included despite the fact that some of them were
completely contradictory to the others. Eventually the Government
had to whip their own Members to vote down two clauses that the
Minister had already moved, presumably by mistake.
That incident served only to highlight what many of us on the
Opposition Benches have been saying from the beginning—that the
Government still cannot reassure us that they are genuinely fully
in control of this Bill. I worry that they are very quickly
running out of last chances to put it right. There is still a
danger that the Bill that receives its Third Reading later today
will have flaws and weaknesses that neither the Government nor
anybody else have spotted yet. Most of today’s Government
amendments are part of the process of picking up flaws or
ambiguities in the original Bill, and we will not oppose them. We
have some concerns about new clause 7, which provides for a
lessening of parliamentary scrutiny in some cases. The Minister
has not yet convinced me that that is an appropriate thing to do.
I hope that when he winds up he will explain why new clause 7 is
appropriate and why, in some cases, parliamentary scrutiny should
be diluted in any way.
As I indicated earlier, we will support new clauses 8 and 9 in
the name of the hon. Member for Hampstead and Kilburn (). New clause 8 would provide a
means of compensating scheme members who, through no fault of
their own, stand to lose out as a result of the Bill. The Bill
rights a wrong for a very large number of people in public
pension schemes but goes in the opposite direction for some, and
we should not forget about them. The new clause does not commit
the Government, or indeed the scheme employers, to any additional
expenditure, but it would require the Chancellor of the Exchequer
at least to recognise that this is an issue and to look at
whether there are realistic and reasonable ways of resolving
it.
New clause 9 would require the Government to review how the Bill
operates in the real world—as opposed to the assessment, as with
any Bill, before discussions on it began—with regard to
equalities. Given how many substantial changes the Government
have already had to make to the Bill, it is prudent to accept
that, once it comes into force, it might have consequences that
the Government have not foreseen, which the new clause would
attempt to protect against.
New clause 1, in the name of the right hon. Member for Newark
(), is a different matter
altogether, and the SNP is minded to oppose it. We have heard
some of the arguments in favour of it—they are similar to
comments made on Second Reading—which simply do not wash. I will
not get into an argument now about the BDS movement. If the
Government genuinely think that that organisation is a threat to
peace and stability in the middle east or elsewhere, they could
bring forward legislation to address it—they have had over two
years of this Parliament to do so, and they still have time—but
this is not the Bill for that.
(Leeds East) (Lab)
Does the hon. Gentleman share my concerns that the new clause
tabled by the right hon. Member for Newark () risks barring ethical
investment decisions across the board—for example, in relation to
Saudi Arabia? Given that future Governments might decide to
support regimes that abuse trade unionists, for example—as we
have seen in Colombia in recent years, or in Chile in the
past—the new clause would be not only anti-democratic but would
risk ethical investment decisions and human rights policies
around the world.
The hon. Member is absolutely right. If the new clause was
intended purely to limit the activities of the BDS movement as a
precursor to possible further restrictions later on, a very
different new clause would have been tabled, and it might have
been possible to word it in a way that we would not have
significant problems with, but this new clause is far too wide.
It could give the Secretary of State—any Secretary of State—the
power to prevent any public pension fund from considering any
kind of ethical, sustainability or other factors simply because
they decide that they are contrary to UK foreign or defence
policy.
(Brighton, Kemptown)
(Lab/Co-op)
The hon. Gentleman is making an interesting argument about why
the new clause is too wide. Is there not also the problem that it
risks investments themselves due to a chilling effect for
investors who might not withdraw from an investment when it is
economically advisable to do so because of fear of breaking the
rules under the new clause, so we could end up with the
devaluation of pension schemes?
I will come on to that later. We need to remember, in all of
this, that the trustees of any pension scheme have an absolute
fiduciary duty to those who rely on the performance of the fund
for their current or future pension. We do not want anything that
ties their hands, such as someone saying they should go only for
very low-yield investments because that person has objections to
the activities of companies that might give a higher yield. There
are times when we must question whether it is right to put
trustees under that kind of pressure. It is also wrong to suggest
that pension trustees, in addition to or instead of their
absolute duty to pension scheme members, should have some kind of
duty to be a mouthpiece for the British Foreign and Commonwealth
Office or the British Ministry of Defence. They are not an arm of
Government; these are legally independent trustees, and they have
to have that legal independence properly protected.
3.00pm
As I have said, I do not want to get into a big argument about
the best way to ensure peace and stability in the middle east,
and I note a number of the points made about the activities of
BDS. I caution strongly against assuming that those
characteristics apply to anything more than a tiny minority of
the people in these islands who have genuine concerns about the
illegal activities of the state of Israel, who genuinely believe
that the United Kingdom needs first to make clear to the state of
Israel that breaches of international law are not accepted and
who believe that the British Government are not taking nearly
enough steps to help Palestine get into a position where it can
be recognised as a sovereign independent state. We should all be
contributing to a two-state solution in the middle east.
Going back to the comments of the right hon. Member for Newark,
he is arguing that people and Governments in other countries
would assume that a decision made by the Wirral Council pension
fund trustees or the Hertfordshire County Council pension fund
trustees somehow mirrored the views of the UK Foreign and
Commonwealth Office or Her Majesty’s Government’s policies on
defence. There are some totalitarian regimes in the world where
every public sector organisation and most of the private sector
organisations are allowed to say only what that Government tell
them to say, but Britain is not one of those countries—well, not
yet, although we are maybe getting quite quickly to that
stage.
It is noticeable that the current Government seem extremely keen
to increase our trade with some countries that exercise that kind
of totalitarian control over all their public bodies. I would
have thought that a Government who sing their own praises about
the devolution of authority to local councils would want to
celebrate giving councils the right to take a different view from
the Government, if that is in the interests of the residents of
that council area, and highlight it to other Governments at every
opportunity.
Taking the right hon. Member’s argument to its logical
conclusion, he said that matters of foreign policy should be
debated here and not in council chambers or town halls around the
UK, but why on earth not? In the debate on Second Reading, he
said that
“we do not want to see local councils trying to influence foreign
policy decisions”.—[Official Report, 5 January 2022; Vol. 706, c.
100.]
I beg to differ; I want to see councils with the ability to
influence not only foreign policy decisions, but decisions on all
aspects of domestic policy. These policy decisions are rightfully
taken by the Government of the day and held to account by the
Parliament of the day, but to suggest that councils should be
frozen out from having any input on those decisions is a
dangerous precedent.
I am listening closely to the hon. Member’s argument, but I am
afraid I just do not accept the points he is trying to string
together in what is a fairly strange argument. The reason this
amendment is so important and the reason we do not expect council
chambers to be dabbling in foreign, defence or security policy is
precisely that they are not given the competences over those
policies. It is the same for the Welsh Senedd, and the Scottish
Government have a limited number of competences. Yes, we want
them to exercise their powers fully in those areas where they are
given competence, but it is a complete diversion of activity and
attention to say that we want councils to be getting involved in
incredibly sensitive and complicated subjects of the kind that my
right hon. Friend the Member for Newark () has already described.
I certainly cannot agree with the right hon. Gentleman. As I have
made perfectly clear, how the British system works is that
Ministers have the authority to take policy decisions, and
Parliament is right to hold Ministers to account for that.
Parliament has the ultimate right to decide what becomes law. If
nobody else is allowed to discuss it, and councils are not
allowed to express views in the interests of the people they are
there to represent, the whole system starts to fall flat on its
face.
It is as plain as the nose on my or anyone else’s face that
decisions on foreign policy can easily have a disproportionate
impact on residents in some parts of these islands. Certainly,
decisions on defence policy can have a significantly greater
impact on some places than others. Remember that councils are
directly democratically elected by local people to represent
their views. Are we suggesting that they should not be allowed to
debate matters of foreign policy simply because they do not have
the right to take the final decision? If that is what Government
Members are saying, why is it that almost every Tory MP who pops
up on their hindlegs at Prime Minister’s questions to ask a
planted question invites the Prime Minister to interfere in local
democratic decision making? We have had two examples today, with
the right hon. Member for Newark expressing his views on possible
decisions by councils that, with respect, are nothing to do with
him, because they are not the council area he represents.
I do not know whether Wirral Council or Hertfordshire will take
the right decision, but I am happy to trust the good people of
the Wirral and Hertfordshire to sort out councillors who get it
wrong too often. That is what local elections are about. I do not
like to see the Government, having substantially stripped back
the powers of local authorities, then deciding to give local
authorities the power to take decisions they agree with, but
taking away the power for local authorities to do things that
might go in a different direction.
Among all this, we are losing sight of the vital fact that as a
matter of law, the trustees of a pension fund are a completely
different organisation and a completely different entity in most
cases from the organisation whose current and former employees
are members of that fund. My wife has for many years been a
trustee of the Fife Council pension fund, as well as having
clocked up nearly 30 years as a councillor. The decisions that
the trustees of the pension fund make are completely different
from the decisions many of the same people will take as members
of Fife Council. Nobody believes that the decisions of the
pension fund reflect the views of the council; the council is not
allowed to try to whip pension trustees, for example.
Will the hon. Member give way?
I will give way once more, but I am aware of the time.
As a matter of law, what the hon. Member is saying is not
correct. Pensions within the public sector, as elsewhere, are
regulated. They were regulated by the Public Service Pensions Act
2013, and they will be regulated by this Bill. He has been
speaking for more than 15 minutes, and it is not clear to me
whether the SNP is in favour or against BDS. It is important that
he makes clear his position.
Madam Deputy Speaker ( )
Order. I am keen that we do not just have a whole debate about
BDS. I want the amendments to be addressed, and there are a few
other speakers trying to get in.
I made the point much earlier that the amendment is not about
BDS; BDS is not mentioned anywhere in it. Going back to the
question of whose money it is, we can go round in constitutional
or legalistic circles, but morally that money belongs to the
people who rely on it for their pensions. If members of the
pension scheme want to make strong representations to their
trustees, saying, “I do not want to profit in my pension from
investments that benefit countries that act in breach of
international law”, why is it such a bad thing for pension scheme
members to be allowed to make those representations to the
trustees? Why is it such a bad thing for the trustees to be
allowed to say, “At the request of our members, we will take a
decision that might not deliver quite such a high yield for the
pensioners, but the pensioners are happy to accept that, because
they will be comfortable in their consciences about where the
money is going and where the profits are coming from”?
We cannot support new clause 1, and we are minded to divide the
House on it later. My final point is that every pension fund
trustee has a duty entirely to look after the interests of their
pensioners and future pensioners. I do not want to see anything
being done that gets in the way of that. We will support the Bill
on Third Reading, but I hope it will come to Third Reading
without new clause 1 included. The fundamental point is that the
£17 billion mistake was made by the Government. If we eventually
pass the Bill into law to be an Act of Parliament that makes
pensioners or their employing authorities pick up part of that
tab, it has not done enough. I fear that by tonight we will still
have a Bill that has not done enough and that the Government will
not be made to take full responsibility for a mistake entirely of
their making.
(Hayes and Harlington)
(Lab)
I declare an interest in that I am a member of the local
government pension scheme. I want to address the amendments
standing in my name—new clause 10 and amendments 22 and 24—but I
would also like to comment on new clause 1.
On the debate about whether or not this is public money, I
thought, as a member of the local government pension scheme, that
the Supreme Court was pretty clear that this is not public money
in the sense that would enable the Government to issue guidance.
However, I have to say that new clause 1 goes further than
guidance; it actually includes directions as well. I work on the
basis, as I did when I was employed in local government, that the
money I earned and the money forgone to invest in my pension
scheme was my earned income; it was not public money under the
control of the Government.
I think there is a lesson for us all here in that I believe that
only in extremis—only in extremis—should the state interfere in
one’s own privately earned income. I say that because, in the
pension scheme regimes we have at the moment, we have an element
of representative democracy with the trustees often being
representatives of the workforce and other experts. That
reassures me that, as a member of the pension fund, I have an
element of say in what those trustees do, if they are appointed,
and that enables me and other members of the pension fund to
exercise an element of control over decision making, but also to
exercise an element of conscience.
(Middlesbrough) (Lab)
Does my right hon. Friend agree that the clumsy way in which new
clause 1 has been worded will create a chilling effect on
risk-averse pension scheme managers in fulfilling their fiduciary
duties and other responsibilities? Does he also agree that it
will significantly incapacitate the ability of pension schemes to
invest ethically, and the rights of pension scheme members and
pension schemes to express and have ethical views taken into
account in the investment of their own money?
I agree with the first point, but let me take up that last point,
because I just want to explain to other Members where I am coming
from and get it on the record.
On moral grounds, I have argued very strongly within my own local
government pension scheme—so far, I have to say,
unsuccessfully—that I do not want the money I have earned, and
part of my pension is my earned income, to be invested in a
number of states. They include Saudi Arabia, because of its
involvement in Yemen. In fact, I have organised demonstrations
when there were visits from various representatives from Saudi
Arabia to this country. I have argued that I do not want my
pension invested in China because of the treatment of the
Uyghurs. Again, I have engaged in demonstrations on that, and
also on the moral ground that a number of trade union friends I
have worked with over the years are currently in prison as a
result of the operation undertaken by the Chinese state in Hong
Kong. Yes, I have argued against investments going into Colombia
because of the murder of trade unionists, and I have also argued
against investments going into Israel because I do
believe—according to the Amnesty human rights report, and many
Jewish institutions—that it is an apartheid state in the way it
treats the Palestinians.
That is my position: on moral grounds, I want to be able to
influence the investments. I do not want my pension invested in
armaments or fossil fuels either, and I believe that that is my
right. I do not believe it is the role of the state to ride
roughshod over my moral choices without extremely good reason.
Given the threat of climate change and other matters, there may
well be, in extremis, reasons for the state to act, but I do not
think that this new clause is in that context.
(Glasgow South West)
(SNP)
If this new clause had been in legislation in the 1980s, it would
have covered South Africa, and the right hon. Member will
remember that local authorities drove the anti-apartheid
movement, while the UK Government refused to impose
sanctions.
3.15pm
I was chair of finance at the Greater London Council at that
time, and I would regularly turn up with my shares with regard to
Barclays bank. When Mandela came here—some Members will have been
there when he spoke—he and others, including the late Archbishop
Tutu, commended those who argued for disinvestment from South
Africa in order to bring about a change in that regime, and it
worked.
The point I am making—I will finish on this element of it—is that
I do not believe it is the role of the state to interfere in this
way. Parliament can decide to expand the role of the state, but I
think it begins to strain the limits of parliamentary democracy.
I have listened to Conservative Ministers warn us in this Chamber
about elective dictatorships, so I just warn hon. Members on both
sides of the House that once these precedents are set, other
Governments will be tempted to follow and, in some instances, go
much further. I think this adds to the slow erosion of our civil
liberties, freedom of choice and, indeed, human rights.
(Central Suffolk and North Ipswich) (Con)
On the right hon. Gentleman’s point about his own pension fund, I
do not think there would be many countries left in which it could
invest. I understand his concerns about pension funds making
ethical investments, but the pension fund also has a fiduciary
duty to sustain the fund, and to make investments in that respect
and for future pensioners who will draw on it. How can he
reconcile the two positions?
I was once, in my callow youth, an adviser to the mineworkers
pension scheme, and then I was an adviser at the TUC, working
with Lord , who is one of our colleagues
in the Lords at the moment, and there was never a problem with
our fiduciary duty of maximising the income to the pension fund
itself because of the range of investment opportunities available
to us. I think we found in the past that exercising such moral
judgment can prove effective in the long term, because it ensures
that the fund is not investing in countries that may in the
longer term become unstable as a result of the actions they take.
I would just say, and I am making a personal point, that I think
new clause 1 flies against my ability to exercise my moral duties
about investments by my pension fund.
Will my right hon. Friend give way?
Yes, but then I want to move on to my amendments.
Is there not a problem with this, in that it leaves the Secretary
of State to decide what the foreign or defence policy might be in
an arbitrary way, rather than requiring pension funds to set an
ethical policy in which they can say that they do not want to
invest in countries where there are human rights abuses? We would
still have to treat all countries equally, so they could not
target one country or another, but there would be an ethical
framework, and this new clause does not allow an ethical
framework.
I would also come out fairly pragmatically and say that there may
be some countries that, according to the Government, were not
appropriate to invest in a few years ago but now are. I do not
want a little red book to be thrown at me again, but I would just
cite the fact that the relationship the Government have had with
China has changed over the years and, I hope, is changing again
at the moment with regard to the Uyghurs.
Let me move on to the new clause and amendments in my name. New
clause 10 is a simple reflection of new clause 8, tabled by my
hon. Friend the Member for Hampstead and Kilburn (), on the pensions trap. I want
to echo what I think she said really eloquently in Committee and
today about how the dialogue on this issue must continue, because
there is an unfairness at the heart of the legislation we are
pushing through at the moment. This affects firefighters, police
superintendents and so on, who feel aggrieved, and I feel that a
bit more dialogue may enable us to find a solution and restore
their confidence in the pension scheme itself. That is why I
support new clause 8.
My new clause 10 is simply more explicit about ensuring that
there are consultations with the trade unions and other employee
representative bodies, and that we seek to overcome the problem
so that we have a non-discriminatory approach that does not fall
foul of the law.
I turn to my amendment 24, which addresses a complex issue. It
reminds me of the debate we had on the d’Hondt proportional
representation system, as there were only two people who
understood it: Mr d’Hondt, who died, and . Let me just go straight to the
point on this matter. I am sorry if I go into some detail. The
Chief Secretary to the Treasury said in Committee that
“it is vital that we establish now, for the avoidance of any
doubt, that no member benefits will be cut and no member
contribution rates will increase as a result of the 2016
valuations. Any benefit improvements due will be honoured, but no
additional costs will be imposed. I reassure the hon. Lady”—
my hon. Friend the Member for Hampstead and Kilburn—
“on her important question, that the costs of our remedy
genuinely sit with the Exchequer, not scheme members.”––[Official
Report, Public Service Pensions and Judicial Offices Bill [Lords]
Public Bill Committee, 27 January 2022; c. 10.]
This is complicated stuff. There is a confusion of two issues
here. The Government did make a mistake and were challenged in
the courts. I fear that that cost burden will now fall on to
members of the pension fund, if it is included in the cost
mechanism as an employee cost. That is the issue.
I turn to two points in that regard. First, there is the cost to
the scheme of giving members the option to choose which
benefits—old or new—they want to accrue during the remedy period.
Some members will choose benefits that are better for them than
they would have received before the McCloud and Sargeant
judgments. The scheme will clearly have to meet the cost of
paying those benefits—fine. We got the assurance from the
Minister that the money will flow—we think it is £17 billion;
that is the last estimate—and the burden will not fall on to the
members themselves, but that is not what we are talking about
here. The issue here is what impact the cost of the remedy should
have on the cost control mechanism. I remind Members that this is
the mechanism for deciding whether members’ benefits should be
changed or, alternatively, whether contributions could be
changed.
There is no doubt that treating the cost of the remedy as an
employee cost for the purposes of the cost control mechanism
leaves members worse off than they would have been had it been
treated as an employer cost. I draw the Chief Secretary’s
attention to the helpful report from the House of Commons Library
entitled “Public service pensions: the cost control mechanism”,
which tells us that if we go back to the initial results of the
2012 scheme valuations, which were reported in 2018, the
Government said that
“the protections in the new cost cap mechanism mean public sector
workers [would] get improved pension benefits for employment over
the period April 2019 to March 2023.”
It is those improved benefits that I believe are now at risk if
the cost of the remedy is included as an employee cost and not an
employer cost.
What does this mean? The improved benefits were required because
members had suffered a reduction in the value of their expected
benefits over the period 2012 to 2016 because of lower than
expected pay increases and because longevity had not increased by
as much as had been expected. In other words, the changes would
not make members better off; they would simply maintain the value
of the benefit package at the level that had been agreed. I
apologise to Members, because this is complicated stuff, but it
has to go on the record if we are to get redress on this, either
today or in subsequent legal actions.
Given the requirement under the cost control mechanism, the
respective scheme advisory board then set about agreeing the
necessary changes in benefits. In other words, because the pay
settlements had not been as large as predicted, and because
people were not living as long as the predicted life
expectancies, the cost burden on the scheme was less, which
should have been reflected in benefits given back to members. The
scheme advisory board started looking at what those benefits
would be, and the Library report gives an example of packages of
changes proposed for the civil service scheme, which included
“a reduction of member contributions; reform of the current
contribution rate structure; and increased death benefits.”
The other schemes reflected similar sorts of benefits, so members
would gain significantly as a result of this unfortunate
situation—unfortunate because they never got enough pay
settlements and never had the increase in life expectancy.
Nevertheless, because those costs never fell on to the scheme,
they should have been paid back to members.
In December 2018, the Court of Appeal ruled that part of the
reforms amounted to unlawful discrimination. That was followed by
the decision by the then Chief Secretary that the cost control
element of the 2016 valuations should be put on hold. In other
words, the members were to gain those benefits because of the
cost control mechanism, the court decision took place, and the
Government then froze the whole process. Eventually, the
Government restarted the process and published the Treasury
directions in October last year. The problem with the directions
is that they treat the cost of remedying the Government’s
mistake, as calculated for the purposes of the cost control
mechanism, as a member cost, not an employer cost.
The important point to understand is that there is nothing
inevitable about the remedy as a member cost. It has always been
accepted that there are certain elements in the calculation
involved in the cost control mechanism that are regarded as
member costs that will impact on the cost control mechanism
itself, but there are also other elements in the calculation that
are employer costs and do not impact on the cost control
mechanism. For example, the impact of changes in pay increases
and mortality are obviously member costs, but changes in the
discount rate and price increases are the employer costs. It is
strongly argued by the trade unions, completely understandably,
that mistakes made by the employer—that is, the Government—are
employer costs.
What has never been discussed is how to treat the cost remedy
incurred by the Government’s own error, and that is what needs to
be addressed today. It was the Government’s mistake to have age
discrimination in the scheme. The Minister in Committee said it
was reflected in trade union representations, but as has been
said by the Public Accounts Committee and others, the Government
are the Government; they should have foreseen that there was the
potential for discrimination. It is the Government who introduced
the measures. It is the Government who are responsible for the
Treasury directions and any legislation. It was a mistake by the
Government. It is therefore logical that the cost of the remedy
should be treated as an employer cost for the purposes of the
cost control mechanism.
I apologise to hon. Members for the complexity of this, but it is
important that we get on the record very explicitly that members
of these pension funds should not have to pay in the long term
for Government mistakes and should therefore have gained the
benefit of either reduced contributions or enhanced benefits,
because that is contained in what the Government agreed a number
of years ago as the cost control mechanism.
3.30pm
Turning briefly to amendment 22, I say to hon. Members in both
Houses that this is not the way to legislate: no matter who is in
Government, no Member of Parliament should accept this style of
legislation where significant changes are made at a very late
stage in the production of a Bill. The Government have introduced
completely new into this legislation an economic test. As my hon.
Friend the Member for Hampstead and Kilburn said, that falls foul
of the agreement and the guarantees that were given that there
would be a 25-year stable regime to administer public service
pensions. Unions were told at that stage that there would be no
surprises and this would last for a generation, and there would
not be these significant amendments that have taken place. The
Government are now saying there is going to be an economic test
that will impose on the cost control mechanism the Government’s
judgment, based upon Office for Budget Responsibility analysis
and assessment of the economic trend. I have never considered the
OBR as addressing issues ex cathedra with infallibility.
To be frank, we have no idea in any detail how this will operate.
We have no idea how it will be transparent and open to debate. I
have tabled my amendment because what I fear most is that this
will be determined by Treasury direction. Treasury directions
never come before this House. They are not like delegated
legislation: they are made by Government themselves with no form
of accountability. So the Government will be able to determine
this economic test and effectively tear up the cost control
mechanism that unions were promised would last 25 years. Whether
benefits will go ahead and contribution levels will be determined
by an OBR assessment of whether the economy can withstand the
cost of that without any Member of this House having the ability
to debate it, vote on it or determine it. That is why I believe
Treasury directions are unsuitable for something so significant
that will affect whether so many of our constituents will live in
poverty in their retirement. For that reason, I believe the
Minister needs to look again at how we can go forward to restore
trust and confidence in the administration of public service
pensions in the future, based upon some of the promises given a
number of years ago to us as Members.
(Edinburgh West) (LD)
This is an important Bill, but Liberal Democrats believe there
are still several serious concerns that need addressing. More
support is needed for individuals in making decisions; perhaps a
helpline would be useful. There are implications for women—the
pensions gap. There is also the potential negative impact on
diversity in the judiciary, which is currently dominated by a
generation of older white men.
I will focus on Liberal Democrat new clauses 4, 5 and 6, but
first let me say that the Liberal Democrats will not be
supporting new clause 1, tabled by the right hon. Member for
Newark (). That is nothing to do with
BDS; it is because the wider implications and unintended
consequences could be significant in cases such as Xinjiang,
where we believe a genocide is taking place. That is not
Government policy, so what would the Government direction be in
that case? Our concern is the wider implications and unintended
consequences.
New clause 4 would require the Government to review the impact of
the Bill on fairness. It calls a review of fairness and just
treatment, particularly with regard to members of current
schemes. It is important to ensure that members of current
schemes are not caught in the pensions trap. Women are more
likely than men to have taken time off work for caring
responsibilities. Under some of the new schemes, which are based
on age, they will have to work longer. The issue of gender in
pensions is not new, and this would not be the first time the
House made a misstep.
The gender pension gap is the percentage difference in pension
income between female and male pensioners. The latest research
showed that it had increased to 37.9%; we must be aware of that.
The deficit will continue, so the amendment seeks to highlight
the importance of this issue and the need for urgent measures to
address it.
New clause 5 is about access to information and would require the
Government to publish guidance to members of affected pension
schemes and allow for provision of a helpline or online services
to offer further assistance in important decisions for people’s
futures. It is important that we think of the Bill in terms of
individuals—the people whom it will affect—and their futures,
what guidance and support will be provided to each person, how
that will be resourced and how the Government will signpost that.
That is key. We have seen with pensions for women born in the
1950s that when decisions and timings were not signposted, that
had a massive impact on them when they found that their pension
age had changed. We must not do that again—and we still have not
rectified the first mistake. The Government have already accepted
that people with complex tax issues can have financial advice.
The same should be the case for millions of public sector workers
who will have to make such choices, so the Government should put
a helpline in place for that.
New clause 6, would require the Government to publish an annual
update on progress in recruiting new members to the judiciary and
on increasing diversity. It is important that our senior judges
in the Court of Appeal and the Supreme Court reflect the society
in which we live if they are to be respected. They must be seen
as part of the current era, to reflect society’s trends and
understand those trends, but there is perhaps a perception that
they do not, and we are all concerned about that.
Although the proportion of judges who are women continues to
increase gradually, women remain under-represented in judicial
roles. That is particularly the case in the courts, where 32% of
all judges and 26% of those in more senior roles are women,
compared with 47% of all judges in tribunals. I am sure we would
all like to see those figures addressed. The situation with
black, Asian and minority ethnic judges is worse, with the
figures being 4% for High Court judges and above compared with 8%
of all court judges and 12% of tribunal judges. Surely that is
far from acceptable. The new clause would ensure that the
Government published an annual update on progress in this
important area.
This is an important Bill and it is important that we address the
issues in it. However, we must do that properly and ensure that
there are not unintended consequences.
(Coventry South) (Lab)
I rise to speak to new clause 1. The year was 1985. After a
campaign lasting decades, 123 councils answered the call for
solidarity with the South African anti-apartheid movement and
adopted policies opposing that injustice, including 39 councils
that had divested from companies operating in South Africa and
Namibia. While the Prime Minister, Margaret Thatcher, was calling
the African National Congress and Nelson Mandela terrorists and
Young Conservatives were proudly wearing badges calling for him
to be hanged, local authorities were on the right side of
history, standing up to the horror of apartheid. Of course, the
Conservative Government could not tolerate that, so, a few years
later, to weaken the anti-apartheid movement, they brought in
laws making it illegal for local councils to boycott South
African and Namibian goods. Looking back, it is crystal clear who
was on the right side of history and who was on the wrong
side.
The new clause, in the name of the right hon. Member for Newark
(), would ban local councils
from taking such a stand. Had it been in place back in 1985,
because the Conservative Government supported apartheid South
Africa—let us not forget that—local councils, no matter the
strength of local feeling or the righteousness of the cause,
would have been prevented from divesting pension funds from
apartheid South Africa. They would have been compelled to be
complicit in injustice.
Government Members may argue that that is history and things are
different now. I contest that the facts say otherwise. The House
knows that British-made weapons and diplomatic support are
integral to the Saudi war in Yemen. Even as that war has claimed
the lives of more than a quarter of a million people, pushed more
than 20 million into absolute destitution and resulted in grave
violations of international law, British complicity has
continued. The new clause could deny councils the right to divest
from arms companies whose bombs rain down on the people of Yemen.
Similarly, if a local authority wanted to align its pension fund
with international law and divest from companies operating in
illegally occupied Palestinian lands, the new clause risks
denying it that right, too.
The Israeli Labor and Meretz parties, our sister parties in
Israel, have both written to the leaders of the Labour party and
to all of us to say that they want divestment from companies that
invest in the occupied territories. Israeli Members of Parliament
are asking us to do this. New clause 1 goes against what they are
asking us to do, does it not?
Yes, it does, and I was proud to stand on a Labour manifesto
committed to that policy, too.
With the rapidly accelerated threat of climate catastrophe and
the need to consign the fossil fuel industry to the dustbin of
history, new clause 1, at the worst possible moment, risks
outlawing councils from standing up for climate justice and
banning divestment of pension funds from companies that are
setting our planet on fire. [Interruption.]The hon. Member for
Brigg and Goole () laughs, but this is an actual
threat. I am not sure if he is a climate denialist, but he should
really look into that.
These are just some of the blatant affronts to local democracy
and ethical investments. New clause 1 is so vague and so badly
worded that it would have a chilling effect on public sector
pension investments. It could be weaponised against any human
rights campaign that raises concerns about pension investments in
any company that is not formally on a UK sanctions list. As
Amnesty International and Human Rights Watch warn, it is so badly
worded that, in fear of committing an offence, pension scheme
managers could be forced to break their fiduciary duties.
In 1959, an anti-apartheid campaigner and Nobel peace prize
winner called Albert Lutuli put out a call for global solidarity.
In Britain, hundreds of thousands of campaigners responded,
launching a boycott of South African goods. People across the
country did what they could do to end the injustice. In my city
of Coventry, the local Labour party led the fight, distributing
leaflets, holding public rallies and even displaying a large
poster in the city for a whole month, publicising the boycott and
raising awareness about apartheid. As so often in history, it was
the actions of local people, anti-racist campaigners, trade
unionists and local councils that led the way, counteracting
Westminster’s complicity.
Those actions, while small in themselves, were part of a global
anti-apartheid movement that was instrumental in bringing an end
to this injustice. We should learn that lesson. I strongly
encourage Tory Members to learn the lessons of history. We should
empower local councils to make democratic ethical investment
decisions, not outlaw them, as new clause 1 does. [Interruption.]
I therefore encourage Members on the Government Benches,
especially the very enthusiastic hon. Member for Brigg and Goole,
to vote against it.
Perhaps I should begin by following the example of my right hon.
Friend the Member for Hayes and Harlington () in declaring my association
with a local government pension fund. I chaired the pension
committee of my local authority for a number of years. I am
pleased to say that since I stopped doing that it has become much
more ethical. I can now tell the House that the pension fund now
has the lowest percentage of its fund invested in fossil fuels of
any local authority in the UK, with the aim of net zero by 2030.
I take no credit at all, other than the fact that it is now
chaired by my researcher.
I should also say that I used to be member of the local
government pension scheme, but I moved the tiny amount of money I
had in that to the MP scheme, so I do not know whether I should
declare that. I wonder if we should all be declaring that fact,
given that although the MP scheme is not subject to the McCloud
judgment, its trustees have said they will follow the McCloud
judgment. For the avoidance of doubt, I put all that on the
record. I do not think I have much time left now, but let us
see.
I generally support the Bill, which is undoing mistakes that the
Government made which were exposed by the McCloud judgment. I do,
however, have a slight reservation. Nobody has mentioned the
matters relating to judicial retirement ages. I see exactly the
force of why they need to be increased, although I share the
reservations of the Law Society that going from 70 to 75 will
actually set back diversity in the judiciary, hopefully only
temporarily, because of those who will be eligible to stay on in
their roles. However, we are in such a parlous state in relation
to the shortage of judges and the crisis in the courts that I can
see the force of the argument.
I will be brief because, in a way, by talking too much about new
clause 1, we are giving it more credibility than it deserves. It
does not really deserve a place in this Bill. I suspect that the
right hon. Member for Newark () knows that, and actually,
we should congratulate him on managing to squeeze it into the
long title of the Bill. I felt that it was slightly surreal to be
listening to a speech about the Abraham accords in relation to a
technical Bill about pensions. We will have, hopefully, a
three-hour debate on recognition of the Palestinian state on
Thursday in this Chamber, in which it might fit, although that
might be stretching it a bit as well. Perhaps he will speak in
that debate as well.
3.45pm
The right hon. Gentleman went through the history, with the 2013
Act and the 2016 regulations. The mistake that he is making in
trying to put this into primary legislation is that pension
schemes are already very well regulated in terms of what they can
and cannot do, quite rightly, because they look after—in the case
of the local government pension scheme—hundreds of billions of
pounds of our constituents’ money.
In 2014, following the 2013 Act, the advice, which the Local
Government Association sought, said that investment powers must
be directed to achieving what is best for the financial position
of the fund, and that provided that this remains true, the
precise choice of investments may be influenced by environmental,
social and governance factors, so long as that does not risk
material financial detriment to the fund.
The 2016 guidance that the right hon. Gentleman referred to said
that the
“investment strategy… must be in accordance with guidance issued
by the Secretary of State”,
who had the power to intervene if satisfied that any authority
had failed to act in accordance with statutory obligations or
guidance. The guidance also said that although
“pursuit of a financial return”
should be
“their predominant concern, they may…take purely non-financial
considerations into account provided that doing so would not
involve significant risk of financial detriment to the scheme and
where they have good reason to think that scheme members would
support their decision.”
Generally speaking, that is the way in which pension funds
behave. However, the proposal goes further than that.
I referred in an intervention to the regulations that went to the
Supreme Court and were defeated. I appreciate that it is
perfectly acceptable—we said this throughout the Brexit debates
about many of the actions relating to Brexit, and this was one of
the strongest arguments against a lot of the reforms to judicial
review, the Human Rights Act and so forth—to argue, as we do now,
that this Parliament is sovereign and can make those decisions.
Of course, it can return to the issue through primary
legislation, but I urge caution. We should look again at the
judgment of the Supreme Court and the reasons that it gave for
making that decision.
I suspect that the clue to what the right hon. Gentleman was
saying came at the end of his speech when he said, effectively,
“I’m teeing this up for the Queen’s Speech. I do not expect the
new clause to be passed today, but I am putting down a marker.”
It is perfectly reasonable to say that because the Government did
say in the last Queen’s Speech that they would bring forward such
a Bill, and they have not. The Queen’s Speech said:
“Measures will be introduced to ensure that support for
businesses reflects the United Kingdom’s strategic interests and
drives economic growth.”—[Official Report, House of Lords, 11 May
2021; Vol. 812, c. 2.]
The Government explained that as delivering a
“manifesto commitment to stop public bodies from imposing their
own approach or views about international relations, through
preventing boycott, divestment or sanctions campaigns against
foreign countries.”
That is all on the record and that is where we are, but we would
be stretching things today if we approved an extremely widely
drawn new clause that goes much further on this issue. The right
hon. Gentleman addressed some of the background to this, but he
then talked in quite lurid terms about BDS. I am sure that there
are Members who support BDS, Members who do not support BDS but
support others’ rights to do that, and Members who do not support
it full stop, but I would not accuse any of them of ulterior
motives. They have their views and they can put them forward
freely in this place.
Like my right hon. Friend the Member for Hayes and Harlington, I
believe that there are many regimes around the world that are
inappropriate for investments of very large sums of my
constituents’ money. They include the Gulf countries, which the
right hon. Member for Newark prayed in aid when he talked about
the Abraham accords. They certainly include Saudi, and they
certainly include China.
I raised a point earlier to which the right hon. Gentleman did
not respond. I made the terrible mistake of asking two questions
and he gave me only one answer, which is what Ministers do; he
was probably remembering his days on the Front Bench, so it was
just instinct not to respond. However, I asked a genuine question
about illegal settlements. Settlements in the occupied
territories —no doubt we will hear more about this on
Thursday—are contrary to international law. His own Government
warn investors about the financial risks, but at the moment there
are no sanctions against illegal settlements. Should new clause 1
become law, we could be in the bizarre situation in which a
pension fund, for good financial reasons, wishes not to invest in
companies that operate in the illegal settlements, but is forced
to put its assets at risk—we do not know what is going to
happen—because it believes that otherwise it would not
comply.
I therefore hope that the right hon. Gentleman will not press his
new clause and that if he does, he will not succeed. Any hon.
Member is entitled to put forward a proposal that they wish to
see coming to fruition at some point, but for the Government to
support something that is so nebulous, wide-ranging and
potentially destructive, and that acts counter to all that public
sector pension schemes do, would be a grave error. I know that
the right hon. Gentleman is a very sensible and measured man, so
I hope that he will not press his new clause. He can come back
with a debate on BDS and tax his Secretaries of State as to why
they have not taken the matter further, but his new clause does
not belong in the Bill.
I will be brief, having been on the Bill Committee. First, I
should probably declare that I am a member of the Scottish local
government pension scheme. I have always taken the view that a
pension is deferred pay. In the past few weeks, university
lecturers have taken industrial action because of the threats to
their pension schemes; I have been very proud to visit their
picket lines and offer my solidarity and support.
I wish to raise a couple of issues. I view new clause 1 as a
Trojan horse. The main points that I want to raise are my support
for the amendments tabled by my good friend the right hon. Member
for Hayes and Harlington (), and the effects on
employees and workers. In Committee, the Chief Secretary assured
me that discussions were ongoing with trade unions to fix the
issues. I hope that he will update the House on any discussions
that have taken place since then and on the progress of those
talks.
A basic principle that has been identified in relation to many of
the amendments is that workers should not be penalised
financially for mistakes that have been made in calculations by
the Government or employers. It is a clear principle for many of
us on the Opposition Benches that no worker should be penalised
for such mistakes and that their pensions should not be affected.
I therefore support the Opposition amendments in that regard.
I thank all right hon. and hon. Members who have spoken today. I
appreciate the constructive way in which all Opposition parties
have handled the Bill. Today’s debate has focused on several
important themes, which I will address in turn.
One central theme was the clarification requested by the hon.
Member for Hampstead and Kilburn () and other Members about
whether the estimated £17 billion cost of remedy will be included
in future valuations of the cost control mechanism for unfunded
schemes. The answer, definitively, is that it will not. The
Government will reform the cost control mechanism to a reform
scheme-only design for future valuations. I hope that that
reassures the House.
Will the Minister give way?
Mr Clarke
Very briefly, but I am conscious of the need to make
progress.
I just need the Minister to say that it will be an employer cost,
not a member cost.
Mr Clarke
The cost of remedy sits with the employer, namely the
Exchequer.
Let us be absolutely explicit. With regard to the cost control
mechanism, is it the case that this will be not a member cost but
an employer cost? Just nod, Minister: that is all you have to
do.
Mr Clarke
I can confirm that the liability for this rests with the
Exchequer. It will be a reform scheme-only design.
[Interruption.] I will write to the right hon. Gentleman with the
clarification that he is requesting.
Correspondence is not good enough. Put it on the record.
Mr Clarke
I will ensure that it is on the record.
My right hon. Friend the Member for Newark () raised the important issue
of guidance for the local government pension scheme which will,
in effect, prevent bodies from engaging in boycotts, divestment
and sanctions activities. In our manifesto, we committed
ourselves to stopping public bodies running their own direct or
indirect boycotts, and the wider BDS movement. I am grateful to
my right hon. Friend for the all the hard work that he has done
to draw the House’s attention to this important issue. I also pay
tribute to for his work.
(Liverpool, Wavertree)
(Lab)
Will the Minister give way?
Mr Clarke
I am sorry, but I must make progress.
The Government have been paying particular attention to the
arguments that my right hon. Friend has put forward, and I assure
him that we take this issue very seriously.
The BDS movement has nothing to do with pensions and everything
to do with politics. It has had the chilling effect of
legitimising antisemitism among the hard left, leading to kosher
food being taken from supermarket shelves, Jewish films being
censored, and the disgusting spectacle of Jewish university
student societies being threatened with bans.
Will the Minister give way?
Mr Clarke
I will give way.
I thank the Minister. He has been very generous. Can he confirm
that new clause 1 has nothing to do with BDS, a point to which
you alluded, Madam Deputy Speaker?
Mr Clarke
On the contrary, it has everything to do with BDS, because,
rather than promoting co-existence, debate and dialogue, it sows
hatred and alienation. There is evidence of divisive BDS
campaigns in public bodies, including too many Labour-led local
authorities attempting to declare boycotts. Only this week we saw
concerning, but sadly unsurprising, reports of a councillor in
Wirral leading demands for Wirral’s pension committee to pass a
BDS motion. Even under the leadership of the new Leader of the
Opposition, Labour politicians continue to endorse the Palestine
Solidarity Campaign and call for boycotts of Israel.
I thank the Minister for confirming that the new clause does
indeed have everything to do with BDS—as it should, because it is
an important contribution to making Jewish people in this country
feel safe. I am afraid that we heard some embarrassing comments
from Opposition Members earlier, featuring the false narrative of
“Everything good is always on the left, and everything bad is
always on the right.” As the Minister says, we see Labour
activists and Labour councillors endorsing what is a
fundamentally antisemitic campaign. I thank him for his words
today, and I hope the Government will accept the new clause,
because it is so important to fighting the scourge of
antisemitism.
Mr Clarke
I thank my hon. Friend for what he has said, and I can confirm
that we will be accepting the new clause. It will have the
Government’s support this afternoon.
The hon. Member for Edinburgh West () raised a number of
important points, but I will deal first with her new clause 4,
which relates to fairness for members of public service pension
schemes. This is also relevant to the point raised by the hon.
Member for Hampstead and Kilburn.
Let me begin by reassuring the hon. Member for Edinburgh West
that equal treatment and fairness for all members, including
those with protected characteristics, remains a central tenet of
the Bill. The Government have conducted a full equalities impact
assessment of the Bill, which was published when it was
introduced. In addition, when making the necessary changes in the
scheme rules to deliver remedy, bodies will carry out any
appropriate equalities analysis for their specific schemes, in
compliance with the Equality Act 2010. Indeed, many schemes are
currently concluding public consultations on the changes in
scheme regulations to implement the prospective remedy. The
Government intend that a similar exercise will take place when it
comes to schemes making further changes in their scheme
regulations to implement the retrospective remedy, prior to 1
October 2023.
The Bill also provides that, from 1 April 2022, all public
service workers who remain in service will do so as members of
the reformed schemes, which provide career average, or CARE,
benefits. CARE schemes offer fairer outcomes to those who
experience lower salary progression over the course of their
careers. A number of women and those with other protected
characteristics are likely to be better off under CARE schemes,
on average. Moving on to guidance for members, I wholly agree
that clear, accessible and accurate guidance—
I am grateful that the Minister is answering all the questions
that I posed in my speech, but I want to go back to the question
that my right hon. Friend the Member for Hayes and Harlington
() asked. The Minister has
said that he will write to us. Can he write both to me and to my
right hon. Friend, and can he be explicit that this will be not a
member cost but an employer cost? Can he confirm that he will be
explicit when he writes to us on that particular point?
Mr Clarke
The cost sits with both members and employers, but the liability
rests with the Exchequer in relation to the £17 billion cost of
remedy. That is how this sits. I will indeed commit to writing to
clarify all these points, and I will write to the hon. Lady and
the right hon. Gentleman.
Judicial diversity and recruitment were the next issues raised by
the hon. Member for Edinburgh West. I emphasise that this is an
important measure for ensuring that we deal with the covid
backlog in our courts, which is why we need to look at raising
the mandatory retirement age. We are conscious of the need to
consider the wider issues around judicial diversity and to ensure
that we have a judiciary that is truly representative of the
public that it serves. The Ministry of Justice publishes annual
official statistics on this issue that provide a detailed annual
picture.
I would like to assure members that the potential impact of what
is being done is small. Compared with retaining the current
mandatory retirement age of 70, a higher retirement age is
projected to result in a 1% to 3% decrease in diversity growth in
the medium to long term. I emphasise the word “growth” there.
Overall, judicial diversity is still forecast to improve, and
this measure would not reduce diversity overall. There would be
only a slight reduction in the trend growth, which is going in a
positive direction. We remain committed to increasing judicial
diversity, and we have just launched an ambitious new magistrates
recruitment plan to bring in younger and more diverse candidates.
The MOJ plans to recruit 1,000 judges a year over the next few
years, and 4,000 magistrates over that period. There will be a
lot of change to the make-up of the judiciary.
The so-called pensions trap—the losses incurred by public service
pension scheme members due to the closure of the legacy
schemes—has been discussed at length throughout the passage of
the Bill. The new clauses tabled by the hon. Member for Hampstead
and Kilburn () and the right hon. Member for
Hayes and Harlington appear to be intended to require the
Chancellor to devise a way to compensate scheme members with
remediable service for any reduction in future pension benefits
resulting from the prospective McCloud remedy legislated for in
clause 80. As I have noted, it is important to stress that the
Government must not take action that would be contrary to the
intention of the Bill to remove the discrimination identified by
the courts and to ensure that all members are treated equally
from 1 April this year by accruing service regardless of their
age.
The Government must also safeguard the purpose of the reforms
proposed by and ensure that public service
pension schemes are put on a sustainable fiscal footing. The
Independent Public Service Pensions Commission stated that
“allowing current members to continue to accrue further benefits
in the present schemes for many decades would be unfair and
inequitable to the new members coming behind them.”
Compensating or carving out members with remediable service for
the difference in pension age between their legacy and reformed
schemes would effectively leave a protected class of public
service pension scheme members beyond 31 March 2022, which could
perpetuate the discrimination identified by the courts or give
rise to new discrimination. It is worth noting that the Home
Office is looking at this issue as we speak and will respond to
its full consultation, in which the issue has been considered at
greater length. I look forward to seeing the results of its
work.
I turn to the contribution from the right hon. Member for Hayes
and Harlington on the reforms to the cost control mechanism. The
cost control mechanism is designed to ensure a fair balance of
risk between public service pension scheme members and taxpayers
with respect to the costs of the schemes. These reforms resulted
from recommendations by the Government Actuary, and the
Government are seeking to implement them following a full public
consultation process. They are the reformed scheme-only design
and the economic check. The economic check is essential to ensure
stability and consistency across the scheme. It is also important
to improve the higher bar for benefit reductions or contribution
increases if the country’s economic outlook changes.
On the point about the 25-year guarantee, the Government do not
believe that these reforms breach that guarantee. The elements
protected by the 25-year guarantee were set out in legislation,
and the cost control mechanism is not included there. The
Government are making these changes following a detailed review
of the mechanism by the Government Actuary and a full and open
consultation process.
Amendments 22 to 24, tabled by the right hon. Member for Hayes
and Harlington and the hon. Member for Hampstead and Kilburn,
seek to reverse two decisions. The first reflects the cost of
remedies in the mechanism of the 2016 valuation, and the second
prevents the waiving of any ceiling breaches of the 2016
valuations that may occur. As I have already noted, the cost
control mechanism is designed both to protect the value of
schemes to members and to protect the Exchequer from unforeseen
costs. At each scheme valuation, the mechanism assesses the
benefits that have accrued and are accruing to members, to
determine whether future benefit levels or member contribution
rates need to be adjusted to meet the costs of the scheme.
The Government are clear that the remedy, by giving eligible
members a choice between two sets of benefits, will increase the
value of schemes to members, and this increase in value has
therefore rightly been included in the mechanism for the 2016
valuations. The Government have decided that it would be
inappropriate to reduce member benefits based on a mechanism that
may not be working as intended, and clause 93 will therefore
ensure that no member’s benefits will be cut or contribution
rates increased as a result of the 2016 valuations.
Amendment 23, which would delete clause 93, would therefore
reverse a decision that will protect members and would lead to
significant cuts to member benefits for any schemes that breach
the ceiling of the 2016 valuations. It is therefore important
that clause 93 is preserved.
I am grateful to all hon. and right hon. Member for their
contributions. With the exception of new clause 1, I hope I have
demonstrated the reasons why I cannot accept these new clauses
and amendments, and I hope hon. and right hon. Members will agree
not to press them to a vote.
Question put and agreed to.
New clause 7 accordingly read a Second time, and added to the
Bill.
New Clause 1
Guidance to public service pension scheme managers on investment
decisions
‘(1) The Public Service Pensions Act 2013 is amended in
accordance with subsection (2).
(2) In schedule 3, paragraph 12(a), at end insert “including
guidance or directions on investment decisions which it is not
proper for the scheme manager to make in light of UK foreign and
defence policy”.’—(.)
This new clause would enable the Secretary of State to issue
guidance to those authorities that administer public sector
pension schemes, including the local government pension scheme,
that they may not make investment decisions that conflict with
the UK’s foreign and defence policy.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
[Division 190
The House divided:
Ayes
299
Noes
81
Question accordingly agreed to.
Held on 22 February 2022 at
4.07pm](/Commons/2022-02-22/division/D5D3DC78-D92B-47E9-9D62-9EC887AA2823/CommonsChamber?outputType=Names)
New clause 1 read a Second time, and added to the Bill.
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