Local Government Pension Scheme (Amendment) Regulations 2002

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Chris Grayling: Let us use the example of a self-employed supply teacher who chooses to re-enter full-time employment as a teacher with a local authority. Would the Minister clarify in detail how that person's position would change as a result of the changes to paragraph (d) and the deletion of paragraph (e), which effectively appear to remove the rights that might have existed previously to transfer from a self-employed situation into full membership of the authority, if I am reading regulation 121 correctly? What has changed to encourage the Government to make the amendment?

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Dr. Whitehead: The amendment alters the circumstances under which AVCs can be transferred into the scheme. The example that the hon. Gentleman gave is not relevant to the local government pension scheme, because the pension scheme would be the teachers' pension scheme, which is the responsibility of the Department for Education and Skills. The regulation widens the scope under which AVCs can be transferred into the local government pension scheme from a non-local government pension scheme AVC scheme.

Chris Grayling: The Minister has rightly pointed out the shortcomings in my example. Let us take the case of a non-teaching member of staff, perhaps someone who had been a self-employed grounds maintenance contractor, who accepts full-time employment with a local authority and, therefore, is migrating from a self-employed to an employed situation. If I understand it correctly, under the previous regulations that person would have been entitled to transfer the funds in their pension scheme into the local authority scheme. Clearly, that will not now be possible. Why did the Government introduce that change?

Dr. Whitehead: The hon. Gentleman's example concerns the local government pension scheme. The change does not prevent the transfer of rights. For example, money from a personal pension plan can be transferred to the main scheme, and AVC rights can be transferred to the AVC rights of the local government pension scheme. Therefore, instead of making it more difficult, the change actually facilitates the transfer in the example that the hon. Gentleman gave.

Regulation 10 adds arm's-length housing companies to the list of scheme employers in the regulations. As part of the preparatory arrangements for setting up the companies, an informal consultation with interested parties about the most appropriate pension arrangements for transferring employees concluded that the best course would be for them to continue to be part of the local government pension scheme. Not only was that considered to be the most appropriate pension scheme for local authority owned companies managing a local authority's estate, but it would also ensure, and I emphasised this previously, a smooth transition in the transfer of staff to the new company. The regulation achieves that objective.

Mr. Foster: In view of the fact that the Minister specifically went out of his way a few moments ago to remind me that the regulation potentially covered any new staff, will he alter the words he just used to include both transferees and new staff in the new housing arrangements?

Dr. Whitehead: Yes. I am delighted to alter the record to include new entrants because they would be covered by those arrangements as far as regulation 10 is concerned.

Chris Grayling: On regulation 10, the Minister will be aware of the various changes that have been proposed to the rights of school governing bodies to set up companies in the Education Bill. If my understanding is correct, non-teaching staff in schools

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would fall under the local authority scheme rather than under the teachers' scheme. What would be the status of employees such as grounds workers who were part of the local authority scheme and who might be part of a new company set up by a school or a number of schools to provide a service of that kind across their local education authority area? What would those employees' status be as a result of the changes in the Education Bill, and have the Government considered including the companies that can be set up under the Education Bill as designated employers in the list of scheme employers under the new regulations?

Dr. Whitehead: I refer the hon. Gentleman back to regulation 3, which could provide for precisely the function that he envisages. The regulations permit local government pension scheme fund authorities to enter into admission agreements with other employers to allow their staff to access the scheme through a contractual agreement. That might happen under those particular circumstances. I am sure that hon. Members will be delighted to know that the final regulation about which I am going to say a few words is regulation 12. It changes the fund administering authority for employees of the national probation service local board for the south Wales area to reflect new local arrangements, which is entirely in line with the wishes of those who are involved locally. I hope that that demonstrates that those are for the most part modest, but nevertheless much needed, technical amendments. It is important for me to emphasise that they are simply a part, albeit an essential one, of our continuing maintenance of the scheme, and that they are no more and no less than that. They are necessary for us to fulfil our ongoing stewardship responsibility for the regulations concerning the local government pension scheme, and to ensure that the scheme's regulatory framework is up to date, legally correct and clear. They are the product of extensive discussion and consultation, they have the support of those who will be affected by them and they are proportionate to their policy purpose. I therefore commend the amendments to the Committee.

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Mr. Foster: Thank you, Mr. Cran. I, too, am delighted to serve under your chairmanship. I congratulate the hon. Member for North-East Cambridgeshire on giving us an opportunity to discuss the important issue of local government pensions. I entirely agreed with his opening remark that the shortfall in the regulations is that they do not begin to tackle some of the crises in local government pension schemes. Hon. Members will be well aware of the deep concerns throughout local government and in many parts of the public sector about problems associated with the funding of pension schemes.

In order that I am not subject to the criticisms that other hon. Members have received from you, Mr. Cran, let me deal directly and briefly with the regulations, which were described by the hon. Member for North-East Cambridgeshire as mundane and anodyne and by the Minister as a course correction. I genuinely believe that they are both wrong. The

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regulations are more fundamental in their scope than is suggested by either of those descriptions. Their importance lies in their historical background. That includes moves by the previous Conservative Government towards compulsory competitive tendering, the move towards best value under the current Administration and the debate in all political parties about the potential role of the private sector in the delivery of public services. Although we may disagree about that role and the extent to which it should be developed, we are nevertheless witnessing a gradual increase in the involvement of the private sector in public services. We must consider how to ensure that private sector employees who deliver public sector services do not end up worse off—whether by a little or a lot—than those who continue to provide public services from within the public sector.

Apart from some minor tinkering with current regulations as a result of extensive consultation, the regulations have two key effects. First, there is a specific addition to the list in regulation 10, which mentions the employees of housing management companies. They will be able to be on the list and, potentially, to benefit from the local government scheme. Secondly, regulation 3 makes it possible for a wide range of bodies, as yet undefined, to appeal to the Secretary of State for membership of the scheme if they do not appear on the list. That represents a huge change. When the Minister read out the list of contributors to the local government pension scheme, there was a serious omission: the new admissions bodies, which will make a major contribution as their employees become part of the LGPS.

Can the Minister tell us what assessment the Government have made of the growing proportion of members of the LGPS who are employees of a non-local government body? An increasing number of admission schemes will relate to private sector companies as well as to the housing management companies and other similar bodies stated in regulation 10. In addition, can he tell us what implication he believes that has for the future operation of the scheme?

An issue that has not been debated today, to my surprise, has been the way in which admission bodies will be expected to make their contribution to the overall coffers of the LGPS. I know that that is covered by regulation. However, given that there is to be a significant increase in such bodies, I wonder whether there is a need to consider that aspect of the arrangement between the admission bodies and the scheme. Looking only at the housing management companies covered by regulation 10, the Committee must be aware that it is estimated that by 2004 more than 50 per cent. of all social housing will be managed by bodies other than local councils. That will mean a significant increase in the number of employees who have the potential to enter the local government scheme.

My penultimate question is about the fact that the Minister was asked several times, in a number of guises but with limited success, what the cost of

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implementing the regulations will be. Some significant changes are being proposed, yet despite repeated questioning, we have heard not a dicky-bird from the Minister on the Government's estimate of the cost of the regulations. In answer to a specific question, the Minister said that there would be no net cost because it would be paid for by a reduction in bureaucracy. Rarely is it the case that an accounting procedure can be used to offset reduced bureaucracy against an increased cost. I would be grateful for an answer.

I have already referred to the letter from the Secretary of State of 26 March. I was disheartened and somewhat frightened by the revelation by the hon. Member for North-East Cambridgeshire that the wording of the press release of 25 March seems totally to contradict the Secretary of State. However, as the hon. Gentleman rightly said, we are beginning to get used to confusion within the Department. Nevertheless, on the assumption that the more recent document is the more accurate, it is clear that legislation will be introduced to ensure that transferees will be

    ''offered either retention of the Local Government Pension Scheme or a broadly comparable scheme.''

I, for one, welcome that.

In response to the questions that he knew I would ask, the Minister has repeated that the regulations will potentially apply to any new staff—those were his words. Any new recruits in a company that has been accepted as an admission body into the scheme will potentially have access to the local government pension scheme. The question is how potential is ''potential''? As I said, the transferees covered by TUPE will be entitled to membership of the local government pension scheme under legislation; it will become statutory that they should have access to it or at least to a broadly comparable scheme.

In his letter of 26 March, the Secretary of State makes it clear that those whom the Minister calls new staff could be offered membership of the local government scheme, and a number of other opportunities are also offered. However, that will not be done through legislation, but under a non-enforceable code of practice dealing with new recruits working on local authority contracts alongside transferred staff.

Will the Minister give us a little information on how he expects the code of practice to be monitored? What effect does he think it will have on the number of new recruits entering the local government pension scheme, which the regulations will now allow them to do? Is he confident that a code of practice is the right way forward, or should there be a statutory requirement, as some would prefer?

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Prepared 16 April 2002