I hope this reassures the noble Baroness that the consultation of scheme managers and pension boards that she has proposed will be carried out without the need for Amendment 65 and that she will feel able to withdraw the amendment.

Baroness Donaghy: I thank noble Lords who have participated in this debate. There is a certain irony, particularly on Amendment 65. This was a very mild response to the Minister’s reply at Second Reading when I, like the noble Lord, Lord Whitty, asked for the agreement of the Government Actuary’s Department. He commented then that it did not wish to participate in what would be seen to be a political event, but wanted to maintain its independence. Amendment 65 was an attempt to recognise the reality of that and write in the involvement of scheme managers and scheme boards as a mild substitute. I am still sorry that the Minister is not willing to include that. However, until I have had a chance to study the official record of the Minister’s reply, I beg leave to withdraw the amendment.

Amendment 62 withdrawn.

Amendments 63 to 65 not moved.

5.45 pm

Amendment 66

Moved by Lord Whitty

66: Clause 10, page 6, line 33, at end insert—

“( ) This section does not apply to the fund valuations of the Local Government Pension Scheme.”

Lord Whitty: My Lords, Amendments 66 and 70 propose the exclusion of LGPS funds from the aspects of the Bill covered by Clauses 10 and 11 because those aspects are primarily related to the unfunded schemes. Clause 10 attempts to impose criteria commonly determined by the Treasury on valuations of all schemes covered by the Bill. Amendment 66 will clarify that Clause 10 is intended to apply to scheme level valuations only, thus preventing future misunderstandings, particularly in relation to the 89 different local government schemes. Without the amendment, there is a lack of clarity around the impact of fund valuations which are included in the Treasury’s scope within Clause 10. This lack of clarity surrounds the apparent inclusion

15 Jan 2013 : Column 632

of both local fund valuations and the national, notional model fund valuation under the control of Treasury regulations.

Individual fund valuations are currently undertaken by fund actuaries under parameters set out in different scheme regulations and assumptions are agreed with the individual fund. It would be a marked change if such valuations were to come directly under Treasury control. If it is intended to include only the notional model fund in the Treasury’s scope, this clause will need to be amended to prevent any further misunderstandings. There are concerns that the assumptions, data and models to be used as directed by the Treasury would not reflect what is currently being used at fund level, thus also undermining the validity of national modelling of costs. The easiest way out of this dilemma is to exclude the LGPS from the operation of those aspects of Clause 10.

Clause 11, which we will discuss later, covers the employment cost cap. The LGA and the trade unions involved in local government believe that this clause should be amended so that we again embed the agreement, reached by employers, unions and Governments, for a separate cost-management process. That agreement ensures that the principal stakeholders of the scheme are responsible for the control of cost management. There is concern that, as it stands, Clause 11 gives the Treasury discretion over how the cost cap is set. This could mean that there would be nothing to prevent the Treasury setting the cap in such a way that it would be easily exceeded, resulting in an increase of employee—and probably employer—contributions or a decrease in benefits. Amendment 70 would make this clear because it would exclude the funded local government pension schemes and funds from the effects of this clause and would better reflect the agreement, supported by the Government, that exists within the LGPS scheme. I beg to move.

Lord Newby: My Lords, I will start with Amendment 66. As previously discussed, the Bill makes provision for pension scheme valuations to be carried out in accordance with Treasury directions. This amendment seeks to clarify that the clause does not apply to valuations of the Local Government Pension Scheme. It would ensure that Treasury directions on valuations would not affect these valuations, which are carried out at the local level. In that respect, it would have a very similar effect to Amendment 62.

The arguments discussed under that amendment also apply here and Amendment 66 is unnecessary. I hope that the Government’s previous commitments, which I have just repeated, have made that clear. The Government simply do not intend to make directions affecting the valuations of individual LGPS funds. Alternative provisions for oversight of these valuations are made elsewhere in the Bill. The amendment is not needed.

Amendment 70 seeks to provide a specific exclusion for the LGPS from the employer cost-cap provisions in Clause 11. A robust cost-control mechanism, on a statutory basis, is still required for the LGPS, even though it is a funded scheme. Clause 11 should apply to the LGPS, as with any other scheme. The Government have had extensive discussions with the Local Government

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Association and the local government trade unions on this issue. As a result of these discussions, and to reflect the unique position of the LGPS as a funded scheme, the Government will give additional flexibility to the LGA and the trade unions in the management of scheme costs. The full details of these additional flexibilities will be finalised in consultation with key stakeholders and then enacted via the Treasury directions made under this clause and in the scheme regulations.

However, it is vital that the Government maintain a statutory backstop to provide reassurance to the taxpayer that action will always be taken if the cost of the scheme becomes unsustainable. This backstop, which will sit behind the cost-control arrangements that I have described, will apply in the same way as in other schemes. If the costs of accruing LGPS benefits, as measured at a national level by the GAD’s model fund, rise or fall by more than two percentage points, action will be required to bring costs back to the level of the cap, as in any other scheme. The requirement to consult on the action to be taken, with a view to reaching agreement, will apply as in any other scheme. If agreement cannot be reached, scheme regulations will set out a default action to be taken, as in any other scheme.

The cost-control mechanism is a key part of delivering good and sustainable pensions that will last for a generation. Without it, there is a risk that costs will once again spiral out of control and leave us with the choice of looking for higher contributions from, and lower benefits for, members or shunting the extra costs unfairly onto the taxpayer. Given these considerations, I hope that the noble Lord will feel able to withdraw or not move both amendments.

Lord Whitty: My Lords, as regards Amendment 66, I am pleased that the Government are prepared to be explicit in their assurances that they do not intend to set directions in relation to individual local government funds. If I understood the Minister clearly, the situation is to some extent similar to that in Amendment 62. A statement that “the Government do not intend” is not a copper-bottomed guarantee, as we know. Nevertheless, I suspect that it is as far as we will get in our consideration of the Bill, and I therefore thank him for that.

As regards Clause 11 on the employer cap, it is clear that in whatever circumstances there needs to be cost control. The point that I am making is that within the local government schemes it is the responsibility of their governance to ensure that cost control applies. There is a Treasury engagement with the national notional scheme and other provisions oblige the Treasury to ensure that the schemes do not get out of control, as the Minister indicated. In fact, the local government scheme has not got out of control. There have been occasions when individual funds’ investment policies have been less than ideal, which have led to short-term problems, but in no period has the local government scheme, which has operated for decades, got out of control.

Given the ongoing governance of individual schemes and the new provisions that we have just agreed in relation to the national scheme, there is little likelihood of the scheme getting out of control in any case. It is therefore otiose for the Treasury to be able to impose individual employer contribution caps in the crude way

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in which it may need to do so in relation to unfunded schemes that have historically—on the odd occasion and possibly now—got out of control. I regret that the Government do not recognise that. We will discuss employer caps in more general terms in a moment, but I should have thought that it would be less trouble to the Treasury, and would make it clearer that the responsibility to ensure that cost controls operate rests fairly and squarely on the shoulders of the stakeholders in the local government schemes, if they were exempted from the ability of the Treasury to impose its own cost controls.

However, that is clearly not the road that the Government are prepared to go down. I will therefore not press Amendment 70 and beg leave to withdraw Amendment 66.

Amendment 66 withdrawn.

Clause 10 agreed.

Clause 11 : Employer cost cap

Amendment 67

Moved by Lord Eatwell

67: Clause 11, page 7, line 10, at end insert—

“(4A) Treasury directions under subsection (3) may only be made after consultation with the persons or representatives of the persons who appear to the Treasury to be likely to be affected by the employer cost cap.”

Lord Eatwell: My Lords, as my noble friend Lord Whitty said, we turn to the general issue of employer cost caps. There is no doubt whatever that a cost cap is an appropriate measure with which we agree, as a means of ensuring that schemes are managed in a cost-efficient way. However, the way in which the cost cap is set is of crucial importance, not least because Clause 11(7) allows a scheme’s regulations to reduce members’ benefits or increase their contributions to meet a target cost for the scheme. How the cost cap is set is therefore important.

What does Clause 11 say? It states that the cost cap will,

“be set in accordance with Treasury directions”.

That is all. There is no requirement for the Treasury to consult or to relate cost considerations to any other set of criteria or measurement. The Treasury therefore has the widest possible discretion on how the cost cap could be set. This means, as my noble friend Lord Whitty suggested with respect to local government schemes—but it is true with respect to schemes in general—that there is nothing to prevent the Treasury setting the cap in such a way that it is easily exceeded, thus triggering the sort of reduction in benefits or increase in contributions anticipated in Clause 11(7).

All that the amendment seeks is to say, “Look, if you are going to change the cost cap, you should consult the people to whom this is being done, the people actually running the schemes, and you may find a degree of information that you otherwise did not have. You may find that measures can be taken, perhaps with mutual advice, to reduce the costs and

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bring them more into line with what is deemed appropriate”. The failure to consult on even the imposition of cost caps is a serious matter that reduces trust in the overall management of the scheme—and particularly in the Treasury’s role in the management of the scheme. All that the amendment says is, “Okay, the Treasury still has the role of setting the cost cap but it should at least consult before changing the cost cap or setting it in the first place”.

A point about this arose from our discussions in Committee on 9 January, when the noble Lord, Lord Newby, referred to the extension of Treasury regulations specifically to Scotland. He sought to reassure the Committee that the Treasury really was going to stay at arm’s length, as it has done in the past, and would not impose any rules on the Scots. They would have the opportunity, as they have now, to manage the details of their scheme, subject to this ultimate backstop in the sky that will never be used. I therefore ask the Minister specifically whether the cost-cap regulations, as set out in Clause 11, will apply in Scotland—in particular, to local government pension schemes. If they do, and there is no requirement for consultation, there is trouble ahead. This amendment will not only bolster the Government’s position with respect to the confidence with which their changes to public sector pension schemes are received, but will also secure the Government’s position with respect to any amendments to the cost cap in Scotland. I beg to move.

6 pm

Lord Newby: My Lords, we absolutely share the intention of the noble Lord, Lord Eatwell, behind this amendment. As I hope I can demonstrate, we have already made adequate provision in the Bill and in the way we are behaving to reassure him.

The first general point is that the Government set out general principles of consultation which will apply to Treasury directions, as to any another legislation. We have discussed these pension reforms extensively with all stakeholders and we will make clear commitments to do so in the future. These consultations will cover the cost cap and the details will be discussed with representatives of all the schemes via the normal scheme governance rules.

The key point is the existing provision in the Bill for consultation on the level of the cap in each scheme as part of the consultation on scheme regulations. The details of the cap will be set out in the scheme regulations, which will be subject to the consultation requirements contained in Clause 19, which states:

“Before making scheme regulations the responsible authority must consult such persons (or representatives of such persons) as appear to the authority likely to be affected by them”.

As with any other scheme changes, we are required by the Bill to consult on the cost cap.

The noble Lord asked whether the cost-cap regulations would apply to Scotland. The answer is yes, it would. The cost cap is clearly a reserved matter and the details about how it would work, which are covered by the scheme regulations, are in exactly the same position as all the other provisions of the regulations that will apply to Scotland as they do to the rest of Great Britain, but not Northern Ireland.

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Lord Eatwell: My Lords, I wish the Minister well in his negotiations with the Scottish Government in this respect. I recognise the general issue of the regulation set in Clause 19, but it is of such importance, as I will illustrate when we come to Amendment 68, that it would be of particular relevance to have the notion of consultation included at this point. However, I will elaborate that argument when I turn to Amendment 68. In the mean time, I beg leave to withdraw Amendment 67.

Amendment 67 withdrawn.

Amendment 67A

Moved by Lord Flight

67A: Clause 11, page 7, line 24, at end insert “, in accordance with guidelines to be provided by HM Treasury”

Lord Flight: My Lords, my five amendments to Clause 11 and one to Clause 20 are about fleshing out how the cost-control mechanism will work. I should like to make the point up front that I well understand the sense of the Government endeavouring to achieve broad agreements with the public sector trade unions in a territory which is thus long term. I pay tribute to the honest broker work done by the noble Lord, Lord Hutton, in examining the territory in such detail.

There is a third party in addition to public sector employees and the Government, which is self-evidently the taxpayer. With pay-as-you-go pensions, the theoretical actuarial deficit or surplus is essentially irrelevant—no doubt, the wrong rate of interest is used anyway in discounting the liabilities—as is, in a way, the percentage of GDP as a cost. As long as we have a pay-as-you-go system, what matters is the cash-flow deficit which other taxpayers have to cover. As I pointed out last week, it was quite surprising to see the OBR forecasting a cash deficit of £15.4 billion by 2016-17. Subsequent to that calculation, the OBR, in its report of 12 December, pointed out that expected longevity is six years longer than the assumptions made when the figures I have just quoted were produced. That implies at least an additional £7 billion of cash-flow shortage. As things stand, from 2016-17 onwards there will be a cash deficit of some £22 billion or £23 billion per annum to be financed by other taxpayers. That is not satisfactory and it certainly follows that there needs to be a cost cap that functions and can deal with all possible options if costs get further out of kilter.

As it stands, the Bill does not cover costs effectively. Most of the key points will be in subsequent regulations. Clause 11 provides a legal framework for the system of cost controls but with virtually no details. It appears to give the Treasury greater future flexibility and control if, for example, there is a change in the inflation index. It is unclear what will happen if no agreement is reached in the areas that are set out in Clause 11 to achieve agreement.

The details of the cost-cap mechanism are yet to be agreed. The Treasury has published a more detailed document, which establishes an employer cost cap in public service pension schemes. In a way it is that document that we should be discussing as it has more detail in it. The Treasury has also published an actuarial

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valuation of public service pension schemes. The actuarial valuation is of less fundamental importance. However, it is that which drives the cost-cap mechanism, so it is important in that context.

The Bill specifies that all schemes must set a cap expressed as a fixed percentage of pensionable pay but it does not define what the percentage might be. It is difficult for the legislation to be costed at present and it is somewhat inadequate to be reviewing the Bill without knowing the percentage caps that will be recommended. There are no details as to what will happen if there is no agreement to any required cost adjustments and there is no specific regard to the cash- flow deficit that is being achieved. The HM Treasury paper establishes an employer cost cap in principle. It sets out the mismatch between the contribution rate which employees pay and the rate controlled by the cap, but that, too, has not been addressed. The Treasury paper provides that the cap mechanism deals only with cost changes relating directly to active members and not to deferred or pensioner members or to cost increases arising from other forms of charge.

In a sense, my amendments are not of huge significance but they endeavour to put a few more clothes on the arrangements. Amendment 67A would provide the principle that, if no agreement was reached once a cap was exceeded, the guidelines provided by the Treasury would need to be applied. Amendment 67B would provide for the cap to include increases in pension payments if cost cuts were required. As with the private sector in many circumstances, it would introduce an element of fairness whereby pensioners would share some of the pain if the funding had reached the stage where the deficit was so great that it had to be cut back.

Amendment 69A would require an affirmative Commons procedure if reductions in pensions in payment were proposed. Given the lack of detailed prescription, Amendment 70A would provide for how the cost cap should operate. It would require the Office for Budget Responsibility to publish periodic appraisals of employer cost-cap arrangements, quadrennially for unfunded pay-as-you-go schemes and triennially for funded local government schemes. It would also require the publication of the schemes’ valuation reports. The key is requiring the reporting of the annual cash-flow shortfall for the next five years, with comparisons between the Independent Public Service Pensions Commission’s projections for benefit payments as a percentage of GDP and the actual anticipated percentage of GDP. Obviously, the point here is that if GDP growth is a lot less than expected or hoped, which is proving to be the case, that will alter that figure. The GDP figure is important as projections are based on better GDP growth reducing the overall cost of public sector pensions as a percentage of GDP.

Amendment 71A would remove any government responsibility—that is, taxpayer responsibility—for financial support for any local government pension scheme. I hope that this is not necessary but there could be a potential financial liability for trustees—the Minister has a trustee role—if a local government scheme were in trouble.

The Bill does not refer to the ongoing constitution of local government pension schemes or specific regulation

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thereof. The Local Government Pension Scheme’s national standards boards feature in the consultation but have not been picked up in the Bill.

Finally, Amendment 118A adds “pensions in payment” as a protected element in relation to a scheme for which proposals for retrospective change may be made by the responsible authority. I have said that I think that is a fair point if such extreme measures are needed.

The bottom line is straightforward. If the cash-flow deficit becomes an unacceptable burden on other taxpayers, there are only four ways—or a mixture of four ways—in which it can be controlled. One is obviously through an increase in employee contributions, but the sort of increase required is, I think, too large for this to be practical as a sole solution. A second is reducing the accrual of pension rights, on which Clause 11 focuses. The next is reducing pensions in payment, to which two of my amendments relate, and the fourth is increasing the pension age. Although that is addressed elsewhere in the Bill, it is not specifically addressed as one of the ways of controlling costs. The Treasury paper on the employer cost cap does not make any specific reference to reducing pensions and it excludes any impact of cost increases from other sources.

I hope that the Minister will respond that my amendments are not necessary and that empowering the Treasury to do anything covers virtually everything. However, I am quite surprised that the deal that has been done comes before both Houses with the sort of cash-flow deficit that it has at a time when it seems obvious that public spending will in due course need to be cut significantly more than it has been or the public finances will be in a complete shambles. Adding £23 billion per annum to public expenditure through the cash subsidy of public sector pensions seems to be a pretty tall order. Although I understand the position and interests of members of public sector pension schemes, I repeat that I am surprised that we have not arrived at a proposal which is, in essence, cash neutral.

6.15 pm

Lord Whitty: My Lords, I am afraid that I cannot really support the noble Lord, Lord Flight, in these measures. I point out to him that they are internally inconsistent and, indeed, contradictory. On the one hand, Amendment 71A effectively removes all responsibility from the Government in relation to any potential, unlikely though it may be, default on the Local Government Pension Scheme.

Lord Flight: That amendment is intended to remove any financial liability, not to remove any obligation to get it dealt with.

Lord Whitty: Just so, my Lords, but the legitimacy of the Government being able to lay down the detailed criteria which his other amendments and indeed many of the Government’s stipulations in the Bill provide in relation to the local government scheme relies on the fact that everybody assumes that the local government scheme has the Government as its underwriter of last resort and that therefore that underwriter has the right to intervene in what is otherwise the equivalent of a

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private scheme between private institutions; namely, local government and private trade unions. They are not central government creatures. They have certain statutory responsibilities but they are separate entities. Therefore, the legitimacy of the Treasury in any sense making directions, stipulations and interventions, as the Bill provides and as the noble Lord’s other amendments would consolidate or take further, depends, so far as concerns the local government scheme, on that implicit underwriting. It is hoped that it would never be called upon. Nevertheless, it is there in the background. The situation in relation to the other schemes is different, but Amendment 71A relates specifically to the local government scheme and I think that it is contradictory to everything else that the noble Lord was advocating and much of what the Minister is advocating.

Lord Newby: My Lords, I agree with the noble Lord, Lord Flight, about the need to keep the ballooning cost of public sector pension schemes under control. That is one of the key features of this Bill. The challenge, which I will come to in a minute, is that it is not straightforward, or indeed possible, to turn the tap off in pensions as you can in some other areas of expenditure.

I think everybody agrees that the cost cap is one of the key elements of these reforms and in order for it to be credible and robust we must ensure that costs will always be adjusted if the cap is breached. This can be done in a number of ways. While it would be preferable if all stakeholders were agreed on the way to do it, we have to allow for the possibility that agreement might not be reached. Clause 11 therefore specifies that scheme regulations must set out the steps to be taken to achieve the target cost if there is no agreement; there simply has to be a default adjustment.

The amendment seeks to strengthen this requirement by specifying that this element of scheme regulations must be in accordance with guidelines provided by the Treasury. This would ensure that the default action mandated in scheme regulations would be more consistent across schemes. I understand my noble friend’s intention in this amendment but it is simply unnecessary. Clause 3 sets out that the majority of scheme regulations made under the Bill require the consent of the Treasury before they are made. This requirement for Treasury approval will provide the assurances my noble friend is seeking because it covers the cost cap. He said in relation more generally to the cap that, for all the schemes, cash flow was more important than theoretical deficits and surpluses. At one level it is, but valuations of the theoretical surpluses or deficits are needed in the unfunded schemes because we have to plan how the Government will meet the cash-flow costs of the schemes over a long period going forward.

The intention behind Amendments 67B, 69B and 118A is to allow pensions already in payment to be altered, should action to adjust the costs of the pension schemes be required as a result of the employer cost-cap mechanism. In theory, this is one of the ways in which you constrain the costs. Unfortunately for the noble Lord, the Government cannot accept these amendments. Amendment 67B would allow pensioners’ accrued

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benefits to be reduced to reduce the cost of the scheme. As the Government have made clear, both in this House and in the other place, we are committed to protecting accrued benefits. Indeed, I hope to bring forward amendments on Report which entrench that view.

There are also significant legal hurdles to altering pensions in payment. In law, pensions in payment are owned by pensioners in exactly the same way as other possessions. Article 1 of Protocol 1 of the European Convention on Human Rights protects these possessions from any interference by the Government that is not only lawful but proportionate. We agree with that provision. Any Government attempting to alter pensions in payment would face a serious risk of legal challenge from pensioners arguing that their possessions should not be taken away in favour of protecting active members in employment from cost control. This would make it very hard for this amendment to work in practice even if we thought it was a good idea, which, sadly for the noble Lord, we do not.

Legal difficulties aside, it is right that those benefits that have already been paid for cannot be reduced. The ability to provide retrospective changes of this nature would mean significant uncertainty for all members of the schemes and potentially destroy any trust in them.

Baroness Noakes: Can the Minister clarify what he is referring to when he says that not being able to adjust existing accrued rights would also affect increases in pensions that were already in payment? One way of using the amendment proposed by my noble friend would be to constrain future increases through whatever indexation is in use at the time. Would it not be sensible for the Government to have that available to them for getting cost control? It is different from saying that you reduce the number of years accrued or the absolute amount of an accrued pension.

Lord Newby: It is, but I think that the same considerations apply. The employee or former employee in effect has a pension contract, which says that he or she is making a payment into a scheme; the employer is making a payment into a scheme and certain payments flow from that. Whether we are talking about rates of accrual or any other component of an agreed pension scheme, my understanding is that retrospective reductions—however they are done; even if we are not talking about a reduction but a freeze, it is a reduction of the implied or explicit rights already in the scheme—would fall foul of the legal issues I raised as much as any other component of the scheme.

I think that I had just about got to the end of what I was going to say on that amendment. Turning to Amendment 70A, I understand my noble friend’s intention in providing for an independent assessment of the operation of the cost-cap mechanism, and for transparency around the cost of public service pensions. However, the Government cannot accept this amendment. The role of the OBR is to improve the accountability of the Government by examining the state of the public finances and the long-term impact of government decisions. While it has a clear remit to analyse the long-term sustainability of the public finances, it has

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full independence in determining how to fulfil this obligation. The Government cannot specify that the OBR provides any specific data or analysis.

However, as my noble friend alluded to, much of the data that would be required under this amendment is already provided by the OBR. The OBR’s economic and fiscal forecasts, produced twice a year, have included a forecast of public sector pension payments and contributions over a five-year period. Indeed, the noble Lord referred to some of the figures it produced in November. For noble Lords who have not had the opportunity to look at them, I refer them to page 146 of the OBR’s Economic and Fiscal Outlook produced in December.

My noble friend’s amendments would also include provision for the OBR to pass judgment on the effectiveness of the cost-cap mechanism. This would change the role of the OBR. It is not a policy-based organisation and must be seen as impartial and independent. For the OBR to be seen to advocate or arbitrate on policies would draw it into political debate and could undermine this independence. If you allow the OBR to start giving advice or arbitrating on policies across the piece, that would completely undermine the role set for it. For that reason, policy on the cost cap, and public service pensions more broadly, must remain the responsibility of the Government.

Amendment 71A seeks to prevent the pension liabilities of local authorities falling to the Government. I should start by highlighting that the Secretary of State for Communities and Local Government is not a trustee of the pension scheme. Rather, the Secretary of State is the person who may make regulations to establish the scheme. Local authorities are responsible for managing and administering both their own budgets and the Local Government Pension Scheme. The authorities, not the Minister, are responsible for their liabilities under the scheme. Legislation requires local authorities to establish and manage pension funds and then set the appropriate level of employer contribution rates to ensure that those funds are able to meet the liabilities of the scheme. In addition, the new requirements in Clause 12 of the Bill will provide additional scrutiny of LGPS fund valuations. There are, of course, safeguards in place.

Baroness Noakes: What the Minister is saying is very helpful. Can he say explicitly that what the noble Lord, Lord Whitty, said—about there being a broad assumption that the Government stood behind local authority pension schemes—is wrong?

6.30 pm

Lord Newby: My Lords, I shall write to the noble Baroness if I get this wrong—and the noble Lord, Lord Whitty, will shake his head or nod depending on whether or not I get it right—but I think that the responsibility for meeting obligations under local authority pension schemes falls to taxpayers within the local authority areas covered by the schemes.

Baroness Noakes: The point that the noble Lord, Lord Whitty, was making was not to dispute the basic legal position but to say if that were defaulted upon,

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there is an assumption underpinning these schemes that the Government stand behind them. That is why I asked the Minister to clarify his view of that.

Lord Newby: I will be very happy to write to the noble Baroness about it but the whole purpose of the cost cap is to ensure that we do not get into that mess. Given the experience of the noble Lord, Lord Whitty, in this area, I am very reassured by his confidence that the local government schemes will not get into this mess. The reason why the cost cap covers local government schemes is that, however unlikely it is, we feel that we need a method of dealing with them in this extremely unlikely eventuality.

Lord Whitty: My Lords, I think we all hope that it is an extremely unlikely eventuality and I genuinely believe that it is an extremely unlikely eventuality. Standing behind this is a slightly theological but nevertheless psychologically important matter. I suspect you cannot find it anywhere in statute but, as the noble Lord, Lord Newby, says, the ultimate responsibility of any failure of a local government scheme would rest, in some context or other, on taxpayers, and it therefore becomes the Government’s responsibility. I hope that the noble Lord can write to me as well, and perhaps to other colleagues in the House. I expect it will be quite a difficult letter to write.

Lord Newby: We look forward to that intellectual exercise. I think that I had just about dealt with Amendment 71A. Amendment 118A, to my mind, is grouped with Amendments 67B and 69A. They all relate to the same point about being able to constrain payments. All the considerations that apply to Amendment 67B and 69A apply to Amendment 118A as well.

Lord Flight: My Lords, the Minister has done a pretty effective job in removing the practicality of my amendment. I will just make the point about pensions in payment. I accept the argument that a contract is a contract, but for new people joining the public sector, a term of their employment could be that their pension right includes the possibility that, if their pension arrangements were in a mess, their pension could be reduced. In the case of an existing contract, I grant that it cannot be removed.

To the extent that it is possible, there ought to be broad similarity between what happens in the private sector and what happens in the public sector. Obviously, in the private sector, if a final salary scheme gets into a mess and the employer cannot finance the deficit, even though it goes to the Pension Protection Fund, people will not necessarily continue to get their full pensions with inflation increases and so forth. I think it is worth looking at seeking to design a scheme that is reasonably fair on both sides. I beg leave to withdraw the amendment.

Amendment 67A withdrawn.

Amendment 67B not moved.

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Amendment 68

Moved by Lord Eatwell

68: Clause 11, page 7, line 26, at end insert “, provided that they do not have the effect of reducing members’ accrued benefits”

Lord Eatwell: My Lords, we return to the issue that I anticipated in my remarks a few moments ago, of the relationship between the cost cap and the benefits to be received.

I remind the House that Clause 11(7), in referring to the cost cap, says that the steps taken in conditions where the cost cap is not met,

“may include the increase or decrease of members’ benefits or contributions”.

Clause 11(7) is entirely unqualified in that respect. It could lead to an increase or a decrease in benefits. As currently drafted, there is absolutely nothing to prevent accrued benefits from being reduced. Indeed, one of the main concerns of the noble Lord, Lord Hutton, about the Bill, which he expressed in written evidence, is that it does not offer proper protection for accrued rights.

Interestingly enough, there is a Treasury paper on the issue of the employer cost cap. On page 6 of that paper it says:

“There is no intention to make changes to benefits already accrued via the cost cap mechanism”.

The very statement that there is no intention to reduce accrued benefits demonstrates that the clause as drafted includes the possibility of the reduction in accrued benefits. As we all know, in politics, the phrase “we have no intention” means “we are going to do it in due course”.

Surely the Minister can have no objection to this amendment, as he has promised that the Government will not reduce any accrued benefits. What is more, this amendment would not change the Bill in any way that is detrimental to the Government. It would be of enormous benefit, providing millions of public service workers with the confidence that the accrued benefits of their pensions are safe. After all, the Government may declare that they have no intention of using Clause 11(7) to reduce accrued benefits but, as we have said several times this afternoon, it cannot bind future Administrations. If the Minister really wants to ensure that accrued rights are safe, why not include this amendment in the Bill so that if the cost cap were ever to be used to attack accrued benefits, any future Administration would have to come to Parliament to amend the legislation?

I stress that this is not a repeat of our discussion about retrospection in Clause 3(3)(c). This is a different issue. It speaks specifically to a statement that benefits might be reduced and does not qualify which benefits might be reduced. It would be enormously helpful to the Government if they accepted this amendment and made it clear that not only do they have no intention but that they intend to legislate to ensure that members’ accrued benefits are not reduced, let us say, unintentionally by the cost cap coming in to exercise its role in maintaining efficiency in the provision of pensions. I beg to move.

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Baroness Donaghy: I will speak briefly in support of my noble friend Lord Eatwell. I think I said at Second Reading that the issue of accrued benefits is a deal-breaker as far as the negotiations are concerned. It is about keeping one’s word. Enshrining this in the Bill would do a huge amount to reassure public servants, particularly those in Scotland who have not yet been properly consulted. I believe that if a public servant sat down and did an audit of all the discussions that we have had on Committee days one and two, they would see the Government’s unwillingness to put in the Bill all the areas in those agreements, saying, “No, we do not think that this, this or this needs to go in” and so on. I realise that this Bill is a legal framework but we are talking about the confidence that people can have in their pensions in the future.

We should not forget that it is not only Governments that can opt out of these things; individuals will make assessments about their own benefits and welfare and future, and it is very important for all our sakes that we maintain some kind of stability in this turmoil. If I can use a pun, the accrued failure of the Government to put any real assurances in the Bill might be viewed in a negative light by a lot of people who are very involved in this debate.

Lord Newby: My Lords, I will respond first to the noble Baroness, Lady Donaghy, before returning to the specific issue raised by the amendment. The vast bulk of the provisions that will affect people are not in the Bill; they are under the schemes. I have circulated the draft Civil Service scheme, an extremely long and detailed document that has in it most of the things—the headlines—that people will look at in determining whether they think the pensions they will get are fair and reasonable. I hope that those who worry that the Bill does not cover a lot of the things that they want covered can be reassured, as I have sought to reassure the House, that in the vast bulk of cases these points will be in the regulations, which obviously have the same force as the Bill.

With regard to Amendment 68, I will not repeat at great length that we have no intention to do what the amendment seeks to prevent. I do not need to refer the noble Lord, Lord Eatwell, to the Treasury paper because he has read it. I do not need to remind people about the UK and European legislation that would limit the Government’s freedom to do what the amendment prevents because I have already done so. What I will say is that we are committed to giving further consideration to the protection of accrued benefits, of all sorts, in all circumstances. I plan to have amendments to that effect ready for Report; they will cover this point along with accrued benefits, so I hope that is a reassurance to the noble Lord.

Lord Eatwell: My Lords, I am grateful to the Minister for that. Of course, he made that commitment at the previous day of Committee when we were discussing the whole issue of retrospection. I am delighted to hear that the amendments he will bring forward—relatively soon, I hope, so that we will have the opportunity to examine them carefully before we discuss them on

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the first day of Report—will also cover this particular eventuality. On the basis of that assurance I beg leave to withdraw the amendment.

Amendment 68 withdrawn.

Amendment 69

Tabled by Lord Eatwell

69: Clause 11, page 7, line 30, leave out “negative” and insert “affirmative”

Lord Eatwell: My Lords, this is again a belt-and-braces amendment. If the Government had not made a commitment to protect accrued benefits in an appropriate way, including benefits in general as referred to in Clause 11(7), we would want any change in the cost cap and the consequences of such to be considered on the basis of an affirmative Motion. Given that the Minister has made a commitment to bring forward amendments to deal with the issue of accrued benefits I will not move Amendment 69.

Amendment 69 not moved.

Amendments 69A to 70A not moved.

Clause 11 agreed.

6.45 pm

Clause 12 : Employer contributions in funded schemes

Amendment 71

Moved by Lord Newby

71: Clause 12, page 8, line 20, leave out subsection (8)

Amendment 71 agreed.

Clause 12, as amended, agreed.

Amendment 71A not moved.

Amendment 72

Moved by Lord Newby

72: Before Clause 13, insert the following new Clause—

“Information about benefits

(1) Scheme regulations must require the scheme manager for a scheme under section 1 which is a defined benefits scheme to provide benefit information statements to each person in pensionable service under the scheme in accordance with this section.

(2) A benefit information statement must include—

(a) a description of the benefits earned by the person in respect of his or her pensionable service, and

(b) such other information as Treasury directions may specify.

(3) The information included in a benefit information statement must comply with such requirements as Treasury directions may specify.

(4) A benefit information statement must be provided—

(a) no later than the relevant date, and

(b) at least once in each year ending with the anniversary of that date.

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(5) The relevant date is the last day of the period of 17 months beginning with the day on which scheme regulations establishing the scheme come into force.

(6) A benefit information statement must be provided in such manner as Treasury directions may specify.”

Lord Newby: My Lords, Amendment 72 delivers on the Government’s commitment to come forward with an amendment to require scheme members to be provided with information about their pension benefits. Amendment 83, in the name of the noble Lord, Lord Eatwell, is also in this group and is based on an amendment, tabled in another place, which we believe is not quite right for a number of reasons. I hope the noble Lord will be satisfied that Amendment 72 is an appropriate alternative.

The new clause will apply to each public service pension scheme made under Clause 1 of the Bill and, by virtue of Amendment 137, all new public body pension schemes. It requires that every active member of the schemes must be regularly provided with information about the pension benefits they have earned. The clause allows for this to be done in a number of ways, including via electronic media. The first statement must be provided within 17 months of the new schemes coming into effect and at least annually thereafter. Like me, noble Lords may wonder why 17 months has been chosen as the period in the amendment. The reason is that 17 months would take us to September of next year, which would mean that scheme members would have this information before they needed to submit their tax return. This is relevant only to high- end earners, who may need to take account of the contributions going into their schemes for tax purposes. This period will ensure that the schemes have the correct infrastructure in place to carry out this commitment. They can, of course, provide statements earlier where they are ready.

In developing the clause we have been mindful of the obligations that already apply to all occupational pension schemes, including the public service schemes. Regulations made under Section 113 of the Pension Schemes Act 1993 set out various information requirements. These are known as the disclosure regulations and include requirements to provide deferred members with information about the benefits they have earned up to the point at which they leave the scheme. As this legislation already requires information to be provided to those members, it would not be appropriate for our amendment to address them. The disclosure regulations also require defined benefit pension schemes to provide information to active members, but only upon request. The effect of our amendments will be to require each of the public service pension schemes to go further than this. Once they are up and running, information will automatically be provided to all active members at least once a year.

The disclosure regulations specify the information that all schemes must provide on request, how it may be provided and certain detailed points about how it must be calculated. Our policy is for the new benefit statements provided under this clause to be produced to the same standards. Rather than mirror the requirements of the disclosure regulations in the Bill, our amendment provides for Treasury directions to

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specify the information that must be provided to members. We have taken this approach because we are mindful that the disclosure regulations themselves may change over time and we will want the public schemes to keep in step. In fact, the regulations governing the disclosure of information in occupational pension schemes are currently under review. We have set out a commitment to consult on those provisions later this year.

We propose to retain parity between the Bill provisions and the disclosure regulations wherever appropriate. It is important that members are given consistent and complementary information about their pension scheme benefits. This approach is also consistent with that we have taken elsewhere in the Bill in extending the role of the Pensions Regulator to the public schemes. The Pensions Regulator will also have a role in overseeing the provision of benefit information to members of the public schemes.

Amendment 86 adds annual benefit information to the list of matters that the regulator will issue guidance on. Amendments 84 and 87 also include the new clause in the areas that the regulator will oversee and on which they can take enforcement action should schemes fail to comply with their duties. The amendments meet the commitment that we made on making information available and I hope that noble Lords will agree with them.

Lord Eatwell: My Lords, I listened carefully to what the noble Lord had to say and I am cognisant that this is a response to the arguments made in another place by my honourable friend about the disclosure and availability of information. My Amendment 83, which is in this group, also seeks to enhance communication to members. I will not go into in any great detail the argument about why that should be done because the noble Lord has already said why it should be done. But I would be grateful if he could set out what are deemed to be the deficiencies of Amendment 83 so that I have the opportunity to study his arguments between now and Report.

Lord Newby: My Lords, the main difference between the two is that the noble Lord’s amendment sets out what information would be included in the benefit statement. We are saying that we wish the information to mirror the disclosure regulations that apply to private sector schemes. These will change from time to time. They have improved over the years and become less opaque. They may change again and we want the information that people under public sector schemes receive to keep up with what is, if not the gold standard, the best practice under those regulations.

We will provide information that mirrors the regulations, which may change. The noble Lord’s amendment is very prescriptive about what the information is. I have not gone through it to see what it misses, if anything, beyond what we are planning, but I hope that when he reads what I have said he will find that we are covering rather more than he wants covered and enabling a certain amount of flexibility to meet best practice.

Amendment 72 agreed.

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Clause 13 : Information

Amendment 73

Moved by Lord Davidson of Glen Clova

73: Clause 13, page 8, line 26, leave out subsection (1) and insert—

“(1) The Treasury shall make directions requiring the scheme manager or responsible authority of a scheme under section 1 to publish scheme information.

(1A) The Treasury may make directions requiring the scheme manager or responsible authority of a scheme under section 1 to provide scheme information to the Treasury.”

Lord Davidson of Glen Clova: My Lords, this amendment makes it a requirement for the Treasury to make directions for the publication of scheme data. It retains the permissive nature for Treasury directions in respect of data that are for the Treasury’s own use.

In his report, my noble friend Lord Hutton condemned the data presently available for public sector pension schemes. His report stated that,

“the Commission has concluded that at present the availability of such data is at best patchy: some key data is not available, at least not publicly. This needs to be improved”.

My noble friend Lord Hutton stressed the need to improve the quality and accessibility of scheme data so that comparison can be made between schemes and individual administrators. With better data, comparison could be made in respect of administration costs, membership profiles and, for the 89 funded local government pension scheme funds that manage more than £150 billion worth of assets, with a return on investments, which noble Lords will doubtless consider rather important.

Comparison, as in many areas, allows good practice and permits weak performance to be identified. Once identified, rectification may then be put in place in relation to that performance. It also enables good practice to be distributed throughout the various funds. In terms of accessibility, my noble friend Lord Hutton recommended that data be published as far as possible to common standards and methodologies and collated centrally. Currently, there is no central, publicly available depository of information.

Clause 13(1) of the Bill is permissive and thus fails to ensure that the Government will implement any changes to the current system for collating public service pension scheme data. Given the importance of full and reliable data in assessing the performance of public sector pension funds, that is not a desirable position.

Amendment 74 would replace the permissive language of “information may relate” with the compulsory language of “information shall include”. Over the decades, the argument about “may”, “maybe”, “must” and so on in context has been a fruitful source of income for many lawyers, and I declare my interest as a lawyer. However, in trying to get clarity in this important area, I suggest that the option that means either you do it or do not do it should be replaced with a mandatory position. The permissive nature of the language is not adequate in this area. My noble friend Lord Hutton in his

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report was very clear that current pension scheme data were not adequate—in his words, “at best patchy”—and some key data were not publicly available.

The report stresses that data should enable the assessment and scrutiny of performance, viability and key facts associated with the different schemes. This cannot be done unless the data are placed in the public domain. I suggest that the Bill should ensure that key data are published and not merely list types of data that the Treasury “may” include should it decide to make directions under Clause 31.

The Minister has frequently referred to flexibility and in many areas that is very useful, but in certain other areas such as this it can be termed, in my noble friend Lord Hutton’s phrase, patchy, which is undesirable in this area. The amendment does not set out to establish every detail of the information to be published but to provide a framework for information requirements.

In Amendment 75 there is an effort to specify that scheme information should include full valuation reports. Again, my noble friend Lord Hutton’s report specifically stated that full valuation reports should be published by our public service pension schemes, yet they are not mentioned in the types of scheme information in Clause 13(3). Without the publication of full valuation reports, comparison between schemes, as noble Lords will immediately appreciate, becomes very difficult. Proposed new subsection (3A) would allow the Treasury to require scheme information to be published to common standards to make it easier to collate. That in turn would help better comparisons between schemes. This is a permissive amendment.

Amendment 76 would require the Office for Budget Responsibility to report at regular intervals on the long-term impact of public service pension schemes. As my noble friend Lord Hutton stressed, there is a need for fiscal policy to take account of the sustainability of public service pension schemes. In that regard, I assume that the view is entirely common. For fiscal policy to be properly informed in relation to the cost of future and past pension promises, there needs to be accurate and independent analysis of the long-term impact of public sector pension schemes on public finances. That is why my noble friend Lord Hutton recommended that the Office for Budget Responsibility should provide a regular published analysis of the long-term fiscal impact of the main public service pension schemes, including the Local Government Pension Scheme. This amendment would ensure that fiscal policy is better informed, and that policymakers and the public are more regularly and reliably informed about the cost of public service pension schemes. Again, one assumes that that is a common objective on all sides of the House.

The Minister in another place said that the amendment was unnecessary, given that the Office for Budget Responsibility already has a responsibility to examine and report on the sustainability of public finances. From this side we suggest that this amendment be accepted, because it facilitates the understanding of the various trends and developments that may take place within the economy that have an impact on fiscal policy, which in turn can have an impact on pension matters. I beg to move.

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7 pm

Lord Newby: My Lords, as the noble and learned Lord, Lord Davidson of Glen Clova, has said, in his final report the noble Lord, Lord Hutton, set out the need for improved transparency of information concerning the public service pension schemes. His report highlighted the range of information that is currently published, including data published by the Office for National Statistics, the OBR, the Treasury and the schemes themselves. However, as he explained, despite this range of data there is no centrally collated information that allows the total impact of the schemes to be readily assessed. Also, differences in the presentation and underlying methodologies and assumptions hamper comparisons between the schemes and, for local government, the funds within them.

Amendments 73 to 75 seek to ensure that Treasury directions require scheme information to be published and specify what that information must include. This is distinct from the current permissive drafting of Clause 13. Greater transparency is absolutely essential if we are to invite analysis and debate on the performance of the schemes. I can reassure the noble and learned Lord that we are committed to improving the information that is made available. It is our intention to use a central direction to ensure that such publications are helpful and consistent across the schemes, and to set out what information will be available—which I think goes a long way towards what the noble and learned Lord is seeking to achieve.

Amendment 74 seeks to require that all information set out in Clause 13(3) is published. However, that list is not intended to be a fixed or exhaustive list of the matters that schemes will be required to publish. Rather, it is intended to set out the core areas of scheme information that the detailed requirements will be built around. The list provides a starting point. The Government are committed to greater transparency, but it is fair to say that there is more work to be done to identify what information should be published, what common methodologies and assumptions should underpin it, and how best to collate or co-ordinate its publication. Once we are doing it on a more systematic basis, we will also want to change or amend the information that is published in the light of comments that are made. I do not necessarily think that even the Treasury will get it absolutely right first time so it would not be helpful to determine a mandatory list now, when information requirements will undoubtedly change as a result of comments made on our first attempts, and over time.

I hope that I can assure the noble and learned Lord that Amendment 75 is not necessary. Clause 13 already allows for Treasury directions to require information to be provided in a particular format. That is the key. Further, Clause 13(3) is not exhaustive, and already allows for schemes to be required to provide or publish full scheme valuation reports.

Finally, I turn to Amendment 76. The OBR already includes the impact of public service pensions in its spring and autumn Economic and Fiscal Outlook reports and in its July Fiscal Sustainability Report. The OBR’s role is established by the Budget Responsibility and National Audit Act 2011. Section 4 of that Act places

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a duty on the OBR to consider and report on the fiscal sustainability of the public finances, of which the public service pension schemes clearly form a significant part. As we discussed on an earlier amendment, the OBR has already started doing this. The report it produced at the time of the Pre-Budget Report in December does exactly, I think, what the noble and learned Lord is seeking to achieve. The OBR clearly intends to carry on doing that, so that amendment is not necessary either. I urge the noble and learned Lord to withdraw this amendment.

Lord Davidson of Glen Clova: I am grateful to the Minister for his clarification on a broad number of areas. One is gratified to discover that we are ad idem in terms of our objectives. I will consider what has been said by the noble Lord and I congratulate him, again, on the openness of Her Majesty’s Treasury to change, which is always useful. I will reflect on what has been said and will seek to withdraw this amendment.

Amendment 73 withdrawn.

Amendments 74 to 76 not moved.

Clause 13 agreed.

Clause 14 : Records

Amendment 77

Moved by Lord Newby

77: Clause 14, page 9, line 5, leave out from “State” to end of line 8

Amendment 77 agreed.

Clause 14, as amended, agreed.

Clause 15 : Regulatory oversight

Amendments 78 to 81

Moved by Lord Newby

78: Clause 15, page 9, line 15, leave out “Part 1 of”

79: Clause 15, page 9, line 18, leave out “that Part of”

80: Clause 15, page 9, line 19, leave out subsection (3)

81: Clause 15, page 9, line 25, leave out “subsections (2) and (3)” and insert “subsection (2)”

Amendments 78 to 81 agreed.

Clause 15, as amended, agreed.

Amendment 82

Moved by Lord Davidson of Glen Clova

82: After Clause 15, insert the following new Clause—

“Review of standards of administration

(1) Within six months of the day on which this Act is passed, the Treasury shall commission an independent review into the standards of administration in public service pension schemes and how those standards could be improved.

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(2) The Treasury shall lay before Parliament the report produced by the review as soon as reasonably practical after the report has been published.”

Lord Davidson of Glen Clova: This amendment would require Her Majesty’s Treasury to commission an independent review into the standards of administration in public service pension schemes. I refer again to my noble friend Lord Hutton’s report, recommendation 22 of which expresses the desire that:

“Government should set what good standards of administration should consist of in the public service pension schemes based on independent expert advice. The Pensions Regulator might have a role, building on its objective to promote good administration. A benchmarking exercise should then be conducted across all the schemes to assist in the raising of standards where appropriate”.

The proposed new clause implements this recommendation by ensuring that the Government will receive independent advice on how standards of administration can be improved in public sector schemes. It also ensures that independent review will be publicly accessible, so that its implementation may be scrutinised and the recommendations easily accessed and implemented by schemes that wish to do so.

The Bill makes provision for the regulator to issue codes of practice at paragraph 14 of Schedule 4, but we say that this provision does not require the regulator or another independent expert to carry out, first, a review and then set out clear principles regarding good administration in public sector pension schemes. Were that to be done, it would, of course, enable these codes to be informed. An independent review would identify areas for improvement in the inevitable drive for better administration. As well as identifying best practice, it could inform future codes of practice and look at the possibility of streamlining and combining the administrative functions of schemes. In his report, my noble friend Lord Hutton observed that the commission,

“received suggestions and evidence from a number of commentators that public service pension schemes offer scope for streamlining and combining of their administrative functions”.

It is suggested that via this amendment one could examine ways in which the Local Government Pension Scheme in particular might benefit from economies of scale. It follows, therefore, that there is potential for sharing administrative costs and services, and creating broad contracts. I beg to move.

Lord Newby: My Lords, we have already taken steps in the Bill to ensure the effective and efficient administration of public service pension schemes. Until now, the schemes have been exempt from much of the legislation that applies to the governance and administration of other occupational pension schemes, but through Schedule 4 we are significantly extending the administration requirements on public service pension schemes. I would not necessarily commend Schedule 4 as it is extremely detailed, but to this extent I would do so because it sets out how we are changing the current arrangements by extending the administration requirements.

The schedule also extends the role of the independent Pensions Regulator in regulating the governance and administration of public service schemes, bringing it

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into line with the regulator’s role in regulating all other occupational pension schemes. As the noble and learned Lord has pointed out, the regulator will issue codes of practice relating to the responsibilities of public service schemes and be able to enforce compliance where schemes do not meet the requirements of the legislation. We are also taking steps to improve the transparency of the schemes and their governance by introducing pension boards, as we have discussed, as well as scheme advisory boards. Taken together, our changes will deliver the commitment to establish and monitor standards of administration in the public schemes.

The burden of the noble and learned Lord’s amendment is that before the codes can be introduced you need to have a review, and indeed he talked about an independent review. We think that we have dealt with the point about independence by the fact that the regulator is independent. Further, you cannot produce codes without reviewing what is already there. You do not simply sit down with a blank sheet of paper and not look at what already exists in terms of best practice elsewhere in the industry. Our expectation is that the Pensions Regulator will of necessity have to review existing best practice before it can produce its own codes. For those reasons, we think that the amendment is unnecessary. We think that we are going to do what the noble and learned Lord is seeking to achieve, but we do not need a belt-and-braces approach in the form of further cover in the Bill to ensure that it actually happens.

Lord Davidson of Glen Clova: Again, I am obliged to the Minister for his clarification. However, if this side has a prejudice it is that it is always better to be better informed. I will reflect on the Minister’s words to see whether what he has said matches our common objective. Once again, I respectfully seek leave to withdraw the amendment.

Amendment 82 withdrawn.

Amendment 83 not moved.

Schedule 4 : Regulatory oversight

Amendment 84

Moved by Lord Newby

84: Schedule 4, page 27, line 15, after “information)” insert “, (Information about benefits) (information about benefits)”

Amendment 84 agreed.

Amendment 85

Moved by Lord Davidson of Glen Clova

85: Schedule 4, page 29, line 36, leave out “may” and insert “shall”

Lord Davidson of Glen Clova: This amendment would provide that the regulator must issue codes of practice by changing the permissive expression “may”. As I said earlier, when one comes across this language, one is always presented with an option either to do it or not, and plainly in this context it is not an enabling use of the word “may”. It does not suggest “shall”, so

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we suggest in this amendment that “shall” would be the better way of proceeding. That is because the desirability of codes of practice must be common, given what the Minister has already said.

As it stands, Schedule 4 allows but does not require the Pensions Regulator to issue codes of practice for public service pension schemes. Under the schedule, these codes of practice would include guidance in relation to the exercise of functions and standards of conduct and practice. Plainly, the intention of these codes is to bring about high standards of scheme governance and administration. We say that there should be a clear requirement that the codes are produced by the Pensions Regulator rather than leaving this as a potentially permissive provision. I believe that the Minister in another place said that this amendment was not necessary, but we take the opposite view in that it introduces a compulsitor on the regulator to make these codes of practice clear to all.

I should say immediately that there are many aspects of Schedule 4 that this side welcomes, specifically the requirement in paragraph 19 that pension board members must have appropriate knowledge and understanding to enable them properly to exercise their functions, and the requirement for public service schemes to establish internal controls, as set out in paragraph 21. However, we are concerned that the regulator is not obliged by this Bill to produce codes of practice for public service schemes. I beg to move.

7.15 pm

Lord Newby: My Lords, it would be an interesting little exercise to look at how many hours of your Lordships’ time is spent debating across the Floor of the House whether to use “may” or “shall”, and vice versa. In my view, they are certainly too many.

As we have just debated, Schedule 4 sets out the new role for the Pensions Regulator in providing regulatory oversight of the administration and governance of public service schemes. A key part of that new role is to issue codes of practice. These codes set out in more detail the legal requirements on schemes and how to fulfil them. The regulator already issues codes of practice for private sector schemes and the drafting in this Bill closely mirrors the drafting in the Pensions Act 2004. These amendments would turn the overarching power for the regulator to issue codes of practice into a duty.

Proposed new Section 90A(2), set out in paragraph 14 of Schedule 4, already imposes a duty on the regulator to issue codes of practice in relation to the 11 matters listed in that provision. This sits under the broader power in proposed new Section 90A(1) to issue codes of practice in relation to the exercise of functions under pensions legislation and the standards of conduct of those exercising these functions. The result is that as currently drafted, the regulator will already be under an obligation to issue codes in relation to certain areas of pensions legislation. The power in new Section 90A(1) allows the regulator to issue codes on other areas in addition to those already required by new Section 90A(2).

New Section 90A(2)(j) provides, as does existing Section 90 of the Pensions Act 2004 on which this provision is based, for the Secretary of State for Work

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and Pensions to add to the list of matters in relation to which codes of practice must be issued. I can therefore assure noble Lords that the regulator will be obliged to issue codes of practice for the public service schemes. These are a key part of implementing the independent oversight and regulation of public service schemes, as recommended by the noble Lord, Lord Hutton.

Amendment 91 in this group relates to codes of practice in Northern Ireland. However, those provisions are all proposed for deletion by Amendment 90, which has already been debated. However, on the main point, I hope that with the reassurances I have given, the noble and learned Lord will feel able to withdraw the amendment.

Lord Davidson of Glen Clova: If the Minister is surprised at the amount of time spent by this Chamber in debate on the potential differences between “may” and “shall”, perhaps he should reflect on the decades that are spent in court having to consider and implement what this House and the other place have actually traduced. I am endeavouring to reduce by a few decades debate in the pensions area on the use of “must” or “shall” instead of “may”.

It is clear that the Government accept that there is a duty for the codes of practice and we welcome that. The difference between us is how far these codes of practice must go. The Minister takes the private sector as the comparator. Sometimes it might be an idea for the public sector to aspire to a slightly higher standard. However, given that no doubt difficult proposition for the coalition Government, I beg leave to withdraw this amendment.

Amendment 85 withdrawn.

Amendments 86 to 90

Moved by Lord Newby

86: Schedule 4, page 30, line 27, at end insert—

“( ) the discharge of duties imposed under section (Information about benefits) of that Act (information about benefits);”

87: Schedule 4, page 31, line 7, after “information)” insert “, (Information about benefits) (information about benefits)”

88: Schedule 4, page 32, leave out lines 28 and 29

89: Schedule 4, page 32, line 31, leave out from “Act)” to end of line 33

90: Schedule 4, page 33, line 5, leave out from beginning to end of line 2 on page 39

Amendments 86 to 90 agreed.

Amendment 91 not moved.

Schedule 4, as amended, agreed.

Clause 16 : Restriction of existing pension schemes

Amendment 91A

Moved by Lord Davidson of Glen Clova

91A: Clause 16, page 9, line 34, leave out subsection (1) and insert—

“(1) New scheme regulations made under sections 1 and 3 shall replace existing schemes’ current regulations and shall take effect on the amendment date.

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(1A) Following the implementation of new scheme regulations under subsection (1), benefits shall only be provided in accordance with those new regulations.”

Lord Davidson of Glen Clova: Amendment 91A and the other amendments in the group are designed to address the concerns with Clause 16, in particular relating to the Local Government Pension Scheme, as it allows for the closure of each of the 89 funds that make up the LGPS.

Our concern is that allowing closure could have a number of unintended consequences. It was mentioned in Committee that local government schemes are exempt from Section 75 of the Pensions Act 1995, so “closure” would therefore not trigger debts under that section. But that is by no means the only risk of the use of the operative word, “closure”.

There are thousands of employers in local government pension funds, each of which has individual admission agreements governing the terms of the employer’s participation in the fund. Those agreements are not necessarily in standard form, meaning that there are potentially thousands of different admission contracts. It is likely that at least some of these agreements will set out various powers for the local authority in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. This could put a massive strain on participating employers and has the potential to put some of them out of business.

The Minister in the other place assured the House that the Government will not close the Local Government Pension Schemes but, respectfully, this misses the point that the Bill allows local authorities to close their funds and the Government cannot prevent them doing so. For their own reasons, local authorities may wish to close schemes in order to crystallise debts from certain employers. The Government have insisted that the word “closure” be used in Clause 16 but this does not in fact mean closure. We suggest that this might be approached differently, to avoid this explanation.

Closing a pension fund means that there are no longer any active members in the scheme but that the scheme continues. However, the Government insist that in the context of Clause 16, “close” does not mean “close”. Rather, it means that no benefits will be provided under the scheme. That is what I understand the position to be.

As Clause 16 is currently drafted, the word “closure” is not given the different meaning that the Government contend. Clause 16(1) provides that,

“no benefits are to be provided under an existing scheme ... after the closing date”.

That is not sufficient to change the word “closure” from its accepted meaning in pensions law.

If the Government want the word “closure” to have this different meaning, they should explicitly define this in the Bill. These amendments would ensure that schemes do not close but that they are amended. It is suggested that “amendment” is by far a better way of proceeding than continuing with the word “closure”. These amendments are designed to achieve the Government’s desired aims, which we share, but prevent what we suspect would be the unintended consequences that could arise if the Bill continues to allow “closure”.

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Amendment 91D is new and provides that the closing date for a Scottish scheme is 1 April 2016. This is to address the fact that administration of the scheme in Scotland is more complex and that more time will be needed. The Bill requires that existing schemes are closed on 5 April 2015. This means that Scottish local government pension schemes have to be renegotiated and scheme regulations drafted. There has to be consultation, approval by the Scottish Parliament and then administrative implementation. This may be achievable in England, because negotiations over the schemes have been concluded and significant work has been undertaken on scheme regulations, as we have already heard. Sadly, this is not the case in Scotland as until this Bill there was no necessity to do so.

A new Scottish Local Government Pension Scheme was implemented as recently as April 2009. The focus was to implement the cost sharing and other provisions of that new scheme. This Bill imposes the principle of the English-negotiated solutions, which were not sought in Scotland.

Two years may seem enough time for the Scots to sort themselves out, but the reality is somewhat different. If one works back from April 2015, the timetable is as follows. At least a full year is required to implement the scheme administratively, which includes software changes; that, I gather, is a minimum period. At least a further year is required to undertake the legal process, including the drafting of regulations, public consultation, ministerial approval and the laying of regulations in the Scottish Parliament. This is based on Civil Service estimates, approved by a Scottish Minister. It is not simply a construct by this side of the House.

That timeframe leaves about two months for initial union consultation with members, negotiation with stakeholders, and then consultation with members and other stakeholders—councils, admitted bodies and so on—about heads of agreement. Pension negotiations, as the Minister will immediately accept, are complex and require extensive data that take a long time to produce. Agreements also require an equality impact assessment, which takes time too.

This timetable assumes that stages progress smoothly, with no significant difficulties. However, as in England, not everything in Scotland necessarily proceeds smoothly—in fact, in Scotland it is possibly less so. Making changes to the Scottish Local Government Pension Scheme is significantly different to doing the same to the English scheme. So far it has taken about a year for the Scottish scheme to catch up with its English counterpart. The last major change in England was in 2008 and 2009 in Scotland. An amendment that delayed implementation in Scotland until 5 April 2016 would therefore have the support of the trade unions, of the Scottish local authority body, COSLA, and of Scottish Ministers. I beg to move.

Lord Newby: My Lords, before I turn to these amendments I would like to notify the Committee of a development with regard to certain Scottish pension schemes.

The regulations made for local government, police or firefighters’ pension schemes in Scotland must follow the framework set by this Bill. However, Clause 3 does not require the Treasury to consent to them before they

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are made. This reflects existing devolution arrangements. The Chief Secretary sought to agree a mechanism to ensure that both Governments were kept appropriately informed of any changes to these regulations, or factors affecting them with the Scottish Government. This would have operated via a non-binding memorandum of understanding.

However the Scottish Government have now informed the Treasury that they do not consider there to be a need for such a memorandum. I can assure noble Lords that these schemes will not operate in a vacuum. Existing agreements will continue to apply to these schemes, and we will continue to support the Scottish Government in making these regulations fair and sustainable.

7.30 pm

Lord Davidson of Glen Clova: Will the Minister briefly elucidate the reasons that the Scottish Government have given for why they do not consider that consent is required? If the Minister cannot do that immediately, I would be happy for him to write to me.

Lord Newby: I think I will have to write to the noble and learned Lord. I am very happy to do so.

I shall return to the amendments and start with Amendment 91D regarding the Scottish scheme. I heard what the noble and learned Lord said about the Scottish Government being unable to implement the reformed schemes in the 27 months available, but the Scottish Government have at no stage asked a Minister for a delay to the implementation of the schemes, and we think there are very good reasons for avoiding a delay.

A delay in implementing the reforms would, for example, result in hundreds of millions of pounds of additional liabilities being accrued in the Scottish schemes. These additional costs would have to be met from the Scottish budget at the expense of Scottish jobs and services. Furthermore, a delay would disadvantage Scottish public service workers on lower and middle incomes by prolonging the period that they will continue to subsidise the pensions of high flyers. I am sure that the noble and learned Lord does not think that that is desirable. The only thing I would say by way of general comment is that it has been clear since the point at which this legislation was introduced that it would apply to Scotland and how it would apply to Scotland. My right honourable friend the Chief Secretary has written repeatedly to the Scottish Government about what is going on in England and how we are making progress, and therefore there is no objective reason why the Scottish Government should not be absolutely marching in lockstep with the Government in London in terms of producing the scheme rules. We think that the time has come for the Scottish Government to get their skates on, and we do not believe that there should be a delay in Scotland for the reasons that I have given.

Baroness Donaghy: As the Minister knows, I am extremely concerned about equality of consultation on this issue. Can he say objectively if the same applies to local government employers and all public servants in Scotland and that they are equally in step and are fully involved?

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Lord Newby: I am afraid I cannot because it is not the responsibility of the London Government. We do not seek to micromanage what is happening in Scotland or to follow every minute of what the Scottish Government are doing in relation to these things, not least because if we did, we would be excoriated by the Scottish Government for interfering in Scottish affairs. These are Scottish affairs and I am afraid we cannot second-guess every bit of discussion that is going on in Scotland. It would make us extremely unpopular for no benefit because we are not responsible for the way those scheme negotiations are progressed.

I shall move to Amendments 92A and 93A. Concerns were raised in another place about the closing dates as originally drafted. Although I am confident that the dates as drafted would have worked as intended, to address the concerns echoed here, and following discussions with each of the schemes about their planned timetable for reform, the Government have tabled Amendments 92 and 93 to revise the closing dates. I hope that noble Lords feel that their concerns have therefore been addressed.

On Amendments 91A, 91C and 93B to 93G, I shall attempt to address noble Lords’ concerns relating to the extent and effect of the closure of the existing schemes. Taken together, these amendments seek to provide for the replacement of the existing regulations in order to make these reforms. This would mean that the new scheme regulations made under Clause 1 would have to provide for both accrued rights prior to reform and new service after reform with different rules pertaining to each. That would be unnecessarily complex and inefficient.

The Bill already enables new and existing arrangements for each workforce to be managed and administered together by virtue of Clauses 4 and 5. The new and existing schemes will have the same scheme manager and the same pension board. From the perspective of a scheme member, their existing and new pension benefits and the administration of their pensions will be seamless. I hope I can also reassure noble Lords that there is no need to place in the Bill any requirement to legislate for the new schemes. The Government have made a number of commitments in this House, in another place and elsewhere to enact the schemes in accordance with the relevant heads of agreement.

I realise that a number of concerns have been raised in another place about the use of the phrase “closing date”. We have given lengthy reassurances that these words have only the meaning that can be attributed to them in the context of the clause; that is, that they close the schemes to future accrual only. This was the subject of the correspondence between the Economic Secretary, the shadow Financial Secretary and the chair of the Local Government Association which I circulated to noble Lords a couple of weeks ago in which we sought to minimise confusion about the use of the word “close”. Government Amendments 111 to 114, to which we will come later, have been drafted to achieve that. I hope that noble Lords can now put their minds at rest on the subject.

We have been clear that our intention is to simplify and consolidate the existing legislation relating to the provision of pensions to public servants. In future,

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public service pension schemes will be made under the powers in the Bill. These amendments, as drafted, would not allow for such consolidation. Although I know what the noble and learned Lord was seeking to achieve, I hope he will understand why I cannot accept his amendments.

Lord Davidson of Glen Clova: I am obliged to the Minister. I remind him that when I referred to Scotland, I said that things do not always seem to move smoothly there. There certainly seems to be a different understanding on this side about what Scottish Ministers, who I take to be the Scottish Government, have expressed by way of a view in relation to timing. As I said, things do not always move smoothly north of the border.

If my learned friend the Minister—he may be learned for all I know and may be my friend—wishes to avoid unpopularity in Scotland, perhaps I may suggest that he refrains from suggesting that the Scottish Government move in lock step with the UK Government and that they get their skates on. In any event, I hear what he says, and we will perhaps return to this in due course when we are both better informed.

In relation to closure, the Minister described possible confusion between the Economic Secretary and his shadow. It may be that this is in effect a difference of approach. I suspect that we will return to this on Report, but at this stage I beg leave to withdraw the amendment.

Amendment 91A withdrawn.

Amendments 91B to 91D not moved.

Amendment 92

Moved by Lord Newby

92: Clause 16, page 10, line 2, leave out “1 April” and insert “31 March”

Lord Newby: My Lords, Clause 16 provides that no person may accrue further benefits in the existing pension schemes after a given date. However, while this is referred to as “the closing date”, it is important to note that this does not mean that these schemes will be closed or wound up on that date. They will continue to exist to pay the benefits accrued up until the closing date, and beyond that date for those who are eligible for transitional provisions.

Although the closing dates as originally drafted would have worked as intended, they were a cause of concern in another place. To address these concerns, and following discussions with each of the schemes about their planned timetable for reform, Amendments 92 and 93 will revise the closing dates. Therefore, for local government workers in England and Wales, the closing date is 31 March 2014, and for all other schemes the closing date is 31 March 2015.

Amendments 111 to 114 are designed to minimise the potential for misinterpretation regarding how the Bill will affect the current schemes. Perhaps I may reiterate what was made clear in another place. There will be no subsequent crystallisation of liabilities when the Bill closes the current schemes to future accruals.

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To provide further clarity on this point, these amendments will remove references to schemes that are closed and instead signpost to the clauses that restrict the build-up of future accruals in the schemes. I beg to move.

Lord Davidson of Glen Clova: There was initially a spark of hope that these amendments might have addressed the question of closure. That spark has died. However, I hear what has been said. I will confine myself to saying that we may return to this matter on Report.

Amendment 92 agreed.

Amendment 92A not moved.

Amendment 93

Moved by Lord Newby

93: Clause 16, page 10, line 4, leave out “5 April” and insert “31 March”

Amendment 93 agreed.

Amendments 93A to 93G not moved.

Amendment 94

Moved by Lord Newby

94: Clause 16, page 10, line 28, leave out from “Wales” to end of line 30

Amendment 94 agreed.

Clause 16, as amended, agreed.

Schedule 5 : Existing pension schemes

Amendments 95 and 96

Moved by Lord Newby

95: Schedule 5, page 39, line 8, leave out paragraph 2

96: Schedule 5, page 39, line 28, at end insert—

“Exception: benefits payable to or in respect of a holder of a devolved office.”

Amendments 95 and 96 agreed.

Amendment 96A not moved.

Amendments 97 to 102

Moved by Lord Newby

97: Schedule 5, page 40, line 7, leave out paragraph 18

98: Schedule 5, page 40, line 13, leave out paragraph 20

99: Schedule 5, page 40, line 19, leave out paragraph 22

100: Schedule 5, page 40, line 24, leave out paragraph 24

101: Schedule 5, page 40, line 33, leave out paragraph 27

102: Schedule 5, page 40, line 35, at end insert—

“27A A scheme under section 48 of the Police and Fire Reform (Scotland) Act 2012.

Exceptions: injury benefits and compensation benefits.”

Amendments 97 to 102 agreed.

Schedule 5, as amended, agreed.

Clause 17 agreed.

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Schedule 6 : Existing injury and compensation schemes

Amendments 103 to 110

Moved by Lord Newby

103: Schedule 6, page 41, line 25, leave out paragraph 2

104: Schedule 6, page 41, line 35, leave out paragraph 6

105: Schedule 6, page 42, line 5, leave out paragraph 8

106: Schedule 6, page 42, line 11, leave out paragraph 10

107: Schedule 6, page 42, line 15, leave out paragraph 11

108: Schedule 6, page 42, line 23, leave out paragraph 14

109: Schedule 6, page 42, line 25, at end insert—

“14A A scheme under section 48 of the Police and Fire Reform (Scotland) Act 2012.

Specified benefits: injury benefits and compensation benefits.”

110: Schedule 6, page 43, line 11, leave out paragraph 23

Amendments 103 to 110 agreed.

Schedule 6, as amended, agreed.

Clause 18 : Final salary link

Amendment 111

Moved by Lord Newby

111: Clause 18, page 10, line 41, leave out “which are closed under section 16” and insert “to which section 16(1) applies”

Amendment 111 agreed.

Clause 18, as amended, agreed.

Schedule 7 : Final salary link

Amendments 112 to 114

Moved by Lord Newby

112: Schedule 7, page 43, line 17, leave out from “scheme” to “(the” in line 18 and insert “to which section 16(1) applies or a scheme to which section 28(2) applies”

113: Schedule 7, page 43, line 38, leave out from “scheme” to “(“the” in line 39 and insert “to which section 16(1) applies or a scheme to which section 28(2) applies”

114: Schedule 7, page 44, line 7, leave out from “after” to “(“the” in line 8 and insert “the date referred to in section 16(1) or 28(2) to an existing scheme to which section 16(1) applies or a scheme to which section 28(2) applies”

Amendments 112 to 114 agreed.

Amendment 115 not moved.

Schedule 7, as amended, agreed.

Clause 19 : Consultation

Amendment 116 not moved.

Clause 19 agreed.

House resumed.

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Arrangement of Business


7.45 pm

Baroness Anelay of St Johns: My Lords, there appears to have been what is, to me, an extraordinary misunderstanding about an agreement in the usual channels about the process by which we would deal with business today. I had anticipated that on this Bill my noble friend Lord Newby would be proceeding beyond Amendment 92 and that group, and that we would be going to 10 pm; this was the agreement very clearly set out. This was the process on this particular Bill but I understand that, despite discussion with me personally this afternoon, when I went through the procedure, what I thought was a careful explanation by me was misunderstood. Therefore, the opposition Front Bench finds itself in a difficult position and believes that it is unable to proceed with further amendments on this Bill.

There are, from time to time, misunderstandings about matters of business. This one has surprised me, but it is a matter that one just deals with and this House likes to proceed in a businesslike manner. Therefore, unexpectedly, we are in a position where the Bill will now stop for today. The remainder will conclude on Monday, although clearly it could have progressed much further tonight. Instead, there is a bonus for those who are now taking part in a very interesting Question for Short Debate. The only people for whom it is not a bonus, I regret to say, are the noble Lord asking the Question for Short Debate and the Minister responding, whose speaking times remain the same. My quick bit of maths as I rushed out of the Chamber leads me to believe that it would now be in order that the QSD goes to one and a half hours, since it is the last business, and that therefore, apart from the opening speaker and the Minister, every other speaker, including the opposition Front Bench spokesperson, is allowed seven minutes instead of four.

Prisoners: Work Programmes

Question for Short Debate

7.47 pm

Asked By Lord Carlile of Berriew

To ask Her Majesty’s Government what opportunities for re-training for prisoners will be provided by the newly developed policies for work in prisons; and how such work programmes will be commissioned.

Lord Carlile of Berriew: My Lords, I feel as though I have won a very small lottery this evening, and I am very pleased that we will have an extended time to deal with what I believe is the important issue of work in prison. I welcome, too, the significant interest in this debate, not least from the noble Lord, Lord Myners, who recently succeeded me as the president of the Howard League for Penal Reform, which I welcome very much. I regret that my noble friend Lady Hamwee is indisposed tonight and will not be speaking in this debate.

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I mention the Howard League not least because it is the only organisation, as I understand it, ever to have run a real free-standing business inside a prison; that is, a business paying the rate for the job and with the prisoners wishing—though failing—to pay tax. Because of bureaucratic obstruction—I anticipate that the noble Lord, Lord Myners, may say a little about this later—it proved impossible to run it as a true business.

In my capacity as a lawyer and as a politician, I visited a very large number of prisons over a great many years. If you visit any prison, you will of course find prisoners doing some work. It may be a bit of gardening, some cleaning or some good or indifferent training courses. Some do contracted work. There are in fact about 100 firms that are contracted through NOMS to engage prisoners in work. However, that work goes to some 9,000 prisoners only—less than 12% of the prison population. Even for those who work, the average number of hours of work in 2010 was 11.8 hours per week, which hardly equates to a working week, and they were paid an average of £9.60.

Prison has several functions, including the protection of the public and retribution. Surely an important function is to release a human being who can live in the real world, which may be a confusing place for someone who left it several years earlier. Former prisoners need to be able to survive—therefore, they need money. Absent earnings in some cases, or in many cases, they will steal to survive. They need to pay rent for decent accommodation. Otherwise, prison may unfortunately provide their softest option for warmth and sustenance. Believe me, there are more than a few prisoners who have chosen prison as the most comfortable place to live. Prisoners need activity, otherwise idle hands may return all too swiftly to the twin devils of acquisitive and violent crime.

The advantage of work for prisoners while they are in prison is that when they become ex-prisoners and obtain jobs with their acquired skills, they can obtain not merely activity and earnings. Work involves other people, and working with other people includes the companionship, discipline and, above all, the self-respect that almost all regular work gives, whatever its nature. The benefits of work in your Lordships’ House require no advocacy.

Most male prisoners—shockingly, more than half—did not work in the year before they entered custody. That is a depressing figure, particularly because there is a correlation between that figure and crime. An even sorrier tale is that in 2009, of those leaving prison, 27% of men entered work, which means that more than seven out of 10 men did not get jobs when they left prison; and 13% of women entered work, which means that nearly 90% of women did not obtain jobs when they left prison. If you look at schemes that have been run abroad, particularly in America, you will find that former prisoners employed by good managers, who provide high-quality training, become extremely enthusiastic and reliable workers. That is surely to be encouraged. The cost-benefit analysis is self-evident. But the fact that seven out of 10 men and nine out of 10 women leave prison without a hope of a job is in truth the narrative leading to the prison revolving door.

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There is an unanswerable case for work, especially for longer-term prisoners serving three years or more. I look forward to hearing the Minister’s response to that point. For such longer-term prisoners, there would be time to train them and the opportunity to teach them new skills. Many prisoners are much brighter than their pre-imprisonment qualifications would suggest. I recall going into a cell not many years ago where a young man showed me his maths GCSE A* certificate. When I asked him what he was proposing to do, he said, “I’m going to be a maths teacher, sir. I’m going to take maths A-level and go to university”. He was obviously very talented at, and loved, mathematics. When I asked him how he had done in mathematics at school, he said, “I never went to school, sir”. There is one single example from my own experience of someone who could be greatly upskilled in prison and be given the opportunity to have not just a job but a real career.

My suggestion to the Government is that if real work is to be brought into prisons, prisoners should earn the going rate for that job, thus avoiding the criticism that by doing such work they would undercut other producers. If a real effort were made to bring contractors into prison to provide work, they would come and provide that work. They would know, after all, that their workforce would at least turn up every day, or in most cases, anyway. The prisoners would pay tax—why not?—and national insurance, make payments towards a pension, contribute towards their families, earn something that is entirely free—namely pride—and, above all, be much fitter for release. In return for their work, they could be allowed privileges and extra purchases and, as the Howard League has suggested, there could be a levy on their earnings to compensate victims.

Mr Kenneth Clarke announced in May last year, as Lord Chancellor, the Government’s One3One initiative. That is welcome but there is precious little sign of it bearing fruit. I am sure that the House would be interested to know what is being done. There is no sign of a proactive approach by the Department for Business, Innovation and Skills, for example, or from other parts of the statutory sector, to bring One3One to effect.

In the couple of minutes remaining, I want to add something about new prisons. The cause of fitting prisoners for the world outside and putting them to employed work depends on a number of factors. It depends on giving them work that provides some meaning for their future lives and on them being able to maintain a relationship with their families while they serve their sentences. I read with dismay the repeated proposal, which comes from any Government, from time to time, that a Titan prison should be built to replace some smaller prisons. A Titan prison would give rise to the usual government procurement problems; it would almost certainly cost a few hundred million pounds more than was estimated. There would be very serious security issues, which would force the authorities to break it down into a number of smaller prisons within a prison. There would be potential staffing problems for a massive establishment, particularly if it was on the sites that have been trailed in the media this week. It would be less likely to produce a Titan than a Titanic, and it is a voyage that sound penal policy should and could do without. I invite my noble friend,

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when he replies to this debate, to make it clear that at worst a Titan prison is just a thought, and that it is far yet from being a proposal.

7.57 pm

Baroness Stedman-Scott: My Lords, I congratulate the noble Lord, Lord Carlile, on securing this debate. I declare an interest in that I am a chief executive of Tomorrow’s People and try to work with some of the people that the noble Lord spoke about to make sure that they secure sustained employment.

It will come as no surprise to anyone here that I believe wholeheartedly that acquiring skills, undertaking training and being prepared for employment during any stay in prison—most importantly, on leaving prison—is critical if we are to ensure that people are supported and helped to secure sustained employment and to stop reoffending.

I would like to speak in support of the newly developed policies for work in prison. The focus of my contribution to this debate is on the benefits to prisoners and ex-offenders, rather than on the commissioning process. The objectives speak for themselves—of prisoners on a working week of 35 to 40 hours, their day focused on routine and work, with the economic benefits to them of being paid and having a wage and some control, in a very controlled environment, as well as the economic benefits to the prisons themselves. There should be links to business—getting businesses involved in this work is very important—and, of course, the creation of jobs through businesses and their supply chains.

Education, training and equipping prisoners for the world of work is very important. The noble Lord, Lord Carlile, referred to somebody who wanted to be a maths teacher after being in prison. I suggest that there are many people in our prisons who are very clever in ways we wish they were not, but if that were channelled in the right direction they could become exemplary employees, contributing to society while securing qualifications during the process.

While all of these objectives are good, I suggest that, for those who are responsible for the programme, it should not be seen as a two-part, two-section approach—something that happens in prison and then something that happens when you come out. For me, the journey that prisoners would take while working in prisons should be seamless. From day one when they start work, it should be part of their journey into sustained employment. Therefore, it is not just about securing the skills to work or to be involved in a business; it is about getting them ready for that time when they leave prison and—we hope, if the links with business are as they should be—they will continue to work for that business or supply chain. The other things that should be put in place are a network of support and somewhere to live so that all the things that would burden them on release are completely taken away. It would be reliant on their becoming good employees, adding value to the business and being what I would call economically independent.

There are examples around the world of work of a similar nature. If you look at this country, we have Timpson—a terrific organisation. We have probably

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all had our shoes repaired, keys cut or dog tags engraved by it. It has its academies in prisons and employs these people when they leave prison—people who are forever grateful to have had the opportunity to realise their destiny. We all know about the national grid service: this, too, is a great thing.

I have been particularly struck by a project I have seen in America called Delancey Street, which is a programme to stop people reoffending and make sure that they achieve their potential. They themselves run real businesses which trade for profit and do not rely on the Government for any money. It is a true inspiration; there is a four-star restaurant which is well worth patronising. It also has a car service that drives executives around—from companies such as Gap—and is paid for its service. It also has a removal company, which is quite remarkable because it is paid to remove things from people’s houses and put them somewhere else. I have to tell noble Lords that its first customer was Getty; he was moving and the people did not turn up with the removal van, so this lady—Mimi Silbert, who started this up and is about four feet tall and a human dynamo—went over and said, “My boys will move you”. He had no choice and she guaranteed that nothing would be stolen—maybe broken, but that was it. It is now the biggest removal company on the west coast of America, trading for profit. Moreover, it owns a Christmas tree plantation, where it sells all its trees to people in San Francisco. The customers pay a premium because they know where the profits are going. It is absolutely true that Delancey Street got the contract to decorate Tiffany’s.

I believe this is a tremendous thing for us to be doing. It is commercially sound, economically sensible, professional in every sense and shows a commercial compassion that we so need in this country.

8.03 pm

Lord Wills: My Lords, I, too, congratulate the noble Lord, Lord Carlile, on securing this debate on this important subject. He has set out the issues compellingly and I do not want to rehearse them here again or go over the ground set out so well just now by the noble Baroness, Lady Stedman-Scott.

I want to focus my remarks on the difficulties that small voluntary organisations face in making a contribution to the important work that is the subject of this debate, particularly if these organisations are offering activities that do not fit within conventional models of the work that prisoners do. I want to illustrate this through the experience of Fine Cell Work, a charity with which members of my family have been involved for some years. Fine Cell Work is a social enterprise that trains prisoners in paid, skilled, creative needlework; it is taught and supported by volunteers from the Embroiderers’ and Quilters’ Guilds. The prisoners are paid for their work, which is then sold around the world. The pieces are high-quality craftwork, interior design commissions and heritage pieces for organisations such as the V&A, English Heritage, Tate Modern and the National Gallery. Fine Cell Work has had great success in the 17 prisons where it currently works.

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Craftwork in prison has been shown to help prisoners develop the more constructive and disciplined aspects of their personalities as they learn new skills and support their families with the money that they earn. It connects inmates to wider society and gives them hope for their future. This is exactly the sort of work that NOMS should be supporting. Apart from everything else, through the combination of work in cells and in studio workshops, it enables prisoners to do practical, skilled vocational work in a 50-hour week—which I think is unprecedented in prisons—with a focused link to employment opportunities on release. It is significant that 80% of the work of Fine Cell Work is done in cells. At a time when budget cuts are leading to more time being spent in cells, it means that prisoners can continue to learn skills that will make them more employable with minimal cost and supervision.

However, because this work does not fit within recognised categories, it has faced real obstacles in realising its full potential. Many prison managers still call it “hobby work” in spite of the professionalism of the products and its commercial success. More than £200,000 worth of goods are sold annually. Prisons have been reluctant to support the training side of the work by seconding education staff to support the charity’s volunteers. To reinforce the prisoners’ sense of achievement and encourage their rehabilitation, their skilled production work should be accredited, but the volunteers are not qualified to deliver accredited training on their own.

Fine Cell Work’s ability to progress has been obstructed by such lack of support and the difficulties it faces in meeting bureaucratic criteria. This is an innovative, small social enterprise but if it is to expand, it needs to work in partnership. It is not a normal business because 70% of its income comes from grants and donations, and it is discounted as a factor in rehabilitation because the very specific NOMS methodology makes it impossible to prove that Fine Cell Work on its own prevents reoffending. Therefore, in this new world, can the Minister say what NOMS can do to safeguard such unorthodox training and rehabilitation programmes over and above work regimes that generate revenue for prisons? What will NOMS do to help small organisations such as this provide the evaluation data that NOMS rightly requires to enable it to make judgments on what sort of providers it wants to operate in prisons? What must small, hard-pressed organisations such as Fine Cell Work provide from their own slender resources? What can NOMS do to facilitate partnerships between small organisations such as Fine Cell Work to enable them to achieve the critical mass they need to meet the requirements of the Ministry of Justice?

I hope the Minister will recognise the threat that the failure to nurture small organisations poses to creativity and innovation in these programmes. I hope he recognises that, over and over again, experience under this Government and the previous Government has shown that the default option of delivering public services by commissioning large organisations—whose main talent has often been only to comply with the bureaucratic procurement criteria of central government—has failed all too often to produce value for money. If we are to get value for money, and if we are to pioneer new approaches to delivering public services, we need these

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innovative, small organisations to flourish. They have a vital role to play in delivering public services, but to do that work they need a system in place that encourages them to do so and does not place unnecessary obstacles in their way. I hope that the Minister, in his response, can reassure your Lordships’ House on all these points.

8.09 pm

The Lord Bishop of Liverpool: My Lords, although I am very sorry that we shall not be hearing from the noble Baroness, Lady Hamwee, this evening, I am delighted to follow the noble Lord, Lord Wills, not least because one of my Christmas presents this year was an embroidered cushion from Fine Cell Work. It has attracted lots of comment as it has pride of place in my study. I am very grateful for this opportunity to commend the excellent work about which we have already heard.

This is a timely debate as old prisons are closing and new prisons are opening. Our old prisons were built on monastic lines with cells modelled on monastic cells so that prisoners would be encouraged to contemplate their crime, and reform. While we should never lose sight of that purpose, the architecture of new prisons should reflect the evidence that training and work programmes for prisoners can be transformative in rehabilitating offenders. Therefore, my question to the Minister is: will the architecture of new prisons reflect this aspect of government policy?

In my capacity as Bishop to Prisons and in the process of making a series of programmes for BBC Radio 4 last year called “The Bishop and the Prisoner”, I have observed closely two retraining and work programmes: the Clink and the Timpson workshops, about which we have already heard. In both cases, training of the prisoners is done on the job, skilling them for future employment.

The Clink is a high-quality, West End-style restaurant created inside a prison, with professional chefs training prisoners to cook and serve paying clients. Two restaurants are already established in our prisons and a further eight are planned. Of the 35 prisoners who have been through the Clink and released, 29 have found jobs and only three have reoffended. Those are remarkable statistics. If those statistics are replicated in the planned further eight prisons, the Government must surely take note of the success of this programme. I have not only seen the statistics, I have tasted the food—I suppose that I ought to declare an interest. I have also met the prisoners without any staff being present and have seen the impact of this programme on their lives in improving their self-esteem and raising their aspirations.

The Timpson workshops, to which the noble Baroness referred, operate in three prisons at the moment. These prisoners learn to repair shoes and as they learn they are paid for their improving productivity as they gain more competence. The brilliance of these schemes is that when they leave prison, the best get jobs in the Timpson business. In other words, the job in prison is the pathway to employment on the outside. It is a great incentive for these offenders to work and retrain. I have listened to prisoners in these workshops and seen how acquiring a skill for the first time is transformative of their outlook and prospects.

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I underline the fact that this is all to the credit of NOMS. The noble Lord, Lord Carlile, has visited many prisons and so have I. It is clear to me that the determining factor in each prison is the visionary outlook of the governor. These schemes have benefited from the enthusiastic endorsement of the governors of the prisons concerned. Although Mr James Timpson, who provides much of the dynamism for these projects, says that from time to time his experience of getting NOMS to be more commercial is a bit like asking the North Korean Government to run Disneyland—to use his phrase—I am sure that NOMS will take that in the spirit in which it is offered. However, that comment highlights the fact that there is great scope within NOMS for a visionary governor to come alongside Fine Cell Work as well as the commercial enterprises and to use these to the benefit of offenders and to address the Government’s hope of reducing reoffending. Will the Minister engage the visionaries behind these and other projects in the design of prisons so that transformative training and work can be at the heart of prisons, both physically and metaphorically?

8.15 pm

Lord Myners: My Lords, it is a pleasure to follow the right reverend Prelate in this debate secured by the noble Lord, Lord Carlile. It is a timely debate in the context of the Government’s announcement last week of planned changes to the prison estate and to post-release supervision and support. I look forward to the Minister’s response. I know that he has taken an active interest in prisons. He told me that he has recently visited Peterborough prison, where no doubt he had the opportunity to see, among other things, the excellent initiatives being developed there by Social Finance under the chairmanship of Bernard Horn and the leadership of David Hutchinson. I declare my interest as the successor to the noble Lord, Lord Carlile, as president of the Howard League for Penal Reform.

As the noble Lord, Lord Carlile, said, some prisoners are paid for doing chores but it is a derisory sum. It is pocket money; in fact, it is less than the average pocket money paid per week to teenagers. It does not constitute employment or a meaningful preparation for release. Prison may, necessarily, have a punitive element but it should not deny the dignity of prisoners. It should focus instead on preparing offenders for a return to the community in an economically and socially purposeful and productive manner.

For many prisoners, life behind bars is sluggish and boring. Too little time is spent on education and helping them to develop the skills necessary to overcome what, for many of them, have been chaotic and painful life circumstances. As the noble Lord, Lord Carlile, noted, and I saw in a recent visit to Brixton prison, there is a great wealth of talent in prison. There are prisoners who want to stop lives of crime and re-establish productive lives which are no longer chaotic, but we are failing them in not taking as much action as we could to prepare them to return to the community and not be drawn back into offending and a life of crime. I found it painful to listen to two extremely bright prisoners who had the right motivation but were desperate about what was going to happen on their release

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because they did not feel in any way prepared to walk out through those gates and back into a safe, secure and hopeful life.

One of the most productive things prison can do is to prepare offenders for the world of regular and paid work. For some of them, this might be the first opportunity in their lives to develop work skills that can be applied in the formal economy. The way to get good outcomes—for prisoners and society—from the time spent in prison, is to provide a life-changing opportunity rather than the current practice, prevalent in so many prisons, of the prison being a warehouse or even worse.

I therefore urge the Government to focus their resources and ability to mobilise employers, to seek ways to create opportunities for prisoners to be gainfully employed, earning a fair wage and paying tax, and to provide the opportunity for prisoners to make a contribution out of their earnings to their families. Many of them feel that the link with their partners, wives, husbands and children is completely broken. I endorse the observation made by the noble Lord, Lord Carlile, about Titan prisons, which will inevitably increase the distance of travel between a prisoner and his family. If the Government want to reflect on this, I suggest they look at the views expressed by Mr Dominic Grieve, who, when he was shadow Justice Secretary, demolished the proposals for Titan prisons made by the Government of which I was a member.

We want to provide effective linkages between prisoners and their families. Through paid employment at a competitive and fair rate, prisoners will be able to make monetary contributions to their families, which will make them feel a continued link, a responsibility and a sense that they have retained their dignity, rather than the current conventional practice in which the conceit of treating a prisoner’s partner as a single parent ignores any opportunity for continuing economic linkage between the prisoner and their family. We want to seize the opportunity to allow prisoners to learn transferable employment skills that will reduce the risk of reoffending, to their own benefit and that of the community.

This is not going soft on prisons or prisoners. It makes assuredly good economic and social sense. It reduces the risk of a vicious circle. Providing training and work is a very real way of breaking that circle. Paid work creates additional motivation and fosters a sense of near-normality. In so doing, we might be making a positive step to address the desperation of prisoners released with little support and little prospect of employment in the formal economy because of the absence of any training or working experience during the period of their imprisonment.

There are, of course, practical issues. What is the right rate for the job? How do employers have access to the prison estate? How do we ensure the continuity of service that a business will require? These challenges can be overcome if everybody has the will to do so. The right reverend Prelate has referred to the importance of the governor. I would also emphasise the importance of ministerial activity and leadership. I read in the Sunday Times Mr Steve Hilton’s views on how difficult it was for Ministers to make change. I urge the Minister

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to take a personal interest in this area. Can he get together with other Ministers, including in the Department for Business, with employers and trade unions—we will hear in a moment from my noble friend Lady Dean—and with other agencies like the Howard League to see if he can place his mark on this particular area and be the Minister who changed the way in which prisons operate in preparing people to return to the economy as effective workers?

8.22 pm

Lord Addington: My Lords, I congratulate my noble friend on bringing this subject forward. Whenever we discuss, do any work on or pay attention to the subject of prisons, we are always struck by how repetitive the problems are, both for the people concerned and for those of us who have been talking about them over time.

Generally speaking, you take into prison someone who is an educational failure and has usually finished their education—at their own decision, or that of their group—at the age of about 14. They commit a series of petty offences and most are on a roundabout of increasing but short-term sentences. They usually finish their offending pattern by the age of about 35. By that time, they have no work pattern, they have broken down several family relationships, and the best that they can expect is a life on benefits. That is a depressing scenario on which there is absolutely no disagreement in this debate. I agree with the suggestions that have been made by my noble friends and everyone in the House who has spoken on this; getting people into a pattern of work is probably the most important thing that can happen to them. If we are to try to achieve any form of preparing people for adult life, that is a very good way forward.

One of the things that initially attracted me to this debate was the problem of getting training and qualifications for that group of people. In the debate and my preparations for it, I realised that the idea of providing the activity and experience of work—particularly given what the noble Baroness, Lady Stedman-Scott, has said—is a positive step forward because this group is probably one of the most difficult to train. What attracted me initially to the activity within prisons, and led to my ongoing interest in it, was the incredibly large number of people there with special educational needs, particularly dyslexia. My interests in dyslexia have been broadcast far too often in this Chamber.

Most of the assessments reckon that 50% of the prison population are within the dyslexia spectrum. The lowest figure that I have seen is 30%, and that was on an assessment of a group of 300. Assessments could not be carried out on 200 of them because they were too violent. Why does that not surprise anyone who has worked in this area? It is for the simple reason that if you have to admit that you cannot do the basic functions of reading and writing, you are going to resent someone who presents you with something on which you are going to be tested. You might not be dyslexic; you might just be stupid in the way that you have always been told.

I could give examples from my life, such as the discovery that my daughter could spell better than I could when she was seven. This is something that

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I never thought I would do but I recommend to noble Lords a programme on channel Five about Shane Lynch. I do not know if the House of Lords has a large following of the band Boyzone, but he is one of its members. He made a moving and articulate programme about someone who is dyslexic going through the problem of having to admit, “What if I am not dyslexic? What if I am thick? What if I have failed?”. This was someone who had a soft landing. He was going to get involved in the garage that his father ran and that was his way forward. The music opportunity came along and he went off there. However, that very successful, rich and well known person was literally terrified at the thought that he might actually just be stupid in the way that people had told him, or in the way that he had assumed he was. In our prisons, we have people who have gone through the justice system for whom the idea of picking up a pencil and writing in public is a humiliating and painful experience. You have to reach them.

Recent government publications now mention special educational needs and take that idea on, but the one place that you cannot get this group of people into is a classroom—not unless you drive them there with whips and guns. For them, it is a frightening place where you reaffirm an unpleasant experience. It is quite obvious, once you think about it. Dyslexics are not the only group affected; you will find an overrepresentation of people with ADHD, Asperger’s and head injury. People who cannot communicate do not handle the criminal justice system well.

I recommend a document, Dyslexia Behind Bars, which is the result of a study run by someone I saw in Chelmsford prison that initially looked at head injury and dyslexia. Here, successful intervention was achieved, primarily by developing and training mentors to go in, speak to a prisoner on an equal level and communicate. Once you have that level of communication, other things become possible. Formalised training and help become possible, but only once you have established that degree of communication. The formalised classroom will not achieve this because people will not use it.

I hope that the Government will embrace the Chelmsford project because I presented a copy of the report to my noble friend Lord McNally, in the company of my noble friend Lady Hamwee, who is much missed. It describes how, when you go in and talk to people on their own level because they trust you, you can begin that communication process. If you are going to strive for formal qualifications in the modern world, you generally have to pass a written test or know how to say why you should get help with that test. In both cases you need information.

I hope that when the Minister replies he will pay attention to the very high number of people in prison who need help with accessing all forms of formalised training and, indeed, with filling out benefit forms when they leave. If we do not pay attention to this, we will create more trouble.

8.30 pm

Baroness Uddin: My Lords, I am most grateful to the noble Lord, Lord Carlile, for bringing this matter before the House in a most poignant manner. It gives

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me an opportunity to share my experience of working with Kazuri, a social enterprise working to re-house female ex-offenders and women who have suffered domestic violence.

I had the privilege recently to launch Kazuri’s report in the House, attended by grass-root practitioners and campaigning organisations, as well as NOMS and the Ministry of Justice. There were more than 80 individuals present. The meeting was addressed by the human rights lawyer, Imran Khan, and the barrister and legal specialist, Flo Krause, as well as by Julia Gibby, who had also prepared evidence to the Justice Committee’s inquiry on women in the criminal justice system.

There are 4,133 women in prison and, staggeringly, 224 of them are Muslim. The report calls for a dismantling of the existing female estate, saying it has no relevance to the needs of women in prison. I commend the report to the House and hope that many noble Lords will take the opportunity to read it, as it makes a harrowing case about the level of misogyny against women in prison. Women serving the end of their sentences at an open prison were surveyed by Kazuri, which identified consistent gaps in provision in training and educational opportunities.

In the current climate of privatisation of public services, the recent probation service announcements and the building of yet more Titan prisons, women are punished far more heavily in prisons that lack trained staff. Kazuri’s report states that underfunded privatised education and resettlement departments are ill equipped to facilitate resettlement and rehabilitation.

We must ensure that there is no further replication of the Work Programme, which has not been a successful example of large private sector companies working with the smaller social enterprises and charities, which walked away. I hope that the Minister will say how the Government intend to work with smaller companies and organisations to deliver more ethical and appropriate services, where large-scale organisations and providers have thus far failed.

It is alarming that, according to the charity Women in Prison, 87% of women who are serving custodial sentences have been victims of violence. According to the Chief Inspector of Prisons, HMP Holloway, which I have visited, no longer offers any courses in understanding domestic violence for the women prisoners.

While the Government are making strides generally to bring violence against women to a higher level on the policy agenda, this must be reflected in the prison estate. If women are not empowered to deal with the impact and long-standing trauma of prison, they will be released and simply fall back into cycles of abuse and—inevitably—crime, to which the noble Lord, Lord Carlile, has eloquently referred.

As a Parliament committed to rooting out violence against women, we cannot leave women in prison out of this equation. Interestingly, the noble lord, Lord McNally, in response to a Question from my noble friend Lady Corston, agreed to yet another review when asked whether custodial care and offender management should be organised to meet gender-specific requirements. The Corston report is the most comprehensive review of women in the criminal justice system. It seems perverse that this universally accepted

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framework to look at the needs of women across the raft of ministries and statutory duties appears to have been sidelined by this Government.

I respectfully submit that the time for reviews is over. There have been numerous reports on and reviews into the plight of women in the criminal justice system, and I urge Her Majesty’s Government to look at the wealth of evidence collated by the Justice Committee as a result of its recent inquiry. Kazuri’s submission to the Justice Committee says that more women than men lose their homes and children as a result of their incarceration, and that more children and public services are affected in profound ways by the incarceration of women. Some 17,000 children suffer every year because their mothers have been placed in custody. Will the Minister say how the Government intend to tackle the disproportionate inequalities faced by women in the criminal justice system?

I submit that the eradication of inequality is not synonymous with treating everybody equally. This is both disingenuous and deeply flawed. It is disingenuous because it gives supremacy to a concept that few would be hard pushed to criticise—namely, upholding the prima facie eradication of inequality—without actually and actively giving weight to evidence and outcomes. It is also deeply flawed because the criminal law and indeed equalities law do not require that criminal offences, maximum penalties and the principles of sentencing should be the same irrespective of the sex of the offender.

When it comes to women offenders, we know what needs to be done. Small alternatives to custody units, intensive therapeutic interventions and the increased use of community-based sentences have all shown tremendous results in reducing reoffending in women and are far less expensive. Can the Minister tell me and the House what we are waiting for and when the directive will be announced to make the seemingly obvious happen?

8.36 pm

Baroness Dean of Thornton-le-Fylde: My Lords, I join other noble Lords in thanking the noble Lord, Lord Carlile of Berriew, and congratulating him on obtaining this debate this evening. Had he been here, the late Lord Corbett of Castle Vale would certainly have been one of the participants. Over his 34 years in Parliament, both in the other place and here, prison reform was at the top of his agenda. Indeed, one of his many successes in that area was introducing his Private Member’s Bill guaranteeing anonymity for victims of rape. Over the years, the issues that he raised were not very popular, so it is encouraging this evening to listen to and participate in this debate, which is being approached by every speaker in a compassionate but very realistic way. Debates on this subject have not always been like that.

Prison, I am told, is about retribution and reform, but all too often the end result is the brutalisation of the individuals who are incarcerated. Sometimes they come out much more bruised and damaged than when they went in. The area of this debate that I should like to concentrate on is work and being paid for work.

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When people go to prison, they sit around and do nothing for hours and hours, yet on their release we expect them to come out as whole human beings. Part of life is having self-esteem and feeling that we have a role to play in society. If a prisoner has a family, he or she wants to be able to hold their head up in that family and say, “I have paid the price. I want to pick up the strands of being part of the family and move forward”. Yet, as we have heard from the noble Lord, Lord Carlile, their chance of employment is very low. Work does not come naturally. It is about discipline; it is about getting up; and it is about contributing and feeling that you are doing something worth while. If in prison you come out with just over £9 for any work you get—and that is not £9 an hour but a week—the message is that what you are doing is not worth while. You are not a worthwhile person; you are in prison; you have offended against society; you are not even worth a half-decent payment or, in too many cases, any kind of training at all.

These are some of the reasons why the trade union movement supports this proposal very strongly. Prisoners work and prisoners get paid. Can the Minister be very clear about the Government’s approach and their policy and strategy going forward? We know that it cannot be resolved overnight. Trade unions would support prisoners being paid a decent wage. The national minimum wage is the obvious benchmark, as we do now have a benchmark. Any employer outside employing someone at below the national minimum wage can be prosecuted.

Work does not have to be done in the prison. It can be done outside under supervised control. It can be in the industrial scene, in the agricultural world or in a whole range of areas. It is at least trying to equip someone when they leave prison to be able to hold their head up and say, “I have had some training. I know what work is; I have done it, I have been paid for it, and I am now ready to take my place in society,”.

The Howard League statistics show that something like 30,000 male adult prisoners have long-term sentences. I just cannot conceive what it must be like to be a human being incarcerated for a long time in prison, with nothing to do or whatever work I am doing to be such a low grade that it is regarded as menial. Yet maybe I have the intelligence and ability, with some training, to do better. To then come outside and try to pick up the strands is an almost impossible task.

This debate this evening is an important one. It is probably one step down a long road but certainly there is no reason why the outcome cannot be very constructive. Of course, that depends almost entirely on the answer from the Minister this evening. I urge him to give us as much encouragement as possible and to set out just what the Government’s policy is in this area.

8.42 pm

Lord Beecham: My Lords, I join all other previous speakers in congratulating the noble Lord, Lord Carlile, on securing the debate and on opening it so eloquently and so fully. The European Convention on Human Rights proclaims the right of citizens, including prisoners, to have access to education and to vocational and continuing training. That is at the forefront of what

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the noble Lord has been discussing tonight. In fairness to the Government, it is something to which they have now addressed their minds. I welcome also their commitment to rehabilitation, while not necessarily agreeing with all the methods, including payment by results, which they propose to use.

However, it is quite clear—and the noble Lord, Lord Carlile, effectively referred to this—that the biggest contributing factors to avoiding reoffending are if prisoners and ex-offenders have a home and a job to go to. Between them, those factors make something like a 50% difference to their chances of avoiding reoffending. It is interesting that a report from the Prison Reform Trust, Out For Good, demonstrates that one-third of prisoners with a home to go to also had a job to go to, which was three times as many as those without a home to go to. There is clearly a correlation there. One-quarter of those leaving prison enter a job on release but a survey of prisoners shows that half of them felt that they needed help to get a job. Equally, half lacked the skills required for no less than 96% of jobs, so there is a clear gap that has to be filled in their interests and in the interests of the community at large.

As my noble friend Lord Myners pointed out, sustaining links with family and employers is also key to reintegrating prisoners into the community and increasing significantly their chances of avoiding reoffending. I join with my noble friend Lord Myners and the noble Lord, Lord Carlile, in being extremely doubtful about the proposal to build vast prisons. They may be a very long way from centres of communication, from people’s families and from potential employers. That is not likely to contribute to the ready access to employment that one would hope to see.

However, it is not only the building of prisons that causes problems but the transfer of prisoners between different establishments. The National Audit Office pointed out that a third of training courses and the like in prisons are not completed, of which half are due to prisoners being transferred. It also pointed out that learning records are often lost when prisoners are transferred. Timpson and other organisations do valuable work with prisoners, but if they are involved and prisoners are transferred, again there is a potential break.