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7 Jan 2015 : Column 337

House of Lords

Wednesday, 7 January 2015.

3 pm

Prayers—read by the Lord Bishop of St Albans.

Property: London Lettings


3.06 pm

Asked by Baroness Gardner of Parkes

To ask Her Majesty’s Government, further to the Answer by Lord Ahmad of Wimbledon on 8 December (HL Deb, cols. 1593–6), what assessment they have made of the views of London residents about Clause 33 of the Deregulation Bill and the impact of the proposed changes to controls on London lettings on long-term residents.

Baroness Gardner of Parkes (Con): My Lords, I declare my interests as recorded in the register.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon) (Con): My Lords, the Government published the discussion document Review of PropertyConditions in the Private Rented Sector on 12 February 2014. The document sought views from the general public on whether the relevant provisions of the Greater London Council (General Powers) Act 1973 should be reviewed or updated. The Government are carefully considering the representations we received, and a formal response to the consultation will be published shortly.

Baroness Gardner of Parkes: My Lords, I thank the noble Lord for that Answer, but I do not know why—and so I ask him why—the Government intend to take away London’s powers to have at least some control over this rapid subletting of short-term holiday accommodation. Under the new terrorism regulations, how are the obligations dealt with to ensure that people coming into such blocks of flats are not in any way unsafe for other local residents? Their behaviour when they are in the blocks certainly causes great danger, just on the local level of leaving doors open. Westminster Council has six officers working full-time on this, and they have never yet lost an appeal when they wished to enforce action.

Lord Ahmad of Wimbledon: My Lords, I note my noble friend’s concerns. I also wish to draw noble Lords’ attention to my interests in the register regarding leasehold properties. In response to her question, the Government’s intention is clear. We wish to use the Deregulation Bill to help reform what we believe to be the outdated provisions of Section 25 of the Greater London Council (General Powers) Act 1973. Londoners who want to rent out their homes for less than 90 consecutive days currently have to apply for

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planning permission. We believe that this does not apply anywhere else in the country, and this brings London in line with other parts of the country. As to her concerns about terrorism and other such acts, of course the provisions and the ability of the police, the local authority and local residents to intervene will still be very much available. We have introduced new safeguards under the Anti-social Behaviour, Crime and Policing Act 2014, which came into force in November last year.

Baroness Donaghy (Lab): My Lords, the Minister will be aware that when the current legislation was introduced in 1973, it was to protect permanent accommodation. Today, we have a housing crisis, an increase in short-term lets and a threat to permanent housing stock. Why are the Government intent on making a bad situation worse?

Lord Ahmad of Wimbledon: The noble Lady referred to my recall of 1973. I was but a toddler then, but I have certainly read up on it. Let me assure her that the purpose behind the Government’s proposals is not in any way to reduce the housing stock, but to allow Londoners who are home owners and wish to put their properties up for rent on a short-term basis of up to 90 days to do so, without the need for increased bureaucracy. The measure will amend Section 25 to permit regulations that allow genuine householders to supplement their income by renting out their property. As to London’s housing shortage, I of course recognise the importance of London homes for Londoners, and the change will not remove the protection available in Section 25.

The Earl of Lytton (CB): I am sure the Minister would agree with me that the sort of occupation that would be facilitated by aspects of the proposed relaxation effectively becomes a form of commercial activity, and is treated as such for many regulatory, safety and taxation purposes. Would he not agree with me that, given the implications for the safety and amenity of regular residents, this matter is a proper concern of the development and building control functions that are exercised on a case-by-case basis on behalf of the community by the local authority?

Lord Ahmad of Wimbledon: My Lords, I assure the noble Earl that the Government have clarified that they intend to use the regulation-making power only to allow residents to let their homes on a short-term, temporary basis, such as when they are on holiday, without the need for planning permission. It is not intended to be used on a permanent or commercial basis. On the concerns that the noble Earl expressed, there will of course be safeguards. As he may be aware, provision will be made in the legislation for exemptions for areas and particular types of accommodation, which will be subject to review. Finally, I assure the noble Earl that we are working with local authorities, particularly those that have expressed concerns, to ensure that regulations provide the correct balance by allowing the kind of short-term letting that we wish to see while keeping the safeguards in place.

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Baroness Grender (LD): My Lords, does the Minister agree that for many tenants there remains a significant risk of eviction when asking landlords for entirely reasonable repairs? Does he therefore welcome the amendments from these Benches to the Deregulation Bill, which reflect Sarah Teather’s Private Member’s Bill on revenge evictions, which sadly did not make progress in the other place?

Lord Ahmad of Wimbledon: My noble friend makes an important point. She will be aware that the Government have looked at the issue of evictions carefully and we are generally supportive of the provisions in the Private Member’s Bill introduced by Sarah Teather. We will look carefully at that Bill to ensure that the correct provisions are made when this comes into legislation, but I share the sentiments and concerns that my noble friend has expressed.

Lord McKenzie of Luton (Lab): My Lords, the consultation that the Minister referred to ended last February, almost a year ago. Why have the Government taken so long to respond to it? If they claim to be in favour of localism and if they are intent on deregulating short-term lets, why should not London local authorities have the right to determine the extent, if at all, to which this deregulation runs in their areas?

Lord Ahmad of Wimbledon: As the noble Lord will be aware, we are working closely with London’s local authorities. As a former member of a London local authority, I can assure him that there is differing opinion between those boroughs within the central part of the capital city and those further afield. As I said earlier, it is important that we strike the right balance, I assure the noble Lord that we are working with local authorities in London to ensure that. We are working in conjunction with them to ensure that the provisions are in the interests both of residents who choose to let their homes and of those who choose not to.

Baroness Hooper (Con): My Lords, in his answers, my noble friend the Minister has referred to resident home owners letting on short lets. How does this apply to non-resident home owners? I appreciate that this is perhaps a particular problem in London, which suggests to me that London should be made a special case.

Lord Ahmad of Wimbledon: My noble friend makes an important point about non-residents. We have made provisions such that, for any non-resident seeking to take advantage of selling their property, there will capital gains tax and repercussions in that regard.

Economy: Prosperity of Towns


3.14 pm

Asked by Lord Greaves

To ask Her Majesty’s Government what proposals they have for promoting the economic prosperity of towns that do not form part of city regions.

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Lord Greaves (LD): My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I remind the House of my interest as a member of an urban local authority in a non-city region area.

The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Lord Ahmad of Wimbledon): My Lords, the Government’s long-term economic plan is already securing a better future and a stronger economy for our country. We have put in place a range of tools and incentives that give communities the freedom and flexibility that they need to drive economic growth. Growth deals build on the success of city deals and mean that every area of England, rural or urban, can benefit from powers and funding devolved from Whitehall.

Lord Greaves: My Lords, that Answer from the Minister sounds very nice, but the reality is that people in those parts of England that do not form part of big city regions—particularly, for example, those in the north of England that are not within the aegis of a handful of large authorities—feel very much as if they are being left in limbo when it comes to the devolution of power and the provision of resources to local authorities. Areas such as west Cumbria, east Lancashire —where I live—and many others feel left in limbo. Does the Minister understand that?

Lord Ahmad of Wimbledon: I am always pleased when my noble friend feels that I am being nice. Let me assure him that this is not about leaving any authority in limbo. The 39 growth deals that have been agreed thus far, and the additional funding for growth deals announced by my right honourable friend the Chancellor of the Exchequer in his Autumn Statement, will ensure that all authorities across the country can apply and can successfully bid for such growth funds. Indeed, Lancashire LEP has already secured £233.9 million from the Government’s local growth fund, which it estimates will create up to 5,000 jobs for the local area, and 6,000 new homes as well.

Lord Wills (Lab): My Lords, the Minister has just referred to the Autumn Statement. He will be aware that there is a widespread belief that the spending decisions in that Statement were driven at least as much by electoral considerations as by economic considerations. Will the Government now publish the details of the assessments of all the projects that competed for that funding, so that people can make up their own minds about how those decisions were taken?

Lord Ahmad of Wimbledon: Let me assure the noble Lord that this Government put the economy first, and indeed we are achieving success in that regard —I am sure that he appreciates that. As for the announcements on the second bid, I ask him to show a little patience, as we will be announcing those very shortly.

Lord Naseby (Con): Is my noble friend aware that in England’s largest town, Northampton, economic prosperity is happening? The university on two campuses

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is now provided with a nice new site on the river, there is a new railway station and a new innovation centre. The local authority, which happens to be Conservative controlled, and the leader of that authority are providing true leadership. None of that would be possible had that authority not been supported by Her Majesty’s Government, and in particular by Her Majesty’s Treasury.

Lord Ahmad of Wimbledon: I totally concur with my noble friend. I could not have put it better myself.

Lord McKenzie of Luton (Lab): My Lords, one of the acknowledged challenges of supporting growth, whether for city regions or otherwise, is the allocation of funding in what the noble Lord, Lord Heseltine, called “penny packets”. LGA research has shown that central government funding for growth has become even more fragmented, with the number of funding streams now having doubled since the noble Lord’s report. The LGA found that there are 124 funding schemes for local growth, spread across 20 government departments, amounting to £22 billion. On what basis does the Minister claim that this is providing value for money, and how is the related bureaucracy helping SMEs in particular to access support?

Lord Ahmad of Wimbledon: The noble Lord should look at the facts. My noble friend Lord Heseltine has been working very closely with the Government, but I can do no better than cite an area that the noble Lord, Lord McKenzie, knows well. In Luton, there has been a successful LEP initiative on growth funds—with Woodside Link, Bedfordshire, the building of the new link road in Houghton Regis will enable major employment growth and help reduce congestion north of Luton. The noble Lord need look no further than his own town, where he will see the benefits and the results of the Government’s schemes.

Baroness Farrington of Ribbleton (Lab): My Lords, would the Minister care to comment on the disproportionate allocation of resources and capacity for growth for many of the areas in the north of England, both the north-west and the north-east? This Government are disproportionately favouring his noble friends’ sort of areas at the expense of local authorities such as Preston and Lancashire. Does he agree that one of the most effective things for enterprise is for the local authority to ensure that it can match funding to make areas places that people want to live in, with decent services?

Lord Ahmad of Wimbledon: Suffice it to say that I do not agree with the noble Baroness. The local growth funds have demonstrably shown success up and down the country. I quote:

“Reaching this landmark deal is a real demonstration of central government’s confidence in our economic potential”.

That is from Edwin Booth, the chair of the Lancashire local enterprise partnership. Last time I checked, that was not down south, where the noble Baroness asserts that some of my noble friends may be.

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Lord Teverson (LD): My Lords, what mechanisms do the Government have to allow non-metropolitan local authorities that want to move ahead and work with neighbouring local authorities cost-effectively to move towards greater devolution? Is a channel for them to achieve that open now?

Lord Ahmad of Wimbledon: The essence behind local growth funds is exactly as my noble friend says. It is about empowering people at a local level: local enterprise partnerships, local councils and local businesses coming together to bid for local funds. Demonstrably, the 39 deals agreed thus far—and the new deals that we will be announcing—will reflect exactly what my noble friend seeks to achieve, which is local communities working together to achieve growth and jobs for their local area.

Lord Clark of Windermere (Lab): My Lords, does not the Minister realise that the noble Lord, Lord Greaves, reflects a view held especially in Cumbria and the north-east of England that, although they support the city regions, they feel left out, especially when the major infrastructure investment, HS2, stops 100 miles to the south of Newcastle and Carlisle in Manchester and Leeds? We will end up with a worse transport service, not a better one.

Lord Ahmad of Wimbledon: We all await the outcome of HS2. I believe that it will be positive for the country and, indeed, for the north. My right honourable friend the Chancellor of the Exchequer has already shown the Government’s commitment in the announcement that he has made in support of the regions across the country, and I am sure that if the noble Lord awaits the outcomes of the second bidding round, some of his concerns will be addressed.

Disabled Students’ Allowance


3.22 pm

Asked by Lord Addington

To ask Her Majesty’s Government whether any reform of Disabled Students’ Allowance will take full account of the case for encouraging independent learning and study for eligible students.

Lord Addington (LD): My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and draw the House’s attention to my declared interests.

Baroness Williams of Trafford (Con): The Government support the case for encouraging more independent study. In future, we expect higher education institutions to consider a more inclusive learning environment as part of their provision of support for disabled students, and our reforms support that.

Lord Addington: I thank my noble friend for that Answer. However, does she agree that at the moment the sector is very worried about what is coming, as it is

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seen as a cost-cutting exercise? If there were a clear statement that independent learning were to be at the heart of all the changes, it would to some extent head this off and give clarity of direction to the ongoing discussion.

Baroness Williams of Trafford: I understand that any change afoot will engender some sort of worry, but the DSA has not been reformed for several years now. We need to improve value for money within the system and balance the responsibility to disabled students between government and higher education institutions, and to make DSA sustainable, because it is a demand-led provision.

Baroness Uddin (Non-Afl): My Lords, given the communication difficulties associated with autism, the withdrawal of study assistance with human support could prove disproportionately detrimental to a student on the autism spectrum. What consideration have the Government given to the impact of their reform on students with autism spectrum disorders, the characteristics of which are not considered in the equality impact assessment?

Baroness Williams of Trafford: Dyslexia support is one of the highest funded considerations under the DSA. The noble Baroness referred to non-medical help. There is absolutely no intention to cut that support, but there will be more responsibility on higher education institutions to embrace that assistance because of their duties under the Equality Act 2010.

Baroness Grey-Thompson (CB): My Lords, I declare an interest as a trustee of the Snowdon Trust, which provides financial support to disabled students. I wonder whether any reform of DSA could also look at providing equal support for postgraduate students. When disabled students move from undergraduate to postgraduate level, the current maximum support drops by 50%, thus preventing some of our brightest and most talented disabled students from reaching their academic potential.

Baroness Williams of Trafford: The noble Baroness makes a valid point. Postgraduate funding is indeed less than undergraduate funding. How the reforms will exactly pan out has been under consultation and the Government will shortly provide guidance to institutions. I hope the noble Baroness has made that point during the consultation process.

Lord Stevenson of Balmacara (Lab): My Lords, under the new arrangements, each individual student will have to negotiate the package of measures they get from their university. In contrast to what happens at present—where there is a statutory framework—there will be no overarching arrangements. What happens when things go wrong? Who will have rights in this matter and where will the statutory rights be located?

Baroness Williams of Trafford: In terms of recourse if things go wrong, there are two directions in which a student can turn. The first is the Office of the Independent

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Adjudicator. The second is the exceptional case process, the format of which is under consideration and will be announced shortly.

Baroness Brinton (LD): My Lords, I follow on from the previous question. How will universities be held accountable to make sure that they are providing the appropriate support under the revised arrangements? Will there be a national benchmark to check that a minimum standard is being provided for students with certain conditions?

Baroness Williams of Trafford: My Lords, the universities—certainly those on the higher fee band—will have to put in place access agreements, which will be monitored by OFFA. As I say, there will also be the appeals process and the Office of the Independent Adjudicator to ensure that these reforms roll out smoothly.

Climate Change: UN Conference


3.27 pm

Asked by The Lord Bishop of St Albans

To ask Her Majesty’s Government what assessment they have made of the agreement reached at the United Nations climate change conference in Lima in December 2014.

The Parliamentary Under-Secretary of State, Department of Energy and Climate Change (Baroness Verma) (Con): My Lords, we secured the basis for everything that the UK Government want in the final agreement. We agreed that countries’ emissions reductions contributions must represent a progression on their current level of effort and be accompanied by information to facilitate understanding. We made progress in elaborating elements of the draft negotiating text and achieved a good result on climate finance by leveraging the UK’s leadership to help get more from other countries.

The Lord Bishop of St Albans: I thank the Minister for her Answer. I know that many people were very disappointed at the outturn of the talks. Is she aware of the little booklet produced by the Royal Society, A Short Guide to Climate Science, which assesses some of the scientific evidence and answers some of the concerns of those who believe that this is not a significant problem for us today? Can she assure the House that Her Majesty’s Government will give a bold moral lead among the international community as we prepare for the talks in December in Paris, so that we can get a significant breakthrough later in the year based on this solid scientific evidence?

Baroness Verma: My Lords, the right reverend Prelate is absolutely right that we need to show leadership. I am aware of the Royal Society’s recent publication A Short Guide to Climate Science and very much welcome its conclusions. It is an excellent and highly accessible summary of climate science and I recommend

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that those who are interested in the subject should read it. I would also like to assure the right reverend Prelate that this Government are absolutely committed to taking the lead and securing a science-led, binding agreement in Paris in December. We have worked very hard to ensure that other countries are working with us.

Viscount Ridley (Con): My Lords, given that the heart of the Lima agreement was merely “an invitation” for countries to define a carbon dioxide reduction target and that “may” was substituted for “shall” throughout the key text, does my noble friend think that sending a delegation to Lima was really worth all that money and aviation fuel? I declare my energy interests as listed in the register.

Baroness Verma: My Lords, I am always grateful for my noble friend’s interventions. I reassure him that to try to bring so many countries from across the globe to a meeting to discuss a point which currently affects us all is most important. Given that we know that sea levels are continuing to rise, polar ice continues to melt and we have increased global temperatures, we need to bring people to the table to discuss such important matters.

Baroness Worthington (Lab): My Lords, I am encouraged to hear that the Minister thinks that we need to increase current levels of effort. As noble Lords will be aware, we negotiate in climate talks as the EU, and the EU is currently on track to comfortably exceed its current targets. Does the Minister agree that to unlock ambition, it might be time for the EU to review—and be prepared to increase—its 2020 target, which we may meet as early as this year?

Baroness Verma: My Lords, the noble Baroness is right that we need to ensure that ambition is always at the heart of what we do. However, we need to make sure that the rest of the world is coming with us so that we all remain competitive as well. Although the noble Baroness is right that we keep raising our ambitions, we need to make sure that others’ ambitions are raised as well.

Lord Teverson (LD): My Lords, one of the interesting developments at Lima was the inclusion of a paragraph, in the document to go forward to Paris, saying that the use of fossil fuels should be ended globally by 2050. Do the Minister and the Government welcome that thought which was put forward and promoted very much by the Catholic Church? Is that not a good second bow to the very dry climate-change targets that we have at the moment, important as they are, and a really positive way to go forward?

Baroness Verma: I am extremely grateful to my noble friend for raising an important point. We are weighing up the position of developing and developed countries in trying to get on to the same trajectory, so we need to be sure about the impacts there will be on the developing nations as well as the developed ones.

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We need to encourage everyone to be less dependent on fossil fuels and to do much more on the renewables sector.

Lord McFall of Alcluith (Lab): My Lords, Lima did make progress although it also leaves a lot to the imagination. The key is the Paris conference, and as the right reverend Prelate said, that will demand moral leadership. Will the Government therefore endorse the approach of Pope Francis, who will not only address the UN on this subject in 2015 but produce an encyclical to be read at every Catholic church in the world, urging everyone that it is their responsibility to take action on a moral and a scientific basis?

Baroness Verma: The noble Lord raises a very important point—that it is an individual responsibility for us all to take. Collectively, that is what Lima managed to do—to bring countries around the table to move forward on the contributions they will make. I agree with the noble Lord that we need to look at it both as individuals and as countries. The Pope and many other leaders across the globe are taking climate change issues very seriously, and I am really pleased that it is now on the top of most agendas.

Lord Vinson (Con): My Lords, whatever the Government decide, does the Minister agree that it is important that the measures taken should have a measurable effect on world CO2 levels and that we do not put our efforts into things that are merely tokenist? To that first end, will the Minister assure the House that the Government are looking seriously at the development of small, modular nuclear reactors, which are inherently safe, can be factory built and cost a fraction of what the main, larger nuclear plants currently cost? That would ultimately give us endless forms of electricity, totally CO2 free.

Baroness Verma: My noble friend raises another very important point—that we need to look at a diverse range of energy sources, as we do. The Government are always looking at how to ensure that we have the most efficient and cost-effective measures in place to deliver secure energy to all people all the time.

Lord Rooker (Lab): While we are on the subject of morality, can the Minister explain to the British public, whose support is required, the morality of the ludicrous position of paying tens of millions of pounds to the owners of wind turbines in order to stop them producing electricity? It is ludicrous and will lose public support for many measures relating to climate change.

Baroness Verma: My Lords, it has always been the case, even under the previous Government, that when there is spare capacity it is cut off and the providers are paid for it. It is nothing new; I have not brought anything new to the table, and the noble Lord is not raising anything new. He might have an aversion to wind farms, but this has always been done, even under his Government.

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Lord Cormack (Con): The fact that it is not new does not mean that it is not stupid.

Lord Avebury (LD): My Lords, has my noble friend looked at the study by Oxford University’s department of engineering which showed that the development of tidal power in the Pentland Firth could supply 42% of Scotland’s electricity? Will she therefore encourage the development of these resources and promote them in other parts of the United Kingdom?

Baroness Verma: My Lords, I know that we have steered slightly away from the Question on the Order Paper, but I suggest to the noble Lord that this Government are looking at all types of energy to ensure that we have a diverse mix of energy so that we are not dependent on having to bring energy from abroad but can supply our own energy at a cost-effective rate to the British public.

NHS: Accident and Emergency Services


3.36 pm

The Parliamentary Under-Secretary of State, Department of Health (Earl Howe) (Con): My Lords, I shall now repeat as a Statement the Answer to an Urgent Question given in another place by my right honourable friend the Secretary of State for Health on major incidents and A&E performance in hospitals. The Statement is as follows.

“Mr Speaker, I welcome this opportunity to come to the House and make a Statement on accident and emergency services.

First, we must recognise the context. The NHS always faces significant pressures during the winter months, but with an ageing population we now have 350,000 more over-75s than four years ago. As a result, we are seeing more people turning up at our A&Es, with 279,000 more attendances in quarter 3 of this year compared to last and a greater level of sickness among those who arrive, leading to an increase in emergency admissions of nearly 6% on last year. This picture is reflected across the home nations, with A&Es in Wales, Scotland and Northern Ireland all missing key performance standards as a result.

A number of hospitals have declared major incidents over the past few days in what is traditionally a particularly busy time in A&E. A major incident is part of the established escalation process for the NHS and has been since 2005. This enables trusts to deal with significant demands, putting in place a command and control structure to allow them to bring in additional staff and increase capacity. It is a temporary measure taken to ensure that the most urgent and serious cases get the safe, high-quality care they need.

The decision to declare a major incident is taken locally, and there is no national definition. We must trust the managers and clinicians in our local NHS to make these decisions and support them in doing so by making sure that there is sufficient financial support available to help deal with additional pressures. I chaired my first meeting to discuss that support on

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17 March last year. On 13 June, we gave the NHS an additional £400 million for winter pressures, topped up in the autumn by £300 million to a record total of £700 million, ensuring that local services had the certainty of additional money and time to plan how it should best be used. The NHS started this winter with 1,900 more doctors and 4,800 more hospital nurses than a year ago. This planning and funding has been widely welcomed by experts in the system, including NHS England, NHS providers, the College of Emergency Medicine and the NHS Confederation.

The funding that the Government have put in, which is on top of the year-on-year real-terms increases in funding, is made possible by a strong economy and will pay for the equivalent of 1,000 more doctors, 2,000 more nurses and 2,000 other NHS and care staff, including physiotherapists and social workers. It will fund up to 2,500 additional beds in both the acute and community sectors and provide £50 million to support ambulance services.

However, the NHS also needs longer term solutions to these pressures. We are providing £150 million through the Prime Minister’s Challenge Fund to make evening and weekend GP appointments available for 10 million people, with over 4 million already benefiting from this. Our better care programme integrates, for the first time ever, health and social care services in 151 local authority areas, with plans starting in April to reduce emergency admissions to hospitals on average by 3%. We have funded the NHS’s own plan to deal with these pressures, the five-year forward view, with an additional £1.7 billion for the NHS in 2015-16 and £1 billion of capital over the next four years to improve primary care facilities.

Let me finish by thanking hard-working NHS staff across the country for the outstanding care that they continue to deliver under a great deal of operational pressure”.

That concludes the Statement.

3.41 pm

Lord Hunt of Kings Heath (Lab): My Lords, I join the Minister in paying tribute to the staff of the NHS who are facing such a pressurised situation at the moment. Does he accept that, for all the actions that he has listed today, the fact is that too many vulnerable people are currently being exposed to too much risk in the NHS as a result of the crisis in A&E? How many hospitals have declared major incidents in the past two weeks? Does he agree that the crisis has been caused principally by the savage cuts in social care and the chaos caused by NHS reorganisation? Why have the Government overseen the closure of dozens of NHS walk-in centres? Why did the Government oversee the replacement of qualified NHS nurses in NHS Direct by unqualified call-centre staff in NHS 111, who have computers programmed to encourage people to go to A&E? When will the Government get a grip?

Earl Howe: My Lords, the noble Lord will understand that I am under instructions to keep my answers brief, in the nature of Urgent Questions. To cover his main points, though, we have made social care a priority at the same time as protecting the NHS budget and

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reducing the deficit. Since 2010 we have allocated additional funding from the NHS each year to support social care worth £1.1 billion in the current year and £2 billion next year. With regard to walk-in centres, there is no evidence that the closure of those centres, where that has occurred, has resulted in additional A&E attendances. A Monitor report in 2013 found that closures were often part of reconfigurations to replace walk-in centres with urgent care centres co-located with A&Es. On NHS reorganisation, I simply point out to the noble Lord that the pressures that we are seeing in the English health service are replicated just as strongly in the NHS in Wales, Scotland and Northern Ireland. Our A&E departments are in fact coping even better than those in the devolved Administrations.

3.44 pm

Lord Tebbit (Con): My Lords, I wonder whether my noble friend will give consideration to helping those people who could not get appointments to see their general practitioners, some of whose surgeries were closed for five days over Christmas, by allowing or encouraging hospitals to set up general practices alongside their A&E departments, which would be open seven days a week, 24 hours a day, for people who registered at the hospital general practice. That would mean more funds for the hospital and less funds for the general practices that chose to close up in that manner.

Earl Howe: My noble friend has made an extremely important point. I have visited hospitals where that very model has been in place, for example, in Luton, where I went not so long ago. More and more hospitals are adopting this suggestion so that when people turn up at A&E they can be triaged immediately into urgent and less urgent cases, often to be channelled through to the GP service.

Lord Kinnock (Lab): I endorse the sentiments just expressed by the noble Lord, Lord Tebbit, unusual though that may be. I ask the Minister to commend those hospitals and health authorities that have introduced GP services as part of their A&E emergency response. I also draw his attention, if he has not seen them already, to the statements of the Royal College of Nursing and the College of Emergency Medicine. Both said emphatically that a substantial part of the reason for the present pressures is the effect of the reduction of local authority funding which means, in the words of one of the college leaders, that there is no community care. That has meant that people have to be accommodated in hospitals who would otherwise be in either their own homes or local authority homes. Is it not the case that the savage cuts imposed on local authorities, which have had a direct impact on commitment to care for the elderly especially, are to blame for a substantial part of this crisis? Will the Government consider, in addition to NHS funding, reversing at least some of those cuts?

Earl Howe: My Lords, I thank the noble Lord for his endorsement of the model which my noble friend proposed for GP presence in or alongside A&E departments. I fully agree with him on that. It works

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well. As regards local authority funding, social care expenditure, in particular, has decreased over the past three years. Obviously that has had an effect on the NHS. It would be idle to pretend that it has not. However he will know the very constrained funding environment in which we stand, and I understand that the party opposite has not undertaken to reverse the reductions in funding to local authorities for understandable reasons. That means that we have got to think clever, and one of the initiatives that we are launching next year is the better care fund which will bring together the NHS and social services in a meaningful way. By far the lion’s share of the funding in the better care fund will go to social services.

Baroness Barker (LD): Since 2010 there has been an average decrease in social care funding in local government of 26%. Are the Government tracking the coincidence of reductions in budgets for things such as continuing care beds and increased attendance at A&E?

Earl Howe: The impact of reductions in social care expenditure is not, I am afraid, entirely clear. I wish it were, because more people are now outside the formal care system. However, outcomes for service users within the formal care system have held up over the period.

Baroness Finlay of Llandaff (CB): Can the Government confirm that they are working with the College of Emergency Medicine—and I declare an interest as a fellow of that college—to manage their STEP programme? It requires sustainable staffing levels within emergency medicine departments, renegotiation of the tariff to make sure that they are adequately funded and dealing urgently with exit block. The college has calculated it would free 20,000 bed days if delayed discharges from the rest of the system were able to happen on time. The “P” of course is for primary care co-location which has already been addressed. Does the Minister recognise that these departments are working incredibly hard? Although people are waiting longer, by and large they are managing to protect outcomes for individuals who are severely ill and who are seen.

Earl Howe: I am grateful to the noble Baroness. It is worth observing that while the standard is that 95% of people arriving at A&E should be seen and treated within four hours, that standard has not been met in recent weeks. Nevertheless, on average, hospitals are seeing and treating around 90% of patients. The department is working closely with the College of Emergency Medicine. Indeed, I have the college’s paper in front of me. I am well aware of the issues that it has identified, but it is worth noting that the college says that the latest figures show that in England hospitals and their staff have coped extraordinarily well.

Baroness McIntosh of Hudnall (Lab): My Lords, can the Minister confirm that staffing, particularly of emergency medicine doctors, is acute in the sense that probably enough are being recruited but not enough are being retained in emergency medicine and that there is a significant loss of those qualified practitioners overseas? What is being done to address that?

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Earl Howe: I recognise that issue. Having said that, we currently have a record number of A&E doctors in the NHS, which is good, and across the system we have 1,800 more doctors and 4,700 more hospital nurses than we had a year ago. However, being an A&E doctor is a stressful occupation, and doctors are sometimes tempted to go overseas. We are concerned about the loss of any A&E doctor, and that is being looked at in conjunction with the royal colleges and the BMA.

Baroness Knight of Collingtree (Con): My Lords, there can be no doubt that the figures which we have been given by the Minister need to be looked at very carefully. It would be a miracle if this enormous demand could be faced with no financial troubles at all. However, does he recognise that there is quite a bone of contention, and that the argument is building up that those who bear the heat and the burden of the day working in A&E departments seem to get a fairly small salary compared to the enormous sums that are paid out to managers within the health service? I do not know whether it would be possible to rein that back a little, but if that is the case, it seems very unfair.

Earl Howe: I am grateful to my noble friend. Of course, rates of pay are a sensitive matter, and it is true that the constraints on pay rises over recent years have had an effect on the attractiveness of particular careers in the health service. We can do little about that in the short term, but there are ways and means of improving the work-life balance and working lives of those who work in the health service, even if we cannot increase their pay at the current time.

House of Lords (Expulsion and Suspension) Bill [HL]

Third Reading

3.52 pm

Bill passed and sent to the Commons.

Stormont House Agreement


3.53 pm

The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD): My Lords, with the leave of the House, I will now repeat a Statement made earlier today by my right honourable friend Theresa Villiers, the Secretary of State for Northern Ireland. The Statement is as follows.

“I would like to make a Statement on the political talks in Northern Ireland which culminated in the Stormont House Agreement on 23 December. When I last updated the House after the visit to Belfast of my right honourable friend the Prime Minister and the Taoiseach, Enda Kenny, I reported that 10 weeks of talks had so far failed to deliver consensus on any of the key issues. I made clear that the stakes over the coming days were high and that without an agreement before Christmas we were unlikely to get so close again for months, or even years.

7 Jan 2015 : Column 352

Further intensive discussions duly took place on Wednesday 17 December and continued on Thursday and Friday of that week. Resuming on Monday 22 December, negotiations continued overnight, concluding some 30 hours later at around lunchtime on the 23rd. At that stage, we presented the parties with a final heads of agreement, reflecting many weeks of discussion and with the input of both the UK and Irish Governments, in accordance with the three-stranded approach. Key issues covered included the finances of the Stormont Executive, reform of the devolved institutions, and the legacy issues of flags, parading and the past. I will take each in turn.

The agreement sets a path for the Executive to put their finances on a sustainable footing for the future, averting the impending budget crisis which was threatening the stability and credibility of the devolved institutions. That includes the implementation of welfare reform, with certain agreed adaptations paid for out of the Northern Ireland block grant, alongside efficiency measures and reforms to the public sector. Measures to improve the way the devolved institutions work, including provision for an official Opposition, a reduction in the number of government departments, and a cut in the number of MLAs by 2021 are also part of the agreement. A commission on flags, identity and culture is to be established by June and, based on the party leader discussions in the summer, proposals are set out by the Government which open the way for a devolved system of adjudicating on parades, to replace the Parades Commission.

Crucially, the agreement also sets out broad-ranging new structures to deal with the legacy of Northern Ireland’s past. These include an oral history archive, a new historical investigations unit to look at the deaths that occurred as a result of the Troubles, and an independent commission for information retrieval established by the UK and Irish Governments. All of these bodies are required to operate in a fair, balanced, proportionate, transparent and accountable way, preventing any group or strand of opinion from being able to subvert the process or try to rewrite history.

The new system puts the needs of victims and survivors centre stage and has reconciliation as a key goal. Consensus on how to deal with Northern Ireland’s past has eluded successive Governments since the Belfast agreement was signed 17 years ago, so the significance of the progress which has been achieved should not be underestimated. The Government have agreed to contribute £150 million over five years to help fund the structures dealing with the past, meaning that the PSNI can devote its efforts to policing the present rather than the past. That funding forms part of a wider package of significant financial support from the Government amounting to £2 billion of additional spending power. That is made up of a combination of new funding and important flexibilities in relation to existing resources and it is targeted at Northern Ireland’s specific circumstances—the legacy of its past, its divided society and its overdependence on the public sector.

Last, but certainly not least, the agreement paves the way for legislation to devolve the power to set the rate of corporation tax for Northern Ireland. A Bill will be presented to the House shortly for First Reading.

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If the Stormont parties press ahead on agreeing their final budget and on delivering welfare reform legislation, the Government will use all their best endeavours to get the legislation on to the statute book before Dissolution. The parties in Northern Ireland have made it clear that corporation tax devolution can help them to rebalance the economy and attract investment because of Northern Ireland’s unique position of having a land border with the Republic of Ireland. I welcome the fact that it is this Government who are delivering that momentous and transformative change, subject to the important conditions contained in the agreement, and I call on the Opposition today to commit to supporting the Bill as a key part of the Stormont House agreement.

The agreement involves compromise on all sides. It is fair and balanced and it has been widely welcomed. First Minister Peter Robinson hailed it as “a momentous step forward”. Deputy First Minister Martin McGuinness described it as “a remarkable achievement”, and,

“a fresh start we need to seize with both hands”.

President Obama said that Northern Ireland’s political leaders have shown that,

“there is a way to succeed for the benefit of all”,

and Secretary of State Kerry called their actions “statesmanship, pure and simple”. But securing an agreement is not the end point—far from it. There is much work ahead on implementation for the Executive, for the UK Government and, where appropriate, for the Irish Government. However, I give this assurance: if the parties in the Executive press ahead on that, the Government will implement our side of the agreement and we will do it faithfully and fairly. There are no side deals.

In closing, I pay tribute to Minister Charlie Flanagan for his crucially important contribution to the process. I would also like to thank the US Administration, and in particular Secretary Kerry’s special representative, Gary Hart, for their support. I thank all the officials at the Northern Ireland Office who worked on this process. Above all, I would like to record my appreciation for the leadership provided by the five Northern Ireland Executive parties.

In the Government’s view, the Stormont House agreement represents a genuine and significant step forward for Northern Ireland, offering the prospect of real progress on some of the most intractable issues we face there—problems that have defied multiple attempts to resolve them over the years. The agreement gives the five parties in the devolved Executive the chance to refocus and work together with renewed confidence for a more prosperous, more stable, more united and more secure future for the people of Northern Ireland. I urge them to seize the opportunities it presents to build a brighter future for Northern Ireland, and I commend the agreement to the House”.

4.02 pm

Lord McAvoy (Lab): My Lords, first, I thank the Government for making advance sight of the Secretary of State’s Statement available to us. Her Majesty’s Opposition welcome many aspects of the agreement that the Minister has outlined to the House. It is not perfect, but it is a genuine advance on the stalemate of

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the past two years. We congratulate the Secretary of State, the Parliamentary Under-Secretary of State and her counterparts in the Irish Government on their painstaking and, I am sure, at times painful facilitation of the talks.

Throughout the political impasse of the past two years, we have repeatedly called for a more active role from the Government. We hope that the right lessons have now been learnt about the consequences of disengagement for political stability and momentum in Northern Ireland. I am sure that the Minister will agree that there is no room for complacency. As we have seen in the recent past, unresolved issues such as parades and flags have the potential to fuel public concern and disorder, and therefore ultimately lead to political instability.

Her Majesty’s Opposition also pay tribute to Northern Ireland’s political leaders for stepping back from the abyss and restoring some level of public confidence in their capacity to move Northern Ireland forward. It is acknowledged that they face unique challenges in managing the transition from a society scarred by conflict and sectarianism to a normal society. However, this acknowledgment does not mean exemption from difficult political choices about priorities, or any expectation of blank cheques from this or any future Westminster Government.

Turning to the agreement itself, Her Majesty’s Opposition welcome the adoption of a viable budget for the next financial year. It is right that this includes some elements of welfare reform while excluding the pernicious bedroom tax, which an incoming Labour Government will scrap.

However concerns remain about the Government’s rush to introduce legislation on corporation tax devolution, a decision that will have profound implications for Northern Ireland and the rest of the United Kingdom. There should have been a proper consultation process, including an analysis of the financial impact of significant reductions in corporation tax on Northern Ireland’s block grant, before introducing legislation in Parliament.

It is good news that a comprehensive system has been agreed to deal with the past. It is to be hoped that, over time, victims and their loved ones will develop confidence in the integrity of the new architecture and get the truth and justice they have been denied for too long. We also support the Government’s decision to make new investment available to boost integrated education, which is one of the most powerful manifestations of what a shared future can mean.

However, I have a number of questions for the Minister. First, what assessment have the Government made of the impact on the block grant for Northern Ireland of reducing corporation tax to the levels in the Republic of Ireland? Secondly, what criteria will be applied to determining whether penalties will be levied by the Treasury next year in connection with welfare reform? Thirdly, what is the timescale for the creation of a new system to deal with the past? Fourthly, what negotiating process will now be put in place to deal with unresolved issues such as parades and flags, and other identity issues such as the Irish language? Fifthly, what process has been agreed to monitor the implementation of this agreement?

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These are genuine questions, to which we hope the Government have turned their mind. We do not want a situation where we are not totally and fully prepared—as far as possible—for any particular new situation in Northern Ireland.

4.07 pm

Baroness Randerson: My Lords, I welcome the broad support of the noble Lord and, in particular, the appreciation he has expressed for all of those involved in this process and the statesmanship that has been shown. However, I have to say yet again in this House that I reject all notions that the Secretary of State and the UK Government have been in any way disengaged from the process. The Secretary of State has been involved throughout the past two years in the processes that have gone on to reach agreement.

What changed significantly was that in the summer the leaders of the political parties asked the Secretary of State to become directly involved. Prior to that they were having discussions and negotiations—and, indeed, slowly making progress—on these issues but had failed to reach an agreement. It is significant that 12 weeks of intense discussions and negotiations, led by the Secretary of State and with the involvement, where appropriate, of the Irish Government, have led to this important agreement.

I regret that the noble Lord has not given the full support of his party to the proposal to devolve corporation tax to Northern Ireland. The desire for this across the community in Northern Ireland appears to unite both the political parties and the business community. They believe it is a significant issue for their future prosperity.

The noble Lord asked me a number of questions and I fear that I may not have been able to take down the full details. Obviously, I will review the record and write to him if necessary. However, I emphasise that the Government are keen to get working on the issues and with the bodies associated with the past, but I should point out that this needs Westminster and Assembly legislation. In contrast, we would expect the work on flags to be up and running by June. We are expecting the Executive to introduce legislation relating to welfare reform this month.

The noble Lord also asked me about corporation tax and adjustments to the block grant. There will of course be adjustments but precise details will have to wait until we know the rate and the precise shape of the plans for the devolution of corporation tax. As there has been with the Scottish Government and the Welsh Government, there will be appropriate discussions with the devolved bodies prior to the devolution.

4.11 pm

Lord Mawhinney (Con): My Lords, reflecting on the Statement just made by my noble friend, it is quite easy to understand why Peter Robinson and Martin McGuinness would be pleased to have an extra £2 billion a year to spend. I was less clear about what my noble friend meant when she said that this £2 billion a year would help to wean the Northern Ireland economy off its overdependence on the public sector. Will she explain what that means?

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Baroness Randerson: Perhaps I may first make clear to noble Lords that the additional funding is not £2 billion a year. It is £2 billion over a number of years in excess of five years. It is not £2 billion of additional money; it is £650 million of additional money over that period. The money beyond that is spending power associated with additional flexibilities granted for the Executive’s budget. The noble Lord asked about the efficiency of the public sector. The reforms that have taken place within the Civil Service and in the public sector generally in the rest of England, Scotland and Wales have not taken place to the same extent in Northern Ireland. Therefore, it is suffering from severe financial pressures. Those reforms need to take place. It is a condition of the additional funding that the Northern Ireland Executive embark on those reforms and we expect them to do that imminently.

Lord Shutt of Greetland (LD): My Lords—

Lord Kilclooney (CB): My Lords—

Lord Christopher (Lab): My Lords—

Baroness Garden of Frognal (LD): There is time. I suggest we hear from the Liberal Democrat Benches and then the Cross Benches before we come back to the Labour Benches.

Lord Shutt of Greetland: I welcome the Statement. I trust we are moving forward and that deadline diplomacy has worked. As ever, it is sad that we have to consider so much about the past. In the 75 paragraphs in the Stormont House agreement, 40 refer to flags, parades and the past. I note that the agreement establishes six new bodies; namely, a commission on flags et cetera, an oral history archive, a mental trauma service, a historical investigations unit, an independent commission on information retrieval, and an implementation and reconciliation group. It would be splendid if these bodies took matters forward, but of course they do not come for free. The document suggests that £150 million will be available over five years to help with these new bodies. What will the total cost of the new bodies be?

In particular, I welcome paragraph 69 under the heading “Outstanding Commitments”, which makes it seem just an afterthought. It talks about,

“initiatives to facilitate and encourage shared and integrated education and housing”,

and matters such as social inclusion. If we are really to see integrated services in Northern Ireland, what cost savings does the Minister believe there will be? It will be interesting to note, on looking further into the past, the contrast between the costs that we may well have to expend and what can be achieved in the future if we are to see some real integration.

Baroness Randerson: The noble Lord refers to the issues related to the past. As was made clear in the Statement, issues associated with the past in Northern Ireland are really the biggest factor that has eluded previous agreements. If this set of bodies proposed here are established and are able to work effectively, clearly considerable progress will have been made.

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Noble Lords will have noted that there are measures built into this to monitor progress; significant effort is being made to make sure that progress is monitored on a regular basis.

The overall cost of establishing those bodies is not of course precisely known. The £150 million in the agreement is the UK Government’s contribution to that cost but, since those bodies touch upon devolved issues, it is entirely reasonable and totally expected that the Northern Ireland Executive will contribute to their cost. Present arrangements are not necessarily working very well and cost money—so this is not entirely new money.

The noble Lord referred to the costs of division. He knows from his considerable experience that various estimates of the costs of the divided society in Northern Ireland have been made. They are variable, but they all show significant cost to that society every year.

Baroness O'Loan (CB): My Lords—

Lord Kilclooney: My Lords—

Baroness O'Loan: My Lords, the Minister gestured to me.

Baroness Garden of Frognal: Could your Lordships keep their remarks short? There will be time for everybody. I indeed gestured in that direction and apologise if that was the wrong thing to do.

Baroness O'Loan: My Lords, thank you. I have four simple questions.

First, a number of cases are currently excluded under the Stormont House agreement from the work of the historical investigations unit. Those cases were previously investigated by the historic inquiries team. However, Her Majesty’s Inspectorate of Constabulary has said that many of these investigations were most unsatisfactory. Can the British Government ensure that they will not be embarrassed in future because our Article 2 obligations are not being complied with?

Secondly, can the British Government and the Minister assure us that the Government will ensure that the historical investigations unit has access to all intelligence and information, particularly that held in this part of the United Kingdom by the security services, the Armed Forces and GCHQ?

Thirdly, what actions will the Government take to ensure that the historical investigations unit has the full legal powers that it needs?

Fourthly, does the £150 million have to provide for victims, or will they be provided for separately? On the matter of trauma services there is a massive unmet need in Northern Ireland: that is a costly and lengthy process.

Baroness Randerson: The noble Baroness first asked a question relating to human rights obligations. I am sure that she has noted the reference to that in the agreement. There is an awareness by the UK Government, and indeed all those involved, of the need to ensure

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that the processes abide by human rights obligations. Therefore, there is work to be done, in particular by the Executive but also by the UK Government, to smooth that process.

In relation to access to intelligence information, and indeed access to information in general, the UK Government will of course ensure that the required information is made available, while balancing the need to ensure the safety of individuals, which is an obligation that is always the case in these situations. It is our intention that the bodies concerned will have the powers they need to do an effective and efficient job, particularly on a timescale satisfactory to those who suffered during the Troubles.

Lord Dubs (Lab): Will the Minister confirm that the historical investigations unit will not be constrained from looking at any of the significant cases in the past? I could mention Ballymurphy and Finucane. Will it be able to look at those in the detail that it needs? Secondly, what is the relationship between the outcome of such investigations and the possibility that there might be recourse to the courts as a result?

Baroness Randerson: It is expected that when there is a need for recourse to the courts, obviously there will be police investigations and decisions by the DPP on whether to prosecute in the normal manner. There is certainly no concern about that process in our minds. I am sure the noble Lord will understand that there is work still to be done in ensuring that the detail is fully fleshed out with regard to the bodies outlined here. Your Lordships will see that although there is significant detail in the agreement and it has been well thought-through, obviously there is a lot of work still to do on the day-to-day way in which these bodies are to operate. It is expected that there will be a meeting later this month where work will progress further on the bodies suggested in the agreement.

Baroness Harris of Richmond (LD): My Lords, £150 million is indeed a significant sum to deal with the past. But I ask my noble friend the Minister: if at the end of those five years significant inquiries are still to take place that have not been resolved, what will the Government do then?

Baroness Randerson: The noble Baroness refers to the timescale that we are envisaging. For example, we hope that the historical investigations unit will be able to complete its work in five years. The Government of the day will have to consider the situation at the end of that time. It will be for the Government of the day to make that decision.

Lord Kilclooney: My Lords, I was involved in the talks leading to the Belfast agreement and representatives of all political parties with elected Members were involved in those talks. Why on this occasion were the elected representatives of one-third of the Unionist voters excluded from the talks that led to this provisional agreement? Is that the basis on which to get all-party support in the future?

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When it comes to corporation tax, I very much welcome the views expressed by the noble Lord, Lord McAvoy. Of course businesses in Northern Ireland have welcomed the move because they will be paying less tax. But the Minister has confirmed—at last—that if the Northern Ireland Assembly reduces corporation tax in Northern Ireland, the block grant will be reduced. That will mean less for hospitals and education. It will be rejected by many people across Northern Ireland.

Baroness Randerson: The noble Lord referred to the reduction in the block grant. That process is taking place with the devolution of other taxes. It is, of course, a decision that the Northern Ireland Executive would take in the light of their decision to pursue corporation tax devolution because the purpose behind pursuing it is to create a more prosperous society and to encourage the establishment of further businesses and further inward investment.

The noble Lord refers to the parties at the talks. I am sure that he is fully aware of the background details of how the talks developed over two years. It is therefore the case that the leaders who were there believed that at that time there was purpose in talking together.

Lord Christopher: My Lords, my question is extremely short. If I were a chief executive of a successful plc registered in London and corporation tax dropped to 12.5% in Belfast, as it is reasonable to assume, what reason would I give my shareholders for not moving my office to Belfast?

Baroness Randerson: The noble Lord raises a legitimate issue which the UK Government have considered and which I know the Northern Ireland Executive is bearing in mind, but it is something for the corporation tax Bill when it comes before this House.

Lord Morrow (DUP): My Lords, can the Minister give an assurance today that the proposed new historical investigations unit will not equate criminals and victims as coequals, that innocent victims will be afforded the respect and regard they deserve and that a clear distinction will always be maintained as the HIU takes forward its work?

Baroness Randerson: The historical investigations unit is being set up in a way which ensures that there will be cross-community support. I think that answers the point of the noble Lord’s question.

Lord Cormack (Con): My Lords, when I chaired the Northern Ireland Affairs Committee in another place, it became increasingly clear to us over the five years we were working that there had to come a time when a line was drawn. I ask my noble friend to bear that in mind in conversations with the Secretary of State. We have another five years, but we cannot have another five years after that and another five years after that. The people of Northern Ireland deserve to live in the future, not in the past.

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Baroness Randerson: While entirely supporting the final sentence of my noble friend’s comments, I ask him to bear in mind that it takes a very long period of time to turn around a society as divided as that of Northern Ireland.

Lord Bew (CB): My Lords, on the issue of the past, I welcome the Minister’s explanation that there will be careful monitoring of the results produced by this process. In the light of Mr Adams’ statement a mere three weeks or so ago that the IRA had no corporate memory and therefore could not, in the context of the Maíria Cahill case, contribute in any meaningful way to the work of historical recovery, it is slightly difficult to see how we can have, in the words of the Statement by the Secretary of State for Northern Ireland, a process which is “balanced, proportionate, transparent and accountable”.

One hundred and fifty million pounds is a lot of money. It is 20% of the amount allotted for the Northern Ireland Civil Service early retirement scheme. The taxpayer is entitled to reassurance that there will be careful monitoring of this process and that for this £150 million there will be something approaching a real, balanced process. This cost is proportionately far more than the historical aspects of the Bloody Sunday inquiry, which is reputed to be so highly expensive.

Baroness Randerson: The noble Lord points out the complexities of dealing with the range of issues that this agreement covers. The number of bodies being set up is significant. They fulfil a whole range of functions. It is intended that one of them should be established as an international body. It is intended that some of them operate completely independently of political representatives. Others do not, but there is always that balance when there is elected political representation.

It is important to bear in mind that the agreement makes provision for an implementation and reconciliation group to oversee the bodies and the work being done on the past. It is important to bear in mind also that the British and Irish Governments and the Northern Ireland Executive are committed to regular, six-monthly monitoring meetings to ensure that things are proceeding in the fair, balanced and transparent manner that I mentioned.

Lord Forsyth of Drumlean (Con): While understanding the particular circumstances in Northern Ireland, does not my noble friend think that there is a danger in this piecemeal constitutional reform? For example, what are we to say as unionists to the nationalists in Scotland who are demanding corporation tax powers on the grounds that it will help their economy when my noble friend is justifying corporation tax in Northern Ireland being set on precisely the same basis? Should we not be careful in moving forward with devolution that we do so on a basis that is balanced and clearly thought through? Is not my noble friend’s answer that she is not yet able to tell us what the effect on the block grant would be deeply worrying in the context of further devolution of tax powers?

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Baroness Randerson: The noble Lord points out that there is of course an inevitable read-across from one devolved nation to another. That is something that we are all very conscious of in relation to both Wales and Scotland. I should point out the one unique feature in relation to Northern Ireland: Northern Ireland shares a land border with the Republic of Ireland, which has a very much lower rate of corporation tax. Therefore, competition to attract business is very much more intense for Northern Ireland than it is for Scotland, Wales and England. It is important to bear in mind that unique position.

Pension Schemes Bill

Committee (1st Day)

4.32 pm

Relevant document: 12th Report from the Delegated Powers Committee

Clauses 1 to 7 agreed.

Amendment 1

Moved by Lord Bradley

1: After Clause 7, insert the following new Clause—


(1) A qualifying money purchase scheme may not sell annuities directly to anyone who has saved with the scheme unless this is the recommendation of an independent annuity broker.

(2) A relevant scheme may provide an independent brokerage service itself.

(3) A self-provided annuity brokerage service will be considered independent for the purposes of this Act if the provision of its services is subject to the direction of independent trustees.

(4) Pension schemes shall ensure that any brokerage service selected or provided meets best practice in terms of providing members with—

(a) an assisted path through the annuity process;

(b) ensuring access to most annuity providers; and

(c) minimising costs.

(5) The standards meeting best practice for annuity brokerage services shall be defined by the Pensions Regulator after public consultation.

(6) The standards set out in subsection (5) shall be reviewed every three years and, if required, updated.”

Lord Bradley (Lab): My Lords, decumulation is the process of converting pension savings into retirement income. I hope that, as we deliberate in Committee, we will try to avoid as much jargon on pensions as we possibly can to make it understandable not only to ourselves but to the public outside.

Our new clause on decumulation is aimed at protecting savers who default into an annuity with their same savings provider. At the start of Committee stage it is important to note that we are in a pretty dramatic and fast-changing environment for pensions. We must not forget those parts of the pensions market that are not currently working for consumers as well as they should. The amendment would provide safeguards for those who do not take advantage of the new flexibilities provided by the 2014 Budget changes, and for whom

7 Jan 2015 : Column 362

an annuity remains the best product. This may be the case for some who feel that they would still prefer the security of a product that guarantees them a set income for their entire lives, without the difficulty of making predictions about life expectancy. That can still be a very attractive option.

The ABI code of conduct requires members to encourage savers to use the open market option when choosing an annuity. However, 50% of savers still buy an annuity from the company they have already saved with. This situation could be further exacerbated by auto-enrolment, under which the majority will be enrolled by inertia. We know that, as a result of not shopping around, many get a much worse deal than they could have had, so this could have a serious effect on the size of their annuity. The National Association of Pension Funds estimates that those who do not shop around get up to 20% less in their annuity. The Financial Conduct Authority estimates that consumers could be missing out on up to £230 million in additional pension savings because they are not shopping around in the most effective way.

We know that this market has not served consumers well in recent years, and the process remains complex. The Financial Services Consumer Panel recognised this in December 2013, and said that a “‘good’ annuity outcome” might well require expert help. Our new clause would require the recommendation of an independent broker to sell an annuity to someone who has saved with the same scheme. This would protect consumers from getting a bad deal when taking a crucial decision in their lives. As was made clear in Committee in the other place, pension schemes should ensure that any brokerage service they employ on behalf of their members meets best practice in terms of providing members with an assisted pathway through the annuity process, ensuring access to most annuity providers and minimising the costs. Pension schemes have a duty to get the best possible deal for their members, or to do it themselves in-house. Such good practice can be found in pension schemes such as the Royal Mail and the National Employment Savings Trust.

That view flows partly from the significant evidence that the best way to get value for money on an annuity is to “bulk-buy” that annuity on behalf of the cohort of scheme members who are going to retire. For example, let us look further at the National Employment Savings Trust, which requires annuity providers to make sealed bids to provide annuities for those who have saved with NEST. It takes the cohort coming up to retirement and says to the providers, “We have X people. Given their personal circumstances, and taken together collectively, what offer of an annuity will you make?”. This seems a sensible way to proceed. It has the advantage of scale, and the expertise of the same pension scheme that built up the pension pot is used to turn it into a retirement income.

This is a brief opening amendment in the form of a new clause, so I shall summarise the position now. Annuities as they are currently constituted have not been delivering value for money for the whole of the market. The fundamental reason is that half of those coming to the point of annuitisation—turning their pension pot into an income—do not shop around for the best deal because it can be a complex, confusing

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and difficult process. Because of that and because of the advantages of bulk-buying by a professional expert, it seems sensible, for the consumer to get it right for their retirement income, to empower pension schemes to undertake that responsibility. As the new clause draws on best practice, I hope that the Government will see its merits. I beg to move.

Baroness Drake (Lab): My Lords, I have some sympathy with the thrust of Amendment 1, under which my noble friend seeks to protect pension savers from purchasing an annuity which is not good value for money or appropriate to their needs. If there was any doubt about the nature of the problems in the annuities market, the recent FCA report has clearly put those to rest. It makes evident the need for assisted paths for consumers through the annuity process. Notwithstanding the new freedoms, annuities still have an important role to play in securing retirement income, and we need the FCA urgently to push ahead with tackling the conduct of providers in the market. With the new freedoms and the anticipated product innovations that will flow from that, the Government and the saver are still very dependent on the market to make them a success and mitigate consumer risk.

The issue of assisting the consumer through the annuity process—the role of the employer, the responsibility of the saver and the role of the provider—is complex. No doubt later in Committee—at least, I hope we will; I hope that an amendment is winging its way—we will debate a second line of defence provision to control the conduct of providers selling retirement income products, including annuities, trying to enhance consumers’ protection when they are in the purchasing process. I hope that we can pursue in more detail how the Government can mitigate the pension saver’s risk when purchasing an annuity, when, I hope, we can get into a wider debate on a second line of defence across all retirement income products.

Lord Bourne of Aberystwyth (Con): My Lords, in opening for the Government on this, I welcome the comments of the noble Lord, Lord Bradley, regarding jargon. We certainly agree on that and I suspect that we will agree on much more as we proceed through the Bill. I, too, will try to avoid jargon and too many acronyms, which seem also to be a feature of the pensions landscape.

We fully appreciate the intention behind the amendment and agree that consumers must be given the necessary information and support on their retirement choices in this new flexible landscape, which I think we all welcome. As the Financial Conduct Authority’s Thematic Review of Annuities and recent published findings from its market study concluded, competition in the annuity market is not working effectively—as the noble Lord, Lord Bradley, said. That means that many consumers are not getting the most out of their hard-earned savings.

To be clear, annuities can be good value where the individual member selects a product that meets his or her needs. That is why the Government are legislating in the Bill to deliver a service providing the public with guidance. That will ensure that individuals can access

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the support that they need to understand and navigate their retirement choices—for example, to help them decide whether an annuity product is the right choice for them at all. Where they decide to purchase an annuity, they must be encouraged and supported to shop around for the best deal. Those are key objectives for the guidance and the Financial Conduct Authority’s rules will underpin it. I will come back to those issues shortly.

Turning to the specifics of the noble Lord’s amendment, I am not convinced that imposing additional costs on either some schemes or members is the best way to facilitate the increase in shopping around. The amendment would effectively require all schemes that offer an annuity to provide or source an independent annuity broker run by independent trustees and overseen by the Pensions Regulator. What is less clear from the amendment is who is to meet the extra costs of this provision. Although some 52% of schemes already offer an annuity broker service, requiring all schemes that provide annuities to their own members to offer or source such a service must come at an extra cost. These additional costs must either be met by all the members of the scheme, whether or not they use the service, or by those members who do so, on some kind of fee or commission basis. If it is the former, then clearly scheme costs increase for all members even if they were going to go and purchase their annuity or other product elsewhere. If it is the latter, then the effect would be to increase the costs of selecting annuities from certain schemes, making them less attractive, or requiring members to pay fees for a decision that they may have made in any event.

4.45 pm

The changes proposed by the noble Lord could restrict members’ choice because members would not be able to secure a pension income from the scheme unless a recommendation from an independent annuity broker had been secured. It might also have the perverse effect of meaning that the pension saver did not look at their own annuity provider because they feared the additional cost and went elsewhere, deterred from going for what might have been their best option. This would create a real risk—and I agree with the noble Baroness, Lady Drake, that risk is inherent in this and we must do what we can to ensure that the risks are minimised—that members would stop considering internal annuity products, even though this might be the best choice for them. It would particularly impact those whose scheme or provider offers them a guaranteed internal annuity rate. This can often be a higher rate than available on the open market, yet individuals would be deterred from considering it by the extra costs of using the brokerage service.

There is also the question of the proposed role of the Pensions Regulator. The Pensions Regulator primarily oversees occupational pension schemes. Many of the annuities offered and bought by members using their defined contribution savings are provided by contract-based pension schemes. These contract-based schemes are then regulated by the Financial Conduct Authority, which also oversees the wider financial services industry, including annuity brokerage. It is therefore not clear how the requirement for the Pensions Regulator to set

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standards for best practice for annuity brokerage can ensure the independence of all annuity brokerage firms offering this service, when they are all regulated by the Financial Conduct Authority.

Although we do not believe that imposing this brokerage requirement on all schemes is the correct approach, there is clearly a need for consumers to receive support in making retirement choices—I absolutely agree on that. This is why the Government and the Financial Conduct Authority are requiring pension providers to signpost customers approaching retirement to the guidance service and encouraging them to use that service, which, of course, is at no cost to the consumer. The guidance service will help consumers to understand their retirement choices, including the different kinds of annuity product available—for example, single or joint life or enhanced annuities for those with health problems. It will also provide consumers with information on how to proceed to the next step if they wish to purchase a product, for example by signposting them to the Money Advice Service’s impartial annuities comparison table.

The Financial Conduct Authority’s policy statement of 27 November 2014 reaffirmed the expectation set out in its own rules that firms encourage consumers to shop around on the open market whether or not they have sought guidance and that they should receive sufficient information, including a key features document, about the consequences of their choices before signing up to a purchase or variation of an existing contract. It also makes clear that it is possible for the provider to draw that to a customer’s attention, where the provider feels that the customer’s action is potentially inconsistent with their circumstances. Importantly, providers will be able to do this without overstepping the boundary into regulated advice.

The Government are also working with industry, in particular through working groups convened by the Association of British Insurers and the National Association of Pension Funds, to ensure that material communicated to customers is genuinely effective in encouraging them to engage with their retirement choices. This includes ensuring providers supply information to customers about their pension pots in a simple and accessible format so that they can compare their provider’s offerings with that of market rivals. The Financial Conduct Authority has also made a series of recommendations including that providers should make clear to customers how their annuity quote compares to other providers in the market.

The Financial Conduct Authority is currently considering how best to build on its market study as part of wider operational objectives of promoting competition and protecting the interests of the consumer. The Government look forward to seeing how this work will progress. We believe that this approach, which will allow individuals to make choices supported by an independent guidance service with access to the right information, is the right way forward. On that basis, I urge the noble Lord to withdraw his amendment.

Lord McKenzie of Luton (Lab): My Lords, can I probe the Minister on his response? It seemed that he was praying in aid the guidance service as an alternative

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to the proposition advanced in the amendment. We will obviously come on to discuss the guidance service more fully on Monday, but I understand that this is, effectively, an upfront and one-off sort of offer. With increased flexibility, are we not likely to be in an era where people will no longer necessarily make the cliff-edge decision on an annuity on day 1 of retirement but will wish to address that some time later during the course of their retirement? In those circumstances, if somebody was looking to purchase an annuity five years after retirement, and having had some income draw-down or other product in the interim, what would be in place to protect people in the annuity market at that point, as the Minister suggested, and not on day 1? Presumably, the guarantee will not be available to be provided on a free basis.

Lord Bourne of Aberystwyth: If I might first take the noble Lord up on one point, what is being proposed by the noble Lord, Lord Bradley, opposite is an alternative to the guidance service which is in the Bill. The guidance service will guide people and there will be a wake-up call via the literature provided before a member’s retirement telling them of the guidance service and with clear signposting to it of the options that face them on retirement and afterwards. It will not just be explained what you can do on day 1 but later on. We anticipate that many people will take that up. Some will not choose to do that, but it is clear that that sets out the pathways for the future. It is only guidance; any advice taken, whether immediately or later on, will of course be subject to the market. We believe that the choice being offered here—supported, as I understand it, by the Opposition—is important and that we can depend on a developing market with innovative products, in which members will be able to shop around not just on retirement but afterwards. All this will be set out in the wake-up call and the guidance that will follow once a member retires.

Baroness Drake: If I may presume to comment on my noble friend’s amendment, the Minister made the comment that it was being proposed as an alternative to the guidance. I do not think that it is. It is basically saying that guidance is guidance; that is what you would receive but you then move into the purchase or decision activity which flows from that guidance. It is what happens at that stage—the relationship between the consumer and the person providing the annuity, whether it is a scheme or a retail provider of retirement products—which is causing a lot of people anxiety. Some refer to it as the second line of defence; this is another way of addressing that. It is trying to regulate the quality of the exchange between the provider of the product, be it an annuity or in some other form, and the consumer at that point. That is a post-guidance activity, not a substitute for guidance.

Lord Bourne of Aberystwyth: I take the point that the noble Baroness, Lady Drake, is making on this issue, but it is clear that the guidance will set out the options available on annuities and, where appropriate, signpost people to taking advice. If they want to compare the annuity product being offered by their own provider with that of somebody else, all that will

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be set out. Whether it is an adjunct to or a substitution for it is somewhat academic. There is a cost associated with this and we believe that the proposals in the Bill, setting out the opportunities for guidance which will come at no cost to the consumer, are the right way forward. They will set out the options available to the consumer on retirement.

Lord McKenzie of Luton: If I may come back on that point, setting out the options available on retirement is one thing, but what happens if someone does not wish to annuitise on day 1? Five years down the track, their life circumstances may have changed dramatically—they may have married, there may have been a death in the family and all sorts of things may have happened to their life—which might mean that the original guidance is not as relevant as it might have been. What is going to protect people, as my noble friend Lady Drake said, from the issues of how the provider is acting at year 5 in those sorts of circumstances?

Lord Bourne of Aberystwyth: Clearly, any form of guidance is not going to be appropriate for ever on specific issues. The guidance is not intended to address the specific situations of every consumer; that is the purpose of advice. The guidance is indicating to people what they should do in their particular circumstance, at that stage, to look at the future. It is for those consumers to decide whether to take that option or not; that is the purpose of the guidance. It is not specific in the way that the noble Lord, Lord McKenzie, is suggesting.

Lord Bradley: My Lords, I am grateful to the Minister for his comprehensive reply on the new clause. The whole purpose of this and of many of the amendments we are tabling in Committee is to assure the public of their protections and to ensure that they have the information and that it is communicated effectively to them so that they can make proper choices at a crucial moment, or moments, in their retirement or post-retirement period. While we have immediately—probably quite rightly—started to discuss the guidance guarantee, I did not expect to start that process within 15 minutes of the start of the Committee stage. That will be an incredibly important part of our deliberations and, while it is very useful for the Minister to start to lay out the purpose and detail of that guidance, I know that we will have many opportunities to expand on that as we progress through the Bill.

The Minister has raised a number of fears about this new clause, which I will look at and reflect on carefully in order to ensure that the issues he has raised will be comprehensively covered by the range of activities to protect the consumer in the way that we want. I am grateful for the comments of my noble friend Lord McKenzie in support of the general thrust of this amendment, which is another attempt to get belt and braces around the advice and guidance to ensure that people are making sensible decisions.

As my noble friend Lady Drake said, we will be bringing forward the issue of a second line of defence, which is relevant to this general debate, again on the

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basis that we want to ensure that the public have confidence in the new arrangements that are being put in place and feel that there is protection for the decisions that they make. We will come back to whether guidance is sufficient to achieve that objective, but we need to look at these elements as a comprehensive package of attempts to achieve the objectives I have set out. However, in the light of the Minister’s comments and the opportunity to reflect on those for a later stage, I beg leave to withdraw the amendment.

Amendment 1 withdrawn.

Clause 8: Introduction and definition

Amendment 2

Moved by Lord Bradley

2: Clause 8, page 4, line 43, at end insert—

“( ) A statutory instrument containing regulations under subsection (3)(b) may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord Bradley: My Lords, Amendment 2, which is in my name and that of my noble friend Lord McAvoy, flows from the recommendations of the Delegated Powers and Regulatory Reform Committee’s 12th report of Session 2014-15. It should be stated at the outset of our deliberations in Committee that the ability to scrutinise this incredibly important piece of legislation, affecting millions of people already in a pension scheme, about to retire or starting the process of accumulating a pension pot, has clearly been limited by a number of factors.

First, many new clauses and amendments were introduced at a very late stage in the other place, so hampering its ability to scrutinise those aspects of the Bill. Secondly, to date, no draft statutory instruments are available for scrutiny alongside this piece of primary legislation, when that legislation relies on secondary legislation to make meaning of many of the proposals in the Bill. Thirdly, there is an incredibly short timetable to get this legislation through Parliament—I understand that implementation is still due to begin at the start of April, barely three months away. Fourthly, this is one of a number of pension Bills and Acts—I think we are up to four, but I am thinking particularly of the Taxation of Pensions Act—that this Bill is inextricably linked to. It is important that we are able to ensure that there are no tensions between the different Bills and Acts and that the freedoms and flexibilities do not in any way contradict the ability to have security of retirement income in future.

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I will balance those critical comments by saying that I thank the Minister for the courtesy he has shown in providing information to me and the Committee at the earliest opportunity and allowing discussion about it. However, it is still the case that a lot of information is still to flow on the Bill, which limits our ability for effective scrutiny. I must also make it clear that we are not fundamentally opposing the Bill; in fact, we are positively supporting it. However, we need

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to ensure that all the details of this legislation are in place so that the public, who will use their new freedoms and flexibilities, are fully aware of the consequences and do what is in their best interests in terms of lump sums or their retirement income.

In our view, the regulation-making powers conferred by Clause 8(3)(b) should be subject to the affirmative procedure rather than the negative. The Department for Work and Pensions’ delegated powers memorandum argues that the negative resolution procedure is appropriate because,

“the Department does not anticipate that there will be many situations in which benefits will need to be excluded from the definition of ‘collective benefits’”,

and gives the example of the with-profits arrangements that the Government may wish to exclude from the definition in this clause to avoid any potential for double regulation.

There is, however, the wider point that the powers conferred by this and other clauses to shape the regulatory environment for collective benefits leave the majority of the work in defining what these benefit schemes will look like to secondary legislation rather than primary. The Delegated Powers Committee said of the Bill that it is,

“remarkable for the number and density of the delegated powers it confers. For instance, Part 2 (which introduces the notion of ‘collective benefits’ in the context of private pension schemes) contains 28 clauses, all of which confer or amplify delegations of legislative power, and only two of which comprise any significant provision that does not confer powers”.

The committee also notes that the number of clauses introduced as the Bill progressed through the other place made it difficult to scrutinise them, as I said earlier. Taken together, those two points make scrutinising this important legislation very difficult. As a result, we will be seeking throughout Committee to get as many further details as possible about the shape of the regulations that are likely to follow. For instance, will the Government be able to produce any draft regulations ahead of Report?

While we support the provisions and want to see collective defined contribution schemes work, and have previously called for their introduction, we also want to be clear how they will work in practice. As I say, this relies on the secondary legislation. The House will be familiar with the potential benefits that can be provided by these schemes and I think it is worth reminding ourselves of them, as they provide tests for what we would like to see emerge as the market develops.

First, they can provide greater certainty to members as to the likely income they will receive in retirement when compared to individual defined contribution schemes. Secondly, they can lead to increased economies of scale when compared to individual defined contribution schemes. Thirdly, they can provide the opportunity for more efficient investment strategies that do not have to divest from relatively higher returning investments as the individual scheme members near retirement. Further, they could be popular with savers due to the fact that they can remove some of the complexity for the individual saver in assessing an income in retirement. Research from the IPPR has shown that the solidarity aspects of CDC schemes—the sharing of risk and reward—is also attractive.

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According to historic data, a CDC scheme would have outperformed an individual DC pension scheme by 33% in 37 of the last 57 years. We see the benefits of many of those factors in Holland and Denmark with the large economies of scale and reduced fees and other costs. It is also clear, while we are currently looking for models capable of providing better income in retirement for savers, that less than half of adults are currently saving adequately for retirement, and as many as one in five has no retirement resources beyond the state pension. This is a challenge that lies ahead.

Relatively recent progress in alleviating pensioner poverty should not obscure the effects of this. Some are given the impression that most pension pots are of sufficient size to enable the holders to head into the luxury car market, but research in 2012 from Partnership showed that more than half of those surveyed spent the additional money from their “enhanced annuity” on food bills, heating and electricity, and generally on paying for their cost of living. We also know that the median pension pot used to purchase an annuity in 2013 was less than £30,000, an amount that does not get you much of the way towards a Lamborghini.

In a recent Parliamentary Question which I tabled I asked what percentage of individuals had accumulated different levels of DC wealth—that is, the amount of money in the pot. The Answer was that 26% had an income pot of between £0 and £4,999. Taken together, 58% had a pension pot below £19,999. We therefore have to be realistic in our expectations about these matters and the effects that changes to the schemes may have. We are not talking about a vast number of people having huge amounts of money to which they will have access without consequences for what income they may get in retirement from those pension pots.

The challenge of providing a good retirement income is clear, and CDC schemes are a good way of meeting it. It is just not yet clear what the Government are capable of providing in terms of detail so that we can be sure that the schemes will achieve the outcomes that we expect in supporting them. Although we support the provisions in Part 2, we want the ability to further scrutinise the details on which collective schemes are based so that we can have assurances that they will achieve the objective that has been set.

I recognise that the Government have now taken a view on that. We believe that the affirmative resolution of the regulations is the best way of ensuring scrutiny by this House. I look forward to hearing, first of all, why the Government did not feel it appropriate to provide for the affirmative resolution in the first instance, and what proposals they will now bring forward to ensure that that scrutiny can be achieved. I beg to move.

Lord German (LD): My Lords, I have considerable sympathy with the amendment before us, not least because the chair of the Delegated Powers and Regulatory Reform Committee of your Lordships’ House would be very upset if we did not make sure that the report was brought before your Lordships’ House.

Pension Bills in the past—the report quotes pension Bills from the 1990s—were frequently used, with very much of the detail coming in the following regulation.

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However, as we know from the debates and discussions we have already had, there are no drafts available; we have had outlines and a sense of direction, but at the moment we do not have substantial amounts of supporting legislation drafts before us, as we might have had in much further primary legislation relating to welfare. The recommendation in paragraph 6 of the report of the Delegated Powers and Regulatory Reform Committee is clear. It says that,

“in view of the potential for the power to be exercised in a way that could significantly alter the constituent benefits included in the definition”,

of collected benefits,

“we are unpersuaded by the DWP’s explanation … why it considers the negative procedure to be an adequate level of Parliamentary control”.

Perhaps my noble friend the Minister in his response might tell us whether the Government will accept this report, and it might also help us if they say whether they would accept the other recommendations about the negative and affirmative resolution and first exercise recommendations which are in that report. That might save us a little time in the future.

Baroness Drake: My Lords, for the purposes of all of today’s business on the Bill I refer to the interests which I have registered as a remunerated trustee of both the Telefónica O2 and Santander pension schemes and the board of the Pensions Advisory Service, and as a non-remunerated member of the board of the Pensions Quality Mark and a governor of the Pensions Policy Institute. I am also a member of the Delegated Powers and Regulatory Reform Committee. That is like an act of cleansing; I hope that I have stated all possible interests that could appear to conflict with anything I might say today.

I support Amendment 2 and very much share the spirit of the contribution made by the noble Lord, Lord German, particularly his comments about the estimable chair of the Delegated Powers Committee. I accept that it will be a very significant challenge to get collective benefit schemes established in the first instance. As we heard from the NAPF and the ABI, there is little observed appetite from providers or employers, certainly at this stage, for engaging with such schemes.

There are other barriers and constraints to be overcome because collective benefit schemes require an assured flow of new members, excellent governance and full transparency, and the new freedoms with their emphasis on individual freedom rather than risk-sharing may well act as a further deterrent. None the less, for those of us who are genuinely interested in seeing the development of more efficient ways of risk sharing, the Bill provides the opportunity to set the founding legal framework and is therefore worthy of proper scrutiny. In fact, not to scrutinise would be a failure to engage with the work that has been done by the Minister for Pensions and the Department for Work and Pensions.

However, Clause 8 is a key and critical provision because it sets the definition for what are collective benefits, on which the rest of the clauses in Part 2 and many of the associated delegated powers depend. That is

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why it is so critical in its construct and its definition of the delegated powers associated with it. In my view, the power to set regulations under Clause 8(3)(b) should be subject to the affirmative procedure because the definition of what is or is not a collective benefit makes it so critical to the scope of the whole of Part 2, which deals with collective benefits.

Clause 8(2) defines what a collective benefit is but Clause 8(3)—the subject of this amendment—defines what it is not. It is not a collective benefit if it is a money purchase benefit or, more particularly, some other benefit of such a description to be specified in regulation.

I understand the Government’s reasoning when they indicate that with-profit arrangements, for example, provided by some insurers should not come within the definition of a collective benefit scheme. It is perfectly reasonable for the Secretary of State to want some flexibility to respond as the market develops and innovation occurs in scheme or benefit design.

Clause 8(3)(b) would allow the Government to use regulation to avoid schemes being subject to the expense of meeting the detailed requirements set out in Clauses 9 to 35 if they are deemed not to be proper collective benefit schemes. But the clause, in granting the Government power to significantly alter by regulation the constituent benefits that are not included in the definition of collective benefits, has the ability therefore to potentially remove members of schemes out of the protection of the requirements in the other clauses in Part 2.

This, of course, could have considerable implications for members and the scope of the whole of Part 2. The potential of this regulation to remove members from the protections they may already have by being in a designated collective benefit scheme, which subsequently a change of regulation deems that they are no longer in, makes it compelling that this remains a power that should be subject to the affirmative procedure. This should be as a general practice, not just in first use, because if collective benefits take off—one hopes that they do and we therefore have wide coverage and scale—any review or change to the definitions of the benefits embraced by such collective schemes will be of outstanding importance to the members.

Lord Bourne of Aberystwyth: My Lords, I confirm to the House and to the noble Lord, Lord Bradley, that the measures under the budget flexibilities are still intended to come into effect for April 2015. This is not the case for the measures relating to collective benefits.

The Bill is deliberately a framework Bill, which is generally the case with pensions legislation. As my noble friend Lord German indicated, it is not unusual to have significant delegated powers in pensions legislation; it is often the norm. The Delegated Powers and Regulatory Reform Committee has made recommendations concerning the powers in Part 2, and I will come on to look at those. I share the enormous respect in which the noble Baroness who chairs that committee is held by the House.

I confirm that the Government accept the views of the committee in respect of the powers in Clauses 9, 10, 11 and 21. We intend to table amendments on

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Report which will make regulations under those clauses subject to the affirmative procedure the first time those powers are used, as the committee recommended.

This amendment relates to the committee’s recommendation about the power in Clause 8(3)(b). This power allows regulations to specify benefits that are not to be considered collective benefits and therefore exclude such benefits from the provisions of Part 2, as the noble Baroness, Lady Drake, just indicated. The committee recommended that this power be subject to the affirmative procedure. I will now explain how we are unable to accept that recommendation in full, although we recognise that there is a strong case for affirmative procedure on first use. We have therefore accepted that.

Let me first give some background on collective benefits. Collective benefits are provided on the basis of investing members’ assets on a pooled basis, in a way that shares risks across the scheme’s membership and has the effect of smoothing out fluctuations, to a degree at least. The collective asset pool is managed on behalf of the members by trustees, or, in non-trust based schemes, by managers. We intend to use powers under Clause 9 to require that there will always be a target attached to collective benefits and that initial targets need to be achievable within a specified probability range. We will ensure that schemes offering collective benefits operate in a transparent and accountable way using a range of powers we have taken in Part 2, together with regulation-making powers in existing pensions legislation. Decisions about the rate of benefit ultimately paid to the member will be for the trustees or managers to make in line with their policies. We will consult fully on how best we use the powers in Part 2 to provide the appropriate framework for these benefits and to ensure good governance.

As the Government set out in the memorandum to the Delegated Powers and Regulatory Reform Committee, there needs to be flexibility to respond to new developments in scheme and benefit design that result in benefits falling within the definition “contrary to policy intention”, as I believe the noble Baroness, Lady Drake, recognised. This power was included in the Bill to ensure that, from the outset, the definition of collective benefits would not catch any personal pension schemes set up by insurers that offer with-profits arrangements that might otherwise fall within the definition.

The Government recognise that the committee rightly considers this a key provision, as it frames all that follows in Part 2 and defines it scope, that should be subject to parliamentary scrutiny. However, there are circumstances where the Government may need to use the power at a later date if new developments in scheme and benefit design result in benefits falling within the definition “contrary to policy intention”. This latter use of the power might require a very quick response to avoid members’ benefits being affected and to avoid schemes being subject to expensive requirements around the setting of targets, actuarial valuations and so on, which are not appropriate. I trust that noble Lords can see that the affirmative procedure could result in delay, leading to significant distress for members, who would wish the matter to be

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resolved as quickly as possible. This is why we believe that the affirmative procedure is inappropriate across the board.

As I have indicated, the Government therefore propose that, as with the powers in Clauses 9 to 11 and 21, the power in Clause 8 should be subject to the affirmative procedure on first use, allowing Parliament the opportunity to debate the scope of the collective benefits provisions when the regulatory framework is first set up, but that subsequent use should be subject to the negative procedure so that the Government can act quickly if necessary.

Turning to the noble Lord’s amendment, I hope that I have clarified the Government’s position on the Delegated Powers and Regulatory Reform Committee recommendations and my commitment that the Government will return on Report with amendments that will implement its recommendations on Clauses 9 to 11 and 21 in full, and in Clause 8 in part. I hope that the noble Lord will feel able to withdraw his amendment.

Baroness Drake:I come back to the point on which I was seeking clarification. If the affirmative procedure is used in the first instance on something quite straightforward, such as that an obvious with-profits policy arrangement is not to be included in collective benefits, but the subsequent use of the regulation under the negative procedure went to the heart, such as saying there is an existing collective benefit scheme and we take the view that it should cease to be a collective benefit scheme therefore retrospectively those members would lose the protections under Part 2, could the regulations not be used to weaken the protections that scheme members had?

Lord Bourne of Aberystwyth: The noble Baroness will be aware that the negative procedure will still provide a measure of protection. We are concerned about the protection of members where there is a need to move quickly. In those circumstances, retaining the negative procedure is the appropriate protection for those members.

Baroness Drake: I push the point as a courtesy because I care about establishing collective benefit schemes. I am assured by the chair of the Delegated Powers Committee—I wish he were standing next to me—that even under the affirmative procedure there is a provision which allows us to move quite quickly.

Lord Bourne of Aberystwyth: That would be an exceptional procedure. It is important for the industry and pensioners that we can provide assurance now that, where there is a need, there is provision to move quickly to ensure that collective benefit schemes are successful. I share the noble Baroness’s feeling that it is important that we give this a fair wind. We therefore recognise that there will be circumstances where the negative procedure is appropriate because of the great need to move quickly.

Lord Bradley: I thank the Minister for his explanation, for his more wide-ranging response to the report of the Delegated Powers Committee and for explaining the Government’s intentions in regard to the range of

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issues discussed and the recommendations made by that committee. It may disappoint him that that does not necessarily mean that we will not debate the clauses to which these regulations apply. There are wider points around those clauses which are not only about whether the regulations should be affirmative or negative. I hope the Committee will show tolerance as we go forward on that matter.

As my noble friend Lady Drake clearly and concisely laid out, Clause 8(3)(b) goes to heart of the definitions of collective benefit schemes. We need to be absolutely sure that, through debating the regulations, we understand fully the consequences of the schemes and how they will apply to the public who might rely on them. I accept entirely the need for flexibility, but I remain to be convinced that moving towards a negative position rather than a positive position through an affirmative vote in this House is the way to achieve that. As my noble friend Lady Drake pointed out, where there is a need for quick action to apply, there are procedures within the House to enable that. We are trying to support collective benefit schemes, and we want to ensure that they are properly scrutinised on behalf of the public.

However, the Minister said that he will be bringing forward amendments on Report. We shall reflect on the comments he has made on the issue and on why the Government consider that the negative procedure is appropriate. We shall think further about whether that is an acceptable position or whether we want the opportunity for further scrutiny through the affirmative procedures of this House. In the light of the comments made and the opportunity for further debate at a later stage, I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Clause 8 agreed.

5.30 pm

Clause 9: Duty to set targets for collective benefits

Amendment 3

Moved by Lord Bradley

3: Clause 9, page 5, line 2, leave out “or managers”

Lord Bradley: My Lords, the three amendments in this group stand in my name and in the name of my noble friend Lord McAvoy. Amendment 3 would remove the words “or managers” for collective schemes. In doing so, trustees would be required to be in place. Amendment 20 to Clause 37 would require managers to act in the best interests of members of the scheme, which seems an absolute minimum if they are to be relied on. Our proposed new clause sets out that trustees shall have a,

“fiduciary duty towards members of the scheme”.

That is an issue which will be debated here and further, and we believe it is essential for the confidence of schemes going forward.

It is my contention that the Bill does not go far enough on governance. The highest standards of governance are needed for schemes that could be even more opaque to their members than DC schemes are

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now. They have to manage pooled assets and, within that, conduct smoothing arrangements for the benefit of all members. This silence in the Bill occurs despite the Government’s consultation entitled,





ensions for





. Paragraph 22 states:

“Collective schemes are complex and can be opaque—because of the indirect relationship between contributions and benefits. This necessitates strong standards of communication and governance. We intend collective schemes to be overseen by experienced fiduciaries acting on behalf of members, taking decisions at scheme level and removing the need for individuals to make difficult choices over fund allocations and retirement income products”.

Failure to require all schemes to have high-quality trustees means that we potentially have some collective DC schemes run by trustees and others where private firms offer them. They could seek to maximise short-term returns that are not necessarily in the best interests of all members. We have consistently argued that all workplace pension schemes must be run by trustees and have a legal duty to prioritise the savers’ interests.

Our proposed new clause would require pension schemes to appoint a “board of independent trustees”. Those trustees would have a fiduciary duty to pension holders that would take preference over any duty owed to shareholders. This change in governance is designed to ensure that members of pension schemes get far better value for money. For example, in its market study, the Office of Fair Trading said that savers were not getting value for money in a contract-based market. A significant reason for that was shareholder interest in contract-based schemes predominating over the interests of savers. Not enough information is available on how schemes are operating and what is available. As has been said, it can be complex and difficult to understand, which is what stops this market functioning in order to bring down those costs.

International evidence, such as that laid out by Chris Curry, director of the Pensions Policy Institute, during the evidence sessions, suggests that a trust-based approach to schemes is preferable and leads to better governance. It would not require a large number of trustees to implement. Of the 200,000 schemes currently estimated to be in place, many are under the management of four or five insurance companies and therefore would be covered by governance boards made up of trustees attached to those boards. Of the remaining pension schemes, progress to trusteeship might be slower. Equally, it might be aided by the amendment to be discussed later when we will encourage scale in terms of pension schemes.

Through these amendments we want to ensure that there is strong and effective governance, that the trustees have a fiduciary duty to look after the interests of members as a priority, and that customers are treated fairly to ensure that their interests are prioritised over those of shareholders where there may be a conflict. The new clause that we have suggested would help to rectify the current shortcomings in governorship and, with the ability to appoint high-quality trustees in whom the members can have absolute faith, strengthen the whole process. I beg to move.

Baroness Drake: My Lords, I rise to support and speak to Amendment 10 in particular. I expressed the view at Second Reading that at some point, unfortunately

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probably later rather than sooner, the Government will inevitably have to place in statute a clear fiduciary duty on pension providers and asset managers to put savers’ interests first.

Why one goes through all the regulatory complication of setting up independent governance committees, giving them fiduciary responsibilities to monitor the behaviour of private pension providers, while exempting the private providers themselves—the people who make and implement the decisions—from such responsibility is a little beyond me. If the responsibility of the independent governance committees is an attempt to align scheme governance with the interests of savers, why should that responsibility not be put directly on to the decision-makers in the pensions industry? But we are where we are.

John Kay, in his review commissioned by BIS, also concluded that all those looking after someone else’s money or advising on investment should be subject to fiduciary standards of care. Many times from these Benches I have argued the case for extending a clear fiduciary duty to those who have discretion over the management of other people’s money. It is a principle that the Australian financial regulatory system has embraced and applies to retail pension providers, including an unequivocal requirement that conflicts of interest must be resolved in the beneficiaries’ interests.

Each time I try to present the arguments in a slightly different or novel way but increasingly the FCA appears to be providing the arguments for the proposition. We have had numerous reports on how the market is not serving pension scheme savers well, be it legacy schemes, annuities, lack of transparency on charges, and many other examples. The new FCA study, which examined how market conditions may evolve from April 2015, found that greater choice and potentially more complex products will weaken the competitive pressures on providers to offer good value. The chair of the FCA has said that the increase in regulatory rules has failed to prevent misconduct and does not seem to “prevent further problems arising”. The FCA director of enforcement and financial crime, Tracey McDermott, speaking at the FCA’s recent enforcement conference in London, referred to the need for a cultural shift among firms similar to the change in public attitudes whereby drink- driving was, in the past, avoided through fear of being fined, but is now seen as a moral issue.

It is clear from the flow of pronouncements from the FCA that the behavioural and cultural challenge within the pensions industry remains a major issue. They are telling us and demonstrating to us that regulatory rules have failed to deliver the cultures that embrace the ethic of care towards the customer. Time after time, reports, reviews and investigations confirm that the private pensions market is dysfunctional, with a weak demand side that cannot be expected or fails to self-remedy, and where the process of trying to provide for the savers’ interest in a competitive fashion does not work well. One is tempted to ask: how many reports of market failure in the pensions market do we have to receive before it is accepted that writing yet another set of rules will not solve the problem? What is needed is a game-changer to force the pace of

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change in providers’ behaviour by strengthening in law the principle that they must act in pension savers’ interests.

The advent of auto-enrolment raises the bar. At the heart of the governance structure for the private pension system must be the interests of the pension saver, and the law must require that providers identify and manage conflicts in favour of the saver. An alignment of interests is not sufficient. The saver’s interests must come first. It will be a major regulatory failure of public policy if millions of citizens are auto-enrolled into pension schemes but Parliament has not ensured that sound governance is in place.

Turning specifically to collective benefit schemes, which Amendment 10 targets, the case for the oversight of the management of such schemes resting with trustees with a clear fiduciary duty to the members of the scheme that takes precedence over other interests is even more compelling. Collective DC schemes are more complex in that they are designed to smooth income and manage intra- and intergenerational risk-sharing between members. The individual does not have a well defined pot over which they have individual ownership. Consequently, transparency is a key challenge and provides a potential breeding ground for conflicts of interest. Collective benefit schemes do not automatically guarantee higher retirement incomes. In order to be sustainable, collective DC schemes need scale, an assured flow of new members, full transparency and, in particular, excellent governance. If these schemes are not well run or if risks are unfairly shifted—for example, across different age cohorts—young savers could be subject to lower payouts.

The Bill has a significant number of delegated powers so there is much still to be understood. On governance for collective DC schemes particularly, the Bill is largely silent. But the complexity of what needs to be addressed is captured in Clauses 9 to 18. The Government appear to recognise the particular nature of the governance challenge in collective benefit schemes and the possibility that things could go wrong because they have added Clause 37 to enable the Secretary of State to impose a duty on managers of collective benefit schemes to act in members’ best interests. But that is not sufficient. If the Government are serious about encouraging and building collective benefit pension provision, the governance rules have to be robust right from the very beginning. The risks are too great to do otherwise and that means requiring a body of independent trustees with a clear fiduciary duty to the members of the scheme, which takes precedence over any other duty, to oversee the running of such collective benefit schemes.

Lord Bourne of Aberystwyth: I thank noble Lords who have participated in the debate on these amendments. The amendments in this group all relate to governance, and the Government recognise and agree that governance is key to effective choice in the pensions arrangements that are being brought forward. The amendments relate to governance in relation to various types of pension schemes in some way, shape or form, and, as I say, the Government recognise and agree that this is important. However, we believe that the new measures that we are delivering under the Bill, under the

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Pensions Act 2014 and under the Financial Services and Markets Act, as well as the proposed draft Financial Conduct Authority rules, seek to address the concerns raised in the most appropriate way.

5.45 pm

Under powers in the Pensions Act 2014, this Government are introducing a new approach to governance standards for all workplace occupational pension schemes. These will come into force from April 2015. The Government’s commitment to improving the governance of workplace pension schemes was demonstrated in the Pensions Act 2014 and in the subsequent publication Better Workplace Pensions: Putting Savers’ Interests First, which was launched on 17 October last year. This confirmed the Government’s plans to introduce governance standards in all workplace money purchase occupational pension schemes from April this year.

The Financial Conduct Authority has also completed a consultation on draft rules for independent governance committees for workplace personal pension schemes, to ensure oversight of these schemes in members’ interests from April this year. These proposals are built on an earlier agreement between the Association of British Insurers and the Office of Fair Trading to establish independent governance committees, and go further by introducing these on a mandatory footing.

The October command paper also included a consultation on draft regulations to place minimum governance standards on occupational pension schemes which are money purchase or have money purchase elements to them. This consultation ended on 14 November 2014, and the Government are currently considering the responses. Subject to parliamentary approval and any changes as a result of the consultation, the governance measures in these regulations will commence from April this year. This is in response to the Office of Fair Trading which, after completing its market study in the summer of 2013, proposed minimum governance standards for workplace pension schemes.

I want to make it clear that the Government believe that the right way is to build on the current landscape. It is critical that legislation acts to support the market to flourish and also to ensure appropriate protection for members. However, the amendment—as we read it—could mean a radical and expensive reformulation of the ownership of funds which are not currently held under trust.

Lord Bradley: I am grateful to the Minister for giving way. I want to be absolutely clear on the point that he was making about the regulations that have been brought forward for implementation from April 2015. They will apply to the new arrangements in the workplace schemes and the board of managers or trustees who will be responsible for them. First, will they be comprehensive in their coverage at that point, including any new collective benefit schemes that come forward soon after April? Secondly, will there be a fiduciary duty on that body to act in the best interests of members, as opposed to other interests?

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Lord Bourne of Aberystwyth: I shall deal with the second point first. As the Minister knows, there will be a contractual obligation with contract-based schemes, but there will not be a fiduciary duty. This is because the essence of a fiduciary scheme with trustees is that fiduciary duties are held by those trustees. A contract-based scheme will have contractual duties which may be greater or lesser than the fiduciary duties, but they are somewhat different. Perhaps I could come back later to the noble Lord with a detailed answer on his point about collective schemes, because I am not quite sure of the scope of that particular aspect.

Coming back to the serious point that I was making, this reformulation of ownership of funds could result in significant obligations. We need to be clear that, if this is the approach of the Official Opposition, then those are radical changes that will require quite an upheaval in the ownership of the way that the market is organised at the moment. I am not quite clear whether the Government have got it right that that is the basis of the amendment and the Opposition are going that far.

Turning to the point that I think the noble Lord, Lord Bradley, was making, we do not want to dictate that non-trust based schemes should no longer have a part to play in pension provision in the workplace. I am not sure whether I have understood that correctly and that is indeed the position of the Opposition. We want to make sure that there is appropriate protection in occupational and personal pensions, trust and contract-based schemes. We want to encourage innovation and not necessarily restrict to a single structure, because we think we can provide appropriate protections across the piece. Similarly, under the provisions of this Bill, schemes offering collective benefits and defined ambition schemes can be trust or contract-based, and can be occupational or personal pensions. It has been suggested in discussions outside this House that such schemes should be restricted to trusts—I do not know whether that is the Opposition’s position. Again, we recognise and respect the concern about and focus on governance—that is quite right—in respect of these provisions, but we do not wish unnecessarily to close down options for how such schemes must be set up in terms of trustees. We have already made separate governance provisions for these benefits and schemes, recognising the new types of risk that they bring. Instead, we want to encourage providers to consider entering this space with innovative products that consumers want, and we have separate, parallel governance provisions for this which we will come on to later.

On the point raised by the noble Lord, Lord Bradley, independent governance committees apply to money purchase benefits. We have other requirements for collective benefits under clauses in Part 2 and in Clause 37, to which we will come later.

It is important to be clear that a requirement to have trustees is not a panacea for the myriad of governance issues that we are debating today. Let us not assume that all trust-based schemes are always better governed than contract-based workplace pension schemes. While we value the role of the many good, indeed excellent, trustees running occupational schemes, we recognise that schemes are variable and the presence of trustees is no panacea for poor governance. There is

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no evidence that one governance structure necessarily or always delivers better outcomes than another. We consider that factors such as scale—which we will consider later—good governance and charge levels are among the key determinants of member outcomes, not whether a scheme is contract or trust based.

The governance of contract-based schemes has grown significantly stronger in recent years, led by the FCA with the “treating customers fairly” principles which have formalised firms’ responsibilities to their customers. The introduction from April 2015 of independent governance committees with a duty to act in members’ interests will further strengthen the governance of contract-based schemes. These points taken together are why we strongly believe that current measures and independent governance committees, rather than trustees, are the right response to money purchase contract-based or personal pensions.

The proposed new clause would also be a significant cost and burden for workplace personal pension schemes. Data from the National Association of Pension Funds show that just under half of the 1,200 schemes that it surveyed in 2013 had independent trustees and that trustee salaries range from about £10,000 to £35,000 a year, although it is true to say that not all trustees or trustee chairs are paid. Therefore, as your Lordships can appreciate, there would be considerable cost involved in increasing this figure particularly over the short term. It could even mean that trust-based schemes had to replace their existing trustees.

We have made separate provision for governance measures for collective benefit and defined ambition schemes, so we do not need independent trustee committees as well. The independent governance committee measures will apply to money purchase benefits, but we have made separate provision for the other schemes. Generally, provisions under Part 2 set out a number of regulation-making powers to make requirements in respect of key governance features: investment, factors affecting benefits, policies for dealing with deficit and surpluses, transfer values and so on.

More specifically, under Clause 37, referred to by the noble Baroness, Lady Drake, we have a regulation-making power that may require managers in non-trust based schemes to have a duty to act in the best interests of members when taking specified decisions in shared risk schemes and schemes offering collective benefits. This is because of the new types of risks that may arise in these new types of shared risk schemes and schemes offering collective benefits, which are different from money purchase benefits or defined contribution schemes. Therefore, Clause 37 takes a regulation-making power to impose a duty on managers of non-trust based schemes to act in the best interests of members when taking specified decisions.

Lord Bradley: On Clause 37 and the Minister’s assurance of the robustness of the independent boards, why is he resisting our amendment which says that managers “must” take those powers and apply them in the best interests of members, rather than only “may”?

Lord Bourne of Aberystwyth: This is probably the main difference between the approaches of the Government and of the Opposition. I do not think that we are miles

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apart on our desired outcome, but we believe that working with the industry, consumer groups and pension groups to achieve the best interests is the right way forward. If we can achieve the same end without making it mandatory, we believe that that is the right approach. It is probably at the root of the difference between the two parties that we believe that we are achieving the result without having to make it mandatory.

I recognise the spirit behind the amendment that has been brought forward and the Government accept the need for the appropriate corporate governance. Whether it is in relation to trust-based schemes or to contract-based schemes, we want the similar result of the managers or the trustees acting in the best interests of the pensioners. I want to reassure noble Lords that the matter that this clause deals with is of great importance to the Government, and we are working with the industry and the Financial Conduct Authority to ensure that we get the approach right.

On Amendment 3, which would change Clause 9, let me set out some context on Clause 9 and why we think that the amendment would undermine a key governance provision. Clause 9 sets out a regulation-making power which may require trustees or managers of schemes offering collective benefits to set targets in relation to any collective benefits that may be provided by the scheme. Ensuring that there is a target in relation to collective benefits offered by the scheme should enable the member to have a realistic picture of the benefits that they are likely to receive. This is important, as the member is handing over control of their investments to those running the scheme. A target will also help those who wish to plan for their retirement income to do so meaningfully.

Removing the ability to require managers to set targets, which is what the amendment would do, would undermine a key provision which provides additional governance and transparency about members’ collective benefits. The requirement to set targets in relation to collective benefits in Clause 9 works closely with the other aspects of the governance regime set out in Part 2 of the Bill. For example, it is our intention that the probability of meeting the targets will be assessed annually in a valuation report to identify whether it falls within a specified probability range. If it falls outside this range, this will trigger the scheme’s policy for dealing with a “deficit” or “surplus”.

I think that we all agree that good governance of pension schemes is essential. That is why the Government’s new governance standards, applying across all workplace pension schemes in respect of money purchase benefits, will protect members by ensuing that schemes are run in their interests. It is also why we have introduced Clause 37: to ensure that there is extra protection for members’ interests.

However, the Government are taking a proportionate approach and seeking to allow constructive forms of innovation by pension providers, as well as retaining flexibility to ensure that regulation remains up to date with changing requirements. On that basis, I respectfully ask noble Lords not to press their amendments.

Lord Bradley: Once again, I am grateful to the Minister for the comprehensive nature of his reply. I am sure that Hansard will correct that I am not the

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Minister—sadly—and probably never will be. We have slightly strayed into the next amendment, Amendment 4, on targets, so I will return to that when we debate that amendment to Clause 9.

Our purpose throughout is to ensure that members’ interests are protected, as the noble Baroness, Lady Drake, has clearly and effectively outlined. We are trying to ensure sound governance. The Minister has given assurances that the proposals being brought forward will achieve the same objective as our amendment. I will reflect on the issues that the Minister has raised and his sense that our views about trustees are not as soundly based as we believe they are. There will be an opportunity for that reflection before Report. In the light of those comments and the strong feelings on this side of House regarding trustees, at this stage I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

6 pm

Amendment 4

Moved by Lord Bradley

4: Clause 9, page 5, line 23, at end insert—

“( ) A statutory instrument containing regulations under this section which is the first exercise of such a power may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.”

Lord Bradley: Amendment 4 stands in my name and in that of my noble friend Lord McAvoy. Again, it flows from the recommendations of the Delegated Powers Committee. We have already had a response from the Minister about how the Government are handling this, but in the light of his preliminary comments about targets I think it is still worth our having a brief debate on this amendment.