That comes down to how the legislation is drafted. There are different financial consequences for local government pension schemes than for other public service pension schemes. That is why we need clarity in the legislation. I am conscious that the Scottish National party Government in Scotland have argued that there is no need for a legislative consent motion to cover the matter because, in theory, the UK Parliament always had primary legislative power over the local government pension scheme in Scotland but has hitherto chosen not to use it. The Government in Scotland have been quick to accept the UK’s proposals, which is unusual, because they normally argue that more power should sit with Holyrood. The movement of the regulation-making powers means that the Scottish Government will not need to grapple with difficult decisions on the reform of certain pensions, but the Opposition feel it would be better for Members of the Scottish Parliament to have an opportunity to scrutinise and debate the application of the legislation to the local government pension scheme in Scotland. Amendment 11 to clause 3
would mean that the Bill would not apply to the local government pension scheme in Scotland unless that is explicitly approved by the Scottish Parliament. The hon. Member for Banff and Buchan (Dr Whiteford) and others have tabled parallel amendments—I gather they are in the third group, so we will probably return to this debate later.
Amendment 12, which is in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), relates to another key Government promise made to public service workers. It seeks to enshrine in the legislation another Government promise made to public service workers—the Government promised that their final salary schemes would be replaced with career-average revalued earnings schemes. That would ensure that public service workers continue to receive a defined benefit pension.
The Bill does not explicitly honour that promise, and clause 7 provides that schemes created under the Bill can be defined benefit or defined contribution schemes, or any scheme of any other description. That is fundamental to the arguments on the Bill, but it is also fundamental to the arguments that Hutton made and the agreements that were reached. All schemes were supposed to be succeeded by career-average defined benefit schemes. In some cases, the Government might like to continue small defined contribution schemes, but the amendment would not affect those; it would apply only to final salary schemes and ensure that they are replaced with another defined benefit arrangement. The amendment therefore simply seeks to put the Government’s promise to public service workers on a statutory footing.
A similar amendment was opposed in Committee, but the reasons given by the Minister were concerning. He claimed that the Government intended to replace the final salary schemes with career-average schemes, but that “the flexibility embedded in” the Bill
“could be helpful to scheme members in future.”
He added that
“it would not be appropriate for this Government to tie the hands of future generations and pension scheme members who might decide that, subject to the protection offered by the enhanced consultation and reporting obligations of clause 20, defined benefit schemes were no longer the most appropriate for public service workers.”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 291-292.]
That is not the first time we have heard the Minister’s bizarre argument that legislation could bind the hands of future Governments. No Government can bind the hands of their successors in that way. Unless the Minister has an insight into changes in the democratic process of which we are unaware, that remains absolutely the case.
Therefore, the argument that clause 7 provides welcome flexibility to scheme members now or in future is, in the Opposition’s view, potentially misleading. In the rare circumstances that a defined contribution scheme is better than the defined benefit one, and scheme members and the Government wish to change schemes to defined contributions schemes, clauses 19 and 20 allow that to happen. Clause 7 provides no flexibility that does not exist in clauses 19 and 20. If we do not make the amendment, we allow the Government to go back on their promises. We seek to keep them to their word on those arrangements.
I know that many hon. Members wish to speak to proposals in this large group, so I shall make my final point on the question of closing local government pension schemes. My hon. Friend the Member for Corby (Andy Sawford) and the hon. Member for Finchley and Golders Green (Mike Freer), among others, have had extensive experience of local government schemes. In Committee, there was anxiety that the Bill mentions closing existing LGPS schemes and beginning new ones. The problem with closing schemes is that there can be unintended and adverse consequences. We heard in Committee about triggering debts which might need to be crystallised on closure. Of course, not just big local authorities but small academies, charities and others are members of such schemes. They might find that they suddenly need to shell out one great lump of money simply because an existing scheme closes and the deficit needs to be dealt with there and then.
The Minister assured us that regulatory provisions did not require such crystallisation, and that there could be protections. The Opposition are not massively happy with that, but even if we accept the Minister’s word that closure does not mean closure, thousands of employers in the local government pension fund have individual admission agreements governing the terms of their participation—the agreements are not necessarily in a standard form, meaning that there could be thousands of different admissions contracts for the schemes. It is likely that at least some of the agreements will set out various powers for local authorities in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. That would put a massive strain on participating employers and could put some of them out of business.
The Minister gave assurances on some of those points in Committee, but he missed the problem that the Bill allows local authorities to close their funds. The Government cannot prevent them from doing so under the Bill. The problem of triggering debts therefore remains substantive. There is also the question of whether closure means closure or continuing a scheme. The Opposition believe that a different approach is needed and that the Bill needs better drafting, which is why we have tabled amendments 20 to 28. We are not trying to add costs to the public purse and are keeping the Government’s proposals, but we are saying that it would be better to amend an existing scheme rather than to close and reopen it. They are in some ways technical proposals, but it would be better to err on the side of caution and provide that new regulations can amend scheme rules to ensure that all future benefits are accrued according to the provisions of the Bill and negotiated arrangements.
Those are essentially my comments on the Opposition’s proposals. My hon. Friends and others have tabled amendments in this group, but I shall let them make the case for them.