Let me follow on from what my hon. Friend the Member for Nottingham East (Chris Leslie) has just said, which relates to the previous debate. The running theme is trust. Every one of the trade union organisations that signed up to the deal or had it imposed upon them in the pensions dispute has expressed reservations about clause 3. That is why amendment 10 from our Front-Bench team seeks to address that matter.
The logic is fairly straightforward, but let us get it on the record again. The Government promised a 25-year deal—a once-in-a-generation commitment that there would be no further reform of public sector pensions and that this would be guaranteed in legislation. However, clause 3—we had a discussion earlier about Henry VIII clauses—gives the Government extremely wide-ranging discretion, through the use of statutory instruments and all forms of delegated legislation, which, more importantly, includes the discretion to act retrospectively on what are clearly accrued pension rights over a long period. The saving grace, as presented by the Chief Secretary to the Treasury, was that the same protection would be written into this Bill as is in the Superannuation Act 1972—as my hon. Friend the Member for Nottingham East (Chris Leslie) said—which is that no changes would be made without the consent of the employees’ representatives. Again, that provision, which was promised, is not in the Bill.
What we now have in the Bill is the exercise of discretion, which breaks the commitment of the 25-year guarantee and does not even go as far as past legislative protection. The argument is that in future the Government will need the flexibility to introduce minor changes in legislation, without being impeded from making minor reforms or tidying things up. However, minor reforms or measures to tidy up the legislation—to reflect changed circumstances or change minor details of a scheme or pension arrangements—should be introduced by consent. Unions have never withheld that consent in past discussions about minor changes in pension provision. That has been the nature of the relationship between the Government and employee representatives up until now. This Bill breaks all that and undermines confidence not just in the Government’s commitments to date, but in their good will on this matter for the long term.
My amendments 3, 5 and 34 relate to exactly the same issue of trust. I am trying in some way to establish further transparency and openness in the management of the future pension schemes that will be established. Amendment 3 relates to valuations, which we discussed in the previous batch of amendments. As I have said, valuations are critical to all those involved in a pension scheme, and certainly to employees who have contributed over the years. They will want to ensure that the valuation is done effectively, on professional terms and with their agreement. That is why my amendment 3 would amend subsection (3)(c) of clause 10, which deals with valuations. As set out in subsections (3)(a) to (3)(f), the Treasury directions under which valuations will take place will include
“how and when a valuation is to be carried out”
and
“the time in relation to which a valuation is to be carried out”
but more importantly,
“the data, methodology and assumptions to be used in a valuation”.
If we are to have real employee participation in a scheme, which involves the management of their money—their deferred pay—it is critical that they are fully involved in the valuation process and therefore that they are consulted and agree to the data, methodology and assumptions to be used. Otherwise, we will yet again undermine members’ confidence in the process of evaluating their own schemes. I do not understand why that is not in the legislation throughout. I hope that the Minister can assure us either that I have missed the mention of full employee involvement in the Bill or that he is willing to amend it accordingly.
Let me turn to my amendments 5 and 34. Again, I just do not understand the drafting of the Bill. These proposals refer to the consultations that will be undertaken before scheme regulations are made. Again, this might seem like an esoteric point, but the scheme regulations are critical because they will determine the nature of the scheme under which the funds will be managed, contributions will be made and benefits will be paid. It is therefore critical that the regulations should be made following full consultation.
In legislation of this kind, when consultations take place and schemes are drafted that are likely to affect their members, the form of words that is normally used includes
“with a view to reaching agreement”.
That intention is always set out in the legislation. Indeed, those exact words are used in clauses 20 and 22 of this Bill. Clause 20(2) states:
“The responsible authority must…consult the persons specified in subsection (3) with a view to reaching agreement with them”.
My amendment 5 would simply put that form of words into clause 19, so that when consultation took place, it would be done with the intent of reaching agreement. I do not understand why it was deleted from that clause in the first place. This is just another way of seeking to reassure the employees, the members of the pension schemes, that they will be fully involved in the process, and that the aim, in introducing any changes to the scheme, is to reach agreement and secure their consent whenever possible. This is not a contentious matter.
I have also tabled amendment 34. An assurance has been given that there will be no further changes for a generation, or 25 years, that new schemes will come into force and that the vast bulk of them will, we hope, be defined benefit schemes, but the whole process involves the security of the elements of the schemes that the Government have guaranteed not to change. Those arrangements must be secured by agreement in the future. If those protected areas of the schemes, which the Government have until now guaranteed, are to change, there should not just be consultation with the employee representatives; there should be consultation with a view to reaching agreement. That consultation should have to secure that agreement. That would give the employees, the members of the pension scheme, the protection that they need, and the reassurance that nothing would be done to those protected areas of their pension without their agreement. Those areas include contributions and benefits.
The whole ethos of the Bill fails to recognise that pensions are not solely in the ownership of the Government or the employing organisation, and that they are paid for by the employees over the years. Those who have
paid into the schemes should therefore have a role in managing them. It is interesting that the Bill does not mention the representation of employees on the pension boards that are to be established. We should at least have a proper consultation process, and that process should involve some security that any changes, particularly to those guaranteed areas, should be achieved by agreement.
I do not know of any other walk of life in which people contribute towards the funding of an organisation or a benefit without having a role to play in the management of it, or at least in the direction of policy. The Government are saying in the Bill that those who have paid vast sums into their pensions should have no say, no role and no entitlement to have their views sought or to have agreement reached. I hope that the Government will take on board some of the amendments and send out a message to the trade unions that represent the members of the pension schemes that yes, they do recognise their rights and they do want them to be fully involved. That full involvement would reassure those members of the Government’s good will and willingness to adhere to their commitment to a 25-year guarantee.
4.15 pm
I come back to the point made by the hon. Member for North Down (Lady Hermon). On the interpretation of the law as it stands and on the basis of the legal advice we have been given over some time, my view is that pension contributions develop accrued rights and that they are protected in European law. My view is that when the Government proceed at some time in the future to interfere or tamper with those accrued rights, there will be a legal challenge. I believe that the Government will lose it, and then—four, five or 10 years down the line—legislative changes resulting from the European Court decision would have to be brought back to Parliament. At that point in time, there will be a cost burden on the Exchequer to compensate those people who will have lost out as a result of the proposed Government changes.
I believe that we should seek to avoid that, and the way to do so, as my hon. Friend the Member for Nottingham East has said through his amendment, is to ensure that those accrued rights are protected and that the Government do not have a vast array of powers retrospectively to interfere in people’s pensions. We can also protect pensions by ensuring that employees are, through their trade unions, properly represented and consulted—and, yes, their consent sought—on any changes that the Government might want to make in the future.