My Lords, the government amendments in this group concern powers, which have been previously debated at length, to amend primary legislation and to make retrospective changes. I am hopeful that both sets of amendments will be well received across the House.
The amendments on powers to amend legislation follow on in particular from the recommendations of the Delegated Powers Committee. As the Delegated Powers Committee noted, the Bill as drafted contains “unrestricted” powers to amend primary legislation. The committee did not see a justification for such a wide scope to make changes without full parliamentary scrutiny. It recommended that the powers be limited to being able to amend existing primary legislation for consequential and consistency purposes only. We have looked at this, and agree with the committee.
While the powers currently mimic those in the Superannuation Act 1972, the predecessor to this Bill, there is no evidence of the powers being used for anything beyond consequential amendments in the past. We do not envisage a scenario where wider use would be needed in the future. The amendments therefore reduce the scope in line with the Delegated Powers Committee’s recommendations. The powers can be used only for consequential changes to current Acts, including changes that are needed to achieve consistency.
I should make clear that the amendments do not remove the power to amend primary legislation completely, since such a power is essential to bridge any gaps between pre-existing primary legislation and the scheme regulations, but they significantly reduce the scope of the powers to be used in ways that the committee felt could not be justified. I hope that this strikes a balance that the House can support.
The powers to make retrospective changes were also mentioned in the Delegated Powers Committee’s report, although it did not make any specific recommendations in this case. However, we have discussed these retrospective powers in detail in your Lordships’ House on a number of occasions, and I hope we are approaching a resolution that everybody can support.
Our amendments take account of amendments tabled at earlier stages by the noble Lords, Lord Eatwell and Lord Whitty, both of whom also have amendments on the Marshalled List today. I hope they feel that we have been able to take account of their arguments as we work through the detail in this complicated but
vital area. As I think we all agree, we must get this absolutely right and I hope the House will feel that our amendments achieve that.
As I have set out before, powers to make retrospective changes can be required for several reasons. Usually they are required to make minor or technical operational changes to allow the schemes to run efficiently, often for the benefit of members. They may also be used to make retrospective changes that are part of wider negotiations and which increase the likelihood of the Government and their employees reaching agreement on a package of reforms. Therefore, the Government firmly believe that such powers are necessary and should not be restricted.
However, the Government recognise that if there are insufficient protections against using these powers in an unfair way, even if we have no intention of doing so, this could damage members’ confidence in these reforms. That is why we have brought forward the new clause contained in Amendment 36 and the associated consequential amendments.
Amendment 36 implements a consent lock for any retrospective changes to pensions that have “significant adverse effects” on members. Members or their representatives would have to agree to such changes. Significance is a low but appropriate threshold—one that is on the whole favourable to members and not the responsible authority. It has already been used in the Bill and by some noble Lords in their own amendments. I note that the amendment tabled by the noble Lord, Lord Whitty, in this area refers similarly to “material” effects. If I may say so, he and I are talking about the same thing.
Indeed, our amendments mean that material or significant retrospective changes would require the consent of the members who are affected, or their representatives. Amendment 36 therefore provides an extremely strong form of protection against the unfair use of retrospective powers. It will give members who are significantly adversely affected, or their representatives, a veto on any such changes. The requirements to follow the affirmative procedure and to lay a report to Parliament will also continue to apply to safeguard wider interests, including those of the House.
The consent requirement will apply to changes that have a significant adverse effect on the pensions of all scheme members, whether active, deferred or pensioners. That means that they go further than the protections against retrospective changes in many existing schemes, including the NHS, local government and teachers’ schemes. They provide unambiguous protections for all members, not just deferred and pensioner members.
However, the consent lock will not apply to retrospective changes that have a significant adverse effect on non-pension benefits, such as injury and compensation schemes. Such benefits will continue to be protected instead by the enhanced consultation procedure of Clause 22. That clause requires consultation with a view to reaching agreement, a report to the appropriate legislature, and the affirmative procedure.
Injury and compensation schemes cover people by virtue of their particular employment, not whether they happen to be members of a public service pension scheme. The persons covered do not accrue an entitlement throughout their career in the same way as a pension,
but rather receive benefits that are calculated at the point of claim. Moreover, those schemes are entirely funded by the employer with no employee contribution. We therefore think that a veto power over changes to injury and compensation schemes that might in some cases be regarded as retrospective would give disproportionate influence to members. None the less, I should make clear that reforms to current injury and compensation schemes are not contemplated by this Bill.
I therefore hope that the House will be able to support these amendments. I believe that they provide excellent reassurance to members that the retrospective powers will not, and indeed now cannot, be used in ways to which they do not consent.
I hope that the House will find it helpful if I speak to the other amendments in the group. The amendment of the noble Lord, Lord Whitty, would restrict the scope of powers to make retrospective changes such that they could make only non-material changes. As I have said, we believe that the scope of those powers should not be categorically restricted. Flexibility can be desirable—I mentioned the possibility of members consenting to significant changes if they are part of a wider negotiating package—and it is much more important that we give members a fair say in what affects them. Our amendments do that, with a veto power no less. So, in the light of our amendments, the amendment of the noble Lord, Lord Whitty, is unnecessary.
The amendments of the noble Lords, Lord Eatwell and Lord Davidson, would take away the clear responsibility of the responsible authorities to make a judgment on the effect of retrospective changes. It is not entirely clear who would take a view instead, but it might well end up being the courts. The difficulty here is that these are decisions—what is significant and who is affected?—that require a clear decision in order to start the right consultative process. Someone has to take a view on the nature of the effects in good faith. In our view, the authority is best placed to do that, given that it operates the schemes and would initiate and implement any changes.
Public authorities should not be held to unrealistic standards of judgment. That is inefficient, encourages inaction or excessive litigation, and hampers their ability to deliver their public functions. Not all effects will be so clear cut as to leave no room for disagreement, so it is right to leave a small margin of safety.
If responsible authorities do not exercise their judgment reasonably, they do so at their own risk. Of course, members can always challenge the decisions of the responsible authority on this point as part of the consultation, or even in the courts. So there is no justification or incentive for the authority to act irresponsibly or without good faith. Although I can understand the reason why these amendments have been tabled, I fear that I cannot support them.
However, I hope that the House is reassured that just because there is a small element of subjectivity, that does not mean that the way is open for the responsible authority to act in an arbitrary manner. More importantly, I hope that the House will agree that the Government’s amendments on retrospection provide excellent protections to members.
The Government have listened carefully on this topic and have brought forward sensible amendments inspired by previous amendments tabled by Members on the other side of the House, and I urge noble Lords to support them.
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