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Lords Chamber

Volume 819: debated on Wednesday 9 March 2022

House of Lords

Wednesday 9 March 2022

Prayers—read by the Lord Bishop of Leeds.

Green Skills

Question

Asked by

To ask Her Majesty’s Government what consideration they have given to introducing a national green skills strategy to ensure that the workforce has the necessary skills to meet the United Kingdom’s net zero emissions commitments.

My Lords, the Net Zero Strategy sets out our plans to work with industry to create the skilled workforce needed to deliver our net-zero targets. This includes green apprenticeships and retraining boot camps. The Government are establishing a green jobs delivery group, co-chaired by a government Minister and an industry representative, where government, industry and other key stakeholders will work together to deliver the skills needed for net zero.

My Lords, I declare my interests as set out in the register and thank the Minister for that Answer. Green skills will be fundamental to economic growth and the levelling-up agenda, as well as to achieving net zero. While I recognise that much is going on in various parts of the forest, will the Government now bring together all the various agencies and departments with business and industry to provide a comprehensive and systematic strategy for skills? I also take the opportunity of the Minister being at the Dispatch Box to ask whether, given the reports in today’s papers about onshore wind, the Government will now give my Private Member’s Bill on the issue fair passage.

I thank the noble Baroness for her question. Before I answer, I will detain the House for a moment to acknowledge that, after 52 years of distinguished service in Parliament, this is the final appearance of my noble friend Lord Tebbit, who is joined by his family in the Public Gallery. I am sure I speak for the whole House in saying that we have been greatly enhanced by his presence here and wish him the very best for his long and happy retirement. We on these Benches will miss him.

Going back to the question of the noble Baroness, she makes a very good point. We are bringing together the Green Jobs Taskforce, chaired by my right honourable friend Minister Hands, with representatives from the DfE, the DWP and all the key departments in Whitehall. With regard to her Private Member’s Bill, we have an energy Bill coming up which will deal with many of these matters.

My Lords, is my noble friend aware of the great amount of consideration that should be given to the horticultural sector, which can offer so much? It has a shortage and is crying out for skilled jobs. What can my noble friend do to assist?

My noble friend makes a very good point. There are a number of different apprenticeship standards supporting green skills. The horticultural sector is very much a green skill, so I totally agree with her that we want to do all we can to encourage this important sector.

My Lords, I join the Minister in paying tribute to the noble Lord, Lord Tebbit, for his long and distinguished service to this House and the other place.

Could the Minister set out for the House the specific skills that the workforce needs to develop and obtain to meet the UK’s net zero commitments?

That is a very wide-ranging question. There are a number of them, but I can give some examples: the wave 1 and 2 skills bootcamps in green subjects, such as housing retrofit, solar and nuclear energy, vehicle electrification. We have 40-plus apprenticeship standards in digital, STEM, nuclear, forestry, manufacturing et cetera—there are a number of them.

My Lords, the International Energy Agency confirms that global emissions are again rising fast. Sadly, it looks as though even if we achieve the UK net zero aim, which is commendable and something that we all want to see, those emissions will continue to rise fast and take us further and further away from the Paris targets. Is it not necessary to think about not only skills for our own net zero but skills to develop entirely new initiatives both in the production of low-carbon energy and in carbon absorption, which has been rather neglected and can be met on a much bigger scale—not only by trees but by entirely new strategies which are now being discussed?

Indeed, my noble friend makes a very good point. The UK is responsible for only 1% of worldwide emissions; it is very much a global problem that we have to work internationally to tackle. There are many exciting new developments in a whole range of industries and technologies that we want to encourage as much as possible. Technology could be our friend here.

My Lords, over one-third of our homes are inadequately insulated, and yet after many failed green deals, the industry that will actually deliver the solution to the problem has lost confidence. It says that if it is going to invest in research, equipment and skills training, it wants the confidence of the Government’s home insulation targets placed firmly into legislation. Why have the Government refused?

We are working very closely with the retrofitting insulation industry. The noble Lord is aware that we are spending billions of pounds helping low-income families to upgrade their accommodation in the low-income private sector, social housing and through local authorities. This is a well-advanced programme, and we also have the ECO scheme which spends up to £1 billion a year on green retrofitting measures, so there is a lot going on this sector.

My Lords, over four decades ago there was a similar scheme to try and push green jobs, based on a fairly similar tripartite-plus system. It was not a great success, although it had a lot of support. Will the Minister ask his civil servants to see if there are any lessons to be learned from that experience that will make sure it works now?

I thank the noble Lord for his suggestion based on his long experience in government. I will certainly pass on that suggestion to my ministerial colleague, and I am sure we would want to learn lessons from past experiences.

My Lords, if my noble friend believes the Government’s strategy when it says that green energy will create more jobs at higher pay than producing an equivalent amount of conventional energy, does that not mean it is wasteful, and that green energy must be more expensive than conventional energy?

It is the entire sector, not just the generation of energy; it includes all the retrofitting standards, the upgrading of insulation, new homes built to higher standards and others that have been mentioned. We are confident that there will be a net increase of jobs, but we do have a legally binding commitment to net zero which we need to pursue.

My Lords, I join the Minister in paying tribute to Lord Tebbit, who was inspirational to me, as an 18 year old, to get involved in politics, and I thank him for all his service.

I have a background in recruitment: can the Minister tell me how many individuals he estimates would be needed in, say, the next five years to join a green skills workforce?

It is very hard to put a precise number on that, but I can give my noble friend some figures. Our net zero strategy supports up to 190,000 jobs by the middle of the 2020s, and up to 440,00 jobs by 2030.

My Lords, the major IPCC report out this week said that the shift from incremental change to transformational change was crucial, given the fact that carbon emissions are heading in the wrong direction. Do the Government really think they are finding the true innovation, the true change, rather than just doing business as usual with a bit of greenwash added?

It is very much not business as usual. As the noble Baroness will be aware, we have one of the most ambitious decarbonisation targets in the western world. We have decarbonised faster than most other industrialised countries. I am sorry if the noble Baroness does not like that, but it remains a fact. As I said in an earlier answer, we are responsible for 1% of worldwide emissions. Yes, we need to make progress in this country, but we also have to look at a global scale and work with partners across the world to bring down their emissions as well.

My Lords, can I make a plea to the Government? So often when we talk about green jobs—as has been mentioned already, in fact—it is nearly always around green energy, renewable energy and all of that side, whereas there is a huge need for those skills that are meeting the biodiversity emergency in this country and globally, as the noble Baroness, Lady Fookes, said. In particular, I mean biologists, ecologists, horticulturalists and farm advisers—there is a real shortage of these. If we want that emergency to be solved as well, we need jobs and training in that sector.

My Lords, there is no denying that environmental illiteracy is a major problem in both the public and private sector. What measures are being taken to embrace technologies such as smart meters to change behaviours?

One of my ministerial responsibilities is the smart metering programme, which has quietly gone ahead in the background. I forget the exact figures, but I think we now have 25 million smart meters installed in this country, and the programme is already delivering net benefits. We have launched a publicity drive to drive take-up even further, and we are looking to see what we can do to expand it even more, because smart meters are a very good thing.

Trade Talks with India, Greenland and Israel

Question

Asked by

To ask Her Majesty’s Government, further to the opening of trade talks with the governments of India, Greenland, and Israel, what steps they intend to take to support parliamentary scrutiny of the negotiating objectives.

My Lords, the Government welcome parliamentary scrutiny of our negotiation objectives. The India objectives were recently published, and we will publish our negotiating objectives for our updated Israel agreement in due course. The Government are negotiating to swiftly restore the terms of our trading relationship with Greenland. If the IAC should publish a report on these objectives, of course the Government will consider it with interest and facilitate a debate on the objectives, subject to parliamentary time.

My Lords, in addition to that, I should say that the Minister very nicely, at 10 pm last night, sent me an extremely helpful letter which said that, as the International Agreements Committee had been asking, there would be an exchange of correspondence between the Government and our committee about how we deal with scrutiny. We have been asking for that since September, so I welcome the letter sent last night. In light of that, it would be a bit churlish, perhaps, to say that it was a shame that the New Zealand agreement was published before it had been shared with our committee, so let us put that to one side. For the moment, I thank the Minister for managing to engineer this big move forward and just ask him to confirm that when that exchange of letters has been agreed, it will be published in the normal manner.

My Lords, it is a great pleasure to be congratulated by the noble Baroness; I have a high respect for her and for the committee she chairs. I apologise that there was a little bit of confusion in the timing of the New Zealand publication. It was a bureaucratic error because so much was going on, and I apologise to the noble Baroness and the House for that short delay.

My Lords, Article 218 of the Treaty on the Functioning of the European Union deals with all agreements between the EU and third countries. It says:

“The European Parliament shall be immediately and fully informed at all stages”.

Through this article, the scrutiny processes of the committee of this House were engaged. Why was this piece of EU law not retained?

My Lords, the Government have put in place a suite of enhanced scrutiny arrangements that go well beyond our statutory obligations, so we have no need to refer back to EU law in that instance.

My Lords, the Government have inserted in the Health and Care Bill, which is currently going through your Lordships’ House, a clause on reciprocal healthcare agreements beyond the existing arrangements with the EU, EEA and Switzerland, because we know they work well. Will reciprocal healthcare agreements form part of the trade talks with India, Greenland and Israel?

My Lords, I am not yet in a position to give an answer on that. We are at the very beginning of our journey with India but, as always, we will report progress to the House as the talks progress.

My Lords, does the Minister agree that it is incumbent upon all of us to do everything we can to promote trade with all countries, particularly the three countries listed in the Question? Therefore, does he hope, as I do, that the whole House condemns the approach taken by certain local authority pension funds in imposing boycotts, divestment and sanctions on just one country: Israel?

My Lords, I think the House recognises that trade is one of the surest ways to economic advancement for a whole range of countries. The UK is strongly committed to our trade and investment relationship with Israel, one of the Middle East’s most dynamic and innovative economies.

My Lords, will the Minister commit the Government to including in the parliamentary scrutiny of the negotiating objectives the aim that global companies that try to abuse and infiltrate food markets—I am not suggesting that any of the three countries mentioned are included in that—should be excluded? Should we not exclude in our negotiating commitments all companies that have proven criminal records in food markets?

My Lords, the Government and I have made clear on a number of occasions that we will never enter into a free trade agreement which in any way diminishes the high standards of food in this country.

My Lords, I congratulate my noble friend on opening negotiations with Greenland, and I declare my interest as someone of half-Danish heritage and co-chair of the All-Party Parliamentary Group on Denmark. How will this negotiation differ from the arrangements we had through our membership of the EU? Will he join with me in recognising the importance of Greenland, with its rich fisheries, oil and minerals, and its lithium deposits?

My Lords, my noble friend always makes a good point, and the negotiations with Greenland provide the opportunity to recognise the UK’s broader bilateral relationship with it. Greenland is an important strategic partner for us, and this agreement will allow us to identify areas for future co-operation, including on UK priorities such as science, research, sustainability, gender equality, critical minerals, a stable Arctic and climate change.

My Lords, I am grateful for this opportunity and I am not as kind as my noble friend Lady Hayter, so I will be churlish. Can we return to the issue of parliamentary scrutiny? The letter that my noble friend alludes to is about trade treaties and is not much wider than that. Is the Minister aware that the diplomatic missions of the countries with which we are seeking to strike agreements watch how Parliament discusses these issues? If there is not proper scrutiny, they will conclude that there is an attempt to hide our failure, there is incompetence, or we have a Government who do not take parliamentary scrutiny into account.

My Lords, “churlish” is an adjective that I would never like to apply to the noble Baroness. I think I have made our attitude towards scrutiny of free trade agreements very clear. Of course, I will draw to the attention of my colleagues in the Foreign, Commonwealth and Development Office her comments on other treaties and agreements.

My Lords, it is very encouraging to hear that we are now negotiating with Greenland. Can the Minister tell us what British export sectors will benefit most from a trade agreement with Greenland, and does he think that that will help in a significant way to counterbalance the deterioration of our trade with the European continent?

My Lords, I am very happy to deal with that. Greenland is an important exporter of seafood to the UK, accounting for 40% of the total value of UK imports of cold-water prawns in 2020. For those who enjoy their prawn cocktails, I can think of no better statistic.

While I join the noble Lord and the noble Baroness, Lady Hayter, in congratulating each other on the Government deciding not to resile on trade agreements and commitments made by the noble Lord himself at the Dispatch Box, I do find their letter a little unsatisfactory in that it is limited to trade, thus meaning that we are still much less well informed than we were when Article 218 of the treaty applied. Also, it casts some doubt on the Ponsonby rule, which has governed the Government’s provision of information on international agreements to Parliament for 98 years. Would the Minister confirm that the Government have no intention of resiling from the Ponsonby rule?

My Lords, first, if I may just offer a small correction to the noble Lord, the Ponsonby rule survived for 86 years before it was supplanted by CRaG. I can completely confirm that now that they are governed by CRaG, the Government will abide by CRaG in all the appropriate circumstances.

My Lords, does my noble friend accept that however much Parliament oversees free trade agreements, it cannot amend them?

My Lords, I recognise the point, but free trade agreements are negotiated under the royal prerogative. The House has full opportunities to scrutinise these agreements as they move to ratification, and I believe this should be sufficient for noble Lords.

My Lords, could the Minister and any of his colleagues who have contacts with the Government of India suggest they take a more robust attitude in relation to the Russian invasion of Ukraine?

Horizon Europe

Question

Asked by

To ask Her Majesty’s Government whether they intend to join the Horizon Europe programme; and if not, why not.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper—and, if I may, I would like to wish the noble Lord, Lord Tebbit, well in his retirement. He is a man I have disagreed with all my adult life, and I am sorry he did not quite last long enough in the Chamber to listen to the exchanges on what is my first Oral Question.

My Lords, in line with the agreement made in December 2020, this Government are committed to finalising our association to Horizon Europe at the earliest opportunity. We continue to push the EU swiftly to formalise our association to Horizon Europe, as international co-operation is more important than ever now. We will support the UK R&D sector in all scenarios, either by associating to Horizon Europe or by implementing an alternative UK programme.

My Lords, I thank the Minister for the reply, but it is very dispiriting. On Monday this week in the other place, the annual STEM for Britain competition was held, which features early-career scientists from the UK and Europe, with brilliant work on display. It is the very week when our chances of co-operation with Europe are slipping away, which will be terribly damaging. Indeed, does the Minister agree with me that not joining Horizon Europe is

“harming scientific research and collaboration”?

He certainly should, because that is a direct quote from the meeting held before Christmas of the Specialised Committee on Participation in Union Programmes.

Finally, may I also ask him about the money? Money has been allocated in the Budget for our participation in Horizon Europe. The financial year is drawing to an end, and we have not yet joined. Can the Minister assure the House that the money allocated for Horizon Europe will not be lost to science but will be carried over, either for the UK’s participation in Horizon Europe or for such other plan B as may eventually be necessary?

I agree with the noble Viscount; it is indeed very disappointing that the EU is refusing to abide by the agreement we made with it. I am sure that some of the EU’s supporters in this House will want to urge it to press ahead with this agreement. The UK stands willing and able to associate. We have an agreement to that effect, and we hope the EU will also abide by its commitments. The noble Viscount will be aware that the spending review allocated funding for full association to EU programmes. In the event that the UK is unable to associate, the full funding allocated will go to UK programmes; £5.6 billion was set aside over the spending review period.

My Lords, the head of policy at the Wellcome Trust is quoted as saying:

“There is a real prospect that bright young scientists will decide it will be best … if they leave the UK.”

Meanwhile, recruitment of postgraduates in some of our elite universities is reported to be seeing a huge drop in candidates. This is because young researchers fear for the future progression of their careers. The Minister said we were seeking to resolve this at the earliest possible opportunity, and I take him at his word. However, these people are making decisions now—the brain drain is already happening. In the meantime, what is the plan to attract and retain the talent we need in this country?

I reiterate the point: we want to associate with Horizon Europe. It is not the UK that is holding up association but the EU. We want to do that at the earliest possible opportunity. If the funding we have set aside is not used for Horizon Europe, we intend to spend equivalent sums on a UK programme, co-operating with other third countries if necessary. Hopefully that will attract the talent the noble Lord refers to.

My Lords, does the Minister take pleasure from the fact that your Lordships’ European Affairs Committee has written to the Commissioner and the Foreign Secretary about seeking to unblock Horizon? Does he not recognise that we and the EU are now basically in a lose-lose situation in which both sides are being damaged by failure to reach agreement? In the months ahead, could we see an effort by both sides to get that unblocked?

I am delighted that the European Affairs Committee has supported our position on this. As I say, the blockage is not on our side. I hope that in its letter it acknowledged where the fault lies in this situation. The EU has an agreement to associate, which we signed up to in good faith. We stand willing to associate; it is the EU that is currently blocking progress.

My Lords, we need to be pragmatic about this. The truth is that this is being held up and delayed because the Government have made such a hash of negotiations on the Northern Ireland protocol. I do not see any prospect of getting it resolved until that problem is sorted out. As this may take some time, are the Government reaching out to counterparts in the EU to make sure that, even if some further months elapse, we can still join the Horizon programme, albeit at a late stage?

I am sorry that the Opposition seem to be supporting the EU position on this. The Northern Ireland protocol is a completely separate part of the agreement, and of course we stand willing to negotiate in good faith on that as well. The two are not linked. The EU has signed up to an agreement and should honour it; we will continue to press it to do so. The Northern Ireland protocol is also part of the same agreement.

My Lords, does the Minister agree that the European Horizon programmes have been hugely important in catalysing research collaborations and networks, not only between British scientists and European ones but with scientists in low and middle-income countries? Moreover, does he agree that they have also been an invaluable funding bridge between the basic science funding that our research councils provide and the much more downstream R&D funding that industry provides? Her Majesty’s Government are committed to funding successful applications to Horizon while negotiations to join continue, but how long is that commitment for? Will it continue if our application to join ultimately fails?

I agree with the noble Lord that the Horizon project is very valuable. That is why we want to continue association with it and why the funding has been allocated. With regard to the funding guarantee, of course we will want to provide certainty as quickly as possible. We will have announcements to make in that regard in due course.

My Lords, the Minister will be aware that one of the key areas of research in the Horizon programme is space, which we see as very important; the Government have done a considerable amount in that area. One area where there was great advance is OneWeb. Have the events in Ukraine effectively stopped the disposition of that satellite system? If not, where do we stand on it?

The noble Lord makes a very good point. Of course, there is currently a dispute ongoing with Russia about the launch of the OneWeb satellite. My right honourable friend the Secretary of State is closely involved in this and is trying to unblock it as quickly as possible. But we will not be held to ransom.

My Lords, accepting that the ideal scenario would be for the UK to be part of the Horizon Europe programme, we are, I understand, in a similar situation to Switzerland. In that respect, what plan or negotiation are the Government having with the Swiss research council to collaborate with it?

The noble Lord asks a very good question. I know that the Minister for Science has had productive discussions with the Swiss on that. They have an extremely good, advanced and able scientific programme, and we will be looking to step up our co-operation with Switzerland.

My Lords, in headier days the Government assured us that Brexit would not mean leaving either Erasmus or Horizon. One is tempted to ask what went wrong, because it certainly is not all the EU’s fault. If the Government have an alternative, why can they not start spending now?

I am afraid it is indeed the EU’s fault, and no amount of spinning from the Liberal Democrats will get away from that. We want to associate with the programme, we stand ready to do so and the money is available. If it proves to be not possible, we will spend equivalent sums on supporting UK science.

My Lords, when the Government negotiated, did they make an “in principle” decision agreement or a cast-iron agreement? It is hard to believe that something that the European Commission agreed to as cast iron is now being rejected by it.

I am sorry that the noble Lord cannot believe that the European Commission could do anything wrong, but this is actually part of the trade and co-operation agreement that the EU and the UK signed up to. We want to see all parts of that agreement implemented.

My Lords, Horizon Europe is the EU’s key funding programme for research and innovation, with a budget of £95.5 billion. It tackles climate change, helps to achieve the UN’s sustainable development goals, and boosts the EU’s competitiveness and growth. Legal entities from the EU and associate countries can participate. Can our participation and our expenditure be on the basis of having the ability to benefit from items that we are financing?

My Lords, the noble Lord, Lord Hannay, referred to our letter. Our letter came after an evidence session, when it was clear that it was mutually harmful to science communities of the UK and Europe not to have the UK participating in the programme. That is not surprising, because the joint declaration, which is the foundation of this agreement, says:

“The Parties recognise the mutual benefit”.

Can the Minister assure us that both parties understand that there is a mutual harm in the programme not starting with UK participation?

I agree totally with the noble Earl that it is to the benefit of both parties. It provides value for money for the UK, which is why we agreed to associate with it. We thought that we had a legally binding agreement with the EU, as part of the trade and co-operation agreement. We will continue to try to unblock that and work towards agreement. We want to associate with it precisely because we think that it is to the benefit of both parties, and we hope that will be obvious to the EU as well.

Ukraine: Disasters Emergency Committee Appeal

Question

Asked by

To ask Her Majesty’s Government what assessment they have made of the value of charitable donations made to the Disasters Emergency Committee appeal for Ukraine; and what plans they have to increase their commitment to match donations.

My Lords, it is testament to the great generosity of the British public that the Disasters Emergency Committee appeal for Ukraine reached £100 million in just four days. This is a hugely valuable contribution and public donations have been boosted by £25 million of government funding, the largest ever aid match donation by any British Government. As of yesterday, the DEC Ukraine appeal stood at £121.5 million, including the FCDO UK aid match contribution of £25 million. Of course we have also committed more support to Ukraine during this crisis, which has reached almost £400 million.

I thank the Minister for his Answer, which is a tribute to the generosity of the British people. One problem has been the number of people sending goods rather than money. I hope the Government can encourage people to make cash donations, which are much easier to process. Is the FCO supporting people on the ground to buy up goods with the money donated so that it is spent in the most effective way for the relief of the people of Ukraine?

My Lords, if I may, I must first correct my noble friend: it is the FCDO. The development element of our work is extremely important and it links in with the humanitarian support. I confirm that through rapid deployment teams, including the assessments they are making, we are working directly with the Ukrainian authorities and the Ukrainian Government to determine exactly what is required on the ground. I agree with him; as my right honourable friend the Foreign Secretary has said, what is best for the Ukrainian people is for people to make cash donations, and the DEC appeal demonstrates the importance of that.

My Lords, I thank the noble Lord and his colleague alongside him—the noble Baroness, Lady Williams—for their help in relation to a case flagged to me by World Jewish Relief, and which I flagged in your Lordships’ House on Monday, of an elderly lady in her 90s who was waiting for a visa in Warsaw. What action is he taking to ensure that the system to assist refugees in such a desperate situation is fit for purpose and properly funded, so that we do not have to come to him and his colleague with individual cases?

My Lords, I thank the noble Baroness for flagging that issue. I speak for my noble friend as well as myself, and I know that I speak for the whole of the Front Bench in saying that wherever there are issues it is our job to respond to Members’ inquiries directly to us in our own roles. If we can assist, as we have managed to do in this case, that is a tribute to the noble Baroness and indeed to the whole of your Lordships’ House about the importance of working collaboratively on this crisis. My noble friend will be taking an Urgent Question shortly on fitness for purpose, but I am assured by her and the Home Office that, for example, visa applications are being received. Over 10,000 people have already started their applications, and as of this morning over 1,000 visas had been issued by the United Kingdom.

My Lords, the incredible generosity of the British people in the donations that we are discussing is equally matched by the desire of business, of faith and community groups, and of families to take hold of and be able to use the sponsorship scheme that was announced this time last week but about which we have no detail. Surely we should be matching the financial contribution with the personal giving that people are now offering to those who will come to their home and receive sustenance and support from the British people.

My Lords, I agree. Again, through this crisis we have seen the best of humanity as people have opened up their doors and given their homes and support to people they do not know—strangers—across Europe. That applies equally to the United Kingdom. I know that my noble friend will be providing the House with an update shortly on the very point that the noble Lord raises.

My Lords, I begin by paying tribute to my noble friend Lord Tebbit, who has been such an inspiration to so many of us on the Government Benches for so very long. We were all deeply moved yesterday by the words of President Zelensky. I am sure his words will lead to further donations to the committee. Sadly, the torrent of words which have registered support for Ukraine has not always been matched by action. Given the lamentable decision of President Biden to veto the ability of Poland to send its MiG-29s to an American base in Germany, will Her Majesty’s Government match the courage of the Government of Poland—not to mention of the Government of Ukraine—and make available facilities in this country to which those MiGs could be flown and collected by Ukrainian pilots, then flown to Ukraine?

My Lords, I join my noble friend in the tribute he paid to my noble friend Lord Tebbit. I remember that one of my first appearances at the Dispatch Box was reflective of an ongoing cricket analogy that we have played out. I greatly respect the support that he has given to me over the years. I am sure I speak for many across the House in paying tribute to my noble friend Lord Tebbit for his services to your Lordships’ House and the country over many years. On the specific question, the United Kingdom has been at the forefront of support for Ukraine, including supporting its defence requirements. Defence is playing a central role in the UK’s response to the Russian invasion. We are working very closely with our allies and partners to fully understand the nature of what is required on the ground. We were reminded of this by President Zelensky, who is in daily contact with my right honourable friend the Prime Minister. I listened very carefully to what my noble friend Lord Howard said, and I will certainly take that back to the Ministry of Defence.

My Lords, I will follow up the question asked by the noble Lord, Lord Blunkett. Yesterday the Government made the very welcome announcement that they are opening out this humanitarian sponsorship scheme, but they did not say anything about how all these people who want to offer their homes can link with those who want to come here. Are the Government yet able to reveal how this contact is to be made?

I know that my noble friend Lady Williams and my colleagues in the Home Office are working on the very points that the noble and right reverend Lord raises about the detail of the scheme. I am sure that she will update the House on progress very shortly.

My Lords, the noble Lord, Lord Howard, mentioned President Zelensky’s moving address to Parliament yesterday. He described the horrific conditions—the killing of children, the bombing of orphanages, schools and hospitals. Earlier this week UNICEF called for greater protection for unaccompanied and separated children crossing borders. What will the Government do to support those children to get to a place of safety?

My Lords, I join the noble Lord; I am sure I speak for the whole House when I say that we are taken by the horror of what is happening in Ukraine, particularly the targeting of humanitarian corridors, the specific targeting of civilian centres of population and the tragedy we now see of families being separated. He is right to raise the issue of vulnerable children, particularly unaccompanied minors. We have RDTs working on the ground in all neighbouring countries. I am in regular touch with all the UN agencies. Only this morning I exchanged messages with Filippo Grandi on specific requirements. I assure the noble Lord that I will provide regular updates on the specific support we are giving to particular vulnerable communities and, most importantly, to vulnerable children.

My Lords, while I agree with what my noble friend Lord Balfe said—that it would be better if donations were given in cash rather than goods—my noble friend will be aware that a number of individuals, charities and companies have attempted to supply goods and medicines through the EU to the people of Ukraine or people on the border, but have experienced great difficulty with customs and form-filling. Will my noble friend look at this and see what could be done to simplify the administrative burden for those who are trying to supply goods in kind?

My noble friend makes a very important practical point. I will certainly take that up. Later today I am leaving for meetings in Vienna with European partners at the OSCE. I am sure this point will be raised, particularly when we look at the OSCE’s set-up on civil society groups’ support for humanitarian efforts, which are also based across the border in Poland. I will update my noble friend accordingly. He makes a point which I am aware of, and we are working with European partners to unlock this particular issue.

Business of the House

Motion on Standing Orders

Moved by

That, in the event that the Supply and Appropriation (Anticipation and Adjustments) Bill has been brought from the Commons, Standing Order 44 (No two stages of a Bill to be taken on one day) be dispensed with on Monday 14 March to allow the Bill to be taken through its remaining stages that day.

Motion agreed.

Business of the House

Motion on Standing Orders

Moved by

That Standing Order 44 (No two stages of a Bill to be taken on one day) be dispensed with on Monday 14 March to allow the Economic Crime (Transparency and Enforcement) Bill to be taken through its remaining stages that day and that therefore, in accordance with Standing Order 47 (Amendments on Third Reading), amendments shall not be moved on Third Reading.

Motion agreed.

Ukraine: Urgent Refugee Applications

Commons Urgent Question

The following Answer to an Urgent Question was given in the House of Commons on Tuesday 8 March.

“President Putin’s invasion of Ukraine is a barbaric and unprovoked attack and we stand shoulder to shoulder with the Ukrainian people. He must fail in Ukraine.

This Government have brought forward a generous humanitarian offer to those Ukrainians who want to come to the UK to escape the conflict. Last week, the Home Secretary announced a new Ukraine family scheme for those with family ties to the UK, and we are extending the scheme further to include aunts, uncles, nephews, nieces, cousins and in-laws. The scheme went live last Friday and has already seen over 10,000 applications submitted, for which over 500 visas have been issued, with more being issued as we speak. We have also announced that we are setting up a new humanitarian sponsorship visa, and we are working at pace with our colleagues in the Department for Levelling Up, Housing and Communities to set that up. We will also work with the devolved Administrations.

We have made significant progress in a short space of time, on top of the first phase of the package that my right honourable friend the Home Secretary set out to the House last week. I also remind the House that a crucial part of the application process is providing biometrics so that we can be sure that applicants are who they say they are. Sadly, we are already seeing people presenting at Calais with false documents claiming to be Ukrainian. With incidents like Salisbury still in our minds, the Government will not take chances with the security of this country and our people. Our friends in the United States, Canada and Australia are rightly taking the same approach as we are.

I would like to update the House on the measures that we are taking to speed up and process the applications and to ensure that we can help applicants as quickly as possible. We have surged staff to key visa application centres across Europe, particularly in Poland, and moved more biometric kit to support them. We have ensured that casework teams are standing by in the UK to process applications to ensure that there are no delays.

We will also establish a larger presence in northern France to help Ukrainians in the region. It is essential that we do not create a choke point at places like Calais, where dangerous people smugglers are present, and ensure the smooth flow of people through the system from across Europe. Alongside that, we are working with our embassies around the world to ensure that we use our diplomatic channels to support our efforts and to provide the latest information.

We have taken decisive action. We are now providing regular public updates on our casework numbers and we will continue to keep the House updated on this progress.”

The Home Office has not stepped up to the mark in processing urgent Ukrainian refugee applications—no doubt in part because the Home Office culture, as shown by the Nationality and Borders Bill, is geared towards keeping refugees out rather than welcoming them in.

On Monday, the Home Secretary claimed that a visa application centre had been set up en route to Calais and was staffed. Yesterday, however, the Commons Minister said that

“we are looking to establish a presence in Lille ... and we expect that to be set up within the next 24 hours.”—[Official Report, Commons, 8/3/22; col. 198.]

Has the Lille centre now been set up, opened and staffed, and how many visas can it process per day?

A week ago, the Home Secretary announced the introduction of a humanitarian sponsorship visa. Yesterday, the Government said in this House:

“The sponsorship scheme … should be up and running very shortly.”—[Official Report, 8/3/22; col. 1265.]

When exactly is the sponsorship scheme going to be “up and running”? Why does the Home Office still not know? What is needed now is an emergency visa scheme for those fleeing Ukraine. Are the Government going to do that?

I thank the noble Lord for his questions. As of 9.30 am this morning, 17,700 applications had been made, and there were 1,000 grants of visas. We are expecting a further 1,000 grants of visas by the end of the day. I think that noble Lords will agree that that is a positive trajectory.

The Lille VAC will indeed be set up.

In total, we had almost 1,000 offers for the humanitarian sponsorship pathway, which I counted up from across this House, given the details I received from the right reverend Prelate and another noble Lord yesterday. I want to take back to the Home Office—as I said yesterday that I would—the offers of support which are not just from within your Lordships’ House but are coming in thick and fast from all over the country. They will be very helpful when those families and people arrive in the UK.

My Lords, Ukrainian refugees arriving in Bucharest and applying to join families in the UK today are being given appointments on 28 March to have their biometrics taken. What are they supposed to do for two weeks in a foreign city where they know no one, have few belongings and little or no money, when they could be here in the UK with their families?

The noble Lord makes a very understandable point. As I said yesterday to the House, I know that we are training people as we speak, and surging the capacity and capability of our VAC teams from that region.

My Lords, what are we doing to liaise with the Polish authorities, who have received so many of these refugees from Ukraine? Surely, if they have been accepted into Poland, we can arrange quick transfers to the UK for those who wish to come here—many of whom have family members here.

My noble friend will have seen footage of my right honourable friend the Home Secretary there over the weekend. We are in very regular contact with Poland. I just turned to my noble friend to clarify the contact we are having with the UNHCR: it sounds regular and very thorough in enabling refugees to come to this country as quickly as possible. If someone is in Poland, and has had their visa issued in Poland, they are absolutely ready to come to this country. That is the very positive benefit of having VACs in Poland.

My Lords, I heard yesterday that one of the refugee application centres in Poland has no available appointments until the end of April—the end of next month. This seems to be a bureaucratic answer to a humanitarian question. I received an email last night asking, “Is the UK Government ill prepared, incompetent or unwilling?”—and I do not know how to answer it.

Well, I hope I can help the right reverend Prelate in saying that we are surging capacity and capability in the VACs. It is not acceptable if people are being told that they have to wait until the end of April. I certainly hope that, when I next return to this House with an update, it will be a far more positive picture.

My Lords, the whole House recognises that the noble Baroness the Minister is a very empathetic person, and she is quite clear about her sincerity in trying to help refugees from Ukraine. However, the Minister for Justice in Ireland today met Ukrainian refugees arriving in that country and ushered them to a separate room, where they were given national insurance numbers or the equivalent and told how to get help with medical and housing requirements. Why is it that we, a similar nation, are requiring that people apply—very bureaucratically—hundreds of miles away and fill in numerous forms, rather than simply directly accepting people from Ukraine and dealing with them here?

There is one area where I will depart from the noble Lord, which is on the need to make sure that people are who they say they are. If someone says they are Ukrainian and in fact are not—particularly if they are someone who we might not wish to have in this country because of their behaviour—it is really important that that place is not taken by someone who has no genuine right to be here. So I do not make an apology for that, but I otherwise completely concur with the noble Lord. We are country that welcomes people and tries to provide as much support as we can—and, as I said, my right honourable friend the Home Secretary was in Poland at the weekend.

My Lords, the FCDO has organised excellent morning briefings and, this morning, the Foreign Office representative suggested that as many as 2 million people may have now been displaced in Ukraine. Would it not be sensible at those briefing sessions for the Home Office also to be represented? The information that the noble Baroness has been giving would be very useful. Can the noble Baroness confirm reports that 227,000 people have now fled from Ukraine across the Romanian border? Has she seen the representations made to her department by James Grundy, the Member of Parliament for Leigh in the north-west of England, about a small charity that has a house where they have already taken a couple of hundred Ukrainian refugees? Would it not be sensible for the Disasters Emergency Committee to include small charities that are not part of DEC so that they too can be funded to ensure that people can be kept in safe places in Romania or Poland without having to make journeys to other parts of the world?

I think that what the noble Lord has done is outline how the people of Ukraine would actually like to get back to Ukraine. His suggestion about small charities that are able to help, whether here or in Romania, is really sensible. In terms of the numbers crossing into Romania, I cannot verify those figures, but I am absolutely sure that it must be a very high number indeed. On the subject of the morning briefings, he must be able to lip-read, because my noble friend Lord Ahmad and I were in fact talking about that just before we stood up.

My Lords, given the extraordinary nature of our times, exemplified yesterday by the eloquent and historic address by President Zelensky, might the Home Office not rise to the moment and welcome Ukrainian refugees in Calais with open arms, instead of chips and KitKats?

First, I pay tribute to my noble friend’s son, who has opened up his heart and accommodation to Ukrainians. As for welcoming with open arms rather than bureaucracy, I have looked at the figures for the VACs where Ukrainian refugees are fleeing to. By and large, they are in Poland. In Calais, there have been one or two instances where people are not who they say they are, so it is important not only to keep them safe but also to make sure that we are giving refuge to those we want to give refuge to.

My Lords, the noble Baroness will be aware of the offers made by the Governments of both Scotland and Wales to take in refugees, reflecting the overwhelming good will among people throughout these islands who want to help in these matters. Is the announcement at Question Time this morning by the Prime Minister, concerning the new responsibilities for the Minister for Levelling Up, an indication that the Government may be rethinking this matter?

I heard not much of the noble Lord’s question, but I am guessing that it concerned the appointment of my very dear friend Richard Harrington as Minister for Refugees. I know him well and he will be a superb appointment.

My Lords, the time allowed for this Question is now up and I will allow a moment or two to clear the Chamber for those who want to escape before the next business takes place.

Public Service Pensions and Judicial Offices Bill [HL]

Commons Amendments

Motion on Amendments 1 to 47

Moved by

1: Clause 1, page 2, line 3, leave out leave out subsection (4) and insert— “(4) The second condition is that the service in question is—

(a) pensionable service under a Chapter 1 legacy scheme,

(b) pensionable service under a Chapter 1 new scheme that would have been pensionable service under a Chapter 1 legacy scheme but for the person’s failure to meet a condition relating to the person’s attainment of normal pension age, or another specified age, by a specified date, or

(c) excess teacher service.

The second condition is met if all of the service in question falls within paragraphs (a) to (c) (even if it does not all fall within only one of those paragraphs).”

2: Clause 1, page 2, line 37, at end insert “, or

(c) is, as a result of a local government contracting-out transfer, pensionable service under a pension scheme that offers pension arrangements that are broadly comparable with those offered to the person before the transfer.”

3: Clause 1, page 3, line 3, after “scheme” insert “or excess teacher service”

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

“(3A) In a case in which any of the person’s remediable service in the employment or office in question is excess teacher service, “the relevant Chapter 1 legacy scheme”, in relation to so much of the person’s remediable service as is excess teacher service, means the local government new scheme mentioned in section 98(2).”

5: Clause 6, page 7, line 10, leave out “in relation to the scheme”

6: Clause 10, page 9, line 19, leave out “in relation to the scheme”

7: Clause 14, page 11, line 21, leave out “in relation to the scheme”

8: Clause 14, page 12, line 13, leave out “in relation to the Chapter 1 legacy scheme”

9: Clause 15, page 12, line 27, leave out “in relation to the scheme”

10: Clause 15, page 13, line 1, leave out “in relation to the Chapter 1 legacy scheme”

11: Clause 16, page 13, line 37, leave out “in relation to the scheme”

12: Clause 16, page 13, line 42, leave out “in relation to the scheme”

13: Clause 16, page 14, line 1, leave out “in relation to the scheme”

14: Clause 17, page 14, line 37, leave out “in relation to the scheme”

15: Clause 22, page 19, line 20, at end insert—

“(da) provision about the benefits payable in respect of a child of a deceased member where—

the member has remediable service in an employment or office, and

the child is not living in the same household as an adult survivor of the member;”

16: Clause 22, page 19, line 20, at end insert—

“(db) provision about cases in which a person has remediable service in an employment or office any of which is excess teacher service;

(dc) provision about cases in which a person has remediable service in an employment or office and also has service in an employment or office as a teacher which—

(i) takes place in the period beginning with the day after the closing date and ending with 31 March 2022,

(ii) is pensionable service under a Chapter 1 new scheme, and

(iii) is not remediable service;”

17: Clause 22, page 19, line 20, at end insert—

“(dd) provision about cases in which a person has a partnership pension account;”

18: Clause 22, page 19, line 20, at end insert—

“(de) provision about cases in which a person is made redundant;”

19: Clause 22, page 20, line 17, at end insert—

““adult survivor”, in relation to a member of a Chapter 1 scheme who has remediable service, means a surviving spouse, civil partner or other adult who is entitled under the scheme to a pension determined (to any extent) by reference to the member’s remediable service;”

20: Clause 22, page 20, line 19, at end insert—

““child”, in relation to a member of a Chapter 1 scheme, means any individual who—

(a) is entitled to receive benefits under the scheme in their capacity as a child of the member, or

(b) would have been entitled to receive benefits under the scheme in that capacity on the assumption that any election under this Chapter was, or was not, made in respect of the member;”

21: Clause 22, page 20, line 19, at end insert—

““made redundant”: a reference to a person being “made redundant” includes, in relation to a member of the armed forces, a person becoming entitled to a redundancy payment under—

(a) Part 2 of the Armed Forces (Redundancy, Resettlement and Gratuity Earnings Schemes) (No 2) Order 2010 (S.I. 2010/ 832),

(b) the Armed Forces Redundancy Scheme Order 2006 (S.I. 2006/55), or

(c) the Armed Forces Redundancy Scheme Order 2020 (S.I. 2020/1298);”

22: Clause 23, page 21, line 5, leave out “in relation to the scheme”

23: Clause 25, page 22, line 11, leave out “in relation to the scheme”

24: Clause 25, page 22, line 15, leave out “in relation to the scheme”

25: Clause 27, page 24, line 20, leave out “given by the Treasury”

26: Clause 27, page 24, line 22, leave out “the Treasury has consulted” and insert “consultation with”

27: Clause 30, page 26, line 32, leave out “in relation to the scheme”

28: Clause 38, page 30, leave out lines 28 to 33

29: Clause 38, page 30, line 44, leave out from beginning to end of line 11 on page 31

30: Clause 38, page 31, line 48, leave out “Part” and insert “Chapter”

31: Clause 39, page 32, line 12, leave out “all of”

32: Clause 39, page 32, line 17, at end insert—

“The second condition is met if all of the service in question falls within paragraphs (a) and (b) (even if it does not all fall within only one of those paragraphs).”

33: Clause 62, page 50, line 47, leave out “given by the Treasury”

34: Clause 62, page 51, line 1, leave out “the Treasury has consulted” and insert “consultation with”

35: Clause 75, page 55, leave out lines 34 to 39

36: Clause 77, page 57, line 3, leave out Clause 77

37: Clause 78, page 57, line 33, leave out Clause 78

38: Before Clause 79, insert the following new Clause—

“Meaning of “remediable service”

(1) For the purposes of this Chapter any continuous period of service of a person in an employment or office is “remediable service” in that employment or office if the following four conditions are met.

(2) In this section “the service in question” means the service mentioned in subsection (1).

(3) The first condition is that the service in question takes place in the period—

(a) beginning with the day after the closing date, and

(b) ending with 31 March 2022 or, if earlier, the date on which the person attains legacy scheme normal pension age.

(4) The second condition is that the service in question is pensionable service under a local government new scheme (including where the service is excess teacher service that is so pensionable by virtue of section 2(1)).

(5) The third condition is that the person was, on 31 March 2012 or any earlier day, in pensionable service under—

(a) a Chapter 1 legacy scheme (within the meaning of Chapter 1),

(b) a judicial legacy scheme (within the meaning of Chapter 2), or

(c) a local government legacy scheme.

(6) The fourth condition is that there is no disqualifying gap in service falling within the period—

(a) beginning with the day after the most recent day in relation to which the third condition is met, and

(b) ending with the day before the first day of the service in question.

(7) In subsection (3)—

“the closing date” means—

(a) 31 March 2014 in relation to service which is pensionable service under regulations under section 7 of SA 1972 which relate to persons in England and Wales;

(b) 31 March 2015 in relation to service which is pensionable service under any other local government new scheme;

“legacy scheme normal pension age” means—

(a) in a case in which the person meets the third condition in relation to a local government legacy scheme, the person’s normal pension age under that scheme;

(b) otherwise, the age of 65.

(8) In subsection (6) “disqualifying gap in service” means a period longer than 5 years at no time during which is the person in service in an employment or office which—

(a) is pensionable service under—

(i) a Chapter 1 scheme (within the meaning of Chapter 1),

(ii) a judicial scheme (within the meaning of Chapter 2), or

(iii) a local government scheme,

(b) is, as a result of a Fair Deal transfer, pensionable service under a Fair Deal scheme, or

(c) is, as a result of a local government contracting-out transfer, pensionable service under a pension scheme that offers pension arrangements that are broadly comparable with those offered to the person before the transfer.”

39: Insert the following new Clause—

“Power to pay final salary benefits

(1) Scheme regulations for a local government new scheme may make provision under which the benefits payable under the scheme, so far as they are determined by reference to a member’s remediable service in any employment or office, are final salary benefits.

(2) The reference in subsection (1) to remediable service includes—

(a) remediable service within the meaning of Chapter 1 that has been transferred in from a Chapter 1 scheme, and

(b) remediable service within the meaning of Chapter 2 that has been transferred in from a judicial scheme.

(3) Scheme regulations made by virtue of subsection (1) may, in particular, include provision under which final salary benefits are only payable under the scheme to or in respect of a person who has service in multiple employments or offices if—

(a) so much of the service as is otherwise pensionable under another local government scheme, or under a Chapter 1 scheme or a judicial scheme, is transferred in to the scheme, or

(b) the service is aggregated for the purposes of determining those benefits.

(4) Scheme regulations for a local government new scheme may make provision under which the benefits payable under the scheme, so far as they are determined by reference to a member’s final salary transferred-in service in any employment or office, are final salary benefits.

(5) For the purposes of subsection (4) a member’s service in an employment or office is “final salary transferred-in service” if—

(a) the service has been transferred in from another pension scheme, and

(b) before the transfer, the benefits payable under that other scheme, so far as determined by reference to the service, were final salary benefits.

(6) Except as provided by the preceding provisions of this section, scheme regulations for a local government new scheme may not make provision under which the benefits payable under the scheme that are determined by reference to a member’s pensionable service in an employment or office are final salary benefits.”

40: Insert the following new Clause—

“Section (Power to pay final salary benefits): transitional provision

(1) Any provision of scheme regulations that—

(a) was, at any time before the coming into force of section (Power to pay final salary benefits)(1), made (or purportedly made) in relation to a local government new scheme under—

(i) section 18 of PSPA 2013 or section 18 of PSPA(NI) 2014 (restriction of existing pension schemes), or

(ii) any other enactment, and

(b) could have been made under section (Power to pay final salary benefits)(1) if it had been in force at that time,

is treated as having been made under section (Power to pay final salary benefits)(1).

(2) Section (Power to pay final salary benefits)(6) does not affect the continued operation of any scheme regulations made before the coming into force of that provision.”

41: Insert the following new Clause—

“Pension credit members

(1) Scheme regulations for a local government new scheme may make provision about the benefits payable to or in respect of a relevant pension credit member and the corresponding pension debit member.

(2) In this section “relevant pension credit member”, in relation to a local government new scheme, means a member of the scheme who has rights under the scheme—

(a) which are attributable (directly or indirectly) to a pension credit, and

(b) the value of which was determined (to any extent) by reference to the value of benefits payable in respect of the remediable service in an employment or office of another member.

(3) In this section “the corresponding pension debit member”, in relation to a relevant pension credit member, means the member mentioned in subsection (2)(b).

(4) The provision that may be made by scheme regulations under this section includes, in particular—

(a) provision modifying any provision of this Chapter in its application to persons of a description specified in the regulations;

(b) provision corresponding to, or applying, any provision of this Chapter, with or without modifications.

(5) In this section—

“modifying” includes disapplying or supplementing (and cognate expressions are to be construed accordingly);

“pension debit” means a debit under section 29(1)(a) of WPRA 1999 or Article 26(1)(a) of WRP(NI)O 1999;

“pension credit” means a credit under section 29(1)(b) of WPRA 1999 or Article 26(1)(b) of WRP(NI)O 1999.”

42: Insert the following new Clause—

“Further powers to make provision about special cases

(1) Scheme regulations for a local government new scheme may make further provision relating to a member who has remediable service in an employment or office.

(2) The provision that may be made under subsection (1) includes, in particular, provision about cases in which a person has remediable service in an employment or office any of which is excess teacher service.

(3) Scheme regulations for a local government new scheme may make provision about injury and compensation benefits payable under a relevant injury and compensation scheme to or in respect of a member who has remediable service in an employment or office.

(4) Provision made under subsection (3) may in particular be made by amending the relevant injury and compensation scheme.

(5) In subsections (3) and (4) and this subsection—

(a) “injury and compensation scheme” means a pension scheme that is listed in Schedule 6 to PSPA 2013 or Schedule 6 to PSPA(NI) 2014 (existing injury and compensation schemes);

(b) an injury and compensation scheme is “relevant”, in relation to a local government new scheme, if it is connected with the local government new scheme;

(c) a reference to “injury and compensation benefits” payable under an injury and compensation scheme is a reference to—

(i) in the case of an injury and compensation scheme in relation to which Schedule 6 to PSPA 2013 or Schedule 6 to PSPA(NI) 2014 specifies particular benefits, those benefits;

(ii) in the case of any other injury and compensation scheme, any benefits payable under the scheme.

(6) The provision that may be made by scheme regulations under this section includes, in particular—

(a) provision modifying any provision of this Chapter in its application to persons of a description specified in the regulations;

(b) provision corresponding to, or applying, any provision of this Chapter, with or without modifications.

(7) In this section “modifying” includes disapplying or supplementing (and cognate expressions are to be construed accordingly).”

43: Insert the following new Clause—

“Power to pay compensation

(1) The scheme manager for a local government new scheme may pay amounts by way of compensation in respect of compensatable losses incurred by members or, in the case of deceased members, their personal representatives.

(2) Scheme regulations for a local government new scheme may make provision under which an employer in relation to the scheme is required to reimburse the scheme manager for amounts paid under subsection (1).

(3) For the purposes of this section a loss incurred by a member, or by a member’s personal representatives, is “compensatable” if and to the extent that—

(a) either of the following conditions is met, and

(b) the loss is of a description specified in Treasury directions.

(4) The first condition is that the loss is attributable to, or is reasonably regarded as attributable to, a relevant breach of a non-discrimination rule.

(5) The second condition is that the loss is attributable to the application of any provision of, or made under, this Chapter.

(6) In this section (subject to subsection (8)) “loss” includes a loss of any kind including, in particular, a Part 4 tax loss.

(7) In this section “Part 4 tax loss”, in relation to a member, means a loss arising as a result of the member—

(a) incurring a charge, or incurring an increased charge, under Part 4 of FA 2004, or

(b) not being entitled to a relief, or being entitled to less relief, under that Part of that Act.

(8) In this section “loss” does not include an amount that is payable under this Chapter or under regulations made by virtue of this Chapter.

(9) In this section “non-discrimination rule” means a rule that is, or at any time was, included in a local government scheme by virtue of—

(a) section 61 of EA 2010, or

(b) paragraph 2 of Schedule 1 to EEAR(NI) 2006.

(10) For the purposes of this section a breach of a non-discrimination rule is “relevant” if it arises from the application of a provision of scheme regulations made before 1 April 2022 under which the benefits payable under the scheme that are determined by reference to a member’s pensionable service in an employment or office are final salary benefits.

(11) Subsection (1) does not confer power to pay amounts by way of compensation in respect of compensatable losses so far as—

(a) any person has already received amounts by way of compensation in respect of them, or

(b) amounts that any person has paid the scheme have been reduced by amounts in respect of them,

whether pursuant to an order of a court or tribunal or otherwise.”

44: Insert the following new Clause—

“Indirect compensation

(1) Scheme regulations for a local government new scheme may make provision under which, where a member has incurred a compensatable loss that is a Part 4 tax loss—

(a) the member is not paid an amount under section (Power to pay compensation) by way of compensation in respect of the loss, and

(b) the member is instead paid such additional benefits under the scheme as may be determined in accordance with the regulations.

(2) In this section “compensatable loss” and “Part 4 tax loss” have the same meaning as in section (Power to pay compensation).”

45: Insert the following new Clause—

“Interest and process

(1) Scheme regulations for a local government new scheme may make provision—

(a) under which interest is required to be calculated and paid on relevant amounts;

(b) about the process by which relevant amounts (and any interest on them) are to be paid.

(2) Scheme regulations made by virtue of subsection (1)(b) may, in particular, include provision—

(a) about when relevant amounts (and any interest on them) are to be paid (including provision under which they are paid in instalments);

(b) under which relevant amounts (and any interest on them) may be paid only on the making of an application;

(c) conferring rights of appeal against decisions taken under the regulations.

(3) In this section “relevant amounts” means any amounts that are payable by the scheme to a person under or by virtue of this Chapter.”

46: Insert the following new Clause—

“Treasury directions

(1) The powers mentioned in subsection (2) must be exercised in accordance with Treasury directions.

(2) The powers are—

(a) the power to make scheme regulations by virtue of section (Pension credit members) (pension credit members) and any powers exercisable by virtue of such regulations;

(b) the power to make scheme regulations by virtue of section (Further powers to make provision about special cases) (further powers to make provision about special cases) and any powers exercisable by virtue of such regulations;

(c) the power of a scheme manager under section (Power to pay compensation)(1) (power to pay compensation);

(d) the power to make scheme regulations by virtue of section (Power to pay compensation)(2) (power to require employer to reimburse compensation paid by scheme manager) and any powers exercisable by virtue of such regulations;

(e) the power to make scheme regulations by virtue of section (Indirect compensation)(1) (indirect compensation) and any powers exercisable by virtue of such regulations;

(f) the power to make scheme regulations by virtue of section (Interest and process)(1) (interest and process) and any powers exercisable by virtue of such regulations.

(3) Treasury directions under this section may provide for amounts that are to be paid by a scheme in relation to a member to be determined—

(a) taking into account the particular circumstances of the member and (if different) the person to whom the amount is to be paid, or

(b) without taking into account any or all of the particular circumstances of that person or those persons.

(4) Treasury directions under this section that relate to the calculation and payment of interest, and variations and revocations of such directions, may only be made after consultation with the Government Actuary.

(5) For the definition of “Treasury directions”, see section (Interpretation of Chapter)(1).”

47: After Clause 79, insert the following new Clause—

“Interpretation of Chapter

(1) In this Chapter—

“Chapter 1 scheme” has the same meaning as in Chapter 1; “final salary benefits” has the meaning given by subsection (2); “judicial scheme” has the same meaning as in Chapter 2;

“local government legacy scheme” has the meaning given by section 79(3);

“local government new scheme” has the meaning given by section 79(2);

“local government scheme” has the meaning given by section 79(1); “scheme regulations”—

(a) in relation to a local government new scheme within section 79(2)(a) has the same meaning as in PSPA 2013 (see section 1(4) of that Act);

(b) in relation to a local government new scheme within section 79(2)(b) has the same meaning as in PSPA(NI) 2014 (see section 1(4) of that Act);

“Treasury directions” means—

(a) in relation to a local government scheme within section 79(2)(a) or (3)(a), directions given by the Treasury;

(b) in relation to a local government scheme within section 79(2)(b) or (3)(b), directions given by the Department of Finance in Northern Ireland.

(2) For the purposes of this Chapter, benefits payable under a pension scheme to or in respect of a member are “final salary benefits” if they are determined by reference to the member’s pensionable earnings, or highest, average or representative pensionable earnings, in a specified period ending at, or defined by reference to—

(a) the time when the member’s pensionable service in relation to the scheme ends, or

(b) the time when the member attains normal pension age under a local government legacy scheme.

(3) Where—

(a) a member of a pension scheme has service in multiple employments or offices that is pensionable service under the scheme, and

(b) the service is aggregated for the purpose of determining the amount of any benefit under the scheme,

the service is treated for the purposes of this Chapter as service in a single employment or office (and references to the employment or office in relation to the service are to be read accordingly).”

My Lords, with the leave of the House, I will also speak to the other amendments and the Motions in the name of the noble Lord, Lord Davies of Brixton. Before I turn to the Commons amendments, I will take a moment to remind your Lordships of what the Public Service Pensions and Judicial Offices Bill will achieve. The Bill ensures that those who deliver our valued public services continue to receive guaranteed benefits in retirement that are among the best available, on a fair and equal basis. It is also vital in addressing the resourcing challenges facing the judiciary, recognising the unique constitutional role of judges. As has been acknowledged throughout the Bill’s passage, this is a complex and technical matter. The Bill covers more than 40 schemes, each of which has its own individual layers of detail and complexity.

Since the Bill’s introduction, the Government have continued to work closely with each of the public service pension schemes, with stakeholders and with departments to check and re-check the Bill to ensure that it will deliver our commitments to remove the discrimination and offer a complete and effective remedy. This has been crucial and has led to a number of refinements being made to the Bill during its stages in the other place.

I recognise that a large volume of amendments is being considered today but I hope noble Lords will agree that the Bill returns to this Chamber in an even stronger position than when it left. I therefore propose that the House agree with the Commons in its Amendments 1 to 81. The House will, I hope, be pleased to hear that I will not set out the detail of each and every amendment, but I hope that your Lordships will find it helpful if I briefly explain the themes that they address. I will of course be happy to turn to specific amendments if your Lordships have any questions they would like to ask.

The first theme is reforms to the cost control mechanism, which relates to Amendments 48, 49 and 52. Your Lordships may recall that the cost control mechanism is designed to ensure a fair balance of risk between public service pension scheme members and taxpayers with respect to the costs of these schemes. The Government asked the Government Actuary to review the cost control mechanism after the provisional results of the 2016 valuations suggested that the mechanism was too volatile and not operating in line with its objectives. Following publication of the final report in June 2021, the Government consulted on three of the recommendations and published their response in October 2021. These reforms will be implemented from the 2020 valuations onwards.

Commons Amendment 48 would implement the framework for two of these three reforms: the reformed scheme-only design and the economic check. I will take each of these in turn. The reformed scheme-only design means that legacy scheme costs are excluded from the mechanism. This would make it more stable and reduce intergenerational unfairness because comparatively younger members’ benefits or contributions will not change based on the cost of legacy schemes they had little, or no, access to. Although this transfers the risk associated with legacy scheme costs to the Exchequer, it ensures consistency between the set of benefits being assessed and the set of benefits potentially being adjusted.

As the Government Actuary’s report makes clear, it does not seem possible for the mechanism to be able to protect the taxpayer unless it considers the wider economic outlook. The economic check—the second reform—will therefore ensure consistency between member benefit or contribution changes and changes in the wider economic outlook. There will be a higher bar for benefit reductions or contribution increases if the country’s long-term economic outlook has improved. This will equally apply to benefit increases or contribution reductions if the long-term economic outlook has worsened.

Therefore, the economic check will operate symmetrically for the benefit of both members and taxpayers. It will operate in a transparently and be linked to an objective and independent measure of expected long-term earnings and GDP growth from the OBR. Given that the economic check can only offset or prevent breaches, not cause them, the likelihood of changes to member benefits or contributions will decline. The reforms will make the mechanism more stable and allow it to operate more in line with its objectives, giving members greater certainty with respect to their retirement incomes.

The second theme concerns amendments relating to the local government workforce, where a number of amendments to Chapter 3 of Part 1 were brought forward by the Government in the Commons to ensure a full and robust remedy for local government workers; for reference, these are Commons Amendments 2, 28 to 30, 36 to 47, 50, 51, 55 to 60, 62, 64, 65, 72 and 75 to 77. The amendments are largely technical, including a significant number designed to ensure that many of the complexities relating to other public service pension schemes that have already been addressed in the Bill are also addressed in local government.

The Government are also making an important change to align the eligibility criteria for protection in local government with other public service pension schemes. Under the amended approach, members who were in pensionable service on or before 31 March 2012 would be in scope of remedy if they leave local government and return within five years, as well as meeting qualifying criteria.

I turn next to a single amendment that concerns a change to regulatory procedure for implementing regulations with respect to the reformed judicial pension scheme. Commons Amendment 61 will simply allow the regulations to be made under the “made affirmative” procedure instead of the draft affirmative, which is the usual process for judicial scheme regulations. This is simply a matter of timing. As the draft affirmative procedure could take four to six weeks, we must rely on the “made affirmative” procedure in order to launch the scheme on 1 April 2022. The change ensures that the reformed pension scheme is in place for all judges on 1 April and that there will be no gap in judicial pensions arrangements. Allow me to reassure the House that the “made affirmative” procedure means that Parliament will still get to scrutinise and debate the draft Judicial Pension Scheme Regulations 2022. This scrutiny is important, given the unique constitutional role of the judiciary. Furthermore, the power is narrowly drawn—it can only be exercised for regulations made within 28 days of Royal Assent and will not apply to any future amendments to judicial pension schemes.

The Ministry of Justice has carried out extensive consultation both on the principles of the new scheme and the draft Judicial Pension Scheme Regulations 2022. This has demonstrated broad support for the new scheme, which provides significantly improved benefits for all members of the judiciary compared to the 2015 scheme. There is agreement that the scheme should help address the recruitment and retention issues in the judiciary, which are considered to be primarily due to the introduction of the 2015 scheme.

I turn next to the issue of guidance on investment decisions for the Local Government Pension Scheme, which, as your Lordships may know, is different to the other main public service pension schemes as it is funded rather than unfunded. My right honourable friend Robert Jenrick, the Member for Newark, in the other place proposed Commons Amendment 54, which would expand existing powers in the Public Service Pensions Act 2013 to allow the responsible authority of a public service pension scheme to issue guidance or directions to the scheme managers to cover investment decisions that it is not proper for the scheme manager to take in light of the UK’s foreign and defence policy.

The Government support that amendment, which is in line with the Government’s manifesto commitments to stopping public bodies from pursuing their own direct or indirect boycotts, divestment and sanctions campaigns against foreign countries, known as BDS. Rather than promoting coexistence, debate and dialogue, these boycotts undermine community cohesion. There is evidence of divisive BDS campaigns in public bodies, including local authorities attempting to declare boycotts. Administering authorities can of course make decisions based on sound environmental, social and governance—so-called ESG—considerations. For example, funds may well choose to not invest based on legitimate concerns over a company’s polluting activities or its poor governance. However, what is clearly inappropriate is for a fund to adopt divisive BDS policies that are inconsistent with UK foreign policy. Sanctions should be determined by the UK Government alone. It is not for local authorities or public bodies to be pursuing their own foreign policy agendas.

Your Lordships may be aware that the Government intend to bring forward wider legislation on BDS, when parliamentary time allows, to ban public bodies from imposing such boycotts and divestments. This will of course be subject to scrutiny in both Houses in the usual way. This amendment signals the Government’s intent and provides the powers for the responsible authority to issue guidance or directions on this matter. It is important to note that the amendment would place no immediate duty on scheme managers to take any such investment or divestment decisions.

If the responsible authority were to issue guidance or directions, this would be subject to the usual 12-week consultation. I hope that this gives the House reassurance that the devising of any parameters related to this amendment would involve extensive engagement with the LGPS community over a number of months, during which time all views and concerns would be considered, so as to ensure they do not inadvertently restrict proper account of ESG matters.

Finally, I will cover the remaining amendments—Amendments 1, 3 to 13, 15 to 21, 25, 26, 31 to 35, 53, 63, 66 to 71, 73 and 79 to 81, which are minor and technical. These amendments are for clarification and are primarily to ensure that the Bill offers a comprehensive pensions remedy for eligible members in particular circumstances or special cases. For example, Amendments 15, 19 and 20 ensure that where a member has died and a child pension is already in payment which would be impacted by a decision taken by someone outside the child’s household, schemes have the powers to make regulations to allow that pension to be protected. A further example under this theme is in Commons Amendments 79 and 81, which change the reference to the Special Educational Needs Tribunal for Wales to the Education Tribunal for Wales, as the tribunal was renamed during the passage of the Bill.

I will be happy to provide further information on any of these amendments should your Lordships have any questions, but I hope these small examples demonstrate just how technical these changes are. I assure the House that they all share the aim of ensuring as robust a remedy as possible. With that, I beg to move.

My Lords, while I do not have a current interest to declare, it would be appropriate for me to mention that, until last August, I was a consultant to a number of trade unions, advising them in this specific area. It appears in the register of interests, but I no longer undertake that work. I thank the Minister for providing more background to the legislation. He has been extremely helpful in ensuring that the fullest information is available on the changes being made at this stage.

However, it is worth recalling that, when the Bill was introduced last July, it dealt with two main issues: first and principally, it provided the remedy for the Government’s unlawful age discrimination in the Public Service Pensions Act 2013; secondly, it established a one-of-a-kind pension scheme for judges and, as a bit of an add-on, increased their retirement age. That is how it left your Lordships’ House.

In the Commons, two significant new issues were added. In Committee, amendments were introduced that made significant changes to the cost control mechanism that applies to public service pension schemes—this is Amendment 48—and then, on Report, Amendment 54 was introduced, which will allow the Secretary of State to issue directions to the trustees of local government pension schemes about how they invest their members’ money. It must be stressed that both these issues are completely new and have no direct connection with what was in the Bill when we considered it previously. Therefore, it is entirely proper—indeed, necessary—that we should give both amendments adequate consideration. I will argue that they are both objectionable.

I will come back to local government pension schemes, but I start with Amendment 48, which provides for significant changes in the cost control mechanism. This is complicated stuff and time is limited, and I am sure that many noble Lords want to get on with subsequent business, but the Government need to rethink their approach—hence the Motions in my name. The key change to the mechanism proposed by the Government is the addition of what is described as an “economic test”. This is completely new; it constitutes a significant change to the mechanism and is clearly outside the repeatedly given guarantees that there would be a 25-year stable regime to administer public service pensions.

Whatever was decided back in 2011 was meant to remain for a generation, and repeated promises were made that there would be no surprises. It is important to understand that these promises went beyond what was ultimately included in the subsequent legislation. For example, following the negotiations that took place on the reforms, the then Chief Secretary to the Treasury, Danny Alexander, said that reform along the lines the Government had proposed could endure for 25 years:

“It will be a sustainable deal that will endure for at least 25 years”.—[Official Report, Commons, 2/11/11; col. 929.]

In the same vein, the Minister for the Cabinet Office, the then Francis Maude MP, gave a guarantee that

“outside of the scheme designs parameters”

there would be

“no further reform for the next 25 years.”—[Official Report, Commons, 20/12/11; col. 151WS.]

This proposal, the introduction of the economic test, is a clear breach of the commitment given by the Government in 2011. The agreement reached then was difficult for many unions and members to accept, as it amounted to public servants paying more, working more and getting less, but unions engaged in the negotiations in good faith and most accepted the resulting deal. The cost-control mechanism set out at that time was a key part of that arrangement.

From the hard information we have been given so far about the economic test, it gives the appearance of being designed to allow the Government to override the results of the cost-control mechanism in the event of what is termed a downward breach of the cost cap. A downward breach is when the value of members’ benefits falls by a significant amount—by a tenth or more, roughly speaking. Such a fall in the value of members’ benefits can arise from a combination of factors, but principally from a reduction in longevity compared with what was expected or from lower rates of inflation, to which benefit increases are linked.

The situation is that the value of members’ benefits might fall significantly and, consequently, they are entitled to an offsetting increase in their benefits to restore their value. But with this amendment the Government are given the power to cancel the increase on a basis that so far is ill defined. The Government and the Minister emphasised the potential for the economic check to be used to override an upward breach and stop the consequent cuts in members’ benefits, if the existing benefits are considered affordable.

To summarise, on the one hand, when growth in the economy is greater than expected, members will not have to suffer cuts in benefits. On the other hand, if economic growth is less than expected, members will not enjoy increases in benefits to which they would otherwise have been entitled. The problem is that it introduces a large degree of subjectivity and potential for political considerations to influence what should be a transparent and objective process. This need for objectivity is only increased by the mistrust generated by the Government’s response to the initial 2016 valuations of public service schemes.

The Minister in the Commons said that the cost-control mechanism

“will operate in a transparent way and be linked to an objective and independent measure of expected long-term earnings and GDP growth from the Office for Budget Responsibility”.—[Official Report, Commons, Public Service Pensions and Judicial Offices Bill Committee, 27/1/22; col. 33.]

But we have no idea in any detail how this will operate. We have no idea how transparent and open to debate it will be.

The detail will be set out in Treasury directions, which never come before this House, let alone the Commons. Treasury directions are not like delegated legislation. They are made by the Government with no form of accountability, so the Government will effectively be able to tear up the cost-control mechanism that unions were promised would last 25 years. That is why I believe Treasury directions are unsuitable for something so significant that will affect the terms of employment of our public sector workers.

The Minister needs to look again at how to restore trust and confidence in public service pensions in future without resiling from the promises given 10 years ago. At the very least, will the Minister spell out for the House in more detail how the Government propose to get from the figures provided by the Office for Budget Responsibility to the ultimate decision not to proceed with increases to which members are entitled?

Having addressed the issue of Amendment 48, I will shift gear somewhat and move on to Amendment 54. I am opposed to the new clause, which was introduced in the Commons on Report—a very late stage of the Bill’s progress through the Commons. It gives the Secretary of State the power to issue guidance or directions to authorities that administer public sector pension schemes that would ban them from taking investment decisions that conflict with the UK’s foreign and defence policy. In practice, as has been explained, this affects only the Local Government Pension Scheme, as it is the only significant public sector pension scheme that has investments.

The new clause would reverse the decision of the Supreme Court in the case involving the Palestinian Solidarity Campaign. The full judgment is worth reading as it sets out the argument against ministerial involvement in trustee decisions with force and clarity. The court found that the Secretary of State was wrong to claim that the Local Government Pension Scheme administrators were part of the machinery of the state. This claim fails to recognise that the administrators have duties which, at a practical level, are similar to those of trustees and that they consider themselves as quasi-trustees who should act in members’ best interests. The court also found the Secretary of State’s claim that contributions to the scheme are ultimately funded by the taxpayer equally misleading, as the fund represents the contributing employees’ money, not state money.

The proponents of the new clause tried to make BDS the issue, but it is actually about government overreach. The Supreme Court ruled that the power of the Secretary of State to issue guidance to local authorities has to respect their primary responsibility as quasi-trustees of the fund. The Secretary of State was not entitled, therefore, to make authorities give effect to his own policies in preference to those that they themselves thought it right to adopt in fulfilment of their fiduciary duties.

I want to make it clear that I do not want to be thought of as simply wishing to dodge the issue of BDS. I would welcome a debate on BDS, but that is not what we are discussing here today. This amendment does not mention BDS and potentially goes much wider, with a potential impact on the whole environmental, social and governance agenda.

The House will be aware that there is general support for initiatives that help pension schemes with assessing ESG-related risks. Indeed, the Government have enacted legislation that requires schemes to consider ESG objectives. It is now accepted that pension funds’ fiduciary responsibilities to members, which prioritise generating investment returns, permit scope to allow the removal of investments on non-economic grounds if they do not materially harm investment fulfilments.

It should also be understood that the Local Government Pension Scheme advisory board for England and Wales has produced guidance on responsible investment and provided investment decision-makers with a range of information, case studies and tools to help them meet the challenges involved. This guidance should be sufficient, and it is not necessary, therefore, to consider further legislative intervention in the operation of their investments or changes to the long-standing law in this area.

I understand that the Pensions and Lifetime Savings Association—the body that represents workplace pension schemes, including the Local Government Pension Scheme—has written to the Treasury to urge the Government to give more time and thought to how this would work in practice before it is adopted into law. We know, as the Minister has explained, that the Government are also considering more widely what role investment funds can play, particularly in promoting local investment, as part of their levelling-up agenda.

I have three more points. First, it should be recognised that in the context of the Local Government Pension Scheme, investment decisions have a potential impact on the contributions paid by employers and members of the scheme. Decisions made to align with government policies may result in additional costs to local government employers and employees, and to the many private sector operations included in their schemes.

Secondly, there is some doubt as to whether the amendment in its current form will work in the way that is intended. It fails to resolve the potential conflict between the Secretary of State’s directions and the trustees’ continuing duties to their members. It calls into question the relationship between the power of the state over individual property rights. At the very least, there is a question about interference with rights under the European Convention on Human Rights.

Thirdly, how are the foreign and defence policy objectives to be decided? There is no clue in the amendment about how rulings and decisions are to be made as to what constitutes the country’s foreign and defence policies. Often, they can be in conflict, and what should the schemes do in those cases?

To conclude, hasty and ill-thought-out legislation on such a complex issue is likely to result in many unintended consequences. If it is to be considered further, it would be better to look at it in the context of the Government’s wider policy on investments by public bodies. As the Minister has explained, the Government have a manifesto commitment to ban public bodies from imposing their own direct or indirect boycott, disinvestment or sanction campaigns against foreign countries. Perhaps the Minister could tell us more about whether they are going to procced with this policy, and if so, how? Given the lack of clarity about the commitment, until the Government come forth with worked-out proposals in this area, what we have here seems premature and opportunistic.

My Lords, let there be no obfuscation. We know what local authorities have already been trying in relation to BDS. We should be clear that the boycott which the noble Lord, Lord Davies, is anxious to facilitate is aimed at one state only. Local authorities have not been trying to divest from China, Myanmar, North Korea, nor even Russia, but only one state—Israel. The BDS movement is intended to delegitimise Israel, and ultimately destroy the state. Singling out Israel for boycott is out of all proportion to other states in this troubled world, and it is anti-Semitic. That is because it applies double standards and denies the Jewish people own right to self-determination, as defined in the IHRA definition.

The noble Lord, Lord Davies, is also reckless as to the interests of public pension holders, who, if asked, would not want to be drawn into a Middle East conflict and are likely to wish to continue to enjoy the fruits of investment in Israeli technology and medical products, not to mention technology that goes into iPads, iPhones, electric car batteries, and other important everyday products. BDS almost always equates to anti-Semitism, which is why Sir Keir Starmer has come out against it and continues his efforts to rid the Labour Party of the anti-Semitism found to be present in it by the EHRC. It does not help the peace process; BDS fuels a rise in anti-Semitic incidents, and the growing number of assaults on Jews and Jewish community buildings. We cannot allow local authorities to make flag-waving foreign policy decisions, bringing their communities into conflicts which are not relevant. Do we want local government pensions scheme investing in Russia? There is no reason why government policies should not be determinative of this.

Bearing in mind our discussions this afternoon, in the Second World War, over 1 million Jews died in Ukraine. Today, Israel has taken in thousands of refugees from Ukraine, Jewish and non-Jewish. Never again will persecuted Jews have no safe place to go, for Israel is the haven for them and the home for survivors of the Holocaust. This is the moral choice that faces your Lordships in relation to Amendment 54A. It is clear that the amendment of the noble Lord, Lord Davies, is not it.

My Lords, I speak at this stage of the Bill because Commons Amendment 54 was tabled so very late on Report in the Commons, after it had already been through this House where it started. How extraordinary it is that an amendment with such potentially wide-ranging impact should have been tabled so that no meaningful scrutiny was possible, with so little notice that the local government pension scheme advisory board was only able to publish its consent after the amendment was passed in the other place.

The concerns the amendment raises are substantial. They go to the heart of who takes the decision on how an individual’s money is invested. Should it be the Government, or should it be the representatives of the people whose money is being invested, which in this case would be the scheme administrators who fulfil the same functions as pension fund trustees? The crux of Amendment 54 is that it is the Government’s money, and the Government should be the final arbiter of the decision. However, when that was tested in 2020, the Supreme Court disagreed and ruled against that contention, asserting that the funds of members of public centre pension schemes belong to the members. It is not public money.

Amendment 54 from the Government seeks in effect to negate that decision. If it were to become law, the Government could issue guidance or directions—and I quote from the explanatory guidance—that

“public sector pension schemes, including the local government pension scheme … may not make investment decisions that conflict with the UK’s foreign and defence policy.”

The crucial decision of who will make the divestment decisions based on ESG and ethical considerations, if Amendment 54 were in place, becomes more blurred.

Some examples may help to illustrate the frictions that could arise. What is happening in Ukraine is uppermost in all our minds. This is not about anti-Semitism; this is about humanitarian concerns. That is why those decisions are taken. What is happening in Ukraine is something we all care about enormously. Many people are outraged by the Russian regime’s callous disregard for innocent civilians who dare to resist their advance. Suppose an LGPS scheme decided to divest from a Russian-owned organisation that is not on the sanctions list—this was the situation not so long ago with Gazprom —the existence of Amendment 54 on the statute book could have deterred that scheme. That, in effect, would be its consequence, given its vague wording and potentially broad application.

Local councils should have a duty to invest ethically, and they should be able to do so unequivocally in alignment with the UN guiding principles on business and human rights. If what is in those principles are not clear to any noble Lords in the Chamber, perhaps they should Google it. It speaks to a very specific example. In areas of the world where states are in breach of international law with clearly documented and verified violations of the human rights of civilian populations, such as is occurring on a regular and sustained basis in the occupied Palestinian territory, local authorities should be able to exercise their ethical judgment and divest from companies that produce and deal in goods from the illegal Israeli settlements in Palestinian territories. However, through Amendment 54, the Government could mandate that if they were to do so, they would be in conflict with the UK’s foreign and defence policy. That cannot be right.

On another issue, fund administrators also have a responsibility to invest in alignment with domestic legislation, such as meeting our net-zero target by 2050, and with international agreements, such as the Glasgow climate accord, agreed at COP 26 just last year. It is not just a responsibility to safeguard environmental and natural assets that is at stake: ultimately, it is the fiduciary duty of fund managers to act in the financial interests of their members.

In 2020, in his annual letter to CEOs, Larry Fink, CEO of BlackRock, the world’s largest assets manager with $10 trillion of assets under management, stated that

“climate risk is investment risk.”

Mark Carney, too, has warned that continued investments in fossil fuels risks write-offs and stranded assets. Local authorities must be able to divest from sources of oil, gas and coal wherever in the world they happen to be, regardless of whether that decision is in alignment with the Government’s foreign and defence policy. Not only must local authorities be able to meet their ESG requirement, they must also be able to fulfil their fiduciary duty. This amendment will hamper their ability to do both, and it should not be included in this Bill.

My Lords, I will address both amendments from the noble Lord, Lord Davies, with whom I so often wholly agree on pension matters; but I am afraid that, in these instances, I find myself in disagreement.

As regards Amendment 48, I would like to make it clear that I support both the amendments that were passed in the Commons. I also believe that public sector workers deserve good pensions. They have good pensions. This stems from the changes that were made in the Hutton review in 2011. I confess that I was astonished at the time that a 25-year settlement seemed to have been agreed in the context of defined benefit pensions, for which costs can change so dramatically in that kind of timeframe. Indeed, employers have found that the costs have significantly increased.

In 2010 or so, the cost of providing a standard public sector pension would have been, perhaps, between 30% and 40% of salary. Subsequent to that, the costs have risen to at least 40% to 50% of salary, if not more than that. So, in effect, there has been a significant pay increase—albeit in deferred pay—for local government workers and public sector workers in general.

The 2016 valuation, based on various assumptions, also does not necessarily mean that the costs at the time would be the ones that are experienced today. Were a valuation to be conducted, say, three years later, four years later or five years later, there would be a significant increase in cost, but by relying wholly on the 2016 valuation and not factoring in the judgments of the courts in terms of the transitional protections agreed, it would appear that the workforce should have increased pension offers, which would subsequently need to be potentially reversed under this economic test.

Part of the problem stems from the expectation—which is wholly unrealistic—that there can be a 25-year guarantee for the kind of defined benefit pensions that are underwritten by taxpayers. That is also an important consideration because local government pension schemes do not belong to the Pension Protection Fund. The benefits promised to the workforce are underwritten by what are called employers, but they are actually taxpayers across the whole country, whether it is council tax payers or ultimately general taxpayers. Given the fiscal situation that we are currently in, and given the changes in the fiscal situation that can accrue, I believe that there is clearly a government interest and a taxpayer interest in the delivery of the benefits of these schemes. It is not just individuals’ money; it belongs to all of us, because we underwrite the full value of all public sector pensions, including the LGPS—which is not, as I say, part of the Pension Protection Fund, so there is no other underwriting available.

So I believe that Amendment 48 is appropriate and I will turn briefly to Amendment 54, where similar concerns would arise. The Secretary of State is now able to directly administer, in accordance with this amendment, that local government pension schemes should not make investment decisions contrary to UK foreign and defence policy. That seems to me to be not unreasonable, given the taxpayer underwriting. There should not be politically motivated boycotts or divestment.

This amendment also fulfils the Government’s manifesto commitment in this regard to stop public bodies running their own independent direct or indirect boycotts. BDS should be nothing to do with pensions. It is just about politics. Given the government under- writing, as other noble Lords have indicated, effectively, the BDS movement has been about one country and encapsulates anti-Semitism. It delegitimises Israel’s right to self-defence and judges that only Israel is guilty of prolonging the conflict between the Palestinians and Israelis. Such assessments have no place in pension decisions. This is also in opposition to government policy, and I commend the Government for their steadfast opposition to BDS and their support for the Abraham accords.

I also find it very difficult to comprehend some of the briefings that we have received which suggest that, by passing this amendment, which would take away the current ability for local authorities to decide of their own accord that they disagree with government policy and would like to impose movements that take money out of, for example, Israel, this is somehow an ethical decision. Anti-Semitism cannot be an ethical decision. One may argue about the breadth of the wording of the amendment and, as my noble friend the Minister said, the Government may or may not decide to disagree with such investments. But insisting that there is no possibility, and that the Government and taxpayers, who underwrite these investments, should not be able to step in and make such politically motivated decisions, or decisions motivated by policies that do not accord with government thinking and manifesto commitments and so on, I believe is appropriate. Therefore, I urge noble Lords to support these amendments, and I apologise to the noble Lord, Lord Davies, because I fundamentally disagree with him on these issues.

My Lords, I entirely agree with the noble Baronesses, Lady Deech and Lady Altmann, that BDS is a discriminatory and racist movement whose object is the destruction of the state of Israel, and unmistakably so. However, I do not agree with them that that is a reason in itself for supporting Amendment 54. For all the reasons articulated by the noble Baroness, Lady Sheehan, my view is that this amendment represents overreach by the Government and has hardly received the sort of scrutiny that such an important measure clearly requires.

My Lords, I had not intended to speak in this debate except to say a few words on the cost control amendments, at the request of my noble friend Lady Janke, who is leading for us on this issue. I shall now say very little on cost control, except that I am very much in the same camp as the noble Lord, Lord Davies.

My answer to the noble Baroness, Lady Altmann, is that if the Government decide that a commitment they made to a 25-year agreement is one that they no longer wish to keep, they should reopen the negotiations, not turn to Parliament in the late stages of the passage of a Bill and take for themselves powers to simply override the commitment that they once made. This was supposed, from a public pensions perspective, to be a Bill that simply corrected unlawful parts of the structure that the Government had entered into that were struck down by the courts in the McCloud judgment. The Government used that as an opportunity to go far beyond that.

I have problems with the cost control mechanism altogether, because it basically says that the mistakes the Government made need to be paid for by the scheme members as a whole: we will correct the injustice to a particular group, but the cost of that will be picked up by the other pensioners in the scheme. Now the Government have essentially said that if they mismanage the economy, that cost needs to be picked up by the members in the scheme as well. At the very least, they should have gone back and negotiated with the parties with whom the original arrangement was structured.

I shall now speak to the other amendment, partly because of a word used by the noble Baronesses, Lady Deech and Lady Altmann: “anti-Semitism”. When I read Amendment 54, it is a direction—I think the Minister tried to emphasise that it is guidance, but it is not guidance, it is a direction, and it says that very clearly in the amendment. I was told that various people were very concerned not to vote against it in the Commons because they were afraid that they would be labelled anti-Semitic. I thought, “Nonsense, not in a Parliament like this, not among people of the standing we have in the House of Commons and the House of Lords.” Yet, I heard very clearly from the noble Baroness, Lady Deech, the notion that opposing the amendment is anti-Semitic. I oppose it, and I dare her ever to say that I am anti-Semitic.

When I see those crowds of refugees coming out of Ukraine, they are to me an evocation of my grandparents, my aunts, my uncles and my cousins who were taken to concentration camps or as slave labour for the Hungarian army on the Russian front. In every political campaign I have waged, I have been attacked for being a Jew. In the most striking attack, a physical attack on my son and on me with eggs and flour, we had to be barricaded into a room and rescued by riot police. I dare the noble Baroness to label me anti-Semitic, but I oppose that amendment, and precisely for the reason that the noble Lord, Lord Macdonald, gave: this is total overreach. Israel and that issue is the excuse.

I look at the actions of the Government in so many ways. When I look at the powers they have taken away from local government, essentially trying to reconstruct it just as an agency of central government departments; when I look at what happens in this House, with skeleton Bills and Henry VIII clauses; when I look at the way that powers that came from the European Union were transferred directly to regulators, becoming, in effect, no longer either visible or, certainly, accountable, I see a constant shift of a central Government that feels they have the right to reach in and take and do whatever they please. With their 80-seat majority in the Commons, they can achieve exactly that and this measure is exactly part of that.

I referred to my family and will do so again. My grandsons have not only the heritage of those who died in the Holocaust but the heritage of those who were slaves. Had this particular amendment been available when Margaret Thatcher was Prime Minister, she could have—and I think we know would have—directed local government pensions to invest in apartheid South Africa and would not have permitted anyone who objected who was part of those pensions to have refused that investment. To me, that is outrageous and it is the fundamental flaw that sits within this amendment.

Looking at this amendment, I say to the noble Baroness, Lady Altmann, who suggested that these pension funds are somehow owned by the taxpayer, that these pension arrangements are in lieu of salary. I do not believe that anyone would say that the salary paid to a local government official should be invested under government direction, so why should the pension of a local government official be invested under government direction?

I will speak later on the economic crime Bill, very much in support of sanctions against Russia. However, those sanctions apply to everybody; they apply to every asset, public and private, and to every pension. The rules are universal. I do not have a problem with universal rules, used in extremis, which is exactly the proposition that the Government will make to us today. I do have a problem, however, when local government is singled out—when the pensions of local government servants now come under the direction of the political interest of a Government. If the Government feel so strongly that the current trustees are behaving inappropriately, they could easily have made an arrangement whereby investment decisions are put to the members; they could let them decide what they think is ethical from their perspective and how their money should be used.

I agree very much with those who have said that this is overreach. If anybody uses that word “anti-Semitism” to address opposition to this, it tells you how utterly empty the policy is in and of itself.

My Lords, we could have a long and interesting debate on the question of anti-Semitism, but I fear that issues are getting slightly confused. Unless I have read this government proposal inaccurately, the Government are not proposing to give themselves powers to instruct any local authority on what it should do; they are giving themselves powers to prevent local authorities involving themselves in what local authorities might like to describe as foreign policy.

I am, on balance, in favour of this proposal, but I could put an argument against it, which would be about its impact on the BDS movement—which is, I think, in my lifetime, the most unsuccessful political campaign that I have seen. It has attempted to close down links between British academics and Israeli universities and academics and, as a consequence, those links have been greatly enhanced and deepened. It has attempted to target all sorts of investments and has failed to do so. There is an example, though, of a local authority attempting to do what might be caught out by this amendment. Sussex County Council, in 2021, following a big campaign—well, not very big, but noisy—by a small number of people demanding that it boycott Israel, made a decision. But when one looks at the decision that it made, it was not making a foreign policy statement expressly; it was fiduciary duty, the council claimed.

Did the council boycott Israel, or the alleged targets, the settlements—that was the original concept of the BDS campaign—but, having failed in that, then shift to Israel? No, it did not. It went to where things have now shifted again. It targeted multinational companies that were, it alleged, operating in Israel. The precise companies that it targeted and the products that it cited were exactly—and I mean exactly—the same products and companies that Zelensky and the Ukrainians are repeatedly requesting to defend themselves from the Russian invasion. That is what that would have meant in terms of disinvestment. The BDS campaign was not a success anywhere. It is about the impact on the Jewish community—particularly the young Jewish community, which gets this and worse thrown in its face repeatedly and constantly. It is about virtue-signalling, when the people who did it did not even have the bottle to say what it was about but pretended, in that one example, that it was fiduciary duty. That is what is particularly abhorrent to me.

It seems a nonsense that local councils, without any consultation with anyone, should try to determine their own particular aspects of British foreign policy. We elect parliamentarians to do that. We, the unelected, can scrutinise in our modest and I hope sensible way, but we elect parliamentarians to do that. It is the essence of electing parliamentarians that, for better or worse, they determine British foreign policy. Councillors and councils should do what councillors and councils should do—I have been a councillor in the past—and not cross over. That is the modesty of this proposal, as I understand it; it therefore seems, not least because some of these aspects were in the Government’s manifesto, that it would not be appropriate for this House to reject it.

I look forward to listening to the Minister—but please, Minister, if you stray into the BDS campaign in any way, do not give credit to a failed, miserable campaign that is run by extremists and targets the Jewish community. We should ensure that it remains a failed campaign and allow the good people of Israel, Palestinians and everyone else to get on with their lives.

My Lords, it is always a great privilege to follow the noble Lord, Lord Mann, whose excellent speech has clarified a number of things for me—and the rest of the House, I hope—about how we should look at Amendments 54 and 54A. I am somewhat puzzled by the assertion from the noble Lord, Lord Davies of Brixton, that Amendment 54 has nothing to do with BDS. I have listened to the debate in the House of Commons and, indeed, the debate this afternoon, and that does not ring true with me.

The predominant drive of the BDS campaign and its leadership is not criticism of Israel’s policies, which would be fair enough, but a demonisation and delegitimisation of Israel using other people’s money—and it is other people’s money. The BDS campaign promotes a biased and simplistic approach to the complex Israeli-Palestinian conflict and presents this dispute over territorial and nationalist claims as if it is the fault of just one party: Israel. The BDS campaign does not support Israeli-Palestinian peace negotiations and, by the way, rejects the two-state solution to the conflict that many people in this House would like to see. Many of the founding goals of the BDS movement, including denying the Jewish people the universal right to self-determination, along with the strategies employed in the BDS campaign, are anti-Semitic. Let us be clear. Many individuals—not all, of course—involved in the BDS campaign are driven by opposition to Israel’s very existence as a Jewish state.

I was in Manchester with my daughter, who is a student at Manchester University. We went shopping in the city centre and encountered a BDS rally. The people there were chanting a chant that noble Lords may have heard: “From the river to the sea”. Do you know what that means? My daughter asked me, “What does that mean for my friends in Israel?” It means their annihilation.

BDS campaigns create tensions in communities in the UK, particularly on college campuses, which result in harassment or intimidation of Jews and non-Jewish Israeli supporters. This sometimes includes overtly anti-Semitic expressions and acts. As I said, this uses taxpayers’ money. This dynamic can create an environment in which, apart from anything else, anti-Semitism can be expressed more freely. I would not wish to suggest that anyone who supports the amendment of the noble Lord, Lord Davies, is anti-Semitic at all; I want to make the point about the BDS.

The Government are preparing legislation for the next parliamentary Session to stop public bodies from pursuing BDS activities because of their harmful impact on our foreign policy and trade interests. As has been said, the 2019 Conservative Party manifesto pledged to

“ban public bodies from imposing their own direct or indirect boycotts … against foreign countries.”

The Prime Minister himself has previously criticised public policies for adopting

“their own pseudo foreign policies against countries which with nauseating frequency turns out to be Israel.”

To his credit, in 2021, the Labour leader, Sir Keir Starmer, stated that:

“Labour does not—and will not—support BDS.”

I hope that Amendment 54 will receive full support from all Members of this House, and that all Members of this House will oppose Amendment 54A. Abstaining is not sufficient.

My Lords, it is a pleasure to follow my noble friend. I will be brief. The UK is Israel’s third largest trading partner, with £2.7 billion-worth of British exports and an overall trade relationship worth £4.8 billion. With improved and growing relations in the Middle East between the Arab world and Israel—the Abraham accords were referred to—and the UK’s very strong connection with Israel, I must say that the BDS campaign is a relic of a past war which is no longer being fought in the region, but rather by a small and divisive minority here in the UK.

Amendment 54, which has passed in the other place, will put an end to the politicisation of public sector pension funds. The main goal of local authorities—in my view as someone who is not a pensions expert—is to improve community cohesion, create local jobs and increase economic growth opportunities in their area. Supporting this amendment will allow the Government to send a clear message that global cohesion on an international scale—and the enhancement of economic growth and opportunity on a local level—should not be jeopardised by the divisive politics of a very small minority.

My Lords, I too thank the Minister for his presentation and the noble Lord, Lord Davies, for bringing forward these amendments. I also declare my interest as set out in the register.

As my noble friend Lady Kramer said, Amendment 54 is a crude and oppressive attempt to fetter the discretion of local government pension schemes. It was introduced late and with minimum scrutiny. The Government should not be in the business of directing how local government pension schemes should invest their funds. These funds are set up under strict legal requirements, as we have seen. Their members are very often vocal about wishing to have ethical considerations considered as part of their investments. As far as I can see, schemes do not appear to have been damaged in any way by investments of local government pension schemes.

The job of pension scheme managers should not be to look at UK foreign policy when setting their investment strategy. That really is not their job. Foreign policy changes, and Governments change, so are we really expecting local government pension scheme fund managers to change their long-term investment strategy every time the UK’s foreign policy changes?

As I said, local government pension schemes aspire to invest ethically, with the members of such pension schemes having the right to express their ethical views and to have them taken into account. Why should these people not require ethical considerations? As my noble friend Lady Kramer mentioned, a clear example in the 1980s was disinvestment from South Africa. The then UK Government were obdurate and determined to defend South Africa from financial sanctions despite the violence, discrimination and widespread human rights abuses of apartheid. I, for one, cannot see why pension schemes should not reflect the views of their members when they want to protest against human rights being abused, as was happening in South Africa.

In the mid-1980s one in four Britons were boycotting South African goods. Many local councils followed their local communities and measures were taken to disinvest from South Africa, including pension schemes, and there were boycotts of South African goods and the boycott of Barclays Bank, which pulled out of South Africa. It was certainly said at the time that foreign banks calling in South African loans was one of the reasons given by the South African President that enabled him to agree with his party the release of Nelson Mandela. So I do not accept that pension schemes should not be used for these purposes.

I feel that this is a measure introduced by a Government with an authoritarian record who wish to take more and more powers to themselves and using the whole idea of BDS to justify that. The amendment is also so loosely worded—as my noble friend Lady Kramer has said, it is directions, not advice, that is being given— that it could easily prevent local government pension schemes making prudent investment decisions based on environmental, social and governance considerations, as is part of their code of conduct. For example, the local authority pension scheme of my former authority, Bristol, sought to disinvest from the tobacco industry as a result of the campaign by Smokefree Bristol. I know of local authorities that wish to disinvest from Saudi Arabia on the grounds of arms sales, and others are looking at boycotting investment in China on the basis of its treatment of the Uighurs and its conduct of the affairs of Hong Kong. As my noble friend Lady Sheehan has said, carbon-neutral boycott is now a common principle, and many local authority pension schemes wish to disinvest from further investment in local gas and coal.

We have experienced in other legislation the relentless expansion of government powers. There is an opportunity in this amendment for the Government to interfere in pension scheme investment when it is not in line with their own views—and I have to say that Governments are notoriously slow in catching up with public opinion.

I thank the noble Lord, Lord Leigh, for clarifying that criticism of the Government of Israel is not at all anti-Semitic. I would also like to thank the noble Baroness, Lady Deech, for her contribution—although she seemed to imply that if we support this Motion then we are somehow being anti-Semitic. I disagree with the noble Baroness, Lady Altmann, with whom I have had the pleasure of working on many pension schemes issues: I do not believe that there is any anti-Semitic intention behind this. I do not see why, if people object to the Israeli Government’s treatment of the human rights of Palestinians, they should not demonstrate that and campaign for disinvestment from Israel if that is part of their beliefs.

The amendment is ill thought-out, badly worded, hastily constructed and has been introduced with no scrutiny, and I do not believe we should support it. If the noble Lord, Lord Davies, moves his amendment and tests the opinion of the House, we will support him.

My Lords, I thank the Minister for his presentation, and I shall speak first to Amendment 48, on the cost control mechanism. We agree with the points made by my noble friend Lord Davies of Brixton, reiterated and added to by the noble Baronesses, Lady Kramer and Lady Janke. In the Commons, we raised these concerns over the introduction of what the Government call the “symmetrical economic check” and voted that this particular reform of the mechanism should not be added to the Bill. I will not repeat the background, which has been expertly put forward by my noble friend, but will just echo the concern that this breaks the Treasury’s 25-year guarantee that there would be no further fundamental reforms.

In 2011, the Government’s Paymaster-General said that those reforms represented a settlement for a generation, and they arose out of the 2011 Hutton review. Further, does the Minister recognise our concern that these reforms risk undermining the faith of public service workers in their pension schemes? What does the Minister expect of future reforms? Since the Government are clearly set on pushing ahead with the economic check, what would be most helpful now are answers to the questions put by my noble friend Lord Davies on how that would work in practice.

We raised concerns in the House of Commons that the check was insufficiently transparent and gave too much room for ministerial interpretation. As has been said, the Government’s answer is that discretion will be limited as the check will be linked to objective and independent figures from the OBR, although that particular element is not set out in the Bill. I should be grateful if the Minister confirmed that. I am hopeful that he will be able to provide some more detailed answers on the process that we should expect and how the OBR figures will be used—a point made by my noble friend Lord Davies.

Turning to Amendment 54, it is fair to say that it is an unexpected addition to what is in reality a technical Bill. It causes one to reflect on the Government’s lack of control of their own Back-Benchers in the House of Commons. The Labour Party supports the broad thrust of the new clause but shares concerns over its wide scope and possible unintended consequences. We also agree with the noble Baronesses, Lady Kramer and Lady Janke, that there is a huge element of government overreach here and we are mindful that the amendment represents directions, not guidance.

We in the Labour Party are unequivocal in our opposition to the divisive and discriminatory use of BDS against the State of Israel. We do not believe that such an approach is appropriate or would enhance the prospects of peace through a negotiated settlement to the conflict, based on a two-state solution. However, regrettably, the clause is poorly worded, too broad in scope and, as we have heard, could cause difficulties for local authorities wanting to take a principled stance on, for example, China’s treatment of the Uighurs. Many other examples have been given in the debate. It is clear that the Government have chosen to progress the Bill with this additional clause but also intend to introduce further legislation in the Queen’s Speech that will be more detailed in this area. It would be helpful if the Minister clarified what comes next and how concerns raised in today’s debate will be considered. What ongoing engagement are the Government having with the Local Government Association, which has raised concerns, and many other bodies interested in this area? I understand that a full consultation process is required before any guidance or directions can be issued under the new clause. What will that consultation process look like? Are there plans to launch a consultation, or will that not be entered into until further legislation is brought forward at the Queen’s Speech?

Finally, I repeat a question on Russia asked by a noble Lord. If schemes want to divest quickly, for example because of links to Russia—Gazprom was mentioned—would anything in the directions under this clause of the Bill put that ability to act in jeopardy in the future? Can the Minister talk to this specific point? It is obviously extremely pertinent right now but there may well be similar issues in future.

Just to be clear, if my noble friend were to press his amendment to a vote, we would abstain.

My Lords, I am pleased to know that the great majority of the amendments have been well received. I thank all noble Lords for their considered contributions. There was quite a bit to cover and a number of questions. As noble Lords would expect, I will do my best to answer them all, or as many as possible within the timeframe allowed.

As the noble Lord, Lord Davies, said, two key themes have emerged in today’s debate. The first is guidance on investment decisions for the Local Government Pension Scheme, and the second is the economic check element of the cost control mechanism reforms. I will start with the latter and turn first to the CCM, as it is called, and in particular the economic check, as raised specifically by the noble Lord, Lord Davies of Brixton. I will speak to Amendment 48. I understand from the noble Lord’s contribution that his concern is specifically with this check, but it is important to note that the effect of rejecting Commons Amendment 48 would be also to reject the framework for the reformed scheme-only design, which, as the noble Lord will be aware, is widely supported overall.

I turn to why we think the economic check is needed. It will ensure consistency between member benefit or contribution changes and changes in the wider economic outlook, as I addressed in my opening speech. To address the question of whether this is objective, the economic check will be linked to the OBR’s independent and objective measure of expected long-term GDP growth and the long-term earnings assumption. It will operate purely mechanically, with no scope for interference from individuals or groups from within government or outside. It will therefore operate transparently and be linked to an objective and independent measure of expected long-term earnings and GDP growth. Further details on the design and operation of the economic check have been set out in the Government’s consultation response published, as the noble Lord in particular will be aware, in October 2021.

I will go a little further on the clause making reference to different sectors of the economy. The Bill implements the framework for the economic check, which will ensure consistency with member benefit and contribution changes. The Bill will allow Treasury directions to set out how the economic check should operate its scheme valuations, including whether and to what extent the growth in the economy, or any sector of the economy, of the UK or any part of the UK should be taken into account. This will allow the economic check to be based on the OBR’s independent projections of long-term UK GDP growth. I will talk more about directions in just a moment. We believe that these reforms will make the mechanism more stable from the 2020 valuations onwards and allow it to operate more in line with its objectives, giving members greater certainty with respect to their retirement incomes.

I turn to points raised by the noble Lords, Lord Davies and Lord Ponsonby, my noble friend Lady Altmann and others on the 25-year guarantee. I took note of the points raised, but the Government do not believe that these reforms breach the 25-year guarantee. The elements protected by the 25-year guarantee are set out in legislation—namely, Section 22 of the Public Service Pensions Act 2013—and the cost control mechanism is not included.

The Government are making these changes following a thorough and independent review of the mechanism by the Government Actuary and a full and open consultation process. As I have noted, the Government Actuary’s report makes clear that it does not seem possible for the mechanism to be able to protect the taxpayer unless it considers the wider economic outlook. The symmetrical operation of the economic check will also protect members. Furthermore, the reforms will lead to a more stable mechanism, with both benefit reductions and improvements becoming less likely, which aligns with the spirit of the 25-year guarantee.

I turn to the original objectives of the cost control mechanism, on which I will again delve into more detail to try to give noble Lords some reassurance. The noble Lord, Lord Davies, asked for greater clarity on the CCM. As I set out in my opening remarks, the Government asked the Government Actuary to review the mechanism following provisional results from the 2016 valuations. This was the first time the mechanism was tested, and the provisional results indicated floor breaches across all schemes for which results were assessed, leading to concerns that the mechanism was too volatile.

As part of this review, the Government Actuary was asked to assess whether and to what extent the mechanism was working in line with the original policy objectives for the mechanism. These objectives are to protect taxpayers from unforeseen costs, to maintain the value of schemes to members and to provide stability and certainty on benefit levels, so the mechanism should be triggered only by extraordinary, unpredictable events. These objectives have been retained since the mechanism was first introduced in the Public Service Pensions Act 2013.

The mechanism was introduced following the recommendations of the Independent Public Service Pensions Commission in 2011. The commission, as the House will know, was chaired by the noble Lord, Lord Hutton of Furness, and specifically recommended a mechanism to protect the Exchequer from increased costs. However, the final mechanism negotiated between the Government and member representatives is symmetrical and so also maintains the value of pensions to members when costs fall.

Let me now turn to the second theme of BDS, as raised by several noble Lords. I hope I can give some reassurances. It was particularly raised by the noble Lord, Lord Davies, and the noble Baronesses, Lady Sheehan and Lady Kramer. I thought the remarks from the noble Lord, Lord Mann, were interesting, very balanced and very helpful. I hope my remarks chime to a large extent with what he said.

As I set out in opening, Commons Amendment 54 does not put a requirement on schemes to make any immediate decisions regarding their investments. It expands existing powers for the responsible authorities to issue guidance or directions, both of which would be drafted and consulted on. I reiterate that this would involve extensive engagement with the LGPS community over the usual 12-week consultation period, during which time all views and concerns would be considered. Any guidance or directions produced would set the parameters out in detail.

There will be consultation with the LGPS community when framing such parameters to ensure that all views and concerns are considered, including on ESG matters, which were raised by the noble Baroness, Lady Janke. I understand that the contributions made by several noble Lords, including the noble Baroness, were to do with ESG. I hope I can ease concerns by assuring the House that this amendment is strictly in relation to UK foreign and defence policy, as reiterated very strongly by the noble Lord, Lord Mann. Any guidance or directions issued would not seek to restrict decisions that meet the Law Commission’s test for investment decisions influenced by non-financial considerations except in a very narrow area concerned with UK foreign and defence policy.

In all other areas the existing tests would apply, namely that scheme managers must have good reason to think that scheme members would share their particular concern and the decision does not involve a risk of significant financial detriment to the fund. If issued, such guidance would seek to provide protection to LGPS funds by preventing decisions which would otherwise have been subject to challenge under the aforementioned Law Commission tests. To reiterate, this power would not be used to restrict the proper account of ESG matters in investment decisions.

To go a little further, I reiterate that these anti-boycott provisions are not about fossil fuels or climate change. The Government have passed legislation to require pension schemes to state clearly their policy on how they take account of climate change and its risks. Clearly, climate change will have long-term financial consequences. Notwithstanding that, fuels like natural gas will continue to play a vital role in Britain’s energy mix, particularly in the production of hydrogen as we transition to a net-zero economy. We need fossil fuel companies to invest in the new technologies to help deliver what we must do to reach net zero.

I will move on to focus on the use of “directions” as opposed to “guidance”—or just to discuss both—a point raised in particular by the noble Lords, Lord Davies and Lord Ponsonby. Administering authorities must have regard to guidance issued by the responsible authority. Directions allow responsible authorities to direct specific action by a scheme manager. For example, a direction may be considered appropriate if the responsible authority is satisfied that the administering authority is failing to act in accordance with guidance.

A power to issue directions is part of the existing statutory framework regarding investments, as set out in LGPS investment regulations in 2016. As was set out in guidance on the regulations, before issuing any directions the Secretary of State must consult the administering authorities concerned and, before reaching a decision, must have regard to all relevant evidence, including reports under Section 13 of the Public Service Pensions Act 2013, reports from the scheme advisory board or from the relevant local pension board, and any representations made in response to the consultation with the relevant administering authority. I can therefore assure the House that any directions or guidance issued under the new power relating to BDS in the LGPS would be subject to the same safeguards.

The noble Lord, Lord Ponsonby, raised an important point about future legislation. I am not sure I can give him too much reassurance on that, but I can say that BDS is an important issue, and that the Government will bring forward comprehensive legislation on the matter as soon as parliamentary time allows. I am sure that will not satisfy him, but that is as far as I am able to go.

Russia was raised by the noble Baronesses, Lady Sheehan and Lady Kramer—quite rightly, in light of the horrors in Ukraine. In addition to clarifying the position with respect to this amendment, I remind the House of the decisive action taken by the Government in response to Russia’s invasion of Ukraine. Since 24 February, we have announced an unprecedented package of sanctions, targeting 17 key Russian banks and more than 220 individuals and entities, including businesses and their subsidiaries, at the heart of Putin’s regime and in Belarus. Last week, the Government introduced the Economic Crime (Transparency and Enforcement) Bill, which the House will be well aware of. Rather coincidentally, we will have the opportunity to debate that Bill imminently. It will reform the system of unexplained wealth orders and introduce a new register of overseas companies owning property in the UK, which, together, will prevent foreign owners from laundering their money in UK property.

I appreciate that this Bill overall is particularly complex and technical, and the number of amendments made could be said to increase both these qualities. However, I hope that they provide greater clarity and certainty as to how the remedy prescribed in the Bill and all other relevant measures will be implemented. I am very grateful for this short debate today and for the contributions noble Lords have made. I hope my responses have provided some reassurances as a result.

Motion agreed.

Motion on Amendment 48

48: After Clause 83, insert the following new Clause—

Employer cost cap

Amendments relating to employer cost cap

(1) Section 12 of PSPA 2013 (employer cost cap) is amended in accordance with subsections (2) to (9).

(2) After subsection (1) insert—

“(1A) Subsection (1) must be complied with before the end of the period of one year beginning with the day on which the scheme’s first valuation under section 11 is completed.”

(3) For subsection (2) substitute—

“(2) A reference in this section to “the employer cost cap” of a scheme under section 1 is a reference to the rate set by virtue of subsection (1) in relation to the scheme.”

(4) In subsection (3)—

(a) after “cap” insert “of a scheme under section 1”;

(b) after “set” insert “, and the changes in the cost of such a scheme are to be measured,”.

(5) In subsection (4)—

(a) in paragraph (a), for “the cap” substitute “the employer cost cap of the scheme”;

(b) in paragraph (b)—

(i) for “subsequent valuations” insert “the second or any subsequent valuation”;

(ii) for “the cap” substitute “the employer cost cap of the scheme”;

(c) in paragraph (c)—

(i) for “the extent to which” substitute “whether and if so to what extent”;

(ii) for “of this section” substitute “mentioned in paragraph (b)”;

(d) after paragraph (c) insert—

“(d) that the data, methodologies and assumptions that are to be used for the purposes mentioned in paragraph (b) are to relate, to any extent, to—

(i) the growth in the economy, or any sector of the economy, of the United Kingdom or any part of the United Kingdom,

(ii) the growth in earnings of any group of persons over any period, or

(iii) the rate of inflation (however measured) over any period.”

(6) After subsection (4) insert—

“(4A) The power to give directions by virtue of subsection (4)(d) is not affected by any statement made before 27 May 2021 by the Treasury, or any Minister of the Crown, relating to the data, methodologies and assumptions that are, or are not, to be used for the purposes mentioned in subsection (4)(b).”

(7) In subsection (5)(a) for “(and any connected scheme)” substitute “(determined, if and so far as provided for by virtue of subsection (4)(c), taking into account the costs of any connected scheme)”.

(8) In subsection (6), in the opening words—

(a) for “the scheme” substitute “a scheme under section 1”;

(b) for “the margins” substitute “either of the margins specified under subsection (5)(a)”.

(9) After subsection (7) insert—

“(7A) Treasury directions may specify the time at which any increase or decrease of members’ benefits or contributions that is provided for under subsection (6) is to take effect.

(7B) Treasury directions may require that provision contained in scheme regulations under subsection (6) permits steps to be—

(a) agreed by virtue of paragraph (a) of that subsection, or

(b) determined by virtue of paragraph (b) of that subsection, only after the scheme actuary has certified that the steps would, if taken, achieve the target cost for the scheme.

(7C) Treasury directions under subsection (7B) may specify—

(a) the costs or changes in costs that are to be taken into account, or

(b) the data, methodologies and assumptions that are to be used,

for the purposes of determining whether any steps would, if taken, achieve the target cost for the scheme.

(7D) In subsection (7B) “the scheme actuary”, in relation to a scheme under section 1, means the actuary who carried out, or is for the time being exercising actuarial functions in relation to, the valuation under section 11 by reference to which it has been determined that the costs of the scheme have gone, or may go, beyond either of the margins specified under subsection (5)(a).”

(10) Section 12 of PSPA(NI) 2014 (employer cost cap) is amended in accordance with subsections (11) to (19).

(11) After subsection (1) insert—

“(1A) Subsection (1) must be complied with before the end of the period of one year beginning with the day on which the scheme’s first valuation under section 11 is completed.”

(12) For subsection (2) substitute—

“(2) A reference in this section to “the employer cost cap” of a scheme under section 1 is a reference to the rate set by virtue of subsection

(1) in relation to the scheme.”

(13) In subsection (3)—

(a) after “cap” insert “of a scheme under section 1”;

(b) after “set” insert “, and the changes in the cost of such a scheme are to be measured,”.

(14) In subsection (4)—

(a) in paragraph (a), for “the cap” substitute “the employer cost cap of the scheme ”;

(b) in paragraph (b)—

(i) for “subsequent valuations” insert “the second or any subsequent valuation”;

(ii) for “the cap” substitute “the employer cost cap of the scheme”;

(c) in paragraph (c)—

(i) for “the extent to which” substitute “whether and if so to what extent”;

(ii) for “of this section” substitute “mentioned in paragraph (b)”;

(d) after paragraph (c) insert—

“(d) that the data, methodologies and assumptions that are to be used for the purposes mentioned in paragraph (b) are to relate, to any extent, to—

(i) the growth in the economy, or any sector of the economy, of the United Kingdom or any part of the United Kingdom,

(ii) the growth in earnings of any group of persons over any period, or

(iii) the rate of inflation (however measured) over any period.”

(15) After subsection (4) insert—

“(4A) The power to give directions by virtue of subsection (4)(d) is not affected by any statement made before 27 May 2021 by the Department of Finance, or any other department, relating to the data, methodologies and assumptions that are, or are not, to be used for the purposes mentioned in subsection (4)(b).”

(16) In subsection (5)(a), for “(and any connected scheme)” substitute “(determined, if and so far as provided for by virtue of subsection (4)(c), taking into account the costs of any connected scheme)”.

(17) In subsection (6), in the opening words—

(a) for “the scheme” substitute “a scheme under section 1”;

(b) for “the margins” substitute “either of the margins specified under subsection (5)(a)”.

(18) After subsection (7) insert—

“(7A) Directions given by the Department of Finance may specify the time at which any increase or decrease of members’ benefits or contributions that is provided for under subsection (6) is to take effect.

(7B) Directions given by the Department of Finance may require that provision contained in scheme regulations under subsection (6) permits steps to be—

(a) agreed by virtue of paragraph (a) of that subsection, or

(b) determined by virtue of paragraph (b) of that subsection, only after the scheme actuary has certified that the steps would, if taken, achieve the target cost for the scheme.

(7C) Directions under subsection (7B) may specify—

(a) the costs or changes in costs that are to be taken into account, or

(b) the data, methodologies and assumptions that are to be used,

for the purposes of determining whether any steps would, if taken, achieve the target cost for the scheme.

(7D) In subsection (7B) “the scheme actuary”, in relation to a scheme under section 1, means the actuary who carried out, or is for the time being exercising actuarial functions in relation to, the valuation under section 11 by reference to which it has been determined that the costs of the scheme have gone, or may go, beyond either of the margins specified under subsection (5)(a).”

(19) In subsections (3), (4), (5), (8), (9) and (10) omit “and Personnel”.”

Amendment to the Motion on Amendment 48

My Lords, I make no apology for promoting this debate; this is an important issue that the House has an obligation to consider carefully. I listened to what the Minister said about the economic test. I still feel there is a lack of information but, particularly in light of his statement that there was no scope within the mechanism for intervention—presumably by the Government—I look forward to seeing the directions in some detail and will try to promote some discussion in this House. However, for the purposes of this debate, I will not move my amendment.

Amendment to the Motion on Amendment 48 not moved.

Motion on Amendment 48 agreed.

Motion on Amendments 49 to 53

49: Insert the following new Clause—“Operation of employer cost cap in relation to 2016/17 valuation

(1) The requirement in provision made under section 12(5)(a) of PSPA 2013 that the cost of a section 1 scheme must remain within a margin above the employer cost cap of the scheme does not apply, and is treated as never having applied, in relation to the cost of the scheme that is calculated by reference to the scheme’s 2016/17 valuation.

(2) Accordingly, provision made under section 12(6) of that Act does not apply, and is treated as never having applied, in relation to a case in which the cost of a section 1 scheme that is calculated by reference to the scheme’s 2016/17 valuation goes beyond a margin above the employer cost cap of the scheme.

(3) In subsections (1) and (2) and this subsection—

(a) “section 1 scheme” means a scheme under section 1 of PSPA 2013;

(b) “the employer cost cap”, in relation to a section 1 scheme, has the same meaning as in section 12 of PSPA 2013;

(c) a reference to a section 1 scheme’s “2016/17 valuation” is to the scheme’s valuation under section 11 of PSPA 2013 the effective date of which is a date in 2016 or 2017.

(4) The requirement in provision made under section 12(5)(a) of PSPA(NI) 2014 that the cost of a section 1 scheme must remain within a margin above the employer cost cap of the scheme does not apply, and is treated as never having applied, in relation to the cost of the scheme that is calculated by reference to the scheme’s 2016/17 valuation.

(5) Accordingly, provision made under section 12(6) of that Act does not apply, and is treated as never having applied, in relation to a case in which the cost of a section 1 scheme that is calculated by reference to the scheme’s 2016/17 valuation goes beyond a margin above the employer cost cap of the scheme.

(6) In subsections (4) and (5) and this subsection—

(a) “section 1 scheme” means a scheme under section 1 of PSPA(NI) 2014;

(b) “the employer cost cap”, in relation to a section 1 scheme, has the same meaning as in section 12 of PSPA(NI) 2014;

(c) a reference to a section 1 scheme’s “2016/17 valuation” is to the scheme’s valuation under section 11 of PSPA(NI) 2014 the effective date of which is a date in 2016 or 2017.

(7) The actuarial valuation with an effective date of 31 March 2016 that was signed on 18 December 2018 under regulation 123 of the Local Government Pension Scheme Regulations (Northern Ireland) 2014 (S.R. (N.I.) 2014 No. 188) is of no effect.”

50: Clause 84, page 62, line 20, at end insert—

“(6A) In section 8 of PSPA 2013 (types of scheme), after subsection (4) insert—

“(4A) The extent to which a scheme under section 1 is a career average revalued earnings scheme is not affected by provision contained in scheme regulations that is made under section (Power to pay final salary benefits) of PSPJOA 2022 (local government schemes: power to pay final salary benefits).””

51: Clause 84, page 63, line 18, at end insert—

“(13A) In section 8 of PSPA(NI) 2014 (types of scheme), after subsection (4) insert—

“(4A) The extent to which a scheme under section 1 is a career average revalued earnings scheme is not affected by provision contained in scheme regulations that is made under section (Power to pay final salary benefits) of PSPJOA 2022 (local government schemes: power to pay final salary benefits).””

52: Clause 86, page 66, line 37, leave out Clause 86

53: After Clause 89, insert the following new Clause—

“Amendments relating to pension schemes for members of the Senedd

In section 30 of PSPA 2013 (new public body pension schemes), after subsection (4) insert—

“(4A) The following provisions of this section do not apply to a new public body pension scheme which is made under section 20(3) of the Government of Wales Act 2006 (remuneration of members of the Senedd: pensions)—

(a) subsection (1)(e) (cost control);

(b) subsection (3) (Treasury consent).””

Motion agreed.

Motion on Amendment 54

54: Insert the following new Clause—

“Guidance to public service pension scheme managers on investment decisions

(1) The Public Service Pensions Act 2013 is amended in accordance with subsection (2).

(2) In Schedule 3, in paragraph 12(a), at end insert “including guidance or directions on investment decisions which it is not proper for the scheme manager to make in light of UK foreign and defence policy”.”

Amendment to the Motion on Amendment 54

I have to say that I understand and respect the strength of noble Lords’ feelings on BDS, but I hold to my view that it was not the subject of today’s debate. Today’s debate was about whether the decisions about local government investments held on behalf of scheme members should be taken by the trustees, who have a fiduciary responsibility, or by the Government, who do not. It is notable that the Pensions and Lifetime Savings Association and local government as a whole consider that this amendment is unnecessary and ill thought-out, with unknown consequences.

However, I take it from the Minister’s words that, in practice, full consideration of this issue will be deferred until the Government come forward with their own legislative proposals, at which time we can give it proper consideration. I suspect that I will still oppose those proposals, but clearly we have not had the time to give this change sufficient attention. In light of what the Minister has said, I will not move my amendment.

Amendment to the Motion on Amendment 54 not moved.

Motion on Amendment 54 agreed.

Motion on Amendments 55 to 81

55: Clause 90, page 72, line 16, at end insert “, or

(c) a compensatable loss for the purposes of section (Power to pay compensation) (power to pay compensation under Chapter 3).”

56: Clause 90, page 72, line 22, at end insert—

“, or (c) a member of a local government new scheme within section 79(2)(a) who has remediable service that is pensionable service under the scheme.”

57: Clause 90, page 72, line 27, at end insert—

“(c) in paragraph (c), “local government new scheme” and “remediable service” have the same meaning as in Chapter 3.”

58: Clause 91, page 73, line 11, at end insert—

(c) a compensatable loss for the purposes of section (Power to pay compensation) (power to pay compensation under Chapter 3).”

59: Clause 91, page 73, line 17, at end insert “, or

(c) a member of a local government new scheme within section 79(2)(b) who has remediable service that is pensionable service under the scheme.”

60: Clause 91, page 73, line 22, at end insert—

“(c) in paragraph (c), “local government new scheme” and “remediable service” have the same meaning as in Chapter 3.”

61: After Clause 95, insert the following new Clause—

“Parliamentary procedure for judicial schemes: transitory provision

(1) This section applies to scheme regulations for a scheme relating to the judiciary that are made at any time within the period of one month beginning with the day on which this Act is passed.

(2) A statutory instrument containing scheme regulations to which this section applies must be laid before Parliament after being made.

(3) Regulations contained in a statutory instrument laid before Parliament under subsection (2) cease to have effect at the end of the period of 28 days beginning with the day on which the instrument is made unless, during that period, the instrument is approved by a resolution of each House of Parliament.

(4) In calculating the period of 28 days, no account is to be taken of any whole days that fall within a period during which—

(a) Parliament is dissolved or prorogued, or

(b) either House of Parliament is adjourned for more than four days.

(5) If regulations cease to have effect as a result of subsection (3), that does not—

(a) affect the validity of anything previously done under the regulations, or

(b) prevent the making of new regulations.

(6) If regulations otherwise subject to the negative procedure are combined with scheme regulations to which this section applies, the combined regulations are subject to the procedure set out in this section.

(7) Section 24 of PSPA 2013 (other procedure) does not apply to scheme regulations to which this section applies.

(8) In this section, the following expressions have the same meaning as in PSPA 2013—

“the judiciary” (see paragraph 2 of Schedule 1 to that Act); “negative procedure” (see section 38(3) of that Act); “scheme” (see section 37 of that Act);

“scheme regulations” (see section 1(4) of that Act).”

62: Clause 98, page 77, line 15, at end insert— ““connected” means—

(a) connected within the meaning of PSPA 2013 (see section 4(6) and (7) of that Act), or

(b) connected within the meaning of PSPA(NI) 2014 (see section 4(6) and (7) of that Act);”

63: Clause 98, page 77, line 48, at end insert—

““excess teacher service” has the meaning given by subsection (2)”

64: Clause 98, page 77, line 49, at end insert—

““Fair Deal scheme” means—

(a) a pension scheme that, in accordance with the Fair Deal Statement of Practice, has been certified by the Government Actuary’s Department as offering, to persons who have been subject to a Fair Deal transfer, pension arrangements that are broadly comparable with those offered to them before the transfer, or

(b) a pension scheme in relation to which the obligation to give such a certificate has been waived in accordance with that statement of practice;

“Fair Deal Statement of Practice” means the statement of practice entitled “Staff Transfers in the Public Sector” issued by the Cabinet Office in January 2000, as supplemented and modified from time to time;

“Fair Deal transfer” means a transfer of a person’s employment from a public sector employer to a private sector employer in accordance with the Fair Deal Statement of Practice;”

65: Clause 98, page 78, line 7, at end insert—

““local government contracting-out transfer” means a transfer of a person’s employment that was required to be conducted—

(a) in accordance with directions given, and having regard to guidance issued, for the purposes of section 101(1) of the Local Government Act 2003 (contracting out: staff transfer matters), or

(b) having regard to guidance issued for the purposes of section 52 of the Local Government in Scotland Act 2003 (asp 1) (guidance on contractual matters);”

66: Clause 98, page 79, line 14, at end insert—

““teacher” means teacher within the meaning of PSPA 2013 (see paragraph 4 of Schedule 1 to that Act) or PSPA(NI) 2014 (see paragraph 4 of Schedule 1 to that Act);”

67: Clause 98, page 79, line 21, at end insert—

“(2) In this Part “excess teacher service” means a person’s service in an employment or office as a teacher where (disregarding section 2(1))—

(a) the service is pensionable service under a local government new scheme, or

(b) the service—

(i) is pensionable service under a Chapter 1 new scheme for teachers, and

(ii) would have been pensionable service under a local government new scheme but for the person’s failure to meet a condition relating to the person’s attainment of normal pension age, or another specified age, by a specified date.

Service in an employment or office is “excess teacher service” if all of the service falls within paragraphs (a) and (b) (even if it does not all fall within only one of those paragraphs).

(3) In subsection (2)—

“Chapter 1 new scheme” has the same meaning as in Chapter 1; “local government new scheme” has the same meaning as in Chapter 3.”

68: Clause 104, page 83, line 7, leave out “Plc” and insert “Limited”

69: Clause 104, page 83, line 11, leave out first “Plc” and insert “Limited”

70: Clause 106, page 86, line 6, leave out “Plc” and insert “Limited”

71: Clause 106, page 86, line 14, leave out “Plc” and insert “Limited”

72: Clause 117, page 93, line 22, at end insert—

“(ba) scheme regulations for a local government scheme (within the meaning of Chapter 3 of Part 1), or”

73: Clause 118, page 93, line 28, at end insert—

“(1A) In Schedule 3 (judicial offices)—

(a) Part 4 extends to Northern Ireland only;

(b) Part 5 extends to England and Wales only.”

74: Clause 119, page 93, line 32, leave out from beginning to “the” in line 34 and insert— “(1) Any provision of, or amendment made by, Part 1 or 3, so far as it—

(a) confers a power to make subordinate legislation or give directions, or

(b) otherwise relates to”

75: Clause 119, page 94, line 10, leave out paragraph (d) and insert—

“(d) Chapter 3, and sections 97 and 98 so far as they apply for the purposes of that Chapter, come into force in relation to a local government scheme within section 79(2)(a) or (3)(a) on—

(i) 1 October 2023, or

(ii) such earlier day as the Treasury may by regulations appoint;

(da) Chapter 3, and sections 97 and 98 so far as they apply for the purposes of that Chapter, come into force in relation to a local government scheme within section 79(2)(b) or (3)(b) on—

(i) 1 October 2023, or

(ii) such earlier day as the Department of Finance in Northern Ireland may by order appoint;”

76: Clause 119, page 94, line 41, at end insert “, or

(b) Chapter 3, or sections 97 and 98 so far as they apply for the purposes of that Chapter, in relation to a local government scheme within section 79(2)(b) or (3)(b).”

77: Clause 119, page 94, line 46, after “(2)(b)” insert “, (2)(da)”

78: Clause 120, page 95, line 4, leave out subsection (2)

79: Schedule 1, page 100, leave out lines 42 to 46 and insert—

“President of the Education Tribunal for Wales

Member of the legal chair panel, or the lay panel, of the Education Tribunal for Wales”

80: Schedule 1, page 105, line 35, leave out “(3)” and insert “(2)”

81: Schedule 3, page 112, leave out lines 37 and 38 and insert—

“Member of the legal chair panel of the Education Tribunal for Wales”

Motion agreed.

Commercial Rent (Coronavirus) Bill

Report

Clause 2: “Rent” and “business tenancy”

Amendment 1

Moved by

1: Clause 2, page 2, line 42, at end insert—

“(6) “English business tenancy” means a business tenancy comprising premises in England.(7) “Welsh business tenancy” means a business tenancy comprising premises in Wales.”Member’s explanatory statement

The amendment would define “English business tenancy” and “Welsh business tenancy”.

My Lords, the amendments proposed to Clauses 2, 9, 23 and, to some extent, 27 are the result of extensive discussions with Welsh Ministers, who expressed their wish that the delegated powers in the Bill be redrafted to clarify areas of Welsh competence in recognition of the importance of the Bill’s policy to Welsh businesses.

The amendments to Clause 9, regarding extending the period for making a reference to arbitration, clarify that the power to extend the arbitration reference period can be exercised for English business tenancies or for Welsh business tenancies, as well as for both. The amendments to Clause 23 decouple the moratorium period and the period for making a reference to arbitration. The moratorium period will end six months from Royal Assent, unless extended.

New Clause 23A provides that the UK must seek the consent of Welsh Ministers to extend the Bill’s moratorium period for Welsh business tenancies in respect of devolved matters. In relation to Clause 27, which is the power to reapply the Bill to a future period of coronavirus, I have tabled an amendment to enable regulations under this clause to be made just for English business tenancies, or just for Welsh business tenancies, or for both. The amendments to this clause also provide that the UK Government will seek the consent of Welsh Ministers on the use of powers to reapply the Act for Welsh tenancies in response to future periods of coronavirus-related business closures, where the provisions are devolved. In addition, in the event of new coronavirus restrictions in Wales, new Clause 27A has been included to enable Welsh Ministers, concurrently with the Secretary of State, to use the power to reapply the relevant moratorium provisions to Welsh business tenancies. I am pleased to confirm that the Senedd has now voted to support the legislative consent Motion in relation to this.

As noble Lords will be aware, the Delegated Powers and Regulatory Reform Committee published its report on 3 February. Following careful consideration of this report, I have now made several amendments to Clause 27 in order to address issues raised by the committee. I thank the committee for bringing this matter to the attention of the House. Primarily, the amendments limit the breadth of the Secretary of State’s powers to reapply the provisions of the Bill in the future. The amended power would allow for targeted modifications to accommodate new dates and to make adjustments to moratorium provisions to take account of new timeframes. However, it would not permit changes to the operation of the arbitration process or policy. The Secretary of State would retain the ability to make different provision for England and Wales, and to make incidental, supplemental, consequential, saving or transitional provisions. I beg to move.

My Lords, it is pleasing to see so many more noble Lords attending this debate than there were in Committee, when there were just four of us—two of whom have subsequently come down with coronavirus. So your Lordships have been warned.

This group of amendments is testimony to the fact that the Minister listened in Committee, and has attended many meetings and taken note. For that, the Minister and the Government should be congratulated and thanked in broad measure. I highlight in particular Amendment 21, which, as the Minister set out, addresses the issues highlighted by the DPRRC. This was a serious issue, and the Minister has effectively addressed it. It is a welcome change and something these Benches were particularly concerned about it, and it was good of the Minister to have taken it on. Also, conversation with the Welsh Government has been extremely successful, and that is borne out by the legislative consent that the Minister and Government have received. Overall, we welcome this group of amendments and think them a very good improvement to the Bill as we now see it.

My Lords, as the House may have spotted, I am not the noble Baroness, Lady Blake, as she is one of the two noble Lords who have fallen victim to Covid. We all wish her well for a quick recovery.

On this side of the House, we also welcome the Government’s moves, which follow on from representations made by the Welsh Government and the DPRRC. They show that the Government have listened and have acted upon the concerns raised. Perhaps the Minister could confirm in response that the Welsh Government are fully satisfied with these changes too, in which case we too are satisfied.

Amendment 1 agreed.

Clause 7: Approval of arbitration bodies

Amendment 2

Moved by

2: Clause 7, page 5, line 23, at end insert—

“(2A) The Secretary of State must ensure that bodies approved under subsection (1) have adequate resources and sufficient numbers of arbitrators as are (whether alone or as a member of a panel of arbitrators) required to conduct arbitrations under this Part.”Member’s explanatory statement

This amendment would require the Secretary of State to ensure that the approved arbitration bodies collectively have sufficient capacity, and resourcing, to hear all arbitrations under this Part.

My Lords, Amendment 2 builds on the debate in Committee. The House will be pleased that I will not repeat all the arguments put forward then, but it is worth saying at the outset that this amendment is in response to severe pressures that businesses, tenants and landlords are under following an extremely difficult trading winter, plus the economic pressures of national insurance increases, energy price rises and escalated inflation. The clock is ticking loudly.

Arbitrators will be dealing with the cases that could not be resolved through voluntary measures between the parties. These will include in the main the most complex, as well as those where a failure to act was in the hope that debt would just disappear. As a point of interest, it would be beneficial to know from which sectors these outstanding cases come—not geographically, but from which sectors of economic activity. Perhaps the Minister could respond.

In Committee, the Minister—whom I paraphrase—told us not to worry about the arbitration service and that all would be well and sorted out in due course. Can he tell us what his optimism is based on? Have the Government made an assessment about the demands that will be made on the service, beyond simply the number of outstanding cases? If so, can we see the evidence of that assessment? Also in Committee, the Minister said that the Government supported the market-based approach in which arbitration firms would move things around to get over the expected spike in demand. The Minister said that he had been reassured by the arbitration firms of their ability to cope. But, without a detailed assessment or understanding of both the volume and complexity of cases, coupled with a change in the nature of the work that arbitrators will be asked to carry out—which the noble Lord, Lord Fox, will introduce in a later amendment, on behalf of the noble Earl, Lord Lytton—this would appear to be wishful thinking.

If in reality there is either an insufficient number of arbitrators, or too many complex cases, or both, this reliance of the market-based approach may be something the Government come to regret. So will they keep the progress in clearing the backlog of cases under review and report back to Parliament from time to time? I have no doubt about the quality and excellence of the arbitration service itself across the whole of the UK, but we are concerned that the Government have not undertaken an assessment of the numbers and the resources available in order to be fully satisfied that all arbitrations can be conducted in good time.

Amendment 15 proposes that, when the Government issue guidance to arbitrators aimed at enabling better outcomes, Parliament should be informed. Some concern has been expressed, in particular by small businesses, that the draft guidance produced may not be fully appropriate to the arbitration process. This is turn raises the prospect that arbitrators’ decisions are likely to be distorted. So Amendment 15 adds a layer to safeguard against such an occurrence by asking the Government to bring statutory guidance to Parliament before it is issued. In both the Commons and in Committee we raised the need for a review of the Bill’s provisions to ensure that the process is being applied transparently, fairly and consistently. While we may not have convinced the Government to include a specific review mechanism, can the Minister assure the House that the operation of the Bill will be carefully monitored?

Finally, on the many thorny questions of viability, can the Minister tell us what engagement is being undertaken with stakeholders to stress test the Government’s draft guidance on this to make sure that it is fit for purpose? I look forward to the noble Lord’s response.

My Lords, I will speak to Amendments 2 and 15 in my name. Amendment 2 is important because it is important to have the arbitrators in place to deliver this service. The purpose of Amendment 15 is to probe the guidance notes, because in Committee that guidance was out for consultation. It is important to get a chance to air some of the issues thrown up from it and to get a sense from the Minister of where we are and when your Lordships’ House will see the final draft—I hesitate to use the phrase “final draft”, because I hope he can confirm that it is a live document and will develop over time alongside experience of this process.

The noble Lord talked about stress testing. It would be helpful if the Minister, during the process of monitoring the guidelines, talked to those who have been involved in arbitration about their experience so that they can be improved over time. Can he confirm that he will?

The Government’s instinct to try to keep this simple is correct, but sometimes simplicity can leave ambiguity. I think some of that has come through in the responses they may well have received. One way of removing that ambiguity is better use of templates, which is one of the responses I have received from people on this. Can the guidelines be better used to genuinely short-circuit the process and therefore reduce costs for the proponents’ way?

A second real issue is the definition of “viability”. We had a debate on that at Second Reading and in Committee; I do not propose to return to it, but there are issues around viability that concern businesses, particularly seasonal ones. There is scope within the guidelines—I have been given this advice by some seasonal businesses—to better define the role of seasonality when looking at the viability of these businesses. I would appreciate the Minister’s thoughts on those issues.

Finally, there is an underlying suspicion from some tenants that large-scale landlords, some of whom have experience in previous types of dispute, will game the system and use their financial muscle to take advantage. They fear that these well-resourced landlords will go for the most expensive options, bid up the costs and put the process beyond the means of small independent traders. Will the Minister ensure that the arbitrators are vigilant in this regard? I would be a bit hesitant here, because there is a potential conflict of interest for those arbitrators—the bigger the job, the larger the potential fee. We then come to important issues around fees. The Minister needs to set very clear guidelines to the arbitrators on that issue, such that they are not bidding up the process or creating the opportunity for big companies to flex their financial muscle.

My Lords, I am grateful to the noble Baroness, Lady Blake of Leeds—originally—and the noble Lord, Lord Fox, for raising their concerns about ensuring that arbitration bodies have adequate arbitrator capacity and administrative capability. I am sorry that the noble Baroness cannot join us today and wish her a speedy recovery, although of course I welcome the noble Lord, Lord Lennie, who is participating in her place. I agree that a number of crucial points have been made in this short debate. The need for arbitrator capacity has been a key consideration in designing the scheme.

The Bill adopts a market-based approach. This means that several arbitration bodies will be approved and deemed suitable to administer the scheme, a point which I will return to in a moment. I believe this is the best way to ensure that we maximise capacity, because arbitration bodies will be able to use their intimate knowledge of matching arbitrator skills and experience to cases. This Bill also helps maximise capacity by empowering approved arbitration bodies to design and optimise their internal workflows to make best use of their own and their arbitrators’ capacity.

The Government designed an approvals process which specifically asked arbitration bodies to evidence their capacity. The deadline for applying has now passed and an internal sifting process is under way. As the sift is ongoing, I cannot comment on the details yet, but I can state that 12 arbitration bodies have applied. This is a very pleasing indicator of the interest being shown in the scheme. To an extent, it shows that the market mechanism looks to be working. Given the breadth and content of the applications, I am confident that the approach we have taken quite rightly empowers arbitration bodies to apply their experience and expertise.

The noble Lord, Lord Lennie, asked about the number of cases. In light of recent intelligence from the mediation policy in New South Wales, Australia, we have adjusted our current estimate of the expected number of arbitration cases. It is important to note that there is still some uncertainty around these estimates, but in the central case we now estimate 2,500 arbitration cases in England and Wales. This is a significant reduction from the previous estimate of 7,500 cases in the central case. On that basis, if we were to discuss this Bill for the next few months, we might have no cases left at all. The noble Lord also asked about the sectors involved. I can confirm that closed sectors included retail, hospitality, personal care, leisure and the arts, and some others, but our evidence suggests that most outstanding rent debt falls within these sectors.

The reduction in estimated cases is a positive sign for both the scheme and the capacity of the arbitration market. As I have stated, I hope this number will reduce further as landlords and tenants continue negotiations. My officials are engaging extensively with arbitration bodies to ensure that we offer as much support as possible in helping them deliver this scheme. I hope that reassures noble Lords that we are engaging with the arbitration bodies on capacity and therefore request that this amendment be withdrawn.

Turning to Amendment 15, I am grateful to the noble Lord and the noble Baroness for raising the matter of laying statutory guidance before Parliament. There is no doubt that the statutory guidance will be very important to arbitrators’ performance of their role. The Government take this very seriously. We want to ensure that the guidance is genuinely useful to and used by arbitrators. That is why we have already published a draft of the guidance to allow for stakeholder input. This draft has been very well received by stakeholders—in particular the guidance on the assessment of the tenant’s viability, in answer to the noble Lord, Lord Lennie. My officials are having ongoing discussions with stakeholders which will inform the final version. This will take into account the comments made by the noble Lord, Lord Fox. We expect the final guidance to be published as soon as possible after Royal Assent.

We are committed to ensuring that the guidance is accessible to all. That is why the final version will also be published on GOV.UK. I am pleased to confirm that we will also write to all Peers to share a copy of the guidance when published and place a copy of it in the Libraries of both Houses. I assure the noble Lord, Lord Fox, that if experience shows that the guidance needs to be updated in any respect as the scheme unfolds, we will do so and make sure that any such changes are publicised.

I hope that noble Lords are reassured by this. We plan to make the guidance widely available and share it with your Lordships. I hope that, on this basis, the noble Lord will feel able to withdraw his amendment.

My Lords, I thank the Minister for his detailed response to the contributions and questions raised. It is good to know that only 2,500 cases remain. He is quite right that the longer we talk, the fewer cases will be left. I am not entirely convinced that this is proof that the market-based approach is working. It is something else, probably about the voluntarily nature of agreements entered into by people under the threat of the arbitration process. Nevertheless, it is a positive sign.

As for the statutory guidance, we welcome being informed of updates, but our preference would probably have been to have it approved, although that is neither here nor there. I beg leave to withdraw the amendment.

Amendment 2 withdrawn.

Clause 8: Functions of approved arbitration bodies

Amendment 3

Moved by

3: Clause 8, page 6, line 14, leave out paragraph (e)

Member’s explanatory statement

This amendment and the others in the name of the Earl of Lytton to Clause 8 are to avoid any ambiguity as to the role of the appointing body and independence of the arbitrator pursuant to the Arbitration Act 1996, to prevent unilateral objections that might delay or frustrate the process and to rely instead on the parties’ existing rights under the Arbitration Act 1996 jointly to remove an arbitrator.

My Lords, I rise to speak on behalf of the noble Earl, Earl Lytton, who, as previously advertised, is the second member of the “Covid 2” in this team. His absence is disappointing for two reasons. First, he is not here to make these speeches and I have to do so on his behalf, and secondly, his wisdom on the issue of property is second to few in your Lordships’ House. The nature of these amendments points to the direction of the advice that he would have given your Lordships’ House had he been here, and I will do my best to represent that. I am given to understand that the amendments that the noble Earl tabled are supported by the RICS, which focuses their purpose.

I will speak to them in groups. In the Clause 8 amendments, the noble Earl’s point is that the appointing body that oversees the function should not carry out more than a general monitoring of the administrative good order of the process. The reason behind the noble Earl’s point is that he is anxious to ensure that the terms of Arbitration Act 1996 are not circumvented, so perhaps the Minister can set the Bill in this context with respect to the Act.

At the heart of the Clause 10 amendments is the expectation that the appointing bodies do not materially alter their screening and selection processes. The noble Earl’s point is that on potential conflicts of interest, they are almost wholly reliant on self-disclosure by potential appointees, so they would frequently have no means of checking the responses for accuracy. I would welcome the Minister’s view on this.

The purpose of the Clause 19 and Clause 20 amendments is to make it permissible in a complex case, or cases, for the appointing body to demand from the parties that a clear statement of the issues and scope of evidence be placed before the arbitrator. Any fee specified in advance should be able to rely on the statement, but also on providing a broad estimate of the applicable arbitrator time and rate, where a fixed fee is impractical. I think what the noble Earl is driving at is that the arbitrators should not be signing a blank cheque for the work they are going to do; they deserve to have a scope to understand what it is they will be arbitrating.

Those are the groupings as the noble Earl set out. For my part, I hope to hear how the Minister and his department will balance these important points from the noble Earl, Lord Lytton, and the RICS, with the need to keep things as simple and cost-effective as possible. I think this is possible but I want to hear how the Government will absorb these two issues. I beg to move Amendment 3.

The noble Lord, Lord Fox, raises the central concerns of the struck-ill noble Earl, Lord Lytton, about the expectations of arbitrators. I would add that he seemed to suggest in Committee that the role of arbitrators in this legislation is inconsistent with the expectation of arbitrators in the Arbitration Act—that is, they decide either one way or the other between two competing cases, rather than trying to filter between the cases to find some remedy between the two.

My Lords, I apologise—I was caught short by the speed with which we are moving through these amendments. Before I respond to these points, I thank the noble Earl, Lord Lytton, for the amendments he tabled. I think everybody who heard him in Committee was impressed by his erudition. I am sorry he is not able to join us to debate these points, but on behalf of the House I thank the noble Lord, Lord Fox, for stepping into the breach and for his impressive grasp of the technical matters underlying these amendments.

I start by saying that I am fully aware of the concerns of arbitration bodies seeking approval under the Bill and my officials have been in continual contact with them to ensure that their views are registered and dealt with appropriately.

The Bill differs in some aspects from the Arbitration Act 1996, and provides that approved arbitration bodies have oversight over arbitrators where they have appointed them. In answer to the noble Earl, Lord Lytton, this was deliberate, and it gives certainty to landlords and tenants that arbitration will be managed efficiently and any issues with the process dealt with expeditiously. I can assure noble Lords that the oversight function is not intended to be onerous and is primarily administrative to ensure that the process runs smoothly. We do not expect bodies to continually monitor proceedings, but only step in where a party has a legitimate complaint or new information comes to light, raising a concern. I hope this reassures the noble Lord, Lord Fox.

Under the Bill, arbitration bodies can decide on unilateral removal requests, and this was also deliberate to avoid adding to pressure on the court system. The bodies should apply the same principles in case law as the court, including that there is a high bar to removing an arbitrator, and the parties should raise any concerns promptly. Frivolous, vexatious or unsubstantiated complaints should be quickly dismissed. Complaints of any substance should be rare, given the rigorous pre-appointment checks that bodies will doubtless carry out. I am pleased to clarify the point raised by the noble Earl in Committee: it is open to the approved arbitration bodies to charge a fee for dealing with a removal application. The intention is that this may disincentivise frivolous or vexatious complaints. In addition, the arbitrator can require an obstructive party to pay a greater share of the arbitration fees. We will include this clarification in the guidance to which I referred earlier.

I appreciate that there is concern about the extent to which arbitration bodies have immunity in respect of their functions. This is an important point that has been raised; I am considering it and will return to this issue at Third Reading.

I appreciate that latter point, and the conflict of interest is a concerning issue, particularly around how arbitrators are able either to sign off on that or not be required to do so.

The noble Lord makes a good point on that, and I hope that all this provides reassurance to the noble Lord, Lord Fox, in his proxy role regarding Amendments 3, 4 and 5 and that he will now not press them.

Turning to Amendments 8 and 9, the Bill’s arbitration scheme is for parties that cannot reach agreement. It should not apply if the protected rent debt is covered by a company or individual voluntary arrangement, or by certain restructuring plans and schemes under the Companies Act 2006. The Bill therefore does not allow a reference to arbitration where such an arrangement has been approved. If, when the Bill scheme is open, such an arrangement has been proposed but not decided, the Bill seeks to preserve the parties’ positions. This is why a party may apply for arbitration but an arbitrator may not be appointed while the decision on the arrangement is pending. If the proposed arrangement is then approved, arbitration should not be available, so, in that instance, the Bill prevents an arbitrator being appointed.

This is important, but it should not be burdensome for approved arbitration bodies. We will set out in guidance a clear and quick process based on tenant disclosure to check whether there is an approved or proposed arrangement to limit administrative burden on the bodies. However, we should not use limited arbitral capacity to determine this. I hope that I have explained convincingly why Amendments 8 and 9 are not necessary or appropriate.

Finally, I thank the noble Lord for raising the important issue of arbitration fees. I turn first to Amendment 10. A cap on fees differing with the complexity of the dispute may seem helpful; however, complexity is subjective and difficult to define and measure. It would therefore be hard to monitor adherence to such a cap. Landlords and tenants may worry that their case would be considered complex, resulting in higher fees, which may discourage SMEs from applying. Of course, a key tenet of this Bill is that this should be an inclusive process and open to all. I hope that explains, for reasons of practicality, why I cannot accept the amendment from the noble Earl and noble Lord on the fee cap.

Amendments 11, 13 and 14 in effect remove the requirements for advance payments of arbitrators’ fees and expenses and oral hearing fees. However, it is fundamental that the parties know in advance how much arbitration will cost to avoid deterring them from using the scheme. A key gain—another key tenet—is that this scheme is intended to be fast and low cost. The arbitration mechanism is focused and based on the parties’ formal proposals and supporting evidence. Oral hearings should concern those proposals and evidence and should not require lengthy cross-examination or experts. Consequently, costs should be predictable.

Requiring fees to be paid in advance prevents a party frustrating the process by refusing to pay. It also avoids arbitration bodies having to take action to recover unpaid fees. Arbitration bodies should be reassured that it is perfectly acceptable under the Bill for them to set a higher fee for large-scale disputes, and vice versa. For these reasons, I hope that the noble Lord will understand that I must stick to the position that fees should be paid in advance.

Finally, I turn to Amendment 12. The scheme must of course be accessible to SMEs, as I have previously said, but the general rule of splitting approved arbitration body fees and expenses 50:50 is important. That even split means that neither side is incentivised to make the process more complex or lengthier than it needs to be. I believe that we should be wary of interfering with this. Of course, the exception is where a party has behaved obstructively, in which case the arbitrator can require them to pay more than 50% because of their conduct. As I have mentioned, it is perfectly acceptable for approved arbitration bodies to set fees payable in advance that differ depending on the size of the parties involved. I hope that all provides a satisfactory explanation to the noble Lord, Lord Fox. I thank him and of course the noble Earl, Lord Lytton, for their close attention to these matters, and I hope that he will not press these amendments.

My Lords, I thank the Minister for his comprehensive answer on these amendments. I am not sure how much cheer the noble Earl will be getting from the answer, but he will I hope be able to respond on his own account at Third Reading.

For my own part, I think the Minister’s response that neither side is incentivised to increase the costs is a bit—if he does not mind me saying so—naïve, because that is exactly what has been happening where the big operators have flexed their muscle to, in a sense, push the smaller operators into a corner. So I do not agree with that point, and it is perhaps something that the Minister could reconsider. With that, I beg leave to withdraw the amendment.

Amendment 3 withdrawn.

Amendments 4 and 5 not moved.

Clause 9: Period for making a reference to arbitration

Amendments 6 and 7

Moved by

6: Clause 9, page 7, line 10, leave out from “period” to end and insert “allowed by subsection (2) for making references to arbitration in the case of—

(a) English business tenancies,(b) Welsh business tenancies, or(c) English business tenancies and Welsh business tenancies.”Member’s explanatory statement

The amendment would clarify that the power to extend the period for making references to arbitration can be exercised for English business tenancies or for Welsh business tenancies only, as well as for both.

7: Clause 9, page 7, line 13, leave out subsection (5)

Member’s explanatory statement

The amendment would omit a definition that is redundant if Lord Grimstone’s proposed amendment to Clause 23 at page 14, line 27 is made.

Amendments 6 and 7 agreed.

Clause 10: Requirements for making a reference to arbitration

Amendments 8 and 9 not moved.

Clause 19: Arbitration fees and expenses

Amendments 10 to 12 not moved.

Clause 20: Oral hearings

Amendments 13 and 14 not moved.

Clause 21: Guidance

Amendment 15 not moved.

Clause 23: Temporary moratorium on enforcement of protected rent debts

Amendments 16 and 17

Moved by

16: Clause 23, page 14, line 27, leave out “for making references to arbitration,” and insert “of six months beginning with that day,”

Member’s explanatory statement

The amendment would mean that the moratorium period is no longer defined directly by reference to the period under Clause 9(2) for making of references to arbitration. Instead the period under Clause 23(2)(b)(i) will end 6 months from Royal Assent, unless extended.

17: Clause 23, page 14, line 30, at end insert—

“(2A) Subsection (2) is subject to any extension of the period mentioned in paragraph (b)(i) that—(a) is made by or by virtue of section (Alteration of moratorium period), and(b) has effect in relation to the protected rent debt.”Member’s explanatory statement

The amendment would acknowledge that the period ending as specified in Clause 23(2)(b)(i) may be extended as provided for in the new Clause proposed by another amendment in the name of Lord Grimstone.

Amendments 16 and 17 agreed.

Amendment 18

Moved by

18: After Clause 23, insert the following new Clause—

“Alteration of moratorium period

(1) In this section “extension regulations” means regulations under section 9(3) extending the period allowed by section 9(2) for making references to arbitration.(2) Where extension regulations made by virtue of section 9(3)(a) or (c) extend that period in the case of English business tenancies, the period specified in section 23(2)(b)(i), so far as it applies in the case of a protected rent debt under an English business tenancy, is extended for the same period of time.(3) Subsection (4) below applies where extension regulations made by virtue of section 9(3)(b) or (c) extend that period in the case of Welsh business tenancies.(4) The Secretary of State may by regulations made by statutory instrument extend the period specified in section 23(2)(b)(i), so far as it applies in the case of a protected rent debt under a Welsh business tenancy, for the same period of time.(5) Regulations under subsection (4) must provide for the extension referred to in that subsection—(a) to have effect for the purposes of this Part including the purposes of Schedule 2, or(b) to have effect for the purposes of this Part other than the purposes of Schedule 2.(6) The power to make the provision referred to in subsection (5)(a) is exercisable only with the consent of the Welsh Ministers to the extension having effect for the purposes of Schedule 2 other than the purposes of paragraph 3(6) and (7).(7) A statutory instrument containing regulations under subsection (4) is subject to annulment in pursuance of a resolution of either House of Parliament.”Member’s explanatory statement

The amendment deals with the effect of use of the Clause 9(3) power on the moratorium period under Clause 23(2). For debts under Welsh business tenancies the effect will depend on regulations, which would require the consent of the Welsh Ministers if a change in the moratorium period affects Schedule 2 (apart from paragraph 3(6) and (7), dealing with reserved matters).

Amendment 18 agreed.

Clause 27: Power to apply Act in relation to future periods of coronavirus control

Amendments 19 to 24

Moved by

19: Clause 27, page 15, line 39, at end insert—

“(1A) Regulations under this section may—(a) be made so as to apply in relation to—(i) English business tenancies,(ii) Welsh business tenancies, or(iii) English business tenancies and Welsh business tenancies;(b) exclude the provisions mentioned in subsection (7B)(a) to (c) from the provisions being re-applied in relation to Welsh business tenancies.”Member’s explanatory statement

The amendment would enable regulations under Clause 27 to be made just for English business tenancies or just for Welsh business tenancies (as well as for both) and also to exclude (in the case of Welsh business tenancies) provisions of the Act which deal with devolved matters in Wales.

20: Clause 27, page 16, leave out lines 15 and 16 and insert—

“(7) Regulations under this section may—”Member’s explanatory statement

The amendment would omit the current specific power to exclude any of the provisions of the Act from applying again by virtue of regulations under Clause 27.

21: Clause 27, page 16, line 17, after “such” insert “necessary”

Member’s explanatory statement

The amendment would limit the power to modify the provisions of the Bill being re-applied to modifications necessary for the re-applied provisions of the Act to work in the circumstances in which the power is being used.

22: Clause 27, page 16, line 19, leave out from “provision” to first “for” in line 20

Member’s explanatory statement

The amendment would limit subsection (7)(c) to making different provision for England and for Wales.

23: Clause 27, page 16, line 23, at end insert—

“(7A) For the purposes of subsection (7)(b)—(a) “modifications” means omissions, additions or variations, and(b) modifications are “necessary” if they appear to the Secretary of State to be necessary for the provisions being re-applied to operate correctly in relation to business tenancies adversely affected by the closure requirements in question.(7B) The power under this section is exercisable only with the consent of the Welsh Ministers so far as it relates to the re-application, in relation to Welsh business tenancies, of—(a) Schedule 2 apart from paragraph 3(6) and (7),(b) section 23 so far as relating to Schedule 2 apart from paragraph 3(6) and (7), and(c) Part 1 and this Part, so far as relating to the provision mentioned in paragraphs (a) and (b).”Member’s explanatory statement

The amendment would require the consent of the Welsh Ministers to regulations re-applying the moratorium provisions of Part 3, with the exception of paragraph 3(6) and (7) of Schedule 2 (the subject-matter of which is reserved under Welsh devolution legislation).

24: Clause 27, page 16, line 24, leave out “The regulations” and insert “Regulations under this section”

Member’s explanatory statement

This is a drafting amendment that would secure consistency of expression in Clause 27.

Amendments 19 to 24 agreed.

Amendment 25

Moved by

25: After Clause 27, insert the following new Clause—

“Concurrent power for Welsh Ministers to apply moratorium provisions again

(1) The Welsh Ministers may exercise the power conferred by section 27, concurrently with the Secretary of State, so far as it relates to the re-application, in relation to Welsh business tenancies, of—(a) Schedule 2 apart from paragraph 3(6) and (7),(b) section 23 so far as relating to Schedule 2 apart from paragraph 3(6) and (7), and(c) Part 1 and this Part, so far as relating to the provision mentioned in paragraphs (a) and (b).(2) Section 27 has effect in relation to regulations made by the Welsh Ministers by virtue of this section as if—(a) references to the Secretary of State were to the Welsh Ministers,(b) subsection (1A)(a)(i) and (iii) and (b) were omitted,(c) in subsection (7)—(i) the references in paragraph (b) to provisions of this Act were references to provisions mentioned in subsection (1)(a) to (c) above, and(ii) the reference in paragraph (d) to an Act of Parliament included a reference to an Act or Measure of Senedd Cymru,(d) subsection (7B) were omitted, and(e) in subsection (8)(b), for “each House of Parliament” there were substituted “Senedd Cymru”.(3) In Schedule 7B to the Government of Wales Act 2006 (general restrictions on legislative competence of Senedd Cymru), in paragraph 11(6)(b) (exceptions to restrictions relating to Ministers of the Crown)—(a) omit the “or” at the end of paragraph (vii), and(b) after paragraph (viii) insert “; or(ix) section 27 of the Commercial Rent (Coronavirus) Act 2022.””Member’s explanatory statement

The amendment would insert a new Clause enabling the Welsh Ministers, concurrently with the Secretary of State, to use the section 27 power to apply again the moratorium provisions specified in subsection (1)(a) to (c) of the new clause in relation to Welsh business tenancies affected by new coronavirus restrictions in Wales.

Amendment 25 agreed.

Economic Crime (Transparency and Enforcement) Bill

Second Reading

Moved by

My Lords, in light of Russia’s invasion of Ukraine, it is vital that we take new action to crack down on Russian dirty money and corrupt elites in the UK. The measures in the Bill—passed with cross-party support in the other place—will enable us to better identify, investigate and sanction the illicit wealth of those who wish to abuse our open economy. While we are rightly focused on taking action against Putin’s regime, these measures will strengthen our framework for tackling economic crime for the long term.

I have been heartened by the previous offers from those across all parties, including on the Opposition Front Benches, to support and co-operate with the Government on emergency legislation and to offer practical support to ensure that the Economic Crime (Transparency and Enforcement) Bill is implemented. I very much hope that we can continue to work in this spirit.

The Bill comprises some emergency measures, developed in light of Putin’s outrageous actions in recent weeks, and other measures that have been planned for quite some time. The first is a new register of overseas entities, which will require overseas companies owning or buying property in the UK to give information about their true owners to Companies House. This will provide more information to help law enforcement identify those using UK property as a money laundering vehicle.

Secondly, there will be reforms to unexplained wealth orders, which are a key tool for the investigation of suspicious assets. Through this Bill, we will improve their effectiveness and make sure that they can be applied to complex ownership structures.

Thirdly, we will streamline the sanctions Act to enable even swifter sanctioning of oligarchs and businesses associated with the Russian Government. The Bill also includes amendments to financial sanctions legislation, including strengthening the Treasury’s power to impose monetary penalties on those who violate our financial sanctions laws.

These are the actions that we can take most swiftly but they are not the sum total of our ambition. We will introduce a second economic crime Bill with further measures as early as we can in the next Session. This will include major reform of Companies House, reforms to prevent the abuse of limited partnerships, new powers to make it easier to seize crypto assets from criminals and measures to provide businesses with more confidence to share information on suspected money laundering. This second Bill will be a substantial piece of legislation. I know that some of the measures it contains have long been called for. I can assure the House that drafting is under way and we will bring it forward as soon as we are able.

I will now provide more detail on the measures in today’s Bill. The Bill will create a register of overseas entities which will require anonymous foreign owners of UK property to reveal their real identity, ensuring that they can no longer hide behind secretive chains of shell companies. We know that corrupt wealth is stored in property in this country, and this new register will help us to find it. Too often, investigators at the National Crime Agency and other bodies reach a dead end when they find that a property of interest to them has its title registered in the name of a foreign company. It can be very difficult to obtain adequate information about that company, depending on where it is registered.

This new register would apply essentially the same beneficial ownership requirements to these companies as already apply to domestic companies registered at Companies House. An overseas entity that owns or wishes to own land in the UK will be required to take steps to identify its beneficial owner or owners and register them with Companies House. They will be required to verify that information and evidence that verification, and they will be required to update information annually. The provisions will apply retrospectively as far as Land Registry data allows: 1999 in England and Wales, and 2014 in Scotland. Should a foreign company not comply with these new obligations or submit false filings, its managing officers can face criminal or civil penalties. In many cases, these officers may be overseas and beyond the reach of UK law enforcement. That is why the key sanction will be the loss of rights to sell or lease the property until the register is populated with verified information.

I emphasise to the House that this is an information measure—an additional tool for law enforcement to use to inform investigations, including the case for making an unexplained wealth order. It is not a necessary underpinning of the actions we are taking right now to sanction allies of Putin. Rather, it will help to clean up our property market over the long term. However, I am mindful that many in your Lordships’ House will want to see it implemented as swiftly as possible, and I can assure the House that work to deliver the register will begin as soon as the Bill receives Royal Assent. A transition period will be in place as an essential protection for the many legitimate businesses and individuals who are likely to be holding property through overseas entities. Noble Lords will know that the Government have already amended the Bill in the other place to reduce this period to six months. We have committed to looking at how any entity in scope of the register selling its property before the register is operational should not be able to evade that scrutiny.

I turn now to the reforms to remove barriers to the use of unexplained wealth orders. These changes will increase the time available to law enforcement to carry out investigations, allowing them to be more comprehensive. We will also reform cost rules so that agencies will not be required to pay respondents’ costs unless they act dishonestly, unreasonably or improperly. This will remove a key barrier that discourages the use of UWOs and will increase and reinforce operational confidence in their use.

With this legislation, unexplained wealth orders will become more effective against those who hold property in the UK through trusts and other complex ownership structures. By targeting those who manage the properties on behalf of the beneficiaries, law enforcement will be able to obtain information that may be obscured by the beneficiaries. Individuals will not be able to hide behind shell companies and foundations any more.

I turn now to the amendments introduced to the Bill in the other place by which we propose to revise the sanctions Act. They will allow us to sanction oligarchs and businesses associated with the Russian Government even more swiftly, in concert with our allies. The new measures will ensure that we have the power to use urgent designation procedures to temporarily mirror the listings that have already been adopted by our allies. The United States, Canada, Australia and the EU are listed in the Bill, and others may be added by regulation.

We will remove the statutory test of appropriateness for making designations, thus simplifying the process. Ministers will still need to be satisfied that there are reasonable grounds to suspect that the person to be designated is “an involved person”, usually on the basis that have been involved in a specified activity. In the context of Russia, the activities specified in regulations include destabilising Ukraine, undermining or threatening its territorial integrity and supporting the Government of Russia. This is the right test to focus on in sanctioning an individual, without unnecessary statutory hurdles.

The Bill will remove some of the constraints on designations by description so that the Government can designate groups of individuals more quickly—for example, members of defined political bodies such as the Russian Federation Council. The Bill will also remove burdensome requirements to formally review each and every sanction every three years, freeing up vital resource to focus on developing new designations. However, designated persons will continue to have the opportunity to ask for their designation to be reviewed through an administrative review, and for the outcome of that review to be considered by the courts. Ministers will continue to be under a duty to revoke a designation where the relevant tests are no longer met in respect of it. The Bill will streamline reporting requirements while ensuring that Parliament can continue, rightly, to hold Ministers to account.

We are seeking to protect the public purse by permitting the payment of damages in connection with designations only in the case of bad faith. The Bill also provides a power to impose a cap on damages applying to any proceedings issued after 4 March, when the amendments were originally tabled in the other place. This will limit the ability of deep-pocketed oligarchs to claim massive payouts from sanctions challenges.

The Bill will also enhance the enforcement of financial sanctions. It will make it easier for the Treasury to impose significant monetary penalties, to name publicly those who have breached financial sanctions and to expand information-sharing powers.

We are collaborating with the devolved Administrations on this Bill. Provisions in it relating to the register of overseas entities and unexplained wealth orders engage devolved powers in both Scotland and Northern Ireland. We will continue to work with them on implementation and I am confident that we can rely on their continued support, for which I am very grateful.

The Government have consulted on the measures in the Bill. The register of overseas entities was the subject of extensive consultation and pre-legislative scrutiny. The Government accepted and acted on most of the Joint Committee’s recommendations. We have designed the reforms of unexplained wealth orders in close consultation with law enforcement agencies and representatives from the accountancy, financial and legal sectors. The Treasury will engage with industry on updating the guidance for financial sanctions before this reform takes effect. I can therefore assure the House that the Government are not acting rashly, and I urge it to support the Bill.

The Bill will ensure that our economy becomes more transparent and stronger at the same time. It will give our enforcement agencies the powers they need to effectively tackle dirty money. The House will be in no doubt, and will have noted, that the other place overwhelmingly supported the Bill when it was considered there on Monday. The Government worked with the Opposition there to strengthen and accelerate the package, and there was a clear and strong desire across party lines to present a united front by passing the legislation as swiftly as possible. I urge noble Lords to take a similar approach in this House. With that, I beg to move.

My Lords, we warmly welcome the arrival of the Bill and we are pleased that the Government have promised to introduce a further economic crime Bill in the next Session. In warmly welcoming the Bill, I would just like to make some points to noble Lords. This is significant progress compared with the position outlined by the noble Lord, Lord Agnew of Oulton, in January, when it appeared that the Government did not want to treat this as a priority issue. But now Putin has left them with no choice. Until now, I am afraid there has been a persistent and troubling lack of political will to act on these issues from the Government. It has taken war to bring about this change of position, and the Government should have acted sooner.

This is welcome, but we do not kid ourselves. The Bill does not resolve all our issues, but it is a stopgap and we will support it. It is the first instalment and we await the detail in part two. I welcome the noble Baroness’s assurances in her speech that part two will be extensive and we look forward to it. The Bill introduces a register of overseas entities, revisions to the function of unexplained wealth orders and changes to the Government’s sanctions regime.

There has long been a case for a new register such as the register of overseas entities. We have been promised it time and again, as far back as the Anti-Corruption Summit of 2016. But the Government have always failed to produce the goods when pushed to do so, and this we regret. We have had multiple consultation exercises on this issue, yet it has taken until now for the Government to move. We have known about weaknesses in the UK’s anti-money laundering regime for some time, with the Financial Action Task Force noting in 2018 that there was a need for substantial increase in resources devoted to financial intelligence as well as a series of other, fundamental reforms.

The truth is that for too long the Government have turned a blind eye to illicit funds being funnelled through the British economy—up to £100 billion per year according to the NCA. There is, as we know, no silver bullet to fight against economic crime. This new register is a much-needed tool, but it will not work unless we get the next Bill right, including by addressing the long-running concerns about the resourcing and powers of key investigatory and enforcement bodies.

Turning to unexplained wealth orders, this tool has not been as effective as hoped so far, so we welcome the various moves to strengthen the unenforced wealth order regime. It is vital that these orders are used. It is important that we understand why so few of those orders have been implemented so far—only 15 orders and four cases. This cannot be explained away entirely by the risk of legal costs. The capacity of the NCA, SFO, FCA, HMRC and CPS to handle these orders also needs to be considered. The Government’s new Clause 31, requiring the Secretary of State to publish annual reports into the use of unexplained wealth orders, is definitely a positive step and we welcome it.

The Bill amends the Sanctions and Anti-Money Laundering Act 2018. The Government are making it easier to replicate the EU’s decisions in this and we welcome the collaborative working in this area with our international partners. This is a demonstration of strength and we back it. The campaign for an effective sanctions regime, though, began following the death of Sergei Magnitsky in 2009. The measures we are finally seeing now are welcome, but we do ask ourselves whether we will not be looking back and wondering whether we would be in a stronger position today had we acted sooner.

If we are to isolate Putin and his network of oligarchs and kleptocrats, the Government need to use these new powers immediately, bringing both pace and breadth to their response to events in Ukraine. While the Bill is not solely about Russia’s illegal and immoral invasion of Ukraine, it is regrettable that recent events have had to unfold before the Government have been prepared to bring these measures forward. Nevertheless, we will show solidarity with Ukraine by assisting the Government in the swift passage of this legislation. It is a common-sense approach to beginning to crack down on the shocking level of economic crime that has taken root in this country.

The Opposition have worked constructively with the Government since they announced the Bill and I am grateful to Ministers in the other place for adopting several of our key asks, including a reduced grace period for registering beneficial ownership and much harsher fines for those who break the rules. There remains, though, more to do. The grace period may have fallen from 18 months to six, but we on these Benches think it is still too long. Properties will be sold and other assets disposed of in far less time, severely undermining the effectiveness of the new register.

As drafted, the Bill does not yet do enough to crack down on the so-called enablers of money laundering and other forms of economic crime. They are arguably as guilty as those who seek to bring illicit funds to our shores in the first place. We know that Ministers are looking to bring forward amendments in a number of areas; we hope they will respond to concerns voiced by noble Lords in this debate today. Can the Government also offer us assurances that the follow-on Bill will be subject to normal processes, allowing both Houses to study and debate all the relevant measures in detail? I hope your Lordships will pass the Bill without undue delay but, in doing so, can we commit this evening to finally tackling the shameful spectacle of illicit money being laundered through our country?

My Lords, every day’s delay in bringing in these measures costs Ukrainian lives, so these Benches join in wishing to pass the Bill urgently. We have, however, been calling for the key property ownership elements in the Bill for years, and we wish we had had them at a time when we could have gone through it carefully, clause by clause, and amended their various flaws.

I am delighted that the Minister has given us an assurance that she will bring the sequel to the Bill promptly. We will be watching for that. It must, as she said, deal with Companies House, limited partnerships and cryptocurrencies, which I am glad she mentioned. I take note that Russia, on the day of the invasion of Ukraine, moved to control key crypto exchanges, and I say to the Government that it may be necessary to move on that issue ahead of part two, because it is an obvious escape hatch that Russia is taking full advantage of. We also hope that in part two the Minister will address two other areas: trusts, which appear not to be fully covered by Schedules 2 and 3, and freeports, with their secrecy privileges. There will be a great deal to do in part two.

As for this Bill, let me start with provisions that deal with the public register of the beneficial ownership of property in the UK. Why have those with property interests purchased with dirty money and hidden by shell companies been given a six-month transition period, during which implementation is suspended? I accept that this is less of an escape hatch than the original 18-month transition period in the first version of the Bill, but it still gives any oligarch plenty of time and scope to alter their arrangements, including by liquidating and moving assets out of the United Kingdom into a safe haven. I understand that the office of the registrar needs to be staffed, resourced and trained, but that should be done urgently and, if necessary, the registrar should be loaned staff to bring its capacity up as quickly as possible.

Surely, penalties for breaching the rules should be retro-effective. It is a technique used by HMRC, particularly against small taxpayers under the loan charge, and it seems ideal to be adapted to this particular set of circumstances. Perhaps the Minister could also tell us whether there are existing powers that could be sharpened to cover the transition period.

Why does the Bill give the Secretary of State sweeping powers to exempt anyone from the register in the interests of the economic well-being of the United Kingdom? That is an incredibly broad criterion, but particularly inappropriate in this country, where allies of Putin are utterly enmeshed as major players in our economy, from media to sport to manufacturing. I am sure that no Minister would dream of making an exemption now, during the Russian invasion of Ukraine, but the clause is a message—and not a subtle one—that, once the crisis fades, anyone with a significant investment in the UK economy, regardless of the source of their money, can expect the privilege of an exemption.

Again and again in this House, your Lordships have warned that the Bill must deal with the network of enablers: the legal firms, the accountants, the developers, the banks—in effect, those who have opened the gate to dirty money and used all their skills to keep it open. I said a few days ago that this would be painful. Enablers include many respected names with very close ties to the political establishment; but why does the Bill not crack down on them and why is there no failure-to-prevent clause included in the Bill, or some equivalent kind of action? It is absolutely vital.

I will say only one thing about unexplained wealth orders. I do not wish to belittle them but, given the extraordinarily high income that oligarchs and kleptocrats enjoy from their many business interests, how useful are these orders and these clauses in our current emergency? Do they really have very much practical relevance? I am not opposed to them, but let us not put undue weight on them.

I welcome the strengthening of sanctions, but I say to the Government that, whenever anything is done in hot haste—and it has to be done that way on this occasion; I fully accept that—it is very sensible later to do a review and work out whether what was needed was done, whether there was any overreach and whether the measures were entirely appropriate. I hope we will hear that from the Government.

Lastly, enforcement absolutely matters. How confident are the Government that the Crown dependencies and overseas territories have adequate sanctions and controls and enforcement capacity? For us, what is the Government’s resourcing plan? The registrar’s office, which will have to verify all this hoarded information, will face a mountain of data and process. When will it be staffed? At the last asking, the National Crime Agency, on which we heavily depend for enforcement, had only 118 staff to investigate all financial crime, despite its complexity and the powerful lawyers and accountants used by the other side. How many additional staff, rather than transferred staff, will there be in the new kleptocrat cell and when will it be up and running, effective and fit for purpose?

If ever there was a time when we needed whistleblowers—and fast—it is now. They are not even mentioned in the Bill. The United States recently passed the Kleptocracy Asset Recovery Rewards Act, with cross-border and extraterritorial jurisdiction. Are we seriously telling whistleblowers, “Go to the Americans—we can’t be bothered”? Or will the Government commit to tackling this omission, hopefully in this part of the Bill, but, if not, absolutely, definitely in Part 2?

My Lords, I remind the House of my interest as a chartered accountant—which I hesitate to do after the last speech, I have to say. Like most noble Lords, I welcome this Bill, although I greatly regret the Government having to introduce these measures in such circumstances and in such a rush. We have tolerated for far too long the UK—and London in particular—becoming a haven for the ill-gotten gains of criminals. Of course, we need to get this Bill onto the statute book quickly, so that we can effectively sanction those responsible for the atrocities taking place in Ukraine.

Economic crime, however, is a much wider subject than Russia, and we have a lot of work to do to remedy the laissez-faire attitude to economic crime that has pervaded government policy—or, perhaps, lack of policy—in the last decade. The resignation speech of the noble Lord, Lord Agnew, said it better than I ever could. There is much more to do than is covered in this Bill, and I was pleased to hear the reassurances about the follow-up Bill.

In my comments, I will concentrate on the overseas entity register, but I have one observation on the unexplained wealth order clauses. The Government have blamed the aggressive use of legal action by oligarchs as the major reason why UWOs have not been successful so far. I am sure that there is some truth in that, but I am unconvinced that it is the main issue. More likely, the major problem is the lack of a properly resourced enforcement agency—something we also see in the wider issue of fraud more generally. I understand the reason for introducing legal costs clauses, but I do feel uncomfortable that someone who is entirely innocent will not be able to recover the potentially huge legal costs to defend themselves.

The overseas entity register is a good start, but I am afraid I do not expect it to make much practical difference. Innocent people will provide the required information—which is useful in itself—but those who are using offshore structures dishonestly to hide their identity will still be able to do so. There are many other ways of hiding ownership, including discretionary trusts, undisclosed nominees, complex corporate structures and so on. The current alleged situation of Graham Bonham-Carter and Oleg Deripaska is a good example of how this can happen.

So, in the spirit of being helpful, how might we improve this? First, while the reduction from 18 months is welcome, the time period of six months is still too long. In fact, the period is more than six months, because these clauses do not commence until such date as the Secretary of State decides. Can the Minister say when that will be? Six months still gives a lot of time for people to rearrange their affairs to avoid the rules. I would have favoured 28 days, but perhaps the three months that the Institute of Chartered Accountants has suggested might be a good compromise.

Secondly, while the new rules will prevent a property being sold once the rules are in force until the entity is registered, this does not stop the sale of the company, or, indeed, of a company further up the chain. The Bill will therefore not prevent a criminal realising the value of the property. Frankly, there is probably not a lot we can do about that, but I note that the register will only have to be updated annually, so it may be a very long time before we discover the change. It would be better if the changes to the beneficial ownership had to be updated on the register immediately after the transaction takes place. The Companies Act 2006 requires the persons of significant control register to be updated within 14 days. Perhaps the Minister could explain why the overseas entities register is different from that?

Thirdly, the register will be pointless if there is no real verification of it. One way to improve that would be to leverage the due diligence that should already be happening under anti-money laundering legislation, although clearly this does not always happen as well as it should do. At the moment, we rely on the passive, risk-based requirement to report suspicious activity. It would seriously concentrate the minds of lawyers and accountants who advise those using offshore entities if there was an active requirement for them to place a statement on the register that they have carried out their due diligence and are satisfied that the beneficial ownership is correctly stated, and if we also made sure they were liable for that statement under Clause 15. As well as improving the integrity of the register, this would have the additional impact of making those who are enabling the hiding of assets to think very seriously about it. The requirement for such a statement could easily be included in the regulations to be made under Clause 16. Is that something the Minister would consider?

This Bill is a start, but it is a rushed Bill, issued to deal with an emergency situation, and scrutiny is being substantially curtailed. It is not without flaws. As I said, the subject of economic crime is much wider, and deserves much greater work and consideration. I was pleased to hear the details of the follow-up Bill, which needs to be comprehensive. Can the Minister please make a clear statement that the follow-up Bill—given the curtailed nature of the scrutiny here—will allow the matters covered in this rushed Bill to be looked at again, with the more detailed scrutiny the subject needs and deserves?

My Lords, I welcome this Bill and the speed with which it is being brought to us, but I share some of the concerns that have been represented already. I do not intend to go into any of the detail of matters that have already been spoken about; I am sure other noble Lords would be better at that than I might be.

I hesitate to bring an ethical argument because, in my experience in this House, ethical arguments simply get ignored. Indeed, one Minister replied to an ethical argument made on a different Bill by saying, “We will not listen to strictures on morality from anyone.” That led me, at the next stage—on Report—simply to say that that implies there is no place in politics for ethics. But it is my ethical concerns, which one might represent as cultural, that cause me to stand now.

Culture is not cleaned up by one act or one reaction to a particular stimulus, albeit a serious one such as the invasion of Ukraine. Some months ago, the Foreign Secretary threatened that sanctions would be introduced if Vladimir Putin invaded Ukraine. At the time, I thought that we should not be threatening that as a reaction to something else that happens. This stuff is immoral. The money that is sweeping through the sewers of London needs to be cleared up for its own sake, not simply as a bargaining chip in relation to Ukraine. If we are going to get rid of dirty money, we ought to do so because it is a moral obligation, not because it is a tactic.

If money is dirty and people are—we keep hearing the word—corrupt, is it that the money is indeed dirty and these people are indeed corrupt, or is it just that the game has changed, so it is now convenient for us to label them in that way? They were not corrupt six months ago, a year ago or five years ago—that was just the reality of the world in which we lived. If it is just the game that changes, and therefore we react to that, I think we have an ongoing ethical, cultural problem. We are tactical, and that is all. If we are going to change the culture, we have to be led by conviction rooted in values, not simply the pragmatics of the particularity of the case we are dealing with.

I am very pleased that an amendment will be tabled in Committee to Clause 18, so I will not say more about that now. I welcome the Bill, but I am concerned about the wider culture within which it sits; I hope that that will be registered, even if disagreed with.

My Lords, I thank my noble friend the Minister for her clear opening to this debate on this very important piece of legislation. It is also a pleasure to follow the right reverend Prelate and to hear what he had to say.

I refer to my interests in the register and declare that, as a barrister in private practice, I have been instructed both by the Serious Fraud Office and by companies and individuals in whom the Serious Fraud Office has taken an interest.

Sadly, the context in which we debate this Bill this evening is the Russian invasion of Ukraine. We are reviewing a Bill that has been passed through the other place in a single day and which will, I am sure, go through your Lordships’ House, if not in a day, quite quickly. Not surprisingly, the criminal and, some may say, paranoid behaviour of Mr Putin in launching this savage attack on Ukraine has led us into thinking that something must be done—and done quickly—to curb the financial freedom of Putin’s benefactors, his nominees and his enablers. These are people who, over the past 25 years, have grown rich through the redistribution to them of what used to be Russian state assets, first by President Yeltsin and then by the current incumbent. They remain rich because Putin permits them to be so, and because they hold vast holdings of valuable property and money throughout the West on his behalf. Although they pretend to be independent operators, they are puppets controlled by a sick and dangerous man, and it is right that our laws do not allow villainy to hide in plain sight.

Two points, however, flow from this. First, although the policy behind the Bill is well understood and universally shared by right-thinking Members of both Houses, the Bill that contains many complicated provisions, which are being considered very speedily. Of course, the war in Ukraine has forced us to act quickly, but the problems caused by passing legislation in a hurry are well known. Although I entirely accept the need for speed, we must be careful that we do not pass bad law which fails to hit the targets that we have identified. As my noble friend the Minister said, another economic crime Bill will be introduced in the forthcoming Session. The Government must stand ready to correct any defects in the current Bill which, through lack of proper consideration, are left in it. I hope it may be used to reform the law of corporate criminal liability—a subject on which I know I must sound like a cracked record.

Secondly, I do not want to be misunderstood in what I am about to say, but we must be careful not to allow our understandable moral indignation to cloud our judgment about what we need to do through this Bill. If there is one thing worse than failing to scrutinise legislation because of haste, it is to pass legislation while caught in a moral spasm. Hard as it is, although I have no doubt that your Lordships’ House and the Government are both capable of doing this, and although it is correct to have a moral purpose behind the policy—here I wholly agree with the right reverend Prelate—we have to pass a Bill now that works effectively for all times and all circumstances against all money launderers, every corrupt actor and kleptocrat from across the globe, not just the Russian ones currently propping up Putin.

Now is not the time to drill too far into the detail of this Bill, nor to lament that, had legislation of this sort been introduced soon after David Cameron’s anti-corruption summit in 2016 or shortly after the work of the Joint Committee on the Draft Registration of Overseas Entities Bill was completed in 2019—I was a member of that committee under the chairmanship of my noble friend, Lord Faulks—we would have considered it in an altogether less fraught atmosphere. That committee made a number of recommendations, which are now in this Bill, but we have lost three years. So I find it a little strange that in the other place Ministers claim to be acting with all due speed. But now is better than next year or never.

Having got that off my chest, I want to pick out a few points from the Bill for later consideration. We need to make sure that, in preventing the criminal concealment of the ownership of property in this jurisdiction, we encompass not only relevant individuals and overseas companies but the owners of shares in those companies, be they individuals, other companies or trusts, and the legal and beneficial owners of the shares. It is not difficult to set up a shell company in an overseas jurisdiction through a nominee. Unless the Bill and those tasked with enforcing the law, once enacted, can get to the actual owner, as opposed to being blocked through a series of impenetrable veils, we will get nowhere.

If what the Government want, as suggested in some government statements, is to reveal the real identities of foreigners who own UK property, we need to ensure that the Bill will achieve precisely that. The legislation, as currently drafted, does not require the disclosure of the ultimate beneficial owner of the property, but rather the disclosure of the beneficial owner of the overseas entity which in turn owns the property. By Clause 33(1), the Secretary of State may by notice require an overseas entity to apply for registration in the prescribed manner within six months.

I agree with the concerns of the noble Lord, Lord Vaux, about the timing issues and the need to register entries on to the register, and I also agree with the noble Baroness, Lady Kramer, on the reduction of the 18-month period to six months. The Government should urgently take accountancy, legal and other professional advice about whether even six months is too long. Nowadays, money flows around the world at the press of a computer button. Should we not think of a far shorter period, with discretion for the Secretary of State or the High Court to extend that period on reasonable grounds in an individual case?

Unexplained wealth orders have not worked as well as they were expected to when they were introduced. Clause 53 allows for urgent designation of named individuals in certain circumstances. I hope the necessary work has already been done, because it may be that many such designations will need to be made immediately on Royal Assent. I have no doubt that the people we want to target will already have anticipated the Minister, and only the unwary minnows will end up being subject to these orders.

Finally, I need convincing that Companies House is the right body to enforce the provisions relating to the registration of overseas entities. It is essentially a recording organisation, a keeper of information provided to it by others. It is not, or not notably, an investigating or prosecuting body, but if it is to have this work, it will need a large injection of specialist staff from the Treasury, the sanctions sections of the FCDO, the National Crime Agency, the City of London police, which is the lead police force in relation to economic crime, and the Serious Fraud Office. It will also, I dare say, need to take additional advice from the security services, and all those agencies will need to be properly resourced to assist in this work.

The Bill must pass, but we must not think it answers all the questions that money launderers and other economic criminals will throw at us. If it assists us, even if indirectly, to get the Russian army out of Ukraine and persuade those supporting Putin to think again, it will most certainly have achieved some good.

My Lords, a considered assessment of this Bill requires some reflection as to why measures to thwart economic crime have failed so dismally up to now. At the centre of the Bill stands the registrar, embodied in Companies House. It is Companies House that is the prime source of the failings that have made London the money-laundering capital of the world. One of the political pantomimes of the last 10 years has been the spectacle of Conservative Prime Ministers referring regularly to the register maintained by Companies House as a gold standard, a beacon of openness, an example to the rest of the world. In reality, the manner in which the register is constructed has been and remains the key element in the inability of this country to stem the inflow of dirty money and the total failure to slow the growth of economic crime.

As has been known for years, the scandal derives from the fact that Companies House does not verify the beneficial ownership of the companies registered. Companies House is a library in which any shameful book can be deposited, as the noble and learned Lord, Lord Garnier, has just argued. That so many shameful books have been deposited is a matter of record. By the way, Companies House has led one prosecution in 150 years. That was of a person who deliberately registered a false company in the name of government Ministers to show how hopeless Companies House was at verifying the data. It then prosecuted this man when he owned up to what he had done.

Today, the Companies House register includes about 4.5 million UK businesses, but it operates in much the same way as it did 150 years ago, meaning that criminals have been able to set up seemingly legitimate shell companies without even the most basic identity checks. A study by Professor Jason Sharman of Cambridge University found that it was impossible to establish a shell company in the Cayman Islands, the Bahamas or Jersey, but easy to do it in London. A further study by Transparency International, in November 2020, reported that British shell companies were implicated in nearly £80 billion worth of money-laundering scandals. On top of that, the anti-corruption group Global Witness reported in 2019 that more than 336,000 companies on the register did not disclose their beneficial owner. It also found that just over 2,000 company owners were actually directors who had been disqualified, yet they were accepted by Companies House. It is this same organisation that we now ask to do more: to manage the new register of beneficial ownership of real property envisaged in the Bill.

In assessing whether Companies House can actually do the job, it is important to dismiss the comfortable fantasy that an open register provides sufficient scrutiny to detect wrongdoing. Protection against even moderately sophisticated financial crooks is provided only by verification and regular reverification of beneficial ownership by skilled forensic accountants. This fact was acknowledged by the noble Lord, Lord Callanan, in his foreword to the September 2020 White Paper Corporate Transparency and Register Reform—note that this was a document published two years ago.

The section on verification is to be found in Clause 16. Clause 16(1) refers to verification of information before an application is made by the overseas entity—that is, before the registrar is even aware of the application. I am sure that noble Lords have noticed that the wording of Clauses 4(1)(c), 7(1)(d) and 9(1)(e) indicates that the task of verification is assigned to the overseas entity. The Government may take some comfort from that, but I assure them that I do not. Clause 16(2) refers to

“the person by whom the information must be verified”,

and

“evidence or other information to be delivered to the registrar”.

Again, this suggests verification by a person other than the registrar, Companies House, to which the information is to be delivered, all ready, tied up with a fancy ribbon and a label reading “Nothing to see here.”

Nowhere in the Bill can I find a statutory obligation for the registrar, Companies House, to verify the data submitted to it. The Institute for Government has noticed the same omission, saying that

“without strengthening the organisation—expanding its powers of inquiry and resources to investigate and remove false information, and requiring mandatory identity checks on those incorporating companies, on company directors and on those who ultimately control companies—the new register could have little impact.”

There is also a clear suspicion that the Government are not willing to provide the resources the job requires, as the noble and learned Lord, Lord Garnier, pointed out earlier. To quote the Institute for Government again:

“the provisions in the new bill will make little difference unless authorities are provided with additional resource to enforce them … the UK already has strong tools to target illicit funds but law enforcement agencies have struggled to make full use of them because of resourcing issues.”

In her introduction, the Minister informed the House that a new economic crime Bill, including reform of Companies House, will be brought forward in the next Session. This has been promised time and again by this Government: it is always in the next Session—and the next Session never comes. On verification, we must act now. Making the verification of data by the registrar a statutory requirement is essential if the Bill is to be a meaningful measure and not just another PR exercise. Without a statutory requirement for verification by the registrar, and without the resources to do the job, this House will be participating in a sham. We must ensure that this is not the case.

My Lords, it is a pleasure to follow a speech of such forceful clarity as we have just heard from the noble Lord, Lord Eatwell. I should start by declaring my interests. The first is similar to those declared by the noble and learned Lord, Lord Garnier, as a practising barrister, although these days I do not do contentious advocacy in courtrooms. The second is that I am the director of a consultancy company that provides advice to foreign entities and foreign individuals—although, I hasten to add, not Russians. I shall say a little about the sort of interests that arise in a few moments.

In ordinary circumstances, I suspect that many of us in your Lordships’ House would be reluctant to support a Bill such as this without the normal debating time that we are given in conventional legislation. A high degree of trust is being placed in the Government to ensure that the Bill reaches the statute book fit for purpose and is applied in a way that means it will bite. However, we are in extraordinary circumstances. There is no doubt that the war being conducted by President Putin, and indeed Russia, against Ukraine is funded at least in part by the product of money that has passed, and passes, through the United Kingdom, and that it is in many ways money that has been obtained illegitimately through the plundering of the public purse of Russia.

That is brought into high relief today by the news that the Mariupol children’s hospital was bombed by the Russians, including its maternity unit, and the photographs of what is left are terrifying and ghastly. Russia has now become a clear enemy of international law, and its agents, including its oligarchs, have no right to expect us to apply in full our normal ethical legal standards to their behaviour, as in their complicity with the Russian state. Indeed, our prime task, alongside doing whatever we can to assist Ukraine, is to protect our own country, the United Kingdom, against being used as an unwitting instrument of international crimes against humanitarian law.

I shall start in substantive terms by referring, as others have, to unexplained wealth orders. I echo what was said by the noble and learned Lord, Lord Garnier, and my noble friend Lord Vaux in their very eloquent speeches. UWOs have been around for a long time but it is a fact that very few proceedings have been taken by the National Crime Agency. There have been four cases, of which one failed. I can tell your Lordships that around the members of the legal profession that I speak to, and there are many on a daily basis, there is astonishment that the NCA has not brought scores of applications to court for UWOs. The reason for that is plain and twofold: one is the risk of costs, which can be dealt with, but the other, which is more difficult to deal with, is that the NCA is simply horribly understaffed to deal with these cases. It is not that there are not people who could do it, but we have to commit to employing those people and they have to be of sufficient quality. They need to be good lawyers and good investigators so that we are not standing here in a few months’ time saying, “The NCA really hasn’t been effective”.

Then, as the noble Lord, Lord Eatwell, referred to, there is the role of Companies House. It just so happens that professionally, in my consultancy company, I made an application on behalf of a client to Companies Ho