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Grand Committee

Volume 829: debated on Wednesday 26 April 2023

Grand Committee

Wednesday 26 April 2023

Arrangement of Business


My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes, as I am sure your Lordships know.

Flags (Northern Ireland) (Amendment) Regulations 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Flags (Northern Ireland) (Amendment) Regulations 2023.

Instrument not yet reported by the Joint Committee on Statutory Instruments

My Lords, the regulations before your Lordships today seek to align flag-flying days in Northern Ireland with the rest of our United Kingdom. A number of changes have recently been made to designated flag-flying days across the UK, following the sad passing of Her late Majesty the Queen in September last year.

The updated list of designated flag-flying days for 2023 was published by DCMS on 9 February. It states that all dates related to Her late Majesty the Queen are removed and several new entries relating to His Majesty the King are added, including the Coronation Day on 6 May, a week on Saturday. There will be a new flag-flying day for the birthday of the Queen and the date of the Prince of Wales’s birthday will be amended.

The Flags Regulations (Northern Ireland) 2000 provided that on certain designated days the union flag and, in certain circumstances, other flags must be flown on government buildings. For the purposes of these regulations, a Northern Ireland government building is one that is occupied wholly or mainly by members of the Northern Ireland Civil Service. The 2000 regulations also set out a number of so-called specified buildings at which the union flag must be flown on the designated days in question. Those buildings were chosen as they are the headquarters of Northern Ireland government departments. In 2002, the provisions were extended to court buildings in Northern Ireland. A number of noble Lords will recall that the New Decade, New Approach document of January 2020 contained a UK Government commitment to align flag-flying days across the whole United Kingdom.

The regulations before your Lordships today will align flag-flying in Northern Ireland with this updated DCMS guidance and the policy followed across the rest of the UK. Prior to publishing the list of designated days, DCMS consulted a range of interested parties and individuals; I can confirm that the updated designation days reflect the wishes of the Palace. Last year, some noble Lords voiced their disappointment that the number of designated flying days was being reduced. These new dates will increase the number of flag-flying days in Northern Ireland by two, bringing the total to 10.

Our approach to flag flying in Northern Ireland through the flags regulations has consistently sought, as I have set out on a number of occasions, to reflect Northern Ireland’s clear and unambiguous constitutional status as an integral part of our United Kingdom, as well as the reality of the different political aspirations that exist across society. The Secretary of State referred the draft regulations to the Assembly on 17 February, as he is required to do, but as the Assembly is not currently sitting, Members have been unable to report back in the usual manner. Taking this into consideration, the Secretary of State has committed to laying the Assembly’s report in Parliament should it be drafted at a later point. In addition, the Secretary of State wrote to all Northern Ireland political leaders to allow a further opportunity for elected representatives to express their views on this issue. I am pleased to report that no concerns were raised.

The flags order of 2000 also requires that consideration be given by the Secretary of State for Northern Ireland to the Belfast agreement when making or amending the regulations. My right honourable friend the Secretary of State is satisfied that these regulations have regard to the Belfast agreement and treat flags and emblems in a manner that is respectful of Northern Ireland’s particular circumstances. The Government will continue to ensure that our approach to flag flying reflects the sovereignty of the United Kingdom in Northern Ireland, and our overall commitments under the Belfast agreement. I look forward to hearing contributions from noble Lords today, I commend this instrument to the Committee and beg to move.

My Lords, I have to say that of course flags are always a real difficulty in Northern Ireland. I am delighted that the Minister referred to the Good Friday agreement and the fact that this order should not in any way contravene the principles behind it of parity of esteem. I am also delighted to hear that, on consultation, no political parties in Northern Ireland offered any objection to this. Nor should there be. We on this side of the Committee will support the statutory instrument and do so willingly. It means that we can reflect, of course, on what the late Queen and the present King thought about Northern Ireland issues and how much they were involved in them.

Sitting suspended for a Division in the House.

I apologise to your Lordships for jumping the queue; apparently, I should have been at the end rather than at the beginning. I particularly apologise to my very good friend, the noble Lord, Lord Rogan. I have known him for 26 years and this is the first time that, although we have not quite fallen out, something went wrong with our relationship.

I shall not keep your Lordships long; I shall simply say two things. Her late Majesty took a deep interest in the future of Northern Ireland. Interestingly, of course, she visited the Republic of Ireland in 2011 and made a huge impact not just there but in Northern Ireland. She was particularly interested in the peace process, as, of course, is His Majesty the King. From my experience, he would host dinners and other events at Hillsborough Castle on a number of occasions, and he took a deep interest in Northern Ireland, the peace process, and many other issues. It is fitting, having heard that no party has objected to the change to these regulations, that the King should know that there is unanimity in Northern Ireland about his position.

I have one point about the consultation. The Minister said that his Secretary of State has consulted the political parties in Northern Ireland, but, of course, he could not consult the Assembly because there is no Assembly. Last week, the Minister and I, and others, were in Belfast to celebrate the 25th anniversary of the Good Friday agreement. I hope that it is a matter of weeks or months —definitely not years—before we see the restoration of the institutions in Northern Ireland. I know that the King himself would be very much in favour of that, to see that there is stability and peace in Northern Ireland. He obviously does not comment on political issues in Northern Ireland, but all of us want some sort of settlement there. I hope that happens fairly soon.

My Lords, the flying of the union flag in Northern Ireland can sometimes be a contentious issue, but it should not be so. This month has seen a series of high-profile events in the Province to mark the 25th anniversary of the signing of the Belfast agreement. Friday 10 April 1998 is a day I remember well and with a certain degree of pride. As my late noble friend Lord Trimble said in his lecture when accepting the Nobel Peace Prize in Oslo in 1998, the Belfast/Good Friday agreement

“showed that the people of Northern Ireland are no petty people. They did good work that day”.

Indeed they did, but as current and former Presidents and Prime Ministers have rightly insisted in different lectures over the past few weeks, the Belfast agreement was about mutual respect. It was also about not being petty. As such, I see no reason why anyone should object to the flying of the union flag in Northern Ireland, which the Belfast agreement enshrined as an integral part of the United Kingdom.

As we know, the regulations before us are being brought forward following the passing of Her late Majesty Queen Elizabeth II. She was a great friend and servant to Northern Ireland. The 19 year-old Princess Elizabeth first visited the Province of Ulster in 1945 as part of the victory tour after the Second World War. She was accompanied by her father, King George VI, and her mother, Queen Elizabeth. Two further visits followed before she ascended the Throne.

In all, she made 22 visits to Northern Ireland as our monarch. Her final trip, in June 2016, included a visit to Bushmills, where she unveiled a statue of local man Robert Quigg, who had received the Victoria Cross for gallantry in the face of the enemy in the Battle of the Somme. The royal visit and the unveiling of that monument was a proud day for a fiercely proud and loyal village in Portrush. After civilian service in the Army, Robert returned to Bushmills and was presented to Queen Elizabeth II when she visited Coleraine on her Coronation tour in 1953. That fact feels particularly poignant, given the reason we are debating these regulations today.

Looking at the detail of the regulations, it is understandable why the dates relating specifically to the life of Her late Majesty are being substituted for those relating to His Majesty King Charles III. However, surely it would have been appropriate to keep at least one of these dates in the calendar for the union flag to be flown in Northern Ireland in her glorious memory—either the date of Her late Majesty’s accession or her birthday seem most appropriate.

Noble Lords will have noticed that, while six dates are being removed from the regulations, they are being replaced by only five. I ask the Minister: would it not have made more sense for Monday 8 May, which will be a bank holiday in celebration of His Majesty’s Coronation, to also have been included? I see no logical argument against it and respectfully invite the Minister to try to prove me wrong.

While I have his attention, I also ask him for an assurance that these regulations will apply to Erskine House, with the union flag flying proudly above it on designated days as an absolute minimum. It defies comprehension that the headquarters of His Majesty’s Government in Northern Ireland does not currently fly the national flag. I hope that the Minister will confirm that it will now fly.

I am privileged to have been invited to attend the Coronation of His Majesty King Charles III next week. I am very much looking forward to it. I also look forward to the union flag flying from government buildings in Northern Ireland, including Erskine House, on 6 May, His Majesty’s Coronation Day, for many years to come. Long may he reign.

My Lords, there is nothing in these regulations that one could disagree with, so I am pleased to support them. As the noble Lord, Lord Rogan, said, the flying of flags and displaying of emblems in Northern Ireland can be, and is, an extremely contentious issue among Northern Ireland’s unfortunately divided community. In the past, we have seen it lead to civil disturbance; I hope those days have long passed. To reiterate what my friend, the noble Lord, Lord Rogan, said, in Northern Ireland government buildings are legally restricted to flying these flags on designated days, unlike the rest of the United Kingdom which has the option to fly the flag every day.

I too have a question for the Minister, who I know will be able to answer it well because he has had considerable experience in the Northern Ireland Office. It is over a year since the Northern Ireland Office relocated to its very fine building, Erskine House, in the centre of Belfast, which is eight storeys high. It is my understanding that Erskine House is not bound by these regulations. Can the Minister say whether the department has made any decision on whether to fly the flag every day, on the designated days, or not at all?

On the visit of the President of the United States to Belfast, which people welcomed, many have commented that his official state car did not display the union flag, which I understand is the normal protocol when a head of state visits. Perhaps the Minister can update me on what the protocol is.

Finally, for the celebrations of the Coronation, I am sure that those who wish to display the union flag will fly it with dignity and respect.

My Lords, it has been an interesting short debate. I too shall be brief because, clearly, the Liberal Democrats also support the regulations that we are debating today.

As other noble Lords have said, the debate is perhaps an opportunity to remember the late Queen Elizabeth II and all that she did to strengthen the United Kingdom and our relations with Ireland during that extremely historic visit.

I hope the Minister may recall that when we last debated designated flag days last September, I asked him whether further consideration had been given to adding to the number of days through commemorating the Battle of the Somme. Several noble Lords, including the noble Lord, Lord Hannan, gave their support to the idea. Have the Government reached a view on adding that battle to the designated flag days?

While I support the regulations, I think it vital that we repeat the importance of respecting how people feel about the flag and its symbolism. I also support what the noble Lord, Lord Murphy, said about hoping that the Northern Ireland Assembly returns as soon as possible.

I sincerely hope that the Coronation goes smoothly and enjoyably, and that the festivities go well in Northern Ireland as well as elsewhere in the United Kingdom and the wider world.

My Lords, I am grateful to those who have contributed to this short but well-informed and important debate on the regulations before us. As seems customary on these occasions, I thank the noble Lord, Lord Murphy of Torfaen, with whom I concur on virtually everything he said. He and other speakers, including the noble Baroness, my noble friend Lord Rogan and the noble Lord, Lord Browne of Belmont, rightly paid tribute to the legacy of Her late Majesty Queen Elizabeth. Like other noble Lords, I was privileged to be present at some of those historic occasions; for example, the handshake in the Lyric Theatre in 2012 during the Diamond Jubilee tour of Northern Ireland. Like my noble friend Lord Rogan, I was also present at Bushmills on that day in 2016 when Her late Majesty unveiled the statue of Robert Quigg. It was a poignant and moving ceremony.

I agree also with what has been said about His Majesty the King and his deep commitment to Northern Ireland. Without in any way going into private conversations, I think we can all be confident that His Majesty will do everything to maintain the marvellous legacy of his late mother, whose ability to bring people together from across the community divide in Northern Ireland was a remarkable achievement. I am sure that will continue under His Majesty.

I also agree, of course, with the comments from the noble Lord, Lord Murphy, and the noble Baroness, Lady Suttie, about the need to get the Assembly back up and running and this being an absolute priority. My noble friend Lord Rogan referred to the events of 25 years ago, with which he was intimately associated—as was the noble Lord who chaired strand 1 of the talks. He referred to the fact that we were together at Queen’s last week for some events to mark the 25th anniversary. It reminded us how important it is to get these institutions back up and running as quickly as possible so that we can start to build a Northern Ireland that works in the interests of the whole community there; that is the surest foundation for Northern Ireland’s position in the United Kingdom.

In respect of a couple of the questions that my noble friend Lord Rogan put to me, I think he raised the issue of a further bank holiday. As I said in my opening remarks, the changes made in these regulations are at the request of the palace so, in these circumstances, all the Government are doing is reflecting the wishes of the palace as communicated to us. However, I understand and take the point made by my noble friend; as I say, they are the palace’s wishes that we are reflecting in these regulations.

Both my noble friend and the noble Lord, Lord Browne, referred to the position in Erskine House. I am afraid it is slightly complicated. As the headquarters of the Northern Ireland Office, Erskine House does not fall within these regulations for the reasons I set out in my opening speech. For the purposes of the regulations, government buildings in Northern Ireland are those occupied mainly by the Northern Ireland Civil Service, as Northern Ireland government departments. The Northern Ireland Office does not fall into that category. There are also further complications in that the Northern Ireland Office does not own the building and is not the lead tenant in the building; this has complicated matters somewhat.

However, I completely share my noble friend Lord Rogan’s aspiration to resolve this issue as quickly as possible and see the union flag fly in an appropriate place in Erskine House on designated days, if not more. I assure him that I will take this issue back, work with my officials and urge them to seek an early resolution of this issue because it is appropriate that the union flag should fly in some form in that building. As my noble friend will know, when one walks into the building, one sees “UK Government” in large letters and the UK Government’s crest is there so, personally, I see no reason why the flag of the United Kingdom should not be there in some form. I will take this issue back and seek a quick resolution. I am, however, mindful that it took me six years to get the flagpole at Stormont House re-erected after the 2010 election; I will try to resolve this issue in a somewhat shorter time than that.

The noble Lord, Lord Browne of Belmont, referred to President Biden’s visit and the flying of the union flag. I think that the issue there—I will double-check this; if I am wrong, I will come back to the noble Lord—was simply that President’s Biden visit to Northern Ireland was not a state visit and the protocols on flag-flying relate to state visits. His visit to the Republic of Ireland was a state visit, which is why the flag flew there. In my discussions, a great deal of care was taken to follow the right protocols to the letter; that is the reason behind this.

Finally, on the point made by the noble Baroness, Lady Suttie, I am afraid that she has caught me out. I cannot immediately give her an answer on where we have got to with her suggestion about 1 July becoming a public holiday as the anniversary of the first day of the Somme. However, I will take that back and find out where we are with it; obviously, it is mainly a matter for DCMS rather than the Northern Ireland Office but I will go back and find out where we are.

I hope I have covered everything. Once again, I thank all noble Lords who contributed.

Motion agreed.

Code of Practice on the Recording and Retention of Personal Data in relation to Non-Crime Hate Incidents

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Code of Practice on the Recording and Retention of Personal Data in relation to Non-Crime Hate Incidents.

Relevant document: 35th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)

My Lords, I begin by acknowledging that non-crime hate incidents have attracted a significant amount of controversy, particularly in this place, due to concerns relating to free speech. I am grateful to all those who expressed their views on this topic during the passage of the Police, Crime, Sentencing and Courts Act 2022. The Government fully understand the strength of feeling on this matter, both within this House and among the public more widely, which is precisely why we laid this code before Parliament on 13 March.

Let me first explain that the collection of non-crime hate incident information is a key legacy of the Macpherson inquiry into the murder of Stephen Lawrence. This information pertains to incidents which are not crimes and provides the police with the means to understand tensions within communities or cases involving particular individuals before they can escalate into serious harm. In this respect, this data is vital for helping the police build intelligence to understand where they must target resources to prevent serious crimes or harms which may later occur. 

This Government are absolutely clear that vulnerable individuals and communities must continue to be protected. However, non-crime hate incidents must never be used to inhibit lawful debate, and we must also be very careful about what information is kept on an individual’s record. This balance has unfortunately not always been struck, and this issue is precisely what the code is designed to address.

Free speech is a cornerstone of our democracy. This code addresses concerns that those who express views which some consider offensive but are not against the law are at risk of becoming the subject of a non- crime hate incident report, and that this may result in their personal data being stored on a policing record. It addresses those concerns by introducing new safeguards to ensure that personal data may be included in a non-crime hate incident record only if the event is clearly motivated by intentional hostility and where there is a real risk of escalation causing significant harm or a criminal offence.

To be recorded as a non-crime hate incident or NCHI, the police must judge that any perception of hostility is valid; the complaint must not be irrational, trivial or malicious. This will ensure that the police record NCHIs only when it is absolutely necessary and proportionate to do so, and not simply because someone is offended. The code also provides detailed guidance on freedom of expression. Clear case studies to illustrate how this fundamental right should be considered in practice by the police are also set out.

We are confident that the content of the code fully reflects the Court of Appeal’s judgment in the case of Harry Miller v College of Policing, which was handed down in December 2021. The court found that the recording of these incidents is lawful but must be subject to more robust safeguards to ensure that such recording is proportionate and protects free speech. As I have mentioned, this is exactly what the code provides. I particularly thank the National Police Chiefs’ Council, the College of Policing and senior police officers, who have engaged with Home Office officials throughout the drafting process to ensure that this code will work from an operational standpoint.

The College of Policing is also currently updating operational guidance for police on the recording of such incidents to ensure this guidance aligns with the new code. The college will also roll out the requisite training for police officers to ensure that the principles within the code are fully understood and embedded within everyday policing practice. This will ensure that the code is applied consistently by forces across England and Wales.

To reiterate, by taking these steps, we are protecting the vital changes that have been implemented by policing since the Stephen Lawrence inquiry. We continue to recognise the need to record intelligence that enables the police to intervene to prevent serious harms and future crimes, and we are determined to support the police in protecting the public. However, we have listened to the concerns raised in relation to the fact that this recording has at times gone too far, and we have acted on them. This code will better protect people’s fundamental right to freedom of expression, as well as their personal data, while still ensuring that vulnerable individuals and communities continue to be safeguarded. By bringing forward the code, we have also ensured that the process is subject to much-needed democratic scrutiny. With that, I commend the draft code to the Committee and beg to move.

My Lords, I must begin by acknowledging the role of my noble friend Lord Moylan, who sadly cannot speak in this debate today. My noble friend moved amendments, which I supported, to the then Police, Crime, Sentencing and Courts Bill in the autumn of 2020. We sought to make the Secretary of State responsible for determining five things in particular: first, the basis on which the record of the incident is to be kept; secondly, how those sensitive records are to be kept; thirdly, for how long they are to be kept; fourthly, what provisions there would be for review; and, fifthly, to whom and on what basis the information on them might be disclosed.

I remind the Committee that, until now, there has been no formal basis to ensure a proper system for selecting and recording what is to be logged, what personal data are to be kept, or when, if ever, the matter is to be reviewed. Nor was there any consistent basis as to when the subject would be given the opportunity, if at all, to respond. This code of practice, made pursuant to what is now the Act, is therefore the first such code of practice on this important matter. Having read it with care, I commend it to the Committee and believe we should approve it. It addresses all our core points and it is good to have it on a proper statutory basis.

Looking forward, however, there are a number of things. We must keep the code of practice’s application under review. I understand that the number of reports which are now on record runs well into six figures—a very large number. Remember that the subjects have committed no crime, but in many cases their names have been recorded and remain recorded.

My first point is therefore that it is important that all police forces act promptly, as the code commends, to review all those reports currently on record to ensure that only those which meet the new requirements remain on record and that others are expunged without delay. To that end, I invite the Minister to ask that each police force in England and Wales reports to the department after 12 months from the code coming into force, and in each year thereafter, to state, first, how many extant reports it has reviewed; secondly, how many reports, if any, remain unreviewed; and thirdly, how many new reports it has recorded. This would ensure that all police forces do their job properly. It should not be burdensome, as they have just to enter it as they do each review, and it would provide valuable data for the Home Office and for Parliament.

Secondly, I stress that the Court of Appeal in December 2021 in the case of Miller, to which my noble friend the Minister referred, stressed the undesirable chilling effect of such reports on lawful free speech. It is really important that this code is henceforth applied with common sense and due regard for the right to freedom of expression.

It is particularly important that the police in the field give full weight to the clear provision in the code that it is not every case which justifies recording the name and details of a particular subject, even if the incident is recorded. The police must adhere tightly to the principle that only if it is proportionate and necessary, and if there is a real risk of harm or of a future criminal offence against a person or group with particular characteristics, should a record be made which identifies the person responsible. These criteria are of no less importance when the vital review of the many existing thousands of reports is conducted.

We must continue to be vigilant. It is important that there is a real change in culture on the part of the police, which keeps the balance properly between protecting vulnerable individuals and groups and ensuring that lawful free speech is given proper weight. So far, so good. I commend the code but let us all remember that it is the start, not the finishing line.

My Lords, I too pay tribute to my noble friend Lord Moylan for tabling the amendments that have enabled the Home Secretary to issue this new draft code. I repeat how much he regrets being unable to be with us today.

The need for reform of non-crime hate incidents is clear on many levels, one of which is that an estimated quarter of a million of these have been recorded, which works out at about 70 a day. One can only imagine the amount of non-crime police time this has used up. It is worth remembering that nothing illegal has been done during all this police time. The police have taken it upon themselves to monitor our thoughts and opinions, and if they do not like what they find they record against us. This is no trivial matter, as recordings will show up in DBS checks in perpetuity.

This use of resources was first highlighted when Amber Rudd, then Home Secretary, was reported by an Oxford professor for something she said during the Conservative Party conference. But I suspect what really brought everyone to horrified attention were the NCHIs recorded against four young schoolboys in Wakefield, one of them autistic, for accidentally dropping and scuffing a Koran, even though the head teacher found that there was no evidence of any malicious intent. The publicity around this case also brought to light the fact that NCHIs, unlike actual crimes, will not automatically be deleted from the young boys’ records when they reach the age of 18.

Not content with issuing non-crime hate incidents against the schoolboys, we then saw the chief constable appearing to promote the idea of blasphemy law and the public humiliation of the autistic boy’s mother. This is where we find ourselves when we start to police hurt feelings and not crime. So, while I very much welcome this new draft code of practice, my welcome comes with alarm bells ringing about the College of Policing’s reaction to it. It is worth remembering that the whole programme was an invention of the college in 2014 and that it has resisted every attempt at reform ever since, even spending an estimated £350,000 losing a Court of Appeal case against an ex-policeman who had been anonymously denounced for legally tweeting his opinion. At the end of the case, Mr Justice Knowles compared the police’s action to the Cheka, the Gestapo and the Stasi, and reminded the court:

“We have never lived in an Orwellian society”.

Now we have both the Home Office’s draft code of practice and the College of Policing’s interpretation of it, which raises the obvious question of why they are interpreting it at all. Surely, the intention of the Home Office was for this new code of practice to be adopted by the college as its operational guidance, not interpreted in its own way. This matters because the police act on guidance from the College of Policing and not on instruction from the Home Office.

The Home Office provides clear definitions of what constitutes a hate incident, including the requirement that there must be evidence of hostility and not just a vague and often anonymous impression that there has been some hostility. It also focuses on criminality, emphasising that not all incidents that may be perceived as offensive or hurtful should automatically be recorded. Importantly, it also clarifies how the data should be integrated into UK GDPR. To support all these clarifications, it provides 11 case studies as examples of how the new code would work in practice, predicting, as far as possible, real-life experiences that might be faced by officers. So far, so good. In fact, Stephen Watson, the Chief Constable of Greater Manchester, welcomed the guidance, saying:

“It is not automatically unlawful to say or do things which can be unpleasant, hurtful, distasteful or offensive. This guidance is replete with sensible provisions to safeguard victims of hate crime and better distinguishes between that which should involve the police and that which, in a free country, should emphatically not”.

As I said, so far, so good, but then comes the College of Policing’s interpretation of what the Home Office intended. In the Home Office’s code, these 11 examples recommended that in 63% of cases the police are explicitly advised not to record the hate incidents. In its interpretation, the college provides just eight examples and if their advice is followed, only 12.5% would not be recorded. In other words, we will be going back to the status quo ante if the police adopt the existing college code of practice, part of which has already been declared illegal by the Court of Appeal as it disproportionately interfered with free expression. The conclusion can only be that the college clearly believes that there should be stricter limits on free speech than Parliament has voted for, and so has invented new limits for itself and imposed them on us.

Quite why the College of Policing has become a law unto itself is unclear. Recently, it made headlines when it urged 43 different forces to decolonise their training materials and advised them to introduce gender-neutral facilities and become Stonewall champions to make themselves more attractive to transgender applicants, even though the most recent census showed that only 0.6% of the population is transgender. Meanwhile, the police in England and Wales last year solved just 5% of burglaries. No wonder the public are disillusioned with policing and could easily feel that everything seems to be policed except crime.

In conclusion, we should insist that the College of Policing follows the Home Office code in particular and, beyond that, concentrates far more on preventing and solving actual crime. I also suggest that the time is right for an inquiry into the college’s purpose and effectiveness, but that is for another time.

My Lords, I too commend the draft code of practice. The Home Office team has done an excellent job on it. My concern, like that of my noble friend Lord Strathcarron, is to do with the interpretation of the code of practice by the College of Policing.

To add further to what my noble friend was saying, seven of the eight scenarios in the College of Policing’s new guidance, its authorised professional practice, were found in the old guidance, which the Court of Appeal, in the Miller case, subsequently found to be unconstitutional because it had a chilling effect on freedom of speech. The police will not be schooled in the Home Office guidance once the college’s APP comes out; they will be schooled in the guidance given by the College of Policing. This means that we will be exactly where we were before.

The Home Secretary’s intention could not have been clearer—she wants officers to stop policing our tweets and start policing the streets—but the College of Policing now seems determined to thwart her. I ask the Minister whether the College of Policing is allowed to do this and, if so, what he and the Home Office can do to make it follow the guidance. Will they review the college’s own APP now that it is out and make sure that the college redoes it? Paragraph 11.2 of the Explanatory Memorandum sets this out very clearly:

“As set out in paragraph 6.2, operational guidance (known as APP) relating to the recording and retention of NCHIs is published by the College of Policing. An updated version will be produced when the code is approved by Parliament”.

I assume we are doing that today. It continues:

“This operational guidance will ensure that the principles provided by the NCHI Code are operationalised, thus creating consistency across all polices forces in England and Wales”.

I hope that the College of Policing will be required to do that.

I have a point to add on training. Following a freedom of information request to police forces in England and Wales on how many had conducted training on free speech, 78% of the police forces that responded said that they had done no training on Article 10 of the European Convention on Human Rights or on the free speech protections in our own common law. Conversely, 56% of the responding police forces said that equality, diversity and inclusion training was inextricably embedded in their training.

I absolutely commend this Government’s recruitment of 20,000 new police officers, which was a pledge made by Prime Minister Johnson a number of years ago, but it adds to the training issue. I understand that 38% of police officers have had less than five years of service. Training in freedom of speech is a real issue for the Home Office to address because it is really important that police officers understand how important it is to uphold the foundational values of freedom of expression in the democratic and liberal society in which we live.

My Lords, at the outset, I declare my interests as in the register. I am a member of the British Transport Police Authority but, for the avoidance of doubt, none of my comments is aimed at the British Transport Police, its officers or the authority.

I welcome this draft code of practice which, as we know, was legislated for in the Police, Crime, Sentencing and Courts Act 2022. I too pay tribute to my noble friend Lord Moylan for his single-mindedness and persistence in pursuing this issue.

I was brought up in south-east London. I can absolutely understand the horror as a result of the tragic murder of Stephen Lawrence. The Macpherson inquiry was needed at the time. I sincerely believe that we have made huge progress in the way we treat all our citizens. Although the Metropolitan Police has had its issues recently, we have come a long way since that tragedy in 1993.

It would be remiss of me not to mention the Secondary Legislation Scrutiny Committee’s comments about consultation. It is not unfair to add to them by saying to the Minister that there was some consternation about the lack of consultation with wider stakeholders other than what I might call the police family—in particular, people who are concerned about civil liberties and freedom of speech. This might be something for the Home Office to be cognisant of in future cases of consultation such as this.

I broadly welcome the code and the practical, pragmatic response to alleged hate incidents. In particular, I welcome the focus on common sense and proportionality, which is very important. It is vital that we enshrine the centrality of freedom of speech and expression, which the code does. There is also the important issue of the protection of individuals’ data. The clarification via the new additional threshold test and the need to have the real risk of the escalation of an incident to the threshold of criminality are also important. To come back to what my noble friend Lord Leicester said, the College of Policing needs to be mindful of these areas.

I do not like the term “interpretation”. I do not want to be too previous because I understand that the College of Policing’s consultation on its authorised professional practice document on the recording and retention of non-crime hate incidents has only just closed so it has not yet published a response to it. However, some of the messages seem mixed in terms of the college setting its face against the Home Secretary’s explicit request for it to move away from non-crime hate incidents which have a very low evidential basis. The police are not social justice warriors; they are there to keep the peace. Above all, they should not be partisan because, at the end of the day, all of us—black or white, young or old, north to south—want as British citizens to have strength of belief and faith in the police. The problem with non-crime hate incidents is that, as they have developed over the past few years, they have reduced people’s trust in the police, which can be only to the detriment of society as a whole.

I come back to the point made by my noble friends Lord Leicester and Lord Sandhurst. These are non-statutory guidelines. I can say, quite brusquely, that if the College of Policing does not take on board the comments from the Home Secretary, Ministers, Peers and Members of Parliament we may need to legislate and move it out of the non-statutory field. Otherwise, sand will be thrown in the machine and the cases that we have seen, which have been mentioned—such as the schoolboy in Wakefield, Kellie-Jay Keen being persecuted by Wiltshire Police, and Harry Miller—will continue.

Briefly, it is important that police at all levels understand that they have a duty to comply with Article 10 of the European Convention on Human Rights in respect of freedom of speech. Like other noble Lords, I do not believe that that knowledge is inculcated in the training process or apparent at the operational level. This worries me, because it is a fundamental right. Noble Lords have only to look at the 2021 case of Forstater v CGD Europe, in which Mr Justice Choudhury specifically said that, as public authorities, the police have to maintain neutrality “as between competing beliefs” and should not express

“any judgment as to whether a particular belief is more acceptable than another”.

That is very important.

On EDI training, it worries me that some third parties, such as LGBTQ++ staff networks, are giving training which seems to be at variance with what Ministers wish to happen and that they are unaccountable. The transparency, autonomy, authority and procurement of the training provided by third parties should be looked at again, particularly as a lot of police forces are refusing FoI requests by saying that contractual relationships with third parties are commercially sensitive and therefore confidential.

The Miller case was much needed in exposing the extrajudicial policy of perceived offence, but it still worries me that the cultural paradigm shift that we have seen in the police, which is reflected in the College of Policing’s hate crime operational guidance, is all about the perception of hurt feelings rather than the reality of criminal conduct.

While the NCHI does not create a criminal offence, it can be disclosed in an enhanced criminal records check and therefore has the potential to prevent a person gaining employment. I am a good example—not that I have committed any criminal offences, but I was a special adviser and therefore had to go for enhanced vetting. If I had been the subject of an accusation which resulted in a non-crime hate incident, that could have prevented me becoming a government special adviser.

Finally, this code is overdue and extremely welcome. I very much hope that, for its own good and the good of policing and our country, the College of Policing follows this strong and welcome lead.

My Lords, I certainly do not want to oppose the adoption of this code but, as the Minister said, it is important that we look at it in a proportionate way, because it is important that these statistics are available to the police and to ensure that we have good communal relations. At the time of the terrorist attacks in Manchester, London and elsewhere it was extremely important that these statistics were available. I would not want—I am sure that noble Lords would not either—a message to go out today that this is to scrap the process of looking at non-crime hate incidents. It is important that we build up a picture and that we say, as my noble friend Lord Jackson just did in relation to Stephen Lawrence and the Macpherson inquiry, that it is recognised how important this is as the basis for acting. There is broad agreement across the country about that, and among police forces.

I do not want to have a pop at the College of Policing—I do not know the substance of what is alleged—but it is important that we preserve the sense of proportionality that is at the essence of this. It is easy to characterise something as Orwellian, but let us dig down to the truth of what is actually happening out there and the importance of keeping this information-gathering in communities up and down the country—communities perhaps not like the ones in which many of us live. Of course, freedom of speech is important, as is the point about not characterising people as criminals. I fully support that, which is why I think that these regulations and the code that we are looking at are so important.

I have a couple of questions for my noble friend the Minister. First, what is the cost of this whole exercise? I appreciate that he might not have the answer to that, so perhaps he can come back to me if he does not have the figures. Secondly, as my noble friend Lord Jackson mentioned, the Secondary Legislation Scrutiny Committee was critical of the process of consultation with regard to these regulations, on two, or possibly three, bases. Why was there not a formal consultation? With regard to the consultation that—

My Lords, there is a Division in the Chamber. The Committee will adjourn. We understand that there are two back-to-back votes so, for the convenience of the House, we will reconvene in about 20 minutes, after both votes have taken place.

Sitting suspended for a Division in the House.

My Lords, this feels a little like that quiz programme, “Just a Minute”: I have now got the subject back and am trying to remember where I was.

I think I had made the point that there were criticisms of the consultation process by the Secondary Legislation Scrutiny Committee, which said:

“These Regulations are drawn to the special attention of the House on the grounds that there appear to be inadequacies in the consultation process which relates to the instrument”.

My noble friend Lord Jackson also raised this point. My points were, essentially, first, why there was not a thorough and full consultation; secondly, given that there was consultation with some bodies, why there was no feedback from that so that we had the benefit of the views of those bodies that were consulted; and thirdly, why those bodies were consulted and not others. We would have benefited from a fuller consultation and, given that there was not a fuller one, from better feedback in relation to those bodies that were consulted and responded.

With that, and bearing in mind what I said about the cost, I hope the Minister will be able to deal with those points.

My Lords, in the Explanatory Memorandum, the Government say that they have consulted, although not formally, with “key policing stakeholders” but, as others have said, the Secondary Legislation Committee says in its 35th report that it asked the Home Office whether they had consulted more widely,

“for example, free speech advocates, those representing victims or data protection interest groups—and, if not, why was this not considered appropriate”.

The Government’s response worries me. They said:

“Given the democratic scrutiny that the code will be subject to and the comprehensive policing input received, the Government did not consult more widely”.

I will focus on how some of the other stakeholders might feel with the introduction of this. Parts of it are certainly welcome. My worry is about the boundaries between what are and are not non-crime hate incidents and other offences. I will come on to that.

At this point, I should declare that, as a disabled person who has used a wheelchair for a decade, I have been on the receiving end of hate crimes, non-crime hate incidents and, I am sorry to say, threatening behaviour and even assault. Some 15 years ago, I was also the victim of a harassment and stalking campaign sustained over a period of two years in which 100 incidents of escalating crimes—that is, nuisances then crimes—were committed, even though the initial incidents were not. So, as I read the code of practice, the boundaries between these different categories—especially in some of the examples, which are key to the education of officers in how they will assess what is and is not a non-crime hate incident—have raised questions.

The additional threshold test for the recording of data is helpful, especially if—as noted in paragraph 22 of the code of practice—the person

“who has experienced the incident is considered to be vulnerable”.

The existing guidelines on recognising vulnerability are extremely helpful and sensible, and to be commended. I ask the Minister: is the reference to vulnerability in the code strong enough, with only a passing reference to the guidelines then a need to click on a hyperlink?

This raises another concern: the examples focus on hate incidents, whether crime or non-crime, and ignore other considerations that police officers should perhaps address. In example D on page 15 of the code, which concerns a resident’s report of a number of NCHIs occurring in a dispute between neighbours, the wording in the box focuses entirely on whether or not to record these incidents as NCHIs. My issue is that other flags should be also raised about the neighbours’ dispute because of the volume of incidents reported. This certainly begins to look like harassment but the focus in the code is on the decision of whether to record.

The problem with harassment, especially that type of harassment, is that it escalates, often in a worsening pattern of behaviour. The early decision on whether or not to record is now weighed with the freedom of speech issue only. Part III of paragraph 31, on page 15 of the code, says:

“All recording authorities have a duty to balance the right to free expression … and/or a real risk that a future criminal offence may be committed against individuals or groups with a particular characteristic(s). All efforts should be made to avoid a chilling effect on free speech (including, but not limited to, lawful debate, humour, satire and personally held views)”.

My concern is with the phrase “all efforts”. The focus of that entire paragraph is free speech. Can the Minister assure me that the issues around an already visible pattern of behaviour—some criminal, some not—in a matter that might be, or progress to be, a crime of, say, affray, assault or harassment, are being considered only in terms of the narrow issue of crime/non-crime hate incidents and in relation to freedom of speech?

My next area of concern relates to two different points, one in paragraph 34 and one in example J, on pages 18 to 19 of the code. First, example J says:

“An individual who uses a wheelchair reports to the police that a man approached her during a house party and threatened her in circumstances that could amount to a crime under section 4 of the Public Order Act 1986. In doing so, the man also made derogatory comments about her disability. A police officer is of the view that this incident would have been recorded as a disability hate crime had this occurred in a public place given the demonstrable threat and hostility that was evident”.

The response to the scenario then focuses entirely on the Public Order Act not being enforceable in a private dwelling, therefore making the incident a non-crime hate incident, but says that, because of the threatening language and the possibility of future escalation, it should be processed and recorded.

I am horrified by this example. Assuming that threatening behaviour that could have amounted to a crime occurred, this is not just a Public Order Act offence. It could also be affray, assault or harassment, all of which are crimes. It also might not be a private event—as in a domestic one, implied by the use of “private dwelling”—even if it is in a private dwelling. If I went to a large party and was threatened—the word used at the beginning of the example—including with disability abuse, I as a victim would not understand why the Public Order Act negates my complaint. My concern would be about what just happened to me. Someone saying, “Sorry, madam, it just happened in the wrong place”, is not going to make me feel safer.

That is part of the problem with the lack of consultation with victims and community groups: this code is written for the police, with no understanding at all of where individual citizens and what happens to them fits in. Example J also illustrates a wider point for disabled people about how this code of practice will be viewed and operated, but it could equally apply to anyone with a protected characteristic.

About six years ago, I was waiting to exit through the wide ticket barriers at Euston. The woman in front of me was shouting down her phone and then, completely randomly, started to shout at me, complaining about my wheelchair being in her way and disabled people in general. This escalated into her trying to use a kick-boxing kick at me; fortunately, she missed me and hit the wheelchair, which I think left her worse off. Everyone else stood back until she ran off and then, too late, came to my aid. I had not said one word during this. I have to say that I was in shock. The noble Lord, Lord Jackson, will be pleased to hear that the British Transport Police was very helpful and supportive. The police found the CCTV and were absolutely clear that this was an attempt to assault me—the combination of shouting directly into my face and then the kick. They were also convinced that she targeted me because I was an easy target and disabled, so it was also recorded as a hate crime. But now the emphasis is on free speech.

As I read Example J, officers will spend their time focusing on whether it is or is not a hate crime incident or a non-crime hate incident and whether it needs to be recorded, rather than the highly abusive behaviour in which that woman used hate language to threaten me and attempted to physically hurt me. Can the Minister say how officers will be reminded that the priority must be to look at every incident as a whole, including other potential crimes, rather than solely to look at the code of practice?

Secondly, on the issue of reporting, I, along with many other disabled travellers, am on the end of abusive verbal incidents on trains. It happens regularly. Comments such as “People like you shouldn’t be allowed on the train during rush hour” or “Why are people like you taking up space where I want to sit?” are regular. They can and do also use abusive language, right in your face—“cripple”, “retard” or even worse. It may be a generic statement and fall under the Home Secretary’s definition of free speech, but the delivery of it leaves the recipient in no doubt that it was intended to be personal. It is personal, and train conductors say that they repeatedly see the same people behaving badly. The ability to record these incidents as NCHIs is therefore important, because it means that a pattern of behaviour can be tracked and followed, as needed. My concern is that police officers, always under pressure, might ever look only at the one incident in front of them; then, if they decide not to record it, there is no trail of consistent abusive behaviour.

Finally, the chair of a hate crime panel in the south-east said to us that they are concerned that this instrument will impact negatively on confidence in reporting. We know that confidence in the police is already low in some communities and these Benches are very concerned about it. For these reasons, starting with the lack of proper consultation as highlighted by the Secondary Legislation Scrutiny Committee’s report, and the unclear narrative in the text and examples about how this fits into broader incidents and crimes, and where the boundaries are, I give notice from these Benches that we may well want to bring this matter to the full House.

My Lords, this new Draft Code of Practice on the Recording and Retention of Personal Data in relation to non-crime hate incidents has been created following the ruling of the Court of Appeal in 2021 in Miller v the College of Policing. The court found that the recording of non-crime hate incidents was lawful, but must be subject to more robust safeguards to ensure a better balance between responding to hate incidents and protecting freedom of speech. The Labour Party supports this revised code.

The code puts a lot of weight on using common sense, but I do not believe we should rely on that phrase too much to ensure its fair and uniform application at an operational level. What is common sense to an experienced officer may not be to a new recruit having to apply these rules for the first time. It also opens the code up to being abused. A number of noble Lords have talked about the importance of the education and training of officers.

I also want to comment on the language of the Government on this matter. The Secretary of State published an article last month stating that the very concept of non-crime hate incidents is

“largely Orwellian and wrongheaded”,

and that they

“distract the police from their core duties”.

We believe that it is right to create a more balanced code, but to attack the principles of NCHIs and suggest that seeking to protect people from more serious and potentially violent crimes is outside the core remit of the police undermines the code before it has even been brought in.

We need to ensure a reasonable, measured and respectful debate on this issue. We should remember, just after the 30th anniversary of the murder of Stephen Lawrence, why the comprehensive recording of hate incidents was introduced in the first place. It was to help protect against more serious hate crimes down the line and stop what happened to Stephen from ever happening again.

As I said, the contributions from the other side of the Committee were largely on education and training, and on implementing this new code of practice in as fair and uniform a way as possible. I too remember the debate on the PCSC Bill, which was led by the noble Lord, Lord Moylan. Although I do not agree with many of the sentiments that were expressed here or in that debate, I welcome this revised code of practice.

The closing speech by the noble Baroness, Lady Brinton, gave a very interesting critique of the examples given in the code of practice and why they may not be the best examples, in her view. The points that she raised highlighted the complexity of administering it, and of the decisions that we will be asking police officers—including young police officers—to make on whether to record these incidents.

I have a specific question for the Minister regarding family courts. As he will know, we get disclosures of police records in family courts. About 80% of the cases that we see in family courts have domestic abuse allegations made. We also get disclosure of police callouts. If there are non-crime hate incidents, my understanding from reading the code is that they could, at the discretion of a chief constable, be included in the enhanced DBS check. Am I right? My assumption is that if it is relevant, it can be disclosed to the family courts. That is the one important question for me, given the nature of the other roles that I do. I look forward to the Minister’s response.

I thank all noble Lords for participating in this very interesting and important debate, particularly for the supportive and constructive atmosphere in which it has taken place. I reiterate my gratitude to the College of Policing and the National Police Chiefs’ Council, and to senior police officers who helpfully have ensured that the code was fit for purpose. Its introduction will be another step forward in our effort to embed common-sense policing across the system, while ensuring personal data and the fundamental right to free speech are better protected.

I will begin by responding to the various points raised by noble Lords and commence with those raised by my noble friend Lord Sandhurst. I thank him for his support for the code. On his request relating to forces reporting NCHIs, it is important to avoid creating additional burdens on the police. As I said, NCHIs are vital for building community confidence and ensuring that significant harm and future criminal offences can be averted. The key thing is to ensure that this recording is properly regulated and that personal data is recorded only when it is necessary and proportionate to do so. This is precisely what the code does.

I also want to be clear that we will not ask forces to delete all existing records because valuable police intelligence would be lost and, fundamentally, it would not be a proportionate use of police resources to undertake a review of all existing records. However, where these records exist and if in any context they are reviewed—for example, during general policing inquiries for the purposes of an enhanced DBS certificate or when a person makes a subject access request—the code makes it clear that particular care should be taken to review the record before considering disclosure. Part of the consideration will include deciding whether, applying the threshold and processes set out in the code, the record should have been created in the first place. If not, the record should be deleted. Individuals can also seek removal of data held by forces via subject access requests. In addition, any records which no longer have a policing purpose and are older than six years will automatically be deleted in line with force record retention practices.

To address the final point raised by the noble Lord, Lord Ponsonby, in relation to family courts, if a non-crime hate incident meets the threshold to be recorded it might be disclosed to the family and other courts by the police in accordance with the Family Procedure Rules and the Civil Procedure Rules in the usual way.

Various noble Lords raised particular cases in the course of their speeches. I am sure noble Lords will appreciate that it would not be appropriate for me to comment on particular incidents, but I can say that the new code is designed to ensure that the police record NCHIs only when it is absolutely necessary and proportionate to do so, not simply because somebody is offended.

In his speech, my noble friend Lord Strathcarron raised issues on the role of the College of Policing. I empathise entirely with much of what he said, and his points were echoed by other noble Lords in the Committee. The Home Office is working very closely with the College of Policing to ensure that its authorised professional practice accurately reflects the contents of the new code. Much of the content of my noble friend’s speech was correct.

In the same vein, I welcome my noble friend Lord Leicester’s speech supporting the code of practice. To be clear, the college will publish operational guidance documents for the police on how to deal with the many different types of crimes and incidents, which will be known collectively as the authorised professional practice. It will be considered the official source of professional practice for policing. As it is vital to forces and will cover a number of technical matters, it important for the college to determine how best to operationalise the content set out in the code. However, we are clear that the college’s guidance must be consistent with the provisions and principles in the code before the Committee today, which will have statutory effect once it is approved by Parliament. That means that when the police are taking relevant decisions, they must give due consideration to what the code says.

The college has recently consulted on the draft updated version of the APP, which has been amended to ensure that it aligns with the principles set out the code. It is currently considering the responses received and will make any necessary changes before the code comes into effect. The college will then publish the final, updated version of the operational guidance, once the code is approved by Parliament, which will take account of the points raised during the consultation.

On my noble friend’s point about training for officers, the College of Policing is responsible for determining the training requirements for forces and has developed an e-briefing pack which will be made available one week before the updated guidance enters into effect. The College of Policing will also communicate with forces, via chief constables, about the changes prior to the code and the updated operational guidance coming into effect.

I will take away the point raised about Article 10 training and raise it with the college.

Sitting suspended for a Division in the House.

I turn to the speech of my noble friend Lord Jackson of Peterborough. Of the issues he raises, I will just address the question of how the code interrelates with DBS checks. This code does not prohibit disclosure of non-crime hate incident personal data as police information on an enhanced criminal record certificate issued by the Disclosure and Barring Service—the DBS. This is for two main reasons. First, NCHIs are simply one form of police intelligence that sits alongside many others—missing persons data, anti-social behaviour, unproven allegations of sexual assault and so on. They exist in line with the police’s common law powers to prevent crime. There are circumstances where police non-conviction information of various kinds will be considered for disclosure in enhanced DBS checks used in relation to roles which involve close working with vulnerable adults or children. Maintaining this regime is essential for safeguarding the rights of others, particularly the most vulnerable.

Secondly, the rules surrounding disclosure of this type of data are already governed by statutory disclosure guidance produced by the Home Office. Non-crime hate incident intelligence is not an exceptional form of police intelligence; it is simply a type of non-crime incident data, collected by the police to prevent crime, hence why it is covered in the same statutory guidance. This statutory disclosure guidance has been tested by the courts, and assists chief officers of police in making fair, proportionate and consistent decisions in determining when local police information should be included in enhanced criminal record certificates. Singling out this category of police data for non-disclosure would be inconsistent with the principles set out in the statutory guidance and probably unnecessary and disproportionate.

The safeguards in the statutory disclosure guidance are very robust. Should a chief officer consider that information is relevant to the purpose for which the check is sought, it ought to be disclosed in line with the guidance and the applicant invited to make representations. Only in cases where there is no room for doubt that the information should be disclosed should a decision to disclose be taken without first giving the applicant an opportunity to make representations. Should the decision to disclose be confirmed following any representations, that information will be included on the certificate that is sent to the applicant only. The applicant also has a right to appeal that disclosure through the independent monitor who considers cases where an individual believes that information disclosed within a DBS enhanced criminal records certificate is either not relevant to the purpose that the check is to be used for, or that it ought not be disclosed. The safeguards therefore balance the rights of job applicants and those of vulnerable people they might have contact with.

Alongside the existence of this strict statutory disclosure guidance, I can reassure your Lordships further. DBS records suggest that, in any event, it is rare for non-crime police information of any sort to appear on an enhanced criminal records certificate supplied to a potential employer. This type of information featured in only 0.1% of the 3.9 million enhanced checks issued by the DBS between April 2019 and March 2020. It is imperative that we do not set an unhelpful precedent by legislating in a way that undermines the police’s ability to build intelligence on possible offending and risks to life more broadly.

The first of the two questions raised by my noble friend Lord Bourne was in relation to the cost of this scheme. Information is published in the economic note on the code on the GOV.UK website. At paragraph 19, there is an explanation of the costs:

“Costs related to this are estimated at £9,200 in the central scenario and cover 10 per cent of chief inspectors and 1 per cent of sergeants being required to read the update”.

My noble friend will see that paragraph 21 states:

“The range of estimated costs vary from the central estimate of £9,200 with a low estimate of £3,500, and a high estimate of £0.4 million”.

A careful analysis has been made of the potential costs and the time taken to consider the code. I hope that that addresses the cost question.

During the debate, my noble friend Lord Bourne and a number of other noble Lords raised a question about consultation. This, of course, is the issue that was raised by the Secondary Legislation Scrutiny Committee. As I mentioned earlier, the Government consulted relevant policing stakeholders, including the College of Policing, the National Police Chiefs’ Council and senior police officers. The code is designed to be used by the police on a day-to-day basis, so it is right that we consulted them. Let me be clear that extensive legal and operational nuances were considered during the drafting of the code. These nuances were worked through with experts in the policing, data protection and legal fields, and the Government are confident that this is the right approach for such a specialised code.

I accept what the Minister said and thank him for it, but I was keen to find out why the feedback was not published.

I will make inquiries in relation to that and write to my noble friend.

I turn to the remarks made by the noble Baroness, Lady Brinton. We were all shocked and saddened by the offending to which she was exposed that she described to the Committee. It is the Government’s view that the code takes particular care in relation to vulnerable individuals. The examples it gives are designed to be examples of non-criminal offences. The matters which were described by the noble Baroness were criminal offences, and the police will follow other guidance if an actual crime has occurred. The incident at Euston which she described sounded to me like an offence of assault at the very least.

The scope of the code is limited to non-crime hate instances. The examples in the text are hyperlinked and are used to illustrate non-crime hate incidents. The code states that,

“where the behaviour of the subject falls short of criminal conduct but may later be evidence of a course of criminal conduct”

the threshold to record a non-crime hate incident may be met. I hope that provides some reassurance to the noble Baroness.

I believe I have addressed the points raised by the noble Lord, Lord Ponsonby. I commend the draft code to the Committee.

Motion agreed.

Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023

Motion to Take Note

Moved by

That the Grand Committee takes note of the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023, given the impact of current increases in the cost of living on pensions payable by the Pension Protection Fund.

Relevant document: 30th Report from the Secondary Legislation Scrutiny Committee

My Lords, this order is routine and has little practical impact on the PPF. The levy that is currently payable is only 16% of the cap set by the order. However, having it before us provides an opportunity to discuss the operation of what is becoming—a bit under the radar—one of the country’s biggest financial institutions.

I have a particular interest as I like to think that the PPF, or at least the name, was my idea. Back in 1995, following the Maxwell scandal, I drafted a paper for the TUC that proposed, among other things, that there should be a central discontinuance fund that should be called—wait for it—the Pensions Protection Fund, or PPF. Of course, the proposal was not accepted at that time, but it was introduced subsequently in the Pensions Act 2004.

Before getting to the focus of my speech, I have a couple of questions. First, the Minister should provide the Committee with some explanation of the error that was made with this order. I am not trying to embarrass anyone, but it surely suggests excessive pressure on DWP staff, so the question is: has the situation been rectified?

Secondly, as was raised in the 30th report from the Secondary Legislation Scrutiny Committee, can the Minister tell us where we have got to in following the recommendations in the departmental review? I will highlight two recommendations from the review. First, recommendation 2 is that

“the DWP and the PPF work together to understand the implications of the PPF’s funding position in light of expected future developments in the population of Defined Benefit (DB) pension schemes and plan well ahead for any legislative changes that might be needed; for example, to address what happens to any funding which is surplus to requirements”.

It is worth noting that the current legislation says nothing about what should happen to any assets that, in the event, are not needed to pay members’ benefits. Given the PPF’s policy of building up a substantial buffer that, even on its own figures, is unlikely to be needed, the question needs to be addressed.

Any money that is left over cannot go back to the employers, because things will have moved on and employers will have moved on. It also seems wrong that it should go to the Government. The only just solution is for it to be used, as far as possible, to provide benefits for members. In practice, this means that the buffer should not be excessive. In these circumstances, where there is no residual legatee, bigger is not necessarily better. It might be unjust, and its level therefore becomes not just a technical issue but an issue of fairness to members.

Recommendation 6 states:

“The PPF should consider how the Board could hear more directly about the member perspective to inform its deliberations”.

It should be a matter of concern that currently there is no formal procedure to reflect the interests of members. So what thought are the Government giving specifically to these two recommendations in the context of the review?

These two recommendations also bring me to focus on the central issue of my remarks: the impact of high rates of inflation on pensions in payment from the PPF and the scope for the fund’s assets to be used to protect their real value. The problem is that the limits on annual pension increases are severe in current circumstances: none at all for benefits accrued before 1997 and only 2.5% per annum for benefits accrued thereafter. Until recently, the PPF operated in a period of relatively low inflation. The problem of inflation has always been there, but it has become more salient now we have moved into a period of materially higher rates of inflation—most obviously in the current year, but the issue is not going to go away.

The net effect of these limits is that the real value of members’ pensions has been cut significantly. Pre-1997 benefits have already been cut by up to one-third, while benefits accrued after that date have fallen by up to one-sixth. It is important to understand that these are reductions so far; they are going to continue. There is bound to be another cut next January, which will be based on the level of inflation this coming May. It is potentially another 7% if we believe the OBR’s forecasts. In the longer term, I am a relative pessimist about inflation —but even optimists do not expect a return to CPI increases of 0% or even 2.5%. So the need to protect the real value of members’ benefits will only increase.

The reductions in the real value of members’ benefits must be seen in context: the funding position of the PPF, in its own words, is “strong”. As a result, the PPF levy has, quite rightly, been reduced and there are plans to reduce it further. I have no problem with that. According to the PPF’s latest annual report and accounts, the scheme held £39 billion in assets as at 31 March 2022. At that point, the PPF estimated that, of that figure, £11.7 billion—almost £12 billion—was in excess of what it needed to pay every current member and their dependants their compensation for life. This represented a funding ratio of 137.9%. I think that would be broadly recognised as going a bit beyond “strong”.

Given the experience of the last 12 months, it is likely that the position this March will be materially stronger. It also needs to be understood that these figures are already being calculated—I presume—on a prudent basis. The general practice is to undertake these valuations on a prudent basis. Unless the PPF advises me otherwise, I assume that this is the case here, so we have prudence placed on top of prudence.

The problem with all this is that PPF members have not shared the benefits of this strong funding position. Indeed, it is the reduction in the real value of their benefits that has been one of the contributing factors to the strong position. This situation is wrong and should be remedied as soon as possible. This will probably require legislation because the board of the PPF has limited ability to pay compensation over the levels set in the Pensions Act. The lack of increases for compensation in respect of pre-1997 service is devastating for the members who are affected, especially during the current cost of living crisis.

As well as the size of the impact, it is also important to appreciate the differential effect on various groups of members. Information released to the trade union Prospect through a freedom of information request shows that the lack of inflation protection for pre-1997 service disproportionately impacts women and older members. There is no rational justification for this discriminatory treatment. Ministers have sought to justify the discrimination by saying that there was no statutory right to increases before 1997—true, but there was no statutory right to have an occupational pension at all. The idea that the initial pension is the real benefit and the increases are an optional extra is fundamentally wrong.

In practice, the majority of pre-1997 scheme members were either accruing benefits to which they were entitled through RPI increases, typically capped at 5%, or were in the many schemes funded on the basis that such increases were going to be provided and members had a reasonable expectation of receiving them. In other words, such increases were part and parcel of the package of scheme benefits, and their effective exclusion from protection must be open to legal challenge. Such a challenge becomes more likely as higher rates of inflation persist. So we should, first, provide higher rates of protection to better reflect modern rates of inflation and, secondly, eliminate the arbitrary and unfair difference in treatment for compensation in respect of pre-1997 and post-1997 service.

On a Brexit note, it is a matter of much regret that the Retained EU Law (Revocation and Reform) Bill does not provide for the retention of the minimum levels of compensation established in the Hampshire and Bauer cases. When that Bill was debated in the Commons, a Minister even went so far as to state that the Hampshire case

“is a clear example of where an EU judgment conflicts with the United Kingdom Government’s policies”.—[Official Report, Commons, Retained EU Law (Revocation and Reform) Bill Committee, 22/11/22; col. 169.]

To conclude, is it the Government’s intention to cut the potential benefits that members might receive from the PPF to below the level to which they are entitled at present? I beg to move.

My Lords, the PPF provides real support to some 295,000 pension scheme members who have entered it, including through the £1.1 billion paid out in compensation each year. It provides security to those in current DB schemes who may need to call on it in future. Add to those figures the Financial Assistance Scheme, which covers a further 150,000 members and, following the Pensions Act 2004, is administered by but not funded through the PPF, and we are providing a blanket of considerable security to heading for half a million people.

It is very important to remember that, before the 2004 Act, members could lose all or much of their pension savings when employers became insolvent or simply walked away from their liabilities. When the Labour Government created the PPF, there were many doomsayers who predicted that it would not be sustainable. In fact, the PPF has defied those doubters: it is financially resilient, has been well run, and has weathered the various economic storms that have occurred over the past 15 years.

However, the financial resilience of the PPF over the very long term still needs careful consideration. I probably take more comfort from the cosiness of prudence than my noble friend does, but the past few years have seen a significant improvement in overall scheme funding through increased employer contributions, rising interest rates and, more recently, rising gilt yields. I acknowledge that, but there is always the risk of the economic environment worsening and future large claims on the PPF. There will be a decline in the number of PPF levy payers resulting from schemes transferring into the PPF, and the number of schemes likely to buy out with an insurance company. Schemes underfunding is one of the biggest risks that the PPF faces, and there are still scenarios in which scheme funding could deteriorate. We have seen rapid movements in the level of scheme funding. What we have witnessed over the past 15 years confirms that.

The funding regime for the remaining open schemes is also important. Many of the larger such DB schemes have considerable deficits on a Section 179 basis—that is, the basis for funding to provide a PPF level of benefits. The Purple Book shows that open schemes are around 20% worse funded than closed schemes, on a Section 179 PPF benefits level basis. Such schemes presenting to the PPF could have a significant impact on the PPF’s funding, if they made a claim. There is also a long tail of small schemes which, together with stress schemes, collectively constitute, as I understand it, over one-third of the remaining 5,100 DB schemes. The estimates suggest that the annual capacity of the buy-out market is £50 billion to £100 billion, but it is likely to be the stronger schemes that buy out, with the less financially resilient schemes left in the PPF universe.

I mention all those things because, although the PPF is resilient when looked at today, we know that the risks that it has to be embrace and deal with can move against it. What work is being done to assess the impact and extent of a future decline in the number of levy players and the implications for the annual levy and the financial resilience of the PPF? In the light of the PPF’s current improved resilience, I understand that the DWP and the PPF are jointly considering the potential for more flexibility in setting the levy. Is the Minister able to report on when we are likely to know the outcome of those deliberations?

Improved PPF financial resilience, against a background of current high inflation levels, is bound to raise questions about current compensation levels paid to scheme members who entered the PPF. Looked at over the long term, an important part of maintaining the financial resilience of the PPF and the fairness towards levy payers has been the level at which PPF compensation payments are set. As my noble friend spelled out, current compensation payments are inflation indexed only on pension benefits accrued since 1997, not on benefits accrued before then, and the index is capped at 2.5%.

Understandably my noble friend is concerned that, in the face of high inflation and its impact on members of the PPF, the annual levy for 2023 is being reduced to 16% of the levy ceiling, given that there are some strong arguments for saying that the level of compensation payments should be improved. Again, I go back to my natural affection for prudence. Changing the PPF compensation levels, specifically to provide improved inflation indexing, would have a material financial impact on the PPF and wider implications for DB schemes, and, by association, the funding of the Financial Assistance Scheme. Changes to indexing would need consideration of the level of increase on the PPF’s future liabilities and the impact on the number and size of claims that the PPF would receive in the future, and it would almost certainly raise arguments about the cost of backdating any index payments.

We would also have to deal with schemes that had wound up outside the PPF through buyout at a level of benefit above current PPF benefits but which, if compensation payments are increased, would have been better off if they had transferred into the PPF. More schemes will become underfunded on a Section 179 basis. In looking at ways in which compensation could be improved, particularly for benefits accrued prior to 1997—I am hesitating on my memory—there are some quite serious issues to reflect on.

I am aware that the Work and Pensions Committee is looking at the system and the level of PPF compensation. Without treading on its toes, I ask the Minister whether there are any plans to increase the transparency of reporting on the department’s consideration of the annual levy raised, and about the scope for increasing the level of compensation to members in a high-inflation environment, and the need to ensure financial resilience of the PPF in the face of other risks evolving over time.

The other issue is that the PPF will be entering its own maturing phase, which will require it to have a greater focus on maintaining financial resilience. Reading the various papers that we had before us, I did wonder whether, in those circumstances, the PPF is right to decide to build reserves at a significantly slower pace than it had been building them. Certainly, in the DB scheme world, the regulator often encourages DB schemes to get assets in while the covenant is strong, and not wait until it is weak and seek the money. I wondered whether it is such a good idea to slow down the building at pace of reserves.

Finally, is it possible to update the Committee on the DWP’s view on the maturing of the PPF, which is a kind of shift in its position? I appreciate that it may not be possible to make a verbal response to that, but a written response would be helpful.

My Lords, I congratulate the noble Lord, Lord Davies, on securing this debate; it is an important one. At the outset, I say that I believe that the Pension Protection Fund has done and is doing an excellent job, and member experience in the PPF seems to be very positive—for me, that is one of the big tests of whether this is working well. The administration is very efficient, and the amount of compensation being paid is reaching those who need it, and are entitled to it, well.

I also congratulate the noble Lord on his foresight in 1995. I recall first becoming involved with Allied Steel and Wire and the various other pension schemes whose members had lost their entire pension very close to the point at which they were expecting to start receiving it, together with all their other life private savings —in those days, if you wanted to have any extra pension contributions you had to put all of it into your employer’s pension scheme. I remember reading about the proposals for a central discontinuance fund and thinking, “If only”. It informed my conversations with the No. 10 Policy Unit, the Treasury and the economic advisers to the Prime Minister at the time as to which way we needed to go to improve the situation the country faced. Over the subsequent two to three years, more and more pension schemes failed, and more and more members started losing their pensions; it was a serious and heartbreaking time. Members, having been told that they were fully protected, would have expected that all their money was safe. They were told that, regardless of what happened to their employer, their money was safe and that their pension was protected—but it turned out not to be the case.

Instead of the proposal from the noble Lord, Lord Davies, of a central discontinuance fund, we got the actuarial profession’s minimum funding requirement. Unbeknown to members—and, indeed, to most pension professionals outside actuarial circles—that was designed to deliver only a 50:50 chance of people receiving their full pensions, and yet members, trustees and employers were told that, on that basis, their fund was fully funded or in surplus. Unfortunately, what happened subsequently, around the end of the 1990s, with the market crash, was that those surpluses melted away. It looked as though the benefits had been secure but, suddenly, the market crash made that position unsafe. We saw that those so-called surpluses were in fact buffers against bad markets, rather than real surpluses—you could judge that only with hindsight in the end.

This is my concern about the Pension Protection Fund. I absolutely want to try to ensure that anyone who has a pension insured by the Pension Protection Fund receives as much as possible. If there were a secure way of ensuring that they did not fall behind while we are suffering this cost of living crisis, I would be the first to support it. My thinking has perhaps been coloured by my experience during those dreadful years, before we got the Financial Assistance Scheme sorted out in 2007—it started around 2008—of seeing people who thought that their pensions were in surplus and that their position was secure finding that, because markets had moved suddenly and unexpectedly and in a way that had never been properly forecast, their pension had disappeared.

I also believe that, although the PPF looks as though it is in surplus now, we need to address what happens should there be a severe economic dislocation causing some of the huge pension schemes, which currently seem safe—and even some of the open schemes —to fail and fall into the same problem. This is an insurance policy rather than a pension, which, for me, is an important distinction.

I would love the Government to find a way to underwrite more generous increases for the Pension Protection Fund. I am particularly mindful of the fact that, before 1997, benefits had no inflation protection at all, yet many schemes—but by no means all—offered full inflation linking, or at least up to 5%. In that pre-1997 period, the older the member was when their scheme failed, the more pension they lost as a result of the failure, because they would have had more accrual.

I support the concept that the noble Lord, Lord Davies, is promoting: that in a time of economic difficulty, with inflation roaring away, we do not want to leave pensioners behind. It is clearly the case that the Pension Protection Fund is, to some degree, leaving pension members behind in real terms. To some degree, it was modelled on the American PBGC, the Pension Benefit Guaranty Corporation. Generally speaking, in America there is no inflation protection at all on these DB schemes, so the UK has always been a little unusual in that regard. Having said that, it makes sense to look at the structure of the levy and I echo the questions for my noble friend about plans for the future management of it.

Finally, to pick up on the remarks of the noble Lord, Lord Davies, on the arbitrary and unfair treatment of pre-1997 members, that applies particularly strongly to members in the Financial Assistance Scheme. This scheme is not funded by all other pension schemes or employers; it is a part of government spending. Members in the Financial Assistance Scheme were never told that there was a Pension Protection Fund that would reduce their pension when they reached retirement; they were always told that their pension was completely “safe and protected by law”, to cite government documents sent to them at the time. They would be particularly at risk, because their schemes failed before the schemes that belonged to the PPF. They would be at risk of losing more because, by definition, they had more pre-1997 benefits.

May I put in a plea? Given that the Financial Assistance Scheme’s membership is more than half the size of the membership of the PPF, if there were any consideration of increasing the generosity of inflation protection for members of the Pension Protection Fund, even on a one-year basis, for example could that be applied to the Financial Assistance Scheme as well? It would be an option to offer them extra on a temporary period. On that basis, does my noble friend know, or will he write to me about, how much extra money the Government have so far added to the assets that were gathered in from Financial Assistance Scheme schemes to supplement the amounts paid out for members of those schemes?

I congratulate the noble Lord, Lord Davies, on this. I echo the words of the noble Baroness, Lady Drake, who knows so much in this area, about a need to be mindful of the longer-term potential risks. I look forward to hearing my noble friend’s response.

My Lords, I thank all noble Lords who have spoken, especially my noble friend Lord Davies of Brixton for giving us this opportunity to reflect on the role and operation of the Pension Protection Fund.

My noble friend Lady Drake was right to remind the Committee of the huge value of the PPF to the thousands of members of DB schemes—both those who benefit directly from the £1 billion-plus of compensation it pays out every year and those who are happily sailing in calm pension waters but benefit from the security of knowing that the lifeboat is there, should they find they need it. Certainly, every day is a school day. I have learned a certain amount of history today, for which I thank noble Lords who have spoken, including the noble Baroness, Lady Altmann, and my noble friends on this side. They reminded me that the PPF was created by the Labour Government to protect the hard-earned pension savings of workers. It is important that we never take it for granted and that we, in our time, do all we can to keep it sustainable.

The Pensions Act 2004 requires the DWP to make an annual order to increase the PPF levy ceiling in line with the growth in earnings. As my noble friend Lord Davies noted, this year we have had two orders, as the first draft omitted the relevant figures in favour of “X”s. I do not want to make life harder for whichever poor person found that they had done that by accident, but I have to note that it is not the first error in recent times that we have had in a DWP order. When I was a non-exec on boards, we were always told that if an error is reported, the question to ask is: is it systemic? Clearly, one error is not systemic, but this is not the first. Can the Minister tell the Committee whether he is confident that his department is sufficiently well resourced with the people whose job it is to draft legislation and make sure that it is checked before it goes out?

The levy ceiling was set in primary legislation to be uprated annually in line with the growth in average weekly earnings, the rationale being that this would allow the increases in the ceiling roughly to track the increases in the pension liabilities of DB schemes, which are, in turn, linked to members’ earnings. In its 30th report, the Secondary Legislation Scrutiny Committee asked whether the policy of annual increase by the growth in earnings is still producing a sensible outcome, or whether it is far outstripping actual usage. It highlighted the gap between the levy ceiling and the actual levy. As we have heard, in 2023-24, the levy will be 16% of the ceiling, compared with 33% in 2022-23 and 43% in 2021-22.

The answer provided to the committee in that 30th report was that

“PPF investment performance has consistently performed ahead of target and combined with the PPF’s levy collection and risk reduction strategies, has resulted in a reserve of £11.7 billion and assets of £39 billion (as of 31 March 2022)”—

as mentioned by my noble friend Lord Davies. It was this which enabled the drop in the levy. The recent PPF funding review concluded that

“the PPF’s financial position has significantly strengthened in recent years, driven principally by strong investment performance, and a changed risk profile. As a result, the PPF is making a step change in its approach and entering a new phase where the focus will shift from building to maintaining its financial resilience”.

As somebody who likes the Janet and John version, I think that means that it has been building up reserves steadily and feels that the time has come to build them up more slowly in future.

The challenge for the PPF is that it has to tack a course between levying enough for its likely needs in the year ahead while ensuring that it is still able to bring in enough additional revenue if it suddenly faces large claims or a significantly riskier environment. Since it can increase the levy by only 25% a year, the decision on the levy can never just be a short-term consideration with a 12-month horizon. Is the Minister confident that the PPF has landed in the sweet spot?

I am also interested to hear the answers to the questions raised by the noble Baroness, Lady Altmann, and my noble friend Lady Drake about the consideration that is being given by the department and the PPF as to whether there is a need for more flexibility in the way that the levy is set and constructed.

Clearly, if the PPF is deemed to have more reserves than it needs, it can do one of two things: reduce the levy or spend more. My noble friend Lord Davies has come down clearly on one side of that, namely that it should choose to spend more. He rightly pointed out that this is a time of very high inflation and, therefore, the impact of the 2.5% cap on indexing is being felt particularly acutely at the moment. Clearly, that has put pressures on all pensioners, including those who rely on PPF payouts. My noble friend’s proposal has attracted support in principle from the committee. The obvious question to the Minister is: has any modelling been done on the cost of removing or raising the cap and, if so, what can he share with us on that—what did it show?

My noble friend Lord Davies also raised two of the questions from the independent review of the PPF. Can the Minister tell me whether the Government have responded to that review? I could not find it, but that may just be because of my search skills. Perhaps he could let us know.

I add another question that had been raised. The costs of administering the PPF are borne by the PPF administration fund and amounted, I gather, to £13.3 million last year. The independent review recommended folding the administration levy into the general PPF levy. Did that proposal find favour?

I am interested to hear the Minister’s take on this delicate balance facing the PPF, especially as it matures. It has been suggested that is in a healthier position than ever, but also that, as more schemes prepare to move into buyouts, the environment could get riskier in future than it has been in the past. It is perhaps time for more of the workings to be made manifest so that there is more clarity for all stakeholders—pension schemes, savers and pensioners—as to the balance of decisions that are being taken. I look forward to hearing the Minister’s reply.

My Lords, I thank the noble Lord, Lord Davies of Brixton, for providing this opportunity to discuss the Pension Protection Fund and Occupational Pension Schemes (Levy Ceiling) (No. 2) Order 2023. This order enables the board of the Pension Protection Fund to raise a pension protection levy that is sufficient to ensure the safe funding of the compensation it provides, while providing reassurance to business that the levy will not be set above a certain amount in any one year.

I thank all noble Lords who have spoken in this short debate. As ever, I am somewhat daunted by the level of expertise, bar none, in this Committee. A good number of questions have been raised and, as ever, I will endeavour to answer them all—mostly at the end of my remarks, just to manage expectations.

I emphasise the Government’s continued commitment to supporting pensioners and protecting their hard-earned retirement savings. Ensuring that those who have worked hard all their lives receive a retirement income that provides them with dignity and financial security is one of our core objectives, and so it should be. We recognise that recent increases in the cost of living have placed particular pressure on pensioners’ household budgets, so we are taking action to target support specifically at pensioners. Around 12 million pensioners in Great Britain will benefit from the 10.1% increase to their state pensions from this month, fulfilling the Government’s manifesto commitment to apply the triple lock. More than 8 million pensioner households across the UK will receive an additional £300 cost of living payment this winter. To aid the most vulnerable, the pension credit standard minimum guarantee has also been increased by 10.1%.

As the Committee will know, combating inflation is one of the Government’s top priorities. Forecasts indicate that inflation is still likely to fall sharply by the end of 2023, in line with the Prime Minister’s pledge to reduce it by half by the end of the year.

I will return to the Pension Protection Fund in a moment, but first I will take a step back to consider the wider context of the schemes it protects. I pay tribute to the noble Lord, Lord Davies, for all that he has done; I was interested, pleased and perhaps not surprised that he had such a hand in the naming and setting up of the PPF—I am not sure of the precise date—back in the 1990s. With around £1.7 trillion of assets over 5,000 schemes and supporting nearly 10 million members as of March 2022, the defined benefit sector is critical for the UK population.

Set against this backdrop, the PPF’s £39 billion in assets under management as of March 2022, including £11.7 billion in reserves, certainly seem proportionate to the scale of its task. As of March 2022, since its inception in 2005 the scheme has stepped in to protect close to 300,000 members who might otherwise have received a greatly reduced retirement income. The noble Baronesses, Lady Drake and Lady Sherlock, referred to the success of this.

Despite the strength of its financial position, the PPF continues to face risks, the biggest being future claims for compensation and increased longevity. It uses its stochastic modelling tool, the “long-term risk model”, to help determine the funding it requires to protect against these future risks. Like other major financial institutions, the PPF protects against risk by holding reserves. The size of its reserve should therefore provide reassurance not only to existing members of the PPF but to members of all eligible pension schemes.

The noble Lord, Lord Davies, asked about the Pension Protection Fund’s reserve of £11.7 billion and asked whether that could be shared with its members—I think that was the gist of his question. It enables the Pension Protection Fund to protect financial security for current and future members. As I said, despite the strength of its financial position, the PPF continues to face a number of risks, the biggest being future claims to compensation and increased longevity, so there is a balance that I am sure the noble Lord could tell me much about.

The compensation provided by the PPF makes it a critical partner in delivering on the Government’s objective of ensuring financial security for pensioners. The PPF provides a crucial safety net to members of eligible pension schemes who are at risk of losing their pensions because of the insolvency of their employer. This safety net could not be more important in these challenging times.

I reiterate, however, that the Pension Protection Fund is therefore a compensation scheme; I know that my noble friend Lady Altmann defined it as an insurance scheme, which is fair enough. As such, it seeks not to replicate the benefits of underfunded pension schemes but rather to ensure that members are compensated fairly and sustainably. A balance must be struck between the interests of those who receive compensation and the levy payers who fund it. It is only by striking this delicate balance, perhaps, that the long-term stability of the PPF can be ensured.

As it is a safety net, the PPF indexation rules are broadly in line with the minimum legal requirements for defined benefit schemes, which vary depending on the time the benefits were accrued. This means that some members receive lower levels of indexation than they would have done had the scheme not entered the PPF. Changes to these rules would be costly and complex, with significant consequences for the pensions system. The PPF’s current liabilities would increase, as would the deficits of the schemes it protects, which use PPF compensation levels to measure their funding. This would mean an immediate increase in costs as well as an increase in the potential scale and likelihood of future claims for compensation. As a result, the PPF would have to alter its funding strategy, likely increasing the burden on levy payers. It would not be appropriate for the Government to increase the burden on levy payers for the purpose of providing more generous indexation than the minimum as laid out in legislation.

The noble Lord, Lord Davies, expanded on this theme by asking why compensation paid by the PPF does not increase in line with inflation. As he knows, compensation based on benefits accrued after April 1997 is increased in line with inflation up to a maximum of 2.5%, which is broadly in line with the legal requirements for defined benefit pension schemes. However, as I mentioned earlier, it is a compensation scheme and was never intended to replicate the benefits. Legislation limits what the PPF can do and there is no discretion either to pay the uplifting of the pre-1997 funds or to pay more than the 2.5%; I may say more about that later.

As my noble friend Lady Altmann said, the PPF has been highly successful in securing the funding required to pay for the compensation that it currently provides. The strength of its financial position, combined with improvements in the funding levels of the schemes it protects, means that it expects to be able to reduce its reliance on the levy. In 2023-24, it intends to collect approximately £200 million—around half of last year’s levy estimate. Reducing the levy will ease the burden on levy payers without risking the long-term funding of compensation.

I thank the Secondary Legislation Scrutiny Committee for the attention that it has paid to this instrument. I hope that the information provided by the department about the levy ceiling has been helpful for noble Lords’ understanding of this successful compensation scheme. I repeat the department’s apologies for the technical errors contained in the original version of this order. They were spotted by the statutory instrument registrar, and this allowed the department to act swiftly to lay this order—it also revoked the defective order—and minimise any inconvenience. Understandably, this matter was raised by the noble Lord, Lord Davies.

To expand on what I have just said, as the noble Lord knows, the technical error in the original version led to the order having to be revoked. This order, No. 2, now revokes and replaces the original instrument and introduces the increase in the levy ceiling as intended. To reassure the Committee, in order to prevent future errors of this type, the department has put in place stronger and clearer processes to ensure accuracy in statutory instruments; that is more of a general comment. The department will continue to work with the PPF as it adapts to the changing landscape of defined benefit pension schemes and takes opportunities to enhance its role in the pension protection network.

I turn to the questions raised in much more depth. The noble Lord, Lord Davies, asked—this was added to by the noble Baroness, Lady Sherlock—about the follow-up planned by our department since the publication of the departmental review of the PPF. The departmental review, published in December 2022, made a limited number of recommendations that focused on finding opportunities to enhance the profile of the PPF and take advantage of its expertise. I can reassure the Committee that the department is currently working with the PPF to explore the recommendations and options for implementing them, including the funding of the Pension Protection Fund and improving member engagement. I hope that that gives some answer to the noble Baroness, Lady Sherlock, who asked whether we had responded; that is where we are at the moment.

The noble Lord, Lord Davies, asked why the Pension Protection Fund does not pay the indexation provided for in the scheme rules. As he will know, the rules on indexation can vary significantly across schemes, so trying to replicate scheme rules would introduce complexity into the broadly standardised indexation rules. The PPF is a compensation scheme and, as such, was never intended to replicate, and I mentioned earlier the balance that has to be struck.

The noble Lord, Lord Davies, also asked how it is fair that the PPF indexes of pre-1997 accruals are so different from more recent accruals. PPF’s indexation rules simply allow for benefits accrued before and after a certain date to be treated differently for the purposes of indexation, which broadly reflects the statutory requirements for defined benefit pension schemes. There is no statutory requirement for defined benefit pensions relating to service before April 1997 to be increased when in payment, apart from any guaranteed minimum pension element.

The noble Lord, Lord Davies, and my noble friend Lady Altmann alluded to the point about why the Government do not legislate to introduce indexation on pre-1997 accruals. I think I may have alluded to this earlier, but changes in the indexation rules would significantly impact the PPF’s funding strategy and the wider pensions system. Increasing the indexation provided on compensation would incur significant direct costs for the PPF.

The noble Lord, Lord Davies, asked an interesting question about retained EU law, particularly in respect of the Hampshire judgment. I can give a short answer which I hope may be of help to him, which is that the Government intend to retain the Hampshire judgment beyond the sunset date. I hope that gives him the answer that he was looking for—there is a nod there, which is helpful to me.

The noble Baroness, Lady Drake, asked a number of questions, the first being what consideration our department has made of the fall in the levy population as a product of the rise in the number of schemes buying out. I think that that was the gist of her question. Stronger regulation has led to scheme funding positions improving significantly in recent years, and the department and the PPF have been considering the implications for the pension protection levy. Maybe I can give some assurance by saying that early discussions between the two organisations have focused on the potential rebalancing of the levy, so that it is more aligned with the evolving universe of defined benefit schemes that the PPF is there to protect.

The noble Baroness, Lady Drake, also asked about the materiality of increasing the indexation of the PPF payments above the 2.5% cap, and I believe that that theme was raised by one or two other Peers. Increasing the indexation provided on compensation would incur significant extra direct costs, as mentioned earlier. The deficits of eligible schemes that use the PPF levels as a way of measuring funding would increase, and therefore the size and likelihood of future claims would grow. I alluded to this in my main speech; I am afraid I cannot add much more to what I have already said.

The noble Baroness, Lady Drake, asked what consideration the department has given in terms of the increasing maturity of the PPF and the resulting changes to its cash flow—a slightly different question. The PPF new funding strategy recognises that its population is maturing and seeks to provide security for its current membership, while holding adequate assets for its future claims. Its investment portfolio is aimed to ensure that it has a stable, long-term cash flow for its current membership, while growing its reserve over a period of time.

My noble friend Lady Altmann asked about financial assistance from the financial assistance scheme and, linked to that, there was a theme about improving the generosity of the scheme. A brief answer is that the indexation rules on financial assistance are broadly in line with the legislation for pension schemes more widely but, further to this, the financial assistance scheme is funded from general taxation and thus this balance—this goes back to this balance—has to be struck between the interests of members of the schemes which are unable to secure their liabilities and the wider taxpayer interests.

As regards a question that my noble friend asked about how much remains of assets transferred from the financial assistance schemes to the Treasury, that is a very specific question on which I will have to write, which I am very happy to do.

The noble Baroness, Lady Drake, asked about DWP’s plans for improving transparency of the PPF’s funding and indeed the levy. The PPF publishes its annual report and accounts and consults on the basis on which it collects the levy. That is the answer I have, and I will consider that and look at Hansard later and see whether I can expand on it.

I appreciate that there is a lot out there, but there are three elements: the scope for raising the levy, the compensation levels and the resilience of the PPF over time. Clearly, there is a sort of inflection point for revisiting and managing that. It was just about understanding that and getting more transparency around it.

Absolutely. That plays well into what I said in that I will reflect on what I and the noble Baroness have said, and there may well be a letter coming to add to the one that I will send to my noble friend.

I will address a couple more questions before I wind up finally. The noble Baroness, Lady Drake, and indeed the noble Baroness, Lady Sherlock, asked whether the PPF is right to build reserves at a slower pace than it has been doing. It is a fair question but that is, as the noble Baroness will expect me to say, very much a matter for the PPF board.

On whether there will be an update on the levy discussions, I may have alluded to this earlier—it was raised not only by the noble Baroness, Lady Drake, but by my noble friend Lady Altmann and indeed the noble Baroness, Lady Sherlock. I will certainly happily make inquiries, and that will be an addition to the letter which is growing bigger by the moment. There may be some other questions that I have not answered, but I will certainly look very closely with my team at Hansard.

To conclude, again I thank the noble Lord, Lord Davies, for providing us with this opportunity to discuss the UK’s flexible and robust regime for funding and protecting defined benefit pensions, which, as was mentioned, is an important subject. This regime has enabled most schemes to weather the severe economic downturns following the crash in 2007-08—the financial crisis, I should better call it—and the Covid pandemic, as well as the prolonged period of historically low interest rates. In fact, the aggregate scheme funding position on a Pension Protection Fund basis improved from 83.4% on 31 March 2012 to 113.1% on 31 March 2022 —an interesting statistic to reflect on. These improvements to scheme funding mean that fewer and fewer members of DB schemes will require the safety net of the PPF. That is of course good news for members, who are increasingly likely to receive their full pension entitlement. This is progress indeed but there is more to do, although of course we cannot eliminate all risk. When employers become insolvent, the PPF continues to stand by as a well-funded and responsibly managed safety net.

I thank the Minister for his detailed and considered response to what I have certainly found a useful debate. I just need to say that I do not think that the issue will go away. As I suggested, the attrition of members’ benefits will continue, and pressure to do something will get stronger. It would be useful if a meeting could be organised—it is probably just as easy to do it directly with the PPF, but Ministers and officials might like to be involved in it as well, so I will write and suggest that. I thank the Minister again for his attention to this important topic.

Motion agreed.

Committee adjourned at 7.29 pm.