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Public Bill Committees

Debated on Thursday 5 November 2020

Environment Bill (Tenth sitting)

The Committee consisted of the following Members:

Chairs: James Gray, † Sir George Howarth

† Afolami, Bim (Hitchin and Harpenden) (Con)

† Anderson, Fleur (Putney) (Lab)

† Bhatti, Saqib (Meriden) (Con)

† Brock, Deidre (Edinburgh North and Leith) (SNP)

† Browne, Anthony (South Cambridgeshire) (Con)

† Docherty, Leo (Aldershot) (Con)

† Furniss, Gill (Sheffield, Brightside and Hillsborough) (Lab)

† Graham, Richard (Gloucester) (Con)

† Jones, Fay (Brecon and Radnorshire) (Con)

† Jones, Ruth (Newport West) (Lab)

† Longhi, Marco (Dudley North) (Con)

† Mackrory, Cherilyn (Truro and Falmouth) (Con)

† Moore, Robbie (Keighley) (Con)

Pow, Rebecca (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)

Thomson, Richard (Gordon) (SNP)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

† Zeichner, Daniel (Cambridge) (Lab)

Anwen Rees, Sarah Ioannou, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 5 November 2020

(Morning)

[Sir George Howarth in the Chair]

Environment Bill

Before we begin, I remind Members about social distancing. Spaces available to Members are clearly marked. Hansard colleagues would be grateful if you could send any speaking notes to hansardnotes@ parliament.uk. I also remind Members to switch electronic devices to silent, please. Tea and coffee are not allowed during sittings.

We will continue line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room, and shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same, or a similar, issue. Please note that decisions on amendments do not take place in the order they are debated but in the order they appear on the amendment paper. The selection list shows the order of debate. Decisions on each amendment are taken when we come to the clause to which the amendment relates.

We now continue our consideration of schedule 1. I call Dr Alan Whitehead to move amendment 157.

Schedule 1

The Office for Environmental Protection

I beg to move amendment 157, in schedule 1, page 124, line 40, at end insert—

“12A (1) At the start of each five-year period, the Secretary of State must publish and lay before Parliament an indicative five-year budget for the OEP.

(2) In sub-paragraph (1) ‘five-year period’ means—

(a) the period of five financial years beginning with the financial year that begins after the commencement of this Schedule, and

(b) each subsequent period of five financial years.

12B If the OEP requests additional funding, due to a change in the nature or extent of its functions, the Secretary of State must publish and lay before Parliament a statement responding to the request.”

This amendment requires the OEP to be given a five-year indicative budget, and allows it to request in-budget increases.

It is a pleasure to serve under your chairmanship, Mr Howarth. Before we start, I note the Minister’s absence this morning. I understand that she is unwell. I hope to convey the wishes of us all, and particularly of the Opposition, for her speedy recovery and return to her full powers, which are considerable, in the business of guiding the Committee. [Hon. Members: “Hear, hear!”] I appreciate that her absence has meant that we have had to slightly rearrange how we proceed today. The Opposition fully support those changes, and hope that we can get through today in a useful and amicable way and be out in good time this afternoon. That is certainly our intention.

We tabled amendment 157 on the basis of the need to underpin the independence of the Office for Environmental Protection as far as its financing is concerned. The Bill effectively states that the Minister can provide funds for the OEP from time to time, as he or she directs. I do not have the exact wording in front of me, but that is essentially what it states. That is not good enough; independent bodies associated with Departments need a clear line of sight of the money that they will receive for their activities.

In the case of another departmentally associated independent body, the Environment Agency, the combination of the Government hugging it closer, in terms of the agency’s activities, and substantially reducing its funding has created a real problem with its activities. We therefore suggest that the procedure for funding the OEP should be that, at the start of each five-year period, the Secretary of State publishes and lays before Parliament an indicative five-year budget, which we anticipate would be maintained for the life of the Parliament. We suggest that that be done not just for the first five-year period, but for each subsequent five-year period, so that at the beginning of each period the OEP has a clear remit in front of it, knows what its budget is and what it can and cannot do, and cuts its cloth accordingly, with a clear line of sight as far as financing is concerned.

That would mean, among other things, that in each Parliament the OEP has guaranteed independence for its activities. I reflect, in parallel, on the experience of Select Committees, which we were talking about in Tuesday’s proceedings. Following changes made a little while ago, Select Committee members are selected at the beginning of each Parliament, and their membership continues independently of the wishes or interference of bodies such as the Government Whips Office—heaven forfend that it would ever do such a thing—or of suggestions that people ought or ought not be on Select Committees because of their views about supporting the Government. Select Committees are proof that that works. Not only are their memberships selected and agreed at the beginning of each parliamentary Session, but their budgets come from a parliamentary vote, not from Government sources.

We are trying to set up a procedure that is reasonably close to that, in that the budget is set. It would not be limitless, but it would be known and secure for a five-year period—the lifetime of a Government. It would not be possible for it to be diluted, diverted or whatever during that period. We think that is an important principle in setting up the OEP, and we hope that the Minister for the time being—I am not sure how to refer to him—will come at least some way towards meeting that principle, perhaps by accepting this amendment. I hope he will at least indicate that he will think seriously about it. If we are not able to get that very clear assurance, we will seek to divide the Committee to put that principle on the record.

My hon. Friend is making a powerful speech about the funding. Let us be honest: if we do not have the correct funding in place, how can the OEP be impartial and carry out its job effectively? Does he agree that it would be a concern if the OEP did not have separate estimates from those of the Department for Environment, Food and Rural Affairs? How else will it maintain its impartiality?

That is absolutely right. We need to make sure, as we go through each element of the OEP’s formation and operation, that it is not only thought to be independent, but seen to be so in its activities. This is an important part of the OEP being seen to be independent. I await the Minister’s thoughts on how we might proceed.

I am grateful to the shadow Minister for his kind remarks in wishing my hon. Friend the Member for Taunton Deane a speedy recovery, and for the amicable tone in which he is seeking to work today. I thank him for the amendment. It highlights the unusual commitment this Government have already made to giving the OEP an indicative multi-annual budget, in response to Parliament’s scrutiny of the draft Bill. This budget will be formally ring-fenced in any given spending review period; that will provide the OEP with more longer-term financial certainty than afforded to most arm’s length bodies.

However, it would be unnecessary and unhelpful to include this commitment in the Bill. Other bodies with multi-annual funding commitments, such as the Office for Budget Responsibility, do not have it set out in legislation. In this Bill we have already included mechanisms to ensure that the OEP will remain adequately funded under this and future Governments.

The Bill imposes a statutory duty on the Secretary of State to provide the OEP with enough funding to undertake its statutory functions. There is also a duty on the OEP, in its annual statement of accounts, to provide an assessment of whether it was provided with sufficient funding by the Secretary of State during that year. The OEP’s statement of accounts will be laid before Parliament.

That brings me to the second part of the amendment. Parliament will have ample opportunity to scrutinise the funding of the OEP further, and to hold Government to account accordingly. The OEP’s funding will be made public through a separate line in DEFRA’s estimate, with further detail in the OEP’s own annual financial report. We will give the OEP the option of providing the relevant Select Committee with an additional estimates memorandum alongside the DEFRA estimate. The memorandum would provide the Select Committee with a clear statement of what is in the estimate, and why any additional funding is being sought.

The OEP will therefore be able to provide Government and Parliament with additional information relating to any changes in funding and how the funding will be applied, enabling any perceived shortcomings to be highlighted. In that spirit, I ask the hon. Gentleman to withdraw the amendment.

I echo the remarks made by the shadow Minister, my hon Friend the Member for Southampton, Test, about sending our best wishes to the Minister, the hon. Member for Taunton Deane. I wish her a speedy recovery.

I will add to the shadow Minister’s remarks about strengthening the multi-annual budget provision and putting it in the legislation. I am grateful to the Minister for saying that there will be some indication of the multi-annual budget, but I ask for it to be stronger. I draw the Committee’s attention to what the Select Cttee on Environment, Food and Rural Affairs said on the funding of the OEP in April 2019. The Bill has been in progress for a long time, so we may not all remember what the Committee said then—some, like me, may not even have been an MP then. It said:

“A history of sustained budget cuts to DEFRA’s arm’s length bodies does not fill us with confidence that the current funding provisions for the Office for Environmental Protection in the draft Bill are sufficient. Given the importance of the OEP’s independence from Government”—

that independence is the reason why it is important that we discuss this matter alongside amendment 156—

“it should have additional budgetary protections than is customary for Non-Departmental Public Bodies.

The Government should commit to providing a multi-annual budgetary framework for the Office for Environmental Protection in the Bill. This commitment would help to ensure the Office for Environmental Protection’s independence from Government and is consistent with best practice as seen with the Office for Budgetary Responsibility. Rather than grant-in-aid, the Office for Environmental Protection should also have its own estimate which should be negotiated directly with HM Treasury, and voted on by Parliament in the yearly Supply and Appropriation (Main Estimates) Bill.”

The Select Committee argues that the requirement for multi-annual provision should be fundamentally written into the Bill, not subject to whims or dependent on good intentions in the future. That is very important for the next topic of our conversation about the independence of the OEP.

It is a pleasure to serve under your chairmanship, Sir George. I also send my good wishes to the hon. Member for Taunton Deane and wish her a speedy recovery.

Much of the discussion on Tuesday was about—as it will be today—the independence of the OEP. Of course, organisations cannot be truly independent if they are heavily dependent on another organisation for their funding and resourcing. I echo many of the comments made by my hon. Friend the Member for Putney and the shadow Minister. This might seem a slightly arcane discussion about how the funding is separated and arrived at, but a point that I have already made, and will, I suspect, continue to make, is that the organisation is so important that it has to be independent, and be seen to be independent, and has to have public confidence, because it replaces a very strong regime.

Sadly, we saw on Tuesday, and will, I fear, see as we go through further clauses today, that the sense of independence is being eroded. That is important, because when we look at other organisations that are involved in environmental protection, we see that the record, particularly under this Government, is absolutely atrocious.

The Lords Select Committee in 2018 described the cuts made to many of these organisations as having a “profound negative impact” on England’s biodiversity. The funding cuts to Natural England under this Government have been absolutely astonishing—there was a cut of some £265 million in 2008-09, and of a mere £85.6 million in 2019-20. This matters because we are being asked to trust the Government to resource the organisation properly. I am sure many of us are regular watchers of “Countryfile”; just a few weeks ago, it had a feature based on Unchecked UK’s report, “The UK’s Enforcement Gap”, which looked at the impact of funding cuts on these organisations. Natural England had a 72% cut between 2009 and 2019, and the Food Standards Agency a 51% cut. The report concluded:

“The implications of these cuts are significant, with declines in almost every metric of regulatory activity—including food safety checks, water pollution sampling”,

and many others. That is the evidence before us regarding past promises from the Government.

Talking of environmental issues and the cuts to Natural England, staggeringly, the monitoring of sites of special scientific interest has declined by 62% between 2010 and 2019. There are many other damaging statistics that one could cite, but it all leads one to conclude that the new organisation—the key organisation for protecting our environment—must be properly resourced to do the job. All the evidence suggests the Government cannot be trusted.

I should apologise to the Committee; I should have brought in other speakers before the Minister. That is what I will do in future. I am sorry if that has caused any confusion, but seven months’ absence has made me a little too rusty.

Thank you, Mr Howarth, for that note of concern about Committee proceedings. I am sure that in no way tripped us up or stopped us achieving our purpose, but thank you for clarifying matters.

I hear what the Minister says about ring-fencing efforts that might be made on the funding process by the Government, but that does not remotely meet the need to fix and set out a budget at the beginning of the period, so that the funding is not just ring-fenced, but clearly separated out from the daily business in the period after that budget has been set. Given the comments of my hon. Friend the Member for Cambridge, I am afraid that we will have to divide the Committee to set down a clear marker about what we want to happen. We hope that the Government will think seriously about the issue as the Bill goes through the House.

Question put, That the amendment be made.

On a point of order, Sir George. In the Committee’s discussions on Tuesday, I noted that the shadow Minister, the hon. Member for Southampton, Test, raised on a couple of occasions—in columns 285 and 287 of the Official Report —the appointment of non-executive directors to the future Office for Environmental Protection. He intimated strongly that it would be a good idea for such directors to be appointed with the consent of the two relevant Select Committees. He later said that perhaps the Select Committees would decide that they would not want to be involved in the appointment of non-executive members of the board.

I have been in contact with the Chair of the Environmental Audit Committee, my right hon. Friend the Member for Ludlow (Philip Dunne), who confirmed that there has never been an approach from Labour Front-Bench Members or any member of his Committee with that suggestion. He does not recall a suggestion for pre-appointment hearings for NEDs—apart from the chair—by any member of his Committee during its inquiry into the draft Environment Bill last year, either. In his view, it is an impractical suggestion, which had never been raised before. May I therefore invite the shadow Minister to withdraw some of his comments about the appointment of non-executive directors from Tuesday’s discussions?

It is the tradition of this House that, for good reasons, the Chair does not take responsibility for the content of right hon. and hon. Members’ speeches. The hon. Member was perfectly entitled to raise his concern, and it is now on the record. I am sure that the shadow Minister will respond if he wants to do so.

I beg to move amendment 156, in schedule 1, page 126, line 2, leave out

‘have regard to the need to’.

This amendment makes the independence of the OEP an absolute requirement.

I apologise for de-knighting you earlier, Sir George; I will continue in the right vein. I will respond briefly to the point of order by the hon. Member for Gloucester. My intention on Tuesday was to draw attention to the principal architecture of various issues and how they might work relative to Select Committees. It was not to impugn the actions of anyone on a Select Committee or any proceedings of Select Committees. If the hon. Member for Gloucester felt that I was doing that in any way, I hope I can set the record straight this morning. As to the remarks that I made about how, in principle, Select Committees work and might have a hand in the appointments, and about the difference between those Committees having a hand in the appointments and the Government—in principle, but not necessarily in practice—not referring to them, I fully stand by those remarks for the future. I hope that that clarifies things for the hon. Gentleman.

I am grateful for the shadow Minister’s comments. The key thing is that there is an important separation between the responsibilities of Select Committees and what a Government choose to do in a Bill. The implication of what he said on Tuesday was that those ideas had been well discussed, and raised previously, and that it was perfectly normal for the two relevant environmental Select Committees effectively to have hearings for non-executive directors, as well as for the chair. I thought it would be helpful to put the record straight and to say that that had never been discussed in the Environmental Audit Committee and that the Chairman had never been approached about it by anyone from any party.

Order. I have made the point that the Chair is not responsible for the content of any right hon. or hon. Member’s speech. Mr Graham has raised his concern in a point of order. Dr Whitehead has responded, and I propose that we now stick rigidly to the amendment at hand and continue with consideration of it.

Thank you, Sir George. We can perhaps talk about this offline, so to speak. I am happy to stand by what I said previously, but I would welcome discussing it further with the hon. Gentleman if he would like to.

The amendment is fairly straightforward. On Tuesday, the hon. Member for Truro and Falmouth made a point about paragraph 17 of schedule 1, which reads:

“In exercising functions in respect of the OEP, the Secretary of State must have regard to the need to protect its independence.”

In her intervention, she emphasised the words “protect its independence”. However, we would rather emphasise the fact that the wording

“have regard to the need to protect its independence”

would not actually protect the OEP’s independence. We suggest deleting the words

“have regard to the need to”

so that the passage would read, “In exercising functions in respect of the OEP, the Secretary of State must protect its independence.” That is simpler and more straightforward, and makes the duty of the Secretary of State clear. I hope that the Minister will respond positively.

I also want to speak about the independence of the Office for Environmental Protection. The former Secretary of State, the right hon. Member for Surrey Heath (Michael Gove), promised us a new, “world-leading”, independent environmental watchdog. However, what is in the Bill is not good enough. The current wording is:

“In exercising functions in respect of the OEP, the Secretary of State must have regard to the need to protect its independence.”

The amendment would change that so that the Secretary of State “must protect its independence”. We have had previous amendments that were short but important, and this is another one. Instead of giving a nod to something, hoping it will happen or wishing for the best, we will actually write this proposal into the Bill. That is important in relation to our earlier conversations about the appointment of the chair and the OEP’s independence.

It was promised that family reunion would be in the original Brexit legislation, but it was not there, and it was promised that it would be in the Immigration Bill, which was discussed only yesterday in the House of Commons, but it was not there. We cannot trust the Government to deliver in the legislation promised, and they have once again moved the goalposts with the Office for Environmental Protection.

I welcome the concept of the Office for Environmental Protection and share the ambition for it, but what the Bill delivers cannot in all seriousness be called independent. The problem is compounded by the Minister’s new clause 24, which further dilutes any appearance or practice of independence. That is really disappointing, and it is why we deem it necessary, unfortunately, to table this short but important amendment. It is not too late to rescue what was originally a really positive idea.

On Tuesday, the Committee discussed the chair. I am disappointed that our amendment was rejected, as it would have gone some way to restoring a semblance of independence and precedence. As the Institute for Government noted:

“This was one of the moves the Treasury made back in 2010 to establish the Office for Budget Responsibility as an independent credible actor. Indeed, the Treasury went even further: the chancellor can only remove the chair and the other two members of the Budget Responsibility Council with the consent of the Treasury Select Committee.”

It is written right there in the procedures.

Overseas examples demonstrate the importance of an independent chair, whose role can be written in and make the whole body more independent. In Canada, the equivalent body, the Commissioner of the Environment and Sustainable Development, which audits the environmental policies of the Government, is appointed by the Auditor General in Canada, who is in turn appointed by the Canadian Parliament.

In its evidence sessions, the Committee had many organisations lining up to share their concerns about the independence of the OEP. Industry-orientated bodies, such as the Aldersgate Group, whose members include companies such as Associated British Ports, IKEA and Thames Water, as well as environmental non-governmental organisations, say that the failure to give MPs a say on who leads the OEP is a mistake. That is why this associated amendment is needed.

I am deeply worried by the further changes to the OEP proposed by the Government, particularly those giving the Secretary of State powers to issue enforcement guidance on matters that must be included in the OEP’s enforcement policy—new clause 24. To quote Greener UK, that gives the Government a

“get out of jail free”

card, to direct the watchdog away from awkward or inconvenient cases.

The Government’s justifications for that simply do not stand up to scrutiny. The Secretary of State has said that this is a normal, standard clause that applies to other public bodies with independent regulatory laws, and I am sure we will hear that again. Although the Government do have a similar power in relation to some existing public bodies, the critical fact is that Ministers do not have a similar power to issue guidance in relation to bodies charged principally or partly with enforcement in relation to potential breaches of the law by other public bodies. For example, the Equality and Human Rights Commission and the Information Commissioner’s Office, which carry out enforcement in relation to breaches of the law on human rights, equality and data protection legislation, are not bound by similar power in relation to their enforcement functions.

Ministers have the power to issue guidance to some bodies in the DEFRA ecosystem, such as Natural England and the Environment Agency, as well as other non-departmental public bodies, such as the Office for Budget Responsibility. However, none of those are enforcement bodies with the power to take the Government to court if there is a suspected breach of law. That is a critical difference.

The Government have also claimed that the new power does not grant the Secretary of State any ability to intervene in decision making about specific or individual cases and that the OEP does not have to act strictly in accordance with the guidance where it has clear reasons not to do so. Although that is technically correct, and I hope it remains so, when considered in the context of all the other changes the Government hope to make to the OEP, that power will clearly have the effect of allocating Ministers an essential role in shaping the basic principles of the watchdog. That will have a severely constraining effect on the OEP’s ability to act independently.

The legislation makes the good intentions law—that is the point—but it would change the whole power dynamic in the room. When the OEP chair is there with the Minister, who has the most power? As Greener UK put it:

“This guidance power inverts the intended hierarchy (in which the OEP oversees ministers) and gives ministers the role of overseeing the OEP.”

That has consequences for the rest of the Bill. No matter what the Government claim, there is no doubt that such a broadly cast power will undermine the OEP’s independence and render the Government’s ambition for a world-leading watchdog unachievable. The Government’s proposals would also limit to only urgent cases the OEP’s powers to bring review proceedings against public policies, which is something that we will be looking at in future.

Let us not make these mistakes with the OEP, which, if set up correctly from the start and left to do its job without interference, has the potential to transform our environment and be a crucial partner to the Government in achieving their aims and policy statements. I hope that the Committee will support amendment 156.

My hon. Friends have made a powerful case, to which I will not add much more. Looking at what we are losing through leaving the European Union, I was very struck by the Library briefing, which states:

“EU law is monitored and enforced by the European Commission under Article 258…as the ‘Guardian of the Treaties’. It is overseen by the Court of Justice of the European Union… which can levy fines on Member States that are found to be in breach of EU law.”

That is an incredibly powerful position. Although we had only a certain amount of influence over that arrangement as a member state, it could be used to considerable effect.

I was very struck by the evidence to the Committee from ClientEarth, which has obviously used that arrangement to good effect on behalf of the citizens of the UK in challenging the Government’s record on air quality. Even back in March, before the amendments before us and others were tabled, ClientEarth was very clear:

“Despite the Government’s words about the independence of the OEP, the funding structure envisaged in the Bill places the OEP too close to Defra and too much discretion is given to the Secretary of State in the appointment of the OEP’s members.”

Those at ClientEarth are concerned because they know that, in the past, they could intervene and act on behalf of UK citizens, but under this system, they will not be able to. That key change weakens our protections, and it is why it is so important that amendments such as this are pursued, although I suspect they will not be successful. However, I think that these provisions in the Bill will be torn to shreds in the other place, quite frankly.

I agree with Opposition Members who have spoken about the need to protect the independence of the OEP. That is why we have introduced a new duty on the Secretary of State to have regard to the need to protect the OEP’s independence, and placed a duty on the OEP to act objectively, impartially and transparently. Unlike with most public bodies, the Bill gives Ministers no power to set the OEP’s programme of activity or to direct the exercise of its functions. Parliament can scrutinise the actions of the Secretary of State in exercising functions in relation to the OEP to ensure that the Government are not interfering in the delivery of the OEP’s statutory functions.

The operational independence of the OEP, however, which we wholeheartedly support, should not impede the Secretary of State in exercising appropriate scrutiny and oversight of the OEP. That is important because the Secretary of State, as an elected representative of the Government, is accountable to Parliament and the public for the overall performance of the body and for the use of public money. Requiring the Secretary of State to actively protect the OEP’s independence at all times would be incompatible with that ministerial accountability, which is one of the Government’s key principles of good corporate governance.

The amendment would prevent DEFRA, the OEP’s parent Department, from exercising appropriate oversight, including accounting officer responsibilities. I therefore ask the hon. Member for Southampton, Test to withdraw his amendment.

My hon. Friends have made powerful contributions on the overall independence of the OEP and the circumstances under which that independence can be enhanced or undermined. In terms of our general discussions this morning, hon. Members will see that the importance of the OEP—its crucial role in holding other bodies to account and possibly taking them to court—puts the OEP into a reasonably unique category as far as such bodies are concerned. Comparisons with some of those other bodies fall rather short in terms of making a distinction between the importance of the OEP and, indeed, the importance originally attached to it by previous Secretaries of State in introducing the Bill in the first place.

That, essentially, is a theme that we will be pursuing today, and amendment 156 is part of that. While I hear what the Minister says about the Department’s ability to guide and control part of the OEP’s actions, it is not good enough, in the context of the formulation before us, to say that the independence of the OEP can be compromised for the purposes set out. We do not intend to pursue the point to a Division this morning, but in terms of the corpus of our contributions on this clause, I want to place on record that the same goes for the debate later today, and we hope that those comments will be heard.I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1 agreed to.

Clause 22

Principal objectives of the OEP and exercise of its functions

I beg to move amendment 189, in clause 22, page 13, line 16, leave out subsection (5).

This amendment removes the restriction on the OEP overlapping with the Committee on Climate Change.

With this it will be convenient to discuss the following:

Government amendments 30 and 66.

Government new clause 4—Memorandum of understanding.

May I send my best wishes to the Minister, and wish her a speedy recovery? I look forward to seeing her back in her place next week.

I say from the outset that amendment 189 is really a probing amendment. I am trying to gain a better understanding of what the Government were seeing to achieve in the clause by excluding areas of climate change committee activity from OEP oversight. However, I note the Government’s in new clause 4, and I look forward to hearing what the hon. Member for Aldershot has to say in that regard.

I thank the hon. Member for Edinburgh North and Leith for her warm wishes, which I will convey to the Minister, and for tabling amendment 189, which gives me the opportunity to explain how the Bill will ensure that there will be clarity over the respective remits of the OEP and the Committee on Climate Change. Government amendments 30 and 66 and new clause 4 will ensure that the OEP does not duplicate the work of the Committee on Climate Change, as well as requiring the two bodies to prepare a memorandum of understanding. I will come on to those in more detail in a moment.

Amendment 189 would remove clause 22(5), which would weaken the overall provision of the Bill to clarify the respective roles of the two bodies. That provision requires the OEP to set out in its strategy how it intends to avoid any overlap with the Committee on Climate Change when exercising its functions. That ensures that the avoidance of such an overlap would run through the OEP’s entire operation. That would be difficult to achieve simply through a memorandum of understanding. I therefore ask the hon. Member to withdraw amendment 189 to ensure that the Office for Environmental Protection and the Committee on Climate Change can work together seamlessly.

Government amendments 30 and 66 and new clause 4 are part of a package of measures, including statutory requirements already set out in the Bill, that help to clarify the distinct roles of the two bodies to ensure that they develop an effective working relationship. Government amendment 30 will ensure that the OEP does not duplicate the work of the Committee on Climate Change by providing that the OEP will not monitor or report on specific matters already within the statutory remit of the Committee on Climate Change. Government amendment 66 ensures the same effect in Northern Ireland should the Northern Ireland Assembly choose to extend the OEP to Northern Ireland.

The OEP has an important role to play alongside and in collaboration with the Committee on Climate Change in ensuring that the UK continues to drive forward ambitious action on climate change. That role is not being called into question by the amendments. Indeed, Greener UK has welcomed the amendments and their addition to the existing provisions, which

“ensure that there is no duplication and overlap”.––[Official Report, Environment Public Bill Committee, 10 March 2020; c. 74, Q116.]

The Committee on Climate Change is also supportive of both the existing measures and the Government amendments. I therefore commend Government amendments 30 and 66 and new clause 4 to the Committee, and graciously urge the hon. Member to withdraw amendment 189.

I think we can claim a little collective win on this. We have been concerned about the possible clash between the remit of the Committee on Climate Change and that of the OEP, almost since the publication of the Bill. I think the matter was raised in proceedings before they were suspended earlier in the year. To avoid duplication and a possible treading on each other’s toes, it is really important that there is not a mix-up between what the OEP does on elements of the climate change and environmental remit, and what the Committee on Climate Change is doing.

The amendments that the Government tabled to clarify and codify that distinction, which also refer to Northern Ireland, seem a positive step forward in how we decide what we are going to do. In a moment, we will come to an amendment that tries to clarify that for another Government body. I welcome these amendments.

I, too, welcome the amendments, but does my hon. Friend agree that they demonstrate that the overall architecture of the whole system has been flawed from the outset? I am thinking of the relationship with other organisations and, for instance, the interaction with the Agriculture Bill and the Fisheries Bill, which we have long argued were done in the wrong order.

Yes, indeed. My hon. Friend is absolutely right. It indicates that the thinking when the Bill was constructed in the first instance did not take account of those distinctions. We may need to go further in deciding who has what brief, as far as these issues are concerned.

On this particular issue, the Minister’s clarification is welcome. Obviously, the Opposition have not won many amendments so far, so being on the right side of a new amendment can be the cause of some rejoicing. We do not wish to oppose the amendments; on the contrary, we support them.

Government amendments 30 and 66 and Government new clause 4 will be determined later in the proceedings.

I beg to move amendment 105, in clause 22, page 13, line 18, at end insert—

‘(5A) The Energy Act 2013 is amended in accordance with subsections (5B) and (5C).

(5B) In section 131(1), for “may” substitute “must”.

(5C) In section 131(2), after subsection (c), insert—

“(d) the duty of the Authority in assisting the delivery of greenhouse gas emissions targets as set out in the Climate Change Act 2008.”

(5D) This section comes into force at the end of the period of three months beginning with the day on which this Act is passed.”

This amendment is intended to facilitate co-operation between the OEP and the Energy Authority.

This amendment follows on from our previous debate about clarifying which of various bodies does what. As my hon. Friend the Member for Cambridge said, there are a number of other issues relating to which body does what—how that works in the overall scheme of things as far as environmental protection is concerned, and how that relates to climate change issues.

One body that has a very substantial hand in the process and is very involved in the consequences of environmental protection, the use and deployment of energy, and decisions about where energy comes from—particularly as far as climate change and net zero considerations are concerned—is Ofgem: the body responsible for those considerations in the energy sphere.

The amendment would align Ofgem’s responsibilities and remit with the other bodies that we have discussed this morning. Ministers have argued that Ofgem’s remit includes concerns about the environment and climate change, but in practice, its written remit does not. Its remit at the moment is simply to secure good value for customers; it does not go into the areas that we have been talking about today. However, from the Energy Act 2013 onwards, the Government have had the ability to put that right. In part 5 of the Act, there is provision for the Government to put forward a strategy and policy statement, which would produce the remit for that body.

I have now been concerned for a long time that while part 5 of the Act would have been simple for the Government to implement—it is there on the statute book, with detailed guidance on how to do it—it has been curtailed merely because it is up to the Minister to trigger the provision. There is no start date for its implementation—we may come later to similar points about this Bill—and the Government have decided not to implement it. They have therefore resiled from the idea of producing a strategy and policy statement.

The amendment seeks to do two things. First, it would amend part 5 of the Energy Act 2013 to ensure that a remit for the policy and strategy statement is written into the Act. Secondly, it would ensure the implementation of that part of the Act by setting a timescale. Ministers would therefore need to pay attention to the insertion of Ofgem’s climate and environmental brief and do something about it by bringing that part of the Act into force within a set period of time.

It is a simple amendment. I appreciate that it would amend another Act of Parliament so we might have to go through a Marx Brothers tootsie-frootsie ice cream sketch form-guide discussion to get to a thorough understanding of how the 2013 Act relates to the Bill, but I hope hon. Members are assured that the Opposition tried hard to draft the amendment so that it would properly give effect to what we want it to do. If hon. Members do not take our word for it, a copy of the Energy Act 2013 is freely available on my desk for them to peruse at their leisure.

The hon. Member’s amendment raises a question about the making of a strategy and policy statement for Ofgem. As he will be aware, the Government intend to publish an energy White Paper ahead of COP26, and it would make sense to draft a strategy and policy statement in the light of the policies and priorities set out in the White Paper. It would be inappropriate to give a specific timeline on publishing the strategy and policy statement at this stage.

Ofgem already has various powers and duties in relation to its important role in the transition to net zero. Its duty is to protect existing and future consumers and, as is already set out in legislation, that includes their interest in the reduction of targeted greenhouse gas emissions. At the start of the year, we welcomed Ofgem’s new decarbonisation action plan, which contains important proposals, including enhancing flexibility in the electricity system and decarbonising heat, which will help us to meet our vital commitment to eliminate our contribution to global warming by 2050.

Given the existing decarbonisation duties on Ofgem, the work it is already undertaking in that area and the close and productive working relationship at all levels between Ofgem and central Government, it is not necessary to place any new duties on Ofgem in relation to the delivery of greenhouse gas emissions targets. I therefore ask the hon. Member to withdraw the amendment.

I thank the Minister for the interesting reply that—he will have to forgive me for saying this—he read out from the piece of paper put in front of him. Nevertheless, that piece of paper is quite interesting, because it appears to say two slightly different things. First, it says, “Don’t worry about putting something in the Bill today, because the energy White Paper is shortly to appear.” There may well be a proposal in the White Paper to implement part 5 of the Energy Act 2013—finally, after seven years. That White Paper has been imminently expected for two years, but is so very imminently expected now that it might appear before Christmas. That statement appears to say that that is what the Government are going to do and that a proposal to unlock part 5 of the Energy Act 2013 will be in the White Paper. If that is the case, that is an interesting development.

However, the second part of the statement says that it is not necessary to do that, because Ofgem has all it needs to undertake a climate and environment brief. Indeed, Ofgem has pushed the boat out a little, on its own freelance account, in terms of a climate and energy brief. It is also the case that the outgoing chief executive officer of Ofgem bewailed the fact that Ofgem did not have that particular brief in its locker, and felt that constrained what Ofgem could do in that area.

That statement is both interesting and curious, as it appears to face both ways. Is it something that the Government intend to do in the energy White Paper, and therefore implement? Alternatively, is it something that is not necessary, and therefore the Government do not intend to bring forward something in the energy White Paper to influence part 5 of the 2013 Act? I have put the Minister on the spot. He may not be able to give me a response today, but I would be interested to see his response in writing in the near future about what exactly that paragraph means.

If the statement means what I think it might mean, that is encouraging. If it means what the second part appears to say, then that is not encouraging at all. I thought the statement might say something slightly less encouraging and that we might have to divide the Committee, but under the circumstances I will await some written information.

I have effectively concluded my comments, Sir George. I hope the Minister will write to me shortly to give a clear indication about what that package means, and we can go from there. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

I beg to move amendment 203, in clause 22, page 13, line 22, after “33(1)(b)” insert “,35(1)(b)”.

This amendment is consequential on Amendment 208. It requires the OEP’s enforcement policy to set out how the OEP will determine whether a failure to comply with environmental law is serious for the purposes of clause 35(1)(b), which is inserted by Amendment 208.

With this it will be convenient to discuss Government amendments 208 and 209.

This group of amendments clarifies the circumstances in which the OEP may bring an environmental review, in order to ensure there is no doubt about its thresholds for action. Government amendment 203 ensures that the OEP’s enforcement policy will set out a consistent approach in determining whether a serious failure has occurred throughout its enforcement process, and is consequential on amendment 208.

We are in an interesting set of circumstances regarding these amendments, and some others that are still to come. Essentially, the Government are amending their own Bill, so on several occasions—both today and in the not-too-distant future—the Opposition may be in the position of stoutly defending the Government’s Bill while, I suspect, Government Members will stoutly defend the amendments that the Government have tabled.

We are potentially in an odd position, in that we actually do not think that the Bill is very good as it stands, particularly in terms of the protection of the independence of the OEP, but we are certainly prepared to defend it from further erosion by what we consider to be a systematic series of Government amendments that, taken together, seriously undermine the OEP’s independence of action over its life.

These amendments are the first part of that action, which took place, to our dismay, over the period the Bill was suspended. Clearly, at some stage somebody decided that the Bill was too kind to the OEP and that further restrictions should be placed on its activities and freedom of action in relation to a series of things, such as notices, environmental improvement plans, and whether the OEP can bring about a review if a subject continues to do what it was doing after a notice has been given. Previously, the Bill enabled the OEP to do that; following the amendments, it no longer can. It has had a substantial element of its freedom to act, and to act appropriately, removed by the amendments.

The other important element in this group of amendments, which will recur in a number of other areas, is, as we have raised in Committee before, the use of the word “serious”. The amendments have curtailed systematically throughout the Bill the remit of the OEP to undertake various actions on the basis of what it thinks is best in a particular set of circumstances, to the extent that before the OEP can act it has to pass a test of whether the action is regarded as serious. We have discussed how a series of differences can flow from one word. The problem with the introduction of the word “serious” in these areas of the Bill and others is that there is no definition in the Bill of what “serious” means. Let us have a guess: who can determine what “serious” means through guidance? Does anyone have any thoughts?

No. The Secretary of State can decide by guidance how “serious” is to be interpreted regarding the OEP’s actions.

It is a fact that environmental protection and action that breaches air pollution limits, for example, will happen slowly and incrementally. Does my hon. Friend agree that it is hard to determine the point at which that becomes serious?

For example, Putney High Street in my constituency is one of the most polluted high streets in the country. That has happened slowly over many years; it would be hard to say when it became serious. When will the Office for Environmental Protection be enabled to step in and say, “This is an issue”? That goes for rivers and all the other issues we will discuss.

The nature of environmental action is that it will happen slowly. The measure of saying something is “serious” will limit the term to so few large-scale events that the Office for Environmental Protection will be rendered so weak in its action.

Order. This is no criticism of the hon. Lady, but her contribution could have been a speech rather than an intervention, which should be brief. I am sure the Committee appreciated it, whether it was a speech or an intervention, but I hope interventions will be kept brief in future.

Thank you, Sir George. I am sure that all Committee members will abide by your guidance in the remaining sessions. My hon. Friend the Member for Putney has hit the nail on the head regarding the discussion of seriousness.

The explanatory statement to Government amendment 208 lays out clearly that

“the OEP may only bring an environmental review against a public authority if it is satisfied on the balance of probabilities that the authority has failed to comply with environmental law”.

The explanatory statement to Government amendment 209 adds:

“The OEP may only bring an environmental review after it has given a decision notice.”

The steps are clearly laid out. Surely, we should all have confidence in the OEP doing its job as defined by the Bill.

I am not sure whether the hon. Member has addressed himself to the totality of these issues. I will raise a question concerning the explanatory notes and the notes on the purport of the amendments in a subsequent debate.

The steps that the OEP must take in providing a notice are perfectly reasonable and should be undertaken; the big difference is the additional test, after those steps have been taken, as to whether the whole thing is serious or not. As my hon. Friend the Member for Putney rightly said, in many instances one cannot set a point at which something becomes serious or not.

We have to be serious about this. If the borough council is not cleaning a particular street in Putney properly, that is not an issue that the OEP should immediately jump at on the evidence of one photograph from one constituent. It should not say, “Right—we must take the authority to court!” There have to be some boundaries, so the insertion of the word “serious” is surely sensible and appropriate.

The central point is that it ought to be within the remit of the OEP to decide what constitutes a cumulation, to the point that something becomes serious. The amendments take that decision out of the hands of the OEP so that a serious test threshold would have to be passed before it could take action in the case of a cumulative serious problem. The hon. Gentleman can read what the amendment paper indicates about whether the OEP considers that that test has been passed.

I fear that the shadow Minister has not read the explanatory statement clearly. It begins:

“This amendment provides that the OEP”

and refers to whether it is satisfied, and whether

“it…considers that the failure…would be serious.”

The emphasis is on the OEP. Does he not accept that?

Yes. Of course the emphasis is on the OEP, but the test of what is serious is outwith the remit of the OEP. The hon. Gentleman can look at other explanatory notes in this regard. There is no definition of “serious” in the Bill. The guidance on the test of seriousness that has to be achieved is inevitably outside the Bill: it is within the remit of the Minister to decide.

As to the decision on whether something is serious enough to proceed—and I suggest to the hon. Gentleman that we are now talking about two different versions of “serious”—if the agency itself, in its work, thinks something is serious, I would have thought that it should be able to proceed. However, the question whether something is serious in terms of the test that must now be passed by the agencies concerned is outside the consideration of whether the agency itself thinks that something may or may not be cumulatively serious. That is a central concern that we have in this area, and other areas.

If the issue were as straightforward as the hon. Gentleman suggests, why on earth would the Government amendments have been tabled in the first place? They have not been put in for a laugh—there is a serious purpose behind them, which is to put “serious” on the face of the Bill and take the definition outside the legislation, so that control of the word “serious” is outside the OEP’s remit.

Frankly, as with the old fable of the frog that does not get out of the saucepan before it boils because at no stage does it decide it is too hot for it to stay, the OEP would have no ability to pull the frog out of the saucepan at any stage. It would simply have to stand by while the frog boiled, and then refer the boiled frog to the Minister and say, “Is that serious enough and should we perhaps have done something about it beforehand?” That seems to me to be a bit of a concern about how the OEP works in the long term.

We do not intend to divide the Committee on the amendment, because we are making a general point about seriousness as part of the corpus of Government amendments that have been tabled. However, when we debate clause 23 we certainly intend to divide the Committee, for reasons that I shall set out.

Amendment 203 agreed to.

I beg to move amendment 204, in clause 22, page 13, line 22, after “36(1)” insert “and (6A)”

We have sought to ensure that the OEP focuses its enforcement function on the most significant and serious breaches of environmental law. Unlike the European Commission, which can only take action against member state Governments, the new Office for Environmental Protection will enforce the delivery of environmental law by all levels of public authority, from local authorities and arm’s length bodies to central Government. On that basis, it is important that the OEP should have the ability to focus on the most significant or serious breaches of environmental law.

Clause 36 allows the OEP to apply to intervene in a judicial review relating to an alleged failure to comply with environmental law. However, the clause as currently drafted does not require the OEP to focus such interventions on serious cases when initiating its own enforcement actions. Amendments 204 and 220 will therefore improve the clause by increasing consistency across the OEP’s application of its enforcement function.

The hon. Gentleman had not indicated that he wished to speak. I call Dr Alan Whitehead.

I put my pen up, Sir George, but that is probably more appropriate for the auction room than the Bill Committee. I will try to raise my pen higher or make some other sign in future.

In future, I will assume that the hon. Gentleman wants to take part, rather than assuming that he does not.

That is kind of you, Sir George; thank you. These amendments follow on from the debate that we had on the last series of amendments. As the Minister said, they would make proceedings consistent across the Bill, but that is precisely the point that we have been making. This series of amendments consistently seeks to introduce different levels of judgment necessary for the OEP to carry out a range of things, including, in the case of amendment 220, applications

“to intervene in a judicial or statutory review relating to an alleged failure by a public authority to comply with environmental law”.

The amendment states that the OEP may apply to intervene in proceedings

“only if it considers that the failure, if it occurred, would be serious”.

As there is no definition of “serious”, the OEP is left in the dark about whether it may intervene or not if it considers a failure to be serious—its definition may not be in line with the Government’s. It is really curious that the explanatory statement to amendment 220 states:

“This amendment provides that the OEP may apply to intervene in a judicial or statutory review relating to an alleged failure by a public authority to comply with environmental law only if it considers that the failure, if it occurred, would be serious”

but that

“If that test is satisfied, it may apply to intervene”.

What test? Who can satisfy it? There is no test in the Bill or, apparently, in the remit of the OEP, yet the explanatory statement refers to a test being satisfied. I can draw no other conclusion: the only way to reconcile the amendment and its explanatory statement is for the Government to provide guidance—separately from the OEP—on how that test can be satisfied. That is one of the fundamental problems that we are grappling with here. Although I accept that the amendments are consequent to the central idea of seriousness, unless we bottom out what seriousness is and how the test can be satisfied, we will not have made any further progress on amendments that sort things out in the Bill.

My hon. Friend is explaining quite a complicated situation really well. What I find baffling about this discussion is that earlier this morning Government Members asserted the independence of the OEP, and here they are introducing an amendment that restricts its independence and makes a judgment as to where to intervene. Does he share my puzzlement?

I do share my hon. Friend’s puzzlement because we appear to be having things in different ways. If the question of seriousness were so straightforward, we would not have to worry about putting these things in the Bill in the first place; the previous formulations would be perfectly adequate.

There is a purpose behind the Government amendments, and that purpose has to be, as I have explained, to take the definition outside the work of the OEP. For that reason, we really have to divide on amendment 220 to establish clearly what we think about this particular activity taking place.

Question put, That the amendment be made.

Amendment 204 agreed to.

On a point of order, Sir George. Hon. Members will have noticed that amendment 204 is consequential. We had to vote on it because of the inclusion of the two amendments in this part of the Bill. However, we wanted to vote on amendment 220. Perhaps we could have it on the record that that is what we wanted to do, but procedurally we were required not to.

We can have a Division on that when we come to it.

Clause 22, as amended, ordered to stand part of the Bill.

Clause 23 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Fay Jones.)

Adjourned till this day at Two o’clock.

Pension Schemes Bill [ Lords ] (Third sitting)

The Committee consisted of the following Members:

Chairs: Mr Laurence Robertson, † Graham Stringer

† Bailey, Shaun (West Bromwich West) (Con)

† Baker, Duncan (North Norfolk) (Con)

† Baldwin, Harriett (West Worcestershire) (Con)

† Bell, Aaron (Newcastle-under-Lyme) (Con)

† Buck, Ms Karen (Westminster North) (Lab)

† Davies, Gareth (Grantham and Stamford) (Con)

† Drummond, Mrs Flick (Meon Valley) (Con)

Eagle, Ms Angela (Wallasey) (Lab)

† Eshalomi, Florence (Vauxhall) (Lab/Co-op)

† Gray, Neil (Airdrie and Shotts) (SNP)

Griffiths, Kate (Burton) (Con)

† Malhotra, Seema (Feltham and Heston) (Lab/Co-op)

† Morris, James (Lord Commissioner of Her Majesty's Treasury)

† Opperman, Guy (Parliamentary Under-Secretary of State for Work and Pensions)

† Roberts, Rob (Delyn) (Con)

† Thomson, Richard (Gordon) (SNP)

† Timms, Stephen (East Ham) (Lab)

Kenneth Fox, Huw Yardley, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 5 November 2020

(Morning)

[Graham Stringer in the Chair]

Pension Schemes Bill [Lords]

Before we resume, I remind the Committee that we need to respect the social distancing guidance, and I will intervene if the guidelines are breached. Also, if hon. Members have speaking notes, it would be helpful to our Hansard colleagues if those notes were sent to hansardnotes@parliament.uk.

Clause 123

Funding of defined benefit schemes

I beg to move amendment 9, in clause 123, page 118, line 1, leave out subsection (2).

This amendment would remove a subsection which requires the Secretary of State, when making regulations or prescribing principles or matters under Part 3 of the Pensions Act 2004, to ensure that certain purposes are achieved as regards pension schemes.

With this it will be convenient to discuss amendment 18, in schedule 10, page 185, line 29, at end insert—

“221C  Guiding Objectives

(1) In exercising any powers to make regulations or otherwise to prescribe any matter of principle under this Part, the objectives of the Secretary of State must include—

(a) supporting the ability of the trustees of a relevant scheme to decide the funding and investment strategy for the scheme taking into account the current and future maturity and liquidity of the relevant scheme consistent with the trustees’ duty to invest assets in the best interests of members and beneficiaries; and

(b) avoiding the specification of requirements in relation to funding and investment strategies that are likely to accelerate the closure of relevant schemes.

(2) In subsection (1), “relevant scheme” means an occupational pension scheme that is not near significant maturity and is open to new members and is reasonably expected to remain so, either indefinitely or for a significant period of time.”

It is a pleasure to serve under your chairmanship, Mr Stringer. I thank colleagues for their attendance and all the parliamentary staff as we try to progress parliamentary business in difficult times.

Clause 123 introduces schedule 10, which amends part 3 of the Pensions Act 2004. The clause is necessary, because it introduces amendments that improve the existing statutory framework for defined-benefit pension scheme funding and strengthen the enforcement powers of the Pensions Regulator to protect members’ pensions better. It follows from the DB White Paper and various consultations that have taken place for a considerable time.

The Government are seeking to overturn the amendment made in the House of Lords. This is with no disrespect to the other place. I respectfully suggest that no Government can commit to ensuring that contributions remain affordable or that scheme closures are not accelerated. We cannot be bound to ensuring that all schemes that are expected to remain open are treated differently from other schemes, as open schemes in this category do not all share the same characteristics. Some will be maturing, just like closed schemes, and it opens up the potential for abuse. A closed scheme could reopen to very small numbers of new members, circumvent safeguards and pursue a riskier investment strategy that would otherwise be inappropriate.

We do not want good schemes to close unnecessarily, or to introduce a one-size-fits-all regime that forces immature schemes with strong sponsors into an inappropriate de-risking journey. What we do want is to build on a well established scheme-specific funding regime that takes account of the key metrics of individual schemes in enabling trustees to assess what can reasonably be supported in terms of investment risk. To ensure that members’ benefits are protected and schemes do not take inappropriate risk, it is vital that trustees look at the characteristics of each scheme and balance scheme liquidity and investment risk with maturity. Open schemes with a strong sponsoring employer that are immature and have managed their risk appropriately should not be forced into an inappropriate de-risking journey.

I make it clear that the Government can commit to using the regulation-making powers available to ensure that the secondary legislation works in a way that does not prevent appropriate open schemes from investing in riskier investments where there are potentially higher returns as long as the risks being taken can be supported and members’ benefits and the Pension Protection Fund are effectively protected.

There is a problem with encouraging good open schemes to de-risk. We know where the bond market and gilts market is right now; we know that that puts them at risk. Baroness Altmann has intervened this week to say:

“If you decide to ‘de-risk’, then you are also deciding to ‘de-return’, taking away the upside potential that is so vital for making DB affordable. Deficit schemes just keep getting worse and contributions keep on rising. QE”—

quantitative easing—

“has undermined funding of all DB schemes”.

Is it not crucial, then, that amendment 18, which is the compromise, be allowed to go through, to ensure that good DB schemes are allowed to stay open and continue? Otherwise, as is the position at the moment, the Government are putting those at risk.

With no disrespect to the hon. Gentleman, I disagree with the premise of what he said, and I disagree with Baroness Altmann, whom I spoke to only two days ago as part of ongoing consultation with their lordships and other peers as to the nature of this type of scheme. I can only reiterate—

It is not just me or Baroness Altmann saying this. The schemes are saying that following this path puts their own good and open schemes at risk for members to continue to enjoy.

The context is that the regulator has a consultation on this issue. The schemes wish to have a different situation to what is proposed by the regulator. It is worth making clear what the consolation is saying because it supports the argument that the Government are making, and not that of the schemes. Does the regulator’s consultation make it clear that all open schemes will not be treated like closed schemes and forced into an inappropriate and expensive de-risking? To answer the question, I refer to paragraph 475 of the consultation, on page 109:

“We acknowledge that if such schemes do continue to admit new entrants and do not mature then the scheme will not actually reach significant maturity. We are content that such a scheme retains the same flexibility in its funding and investment strategies that all immature schemes have.”

The regulator adds later in paragraph 481, on page 111:

“This is on the basis that open schemes have a longer time until they become significantly mature than closed schemes (some are not expected to mature at all) and longer investment horizons. Because of this extra flexibility, they can expect higher investment returns over the long-term which can be reflected in their discount rate assumptions.”

I want to make it clear again—I have said it once, but I will say it again—that the Government are not proposing to introduce a one-size-fits-all funding standard and neither is the regulator. Its proposals seek to secure a reasonable balance between the protection of member benefits, fairness between schemes, and the ability of schemes to take more investment risk, especially where an immature scheme has a strong employer and expects to remain open and in a steady status for a long time. There is an ongoing consultation. On 2 October, I met with individual schemes making this case and discussed it for over an hour. I have also engaged with the peers who are the proponents of this amendment.

I regret to say that the Government do not agree that amendment 18 is an appropriate compromise. The amendment is unnecessary and unhelpful. We state that trustees are required to act and exercise their powers, including their investment decisions, in the best interests of their members and we are not seeking to change that. Trustees must first and foremost carry out the terms of the trust in accordance with the trustee, the rules of the scheme and the applicable law. Legislation must set the boundaries within which the trustees can exercise their discretions and ensure that their legislative duties operate in such a way as to protect all members by also protecting the PPF and its levy payers.

There is no mention in amendment 18 of the ability of the sponsor to pay more in the future if investments do not perform as expected, and that must be part of a scheme-specific regime that assesses whether risk is supportable in a transparent and rational way. It is reasonable for schemes to invest in return-seeking assets to try to keep costs down, if that risk is supportable. Indeed, the Government have made that clear—I am the Minister who brought forward the illiquid proposals, which permit investment in venture capital, renewables, social housing and the like. The Government are not against such investment as part of a balanced portfolio. We are not in support of amendment 18.

The Minister protests strongly the Government and TPR’s intentions. Why then not allow those protections and the intentions of the Government to be on the face of the Bill? The Opposition’s amendment 18 would satisfy those concerns and ensure those protections and also what those open schemes are calling for.

With respect, I do not agree. The proposals in amendment 18 are not in accord with the proposals in the consultation by the regulator. As I have outlined, there are significant problems with such an amendment, and it is not something that this Government, or any Minister in my position, could support.

It is a pleasure to serve under your chairmanship, Mr Stringer. I thank the Minister for his opening remarks. He has had considerable dialogue with the hon. Member for Birmingham, Erdington (Jack Dromey), who I know is sorry that he cannot be here today. I will speak to Government amendment 9 and also Labour’s amendment 18 on his behalf. I also thank the hon. Member for Airdrie and Shotts for his interventions.

We regret that the Government seek to remove the amendment made to clause 123 in the Lords. As the Minister is aware, there are grave concerns about the impact of the provisions in the Bill on open DB schemes, which includes many public sector schemes. Labour has been clear all along that we do not accept the premise that good DB schemes are not worth protecting.

I thank the Minister for his intervention, and I am happy to see that that commitment continues to be made. Nevertheless, it is not least because DB schemes currently have 10.5 million members, with £1.5 trillion under management. The Minister will have noted that the Pensions Regulator recently made clear its desire to

“develop an approach that works well for open schemes”,

stating that it wishes to

“secure a reasonable balance between protection of member benefits, fairness between schemes, and flexibility for schemes to fund and invest as they wish—especially where they have a strong covenant and a long-time horizon.”

The new subsection (2)—as amended with this objective in mind—requires the Pensions Regulator to take a different approach to regulating the funding of open DB schemes, compared with those that are closed. It sets out several factors for the Secretary of State to take into account in regulations regarding scheme funding, which include distinguishing between open and closed schemes, balancing scheme liquidity and scheme maturity, and ensuring that affordability of contributions for employers and members is maintained.

Notwithstanding the Minister’s comments, I want to continue with our argument. A number of peers with considerable authority in the pensions world spoke in favour of the amendment. The Minister said he had spoken with some of them in recent days, including Baroness Altmann, who supported the amendment in the Lords. Baroness Altmann noted that the Pensions Regulator’s funding code seems

“to want to drive DB schemes on a path to so-called de-risking, aiming for a particular date of maturity. This concept is simply inappropriate for an open scheme.”—[Official Report, House of Lords, 30 June 2020; Vol. 804, c. 681.]

However, given that the Government do not wish to retain these provisions, Labour’s amendment 18, in the spirit of constructive engagement that we have maintained throughout this Bill, offers a compromise—as was noted by the hon. Member for Airdrie and Shotts—which aims to address the need for flexibility in the treatment of open schemes with the Government’s aim, which we share, to ensure that schemes plan appropriately for the long-term.

The Minister said that this was not an appropriate compromise, but allow me to lay out our arguments for proposing it. In drafting amendment 18, we sought to address some of the concerns that were raised about clause 123, as amended in the Lords. The present amendment has two core objectives. The first is to support the ability of trustees to decide the funding and investment strategy for schemes, taking into account current and future maturity and liquidity, consistent with the trustees’ duty to invest assets in the best interests of members and beneficiaries. That is intended to protect schemes from any inappropriately risky or risk-averse requirements that would significantly adversely affect the affordability of schemes for employers and members. The second is to recognise that schemes are usefully and beneficially open to new entrants and should be allowed to remain so. The amendment is aimed at avoiding requirements in funding investment strategies that are likely to accelerate the closure of relevant schemes.

I am aware that the Minister has had representations about our amendment from multiple trade unions, including representatives of the railways pension scheme, which has 350,000 members, 100,000 of whom are still active. That number will probably continue. The Minister may also have noted that others in the pensions world have expressed concern about the treatment of open DB schemes.

In response to the Pensions Regulator’s recent consultation on the DB funding code in September, the Pensions and Lifetime Savings Association expressed concern that the proposed code was too prescriptive and risked undermining many of the potential benefits of the new approach. It was also concerned that the proposals might unintentionally hasten the closure of open DB schemes. The requirement to fund accrued benefits in the same way as benefits for retirees would place a significant burden on funding requirements and did not reflect the differing dynamics and time horizons of many such schemes. The association said that the proposals could mean new accruals becoming prohibitively expensive when in practice benefits would not come into payment for many decades.

Lane Clark and Peacock also called for the treatment of open schemes to be given more thought, saying that it would lead in some cases to unnecessary de-risking and premature closure of otherwise viable schemes. The head of DB consultancy at Hymans Robertson said that the effect could be to force further DB closures by pushing up contribution rates, because of lower expected returns on investments, and that it could push stressed employers into insolvency at the expense of securing DB benefits:

“Put simply, it could push up costs so high that DB pensions become a thing of the past.”

Regrettably, as far as I am aware, no official economic assessment has been produced in advance of the legislation passing to understand the impact of the code of practice. However, research by RPMI with a cohort of open schemes estimated that the Pensions Regulator’s proposals could increase liabilities by between £120 billion and £160 billion.

Those are stark warnings. In that context, I welcome the Minister’s comments on the issue that it is critical to the 1.1 million ordinary members of the schemes that are currently open to new members and to the 7.6 million who are members of schemes still open to future accrual. In fact, we do not believe that our positions are so divided on this issue. Baroness Drake summarised it well in the Lords:

“The amendment seeks to address two issues: first, that it should not be government policy to require trustees of pension schemes materially open to new entrants with strong employer covenants to adopt a strategy that will result in them de-risking their investments unnecessarily and prematurely…and, secondly, that the Secretary of State, in exercising powers under Schedule 10 to make provisions through regulation on the funding of defined benefit schemes, should make provisions that are consistent with the policy in the White Paper statement that running on with employer support could be an acceptable long-term strategy for a materially open scheme. The amendment is consistent with any reading of the government policy in the White Paper, but it seeks to ensure that it happens.”—[Official Report, House of Lords, 30 June 2020; Vol. 804, c. 682.]

The Minister has said that he does not consider our amendment to be an appropriate compromise, but does he agree that the spirit of our amendment is consistent with Government policy? If so, will he continue to work with us to progress this issue in the light of the legitimate concerns raised about open defined-benefit schemes?

The Minister has referenced the regulator’s consultation. Does he agree that it is entirely appropriate for elected politicians to provide a policy direction of travel to the regulator, without dictating points of detail that remain rightly the realm of regulations? Will the Minister also give assurances that the Bill, as amended by the Government in Committee, will not accelerate the closure of open schemes and that they will be treated differently?

It is a pleasure to serve under your chairmanship once again, Mr Stringer. I am pleased to get the chance to delve further into some of the issues that were raised on Second Reading, of which this was one. I am happy to add my support, along with that of my hon. Friend the Member for Airdrie and Shotts, to amendment 18.

When I spoke on Second Reading I warned of the need to be aware of unintended consequences, one of which originated outside the Bill. One that merited clear guidance in the Bill to prevent it from ever coming to pass was the issue around defined-benefit schemes.

The Minister says he does not want good schemes to close and schemes to be forced into the de-risking process. That is fine and good as far as it goes, but Ministers come, Ministers go, Ministers change their mind, yet legislation endures. I have been very impressed with the Minister’s handling of the Bill today and I do not want to see him go anywhere—

I have got a bit to go. The Minister highlighted paragraphs in the Pensions Regulator’s recent consultation, but I draw his attention to paragraph 210, which states:

“We consider that trustees’ focus should be to ensure the security of members’ accrued benefits rather than to ensure the provision of future benefits.”

Taking all that together, it is at best inconsistent. It should be obvious why we all want to be assured that schemes are funded to meet their liabilities. Nevertheless, that is a deeply worrying statement for many people, including the scheme managers and trustees. There needs to be a difference in the investment strategy between DB schemes, which are open to new members, and those that are not.

As the Minister said, there are clear differences between open and closed schemes. A scheme that is closed to new members, for example, has to have a fixed end point, and their assets need to be readily available to pay pensions. That means investing in assets where the value is predictable, which inevitably leads to investing in asset classes that have lower returns.

In stark contrast, a scheme that is open to new members sees scheme leavers replaced with new members. It does not have to sell assets to pay pensions and can continue indefinitely. To deliver the required investment returns, it needs to be free to invest in a range of asset classes, which may be more speculative and less predictable, but which, nevertheless, over the longer term, might be expected to deliver better financial results and outcomes for the members.

Again, I hear what the Minister says about the actions he has personally taken to increase the range of asset classes in which pension schemes can invest. That is all well and good, which makes it seem all the stranger that we might end up inadvertently with the unintended consequence of choking that freedom off for DB schemes, for want of a lack of clear guidance in the Bill. That is assuredly what will happen.

If we insist on ensuring the security of accrued benefits, which are not at any serious risk, we effectively begin to mandate an investment policy suitable only for closed schemes. As soon as that happens, the potential returns are restricted. The liabilities of the schemes increase overnight, potentially anywhere between £120 billion and £160 billion. The cost of contributions to the employer, potentially the employee, or both is therefore increased. Inevitably, over time—potentially a very short time—the schemes are rendered unaffordable, and we see the closure to new members of what were otherwise perfectly good DB schemes.

Clause 123 provides for open schemes to be treated differently, given their unique characteristics. Retaining the amendment made to the clause would certainly be a stronger safeguard than amendment 18. However, amendment 18 is a genuine attempt to try to find a compromise position that captures the essence of clause 123, while at the same time managing to be far less prescriptive in what the Secretary of State is obliged to do.

Some 21% of DB scheme members belong to schemes that are still open to new members. They still perform a vital role in people’s pension retirement provision, often for lower and middle-income families who have few other savings, and the matter therefore warrants the most careful attention. Amendment 18 would provide the means by which we can ensure that those DB schemes can continue to thrive and deliver for all their members, present, past and future.

I agree with the Minister when he says that there needs to be a reasonable balance between those classes of member, but legislation can be used to usefully set the parameters to guide trustees, which is exactly what amendment 18 would do, given the mixed messages from the regulator. If it is not deemed to be an appropriate compromise, I invite the Minister to work cross-party to try to find a compromise that would offer reassurance to scheme members and managers and that can definitely guarantee the future of DB schemes. Leaving it out of the Bill will not offer reassurance and, given the current mixed messages coming out of the regulator, will lead us down the path of unintended consequences with adverse outcomes for many of those who can least bear the cost.

I loved the first part of the hon. Gentleman’s speech, and I am grateful for his tacit endorsement of our approach. I also loved the latter part, because I do want to work on a cross-party basis. If mixed messages have in any way been interpreted—I am not sure it is an intention in any way by the regulator; I assure him of that and I have spoken to the regulator—and if any clarification needs to be made, I cannot repeat any more that we are here to support DB in whatever shape or form. We have had a DB White Paper, and that consideration and the consultation has brought forward various things. The ongoing consultation by the regulator is exactly that—a consultation.

The request was made for more thought. There is a legitimate and relevant point, although I will resist the amendment, that this is a perfectly valid debate to have in this place. It will definitely influence the regulator’s approach and ensure that, if there is any doubt whatsoever, not all schemes will be treated the same. There is not a one-size-fits-all approach. If anyone is proposing that that is the case, it simply is not. Every scheme should be looked at on its own merits and in its own particular way, because, as all colleagues have rightly identified, schemes have different profiles, different amounts and different objectives. That is what the regulator is trying to do—to build on the current approach.

I make a couple of quick points. Most schemes will not need to change their approach, as they are already doing the right thing. The investment risk that is supportable for each scheme will continue to depend on scheme- specific factors, including scheme maturity and the strength of the employer covenant, as is currently the case. Maturing schemes, whether open or not, will be expected gradually to de-risk their investments as they move towards lower dependence on the employer. There will be no such requirement for schemes that remain significantly immature, with strong employer covenants, who have been pursing appropriate funding and investment strategies. Taking investment risks—however one wants to describe that—is utterly acceptable as long as it is supportable.

I repeat that I am the Minister who, at the same stage as I am trying to improve and support DB, has given the schemes the power under the illiquids consultation to invest in alternatives, whether that is in green infrastructure, social housing or venture capital, building on the Treasury’s work with the patient capital review and building on the work that the Department for Work and Pensions has done for some considerable time, to make it crystal clear that such investments can be pursued and that they can also produce a higher return.

Does the Minister accept that there is a difference between being given the opportunity to invest in those asset classes and having the freedom to invest in them, if there is a perception that people are being guided down a route of de-risking, and would not that be the benefit of setting it out loosely or flexibly in legislation, in terms of the guidance that could then be given to trustees on how those schemes ought to be managed?

The appropriate way forward, with respect, is a three-pronged approach, which would be a combination of primary legislation, regulation and the DB funding code to balance effectively employer affordability and member security. I think we all start with the fundamental principle—certainly as Minister I have to have it as the guiding principle—that the member is the most important person to be safeguarded, and I believe that the three-pronged approach is the appropriate way. There is an ongoing consultation and I genuinely believe that it should be allowed to run its course, with us all having the opportunity to make points to it.

I will just finish the point I was making: the scheme funding measures in the Bill, together with secondary legislation and the revised scheme funding code, seek to support trustees and employers to manage their scheme funding with a focus on longer-term planning. As is now the case, the scheme’s liquidity requirements and investment timelines and the amount of risk each scheme can support will depend on factors including its maturity and the strength of the employer covenant. Trustees can and do already invest in illiquid assets such as infra- structure, and our measures do not seek to discourage such investments where they are appropriate.

I finish on that point, although of course I am happy to maintain dialogue. I have met the various proponents of the scheme, I have explained to various peers why the Government cannot support these proposals, and I have exchanged correspondence with the various unions that have made representations to me. That dialogue will unquestionably continue, but, without any shadow of doubt, the Government will resist the Opposition amendment.

Question put, That the amendment be made.

Amendment 9 agreed to.

Clause 123, as amended, ordered to stand part of the Bill.

Schedule 10

Funding of defined benefit schemes

Amendment proposed: 18, in schedule 10, page 185, line 29, at end insert—

“221C  Guiding Objectives

(1) In exercising any powers to make regulations or otherwise to prescribe any matter of principle under this Part, the objectives of the Secretary of State must include—

(a) supporting the ability of the trustees of a relevant scheme to decide the funding and investment strategy for the scheme taking into account the current and future maturity and liquidity of the relevant scheme consistent with the trustees’ duty to invest assets in the best interests of members and beneficiaries; and

(b) avoiding the specification of requirements in relation to funding and investment strategies that are likely to accelerate the closure of relevant schemes.

(2) In subsection (1), “relevant scheme” means an occupational pension scheme that is not near significant maturity and is open to new members and is reasonably expected to remain so, either indefinitely or for a significant period of time.”—(Seema Malhotra.)

Question put, That the amendment be made.

Schedule 10 agreed to.

Clause 124

Climate change risk

I beg to move amendment 17, in clause 124, page 118, line 23, leave out “an occupational pension scheme” and insert—

“(a) an occupational pension scheme, or

(b) a contract-based workplace scheme”.

This amendment would add contract-based workplace schemes to obligations under this clause, as well as occupational pension schemes.

I will keep my remarks on the amendment brief. In a sense, it builds on the positive work in the Lords on climate change by extending the provisions in the clause to contract-based workplace schemes as well as occupational pension schemes. I hope the Minister will agree that it is a common-sense extension of the welcome measures already contained in the Bill, and that it would ensure effective governance of all relevant schemes with respect to the effects of climate change.

The clause introduces a variety of measures in respect of climate change risk. We believe the clause and the regulations that it allows the Government to make are a huge step forward in the UK’s fight against climate change and mark the first provisions of their kind globally.

We are proud that this Government are the first among the G7 to introduce a target for net zero by 2050. We are among the leaders in environmental, social and corporate governance with the pioneering way that we are transforming the pensions and asset managing processes of the City of London, and the pensions provision, on an ongoing basis. We have the green finance strategy that the Government have introduced. I respectfully suggest that the build-up to COP26, which is one year from today, gives us an opportunity to show the great work that we are doing in this country and to demonstrate how we can show leadership around the world.

I believe we all know and accept that climate change is a pressing and imminent threat not only to our planet, but to our investments and, therefore, to our pensions. Back in August, my right hon. Friend the Secretary of State for Work and Pensions launched the Government’s consultation on the measures they propose to introduce, which include powers to ensure that pensions are properly protected against the risk posed by climate change and can take full advantage of the investment opportunity it presents. I believe that there is an opportunity for this country to lead the way—an opportunity to be the first in the market as we create climate change-friendly investments and an investment strategy that genuinely transforms this country, helps us to get to net zero and provides sustainable long-term pensions.

I warmly welcome clause 124, which affirms the Government’s commitment to tackle climate change using the power of finance and investment to move things forward. Does he agree that the issuance of a green gilt and asset purchase facility is a good next step forward in enabling more pension funds in our country to invest in our bond markets in a way that will help us to meet our climate change targets?

My hon. Friend is a specialist in this field thanks to his profession prior to being elected to the House. It seems to me that as we drive forward the ESG reforms and the changes under clause 124, and as we have climate-related financial disclosure, pension funds will wish to invest in a sustainable way that produces an appropriate return but is supportable from an ESG point of view.

Effectively, only three forms of capital can provide the infrastructure renewal and retrofitting that will be required for us to get to net zero: Government money though taxes, private sector money brought forward by individual companies, and pension fund investments. Creating a green gilt, as the French, the Germans the Poles and some parts of California have already done, would be a very good way forward. To their credit, the Chancellor and Ministers at the Treasury are looking into it, and I believe that such a move will happen in the fullness of time.

I utterly support the efforts of my hon. Friend to ensure that a green gilt is an alternative form of investment for pension funds as they seek to invest in a sustainable long-term way that also supports the objective of this country. I utterly support the campaign that he has been fighting, both in word and in the House, on that issue.

It is a matter of cross-party pride that we are seeing the commitment to climate change risk come into pensions legislation, and that we are leading the way on this issue. Over the past few years, we have introduced flexibility for trustees to look at non-financial measures in relation to investment decisions, which is an important part of the journey. In the spirit of these legislative provisions, does the Minister agree that, to realise the potential of the Bill and the opportunity for trustees, it is important to continue dialogue and to seek international agreement? Some countries are making progress in the right direction, but others are not—for example, the legislation passed in Australia looks like it is going in the opposite direction.

The hon. Lady makes a number of good points, all of which I endorse. It was noted in the record of the conversation between the Prime Minister and his Australian counterpart only last week that our Prime Minister tried to make the case to Mr Morrison that Australia should be doing more on climate change. The flipside of that is that, clearly, we should be using our advocacy. It is to his great credit that the right hon. Member for Doncaster North (Edward Miliband), when he was the Secretary of State for Energy and Climate Change in the Labour Government, introduced the Climate Change Act 2008. That work has continued since under the coalition Government and the Conservative Governments. The direction of travel could not be clearer in this county, and I believe our legislation has made clear what we are trying to do.

Order. I do not want to turn this into a full-blown debate on climate change. We are debating a proposed amendment to a clause, which takes into account climate change in a specific way. I would be grateful if the Minister focused his remarks on the amendment.

I entirely endorse everything you say, Mr Stringer, and I apologise. I was answering too fully what I would suggest is probably a legitimate question from the hon. Member for Feltham and Heston about a clause entitled “climate change”.

However, to return to amendment 17, I respectfully suggest that that is not necessary. There are two fundamental reasons why. First, action has already begun on that specific issue; I have provided the hon. Lady with the exchange of correspondence between myself and Chris Woolard, the interim chief executive of the Financial Conduct Authority, dated 30 September and 22 September 2020, which specifically addresses the point. The FCA is the appropriate regulator to make proposals for its regulated sectors. The FCA, as Chris Woolard makes clear, will be making proposals on climate change with respect to personal pension schemes, otherwise known as contract-based schemes. The letter has been in the House of Commons Library since Second Reading.

I can assure the Committee that the FCA plans to consult on corresponding climate-related financial disclosures for personal pension schemes in the early months of next year and to finalise the rules by the end of 2021. That will mean that by 2022, subject to consultation and cost-benefit analysis, pension schemes, no matter whether they are occupational or personal, will be subject to TCFD reporting requirements. The whole point of the exchange of correspondence is that the FCA has effectively accelerated the process it has been going through to catch up with what the DWP and regulators are doing in this space. Given that announcement, I urge hon. Members to withdraw amendment 17.

I take on board the points the Minister has made. This is an area that may requires further dialogue, and we will reflect on what the Minister has said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 124 ordered to stand part of the Bill.

Clause 125

Exercise of right to cash equivalent

I beg to move amendment 21, in clause 125, page 121, line 11, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 95 of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 22, 23 and 24 are related.

With this it will be convenient to discuss the following:

Amendment 22, in clause 125, page 122, line 4, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 101F of the Pension Schemes Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 23 and 24 are related.

Amendment 23, in schedule 11, page 193, line 20, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (6ZA) of section 91 of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 22 and 24 are related.

Amendment 24, in schedule 11, page 194, line 15, at end insert—

“(e) the results of due diligence undertaken by the trustees or managers regarding the intended transfer or the receiving scheme.”

This amendment enables regulations under inserted subsection (5A) of section 97F of the Pension Schemes (Northern Ireland) Act 1993 to prescribe conditions about the results of due diligence undertaken in relation to a transfer request such as to determine that the statutory right to a transfer is not established if specific “red flags” are identified in relation to the transfer or intended receiving pension scheme. Amendments 21, 22 and 23 are related.

New clause 10—Pensions Guidance

“The Secretary of State must write to members or survivors of pension schemes five years prior to the age of becoming eligible to access their benefits, to state a scheduled date and time for a pensions guidance appointment, or the option to reschedule or defer this appointment; and write annually until a pensions guidance appointment has been taken, or the member’s desire to opt out has been confirmed.”

This new clause would ensure members or survivors of pension schemes receive an impartial pensions guidance appointment prior to the point when they become eligible to access their pension benefits, with an appointment booked each year until such time that the member has received impartial guidance.

I am pleased to be serving under your chairmanship this morning, Mr Stringer.

The Work and Pensions Committee, which I chair, discussed amendments 21 to 24, and I am grateful to Labour colleagues on the Committee, the Conservative Vice Chair of the Committee, the hon. Member for Amber Valley (Nigel Mills), and the right hon. Member for New Forest West (Sir Desmond Swayne) for putting their names to the amendments. I am grateful to the hon. Members for Airdrie and Shotts and for Gordon for doing so today as well. This is a tripartisan amendment, as all good pension policy should be.

Last weekend, I was in touch with a nurse who works at a health centre in my constituency. Her husband drives a black cab. Some years ago, a financial adviser they knew well and who had given them good advice previously called and told them about an opportunity to realise their pension savings early with no real downside. They took up his offer. The upshot is that all their savings have gone and they now face a massive tax bill of about £60,000 with no means to pay it. The financial adviser, I understand, is living on a yacht in Tenerife.

All of us can understand just how devastating is the impact on hard-working families of being robbed of their life savings in that way. People who have saved conscientiously, worked hard and done the right thing, and who are entitled to be able to look forward to secure retirement, suddenly find that their hopes have been destroyed. The Transparency Task Force, one of the groups that urged the Select Committee to undertake an inquiry on scams, reports cases of spouses who, sometimes for years, have not dared tell their partner what has happened, so awful are the consequences. People wake up every day in dread of the future. They are often ashamed and embarrassed to have fallen for such a barefaced lie. Scammers groom people; they become trusted family friends. They “warn” savers that schemes will advise them not to transfer their money, and claim that that is because the schemes want to hang on to it for their own benefit. If the saver does become aware that the receiving scheme has fallen foul of regulators, they will say that that was just because someone was late filling in some forms.

It seems absurd that, as the law stands, trustees are compelled to make a transfer if a member demands it, even if the trustees know that the money is being handed over to crooks. Even if the receiving scheme is on the warning list, published by the Financial Conduct Authority, of firms known to be suspect, the law requires trustees to go ahead with the transfer; and if they are slow about it, they can be fined.

The Select Committee on Work and Pensions has launched an inquiry on the impact of the pension freedoms five years after they were introduced in April 2015, and the first of three parts is looking at pension scams. It is striking how loud a call there has been, from many different places, for the Select Committee to look at this matter. It reflects widespread revulsion at some of the scandals we have seen and fear of the damage that they do—certainly to individuals, but also to the industry as a whole. There has been a particular worry that the pension freedoms plus the financial pressures of the pandemic could be creating what the Pensions Regulator has called a golden age for pension scams, so the inquiry is looking at the prevalence and impact of scams.

Margaret Snowdon, who leads the Pension Scams Industry Group, told the Select Committee at its meeting on 16 September that, based on a survey that the group carried out a couple of years ago, it estimates that some 5% of pension transfers in the last five years have been into scams. The amount may total £10 billion over that period and 40,000 people may have been affected; some will not yet know that they have been scammed. And this is carrying on. Responsibility for preventing and responding to scams cuts across many different bodies, and our witnesses reflect that. It is a tragedy that many victims see very little, if any, of their money ever returned.

The Bill was amended in the other place before the summer break—the amendment was, I am glad to say, accepted by the Government—so that if a defined-benefit transfer application raises one of the red flags on a prescribed list of features likely to indicate that there is a scam going on, the trustees must delay the transfer until the saver has taken financial advice.

These four amendments are based on work by the Pension Scams Industry Group. I pay tribute to Margaret Snowdon and her colleagues for their hard work. The amendments would empower trustees to refuse a transfer altogether if they had good grounds, based on the red flag analysis, for believing that a proposed transfer involved moving pension savings into a scam. It would say to the trustees, “You don’t have to do this.” The amendments provide for the making of regulations that prevent a transfer from taking place, depending on the results of that due diligence on the receiving scheme undertaken by the trustees or the scheme managers. That would allow a period of consultation and evidence gathering before regulations were drafted and implemented, to ensure that the detail was right.

I am grateful to the Minister for the helpful discussions we have had on this point since the summer. I know that he is as appalled as I am by the impact of scams, and that he has been looking very carefully, with his officials, at whether it is possible to achieve the effect of the amendments—without actually accepting them—by using powers already in the Bill. I am looking forward to what he will have to say to us today about that. From what I have seen, and thanks to the work of his officials, it does look as though it might well be possible to deliver the effect of the amendments with regulations under the Bill as it stands. I was sceptical about that to begin with, but thanks to the work that the Department has now done, I can see that that might well be the case.

I want to sound one note of caution. I understand that the Department would like to exempt from its proposed regulations certain categories of scheme. For example, it would want to guarantee that a transfer to an authorised master trust should not be blocked on the basis of a red flag assessment. Actually, I have no problem with exempting authorised master trusts, given their oversight by the Pensions Regulator, but it would be a serious mistake to exempt FCA-registered schemes, because a lot of scams are FCA registered.

I am told, for example, that it is perfectly possible for schemes to be both FCA registered and on the FCA warning list. Typically, those might involve an overseas adviser, probably not FCA registered, who would use the platform of a UK self-invested personal pension which is FCA registered to offer exotic investments overseas. That is precisely the form that many such scams take. When the regulations are drawn up, whether under my amendments, if they are accepted, or under the existing powers as the Minister intends, it is important not to create a large loophole to allow the bulk of the crimes to carry on. We certainly need to improve drastically the protection for savers. Implementation of the pension freedoms without safeguards has inflicted great harm. We must now put essential safeguards in place.

I come now to new clause 10. Last week, the Department published a document entitled, “Stronger nudge to pensions guidance: statement of policy intent”. That does not sound like a document that will set the world or fire, but I think its content is widely regarded as rather timid and disappointing. It does not deliver the default guidance approach that Members on all sides wanted when the Financial Guidance and Claims Act 2018 became law and was debated.

Consumer organisations are also calling for people to be directed to an appointment automatically, rather than expecting them to sort one out for themselves. We know how successful harnessing inertia to bring people into pension saving has been; we should harness inertia as well when people come to access their pension savings—auto-enrol in, but auto-enrol out, too. New clause 10 would auto-enrol pension savers into an appointment with Pension Wise these as they approach the point of accessing their pension. Put savers’ interests first and recognise the dangers in hasty, badly made decisions.

Pension Wise is delivered by Citizens Advice. It is immensely popular with the rather small number of people who use it. Nine out of 10 of those who use it report high or very high satisfaction. That is a pretty impressive level of satisfaction, yet the service is hidden away from most people. A significantly higher number of users than non-users say that they are very or fairly confident about avoiding pension scams having used Pension Wise. The default ought to be that people get an appointment.

Progress on take-up has been poor. Pension Wise reaches only a fraction of those who need it most—non-advised pension savers at the point when they choose to access their pension savings. The FCA estimates that between one in 10 and one in eight savers—a tiny proportion—first use Pension Wise when accessing a pension, and what should be the norm is instead the preserve of a minority. We should not be surprised about that. Pension planning is complicated, people do not know the ins and outs, and it very easily drops down a to-do list with all the other things going on, despite its importance.

In the statement of policy intent of last week, the Department said it will implement a guidance policy based on the “Stronger Nudge trials” of the Money and Pensions Service. Those trials did show a very limited increase in appointment bookings resulting from the nudges that were tested, but it is nowhere near enough. That is why the amendment is necessary.

Two nudges were tested. The first was that the pension provider offered to book a Pension Wise appointment for the consumer; the second was that the customer was transferred to the Money and Pensions Service, who then booked a Pension Wise appointment for them. The document sets out that, with both nudges, around 11% of pension holders attended a Pension Wise appointment, compared with 3% in the control group.

It is perfectly true that one in nine is a better level of take-up than one in 33, but we can surely agree that we must do far better than that. Auto-enrolment was needed for pension saving precisely because the nudges that we had all tried for years did not work. That is why we now have more than 10 million extra people saving into work- place pensions. Pension saving has become the norm, and impartial pensions guidance must become the norm as well. That is what the amendment would deliver.

Sir Hector Sants, the chair of the Money and Pensions Service, said to the Work and Pensions Committee in March:

“A significant number of the people who contact Pension Wise will come away saying that, after having spoken to our guidance service, they have concluded that they should do something different from what they had in mind in the first place…72% of people are saying they have changed their mind about what they will do as a result of talking to our guidance service. In a way, that is a simple statistic that tells you that the vast majority of people, left to their own devices, will probably make a poor decision.”

The amendment proposes that the Department should write to members of defined-contribution pension schemes each year from when they are five years away from being able to access their pension benefits and set a time and date for their appointment. That is the sort of thing that already happens with health checks. It is convenient for the saver, but it also allows the Money and Pension Service to schedule appointments efficiently, as its resources allow.

Pension Wise is the realisation of the pension freedoms policy—the promise that was made at the time of free, impartial, high-quality guidance for those who do not use a regulated financial adviser for pensions decisions. It is the main consumer protection in the pension freedom policy—it was not an optional extra—but hardly anyone is using it. Pension Wise can be the difference between well-informed decisions leading to financial security in retirement and bad decisions, with pensions scams a real possibility. We need determination to fix that, and the current policy lacks determination.

Auto-enrolling people to Pension Wise appointments fits the bill. Starting five years ahead of eligibility will get people thinking while they have time to reflect on their options and make their choices. An impartial session will set them on the right tracks and correct misunderstandings. Repeating the invitation each year until the appointment is taken up or is opted out of will equip savers with very important information to think ahead effectively for their financial needs in retirement.

Regulators will have a key role in the direction of pension guidance policy, because their consumer protection duties oblige them to take an interest in it. The FCA uses its own business plan to cite the

“significant risk of harm”

arising from,

“the way consumers have been given additional responsibility for complex investment decisions, through the shift to Defined Contribution (DC) pensions and the Government’s 2015 pension freedoms.”

Likewise, the Pensions Regulator has emphasised focusing on security and value in pension schemes, preventing and tackling pension scams and understanding and enabling good saver decision-making in its long-term corporate plan published recently. The regulators are absolutely up front about the risks for people and the need to address them, but the Department’s policy response so far has fallen far short. It is much weaker than is needed.

We cannot sit back while Pension Wise continues to be an excellent service taken up by hardly anybody. The Government and regulators must end their indifference on this. Aspiring to an 11% take-up simply is not enough. We need auto-enrolment into a service that enables better outcomes from pension savings.

I do not have too much to add to the fantastic speech that has just been made by the right hon. Member for East Ham, the Chair of the Select Committee. I have to say that my heart breaks—I am sure others feel the same—for his constituent and the way that family has been treated and the situation they are now in. That case reinforces the need—if there ever was one—for stronger and more robust action, and that is why we support the amendments and new clause.

I especially concur with the right hon. Gentleman’s points about the actions of trustees where there are red flags and hope that the amendments or the Ministers response will satisfy our concerns that that will be addressed. We support these amendments on pension guidance and protecting against scams. We have been contacted by a number of organisations in this area, not least Just Group plc, who I am very grateful to for its briefing.

The Department appeared to pre-empt some of these discussions with its most recent statement of policy intent, which suggested a stronger nudge towards using Pension Wise. It is worth repeating the point made by the right hon. Member for East Ham that the cited MaPS stronger nudge trials showed only a very small increase in the number of people who actually went on to have a Pension Wise appointment. The DWP claimed that it

“significantly increased the take-up of Pension Wise guidance.”

But, again, this is pure spin.

The hon. Member for Delyn earlier in the Committee stage said that we should look at outcomes. We agree. The outcome of the stronger nudge trials was to get people to Pension Wise appointments in less than one in ten cases. It moved them from 3% to 11%. Eleven per cent. A stronger nudge is just not going to be enough, not by a long chalk. On that trajectory, the most the DWP could hope for, according to Just Group plc, is that between 20% to 25% at the upper end of the range of eligible pension savers would receive their Pension Wise session.

That was a huge concern of ours during the passage of the Financial Guidance and Claims Act 2018. We argued then for an opt-out guidance system, and now we are back to looking at this again. We still support this approach. The Government appear not to be willing to accept what colleagues across the House from all parties, Select Committees, and consumer groups and industry experts say is the best way forward. Instead, they are pushing stronger nudge.

The Government have not provided a timeframe for the DWP’s planned consultation on the new guidance rules for occupational defined-contribution schemes, nor the FCA’s rules for contract-based providers. In previous aspects of the Bill we have been asked to trust the Government to draft the necessary regulations. The same was said in consideration of the 2018 Act in this area, but we are still waiting. While I accept that the Chair of the Select Committee, has been having more intense discussions, I am sceptical. For those reasons and others outlined, we support the amendments and new clause.

I thank the right hon. Member for East Ham who leads the Select Committee for his kind words and heartfelt speech. I echo the comments in terms of his constituents, who clearly have had a terrible time. My thoughts are with them.

I will try to address the points raised. In respect of clause 125, the objective of the Government is quite clear. We wish to bring forward measures that will significantly and realistically prevent future scams. We believe that transfers will not go ahead if the conditions set out in the regulations are not met. These conditions can relate to both the destination of the transfers, meaning transfers can be prevented to schemes that do not have the right authorisation, and cases where the member has not supplied the evidence of, say, employment or residency. Importantly, those conditions can also include other red flags, such as who else is involved in a transfer. If those red flags are apparent, the regulations will enable the trustees to refuse to transfer. If the red flag is significant, it will direct the member to guidance or information that they must take prior to being allowed to transfer. Trustees will need to undertake due diligence to establish whether those conditions are met or not. Clause 125 puts trustees in the driving seat in relation to permitting transfers to proceed.

The right hon. Gentleman raised a number of specific issues, which I will try to address. The first relates to the scope of clause 125 in respect of DB and DC pension schemes. I take his point on master trusts, but I assure the Committee that the conditions to be met in relation to safe destinations, red flags and guidance before a transfer can proceed will be applicable to members of DB and DC schemes. Those conditions will be in addition to the current advice requirements for DB members seeking to transfer over £30,000 cash-equivalent value.

I have had discussions with the right hon. Gentleman, both in writing and in person, and with other colleagues on the Work and Pensions Committee, stakeholders, interested parties and other parliamentary colleagues. I have also engaged at great length, sadly by Zoom, with the all-party parliamentary group on pension scams, and then followed that up individually.

Colleagues who are concerned about the extent to which the PSIG requirements of red flags are being met should read the exchange of correspondence in the Library, following the right hon. Gentleman’s agreement that I could disclose it, in respect of the background of our meetings in September on two occasions, the letter that I wrote on 6 October, which included the Financial Conduct Authority’s approach of 5 October, and the follow-up letter of 22 October. If that second letter is not in the Library, which I am not totally sure it is, I will ensure that it is by close of business today. I wish also to put on record my thanks for the efforts of the PSIG, Margaret Snowdon and the various other parties who are all working for the common good to ensure that scams are prevented.

I will speak about guidance in a second, but first I will make two points. Clearly we wish to prevent, as far as possible, any scams or misdemeanours taking place, but that will have to be done through primary legislation and secondary regulations. It seems to me, as this process has been developing, that there is a degree of symmetry between the work that stakeholders—the PSIG and others—are doing, the work that this House is doing by passing primary legislation, and the specific drafting and codification of the regulations, which will be the nuts and bolts that will take this forward.

My objective is that we pass clause 125, which provides the statutory framework. My hope is that Royal Assent is received speedily and I suspect that my civil servants, who obviously have nothing else to do in these difficult times, will be able to progress the regulations very soon. I am hopeful that the Work and Pensions Committee report will have been published by then, and the ongoing dialogue that we have had with the Select Committee, cross-party, will continue, so that we frame the regulations that flow from clause 125 to accord with all our stated objectives.

I accept that the devil is always in the detail. We are all trying our hardest to be as precise as possible, without the regulations having been drafted already, but with regard to the four red flag objectives that are set out and that the right hon. Gentleman has rightly brought to my attention on Second Reading and in correspondence, I am confident that the answers that I have given to him in writing, and that the FCA has given, constitute a basis upon which we can regulate to prevent those matters.

The right hon. Gentleman is trying to tease out the extent of the amendments that he has tabled and the extent to which the Government can address them. We are able to address those matters within the confines of clause 125. I stress that we want to ensure that the powers can be applied quickly. I accept that time is of the essence in ensuring that the regulatory powers come forward as a matter of urgency.

I am grateful for the Minister’s perceptiveness in our discussions. May I check that he accepts the point that I made, that there should not be a carve-out for all FCA-registered schemes? FCA-registered schemes have been part of the problem in quite a lot of the scams that have arisen over the past few years.

The right hon. Gentleman flagged that to me. I will attempt to give an answer—he only flagged it to me this morning, but I have tried to devise a precise answer. We are considering how we can use the powers in the Bill to address those specific concerns about self-invested personal pensions. They are clearly an FCA-regulated personal pension scheme that permit investment in a broader range of investments than conventional personal pensions do.

I am asked to point that in 2018 the FCA wrote to SIPP operators to remind of the due diligence requirements to follow when accepting customers’ investments. The FCA considers—this is the instruction I have been given, but I will follow it up in more detail—that most SIPP operators adapted their due diligence procedure in line with the FCA’s expectations, or have voluntarily left the market as a result of the FCA’s scrutiny. I assure the right hon. Member for East Ham and the Committee that that is the extent to which I can give him an answer today.

I will go away and drill down in more detail before Report and Third Reading, because the right hon. Gentleman makes a legitimate point. Clearly, the regulator is a separate one that I do not control, but in the time I have I will come on to how it is that we are trying to get the regulators to work together—how Project Bloom is something that we are addressing on an ongoing basis. We will get back to him before Report. However, my understanding is that we are considering how to address that issue within the confines we have. The point is legitimately made.

Forgive me, for I have not been privy to all the discussions that have been going on. I take Members at their word that the exchanges that have been going on have been constructive. I therefore do not want to break that consensus in any way, but I am looking for some guidance from the Minister, in particular on the red flag amendments. Given that he has accepted that time is of the essence, and accepts the premise and principle of the amendments that we support, why is he unwilling to see them in the Bill? Is there a particular reason? What is his reasoning why those amendments cannot be accepted to ensure that they are in primary legislation as an added protection?

The simple answer is that this is not something that could be in primary legislation and then enforced; primary legislation is the framework, and it is has to be in the subsequent specific regulations that follow. I can give the hon. Gentleman an assurance on that point, as I have given it to the Chair of the Select Committee.

We accept these matters and believe that clause 125 already addresses the points made by the amendments, but we still have to draft specific regulations to deal with the specific problems, and those will be much larger than clause 125 and way more comprehensive. The process of dealing with a transfer, what particular points apply, how it is a trustee operates due diligence and how it is that that process works, is genuinely a complex process. Detailed provisions have to be gone through, working with the various parties going forward. The point I am trying to make is that we agree with the principle of the amendment, but it should not be on the face of the Bill; we should accept that clause 125 provides the framework, and we then need to deal with the regulations going forward.

In the time remaining, I will try to address the points about guidance and see if I can assess that in a particular way. Briefly, it is entirely right that people should be supportive of the good work that Pension Wise has done. Demand for the service has grown year on year since we launched it in 2015. The service delivered 205,642 transactions in 2019-20, which was a combination of face to face, telephone and online—more than triple the sessions in the first year of operation—and has had 10 million visits to the website since 2015.

I would push back on the argument for new clause 10, which is that there is no previous engagement. The DWP’s work should also be seen in the context of the work that the FCA does. There is already a multitude of interventions at an earlier stage. Within two months of their 50th birthdays, members receive a single-page summary document that points to the pensions guidance, as required under the Financial Services and Markets Act 2000. Wake-up packs, which were developed in association with all of industry and the interested bodies and are a requirement of the 2000 Act, are received at the age of 55. They include the single page summary document and they point specifically to pensions guidance.

At a later stage, as the individual gets closer to accessing their pension savings and enters the drawdown phase in contract-based pensions, the FCA investment pathway requires that they be presented with four options as to how they want to use their drawdown pot, so it is not the case that there is no engagement prior to the drawdown. That is proposed by the FCA policy statement, which will come into force in 2021.

Although I fully accept that I should be pressed on DWP guidance, the FCA policy statement will come into force in 2021, and, between now and Report, detailed explanation of what that statement entails should be provided to the right hon. Member for East Ham. If it has not been provided to the Select Committee as part of its inquiries on scams, that is a lacunae that needs to be addressed, because it seeks to ensure that all arms of government are working together. The FCA policy statement, and the incoming changes, will definitely make a difference.

Briefly, on the stronger nudge towards guidance, which arose from the Financial Guidance and Claims Act 2018, it is fair to say that where there is transfer from one scheme to another to continue to accumulate and no risk is identified, the transfer can be acted on in accordance with the current requirements. Where a risk is identified, the member must be notified that they will be required to prove that they have taken information or guidance before the transfer can proceed. That is the appropriate effect of what we are legislating for in clause 125 and in the Bill.

Where there is transfer from one scheme to another to access pension freedom with no risk identified, there is the nudge towards guidance and the member is notified that they will need to prove that they have taken guidance or opted out. Where a risk is identified, the points that we have gone through on clause 125 and the prevention of scams come into play. The member must be notified that they are required to prove that they have taken information or guidance, and the amended requirements under clause 125 continue to apply.

There is a graded system depending on the identification of risk to the individual trustees as they proceed. In addition, work has been done to prevent pensions cold calling, and there has been a tightening of the rules to prevent fraud of registered pension schemes. I accept that more needs to be done to bring various departments together. I know that the Select Committee has looked at this area, assessing whether Project Bloom, the multi-agency partnership, and the ScamSmart campaign, are working sufficiently well, and that is something that I have undertaken to improve. The regulator’s evidence to the Select Committee on that exact point argued that a much more beefed-up effort was needed to bring all those particular parties together. Yes, the two arms of government need to work better together, and I hope I have explained how we are doing, but we also need much greater interdepartmental and interorganisational co-operation.

Finally, there has been criticism. I will not go into detail about whether the stronger nudge is a good behavioural insight trial. I support what has been done, but that is a matter of ongoing regulation as well. The appropriate approach would be that we work with the Select Committee on making that as effective as possible on an ongoing basis. I invite the right hon. Gentleman to withdraw his amendment.

I am grateful to the Minister and to everyone who has taken part in this debate. I welcome a lot of what he has said. On guidance, he told us that the FCA writes to everyone at age 50, but it seems to me that what it should do is say, “Your appointment with Pension Wise is at the following time and place”, taking advantage of that opportunity to increase significantly the likelihood of the guidance being taken. I am grateful to him, however, for saying that further information will come forward before Report and that the discussions and deliberations on the four amendments will also carry on between now and Report. At this stage, therefore, I do not propose to press any of the amendments to a vote.

I want to make a few comments. I appreciate the exchange between the Minister and my right hon. Friend the Member for East Ham. I recognise the complexity of the different regulators that the Minister alluded to, and the need to join things up. From a consumer perspective, it is very important to join up different regulators, because it is difficult and confusing for individual consumers or citizens to deal with multiple regulators on different issues. Invariably, we end up with multi-year battles that are exhausting for them and their families. Therefore, ensuring that we have stronger remedies in place is critical to reduce some of the risk.

I support my right hon. Friend and appreciate Minister’s comments about not carving out FCA-regulated schemes that still pose a risk for those at risk of scams. The Minister has mentioned further regulations to come and that the exchange between him and my right hon. Friend the Chair of the Select Committee has been placed in the House of Commons Library—it will be important to review that—but the test will be the extent of the improvements to the system and of the tightening of protections. Those who are vulnerable to pension scammers are at serious risk, and gaps in regulation increase their vulnerability. It is not a harm-neutral situation. This is a uniquely difficult time, and it is a sad fact of the pensions world that there are people who seek to capitalise on that.

The hon. Member for Airdrie and Shotts also made some important comments. I want to lend our support, but we also need to keep this under review as we debate the regulations. We support the amendments, although my right hon. Friend the Member for East Ham has chosen not to proceed with them at this stage. They propose a sensible set of measures to counteract the risks that people, particularly those who are especially vulnerable, face right now.

Amendments 21 to 24 could play a part in future stages of the Bill. They would strengthen the protections to prevent individuals from transferring their pensions into scam schemes. We also welcome that the amendments have been tabled on a cross-party basis by members of the Work and Pensions Committee. It would be helpful to see how quickly those concerns move on to the Minister’s radar, and his imperative to act on them. We welcome both the ongoing dialogue with the Chair of the Select Committee and the proposed route map for addressing the issues under existing powers, which we hope will dramatically increase protection against scammers.

New clause 10 is intended to protect people from scams by auto-enrolling pension scheme members in pensions guidance appointments. That principle is extremely important, and the arguments for a much-needed source of information and impartial advice were well made. That would empower individuals to make good pensions decisions, and through that empowerment they would be more resistant to scammers.

We strongly support the intentions of new clause 10 and amendments 21 to 24, tabled by my right hon. Friend the Member for East Ham. I congratulate him on his Select Committee’s work on this crucial issue, which is a serious matter and could become more so for all our constituents. It is important to have the right protections to give savers greater confidence, particularly with continued pension scheme reform. I urge the Minister to act speedily to ensure that the arms of government that he talked about continue to work closely. I am sure that we can encourage and support him, on a cross-party basis, to move that along more quickly.

I would like to acknowledge the work of Pension Wise and Citizens Advice, and the services that they provide. There will, I hope, be ways—perhaps through what we can do here—to raise awareness of the services that those organisations offer, and, importantly, of pre-emptively encouraging people to get advice in what is a difficult area. We all fall prey to that: when something is incredibly confusing, as my right hon. Friend said, it gets put at the bottom of the pile, often until it is too late. These protections will go a long way to giving more people, particularly younger generations, the confidence to save and save early, which makes a difference.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(James Morris.)

Adjourned till this day at Two o’clock.

Pension Schemes Bill [ Lords ] (Fourth sitting)

The Committee consisted of the following Members:

Chairs: †Mr Laurence Robertson, Graham Stringer

† Bailey, Shaun (West Bromwich West) (Con)

† Baker, Duncan (North Norfolk) (Con)

† Baldwin, Harriett (West Worcestershire) (Con)

† Bell, Aaron (Newcastle-under-Lyme) (Con)

† Buck, Ms Karen (Westminster North) (Lab)

† Davies, Gareth (Grantham and Stamford) (Con)

† Drummond, Mrs Flick (Meon Valley) (Con)

Eagle, Ms Angela (Wallasey) (Lab)

† Eshalomi, Florence (Vauxhall) (Lab/Co-op)

† Gray, Neil (Airdrie and Shotts) (SNP)

Griffiths, Kate (Burton) (Con)

† Malhotra, Seema (Feltham and Heston) (Lab/Co-op)

† Morris, James (Lord Commissioner of Her Majestys Treasury)

† Opperman, Guy (Parliamentary Under-Secretary of State for Work and Pensions)

† Roberts, Rob (Delyn) (Con)

† Thomson, Richard (Gordon) (SNP)

† Timms, Stephen (East Ham) (Lab)

Kenneth Fox, Huw Yardley, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 5 November 2020

(Afternoon)

[Mr Laurence Robertson in the Chair]

Pension Schemes Bill [Lords]

I will just remind Members about social distancing, and that Hansard colleagues would be grateful if Members emailed their speaking notes to hansardnotes@parliament.uk.

Clauses 125 to 129 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clauses 130 and 131 ordered to stand part of the Bill.

Clause 132

Short title

Amendment made: 10, in clause 132, page 125, line 17, leave out subsection (2).—(Guy Opperman.)

This amendment would remove the privilege amendment inserted by the Lords.

Clause 132, as amended, ordered to stand part of the Bill.

I understand that there is an agreement that all the remaining new clauses should be debated together. Is that correct? [Hon. Members: “Yes.”]

New Clause 1

Auto-enrolment

“(1) The Pensions Act 2008 is amended as follows—

(a) in section 3, in subsection (1)(a) leave out ‘22’ and insert ‘18’;

(b) in section 13, leave out subsection (1)(a).

(2) The Secretary of State shall, not later than two months after the day on which this Act is passed, lay before Parliament a statement containing a timetable for the implementation of these changes.”—(Neil Gray.)

This new clause would lower the age threshold for auto-enrolment from 22 to 18, and remove the lower limit of the “qualifying earnings” band, so that contributions are payable from the first pound earned. It would also require the Secretary of State to lay before Parliament a timetable for implementing these changes.

Brought up, and read the First time.

With this it will be convenient to discuss the following:

New clause 2—Pensions Advisory Commission

“(1) The Pensions Regulator shall establish a committee to be known as the Pensions Advisory Commission.

(2) The Commission shall consist of—

(a) members of the Regulator as provided under section 2(1) of the Pensions Act 2004, and

(b) five other persons appointed by Her Majesty on the recommendation of the Secretary of State.

(3) A person appointed under subsection (2)(b) shall exercise only functions in pursuance of the duties in subsections (5) and (6).

(4) The Commission shall be chaired by a person appointed under subsection (2)(b).

(5) It shall be the duty of the Pensions Advisory Commission to submit to the Secretary of State each calendar year, beginning with the year 2022, a report setting out the Commission‘s views on—

(a) the impact of provisions in Parts 1, 2 and 4 of this Act on—

(i) persons in different parts and regions of the United Kingdom,

(ii) equal treatment of men and women in access to pension provision, and

(iii) persons with a protected characteristic under section 4 of the Equality Act 2010; and

(b) the effectiveness of the powers in Parts 1 to 3 of this Act in enabling the Pensions Regulator to achieve its objectives under section 5 of the Pensions Act 2004.

(6) It shall also be the duty of the Commission to report to the Secretary of State by 31 October 2021 its views on when commercial operators should be able to enter the market for provision of a pensions dashboard service.

(7) The Secretary of State must lay before Parliament a copy of every report received from the Commission under this section.”

New clause 3—Employer debt: trustees’ discretion

“The following changes are made to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678)—

‘(1) In regulation 2, in the definition of ‘scheme apportionment arrangement’—

(a) in sub-paragraph (f)(ii), after ‘apply’, insert ‘but not if the circumstances in paragraph (h) apply’;

(b) at end, insert—

‘(h) the consent of the remaining employer or employers shall not be required under (f)(ii) above where all of the following conditions apply—

(i) the departing employer’s debt was treated as becoming due prior to the coming into force of this provision; and

(ii) the departing employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due, and

(iii) the employer in question was operating as an unincorporated business during his participation in the scheme, and

(iv) the trustees or managers consider that, in the context of the scheme overall, it would not be in the scheme’s interests to seek recovery of the employer’s liability share from the departing employer.’

(2) In regulation 9, after paragraph (14B), insert the following new paragraph—

‘(14C) Condition L is that a debt was treated as becoming due from him under section 75 of the 1995 Act but is excluded under this Condition because—

(a) the employer’s debt was treated as becoming due prior to this Condition coming into force; and

(b) the employer’s debt was less than 0.5% of the scheme’s overall liabilities, as estimated by the trustees or managers on advice of the scheme actuary, as if the whole scheme had been winding-up at the time the debt was treated as becoming due, and

(c) the employer in question was operating as an unincorporated business during his participation in the scheme, and

(d) at or before the applicable time, the trustees or managers have made a determination not to pursue the debt on the grounds that, in the context of the scheme overall, seeking recovery represented a disproportionate cost to the scheme.’”

This new clause is intended to enable pension scheme trustees to exercise discretion not to pursue employer debt (“section 75 debt”) following an employer’s exit from a pension scheme where such debt is below a de minimis threshold. This aims to support unincorporated employers who are now retired for business and for whom there are no easements within the current regulation.

New clause 4—Employer debt: deferred debt arrangement

“The following changes are made to the Occupational Pension Schemes (Employer Debt) Regulations 2005 (SI 2005/678)—

(1) In regulation 6F—

(a) in paragraph (1), leave out ‘A’ and insert ‘Subject to the provisions of paragraph (8) below, a’;

(b) at end, insert—

‘(8) In relation to a frozen scheme, the trustees or managers of the scheme may agree to a deferred debt arrangement where the employment-cessation event occurred at a time prior to the scheme becoming a frozen scheme, providing the conditions of paragraph (3) are met at the time the deferred debt arrangement is entered into.’”

This new clause would permit employers in a pension scheme closed to future accrual to apply for a deferred debt arrangement, providing they meet the other statutory tests. This aims to support employers who are still trading but were not able to use the existing deferred debt easement.

New clause 5—Review of automatic enrolment

“(1) The Secretary of State must, by regulations made by statutory instrument, make any amendment to, or repeal or revoke any provision of, this Act, the Pensions Act 2008 or any other primary or secondary legislation in order to implement the recommendations of the Automatic Enrolment Review 2017.

(2) Any regulations made under subsection (1) must be laid before Parliament within six months of the day on Royal Assent is given to this Act.

(3) No regulations shall be made under subsection (1) unless a draft of the regulations has been laid before, and approved by, a resolution of both Houses of Parliament.

(4) Before the end of a period of two years from the day on which Royal Assent is given to this Act, the Secretary of State must lay before Parliament the report of a further review of the operation of automatic enrolment.

(5) The report under subsection (4) must make a recommendation as to whether the Government should bring forward further legislation to implement the findings of the review.”

This new clause would require the Secretary of State to implement the recommendations of the Automatic Enrolment Review 2017 and require a further review of automatic enrolment within two years.

New clause 6—Occupational pension schemes: review of support—

“(1) The Secretary of State shall undertake a review of the level of support available under the Financial Assistance Scheme to any member of an occupational pension scheme which is a qualifying pension scheme under Regulation 9 of the Financial Assistance Scheme Regulations 2005 (S.I., 2005, No 1986), regardless of whether the employer in relation to that scheme was solvent or insolvent.

(2) The Secretary of State shall lay the review before Parliament no later than—

(a) the day which is six months from the day on which this Act receives Royal Assent, or

(b) if neither House of Parliament sits on the day specified in (a), the first day on which either House sits after that day.”

This new clause would require the Secretary of State to carry out a review of the support available to Financial Assistance Scheme qualifying members, including the former ASW steelworkers.

New clause 7—Regulation of pension superfunds

“(1) The Secretary of State shall publish a statement on proposals for primary legislation in relation to a duty on the Pensions Regulator to regulate pension superfunds.

(2) For the purposes of this section, a pension superfund is a defined benefit pension scheme that allows for the severance of an employer’s liability towards a defined benefit scheme and one of the following conditions applies—

(a) the scheme employer is replaced by a special purpose vehicle (SPV) employer, or

(b) the liability of the employer to fund the scheme’s liabilities is replaced by an employer backed with a capital injection to a capital buffer.

(3) The statement under subsection (1) shall be laid before Parliament before the end of a period of six months from the day on which this Act receives Royal Assent.”

This new clause would require the Secretary of State to publish within six months of Royal Assent proposals for primary legislation to place a duty on the Pensions Regulator to regulate pension superfunds.

New clause 8—Trustees’ voting rights and engagement activities: publication of information

“(1) Schedule 18 to the Pensions Act 2014 is amended as follows.

(2) After paragraph 2, insert—

‘2A The Secretary of State may by regulations make provision requiring the publication of information about—

(a) the exercise of the rights (including voting rights) attaching to the investments of the scheme, by or on behalf of, the trustees of the scheme; and

(b) engagement activities undertaken by or in respect of the investments, by or on behalf of, the trustees of the scheme’”

(3) In paragraph 3, omit “1 or 2” wherever it appears and insert in its place ‘1, 2 or 2A’.”

This new clause would give the Secretary of State the power to create regulations requiring pension schemes to publish information about how voting and other engagement activities have been carried out.

New clause 9—Duty to publish information on the statement of investment principles

“(1) The Pensions Act 2004 is amended as follows.

(2) In section 244, at end insert—

‘(8) The most recent version of the scheme statement of investment principles must be made available to the Pensions Regulator for publication every three years.’”

This new clause is to ensure all scheme SIPs are made available to TPR.

New clause 11—Pension accounts

“(1) A jobholder to whom section 3 of the Pensions Act 2008 applies may by notice require an employer to arrange for the jobholder to receive into a pension account any contribution which would otherwise be made by the employer into an automatic enrolment scheme.

(2) A contribution by a jobholder or by their employer into the jobholder’s pension account shall be invested in a pension scheme offered by an approved pension provider.

(3) The Secretary of State may by regulations make provision—

(a) about the form and content of a notice given under subsection (1), or

(b) about the arrangements that the employer is required to make.

(4) The Secretary of State may make regulations to set criteria by which a pension provider may be approved for the purposes of subsection (2).

(5) Regulations under this section shall be made by statutory instrument and may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.”

New clause 12—Duty to state how non-financial factors are taken into account

“(1) The Occupational Pension Schemes (Investment) Regulations 2005 are amended as follows.

(2) In sub-paragraph (3)(b) of regulation 2 (statement of investment principles), leave out sub-sub-paragraph (vii) and insert—

‘(vii) how non-financial factors are taken into account in the selection, retention and realisation of investments’.”

This new clause would create a duty in the OPSR 2005 for schemes to state how non-financial factors such as beneficiaries’ views are considered in the development of investment policies, replacing the existing duty to state “the extent (if at all) to which” such factors are taken into account.

It is good to see you back in the Chair, Mr Robertson. I wish to speak to the remaining clauses that stand in the name of the Scottish National party, and to support those tabled by other Members as part of this group. My hon. Friend the Member for Gordon will speak to proposed new clauses 3 and 4.

As we have repeatedly said, we are fully supportive of automatic enrolment. We think it has been a big success in getting people saving for their retirement who otherwise would not have, and it does so earlier, which has a compound impact on those people’s ability to save for a dignified retirement. That said, there are issues, some unintended and others relating to the speed of roll-out, that we wish to see addressed. Our new clauses in this group build on the success of automatic enrolment by seeking to expand eligibility to those who were left out earlier and to address issues related to small or micro-sized pension pots.

This Bill is a clear opportunity to address inadequate lifetime savings and inequalities such as the gender pension gap by building on the successes of automatic enrolment. While we wholeheartedly support the premise, far too many have been left behind and still cannot benefit from this important measure, so we want to see the UK Government remove the lower earnings limit and the lower age limit well before the mid-2020s, so that contributions are payable from the first pound earned at the earliest opportunity for savers. We also want to see the Government have much greater ambition in raising contributions beyond 8%, but we understand, in deliberations with the excellent Clerks to the Committee, that that is not within the scope of this particular Bill.

Our amendment would lower the age threshold for auto-enrolment from 22 to 18 and remove the lower limit of the qualifying earnings band so that contributions are payable from the first pound earned. While we welcome the Pensions Minister’s commitment on Second Reading that the UK Government have set a mid-2020s timetable to implement these changes, our new clause would require the Secretary of State to lay this timetable before Parliament. Automatic enrolment should be available to those currently left out at the earliest opportunity. The UK Government need to be accountable to Parliament in implementing these changes to prevent further delays.

As women disproportionately populate low-income and part-time jobs, they would disproportionately benefit from the Government’s getting on with reaching more people with auto-enrolment. Similarly, by removing the qualifying earnings band, low-income workers, who otherwise have little prospect of having a decent private pension, will also benefit. We additionally support Labour’s new clause, which would require the Secretary of State to implement the recommendations of the automatic enrolment review and require a further review of automatic enrolment within two years. That would do a similar job to our new clause 1 and would keep the pressure on Ministers to be far more ambitious. Why wait? We know and have trumpeted the benefits of auto-enrolment as enthusiastically as the Minister himself. Why wait for women and low-income workers to benefit?

As I alluded to earlier in the Committee’s deliberations, we also recognise that an unintended consequence of auto-enrolment is the increasing number of people who move jobs frequently, such as agency workers, and therefore build up a number of small or micro-sized pension pots. Some of those pots might be small as £50 or £100, in which case hard-earned savings could be quickly wiped away by charges, fees and levies.

The Pensions Policy Institute reports that the number of deferred pension pots in the UK defined-contribution master trust market is likely to rise from 8 million in 2020 to around 27 million in 2035, but member charges often erode small deferred member pots over time and small pots can be uneconomic for providers to manage. Extra management charges and costs may eventually be passed on to members through increased charges, and financial instability in master trust schemes arising from too many small ports could, in extreme circumstances, result in trustees’ triggering an event to wind up the scheme.

Our new clause 11 proposes a solution to that by providing for individual pension accounts for people to invest in their own schemes with DC providers. Where someone has earned from more than one employer, rather than having multiple employers make contributions to different schemes on behalf of the worker, the worker could set up an account with a provider and request that their employer allocate their auto-enrolment contributions to that account. That would stop their multiple plots being eaten into by charges and give greater control to the person in whose name the investments are actually being made.

We hope that the Government review pushed for by the Select Committee on Work and Pensions will come up with an answer, not just to the problem of charges that we had an opportunity to address earlier in this Committee, but also with regard to micro-sized pots. This could be an answer, and we look forward to hearing the Minister’s considered perspective.

I briefly referred earlier to our new clause 2, which would see a commission established to cover the terms of this Bill. Hon. Members will know, as they have heard it long enough from SNP parliamentarians, that we support the establishment of an independent standing pensions and savings commission. At another time, when the Minister did not have a majority behind him, he may have looked at versions of some of our suggestions throughout the Bill. We are in a different place, and reasonable cross-party amendments put forward to support stakeholders across the market are being voted down. We reiterate our call for the establishment of an independent pensions and savings commission to look holistically at pension reform, focus on existing inequalities and pave the way for a fair universal pension system.

The entire pension landscape is in need of fundamental reform, particularly given the pressing need to review and enhance automatic enrolment. We ask that the commission start its work by reviewing parts 1, 2 and 4 of the Bill and their impact on different parts of the UK, equal treatment of men and women, and persons with protected characteristics—that is where our attention is focused in new clause 2—and when commercial dashboards should enter the market. That would be the responsible way to take these issues forward.

As I said earlier, time is the wisest counsellor of all, and by taking the time on commercial dashboards, the Minister could consult and take stock with independent experts to ensure that they work for all. We want to see the Money and Pensions Service dashboard as quickly as possible. The Minister seemed to suggest the other day, when we said he needed to take time, that we wanted him to slow down the MaPS dashboard, but that is just not true. The success of the MaPS dashboard is not dependent on commercial dashboards entering the market or arriving at the same time—quite the contrary, unless there has been a deal done or a quid pro quo whereby commercial providers are incentivised to provide their data for the MaPS dashboard in return for them being allowed to develop their own commercial dashboards independently and immediately.

New clause 2 would allow us to take the time to ensure that people are protected. That would ensure that we get it right, and would bring people in on a cross-party basis. That is how the best policy is developed.

It is a pleasure to conclude our consideration of the Bill under your chairmanship, Mr Robertson. As the Committee has agreed, I will make a short contribution on new clauses 5, 6, 7 and 8. New clause 5 is on the theme of auto-enrolment, and I will echo a number of the comments of the hon. Member for Airdrie and Shotts. The new clause would require the Secretary of State to implement the recommendation of the 2017 auto-enrolment review and conduct a further review three years on.

It is a source of great pride that the previous Labour Government introduced auto-enrolment, which transformed the pensions landscape and reversed a long-term decline in pension savings. We now have 10 million more people saving into a pension at work. The policy is widely agreed to have been a success and is praised on both sides of the House. It is a model of good policy making, rooted in consensus.

However, it is always essential to keep such schemes under constant review and develop them if they are to keep pace with changing patterns in the workplace. We are therefore concerned that, even after 10 years, there are an estimated 12 million people under-saving for retirement. To look at the reasons for that and potential solutions, it was welcome that the Government commissioned a review of the policy in 2017. The review found that:

“Current saving levels risk a significant proportion of the working-age population not meeting their retirement expectations. In addition the current structure of automatic enrolment means there are gaps in coverage, in particular for those in low paid part-time jobs and younger workers”.

The review made two recommendations: that the age threshold for auto-enrolment be lowered from 22 to 18, and that the lower limit of the qualifying earnings band be removed so that contributions are payable from the first pound earned by an employee. They are yet to be implemented, so I would welcome some indication from the Minister as to whether he has a timetable in mind for these significant changes.

There is also the question of contribution rates and whether it will ultimately be necessary for them to be increased to ensure that individuals have adequate savings for their retirement. The 2017 review noted that the contributions of 8% are unlikely to give individuals the retirement to which they aspire. As my hon. Friend the Member for Birmingham, Erdington (Jack Dromey) said,

“8% cannot be the summit of our ambition.”—[Official Report, 4 May 2020; Vol. 675, c. 471.]

I would welcome the Minister’s comments on what further work he hopes to do on contribution rates and when he will bring the matter forward to the House.

New clause 6 seeks a review of support for the Allied Steel and Wire pensioners. The plight of the pensioners in that fund is desperate. ASW Ltd was put into receivership in July 2002 and placed in insolvent liquidation in April 2003. The two pension schemes covering the workers—the ASW pension plan and the ASW Sheerness Steel group pension fund—wound up underfunded.

The two schemes are in the financial assistance scheme. Although the workers were assured that they would receive approximately 90% of their expected pensions, the FAS simply has not delivered for them. Former ASW steelworkers have told us how, because of the limited maximum payment, limited indexation and no backdating of payments prior to 2005, many members are receiving considerably less than 90% of their expected pensions incomes, with some receiving only 40% or 50% of what they had hoped for.

The consequence is that many of those individuals worked for decades, paying 100% of their pension contributions, only to find many years later that they would receive half of what they were entitled to. Despite their campaigning leading to legal changes that protected the retirement funds of many other members of wound-up schemes, their situation remains unresolved. We applaud them for their committed and effective campaigning efforts, but it is not right that they have had to fight for their full pensions for almost 20 years. Tragically, some have now died before getting the retirement income that should have been theirs to begin with.

In the light of that sad situation, we make two requests of the Pensions Minister. Will he confirm that he will meet with the former ASW steelworkers, who have been campaigning for 18 years for pensions justice, and will he engage with the intensely difficult situation they find themselves in and work cross-party to find a solution?

New clause 7 would oblige the Secretary of State to bring forward legislation for the regulation of pension superfunds. As my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds) noted on Second Reading, we were rather surprised to see that the Bill was entirely silent on the creation of pension superfunds. It is potentially an extremely significant development, as I know the Minister recognises, and we do not believe it is appropriate for the Government to leave it in the hands of the Pensions Regulator to rule on this matter.

An interim regime is not enough. We need proper regulations that have been subjected to Parliamentary scrutiny. The Minister said on Second Reading that

“the Government do need to address it in due course”. —[Official Report, 7 October 2020; Vol. 681, c. 959-60.]

Is he now in a position to give us further detail? The Government knew of the concerns that we have raised, and concerns have also been expressed by the Governor of the Bank of England and many people in the industry. The Minister has previously accepted that superfunds, as a new market, come with risks, particularly as they will hold large amounts of assets in one vehicle.

We do not understand why measures to regulate superfunds are not in the Bill, and are left to be dealt with “in due course” on such an unspecified timescale. We would be grateful for the Minister’s comments on when he intends to bring forward regulations of the type proposed in Labour’s amendment, and what is currently delaying the process.

Finally, new clause 8 deals with transparency, an issue that will be addressed by my right hon. Friend the Member for East Ham. New clause 8 would give the Secretary of State the power to create regulations requiring pension schemes to publish information about how voting and other engagement activities have been carried out by their trustees. It would be a big step towards clearer, comparable voting disclosure by institutional investors looking after other people’s money.

At the moment, asset managers are allowed to decide which votes to disclose—any they deem “significant”—and there is no consistent voting disclosure template in use by the asset management sector. That renders it extremely onerous for savers or other third parties to compare the voting record of particular schemes against each other in the market. It is a huge challenge even for pension scheme trustees to see how voting has happened across different investment funds, let alone for ordinary savers with an interest in issues such as executive pay or climate change objectives. Too many fail to make their voting records easily accessible.

The hon. Member for Delyn said on Tuesday that individuals with an interest in particular issues, such as climate change or executive pay, would go and seek out information themselves to inform their saving habits, but it is clear that there are significant barriers to doing that. The amendment would help to allow savers to make more informed use of their pension freedoms by comparing the voting records of particular schemes against others. This is something the Minister should strongly support, as it could make a significant contribution to his climate change agenda. Will he work with us on this important issue before Report stage?

It is good to see you back in the Chair, Mr Robertson.

I rise to speak to new clauses 3 and 4, which stand in my name and those of my hon. Friends the Members for Airdrie and Shotts, for Perth and North Perthshire (Pete Wishart), and for Kilmarnock and Loudoun (Alan Brown). I should make it clear to the Minister that it is our intention to make amendments of this nature on Report, so we will hear with interest what he has to say in response to the points we make today.

On Second Reading, I spoke about the impact that section 75 of the Pensions Act 1995, which deals with employer debt, could have on an individual employer within a multi-employer pension scheme. I cited the example of the Plumbing and Mechanical Services (UK) Industry Pension Scheme, but in reality the issue could apply to any scheme of a similar nature. I appreciate that not all of us go to sleep at night and dream of the implications of section 75 of the 1995 Act, so if members of the Committee will bear with me for a moment, I will run through them.

Section 75 sets out regulations that are intended to deal with deficiencies in assets in pension schemes; those regulations have evolved and been amended since they were first introduced in the 1995 Act. The key change came into force in September 2005: any employer who left a scheme or prompted a trigger event, such as retiring or moving from being a sole trader to a partnership or a limited company, was required to pay a section 75 debt. That debt is calculated on a buy-out basis, which assumes that the whole scheme is being bought out by an insurance company, so it is a very expensive way of valuing a pension scheme. Also, part of that buy-out debt comprises the orphan liabilities of past employers, who may have become insolvent or left the scheme before 2005 but did not pay their own section 75 debts, so not only is the scheme being valued generously, but those who remain in it are left to pick up the debt of others who have been able to leave it without that burden being placed upon them.

In the case that I raised, the scheme trustees for the Plumbing and Mechanical Services (UK) Industry Pension Scheme estimate that some 60% or £1.3 billion worth of the total scheme’s liabilities are, in fact, orphan. The trustees did not apply the section 75 debt when the provision was introduced in 2005, saying that, because of the nature of the scheme, it would have been impossible to do so. During that period, they lobbied Government to change the legislation, but the employers were unaware that the legislation was not being applied or indeed that any debts were even due until spring 2016, when they became aware of that situation.

I am given to understand that that has had some pretty serious consequences for the plumbers who have since retired and who have triggered the section 75 debt. It particularly affects a small group of around 30 retired plumbers aged between their late 60s and early 90s, who retired between 2005 and 2016. Some easements were introduced to the section 75 legislation over that period, but none of them apply to this small group, because the trustees did not advise them. I am told that they had a section 75 debt until 2018, and onwards.

The individual debts that I am talking about here have a wide range—up to £1.2 million, but with the majority being in the region of about £700,000. Such debts are totally unaffordable for this group, who were unincorporated sole traders for the most part. Naturally, they and their families are absolutely beside themselves with worry about this situation. If the debt is pursued, as legally it must be, it could lead to their bankruptcy and the repossession of their homes, all in pursuit of assets that, even if they are realised, would still fail to repay the outstanding debt.

As I say, there have been some easements. Deferred debt arrangements were introduced in April 2018 as a statutory easement, to allow an employer who had triggered the section 75 debt simply to defer debt but retain a liability to the scheme. That has allowed employers to continue to trade without facing possible insolvency, dependent on the size of the debt, and it allows employers to continue supporting the scheme. However, this scheme closed to benefit accrual in June 2019. Employers who triggered section 75 before the closure of the scheme, and who continue to trade, are not able to use that easement, as it is only available while a scheme is still open. That is one of the proposals in the new clauses.

The second proposal is to amend legislation to allow the application of a deferred debt arrangement in a closed scheme environment. New clause 3 gives flexibility to waive a debt in certain circumstances, as set out in the clause, where the debt is below a de minimis level; 0.5% for the fund value is suggested, bearing in mind that is a reasonable valuation of the fund and of buying it out on a commercial basis. However, new clause 4 would extend the availability of existing deferred debt arrangements for employers who are still trading, but who do not qualify to use the existing easement at present.

Hopefully we all understand the purpose of section 75, but the obligation to apply it in this case is causing untold misery to groups of small employers who have never sought to do anything other than the right thing by those in their employ. I struggle to believe anyone would have deliberately written that legislation or set up and operated the scheme in such a way to engender this kind of outcome. New clauses 3 and 4 would allow the Minister to resolve this issue mathematically, without undermining the important role that section 75 plays in safeguarding the funding of pension schemes. It is our intention to return to this issue on Report, but I would be grateful for the Minister’s observations on how we might tackle this. If we are not to tackle it in this way, in what way—if any—can the Minister envisage it being addressed in the future?

It is a pleasure to serve under your chairmanship, Mr Robertson. I am very interested by the points raised so far; I am particularly interested—as many others are—in what the Minister has to say in response to the points raised by the hon. Member for Airdrie and Shotts and my hon. Friend the Member for Westminster North about auto-enrolment and where we are going on that.

I will speak to new clauses 9 and 12, and I am grateful for the briefing provided by the organisation ShareAction on the issues raised in these new clauses. One thing I did not need any briefing about was the fact that, 22 years ago, I became the Pensions Minister for the first of two terms in the role. My hon. Friend the Member for Wallasey was a Minister in the Department at the time, which was then called the Department of Social Security. I picked up some work on ethical investment in pension funds started the previous year by my predecessor in the job, John Denham. John made quite a groundbreaking speech on this in July 1998. He wanted a fair hearing for ethical investment to encourage open and honest debate on the issues it raises for the pensions world, and the legal framework within which all pension fund investment must be carried out. It prompted a big debate and much discussion.

One of the officials told me he was given the task of making John’s wish to support pension funds in adopting ethical—although the term was changed quickly to socially responsible—investment policies a reality. At the time, the conventional wisdom was that pension funds had a statutory obligation to maximise the returns on pensions savings and were not allowed by law to take any other considerations into account. The official told me he went around the City looking for ideas and drew a blank until he happened to speak to a senior member of staff at the central finance board of the Methodist Church, who explained how they had been applying ethical principles to their investment strategy for years. One weekend, I remember thinking about all of this, and the official put a copy of a speech—or rather, a sermon—delivered by John Wesley in my red box to help me to understand where all this was heading.

The insight from that conversation with the central finance board of the Methodist Church led to regulations which I introduced in June 1999, and which paved the way for lots of developments since, including the welcome ones in clause 124. The Occupational Pension Schemes (Investment, and Assignment, Forfeiture, Bankruptcy etc.) Amendment Regulations 1999 contained a regulation headed “Additional content of statement of investment principles”, which refers to

“other matters on which trustees must state their policy in their statement of investment principles”.

There are two such matters: one is the

“exercise of the rights (including voting rights) attaching to investments”—

picked up in the new clause that my hon. Friend the Member for Westminster North just spoke to—and the other, the first, is

“the extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realisation of investments”.

That was the first time that those issues were put into the statute book in relation to pension funds. The wording was carried over to the Occupational Pension Schemes (Investment) Regulations 2005, which is the measure the new clause would amend.

Well before that, pension schemes had been legally required to publish a statement of investment principles. The argument of the new clause is that the Department for Work and Pensions and the Pensions Regulator should create a central repository for such statements, so that savers can access them and compare the investment policies of their scheme with others. The modern slavery registry could serve as a model.

A recent report by the UK Sustainable Investment and Finance Association, which under its former name was involved in the discussions I had in 1999, found that two thirds of schemes were not compliant with their legal duty to publish their statement of investment principles. The new clause would therefore create a requirement for trustees to send a copy of the latest version of their SIP to the Pensions Regulator for publication. TPR would also create and maintain a public repository of SIPs. The Minister in the other place, responding to a debate on the issue, indicated that the Government were looking to create a SIP repository. I hope that the Minister will be able to confirm that for us this afternoon, and perhaps indicate when he expects it to be available for the public.

New clause 12 is a straightforward modification of the words I read out from the Occupational Pension Schemes (Investment) Regulations 2005. The regulations state that each scheme’s statement of investment principles should be updated at least every three years, and set out seven areas in which policy should be spelt out in the statement of investment principles. The last of those areas, the seventh, is the one that I read earlier—

“the extent (if at all) to which”

non-financial matters

“are taken into account in the selection, retention and realisation of investments”.

The new clause simply replaces

“the extent (if at all) to which”,

with “how”, so increasing the presumption that non-financial matters should be taken into account.

The principal aim of new clause 12, as indicated in the explanatory statement, is that the views of scheme members should be among the non-financial matters taken into account. Research into people’s views on sustainable investment published last September by the Department for International Development, shortly before its regrettable abolition, found that more than two thirds of UK savers would like their investments to be responsible and to have a positive impact. However, few pension schemes routinely seek to understand their members’ views and even fewer go on to design investment strategies that match their members’ preferences and hopes.

How best to solicit members’ interests and views would depend on the size and resources of a scheme. It could be simply offering the opportunity to comment on a draft investment policy, or it could be a survey or focus groups to help develop policies to reflect members’ priorities and interests. Scheme decision makers would not be bound by the result of consultation with members, but the findings would inform the decisions they make.

Strong and emerging evidence shows that asking members for their views on environmental, social and governance issues can help to increase engagement with pension saving, building a sense of ownership and potentially driving up savers’ contribution levels. Half of those surveyed in the DFID research said that they would save more if they knew that their savings and investments would make a positive difference in the world. Those are important opportunities, and I hope the Minister agrees that we ought to take advantage of them.

It is a pleasure to serve under your chairmanship, Mr Robertson. I am beginning to regret agreeing to address 11 separate new clauses at once—it seemed like a great idea before lunchtime. Given the multitude of speeches I have heard and the multitude of notes to which I have to refer, I am sure that the next 15 minutes will be entertaining. Here goes. I will try to address the new clauses in sequential order to assist colleagues in their understanding, and at least then my notes will prove relatively useful.

On new clauses 1 and 5, the former Secretary of State, David Gauke—he is much missed in this place—set out provisions for the automatic enrolment review to be enacted by this and future Governments. There is a cross-party approach, particularly on automatic enrolment, that was started by the Labour Government, continued by the coalition Government and brought forward on an ongoing basis by the Conservative Government. In my view, the DWP’s single biggest achievement on pensions in the last couple of years has been the double jump to 8% of automatic enrolment in 2019. Opt-outs were very low and the increase in savers has been massive, with well over 10 million people now saving. Savings by young people and women have increased from approximately 40% to well above 80%.

Our thanks are due to all the businesses who provide support on that. That goes to the heart of the issue: even though it is a defined-contribution system, contributions are not made purely by the individual concerned; a 3% contribution is made by businesses, with some assistance from the Chancellor and tax rebates.

We will unquestionably implement the automatic enrolment review, as previously stated, by the mid-2020s. As I said earlier, my view is that there will be a further pensions Act in this Parliament with a view to implementing that. It will, without a shadow of a doubt, require primary legislation both to institute the short points necessary for automatic enrolment and to give an indication of its direction. Primary legislation is also needed for superfunds. I was told that CDCs would need relatively little legislation until, after a lot of work, our 52 clauses were drafted, but I believe that automatic enrolment would require a relatively small Bill. However, there is no doubt that superfunds would need a large Bill, and I will come to that later. The mid-2020s remain our target.

Clearly, we have to balance the current fiscal situation and the fact that this Government, with the support of all Members of the House, have put additional burdens on business, whether by raising the living wage—the rate of which has been massively increased for low-income workers since the days of the minimum wage—or other costs. For certain larger businesses, there is the apprenticeship levy among other things. Unquestionably, the Chancellor, the Prime Minister and the Secretary of State for Work and Pensions have to look at the fiscal framework, and they will have to decide how to do that and whether there should be an increase above 8%.

To the question about whether we will reduce the lower earnings threshold and raise the age groups, the answer is yes, we will. I have made and continue to make that point repeatedly in Parliament.

I welcome the Minister’s commitment to legislate in this Parliament. Can he give us some indication of when in the next four years that Bill might be introduced? December 2024 would be rather late to legislate for something to take effect the following year. Will he reassure us that it will be done a little earlier than that?

I am always nervous about saying that the legislation will come in on this or that particular date because—as the right hon. Gentleman will understand, having held my current job—it is way above my pay grade. I have been trying to get this Bill into this House for a considerable time: well over a year, in fact. The election got in the way of the first attempt, and clearly other things are taking place—whether relating to covid or other legislation.

All I can say is that we will, I hope, have time for such legislation at some stage. It is a matter for the Prime Minister, the Chancellor and the Cabinet, and the usual write-around process that applies, to decide when there will be a further piece of pensions legislation. I cannot be any more specific. Frankly, if I gave a date, the Whip, my hon. Friend the Member for Halesowen and Rowley Regis, would wrestle me down and say that it is not for me to make Government policy and announce a specific date.

I can only say that our intention is that what we are discussing should take place in the mid-2020s. As we all know, summer can be a very long month when one is defining things in Parliament; I take the point that, if it is to happen in the mid-2020s, legislation has to be in order at some particular stage.

The great advantage of the Government’s review of automatic enrolment, “Maintaining the Momentum”, is that it sets out the procedures through which the Government are going to proceed in terms of the lower earnings rate and the change of age. Because of the way payroll works and the sophistication of payroll now that we have automatic enrolment up and running, I am advised that the changes are relatively easy to make. I accept that businesses will need some time, but it will not be like the original version of automatic enrolment, when we had to completely invent a system; this is an expansion of a pre-existing system. The right hon. Gentleman can remind me of that when things do not necessarily go like a Swiss watch, but that is my confidence on the matter. I hope that that provides assurances.

I will touch on one particular point: expansion of 8%. I endorse the comment that 8% is not sufficient—there is common belief about that. We are looking at international models, and Australia is the best example of the way forward. Clearly, I hope that in the longer term we would increase automatic enrolment, but there has to be a balance as to who is going to contribute to that. Will the employer have a larger role, paying more than the 3% that they do at present? Alternatively, will it be solely down to the individual? How can one offset that in respect of tax rebates and other such things?

Such policy work needs to be done on an ongoing basis and will take a little time. We have to be mindful of the fact we are in the middle of particularly difficult fiscal times because of covid. Imposing further burdens on businesses has to be balanced with the desire, which all of us have, to ensure that people have greater savings on an ongoing basis. This is a work in progress. I do not have any difficulty in being held to account for that: quite right, too—I would like to make progress as well. How we make progress is complicated.

The next amendment that the hon. Gentleman for Airdrie and Shotts brought forward was new clause 11, regarding automatic enrolment again. On the simple point about small pots, I should say that the matter is already a work in progress. I endorse so much of the broad thrust of what the amendments are saying. I totally endorse the principle the issue of small pots needs to be examined. The Work and Pensions Committee, to be fair to it, is beginning to look into that, as we discussed earlier. We have convened at the Department. I have asked all the industry sector and some of the third sector people, who clearly matter in this light, to come together and give me a report before the end of November, on a very provisional basis, about what they see as the key challenges and approaches going forward.

I would clearly be surprised if I were not summoned before the Work and Pensions Committee in due course to discuss these matters, in order to try to formulate policy. It seems to me that there is great scope, and a desire, to address a small problem on a long-term basis. In my view, that has to be wrapped up with a consideration of costs and charges as a whole. I would not want to deal with the issue in a bite-sized piece; if I can do it, I will attempt to do it in the round.

On amendment 2, which relates to the Pensions Commission, the hon. Member for Airdrie and Shotts and I have debated this issue on many occasions. There is no doubt that the Pensions Commission, which produced the automatic enrolment review, did a great job. I will always be grateful to it. I accept the broad principle of having a cross-party approach. I would like to think that I have gone to great efforts to have such an approach on an ongoing basis, but it is not the case that the Bill will not have ongoing scrutiny. Clearly, the CDC regime is a subject matter for the Pensions Regulator.

In respect of part 4 of the Bill, the Money and Pensions Service already submits an annual report to the Secretary of State, which is then laid before Parliament. The dashboard is subject to thorough governance requirements and oversight, and detailed processes are in place to ensure that the Pensions Regulator has powers to exercise in respect of annual assurance assessments and quarterly accountable reviews with the chief executive. I do not discount future reviews of some elements of the pensions system. A state pension age review is always done, as legislated for, on an ongoing basis. The Cridland review was the last one, and there is legislation in place that means another one has to take place.

I move on to new clause 6, in respect of the FAS. Although I have great sympathy with the assertions made by the hon. Member for Westminster North on behalf of the ASW, it should be said that the financial assistance scheme has been the subject of a number of reviews throughout its existence. The level of support available to members, and the coverage of the scheme, has improved since its inception in response to criticism that it was less generous than the pension protection fund. Clearly, that dates back to in between the two times that the right hon. Member for East Ham was the Pensions Minister, and to the process by which the FAS was set up.

The scheme, which was set up under the Labour Government and has been endorsed by all Governments since, was never intended to provide a complete replacement for lost pensions. Rather, it was designed to ensure that, in the event of a scheme falling into difficulty, its members were not left with little or none of their expected benefits. I have to make the point again: it is also funded by taxpayers, so any changes that would increase expenditure would need to address those issues and the fact that it is paid for by other taxpayers, especially in the light of this period of high economic uncertainty—albeit that those taxpayer contributions come via the Government. In my opinion, it would not be appropriate to commit to a review at this challenging time. I am happy to engage with the ASW in the future, but I do not wish to get its hopes up about amendments and changes being made to the FAS on an ongoing basis.

The hon. Member for Westminster North raised the issue of pension superfunds. I welcome her support for the broad principle of those. I believe that the DWP has done two very significant things in the creation of CDCs, which is what the Bill does, and in the interim superfund regime. For the first time, we have alternative products for schemes to invest in and proceed with, whereas there was no choice previously. There was a genuine gap in the market—either a scheme was sufficiently funded and was able to proceed to an insurance buy-out or in whatever way it wished to proceed, or it got into difficulties and went into the pension protection fund. There was no alternative or middle ground, but collective defined contributions and superfunds provide that alternative.

There were not many abiding successes of lockdown, but one was the work of the pension protection fund and TPR—I am deeply grateful to its team—in producing the interim regime and doing a Government write-around in the middle of lockdown in order to produce a superfunds interim regime. If there was any doubt about it before covid, there is now no question that superfunds are appropriate, given the impacts of the virus. I massively support them. I cannot give an assurance about producing regulations and the statutory basis within the timeframe given, but I am keen to do so.

I do not dispute that we must put this on a statutory footing; we accept that. However, I have looked at the process for superfund legislation, and it is definitely complex. We will have to respond to the present consultation, having considered the interim regime, and I know that superfund legislation will require at least a 50-clause Bill and probably close to a 100-clause Bill. Such legislation is not a simple undertaking; it will require a proper piece of parliamentary and statutory legislation that will take time.

I am afraid the timeframe envisaged by new clause 7 cannot be met, but the intent is definitely there, in the fullness of time, to proceed by statute, subject to all the usual provisos of requiring Government write-round and the progress of the interim regime as suitably monitored by the Treasury Committee and the Work and Pensions Committee.

The hon. Member for Westminster North raised transparency and stewardship. The Government believe that new clause 8 is unnecessary in part because section 1,277 of the Companies Act 2006 already provides for transparency in the exercise of voting rights. The Act already provides the Secretary of State with the powers to make regulations to require occupational pension schemes to publish information about the exercise of voting rights that are attached to shares.

In relation to transparency of engagement, DWP regulations from 2018 require defined contribution schemes to publish how they have implemented their policies on engagement. Further regulations in 2019 enhanced that and extended it to defined-benefit schemes. The 2019 legislation also introduced a requirement on both DC and DB schemes to describe voting behaviour by or on behalf of trustees, including details of the most significant votes. However, our work in this area continues. I know that the hon. Member for Birmingham, Erdington—he would raise this if he were here—is keen for us to meet and discuss key matters, and a cross-party discussion on the key issue of stewardship on climate change would be worthwhile. He has been pressing me for that for some time, and I will be happy to sit down and thrash that out with him, taking his views and those of other interested parties.

I turn to new clauses 3 and 4, tabled by the hon. Member for Gordon, on plumbers’ pensions. I have met a number of plumbers affected both in various parts of Scotland and in Lancashire and responded to a debate in the main Chamber led by the former Member for Angus early in my time as Minister for Pensions. I am acutely aware of the difficulties, stress and upset experienced by many of the individual plumbers’ firms—small and medium-sized enterprises and decent people—who are trying, as one person put it, to “just plumb away” and have got themselves in a difficult position. It is exceptionally difficult to find a way to resolve the situation as the hon. Gentleman wishes.

As I have made clear in correspondence with colleagues and in the previous debate, a series of easements have been entered into, but I am afraid that the Government cannot agree to the proposal the hon. Gentleman seeks. There are a number of reasons for that, some of which he will be aware of and have been explored previously, but I will set them out in more detail.

The proposal would change legislation for one group of employers to the detriment of scheme members, other employers and, potentially, the Pension Protection Fund. I accept that, as discussed in the House of Lords and by the hon. Gentleman, a threshold set at 0.5% of the scheme’s total liabilities would enable a large number of unincorporated employers to depart schemes without payment, passing a significant level of debt on to the remaining employers. However, although 0.5% sounds like a small amount, multiple instances can quickly add up to a large amount of money being written off.  The Government recognise the difficulty facing employers in managing that debt, but they cannot offer any further easements beyond those already provided for in legislation. To be fair to the hon. Gentleman, he set out the amendments and the differences in legislation that came forward in 2017 and 2018. We are providing assistance to the individual plumbers on an ongoing basis.

The current employer debt system is intended to be equitable to all employers, including those that remain and those that have already paid the debts due from them. It is designed so that if all employers leave the scheme, it will be fully funded on a buy-out basis in order to be able to secure fully the members’ benefits. For the individuals concerned, this particular problem is very emotive and understandably so, but it was specifically addressed in the defined benefit Green Paper and in the White Paper in 2017 and 2018, with a view to trying to see whether there was a way forward on multi-employer schemes. The hon. Gentleman will understand that there are a significant number of multi-employer schemes and, save and excepting the plumbers’ scheme, there is not a call for the change that is sought by way of this new clause. That is the product of the extensive consultation that took place in respect of the DB White Paper and the DB Green Paper.

I accept that new clause 4 is intended to help employers in frozen non-associated multi-employer schemes whose debt became due before the scheme was frozen, by enabling them to agree with the scheme trustees to defer their employer debts. However, the new clause would weaken the protections contained in the current deferred debt arrangement system. We need to balance the needs of the affected employers with the risks to scheme members and other employers.

The new clause would be unfair to those employers previously connected with the scheme who have already paid their section 75 debt and it only offers employers a temporarily reprieve at best, since the debt would still exist and would have to be paid in the future. The employer would have to pay a larger section 75 debt in future if the scheme’s funding position were to decline further, and the employer would remain liable for deficit repair contributions. I respectfully suggest that the new clause would not help sole traders who want to retire or have retired and want to completely end their liability for the schemes.

However, my officials will continue to engage with concerned employers on this issue, especially in relation to the Plumbing and Mechanical Services (UK) Industry Pension Scheme. I understand from the scheme’s annual accounts and financial statements for the year ending 5 April 2019 that,

“the trustees do not calculate or pursue an employer debt where the costs in doing so are considered disproportionate from a financial perspective”.

I am also acutely conscious that there are ongoing legal proceedings in respect of these matters, and a debate as to whether further legal proceedings should take place, so it is probably best that I do not comment further on this particular matter, but I regret that I cannot accede to that new clause.

I turn finally to the new clauses tabled by the right hon. Member for East Ham, the Chair of the Select Committee. I am pleased to say that we are already addressing the points that he seeks to raise. I fear that the proponents of new clause 11, in particular, are not aware of the depths of the TCFD consultation from August of this year, because I understand the specifics of that consultation address those particular points—[Interruption.] It helps if I turn to the right section; I am meant to be talking about new clause 9. Like the hon. Member for Feltham and Heston, I am losing my voice.

New clause 9 is not required, as in August this year, the TCFD consultation was issued on exactly the same proposals and the Pensions Regulator has already committed to action on that point. The DWP has made proposals, as it has been uncovered by the UK Sustainable Investment and Finance Association and others that compliance with the statement of investment principles regulations has been poor in some cases.

Our consultation made proposals to require trustees of occupational pension schemes to provide a web link to the published SIP directly to the Pensions Regulator. We have proposed inclusion of the address of the SIP as part of the scheme return, which is provided from trustees directly to the regulator for most schemes every year. New clause 9 would require trustees to reactively send the information to the Pensions Regulator for publication every three years. It is a far less streamlined approach than that on which the Government have already consulted. We will publish our response on that early next year.

I want to press the Minister on the timescale. I take the point that a response will be published early next year, so when does he expect the arrangements to be in place so that people can see the statements online?

My note says early next year. I cannot elaborate further than that but I will write to the right hon. Gentleman before Report and set out in more detail the precise position in respect of the timetable and when we are expecting that to go.

Finally, I turn to new clause 12. I was not aware that it had been selected, so my response to it will be relatively limited. I know the organisation that is in favour of the proposal, but the best argument against it is that the Law Commission, which is definitely not Government and is an esteemed body, looked at this particular point on two occasions, and rejected it both times. There are reasons why. It takes the view that while it is entirely right and proper for the likes of ESG to influence investment, the individual decision-making processes of the trustees should not be influenced as is proposed by the proponents of this argument. I bow to the Law Commission on that, and it is certainly not DWP policy to take that way forward.

There is, however, a current requirement on trustees to disclose, via their statement of investment principles, how they take into account members’ views. Giving trustees the option not to follow those views, which may be from a subset of members, is appropriate and flexible. The regulations already allow trustees to consult members, ensuring that investment decisions are taken in the interest of the membership as a whole, and not driven in one direction by a small cohort of highly engaged individuals. I accept that there is a balance—the Law Commission took this view—between members being allowed to have their say and being involved in the process and a small cohort of particularly active members dictating a policy that would apply to the many. With respect, I rely upon the Law Commission in this, and invite colleagues to withdraw the new clause.

I think I have addressed all 11 new clauses and my voice is beginning to go. If I have not done so or have misspoken, because—as the Committee is aware—I am not able to take notes saying, “Minister please correct that for the record”, I will undertake to do that, as I will throughout this process. I therefore invite colleagues to withdraw the new clauses, except for those that they wish to put to a vote.

I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 5

Review of automatic enrolment

“(1) The Secretary of State must, by regulations made by statutory instrument, make any amendment to, or repeal or revoke any provision of, this Act, the Pensions Act 2008 or any other primary or secondary legislation in order to implement the recommendations of the Automatic Enrolment Review 2017.

(2) Any regulations made under subsection (1) must be laid before Parliament within six months of the day on Royal Assent is given to this Act.

(3) No regulations shall be made under subsection (1) unless a draft of the regulations has been laid before, and approved by, a resolution of both Houses of Parliament.

(4) Before the end of a period of two years from the day on which Royal Assent is given to this Act, the Secretary of State must lay before Parliament the report of a further review of the operation of automatic enrolment.

(5) The report under subsection (4) must make a recommendation as to whether the Government should bring forward further legislation to implement the findings of the review.”—(Seema Malhotra.)

This new clause would require the Secretary of State to implement the recommendations of the Automatic Enrolment Review 2017 and require a further review of automatic enrolment within two years.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

New Clause 7

Regulation of pension superfunds

“(1) The Secretary of State shall publish a statement on proposals for primary legislation in relation to a duty on the Pensions Regulator to regulate pension superfunds.

(2) For the purposes of this section, a pension superfund is a defined benefit pension scheme that allows for the severance of an employer’s liability towards a defined benefit scheme and one of the following conditions applies—

(a) the scheme employer is replaced by a special purpose vehicle (SPV) employer, or

(b) the liability of the employer to fund the scheme’s liabilities is replaced by an employer backed with a capital injection to a capital buffer.

(3) The statement under subsection (1) shall be laid before Parliament before the end of a period of six months from the day on which this Act receives Royal Assent.”—(Seema Malhotra.)

This new clause would require the Secretary of State to publish within six months of Royal Assent proposals for primary legislation to place a duty on the Pensions Regulator to regulate pension superfunds.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Question proposed, That the Chair do report the Bill, as amended, to the House.

I rise briefly, Mr Robertson, to thank you and your fellow Chair; thank the Clerks, who have worked with all colleagues to a massive degree, which is extraordinarily difficult in times of covid; and thank the Hansard team. I would normally thank the Doorkeepers, but they have not had to listen to us—lucky them. I particularly want to thank colleagues who have proceeded to pass a 132-clause, 200-page Bill in under a day and a half.

With proper parliamentary scrutiny where it particularly mattered, while working on a cross-party basis on other things. I also thank my team at the Department for Work and Pensions, who have put in Herculean efforts to produce this Bill, and it would not be inappropriate to thank the Whips for keeping us in due order throughout this wonderful process.

I give my thanks to everybody for their good humour and co-operation, and to the Clerks for their help.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Committee rose.

Written evidence reported to the House

PSB20 Carys Boughton, Gareth Ludkin, John Hardy & (on behalf of Divest Parliament) Joel Moreland (Principal Consultant, Social and Environmental Finance), Mark Campanale (Founder & Executive Director, Carbon Tracker Initiative), and Robert Noyes (Divest / Invest Campaigner & Researcher, Platform)

PSB21 Caroline Pearson, Pensions Manager, L&Q

PSB22 Aimee Chadha

PSB23 Steve Delo, PAN Trustees

PSB24 Pensions Policy Institute

PSB25 Dr Kathryn Waite, Associate Professor in Digital Marketing, Edinburgh Business School, Heriot Watt University, Edinburgh, and Professor Tina Harrison, Professor of Financial Services Marketing and Consumption, University of Edinburgh Business School, University of Edinburgh

PSB26 Willis Towers Watson

Environment Bill (Eleventh sitting)

The Committee consisted of the following Members:

Chairs: James Gray, † Sir George Howarth

† Afolami, Bim (Hitchin and Harpenden) (Con)

Anderson, Fleur (Putney) (Lab)

† Bhatti, Saqib (Meriden) (Con)

† Brock, Deidre (Edinburgh North and Leith) (SNP)

† Browne, Anthony (South Cambridgeshire) (Con)

† Docherty, Leo (Aldershot) (Con)

† Furniss, Gill (Sheffield, Brightside and Hillsborough) (Lab)

† Graham, Richard (Gloucester) (Con)

† Jones, Fay (Brecon and Radnorshire) (Con)

† Jones, Ruth (Newport West) (Lab)

† Longhi, Marco (Dudley North) (Con)

Mackrory, Cherilyn (Truro and Falmouth) (Con)

† Moore, Robbie (Keighley) (Con)

Pow, Rebecca (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)

Thomson, Richard (Gordon) (SNP)

† Whitehead, Dr Alan (Southampton, Test) (Lab)

† Zeichner, Daniel (Cambridge) (Lab)

Anwen Rees, Sarah Ioannou, Committee Clerks

† attended the Committee

Public Bill Committee

Thursday 5 November 2020

(Afternoon)

[Sir George Howarth in the Chair]

Environment Bill

Clause 24

Co-operation duties of public authorities and the OEP

I beg to move amendment 190, in clause 24, page 14, line 29, at end insert—

“(g) a Scottish local authority,

(h) a Scottish housing association, or

(i) a Scottish environmental regulator.”

This amendment seeks to ensure clear reporting lines in Scotland and to ensure that the OEP’s remit does not clash with that of the Scottish regulator.

This amendment—I touched on this on Tuesday—continues the intent of amendment 188. Its aim is to ensure that Scottish public bodies do not duplicate their chain of authority, that they report to the correct bodies and that the devolved settlement around environmental protection is protected. It would basically ensure that the devolved nature of the Administration in Scotland was respected, that the reporting lines for those duties were clear and that the remit of the Office for Environmental Protection did not clash with that of the Scottish regulator.

I hope the Minister will see that muddying the waters of authority in the present way is rather unhelpful, and I hope he and his colleagues will see fit to support what would be a very reasonable addition to the Bill.

I thank the hon. Member for her contribution. I would like to reassure her that the Bill respects all the devolution settlements, including the Scotland Act. Therefore, the duty to co-operate does not apply to Scottish Ministers, the Scottish Parliament or any person carrying out devolved functions, and the public authorities listed in the amendment are already excluded from the duty to co-operate to the extent that they will be carrying out devolved functions. That means that these public authorities would not be required to share any information with the OEP in relation to their devolved functions in Scotland. Therefore, it is not necessary to list them as excluded bodies for the purposes of clause 24.

I support the hon. Member’s intention to avoid overlaps with the functions of the equivalent Scottish governance body. That is why we have appropriately sought to limit the OEP’s remit to reserved matters, while avoiding any devolved matters that would appropriately be dealt with by that other body. I therefore ask the hon. Member to withdraw the amendment.

I am just trying to establish this from the Minister: all these bodies are included in the reference to the Scottish Government—to “the Scottish Ministers”. I think that that is what the Minister is saying. If that is indeed the case, although I stick to my point that all matters of the environment should be under the aegis of the Scottish Government, I am content to withdraw my amendment at this point, but I might revisit it on Report and Third Reading. We will, of course, be speaking to other amendments relating to the same matter later on. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 24 ordered to stand part of the Bill.

Clause 25

Monitoring and reporting on environmental improvement plans and targets

I beg to move amendment 98, in clause 25, page 15, line 26, at end insert

“including setting out what action will be taken”.

This is a fairly simple and straightforward amendment, which I hope will be taken in a fairly simple and straightforward manner. In subsections (9) and (10) of clause 25, there is provision for the Secretary of State to do certain things. By the way, I cannot resist emphasising that on this occasion the Secretary of State “must” do them. Subsection (9) states:

“The Secretary of State must—

(a) respond to a report under this section, and

(b) lay before Parliament, and publish, a copy of the response.”

Subsection (10) states:

“Where a report under this section contains a recommendation for how progress could be improved, the response must address that recommendation.”

But the clause does not include a provision for setting out what action the Secretary of State might take in response to that report. Amendment 98 would add the words,

“including setting out what action will be taken”.

It would be a prudent addition to the Bill, ensuring that when the Secretary of State is responding to an annual reporting process, he or she responds to the fact not just that there is a report, but that there is a report and that action should be taken. The Secretary of State ought to record at the same time as responding to the report what actions he or she is going to undertake.

I thank the hon. Gentleman for this amendment, as it allows me to highlight the reporting mechanisms and duties the Bill creates for the Office for Environmental Protection and the Government.

These carefully designed reporting mechanisms are central to the OEP’s ability to hold the Government to account on their environmental commitments. Clause 25(10) already requires the Secretary of State to address any recommendations made by the OEP when they respond to the OEP’s annual report. This requirement was added to the Bill following pre-legislative scrutiny. It is expected that Ministers will respond to the OEP’s recommendations in the Government’s own progress report on the environmental improvement plan. This report must describe what has been done over the previous year to implement the EIP—that is, what actions have been taken—and consider whether the natural environment has improved. Both the OEP’s report and the Government’s response will be published and laid before Parliament. This gives stakeholders and Parliament the opportunity every year to scrutinise whether the Government have taken action in response to the OEP’s recommendations.

As part of the triple lock in the targets clauses, the Government are required to review the EIP at least every five years. In doing so, they must consider whether further or different steps should be included in the plan specifically to achieve interim and long-term targets. This would include consideration of the OEP’s recommendations since the last review. Given that the Government are already required to respond to the OEP’s recommendations in this way, there is no need to include any additional requirement in the Bill to set out the actions that the Government will take. I therefore ask the hon. Gentleman to withdraw his amendment.

I thank the Minister for that explanation. I am not entirely sure that it completely satisfies our concerns, but under the circumstances we do not wish to press the amendment to a Division this afternoon. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 25 ordered to stand part of the Bill.

Clause 26

Monitoring and reporting on environmental law

I beg to move amendment 99, in clause 26, page 15, line 31, at end insert “(including international environmental law)”.

Again, this it is a fairly straightforward amendment. For the sake of clarity and completeness, it would add half a line to the Bill concerning the monitoring under clause 26 by the OEP of the implementation of environmental law. Clause 26(1) states: “The OEP must”—again, “must”—

“monitor the implementation of environmental law.”

As we alluded to earlier in our proceedings, we are simply suggesting adding, “(including international environmental law)”, so that the OEP is required to have regard to what is happening in environmental law not only here in the UK, but elsewhere, for the greater elucidation of what is happening in environmental law in this country. The amendment would make it clear that that is a responsibility of the OEP. We think it would strengthen the position in terms of a light being shone on not just UK environmental law, but environmental law across the world.

I rise to support the amendment. It is all very well having environmental law, but we must take account of international law as well. As we have heard in previous debates, air quality has no boundaries as such. We must also take account of the fact that international law will impact on the way we manage recycling, waste and so on. I therefore stand in support of the amendment.

I thank the hon. Gentleman for tabling the amendment, as it gives me the opportunity to clarify the OEP’s remit. The intention of the amendment is to include international environmental law within the remit of the OEP’s monitoring function only where it is relevant to the UK. However, the relevant international environmental law already falls within the remit of the OEP in three ways.

First, any domestic legislation that implements an international convention and meets the definition of environmental law—for example, the conservation of habitats and species regulations implementing the Bern convention on the conservation of European wildlife and natural habitats, and the EU habitats and birds directives—would already be in the scope of the OEP. Secondly, the OEP will be able to scrutinise our international environmental commitments where they are included in the environmental improvement plan, for example our commitments to the UN convention on biological diversity. Finally, the Secretary of State may ask the OEP’s advice when fulfilling the duty, under clause 20, to report on significant developments in international environmental protection legislation.

I hope that reassures the hon. Gentleman that the OEP has already been given a role in holding the Government to account for our international environmental commitments. I therefore hope that he will withdraw the amendment.

I am not entirely sure that what the Minister has said this afternoon clarifies the matter to the extent that we wanted in our amendment. However, I draw attention to the fact that when someone says something in this Committee it goes on the record and can be used subsequently for the purpose of clarifying the intentions behind a measure in the Bill. Nevertheless, the fact that the Minister has, by way of a not quite bang-on description of exactly what is happening at the moment, gone slightly further in his clarification of what he thinks would be the responsibility of the OEP under these circumstances, is, I think, good enough for me. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 30, in clause 26, page 15, line 33, at end insert—

“(2A) But the OEP must not monitor the implementation of, or report on, a matter within the remit of the Committee on Climate Change.

(2B) A matter is within the remit of the Committee on Climate Change if it is a matter on which the Committee is, or may be, required to advise or report under Part 1, sections 34 to 36, or section 48 of the Climate Change Act 2008.”—(Leo Docherty.)

This amendment modifies the OEP’s duty to monitor, and power to report on, the implementation of environmental law under clause 26. It provides that the OEP must not monitor or report on matters within the remit of the Committee on Climate Change, which is defined in subsection (2B) by reference to specified provisions of the Climate Change Act 2008.

Clause 26, as amended, ordered to stand part of the Bill.

Clause 27

Advising on changes to environmental law etc

I beg to move amendment 4, in clause 27, page 16, line 16, leave out

“may, if the Minister sees fit,”

and insert “must”.

At first sight, this amendment looks as if it is just another “may” and “must” amendment. I say “just”, but I think Members have got the message that this is something we are concerned about throughout the Bill. The Bill is written in such a way that Ministers may do all sorts of things, but there are very few things that they must do. It would strengthen the Bill immensely if the “mays” were converted to “musts”. The hon. Member for Falmouth and—

Sorry, Gloucester—it is in the west country, so that is okay. I hope our listeners in the west country will not be offended by that comment. As the hon. Member for Gloucester said earlier, there are a considerable number of circumstances where replacing “may” with “must” could do a very good job.

This is a particularly egregious version of that “may” or “must” dilemma. Clause 27(6) states:

“The Minister concerned may…lay before Parliament—

(a) the advice, and

(b) any response the Minister may make to the advice”—

that is, the advice on changes to environmental law and so on. I have deliberately left out a little bit of that subsection. Over and above “may”, it says,

“if the Minister thinks fit”.

The preceding subsection gives the OEP a responsibility to publish advice on changes to environmental law, stating:

“The OEP must publish—

(a) its advice, and

(b) if the advice is given under subsection (1), a statement of the matter on which it was required to give advice and any matters specified under subsection (2).”

The OEP has a duty to do that—it must publish the advice.

When that advice gets to the Minister’s desk, the Minister may not feel like responding at all, and the Minister may justify the fact that he or she has not responded at all by simply saying, “Well, I didn’t think fit to do it.” That phrase is capable of any interpretation whatever. All the Minister has to do is say, “I didn’t bother to publish the advice or any response to it because I didn’t think fit to do so.” There is no objective test of that; the Minister can just decide that they do not want to do it, and that is the end of it. That is a really bad piece of drafting, and it ought to be removed. At the least, we want to see the word “may” replaced by “must”, but we also think that the additional anti-belt-and-braces device—“if the Minister thinks fit”—should be removed from the clause.

The Bill provides the OEP with statutory functions that enable it to provide advice on any proposed changes to environmental law. It can also provide advice, at the request of a Minister, on any other matter relating to the natural environment. The clause provides the Minister with a discretionary power to lay the OEP’s advice and any response they wish to make to it before Parliament. In this situation, it is entirely appropriate to provide the Minister with that flexibility.

The provision of advice from the OEP to Government may not simply be a single event but could be an iterative process. Given that the OEP will become an expert body, Ministers may regularly ask it for advice, which may include specific technical questions on relatively minor matters. Requiring the OEP’s advice to always be laid before Parliament may impede the interaction between the OEP and Government. The Government should be able to seek advice from and respond to their public bodies with ease. This approach is not new; the advice provided by the Committee on Climate Change under sections 33 to 35 of the Climate Change Act 2008 is not laid before Parliament. Flexible, case-by-case provision is needed here, and it would be inappropriate to convert this power into an inflexible duty. The Committee should be assured that, if the OEP’s advice is significant enough for Parliament to debate it, the Minister will lay it before Parliament so that it can be discussed.

Some of us Opposition Members do not have experience of government, so we have to trust the way others work, but I find this slightly extraordinary. It seems to me that if this is in legislation, it is not a question of just picking up the phone and having a casual chat with people; it is about seeking advice. If the Minister is seeking advice, why on earth should that not be available to Parliament? Parliament ought to be able to see what the Government are doing. That does not preclude the odd informal phone conversation.

I take the hon. Gentleman’s point, but the key word here is “flexibility”. It is important that flexibility be retained in the relationship so that the Government can interact with the OEP and other public bodies with ease. That is the important principle at stake here.

The OEP is required to act transparently, and any advice that it provides, either on its own initiative or at the request of a Minister, must be published. Parliamentarians will be able to use the OEP’s published advice to question the Government on action they have taken in response to the OEP’s advice. I hope that has eased some of the concerns of the hon. Member for Southampton, Test, and I courteously ask him to withdraw the amendment.

I am a bit bemused by the passage that the Minister has just read out. The process here is that the Minister is laying something before Parliament. That is all the Minister is doing, or might be required to do. I really cannot think why that affects the moving nature of the relationship or the question of iterative changes, which the Minister alluded to. It seems to me that that answer has actually dug the hole a bit deeper, in terms of what concerns us about the clause.

The clause relates to advising on changes to environmental law, which it should absolutely be the province of Parliament to have a good look at. If the clause is simply about the relationship between the OEP and a Minister, and the Minister can, at his or her pleasure, decide whether something goes before Parliament, although it is true that Parliament can, in theory, quiz the OEP separately about what it is doing, that requires all sorts of other devices to be put in place. The laying before Parliament of the advice and, most crucially, any response the Minister may make to that advice, would mean that Parliament had a reasonably automatic route to deciding what it wanted to do about those things.

Indeed, taking the clause at face value, we know that under some of the procedures in this place, it would be very difficult for MPs to find out what had gone on, particularly in terms of the Minister’s response to advice that the OEP provided. That response may be in the form of an internal communication, which could be revealed to Parliament only by quite assiduous work to try to get it on the public record. This seems to me a completely unsatisfactory formulation for that reason alone.

The shadow Minister is making an important point. The wording in the clause is

“if the Minister thinks fit”.

Again, the power is now vested in one person, and we are back in a situation in which, if it is a good Tuesday, the Minister may do it; if it is a bad Tuesday, he may not. This is where we need to take the subjectivity out. The objective advice that must be given by the OEP and published should then make its way naturally to Parliament, to ensure that it can be acted on.

My hon. Friend is absolutely right. She emphasises that the proper relationship is between the OEP, the Minister and Parliament, not the OEP, the Minister and maybe Parliament. That is what this issue is about.

This is not quite the same as other issues that this Committee has considered, which were about the extent to which the Government may be trying to withdraw or reduce the powers of the OEP. Nor, indeed, is it a question of a simple “may” or “must”, because it goes to the heart of the need for that three-part relationship when it comes to changes to environmental law.

I am getting a little weary of pointing out these lacunae and various other things in the Bill. On this occasion, we do not want to divide the Committee, but I hope that the Minister has heard what we say about the relationship between the Committee, Ministers and Parliament, which it would be in the Government’s own interest to clarify, because opaque processes can become the cause of quite unnecessary tussles, misunderstandings and opposition. Simply making things open, transparent and clear will prevent those difficulties in most instances. If those difficulties can be compounded depending on whether the Minister has a good or a bad Tuesday, as my hon. Friend the Member for Newport West said, the chances of something happening that may not be to the advantage of the Government are also then compounded.

As I say, I am not seeking to divide the Committee, but I hope that the Minister will consider whether an amendment to the Bill at a future date might be appropriate to make matters clear. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27 ordered to stand part of the Bill.

Clause 28

Failure of public authorities to comply with environmental law

I beg to move amendment 117, in clause 28, page 16, line 30, after “means a” insert—

“Minister of the Crown, a government department and public body, including a local authority, or any”.

This amendment clarifies that Ministers, government departments and public bodies are public authorities in respect of all their functions.

With this, it will be convenient to discuss amendment 191, in clause 28, page 16, line 39, at end insert—

“(f) a Scottish local authority,

(g) a Scottish housing association, or

(h) a Scottish environmental regulator.”

This amendment seeks to increase the definition of ‘public authority’ in relation to failures by public authorities to comply with environmental law.

Amendment 117 seeks clarity about what a public authority is. Hon. Members will see from perusing the amendment paper that it is not an action amendment; it does not ask the Government to do anything differently. It amends that part of the Bill—a part found in all Bills—that defines words and terms in the Bill. Although I cannot put my finger on it exactly, I believe there is a definition of “public authority” elsewhere in the Bill, but not in this clause.

Amendment 117 would put a definition of “public authority” in this part of the Bill by inserting before

“a person carrying out any function of a public nature that is not a devolved function, a parliamentary function or a function of any of the following persons”

the words

“a Minister of the Crown, a government department and public body including a local authority”;

those would be public authorities carrying out that function. That would expand the definition in the Bill to match what is said elsewhere in the Bill about what a public authority consists of.

I am grateful for the opportunity to speak in support of the amendment. We are well aware that the terms “public authority” and “public body” are often used interchangeably, which can lead to a lack of clarity. We are concerned that “public authority” could be interpreted as meaning a smaller category of public bodies. Public bodies are sometimes, for the avoidance of doubt, explicitly listed in legislation as being encompassed by the term authority. For example, section 28G of the Wildlife and Countryside Act 1981 clarifies that authorities include

“any other public body of any description.”

This clarification is helpful for those reading only part of the Bill; it means that they do not need to read the whole Bill to understand a clause. It is important that we clarify what we mean by the term, so we welcome the amendment.

I thank hon. Members for their contributions. I agree that it is of great importance that the OEP should be able to hold public authorities to account, and that all parties should have certainty about its remit. I assure hon. Members, however, that the provisions in the Bill are sufficient to ensure both those things.

Regarding amendment 117, we have deliberately taken a broad approach to defining a public authority as

“a person carrying out any function of a public nature”,

subject to a number of specific exclusions. The same approach is used in a number of other Acts, including the Human Rights Act 1998 and, more recently, the European Union (Withdrawal Agreement) Act 2020. It is, therefore, an approach with which the courts are familiar.

The existing definition already covers UK Ministers and Government Departments, local authorities, arm’s length bodies such as the Environment Agency, and all other bodies that carry out public functions. It is therefore unnecessary to list specific types of public authority in the Bill, as they are already captured. Furthermore, by including the term “public body” without defining it further, this amendment would introduce a lack of clarity about who and what is covered by this particular new element of the definition.

I reassure the hon. Member for Edinburgh North and Leith that the Bill respects the devolution settlements, including the Scotland Act 1998. Scottish Ministers, the Scottish Parliament and any person carrying out devolved functions have been excluded from the remit of the OEP. The public authorities listed in amendment 191 are, therefore, already excluded from the remit of the OEP, to the extent that they are carrying out devolved functions, so it is not necessary to list them as excluded bodies for the purposes of clause 28. I support her intention of avoiding overlaps with the equivalent Scottish governance body, Environmental Standards Scotland. That is why we have appropriately sought to limit the OEP’s remit to reserved matters, while avoiding any devolved matters that would appropriately be dealt with by that body.

In conclusion, I hope that Members are reassured that the definition is fit for purpose. It both avoids overlaps with bodies carrying out devolved functions, and ensures that the OEP has oversight over all relevant public authorities. As such, I politely ask the hon. Member for Southampton, Test, to withdraw the amendment.

I am somewhat reassured by the Minister’s comments. He has basically given me the same assurance as he gave for amendment 190—that all the bodies covered in the amendment are already covered by references to either “(d) a devolved legislature” or “(e) the Scottish Ministers”. I am happy with that assurance and will not press amendment 191.

Likewise, although we think it would be a good idea to have the words in amendment 117 in the Bill, we are a little reassured by what the Minister has said, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 28 ordered to stand part of the Bill.

Clause 29

Complaints

I beg to move amendment 192, in clause 29, page 17, line 5, leave out subsection (4).

This amendment would allow public bodies to report the actions of other public bodies where they are at fault.

The amendment has come about because it seems a little strange to me that public bodies would be excluded from the reporting side of the system, particularly as public bodies might be reckoned to be rather more likely to receive knowledge about breaches. If public bodies should be held to account, why is it sensible for them to not aid in holding other public bodies to account? Reports made by those carrying out public functions are not likely to be less valid, or less based on true concern, so I do not feel they should be discounted. I am keen to hear the Minister’s response, because, as I say, it seems a strange part of the Bill.

I thank the hon. Lady for tabling her amendment. It is of course important that the OEP be aware of potential breaches of environmental law, and the power to receive complaints is an important element of that. However, it would not be appropriate for one public authority to be able to submit a complaint to the OEP about another public authority; it would amount to one part of the government system complaining about another. There are more appropriate ways for public authorities to resolve such disputes.

Public authorities are expected to work together constructively to resolve any instances of alleged non-compliance. For example, the Government’s code of good practice is clear that Government Departments and arm’s length bodies should

“develop constructive working relationships based on trust, respect and shared values.”

Furthermore, if a public authority has a specific role in regulating other public authorities, mechanisms will already be in place to enable the relevant bodies to enforce the relevant regimes. For example, when a local authority applies to the Environment Agency for an environmental permit and is subject to permit conditions, the Environment Agency already has powers to take the necessary enforcement action under existing legislation if the local authority fails to abide by the conditions.

There are also relevant precedents for our approach, which is broadly similar to that in the Local Government Act 1974 in relation to what is now called the local government and social care ombudsman. In that Act, public authorities are also excluded from submitting complaints to the ombudsman.

I note that a person who works for a public authority would still be able to submit a complaint in a personal capacity, rather than on behalf of their organisation. As such, I hope that the hon. Member is reassured that the provision in clause 29(4) is appropriate, and ask her to withdraw the amendment.

I am not entirely convinced by the Minister’s response. My point about public bodies being more likely to hear of potential breaches from other public bodies still stands, but I will reflect a little more on what he has said. I will withdraw the amendment, but I might revisit it in future. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 29 ordered to stand part of the Bill.

Clause 30

Investigations

I beg to move amendment 5, in clause 30, page 18, line 6, leave out “may” and insert “must”

Where the OEP carries out an investigation this amendment seeks to ensure that it is made public.

This is another “may” and “must” amendment, which draws attention to an interesting passage of “mays” and “musts” in this clause that culminates in letting the OEP off. Subsection (1) states:

“The OEP may carry out an investigation under this section if it receives a complaint”

made under the previous section. Subsection (2) states that it

“may carry out an investigation under this section without having received such a complaint if it has information that, in its view, indicates that…a public authority may have failed to comply with environmental law, and…if…the failure would be a serious failure.”

So it can carry out an investigation.

However, subsection (4) states:

“The OEP must notify the public authority of the commencement of the investigation.”

So there is a requirement and a duty on the OEP to tell the public authority what it is doing about the investigation. Not only must it tell the public authority, but under subsection (5) it must

“prepare a report on the investigation and provide it to the public authority.”

Then, subsection (8) states that the report should set out

“whether the OEP considers that the public authority has failed to comply with environmental law…the reasons the OEP came to that conclusion, and…any recommendations the OEP may have”.

So there is quite a powerful set of instructions to the OEP as to what it may do when it carries out an investigation into a public authority and how it is supposed to prepare a report. It must set out the things that I have just cited.

After all that, subsection (9) states:

“The OEP may publish the report or parts of it.”

Or it may not; it may keep it to itself and put it in a cupboard. Having done all that, the OEP is not required to do anything about it. However, subsection (10) states:

“If the public authority is not a Minister of the Crown, the OEP must also…notify the…Minister of the commencement of the investigation, and…provide the relevant Minister with the report prepared under subsection (5).”

So the OEP must provide the Minister with something if the public authority is not a Minister of the Crown, but it does not have to publish the report. It is not clear whether the Minister has to do anything if the OEP does not, although the OEP, instead of leaving the report in the cupboard, might send it across the Minister’s desk.

We therefore have a circularity that ends in a dead end, if it is possible to conceive of such a thing. That concerns me, because if I were the interim chair of the OEP and I was not completely au fait with everything that it ought to do or not do, I would take that passage to mean that the OEP does not actually have to do very much. I do not think that is good enough; the OEP should be bound by what it is required to do in the case of these investigations.

Does my hon. Friend agree that the Bill cannot make up its mind whether the OEP is a strong body that stands for environmental rights or a puppy of the Government?

That is an interesting point. This clause does not appear to be able to decide whether the OEP should or should not do something. Having said that it should be a strong, independent body, to the extent that the Government are thinking about how the word “independent” may be interpreted, the Bill seems to let it perform less than its best, in terms of what that independence might consist of.

We have seen today a number of further insinuations that the Office for Environmental Protection will be less than satisfactorily independent. This is the first time that such an office has been created in this country—it is a unique historical moment—and all the evidence we have heard so far clearly suggests that it is up to the OEP to define a large amount of its role and that the Government are giving it the opportunity to do so. Surely we should accept that this will be a great step forward and stop undermining it.

It is not a question of undermining the integrity of the OEP at all. As the hon. Gentleman says, it does not exist yet, although bits of it are gradually coming into existence and may materialise in corporeal form in due course. It is therefore not easy to say that anyone in this room is undermining its performance and actions. We are talking about whether the framework within which it functions will work well or not. It is incumbent on us to ensure that, as the OEP comes into existence, the framework is as good as it can be and that the lines of its relationship with Parliament and Ministers are as clear as they should be. We are not undermining what the OEP will do; we are trying to support it by clarifying, before it is under way, what the boundaries are, how they work and who is expected to do what. That is not clear in this passage of the Bill.

I completely support the OEP’s independence, but I am confused. At the moment, the OEP can decide whether it publishes a report, but the hon. Gentleman’s amendment proposes that it must publish a report, which presumably reduces rather than increases its independence of action. When it does a report, it might decide that there are certain things that it does not want to publish for certain reasons—we do not know, because we cannot pre-empt it. The hon. Gentleman is saying that it has to do something, which surely reduces its independence.

With respect, independence has nothing to do with an authority not doing what it should do or just deciding that it cannot be bothered to do something or other. That is not independence, but sloth. We would expect the framework for an independent body to support its independence by giving it a framework within which to work that makes sure it can work as well as it should—by determining on what lines the expectations about what it does should be determined, and, indeed, how the public will see that independence in action. Our suggestions would not downgrade or undermine the independence of the OEP. On the contrary, they would help it to act in the best possible way as an independent body.

There are many reasons why an organisation such as the OEP might not want to publish a report, other than sloth. As a former journalist, I am all in favour of openness—I think everything should be as open as possible—but there might be reasons for wanting a private, or non-public, investigation, and the amendment would remove the ability to decide to carry out a private investigation. It would curtail the OEP’s course of action and reduce its independence. I think everything should be public, but I can certainly see that there are scenarios where the OEP might decide to do something that it did not want put in the public domain. The Opposition would remove that course of action.

There are a number of existing laws, protocols and arrangements for all public bodies that give them, in certain circumstances, discretion not to do certain things, such as in relation to national security or the revelation of individual contracts—there are all sorts of things of that kind. Guidelines already allow that discretion.

I do not think that the idea that a Department should, under normal circumstances, publish reports to elucidate matters for the public, where those existing areas of discretion in the law do not apply, is in any way undermined. That is part of the process by which we express our confidence in that public body in the first place as a body that operates transparently and in concert with the Minister and Parliament to get the relevant matters out on the table and discussed and that can demonstrate that it is doing that. That is a perfectly appropriate way to ensure that the public and indeed this place are confident about its independent operation. I am not, therefore, sure that the point made by the hon. Member for South Cambridgeshire, well-intentioned as I think it was, has a great deal of substance in relation to the clause.

I thank the hon. Gentleman for his contribution and agree that it is extremely important that the OEP should operate as transparently as possible. However, it is also important that it should be allowed the discretion it needs to operate effectively.

Investigation reports prepared under the clause will play an important role in ensuring that the OEP’s enforcement activities are transparent and in enabling public authorities to learn from its recommendations. We expect that, in the majority of cases, the OEP would choose to publish its report. However, it is important that it should have the discretion to choose whether that is appropriate. Some investigations may involve matters of significant sensitivity or confidentiality. For instance, the OEP may investigate a complaint that has been motivated by bad faith or factually incorrect information. There may be no public interest in its widely publishing a report containing entirely groundless allegations.

The OEP should be able to decide whether it is in the public interest to publish a report, and to determine whether any other restrictions on the publication of information need to be taken into account. It is of course required by clause 22(2)(b) to have regard to the need to act transparently. It will need to exercise its discretion concerning publication in line with that duty. Also, clause 38 already requires it to publish a statement at key stages in the enforcement process, to ensure that it is as transparent as possible. Furthermore, any information that the OEP does not proactively publish or report will still be subject to requests for disclosure under the relevant legislation.

The clauses therefore strike the right balance and make clear provision to ensure that the OEP acts as transparently as possible. Although I acknowledge the positive intent behind it, the amendment is unnecessary and could hinder the OEP’s ability to make decisions in the public interest. It could also lead to the unnecessary publication of baseless allegations. On those grounds, I ask the right hon. Gentleman to withdraw the amendment.