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I will in a second. I just want to emphasise the point so we do not hear it again. There were no negotiations. There was no deal. [Interruption.] The negotiations were stopped. There was no deal on offer, and no money was being offered. I hope that Members will scratch that bit out of their speeches as they go forward.
Yes, I absolutely can. I am not a lawyer, but I would say it is crystal clear in the sentence the hon. Gentleman has just read: “mutually beneficial”. What the democratically elected Government of the day decided, through Lord Cameron of Chipping Norton, who I said—if the hon. Gentleman was in the debate earlier, he would have heard it—[Interruption.] The hon. Gentleman says he has other things to do, Madam Deputy Speaker. I suggest that if he thinks this is very important, he should have been here for the whole debate and not just intervene on a debate that I think is about national security. I repeat the point to him: the Foreign Secretary at the time ended the negotiations because, as the then Prime Minister said, “mutually beneficial” was deemed not to have been the case. I want to touch briefly on the arguments put forward by the Government about hiding behind international law. I cannot do it justice like my right hon. and learned Friend the Member for Kenilworth and Southam, but it is clear that the Government keep hiding behind judgments that they have to follow. I remind the Minister again that it is not a binding judgment. If the Government had chosen to challenge that non-binding judgment, he would have had the support of those of us on the Opposition Benches. The Government decided not to do that and have accepted a non-binding judgment and fast-tracked the capitulation and surrender of a British overseas territory for the first time in a long time. The Minister could have challenged that decision, because it was non-binding. I shall let the record stand with the speech by my right hon. and learned Friend the Member for Kenilworth and Southam, who went through the numerous international structures that this Government have signed up to and set out how we did not have to follow that. Lastly, clause 2 is absolutely disastrous. The hon. Member for Crawley (Peter Lamb) spoke of the historical context here. I congratulate and commend the hon. Gentleman for his speech; he is an incredibly brave and principled man who stands up for his constituents. Under clause 2, this Government have decided unilaterally to recognise that Mauritius has sovereignty over the Chagos islands. I remind the House and the Government that Mauritius has never in the historical context of the Chagos islands had sovereignty, and that this Government have chosen to give sovereignty over the islands to a country that has never had it.
I will in a second. Some, including the right hon. Member for Islington North (Jeremy Corbyn), have said that we want to “return” the islands. I say that is impossible, because it is not possible to return sovereignty to a country that never had sovereignty in the first place. This is a decision and a negotiation undertaken by this Government, and they should hang their heads in shame over the way they have done it.
I disagree with the right hon. Gentleman, because it was clear in the negotiations that took place in the ’60s, when the United Kingdom paid Mauritius, that Mauritius actively accepted that it had no sovereignty claim over the islands, and that stands in international agreements from times gone by. This Bill is a bad deal. It is a bad deal for the United Kingdom and for our constituents; and it is a bad deal because of the money that this Government have decided to spend, and because of their decision to tax people while spending £35 billion overseas. The Government have abandoned the usual norms of the traditional Governments of this country of standing up in a transparent way for the way we act internationally; they have decided to abdicate their responsibility in doing that. This is a bad deal for this country. It has been welcomed by malign international partners, it has undermined our defence, and it will cost us billions. Above all, with this Bill, the Government have abandoned and avoided every scrutiny mechanism within the House of Commons that would enable hon. Members to challenge them and get the answers that this House quite rightly deserves—[Interruption.] Government Members say that we have the chance today, but I remind them that many, many Members have asked questions of Ministers about the legal position on refusing this, and Ministers have been unable and unwilling to provide answers in the context of the international law that we have spoken about to do that. This is the day that the Labour Government showed the British people out there, as well as the Chagossians in the Public Gallery today, that they do not stand up for the people of this country. They did not stand up when we saw that international law might go against us. They chose to abandon their responsibilities to protect the people of this country and the military assets that this country has in the overseas territories. I predict that, in the four years ahead, this £35 billion surrender treaty will come to haunt this Labour Government. I remind Government Members that after they have gone through the Lobby and voted for the Bill tonight—after they have read out their Labour party briefing saying that it is the right thing to do—they will have to knock on doors and explain how they gave £35 billion of taxpayers’ hard-earned money to a country that never had sovereignty over this British overseas territory. They should hang their heads in shame, and I think they will do so.
The hon. Member for Rugby (John Slinger) has omitted some of the quote, because he was proven wrong before. He has failed to say that the former Prime Minister said “mutually beneficial”. Some of the gain that came out of that discussion was the fact that it was not mutually beneficial for this country, and we stopped the negotiations.
Order. You were so close to succeeding. Let us try to get the language right.
Order. I now call Lewis Cocking for the final Back-Bench contribution. Colleagues who have contributed to the debate should be making their way back to the Chamber.
With the leave of the House, we will take motions 3 and 4 together. Motion made, and Question put forthwith (Standing Order No. 118(6)), Financial Services and Markets That the draft Markets in Financial Instruments (Miscellaneous Amendments) Regulations 2025, which were laid before this House on 3 July, be approved. That the draft Financial Services and Markets Act 2023 (Capital Buffers and Macro-prudential Measures) (Consequential Amendments) Regulations 2025, which were laid before this House on 9 June, be approved.—(Gen Kitchen.) Question agreed to.
I call Mr Jim Shannon to speak on the accessibility of railway stations in the Dulwich and West Norwood constituency.
This is a very important debate. Minister, you may wish to take this opportunity to reflect on the accessibility funding application of Wadhurst station in my constituency of Sussex Weald.
It is a pleasure to serve under your chairmanship, Ms McVey. As a proud Englishman, it is not often that I admit the Australians are better than us at something. I am talking not about cricket, but about the immensely important issue of pensions adequacy. The Australians do it better, and what underpins their success is the super stapling model, a system that fundamentally changes how savers interact with their pensions. That is why our new clause 36 seeks to follow in Australian footsteps by establishing a model that would automatically amalgamate pension pots through an individual’s working life. Although I recognise and commend the Government’s work on small pot consolidation, I believe that real engagement and adequacy benefit lies in moving towards a lifetime pension pot model. It is a bolder, more engaging and more adequate model that would benefit pension funds and savers alike.
I refer the Committee to my entry in the Register of Members’ Financial Interests, having worked in the water sector before being elected to Parliament. I will be speaking predominantly to amendment 248. The Committee heard evidence from industry experts who expressed concerns about the Bill’s mandation power. They were consistent and clear in raising concerns about the reserve powers in the Bill. I would like to reiterate some of those concerns raised by the industry, which I believe hon. Members should support today. At the heart of clause 38 is its impact on the fiduciary duty of trustees—not just a mere technicality, but a duty that has been at the heart of trust-based governance for centuries. Trustees have a legal duty to act solely in the best interests of their members. However, the Government believe it is acceptable to tear up that duty through a ministerial power grab. If the Bill is passed in its current form, Ministers will have the power to override the judgment of trustees, which I do not believe is appropriate. That is not to guide or support, but to mandate them—to potentially force them to act against what are arguably the best interests and returns for their members. That leads me to the potential impact on pensions adequacy in the UK. We are facing a pensions adequacy crisis, as I and other members of this Committee have said before. The majority of people are not saving anywhere near enough for retirement, and the cost to the state pension will only continue to rise, yet we have seen that the Government are willing to take investment decisions out of the hands of pension fund trustees.
I will come on to some of those points later, so I will address them then.
I hope to address some of those points. The Government are willing to take investment decisions out of the hands of pension fund trustees to force investments into projects that may be politically convenient for them, but may potentially lead to financial loss for members. They are directing investment on the backs of ordinary UK savers. When people save into a pension scheme, they are entrusting their future security to a system that is working supposedly for them and not for political gain. To answer the point made by the hon. Member for Hendon, rather than coercing trustees to follow conditions set by Ministers, would it not be better to create the right economic conditions to make trustees want to invest in the UK? The last Conservative Government, through their Mansion House reforms and the work of my right hon. Friend the Member for Godalming and Ash, brought in active commitment from the pension fund trustees who want to invest. We did not need to mandate that, and the Government should learn from that approach. Amendment 248 will preserve the fiduciary duty, but continue the trajectory to increase pension fund investment in the UK.
I trust the pensions industry to make those judgments because they are the experts in this area, not Government Ministers, who often have short-term views. On Second Reading, one of my hon. Friends raised the example of HS2 and how Government priorities and policies can change over time. Would the hon. Member be happy for his constituents to have their money invested in a Government project or a large infrastructure scheme that is then scrapped, and to see huge losses to their pension scheme? I have huge concerns about the mandation point. Clause 38, in its current form, undermines the trust that I mentioned earlier. I therefore urge hon. Members to back our amendment to ensure that the fiduciary duty remains and that we protect the security of millions of savers.
Is it the case—my right hon. and learned Friend is a former Attorney General—that the ITU treaty to which we and others are a party states specifically that the ITU has no authority over the allocation of military spectrum, or military communications? It is clear that the ITU has no leverage legally at all over Diego Garcia.
This is fundamental to the whole argument. We have pressed the Government for months to tell us what the legal threat to the islands was. In his opening speech the Minister said that it was UNCLOS. That was the justification they have given us. Does my right hon. and learned Friend agree that we have a general opt-out and two specific opt-outs under article 298(1)(b) of the United Nations convention on the law of the sea, which includes “disputes concerning military activities”? We have an opt-out from UNCLOS. The Government’s whole case is spurious—£35 billion worth of spurious.
It is a pleasure to serve under your chairmanship as always, Ms McVey—fantastic umpiring, and hopefully no need for DRS. I start with a declaration of interest: over the summer I, alongside a number of colleagues, attended a cricket match with Sky. It was below the registrable threshold, but I am making sure that it is transparently disclosed. I thank the hon. Member for Cheltenham (Max Wilkinson) for securing this important debate. After another great summer for English cricket and sport, and ahead of the Ashes series and the women’s one-day international world cup, it is timely that we are having this debate, and I thank all hon. Members for their fantastic contributions so far. As many of us will remember, between 1999 and 2005, test matches were shown on Channel 4. That culminated in the historic 2005 home Ashes series, shown on Channel 4. There was an average of between 2 million and 3 million viewers per day for an average test match, before that soared to upwards of 7 million viewers for the 2005 tests and peaked at 8.5 million on the deciding and dramatic final day of the series. The impact of that fantastic series was clear, with the ECB reporting a massive increase in junior club memberships after the 2005 series, and waiting lists at many clubs across the country. Sport England data showed that junior participation rose in 2006 by roughly 7%, bucking wider trends across the sector. However, there has been a decline, which has been referenced, in participation rates following the switch from free-to-air cricket to subscription-based broadcasting, and there is of course a discussion to be had, as always, about coincidence versus causation, which is why we are here today. For example, Sport England’s Active People survey showed a fall from 428,000 adults playing cricket weekly in 2007-08 to 278,000 in 2014-15. That represents a drop of about 35%, and over the same period participation halved among 16 to 24-year-olds. More recently, we have begun to see a welcome revival in participation rates as more matches are shown on free-to-air television and England’s Bazball style has attracted new admirers. Most famously, that includes the 2019 cricket world cup final, sub-licensed by Sky and shown on Channel 4 as live international cricket returned to free-to-air television for the first time in 14 years. That thrilling final, which I also had the joy of watching, saw a peak of 4.8 million viewers for Channel 4 and 3.5 million for Sky—a total of 8.3 million. It was a huge audience for a huge moment for British sport. Data from the ECB has shown that more than 1 million under-16s watched that final, and I am sure each and every one of them took inspiration from what they saw. Of course, all sporting bodies face a tension between ensuring that their sports are accessible to the widest possible audience and the need for financial stability and support as provided by subscription-based broadcasters. The broadcast contracts with Sky have been the financial engine of English cricket for some time now, and the most recent deal is worth more than £200 million per year. Those revenues have funded professional central contracts for men and women. That includes increasing the number of professional women cricketers from 17 to more than 100. It has also helped to sustain the England team at the top of the world game and finance grassroots programmes that have reached millions of children across the country. Without that support, the professional and grassroots structures of cricket would simply not be sustainable. As a fan of cricket, I applaud Sky’s innovative coverage—I had the privilege of seeing behind the scenes first hand over the summer. Recent years suggest that a balance can be struck—and has been struck. The 2019 world cup final was shared by Sky and Channel 4, and reached millions of people. The Hundred has brought live cricket back to the BBC, with sizeable audiences for both the men’s and women’s games, and a clear impact on youth and girls’ participation, alongside vital grassroots community work. I am pleased that women and girls’ cricket is growing fast across the country, including in my Old Bexley and Sidcup constituency. It is fantastic that local clubs, such as Bexley cricket club, Bexleyheath cricket club—they are separate clubs—and Sidcup are growing the girls’ game in my local community. Last year saw a 21% growth in girls’ teams, a 25% growth in women’s teams, and 1,000 new women’s and/or girls’ teams across the country. Moreover, initiatives such at Metro Bank’s girls in cricket fund have added to that momentum, delivering over 1,000 hours of dedicated coaching support and helping to grow the number of girls’ teams by more than a fifth in the past year alone. That contributed towards a record 192,000 recreational games being played across the country in 2024, more than 12,500 higher than the previous record. Those moments and the data that follows show that when cricket is visible, it can capture the imagination of the public, regardless of background. That is why the previous Conservative Government were proud to invest £34.7 million to maximise the opportunity of the women’s T20 world cup in 2026, cricket’s inclusion in the Olympics in 2028, and a men’s T20 cricket world cup in 2030 to build a network of state school cricket programmes and facilities. While the recent announcement regarding cricket dome funding from the Government over the summer is very welcome, this Government have so far only allocated £1.5 million to fund those two new cricket domes. The money was there, but the Government have instead taken the political choice to reallocate what remains of the capital fund. Will the Minister say whether clubs across the country, which will be listening to this debate, should expect more funding to come their way in terms of grassroots support in the years ahead? The challenge remains trying to find a balance between reach and growth in participation via the exposure that free-to-air broadcasting brings, and with the financial resources provided from subscription funding. We can all agree across the House that too much of one without the other undermines the long-term health of the sport. That is an outcome that none of us wants. I thank all hon. Members again for this important debate, as well as the hon. Member for Cheltenham for supporting it.
If the Chancellor is looking for some quick-win infrastructure projects that will unlock economic growth, I recommend taking a look at a passing loop on the South Fylde line, which would better connect trains to employment and education sites through more reliable services. It would also act as a boost for the tourism industry on the Fylde coast; people across Lancashire—maybe from other great towns such as Chorley—like to visit Lytham St Annes and the Fylde coast, and would be able to do so on half-hourly rail services. Will the Chancellor take a look at that fantastic opportunity to boost economic growth in Lancashire and the Fylde?
It is a pleasure to serve under your chairmanship, Ms McVey, and very good to see the Minister in his place after last week, when there were lots of changes. I thank the hon. Member for Ely and East Cambridgeshire (Charlotte Cane), who gave a brilliant opening speech in this important debate. All Members, across the Chamber, have contributed very strongly. It is always a pleasure for me to speak on behalf of His Majesty’s official Opposition, even though this afternoon I have missed the all-party parliamentary group on dyslexia event to which I had an invitation. I absolutely agree about the breadth of impact of neurodivergence and the difference between it and learning disability. It was really important to set that out at the start. We are talking about different people with different needs. Like many of us, I have constituents who as parents find that funding issues are difficult, especially in rural areas, so I am very like-minded on better support for SEND. Education is what shapes us. Of course the impact, particularly in my part of the world, of the Government measure affecting small private schools and of choice being taken away from some parents has been very problematic. Many of us will have seen that in our constituency surgeries. As Conservatives, we believe that no matter what someone’s background and talents are, their full potential should be realised, and neurodiversity as explained today is an amazing way in which difference can truly be harnessed. There have been brilliant speeches showing what real contributions people can make. Neurodivergence should be no barrier to someone’s future, yet unfortunately we have heard about challenges from too many Members today. I thank those who have related their personal stories today. My yellow notes here remind people about my mild dyslexia—and the amount of cartridges that I go through in my constituency office. I think I have probably saved DWP a lot of money by leaving that Department, where I used a lot of yellow cartridges. But my brother has very severe dyslexia, and we go about things very differently, as people would expect. During the five years that I spent as a DWP Minister in the Conservative Government, it was my absolute privilege to work in that Department of wonderful people, as it was known when I was there—I hope it still is—helping to unlock potential and support people. As we heard today, with the right support and assistance, people can progress and thrive. In fact, this Minister is a great example of progression by being completely persistent and eventually getting his ministerial opportunity. It is great to see him there. All of us this afternoon have spoken especially about young people, whom we want to see progress and who may face unseen and unrecognised barriers. I am thinking particularly of the covid generation—the young people who are coming through now. Under the Conservatives, people saw a transformation in disability employment, with 2.6 million more disabled people entering work since 2013—a target met five years early. There was the Back to Work plan, with a £2.5 billion price tag on it, to support that next stage; the £64 million for the WorkWell pilot; and the £53 million for universal support. I am very mindful that those are not just numbers: they represent lives changed, independence gained and dignity restored. I am very mindful, as I am sure we all are, that behind every single statistic is a person, a need and a community. We should have their backs and help them. The Buckland review has been mentioned, of course. I had the pleasure of seeing its launch and the amazing work with the Autistica charity. The review offered 19 practical recommendations to help autistic people to start, stay and succeed in work, and to tackle the fact that around 30% of working-age autistic people are not in work. That is wrong. The supported internships mentioned today are absolutely vital, and the disability action plan—which I had the pleasure of helping to push forward—aims to ensure that the UK is the most accessible country in the world in the realm of work, tackling some of the inequalities faced in employment. That key partnership between employers and Government, which we have heard about, helps to turn the aspirations and good practice of employers—things that look nice on websites or mindsets that people have—into the ability to support people in the workplace and make it truly inclusive. The DWP itself, and the health model offices, are about looking at it from the point of view of claimants and those who need support—to see it their way. I remember going to one office where the walls and the pillars in the room were painted differently, because neurodivergent people needed to access the room differently. That is the way that our Jobcentre Plus offices should be set up. I am pleased to be supporting a Disability Confident breakfast in my patch to discuss and engage with the programme of understanding assistive technology and meaningful workplace changes, as we have heard today. It is vital that processes work for changed applications, and that access in technology means people are screened in rather than screened out. Under Labour, I am afraid the welfare system is growing, and it is vital that those on universal credit, or whose lives are being wasted and potential squandered, are understood and helped. In fact, the Sussex chamber of commerce has been doing some great work in my own backyard with Little Gate Supported Employment, Genius Within and other great local employers such as PVL, Time 24, Thriiver and many others. Removing barriers is hard for employers in all sectors and of all sizes, so partnership and best practice are vital. As the official Opposition, I offer to work collaboratively with the Minister and employers to help people to get in and stay in work. We in the Opposition will continue to focus on social mobility and life chances. I hope the changes at DWP make the impact that is needed, and I welcome the skills brief being brought into DWP. That is something I worked on and would have loved to have seen it realised. We have heard about the challenges around Access to Work and the flexible support fund, but with technology and the right attitude, employers can make small changes that make a huge difference. Access to Work needs to be updated, and we recognise that DWP has certain needs in this. With employer adjustments—better training, HR and mindset—all this means that if someone is not the finished article, they can get through the door and become one. Finally, Ms McVey—I can see you are rightly looking at me—welfare reform and living within our means are vital, because if we are to get back to being productive, to grow and to ensure there is support for those in the welfare system, we need people to be paying in. Sadly, Labour’s unemployment Bill is a concern, smothering employers with more red tape, making it more difficult for our constituents to generate revenue and offer jobs, and making it harder for young people—the ones particularly impacted by the pandemic—to get the start they need. Labour rightly promised change—we have all seen the change in the last few weeks—and I hope this new opportunity is taken. Our mission in government, which the current Government should share, was to focus on delivery and on the vital outcome of making the UK the best and most accessible place in the world, where the employment needs of people with neurodiversity or other learning need, are met. That way, people can live, work and thrive in this economy.
As well as the expert panel and the updates from the Buckland review, will the Minister undertake to use his good offices in the DWP and across government, including the NHS and other public sector employers, to ensure that the learning is used? As we have heard, it is tough in the wider labour market. Support is already given to care leavers across Government and by the Minister’s own Department; will he lead the way in the DWP?
The Minister is being very generous in giving way. That commissioning model will be music to most constituency MPs’ ears. How will DWP monitor the local output and changes for people on the ground?
It is a pleasure to serve under your chairmanship, Sir Jeremy. I congratulate the Minister on her new role in what I am sure will be the first of many encounters. In what can be a divisive Department, I am pleased to begin with an issue on which we can agree. The Data Protection and Digital Information Bill, put forward by the previous Government during the last Parliament, sought to enable joint processing between qualifying competent authorities and intelligence services under part 4 of the Data Protection Act 2018. As the Minister summarised, it was rightly recognised that there was an increasing expectation that law enforcement and the intelligence services would work jointly in operational partnerships, particularly in response to lessons learned from the tragic terrorist incidents at the Manchester Arena and Fishmongers’ Hall. Under the existing regime, it is understandable that sharing data across Data Protection Act regimes proves cumbersome, making the necessary decision making in our national security infrastructure more challenging. Removing those obstacles and allowing partnerships to process data under a single regime is a step to be welcomed. Any measure that enables more effective and efficient use of data to enhance our national security is to the benefit of us all. Indeed, it is essential that we learn from the events of the past. We owe it to the victims of these abhorrent acts of terrorism. As such, we should welcome the change in the Government’s Data (Use and Access) Act 2025 and the regulations debated today. Regarding joint processing, it has been noted previously that the controls and safeguards under part 4 of the 2018 Act will apply. Although I am aware that each body has expertise to manage the use of data, the creation of a single regime can pose specific challenges. Therefore, considering that some of the data used in such cases may be particularly sensitive, have Ministers engaged sufficiently with the relevant agencies and competent authorities to ensure that they are prepared to use the new rules effectively and without incident? In addition, although the use of designation notices by the Home Secretary is an integral part of the new regime, I must ask Ministers whether they are satisfied that the process for providing notices for joint controllership of specific processing will be effective. Although I appreciate that, for security reasons, the Minister will not be able to provide details as to why one competent authority has been included, it will be useful to receive assurances that robust systems are in place to ensure that such processes include appropriate safeguards and that the data being used is in line with the notice. These safeguards are critical, as we all recognise the public’s desire for their data to be protected while ensuring that national security is maintained. I therefore welcome the draft regulations and hope they are implemented effectively.
This is a very uncontentious and highly technical part of the Bill. We have no objections to any of these provisions and so will be supporting them.
Perhaps it is exciting for those who enjoy dry reading. We in the Opposition have no objections. Amendment 36 agreed to. Amendments made: 37, in clause 29, page 27, line 30, leave out— “a relevant person, other than the FCA,” and insert— “the small pots data platform operator or the trustees or managers of a relevant pension scheme”. This amendment ensures that the FCA cannot be required to pay compensation under small pots regulations. Amendment 38, in clause 29, page 27, line 39, leave out “Subject to subsection (4),”. This amendment is consequential on Amendment 39. Amendment 39, in clause 29, page 28, line 3, leave out subsection (4). This amendment removes provision that is no longer needed because of the general data protection override in section 183A of the Data Protection Act 2018, which was inserted by section 106(2) of the Data (Use and Access) Act 2025 and came into force on 20 August 2025. Amendment 40, in clause 29, page 28, leave out lines 8 and 9.—(Torsten Bell.) This amendment is consequential on Amendment 39. Clause 29, as amended, ordered to stand part of the Bill. Clause 30 Enforcement by the Pensions Regulator Question proposed, That the clause stand part of the Bill.
Again, I have no real comments, apart from to ask the Minister, perhaps when winding up, if he could explain how the Government came to the penalty levels of £10,000 for individuals and £100,000 for others. It would be useful to understand what the thinking was behind that.
I will speak to our new clause 36. I am grateful to the Minister for his comments; I will come to those in a minute. The Government dropped plans for the lifetime provider or “pot for life” model, which would have allowed individuals to direct all workplace pension contributions into a single, personally chosen pension pot throughout their career. That was first proposed by the Conservative Government. Although we appreciate that the initial lifetime pot model has not had support from the current Government or, to be fair, from the industry, we believe there is much merit in exploring a model that would allow for pensions to follow individuals between jobs. The new clause would ensure that fragmented small pots are not left as workers move between jobs. By changing our current proposals from a lifetime pot to a magnetic pot proposal where the pot follows the individual, we hope we can bring down some of the administrative costs of the initial lifetime pot proposal. Our new clause 36 will provide for a pension pot that would follow members from job to job, consolidating with each new workplace scheme rather than relying on a single lifetime provider. This approach could reduce fragmentation while retaining the advantages of employer oversight and collective governance. This would have similarities with the Australian system, where a person can staple to their first chosen pension provider so that it follows them from job to job. That helps to reduce the administrative burden on individuals and the number of small pots, and that can reduce costs for consumers and help the overall consolidation of the market. These changes have been backed by some in the industry, including Hargreaves Lansdown, which has said that having a single pot would simplify someone’s pension investment, bringing transparency and clarity. It has said that for those who move jobs frequently, a single pension pot would be invaluable. The Minister made a couple of points. The first was about the substantial overhaul of the system to be able to deliver reform. Although I appreciate that this may be outside the scope of the Bill, we should not worry about substantial overhauls to make things better for people who are saving for their retirement. It is incredibly important that we get this right. Just because it is a lot of work does not necessarily mean it is a bad thing to do, so I urge him to think about it. The Minister made a very important point: somebody could move from one job to another and find that their pension moves from a fund that offers good value for money and is performing well to a fund that is performing worse. But exactly the opposite is also the case. If somebody frequently changes jobs, the law of averages and statistics means that over their lifetime they will get the average rate, which means they do not get stuck in one or the other. One would cancel the other out—it is a maths problem. The Minister has made his points. This is not something we want to press, but we feel very strongly that the Treasury and Treasury Ministers should think very carefully about it, because, as I say, hard work is not a reason not to do the right thing. There is much more support from the industry for the magnetic pot rather than the lifetime pot, which stays with one provider.
I think the Minister has got this the wrong way round. It was the lifetime pot, which was being paid into as people went around, that the industry did not like, because that was administratively quite difficult. The stapled pot—stapled to the lapel, or whatever, to be dragged around like the Australian one—is what we are proposing this time round, which is the new version that the industry does agree with. I think the Minister might have got his notes upside down.
I would like to speak to the wider clause before coming to our amendments. It is important to get on the record that this is a very bad clause. The Minister mentioned asset allocation, and this measure, which is known as mandation, has gone down incredibly badly with the pensions industry. Mandation risks undermining the core obligation of trustees, which is to act in the best interests of savers. Pension savings reflect decades of work and are not an abstract figure on a balance sheet—they are the hope of a secure future for millions of people. Trustees and fund managers bear a legal responsibility to protect and grow these savings, investing wisely where the best opportunities may be found. Their role is not to follow political direction but to uphold the trust placed in them and the fiduciary duty they owe, which is the foundation of confidence in the pension system. As has been said in multiple responses to the Bill, clause 38 as currently written undermines the UK’s reputation as a predictable and rules-based investment environment. When trustees select investments, they must find the safest and strongest options for beneficiaries. Can we even be confident that the Government will be able to provide a pipeline of investment opportunities? Pension funds could end up being forced to fight against each other for a selection of low-performing assets. If these powers are used, it changes accountability. If mandated investments fail, is it the trustees or the Government who should answer for those losses? Savers deserve clarity about who ultimately protects their hard-earned pension pots. It has been said that this merely provides the powers to do mandation and does not necessarily force firms to do this, but I will come to that later. Our amendment 275 highlights the fact that there is a political party, whose Members are not in attendance here, which has already said that if it gets into government—and, let’s face it, it has a fighting chance—it will mandate pension funds to invest in the UK water industry in order to support the Government renationalising the UK water industry. I would like to highlight some of the issues that have been raised. The Pensions Management Institute has said: “this provision sets a dangerous precedence for Government interference in the fiduciary duty of trustees to act in members’ best financial interests.” Pensions UK has said: “this ambition is subject to fiduciary duties and is dependent on supporting actions by Government, namely that there will need to be a strong pipeline of investable UK assets. Without this, schemes will be competing against each other for the same assets, which risks asset bubbles and poor value for money.” The Investment Association has said: “It comes with significant risks for members in the form of capital being poorly allocated if political preferences take priority over member needs. Any resulting poor investment outcomes will be borne by the member. By creating the risk of political interference in capital allocation, the power undermines the UK’s global reputation as a predictable and rules-based investment environment”. Which? has said that this measure “may result in schemes making worse or riskier investment decisions that may not be in the best long-term financial interests of savers.” Aviva has said: “as currently drafted in Section 28C, the power in the Bill goes far beyond this policy intent and the scope of the Accord, with very limited constraints on how, and under what circumstances, the requirements could be introduced.” The Institute and Faculty of Actuaries has said: “We are concerned about the introduction of investment mandation powers, and potential interference of those powers—or their threatened use—with trustees’ fiduciary duties.” Unison has said: “We have significant concerns about these clauses. Fiduciaries are best placed to set the correct balance between asset classes, and equities have liquidity, governance, transparency of pricing, equality of treatment between investors, and other advantages for pension funds.” Finally, the Association of British Insurers said: “A mandation reserve power would undermine trust in the pension system and create a risk of political interference in capital allocation, which would undermine the UK’s reputation as a predictable and rules-based investment environment.” I understand that this is a reserve power of mandation, but it sets a very bad precedent, so we will oppose the clause.
We have no objection to the technical amendments, but we will oppose the whole clause.
I beg to move amendment 250, in clause 38, page 37, line 12, at end insert “or (c) the relevant Master Trust meets the innovation exemption requirement.”
The Bill sets a minimum asset threshold of £25 billion for workplace pension schemes to operate as megafunds by 2030. This is not, in itself, particularly controversial, and we are all fully aware of the arguments about scale being effective when running pension funds. The requirement is intended to drive consolidation, improve economies of scale and boost investment in UK assets, but there is concern that such a high threshold could disadvantage boutique or niche funds or new entrants into the market that provide specialist services to cater for financially literate members who prefer a more tailored approach to their pension management. For example, Hargreaves Lansdown has highlighted that its £5 billion fund serves members who value investment autonomy and expertise. The risk is that the policy could reduce competition, limit consumer choice and stifle innovation by making it harder for smaller, specialist providers to operate or enter the market Clause 38 provides little detail of the meaning of the “ability to innovate” and how “strong potential for growth” will be measured, but it is essential that the Bill provides a credible route to support innovation. If we tie the pensions market up by restricting it to a handful of large providers focused on back-book integration and building scale, there will be less space for innovation aimed at pension member engagement. The benefit of the existing market is that its diversity provides choice and creates competition, and competition is an important part of this. Smaller schemes are chosen by employers for specific reasons. If we lose that diversity and essentially create a handful of the same scheme propositions, employers and members will lose out on this benefit. Realistically, it will be extremely challenging for new entrants to the market to have a chance of building the required scale. Our amendments create an innovation exemption for pension funds that provide specialist or innovative services as part of the new entrants clause. This will allow boutique or niche providers to continue operating if they demonstrate diversity in the market or serve a specific member need, even if they do not meet the £25 billion threshold.
I am not entirely happy with the Minister’s comments. I am slightly surprised, and I thought he might have listened a bit more carefully. We absolutely understand the economies of scale. A large, £25 billion pension fund can do amazing things. We are 100% behind that. We have not disagreed with that at all. However, I somehow feel myself listening to the Minister and hearing the reverse of the arguments we were making as we tried to allow new-entrant banks into the market after the financial crisis. Those of a certain age—and the Minister turned 43 the other day, so he will remember the financial crisis—know that the problem was that a few very big banks were spreading the contagion. I remember being on the Treasury Committee and the Parliamentary Commission on Banking Standards after the financial crisis, when we were trying to sort out Labour’s previous mess, and not a single ab initio banking licence had been issued for 100 years. The only way that companies could get into the banking market—as Virgin and Metro were doing—was by buying dormant banking licences. I remember having long conversations—successfully, as it turned out—in order to try to allow companies such as Starling into the market. I think that Starling received the first ab initio banking licence for 100 years. Having learned over the past 10 or 15 years about the effects of having large scale only, we are now having an argument about potentially stifling the pensions equivalent of companies such as Starling, Metro, Revolut and other innovators coming into the pensions market. I was hoping that from debating the amendments I could be convinced that the Minister would take away the thinking behind what we have come up with: that innovation should be good, and that there should permanently be new, fresh blood coming through. However, I do not think that he has got it. I was not going to push the amendments to a vote, but I now feel motivated to do so.
On a point of order, Ms McVey. Might it be easier, for brevity, if we vote on amendments 251 to 253 together?
I beg to move amendment 248, in clause 38, page 41, line 4, leave out from beginning to end of line 9 on page 43. This amendment would remove the ability of the Government to set mandatory asset allocation targets for certain pension schemes, specifically requiring investments in UK productive assets such as private equity, private debt, and real estate.
Amendments 248 and 249 talk about removing mandation—something I spoke about when we debated clause 38, so I will not cover those amendments other than to say that it is something we feel strongly about. Amendment 275 concerns mandation with regard to the water industry. It comes as a result of an announcement from the leader of Reform about potentially using pension fund money to invest in Thames Water, and part of Reform’s manifesto talked about nationalising the water industry, but using pension fund money to own 50% of those holdings. To a certain extent, that is performative because we are talking about a specific sector. This amendment specifically talks about the water companies, but it could be carried forward to any other potentially nationalised sector.
This is rather strange, because I wanted to intervene on the intervention, but I hope that my hon. Friend will come on to the various other things that we have proposed. For example, we have proposed looking at the Maxwell rules, which are driving the incentive of pension fund trustees to invest in gilts because of the implications of volatile markets for balance sheets. We are trying to look at the wider regulation that is driving certain behaviour, and I hope that my hon. Friend will raise that in due course. We are 100% behind the Bill—not every single part of it, although the thrust is very good—but, as my hon. Friend will mention, there are areas that could be changed to achieve its aims.
I rise to speak to new clause 32, which looks at the effects of some of the changes on the UK gilt market. Defined-benefit pension schemes are major holders of UK Government bonds, with pension funds holding around 28% of the gilt market —the UK Government bond market—as of early 2022. Those investments provide stable, long-term funding for the UK Government and are essential to the functioning of the debt market. Significant shift by DB schemes away from gilts and into equities—which, in itself, is not a bad thing, as long as it does not happen in a disorganised way, which could be prompted by policy changes—may reduce the demand for gilts, potentially increasing yields and destabilising the market. At the end of the day, if 28% of the ownership of the gilt market is taken away, somebody else needs to be found to buy it. Otherwise, there will be a falling market. We all know what a gilt crisis looks like for pension funds. The 2022 gilt crisis highlighted the market’s vulnerability to large and sudden sales by pension funds, which triggered a fire-sale spiral and required Bank of England intervention to stabilise prices. It was not a good day. The Debt Management Office and market experts have noted that the gilt market is highly reliant on pension fund investment, and any structural reduction in demand could impact Government borrowing costs and market stability. The Office for Budget Responsibility has highlighted concern about the impact of a low gilt allocation scenario, which is likely if the Bill achieves the outcomes that the Government want. A low gilt allocation scenario would mean that pension sector allocation of gilt holdings would drop to 10% of GDP by around 2040, down from around 30% today. That in itself, all other things being equal, would result in an extra £22 billion of debt interest payments on the current gilt market. We are highly concerned that a wholesale move from the gilt market by the pension industry places even more burden on the Treasury to manage debt payment. As the deficit continues to grow, the Government must have laser focus on the impact on the gilt market in relation to how they fund Government debt. The new clause introduces a requirement for an impact assessment before any regulatory or policy changes that could materially alter DB schemes’ asset allocations away from gilt. It should mandate consultation with the Debt Management Office and industry stakeholders to monitor and mitigate risk to market stability. We are not trying to stop the Government persuading pension funds into equities or other alternative investments, but we need a proper conversation with the Debt Management Office about what that means for the cost of Government borrowing, which could potentially be significant.
I thank the Minister for talking through the amendments. We understand the intention behind them, but we are worried that, as can often be the case, there may be an unintended consequence: the creation of a closed shop for master trusts. We do not want suddenly to find that, in trying to make a transition pathway, we end up making things more difficult because it has been interpreted in the wrong way. We are minded to oppose the amendments, but perhaps the Minister could instead give us his thoughts on how we can ensure that they do not get used the wrong way and that we do not end up with a closed shop of master trusts.
I completely understand that. The question is, what is plausible? One man’s plausible might be another man’s impossible. That is the bit that we are worried about: how to ensure that someone is not squeezed out who otherwise could be in it.