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Since April, eight companies have personally approached me to tell me that they have either laid people off or have had to close their businesses after decades of trading because of the rise in national insurance contributions. How many businesses in the Minister’s constituency have told him a similar story?
More than 300,000 children in mainstream schools receive education, health and care plans, including many from my constituency, but it is being reported that that vital provision may disappear. Whatever the challenges of the SEND system, surely the answer is not to remove those rights, because families cannot afford to lose such precious protections. Will the Secretary of State confirm that EHCPs will not be removed for children receiving mainstream education?
I thank the Policing Minister for visiting Northallerton this year and hearing directly from my farming constituents about the impact of livestock and equipment crime on their lives and health. I am grateful to North Yorkshire police for all their hard work, and for the recent funding uplift for the national rural crime unit, but does the Minister agree with me on the importance of implementing the Equipment Theft (Prevention) Act 2023 and, more broadly, ensuring that rural areas get the attention they deserve?
It has been a privilege to hear so many well-informed and considered speeches this evening. I am sure we would all agree that there is clearly significant expertise in the Chamber. The heart of this Bill is people doing the right thing by preparing for their future and saving into their pension pots. With auto-enrolment having been introduced by the Conservatives in 2012, there are now over 20 million employees saving into a workplace pension. That is 88% of eligible employees saving into a pension and preparing for later in life, which is a great achievement that I hope everyone in this House can celebrate. However, while the number of people who are saving has increased significantly, engagement has remained low, as we have heard this evening. Less than half of savers have reviewed how much their pension is worth in the past 12 months, while over 94% of pension savers are invested in a pension scheme’s default investment strategy. With people taking the right steps and starting to save for their retirement early thanks to our action, we must now ensure that the pensions market is working for them, so that they get the best returns on their savings and ultimately have the comfortable and secure retirement for which they were planning. We have heard many contributions this evening. I will briefly mention the hon. Member for Tamworth (Sarah Edwards) and my right hon. Friend the Member for North West Hampshire (Kit Malthouse), both of whom gave us lengthy and very detailed speeches presenting both sides of the argument. [Interruption.] They were very enjoyable speeches—that was not a criticism, just an observation of the way things have gone this evening. Both the hon. Member and my right hon. Friend clearly showed the expertise that they garnered earlier on in their careers and expressed some legitimate concerns, particularly about the consensus that there has perhaps been in the Chamber this evening. Some points have been made showing that that consensus is not entirely guaranteed, certainly among Conservative Members. We support the principles behind the Bill—indeed, much of what we have heard builds on the work that the Conservatives were doing while we were in government. We want to ensure that poorly performing pension schemes are challenged, excessive administration costs are removed, and savers receive the best returns on their investments. Ultimately, that is how we will ensure more people have a comfortable retirement. However, we have concerns about some specific measures in the Bill, which we will scrutinise further as it progresses. In particular, we have significant concerns about the reserve powers that allow the Government to set percentage targets for asset allocation in core defaults offered by defined-contribution providers. In other words, a future Government could tell pension schemes where they must invest their funds, regardless of whether it delivers good returns for savers. This potentially conflicts with their fiduciary duty to act in the best interests of their members. While I know the Minister will stress that the Government do not intend to use those reserve powers, that neither addresses concerns about what a different future Government could do nor explains why those powers are being brought in. It could be asked why the reserve powers are being created at all. We want to see more investment in the UK market. While this country is one of the largest pension markets in the world, only around 20% of DC assets are invested in the UK. However, the solution should be to make domestic investment more attractive—to create opportunities that deliver better returns for savers—not simply to mandate investment in assets that deliver lower returns. During our last term in office, we worked with the industry to introduce the Mansion House reforms as a voluntary agreement to boost investment in the UK, but this Bill goes further—it could mandate such investment against the wishes of the industry. Similarly, the local government pension scheme will have a new duty to invest in the local economy. While that is understandable at face value, it raises concerns about returns on investments if there are not suitable local opportunities. We also have questions about some of the Government’s assumptions, and would like to understand more about how they were reached and the evidence used. For example, why is the minimum value for megafunds just £25 billion? Why is having fewer and larger pension providers better? We recognise the benefits of economies of scale, but what about competition and innovation? It has also been raised by the industry that a significant number of details are unknown, as they will come later in the form of regulations. Can the Minister set out some more details on when the various sets of regulations will be published, and whether that will be before the Bill has passed through Parliament? Finally, the Bill fails to cover a number of areas, and we would like to understand why. Concerns about pension adequacy have been touched on this evening and whether people are saving enough to have the security and dignity in retirement they deserve. Auto-enrolment was a good start, but it will not be the only solution. Indeed, lots of people are still not eligible. When we passed the Pensions (Extension of Automatic Enrolment) Act 2023, the then Conservative Government confirmed their intention to reduce the lower age limit to 18, as has been mentioned this evening. As yet, the current Labour Government have not done so. Auto-enrolment does not apply to self-employed people, despite just 16% of self-employed people actively saving into a workplace or personal pension. The Bill does not look at whether people are saving enough and early enough, and I would be grateful if the Minister could set out whether that is deliberate and whether further action will be taken. I briefly draw the House’s attention to my declaration in the Register of Members’ Financial Interests as a serving councillor, but I hasten to add that unfortunately I am not a member of the local government pension scheme. Sadly, I was elected after that provision was scrapped, but an entire chapter is given over to the local government pension scheme in this Bill. Indeed, it is a key element, enabling local authorities to use pension schemes to invest in their local economy. However, as with much of the legislation being taken through Parliament at the moment, the who, what and when remain unanswered. Without the English devolution Bill before us, for example, we are not entirely clear on what form local government will take, nor entirely clear on how compatible this Bill is with that forthcoming local government legislation. We are in effect being asked to legislate on a moveable feast. Indeed, there is likely to be a considerable transition timetable for local government changes, which all raises questions about how the local government reorganisation transition fits in with the plans in the Bill. Following on from the comments of the hon. Member for Truro and Falmouth (Jayne Kirkham), how will asset pools work under local government reorganisation? Who gets the potential investment benefits or spending power, and where does all that investment take place? The Bill also fails to mention any reforms to the local government pension scheme, which reached a record surplus of £45 billion in June 2024. One reason for that might be that it is being used to offset Government debt under the Chancellor’s current fiscal rule, which uses public sector net financial liabilities to measure that debt. That is a huge amount of money in local government terms, and it is not going towards local services, business support or regional projects. Can the Minister confirm whether the Government intend to reform the local government pension scheme beyond the measures outlined in the Bill? Finally on the local government pension scheme, I look forward to seeing more detail as to how newly created asset pools will work in practice with the local government pension scheme. Local government treasury management over recent years has seen local authorities taking advantage of the investment opportunities available to them to acquire properties and the like, but often some distance from their local authority. That is something to tease out in Committee, but when the Government state that they wish local authorities to have finance available to invest locally to bring economic growth, what does “local” look like? Finally, can the Minister confirm that fiduciary rules regarding investments and how they are assessed will prevail going forward? Overall, we will support a Bill that reduces administration costs, removes complexity for savers and maximises value for members, ultimately helping people who took the right action to save for their retirement to live in comfort and dignity. While this Bill makes the start, there is more to do to get it right, and we look forward to working with the Government to achieve that. There is plenty of food for thought for amendments to take us forward.
(Urgent Question): To ask the Secretary of State for Foreign, Commonwealth and Development Affairs if he will make a statement on the UK’s response to the actions of the Iranian regime.
As we mark the 20th anniversary of the London terrorist attacks, the victims, survivors and their families, and the emergency services personnel who responded that day, continue to be in our thoughts. Two weeks have passed since the US airstrikes against Iran’s nuclear facilities. Does the Minister have an assessment of their impact, and what is his response to the Iranian regime now prohibiting co-operation with the International Atomic Energy Agency and its inspectors leaving Iran? Given Tehran’s refusal to co-operate, are the Minister and the Department in discussions with partners about applying snapback sanctions and other measures? Is he concerned that this demonstrates that Iran will continue to pursue its entire nuclear weapons programme? Given the information received through discussions with America, Israel and other intelligence partners, will the Government finally come off the fence about the strikes and agree with the Opposition that they were absolutely necessary? On our interests in the region, can the Minster assure us that he is taking continued steps to bolster the security of our military assets and personnel, and what assessment has he made of Iran’s ballistic missile capabilities and the threats that they may continue to pose to our interests? We agree that Iran can never have a nuclear bomb, but the regime is a fundamental menace in so many other ways. It sponsors terrorism across the middle east, and threatens our own country with sophisticated plots. What work is taking place across Government to respond to the threats posed to dissidents in the UK, and to those with family members in Iran who face persecution as the Iranian regime seeks to threaten and blackmail them? What more will the Minister do to take down the finance structures propping up the regime’s destabilising activities, and to stand with the brave people of Iran, including human rights defenders, who face the most barbaric oppression? With the Iranian regime and its terrorist proxies in a weakened state due to Israel and America’s actions, does he agree that this is a moment for the Government to publish a serious strategy to roll back the regime’s malign influence? Finally, can the Minister give an update on the discussions he has had with partners about the US-led plans for a ceasefire in Gaza, freeing the hostages, aid access and securing the removal of Hamas?
It is a pleasure to see you in the Chair, Sir John. I thank the Minister for that thorough explanation of the draft regulations. As she outlined, they establish the eligibility criteria and procedural framework for the super-complaints mechanism under the Online Safety Act 2023—a long-awaited and essential step forward in the effort to protect users, particularly children, in the digital space. Protecting children was one of the top priorities of the last Government, which is why we introduced and passed the Act. Although we welcome the implementation of this mechanism, we must acknowledge that there is still a risk that we will fail our children. As Ian Russell has powerfully and heartbreakingly stated, the Government are “going backwards”. The super-complaints process that we are discussing is not about minor grievances; it is about systemic failures across services, or, in exceptional circumstances, failures within individual services, that put users, especially the most vulnerable, at real risk. These are serious matters, and deserve to be handled with the utmost care, scrutiny and understanding. Progress is being made. We welcome the clarity on the eligibility criteria, which require that organisations bringing forward complaints must be independent from the services regulated under the Act. That is a sensible and important safeguard. Similarly, the decision to allow a shorter application process for organisations already deemed eligible is a pragmatic move that will avoid unnecessary bureaucracy. None the less, we must also ask hard questions. Ofcom is already under considerable pressure to deliver its duties under the Online Safety Act, so it is right to ask whether it will be given the support it needs to manage the new mechanism effectively. Expanding the scope of complainants, as the Government appear to be doing, risks compounding the burden without necessarily improving the quality of complaints. That is a key point of divergence from the previous Government’s approach. We believed, and continue to believe, that the super-complaints process should focus on quality, not quantity. We must prioritise high-quality, evidence-based complaints from trusted organisations. Can the Minister assure the Committee that the £72.6 million allocated to online safety in 2025-26 is not just headline money, but is actually proportionate and sufficient to deal with the likely increase in the volume of super-complaints? The framework around super-complaints matters. It is not just about the process; it is a test of whether we are serious about holding online services to account for systemic harms. Let us not fall into the trap of creating a mechanism that looks good on paper but fails in practice due to a lack of focused resources or political will. We owe it to the families who have suffered like the Russell family have to get this right, and we owe it to the children whom we promised to protect. I look forward to the Minister’s answers to those questions.
I find it highly alarming that the Chief Secretary to the Treasury does not seem to realise that the cost of Government borrowing is higher now than at any time since the last Labour Government. All of this comes back to decisions about spending, so why, when Labour’s manifesto said that it would limit spending increases to £9.5 billion a year, did it increase spending by eight times as much—£76 billion a year—three months later in its Budget?
A £6 billion hole has been opened up because those on the Labour Front Bench cannot get those on the Labour Back Benches to vote for their own policies. As a result, No. 10 is today conspicuously refusing to rule out a wealth tax. If we tell business people and wealth creators that their money will get taxed if they leave it in this country, we drive even more investors away. Is it not the case that even if this measure is not ultimately put in place, over the next couple of months the speculation about a wealth tax itself will drive investment away from this country?
Order. To ensure that everyone gets in, could questions and answers be short?
I am grateful to the right hon. Member for his point of order and for giving notice of it. The Bill was not referred to the examiners at the time of presentation, indicating that the view taken by the relevant House authorities at the time was that the Bill was not prima facie hybrid. He is welcome to refer to any aspect of part 1 of the Bill during today’s proceedings. The Chair cannot be expected to respond substantively today, but I will ensure that he receives a substantive written response this week. His final point was about proceedings in the House of Lords, which are not a matter for the Chair, or indeed for this House. I ask him not to refer to that matter in his speech.
I thank the hon. Gentleman for notice of his point of order. Can I confirm that he has given notice to the right hon. Members concerned? They will, no doubt, be aware after this.
The booklet on “Rules of behaviour and courtesies in the House of Commons” is entirely clear that notice must be given when a Member intends to visit another colleague’s constituency except for purely private purposes. The hon. Gentleman has indeed put on the record that his constituency is the centre of the universe.
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I call Chair of the Select Committee, Debbie Abrahams, after whom I will call Steve Darling.
Jennie seems to have captured the mood of the House, but I call the spokesperson for the Liberal Democrat party.
Whether at Asda in Basildon or Waitrose in Billericay, there have been real issues with shop thefts, particularly by organised gangs, which often come from outside the local area. They come in, ransack stores and then drive away. What is the Minister doing to address the issues that go beyond local theft and are actually a nationwide gang issue?
Who does the Chief Secretary to the Treasury think is most responsible for the extra 276,000 people unemployed since the time of the Budget? Is it the national insurance jobs tax, is it the business rates increases, or is it the attacks that the Government have made on long-term investment, whether through agricultural property relief or business property relief?
Cross-party working is essential to ensuring that there is public confidence in a system we will all need to use in our twilight years. That is why Conservative Members are ready to work constructively to improve this legislation and, where necessary, to provide a “critical friend” approach and challenge the Government’s thinking. When it comes to pensions and the long-term financial security of our constituents, we should not play party politics. It is in this spirit that I raise my own concerns with the Bill. The Bill does not focus enough on increasing the amount of money flowing into people’s pension pots—something we literally cannot afford to ignore. I am proud that it was the last Conservative Government that led the introduction of auto-enrolment—a significant pensions reform that dramatically improved individuals’ financial wellbeing in later life. The 8% contribution was a game changer. Yes, the system relies on inertia, but for the first time, millions of workers began saving for their retirement. We must now confront an uncomfortable truth: the contribution rate looks less adequate by the day. Too many of our constituents are heading towards retirement without the income they will need. For example, the Pensions Policy Institute has highlighted that 9 million UK adults are currently under-pensioned. Inaction is not an option. We are allowing people to sleepwalk into a retirement crisis. The level of auto-enrolment contribution was never intended to be a silver bullet. Instead, it was conceived as a foundation or starting point for pension savings. Importantly, that foundation was once supported by two key pillars: defined-benefit schemes, which offered guaranteed incomes to many, and higher levels of home ownership, which provided an asset to fall back on in later life. Both have eroded significantly over the last two decades. The 8% auto-enrolment rate on its own is woefully inadequate, and many workers will not realise that in respect of their own financial circumstances until it is too late. It would be all too easy to simply raise the auto-enrolment rate to some arbitrary level, but we would find ourselves back here in 15 years’ time having the same conversation about a system where inertia and disengagement continue. If we truly want lasting change, we cannot focus solely on the percentage; we need to dramatically improve how people engage with their savings. That starts with improving financial education. As the sponsor of a private Member’s Bill on this precise topic and as a chartered accountant by background, this is a cause on which I place great importance. Shockingly, though perhaps unsurprisingly, Standard Life has highlighted that three in four people do not know how much they have in pension savings. That needs to change through increased engagement, but also by allowing savers increased control over their own savings. People should be able to easily view all their pots in one place, which is why it is frustrating to have seen delays to the roll-out of the pensions dashboard, which many hon. Members have mentioned. The pensions dashboard will encourage individuals to make active choices, to understand their options and to assess whether their current savings are enough for their desired lifestyle in retirement.
The hon. Member makes an important point. That goes back to financial education and ensuring that people truly understand their pensions and savings. Increasing savings is important, but we need to ensure that it is driven by individuals who understand and can shape their own financial futures. Other countries have looked at increasing incentives for saving. South Africa and the US have schemes that enable people to draw from their pension pots in tightly defined circumstances, such as for emergencies or investment opportunities. Such flexibility would increase confidence in pension savings and help address the other concerning fact that 21% of UK adults have less than £1,000 set aside for emergencies, leaving them susceptible to economic shocks outside of their control and, in turn, less likely to prioritise savings in their pensions. Poor pensions adequacy does not just harm retirees; it has serious implications for the state. As our life expectancy continues to rise, the state’s pension bill will continue to increase. Benefits like pension credit will increase exponentially as the lack of adequate private provision leaves more and more relying on the state. As we saw just last week, it is often incredibly hard to reform welfare. As a Conservative, I believe that the answer lies in personal responsibility and in encouraging and helping people to build up their own private pension provision for the benefit of themselves, their family and, ultimately, the rest of society.
My right hon. Friend makes a compelling case. As I said in my speech, this goes back to financial education and ensuring that we all understand the implications of pensions adequacy. My concern about adequacy does not mean that the Bill does not have its merits. The continuation of Conservative policy, the small pots consolidation and the creation of megafunds are sensible reforms that will increase individuals’ pension pots by reducing dormant pots and increasing economies of scale. However, this is a missed opportunity for a Government with a large majority. They could have acted more boldly, moved faster and improved pension adequacy throughout the United Kingdom. I would like a clear commitment from the Government that they are actively looking at improving pensions adequacy. The Labour party has long professed to be the party of workers, yet some who look at the Bill will sense that it does not go far enough in preventing the UK from declining into being a society funded by welfare in retirement. Let us encourage people to strive, work hard and save more for a better future. I very much hope that the Government will work collegiately and cross party with His Majesty’s Opposition in Committee to ensure that our constituents do not sleepwalk into a retirement crisis.
I endorse the tribute to the late Tessa Jowell—she was a remarkable lady. The Secretary of State pointedly refused to rule out scrapping EHCPs. If that is her intention, may I genuinely offer her some advice? Please do not do that. I have had parents in my surgery in tears of frustration, some of whom have had to spend over two years navigating a bureaucratic assault course to get an EHCP. [Interruption.] Please—if those EHCPs are taken away, there will be an anguished and angry backlash, so whatever the Secretary of State is contemplating on SEN, I ask her please not to abolish EHCPs.
T7. My thoughts are with the family of Jayesh Pitrola. Hertfordshire’s policing budget already faces a £7 million shortfall, and the recent spending review contained no direct funding from the Home Office to address that. Will the Home Secretary reassure my constituents, as well as our police and crime commissioner Jonathan Ash-Edwards, that Hertfordshire will benefit from more police officers without further local tax rises being required?
May I join you, Mr Speaker, in marking the anniversary of the 7/7 London bombings? Our thoughts are with the victims and families, and all who did all they could to help those in need. Yesterday, Met Police Commissioner Sir Mark Rowley called the spending review “disappointing”, highlighting that he is being forced to cut 1,700 officers and staff. Policing may not be a priority for this Labour Government, but the last Government put a record number of police on our streets. Will the Home Secretary commit to keeping total number of police officers above 147,746, as it was under the last Government—yes or no?
I think that was a failure to commit to that total number. During the passage of the Crime and Policing Bill, we asked the Government to stop our police having to investigate playground squabbles and hurty words online as non-crime hate incidents, and now senior police officers are joining that call. Merseyside chief constable, Serena Kennedy, has said: “Non-crime hate incidents are having a disproportionate impact on trust and confidence in policing”. I realise that U-turns are quite fashionable for the Government, so will the Home Secretary now finally scrap non-crime hate incidents and save 60,000 hours of police time?
It is a great pleasure to be here with you, Madam Deputy Speaker, and I welcome the Minister to his place. He has been here a couple of days over a year and is already taking an important Bill through Parliament. It is good to see him, and I very much look forward to working constructively with him as the Bill progresses through the House. While the Bill is not perfect, the Minister will be pleased to hear that there is cross-party consensus on many of the planned changes. That is because we all want our pension system to be working better. If we rewind back to 2010, we inherited from Labour—dare I say it—a private pension system that was not quite ideal. The move from a defined-benefit pension-dominated market to a defined-contribution system had left millions of people behind. Back in 2011, only 42% of people were saving for a workplace pension. The cornerstone of change was auto-enrolment, which has been an overwhelming success, as I am sure the Minister will agree. Now around 88% of eligible employees are saving into a pension, and the remaining 10% who opt out tend to do so because of sound investment advice. The Conservatives are proud of our rock-solid support in government for our pensioners. The triple lock ensured that we lifted 200,000 pensioners out of absolute poverty over the course of the last Government. Workers deserve dignity in retirement, not just a safety net in old age. They deserve to look forward to their later years with hope, not anxiety, and with choice, not constraint. That is why before the last election, the previous Government had turned their attention to two central issues: first, getting the best value for money out of our pension schemes and, secondly, pensions adequacy. I will come to pensions adequacy later, but let me start by recognising some of the positive measures contained in the Bill to make our pension funds work better for savers. When Labour gets pensions policy right, it is often by building on the Conservative legacy, recognising what works and seeking to extend it. That is why we broadly support the measures in the Bill that seek to consolidate and strengthen the gains of auto-enrolment. We also welcome the continued progress towards the pensions dashboard, which will revolutionise the way people access their pension information and plan for their financial future. For too long, the complexity and fragmentation of pension pots has left savers confused and disengaged, as we have heard. If you are anything like me, Madam Deputy Speaker, and are thinking more actively, dare I say it, about your retirement income—actually not like me; you are a lot younger. [Interruption.] Mr Speaker is like me; he is thinking about his pension. He will have spent countless hours trying to track down old pensions. The dashboard, however, will put power back into the hands of savers, and we will support measures in the Bill to improve its implementation and delivery. I want to highlight the creation of larger megafunds in both the public and private sectors, as well as the consolidation of the local government pension scheme, as sensible and pragmatic steps. The LGPS is one of the largest pension schemes in the UK, as we have heard. It has 6.7 million members with a capital of £391 billion, yet it is highly fragmented into 86 locally administering authorities. There is a great deal of divergence in the funding positions of those councils, even among geographic neighbours. They range from Kensington and Chelsea, which has a scheme funding level of 207%, to neighbouring local authorities like Waltham Forest, Brent, and Havering, which were underfunded in the 2022 triennial review. While we support the concept of these megafunds, there are legitimate questions that I hope the Minister will address in Committee. We do not want to see constituents from one council area unwittingly funding shortfalls from neighbouring areas. Like many people in this House, I first cut my teeth in politics as a councillor. Soon after being elected, I was appointed chairman of the finance committee on Forest of Dean district council. One of our tasks was to oversee the performance of our local pension fund. Let me assure the House: the Forest of Dean is a truly wonderful place, but it is not the City of London. Our finance committee was made up of dedicated local councillors, but when it came to scrutinising the pension fund, we were—to put it kindly—out of our depth. Meanwhile, the pension fund managers, with their packed diaries and weary expressions, seemed to treat a trip to rural Gloucestershire as a rare expedition to the outer reaches of the Earth. One thing struck me about small local government pension funds: they simply did not work. But it is not just in local government, small funds are—albeit with some notable exceptions for bespoke funds—not fit for purpose in a global investment environment, as we heard from the Minister. The creation of larger funds will enable greater scale, better investment efficiency and, ultimately, better value for money for members. It will allow our pension funds to compete on the world stage, to invest more in UK infrastructure and to deliver higher returns for British savers. There are other areas of the Bill that we support and welcome. The consolidation of small, fragmented pension pots is a long-overdue reform. Bringing those together will reduce administrative costs and prevent the erosion of savings through unnecessary fees. The introduction of a value-for-money framework is essential to ensure that savers are getting the best possible deal, not just on charges, but on investment performance and retirement outcomes. We also welcome the development of guided retirement products. We cannot simply leave savers on their own to navigate complex choices at retirement. Changes to provide greater support for those facing terminal illness will provide comfort to those in extremely challenging circumstances. These are all positive steps, and we will work constructively with the Government to ensure they are delivered effectively. While there is much to welcome, there are also significant areas where the Bill falls short and areas that require attention if we are to deliver a pensions system that is truly fit for the future. Most fundamentally, the Bill does not address pensions adequacy. The uncomfortable truth is that millions of people in this country are simply not saving enough for their retirement. The amounts people are saving, even with auto-enrolment, are too low to deliver a decent standard of living in old age. Research by Pensions UK shows that more than 50% of savers will fail to meet the retirement income targets set by the 2005 pensions commission. Closing the gap between what people are saving and what they will need must be the pressing concern of this Government. We urgently need the second part of the pensions review to be fast-tracked, with a laser-like focus on pensions adequacy. We need a bold, ambitious plan to ensure that every worker in this country can look forward to a retirement free from poverty and insecurity.
It is an important question, and one that I will come to in due course. Watch this space for a fascinating manifesto in the run-up to the next general election—I am sure everybody looks forward to it.
The former City Minister raises a good and important point. He tries to bring together a number of related but quite disparate issues that we need to think carefully about. I would not want to make Conservative party policy on the hoof at the Dispatch Box, though the Minister urges me to do so. These are important points, and I think my right hon. Friend would understand that I would not want to rush into anything without careful, considered thought. These are issues on which he and I—and the Minister, of course—might get together. As I said, we need a bold, ambitious plan to ensure that every worker in this country can look forward to a retirement free from poverty and insecurity. That means looking again at contribution rates, the role of employers and how we support those who are excluded from the system. Another omission in the Bill is the failure to extend the benefits of auto-enrolment to the self-employed. There are over 4 million self-employed people in the UK—people who are driving our economy, creating jobs and taking risks. Too many of them face the prospect of old age in poverty, with little or no private pension provision. Research by the Institute for Fiscal Studies found that only 20% of self-employed workers earning over £10,000 a year save into a private pension. With the self-employed sector continuing to grow, the Bill misses an opportunity to come up with innovative solutions for this underserved group in the workplace.
The hon. Member makes an important point. The earlier people start putting money in, the better. As a result of compound interest, over many years they will end up with a bigger pension pot, even if at the beginning the contribution is quite small; the amount aggregates over a long period. We will discuss that in Committee. We are concerned about the lack of detail in the Bill. Too much is left to the discretion of regulators and to secondary legislation. Parliament deserves to have proper oversight of these reforms. From my discussions with the industry, it seems there is tentative support for many of the reforms in the Bill. However, the message that keeps coming back is that the devil will be in the detail, so I hope that as this Bill makes progress through the House, the Minister will be able to fill in more of the blanks—and I am sure he will; he is a diligent individual. I move on to the most important thing that this Bill hopes to achieve: growth. We want to support Labour Members on the growth agenda, but too often they go about it in slightly the wrong way. Surpluses in defined-benefit pension schemes are a great example. Interest rates have risen post-covid, and that has pushed many schemes into surplus. In principle, we support greater flexibility when it comes to the extraction of these surpluses, but there need to be robust safeguards; that is certainly the message coming back from the industry. Under the legislation, there is nothing to stop these surpluses being used for share buy-backs or dividend payments from the host employer, for instance. Neither of these outcomes necessarily help the Government’s growth agenda. We would welcome a strengthening of the Bill to prevent trustees from facing undue pressure from host employers to release funds for non-growth purposes. In addition, to provide stability, the Government should carefully consider whether low dependency, rather than buy-out levels, will future-proof the funds, so that they do not fall back into deficit. Although the Government are keen to extract surpluses from the private sector, there is not the same gusto shown in the Bill when it comes to local government pensions. The House has discussed in detail the Chancellor’s fiscal rules, not least earlier today. Under the revised rules introduced by the Chancellor, the measure of public debt has shifted from public sector net debt to public sector net financial liabilities. As a consequence, the local government pension scheme’s record £45 billion surplus is now counted as an asset that offsets Government debt. This gives the Chancellor greater headroom to meet her fiscal targets—headroom that, dare I say it, is shrinking week by week. I do not wish to sound cynical, but perhaps that is the reason why the Bill is largely silent on better using these surpluses. This may be a convenient accounting trick for the Chancellor, but the surpluses could have been used, for instance, to give councils pension scheme payment holidays. The Government could make it easier to follow the example set by Kensington and Chelsea, which has suspended employer pension contributions for a year to fund support to victims and survivors of the 2017 Grenfell Tower tragedy. These revenue windfalls could be redirected towards a range of initiatives, from local growth opportunities such as business incubators to improving our high streets. We could even leave more money in council tax payers’ pockets. I turn to the part of the Bill on which we have our most fundamental disagreement: the provisions on mandation. The Bill reserves the power to mandate pension funds to invest in Government priorities. That not only goes against trustees’ fiduciary duties—although I appreciate and recognise the point the Minister made earlier—but means potentially worse outcomes for savers. Pensions are not just numbers on a spreadsheet; they represent a lifetime of work, sacrifice, and hope for a secure future. The people who manage these funds and their trustees are under a legal duty to prioritise the financial wellbeing of savers. Their job is not to obey political whims, but to invest prudently, grow pension pots and uphold the trust placed in them by millions of ordinary people. That fiduciary duty is not a technicality; it is the bedrock of confidence that the entire pension system rests on. These pension fund managers find the safest and best investments for our pensions, no matter where in the world they might be. If things go wrong, we can hold them to account. But if this reserve power becomes law, we have to ask the question: if investments go wrong, who carries the can? Will it be the pension fund manager and the trustees, or the Government, who did the mandation? Likewise, while the reserve power in the Bill focuses on the defined-contribution market, the shift in emphasis has potentially profound impacts across the sector. UK pension funds, along with insurance companies, hold approximately 30% of the UK Government’s debt or gilt market. If mature defined-benefit schemes move from the gilt market to equities, that potentially has a profound impact on the Government’s debt management, or ability to manage debt, and therefore interest rates and mortgage rates. For that reason, we would welcome the Minister confirming whether any concerns have been raised by the Debt Management Office, and possibly the Bank of England. There is widespread opposition from across the industry to this power—I am approaching the end of my speech, you will be pleased to hear, Madam Deputy Speaker. There are better ways for the Government to deliver growth, such as changing obsolete rules and removing restrictions. In the annuity market, solvency rules prevent insurers from owning equity in productive UK assets. Wind farms, for example, deliver stable returns through contracts for difference and contribute to the Government’s green agenda. They could be an ideal match for long-term annuity investments, while also delivering clean energy. Releasing the limits on the ability of insurers to fully deploy annuity capital has the potential to unlock as much as £700 billion by 2035, according to research by Aviva. Rather than imposing top-down mandates, we want the Government to maximise growth opportunities from our pension industry by turning over every stone and seeking out the unintended consequences of old regulations, not imposing new ones. I will conclude, Madam Deputy Speaker, as you will be delighted to hear. [Interruption.] Yes, I have taken a lot of interventions. We reaffirm our commitment to working constructively with the Government. Stability in the markets is of paramount importance, and we recognise the need for a collaborative approach as the Bill progresses through the House. We will bring forward amendments where we believe improvements can be made, and we will engage in good faith with Ministers and officials to get the detail right. We want to go with, not against, the grain of what the Government are seeking to achieve through this Bill, and I look forward to working with the Minister in the weeks and months ahead.
The Mercure hotel in Stanwell in my constituency is used to house asylum seekers, and I have had multiple reports of asylum seekers there working illegally. Will the Department please put that on immigration enforcement’s radar, so that it can take the appropriate action?
Before the general election, the Chancellor said that this would be the most pro-business Government ever. She spoke recently at The Times CEO summit. Before she was introduced to the CEOs, the host asked how many of them thought that this Government are still pro-business, and not a single hand went up. Why does the Chief Secretary to the Treasury think that is?
The way in which the Minister is talking about insurance buy-out suggests that, in the Government’s mind, insurance buy-out is still in some way a gold standard. Can he reassure the House that he is seeking to flatten the playing field, such that the increased choice available to defined-benefit pension schemes will mean that for perpetuals who run on—such as OMERS, which started off as the Ontario municipal employees retirement system and is now worth 140 billion Canadian dollars—there is as much safety in superfunds as there is in insurance buy-out?
I was just googling “dirigiste” and my right hon. Friend’s everyman quote. Will he comment on the fact that OMERS, which he would probably agree is one of these megafunds that he thinks are slow and unwieldy and invest in infrastructure and illiquids, returned a 7.1% net return over the last 10 years and the London Pensions Fund Authority returned a 7% return over the last 10 years?
I regret that the Pensions Minister, the hon. Member for Swansea West (Torsten Bell), is no longer in his place; I wanted to pay him something of a compliment for getting the Bill here today with typical ambition and enthusiasm. I should, however, remind him of my grandmother’s favourite saying: an ounce of experience is worth a ton of enthusiasm. I stand here to talk about part 3 of the Bill on the basis of about four years’ experience as a director of the first pensions superfund, having attempted to get it through the Pensions Regulator and the interim regime put up under the last Government. That was ultimately unsuccessful; part of the reason why we are going to need the Pensions Minister’s enthusiasm and ambition is that he will come up against a series of vested interests. When we attempted—[Interruption.] I welcome the Pensions Minister back to his place and am grateful that he is here to listen to this. When we attempted to launch the pensions superfund, we were bombarded by people who wanted to strangle the superfund industry at birth: the Association of British Insurers; an extraordinary intervention by the Governor of the Bank of England—I am not sure whether the Minister has had a chance to reprogramme the Governor of the Bank of England recently, but I hope he is more enthusiastic about the Minister’s proposal than he was about the last Government’s—and lastly, the Pensions Regulator itself. I think the Minister wants to create a thriving market in superfunds. However, under the current interim guidance, capital requirements for superfunds are about twice those for insurers providing buy-outs, so it is hardly surprising that we have seen a number of recent new entrants to the insurance market but no new superfunds. The Solvency II regime—apologies for the slightly technical language, but the Minister will appreciate it—that applies to insurers works off a one-year 99.5% confidence level, but over time the industry has been allowed to apply a number of important adjustments, including diversification, matching adjustments and deferred tax credits. All have had the effect of effectively reducing the capital requirement for insurers. In combination, that means that the capital buffer for a buy-out provider is approximately half that of a superfund under the current interim regime, even taking into account the fact that superfunds are proposed to have a one-year 99% confidence level. The Bill must address that inherent unfairness if, as the Minister wants, the superfund market is to grow. At the moment, it is the proverbial baby who refuses to put on weight. Can the Minister assure me that the Bill will address the problem and create a more level playing field that will allow superfunds to offer the 10% to 15% pricing discount to insurers that his Department has said it is seeking? As the Minister knows, there are a number of techniques for achieving that. He might consider: specifying that superfunds should apply a 98% one-year confidence threshold; the creation of a rule similar to the matching adjustment that applies to insurers; extending a VAT exemption to superfunds for essential pension services, such as admin, actuarial and investment, including scheme origination and transfers of the scheme to superfunds; or—I suppose this is an “and/or”—allowing superfunds to use structured capital instruments such as subordinated debt and preferred shares to lower the cost of capital and enhance investment flexibility, without compromising quality. Lastly, I turn to the Pensions Regulator’s process of assessing superfunds and giving them a licence to operate—this is the bit where I have the scars on my back. Will the Minister take a close personal interest in this and change the way that the Pensions Regulator works, so that there are stricter and shorter time limits for assessing suitability—shorter than the limits currently in the Bill, which are six months as a default and nine months as a stretch? In the case of the pensions superfund, we had three applications and a similar timescale was used. One can just imagine why the investors’ patience finally ran out and the whole thing was wound up. I do not want the Minister to be in the position of his predecessor, Guy Opperman, who stood in this place and said that greenlighting superfunds was his greatest achievement during lockdown, yet as a result of a combination of the regulatory environment that was put in place and the vested interests of those who argued against the birth of superfunds, the whole concept was strangled at birth. I want the Minister to avoid that, so I encourage him to look back at the first efforts to produce superfunds and tell the Pensions Regulator a great deal more about how it should do its business. The reason why the Pensions Regulator became risk averse was because the last Government refused to cover superfunds in their Pension Schemes Bill, now the Pension Schemes Act 2021. The Pensions Regulator did not see why it should take any additional risk if politicians were not going to. I encourage the Minister to have the strength of his convictions to use primarily legislation to tell the Pensions Regulator the market that he wants it to regulate. Then he will give pension superfunds a fighting chance of coming into existence and consolidating. Notwithstanding some of the concerns that others have had, 5,100 of anything is not a working marketplace; it is ripe for consolidation—it was then and it is now.
When the right hon. Lady was in opposition, she criticised every announcement simply because it came from the Conservatives. Take childcare: she called the hours model that she talked about today “broken”. She said that she would have a new childcare system, and that its creation would be “like the creation of the NHS.” Yet now, in government, she trumpets the childcare system that the Conservatives designed as one of her main achievements. The right hon. Lady once dismissed family hubs as a “poor imitation”, but after last week’s chaos, what is she turning to for the Government’s reset? Yes, the Conservatives’ family hubs plans. That is why I was surprised this weekend to hear her claims that this could only happen under Labour. The irony is that this programme was started under the Conservatives—we did not hear that today—and the expansion was not in the Labour manifesto; it was in the Conservative one. Her strategy document, published today, has even lifted the name of our “Best Start for Life” plan, published in 2021. Imitation really is the sincerest form of flattery, for which I thank the right hon. Lady. Perhaps recent events have reminded her that Labour does not have a monopoly on good ideas—if indeed it has any good ideas at all. I will not take the right hon. Lady’s approach, which was opposition for opposition’s sake. I agree in principle with much of what is being proposed today, but as with free school meals and the children’s care cap, I will do my job and point out the gaps, raise concerns and expect proper answers. She might consider engaging with the questions this time, instead of falling back on a rant about the Conservatives, which frankly convinces no one and improves nothing. With that in mind, is this genuinely new money being announced today, or just a reannouncement of the family hubs money from the spending review? The right hon. Lady talks about £500 million of funding. Which financial years, and how many years, does that cover? Is the funding for new hubs only, or will it support existing ones, too? Will there be new capital funding for bricks and mortar provision? As the Secretary of State acknowledged, Sure Start had its limitations. It failed to effectively target support at those who needed it most. What is being done differently this time to avoid the same mistakes being made? When I visited a family hub in Dartford earlier this year, I was shocked to hear how many mothers were being referred to it because they faced domestic violence from their own children. These are children who have grown up witnessing abuse at home. What data is being collected through these hubs to track national tends like these, and how is that informing the Government’s response to the most pressing issues facing these families? I welcome the Government’s focus on school readiness. Children who lived through lockdown are arriving at school with speech delays and gaps in basic skills. This is one of covid’s longest shadows, but if we are serious about tackling it, we need to be honest about responsibility: what falls to parents and what falls to teachers? Teachers are stepping in where parents are not. They do it because they care, but it is not their job to potty-train, to brush teeth or to teach children to get dressed. Of course, children with SEND need tailored support—that is a different conversation entirely—but for most children, that support needs to start at home. The Government have set a target for school readiness, but it relates to the end of the school reception year. We need a target that actually reflects school readiness and what has happened at home, not the brilliant work of reception teachers. The right hon. Lady has said that her No. 1 priority was early years, but the rhetoric does not match the reality. Nurseries across the country are on the brink because of decisions her Government have made. While it is welcome that they have continued the roll-out of our early years offer, the lack of compensation for the national insurance contributions increase is forcing providers to either hike fees or shut their doors. It is no use giving out incentive payments for jobs at nurseries if providers are closing because they have been clobbered by NICs. Finally, I must raise the issue of SEND. This has been splashed across three national newspapers, and despite the off-the-record briefings from her Department, the right hon. Lady has failed to give parents any reassurance over the weekend. Parental anxiety is, as we all know, going through the roof, so I will give her one more opportunity. Can she confirm that no parent or child will have their right to support reduced, replaced or removed as a result of her planned changes? Right now, this is a Government devoid of ideas. A year in, they are defined by broken promises and U-turns. Parents need and deserve answers on what their Government are doing, and until they get them, they have every reason to doubt everything this Government have to say.
On a point of order, Madam Deputy Speaker. Along with 6.5 million fellow members, I am a member of the local government pension scheme, through my proud membership of the London Pensions Fund Authority. We are uniquely affected by the Pension Schemes Bill, which we are about to contemplate. I am therefore concerned that it should be a hybrid Bill rather than a public Bill. I seek your guidance, please, as to whether the Bill has been properly certified as a public Bill and whether, in fact, it should be referred to the examiners to decide whether it should go through the hybrid Bill process. If not, and the House decides to proceed today, could the House of Lords independently decide through its examiners whether it is, in fact, a hybrid Bill?
I congratulate the hon. Member for Tamworth (Sarah Edwards) on her speech. I am afraid, however, that you, Madam Deputy Speaker, will have to forgive me for puncturing the air of bonhomie and positivity about the Bill, because I am really not content with it. Frankly, I feel it is my duty as an Opposition Back Bencher to be suspicious of consensus, particularly when the City of London is conspiring with a Labour Government to muck about with our pensions. We have seen that before. I am old enough to remember Gordon Brown’s so-called reforms in 1997, which struck a hammer blow to the British people’s pension funds. You will remember, Madam Deputy Speaker, that the late, great Frank Field—who was then the Pensions Minister—later called those changes a spectacular mistake that struck a hammer blow to the solvency of British pension funds and drove a dagger deep into the heart of the defined-benefit landscape, resulting in its extinction. As such, I am afraid that must rise to raise some very significant reservations about this bit of legislation—and not just its technical execution, but the political instinct that it betrays. While the Bill is wrapped in the warm words of reform and modernisation, what it actually does is centralise control, unsettle previously settled rights, and risk disenfranchising precisely those people whom it purports to help. To begin with the Bill’s technical aspects, I reiterate my point of order. I am a member of the local government pension scheme through my membership of the London Pension Funds Authority, and I am uniquely affected by this legislation, as are 6.5 million other former and current public sector workers. My view is that, under this Bill, those people’s rights are being denied, and that through the hybrid legislation process, they or their representatives should have the right to petition the Bill Committee and explain why they feel they are affected by investment pooling, the changes to fiduciary delegation and the asset consolidation. They are uniquely affected by this Bill, which strikes profoundly at the governance of the pension funds they have paid into in a way that it does not for other pension funds in this country. That is the definition of hybridity—if that is a word—so if we are going to stick to the rules in this House, we really should stick to them. I look forward to getting the letter that you promised me, Madam Deputy Speaker, and I know that you have asked me not to refer to procedure in the other place, but this is not the only Chamber that will be looking at this legislation. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams), who is just about to leave—I am sorry to detain her but will be brief—asked the Minister what the problem is. I repeat her question, but in relation to the local government pension scheme, I also ask what it has to do with him. It is my money, not his, and it is for scheme members to make decisions about how they wish their money to be used. It is not taxpayers’ money; it is my money. It is a defined-contribution and benefit scheme, and we have all paid into it. He is the second Minister in the space of 18 months to try to interfere with the local government pension scheme, and I stood in this Chamber and opposed Michael Gove, now Lord Gove in the other place, when he attempted to manipulate the local government pension scheme for political reasons. I urge the Minister to think twice before he does so. Secondly, I believe that this Bill is conceptually flawed. If we are being generous—[Interruption.] By all means, the hon. Member for Oldham East and Saddleworth is free to go—I will not be mentioning her again. She was hesitantly rising to leave. If I am being generous, the ambition behind this Bill is to unlock capital that can be invested for the purposes of growth, but the methods it proposes are chillingly dirigiste and make the dangerous assumption that Whitehall knows best and that central direction by the Government can outperform the dispersed judgment of hundreds of experienced trustees managing diverse funds in varied contexts. Essentially, with this Bill the Minister is turning the pension fund industry into an element of Government procurement by the back door. There are three further points that I want to put on the radar on Second Reading. I understand that the Bill will go through, but I hope the Minister will take them into account. First, it is simply not true that megafunds perform better. There is plenty of academic and empirical evidence that the picture is much more mixed. Often, smaller funds with better governance and a more focused investment strategy can perform better. These supertanker monopoly funds lose agility, lack accountability and become distant from pensioners and members of the fund. Their investment discretion and their ability to move quickly on investment decisions becomes sclerotic and bureaucratic. In particular, it is true that these megafunds specifically underperform when they invest in exactly the kind of illiquid assets that the Government are hoping to push them into: infrastructure and private equity. I urge the Government and the Minister please to examine carefully the evidence from the United States and elsewhere that shows that these very large funds do not necessarily produce better returns for investors. They may well be able to reduce costs because of scale, but I am afraid that the evidence is just not there on fundamental investment returns. My second point is on the danger of politicisation. We have seen elsewhere in the world where pension funds have been pushed into the Government’s priorities to their own detriment. In Canada, large pension funds have come under significant Government pressure to invest in state infrastructure. In France, pension fund surpluses have been directed into Government bond-buying programmes effectively against their will. Once those assets become controlled and directed into state-favoured investment vehicles, which is what the Government are proposing through this Bill, the temptation for Ministers—not necessarily this Minister, but future Ministers—is to go further and push funds into politically convenient infrastructure projects that may prove to be financially disastrous. If that power had been available to the political team that decided to instigate the frankly financially disastrous HS2, and my pension fund had been put in it, where would I be now? I urge the Minister to think carefully about the responsibility for my retirement and my future. By me, I am referring to myself as a member of the local government pension fund. I am everyman for these purposes. I am afraid that essentially what has happened in France and in Canada, and what may happen under this legislation in the UK, is that the pension fund system effectively becomes a tool of Government fiscal policy. Effectively, absent capital spending available directly from the taxpayer, the Government direct capital spending from pension funds—from private money—and plug holes that they create by writing cheques that they cannot fulfil. I would be interested in the Minister’s response to that.
As I said, the evidence about performance across the population of funds is mixed. Some smaller funds do extremely well, because they have strong governance and a focused and nimble investment strategy. Some megafunds do reasonably well, because they can spread their risk across a variety of asset classes, but it is not a given that a big fund will perform better than a smaller fund. In fact, in certain circumstances smaller funds, because they have better accountability and can have a more focused investment strategy, may well perform better. Frankly, and this speaks to my hon. Friend’s point, it is for me as a member of the pension fund to decide what I want to do, performance or otherwise, because it is my money. Given that I have contracted with this pension fund under circumstances made clear to me when I contracted with it as part of my employment or otherwise, it is not necessarily for the Government to steam in and tell me what I should or should not do with my own money. That means I carry a certain element of risk—absolutely—but unless we are going full-throated for the total financial infantilisation of the British people, I cannot see that we have any other way to preserve our financial freedom and autonomy.
That may well be true, but that is a different question. There is a question about financial education and the ability of large numbers of our fellow citizens to understand these financial complexities. We have a large and professional independent financial adviser community, and all pension funds are required to have pension advisers who can speak to members, tell them what is going on and explain the decisions before them. I do think that over the years, such steps have disenfranchised the British people from their financial decisions, yet we hold them responsible for their debts, their mortgages and their future. There is a larger question for us in this House about how much we have subtracted from the autonomy of the British people, and therefore how much blame attaches to us as politicians when their financial circumstances are not what they expect.
But I have paid into that scheme.