Local Government Pensions Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 — Motion of Regret

Part of the debate – in the House of Lords at 5:45 pm on 13th May 2014.

Alert me about debates like this

Photo of Baroness Stowell of Beeston Baroness Stowell of Beeston The Parliamentary Under-Secretary of State for Communities and Local Government 5:45 pm, 13th May 2014

My Lords, I start by paying tribute to councillors and the work that they do. Unlike all noble Lords who have contributed to today’s debate, I have never been a councillor or worked in local government, but my granddad was a councillor in Beeston during the late 1940s and early 1950s. I never knew him but, when I was a little girl and out with my dad, older people in Beeston would often remark that they had known my granddad and tell me about some of the things that he had achieved for the people of Beeston. They never mentioned politics or his party, but they were very keen to reinforce that he had changed things for the better as a councillor.

Unlike me, other DCLG Ministers have direct experience of local government. All have been councillors and many of them have been leaders of councils; that includes my noble friend and respected predecessor Lady Hanham, who was leader of Kensington and Chelsea and also my noble friend Lady Williams of Trafford, who was with me on the Front Bench earlier. She takes her title from the council that she led. They know what it is like to be a councillor. They understand what it means to represent people locally and the importance of that role. They know that it extends from being at the front line of a national crisis, such as the recent floods, to spending hours every week listening to local people and doing what they can to help on matters that may seem minor to outsiders but are of major importance to those affected.

I had the privilege—and I do underscore that word—to hear my right honourable friend the Secretary of State Eric Pickles pay tribute to councillors with real enthusiasm at the LGA’s annual reception in Parliament only the other week. I have heard him in private in ministerial meetings, particularly during the flooding crisis, stand up for councillors and all that they were doing at that time. I reiterate to noble Lords and to the House this afternoon that everyone in the Department for Communities and Local Government understands and respects the work of councillors. All of us understand that councillors do all this excellent work voluntarily as elected representatives of local people.

This debate relates to the provision in the Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations, which, as we have heard, excludes councillors and other elected local officeholders from membership of the new Local Government Pension Scheme. It may be helpful to highlight to noble Lords that those regulations also serve a broader purpose. In June 2010, the Government invited the noble Lord, Lord Hutton of Furness, to chair the Independent Public Service Pensions Commission. The purpose of the commission was to carry out a fundamental structural review of public service pension provision and to make recommendations on pension arrangements that would be sustainable and affordable in the long term. Further to the commission’s recommendations, I am pleased to be able to tell noble Lords that the new scheme for local government workers came into operation, on time, on 1 April this year. Importantly, the design of the new scheme will ensure that the large number of low-paid workers in local government will continue to have access to good pension arrangements that are affordable for them.

The new Local Government Pension Scheme, like its predecessor, is an occupational pension scheme intended for employees, who make a contribution alongside the employer’s contribution, which is paid by taxpayers. This Government do not believe that councillors, as representatives elected locally to hold town halls to account and to serve local people, should be in a pension scheme designed for employees. It is on this point of principle that Ministers take a fundamentally different view to the previous Administration. We do not believe it is right to blur the line between council staff and elected councillors.

That point has been heard before and has been referred to by noble Lords during the debate this afternoon; indeed, my noble friend Lady Hanham reinforced the point in her contribution. Contrary to the contributions of noble Lords today, it seems that the vast majority of councillors agree with this Government, because only 16% of councillors in England are part of the Local Government Pension Scheme. To put it another way, only 30% of those eligible to join are members of the scheme. This Government want all councillors to have the full opportunity to demonstrate, as the vast majority already do, that they are independent and not reliant on the municipal payroll.

We made our position clear when we first announced the proposals in December 2012. I was not going to make this point, but as my noble friend Lord Tope said with tongue in cheek that this was a good day to bury bad news, it is worth reminding noble Lords that he said that because the previous Government announced their decision to provide access to the Local Government Pension Scheme on the day of 9/11. I hope that my noble friend is not seriously saying that the last working day before Christmas—a day when we were in any case publishing the local government financial settlement in documents which all people interested in local government activity were waiting for—is the same as 9/11. When we announced our intentions, Ministers indicated the Government’s view that councillors’ ongoing membership of the Local Government Pension Scheme was not appropriate. The Government’s direction of travel has been clear since then.

The Government have, of course, sought views on this change. Between April and June last year, we consulted with a wide range of interested parties. Although the consultation made clear the Government’s preferred position, it also invited respondents to offer evidence about the impact of the change and to suggest alternative proposals. It is fair to say, as noble Lords have made clear this afternoon, that a majority of respondents did not support the Government’s proposals. Many—particularly some councillors and those representing them—felt strongly that they should be able to continue to be members of the Local Government Pension Scheme. However, it is worth pointing out to noble Lords that only 472 individual councillors felt moved to write as part of the consultation to express their opposition, which is fewer than 3% of the around 18,000 councillors in England.

We have heard today some reasons why those who oppose these changes do so, but it is important to go back to the previous Labour Government’s decision to make it possible for councillors to access the scheme and the reason they outlined for making this change and creating this access. In his Written Ministerial Statement in 2003, Nick Raynsford talked about the change being brought in to address what he described as disincentives. This change was intended to incentivise more people to come forward to stand as councillors but, as I have already said, only 16% of all councillors in England have taken up the offer. If the previous Government decided to make this change to provide an incentive, it clearly has not succeeded. If it was about incentive, then why have more councils and councillors not decide to take up the opportunity?

The LGA and some noble Lords have argued that, if we withdraw access to the scheme, people will not put themselves forward to be councillors. We disagree with that and, indeed, are not aware of any strong evidence that offering access to the scheme has resulted in any change in the number of people putting themselves forward for public service. Similarly, we are not aware of any strong evidence that ending access to the scheme will limit the number of people standing for local election.

I note in particular the point raised by my noble friend Lord Shipley and other noble Lords about the upcoming local elections. I think it was one of my noble friends who suggested that this change was somehow an insult to those who were minded to put themselves forward and that we were doing something that would deter people. The facts do not bear that out. In the forthcoming local council elections in England, we see an extra 1,000 candidates standing compared to when those seats were last fought—an additional 1,000 people have decided it is worth their while to put themselves forward to represent local people even though they will no longer be able to access the Local Government Pension Scheme. People become councillors because they want to serve their communities, because they want to change things or because they may have clear, strong political beliefs.

The leader of the Opposition in the other place, Mr Miliband, has tabled an Early Day Motion calling not only for councillors to be reinstated in the scheme, as the Motion of the noble Lord, Lord McKenzie, does today, but for annulling the new pension arrangements in toto—the new arrangements that will benefit low-paid local government workers. My noble friend Lord Bourne made the point that these changes that the Government are introducing are providing some savings. I am happy to acknowledge that the savings are modest, but they are none the less savings. It is important for us to understand whether the Labour Opposition are now committing to reinstating councillors’ access to the Local Government Pension Scheme, were they to be elected. It would be interesting to know, when the noble Lord, Lord McKenzie, comes to respond, whether that is something they will be campaigning on in the remaining few days before the local elections on 22 May.

This Government do not believe that people choose to enter local public life in order to have access to the Local Government Pension Scheme. I know that no one in this debate is suggesting otherwise. However, given the focus and energy that has been spent on this issue, I worry that there is a risk that we give the public the impression that this is the case. We need to be quite careful on this matter.

I turn to some of the specific points raised in the debate that I have not already covered. My noble friend Lord True, the noble Lord, Lord Beecham, and the noble Baroness, Lady Bakewell, talked about the treatment of councillors for tax purposes and questioned the distinctions between allowances and expenses. There are a couple of important points for me to make here. For tax purposes, local councillors are officeholders, not employees. Officeholders are subject to the same tax rules as employees, and these include the tax rules for allowances and expenses. That definition is quite a long-standing one; it does not equate to someone being classed as an employee. The noble Baroness, Lady Bakewell, raised in particular the issue of tax on mileage. I am very much aware of that concern among councillors at the moment. Noble Lords might like to know that this is something about which we in DCLG are talking to the Treasury at this time.

My noble friend Lord True talked about the definition of councillors as employees and referred to the Electoral Commission’s guidance on the qualifications necessary to stand for local election. It indicates that service as a councillor in an area can be treated in the same way as having your main place of work in that area. However, if we look again at the same Electoral Commission’s guidance, it also indicates that you would be disqualified from standing for election to a council if you were employed by that local authority.

The noble Baroness, Lady Jones, and the noble Lord, Lord Tope, talked about the London mayor and Assembly members and questioned the arrangements for them. It is worth reminding ourselves that separate legislation provides for the London mayor and Assembly members to have access to a pension scheme. By removing their access to the Local Government Pension Scheme, we are not at the same time changing the law that remains in place for them to access a pension scheme that would attract contributions from an employer. However, by making this change, we will bring them into line with MPs, because they will be able to access a pension scheme in just the same way as MPs do: they do have a pension scheme but they are not in the same pension scheme as any employee of Parliament.

As to whether a new scheme for the London mayor and Assembly members would be more expensive—a point raised by my noble friend Lord Tope—I would argue that, equally, it does not have to be more expensive; it could be less expensive. I certainly hope, on behalf of London taxpayers, that the relevant body would take account of that possibility.

My noble friend Lord True wanted to draw a comparison—