Perhaps I should begin by following the example of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) in declaring my association with a local government pension fund. I chaired the pension committee of my local authority for a number of years. I am pleased to say that since I stopped doing that it has become much more ethical. I can now tell the House that the pension fund now has the lowest percentage of its fund invested in fossil fuels of any local authority in the UK, with the aim of net zero by 2030. I take no credit at all, other than the fact that it is now chaired by my researcher.
I should also say that I used to be member of the local government pension scheme, but I moved the tiny amount of money I had in that to the MP scheme, so I do not know whether I should declare that. I wonder if we should all be declaring that fact, given that although the MP scheme is not subject to the McCloud judgment, its trustees have said they will follow the McCloud judgment. For the avoidance of doubt, I put all that on the record. I do not think I have much time left now, but let us see.
I generally support the Bill, which is undoing mistakes that the Government made which were exposed by the McCloud judgment. I do, however, have a slight reservation. Nobody has mentioned the matters relating to judicial retirement ages. I see exactly the force of why they need to be increased, although I share the reservations of the Law Society that going from 70 to 75 will actually set back diversity in the judiciary, hopefully only temporarily, because of those who will be eligible to stay on in their roles. However, we are in such a parlous state in relation to the shortage of judges and the crisis in the courts that I can see the force of the argument.
I will be brief because, in a way, by talking too much about new clause 1, we are giving it more credibility than it deserves. It does not really deserve a place in this Bill. I suspect that the right hon. Member for Newark (Robert Jenrick) knows that, and actually, we should congratulate him on managing to squeeze it into the long title of the Bill. I felt that it was slightly surreal to be listening to a speech about the Abraham accords in relation to a technical Bill about pensions. We will have, hopefully, a three-hour debate on recognition of the Palestinian state on Thursday in this Chamber, in which it might fit, although that might be stretching it a bit as well. Perhaps he will speak in that debate as well.
3.45 pm
The right hon. Gentleman went through the history, with the 2013 Act and the 2016 regulations. The mistake that he is making in trying to put this into primary legislation is that pension schemes are already very well regulated in terms of what they can and cannot do, quite rightly, because they look after—in the case of the local government pension scheme—hundreds of billions of pounds of our constituents’ money.
In 2014, following the 2013 Act, the advice, which the Local Government Association sought, said that investment powers must be directed to achieving what is best for the financial position of the fund, and that provided that this remains true, the precise choice of investments may be influenced by environmental, social and governance factors, so long as that does not risk material financial detriment to the fund.
The 2016 guidance that the right hon. Gentleman referred to said that the
“investment strategy… must be in accordance with guidance issued by the Secretary of State”,
who had the power to intervene if satisfied that any authority had failed to act in accordance with statutory obligations or guidance. The guidance also said that although
“pursuit of a financial return”
should be
“their predominant concern, they may…take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision.”
Generally speaking, that is the way in which pension funds behave. However, the proposal goes further than that.
I referred in an intervention to the regulations that went to the Supreme Court and were defeated. I appreciate that it is perfectly acceptable—we said this throughout the Brexit debates about many of the actions relating to Brexit, and this was one of the strongest arguments against a lot of the reforms to judicial review, the Human Rights Act and so forth—to argue, as we do now, that this Parliament is sovereign and can make those decisions. Of course, it can return to the issue through primary legislation, but I urge caution. We should look again at the judgment of the Supreme Court and the reasons that it gave for making that decision.
I suspect that the clue to what the right hon. Gentleman was saying came at the end of his speech when he said, effectively, “I’m teeing this up for the Queen’s Speech. I do not expect the new clause to be passed today, but I am putting down a marker.” It is perfectly reasonable to say that because the Government did say in the last Queen’s Speech that they would bring forward such a Bill, and they have not. The Queen’s Speech said:
“Measures will be introduced to ensure that support for businesses reflects the United Kingdom’s strategic interests and drives economic growth.”—[Official Report, House of Lords, 11 May 2021; Vol. 812, c. 2.]
The Government explained that as delivering a
“manifesto commitment to stop public bodies from imposing their own approach or views about international relations, through preventing boycott, divestment or sanctions campaigns against foreign countries.”
That is all on the record and that is where we are, but we would be stretching things today if we approved an extremely widely drawn new clause that goes much further on this issue. The right hon. Gentleman addressed some of the background to this, but he then talked in quite lurid terms about BDS. I am sure that there are Members who support BDS, Members who do not support BDS but support others’ rights to do that, and Members who do not support it full stop, but I would not accuse any of them of ulterior motives. They have their views and they can put them forward freely in this place.
Like my right hon. Friend the Member for Hayes and Harlington, I believe that there are many regimes around the world that are inappropriate for investments of very large sums of my constituents’ money. They include the Gulf countries, which the right hon. Member for Newark
prayed in aid when he talked about the Abraham accords. They certainly include Saudi, and they certainly include China.
I raised a point earlier to which the right hon. Gentleman did not respond. I made the terrible mistake of asking two questions and he gave me only one answer, which is what Ministers do; he was probably remembering his days on the Front Bench, so it was just instinct not to respond. However, I asked a genuine question about illegal settlements. Settlements in the occupied territories —no doubt we will hear more about this on Thursday—are contrary to international law. His own Government warn investors about the financial risks, but at the moment there are no sanctions against illegal settlements. Should new clause 1 become law, we could be in the bizarre situation in which a pension fund, for good financial reasons, wishes not to invest in companies that operate in the illegal settlements, but is forced to put its assets at risk—we do not know what is going to happen—because it believes that otherwise it would not comply.
I therefore hope that the right hon. Gentleman will not press his new clause and that if he does, he will not succeed. Any hon. Member is entitled to put forward a proposal that they wish to see coming to fruition at some point, but for the Government to support something that is so nebulous, wide-ranging and potentially destructive, and that acts counter to all that public sector pension schemes do, would be a grave error. I know that the right hon. Gentleman is a very sensible and measured man, so I hope that he will not press his new clause. He can come back with a debate on BDS and tax his Secretaries of State as to why they have not taken the matter further, but his new clause does not belong in the Bill.