Baroness Bowles of Berkhamsted (LD)

My Lords, I have several amendments in this group: Amendments 154, 157, 158 and 159, which I will not say much about because I am fishing in the same pond as everybody else. If there is this mandation, we are anxious to know how it works, and we think the review should come earlier—I have put in some of the things that I think it should look at. I will spend more time on my Amendment 131, which is about prior steps that would have to be taken before there was any exercise of the mandation and regulations were made. It is about the prior steps that must be taken before the Secretary of State can exercise the regulation-making power in new Section 28C—what I termed the devil’s clause once before, although we now know that it is the ABI clause. It is probably worth pausing here to remind ourselves whom the ABI represent: it is the Association of British Insurers and it represents the insurance companies, which are the manufacturers of the LTAFs, as was indicated earlier. It had a meeting in which, as usual, it displayed the slide that says, “We’re not colluding and breaking competition law, but we’re just going to agree that we won’t be investing in the other vehicle that has protected net asset value, and we’ll do a Q&A that says that’s not happening”. Interestingly, the insurers present at that meeting seem to have either forgotten about it or are telling me that they did not agree to anything. However, I leave that hanging. If the Government wish to enforce a power of this potential scope, which, as has been explained, is much wider than the example in the Bill—a power that could reshape asset allocation across the pension sector—it must be subject to proper safeguards. These prior steps are not obstacles but constructive checks that should support the Government’s own objectives. Proposed new paragraph (a) would require the Secretary of State to “review the effect of any voluntary agreements or coordinated commitments relating to asset allocation”. We have had a lot of policy alignment, pledges and so forth, and we all want the voluntary method to succeed. But if the point comes that regulations are contemplated, it is essential to understand what the voluntary route has already achieved, where the evidence points and why it did not happen. Proposed new paragraph (b) would require an assessment of “the impact of any such agreements on asset allocation, pricing and valuations”. If the Government are concerned about market functioning, they should be equally concerned about how co-ordinated commitments affect pricing signals and valuation discipline. This is simply good policy hygiene because it ultimately affects workers’ pensions. Proposed new paragraph (c) would require a review of “the likely effect on returns to pensions savers”. We all hope for the double benefit: better long-term returns for savers and productive investment that supports the UK economy. But we must analyse whether that is happening in practice, and if not, why not, before moving to a regulatory footing. Proposed new paragraph (d) would require the Secretary of State to “obtain clearance” from the Competition and Markets Authority, and that is entirely consistent with the CMA’s pro-competition remit and with the competitiveness and growth objectives embedded in FSMA. Any use of this power must reinforce the UK’s competition framework, not bypass it, and where co-ordinated commitments already exist in the market, the Government must be certain that any regulations they bring forward meet a clear public interest justification.