Viscount Younger of Leckie (Con)

My Lords, it is a privilege to open today’s debate and to begin what I am sure will be five engaging and constructive days of scrutiny on this Bill in Committee. The proposed new purpose clause, in my name and those of my noble friend Lady Stedman-Scott and the noble Baroness, Lady Bowles, is not an attempt to rehearse the arguments advanced at Second Reading. Rather, it is intended to address a specific issue arising from the way in which the Bill has been framed and from the legislative approach that the Government have chosen to adopt. The debate I seek to initiate is a principled one about legislative clarity and certainty, particularly in the context of what is, by any reasonable definition, a framework Bill. We believe that the Bill, as currently drafted, is light on detail and relies heavily on delegated powers. This has inevitably left your Lordships debating intentions, aspirations and hypothetical outcomes, rather than the Government’s settled policy. In those circumstances, is it not all the more important that Parliament is clear on the face of the legislation about what it actually intends to achieve? The purpose clause amendment therefore intends to establish an overarching statement of intent, setting out the objectives against which the Bill and the regulations made under it should be understood and scrutinised. Where detailed provision is deferred to secondary legislation, such a statement provides Parliament, regulators and stakeholders with a clear point of reference. Without it, how are we to assess whether the powers being taken are exercised consistently with the will of Parliament, rather than merely within the scope of ministerial discretion? More broadly, the amendment invites the House to reflect on whether Parliament is being asked to confer wide-ranging powers without sufficient clarity as to how they are intended to be used. At what point does flexibility begin to shade into uncertainty? How can proper legislative certainty be maintained when substantive policy choices are deferred, potentially amended repeatedly and then removed from direct parliamentary scrutiny? If there were an alternative procedural route that allowed the House to engage meaningfully with these questions, we would of course be willing to consider it. However, in the absence of such a mechanism, is it not reasonable to seek to debate these matters through a proposed new purpose clause, which would allow the House to test the Government’s intent within the normal amending stages of the Bill? This concern is particularly acute in relation to value for money. Much of what this legislation seeks to achieve will ultimately stand or fall on the effectiveness of the value-for-money framework. Yet the provisions before us are thin and largely skeletal, despite the central role that the framework is expected to play. How can Parliament properly assess the merits of this approach when so much turns on detail that has yet to be set out? I say at the outset that we are supportive of the value-for-money framework in principle, but its success will depend almost entirely on the detail of its design, the consistency of its application across schemes and the robustness of its enforcement. Without greater clarity on these points, how are trustees, regulators and members to understand the standards against which they will be judged? That leads me to a wider question about the long-term purpose of the Bill. How do the Government envisage the pensions landscape to look like in 10, 15 or even 20 years’ time? Is the objective consolidation, greater scale, improved outcomes for savers or some combination of all three? How will we know whether this legislation has succeeded in delivering that vision? We wish to engage not only with the immediate legislative mechanisms but with the broader strategic direction that underpins them. We fully accept that legislation must allow Ministers a degree of flexibility to respond to changing circumstances, but flexibility without a clear, articulated destination risks leaving Parliament and the industry uncertain about the direction of travel. Is it unreasonable to ask for the House to be told not only what powers are being taken but to what end they are intended to be used? It is in that spirit that this purpose clause has been tabled and I very much look forward to the debate that I hope it will provoke. I wish to return briefly to the question of mandation, which, although I have not directly mentioned it, is an underlying issue in the Bill. It illustrates precisely why questions of purpose, process and limitation matter so greatly in the context of a framework Bill of this kind. We will of course turn to this in greater detail later in Committee but, as we are discussing the purpose of the Bill in this clause, it would be remiss of me not to mention it here at the outset as one of the most contentious provisions in the Bill—as we heard, broadly around the House, at Second Reading. As drafted, the Bill establishes a broad enabling framework but leaves a great deal of substantive policy to be determined later through regulation. That approach inevitably creates uncertainty. It also places a heightened responsibility on Parliament to ensure that any powers taken are clearly bounded, carefully justified and firmly anchored to a stated purpose. In that context, we do not consider there to be a compelling case that asset allocation mandates are necessary to increase productive investment in the United Kingdom. Indeed, mandation risks cutting across the fundamental principle that investment decisions should be taken in the best interests of savers by trustees and providers who are properly accountable for the outcomes. I am sure that we will hear more about these arguments in Committee. When the Bill itself provides only a skeletal framework, the absence of clarity around how such powers might be used becomes all the more concerning. If any future Government were ever minded to pursue mandation, it is essential that any such power be tightly limited, that savers’ outcomes are clearly protected and that asset allocation decisions are insulated as far as possible from political cycles and short-term pressures. Investment decisions should remain with those charged with fiduciary responsibility and not be directed by Ministers, however well intentioned. Those safeguards cannot simply be assumed; in a framework Bill, they must be explicit. Moreover, the case for mandation is further weakened by the existence of credible and constructive alternative routes to unlocking greater levels of UK investment. Industry participants, including Phoenix Group, have identified a number of areas where policy reform could make a meaningful difference without recourse to compulsion. Government institutions such as the National Wealth Fund and Great British Energy could play a significant role by aligning guarantee products with insurers’ matching adjustment requirements, by engaging institutional investors earlier so that projects are structured to meet long-term investment needs and by continuing collaboration with the ABI Investment Delivery Forum to deliver investable infrastructure pipelines. Similarly, the Mansion House Accord, building on the 2023 compact, has already driven tangible industry action. In our view, the priority now should be delivery, rather than the creation of new and potentially far-reaching powers. That includes implementing a robust value-for-money framework with standardised metrics; introducing minimum default fund size requirements, whether £25 billion or £10 billion, with a credible growth plan; and aligning the defined contribution charge cap with the Pensions Regulator’s approach by excluding performance fees where appropriate. More broadly still, stronger capital markets are essential if the United Kingdom is to attract both domestic and international investment. This includes supporting the work of the Capital Markets Industry Taskforce, exploring measures to foster a stronger home bias in UK equities, considering whether stamp duty on share transactions is acting as a drag on competitiveness, and examining targeted tax incentives for pension fund investment in UK infrastructure. Ultimately, rather than mandating investment, policy should focus on understanding why UK investment has lagged. That requires serious engagement with questions of market structure, regulatory design, the quality of investment pipelines and the underlying risk-return characteristics of UK assets. Mandation risks treating the symptoms rather than addressing the causes. I look forward to the Minister’s response. I make no apology for laying out certain aspects that I believe fit with the purpose of the Bill. However, as I said at the outset, I hope that we have a productive and interesting Committee. I beg to move.