Lord Katz (Lab)

My Lords, I am grateful to the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for this amendment. I agree with them that funds in the LGPS should not be specifying preferences between similar investment vehicles in their investment strategies. I fear that the rest of my response may well disappoint the noble Baroness, Lady Bowles, and—though perhaps not to such a great extent—the noble Baroness, Lady Altmann. I say in passing to the Committee that it is always good to hear consensus breaking out, even if it rather gets to the horseshoe theory of politics when it is my noble friend Lord Davies and the noble Lord, Lord Fuller. But let us try to end today’s Committee session on a positive note. I will now go into the detail. Under our reforms, decisions on implementation of strategies, including selection of appropriate vehicles and managers, will be made by the LGPS pools, which will have the capacity and expertise to deliver the benefits of scale that we have discussed. It is the Government’s view that the draft regulations are already clear in that respect. This will be supported by guidance, setting out that investment manager selection is solely the responsibility of the pool. LGPS pools will make the decision on whether to invest through external managers and which managers to use, and there is nothing whatever to prevent them using investment trusts should they consider it beneficial. This is where the space for disappointment potentially arises. I am aware of the concerns expressed in relation to the treatment of listed investment funds, notably investment companies and trusts, under the reserve asset allocation powers, which are relevant to DC pension schemes. That was set out very powerfully by the noble Baroness, Lady Bowles. The Committee will have the chance to debate these concerns when we reach Clause 40 and discuss Chapter 3, which deals with asset allocation for DC schemes. To get to the heart of it, the noble Baroness, Lady Altmann, asked about the impact on the LGPS. To give reassurance, we are not excluding closed-ended investment funds from the LGPS. I can be absolutely clear that that is the case. We are not excluding them, and neither will local authorities be directed to exclude them. I hope that provides clarity as we discuss the LGPS elements of the Bill. Having said that, we have had comments around investment and asset types, particularly from my noble friend Lord Davies, as well as others, on this group of amendments. We will take what has been said and consider it in time for the debate on this issue when we get to it in greater detail. In anticipation of that day—which we are all looking forward to, particularly at two minutes to Committee rising—I ask the noble Baroness, Lady Bowles, to withdraw her amendment.