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Mr. Hawkins: I am glad to have the opportunity to raise some particular concerns about the new clausesand amendments. The hon. Member for Northavon (Mr. Webb) referred to my intervention on the Minister. As well as adopting the sensible concerns that were expressed by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), the Front-Bench spokesman, I say that my concern about the new clauses is that they get away from certainty, particularly where a marriage breaks down. I hope that the Minister will take seriously the concern of those who have conducted ancillary relief cases in the courts, that anything that removes the opportunity for the court to bring certainty at the conclusion of the litigation arising from a marriage is a dangerous matter.
As well as having conducted family law cases in the courts for a number of years, I am deputy chairman of the all-party group on insurance and financial services. I am concerned at anything that waters down the distinction between approved and unapproved pension schemes, which is what my hon. Friend the Member for Grantham and Stamford suggested was happening. He posed the question how that came about: how it was that the Government should introduce and apparently agree in Committee the original clauses 11 and 12, and suddenly try to row back from them. The hon. Member for Northavon said that he wanted to know about the provenance of the new clause.
The Minister will tell us in his reply whether he knows the answer to that question. However, my guess is that a bureaucrat somewhere in the Inland Revenue, at a very late stage, woke up to the implications of the original, and agreed, clauses 11 and 12, and suddenly said, "This is an opportunity for us to water down the distinction between approved and unapproved pension schemes." I guess, and fear, that that is the provenance of the sudden and undiscussed new clauses, which are undermining the original agreement in Committee.
I think that it would be very unwise for the Government to pursue passage of new clauses 11 and 12 and their consequential amendments. If they do pursue them, they will be creating a time-bomb for courts dealing with ancillary relief cases when they have to deal with the sometimes very complex financial arrangements arising from a divorce.
Unless the Minister is prepared to give the courts some guidance on how excessive contributions are to be defined, how are courts to decide the matter? The decision will not be at all easy for the courts, who are always anxious to protect the rights of both spouses after a divorce. Perhaps not many other hon. Members have dealt with very complex ancillary relief cases, as I did for a number of years. I am well aware that anything to do with the unscrambling of pension relief in ancillary relief cases arising from a divorce is already an exceptionally complex task for courts to perform.
The one thing that courts always attempt to do is to provide certainty. As Hon. Members on both sides of the House will know, and as we have always said, when there is a divorce, the objective should be to achieve a clean break. The Government are now opening the scope for the trustee in bankruptcy, after all the pension contributions have been assessed, to come back and say, "I want to claw back some contributions that I think are excessive." The trustee may even be able, on divorce, to claw back some of the pension contributions made--in the typical case--by the husband from the wife's share of the estate. That may serve the objectives of some minor pettifogging official in the Revenue, but it is not the type of thing that courts want to be wrestling with. The Government, exceptionally unwisely, are opening a whole new can of worms.
As my hon. Friend the Member for Grantham and Stamford said, the Government should have left intact the clear, understood and long-established distinction between approved and unapproved schemes, not try to water down the distinction or row back from what was agreed in Committee, simply to satisfy the desire of some official in the Revenue.
Mr. Timms:
I am pleased to assure the House that there has been no U-turn or somersault. Consequently, some of the strictures that we have heard have been inappropriate.
I should like first to answer the question of the hon. Member for Northavon (Mr. Webb) on how the new clauses arose. As we have heard, the Pensions Act 1995 contained a statutory protection for occupational pensions in the event of bankruptcy. However, as a safeguard against abuse, section 95 of that Act provided that a court could order that contributions should be recovered from the pension fund if it could be shown that they were excessive. Therefore, that approach was a feature of the 1995 Act. However, the section was never commenced because it was technically defective.
Subsequently, along came the Landau judgment--which we have heard about--highlighting the disparity between occupational and personal pensions. In its judgment, the High Court found that, in bankruptcy, pension rights in a retirement annuity contract vested in the trustee, thereby calling into question the security of rights in personal pensions. It is, indeed, the case that very many personal pensions are being seized in bankruptcy--hence the need for the original clauses 11 and 12, which were welcomed by Opposition Members.
Therefore, since 1995, the intention has been that there should be such protection from abuse.
The hon. Member for Grantham and Stamford (Mr. Davies) sometimes demonstrated a rather loose grasp on some of the Green Paper's detail. Nevertheless, I do not
think that it would be unkind to draw his attention to paragraph 49, on page 74 of the Green Paper, which states:
Mr. Quentin Davies:
Does the hon. Gentleman remember paragraph 48, on page 74--which he has just quoted--of the Green Paper, which states:
Mr. Timms:
It is neither. The following paragraph says that there needs to be a safeguard, as there was in the 1995 Act.
The consultation period began on 16 December and concluded on 12 February. We have taken account of the results of that consultation in the new clauses and amendments. I assure the hon. Member for Northavon that we have pursued the issue carefully. Our intention has been clear since the publication of the Green Paper. We have consulted carefully and taken account of what was said to us. The new clauses and amendments are the result of that careful process.
Mr. Davies:
The hon. Gentleman talks about representations. Were the decisive representations--no doubt powerful, clever, effective lobbying--from lawyers and accountants specialising in insolvency? Insolvency practitioners are the only category of humanity to be greatly advantaged by the Government's U-turn this evening. Without the new clauses and amendments, the Bill would give complete security to members of approved schemes. There would be no ambiguity about their protection. Now all pensions--approved and unapproved--are up for grabs. The Government seem to have fallen for the representations--no doubt the biggest ones--from those with a direct commercial interest in such confusion in the legal system.
Mr. Timms:
The hon. Gentleman still has not grasped the point that I am urging on him. The 1995 Act contained a provision to safeguard against the same problem. We all agree that pensions should be protected from bankruptcy, but there has always been a requirement to guard against the possibility of people abusing that protection by making unduly large contributions to keep the money out of reach of their creditors. That would be a clear abuse. The previous Government introduced legislation to deal
Mr. Rendel:
I am getting a bit confused about the timing. We have heard time and again of the Government producing legislation before the end of the consultation period. In this case, the Government announced what they were going to do in a Green Paper and went through a consultation process that finished as early as February, yet in May we still do not have the legislation for Scotland before us even on Report. What on earth has gone wrong?
"At the same time we need to prevent people from using a pension scheme to put money deliberately beyond the reach of their creditors. There will therefore be a mechanism to allow a court to order that excessive contributions paid into the scheme can be recovered from the pension fund".
The Government have, therefore, always intended that there should be such a provision. The Green Paper made it clear that we would attempt to make such provision, and our intention was restated in the consultation document "Strengthening the Pensions Framework", which was published the day after publication of the Green Paper.
"We therefore propose that all tax-approved private pension rights"--
which, of course, means approved schemes--
"should be exempt from the bankruptcy process, thus falling outside the jurisdiction of the trustee in bankruptcy"?
That intention was duly enshrined in clause 11--which is now being reversed by new clause 11. The Minister can hardly deny that that is a somersault or a U-turn; he may choose whichever term he likes.
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