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On 16 July 1971, the House resolved not to entertain any complaint of contempt or breach of privilege in respect of the publication of its debates or proceedings, but that resolution in no way removed the constraints
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on those who, for whatever reason, choose to misrepresent the proceedings of the House or to publish false or misleading reports of our debates.
"destructive of the freedom of Parliament".
I can therefore advise the hon. Gentleman and the House that the deliberate or reckless misrepresentation of the debates and proceedings of the House is potentially a contempt of the House, against which the House may wish to proceed. Moreover, those who act in this way are unlikely to be protected in the courts by the unqualified privilege which normally attaches to the reporting of our proceedings.
Mr. Andrew Turner (Isle of Wight) (Con): On a point of order, Mr. Speaker. I am grateful to you for responding in that way to the point of order raised by the hon. Member for Birmingham, Northfield (Richard Burden). It certainly illuminates a number of remarks that might be made about any of us, at any time. However, is it not the case that many Labour Members voted for the network reinvention scheme on 15 October 2002, and that it is under that scheme that many urban post offices are threatened?
As amended in the Standing Committee, further considered.
Question again proposed, That the amendment be made.
The Minister for Pensions (Malcolm Wicks): We were yesterday in the middle of an important debate on aspects of the pension protection fund. As I recall, as proceedings came to a halt I was gently advising the hon. Member for Northavon (Mr. Webb), in relation to important social reforms, that he should perhaps try to adopt a less pessimistic and cynical approach to what I regard as proper social advances. Although there are always difficult questions to ask and proper scrutiny is needed, we should not be in the business of trying to undermine confidence in important measures such as the pension protection fund.
In the course of yesterday's discussion, various detailed issues were raised, and I should like to reply to them in a little detail, notwithstanding the pressures on time this afternoon. I feel that some of the issues around the 100 per cent. compensation, as opposed to 90 per cent., were discussed in great detail in Committee, but I shall try to summarise some of the issues.
Hon. Members made various suggestions about changing the levels of compensation to be paid to those over and under a scheme's normal pension age. There were some calls for compensation to be increased to 100 per cent. of the PPF benefits for non-pensioners, and questions about levelling down to 90 per cent. for all. Before I begin a detailed response to the points made, I shall first remind Members why we are setting up the PPF. It is to guard against a situation in future where employers go bust, leaving pension schemes desperately underfunded and pension scheme members receiving
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only a small fraction of the pension that they were promised. From time to time, one or two hon. Members forget that important fact. We can argue about the respective merits of 100 per cent. and 90 per cent., or something in between, but many people, who after years of paying contributions would otherwise be left receiving only 20 or 30 per cent., will be grateful that Parliament has done its work to provide at least the 90 per cent. That is sometimes forgotten.
All things being equal, we would of course prefer to pay 100 per cent. to all, but some reduction in compensation is necessary to guard against the moral hazard of companies' taking advantage of PPF compensation and, of course, to control costs. By providing 90 per cent. compensation for those under a scheme's normal pension age, we are incentivising those who have the greatest influence over funding levelssuch as high-paid directorsto keep the scheme out of PPF. That is an important element of the range of moral hazard provisions that the Bill now contains.
In designing the pension protection fund we have learned lessons from the Pension Benefit Guaranty Corporation in the United States. Yesterday, we discussed the admissible rules and the disregarding of rule changes in the previous three years, which are learned directly from the US experience. Like the US PBGC, the PPF will apply a benefit capin our case £25,000 for those below normal pension age. The 90 per cent. compensation level for those below normal pension age, too, builds on the US experience, where no such moral hazard provision exists, and where all scheme members are guaranteed 100 per cent. We do not want to take money away from people above normal pension age who are receiving their pension. Under our scheme, those who enter the PPF who are already above normal pension age and receiving their pension will receive 100 per cent. compensation and will not suddenly be left with a drop in their income. Surely that is sensible.
I should emphasise that, in designing the PPF, we have worked hard to balance the need to provide meaningful protection for scheme members with the need to ensure that the fund will be affordable. Hon. Members have suggested equalising compensation to 100 per cent. for all, but that would add an estimated £100 million to the levy each year. As I said to hon. Members yesterdayagain, gentlythey were not very forthcoming about the cost implications of their amendments, and it was not at all clear whether those costs would be met by increasing the levy or by the taxpayer.
Mr. Steve Webb (Northavon) (LD):
Perhaps, then, the Minister can assist the House by assessing the cost implication of a proposed reform. He says that the extra would be £100 million if everyone under normal pension age were to receive 100 per cent., but I made the distinction in my contribution yesterday between workers below pension age and retired people below pension age. Does he know how much of that £100 million relates to retired peoplepeople who are drawing pensions below pension age? I imagine that that is a small fraction of the figure. My key point was that the anti-moral hazard measures will hit carers and
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others who have retired early for good reasons. There might be a better way of dealing with the moral hazard issue.
The hon. Gentleman asked about early retirees and whether the PPF compensation levels were unfair. We recognise that with any scheme such as this there will be aspects of rough justice, but we have taken the view that early retirees will be more likely than those over the normal pension age to be able to top up their incomefor example, through part-time work. We recognise that that will not be true for those who retire early on grounds of ill health, so such people will receive 100 per cent. compensation if the board considers that the trustees made the ill-health award correctly.
If we did not apply the 90 per cent. figure to early retirees, new questions of moral hazard would be opened up. If early retirees also received 100 per cent., individuals could start taking early retirement with the sole intention of maximising their entitlement to PPF compensation. It would be hugely difficult to prevent this, as early retirement is not awarded in the same way as an ill health pension, so it would be more difficult for the PPF to police. Furthermore, there is also a cost implication in paying early retirees 100 per cent. compensation. Notwithstanding the moral hazard risk that I have described, we estimate that such a payment would require PPF levies to be increased by £10 million per annum.
On the power to vary compensation and levels of benefit, the hon. Member for Northavonhe features in our debates and in our thoughtsasked what extreme circumstances might lead to the board's making a recommendation to the Secretary of State. He inferred that as soon as a big scheme came into the PPF, compensation levels would immediately be reduced. We expect that the circumstances in which that might happen would be extraordinary rather than extreme. It is important to emphasise that if two or three big FTSE 100 companies go bustin case any City editors are half-listening, I should repeat that this is an extraordinary, in extremis scenariothe PPF will take control of the pension assets. In the short to medium term, the PPF will therefore be very cash rich, so the circumstance described in which the PPF might "fall over" is simply not right. In such a scenario, the board will have no problem in paying benefits, but it will obviously want to consider the requirements of the long-term funding situation in order to reduce any deficit between assets and liabilities. In other words, the PPF is likely to be able to cope, even in the in extremis situation of two or three very large companies going bust.
In the very unlikely event that the board wanted to vary the level of compensation, it would have to consider raising the levy. Before a recommendation was made to the Secretary of State, the board would have to reduce indexation and revaluation to zero, which would significantly reduce liabilities. The board would also be required to consult. Any changes to the compensation percentages would of course be subject to the affirmative procedure. There is no need, therefore, for the Government to be a lender of last resort. If a large pension scheme comes into the PPF, this will not create
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a liquidity problem, as the assets of the scheme will be taken into the PPF. The scheme will of course be underfunded to some extent, and the PPF levy will ensure that, over time, the PPF is financed adequately to pay all its liabilities.
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