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Mr. Nigel Waterson (Eastbourne) (Con): I thank the Minister for dealing briefly, as he put it, with some of the Lords amendments. I entirely accept what he said about so-called pension liberation schemes and we welcome the fact they have effectively been shut off as an option.
There is a sort of Alice Through the Looking Glass quality to the Bill. I remember saying, to the point of almost bleating, in Committee and earlier that if ever there were a piece of legislation that cried out to start its life as a draft Bill and be subject to the pre-legislative scrutiny procedures of both Houses, this is it. For the Minister to say rather ruefully, at this half-past 11th hour, that that might have been the best way forward is absolutely amazing.
Malcolm Wicks: I must correct the hon. Gentleman. What I said was that there was a great demand out there for pension protection now and that is why we needed to introduce the legislation, even if it meant some inconvenience to various colleagues in having to amend the Bill as it proceeded through its stages. The demand was to protect people now and we responded to it.
Mr. Waterson: A broader issue that arises—it is more appropriate to debate it in detail in a later group of amendments—is whether the Government have looked into the issue from the wrong end of the telescope. They should have focused their immediate attention and energies on tackling the problem of people in the here and now who have lost their pension rights, while taking a more measured approach, in respect of time for debate and for implementation, to ensure that they got the Bill right. That was certainly the attitude of the then Government towards the Pensions Act 1995.
I am afraid that matters are even worse than I described. Not only did we not have a draft Bill—[Interruption.] It is not just a matter of inconvenience. We are all here to do our best and to take however long it takes. We could certainly spend a great deal more than four hours today on these important matters without unduly straining ourselves, but we are not being allowed to because of the timetable motion that the Government have forced through. The guillotine has been used in one way or another at every stage of the Bill's passage.
I want to discuss the moral hazard provisions, the really crucial part of the group, in more detail. It is not just that there was no draft Bill encompassing those provisions—I am talking about the original provisions—as they were produced at the very end of consideration in the House. As far as I have been able
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to discover, there was no consultation and no discussion with anybody about whether the provisions were appropriate, workable, and tackled the issues that they were intended to tackle.
What happened in due course—I shall deal with the issue in greater detail when I move on to specific provisions—is that, having failed consistently to listen to Opposition voices in the House or to consult any relevant outside bodies, professional or otherwise, the Government got themselves in a tremendous mess. They then had completely to abandon their first attempt at moral hazard provisions, go through a consultation process—putting the cart before the horse—and then return with a series of further different provisions to deal with the same problem.
The Minister was right to pay tribute to the work of the revising Chamber, though in respect of this particular legislation, the task was more than just revision. The Lords laboured long and hard—we could not in the House, as our consideration was finished— to try to get the Bill right. The fact that, as the Minister himself said, the Lords tabled 1,200 amendments, surely illustrates the Government's problems. The Government tabled 450 amendments during the Commons stages, adding 62 new clauses and 81 pages to the Bill. It arrived in the Lords with 310 clauses and 13 schedules and has now developed into a two-volume Bill. We rarely encounter that nowadays, except in the case of a Finance Bill.
The Bill grew even longer in the House of Lords. Prior to Third Reading, the Government had made 442 further amendments and added a further 16 clauses and 50 pages to its length. On any view, that amounts to an awful lot of afterthought on the part of the Government and their draftsmen.
Following the Minister, I, too, pay tribute to the work of the Opposition, particularly the official Opposition, in the House of Lords. I am particularly grateful to my noble Friend Lord Higgins. The Bill is still far from perfect, but it has been enormously improved.
I shall now deal with the moral hazard provisions in greater detail. Personally, I have always taken the view that a more accurate description would be "anti-avoidance". I made the point in Committee, though much good it did me, about the importance of those provisions for the likely shape of the Bill. I went to Washington to discuss the approach with people who had more than 30 years experience of this matter. I also spoke to experts here, particularly people in the City of London, actuaries, lawyers and others. One theme that always came across vividly was that the Government would be well advised to get the anti-avoidance or moral hazard provisions right from the start, because if they were not dealt with properly, they could make a total nonsense of the other, doubtless laudable, provisions in the Bill. It is a tribute to the Government's incompetence that, far from those provisions being the first to be considered and dealt with, they were among the last, at least during the passage through this House.
The Minister took us through the moral hazard provisions, and he described their effects fairly. We welcome the fact that the time limit involves going back no more than six years, and we are pleased at what was said about insolvency practitioners acting in good faith. In that connection, my hon. Friend the Member for
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Bournemouth, West (Sir John Butterfill) made a good, practical point. I shall be interested to hear how the Minister deals with that specific question.
2.30 pm
There is a new power to ensure that a contribution notice may not be issued to prescribed people, and a new and reasonable test about the issue of a financial support direction. As I understand it, the regulator will need to be satisfied that it is reasonable to issue an FSD—aficionados of the Bill know that it is truly acronym country—to a person. A number of factors will have to be considered when that decision is made, and in respect of decisions about non-compliance contribution notices. The regulator must consider whether any benefit has been obtained, directly or indirectly, by the person named in the FSD from the employer.
I turn now to the clearance procedure. Concern has been expressed about what that could turn into, but the regulator must now provide a clearance procedure, and make decisions about clearance as soon as is reasonably practical. That makes considerable sense in what is a fast-moving business environment.
The regulator will not be bound by any clearance statement if there is a material change in circumstances, or if the circumstances described in the application are not real. Another change of heart by the Government is that most people have been excluded from the scope of the FSDs. We welcome that.
In sum, we welcome what has been put in the Bill about so-called pension liberation schemes. We think that the moral hazard provisions, as they are called, achieve a balance between different needs and aspirations. The process involved has been unnecessarily long and painful, and we must be grateful for the fact that we have an active and vibrant second chamber. Left to themselves, the Government would never have reached this destination.
There is nothing in this group of amendments on which we would wish to divide the House. Again, I am grateful for the hard work done in the other place on this part of the Bill.
Mr. Webb : We have 672 Lords amendments to discuss this afternoon, and almost all of them are Government amendments. My arithmetic tells me that we have 21 seconds to discuss each amendment. However, in this section of the debate, we have to discuss 183 amendments in 30 minutes, which comes out at under 10 seconds per amendment. That shows the lack of serious scrutiny that will be given to some important matters.
The amendments propose ways to close what the Minister rightly called scams. It is a source of concern that people can be ripped off in this way, and we welcome this attempt to close the loophole. However, I am worried that legislation passed with the best of intentions but in haste is often repented of at leisure. The short amount of time available for consideration of these amendments means that proper scrutiny is impossible and that there may be unintended consequences. As a result, people who are supposed to benefit from the Bill might suffer from other loopholes
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created by the attempt to close the particular loophole under discussion.
When pensions legislation is made in haste, it is often poor and in need of subsequent amendment. I often wonder what the Government would have done to close this loophole if they had not had this Bill going through the House. The Bill has been around for a long time, so the Government have thought that they could just amend it and add to it whenever anything on pensions has popped up. They thought that they could use the Bill to do those things on pensions that they quite fancy doing. Often, changes have been made long after this House had a chance to consider the Bill, so it is difficult to do justice to the 112 amendments in this group and to spot the bear pits that the Government may have created.
There is no reason why we could not have been allowed time to scrutinise these amendments properly but, for some reason, the Government decided to prevent that proper scrutiny. On behalf of the people whom we are trying to protect by means of amendment No. 1 and associated amendments, I hope that we do not live to rue that lack of scrutiny.
The people who will lose out are those who find that a large part of their pension investment is taken up by charges and fees when they are sold the products that we are discussing this afternoon. That is what will happen if we do not get the legislation right. Given the cursory run-through from the Minister at the start of this debate, it is difficult to tell whether the amendments will have the desired effect.
The financial services industry is notorious for inventing new products, scams and wheezes to get around regulations. The Government have produced these amendments like rabbits out of a hat this afternoon. It is very late in the day, so it is hard to have confidence that thought has been given to all the ways in which the provisions might be evaded.
On the face of it, the amendments look broadly sensible. They attempt to close down undesirable practices and respond to some of the concerns expressed about the Bill. Like the Conservatives, we shall not divide the House on the amendments, although we do want to register our concern that insufficient time has been given for the scrutiny that such important changes deserve.
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