Pensions Bill

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The Chairman: With this it will be convenient to discuss Government amendments Nos. 369, 374 and 391.

Malcolm Wicks: Amendments Nos. 368 and 369 would amend clause 99. They are grouped with amendments Nos. 374 and 391, which would make consequential changes to clauses 104 and 144. The clause sets out the criteria that must be satisfied before the board can assume responsibility for a scheme when an insolvency event has occurred.

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Amendment No. 368 would add further provision, setting out that any insolvency event that occurs in relation to the scheme is only a qualifying event for the purpose of entry to the PPF if it occurs after the day that the PPF starts operating which, subject to Parliament, is planned for April 2005 and defined under clause 98 as the ''appointed day''. Clause 98 makes it clear that any scheme that commences winding up prior to the appointed day will not be covered by the PPF. The amendment further ensures that scheme trustees will not be able to manipulate their situation in the run up to the PPF to gain entry. Without the amendment, a company could go bust today, but if the trustees could prevaricate for long enough and delay commencing winding up the pension scheme, the PPF could be liable to pay compensation.

The amendment also includes a power to prescribe further circumstances in which an insolvency event would not be classed as qualifying for the purposes of the fund. That power will protect the PPF and levy payers from employers who can manipulate the insolvency proceedings as a way of letting their pension scheme fall into the PPF when it is up and running.

Mr. Osborne: I understand that the Minister is trying to protect the PPF from inheriting many insolvencies, but the counterpoint to his argument is that some workers will not have protection in the absence of a retrospective scheme because the insolvency people could not prevaricate. Does he have an idea of how many people during the next year that could affect? If we did not accept the amendment, a company could hold out and people could receive some compensation by entering into the scope of the PPF.

Malcolm Wicks: No, I do not, but there will be some people.

I shall continue my explanation. An insolvency event, as defined under clause 95, could occur after the appointed day but in fact be a stage in an ongoing insolvency proceeding that started prior to the introduction of the PPF. For example, a company could go into administration today but hold off its liquidation until after the PPF goes live—hopefully, in the spring of next year.

As responsible businesses and employers gear themselves up to pay the levy from next year, we must do all we can to protect the PPF and those levy payers from moral hazard and from employers and trustees who would seek to bend the rules, undermining a principle at the core of the PPF. In that respect, the PPF is like an insurance scheme. People cannot get the payout if they have not paid the premium. I should add that without the amendment the line on retrospection would be blurred, and members of schemes facing difficulties now would face a lottery as to whether they might potentially be able to enter the PPF entirely independent of whether their scheme trustees or managers might be able to manipulate the rules surrounding winding up.

Amendment No. 374 makes a consequential change to clause 104 to ensure that the definition of a qualifying insolvency event is consistent with the

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provisions relating to the assessment period. Amendment No. 391 has the same effect on clause 144, which relates to fraud compensation. I urge hon. Members to agree the amendment.

Amendment agreed to.

Amendment made: No. 369, in

    clause 99, page 61, line 28, leave out paragraph (a).—[Malcolm Wicks.]

Clause 99, as amended, ordered to stand part of the Bill.

Clause 100

Duty to assume

responsibility for schemes following application or notification

Question proposed, That the clause stand part of the Bill.

Malcolm Wicks: It might be useful if I described, albeit briefly, the purpose of the clause. It provides the PPF with the power to assume responsibility for certain schemes where there has not been an insolvency event as defined by clause 95—for example, public sector schemes without a Crown guarantee and schemes with employers based overseas and subject to foreign insolvency proceedings. We are totally committed to providing protection for the members of such eligible schemes who will be liable to pay the PPF levy. We need to ensure that the legislation provides for eligible schemes whose sponsoring employers cannot meet the insolvency events test to enable them to benefit from PPF compensation. The clause makes provisions to protect their members, because we recognise that such schemes may also face risk in future.

Mr. Osborne: The Minister mentioned in passing public sector schemes that did not have a Crown guarantee. Could he give the Committee some examples of such schemes? Presumably they will be paying the levy.

Malcolm Wicks: Yes.

Mr. Osborne: Given that they are public sector schemes, what would be the burden and will the costs of the levy be borne by the taxpayer?

Malcolm Wicks: We are talking about prime examples of all non-departmental public bodies whose employers are not members of the civil service pension scheme. They will pay the levy and will be able to benefit from the PPF in such adverse circumstances.

Mr. Osborne: Will the Minister give way?

Malcolm Wicks: May I give some examples? I am talking about—[Interruption.] I did not hear that. No doubt the hon. Member for Eastbourne could stand up and say that. In giving examples, I do not want to frighten workers in those bodies by saying that they are on the verge of bankruptcy. Examples would include, inter alia, the Arts Council, the British Tourist Authority and the Medical Research Council.

Several hon. Members rose—

Malcolm Wicks: I give way.

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The Chairman: Let us take a decision. Who are you giving way to, Mr. Wicks?

Malcolm Wicks: I give way to the hon. Member for Tatton.

Mr. Osborne: There may be quite a large number of such bodies. We want to provide their scheme members with protection—I am not suggesting that we do not. However, I am not sure whether the Minister dealt with the second part of my intervention. Will the cost be borne by the taxpayer, presumably because most of these bodies receive grants from Whitehall Departments, or by the levies and charges on some of those bodies? Is there any idea of cost? I am not sure that I saw anything in the regulatory impact assessment about the ultimate cost to the taxpayer of what could be a significant bill if all the non-departmental public bodies were not paying this levy.

3.30 pm

Malcolm Wicks: From memory, after the initial year with the flat-rate levy, we are talking about £20 on average per scheme member. That is a general PPF estimate, without taking account of the risk-based levy. The amount of money would be of that order; I am not saying that it is insignificant, but it would not represent a significant burden on those bodies.

I think that the hon. Gentleman is trying to persuade me to say that, given that many such bodies are funded by the Exchequer, there is an implication for the taxpayer. Yes, there is such an implication. However, it is for the bodies to determine how they would afford the levy, which would give them important protection.

Mr. Waterson: I have had a slightly surreal thought, which the Minister may be able to confirm. Presumably, the PPF staff's pension fund might well be included among those of the non-departmental public bodies.

Malcolm Wicks: No, because those staff will be counted as civil servants. They will be in final salary schemes, but counted as civil servants. I recognise the hon. Gentleman's line of questioning, but it seems to me that the Arts Council could arrange some glorious spectacular of modern ballet and rock music to pay the levy.

Mr. Osborne: I was not planning to speak on the clause. We are being asked to agree to something, but the Minister has given no clear indication of the scale of the impact that it would have on the Exchequer. We do not know whether this will cost the taxpayer a million pounds, or more. The Minister said in a jokey way that the Arts Council could organise a rock ballet to pay for it.

All the bodies will be faced with additional cost. All that I ask of the Minister is that he should give some idea that the Government know the cost that they are imposing on themselves, or rather on the non-departmental bodies that they work with. Perhaps he would write to me and other Committee members about that. What will be the cost to all the bodies paying the levy that fall within the broad ambit of the public sector? That seems a perfectly reasonable

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question. I am not against the levy, and I am not trying to be critical. I would just like to know the facts—what the burden on the taxpayer will be.

Malcolm Wicks: It will be up to the bodies for which we are legislating to determine the nature of the levy for these institutions; my guess would be that for many of them, the risk-based element would be nothing or very low. We are not talking about a large sum of money. There are not large numbers of such organisations with large staff memberships. However, if I can help the hon. Gentleman with some arithmetic on the matter, I will do so by letter, and I will copy that to other Committee members.

I am slightly confused about whether we should take seriously the big spender assumptions of the Opposition in terms of retrospection, or their minute concern about the arithmetic as it affects the bodies. Which is it to be?

Mr. Osborne: The Minister has attempted to taunt us all day by asking, ''Where is the money coming from?'' It is perfectly reasonable in discussing this clause to ask where the money is coming from and how much money will be involved.

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