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I want to lead a Government humble enough to know its placewhere I will always strive to beand that is on the peoples side.
He should tell that to the 125,000 people who were looking to the lifeboat fund for help. The big clunking fist has crashed down, and the Government have invoked the Parliament Acts and stopped any further discussion. They have, in effect, torpedoed the lifeboat.
Even before the Government did that, however, there were dark threats from Government sources that if the lifeboat fund amendments did get through, they might abandon the whole Bill, leaving victims with even less money than they would have received under the Governments latest proposals. I hope that the Minister will take the opportunity to dissociate himself from such threats. I can assure him that the campaign to get proper help to those victims will continue both inside and outside Parliament. If the Prime Minister thinks that he has heard the last of this issue, he is very much mistaken.
The amendments on annuitisation are the remaining vestiges of the raft of lifeboat fund amendments. It is also perhaps worth reminding the House that that approach to bulk annuity purchase has been advocated by the Conservatives for at least a couple of years and by campaigners such as Ros Altmann for even longer. Can the Minister make an estimate of the pension fund assets that have already been committed to annuity purchase in the time scale and are therefore no longer available to provide direct help to the victims?
The Minister touched on the recent report by Andrew Young and his team. It is worth quickly reviewing some of the major conclusions on this subject. On page 13, they concluded that there was some £1.7 billion of uncommitted assets in schemes eligible for FAS assistance that are in the process of winding up. What we do not know is where they are in that process at this precise moment. Andrew Young also concluded in chapter 4:
The current process of annuitisation on a scheme by scheme basis is unlikely to offer the best use of residual scheme assets.
I am delighted that that is now accepted by hon. Members on both sides of the House in considering what should happen next to those remaining pension assets.
The latest amendments are a compromise. I am delighted to hear that the Minister is prepared to accept them. They were drafted by my colleague Lord Skelmersdale in the other place and they cover the issues of real concern to hon. Members on both sides of the House. The most important is amendment No. 22B, which places a temporary restriction on the purchase of annuities. It would fair to describe the others as consequential. The noble Lord McKenzie said:
It strikes a pragmatic approach by putting a hold on annuitisation for the benefit of all members of qualifying pension schemes who hope to see the extra funds generated by the assets within their schemes matched by the Government, while allowing trustees to purchase annuities with the permission of the scheme manager where it would be appropriate to do so.[ Official Report, House of Lords, 24 July 2007; Vol. 694, c. 711.]
I have some questions, which the Minister may be able to deal with today, with the leave of the House, or in correspondence. First, the Young report talks about total unallocated assets of £1.7 billion in pension funds within the FAS. What proportion of those assets is likely to be affected by the proposed regulations? Secondly, the Government have promised to publish regulations. I think that that was made clear by Lord McKenzie. Can the Minister give me an idea of the time scale during which he expects to be able to do so? Thirdly, the Minister told us that he had written to trustees. Is he prepared to put a copy of that letter in the Library and perhaps supply copies to Front-Bench spokesmen in this and the other House so that we can see exactly what he has said to them?
May I also touch on the issue of circumstances in which some trustees may wish to proceed with purchasing annuities in the usual way? That was dealt with by Lord Skelmersdale in the other place when he made the point that his principal amendment gave the FAS scheme managerthe Secretary of Statediscretion to allow annuities to be purchased in
someI expect rareinstances. For example, that could be where a scheme is only lightly under-funded and therefore members are unlikely to benefit from the FAS overall.[ Official Report, House of Lords, 24 July 2007; Vol. 694, c. 713.]
I must say in parentheses, however, that one wonders why they might be in that situation in the first place. Will the Minister confirm today or in writing that it is his understanding that the scheme managerthe Secretary of Statewould permit such a purchase only in rare circumstances, and usually when there were merely small amounts of underfunding in a scheme? If that is not his understanding, will he tell us what circumstances he envisages triggering the purchase of annuities?
My understanding of the Government positionI am happy to allow the Minister to intervene if I am overselling itis that in almost every case they are now expecting trustees in schemes that are in the FAS not to bulk-purchase annuities for the foreseeable future, and that in the rare cases when they might want to purchase annuities they would almost certainly be almost totally funded and would seek the permission of the scheme manager.
There is consensus between Ministers and Conservative Front Benchers that from this day forward the bulk purchase of annuities for FAS-based schemes will be rare, and that assets will be husbanded with a view not to buying annuities but to providing benefits directly to scheme members. On that basis, I commend the amendmentsI call them the Skelmersdale amendments as providing a sensible and practical resolution of an honourable and decent difference of opinion on how to approach the issue. I hope that they are workable, I look forward to seeing the regulations in draft, and I would be interested to know when they are likely to appear.
Danny Alexander (Inverness, Nairn, Badenoch and Strathspey) (LD): I welcome the opportunity to debate this amendment and those that we shall soon address. As the hon. Member for Eastbourne (Mr. Waterson) made clear, the amendment on annuities, which this House debated last week and which the House of Lords rejected and replaced with those before us today, was part of a wider raft of amendments on the lifeboat fund. I can do no better than quote the remarks in the House of Lords debate yesterday of my party colleague Lord Oakeshott of Seagrove Bay. He quoted the conclusion of the Young review. On page 29 of the review it is stated that
the current FAS scheme is not the best way of ensuring good value, as there is a complicated process and benefit structure, considerable duplication of administration, insufficient risk-pooling etc.
In other words, even the Governments own review comes to that conclusion. Lord Oakeshott further said, on other amendments with which this one had been grouped:
One hundred and twenty-five thousand members of failed pension schemes have been robbed twice; first when their funds collapsed, and now by a government ruse to block House of Lords[ Official Report, House of Lords, 24 July 2007; Vol. 694, c. 708.]
debate on the Pensions Bill. I wholeheartedly agree with Lord Oakeshotts sentimentsand I also pay tribute to his work in campaigning for the 125,000 pensioners whose pension rights have been removed and who have campaigned so assiduously.
Mr. Mike O'Brien: I heard what both Front-Bench spokesmen said about a Government ruse in relation to the Parliament Act 1911, but financial privilege is regularly invoked, so this is nothing new. It is done in respect of a fair number of Bills where the other place makes finance proposals. Why does the hon. Gentleman say that it is a ruse when it is a regular event?
Danny Alexander: The situation has not been made at all clear, and although privilege might occasionally have been invoked it has not been used often in the past few years.
Mr. Waterson: According to my research, the 1911 Act has been invoked only on seven occasions, and on Bills to do with matters such as the Welsh Church, Home Rule, war crimes, sexual offences and hunting. It is hardly an everyday occurrence.
Danny Alexander: I am grateful for that intervention. The Minister referred to Lords amendment No. 22B, which would provide support for members of the FAS by blocking the bulk-purchase of annuities using the assets that remain in schemes. Its purpose is to allow the unused funds that are left in the pension schemes to be used to improve the benefits within the FAS. It is a great shame that the Minister is still unwilling to state that he agrees with the position set out by the Liberal Democrats and the Conservatives and, more significantly from the Ministers point of view, by many of his Back Benchers. The right, just and decent thing to do would be to ensure that those whose pension schemes collapsed before the introduction of the Pension Protection Fund and who therefore benefit under the FAS should receive benefits at the same level as those in the PPF. We have consistently articulated that position. That is the purpose to which any funds that can be husbanded through the judicious and speedy application of regulations under the amendment should be put. That is what the 125,000 people, organised so admirably by Dr. Ros Altmann and others, have been campaigning for. Much anger was expressed on this matter in the debate in the other place, but such anger is more strongly felt by the 125,000 people who believe that, unaccountably, they will have to wait longer than they had expected to get what they regard as a just and decent settlement.
We welcome the amendment. In last weeks debate, I observed that what was then amendment No. 22 served the Governments purpose. At that time, the Minister denied that. I am delighted that common sense has prevailed and that the Government have accepted this revised version of that amendment.
I have a couple of questions about how the Minister intends to implement it. Lord McKenzie has made it clear that the Government intend to introduce regulations under the amendment. How quickly do they intend to do so? Clearly, the regulations are subject to a negative procedure. Can they be introduced during the summer recess, or will that have to wait until October? As has been said, time is of the essence. According to the Young review, £1.7 billion of assets remain in the schemes. As the Young review also made clear, and as was made clear in last weeks debate, any delay could result in some of the funds being annuitised by scheme managers.
Mr. O'Brien: I agree that it is important that the rules are introduced quickly. We will use the negative procedure, and we will seek to move as quickly as possible as we want them to be in place by the autumn. The House must have an opportunity to debate that, if it wishes to do so. However, although I agree with the hon. Gentleman on this, the consequence will be that we will not have a consultation period; we will just introduce the rules. We will be happy to share them with Opposition spokespersons in advance.
I am grateful to the Minister for the speed with which he is seeking to act and for his generosity in suggesting a consultation, which I would welcome. He is righttime is of the essence and we should get on with this. If that means that a shorter than usual consultation period is necessary, or no
consultation period at all, we Liberal Democrats would be perfectly happy with that, given the imperative in these circumstances.
If I have read amendment No. 22B correctly, it places a restriction on the purchase of annuities for a maximum of nine months. Subsection (1) of the proposed new clause states:
The Secretary of State must by regulations make provision for securing that, during the period of 9 months beginning with the date on which the regulations come into force, the trustees of the relevant pension schemes are prohibited from purchasing, or agreeing to purchase, annuities on behalf of qualifying members.
It was perhaps Lord Skelmersdale who came up with the nine-month period, but the Government obviously agreed to it. Does the Minister think that that is the length of time needed for the Government to introduce and act on the conclusions of the Young review? Given that the House has reached a positive consensus on this very narrow issue, it would be a shame if the limited time scale specified in the amendment meant that, although bulk annuitisation was restricted for that period, it was not until after that period had elapsed that progress was made on using the assets in those funds. Perhaps the Minister will clarify that point.
Like our colleagues in the House of Lords, we Liberal Democrats in this place are more than happy to accept these amendments, which represent a good step forward. I wish only to register my deep sadness that they are not part of the wider lifeboat scheme under which the original amendment was introduced.
Mr. Mike Weir (Angus) (SNP): I just want to make a few points. I agree with what the hon. Members for Eastbourne (Mr. Waterson) and for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) said about the lifeboat fund. It is a shame that it is not in the amendments; none the less, I do support them.
To my mind, the original House of Lords amendment was perfectly adequate, and I do not understand why there has been such a hoo-hah about changing it. I am concerned about subsection (2) of the proposed new clause in Lords amendment No. 22B, which states:
The regulations must make provision...for authorising the scheme manager to approve the purchase of any such annuities if the scheme manager thinks it appropriate to do so.
We are talking about a nine-month period; however, speed is of the essence in dealing with these issues. One scheme in my constituency, operated by a solvent employer, illustrates the slow crawl through this legislation that has taken place to get some justice. As the Bill progressed, the Minister rightly agreed that that employer should be covered by the financial assistance scheme, which it previously had not been. The trustees were asking that annuities be bought for those in the scheme who were retiring. Had that change not been made when it was, that scheme would have been annuitised and the assets lost. There is therefore an urgent need to get this situation sorted out.
The original amendment would have imposed a straightforward ban for nine months on annuitising such schemes. I can understand why some slight wriggle room has been provided in certain circumstances, but I am concerned that in cases where trustees want to annuitise a scheme, they will have to
make an application to the Secretary of State, who will presumably have to investigate the particular circumstances of that scheme before deciding whether to allow annuitisation. That is an extra burden of bureaucracy that the original amendment did not impose; it simply provided for a nine-month ban until the situation has been sorted out. Presumably, all the scheme assets would then have gone into the general FAS pot, which is a better approach. Does the Minister feel that amendment No. 22B imposes an extra bureaucratic layer that could lead to delay, and could require the Secretary of State to investigate many schemes that it would otherwise not have been necessary to investigate?
Mr. Mike O'Brien: With the leave of the House, I seek to reply to this debate and to some of the points raised. Let me first deal with what should perhaps be described as the political knockabout points, before moving on to the serious stuff.
Various claims were made about the Parliament Act 1911, which has a number of different provisions. It was invoked, as described by the hon. Member for Eastbourne (Mr. Waterson), when the other place refused to accept particular pieces of legislation regularly passed by this House. That probably happened on about seven occasionsindeed, I think that I was part of the process with one of thembut that is not what we are talking about here. Rather, we are talking about the invoking of financial privilege, which happens to be dealt with in the 1911 Act, but which has been regularly invoked in this place over many years. It is therefore an entirely different matter from the point raised by the hon. Gentleman. The parliamentary procedures are different, and such invoking in the other place merely means that the Lords would have to table a differently worded amendment.
It was therefore possibleI assumed that Opposition Members knew thisto table a differently worded amendment, if the Opposition really want to bring back their lifeboat proposal. Frankly, however, it was pretty well sunk by the Young report, so they were better off not doing that. The lifeboat proposal was torpedoed not by the Government, but by the Young report, which said that the basis on which it was framedthat pensions and the various insurance assets were unclaimed and lying there, and could easily be accessedfaced impediments so great that it was not a realistic option.
Mr. Waterson: I do not want to follow the Minister down the route of discussing the 1911 Act, because I suspect that I would be ruled out of order. However, I remind him thatamendments or no amendments, and whatever their wordingif the Government had accepted the principle of a lifeboat fund and getting help to people sooner rather than later, as we suggested, we would have been happy to accept any drafting from the Government. It is because they set their face against that principle and the proposed timetable that we are where we are. The Minister referred to dealing with knockabout political points before moving on to the serious stuff. The serious issue is the people who need help from the FAS but are not getting it, and might not get it for some time.
Mr. O'Brien: The Government did not accept the lifeboat scheme for the very reason that we set out, which the Young review confirmedthat the basis of the scheme was full of financial holes. The Young report stated clearly that the idea that sitting in pension and insurance funds are assets that could easily be accessed is unrealistic as an option to help those pensioners.
Danny Alexander: Will the Minister give way?
Mr. O'Brien: I do not want to labour this point and I am conscious of the time, but I will give way to the hon. Gentleman.
Danny Alexander: I want to have one last brief go at this point, and then I shall allow the Minister to move on. The Government still have not stated clearly why they do not want to allow FAS beneficiaries to receive benefits at the Pension Protection Fund level. We Liberal Democrats have put forward a range of options for funding that, and the financial cost would be slim, given the figures that we have heard mentioned in the Lords, such as £25 million a year for the first 10 years. If the issue is purely a financial one, that figure seems like pretty slim pickings, given that we have just heard that billions more are to be spent on aircraft carriers.
Mr. OBrien: It was the Young report, not the Government, that torpedoed the lifeboat, but it was pretty leaky anyway. Rafts were mentioned in various analogies, and the lifeboat was a cobbled-together raft that sank of its own volition. We warned the Opposition that it would sink, and it did. Let us move on and see how, realistically, we can help the pensioners involved, because that is the important thing.
The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) asks, reasonably, why the funding will not be to the PPF level. The answer is that the PPF is essentially an insurance scheme and people make contributions to it, as a result of which they are entitled to payments from it. If we were to go to PPF levels, that would have to be funded. The hon. Gentleman has made it clear that the Liberal Democrats would be happy to put Government funding into that. That is a straightforward point of view, and I understand and respect it. However, the Conservatives have always said that they would not put loads of Government money into the scheme. They would not be prepared to spend an extra £1 billion. They are silent on that point, and as far as they are concerned, there would be no extra money. They claim that the funding would somehow be obtained from the unclaimed assets, but that idea has now been torpedoed.
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