Clause
31
Calculation
and payment of
contributions
Paul
Rowen:
I beg to move amendment No. 95, in
clause 31, page 13, line 14, leave
out from ‘within’ to ‘after’ in line 15 and
insert ‘three
months’.
Again,
this is a probing amendment, along the lines of the previous
discussion. In clause 31 no period is specified in which payment should
be made. We have suggested three months and I am interested in what the
Minister thinks might be a reasonable timeframe. In the consultation we
had, the lack of a time period for contributions to be paid was seen as
an issue that perhaps should be looked at. I am easy about whether the
Minister thinks it should be three months, six months or within a
financial year.
Following on
from the previous discussion, if nothing else, the principle that there
should be a payment period within which or after which interest will be
charged needs to be set down. If the Minister introduces the exception
on interest it is important that we agree that payment is made within a
certain period, after which the employer is liability for
interest.
Andrew
Selous:
The hon. Gentleman has raised a good point. I am
not entirely sure whether three months would be the right figure. Many
of us get chased up a lot sooner than three months if we owe money, and
rightly so in many cases. Provided, as we have debated, the payment is
made with interest, it perhaps does not matter exactly what that figure
is. The important point is that the payment is made and that it is made
with interest, but the hon. Gentleman is right in that the payment
needs to be chased
up.
Mr.
O'Brien:
I have a lot of sympathy with the views
expressed by the Liberal Democrats on this issue.
Employees should not be disadvantaged by their employer’s
failure to comply by not paying contributions on time. The compliance
regime is designed to place employees in the position that they would
have been in had their employer complied. Subsection (2)(c) proposes
that after a set time period employers should be required to pay both
their and their employees’ contributions. The hon. Member for
Rochdale is right that various stakeholders, including Help the Aged
and the TUC, have expressed an interest in this issue. Before we
identify a period—three months is the one for which I have some
sympathy—I want to discuss with the stakeholders, including
business organisations, what the best period would be. I think the way
forward on this is to allow us to consult properly before taking a
final view, including about the appropriate length of time in question.
We therefore propose that details should be consulted on and set out in
secondary legislation when this issue has been further considered. In
principle, I am with the hon. Gentleman. Although I will not commit the
Government to it, I am even with him in thinking that three months
sounds like a reasonable period. However, I want to hear all the
arguments before I make a final decision, and I want the business
community, as well as other stakeholders, to have a say. On that basis,
I hope he will feel able to withdraw the
amendment.
Paul
Rowen:
I am grateful for the Minister’s assurance
with regard to this issue. I know it will be welcomed by many groups,
and I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
31 ordered to stand part of the
Bill.
Clause
32
Fixed
penalty
notices
Andrew
Selous:
I beg to move amendment No. 145, in
clause 32, page 14, line 28, at
end add—
‘(h) the Secretary
of State shall have the power to apportion such amount as the Secretary
of State thinks appropriate of fixed penalty notice payments for the
benefit of qualifying jobholders in circumstances where their employers
are unable to pay the prescribed
contributions.’.
The
amendment is an attempt to open up the question of where the money paid
in fixed penalty notices will
go. Will it all go straight into the Government’s general
coffers? Will it go to the Pensions Regulator? Is there, perhaps, the
possibility I am suggesting; that jobholders—either the
jobholders from the employer to whom the fixed penalty notice has been
issued or jobholders more generally, who could be the subject of some
sort of hardship fund if their employer had gone bust and contributions
were not possible—might be able to benefit from these fixed
penalty
notices? There
are various times in public life when money is raised by fines or
penalties of one sort or another. It is not always clear to the public
where that money goes, what happens to it, or for what purposes it will
be used. Amendment No. 145 is worded in a very wide way. It just gives
the Secretary of State a permissive power to apply such moneys raised
by way of fixed penalty notices for the benefit of jobholders, should
he or she see fit to do so, at any time. It does not require the
Secretary of State to do anything; it is purely a permissive power. On
that basis, I would commend it to the
Minister.
The
Parliamentary Under-Secretary of State for Work and
Pensions (Mr. James Plaskitt):
The hon. Member
for South-West Bedfordshire has had quite a good run with some of his
amendments, but it has now ended, I am sorry to say. Let me explain why
we are not keen on the amendment.
Clause 32 gives the Pensions
Regulator the power to issue fixed penalty notices to persons who have
failed to comply with compliance or contribution notices and the
employer duty provisions. The primary role of fixed penalties is to act
as a deterrent and, where necessary, sanction those who have not
complied. The amendment gives the Secretary of State the power to
decide which moneys arising from fixed penalties should be used for the
benefit of qualifying jobholders. However, it is a long-standing
practice that revenue from fixed penalties goes directly to the
consolidated fund of the Exchequer, so that it can be used as
appropriate on a full range of public services.
The regulator will not gain
financially from the imposition of fines, and there will be no hidden
incentives for their issuing. Importantly, this measure is fully in
line with the findings of the Macrory review, separating revenue
streams in order to eliminate all perverse incentives. The hon.
Gentleman may know that we are taking forward the recommendations of
the Macrory review via the Regulatory Enforcement and Sanctions Bill,
which is currently at Committee stage in the
Lords.
4.30
pm
Paul
Rowen:
I understand that that is a general rule, but it is
not always the case. With speed cameras, for example, a proportion of
the money raised is put to the benefit of the local authority for
developing traffic management and safety schemes. Given what we are
dealing with, an obvious possibility would be to develop hardship
schemes when there are
problems.
Mr.
Plaskitt:
I am not certain that that is a parallel, which
might become obvious if we see what Macrory says. The hon. Gentleman
will be familiar with what I cite, but I am going to put it on
record.
Macrory
recommends that we have seven principles for penalties. The seventh is
germane to the argument:
“It is important that
regulators do not have targets for different types of enforcement
actions or any correlation with salary bonuses or similar incentives.
This might incentivise staff to pursue certain enforcement actions
inappropriately.”
He
goes
on:
“I
would emphasise that regulators should not retain the revenue from
Monetary Administrative Penalties, or exercise any control over how
that revenue should be
spent.”
Those
points are relevant. Macrory reinforces the argument in a way that will
help hon. Members later
on:
“I want to
avoid creating any perverse financial incentives for regulators that
might influence their choice of sanctioning tool. This view is already
entrenched in relevant section of HM-Treasury’s Consolidated
Budgeting Guide and I echo their views on the separation of revenue
streams in order to eliminate perverse
incentives.”
Finally, he
says:
“I have
also emphasised that regulators must avoid creating perverse incentives
(such as staff appraisal criteria) that will encourage the use of
financial penalties without regard to the regulatory outcomes to be
achieved.”
Given
that here we are dealing with pensions and company contributions to
pensions, which are therefore related to the other questions, and that,
in implementing Macrory, we are pursuing his recommendations
specifically on the issue, going down the route suggested by the
amendment would take us in the wrong direction. The compliance regime
is designed so that jobholders are not put at any sort of disadvantage.
Where an employer is non-compliant, we are designing the regime based
on the principles that employers are not better off by not complying,
and jobholders are not worse off because their employer failed to
comply. We do not want any risk-perverse incentives coming in. If we
stick with the principle that sanctions of that nature come directly to
the Consolidated Fund and there is no question of the regulator
distributing them in any way, we can remain consistent with that
principle. That is important for both this measure and that on
sanctions regimes in general, which is being considered in the other
place. Given that, I hope that the hon. Gentleman will withdraw the
amendment.
Andrew
Selous:
The Minister has explained where the money is
going to go, which was not clear from the Bill. I am grateful for the
Minister pointing to the Macrory review, with which I am somewhat
familiar in other contexts. I accept what he says about that and about
perverse incentives. We probably all agree that the Consolidated Fund
of the Exchequer is not a bad place for the money to
go—especially at the moment, given the state of Government
finances. With that in mind, I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
32 ordered to stand part of the
Bill.
Clause
s
33 and 34
ordered to stand part of the
Bill.
Clause
35
Review
of
notices
Andrew
Selous:
I beg to move amendment No. 146, in
clause 35, page 16, line 1, at
end insert—
‘(f) a notice
under section 72 of the Pensions Act 2004 (c. 35) (provision of
information).’.
The amendment was tabled
because it appeared that the list of notices to which
a review may be applied appears to have left out the notice cited in
clause
33(1)(d):
“a notice
under section 72 of the Pensions Act 2004...(provision of
information).”
I
am sure the Minister will tell me there is a very good legal reason for
that being left out, but I was curious when I compared clause 33, which
sets out a full list of different compliance notices to which
escalating penalties apply, with clause 35, in which the notice in
clause 33(1)(d) has been left out. I am sure that I am about to be
reassured by the Minister, but I thought that the issue was worth
raising, as it is certainly not clear to
me.
Mr.
Plaskitt:
I would not bank on
it.
The Pensions
Regulator has the power to review all notices of issues as part of the
new compliance regime. These are compliance notices, third-party
notices, unpaid contribution notices, and fixed and escalating penalty
notices. The Pensions Regulator will have the power to confirm, vary or
revoke notices, or to substitute a different notice if it feels that is
appropriate. Cases in which sanctions for failure to produce
information have been applied incorrectly—for example, if the
required information had actually been provided—would therefore
be corrected through the review
process.
A section 72
notice, as set out in the Pensions Act 2004, is a notice requiring
trustees, scheme managers, employers and others who appear to hold
relevant information to provide specified information to the regulator.
The important point is that this is an evidence-gathering power only.
It gives the regulator the power to require from the person information
that is relevant to the exercise of its functions. It is not a sanction
in its own right—that is the difference. A separate notice has
to be issued to penalise those who fail to comply with a section 72
notice. We therefore do not consider it appropriate to have a review
process under clause 35 for people served with a section 72
notice.
Allowing a
review process for section 72 notices could impair the
regulator’s efficiency when gathering information. In our view,
it is inappropriate to allow people to hinder the notice’s use
by invoking procedures for review and appeal. It is, however, necessary
to give a safeguard to someone who is at risk of being penalised for
refusing to comply. Fixed penalty notices under clause 32 and
escalating penalty notices under clause 33 may be issued for failure to
comply with notices requiring the production of information issued
under section 72 of the 2004 Act. As I have explained, review is
already available at the point at which anyone may face sanctions for
failure to provide information. Given that, I hope that the hon.
Gentleman will agree to withdraw the
amendment.
Andrew
Selous:
I like to think that these little exchanges are
causing the odd shaft of sunlight to come down on some more obscure
parts of pensions legislation. I am sure that people who follow our
proceedings carefully will have been very enlightened by what the
Minister had to say. I am grateful to him, and I beg to ask leave to
withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
35 ordered to
stand part of the
Bill
.
Clause
36
References
to the Pensions Regulator
Tribunal
Andrew
Selous:
I beg to move amendment No. 147, in
clause 36, page 16, line 17, leave
out ‘may’ and insert
‘must’.
The
clause deals with references to the Pensions Regulator tribunal. My
hon. Friends and I tabled the amendment because we heard strong,
heartfelt pleas—certainly from the representatives of
employers’ organisations during our evidence
sessions—that the compliance and enforcement regime should be
proportionate, with the big stick used only when really needed. Given
the wording of clause 36, it strikes me that giving the Secretary of
State a discretionary power on how he or she might constitute a
tribunal and the manner in which the tribunal would be called would not
give employers the reassurance that they need that they will have the
right to go to a
tribunal.
Some time
ago, one of our older and wiser colleagues put it to me that summary
justice without the right of appeal is the hallmark of a dictatorship.
While I would not suggest that ministerial motives go quite so far, the
serious point is that while we all back a tough compliance regime, it
must be fair. Those employers who are being hauled up, perhaps for
inadvertent errors, must have rights. It might be that the business is
incredibly busy, that the order book is overflowing, that there are
staff problems, or that the matter has genuinely slipped their minds.
The right to go to a tribunal should be absolute, which is why I query
the word “may” and think that “must” should
be
inserted.
Paul
Rowen:
I hope that the Minister can give us some
indication of why the word used is “may” and not
“must”. We all accept that the compliance regime has to
have a light touch and to be fair. The impact assessment sets out the
three clear areas in which the regime has to meet
standards.
The other
side of the coin is missing, however, although I accept that this will
not happen in the vast majority of cases. I am sure—we have seen
the figures—that most employers will operate the scheme without
problems. However, there will be a small number of employers with whom
there are problems, and the compliance regime is meant to deal with
that. Equally, there might be compelling reasons why that employer has
not met his or her obligations, so allowing him or her the right to a
tribunal is the appropriate way
forward.
I hope that
the Minister can respond favourably. Given the consensus that has been
developed so far, the slight change from a three-letter word to a
four-letter word might help to get more widespread support for the
measures in the
Bill.
Mr.
Plaskitt:
I am grateful to those who have contributed to
the debate. It might be helpful if I clarify a few points
first.
The Pensions
Regulator is funded by a levy on pension schemes. That levy is used to
pay for a range of activities. We do not believe that the funds raised
by the levy should be used to cover the costs to the Pensions
Regulator of designing and putting in place its compliance procedures in
the run-up to 2012. That work is essential if the regulator is to
discharge its compliance responsibilities in the future. It is for a
broader public benefit and, therefore, should be funded accordingly. We
propose to do that through grants in aid using powers under schedule 5
of the Pensions Act 2004. Interestingly, that means that the work would
be funded from the Consolidated Fund, into which we have just agreed to
put money under the previous clause. Expenditure and funding given to
the regulator to develop its compliance regime will be accounted for
separately from its current activity and funding
regime. There were
queries at one point about the issue of funding, so I want to respond.
On the question of “may” versus “must”, the
“may” in subsection (1) refers to making regulations.
There is also a right to appeal in subsection (1). I hope that that
covers the point and that the hon. Member for South-West Bedfordshire
will withdraw the
amendment.
4.45
pm
Andrew
Selous:
Having heard the Minister’s assurance that
anyone who has come before the Pensions Regulator has the right to go
to a tribunal, I am happy to withdraw my amendment. The wording of
clause 36 was not clear to me, but having heard the Minister’s
reassurance, I am entirely happy to beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Paul
Rowen:
I beg to move amendment No. 97, in
clause 36, page 16, line 29, at
end add—
‘(4) The Secretary
of State shall publish a report on the funding of the Pensions
Regulator Tribunal for references made under this section within 12
months of the section coming into
force.’.
This
is very much a probing amendment that was tabled to get more
information from the Minister. He has already partly answered how the
tribunal is to be adequately funded. A lot of people have talked about
making sure that the Pensions Regulator is adequately funded. We will
have that discussion when we come to chapter 5, which deals with the
regulator and the way in which it will operate. Particularly regarding
the run-up period and beyond, I would like to know what the Minister
sees as the funding requirement for the tribunal, and how he will
ensure that the funding is made
available.
As I said,
the Minister has already partly answered the question, but I will be
interested to hear what he says because we want employers to have the
right to go to that tribunal. We also want to ensure that it has enough
resources—human or whatever—to enable adequate and speedy
dealings with any issues arising, especially in the initial stages
following the introduction of the Bill. The worst thing that could
happen would be a backlog of cases before the tribunal that were not
resolved, because that would affect not just the employer, but the
employee. That would have an impact on the success of the scheme and
could well increase the costs. It is important that, in the initial
stages, the tribunal is adequately funded—not just financially,
but with the human resources to ensure that anything put before it is
dealt with speedily.
Andrew
Selous:
I agree with the sentiments expressed by the hon.
Gentleman. I understand exactly where he is coming from. In our
previous debate, the Minister reassured the Committee that anyone who
wants to go before the tribunal will be able to do so. The only
question that remains is for me is to ask the Minister for an assurance
that that will happen in a reasonably timely manner and that that is
being factored into the Government’s plans. We all know that
justice delayed can be justice denied—there might be adverse
publicity for an employer who has been hauled up before the Pensions
Regulator. If employers want to go to the tribunal, it is important
that we know that they can, but they should be able to go reasonably
speedily and, as the hon. Gentleman said, they should get a proper
service when they get
there.
Mr.
Plaskitt:
I appreciate the points that both hon. Members
have made. I understand why they are seeking such assurances and I will
now try to give them. However, I will say a little more by way of
explanation, because there is an interaction between what we are doing
in the Bill and the decisions already taken and envisaged in the
Tribunals, Courts and Enforcement Act 2007. If I can, I will explain
the interrelationship between the
two.
Andrew
Selous:
There is no reference to that in the
clause.
Mr.
Plaskitt:
This is a bit tricky, but I will try to take the
Committee through
it.
While the Bill
names the Pensions Regulator tribunal as the appellate body to hear
appeals under this regime, we do not envisage that it will actually
perform that function. That is because by the time appeals under the
new regime are ready to be heard, we anticipate that the functions of
the Pensions Regulator tribunal will have moved into the new tribunals
structure, which is being set up under the 2007 Act.
Section 3 of
2007 Act establishes new first-tier and upper-tier tribunals. Once the
provision is in force, section 30 of that Act will be used to transfer
the functions of the Pensions Regulator tribunal to the new
arrangements. It is envisaged that the functions relating to the new
duties introduced from 2012 will go to the first-tier tribunal. Given
the likely nature of appeals under this regime, we feel that that
tribunal is indeed the more appropriate appellate body, because it will
be the first-instance tribunal for most jurisdictions, and most appeals
from original decision-making bodies will commence in that tier. We
anticipate that the functions will transfer to the new arrangements in
2009, subject to the completion of recommendations on tax appeals
modernisation work outlined in the Government’s consultation
paper on implementing part 1 of the 2007
Act.
The amendment
proposes that we produce a report on funding the Pensions Regulator
tribunal for references made under this regime. I understand the
concern that has been expressed that the Pensions Regulator and the
tribunal should each be adequately resourced for their roles in
relation to this work.
We are
working with the Pensions Regulator to develop the new regime and to
assess the costs and resources required to undertake the new compliance
functions in general. As I have said, we envisage using the first-tier
tribunal. However, we expect the approach on funding
to be similar to that taken to the Pensions Regulator tribunal. The
Department will continue liaising with the Tribunals Service to assess
the additional resource requirements and the funding implications of
the new initiative. I assure the Committee that our officials are
working closely with colleagues at the Tribunals Service to ensure that
the new appellate functions will be successfully accommodated in the
revised structure. The hon. Member for South-West
Bedfordshire raised a point about timeliness. Part of the reason why
the Government are implementing the tribunals reform system under the
2007 Act is to try to deliver exactly that. I want to reassure him and
the rest of the Committee that we are committed to funding this
mechanism in such a way that it can act
speedily.
Andrew
Selous:
I might have missed this, in which case I
apologise to the Minister and the Committee, but I am not entirely
clear about where the funding for the tribunal will come from. I am not
sure whether the Minister said it was from the Consolidated Fund, or
whether it will come from any part of the pensions contributions that
are
made.
Mr.
Plaskitt:
No, it will not come from the contributions. I
tried to make that clear, but I will reiterate that. Now that I have
clarified that and addressed the other points raised, I hope that the
hon. Member for Rochdale will withdraw the
amendment.
Paul
Rowen:
I am grateful for the Minister’s
clarification, which was very helpful. I beg to ask leave to withdraw
the
amendment.
Amendment,
by leave,
withdrawn.
Clause
36
ordered to stand part of the
Bill.
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